COMMISSIONER OF INCOME TAX Vs. KAMAL CHEMICALS INDUSTRIES

JUDGEMENT

(1.) IN this appeal filed under s. 260A of the IT Act, 1961 (for short, "the Act"), the appellant has prayed for determination of the following question of law : "Whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in law in cancelling the penalty levied under s. 271(1)(c) of the IT Act particularly when the assessee had surrendered the amount of cash credit in the revised return of income when it failed to prove the genuineness of the creditors, particularly in view of the judgment of the Hon'ble Punjab & Haryana High Court in the case of Mahavir Metal Works vs. CIT (1973) 92 ITR 513 (P&H), wherein it has been held that the filing of revised return is an admission by the assessee that the income was concealed - course of the assessment proceedings, counsel for the assessee made an offer to surrender a sum of Rs. 2,95,000 by stating that his client wanted to purchase peace subject to the condition that there would be no penalty and prosecution. The AO did not accept the surrender made on behalf of the assessee and finalised the assessment vide his order dt. 31st penalty proceedings under ss. 271(1)(a), 271(1)(c) and 273(1)(b) of the Act. The Commissioner of Income -tax AO to verify the statement of peak deposits furnished by the appellant with a further direction that if it was found in order, then he should restrict the addition to the peak amount shown by the appellant or the peak amount arrived at by him after verification. Paras 5 and 6 of the order passed by the CIT(A) read as under :

(2.) THE appeal filed by the Revenue against the aforementioned order was dismissed by the Income -tax Appellate Tribunal, of the Act by holding that the assessee had introduced its own money in the names of bogus persons as creditors and later on surrendered the same in the revised return. The CIT(A) dismissed the assessee's appeal and upheld the penalty order. However, in the further appeal, the Tribunal remanded the case to the AO for fresh determination of the issue of

(3.) 2001, whereby he again imposed penalty of Rs. 1,38,310 on the assessee. The appeal filed by the assessee against the second penalty order was allowed by the CIT(A). He held that the assessee had been able to establish the identity of the creditors and the source of their income. He further held that as per the Tribunal's order, the genuineness of the cash credits is also proved and this could not even be a case of capital build -up because the amounts were returned to the creditors. The CIT(A) then observed that there was nothing in the statement of Naresh Kumar (middleman) to cast doubt on the genuineness of the transaction relating to cash credits and that the Department has failed to prove that the assessee had deliberately furnished inaccurate particulars of the income or filed an incorrect return. The Tribunal confirmed the order of the CIT(A) and dismissed the appeal filed by the Revenue by making the following observations : "There is no dispute that confirmations from all the creditors were filed. There is also no dispute that the loan amounts were repaid by the assessee. It is also a matter of record that the loans were obtained through one middleman, i.e., Shri Naresh Kumar, who appeared and confirmed that all the loans were arranged by him. Though the assessee has surrendered the same just to buy peace, but it does not mean that if the amount of loan was surrendered, then penalty is also leviable. The AO has to record the satisfaction that assessee has concealed the particulars of income. As no such satisfaction is recorded, therefore, the issue is squarely covered by the decision of the jurisdictional High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del). Even on the merits, the finding of the CIT(A) could not be controverted by the learned Departmental Representative that all the particulars of loans were disclosed while filing the return of income. Confirmations were filed and the loans were repaid also. The confirmation of the middleman was also filed, even his statement was also recorded whereby it was confirmed that all the loans were arranged by him."