A.C.I.T., Central Circle-X, Kolkata v. M/s. Concast Steel & Power Ltd. (Formerly M/s. Pawansut Sponge Pvt. Ltd.)
[Citation -2016-LL-0916-33]

Citation 2016-LL-0916-33
Appellant Name A.C.I.T., Central Circle-X, Kolkata
Respondent Name M/s. Concast Steel & Power Ltd. (Formerly M/s. Pawansut Sponge Pvt. Ltd.)
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags search and seizure operation • assessment proceeding • concealment of income • imposition of penalty • disclosure of income • brought forward loss • surrender of income • outstanding balance • undisclosed income • bona fide belief • estimate basis
Bot Summary: 4) The assessee made the disclosure of Rs.40 Lacs as income for the assessment year 2008-09 as a result of search and survey operation carried out on the assessee had there been no such survey operation the assessee would not have disclosed the same as its income. The assessee before the learned CIT(A) submitted that the documents marked as UKS 1 were seized from the residence of the director, Shri Uttam Kumar Saraogi, of SPS Steel ITA No.1487 Kol 2012 M s. Concast Steel Power Ltd. A.Y.2008-09 4 Power Ltd. who was neither director nor employee of assessee company. For the addition of Rs. 40 lacs which was accepted by the assessee at the time of search dated 14.2.2008, we find that the addition pertains to the financial year 2007-08 and the time to disclose the same in the income tax return was available to the assessee. In such a case, the AO should further bring some material on record so that it is conclusively established that such surrender represented the real income or undisclosed income of the assessee. Further, such course of action would have made it possible to the assessee to plead various reasons which would have enabled the assessee to get the benefit of doubt. Mere fact of agreed addition does not result into a conclusion that the amount agreed to be added as income is concealed income; in such a case, the AO should further bring some material on record so that it is conclusively established that such surrender represented the real income or undisclosed income of the assessee; on the facts of the case, penalty was not leviable in respect of surrender of share capital as income. If the assessee had given explanation and on non-acceptance of such explanation, the assessee had agreed for addition just to satisfy the IT authorities or agreed for addition under compelling circumstances, merely to buy peace, then only on the basis of such agreed addition or surrender of income, it cannot be held that the assessee had concealed income.


IN INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA Before Hon ble Shri Waseem Ahmed, Accountant Member and Shri K.Narasimha Chary, Judicial Member I.T.A. No.1487 Kol 2012 Assessment Year : 2008-09 A.C.I.T. , Central Ci rcle-X, V s. M s. Concast Steel & Room no.9, 4 t h Floor, Power Ltd. (Formerly Aayak ar Bhawa n, Purba M s. P awansut 110, Shanti Pall y, Kol kat a- Sponge Pvt. Ltd.) 700107. 21, Hem ant Basu Sarani, 5 th F loor, Kol kata-700001. PAN: AACCP9643B Appell ant .. Respondent By Appellant Shri Tanuj Kumar Neogi , Addl. CIT.Sr.DR By Respondent Shri Ravi Tulsiyan, FCA Date of Hearing 25-08-2016. Date of Pronouncement 16 -09-2016. O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by revenue is against order of Commissioner of Income Tax (Appeals)-Central-II, Kolkata dated 10.07.2012. Assessment was framed by A.C.I.T., Central Circle-X, Kolkata u s 153C 143(3) of Income tax Act, 1961 (hereinafter referred to as Act ) vide his order dated 31.12.2009 for assessment year 2007-08. grounds raised by revenue are as under : 1. That CIT(A) erred in accepting assessee s contention that, page 12 of bunch of seized document marked UKS-1 did not belong to assessee ocmpany at all and figures and calculations therein did not reflect any transaction of assessee company at all and this document was having no evidentiary value. ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 1 2. That CIT(A) failed to notice that out of 4 amounts identified from above mentioned page-12 as quantum of sales by AO there was one figure of Rs.67,87,555 - which was same as gross purchase figure of Rs.67,87,555 - appearing on page 13 of same set of documents which assessee confessed to as reflecting it s own transaciton and also confessed having made cash payment outside books aggregating Rs.21,49,778 - on basis of entires appearing on that same page-13, and appearance of transaction figure of page 13 in page 12 also conclusively proves that figures mentioned on page 12 reflected transaction done by assessee company only. 3. That CIT(A) erred in holding that no penalty u s 271(1)(c) should have been imposed on acocunt of additon of Rs.1,17,17,644 - done u s 69C by AO relying on unexplained transaction figures appearing on page 12 of seized set documetns marked UKS-1, in order u s 143(3) 153C completed on 31.12.2009. 