ORDER
Ramesh Tolani, J.M.
1. This is an appeal by the assessee against the order of the learned CIT(A) XVIII, New Delhi, dated 18th March, 1997, for asst. yr. 1991-92 confirming the penalty levied under s. 271(1)(c) of the IT Act, 1961.
2. Following grounds of appeal have been raised by the assessee :
1. “That the order is bad in law and in facts.”
2. “That in the facts and circumstances of the case, the learned AO grossly erred in initiating penalty proceedings under s. 271(1)(c) of the IT Act. He further erred in imposing a penalty of Rs. 3,10,500 on the appellants under s. 271(1)(c) of the IT Act and the learned CIT(A) has erred in confirming the imposition of the said penalty.”
3. Shri K. Sampath, C.A. appeared on behalf of the assessee and Shri S. R. Malik, Departmental Representative, appeared for the Revenue.
4. The learned counsel for the assessee submitted that the appellant company derives income from sale and purchase of gold and diamond ornaments. It filed its return of income for the above assessment year 31st December, 1991, showing a loss of Rs. 39,372. The Department conducted a survey at the business premises of the appellant under s. 133A of the Act on 30th January, 1992. While the survey was still in progress, the appellant made a voluntary suo motu disclosure of an income of Rs. 6 lacs vide its letter dated 30th January, 1992, itself. The relevant portion of the said letter reads as under :
“While the survey is still in progress, we the directors of the company want to confess suo motu that there is difference in the cash, stock as per the actual inventory made by you and that which is actually available in our business premises. In view of this, we want to voluntarily declare rupees six lacs as income to be included for the asst. yr. 1991-92.
We have already filed return of income for the asst. yr. 1991-92, declaring an income of Rs. 39,372 (i.e., a loss of Rs. thirty-nine thousand three hundred seventy-two only). As a result of this disclosure, we will immediately revise our return by adding an income of Rs. 6 lacs to the income returned vide return of income filed on 31st December, 1991.
We will accordingly deposit due taxes to the Government account. This surrender is irrevocable and has been made out of free consent and without any undue influence or coercion. Please accept this offer and give immunity from any penal consequences under the IT Act.”
5. Based on this admission of the assessee during the continuance of the survey proceedings, the ITO accepted the income declared by the assessee and assessed the same for asst. yr. 1991-92 computing total income at Rs. 5,60,630. The observations in the assessment order in this behalf made by the AO are as under :
“As the assessee has increased his income declared in the original return by Rs. 6 lakhs as per surrender made during the course of survey operation under s. 133A, the books and trading results needs no further comments.”
6. The AO has brought no other material on record or any other basis for quantifying this amount of income.
7. In the penalty proceedings the assessee made the following representation :
‘In this connection, I may point out that the survey on the business premises of the assessee took place on 30th January, 1992. The assessee had then addressed a letter to the ITO, Co. Ward 2(1), New Delhi (copy enclosed), wherein there was an oral discussion for surrender the additional amount of Rs. 6 lacs in the return of income already filed for the asst. yr. 1991-92. Under the normal circumstances the amount concealed, stock and cash would only to be made assessable for the asst. yr. 1992-93 for which return would have been filed after the close of the accounting year. The figure of the lump sum was arrived as a result of oral agreement that no penal consequences would be taken against the assessee. The voluntarily offer made by the assessee as per last para of letter which reads as under :
“We will accordingly deposit due taxes to the Government account. This surrender is irrevocable and has been made out of free consent and without any under influence or coercion. Please accept this offer and give us immunity from any penal consequences under the IT Act.”
You will thus kindly appreciate that the assessee has fulfilled his obligation of filing the revised return and paying tax due on the revised income. Thus, there was no justification for further initiating penalty proceedings or nor imposing any penalty for honourable oral agreement arrived at the time of survey under s. 133-A. Your honour being the successor in office of the ITO Co. Ward 2(1). Kindly take the aforesaid letter dated 30th January, 1992, into consideration and drop the penalty proceedings initiated against the assessee.”
8. The learned AO rejected the contention of the assessee and levied a penalty of Rs. 3,10,500 under s. 271(1)(c) of the Act.
9. Aggrieved by this order, the assessee preferred first appeal which was rejected and the penalty was confirmed by the CIT(A), on the conclusion that the grant of immunity from penal proceedings is not available in the assessment proceedings from the AO.
10. The learned counsel for the assessee submitted that the offer for surrendering Rs. 6,00,000 as income of the assessee was made when the survey was in progress and not after conclusion of the survey proceedings. Therefore, the admission of the assessee cannot be held to be consequent to material finally detected by the Department. This admission was further coupled with a condition that the penalty will not be levied on the basis of this admission.
11. In addition, the survey was conducted on 30th January, 1992, and not on 30th September, 1992, as written in the orders of the lower authorities. Consequently, the year of survey is asst. yr. 1992-93. If the AO had detected any material incriminating the assessee for having concealed any income for asst. yr. 1991-92, the same should have been objectively dealt with in the assessment order and as well as in the penalty order. Instead, the assessee’s offer has been partly made a base as far as the assessment is concerned, but partly it has been overlooked as far as the penalty part is concerned. The learned counsel for the assessee vehemently relied on judgment of the Bombay High Court in the case of Ramnath Jagannath vs. State of Maharashtra (1984) 57 STC 47. This case though being from sales-tax, deals with the admission similar to the one made by the assessee herein. The following observations of the Hon’ble High Court shall set out the controversy therein :
“As regards Revision Applns. Nos. 657 and 658, it was submitted that my client is agreeable to pay the whole of the amount of tax assessed by the STO, Nasik, District Nasik, provided the post-assessment penalty leviable under s. 16(4) of the Bombay ST Act, 1953, is remitted in full and the chapter is closed once and for all.”
12. It was further stated in the said letter as follows :
“In view of these facts, I am making a humble submission that the aforesaid proceedings may please be brought to a conclusion by accepting full amount of tax as per the order passed in appeal without insisting on the post-assessment penalty. This offer may please be considered and if accepted, may please be communicated to my client so as to enable him to pay off the full amount within the stipulated time …..”
“On a plain reading of the said letter and in the light of the aforesaid facts, it is clear that the offer made in the said letter to give up the aforesaid claim was clearly a conditional offer conditioned on the post-assessment penalty levied and leviable being given up. It was urged by Mr. Jetley that this offer must be regarded as an unconditional offer, because it was not within the power of the Dy. CIT to give up the penalty completely, as suggested in the letter and hence the dealer could not have seriously made that offer. In our view, this contention cannot be accepted. That the offer was coupled with the condition which was not reasonable or one which could not have been accepted in law completely, would not render unconditional the offer which was in terms made on a condition. If it was not possible to accept that condition the only result would be that the said offer must be rejected. But where an offer is coupled with conditions which cannot be accepted fully, the offer cannot be treated as an unconditional offer merely on that count. The offer contained in the said letter was in terms conditional. This is clear from the plain language setting out the offer and the surrounding facts.”
13. The learned counsel for the assessee relied on some following other judgments :
(1) CIT vs. Mansa Ram & Sons (1977) 106 ITR 307 (All);
(2) CIT vs. Adamkhan (1997) 223 ITR 264 (Mad);
(3) CIT vs. Amalendu Paul (1984) 145 ITR 439 (Cal);
(4) Amir Chand vs. ITO (1994) 48 TTJ (Del) 308 : (1994) 49 ITD 606 (Del);
(5) 45 ITR 542 (sic); and
(6) 203 ITR 564 (sic)
14. The learned counsel for the assessee concluded his arguments as under :
(1) The base of addition is solely the admission made by the assessee during the continuance of survey. The date of survey falls in asst. yr. 1992-93. The admission is conditional that penalty will not be imposed.
(2) The AO has not given any material as to why the figure admitted by the assessee, alone has been adopted as the basis for inclusion of admitted account of income.
(3) The Revenue cannot rely on part of the proposal favourable to it and deny the part of the same proposal which is not favourable to the Revenue.
(4) For imposition of penalty merely admission of the assessee in the asst. yr. 1991-92 by itself is not sufficient to sustain the penalty for concealment as imposed.
15. The learned Departmental Representative vehemently argued supporting the orders of the lower authorities. It was vehemently put forth that there cannot be an estoppel against the law and relied on the following case laws :
(1) Tube Fabrico (I) Ltd. vs. CIT (1994) 210 ITR 1035 (Del);
(2) Sir Shadilal Sugar & Gen. Mills Ltd. & Anr. vs. CIT (1987) 168 ITR 705 (SC);
(3) C. B. Bailey vs. Dy. CIT (1998) 66 ITD 1 (Del); and
(4) Anand Liquors vs. CIT (1998) 232 ITR 35 (Ker).
16. We have heard the rival submissions and have perused the material available on record. It is evident from the record that the proposal was made during the continuance of survey. The material, if any, which was detected as a result of survey, the date for the same falls in the asst. yr. 1992-93. The assessee made a proposal agreeing to disclose additional income of Rs. 6 lacs for asst. yr. 1991-92. The learned AO has not mentioned in the assessment order any material as to why the income of Rs. 6 lacs, which is being included in the income of the assessee on the basis except the admission. The admission is conditional and its condition is that the penalty will not be imposed. The penalty has been imposed without any objective material and accepting only a part of the offer of the assessee. We are of the view that the penalty has not been validly imposed by the lower authorities. Consequently, the same is deleted and the appeal of the assessee is allowed.