ORDER
Hari Om Maratha, J.M.
1. This appeal of the assessee for asst. yr. 2003-04 is directed against the order of learned CIT(A) dt. 4th Dec, 2006, which emanates from a penalty order dt. 25th July, 2006 under Section 271(1)(c) of the IT Act, 1961.
2. The facts leading to this appeal are that the assessee filed return of income on 17th Oct., 2003 and the assessment was passed on 25th Jan., 2006. The assessee is proprietor of M/s Jyoti Studio and is engaged in studio photography, outdoor photography, video cassettes, album, etc. A survey under Section 133A was conducted and during this survey assessee surrendered total amount of Rs. 1,09,859 (Rs. 93,126 on account of excess stock and Rs. 16,733 on account of excess cash). The assessee also claimed long-term capital loss of Rs. 89,210 on account of sale of residential house situated at Bhopalpura, Udaipur. The surrendered amount was not shown by the assessee in his return of income. The AO also queried about the value of the house sold during the year. Therefore, the assessee revised his original return of income by incorporating an amount of Rs. 1,09,859 and also declared capital gains of Rs. 1,32,967 as per the provisions of Section 50C of the Act. Assessment order was completed on 25th Jan., 2006 at total income of Rs. 4,12,120 including capital gain of Rs. 1,32,967 and the AO also initiated penalty proceedings under Section 271(l)(c) for concealment of taxable income and for furnishing inaccurate particulars of income. After show causing and hearing the assessee, learned AO levied a penalty of Rs. 1 lakh on total income, according to AO, concealed at Rs. 3,33,036.
3. This penalty was confirmed by learned CIT(A) vide order dt. 25th July, 2006. The assessee has raised this second appeal.
4. I have heard both the sides and have also perused the relevant material on record.
5. It has been contended by learned Authorised Representative Sh. N.R. Meratia that the impugned additions, on the basis of which penalty under Section 271(l)(c) has been levied were made on estimate basis, and when additions are based alone on estimation, no such penalty can be levied. It has also been argued that Section 50C came into operation only w.e.f. 1st April, 2003 and was applicable to asst. yr. 2004-05, whereas the assessment order (sic-year) under consideration is 2003-04 only. Even otherwise it was a recent change and the assessee had disclosed all the relevant facts, is the other argument of learned Authorised Representative. As far as statement of the assessee is concerned, it has been submitted that it does not have any legal force as it has not been properly recorded. It is not clear as to who recorded this statement. On the other hand, the case of the Department is that all the relevant additions which are based on surrender, are the result of a query made by the AO and cannot be taken as voluntary disclosure by way of a revised return, which was non est in the eyes of the law having not been filed within permitted time. According to learned Departmental Representative the assessee has furnished inaccurate particulars of income and thus a penalty under Section 271(l)(c) is exigible. I have cogitated the entire material available on the record in the light of the rival submissions. The well settled principle of law is that the parameters for levy of penalty and for making quantum additions operate in separate and distinct spheres. It is also a trite law that a penalty is not exigible only on account of estimated additions. Undoubtedly, the assessee did not file appeal against impugned quantum additions. Before levying penalty under Section 271(1)(c) of the Act either the concealment of taxable income or the furnishing of inaccurate particulars of income has to be established to the hilt by learned AO, failing which the case for levy of penalty would not be made out. The use of word ‘may’ in Section 271(l)(c), admits, reasonable cause and sufficient reasons to exonerate the defaulter from the levy of this penalty. The concerned AO has to visualize the entire sequence of facts before coming to the conclusion that a case of a penalty is made out. If and only if the AO can conclude that the assessee has knowingly and/or verily concealed income either directly by furnishing inaccurate particulars of income, a penalty under Section 271(l)(c) can be levied. The AO has to examine the minutest nuisances of facts and figures of a given case. There cannot be straightjacket formula to fit in an assessee for such penalty. It depends upon the facts of a particular case. The whole hog of facts and circumstances including the nature of business, the explanation of the assessee, the manner of addition and the other host of factors, have to be taken into consideration. The AO is not obliged to impose penalty, automatically, in each case of such defaults. Discretion given to him has to be exercised judiciously. Yes, in cases where the return is revised as a result of detection by the Department, the revised return cannot be treated as voluntary but still the ‘ingredients’ of addition do admit sufficient and plausible reasons to extenuate the default. It depends on the facts and the circumstances of a given case whether a penalty can be levied or not. In the given case the learned CIT(A) has simply mentioned that the assessee has revised the return after constant legal pursuit by way of issuing show-cause notices, the penalty levied by AO is to be confirmed. But, I beg to differ from the above finding because learned CIT(A) has not at all considered the written submissions of the assessee even after incorporating the same, verbatim, in the order.
6. The assessee is doing photography service and was oblivious of surrender made during survey. Immediately after the query was made in this regard, he filed a revised return and did not contest the quantum addition as well. The assessee first obtained a copy of his statement made during the survey and then without loss of time revised his return of income. He got a copy of the statement on 26th July, 2004 and filed revised return on 14th Dec, 2004. The AO did not take cognizance of the revised return as the original return was also delayed because it was not filed within time prescribed under Section 139(1). However, the AO considered the income shown in the revised return for assessment purposes. The assessee surrendered income of Rs. 1,09,859 on account of stock and cash and Rs. 1,32,967 on account of long-term capital gains under Section 50C of the Act and paid taxes accordingly. It has been brought to my notice that the alleged statement of the assessee is not signed by anyone from the side of the Department, which according to the Authorised Representative cannot be taken into account at least for purpose of penalty proceedings. Reliance has been placed on the decision of this Bench given in the case of Mangilal v. ITO in ITA No. 40/Jd/2003 (asst. yr. 2000-01) order dt. 13th Oct., 2006, wherein it has been held that when the statement is not signed by any authorized officer to declare that the statement was read over and accepted as correct (in short ‘RO & AC’), it does not have any evidentiary value. The learned Authorised Representative has also placed reliance on the decision of Hon’ble Supreme Court given in the case of CIT v. Suresh Chandra Mittal wherein it has been held that concealment cannot be inferred, ipso facto, from surrender or addition but it has to be proved by the Department. For non-filing of appeal against the surrendered income reliance has been placed on the decision of Narender Kumar v. ITO (2005) 94 TTJ (Jd) 156. For making a wrong claim which is subsequently withdrawn, reliance has been placed on the decision of this Bench given in the case of Dew Dass Sukhani v. ITO (2006) 101 TTJ (Jd) 551. Insofar as estimated addition is concerned, in my view, the law is settled that no penalty under Section 271(l)(c) can be levied. Section 50C was introduced w.e.f. 1st April, 2003 and was a new section which was applicable from the asst. yr. 2003-04 only and this being the very first year, in such circumstances, the default of the assessee to declare long-term capital gains cannot lead to levy of such a penalty. The cumulative effect of all the above facts makes out a just and sufficient cause for absolving the assessee from visiting such penalty. Accordingly, I set aside the order of learned CIT(A) and order to cancel/delete the impugned penalty of Rs. 1 lakh.
7. In the result, the appeal of the assessee is allowed.