TaxTMI 
TaxTMI 
2011 (11) TMI 658
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....ts and in law, in confirming the penalty as the additions was made only on the basis of surrender made by the assessee and not with reference to any documentary evidence. 4. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the levy of penalty is untenable no finding has been given on merit regarding concealment in the penalty order passed by the AO. 5. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law, in rejecting the contention of the appellant that the order passed by the AO levying penalty is untenable in the eye of law as no satisfaction, as required under the law, has been recorded by the AO in the assessment order." 2. The facts are that the assessee company is engaged in the business of earning commission from sale of Heavy Machines and running of Hotel. During the year, it showed total receipts of Rs. 84,81,498/- as against Rs. 45,22,539/- of the immediately preceding assessment year. It declared net profit of Rs. 32,11,376/- against that of Rs. 9,59,880/- of the immediately preceding assessment year. A survey was conducted o....
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....ndition that offer of the surrender was by way of voluntary disclosure without admitting any concealment or any intention to conceal and subject to non-initiation of penalty proceedings and prosecution. 5. Later, the assessee filed a petition u/s 144 A of the I.T. Act before the ACIT, for expediting the assessment proceedings. A copy thereof was forwarded to the AO. In the said petition, the assessee company showed its willingness to be taxed of Rs. 56,49,000/-, as the company's income from other sources. 6. Vide letter dated 27.11.2006 the ACIT called for some documents and information from the assessee. The Addl. CIT asked the AO of Marketing Services to submit a detailed report thereon. The AO was asked to supply the following documents:- a) Photocopy of all the statements recorded during the course of Survey operation. b) Copy of any communication reference regarding utilization of the offered sum. c) Copies of all the returns along with Balance Sheet, P&L A/c, Partners capital A/c and other annexure in respect of M/s Marketing Services along with copies of returns of the partners for the assessment year 2001-02 to A.Y. 2006-07. d) Copies of the assessment ord....
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.... share application money before it was offered to tax in the hands of M/s. Marketing Services, there could not be any occasion to again introduce the same amount in the books of the firm, M/s. Marketing Services; that in the said facts and circumstances of the case and in view of the fact that no adverse inference was possible to be drawn against the assessee company against the induction of share application money to the extent of Rs. 1,82,51,000/-, the source of the share application money to the said extent may be treated as explained; that more-over, the share application money to the extent of Rs. 1,82,51,000/- had already been subjected to tax in the hands of M/s. Marketing Services and it could not be taxed again in the hands of the recipient; that the AO was, as such, being requested to accept the assessee's explanation regarding the source of the share application money to the extent of Rs. 1,82,51,000/-, subject to ensuring again that the surrendered amount had been invested or utilized elsewhere, except as stated by the assessee; that as regards the balance amount of share application money of Rs. 40,24,000/-, the assessee had itself stated it as unexplained and had volu....
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....sessment order. 13. Before us, the learned counsel for the assessee has argued that the ld. CIT(A) has erred in confirming the penalty wrongly levied; that the ld. CIT(A) has erred in ignoring the assessee's contention that no penalty was leviable as the assessee had suo motu surrender6ed the income and that as such, there was neither any concealment of income, nor any furnishing of inaccurate particulars thereof by the assessee; that the ld. CIT(A) has failed to take into consideration the fact that the additions had been made only on the basis of surrender made by the assessee, without any reference to any documentary evidence; that the ld. CIT(A) has further failed to consider the assessee's contention that no finding having been recorded on merit regarding concealment in the penalty order, the levy of penalty is unsustainable; that the ld. CIT(A) has also erred in failing to accept the assessee's contention that the penalty order is untenable in law even because no satisfaction has required under the law has been recorded by the AO in the assessment order; that the ld. CIT(A) has also wrongly ignored the fact that the observation in the penalty order to the effect that the a....
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....rder page 3, para 12), it is a subsequent development, when it already taken possession of the seized documents. 15. We have heard the parties and have perused the material on record. This material on record shows that the offer of surrender was only to settle the dispute and that while doing so, the assessee did not admit any concealment income. This is evident from the assessee's letter dated 22.11.06 (APB 1 to 3). Therein, it has been stated, inter alia, as follows:- "The company with a view to avoid litigation and buy peace and to channelise the energy and resources towards productive work and to make amicable settlement with the Income Tax Department offered to surrender a sum of Rs. 56,49,000/- as income from other sources." 16. The said amount of Rs. 56,49,000/- subsequently got reduced to Rs. 40,74,000/-, when peak was worked out at Rs. 219.5 lakhs. 17. The aforesaid offer of surrender was accepted only subsequent to it having been examined on a petition filed u/s 144A of the Act and on examining the records of the case. It is pertinent to mention here, as noted herein above, that vide letter dated 13.12.06, the ACIT, Circular 32(1), New Delhi, i.e., the AO of M....
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....decline to give any direction to the AO in this regard as the assessee company itself has treated the balance amount of share application money as its unexplained money and offering it for tax. Moreover, no such direction in my opinion for non initiation of penalty proceedings can be issued to the AO as before initiating penalty proceedings, he has to satisfy himself and come to a definite conclusion that whether the assessee company has concealed the particulars of income or filed inaccurate particulars of income. All the powers regarding initiation of penalty proceedings are vested in the AO and I cannot step into the shoes of AO. In view of these facts, I decline to give any direction in respect of initiation of penalty proceedings. As regard initiation of prosecution proceedings, I again decline to give any direction as the initiation of prosecution proceedings are at the instance of Chief Commissioner/Commissioner of Income Tax." 19. It was only there-after that the offer had been accepted by the AO and the assessment had been finalized. 20. It is evident from the above obtaining facts that there was entirely no material on record against the assessee to show any conceal....