M/s. Gaurdwell Security Services(P) Ltd., Surat V. The Income tax Officer, Ward-1(2), Surat

ITA 292/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6011 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 16-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Rejection of books of accounts; Onus to prove; Revised return
• Section: 271(1)(c); 143(3); 133A; 205; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 3.06.10 DRAFTED ON:3.06.2010 ITA NO.292/AHD/2007 ASSESSMENT YEAR : 2003-2004 M/S. GAURDWELL SECURITY SERVICES PVT. LTD., OMKAR CHAMBER, STATION ROAD, SURAT. VS. INCOME TAX OFFICER, WARD 1(2), SURAT. PAN/GIR NO. : AAACG8790J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI HARDIK VORA A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1, SURA T DATED 5.12.2006. 2. THE SOLE GROUND TAKEN BY THE ASSESSEE AGAINST TH E CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENA LTY OF RS.3,00,653/- U/S.271(1)(C) OF THE I.T.ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD AS UNDER:- - 2 - THE APPEAL HAS BEEN FILED ON 21.7.06 AGAINST THE A .O.'S ORDER DATED 19.6.06, PASSED U/S 271(L)(C) LEVYING A PENAL TY OF RS.3,00,653/-. THE APPEAL IS IN TIME. IN RESPONSE T O APPEAL NOTICE, SHRI SAPNESH SHETH, C.A. ATTENDED AND FILED THE SUBMISSIONS. THERE ARE THREE GROUNDS OF APPEAL, ALL BEING COMMON ON THE ISSUE OF LEVY OF PENALTY, ARE TAKEN T OGETHER. 2.1 IN THE PENALTY ORDER THE AO HAS STATED THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR A.Y.2003-04 DECLARIN G INCOME OF RS.1,67,520/- ON 29.11.03. THE ASSESSMENT WAS CO MPLETED U/S 143(3) ON 28.2.05 AT A TOTAL INCOME OF RS.27,95 ,740/-. DURING THE ASSESSMENT PROCEEDINGS PENALTY PROCEEDIN GS WERE INITIATED ON THE FOLLOWING TWO ADDITIONS: I) UNDISCLOSED INCOME RECEIPTS OF RS.9,93,240 /- II) SALARY EXPENSES OF RS.7,28,767/-. 2.2 IN THE PENALTY ORDER THE AO HAS STATED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING SE CURITY SERVICES TO VARIOUS PARTIES ON CONTRACT BASIS. A SU RVEY WAS CONDUCTED U/S 133A ON 22.1.03 DURING WHICH VARIOUS IRREGULARITIES WERE FOUND AND CERTAIN INCRIMINATING DOCUMENTS/EVIDENCES WERE IMPOUNDED. THE AO ALSO NOT ICED A FALL IN NET PROFIT DURING THE CURRENT YEAR. DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE DIRECTOR OF THE COMPAN Y WAS ALSO RUNNING A PROPRIETARY CONCERN ENGAGED IN SAME BUSIN ESS AND HE WAS NOT MAINTAINING ANY SEPARATE BOOKS OF ACCOUN TS FOR THE SAID FIRM. IT WAS ALSO NOTICED THAT NEITHER THE ASS ESSEE COMPANY NOR THE PROPRIETARY FIRM OF THE DIRECTOR HA D SHOWN RECEIPTS FROM M/S BHARAT PETROLEUM CORPORATION LTD. BRIGHT HOUSE, HARIOM MARKET, RELIANCE PARKING (HAZIRA) AND RELIANCE INDUSTRIES LTD. THIS ISSUE HAS BEEN DEALT BY THE CIT(A) IN CAS-I/08/05-06 IN THE ORDER DATED 27.10.0 5 IN PARA- 4. BEFORE THE AO AS WELL AS BEFORE THE CIT(A) THE A PPELLANT SUBMITTED THAT SEPARATE BOOKS OF ACCOUNTS WERE MAIN TAINED FOR SALARY EXPENSES AND SECURITY RECEIPTS OF THE ASSESS EE COMPANY AND THE PROPRIETARY CONCERN OF THE DIRECTOR AND THE REFORE THE CONTENTION OF THE AO IS WRONG. WITH RESPECT TO THE RECEIPTS CONCERNING BRIGHT HOUSE AND HARIOM MARKET, IT WAS S TATED THAT THE NEGOTIATIONS WERE GOING ON AND THE TRANSAC TIONS COULD NOT MATERIALISE AND NO SERVICES COULD BE PROVIDED. IT WAS STATED THAT THE NAME OF BHARAT PETROLEUM WAS GIVEN BY MISTAKE. THE NAME OF RELIANCE INDUSTRIES WAS ALSO G IVEN BY MISTAKE. IT WAS ACTUALLY RELIANCE PARKING (HAZIRA). NEITHER THE AO NOR THE CIT(A) ACCEPTED THE EXPLANATION. THE CIT (A) HAS - 3 - IN PARA 4, 11 OBSERVED THAT DURING THE APPELLATE PR OCEEDINGS THE AR OF THE APPELLANT COMPANY SUBMITTED THAT EVEN IF IT IS PRESUMED THAT THE APPELLANT COMPANY HAS DEPLOYED EM PLOYEES TOWARDS THE ABOVE PROJECT THAN 100% OF THE RECEIPTS COULD NOT BE ADDED. IN PARA 4.10 THE CIT(A) HAS MENTIONED THA T VIDE LETTER DATED 20.9.04 THE ASSESSEE HAD SUBMITTED BEF ORE THE A.O. THAT THE APPELLANT COMPANY HAS OFFERED INCOME OF RS .8 LACS AS REMUNERATION FOR THE YEAR UNDER CONSIDERATION. THE SUBMISSION MADE BY THE APPELLANT WAS EXAMINED BY THE CIT(A) AN D HE CONFIRMED THE ADDITION TO THE EXTENT OF RS.8,00,000 /- AND DELETED THE BALANCE ADDITION OF RS.1,93,240/-. WITH RESPECT TO THE SECOND ISSUE OF DISALLOWANCE OF RS.7,28,767/- I N RESPECT OF SALARY EXPENSES, THE A.O. HAS STATED THAT IN THE AS SESSMENT ORDER THE AO HAD COMPARED THE SALARY EXPENSES CLAIM ED BY THE ASSESSEE BY SALARY RECEIPTS. SINCE THE ASSESSEE HAS PROVIDED SECURITY SERVICES TO VARIOUS PARTIES, THE AO WORKED OUT THE COMPARISON OF SALARY EXPENSES WITH THE RECE IPT FROM THE RELEVANT PARTIES. THE AO FOUND THAT IN MOST OF THE COMPANY THE RATIO BETWEEN THE SERVICES AND SALARY E XPENSES WAS BETWEEN 75% TO 80% BUT IN THE CASE OF TWO PARTI ES THE RATIO WAS 80% TO 90% AND IN ONE CASE THE SALARY EXP ENSES EXCEEDED THE INCOME AND THE RATIO WAS 112.49%. THE OVERALL RATIO OF SALARY EXPENSE OF 76.91% IN THE CURRENT YE AR IN COMPARISON WITH EARLIER TWO YEARS RATIOS OF 62.25% AND 62.72% RESPECTIVELY. THE AO THEREFORE WAS NOT SATIS FIED BY THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNT IN VIEW OF THE UNRECORDED RECEIPTS FOUND DURING THE COURSE OF SURV EY AND REJECTED THE BOOKS OF ACCOUNTS U/S 145 AND ADOPTED THE RATIO OF SALARY EXPENSES AT 62.25% AS IN THE LAST YEAR. HE T HEREFORE MADE AN ADDITION OF RS.7,28,767/-. THE CIT(A) IN IT S ORDER DELETED THE ADDITION SUBSTANTIALLY AND CONFIRMED TH E ADDITION ONLY TO THE EXTENT OF RS.18,105/- ONLY AS PER PARA 5.71 OF THE APPELLATE ORDER DATED 27.10.05. 2.3 IN THE PENALTY ORDER THE AO HAS STATED THAT BOT H THE ADDITIONS WERE SUSTAINED BY THE CIT(A) REPRESENT RE AL INCOME. WITH RESPECT TO THE FIRST ISSUE THE RECEIPTS WERE N OT SHOWN AND AS A RESULT OF SURVEY THE ASSESSEE HIMSELF HAS AGRE ED TO SURRENDER RS.8 LACS. IN THE CASE OF SECOND ISSUE TH E AMOUNT OF DISALLOWANCE OF RS.18,105/- WAS THE SALARY EXPENDIT URE IN EXCESS OF INCOME. NO PRUDENT BUSINESSMAN WOULD DO S O AND SINCE THE SURRENDER OF RECEIPTS SHOWS THAT THE BOOK S OF ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT THE PENAL TY IS LEVIABLE ON BOTH THE ISSUES. THE AO ALSO STATED THA T A PENALTY - 4 - NOTICE WAS ISSUED TO ASSESSEE ON 15.5.06 FOR ATTEND ANCE ON 7.6.06 BUT NONE ATTENDED. IN VIEW OF THESE REASONS THE AO LEVIED THE MINIMUM PENALTY OF RS.3,00,653/-. 2.4 DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS STATED THAT THE ADDITION HAS BEEN SUSTAINED BECAUSE OF THE SURRENDER OFFER MADE BY THE APPELLANT. ACCORDING TO HIM THERE FORE THE PENALTY SHOULD NOT BE LEVIED. THE APPELLANT HAS REL IED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. SURESHCHANDRA MITTAL [251 ITR 9] WHEREIN THE PENALT Y WAS DELETED WHEN THE ASSESSEE FILED REVISED RETURN AFTE R THE SEARCH. 2.5 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND OBSERVATIONS OF THE A.O. IT IS CLEAR THAT AS A RESULT OF SURVEY THE APPELLANT HAD OFFERED RS.8 LACS TO COVER UP DEFECTS/OMISSION/ERRORS. IT IS CLEAR THAT DURING TH E SURVEY IT WAS FOUND THAT THE ASSESSEE HAD NOT SHOWN ITS INCOME CO RRECTLY. ALL THE RECEIPTS WERE NOT SHOWN. EVEN THE EXPENDITURE I N RESPECT OF SECURITY PROVIDED TO SAMEER DIAMONDS WAS IN EXCE SS OF THE RECEIPTS AND THEREFORE THE ADDITIONS WERE SUSTAINED BY THE CIT(A). CLEARLY THE APPELLANT HAS ADMITTED THAT IT HAD CONCEALED THE INCOME WHICH WAS SURRENDERED DURING T HE SURVEY. BUT FOR THE SURVEY ACTION THE APPELLANT WOU LD NOT HAVE DISCLOSED THIS INCOME. THE HON'BLE SC IN THE CASE O F SURESHCHANDRA MITTAL (SUPRA), RELIED UPON BY THE AP PELLANT, HAS SIMPLY DECLINED TO INTERFERE WITH THE HIGH COURT OR DER PASSED IN THE CASE OF SURESHCHANDRA MITTAL REPORTED IN [24 1 ITR 144]. THE HIGH COURT HAD PASSED THE ORDER BECAUS6 THE ITA T HAD GIVEN A FINDING OF FACT THAT THE DEPARTMENT HAD FAI LED TO PROVE THE CONCEALMENT. THEREFORE THE FACTS OF THIS CASE A RE NOT APPLICABLE ON THE FACTS OF THE ASSESSEE'S CASE. IN THE ASSESSEE'S CASE PAPERS WERE FOUND WHICH SHOWED THAT THE ASSESS EE HAD NOT SHOWN RECEIPTS IN, RESPECT OF CERTAIN PARTIES. THEREFORE THE SURRENDER MADE BY THE APPELLANT AS A RESULT OF SURV EY REPRESENTED CONCEALED INCOME. SINCE THIS SURRENDER WAS NOT REFLECTED IN THE RETURN BUT ADMITTED DURING THE ASS ESSMENT PROCEEDINGS CONSEQUENT UPON THE PAPERS FOUND DURING THE SURVEY ACTION, THE SURRENDER CANNOT BE SAID TO BE V OLUNTARY. 3. WITH RESPECT TO THE POSITION OF LAW FOR LE VY OF PENALTY, THE LEGAL POSITION IS DISCUSSED IN FOLLOWING PARAGR APHS. LAW IN RESPECT OF LEVY OF PENALTY UNDER SECTION 271 (L)(C) - 5 - THE LANGUAGE OF THE EXPLANATION BELOW SECTION 271(L )(C) HAS UNDERGONE CHANGES FROM TIME TO TIME, BUT THE PRESEN T EXPLANATION IN THE LIGHT OF THE PRECEDENTS ESTABLIS HED BY VARIOUS DECISIONS OF COURTS INCORPORATES ALL THESE PROPOSITIONS. THE LAW ONE WOULD IMAGINE IS CLEAR AND THERE SHOULD NOT BE ANY SCOPE FOR CONTROVERSY EVEN IN APPLICATION OF TH ESE PRINCIPLES TO ANY GIVEN SET OF FACTS. 3.1 THE SETTLED POSITION OF LAW IN RESPECT OF LEVY OF PENALTY UNDER SECTION 271(L)(C) OF THE ACT HAS BEEN LAID DO WN BY THE HON'BLE SUPREME COURT IN THE CASE OF B.A. BALASUBRA MANIAN AND BROS. CO. V. CIT (1999) 236 ITR 977 WHEREIN THE HON'BLE SUPREME COURT FOUND THAT THE DECISION IN CIT V. ANW AR ALI (1970) 76 ITR 696 HOLDING THAT IT IS FOR THE REVENU E TO PROVE CONCEALMENT BEFORE LEVY OF PENALTY IS LAW, NO LONGE R HOLDS THE FIELD, AFTER THE INTRODUCTION OF EXPLANATION TO SEC TION 271(L)(C), WHICH SPECIFICALLY STIPULATES, THAT WHERE THE DIFFE RENCE BETWEEN THE RETURN AND ASSESSED INCOME EXCEEDS THE SPECIFIED LIMITS, THE BURDEN OF PROOF IS ON THE TAX-PAYER. TH E LIMIT IS NOW REMOVED SO THAT, ANY DIFFERENCE WILL ATTRACT TH E EXPLANATION. 3.2 THE SUPREME COURT IN THE B.A.BALASUBRAMANIAN & BRS. CO. DECISION REFERRED TO THE EARLIER DECISIONS IN C IT V. MUSSADILAL RAM BHAROSE (1987) 165 ITR 14, CIT V. K. R. SADAYAPPAN (1990) 185 ITR 49(SC) AND ADDL.CIT V. JE EVAN LAL SAH (1994) 205 ITR 244 (SC). SINCE THIS DECISIO N IS A SHORT ONE AND HAS FOLLOWED THE THREE EARLIER DECISI ONS, THESE SHOULD NO DOUBT, BE READ TOGETHER FOR UNDERSTANDING THE FULL SCOPE OF THE EXPLANATION. 3.3 IN CIT V. MUSSADILAL RAM BHAROSE'S CASE (1987) 165 ITR 14 (SC), THE DIFFERENCE BETWEEN THE RETURNED AND AS SESSED INCOME AROSE BECAUSE BOTH SALES AND PROFITS WERE ES TIMATED, SINCE THE BOOKS WERE NOT VERIFIABLE. THE TRIBUNAL F OUND THAT THOUGH THE BOOKS CONTAINED DEFECTS ON THE BASIS OF WHICH THE RETURN WAS FILED, THE DIFFERENCE DID NOT ARISE DUE TO ANY GROSS OR WILLFUL NEGLIGENCE AND MUCH LESS ON ACCOUNT OF F RAUD. AFTER REVIEW OF THE VARIOUS DECISIONS OF HIGH COURT ON TH E SUBJECT, THE SUPREME COURT CONCLUDED THAT IT IS NOT A CASE, WHERE THERE WAS NO EVIDENCE OR THERE WAS SUCH EVIDENCE ON THE B ASIS OF WHICH NO REASONABLE MAN WOULD HAVE ACCEPTED THE EXPLANATION OF THE ASSESSEE. IT WAS POINTED OUT THA T THE - 6 - PRESUMPTION RAISED BY THE EXPLANATION STOOD REBUTTE D IN THE FACTS OF THE CASE, BECAUSE OF THE ABSENCE OF ANYT HING TO SUGGEST GROSS OR WILLFUL NEGLIGENCE OR FRAUD. 3.4 IN CIT VS. K.R. SADAYAPPAN (1990) 185 ITR 49, T HE ASSESSEE WHO HAD PAID ON-MONEY OF RS.18,750/- FOR P URCHASE OF A PLOT IN HIS SON'S NAME WAS UNABLE TO EXPLAIN T HE SOURCE OF SUCH ON-MONEY PAYMENT TO THE SATISFACTION OF THE AS SESSING OFFICER, SINCE THE CASH FLOW STATEMENT ON THE BASIS OF WHICH THE EXPLANATION WAS TENDERED WAS FOUND TO CONTAIN D EFECTS LIKE ABSENCE OF DRAWINGS FOR PERSONAL EXPENSES. THE EXPL ANATION TO SECTION 271(L)(C) WAS RELIED UPON FOR LEVY OF PE NALTY. THE TRIBUNAL FOUND THE ASSESSEE'S EXPLANATION WAS NOT O NLY NOT CONVINCING, BUT ALSO FALSE, BECAUSE CASH SOUGHT TO BE AVAILABLE COULD NOT HAVE BEEN AVAILABLE, BUT ALL THE SAME HEL D THAT THERE WAS NO CASE FOR PENALTY, SINCE THE INCOME-TAX DEPAR TMENT HAS NOT SHOWN THAT THE ON-MONEY PAYMENT REPRESENTED CON CEALED INCOME OF THE ASSESSEE FOLLOWING THE RATIONALE OF T HE DECISION IN CIT V. ANWAR ALI (1970) 76 696 (SC). THE SUPREME COURT HELD THAT WHERE THE EXPLANATION WAS FALSE, IT CANNO T BE SAID THAT THE PRESUMPTION RAISED BY THE EXPLANATION UNDE R SECTION 271(L)(C) STOOD REBUTTED BY 'COGENT, RELIABLE AND R ELEVANT MATERIAL'. IT FOUND THAT THE DECISION OF THE TRIBUN AL AND THE HIGH COURT DID NOT ACCORD WITH THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN MUSSADILAL RAM BHAROSE'S CASE (198 7) 165 ITR 14. 3.5 IN ADDL.CIT V. JEEVAN LAL SAH (1994) 205 ITR 24 4, THE SUPREME COURT WAS DEALING WITH PENALTY PROCEEDINGS INITIATED ON REASSESSMENT, WHICH WAS PROMPTED BY SOME INFORMA TION IN THE POSSESSION OF THE DEPARTMENT. THE ASSESSEE HIMS ELF OFFERED HIGHER INCOME DISCLOSING CERTAIN DEPOSITS A ND INTEREST, WHICH HE HAD NOT DISCLOSED EARLIER. THE TRIBUNAL AN D THE HIGH COURT FOUND THAT NOTWITHSTANDING THE EXPLANATION, A NWAR ALL'S CASE REQUIRED DEFINITE PROOF THAT THE AMOUNT ADDED REPRESENTED INCOME OF THE ASSESSEE, BUT THE SUPREME COURT FOUND THAT SUCH WAS NOT THE LAW, SINCE CIT V. ANWAR ALI (1970) 76 I TR 696 (SC) IS NO LONGER GOOD LAW AFTER THE EXPLANATION AN D THAT IN CASES WHERE EXPLANATION IS ATTRACTED, LEVY OF PENAL TY OR OTHERWISE WOULD DEPEND UPON THE PRINCIPLES ENUNCIAT ED IN MUSSADILAL RAM BHAROSE'S CASE (1987) 165ITR 14 AND SADAYAPPAN'S CASE (1990) 185 ITR 49. THE MATTER WAS , - 7 - THEREFORE, REMANDED TO THE TRIBUNAL FOR A DECISION CONSISTENT WITH THOSE GUIDELINES. 3.6 THE MADRAS HIGH COURT IN CIT V. BALASUBRAMANIAM AND BROS.(1985) 152 ITR 529 HAD HELD THAT THE ASSESSEE HAD SOLD SOME IMPORT LICENSE, THE PROFITS FROM WHICH CAME TO BE ESTIMATED BY THE ASSESSING OFFICER AT A FIGURE HIGH ER THAN THE ONE REPORTED BY THE ASSESSEE, BECAUSE THE ASSESSEE FAILED TO FURNISH DETAILS OF PURCHASERS OF THE LICENSES, THOU GH REQUIRED OF HIM. IT WAS, IN THIS CONTEXT, THE INCOME CAME TO BE ESTIMATED AT MARKET QUOTATIONS OF PREMIUM PUBLISHED IN COMMERCIAL JOURNALS. THE TRIBUNAL FOUND THAT THERE WAS NOTHING TO SUGGEST INFERENCE OF CONCEALMENT, SINCE RECEIPT OF EXTRA CONSIDERATION FOR SALE OF LICENSE HAD NOT BEE N PROVED BY THE REVENUE. THE HIGH COURT, HOWEVER FOUND THAT MER ELY BECAUSE AN ESTIMATE HAD BEEN MADE, PENALTY CANNOT B E RULED OUT IN THE LIGHT OF THE ASSESSEE'S FAILURE TO GIVE PARTICULARS OF THE PURCHASERS OF THE LICENSES EVEN ON DEMAND ON AL LEGED NON AVAILABILITY OF PARTICULARS DUE TO THE TIME LAG AND THE FACT THAT EVEN THE NAMES GIVEN WERE OF PERSONS, WHO COULD NOT BE TRACED. THE RULE OF EVIDENCE IN THE EXPLANATION WOU LD, THEREFORE, HAVE APPLICATION AND THE ASSESSEE HAD NO T ESTABLISHED THAT THE DIFFERENCE BETWEEN THE RETURNE D AND ASSESSED INCOME WAS NOT DUE TO ANY FRAUD OR WILLFUL NEGLECT INASMUCH AS IT WITHHELD THE REQUISITE MATERIAL EVEN WHEN CALLED FOR. IT IS IN THESE CIRCUMSTANCES, THAT THE HIGH COURT FOUND THAT THE TRIBUNAL WAS NOT CORRECT IN CANCELIN G THE PENALTIES AND THE SUPREME COURT IN THE PRESENT CASE HAS ENDORSED THE VIEW OF THE HIGH COURT. 3.7 IT CAN NOW BE SAID THAT WITH REFERENCE TO THE L ANGUAGE OF LAW AND THE PRECEDENTS THE LAW ON THE SUBJECT CAN B E SPELT OUT IN THE FOLLOWING PROPOSITIONS: (1) WHEREVER THERE IS A DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME, THERE IS AN INFERENCE OF CONCEALME NT AS A RULE OF LAW. (2) THE RESPONSIBILITY FOR REBUTTING SUCH INFER ENCE IS SQUARELY ON THE TAX PAYER. (3) THE ASSESSEE IS EXPECTED TO OFFER AN EXPLAN ATION FOR THE DIFFERENCE. ABSENCE OF ANY EXPLANATION, BY ITSELF, WILL MERIT PENALTY. (4) THE EXPLANATION WHERE OFFERED, SHOULD NOT B E FOUND TO BE FALSE. - 8 - (5) MERELY BECAUSE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE HIS EXPLANATION, PENALTY MAY NOT BE EXIGIBLE, IF SU CH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 3.8 THE LANGUAGE OF THE EXPLANATION BELOW SECTION 2 71(L)(C) HAS UNDERGONE CHANGES FROM TIME TO TIME, BUT THE PR ESENT EXPLANATION IN THE LIGHT OF THE PRECEDENTS ESTABLIS HED BY VARIOUS DECISIONS OF COURTS INCORPORATES THE ABOVE PROPOSITIONS. THE LAW ONE WOULD IMAGINE IS CLEAR AN D THERE SHOULD NOT BE ANY SCOPE FOR CONTROVERSY EVEN IN APP LICATION OF THESE PRINCIPLES TO ANY GIVEN SET OF FACTS. 3.9. IT IS, THEREFORE, VERY CLEAR THAT THE RESPONSI BILITY FOR REBUTTING THE INFERENCE IS SQUARELY ON THE TAX PAYE R AND THE ASSESSEE IS EXPECTED TO OFFER AN EXPLANATION FOR TH E ADDITION. IF THE EXPLANATION IS NOT VALID, THE PENALTY IS AGAIN LEVIABLE. 3.10. FURTHER AS PER THE DECISION OF HON'BLE GUJARA T HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125, THE PENALTY U/S. 271(L)(C) IS JUSTIFIED IF THE ADDI TION REPRESENTED THE ASSESSEE'S REAL INCOME AND THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. 4. FURTHER IN A RECENT CASE, THE HON'BLE HIGH COURT IN THE CASE OF M/S. D&H SECHERON ELECTRODES (P) LTD. V. CIT 144 TAXMAN 689 (2005) (M.P.) HAS HELD THAT THE FACT OF SUPPRESSION WAS VERY MUCH WITHIN THE KNOWLEDGE OF T HE ASSESSEE ESPECIALLY A COMPANY BEING MANAGED BY CAS. THE HON'BLE M.P. HIGH COURT FOUND THAT IN A PROFESSIONA LLY LED COMPANY MANAGED BY CAS IT IS NOT CORRECT FOR THE AP PELLANT TO ARGUE THAT THERE WAS NO DELIBERATE AND CONSCIOUS AT TEMPT FOR CONCEALMENT OF INCOME. 5. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE ADDITI ON OF RS.8 LACS ON ACCOUNT OF UNEXPLAINED RECEIPTS AND OF RS.18105/ - ON ACCOUNT OF INFLATION OF EXPENSES REPRESENT THE CONC EALED INCOME OF THE APPELLANT. AS STATED ABOVE, THE ASSES SEE HAD NOT SHOWN CERTAIN RECEIPTS AND HAD INFLATED SALARY EXPE NSES IN THE CASE OF ONE PARTY. SINCE THIS SURRENDER WAS NOT REF LECTED IN THE RETURN BUT ADMITTED DURING THE ASSESSMENT PROCEEDIN GS CONSEQUENT UPON THE PAPERS FOUND DURING THE SURVEY ACTION, - 9 - THE SURRENDER CANNOT BE SAID TO BE VOLUNTARY. THERE FORE AS STATED ABOVE, THESE TWO ADDITIONS REPRESENTED REAL INCOME AND NOT NOTIONAL INCOME WHICH HAS BEEN CONCEALED BY THE INCOME BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME. FURTHER AS PER THE DECISION OF HON'BLE M.P. HIGH COURT QUOTED ABOVE IN PARA-7, THE APPELLANT BEING A COMPANY IT IS DEEMED THAT THE CONCEALMENT IS DELIBERATE AND CONSCIOUS BECAUSE IT HAS THE FACILITY OF EXPERT IN FINANCE AS WELL AS ACCOUNTS. IN VIEW OF THE ABOVE BOTH THE CONDITIONS SPECIFIED BY THE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES (SUPRA) MENTIONED ABOVE ARE MET. HENCE THE PENALTY LEVIED IS CONFIRMED AND ALL THE GROUNDS OF APPEAL ARE DISMISSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, PENALTY O F RS.3,00,653/- WAS LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THE AFOR ESAID PENALTY WAS LEVIED FOR CONCEALMENT OF TWO INCOMES NAMELY RS.8 L ACS AS SECURITY CHARGES RECEIPTS AND RS.18,105/- EXCESS EXPENSES CL AIM. 5. IN THE INSTANT CASE, A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 21.01.2003. DURING THE COURSE OF THE S URVEY, THE ASSESSEE ADMITTED OF RENDERING OF SERVICE OF SECURI TY GUARDS TO FOUR CONCERNS NAMELY M/S.BHARAT PETROLEUM CORPORATION LT D., BRIGHT HOUSE, HARIOM MARKET, RELIANCE INDUSTRIES LTD. AND HAD DECLARED AMOUNT OF RS.8 LACS AS INCOME DERIVED THEREFROM. HO WEVER, THE ASSESSEE HAD NOT DISCLOSED THE SAID ADDITIONAL INCO ME IN THE RETURN OF INCOME AND ON APPEAL IN THE QUANTUM APPEAL, LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SUSTAINED THE ADDITION TO TH E EXTENT DISCLOSED BY THE ASSESSEE IN THE STATEMENT MADE DURING THE CO URSE OF THE SURVEY. 6. FURTHER, THE LEARNED ASSESSING OFFICER OBSERVED THAT SALARY EXPENSES IN RESPECT OF ONE PARTY NAMELY M/S.SAMIR D IAMOND WAS - 10 - 112.49% OF THE RECEIPTS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTED THE ALLOWANCE OF SALARY EXP ENSES TO THE EXTENT OF 100% OF RECEIPTS AND THEREAFTER DISALLOWED RS.18 ,105/- OUT OF SALARY EXPENSES. 7. THE LEARNED ASSESSING OFFICER LEVIED PENALTY UND ER SECTION 271(1)(C) IN RESPECT OF THE AFORESAID ADDITIONS AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A CTION OF THE LEARNED ASSESSING OFFICER. 8. WE FIND THAT THE ASSESSEE EXPLAINED BEFORE THE L OWER AUTHORITY THAT THE ADDITION OF RS.8 LACS WAS MADE SOLELY ON T HE BASIS OF STATEMENT OF THE ASSESSEE RECORDED DURING THE COURS E OF SURVEY. THE ASSESSEE EXPLAINED THAT DUE TO MISTAKE, THE AFORESA ID AMOUNT WAS DISCLOSED AS INCOME BY THE ASSESSEE DURING THE COUR SE OF SURVEY AS IN FACT ONLY NEGOTIATION FOR PROVIDING SECURITY GUARDS WERE GOING ON AT THE MATERIAL TIME WITH BRIGHT HOUSE AND HARIOM MARK ET AND ACTUALLY NO SERVICES WERE RENDERED AND NO CHARGES WERE ACTUA LLY RECEIVED. IT WAS STATED THAT THE NAME OF M/S.BHARAT PETROLEUM CO RPORATION LTD. AND RELIANCE INDUSTRIES WAS GIVEN BY MISTAKE. IT WA S ACTUALLY RELIANCE PARKING (HAJIRA). WE FIND THAT THE LOWER AUTHORITI ES COULD NOT POINT OUT ANY FALSITY IN THE ABOVE EXPLANATION OF THE ASS ESSEE BY BRINGING COGENT MATERIAL ON RECORD. THE ASSESSEE EXPLAINED T HAT IT HAS ACCEPTED THE ADDITION CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ONLY TO BUY PEACE OF MIND AND SIMPLY ACCE PTANCE OF ADDITION AND PAYING TAX THEREON DOES NOT ENABLE THE DEPARTMENT TO FURTHER LEVY PENALTY AGAINST THE ASSESSEE. WE FIND THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MAT ERIAL BEFORE US TO - 11 - CONTROVERT THE ABOVE EXPLANATION OF THE ASSESSEE. IT IS OBSERVED THAT THE ADDITION OF RS.8 LACS WAS MADE MERELY ON THE BA SIS OF THE STATEMENT OF THE ASSESSEE AND NO POSITIVE MATERIAL COULD BE BROUGHT BY THE REVENUE TO SHOW THAT THE ASSESSEE ACTUALLY RECE IVED ANY CHARGES WHICH IT HAD NOT DISCLOSED IN ITS RETURN OF INCOME. THEREFORE, IN OUR CONSIDERED OPINION, PENALTY UNDER SECTION 271(1)(C) IS NOT EXIGIBLE ON THE ABOVE ADDITION OF RS.8 LACS. 9. SIMILARLY IN RESPECT OF DISALLOWANCE OF SALARY EXPENSE OF RS.18,105/-, WE FIND THAT NO POSITIVE MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE SALARY EXPENSES AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME WAS BOGUS AND THE ASSESSEE COULD NOT HAVE SUFFERED LOSS IN ONE CASE. IN ABSENCE OF ANY POSITIVE MATERIAL TO SHOW THAT ASSESSEE ACTUALLY INCURRED LESS EXPENSES AND HAS CLAIMED MORE EXPENSES IN THE RETURN WITH A VIEW TO DEFRAUD REVENUE IN OUR CONSIDERED VIEW, THE LOWER AUTHORITIES WERE NOT JUS TIFIED IN LEVYING PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF THE A FORESAID AMOUNT OF RS.18,105/- ALSO. 10. WE THEREFORE, DELETE THE PENALTY OF RS.3,00,653 /- LEVIED UNDER SECTION 271(1)(C) OF THE ACT AND ALLOW THE APPEAL O F THE ASSESSEE. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 11 TH DAY OF JUNE 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 11 TH DAY OF JUNE, 2010 PARAS - 12 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 07.06.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 08.06.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 08.06.2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 08.06.2010 ----------- -------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 09.06.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 11.06.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 11.06.2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- ---- -----------------