ACIT, Pune V. M/s Marvel Realtors.& Developers Ltd., Pune

ITA 2439/PUN/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0226 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Loose papers; Document seized; Documents seized
• Section: 69C; 40A(3); 143(3); 133A; 153A; 69; 132; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 2439/PN/2012 %' ( ')( / ASSESSMENT YEAR : 2007-08 ACIT, CENTRAL CIRCLE 1(1), PUNE ....... / APPELLANT ' /VS. MARVEL REALTORS & DEVELOPERS LIMITED, JEWEL TOWERS, SECOND FLOOR, LANE NO. 5, ABOVE HOTEL GREAT PUNJAB, KOREGAON PARK, PUNE PAN : AAFCM6433R / RESPONDENT / ITA NO. 2473/PN/2012 %' ( ')( / ASSESSMENT YEAR : 2007-08 MARVEL REALTORS & DEVELOPERS LTD., MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO. : 84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 PAN : AAFCM6433R ....... / APPELLANT ' /VS. ASSTT. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE 1(1), PUNE / RESPONDENT ASSESSEE BY : SHRI SHARAD SHAH REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 22-11-2016 / DATE OF PRONOUNCEMENT : 30-12-2016 2 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 * / ORDER PER VIKAS AWASTHY, JM : THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -I, PUNE DATED 26-07-2012 FOR THE ASSESSMENT YEAR 2007-08 CO NFIRMING LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS A BUILDER AND DEVELOPER. A SEARCH ACTION U/S . 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE AND AT RESIDENCE OF ITS MANAGING DIRECTOR SHRI VISHWAJEET SUBHASH JHAVAR ON 22-05-2008 AT PUNE. APART FROM AFORESAID SEARCH, SURVEY ACTION U/S. 133A WAS ALSO CARRIED OUT AT THE BUSINESS PREMISES OF ER STWHILE DIRECTOR OF MARVEL GROUP SHRI PANDOO P. NAIG AT MUMBAI. DURING THE COURSE OF SURVEY CERTAIN LOOSE PAPERS, EXCEL SHEETS, NOT E BOOKS WERE SEIZED/IMPOUNDED BY THE DEPARTMENT FROM THE PREMISES OF SHRI PANDOO P. NAIG. INCRIMINATING DOCUMENTS SEIZED FROM SHRI PA NDOO P. NAIG INDICATED RECEIPT OF UNACCOUNTED SALE PROCEEDS AND ITS UTILIZATION FOR DEVELOPMENT OF THE PROJECT BY THE ASSESSEE. SHRI VIS HWAJEET SUBHASH JHAVAR, MANAGING DIRECTOR OF THE COMPANY IN HIS S TATEMENT RECORDED U/S. 132(4) ADMITTED UNDISCLOSED INCOME OF ` 11,00,00,000/- FOR ALL ITS GROUP CONCERNS ON THE BASIS OF MATERIAL FOUND DU RING SEARCH AND AGREED TO PAY TAXES ON THE SAME. THE ASSESSEE C LAIMED BEFORE THE ASSESSING OFFICER THAT UNACCOUNTED INCOME ON THE BASIS OF MATERIAL FOUND IN SEARCH WAS ADMITTED FROM THE REAL ESTATE BUSINES S, THEREFORE, 3 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 THE SAME ARE REQUIRED TO BE COMPUTED AND ASSESSED ON PROJECT COMPLETION METHOD. THE ASSESSING OFFICER ACCEPTED THE ME THOD OF COMPUTATION OF INCOME AS PROPOSED BY THE ASSESSEE IN RE SPECT OF DISCLOSED TRANSACTION APPEARING IN THE REGULAR BOOKS OF AC COUNT BUT IN RESPECT OF UNACCOUNTED TRANSACTION, THE ASSESSING OFFICER HELD THAT THE SAME IS ASSESSABLE IN THE YEAR OF ITS TAKING PLACE. THE AS SESSING OFFICER, THEREAFTER, COMPUTED UNDISCLOSED PROFIT FROM DIFFERENT G ROUP CONCERN BY BIFURCATING THE RECEIPTS AND THE EXPENDITURE FOUND IN THE SEIZED PAPER FROM THE BUSINESS PREMISES OF THE ASSESSEE AT PUNE FOR THE RESPECTIVE FINANCIAL YEARS. IN RESPECT OF UNACCOUNTED EXP ENSES, THE ASSESSING OFFICER MADE DISALLOWANCE U/S. 40A(3) AND U/S. 40(A)(IA) FOR DETERMINING ALLOWABLE UNACCOUNTED EXPENSES AGAINST THE UN ACCOUNTED RECEIPTS. FOR DETERMINING UNACCOUNTED INCOME OF ASSESSM ENT YEAR UNDER APPEAL, THE ASSESSING OFFICER TREATED THE FIGURES AVA ILABLE IN THE DOCUMENTS FOUND FROM THE PREMISES OF SHRI PANDOO NAIG, FORM ER DIRECTOR AT MUMBAI AS SEPARATE FROM THE PAPERS FOUND AT PUNE. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT FOR ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 31-12-2010 PASSED U/S. 143(3) R.W.S. 153A OF THE ACT. THE ASSESSING OFFICER MADE ADDITION OF ` 65,62,669/- U/S. 69C OF THE ACT ON ACCOUNT OF NEGATIVE CASH BALANCE AND ` 3,70,00,000/- U/S. 68 OF THE ACT ON ACCOUNT OF UNDISCLOSED RECEIPTS. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE DID NOT PREFER APPEAL AN D ACCEPTED THE ADDITION. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER VIDE ORDER DATED 30-06-2011 LEVIED PENALTY OF ` 1,46,63,195/- FOR CONCEALMENT OF INCOME OF ` 4,35,62,669/-. 4 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 AGGRIEVED BY THE ORDER DATED 30-06-2011 LEVYING PENALTY U/S. 271(1)(C), THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIO NER OF INCOME TAX (APPEALS). BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS), THE ASSESSEE INTER ALIA RAISED THE GROUND THAT ADDITION OF ` 65,62,669/- HAS BEEN MADE U/S. 69C OF THE ACT ON ACCOUN T OF UNEXPLAINED EXPENDITURE AND ` 3,70,00,000/- U/S. 68 AS UNEXPLAINED CASH CREDITS WHICH DOES NOT CONFIRM TO ANY LEGAL PROVISION OR ACCOUNTING PRINCIPLE. THE ASSESSING OFFICER SHOULD HAVE GRA NTED THE BENEFIT OF TELESCOPING TO THE ASSESSEE IN RESPECT OF ABOVE ADDITIONS. THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ACCEPTED THE A PPEAL OF THE ASSESSEE BY THE DIRECTING THE ASSESSING OFFICER TO GIVE TH E BENEFIT OF TELESCOPING WHILE COMPUTING PENALTY. AGAINST, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) NOW, BOTH, THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. 3. THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS : 1. ON THE FACTS AND IT THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING DIRECTION TO THE ASSESSING OFFICER TO RE-COMPUTE THE UNDISCLOSED INCOME FOR LEVYING PENALTY U/S. 271(1)( C) AFTER GIVING TELESCOPIC BENEFIT ON NEGATIVE CASH BALANCE OF ` `65,62,669/- ALTHOUGH QUESTION OF BENEFIT OF TELESCOPY DOES NOT ARISE; 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) BE VACATED AND THE OF THE AO'S ORDER MAY BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MO DIFY ANY OF THE ABOVE GROUNDS RAISED, ANY OTHER GROUNDS AT THE TIME OF PRO CEEDINGS BEFORE THE HONBLE TRIBUNAL WHICH MAY PLEASE BE GRANTED. 5 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 4. THE GROUNDS RAISED BY THE ASSESSEE IMPUGNING THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) ARE AS UNDER : 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, NO PENALTY IS LEVIABLE IN TERMS OF PROVISIONS OF SECTION 271(1)(C). IT FURTHER BE HELD THAT, PENALTY PROCEEDINGS INITIATED BY THE AO U/S. 271 (1) (C) & LEVY OF PENALTY BY THE AO IN TERMS OF THE SAID SECTION IS UNWARRANTED, UNJ USTIFIED IMPROPER AND DESERVES TO BE DELETED. THE PENALTY IMPOSED BY THE AO U/S. 271(1)(C) BE DELETED. THE 1 ST APPELLATE AUTHORITY SHOULD HAVE DELETED THE PENALT Y IMPOSED BY THE ASSESSING OFFICER AS PER PROVISIONS OF LAW AND FACTS PREVAILING IN THE CASE. THE APPELLANT BE GRANTED JU ST AND PROPER RELIEF IN THIS RESPECT. 