Sunil Kumar Singhania, Hyderabad V. ACIT, Hyderabad

ITA 1118/HYD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59301 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 17-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISHWANATHAM
• Assessee Lawyers: GVVS MURTHY
• Keywords: Document seized; Reasonable cause; Difference of opinion; Block assessment; Retraction; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 1118/HYD/2009 (ASSESSMENT YEAR : 2002-2003) I.T.A. NO. 1119/HYD/2009 (ASSESSMENT YEAR : 2003-2004) SHRI SUNIL KUMAR SINGHANIA HYDERABAD PAN: AIRPS7990N VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI G.V.V.S. MURTHY RESPONDENT BY: SHRI K. VISHWANATHAM DATE OF HEARING: 28 . 0 2 .201 2 DATE OF PRONOUNCEMENT: 28 .02.2012 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE TWO APPEAL BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 8 TH OCTOBER, 2009 FOR ASSESSMENT YEARS 2002-03 AND 2003-04. SIN CE COMMON ISSUE IS INVOLVED BOTH THE APPEALS ARE CLUBBED TOGE THER, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE ISSUE ARE THAT A SEARCH AND SEIZ URE OPERATION U/S. 132 OF THE INCOME-TAX ACT, 1961 WAS CONDUCTED IN THE NAREDI GROUP OF CASES IN THE COURSE OF WHICH TH E RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE WERE ALSO COV ERED. CONSEQUENT TO THE SEARCH, THE ASSESSEE FILED RETURN S OF INCOME FOR A.Y. 2002-03 DECLARING INCOME OF RS. 2,83,650 AND F OR A.Y. 2003- 04 AT RS. 3,44,700. AFTER EXAMINING THE BOOKS OF A CCOUNT AND SEIZED MATERIALS THE ASSESSING OFFICER COMPLETED TH E ASSESSMENTS DETERMINING INCOME AT RS. 5,38,900 FOR A.Y. 2002-03 AND RS. I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 2 8,53,282 FOR A.Y. 2003-04. AS THE ASSESSEE HAD NOT DISCLOSED THE INCOME FROM BILL DISCOUNTING CORRECTLY THE ASSESSIN G OFFICER HAD MADE ADDITION OF RS. 2,55,248 AND RS. 5,08,582 IN THE A.YS. 2002-03 AND 2003-04, RESPECTIVELY. CONSEQUENTLY PE NALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WERE ALSO INI TIATED BOTH THE YEARS. IN THE COURSE OF THE PENALTY PROCEEDINGS TH E ASSESSEE SUBMITTED THAT THE ADDITION IN THE ASSESSMENT WAS M ADE ON ESTIMATE BASIS AND THERE IS NO JUSTIFICATION OF LEV Y OF PENALTY. THE ASSESSEE CLAIMED THAT THERE WAS NO MATERIAL EVIDENC E POINTING OUT ANY CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVER, THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. HE WAS OF T HE VIEW THAT THE ADDITION IN THE ASSESSMENT ORDER WAS MADE BASED ON THE CONCRETE EVIDENCE AS PER THE SEIZED MATERIALS. ACCORDINGLY, HE LEVIED A PENALTY OF RS. 1,18,756 AND RS. 2,10,420 FOR A.YS. 2002-03 AND 2003-04, RESPECTIVELY. BEING AGGRIEVED, THE ASSESS EE WENT IN APPEAL BEFORE THE CIT(A). ON APPEAL, THE CIT(A) CO NFIRMED THE PENALTY. AGAINST THIS, THE ASSESSEE IS IN APPEAL B EFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN CHARGING FOR BILL DISCOUNTING RS. 10 TO RS. 28 PER RS. 10000. THE ASSESSING OFFICER RELIED ON CER TAIN SEIZED MATERIAL WHICH SHOWS THE DISCOUNTING CHARGES AT RS. 28 PER RS. 1000 BUT HE IGNORED THE SEIZED MATERIAL WHICH SHOWS THE DISCOUNTING CHARGES LESSER THAN RS. 28 PER RS. 1000 0. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE VARIOUS SEIZED MATERIALS WHEREIN THE ASSESSEE MENTIONED THE DISCOUNTING CHARGES LESSER THAN RS. 28 PER RS. 10000, COPIES OF WHICH ARE PLACED IN THE PAPER BOOK. 4. REGARDING THE DISALLOWANCE OF EXPENDITURE, HE SUBMI TTED THAT THE ASSESSING OFFICER RELIED UPON THE ASSESSEE 'S STATEMENT GIVEN DURING THE COURSE OF SEARCH PROCEEDINGS. IT IS SUBMITTED I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 3 THAT A STATEMENT GIVEN ACROSS THE TABLE WITHOUT GOI NG TO THE FACTS CANNOT BE TAKEN AS AN AUTHENTIC ONE FOR THE PURPOSE OF COMPUTATION OF UNDISCLOSED INCOME IN SEARCH CASES. HE PLACED RELIANCE ON THE BOARD INSTRUCTION IN F. NO. 286/2/2 003-IT(INV.) DATED 10.3.2003 WHEREIN IT WAS INSTRUCTED NOT TO TA KE INTO CONSIDERATION ANY FINANCIAL MATTERS CONTAINED IN TH E STATEMENT GIVEN IN THE SEARCH OPERATIONS. HE ALSO RELIED ON THE FOLLOWING JUDGEMENTS: A) NEWCHEM LTD. VS. DCIT (1993) 47 ITD 487 (DEL.) B) CIT VS. RAVEL SINGH & CO., (2002) 254 ITR 191 (P&H) C) CIT VS. AJAY HARI DALMIA (1986) 157 ITR 145 (DEL) D) HARI OM KUMAR UMESHCHAND VS. ITO (2002) 257 ITR (AT ) 121 (AGRA) E) ADDL. CIT VS. DELHI CLOTH AND GENERAL MILLS CO-OPER ATIVE LTD. (1986) 157 ITR 822 (DEL.) F) JAJU (JK) VS. CIT (1990) 181 ITR 410 (MP) 5. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ASSESSING OFFICER HAS NO DOUBT ESTIMATED THE COMMIS SION ON CHEQUE DISCOUNTING BUT THE SAID ESTIMATION IS DULY SUPPORTED BY SEIZED MATERIALS FOUND DURING THE SEARCH AND SEIZUR E OPERATION. THUS IT CANNOT BE SAID THAT THE ESTIMATION WAS WITH OUT ANY BASIS OR CORROBORATIVE EVIDENCE. IN FACT THE QUANTUM ADD ITION MADE BY THE ASSESSING OFFICER WAS SUBJECTED TO APPEAL AND T HE FIRST APPELLATE AUTHORITY AFTER ANALYSING THE ISSUE IN DE TAIL AND VERIFYING THE SEIZED MATERIAL HAS CONFIRMED THE PERCENTAGE AD OPTED BY THE ASSESSING OFFICER FOR COMMISSION ON CHEQUE DISCOUNT ING. DURING THE APPELLATE PROCEEDINGS AGAINST THE ASSESSMENT OR DERS THE CIT(A) HAS CATEGORICALLY OBSERVED THAT THE SUBMISSION OF T HE ASSESSEE THAT THE COMMISSION EARNED WAS RS. 10 PER TEN THO USAND OR RS. 5 PER TEN THOUSAND WAS CONTRARY TO THE FACTS ON REC ORD. HE ALSO OBSERVED THAT THE ASSESSING OFFICER HAS TAKEN THE A VERAGE RATE OF COMMISSION BASED ON THE SEIZED DOCUMENTS FOR WHICH THE ASSESSEE HAD NO ANSWER. ACCORDINGLY, THE CIT(A) ON PROPER A PPRECIATION OF FACTS ON RECORD, CONFIRMED THE RATE OF COMMISSION A DOPTED BY THE ASSESSING OFFICER. FURTHER IT IS ALSO TO BE NOTED THAT COMMISSION I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 4 ORIGINALLY OFFERED BY THE ASSESSEE PRIOR TO THE SEA RCH WAS MUCH LESS THAN WHAT WAS OFFERED IN RESPONSE TO THE NOTIC ES ISSUED SUBSEQUENT TO THE SEARCH. THIS INDICATES THAT THOU GH THE ASSESSEE WAS WELL AWARE OF ITS COMMISSION INCOME HAD DELIBER ATELY SHOWN LESSER INCOME THOUGH ALL THE RELEVANT DETAILS WERE IN HIS POSSESSION. IT IS ONLY AFTER THE SEARCH OPERATION THAT HE CAME OUT WITH HIGHER INCOME. THUS AFTER PROPERLY ANALYSING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) OBSERVED THAT THERE WAS A CASE OF CONCEALMENT OF INCOME. THE ASSESSEE'S CONT ENTION THAT PENALTY IS NOT LEVIABLE SINCE THE ASSESSING OFFICER ESTIMATED THE INCOME IS ALSO NOT TENABLE SINCE THE ASSESSING OFFI CER HAS ADOPTED THE AVERAGE RATE OF COMMISSION TO ARRIVE AT THE COM MISSION INCOME AND IT WAS NOT A CASE OF SIMPLE ESTIMATION WITHOUT ANY MATERIAL BASIS. ACCORDINGLY, THE LEARNED DR SUBMITTED THAT THE APPEALS OF THE ASSESSEE MAY BE DISMISSED AND THE ORDER OF THE CIT(A) BE CONFIRMED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THE INCOME OF THE ASSESSEE IS DETERMINED BASED UPON CERTAIN SEIZED MATERIAL WHICH SHOWS THE DISCOUNTING CHARGES AT RS. 28 PER TEN THOUSAND. IT IS ALSO AN ADMITTED FACT THAT THERE ARE OTHER MATERIALS SHOWING THE BILL DIS COUNTING CHARGES LESS THAN RS. 28 PER TEN THOUSAND RUPEES. THE ASSE SSEE CHARGED DIFFERENT BILL DISCOUNTING CHARGES DEPENDING UPON T HE CUSTOMER. THERE IS NO UNIFORM RATE OF DISCOUNTING CHARGES. W HILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER CONSIDERED HIG HER DISCOUNTING CHARGES REFLECTED IN THE SEIZED MATERIA L EVEN THOUGH THERE IS SEIZED MATERIAL THAT SHOWS THE BILL DISCOU NTING CHARGES LESS THAN RS. 28 PER RS. 10000. 7. FURTHER THE EXPENDITURE WAS DISALLOWED ON THE BASIS OF THE STATEMENT RECORDED DURING THE COURSE OF SEARCH ACTI ON. THERE IS NO CONCLUSIVE EVIDENCE TO SUGGEST THAT THE ASSESSEE CONCEALED I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 5 INCOME BY FURNISHING INACCURATE PARTICULARS OF INCO ME. THE ASSESSING OFFICER IS REQUIRED TO SATISFY HIMSELF ABOUT THE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICU LARS OF SUCH INCOME. IT GIVES DISCRETION TO THE ASSESSING OF FICER TO EXONERATE THE ASSESSEE FROM LEVY OF PENALTY EVEN IN CASE WHERE THE ASSESSEE HAS CONCEALED THE INCOME OR FURNIS H INCORRECT PARTICULARS OF INCOME. THE EXPRESSION IN SECTION 271(1)(C) READS AS FOLLOWS: IF THE ASSESSING OFFICER ............ IS SATISFIED TH AT IN PERSON ........ (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME; HE MAY DIRECT ....... 8. THAT ABOVE PROVISION SHOWS THAT THE ASSESSING OFFICER I S VESTED WITH A DISCRETIONARY POWER TO LEVY OR NOT TO LEV Y ANY PENALTY IN A DESERVING CASE. IN THE CASE OF HINDUSTA N STEEL LTD VS. STATE OF ORISSA (83 ITR 26) (SC), THE APEX COUR T HELD THAT PENALTY SHOULD NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. THE ASSESSING OFFICER HAS TO EXER CISE HIS DISCRETION JUDICIOUSLY. IF AN ASSESSEE FILES THE REV ISED RETURN THOUGH AT A LATER STAGE OR DISCLOSED TRUE INCOME, PENALT Y NEED NOT BE LEVIED. NO DOUBT, MERELY OFFERING ADDITIONAL INCOME WILL NOT AUTOMATICALLY PROTECT THE ASSESSEE FROM LEVY OF PENALTY BUT IN A GIVEN CASE WHERE THE ASSESSEES CASE , CAME FORWARD WITH ADDITIONAL INCOME THOUGH AFTER DETECTION A ND ON ACCOUNT OF THAT THE ASSESSEE WAS NOT IN A POSITION TO EXPLAIN PROPERLY THE SEIZED MATERIAL AND EXPRESS REM ORSE, IN HIS CONDUCT UN-HESITANTLY, THE ASSESSING OFFICER MIGH T HAVE TO EXERCISE THE DISCRETION IN FAVOUR OF SUCH ASSESSEE AS I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 6 OTHERWISE THE EXPRESSION MAY IN SECTION 271(1)(C) OF THE ACT REMAINS REDUNDANT. IF IT IS TO BE UNDERSTOOD THAT IN A CASE OF ADMITTED CONCEALMENT PENALTY IS NOT AUTOMATIC. THE DISCRETION VESTED IN THE OFFICER SHOULD BE USED NOT T O LEVY THE PENALTY. IN OUR OPINION, THE CASE BEFORE US IS MOST BEFITTING CASE TO EXERCISE SUCH DISCRETION. IT SHOWS THAT THERE IS NO CONCLUSIVE PROOF THAT THE ASSESSEE CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. FURTHER AS SEEN FROM THE FACTS OF THE CASE, TO AVOID LITIGATION THE ASSE SSEE ACCEPTED THE ADDITIONS. THE LOWER AUTHORITIES RELIED O N PROCEEDINGS BEFORE ASSESSING OFFICER RELATING TO THE ASSESSMENT FOR LEVYING THE PENALTY. THE SAME DO NOT CONSTITUTE ADMISSION FOR THE PURPOSE OF LEVYING PENALT Y. THE ADDITION MADE ON THE BASIS OF MORE OR LESS ON THE OFFE R MADE BY THE ASSESSEE AND THE ASSESSING OFFICER NOT BROUGHT 100 PER CENT INCRIMINATING MATERIAL FOR CONCEALMENT OF IN COME AND THERE IS NO ENOUGH MATERIAL FOR ESTABLISHING THE CONCEALMENT INDEPENDENTLY IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE PENALTY IS NOT LEVIABLE AND THE SA ME IS DELETED. 9. FURTHER LAW ON ADMISSION AND RETRACTION IS WELL SE TTLED. IN THIS REGARD THE FOLLOWING PREPOSITION OF LAW MAY BE CONSIDERED : I) IT IS HELD THAT STATEMENTS RECORDED DURING SEARCH PROCEEDING WHICH CONTINUED FOR AN UNDULY LONG PERIOD CANNOT BE CONSIDERED TO BE FREE, FEARLESS AND VOLUNTARY, [DEEPCHAND AND CO VS ACIT 1995, 51 TTJ BOM 421] THUS AN ELEMENT OF COMPULSION IS DISCERNIBLE IN THE CASE OF THE APPELLANT ON THE FACTS AND CIRCUMSTANCES OF CASE JUSTIFYING RETRACTION. I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 7 (II) THAT THE MEASURE OF SEARCH IS TO UNEARTH DOCUMENTS, REVEALING CONCEALED INCOME AND WEALTH. SINCE STRICTLY SPEAKING, INTERROGATION IS NOT A PART OF THE OBJECT OF THE SEARCH, IT IS EXPECTED THAT AN APPELLANT IS NOT PUT TO PRESSURE INTO MAKING AN ADMISSION AND THE STATEMENT SHOULD NOT GO BEYOND WHAT IS DISCOVERED IN COURSE OF SEARCH FROM THE PREMISES OF THE APPELLANT. (III) IT IS A SETTLED PRINCIPLE OF EVIDENCE THAT T HE APPROACH OF A COURT IS FIRST TO MARSHAL EVIDENCE AGAINST THE ACCUSED EXCLUDING CONFESSION ALTOGETHER AND SEE WHETHER THE ACCUSED CAN BE HELD GUILTY. THEREFORE THE ASSESSING OFFICER OUGHT NOT HAVE PLACED UNDUE IMPORTANCE ON THE ADMISSION WHICH WAS BEREFT OF ANY DOCUMENTARY EVIDENCE FOUND DURING THE COURSE OF SEARCH. AN ORAL EVIDENCE ONLY SUPPLEMENTS DOCUMENTARY EVIDENCE, CANNOT SUPPLANT THE SAME. (IV) IT IS ALSO A WELL ACCEPTED PRINCIPLE THAT AN ADMISSION IS NOT CONCLUSIVE EVIDENCE AS TO THE TRUTH OF THE MATTER STATED THEREIN. IT IS ONLY A PIECE OF EVIDENCE, THE RELEVANCY OF WHICH IS REQUIRED TO BE JUDGED BASING ON THE MATERIAL EVIDENCE AND CIRCUMSTANCES IN WHICH IT IS MADE. (V) A MERE CONFESSIONAL STATEMENT WITHOUT THERE BEING ANY DOCUMENTARY PROOF SHALL NOT BE USED AS EVIDENCE AGAINST THE APPELLANT. IN THE FOLLOWING CASE BEFORE THE COURT, A STATEMENT OF MANAGING DIRECTOR WAS RECORDED IN COURSE OF SEARCH WHEREIN HE ADMITTED UNDISCLOSED INCOME BUT LATER RETRACTED FROM THE SAID STATEMENT AND I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 8 ACCORDINGLY THE COURT HELD THAT WITHOUT DOCUMENTARY PROOF, A STATEMENT ALONE CANNOT BE UTILIZED AGAINST THE APPELLANT. [CIT V SHREE RAMDAS MOTOR TRANSPORT, 238 ITR 177 (183) AP]. (VI) IN THE CASE OF APPELLANT, NO SUFFICIENT EVIDENCE WAS FOUND IN COURSE OF SEARCH CONCLUSIVELY INDICATING RECEIPT OF EXACT AMOUNT OF DISCOUNT CHARGES WHICH IS RESULTED IN ADDITIONS. (VII) IT IS SETTLED PRINCIPLE THAT IN CASE EVIDENC E IS IN THE FORM OF STATEMENT WHICH IS SOUGHT TO BE UTILIZED AGAINST THE APPELLANT PERTAINS TO AN EX- PARTE STATEMENT OF WITNESS, THE SAME CANNOT BE UNILATERALLY UTILIZED AGAINST THE APPELLANT WITHOUT THE WITNESS BEING PUT TO CROSS EXAMINATION. IN THE CASE OF JAIKISHAN R AGARWAL VS. ACIT 2000 66 TTJ 704 IT WAS HELD THAT IN A CASE WHERE NO DOCUMENT WAS SEIZED IN COURSE OF A SEARCH SHOWING PAYMENT OF EXTRA CONSIDERATION FOR PURCHASE OF A PROPERTY, WHETHER ADDITIONS CAN BE MADE ON THE BASIS OF STATEMENT RECORDED FROM THIRD PARTIES. IT WAS HELD THAT ANY STATEMENT RECORDED AT THE BACK OF THE APPELLANT HAS NO EVIDENTIARY VALUE AND IN THE ABSENCE OF ANY EVIDENCE SEIZED IN COURSE OF SEARCH INDICATING PAYMENT OF EXTRA CONSIDERATION OVER AND ABOVE WHAT IS MENTIONED IN THE DOCUMENT, THE ADDITION CANNOT BE SUSTAINED. (VIII) AS REGARDS RETRACTION, THE PRINCIPLE IS THA T IT SHOULD BE RETRACTED BEFORE THE CONCERNED AUTHORITY DECIDES THE MATTER. IN OTHER WORDS, THE APPELLANT SHOULD NOT PLACE THAT AUTHORITIES I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 9 IN SUCH A POSITION SO AS TO THWART THE PROCESS OF INVESTIGATION. THIS GAVE THE AUTHORITIES SUFFICIENT TIME TO COLLECT CORROBORATIVE EVIDENCE WHICH THEY HAVE FAILED TO DO AS EXPLAINED IN THE PRECEDING PARAS. THAT A RETRACTION CAN BE MADE BEFORE FILING THE RETURN IS ACCEPTED AS PRINCIPLE IN THE CASE OF R P MONGA VS DCIT 2004, 269 ITR (AT) 1 DELHI. 10. THUS THE ADMISSION WHICH WAS MORE INFLUENCED BY EXTRANEOUS CONSIDERATION AND OTHER FACTORS AND WAS NOT SUPPORTED BY ANY INCRIMINATING MATERIAL AS EXPLAINED IN COURS E OF ASSESSMENT AND PENALTY PROCEEDINGS, CANNOT BE A BAS IS TO IMPOSE A PENALTY FOR CONCEALMENT OF INCOME. IT WAS NO ADMI SSION AT ALL AS LEGALLY UNDERSTOOD. FURTHER, THE DEPARTMENT HAS ONL Y RESTED ITS CONCLUSION BOTH IN THE ASSESSMENT AND PENALTY PROCE EDING ON THE STATEMENT OF THE ASSESEE AND CERTAIN SEIZED MATERI AL. THESE THINGS ALONE IS NOT SUFFICIENT FOR IMPOSITION OF PENALTY. ALTHOUGH SUFFICIENT TIME WAS AVAILABLE CAUSE FURTHER ENQUIRY TO DISCRED IT THE ASSERTION OF THE APPELLANT, THIS WAS NOT DONE. IN SUCH A SITU ATION, NO PENALTY CAN BE IMPOSED ON THE ADMITTED AMOUNT. 11. EVEN GOING BY THE RATIO OF THE DECISION OF THE DELH I HIGH COURT IN THE CASE OF CIT VS HARKARAN DAS VED PAL [1 77 TAXMAN 398 DEL; 336 ITR 8] WHEREIN IT WAS HELD THAT WHERE IT WAS APPARENT THAT UNDISCLOSED INCOME HAD BEEN COMPUTED MERELY ON THE BASIS OF THE SURRENDER MADE BY THE ASSESSEE IN THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS AND DE HORS THE SU RRENDER, THERE WAS NO EVIDENCE WHICH COULD HAVE BEEN SAID TO HAVE BEEN FOUND AS A RESULT OF THE SEARCH AND, THEREFORE, THE 'COMPUTATION' OF UNDISCLOSED INCOME BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT PROCEEDINGS COULD NOT BE CONSTRUED AS A I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 10 'DETERMINATION' OF UNDISCLOSED INCOME CONTEMPLATED UNDER SECTION 158BC(C), PENALTY COULD NOT BE LEVIED. 12. AS ALREADY NOTED, WHATEVER MATERIAL WAS FOUND DURIN G THE COURSE SEARCH WAS EITHER INSUFFICIENT OR TOO SKIMPY TO LEAD TO ENHANCEMENT OF TURNOVER. IT IS FOR THIS REASON THAT IN THE CASE OF THE ASSESSEE THE DEPARTMENT DID NOT DISTURB THE TUR NOVER/TOTAL AMOUNT OF CHEQUE DISCOUNTED RECORDED IN THE BOOKS O F ACCOUNT. SIMILARLY AS IN THE CASE OF HARKARAN DAS VED PAL (S UPRA), DE HORS THE ADMISSION OF THE ASSESSEE, THAT TOO ON ESTIMATE D BASIS, THERE IS NO EVIDENCE AVAILABLE TO COMPUTE OR DETERMINE UNDIS CLOSED INCOME. THEREFORE, THE RATIO OF THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF HARKARAN DAS VED PAL (SUPRA) ALSO AP PLIES WITH EQUAL FORCE TO THE AMOUNT INCLUDED IN THE UNDISCLOS ED INCOME. 13. IN OUR OPINION, IN THE PRESENT CASE THE PENALTY HAS BEEN LEVIED ONLY ON THE BASIS OF ESTIMATED INCOME. THE INCOME OF THE ASSESSEE HAS BEEN ESTIMATED IN RESPECT OF VARIOUS T RANSACTIONS CARRIED ON BY THE ASSESSEE AS SEEN FROM THE ABOVE F ACTS. THE OTHER INCOME IS CONSIDERED AS UNDISCLOSED INCOME IS ON AC COUNT OF ADMISSION BY THE ASSESEE. BEING ON THIS COUNT ALSO PENALTY CANNOT BE LEVIED. IN ENTIRETY, IN THIS CASE THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED ON ESTIMATE BASIS. THERE IS NO CON CLUSIVE MATERIAL TO SHOW THAT THERE IS ACTUAL CONCEALMENT O F INCOME. THOUGH THE ADDITION IS CONFIRMED BY THE CIT(A), IT DOES NOT PROVE THAT THE ASSESSING OFFICER HAS THE MATERIAL TO SUGG EST THAT THE ASSESSEE EARNED EXACT AMOUNT OF PROFIT AS DETERMINE D BY THE ASSESSING OFFICER OUT OF THESE UNACCOUNTED TRANSACT IONS. IN OUR OPINION, THE PENALTY IS NOT MANDATORY IF THE ASSESS EE OFFERS CONVINCING REASONS OR IF ANY REASONABLE CAUSE DEMON STRATED FOR NON-INCLUSION OF SUCH INCOME, PENALTY IS NOT ATTRAC TED. 14. IN THE CASE OF SMT. MALA DAYANIDHI VS. CIT (92 TTJ 270) (BANG.) IT WAS HELD THAT ADDITION NOT BASED ON MATE RIAL FOUND I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 11 DURING THE SEARCH OR MATERIAL IN POSSESSION OF ASSE SSING OFFICER BUT BASED ON DIFFERENCE IN VALUATION OF PROPERTY, A S DISCLOSED BY THE ASSESSEE AND AS ESTIMATED BY THE DVO, THERE WAS NO CONCEALMENT ATTRACTING PENALTY U/S. 158BFA(2) OF TH E ACT. IN THE INSTANT CASE THERE WAS A ESTIMATE AT THE LEVEL OF A SSESSING OFFICER AS WELL AS AT THE LEVEL OF CIT(A) IN RESPECT OF THE UNDISCLOSED INCOME. FROM THE ENTIRE FACTS OF THE PRESENT CASE, IT WOULD BE CLEAR THAT THE INCOME OF THE ASSESSEE WAS ESTIMATED AND MATERIAL ON RECORD BY THE ASSESSING OFFICER IS NOT ENOUGH TO LEVY PENALTY FOR CONCEALMENT OF INCOME. IN OUR OPINION, UNLESS THER E IS CONCLUSIVE MATERIAL SHOWING THE EXACT AMOUNT OF CONCEALMENT OF INCOME NO PENALTY IS LEVIABLE ON THE ADDITION IF MADE ON ESTI MATE BASIS. WHILE TAKING SUCH A VIEW, WE ARE FORTIFIED BY THE J UDGEMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PREM DAS (248 ITR 234) (P&H), WHEREIN IT WAS HELD AT PAGE 23 6 AS UNDER: 'WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE AND THE ASSESSEE. IT APPEARS THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF EXPENSES FROM THE GROSS FREIGHT RECEIPTS IN RESPECT OF HIS OWN TRUCKS ON ESTIMATE BASIS AND HAD SHOWN INCOME FROM COMMISSION AT 7 PER CENT OF THE GROSS RECEIPTS IN RESPECT OF THE TRUCKS OWNED BY OTHERS. THE AO HAD ALLOWED EXPENDITURE AT 80 PER CENT. THE CIT( A) ALLOWED EXPENDITURE AT 84 PER CENT. SIMILARLY, WHER EAS THE AO HAD ESTIMATED INCOME FROM COMMISSION AT 10 PER CENT, THE CIT ALLOWED IT AT 8 PER CENT. THE T RIBUNAL FOUND THAT THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME WAS DUE TO THE DIFFERENCE OF OPINIO N ABOUT THE ESTIMATED RATES OF INCOME AND EXPENDITURE . INCOME HAD BEEN ENHANCED BY THE AO BY ADOPTING A LOWER ESTIMATE IN RESPECT OF THE EXPENDITURE AND HI GHER ESTIMATE WITH REGARD TO THE INCOME FROM COMMISSION. THE AO DETERMINED THE INCOME OF THE ASSESSEE ON ESTIMATE BASIS. THE TRIBUNAL NOTICED THAT SINCE THE DIFFERENCE IN ESTIMATES WAS BASED ON A DIFFERENCE O F OPINION, THERE WAS NO POSITIVE PROOF REGARDING CONCEALMENT OF INCOME BY THE ASSESSEE. THE ASSESSEE HAD SHOWN EXPENDITURE AS ALSO THE INCOME FROM COMMISSION ON ESTIMATE BASIS. THE RATES OF ESTIMATE I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 12 WERE VARIED BY THE AO. THESE WERE FURTHER VARIED BY THE CIT(A). THE TRIBUNAL, THEREFORE, CANCELLED THE PENALTY ON THE GROUND THAT THERE WAS NO POSITIVE EVIDENCE TO PROVE SUPPRESSION OF INCOME. ON A CONSIDERATION OF THE MATTER, IT IS NOTICED THA T THE ASSESSEE HAD RETURNED INCOME ON ESTIMATE BASIS. THE AO AND THE CIT ADOPTED DIFFERENT ESTIMATES. IT WAS, THUS, A CASE OF DIFFERENCE OF OPINION.' 15. FROM THE ABOVE JUDGEMENT IT IS CLEAR THAT WHEN THE ASSESSING OFFICER AND THE CIT(A) ADOPTED FIGURES OF INCOME ON ESTIMATE BASIS AND IT IS A CASE OF DIFFERENCE OF OP INION BETWEEN THE ASSESSEE AS WELL AS THE DEPARTMENT AND THAT REASON CANNOT BE A BASIS FOR LEVY OF PENALTY. BEING SO, WHATEVER SAID BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE CITED SUPRA WITH REG ARD TO PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX A CT IS APPLICABLE TO THE PRESENT CASE. FURTHER AS NOTED FROM THE ARG UMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE VARIOUS TRIBUNALS HAVE HELD THAT UNLESS ANY POSITIVE CONCEALMENT IS FOUND, NO PENALT Y IS LEVIABLE ON THE ADDITIONS MADE ON ESTIMATE BASIS. IN THE CASE OF HARI GOPAL SINGH VS. CIT (258 ITR 85) (P&H) IT WAS HELD THAT W HERE THE ASSESSMENT IS MADE ON ESTIMATE BASIS, NO PENALTY U/ S. 271(1)(C) OF THE ACT CAN BE IMPOSED. IN THAT CASE IT WAS OBSERV ED THAT ON ACCOUNT OF MERE DIFFERENCE OF OPINION AS REGARDS TH E ESTIMATION OF INCOME PENALTY CANNOT BE LEVIED. SINCE THE ASSESSI NG OFFICER AND THE TRIBUNAL ADOPTED DIFFERENT ASSESSMENTS FOR ASCE RTAINING THE INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT T HE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME SO AS TO AT TRACT PENALTY U/S. 271(1)(C) OF THE ACT. IN THE PRESENT CASE THE RE IS A DIFFERENCE IN ESTIMATING THE INCOME OF THE ASSESSEE BY THE ASS ESSEE ITSELF AND BY THE DEPARTMENT. BEING SO, THE DIFFERENCE IS ONL Y ON ACCOUNT OF DIFFERENCE IN OPINION IN DETERMINING THE INCOME. T HAT DIFFERENCE IN OPINION AMONG THE PARTIES CANNOT RESULT IN LEVY OF PENALTY. I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 13 16. FURTHER THE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (83 ITR 26) (SC) HELD AS U NDER: 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMI NAL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPO SED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOU LD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIG ATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EX ERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVA NT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF PROVISIONS OF THE ACT OR WHICH THE BREACH FLOWS FROM A BONA FI DE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN TH E MANNER PRESCRIBED BY THE STATUTE.' 17. IN THE LIGHT OF THE ABOVE OBSERVATIONS, WE ARE OF T HE OPINION THAT IT WOULD BE WITHIN THE POWER OF THE INCOME-TAX AUTHORITIES NOT TO LEVY PENALTY HAVING REGARD TO THE NATURE OF MIST AKE OR OMISSION COMMITTED BY THE ASSESSEE AND GENERAL CONDUCT OF TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SUCH OTHER RELEVANT FACTORS. 18. IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC) THE HONBLE SUPREME COURT HELD THAT WHERE TH E ASSESSEE CLAIMED THAT HE OFFERED ADDITIONAL INCOME ONLY TO B UY PEACE AND AVOID LITIGATION AND THE DEPARTMENT DID NOT PROVE C ONCEALMENT BUT SIMPLY RESTED ITS CONCLUSION ON THE VOLUNTARY SURRE NDER OF INCOME BY ASSESSEE IN GOOD FAITH, NO PENALTY FOR CONCEALME NT OF INCOME CAN BE LEVIED. IN OUR OPINION, THE FACTS OF THE CAS E BEFORE US ARE FULLY COVERED BY THIS DECISION OF THE HONBLE APEX COURT. 19. IN THE CASE OF CIT VS. KHODAY ESWARSA & SONS 1972 C TR (SC) 295 : (1972) 83 ITR 369 (SC) HONBLE APEX COUR T HELD THAT I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 14 BEFORE LEVYING PENALTY THE DEPARTMENT MUST SHOW THA T ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS IN COME AND DELIBERATELY FURNISHED INACCURATE PARTICULARS OF TH E SAME. IN THE PRESENT CASE, THE DEPARTMENT IS NOT ABLE TO ESTABLI SH EITHER CONSCIOUS OR DELIBERATE CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. T HE ASSESSEE UNDOUBTEDLY OFFERED THE INCOME IN THE ASSESSMENT ST AGE ITSELF AND NOT CONTESTED THE ADDITION AND EXTENDED CO-OPERATIO N AT THE STAGE OF ASSESSMENT. THE ASSESSEE DELIBERATELY HAS NOT CO NCEALED THE PARTICULARS. 20. IN OUR OPINION, THE EXPLANATION GIVEN IN THE PRESEN T CASE FOR NON-RETURNING OF INCOME AS EXPECTED BY THE DEPARTME NT IS BONA FIDE. THE ASSESSEE HAS ACCEPTED THE ADDITION ONLY WITH THE SOLE INTENTION TO AVOID LITIGATION AND BECAUSE THE ASSES SEE HAS NOT GONE IN APPEAL AGAINST THE QUANTUM ADDITION, IT DOES NOT AUTOMATICALLY QUALIFY FOR LEVY OF PENALTY AND IT DOES NOT ENTAIL THE DEPARTMENT TO LEVY PENALTY. PENALTY PROCEEDINGS ARE NOT AUTOMATI C AND THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO DIFFERENT PROCEEDINGS. THE REVENUE AUTHORITIES ARE REQUIRED TO EXAMINE THE PENALTY PROCEEDINGS INDEPENDENTLY AND O N THE BASIS OF MATERIAL AVAILABLE ON RECORD. AS SEEN FROM THE ARGUMENTS OF THE ASSESSEE, IT IS AMPLY CLEAR THAT THE ASSESSEE HAD A CCEPTED THE ADDITION ONLY TO AVOID LITIGATION AND TO BUY PEACE WITH THE DEPARTMENT. THE PROVISIONS OF SECTION 271(1)(C) GI VES DISCRETIONARY POWER TO ASSESSING OFFICER TO LEVY P ENALTY. THIS DISCRETION SHOULD HAVE BEEN USED BY THE ASSESSING O FFICER IN FAVOUR OF THE ASSESSEE BECAUSE THE ADDITIONS ARE CO NFIRMED EITHER BY THE CIT(A) ON ESTIMATED BASIS. BEING SO, WHERE THE PROVISIONS BEGIN WITH THE WORD 'MAY' AND NOT 'SHALL' AND THE W ORD 'MAY DIRECT' IN SECTION 271(1)(C)) DO INDICATE THAT A DI SCRETIONARY POWER IS AVAILABLE WITH THE ASSESSING OFFICER AND THE CIT (A) TO LEVY PENALTY EVEN WHERE TECHNICALLY THE PROVISIONS ARE A TTRACTED. BEING I.T.A. NOS. 1118 & 1119 /HYD/2009 SHRI SUNIL KUMAR SINGHANIA ============================ 15 SO, IN THE LIGHT OF THE JUDGEMENT OF SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD., POSTULATES THE SITUATION THAT PENALTY SHOULD NOT BE LEVIED IN THE PRESENT CASE. 21. IN OUR OPINION, THIS CASE IS NOT FIT CASE TO LEVY P ENALTY THOUGH CERTAIN ADDITIONS MADE BY THE ASSESSING OFFI CER WERE CONFIRMED BY THE TRIBUNAL. ACCORDINGLY, WE DELETE THE ENTIRE PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE. 22. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 28 TH FEBRUARY, 2012 COPY FORWARDED TO: 1. SHRI SUNIL KUMAR SINGHANIA, 1 - 3, FATHE NAGAR, BALANAGAR, HYDERABAD-37. 2. THE ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, HYDERABAD. 3. THE CIT(A) - I, HYDERABAD 4 . THE CIT (CENTRAL) , HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD. TPRAO