INCOME TAX REPORTS (ITR) HIGHLIGHTS
F No intimation in writing to assessee before making adjustment of refund : Order adjusting refund not justified : Cognizant Technology Solutions India P. Ltd. v. Deputy CIT (Mad) p. 373
F Reasons given in notice not matters considered by AO in original assessment on which opinion formed : Reassessment valid : Innovative Foods Ltd. v. Union of India (Ker) p. 389
F Interest earned by short-term investment of money raised by issue of zero coupon bonds in order to maintain debt equity ratio taxable as income from other sources : Bharat Oman Refineries Ltd. v. CIT (MP) p. 399
F Tribunal finding transaction whereby capital loss was incurred was genuine : Set off of capital loss valid : CIT v. Special Prints Ltd. (Guj) p. 404
F Sufficient disclosure in return to enable AO to scrutinise the claim : Reopening after four years not valid : National Dairy Development Board v. Deputy CIT (Guj) p. 413
F Assessee maintaining audited books of account : No question of disbelieving them in absence of cogent evidence : CIT v. Dolphin Builders P. Ltd. (MP) p. 420
F No jurisdiction of authority to open camp office in residence of assessee : Prakash V. Sanghvi v. Ramesh G., Major, Deputy Director of I. T. (Inv.) (Karn) p. 426
F Premium payment received on transferring export licence : No deduction under section 80HHC : CIT v. Garniwal Exports P. Ltd. (Karn) p. 432
F Corpus donations substantially utilised for commercial activities in nature of construction of shopping complex : Assessee not entitled to approval under section 80G : Vishal Khanna Public Charitable Trust v. Union of India (All) p. 442
F Some purchases recorded by assessee were not bogus but from other parties not recorded in books : Estimation of profit element embedded in purchases : CIT v. Simit P. Sheth (Guj) p. 451
F Business of firm continued by erstwhile partner : Loss of firm could not be carried forward and set off by sole proprietor : Pramod Mittal v. CIT (Delhi) p. 456
F Premium on redemption of debentures deductible under section 37 : Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Guj) 460
F Expenditure on restructuring loan : Revenue expenditure : Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Guj) 460
F Borrowed capital utilised for purchasing new machinery for expansion of business : Interest deductible : Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Guj) 460
F Deduction under section 35D in prior years : Deduction allowable in assessment year under consideration : Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Guj) 460
F Lease of assets : Depreciation allowed in previous years : Depreciation allowable in assessment year under consideration : Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Guj) 460
F Payments to employees under VRS allowable deduction : CIT v. State Bank of Mysore (Karn) p. 468
F Sales through commission agents : Some buyers in relevant assessment year stating that sales were direct : Statement not rebutted with evidence : Amounts not deductible : CIT v. Printer House P. Ltd. (Delhi) p. 474
F Reassessment on ground of miscalculation of special deduction under section 80HHC and excess deduction on account of provision for warranty valid : Inductotherm (India) P. Ltd. v. M. Gopalan, Deputy CIT (Guj) p. 481
F Original assessment without scrutiny not a reason for issuing notice under section 148 : Ratna Trayi Reality Service P. Ltd. v. ITO (Guj) p. 493
F Entire amount not paid : Clause in agreement that parts of property could be transferred to third parties : Not relevant : No transfer of property : Ratna Trayi Reality Service P. Ltd. v. ITO (Guj) p. 493
F Transfer of case for purposes of co-ordination : Reason must be given : Global Energy P. Ltd. v. CIT (Bom) p. 502
F Stay ordered by High Court and thereafter order passed under section 142(2A) for special audit : Both periods to be excluded for computing limitation : CIT v. Ulike Promoters P. Ltd. (Delhi) p. 507
F Loss due to confiscation of goods deductible : CIT v. T. C. Reddy (AP) p. 516
F Gains from transfer of paintings not assessable in AY 2005-06 : CIT v. Kuruvilla Abraham (Mad) p. 519
F Concealment of income resulting in reduction of loss : Penalty can be levied : CIT v. Balaramakrishna Engineering Contractors Corporation (AP) p. 524
F Commissioner revising order on ground transport subsidy could not have been deducted by resorting to section 80-IA not valid : Patkai Coal Products P. Ltd. v. CIT (Gauhati) p. 528
F Rules :
Income-tax (Fourth Amendment) Rules, 2013 : Gazette reference p. 21
Income-tax (Fifth Amendment) Rules, 2013 : Gazette reference p. 40
Income-tax (Sixth Amendment) Rules, 2013 : Gazette reference p. 40
Income-tax (Ninth Amendment) Rules, 2013 : Gazette reference p. 40
Income-tax (Tenth Amendment) Rules, 2013 : Gazette reference p. 40
Income-tax (Eleventh Amendment) Rules, 2013 p. 21
Income-tax (Twelfth Amendment) Rules, 2013 p. 24
Income-tax (Thirteenth Amendment) Rules, 2013 p. 36
F Notifications :
Finance Act, 2013 : Notification under section 115(2) : Commencement of Chapter VII in respect of Commodities Transaction Tax p. 21
Income-tax Act, 1961 : Notification under section 10(46) : Exemption to Board/Trust/Commission constituted with object of regulating/administering an activity for benefit general public p. 20
Income-tax Act, 1961 : Notification under section 90 : Agreement between the Government of the Republic of India and the Government of the Principality of Monaco for the exchange of information relating to tax matters : Gazette reference p. 40
Income-tax Act, 1961 : Notification under section 90 : Convention between the Government of the Republic of India and the Government of the People's Republic of Bangladesh for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income : Amendment : Gazette reference p. 20
F Anatomizing the relevance of incriminating material for section 153A proceedings-Ananya Kapoor, Final year student p. 31
F IT Applications in Income-tax Department : CAG's examination-T. N. Pandey, Retd. Chairman, CBDT p. 21
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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS
F Business expenditure : VRS : Amortisation of expenditure : One-fifth of expenditure allowable u/s. 35DDA : State Bank of Mysore v. CIT (Appeals) (Bangalore) p. 244
F Non-resident : Shipping company : Profit from operation of ships in international traffic not taxable in India under article 9(1) of DTAA (Denmark) : A. P. Moller Maersk A/S v. Deputy DIT (International Taxation) (Mumbai) p. 253
F Interest on refund received from foreign shipping company falling under article 12 of DTAA (Denmark) liable to tax : A. P. Moller Maersk A/S v. Deputy DIT (International Taxation) (Mumbai) p. 253
F Industrial undertaking : Special category State: Deduction not to be denied on technicalities when assessee otherwise entitled : ITO v. S. Venkataiah (Hyd) p. 256
F Where channel-placement charges paid to agencies not expenditure on sales promotion or publicity, not liable to FBT : T. V. Today Network Ltd. v. Dy. CIT (Delhi) p. 1
F Search and seizure : Block assessment : Where limitation to be reckoned taking into consideration last valid panchanama, assessment barred by limitation : Mani and Money Ltd. v. Dy. CIT (Chennai) p. 9
F Where no evidence to prove that trusteeship and management fees not genuine, expenditure allowable : Asst. CIT v. Small is beautiful (Hyd.) p. 41
F Benefit on account of unmatured foreign exchange contracts as on last day of accounting year credited to P & L A/c taxable : Credit Lyonnais v. Asst. DIT (Mumbai) p. 51
F Non-resident : Where foreign agent providing systematic market research falls u/s. 9(1)(vii), assessee liable to TDS : Asst. CIT v. Evolv Clothing Co. P. Ltd. (Chennai) p. 71
F Where value of plant and machinery in year exceeding Rs. 1 crore, assessee not qualifying as small scale industry not entitled to deduction : Ace Multi Axes Systems Ltd. v. Dy. CIT (Bangalore) p. 83
F Where Indian company approved as an infrastructure company and allowed deduction u/s. 80-IA, conditions satisfied at time of sale of shares in company, capital gains eligible for exemption u/s. 10(23G) : Vanenburg Facilities B.V. v. Asst. DIT (Hyd.) p. 114
F Fringe benefits tax : Expenses on dropping employees at night time not treated as fringe benefit not liable to FBT : Peerless Hotels Ltd. v. Dy. CIT (Kolkata) p. 151
F Housing project : Furnishing of completion certificate issued by local authority mandatory for years after amendment not requirement for earlier years : Sainath Estates P. Ltd. v. Dy. CIT (Hyd.) p. 155
F Search and seizure : Where net annual value of property quantified as assessment u/s. 143(3) same addition not to be made again in assessment u/s. 153A, validity of addition made in assessment u/s. 143(3) not to be adjudicated by Tribunal in appeal arising from search assessment : Sainath Estates P. Ltd. v. Dy. CIT (Hyd.) p. 155
| COMPANY LAW INSTITUTE OF INDIA PVT. LTD. No. 2, Vaithyaram Street, T.Nagar, Chennai - 600017. Phone: (044) 24350752 - 55 Fax: (044) 24322015 info@cliofindia.com |
Unearthed Sale
Whether total unearthed sale or only profit thereon would tantamount to additions?
AKHILESH KUMAR SAH
Advocate
Introduction
1. In the judgment of ITAT, Lucknow in case of Dr. Anoop Manchanda v. CIT(A) [IT Appeal Nos. 223 & 224/LKW/12, dated 27-8-2012], the Hon'ble Members of the Division Bench have held that the entire amount of sales could not represent the income of the assessee who had not disclosed the sales, as the sales only represented the price received by the seller of the goods in excess over the cost incurred; in that event only the part of the profit could become the income.
Facts of the case in brief
2. There were two appeals filed by the appellant against the order of the CIT(A), Lucknow challenging the validity of action taken under section 148 of the Income-tax Act, 1961 as well as for the addition of entire amount of undisclosed sales of medicines & opticals found during survey done under section 133A in the business premises of the appellant, amounting to Rs. 137,071 in A.Y. 2002-03 & Rs. 58,250 in A.Y.2003-04. Besides that appellant also challenged the disallowance of salary paid to employees of Rs. 39,600 in A.Y.2002-03 & Rs. 43,600 in A.Y.2003-04.
Decision in the case in brief
3. The ITAT Lucknow relied on the judgment of the Gujarat High Court in the case of CIT v. President Industries [2002] 124 Taxman 654and held that it might be correct that the entire amount of sales could not represent the income of the assessee who had not disclosed the sales, as the sales only represented the price received by the seller of the goods in excess over the cost incurred for such medicines and in that event only the part of the profit could become its income. In respect of disallowance of salary it was held by the Division Bench that the reasonableness of the salary could not be a basis to treat the actual amount paid as excessive or that the amount had been paid for the work not done by its employees. Revenue's case was not that the assessee had inflated salary in the name of any of its employees nor that salary was shown to have been paid to non-existent persons. The Tribunal delivered its golden ruling that the reasonableness of the salary could not be the basis to treat the actual amount paid as excessive.
4. Rulings in similar other cases
4.1 In British South Africa Co. v. CIT - No gain or profit could be said to arise unless and until a balance had been struck between the cost of acquisition and the proceeds of sale British South Africa Co. v. CIT [1946] 14 ITR 17 (PC)(Supp.).
4.2 In CIT v. Motilal Padmpat Sugar Mills (P.) Ltd. - In CIT v. Motilal Padampat Sugar Mills (P.) Ltd.[1992] 196 ITR 25 (All.) the assessee received Rs. 2,05,000 as compensation and Rs.12,500 towards interest thereon. It was held that the reopening of the assessment under section 147(a) by treating whole of the receipts as income, on the facts & circumstances of the case, was not valid.
4.3 In Brij Bhushan Lal Praduman Kumar v. CIT - In Brij Bhushan Lal Praduman Kumar v. CIT [1978] 115 ITR 524 (SC) the cost of materials supplied by the Government (M.E.S. Department) for being used in the execution of works was held liable to be taken into consideration while estimating the profits of a contractor.
4.4 In Calcutta Co. Ltd. v. CIT - In Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 (SC), the Supreme Court observed at page 8 as under:
"When we speak of the profits and gains of a trader we mean that which he had made by his trading. Whether there be such a thing as profit or gain can only be ascertained by setting against the receipts the expenditure or obligations to which they have given rise".
4.5 In Motipur Sugar Factory Ltd. v. CIT - In Motipur Sugar Factory Ltd. v. CIT [1955] 28 ITR 128 (Pat.), at page 133, the Patna High Court observed as follows:
"Now to my mind it is very clear what is the intuitus, both from the enactment and from the rules under which the duties are to be ascertained. The thing to be taxed is the amount of profits and gains. The word 'profits' I think is to be understood in its natural and proper sense-in a sense which no commercial man would misunderstand. But when once an individual or a company has in that proper sense ascertained what are the profits of his business or his trade the destination of those profits or the charge which has been made on those profits by previous agreement or otherwise, is perfectly immaterial. The tax is payable upon the profits realized, and the meaning to my mind is rendered plain by the words 'payable out of profits'".
" The profit of a trade or business is the surplus by which the receipts from trade or business exceeded the expenditure necessary for the purpose of earning those receipts..............Unless and until you have ascertained that there is such a balance, nothing exists to which the name of profits can properly be applied."
4.6 In Badridas Daga v. CIT - Profits and gains which are liable to be taxed under section 10(1) of the I.T. Act 1922 (corresponding to section 28 of the IT Act, 1961) are what are understood to be such under ordinary commercial principles (Badridas Daga v. CIT [1958] 34 ITR 10 (SC)).
4.7 In CIT v. A. Krishnaswami Mudaliar - The Supreme Court in CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 observed as under:
"In computing the balance of profits and gains for the purposes of income-tax,....two general and fundamental common places have always to be kept in mind. In the first place, the profits of any particular year or accounting period must be taken to consist of the difference between the receipts from the trade or business during such year or accounting period and the expenditure laid out to earn those receipts. In the second place, the account of profit and loss to be made up for the purpose of ascertaining that difference must be framed consistently with the ordinary principles of commercial accounting, so far as applicable, and in conformity with the rules of the Income-tax Act, or of that Act as modified by the provisions and schedules of the Acts regulating excess profits duty, as the case may be. For example, the ordinary principles of commercial accounting require that in the profit and loss account of a merchant's or manufacturer's business the values of the stock-in-trade at the beginning and at the end of the period covered by the account should be entered at cost or market price, whichever is the lower, although there is nothing about this in the taxing statutes."
4.8 In CIT v. Kalyanji Mavji & Co. - On accepted commercial practice and trading principles an item of business expenditure must be deducted in order to arrive at the true figure of profits and gains for tax purposes (CIT v. Kalyanji Mavji & Co. [1980] 122 ITR 49 (SC)).
4.9 In CIT v. Caixa Economica De Goa - While the assessee cannot re-agitate claims already assessed, it is open to the assessee in reassessment proceedings to put forward claims for deduction of any expenditure which is relatable to the income which is sought to be assessed as escaped income in the reassessment proceedings [CIT v. Caixa Economica De Goa [1994] 210 ITR 719 (Bom.)]
4.10 In CIT v. Jahanganj Cold Storage - The Allahabad High Court has observed in CIT v. Jahanganj Cold Storage [1989] 44 Taxman 139 that all receipts by an assessee may not necessarily be income of the assessee for the purpose of the Income-tax Act.
Conclusion
5. On the finding of unrecorded sales of an assessee some reasonable percentage may be taken as the net income and not the whole of the sales. Section 44AD speaks of minimum 8% net profit in estimation of a scheme. As per accepted accounting principles the cost of sales has to be deducted from sales while computing profits. However, for the source of purchase and expenses reasonable explanation has to be provided. Also, reasonability of the salary paid from allowance point of view in a concern depends upon the actual payments made and facts and circumstances of the case.
IT: Where assessee had deposited amount received from his employees as contributions in provident fund and ESI fund of employees after due date, i.e., after 15th of next month, but before due date of filing return, Assessing Officer was wrong in adding said amount to income of assessee as per provisions of section 36(1)(va) read with section 2(24)(x)
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[2013] 35 taxmann.com 616 (Rajasthan)
HIGH COURT OF RAJASTHAN
Commissioner of Income-tax, Udaipur
v.
Udaipur Dugdh Utpadak Sahakari Sangh Ltd.*
NARENDRA KUMAR JAIN AND ARUN BHANSALI, JJ.
D.B. IT APPEAL NO. 48 OF 2012†
MAY 13, 2013
Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment [Provident fund] - Assessment year 2006-07 - Assessee had deposited amount received from his employees as contributions in provident fund and ESI fund of employees after due date, i.e., after 15th of next month, but before due date of filing return - Assessing Officer added said amount to income of assessee as per provisions of section 36(1)(va) read with section 2(24)(x) - Whether since assessee had deposited said amount in provident fund and ESI fund of employees before due date of filing return, Assessing Officer was wrong in adding impugned amount to income of assessee - Held, yes [Para 10] [In favour of assessee]
FACTS
| ■ | The assessee was engaged in the business of dairy product, etc. During the previous year relevant to the assessment year 2006-07, it had deposited the amount received from his employees as contributions in the provident fund and ESI fund of the employees after the due date, i.e., after 15th next month. The Assessing Officer added the said amount to the income of the assessee as per the provisions of section 36(1)(va) read with section 2(24)(x). | |
| ■ | On appeal, the Commissioner (Appeals) held that where payments on account of contribution to the PF, ESI, etc. were made within the due date of filing the return, such deductions were allowable. He having noticed that the provident fund contribution and ESI fund was deposited by the assessee before the due date of filing the return deleted the impugned addition made by the Assessing Officer. | |
| ■ | On second appeal, the Tribunal upheld the order passed by the Commissioner (Appeals) holding that the employees' contribution was allowable, if the same was paid before the due date of return. | |
| ■ | On appeal to High Court, the revenue contended that after the deletion of the second proviso to section 43B by the Finance Act, 2003, with effect from 1-4-2004, the contribution of the employer was governed by provisions of section 43B, whereas the employees' contribution continued to be governed by provisions of section 36(1)(va) read with section 2(24)(x) and, therefore, the Tribunal fell in error in deleting the addition made by the Assessing Officer under section 36(1)(va) read with section 2(24)(x). |
HELD
| ■ | In view of the decisions of the Supreme Court in the cases of CIT v. Alom Extrusions Ltd. [2009]319 ITR 306/185 Taxman 416 andCIT v. Vinay Cement Ltd. [2009] 313 ITR (St) 1 as well as that of Delhi High Court in the case of CIT v. AIMIL Ltd. [2010] 321 ITR 508/188 Taxman 265 (Delhi), wherein a similar issue arising under section 43B was decided in favour of the assessee, the appeal preferred by the revenue has no substance. Therefore, the same was liable to be dismissed. [Para 10] |
CASE REVIEW
CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 (SC) (para 10) CIT v. Vinay Cement Ltd. [2009] 313 ITR (St.) 1 (para 10) and CIT v. AIMIL Ltd. [2010] 321 ITR 508/188 Taxman 265 (Delhi) (para 10) followed.
