TaxTMI 
TaxTMI 
2012 (9) TMI 442
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.... vide letter dated 19.12.2007 surrendered Rs.4,00,000/- in addition to the income declared in the return which was further revised to Rs.4,50,000/- and ultimately, Rs.5,00,000/- was surrendered before the AO as additional income with the request that liberal and lenient action may be taken while considering the penal provisions. The AO, therefore, noted that the surrender of income of Rs.5,00,000/- is considered appropriate to cover the possible leakage of revenue in respect of trading and profit & loss account. Addition of Rs.5,00,000/- was, accordingly made. 2.1 The AO further noted that a sum of Rs.75,912/- has been shown as unsecured loan outstanding in the name of Shriram Investments for which no explanation with details and evidences have been furnished to prove the genuineness of such credit balances. In the absence of any evidence, such cash credits were treated as bogus liability and addition of Rs.75,912/- was also made to the income of the assessee. The total income was computed at Rs.10,78,100/- and the AO initiated the penalty proceedings u/s. 271(1)(c) of the IT Act for furnishing inaccurate particulars of income. 2.2. The AO vide separate penalty order dated 13....
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.....06.2012, in which it was held that when the assessee disclosed all the particulars of income at the assessment stage, therefore, merely on estimate of income, penalty is not leviable. He has submitted that Explanation-1 to section 271(1)(c) is not applicable in the case of the assessee. On the other hand, the ld. DR relied upon the orders of the authorities below and relied upon the decision of Madras High court in the case of Rathnam and Co. vs. Inspecting ACIT, 124 ITR 376, in which it was held - "Penalty - Concealment - Assessee agreeing to addition to low gross profits disclosed without demur - Levy of penalty - justified - Applicability of penal provisions not dependent on consent or otherwise of assessee." He has also relied upon the decision of Hon'ble Allahabad High Court in the case of Mirzapur Construction Co. ,122 ITR 828, in which it was held - "Held, on the facts, that the cash credits in the account books of the assessee on the findings recorded by the Tribunal was its concealed income. Further, the record did not disclose that the ITO had agreed not to take legal action in case the assessee agreed to be assessed at a higher rate. The facts relied upon by th....
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.... up possible leakage of revenue in respect of trading and profit & loss account. Thus, the AO failed to point out any specific instance as to for which surrender was made by the assessee of additional income. The AO initiated the penalty for filing inaccurate particulars of income, but in the assessment order, the AO failed to point out any specific instance of inaccurate particulars of income or instance of concealing the particulars of income, for which assessee made surrender of income. It would mean that the AO was not sure which particulars of income was inaccurate. No specific finding of fact of possible leakage of revenue has been mentioned. It, therefore, proves that the AO instead of passing the assessment order as per provisions of section 144/15(3) of the Act, made the adhoc addition on the assessee agreed to surrender Rs.5,00,000/- without citing any instance as to under which head such an addition has been made. Such an addition could not be based even on best judgment assessment. Therefore, it was an estimate of income without any basis or material on record and was merely addition made on the basis of surrender made by the assessee without explaining as to under w....
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....see needs no further adjudication. 5. As regards the levy of penalty on the addition of Rs.75,912/-, the AO specifically noted that it was unsecured loan in the name of Shree Ram Investments, for which the assessee has not furnished any explanation, details and evidences. Therefore, same cash credit was treated as bogus liability. The assessee did not furnish any explanation at the penalty stage before the AO as well as before the ld. CIT(A). Thus, the assessee failed to rebut the finding of fact recorded by the authorities below. The assessee also failed to explain the issue even in the penalty proceedings. Therefore, the decision of Allahabad High Court in the case of Mirzapur Construction Co. (supra) relied upon by the ld. DR would apply against the assessee. Further, Explanation-1 to section 271(1)(c) of the Act would be read against the assessee because the assessee failed to offer any explanation before the authorities below. Therefore, the amount added to the computation of total income shall be deemed to represent the income, in respect of which particulars have been concealed for the purpose of section 271(1)(c) of the IT Act. Hon'ble Delhi High Court in the case of CIT....
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....ed in the present case inasmuch as the assessed income was more than 80 per cent. of the returned income, being Rs.1,63,850 as against the returned income of Rs.71,870. The onus was on the assessee which it had failed to discharge as no explanation whatsoever was given by it before the Assessing Officer. Moreover, the Tribunal had recorded a clear finding that by debiting the amount of purchase of goods at Rs.51,314.74 twice, the profits had been reduced. The levy of penalty was therefore justified." 5.2 Hon'ble Delhi High Court in the case of Kamal Chand Jain vs. ITO, 277 ITR 429 (Del.) held in para 6 & 7 of the judgment as under : "6. We are concerned with the asst. yr. 1991-92. The Explanation to the provisions of s. 271 of the Act was in force at the relevant time. Explanation 1 to this section was made effective from 1st April, 1976. Under the Explanation where an explanation offered by the assessee is found by the AO, or even the CIT(A) to be false or that the explanation was bona fide and fails to substantiate such explanation, then the amount added or disallowed in computing the total income of such person as a result thereof would deem to represent the income in resp....