2. WITHOUT PREJUDICE TO GROUND NO: 1 AND IN ALTERNATIV E IT BE HELD THAT ORDER PASSED BY THE 1 ST APPELLATE AUTHORITY RESTORING THE ISSUE FOR RE- ADJUDICATION BY THE AO IS IMPROPER, UNJUSTIFIED AND UNWARRANTED. THE 1 ST APPELLATE AUTHORITY SHOULD HAVE DELETED THE PENALTY IMPOSED BY THE AO IN TERMS OF PROVISIONS OF SEC, 271(1) (C) OF THE AC T. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 3. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, AMEND, MO DIFY, RECTIFY, DELETE, RAISE ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 5. SHRI SHARAD SHAH APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN LEVYING PENALTY IN RESPECT OF ADDITIONS MADE U/S. 68 OF THE ACT. THE LD. AR POINTED THA T THOUGH THE ASSESSEE HAS NOT ASSAILED THE QUANTUM ADDITION AND HAS ACCEPTED THE ADDITION BUT THAT WOULD NOT MEAN THAT PENALTY WOULD BE A TTRACTED AUTOMATICALLY ON SUCH ADDITIONS. THE LD. AR SUBMITTED THA T PENALTY PROCEEDINGS ARE DIFFERENT AND SEPARATE FROM ASSESSMENT P ROCEEDINGS, THEREFORE, THE ASSESSEE CAN RAISE NEW PLEA DURING PENALT Y PROCEEDINGS. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KHODAY ESWARSA AND SONS REPORTED AS 6 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 83 ITR 369 AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS. J.K. SYNTHETICS LIMITED REPORTED AS 219 ITR 267. THE LD. AR C ONTENDED THAT IN THE PRESENT CASE ADDITION U/S. 68 HAS BEEN MADE ON A CCOUNT OF ALLEGED INCRIMINATING DOCUMENTS FOUND DURING SURVEY AT THE PREMISES OF SHRI PANDOO P. NAIG, FORMER DIRECTOR OF THE ASSESSEE CO MPANY AT MUMBAI. ADDITION U/S. 68 CAN ONLY BE MADE WHERE CASH CR EDITS ARE FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT HAS B EEN ALLEGED THAT LOOSE PAPER BUNDLE IMPOUNDED FROM THE BUSINESS PREMISES O F SHRI PANDOO P. NAIG REFLECT ENTRIES IN THE NAME OF V.J. APPA. TH E RELEVANT EXTRACT OF THE ENTRIES PURPORTEDLY FOUND IN THE LOOSE P APER BUNDLE IMPOUNDED FROM MUMBAI ARE AS UNDER : DATE PARTICULARS AMOUNT (RS.) A.Y. 7/4/2007 V J 1,39,000 2008 - 09 28/11/2006 V J 1,50,00,000 2007 - 08 29/1/2007 V J 2,20,00,000 2007 - 08 29/5/2007 APPA INVESTMENT 1,00,00,000 2008 - 09 29/5/2007 APPA INVESTMENT 1,36,00,000 2008 - 09 22/5/2007 APPA - INT 1,24,00,000 2008 - 09 TOTAL 7,31,39,000 5.1 THE LD. AR SUBMITTED THAT THE HONBLE PUNJAB AND HAR YANA HIGH COURT IN THE CASE OF SMT. SHANTA DEVI VS. COMMISSIONER OF I NCOME TAX REPORTED AS 171 ITR 532 HAS HELD THAT ADDITION IN RESPE CT OF CASH CREDIT ENTRIES FOUND IN THE BOOKS OF ACCOUNT OF PARTNERSHIP FIRM IN WHICH THE ASSESSEE WAS A PARTNER CANNOT BE MADE IN ASSESSEES HAND. THE LD. AR SUBMITTED THAT IF THE ADDITION ITSELF IS NOT SUSTAINABLE THEN THERE IS NO QUESTION OF LEVY OF PENALTY ON SUCH ADDITION. MERELY BECA USE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED RESULTING IN SOME ADDITIONS AND THE ADDITIONS HAVE NOT BEEN CHALLENGED WOULD NOT RESULT IN NECESSARILY IMPOSITION OF PENALTY. PENALTY PROCEEDINGS AR E NOT 7 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 CONTINUATIONS OF ASSESSMENT PROCEEDINGS. TO SUPPORT HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DHAR AMCHAND L. SHAH REPORTED AS 204 ITR 462. 