4. That Departmnet craves leave to add, modify or alter any of ground(s) of appeal and or adduce additonal evidence at time of hearing of case. 2. solitary issue raised by Revenue in all grounds of appeal is that ld. CIT(A) erred in deleting penalty imposed by AO under section 271(1)(c) of Act. 3. Before carving out specific issue let us understand brief history of case. In this case search and seizure operation was conducted at SPS group of companies on dated 14.2.2008. present assessee is part of SPS group of companies and it was covered under survey operation under section 133A of Act. During search proceedings certain documents were seized and marked as UKS 1 pertaining to assessee. Accordingly notice was issued to assessee under section 15 3C of Act. During assessment proceedings page number 5 and 13 of UKS 1 were confronted with director of assessee company. assessee on basis of seized documents page number 5 and 13 accepted that there were unaccounted cash expenses for Rs. 37,82,356.00 and accordingly made disclosure of Rs.40 Lacs ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 2 which was shown in income tax return for financial year 2007-08 corresponding to assessment year 2008-09. In addition to above AO during assessment proceedings found some noting on page number 12 of seized documents UKS 1. As per noting assessee was to make payment for Rs. 2,58,32,531.00 and out of which assessee made payment for Rs. 2,55,00000.00 leaving outstanding balance of Rs. 3,32,531.00. On question by AO assessee was able to explain expenses for Rs. 1.00 crore only and balance amount of Rs. 1.55 crores remained unexplained. Accordingly AO was of opinion that out of total unexplained expenses of Rs. 1.55 crores, assessee has already offered unexplained expenses of Rs. 37,82,356.00 and balance of Rs. 1,17,17,644.00 (1,55,00,000-37,82,356.00) also remained unexplained. As assessee has already offered sum of Rs. 40.00 lacs to tax as income from other sources, similarly balance amount of Rs. 1,17,17,644.00 should be treated as income from undisclosed sources. Finally AO made assessment for year under consideration under section 153C 143(3) of Act after making addition of Rs. 1,17,17,644.00 to total income of assessee. AO initiated penalty proceedings under section 271(1)(c) of Act. AO accordingly issued notice under section 274 read with section 271 of Act dated 31.12.2009 for levying penalty under section 271(1)(c) of Act for concealing particulars of income. In response to notice assessee submitted that disclosure of Rs.40 lacs as income from other sources was made to buy peace of mind. Similarly assessee did not prefer appeal against addition made by AO for Rs. 1,17,17,644.00 to buy peace of mind. assessee also submitted that papers seized at time of search at SPS group of companies do not belong to it. There was also no name of assessee mentioned in seized documents. ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 3 seized papers were found from residence of then director of SPS Steel & power limited, therefore provisions of section 292C of Act are also not applied to assessee. However AO disregarded plea of assessee by observing that : 1) seized papers were belonging to assessee company as it was accepted by Director of assessee. 2) concealment was detected after confronting seized documents before assessee. On confrontation and seeking clarification from assessee rendered no explanation. Therefore there was no option available to assessee except to confess concealment. 3) unexplained expenses of Rs.1,17,17,644.00 were not disclosed in income tax return by assessee even after search. concealment of such expenses was detected by AO after going through meticulous and rigorous examination of documents. 4) assessee made disclosure of Rs.40 Lacs as income for assessment year 2008-09 as result of search and survey operation carried out on assessee had there been no such survey operation assessee would not have disclosed same as its income. aforesaid facts clearly prove that assessee was well aware about unexplained expenses as discussed above. In instant case assessee made conscious and deliberate attempt to hide income in order to avoid tax. Therefore it is fit case for imposition of penalty under section 271(1)(c) of Act for concealing particulars of income. Accordingly AO imposed penalty on Rs. 1,57,17,644.00 (1,17,17,644+40,00,000.00) at rate of 100% of amount of tax sought to be evaded i.e. amounting to Rs. 53,44,427.00 only. 4. Aggrieved assessee preferred appeal to ld. CIT(A). assessee before learned CIT(A) submitted that documents marked as UKS 1 were seized from residence of director, Shri Uttam Kumar Saraogi, of SPS Steel & ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 4 Power Ltd. who was neither director nor employee of assessee company. assessee in instant case has admitted unexplained expenses of Rs. 37,82,356.00 on basis of seized documents 5 & 13 of UKS 1 and accordingly made disclosure of income for Rs. 40 Lacs in assessment year 2008-09 in its income tax return. other pages of seized documents were not belonging to assessee therefore no disclosure was made by assessee. page no. 12 of UKS 1 on basis of which AO has made addition for Rs. 1,17,17,644.00 does not belong to assessee. Even name of assessee is not reflecting on page number 12 of UKS 1. However assessee has accepted addition made by AO to avoid litigation and to buy peace of mind. It was also submitted that there was brought forward loss which set off entire addition made by AO. Therefore as such there was no impact on income of assessee except reducing quantum of brought forward loss. assessee also submitted that AO has imposed penalty even on income of Rs. 40 Lacs which was disclosed in course of search without considering fact that due date for filing return of income under section 139(1) of Act was not expired for assessment year 2008-09. ld. CIT(A) accordingly deleted penalty imposed by AO under section 271(1)(c) of Act by observing as under: 5.5. I am of opinion that AO was not justified in treating agreed addition of Rs.1,17,17,644 - as concealed income of appellant company. consequently, he was also not justified in imposing penalty u s 271(1)(c) on said amount. Further, AO was not justified imposing penalty on sum of Rs.40 lakhs disclosed by appellant in course of search because due date of filing of return was not expired as on date of search and appellant company had filed return of income on 30.09.2008 u s 139(1) of Act including income disclosed by him. Thus, in totality of facts AO was not justified imposing penalty amounting to Rs.53,42,427 - u s 271(1)(c) of Act and same is directed to be deleted. ground nos. 1 to 4 are allowed. ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 5 5. Aggrieved by order of ld. CIT(A), assessee is in 2nd appeal before us. ld. DR before us submitted that seized documents were belonging to assessee as transactions recorded in those documents were matching with transactions of assessing. ld. DR also submitted that assessee in course of assessment proceeding has duly admitted unexplained expenditure. ld. DR vehemently supported order of AO and on other hand ld. AR before us submitted that seized documents do not belong to assessee other than 5 & 13 of UKS 1 therefore disclosure of Rs. 40 lacs was made in return of income. other additions were accepted to buy peace of mind and to avoid litigation. As such assessee did not conceal any income. ld. AR supported order of learned CIT(A). We have heard rival contentions of both parties and perused materials available on record. From foregoing discussions we find that certain documents marked as UKS 1 were seized as result of search on SPS group of companies dated 14.2.2008 pertaining to assessee company. Accordingly assessee offered sum of Rs. 40 lacs to tax for year under consideration on basis of seized documents 5 & 13 of UKS 1 by disclosing same in its income tax return. However AO has made addition for Rs. 1,17,17,644.00 only as unexplained expenses under section 69C of Act on basis of seized documents marked as 12 of UKS 1. However assessee claimed that seized document 12 of UKS 1 does not belong to it, therefore addition made on this document was not warranted but. However assessee did not prefer appeal against addition made by AO just to avoid litigation and to buy peace of mind. However AO has imposed penalty for concealment of particulars of income under section 271(1)(c) of Act at rate of 100% on both aforesaid amount (40,00,000.00 + 1,17,17,644.00) of tax sought to be evaded. On appeal learned CIT(A) deleted penalty on both addition made on ground that there was time to file income tax return for assessment year 2008-09 for addition of ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 6 Rs. 40 lacs which was duly disclosed in income tax return. For other addition of Rs. 1,17,17,644.00 ld. CIT(A) was of opinion that seized document number 12 on basis of which addition was made by AO is dump paper and it does not contain name of assessee. Now question before us arises so as to whether penalty imposed by AO is within provisions of section 271(1)(c) of Act. For addition of Rs. 40 lacs which was accepted by assessee at time of search dated 14.2.2008, we find that addition pertains to financial year 2007-08 and time to disclose same in income tax return was available to assessee. Therefore in our considered view addition of Rs. 40 Lacs cannot be held as concealment of income. Similarly for addition of Rs. 1,17,17,644.00 made by AO on basis of seized documents no. 12 of UKS 1, we find that even name of assessee was not appearing on such document. Therefore it cannot be concluded with conclusive evidence that it belongs to assessee. From finding of ld. CIT(A) we find that assessee has not owned up responsibility of such documents. ld. DR has also failed to bring anything on record to argument of ld. AR so as ascertain whether these papers belong to assessee or not. In our considered view penalty provisions will be attracted only when there are deliberate and conscious acts of assessee to hide income to avoid tax. Simply assessee has agreed for addition does not amount to concealment of income. In this connection we are putting our reliance in order of Hon ble ITAT Nagpur Branch in case of ACIT Vs. Malu Electrodes (P) Ltd. 127 TTJ 599. relevant extract of order is reproduced below : Mere fact of agreed addition does not result into conclusion that amount agreed to be added as income is concealed income. In such case, AO should further bring some material on record so that it is conclusively established that such surrender, in fact, represented real income or undisclosed income of assessee. Generally, assessee agrees for addition to buy peace and avoid litigation and under bona fide belief that penalty would not be levied thereafter. It is generally believed that this legitimate expectation of assessee is not binding ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 7 on AO because assessing authority cannot make promise against statute. But when there is discretion with AO, then, such legitimate expectation should be fulfilled as principle of estoppel can be applied only when there is no discretion. To put it differently, AO by not levying penalty under s. 271(1)(c), in such situation will be justified in exercising judicial discretion given to him by legislature. This is also so for reason that all official acts are presumed to be done bona fidely. Further, if official acts are presumed to be done bona fidely, there appears to be no reason to assume that it is otherwise for taxpayer. Thus, in this view of matter, in case of agreed additions, without going into technicalities of leviability of penalty under s. 271(1)(c), penalty proceedings should not be initiated. In this regard, it is often said that concept of plea bargain recognized in US jurisprudence is unknown to Indian law which is not correct as there are specific provisions which provide for non-levy or waiver of penalty. When in case of search, assessee declares certain undisclosed income, then, he is saved from levy of penalty. Undisputedly exercise of search and search assessments is more rigorous than assessment proceedings under s. 143(3) in normal course and when assessee, in those situations, can be exempt from levy of penalty under s. 271(1)(c) there is no reason that in case of agreed additions even though same may be after some exercise by AO, penalty under s. 271(1)(c) cannot be waived. Concept of plea bargain is recognized in IT Act, 1961, in specific situations as well as by giving discretion to AO to levy or not to levy penalty under s. 271(1)(c), hence, AO, in case of agreed additions, should not levy penalty under s. 271(1)(c). Further, if it is assumed that assessee, in present case, instead of agreeing for addition would have contested matter, then, perhaps in view of decision of Supreme Court in case of CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR (SC) 308, even addition could not be made or could not have been sustained. Further, such course of action would have made it possible to assessee to plead various reasons which would have enabled assessee to get benefit of doubt. Hence, when assessee acts in manner which results into additional revenue in smooth manner, then, penalty under s. 271(1)(c) should not be levied which would encourage assessee to come out clean without fear of penalty or prosecution and that could serve purpose of provisions of s. 271(1)(c) more effectively. Mere fact of agreed addition does not result into conclusion that amount agreed to be added as income is concealed income; in such case, AO should further bring some material on record so that it is conclusively established that such surrender, in fact, represented real income or undisclosed income of assessee; on facts of case, penalty was not leviable in respect of surrender of share capital as income. Similarly we are also relying in following order of Various Hon ble Courts and Tribunals. Hon ble ITAT, Lucknow in case of Smt. Brij Bala Choudhry Vs. ITO 82 TTJ 355 has held as under. assessee surrendered income during assessment proceedings, only when she could not adduce documentary evidence to explain source on account of sale of assets and realization of debts. Thus, assessee had explained source, but ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 8 since Department was not satisfied and further since it was not possible for assessee to adduce documentary evidence, she surrendered amount of Rs. 35,000 only to purchase peace with Department. If assessee had given explanation and on non-acceptance of such explanation, assessee had agreed for addition just to satisfy IT authorities or agreed for addition under compelling circumstances, merely to buy peace, then only on basis of such agreed addition or surrender of income, it cannot be held that assessee had concealed income. Under such circumstances, it is further obligatory on part of Department to show by some other material that assessee had concealed particulars of his her income. assessee had made surrender only to purchase peace with Department and after being compelled by ITO as appears from circumstances of this case. Hence, it is not fit case for imposition of penalty, because concealment of income or particulars of income, is not found to be established from material on record and Department has also failed to prove by independent material that assessee had concealed her income or particulars thereof. So far as addition of Rs. 5,000 is concerned, although about this addition, no explanation was submitted by assessee during proceedings of penalty, but from assessment order, it is found that this addition has also been made just on estimate basis and it cannot be said that it represents or discloses concealed income; hence penalty is not leviable on basis of this agreed addition of Rs. 5,000. In view of above, view taken by CIT(A) cannot be upheld Thus, penalty is cancelled CIT vs. S. Sankaran (2002) 175 CTR (Mad) 62 : (2000) 241 ITR 825 (Mad), CIT vs. Jugal Kishore Har Gopaldas (2000) 161 CTR (Ker) 74 : (2000) 243 ITR 220 (Ker) and CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC) relied on; India Sea Foods vs. CIT (1978) 114 ITR 124 (Ker), CIT vs. E.V. Rajan (1987) 61 CTR (Mad) 121 : (1985) 151 ITR 189 (Mad) and H.V. Venugopal Chettiar vs. CIT (1985) 153 ITR 376 (Mad) distinguished. Assessee could not be said to have concealed her income merely because she surrendered certain amount to buy peace with Department as she could not adduce documentary evidence in support of her explanation regarding source of capital or on basis of another agreed addition which was made simply on estimate basis and, therefore, penalty under s. 271(1)(c) was not leviable. 6. From above we find that in instant case AO has made on basis of admission made by assessee of unexplained expenses during search proceedings otherwise there was nothing on record to prove seized document page no. 12 of UKS 1 belongs to assessee. Even name of assessee was not appearing in those documents. above documents were submitted before us at time of hearing which are placed on record. From perusal of above documents it is not ascertained whether transactions are reflecting purchase and sales figures of assessee. ld. DR has also not anything on record contrary to arguments of ld. AR ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 9 and findings of ld. DR. In view of above we do not find any reason to interfere in order of ld. CIT(A). Hence this ground of appeal of Revenue is dismissed. 7. In result, revenue s appeal stands dismissed. Order pronounced in open court 16 09 2016 Sd - Sd - (Narasimha Chary) (Waseem Ahmed) (Judicial Member) (Accountant Member) RG.PS - 16 09 2016 Copy of Order Forwarded to:- 1. Appellant 2. Respondent 3. 2 Concerned CIT 4. 2 - CIT (A) 5. 5 , , Kolkata DR, ITAT, Kolkata 6. ; Guard file. By order , , ITA No.1487 Kol 2012 M s. Concast Steel & Power Ltd. A.Y.2008-09 10 A.C.I.T., Central Circle-X, Kolkata v. M/s. Concast Steel & Power Ltd. (Formerly M/s. Pawansut Sponge Pvt. Ltd.)
Report Error