CASES REFERRED TO
CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 (SC) (para 6) and CIT v. AIMIL Ltd. [2010] 321 ITR 508/188 Taxman 265 (Delhi) (para 9).
K.K. Bissa for the Appellant.
ORDER
BY THE COURT: The defect pointed out by the office is over ruled.
2. This appeal has been filed by the Revenue aggrieved by the order dated 16.12.2011 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('ITAT') in ITA No. 351/JU./2010 for the assessment year 2006-07, whereby, the appeal filed by it against the order dated 15.03.2010 passed by the Commissioner of Income Tax (Appeals), Udaipur ['CIT (A)') has been dismissed.
3. The facts in brief are that the assessee is engaged in the business of dairy product, processing and marketing of milk and milk product and cattle feed etc. It filed its return of income for the assessment year 2006-07 on 30.10.2006 declaring total income of Rs. 9,80,723/-. While completing the assessment under Section 143(3) of the Income Tax Act, 1961 ('the Act') vide its order dated 26.12.2008 the Assessing Officer (AO) noticed that the assessee had deposited payment of Rs. 14,60,412/- in the PF fund and Rs.973/- in the ESI fund with delay that is the said payments were deposited after the due dates i.e. after 15th next month and, therefore, added the said amount to the income of the assessee as per the provisions of Section 36(1)(va) read with Section 2(24)(x) of the Act.
4. Aggrieved by the assessment order dated 26.12.2008, the assessee filed an appeal before the CIT(A), who, vide its appellate order dated 15.03.2010 after noticing certain judgments came to the conclusion that it is a settled position of law that where payments on account of contribution to the PF, ESI etc. are made within the due date of filing the return, such deductions are allowable. It was further noticed that it was not in dispute that the PF contribution and ESI was deposited by the appellant before the due date of filing the return and, consequently, the CIT(A) deleted the dis-allowance made by the AO and granted a relief of Rs. 14,61,385/-.
5. The order dated 15.03.2010 passed by the CIT(A) was questioned by the Revenue before the ITAT and, the ITAT by its order dated 16.12.2011 upheld the order passed by the CIT(A) on the said issue, inter alia, holding that the employees' contribution is allowable, if the same is paid before the due date of return.
6. It was contended by learned counsel for the Revenue that the CIT(A) and ITAT fell in error in deleting the addition made under Section 36(1)(va) read with Section 2(24)(x) of the Act without considering the facts and legal aspect involved therein. It was submitted with reference to Section 43B of the Act that the deletion of second proviso therein, after the amendment by the Finance Act, 2003; the contribution of the employer is governed by provisions of Section 43B, whereas, employees' contribution continues to be governed by provision of Section 36 (1)(va) read with Section 2(24)(x) of the Act and, therefore, the ITAT fell in error in upholding the order passed by the CIT(A).
7. The effect of deletion of second proviso to Section 43B of the Act was considered by Hon'ble Supreme Court in CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 and it was observed at page 314 of the report as under:-
".....section 43B (main section), which stood inserted by the Finance Act, 1983, with effect from April 1, 1984, expressly commences with a non obstante clause, the underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, section 43B (main section) made it mandatory for the Department to grant deduction in computing the income under section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that the accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act (octroi) and other tax laws. Therefore, by way of the first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the return under the Income-tax Act (due date), the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of the Finance Act, 2003, deleting the second proviso and brining about uniformity in the first proviso by equating tax, duty, cess, and fee with contributions to welfare funds."
8. Further the Hon'ble Supreme Court in CIT v. Vinay Cement Ltd. [2009] 313 ITR (St.) 1 while dismissing the Special Leave Petition preferred by the Revenue against the judgment of the Guwahati High Court observed as under:-
"In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return."
9. Following the observations of Hon'ble Supreme Court in Vinay Cement (supra), the Delhi High Court in CIT v. Aimil Ltd. [2010] 321 ITR 508/188 Taxman 265 held at page 518 as under:-
"We may only add that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. In so far as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (2009) 313 ITR (St.) 1."
10. In view of the settled legal position, the appeal preferred by the Revenue has no substance and the same is, therefore, dismissed. No costs.
SKJ ST : Activities in relation to conduct of online examination and evaluation by a foreign company in relation to certifying professional competence of candidates in various spheres of software skill are, prima facie, Business Auxiliary Services
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[2013] 36 taxmann.com 279 (Bangalore - CESTAT)
CESTAT, BANGALORE BENCH
Sun Microsystems (I) (P.) Ltd.
v.
Commissioner of Service Tax, LTU, Bangalore*
P.G. CHACKO, JUDICIAL MEMBER
AND M. VEERAIYAN, TECHNICAL MEMBER
AND M. VEERAIYAN, TECHNICAL MEMBER
STAY ORDER NO. 782 OF 2012
APPLICATION NO. ST/STAY/ 1660 OF 2011
APPEAL NO. ST/ 2693 OF 2011
APPLICATION NO. ST/STAY/ 1660 OF 2011
APPEAL NO. ST/ 2693 OF 2011
MAY 7, 2012
I. Section 65(19), read with section 65(27), of the Finance Act, 1994 - Business Auxiliary Services - Stay Order - Assessee's holding company M/s. Sun, USA was awarding various certificates in software field whose online examination and evaluation were undertaken by M/s. Prometric, USA - Assessee was involved in sale of vouchers providing a password to a prospective candidate for appearing in examination - Department argued that assessee's activities amounted to 'Business Auxiliary Service' - Assessee argued that there was no service involved and even if there was any service, it was educational service and even otherwise, exempt under Notification No. 14/2004-S.T., dated 10-9-2004 - HELD : Prospective candidates did not, prima facie, have a relationship of student-teacher in programme leading to issue of certificates by Sun, USA, as learning/training, if any, was taken from other sources and assessee was merely enabling conduct of examination and evaluation - Claim that assessee was selling e-vouchers was unacceptable; its activities were, prima facie, in relation to conduct of online examination and evaluation by Prometric in relation to certifying professional competence of aspiring candidates in various spheres of software skills - Claim to eligibility of Notification No. 14/2004 was made for first time before Tribunal and could be gone into in detail only at time of final hearing - Hence, pre-deposit was ordered in part [Para 5.1] [In favour of revenue]
II. Section 73 of the Finance Act, 1994 - Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded - Invocation of extended period of limitation - Stay Order - Assessee's audit was done by department during year 2005 and audit notes were issued in April 2006 and discussion meeting on audit notes was held with Commissioner on 1-1-2009 - During audit and subsequent discussions, department proposed levy of service tax on assessee's activities under 'Commercial Coaching Training or Coaching Services' but while Show-cause notice dated 6-4-2010 proposed demand under 'Business Auxiliary Service' and sought to invoke extended period - Assessee argued that extended period was not invocable - HELD : In view of audit visits in 2005 leading to discussion on assessee's activities in 2009 by Commissioner, issue of show-cause notice for period from October, 2004 to March, 2009 invoking extended period of limitation may not be justified [Para 5.2] [In favour of assessee]
G. Shiva Dass for the Appellant. R.K. Singla for the Respondent.
ORDER
M. Veeraiyan, Technical Member - Heard both sides extensively on the stay petition.
2. The appellant is a subsidiary of Sun, USA. The appellants along with Authorized Sun Education Centre (ASEC partners) are involved in facilitating conduct of online examination for awarding various certificates by Sun, USA. The online examination and evaluation are undertaken by M/s. Prometric, USA. The appellant claims that they are involved in "sale of vouchers" which basically provides a password to a prospective candidate for the purpose of appearing for the examination. The Commissioner has held that the appellants are involved in rendering 'Business Auxiliary Service' and on the amounts objected by the appellants from various candidates demanded service tax amounting to Rs. 8,50,98,796/- relating to the period from October, 2004 to September, 2008 along with interest and imposed penalties.
3.1 Learned advocate for the appellant submits that they are only engaged in sale of Prometric vouchers and that they are not rendering any service at all. Alternatively he submits that if activities are treated as rendering of service, the same should be treated as rendering of services in relation to education and that they are eligible for the benefit of exemption Notification No. 14/2004-S.T., dated 10-9-2004.
3.2 He further submits that there was audit of the appellant's activities by the department during 2005, and audit notes were issued in April, 2006 and in pursuance to the said audit notes, discussion meeting was held with the Commissioner on 1-1-2009. During the audit and subsequent discussions, the department proposed levy of service tax on these very activities under the head 'Commercial Coaching and Training' and subsequently they have changed the view and issued a show-cause notice on 6-4-2010 proposing demand under the category of 'Business Auxiliary Service' relating to the period October, 2004 to March, 2009. Therefore, substantial part of the demand is time-barred. According to him, about Rs. 1,26,96,335/- will be within the normal period of limitation.
4. Learned Commissioner (AR) reiterating the findings and reasoning of the Commissioner submits that the activities of the appellants in relation to award of certificates by Sun, USA cannot be treated as sale activities. Further, no coaching or training is given by the appellants to treat their activities as part of any educational programme. Further, he submits that these grounds have not been taken before the Commissioner.
