TaxTMI 
TaxTMI 
2010 (5) TMI 927
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....ppellant case and in law, the Honb'le C.I.T. had erred in confirming the levy of penalty amounting to ₹ 11,57,000/- imposed U/s.271(1)(c) of the I.T. Act 1961 by the ld. ACIT, Circle 2, Baroda for concealing particulars of income or furnishing inaccurate particulars of such income. 1.02 Your appellant says and submits that no penalty can be levied on protective assessment. Your appellant further submits that the Hon'ble C.I.T. had confirmed the action of ld. A.C.I.T., Circle 2, Baroda without considering the facts and circumstances of the case." 3. The brief facts leading to the above issue are that the assessee is an individual and filed his return of income on 17-03-1989. A search operation u/s.132 of the Act was carried out on business & residential premises of the assessee on 12/13-05-1988. During the course of search, various incriminating documents, registers, books of account were found and seized by the Investigation Wing of the Department at Baroda. When these incriminating documents were confronted to the assessee and its Group concern they offered such amounts as income earned from undisclosed sources in its books u/s.132(4) of the Act. It is an admitted positio....
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....sed by Hon'ble ITAT, Ahmedabad No. ITA 4180/Ahd/1994 dated 12.10.2001 in the case of M/s. Chaturbhai Haribhhai Patel & Co. and order No.ITA No.4189 to 4191/Ahd/1994 dated 12.10.2001 in the case of M/s. Harshadkumar & Co., M/s. Chaturbhuj Tobacco Co., and M/s. Natwarbhai C Patel & Co. The contention of the appellant is found to be correct that the additions made in the hands of firm have been deleted on the plea that the disclosure has been offered by the partners (appellant) of the firms. In view of this, I fully agree width the view of the appellant that the assessment be made on substantive basis. The A.O. is therefore, directed to uphold the amount of disclosure in the hands of appellant on substantive basis." 4. The Assessing Officer during the course of assessment proceedings noted that the income of ₹ 61,47,607/- represents the income of the firm and for the same the Assessing Officer recorded the facts in para-6.7 as under:- "6.7. The above discussion leads to only one conclusion. That is, this amount has been taken back from the accounts of the benamidars (dalals) after making payment by cheques (Ref. Question 32: Shri N.C. Patel's statement u/s.132(4) dated 13.5.8....
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....then decide whether or not he wanted to take advantage of this provision. In view of this it is clear that he was not told of any blanket immunity under the Act. Shri N.C. Patel made the disclosure after verifying the provisions of sec. 271(1)(c) Explanation-5." 6. In view of the above position, the Assessing Officer levied the penalty u/s.271(1)© of the Act. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the Assessing Officer by giving following finding in para-2.6 and 2.7 of his appellate order:- "2.6 I have considered the submissions of the ld. counsel and facts of the case. I have also gone through the various case laws relied upon by the ld. counsel. There is no evidence on record to show that any promise was made during the course of search that no penalty shall be levied u/s.271(1)©. During the course of search the authorized officer has simply brought the provisions of explanation (5) of section 271(1)(c) to the attention of the appellant and has posed the question whether he was in favour of taking advantage of these provisions. It cannot be said that any assurance, whatsoever, has been given to the appellant that n....
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....ection 271(1)(c). The contention of the ld. counsel that no penalty is leviable since demand raised after assessment is Nil is not tenable since the income of ₹ 20,49,203/- shown in the return of income is admitted by appellant himself to be unaccounted. All the case laws relied upon by the ld. counsel are distinguishable on facts. Two of the case laws on which the ld. counsel strongly relied are discussed here to show how the facts in those cases are different from those of the present case." 7. Before us the Ld. Sr. counsel for the assessee, Shri J.P. Shah argued that no penalty can be levied in case the assessment is made on the basis of protective and not substantive. He stated that it is impossible to gather that the ITO has entertained a reasonable belief that some income of the assessee has been concealed or inaccurate particulars have been furnished till he does not come to a conclusion that the income belongs to assessee. He stated that no doubt it is open to an ITO to make protective assessment but it not open to levy penalty on protective assessment as reason to believe possesses lesser power than the words "satisfaction", which is a prerequisite for initiation of....
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....as substantive addition and viewed in totality, it is thus clear that as per the assessee's own statement recorded u/s.132(4) of the Act, making the disclosure of ₹ 20,49,203/- in his own hand that the Tribunal has directed the substantive addition to be made in the hands of the assessee. Under these circumstances, he finally argued that it cannot be said that penalty has been levied on protective basis or there was no satisfaction recorded by the AO that the disclosure made by the assessee during search and subsequently in the return of income after detection by the Revenue attracted the provisions u/s.s271(1)© of the Act. 9. After hearing the rival contentions and going through the case records, we find that the Assessing Officer was of the confirmed view that substantive assessment in the hands of the two firms as mentioned earlier was made for the reasons given at page No.68 of the assessment order and it was only when statement 'A' and 'B' filed by the assessee tried to explain the disclosure made during search as credits appearing in the names of various persons in the books of account of the aforesaid two firms that the substantive assessment has been made. Accor....