IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.409/MUM/2009(A.Y. 2001-02) ITA NO.410/MUM/2009(A.Y.2002-03) ITA NO.411/MUM/2009(A.Y. 2003-04) ITA NO.290/MUM/2009(A.Y. 2004-05) ITA NO.291/MUM/2009(A.Y. 2005-06) ITA NO.292/MUM.2009(A.Y. 2006-07) ITA NO.3817/MUM/2011(A.Y.2006-07) M/S. UNIMARK REMEDIES LTD., 19, CRYSTAL, 1 ST FLOOR, JUHU ROAD, SANTACRUZ (W), MUMBAI - 400 054. PAN: AAACU 0589R (APPELLANT) VS. THE ACIT, CEN. CIR.45, MUMBAI. (RESPONDENT) APPELLANT BY : S/SHRI VIJAY MEHTA/ A.K.G HOSH RESPONDENT BY : SHRI RAJARSHI DWIVEDY DATE OF HEARING : 13/09/2012 DATE OF PRONOUNCEMENT : 2 6 /09/2012 ORDER PER BENCH, ALL THESE APPEALS ARE FILED BY THE ASSESSEE. (I) ITA NO.409/MUM/2009 TO ITA NO.411/MUM/2009 ARE DIRECTED AGAINST A CONSOLIDATED ORDER PASSEDY LD. CIT(A),C-I II, MUMBAI DATED 14/11/2008 FOR ASSESSMENT YEARS 2001-02 TO 2003-04. THESE ARE APPEALS RELATING TO PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). (II) ITA NO.290/MUM/2009 & 291/MUM/2009 ARE DIRECTE D AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) DATED 21/11/2008 AND 19/11/2008 FOR ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. THESE ARE ALSO APPEALS IN RESPECT OF LEVY OF PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 2 (III) ITA NO.292/MUM/2009 IS DIRECTED AGAINST AN O RDER PASSED BY LD. CIT(A) DATED 19/11/2008 FOR ASSESSMENT YEAR 2006-07 . THIS IS QUANTUM APPEAL. (IV) ITA NO.3817/MUM/2011 IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 24/1/2011 IN RESPECT OF ASSESSMENT YEA R 2006-07. IT IS AN APPEAL RELATING TO PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT. 2. ALL THESE APPEALS WERE ARGUED TOGETHER BY BOTH T HE PARTIES AND ARE RELATED TO ONE ASSESSEE HENCE, FOR THE SAKE OF CONV ENIENCE ALL THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. THE COMMON FACTS WHICH WILL BE RELEVANT TO DECID E THESE APPEALS ARE THAT A SEARCH OPERATION WAS CONDUCTED ON THE PREMIS ES OF THE ASSESSEE AND ITS GROUPS ON 10/01/2006. THE RETURN OF INCOME WER E ORIGINALLY FILED UNDER SECTION 139(1) OF THE ACT. SUBSEQUENTLY, CONSEQUEN T TO SEARCH NOTICES UNDER SECTION 153-A WERE ISSUED, IN RESPONSE TO WHICH THE ASSESSEE HAS BEEN AGAIN ASSESSED UNDER SECTION 143(3) R.W.S. 153-A OF THE ACT. CONCEALMENT PENALTY HAS BEEN IMPOSED FOR ALL THESE YEARS WHICH HAVE BEEN CONFIRMED BY LD. CIT(A). 3.1 AS RELEVANT FACTS FOR A.Y 2001-02, 2002-03 AND 2003-04 ARE ALMOST IDENTICAL AND THE APPEALS RELATING TO PENALTY UNDE R SECTION 271(1)(C) HAVE BEEN DISPOSED BY LD. CIT(A) BY A CONSOLIDATED ORDER , WE SHALL FIRST ADVERT TO DECIDE THESE APPEALS. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 3 ITA NO.409, 410 & 411/MUM/2009(A.YS.2001-02, 2002-0 3 & 2003-04): 4. GROUNDS OF APPEAL FOR ALL THESE THREE YEARS A RE IDENTICALLY WORDED EXCEPT DIFFERENCE IN FIGURES. GROUNDS OF APPEAL FOR A.Y. 2001-02: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLA NTS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 98,875/- LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE AC T. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS.98,875/- LEVIED BY THE AO DESPITE THE FACT THAT THE ADDITIONAL INCO ME OF RS. 2,50,000/- WAS DECLARED IN THE STATEMENT U/S. 132(4) AND INCLU DED IN THE RETURN OF INCOME FIELD IN RESPONSE TO NOTICE ISSUED U/S. 1 53-A. 3. THE APPELLANT CRAVE LEAVES TO ADD, AMEND, ALTER , MODIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. THE APPELLANT PRAYS THIS HONBLE TRIBUNAL TO CANCEL / DELETE THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) AND CONFIRM ED BY THE LD. CIT(A). 4.1 FOR OTHER YEARS THE FIGURES ARE AS UNDER: ITA NO. ASSESSMENT YEARS AMOUNT ITA NO. 410/MUM/2009 2002-03 RS. 1,51,725/- ITA NO.411/MUM/2009 2003-04 RS.2,02,125/- 4.2 IN ALL THESE CASES CONCEALMENT PENALTY HAVE BEE N LEVIED ONLY ON ONE ADDITION WHICH IS IN RESPECT OF PAYMENT MADE TO GOV ERNMENT DEPARTMENTS. IT IS THE CASE OF THE REVENUE THAT DURING THE COURS E OF SEARCH OF THE ASSESSEES VARIOUS BUSINESS PREMISES, CERTAIN LOOSE PAPERS WERE FOUND AND SEIZED WHICH REVEALED PAYMENTS MADE TO VARIOUS GOVE RNMENT AUTHORITIES. THE RECORDING OF STATEMENT OF THE EMPLOYEES AT THO SE PREMISES REVEALED THAT THOSE PAYMENTS WERE MADE AS SPEED MONEY AND WERE DEBITED IN THE BOOKS UNDER THE HEAD BUSINESS EXPENDITURE BY RAISING CORR ESPONDING VOUCHERS. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 4 THESE EXPENSES WERE DISALLOWABLE UNDER SECTION 37(1 ) OF THE ACT HENCE, ADDITION ON THIS ACCOUNT IN RESPECT OF EACH OF TH E YEAR WERE MADE AS FOLLOWS: ASSESSMENT YEAR AMOUNT 2001-02 RS. 2,50,000/- 2002-03 RS.4,25,000/- 2003-04 RS.5,50,000/- 4.3 IT MAY BE MENTIONED HERE THAT WHILE FILING THE RETURN OF INCOME UNDER SECTION 153A THE ASSESSEE HAD DECLARED THE AF OREMENTIONED AMOUNT IN THE RETURN OF INCOME ITSELF AND HAD PAID DUE TAXES AND THUS IN FACT THERE WAS NO ADDITION MADE IN THE ASSESSMENT ORDER TO TH E RETURNED INCOME BUT AFOREMENTIONED AMOUNTS WERE DECLARED BY THE ASSESSE E IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.153A. HOWEV ER, THE AO INITIATED THE CONCEALMENT PENALTY ON AFOREMENTIONED ADDITION ON T HE GROUND THAT IF SEARCH ACTION HAD NOT BEEN TAKEN PLACE AGAINST THE ASSESSEE, THE ASSESSEE MAY NOT HAVE DECLARED THIS AMOUNT, THEREFORE, AFOR EMENTIONED ADDITION WAS LIABLE FOR CONCEALMENT PENALTY UNDER SECTION 271(1) (C) R.W. EXPLANATION-5 THEREOF. 4.4 APART FROM THAT CERTAIN OTHER ADDITIONS WERE A LSO MADE IN THE SHAPE OF VEHICLES EXPENSES, DEPRECIATION THEREON AND TELE PHONE EXPENSES ETC. ON WHICH NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN INITIATED OR LEVIED. THEREFORE, THOSE ADDITIONS ARE NOT SUBJECT MATTER OF PENALTY. 5. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . A.R THAT FOR THESE YEARS THERE IS NO VARIATION IN THE INCOME ASSESSED AND RETURNED ON THE ISSUES ON WHICH CONCEALMENT PENALTY HAS BEEN IMPOSE D. IT WAS SUBMITTED THAT THE IMPUGNED AMOUNT ON WHICH CONCEALMENT PENAL TY HAS BEEN IMPOSED HAS ALREADY BEEN INCORPORATED AS INCOME IN THE RETU RN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT, THEREFORE, CO NCEALMENT PENALTY CANNOT ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 5 BE IMPOSED. HE SUBMITTED THAT THIS ISSUE HAS RECE NTLY BEEN CONSIDERED BY DELHI ITAT IN THE CASE OF PREM ARORA VS. DCIT VIDE ORDER DATED 9/3/2012 IN ITA NO. 4702/(DEL) OF 2010 FOR ASSESSMENT YEAR 2004 -05. HE HAS PLACED COPY OF THE SAID ORDER ON RECORD AND A COPY WAS AL SO GIVEN TO LD. D.R. HE SUBMITTED THAT THIS ISSUE WAS CONSIDERED AT LENGTH BY THE TRIBUNAL AND AFTER CONSIDERING ALL THE SUBMISSIONS OF THE DEPARTMENT AS WELL AS ASSESSEE THE TRIBUNAL HAS ARRIVED AT A CONCLUSION THAT IN THE C ASES WHERE SEARCH IS INITIATED ON OR BEFORE 1 ST JUNE, 2007 PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED WHERE THE RETURN FILED IN RESPONSE TO NO TICE UNDER SECTION 153A INCLUDES THE INCOME ON WHICH THE CONCEALMENT PENAL TY IS SOUGHT TO BE IMPOSED. HE SUBMITTED THAT THE TRIBUNAL WHILE CONS IDERING THIS ASPECT HAS ALSO REFERRED TO EXPLANATION-5 AND IT WAS HELD THAT PENALTY UNDER SECTION 271(1)(C) IS NOT IMPOSABLE IN SUCH TYPE OF CASE A S IT IS NEITHER A CASE OF CONCEALMENT OF INCOME NOR OF FURNISHING OF INACCUR ATE PARTICULARS . IT WAS HELD THAT THE CONCEALMENT OF INCOME IS TO BE DETERM INED WITH REFERENCE TO THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. ONCE RETURNED INCOME FILED UNDER SECTION 153A IS ACCEPTED BY THE AO IT CAN NEITHER BE A CASE OF CONCEALMENT NOR OF FURNIS HING OF INACCURATE PARTICULARS OF SUCH INCOME. SO FAR AS IT RELATES TO APPLICATION OF EXPLANATION-5 IT WAS HELD THAT IT WILL COME INTO O PERATION IN THE CASES WHERE IN THE COURSE OF A SEARCH THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE S OR THING, AND THE ASSESSEE CLAIMED THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING ( WHOLLY OR IN PART) HIS INCOME. 5.1 LD. A.R FURTHER SUBMITTED THAT MUMBAI BENCHES IN THE CASE OF SHRI YOGESH PARIKH(DIRECTOR OF ASSESSEE COMPANY), RELYIN G UPON AFOREMENTIONED DECISION HAS ACCEPTED THE CASE OF THE ASSESSEE T HAT PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED WHERE THE INCOME HAS BE EN INCLUDED IN THE RETURN FILED BY THE ASSESSEE UNDER SECTION 153A OF THE ACT. HE IN THIS REGARD ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 6 REFERRING TO THE ORDER OF THE TRIBUNAL DATED 25/07 /2012 IN THE CASE OF SHRI YOGESH PARIKH VS. ACIT, ITA NOS. 6750, 6051/M/08 FO R ASSESSMENT YEARS 2003-04 AND 2004-05 AND ITA NO.3409/M/2009 FOR ASSE SSMENT YEAR 2005- 06, A COPY OF THE SAID ORDER WAS FILED BEFORE US AND COPY WAS GIVEN TO LD. D.R. THUS IT WAS PLEADED BY LD. A.R THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS COVERED BY THE AFOREMENTIONED DECISIONS O F THE TRIBUNAL AND NO PENALTY SHOULD BE HELD TO BE IMPOSABLE ON THE AMOUN TS OF INCOME WHICH WERE DECLARED BY THE ASSESSEE IN THE RETURN OF INCO ME FILED BY IT IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. HE SUBMIT TED THAT IN THE AFOREMENTIONED CASES IT HAS BEEN HELD THAT IN SUCH CASES PENALTY CANNOT BE LEVIED RELYING ON THE RETURN FILED UNDER SECTION 139(1). 6. ON THE OTHER HAND, LD. D.R RELIED UPON THE ORDER PASSED BY AO AS WELL AS LD. CIT(A). HE SUBMITTED THAT DEFAULT OF C ONCEALMENT HAS TO BE CONSIDERED WITH REFERENCE TO ORIGINAL RETURN AND, T HEREFORE, LD. CIT(A) HAS RIGHTLY UPHELD THE LEVY OF CONCEALMENT PENALTY AND HIS ORDER SHOULD BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. PENALTY IN THESE CAS ES HAS BEEN IMPOSED ON THE INCOME DISCLOSED IN THE RETURN OF INCOME FILED IN R ESPONSE TO NOTICE U/S. 153A. THE REASON FOR IMPOSITION OF SUCH PENALTY IS THAT THE ACT OF CONCEALMENT RELATED TO RETURN FILED U/S. 139(1) AN D NOT TO RETURN FILED U/S. 153A. THEREFORE, THE QUESTION IN THE PRESENT APPE ALS IS LIMITED ONLY TO THE EXTENT THAT WHETHER CONCEALMENT PENALTY CAN BE LEV IED IN SUCH A CASE WITH REFERENCE TO ORIGINAL RETURN. THE CASE OF THE AO I S THAT ASSESSEE HAS COMMITTED THIS DEFAULT WHILE FILING THE ORIGINAL RE TURN OF INCOME , THEREFORE, CONCEALMENT HAS TO BE VIEWED WITH REFERENCE TO RETU RN ORIGINALLY FILED AND AO ALSO HAS REFERRED TO THE PROVISIONS OF EXPLANATION- 5. LD. CIT(A) HAS UPHELD THE ORDER OF THE AO. WE FOUND THAT THIS ISSUE HAS B EEN CONSIDERED AT LENGTH ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 7 IN THE AFOREMENTIONED ORDER OF DELHI ITAT IN THE C ASE OF SHRI PREM ARORA VS. DCIT (SUPRA). IN THAT CASE PENALTY OF RS.47,51,579 /- WAS IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. SEARCH WAS CONDUCTED ON 22/11/2006. THE ASSESSEE WAS FOUND IN THE POSSESSION OF CASH OF RS. 1,11,45,350/-. A NUMBER OF LOOSE PAPERS CONTAINING INCRIMINATING MAT ERIAL WERE ALSO FOUND AND SEIZED FROM WHERE IT WAS FOUND THAT ASSESSEE HA D BEEN CARRYING ON UNACCOUNTED BUSINESS ACTIVITIES WHICH WERE NOT DISC LOSED IN THE RETURN OF INCOME. THE ASSESSEE IN THE RETURN FILED IN RESPON SE TO NOTICE UNDER SECTION 153A ADMITTED AN INCOME OF RS.1,43,41,002/- FROM UN DISCLOSED BUSINESS ACTIVITIES ON WHICH PENALTY WAS IMPOSED BY THE REVE NUE BY INVOKING THE PROVISIONS OF SECTION 271(1)(C) R.W. EXPLANTION-5 O F THE ACT AND ON THESE PARTS IT WAS HELD BY THE TRIBUNAL THAT PENALTY COU LD NOT BE IMPOSED AS THE INCOME WAS DISCLOSED IN THE RETURN FILED IN RESPONS E TO NOTICE UNDER SECTION 153A OF THE ACT. THE RELEVANT OBSERVATION OF THE T RIBUNAL ARE AS FOLLOWS: 18. IT MAY BE NOTED FROM ABOVE THAT ON ONE HAND TH E ASSESSING OFFICER HAD REJECTED THE CASH FLOW STATEMENT PREPARED FROM SEIZED MATERI AL FOR ALL THE SIX ASSESSMENT YEARS AND ESTIMATION OF COMMISSION INCOME BY THE AS SESSEE. ON THE OTHER HAND HE HAD ACCEPTED THE RETURNED UNDISCLOSED INCOME OF RS. 1,43,41,002/- DECLARED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S 153A OF THE ACT BEING HIGHER THAN THE ESTIMATED INCOME BY HIM AT RS.1,28,71,560/-. 19. THERE IS NO DISPUTE THAT THE ASSESSEE WAS INDUL GING IN UNACCOUNTED BUSINESS ACTIVITIES FOR LAST SO MANY YEARS. IT IS ALSO EVIDE NT FROM THE ABOVE FACTS THAT THE ESTIMATION OF UNDISCLOSED INCOME BY THE ASSESSEE AN D THE ASSESSING OFFICER IS BASED ON TWO DIFFERENT METHODS. THE ASSESSEE ESTIMATED TH E UNDISCLOSED INCOME BASED ON SEIZED MATERIALS BY DRAWING CASH FLOW STATEMENT RES ULTING INTO AVAILABILITY OF RS. 2,20,07,726/- AS ON THE DATE OF SEARCH. HOWEVER, TH E ASSESSING OFFICER PRESUMED ON THE BASIS OF ENTRIES RECORDED ON NOTE PAD THAT SHRI PREM ARORA WAS HANDLING UNACCOUNTED CASH OF MDH LIMITED FOR MAKING PURCHASE S IN CASH OF VARIOUS RAW MATERIALS SUCH AS SPICES REQUIRED FOR MANUFACTURING OF VARIOUS PRODUCTS OF MDH LIMITED. HE PRESUMED CERTAIN ENTRIES ON NOTE PAD FO R LOT NUMBERS AS RATES AND QUANTITIES OF CERTAIN SPICES/DRY FRUITS AND BY MULT IPLYING THE ASSUMED QUANTITIES AND RATES ESTIMATES SALES FOR THE PERIOD FROM 10.4.2005 TO 31.05.2005 AT RS 3,35,19,690/- . HE HAS COMPLETELY IGNORED THE OTHER SEIZED MATERI AL WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE ASSESSEE WHILE ESTIMATING UND ISCLOSED COMMISSION INCOME. THE ASSESSING OFFICER EXTRAPOLATED SALES BASED ON E STIMATION OF SALES OF 52 DAYS (10.4.2005 TO 31.05.2005) FOR FINANCIAL YEAR 2005-0 6. HE FURTHER EXTRAPOLATED SALES FIGURES BACKWARD FOR THE PERIOD RELEVANT TO ASSESS MENT YEARS 2001-02 TO 2005-06 BY ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 8 PRESUMING THAT THERE WAS 20% GROWTH IN BUSINESS IN EACH YEAR. HE HAS FURTHER ESTIMATED PROFITS BY PRESUMING PROFITS OF 10%. THU S ESTIMATION OF PROFITS AT RS.1,28,71,560/- FOR ASSESSMENT YEAR 2004-05 IS B ASED ON MULTIPLE ESTIMATIONS AND PRESUMPTIONS. THE METHOD OF ESTIMATION OF SALES AN D PROFITS FOR THE ASSESSMENT YEARS COVERED BY THE PERIOD OF SIX YEARS HAS BEEN R EJECTED BY THE TRIBUNAL IN QUANTUM APPEAL PROCEEDINGS OF THE ASSESSEE AS WELL AS IN THE CASE OF MDH LTD. ON THE CONTRARY THE ESTIMATION OF PROFITS FOR ALL THE SIX ASSESSMENT YEARS COVERED U/S 153A HAD BEEN UPHELD BY THE TRIBUNAL. FOR THE ASSES SMENT YEAR UNDER CONSIDERATION AS MENTIONED EARLIER THE ASSESSING OFFICER HAD ALSO FINALLY ACCEPTED THE RETURNED INCOME U/S 153A. THUS THE ASSESSED UNDISCLOSED INCO ME FOR THE ASSESSMENT YEAR IS AS RETURNED BY THE ASSESSEE U/S 153A. THE ASSESSING OFFICER WHILE ADOPTING A DIFFERENT METHOD FOR ESTIMATION OF INCOME FROM ENTR IES NOTED ON A NOTE PAD HAD NOT RECODED ANY FINDINGS AS TO WHY THE OTHER SEIZED MAT ERIAL RELIED BY THE ASSESSEE WAS NOT RELEVANT. SINCE THE RETURNED INCOME HAS BEEN AC CEPTED, THERE IS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER THAT ASSESSEE HAD CONCEALED INCOME WITH REFERENCE TO RETURN OF INCOME FILED BY HIM IN RESPO NSE TO NOTICE U/S 153A. IT IS ALSO NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. 20. HONBLE SUPREME COURT IN VARKEY CHACKO V. CIT 2 03 ITR 885 (SC) HAS HELD THAT A PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME CAN BE IMPOSED ONLY WHEN THE ASSESSING AUTHORITY IS SATISFIED THAT THERE HAS BEEN SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. A PENALTY PROCEEDING, THEREFORE, CAN BE INITIATED ON LY AFTER AN ASSESSMENT ORDER HAS BEEN MADE WHICH FINDS SUCH CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS. THE PENALTY WAS PERMISSIBLE UNDER THE LAW ON THE DATE O N WHICH THE OFFENCE OF CONCEALMENT OF INCOME WAS COMMITTED, THAT IS TO SAY , ON THE DATE OF THE OFFENDING RETURN. 21. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. K.R. CHINNI KRISHNA CHETTY [2000] 246 ITR 121 HAS HELD THAT UNDER SECTION 271( 1)( C ) OF THE ACT THE AUTHORITY IS GIVEN THE DISCRETION TO LEVY A PENALTY IF THERE IS CONCEALMENT OF PARTICULARS OF INCOME AND EVEN AS REGARDS THE QUANTUM OF THE PENALTY THER E IS A DISCRETION. OF GREATER IMPORTANCE IS THE NECESSITY FOR A DEFINITE FINDING THAT THERE IS CONCEALMENT, AS WITHOUT SUCH A FINDING OF CONCEALMENT, THERE CAN BE NO QUES TION OF IMPOSING ANY PENALTY. 22. IF THE FACTS OF ASSESSEES CASE ARE EXAMINED IN THE LIGHT ABOVE MENTIONED DECISIONS, WE FIND THAT ASSESSING OFFICER ESTIMATED SALES AND PROFITS BY EXTRAPOLATING CERTAIN ENTRIES HAS BEEN REJECTED BY THIS TRIBUNAL IN QUANTUM APPEAL. HE HAS NOT GIVEN ANY FINDING IN ASSESSMENT ORDER THAT THE ASSE SSEE HAD CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE HAD SIMPLY ACCEPTED THE RETURNED INCOME U/S 153A ESTIMATED BY THE ASSESSEE. HENCE ASSESSEES CASE IS COVERED BY THE DECISIONS REFERRED TO ABOVE AND PENA LTY U/S 271(1)(C) WILL NOT BE IMPOSABLE. 23. IN CIT V. SURESH CHANDRA MITTAL [2001] 251 ITR 9 (SC) THE ASSESSEE FILED REVISED RETURNS SHOWING HIGHER INCOME AFTER SEARCH AND NOTI CE FOR REOPENING OF ASSESSMENT, TO PURCHASE PEACE AND AVOID LITIGATION AND DEPARTME NT SIMPLY RESTED ITS CONCLUSION ON THE ACT OF VOLUNTARY SURRENDER DONE BY THE ASSES SEE IN GOOD FAITH, HIGH COURT WAS ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 9 JUSTIFIED IN HOLDING THAT NO PENALTY COULD BE LEVIE D. THE ASSESSEES CASE IS ON MORE STRONG FOOTINGS AS THAT OF SURESH CHAND MITTAL DECI DED BY HONBLE SUPREME COURT. AS HELD IN EARLIER PARAGRAPHS THERE SHOULD BE VARIATIO N IN ASSESSED AND RETURNED INCOME AND SUCH VARIATION SHOULD BE AS A RESULT OF CONCEALMENT. IT IS NOT THE CASE OF ASSESSING OFFICER THAT PENALTY U/S 271(1)(C) HAS BE EN IMPOSED ON CERTAIN ADDITIONS MADE BASED ON SEIZED MATERIAL WHICH HAD NOT BEEN AD MITTED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SEC. 153A OF THE ACT. RATHER IT IS A CASE WHERE THE STATUTE HAS GIVEN AN OPPORTUNITY TO THE ASSESSE E TO RECTIFY THE OMISSIONS ON PART OF THE ASSESSEE. HENCE NO PENALTY WILL BE LEVIED IF THE ASSESSEE DECLARES UNDISCLOSED INCOME U/S 153A OF TH E ACT. 24. THE ASSESSING OFFICER HAS INVOKED PROVISIONS OF EXPLANATION 5 TO SEC. 271(1)(C ) WHILE IMPOSING PENALTY IN ASSESSMENT YEAR 2004-05. IT IS ALSO IMPORTANT TO NOTE THAT CHAPTER XIVB WAS INSERTED IN THE STATUTE BY THE FIN ANCE ACT, 1995 W.E.F. 1.7.1995 WHICH PRESCRIBED SPECIAL PROCEDURE FOR SEARCH ASSES SMENTS. NO PENALTY U/S 271 OR 271A OR 271B, OR INTEREST U/S 234A/234B/234C WAS LE VIABLE IN RESPECT OF UNDISCLOSED INCOME DETERMINED IN BLOCK ASSESSMENT IN VIEW OF SP ECIFIC PROVISIONS OF SECTION 158BF OF THE ACT. SECTION 158BFA WAS INSERTED BY TH E INCOME -TAX (AMENDMENT), ACT , 1997 W.E.F. 1.1.1997 PRESCRIBING BOTH INTERES T AND PENALTY FOR CONCEALMENT OF INCOME IN RESPECT OF UNDISCLOSED INCOME DETERMINED U/S 158BC(C). THUS THE PROVISIONS OF EXPLANATION 5 TO SECTION 271(1) REMAI NED INOPERATIVE DURING THE PERIOD FROM 1.7.1995 TO 31.05.2003. 25. SECTION 153A WAS I NSERTED INTO STATUTE W.E.F 1.6.2003. CLAUSE (I) OF EXPLANATION TO SECTION 153 A CLARIFY THAT SUBJECT TO SECTIONS 153A, 153B AND 153C, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION MEANING THEREBY THAT PROVI SIONS RELATING TO PENALTY AND PROSECUTION WILL ALSO APPLY. IT MEANS THAT THE EXP LANATION 5 OF SECTION 271(1) WILL ALSO APPLY IN SEARCH ASSESSMENT MADE U/S 153A OF THE ACT PROVIDED THAT THE CONDITIONS RELATING THERETO ARE SATISFIED. 26. IN THE CASE BEFORE US THE ASSESSEE HAS DISCLOSED UNDISCLOSED INCOME IN THE RETURN OF INCOME FILED I N RESPONSE TO NOTICE U/S 153A OF THE ACT WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER. WE HAVE HELD IN EARLIER PARAGRAPHS THAT UNDER THE SCHEME OF SEARCH ASSESSM ENT U/S 153A, THE TOTAL INCOME OF THE ASSESSEE IS TO BE DETERMINED FOR EACH OF S IX ASSESSMENT YEARS. THE ASSESSMENT OR RE-ASSESSMENT PROCEEDING U/S 153A IS NOT IN CONTINUATION OF ASSESSMENT PROCEEDINGS U/S 143 OR SEC. 147 OF THE ACT. SINCE THERE IS COMPLETE DETACHMENT OF 153A PROCEEDINGS FROM REGULAR ASSESSM ENT PROCEEDINGS U/S 143 OR 147 AND HENCE CONCEALMENT OF INCOME IS TO BE DETER MINED WITH REFERENCE TO THE RETURN OF INCOME TO BE FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. ONCE RETURNED INCOME IS ACCEPTED BY THE ASSESSING OFFICER IT CAN NEITHER BE A CASE OF CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE OF PARTICUL ARS OF SUCH INCOME. THE ASSESSEE HAD DISCLOSED INCOME IN THE RETURN OF INCOME FILE D DETERMINED ON THE BASIS OF ENTRIES RECORDED IN SEIZED MATERIAL. 27. HONBLE DELHI HIGH COURT IN THE CASE OF M/S S.A .S. PHARMACEUTICALS (SUPRA) WHILE DECIDING THE ISSUE LEVY OF PENALTY U/S 271(1)(C) IN PARAGRAPH 15 & 16 HAS HELD AS UNDER: 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE HA S TO BE IN THE INCOME TAX RETURN ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 10 FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS COURT IN THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI-I VS MOHAN DAS HA SSA NAND 141 ITR 203 AND IN RELIANCE PETRO PRODUCTS PVT. LTD (SUPRA), THE SUPRE ME COURT HAS CLINCHED THIS ASPECT, VIZ., THE ASSESSEE CAN FURNISH THE PARTICULARS OF I NCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME TAX RETURN FILED BY TH E ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLANATION 4 AS WELL AS 5 AND 5A OF S ECTION 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT . 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING T HE SURVEY. THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMO UNT SURRENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS TO WHETHER THIS WOULD ATTRACT PENA LTY UPON THE ASSESSEE UNDER PROVISIONS OF SECTION 271(1)(C) OF THE ACT. OBVIOUS LY, NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVI SIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING S URVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWE VER, THERE CANNOT BE ANY PENALTY ON SURMISES, ON CONJECTURES AND POSSIBILITIES. SEC TION 271(1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE I S ACTUALLY A CONCEALMENT OR NON- DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CA NNOT BE IMPOSED. THERE IS NO SUCH CONCEALMENT OR NON-DISCLOSURE AS THE ASSESSEE HAD M ADE A COMPLETE DISCLOSURE IN THE INCOME TAX RETURN AND OFFERED THE SURRENDERED A MOUNT FOR THE PURPOSE OF TAX. IF THE FACTS OF THE CASE ARE EXAMINED IN THE LIGHT OF DECISION OF HONBLE DELHI HIGH COURT IN SAS PHARMACEUTICALS (SUPRA) PENALTY U/S 27 1(1)(C) IS NOT IMPOSABLE WHERE THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME IN RETURN FILED U/S 153A OF THE ACT. IN EARL IER PARAGRAPHS WE HAVE HELD THAT THE CONCEALMENT OF INCOME IS TO BE DETERMINED WITH REFERENCE TO THE RETURN OF INCOME TO BE FILED IN RESPONSE TO NOTICE U/S 153A O F THE ACT. ONCE RETURNED INCOME FILED U/S 153A IS ACCEPTED BY THE ASSESSING OFFICER IT CAN NEITHER BE A CASE OF CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE OF PARTICULARS OF SUCH INCOME. HENCE, THE ASSESSEES CASE IS SQUARELY COVERED BY T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE SAS PHARMACEUTICALS (SUPRA). HENCE, PENALTY U/S 271(1)(C) IS NOT EXIGIBLE. 28. THE NEXT CONTENTION OF LD AR OF THE ASSESSEE IS THAT IF THE PROVISIONS OF EXPLANATION 5 OF SECTION 271(1) IN RESPECT OF SEARC HES INITIATED ON OR BEFORE 1.6.2007 WERE SUFFICIENT ENOUGH FOR IMPOSITION OF PENALTY U/ S 271(1)(C), THERE WAS NO NEED FOR INSERTING OF EXPLANATION 5A AND SECTION 271AAA INTO THE STATUTE BY THE FINANCE ACT, 2007. ON THE CONTRARY LD CIT(DR) HAS CONTENDED THAT THE AMENDED PROVISIONS OF EXPLANATION 5 WILL APPLY TO THE FACT OF THE ASSESSE ES CASE. PROVISIONS OF EXPLANATION 5 OF SECTION 271(1) COMES INTO OPERATION IN THE CAS ES WHERE IN THE COURSE OF A SEARCH THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING, AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HI S INCOME (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE TH E DATE OF SEARCH BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE OR WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE, SUC H INCOME HAS NOT BEEN DECLARED THEREIN; OR ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 11 (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFT ER THE DATE OF THE SEARCH, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR BEFORE THE DATE OF SEARCH, HE SHALL , FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER SECTION 271(1)(C ) BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME UNLESS THE CASE FALLS IN EXCEPTIONS PROVIDED EITHER UNDER CLAUSE (1) OR CLAU SE (2) OF THE EXPLANATION 5. CLAUSE (1) COVERS THE CASES WHERE SUCH INCOME OR TRANSACTI ONS RESULTING IN SUCH INCOME IS/ARE RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY HIM FOR ANY SOURCE OF INCOME BEFORE THE DATE OF SEARCH OR SUCH INCOME IS OTHERWI SE DISCLOSED TO CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEA RCH. ON THE OTHER HAND CLAUSE (2) IS APPLICABLE WHERE THE ASSESSEE MAKES A STATEM ENT UNDER SECTION 132(4) THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED O UT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED IN HIS RETURN OF INCOME TO BE FURNIS HED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SEC. (1) OF SEC. 139 AND ALSO SPEC IFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. 29. WE ALSO FIND THAT THE FINANCE ACT, 2007 HAS INS ERTED WORDS SEARCH INITIATED UNDER SEC. 132 BEFORE THE FIRST DAY OF JUNE, 2007 IN EXPLANATION 5 OF SEC. 271(1) OF THE ACT. FURTHER EXPLANATION 5A WAS INSERTED IN THE STATUTE BY THE FINANCE ACT, 2007 IN RESPECT OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007. THUS EXPLANATION 5 WILL NOT BE APPLICABLE IN RESPECT OF A SEARCH INITIATED ON OR AFTER 1.6.2007. FURTHER THE WORDS SEARCH INITIATED UNDER SEC. 132 BEFORE THE FIRST DAY OF JUNE, 2007 HAVE BEEN INSERTED BY THE FINANCE AC T, 2007 W.E.F. 1.6.2007. IN OUR CONSIDERED OPINION THE AMENDED PROVISIONS OF EXPLAN ATION 5 WILL BE APPLICABLE ONLY FOR ASSESSMENT YEAR 2008-09 IF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING IS FOUND FROM THE POSSESSION OF THE SEARCH ED PERSON IN RESPECT WHOM SEARCHES ARE INITIATED ON OR AFTER 1.4.2007 TO 31.0 5.2007. 30. IN CASE OF A SEARCH INITIATED ON OR AFTER 1.6.2 007 AS PROVIDED IN EXPLANATION 5A, THE ASSESSEE WILL BE LIABLE FOR PENALTY/S 271(1)(C) BOTH IN RESPECT OF ASSETS AS WELL AS ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS. BUT NO SUCH PROVISION RELATING TO ENT RIES WAS IN EXISTENCE IN EXPLANATION 5 PRIOR TO INSERTION OF EXPLANATION 5A IN SECTION 2 71(1) OF THE ACT. HENCE THE SCHEME OF ASSESSMENT TILL INSERTION OF EXPLANATION 5A AND SECTION 271AAA BY THE FINANCE ACT, 2007 GAVE IMMUNITY TO THE ASSESSEES IN RESPECT OF UNDISCLOSED INCOME BASED ON ENTRIES RECORDED IN SEIZED MATERIAL. EXPLANATION 5A SUBSTITUTED BY THE FINANCE ACT, 2009 W.R.E.F. 1.6.2007 IS REPRODUCED AS UNDER: EXPLANATION 5A. WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSEE IS FO UND TO BE THE OWNER OF ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 12 (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PAR T) HIS INCOME FOR ANY PREVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE B OOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (W HOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THE REIN; OR (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FO R SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWIT HSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED O N OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PA RTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 31. FROM ABOVE DISCUSSION IT IS CLEAR THAT THE PROV ISIONS OF EXPLANATION 5 ARE APPLICABLE IN THE CASES WHERE DURING THE COURSE OF SEARCH INITIATED ON OR BEFORE 1.6.2007 ANY MONEY, BULLION, JEWELLERY OR OTHER VAL UABLE ARTICLE OR THING IS FOUND IN THE POSSESSION OR UNDER CONTROL OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE THE SEARCH WAS CONDUCTED ON 22.11.2006 AND CASH OF RS. 1,11,45,350/- WAS FOUND FROM THE POSSESSION OF THE ASSESSEE. THE ASSESSEE HAD U NDISCLOSED COMMISSION INCOME AS WELL AS PURCHASES AND SALES AS SEEN FROM THE STA TEMENT OF AFFAIRS MADE BY THE ASSESSEE BASED ON SEIZED MATERIAL. THE ASSESSEE HAD DRAWN CASH FLOW STATEMENT FOR THE ENTIRE PERIOD OF SIX YEARS IN ORDER TO DETERMIN E UNDISCLOSED INCOME BASED ON SEIZED MATERIAL FOR EACH OF SIX ASSESSMENT YEARS. E XPLANATION 5 TO SECTION 271(1) OF THE ACT CANNOT BE INVOKED IN ASSESSMENT YEAR 2004-0 5 MERELY ON PRESUMPTION THAT THE ASSESSEE MIGHT HAVE BEEN IN POSSESSION OF CASH THROUGHOUT THE PERIOD COVERED BY SEARCH ASSESSMENTS. THE INCOME OFFERED TO TAX U/ S 153A FOR ASSESSMENT YEAR 2004-05 IS BASED ON ENTRIES RECORDED IN THE SEIZED MATERIAL. UNLIKE PROVISIONS OF EXPLANATION 5A, THE PROVISIONS OF EXPLANATION 5 CAN NOT BE INVOKED IN ASSESSMENT YEAR 2004-05 IN RESPECT OF ENTRIES RECORDED IN SEIZ ED MATERIAL. THUS INVOKING OF EXPLANATION 5 IN ASSESSMENT YEAR 2004-05 IS BASED O N PRESUMPTIONS, SURMISES AND CONJECTURES. IT IS SETTLED LAW THAT SUSPICION HOWSO EVER STRONG, IT CANNOT TAKE PLACE OF ACTUAL EVIDENCE AND HENCE THE CONTENTION OF THE REV ENUE THAT ASSESSEE WAS IN POSSESSION OF CASH THROUGHOUT THE PERIOD OF SIX ASS ESSMENT YEARS HAS TO BE REJECTED. IN VIEW OF ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT EVEN THE AMENDED PROVISIONS OF EXPLANATION 5 CANNOT BE APPLI ED IN ASSESSMENT YEAR 2004- 05. CONSEQUENTLY PENALTY U/S 271(C) CANNOT BE IMPOS ED BY INVOKING EXPLANATION 5 OF THE ACT IN ASSESSMENT YEAR 2004-05 IN RESPECT OF CA SH FOUND IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. 32. NOW COMING TO THE DECISIONS RELIED BY LD CIT (D R) IN THE CASE OF AJIT B ZOTA (SUPRA) AND IN KIRIT DAHYABHAI PATEL (AHD)(SUPRA) W E FIND THAT THESE DECISIONS ARE DISTINGUISHABLE ON FACTS AND HENCE NOT APPLICABLE. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 13 33. IN VIEW OF ABOVE DISCUSSIONS IT IS HELD THAT PE NALTY U/S SECTION 271(1)(C) IS NOT IMPOSABLE ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE DISCUSSED IN DETAIL AS ABOVE. EXPLANATION 5 IS NOT APPLICABLE FOR THE REASONS MEN TIONED ABOVE IN OUR DECISION. THEREFORE, LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMI NG THE PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO DELETE THE PENALTY. 34. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED 7.1 THE TRIBUNAL IN THE CASE OF DIRECTOR OF THE AS SESSEE COMPANY (SHRI YOGESH PARIKH VS. ACIT (SUPRA) ) HAS FOLLOWED THE AFOREMENTIONED ORDER AND HAS HELD THAT PENALTY UNDER SECTION 271(1)(C) CANNO T BE IMPOSED ON THE INCOME WHICH WAS INCLUDED BY THE ASSESSEE IN THE R ETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. 7.2 IN VIEW OF THE ABOVE DISCUSSIONS, AS THERE IS N O DISPUTE REGARDING THE FACT THAT THE INCOME WHICH HAS BEEN MADE SUBJECT T O LEVY OF CONCEALMENT PENALTY WAS ALREADY INCORPORATED BY THE ASSESSEE IN THE RETURN FILED BY IT UNDER SECTION 153A OF THE ACT, RESPECTFULLY FOLLOWI NG THE AFOREMENTIONED DECISIONS OF THE CO-ORDINATE BENCHES, WE DELETE THE PENALTY AND THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ITA NO.290/M/09(A.Y. 2004-05): 8. GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 1,98,22,372 /- LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY O F RS.1,98,22,372/- LEVIED BY THE AO DESPITE THE FACT THAT THE ADDITIONAL INCO ME OF RS. 2,76,17,000/- WAS DECLARED IN THE STATEMENT U/S. 132(4) AND INCLU DED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S. 153A . 3. IN ANY EVENT LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS.1,98,22,372/- , WHICH IS HIGHLY EXCESSIVE AS THE AO LEVIED PENALT Y EQUIVALENT TO 200% OF THE TAX SOUGHT TO BE EVADED. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 14 8.1 IN THIS CASE IN THE RETURN OF INCOME FILED UND ER SECTION 153A, THE ASSESSEE DECLARED TOTAL INCOME OF RS. 3,26,03,090/- . FOLLOWING INCOMES WERE DECLARED UNDER SECTION 132(4) OF THE ACT, WHIC H WERE PART OF THE AFOREMENTIONED RETURNED INCOME. PARTICULARS AMOUNT S. BOGUS PURCHASES RS. 29,25,000/- PAYMENT TO GOVERNMENT DEPTTS. RS. 36,92,000 /- TOTAL RS. 66,17,000/- ============= APART FROM ABOVE A SUM OF RS.10,000/- WAS ADDED UND ER SECTION 14A OF THE ACT BY ESTIMATING EXPENSES INCURRED BY ASSESSEE FOR EARNING DIVIDEND INCOME OF RS.38,000/- ON WHICH CONCEALMENT PENALTY HAS ALS O BEEN INITIATED. THE DISALLOWANCE OF RS.1.00 LAC WAS ALSO MADE ON VEHICL E EXPENSES AND DEPRECIATION WHICH HAS NOT BEEN MADE SUBJECT FOR C ONCEALMENT PENALTY. FURTHER A SUM OF RS.2,10,00,000/- WAS ALSO ADDED AS UNEXPLAINED CREDIT AND SUCH SUM WAS REQUESTED TO BE ADDED THROUGH REVI SED COMPUTATION FILED DURING THE COURSE OF IMPUGNED ASSESSMENT PROCEEDING S. WHILE MAKING THE SAID ADDITION THE OBSERVATION OF THE AO ARE AS UNDE R: (1) UNEXPLAINED CREDIT: ASSESSEE IN REVISED COMPUTATION OF INCOME FILED DUR ING ASSESSMENT PROCEEDING DECLARED RS. 2.10 CR. ON ACCOUNT OF UNEX PLAINED CASH CREDIT. ON PERUSAL OF ANNEX.A3 PAGE 2, IT WAS FOUND ASSESSEE HAS PAID INTEREST OF RS.3,57,000/- ON ACCOUNT OF UNEXPLAINED CREDIT FOR THE QUARTER ENDING 31.3.2004. ALSO HE PAID RS. 90,000/- FOR THE MONTH OF MARCH 2004. HOWEVER, RATE OF INTEREST PAID ON THESE UNEXPLAINED CREDIT WAS CONFIRMED FROM THE ENTRY ON PAGE 9 OF ANNEXURE A-3. RATE OF INTEREST WAS WORKED OUT @1% PER MONTH. APPLYING THIS ATE OF 1% PER MONTH, THE TOTAL AMOUNT OF UNEXPLAINED CREDIT COMES TO RS. 2.09 CR. HENCE, RS. 2.10 CR IS ADDED AS UNEXPLAINED CREDIT I N THE INCOME OF THE ASSESSEE. THIS AMOUNT WAS NOT DECLARED BY THE ASSE SSEE IN THE ORIGINAL RETURN OF INCOME AND ALSO IN THE RETURN FILED IN RE SPONSE TO NOTICE ISSUED U/S.153A OF INCOME TAX ACT. ONLY DURING THE ASSESS MENT PROCEEDINGS, THE ASSESSEE FILED A REVISED COMPUTATION. THEY DECLARE D THE AMOUNT OF RS.2.10 CRORE IN THE REVISED COMPUTATION. PENALTY PROCEEDI NGS U/S. 271(1)(C) READ WITH EXPLANATION 5 IS INITIATED AGAINST THE ASSESSE E. THERE IS NO STATEMENT ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 15 U/S. 132(4) OF INCOME TAX ACT WHEREIN THIS AMOUNT I S DECLARED FOR A.Y 2004-- 05. 8.2 SO FAR AS IT RELATES TO PENALTY LEVIED ON ACCOU NT OF BOGUS PURCHASES AND PAYMENT TO GOVERNMENT DEPARTMENTS AS AS THEY WERE DISCLOSED IN THE RETURN OF INCOME FILED UNDER SECTION 153A OF THE A CT, THE ISSUE IS COVERED BY THE DECISION RENDERED BY US IN RESPECT OF ASSESSMEN T YEARS 2001-02,2002- 03 & 2003-04. THEREFORE, CONCEALMENT PENALTY IS N OT LEVIABLE IN RESPECT OF THESE ADDITIONS. 8.3 NOW COMING TO THE ISSUE OF LEVIABLITY OR OTHER WISE OF CONCEALMENT PENALTY IN RESPECT OF ADDITION OF RS. 2,10,00,000 /-, IT IS THE CONTENTION OF THE ASSESSEE THAT PRINCIPAL AMOUNT IN RESPECT OF WHICH INTEREST RELATES WAS TO BE BIFURCATED IN THREE YEARS I.E. 2004-05, 2005- 06 AND 2006-07. THEREFORE, THE ASSESSEE DISCLOSED THE PRINCIPAL AMO UNT IN THESE THREE YEARS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH W ERE SIMULTANEOUSLY CARRIED OUT, THE DISCLOSED INCOME IN THE RETURN OF INCOME FOR THESE THREE YEARS WERE ONLY SHIFTED TO ONE ANOTHER AS PER THE VIEW TAKEN BY THE DEPARTMENT. BUT IF AGGREGATE OF INCOME DISCLOSE D IN THESE THREE YEARS IN THE RETURNS FILED UNDER SECTION 153A IS TAKEN INT O ACCOUNT TOGETHER THEN THERE IS NO VARIATION IN THE DISCLOSED INCOME IN T HE RETURNS AND THE ASSESSMENTS MADE BY THE AO IN RESPECT OF THESE THRE E YEARS. THEREFORE, IT IS THE CASE OF THE ASSESSEE THAT THERE IS NO CONCEALME NT AND IT IS ONLY A CASE WHERE RETURNED INCOME OF BLOCK PERIOD HAS BEEN SHIFTED FROM ONE YEAR TO ANOTHER. TO DEMONSTRATE A CHART HAS BEEN FILED BY LD. A.R WHEREIN IT IS DESCRIBED THAT THERE IS NO DIFFERENCE IN THE INCOME DECLARED IN THE RETURNS FILED UNDER SECTION 153A AND SHOWN IN THE REVISE D COMPUTATION SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RESP ECT OF THESE THREE YEARS. THAT CHART IS BEING REPRODUCED HEREIN BELOW: ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 16 COMPARATIVE STATEMENT SHOWING THE INCOME DECLARED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A AND REVISED C OMPUTATION OF TOTAL INCOME FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS: PARTICULARS A.Y 04-05 AY 05-06 AY 06-07 TOTAL TOTAL INCOME DECLARED IN THE RETURN FILED U/S. 153A 32,603,090 56,024,420 135,055,020 223,682,530 TOTAL INCOME AS PER REVISED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS 53,570,090 52,818,560 117,293,880 223,682,530 DIFFERENCE 20,967,000 -3,205,860 -17,761,140 0 8.4 IN THE AFOREMENTIONED CHART THE AGGREGATE OF I NCOME DECLARED FOR THESE THREE YEARS UNDER SECTION 153A IS A SUM OF RS .22,36,82,530/- AND AS PER REVISED COMPUTATION ALSO THE INCOME REMAIN THE SAME. THE FACT THAT REVISED CALCULATIONS WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF HAS BEEN RECOGNIZED BY AO AND THE RELEVANT O BSERVATION OF THE AO HAVE ALREADY BEEN REPRODUCED ABOVE. THUS IT IS THE CASE OF THE ASSESSEE THAT AMOUNT OF RS.2,10,00,000/- IS PART AND PARCEL OF TH E INCOME DECLARED IN THE RETURNS OF INCOME FILED UNDER SECTION 153A OF THE A CT. THEREFORE IT WAS PLEADED BY LD. A.R THAT NO CONCEALMENT PENALTY I S WARRANTED IN RESPECT OF ADDITION OF RS.2,10,00,000/- AS THIS INCOME WAS PART OF THE INCOME DISCLOSED IN THE RETURNS FILED IN RESPONSE TO NOTI CE UNDER SECTION 153A RELATING TO THE BLOCK PERIOD AND IT IS ONLY A CASE OF SHIFTING THE INCOME FROM ONE YEAR TO ANOTHER. LD. A.R HAS ALSO FILED BEFORE US COPIES OF THE REVISED COMPUTATION FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07, FROM WHERE THE FIGURES IN THE AFOREMENTIONED CHART WERE VERIFIED AND IT WAS FOUND THAT THE FIGURES MENTIONED IN THE CHART ARE CORRECT . 9. ON THE OTHER HAND, LD. D.R SUBMITTED THAT A SUM OF RS.2,10,00,000/- IS NOT THE PART OF THE RETURN FILED UNDER SECTION 153A FOR A.Y 2004-05, THEREFORE, TO ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 17 THAT EXTENT THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF ITS INCOME IN RESPEPCT OF A.Y 2004-05AND PENALTY SHOULD BE CONFIR MED THEREON. 10. WE HAVE HEARD BOTH THE PARTIES AND THEIR SUBMIS SIONS HAVE CAREFULLY BEEN CONSIDERED. THE RELEVANT OBSERVATIONS OF THE AO WHILE ASSESSING THIS INCOME FOR A.Y 2004-05 HAVE ALREADY BEEN REPRODU CED. THE AO HAS TAKEN A VIEW THAT THE INTEREST EARNED BY THE ASSESSEE DUR ING THE YEAR REPRESENTED THE PRINCIPAL AMOUNT WHICH WAS DECLARED IN ANOTHER YEAR BY THE ASSESSEE. SO HE ADDED THE SAID PRINCIPAL DURING THE YEAR UNDE R CONSIDERATION. IT CAN BE SEEN FROM THE FACTS OF ASSESSMENT YEAR 2005-06 THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE UNDER SECTION 153A OF THE ACT AT AN INCOME OF RS.5,60,24,420/- AND DESPITE THE VARIOUS ADDITIONS MADE THE NET INCOME HAS BEEN ASSESSED BY THE AO AT RS.5,29,28,560/-. S IMILARLY FOR A.Y 2006-07 RETURN OF INCOME WAS FILED AT RS. 13,50,55,021/- AN D IT HAS BEEN ASSESSED AT RS.12,98,02,570/-. FOR ASSESSMENT YEAR 2006-07 THE AO HAS ALSO REDUCED A SUM OF RS.3,68,75,000/- IN THE COMPUTATION OF ASSES SABLE INCOME ON ACCOUNT OF SURRENDER OF PREVIOUS YEARS INCLUDED IN THE INCOME FOR A.Y 2006-07. THE COMPUTATION OF ASSESSED INCOME IN TH E ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 IS REPRODUCED BELOW: NET PROFIT AS PER P&L A/C. RS.35,88,37,163/ - LESS: INCOME DECLARED U/S. 132(4) IN ORIGINAL RETURN R S.3,54,00,000/- RS.32,34,37,163/- ADD: 1) ITEM CONSIDERED SEPARATELY AS PER COMPUTATION RS.7,3 6,76,605/- RS.39,71,13,768/- 2) AS DISCUSSED IN PARA 1 RS. 2 5,50,000/- AS DISCUSSED IN PARA 2 RS. 37,19,372/- AS DISCUSSED IN PARA 3 RS. 29,78,170/- AS DISCUSSED IN PARA 4 RS. 4,21,104/- AS DISCUSSED IN PARA 5 RS. 79,70,191/- AS DISCUSSED IN PARA 6 RS. 1,9 7,15,221/- AS DISCUSSED IN PARA 7 RS. 1,2 2,67,545/- AS DISCUSSED IN PARA 8 RS. 1,41,171/- AS DISCUSSED IN PARA 9 RS. 1,00,000/- RS. 4,98,62,774/- ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 18 RS. 44,69,76,54 2/- 3) LESS: ITEM ALLOWED/CONSIDERED (I) SEPARATELY FROM POINT 1 TO 8 RS .26,05,22,397/- (II)AS DISCUSSED IN PARA 7 RS. 1, 97,15,221/- (III)SURRENDER OF PREVIOUS YEARS INCLUDED IN THIS YEAR RS. 3,68,75,000/- RS. 31,71,12,618/- RS. 12,98,63,9 24/- LESS : DEDUCTION UNDER CHAPTER VIA RS. 61,350/- -------------- --------- NET TAXABLE INCOME RS. 12,98,02,574/- NET TAXABLE INCOME ROUNDED OFF TO RS. 12,98,02,570/- ============== == 10.1 FROM THE ABOVE CALCULATION IT IS CLEAR THAT A SUBSTANTIAL AMOUNT OF RS. 3,68,75,000/- HAS BEEN REDUCED FROM THE RETURNE D INCOME OF ACCOUNT OF SURRENDER OF PREVIOUS YEARS INCLUDED IN A.Y 2006-07 . THEREFORE, IT IS A SIMPLE CASE OF SHIFTING OF INCOME OF THE BLOCK PERI OD FROM ONE YEAR TO ANOTHER. OTHERWISE, IF RETURNED INCOME UNDER SECTI ON 153A FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 ARE CONSIDERED T OGETHER THEN THERE IS NO DIFFERENCE WHATSOEVER IN THE RETURNED INCOME AND REVISED COMPUTATION SUBMITTED BY THE ASSESSEE WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE AO WHILE ASSESSING THE INCOME FOR THESE YEARS. THI S POSITION HAS BEEN MADE CLEAR IN THE CHART REPRODUCED IN PARA 8.2 OF THIS O RDER. THEREFORE, SIMPLE SHIFTING OF INCOME FROM ONE YEAR TO OTHER YEAR OF T HE SAME BLOCK PERIOD CANNOT BE TERMED AS CONCEALMENT OF INCOME BY THE ASSESSEE. THEREFORE, CONSIDERING THE FACTS OF THE PRESENT CASE, WE ARE O F THE OPINION THAT CONCEALMENT PENALTY CANNOT BE LEVIED WITH RESPEC T TO THE AMOUNT OF RS.2,10,00,000/-. 11. APROPOS CONCEALMENT PENALTY LEVIED IN RESPECT O F THE ADDITION OF RS.10,000/- MADE BY THE AO UNDER SECTION 14A OF THE ACT ON ESTIMATE BASIS FOR THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNI NG EXEMPTED DIVIDEND ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 19 INCOME OF RS.38,000/-, WE FIND THAT THIS ADDITION I S BASED ONLY ON MERE ESTIMATE. NO MATERIAL HAS BEEN BROUGHT ON RECORD T O SHOW THAT THERE WAS ANY CONCEALMENT ON THE PART OF THE ASSESSEE. MOREO VER, THE AMOUNT IS VERY SMALL AND IT CANNOT BE SAID THAT ASSESSEE ACTED DIS HONESTLY IN MAKING SUO- MOTO DISALLOWANCE. THE FACT OF EARNING EXEMPTED DIVIDEND WAS DISCLOSED. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND SMALLNESS OF AMOUNT, WE DO NOT SEE JUSTIFICATION IN THE LEV Y OF CONCEALMENT PENALTY ON THIS ADDITION. IT CAN BE SEEN THAT LARGE AMOUNT O F INCOME HAS BEEN RETURNED BY THE ASSESSEE AND THE INCOME OF THE YEAR ITSELF WOULD BE SUFFICIENT TO MAKE INVESTMENT IN THE SHARES ON WHICH THE ASSE SSEE HAS EARNED DIVIDEND. IT IS ALSO NOT THE CASE OF AO THAT AN Y PARTICULAR AMOUNT OF INTEREST OR ANY OTHER EXPENDITURE IS INCURRED BY TH E ASSESSEE FOR EARNING SUCH DIVIDEND. IN THE ABSENCE OF ALL THESE FACTS AND ADDITION BEING ON ESTIMATE BASIS, WE SEE NO JUSTIFICATION IN LEVY O F CONCEALMENT PENALTY WITH REGARD TO THIS ADDITION. 11.1 IN VIEW OF ABOVE DISCUSSION CONCEALMENT PENAL TY LEVIED FOR THIS YEAR IS DELETED. ITA NO.291/MUM/2009. A.Y.2005-06: 12. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN TS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF R S. 92,12,079/- LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 92,12,079/- LEVIED BY THE AO DESPITE THE FACT THAT THE ADDITION AL INCOME OF RS.2,57,94,131/- WAS DECLARED IN THE STATEMENT U/S . 132(4) AND INCLUDED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S. 153A. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 20 12.1 IN THIS YEAR PENALTY HAS BEEN LEVIED WITH RESP ECT TO THE FOLLOWING ADDITIONS. I) UNEXPLAINED CREDITS/RECEIPTS RS. 23,00,000/- II) BOGUS PURCHASES RS.1,94,95,301/- III) PAYMENT TO GOVT. DEPTS. RS. 32,61,842/- III)EXPENSES ATTRIBUTABLE TO DIVIDEND INCOME RS. 10,000/- TOTAL : RS.2,58,04,143/- ============== ALL THESE ADDITIONS EXCEPT THE ADDITION OF RS.10,00 0/- U/S.14A WERE DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME F ILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. THEREFORE, THE ISSU E WILL BE COVERED BY THE DECISION TAKEN BY US IN RESPECT OF ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04. SIMILARLY PENALTY WITH REGARD TO ADDIT ION OF RS. 10,000/- ON ACCOUNT OF EXPENSES ATTRIBUTABLE TO DIVIDEND INCOME IS ALSO COVERED BY OUR DECISION IN RESPECT OF ASSESSMENT YEAR 2004-05 WHER E WE HAVE HELD THAT NO PENALTY IS LEVIABLE IN RESPECT OF SUCH ADDITION OF RS.10,000/-, THEREFORE, PENALTY LEVIED IN RESPECT OF A.Y 2005-06 IS DELETED . ITA NO.292/MUM/2009(A.Y 2006-07): 13. GROUNDS RAISED IN THIS APPEAL READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN TS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,22,67,545/- MADE BY THE AO ON THE BASIS OF SEIZED LOOSE PER PAG E NO.6 OF ANNEXURE A-1. 2. IN ANY EVENT THE LD. CIT(A) ERRED IN NOT ALLOWI NG THE EXPENDITURE OF RS.66,38,475/- RECORDED IN THE SAME SEIZED MATERIAL ON THE BASIS OF WHICH THE ADDITION OF RS.1,22,67,545/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). THE ONLY GROUND PRESSED BY LD.A.R IN THIS APPEAL IS WITH REGARD TO GROUND NO.2, WHICH CHALLENGED THE FINDING OF LD. CIT(A) WH EREBY THE ASSESSEE HAS ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 21 NOT BEEN ALLOWED WITH EXPENDITURE OF RS.66,38,475/ - AGAINST ADDITION OF RS. 1,22,67,545/- MADE BY THE AO AND CONFIRMED BY LD. C IT(A). 13.1 DURING THE COURSE OF SEARCH, A DOCUMENT CONTAI NING FOLLOWING ENTRIES WAS SEIZED : 46000 CASH 05.09.05 9000 D.M.SCIENIFIC 8000 ORCHID ENTERPRISES 5000 CHOKSI LABORATORIES 7000 EASTERN REMEDIES 2500 MICRO FINE 5000 S.J.P 9250 PHARMA CHEM 5000 N.K.P 12000 MULTI CHEM. 4000 D.K 6000 PRECTITECH LAB 6000 ENCUBE 5000 EXCISE (JUN, JUL, AUG) 15000 ANGDIA (AHD) 150 STANDARD ROAD 2000 KRISHNA FINECHEM 11 GANESH MANDAL 7000 ABHIJEET 200 MAHESH KAVAL 17675.45 C. SALES 2.4 TAVI (J.P) 3.5 NASTA 160 SHANTI SHIPPING AGENCY 200 REAL CALLIBRATION 2400 PADMAVATI CHEMICAL 1200 J.M.SHARAFF 3300 MEHUL BHAI 5 PETROL 2.85 ZEROX 10000 VAPI 122675.45 66384.75 66384.75 56290.70 AS ONE OF THE ENTRIES IN THE AFOREMENTIONED SEIZED DOCUMENT WAS IN THE NAME OF ONE SHRI MAHESH KAVAL BEING ASSOCIATE DIREC TOR FINANCE OF THE ASSESSEE COMPANY, A STATEMENT WAS RECORDED UNDER SE CTION 132(4) OF THE ACT AND FROM HIS STATEMENT IT WAS FOUND THAT THE AMOUNT 200 WRITTEN IN THE AFOREMENTIONED DOCUMENT REPRESENTED RS. 20,000/-, T HEREFORE, THE AO HELD THAT THE FIGURES WRITTEN IN THE AFOREMENTIONED DOC UMENTS WERE TO BE INCREASED BY TWO ZEROS AT THE END AND IN THIS MANNE R A SUM OF RS.1,22,675.45 WAS INTERPRETED TO BE A SUM OF RS. 1 ,22,67,545/- AND THE ADDITION WAS ACCORDINGLY MADE. LD. AO DID NOT ACCE PT THE SUBMISSIONS OF ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 22 THE ASSESSEE THAT AMOUNT OF RS.1,22,675 WAS TO BE T AKEN IN PLACE OF RS.1,22,67,545/- PROPOSED BY THE AO. 13.2 BEFORE LD. CIT(A), THE SUBMISSIONS MADE BEFORE AO WERE REITERATED AND IT WAS SUBMITTED THAT THE DOCUMENT RELYING UPON WHICH ADDITION HAS BEEN MADE SHOULD BE CONSIDERED AS A WHOLE AND SET O FF OF DEBIT SIDE OF THE DOCUMENT SHOULD BE GIVEN. THE ASSESSEE ALSO RELIED UPON CERTAIN DECISIONS TO CONTENT THAT AFTER GIVING SET OFF TO THE DEBIT S IDE WHATEVER ADDITION REMAINS OF RS.56,29,070/- SHOULD BE MADE AND AGAINST THAT A LSO NO ADDITION SHOULD BE MADE AS THE SAID ADDITION WILL BE COVERED BY AN AMOUNT OF RS.79,70,191/- ADDITIONALLY DECLARED IN THE RETURN FILED IN RESPON SE TO NOTICE UNDER SECTION 153A OF THE ACT TO COVER ERRORS AND OMISSIONS. TH US THE MAIN CONTENTION OF THE ASSESSEE BEFORE LD. CIT(A) WAS THAT ADDITION OF THE ENTIRE CREDIT SIDE OF THE SEIZED DOCUMENT SHOULD NOT BE MADE AND SET OF F OF DEBIT ENTRIES STATED THEREIN SHOULD BE GRANTED. IT WAS FURTHER SUBMITTED THAT BALANCE AMOUNT OF RS.56,29,070/- SHOULD BE ADJUSTED AGAINST THE ADDI TIONAL DISCLOSURE OF RS.79,70,191/- MADE IN THE RETURN FILED IN RESPONS E TO NOTICE UNDER SECTION 153A OF THE ACT. THE ASSESSEE RELIED UPON THE FOLL OWING DECISIONS: 1. SMT. USHA TRIPATHI VS. ACIT ITAT REPORTED IN 66 TTJ 508 (ALL) 2. ELLITE DEVELOPERS VS. DCIT REPORTED IN 68 TTJ 6 16 (NAG) 3. DHANVARSH BUILDERS & DEVELOPERS PVT. LTD. VS. D CIT REPORED 289 ITR (AT) 50 (PUNE) 4. GLASS LINES EQUIPMENTS CO. LTD. VS. CIT REPORTE D IN 253 ITR 454 (GUJ) 5. SMT. BOMMANA SWARNA REKHA VS. ACIT REPORTED IN 94 TTJ 885 (VISAK) 6. OM PRAKASH SURESH KUMAR VS. ACIT REPORTED IN 91 TTJ 193 (DEL) 7. MANGE RAM MITTAL VS. ACIT REPORTED IN 289 ITR ( AT) 112 (DEL) (SB) 13.3 LD. CIT(A) HAS REJECTED THE FIRST CONTENTION O F THE ASSESSEE ON THE GROUND THAT UNDER SECTION 37 OF THE ACT, IN ORDER T O CLAIM ANY DEDUCTION FOR EXPENSE , THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SAID PAYMENT REPRESENTS EXPENSES WHOLLY AND EXCLUSIVELY INCURR ED FOR THE PURPOSE OF ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 23 BUSINESS; THERE ARE CERTAIN SUBSTANTIAL PAYMENTS MADE BY THE ASSESSEE AS DESCRIBED IN THE DEBIT SIDE OF THE SEIZED DOCUMENTS TO THE CONCERNS WHO ARE KNOWN PARTIES TO THE ASSESSEE AND IN ABSEN CE OF ANY COMMUNICATION HAVING BEEN SHOWN THAT THOSE TRANSACTION WERE FOR B USINESS PURPOSE, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. THUS, LD . CIT(A) HAS HELD THAT AO WAS RIGHT IN MAKING ADDITION OF RS. 1,22,67,545/ - REPRESENTING THE ENTIRE CREDIT SIDE OF THE SEIZED DOCUMENT. HOWEVER, LD. C IT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT SET OFF IS REQUIRED TO BE GRANTED IN RESPECT OF ADDITIONAL INCOME DECLARED BY THE ASSESSEE FOR A SU M OF RS. 79,70,191/- AND HE HAS DIRECTED THE AO TO GIVE SET OFF OF THE SAID AMOUNT AGAINST THE ADDITION OF RS.1,,22,67,545/-. THUS THE ADDITION WHICH HAS BEEN UPHELD IS AN AMOUNT OF RS.42,97,354/- WHICH IS THE DIFFERE NCE BETWEEN THE TWO AMOUNTS OF RS. 1,22,67,545/- AND RS. 79,70,191/-. 14. AFTER NARRATING THE FACTS LD. A.R REITERATED TH E SUBMISSIONS MADE BY THE ASSESSEE BEFORE LD. CIT(A). RELYING UPON THE DECISIONS CITED BEFORE LD. CIT(A), IT WAS PLEADED BY LD. A.R THAT ASSESSEE IS ENTITLED TO GET SET OFF OF DEBIT SIDE OF THE SEIZED DOCUMENTS. HE PLEADED THA T IF SET OFF IS GRANTED THEN NO ADDITION IS REQUIRED TO BE MADE AS THE BALANCE A MOUNT IS SUFFICIENTLY COVERED BY THE ADDITIONAL INCOME DECLARED BY THE AS SESSEE OF A SUM OF RS.79,70,191/- IN THE RETURN FILED IN RESPONSE TO N OTICE UNDER SECTION 153A OF THE ACT. HE SUBMITTED THAT THE SET OFF OF THE S AID AMOUNT AGAINST THE ADDITION MADE IN RESPECT OF SEIZED DOCUMENTS HAS BE EN ACCEPTED BY THE REVENUE AS NO APPEAL HAS BEEN FILED AGAINST THE DE CISION OF LD. CIT(A) VIDE WHICH SUCH SET OFF HAS BEEN GRANTED. THUS IT WAS P LEADED BY LD. A.R THAT THE QUANTUM APPEAL OF THE ASSESSEE IS REQUIRED TO B E ALLOWED. 15. ON THE OTHER HAND, IT WAS VEHEMENTLY PLEADED BY LD. D.R THAT LD. CIT(A) HAS RIGHTLY UPHELD THE ADDITION OF RS.1,22,6 7,545/-. HE SUBMITTED THAT TO CLAIM AN EXPENDITURE, THE ASSESSEE IS REQUI RED TO PROVE THAT THE SAID ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 24 EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. THE ASSESSEE DID NOT EXPLAIN THE NATURE OF THE AMOUNT WHICH HAS BEEN DEBITED IN THE SAID ACCOUNT. THEREFORE, HE PL EADED THAT LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO. HE FURTHER SU BMITTED THAT IF EXPENSES AS CLAIMED BY THE ASSESSEE ARE GIVEN SET OFF THEN THE ASSESSABLE INCOME OF THE ASSESSEE WILL COME BELOW RETURNED AMOUNT, THEREFORE , THE SAID CONTENTION SHOULD NOT BE ACCEPTED. HE SUBMITTED THAT LD. C IT(A) WAS REASONABLE ENOUGH IN GRANTING THE SET OFF OF AMOUNT OF RS.79,7 0,191/- AGAINST THE INCOME OF RS.1,22,67,545/- . HE SUBMITTED THAT THE ORDER OF LD. CIT(A) ON THIS ISSUE SHOULD BE UPHELD AND THE APPEAL FILED B Y THE ASSESSEE SHOULD BE DISMISSED. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ENTRIES IN THE SEI ZED DOCUMENTS HAVE ALREADY BEEN REPRODUCED. IT IS NOT THE CASE OF THE ASSESSE E THAT THE SEIZED DOCUMENTS DO NOT BELONG TO IT. IT IS ALSO CLEAR TH AT THE ENTRIES STATED THEREIN TO BE INCREASED BY TWO ZEROS AS THE SAME IS CLEAR F ROM THE STATEMENT OF SHRI MAHESH KAVAL WHO IS ASSOCIATE DIRECTOR FINANCE OF THE ASSESSEE COMPANY, WHO HAS ADMITTED THAT THE AMOUNT 200 WRITTEN THEREI N IS A SUM OF RS.20,000/-. AS THE DOCUMENTS HAS BEEN TOTALED THE SAME WILL SHOW THAT ALL THE ENTRIES STATED THEREIN ARE TO BE SIMILARLY INTE RPRETED. NOW THE CLAIM OF THE ASSESSEE IS THAT SET OFF OF THE DEBIT ENTRIES S HOULD BE GRANTED TO THE ASSESSEE AGAINST CREDIT SIDE. THIS CONTENTION OF T HE ASSESSEE HAS BEEN REJECTED BY THE LD. CIT(A) ON THE GROUND THAT SUCH SET OFF CANNOT BE GRANTED UNLESS ASSESSEE PROVES THAT THE DEBIT ENTRIES STATE D IN THE DOCUMENTS ARE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOS E OF BUSINESS. THE DOCUMENTS BEING BELONGING TO THE ASSESSEE, THE ASSE SSEE IS IN A BETTER POSITION TO EXPLAIN THE SAME AND ASSESSEE CHOOSES NOT TO EXPLAIN THE SAME, THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE ACCE PTED ON THE FACE OF IT. THE ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 25 SET OFF CAN BE GRANTED ONLY IF ASSESSEE IS ABLE TO EXPLAIN THAT THE AMOUNT SHOWN ON THE DEBIT SIDE ARE THE EXPENDITURE EITHER INCURRED FOR THE PURPOSE OF BUSINESS OR HAVE BEEN INCURRED TO EARN THE AMOUN T WHICH IS SHOWN IN THE CREDIT SIDE. HERE IT MAY BE THE CONTENTION OF THE ASSESSEE THAT AMOUNT HAS COME TO THE CREDIT FROM VARIOUS ENTITIES AND PAID ALSO BY WAY OF VARIOUS ENTRIES TO VARIOUS PARTIES, THEREFORE, AGGREGATE OF THE CREDIT ENTRIES ALONE CANNOT BE TAKEN AS INCOME AS THE SAME SHOULD CONSI DERED TO BE CREDITS BY EARLIER DEBIT ENTRIES. HOWEVER, IN ABSENCE OF D ATES OF THE RECEIPTS AND PAYMENTS SUCH CLAIM OF THE ASSESSEE CANNOT BE ACCEP TED. SUCH CLAIM CAN BE TAKEN INTO ACCOUNT ONLY WHEN THE DATES OF THE CREDI T AND DEBIT ENTRIES ARE KNOWN. WHAT IS KNOWN IN THE PRESENT CASE IS OPENIN G BALANCE OF RS.46.00 LACS AS ON 5/9/2005 AND THE DATES OF OTHER ENTRIES ARE NOT KNOWN. IT CAN ALSO NOT BEEN SAID WITH CERTAINTY THAT ALL ENTRIES ON THE SEIZED DOCUMENTS PERTAIN TO ONE DATE BECAUSE THE SUM OF 200 ADMITT ED BY THE ASSOCIATE DIRECTOR FINANCE OF THE ASSESSEE COMPANY TO BE A SU M OF RS.20,000/- WAS PERTAINING TO JULY 2005. THEREFORE, ALL THE ENTRIE S CANNOT BE CONSIDERED TO BE OF 5/9/2005 AND THEY CAN BE PREDATED OR POST D ATED. HOWEVER, FOR THE PURPOSE OF CLAIMING THE ENTIRE DEBIT SIDE AS AN EXP ENDITURE, THE ONUS WILL BE ON THE ASSESSEE TO PROVE THAT THE AMOUNT STANDING ON THE DEBIT SIDE WAS IN THE NATURE OF EXPENDITURE. SIMILAR PROPOSITION WIL L NOT BE APPLICABLE TO THE CREDIT SIDE BECAUSE IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THAT WHAT IS THE NATURE OF CREDIT ENTRIES IF ASSESSEE PLEADS THAT T HE CREDIT SIDE ALSO CANNOT BEEN ASSESSED AS INCOME AS IT DOES NOT HAVE THE CHA RACTER OF INCOME. 16.1 SO FAR AS IT RELATES TO THE CASE LAW RELIED UPON BY THE ASSESSEE, IT MAY BE MENTIONED THAT IN THE CASE OF SMT. USHA TRI PATHI VS. ACIT (SUPRA) A DIARY WAS SEIZED IN WHICH GROSS RECEIPTS WERE REC ORDED AT RS.20,73,974/-. SIMILAR EXPENSES WERE NOTED IN THE DIARY AMOUNTING TO RS. 2,73,283/-. THESE EXPENSES WERE CLAIMED BY THE ASSESSEE TO BE GIVEN AS INCENTIVE / ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 26 COMMISSION TO THE MIDDLE MEN. THOSE PERSONS WERE EXAMINED BY THE AO AND THEY HAD ADMITTED IN THEIR STATEMENT THAT THEY HAD RECEIVED THE SAID AMOUNT FOR THE PURPOSE OF PAYING THE SAME AS INCENT IVE TO VARIOUS MIDDLE MEN. THEREFORE, IN THE SAID CASE THE ASSESSEE WAS ABLE TO PLACE ON RECORD AN EVIDENCE ACCORDING TO WHICH THE AMOUNT WAS SPENT FO R THE PURPOSE OF BUSINESS. 16.2 IN THE CASE OF ELITE DEVELOPERS VS. DCIT (SU PRA), THE FACTS IN THAT CASE ARE DIFFERENT AS IN THE SAID CASE AO ESTIMATED A S UM OF RS.40.00 LACS AS ON- MONEY ON SALE OF FLATS RELYING ON THE STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM AND SOME SEIZED DOCUMENTS. PARTNER HAD ADMITT ED AN UNDISCLOSED INCOME OF RS.40.00 LACS IN RESPECT OF WHOLE GROUP A ND NOT IN RESPECT OF THE ASSESSEE FIRM ALONE. ON THESE FACTS IT WAS OBSERVE D THAT SINCE AO HAS NOT EXAMINED THE PARTIES WHO WERE BELIEVED TO HAVE PAID ON-MONEY AND HAS NOT BROUGHT ANY COGENT MATERIAL TO CORROBORATE SUCH ALL EGATION, THEREFORE, THE CONCLUSION DRAWN BY THE AO WAS BASED ON SURMISES AN D CONJECTURES. THE FACTS IN THE PRESENT CASE ARE ENTIRELY DIFFERENT. HERE IT IS NOT THE CASE OF THE ASSESSEE THAT THE PARTIES MENTIONED IN THE SEIZED D OCUMENTS ARE NOT KNOWN TO THE ASSESSEE. 16.3 IN THE CASE OF DHANVARSHA BUILDERS & DEVELOPER S PVT. LTD. (SUPRA) THOUGH THE PROPOSITION HAS BEEN ACCEPTED THAT THE D OCUMENTS SHOULD READ AS A WHOLE IF IT HAS TO BE RELIED UPON, BUT AT THE SAME TIME IN THE SAID CASE IT WAS OBSERVED THAT EXPENDITURE BEING CLAIMED BY THE ASSESSEE ON THE BASIS OF SEIZED DOCUMENTS WAS AGAINST THE NAME OF ONE SHRI RAJENDER, WHO WAS CARRYING ON THE WORK OF CONTRACTOR FOR THE ASSESSEE AND HIS BILL WAS ALSO FOUND IN THE SEIZED DOCUMENTS ON THE BASIS OF WHIC H THE TRIBUNAL HAD FOUND THAT ASSESSEE IS ENTITLED TO GET SET OFF OF THE EXP ENDITURE STATED IN THE ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 27 DOCUMENTS AGAINST THE CREDIT WHICH WAS TREATED AS I NCOME. THEREFORE, THE FACTS OF THE SAID CASE ARE DISTINGUISHABLE. 16.4 IN THE CASE OF GLASSLINE EQUIPMENTS COMPANY LT D. VS. CIT (SUPRA), SIMILAR PROPOSITION HAS BEEN ACCEPTED BY HONBLE GU JARAT HIGH COURT THAT IT IS A WELL SETTLED CANON OF INTERPRETATION THAT DOCU MENTS HAS TO BE READ AS A WHOLE; IT IS NOT PERMISSIBLE TO ACCEPT A PART AND I GNORE THE REST OF THE DOCUMENTS. BUT THE SAID DECISION WAS RENDERED IN A DIFFERENT CONTEXT AND WILL HAVE NO APPLICATION ON THE FACTS OF THE PRESEN T CASE. AN AFFIDAVIT SUBMITTED BY THE ASSESSEE WAS RELIED UPON BY LD. CI T(A) FOR DISALLOWING A SUM OF RS.38,349/- AND OTHER PART OF THE AFFIDAVIT CLAIMING THE EXTRA DEPRECIATION WAS IGNORED, THEREFORE, IT WAS HELD TH AT A DOCUMENT HAS TO BE READ A WHOLE AND IT IS NOT PERMISSIBLE TO ACCEPT A PART AND IGNORE REST OF THE DOCUMENT. HOWEVER, IN THE PRESENT CASE IT HAS ALRE ADY BEEN HELD THAT IF ASSESSEE WANTS TO CLAIM AN EXPENDITURE THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE AMOUNT ON THE DEBIT SIDE IS IN THE NATURE OF EXPENDITURE. 16.5 IN THE CASE OF SMT. BOMMANA SWARNA REKHA VS. ACIT (SUPRA), LOOSE PAPER DID NOT HAVE ANY NAME OF THE ASSESSEE OR HER HUSBAND. THE AO TREATED THE SAID PAPER AS BELONGING TO THE ASSESSEE . THE SAID PAPER WAS NOT FOUND FROM THE POSSESSION OF THE ASSESSEE BUT WAS F OUND FROM THE BUSINESS PREMISES OF THE HUSBAND OF THE ASSESSEE. THE TOTAL OF THE LOOSE PAPER WAS A SUM OF RS.42,72,081/- OUT OF WHICH A SUM OF RS.25,5 3,818/- WAS TREATED BY THE AO TO BE RELATING TO THE TRANSACTION OF THE HUS BAND OF THE ASSESSEE. ON THESE FACTS IT WAS HELD THAT THE LOOSE PAPER BOUND AND SEIZED WAS TO BE READ AS A WHOLE AND IT CANNOT BE READ AS PARTLY BELONGIN G TO THE HUSBAND OF THE ASSESSEE. THEREFORE, THE FACTS OF THE SAID CASE AR E ENTIRELY DIFFERENT. 16.6 IN THE CASE OF OM PRAKASH SURESH KUMAR VS. ACIT (SUPRA), THE FACTS ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE ASSESS EES CASE. THE PROPOSITION ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 28 LAID DOWN IN THE SAID CASE IS THAT ENTIRE SEIZED MA TERIAL WAS TO BE READ AS A WHOLE AND THE DOCUMENTS BELIEVED AS SHOWING UNDISC LOSED INCOME HAS ALSO TO BE BELIEVED IN RESPECT OF WITHDRAWAL ENTRIES CON TAINED THEREIN. IT WAS THE CASE OF THE ASSESSEE THAT ONE S ALONE WAS DEALING WITH SALE OF MILK PRODUCTS FROM THE DELHI OFFICE OF HDP TO THE EXCLUS ION OF ALL OTHER THREE PARTNER OF HDP AND IT WAS FOUND THAT SUCH PLEA OF T HE ASSESSEE WAS CORROBORATED FROM MONTHLY PEAK CREDIT OF FINANCIAL YEAR 1992-93. THE MAXIMUM PEAK OF RS.45,08,832/- WAS IN THE MONTH OF NOVEMBER,1992 AND ADMITTEDLY BY THAT TIME ASSESSEE S HAD WITHDRAWN RS.1.29 CRORES. IT WAS THE CONTENTION OF THE REVENUE THAT AMOUNT WITHDRAWN BY S WAS NOT THE SAME WHICH WAS SEIZED DURING THE SEARCH OPERATION A ND IT WAS HELD BY THE TRIBUNAL THAT IN ABSENCE OF ANY DOCUMENT OR EVIDENC E FOUND DURING THE COURSE OF SEARCH THAT S OR HIS FAMILY MEMBERS WER E HAVING ANY OTHER SOURCE TO GENERATE FUNDS, THE WITHDRAWAL BY S FRO M THE FIRM SHOULD HAVE BEEN ACCEPTED AND IT IS IN THIS CONTEXT IT WAS HELD THAT SEIZED MATERIAL WAS TO BE READ AS A WHOLE. THEREFORE, THE FACTS OF THAT C ASE ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. 16.7 SO FAR AS THE CASE OF MANGE RAM MITTAL VS. A CIT (SUPRA) THIS ISSUE IS DISCUSSED BY SPECIAL BENCH IN PARA 139 AT PAGE 231 OF THE REPORT. THE OBSERVATIONS OF THE SPECIAL BENCH IN THIS REGARD AR E FOR ASSESSMENT YEARS 1996-97 AND 1997-98. THE TRIBUNAL FOUND THAT THE SEIZED DOCUMENT WAS IN THE NATURE OF INCOME EXPENDITURE ACCOUNTS FOR FINAN CIAL YEARS 1995-96 AND 1996-97 AND WHILE ASSESSING INCOME THE AO IGNORED T HE LOSS FIGURE OF RS.99,09,555/-, AND ON THESE FACTS IT WAS HELD THAT IT WAS NOT OPEN TO AO TO MAKE ASSESSMENT OF INCOME FIGURE AND AT THE SAME T IME IGNORE THE LOSS FIGURE ON ONE AND THE SAME SEIZED DOCUMENT. THEREF ORE, IN THAT CASE THE SEIZED DOCUMENT WAS AN INCOME AND EXPENDITURE ACCO UNT, WHEREAS IN THE PRESENT CASE ASSESSEE IS NOT ABLE TO ESTABLISH THA T THE SEIZED DOCUMENT IS IN ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 29 THE NATURE OF INCOME AND EXPENDITURE ACCOUNT, THERE FORE, SAID DECISION IS ALSO NOT APPLICABLE. 16.8 IN VIEW OF ABOVE DISCUSSIONS WE DO NOT FIND AN Y INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). THEREFORE, WE DECLINE TO INT ERFERE AND THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO.3817/MUM/20011 (A.Y 2006-07): 17. GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF R S.41,29,256/- LEVIED BY THE AO BY INVOKING PROVISIONS OF SECTION 271(1) (C) OF INCOME TAX ACT, 1961. 2.IN ANY EVENT THE LD. CIT(A) ERRED IN NOT DELETING THE PENALTY LEVIED BY THE LD. A.O IN RESPECT OF THE AMOUNT OF INCOME OF R S.79,70,190/- FOR WHICH THE SET OFF /TELESCOPING WAS ALLOWED BY THE L D. CIT(A) IN QUANTUM APPEAL. 18. THE AO LEVIED PENALTY ONLY IN RESPECT OF AN ADD ITION OF RS. 1,22,67,545/-. THE PENALTY IS LEVIED @100% OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO RS.41,29,256/-. IT WAS THE CASE OF TH E ASSESSEE BEFORE AO THAT NO PENALTY CAN BE IMPOSED IN VIEW OF THE SET OFF OF EXPENDITURE SHOWN IN THE SAME SEIZED DOCUMENTS AND THE ADDITIONAL INCOME DEC LARED BY THE ASSESSEE IN THE RETURN FIELD IN RESPONSE TO NOTICE UNDER SEC TION 153A OF THE ACT. SUCH CONTENTIONS OF THE ASSESSEE HAVE BEEN REJECTED BY T HE AO. 18.1 BEFORE LD. CIT(A) THE ASSESSEE TOOK THE SAME P LEA. IT WAS ALSO CONTENDED THAT PENALTY SHOULD BE RESTRICTED TO THE BALANCE ADDITION ONLY AFTER GIVING SET OFF OF ADDITIONAL INCOME DECLARED IN THE RETURN FIELD IN ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 30 RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. HOWEVER, LD. CIT(A) DID NOT ACCEPT ANY OF SUCH CONTENTIONS OF THE ASSESSEE. ACCORDING TO LD. CIT(A) THE PENALTY IS SUSTAINABLE ON THE ENTIRE OF RS. 1,2 2,67,545/-. 18.2 THE SUBMISSIONS MADE DURING THE QUANTUM APPEAL WERE REITERATED LD. A.R. IT WAS SUBMITTED THAT PENALTY PROCEEDINGS ARE DIFFERENT AND THE ADDITION IN ASSESSMENT CANNOT SOLELY BE RELIED UPON TO UPHOLD THE PENALTY. IT WAS SUBMITTED THAT ASSESSEE HAS BEEN ABLE TO DEM ONSTRATE THAT ACCORDING TO THE WELL SETTLED PROPOSITION OF LAW SEIZED DOCUM ENT HAS TO BE READ AS WHOLE AND, THEREFORE, THE ASSESSEE IS ENTITLED TO S ET OFF OF EXPENDITURE MENTIONED IN THE SEIZED DOCUMENT ITSELF. HE SUBMIT TED THAT THIS WAS THE VIEW POINT SUPPORTED BY VARIOUS JUDICIAL PRONOUNCE MENTS AND IF THE SAME IS NOT ACCEPTED FOR THE PURPOSE OF QUANTUM PROCEEDINGS BUT IT IS A VALID ARGUMENT FOR PENALTY PROCEEDINGS FOR THE REASON THA T IT IS REJECTION A POSSIBLE VIEW TAKEN BY THE ASSESSEE. LD. A.R SUBMITTED THA T TO COVER THE CONTINGENCY OF NON-ACCEPTANCE OF SUCH ARGUMENTS OF THE ASSESSEE AN ADDITIONAL AMOUNT OF RS.79,70,191/- WAS DECLARED IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A. HE SUBMITTED THAT BY TAKING BO TH THE AMOUNT TOGETHER I.E. SUM OF RS.79,70,191/- DECLARED IN THE RETURN A ND RS.66,38,475/- MENTIONED AS EXPENDITURE IN THE SEIZED DOCUMENT THE N THE RETURNED INCOME OF THE ASSESSEE IS MORE THAN THE INCOME ASSESSABLE. HE SUBMITTED THAT, THEREFORE, NO PENALTY SHOULD BE HELD IMPOSABLE. IN THE ALTERNATIVE IT WAS SUBMITTED THAT IN THE QUANTUM APPEAL ITSELF LD. CIT (A) HAS GIVEN THE SET OFF OF RS.79,70,191/- WITH THE FOLLOWING OBSERVATIONS, THEREFORE, THE SAID AMOUNT IS REQUIRED TO BE EXCLUDED FOR THE PURPOSE O F LEVY OF CONCEALMENT PENALTY. 5.2 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS AN D FIND FORCE IN THE ARS ARGUMENTS. SINCE THE APPELLANT HAD DECLARED ADDITI ONAL INCOME OF RS. 79,70,191/- TO COVER UP POSSIBLE DISCREPANCIES IN T HE SEIZED MATERIAL AND THE AO HAD NOT MADE ANY SPECIFIC ADDITION ON THE BASIS OF SEIZED MATERIAL, THE AMOUNT OF RS. 79,70,191/- DECLARED IN THE RETURN AN D ADDED BY THE AO ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 31 AS PER PARA 5 OF THE ASSESSMENT ORDER DESERVES TO B E SET OFF OF AGAINST THE ADDITION OF RS.1,22,67,545/-. THEREFORE, ALTHOUGH THE ADDITION OF RS.1,22,67,545/- STOOD CONFIRMED, THE AO IS DIRECTE D TO ALLOW SET OFF OF THE ADDITIONAL INCOME DECLARED AT RS.79,70,191/- AGAINS T THE AFORESAID INCOME. THEREFORE, THIS GROUND OF APPEAL ALLOWED. 19. ON THE OTHER HAND, LD. D.R RELIED UPON THE ORDE R PASSED BY LD. CIT(A) VIDE WHICH IT HAS BEEN HELD THAT THE PENALTY IS LEV IABLE WITH RESPECT TO ENTIRE ADDITION OF RS.1,22,67,545/-. 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE IMPUGNED DOCUMENT O N THE BASIS OF WHICH ADDITION HAS BEEN MADE HAS ALREADY BE REPRODUCED IN THE ABOVE PART OF THIS ORDER. IT HAS ALREADY BEEN DISCUSSED THAT IT IS A CASE WHERE ASSESSEE COULD NOT PROVE THE FACTUM OF EXPENDITURE BUT THAT DOES N OT MEAN THAT DEPARTMENT IS ALSO ESTABLISHED THAT WHAT IS ASSESSED IS THE RE AL INCOME OF THE ASSESSEE ON WHICH CONCEALMENT PENALTY IS LEVIABLE. THE NATU RE OF CREDIT AS WELL AS DEBIT ENTRIES HAS NOT BEEN DETERMINED TO TAKE HOME THE POINT THAT WHAT IS DEPICTED ON THE SEIZED PAPER IS THE INCOME OF THE A SSESSEE. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE PARTIES MENTIONED THERE IN CANNOT BE APPROACHED TO DETERMINE THE CHARACTER OF THE AMOUNT STATED IN THE SEIZED DOCUMENTS. NO SUCH ATTEMPT HAS BEEN MADE BY THE DEPARTMENT TO ASCERTAIN THE CHARACTER OF RECEIPTS AS WELL AS PAYMENTS. THEREFO RE, THE ADDITION ITSELF IS ONLY ON THE BASIS OF PRESUMPTION LAID DOWN IN SECT ION 132(4). FURTHER, FOR THE PURPOSE OF LEVY OF PENALTY IT IS TO BE ESTABLIS HED THAT WHAT IS ASSESSED IS THE CONCEALED INCOME OF THE ASSESSEE. THE AMOUNTS STATED ON THE SEIZED DOCUMENT HAS ALSO NOT BEEN RELATED TO ANY CASH OR A SSETS SEIZED DURING THE COURSE OF SEARCH. IN ABSENCE OF ANY SUCH MATERIAL AND COGENT EVIDENCE THAT THE AMOUNT STATED IN THE SEIZED DOCUMENT IS IN THE NATURE OF INCOME, WE DO NOT CONSIDER IT JUST AND PROPER TO UPHOLD THE CONCE ALMENT PENALTY ON THE ADDITION. WE MAY ALSO MENTION THAT LD. CIT(A) HAS CLEARLY GIVEN THE SET OFF OF ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 32 A SUM OF RS.79,70,191/- TO THE ASSESSEE ON ACCOUNT OF ADDITIONAL INCOME DECLARED BY THE ASSESSEE IN THE RETURN FIELD IN RES PONSE TO SECTION 153A OF THE ACT, THEREFORE, LD. CIT(A) HAS WRONGLY REJECTE D SUCH CLAIM OF THE ASSESSEE. SINCE WE HAVE HELD THAT IT IS NOT A FIT CASE WHERE LEVY OF CONCEALMENT PENALTY CANNOT BE JUSTIFIED, THE ALTERN ATIVE CLAIM OF THE ASSESSEE HAS BECAME ACADEMIC THAT PENALTY SHOULD NOT BE LEV IED WITH RESPECT TO AMOUNTS WHICH HAS BEEN HELD TO BE SET OFF BY LD. CI T(A). 21. IN VIEW OF ABOVE DISCUSSIONS WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF CONCEALMENT PENALTY, THEREFORE, THE CONCEALMENT PEN ALTY IS DELETED. THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 22. TO SUM UP ITA NO.292/MUM/2009 IS DISMISSED AND ALL OTHER APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26TH DAY OF SEPT. 2012 SD/- SD/- (B.RAMAKOTAIAH ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 26 TH SEPT. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R F BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.409,410,411/MUM/2009(A.Y. 2001-02) ITA NO.290,2911&292/MUM/2009(A.Y. 2004-05) TA NO.3817/MUM/2011(A.Y.2006-07) 33 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13-14- 17&18/09/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20/09/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER