COMMISSIONER OF INCOME TAX Vs. SURESH CHAND BANSAL

JUDGEMENT

(1.) THE question in this matter arose is whether the implementation of the penalty imposed under Section 271(1)(c) of the IT Act, 1961 against the assessee is correct.

(2.) THE facts of the case briefly are as follows: An order was passed under Section 271(1)(c) of the IT Act, 1961. A return was filed by the assessee as per notice under Section 153A issued by the Revenue Department on 20th May, 2005 which was duly served upon the assessee on 24th May, 2005. The assessee filed a revised return under Section 153A showing income of Rs. 27,04,280 while in the revised return of income -tax it has been shown as Rs. 3,00,278. Hence, the order was passed assessing the total income of the assessee at Rs. 30,04,280. Therefore, for such addition of Rs. 27,04,000 as undisclosed income the notice under Section 271(1)(c) was issued and served on the assessee.

(3.) BEING aggrieved appeal was filed before the CIT(A). It appears that the grounds of appeal were against the order of penalty under Section 271(1)(c) of the said Act and the amount of penalty of Rs. 9,09,228. It appears from the facts that the CIT(A) dealt with the matter and held as follows: There are a number of High Courts judgments where it is held that provision of Section 271(1)(c) are not attracted to cases where income of an assessee is assessed on estimate basis and additions are made therein on that basis Harigopal Singh v. CIT . Where assessment had been made on estimate basis and there was no finding regarding concealment of income, levy of penalty was not justified. CIT v. Suresh Kumar Bansal and Anr. . The judicial authorities cited here were further discussed in the context of the Supreme Court judgment in the case of Dilip N. Shroff v. Jt. CIT : [2007]291ITR519(SC) . The Authorised Representative of the appellant rightly pointed out that penalty would be leviable if the assessee conceals particulars of his income or furnishes inaccurate particulars thereof. But, by reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Position of penalty is not automatic 'not only is the levy of penalty discretionary in nature but the discretion is also required to be exercised on the part of the AO keeping the relevant factors in mind. Some of those factors, apart from being inherent in the nature of penalty proceedings, inhere on the face of the statutory provisions. Penalty proceedings are not to be initiated merely to harass the assessee. The approach of the AO in this behalf must be fair and objective. The CIT(A) after considering the facts as well as the materials placed before it and after considering the decisions reported in Harigopal Singh v. CIT , Suresh Kumar Bansal and Anr. as also the decision in the case of Dilip N. Shroff v. Jt. CIT : [2007]291ITR519(SC) came to the conclusion and held as follows: The discretion to be exercised by the AO before deciding about levy of penalty is proper evaluation of the facts on the basis of which the total income is determined. If it is found on facts that the additional income assessed is the same as the additional income offered even if the offer came in consequence of search action, it is likely that the offer is made in a spirit of settlement. Such offer by itself is not an admission of concealment of income. In the case of CIT v. L.K.S. Canee : [2000]244ITR130(Mad) , Madras High Court did not interfere with the order of the Tribunal deleting penalty imposed on assessee lottery agent, whose income had been estimated after taking judicial notice of peculiar features of the business of sale of lottery tickets. The AO in that case found the verification of expenses on advertisements and expenses on unsold ticket as impossible and held that the income had to be necessarily estimated. A similar approach is adopted by Punjab & Haryana High Court in a number of cases Harigopal Singh v. CIT , CIT v. Suresh Kumar Bansal and Anr. ; CIT v. Ravail Singh & Co. . The reason for this is that the burden is on the AO to specially point out the amount of income concealed by the appellant and to further prove that the appellant had no explanation about the sources of such income and if the explanation is offered, it is found to be false. This would require investigation at various points even after the assessment order is passed. The basis of this specific amount of addition must be discussed in detail. This would require reference to the documents which formed the basis of inference about additional income. It should be further shown that the appellant was given the opportunity to offer explanation and that in spite of such opportunity, no explanation was offered. On receipt of explanation, the AO should further give a finding that the explanation is false and not bonajide. It is in this manner that the order of penalty goes beyond the findings in the order of assessment. While the content of the assessment order remains relevant, in the order of penalty something more is required to be done even after introduction of Explanation to Section 271.