1. The assessee is in appeal against order dated 29th July, 1991 of the learned CIT (Appeals) sustaining penalty of Rs. 27,270 levied by the Assessing Officer under Sections 271(1)(c) of the I.T. Act, 1961.
2. The relevant facts are that the assessee is an individual, engaged in cloth business in the name and style of M/s. Pardesi Emporium, Prop.
Shri Amir Chand. His accounting period is financial year. In response to notice under Sections 139(2), the assessee filed his return of income on 24th September, 1985 at Rs. 78,950 including a sum of Rs. 61,000 offered as his taxable income for the relevant previous year.
The assessment was framed at Rs. 79,280, the difference of Rs. 330 being on account of difference in balance sheet and charity.
3. The Assessing Officer noted that the assessee had surrendered the sum of Rs. 61,000 as his income in the return consequent to a survey conducted at the business premises of the assessee on 28-1 -1985 under Sections 133A when excess stock of Rs. 28,902 was found as also the assessee had made an investment of Rs. 22,161 in the purchases made outside books of account and further the assessee had also purchased a scooter during the relevant previous year involving an investment of Rs. 7,000 which was not recorded in the books of account. With these observations, the Assessing Officer framed the assessment and initiated penalty proceedings under Sections 274 read with Sections 271(1)(c).
The reply furnished by the assessee in response to show-cause notice was rejected and the Assessing Officer imposed the impugned penalty on the assessee for having intentionally concealed the particulars of his income in respect of books of account. The matter was taken in appeal before the learned CIT(A) who not only agreed with the findings of the Assessing Officer but also pressed into service Explanation 5 to Sections 271(1)(c). While doing so, the learned CIT(A) conceded that "though this section covers Sections 132, yet by sheer logic (Emphasis supplied) it would cover Sections 133A also. It would, therefore, apply in appellant's case with equal force". He, thus, confirmed the penalty levied.
4. The learned AR for the assessee Shri K. Sampath assailed the orders of the authorities below and submitted that neither facts nor law authorised the Assessing Officer as also the learned CIT(A) to impose and sustain the penalty. He took us through his paper book including letter addressed to the Assessing Officer explaining the discrepancy in stock as also cash found at the time of survey. He also invited our attention to the submissions made before the learned CIT(A) on 10th July, 1991 submitting that the amount of Rs. 61,000 was surrendered only to buy peace with implied approval and understanding with the Assessing Officer that no penalty would be levied. The assessee also submitted that the survey was conducted on 28th January, 1985 while the return for the relevant previous year ending on 31st March, 1975 had not become due. He also submitted that there was no question of concealment of any income since no addition stood made to his returned income. He also invited the attention of the learned CIT(A) to the judgment of the Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1 and a few orders of the Tribunal. According to Shri Sampath, the authorities below arbitrarily rejected the assessee's explanation that no penalty was livable. Shri Sampath also took us through pages 8 to 12 of his paper book containing complete explanation regarding 22 bills of purchases seized and submitted that there was no unaccounted purchases as was alleged by the Assessing Officer. He submitted that difference in stocks was due to the fact that stock taking was done hastily on estimate basis ignoring the realities of business, inasmuch as, the assessee some time has to give rebate to the customers and the stocks also included some very old stocks having practically no or very little market value.
5. Shri Sampath submitted that while the assessee had not concealed any particular of his income, the Assessing Officer had made the voluntary surrneder of Rs. 61,000 as a jumping board for concluding that the assessee had admitted to have concealed his income to this extent without realising that the assessee had voluntarily offered this amount in his return. This according to Shri Sampath was done mainly to buy peace and to avoid litigation with the department, even though, full and proper explanation was available with regard to the alleged discrepancy in stock and alleged unaccounted investment made during the relevant previous year. According to Shri Sampath unless there is a return, there is no occasion to charge the assessee with concealment of income or for that matter furnishing inaccurate particulars thereof.
Assailing the reasoning of the learned CIT(A) that Explanation 5 to Sections 271(1)(c) was attracted in the case of the assessee, the learned AR submitted that Explanation 5 comes into play only when action under Section 132 is taken and it was wrong on the part of the learned CIT(A) to make no distinction between the provisions of Sections 132 and 133A of the Act. He also invited our attention to the Order of the Tribunal in the case of ITO v. Sushil Kumar Mittal [IT Appeal No. 5211 (Delhi) of 1989] for assessment year 1985-86 and order for assessment year 1982-83 in the case of Asstt. CIT v. Kala Vastra Niketan [IT Appeal No. 5105 (Delhi) of 1989 dated 18-3-1991]. Shri Sampath submitted that no penalty was exigible.
6. The learned DR supported the order of the Assessing Officer and submitted that but for the survey the assessee would have not surrendered the amount of Rs. 61,000 which amounts to admission of concealment on the part of the assessee and, therefore, penalty was rightly imposed.
7. We have heard both the parties and have perused the relevant record.
It is impossible to subscribe to the views of the learned CIT(A) that "by sheer logic Explanation 5 to Sections 271 (1)(c) would cover Section 133A also". The two provisions are distinct and separate and it is not permissible to press into service Explanation 5 to Sections 271(1)(c) while dealing with a case of survey under Section 133A since the said explanation is applicable only in proceedings under Section 132 of the Act. While the Assessing Officer rightly restrained himself from invoking Explanation 5 to Sections 271(1)(c) the learned CIT(A) was absolutely in the wrong in doing so.
8. We also do not agree with the reasoning of authorities below that the assessee concealed the particulars of his income to the extent of Rs. 61,000. The basis of charging the assessee with the act of concealment or for that matter with furnishing of inaccurate particulars of his income is the return. In the return filed by the assessee, he disclosed an income of Rs. 78,950 including Rs. 61,000 which has been almost accepted with minor variation of Rs. 330 and assessed at Rs. 79,280. The return filed is not even a revised return.
For establishing concealment in a case, it is necessary that a return of income was filed and that the income concealed was omitted from being included in the income returned. There are no such facts on record. On the contrary, the accepted fact is that the returned income has been accepted. The mere fact that a survey took place in January 1985 and the assessee in his return for the relevant previous year ending on 31 -3-1985 voluntarily offered some amount as his income would not per se lead to the charge of concealment being proved automatically by the revenue. There may be hundred and one reasons with the assessee to offer the amount as his income but that by itself would not mean that the assessee automatically comes into the net of Sections 271 (1) (c) (See Sir Shadilal Sugar & General Mills Ltd. v. CIT [ 1987] 168 ITR 705 (SC). There is no presumption of concealment unless positively established. The question of concealment in the case of the appellant does not arise as he himself offered the amount of Rs. 61,000 in the return of his income. Therefore, on a consideration of all relevant facts and circumstances of the case, we are of the view that there was no occasion even for initiation of proceedings under Sections 271(1)(c) much less imposition of the penalty thereunder. We, therefore, cancel the penalty levied and allow the assessee's appeal.