M/s. Volga Steel, Ahmedabad V. The Income tax Officer,Ward-5(1), Baroda

ITA 2622/AHD/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6157 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Assessee Lawyers: MK PATEL WITH ANIL R SHAH
• Section: 143(3); 133A; 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SN ITA NO. AY APPELLANT RESPONDENT 1 2621/AHD/2012 2008-09 M/S. H S STEEL, 40, NARSINHIJI ESTATE, YAMUNA MILL ROAD, PRATAPNAGAR, BARODA-390 004 PAN : AABFH 4872 N THE ITO, WARD-5(1), BARODA 2 2622/AHD/2012 2008-09 M/S. VOLGA STEEL, 40, NARSINHIJI ESTATE, YAMUNA MILL ROAD, PRATAPNAGAR, BARODA-390 004 PAN : AACFV 0074 D THE ITO, WARD-5(1), BARODA 3 3037/AHD/2015 2008-09 M/S. H S STEEL, BARODA-390 004 PAN : AABFH 4872 N THE ITO, WARD-5(1), BARODA 4 3038/AHD/2015 2008-09 M/S. VOLGA STEEL, BARODA-390 004 PAN : AACFV 0074 D THE ITO, WARD-5(1), BARODA 5 1599/AHD/2016 2008-09 M/S. H S STEEL, BARODA-390 004 PAN : AABFH 4872 N THE ITO, WARD-5(1), BARODA ASSESSEE BY : SHRI MK PATEL WITH ANIL R SHAH, AR REVENUE BY : SHRI RAJESH MEENA, SR DR / DATE OF HEARING : 03/01/2018 / DATE OF PRONOUNCEMENT: 01/02/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER :- THE LEARNED FIRST APPELLATE AUTHORITY HAS DECIDED T HE APPEALS OF BOTH THE ASSESSEES AGAINST ASSESSMENT ORDERS DATED 29.12 .2010 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 IN ASSES SMENT YEAR 2008-09 BY SEPARATE ORDERS ON 12.09.2012. THE LEARNED ASSESSI NG OFFICER HAS GIVEN EFFECT TO THE ORDER OF THE LEARNED CIT(A) IN THE CA SE OF BOTH THE ASSESSEES ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 2 VIDE ORDER DATED 19.11.2012. THE ASSESSEES WERE NO T SATISFIED WITH THE ORDER GIVING EFFECT, PASSED BY THE LEARNED ASSESSING OFFI CER, AND FILED APPEALS BEFORE THE LEARNED CIT(A) WHO HAS DECIDED THE APPEA LS OF BOTH THE ASSESSEES VIDE ORDER DATED 01.08.2015. THESE ORDERS OF THE L EARNED CIT(A) ARE BEING IMPUGNED IN ITA NOS. 3037 AND 3038/AHD/2015. THE LEARNED ASSESSING OFFICER HAS IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON BOTH THESE ASSESSEES VIDE ORDER DATED 27.03.2014. PENALTY OF RS.8,84,599/- IN THE CASE OF M/S. H.S. STEEL AND RS.8,41,311/- IN THE CASE OF M/S. VOLGA STEEL WERE IMPOSED. ON APPEAL, LEARNED CIT(A) HAS DELETED THE PENALTY IN THE CASE OF M/S. VOLGA STEEL VIDE ORDER DATED 26.02.2016; HOWEV ER, IN THE CASE OF M/S. H.S. STEEL, PENALTY WAS CONFIRMED VIDE ORDER DATED 18.03.2016. THIS ORDER IS BEING IMPUGNED BY THE ASSESSEE IN ITA NO.1599/AHD/2 016 IN ASSESSMENT YEAR 2008-09. 2. FIRST WE TAKE UP THE TWO QUANTUM APPEALS, I.E. I TA NOS. 2621 AND 2622/AHD/2012. THE GROUNDS OF APPEAL TAKEN BY BOTH THE ASSESSEES ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THEIR GRIEVANCE IS THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.25,01,02 5/- AND RS.25,00,525/- IN THE CASE OF M/S. H S STEEL AND M/S. VOLGA STEEL RES PECTIVELY. 3. THE BRIEF FACTS OF THE CASE ARE THAT BOTH THE AS SESSEES ARE ENGAGED IN WHOLESALE TRADING OF IRON SHEETS. THEY HAVE FILED T HEIR RETURNS OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 28.09.2008 AND 21.11.200 8, DECLARING TOTAL INCOME AT RS.1,24,650/- AND RS.2,10,050/-, IN THE C ASE OF M/S. H S STEEL AND M/S. VOLGA STEEL RESPECTIVELY. A SURVEY UNDER SECT ION 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEES ON 27.02.2008. DURING THE COURSE OF SURVEY, INVENTORY OF STOCK WAS PREPAR ED AFTER PHYSICAL VERIFICATION. THE VALUE OF THE STOCK WAS WORKED OU T AT RS.45,36,120/- IN THE CASE OF M/S. H S STEEL AND RS.43,25,880/- IN THE CA SE OF M/S. VOLGA STEEL; ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 3 WHEREAS IN THE BOOKS OF ACCOUNTS, THE ASSESSEES HAV E ACCOUNTED STOCK AT RS.20,35,105/- IN THE CASE OF M/S. H S STEEL AND RS .18,25,355/- IN THE CASE OF M/S. VOLGA STEEL. THUS, THERE WAS EXCESS STOCK OF R S.25,01,015/- AND RS.25,00,525/- IN THE CASE OF M/S. H S STEEL AND M/ S. VOLGA STEEL RESPECTIVELY. THE LEARNED ASSESSING OFFICER HAS MA DE ADDITION OF THESE EXCESS STOCKS. 4. APPEAL TO THE LEARNED CIT(A) DID NOT BRING ANY R ELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE HAVE DIRECTED THE DEPARTM ENT TO PRODUCE INVENTORY OF STOCK FOUND AT THE PREMISES OF BOTH TH E ASSESSEES. IN RESPONSE OF BENCHS DIRECTION, THE DEPARTMENT HAS PLACED ON RECORD COPY OF THE INVENTORY OF STOCK AS WELL AS THE STATEMENT OF THE PARTNERS RECORDED AT THE TIME OF SURVEY. WHILE IMPUGNING THE ORDERS OF THE LEARNED CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE(S) CONTENDED THAT THE ALLEGED INVENTORY OF STOCK EXHIBITING EXCESS STOCK FOUND AT THE TIME OF SURVEY IS INCORRECT, BECAUSE DEPARTMENT FAILED TO PRODUCE ANY SUPPORTING MATERIAL EXHIBITING CALCULATION SHEET AND HOW THE STOCK WAS WEIGHED. ON THE OTHER HAND, THE ASSESSEE HAS BEEN MAINTAINING STOCK REGISTER, PURCH ASE REGISTER, SALE REGISTER ETC. THEY HAVE ACCOUNTED ALL THE PURCHASES AND THE SALES MADE BY THEM. THE STOCK REGISTER HAS BEEN PLACED ON RECORD FROM P AGE NOS. 86 TO 132 OF THE PAPER-BOOK IN THE CASE OF M/S H S STEEL. SIMILARLY , THE STOCK REGISTER HAS BEEN PLACED ON RECORD IN THE CASE OF M/S VOLGA STEE L ALSO. HE FURTHER CONTENDED THAT THIS INVENTORY WAS PREPARED JUST TO GIVE SUPPORT TO THE DISCLOSURE OBTAINED FROM THE PARTNERS AT THE TIME O F SURVEY. THE SURVEY TEAM WAS NOT AUTHORIZED TO RECORD THE STATEMENT AFT ER ADMINISTERING OATH AND, THEREFORE, ANY DISCLOSURE MADE DURING THE COUR SE OF SURVEY HAS NO EVIDENTIARY VALUE. HE MADE REFERENCE TO SECTION 13 3A(3)(III) OF THE INCOME- TAX ACT AND, IN SUPPORT OF HIS CONTENTION, HE RELIE D UPON THE JUDGMENT OF ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 4 HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHE WS & SONS VS CIT, REPORTED IN (2003) 263 ITR 101 (KER). HE FURTHER M ADE REFERENCE TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. S. KHADER KHAN SON, REPORTED IN [2008] 300 ITR 157 (MAD). TH IS DECISION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT ALSO. ON THE ST RENGTH OF THESE DECISIONS, HE CONTENDED THAT THE STATEMENT RECORDED UNDER SECTION 133A HAS NO EVIDENTIARY VALUE. 6. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. HE SUBMITTED THAT LEARNED FIRST APPELLATE AUTHORITY HAS CONSIDERED THE DECISIONS OF HONBLE KERALA HIGH COURT (SUPRA) AS WELL AS OF HONBLE MADRAS HIGH COU RT (SUPRA) AND OBSERVED THAT THE ADDITIONS ARE NOT BEING MADE ON T HE BASIS OF ADMISSION OF INCOME BY THE PARTNERS IN THEIR STATEMENT UNDER SEC TION 133A OF THE INCOME- TAX ACT; RATHER, THE ADDITIONS ARE BASED ON RECOVER Y OF EXCESS PHYSICAL STOCK ADMITTED BY THE PARTNERS AND NOT RETRACTED. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF INVENTORY OF STOCK WOULD INDICATE THAT THE STOCK STATEMENT WAS PREPARED AFTER PHYSICAL VERIFIC ATION. THE PARTNERS HAVE PUT THEIR SIGNATURES AFTER VERIFYING THE CORRECTNES S OF THE STOCK STATEMENT. THE ASSESSEE IS SIMPLY DENYING ABOUT THE AVAILABILI TY OF EXCESS PHYSICAL STOCK AT THE TIME OF SURVEY. THEY ARE HARPING UPON THE PURCHASE BILLS AND SALES BILLS AND ENTRIES MADE IN THE STOCK REGISTER. IT IS PERTINENT TO OBSERVE THAT THE SURVEYS AND SEARCHES ARE THE LAST RESORTS WITH THE REVENUE TO VERIFY THE ACTUAL POSITION ON THE SPOT. THE ALLEGATION AG AINST THE ASSESSEE(S) IS THAT THEY WERE NOT ACCOUNTING TOTAL PURCHASES IN THEIR B OOKS. THAT IS WHY EXCESS PHYSICAL STOCK WAS AVAILABLE ON A PARTICULAR DAY WH EN THE SURVEY WAS CARRIED OUT. THESE ALLEGATIONS CANNOT BE REFUTED B Y MERELY JUST SAYING THAT THE ALLEGED CALCULATION MADE AT THE TIME OF SURVEY IS WRONG. IT IS FOR THE ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 5 ASSESSEE TO PROVE HOW IT IS WRONG EITHER BY DIRECT EVIDENCE OR BY CIRCUMSTANTIAL EVIDENCE. ONE OF THE WAYS AVAILABLE WITH THE ASSESSEE WOULD BE TO RETRACT THE STATEMENT AS WELL AS TO FILE A CO MPLAINT AGAINST THE SURVEY TEAM BEFORE THE HIGHER AUTHORITIES ON 28.02.2008 IT SELF. THE SURVEY TEAM WAS NOT HAVING POWER TO GET DECLARATION AS WELL AS ARREST THE ASSESSEE. THE PARTNERS SHOULD HAVE NOT PUT THEIR SIGNATURES ON TH E INVENTORY OF STOCK PREPARED BY THE SURVEY TEAM. NOW, WITH THE HELP OF SIMPLE DENIAL, THEY CANNOT SAY THAT EXCESS STOCK WAS NOT FOUND. 8. AS FAR AS THE TWO DECISIONS REFERRED BY THE LEAR NED COUNSEL FOR THE ASSESSEE(S) ARE CONCERNED, THEY ARE RELATED TO THE STATEMENT RECORDED AT THE TIME OF SURVEY. THEIR STATEMENTS, PER SE, COULD NO T BE ADMISSIBLE IN EVIDENCE, BUT IT IS TO BE USED AS CORROBORATIVE INF ORMATION AGAINST THE ASSESSEE. IN THE PRESENT CASES, THE ADDITION WAS N OT MADE ON THE BASIS OF ALLEGED ADMISSION IN THE STATEMENT, BUT ON THE BASI S OF EXCESS PHYSICAL STOCK FOUND AT THE TIME OF SURVEY WHICH WAS ACCEPTED BY T HE PARTNERS DURING THE SURVEY BY PUTTING THEIR SIGNATURES ON THE INVENTORY . THUS, THESE JUDGMENTS ARE OF NO HELP TO THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THE FIRST FOLD OF GRIEVANCE RAISED BY THE ASSESSEE(S). 9. THE NEXT ISSUE AGITATED BY THE ASSESSEE(S) IN BO TH THE APPEALS IS THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME-TAX ACT. AT THE TIME OF HEARING, IT WAS ADMITTED THAT CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE. NO ARGUMENT WAS ADVANCED; HENCE, IT IS REJECTED. 10. IN THE CASE OF M/S VOLGA STEEL, NO OTHER GROUND WAS RAISED AGAINST THE ORDER OF LEARNED CIT(A) DATED 12.09.2012; HENCE, IT A NO. 2622/AHD/2012 IS REJECTED. ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 6 11. IN THE CASE OF M/S H S STEEL, ONE MORE ISSUE HA S BEEN AGITATED, WHEREIN IT HAS BEEN PLEADED THAT LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING A SUM OF RS.52,730/-. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS DEBITED A SUM OF RS.3,22,188/- IN THE PROFIT AND LOSS ACCOUNT TOWARD S FREIGHT CARTING AND OCTROI EXPENSES. THE ASSESSEE HAS PAID FREIGHT OF R S.52,730/- TO M/S. NIRALA ROADWAYS. ACCORDING TO THE ASSESSING OFFICER, TDS WAS NOT DEDUCTED ON THIS FREIGHT AND, THEREFORE, IT WAS DISALLOWED WITH THE HELP OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT. THE LEARNED COUNS EL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT RECIPIENTS MUST HAVE AC COUNTED THESE RECEIPTS IN THEIR TAXABLE INCOME AND AS PER THE LATEST DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSH IP (P) LTD, IF THE RECIPIENTS HAVE PAID THE TAXES ON THE RECEIPTS ON W HICH TDS WAS NOT DEDUCTED, THEN, NO DISALLOWANCE BE MADE IN THE HAND S OF PAYER WITH THE HELP OF SECTION 40(A)(IA) OF THE ACT. ON DUE CONSI DERATION OF THIS CONTENTION, WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE TO T HE FILE OF THE ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER SHALL VERIF Y AS TO WHETHER M/S. NIRALA ROADWAYS HAS INCLUDED RS.52,730/- IN THEIR T AXABLE RECEIPTS AND, IF IT WAS INCLUDED, THEN, NO DISALLOWANCE TO BE MADE. WE MAKE IT MORE SPECIFIC THAT THE ASSESSING OFFICER SHALL ISSUE SUMMONS TO M /S. NIRALA ROADWAYS FOR VERIFYING THIS FACT. THE ASSESSEE SHALL SUPPLY ADD RESS OF M/S. NIRALA ROADWAYS TO THE ASSESSING OFFICER. ACCORDINGLY, TH IS GROUND OF APPEAL IS PARTLY ALLOWED. 13. IN THE RESULT, ITA NO.2621/AHD/2012 IS PARTLY A LLOWED. 14. NOW WE TAKE UP ITA NOS. 3038 & 3037/AHD/2015. IN THE APPEAL OF M/S. VOLGA STEEL, THE ASSESSEE HAS AGAIN TAKEN VERB ATIM SAME GROUNDS OF APPEAL WHICH WERE TAKEN AGAINST THE ORDER OF LEARNE D CIT(A) DATED ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 7 12.09.2012. WE ARE OF THE VIEW THAT LEARNED CIT(A) HAS RIGHTLY UPHELD THE ORDER OF THE ASSESSING OFFICER DATED 19.11.2012 VID E WHICH HE HAS GIVEN EFFECT TO THE ORDER OF THE LEARNED CIT(A) DATED 12. 09.2012. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) DATED 1 ST AUGUST 2015 WHILE UPHOLDING THE ORDER GIVING EFFECT OF THE ASSESSING OFFICER. THIS APPEAL IS REJECTED. 15. THE FACTS IN THE CASE OF M/S. H S STEEL ARE ALS O SIMILAR. THE ASSESSING OFFICER HAS GIVEN EFFECT TO THE ORDER OF LEARNED CI T(A) DATED 12.09.2012 VIDE ORDER DATED 19.11.2012. THIS ORDER WAS CHALLENGED BEFORE THE CIT(A) BY THE ASSESSEE AND THE CIT(A) HAS DISMISSED THE APPEAL VI DE IMPUGNED ORDER DATED 1 ST AUGUST 2015. WE FIND THAT THE GROUNDS AS TAKEN AG AINST THE ORIGINAL ORDER DATED 12.09.2012 ARE BEING TAKEN AGA INST THE ORDER GIVING EFFECT WHICH ARE NOT SUSTAINABLE. WE DO NOT FIND A NY MERIT IN THIS APPEAL. IT IS REJECTED. 16. NOW WE TAKE UP ITA NO. 1599/AHD/2016. IN THIS APPEAL, THE GRIEVANCE IS THAT LEARNED CIT(A) HAS ERRED IN CONFI RMING THE PENALTY OF RS.8,84,599/- WHICH WAS IMPOSED BY THE ASSESSING OF FICER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT. THE LEARNED ASSES SING OFFICER HAS CONSIDERED THREE AMOUNTS FOR VISITING THE ASSESSEE WITH PENALTY VIZ. (A) ON ACCOUNT OF UNDISCLOSED INCOME - RS.25,01 ,015/- (VALUE OF EXCESS STOCK FOUND DURING SURVEY) U/S 69B OF THE IT ACT (B) ON ACCOUNT OF UNACCOUNTED CASH - RS. 3 2,117/- (C) ON ACCOUNT OF EXPENSES U/S 40(A)(IA) - RS. 52,730/- 17. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSE E HAS CONCEALED THE PARTICULARS OF HIS INCOME AND HE IMPOSED A PENALTY AT THE RATE OF 100% OF TAXES SOUGHT TO BE EVADED. 18. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF T O THE ASSESSEE. ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 8 19. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF M/S. VOLGA STEEL, LEARNED CIT(A) HAS DELETED THE PENALTY VIDE ORDER DATED 26.02.2016. THIS ORDER WAS NOT CHALLENGED BY THE D EPARTMENT BEFORE THE ITAT. THE FACTS IN THE CASES OF BOTH THE ASSESSEES ARE IDENTICAL. HE PLACED ON RECORD COPY OF THE CIT(A)S ORDER. 20. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 21. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. 22. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEAR ING ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTIC ULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURA TE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 9 (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUBSECTION, BE DEEME D TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 23. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT FO R VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTIO N CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INT O PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)( C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISION S OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLA NATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFI CER OR LEARNED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT , MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 10 NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAYA IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RE SPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FI NDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PRO VIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT T HAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF TH E ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEE N FURNISHED. 24. IN THE LIGHT OF ABOVE, LET US EXAMINE THE FACTS OF THE CASE. AS DISCUSSED IN THE QUANTUM APPEAL, EXCESS STOCK WAS FOUND AT TH E PREMISES OF THE ASSESSEE DURING THE COURSE OF SURVEY. THE PARTNERS HAD PUT SIGNATURES ON THE INVENTORY PREPARED BY THE SURVEY TEAM. THAT AD MISSION WAS NEVER RETRACTED. IT FAILED TO GIVE ANY EXPLANATION ABOUT THE SOURCE OF EXCESS STOCK. WE HAVE CONFIRMED ADDITION IN THE QUANTUM APPEAL. IN THE PENALTY APPEAL, THERE IS NO EXPLANATION AT THE END OF THE ASSESSEE AS TO WHAT PROMPTED IN THE MINDS OF THE PARTNERS FOR NOT DISCLOSING THE EXCESS STOCK ADMITTED DURING THE COURSE OF SURVEY IN THE RETURN OF INCOME. AS F AR AS THE CONTENTION OF ITA NOS. 2621 & 2622 OF 12, 3037 & 3038 OF 15 AND 1599 OF 16 - HS STEEL & VOLGA STEEL AYS : 2008-09 11 LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE CASE O F M/S. VOLGA STEEL LEARNED CIT(A) HAS DELETED THE PENALTY, WE ARE OF THE VIEW THAT THERE IS NO NEGATIVE EQUITY IN LAW NAMELY IF A PERSON COULD NOT BE CAUGH T FOR INFRINGEMENT OF LAW, THEN ONE WHO CAUGHT HAS RIGHT TO PLEAD EQUITY ON THE GROUND THAT SUCH AND SUCH PERSON WAS NOT PUNISHED FOR INFRINGEMENT O F LAW. THEREFORE, THE ASSESSEE CANNOT DRAW ANY BENEFIT FROM THE ORDER OF THE CIT(A) IN THE CASE OF M/S. VOLGA STEEL. TAKING INTO CONSIDERATION THE AB OVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY MERIT S IN THIS APPEAL. IT IS DISMISSED. 25. IN THE RESULT, ALL APPEALS ARE DISMISSED, EXCEP T IN THE CASE OF M/S. H S STEEL IN ITA NO.2621/AHD/2012 WHICH IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 ST FEBRUARY, 2018 AT AHMEDABAD. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/02/2018 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD