Shri Bipan Kumar Jain, Ludhiana V. DCIT, Ludhiana

ITA 285/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73550 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 14-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S C JAIN
• Keywords: Unexplained investment; Value adopted by valuation officer; Gift; Business income; Deemed to accrue or arise in india; Retrospective amendment; Accommodation entries; Onus to prove; Revised return; Reassessment proceedings
• Section: 143(3); 133A; 14A; 139(5); 147; 131; 148; 28; 139; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1062/CHD/2012 ASSESSMENT YEAR : 2002-03 ITA NO. 280 & 285/CHD/2013 ASSESSMENT YEAR : 2003-04 & 2004-05 BIPAN KUMAR JAIN VS. D.C.I.T, C-VI, LUDHIANA LUDHIANA AASPJ 3794 L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.C. JAIN RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING 24.2.2014 DATE OF PRONOUNCEMENT 2 4.3.2014 O R D E R PER T.R.SOOD, A.M THESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 17.7.2012, 24.12.2012 & 30.1.2013 OF THE LD CIT(A)-II, LUDHIAN A. SOME ISSUES IN THESE APPEALS ARE COMMON AND WERE HEARD TOGETHE R SO THESE ARE BEING DISPOSED OFF BY THIS COMMON ORDER: 2. IN ALL THESE CASES THE ASSESSEE HAS FILED COMMON REVISED GROUNDS. THE ISSUES INVOLVED ARE COMMON NAMELY CO NFIRMATION OF LEVY OF PENALTY U/S 271(1)(C). BY THE CONSENT OF PA RTIES IN ITA NO. 1062/CHD/2012 TAKEN UP FOR DETAILED ADJUDICATION AS IT WAS POINTED OUT BY BOTH THE PARTIES THAT THE ISSUES IN OTHER YE ARS ARE COMMON AND IDENTICAL. ITA NO. 1062 3 IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOW ING REVISED GROUNDS: 2 1 THAT THE LD. CIT-II HAS NOT CONSIDERED THE CORRECT FACTS OF THE CASE AND APPEAL HAS BEEN DISMISSED IGNORING THIS FACT THAT T HE MATTER INVOLVED IN THE COMPUTATION OF INCOME IS DEBATABLE ISSUE. 2. THAT THE ASSESSEE NEVER DID THE BROKING BUSINESS AS ASSUMED BY THE AO AND IGNORED BY CIT(A)-II, HENCE THE PENALTY LEVIED AND CONFORMED BY CIT-II SHOULD BE DELETED. 3. THAT THE CIT(A)-II HAS NOT CONSIDERED THE EXPLAN ATIONS AND CORRECT REASONS AND HAS NOT CONSIDERED THE ITAT ORDER ON TH IS ISSUE FOR QUANTUM APPEAL. 4 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C.A AND A SURVEY WAS CONDUCTED IN HIS PREMISES ON 15.6.2004. DURING THE COURSE OF SURVEY IT WAS DISCOVERED THAT THE ASSESSE E WAS ENGAGED IN GIVING ACCOMMODATION/BOOK ENTRIES ON ACCOUNT OF LONG/SHORT TERM CAPITAL GAINS/GIFTS/LOANS BY CHARGING COMMISSION. MODUS OPERANDI ADOPTED BY THE ASSESSEE WAS THAT THE CASH WAS BEING RECEIVED FROM DIFFERENT BENEFICIARIES WHICH WAS DEPOSITED IN VARI OUS BANK ACCOUNTS OF THE ASSESSEE, HIS FAMILY MEMBERS AND SOME OTHER ENTITIES FROM WHERE CHEQUES WERE ISSUED IN FAVOUR OF SUCH BENEFIC IARIES/CLIENTS FOR BOGUS CAPITAL GAINS/SHARE PROFIT/GIFTS ETC. DU RING THE COURSE OF SURVEY IT WAS ADMITTED BY THE ASSESSEE THAT HE HAS ISSUED CHEQUES AGAINST BOGUS ENTRIES FOR CAPITAL GAINS/GIFTS ETC. VARIOUS DOCUMENTS ETC. INCLUDING BLANK CHEQUE BOOKS, BANK ACCOUNTS WE RE FOUND DURING SURVEY EVEN RELATING TO THE EARLIER YEARS. AFTER TH E CONCLUSION OF SURVEY ULTIMATELY THE ASSESSEE SURRENDERED A SUM O F RS. 15 LAKHS FOR ASSESSMENT YEAR 2004-05 AND RS. 12 LAKH FOR AS SESSMENT YEAR 2005-06. IT WAS FURTHER NOTICED THAT THE ASSESSEE H AS NOT FURNISHED ANY RETURN OF INCOME SINCE ASSESSMENT YEAR 1996-97 TILL THE DATE OF SURVEY I.E. 15.6.2004. IN VIEW OF THE MATERIAL FOU ND DURING SURVEY AND THE ADMISSION OF THE ASSESSEE, A NOTICE U/S 148 WAS ISSUED FOR ASSESSMENT YEAR 2002-03 IN RESPONSE TO WHICH THE A SSESSEE FILED RETURN DECLARING INCOME OF RS. 45,000/-. DURING AS SESSMENT PROCEEDINGS IT WAS FURTHER NOTICED THAT APART FROM INDULGING IN GIVING ACCOMMODATION ENTRIES IN THE FORM OF CAPITAL GAINS, GIFTS, LOANS ETC. 3 THE ASSESSEE HAS ALSO MADE HUGE INVESTMENT IN SALE AND PURCHASE OF SHARES. THE TURN OVER IN RESPECT OF THESE BOGU S ENTRIES FOR ASSESSMENT YEAR 2002-03 WAS FOUND TO BE RS. 44,08, 57,148/-. ON THIS COMMISSION/NET PROFIT ACCRUING TO THE ASSESSE E WAS ESTIMATED AT 1% AND ACCORDINGLY THE ADDITION OF RS. 44,08,571 /- WAS MADE. IT WAS FURTHER NOTICED ON THE BASIS OF INFORMATION REC EIVED FROM R. KOHLI & CO. ON 27.3.2006 THAT THE ASSESSEE WAS ALSO DOING THE BUSINESS OF SALE AND PRUCHAE OF SHARES DURING THIS PERIOD. SUMMARY OF THE TRANSACTION HAS BEEN EXTRACTED BY THE ASSESS ING OFFICER AS UNDER: PURCHASE SALES NO. OF SHARES AMOUNT NO. OF SHARES AMOUNT A) SILVER LINE 55,000 2,195,800 50,000 2,957,250 B) REL PETRO 80,000 2,612,850 C) RCFL 50,000 3,806,009 CLOSING STOCK 135,000 6,449,024 PROFIT RS. 7,91,615/- THIS PROFIT OF RS. 791615/- WAS ALSO ADDED TO THE I NCOME OF THE ASSESSEE. THE ASSESSEE WAS FURTHER CONFRONTED THA T SINCE TOTAL INVESTMENT OF RS. 8614659/- FOR PURCHASE OF 185,000 EQUITY SHARES HAS BEEN MADE. OUT OF WHICH 50,000 SHARES OF SILVE R LINE WERE ALREADY SOLD AND THEREFORE BALANCE INVESTMENT WAS R S. 6449024/- FOR WHICH THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE. IT WAS SIMPLY STATED THAT THE ASSESSEE DID NOT HAVE ANY MONEY AND WHATEVER TRANSACTION HE WAS DOING WERE ON BEHALF OF THE CLIE NTS AND PROFITS WERE DISTRIBUTED AMONG THE CLIENTS. THE ASSESSING OFFICER DID NOT FIND FORCE IN THESE SUBMISSIONS AND FURTHER ADDED A SUM OF RS. 6449024/-. ON ALL THESE ITEMS PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED. 5 IN RESPONSE TO THE SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S 271(1)(C) IT WAS SIMPLY STATED THAT THE APPEALS WER E PENDING BEFORE THE ITAT, THEREFORE PENALTY PROCEEDINGS SHOULD BE K EPT IN ABEYANCE. ACCORDINGLY TO THE ASSESSING OFFICER PENALTY PROCEE DINGS WERE 4 GETTING TIME BARRED, THEREFORE THIS REQUEST WAS REJ ECTED. THEREAFTER THE ASSESSING OFFICER NOTICED THAT ADDITION ON ACCO UNT OF COMMISSION RECEIVED AGAINST BOGUS ENTRIES OF CAPITAL GAIN ETC. AMOUNTING TO RS. 4408571/- GOT REDUCED TO RS. 1891012/- BECAUSE THE LD. CIT(A) HAS REDUCED THE TURN OVER FROM RS. 44.08 CRORES TO RS. 37.82 CRORES AND EVEN THE ESTIMATED PROFIT @ 1% ADOPTED WAS REDUCED TO 0.5%. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS N EITHER DISCLOSED THESE TRANSACTIONS TO THE REVENUE NOR FILED ANY RET URN OF INCOME AGAINST THIS INCOME, THEREFORE PARTICULARS IN RESPE CT OF INCOME AMOUNTING TO RS. 1891012/- HAVE BEEN CONCEALED. SI MILARLY THE ASSESSEE HAD ALSO NOT DISCLOSED THE TRANSACTIONS FO R INVESTMENT IN SHARES AS WELL AS PROFIT FROM SHARES WAS NOT DISCLO SED, THEREFORE PARTICULARS OF INCOME ASSESSED DURING THE ASSESSMEN T PROCEEDINGS AMOUNTING TO RS. 791615/- ON ACCOUNT OF PROFIT EARN ED ON SHARES AND RS. 6449024/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN SHARES, HAVE ALSO BEEN CONCEALED. ACCORDINGLY HE WAS OF OPINION THAT THIS IS A FIT CASE FOR LEVY OF PENALTY AND ULTIMATELY PENALTY AT THE MINIMUM RATE OF 100% WAS LEVIED AMOUNTING TO RS. 2795170/- . 6 ON APPEAL. IT WAS MAINLY SUBMITTED THAT INCOME HA S BEEN ULTIMATELY ESTIMATED BY THE ASSESSING OFFICER, LD. CIT(A) AND EVEN BY THE TRIBUNAL, THEREFORE NO PENALTY CAN BE LEVIED ON ESTIMATED INCOME AND IN THIS REGARD HE RELIED ON THE FOLLOWIN G DECISIONS BEFORE HIM: A) COMMISSIONER OF INCOME TAX VS. METAL PRODUCTS OF INDIA 150-ITR 714 (PH) B) CIT VS. M.M. RICE MILLS 253-ITR-17 (PH) C) CIT VS. VALIMKBHAI H. PATEL 201 CTR (GUJ) 113-20 06-280 ITR-487(GUJ) D) COMMISSIONER OF INCOME TAX VS. DHILLON RICE MILL S 256 ITR 447 (PH) IT WAS FURTHER SUBMITTED THAT ORIGINALLY THE STATEM ENT WAS MADE BY THE ASSESSEE BEFORE THE DEPARTMENT THAT THE ASSESSE E HAS AT BEST EARNED COMMISSION ONLY OF 0.25% WHICH WAS APPROVED BY THE ADDL CIT AND THEREFORE IT WAS A CASE OF WRONG ESTIMATION LATER ON BY 5 DENYING FROM EARLIER SETTLED POSITION. IT WAS ALSO CONTENDED THAT I.T.A.T. HAS ALREADY RESTORED CERTAIN ISSUES TO THE FILE OF ASSESSING OFFICER FOR RECALCULATION OF THE ISSUES. FINALLY I T WAS POINTED OUT THAT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE HON'BLE PUNJAB AND HARYANA HIGH COURT , THEREFORE APPEAL PROCEEDINGS O N PENALTY SHOULD BE KEPT PENDING. 7 THE LD. CIT(A) CONSIDERED THE SUBMISSIONS IN RESP ECT OF FIRST ISSUE REGARDING CONFIDENTIAL NOTE PREPARED BY THE I TO AS PER WHICH THE COMMISSION WAS TO BE ADOPTED @ 0.25%. IT WAS O BSERVED THAT THE LD. CIT(A) AND THE TRIBUNAL HAS ALREADY OBSERVE D THAT THIS WAS PART OF INITIAL CORRESPONDENCE IN DEPARTMENT AND IF NECESSARY MATERIAL WAS FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEN SUCH HIGHER INCOME CAN BE ESTIMATED. HE FURTHE R OBSERVED THAT IT WAS ALSO NOTED DURING QUANTUM PROCEEDINGS BY THE LD. CIT(A) THAT THE DEPARTMENTAL OFFICERS WERE NOT AWARE OF TOTAL A SSTS OF THE ASSESSEE AND HIS FAMILY MEMBERS AND THEREFORE LATTE R ESTIMATION WAS JUSTIFIED. 8 ON THE SECOND ISSUE OF RESTORATION OF MATTER BY T HE TRIBUNAL TO THE ASSESSING OFFICER IT WAS OBSERVED THAT ONLY TH E ISSUE WHICH WAS RESTORED BY THE TRIBUNAL, WAS RELATING TO VERIFICAT ION OF SOURCE OF PAYMENT MADE BY THE ASSESSEE TO R.K. KOHLI & CO. IN RESPECT OF ACQUISITION OF SHARES AND THE ASSESSING OFFICER AFT ER VERIFICATION IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL, HAS NO TED THAT THE ASSESSEE HAS MADE PURCHASE OF SHARES OF SILVERLINE, RELIANCE PETRO, RCFL LTD., ETC. AND THE PAYMENTS WERE MADE FROM THE BANK ACCOUNTS OF SMT. KANTA RANI, BIPIN JAIN AND RAJIV JAIN. THU S ALL INVESTMENTS WERE MADE BY THE ASSESSEE AND HIS FAMILY MEMBERS AN D THEREFORE NO RELIEF WAS GRANTED WHILE GIVING EFFECT TO THE OR DER OF THE TRIBUNAL. IN RESPECT OF NON LEVY OF PENALTY IN CASES OF ESTIM ATED INCOME, THE LD. CIT(A) OBSERVED THAT IT WOULD DEPEND ON THE FAC TS OF EACH CASE. 6 HE ALSO RELIED ON THE FOLLOWING DECISIONS WHERE THE PENALTY WAS HELD TO BE LEVIABLE: (A) ADDL. CIT VS. CHANDRAKANTHA AND ANOTHER, 205 IT R 607 (MP) (B) ADDL. CIT VS. LAKSHMI INDUSTRIES AND COLD STORA GE CO. LTD, 146 ITR 492(ALL) (C) SUSHIL KUMAR SHARAD KUMAR VS. CIT 232 ITR 588(A LL) (D) CIT VS. MD. WARASAT HUSSAIN, 171 ITR 405 (PATNA ) (E) A.M. SHAH & CO. VS. CIT, 238 ITR 415(GUJ.) (F) CIT VS. KRISHNASWAMY AND SONS, 219 ITR 157 (MAD ) (G) CIT VS. SWARUP COLD STORAGE & GENERAL MILLS, 13 6 ITR 435 (ALL) (H) CIT VS. CHANDRA VILAS HOTEL, 291 ITR 202 (GUJ.) 9 IN RESPECT OF LAST CONTENTION THAT THE APPEAL WAS PENDING BEFORE THE HON'BLE PUNJAB AND HARYANA HIGH COURT , HE OBSERVED THAT THIS WOULD NOT HELP THE ASSESSEE BECAUSE THIS CANNOT BE A GROUND FOR NOT IMPOSING THE PENALTY. THE LD. CIT(A ) ALSO DISTINGUISHED THE CASE LAW RELIED ON BY THE ASSESSE E AND ALSO OBSERVED THAT THE ASSESSEE DID NOT SURRENDER ANY IN COME FOR ASSESSMENT YEAR 2002-03 DESPITE SURVEY AND KNOWLED GE THAT HE HAS SIMILAR INCOME F OR ASSESSMENT YEAR 2002-03. HE A LSO OBSERVED THAT LEVY OF PENALTY HAS BEEN DESCRIBED AS STRICT L IABILITY AND IN THIS REGARD HE PARTICULARLY RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF K.P. MADHUSUDHANAN V CIT, 251 ITR 99 (S.C) AND UNION OF INDIA VS. DHARMENDRA TEXTILES LTD., 306 IT R 277. 10 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE MADE ORAL SUBMISSIONS AND HAVE ALSO FILED WRITTEN SUBMISSIONS . IT WAS MAINLY CONTENDED THAT THE ASSESSEE WAS ACTING AS AN AGENT OF VARIOUS COMPANIES I.E. M/S USHA GARG & CO. M/S SUBHASH BHAR DWA & CO. M/S P.K. KHANNA & CO., AND M/S B. FINLEASE INDIA PV T LTD. THE ASSESSEE WAS MERELY ACTING AS AGENT OF THESE FIRMS AND THESE FIRMS WERE DOING THEIR BUSINESS AND THE ASSESSEE WAS ONLY ENTITLED TO BROKERAGE OF 0.25%. THESE FIRMS WERE MAINTAINING P ROPER ACCOUNTS WHICH HAVE BEEN AUDITED ALSO. THE STATEMENTS OF VA RIOUS PERSONS FROM THESE FIRMS WERE TAKEN AT THE BACK OF THE ASSE SSEE AND NO STATEMENT HAS BEEN RECORDED IN CASE OF B. FINLEASE INDIA PVT LTD. IN ANY CASE ULTIMATELY ASSESSEES INCOME HAS BEEN ESTI MATED AND 7 THEREFORE NO PENALTY IS LEVIABLE. IN THE WRITTEN S UBMISSIONS IT HAS BEEN FURTHER POINTED OUT THAT HOW THE STATEMENTS OF VARIOUS PERSONS HAVE BEEN RECORDED AND HOW THESE PERSONS HAVE CLEAR LY ADMITTED THAT THEY WERE FILING RETURNS OF INCOME. ONCE THE ASSESSEE WAS ONLY ACTING AS AN AGENT AND GOT ONLY SOME SHARE OF BROKE RAGE THEN ALL THE CREDITS IN THE BOOKS OF THESE FIRMS COULD NOT HAVE BEEN CONSIDERED FOR ESTIMATING INCOME IN THE CASE OF ASSESSEE. 11 HE REFERRED TO PAGE 2 TO 6 OF THE PAPER BOOK WHI CH IS PART OF THE INTERNAL CORRESPONDENCE OF THE DEPARTMENT IN WH ICH ULTIMATELY IT HAS BEEN SUGGESTED THAT THE ASSESSEE WAS SHARING CO MMISSION RECEIVED WITH THESE FIRMS AND THEREFORE CREDIT OF 0 .15% SHOULD BE ALLOWED ON THESE ACCOUNTS WHICH WOULD MAKE GROSS PR OFIT OF THE ASSESSEE AT 0.25%. IGNORING THIS CORRESPONDENCE TH E ASSESSING OFFICER ESTIMATED THE PROFIT AT 1% WHICH WAS LATER ON REDUCED BY 0.5% BY THE LD. CIT(A) AND THEREAFTER THE TRIBUNAL CONFIRMED THE SAME. THUS HIGHER PROFIT HAS BEEN ESTIMATED, THERE FORE NO PENALTY IS LEVIABLE. IN THIS REGARD HE ALSO PLACED RELIANC E ON THE FOLLOWING DECISIONS: AGGARWAL CONSTRUCTION CO. VS. ACIT, ITA NO. 843/CHD /2009 BHARTI AIRTEL LTD. VS. CIT, ITA NO. 94/ASR/2011 FINE LINE CONSTRUCTION PVT LTD VS. ACIT, ITA NO. 4 907/DEL/2012 DEEPSHIKHA MAHESWARI VS. ITO, ITAS NO. 581, 582, 58 3, 584, 585 & 586/DEL/2013 PPP ASSOCIATES VS. ACIT, ITA NO. 946 TO 953/PN/2009 JUGENDRA SINGH & CO., VS. DCIT, ITA NO. 420/AGRA/20 12 M/S OMRS WINES VS. ITO, ITA NO. 410 TO 414/HYD/2013 12 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE CARRIED US THROUGH VARIOUS CONTENTS OF THE IMPUGNED ORDER. HE PARTICULARLY REFERRED TO THE RELEVANT PORTION OF THE STATEMENT R ECORDED DURING SURVEY WHICH HAVE BEEN EXTRACTED BY THE LD. CIT(A) WHICH CLEARLY SHOWS THAT THE ASSESSEE DURING SURVEY ADMITTED THAT THE ASSESSEE 8 WAS PROVIDING ACCOMMODATION ENTRIES BY RECEIVING CA SH FROM THE BENEFICIARIES / CLIENTS. PARA 3.1.1. CLEARLY SHOW THAT THE STATEMENT OF OTHER PERSONS WERE ALSO RECORDED WHO HAD ALSO CL EARLY STATED THAT IT WAS THE ASSESSEE WHO WERE DOING BUSINESS OF PROV IDING ACCOMMODATION ENTRIES AND CHEQUE BOOKS DULY SIGNED BY THESE PERSONS, WERE HANDED OVER TO THE ASSESSEE. THOUGH THE DOCUMENTS WERE FOUND FOR ASSESSMENT YEAR 2002-03 BUT STILL T HE ASSESSEE PREFERRED TO MAKE SURRENDER ONLY IN THE ASSESSMENT YEAR 2004-05 AND 2005-06. THE LD. D.R. FOR THE REVENUE FURTHER R ELIED ON THE DECISION QUOTED BY THE LD. CIT(A) AT PAGE 10. HE A LSO SUBMITTED THAT PENALTY HAS BEEN HELD TO BE LEVIABLE BY HON'BL E PUNJAB AND HARYANA HIGH COURT IN CASE OF SHVETA NANDA VS. CIT , ITA NO. 810 OF 2008 (COPY FILED) WHEREIN INCOME WAS DETECTED DU RING SURVEY. SIMILARLY WHEN A GROUP OF PERSONS KNOWN AS M/S BALD EV ELECTRICALS, LUDHIANA WAS FOUND TO HAVE BEEN INDULGED IN TAX EVA SION BY SHOWING INCOME FROM OTHER SOURCES AS AGRICULTURAL INCOME TH EN PENALTY WAS HELD TO BE LEVIABLE BY HON'BLE PUNJAB AND HARYANA H IGH COURT IN CASE OF RAJESH CHWAL VS. CIT, 203 CTR 209 (COPY FIL ED). HE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF MAK DATA P. LTD VS. CIT, 358 ITR 593 (S.C). 13 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREF ULLY. FIRST OF ALL WE WOULD LIKE TO NOTE THAT PENALTY PROCEEDINGS ARE INDEPENDENT FROM ASSESSMENT PROCEEDINGS AND DURING PENALTY PROC EEDINGS ISSUE RELATING TO ASSESSMENT CAN NOT BE AGITATED. THE LD. COUNSEL FOR THE ASSESSEE HAS TRIED TO FIND FAULT WITH ASSESSMENT FO R EXAMPLE HE HAD CONTENDED THAT THE ASSESSEE WAS NOT DOING ANY BUSIN ESS OF ACCOMMODATION ENTRY IN THIS ASSESSMENT YEAR, THEREF ORE ADDITION WAS NOT JUSTIFIED. THE QUESTION WHETHER LEGALITY O F THE ASSESSMENT CAN BE GONE INTO PENALTY PROCEEDINGS CAME UP FOR CO NSIDERATION OF HON'BLE MADHYA PRADESH HIGH COURT IN CASE OF S.S. RATANCHAND 9 BHOLANATH VS. CIT, 210 ITR 682 (M.P). FOLLOWING TW O QUESTIONS WERE RAISED: (1) - WHETHER, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE ITOS ORDER DATED SEP[T 4,1976 WAS LEGALLY VALI D? (2) - IF THE ANSWER TO QUESTION NO. (1) IS IN THE A FFIRMATIVE WHETHER THE QUESTION OF LEGALITY OF THE ASSESSMENT COULD BE GONE INTO IN PENALTY PROCEEDINGS? IN THAT CASE THE ASSESSEE WAS AN HINDU UNDIVIDED FA MILY AND THE ASSESSMENT WAS FINALIZED FOR ASSESSMENT YEAR 1971-7 2. IN APPEAL BY THE ASSESSEE, THE APPELLATE AUTHORITY REDUCED CE RTAIN ADDITIONS AND ON THE QUESTION WHETHER THE AMOUNT OF SALES TAX PENALTY PAID BY THE ASSESSEE IS LIABLE TO BE DEDUCTED FROM THE INCO ME, IT DIRECTED THE ASSESSING OFFICER TO DECIDE AFRESH AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. THE APPELLATE AUTHORITY THEREBY SET ASIDE THE ASSESSMENT ORDER. DURING REASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTED THAT A SUM OF RS. 11,027 RELATING TO THE S ALE OF A TEMPO VAN ON ACCOUNT OF WRONG TOTALING IS LIABLE TO BE ADDED TO THE INCOME. THE ASSESSING OFFICER PASSED A REASSESSMENT ORDER A DDING RS. 11,027 TO THE TOTAL INCOME. HE ALSO INITIATED PENAL TY PROCEEDINGS AGAINST THE ASSESSEE. THE ASSESSEE DID NOT CHALLEN GE THE REASSESSMENT ORDER IN APPEAL. THE PENALTY PROCEEDI NGS ENDED WITH AN ORDER LEVYING PENALTY OF RS. 12,000 ON ACCOUNT O F CONCEALMENT OF INCOME OF RS. 11,027. THE APPEAL FILED BY THE ASSE SSEE WAS DISMISSED BY THE COMMISSIONER AND THE SECOND APPEAL WAS DISMISSED BY THE TRIBUNAL. 14 WHILE ADJUDICATE QUESTION NO. 2, IT HAS BEEN OBS ERVED BY THE HON'BLE HIGH COURT AS UNDER: QUESTION NO. 2 : IT IS CONTENDED FOR THE REVENUE T HAT EVEN ASSUMING THAT THE ADDITION OF RS. 11,027 IN THE INCOME WAS ERRONEOUS, THE ASSESSEE CA NNOT RAISE THIS QUESTION IN PENALTY PROCEEDINGS SINCE THE REASSESSMENT ORDER WAS NOT CH ALLENGED IN APPEAL. THE ANSWER OF THE ASSESSEE IS THAT PENALTY PROCEEDINGS ARE QUASI-CRIM INAL IN NATURE, THAT THE DEPARTMENT HAS TO ESTABLISH IN PENALTY PROCEEDINGS THAT THERE HAS BEE N CONCEALMENT OF INCOME, THAT THOUGH THE FINDINGS IN THE ASSESSMENT ORDER CONSTITUTE EVIDENC E IN PENALTY PROCEEDINGS THEY ARE NOT CONCLUSIVE AND THE MATTER HAS TO BE DECIDED AFRESH IN PENALTY PROCEEDINGS. THEREFORE, IT IS SUBMITTED THAT THE ASSESSEE CAN CHALLENGE THE ASSES SMENT ORDER IN THE PENALTY PROCEEDINGS. THE ASSESSEE RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN JAINARAYAN BABULAL VS. CIT (1988) 69 CTR (BOM) 201 : (1988) 170 ITR 399 (BOM). THIS D ECISION RELIES ON AN EARLIER DECISION OF THE 10 BOMBAY HIGH COURT IN CIT VS. GOKULDAS HARIVALLABHDA S (1958) 34 ITR 98 (BOM), WHICH IS APPROVED BY THE SUPREME COURT IN CIT VS. ANWAR ALI (1970) 76 ITR 696 (SC). IN ANWAR ALI'S CASE (SUPRA), THE SUPREME COURT HAS INDICATED THAT THE PROVISION IN QUESTION IS PENAL IN THE SENSE THAT ITS CONSEQUENCES ARE INTEND ED TO BE AN EFFECTIVE DETERRENT WHICH WILL PUT A STOP TO PRACTICES WHICH THE LEGISLATURE CONSIDERS T O BE AGAINST THE PUBLIC INTEREST AND HELD THAT IF THERE IS NO EVIDENCE ON THE RECORD EXCEPT THE EXPLA NATION GIVEN BY THE ASSESSEE, WHICH EXPLANATION HAS BEEN FOUND TO BE FALSE, IT DOES NOT FOLLOW THAT THE RECEIPT CONSTITUTES HIS TAXABLE INCOME. THE COURT OBSERVED : 'IT MUST BE REMEMBERED THAT THE PROCEEDINGS UNDER S . 28 ARE OF A PENAL NATURE AND THE BURDEN IS ON THE DEPARTMENT TO PROVE THAT A PARTICULAR AMOUNT IS A REVENUE RECEIPT. IT WOULD BE PERFECTLY LEGITIMATE TO SAY THAT THE MERE FACT THAT THE EXPLA NATION OF THE ASSESSEE IS FALSE DOES NOT NECESSARILY GIVE RISE TO THE INFERENCE THAT THE DIS PUTED AMOUNT REPRESENTS INCOME. IT CANNOT BE SAID THAT THE FINDING GIVEN IN THE ASSESSMENT PROCE EDINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE. HOWEVER, IT IS GOOD EVIDENCE. BEFORE PE NALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSI ON THAT THE DISPUTED AMOUNT REPRESENTED INCOME AND THAT THE ASSESSEE HAD CONSCIOUSLY CONCEA LED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS.' [EMPHASIS, SUPPLIED] A READING OF THE ABOVE OBSERVATIONS SHOWS THAT WHIL E ASSESSMENT PROCEEDINGS MAY CONSTITUTE GOOD EVIDENCE IN PENALTY PROCEEDINGS , THEY ARE NOT CONCLUSIVE. THE STATUTORY AUTHORITY DEALING WITH PENALTY PROCEE DINGS MUST BE SATISFIED THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICUL ARS OF HIS INCOME WHICH ATTRACTS THE PENAL PROVISIONS OF THE ACT. IN THE PR ESENT CASE, THE ASSESSEE HIMSELF TOLD THE ASSESSING OFFICER THAT THERE WAS A SUPPRESSION OF INCOME TO THE EXTENT OF RS. 11,027. THIS WAS ALSO VERIFIED BY THE ASSESSING OFFICER, AND HENCE THE QUESTION OF THE AUTHORITY IN PENAL PROCEE DINGS COMING TO ANY CONCLUSION DIFFERENT FROM THE ONE ARRIVED AT IN THE REASSESSMENT PROCEEDINGS DOES NOT ARISE. THE ABOVE DECISION IS NOT AN AUTHOR ITY FOR THE PROPOSITION THAT WHERE THE REASSESSMENT IS NOT CHALLENGED IN APPEAL, THE ORDER AS SUCH CAN BE COLLATERALLY CHALLENGED IN PENALTY PROCEEDINGS. IF THE ASSESSMENT ORDER OR REASSESSMENT ORDER BECOMES FINAL, THAT IS BINDING O N BOTH THE PARTIES AND NEITHER PARTY CAN SEEK TO REOPEN IT IN A PENALTY PR OCEEDING. THIS CONCLUSION, OF COURSE, DOES NOT AFFECT THE SETTLED POSITION OF LAW THAT THE ASSESSMENT ORDER OR REASSESSMENT ORDER IS NOT CONCLUSIVE IN PENALTY PRO CEEDING. WE, THEREFORE, HOLD THAT QUESTION NO. 2 HAS TO BE ANSWERED IN FAVOUR OF THE REVENUE. THUS FROM ABOVE IT IS CLEAR THAT ISSUES WHICH OBTAI NED FINALITY IN THE ASSESSMENT, CANNOT BE RE-AGITATED DURING PENALTY PR OCEEDINGS. THEREFORE DURING PENALTY PROCEEDINGS FOR THIS YEAR I.E. ASSES SMENT YEAR 2002-03 IT CANNOT BE CONTENDED THAT NO DOCUMENTS WERE FOUND FO R ASSESSMENT YEAR 2002-03 OR PROFIT FROM BOGUS ENTRIES HAS BEEN ESTIM ATED AT HIGHER RATE. 15 IN THIS CASE THE LD. CIT(A) HAS MADE MAIN OBSERV ATION WHICH CLARIFY THE FACTS AS WELL AS CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE AT PARA 3.1 WHICH READ AS UNDER: 3.1 BRIEF FACTS LEADING TO THE IMPOSITION OF PENALT Y IN THIS CASE ARE THAT THE APPELLANT WAS A CHARTERED ACCOUNTANT BY PROFESSION AND OPERATING FROM HIS OFFICE CUM RESIDENCE AT 94-D, BRS NAGAR, LUDHIANA. THE APP ELLANT HAD NOT FURNISHED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W ITHIN THE TIME ALLOWED U/S 139 OF THE I.T. ACT. SURVEY OPERATIONS WERE CARRIED OUT U/S 133A OF THE I.T. ACT AT THE OFFICE OF THE APPELLANT WAS ENGAGED IN GIVING ACCOM MODATION / BOOK ENTRIES ON ACCOUNT OF LONG / SHORT TERM CAPITAL GAINS / GIFTS / LOANS, BY CHARGING COMMISSION. THE MODUS OPERANDI CARRIED ON BY THE APPELLANT WAS THAT CASH RECEIVED FROM DIFFERENT BENEFICIARIES WAS DEPOSITED IN VARIOUS BA NK ACCOUNTS OF THE APPELLANT, HIS FAMILY MEMBERS AND OTHER SHARE BROKERS, FROM WHERE CHEQUES WERE ISSUED IN FAVOUR OF THE CLIENTS FOR BOGUS CAPITAL GAINS / SHA RE PROFITS/ GIFTS ETC. THE APPELLANT 11 IN HIS STATEMENT RECORDED DURING COURSE OF SURVEY O PERATION ON 15.06.2004 ADMITTED TO HAVE ISSUED CHEQUES / DRAFTS FOR BOGUS PROFITS IN RETURN OF THE CASH PROVIDED TO HIM BY HIS CLIENTS. THE APPELLANT ALSO DISCLOSED THE NAME OF VARIOUS CONCERNS UNDER WHICH HE WAS CARRYING ON HIS BUSINES S AND ALSO THE BANK ACCOUNT FROM WHERE CHEQUES / DRAFTS WERE ISSUED. IN ANSWER TO QUESTION NO. 2,3, & 4 IT WAS STATED AS UNDER:- Q. 2 WHAT IS THE MODUS OPERANDI OF THE COMPANY AND YOU ? ANS. I ARRANGE BUY AND SALE ORDERS WHICH ARE EXECU TED BY THEM ON BEHALF OF MY CLIENTS. FOR THIS PURPOSE, BANK ACCOUNT NO. 9904 0 HAS BEEN OPENED WITH BANK OF PUNJAB, 112, PAKHOWAL ROAD FOR ISSUE O F CHEQUE / DRAFTS FOR THE PROFIT EARNED BY THE CLIENTS. THE DEPOSITS IN T HE BANK ARE OF TWO TYPES. ONE IS THE AMOUNT OF ADVANCE RECEIVED FROM T HE CLIENTS AND THE OTHER IS FOR LOSS INCURRED BY THE SECOND PARTY. HOW EVER, I MAY CLARIFY THAT IN FACT THERE IS NO SECOND PARTY TO THE DEAL AND IN FAT THE AMOUNT IS PROVIDED BY THE PARTY SEEKING PROFITS AND AFTER DEP OSIT OF CASH RECEIVED FROM HIM WE ISSUE HIM CHEQUE / DRAFT. IN OTHER WORD S, ONLY PROFIT ENTRIES ARE PROVIDED BY US IN THE NAME OF M/S B. FINLEASE I NDIA PVT. LTD. AND NO TRANSACTIONS WITH THE STOCK EXCHANGES ARE ENTERED I NTO AND ONLY PROFITS ON PAPERS ARE PROVIDED TO THE CLIENTS ON COMMISSION BY THE COMPANY THROUGH ME. FOR THIS PURPOSE / SERVICES / CHARGE CO MMISSION OF FIVE PAISA PER HUNDRED OF PROFIT BILL ISSUED. THE COMP ANY CHARGES BALANCE TWENTY PAISA PER THOUSAND. THUS TOTAL COMMISSION CH ARGED IS TWENTY FIVE PAISA PER HUNDRED OF THE PROFIT BILL ISSUES. Q.3 FOR WHICH COMPANIES YOU ARE WORKING ON COMMISSI ON AND INTIMATE THE BANK ACCOUNTS ? ANS. AT PRESENT I AM WORKING ONLY FOR M/S B. FINLEA SE INDIA PVT. LTD. ITS BANK ACCOUNT NO. 99040 WITH BANK OF PUNJAB, PAKHOWAL ROA D, LUDHIANA. PRIOR TO THIS, I HAVE WORKED FOR THE FOLLOWING COMPANIES. A. M/S P.K KHANNA & COMPANY C/O (ISE), LUDHIANA STO CK EXCHANGE. B. USHA GARG & CO. C/O LUDHIANA STOCK EXCHANGE AT P RESENT, I DO NOT REMEMBER THE ACCOUNT NUMBER WHICH STAND CLOSED AS O N DATE. Q.4. PLEASE EXPLAIN THE NATURE OF BANK SIGNED CHEQU E BOOK BY GARG INVESTMENT SERVICES NO. 052719 TO 052750 A/C NO. 74 6 OF LORD KRISHNA BANK LTD. CAPITAL PLAZA, MALL ROAD, LUDHIANA. ANS. THIS WAS A SUB BROKERSHIP FIRM OF M/S USHA GA RG & COMPANY. I HAVE SINCE STOPPED WORKING FOR THIS FIRM EIGHTEEN CHEQUE S WERE ISSUED UPTO 25.06.2002 AND THE BALANCE CHEQUES ARE BEING UNUSED . 3.1.1 SIMULTANEOUS SURVEY OPERATION U/S 133 A OF TH E ACT WERE ALSO CARRIED OUT AT THE BUSINESS PREMISES OF OTHER BROKERS AT LUDHIANA AND IN THEIR STATEMENTS RECORDED DURING THE COURSE OF SURVEY, THEY ADMITTED TO HAVE ISSUED CHEQUES FOR BOGUS PROFITS AGAINST CASH PROVIDED BY CLIENTS. STA TEMENT OF SH. MANOJ KUMAR S/O SH. SUBHASH BHARDWAJ (CONCERN M/S SUBHASH BHARD WAJ & COMPANY) WAS RECORDED U/S 131 OF THE I.T. ACT ON 29.6.2004 IN WH ICH HE ADMITTED TO HAVE SIGNED BLANK CHEQUE BOOK IN RESPECT OF THEIR BANK A CCOUNT NUMBER 99021 WITH BANK OF PUNJAB LIMITED, PAKHOWAL ROAD, LUDHIANA AND CURRENT ACCOUNT NUMBER 1734 WITH LORD KRISHNA BANK, LUDHIANA AND HANDING O VER TO SH. B.K. JAIN, WHO DEPOSITED CASH IN THESE BANK ACCOUNTS FROM WHICH CH EQUES WERE ISSUED TO HIS CLIENTS. IN THE COURSE OF SURVEY U/S 133 A OF THE A CT, AT THE BUSINESS PREMISES OF M/S USHA GARG & COMPANY ON 25.06.2004, STATEMENT OF SH. SAGUN GARG S/O PAWAN KUMAR GARG WAS RECORDED IN WHICH HE ADMITTED THAT THE CURRENT ACCOUNT NUMBER 746 WITH LORD KRISHNA BANK LTD. LUDHIANA WAS USED BY THE APPELLANT FOR HIS BUSINESS PURPOSES. ON 02.08.2004 STATEMENT OF ANOTHER SHARE BROKER SH. PARDEEP KHANNA, PROPRIETOR OF M/S P.K. KHANNA & COMPANY WAS RECORDED U/S 131 OF THE ACT IN WHICH HE ADMITTED TO SIMILAR DEPOSITION AS ABOVE IN CONNECTION WITH HIS ACCOUNT IN BANK OF PUNJAB LTD. LUDHIANA. 3.1.2 THE APPELLANT AFTER THE CONCLUSION OF THE SUR VEY VIDE LETTER DATED 01.03.2005 MADE A SURRENDER OF RS. 27 LACS I.E. RS. 15 LACS RE LATING TO AY 2004-05 AND RS. 12 LACS RELATING TO AY 2005-06. IN THE SAID LET TER IT WAS STATED BY THE APPELLANT THAT THE SURRENDER WOULD COVER ALL THE TR ANSACTIONS IN CASH ROUTED THOUGH HIS SAVING ACCOUNTS OR CURRENT ACCOUNTS MAIN TAINED IN THE NAME OF THE FIRM / COMPANY OR IN HIS NAME AND IN THE NAME OF HI S FAMILY MEMBERS AND NEPHEW INCLUDING OTHER BROKERS / SUB BROKERS. THE S URRENDER WAS ALSO TO COVER ALL EARNINGS OR OTHER MISC. INCOME / SUB BROKERAGE / SUB COMMISSION EARNED DURING THE PERIOD OF SURRENDER. THE INCOME SURRENDE RED BY THE APPELLANT WAS DISCLOSED IN THE RETURN OF INCOME FURNISHED FOR AYS 2004-05 AND 2005-06. THE APPELLANT HAD NOT FURNISHED ANY RETURN OF INCOME SI NCE AFTER AY 1996-97 TILL THE DATE OF SURVEY ON 25.06.2004. INFORMATION WAS COLLE CTED DURING THE SURVEY 12 OPERATION THAT THE BUSINESS WAS BEING CARRIED OUT I N THE EARLIER YEARS ALSO. IN VIEW OF THE INFORMATION GATHERED DURING THE SURVEY, THE AO FOUND THAT THE APPELLANTS INCOME RELEVANT TO AY 2002-03 HAD ESCAP ED ASSESSMENT WITHIN THE MEANING OF SECTION 147 AND HENCE PROCEEDINGS U/S 14 8 OF THE ACT WERE INITIATED, IN RESPONSE TO WHICH THE APPELLANT FURNI SHED RETURN OF INCOME DECLARING INCOME OF RS. 45,000,/- 3.1.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO IDENTIFIED THE VARIOUS BANK ACCOUNTS USED BY THE APPELLANT FOR HIS BUSINES S AND COPIES OF THESE ACCOUNTS WERE CALLED FROM THE RESPECTIVE BANKS U/S 133 (6) OF THE I.T. ACT. THE AO FROM THE AFORESAID COPIES OF ACCOUNTS FROM THE C ONCERNED BANKS COLLECTED THE INFORMATION FOR THE YEAR UNDER CONSIDERATION AN D THE DEPOSITS WERE WORKED OUT TO RS. 44,08,57,148/-. THE AO ADOPTED THE RATE OF COMMISSION OF 1% AS REASONABLE FOR WORKING OUT THE INCOME OF THE APPELL ANT. THE INCOME FROM BUSINESS WAS COMPUTED AT RS. 4408571/-. 3.1.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, INFORMATION WAS RECEIVED FROM M/S R. KOHLI & COMPANY, STOCK BROKER WITH REGARD TO TRANSACTIONS OF PURCHASES AND SALE OF SHARES BY THE APPELLANT DURING THE ACCO UNTING PERIOD RELEVANT TO AY 2002-03. FROM THE DETAILS, THE AO NOTED THAT THE AP PELLANT HAD MADE TOTAL INVESTMENT OF RS. 86,14,657/-. FURTHER ON SALE OF 5 0,000 SHARES OF SILVER LINE, THE APPELLANT EARNED PROFIT OF RS. 7,91,615/- AND B ALANCE 1,35,000 SHARES OF DIFFERENT COMPANIES VALUED AT RS. 64,49,024/- WERE AVAILABLE AS CLOSING STOCK. IN REPLY, THE APPELLANT VIDE LETTER DATED 29.03.200 6, STATED THAT IT WAS CARRYING ON THE TRANSACTIONS ON BEHALF OF OTHERS AND THE PRO FITS WERE DISTRIBUTED TO SUCH PERSONS. THE AO GATHERED INFORMATION THAT IMMEDIATE LY AFTER THE PURCHASE OF SHARES, THESE WERE TRANSFERRED VIA ELECTRONIC MEDIA TO THE PERSONAL D-MAT ACCOUNT OF THE PURCHASER. THE AO ALSO OBSERVED THAT AS PER THE RULES AND REGULATIONS OF THE DEPOSITORY, IN CASE THE PERSON H OLDS CERTAIN SHARES ON BEHALF OF ANOTHER PERSON, A DECLARATION HAS TO BE FILED TO THAT EFFECT. THE AO OBSERVED THAT THE APPELLANT HAD FAILED TO FILE THE DECLARATI ON IN HIS OWN NAME OR NAME OF HIS FAMILY MEMBERS TO PROVE THAT HE WAS NOT HOLDING THESE SHARES IN HIS OR HIS FAMILY MEMBERS D-MAT ACCOUNT. IN THE ABSENCE OF THE EVIDENCE, THE VALUE OF CLOSING STOCK OF 1,35,000 SHARES AT RS. 64,49,024/- WAS HELD TO REPRESENT UNEXPLAINED INVESTMENT IN THE BUSINESS BY THE APPEL LANT. THE SAME WAS INCLUDED AS UNEXPLAINED INVESTMENT OUT OF INCOME FR OM UNDISCLOSED SOURCES AND WAS ASSESSED AS DEEMED INCOME U/S 69 OF THE ACT . FURTHER, PROFIT OF RS. 7,91,615/- WAS ALSO ADDED AS INCOME FROM BUSINESS O F THE APPELLANT. 3.1.5 THE APPELLANT FILED AN APPEAL BEFORE THE CIT( A). THE CIT(A) REWORKED THE TURNOVER OF THE APPELLANT AT RS. 37,82,02,425/- AS AGAINST THE TURNOVER OF RS. 44,08,57,148/- WORKED AT BY THE AO. THE CIT(A) ALSO HELD THAT THE RATE OF COMMISSION ON THIS TURNOVER SHALL BE TAKEN AT 0.5% AS AGAINST RATE OF 1% TAKEN BY THE A.O. THE OTHER TWO ADDITIONS WERE CONFIRMED BY THE CIT(A). 3.1.6 THE AO THERAFTER, ISSUE A SHOW-CAUSE NOTICE O N THE APPELLANT AS TO WHY PENALTY U/S 271(1)(C) MAY NOT BE IMPOSED. THE AO AFTER CONS IDERING THE REPLY OF THE APPELLANT HELD AS UNDER:- FROM THE DOCUMENTARY EVIDENCES WHICH INCLUDE THE BANK ACCOUNTS, THE STATEMENT OF THE ASSESSEE AN OTHER FINDINGS AS MENT IONED IN THE ASSESSMENT ORDER ALSO, IT IS CLEAR THAT THE ASSESSEE HAS A VER Y SYSTEMATIC AND ORGANIZED BUSINESS OF GIVING BOGUS ENTRIES. YET THE ASSESSEE NEVER DISCLOSED THIS PROFIT MAKING ACTIVITY FOR INCOME TAX PURPOSES. IN FACT THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME U/S 139 AT ALL EVEN WHEN THE TAXABLE INCOME WAS MUCH HIGHER THAN THE THRESHOLD LIMIT. THE BUSINESS OF TH ASSESSEE WAS ON LARGE SCALE AND WAS FLOURISHING. THE QUANTUM OF DEP OSIT IN THE ACCOUNTS OPERATED BY HIM WAS IN CRORES. IN THESE CIRCUMSTANC ES THE ACT OF NOT DISCLOSING HIS INCOME FROM SUCH BUSINESS BY NOT FIL LING THE RETURN, AMOUNTS IS NOTHING BUT DELIBERATE CONCEALMENT OF INCOME. EV EN IN THE RETURN FILED U/S 147 THIS INCOME WAS NOT DISCLOSED BY THE ASSESSEE. THE ASSESSEE WAS RUNNING A WELL ORGANIZED CONTINUOUS BUSINESS AND YE T CONCEALED HIS INCOME COMPLETELY WHICH COULD ONLY BE UNEARTHED BY THE SUR VEY AND THE SUBSEQUENT ASSESSMENT PROCEEDINGS. THE ASSESSE IS A CHARTERED ACCOUNTANT. SUCH ACT, COMING FROM A PROFESSIONAL MEANS ONLY ONE THING, TH AT THE CONCEALMENT OF INCOME WAS A WELL THOUGHT OUT AND DELIBERATE ACT TO CHEAT THE REVENUE. 3.1.7 THE A.O. THEREAFTER, IMPOSED A PENALTY OF RS. 27,95,170/- @ 100% TAX SOUGHT TO BE EVADED. 13 THE ABOVE CLEARLY SHOWS THAT THE ASSESSEE HAS CLEAR LY ADMITTED IN RESPONSE TO QUESTION NO. 2 THAT HE WAS PROVIDING AC COMMODATION ENTRIES AND HE WAS RECEIVING CASH AGAINST WHICH HE WAS PROVIDING ENTRIES TOWARDS FAKE CAPITAL GAIN, THE GIFTS, LOANS ETC. IT FURTHER SHOWS THAT THE ASSESSEE HAS ALSO ADMITTED THAT HE W AS WORKING FOR P.K. KHANNA & CO., AND USHA GARG AND CO. THE ABOVE ALSO SHOWS THAT SIMILARLY SURVEY OPERATIONS WERE ALSO CONDUCTE D IN THE PREMISES OF SOME OTHER FIRMS AND THE STATEMENTS OF OTHER PER SONS WERE RECORDED. FOR EXAMPLE IN CASE OF SUBHASH BHARDWAJ & CO., MANOJ KUMAR S/O SHRI SUBHASH BHARDWAJ ADMITTED THAT HE WA S SHOWN BLANK CHEQUE BOOKS IN RESPECT OF ACCOUNT NO. 99115 WITH BANK IF PUNJAB LTD. PAKHOWAL ROAD, LUDHIANA AND CURRENT ACCOUNT NO . 1734 WITH LORD KRISHNA BANK AND SUCH CHEQUE BOOKS WERE HANDE D OVER TO SHRI B.K. JAIN AND CHEQUES WERE ISSUED BY HIM ONLY. SIM ILARLY SHYAM GARG S/O SHRI PAWAN GARG IN CASE OF USHA GARG & CO. , ADMITTED THAT A CURRENT ACCOUNT NO. 746 WAS OPENED WITH LORD KRIS HNA BANK, LUDHIANA WHICH WAS USED FOR SUCH BUSINESS PURPOSES ALONG WITH B.K. JAIN I.E. THE ASSESSEE. IN THIS REGARD WE MAY REFER TO THE WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE WHEREIN THE COUNSEL FOR THE ASSESSEE HIMSELF QUOTED CERTAIN EXT RACTS OF THE STATEMENTS RECORDED FROM VARIOUS OTHER PERSONS. IN RESPECT OF THE STATEMENT FROM SHRI SHAGUN GARG, FOLLOWING EXTRACTS HAVE BEEN QUOTED- QUESTION 1 I AM SHOWING YOU DOCUMENT NO. 60 OF TH E IMPUGNED DOCUMENTS IN THE CASE OF SHRI BIPAN KUMAR JAI, 94-D, BRS NAGAR, LUDHIANA. PL GO THROUGH THESE DOCUMENTS AND STATE WHAT YOU HAVE TO SAY? ANSWER I HAVE CAREFULLY EXAMINED THE CONTRACT NOT E/BILLS KEPT IN THE ENVELOPE AND MARKED V.V. BHALLA. I ADMIT THAT THIS CONTRACT NOTES ARE SIGNED BY ME/MY EMPLOYEE. THESE ARE BILLS ISSUED AGAINST CASH RECE IPTS. QUESTION WHO PAID YOU CASH? ANSWER MR. BIPAN KUMAR JAIN PAID ME CASH AND I HA VE ISSUED BILLS IN THE FOLLOWING NAMES: 1 DAMODAR PRASD TODI RS. 1171750/-. 2 RAMESH KUMAR TODI - RS. 1171250/- 3 DAMODAR PRASAD TODI & SONS HUF RS. 2231750/- 14 4 SURESH KUMAR TODI RS. 1167600/- 5 PANA DEVI TODI RS. 1172125/- THESE ARE JUST BILLS AND THEIR WAS NO SHARE TRANSAC TIONS. THE NAME OF THE SHARE, DISTINCTIVE NO. ETC WERE ALSO PROVIDED BY MR. B.K.J AIN. NORMALLY HIS SON WILL COME AND HANDOVER US A PARCHI CONTAINING THESE DETAILS. WE WILL ISSUE THE BILLS ACCORDINGLY. THIS REPLY IS AT PAPER BOOK PAGE 19. QUESTION GIVE BRIEF DESCRIPTION OF TRANSACTIONS I N THE BANK ACCOUNTS? ANSWER THE SOURCE OF DEPOSIT IN THREE BANK ACCOUN TS CAN BE EXPLAINED BY BIPAN KUMAR JAIN, 94-D, BRS NAGAR. IT WAS MUTUALLY DECID ED BETWEEN ME AND B.K. JAIN THAT HE WILL DEPOSIT CASH IN THE BANK ACCOUNT OF M/ S SUBHASH BHARDWAJ & CO., KEPT IN BANK OF PUNJAB AND LORD KRISHNA BANK. I HAVE GIV EN HIM A BLANK CHEQUE BOOK DULY SIGNED BY ME. HE USE TO SEND ME A PARCHI GIVI NG DETAILS OF CLIENTS NAME, ADDRESS AND AMOUNT OF BILL AND NAME OF SHAES, NO OF SHARES, DATE OF SHARES AND NAME OF COMPANY WITH DISTINCTIVE NO IN SOME CASES O N THE BASIS OF THESE PARTICULARS RECEIVED FROM BIPAN KUMAR JAIN, I WILL PRINT OUT THE BILLS OF SHARE PROFITS, CLIENTS ACCOUNT AND CONTRACT NOTE AND HAND OVER TO BIPAN KUMAR JAIN OR HIS SON AND ONE MORE EMPLOYEE SHRI HARINDER. THE DETAI LS OF ADVANCE PAYMENT RECEIVED AS CHEQUE PAYMENT WERE ALSO PROVIDED BY HI M. THE DEPOSIT / WITHDRAWALS OF CASH / CHEQUE WAS MADE BY BIPAN KUMAR JAIN AND H IS SON. THE BILLS OF SALE/PURCHASE OF SHARES ISSUED UNDER M Y SIGNATURE AND THE TRANSACTIONS OF SALE /PURCHASE MENTIONED IN THE BIL LS ARE BOGUS. THE ABOVE EXTRACT MAKES IT ABSOLUTELY CLEAR THAT IT WAS ASSESSEE WHO WAS THE MAIN KINGPIN IN CARRYING OUT THE BUSINESS OF PR OVIDING BOGUS ENTRIES. 16 THE LD. CIT(A) HAS ALSO NOTED THAT THE INFORMAT ION WAS GATHERED FROM R. KOHLI & CO. DURING ASSESSMENT PROC EEDINGS WHICH CLEARLY SHOWS THAT THE ASSESSEE HAD MADE TOTAL INVE STMENTS OF RS. 8614657/-. OUT OF THESE INVESTMENTS THE ASSESSEE HAS SOLD 50,000 SHARES OF SILVERLINE AND THE ASSESSEE HAD EARNED RS . 791615/-. THE BALANCE INVESTMENT IN OTHER SHARES WAS RS. 6449024/ -. FROM THESE FACTS, THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE H AD EARNED INCOME WHICH WAS NOT DISCLOSED TO THE DEPARTMENT AN D THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO CONTR OVERT THESE FINDINGS BEFORE US. THE LD. CIT(A) HAS FURTHER CLE ARLY NOTED THAT DESPITE THE SURVEY THE ASSESSEE DID NOT MAKE ANY DI SCLOSURE IN ASSESSMENT YEAR 2002-03 AND 2003-04 WHICH MEANS TH E ASSESSEE HAS CLEARLY CONCEALED THE PARTICULARS OF INCOME. W E FIND THERE IS NO MATERIAL TO DEVIATE FROM THIS FINDING. THEREFORE IT BECOMES ABSOLUTELY CLEAR THAT THE ASSESSEE HAS CONCEALED TH E PARTICULARS OF INCOME. NOW ONLY QUESTION IS WHETHER THE INCOME HA S REALLY BEEN ESTIMATED. FIRST OF ALL IT WAS CONTENDED THAT THER E WAS INTERNAL 15 CORRESPONDENCE THROUGH WHICH REVENUE ORIGINALLY WAN TED TO TAKE INCOME @ 0.25% OF THE TOTAL TURNOVER. HOWEVER, LAT ER ON SAME WAS TAKEN UP AT 1% WHICH WAS REDUCED TO 0.5% BY THE LD. CIT(A) WHICH GOT CONFIRMED FROM THE TRIBUNAL. THE LD. CIT(A) I N THIS REGARD HAS OBSERVED AT PARA 3.3(I) WHICH IS AS UNDER: (I) THE ISSUE REGARDING THE CONFIDENTIAL NOTE PREPA RED BY THE ITO AS PER WHICH THE RATE OF COMMISSION HAD BEEN ADOPTED @ 0.2 5% WAS ALSO RAISED BY THE APPELLANT DURING THE APPEAL AGAINST QUANTUM ADD ITIONS. THE ISSUE WAS DULY CONSIDERED BY THE CIT(A) AND HONBLE ITAT. ON THIS ISSUE THE CIT(A) OBSERVED AS UNDER:- AS FOR THE CONFIDENTIAL NOTE OF THE AO AND THE ADDITIONAL CIT-RANGE-VI, ARE CONCERNED THESE ARE JUST PART OF INITIAL CORRES PONDENCE OF THE DEPARTMENT AND IF DURING THE ASSESSMENT PROCEEDINGS, THE AO HA D NECESSARY MATERIAL TO CONCLUDE THAT THE RATE OF PROFIT IN THE CASE OF THE APPELLANT WAS HIGHER THAN THE RATE MENTIONED IN THESE NOTES, THE AO COULD VERY WE LL ESTIMATE THE INCOME BY APPLYING THAT RATE. THE CIT(A) FURTHER NOTED THAT AT THE TIME OF PREPAR ING THESE NOTES, THE OFFICERS WERE NOT AWARE OF THE TOTAL ASSETS OF THE APPELLANT AND HIS FAMILY MEMBERS OTHER THAN ASSETS OF ABOUT 26 LACS WHICH IN CLUDED THE RESIDENTIAL HOUSE OF RS. 20 LACS. THIS OBSERVATION OF THE CIT(A ) HAS BEEN REFERRED TO BY THE HONBLE ITAT ON PAGE 16 OF ITS ORDER AND THE CO NTENTION RAISED BY THE APPELLANT WAS REJECTED. THIS CONTENTION OF THE APPE LLANT THEREFORE HAS NO MERIT. THE ABOVE CLEARLY SHOW THAT EVEN THE TRIBUNAL HAS C ONFIRMED THAT THESE ARE ONLY INITIAL ESTIMATES AND WHEN ACTUAL PO SITION BECAME CLEAR DURING ASSESSMENT PROCEEDINGS THEN ULTIMATELY PROFIT WAS ESTIMATED AT 1% BY THE ASSESSING OFFICER OF TOTAL C REDITS WHICH WAS ALSO REDUCED TO 0.5% BY THE LD. CIT(A) WHICH WAS CO NFIRMED BY THE TRIBUNAL. ONE MORE ASPECT WAS INVOLVED THAT IS WHY THE ADDITION ON ACCOUNT OF PROFIT FROM SHARE AND INVESTMENT WHICH H AS BEEN DISCUSSED BY THE LD. CIT(A) AT PARA 3.3(II) WHICH I S AS UNDER: 3.3(II) - REGARDING CONTENTION OF THE APPELLANT TH AT CERTAIN ISSUES HAVE BEEN RESTORED BY THE HONBLE ITAT TO THE ASSES SING OFFICER, IT MAY BE MENTIONED THAT THE HONBLE ITAT HAS PASSED THE O RDER IN THE APPELLANTS CASE FOR ASSESSMENT YEAR 2002-03 IN IT A NO. 1094/CHD/2008 VIDE ORDER DATED 27.4.2010. THE HONBLE ITAT HAS C ONFIRMED THE DECISION OF LD. CIT(A) ON ALL THE ISSUES EXCEPT ONE WHICH WAS RESTORED BACK TO THE ASSESSING OFFICER. THE RELEVANT PART O F THE HONBLE ITATS ORDER READ AS UNDER: THE SECOND CONTENTION OF THE ASSESSEE WAS THAT THE AMOUNTS FOR THE PURCHASE OF SHARES WERE PAID OUT OF THE BANK AC COUNTS OF THE ASSESSEE, HIS MOTHER AND HIS SON, WHICH HAS BEEN CO NSIDERED WHILE ESTIMATING THE INCOME IN THE HANDS OF THE ASS ESSEE. THE AR FOR THE ASSESSEE HAD MADE REFERENCE TO THE EVIDENCE FILED IN THIS REGARD AT PAGES 225 TO 227 OF THE PAPER BOOK. THE SAID EVIDENCE PLACED BEFORE US HAD NOT BEEN FILED BEFORE THE ASSE SSING OFFICER AND THE SAME WAS NOT CONSIDERED BY THE ASSESSING OF FICER. IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO 16 ASSESSING OFFICER TO VERIFY THE SOURCE OF PAYMENTS MADE BY THE ASSESSEE TO R.K KOHLI & CO. VIS--VIS THE DETAILS O F SHARES ACQUIRED. IF IT IS FOUND THAT THE TRANSACTIONS IN THE RELEVANT SOURCE BANK ACCOUNT HAVE BEEN CONSIDERED WHILE ESTI MATING THE INCOME IN THE HANDS OF ASSESSEE FOR ACCOMMODATION BASIS, NECESSARY CREDIT SHALL BE ALLOWED WHILE COMPUTING U NEXPLAINED INVESTMENT. A REPORT IN THE MATTER WAS CALLED FROM FOR THE ASSE SSING OFFICER. THE ASSESSING OFFICER INFORMED THAT CONSEQUENTIAL ORDER HAD BEEN PASSED ON 25.4.2012 WHICH RESULTED INTO NO RELIEF TO THE APPE LLANT. THE RELEVANT PART OF THE ORDER OF THE ASSESSING OFFICER READS AS UNDER: ACCORDINGLY THE DETAILS OF SHARES PURCHASED BY THE ASSESSEE AND STATEMENT OF ACCOUNTS OF M/S R.KOHLI & CO., HAS BEE N CALLED FOR AND THE ISSUE IS DISCUSSED WITH THE LD. COUNSEL FOR THE ASSESSEE SUBHASH JAIN, C.A. ON VERIFICATION IT IS FOUND THA T THE ASSESSEE HAS PURCHASED SHARES OF M/S SILVERLINE, RELIANCE PE TRO, RDFL LTD. ETC. DURING THIS YEAR. FOR PURCHASE OF THESE SHARE S CHEQUES WERE ISSUED OUT OF THE FOLLOWING BANK ACCOUNTS: HDFC 90342100000563 KANTA RANI, HDFC 03421000 00536 BIPAN JAIN, HDFC- 0342100000900-RAJIV JAIN. THESE BANK ACCOUNTS HAVE NOT BEEN CONSIDERED WHILE COMPUTING T HE TRANSACTIONS FOR ESTIMATING THE INCOME IN THE HAND S OF ETH ASSESSEE ON ACCOMMODATION BASIS. THEREFORE THE INV ESTMENT IN THESE SHARES IS TO BE TREATED AS UNACCOUNTED INVEST MENT OF THE ASSESSEE AND IS TO BE INCLUDED IN THE HANDS OF THE ASSESSEE AS PER ORDER OF THE HONBLE ITAT PAGE 39 THUS NO RELIE F ON THIS ACCOUNT IS AVAILABLE TO THE ASSESSEE FOR THE ASSESS MENT YEAR 2002-03. HOWEVER, THE BENEFIT OF TELESCOPING FOR THE ASSESSMENT YEAR 2003-04 HAS ALREADY BEEN ALLOWED BY THE LD. C IT(A)-II, LUDHIANA VIDE HIS ORDER DATED 29.9.2008 REFERRED AB OVE. THUS THE ORDER OF THE HONBLE ITAT HAS NOT RESULTED IN ANY CHANGE IN THE QUANTUM ADDITIONS AS DECIDED BY THE LD. CIT(A). TH US CONTENTION OF THE APPELLANT THEREFORE DOES NOT HELP HIS CASE. THEREFORE IT BECOME CLEAR THAT THERE WAS SPECIFIC I NFORMATION THAT THE ASSESSEE HAS MADE INVESTMENTS IN SHARES AND WHE N THE TRIBUNAL DIRECTED TO VERIFY THE ACTUAL INVESTMENT THE SAME W ERE VERIFIED BY THE ASSESSING OFFICER AND IT WAS NOTED THAT THE INV ESTMENT HAS BEEN MADE BY ISSUING CHEQUES IN THE HDFC BANK OF THE ASS ESSEE AND HIS FAMILY MEMBERS AND SUCH INVESTMENTS WERE NOT DECLAR ED BY THE ASSESSEE AND THEREFORE THIS IS A CLEAR CUT CASE OF CONCEALMENT. 17 NOW ONLY QUESTION WHICH IS REQUIRED TO BE CONSID ERED WHETHER THE PENALTY CAN BE LEVIED IN CASES WHERE INCOME HAS BEEN ESTIMATED. WE ARE OF THE OPINION THAT THE LD. CIT( A) HAS CORRECTLY OBSERVED THAT IT WOULD DEPEND ON THE FACTS OF EACH CASE. IN THIS REGARD LET US CONSIDER THE CASE LAWS RELIED ON BY T HE LD. COUNSEL FOR THE ASSESSEE. WE MAY OBSERVE THAT THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON MANY JUDGMENTS, THEREFORE WE ARE DISCUSSING 17 THEM IN SHORT. FIRSTLY WE CONSIDER THE DECISIONS OF TRIBUNAL RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. (I) FIRST DECISION RELIED ON IS IN CASE OF AGGARWAL CONSTRUCTION CO. VS. ACIT, ITA NO. 843/CHD/2009. IN THIS CASE THE A SSESSEE HAS DECLARED NET PROFIT AT 10% WHICH WAS ULTIMATELY ES TIMATED AT 12%. PENALTY WAS LEVIED U/S 271(1)(C) AND THE MATTER TRA VELED TO THE TRIBUNAL WHICH OBSERVED THAT IT WAS MAINLY A CASE OF SUBSTITUTION OF ONE ESTIMATE BY ANOTHER, THEREFORE PENALTY CONSEQUE NCES WERE NOT ATTRACTED. THUS IN THIS CASE PURELY ESTIMATE WAS M ADE INSTEAD OF 10% - 12%. (II) SECOND CASE RELIED ON IS IN CASE OF BHARTI AIR TEL LTD, VS. CIT (SUPRA). IN THAT CASE THE ADDITION WAS MADE ON ACC OUNT OF DISALLOWANCES U/S 14A R.W.R 8D. THE TRIBUNAL OBSER VED THAT APPLICABILITY OF RULE 8D ITSELF WAS DOUBTFUL IN ASS ESSMENT YEAR 2007- 08 AND THEREFORE PENALTY WAS DELETED PARTICULARLY B ECAUSE THE ASSESSEE HAD MADE ALL THE DISCLOSURE. WE FIND RULE 8D WAS HELD NOT TO BE APPLICABLE IN ASSESSMENT YEAR 2007-08 BY HON' BLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCEE, VS. DCIT, 3 28 ITR 81 (BOM). THEREFORE EVEN IF ADDITION WAS MADE IT WAS MADE ON ACCOUNT OF DOUBTFUL ITEM AND IN ANY CASE THE PARTICULARS HA VE BEEN DISCLOSED BY THE ASSESSEE, THEREFORE PENALTY WAS CORRECTLY DE LETED. (III) NEXT CASE RELIED ON IS IN CASE OF FINE LINE C ONSTRUCTION PVT LTD VS. ACIT (SUPRA) OF DELHI BENCH OF THE TRIBUNAL. I N THAT CASE THE BOOKS OF ACCOUNTS WERE REJECTED AND NET PROFIT RATE OF 5% WAS APPLIED. PENALTY WAS DELETED AS IT WAS A CASE OF S IMPLY ESTIMATE. (IV) NEXT CASE RELIED ON IS IN CASE OF DEEPSHIKHA M AHESWARI VS. ITO (SUPRA) WHERE THE ADDITION WAS MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN CONSTRUCTION ON THE VALUATION MADE BY DVO. THE DVO HAD APPLIED CPWD RATES WHICH WAS REVISED BY THE TR IBUNAL AND IT 18 WAS DIRECTED TO APPLY PWD RATES. IN THESE CIRCUMSTA NCES PENALTY WAS DELETED. (V) NEXT CASE RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT OF PPP ASSOCIATES VS. ACIT (SUPRA). IN THAT CASE A LSO A SURVEY WAS CONDUCTED AND CERTAIN BUSINESS INCOME WAS UNEARTHED DURING SURVEY FOR VARIOUS YEARS. ULTIMATELY PROFIT WAS ESTIMATE D AT 1.5%. ULTIMATELY EVEN THE TRIBUNAL CONFIRMED THE PENALTY IN RESPECT OF ASSESSMENT YEAR 1998-99 AND 2001-02. HOWEVER, PE NALTY WAS DELETED FOR ASSESSMENT YEAR 2003-04 TO 2005-06 BEC AUSE THE ASSESSEE STILL HAD NOT FILED THE RETURN. OTHER DECI SIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE OF SIMILAR PAT TERN. 18 NOW LET US CONSIDER THE DECISIONS OF VARIOUS HON 'BLE HIGH COURTS RELIED ON BY THE LD. COUNSEL FOR THE ASSESS EE. (I) CIT VS. METAL PRODUCTS OF INDIA (SUPRA). THE A SSESSEE FILED RETURN OF INCOME FOR RS. 52416/- ON THE BASIS OF BO OKS OF ACCOUNTS MAINTAINED. THE BOOKS OF ACCOUNTS WERE REJECTED AN D ADDITION OF RS. 149624/- WAS MADE WHICH WAS REDUCED TO RS. 8000 0/- BY AAC. ON THE BALANCE AMOUNT PENALTY OF RS. 12000/- WAS LE VIED. THE PENALTY WAS DELETED BY OBSERVING THAT MERELY BECAUS E THE ADDITION HAS BEEN MADE ON ESTIMATED BASIS BY ADOPTING A VIEW THAT GROSS PROFIT SHOWN IN THE BOOKS WAS TOO LOW, DID NOT AUT OMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS A FAILURE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD, GROSS OR WILLFUL INCOME. THIS D ECISION IS TOTALLY DISTINGUISHABLE BECAUSE LATER ON EXP (I) WAS INSERT ED TO SEC 271(1)(C) WHICH SHIFTED THE BURDEN TO THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT. MOREOVER FULL BENCH OF T HE HON'BLE SUPREME COURT IN CASE OF UNION OF INDIA VS. DHARME NDRA TEXTILES (SUPRA) HAS CLEARLY HELD THAT THERE IS NO NEED TO P ROVE MENS REA IN CASE OF PENALTY LEVIABLE UNDER DIFFERENT STATUTES. 19 (II) NEXT CASE RELIED ON IS CIT VS. M.M. RICE MILLS (SUPRA). IN THIS CASE THE ASSESSEE HAD FILED RETURN OF INCOME FOR RS . 63310/-. ADDITIONS WERE MADE TO THE TUNE OF RS. 145200/- ON ACCOUNT OF KHUDI PHAK AND AND ON ACCOUNT OF CHHILKA. PENALTY WAS DE LETED BY THE COURT BY CONFIRMING THE ORDER OF CIT THAT NO CONCEA LMENT WAS ESTABLISHED. AS OBSERVED EARLIER THERE IS NO NEED TO ESTABLISH THE CONCEALMENT BY THE DEPARTMENT. THIS ASPECT WE SHAL L DISCUSS LATER ON. (III) NEXT CASE RELIED ON IS CIT VS. DHILLON RICE M ILLS (SUPRA). IN THIS CASE ALSO THE DECISION OF CIT VS. METAL PRODUC TS HAS BEEN FOLLOWED AND IT WAS OBSERVED THAT CONCEALMENT WAS N OT PROVED, THEREFORE PENALTY COULD NOT BE IMPOSED. (IV) NEXT CASE RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT OF CIT VS. VALIMKBHAI H. PATEL (SUPRA). IN THIS CA SE THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING LOSS OF RS. 33 7414/-. INCOME WAS ASSESSED AT RS. 294480/-. THE ADDITION WAS MAI NLY ON ACCOUNT OF LOSS OF SALT FOR WHICH A CERTIFICATE FROM DY. CO MMISSIONER WAS FILED. HOWEVER, THE ASSESSING OFFICER ACCEPTED THE LOSS BUT REDUCED THE VALUE OF THE SALT FROM RS. 118 TO RS. 50. PEN ALTY WAS DELETED MAINLY BY FOLLOWING THE EARLIER DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V. PRITHIPAL SING H AND CO. 183 ITR 69 WHEREIN IT WAS OBSERVED THAT MERE REDUCTION IN LOSS WOULD NOT LEAD PENAL CONSEQUENCES. THIS POSITION ALSO GO T CHANGED BY AMENDMENT IN LAW BY SUBSTITUTION OF SUB CLAUSE (A) TO EXP (4) BY FINANCE ACT, 2002 W.E.F. 1.4.2003. THIS CLAUSE REA DS AS UNDER: EXPLANATION 4. FOR THE PURPOSES OF CLAUSE ( III ) OF THIS SUB-SECTION, THE EXPRESSION 'THE AMOUNT OF TAX SOUGHT TO BE EVADED', [( A ) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAS T HE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEANS T HE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME;] 20 OTHERWISE THIS POSITION HAS BEE CLARIFIED BY THE LA RGER BENCH OF THE HON'BLE SUPREME COURT IN CASE OF CIT VS. GOLD COIN HEALTH FOODS (P) LTD. 304 ITR 308 WHEREIN IT HAS BEEN OBSERVED T HAT PENALTY IS LEVIABLE EVEN IF IT IS A CASE OF REDUCTION OF LOSS. THE HEAD NOTE READS AS UNDER: EXPLANATION 4 TO SECTION 271(1) (C)(III) OF THE INC OME-TAX ACT, 1961, REGARDING THE IMPOSITION OF PENALTY EVEN IF THE RETURNED INCO ME IS A LOSS, IS CLARIFICATORY AND NOT SUBSTANTIVE. IT APPLIES EVEN TO ASSESSMENT YEARS PRIOR TO APRIL 1, 2003, THE DATE ON WHICH IT WAS BROUGHT INTO FORCE. WHAT T HE FINANCE ACT, 2002, INTENDED WS TO MAKE THE POSITION EXPLICIT WHICH OTH ERWISE WAS IMPLIED. V IRTUAL S OFT S YSTEMS L TD . V . CIT [2007] 289 ITR 83 (SC) OVERRULED. A COMBINED READING OF THE RECOMMENDATIONS OF THE WA NCHOO COMMITTEE AND CIRCULAR NO. 204 DATED JULY 24,1976, MAKES THE POSI TION CLEAR THAT EXPLANATION 4 (A) TO SECTION 271(1)(C) (III) INTENDED TO LEVY P ENALTY NOT ONLY IN A CASE WHERE AFTER ADDITION OF CONCEALED INCOME, A LOSS RETURNED , AFTER ASSESSMENT BECOMES POSITIVE INCOME, BUT ALSO IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS AND FINALLY THE ASSESSED INCOME I S ALSO A LOSS OR A MINUS FIGURE. THEREFORE, EVEN DURING THE PERIOD BETWEEN A PRIL 1, 1976 AND APRIL 1,2003, THE POSITION WAS THAT PENALTY WAS LEVIABLE EVEN IN A CASE WHERE ADDITO OF CONCEALED INCOME REDUCES THE RETURNED LOSS. THE CIRCUMSTANCES UNDER WHICH AN AMENDMENT WAS BROU GHT INTO EXISTENCE AND THE CONSEQUENCES OF THE AMENDMENT WILL HAVE TO BE T AKEN CARE OF WHILE DECIDING WHETHER THE AMENDMENT WAS CLARIFICATORY OR SUBSTANTIVE IN NATURE AND WHETHER IT WILL HAVE RETROSPECTIVE EFFECT OR IT WAS NOT SO. (V) NEXT DECISION RELIED ON WAS IN CASE OF CIT VS. DEVNDAS PERUMAL (SUPRA). IN THIS CASE ALSO CERTAIN ADDITIO NS WERE MADE ON ESTIMATE BASIS AND PENALTY WAS HELD NOT LEVIABLE BE CAUSE IT WAS OBSERVED THAT MERE ESTIMATE OF PROFIT DOES NOT FOLL OW THAT THERE WAS A FAILURE TO DETERMINE THE CORRECT INCOME DUE TO FR AUD, GROSS OR WILLFUL INCOME. AS OBSERVED EARLIER THIS POSITION N O MORE EXISTS OF THE DECISION OF LARGER BENCH OF THE HON'BLE APEX CO URT IN CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES (SUPRA) WHER E IT IS OBSERVED THAT THERE IS NO REQUIREMENT OF MENS REA FOR LEVY O F PENALTY IN DIFFERENT STATUTES. (VI) NEXT DECISION RELIED ON IS IN CASE OF CIT VS. SMT. K.M. KUTTI (SUPRA). IN THAT CASE THE ASSESSEE WAS PLYING BUSES AND HAD NO ACCOUNTS, THEREFORE RETURNS WERE SUBMITTED ON ESTIM ATE BASIS AND INCOME WAS ESTIMATED AT RS. 12000 PER BUS. ULTIMAT ELY THE INCOME 21 WAS ESTIMATED AT MUCH HIGHER AMOUNT AND PENALTY WAS ALSO LEVIED. HON'BLE HIGH COURT WHILE CONFIRMING THE FINDINGS OF THE TRIBUNAL IN DELETING THE PENALTY OBSERVED THAT THERE WAS NO CON CEALMENT ON THE PART OF THE ASSESSEE. (VII) LAST CASE RELIED ON BY THE LD. COUNSEL FOR TH E ASSESSEE IS IN CASE OF SHIV LAL TAK VS. CIT (SUPRA). IN THAT CASE ALSO THE ASSESSEE WAS A CONTRACTOR AND HAD RETURNED INCOME OF RS. 991 64/-. SOME DEFECTS WERE FOUND IN THE BOOKS OF ACCOUNTS AND PRO FIT RATE OF 12% ON CONTRACT RECEIPTS WAS APPLIED. LATER ON PENALTY U/S 271(1)(C) WAS LEVIED. IN THIS CASE ALSO PENALTY WAS DELETED BECA USE THERE WAS NO WILLFUL CONCEALMENT OF PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. WE HAVE ALREADY NOTED THAT THIS DECISION IS NO MORE AVAILABLE IN VIEW OF THE DECISION OF HON'BLE SUPREM E COURT IN CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS, 3 06 ITR 277. 19 THEREFORE IT IS CLEAR THAT THE ABOVE DECISIONS R ELATE TO THE SITUATION WHICH WAS PREVALENT IN THOSE ASSESSMENT Y EAR. FOR EXAMPLE THERE WAS NO WILLFUL INCOME ON THE PART OF THE ASSESSEE. ALL THESE CASES ARE TOTALLY DISTINGUISHABLE IN THE LIGH T OF THE DECISION OF HON'BLE SUPREME COURT IN CASE OF UNION OF INDIA VS . DHARMENDRA TEXTILE PROCESSORS (SUPRA). IT IS VERY CLEARLY HEL D AS UNDER: THE EXPLANATION APPENDED TO SECTION 271(1) (C) OF T HE INCOME-TAX ACT, 1961, INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASS ESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETU RN. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH THE EXPLAN ATIONS INDICATES THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FO R LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C. THEREFORE CLEARLY THERE IS NO MORE REQUIREMENT OF M ENS REA AND THE DECISION RENDERED PRIOR TO THIS DECISION, ARE OPERA TIVE NO MORE. IN THE SECOND SET OF DECISIONS PENALTY WAS DELETED BEC AUSE IT WAS MERELY A CASE OF REDUCTION OF LOSS. THAT DECISION IS ALSO NOT AVAILABLE IN VIEW OF THE LATTER DECISION OF LARGER BENCH OF THE HON'BLE SUPREME COURT IN CASE OF GOLD COIN (SUPRA). WE HAVE ALREADY 22 DISCUSSED THE FINDINGS OF THE HON'BLE SUPREME COURT AS WELL AS THE IMPLICATIONS. THIRD SET OF DECISIONS ARE WHERE ONLY A PARTICULAR ESTIMATE HAS BEEN MADE. FOR EXAMPLE INCASE OF CONTR ACTORS WHERE BOOKS ARE NOT FOUND TO BE CORRECT AND THE PROFIT IS ESTIMATED SAY AT 8,10 OR 12%, THE PENALTY WAS HELD NOT TO BE LEVIABL E BUT AT THE SAME TIME AS POINTED OUT BY THE LD. CIT(A) THERE ARE VAR IOUS DECISIONS WHERE THE PENALTY HAS BEEN HELD TO BE LEVIABLE EVEN IN THE CASE OF ESTIMATED INCOME. FOR EXAMPLE IN CASE OF ADDL CIT VS. SMT. CHANDER KANTA (SUPRA). HON'BLE MADHYA PRADESH HIGH COURT HELD THAT PENALTY TO BE LEVIABLE EVEN IN CASE OF ESTIMAT ED INCOME. IN THAT CASE THE ASSESSEE HAS FILED RETURN SHOWING LOSS OF RS. 51530/- WHICH WAS LATER ON REVISED TO INCOME OF RS. 7500. THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNTS AND THERE FORE IN WAS ESTIMATED AT RS. 51,000/-. IT WAS HELD AS UNDER: HELD, THAT WHEN THE ASSESSEE SUBMITTED HIS RETURN A ND SHOWED A LOSS OF RS. 50,000 AND THEN REVISED IT AN SHOWED A PROFIT OF RS . 7,500, HE HAD NECESSARILY SUPPRESSED THE PARTICULARS OF INCOME AND GIVEN AN I NCORRECT ACCOUNT OF HIS INCOME. THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCO UNT. HIS INCOME HAD, THEREFORE, TO BE ASSESSED ON ESTIMATE BASIS. THE TR IBUNAL COMMITTED AN ERROR IN HOLDING THAT SINCE THE ASSESSEES INCOME WAS ASSESS ED ON ESTIMATE BASIS, THE ASSESSEE WAS NOT LIABLE TO ANY PENALTY. 20 THE LD. COMMISSIONER ALSO RELIED ON THE ORDER OF HON'BLE MADRAS HIGH COURT IN CASE OF CIT VS. S. KRISHNASWAM Y AND SONS, 219 ITR 157 (MAD). IN THIS CASE IT WAS HELD AS UND ER: (I) THAT THE TRIBUNAL HAD NOT EXPRESSLY HELD THAT FOR THE DEFAULT COMMITTED BY THE ACCOUNTANT, PENALTY U/S 271(1)(C) OF THE INCOME -TAX ACT, 1961 COULD NOT BE LEVIED. THIS QUESTION DID N OT ARISE FROM THE ORDER OF THE TRIBUNAL AND COULD NOT BE CONSIDERED. THE T RIBUNAL HAD NOT GIVEN ANY FINDING ON THE QUESTION WHETHER THE ASSESSMENT WAS BASED ON COMPROMISE AND THIS QUESTION COULD NOT BE CONSIDERE D BY THE HON'BLE HIGH COURT : (II) THAT THE TRIBUNAL HAD ACCEPTED THE CONTENTION THAT TWO OF THE ASSESSEE-FIRMS PARTNERS WERE NOT ABLE TO LOOK AFTE R THE ASSESSEE FIRMS BUSINESS. THE ASSESSEE FIRM HAD FOUR PARTNERS AND IF TWO OF THE PARTNERS WERE ENGAGED OTHERWISE, THE OTHER PARTNERS COULD HA VE LOOKED AFTER THE BUSINESS. THIS WAS NOT A CASE OF THE ASSESSING AUT HORITY ESTIMATING THE INCOME. EVEN ASSUMING THAT THE REVISED ASSESSMENT WAS BASED ON AN SEIZURE EFFECTED GROSS OMISSIONS OF COLLECTIONS WER E FOUND OUT, AND, SUBSEQUENTLY, THE ASSESSEE ITSELF HAD FILED REVISED RETURNS ACCEPTING THE OMISSION. THE CANCELLATION OF PENALTY WAS NOT VALI D. 23 21 SIMILARLY THE LD. COMMISSIONER FURTHER RELIED ON THE ORDER OF HON'BLE PATNA HIGH COURT IN CASE OF CIT VS. WARASAT HUSSAIN, 171 ITR 405 AND HELD AS UNDER: ASSESSMENT BY ESTIMATE IS ONE OF THE KNOWN PROCESSE S IN THE TAXATION WORLD. WHERE THE ASSESSEE CONCEALS RELEVANT MATERIAL / EVI DENCE, THE REVENUE HAS NO OPTION BUT TO MAKE A BEST JUDGMENT ASSESSMENT BY ES TIMATE. AN ASSESSMENT BY ESTIMATE IS AS MUCH LEGAL AS ANY OTHER ASSESSMENT. ONCE AN ASSESSMENT HAS BEEN DONE, WHETHER IT IS A BEST JUDGMENT ASSESSMENT OR OTHERWISE, THE FIGURE ASSESSED MUST BE HELD TO BE THE INCOME OF THE ASSES SEE. SUCH AN ASSESSMENT WOULD NOT AFFECT THE LEVY OF PENALTY. 22 AGAIN HON'BLE ALLAHABAD HIGH COURT IN CASE OF SU SHIL KUMAR SARAD KUMAR VS. CIT, 232 ITR 588 (ALL) OBSERVED AS UNDER: THE FINDINGS RECORDED IN THE ASSESSMENT ORDER CONST ITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE RE GARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. IN DECIDIN G WHETHER PENALTY CAN BE IMPOSED IN A GIVEN CASE, THE ENTIRETY OF THE CIRCUM STANCES MUST BE TAKEN INTO ACCOUNT. THERE MAY B CASES WHERE ADDITIONS MAY BE M ADE PURELY ON ESTIMATE WITHOUT REFERENCE TO ANY EVIDENCE / MATERIALS BEING ON RECORD. IN SUCH A CASE, IT COULD BE ARGUED WITH SOME FORCE THAT PENALTY CAN NOT BE LEVIED ON THE FIGURES WHICH ARE MERELY BASED ON GUESS WORK OR ESTIMATE. B UT IN A CASE WHERE AFTER DETAILED INVESTIGATION THE ASSESSEE WAS CONFRONTED WITH EVIDENCE AND MATERIALS AND HE FAILED TO DISLODGE THE FACTUAL POSITION ON T HE BASIS OF WHICH ADDITIONS WERE MADE, THE CASE STANDS ON A DIFFERENT FOOTING. IN SUCH A CASE, IT IS ALWAYS OPEN TO DRAW AN INFERENCE OF CONCEALMENT OR OF FURN ISHING INACCURATE PARTICULARS OF INCOME, RESULTING FROM DELIBERATE UN DERESTIMATE OF INCOME. IN OTHER WORDS, THE INCOME-TAX AUTHORITIES MUST BE SAT ISFIED ON EXAMINATION OF THE CUMULATIVE EFFECT OR THE ENTIRETY OF THE CIRCUMSTAN CES THAT THE ONLY REASONABLE INFERENCE FROM SUCH FACTORS OR MATERIAL THAT COULD BE DRAWN WAS THAT THE DISPUTED AMOUNT ADDED AS A RESULT OF ESTIMATE, REPR ESENTED INCOME AND THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS THEREOF. 23 SIMILAR OBSERVATIONS HAVE BEEN MADE IN OTHER CAS ES RELIED ON BY THE LD. CIT(A). WE FURTHER FIND THAT HON'BLE GA UHATI HIGH COURT IN CASE OF F.C. AGARWAL VS. CIT, 102 ITR 408(LATER CONFIRMED BY THE HON'BLE SUPREME COURT) HELD THAT THE PENALTY WAS LE VIABLE EVEN IF THE INCOME WAS ESTIMATED. IN THAT CASE THE ASSESSE E FILED RETURNS FOR THE ASSESSMENT YEARS 1963-64 AND 1964-65 ON MAY 22, 1964, SHOWING TOTAL INCOME OF RS. 30,750 AND RS. 36,315, RESPECTI VELY, AND FOR 1965-66 ON SEPTEMBER 13,1965, SHOWING NIL INCOME. LATER, ON MARCH 20,1968, THE ASSESSEE FILED REVISED RETURNS FOR THE SAID THREE Y EARS SHOWING TOTAL INCOME OF RS. 2,74,189, RS. 3,35,181 AND RS. 81,030 , RESPECTIVELY. BEFORE THE INCOME-TAX OFFICER, THE ASSESSEE STATED THAT HE HAD NOT MAINTAINED 24 ANY REGULAR BOOKS OF ACCOUNT AND, THEREFORE, THE RE TURNS HAD BEEN FILED ON ESTIMATE OF CERTAIN NET PROFITS ON SALES. THE INCOM E-TAX OFFICER COMPLETED THE ASSESSMENTS BY ESTIMATING THE SALES AT SLIGHTLY HIGHER FIGURES. THE INCOME-TAX OFFICER WAS OF THE VIEW THAT THE ASSESSE E HAD DELIBERATELY NOT DISCLOSED HIS CORRECT INCOME IN THE RETURNS AND INI TIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME-T AX ACT, 1961, AND REFERRED THE MATTER TO THE INSPECTING ASSISTANT COM MISSIONER UNDER SECTION 274. THE INSPECTING ASSISTANT COMMISSIONER FOUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONUS OF SHOWING THAT THE DIFFERENCE BETWEEN THE INCOME SHOWN IN THE ORIGINAL RETURNS AND THE INCOME ASSESSED HAD NOT ARISEN AS A RESULT OF ANY F RAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE AND, THEREFORE, THE PROVISIONS OF THE EXPLANATION TO SECTION 271(1)(C) APPLIED AND LEVIED PENALTY IN RESPECT OF ALL THE THREE YEARS. ON APPEAL, THE APPELLATE TRIBU NAL HELD THAT THE TOTALITY OF CIRCUMSTANCES CLEARLY POINTED OUT THAT AT BEST I T WAS A CASE OF GROSS AND WILLFUL NEGLECT ON THE PART OF THE ASSESSEE AND THAT THE CONCEALMENT HAVING TAKEN PLACE IN THE ORIGINAL RETURNS, THE TAX THAT WOULD HAVE BEEN AVOIDED HAD THOSE ORIGINAL RETURNS BEEN ACCEPTED WO ULD BE THE CORRECT FIGURE TO BE TAKEN INTO CONSIDERATION WHILE CALCULA TING THE PENALTY UNDER SECTION 271(1)(C). THE TRIBUNAL, THEREFORE, UPHELD THE ORDER OF THE INSPECTING ASSISTANT COMMISSIONER LEVYING PENALTY B UT REDUCED THE PENALTY TO 20% OF THE TAX SOUGHT TO BE AVOIDED. ON A REFERENCE AT THE INSTANCE OF THE ASSESSEE. HELD, THAT CONSIDERING THE MATERIAL ON RECORD AND T HE STAGGERING DIFFERENCES BETWEEN THE ORIGINAL RETURNS AND THE REVISED RETURN S AND THAT NO PARTICULAR ITEM OF INCOME HAD BEEN POINTED OUT TO EXPLAIN THAT THE REVISED RETURNS WERE MERELY THE RESULT OF INADVERTENT MISTAKES OR OMISSIONS, TH E TRIBUNAL HAD COME TO THE CONCLUSION THAT THE ASSESSEE HAD SUBMITTED INACCURA TE PARTICULARS OF HIS INCOME AND HAD ALSO CONCEALED THE PARTICULARS OF HI S INCOME WHILE FILING THE ORIGINAL RETURNS. THIS WAS A FINDING OF FACT ARRIVE D AT BY THE TRIBUNAL AFTER CONSIDERING THE MATERIALS ON RECORD AND THE ENTIRET Y OF CIRCUMSTANCES IN THE CASE AND THIS FINDING OF FACT COULD NOT BE SAID TO BE IN ANY WAY BAD OR PERVERSE IN LAW. THE EXPLANATION TO SECTION 271(1)(C) OF THE ACT CAM E INTO FORCE WITH EFFECT FROM APRIL 1, 1964. THE RETURN FOR THE ASSESSMENT YEAR 1 963-64 WAS FILED ON MAY 22, 1964, AFTER THE EXPLANATION CAME INTO FORCE. THAT B EING SO, THE EXPLANATION WAS APPLICABLE TO 1963-64 ALSO. THE EXPLANATION WAS THU S APPLICABLE TO ALL THE THREE YEARS IN QUESTION. THE TOTAL INCOME RETURNED BY THE ASSESSEE IN EACH OF THE 25 THREE ASSESSMENT YEAR BEING LESS THAN 80% OF THE TO TAL INCOME ASSESSED IN EACH CASE, THE EXPLANATION WAS FULLY SQUARELY APPLI CABLE ON THE FINDING OF THE TRIBUNAL AND IN ANY VIEW OF THE MATTER, THE TOTALIT Y OF THE CIRCUMSTANCES CLEARLY POINTED OUT THAT IT WAS A CASE OF GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE AND THE ASSESSEE HAD FAILED TO PROVE THAT IT WAS NOT A CASE OF GROSS OR WILLFUL NEGLECT ON HIS PART IN FURNISHING THE OR IGINAL RETURNS. AS A PROPOSITION OF LAW IT MAY BE CORRECT THAT WHER E A REVISED RETURN AS CONTEMPLATED UNDER SECTION 139(5) IS SUBMITTED BEFO RE THE ASSESSMENT IS MADE AFTER THE ASSESSEE HAD DISCOVERED SOME OMISSION OR SOME WRONG STATEMENT IN THE ORIGINAL RETURN, A PENALTY PROCEEDING FOR CONCE ALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME AS CONTEMPLATED UNDER SECTION 271(1) (C) OF THE ACT MAY NOT BE ATTR ACTED. BUT, FOR THAT PURPOSE THE REVISED RETURN ITSELF MUST BE WITHIN THE CORREC T AMBIT AND SCOPE OF SECTION 139(5). IN THE PRESENT CASE, NO DOUBT, THE DISCOVER Y OF THE OMISSION OR WRONG STATEMENT WAS MADE BY THE ASSESSEE. THAT BY ITSELF IS NOT SUFFICIENT TO BRING THE REVISED RETURN WITHIN THE AMBIT OF SECTION 139( 5). THE FURTHER REQUIREMENT IS THAT THIS OMISSION OR WRONG STATEMENT IN THE ORIGIN AL RETURN MUST BE DUE TO BONA FIDE INADVERTENCE OR MISTAKE ON THE PART OF THE ASS ESSEE. THE ASSESSEE IN THIS CASE COULD NOT GIVE ANY PARTICULARS BASIS FOR THE O RIGINAL RETURNS. THE CONTENTIONS OF THE ASSESSEE THAT HE HAD NO PROPER A CCOUNTS NOTWITHSTANDING THE ADMITTED FACT THAT HE HAD INCOMES IN LAKHS OF R UPEES WAS RIGHTLY REJECTED BY THE TRIBUNAL. IN THE CIRCUMSTANCES, THE OMISSION O R WRONG STATEMENTS IN THE ORIGINAL RETURNS AS ADMITTED BY THE ASESSEE, COULD NOT BE STATED TO BE, BY ANY STANDARD OF EVALUATION OF EVIDENCE OR MATERIAL ON R ECORD, INADVERTENT OR BONA FIDE OMISSION OR MISTAKE. THAT BEING SO, THE REVIS ED RETURNS WERE NOT REALLY WITHIN THE CORRECT AMBIT AND SCOPE OF SECTION 139(5 ) OF THE ACT SO AS TO ALLOW IMMUNITY TO THE ASSESSEE FROM THE MISCHIEF OF SECTI ON 271(1)(C) OF THE ACT. 24 ABOVE DECISION WAS LATER ON CONFIRMED BY THE HON 'BLE APEX COURT REPORTED AT 186 ITR 571 AS G.C. AGARWAL VS. C IT. THIS MEANS THAT PENALTY ON ESTIMATE BASIS HAS BEEN HELD TO BE LEVIABLE EVEN BY THE HON'BLE APEX COURT. AGAIN HON'BLE SUPREME COURT IN CASE OF B.A. BALASUBRAMANIAM AND BROS CO. VS. CIT, 236 ITR 977 CONFIRMED THE DECISION OF HON'BLE MADRAS HIGH COURT IN CASE O F CIT VS. B.A. BALASUBRAMANIAM AND BROS, 152 ITR 529. IN THAT CAS E THE ASSESSEE RECEIVED CERTAIN IMPORT LICENCES BASED ON A PERCENT AGE VALUE OF THE GOODS EXPORTED, IT DID NOT IMPORT THE GOODS AGAINST THE SAID IMPORT LICENCES BUT SOLD THEM AS SUCH. AS THE ASSESSEE DI D NOT FURNISH AT THE TIME OF ASSESSMENT THE DETAILS OF COMMODITIES C OVERED BYTHE LICENCES, THE PARTIES TO WHOM THEY WERE SOLD AND TH E PROFIT EARNED WITH REFERENCE TO EACH OF EH IMPORT LICENCES, THE O FFICER ESTIMATED THE PROFIT EARNED BYTHE SALE OF THE LICENCES BASED ON THE MARKET QUOTATIONS ON PREMISES PUBLISHED IN FINANCIAL JOURN ALS. THE INCOME ESTIMATED BY THE ITO FOR THE THREE YEARS 1967-68, 1 968-69 AND 1969-70 WAS REDUCED BY THE TRIBUNAL AT VARYING FIGU RES. IN THE 26 CONSEQUENTIAL PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT THE PENALTIES LEVIED BY THE IAC WERE DELETED BY THE TRI BUNAL IN THE VIEW THAT MERELY BECAUSE THE INCOME FROM THE SALE OF THE LICENCES WERE FIXED AT FIGURES HIGHER THAN THE AMOUNTS DISCLOSED BY THE ASSESSEE, IT DID NOT MEAN THAT THE DIFFERENCE REPRESENTED THE CONCEALED INCOME OF THE ASSESSEE JUSTIFYING THE IMPOSITION OF PENALT Y AND AS THE INCOME FROM THE SALE OF THE LICENCES HAD BEEN ADOP TED ON AN ESTIMATED BASIS, NO PENALTY COULD BE LEVIED. LATER ON WHEN THE MATTER TRAVELED TO THE HON'BLE HIGH COURT IT WAS H ELD AS UNDER: THAT THE ASSESSEE HAVING FURNISHED THE INCOME BYWA Y OF SALE OF IMPORT LICENCES WHICH WAS FAR BELOW THE MARKET QUOTATION A ND NOT HAVING FURNISHED THE NECESSARY INFORMATION SOUGHT FOR BY T HE DEPARTMENT REGARDING THE IMPORT LICENCES, BY REASON OF THE EXP LANATION TO SEC 271(1)(C), THE BURDEN WAS ON THE ASSESSEE TO SHOW T HAT THERE WAS NO CONCEALMENT OF INCOME. AS THE ASSESSEE DID NOT PRO DUCE THE REQUISITE MATERIAL TO ESTABLISH THAT THE DIFFERENCE BETWEEN T HE INCOME RETURNED AND INCOME ASSESSED WAS NOT DUE TO ANY FRAUD OR WIL LFUL NEGLECT ON HIS PART THE NON PRODUCTION OF THE MATERIALS FOR ASCERT AINING THE CORRECTNESS OF THE INCOME RETURNED COULD BE TAKEN TO BE EITHER DUE TO FRAUD OR WILLFUL NEGLECT. CONSEQUENTLY THE TRIBUNAL WAS NOT CORRECT IN CONCEALING THE PENALTIES LEVIED FOR THE VARIOUS YEARS IN QUESTION. WHEN THE MATTER TRAVELED TO THE HON'BLE SUPREME COU RT IT WAS HELD AS UNDER: AFFIRMING THE DECISION OF THE HON'BLE HIGH COURT THAT THE HON'BLE HIGH COURT WAS CORRECT IN HOLDING THAT AS THE INCOME RE TURNED WAS LESS THAN 80 PER CENT, OF INCOME ASSESSED, THE EXPLANATION TO SEC 271(1)(C) BECAME APPLICABLE AND THE ITO WAS JUSTIFIED IN IMPO SING PENALTY BECAUSE THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONU S WHICH WAS ON IT UNDER THE EXPLANATION TO SEC 271(1)(C). THEREFORE IT DEPENDS ON THE CIRCUMSTANCES HOW THE INCOME WAS ESTIMATED. FOR EXAMPLE IF IT IS ONLY A CASE OF PUR E ESTIMATE, LET US SAY FOR DETERMINING COST OF CONSTRUCTION THE ASSESS ING OFFICER ESTIMATED THE COST. THIS WAS LATER ON REDUCED BY T HE TRIBUNAL TO A LESSER AMOUNT THEN PERHAPS PENALTY IS NOT LEVIABLE BECAUSE COST OF CONSTRUCTION IS SIMPLE MATTER OF ESTIMATE AND NO TW O EXPERTS WOULD EVER AGREE ON SIMILAR ESTIMATE. HOWEVER, IF THE EST IMATE IS BASED ON THE BASIS OF DOCUMENTS FOUND AND IT IS NOT POSSIBLE TO COMPUTE THE INCOME OTHERWISE THEN BY ESTIMATE THEN PENALTY WOUL D BE CLEARLY LEVIABLE. IN THE CASE BEFORE US, DURING SURVEY VAR IOUS DOCUMENTS INCLUDING BLANK CHEQUE BOOKS WERE FOUND AND THE ASS ESSEE CLEARLY 27 ADMITTED THAT HE WAS ENGAGED IN PROVIDING ACCOMMODA TION ENTRIES IN THE FORM OF CAPITAL GAIN, GIFTS, LOANS ETC BY RE CEIVING CASH AND ISSUING CHEQUES. THE ASSESSEE HAS NOT ONLY DEFRAUD ED REVENUE BY CONCEALING HIS OWN INCOME BUT HAS ALSO DEFRAUDED RE VENUE BY HELPING OTHERS IN SAVING TAXES BY HIDING THE ACTUAL INFORMATION OF GIFTS, LOANS ETC. NOW IT IS VERY DIFFICULT TO COME TO A CORRECT FIGURE IN THE FORM OF CHARGES RECEIVED BY THE ASSESSEE FOR PR OVIDING SUCH ACCOMMODATION ENTRIES AND ONLY ESTIMATION WAS POSS IBLE. THE ESTIMATE HAS BEEN MADE ON THE TOTAL ACCOMMODATION E NTRIES PROVIDED BY THE ASSESSEE. THE FACT OF DOING THIS B USINESS WAS NEVER DISCLOSED TO THE REVENUE. IN FACT THE ASSESS EE HAS NOT FILED RETURNS OF INCOME FROM 1996 TILL DATE OF SURVEY WHI CH CLEARLY SHOW THAT THE ASSESSEE HAS DELIBERATELY CONCEALED TO OFF ER HIS INCOME FOR TAXATION AND THEREFORE THIS IS A FIT CASE FOR LEVY OF PENALTY. 25 THE LD. D.R. FOR THE REVENUE HAS ONLY RELIED ON THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF R AJESH CHAWLA VS. CIT (SUPRA). IN THAT CASE THE ASSESSEE WAS A MEMBER OF GROUP KNOWN AS M/S BALDEV ELECTRICALS, LUDHIANA. INFORMA TION WAS RECEIVED BY THE INTELLIGENCE WING THAT THE MEMBERS OF THE GROUP ARE INDULGING IN TAX EVASION BY SHOWING INCOME FROM OTH ER SOURCES AS AGRICULTURAL INCOME. DURING INVESTIGATION THE APPE LLANT RAJESH CHAWLA AND RAJIV CHAWLA WERE SUMMONED BY THE ADI, L UDHIANA AND ASKED TO PRODUCE EVIDENCE ABOUT AGRICULTURAL INCOME . AS PER ORDER OF THE ACIT, SUMMONS DATED 24 TH MAY, 1996 WERE SENT TO RAJESH CHAWLA AND RAJIV CHAWLA U/S 131(A) OF THE ACT ASKIN G THE ASSESSEE TO PRODUCE THE RELEVANT DOCUMENTS. RAJESH CHAWLA A ND RAJIV CHAWLA ATTENDED THE OFFICE ON 4 TH JUNE 1996 BUT NO DOCUMENTS WERE PRODUCED. STATEMENT OF RAJIV CHAWLA WAS RECORDED O N 4 TH JUNE, 1996. ON 10 TH JUNE 1996 ASSESSEES COUNSEL GOT AN ADJOURNMENT FOR 14 TH JUNE, 1996. ON 14 TH JUNE, 1996 LD. COUNSEL FOR THE 28 ASSESSEE OFFERED TO DISCLOSE INCOME SUBJECT TO NO P ENALTY BUT HE WAS TOLD THAT DISCLOSURE COULD NOT BE CONDITIONAL. HE WAS AGAIN ASKED TO PRODUCE THE GENUINENESS OF HIS CLAIM AND F ILE A STATEMENT ON 20 TH JUNE, 1996. ON 20 TH JUNE 1996 LD. COUNSEL FOR THE ASSESSEE STATED THAT CERTAIN AGRICULTURAL RECEIPTS WERE IN C ASH FOR WHICH NO RECORD WAS AVAILABLE AND ORIGINAL AGREEMENTS OF THE FAMILY MEMBES WERE NOT TRACEABLE. ON 18 TH JUNE, 1996 REVISED RETURN SURRENDERING AGRICULTURAL INCOME WAS FILED. THE ASSESSING OFFIC ER TAKING IT TO BE A CASE OF ESCAPED ASSESSMENT, ISSUED NOTICE U/S 148 O F THE ACT ON 16 TH OCT. 1996 AND AFTER ACCEPTING THE REVISED RETURNS U/S 143(3) R.W.S. 147 INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT. IT WAS MAINLY CONTENDED THAT PENALTY WAS NOT LEVIABLE BECAUSE THE ASSESSEE HAS VOLUNTARILY DISCLOSED THE INCOME AND I N VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN CASE OF SIR SH ADI LAL SUGAR AND GENERAL MILLS VS. CIT, 168 ITR 705 OBSERVED THA T PENALTY WAS NOT LEVIABLE. HON'BLE HIGH COURT AFTER CONSIDERIN G THE DETAILED ARGUMENTS AS WELL AS THE CASE LAW OBSERVED AT PARA 4 AS UNDER: THE ABOVE DISCUSSION BY THE TRIBUNAL CLEARLY SHOWS THAT IT WAS NOT A CASE OF BONAFIDE VOLUNTARY DISCLOSURE BUT ONLY TO A VOID CONSEQUENCES OF LAW. IT IS NOT POSSIB LE TO HOLD THAT IN EVERY CAS E, MERE SURRENDER OF INCOME WILL FORECLOSE ANY ACTION FOR CONCEALMENT OF INCOME. JUDGMENTS OF HON'BLE SUPREME COURT IN SIR SHADI LAL AND CIT S URESH CHANDRA MITTAL (2001) 170 CTR 182: 251 ITR 9 HAVE RIGHTLY B EEN DISTINGUISHED BY THE TRIBUNAL. FINDINGS RECORDED BY THE TRIBUNAL CA NNOT BE HELD TO BE PERVERSE IN ANY MANNER, THE SAME BEING BASED ON REL EVANT MATERIAL. THE ASSESSEES HAVE BEEN HELD TO BE MEMBERS OF THE SAME FAMILY AND IT HAS ALSO BEEN FOUND THAT REVISED RETURNS WERE FILED ON COMING TO KNOW ABOUT DETECTION OF CONCEALMENT. A DIVISION BENCH OF THIS COURT IN PADAM KUMAR GARG VS. ITO & ANR, 26 IT REP 26 (PH) HELD TH AT ASSESSEE COULD NOT ESCAPE PENALTY MERELY ON THE GROUND THAT HE HAD SURRENDERED THE AMOUNT. SIMILAR VIEW HAS BEEN TAKEN IN P.C. JOSEPH & BROS VS. CIT. 158 CTR 104: 240 ITR 818 AND CIT VS. SUDHARSHAN SILKS & SAREES, 171 CTR 256: 253 ITR 145 (KAR). 26 IN THE CASE BEFORE US, EVEN NO RETURN OF INCOME WAS FILED AND THEREFORE CASE OF THE ASSESSEE IS WORSE THAN THE CA SE OF RAJESH CHAWLA (SUPRA). 27 WE MAY OBSERVE THAT AFTER INSERTION OF EXP THE S ITUATION HAS TOTALLY CHANGED. THIS BECOMES ABSOLUTELY CLEAR FRO M THE DECISION OF 29 HON'BLE APEX COURT WHICH HAS BEEN RELIED ON BY THE CIT(A) IN CASE OF K.P. MADHUSUDHANAN VS. CIT (SUPRA). IN THAT CASE A DEMAND DRAFT OF RS. 50,000 HAD BEEN PURCHASED ON JAN 27, 1986, I N FAVOUR OF SREE JAYALAXMI ENTERPRISES, BHRAVAPATANAM, ANDHRA P RADESH BUT IN THE ASSESSEES ACCOUNTS THIS AMOUNT WAS ENTERED ONL Y ON FEB 4, 1986. THE ASSESSEE HAD MADE A TELEGRAPHIC TRANSFER THROUGH THE ANDHRA BANK, CALICUT, ON MAR 24,1986 TO MADAVENKATA RATANAM AND OTHERS, BHIMAVARAM, ANDHRA PRADESH; THIS TRANSACTIO N AGAIN WAS ENTERED ONLY ON APRIL 24, 1986. WHEN THESE WERE PO INTED OUT TO THE ASSESSEE, IT SUBMITTED THAT A LELTTER DATED AUG 28, 1989 STATING THAT AS SUFFICIENT CASH BALANCE WAS NOT AVAILABLE TO IT ON THE DATES OF THE TRANSACTIONS , IT HAD OBTAINED HAND LOANS FROM FRIE NDS AND AS IT EXPECTED TO REPAY SUCH LOANS WITHIN A SHORT TIME, N O ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS IN RESPECT THEREOF. THE LETTER ALSO STATED THAT SINCE IT WAS UNABLE TO FURNISH EVIDENCE FOR SUCH LOANS, IT OFFERED THE AMOUNT OF RS. 93,000 AS ADDITIONAL INCO ME. THE ASSESSMENT WAS ACCORDINGLY MADE TREATING THE SUM OF RS. 93,000 AS UNEXPLAINED INVESTMENT. ON THE ABOVE FACTS PENALTY WAS ULTIMATELY LEVIED WHICH WAS DELETED BY THE TRIBUNAL. HOWEVER, ON APPEAL HON'BLE HIGH COURT REVERSED THE DECISION AND DID N OT FOLLOW THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CASE OF C IT VS. P.M. SHAH, 203 ITR 792. HON'BLE APEX COURT OBSERVED AT PAGE 103 AS UNDER: IN CIT V. P.M. SHAH(1993)203 ITR 792, THE HIGH COUR T AT BOMBAY OBSERVED THAT THE EXPLANATION TO SECTION 271(1)(C) CREATE A LEGAL FICTION. IT WAS THAT THE ASSESSEE WOULD BE DEEMED TO HAVE CONCEALED THE PART ICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IN THE CIR CUMSTANCES SET OUT IN THE EXPLANATION. BUT FOR SUCH A LEGAL FICTION, IT COULD NEVER HAVE BEEN SAID THAT THERE WAS NAY CONCEALMENT OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME SIMPLY BECAUSE THE RETURNED INCOME WAS LESS THAN 80 PER CENT. OF THE ASSESSED INCOME. THE EXPLANATION SHIFTED THE BURDEN OF PROOF ON THE ASSESSEE. THEREFORE, IT SAID (PAGE 797): WHEN THE EXPLANATI ON IS BEING RESORTED TO BY THE INCOME-TAX OFFICER OR BY THE INSPECTING ASSISTA NT COMMISSIONER IN PENALTY PROCEEDINGS, IT IS ESSENTIAL THAT THE ASSESSEE MUST BE INFORMED THAT PENALTY PROCEEDINGS AGAINST HIM ARE BEING COMMENCED UNDER T HE EXPLANATION TO SECTION 271(1)(C). IT ADDED (PAGE 799): THE INSPECTING A SSISTANT COMMISSIONER COULD NOT HAVE PROCEEDED TO LEVY THE PENALTY UNDER THE EX PLANATION TO SECTION 271(1)(C). THESE ARE PNALTY PROCEEDINGS AND THE SEC TION MUST BE STRICTLY 30 CONSTRUED. THE ASSESSEE, IN OUR VIEW, HAD NO OPPORT UNITY OF MEETING THE CASE UNDER THE EXPLANATION TO SECTION 271(1)(C). `THE BENCH OF THE HIGH COURT AT BOMBAY THAT DELIVER ED THE JUDGMENT IN THE CASE OF P.M. SHAH [1993]203 ITR 792 FOLLOWED IT IN HT ECASE OF CIT V. DHARAMCHAND L. SHAH [1993] 204 ITR 462 (BOM). IT SA ID (PAGE 468): IN THE ABSENCE OF INVOKING THE EXPLANATION SPECIFICALLY, T HE BURDEN WOULD REMAIN ON THE REVENUE TO BRING THE ASSESSEES CASE WITHIN THE MISCHIEF OF THE MAIN PROVISIONS OF SECTION 271(1)(C) OF THE ACT. WE FIND IT DIFFICULT TO ACCEPT AS CORRECT THE TWO J UDGMENTS AFOREMENTIONED. THE EXPLANATION TO SECTION 271(1)(C) IS A PART OF SECTI ON 271. WHEN THE INCOME-TAX OFFICER OR THE APPELLATE ASSISTANT COMMISSIONER ISS UES TO AN ASSESSEE A NOTICE UNDER SECTION 271, HE MAKES THE ASSESSEE AWARE THAT THE PROVISIONS THEREOF ARE TO BE USED AGAINST HIM. THESE PROVISIONS INCLUD E THE EXPLANATION. BY REASON OF THE EXPLANATION, WHERE THE TOTAL INCOME R ETURNED BY THE ASSESSEE IS LESS THAN 80 PER CENT. OF THE TOTAL INCOME ASSESSED UNDER SECTION 143 OR 144 OR 147, REDUCED TO THE EXTENT THEREIN PROVIDED, THE AS SESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OF FURNISHE D INACCURATE PARTICULARS THEREOF, UNLESS HE PROVES THAT THE FAILURE TO RETUR N THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR NEGLECT ON HIS PART. THE AS SESSEE IS THEREFORE, BY VIRTUE OF THE NOTICE UNDER SECTION 271 PUT TO NOTICE THAT IF HE DOES NOT PROVE, IN THE CIRCUMSTANCES STATED IN THE EXPLANATION, THAT HIS F AILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS THEREOF AND, CONSEQUENTLY, BE LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCATION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE UNDER SECTION 271 IS, IN OUR VIEW, NECESSARY BEFORE THE PROVISIONS OF THE EXPLANATION THEREIN ARE APPLIED. THE HIGH COURT AT BOMBAY WAS, THEREFORE IN ERROR IN THE VIEW THAT IT TOOK AND THE DIVISION BENCH IN THE IMPUGNED JUDGMEN T WAS RIGHT. LEARNED COUNSEL FOR THE ASSESSEE THEN DREW OUR ATT ENTION TO THE JUDGEMENT OF THIS COURT IN SIR SHADILAL SUGAR AND GENERAL MILLS LTD. V. CIT[1987] 168 ITR 705. HE SUBMITTED THAT THE ASSESSEE HAD AGREED TO T HE ADDITIONS TO HIS INCOME REFERRED TO HEREINABOVE TO BUY PEACE AND IT DID NOT FOLLOW THEREFROM THAT THE AMOUNT THAT WAS AGREED TO BE ADDED WAS CONCEALED IN COME. THAT IT DID NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCE ALED INCOME IS UNDOUBTEDLY WHAT WAS LAID DOWN BY THIS COURT IN THE CASE OF SIR SHADILAL SUGAR AND GENERAL MILLS LTD. [1987] 168 ITR 705 AND THAT, THEREFORE, THE REVENUE WAS REQUIRED TO PROVE THE MENS REA OF A QUASI-CRIMINAL OFFENCE. BUT IT WAS BECAUSE OF THE VIEW TAKEN IN THIS AND OTHER JUDGMENTS THAT THE EXPLANATION TO SECTION 271 WAS ADDED. BY REASON OF THE ADDITION OF THAT EX PLANATION, THE VIEW TAKEN IN THIS CASE CAN NO LONGER BE SAID TO BE APPLICABLE. 28 THUS IT BECOMES CLEAR THAT AFTER INSERTION OF TH IS EXPLANATION THE BURDEN HAS SHIFTED TO THE ASSESSEE TO GIVE BONA FIDE EXPLANATION REGARDING A PARTICULAR ITEM OF INCOME AND IF NO BON AFIDE EXPLANATION IS AVAILABLE THEN PENALTY IS TO BE LEVIED. IN THE CASE BEFORE US, NO EXPLANATION HAS BEEN GIVEN AND THEREFORE PENALTY HA S BEEN RIGHTLY LEVIED. 29 THE LD. D.R. FOR THE REVENUE HAD ALSO STRONGLY R ELIED ON THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF SHVETA NANDA VS. CIT (SUPRA). IN THAT CASE ALSO A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE AND SOME DISCREPANCIES WERE DETECTED IN THE RECORD AND SOME INCRIMINATING DOCUMENTS WERE 31 FOUND. FROM THESE DOCUMENTS IT WAS FOUND THAT THE ASSESSEE HAD BEEN PAYING HANDSOME COMMISSION AND INCENTIVES TO I TS DIRECTORS AND FAMILY MEMBERS. ROHIT KHANNA, THE MD OF THE COM PANY WHO IS THE HUSBAND OF THE ASSESSEE, ON BEING ASKED TO EXPL AIN TH ABOVE DISCREPANCIES GAVE AN UNDERTAKING IN WRITING ON 12. 3.2003 TO GET AN ADDITIONAL AMOUNT OF RS. 90,00,000/- SURRENDERED FR OM 14 PERSONS, INCLUDING RS. 2,50,000/- FROM HIS WIFE, I.E. THE PR ESENT ASSESSEE, SUBJECT TO THE CONDITION THAT NO PENAL ACTION WOULD BE INITIATED AGAINST THEM. LATER ON THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND IT WAS NOTICED THAT THE ASSESSEE HAD N OT DECLARED ANY ADDITIONAL AMOUNT IN THE RETURN OF INCOME FOR ASSES SMENT YEAR 2003- 04. THE ASSESSEE, HOWEVER, AGREED TO PAY TAX ON TH E FULL INCOME ALONG WITH INTEREST. THE ASSESSING OFFICER DID NOT AGREE WITH THESE SUBMISSIONS AND ADDED THIS AMOUNT AND ALSO INITIAT ED PENALTY PROCEEDINGS F OR LEVY OF PENALTY U/S 271(1)(C). DU RING PENALTY PROCEEDINGS IT WAS OBSERVED THAT SURRENDER OF FULL INCOME WAS NOT VOLUNTARILY AND IN GOOD FAITH AND ULTIMATELY PENALT Y WAS LEVIED. PENALTY WAS DELETED BY THE LD. CIT(A). HOWEVER, ON APPEAL THE TRIBUNAL REVERSED THE DECISION OF LD. CIT(A). WHEN THE MATTER TRAVELED TO HON'BLE HIGH COURT IT WAS OBSERVED AT PARA 12 AS UNDER: FURTHER THE JUDGMENTS OF THE HON'BLE HIGH COURTS A ND THE ORDER OF THE TRIBUNAL ON WHICH RELIANCE HAS BEEN PLACLED BY THE LD. COUNSEL FOR THE ASSESSEE DO NOT HELP THE ASSESSEES CAUSE, INASMUCH AS THOSE CASES WERE DECIDED ON INDIVIDUAL FACT SITUATION INVOLVED THEREIN WHERE A FINDING CAME TO BE RECORDED THAT THERE WAS NO CONCEALMENT O R FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE THEREIN. HERE THE LD. COUNSEL FOR THE ASSESSEE WAS UNABLE TO POINT OUT TH AT THE ASSESSEE HAD DISCLOSED THE SURRENDER AMOUNT IN THE RETURN OF INC OME FILED BY HER OR THAT THERE WAS NO CONCEALMENT OR THAT FULL PARTICUL ARS HAD BEEN DISCLOSED BY THE ASSESSEE. IN THE ABSENCE OF THIS, THE FINDI NGS RECORDED BY THE TRIBUNAL IN THE CONTEXT AFORESAID, CANNOT BE FAULTE D WITH AND NO ERROR OF LAW COULD BE FOUND THEREIN IN CASE BEFORE US ALSO THE SURRENDER WAS NOT MADE V OLUNTARILY AND THE DOCUMENTS WERE FOUND IN THIS ASSESSMENT YEAR ST ILL THE ASSESSEE HAD NOT BOTHERED TO FILE ANY RETURN. EVEN IN ASSESS MENT YEAR 2004- 05 AND 2005-06 ONLY PART OF INCOME WAS DECLARED THE REFORE THE 32 ASSESSEE HAS CLEARLY CONCEALED THE PARTICULAR OF HI S INCOME WHICH WOULD ATTRACT PENAL CONSEQUENCES. 30 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE O PINION THAT THIS IS A FIT CASE FOR LEVY OF PENALTY AND ACCORDINGLY W E CONFIRM THE ACTION OF THE LD. CIT(A) AND CONFIRM THE LEVY OF P ENALTY. ITAS NO. 280 & 285/CHD/`2013 31 IN BOTH THESE APPEALS THE FACTS AND ISSUES ARE I DENTICAL AS IN ASSESSMENT YEAR 2002-03 IN ITA NO. 1062/CHD2012 WH ICH WE HAVE ADJUDICATED ABOVE, THEREFORE FOLLOWING THE ABOVE OR DER, IN THESE TWO YEARS ALSO WE CONFIRM THE ORDER OF THE LD. CIT(A). 32 IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.3.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24.3.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR