The ACIT, Central Circle-4, Surat V. M/s. Jupitor Distillery, Nani Daman

ITA 1555/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51058 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Income from undisclosed sources; Search and seizure; Retraction; Revised return
• Section: 40A(3); 143(3); 5(2); 133A; 153A; 145; 263; 132

Judgement Text

, , , , , , . .. .' ' ' ' ' ' ' ' , # # # # $ $ $ $ IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE HONBLE SHRI BHAVNESH SAINI, J.M. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) . ITA NO. 1555/AHD./2009 : %&- 2005-2006 THE A.C.I.T., CENTRAL CIRCLE-4, SURAT - VS- JUPITER DISTILLERY, DAMAN (PAN : AACFJ 0179R) ()* /APPELLANT) ( +,)* /RESPONDENT ) )* - . / APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. +,)* - . / RESPONDENT BY : SHRI K. GOPAL, A.R. /0 - 12# / DATE OF HEARING : 03/10/2011 3'% - 12# / DATE OF PRONOUNCEMENT : 16/12/2011 / ORDER PER SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, AHMEDABAD IN APPEAL NO. CIT(A)-II/CC.4/1/2008-09 DATED 03.02.2009 FOR THE ASSESSMENT YEAR 2005-06 PA SSED UNDER SECTION 250 R.W.S 271(1)(C) OF THE I.T.ACT, 1961. 2. THOUGH THE REVENUE HAS, RAISED FIVE GROUNDS, THE PRIME GRIEVANCE OF IT BEING THAT THE LD. CIT (A) HAD ERRED IN DELETING T HE PENALTY OF RS.49.07 LAKHS BY IGNORING THE PROVISIONS OF EXPLANATION 4(A) BELOW S.271 (1) (C) OF THE ACT. 3. BRIEFLY STATED, THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF LIQUORS. SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE ACT WERE CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE PARTNERS AND, SIMUL TANEOUSLY, SURVEY ACTION U/S 133A WAS UNDERTAKEN AT THE BUSINESS PREMISES OF THE ASSE SSEE. THE ASSESSEE HAD TAKEN THE ENTIRE LIABILITY OF THE UNDISCLOSED TRANSACTIONS TO WARDS UNDISCLOSED INCOME, INVESTMENTS AND EXPENDITURE AND ACCORDINGLY, ADMITT ED OF UNACCOUNTED INCOME OF RS.3.2 CRORES. IN COMPLIANCE WITH THE ISSUANCE OF N OTICE U/S 153C OF THE ACT, THE ITA NO. 1555-AHD-09 2 ASSESSEE FURNISHED A RETURN OF INCOME ADMITTING NIL INCOME. BRUSHING ASIDE THE VARIOUS CONTENTIONS PUT-FORTH BY THE ASSESSEE AND F OR THE REASONS RECORDED THEREIN, THE LD. AO CONCLUDED THE ASSESSMENT U/S 143(3) R.W.S 15 3C OF THE ACT, DETERMINING THE TOTAL TAXABLE INCOME AT RS. NIL ON ACCOUNT OF ACCUM ULATED LOSSES AND DEPRECIATION CLAIMS. HOWEVER, HE MADE AN ADDITION OF RS.89.98 L AKHS PERTAINING TO INCOME ON ACCOUNT OF UNACCOUNTED PRODUCTION, SALE AND SUPPRES SION OF PROFIT. 3.1. IT WAS THE CASE OF THE REVENUE THAT SURVEY U/ S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING THE SURVEY OPERATIONS, SEVERAL DOCUMENTS INCLUDING DIGITAL DOCUMENTS MAINT AINED ON THE MAIN COMPUTER SERVER WERE UNEARTHED AND IMPOUNDED. THOSE COMPUTE RIZED DOCUMENTS REVEALED AND EVIDENCED PARALLEL BUSINESS RUN BY THE APPELLANT FO R WHICH AN ALTERNATE SET OF DIGITAL ACCOUNTS WERE MAINTAINED. ON THE DEPOSITION OF THE COMPUTER OPERATOR OF THE APPELLANT DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS NOT ICED THAT THE RECORDS OF UNACCOUNTED SALES AND PURCHASES HAVE BEEN MAINTAINED ON THE COM PUTER SERVER IN FACT ACCOUNT SOFTWARE UNDER THE DOCUMENT NAME SAMPLE FILE 200 3-2005 AND SAMPLE 2005-06 FILE, THAT THE REGULAR BOOKS OF ACCOUNTS SEPARATEL Y MAINTAINED ON THE COMPUTER SHOWED ONLY THE ACCOUNTED PORTION OF BUSINESS WHICH HAD BE EN PRODUCED BEFORE THE AUTHORITIES, WHILE A DIGITAL DOCUMENT MODULE, SAMP LE FILE AS MENTIONED ABOVE EMBODIED TOTAL ACCOUNTS, BOTH OF REGULAR ACCOUNTED BUSINESS (NO.1) AND UNACCOUNTED BUSINESS (NO.2). THE SAMPLE FILE MAINTAINED ON F ACT SOFTWARE AND EXTRACTED FROM THE BACK-UP OF THE IMPOUNDED HDD COMPRISE OF DAILY SALES AND PURCHASES EFFECTED FOR THE RELEVANT AY. THUS, ACCORDING TO THE REVENUE, T HE BASIS FOR ADDITION AND THE PENAL PROCEEDINGS HAS BEEN DETECTION OF OUT-OF-BOOKS PROD UCTION AND UN-RECORDED SALES AS PER IMPOUNDED DIGITAL DOCUMENT AND CONSEQUENT CONCE ALMENT OF INCOME DETERMINED DURING THE ASSESSMENT PROCEEDINGS. 3.2. ON THE BASIS OF UNEARTHING OF THE CONCEALMENT OF INCOME, THE ASSESSEE WAS ISSUED A NOTICE U/S 274 R.W.S 271(1)(C) OF THE ACT REQUIRING TO SHOW-CAUSE AS TO WHY IT SHOULD NOT BE PENALIZED FOR HAVING CONCEALED THE PARTICULARS OF ITS INCOME AND/OR FURNISHED INACCURATE PARTICULARS OF SUCH INC OME. AFTER DULY ANALYZING THE LENGTHY SUBMISSION OF THE ASSESSEE AND ALSO EXTENSI VELY QUOTING THE FINDINGS OF THE ITA NO. 1555-AHD-09 3 HONBLE EARLIER BENCH IN THE CASE OF DCIT V. SMT. J AYSHREE M PETHANI [IT (SS)A NO.169/AHD/2002 WHICH HAD LAID DOWN TESTS FOR DETER MINING THE CULPABILITY AND LEVY OF PENALTY AND ALSO RELYING ON VARIOUS JUDICIAL PRO NOUNCEMENTS ON A SIMILAR ISSUE AS RECORDED IN THE IMPUGNED ORDER UNDER CHALLENGE, THE AO HAD OBSERVED THUS (ON PAGE 14) THUS, THE FOLLOWING POINTS EMERGE AS REGARDS TO THE PENALTY PROCEEDINGS: 1. THE ASSESSEE HAS FAILED TO GIVE ANY JUSTIFICATION O R ACCEPTABLE EXPLANATION FOR REPORTING OF LOWER THAN ACTUAL INCOME AS PER THE IM POUNDED DIGITAL FILES NAMED AS SAMPLE FILES; 2. THE ASSESSEE HAS WILLFULLY FURNISHED RETURN OF LOWE R INCOME IN ORDER TO EVADE TAXES BY ESTABLISHED UNDER-REPORTING OF INCOME BY W AY OF SUPPRESSION OF REVENUE; 3. THE RATIO AND TESTS LAID DOWN FOR LEVY OF PENALTY A S IN THE CASES OF NATIONAL TEXTILES V. CIT 249 ITR 125 OF JURISDICTIONAL HIGH COURT AND DCIT V. SMT JAYSHREE M PETHANI IT(SS)A NO.169/AHD/2002 OF THE J URISDICTIONAL HONBLE ITAT, AHMEDABAD ARE CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE; 4. IN THE PENALTY PROCEEDINGS, THE ASSESSEE HAS FAILED TO ADVANCE ANY EVIDENCE IN SUPPORT OF ITS CLAIMS AND CONTENTIONS AND ALL THE A RGUMENTS OF THE ASSESSEE HAVE BEEN FOUND TO BE OF NO CONSEQUENCE. THE ELEMENT OF ANIMUS IS BLATANT IN ASSESSEES EVASIVE AND BASELESS REPLIES. HENCE, LOGICALLY AND INESCAPABLY, THIS CASE FALLS W ITHIN THE MISCHIEF OF S.271(1)(C). THE CASE OF THE ASSESSEE CLEARLY ATTR ACTS THE PENAL PROVISION OF S.271(1)(C) AND ON THE FACTS OF THE CASE, SATISFIED THAT THE ASSESSEE IS AT FAULT IN REGARDS TO THE PROVISIONS OF S.271(1)(C) OF THE I.T .ACT, 1961, I HOLD THAT IT IS A FIT CASE FOR LEVY OF PENALTY OF THE I.T. ACT, 1961. SINCE, THE INSTANT CASE PERTAINS TO REDUCTION IN LO SS ON ACCOUNT OF CONCEALMENT OF INCOME, AS PER EXPLANATION 4(A) TO SECTION 271, THE AMOUNT OF TAX SOUGHT TO BE EVADED IN SUCH CASE WHERE THE AMOUNT OF INCOME IN R ESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN, MEANS THAT THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF ITA NO. 1555-AHD-09 4 WHICH PARTICULARS HAVE BEEN CONCEALED, HAD SUCH INC OME BEEN THE TOTAL INCOME. ACCORDINGLY, IN THIS CASE THE MINIMUM PENALTY AT TH E .................................. . IN VIEW OF THE ABOVE AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE MERITS OF EXPLANATION OF THE ASSESSEE, I PROCEE D TO IMPOSE PENALTY OF RS.49,07,766/- BEING 100% OF THE TAX LEVIABLE IN RE SPECT OF THE EXCESS OVER RETURN UNDISCLOSED INCOME DETERMINED UNDER CLAUSE (C) OF S .SEC. 271(1) R.W. EXPLANATION 4(A) THEREOF. HENCE, ACCORDINGLY, THE ASSESSEE IS DIRECTED TO PAY, BY WAY OF PENALTY, A SUM OF RS.49,07,766/-.. 4. AGGRIEVED, THE ASSESSEE CARRIED THE ISSUE BEFOR E THE LD. CIT (A) FOR RELIEF. DURING THE COURSE OF APPELLATE PROCEEDINGS (PENALTY), IT WAS VALIANTLY ARGUED THAT 3....THAT PENALTY CANNOT BE LEVIED ON ADDITION OF RS.89,40,079/- U/S 40A(3) MADE BY DISALLOWING 20% OF CASH EXPENDITURE. ALL T HE EXPENDITURE ARE GENUINE AND INCURRED FOR EARNING THE INCOME. SINCE THE SALE S AND PURCHASE WAS OUTSIDE BOOKS, IT WAS INCURRED IN CASH BUT THE FACT IS THAT THE EXPENDITURE IS INCURRED AND DISALLOWANCE DOES NOT CALL FOR IMPOSITION OF PE NALTY FOR CONCEALMENT. FOR ADDITION OF RS.89,98,810/- BEING PROFIT OUT OF BOOK IT WAS SUBMITTED THAT THE ASSESSEE HAS ALREADY SURRENDERED AMOUNT OF RS.1,60, 00,000/- AT THE TIME OF SURVEY AND IN STATEMENT RECORDED AND ALSO OFFICERED (SIC) OFFERED IT IN RETURN OF INCOME. WHEN HE HAS OFFERED IT AS INCOME, THE LEVY OF PENALTY U/S 271(1)(C) ON THIS AMOUNT IS NOT JUSTIFIED. FURTHER, IT WAS SUBM ITTED THAT THE AO WHILE MAKING THE ASSESSMENT HAS TAKEN SALE OF COUNTRY LIQUOR FRO M REGULAR BOOK AND SALE OF INDIAN MADE FOREIGN LIQUOR FROM UNACCOUNTED BOOK WH ICH IS NOT PROPER. BOTH THE FIGURES SHOULD BE TAKEN FROM THE UNACCOUNTED BO OKS AND IF THIS IS TAKEN, THERE WILL BE NO DIFFERENCE IN RETURNED AND ASSESSE D INCOME AND ADDITION WILL NOT BE THERE. FURTHER, IT WAS SUBMITTED THAT EVEN IF THE ADDITION IS SUSTAINED IN APPELLATE PROCEEDINGS, THE PENALTY IS NOT JUSTIFIED AS THE ASSESSMENT AND PENALTY PROCEEDINGS ARE DIFFERENT. HE HAS ALREADY SURRENDE RED SUPPRESSED INCOME IN ITA NO. 1555-AHD-09 5 THE STATEMENT MADE AND OFFERED THE INCOME. THEREFO RE, IT WAS SUBMITTED THAT THE PENALTY SHOULD BE DELETED. 4.1. AFTER DUE CONSIDERATION OF THE FACTS AND SUBMI SSION OF THE ASSESSEE, THE LD. CIT (A) OBSERVED THUS - 4I AGREE WITH THE APPELLANTS VIEW. PENALTY C ANNOT BE LEVIED ON ADDITION OF RS.89,40,079/- U/S 40A(3) MADE BY DISAL LOWING 20% OF CASH EXPENDITURE. ALL THE EXPENDITURE ARE GENUINE AND I NCURRED FOR EARNING THE INCOME AND DISALLOWANCE DOES NOT CALL FOR IMPOSITIO N OF PENALTY FOR CONCEALMENT. FOR ADDITION OF RS.89,98,810/- BEING PROFIT OUT OF BOOKS, THE ASSESSEE HAS ALREADY SURRENDERED AMOUNT OF RS.1,60,00,000/- AT T HE TIME OF SURVEY/STATEMENT RECORDED AND ALSO OFFERED IT IN RETURN OF INCOME. WHEN HE HAS OFFERED IT AS INCOME, THE LEVY OF PENALTY U/S 271(1)(C) ON THIS A MOUNT IS NOT JUSTIFIED. 5. AGITATED, THE REVENUE HAS COME UP WITH THE PRESE NT APPEAL BEFORE THIS BENCH. IT WAS STRONGLY ARGUED BY THE LD. D.R. THAT THE LD. CIT (A) HAD ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY WITHOUT CONSIDERING THE FAC TS THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE OUT-OF BOOKS PRODUCTION AND UNRECORDED SALES AS PER IMPOUNDED SAMPLE FILE DURING THE COURSE OF SURVEY AT THE PREMISES O F THE ASSESSEE. THE LD. D.R. FURTHER SUBMITTED THAT HE FURTHER ERRED IN LAW IN DELETING THE PENALTY IMPOSED BY IGNORING THE PROVISIONS OF EXPLANATION 4(A) BELOW S.271(1)(C) AN D ALSO WITHOUT RECORDING ANY FINDING THAT THE EXPLANATION OF THE ASSESSEE FOR NO T DISCLOSING THE INCOME WAS BONA FIDE; AND ALSO ERRED IN CANCELING THE PENALTY IN CO MPLETE DISREGARD TO THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [306 ITR 277 (SC)] WHEREBY THE PENALTY WAS HELD TO BE A CIVIL LIABILITY AS A REMEDY FOR LOSS OF REVENUE AND MENS REA WAS NOT C ONSIDERED AN ESSENTIAL INGREDIENT OF S.271(1)(C) OF THE ACT. 5.1. TO STRENGTHEN HIS ASSERTION, THE LD. D R HAD P LACED RELIANCE ON THE FOLLOWING CASE LAWS, NAMELY: (I) LMP PRECISION ENGG. CO. LTD V. DCIT (2011) 330 ITR 93 (GUJ); (II) ACIT V. KIRIT DHYABHAI PATEL (2009) 121 ITD 159 ITAT, AHD B THIRD MEMBER BENCH; & (III) SHYAM BEHARI V. ACIT ITAT DELHI G BENCH (2011 ) 43 SOT 129 (DEL) ITA NO. 1555-AHD-09 6 5.2. ON THE OTHER HAND, THE LD. AR CAME UP WITH EMP HATIC REITERATION OF MORE OR LESS WHAT WAS PORTRAYED BEFORE THE FIRST APPELLATE AUTHO RITY. IN FURTHERANCE, IT WAS CONTENDED THAT THE LEVY OF CONCEALMENT PENALTY U/S 271(1)(C) OF THE ACT WAS NOT AT ALL JUSTIFIABLE AS THE INCOME DISCLOSED DURING THE COUR SE OF SURVEY PROCEEDINGS WAS INCLUDED IN THE RETURN OF INCOME FURNISHED ON 31.10 .2005 AND, HENCE, IT WAS URGED, NO CONCEALMENT IN THE RETURN FILED BY THE APPELLANT. I T WAS, FURTHER, SUBMITTED THAT THE PENALTY PROCEEDINGS FOR THE AYS 2004-05 AND 2006-07 WERE DROPPED ON IDENTICAL FACTS, AND, THUS, THE STAND OF THE AO TO LEVY OF PE NALTY FOR THE IMPUGNED ASSESSMENT YEAR UNDER DISPUTE WAS NOT AT ALL JUSTIFIED. FURTHE R, THE LD. AR SOUGHT REFUGE UNDER CLAUSE 2 OF EXPLANATION 5 TO S. 271(1)(C) OF THE AC T SINCE, ACCORDING TO THE LD. A.R., THE DISCLOSURE WAS MADE DURING THE COURSE OF SEARCH PRO CEEDINGS U/S 132(4) OF THE ACT. BEFORE PARTING WITH HIS ARGUMENTS, THE LD. A R HAD PLACED STRONG RELIANCE ON THE FOLLOWING CASE LAWS: (I) DCIT V. DR SATISH B GUPTA (2011) 135 TTJ (AHD) 611; (II) SADBHAV BUILDERS V. ITO - ITA NO.1418/AHD/2008 DT. 21.1.2011; & (III) CIT V. SAS PHARMACEUTICALS ITA NO.1058 OF 2009 DT .8.4.2011 OF HONBLE DELHI HIGH COURT. 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS AN D CAREFULLY PERUSED THE MATERIALS AVAILABLE FROM THE RECORDS. AT THE OUTSET , IT IS OBSERVED THAT THE DOCUMENTARY EVIDENCES ADDUCED BY THE LD. A.R DURING THE COURSE OF HEARING IN THE SHAPE OF A VOLUMINOUS PAPER BOOK RUNNING INTO 1 330 PAGES AN D ALSO VARIOUS CASE LAWS ON WHICH THE RESPECTIVE PARTIES HAVE PLACED THEIR UNST INTED CONFIDENCE. 6.1. IT WAS THE CASE OF THE REVENUE THAT THE ASSESS EE HAD GROSSLY FAILED TO ( AT THE COST OF REPETITION) - (I) GIVE ANY JUSTIFICATION OR ACCEPTABLE EXPLANATION F OR REPORTING OF LOWER THAN ACTUAL INCOME AS PER THE IMPOUNDED DIGITAL FILES NA MED AS SAMPLE FILES; (II) THE ASSESSEE HAS WILLFULLY FURNISHED RETURN OF LOWE R INCOME IN ORDER TO EVADE TAXES BY ESTABLISHED UNDER-REPORTING OF INCOM E BY WAY OF SUPPRESSION OF REVENUE; ITA NO. 1555-AHD-09 7 (III) THE RATIO AND TESTS LAID DOWN FOR LEVY OF PENALTY A S IN THE CASES OF NATIONAL TEXTILES V. CIT 249 ITR 125 OF JURISDICTIONAL HIGH COURT AND DCIT V. SMT JAYSHREE M PETHANI IT(SS)A NO.169/AHD/2002 OF THE J URISDICTIONAL HONBLE ITAT, AHMEDABAD ARE CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE; & (IV) IN THE PENALTY PROCEEDINGS, THE ASSESSEE HAS FAILED TO ADVANCE ANY EVIDENCE IN SUPPORT OF ITS CLAIMS AND CONTENTIONS AND ALL TH E ARGUMENTS OF THE ASSESSEE HAVE BEEN FOUND TO BE OF NO CONSEQUENCE. THE ELEMENT OF ANIMUS IS BLATANT IN ASSESSEES EVASIVE AND BASELESS REPLI ES. 6.2. TO COUNTER THE REVENUES ALLEGATIONS, THE ASS ESSEE HAD COME UP WITH THE SUBMISSION THAT THE LEVY OF CONCEALMENT PENALTY U/S 271(1)(C) WAS NOT AT ALL JUSTIFIABLE AS THE INCOME DISCLOSED DURING THE COURSE OF SURVEY PROCEEDINGS WAS INCLUDED IN THE RETURN OF INCOME FURNISHED AND, HENCE, NO CONCEALM ENT IN THE RETURN FILED BY THE ASSESSEE. THE LD. A.R. FURTHER SUBMITTED THAT THE PENALTY PROCEEDINGS FOR THE AYS 04- 05 AND 06-07 WERE DROPPED ON IDENTICAL FACTS, AND, THUS, THE STAND OF THE AO TO LEVY OF PENALTY FOR THE AY UNDER DISPUTE WAS NOT JUSTIFIED AND THAT THE APPELLANT SOUGHT REFUGE UNDER CLAUSE 2 OF EXPLANATION 5 TO S. 271(1)(C) OF THE ACT SINCE THE DISCLOSURE WAS MADE DURING THE COURSE OF SEARCH PROCEEDINGS U/S 13 2(4) OF THE ACT. 6.3. LET US NOW ANALYZE THE LEGAL POSITION ON THE ISSUE: CASE LAWS RELIED ON BY THE REVENUE: (I) LMP PRECISION ENGG. CO. LTD., V. DCIT (2011) 33 0 ITR 93 (GUJ) : THE ISSUE BEFORE THE HONBLE COURT WAS, BRIEFLY, TH AT THE STATEMENT OF THE CHAIRMAN AND M.D. OF THE ASSESSEE COMPANY WAS RECORDED AS CE RTAIN PURCHASES MADE BY IT DID NOT APPEAR TO BE GENUINE. IT WAS ONLY THEREAFTER, THE ASSESSEE FILED A DECLARATION U/S 273A DISCLOSING ADDITIONAL INCOME OF RS.54.71 LAKHS AS BEING RELATABLE TO THE AY 85- 86 WHICH WAS FOLLOWED BY REVISED RETURNS FOR ALL TH E THREE RELEVANT AYS DECLARING IDENTICAL ADDITIONAL INCOME OF RS.18 LAKHS EACH AND THAT BEFORE THE ASSESSMENTS COULD BE FINALIZED, THE ASSESSEE CAME UP WITH ANOTHER APP LICATION DECLARING ADDITIONAL INCOME OF RS.78.56 LAKHS WITH A CONTENTION THAT WH ILE DISCLOSING THE SAID RS.78.56 LAKHS, IT HAD WITHDRAWN THE DECLARATION OF RS.18 LA KHS EACH FOR THE OTHER TWO YEARS WAS NOT SUPPORTED BY ANY EVIDENCE ON RECORD. THE ASSES SEE HAD AT NO STAGE MADE A ITA NO. 1555-AHD-09 8 CATEGORICAL ASSERTION THAT THE AMOUNT OF RS.18 LAKH S EACH WAS NOT CONCEALED INCOME OF THE ASSESSEE FOR THE AYS 86-87 AND 87-88, BUT IT WA S ONLY STATED THAT THE DISCLOSURE OF RS.18 LASKS EACH IN THE SUBSEQUENT YEARS WAS REQUIR ED TO BE DELETED ON ACCOUNT OF ADDITIONAL DISCLOSURE IN THE AY 85-86. CONSIDERING THE ASSESSEES CONTENTION, THE HONBLE COURT HELD THAT THIS CANNOT BE EQUATED WITH WITHDRAWAL OR RETRACTION OF THE DISCLOSURE MADE BY THE ASSESSEE AND THAT IT CANNOT BE ACCEPTED THAT THE REVISED RETURNS FOR ALL THE THREE YEARS WERE FILED VOLUNTARILY IN G OOD FAITH AND THE FACT THAT THE ASSESSEE HAS NOT CHALLENGED ANY OF THE ASSESSMENT ORDERS FOR THE RELEVANT AYS, IN CONJUNCTION WITH THE OVERALL CONDUCT OF THE ASSESSEE IS A DEFIN ITE POINTER TO THE CONCLUSION THAT THE ASSESSEE INDULGED IN THE ACT OF CONCEALMENT OF INCO ME AND THEREFORE, LEVY OF PENALTY U/S 271(1)(C) WAS JUSTIFIED. 6.4 WE HAVE PERUSED THE ABOVE RULING OF THE HONBLE COURT AND IT IS OBSERVED THAT THE ISSUE BEFORE THE HONBLE COURT WAS ON THE DIFFE RENT FOOTING TO THAT OF THE ISSUE UNDER CONSIDERATION AND, THEREFORE, THE CASE LAWS R ELIED ON BY THE REVENUE CANNOT COME TO ITS RESCUE. (II) ACIT V. KIRIT DAHYABHAI PATEL (2009) 125 TTJ ( AHD) (TM)145 : THE ISSUE IN THAT ASSESSEE WAS THAT A SEARCH TOOK P LACE ON 4.9.2003 AND IN RESPECT OF THE EARLIER YEAR (AY 2002-03) HAD ENDED AND THE RET URN WAS FILED BY THE ASSESSEE AFTER THE SEARCH IN RESPONSE TO NOTICE ISSUED U/S 153A ON 31.5.2004. IT WAS FINDING OF THE HONBLE BENCH THAT ADDITIONAL INCOME DECLARED IN TH E RETURN DID NOT FALL UNDER THE CATEGORY OF THE RETURN MENTIONED IN EXPLN. 5(2) TO S. 271(1)(C) AND, THUS, THE ASSESSEE WAS NOT ENTITLED TO THE IMMUNITY FROM PENALTY. 6.5 WITH MUCH REGARDS, WE WOULD LIKE TO REITER ATE THAT THE REVENUE CANNOT TAKE SHELTER IN THE ABOVE CITED FINDINGS OF THE HONBLE BENCH SINCE THE ISSUE ON HAND, THE ASSESSEE HAD FURNISHED ITS RETURN OF INCOME ON 31.1 0.2005, ON THE BASIS OF MATERIALS AVAILABLE WHEREIN IT HAD ADDED ADDITIONAL INCOME OF RS.1.60 CRORES IN ITS COMPUTATION OF INCOME. IT IS PERTINENT TO MENTION HERE THAT TH E LD. AO IN HIS ASSESSMENT ORDER HAD UNWITTINGLY MENTIONED THAT A NOTICE U/S 153C OF THE ACT WAS SERVED ON THE ASSESSEE ON 27.4.2006, WHEREAS A RETURN OF INCOME DECLARING A T OTAL INCOME OF NIL WAS FILED ON 23.3.2006. ITA NO. 1555-AHD-09 9 (III) SHYAM BEHARI V. ACIT (2011) 43 SOT 129 (DEL) : 6.6 IN THIS CASE, DURING THE COURSE OF SEARCH, IT WAS F OUND THAT THE ASSESSEE WAS KEEPING TWO SETS OF BOOKS AND DOCUMENTARY EVIDENCE WAS FOUND EXHIBITING THE INVOLVEMENT OF ASSESSEE IN SELLING THE GOODS OUT OF BOOKS AND RECORDING EXPENDITURE. THE AO MADE THE ADDITION BY ESTIMATING THE PROFIT A T 10 PER CENT ON UNRECORDED SALES WHICH WAS REDUCED TO 4 PERCENT BY THE CIT (A) AND 3 PER CENT BY THE TRIBUNAL. THE PENALTY LEVIED ON ADDITION WAS CONFIRMED BY THE CIT (A). IT WAS HELD BY THE HONBLE TRIBUNAL THAT THE ASSESSEE WAS MAINTAINING TWO SETS OF BOOKS AND ADDITION HAD BEEN MADE ON THE BASIS OF THE DOCUMENTARY EVIDENCE WHICH HAD BEEN CONFIRMED UPTO THE TRIBUNAL. IT IS NOT THE CASE OF SIMPLICITOR ESTIMA TION OF THE INCOME BY DISBELIEVING THE BOOKS OF ACCOUNT OR OTHER DETAILS SUBMITTED BY AN A SSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE DEPARTMENT WAS ABLE TO LAY ITS HANDS ON THE DOCUMENTARY EVIDENCE EXHIBITING THE CONDUCT OF THE ASSESSEE FOR AVOIDING TAX AND CARRYING OUT THE BUSINESS ACTIVITY OUT OF THE REGUL AR BOOKS. 6.7 IN THIS REGARD, WE LIKE TO POINT OUT THAT IN THE CASE OF THE ABOVE MENTIONED ASSESSEE, ESTIMATION OF ADDITION WAS MADE ON THE B ASIS OF BOOKS OF ACCOUNT WHEREAS IN THE PRESENT ASSESSEE, ITS BOOKS OF ACCOUNTS WERE REJECTED U/S 145 OF THE ACT, AND THUS, IN OUR VIEW, THE CASE LAW REFERRED BY THE REV ENUE HAS NO RELEVANCE. CASE LAWS RELIED ON BY THE ASSESSEE: (I) M/S. SADHBHAV BUILDERS V. ITO ITA NO.1418/AH D/2008 (AY 2002-03): THE ISSUE, IN BRIEF, WAS THAT THE ASSESSEE FILED IT S RETURN OF INCOME ADMITTING AN INCOME OF RS.69,880/-, HOWEVER, THE LD. AO CONCLUDED THE A SSESSMENT ON A TOTAL INCOME OF RS.14.88 LAKHS AFTER DISALLOWING VARIOUS EXPENSES T HAT CERTAIN DEFECTS IN THE VOUCHERS AND INCREASE IN EXPENSES DISPROPORTIONATE TO THE TU RNOVER. SUO MOTTO ACTION, THE LD. CIT DIRECTED THE AO U/S 263 OF THE ACT TO MAKE A SE PARATE ADDITION OF RS.8 LAKHS WHICH WAS DISCLOSED BY THE ASSESSEE AS UNDISCLOSED INCOME DURING THE COURSE OF SURVEY. THE TRIBUNAL IN THE QUANTUM APPEAL OBSERVE D THAT THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE WAS PROPER AND, THEREFORE, DIRECT THE AO TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE AT 5% OF ITS TURNOVER AND AL SO TO SEPARATELY ADD THEREAFTER RS.8 LAKHS WHICH WAS DISCLOSED BY THE ASSESSEE DURING SU RVEY OPERATION. IT WAS CONTENDED ITA NO. 1555-AHD-09 10 BY THE ASSESSEE DURING THE COURSE OF PENAL PROCEEDI NGS BEFORE THE TRIBUNAL THAT THE INCOME OF RS.8 LAKHS DETECTED DURING SURVEY OPERATI ON WAS DULY DISCLOSED AS SEPARATE INCOME IN ITS ROI AND, FURTHER, THE TRIBUNAL ESTIMA TED THE INCOME OF THE ASSESSEE AT RS.2.07 LAKHS IN PLACE OF LOSS OF RS.7.3 LAKHS DUE TO REJECTION OF BOOKS OF ACCOUNT ON ESTIMATE BASIS ONLY AND, THEREFORE, LEVY OF PENALTY U/S 271(1)(C) OF THE ACT WAS NOT JUSTIFIABLE. AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE, THE HONBLE BENCH HAS RECORDED ITS FINDINGS, THUS 5. WE FIND THAT IT IS NOT IN DISPUTE THAT INCOME O F RS.8 LACS WAS DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SURVEY ON 25.7.2002 A ND IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE FOR THE FIRST TIME FILED ITS RETU RN OF INCOME FOR THE AY UNDER CONSIDERATION ON 29.11.2002 WHERE THIS INCOME WAS D ULY DISCLOSED THEREIN. UNDER S. 271(1)(C) THE CONCEALMENT OF INCOME IS TO BE INFERRED FROM THE RETURN OF INCOME AND NOT MERELY AN ATTEMPT TO MAKE CONCEALMEN T. IF THE ASSESSEE RECTIFIES ITSELF AND DECLARES THE CORRECT INCOME IN THE VALID RETURN OF INCOME AND DOES NOT FILE ANY RETURN BY CONCEALING THE INCOME THEN SUCH ACT IS NOT PUNISHABLE U/S 271(1)(C) OF THE ACT. THEREFORE, IN OUR CONSIDERED OPINION, NO PENALTY CAN BE LEVIED IN RESPECT OF INCOME OF RS.8 LACS WHICH WAS DULY DISCLOSED BY THE ASSESSEE IN ITS VALID RETURN OF INCOME. 6. FURTHER, WE FIND THAT THE REMAINING AMOUNT OF A SSESSED INCOME WAS DETERMINED ON THE BASIS OF ESTIMATION OF THE INCOME BECAUSE OF REJECTION OF BOOKS OF ACCOUNT. NO POSITIVE MATERIAL WAS BROUGHT ON RE CORD BY THE REVENUE TO SHOW THAT ANY BOGUS OR NON-GENUINE EXPENDITURE WAS CLAIM ED BY THE ASSESSEE IN THE RETURN OF INCOME.......... WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT AS ULT IMATELY ASSESSED INCOME IS ALMOST 16 TIMES OF THE RETURNED INCOME, THEREFORE, PENALTY U/S 271(1)(C) SHOULD BE LEVIED. IN OUR CONSIDERED OPINION, PENALTY U/S 271(1)(C) CAN BE LEVIED ONLY WHEN IT IS FOUND THAT THE ASSESSEE HAS ACTUALLY CON CEALED PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED BY IT OR HAS FURNISHED A NY INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME AND THE SAME HAS NO RELEVANCE WITH THE QUANTUM OF ASSESSED INCOME AS A NUMBER OF TIMES OF THE RETU RNED INCOME. IT IS SETTLED POISON OF LAW THAT THE CONSIDERATION WHICH APPLIES IN A PENALTY PROCEEDINGS IS DIFFERENT FROM THE CONSIDERATION WHICH APPLIES IN A N ASSESSMENT PROCEEDINGS. MERELY INABILITY OF THE ASSESSEE TO SUBSTANTIATE IT S RETURN OF INCOME AND, THEREFORE, ESTIMATION OF INCOME DOES NOT NECESSARIL Y MEAN EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME IN THE RETURN OF INCOME BY THE ASSESSEE. THERE IS DIFFERENCE BETWEEN UNPR OVED AND DISPROVED. THUS, IT IS OBSERVED THAT NO MATERIAL COULD BE BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAS EITHER CONCEALED ANY PAR TICULARS OF INCOME IN THE RETURN OF INCOME OR HAS FURNISHED ANY INACCURATE PA RTICULARS OF INCOME IN THE ITA NO. 1555-AHD-09 11 RETURN OF INCOME FILED BY IT. WE, THEREFORE, DELET E THE PENALTY OF RS.4,58,240/- LEVIED U/S 271 (1)(C) OF THE ACT. 6.8 WE ARE IN TOTAL AGREEMENT WITH THE FINDING S OF THE HONBLE BENCH CITED SUPRA . AS THE ISSUE BEFORE US IS ALMOST SIMILAR TO THAT OF THE ISSUE DEALT WITH BY THE HONBLE BENCH, WE ARE OF THE CONSIDERED VIEW THAT THE SAID FINDINGS ARE DIRECTLY APPLICABLE TO THE FACTS OF THE ISSUE ON HAND. IT IS ALSO PERTINE NT TO MENTION HERE THAT THE ASSESSEES PREMISES WERE SUBJECTED TO SEARCH AND SEIZURE AND S URVEY ON 21 ST AND 22 ND OF JULY, 2005 AND THE PARTNERS OF THE ASSESSEE FILED THEIR DECLARATION LETTER DT.25.8.2005 BEFORE THE ADDL. DIT INV), SURAT WITH THE FOLLOWING INCOM E FOR TAX: F.Y. 2004-05 (ASST. YEAR 2005-06 ) RS.1,60,00,000/- [SOURCE: PAGES 1 AND 2 OF P.B A.R.] SIMULTANEOUSLY, THE ASSESSEE IN ITS COMMUNICATIONS DATED 20.8.2005 AND AGAIN ON 21.9.2005 ADDRESSED TO THE ADDL./ASST. DIT (INV), S URAT [COURTESY: PAGES 5 & 7 OF PB AR] WITH A REQUEST TO PROVIDE THE COPY OF HARD DISC WHICH WOULD FACILITATE IT TO PREPARE ITS RETURN OF INCOME, BUT OF NO AVAIL. HOWE VER, IN ITS COMPUTATION OF INCOME AS WELL AS IN FORM 3CB HAD SHOWN RS.1,60 CRORES AS ADD ITIONAL INCOME SURRENDERED. HOWEVER, IT APPEARS THAT THE IMPOUNDED RECORDS HAVE NOT BEEN RETURNED OR FURNISHED COPIES THEREOF BY THE REVENUE TO FACILITATE THE APP ELLANT TO FINALIZE ITS ACCOUNTS AND TO SKETCH ITS COMPUTATION OF INCOME. IT MAY NOT ALSO BE OUT OF PLACE TO MENTION HERE THAT THE LD. AO IN HIS ASSESSMENT ORDER HAD MENTIONED TH AT A NOTICE U/S 153C OF THE ACT WAS ISSUED ON 27.4.2006 WHICH WAS SERVED UPON THE A SSESSEE ON 27.4.2006. HOWEVER, ON THE SAME BREATH, HE HAD STATED THAT IN RESPONSE TO NOTICE ISSUED U/S 153C OF THE ACT, RETURN OF INCOME DECLARING TOTAL INCOME OF RS.NIL W AS FILED ON 23.3.2006. IF THE LD. A.OS ASSERTION WERE TO BE TAKEN ON ITS FACE VALUE, THEN THE ASSESSEE ON ITS OWN, RATHER VOLUNTARILY, FURNISHED ITS RETURN OF INCOME BEFORE THE ISSUANCE OF THE NOTICE U/S 153C OF THE ACT WHEREIN IT HAD VOLUNTEERED TO ADMIT AN A DDITIONAL INCOME OF RS.1.60 CRORES. (II) CIT V. SAS PHARMACEUTICALS ITA NO.1058 OF 2 009 DELHI HIGH COURT: BRIEFLY, THE ASSESSEES BUSINESS PREMISES WERE SUBJ ECTED TO SURVEY OPERATION AND DURING THE SURVEY DISCREPANCIES IN CASH, STOCK AND DIFFERENCE IN THE COST OF RENOVATION WERE UNEARTHED. WHEN CONFRONTED, THE ASSESSEE HAD S URRENDERED THE AMOUNT OF ITA NO. 1555-AHD-09 12 RS.88.14 LAKHS DURING THE SURVEY AND WHILE FURNISHI NG ITS RETURN OF INCOME, DECLARED ITS INCOME AT RS.87.71 LAKHS WHICH INCLUDED THE SURREND ERED SUM. WHILE FRAMING THE ASSESSMENT, THE LD. AO ALSO INITIATED PENAL PROCEED INGS WITH REASONING THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND, SUBSEQUENTLY PENALIZED FOR RS.32.39 LAKHS FOR CONCEALMENT OF ITS INCOME. ON APPEAL, PENALTY IMPO SED WAS CANCELLED ON THE PREMISE THAT THERE WAS NO CONCEALMENT OF INCOME AS THE SAME WAS REFLECTED IN ITS RETURN. THE TRIBUNAL HAD ALSO UPHELD THE FINDING OF THE CIT(A). FRUSTRATED, THE REVENUE TOOK UP THE ISSUE WITH THE HONBLE COURT FOR REDRESS. WHIL E FURNISHING ITS RETURN, THE ASSESSEE HAD ACCEPTED THE DIFFERENCE UNEARTHED DURING SURVEY AND NO ATTEMPT WAS MADE BY IT EVEN AFTER TO SURRENDER TO RETRACT THERE-FROM OR TO EXPLAIN THAT THERE WERE NO SUCH DISCREPANCIES. IN THIS CONTEXT, A QUESTION HAD ARIS EN AS TO WHETHER THE ASSESSEE CAN BE PENALIZED U/S 271(1)(C) OF THE ACT WHEN IT HAD SHOW N ITS INCOME IN ITS RETURN AND CONTENDED THAT IT HAD VOLUNTARILY DECLARED THE SAME IN ITS REGULAR RETURN. AFTER ANALYZING THE (I) PROVISIONS OF THE RELEVANT SECTIO N (II) THE CONTENTION OF THE REVENUE THAT THE INTENTION OF THE ASSESSEE IN MAINTAINING F ALSE RECORDS RELATING TO CASH, STOCK AND RENOVATION ETC., WAS MANIFEST I.E., TO CONCEAL THE PARTICULARS OF ITS INCOME AND FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME (III) THE ASSESSEES CONTENTION THAT CLAUSE (C) OF S.271(1) OF THE ACT MAKES IT CLEAR TH E ACT OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS IS RELATABLE ONLY IN RES PECT OF A RETURN BEING FILED AND AS SUCH IN A CASE WHERE THE STAGE OF FILING OF RETURN ITSEL F HAD NOT BEEN REACHED, THERE WAS NO QUESTION OF INVOCATION OF PENAL PROVISION OF S.271 OF THE ACT ETC., TO SUBSTANTIATE HIS CLAIM, THE ASSESSEES A.R. TOOK REFUGE OF EXPLN 5 AND EXPN 5A OF S.271 OF THE ACT AND ALSO THE RULING OF THE APEX COURT IN CIT AHMEDABAD V. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). AFTER CONSIDERATION O F THE RESPECTIVE SUBMISSIONS, THE HONBLE COURT OBSERVED THUS 12.WE ARE OF THE VIEW THAT THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE HAS TO PREVAIL AS IT CARRIED SUBSTANTIAL W EIGHT. IT IS TO BE KEPT IN MIND THAT SECTION 271(1)(C) OF THE ACT IS A PENAL PROVIS ION AND SUCH A PROVISION HAS TO BE STRICTLY CONSTRUED. UNLESS THE CASE FALLS WITHI N THE FOUR-CORNERS OF THE SAID PROVISION, PENALTY CANNOT BE IMPOSED. SUB-SECTION (1) OF S.271 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENING WHEREOF THE AO OR TH E CIT (A) MAY DIRECT PAYMENT OF PENALTY BY THE ASSESSEE. WE ARE CONCERNE D HEREWITH THE FUNDAMENTALITY PROVIDED IN CLAUSE (C) OF S.271(1) O F THE ACT WHICH AUTHORIZES IMPOSITION OF PENALTY WHEN THE AO IS SATISFIED THAT THE ASSESSEE HAS EITHER: ITA NO. 1555-AHD-09 13 (A) CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME 13. IT IS NOT THE CASE OF FURNISHING INACCURATE PA RTICULARS OF INCOME, AS IN THE INCOME-TAX RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE INCOME-TAX RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSEE OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONCEALMENT HAS REFERENCE TO THE INCOME-TAX RETURN FILED BY THE ASS ESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE INCOME-TAX RETURN . 14. WE MAY, FIRST OF ALL, REJECT THE CONTENTION O F THE LEARNED COUNSEL FOR THE REVENUE RELYING UPON THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT OCCURRING IN SUB-SECTION (1) OF S.271 OF THE A CT AND CONTENDING THAT EVEN DURING SURVEY WHEN IT WAS FOUND THAT THE ASSESSEE H AD CONCEALED THE PARTICULAR OF HIS INCOME, IT WOULD AMOUNT TO CONCEALMENT IN TH E COURSE OF ANY PROCEEDINGS. THE WORDS IN THE COURSE OF ANY PROC EEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT ( A). WHEN THE SURVEY IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATISFA CTION OF AO OR THE CIT (A) OR THE CIT DOES NOT ARISE. WE HAVE TO KEEP IN MIND TH AT IT IS THE AO WHO INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COURSE OF SURV EY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAKEN WHILE MAKING ASSESSME NT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION IN THE COURSE OF ANY P ROCEEDINGS UNDER THIS ACT CANNOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS, IN THIS CASE. 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY TH E ASSESSEE HAS TO BE IN THE INCOME-TAX RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN THE CASE OF CIT, DELHI I V. MOHAN DAS HASSA NAND 141 ITR 203 AND IN RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT, VIZ., THE ASSESSEE CAN FURNIS H THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME- TAX RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLANATION 4 AS WELL AS 5 AND 5A OF S.271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING THE SURVEY. THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMOUNT SURR ENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS TO WHETHER THIS WOULD ATTRACT PENALTY U PON THE ASSESSEE UNDER THE PROVISIONS OF S.271(1)(C) OF THE ACT. OBVIOUSLY, N O PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS AR E DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING S URVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY ONLY ON SURMISES, CONJECTURES AND POSSIBILI TIES. SECTION 271(1)(C) OF THE ITA NO. 1555-AHD-09 14 ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUN D THAT THERE IS ACTUALLY A CONCEALMENT OR NON-DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONCEALMENT OR NON-DISCL OSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE INCOME-TAX RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 6.9 WE FULLY ENDORSE THE RULING OF THE HONBL E COURT. IN THE PRESENT CASE ALSO, THE ASSESSEE HAD SURRENDERED A WHOPPING SUM OF RS.1.6 C RORES DURING THE COURSE OF SURVEY/SEARCH AND SEIZURE OPERATION. WHILE FURNISH ING ITS RETURN OF INCOME, THE APPELLANT HAD DECLARED ITS INCOME INCLUDING THE AMO UNT SO SURRENDERED. HOWEVER, WHILE FRAMING THE ASSESSMENT ORDER, THE LD. AO INIT IATED PENAL PROCEEDINGS ON THE PREMISE THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS BY SUPPRESSING AND UNDER-REPORTING THE INVESTMENT IN BANK ACCOUNTS AND ON ACCOUNT OF INCOME DEEMED TO HAVE ACCRUED TO IT. 6.10. TAKING INTO ACCOUNT THE SUBMISSIONS OF T HE LD. A.R, THE LD. D R AND ALSO THE JUDICIAL PRONOUNCEMENTS ON A SIMILAR ISSUE AND IN C ONFORMITY WITH THE FINDINGS OF THE HONBLE BENCH IN THE CASE OF M/S. SADHBHAV BUILDERS V. ITO AND THE RULING OF THE HONBLE DELHI HIGH COURT CITED SUPRA, WE ARE OF THE UNANIMOUS VIEW THAT PENAL PROCEEDINGS INITIATED AND SUBSEQUENT IMPOSING OF PE NALTY U/S 271(1)(C) OF THE ACT IN THE PRESENT APPELLANTS CASE ARE NOT IN ACCORDANCE WITH THE PROVISIONS OF S. 271 (1)(C) AS ENVISAGED IN THE ACT. IT IS ORDERED ACCORDINGL Y. 7. BEFORE PARTING WITH, WE WOULD LIKE TO CLA RIFY THAT THE APPELLANT IN ITS GROUNDS OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AGITATE D IN GROUND NO. 3 WAS THAT 3. THE LD. ACIT ERRED ON THE FACTS AND CIRCUMSTAN CES OF THE CASE, WITHOUT PREJUDICE, FAILED TO APPRECIATE THE FACT TH AT THE CONCEALED INCOME ON ACCOUNT OF UNACCOUNTED PRODUCTION AND SALE AND S UPPRESSION OF PROFIT WAS ONLY RS.89,98,810/- AND NOT RS.1,63,59,219/- (R S.89,98,810/- + RS.73,60,409/-) 7.1. HOWEVER, WHILE ADJUDICATING THE ISSUE, TH E LD. CIT (A) HAD HARPED ON THE ISSUE OF ADDITION OF RS.89,40,079/- MADE U/S 40A(3) OF TH E ACT BY DISALLOWING 20% OF COST EXPENDITURE ETC., TO BE PRECISE, THIS ISSUE HAS NO RELEVANCE AND RATHER NOTHING TO DO ITA NO. 1555-AHD-09 15 WITH THE PENAL PROCEEDINGS U/S 271(1)(C) OF THE ACT WHEREAS THE LD. CIT (A) DEALT WITH A NON-ISSUE AND ALSO ADJUDICATED THE SAME WITH THE OBSERVATIONS THAT 4. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. I AGREE WITH THE APPELLANTS VIEW. PENALTY CANNOT BE LEVIED ON ADDI TION OF RS.89,40,079/- U/S 40A (3) MADE BY DISALLOWING 20% OF CASH EXPENDI TURE. ALL THE EXPENDITURE ARE GENUINE AND INCURRED FOR EARNING TH E INCOME AND DISALLOWANCE DOES NOT CALL FOR IMPOSITION OF PENAL CONCEALMENT. THUS, THE LD. CIT (A) HAD ADJUDICATED A N ISSUE WHICH WAS NEITHER RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL NOR THE LD. AO IN ITIATED PENAL PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE DISALLOWANCE OF RS.89,4 0,079/- MADE U/S 40A(3) OF THE ACT. IN EFFECT, THE MAIN ISSUE OF PENALTY IMPOSED U/S 271(1)(C) OF THE ACT HAS BEEN EFFECTIVELY SIDE-TRACKED. 8. IN THE RESULT, THE REVENUES APPE AL IS DISMISSED. 4 - 3'% 5 & 16 / 12 /2011 ' 6 - 70 8 THIS ORDER PRONOUNCED IN COURT ON 16/12/2011. SD/- SD/- (BHAVNESH SAINI) (A.MOHAN ALANKAMO NY) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 16/12/2011 - -- - +19 +19 +19 +19 :9%1& :9%1& :9%1& :9%1&- -- - 1. )* 2. +,)* 3. 1 /> 4. />- - 5. 97 +1 , , 8 6. 7B C4 , D/ F , 8 TALUKDAR/ SR. P.S.