Chandan K. Shewani, Pune V. DCIT,Cent. Cir. 1(1), Pune

ITA 235/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56387 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 10-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Assessee Lawyers: SUNIL PATHAK NIKHIL PATHAK
• Keywords: Unexplained cash credit; Gift; Question of law; Reasonable cause
• Section: 153A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 235 & 236/PN/2010 (ASSTT. YEARD : 2002-03 & 2003-04) CHANDAN K. SHEWANI ... APPELLANT D-14, PARMAR PARADISE, B.J. ROAD PUNE-411001 PAN: ABDPS4846G V. DY. COMMISSIONER OF INCOME TAX RESPONDENT CENTRAL CIRCLE 1(1), 4 TH FLOOR, P.M.T. BUILDING, C WING\, SHANKERSETH ROAD, SWARGATE, PUNE APPELLANT BY : S/SHRI SUNIL PATHAK/NIKHIL PATH AK RESPONDENT BY : SHRI ALOK MISHRA DATE OF HEARING : 16/7/12 DATE OF PRONOUNCEMENT : 29-8-12 ORDER PER R.S. PADVEKAR, JM THESE TWO APPEALS ARE ARISING FROM THE PENALTY ORDE RS PASSED U/S. 271(1)(C) OF THE ACT FOR THE A.YS. 2002-03 AND 2003 -04. AS THE FACTS ARE IDENTICAL IN BOTH THE A.YS., BOTH THESE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. THE ASSESSEE HAS QUESTIONED THE VALI DITY OF THE PENALTIES LEVIED U/S. 271(1)(C ) BY THE A.O. AND PARTLY SUSTA INED BY LD. CIT(A) FOR THE A.Y. 2002-03 AND A.Y. 2003-04. 2. THE FACTS REVEALED FROM THE RECORD ARE AS UNDER . THERE WAS SEARCH ACTION IN THE CASE OF ASSESSEE U/S. 132 OF THE ACT ON 15.6.2004 DURING WHICH, CASH AMOUNTING TO RS. 35,25,000/- WAS SEIZED AS THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE SAID CASH. IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A, ASSESSEE DECLARED THE ADDITIONAL INCOME OF RS. 9,80,000/-, WHICH COMPRISED OF UNDISCLOSED FAMI LY EXPENSES OF RS. 4,80,000/- AND FICTITIOUS GIFTS OF RS. 5,00,000/- O VER AND ABOVE WHAT WAS DETECTED AS A RESULT OF SEARCH. THE A.O. MADE ESTI MATED ADDITION OF RS. 50,000/- TO UNDISCLOSED INCOME OFFERED BY THE ASS ESSEE OF RS. 9,80,000/- AND ANOTHER SUM OF RS. 50,000/- TOWARDS ON-MONEY. THE A.O. INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)( C ) AND VIDE ORDER ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 2 DATED 28.3.2008, LEVIED THE PENALTY OF RS. 4,50,000 /- U/S. 271(1)(C ) OF THE ACT. AS OBSERVED BY THE A.O, THE ADDITIONAL IN COME ON ACCOUNT OF UNDISCLOSED CASH CREDITS AND FICTITIOUS GIFTS TO TH E EXTENT OF RS. 9,80,000/- WAS OFFERED IN CONSEQUENCE TO THE SEARCH ACTION ONL Y. THE A.O HAS FURTHER OBSERVED THAT THE ASSESSEES CASE IS COVERED BY EXP LANATION 3 TO SEC. 271(1)(C ). CONSIDERING THE FACT THAT ASSESSEE FIL ED THE RETURN OF INCOME ONLY AFTER THE DATE OF SEARCH, HE CONCLUDED THAT TO THE EXTENT OF RS. 15,42,140/-, THE ASSESSEE HAS CONCEALED THE INCOME FOR THE A.Y. 2002-03 AND HE LEVIED THE PENALTY TO THE EXTENT OF RS. 4,50 ,000/- FOR THE A.Y. 2002-03. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD CIT(A). THE LD CIT(A) CONFIRMED THE PENALTY ON THE FOLLOWING ITEMS OF INCOME : 1) UNEXPLAINED CREDIT RS. 9,80,000/- 2) UNDISCLOSED ENTRY RS. 10,676/- 3) INCOME FROM SHARE TRADING RS. 4, 566/- 4. CAPITAL GAINS RS. 1,36,252/- 5. DIVIDEND RS. 977/- IN SUM AND SUBSTANCE, THE ASSESSEE COULD NOT GET MA JOR RELIEF FROM LD. CIT(A) AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE US FOR A.Y. 2002-03. 3. IN RESPECT OF A.Y. 2003-04, THE ASSESSEE FILED THE RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR ON 29.4.2005 DISCLOSIN G TOTAL INCOME OF RS. 37,99,170/-. IN THE SAID RETURN, THE ASSESSEE OFFE RED THE ADDITIONAL INCOME OF RS. 32,00,000/- ON ACCOUNT OF UNDISCLOSED CASH CREDIT AND RS. 55,000/- ON ACCOUNT OF UNDISCLOSED ENTRY. THE A.O. CONCLUDED THE ASSESSMENT OF THE ASSESSEE DETERMINING THE TOTAL IN COME OF RS. 38,39,170/-. THE A.O. INITIATED THE PENALTY PROCE EDINGS U/S. 271(1)(C ) IN RESPECT OF THE ADDITIONAL INCOME OF RS. 32,55,00 9/- WHICH WAS OFFERED BY THE ASSESSEE. IT APPEARS THAT THE ADDITION OF RS . 50,000/- MADE BY THE A.O IN RESPECT OF THE UNDISCLOSED CASH CREDIT TO TH E EXTENT OF RS. 50,000/- WAS DELETED BY THE CIT(A). THE ASSESSEE CONTENDED THAT THERE IS NO VARIATION BETWEEN THE INCOME ASSESSED AND DECLARED IN THE RETURN OF INCOME FILED U/S. 153A. THE A.O. REJECTED THE CONT ENTION OF THE ASSESSEE AND LEVIED THE PENALTY OF RS. 12,00,000/- ON THE IN COME OF RS. 32,55,000/- WHICH WAS OFFERED BY THE ASSESSEE IN TH E RETURN FILED. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD CIT(A). BEFORE THE LD CIT(A), THE ASSESSEE CONTENDED THAT WITH A VIEW TO BUY PEACE OF MIND, THE ASSESSEE DECLARED THE ADDITIONAL INCOME T O THE TUNE OF RS. ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 3 32,55,000/- RIGHT AT THE TIME OF SEARCH ACTION ITSE LF. AS PER CONTENTION OF THE ASSESSEE, THE SAID AMOUNT WAS IN RESPECT OF UNE XPLAINED CASH CREDITS AS UNDER : PARTICULAR AMOUNT 1.DRAWING OF FAMILY RS.1,71,193/ - 2.CITI BANK A/C. NO.5 - 1036 - 3 5 - 707 RS.5,00,000/ - 3.CITI BANK A/C. NO.15 - 1036 - 36-703 RS.9,75,000/ - BANK 148100 00 6216 RS. 13,75,00/ - TIRUPATI FINANCIAL NAGARI RS. 1,00 ,000/ - CASH BALANCE RS. 75,807/ - TOTAL RS.32,00,000 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. WE FIRST TAKE THE ASSESSEES APPEAL FOR THE A.Y. 2002-03 BEING IT A NO. 235/PN/2010. AS PER THE FACTS ON RECORD, SEARCH ACTION U/S. 132( 1) OF THE I.T. ACT WAS CARRIED OUT AT THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASSESSEE ON 15.6.2004. DURING THE COURSE OF SEARCH, CASH OF RS. 35,59,100/-WAS FOUND. SO FAR AS A.Y. 2002-03 IS CONCERNED, IN RES PONSE TO NOTICE U/S. 153A OF THE ACT, THE ASSESSEE FILED THE RETURN OF I NCOME DISCLOSING TOTAL INCOME OF RS. 14,92,138/-. THE A.O COMPLETED THE A SSESSMENT MAKING THE ADDITION TO THE EXTENT OF RS. 1,00,000/-. THE TOTAL INCOME OF THE ASSESSEE DECLARED IN THE RETURN WAS COMPRISED OF TH E FOLLOWING INCOME - SR.NO. PARTICULARS AMOUNT RS. PS. 1. INCOME FROM HOUSE PROPERTY 1,67,389.00 2. INCOME FROM SHARE TRADING 4656.00 3. SHORT TERM CAPITAL GAIN ON SALE OF SHARES 1,36,252.00 4. INTEREST + DIVIDEND 1,93,166.00 5. UNEXPLAINED CASH CREDIT (GIFTS + PERSONAL EXPENDITURE OF ASSESSEE AND HIS SISTER ) 9,80,000.00 6. UNEXPLAINED ENTRY 10,676.00 TOTAL 1,492,140.00 ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 4 THE A.O. MADE ADDITION OF RS. 50,000/- ON ADHOC BAS IS I.E. PRESUMING THAT THE ASSESSEE MIGHT HAVE PAID 10% COMMISSION ON THE GIFT SHOWN AND ANOTHER ADHOC ADDITION OF RS. 50,000/- PRESUMIN G THAT ASSESSEE MIGHT NOT HAVE DISCLOSED SOME INCOME TO THAT EXTENT . THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD CIT(A) A ND THOSE ADDITIONS WERE DELETED. THE A.O. LEVIED THE PENALTY ON THE E NTIRE INCOME DECLARED BY THE ASSESSEE U/S. 271(1)(C ) TO THE EXTENT OF RS .4,50,000/-. THE LD CIT(A) DELETED THE PENALTY PERTAINING TO THE INCOME FROM HOUSE PROPERTY AND INTEREST INCOME BUT SUSTAINED THE PENALTY RESPE CT OF THE OTHER ITEMS OF THE INCOME. 5. THE ASSESSEE HAS DECLARED RS. 5,00,000/- TOWARD S AMOUNT OF THE GIFT CLAIMED TO HAVE BEEN CREDITED TO THE BANK ACCO UNT AND PERSONAL AS WELL HIS SISTERS PERSONAL EXPENSES OF RS. 4,80,000 /-. ADMITTEDLY, THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT. THE ASSESSEE NEVER FILED THE RETURN OF INCOME FOR THE A.Y. 2002-03 PRI OR TO THE DATE OF SEARCH U/S. 139 OF THE ACT BUT FOR THE FIRST TIME FILED T HE RETURN OF INCOME ON 29.4.2005. AS PER THE COPIES OF THE PANCHANAMA, IT IS SEEN THAT SUBSTANTIAL CASH WAS SEIZED FROM THE RESIDENTIAL PR EMISES AS WELL AS LOCKER NO. 20 OF PDCC BANK. IT IS ALSO SEEN THAT B ANK PASS BOOKS WERE SEIZED IN RESPECT OF 13 BANK ACCOUNTS. 6. THE LD COUNSEL ARGUES THAT THE INCOME DECLARED T OWARDS GIFT WHICH WAS CREDITED TO THE BANK ACCOUNT WAS THE GENUINE GI FT BUT TO BUY THE PEACE AND AVOID PROTRACTED LITIGATION, THE ASSESSE E DECIDED TO COME CLEAN AND OFFERED THE INCOME SUO MOTTO. HE SUBMIT S THAT THE ASSESSEE ALSO DECLARED RS. 4,80,000/- TOWARDS HIS PERSONAL E XPENDITURE AS WELL AS PERSONAL EXPENDITURE OF HIS SISTER WHO IS A DIVORCE E. HE SUBMITTED THAT EXCEPT THE ADHOC ADDITION OF RS. 1,00,000/- WHICH I S ALSO OTHERWISE DELETED, THE INCOME OFFERED AS PER THE RETURN WAS A CCEPTED. HE SUBMITTED THAT NO PENALTY IS LEVIABLE AS NO MONEY, VALUABLE ARTICLE, BULLION, GOLD ETC., IS SUBJECT MATTER OF THE ASSESS MENT FOR THE A.Y. 2002- 03. HE SUBMITTED THAT IN THE PRECEDING THREE YEARS , THE PENALTY LEVIED BY THE A.O WAS DELETED WHICH WAS IN RESPECT OF THE INC OME VOLUNTARILY OFFERED TOWARDS THE DRAWINGS OF THE ASSESSEE AND DI VORCED SISTER. HE SUBMITTED THAT THERE WAS INCRIMINATING MATERIAL FOU ND AGAINST THE ASSESSEE DURING THE COURSE OF THE SEARCH. IN SO F AR AS THE CASH FOUND IN THE COURSE OF SEARCH IS CONCERNED, SAME IS OFFERED IN THE A.YS. 2004-05 ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 5 AND 2005-06. PER CONTRA, THE LD. D.R. SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 7. WE FIND THAT THE A.O HAS LEVIED THE PENALTY FOR THE A.YS. 1999- 2000, 2000-01 AND 2001-02. WE FIND THAT IN THE PRE CEDING THREE YEARS, THE PENALTY LEVIED BY THE A.O IS DELETED. THE MAJO R INCOME OFFERED FOR THE SAID YEARS WAS IN RESPECT OF THE PERSONAL EXPEN DITURE OF THE ASSESSEE AND HIS DIVORCEE SISTER AS SOME ENTRIES WERE FOUND IN THE DIARY AND TO AVOID FUTURE PROBE BY THE TAX SLEUTH, ASSESSEE OFFE RED THE SAID AMOUNT AS THE UNDISCLOSED INCOME. IN THE PRESENT YEAR, IN AD DITION TO THE INCOME TOWARDS THE GIFT OF RS. 5,00,000/-, ASSESSEE ALSO O FFERED RS. 4,80,000/- TOWARDS PERSONAL & HOUSEHOLD EXPENDITURE. THE ASSE SSEE ALSO DECLARED THE INCOME FROM THE SHARE TRADING AND INCOME FROM C APITAL GAIN. THE ASSESSEE ALSO PAID TAXES ON THE INCOME DECLARED IN THE RETURN IN RESPONSE TO NOTICE U/S. 153A THOUGH THE INCOME OFFERED BY T HE ASSESSEE IN RESPECT OF ALLEGED GIFT OF RS. 5,00,000/- AND HIS PERSONAL AND SISTER EXPENDITURE OF RS. 4,80,000/- WHICH MAY BE BASED ON SOME ENTRIES I N THE DIARY BUT THE FACTS REMAINS THAT THE EXPLANATION -5 TO SEC. 271(1 )(C ) HAS NO APPLICATION TO THE ASSESSEES CASE FOR THE A.Y. 20 02-03 AS NO ADDITION IS MADE WHICH IS BASED ON ANY MONEY, GOLD, JEWELLERY ETC., FOUND DURING THE COURSE OF SEARCH. 8. WHILE DECIDING ASSESSEES APPEAL FOR A.YS. 19 99-2000 AND 2001- 02, THE PENALTY LEVIED ON THE INCOME OFFERED TOWARD S THE PERSONAL EXPENDITURE OF THE ASSESSEE AND HIS DIVORCEE SISTER HAS BEEN DELETED. EVEN THOUGH THE PARLIAMENT HAS INSERTED EXPLANATION 5A TO SEC. 271(1)( C ), SAID EXPLANATION IS APPLICABLE IN RESPECT OF TH E SEARCH INITIATED U/S. 132 ON OR AFTER 1 ST JUNE 2007. SECTION 5A IS INTRODUCED TO PATCH OUT THE LACUNAE IN THE EXISTING PROVISIONS MORE PARTICULARL Y TO OVERCOME THE JUDICIAL INTERPRETATION OF EXPLANATION -5. IF THE SEARCH IS INITIATED U/S. 132 ON OR AFTER 1 ST JUNE 2007 THEN THERE IS A LEGAL PRESUMPTION THAT A NY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT O R OTHER DOCUMENTS OR TRANSACTIONS, WHICH IS CLAIMED AS INCOME BY THE ASS ESSEE, THE SAME WOULD BE TREATED AS DEEMED CONCEALMENT OF THE PART ICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. SO FA R AS THE PRESENT ASSESSEE IS CONCERNED, THE DATE OF SEARCH IS 15.6.2 004 AND HENCE, EXPLANATION 5A TO SEC. 271(1)((C ) IS NOT APPLICABL E. IT IS WELL SETTLED RULE OF INTERPRETATION OF THE PENALTY PROVISIONS THAT T HE SAME SHOULD BE ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 6 STRICTLY INTERPRETED AND THERE IS NO SCOPE FOR ANY PRESUMPTION FOR LEVY OF THE PENALTY UNLESS STATUTE SPECIFICALLY PROVIDES SA ME. 9. SO FAR AS THE EXPLANATION-3 TO SEC. 271(1)(C) IS CONCERNED, WHICH READS AS UNDER : EXPLANATION 3.- WHERE ANY PERSON FAILS, WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED IN SUB-SECT ION (1) OF SECTION 153 A RETURN OF HIS INCOME WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR COMM ENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1989, AND UNTIL THE EXPIRY OF THE PE RIOD AFORESAID, NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) OF SUB- SECTION (1) OF SECTION 142 OR SECTION 148 AND THE A SSESSING OFFICER OR THE COMMISSIONER (APPEALS) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR SUCH PERSON HAS TAXABLE INCOME, THE N, SUCH PERSONAL SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME 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 PURSUANCE OF A NOTICE UNDER SEC TION 148. THE SAID EXPLANATION PRESUMES THAT THERE IS A CONC EALMENT OF PARTICULARS OF INCOME OR FILING OF THE INACCURATE PARTICULARS O F INCOME IN THE SITUATION WHERE THE ASSESSEE DID NOT FILE RETURN OF INCOME U /S. 139 OR WITHIN THE TIME LIMIT PRESCRIBED U/S. 153(1) OF THE ACT BUT FI LES THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 148. THE SAID EXPLANAT ION IS ALSO SILENT IN THE SITUATION IF THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME FOR ANY PARTICULAR A.Y. BUT FILED THE RETURN OF INCOME FOR THE FIRST TIME IN RESPONSE TO NOTICE U/S. 153A, THEN WHAT WOULD BE THE LEGAL P RESUMPTION ? IN OUR OPINION, EXPLANATION-3 HAS NO APPLICATION, WHEN THE RETURN IS FILED IN RESPONSE TO NOTICE U/S. 153A. WE, THEREFORE, HOLD THAT AS PER THE FACTS OF THIS CASE AND LAW APPLICABLE, THERE IS NO JUSTIF ICATION TO LEVY THE PENALTY FOR THE A.Y. 2002-03 IN THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 153A EVEN FOR THE SAID INCOME IS BASED ON SOME ENTRIES FOUND IN THE DIARIES OR OTHER DOCUMENTS OR EVEN BANK ACCOUNT DURING THE COURSE OF SEARCH. WE, ACCO RDINGLY DELETE THE PENALTY SUSTAINED BY THE LD CIT(A). ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 7 10. NOW WE TAKE UP THE ASSESSEES APPEAL FOR A.Y. 2 003-04 BEING ITA NO. 236/PN/2010. IN THIS YEAR, THE ASSESSEE FILED THE RETURN OF INCOME DISCLOSING THE TOTAL INCOME OF RS. 37,99,170/- AND THE A.O DETERMINED THE TOTAL INCOME AT RS. 38,39,170/- BY MERELY MAKIN G ADHOC ADDITION OF RS. 50,000/-. THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN IS AS UNDER : SR.NO. PARTICULARS AMOUNT RS. . 1. INCOME FROM HOUSE PROPERTY 2,19,000/- 2. INCOME FROM BUSINESS 1,25,910/- 3. SHORT TERM CAPITAL GAINS OF SALE OF SHARES 1,59,478/- 4. INTEREST INCOME 40,882/- 5. UTI MEP REDEMPTION 10,000/- 6. UNEXPLAINED CASH CREDITS 32,00,000/- 7. UNEXPLAINED ENTRY 55,000/- GROSS TOTAL 38,11,170/- LESS : DEDUCTION U/SEC. 80 L 12,000/- T OTAL RS. 37,95,170 11. IN SUM OF RS. 32,00,000/- DECLARED BY THE ASS ESSEE, SAID DECLARED INCOME COMPRISED OF THE FOLLOWING ITEMS : 1) DRAWING OF THE FAMILY RS. 1,71,193/- 2) CITI BANK A/C. NO.5-103635-707 RS. 5,00,000/- 3) CITI BANK A/C. 15-103636-703 RS. 9,75,000/- 4) HDFC BANK A/C. NO.148100006216 RS.13,75,000/- 5) TIRUPATI FINANCE NAGARI SOCIETY RS.1,00,000/- 6) CASH BALANCE RS.75,807/- TOT AL RS. 32,00,000/- SO FAR AS THE DEPOSITS IN THE BANK A/C. ARE CONCERN ED, THE BANK ACCOUNTS WERE DETECTED IN THE COURSE OF SEARCH. ASSESSEE CO NTENDED THAT IT WAS DIFFICULT FOR HIM TO EXPLAIN THE DEPOSITS MADE IN T HE BANK ACCOUNTS. THE ASSESSEE FURTHER SUBMITTED THAT HE OFFERED IMPUGNED CREDIT AS LIVING ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 8 EXPENSES OF FAMILY MEMBERS AS INCOME WITH A VIEW TO BUY PEACE OF MIND BUT HE COULD NOT PROVE THE SOURCE OF THE SAID CREDI T. THE EXPLANATION OF THE ASSESSEE WAS TURNED DOWN BY BOTH THE AUTHORITIE S BELOW. 12. IT IS WORTHWHILE TO REPRODUCE THE OPERATIVE P ART OF THE REASONS GIVEN BY THE LD CIT(A) FOR CONFIRMING THE PENALTY ON THE INCOME DECLARED TOWARDS THE UNEXPLAINED CREDIT OF RS. 32,00,000/-, UNEXPLAINED ENTRY OF RS. 55,000/- , INTEREST INCOME RS. 40,882/- AND CAP ITAL GAINS OF RS. 1,59,478/- AS UNDER : 5.6 FURTHER, REFERENCE CAN ALSO BE MADE TO THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF K.P. MADHUSUDH AN REPORTED IN 251 ITR 99 WHEREIN THE APEX COURT AFFIRMED THE DECI SION OF KERALA HIGH COURT THAT IT CANNOT BE LAID DOWN AS A GENERAL PROPOSITION THAT NO PENALTY CAN BE LEVIED FOR AGREED ASSESSMENT WHEN THE EXPLANATION OFFERED BY THE APPELLANT REGARDING THE CREDITS HAD NO SEMBLANCE OF ACCEPTABILITY. IN THE PRESENT CASE AL SO, THE APPELLANT HAS OFFERED AN EXPLANATION FOR THE CREDITS, WHICH H E IS NOT ABLE TO SUBSTANTIATE AND THEREFORE, EVEN UNDER THE DEEMING PROVISIONS OF EXPLANATION 1 TO SEC. 271(1)(C ), THE APPELLANT IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF HIS INCOME. IN THE CIRCUMSTANCES, T HE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT-II VS SHRI. E. V. BALASHANMUGHAM (2006) 286 ITR 626 (MAD) RELIED UPON BY THE APPELLANT CANNOT COME TO THE AID OF THE APPELLANT. 5.7 IT IS ALSO CLAIMED THAT THE RECORDS OF THE APPE LLANT WERE NOT WELL MAINTAINED AND THE APPELLANT WAS NOT ABLE TO A TTEND TO HIS TAX MATTERS DUE TO PERSONAL DIFFICULTIES IN HIS FAMILY. IT IS STATED THAT HE WAS OVERTAKEN BY CERTAIN CIRCUMSTANCES IN THE FAMIL Y AND HE HAS NOT DELIBERATELY ATTEMPTED TO CONCEAL THE PARTICULA RS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THIS C LAIM ALSO CANNOT BE ACCEPTED. FIRSTLY, THE CLAIM MADE BY THE APPELL ANT THAT THERE WERE CERTAIN DIFFICULTIES IN THE FAMILY AT THE MATE RIAL POINT OF TIME IS NOT SUPPORTED BY ANY EVIDENCE ON RECORD. ON THE CO NTRARY, THE APPELLANT MADE SUBSTANTIAL DEPOSITS IN THE BANK ACCOUNT AND ALSO DEALT IN SHARES REGULARLY DURING THE YEAR AND IN SU BSEQUENT YEARS AND EARNED SUBSTANTIAL INCOME BY WAY OF CAPITAL GAI NS AS PER THE DETAILS FURNISHED DURING THE APPELLATE PROCEEDINGS. IT IS ALSO A FACT THAT CASH OF RS.35,25,000/- WAS FOUND AND SEIZED FR OM THE ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 9 PREMISES OF THE APPELLANT DURING THE SEARCH. THE S O-CALLED PERSONAL DIFFICULTIES IN NO WAY AFFECTED HIS EARNINGS DURING THE YEAR AND SUBSEQUENTLY. THE RETURN FOR THE YEAR UNDER THE AP PEAL WAS DUE ON 31-10-2003 AND IT WAS NOT FILED TILL THE DATE OF TH E SEARCH ON 15/06/2004. THEREFORE, IT CANOT BE SAID THAT THE A PPELLANT WAS OVERTAKEN BY CERTAIN CIRCUMSTANCES IN THE FAMILY AN D AS A RESULT, HE DID NOT PAY ADEQUATE ATTENTION TO THE TAX MATTERS. 5.8 COMING TO THE CASE LAWS RELIED UPON BY THE APPE LLANT. IT MAY BE MENTIONED THAT THE SAID DECISIONS ARE DISTINGUIS HABLE ON FACTS OF THE PRESENT CASE. IN THE CASE OF KRISHNALAL SHIVCH AND RAI VS. CIT REPORTED IN 88 ITR 293, THE HONBLE PUNJAB HIGH COU RT OBSERVED THAT NO OPPORTUNITY WAS AFFORDED TO THE ASSESSEE FO R LEADING EVIDENCE AND PROVE THAT THE IMPUGNED CREDITS WERE G ENUINE AND IN THAT CONTEXT, THE HONBLE PUNJAB HIGH COURT HELD THAT THE PENALTY LEVIED WITHOUT SUCH OPPORTUNITY WAS INVALID. THE F ACTS IN THE PRESENT CASE ARE TOTALLY DIFFERENT IN THE SENSE TH AT APPELLANT HIMSELF ADMITTED THE UNDISCLOSED INCOME / CREDITS IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A, CONSEQUENT TO THE SEARCH. THEREFORE, IT IS NOT A MERE SURRENDER OF ADDITIONAL INCOME. FACED WITH THE INEVITABLE CONSEQUENCES, THE APPELLANT WAS FORCED TO DISCLOSE SUCH INCOME WHICH HE HAD FAILED TO DISCLOS E BY FILING THE REGULAR RETURNS OF INCOME IN THE NORMAL COURSE. IN THE CASE OF CIT VS. SV ELECTRICALS, THE ISSUE WAS WHETHER PENALTY W AS LEVIABLE WHEN THE DISCLOSURE WAS TOTAL AND THERE WAS NO DELIBERA TE INTENTION TO EVADE PAYMENT OF TAXES. IN THAT CASE, THE ITAT UP HELD THE ORDER OF THE CIT(A) IN SETTING ASIDE THE PENALTY ON THE G ROUND THAT THERE WAS TOTAL DISCLOSURE AND NO DELIBERATE INTENTION T O EVADE LAWFUL TAXES. IN THAT CONTEXT, THE HONBLE HIGH COURT HEL D THAT IT IS NOT A FIT CASE TO UPTURN THE CONCURRENT FINDINGS OF THE TWO APPELLATE AUTHORITIES AND IT DOES NOT INVOLVE ANY QUESTION OF LAW. THUS, THE FACTS IN THAT CASE HAVE NO PARALLEL TO THE FACTS EX ISTING IN THE PRESENT CASE. SIMILARLY, IN THE CASE OF CIT VS. KO DURI RAJA RAO, THE ANDHRA PRADESH HIGH COURT HELD THAT PENALTY U/S. 28 (1)(C ) OF 1922 ACT IN THE ABSENCE OF POSITIVE EVIDENCE TO SHOW THA T THAT THE AMOUNT WAS INCOME OF THE ASSESSEE DELIBERATELY CONC EALED.. THIS DECISION WAS RENDERED UNDER THE PROVISIONS OF 1922 ACT AND MUCH WATER HAS FLOWN SINCE THEN AND THE WILLFUL OR DELIB ERATE CONCEALMENT IS NO LONGER REQUIRED TO BE PROVED FOR LEVYING PENA LTY U/S. 271(1)(C ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 10 ). MOREOVER, THE ADDITION WAS MADE IN THE PRESENT CASE ON THE BASIS OF POSITIVE EVIDENCE I.E. ENTRIES IN THE BANK A/C AND OTHER DOCUMENTS FOUND DURING THE SEARCH. FOR THE SAME RE ASONS, THE DECISION BY THE ITAT LUCKNOW REPORTED IN 87 ITD 173 IS ALSO OF NO HELP TO THE APPELLANT. SIMILARLY, THE DECISIONS RE PORTED IN 204 ITR 244 AND 221 ITR 110 DO NOT RENDER ANY SUPPORT TO TH E CASE OF THE APPELLANT AS WILLFUL NEGLECT, MENS REA ETC. IS NO L ONGER A CONDITION PRECEDENT FOR IMPOSITION OF PENALTY. THUS, THE DEC ISIONS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE TO THE FACTS O F THE PRESENT CASE. AT THIS JUNCTURE, REFERENCE CAN BE MADE TO THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE PROCESSORS LTD. AS REPORTED IN 306 ITR 277 WHEREIN THE APEX COURT HELD THAT MENS REA IS NOT AN ESSENTIAL INGREDIENT O F SEC. 271(1)(C ) AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPE TENT TO IMPOSE PENALTY BELOW THE PRESCRIBED MINIMUM. 13. IN THE A.Y. 2003-04, IT IS ADMITTED FACTUAL POS ITION THAT THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FI LED IN RESPONSE TO NOTICE U/S. 153A IS RS. 37,99,170/-. IN THIS YEAR, THE ASSESSEE FILED THE RETURN OF INCOME ON 29.4.2005 I.E. WITHIN 2 YEARS F ROM THE END OF THE A.YS. 2003-04 AS PER THE TIME LIMIT PRESCRIBED U/S . 153(1) FOR COMPLETING THE ASSESSMENT U/S. 143 OR 144 OF THE ACT. WHI LE COMPLETING THE ASSESSMENT, THE A.O MADE THE MERE ADDITION OF RS. 5 0,000/- BUT OTHERWISE, THE RETURN OF INCOME WAS ACCEPTED. AS INTERPRETED BY THE DIFFERENT JUDICIAL PRONOUNCEMENT, THE EXPRESSION T AX SOUGHT TO BE EVADED APPEARING IN CLAUSE (C) IN SEC. 271(1) IS T O BE UNDERSTOOD AS A DIFFERENCE BETWEEN THE INCOME DECLARED BY THE ASSES SEE IN THE RETURN OF INCOME AND INCOME FINALLY ASSESSED. AFTER INTRODUC TION OF SEC. 153A W.E.F. 1.6.2003, THERE IS NO SPECIFIC PENALTY PROV ISION TO DEAL WITH THE ASSESSMENT FRAMES IN CONSEQUENCES OF SEARCH AND SEI ZURE ACTION U/S. 132 OF THE ACT. EXCEPT RS. 75,807/- DECLARED BY THE AS SESSEE AS A CASH, THERE IS NO DECLARATION BASED ON ANY MONEY, BULLION, JEWE LLERY OR OTHER VALUABLE ARTICLES OR THING IN THE NATURE OF ASSETS. AS DISC USSED IN THE ASSESSEES APPEAL FOR A.Y. 2002-03, EXPLANATION 5A IS APPLICAB LE FROM 1.6.2007 AND HENCE, IN THIS YEAR, WE ARE ONLY CONCERNED WITH EXP LANATION-5 AS THE DATE OF SEARCH IS PRIOR TO 1.6.2007. EXCEPT THE ESTIMAT ED ADDITION OF RS. 50,000/-, NO ADDITION IS MADE BY THE A.O. THE A.O HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF IN COME FILED IN RESPONSE ITA NOS.235 & 236/PN/2010 CHANDAN K. SHEWANI A.YS. 2002-03 & 2003-04 PAGE OF 11 11 TO NOTICE U/SEC. 153A AND IN RESPECT OF SAID INCOME . EXPLANATION-5 CANNOT BE APPLIED. MOREOVER, NO OTHER INCOME IS ADDED WHI CH IS BASED ON ANY INCRIMINATING MATERIAL WHICH CAN BE SUBJECTED TO TH E PENAL CONSEQUENCES. IT IS TRUE THAT THE ASSESSEE FILED THE RETURN OF IN COME FOR THE A.Y. 2003-04 ONLY AFTER SEARCH ACTION BY THE DEPARTMENT, BUT, AS THERE IS NO SPECIFIC PROVISION TO LEVY THE PENALTY ON THE INCOME DECLARE D BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A, E XCEPT EXPLANATION-5, WE HAVE TO APPLY PROVISIONS OF SEC. 271(1)(C ) AS ARE APPLICABLE IN THE NORMAL ASSESSMENTS. 14. FOR THE REASONS GIVEN IN THE ASSESSEES APPEAL FOR THE A.Y. 2002-03 AND IN THE LIGHT OF THE DISCUSSION HEREINABOVE, WE HOLD THAT THE PENALTY LEVIED BY THE A.O ON THE INCOME DECLARED BY THE ASS ESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153A IS NOT SUSTAINABLE. WE ACCORDINGLY DELETE THE ENTIRE PENALTY LEVIED BY THE A.O FOR A.Y. 2003-04 AND THE RESPECTIVE GROUNDS TAKEN BY THE ASSESSEE AR E ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH A UGUST 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 29TH AUGUST, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE CIT(A)-I, PUNE 5. THE D.R. B BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE