M/s Hyderabad House Private Limited, Hyderabad V. Asst.CIT,Central Circle 2, Hyderabad

ITA 1862/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6478 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Keywords: Unexplained investment; Search and seizure; Document seized; Initiation of penalty proceedings; Wrong claim; Difference of opinion; Agreed addition; Documents seized
• Section: 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1861/HYD/2013 A.Y. 2006-07 ITA NO. 1862/HYD/2013 A.Y. 2007-08 ITA NO. 1863/HYD/2013 A.Y. 2008-09 M/S. HYDERABAD HOUSE PVT. LTD., HYDERABAD PAN: AAACH9969G VS. THE ASST. CIT CENTRAL CIRCLE-2 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI MOHD. AFZAL RESPONDENT BY: SMT. K. HARITA DATE OF HEARING: 2 8 .04.2014 DATE OF PRONOUNCEMENT: 23 .0 5 .2014 ORDER PER CHANDRA POOJARI, A.M.: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-III, HYDERABAD DATED 13 TH NOVEMBER, 2013 FOR A.YS. 2006-07 TO 2008-09. 2. THE GROUND RAISED BY THE ASSESSEE IN THESE APPEALS IS WITH REGARD TO LEVY OF PENALTY U/S. 271(1)(C) OF TH E ACT AND BEING SO, WE ARE INCLINED TO ADJUDICATE THE ISSUE I N A CONSOLIDATED MANNER. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SUPPLY OF FOOD ITEMS AT SEVERAL OUTLETS. A SEARCH AND SEIZURE OPE RATION U/S. 132 OF IT ACT, 1961 WAS CONDUCTED ON 12.12.2007 IN THE BUSINESS PREMISES OF THE 2 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= ASSESSEE AND SUBSEQUENTLY STATUTORY NOTICES WERE ISSUED. I T HAS FILED ITS RETURN OF INCOME FOR THE A.YS. 2008-09 , 2007-08 AND 2006-07 AND ASSESSMENT WAS COMPLETED ON 31.12.2009 FOR ALL THE THREE YEARS. DURING SEARCH AND SEIZURE OPERATI ONS DOCUMENTARY EVIDENCE WAS FOUND AND SEIZED ACCORDING TO WHICH THE ACTUAL TURNOVER FOR CERTAIN MONTHS OF THE YEAR WAS FOUND TO BE MUCH HIGHER THAN THE TURNOVER SHOWN BY THE ASSESSEE IN ITS RETURN OF INCOME. ACCORDINGLY, THE ASSESSING OFFICER EXTRAPOLATED THE TURNOVER FOR THE ENTIRE YE AR. DURING APPEALS BEFORE THE CIT(A) AND THE TRIBUNAL , IT WAS HELD THAT THE TURNOVER HAS BEEN CORRECTLY CALCULATED. HOWEVER, THE NET PROFIT HAD BEEN REDUCED BY THE CIT(A) AND FURTHER R EDUCED BY THE TRIBUNAL . DURING PENALTY PROCEEDINGS, THE ISSUE WAS EXAMINED AND IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT ONLY BEEN CONCEALING INCOME, BUT HAD ALSO BEEN FILING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, FOLLOWING PENALTIES WERE IMPOSED IN THE THREE YEARS : A.Y. 2008-09 PENALTY IMPOSED @ 100% RS. 14,18,852/- A.Y. 2007-08 PENALTY IMPOSED @ 100% RS. 38,56,477/- A.Y. 2006-07 PENALTY IMPOSED @ 100% RS. 35,56,130/- 4. ON APPEAL THE CIT(A) OBSERVED THAT THE AR G UMENT OF THE ASSESSEE THAT PROPER OPPORTUNITY WAS NOT PROVIDED AND THAT HE DID NOT KNOW WHAT CHARGE TO DEFEND AGAINST IS INCOR RECT AND NOT TENABLE. A MERE LOOK AT THE PENALTY ORDER WILL SHOW THAT AMPLE OPPORTUNITY WAS PROVIDED. EVEN THE ASSESSMENT ORDER VERY C LEARLY LISTS DOWN THE DEFAULT COMMITTED BY THE ASSESSEE . THE APPEALS PERTAINING TO THE ASSESSMENT ORDERS TRA VELLED RIGHT UP TO THE TRIBUNAL AND AT NO STAGE DID THE ASSESSEE 3 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= QUESTION THE INITIATION OF PENALTY PROCEEDINGS. SINCE THE INITIATION PERTAINS TO THE ASSESSMENT ORDER, IT HAD TO BE QUESTIONED VIS-A-VIS THE ASSESSMENT ORDERS. IT CANNOT BE QUESTIONED NOW IN THE APPEAL PERTAINING TO THE PENA LTY ORDERS BECAUSE THE IMPUGNED ORDERS VIS-A-VIS THE INITIATIO N OF PENALTY WERE THE ASSESSMENT ORDERS. IN ANY CASE, EVEN DURING PENALTY PROCEEDINGS, THE ASSESSEE CO U LD HAVE ASKED THE ASSESSING OFFICER IF IT WAS NOT SURE OF ANY CHARGE. HOWEVER, THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND ITS ARGUMENTS FILED DURING THE PENALTY PROCEEDINGS CLEARLY INDICATE THAT IT WAS VE RY SURE OF THE CHARGES AND HAD GOT AMPLE OPPORTUNITY TO DEFEND ITS CASE. FOR ALL THE REASONS GIVEN ABOVE, THE ARGUMENTS PERT AINING TO THE INITIATION OF PENALTY PROCEEDINGS ARE NOT TENAB LE. 5. COMING TO THE MERITS OF THE CASES, THE CIT(A) OBSERVED THAT THERE WAS A DISTINCT AND WELL THOUGHT OUT PLAN FOR TAX EVASION. THE ASSESSEE WAS MAINTAINING TWO SETS OF BOOKS AND RECORDS. ONE SET WAS OBVIOUSLY MEANT FOR THE INCOME TAX AUTHORITIES WHEREIN SYSTEMATICALLY THE ASSESSEE HAD BEEN DISCLOSING LOWER SALES AND HENCE LOWER TURNOVER. THE OTHER SET OF DOCUMENTS CONTAINED THE EXACT AMOUNT OF SALES. IT WAS IN THE KNOWLEDGE OF THE ASSESSEE WHO IN FACT PLANNED AND EXECUTED THE TAX EVASION STRATEGY. HAD THE SEARCH AND SEIZURE OPERATIONS NOT BEEN CARRIED OUT, THIS MODUS OPERAND I WOULD NEVER HAVE BEEN DISCOVERED AND THE TAX EVASION WOUL D NOT HAVE COME TO LIGHT. THE SEIZED DOCUMENTS DO NOT PROVIDE EVIDENCE OF AN ABNORMAL INCREASE IN SALES FOR CERTAIN MONTHS. RATHER, T HE Y P ROV I D E A CLEAR GLIMPSE OF THE ACTUAL BUSINESS OF 4 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= THE ASSESSEE . IN OTHER WORDS, THE EVIDENCE AT HAND CLEARLY INDICATES HOW THE BUSINESS OF THE ASSESSEE IS BEING CARRIED OUT AND WHAT IS THE QUANTUM OF DAILY AND MONTHLY SALES OF THE ASSESSEE . THE ARGUMENTS OF THE ASSESSEE REGARDING MERE ESTIMATIONS AND ALSO REGARDING AGREED ADDITIONS ARE NOT TENABLE. THE CASE LAW RELIED UPON BY THE ASSESSEE ONLY PERTAINS TO THOSE INSTANCES WHERE NO EVIDENCE IS AVAILABLE W ITH THE ASSESSING OFFICER AND CERTAIN ESTIMATIONS ARE MADE BASED ON MARKET COMPARISONS OR EVEN ON LESS SUBSTANTIAL EVID ENCE. THE ADDITIONS IN QUESTION CANNOT BE TERMED AS AGREED AD DITIONS BECAUSE THERE IS NOTHING THAT THE ASSESSEE HAD AGREED TO SUO MOTO. 6. THE CIT(A) OBSERVED THAT THE CONDUCT OF THE ASSESSEE HAS BEEN SUCH THAT IT CERTAINLY CALLS FOR THE LEVY OF P ENALTY. FIRST OF ALL, THE ASSESSEE ARRANGES ITS FINANCIAL AFFAIRS IN SUCH A WAY AS TO WRITE DUPLICATE SETS OF ACCOUNT. THEREAFTER, PORTIONS OF THE DUPLICATE ACCOUNTS ARE SEIZED DURING SEARCH OPERATI ONS. EVEN AT THIS POINT OF TIME, THE ASSESSEE DOES NOT COME CLEAN. IN THE RETURN OF INCOME FILED CONSEQUENT TO THE SEARCH OPE RATIONS, THE ASSESSEE DOES NOT DISCLOSE EITHER ITS TRUE TURNOVER OR THE TRUE PROFIT PERCENTAGE. EVEN AT THIS STAGE, ADDITIONS HAVE TO BE RESORTED TO AND THE TURNOVER IS ULTIMATELY CONFIRME D IN APPEAL IT IS ONLY WHEN THE ASSESSEE FINDS OVERWHELMING EVIDENCE AGAINST THAT IT ADMITS TO THE TURNOVER. THE CASES , THEREFORE , CLEARLY CALL FOR CONFIRMATION OF PENALTIES. THE CIT(A) TOOK SUPPORT FROM THE JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE 5 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= CASE OF CIT VS. HCIL KALINDEE ARSSPL (DELH I HIGH COURT). THE OPERAT IO NAL PART OF THA T ORDER IS QUOTED BELOW:- 'THE ASSESSEES CLAIMED DEDUCTION U/S 80IA ON THE GR OUND THAT IT HAS EXECUTED AN ELIGIBLE INFRASTRUCTURE PRO JECT. A COPY OF FORM NO.3CB, 3CD AND FORM NO. 10CCB WAS FILED WI TH THE RETURN IN SUPPORT OF THE CLAIM. IN THE ASSESSM ENT ORDER, THE AO DENIED 80IA DEDUCTION ON THE GROUND THAT THE ASSESSEE HAD NOT EXECUTED THE WORK BUT HAD GIVEN A SUB- CONTRACT TO ANOTHER PARTY AND THAT IT WAS NOT ELIGI BLE U/S 80IA(13). THE ASSESSEE ACCEPTED THE DENIAL OF THE CLAIM. THE AO LEVIED PENALTY U/S 271(1)(C) FOR FILING INACCURA TE PARTICULARS OF INCOME WHICH WAS UPHELD BY THE CIT(A ). THE TRIBUNAL RELIED ON RELIANCE PETRO PRODUCTS (322 ITR 158 (SC) AND DELETED THE PENALTY ON THE GROUND THAT THE CLAIM FOR DEDUCTION U/S 80IA WAS ON THE BASIS OF A CERTIFICAT E OF THE CA WAS BONA FIDE AND ALL THE MATERIAL FACTS RELEVANT T HERETO HAD BEEN FURNISHED. ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD REVERSING THE TRIBUNAL ORDER: WHILE IT IS TRUE THAT THE INCOME-TAX ACT, 1961 IS O NE OF MOST VEXED AND COMPLICATED LEGISLATION AND REQUIRES HIGH EST DEGREE OF INTERPRETATIVE SKILLS AND THERE ARE DIVER GENT VIEWS ON INTERPRETATION OF ITS PROVISIONS AND WHILE IT IS ALSO TRUE THAT PENALTY FOR CONCEALMENT CANNOT BE IMPOSED MERELY BE CAUSE ASSESSEE'S INTERPRETATION OR CLAIM IS REJECTED, SUC H CASES HAVE TO BE DISTINGUISHED FROM CASES WHERE THE CLAIM OF T HE ASSESSEE IS FARCICAL OR FARFETCHED. DUBIOUS AND FAN CIFUL CLAIMS UNDER THE GARB OF INTERPRETATION, ARE A MERE PRETENCE AND NOT BONA FIDE. ABSURD OR ILLOGICAL INTERPRETATI ONS CANNOT BE PLEADED AND BECOME PRETENCE AND EXCUSES TO ESCAP E PENALTY. 'BONA FIDES' HAVE TO BE SHOWN AND CANNOT B E ASSUMED. THE FACT THAT THE CLAIM FOR DEDUCTION U/S 80IA WAS DULY SUPPORTED BY THE CHARTERED ACCOUNTANT'S CERTIF ICATE AND PRESCRIBED FORMS SIGNED BY THE CA CANNOT ABSOLVE AN D PROTECT AN ASSESSEE WHO FURNISHES INACCURATE PARTIC ULARS BECAUSE THEN IN ALL CASES WHERE A FORM/CERTIFICATE IS FURNISHED BY THE CA BUT A WRONG CLAIM OF DEDUCTION IS MADE, N O PENALTY U/S 271(1)(C) CAN BE IMPOSED. MERELY BECAUS E THE ASSESSEE COMPLIES WITH THE STATUTORY PROCEDURAL REQ UIREMENT OF FILING THE PRESCRIBED FORM AND CERTIFICATE OF TH E CHARTERED ACCOUNTANT CANNOT ABSOLVE THE ASSESSEE OF ITS LIABI LITY IF THE ACT OR ATTEMPT IN CLAIMING THE DEDUCTION WAS NOT BO NA FIDE. ON FACTS, THE ASSESSEE'S CLAIM WAS NOT TENABLE DUE TO THE EXPLANATION TO S. 80IA(13) WHICH STIPULATES THAT BE NEFIT IS NOT AVAILABLE TO A CONTRACTOR CARRYING ON A WORKS CONTR ACT. THE ASSESSEE HAS NOT SHOWN ANY 'TANGIBLE MATERIEL' OR B ASIS AS TO WHY A CLEAR STATUTORY PROVISION WHICH EXCLUDES WORK S CONTRACTS WAS IGNORED.' 6 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= 7. THE CIT(A) OBSERVED THAT T HE ABOVE DECISION CATEGORICALLY PLACED THE ONUS OF TAX COMPLIANCE AT TILE DOORSTEP OF THE ASSESSEE, H OLD I NG THAT EVEN STATUTORY CERTIFICATIONS DO NOT PREVENT THE LEVY OF PENALTY. IT IS CLEAR FROM ABOVE THAT THE CONDUCT OF THE ASSESSEE IS FAR FROM BONA FIDE AND THERE WAS A CLEAR-CUT STRATEGY TO NOT ONLY EVADE TAXES, BUT ALS O TO FILE INACCURATE PARTICULARS OF INCOME EVEN AFTER SEARCH OPERATION. THEREFORE, THE CIT(A) CONFIRM ED THE PENALTY U/S 271(1)(C) OF THE ACT . HOWEVER, HE DIRECTED THE AO TO DETERMINE THE QUANTUM OF PENALTIES AFTER DETERMINING THE CONCEALED INCOME ACCURATELY TAKING INTO ACCOUNT THE REDUCTION IN PROFIT PERCENT AGE BY THE TRIBUNAL. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED AR SUBMITTED THAT WHILE INITIATING PENA LTY PROCEEDINGS U/S 271(1)(C) THE ASSESSING OFFICER HAS NOT SAID WHETHER THE SAME IS FOR CONCEALMENT OF INCOME OR FO R FURNISHING OF INACCURATE PARTICULARS. IN THE CASE O F CIT VS MANJUNATHA COTTON & GINNING FACTORY (2013) 053(1) I TCL 0002 IT WAS HELD THAT THE PERSON WHO IS ACCUSED OF THE C ONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HI M AS SECTION 274 MAKES IT CLEAR THAT THE ASSESSEE HAS RI GHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPOR TUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT E XIST, AS SUCH, HE IS NOT LIABLE TO PAY PENALTY. SENDING A PRINTED FORM, WHERE ALL THE GROUNDS MENTIONED WOULD NOT SATISFY REQUIRE MENT OF 7 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= LAW AND HENCE, NO PENALTY CAN BE IMPOSED ON BASIS O F SUCH VAGUE NOTICE. 9. THE AR SUBMITTED THAT DURING THE COURSE OF SEARCH, THE SEARCH PARTY FOR THE SUBJECT ASSESSMENT YEAR FOUND ESCAPED TURNOVER FOR THE MONTHS OF JANUARY AND FEBRUARY 200 6. THE ASSESSEE DURING THE COURSE OF POST SEARCH ENQUIRIES OFFERED THE ESTIMATED ESCAPED TURNOVER AT RS. 7,04,32,296/- TO PURCHASE PEACE WITH THE DEPARTMENT, IN SPITE OF NO MATERIAL WAS FOUND, EXCEPT FOR TWO MONTHS DURING THE COURSE OF SEARCH. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS COMPELLED T O PAY RENTS TO VARIOUS LANDLORDS AND ALSO TO MATERIAL SUP PLIERS SUCH AS MUTTON, VEGETABLES, FIREWOOD AND FISH IN CASH AN D OUT OF BOOKS OF ACCOUNTS WHICH HAS BEEN ELABORATELY STATED BY THE ACCOUNTANT OF THE COMPANY IN HIS STATEMENT BEFORE T HE INVESTIGATING AUTHORITIES. THESE PERSONS REFUSED T O ACCEPT THE PAYMENT BY CHEQUE THEREFORE; THE ASSESSEE HAS NO OT HER GO EXCEPT TO OBLIGE THE LANDLORDS AND SUPPLIERS. THERE FORE, THE ASSESSEE UNWILLINGLY TO MEET SUCH EXPENDITURE WAS C OMPELLED NOT TO RECORD A PART OF TURNOVER FOR TWO MONTHS IN THE BOOKS OF ACCOUNTS FOR THE SUBJECT ASSESSMENT YEAR. OTHERW ISE, THERE IS NO OMISSION IN RESPECT OF ESCAPEMENT OF TURNOVER FOR THE OTHER 10 MONTHS. HOWEVER, AS SUBMITTED ABOVE THE AS SESSEE OFFERED THE ESTIMATED ESCAPED TURNOVER IN HIS STATE MENT AND TO STAND BY THE WORD AND ALSO NOT TO HAVE A PROTRAC TED LITIGATION WITH THE DEPARTMENT, THE ASSESSEE HAS NO T CONTESTED IN RESPECT OF ESTIMATION OF TURNOVER BEFORE THE APP ELLATE AUTHORITIES. IN RESPECT OF DISALLOWANCES MADE FROM THE 8 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= PRODUCTION EXPENDITURE, EMPLOYEES BENEFIT AND ADMIN ISTRATIVE EXPENDITURE, THE AR SUBMITTED THAT THE ASSESSEE HAS TO DEAL WITH AN UNORGANIZED SET OF PERSONS AND, THEREFORE, NOT POSSIBLE TO OBTAIN PERFECT VOUCHERS IN RESPECT OF P AYMENTS, WHICH ONLY HAS THE EVIDENTIARY VALUE IN THE EYES OF ASSESSING OFFICER. IN THE ABSENCE OF SUCH VOUCHERS THE DISAL LOWANCES HAVE BEEN MADE BY THE ASSESSING OFFICER AT 15% AND ULTIMATELY THE SAME IS REDUCED TO 5% BY THE ITAT AF TER REDUCING THE PAYMENTS MADE BY CHEQUE AND ALSO PAYME NTS MADE TO GOVERNMENT AUTHORITIES. IN THE PROCESS OF M AKING ASSESSMENTS THE ASSESSING OFFICER HAS NOT ESTIMATED THE PROFITS ON A COMPARATIVE BASIS. IN RESPECT OF TURNO VER THE ESTIMATE HAS BEEN MADE BY CALCULATING THE AVERAGE M ONTHLY TURNOVER AND THE SAME IS MULTIPLIED BY 12 TO ARRIVE AT THE ANNUAL TURNOVER. 10. THE AR SUBMITTED THAT THE OFFER MADE BY THE ASSESSE E IN RESPECT OF ESCAPEMENT OF TURNOVER ON ACCOUNT OF COMPULSION OF PAYMENT TO LANDLORDS AND ALSO TO SUPP LIERS IS NOT FOUND FALSE BY THE ASSESSING OFFICER. THE AR SU BMITTED THAT THE TURNOVER IS ACCEPTED TO PURCHASE PEACE WIT H THE DEPARTMENT, THEREFORE, NO PRESUMPTION OF CONCEALMEN T OR FURNISHING OF INACCURATE PARTICULARS COULD BE ATTRI BUTED TO THE ASSESSEE FOR THE SUBJECT ASSESSMENT YEAR. IN VIEW OF THE FACTS AND CIRCUMSTANCES THE TRIBUNAL MAY CANCEL THE PENAL TY LEVIED. THE DR PLACED RELIANCE ON THE DECISION OF HON'BLE K ARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & 9 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= GINNING FACTORY (2013) 053(1) ITCL 0002. THE AR AL SO RELIED ON THE FOLLOWING DECISIONS: (1) IN THE CASE OF PRAKASH ARTS MOVING MEDIA VS DCIT IN ITA NOS. 238 TO 241/VIZAG/2011 BY THE ITAT VIZAG BENCH IT WAS HELD THAT THE ASSESSING OFFICER HAD ACCEPTED THAT NEITHER THE BOOKS OF ACCOUNTS NOR THE ENTRIES FOUND IN THE SEIZED MATERIAL WERE COMPLETE, ON THE BASIS OF WHICH NET PROFIT COULD BE WORKED OU T AND THE ADDITIONS MADE IN THE HANDS OF ASSESSEE SHOWED THAT THERE WAS NO SUFFICIENT RECORD TO CONCLUDE THAT THE ASSESSEE WAS GUILTY OF EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THEREFORE, PENALTY WAS DELETED. (2) IN THE CASE OF ITO VS K. SURESH, M/S VIJAYLAKSHMI ELECTRONICS ITA NO. 794/HYD/2011 THE ITAT HYDERABAD 'B' BENCH HELD THAT NO PENALTY COULD BE IMPOSED IN CASE WHERE ADDITIONAL TURNOVER HAD BEEN DECLARED BY ASSESSEE VOLUNTARILY AND INCOME ELEMENT EMBEDDED IN THE ADDITIONAL TURNOVER DISCLOSED BY THE ASSESSEE WAS A SUBJECT MATTER OF ESTIMATE AND APPLICATION OF LAW. 11. THE AR FURTHER SUBMITTED THAT EXPLANATION 5A TO SEC TION 271 IS ALSO NOT APPLICABLE AS DURING THE COURSE OF SEARCH NO BOOKS OF ACCOUNTS WERE FOUND CONFIRMING THE ESCAPED TURNOVER AND ALSO THE SLIP OF PAPERS FOUND WERE NOT CONCLUSIVE TO DETERMINE THE ESCAPED TURNOVER/INCOME, THEREFORE , 10 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= ULTIMATELY THE TURNOVER WAS ESTIMATED AND INCOME WA S ALSO ESTIMATED. UNDER THESE CIRCUMSTANCES APPLICATION OF EXPLANATION 5A CAN ALSO BE RULED OUT. THE EXPLANATI ON OFFERED IN RESPECT OF TWO MONTHS ESCAPED TURNOVER IS A BONA -FIDE EXPLANATION AND THE ASSESSEE HAS DISCLOSED ALL THE FACTS RELATING TO SUCH ESCAPEMENT BEFORE THE DEPARTMENT D URING THE COURSE OF SEARCH AND ALSO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. ACCORDINGLY, THE AR PLEADED BEFORE US THAT TO DELETE THE PENALTY LEVIED. 12. THE AR SUBMITTED THAT THE JUDGEMENT OF SUPREME COUR T IN THE CASE OF MAK DATA P. LTD. VS. CIT, CIVIL APPE AL NO. 9772 OF 2013 DATED 30.10.2013 CANNOT BE APPLIED TO THE F ACTS OF THE PRESENT CASE. IN THAT CASE SURRENDER OF INCOME BY THE ASSESSEE IS NOT VOLUNTARY AND IN THE SENSE THAT OFFER WAS MA DE IN VIEW OF THE DETECTION MADE BY THE AO IN THE SEARCH CONDU CTED IN THE SISTER CONCERN OF THE ASSESSEE. IN THE PRESENT CASE, ACCORDING TO THE AR, THE INCOME WAS DETERMINED ONLY ON ESTIMATION BASIS AND THERE IS NO CONCLUSIVE EVIDENC E TO SUGGEST THE CONCEALMENT OF INCOME. FURTHER, HE REL IED ON THE JUDGEMENT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTOR (KARN), 53 ITCL 2 WHEREIN HELD AS UNDER: 'PENALTY U/S. 271(1)(C) CONCEALMENT EXPLANATION NOT FOUND FALSE BUT BONA FIDE THOUGH NOT PROVED CONCLUSIVELY PENALTY PROCEEDINGS WERE INITIATED B Y ASSESSING AUTHORITY ON BASIS OF AGREED ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK. THERE WAS NO EVIDENCE OR MATERIAL ON RECORD TO SUGGEST THAT T HE ASSESSEE HAS DELIBERATELY ACTED IN DEFIANCE OF LAW TO CONCEAL ITS INCOME IN THE FORM OF EXCESS STOCK. SI NCE ITS EXPLANATION HAS BEEN ACCEPTED TO A GREAT EXTENT, TH E APPELLATE AUTHORITY HELD THAT THERE COULD BE NO PRESUMPTION OF CONCEALMENT OR FURNISHING OF INACCUR ATE 11 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= PARTICULARS SINCE THERE WAS NO MALA FIDE INTENTION ON THE PART OF THE ASSESSEE. THE TRIBUNAL ALSO UPHELD THE ORDER OF THE FIRST APPELLATE AUTHORITY DELETING THE PENAL TY. ' HELD, WHEN TWO FACT FINDING AUTHORITIES WERE SATISF IED THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT FALSE AND IT IS A BONA-FIDE ONE, THOUGH THE ASSESSEE HAS FAILED TO CONCLUSIVELY PROVE THE EXPLANATION OFFERED, THER E IS NO JUSTIFICATION TO INTERFERE WITH THE WELL CONSIDE RED ORDER PASSED BY THE TRIBUNAL.' 13. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORD ER OF THE CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. THE MAIN CONTENTION OF THE ASSESSEE'S C OUNSEL IS THAT THE ADDITION IS MADE IN THESE CASES ONLY ON ES TIMATED BASIS AND THERE IS NO MATERIAL BROUGHT ON RECORD DU RING THE PENALTY PROCEEDINGS SO AS TO LEVY PENALTY. ACCORDI NG TO THE AR THERE WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATED INCOME OF THE ASSESSEE SINCE THE LOWER AUTHORITIES AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATE IN ASSESSING TH E INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSE E HAD CONCEALED THE PARTICULARS OF INCOME SO AS TO LEVY P ENALTY U/S. 271(1)(C) OF THE ACT. SINCE THERE WAS A DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME DUE TO DIFFEREN CE OF OPINION ABOUT ESTIMATED RATES OF INCOME, IT CANNOT BE SAID THAT THERE IS CONCEALMENT OF INCOME AND PENALTY CAN NOT BE LEVIED. BUT IN THE PRESENT CASE, THE ASSESSEE HAS MAINTAINED TWO SETS OF BOOKS OF ACCOUNT. ONE SET WAS MAINTAIN ED FOR INCOME-TAX AUTHORITIES WHEREIN SYSTEMATICALLY THE A SSESSEE HAD BEEN DISCLOSING TO THE LOWER SALES AND THEREBY DECL ARING LOWER INCOME BY CONCEALING ITS INCOME. THE OTHER SET OF DOCUMENTS 12 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= CONTAINS THE ACTUAL AMOUNT OF SALES. IT WAS IN THE KNOWLEDGE OF THE ASSESSEE, BUT, IN FACT, IS A WELL PLANNED AN D EXECUTED TAX EVASION SO AS TO DEFRAUD THE REVENUE. BECAUSE OF S EARCH ACTION CARRIED OUT BY THE DEPARTMENT, THE UNACCOUNT ED TURNOVER CAME TO LIGHT AND THE EVASION WAS FOUND OU T. THE AR PLEADED BEFORE US THAT THE ASSESSEE HAS CONCEALED I NCOME BECAUSE THE ASSESSEE HAS TO MAKE CASH PAYMENT TOWAR DS PURCHASE OF FISH, CHICKEN, MUTTON AND VEGETABLES AN D IT IS NOT POSSIBLE TO MAKE ANY PAYMENT TO THESE TRADERS BY CH EQUE AS THOSE TRADERS ARE SMALL TRADERS WHO DO NOT ACCEPT C HEQUE PAYMENT AS SUCH THE ASSESSEE HAS SUPPRESSED THE CAS H SALES. ACCORDING TO THE AR THIS EXPLANATION IS BONA FIDE A ND NOT PROVED UNTRUE SO AS TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT. THIS ARGUMENT OF THE ASSESSEE COUNSEL IS TOTALLY MI SCONCEIVED WHICH AND HAVING NO LEGAL SANCTION. MORE SO, IT IS A BASELESS CONTENTION. 15. FURTHER, T HE ARGUMENTS OF THE AR REGARDING MERE ESTIMATIONS AND ALSO REGARDING AGREED ADDITIONS ARE NOT TENABLE. THE CASE LAW RELIED UPON BY THE ASSESSEE ONLY PERTAINS TO THOSE INSTANCES WHERE NO E VIDENCE IS AVAILABLE WITH THE ASSESSING OFFICER AND CERTAIN ESTIMATIONS ARE MADE BASED ON MARKET COMPARISONS OR EVEN ON LESS SUBSTANTIAL EVID ENCE. THE ADDITIONS IN QUESTION CANNOT BE TERMED AS AGREED AD DITIONS BECAUSE THERE IS NOTHING THAT THE ASSESSEE HAD AGREED TO SUO MOTO. IN FACT, THE CONDUCT OF THE ASSESSEE HAS BEEN SUCH THAT IT CERTAINLY CALLS FOR THE LEVY OF PENALTY. FIRST OF A LL, THE ASSESSEE ARRANGE D ITS FINANCIAL AFFAIRS IN SUCH A WAY AS TO WRITE DU PLICATE 13 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= SETS OF ACCOUNT. THEREAFTER, PORTIONS OF THE DUPLIC ATE ACCOUNTS ARE SEIZED DURING SEARCH OPERATIONS. EVEN AT THIS P OINT OF TIME, THE ASSESSEE DOES NOT COME CLEAN. IN THE RETURN OF INCOME FILED CONSEQUENT TO THE SEARCH OPERATIONS, THE ASSESSEE DOES NOT DISCLOSE EITHER ITS TRUE TURNOVER OR THE TRUE PROFI T PERCENTAGE. EVEN AT THIS STAGE, ADDITIONS HAVE TO BE RESORTED T O AND THE TURNOVER IS ULTIMATELY CONFIRMED AT THE STAGE OF FIRST APPELLATE PROCEEDINGS . THE CASES , THEREFORE , CLEARLY CALL FOR CONFIRMATION OF PENALTIES. OUR VIEW IS FORTIFIED BY THE ORDER OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HCIL KAL IND EE ARSSPL (DEL) (CITED SUPRA). 16. IN THE PRESENT CASE, IT IS CLEAR THAT THE CONDUCT O F THE ASSESSEE IS FAR FROM BONA FIDE AND THERE WAS A CLEAR-CUT STRATEGY TO NOT ONLY EVADE TAXES, BUT ALSO TO FILE INACCURATE PARTICULARS OF INCOME EVEN AFTER SEARCH OPERATION. THEREFORE, WE HAVE NO HESITATION IN CONFIRMING THE PENALTY U/S 27 1(1)(C) OF IT ACT, 1961 . ACCORDINGLY, THE ACTION OF THE LOWER AUTHORITIES IS CONFIRMED. 17. IN THE RESULT, ASSESSEE'S APPEALS IN ITA NOS. 1861- 1863/ HYD/2013 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD MAY, 2014 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 23 RD MAY, 2014 TPRAO 14 ITA NOS. 1861-1863/HYD/2013 M/S. HYDERABAD HOUSE PVT. LTD. ========================= COPY TO: 1. M/S. HYDERABAD HOUSE PVT. LTD., C/O. SRI MOHD. AFZA L, ADVOCATE, 11-5-465, SHERSON'S RESIDENCY, FLAT NO. 4 02, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD-500 004. 2. THE ASST. CIT, CIRCLE-2(2), IT TOWERS, HYDERABAD. 3. THE CIT(A)-II, HYDERABAD. 4. THE CIT-II, HYDERABAD. 5. THE DR, A BENCH, ITAT, HYDERABAD.