1. This appeal by the assessee is for the assessment year 1996-97. The assessee is aggrieved by the order of the Id. CIT(A) confirming the penalty imposed under Section 271(1)(c) of the Income tax Act, 1961 which according to the assessee is erroneous and liable to be cancelled.
The assessee filed a return of income declaring income at Rs. 8,85,440/- on 24.12.1996. The assessee has taken contract for sale of liquor and was having two shops, i.e. Camp-I and Camp-II, Bhilai.
The assessee has shown sale of country liquor of Masala variety at the rate of Rs. 86/- per litre and plain variety at the rate of Rs. 72/- per litre though-out the year. On verification of the figures shown by the assessee, a letter was written to the District Excise Officer, Durg for finding out the actual selling rate in the year under consideration. He informed the rates as under:Masala Rs. 73/- Rs. 49/- Rs. 25/-Plain Rs. 61/- Rs. 41/- Rs. 21/- Since there was a difference between the prices shown by the assessee and the rates supplied by the District Excise Officer, the assessee was asked by the AO to explain discrepancy particularly in the absence of sale of vouchers and all the sales being cash sales. For the reasons stated in the assessment order at page 3, the AO came to the conclusion that the assessee had suppressed the actual sales figures. When confronted, the, assessee surrendered the difference of Rs. 5,55,472/- as an additional income. On this basis, the penalty proceedings were initiated. It was submitted during the penalty proceedings that since the assessee did not intend to get involved in the litigation with the Department and in order to buy peace of mind, the assessee offered the amount for taxation. It was made voluntarily without any adverse finding by the department. Hence, it was submitted that there should not be any penalty proceedings. The AO held that the assessee's contentions are not tenable and factually incorrect. The assessee offered the income only when he was confronted that there is a difference in the selling price of the country liquor as per books of account and the records of the Excise Department. The difference was worked out by the AO and as far as the assessee is concerned, he chose to accept the addition and did not contest the same in appeal. Not contesting the addition in appeal or accepting the same, it cannot be treated as voluntarily offer on the part of the assessee. He further held that the contention of the assessee with regard to non levy of penalty etc. has no meaning and it has no relevance with regard to the penalty proceedings are concerned. He levied the penalty of Rs. 2,25,000/- under Section 271(1)(c) of the Act.
3. Aggrieved by the above, the assessee approached the first appellate authority. It was contended before the Id. CIT(A) that the assessee was maintaining the regular books of account which are duly audited under Section 44AB and considering the nature of trade, there was no practice of maintaining of sale bills/vouchers nor it was practicable since all the sales were effected in cash. The Excise Department has not fixed any price for sale but only the purchase prices are fixed by the Government and the contractors were free to sell the liquor considering the competition prevailing in the market and that the Excise Department's maintains the selling rates as per their own estimate. So as to purchase peace and avoid litigation, in the assessment proceedings, the assessee surrendered the amount and that does not automatically establish the furnishing of inaccurate particulars. The assessee relied on the decision of the Hon'ble Supreme Court reported in 168 ITR 705.
4. Considering the fact that there was no dispute with regard to fact that the information obtained from the State Excise Department revealed the rates and the rate at which the liquor claimed to have been sold by the assessee were much lower rates certified by the State Excise Department and thus by reducing the selling price in its books of account, the assessee consciously attempted to evade the tax. He held that the contention of the assessee that the surrender was voluntarily without any adverse finding has no merit. He held that had the AO not made the investigation, the assessee would have conveniently been successful in evading the tax on the aforesaid sum. He held that the case cited by the assessee had no application. The CIT(A) gave partial relief to the assessee. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal.
5. The Id. Counsel for the assessee submitted that the State Excise Department has not fixed any rate for sale and the figures intimated by the Excise Department are tentative sale prices of goods and is mainly for the purpose of estimating the auction amount for subsequent year.
There is nothing on record to show that the assessee had actually sold the liquor for a higher price. Only the purchase price of the liquor is fixed by the Government and selling prices are to be fixed by the licencees. Before accepting the order of the assessee, there is no iota of evidence on record that the assessee has collected more. Inviting our attention to the assessment order which is placed in the paper book where the AO observed that "total difference or suppression of sales figures by the assessee, therefore, comes to Rs. 5,55,472". He submitted that even the AO is not certain whether it is a difference or suppression. The counsel submitted that the business was done for one year and subsequently, the partners have started their own independent business and as such, the assessee thought that it is not worthwhile to go into litigation and, therefore, the assessee agreed for the addition. The counsel submitted that the penalty proceedings are independent proceedings where evidence is more stringent and requires positive evidence of suppression. He relied on the decision of the Hon'ble Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT 168 ITR 705. The counsel submitted that no defect has been pointed out in the assessee's books of account and the assessee's accounts are audited. There is no adverse remark by the auditor with regard to the quantitative details of purchases and sales. Relying on the decision of the Patna High Court in the case of MD Umer v. CIT Bihar 101 ITR 525, he submitted that the assessee had a strong case but under the circumstances that the partners had started their own independent businesses, the assessee refrained from taking any recourse to law and hence, it is not an admission. Relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal reported in 251 ITR 9, he submitted that surrender of certain income to purchase peace and to avoid litigation automatically does not lead to penalty proceedings. The counsel submitted that as per the business practice followed by the trader in this field, no contractor maintains sales bills and the asses see is not an exception. In fact, there is no evidence on record to show that the assessee had earned more income than what he declared. In penalty proceedings, the onus is on the revenue to show that the assessee had positive income than declared.
6. Relying on the decision of the ITAT, Nagpur Bench in the case of ACIT v. Gupta Enterprises Raipur in ITA No. 463/Nag/97, the counsel submitted that in this case the. Tribunal held that where no books of account are maintained, 3% rate of profit taking the sales two times of the licence fee is sufficient. If that be so, the assessee had shown more than that and, therefore, no penalty could be levied.
7. On the other hand, the Id. Departmental Representative supported the orders of the lower authorities. Inviting our attention to para. 10 of the order of the Tribunal in the case of DCIT v. Suresh Kumar Jain reported in 86 TTJ 289 (Nagpur), he submitted that this is a fit case to levy the penalty. He submitted that in this case, the decisions relied upon by the assessee had been discussed thoroughly and ITAT decided the issue in favour of the revenue. The Id. DR particularly stressed the decision of the Kerala High Court in the case of CIT v.D.K.B. & Co. 243 ITR 618. He submitted that the assessee has no other alternative but to surrender the undisclosed income earned. Had the revenue not taken steps, the income would have been escaped from the tax net. Only after the AO finding out the difference between two, the assessee surrendered it. The assessee had not taken the matter in farther appeal. In these circumstances, the Id. DR submitted that the order of the CIT(A) is to be confirmed.
8. We have considered the rival submissions, gone through the orders of the authorities below and the decisions cited before us by the contending parties. First, we will come to the decision mainly relied upon by the DR of the ITAT, Nagpur Bench reported in 86 TTJ 789(supra).
The main reliance was placed on the decision of the Hon'ble Kerala High Court in the case of DKB and Co (supra) and. also the Gujarat High Court decision in the case of Akshay Bhandar v. CIT reported in 220 ITR 325. The Hon'ble Kerala High Court in the case reported in 243 ITR 618 observed as under: it is settled position in law that there cannot be estoppel against a statute. It is for the department to consider the explanation offered by the assessee in respect of an amount which was offered to be taxed. It is not automatic that whenever an amount has been offered by the assessee, penalty is not to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount to be taxed subsequently. If such an explanation is offered, the Department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on the merits.
The Hon'ble Kerala High Court has not held that in each and every case when the assessee surrenders income before the AO and not contests the same in appeal, it automatically leads to penalty. This is particularly clear on the plain reading of the underlined portions of the Hon'ble Court's observations. In the case reported in 220 ITR 325, the Hon'ble Gauhati High held that even after the deletion of the word "deliberately", the word "concealed" shifted the burden of proof to the assessee but still it is a rebuttable one. Coming to the instant case of the assessee, as rightly contended by the counsel for the assessee, the State Excise Department has not fixed any sale price. There is no positive evidence to show that the assessee had sold the liquor for higher price. The fact that the assessee has accepted the I assessment and offered the income to tax does not automatically lead to the conclusion that the assessee had concealed the income. Penalty proceedings are independent and the assessee is not precluded from giving evidence as that stage. It may be good case to make addition but it is not necessary that such cases leads to levy of penalty if the assessee offers an explanation which is prima facie is acceptable. When the assessee has discharged his initial burden then it is for the revenue to show positively that the assessee had concealed the income.
9. Coming to the decision of ITAT, Nagpur Bench in the case of DCIT v.Suresh Kumar Jain, relied upon by the DR, this was a case of cash credit and when questioned, one of the creditor had stated that this was the fund of the assessee. The amount represented the assessee's own income routed through him. Therefore, the facts are distinguishable with the instant case of the assessee. In the case reported in 251 ITR 9, the Hon'ble Supreme Court affirmed the decision of the Hon'ble M.P.High Court reported in 241 ITR 124, and held that "but the Appellate Tribunal held that the Department has not discharged its burden of proving concealment and had simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith and that the penalty could not be levied." This was a case where in on a reference, the High court held that no penalty could be levied for concealment.
The department preferred an appeal to the Supreme Court and the Hon'ble Supreme Court dismissed the appeal holding that no interference in the order of the High Court was called for. As we have already held, where assessee offers certain amount in good faith, it does not automatically lead to levy of penalty. In the instant case, there is no positive proof of concealment. There are no categorical finding of any of the authorities that the assessee had sold the liquor for higher price than what has shown in the books of account. The case of the revenue is that the State Excise Department has taken a higher price and that should be treated as assessee's actual selling price. No proof to this effect.
Selling price depends upon various factors.
10. In view of the above, we find tat this is not a fit case to levy the penalty under Section 271(1)(c). The penalty levied is cancelled and the appeal of the assessee is allowed.