M/s. Karnataka Planters Coffee Curing Works (P) Ltd., Mysore V. DCIT, Mysore

ITA 126/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9552 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 18-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Additional evidence; Agreed addition
• Section: 271(1)(c); 133A; 251; 264; 192

Judgement Text

ITA NO.126/B/09 1 1 IN THE INCOME TAX APPELL ATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH A AA A BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI K.P.T. THANGAL K.P.T. THANGAL K.P.T. THANGAL K.P.T. THANGAL, , , , VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT AND AND AND AND SHRI SHRI SHRI SHRI N.L KALRA N.L KALRA N.L KALRA N.L KALRA, A , A, A , ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER ITA NO.126/ BANG/2009 (ASSES SMENT YEAR 2003-04) KARNATAKA PLANTERS COFFEE CURING WORKS PVT. LTD., AVARTHI BYLAKUPPE POST, PERIYAPATNA TQ. MYSORE. . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), KUSHALNAGAR. . RESPONDENT APPELLANT BY : SHRI KRISHNAMOORTHY RESPONDENT BY : SMT. PREETHI GARG O R D E R O R D E R O R D E R O R D E R PER K.P.T. THANGAL, VICE PRESIDENT PER K.P.T. THANGAL, VICE PRESIDENT PER K.P.T. THANGAL, VICE PRESIDENT PER K.P.T. THANGAL, VICE PRESIDENT : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), MYSOR E DATED 22-12-2008 FOR THE ASST. YEAR 2003-04 IN CONFIRMING THE PENALTY LEVIED TO THE EXTENT OF RS.84,44,790/-. 2. THE FACTS LEADING TO THE DISPUTE ARE BRIEFLY AS UNDER : THE ASSESSEE, A COMPANY FILED THE RETURN FOR THE A SST. YEAR 2003- 04 ON 30.10.03 DECLARING A LOSS OF RS.1,71,58,139/- . THIS WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED ITA NO.126/B/09 2 2 A SUM OF RS.2,10,24,226/- WAS SHOWN AS SECURED LOAN PAYABLE TO CORPORATION BANK MADIKERI AS ON 31.3.02 AND THE SAM E WAS PAID AS ON 31.3.03. HE FURTHER NOTICED DURING THIS PERIOD, CU RRENT LIABILITY OF THE ASSESSEE HAS GONE UP RS.3,27,81,710/- TO RS.5,63,89 ,762/-. SUNDRY CREDITORS FOR PURCHASE HAD GONE UP FROM RS.3,16,16, 037/- AS ON 31.3.02 TO RS.5,56,43,710/- AS ON 31.3.03. THERE WAS SURVE Y ACTION UNDER SECTION 133A IN THE PREMISES OF THE ASSESSEE ON 24. 10.05 AND THE SURVEY WAS FOLLOWED BY ENQUIRIES WITH CORPORATION BANK, MADIKERI WITH WHOM ASSESSEE WAS MAINTAINING LOAN ACCOUNT AND CURR ENT ACCOUNT. ON VERIFICATION, IT WAS NOTICED THAT ASSESSEE CLEARED THE LOAN BY TRANSFER FROM INDIVIDUAL CROP LOAN ACCOUNTS OF FAMILY MEMBER S AND CROP LOAN ACCOUNTS OF THREE COFFEE ESTATES BELONGING TO THE F AMILY OF THE ASSESSEE COMPANY AND ALSO FROM THE BANK ACCOUNTS OF THE MANA GING DIRECTOR OF THE COMPANY MAINTAINED AT CHENNAI. ON ENQUIRY, IT WAS FURTHER NOTED NONE OF THE FAMILY MEMBERS WERE RESIDING AT MADIKER I AND THE ACCOUNTS WERE ACTUALLY MANAGED BY SHRI S.N KABIR, MANAGING D IRECTOR OF THE COMPANY. SHRI S.N KABIR INTRODUCED ALL THE BANK ACC OUNTS IN THE NAME OF THE FAMILY MEMBERS AND HE HOLDS GENERAL POWER OF A TTORNEY TO OPERATE ALL THE BANK ACCOUNTS IN THE NAME OF THE FAMILY MEM BERS. WITH REGARD TO THE CROP LOAN AVAILED BY THE FAMILY MEMBERS, SHRI S .N KABIR ONLY SIGNED THE LOAN APPLICATION FORMS AND FUNDS WERE TRANSFERR ED TO THE COMPANIES ACCOUNT. SUBSEQUENTLY, THESE CROP LOANS WERE REPAI D BY CASH REMITTANCE AND CROSS TRANSACTION BETWEEN THE ACCOUNTS HELD IN THE NAME OF MEMBERS. ITA NO.126/B/09 3 3 3. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF NAME AND ADDRESSES OF THE LOAN CREDITORS, CREDIT WORTHINESS, SOURCE FOR THE REPAYMENT OF CROP LOAN, CONFIRMATION LETTERS, INCOM E-TAX ASSESSMENT PARTICULARS ALONG WITH PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THE AO NOTICED FROM THE DETAILS AND OTHER PARTICULARS FILED, THAT ASSESSEE COMPANY FAILED TO FURNISH THE DETAILS WITH REGARD TO CREDIT WORTHINESS OF THE FAMILY MEMBERS, SOURCE OF THEIR REPAYMENT OF CROP LOAN ETC. IT WAS NOTICED THAT TR ANSACTION PERTAINING TO CROP LOANS RECEIVED FROM THE BANKS AND THE LOAN ADV ANCED BY THEM TO THE ASSESSEE COMPANY HAVE NOT BEEN REFLECTED IN THE RETURNS. THERE WAS NO ENTRY IN THE BALANCE SHEET PERTAINING TO THE LOA N ADVANCED. IT WAS FURTHER NOTICED THAT THE GENUINENESS WAS ASKED TO E XPLAIN. IN RESPONSE TO THE ABOVE, IT WAS STATED THAT THE MATTERS WERE L OOKED AFTER BY THE MANAGING DIRECTOR OF THE COMPANY ONLY, AND HE MAINT AINED THE AFFAIRS ON BEHALF OF THE FAMILY MEMBERS, AND NONE OF THE FAMIL Y MEMBERS ACCORDING TO THE AO HAD ANY KNOWLEDGE OF THESE TRAN SACTIONS, AND THEREBY THE ASSESSEE COMPANY FAILED TO ADDUCE ANY E VIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRANSACTION, INCLUDING FU RNISHING OF CONFIRMATORY LETTERS OF THE LOAN CREDITORS. THE AS SESSEE COMPANY ITSELF ON THE ABOVE CIRCUMSTANCES ADMITTED THE FACT THAT INCREASE IN THE SUNDRY CREDITORS FROM RS.3,16,16,037/- TO 5,56,43,7 10/- WAS NOT ON ACCOUNT OF INCREASE IN TRADE CREDITORS BUT ON ACCOU NT OF UNEXPLAINED CASH CREDITS. THUS, THE TAX TO THE EXTENT OF RS.2,38,14 ,700/- WAS ADMITTED BY THE ASSESSEES REPRESENTATIVE. THE AO IN THE ABOVE CIRCUMSTANCES, INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C). ITA NO.126/B/09 4 4 4. BEFORE THE AO, IT WAS CONTENDED, THAT ADMISSION WAS ONLY FOR THE PURPOSE OF TAX AND NOT FOR PENALTY PROCEEDINGS. AS FAR AS THE INCOME CONCERNED, ADMISSION OF THE INCOME DOES NOT AMOUNT TO CONCEALMENT AND THIS WAS OFFERED VOLUNTARILY WITH UNDERSTANDING THAT THERE WILL BE NO PENALTY PROCEEDINGS. THE AO HELD, THAT THE ABOVE E XPLANATIONS ARE NOT ACCEPTABLE. AS FAR AS THE CONCEALMENT CONCERNED, HE HELD, ASSESSEE FAILED TO ADDUCE ANY EVIDENCES IN SUPPORT OF GENUIN ENESS OF THE LOANS BORROWED FROM THE FAMILY MEMBERS, FAMILY ESTATES. EVEN IN THAT RETURN, THE LOAN WAS SHOWN AS LOAN CREDITORS UNDER THE HEAD CREDITORS FOR PURCHASES. ONLY BECAUSE OF THE SEARCH OPERATION IN THE ASSESSEES PREMISES, IT CAME TO THE KNOWLEDGE OF REVENUE. OTHE RWISE THIS WOULD HAVE BEEN KEPT UNDISCLOSED. FURTHER, SCRUTINY OF T HE BANK ACCOUNT ETC. SHOW THAT SHRI. S.N KABIR IS THE BRAIN BEHIND THE ENTIRE LOAN TRANSACTION INCLUDING INTRODUCTION OF THE ACCOUNTS, TRANSFER O F FUNDS FROM INDIVIDUAL ACCOUNTS TO COMPANY ACCOUNTS AND SUBSEQUENT REPAYME NT OF CROP LOANS IN CASH ON BEHALF OF THE INDIVIDUALS. COMPANY FAI LED TO FURNISH THE CONFIRMATORY LETTERS FROM LOAN CREDITORS AND TO CO NFIRM THE GENUINENESS OF THE TRANSACTION INCLUDING THAT OF THE M.D. THE RETURN FILED BY THE LOAN CREDITORS DID NOT CONTAIN THE TRANSACTION, PERTAINI NG TO THE LOAN ADVANCED BY THE FAMILY MEMBERS TO THE COMPANY, WHICH PROVE T HE NON- GENUINENESS OF THE ENTIRE TRANSACTION. THE ASSESSEE S ARGUMENT IS THAT THIS WAS AGREED ADDITION AND ON THE CONDITION THAT NO PENALTY PROCEEDINGS FOR CONCEALMENT WOULD BE INITIATED, WAS REJECTED AND AO HELD ASSESSEE HAS NOT GIVEN PLAUSIBLE EXPLANATION TO THE SATISFACTION OF ITA NO.126/B/09 5 5 THE AUTHORITIES TO DROP THE PENALTY PROCEEDINGS. H ENCE, HE LEVIED THE MINIMUM PENALTY. 5. THERE WAS ANOTHER ADDITION OF RS.3,13,276/- I.E INTEREST RECEIVED FROM SHRI VINOD D SHIVAPPA TO THE EXTENT OF RS.3,13 ,276/- WHICH WAS ALSO A PART OF THE PENALTY AMOUNT. SINCE IT WAS AGR EED ADDITION, ASSESSEE, UNDER SECTION 264, APPROACHED THE COMMISS IONER, WHICH WAS DISMISSED. THE ASSESSEE APPROACHED THE HONBLE HIG H COURT BY WAY OF WRIT, WHICH WAS AGAIN DISMISSED. ONE OF THE ARGUME NTS TAKEN BEFORE THE LEARNED CIT(A) WAS THAT THE SOURCE OF THE LOAN WAS EXPLAINED FROM THE ENTRIES OF THE BANK ACCOUNT OF 37 PARTIES AND THE S OURCE IS EITHER CROP LOAN OR COFFEE SALES AND, THEREFORE, THERE IS NO CA SE OF APPLICATION OF SEC. 68. BANK ACCOUNTS OF THESE 37 PARTIES ARE COMING F ROM THE ASST. YEAR 88 ONWARDS AND, THEREFORE, IT CANNOT BE SAID THAT ACCO UNTS WERE OPENED AND AMOUNTS CREDITED FOR THE PURPOSE OF REPAYMENT OF TH E LOAN. ALL THE 37 PARTIES ARE COFFEE CULTIVATORS AND ENTITLED FOR CRO P LOAN. THE PROOF THAT REQUIRED FOR PENALTY PROCEEDINGS IS MUCH MORE STRIN GENT. PENALTY IS NOT AUTOMATIC, THE ASSESSEE SURRENDERED THE INCOME TO BUY PEACE. THERE IS NOTHING ON RECORD SO SHOW THAT TRANSACTIONS WERE NO T GENUINE. THE CREDITORS INCOMES WERE DISCLOSED BY 37 PARTIES IN THEIR RETURN, AS THE DETAILS OF CROP LOAN TAKEN OR MONEY LENT WAS NOT SH OWN IN THE RETURN AS IT RELATED TO AGRICULTURAL ACTIVITY, WHICH IS NOT TAXA BLE. THE ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCES SEEKING PERMISSION UND ER RULE 46A. THIS EVIDENCES INCLUDED BANKS STATEMENT OF SOME OF THESE ACCOUNT HOLDERS. THESE ACCOUNTS WERE KNOWN TO AO AND WAS IN HIS POSS ESSION. THIS WAS ITA NO.126/B/09 6 6 DONE TO INDICATE THAT BANK ACCOUNTS WERE NOT NEWLY CREATED BUT THESE ACCOUNTS WERE EXISTING OVER A PERIOD OF YEARS. IT WAS FURTHER SUBMITTED THAT ALONG WITH THESE PERSONS BANK ACCOUNT, COMPI LATIONS OF FINANCIAL STATEMENT RELATING TO AGRICULTURAL INCOME WAS PREPA RED, AT THE INSTANCES OF REPRESENTATIVE PERSONS BY A CA, AND IT WAS CERT IFIED BY HIM ON 10.4.07. IT WAS ALSO SUBMITTED BEFORE THE LEARNED C IT(A) THAT THE ADDITIONAL MATERIAL SOUGHT TO BE PRODUCED WAS TO SH OW THAT THE CROP LOANS RAISED BY THE 37 PERSONS HAVE DULY BEEN DISCL OSED IN THE ACCOUNT AND THE COMPILATION MADE OUT OF THESE ACCOUNTS WERE CAPABLE OF VERIFICATION WITH RESPECT TO ACCOUNTS OF THE INDIVI DUAL CONCERNED. HOWEVER, THE LEARNED CIT(A) DID NOT ACCEPT EVIDENCE S FOR THE REASON THAT FIRST OF ALL ASSESSEE HAD NOT GIVEN ANY REASON FOR WHY IT WAS NOT SUBMITTED BEFORE THE AO EITHER DURING THE ASST. PRO CEEDINGS, OR DURING PENALTY PROCEEDINGS. WHILE COMING TO THE ABOVE CON CLUSION CIT(A) FURTHER NOTED THAT IT WAS NOT THE CASE OF ASSESSEE THAT THESE EVIDENCES WERE ALSO PART OF THE PROCEEDINGS BEFORE THE HONBL E HIGH COURT. WITH THE ABOVE OBSERVATION HE DID NOT ADMIT ADDITIONAL E VIDENCES. HE FURTHER HELD THAT THE AMOUNT WAS TAXED NOT BECAUSE OF AGREE MENT ALONE. RATHER, THE ADMISSION WAS FOLLOWED BY THE ENQUIRY A ND INVESTIGATION. FURTHER, HE HELD THERE WAS NO SUCH UNDERSTANDING, A ND SUCH UNDERSTANDING EVEN IF IT IS THERE, WILL NOT STAND A GAINST THE OPERATION OF LAW. HE HELD MENSREA IS NOT AN INGREDIENT WITH REG ARD TO SEC. 271(1)(C) AS HELD BY THE OF HONBLE SUPREME COURT IN THE CAS E OF UNION OF INDIA VS. DHARMENDRA TEXTILE. HENCE, HE CONFIRMED THE PENALT Y WITH REGARD TO FIRST ADDITION I.E UNEXPLAINED CREDITS. ITA NO.126/B/09 7 7 AGGRIEVED BY THE ABOVE ORDER OF THE LEARNED CIT(A) , ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. IT WAS SUBMITTED, THAT THE INDIVIDUAL CREDITORS HAD DISCLOSED THE CROP LOANS BY PREPARING A BALANCESHEET AND CAPITAL ACCOUNT DULY CERTIFIED BY HIM IN 2007. THE LEARNED CIT(A) DID NOT ADMIT T HIS EVIDENCE HOLDING THAT WHY ASSESSEE DID NOT FILE IT BEFORE AO EITHER DURING THE ASST. PROCEEDINGS OR PENALTY PROCEEDINGS AND IT WAS NOT PRODUCED EVEN BEFORE THE HONBLE HIGH COURT. IT WAS SUBMITTED TH AT LEARNED CIT(A) COMPLETELY OVER LOOKED THE FACT THAT IT WAS AN AGRE ED ASSESSMENT, IN THE COURSE OF WHICH PENALTY PROCEEDINGS WERE INITIATED, AND THERE WAS NO OCCASION FOR THE ASSESSEE TO PROVE THE TRANSACTION WERE GENUINE. ON THE OTHER HAND HE SUBMITTED THAT THE INSPECTION OF THE BANK RECORDS THAT 37 PERSONS WILL SHOW THAT THEY ARE CLOSE RELATIVES AND THEY WERE MAINTAINING ACCOUNTS OVER A LARGE NUMBER OF YEARS, AS LISTED IN ANNEXURE A AT PAGE 57 OF THE WRIT APPEAL FILED BEFORE THE HONBLE HIGH CO URT. THESE PERSONS WERE SANCTIONED CROP LOANS ON THE STRENGTH OF THEIR OWN FINANCIAL STANDING AND POSSESSION OF VAST AGRICULTURAL ESTATE S AS SHOWN AT PAGE 58 AND 59 OF THE WRIT APPEAL PENDING BEFORE THE HONBL E HIGH COURT. THE ASSESSEES REPRESENTATIVE SUBMITTED ASSESSMENT ITSE LF WAS TAKEN UP FOR DETAILED SCRUTINY ONLY AT THE FAG END OF THE YEAR I .E ON 8.11.05 AND DUE TO PAUCITY OF TIME, ASSESSEE COULD NOT PRESENT THE CASE WELL. THE CREDITORS WERE PERSONS OF SUBSTANCE AND THAT THE CROPS LOANS WERE SANCTIONED TO EACH INDIVIDUAL AND THAT THESE LOANS WERE CREDITED INTO THEIR RESPECTIVE ITA NO.126/B/09 8 8 ACCOUNTS OUT OF WHICH ACCOUNTS, MONEY WERE TRANSFER RED TO THE ACCOUNT NO.483 OF THE ASSESSEE COMPANY AND AS TIME NEEDED T O ESTABLISH THIS LINK WAS NOT AVAILABLE, ASSESSEE AGREED TO THE IMPU GNED ADDITION. THIS WAS WHAT ACTUALLY HAPPENED BEFORE THE AO AND THE AG REEMENT WAS NOT BECAUSE THE AO HAD FOUND THAT THE TRANSACTION WAS N OT GENUINE. EVEN THE LEARNED CIT AT THE TIME OF HEARING THE 264 PETITION DID NOT RAISE ANY QUESTION AT ALL AND IF ON THE OTHER H AND HE HAD DOUBTS ABOUT THE GENUINENESS OF THE BANK ACCOUNT, HE SHOULD HAV E CALLED UPON THE ASSESSEE TO CLEAR ANY DOUBT IN HIS MIND, ON THE OT HER HAND WITHOUT GOING THROUGH THE RECORDS AND WITHOUT ANY MATERIAL, HE HE LD THAT BANK ACCOUNTS WERE CREATED FOR THE PURPOSE OF ACCOMMODATION. IN F ACT ASSESSEE PREPARED A CHART SHOWING THAT THESE ACCOUNTS WERE I N EXISTENCE OVER AS LARGE NUMBER OF YEARS, HOW THE MONEY WAS TRANSFERRE D FROM THEIR ACCOUNT TO THE ACCOUNTS OF THE COMPANY, AND THEY WE RE PERSONS OF SUBSTANCE AND POSSESSED WEALTH, AND THAT THEY WERE FINANCIALLY CAPABLE OF PROVIDING THE SUM TRANSFERRED FROM THEIR ACCOUNT S TO THE ASSESSEE, AND SAME WAS FILED AS ANNEXURE TO THE WRIT PETITION. T HE STATEMENT OF THE ASSESSEE BEFORE THE HONBLE JUDGE AT THE TIME OF WR IT PETITION WILL PROVE THIS, IT WAS SUBMITTED, THE LEARNED CIT(A) DID NOT CONSIDER THIS FACT SUBMITTED BY THE ASSESSEES REPRESENTATIVE. THE LE ARNED CIT(A) DID NOT CALL FOR THE RECORDS AND EXAMINE THEM, AND LEARNED CIT(A) OVER LOOKED THE FACT THAT NATIONALIZED BANKS WERE HOLDING THESE ACCOUNT OVER A LARGE NUMBER OF YEARS, AND THAT THEY WERE NOT DUMMY ACCOUNTS, AND IN THESE ACCOUNTS THERE WERE VARIOUS TRANSACTION NOT RELATIN G TO THE ASSESSEE HAD ITA NO.126/B/09 9 9 ALSO FIGURED. THE NATIONALIZED BANK GRANTED CROP L OANS OF LARGE SUMS TO THESE PERSONS BECAUSE THEY WERE PERSONS OF SUBSTANC E AND THEY HAD SUBSTANTIAL INCOME. NO NATIONALIZED BANK WOULD SAN CTION LOANS FOR THE PURPOSE OF ACCOMMODATION, AND WILL STAND AS A PARTY TO A COLLUSIVE TRANSACTION. SHRI S.N KABIR WAS OPERATING THE ACCOUNTS BECAUSE H E WAS STATIONED AT MADIKDERI AND WAS HOLDING GPA FOR EAC H OF THE ACCOUNT HOLDERS. THE LEARNED CIT(A) HAD REFERRED TO THE FA CT THAT THE ACCOUNTS WERE OPERATED BY SHRI S.N KABIR. IN OTHER WORDS, TH E STAND OF THE REVENUE IS THAT ACCOUNTS WERE INTRODUCED BY SHRI S.N KABIR, OPERATED BY SHRI S.N KABIR AND IF THAT IS SO, ALL THE ADDITIONS SHOULD H AVE BEEN MADE IN HIS INDIVIDUAL ASSESSMENT, AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. IN SUPPORT OF THE ABOVE CONTENTION ASSESSEES REPRESEN TATIVE RELIED ON THE DECISIONS OF THE HIGH COURT IN THE CASE OF DIVINE L EASING AND FINANCE LTD., 299 ITR 39 AND LOVELY EXPORT PVT. LTD., 299 I TR 268 AND ALSO GUJARATH HIGH COURT DECISION IN THE CASE OF ROHINI BUILDERS 256 ITR 360 AND GUJARATH HEAVY ELECTRICALS, ,, , LTD. 256 ITR 795. THE QUESTION OF NON REFLECTING THIS IN THE STATEMENT OF CREDITORS IN TH EIR INCOME-TAX RETURN CANNOT BE A REASON TO MAKE THIS ADDITION AS THESE A RE AGRICULTURAL INCOME. THESE ACCOUNT HOLDERS DID NOT DISCLOSE IN THE INCOME, AS IT WAS NOT MANDATORY. IT WAS THE CASE OF THE ASSESSEE THA T THESE PERSONS HAD RAISED CROP LOAN AND IT WAS TRANSFERRED FROM THESE ACCOUNT TO ACCOUNT NO.483 OF THE ASSESSEE-COMPANY. IN ORDER TO SHOW TH AT THE SAID CROP LOANS HAD BEEN DISCLOSED IN THE BOOKS OF ACCOUNT, THE SERVICES OF A CAS ITA NO.126/B/09 10 10 WERE SOUGHT FOR AND HE PREPARED THE BALANCE SHEET F ROM THE MATERIAL THAT WAS ALREADY AVAILABLE BEFORE THE REVENUE AUTHO RITIES. THIS EXERCISE HAD TO BE UNDER TAKEN SEPARATELY BECAUSE THE ACCOUN T HOLDERS WERE NOT LIABLE TO BE ASSESSED UNDER THE INCOME-TAX ACT, AGR ICULTURAL INCOME WAS NOT NECESSARY TO BE DISCLOSED, SINCE IT WAS THEIR N ON TAXABLE AGRICULTURAL INCOME. A CERTIFICATE FROM CA HAS LEGAL SANCTITY . EVEN, THE LEARNED CIT(A) IS NOT DISPUTING THAT THE ACCOUNT HOLDERS I. E CREDITORS ARE PERSONS OF SUBSTANCE. THE ONLY REASON FOR REJECTION IS TH AT THEY DID NOT SHOW THE LOAN IN THEIR INCOME-TAX STATEMENTS. MERE NON DISC LOSURE OF SUCH RECEIPTS DOES NOT LEAD TO CONCLUSION, AUTOMATICALLY , THAT SUCH INCOME DID NOT EXIST. IN ADDITION TO THIS, ADMITTEDLY, THREE OF THE CREDI TORS ARE AGRICULTURAL FIRMS, AND THEY ARE NOT LIABLE TO INCO ME-TAX AT ALL. THUS, EVEN AS PER THE NORMS APPLIED BY THE LEARNED CIT(A), THE SE FIRMS WERE NOT SUPPOSED TO DISCLOSE THE LOAN TRANSACTION IN THEIR INCOME-TAX STATEMENTS, FOR THE SIMPLE REASON THAT THEY WERE NOT LIABLE TO BE TAXED. ANOTHER OBJECTION OF THE LEARNED CIT(A) IS THAT THERE WAS N O CONFIRMATION FROM THE CREDITORS BUT INDIVIDUAL CONFIRMATION WAS NOT CALL ED FOR. IT IS FURTHER THE CASE OF THE ASSESSEE THAT WHAT IS STATED WITH REGAR D TO THE ACCOUNTS WERE RELATED ONLY TO THE INDIVIDUALS, AND NOT TO THE THR EE FIRMS. BUT THESE AMOUNTS ALSO WERE BROUGHT TO TAX AS INCOME IN THE H ANDS OF THE ASSESSEE. ITA NO.126/B/09 11 11 7. THE ASSESSEES REPRESENTATIVE SUBMITTED TO PUT A N END TO ANY DOUBT ON THIS, ASSESSEE NOW OBTAINED CONFIRMATION, FROM EACH ONE OF THESE CREDITORS, AND THE SAME IS PART OF THE PAPER BOOK PROPOSED TO BE FILED. IN THE VOLUMES OF THE PAPER BOOKS FILED BEF ORE THE LEARNED CIT(A), THE LINK HAD BEEN CLEARLY ESTABLISHED, AND EXCEPTIN G THE CERTIFICATES FROM THE CA AND RELATED STATEMENTS, THE BANK STATEMENT AS WELL AS THE CROP LOAN STATEMENT OF BANK DOCUMENTS, COPIES OF WHICH W ERE OBTAINED BY THE AO HIMSELF, AND AS SUCH THESE DID NOT CONSTITUTE FR ESH MATERIAL. THE SAME SHOULD HAVE BEEN ADMITTED IN THE INTEREST OF J USTICE. THE ASSESSEES REPRESENTATIVES SUBMITTED THE ABOVE FACT S ILLUSTRATE THE FACTUAL POSITION, THAT THE CROP LOANS HAD FIGURED I N THE ACCOUNTS MAINTAINED FOR AGRICULTURAL INCOME AND THAT THESE F ACTS CAN BE VERIFIED FROM THE BOOKS. IN FACT LEARNED CIT(A) WHO NORMALL Y CALLS FOR REPORT ON THE SUBMISSION MADE BY THE ASSESSEE. IN THIS CASE D ID NOT CALL FOR EVEN THE RECORDS AS PRAYED FOR BY THE ASSESSEE. 8. COMING TO THE LEARNED CIT(A)S OBSERVATION THAT MENSREA IS NOT REQUIRED TO LEVY THE PENALTY, THE ASSESSEES REPRES ENTATIVES SUBMITTED THESE OBSERVATION WERE IN THE CONTEXT OF A PENALTY, FOR TECHNICAL DEFAULT, IN A CENTRAL EXERCISE CASE, AND THIS HAS NO BEARING ON INCOME-TAX PENALTIES, FOR THE REASON THAT THEY DID NOT, IN THE SAID DECISION, REFER TO THE WELL KNOWN DECISION OF THE APEX COURT IN THE CA SE K.C BUILDERS, 269 ITR 562 WHEREIN, IT HAS BEEN HELD THAT MENSREA IS I MPORTANT INGREDIENT IN PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME, FOR THE REASON THAT THE TERM CONCEALMENT ITSELF DENOTES GUILTY MIND. THIS D ECISION HAS NOT BEEN ITA NO.126/B/09 12 12 OVER RULED IN THE DECISION RELIED UPON BY THE LEAR NED CIT(A). THE ASSESSEES REPRESENTATIVES FURTHER SUBMITTED THAT L EARNED CIT(A) DID NOT REFER TO THE JURISDICTIONAL HIGH COURTS DECISION, IN THE CASE OF BADRA ADVANCING PVT. LTD., ALTHOUGH THE CASE WAS CITED TO SHOW THAT PENALTY CAN BE LEVIED ONLY UNDER EXCEPTIONAL CIRCUMSTANCES, WHE N IT IS ESTABLISHED BEYOND THE DOUBT THAT THE ASSESSEE IS GUILTY OF CON CEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE ASSESSEES REPRESENTATIVE FURTHER SUBMITTED WITH REFERENCE TO FURNISHING INACCURATE P ARTICULARS, DOES NOT INDICATE WHAT PARTICULARS FURNISHED WERE PROVED TO BE INACCURATE OR WHAT ARE THE INACCURATE PARTICULARS FURNISHED. THE ASSE SSEES REPRESENTATIVE BROUGHT OUR ATTENTION TO PAGE 6 OF PARA 6 OF THE PA RT OF THE STATEMENT OF MR. SHARIFF, WHICH IS AS UNDER : WE HAVE NOT MAINTAINED PRIMARY RECORDS OF THE ASSIMILATION OF FUNDS FROM THE INDIVIDUAL SOURCES, THOUGH ALL OF THEM HAVE GOT GOOD AGRICULTURAL INCOME. IN VIEW OF THIS ALSO THE VOLUME OF WORK INVOLVED TO COLLECT TH E PARTICULARS AT THIS STAGE THE SUM OF RS.2,38,14,700 /- WHICH REPRESENTS THE MONEY TRANSFERRED FROM 34 INDIVIDUALS AND 3 PLANTATION FIRMS IS HEREBY OFFERE D FOR TAXATION FOR THE A.Y 2003-04. THIS IS DONE TO BUY PEACE WITH THE DEPARTMENT AND WITH THE GOOD INTENTION OF COOPERATING AND NOT TO INVOLVE IN PROTRACTED LITIGA TION WITH THE DEPARTMENT. 9. ASSESSEES REPRESENTATIVE SUBMITTED THAT THIS WI LL SHOW THAT THE AMOUNT WAS OFFERED FOR TAXATION, ONLY TO BUY PEACE, AND IN THE ABSENCE OF ITA NO.126/B/09 13 13 MATERIAL TO SHOW POSITIVELY THAT THE SAID SUM REPRE SENTED INCOME OF THE ASSESSEE, THE PROVISION OF SEC. 271(1)(C) DO NOT AT TRACT AT ALL. THOUGH THERE IS NO ESTOPPEL AGAINST THE LAW, YET REVENUE A UTHORITIES DOES NOT POINT OUT HOW TRANSFER OF MONEY FROM ONE BANK ACCOU NT TO ANOTHER, IN THE VERY SAME BANK, AND ALL THROUGH BANKING CHANNELS, R EPRESENTS INCOME LIABLE TO BE TAXED UNDER SECTION 68. ON TOP OF ALL , EVEN IF THE CREDITOR DOES NOT DISCLOSE THE SAID TRANSACTION, THE PLACE F OR ASSESSMENT IS ASSESSMENT PROCEEDINGS OF THE CREDITOR AND NOT THAT OF THE ASSESSEE. F F F FOR THE ABOVE PROPOSITION HE RELIED ON THE DECISION OF HONBLE GUJARATH HIGH COURT IN THE CASE OF GUJARATH HEAVY ELECTRICALS LTD . (SUPRA). 10. ALTHOUGH IT IS ALLEGED THAT THE ASSESSEE HAD FU RNISHED INACCURATE PARTICULARS LEADING TO THE LEVY OF PENALTY, IT DOES NOT POINT OUT WHICH ARE THE INACCURATE PARTICULARS OF THE ASSESSEE. IT IS NOT KNOWN HOW THE DISCHARGE OF BANK LOAN THROUGH TRANSFER OF FUNDS FR OM OTHER BANK ACCOUNTS, MAINTAINED OVER A PERIOD OF NUMBER OF YEA RS, COULD BE CONSTRUED AS UNACCOUNTED CASH CREDIT IS IN EXPLICAB LE. THE ASSESSEES REPRESENTATIVE SUBMITTED FURTHER AS UNDER : THE HONBLE CIT(A) HAS REPEATEDLY REFERRED TO THE OBSERVATIONS OF THE HONBLE CIT IN THE 264 PROCEEDING TO THE EFFECT THAT THE IMPUGNED BANK ACCOUNTS WERE CREATED FOR THE PURPOSES OF ACCOMMODATION TO JUSTIFY THE LEVY OF PENALTY IGNORI NG THE SETTLED PRINCIPLE THAT AS THE SATISFACTION FOR ITA NO.126/B/09 14 14 INITIATING THE PENALTY PROCEEDING IS THAT OF THE AO , WHAT IS RELEVANT AND MATERIAL IS THE FINDINGS OF TH E AO IN THE ORDER OF ASSESSMENT AND THAT IN THE ORDER OF ASSESSMENT THE AO NEVER DOUBTED THE GENUINENESS OF THE TRANSACTIONS THROUGH BANK AND FURTHER, HIS ONLY DOUBT WAS AS TO WHY THE RESPECTIVE PERSONS HAD NOT DISCLOSED THE LOAN TRANSACTION IN THEIR RESPECTIVE INCOME-TAX STATEMENTS, AND THAT NO WHERE IN THE ORDER THERE IS EVEN A WHISPER THAT THE BANK ACCOUNT S WERE CREATED FOR PURPOSES OF ACCOMMODATION, FOR THE SIMPLE REASON THAT HE HAD WITH HIM THE SAID BANK ACCOUNTS WHICH CLEARLY SHOWED THAT THE SAID ACCOUNT S WERE OPENED IN THE NORMAL COURSE AND WERE OPERATED IN THE NORMAL COURSE. HE ALSO OVERLOOKED THE FACT THAT THE ASSESSMENT WAS MADE MAKING HUGE ADDITIONS RUNNING INTO CRORES OF RUPEES AND THAT THE AO LEVYI NG PENALTY U/S 271(1)(C) LIMITED HERSELF TO ONLY TWO I TEMS AND LEFT OUT THE OTHER TWO ADDITIONS MADE ON THE GROUND OF UNDERSTATEMENT OF CLOSING STOCK AND OVERSTATEMENT OF EXPENSES FOR PURPOSES OF LEVY OF PENALTY AND THAT IS INDICATIVE OF THE FACT THAT IT IS INDEED AN AGREED ASSESSMENT AS STATED IN THE STATEMENT OF MR. IBRAHIM SHARIFF, AND THAT THE OFFE R OF INCOME WAS ONLY FOR PURPOSES OF TAXATION WITH A VIE W TO BUY PEACE AND AVOID LITIGATION WHICH HE CONVENIENTLY OMITTED TO REFER IN THE ORDER PASSED B Y HIM AND THAT THE SUMS ADDED WERE NEVER CAPITALIZED AND THAT THE SAID PERSONS REMAIN CREDITORS EVEN AS ON DATE. 11. IN THE PREMISES OF THE ABOVE FACTS, THE ASSESSE ES REPRESENTATIVE SUBMITTED, PAN NUMBERS OF 37 ACCOUNT HOLDERS WHICH WERE CALLED FOR ITA NO.126/B/09 15 15 AND IT WAS SUBMITTED. ONLY OBJECTION BY THE REVENU E AUTHORITIES THAT LED TO THE PENALTY IS THAT IN THE STATEMENT OF THE RETU RN, THE INDIVIDUALS HAVE NOT DISCLOSED ACCOUNTS. 12. INVITING OUR ATTENTION TO PAPER BOOK VOLUME 2 O F PAGE 66 ASSESSEES REPRESENTATIVE SUBMITTED THESE ARE SUMMA RY STATEMENT OF ADDITIONS. THE PERUSAL OF THE ABOVE SUMMARY MAKES I T CLEAR THAT THERE WERE CROP LOAN OF RS.1,84,50,000/-. THERE WAS COFFE E SALE OF WORTH RS.48,95,000/-, THERE ARE SUBSIDIARY FROM THE COFF EE BOARD AND TIMBER SALE OF RS.89,000/-. THE ASSESSEES REPRESENTATIVE AGAIN BROUGHT OUR ATTENTION TO PAPER BOOK PAGE 57 AND 58, WHICH IS TH E DETAILS OF BANKS ACCOUNT WITH CORPORATION BANK, MADIKERI OF THE CRED ITORS. IT IS FROM THESE ACCOUNTS, THE ENTIRE MONEY A TRANSACTION HAS DONE. PAGE 58 AND 59 WILL CLEARLY SHOW THAT THERE WERE TRANSFER OF MONEY FROM ONE ACCOUNT TO ANOTHER ACCOUNT AND HE FURTHER SUBMITTED, THAT IN T HE PRECEDING YEAR, AS WELL IN THE SUBSEQUENT YEARS HUGE AMOUNTS OF MONEY WERE AGAIN TRANSFERRED FROM THESE ACCOUNTS TO ACCOUNT NO.483 OF THE COMPANY. THE ASSESSEES REPRESENTATIVE AGAIN BROUGHT OUR ATTENTI ON TO PAPER BOOK PAGE 60 I.E DETAILS OF THE BANK TRANSFER AND RELATE D MATTERS TO SHOW THAT ALL THE ACCOUNT HOLDERS ARE PERSONS OF MEANS, THEY ARE HAVING A LARGE HOLDING OF LAND. PERSONS MENTIONED IN ITEM NO.1 TO 3 AND 4 ARE HAVING LAND HOLDINGS TO THE EXTENT OF MORE THAN 16.50 ACRE S. SHRI S.N KABIR IS HAVING 62.95 ACRES AND ALL THE 37 PERSONS ARE HAVIN G HUGE LAND AND NONE OF THEM IS HOLDING LAND LESS THAN 16 ACRES. FURTHER, IT SHOWS THAT THE ACCOUNT HOLDER OF 10739 PRLS. FATHIIMA WAS HAV ING COFFEE SALES OF ITA NO.126/B/09 16 16 ABOUT 10 LAKHS, CROP LOAN OF RS. 25,000/- AND COFFE E BOARD SUBSIDIARY AND THE TOTAL AMOUNT TRANSFERRED WAS RS.4,56,000/- WHICH SHOW THAT THEY WERE HAVING HUGE FUNDS. THE ASSESSEES REPRES ENTATIVE FURTHER SUBMITTED ON THE EVERY SAME DAY THESE AMOUNTS WERE TRANSFERRED TO COMPANYS ACCOUNT NO.483. FOR EXAMPLE SHRI S.N KAB IR ITEM NO.5 HOLDER OF ACCOUNT NO.10749 HOLDS 62.95 ACRES OF LAND AND T HE AMOUNT TRANSFERRED WAS 3 LAKHS, WHICH CAME FROM THE ACCOUN T OF SHRI S.N KABIR. THE ASSESSEES REPRESENTATIVE SUBMITTED SINCE THIS WAS AGREED ADDITION, ASSESSEE WAS NOT SUPPOSE TO PROVE THE DETAILS, AND THIS HAS BECOME NECESSARY ONLY WHEN THE REVENUE STARTED PENALTY PRO CEEDINGS, WHICH IS AN INDEPENDENT PROCEEDINGS WHEREIN THE ASSESSEES H AD FULL LIBERTY TO PROVE EVERYTHING INDEPENDENTLY, EVEN THOUGH IN THE REGULAR ASSESSMENT ASSESSEE DID NOT CONTEST THIS ISSUES. THE ASSESSEE S REPRESENTATIVE SUBMITTED PERUSAL OF PAGE NO.66 SHOW THAT CROP LOAN TRANSFERRED ON THE VERY SAME DAY OF RS.1,84,58,000/- COMES FROM THE AC COUNTS OF 37 PERSONS. IN SPITE OF THE REQUEST, LEARNED CIT(A) DID NOT ADM IT THE ADDITIONAL EVIDENCES FOR THE SIMPLE REASON THAT THIS WAS NOT F ILED EARLIER. THE ASSESSEES REPRESENTATIVE SUBMITTED IT WAS NOT NECE SSARY BECAUSE THE ADDITION WAS AGREED FOR THAT VERY REASON. ALL THES E ACCOUNTS WERE EXISTING FOR A NUMBER OF YEARS AND THIS WAS NOT OPE NED JUST TO CAMAFLOUGE AND TO DIVERT THE FUNDS FROM UNKNOWN SOU RCE. THE ASSESSEES REPRESENTATIVE BROUGHT OUR ATTENTION TO VOLUME 3 OF PAGE 1 TO 37 IS SUPPORTS THE ABOVE CONTENTION. IT IS THE DETA ILS OF TRANSACTION DURING ITA NO.126/B/09 17 17 THE YEAR ENDED 31.3.02 FOR COMPARISON WITH THE YEAR ENDED ON 31.3.03. THE ASSESSEES REPRESENTATIVE FURTHER SUBMITTED THA T ASSESSEE HAD NOW, AS A PRECAUTION, ENCLOSED THE AFFIDAVITS AND REQUES TED TO ADMIT THESE ADDITIONAL EVIDENCES, AND REQUESTED THE TRIBUNAL TO REMAND THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE ON M ERIT IN THE LIGHT OF THESE ADDITIONAL EVIDENCES. 13. RELYING UPON THE DECISION IN THE CASE OF NIHAL CHAND BADRILAL, 135 ITR 519 HE SUBMITTED THAT THE AO HAS NO JURISDICTIO N TO IMPOSE PENALTY ON A GROUND DIFFERENT FROM THAT ON WHICH THE ITO HA D STARTED THE PENALTY PROCEEDINGS. HE FURTHER SUBMITTED RELYING UPON THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. FAIZUUD IN, 108 ITR 379 MERE ADDITION OF AN ITEM OF UNEXPLAINED CASH CREDIT TO T HE INCOME IS NOT ENOUGH TO ATTRACT PENALTY. THERE SHOULD BE INDEPEN DENT PROOF OF THE FACT THAT WHAT WAS ADDED WAS ACTUALLY THE REAL INCOME OF THE ASSESSEE. IN THE INSTANT CASE, IN THE ASSESSMENT STAGE, MERELY ASSES SEE ADMITTED TO MAKE ADDITIONS. AUTOMATICALLY, THIS DOES NOT LEAD TO THE CONCLUSION THAT ASSESSEE HAS CONCEALED INCOME AND PENALTY IS LEVIAB LE. FURTHER RELYING UPON THE DECISION OF HONBLE GUJARATH HIGH OURT IN THE CASE OF DCIT VS. ROHINI BUILDERS, 256 ITR 360, ASSESSEES REPRESENTA TIVE SUBMITTED THAT ASSESSEE IS NOT EXPECTED TO PROVE THE GENUINENESS O F THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS BECAUSE UNDER THE LAW ASSESSEE CAN BE ASKED TO PROVE THE SOURCE OF CREDITS IN HIS BOOKS OF ACCOUNTS BUT NOT THE SOURCE OF SOURCE. IN THE INSTANT CASE, ASS ESSEES REPRESENTATIVE SUBMITTED THAT IT IS AN ADMITTED POSITION, ALL THE MONEY HAS COME FROM ITA NO.126/B/09 18 18 ESTABLISHED ACCOUNTS WHICH WAS STANDING IN THE NAME OF 37 CREDITORS, FOR A VERY LONG PERIOD AND FROM THESE ACCOUNTS THE MONE Y HAS COME TO ACCOUNT OF THE ASSESSEE. HE ALSO RELIED ON THE FOL LOWING DECISIONS IN SUPPORT OF THE VARIOUS ARGUMENTS : (1) DURGA KAMAL RICE MILLS, 265 ITR 27 (CAL H.C) (2) CIT VS. DAULATH RAM RAWATMULL, 87 ITR 349 (S.C) (3) YADU RAJ NARAIN SINGH, 286 ITR (ALL H.C) (4) CIT VS. BALBIR SINGH, 304 ITR 124 (5) JALARAM OIL MILLS, 253 ITR 192 (GUJ) (6) SRI SHADILAL S.C, 168 ITR 705 (7) SURESH CHANDRA MITTAL, 251 ITR 9 (S.C) (8) BALWANTH RAI, 23 ITCL P & H 460 (9) BADRA ADVANCING LTD. 24 ITCL 178 (KAR H.C) (10)REALTIME MARKETING P. LTD., 24 ITCL 529 (DEL H. C) (11)CIT VS. DIAMOND PRODUCTS LTD., 26 ITCL 450 (DEL H.C) 14. IN THE CASE REPORTED IN ROHINI BUILDERS (SUPRA) HONBLE GUJARAT HIGH COURT HELD THAT IN THE CASE OF CASH CREDIT, IF THE AMOUNT IS RECEIVED BY ACCOUNT PAYEE CHEQUE, ASSESSEE HAS DISCHARGED TH E INITIAL BURDENS, THEN THE SOURCE OF CREDIT NEED NOT BE PROVED AND FU RTHER THAT EVEN IF THE EXPLANATION WAS NOT SATISFACTORY IT WOULD NOT AUTOM ATICALLY RESULT IN DEEMING AMOUNT AS INCOME OF THE ASSESSEE. 15. IN THE CASE OF CIT VS. GLOCOM IMPEX PVT. LTD., REPORTED IN 299 ITR 39, HONBLE DELHI HIGH COURT HELD IF THE GENUINENES S AND CREDITWORTHINESS OF THE CREDITOR ESTABLISHED, AMOUN T REPRESENTING THE ITA NO.126/B/09 19 19 CREDIT NOT TO BE INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE. COMING TO THE INSTANT CASE OF THE ASSESSEE, IT IS NOT DISPUTE D THAT THE AMOUNT HAS COME FROM ACCOUNT OF 37 MEMBERS, WHOSE ACCOUNTS WAS STANDING IN THE NATIONALIZED BANKS FOR PAST MANY YEARS. MERELY BECA USE THE ACCOUNT OF THE RECIPIENT COMPANY WAS OPERATED BY ONE INDIVIDUA L WHO INTRODUCED THE ACCOUNTS, IPSO FACTO WILL NOT LEAD TO THE CONC LUSION THAT THE ACCOUNTS WERE OPENED, JUST TO ACCOMMODATE THE PRESENT ASSESS EE. HERE IN ABOVE, WE HAVE ALREADY MENTIONED THAT THESE ACCOUNT HOLDE RS WERE HAVING SUFFICIENT COFFEE PLANTATION LAND AND THEY WERE GET TING LOANS AND WERE HAVING AGRICULTURAL INCOME. ACCORDING TO THE ASSES SEE, ASSESSEE HAS NOT DISCLOSED THE AGRICULTURAL INCOME, SINCE IT WAS NOT TAXABLE AND THAT WAS REASON WHY IT WAS NOT REFLECTED IN ASSESSEES STATE MENT THAT ACCOMPANIED THE RETURN. 16. REPLYING TO THE ABOVE, LEARNED DR INVITED OUR A TTENTION TO THE ASSESSMENT ORDER PARA 3 AND SUBMITTED A PERUSAL OF THE SAME WILL CLEARLY SHOW THAT, IF THERE WAS NO SURVEY UNDER SEC TION 133 WAS CONDUCTED, NONE OF THESE THINGS WOULD HAVE COME OUT AND THE INCOME WOULD HAVE ESCAPED ASSESSMENT. THE ENQUIRIES CON DUCTED ONLY REVEALED THAT ASSESSEE HAD CLEARED THE LOANS TO THE TUNE OF CRORES OF RUPEES AND EVERY AFFAIR WAS MANAGED BY A SINGLE IND IVIDUAL. HE MANAGED THE ACCOUNTS, INVESTED THE MONEY, WITHDRAWN THE MON EY AND IT WAS ONE MAN SHOW AND THE ASSESSEE COULD NOT EXPLAIN ANYTHIN G. WHEN THE ASSESSEE WAS CORNERED, ASSESSEE ADMITTED THE ENTIRE FAULT AND OFFERED THE AMOUNT. THE ASSESSEE COULD NOT CORRELATE ANY O F THESE ACCOUNTS. ITA NO.126/B/09 20 20 THE CROP LOANS WERE IN FACT CLEARED BY THE CASH TRA NSACTION BETWEEN THE MEMBERS. WHEN THE COPIES OF THE RETURN OF THESE 34 INDIVIDUALS OBTAINED FOR VERIFICATION, AS TO WHETHER THE ADVANC E WERE REFLECTED IN THE STATEMENT IT IS FOUND THAT THE SAME HAS NOT BEEN RE FLECTED. THE ASSESSEE DID NOT EXPLAIN ANYTHING AND OFFERED THIS AS UNDISC LOSED INCOME OF THE COMPANY. MANAGING DIRECTOR OF THE COMPANY ONLY HA S MANAGED, AND NONE OF THE INDIVIDUALS HAVE ANY KNOWLEDGE OF THESE TRANSACTIONS. 17. IN THE LIGHT OF THE ABOVE FACTS, THE LEARNED DR SUBMITTED THAT PENALTY PROCEEDINGS WERE RIGHTLY INITIATED. THE AR GUMENT OF THE ASSESSEE THAT IT WAS AN AGREED ADDITION ETC. DOES NOT HOLD G OOD. THERE IS NO ESTOPPEL AGAINST THE LAW. INVITING OUR ATTENTION T O PAPER BOOK PAGE NO.2 AT PAGE 99 I.E THE ORDER OF THE COMMISSIONER PASSED UNDER SECT. 264, THE LEARNED DR SUBMITTED THAT ASSESSEE WAS TAKING TECHN ICAL OBJECTIONS AND WERE SHIFTING THE STANDS NOW AND THEN BEFORE THE RE VENUE AUTHORITIES, WHICH SHOWS ASSESSEE IS HAVING NO GENUINE CASE. IN SHORT THE LEARNED DR SUBMITTED THAT ORDER OF THE REVENUE AUTHORITIES MAY BE CONFIRMED. THE LEARNED DR FURTHER SUBMITTED MONEY WAS RECEIVED AS COFFEE SALES. THOUGH, AMOUNTS HAVE CLAIMED TO HAVE BEEN REPAID, T HE ASSESSEE HAD NOT SUBSTANTIATED THE CLAIM. IN THESE CIRCUMSTANCES RELYING UPON THE FOLLOWING JUDGMENTS (1) CIT VS. RATTAN SINGH GREWAL, 304 ITR 75 (P&H H .C) (2) UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTIL ES PROCESSORS AND OTHERS, 306 ITR 277 ( S.C) REVENUE AUTHORITIES MAY BE CONFIRMED. ITA NO.126/B/09 21 21 18. CONSIDERING THE RIVAL SUBMISSIONS AND GOING THR OUGH THE ORDER OF THE REVENUE AUTHORITIES, WE ARE OF THE VIEW THAT AP PEAL BY THE ASSESSEE IS LIABLE TO BE ALLOWED. 19. COMING TO THE DECISION RELIED ON BY THE LEARNED DR, REPORTED IN THE CASE OF CIT VS. RATTAN SINGH GREWAL (SUPRA), WE ARE AFRAID THAT THIS DECISION IS DISTINGUISHABLE ON FACTS. THIS WAS A C ASE WHEREIN ASSESSEE DID NOT FILE THE RETURN AT FIRST INSTANCE AND EVEN AFTER THE ISSUANCE OF NOTICE UNDER SECTION 148, THE ASSESSEE FILED THE RE TURN DECLARING NIL INCOME. WHEN CONFRONTED, THE INVESTMENT MADE BY TH E ASSESSEE WAS UNEXPLAINED AND THE EXPLANATION WAS FOUND TO BE FAL SE. HENCE IT WAS HELD THAT ASSESSEE WAS FAILED TO DISCHARGE THE ONUS PUT ON HIM IN TERMS OF EXPLANATION TO SECTION 271(1)(C) AND, THEREFORE, HONBLE HIGH COURT HELD THAT ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME AND PENALTY WAS LEVIABLE. IT IS NOT SO IN THE INSTANT CASE. I N THIS CASE ASSESSEE FILED THE RETURN. WHEN THE ASSESSEE FAILED TO EXPLAIN THE CREDITS, ASSESSEE SURRENDERED IT WITH A CONDITION THAT THERE WILL BE NO PENALTY UNDER SECTION 271(1)(C). WHEN UNDER SECTION 271(1C) PENALTY WAS L EVIED, ASSESSEE CONTESTED IT. ONE OF THE ARGUMENTS OF THE LEARNED DR THAT RECORDED HEREIN ABOVE IS THAT ASSESSEE PRODUCED EVIDENCES BE FORE THE LEARNED CIT(A) BUT IT WAS NOT ACCEPTED ON THE GROUND THAT A SSESSEE DID NOT PRODUCE EVIDENCES AT FIRST STAGE BEFORE THE AO, AND WE HAVE ALREADY HELD THAT IT WAS AN AGREED ADDITION. ONLY AT THE STAGE O F PENALTY PROCEEDINGS, ASSESSEE WAS SUPPOSED TO PROVE THE GENUINENESS OF T HE CREDITS WHICH ITA NO.126/B/09 22 22 WAS REJECTED BY THE LEARNED CIT(A) HOLDING THAT ASS ESSEE DID NOT DO SO AT THE FIRST ASSESSMENT STAGE ITSELF. 20. COMING TO THE DECISION OF HONBLE SUPREME COURT REPORTED IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TE XTILE PROCESSORS AND OTHERS (SUPRA), THIS DECISION STRICT LY DOES NOT HELP THE REVENUE. THIS WAS THE CASE WHEREIN HONBLE SUPREME COURT HELD THAT FOR CONCEALMENT PENALTY, WILLFUL CONCEALMENT WAS NOT ES SENTIAL. THE HONBLE SUPREME COURT HELD THAT THE SECTION HAS BEEN ENACTE D TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE AND THE PENALTY IS A CIV IL LIABILITY. COMING TO THE INSTANT CASE OF THE ASSESSEE FACTS ARE AGAIN DI STINGUISHABLE. THIS WAS AGREED ADDITION AND ASSESSEE DID NOT CONTEST THE MA TTER IN THE REGULAR APPEAL. BUT ASSESSEE CONTESTED ONLY WHEN PENALTY W AS LEVIED AGAINST THE ASSESSEE. ASSESSEE PRODUCED EVIDENCES BEFORE T HE LEARNED CITI(A) BUT LEARNED CIT(A) DID NOT ACCEPT THIS EVIDENCES H OLDING THAT ASSESSEE DID NOT GIVE EVIDENCES BEFORE THE AO EITHER AT THE TIME OF REGULAR ASSESSMENT OR AT THE TIME OF PENALTY PROCEEDINGS. FROM THE PENALTY PROCEEDINGS, WE HAVE ALREADY NOTED THAT AO WAS MAIN LY RELYING ON THE FACTS THAT THE ASSESSEE COULD NOT EXPLAIN THE FACTS PROPERLY AND ASSESSEE SURRENDERED THE INCOME FOR THE PURPOSE OF TAX. WE HAVE ALREADY MENTIONED HEREIN ABOVE, MERE FACT THAT ONE PERSON W AS MANAGED THE ACCOUNT AS A G.P.A HOLDER AND THE OTHER 37 PERSONS, WHO WERE IN CHENNAI WERE NOT OPERATING THE ACCOUNT ETC. AND ASS ESSEE WAS NOT IN A POSITION TO EXPLAIN BECAUSE THE ADDITION WAS MADE O N AGREED BASIS. ITA NO.126/B/09 23 23 21. PERUSAL OF THE PENALTY ORDER MAKES IT CLEAR THA T PRIMARY REASON FOR LEVYING THE PENALTY IS THAT, ON ENQUIRY CONDUCTED W ITH THE BANK AUTHORITIES, IT CAME TO THE KNOWLEDGE OF THE REVENU E, THAT NONE OF THE FAMILY MEMBERS FROM WHOM THE ASSESSEE COMPANY BORRO WED FUNDS WERE RESIDING AT MADIKERI, AND ALL THE BANK ACCOUNTS FRO M WHICH IT IS CLAIMED THAT THE MONEY HAS COME TO THE ACCOUNT OF THE ASSES SEE WERE STOOD IN THE NAME OF THE FAMILY MEMBERS. BUT THE ACCOUNTS WE RE OPERATED BY SHRI S.N KABIR MANAGING DIRECTOR, WHO INTRODUCED AL L THE BANK ACCOUNTS IN THE NAME OF THE FAMILY MEMBERS. HE OPERATED THE ACCOUNTS AS HE WAS HOLDING GPA TO OPERATE ALL THE ACCOUNTS, FOR AND ON BEHALF OF THE FAMILY MEMBERS. WITH REGARD TO THE CROP LOAN AVAILED BY T HE FAMILY MEMBERS SHRI KABIR ONLY SIGNED THE LOAN APPLICATION FORM, A ND TRANSFERRED THE FUNDS TO THE COMPANY AND ENQUIRIES FURTHER REVEALED CROP LOANS WERE TAKEN BY FAMILY MEMBER WERE REPAID SUBSEQUENTLY BY CASH REMITTANCE. TO VERIFY THE GENUINENESS OF THE TRANSACTION OF THE RETURN FILED BY THESE FAMILY MEMBERS, THEY WERE CALLED FOR. THE AO FURTH ER NOTED THAT NONE OF THE TRANSACTIONS PERTAINING TO CROP LOANS RECEIVED FROM BANKS AND CONFIRMATION LETTERS OF THE FAMILY MEMBERS AND LOAN S ADVANCED WERE REFLECTED IN THEIR RETURNS. ON THE PREMISES OF THE ABOVE, ASSESSEE SURRENDERED THE AMOUNTS FOR TAXATION WITH A CONDITI ON THAT THERE WILL BE NO PENALTY PROCEEDINGS UNDER SEC. 271(1)(C), SO AS TO SETTLE THE MATTER ONCE AND FOR ALL. 22. ASSESSEE AGGRIEVED BY THE PENALTY, CONTESTED TH E ISSUE BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HELD THAT SINCE THE ASSESSEE HAD NOT ITA NO.126/B/09 24 24 PROVED THE GENUINENESS OF THE TRANSACTIONS BEFORE T HE AO AND ASSESSEE WHEN CORNERED, SURRENDERED EVERYTHING. THE CONTE NTION OF THE ASSESSEE IS THAT SINCE THIS WAS AGREED ADDITION THERE WAS NO OPPORTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO N IS TO BE ACCEPTED. BEFORE THE LEARNED CIT(A) ASSESSEE TRIED TO INTRODU CE NEW EVIDENCES SO AS TO PROVE THE GENUINENESS OF THE TRANSACTION BUT THE SAME WAS REJECTED BY THE LEARNED CIT(A) HOLDING THAT THE ASSESSEE DID NOT GIVE ANY EVIDENCES BEFORE THE AO. IN THE PREMISES OF THE AB OVE FACTS, WE ARE OF THE VIEW THAT SINCE THIS WAS AGREED ADDITION AND NA TURALLY, PENALTY CANNOT BE LEVIED AGAINST THE ASSESSEE WITHOUT GIVING A PRO PER OPPORTUNITY TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. OFCO URSE, THE REVENUE IS NOT BOUND BY THE CONDITIONAL OFFERED BY THE ASSESSE E BUT AT THE SAME TIME, MERELY BECAUSE ASSESSEE AT ASSESSMENT STAGE D ID NOT CONTESTED ISSUE, ALSO CANNOT GO AGAINST THE ASSESSEE. 23. IN THE LIGHT OF THE ABOVE FACTS, FOR THE REASON S STATED HEREIN ABOVE APPEAL BY THE ASSESSEE IS TO BE ALLOWED AND THE ISS UE IS TO BE REMANDED BACK TO THE FILE OF THE AO TO DECIDE IT ON MERIT, C ONSIDERING THE EVIDENCES NOW BROUGHT BEFORE US AND ALSO ANY OTHER EVIDENCE T HAT MAY REQUIRE TO PROVE THE GENUINENESS OF THE CLAIM. IN THE INTERES T OF THE JUSTICE FOR THE REASON STATED ABOVE, WE REMAND THE MATTER BACK TO T HE FILE OF THE AO TO DECIDE THE ISSUE AFRESH. ITA NO.126/B/09 25 25 IN THE RESULT, APPEALS OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21ST AUG, 2009. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - ( (( (N.L N.LN.L N.L KALRA KALRA KALRA KALRA) ) ) ) (K.P.T. THANGAL (K.P.T. THANGAL (K.P.T. THANGAL (K.P.T. THANGAL ) ) ) ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED 21/8/09 VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. BY ORDER ASST. REGISTRAR, ITAT, BANGAL ORE.