5.1 We have carefully considered the submissions from both sides and perused the records. The prospective candidates do not, prima facie, have a relationship of student-teacher in the programme leading to issue of certificates by Sun, USA. The learning/training, if any, is taken from other sources and the appellants are enabling conduct of examination and evaluation. The claim that appellants are selling e-vouchers may not deserve to be accepted. Their activities are, prima facie, in relation to conduct of online examination and evaluation by Prometric in relation to certifying professional competence of the aspiring candidates in various spheres of software skills. Further, we find that the claim to the eligibility of Notification No. 14/2004 has been made for the first time before us and has not been raised before the Commissioner. This claim requires to be gone into in detail at the time of final hearing.
5.2 Further, in view of the audit visits in 2005 leading to discussion on the very same activities in 2009 by the Commissioner, the issue of show-cause notice for the period from October, 2004 to March, 2009, invoking extended period of limitation may not be justified.
5.3 No financial hardship has been pleaded before us.
6. In view of the above, we deem it appropriate to direct the appellant to deposit Rs. 1 crore (Rupees One crore only) within 6 weeks from today and report to the Assistant Registrar on 6-8-2012 and the Assistant Registrar to report to the Bench on 13-8-2012. Subject to deposit of the above amount, there shall be waiver of pre-deposit of balance of dues as per the impugned order and stay of recovery thereof till disposal of the appeal.
IT: Where assessee offered amount in question as additional income to buy peace and to avoid prolonged litigation, addition made on basis of such offer of assessee did not call for levy of penalty under section 271(1)(c)
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[2013] 36 taxmann.com 3 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'B'
Marathon Nextgen Reality & Textiles Ltd.
v.
Deputy Commissioner of Income-tax*
B.R. MITTAL, JUDICIAL MEMBER
AND R.K. PANDA, ACCOUNTANT MEMBER
AND R.K. PANDA, ACCOUNTANT MEMBER
IT APPEAL NOS. 3073 & 3972 (MUM.) OF 2008
[ASSESSMENT YEAR 2005-06]
[ASSESSMENT YEAR 2005-06]
DECEMBER 14, 2011
Section 271(1)(c), read with section 132, of the Income-tax Act, 1961 - Penalty - For concealment of income [Surrender of income] - Assessment year 2005-06 - Whether when assessee had denied receipt of amount in question and seized documents also did not bear signatures or initials of any person, merely because assessee had offered same as additional income, same did not call for levy of penalty under section 271(1)(c) - Held, yes - Whether further, where assessee offered amount in question as additional income to buy peace and to avoid prolonged litigation, addition made on basis of such offer of assessee did not call for levy of penalty under section 271(1)(c) - Held, yes [Paras 11 & 12] [In favour of assessee]
FACTS
| ■ | A search under section 132 was initiated in the case of the assessee along with other group cases. During the course of the said search various documents, books of account etc. were found and seized. Seized documents contained receipt of 'on money' by the assessee from various persons in respect of its various projects. Out of the total on-money of Rs. 402.53 lacs, the assessee had offered only Rs. 123.85 lacs in the return filed. Out of the balance amount of Rs. 278.69 lacs, it was explained during the search proceedings that an amount of Rs. 110.5 lacs was not received by the assessee since it did not contain initials of any of the family members acknowledging receipt of the said amount. It was further explained that an amount of Rs. 25 lacs was spent for various expenses, an amount of Rs. 138 lacs was paid to middlemen for removal of encroachment from the land and an amount of Rs. 5,18,800 was incurred for miscellaneous expenses. However, during the course of assessment proceedings, the assessee offered the amount of Rs. 278.69 lacs as additional income with a condition that no penalty should be levied. It was also explained that the same was being offered as the assessee was not in a position to substantiate with evidence and to buy peace and to avoid prolonged litigation. | |
| ■ | The Assessing Officer was not convinced with the explanation given by the assessee and levied penalty on the amount of Rs. 110.5 lacs and Rs. 163 lacs. | |
| ■ | The Commissioner (Appeals) deleted the penalty levied by the Assessing Officer on the amount of Rs. 110.50 lacs on the ground that there was no signature on the seized document as a token of receipt of on-money against the entries of Rs. 100.5 lakhs and Rs. 10 lakhs respectively. However, he sustained the penalty on amount of Rs. 1.63 crore on the ground that no documentary evidence was filed to substantiate that such expenditure had been incurred. | |
| ■ | On second appeal: |
HELD
| ■ | So far as the ground raised by the revenue regarding the deletion of penalty on amount of Rs. 110.50 lacs is concerned, admittedly, the basis of addition was the nothings in the seized document which contain the date, name, project, area, total, remarks and initials of receiver. Admittedly, the amount of Rs. 100.50 lacs on 16th Oct., 2004 and Rs. 10 lacs on 20-10-2004 does not contain initials of any receiver. Further, the marketing executive of the assessee 'V' in his statement recorded under section 132(4) has categorically stated that the amount mentioned on 16-10-2004 was to be received but anyhow it was not received and therefore there is no signature of our director against the date. Nothing has been brought on record to disprove the above statement given by 'V' during the course of search recorded under section 132(4). Further the director of assessee 'M' gave detailed explanation during the course of assessment proceedings that two amounts of Rs. 10 lacs and 100.50 lacs respectively were not received and the same did not bear initials of any person on the last column of the document. When 'V' and the director of the company 'M' have categorically stated that the amounts of Rs. 10 lacs and 100.50 lacs were not received and when the seized document does not contain the signatures or initials of any family member or director of the assessee-company acknowledging the receipt of the same, therefore, merely because the assessee has offered the same as additional income during the course of assessment proceedings, the same does not call for levy of penalty under section 271(1)(c). In this view of the matter there was no infirmity in impugned order deleting the penalty levied on Rs. 110.50 lacs. [Para 11.2] | |
| ■ | As regards the ground raised by the assessee in relation to penalty imposed on Rs. 1.63 crore, the director of the assessee-company 'M' in his statement recorded under section 132(4) has categorically stated that the amount of Rs. 25 lacs was spent as business expenditure and not debited in the regular books of account. Similarly Rs. 1.38 crore was given to various middlemen to settle the property encroachment. Further 'M' in his reply to question No. 10 had stated that for business exigency he is unable to disclose the names of the middlemen to whom the payments of Rs. 1.38 crore were given. No doubt, the assessee has offered the above two amounts as additional income during the course of assessment proceedings on the ground that it is not in a position to substantiate with evidence and therefore to buy peace and to avoid prolonged litigation it wants to offer the same as additional income. Since the assessee offered the same as additional income, the Assessing Officer was justified in making the addition. But the addition by itself will not amount to concealment of income or furnishing of inaccurate particulars of income to attract the levy of penalty under section 271(1)(c). The assessee would not have offered the amount if he had the supporting documents to substantiate the expenditure. | |
| ■ | There was merit in the submission of the assessee that the nature of expenditure explained during the course of search is common in real estate business. Since the assessee was unable to substantiate the claim with supporting evidence it offered the same as additional income to buy peace and to avoid prolonged litigation. The revenue has not brought anything on record to suggest that the amount has not been spent by the assessee or it has been utilized for acquiring some other assets. The entire addition has been made on the basis of admission by the assessee in the shape of the covering letter offering the same as additional income. When a statement is recorded from the assessee and addition is made on the basis of the statement recorded then the same statement has to be accepted in full or rejected in full. The revenue cannot pick-up and choose that portion which is favourable to the department and against the assessee. Therefore, the addition made on the basis of the offer letter of the assessee does not call for levy of penalty under section 271(1)(c). [Para 12] |
CASES REFERRED TO
Ramnath Jagannath v. State of Maharashtra [1984] 57 STC 46 (Bom.) (para 5.4), CIT v. Amalendu Paul [1984] 145 ITR 439/[1983] 13 Taxman 325 (Cal.) (para 5.4), CBI v. V.C. shukla AIR 1998 SC 1406 (para 8.1), Prakash K. Kothari [IT (SS) A. No. 241 (Mum.) of 2005, dated 20-4-2006] (para 8.1), Kanbay Software India (P.) Ltd. v. Dy. CIT [2009] 31 SOT 153 (Pune) (para 8.2), CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) (para 8.3), Tarachand Ghanshyamdas v. CIT [1966] 59 ITR 378 (Mad.) (para 8.4), Dy. CIT v. Chirag Metal Rolling Mills Ltd. [2008] 305 ITR 29/[2007] 162 Taxman 317 (MP) (para 9.1), H.V. Venugopal Chettiar v. CIT [1985] 153 ITR 376/23 Taxman 412 (Mad.) (para 9.1), CIT v. D.K.B. & Co. [2000] 243 ITR 618/[2003] 128 Taxman 552 (Ker.) (para 9.1) and Rathnam & Co. v. IAC [1980] 124 ITR 376/4 Taxman 342 (Mad.) (para 9.1).
Sashi Tulsiyan for the Appellant. P.C. Maurya for the Respondent.
ORDER
R.K. Panda, Accountant Member - These are cross-appeals. The first one is filed by the assessee and the second one filed by the Revenue and are directed against the order dt. 24th March, 2008 passed by the learned CIT(A)-Central VI, Mumbai relating to asst. yr. 2005-06. For the sake of convenience these appeals were heard together and are being disposed of by this common order.
2. The assessee in the grounds of appeal has challenged the order of the learned CIT(A) in sustaining the penalty levied by the AO under s. 271(l)(c) of the IT Act in respect of 'on-money' receipt of L63 crore. The Revenue in its grounds of appeal has challenged the order of the learned CIT(A) in deleting the penalty levied by the AO under s. 271(l)(c) of the IT Act in respect of addition of Rs. 110.50 lakhs.
3. The brief facts leading to the levy of penalty by the AO are as under :
A search under s. 132 of the IT Act was initiated on 2nd Dec, 2004 in the case of the assessee along with M/s Marathon Realty Ltd. and other group cases. During the course of the said search various documents, books of account etc. were found and seized. During the course of search action at the residence of Shri Virendra Shetty, senior executive of the assessee group companies residing at C-401, Saidham Complex, PK Road Extension, Mulund (W), Mumbai-80, a file marked as 'Annex. Al' containing pp. 1 to 10 as per Panchnama dt. 2nd Dec, 2004 was found and seized. Page Nos. 6 (both sides) and 7 of this file pertain to the assessee. In the statement recorded at the time of search proceedings from Shri Virendra Shetty and Shri Mayyur Shah, directors of the assessee-company they admitted the fact that the contents of the pp. 6 and 7 pertain to the assessee group companies. The page No. 6 revealed that the cash reflected in the seized paper was received by Shri Virendra Shetty on various dates between 4th Sept., 2004 to 1st Dec, 2004 on behalf of the assessee and was ultimately handed over periodically to the directors/family members of the group. This cash amounts referred therein are received by the assessee group as 'on-money' charged by Marathon Group in its various pages as appearing in the said paper. This page refers to the projects of the assessee i.e. M/s Marathon Nextgen Realty & Textiles Ltd. and M/s Marathon Realty Ltd.
3.1 During the course of post-search proceedings and assessment proceedings, the assessee company was asked to explain the contents of the documents being page No. 6 of file A/1 seized from the residence of Shri Virendra Shetty. During the post-search enquiry i.e., on 22nd Jan., 2005, Shri Mayyur Shah was also confronted with the statement of Shri Virendra Shetty recorded on 2nd Dec, 2004 wherein Shri Mayyur Shah has also confirmed the fact of having received the on-money on sale of flats in their projects.
4. The AO noted that although the total amount of on-money details found was Rs. 449.48 lacs, the assessee has offered only Rs. 123.85 lacs in its books as against Rs. 402.53 lacs mentioned in the seized paper regarding on-money and pertaining to the assessee-company. He noted that the balance on-money of Rs. 46.95 lacs pertains to Marathon Realty Ltd. for the asst. yr. 2005-06.
4.1 The AO asked the assessee-company to justify its claim on certain amounts which were not actually received claiming as not having been acknowledged by way of signatures of the directors/family members of the assessee group. According to the AO all the particulars being dated, parties name, project name, amount and remarks are found noted in the seized paper, except for the initial of receiver. He noted that Shri Virendra Shetty being sales executive received the cash on behalf of the assessee group companies only. The assessee is in receipt of the said cash amounts for which acknowledgement (signatures) of the directors/family members of Marathon group remained to be obtained on seized paper. The money has been received on behalf of the assessee-company by Shri Virendra Shetty. Only the signature part was pending. Therefore, this in no way takes away from the facts of the receipt of the on-money by the assessee-company. The AO also asked the assessee to substantiate its claim of having incurred expenditure as unaccounted business expenses of Rs. 25 lacs and payments made to middlemen of Rs. 138 lacs and its allowability in computation of total income of the assessee-company as deduction from the gross amount of cash of Rs. 4.49 crore as appearing in the seized paper. The AO noted that the assessee could not submit any details being nature of such expenses, persons to whom payments made, bills, vouchers or any of the relevant documents. Regarding middlemen payments the assessee could not give any details as to names of persons who acted as middlemen. According to him even otherwise also those payments are to be considered as illegal payments, since the assessee could not substantiate the claim of such expenditure or payments to middlemen. The AO asked the assessee to show cause as to why the total of transaction recorded in the seized papers being Rs. 4,49,48,800 should not be treated as "undisclosed income" of the assessee on account of on-money receipts.
4.2 The assessee in its reply filed its submissions which read as under :
"There was search and seizure action under s. 132 of IT Act 1961 at the premises of Marathon Group as on 2nd Dec, 2004 and 3rd Dec, 2004. At that time we had declared an undisclosed Income of Rs. 1,23,85,000 (in asst. yr. 2005-2006). The total offer of Income by the group in statement under s. 132(4) was in the following manner and was determined on the basis of cash found at the time of search :
| Marathon Nextgen Realty & Textiles Ltd. | 1,23,85,000 | |
| Marathon Realty Ltd. | 46,95,000 | |
| United Builders | 4,40,000 | |
| 1,75,20,000 |
After completion of the search proceedings we had filed the return of income for asst. yr. 2005-06 under s. 153A of IT Act 1961 inclusive of declared income of Rs. 1,23,85,000.
During the course of search some papers were found from possession of one of the employees being Mr. Virendra Shetty and the assessee group had explained all the seized papers. We were asked to show cause why total of transactions recorded In paper seized from him being Rs. 4,49,48,800 should not be treated as undisclosed income of the group and we had submitted explanations on the basis of which explanations for following items was accepted subject to verification at the time of assessment:
| 10,00,000 | For Era IV Project-as the papers were unsigned. | ||
| 1,00,50,000 | For Innova Project-as the papers were unsigned. | ||
| 25,00,000 | Unaccounted expenses—though they were genuine expenses the assessee is not in a position to justify the same with supporting documents | ||
| 1,38,00,000 | Payment made to middlemen for removal of encroachments from the land which are actual expenses for the assessee but cannot be justified under s. 37(1) of IT Act. | ||
| 5,18,800 | Miscellaneous expenses | ||
| 2,78,68,800 |
The assessee has furnished detailed explanation on each of the above issues during the course of assessment proceedings and the assessee submits that the same cannot be treated as income of the assessee.
However, with a view to buy peace and avoid litigation, the assessee seeks to offer the said amount by way of income subject to the condition that no penal proceedings shall be initiated nor any penalty levied. After addition of Rs. 2,78,68,800 to the disclosed amount of Rs. 1,23,85,000, the total additional income is Rs. 4,02.53,800 for MRNTL. On addition of undisclosed income for Marathon Realty Ltd. of Rs. 46,95,000 the total undisclosed income for Marathon Group comes to Rs. 4,49,48,800.
We had not charged on-money in the various projects since the projects though commenced in February, 2004 the booking of the flats was started in September, 2004. Since these were relatively new projects there is no question of charging on-money previously. Whatever amounts collected by us were to meet expenses of middlemen for freeing the property from encroachments and other expenses to meet for the same purpose. This is not the normal business practice of us. All the above amounts stated though the same are genuine expenses for us, we are not in the position to justify the same with IT Department.
We want to buy peace of mind and to avoid protracted litigation we have no objection if the IT Department makes addition to its undisclosed income at the tune of Rs. 2.78,68,800 as discussed above.
We request that the IT Department should not levy penalty proceedings under s. 271(l)(c) of IT Act, 1961 taking into consideration the fact that we have always co-operated with the IT Department on all issues."
5. However, the AO was not convinced with the explanation given by the assessee. He observed that the seized papers found from the residence of Shri Virendra Shetty as well as unaccounted cash found from the residence of directors clearly show that the assessee group has charged on-money on the sale of flats and commercial premises in its projects referred to in the said seized documents which are not accounted in the regular books of account of the assessee company. Since an amount of Rs. 46,95,000 has been treated as "undisclosed income" pertaining to M/s Marathon Realty Ltd. and is considered in its assessment for the asst. yr. 2005-06, the AO treated the balance amount of Rs. 4,02,53,800 as "additional income" of the assessee pertaining to asst. yr. 2005-06. Since the assessee has disclosed additional income of Rs. 1,23,85,000 in its return of income, the AO made an addition of Rs. 2,78,68,800 as the "additional income" being on-money receipts of the assessee-company.
5.1 Subsequently the AO initiated penalty proceedings under s. 271(l)(c) of the IT Act. It was explained by the assessee that the total amount of on-money receipts shown in p. 6 of Annex. 1 was Rs. 4,02,53,800 (total Rs. 4,49,48,800 out of which Rs. 46,95.000 related to Marathon Realty Ltd., two amounts of Rs. 10 lakhs and Rs. 100.50 lacs were not received and the same did not also bear initials of any person on the last column of p. 6 of Annex. Al. Out of the balance amount remaining expenses were claimed to the extent of Rs. 1,68,18,800 and thus, the balance amount of Rs. 1,23,85,000 was offered for tax in the return of income filed for the asst. yr. 2005-06. In the course of assessment proceedings, the assessee filed a letter. On the basis of the letter so filed and the additional income so offered, the AO made addition of Rs. 2,78,68,800 to the returned income of Rs. 2,40,76,210.
5.2 It was submitted that so far as the amount of Rs. 1,23,85,000 is concerned, the assessee has offered the -said amount during the course of search in the statement recorded under s. 132(4) as additional income in the return of income filed for the asst. yr. 2005-06, and for which the financial year was not ended at the time of search action conducted on 2nd Dec, 2004. The assessee has thus disclosed the amount in the return of income filed, disclosed in the statement recorded under s. 132(4) and the manner of earning the said income has also been disclosed and the tax on the same has also been paid. Therefore, the assessee falls within the scope of immunity provided under Expln. 5 to s. 271(l)(c)of the Act.
5.3 So far as the balance amount of Rs. 2,78,68,800 is concerned, it was submitted that during the course of assessment proceedings it was explained before the AO that Rs. 110.50 lakhs was not received at all, as there was no initials of any family member receiving such amount in the loose papers seized, on the basis of which the addition is made. So far as the balance amount of Rs. 1,68,18,800 is concerned it was categorically stated during the course of search proceedings itself that this was incurred as expenses for removing encroachments etc. It was submitted that merely because the explanation given could not be substantiated, that by itself would not lead to concealment of income or furnishing of inaccurate particulars of income and hence, the penalty proceedings initiated may be dropped.
5.4 Various decisions were also cited before the AO. It was submitted that during the course of assessment proceedings the assessee had offered the entire amount of Rs. 2,78,68,800 by filing a letter wherein the amount offered was a conditional offer for not to initiate or levy penalty proceedings under s. 271(l)(c) of the Act. Referring to the decision of Hon'ble Bombay High Court in the case of Ramnath Jagannath v. State of Maharashtra [1984] 57 STC 46 at p. 51 it was submitted that an offer if coupled with conditions which are not reasonable or one which cannot be accepted in law completely would not render, unconditional the offer which is in terms made on a condition. If it is not possible to accept that condition, the only result would be that that offer must be rejected. But where an offer is coupled with conditions, which cannot be accepted fully, the offer cannot be treated as an unconditional offer merely on that count: Referring to the decision of Hon'ble Calcutta High Court in the case of CIT v. Amalendu Paul [1984] 145 ITR 439/[1983] 13 Taxman 325it was submitted that when a cash credit was included in revised return with a prayer that no penalty be levied, it was held that a conditional admission of the assessee cannot be made basis for penalty. Various other decisions were also cited before the AO to the proposition that no penalty under s. 271(l)(c) of the IT Act. should be levied.
5.5 However, the AO was not convinced with the explanation given by the assessee. According to him on-money of Rs. 110.50 lakhs was received by Shri Virendra Shetty, marketing executive of the assessee company which itself shows that the money has been received by the assessee group. Similarly, the assessee has also not given any explanation with evidence to the satisfaction of the AO regarding the expenditure of Rs. 1,68,18,800. Therefore, the AO relying on a couple of decisions, held that the assessee has concealed its income by furnishing inaccurate particulars of income of an amount of Rs. 2,78,68,800. The explanation offered by the assessee is not substantiated with evidence. He, therefore, levied penalty of Rs. 1,01,97,891 under s. 271(l)(c) of the Act being 100 per cent of the tax sought to be evaded.
6. Before the learned CIT(A) the assessee reiterated the same submissions as made before the AO. It was submitted that the assessee has surrendered the additional income during the assessment proceedings just to buy peace and to avoid prolonged litigation and with a specific prayer/condition that no penalty should be levied in respect of this addition. Thus in the assessment order the addition was made by way of agreed assessment, for which the assessee did not prefer any appeal against the addition. The addition was made on the basis of assessee's offer of the amount and there is no other independent material/evidence on record to establish that the amount of addition represented the assessee's income so as to conclude that the assessee has concealed the particulars of its income. It was submitted that in this case since the AO had made the addition on the basis of offer/surrender by the assessee, and has thus accepted the offer, therefore, the offer has to be accepted along with the condition and not without that. The Department cannot blow hot and cold at the same time. It cannot accept the offer to make the addition and reject the attaching condition to impose the penalty. It was submitted that the Department in the instant case has not made any independent enquiry. Therefore, if the assessee's conditional offer is removed, there remains nothing on record to establish or even to suggest that the amount of Rs. 110.50 lakhs, which does not bear initials of the recipient in the last column on p. 6 of Annex. Al was indeed received. Similarly, there is no evidence with the Department that the amount of Rs. 1,68,18,800 had not been incurred as expenditure. It was submitted that in the Expln. 1 to s. 271, the initial burden is on the Department to prima facie establish concealment of income or furnishing of inaccurate particulars by assessee and, thereafter, only the assessee's explanation is to be considered as to whether the same is false, bona fide or has not been substantiated etc. The provision of s. 271(l)(c) of the IT Act was brought to the notice of the learned CIT(A). Further, the statements recorded under s. 132 (4), during the course of search action from Shri Virendra Shetty and Shri Mayur Shah, directors of the assessee-company were bought to the notice of the learned CIT(A) to substantiate that the amount of Rs. 110.50 lakhs was not received and an amount of Rs. 1,68,18,800 has been incurred as expenses. Relying on a couple of decisions it was submitted that no penalty under s. 271(l)(c) of the IT Act should be levied.
6.1 Based on the arguments advanced by the assessee, the learned CIT(A) deleted the penalty levied by the AO under s. 271(l)(c) of the IT Act. on addition of Rs. 110.50 lakhs and sustained the penalty levied by the AO on the balance amount of Rs. 1.63 crore. While doing so he held that so far as the on-money of Rs. 110.50 lakhs claimed by the assessee as not received is concerned, it is an undisputed fact that there were no signatures as a token of receipt of money taken against the two entries of Rs. 100.5 lakhs and Rs. 10 lakhs in the document found and seized during the course of search. The marketing executive of assessee-company Shri Virendra Shetty in his statement recorded under s. 132(4) during the course of search in response to answer to question No. 8 has also categorically stated that the amount has not been received. A director of the assessee company Shri Mayyur Shah has also given detailed explanation in the course of assessment proceedings that out of the total income of Rs. 4,02,53,800 two amounts of Rs. 10 lacs and Rs. 100.50 lacs were not received and the same did not have initials of any persons on the last column of the document. The AO has not controverted the above submissions of the responsible persons. According to him the assessee had offered an explanation with reference to the non-receipt of the said two amounts and has been able to substantiate the same with the help of statement of Shri Virendra Shetty as well as the absence of initials against the said entries in the seized documents. The above explanation has not been proved to be false or untrue. Therefore, the penalty under s. 271(l)(c) of the IT Act. cannot be levied on the amount of Rs. 110.50 lakhs.
6.2 So far as the other two amounts i.e., 1.38 crore and 25 lakhs are concerned, he noted that the same has been claimed to be expenditure on account of payments made to middlemen to settle property encroachments and business expenditure respectively. However, no evidence was filed to substantiate the said statement, no documents indicating any such expenses having been incurred were found and seized during the course of search action. Therefore, the expenditure cannot be accepted as genuine merely on the basis of statement without filing any document or evidence to corroborate the said statement. The submission of the assessee that disclosure was made only to buy peace of mind and avoid protracted litigation has not much truth, since it is a matter of record, that material was found during the course of search indicating the receipt of on-money and no such evidence was found during the course of search regarding any expenditure. In the instant case, there was material in the possession of the Department to corroborate the theory of receipt of on-money but the assessee has no material to corroborate its theory of expenses having been incurred. Therefore, he concurred with the finding of the AO that the assessee has not been able to substantiate its claim of having incurred expenditure on unaccounted business expenses of Rs. 25 lakhs and payments made to middlemen of Rs. 138 lakhs and its allowability in the computation of the total income of the assessee as deduction from the gross amount of cash of Rs. 4.49 crore as appearing in the seized paper. The assessee also could not submit any details regarding the nature of such expenses, persons to whom payments were made, bills, vouchers or any other relevant document. The assessee could not give the names of the middlemen and the addresses of the middlemen who received payments aggregating to Rs. 138 lakhs. He, accordingly, confirmed the levy of penalty under s. 271(l)(c) of the IT Act. on Rs. 138 lakhs and Rs. 25 lakhs respectively.
7. Aggrieved with such part relief given by the learned CIT(A), the assessee as well as the Revenue are in appeal before us.
8. The learned counsel for the assessee reiterated the same submissions as made before the AO and the learned CIT(A). He submitted that the penalty in this case was levied on agreed assessment. Referring to the copy of assessment order, the learned counsel for the assessee drew the attention of the Bench to page Nos. 2 and 3 of the assessment order and submitted that the contents of the seized papers which have been extracted by the AO do not contain any on-money receipt and are written in coded language such as P.P. F.P, L, CRS, MRS, ARS and SCS etc. The Revenue was not able to decipher the coded language without the help of the assessee. Referring to the copy of statement of Shri Virendra Shetty recorded by the Department during the course of search on 2nd Dec, 2004 under s. 132(4) of the IT Act, the learned counsel for the assessee drew the attention of the Bench to Q. No. 8 put to Shri Virendra Shetty and the reply given by him, according to which the amounts mentioned against date 16th Oct., 2004 and 20th Oct., 2004 were to be received. But anyhow the money was not received and, therefore, there is no signature. Persons who use to receive the cash have made statements before the search party itself that the amounts of Rs. 100.50 lakhs and Rs. 10 lakhs were never received. Referring to the statement of Shri Mayur Shah, director of the assessee-company recorded by the search party on 22nd Jan., 2005 under s. 132(4) of the Act, the learned counsel for the assessee drew the attention of the Bench to Q. No. 7 put by the Dy. Director of IT and the reply given by him according to which an amount of Rs. 3.38 crore only is received which is duly acknowledged. He submitted that in response to Q. No. 8, the director had stated that out of Rs. 3.38 crore received, Rs. 1.75 crore was found and the balance amount was spent. Further, the director had also given the break-up of expenditure according to which an amount of Rs. 25 lacs was incurred for business needs and an amount of Rs. 1.38 crore was paid to middlemen to settle property encroachment. Referring to the answer given by the director in reply to the Q. No. 10 put by the Dy. CIT(A), the learned counsel for the assessee submitted that the director at that time had stated that due to business exigencies, he is unable to disclose their names. Referring to the letter addressed to the AO on 26th Dec, 2006, copy of which is placed at paper book page Nos. 21 and 22, he submitted that the assessee had made a conditional offer to the AO for making the addition of Rs. 2,78,68,800. It was offered to buy piece of mind and to avoid prolonged litigation. Under these circumstances, the assessee had no objection for the amount of Rs. 2,78,68,800 to be added to the total income of the assessee with a request not to initiate the penalty proceedings under s. 271(l)(c) of the IT Act.
8.1 He submitted that the disclosure was on the basis of one loose paper. The Department has not brought any material whatsoever which has been accepted by the assessee. Referring to a number of decisions including the decision of Hon'ble Supreme Court in the case of CBIv. V.C. shukla AIR 1998 SC 1406, he submitted that loose sheets of papers contained in files are not books of account and cannot be reliable. He submitted that when a statement is recorded from the assessee and addition is made on the basis of the statement recorded then the same statement has to be accepted in full or rejected in full. The Revenue cannot pick-up and choose that portion which is favourable to the Department and against the assessee. For this proposition, he relied on the decision of the Tribunal in the case of Prakash K. Kotharivide IT(SS)A No. 241/Mum/2005 order dt. 20th April, 2006 for the block period 1st April, 1995 to 21st Feb., 2002. He submitted that in the instant case the Revenue has not brought out anything by conducting any independent enquiry. The learned counsel for the assessee drew the attention of the Bench to cl. (2) of Expln. 5 to s. 271(l)(c) of the IT Act according to which no penalty under s. 271(l)(c) of the IT Act can be imposed, if the assessee in the course of search makes a statement under s. 132(4) that the undisclosed asset has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in sub-s. (1) of s. 139 and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. He submitted that the assessee in the instant case has met all the conditions of the Expln. 5 to s. 271(l)(c) of the IT Act. Referring to the provisions of Expln. 1 to s. 271(l)(c) of the IT Act, he submitted that the assessee in the instant case has offered an explanation to the AO who has not brought out anything on record to show that such explanation is false. The assessee has also substantiated the disparity made by it giving the gross and net amount. He submitted that the bona fide of the assessee shows that the statement given at the time of search was not an afterthought.
8.2 Referring to the decision of Pune Bench of the Tribunal in the case of Kanbay Software India (P.) Ltd. v. Dy. CIT [2009] 31 SOT 153 (Pune) he drew the attention of the Bench to paras 60 to 68 of the order and submitted that when an explanation is offered by the assessee in discharge of the onus cast upon him by Expln. 1 to s. 271(l)(c) of the IT Act, it is not for the AO to ponder over what should have happened in ideal circumstances, and reject the explanation because what has actually happened is less than such an imaginary ideal situation; he has to consider the Explanation objectively and unless he finds the same against the human probabilities or unless there are any real inconsistencies or factual errors in such an explanation, the AO ought to accept the same. It cannot always be feasible to prove the claim of bona fides to the hilt, nor the assessee can be expected to do so. The explanation for bona fide needs to be considered in a fair and objective manner and in the light of the human probabilities. He submitted that the assessee in the instant case is a builder and as such payments of the type explained earlier are normal in such type of business. The statement was given under s. 132(4) explaining the nature of expenses incurred and the business exigency for non-disclosure of the names of the middlemen. Therefore, the assessee discharged the onus cast on it by making an explanation.
8.3 Referring to the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 he submitted that mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate particulars.
8.4 Referring to the decision of the Tribunal in the case of Tarachand Ghanshyamdas v. CIT [1966] 59 ITR 378 (Mad.) he submitted that when the offer was conditional, the AO cannot go to that part of the offer which is favourable to the Department and against the assessee. He also relied on a couple of decisions as per the written submissions and submitted that the penalty levied by the AO and confirmed by the learned CIT(A) should be deleted and the portion on which penalty levied by the AO has been deleted by the learned CIT(A) should be upheld. In sum and substance he submitted that no penalty under s. 271(l)(c) of the IT Act. can be levied in the instant case.
9. The learned Departmental Representative on the other hand, while supporting the order of the AO submitted that this is a fit case for levy of penalty under s. 271(l)(c) of the IT Act. Refuting the submission of the learned counsel for the assessee that the seized document contains coded language which could not be deciphered without the help of the assessee, he submitted that there is no code as such since it is crystal clear from the language itself. So far as the submission of the learned counsel for the assessee that it was a conditional offer, he submitted that conditional offer has no legal sanctity as far as income-tax proceedings are concerned. Referring to the decision of Hon'ble Supreme Court in the case of V.C. Shukla (supra) relied on by the learned counsel for the assessee, he submitted that the ratio of the said decision is not applicable to the facts of the present case. He submitted that when the assessee during the course of search proceedings and assessment proceedings has admitted the receipt of on-money, no further enquiry was required by the Department.
9.1 The learned Departmental Representative also relied on the decision in the case of Dy. CIT v. Chirag Metal Rolling Mills Ltd. [2008] 305 ITR 29/[2007] 162 Taxman 317 (MP) and the decisions in H.V. Venugopal Chettiar v. CIT [1985] 153 ITR 376/23 Taxman 412 (Mad.), CIT v. D.K.B. & Co. [2000] 243 ITR 618/[2003] 128 Taxman 552 (Ker.) and Rathnam & Co. v. IAC [1980] 124 ITR 376/4 Taxman 342 (Mad.).So far as the amount of Rs. 110.50 (sic-lakhs) crore is concerned, the learned Departmental Representative submitted that although the signature is not there but all other conditions are fulfilled such as specific date, name of the project, area, amount etc. Since the assessee has offered the amount during the course of assessment proceedings, it is not correct to say that the amount has not been received. Since the learned CIT(A) has not given any cogent reason while deleting the penalty on this amount, he submitted that the penalty levied by the AO on this amount should be upheld.
10. The learned counsel for the assessee in his rejoinder submitted that the document seized during the course of search on the basis of which addition has been made was in fact in coded form. Only on the basis of the explanation given by the assessee, the Revenue was able to decipher the same.
11. We have considered the rival submissions made by both the sides, perused the orders of the AO and the learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that during the course of search a file marked Annex. Al containing pp. 1 to 10 as per the Panchnama dt. 2nd Dec, 2004 was found and seized. There is also no dispute to the fact that page Nos.. 6 and 7 of the said Annex. Al pertain to the assessee which contain receipt of 'on-money' by the assessee from various persons in respect of its various projects. We find out of the total on-money of Rs. 449.40 lakhs, an amount of Rs. 46.95 lakhs pertains to Marathon Reality Ltd., an associate concern. Out of the balance amount of Rs. 402.53 lacs, the assessee had offered only Rs. 123.85 lakhs in the return filed- Out of the balance amount of Rs. 2,78;68,800 it was explained during the search proceedings that an amount of Rs. 1,10,50,000 wag not received by the assessee since it does not contain initials of any of the family members acknowledging receipt of the said amount. It was further explained that an amount of Rs. 25 lacs was spent for various expenses, an amount of Rs. 1,38.00,000 was paid to middlemen for removal of encroachment from the land and an amount of Rs. 5,18,800 was incurred for miscellaneous expenses. However, during the course of assessment proceedings, the assessee offered the amount of Rs. 2,78,68,800 as additional income with a condition that no penalty should be levied. It was also explained that the same is being offered as the assessee is not in a position to substantiate with evidence and to buy peace and to avoid prolonged litigation. We find the AO was not convinced with the explanation given by the assessee and levied penalty on the amount of Rs. 1,10,50,000 and Rs. 1,63,00,000 respectively which is the dispute in the impugned cross-appeals.
11.1 We find the learned CIT(A) deleted the penalty levied by the AO on the amount of Rs. 110.50 lakhs on the ground that there is no signature on the seized document as a token of receipt of on-money against the entries of Rs. 100.5 lakhs and Rs. 10 lakhs respectively. Further Shri Virendra Shetty in his statement recorded under s. 132(4) had stated non-receipt of the said amount and the director Shri Mayyur Shah had also stated during the assessment proceedings about non-receipt of the said amount/However, he sustained the penalty of Rs. 1.63 crore on the ground that no documentary evidence was filed to substantiate that such expenditure has been incurred It is the submission of the learned counsel for the assessee that the amount of Rs. 1,10,50,000 was not received by the assessee as on-money since it does not contain initials of any of the family members which is supported by the statement of Shri Virendra Shetty during the course of search and of Shri Mayyur shah during the course of assessment proceedings. Further the amount of Rs. 1.63 crore has been spent for the purpose of business and since the assessee had no supporting evidence, it offered the same as additional income to buy peace and avoid prolonged delay, therefore, no penalty is called for. It is the submission of the learned Departmental Representative that although no initials are there but the paper contains all other particulars which give strong indication of receipt of on-money of Rs. 1,10,50,000. The assessee has offered the same as additional income. Therefore, penalty under s. 271(l)(c) is attracted on this amount. So far as the amount of Rs. 1,63,00,000 is concerned, no evidence whatsoever was filed to substantiate that such expenditure has been incurred. Therefore, the penalty under s. 271(l)(c) is attracted on this amount. However, he sustained the penalty levied by the AO on the addition of Rs. 1.63,00,000.
11.2 So far as the ground raised by the Revenue regarding the deletion of penalty on amount of Rs. 110.50 lakhs is concerned we find no infirmity in the order of the learned CIT(A) Admittedly, the basis of addition was the notings in the seized document which contain the date, name, project, area, total, remarks and initials of receiver. Admittedly, the amount of Rs. l00.50 lakhs on 16th Oct., 2004 and Rs. 10 lakhs on 20th Oct., 2004 does not contain initials of any receiver. We find Shri Virendra Shetty in his statement recorded under s. 132(4) of the Act on 2nd Dec., 20O4 vide his answer to Question No. 8 has categorically stated that the amount mentioned on 16th Oct., 2004 was to be received but anyhow it was not received and therefore there is no signature of our director against the date. Nothing has been brought on record to disprove the above statement given by Shri Virendra Shetty during the course of search recorded under s. 132(4) of the Act. We further find the director Shri Mayyur Shah gave detailed explanation during the course of assessment proceedings that two amounts of Rs. 10 lakhs and 100.50 lacs respectively were not received and the same did not bear initials of any person on the last column of the document. When the marketing executive Shri Virendra Shetty and the director of the company Shri Mayyur Shah have categorically stated that the amounts of Rs. 10 lakhs and 100.50 lakhs were not received and when the seized document does not contain the signatures or initials of any family member or director of the assessee-company acknowledging the receipt of the same, therefore, merely because the assessee has offered the same as additional income during the course of assessment proceedings, the same in our opinion does not call for levy of penalty under s. 271(l)(c) of the Act. In this view of the matter and in view of the detailed discussion by the learned CIT(A) on this issue and in absence of any contrary material brought to our notice against the findings of the learned CIT(A) on this issue we do not find any infirmity in his order deleting the penalty levied on Rs. l0,50,000. We accordingly uphold the same and the ground raised by the Revenue is dismissed.
12. Now coming to the ground raised by the assessee, we find the director of the assessee-company Shri Mayyur Shah in his statement recorded under s. 132(4) of the Act on 22nd Jan., 2005 vide question No. 8 has categorically stated that the amount of Rs. 25 lakhs was spent as business expenditure and not debited in the regular books of account. Similarly Rs. 1.38 crore was given to various middlemen to settle the property encroachment. We find Shri Mayyur Shah in his reply to question No. 10 had stated that for business exigency he is unable to disclose the names of the middlemen to whom the payments of Rs. 1.38 crore were given. No doubt, the assessee has offered the above two amounts as additional income during the course of assessment proceedings on the ground that it is not in a position to substantiate with evidence and therefore to buy peace and to avoid prolonged litigation it wants to offer the same as additional income. Since the assessee offered the same as additional income, the AO was justified in making the addition. But the addition by itself will not amount to concealment of income or furnishing of inaccurate particulars of income to attract the levy of penalty under s. 271(l)(c) of the Act. The assessee would not have offered the amount if he had the supporting documents to substantiate the expenditure. We also find merit in the submission of the learned counsel for the assessee that the nature of expenditure explained during the course of search is common in real estate business. Since the assessee was unable to substantiate the claim with supporting evidence it offered the same as additional income to buy peace and to avoid prolonged litigation. The Revenue has not brought anything on record to suggest that the amount has not been spent by the assessee or it has been utilised for acquiring some other assets. The entire addition has been made on the basis of admission by the assessee in the shape of the covering letter offering the same as additional income. We therefore find force in the submission of the learned counsel for the assessee that when a statement is recorded from the assessee and addition is made on the basis of the statement recorded then the same statement has to be accepted in full or rejected in full. The Revenue cannot pick-up and choose that portion which is favourable to the Department and against the assessee. Therefore, in our opinion the addition made on the basis of the offer letter of the assessee does not call for levy of penalty under s. 271(l)(c))of the Act.
12.1 We find the Hon'ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd. (supra) has held as under : (Short notes):
"A glance at the provisions of s. 271(l)(c) of the IT Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word 'particulars' used in s. 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under s. 271(l)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars."
12.2 We find the offer by the assessee admitting the additional income was a conditional offer wherein the assessee had offered the additional income and at the same time requested for non-levy of penalty under s. 271(l)(c) of the IT Act. We find the Hon'ble Bombay High Court in the case of Ramnath Jagannath (supra) has held as under (Short notes) :
"The assessee carried on the business of buying and selling provisions. For the assessment years 1st April 1955. to 31st March, 1956, and 1st April, 1956. to 31st March, 1957, the Sales-tax Officer passed assessment orders disallowing the claim of the assessee for deductions under the first proviso to s. 9 of the Bombay Sales-tax Act, 1953, on the ground that the assessee had produced bogus declarations in K Forms. The asepsis's appeals to the Asstt. CIT were dismissed and penalty was levied under the provisions of sub-s. (4) of s. 16 of the Act for late payment by the Asstt. CIT. The assessee then filed applications for revision to the Dy. CIT before whom the assesses's counsel made an oral offer if the post-assessment penalty which was levied by the Asstt. CIT was remitted in full, in order to put an end to the proceedings; the assessee was agreeable to pay the entire amount of tax to which it was assessed. The Dy. CIT asked the counsel of the assessee to put down the assesses's offer in writing and accordingly a letter was addressed to the Dy. CIT by the counsel of assessee. No communication was made to the counsel by the Dy. CIT. The Dy. CIT dismissed the revision application holding that it was not a proper and fit case to waive or reduce the post-assessment penalty and that the counsel of the assessee unconditionally gave up the claim under the first proviso to s. 9 of the Act and only argued for the waiver or reduction of the penalty. The Tribunal in further revision held that the assessee agreed to get its claim for deduction under first proviso to s. 9 of the Act rejected unconditionally but did not agree to the post-assessment penalty. On reference :
Held, that on a plain reading of the letter of assesses's counsel to the Dy. and in the light of the facts, it was clear that the offer made in the letter to give up the claim of deduction under first proviso to s. 9 of the Act was clearly a conditional offer on the post-assessment penalty levied and leviable being given up. If it was rejected by the Dy. CIT he was bound to deal with the claim of the assessee for deduction under the first proviso to s. 9 of the Act on merits.
That an offer if coupled with conditions which are not reasonable or one which cannot be accepted in laid completely would not render unconditional the offer which is in terms made on a condition. If it is not possible to accept that condition, the only result would be that offer must be rejected. But where an offer is coupled with conditions which cannot be accepted fully, the offer cannot be treated as an unconditional offer merely on that count."
12.3 Considering the totality of the facts of the case and considering the fact that the assessee during the course of search in the statement recorded under s. 132(4) had stated that the amount of Rs. 25 lakhs was unaccounted expenses though they were genuine expenses and an amount of Rs. 1.38 crore has been paid to middlemen for removal of encroachment in the land and since the Department has not proved that the amount has not been spent and has been utilised for some other purpose and further considering the fact that the assessee made a conditional offer, therefore, although the same is justified for addition in the quantum assessment, however, the same is not sufficient to attract the levy of penalty under s. 271(l)(c). In this view of the matter we are of the considered opinion that no penalty under s. 271(l)(c) of the Act can be levied on the amounts of Rs. 25 lakhs and 1.35 crore respectively. Therefore, the ground raised by the assessee is allowed.
13. In the result, the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is allowed.
IT: Where assessee was driven to unnecessary litigation even after concluding order had been passed in her case, cost was to be awarded against revenue for such a conduct
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[2013] 36 taxmann.com 49 (Delhi)
HIGH COURT OF DELHI
Ms. Chain
v.
Under Secretary, Government of India, Ministry of Finance, Central Board of Direct Taxes*
BADAR DURREZ AHMED AND R.V. EASWAR, JJ.
W.P.(C) NO. 2045 OF 2012
APRIL 8, 2013
Section 260A of the Income-tax Act, 1961 - High Court - Appeals to [Unnecessary litigation] - Whether where assessee was driven to unnecessary litigation even after concluding order had been passed in her case, cost was to be awarded against revenue for such a conduct - Held, yes [In favour of assessee]
Piyush Kaushik for the Appellant. Kamal Sawhney, Sabib and J.P. Singh for the Respondent.
JUDGMENT
1. It is an admitted fact that since the last date of hearing all the jewellery has been returned to the petitioner at Ahmadabad. Now, nothing remains with the respondents. However, since the petitioners were driven to litigation to retrieve the jewellery even after the order was passed by the CIT (Appeals) as far back as on 17-05-2010, we feel that the petitioner ought to be awarded costs. Thus, while disposing of this writ petition, as no further directions are necessary, we direct I that the respondents, in particular, respondent No.6 shall pay costs of Rs. 15,000/- to the petitioner within two weeks.
2. The writ petition stands disposed of.
3. All pending applications stands disposed of.
SUNILRegards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
__._,_.___
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