5.2 THE LD. AR FURTHER SUBMITTED THAT IN RESPECT OF ADDITION MADE U/S. 69C THE ASSESSEE HAS FURNISHED DETAILED SUBMISSIONS B EFORE THE AUTHORITIES BELOW BUT THE SAME WERE BRUSHED ASIDE IN AN ARBITRARY AND UNJUSTIFIED MANNER. THE LD. AR POINTED THAT ` 65,62,669/- REPRESENTED CASH DEFICIT AS WORKED OUT BY THE ASSESSING OFFICER BEING THE DIFFERENCE BETWEEN ON-MONEY RECEIVED AND EXPENDED. THE ASSESSING OFFICER HAS WORKED OUT ON-MONEY RECEIVED AT ` 45,,00,000/- AND SPENT ` 1,10,62,669/- AND TREATED THE SAID FIGURES AS AUTHENTIC A ND MADE ADDITION OF THE DIFFERENCE BETWEEN TWO AS DEFICIT U/S. 69C OF THE ACT. THE LD. AR REITERATED HIS SUBMISSIONS IN RESPECT OF LEVY O F PENALTY ON ADDITIONS MADE U/S. 69C OF THE ACT. 6. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS) IN UPHOLDING THE LEVY OF PENALTY IN RES PECT OF ADDITION OF ` 3.70 CRORES MADE U/S. 68 OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN GRANTING THE BENEFIT OF TELESCOPING WITH RESPECT TO ADDITION S MADE U/S. 69C AND U/S. 68 OF THE ACT. THE LD. DR PRAYED FOR MODIFYIN G THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND UPHOLDING THE O RDER PASSED BY THE ASSESSING OFFICER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. 8 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS ON WHICH THE LD . AR OF THE ASSESSEE HAS PLACED RELIANCE TO FORTIFY HIS SUBMISSIONS. PE NALTY HAS BEEN LEVIED IN RESPECT OF ADDITIONS OF ` 65,62,669/- MADE U/S. 69C AND ` 3.70 CRORES U/S. 68 OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE ACCEPTED THE ADDITIONS AND HAS NOT FILED ANY AP PEAL ASSAILING THE SAME. THUS, THE ASSESSMENT ORDER ATTAINED FINALITY. T HEREAFTER, THE PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE IN RESPECT OF AFORESAID ADDITIONS ON ACCOUNT OF CONCEALMENT OF INCOME U/S . 271(1)(C) OF THE ACT. IT IS A WELL SETTLED LAW THAT ASSESSMENT PROC EEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INC OME TAX VS. DHARAMCHAND L. SHAH (SUPRA) HAS HELD : IT IS BY NOW TRITE LAW THAT THE ASSESSMENT PROCEED INGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT PROCEEDIN GS. THE FACT THAT CERTAIN ADDITIONS WERE MADE IN THE ASSESSMENT PROCE EDINGS WOULD NOT AUTOMATICALLY JUSTIFY THE REVENUE TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, ANY ADDITION MADE DURING ASSESSMENT IPSO FACTO WOULD NOT RESULT IN LEVY OF PENALTY. 8. THE LD. AR HAS POINTED THAT THE ADDITION OF ` 3.70 CRORES MADE U/S. 68 OF THE ACT IS NOT SUSTAINABLE AS THE ADDITION HAS BEEN MADE IN VIOLATION OF PROVISIONS OF SECTION 68 OF THE ACT. BEFORE PROC EEDINGS FURTHER IT WOULD BE RELEVANT TO EXPLAIN SECTION 68 OF THE ACT : 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION 9 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSES SING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. A BARE PERUSAL OF THE PROVISIONS OF SECTION 68 WOULD SHOW THAT ADDITION U/S. 68 CAN BE MADE ONLY WHERE ANY AMOUNT IS FO UND CREDITED IN THE BOOKS OF ASSESSEE AND THE ASSESSEE HAS FAILED TO OFFER ANY VALID EXPLANATION OR THE EXPLANATION FURNISHED BY THE ASSESSEE IN THE OPINION OF ASSESSING OFFICER IS NOT SATISFACTORY. IN THE PRESENT CASE, WE FIND THAT ADDITION U/S. 68 HAS BE EN MADE ON THE BASIS OF ENTRIES IN THE DIARIES FOUND DURING SURVEY AT THE PREMISES OF ONE OF THE FORMER DIRECTOR OF THE ASSESSEE CO MPANY. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ANY TRANSFER OF M ONEY EITHER THROUGH CHEQUE OR CASH DURING THE YEAR UNDER CONSIDER ATION WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. UNDE R SUCH CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ADDITION U/S . 68 IS NOT SUSTAINABLE. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SMT. SHANTA DEVI VS. COMMISSIONER OF INCOME TAX (SUPRA) D ELETED THE ADDITION U/S. 68 IN THE HANDS OF ASSESSEE, WHERE CASH CREDIT ENTRIES WERE FOUND IN THE BOOKS OF ACCOUNT OF THE PARTNERSHIP FIR M IN WHICH THE ASSESSEE WAS PARTNER. THE RELEVANT EXTRACT OF THE JUD GMENT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SMT. SHANT A DEVI VS. COMMISSIONER OF INCOME TAX (SUPRA) IS AS UNDER : 8. IT IS NOT IN DISPUTE THAT IN CASE THE BOOKS OF A CCOUNT OF THE PARTNERSHIP FIRM ARE NOT TO BE TREATED AS THOSE OF THE INDIVIDUAL PARTNER, THEN THE AMOUNT OF RS. 8,400 WHICH REPRESENTS ALLEG ED UNDISCLOSED INCOME, COULD NOT BE BROUGHT TO TAX ALONG WITH THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1963-64, BECAUSE IN THAT CA SE, THE PROVISIONS OF SECTION 69 OF THE INCOME TAX ACT SHALL BE APPLICABL E. 10 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 9. PERUSAL OF SECTION 68 OF THE INCOME TAX ACT WOUL D SHOW THAT IN RELATION TO THE EXPRESSION ' BOOKS ', THE EMPHASIS IS ON THE WORD ASSESSEE. IN OTHER WORDS, SUCH BOOKS HAVE TO BE THE BOOKS OF THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE. 10. IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE M AINTAINED NO BOOKS OF ACCOUNT. THE CASH CREDIT ENTRY OF WHICH TH E SUM IN QUESTION FORMS PART, WAS FOUND IN THE BOOKS THE ACCOUNT OF T HE PARTNERSHIP FIRM WHICH IN ITS OWN RIGHT IS AN ASSESSEE. 11. IN THE ABOVE VIEW OF THE MATTER, THE BOOKS OF A CCOUNT OF THE PARTNERSHIP FIRM HEREIN CANNOT BE CONSIDERED AS THO SE OF THE INDIVIDUAL ASSESSEE HEREIN AND, THEREFORE, SECTION 68 OF THE I NCOME TAX ACT WOULD NOT BE ATTRACTED TO THE PRESENT CASE. 9. SINCE, THE ADDITION MADE U/S. 68 IS ITSELF NOT SUSTAINABLE T HERE IS NO QUESTION OF LEVY OF PENALTY ON SUCH ADDITION. THUS, WE A RE OF THE CONSIDERED VIEW THAT LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON ADDITION MADE U/S. 68 OF THE ACT IS LIABLE TO BE SET ASIDE. 10. THE SECOND ADDITION ON WHICH PENALTY HAS BEEN LEVIED IS WITH RESPECT TO ` 65,62,669/- U/S. 69C OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED THE BENEFIT OF TELESCOPING BY OBSERVING AS UNDER : 9. NOW COMING TO THE COMPUTATION OF PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED AT RS.1,46,63,195/- ON THE UNDI SCLOSED INCOME DETERMINED IN THE ASSESSMENT ORDER AT RS.4,35,62,66 9/-, IT IS NOTED THAT UNDISPUTEDLY THE SAME SUFFERS FROM SOME DEFECTS. TH E AO HAS COMPUTED THE AFORESAID INCOME AFTER DISALLOWING UND ISCLOSED EXPENSES AVAILABLE IN THE SEIZED DOCUMENTS U/S 40A(3) AND U/ S 40(A)(IA) AND ALSO WITHOUT GIVING THE TELESCOPIC BENEFIT OF SHORTAGE O F RS.65,62,669/- (RECEIPT OVER EXPENSES IN THIS YEAR). HOWEVER THE A PPELLANT HAS CLAIMED IN THEIR LETTER DTD. 17/7/2012, WHICH HAS BEEN FURT HER ELABORATED IN THEIR LETTER DTD. NIL FILED ON 20/7/2012, THAT THE COMPUT