ACIT, CHENNAI V. M/s. S & P Foundation P. Ltd., CHENNAI

ITA 2084/CHNY/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4294 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 01-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 29-11-2013
• Court: TRIBUNAL
• Department Lawyers: DURGESH SUMROTT
• Assessee Lawyers: G BASKAR
• Keywords: Initiation of penalty proceedings; Reasonable cause; Onus to prove; Revised return
• Section: 153A; 148; 132; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , . , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ITA NO.2084/MDS/2013 ! # $# / ASSESSMENT YEAR : 2006-07 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-IV(2), 46, NUNGAMBAKKAM HIGH ROAD, CHENNAI. VS. S & P FOUNDATION PVT. LTD., OLD NO.27, NEW NO.38, MADLEY ROAD, T.NAGAR, CHENNAI 600 017. [PAN: AAICS 0224K] ( /APPELLANT ) ( / RESPONDENT ) %& ( ) / APPELLANT BY : SHRI DURGESH SUMROTT, CIT *+%& ( ) / RESPONDENT BY : SHRI G.BASKAR, ADVOCATE ( , / DATE OF HEARING : 01.03.2017 -$ ( , / DATE OF PRONOUNCEMENT : 06.06.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE REVENUE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNAI (CIT(A) FOR S HORT) DATED 05.12.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) VI DE ORDER DATED 30.06.2010 FOR ASSESSMENT YEAR (AY) 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A COMPANY IN THE BUSINESS OF CONSTRUCTION AND REAL ESTATE, WAS SUBJECT TO SEA RCH U/S. 132 OF THE ACT ON 10/1/2008. BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WE RE FOUND AND SEIZED. IN 2 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. RESPONSE TO NOTICE U/S. 153A PURSUANT TO THE SEARCH , THE ASSESSEE FILED A RETURN OF INCOME ON 12/8/2009, ADMITTING A TOTAL INCOME OF .2,55,13,240/- INCLUDING ADDITIONAL INCOME OF . 1,53,98,570/- OFFERED TOWARD DEVELOPMENT CHARGES . ASSESSMENT, ACCORDINGLY, WAS MADE, MAKING AN ADDITI ON OF . 13,000/-, U/S. 40(A)(IA) TO THE INCOME AS DISCLOSED. THE ASSESSEE WAS SUBSEQUENTLY ISSUED SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT, TO WHICH IT REPLIED AS UNDER: ' ...IN THE FINAL ACCOUNTS OF THE FY 05 -06, AN AMO UNT RS. 1,53,98,570 / - HAD BEEN DEBITED TO 'LAND DEVT. COST' BY GIVING CORRESP ONDING CRDIT TO 'ADVANCES FROM ALLOTTEES'. SUCH DEBIT OF RS. 1,53,9 8,570/- UNDER 'LAND DEVT. COST' WERE NOTHING BUT ON MONEY PAYMENTS TO V ARIOUS LAND OWNERS. IN OTHER WORDS THE FINAL ACCOUNTS OF THE YEAR ENDING 3 1.3.2006 HAD WRONG CREDIT TO AN EXTENT OF RS.1,53,98,570/- UNDER THE HEAD 'ADVANCES FROM ALLOTTEES'. IN ORDER TO COME CLEAN BEFORE THE DEPAR TMENT WE HAVE NOW REVISED OUR COMPUTATION OF INCOME BY DISALLOWING TH E EXPENDITURE OF RS.1,53,98,570 UNDER LAND DEVELOPMENT COST (ALSO TO REMOVE THE EXCESS CREDIT UNDER ADVANCES FROM ALLOTTEES).' IN THE VIEW OF THE ASSESSING OFFICER (AO), THE ASSE SSEE HAD, AS APPARENT, OFFERED TO DISCLOSE ITS INCOME ONLY IN RESPONSE TO THE SEARCH PROCEEDINGS, WHEREAT THE CREDIT OF . 153.99 LAKHS AS ADVANCE FROM ALLOTTEES HAD BEEN CALLED INTO QUESTION. THE ASSESSEE, IN FACT, DESPIT E HAVING INCOME CHARGEABLE TO TAX FOR THE RELEVANT YEAR AS PER ITS BOOKS OF ACCO UNT, WHICH WERE COMPLETE UP TO 31/3/2006, AS FOUND AT THE TIME OF SEARCH, HAD NOT FILED ITS RETURN OF INCOME FOR THE RELEVANT YEAR BY THE DUE DATE OF FILING OF RETU RN U/S. 139(1) AND, IN FACT, EVEN UP TO THE DATE OF SEARCH; RATHER, NOT EVEN WITHIN 3 0 DAYS OF THE ISSUE OF NOTICE U/S. 153A ON 29/9/2008, AS REQUIRED BY LAW. HE, ACC ORDINGLY, LEVIED PENALTY U/S. 271(1)(C) ON THE ASSESSED INCOME. IN APPEAL, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME U/S.139(1) OF THE ACT FOR THE RELEVANT YEAR ON 30/11/2006 AT AN INCOME OF . 1,01,14,668/-. IT WAS THEREFORE WRONG TO SAY THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME UP TO THE DATE OF SEARCH. THE ONLY QUESTION THAT THEREFORE 3 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. SURVIVED WAS THE LEVY OF PENALTY ON THE ADDITIONAL INCOME OF . 153.99 LAKHS OFFERED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S. 153A AS WELL AS THE DISALLOWANCE OF . 13,000 U/S. 40(A)(IA) IN ASSESSMENT. CONSIDERING THE ASSESSEES SUBMISSIONS ON THE FACTS OF THE CASE, HE DELETED THE PENALTY THEREON, HOLDING AS UNDER: 6.1 AS REGARDS THE PENALTY ON ADDITIONAL AMOUNT OF RS.1,58,98,570/-, BEING WITHDRAWAL OF LAND DEVELOPMENT CHARGES, THE AO HAS STATED THAT BUT FOR SEARCH, THE ASSESSEE WOULD NOT HAVE DISCLOSED ANY I NCOME FILED IN RESPONSE TO NOTICE U/S 153A. HE HAS, HOWEVER, NOT GIVEN ANY DEFINITE FINDING AS TO HOW IT CONSTITUTES CONCEALED INCOME. WHILE CONSIDER ING AN APPEAL AGAINST AN ORDER MADE U/S 271 (1 )(C), WHAT IS REQUIRED TO BE EXAMINED IS THE RECORD WHICH THE AO IMPOSING PENALTY HAD BEFORE HIM AND IF THAT RECORD CAN SUSTAIN THAT THERE HAS BEEN CONCEALMENT OR FURNISHI NG INACCURATE PARTICULARS OF INCOME, THAT WOULD BE SUFFICIENT TO SUSTAIN THE PENALTY. AT THIS JUNCTURE, IT WOULD BE APPROPRIATE TO NOTE THAT THE EXPLANATION C ONTAINED SECTION IN U/S 271 (1 )(C) IS SELF CONTAINED IN THAT IT TREATS EVE RY DIFFERENCE BETWEEN THE REPORTED AND ASSESSED INCOME AS CONCEALED INCOME, B UT AT THE SAME TIME, PROVIDES THE CRITERIA WHERE PENALTY WOULD BE WARRAN TED. PENALTY IS LEVIABLE FOR CONCEALMENT WHERE AN ASSESSEE FAILS TO OFFER AN Y EXPLANATION FOR A DIFFERENCE OR OFFERS AN EXPLANATION, WHICH IS FOUND TO BE FALSE. IN THE INSTANT CASE, THE AMOUNT HAS BEEN VOLUNTARILY OFFERED BY TH E APPELLANT IN THE RETURN. OF INCOME U/S.153A BY WITHDRAWING THE LAND DEVELOPM ENT EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS B EEN ABLE TO OFFER AN EXPLANATION WHICH IS SATISFACTORY. FURTHER, AS SUBM ITTED BY THE LD. LD. A.R TAXES HAVE ALSO BEEN PAID ON THE ADMITTED INCOME. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SURESH CHANDRA MITTAL, 259 ITR 9 (SC) IS RELEVANT IS SUCH A SITUATION. THE HON 'BLE SUPREME COURT HELD THAT PENALTY IS NOT LEVIABLE IF THE ASSESSEE FILES REVISED RETURN OFFERING ADDITIONAL INCOME. IN THAT CASE, THE ASSESSEE HAD O RIGINALLY FILED RETURNS SHOWING MEAGRE INCOME. WHEN, AFTER SEARCH ACTION U/ S 132, A NOTICE U/S 148 WAS SERVED ON HIM, HE FILED REVISED RETURNS SHOWING HIGHER INCOME. SUBSEQUENTLY, ASSESSMENT ORDER WAS PASSED AND THE R ETURN SUBMITTED WAS REGULARIZED U/S 148. IN PENALTY PROCEEDINGS U/S 271 (1 )(C), THE ASSESSEE CLAIMED THAT HE OFFERED ADDITIONAL INCOME TO BUY PE ACE OF MIND AND AVOID LITIGATION. A.O. DID NOT ACCEPT THE CONTENTION AND LEVIED PENALTY WHICH WAS CONFIRMED BY CIT(A). BUT THE ITAT HELD THAT THE DEP ARTMENT HAS NOT 'DISCHARGED ITS BURDEN OF PROVING CONCEALMENT AND H AD SIMPLY RESTED ITS CONCLUSION ON THE ACT OF VOLUNTARY SURRENDER DONE B Y ASSESSEE ON GOOD FAITH, AND THAT PENALTY ORDER COULD NOT BE LEVIED IN SUCH INCOME. ON A REFERENCE, THE HON'BLE HIGH COURT HELD THAT NO PENALTY COULD B E LEVIED FOR CONCEALMENT. THE DEPARTMENT PREFERRED APPEALS TO TH E HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT DISMISSED THE APPE ALS HOLDING THAT NO INTERFERENCE WITH THE ORDER OF THE HIGH COURT WAS C ALLED FOR (251 ITR 9). 4 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. THERE IS NO REASON AS TO WHY THE RATIO OF THE ABOVE DECISION WILL NOT BE' APPLICABLE TO THE FACTS OF THE PRESENT CASE. HERE A LSO, A SEARCH ACTION U/S 132 WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE. TH E APPELLANT HAD FILED ORIGINAL RETURN OF INCOME ON 28.11.2006 DECLARING I NCOME OF RS. 1,01,46,668/-. SUBSEQUENT TO SEARCH U/S 132, IT FIL ED RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 153A WHEREIN IT HAS OFFE RED ADDITIONAL INCOME OF RS.1,53,98,570/- BY WITHDRAWING THE CLAIM OF LAND D EVELOPMENT EXPENSES. THE AO HAS ALSO ACCEPTED THE ABOVE INCOME IN THE AS SESSMENT ORDER. THERE IS NO DEFINITE FINDING REGARDING CONCEALMENT OF INC OME OF FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. THE APPELLAN T DID NOT FILE ANY APPEAL BECAUSE ADDITION OF RS.13,000/- ONLY WAS MADE U/S 4 0(A)(IA) TO THE RETURNED INCOME. MOREOVER, IT IS WELL SETTLED THAT ASSESSMEN T AND PENALTY PROCEEDINGS ARE SEPARATE. IN VIEW OF THESE FACTS AND RESPECTFUL LY FOLLOWING THE ABOVE DECISION, I AM OF THE CONSIDERED OPINION THAT PENAL TY CANNOT BE LEVIED ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. 6.2 AS REGARDS DISALLOWANCE U/S 40(A)(IA) IT MAY BE STATED THAT PENALTY WAS NOT INITIATED ON THIS ADDITION OF RS.13,000/- IN TH E ASSESSMENT ORDER. HOWEVER, PENALTY HAS BEEN LEVIED BECAUSE THE ENTIRE ASSESSED INCOME WAS SUBJECTED TO PENALTY U/S 271 (1 )(C).THE HON'BLE IT AT(SB), VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORT V. ADD. CIT, (2012) 20 TAXRNAN.COM 244 HAS HELD THAT PROVISIONS OF SEC.40 (A)(IA) ARE APPLICABLE ONLY TO AMOUNTS OF EXPENDITURE PAYABLE AS ON 31 ST MARCH OF THE PREVIOUS YEAR AND NOT TO ACTUAL AMOUNTS PAID DURING THE PREV IOUS YEAR WITHOUT DEDUCTION OF TDS. WHEN THE ADDITION ITSELF IS NOT S USTAINABLE, THERE IS NO QUESTION OF LEVY OF PENALTY ON SUCH ADDITION. THE H ON'BLE SUPREME COURT IN CIT V. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 15 8 HAS ALSO HELD THAT DISALLOWANCE OF EXPENSES PER SE WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. HENCE, THE PENALTY IS NOT LE VIABLE ON THIS ADDITION. IN THE RESULT, THE GROUND IS ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL. 3. BEFORE US, THE ADMITTED POSITION WAS THAT NO RETURN OF INCOME HAD BEEN FILED PRIOR TO THE DATE OF SEARCH, AND HAD BEEN ONL Y AFTER THE ISSUE OF NOTICE U/S. 153A, ON 12/8/2009. WHILE THE REVENUE RELIED ON THE FINDINGS IN ASSESSMENT AND THE PENALTY ORDERS, THE LD. AR WOULD ON THE DEC ISIONS IN RAWATMAL HARAKCHAND V. CIT [1981] 129 ITR 346 AND IN P.V.DOSHI V. CIT [1978] 113 ITR 22, AVERRING THAT EVEN THE INITIATION OF THE PE NALTY IS BAD IN LAW. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. 4.1 WE MAY PROCEED BY DELINEATING THE RESPECTIVE CA SES OF THE PARTIES BEFORE US. THE REVENUES CASE IS THAT THE FILING OF THE RE TURN BY THE ASSESSEE IS ONLY SUBSEQUENT TO THE SEARCH AND UPON DISCOVERING THAT IT HAD NO REASONABLE EXPLANATION FOR THE ADVANCE FROM ALLOTTEES CREDIT ED IN ITS BOOKS IN CASH , IN THE LIKE SUM, I.E., . 153.99 LAKHS, CORRESPONDING TO THE EXPENDITURE BO OKED UNDER THE ACCOUNT HEAD DEVELOPMENT CHARGES, AND WHICH I S ADMITTEDLY ON MONEY PAID TO THE PERSONS FROM WHOM LAND OR RIGHTS THEREIN HAD BEEN ACQUIRED. THE BASIS FOR THE RELIEF BY THE FIRST APPELLATE AUTHORITY IS THAT THE ASSESSEE HAVING ALREADY FILED ITS RETURN ON 30/11/2006, IT IS ONLY THE ADDI TIONAL INCOME (OF . 153.99) LACS OFFERED PER THE RETURN U/S. 153A, OR THE DISALLOWAN CE EFFECTED IN ASSESSMENT, THAT COULD AT ALL BE CONSIDERED FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271(1)(C). THE LATTER WAS ON THE BASIS THAT THE AMO UNT WAS NOT PAYABLE AS AT THE YEAR-END, EVEN AS ADVOCATED BY THE TRIBUNAL IN MERILYN SHIPPING & TRANSPORT V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISH)(SB) (REFER PARA 6.2 OF THE IMPUGNED ORDER). WITH REGARD TO THE FORMER, THERE WAS NO FIN DING AS TO CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE AO, WHO HAD MERELY INFERRED THAT THE ASSESSEE WOULD NOT HAVE RETURNED ITS INC OME BUT FOR THE SEARCH THEREON. THE BURDEN TO PROVE THAT IT WAS NOT A CASE OF A VOLUNTARY SURRENDER OF INCOME, MADE IN GOOD FAITH, IS ON THE REVENUE, WHIC H IT HAD NOT DISCHARGED. THE ASSESSEE HAS ONLY OFFERED THE INCOME TO BUY PEACE O F MIND. HE, ACCORDINGLY, DELETED THE PENALTY ON THE ENTIRE SUM, RELYING ON T HE DECISION IN THE CASE OF CIT V. SURESH CHANDRA MITTAL [2001] 251 ITR 9 (SC), WHEREIN, SIMILARLY, NOTICE U/S. 148 HAD BEEN ISSUED AFTER SEARCH ACTION U/S. 132, I N RESPONSE TO WHICH THE ASSESSEE HAD OFFERED A HIGHER INCOME (REFER PARA 6. 1). THE PENALTY, WHICH STANDS LEVIED ON THE ENTIRE ASS ESSED INCOME, WOULD ACCORDINGLY NEED TO BE CONSIDERED SEPARATELY FOR EA CH OF THE THREE SUMS COMPRISING IT. WHILE THE REVENUE MAINTAINS THAT NO RETURN OF INCOME HAD BEEN FILED PRIOR TO 12/8/2009, THE LD. CIT(A) HAS ALLOWE D RELIEF TO THE ASSESSEE (ON THE 6 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. REGULAR BUSINESS PROFIT AS PER ITS BOOKS OF ACCOUN T) ON THE BASIS THAT THE SAME HAD BEEN DULY RETURNED ON 30/11/2006. THE ISSUE THU S TURNS ON A MATTER OF FACT, I.E., WHETHER OR NOT THE ASSESSEE HAD FILED ITS RET URN OF INCOME ON 30/11/2006, THE ONLY RETURN ADMITTEDLY FURNISHED BY IT PRIOR TO THA T U/S. 153A ON 12/8/2009. IT IS INDEED SURPRISING THAT THERE SHOULD BE ANY AMBIGUIT Y AND, FURTHER, CONTINUING UP TO THE SECOND APPELLATE STAGE, ON SUCH A SIMPLE MAT TER OF FACT. WHERE THE ASSESSEE HAS FILED A RETURN ON 30/11/2006, THE SAME WOULD NECESSARILY BE RECEIPTED, I.E., CARRY A RECEIPT NUMBER AND, BESIDE S, WOULD HAVE BEEN PROCESSED U/S. 143(1)(A). BE THAT AS IT MAY, WHERE FURNISHED, THERE IS NO QUESTION OF THE ASSESSEE BEING SUBJECT TO PENALTY THEREON, WHILE, W HERE NOT, THE SAME IS RETURNED FOR THE FIRST TIME ONLY ON 12/8/2009, EVEN AS THE S AME IS ONLY AS PER ITS BOOKS OF ACCOUNT, FOUND AND SEIZED IN SEARCH. ACCORDINGLY, T HE ASSESSEE HAVING NOT FURNISHED ANY EXPLANATION FOR NOT RETURNING THE INC OME CHARGEABLE TO TAX, IT SHALL BE LIABLE FOR PENALTY ON THE INCOME OF . 101.15 LAKHS. THE ISSUE IS IN FACT SQUARELY COVERED BY EXPLANATION 3 TO SECTION 271(1)(C), WHICH READS AS UNDER; THE TIME PERIOD PRESCRIBED U/S. 153 EXPIRING ON 31/ 3/2009: EXPLANATION 3. WHERE ANY PERSON FAILS, WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1) OF SECTION 153 A RETURN OF HIS INCOME WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1989, AND UNTIL THE EXPIRY OF THE PERIOD AFORESAID, NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 142 OR SECTION 148 AND THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR SUCH PERSON HAS TAXABLE INC OME, THEN, SUCH PERSON SHALL, FOR THE PURPOSES OF CLAUSE ( C ) OF THIS SUB-SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR, NOTWITHSTANDING THAT SUCH PERSON FURNISHES A RETURN OF HIS INCOME AT ANY TIME AFTER THE EXPIRY OF THE PERIOD AFORESAID IN PU RSUANCE OF A NOTICE UNDER SECTION 148. IN THIS REGARD, HOWEVER, WE OBSERVE FROM THE ASSES SMENT ORDER THAT THE ASSESSEE HAD PAID ADVANCE TAX AT . 35 LACS. THE COMPUTATION OF PENALTY, WHICH STANDS LEVIED AT 100 PER CENT OF THE TAX SOUGHT TO BE EVADED, SHALL, IN THE PRESENT CASE, BE WITH REFERENCE TO EXPLANATION 4(B) TO S. 271(1)(C), READING AS UNDER, 7 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. WHICH ALLOWS CREDIT FOR THE ADVANCE TAX. WITHOUT DO UBT, INTEREST U/SS. 234A, 234B, AND 234C SHALL, IN VIEW OF S. 140A, CHARGEABL E UP TO THE DATE/S OF THE PAYMENT OF ADVANCE-TAX, HAVE TO BE APPROPRIATED FIR ST, AND ONLY THE BALANCE AMOUNT REGARDED IN LAW AS THE AMOUNT OF ADVANCE-TAX PAID BY THE ASSESSEE FOR THE RELEVANT YEAR: EXPLANATION 4. FOR THE PURPOSES OF CLAUSE ( III ) OF THIS SUB-SECTION, THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED, ( A ). ( B ) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS THE TAX ON THE TOTAL INCOME ASSESSED AS REDUCED BY THE AMOUNT OF ADVANCE TAX, T AX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SELF-ASSESSMENT TAX PAID BE FORE THE ISSUE OF NOTICE UNDER SECTION 148; ( C ). WE DECIDE ACCORDINGLY, WITH THE AO COMPUTING THE P ENALTY, WHERE NO RETURN HAS BEEN FILED ON 30.11.2006, ALLOWING CREDI T FOR THE ADVANCE TAX. 4.2 NEXT, WE MAY DISCUSS THE ASPECT OF LEVY OF PENA LTY ON THE SUM OF . 153.99 LACS OFFERED AS ADDITIONAL INCOME PER THE S. 153A R ETURN. EXPLANATION 5A TO S. 271(1)(C) OF THE ACT READS AS UNDER: EXPLANATION 5A. WHERE IN THE COURSE OF A SEARCH INITIATED UNDER SE CTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSE SSEE IS FOUND TO BE THE OWNER OF, ( I ) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE A RTICLE OR THING (HEREINAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS YEAR; OR ( II ) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACC OUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH AND, - (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS Y EAR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R SUCH YEAR HAS EXPIRED AND THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEA RCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUS E ( C ) OF SUB- 8 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONC EALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. WHERE, THEREFORE, THE ASSESSEE IS FOUND IN THE COU RSE OF SEARCH TO BE THE OWNER OF ANY ASSET, THE SOURCE OF WHICH IS ATTRIBUT ABLE TO INCOME, OR OTHERWISE AS THE OWNER OF ANY INCOME (FOR ANY PREVIOUS YEAR) BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT, DOCUMENTS OR TRANSACTIONS, WHICH HAS NOT BEEN DISCLOSED PER THE RETURN OF INCOME FOR THE RELEVANT YEAR ENDED PR IOR TO THE DATE OF SEARCH (OR IN RESPECT OF WHICH YEAR NO RETURN HAD BEEN FILED DESP ITE THE EXPIRY OF THE DUE DATE FOR FURNISHING THE RETURN OF INCOME AS ON THE DATE OF SEARCH), THEN, NOTWITHSTANDING IT BEING RETURNED AS INCOME PER THE RETURN FILED SUBSEQUENT TO THE SEARCH, THE ASSESSEE SHALL, FOR THE PURPOSE OF LEVY OF PENALTY U/S. 271(1)(C), BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, I.E., PER THE RETURN OF INCOME AS FURNISHED . IN THE FACTS OF INSTANT CASE, THE ASSESSEE HAVING RETURNED THE ADDITIONAL INCOME OF . 153.99 LACS IN PURSUANCE TO NOTICE U/S. 153A, WHI CH IT ADMITS AS HAVING DONE VOLUNTARILY, HOW, WE WONDER, IS IT NOT A CASE SQUARELY GOVERNED BY THE SAID EXPLANATION 5A . THE ASSESSEE IN FACT ADMITS TO THE SUM CREDITED TO THE ACCOUNT ADVANCE FROM ALLOTTEES AS REPRESENTING IT S INCOME . THE SAME, IT NEEDS TO BE APPRECIATED, DOES NOT EXPLAIN, MUCH LESS SATI SFACTORILY, THE NATURE AND SOURCE OF THE SAID CREDIT, SO THAT SECTION 68, DEEM ING THE SAME AS THE ASSESSEES INCOME FOR THE CURRENT YEAR, SHALL APPLY WITH FULL FORCE. WHO ARE THE ALLOTTEES? WHAT IS THEIR CREDITWORTHINESS? HAVE THEY CONFIRMED PAYING THE SAME, REPRESENTING THE MONEY PAID TO THE SELLERS OF LAND? WHY, AGAIN, IF THEY HAVE, IS THE AMOUNT NOT REFLECTED AS THE SALE PROCEEDS OF TH E RELEVANT REAL ESTATE/PROPERTY, HAVING BEEN RECOVERED FROM THE ALLOTTEES BY THE ASS ESSEE AS A PART OF THE COST, OR OTHERWISE CHARGED TO THEM? THIS IS ALL THE MORE SO AS THE ASSESSEE HAS CLAIMED AND BEEN ALLOWED DEDUCTION (IN COMPUTING ITS REGULA R PROFIT) IN RESPECT OF EXPENDITURE OF ITS BUSINESS BY WAY OF ON MONEY PAID TO THE SELLERS OF LAND, AS 9 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. DEVELOPMENT CHARGES. HOW DOES IT, IN ANY CASE, REPRESENT A LIABILITY OF THE ASSESSEE ? IN FACT, TO THE EXTENT THE ASSESSEE HAS RECEIVED MONEY, DULY ENTERED IN ITS BOOKS OF ACCOUNT, THE SAME IS ALSO COVERED UND ER CLAUSE (I), I.E., BESIDES CLAUSE (II), OF EXPLANATION 5A . THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SQUARELY COVERED BY THE SAID PROVISION, EVEN AS OBS ERVED BY THE BENCH DURING HEARING, TO NO SATISFACTORY ANSWER BY THE LD. AR. T HE LD. CIT(A) HAS IN OUR VIEW COMPLETELY MISLED HIMSELF IN THE MATTER BY NOT CONS IDERING A DIRECT PROVISION OF LAW, CLEARLY APPLICABLE IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. IN FACT, THAT THE AO HAS NOT REFERRED TO IT IS NOT RELEVANT IN-AS -MUCH AS THE PROVISION OF LAW (SECTION), IS TO BE READ ALONG WITH EXPLANATION APPENDED THERETO, WITH THERE BEING NO ESTOPPEL AGAINST LAW (ALSO REFER: CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC)). THE SCOPE FOR THE NON-APPLICATION OF THE SAID EXPLANATION IS ONLY WHERE THE ASSESSEE DOES NOT ADMIT THE SAME AS ITS INCOME, WHICH THEN BECOMES A SUBJECT MATTER OF DISPUTE BETWEEN THE ASS ESSEE AND THE REVENUE. AGAIN, IN VIEW OF THE FOREGOING, REFERENCE TO THE A DMISSION BEING VOLUNTARY, OR TO THE DECISIONS, AS THE CASE OF SURESH CHANDRA MITTAL (SUPRA), IS COMPLETELY MISPLACED. AS AFORE-NOTED, THAT THE INCOME IS ADMIT TED, AND THE DISCLOSURE VOLUNTARY, IS THE REASON OR THE BASIS FOR THE APPLI CATION OF EXPLANATION 5A . EVEN ON FACTS, IT IS TO BE APPRECIATED THAT IT IS THE SE ARCH AND THE CONCOMITANT DISCOVERY OF THE BOOKS OF ACCOUNT, DULY COMPLETED, REFLECTING THE SAID CREDIT AS WELL AS EXPENDITURE CLAIMED, THAT HAS LED TO THE DI SCLOSURE, WITH THE ASSESSEE HAVING NO ANSWER TO THE VARIOUS ASPECTS OF THE CRED IT OR THE AMOUNTS CREDITED TO THE ACCOUNT HEAD ADVANCE TO ALLOTTEES AS WELL AS THE CORRESPONDING DEBIT TO THE ACCOUNT DEVELOPMENT CHARGES, CLAIMED AS DEDUCTION . THERE IS NO CONFIRMATION FROM THE TRANSFEROR/S OF THE REAL ESTATE TO HAVING RECEIVED ON MONEY, I.E., QUA THE AMOUNT DEBITED TO THE SAID (LATTER) ACCOUNT, WHICH HAS IN ANY CASE BEEN CLAIMED AND ALLOWED AS DEDUCTION. 10 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. AS EXPLAINED IN MAK DATA (P.) LTD. V. CIT [2013] 358 ITR 593 (SC), THE PLEA AS TO THE DISCLOSURE BEING ONLY TO BUY PEACE O F MIND, ETC., IS ONLY A RUSE OR A MAKE BELIEVE. THE ASSESSEES CASE, ON THE CONTRARY , IS SQUARELY COVERED AGAINST IT BY THE DECISIONS IN THE CASE MAK DATA (P.) LTD. (SUPRA); K.P MADHUSUDHANAN V. CIT [2001] 251 ITR 99 (SC); AND CIT V. ZOOM COMMUNICATIONS P. LTD. [2010] 327 ITR 510 (DEL), TO NAME SOME, BEING CLEAR LY APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I.E., QUA ADDITIONAL INCOME. AND, CONSIDERED EITHER WAY, IRRESPECTIVE OF WHETHER THE ASSESSEE HA S FILED, OR NOT FILED, THE RETURN OF INCOME ON 30/11/2006. BOTH EXPLANATION 5A , AS WELL AS EXPLANATION 1 TO S. 271(1)(C) ARE, ACCORDINGLY, ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE SAID SUM. WE DECIDE ACCORDINGLY (ALSO REFER PARA 4.4). 4.3 FINALLY, WE MAY DISCUSS THE ASPECT OF DISALLOWA NCE UNDER SECTION 40(A)(IA) EFFECTED AT . 13,000. THE LD. CIT(A) HAS DIRECTED DELETION ON T HE BASIS OF THE CORRESPONDING AMOUNT BEING NOT PAYABLE AS AT THE YE AR-END FOLLOWING MERILYN SHIPPING & TRANSPORT (SUPRA). THE PLEA IS VALID. HOWEVER, WE OBSERVE NO EXPLANATION BY THE ASSESSEE TO THAT EFFECT; RATHER, WHATSOEVER. AND, CONSEQUENTLY, ABSENCE OF ANY FINDING BY ANY AUTHORI TY. THE MATTER WOULD ACCORDINGLY HAVE TO GO BACK TO THE FILE OF THE AO T O DETERMINE AS A MATTER OF FACT WHETHER THE AMOUNT DISALLOWED OUTSTANDS, IN WH OLE OR IN PART, AS AT THE YEAR- END, SO THAT TO THE EXTENT IT OUTSTANDS, NO PENALTY WOULD BE EXIGIBLE. WHERE, AND TO THE EXTENT NOT, AN ABSENCE OF ANY EXPLANATION WO ULD JUSTIFY THE LEVY OF PENALTY UNDER 271(1)(C). WE DECIDE ACCORDINGLY. 4.4 BEFORE PARTING WITH OUR ORDER, WE MAY ALSO ADDR ESS THE ASSESSEES CHARGE OF EVEN THE INITIATION OF PENALTY PROCEEDINGS BEING BAD IN LAW. IN THIS REGARD, IT MAY SUFFICE TO REFER TO THE FOLLOWING OBSERVATIONS BY THE HON'BLE APEX COURT IN MAK DATA (P.) LTD. (SUPRA), A DECISION RENDERED BY IT WITH REFERENCE T O AND IN FACT APPLYING ITS EARLIER DECISIONS, AS IN UNION OF INDIA V. DHARAMENDRA TEXTILE 11 ITA NO.2084 /MDS/2013 (AY 2006-07) ASST. CIT V. S & P FOUNDATION PVT. LTD. PROCESSORS [2008] 306 ITR 277 (SC) AND CIT V. ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC): EXPLANATION 1 TO SECTION 271(1)(C) OF THE INCOME-T AX ACT, 1961 , RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NO TICED BY THE ASSESSING OFFICER, BETWEEN THE REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIA BLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION HAS BEEN DIS CHARGED BY HIM, THE ONUS SHIFTS TO THE DEPARTMENT TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED INCOME AND NOT OTHERWISE. VOLUNTARY DISCLOSURE DOES NOT RELEASE THE ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS. THE LAW DOES NOT PROVIDE THAT WH EN AN ASSESSEE MAKES A VOLUNTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HA S TO BE ABSOLVED FROM PENALTY. THE ASSESSING OFFICER SHOULD NOT BE CARRIE D AWAY BY THE PLEA OF THE ASSESSEE SUCH AS VOLUNTARY DISCLOSURE, BUY PEACE , AVOID LITIGATION, AMICABLE SETTLEMENT, TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEA LMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. THE ASSESSING OFFICER HAS TO SATISFY HIMSELF WHETH ER OR NOT PENALTY PROCEEDINGS SHOULD BE INITIATED DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER IS NOT REQUIR ED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT IN TO WRITING. THE ASSESSEES PLEA AND, ITS CASE, IS WITHOUT MERIT . 5. IN THE RESULT, THE REVENUES APPEAL IS DISPOSED ON THE AFORESAID TERMS. ORDER PRONOUNCED ON JUNE 06, 2017 AT CHENNAI . SD/- (29/5/17) SD/- (19/5/17) ( . ) ( ) (G. PAVAN KUMAR) (SANJAY ARORA) ! /JUDICIAL MEMBER /ACCOUNTANT MEMBER /CHENNAI, . /DATED, JUNE 06, 2017. EDN / ( *!,01 21$, /COPY TO: 1. %& /APPELLANT 2. *+%& /RESPONDENT 3. 3, ( )/CIT(A) 4. 3, /CIT 5. 145 *!,! /DR 6. 56# 7 /GF