P.M. Jagtap, A.M. - (1.) THIS appeal of the assessee is directed against the order of CIT(A), Jodhpur, dt. 1st Jan., 1999, confirming the penalty of Rs. 1,80,000 imposed under s. 271(1)(c). In this case, the return of income declaring a loss of Rs. 32,280 was filed on 9th Aug., 1990. THIS case was selected for scrutiny and during the course of scrutiny, the assessee was asked to furnish the information about certain credits in the books of account. After receiving the relevant details about the creditors from the assessee, the AO initiated further enquiries to find out the genuineness of the creditors. In the meanwhile, the assessee filed a revised return on 26th Feb., 1991, surrendering these cash credits involving a sum of Rs. 4 lakhs as his income under Section 68. Consequently a notice was issued by the AO to the assessee requesting him to state why an order under Section 271(1)(c) imposing penalty for concealment of income or for furnishing inaccurate particulars of such income be not levied. The explanation offered by the assessee in this case was not found satisfactory by the AO and accordingly the AO imposed penalty under Section 271(1)(c) considering that the assessee had concealed the particulars of his income or furnished inaccurate particulars in terms of Section 271(1)(c). The matter was carried before the CIT(A) who confirmed the said penalty. Aggrieved by the same, the assessee is in appeal before us.
(2.) The learned counsel for the assessee Shri S. Jhanwar submitted that the penalty in this case has been levied under the main Section 271(1)(c) and not under any Explanation thereto. He also submitted that penalty has been levied in this case before the detection of concealment by the Department. He also submitted that the AO has erred in assuming the surrendered amount as concealment without making any further enquiries in the matter. He also submitted that inclusion of amount of creditors in income nowhere proves that it is a concealed income of the assessee and contended that no question of penalty, therefore, arises. He further submitted that as the penalty has been levied under the main provisions of Section 271(1)(c), the burden is on the Department to prove that the assessee has concealed the income and contended that nothing has been brought on record by the Department to prove the concealment. He further contended that mere agreement to be taxed on certain amount does not preclude the concealment. For this contention, he relied on the following decisions : (i) Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC); (ii) CIT v. J.V. Appadumi Chettair Co.; (iii) CIT v. C.J. Rathnaswamy (1996) 89 Taxman 509 (Mad); (iv) CIT v. Sant Das Nihal Chand; (v) CIT v. Navnitlal Pochalal (1995) 213 ITR 69 (Guj); (vi) CIT v. Nuruddin & Bros. (1990) 185 ITR 481 (Cal); (vii) Girdhanlal Soni v. CIT (1989) 179 ITR 111 (Cal); (viii) CIT v. Haji Gaffar Haji Dada Chini (1988) 169 ITR 33 (Bom); (ix) CIT v. Punjab Tyres (1986) 162 ITR 517 (MP); (x) CIT v. M. George & Bros. (1986) 160 ITR 511 (Ker); and (xi) Smt. Hema Malini v. ITO (1993) 45 TTJ (Bom) 77. He further contended that where the assessee agreed to certain additions either to buy peace or avoid harassment or litigations, penalty cannot be levied. For this he placed reliance on the following judgment. (i) Akshay Bhandar v. CIT (1997) 90 Taxman 289 (Gau); (ii) 111 ITR 805 (Gau) (sic); (ni) CIT v. Mansa Ram & Sons (1977) 106 ITR 307 (All); (iv) Addl. CIT v. Kishan Singh Chand (1977) 106 ITR 534 (All); (v) CIT v. M. Bhuta & Co. (1976) 103ITR 183 (Bom); (vi) CIT v. Narang & Co. (1975) 98 ITR 462 (Del); (vii) Krishan Lal Shiv Chand Rai v. CIT (1973) 88 ITR 293 (P&H); and (viii) Pamsmal Parekh v. Asstt. CIT (1997) 58 ITD 34 (Jp). He further submitted that the assessee in this case made the surrender specifically on the condition that no penalty would be levied and, therefore, contended that penalty cannot be levied as held in the following cases : (i) CIT v. Atamkhan (1997) 223 ITR 264 (Mad); (ii) CIT v. Kiran & Co. (1996) 217 ITR 326 (Bom); (iii) CIT v. Haji Gaffar Haji Data Chini (supra); and (iv) Vijay Engg. & Machinery Co. vs IAC (1994) 74 Taxman 329 (Bom) (Mag). He further submitted that the AO has not made any efforts to show that the disputed amount represented the income of the assessee and that the assessee has consciously concealed the particulars of his income or deliberately furnished inaccurate particulars about the same. He further contended that penalty cannot be levied simply because the additions are sustained in the quantum proceedings. He also submitted that penalty proceedings are quasi criminal and penal in nature and contended that it was necessary for the AO to establish the mens rea on the part of the assessee in such cases before levying the penalty under Section 271(1)(c) especially when the Explanation to Section 271(1)(c) is not invoked. He also submitted that the offer for surrender in the revised return was made by the assessee voluntarily in good faith prior to any detection by the Department as a gesture to avoid probable unending litigation as also in order to buy peace and, therefore, contended that such facts and circumstances do not justify levy of penalty under Section 271(1)(c). The learned Departmental Representative relied on the orders of the authorities below and submitted that the letter of surrender was addressed by the assessee to the learned CIT and after obtaining a report from the AO the request of the assessee for not levying the penalty under Section 271(1)(c) was refused by the learned CIT. He further submitted that the judgment of Supreme Court in cited by the learned counsel for the assessee is not relevant in this case because the word "deliberate" has been deleted now in the new Act of 1961. He further submitted that the disclosure of income by the assessee in the revised return cannot be considered as voluntary, because at that time, the assessee was cornered by the enquiries initiated by the AO. He also submitted that the AO has discharged his burden by making sufficient enquiries which finally culminated in the surrender of income by the assessee. He further, submitted that the non-receipt of replies from the banks and creditors to the enquiries made by the AO itself is a proof of bogus entries and contended that once surrender is made by the assessee, there was no reason for the AO to make any further enquiry in the matter. He, therefore, contended that this was the not case to levy of penalty under Section 271(1)(c).
(3.) WE have heard both the parties considered the rival submissions and also perused the material on record including the cited cases. It is observed that during the course of the assessment proceedings, the assessee was required by the AO to furnish the details of creditors appearing in the balance sheet. Accordingly, the assessee furnished all the relevant information about the creditors such as name, address, GIR No., mode of payment, amount, etc. along with respective confirmation letters. After obtaining this information from the assessee on 11th Feb., 1991, the AO initiated further enquiries on 21st Feb., 1991, in order to ascertain the genuineness of the creditors. Meanwhile, the assessee filed the revised return on 26th Feb., 1991, surrendering this amount of cash credits amounting to Rs. 4 lakhs. It is also observed that the assessee has furnished a chart for calculating the peak balance of such credits which is available on p. 6 of the paper book furnished before us. The said chart reveals that after obtaining all these loans in the previous year relevant to asst. yr. 1990-91, the assessee immediately repaid these loans in the subsequent year during the month of April-May, 1990, reducing the balance in such creditors' a/c to Nil. All these entries have been reflected in the books of the assessee and there is no dispute about the same. It is also observed that the enquiries initiated by the AO during the course of assessment proceedings regarding the impugned credit entries have not fetched any negative reply. It is also evident from the record that immediately after the filing of the revised return by the assessee, the AO stopped himself from making any further enquiry and finalised the assessment on 27th March, 1991. Subsequently, the proceedings for levy of penalty under Section 271(1)(c) were initiated and after receipt of Tribunal's order, the penalty was imposed under Section 271(1)(c) considering that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income. It is observed that the assessee surrendered the amount of cash credit in his revised income for avoiding any further litigation as also to buy the peace of mind. It is also observed that the assessee has not accepted that he had deliberately furnished inaccurate particulars or concealed any income, but merely surrendered the amount for which there might be hundred reasons. It is also observed that the assessee was under the bona fide impression that there was sufficient proof to establish the genuineness of the creditors till 11th Feb., 1991, when the confirmation letters were obtained from relevant creditors. However, immediately after becoming aware of the difficulties in establishing the genuineness of the creditors, for one reason or the other, he surrendered this amount by filing the revised return. It, therefore, cannot be said that the assessee had any mala fide intention to deliberately file a false return containing inaccurate particulars of his income. It is also observed that the assessee surrendered the amount of unexplained cash credit but has not agreed for the additions on the basis that such cash credit constitutes his concealed income. It is also observed that no material/evidence have been brought on record by the AO to show that the assessee has consciously concealed the particulars of his income either in the assessment proceedings or in the penalty proceedings.;