ATION OF THE UNDISCLOSED INCOME ON WHICH PENALTY CAN BE HELD TO BE LEVIABLE WAS 11 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 DEFECTIVE. THIS CLAIM OF THE APPELLANT HAS BEEN CAR EFULLY CONSIDERED, AND I AM OF THE CONSIDERED VIEW THAT EVEN THOUGH THE AP PELLANT HAS ACCEPTED THE FINDING GIVEN IN THE ASSESSMENT ORDER BY NOT FI LING ANY APPEAL, IT IS AN ADMITTED FACT THAT APPLICATION OF SEC.40A(3) AND SEC.40(A)(IA) ARE ISSUES ON WHICH DIFFERENT COURTS HAVE DIFFERENT VIE WS AND THEREFORE IT WILL BE INCORRECT TO INCLUDE THE IMPACT OF THESE DI SALLOWANCES FOR COMPUTING THE PENALTY U/S 271(1)(C). SIMILARLY THE ISSUE OF GRANTING TELESCOPIC BENEFIT ATLEAST IN RESPECT OF THE SAME A SSESSEE FOR THE SAME ASSESSMENT YEAR HAS TO BE CONSIDERED. THE AO HAS NO T GIVEN ANY REASON IN THE ASSESSMENT ORDER FOR NOT GRANTING THIS BENEF IT IN A MANNER WHICH CAN JUSTIFY LEVY OF PENALTY FOR DENIAL OF SUCH BENE FITS. IN VIEW OF THE ABOVE I AM OF THE OPINION THAT THE COMPUTATION OF P ENALTY IS FAULTY. THE INCOME SOUGHT TO BE EVADED ON WHICH THE PENALTY HAS BEEN LEVIED @ 100% REQUIRES REWORKING. THE APPELLANT HAS SUBMITTE D A COMPUTATION AS PER WHICH THE NET UNDISCLOSED INCOME, WHICH ON THE PRINCIPLE DISCUSSED ABOVE, CAN BE ACCEPTED, FOR COMPUTING THE PENALTY O R THE INCOME SOUGHT TO BE EVADED, HAS BEEN SHOWN AT RS.1,90,91,2 56/-. I FIND THE SAME TO BE ACCEPTABLE. HOWEVER, THE AD IS DIRECTED TO VERIFY THIS COMPUTATION ON THE MATERIALS AVAILABLE ON RECORD AN D IF THE COMPUTATION OF RS.1,90,91,256/- IS FOUND TO BE CORRECT AFTER EX CLUDING THE DISALLOWANCES OF EXPENSES MADE U/S 40A(3) AND U/S 4 0(A)(IA) AND GRANTING TELESCOPIC BENEFIT AS DISCUSSED ABOVE, THE N THE AFORESAID SUM OF RS.1,90,91 ,256/- HAS TO BE TAKEN AS THE UNDISCL OSED INCOME SOUGHT TO BE EVADED ON WHICH PENALTY U/S 271(1)(C) @ 100% SHOULD BE COMPUTED. THE APPELLANT HAS COMPUTED THIS PENALTY O N THE AFORESAID PRINCIPLE, WITHOUT PREJUDICE TO THEIR CLAIM FOR FUL L RELIEF AT RS.64,26,115/-. THE AO CAN VERIFY THE COMPUTATION AND REDUCE THE PE NALTY ACCORDINGLY. AFORESAID GROUNDS 1 TO 10 ARE TREATED AS PARTLY ALL OWED. ONE OF THE CONTENTION OF THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY WAS TO GRANT THE BENEFIT OF TELESCOPING IN PENALT Y PROCEEDINGS IN RESPECT OF THE ADDITIONS MADE DURING ASSESSMENT. THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTING THE CONTENT IONS OF THE ASSESSEE ON MERITS AND ACCEPTING THE ALTERNATE SUBMISSI ONS OF THE ASSESSEE GRANTED THE BENEFIT OF TELESCOPING. NEITHER THE LD. AR NOR THE LD. DR COULD SUBSTANTIATE THE ERROR IN THE FINDINGS OF COMMIS SIONER OF 12 ITA NOS. 2439 & 2473/PN/2012, A.Y. 2007-08 INCOME TAX (APPEALS) IN EXTENDING THE BENEFIT OF TELESCOPING. THUS, WE UPHOLD THE BENEFIT OF TELESCOPING GRANTED BY THE COMMISSION ER OF INCOME TAX (APPEALS). ACCORDINGLY, THE SOLITARY GROUND RAIS ED BY THE DEPARTMENT IN APPEAL AND THE SUBMISSIONS OF THE ASSESSE E ASSAILING PENALTY ON ADDITION MADE U/S. 69C ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 30 TH DAY OF DECEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH DECEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, PUNE 4. ' / THE CIT (CENTRAL), PUNE 5. !*+ %%,- , ,- , B ./0 , / DR, ITAT, . BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE