Dy. Cit vs Sunder Lal
2000 Latest Caselaw 1162 Del

ORDER

Krishan Swarup, A.M.

In this appeal against the order of the Commissioner (Appeals), Rohtak dated 19-8-1994, the department is objecting to the cancellation of penalty of Rs. 9,28,658 imposed under section 271(1)(c) of the Income Tax Act for the assessment year 1991-92.

2. Briefly stated, the facts concerning imposition of penalty are thus. Search and seizure operations were conducted in the case of the assessee on 26/27-6-1990, during the course of which certain valuables and documents were seized. In his statement under section 132(4) of the Act, the assessee made a surrender of Rs. 17,03,119. Return for the assessment year under consideration was filed on 30-8-1991, declaring an income of Rs. 22,19,640 in which, besides declaring the income for the current year, an amount of Rs. 17,03,119 surrendered under section 132(4) was included. The assessment was completed on a total income of Rs. 23,36,910 and penalty proceedings under section 271(1)(c) were initiated. In the penalty order, the assessing officer while considering the question whether penalty under section 271(1)(c) could be imposed in the context of amount of Rs. 17,03,119 surrendered under section 132(4) of the Act, referred to the four ingredients of clause (2) to Explanation 5 and pointed out that one of the conditions of specifying in the statement, the manner in which the said income had been derived, was not fulfillled. The surrendered amount of Rs. 17,03,119 was held to be the concealed income of the assessee and a penalty of Rs. 9,28,658 was imposed.

2. Briefly stated, the facts concerning imposition of penalty are thus. Search and seizure operations were conducted in the case of the assessee on 26/27-6-1990, during the course of which certain valuables and documents were seized. In his statement under section 132(4) of the Act, the assessee made a surrender of Rs. 17,03,119. Return for the assessment year under consideration was filed on 30-8-1991, declaring an income of Rs. 22,19,640 in which, besides declaring the income for the current year, an amount of Rs. 17,03,119 surrendered under section 132(4) was included. The assessment was completed on a total income of Rs. 23,36,910 and penalty proceedings under section 271(1)(c) were initiated. In the penalty order, the assessing officer while considering the question whether penalty under section 271(1)(c) could be imposed in the context of amount of Rs. 17,03,119 surrendered under section 132(4) of the Act, referred to the four ingredients of clause (2) to Explanation 5 and pointed out that one of the conditions of specifying in the statement, the manner in which the said income had been derived, was not fulfillled. The surrendered amount of Rs. 17,03,119 was held to be the concealed income of the assessee and a penalty of Rs. 9,28,658 was imposed.

3. In appeal, after referring to the facts of the case and arguments of the assessee, learned Commissioner (Appeals) observed that in his statement under section 132(4) of the Act, the assessee had disclosed that an amount of Rs. 17,03,119 was earned from speculation business but while filing the return, the amount was bracketed under the head "income from other sources". He further observed that the surrendered amount was accepted as the income of the assessee for the year under consideration and that the variation in the returned and assessed income was due to increase in the share income from a firm, which was of no relevance so far as the imposition of penalty was concerned. It was held that in the circumstances no penalty under section 271(1)(c) was exigible.

3. In appeal, after referring to the facts of the case and arguments of the assessee, learned Commissioner (Appeals) observed that in his statement under section 132(4) of the Act, the assessee had disclosed that an amount of Rs. 17,03,119 was earned from speculation business but while filing the return, the amount was bracketed under the head "income from other sources". He further observed that the surrendered amount was accepted as the income of the assessee for the year under consideration and that the variation in the returned and assessed income was due to increase in the share income from a firm, which was of no relevance so far as the imposition of penalty was concerned. It was held that in the circumstances no penalty under section 271(1)(c) was exigible.

4. The submission of the learned Departmental Representative was that since the assessee had himself shown the surrendered amount as income from other sources, without indicating any source, the condition precedent for claiming immunity under item (2) of Explanation 5 to section 271(1)(c) was not satisfied inasmuch as he had not specified the manner in which the surrendered income had been derived. The learned counsel for the assessee submitted that this assertion was not factually correct. He strongly relied on the order of the learned Commissioner (Appeals).

4. The submission of the learned Departmental Representative was that since the assessee had himself shown the surrendered amount as income from other sources, without indicating any source, the condition precedent for claiming immunity under item (2) of Explanation 5 to section 271(1)(c) was not satisfied inasmuch as he had not specified the manner in which the surrendered income had been derived. The learned counsel for the assessee submitted that this assertion was not factually correct. He strongly relied on the order of the learned Commissioner (Appeals).

5. We have carefully considered the facts and circumstances of the case and the rival submissions. It is not in dispute that during the course of search income of Rs. 17,03,119 was surrendered by the assessee under section 132(4) of the Act. This is evident from the fact that in the assessment the assessing officer has himself narrated, "income surrendered under section 132(4). The surrendered income has been assessed as such. In his order, the learned Commissioner (Appeals) has recorded a finding of fact. In the statement recorded at the time of search and seizure operation assessee disclosed that an amount of Rs. 17,03,119 was earned from speculation business of silver and gold." Nothing has been placed before us to show that this finding was factually incorrect. In any case, when the assessee was making a surrender during the course of search, in recording the statement, it was incumbent upon the authorized officer to ask a question from the assessee as to how the income which was being surrendered was earned. We fail to understand as to how the surrender could be accepted without raising this question.

5. We have carefully considered the facts and circumstances of the case and the rival submissions. It is not in dispute that during the course of search income of Rs. 17,03,119 was surrendered by the assessee under section 132(4) of the Act. This is evident from the fact that in the assessment the assessing officer has himself narrated, "income surrendered under section 132(4). The surrendered income has been assessed as such. In his order, the learned Commissioner (Appeals) has recorded a finding of fact. In the statement recorded at the time of search and seizure operation assessee disclosed that an amount of Rs. 17,03,119 was earned from speculation business of silver and gold." Nothing has been placed before us to show that this finding was factually incorrect. In any case, when the assessee was making a surrender during the course of search, in recording the statement, it was incumbent upon the authorized officer to ask a question from the assessee as to how the income which was being surrendered was earned. We fail to understand as to how the surrender could be accepted without raising this question.

5.1 On a careful consideration of the facts and circumstances of the case in its entirety, we are of the considered opinion that the ground taken by the department for imposing the penalty is untenable both in law and on facts. Accordingly we hold that there is no infirmity in the order of the learned Commissioner (Appeals) in cancelling the penalty.

5.1 On a careful consideration of the facts and circumstances of the case in its entirety, we are of the considered opinion that the ground taken by the department for imposing the penalty is untenable both in law and on facts. Accordingly we hold that there is no infirmity in the order of the learned Commissioner (Appeals) in cancelling the penalty.

6. In the result, the appeal is dismissed.

6. In the result, the appeal is dismissed.