Mr. Anandakumar, Bangalore V. ACIT, Bangalore

ITA 199/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0651 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR
• Assessee Lawyers: SARANGAN
• Keywords: Rejection of books of accounts; Business income; Revised return
• Section: 40A(3); 194C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.199/BANG/2012 ASSESSMENT YEAR : 2007-08 SHRI ANANDAKUMAR, NO.1189, B CROSS, B-SECTOR, YELHANKA NEW TOWN, BANGALORE 560 016. PAN : ADUPA 3651Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI SARANGAN, SR. ADVOCATE RESPONDENT BY : SHRI BIJOY KUMAR PANDA, ADDL.CIT(DR) DATE OF HEARING : 06.02.2013 DATE OF PRONOUNCEMENT : 22.02.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 07.12.2011 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSE SSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(APPEALS) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1 )(C) OF THE ACT. ITA NO.199/BANG/2012 PAGE 2 OF 16 3. THE FACTS UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. FOR THE AY 2007-08, HE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.22,61,010. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF BUYING AND SELLING LANDS AND FORMATION OF RESIDENTIAL LAYOUT AND SALE OF RESIDEN TIAL SITES. THE ASSESSEE HAD COMMENCED THE ABOVE BUSINESS IN THE YEAR 2004 A ND HAS DONE THREE PROJECTS VIZ., ANAND NAGAR PHASE I, PHASE II & PH ASE III. THESE PROPERTIES WERE LOCATED AT NO.32/P2, 32/P3 AND 36/5 6, ANANDANAGAR, MEESAGANAHALLI VILLAGE, JALAHOBLI, BANGALORE NORTH. THESE PROJECTS WILL BE ALSO BE REFERRED TO AS PROJECT 32/P2 AND 32/P3 AND 35/56 RESPECTIVELY. 4. IN THE PROFIT & LOSS ACCOUNT AS ON 31.03.2007 AT TACHED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE HAD ARRIVED AT A PRO FIT OF RS.23,07,840 AND AFTER ADDING INADMISSIBLE EXPENSES OF RS.63,171, TH E INCOME OF THE BUSINESS WAS ARRIVED AT A SUM OF RS.23,71,011. 5. ON 17.12.09 IN THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE FILED A TRADING, PROFIT & LOSS ACCOUNT AS ON 31.03. 2007 IN WHICH HE DECLARED A LOSS OF RS.40,09,019. 6. IT IS NOT IN DISPUTE THAT THE PROFIT & LOSS ACCO UNT FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME WAS DULY AUDITED AN D AN AUDIT REPORT IN FORM NO.3CB HAD ALSO BEEN FILED ALONG WITH THE RETU RN OF INCOME. THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD FILED T HE REVISED TRADING, PROFIT & LOSS ACCOUNT WHICH WAS DIFFERENT FROM THE ONE FIL ED ALONG WITH THE RETURN OF INCOME, THE BOOKS OF ACCOUNTS ARE NOT RELIABLE A ND THEREFORE HE REJECTED THE SAME BY RELYING ON THE PROVISIONS OF SECTION 14 5 OF THE ACT. ITA NO.199/BANG/2012 PAGE 3 OF 16 7. THEREAFTER THE AO FOUND THAT THE ASSESSEE HAD NO T DEDUCTED TAX AT SOURCE ON PAYMENT MADE OF RS.10 LAKHS TO M/S. SOUMY A SRI ENTERPRISES FOR LAYOUT FORMATION EXPENSES AND RS.20,32,142 MADE TO M/S. WATER SUPPLY LINES. ACCORDING TO THE AO, THE ASSESSEE WAS OBLIG ED TO DEDUCT TAX AT SOURCE ON THE ABOVE PAYMENTS U/S. 194C OF THE ACT A ND SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE, THE AFORES AID EXPENSES CLAIMED AS DEDUCTION WHILE COMPUTING INCOME HAD TO BE DISALLOW ED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AO ALSO MADE A REFERENCE TO THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS, WHEREIN THE LOSS ON SALE OF SITES AND PROPERTIES AMOUNTING TO RS.31,17,279 HAD BEEN CLAIMED. THE AO WAS OF THE V IEW THAT THE ASSESSEE DID NOT FILE ANY EVIDENCE IN RESPECT OF TH E AFORESAID LOSS. THE AO WAS ALSO OF THE VIEW THAT SOME OF THE PAYMENTS MADE BY THE ASSESSEE WERE IN CASH AND IN VIOLATION OF PROVISIONS OF 40A( 3) OF THE ACT. POINTING OUT TO THE ABOVE DEFECTS, THE AO RESORTED TO AN EST IMATION OF INCOME OF THE ASSESSEE. THE AO REFERRED TO THE FACT THAT THE ASS ESSEE HAD SOLD 2,86,139 SQ.FT. OF LAND FROM PROJECTS 32/P2 AND 32/P3 AND 35 /56. THEREAFTER THE AO LISTED OUT SOME OF THE SALE INSTANCES IN EACH OF TH E ABOVE PROPERTIES, WHICH WAS AS FOLLOWS:- 4.6 IN RESPECT OF THE PROJECT AT 32/P, THE ASSESS EE HAD SOLD 81,451 SQUARE FEET OF PLOTS, IN RESPECT OF 32/P3 TH E ASSESSEE HAD SOLD 40,404 SQ.FT. AND IN 36 & 56 HE HAD SOLD 1,64, 284 SQ.FT. THE SALE VALUE SHOWN PER SQUARE FEET IN RESPECT OF THES E PROJECTS WAS VARYING FOR THE SAME YEAR. WITH REGARD TO THE PLOT S SOLD AT 32/P2 THE DIFFERENT SALE VALUES SHOWN BY THE ASSESSEE WAS AS FOLLOWS:- ITA NO.199/BANG/2012 PAGE 4 OF 16 SITE NO. NAME OF THE BUYER S/SRI/SMT AREA DATE AVERAGE RATE TOTAL AMOUNT 8 PAWAN KUMAR DAHIMA 1200 22.02.2006 317 3,80,000 24 B.M. SRINIVAS 1853 17.03.2006 137 2,54,790 29 PURUSHOTHAMA 1200 17.03.2006 125 1,50,000 42 MANIKANDAN SUNDERAM 1400 16.07.2005 375 5,25,000 50 L. PADMAVATHAMMA 1400 18.03.2006 143 2,00,000 FROM THE ABOVE TABLES, IT CAN BE SEEN THAT THE ASSE SSEE HAD SHOWN THE SALE OF THE PLOTS INCLUDING THE DEVELOPMENT CHA RGES AT AS LOW AS 125 PER SQ.FT. TO 375 PER SQ.FT., IN RESPECT OF THE ABOVE PLOTS. THE ELEMENT OF RECEIPT OF ON MONEY WAS NOT RULED OU T. 4.7 WITH REGARD TO THE PLOTS SOLD AT 32/P3 THE DIFF ERENT SALE VALUES BY THE ASSESSEE WAS AS FOLLOWS: SITE NO. NAME OF THE BUYER S/SRI/SMT AREA AVERAGE RATE TOTAL AMOUNT 3 SHUBHA M 1140 150 1,71,000 1 RAGHAVENDRA S 1140 400 4,56,000 15 RAGHUNANDAN V 1200 108 1,30,000 33 SAMPANGIRAMAIAH 1200 600 7,20,000 32 KARTHIK R. MORO 1200 300 3,60,000 25 RAMALINGAPPA B 1200 350 4,20,000 FROM THE ABOVE TABLE, IN RESPECT OF THE ABOVE FEW P LOTS, IT CAN BE SEEN THAT THE ASSESSEE HAD SHOWN THE SALE VALUE OF THE PLOTS INCLUDING THE DEVELOPMENT CHARGES AT AS LOW AS 108 PER SQ.FT. TO AS HIGH AS 600 PER SQ.FT. THE ELEMENT OF RECEIPT O F ON-MONEY WAS NOT RULED OUT AS THE ASSESSEE COULD NOT HAVE SOLD F OR SUCH A LOW PRICE AS 108 PER SQ.FT. WHEN HE WAS ALSO GETTING TH E RATE OF RS.600 PER SQ.FT. 4.8 WITH REGARD TO THE PLOTS SOLD AT 36/1&2, 57/1& 2, 56/5, 56/6A, 63, THE DIFFERENT SALE VALUES SHOWN BY THE A SSESSEE WAS AS FOLLOWS: ITA NO.199/BANG/2012 PAGE 5 OF 16 SITE NO. NAME OF THE BUYER S/SRI/SMT AREA DATE AVERAGE RATE TOTAL AMOUNT 66 G. LAKSHMINARAYAN 2400 15.04.06 208 5,00,000 43 RAGHAVENDRA K 2400 17.05.06 404 9,70,000 68 RAJESH RAPPAL 2400 12.04.06 600 14,40,000 65 MANJULA B. 2400 22.04.06 437 10,50,000 3 DR. C.V. NIRANJAN 3402 10.08.06 150 5,10,300 14 SHAINI SINGH 1833 28.03.07 220 4,04,890 FROM THE ABOVE TABLE, IN RESPECT OF THE ABOVE FEW P LOTS, IT CAN BE SEEN THAT THE ASSESSEE HAD SHOWN THE SALE VALUE OF THE PLOTS INCLUDING THE DEVELOPMENT CHARGES AT AS LOW AS 150 PER SQ.FT. TO AS HIGH AS 600 PER SQ.FT. THE ELEMENT OF RECEIPT O F ON-MONEY WAS NOT RULED OUT AS THE ASSESSEE COULD NOT HAVE SOLD F OR SUCH A LOW PRICE AS 150 PER SQ.FT. IN AUGUST, 2006, WHEN HE WA S ACTUALLY GETTING THE RATE OF RS.600 PER SQ.FT. IN AS EARLY A S APRIL 2006. 8. THE AO THEREAFTER ESTIMATED THE INCOME OF THE AS SESSEE BY MAKING THE FOLLOWING OBSERVATIONS:- 4.9 THE ASSESSEE HAD SOLD IN TOTAL 2,86,139 SQ. FE ET OF LAND AND SITES BUT THE PROFIT SHOWN WAS MEAGER. OTHER FACTO RS LIKE, THE FILING OF A REVISED COMPUTATION TOTALLY CHANGING TH E FIGURES SHOWN AS PER AUDITED ACCOUNTS, ABSENCE OF PROOF FOR CLAIM OF LOSS ON SALE OF SITES, SELF MADE VOUCHERS FOR CERTAIN EXPENDITUR E, CASH PAYMENTS FOR EXPENSES ATTRACTING 40A(3) DISALLOWANC ES, DISALLOWANCE OF DONATION IN COMPUTATION STATEMENT, SALE VALUE OF SITES/PLOTS SHOWN AT LOWER PRICE ETC AS DISCUSSED A BOVE ARE PUT TO THE ASSESSEE. TAKING INTO ACCOUNT ALL THE FACTORS OF THE CASE, THE NET INCOME FROM SALE OF SITES SOLD IS TAKEN AT RS.2 CRORES AND THE SAME IS ASSESSED AS THE INCOME FROM BUSINESS OF THE ASSESSEE FOR THE A.Y. 2007-08. THE ASSESSEE HAD NO OBJECTION FOR ASSESSING THE BUSINESS INCOME AT 2 CRORES. 9. IT IS NOT IN DISPUTE THAT THE ASSESSEE ACCEPTED THE ABOVE ASSESSMENT AND DID NOT FILE ANY APPEAL AGAINST THE ORDER OF ASSESSMENT. IN FACT, EVEN THE AO HAS RECORDED THE FACT THAT THE ASSESSEE HAS AGREED TO THE ESTIMATION OF INCOME DONE BY THE AO. IT IS IN RESPECT OF THE AFORESAID ITA NO.199/BANG/2012 PAGE 6 OF 16 ADDITION MADE IN THE COURSE OF ASSESSMENT PROCEEDIN GS THAT THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE RETURNED INCOME WAS RS.22,61,010 AND THE ASSESSED INCOME WAS RS.2 CRORES. THUS THE ADDITION MADE BECAUSE OF THE ASSESSMENT PROCEED INGS AS INCOME FROM SALE OF PLOTS WAS RS.1,77,38,990. IN RESPECT OF TH E AFORESAID ADDITION, THE AO WAS OF THE VIEW THAT THE ASSESSEE FURNISHED INAC CURATE PARTICULARS OF INCOME. 10. IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE AO BEFORE IMPOSING PENALTY, THE ASSESSEE SUBMITTED THAT THE INCOME DEC LARED IN THE ORIGINAL RETURN WAS DULY SUPPORTED BY AUDITED ACCOUNTS. IT WAS ALSO SUBMITTED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, NONE OF TH E CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME HAS BEEN FOUND TO BE INCORRECT. THE ASSESSEE ALSO SUBMITTED THAT HE AGREED TO THE ADDIT ION MADE BY THE AO ON THE BASIS OF ESTIMATES ONLY TO SETTLE THE CASE AMIC ABLY AND BUY PEACE AND GIVE FINALITY TO THE LITIGATION. THE ASSESSEE RELI ED ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. SANGRUR VANASPATHI MILLS, 303 ITR 53 (P&H) WHEREIN IT WAS HELD THAT WHERE INCOME OF ASSESSEE IS ASSESSED ON ESTIMATE BASIS AN D ADDITIONS ARE MADE, WITHOUT THERE BEING ANY CONCRETE EVIDENCE OF CONCEA LMENT, PENALTY CANNOT BE IMPOSED. RELIANCE WAS ALSO PLACED ON THE DECISI ON OF CIT V. AERO TRADERS P. LTD. 322 ITR 316 (DEL) WHEREIN SIMILAR PROPOSITION WAS LAID OUT. RELIANCE WAS ALSO PLACED ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 (SC) WHEREIN IT WAS HELD THAT MERELY BECAUSE A CLAIM MA DE BY THE ITA NO.199/BANG/2012 PAGE 7 OF 16 ASSESSEE IN THE RETURN OF INCOME IS NOT ACCEPTED, T HAT WILL NOT ATTRACT PENALTY U/S. 271(1)(C) OF THE ACT. 11. THE AO, HOWEVER, REJECTED THE PLEA OF THE ASSES SEE AND MADE A REFERENCE TO THE VARIOUS OBSERVATIONS IN THE ORDER OF ASSESSMENT IN WHICH ULTIMATELY THE AO RESORTED TO ASSESSMENT OF INCOME OF THE ASSESSEE. THE AO ALSO MADE A REFERENCE TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF UOI V. DHARMENDRA TEXTILES PROCESSORS 2 95 ITR 244 SC WHEREIN THE HONBLE SUPREME COURT HELD THAT PENALTY U/S. 271(1)(C) OF THE ACT WAS A CIVIL LIABILITY AND THERE WAS NO REQUIREM ENT OF MENS REA ON THE PART OF THE ASSESSEE TO BE ESTABLISHED BEFORE PENAL TY CAN BE IMPOSED. THE AO ACCORDINGLY HELD THAT THE ASSESSEE CONCEALED PAR TICULARS OF INCOME AND ACCORDINGLY IMPOSED MINIMUM PENALTY U/S. 271(1)(C) OF THE ACT. 12. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CON FIRMED THE ORDER OF THE AO GIVING RISE TO HE PRESENT APPEAL BY THE ASSE SSEE BEFORE THE TRIBUNAL. 13. THE LD. COUNSEL FOR THE ASSESSEE MADE THE FOLLO WING SUBMISSIONS:- (1) THE ASSESSEES BOOKS OF ACCOUNTS WERE REJECTED ON THE BASIS OF IRRELEVANT GROUNDS. IN THIS REGARD, HE POINTED OUT THAT THE ORIGINAL PROFIT & LOSS ACCOUNT FILED ALONG WITH THE RETURN O F INCOME WAS DULY AUDITED AND AUDIT REPORT WAS ALSO FILED. IN THE CO URSE OF ASSESSMENT PROCEEDINGS, ANOTHER PROFIT & LOSS ACCOUNT WAS FILE D IN WHICH A LOSS OF RS.40,09,020 WAS CLAIMED. THIS REVISED PROFIT & LOSS ACCOUNT COULD NOT HAVE BEEN TAKEN NOTE OF BY THE AO, BECAUS E AS PER THE ITA NO.199/BANG/2012 PAGE 8 OF 16 DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD., 284 ITR 323 (SC) , THE AO CANNOT TAKE COGNIZANCE OF ANY CLAIM WITHOUT THERE BEING A REVISED RETURN F ILED BEFORE THE AO. (2) IT WAS BROUGHT TO OUR NOTICE THAT THE AO REJEC TED THE BOOKS OF ACCOUNTS ONLY ON THE BASIS OF A REVISED PROFIT & LO SS ACCOUNT FILED SHOWING A LOSS. THIS, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, IS NOT A GROUND TO REJECT THE ASSESSEES BOOKS OF A CCOUNTS U/S. 145 OF THE ACT. IT WAS POINTED OUT THAT THE BOOKS OF A CCOUNTS COULD BE REJECTED ONLY AFTER RENDERING A FINDING THAT THE SA ME ARE NOT CORRECT OR COMPLETE OR THEY DO NOT FOLLOW THE METHOD OF ACC OUNTING REFERRED TO IN SECTION 145(1) OF THE ACT OR THE ACCOUNTING S TANDARDS NOTIFIED U/S. 145(1) OF THE ACT. SINCE NONE OF THE CONDITION S WERE SATISFIED IN THE PRESENT CASE, THE AO COULD NOT HAVE RESORTED TO AN ESTIMATION OF INCOME U/S. 145(3) OF THE ACT. (3) IT WAS SUBMITTED THAT IN THE COURSE OF ESTIMAT ION OF INCOME, THE AO HAS REFERRED TO SALE OF 2,86,139 SQ.FT. OF LAND UPT O THE END OF THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. HE POINTED OUT THAT FROM THE DETAILS GIVEN BY THE AO IN THE ORDER OF ASSESSMENT, THE AO HAS CONSIDERED INSTANCES OF SALE WHICH DO NOT FA LL WITHIN THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08. HIS SUBMIS SION WAS THAT THE BASIS ON WHICH THE AO RESORTED TO ESTIMATION OF INC OME WAS PRIMA FACIE ERRONEOUS. IT WAS ALSO SUBMITTED THAT THE AO HAS P RESUMED THAT THERE WAS ON-MONEY TRANSACTION WITHOUT THERE B EING ANY EVIDENCE BROUGHT ON RECORD TO SHOW RECEIPT OF ON-MO NEY. IN THIS ITA NO.199/BANG/2012 PAGE 9 OF 16 REGARD, IT WAS POINTED OUT BY HIM THAT THE SALES RE CORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT ARE SUPPORTED BY R EGISTERED SALE DEEDS AND THE CONSIDERATION RECORDED THEREIN WAS DU LY DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. IT WAS SUBM ITTED THAT WITHOUT EVIDENCE, THE AO CANNOT PRESUME THAT THE ASSESSEE H AD RECEIVED ON-MONEY. IN THIS REGARD, REFERENCE WAS MADE TO TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF K.P. VARGHESE V. ITO, 131 ITR 597 (SC) . (4) THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT THE RELIANCE PLACED BY THE REVENUE AUTHORITIES ON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPRA) FOR SUSTAINING THE PENALTY IMPOSED ON THE ASSESSEE IS E RRONEOUS. IN THIS REGARD, HE BROUGHT TO OUR NOTICE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) WHEREIN THE HONBLE SUPREME COURT AFTER CONSIDERING ITS DECISION IN THE CASE OF DILIP N. SHROFF V. JCIT, 291 ITR 519 (SC) AND THE DECISION IN THE CASE OF DHARMENDRA TEXTILES PRO CESSORS (SUPRA) , CAME TO THE CONCLUSION THAT IT IS ONLY WITH REGARD TO EXISTENCE OF MENS REA THAT THE HONBLE SUPREME COURT IN DHARMENDRA TEXTI LES PROCESSORS (SUPRA) HELD THAT THE SAME IS NOT REQUIRED. HOWEVER, IN RESPECT OF THE REQUIREMENT, FURNISHING OF INACCURAT E PARTICULARS OF INCOME CAN LEAD TO CONCEALMENT ONLY IF THE ASSESSEE FAILS TO PROVE THAT HIS EXPLANATION IS BONA FIDE AND THAT HE HAS GIVEN ALL FACTS MATERIAL FOR COMPUTATION OF HIS INCOME. IN THIS R EGARD, HE POINTED ITA NO.199/BANG/2012 PAGE 10 OF 16 OUT THAT IN THE ORDERS OF THE AO IN THE ASSESSMENT AS WELL AS PENALTY PROCEEDINGS, THERE HAS BEEN NO COMPLAINT BY THE AO THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS NOR I S THERE ANY FINDING THAT THE EXPLANATION OFFERED BY THE ASSESSE E WAS NOT BONA FIDE OR THAT THE FACTS RELEVANT TO ASSESSMENT HAVE NOT B EEN PROPERLY DISCLOSED BY THE ASSESSEE. IT WAS SUBMITTED THAT P ENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DISTINCT . THE FACTS LEADING TO THE ADDITION IN THE ASSESSMENT PROCEEDIN GS MAY BE RELEVANT IN PENALTY PROCEEDINGS, BUT WAS NOT CONCLU SIVE. REFERENCE IN THIS REGARD WAS MADE TO THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT V. BALAJI DISTILLERIES LTD. 255 CTR 265 (MAD) WHEREIN THE HONBLE MADRAS HIGH COURT AFTER REFERR ING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PRICE WATERHOUSE COOPERS PVT. LTD., 348 ITR 306 (SC) , HELD THAT WHERE THE ADDITIONS MADE WERE NOT DUE TO LACK OF BONA FIDES, BUT ON EXISTENCE OF CERTAIN OTHER CIRCUMSTANCES, IT CANNOT BE SAID T HAT THE ASSESSEE IS GUILTY OF CONCEALMENT. 14. THE LD. DR, ON THE OTHER HAND, WHILE REITERATIN G THE STAND OF THE REVENUE AS REFLECTED IN THE ORDER OF THE CIT(APPEAL S), FURTHER SUBMITTED THAT EVEN IN A CASE WHERE ADDITION TO THE TOTAL INCOME I S MADE ON THE BASIS OF ESTIMATION, PENALTY CAN BE LEVIED. IN THIS REGARD, HE REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF A.M. SHAH & CO. V. CIT, 238 ITR 415 (GUJ) AND THE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V. SMT. CHANDRAKANTA, 205 ITR 607 (MP) . IT WAS NEXT ITA NO.199/BANG/2012 PAGE 11 OF 16 SUBMITTED BY HIM THAT EVEN WHERE ADDITIONS HAVE BEE N MADE ON THE BASIS OF AGREEMENT BY THE ASSESSEE, STILL PENALTY CAN BE LEVIED. IN THIS REGARD, THE LD. DR PLACED RELIANCE ON THE DECISIONS OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF P.C. JOSEPH & BROS. V. CIT, 243 ITR 818 (KER) AND THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF K.L. SWAMY V. CIT, 239 ITR 386 (KARN) . HE ALSO PLACED STRONG RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DHARMENDRA TEXTILES PROCESSORS (SUPRA) AND SUBMITTED THAT THE RATIO LAID DOWN THEREIN WILL EQUALLY APPLY TO THE PENALTY IMPOSED U /S. 271(1)(C) OF THE ACT IN THE PRESENT CASE. THE LD. DR ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN CIT V. ZOOM TELECOMMUNICATIONS PVT. LTD., 321 ITR 510 (DEL) , WHEREIN IT WAS HELD THAT WHERE A CLAIM IS MADE BY AN ASSESSEE WITHOUT ANY BASIS AND EXPLANATION IS REJECTED, THEN SUCH A CLAIM SHOULD BE CONSIDERED AS A CLAIM WHICH IS NOT MADE BONA FIDE . 15. THE LD. COUNSEL FOR THE ASSESSEE DISTINGUISHED ALL THE CASES RELIED UPON BY THE LD. DR. WE WILL REFER TO THESE SUBMISS IONS LATER. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE S HALL FIRST CONSIDER THE FACTS THAT TRANSPIRED IN THE ASSESSMENT, WHICH IN OUR OPINION, WILL BE VERY VITAL FOR COMING TO THE CONCLUSION WHETHER THE RE WAS ANY CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. IN THIS REGARD, THE FIRST ASPECT WHICH WE NOTICE IS TH AT THE RETURN OF INCOME FILED BY THE ASSESSEE WAS ACCOMPANIED BY A PROFIT & LOSS ACCOUNT WHICH WAS DULY AUDITED. THE PROFIT IN THIS PROFIT & LOSS ACC OUNT WAS A SUM OF ITA NO.199/BANG/2012 PAGE 12 OF 16 RS.23,71,011. IN THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE FILED A REVISED PROFIT & LOSS ACCOUNT IN WHICH HE H AD CLAIMED A LOSS OF RS.40,09,019. THERE IS NO DISCUSSION IN THE ORDER OF ASSESSMENT AS TO HOW THIS LOSS WAS CLAIMED. THE AO PROCEEDED TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WHICH THE SUPPORTED THE INCOME AS DECLARED IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, THE REJECTION OF BOOKS OF ACCOUNTS U/S. 1 45(3) OF THE ACT CAN BE ONLY ON RENDERING A FINDING REGARDING CORRECTNESS O R COMPLETENESS OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THERE ARE NO RE ASONS GIVEN FOR REJECTING THE BOOKS OF ACCOUNTS ON THE BASIS OF WHI CH THE ORIGINAL RETURN WAS FILED. FILING OF A PROFIT & LOSS ACCOUNT IN TH E COURSE OF ASSESSMENT PROCEEDINGS WHICH IS DIFFERENT FROM THE PROFIT & LO SS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME, CANNOT LEAD TO A CONCLUSION T HAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT COMPLETE OR CORRECT, ESPECIAL LY WHEN THE REASONS FOR FILING OF A REVISED PROFIT & LOSS ACCOUNT HAVE NOT BEEN CONSIDERED OR EXPLANATION CALLED FOR BY THE AO. 17. THE NEXT ASPECT THAT NEEDS TO BE CONSIDERED IS WITH REGARD TO THE ESTIMATION OF INCOME BY THE AO. THE AO ESTIMATED T HE INCOME OF THE ASSESSEE KEEPING IN MIND THE DISALLOWANCE OF EXPENS ES THAT HAVE TO BE MADE U/S. 40(A)(IA) OF THE ACT AND LOSS ON SALE OF SITES. THESE EXPENSES TOTAL A SUM OF RS.61,50,000 [10 LAKHS + 20,32,142 ( BOTH THESE ITEMS ARE DISALLOWANCE U/S.40(A)(IA)) + 31,17,279 (LOSS ON SA LE OF SITES)]. THE FACT THAT AN ITEM OF EXPENDITURE IS DISALLOWED U/S. 40(A )(IA) OR 40A(3) CANNOT LEAD TO THE CONCLUSION THAT THOSE EXPENSES ARE NOT GENUINE. IN FACT, DISALLOWANCE UNDER THOSE PROVISIONS PRESUPPOSES THA T THOSE EXPENSES ITA NO.199/BANG/2012 PAGE 13 OF 16 WERE LEGITIMATE EXPENSES AND HAD TO BE ALLOWED AS D EDUCTION, BUT FOR THE SPECIFIC PROVISION IN LAW. THE LOSS ON SALE OF SI TES IN AN ITEM CLAIMED IN THE REVISED PROFIT AND LOSS ACCOUNT FILED BY THE ASSESS EE. THE AO HAS NOT PROCEEDED TO COMPUTE THE INCOME OF THE ASSESSEE ON THE BASIS OF THE REVISED PROFIT AND LOSS ACCOUNT. THEREFORE THE LOS S OF SALE OF SITES CLAIMED BY THE ASSESSEE IN THE REVISED PROFIT AND LOSS ACCO UNT WAS IRRELEVANT FOR THE PURPOSE OF ESTIMATION OF INCOME OF THE ASSESSEE. 18. SECONDLY, THE AO RESORTED TO ESTIMATION ON THE BASIS OF DIFFERENT COST PRICES ON WHICH THE PLOTS WERE SOLD TO VARIOUS PARTIES WITHIN A SHORT SPAN OF TIME. THE DETAILS WITH REGARD TO AS TO HOW THE AO QUANTIFIED SUCH DIFFERENCES ARE NOT GIVEN IN THE ORDER OF ASSESSMEN T. HOWEVER, IT IS CLEAR THAT THE AO HAS PROCEEDED ON THE BASIS THAT THE ASS ESSEE HAS RECEIVED ON- MONEY. IN THIS REGARD, AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THERE IS NO EVIDENCE ON RECORD TO SHOW TH E RECEIPT OF ON-MONEY. THE FACT THAT THERE WAS VARIATION IN PRICES ON WHIC H THE PLOTS WERE SOLD AT DIFFERENT POINTS OF TIME CANNOT BE THE BASIS TO HOL D THAT THE ASSESSEE RECEIVED ON-MONEY ON SALE OF PLOTS. THUS, THE BASI S ON WHICH THE AO MADE ON ESTIMATION OF INCOME IS FOUND TO BE NOT ON A VERY SOUND FOOTING. APART FROM THE ABOVE, THE SALE MADE BY THE ASSESSEE OF SITES IN THE EARLIER YEAR AND THE SUBSEQUENT YEAR HAVE ALSO BEEN CONSIDE RED BY THE AO FOR THIS PURPOSE, WHICH AGAIN IS NOT JUSTIFIED. THE AS SESSEE IS IN THE BUSINESS OF SALE OF SITES AND THEREFORE SITES WOULD CONSTITU TE ITS STOCK-IN-TRADE. STOCK-IN-TRADE CANNOT BE VALUED ON THE BASIS OF MAR KET PRICE WHICH IS HIGHER THAN THE COST PRICE. ITA NO.199/BANG/2012 PAGE 14 OF 16 19. THE ONLY ASPECT THAT REMAINS TO BE CONSIDERED O N THE ASPECT OF ESTIMATION OF INCOME BY THE AO IS THE ASSESSEES AG REEMENT FOR ESTIMATION OF INCOME MADE BY THE AO. WE ARE OF THE VIEW THAT THE FACT THAT THE ASSESSEE AGREED TO THE ADDITION CANNOT BE THE SOLE BASIS ON WHICH PENALTY CAN BE IMPOSED. CUMULATIVE EVALUATION OF THE CIRCUM STANCES HAS TO BE MADE. 20. IN THE PRESENT CASE, THE ASSESSEES PLEA WAS TH AT HE AGREED TO THE ADDITION MADE ONLY TO BUY PEACE WITH THE DEPARTMENT . IN OUR VIEW, THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE CLAIM OF THE ASSESSEE THAT HE AGREED TO ESTIMATION OF INCOME BY THE AO ONLY TO BUY PEACE IS NOT A BONA FIDE CLAIM. TAKING A CUMULATIVE ACCOUNT OF ALL THE CIRC UMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO BE GUILTY OF CONCEALING THE PARTICULARS OF INCOME OR OF FURNISHING INACCURATE P ARTICULARS OF INCOME. THE REVISED PROFIT & LOSS ACCOUNT WHICH WAS FILED BY TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS, IN OUR VIEW, COULD NOT H AVE BEEN TAKEN COGNIZANCE OF BY THE AO IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) . WE ARE ALSO OF THE VIEW THAT THE QUESTION WHETHER THERE WAS CONCEALMENT OR FURNISHING OF PARTICULARS OF INCOME IS ESSENTIALLY A QUESTION OF FACT. THE PRINCIPLE LAID DOWN IN SEVERAL DECISIONS WILL BE A GUIDING FACTOR IN DECIDING THE QUESTION. 21. WITH REGARD TO THE DECISION RELIED UPON BY THE LD. DR, WE FIND THAT THE DECISION OF K.L. SWAMY (SUPRA) IS A CASE WHERE THERE WAS INCRIMINATING MATERIAL FOUND AND IN A REVISION U/S. 273A OF THE ACT, THE REVENUE REFUSED TO REDUCE THE PENALTY. SIMILARLY, P.C. JOSEPH & BROS. ITA NO.199/BANG/2012 PAGE 15 OF 16 (SUPRA) WAS A CASE OF WHERE AFTER COMPLETION OF THE ORIGINAL ASSE SSMENT, A SEARCH WAS CONDUCTED AND INCRIMINATING DOCUMENTS WE RE FOUND AND IN THOSE CIRCUMSTANCES, DESPITE SURRENDER OF INCOME IN A REVISED RETURN, IT WAS HELD THAT THERE WAS CONCEALMENT OF INCOME ATTRA CTING PENALTY. IN SMT. CHANDRAKANTA (SUPRA) , IT WAS A CASE OF THE ASSESSEE FILING A REVISED RETURN OF INCOME WHERE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND IN THE ORIGINAL RETURN LOSS HAD BEEN DE CLARED, WHILE IN THE REVISED RETURN INCOME WAS DECLARED. IN SUCH CIRCUM STANCES, THE COURT CAME TO THE CONCLUSION THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME WITH REFERENCE TO THE ORIGINAL RETURN OF INCOME. I N THE PRESENT CASE, AS WE HAVE ALREADY NOTICED, THERE WAS NO REVISED RETURN O F INCOME. THE DECISION OF A.M. SHAH & CO. (SUPRA) IS AGAIN A CASE WHERE SERIOUS DISCREPANCIES WERE FOUND IN THE FORM OF VAST PURCHASES AND SALES AND ON THOSE FACTS ,IT WAS HELD THAT PENALTY COULD BE IMPOSED. THE HONBL E DELHI HIGH COURT IN THE CASE OF ZOOM TELECOMMUNICATIONS PVT. LTD. (SUPRA) ON FACTS FOUND THAT THE CLAIM MADE BY THE ASSESSEE WAS NOT BONA FIDE AND WAS WHOLLY WITHOUT ANY BASIS. IN FACT, THE LD. COUNSEL FOR THE DREW OUR ATTENTION TO PARA 20 OF THE AFORESAID DECISION WHEREIN THE CO URT HAS EXPLAINED THAT IF THERE ARE BONA FIDES ON THE PART OF THE ASSESSEE, THEN PENALTY COULD NO T BE IMPOSED. IN OUR VIEW, THE DECISIONS RELIED ON BY T HE LD. DR CANNOT BE OF ANY ASSISTANCE IN THE PRESENT CASE. WE ARE THEREFO RE OF THE VIEW THAT ON THE FACTS OF THE PRESENT CASE, PENALTY OUGHT NOT TO HAVE BEEN IMPOSED ON THE ASSESSEE. WE ACCORDINGLY DIRECT THAT THE PENAL TY IMPOSED BE CANCELLED. ITA NO.199/BANG/2012 PAGE 16 OF 16 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 22 ND FEBRUARY, 2013. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.