S.L. Shiva Raj, Nizamabad, Hyderabad V. DCIT, Central Circle-1(3), Hyd, Hyderabad

ITA 1002/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98639 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 29-09-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 03-08-2015
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Keywords: Depreciation; Transfer pricing; Search and seizure; International transaction; Source of fund; Reassessment proceedings
• Section: 143(3); 92E; 153A; 147; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1002/HYD/2015 ASSESSMENT YEAR: 2002-03 S.L. SHIVA RAJ, NIZAMABAD [PAN: ALPPS3268L] VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K. C. DEVDAS , AR FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR DATE OF HEARING : 0 1 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 30 - 1 0 - 2015 O R D E R THIS IS AN ASSESSEES APPEAL AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XI, HYDERABAD DATED 10-06-2015, CONFIRMING THE PENALTY OF RS. 2,80,394/ - LEVIED ON ASSESSEE U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] BY THE ASSESSING OFFICER (AO) VIDE THE ORDER DT. 15-06-2010. ASSESS EE HAS RAISED AS MANY AS EIGHT GROUNDS ON THE ISSUE OF LEVY OF PENAL TY. I HAVE HEARD LD. COUNSEL AND LD. DR IN DETAIL AND PERUSED THE PA PER BOOK PLACED ON RECORD FROM PAGES 1 TO 61 AND INDEX OF PR ECEDENTS FILED IN SEPARATE PAPER BOOK SUPPORTING VARIOUS SUBMISSIO NS. I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 2 -: 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND A SALES TAX PRACTITIONER BY PROFESSION. HE HAS FILED RETURN OF INCOME FOR THE AY. 2002-03 U/S. 139(1) ON 31-03-2003 DISCLOSING AN INCOME OF RS. 2,99,263/-. THIS RETURN WAS PROCESSED U/S. 143 (1) OF THE ACT. ASSESSEE HAS ADMITTED INCOME FROM HOUSE PROPERTY AND INCOME FROM PROFESSION IN THE SAID RETURN. THERE WERE SE ARCH AND SEIZURE OPERATIONS CONDUCTED IN ASSESSEES CASE ON 16-06-20 08, WHEN HE WAS INTERCEPTED AT RAJIV GANDHI INTERNATIONAL AIRPO RT AT HYDERABAD ON HIS WAY FROM CHENNAI AND CASH OF RS. 12.65 LAKHS WAS FOUND. THE SEARCH AND SEIZURE OPERATION LEAD TO THE DETECT ION OF 27 UNDISCLOSED BANK ACCOUNTS OF ASSESSEE, IN WHICH THE RE WERE DEPOSITS AND WITHDRAWALS MADE AT REGULAR INTERVALS. IN HIS DEPOSITION U/S. 132(4), IT WAS ADMITTED THAT THE DE POSITS WERE OUT OF THE UNACCOUNTED SOURCES OF INCOME. THE EXTRACTS OF THESE BANK ACCOUNTS WERE OBTAINED FROM THE BANKS AND ASSESSEE WAS ASKED TO FURNISH CASH FLOW STATEMENTS. ASSESSEE HAD FILED N ECESSARY CASH FLOW STATEMENTS AND THE EXCESS APPLICATION OF FUNDS OVER THE EXPLAINABLE SOURCES CAME TO AN EXTENT OF RS. 90.47 LAKHS AS ON 31-03-2008. FOR THE IMPUGNED ASSESSMENT YEAR, THE UNEXPLAINED NEGATIVE CASH BALANCE CAME TO AN AMOUNT OF RS. 9,16 ,321/-. SINCE ASSESSEES INCOME HAS ESCAPED ASSESSMENT, PROCEEDIN GS U/S. 147 WERE INITIATED AND NOTICE U/S. 148 WAS ISSUED ON 30 -03-2009. ASSESSEE, IT SEEMS FILED RETURN OF INCOME ON 15-05- 2009 BUT AO AGAIN ISSUED ANOTHER LETTER ON 25-08-2009 CALLING F OR RETURN. ASSESSEE VIDE LETTER DT. 02-09-2009 REPLIED THAT HE HAS ALREADY FILED RETURN OF INCOME ADMITTING ADDITIONAL INCOME OF RS. 9,16,321/-. AO COMPLETED THE ASSESSMENT PROCEEDINGS DETERMINING THE TOTAL INCOME AT RS. 12,15,580/- AS ADMITTED IN THE RETURN IN RESPONSE TO NOTICE U/S. 147. HOWEVER, HE HAS QUANTIFIED THE PE AK NEGATIVE BALANCE OF RS. 9,16,321/- AND SEPARATELY BROUGHT TO TAX TAKING THE I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 3 -: INCOME AS PER THE ORIGINAL RETURN AS THE BASIS. HE ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C). THE ASSESSMENT WAS ACCEPTED AND THERE WAS NO APPEAL. 3. IN THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE W AS ASKED TO EXPLAIN WHY PENALTY PROCEEDINGS CANNOT BE CONCLUDED ? THERE WAS NO REPLY. ASSESSEE WAS GIVEN ONE MORE OPPORTUNITY ON 12-05- 2010. ASSESSEE FILED HIS REPLY ON 01-06-2010 CONTE NDING THAT ASSESSEE HAS ADMITTED ADDITIONAL INCOME AS DECLARED U/S. 132(4) OF THE ACT, COMPLYING WITH ALL THE CONDITIONS LAID DOW N IN SUB-CLAUSE 2 TO EXPLANATION-5 OF SECTION 271(1)(C) OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSMENT HAS BEEN COMPLETED ON THE SAME INCOME WHICH WAS DECLARED IN THE RETURN IN RESPONSE TO NOT ICE U/S. 148. AS THERE IS NO DIFFERENCE BETWEEN RETURNED INCOME A ND ASSESSED INCOME, NO PENALTY CAN BE LEVIED. RELYING ON THE D ECISION OF DURGA KAMAL RICE MILLS VS. CIT [265 ITR 25] (CAL.), ASSES SEE CONTENDED THAT LEVY OF PENALTY IS NOT AUTOMATIC. HE ALSO REL IED ON JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF JAIN BROTHERS VS. UNION OF INDIA [77 ITR 107]. WITH REFERENCE TO BURDEN OF ES TABLISHING THE CONCEALMENT, ASSESSEE RELIED ON JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT [291 ITR 519] (SC). IT WAS FURTHER CONTENDED THAT PENALTY WILL NOT BE ORDI NARILY BE IMPOSED UNLESS THE PARTY APPLIED EITHER ACTS DELIBE RATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. ASSESSEE ALSO RELIED ON THE FOLLOWING CASE LAW: I. CIT VS. SUNILCHAND MITTAL [251 ITR 9] (SC); II. CIT VS. RAM COMMERCIAL ENTERPRISES LTD., [246 ITR 5 68] (DEL); I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 4 -: III. CIT VS. VIKAS PROMOTERS PVT. LTD., [277 ITR 337] (D EL); IV. DIWAN ENTERPRISES VS. CIT & ORS. [246 ITR 571] (DE L); AND V. CIT VS. B.R. SHARMA [275 ITR 303] (DEL) 4. LD. AO HOWEVER, DID NOT AGREE WITH ASSESSEES SU BMISSIONS. AO HAS COME TO A CONCLUSION THAT EVEN THOUGH ASSESS EE DECLARED INCOME, IT WAS IN RESPONSE TO NOTICE U/S. 148 WHICH AMOUNTS TO FURNISHING ON INACCURATE/CONCEALMENT OF PARTICULARS IN THE ORIGINAL RETURN OF INCOME FILED BY ASSESSEE. HE ALSO CONCLU DED THAT PROVISIONS OF EXPLANATION-5 TO SECTION 271(1)(C) AR E NOT APPLICABLE W.E.F. 01-06-2007. THEREFORE, THERE IS NO IMMUNITY TO ASSESSEE UNDER THIS SECTION. AO CONCLUDED THAT THE ADDITION S MADE IN THE ORDER U/S. 143(3) COME CLEARLY WITHIN THE MEANING O F CONCEALMENT U/S. 271(1)(C). AO RELIED ON THE JUDGMENT OF THE H ON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS & OTHERS [306 ITR 277] THAT PENALTY IS A CIVIL LIABILITY AND WILL FUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT. ACCORDINGLY, HE ARRIV ED AT THE TAX SOUGHT TO BE EVADED RS. 2,80,394/- AND LEVIED MINIM UM 100%OF THE AMOUNT AS PENALTY AS PER THE PROVISIONS. 5. ASSESSEE CONTESTED THE ISSUE BEFORE THE LD. CIT( A). DETAILED SUBMISSIONS WERE MADE IN THE GROUND ITSELF AS EXTRA CTED BY THE LD. CIT(A) IN PARA 2 OF THE ORDER. LD. CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEES CONTENTIONS AND CONFIRMED THE PENAL TY. WHILE DOING SO, LD. CIT(A) OPINED THAT AMENDMENT TO EXPLA NATION-5A IS FULLY APPLICABLE TO THE APPELLANT. THE UNDISCLOSED INCOME WAS COMPUTED ON THE BASIS OF UNDISCLOSED BANK ACCOUNTS FOUND DURING THE COURSE OF SEARCH. LD. CIT(A) OPINED THAT DISCLOSURE WAS MADE BY THE APPELLANT U/S. 132(4) ONLY WHEN THE INCRIMIN ATING MATERIAL I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 5 -: WAS CONFRONTED TO HIM AND IN VIEW OF THIS, THE PENA LTY IMPOSED BY THE AO U/S. 271(1)(C) R.W. EXPLANATION-5A IS SUSTAI NED . ASSESSEE IS AGGRIEVED. 6. LD. COUNSEL SUBMITTED THAT CIT(A)S ORDER WAS NO T CORRECT IN THE SENSE THAT EXPLANATION-5A IS NOT APPLICABLE TO THE FACTS OF THE CASE AS ASSESSMENT WAS DONE U/S. 147 AND IT IS OUTS IDE THE BLOCK PERIOD. IT WAS SUBMITTED THAT FOR THE BLOCK PERIOD IN ALL THE SIX ASSESSMENT YEARS, ASSESSEE HAS DISCLOSED INCOMES AN D PENALTY PROCEEDINGS THEREON WERE DROPPED BY THE AO. IT WAS SUBMITTED THAT LEVY OF PENALTY IN THE IMPUGNED YEAR IS NOT CO RRECT AS ASSESSEE HAS BONAFIDELY DECLARED THE INCOMES. LD. COUNSEL P LACED ON RECORD VARIOUS SUBMISSIONS AND RELIED ON THE FOLLOWING CAS E LAW: I. CIT VS. VINAY SHARMA (CC NOS. 18018/2014 DT. 17-11- 2014); II. ANOOPGARH KRAYA VIKRAYA SAHAKARI SAMITI LTD., VS. A CIT (RAJASTHAN) [124 DTR 165]; III. PREM ARORA VS. DCIT [78 DTR (DEL) (TRIB) 91]; IV. CIT VS. SURESH CHANDRA MITTAL [251 ITR 9] (SC); V. DILIP N. SHROFF VS. JCIT [291 ITR 519] (SC); VI. T. ASHOK PAI VS. CIT [292 ITR 11] (SC); VII. CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., [322 ITR 158] (SC); VIII. SUDARSHAN SILKS AND SAREES VS. CIT [300 ITR 205] (S C) IT WAS THE SUBMISSION THAT THE FACTS OF THE CASE DO ES NOT WARRANT PENALTY U/S. 271(1)(C) AS ASSESSEE HAS BONAFIDELY D ECLARED THE INCOMES AS DECLARED IN THE STATEMENT U/S. 132(4). I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 6 -: 7. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AU THORITIES TO SUBMIT THAT PENALTY IS WARRANTED. HE HAS RELIED ON THE FOLLOWING CASE LAW: I. LMP PRECISION ENGG. CO. LTD. VS. DCIT (ASSTT.) SPL. RANGE [183 TAXMAN 12] (GUJ); II. CIT VS. MAHABIR PRASAD BAJAJ [298 ITR 109] (JHARKHA ND); III. B.A. BALASUBRAMANIAN AND BROS. CO. VS. CIT [236 ITR 977] (SC); IV. ADDL. CIT VS. JEEVANLAL SAH [205 ITR 244] (SC); V. RAJ KUMAR CHAURASIA VS. CIT [288 ITR 329 (ALL); VI. CIT VS. ANWAR ALI [76 ITR 696 (SC); VII. CIT VS. HANDLOOM EMPORIUM [282 ITR 431 (ALL); VIII. M.S. MOHAMMED MARZOOK (LATE) AND ANOTHER (REPRESENT ED BY LEGAL HEIRS) VS. ITO [283 ITR 254] (MAD); IX. SARDAR BHAGWAN SINGH CHAWLA VS. CIT [279 ITR 142] ( ALL); X. MADANLAL KISHORILAL VS. CIT (ALL) [144 CTR: VOL. 19 7 DTD. 19-08-2005]; XI. CIT VS. GURBACHAN LAL [250 ITR 157] (DELHI); XII. KAMAL CHAND JAIN VS. ITO [277 ITR 429] (DEL); XIII. MAK DATA (P) LTD., VS. CIT [358 ITR 0593] 8. I HAVE CONSIDERED THE ISSUE AND PERUSED THE VARI OUS PROPOSITIONS LAID DOWN BY RIVAL PARTIES AND SUPPORT ING CASE LAW. IT IS TO BE KEPT IN MIND THAT ASSESSEE ADMITTED THE TR ANSACTIONS IN THE BANK ACCOUNTS ONLY AFTER THE SEARCH AND SEIZURE PROCEEDINGS UNDERTAKEN ON HIM. IT IS ALSO A FACT THAT HE HAS D ISCLOSED MOST OF THE INCOMES U/S. 132(4) IN THE RESPECTIVE ASSESSMEN T YEARS OF THE BLOCK AND HE GOT IMMUNITY FROM PENALTY IN VIEW OF T HE PROVISIONS AS APPLICABLE TO THE FACTS OF THE CASE THEREIN. JU ST BECAUSE HE GOT I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 7 -: IMMUNITY FROM PENALTY IN OTHER YEARS, IT DOES NOT A UTOMATICALLY LEAD TO CANCELLATION OF PENALTY IN THE IMPUGNED ASS ESSMENT YEAR UNLESS THE FACTS OF THE CASE ALSO WARRANT SUCH IMMU NITY. 9. IT IS THE FACT THAT ASSESSEE FILED HIS ORI GINAL RETURN OF INCOME BELATEDLY IN THE YEAR 2002-03 I.E., ON 31-03-2003 A S AGAINST THE DUE DATE OF 31-08-2002, DECLARING INCOME FROM PROF ESSION, HOUSE PROPERTY. IT IS ALSO A FACT THAT HE WAS OPERATING MANY BANK ACCOUNTS, DEPOSITING CASH AND WITHDRAWING CASH. TH OSE DETAILS WERE NOT ADMITTED BY ASSESSEE IN THE ORIGINAL RETUR N. EVEN AFTER DECLARATION UNDER SECTION 132(4) AS STATED BY ASSES SEE, ASSESSEE HAD NOT FILED RETURN OF INCOME VOLUNTARILY ON HIS O WN, UNTIL PROCEEDINGS U/S. 147 WERE INITIATED BY THE AO. THE RETURN FILED WAS SUBSEQUENT TO THE PROCEEDINGS INITIATED U/S. 14 7. HAD THE ASSESSEE FILED THE RETURN IMMEDIATELY AFTER DISCLOS URE AND THEN, AO REGULARISED SUCH RETURN BY INITIATING PROCEEDINGS, ACCORDING TO THE ACT, THEN, ASSESSEES CONTENTION THAT HE HAS FILED RETURN BONAFIDELY DISCLOSING HIGHER INCOME COULD HAVE BEEN ACCEPTED. 10. PROCEEDINGS U/S. 147 ARE INITIATED FOR BRINGING TO TAX ANY INCOME CHARGEABLE TO TAX THAT HAS ESCAPED ASSESSMEN T FOR ANY ASSESSMENT YEAR. EXPLANATION-2 TO SECTION 147 DEEM S CERTAIN CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. SECTION 147.. . EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 8 -: YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN T HE RETURN ; [(BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A R EPORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E ;] (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED;] [(D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INC LUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA.] 11. SECTION 147 AUTHORISES THE AO TO INITIATE PROCE EDINGS U/S. 147, IF THERE IS ANY ESCAPEMENT OF INCOME AS CONTEM PLATED. IT IS TO BE NOTED THAT ESCAPEMENT OF INCOME IS DIFFERENT FRO M CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THEREFORE, IN ALL CASES WHERE PROCEEDINGS U/S. 147 ARE INITIATED, IT DOES NOT AUTOMATICALLY BECOME CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS UNLESS SUCH INCOME WHICH ES CAPED ASSESSMENT COMES WITHIN THE PROVISIONS OF SECTION 2 71(1)(C) WARRANTING PENALTY. 12. PROVISIONS OF SECTION 271(1)(C) EMPOWERS THE AO TO LEVY PENALTY EITHER FOR CONCEALMENT OF INCOME OR FOR FUR NISHING OF INACCURATE PARTICULARS. THESE TWO CONCEPTS ARE SUB JECT MATTER OF VARIOUS ADJUDICATIONS NOT ONLY BY VARIOUS HIGH COUR TS BUT ALSO BY THE HON'BLE SUPREME COURT IN DIFFERENT CASES. BOTH THE PARTIES RELIED ON VARIOUS CASE LAW SUPPORTING THEM. HOWEVE R, AS CAN BE I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 9 -: SEEN FROM THE FACTS OF THE CASE LAW RELIED UPON, MO ST OF THE PROPOSITIONS ARE ARISING FROM THE ADDITIONS MADE IN THE ORIGINAL ASSESSMENT, BUT NOT IN RE-ASSESSMENT. IT IS TO BE KEPT IN MIND THAT THE ASSESSMENT IN ASSESSEES CASE IS NOT AN ORIGINA L ASSESSMENT. SO, MOST OF THE CASE LAW RELIED UPON AND THE PROPOS ITIONS LAID DOWN BY THE CASE LAW DOES NOT APPLY TO THE FACTS OF THE CASE, AS THE PROCEEDINGS ARE RE-ASSESSMENT PROCEEDINGS U/S. 147. AO HAS JURISDICTION IN REASSESSMENT PROCEEDINGS TO IMPOSE PENALTY FOR CONCEALMENT OF INCOME IN THE RETURN FILED IN REFERE NCE TO ORIGINAL RETURN OF INCOME FILED FOR THAT YEAR, NOTWITHSTANDI NG THAT ASSESSEE HAD SUBMITTED CORRECT RETURN IN COMPLIANCE WITH THE NOTICE FOR REASSESSMENT. I. GURU CHARANPRASAD IN RE, AIR 1931 ALL 421, II. C.V. GOVINDARAJULU IYER VS. CIT [16 ITR 391] (MAD); III. K.C. MUKHERJEE VS. CIT [37 ITR 224] (PATNA); IV. CIT VS. ANGARA SATYAM [37 ITR 230](AP); V. CIT VS. GOPAL KRISHNA SINGHANIA [89 ITR 27] ( ALL) (FB); VI. R. KUPPU SWAMY CHETTY VS. CIT [135 ITR 235] ( MAD) (FB); VII. ADDL.CIT VS. T.K. PERUMALSWAMY [150 ITR 600] (MAD); VIII. CIT VS. MAKHAN SINGH [154 ITR 121] (RAJ); 13. ONLY IN A CASE WHERE REASSESSMENT PROCEEDINGS A RE NOT FOUND TO BE VALIDLY INITIATED AND HELD TO BE UNSUST AINABLE, THE PENALTY PROCEEDINGS CANNOT SURVIVE [CIT VS. YONUS K UNJU, A [228 ITR 147] (KER)]. IN THIS CASE, THERE IS NO CHALLENGE TO THE PROCEEDINGS U/S. 147. THEREFORE, SINCE ASSESSEE HA S DISCLOSED HIGHER INCOME, WHICH WAS NOT DISCLOSED IN THE ORIGI NAL RETURN, WHAT I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 10 - : EVER MAY BE THE CIRCUMSTANCES, THERE IS AN ESCAPEME NT OF INCOME WHICH WAS BROUGHT TO TAX. AO HAS CONCLUDED THAT AS SESSEE IS DEPOSITING MORE CASH IN VARIOUS BANK ACCOUNTS THAN THE KNOWN SOURCES OF INCOME. AS CAN BE SEEN FROM THE ORIGINA L RETURN, ASSESSEE HAS DECLARED INCOME FROM PROFESSION AND MA NY OF THE BANK ACCOUNTS WHICH ASSESSEE WAS MAINTAINING ARE NO T CONSIDERED AT THE TIME OF ORIGINAL RETURN OF INCOME, EVEN THOU GH ASSESSEE IS AWARE ABOUT THE TRANSACTIONS. ONLY WHEN CONFRONTED WITH SEARCH AND SEIZURE PROCEEDINGS AND IDENTIFICATION OF 27 BA NK ACCOUNTS MAINTAINED BY HIM, NOT ONLY IN HYDERABAD BUT ALSO I N OTHER PLACES LIKE CHENNAI, COMPLETE TRANSACTIONS HAVE COME TO TH E KNOWLEDGE OF THE DEPARTMENT. SINCE ASSESSEE HAS NOT BONAFIDELY ACTED IN DISCLOSING OF HIS TRANSACTIONS AT THE TIME OF FILIN G ORIGINAL RETURN, SUBSEQUENT CONDUCT, CONSEQUENT TO THE SEARCH, MAY N OT GIVE IMMUNITY TO ASSESSEE IN THE REASSESSMENT PROCEEDING S. IT IS CONTENDED THAT IN ALL OTHER YEARS, WHERE ASSESSEE H AS DISCLOSED THE INCOMES IN RESPONSE TO SECTION 153A PROCEEDINGS, PE NALTY WAS DROPPED. THE SCHEME OF ASSESSING INCOMES IDENTIFIED IN SEARCH HAVE BEEN MODIFIED AND IN THE REVISED PROCEDURE, AS SESSMENTS U/S. 153A ARE INDEPENDENT OF ORIGINAL ASSESSMENT PROCEED INGS. THEREFORE, THE IMMUNITY PROVIDED IN PROCEEDINGS U/S . 153A CANNOT BE EXTENDED TO THE PRESENT PROCEEDINGS BEING REASSE SSMENT PROCEEDINGS U/S 147. 14. EXPLANATION-1 TO SECTION 271(1)(C) IS CERT AINLY APPLICABLE TO THE FACTS OF THE CASE. ASSESSEE HAS NOT GIVEN ANY BONAFIDE EXPLANATION WHY THE INCOMES ARE NOT DISCLOSED IN TH E ORIGINAL RETURN. THE EXPLANATION GIVEN BY ASSESSEE IS WITH REFERENCE TO THE RETURN FILED IN RESPONSE TO NOTICE U/S. 148. IT MA Y BE TRUE THAT AO ACCEPTED THE INCOME AS DISCLOSED IN THE RETURN FILE D IN RESPONSE TO I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 11 - : NOTICE U/S. 148. BUT CONCEALMENT OF INCOME HAPPENE D VIZ-A-VIZ THE ORIGINAL RETURN FILED ON 31-03-2003 DISCLOSING A LESSER INCOME. IN THE CASE OF CIT VS. MOHD. MOHTRAM FAROOQUI [259 ITR 132], HON'BLE RAJASTAN HIGH COURT CONFIRMED THE PENALTY W HEN CASH WAS SEIZED FROM ASSESSEE BY POLICE AUTHORITIES. IT WAS EXPLAINED BY ASSESSEE THAT PART OF CASH BELONG TO THIRD PERSONS. THERE IS NO EVIDENCE TO SUPPORT THE EXPLANATION, THAT ASSESSEE HAS SURRENDERED THE AMOUNT FOR ASSESSMENT. IT IS HELD THAT SURREND ER IS NOT VOLUNTARY AND LEVY OF PENALTY IS WARRANTED. THE FA CTS IN THIS CASE ARE SIMILAR TO ASSESSEES ARGUMENT THAT HE HAS VOLU NTARILY SURRENDERED THE REVISED INCOME. THIS ARGUMENT CANNO T BE ACCEPTED ON THE FACT THAT HE WAS MAINTAINING VARIOUS BANK AC COUNTS AND THE INCOMES WERE NOT DISCLOSED IN THE ORIGINAL RETURN. IN VIEW OF THIS, I AM OF THE OPINION THAT AO HAS CORRECTLY IMPOSED PE NALTY U/S. 271(1)(C). 15. IT IS TO BE NOTED THAT AO HAS CLEARLY STATED IN THE PENALTY ORDER THAT EXPLANATION-5 TO SECTION 271(1)(C) IS NO T APPLICABLE TO THE FACTS OF THE CASE. IN SPITE OF CLEAR FINDING, I AM SURPRISED TO NOTE THAT LD. CIT(A) CONFIRMED THE PENALTY INVOKING THE EXPLANATION-5A. AS SEEN FROM THE ORDER, THERE IS A WRONG NOTING ALSO THAT THE PROCEEDINGS ARE INITIATED U/S. 153A. MAY BE THE CIT(A) WAS ON THE IMPRESSION THAT THE PROCEEDINGS A RE INITIATED U/S 153A AND PENALTY WAS LEVIED. SINCE THE PRESENT PRO CEEDINGS ARE NOT PROCEEDINGS U/S. 153A AND ARE REASSESSMENT PROC EEDINGS UNDER SECTION 147, ORDER OF CIT(A) TO THAT EXTENT I S NOT BASED ON FACTS. BE THAT AS IT MAY, I AM OF THE OPINION THAT PENALTY IN REASSESSMENT PROCEEDINGS ARE WARRANTED, IN VIEW OF THE VARIOUS DECISIONS RELIED ON ABOVE. I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 12 - : 16. HON'BLE ALLAHABAD HIGH COURT (FULL BENCH) IN TH E CASE OF CIT VS. GOPAL KRISHNA SINGHANIA [89 ITR 27] (ALD) H ELD AS UNDER: PENALTY CAN BE LEVIED DURING THE COURSE OF PROCEEDINGS FOR REASSESSMENT UNDER SECTION 34 OF THE INDIAN INC OME-TAX ACT, 1922, IN RESPECT OF A DEFAULT COMMITTED BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' IN SECTION 271(1)(C ) OF THE INCOME-TAX ACT, 1961, CORRESPONDING TO SECTION 28(1)(C) OF THE ACT OF 19 22, WOULD GOVERN A SITUATION WHERE SUCH PARTICULARS HAD BEEN CONCEALED IN THE ORIGINAL PROCEEDINGS WHICH HAD ALREADY TERMINATED. THE PURPOSE OF THE PROCEEDINGS UNDER SECTION 34 IS TO BRING TO TAX THE INCOME WHICH SHOULD HAVE BEEN ASSESSED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. WHEN AN ASSESSMENT IS RE-OPENED UNDER SECTION 34 , THE FINDING WITH REGARD TO THE ORIGINAL RETURN STANDS RE-OPENED AND THE ULTIMATE FINDING AS TO WHE THER A RETURN IS CORRECT OR NOT IS TO BE FOUND IN THE ORDER PASSED U NDER SECTION 34. THE PROVISIONS THEREIN UNDER THE OLD ACT ARE SIMILA R TO THE PROVISIONS IN INCOME TAX ACT, 1961. THEREFORE, I A M OF THE OPINION THAT THE DECISION OF THE FULL BENCH OF ALLAHABAD HI GH COURT WILL EQUALLY APPLY TO THE FACTS OF THE CASE. 17. AS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD., VS. CIT [358 ITR 0593], THERE CA NNOT BE ANY SURRENDER OF INCOME WITH A VIEW TO AVOID LITIGATION BY PEACE AND TO CHANNELISE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORKING AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEP ARTMENT. STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENSES IN EXPLANATION-I, SECTION 271(1)(C) OF THE ACT. IT IS TRITE LAW THAT VOLUNTARY DISCLOSURE DOES NOT RELEASE ASSESSEE FROM MISCHIEF OF PENAL PR OCEEDINGS. LAW DOES NOT PROVIDE THAT WHEN ASSESSEE RETURNS A VOLUN TARY DISCLOSURE OF HIS CONCEALED INCOME, HE HAS TO BE ABSOLVED FROM PENALTY. AS ALREADY STATED, THE PENALTY IS LEVIED WITH REFERENC E TO ORIGINAL RETURN OF INCOME AND NOT WITH REFERENCE TO THE ASSE SSMENT MADE I.T.A. NO. 1002/HYD/2015 S.L. SHIVA RAJ :- 13 - : CONSEQUENT TO THE DISCLOSURE BY ASSESSEE. IN VIEW OF THIS, I UPHOLD THE ORDER OF PENALTY FOR THE ABOVE REASONS. ASSESS EES GROUNDS ARE ACCORDINGLY REJECTED. 18. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 30 TH OCTOBER, 2015 TNMM COPY TO : 1. S.L. SHIVA RAJ, NO. 5-4-36/15, DWARAKA NAGAR, NIZAMABAD. C/O. B. NARSING RAO & CO., CHARTERED ACCOUNTANT, PLOT NO. 554, ROAD NO. 92, JUBILEE HILL S, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1 (3) , HYDERABAD. 3. CIT(APPEALS) - XI , HYDERABAD. 4. THE PR. CIT (CENTRAL) , HYDERABAD . 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.