DCIT, CHENNAI V. Sh R.Anbuvel Rajan, CHENNAI

ITA 2040/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64698 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Corroborative evidences; Agreed addition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER] I.T.A.NO.2040/MDS/2010 ASSESSMENT YEAR : 2007-08 THE DY. CIT BUSINESS CIRCLE III CHENNAI VS SHRI R.ANBUVEL RAJAN NO.1C, SORRENTO ENCLAVE 7/4 SARDAR PATEL ROAD ADYAR CHENNAI 600 020 [PAN AGZPA 9406B] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI K.BALASUBRAMANIAN, ADVOCATE/TAX CONSULTANT DATE OF HEARING : 18-12-2012 DATE OF PRONOUNCEMENT : 21-12-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-VIII, DATED 27.9.2010. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A.NO. 2040/10 :- 2 -: 2. THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS. 60,80,170/- LEVIED BY THE ASSESSING OFFICER UNDER S ECTION 271(1) (C). 2.1 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE ASSESSEE REDUCED HIS TAX LIABILITY SUBSTANTIALLY (T O THE TUNE OF RS. 60.8 LAKH) BY BOOKING EXPENSES INCORRECTLY. 2.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT TH ERE WAS GROSS FAILURE ON THE PART OF THE ASSESSEE TO COMPUT E, HIS CORRECT TAX LIABILITY AS PER THE PROVISIONS OF THE ACT. 2.3 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ACTION OF THE ASSESSEE IN BOOKING THE ADVANCES UNDER PURCH ASES, IN DEBITING PERSONAL INVESTMENTS UNDER PURCHASES, IN U NDER- VALUING THE CLOSING STOCK AND UN-SUBSTANTIATING COM MISSION PAYMENTS (WITHOUT TDS COMPLIANCE) CANNOT BE TERMED AS BONAFIDE OMISSIONS. 2.4 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AD DITIONS MADE IN THE ASSESSMENT ORDER WERE NOT 'AGREED ADDIT IONS' BUT WERE BASED ON THE DETAILS AND DOCUMENTS COLLECT ED. THE ASSESSEE MERELY ADMITTED TO THE SHORTCOMINGS AND ESCAPEMENT OF TAXABLE INCOME, BASED ON SUCH DETAILS AND DOCUMENTS. 2.5 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DECISIONS BASED ON 'AGREED ADDITIONS.' ARE THUS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 2.6 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT A SSESSEE CONCEALED THE PARTICULARS OF INCOME AND ALSO FURNIS HED INACCURATE PARTICULARS AS ENVISAGED IN SECTION 271( 1) (C) AND THE PROVISIONS OF EXPLANATION 1 (A) AND (B) ARE NOT RELEVANT TO THE FACTS OF THE CASE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDU CED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) MAY BE SET ASID E AND THAT OF ASSESSING OFFICER RESTORED. I.T.A.NO. 2040/10 :- 3 -: 3. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) ERRED IN DELETING THE PENALTY OF ` 60,80,170/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND PROPERTY DEVELOP MENT. FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED RETURN OF INCOME ADMITTING INCOME OF ` 93,61,470/-. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` 2,74,24,970/-. THE ASSESSING OFFICER MADE AN ADDI TION OF `1.47 CRORES WHICH COMPRISED OF THE FOLLOWING: (I)ADVANCE SHOWN AS PURCHASES ` 1.25 CRORES (II) INVESTMENT IN PERSONAL PROPERTY SHOWN AS PURCHASE ` 22 LAKHS (III)DISALLOWANCE U/S 40(A)(IA) ` 19,63,500/- 5. IN RESPECT OF ITEM NO.(I) THE FOLLOWING THREE ITEM S WERE TREATED BY THE ASSESSING OFFICER AS ADVANCE AND EXC LUDED THEM FROM PURCHASE OF LANDS: (A) GOA OLEANARCIE P. LTD ` 50 LAKHS (B) NUTECH TOWNSHIP PROMOTERS ` 50 LAKHS (C) DAMAN PRAKASH ` 25 LAKHS TOTAL ` 1.25 CRORES 6. IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE ASS ESSING OFFICER, THE ASSESSEE SUBMITTED THAT THERE WERE NU MEROUS MEDIATORS TO CONTACT THE VARIOUS LAND OWNERS AND BRING THEM T O THE ASSESSEE. I.T.A.NO. 2040/10 :- 4 -: THE LANDS OWNED BY THEM VARY IN SIZES AND DIMENSIO NS I.E FROM LESS THAN ONE GROUND TO MORE THAN ONE ACRE. THE ASSESS EE HAS TO ACQUIRE ALL SUCH LANDS IRRESPECTIVE OF SIZE AND PRICE SO TH AT IT CONSOLIDATE THEM AND TRANSFER TO L&T SOUTH CITY PROJECT-I AS POWER O F ATTORNEY HOLDER FOR THE SAID LANDS. WHEN THE MEDIATORS GO TO VARIO US VILLAGES AND OWNERS AND AFTER NEGOTIATING WITH THEM, THEY ISSUE SLIPS TO THE OWNERS WHO BRING THEM TO THE ASSESSEES OFFICE AND THE A SSESSEE PAYS THEM FULLY IN ORDER TO CLINCH THE DEAL. THOUGH SUCH PUR CHASE IS COMPLETED ON THE DATE OF PAYMENT TO THEM, THE PROCESS OF EXEC UTING POWER OF ATTORNEY IN FAVOUR OF THE ASSESSEE TAKES SOME MORE TIME. THEREFORE, ONCE THE PAYMENT IS MADE ON THE SLIPS THE OFFICE AC COUNTS IT AS PURCHASE. IT WAS SUBMITTED THAT IN THE THREE CASES MENTIONED IN THE ASSESSMENT ORDER, WHO WERE THE MEDIATORS THE SAME P ROCEDURES NARRATED ABOVE WAS FOLLOWED. BECAUSE OF NUMEROUS M EDIATORS AND CONFUSION IN SURVEY NUMBERS AND EXTENT, AND LACK OF KNOWLEDGE AS TO WHETHER THE TRANSACTION WAS OVER, THE OFFICE PEOPL E BOOKED THESE THREE CASES ALSO AS PURCHASE THOUGH UNDER THEM THER E WERE SOME ACTUAL PURCHASES ALSO. THE THREE MEDIATORS HAD TO ACCOUNT FOR TO THE ASSESSEE SUCH DETAILS AND BRING THE OWNERS FOR EXEC UTION OF POWER OF ATTORNEY IN FAVOUR OF THE ASSESSEE. THERE WAS NO DENIAL OF THE FACT THAT SOME PURCHASES BY THESE MEDIATORS WERE OVER. BUT, FOR WANT OF TIME AND LACK OF SUCH DETAILS FROM THESE MEDIATORS, THE ASSESSEE WAS I.T.A.NO. 2040/10 :- 5 -: UNABLE TO PRODUCE SUCH DETAILS BEFORE THE ASSESSING OFFICER BEFORE COMPLETION OF THE ASSESSMENT PROCEEDINGS AND HENCE, AGREED FOR THE ADDITION. IT WAS SUBMITTED THAT HAD THE ASSESSEE BEEN GIVEN SOME MORE TIME, HE WOULD HAVE COLLECTED THE DETAILS AND SUBMITTED BEFORE THE ASSESSING OFFICER AND PROVED MAJOR PURCHASES IF NOT WHOLLY. IT WAS THEREFORE, SUBMITTED THAT THERE WAS NO INTENTIONAL CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH REGARD TO THIS ITEM. IT WAS ALSO SUBMITTED THAT MOREOVER, IT WAS AN AGRE ED ADDITION AND THEREFORE, IT WAS NOT A CASE OF CONCEALMENT OF INCO ME AND DOES NOT ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IT WAS ALSO SUBMITTED THAT MERE AGREEMENT FOR ADDITION DOES NOT MEAN THAT THERE HAS BEEN EITHER FRAUD OR WILLFUL NEGLECT SO AS TO J USTIFY LEVY OF PENALTY. THE ASSESSEE RELIED ON THE DECISION OF HON'BLE MAD RAS HIGH COURT IN THE CASE OF CIT VS S.I.PARIPUSHPAM [2001] 249 ITR 5 50(MAD). 7. IT WAS FURTHER SUBMITTED THAT WITH REGARD TO DISAL LOWANCE U/S 40(A)(IA) OF THE ACT, IT WAS A DEEMING PROVISIO N AND AS SUCH, THERE WAS NO CONCEALMENT OF INCOME INVOLVED HERE. A DEEM ED PROVISION CANNOT LEAD TO A DEEMED CONCEALMENT WHICH TANTAMOUN T TO DOUBLE JEOPARDY. 8. WITH REGARD TO THE LAND PURCHASED IN THANJAVUR AT ` 22 LAKHS WHICH WAS TREATED AS PERSONAL AND REDUCED FROM THE PURCHASE BY THE I.T.A.NO. 2040/10 :- 6 -: ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE FACT REMAINS THAT VIDE BALANCE SHEET FOR THE YEAR ENDED ON 31.3.2007 THIS LAND WAS NOT TREATED AS PART OF INVESTMENT. INVESTMENT OF ` 30,60,000/- SHOWN IN THE BALANCE SHEET COMPRISED OF AVR PROPERTIES & DEV ELOPERS P. LTD CAPITAL ` 60,000/- AND FINECHEM ` 30,00,000/-. THE ASSESSEE AGREED FOR THE ADDITION FOR THE REASON THAT LATER ON HE NO TICED THAT HIS OFFICE DID NOT INCLUDE THE SAID ` 22 LAKHS IN CLOSING STOCK. 9. THE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED W ITH THE SUBMISSIONS OF THE ASSESSEE AND THEREFORE, LEVIED A PENALTY OF ` 60,80,170/- BEING 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY WAY OF INFLATING EXPENSES, NON-ADJUSTMENT OF CLOSING STOCK AND NON- DISALLOWANCE OF EXPENSES AS PER DEEMING PROVISIONS OF THE ACT. 10. ON APPEAL, THE CIT(A) DELETED THE PENALTY BY OBSERV ING AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSI ONS. APPELLANT'S CASE WAS NOTIFIED BY THE COMMISSIONER O F INCOME-TAX FOR COMPLETION OF ASSESSMENT BY ADDI. CIT . AFTER COMPLETION OF THE SAME CASE AUTOMATICALLY REVERTS B ACK TO THE ASSESSING OFFICER. THEREFORE, PENA L TY PROCEEDINGS, BEING INDEPENDENT FROM ASST. PROCEEDINGS, WERE COMP L ETED BY THE SUCCEEDING OFFICER AFTER GETTING APPROVAL OF THE AD DL . CIT UNDER SECTION 274(2) OF THE ACT. THEREFORE, JURISDI CTION WAS PROPERLY EXERCISED AND APPELLANT FAILS ON THIS GROUND. I.T.A.NO. 2040/10 :- 7 -: 8. THE ASSESSING OFFICER LEVIED PENALTY UNDER SECT ION 271(1) FOR THE FOLLOWING REASONS:- 1. THE APPELLANT'S SUBMISSION IS SUPERFLUOUS. 2. ACCOUNT SHOULD BE HAVE BEEN MADE AS PER ACCOUNTING STANDARDS. 3. ADVANCE PAID WERE CLAIMED AS PURCHASES AND NOT INCLUDED IN CLOSING STOCK. 4. PERSONAL EXPENSES CANNOT BE CLAIMED AS REVENUE EXPENSES. 5. DISALLOWANCE U/S 40(A)(IA) NOT DONE SUO MOTU BY ASSESSEE 6. MERE ADMISSION OF OMISSION IS NOT A VOLUNTARY DISCLOSURE. ALL THE ABOVE REASONING OF THE ASSESSING OFFICER IN LEVYING THE PENALTY WERE COVERED BY THE EXPLANATION OFFERED BY THE APPELLANT BY WAY OF REPLY TO THE SHOW CAUSE NOTICE. ASSESSING OFFICER HAS NOT STATED IN THE PENALTY ORD ER AS TO HOW THE EXPLANATION OFFERED DID NOT MEET WITH HIS A BOVE POINTS. AS POINTED OUT BY COUNSEL HE HAS NOT RECORD ED IN HIS ORDER AS TO WHY HE DID NOT CONSIDER THE CASE LAWS R ELIED ON BY APPELLANT. CLAUSE(A) OF EXPLANATION 1 TO SEC.271 (1)(C) DEEMS THAT AMOUNT ADDED REPRESENT INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED PROVIDED THAT THE EXPLANATION OFFERED BY THE APPELLANT WAS FOUND FAL SE BY THE AUTHORITY. THE ASSESSING OFFICER HAS NOT RECOR DED THAT THE EXPLANATION OFFERED BY THE APPELLANT WAS F ALSE. APPELLANT HAS OFFERED HIS EXPLANATION AS REQUIRED I N CLAUSE (B) AND PROVED HIS BONA FIDE. THERE IS NO DISPUTE THAT ALL THE RELEVANT FACTS MATERIAL TO THE COMPUTATION OF TOT AL INCOME ARE DULY FURNISHED BY APPELLANT AND NO DEFICIENCIES IN FURNISHING THE SAME WERE POINTED BY THE ASSESSING O FFICER. 'WHERE THERE IS NOTHING TO SUGGEST GROSS OR WILLFUL NEGLECT OR FRAUD, THE EXPLANATION CANNOT HELP THE REVENUE TO J USTIFY PENALTY. THE EXPLANATION ITSELF IS THAT PENALTY SHO ULD BE EXIGIBLE ONLY WHERE NO EXPLANATION IS OFFERED BY TH E APPELLANT OR HE OFFERS AN EXPLANATION, WHICH IS FOU ND TO BE FALSE. WHERE AN APPELLANT OFFERS AN EXPLANATION, PE NALTY WILL NOT BE EXIGIBLE, IF HE PLACED ALL THE FACTS AND MAT ERIALS RELATING TO THE ADDITION, EVEN IF HE FAILS TO SUBST ANTIATE AND PROVE HIS EXPLANATION, WHICH IS BONA FIDE'. AS COUL D BE SEEN FROM THE ABOVE AND OTHER SUBMISSIONS THE APPELLANT DID OFFER HIS EXPLANATION, HE PLACED ALL THE MATERIALS AND FA CTS RELATING TO THE ADDITION, THE SAME WAS NOT PROVED AS FALSE A ND HENCE EXPLANATION (1) TO SEC.271(1)(C) IS NOT ATTRACTED T O THE FACTS I.T.A.NO. 2040/10 :- 8 -: OF THIS CASE. 7. IN THIS CONNECTION IT IS PERTINENT TO REPRODUCE BEL OW THE ITAT PUNE A BENCH DECISION IN THE CASE OF KANBAY SOFTWARE INDIA (P) LIMITED.VSDEPUTY COMMISSIONER OF INCOME-TAX REPORTED IN 122 TTJ 721. THE LEARNED MEMBERS IN THEIR LENGTHY ORDER RUNNING TO 71 PARAGR APHS, AFTER ANALYZING PROVISIONS OF SEC.271(1), EXPLANAT IONS THEREUNDER, POINTING OUT HOW S.C DIFFERED FROM THEI R OWN EARLIER DECISION IN DILIP N.SHROFF'S CASE IN DHARME NDRA TEXTILE PROCESSOR'S CASE HELD IN PARA 68: 68. IN ANY EVENT, WHEN AN EXPLANATION IS OFFERED BY THE ASSESSEE IN DISCHARGE OF THE ONUS CAST UPON HIM BY EXPLN. 1 TO S. 271(1)(C), IT IS NOT FOR THE AO TO PONDER OVER WHAT SHOULD HAVE HAPPENED IN IDEAL CIRCUMSTANCES, AND REJECT THE EXPLANATION BECAUSE WHAT HAS ACTUALLY HAPPENED IS LESS THAN SUCH AN IMAGINARY IDEAL SITUATION; HE IS TO CONSIDER THE EXPLANATION OBJECTIVELY AND UNLESS HE FINDS THE SAME AGAINST THE HUMAN PROBABILITIES OR UNLESS THERE ARE ANY REAL INCONSISTENCIES OR FACTUAL ERROR S IN SUCH AN EXPLANATION, THE AO OUGHT TO ACCEPT THE SAME. IT CANNOT ALWAYS BE FEASIBLE TO PROVE THE CLAIM OF BONA FIDES TO THE HILT, NOR, IN OUR CONSIDERED VIEW, THE ASSESSEE CAN BE EXPECTED TO DO SO. WHETHER OR NOT A PERSON HAS ACTED BONA FIDE REFLECTS THE STATE OF HIS MIND IN RESPECT OF H IS CONDUCT, AND, THEREFORE, THE ASSESSEE HAS HIS INHERENT LIMITATIONS IN ESTABLISHING THIS ASPECT OF THE MANNER. ALL THAT THE ASSESSEE CAN DO IS TO EXPLAIN THE CIRCUMSTANCES IN WHICH HE HAS ACTED IN A PARTICULAR MANNER AND SET OUT THE RELATED FACTS . THE EXPLANATION FOR BONA FIDES, AT THE COST OF REPETITION, NEEDS TO BE CONSIDERED IN A FAIR AND OBJECTIVE MANNER AND IN THE LIGHT OF HUMAN PROBABILITIES. AS LONG AS THE EXPLANATION GIVEN BY THE ASSESSEE IS IN THE LIGHT OF THE HUMAN PROBABILITIES, THERE ARE NO FACTUAL ERRORS OR INCONSISTENCIES, AND IT IS SUPPORTED BY REASONABLE SUPPORTING EVIDENCES REGARDING FACTUAL ELEMENTS EMBEDDED THEREIN, IF ANY, THE BONA FIDES SHOULD BE TAKEN AS PROVED. THE ASSESSEE'S EXPLANATION REGARDING BONA FIDES OF THE CLAIM DOES NOT SUFFER FROM ANY APPARENT CONSISTENCIES OR FACTUAL ERRORS AND IT IS QUITE IN TUNE WITH THE HUMAN PROBABILITIE S. THERE IS NO GOOD REASON TO REJECT THE SAME AS UNACCEPTABLE FOR THE PURPOSE OF MAKING OF THE I.T.A.NO. 2040/10 :- 9 -: CLAIM OF DEDUCTION BEING COVERED BY THE DEEMING FICTION UNDER EXPLN. 1 TO S. 271(1)(C). 69. IN VIEW OF THE REASONS SET OUT ABOVE, THE CASE OF THE ASSESSEE IS NOT EVEN HIT BY THE MISCHIEF OF ANY OF THE THREE EVENTUALITIES ENVISAGED BY THE DEEMING FICTION UNDER EXPLN. 1 TO S. 271 (L)(C). WE HAVE ALREADY HELD THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE COULD NOT BE SAID TO HAVE CONCEALED THE ' PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. UNDER THE SCHEME OF S. 271(1)(C), THEREFORE, IT WAS NOT A FIT CASE FOR THE IMPOSITION OF PENALTY. WE NEED NOT, THEREFORE, ADDRESS OURSELVES TO OTHER LEGAL ISSUES RAISED BEFORE US, AND, FOR THE SHORT REASONS SET OUT ABOVE, HOLD THAT IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY UND ER S. 271(1)(C) OF THE ACT. THE ISSUE WHETHER EVEN IN THE ABSENCE OF ANY MENS REA, ON THE FACTS OF THIS CASE, THE ASSESSEE COULD HAVE BEEN IMPOSED PENALTY UNDER S. 271(1)(C) WOULD HAVE BEEN RELEVANT ONLY IF IT WAS FOUND TO BE A FIT CASE FOR IMPOSITION OF PENALTY UNDER THE SCHEME OF S. 271 (L)(C). SINCE WE HAVE COME TO THE CONCLUSION THAT UNDER THE SCHEME OF S. 271(1)(C), IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY, AND IN VIEW OF OUR ANALYSIS OF LEGAL POSITION SET OUT EARLIER IN THIS ORDER, WE HOLD THAT THE FACTS AND CIRCUMSTANCES OF THE CASE DID NOT WARRANT OR JUSTIFY ANY IMPOSITION OF PENALTY. WE, THEREFORE, DIRECT THE AO TO DELETE THE IMPUGNED PENALTY OF RS. 2,00,00,000. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 10. IT IS EVIDENT FROM PARAS I, IL & III OF THE ASST . ORDER ITSELF THAT THE APPELLANT AGREED FOR THESE ADD I TIONS. WITH REGARD TO ADDITIONS MADE OF ` 1,25,00,000/-, THE ASSESSING OFFICERS COMMENTS ARE AS UNDER: 'HENCE THE PAYMENTS ARE NOT RELATED TO THE SALES EFFECTED AND DOES NOT CONSTITUTE THE COST AND HENCE RS. 1,25,00,000/- IS NOT ALLOWABLE AS EXPENDITURE. THE ASSESSEE HAS ADMITTED FOR THE ABOVE ADDITION.' I.T.A.NO. 2040/10 :- 10 -: WITH REGARD TO INVESTMENT IN PERSONAL PROPERTY SHOW N AS PURCHASE ALSO THE AO'S COMMENTS ARE AS 'THE ASSESSE E HAS ADMITTED FOR THIS ADDITION.' WITH REGARD TO COMMISSION DISALLOWED U/S 40(A)(IA), THE LEARNED AO'S COMMENTS ARE AS UNDER: 'THE ABOVE AMOUNTS ARE PAID TO VARIOUS PERSONS THRO UGH CHEQUE, AND ARE INCLUDED UNDER THE HEAD PURCHASE OF LANDS. DURING SCRUTINY PROCEEDINGS ASSESSEE EXPLAIN ED THAT THESE AMOUNTS REPRESENT COMMISSION PAYMENTS MADE BY ASSESSEE. HOWEVER, IT IS SEEN THAT TDS IS N OT DEDUCTED ON THESE PAYMENTS MADE TO VARIOUS PERSONS. HENCE EVEN THOUGH THEY ARE PAID THROUGH CHEQUE AND ARE INCURRED FOR THE PURPOSE OF BUSINESS THEY ARE DISALLOWED U/S 40(A)(IA). THE ASSESSEE HAS ADMITTED FOR THIS ADDITION.' MERE AGREEMENT FOR ADDITION DOES NOT MEAN THAT THER E HAS BEEN EITHER FRAUD OR WILFUL NEGLECT SO AS TO JUSTIFY LEVY OF PENALTY. IT WAS SO HELD IN CIT V . S.I.PARIPUSHPAM [2001] 249 ITR 550(MAD) FOLLOWING SIR SHADILAL SUGA R & GENERAL MILLS LTD V. CIT [1987] 168 ITR (SC) AND CI T V. INDEN BISLERS (1999: 240 ITR 943 (MAD). 'PENALTY UNDER S. 271(1)(C) - CONCEALMENT - AGREED ADDITION -BY ITSELF DOES NOT ESTABLISH FRAUD OR WILLFUL NEGLECT WITHOUT SOMETHING MORE. ' T HE LAW THAT ASSESSMENTS AND PENALTY PROCEEDINGS ARE DIFFERENT AND THAT PENALTY DOES NOT BECOME ELIGIBLE , M ERELY BECAUSE THE ADDITION HAD BECOME FINAL IS WELL SETTLED V I DE ALLAHABAD HIGH COURT DEC I S I ON IN T HE CASE OF CIT V. MATA PRASAD [ 2 005] 278 ITR P , 354. THE OTHER DECISIONS RELIED ON BY THE COUNSEL ALSO SUPPORT TH E VIEW THAT NO CONCEALMEN T OF IN C OME I S INVO L VED WHERE APPE L LANT AGREES FOR TH E ADDITION TO AVOID LITIGATION AND TO BUY PEACE W I TH THE DEPARTMEN T . 11. IN VIEW OF THE FACTUAL POSITION, THAT ADDITIONS W ERE AGREED TO BY THE APPELLANT WHICH WERE ALSO BROUGHT OUT IN THE ASSESSMENT ORDER BY THE A.O HIMSELF, THE EXPLANATIO N I(A) AND (B) IS NOT APPLICABLE AND RESPECTFULLY FOLLOWIN G THE ABOVE JUDICIAL DECISIONS CITED ABOVE, ESPECIALLY THE JURI SDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS S.I.PARIP USHPAM (2001) 249 ITR 550(MAD), I HOLD THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, I.T.A.NO. 2040/10 :- 11 -: PENALTY OF ` 60,80,170 LEVIED U/S 271(1)(C) IS DIRECTED TO BE CANCELLED. 12. THE DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER HE SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO COMPUTE HIS CORRECT TA X LIABILITY AS PER THE PROVISIONS OF THE ACT. THE CIT(A) OUGHT TO HAVE AP PRECIATED THAT THE ACTION OF THE ASSESSEE IN BOOKING THE ADVANCES UND ER PURCHASES, IN DEBITING PERSONAL INVESTMENTS UNDER PURCHASES, IN U NDERVALUING THE CLOSING STOCK AND UN-SUBSTANTIATING COMMISSION PAYM ENTS WITHOUT TDS COMPLIANCE CANNOT BE TERMED AS BONAFIDE OMISSIONS. THE CIT(A) ALSO FAILED TO APPRECIATE THAT THE ADDITIONS MADE IN THE ASSESSMENT ORDER WERE NOT AGREED ADDITIONS BUT WERE BASED ON THE D ETAILS AND DOCUMENTS COLLECTED. THE ASSESSEE MERELY ADMITTED TO THE SHORTCOMINGS AND ESCAPEMENT OF TAXABLE INCOME BASED ON SUCH DETAILS AND DOCUMENTS. HE FURTHER SUBMITTED THAT THE CIT(A ) OUGHT TO HAVE APPRECIATED THAT THE DECISIONS BASED ON AGREED ADD ITIONS ARE THUS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. H E, THEREFORE, SUBMITTED THAT THE ASSESSEE CONCEALED THE PARTICUL ARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME AS ENVISAGED IN SECTION 271(1)(C) OF THE ACT AND THE PROVISIONS OF EXPLANAT ION 1(A) AND (B) ARE NOT RELEVANT TO THE FACTS OF THE CASE. HE SUBMITTE D THAT THEREFORE, THE I.T.A.NO. 2040/10 :- 12 -: ORDER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 13. THE A.R OF THE ASSESSEE, ON THE OTHER HAND, FULLY JUSTIFIED THE ORDER OF THE CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, PENALTY U/S 271(1)(C) OF THE ACT W AS LEVIED BY THE ASSESSING OFFICER WITH RESPECT TO THE FOLLOWING THR EE ADDITIONS MADE TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPL ETED U/S 143(3) OF THE ACT : (I) ` 1.25 CRORES ON ACCOUNT OF ADVANCE PAID FOR PURCHAS E OF PROPERTY. (II) ` 19,63,500/- ON ACCOUNT OF DISALLOWANCE OF EXPENDIT URE U/S 40(A)(IA) OF THE ACT DUE TO DEFAULT IN TDS ; AND (III) ` 22 LAKHS ON ACCOUNT OF NON-DISCLOSURE IN CLOSING S TOCK. 15. ON APPEAL, THE CIT(A) DELETED THE PENALTY IMPOSED B Y THE ASSESSING OFFICER. 16. WE FIND THAT DURING THE PENALTY PROCEEDINGS IN RESP ECT OF THE ISSUE OF ` 1.25 CRORES THE ASSESSEE EXPLAINED BEFORE THE ASS ESSING OFFICER AS UNDER: I.T.A.NO. 2040/10 :- 13 -: AT THE OUTSET I SUBMIT THAT MY NATURE OF BUSINESS IS REAL ESTATE. FOR THE L & T SOUTH CITY PROJECT I ACTED AS A MEDIATOR WITH NUMBER OF MEDIATORS WORKING FOR ME. THESES NUMEROUS MEDIATORS CONTACT THE VARIOUS LAND OWNERS IN SIRUSERI AND OTHER PLACES AND BRING THEM TO US. THE LANDS OWNED BY THEM VARY IN SIZES AND DIMENSIONS IE., FROM LESS THAN 1 GROUND T O MORE THAN ONE ACRE. WE HAVE TO ACQUIRE ALL SUCH LANDS IRRESPECTIVE OF SIZE AND PRICE SO THAT WE CAN CONSOLIDATE THEM AND TRANSFER TO L & T AS POWER OF ATTORNEY HOLDER FOR THE SAID LANDS. WHE N THE MEDIATORS GO TO VARIOUS VILLAGES AND OWNERS AND AFTER NEGOTIATING WITH THEM AND AGREE ABOUT PRICE, THEY ISSUE SLIPS TO THE OWNERS WHO BRING THEM TO OU R OFFICE AND WE PAY THEM FULLY IN ORDER TO CLINCH THE DEAL. THOUGH THE SUCH PURCHASE WAS COMPLETED ON THE DATE OF PAYMENT TO THEM, THE PROCESS OF EXECUTING POWER OF ATTORNEY IN OUR FAVOUR TAKES SOM E MORE TIME. ONCE THE PAYMENT IS MADE BASED ON THE SLIPS, OUR OFFICE ACCOUNTS IT AS PURCHASE. IN THE THREE CASES MENTIONED IN THE ASST.ORDER, WHO WERE OUR MEDIATORS, THE SAME PROCEDURE NARRATED ABOVE WAS FOLLOWED. BECAUSE OF NUMEROUS MEDIATORS AND CONFUSION IN SURVEY NOS. AND EXTENT, AND LACK OF KNOWLEDGE AS TO WHETHER THE TRANSACTION WAS OVER, OUR OFFICE PEOPLE BOOKED THESE THREE CASES ALSO AS PURCHASE THOUGH UNDER THEM THERE WERE SOME ACTUAL PURCHASES ALSO. THESE THREE MEDIATORS HAVE TO ACCOUNT FOR US SUCH DETAILS AND BRING TO US THE OWNERS FOR EXECUTION OF POWER OF ATTORNEY IN OUR FAVOUR. THERE IS NO DENYING THE FAC T THAT SOME PURCHASES BY THESE PEOPLE WERE OVER. BUT, FOR WANT OF TIME AND LACK OF SUCH DETAILS FROM THESE MEDIATORS, WE WERE UNABLE TO PRODUCE SUCH DETAILS BEFORE YOUR GOODSELF BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS AND HENCE AGREED FOR THE ADDITION. WERE I GIVEN SOME MORE TIME I WOULD HAVE COLLECTED SUCH DETAILS AND SUBMITTED TO YOUR GOODSELF AND PROVED MAJOR PURCHASES IF NOT WHOLLY. THEREFORE, THERE WAS NO INTENTIONAL CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY ME WITH REGARD TO THIS ITEM. MOREOVER, THIS IS AN AGREED ADDITION. THEREFORE, THIS IS NOT A CASE OF CONCEALMENT OF INCOME BY ME SO AS TO ATTRACT PROVISIONS OF SEC.271(1). MERE AGREEMENT FOR ADDITION DOES NOT MEAN THAT THERE HAS BEEN EITHER I.T.A.NO. 2040/10 :- 14 -: FRAUD OR WILLFUL NEGLECT SO AS TO JUSTIFY LEVY OF PENALTY. IT WAS SO HELD IN CIT V. S.I.PARIPUSHPAM [2001] 249 ITR 550 (MAD) FOLLOWING SIR SHADILAL SUGAR AND GENERA L MILLS LTD V. CIT [1987]168 ITR 705 (SC) AND CIT V. INDEN BISLERS [1999] 240 ITR 943 (MAD). IN VIEW OF THE BINDING NATURE OF J URISDICTIONAL HIGH COURT DECISIONS AND SUPREME COURT DECISIONS, THERE IS NO CONCEALMENT OF INCOME IN MY CASE AND HENCE KINDLY DROP THE PROPOSED PENALTY PROCEEDINGS COVERING THIS ISSUE. 17. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF T HE ASSESSEE AND THE RELEVANT OBSERVATION OF THE ASSESS ING OFFICER FOR LEVY OF PENALTY IN RESPECT OF THIS ISSUE IS AS UNDER: ASSESSEES SUBMISSION IS CONSIDERED. IT IS SEEN TH AT THE SUBMISSION IS SUPERFLUOUS AND AN ADMISSION OF ASSESSEE'S OWN OMISSION, CONFUSION AND MISTAKES. THE ACCOUNT SHOUL D HAVE BEEN MADE AS PER ACCOUNTING STANDARD SO THAT CORREC T PROFIT FROM SUCH ACCOUNT CAN BE ASCERTAINED. ASSESSEE CLAIMED ADVANCES AS PURCHASES AND HAS NOT INCLUDED THE SAME IN CLOSI NG STOCK. 18. THUS, WE FIND THAT IT IS ADMITTED BY THE ASSESSING OFFICER IN THE PENALTY ORDER THAT THE ASSESSEE ADMITTED HIS O WN OMISSION, CONFUSION AND MISTAKES DURING THE ASSESSMENT PROCEE DINGS. THE ASSESSING OFFICER HAS NOT DISPUTED THE CONTENTION O F THE ASSESSEE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE ITS ELF FOUND OUT THAT ` 1.25 CRORES WERE ADVANCE AND BROUGHT THE SAME TO T HE NOTICE OF THE ASSESSING OFFICER. IT WAS NOT THE ASSESSING OFFICE R BUT THE ASSESSEE HIMSELF VOLUNTARILY BROUGHT THE POSITION TO THE NOT ICE OF THE ASSESSING OFFICER AND AGREED FOR THE ADDITION VOLUNTARILY. IN VIEW OF THESE I.T.A.NO. 2040/10 :- 15 -: UNDISPUTED FACTS, IN OUR CONSIDERED OPINION, THE DE CISION OF THE CIT(A) IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF THE ADDITION OF ` 1.25 CRORES DOES NOT WARRANT ANY INTERFERENCE. IN OUR CONSIDERED OPINION, FOR LEVY OF PENALTY U/S 271(1 )(C) OF THE ACT, THE RETURN OF INCOME OF THE ASSESSEE IS NOT THE SOLE C RITERIA AND THE CONDUCT OF THE ASSESSEE DURING THE COURSE OF ASSES SMENT PROCEEDINGS FROM THE FILING OF THE RETURN TILL THE DATE OF COMP LETION OF ASSESSMENT PROCEEDINGS IS ALSO A RELEVANT FACTOR WHICH SHOULD BE TAKEN INTO CONSIDERATION. IT IS NOT A CASE WHERE THE ASSESSE E TRIED TO HIDE THE CORRECT FACTS DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 19. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN STEE L LTD. VS STATE OF ORISSA, [1972]83 ITR 26, AND THE DECISION OF THE HO N'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS GEETHA RAMAKRISHNA MILL S P. LTD., [2007] 288 ITR 489(MAD). THE HON'BLE SUPREME COURT, IN TH E ABOVE QUOTED DECISION HAS HELD AS UNDER: AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY O UT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONS CIOUS DISREGARD OF ITS OBLIGATION. (PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIG ATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMST ANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE I.T.A.NO. 2040/10 :- 16 -: PENALTY WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FRO M A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 20. IN RESPECT OF THE NEXT ISSUE RELATING TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF EXPENDITURE OF ` 19,63,500/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, IN OUR CONSIDERED OPINION, THE CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY. WE FIND THAT IT IS NOT THE CASE WHERE THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS FOUND TO BE FALSE OR BOGUS. I N OUR CONSIDERED VIEW, THE ASSESSEE IS OBLIGED TO FURNISH THE PRIMA RY MATERIAL FACTS CORRECTLY AND COMPLETELY. NO DEFECT IN THE PRIMARY MATERIAL FACTS FURNISHED BY THE ASSESSEE WAS FOUND TO BE FALSE OR BOGUS. THEREFORE, PENALTY U/S 271(1)(C) OF THE ACT, MERELY BECAUSE OF A MISTAKE IN THE COMPUTATIONAL PROVISIONS, CANNOT BE IMPOSED. OUR V IEW IN RESPECT OF THIS ISSUE FINDS SUPPORT FROM THE DECISION OF HON'B LE DELHI HIGH COURT IN THE CASE OF CIT VS AT&T COMMUNICATION SERVICES I NDIA (P) LTD. [2012] 18 TAXMANN.COM144(DELHI) AND THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS SEAWAY S SHIPPING LTD. IN I.T.A.NO. 80/H/2011. 21. IN RESPECT OF THE LAST ISSUE RELATING TO LEVY OF PE NALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF SUPPRESSION OF C LOSING STOCK OF ` 22 LAKHS, WE FIND THAT THE ASSESSEE CONTENDED BEFORE BOTH THE LOWER I.T.A.NO. 2040/10 :- 17 -: AUTHORITIES THAT THE INCREASED CLOSING STOCK OF THI S YEAR WILL BECOME THE OPENING STOCK OF SUBSEQUENT YEAR AND WILL OFFSET AG AINST THE INCOME DISCLOSED IN THE SUBSEQUENT YEAR. THE ASSESSEES CONTENTION IS THAT BECAUSE OF THE NON-INCLUSION OF CLOSING STOCK OF ` 22 LAKHS THE ASSESSEE IN SUBSEQUENT YEAR DISCLOSED MORE PROFIT B Y ` 22 LAKHS. IN OTHER WORDS, THE CONTENTION OF THE ASSESSEE IS THA T INCOME OF ` 22 LAKHS IS NOT CONCEALED BUT THE SAME HAS BEEN DECLAR ED IN THE SUBSEQUENT YEAR IN CASE OF THIS YEAR UNDER CONSIDER ATION. WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE NOT VERIFIED THE AB OVE CONTENTION OF THE ASSESSEE. WE FIND THAT THE CIT(A) WAS NOT JUS TIFIED IN DELETING THE PENALTY IN RESPECT OF ABOVE ISSUE BY OBSERVING THAT THERE WAS NO DEFICIENCY IN FURNISHING THE MATERIAL FACTS WHEREAS THE ASSESSEE WAS FOUND TO BE DEFICIENT IN FURNISHING THE PROPER CLOS ING STOCK. HOWEVER, IF THE CONTENTION OF THE ASSESSEE THAT BECAUSE OF NON-INCLUSION OF ` 22 LAKHS IN CLOSING STOCK OF THIS YEAR THE ASSESSEE H AS SHOWN MORE INCOME OF ` 22 LAKHS IN THE SUBSEQUENT YEAR THEN IT CANNOT BE HELD THAT THE SUPPRESSION OF CLOSING STOCK WAS WITH THE INTENTION OF EVADE PAYMENT OF TAX. IN THESE CIRCUMSTANCES, IN OUR CON SIDERED OPINION, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE, TO RE STORE THIS PART OF THE GROUND OF APPEAL BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND THEREAFTER ADJUDICATION AFRESH AS PER LAW IN THE LIGHT OF THE OBSERVATION HEREIN ABOVE AFTER ALLOWING SUFFICI ENT OPPORTUNITY OF I.T.A.NO. 2040/10 :- 18 -: HEARING TO THE ASSESSEE. WE, ACCORDINGLY, MODIFY THE ORDER OF THE CIT(A) TO THE ABOVE EXTENT. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 21 ST OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (SATBEER SINGH GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 21 ST DECEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR