Sanjay Enterprises Pvt Ltd, V. ITO Ward 7 (3),

ITA 3036/DEL/2007

• Counselvise Citation: 303620114 RSA 2007
• Duration Of Justice: 4 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 28-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 19-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Search and seizure; Bad and doubtful debts; Accommodation entries; Bogus loan; Reassessment proceedings
• Section: 143(3); 133A; 10B; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM ITA NOS. 3036 &4083/DEL/07 ASSESSMENT YEAR:2001-02 M/.S SANJAY ENTERPRISES PVT.LTD. 20, ANSARI ROAD, DARYAGANJ, NEW DELHI 110 002. V/S . INCOME TAX OFFICER, WARD-7 (3),CR BUILDING, NEW DELHI [PAN:AAECS6481J] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI RAJ KUMAR GUPTA, AR REVENUE BY SMT. S. MOHANTY, DR DATE OF HEARING 29-11-2011 DATE OF PRONOUNCEMENT 16-12-2011 O R D E R A.N.PAHUJA:- THESE TWO APPEALS - QUANTUM APPEAL FILED ON 19.6.20 07 AGAINST AN ORDER DATED 30.11.2005 & PENALTY APPEAL FILED ON 10.10.20 07 AGAINST AN ORDER DATED 16 TH JULY, 2007 OF THE LEARNED CIT(A)-X, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- ITA NO. 3036/DEL/07 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-X & THE LEARNED INCOME TAX OFFICER HAVE ERRED IN MAKING AN ADDITION OF ` 10,00,000/- AS INCOME FROM UNDISCLOSED SOURCES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -X & THE LEARNED INCOME TAX OFFICER HAVE ERRED IN MAKING AN ADDITION OF ` . 20,000/- AS COST OF UNEXPLAINED CREDIT. 3. THE ASSESSEE-COMPANY MAY KINDLY BE GIVEN THE RIG HT TO MAKE FURTHER ADDITIONS TO THE ABOVE GROUNDS AT THE TIME OF HEARI NG OF THE APPEAL. ITA NO. 4083/DEL/07 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -X & THE LEARNED INCOME TAX OFFICER HAVE ERRED IN LEVYING A PENALTY OF ` 4,03,000/- U/S 271(1)(C) OF THE INCOME-TAX ACT,1961. ITA NO. 3036&4083/DEL/07 2 2. THE ASSESSEE-COMPANY MAY KINDLY BE GIVEN THE RI GHT TO MAKE FURTHER ADDITIONS TO THE ABOVE GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 2. THESE APPEALS-QUANTUM AND PENALTY, INITIALLY DISPOSED OF VIDE ORDERS DATED 10.12.2008 & 11.11.2008, WERE SUBSEQUENTLY RECALLED VIDE ORDER DATED 19.2.2010 & 17.7.2009 IN MA NOS.3/DEL./2010 & 169/DEL./2009 RES PECTIVELY. 3. ADVERTING FIRST TO QUANTUM APPEAL, FACTS, IN BRI EF, AS PER THE ORDERS THAT RETURN DECLARING LOSS OF ` `2,15,350/- FILED ON 31 ST OCTOBER, 2001 BY THE ASSESSEE, AN 100% EOU, AFTER BEING PROCESSED ON 12 TH JULY, 2002 IN SECTION 143(1) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS S ELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 24 TH OCTOBER, 2002. SUBSEQUENTLY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 16 TH OCTOBER, 2003, ACCEPTING THE RETURNED INCOME. THEREAFTER, IN CONSEQUENCE OF SURVEY, INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT VIDE LETTER DATED 17 TH OCTOBER, 2003 ABOUT SOME BOGUS TRANSACTIONS ENTERED INTO BY THE A SSESSEE WITH COMPANIES OPERATED BY SHRI SANJAY RASTOGI AND HIS FAMILY MEM BERS. IT TRANSPIRED FROM THE INFORMATION THAT THE ASSESSEE RECEIVED A LOAN / CRE DIT ENTRY OF ` 10,00,000/- VIDE CHEQUE NO. 323197 IN THE MONTH OF MAY, 2000 IN ITS BANK ACCOUNT NO. CA-28255 HELD IN ING VYSYA BANK ,CHANDNI CHOWK, FROM M/S. FR ENZY PRODUCTS (P) LTD. ,A COMPANY MANAGED BY SHRI SANJAY RASTOGI AND HIS ASS OCIATES. IN THE LIGHT OF THIS INFORMATION ,AFTER RECORDING REASONS, IN WRITING AN D WITH THE PRIOR APPROVAL OF THE ADDL. CIT,ASSESSMENT WAS REOPENED U/S 147 OF THE AC T WITH THE SERVICE OF A NOTICE U/S 148 OF THE ACT, ISSUED ON 28 TH NOVEMBER, 2003. IN RESPONSE, THE ASSESSEE FILED RETURN DECLARING NIL INCOME ON 10 TH DECEMBER, 2004, CLAIMING DEDUCTION U/S 10B OF THE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDI NGS, SHRI SUNIL AGARWAL, DIRECTOR OF THE COMPANY APPEARED AND HE WAS INFORM ED THAT THE OFFICE OF SHRI SANJAY RASTOGI WAS SURVEYED U/S 133A OF THE IT ACT 1961 ON 4 TH MARCH, 2003 ,WHEN IT TRANSPIRED THAT SHRI SANJAY RASTOGI ALONG WITH H IS FATHER SHRI M.S. RASTOGI AND ASSOCIATES SHRI ASHWANI UPPAL & HIS EMPLOYEES, WAS RUNNING CONCERNS, WHICH WERE ENGAGED IN GIVING BOGUS/ACCOMMODATING ENTRIES. THE ADDRESS OF MOST OF THESE CONCERNS WAS AT 210, VAKIL CHAMBERS, A-115, SHAKARP UR, DELHI. THE RESIDENTIAL ITA NO. 3036&4083/DEL/07 3 ADDRESSES OF SHRI SANJAY RASTOGI, 37- SAINI ENCLAVE , DELHI WAS FOUND TO HAVE BEEN USED FOR SAME PURPOSE OF GIVING BOGUS ENTRIES. IN H IS STATEMENT RECORDED BY INVESTIGATION WING, SHRI SANJAY RASTOGI IN REPLY T O QUESTION NO. 14 ADMITTED THAT HE WAS PROVIDING CERTAIN SERVICES IN CONNECTION WITH C OMPANIES / CONCERN / ENTITIES, WHICH WERE NOT DOING THE REAL GENUINE BUSINESS EXCL USIVELY. FEW PRIVATE LTD. / LTD. COMPANIES WERE USED AS FRONT COMPANIES AS CONDUIT FOR EXECUTION OF SUCH ENTRIES / TRANSACTIONS, WHICH WERE NOT DOING BUSINESS IN ACTU AL. SHRI SUNIL AGARWAL DIRECTOR OF THE COMPANY WAS CONFRONTED WITH THE AFORESAID QUES TION AND REPLY OF SHRI SANJAY RASTOGI AND HE WAS HANDED OVER A COPY OF THE ABOVE STATEMENT TO READ FOR HIMSELF WITH THE REQUEST TO FURNISH THEIR REPLY.. IN RESPON SE TO A QUERY REGARDING ENTRY OF ` 10,00,000/- TAKEN BY THE ASSESSEE ON 2 ND MAY, 2000 ,SHRI S.K. SARKAR AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE REPLIED T HAT ` 10,00,000/- WAS RECEIVED VIDE CHEQUE NO. 323197 DATED 2.5.2000 AND AN AMOUNT OF ` 5,00,000/- WAS REPAID VIDE CHEQUE NO. 411681 DATED 26.04.2001. HOWEVER TH E ASSESSEE DID NOT FURNISH THE CONFIRMED COPY OF ACCOUNT FROM THE BOOKS OF M/S . FRENZY PRODUCTS (P) LTD. IN ANOTHER LETTER DATED 18 TH MARCH, 2005, THE ASSESSEE CONTENDED THAT SHRI SANJ AY RASTOGI DID NOT NAME THE ASSESSEE COMPANY AS RECIPI ENT OF ANY ACCOMMODATION AMOUNT AND THAT AMOUNT OUTSTANDING WAS ONLY ` 5,00,000/-. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND ADDED AN AMOUNT OF ` 10,00,000/- BY WAY OF UNEXPLAINED CREDITS BESIDES AN AMOUNT OF ` 20 ,000/- BY WAY OF COMMISSION @ 2% FOR FAILURE OF THE ASSESSEE IN ESTABLISHING GE NUINENESS OF THE TRANSACTIONS . 4. ON APPEAL, THE LD. CIT(A) DIRECTED THE AO TO SUMMON TO ALL THE CONCERNED PARTIES INCLUDING MANAGING DIRECTOR OF M/S. FRENZY PRODUCTS (P) LTD. FROM WHOM THE ALLEGED LOAN WAS CLAIMED TO HAVE BEEN RECEIVED AND RECORD THEIR STATEMENTS. INTER ALIA, IT WAS ALSO DIRECTED THAT TO GIVE AN OPPORTUN ITY TO THE ASSESSEE TO REBUT THE STATEMENT IF THAT WAS MADE AGAINST THE ASSESSEE AND SUBMIT A REMAND REPORT. IN TERMS OF THESE DIRECTIONS, THE AO RECORDED THE STAT EMENT OF SHRI SANJAY RASTOGI ON OATH ON 27.9.2005 AS REPRODUCED IN THE IMPUGNED ORD ER ON PAGE 3 TO 7. IN REPLY TO QUESTION 5 WHEREIN ,SHRI SANJAY RASTOGI WAS, INTER ALIA, ASKED ABOUT THE BOGUS ENTRY OF ` .10 LACS GIVEN TO M/S. SANJAY ENTERPRISES PVT. LTD . ,HE STATED AS UNDER :- I HAVE SEEN AND HAVE CAREFULLY GONE THROUGH THE LIS T OF COMPANIES OPERATED FROM MY OFFICE, WHICH HAVE BEEN REPORTED I N THE LIST BY YOUR ITA NO. 3036&4083/DEL/07 4 DEPARTMENTS INVESTIGATION WING, HAVING BEEN REPORT ED TO BE ENGAGED IN GIVING BOGUS/ ACCOMMODATION ENTRIES TO VARIOUS PERSONS/BENEFICIARIES. I HAVE CAREFULLY SEEN THE NAMES AND HAVE ALSO READ THE DETAILS OF THE BOGUS ENTRIES GIVEN TO THE PARTIES/PERSONS WHOSE NA ME ARE MENTIONED IN THE QUESTION STATED ABOVE FROM (I) TO (IV) ABOV E. AFTER SEEING THE DETAILS I CONFIRM THAT THE COMPANIES M/S. AADHUNIK SYSTEMS PVT. LTD., M/S. FRENZY PRODUCTS PVT. LTD. AND M/S. M.S. LEASIN G PVT. LTD. OPERATED FROM MY OFFICE AND WERE UNDER OUR CONTROL. ALTHOUGH THE DIRECTORS IN THESE COMPANIES WERE MY ASSOCIATES BUT THE CONTROL WAS OF MY SELF AND MY FATHER, AND COMMISSION INCOME RECEIV ED ON GIVING THESE BOGUS ENTRIES THROUGH OUR VARIOUS COMPANIES W AS RECEIVED BY US. I ALSO CONFIRM THAT THE BANK ACCOUNTS STATED IN THE QUESTION WERE OPERATED IN THE NAME OF M/S. AADHUNIK SYSTEMS PVT. LTD., M/S. FRENZY PRODUCTS PVT. LTD. AND M/S. M.S. LEASING PVT. LTD. BY ME IN THE NAME OF MY ASSOCIATES. I ALSO CONFIRM THAT THE BELOW MENTIONED LOAN/ADVANC E/SHARE APPLICATION ENTRIES APPEARING IN THE NAME OF VARIOUS COMPANIES WERE GIVEN BY US FROM BANK ACCOUNTS OF DIFFERENT COMPANIES OPERATED FROM MY OFFICE ON CHARGING OF COMMISSION FOR GIVING THE ENTRY AND ON RECEIPT OF EQUIVALENT AMOUNT OF CASH AND THESE ENTRIES WERE GIVEN AS BOGU S/ACCOMMODATION ENTRIES. (I) THE BOGUS ENTRY OF RS.1000000/- (TEN LACS) WAS GIVE N TO M/S. SANJAY ENTERPRISES PVT. LTD. BY OUR COMPANY M/S. FRENZY PR ODUCTS PVT. LTD. VIDE CHEQUE NO. 0323197 DATED 2.5.2000. (II) . 4.1 . IN REPLY TO QUESTION NO. 6 , SHRI SANJAY RAS TOGI REPLIED AS UNDER :- THE SHARE APPLICATION MONEY WAS GIVEN AS A PERMANE NT ENTRY TO THE BENEFICIARY PERSON AND THE LOAN AND ADVANCE ENTRY W AS AT TIME RETURNED / REVERTED BACK BY THE PARTY WHO TOOK THE LOAN/ADVANCE BOGUS ENTRY. IN THIS PARTICULAR CASE THE CASH OF RS.. 500 000/- WAS CREDITED INTO OUR ACCOUNT THROUGH A CHEQUE AND AN AMOUNT OF RS.`. 5,00,000/- WAS PAID IN CASH FOR RETURN OF THE BOGUS ENTRY. 4.2 SUBSEQUENTLY SHRI S.K. SARKAR, CHARTERED ACCOU NTANT OF THE ASSESSEE COMPANY SOUGHT COPY OF THE AFORESAID STATEMENT RECO RDED ON 27.9.2005., WHICH WAS SUPPLIED TO THE ASSESSEE. ON RECEIPT OF COPY OF SAI D STATEMENT, INSTEAD OF REBUTTING ANY OF THE AVERMENTS MADE IN THE STATEMENT, THE AS SESSEE SURRENDERED THE AFORESAID AMOUNT OF ` 10,00,000/- TAKEN AS LOAN FROM FRENZY PRODUCTS (P ) LTD. ITA NO. 3036&4083/DEL/07 5 BEFORE THE AO ON 22.11.2005. CONSEQUENTLY, THE ASSE SSEE SUBMITTED AN APPLICATION BEFORE LD. CIT(A) ON 30 TH NOVEMBER, 2005 SEEKING WITHDRAWAL OF THE APPEAL. I N THE LIGHT OF THESE FACTS THE LD. CIT(A) CONCLUDED AS UN DER :- ON 18.10.2005 SHRI S.K. SARKAR, CA COUNSEL OF THE A PPELLANT APPLIED FOR A COPY OF THE STATEMENT OF SHRI SANJAY RASTOGI RECORD ED ON 27.9.2005 WHICH WAS SUPPLIED TO THE APPELLANT. ON RECEIPT OF THE CO PY OF STATEMENT OF SHRI SANJAY RASTOGI, INSTEAD OF REBUTTING ANY OF THE AVE RMENTS RECORDED IN THE STATEMENT, THE APPELLANT COMPANY SURRENDERED THE LO AN AMOUNT OF RS.. 10,00,000/- TAKEN FROM FRENZY PRODUCTS (P) LTD. BEF ORE THE AO ON 22.11.2005. THE COUNSEL OF THE APPELLANT APPEARED B EFORE ME ON 30.11.2005 SUBMITTING AN APPLICATION FOR WITHDRAWAL OF ITS APP EAL IN VIEW OF ITS SURRENDER BEFORE THE AO. FROM THE STATEMENT OF SHRI SANJAY RA SOTGI, IT IS ESTABLISHED BEYOND DOUBT THAT THE AMOUNT OF `RS..10,00,000/- SH OWN TO HAVE BEEN OBTAINED AS LOAN FROM M/S. FRENZY PRODUCTS (P) LTD. IS NOTHING BUT AN ACCOMMODATING ENTRY OBTAINED ON PAYMENT. THE APPELL ANT COULD NOT REBUT THE STATEMENT OF SHRI SANJAY RASTOGI, WITH ANY MATERIAL EVEN AFTER GIVING AN OPPORTUNITY TO DO SO. THE APPELLANT WAS THEREFORE L EFT WITH NO OTHER ALTERNATIVE BUT TO SURRENDER THE AMOUNT FOR TAXATION WHICH THE ASSESSEE HAS DONE. UNDER THE CIRCUMSTANCES, THE ADDITION OF RS.. 10,00,000/- BEING BOGUS LOAN AND RS.20,000/- BEING PAYMENT MADE FOR OBTAINING THE EN TRY IS JUSTIFIED AND CONFIRMED. BOTH THE GROUNDS ARE THEREFORE DISMISSED . 5. THE ASSESSEE PREFERRED AN FILED AN APPEAL BEFOR E THE ITAT AGAINST THE AFORESAID ORDER OF THE LD. CIT(A). THE ITAT, VIDE THEIR ORDER DATED 10 TH DECEMBER, 2008 CONCLUDED ON THE AFORESAID ADDITION OF ` . 10 LAC IN THE FOLLOWING TERMS :- 2.3 WE HAVE CONSIDERED THE FACTS AND RIVAL SUBMISS IONS. WE FIND THAT THE STATEMENT OF SHRI M.S. RASTOGI WAS RECORDED ON 27.09.2005 BY THE ASSESSING OFFICER, IN WHICH IT WAS DEPOSED THAT THE ENTRY OF RS.`. 10,00,000/- WAS MERELY AN ACCOMMODATION ENTRY AND T HAT HE WAS CHARGING COMMISSION AT THE RATE 0.25% OF THE AMOUNT FOR FURNISHING SUCH ENTRIES. THEREAFTER, THE AMOUNT WAS SURRENDERE D BY THE ASSESSEE FOR TAXATION AND THE ADDITION WAS MADE, INTER ALIA, ON THE GROUND THAT THE AMOUNT WAS SURRENDERED BY THE ASSESSEE IN THE C OURSE OF ASSESSMENT PROCEEDINGS BY WAY OF A WRITTEN LETTER. IN VIEW THEREOF, IT WAS NOT NECESSARY TO AFFORD AN OPPORTUNITY OF CROSS -EXAMINATION TO THE ASSESSEE AS THE STATEMENT WAS NOT THE PRIMARY BASIS FOR MAKING THE ADDITION. THEREFORE, IT IS HELD THAT THE LEARNED CI T(APPEALS) WAS RIGHT IN UPHOLDING THE ADDITION OF RS. 10,00,000/-. THE LETT ER OF THE ASSESSEE DATED 22.11.2005 DID NOT ADMIT THAT ANY COMMISSION WAS PAID FOR OBTAINING THE ENTRY. THUS, THE ADDITION OF RS. 20,0 00/- EMANATES FROM THE STATEMENT OF SHRI S.M. RASTOGI. THE ASSESSEE WA S NOT ALLOWED AN OPPORTUNITY OF CROSS EXAMINE SHRI S.M. RASTOGI. IN ABSENCE THEREOF, THERE IS NO FIRM EVIDENCE ON RECORD TO COME TO THE CONCLUSION THAT THE SUM OF `RS.20,000/- WAS PAID FOR OBTAINING THE ENTR Y, WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE RESULT O F THE ABOVE ITA NO. 3036&4083/DEL/07 6 DISCUSSION IS THAT THE ADDITION OF RS. 10,00,000/- IS UPHELD AND THE ADDITION OF RS.. 20,000/- IS DELETED. 6. LATER THE AFORESAID ORDER WAS RECALLED IN MA NO. 169/D/09 VIDE ORDER DATED 17 TH JULY, 2009. THIS IS HOW APPEAL IS NOW FIXED BEFORE US . AT THE OUTSET, THE LD.. AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE IS NOT INCLINED TO PRESS GROUNDS RAISED IN THE APPEAL. THE LD. DR DID NOT OP POSE THESE SUBMISSIONS OF THE LD. AR. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. IN VIEW OF CATEGORICAL STATEMENT MADE BEFORE US BY TH E LD. AR THAT THE ASSESSEE DOES NOT WANT TO PRESS THE GROUNDS RAISED IN THIS APPEAL ,ACCORDINGLY GROUND NOS. 1 TO 3 IN THE QUANTUM APPEAL ARE DISMISSED. ITA NO. 4083/DEL/2007 8. ADVERTING NOW TO THE APPEAL RELATING TO LEVY O F PENALTY OF ` ` 4,03,410/- U/S 271(1) (C) OF THE ACT, AFTER THE DISMISSAL OF APPEA L BY THE LD. CIT(A), IN RESPONSE TO A SHOW CAUSE NOTICE DATED 9.1.2007 BEFORE LEVY OF PE NALTY, THE ASSESSEE DID NOT SUBMIT ANY REPLY OR EXPLANATION BEFORE THE AO. ACCO RDINGLY, THE AO LEVIED A PENALTY OF ` 4,03,410/- @ 100% OF THE TAX ARE TO BE EVADED ON THE AFORESAID AMOUNT OF ` .10,00,000/- & ` ` 20,000/- ON ACCOUNT OF COMMISSION IN RELATION TO THE ENTRY ON THE GROUND THAT THE ASSESSEE CONCEALED THE PARTICULARS OF ITS INCOME. 9. ON APPEAL, THE LD. CIT(A) UPHELD THE LEVY OF P ENALTY AS UNDER:. 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE AR AND PERUSED THE ASSESSMENT ORDER AND APPELLATE ORDER OF LD. CIT(A) FOR A.Y. 2001-02. IN THIS CASE THE DEPARTMENT HAD GATHERED THE EVIDEN CE BY EXAMINING SHRI SANJAY RASTOGI REGARDING THE MODUS OPERANDI A DOPTED BY SHRI SANJAY RASTOGI IN ACCOMMODATING APPELLANT TO BRING INTO THEIR BOOKS THEIR UNDISCLOSED INCOME IN THE GUISE OF LOANS. IT IS PERTINENT TO NOTE THAT THE STATEMENT OF SHRI SANJAY RASTOGI RECORDED ON 27.09.2005 SPECIFICALLY POINTED OUT THAT THE NAME OF THE APPEL LANT COMPANY AND ADMITTED THAT HE HAD GIVEN A BOGUS ACCOMMODATION EN TRY OF RS.10,00,000/- AS LOAN THROUGH M/S. FRENZY PRODUCTS (P) LTD., WHICH WAS MANAGED BY HIM. THUS, THERE WAS A DIRECT EVIDEN CE TO SHOW THAT THE APPELLANT HAD USED THE SERVICES OF MR. SANJAY R ASTOGI FOR THE PURPOSE OF BRINGING INTO ITS ACCOUNTS ITS UNDISCLOS ED INCOME IN THE ITA NO. 3036&4083/DEL/07 7 GUISE OF LOANS. WHEN THE STATEMENT OF SHRI SANJAY R ASTOGI WAS CONFRONTED TO THE APPELLANT, THE APPELLANT INSTEAD OF REBUTTING THE CONTENTS OF THE STATEMENT, HAD SURRENDERED THE AMOU NT BEFORE THE AO AND, HENCE, IN A WAY ADMITTED THE FACT THAT THE AMO UNT OF RS.10,00,000/- SHOWN AS LOAN FROM M/S. FRENZY PRODU CTS (P) LTD. WAS NOT A GENUINE LOAN AND WAS ONLY A BOGUS ACCOMMODATI ON ENTRY OBTAINED THROUGH SHRI SANJAY RASTOGI. THE APPELLANT CAME FORWARD TO SURRENDER THE AMOUNT ONLY WHEN THE APPELLANT WAS CO RNERED WITH COGENT EVIDENCE GATHERED BY THE DEPARTMENT THAT THE LOAN OF RS.10,00,000/- SHOWN WAS NOT A GENUINE TRANSACTION. THUS, IT WAS PROVED BEYOND DOUBT BY THE DEPARTMENT THAT THE AMOU NT OF RS.10,00,000/- SHOWN TO HAVE BEEN OBTAINED AS LOAN FROM M/S. FRENZY PRODUCTS (P) LTD. WAS NOTHING BUT AN ACCOMMODATION ENTRY OBTAINED WITH THE HELP OF SHRI SANJAY RASTOGI. HENCE, IT WAS A FIT CASE FOR LEVYING PENALTY U/S 271(1)( C) AS THERE WAS A DEFINITE FIND ING OF CONCEALMENT OF INCOME BY THE APPELLANT BY FURNISHING INACCURATE PA RTICULARS OF INCOME REGARDING A LOAN OF `. 10,00,000/-. THE CIRCULAR NO. 451 DATED FEBRUARY 17, 1986 DOES N OT HELP THE APPELLANT. FIRST, THE CIRCULAR DOES NOT GRANT IMMUN ITY FOR PENALTY U/S 271(1)(C) FOR WITHDRAWN OF APPEAL AS CONTENDED BY T HE AR. SECONDLY, THE APPELLANT HAD NOT VOLUNTARILY WITHDRAWN THE APP EAL. THE APPEAL WAS WITHDRAWN ONLY WHEN SH. RASTOGI CATEGORICALLY STATE D IN HIS STATEMENT THAT HE HAD PROVIDED AN ACCOMMODATION ENTRY OF RS.` .10,00,000/- TO THE APPELLANT COMPANY AFTER OBTAINING AN EQUIVALENT AMOUNT OF CASH AND THE APPELLANT COMPANY HAD NOTHING TO REBUT THE AVERMENTS OF SHRI RASTOGI. IT MAY BE NOTED THAT THE RATIO IN THE CASE OF CIT VS. FREEMENTAL INDIA TELEVISO (2007) 159 TAXMAN 31 (DEL) RELIED UP ON BY THE A.R. IS NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE AS THE FACTS OF THAT CASE WERE DIFFERENT AND DISTINCT FROM THE APPELLANT S CASE. IN THAT CASE THE APPELLANT HAD CLAIMED A DEDUCTION OF RS. 10,66, 029/- AS FORMAT FEE. THE AO HAD NOT ALLOWED THIS DEDUCTION AND THE AMOUN T WAS ADDED TO THE TOTAL INCOME. BUT BEFORE THE ASSESSMENT WAS COM PLETED, THE APPELLANT HAD WITHDRAWN THE CLAIM FOR DEDUCTION AND HAD OFFERED THE AMOUNT FOR TAX. ON THESE FACTS, THE PENALTY WAS DEL ETED BY THE HONBLE HIGH COURT OBSERVING THAT THE APPELLANT HAD OFFERED THE AMOUNT FOR TAX IN NOVEMBER, 1997 WELL IN ADVANCE OF ASSESSMENT ORD ER BEING PASSED IN MARCH, 2000. WHEREAS, IN THE INSTANT CASE OF THE APPELLANT, IT IS PERTINENT TO NOTE THAT THERE WAS NO SUCH WITHDRAWAL OR SURRENDER BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. RATHER THE APPELLANT HADE FILED AN APPEAL AGAINST THE ASSESSME NT ORDER BEFORE THE CIT(A) AND CONTESTED THE ADDITION MADE BY THE A.O. THE APPELLANT SURRENDERED THE AMOUNT AFTER THE COMPLETION OF ASSE SSMENT WHEN THE APPELLANT WAS CONFRONTED WITH THE STATEMENT RECORDE D BY THE AO FOR SUBMITTING OF REMAND REPORT DURING THE APPELLANT PR OCEEDINGS. THUS, IT WAS NOT A SURRENDER MADE VOLUNTARILY BY THE APPELLA NT. IT WAS MADE BECAUSE THE APPELLANT HAD NO OPTION/NOTHING TO REBU T THE EVIDENCE ITA NO. 3036&4083/DEL/07 8 GATHERED BY THE DEPARTMENT. THE APPELLANT HAD NO AL TERNATIVE BUT TO SURRENDER THE AMOUNT BEFORE THE DEPARTMENT. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT IT WAS A FIT CASE FOR LEVYING PENALTY U/S 271(1)(C) . HENCE, THE PENALTY OF RS.4,03,410/-LEVIDED U/S 271(1)(C) BY THE AO FOR A. Y. 2001-02 IS CONFIRME D. 10. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E WHILE CARRYING US THROUGH THE IMPUGNED ORDER CONTENDED THAT THOUGH THE AO AND THE LD. CIT(A) HAVE MENTIONED IN THE ORDER THAT COPY OF THE STATEMENT O F SHRI SANJAY RASTOGI RECORDED ON 27 TH SEPTEMBER, 2005 WAS SUPPLIED TO THE ASSESSEE, IN F ACT, IT WAS NEVER SUPPLIED. HE POINTED OUT THAT THE ASSESSEE HAD ALRE ADY RETURNED AN AMOUNT OF ` ` . 5,00,000/- TO M/S. FRENZY PRODUCTS (P) LTD. THE LD. AR ADDED THAT SURRENDER WAS MADE IN THE QUANTUM PROCEEDINGS ONLY TO BUY PEACE O F MIND AND THEREFORE, PENALTY SHOULD NOT BE LEVIED. IN SUPPORT, THE LD. A R RELIED UPON THE DECISION IN CIT VS. D & H SECHERON ELECTRODES LIMITED.,296 ITR 193.(MP) .ON THE OTHER HAND , THE LD. DR POINTED OUT THAT BEFORE THE INVE STIGATION WING DURING THE COURSE OF SURVEY, SHRI SANJAY RASTOGI ADMITTED THE BOGUS E NTRIES GIVEN TO THE ASSESSEE AND SUBSEQUENTLY IN THE STATEMENT RECORDED BY THE A O ON 27.9.2005 AT THE BEHEST OF LD. CIT(A), SHRI SANJAY RASTOGI CATEGORI CAL ADMITTED TO GIVING ACCOMMODATION ENTRIES TO THE ASSESSEE . INSTEAD OF CROSS EXAMINING SHRI SANJAY RASTOGI, THE ASSESSEE JUST CHOSE TO SURRENDER THE AMOUNT. HE ADDED THAT THE ASSESSEE NEVER SOUGHT CROSS EXAMINATION OF SHRI SA NJAY RASTOGI DURING THE QUANTUM PROCEEDINGS OR EVEN IN THE PENALTY PROCEEDI NGS BEFORE THE AO . INTER ALIA, THE LD. DR RELIED UPON THE DECISION IN H. V. VENUGOPAL CHETTIAR. VS. CIT,153 ITR 376(MAD.), DCIT VS. CHIRAG METAL ROLLING MILLS LIMITED.305 ITR 29( MP) AND ADDED THAT LEVY OF PENALTY SHOULD BE UPHELD. IN HI S REJOINDER, THE LD. AR SUBMITTED THAT IN THE DECISIONS RELIED UPON BY LD. DR THE RESPECTIVE ASSESSEES CATEGORICALLY ADMITTED CONCEALMENT WHEREAS IN THE I NSTANT CASE NOWHERE THE ASSESSEE ADMITTED CONCEALMENT OF INCOME. HE ADDED T HAT STATEMENT RECORDED AT THE BACK OF THE ASSESSEE COULD NOT BE RELIED UPON. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE AS ALSO DECISION REFERRED TO BY BOTH THE SIDES. AS IS APPARENT FROM THE AFORESAID ITA NO. 3036&4083/DEL/07 9 FACTS, IN THIS CASE DURING THE COURSE OF SURVEY, SH RI SANJAY RASTOGI, CA EXPLAINED HIS MODUS OPERANDI IN GIVING ACCOMMODATION ENTRIE S TO VARIOUS PERSONS THROUGH CONCERNS CONTROLLED AND MANAGED BY HIM. HE ADMITTED HAVING RECEIVED CASH AND ISSUED CHEQUE OF AN EQUIVALENT AMOUNT TO VARIOUS PE RSONS, INCLUDING THE ASSESSEE ON THE BASIS OF INFORMATION REVEALED DURING THE SU RVEY , THE ASSESSMENT IN THIS CASE WAS REOPENED U/S 147 OF THE ACT .DURING THE COURSE OF REASSESSMENT PROCEEDINGS, SHRI SUNIL AGGARWAL, DIRECTOR OF THE COMPANY APPEAR ED AND HE WAS INFORMED BY THE AO THAT SHRI SANJAY RASTOGI ADMITTED DURING THE S URVEY THAT HE ALONG WITH HIS FATHER SHRI M.S. RASTOGI AND ASSOCIATES SHRI ASHWAN I UPPAL & HIS EMPLOYEES, WAS RUNNING CONCERNS, WHICH WERE ENGAGED IN GIVING BOGU S/ACCOMMODATING ENTRIES. IN HIS STATEMENT RECORDED BY INVESTIGATION WING, SHRI SANJAY RASTOGI IN REPLY TO QUESTION NO. 14 ADMITTED THAT HE WAS PROVIDING CERT AIN SERVICES IN CONNECTION WITH COMPANIES / CONCERN / ENTITIES, WHICH WERE NOT DOIN G THE REAL GENUINE BUSINESS EXCLUSIVELY. FEW PRIVATE LTD. / LTD. COMPANIES WER E USED AS FRONT COMPANIES AS CONDUIT FOR EXECUTION OF SUCH ENTRIES / TRANSACTION S, WHICH WERE NOT DOING BUSINESS IN ACTUAL. SHRI SUNIL AGGARWAL DIRECTOR OF THE COMPANY WAS CONFRONTED WITH THE AFORESAID QUESTION AND REPLY OF SHRI SANJAY RASTOGI AND HE WAS HANDED OVER A COPY OF THE ABOVE STATEMENT TO READ FOR HIMSELF WITH TH E REQUEST TO FURNISH THEIR REPLY. SINCE THE ASSESSEE RECEIVED FROM M/S FRENZY PRODUCT (P) LTD. AN ACCOMMODATION ENTRY OF ` 10 LACS AND THE ASSESSEE DID NOT CONTROVERT THE S TATEMENT OF SHRI SANJAY RASTOGI, AFTER CONSIDERING THE REPLY OF THE ASSESSE E, THE AO ADDED AN AMOUNT OF ` 10,00,000/- BY WAY OF UNEXPLAINED CREDITS BESIDES A N AMOUNT OF ` 20 ,000/- BY WAY OF COMMISSION @ 2% .ON APPEAL, THE LD. CIT(A) DIREC TED THE AO TO SUMMON TO ALL THE CONCERNED PARTIES INCLUDING MANAGING DIRECTOR OF M/ S. FRENZY PRODUCTS (P) LTD. FROM WHOM THE ALLEGED LOAN WAS CLAIMED TO HAVE BEEN RECE IVED AND RECORD THEIR STATEMENTS. IN TERMS OF THESE DIRECTIONS, THE AO R ECORDED THE STATEMENT OF SHRI SANJAY RASTOGI ON OATH ON 27.9.2005 AS REPRODUCED I N THE IMPUGNED ORDER ON PAGE 3 TO 7.IN THIS STATEMENT, SHRI SANJAY RASTOGI SPEC IFICALLY POINTED OUT THE NAME OF THE ASSESSEE COMPANY AND ADMITTED THAT HE HAD GIVEN A B OGUS ACCOMMODATION ENTRY OF RS.10,00,000/- AS LOAN TO THE ASSESSEE THROUGH M/S. FRENZY PRODUCTS (P) LTD., WHICH WAS MANAGED BY HIM. WHEN THE STATEMENT OF SHRI SANJ AY RASTOGI WAS CONFRONTED TO THE ASSESSEE, INSTEAD OF REBUTTING THE CONTENTS OF THE STATEMENT, THE ASSESSEE SURRENDERED THE AMOUNT BEFORE THE AO AND SOUGHT P ERMISSION TO WITHDRAW THE ITA NO. 3036&4083/DEL/07 10 APPEAL. APPARENTLY, THE ASSESSEE CAME FORWARD TO S URRENDER THE AMOUNT ONLY WHEN THE ASSESSEE WAS CORNERED WITH COGENT INCRIMINATING EVIDENCE GATHERED BY THE AO THAT THE LOAN OF RS.10,00,000/- SHOWN WAS NOT A GEN UINE TRANSACTION. EVEN BEFORE US, AS AFORESAID, THE ASSESSEE DID NOT PRESS GROUND S RELATING TO THE SAID ADDITION IN QUANTUM APPEAL . DURING THE COURSE OF PENALTY PROCE EDINGS, THE ASSESSEE DID NOT FURNISH ANY EXPLANATION IN RESPONSE TO SHOWCAUSE NO TICE ISSUED BY THE AO. IN THE ABSENCE OF ANY EXPLANATION DURING THE PENALTY PRO CEEDINGS, APPARENTLY, CLAUSE (A) OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT IS A TTRACTED . BEFORE PROCEEDING FURTHER , WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SE CTION 271(1)(C) OF THE ACT, WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CO NCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT, IS SATISFIED THAT ANY PERSON- .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY,- (III) IN THE CASES REFERRED TO IN CLAUSE (C) , IN ADDITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INC OME OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE DEPUTY COMMISSIONER (APPEALS) OR THE COMMISSIONER (APPEALS) TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE P URPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. ITA NO. 3036&4083/DEL/07 11 11.1 AS IS EVIDENT FROM THE AFORESAID CL. (C) OF S. 271(1) OF THE ACT, THE WORDS USED ARE 'HAS CONCEALED THE PARTICULARS OF HIS INCO ME' OR FURNISHED 'INACCURATE PARTICULARS OF SUCH INCOME'. THUS, BOTH IN CASE OF CONCEALMENT AND INACCURACY, THE PHRASE 'PARTICULARS OF INCOME' HAS BEEN USED. T HE LEGISLATURE HAS NOT USED THE WORDS 'CONCEALED HIS INCOME'. FROM THIS IT WOULD BE APPARENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE F ULLY OR TRULY ALL THE PARTICULARS. THE WORDS 'PARTICULARS OF INCOME' REFER TO THE FACT S WHICH LEAD TO THE CORRECT COMPUTATION OF INCOME IN ACCORDANCE WITH THE PROVIS IONS OF THE ACT. SO WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS IN COME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER S. 271(1)(C) OF TH E ACT. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNI SHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMEL Y, KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO LAW LEX ICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS C ON+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION ; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF ; TO WITHHOLD KN OWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN I TEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHOR ITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' 11.2 IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE TO THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED, THEN SUCH DISCLOSUR E CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF PARTICULARS OR FURNISHING INACCURATE PARTICULARS THEREOF FOR THE PURPOSE OF LEVY OF PENALTY. THE PEN ALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURS E OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PA RTICULARS OF HIS ITA NO. 3036&4083/DEL/07 12 INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IN THIS CONTEXT, HONBLE GUJRAT HIGH COURT IN THE CASE OF AM SHAH & CO. VS. CIT,238 ITR 415(GUJ) OBSERVED THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DET ECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INCOME AND INACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP, AS FOR EXAMPLE WHEN HALF OF THE INCO ME UNDER A PARTICULAR HEAD IS NOT AT ALL DISCLOSED, THAT WOULD BE CONCEALED TO THAT E XTENT WHILE THE REMAINING HALF WHICH IS IN FACT DISCLOSED WOULD, NOT BEING HIS COMPLETE DISCLOSURE AMOUNT TO INACCURATE PARTICULARS OF INCOME AS REGARDS THAT CONSTITUENT I TEM OF THE RETURN. BY THE VERY NATURE OF THE ASSESSMENT PROCEEDINGS THE ITO WHILE ASCERTAINING THE TOTAL INCOME CHARGEABLE TO TAX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICULARS OF INCOME CONCEALED OR OF WHICH FALSE PARTICULARS A RE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR D EFINITE PARTICULARS OF INCOME ARE DETECTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOM E FIGURE TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CONCEALMENT TO THAT EXT ENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DET ECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOTAL INCOME INACCURATE I N PARTICULARS TO THE EXTENT IT DOES NOT INCLUDE SUCH INCOME. WHETHER IT BE A CASE OF ON LY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VI TIATED WOULD BE SPECIFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF P ARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENALTY PROCEEDINGS ON O NE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE BEEN SPECIFICALLY AND DIRECTLY DETECTED . THE OPPORTUNITY OF HEARING GIVEN BY THE NOTICE UNDER SECTION 271(1)(C), OBVIOU SLY IS AGAINST SUCH CONCEALMENT AND INACCURACY AS IS DETECTED IN THE ASSESSMENT PRO CEEDINGS. 11.3. INDISPUTABLY, THE ASSESSEE ,INSTEAD OF REB UTTING THE STATEMENT OF SHRI SANJAY RASTOGI RECORDED ON 27.9.2005 ON OATH DURING THE REMAND PROCEEDINGS, SURRENDERED THE AMOUNT AND SOUGHT TO WITHDRAW THE A PPEAL FILED BEFORE THE LD. CIT(A). EVEN DURING THE PENALTY PROCEEDINGS, THE A SSESSEE DID NOT SUBMIT ANY EXPLANATION AT ALL BEFORE THE AO . IN THESE CIRCUMS TANCES, IT DOES NOT LIE IN THE MOUTH OF THE ASSESSEE THAT IT DID NOT CONCEAL PARTI CULARS OF ITS INCOME IN THE RETURN FILED ORIGINALLY . IN THE COURSE OF PENALTY PROCEED INGS , THE ASSESSEE DID NOT BRING ANY MATERIAL BEFORE THE AO TO REBUT THE INFERENCES DRAWN BY THE ASSESSING OFFICER IN THE COURSE OF REASSESSMENT PROCEEDINGS. IN TERM S OF PROVISIONS OF SEC. 271(1)(C) OF THE ACT READ WITH EXPLANATION 1 THERET O AND THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF B.A. BALASUBRAMANIAM & BROS. CO. V. CIT [1999] ITA NO. 3036&4083/DEL/07 13 157 CTR 556(SC), CIT V. B.A. BALASUBRAMANIAM & BROS . [1984] 40 CTR (MAD.)/[1985] 152 ITR 529 (MAD.) , CIT V. MUSSADILAL RAM BHAROSE [1987] 60 CTR (SC) 34/[ 1987] 165 ITR 14 (SC); TC 50 R. 474; CIT V. K.R. SADAYAPPAN [1990] 86 CTR (SC) 120; [1990] 185 ITR 49 (SC); TC 50 R. 795, ADDL. CIT V. JEEVAN LAL SAH [1994] 117 CTR (SC) 130; [1994] 205 ITR 244 (SC); TC 50 R. 973 AND K.P.MADHUSUDANAN VS. CIT,251 ITR 99(SC), IT IS WELL ESTABLISHED THAT WHENEVER THERE IS DIFFERENCE BETWEEN THE RETURNED A ND ASSESSED INCOME, THERE IS INFERENCE OF CONCEALMENT. THE EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT RAISES A PRESUMPTION THAT CAN BE REBUTTED BY THE ASSESSEE WI TH REFERENCE TO FACTS OF THE CASE. THUS, THE ONUS IS ON THE ASSESSEE TO REBUT TH E INFERENCE OF CONCEALMENT. THE ABSENCE OF EXPLANATION ITSELF WOULD ATTRACT PEN ALTY. THE ONUS LAID DOWN UPON THE ASSESSEE TO REBUT THE PRESUMPTION RAISED UNDER EXPLANATION 1 WOULD NOT BE DISCHARGED BY ANY FANTASTIC OR FANCIFUL EXPLANATION . IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION HAS TO BE ACCEPTED . IN OUR CON SIDERED VIEW, THE PROVISIONS OF CLAUSE (A ) OF EXPLANATION 1 TO SECTION 271(1)(C), WHEN THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION DURING PENALTY PROCEEDINGS , IS CLEARLY ATTRACTED AND THE ASSESSEE HAS MISERABLY FAILED TO DISCHARGE THE ONUS LAID DOWN IN THIS EXPLANATION. THE PLEA OF THE ASSESSEE BEFORE US THAT COPY OF THE STATEMENT OF SHRI SANJAY RASTOGI RECORDED ON OATH ON 27.9.2005 WAS NOT CONF RONTED TO THEM FOR REBUTTAL, IS BASELESS IN VIEW OF OBSERVATIONS OF THE LD. CIT(A) ON PAGE 7, REPRODUCED ABOVE IN PARA 4.2 ,WHERE IN IT IS CLEARLY MENTIONED THAT COP Y OF THE STATEMENT WAS SUPPLIED TO THE ASSESSEE AND THEREAFTER ALONE, THE ASSESSEE SURRENDERED THE AMOUNT AND SOUGHT PERMISSION TO WITHDRAW THE APPEAL. EVEN OTHE RWISE , FOR THE FIRST TIME AN AFFIDAVIT DATED 26.6.2008 HAS BEEN FILED BY SHRI SU NIL AGARWAL, DIRECTOR THE ASSESSEE COMPANY BEFORE THE ITAT IN QUANTUM PROCEED INGS WHEREIN IT IS STATED THAT THE SAID STATEMENT OF SHRI SANJAY RASTOGI WAS NOT MADE AVAILABLE TO THEM.. HOWEVER, SHRI S.K. SARKAR ,WHO APPEARED BEFORE THE ITAT ON 30.7.2008 WAS SPECIFICALLY INFORMED THAT THE AFFIDAVIT IS NOT OF THE APPROPRIATE PERSON, SHRI S.K. SARKAR, AR, HAVING OBTAINED COPY OF THE STATEMENT O N HIS REQUEST DATED 18.10.2005. THEREAFTER, THE ASSESSEE DID NOT FILE ANY AFFIDAVIT OF SHRI S.K. SARKAR NOR DISPUTED THE FINDINGS OF THE LD. CIT(A) IN QUAN TUM PROCEEDINGS BEFORE THE ITAT. IN PENALTY PROCEEDINGS ALSO, THE ASSESSEE DID NOT SUBMIT ANY REPLY BEFORE THE AO .IT IS ONLY ON 30.7.2008 THAT SHRI SUNIL AG ARWAL, DIRECTOR OF THE COMPANY ITA NO. 3036&4083/DEL/07 14 FILED AFFIDAVIT, SEEKING COPY OF THE STATEMENT. SI NCE THE FACTS ON RECORD ESTABLISH THAT THE ASSESSEE WAS SUPPLIED A COPY OF THE AFORES AID STATEMENT RECORDED ON OATH ON 27.9.2005 AND ONLY THEREAFTER, AMOUNT WAS S URRENDERED DURING THE REMAND PROCEEDINGS AND THE ASSESSEE SOUGHT TO WITH DRAW THEIR APPEAL BEFORE THE LD. CIT(A), THE PLEA MADE BEFORE US THAT COPY O F THE SAID STATEMENT WAS NOT MADE AVAILABLE IS MEANINGLESS AND IS NOT TENABLE. E VEN OTHERWISE, SINCE THE TRANSACTION WAS BETWEEN THE ASSESSEE COMPANY AND M/ S FRENZY PRODUCT(P) LTD , A COMPANY CONTROLLED BY SHRI SANJAY RASTOGI, ALL TH E FACTS WERE WITHIN THE SPECIFIC KNOWLEDGE OF THE ASSESSEE AND ITS DIRECTOR. IN FAC T ,SHRI SANJAY RASTOGI WAS CONFRONTED WITH THE STATEMENT OF SHRI SANJAY RASTO GI RECORDED DURING THE COURSE OF SURVEY, IN THE REASSESSMENT PROCEEDINGS. IN ANY CASE, THE FACT REMAINS THAT THE SAID SURRENDER WAS NOT VOLUNTARY AND IT IS ON LY AFTER STATEMENT OF SHRI SANJAY RASTOGI WAS RECORDED DURING THE REMAND PROCEEDINGS, THE ASSESSEE FELT CORNERED AND OFFERED THE AMOUNT TO TAX. 11.4 . HERE ,WE MAY HAVE A LOOK AT THE MEANING O F WORD VOLUNTARY. THE MEANING OF WORD VOLUNTARILY HAS BEEN DELIBERATED UPON BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHRI RAKESH SURI REPOR TED IN 2010-TIOL-357-HC-ALL-IT AS UNDER:- 41. A FULL BENCH OF THE ALLAHABAD HIGH COURT IN TH E CASE REPORTED IN (1998) 230 ITR 855:BHAIRAV LAL VERMA VERSUS UNION OF INDIA, WHILE INTERPRETING THE WORD `VOLUNTARILY GIVEN IN SECTION 273(A) OF THE ACT HELD THAT VOLUNT ARILY MEANS OUT OF FREE WILL WITHOUT ANY COMPULSION. WHEN THE ASSESSEE CONCEALED THE IN CRIMINATING MATERIAL WITH REGARD TO INCOME SO DISCLOSED CANNOT BE HELD TO BE VOLUNTARILY. IT SHALL BE APPROPRIATE TO REPRODUCE THE RELEVANT PORTION FROM THE JUDGMENT OF BHAIRAV LAL VERMA (SUPRA) AS UNDER: THE POSITION THUS SETTLED IS THAT THE WORD VOLUNTARILY IN SECTION 273A OF THE ACT MEANS OUT OF FREE WILL WITHOUT ANY COMPULSI ON. DISCLOSURE OF CONCEALED INCOME AFTER THE DEPARTMENT HAS SEIZED THE INCRIMIN ATING MATERIAL WITH REGARD TO THE INCOME SO DISCLOSED, CANNOT BE VOLUNTARY DIS CLOSURE, BECAUSE IT WAS MADE UNDER THE CONSTRAINT OF EXPOSURE TO ADVERSE AC TION BY THE DEPARTMENT. BUT IT CANNOT BE HELD AS A PRINCIPLE OF LAW THAT TH E DISCLOSURE OF INCOME MADE AFTER THE SEARCH/RAID CANNOT BE VOLUNTARY. IT IS A QUESTION WHICH HAS TO BE DECIDED BY THE DEPARTMENT IN EACH CASE ON THE BASIS OF THE MATERIAL ON THE ITA NO. 3036&4083/DEL/07 15 RECORD. IF ON RECORD THERE IS INCRIMINATING MATERIA L WITH REGARD TO THE DISCLOSED INCOME, THE DISCLOSURE CANNOT BE VOLUNTARY. BUT IF THE DEPARTMENT HAS NO INCRIMINATING MATERIAL WITH REGARD TO THE INCOME DI SCLOSED, THE DISCLOSURE IS LIABLE TO BE TREATED AS VOLUNTARY HAVING BEEN MADE WITHOUT ANY COMPULSION OR CONSTRAINT OF EXPOSURE TO ADVERSE ACTION BY THE DEP ARTMENT. IN A CASE WHERE THE ASSESSEE HAS DISCLOSED NOT ONLY THE INCOME REGA RDING WHICH THE DEPARTMENT HAS INCRIMINATING MATERIAL, BUT HAS ALSO DISCLOSED THE INCOME WITH REGARD TO WHICH NO INCRIMINATING MATERIAL WAS SEIZE D BY THE DEPARTMENT, THE DISCLOSURE OF THE INCOME WITH REGARD TO WHICH THE D EPARTMENT HAS NO INCRIMINATING MATERIAL, IS LIABLE TO BE TREATED AS VOLUNTARY. FOR EXAMPLE, IF AN ASSESSEE IS HAVING FIVE ACCOUNTS AND THE DEPARTMENT HAS INCRIMINATING MATERIAL WITH REGARD TO ONE OF THOSE ACCOUNTS ONLY, THE DISC LOSURE OF INCOME RELATING TO FOUR ACCOUNTS WITH REGARD TO WHICH THE DEPARTMENT H AS NO INCRIMINATING MATERIAL, IS VOLUNTARY, BECAUSE IT WAS MADE WITHOUT ANY CONSTRAINT OR COMPULSION, EVEN THOUGH THE DISCLOSURE OF THE INCOM E RELATING TO THE ACCOUNT REGARDING WHICH THE DEPARTMENT HAS INCRIMINATING MA TERIAL, IS LIABLE TO BE TREATED AS NONVOLUNTARY. :- DICTIONARY:- 42. BLACKS LAW DICTIONARY (SEVENTH EDITION)DEFINES VOLUNTARILY AS INTENTIONALLY OR WITHOUT COERCION. IT SHALL BE APPR OPRIATE TO REPRODUCE MEANING OF VOLUNTARILY AND VOLUNTARY AS GIVEN IN BLACK S LAW DICTIONARY, WHICH IS AS UNDER:- VOLUNTARILY, ADV. INTENTIONALLY; WITHOUT COERCION. VOLUNTARY, ADJ. 1. DONE BY DESIGN OR INTENTION . 2. UNCONSTRAINED BY INTERFERENCE; NOT IMPELLED BY OUTSIDE INFLUENCE . 3. WITHOUT VALUABLE CONSIDERATION; GRATUITOUS < VOLUNTARY GIFT>. 4. HAVING MERELY NOMINAL CONSIDERATION - VOLUNTARINESS, N. 43. IN THE LAW LEXICON BY P. RAMANATHA AIYAR, MEANI NG OF VOLUNTARY HAS BEEN GIVEN AS, TO QUOTE:- VOLUNTARY OF ONES FREE WILL, IMPULSE OF CHOICE; NOT CONSTRINGED BY ANOTHER; ACTING VOLUNTARILY OR WILLINGLY [S. 2(2), SALE OF G OODS ACT]; [ART. 101(3), PROV., CONST.] VOLUNTARY THE EXPRESSION `VOLUNTARY IS USED IN THIS SECTION TO MEAN `NATURALISATION IN THE NARROW SENSE OF THAT TERM AND ITA NO. 3036&4083/DEL/07 16 EXCLUDING COMPULSORY, INVOLUNTARY OF COLLECTIVE NATURALIZATIO N WHICH SOME STATES HAVE ADOPTED AT DIFFERENT TIMES. T.E. MOHOM ED USMAN VS. STATE OF MADRAS, AIR 1961 MAD 129, 138. [CITIZENSH IP ACT, 1955,S. 9(1)] MEANS DOING OF SOMETHING AS THE RESULT OF THE FREE EXERCISE OF THE WILL BUT NOT SOMETHING DONE UNDER A LEGAL DUTY. WHERE A PERSON OBTAINED A PASSPORT ACTED ON HIS OWN VOL ITION AND KNEW THE NATURE OF HIS ACT AND DID NOT ACT IN PERFORMANCE OF A LEGAL DUTY, NOR DUE TO COERCION OR FRAUD OR MISREPRESENTATION OR MISTAKE HE HAS ACTED VOLUNTARILY. ABDUL SALAM V. UNION OF INDIA, A IR 1969 ALL. 223 AT 228. [CITIZENSHIP RULES (1956) R. 30] 11.41 FROM THE SAID DECISION IT IS, THUS, CLEAR THAT VOLUNTARILY MEANS OUT OF FREE WILL WITHOUT ANY COMPULSION. IT IS ALSO OBSERVED THEREIN THAT WHEN THE ASSESSEE CONCEALED INCRIMINATING MATERIAL WITH REGARD TO THE INCOME DISCLOSED BY THE ASSESSEE, SURRENDER CANNOT HELD TO BE VOLUNTARILY. SURRENDER OF INCOME AFTER THE DEPARTMENT HAS COLLECTED INCRIMINATING MATERIAL WIT H REGARD TO THE INCOME SO DISCLOSED, CANNOT BE VOLUNTARY SURRENDER , BECAUSE IT WAS MADE UNDER THE CONSTRAINT OF EXPOSURE TO ADVERSE ACTION BY THE DEPARTMENT. IN THE PRESENT CASE, THE DEPARTMENT HAS COLLECTED SUFFICIENT MATERIAL AGAINS T THE ASSESSEE AND ONLY AFTER INCRIMINATING MATERIAL COLLECTED BY THE DEPARTMENT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE, THE SURRENDER WAS, THUS, MADE BY THE ASSESSEE UNDER THE CONSTRAINT OF EXPOSURE TO ADVERSE ACTION BY THE AO. WE TOTAL LY AGREE WITH THE CONCLUSION OF THE LD. CIT(A) THAT THE ASSESSEE HAD NO OPTION AND NOTHING TO REBUT THE EVIDENCE GATHERED BY THE DEPARTMENT. IN SUCH CIRCUMSTANCES, LEVY OF PENALTY IS JUSTIFIED. MOREOVER ,MERELY BECAUSE AMOUNT OF RS. 5 LACS HAS B EEN PAID IN SUBSEQUENT YEAR , DOES NOT MAKE A INGENUINE TRANSACTION, GENUINE. THE ASSESSEE MISERABLY FAILED TO REBUT THE INCRIMINATING STATEMENT OF SHRI SANJAY R ASTOGI RECORDED DURING THE COURSE OF SURVEY AND THAT RECORDED DURING THE REMAND PROCE EDINGS IN RELATION TO TRANSACTION OF RS. 10 LACS, IN THE REASSESSMENT PROCEEDINGS AS ALSO IN PENALTY PROCEEDINGS. IN FACT, NO EXPLANATION WAS FILED BEFORE THE AO DURING THE PENALTY PROCEEDINGS . THUS, ITA NO. 3036&4083/DEL/07 17 THE ASSESSEE MISERABLY FAILED TO DISCHARGE THE INIT IAL ONUS LAID DOWN UPON THE ASSESSEE IN TERMS OF EXPLANATION 1 TO SEC. 271(1) (C) OF THE ACT. 11.5 WE FIND THAT THE LEGAL POSITION IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT IN K.P. MADHUSUDHANAN V. CIT [20 01] 251 ITR 99 . THEREIN, THE HONBLE COURT AFFIRMED THE DECISION OF THE KERA LA HIGH COURT IN CIT V. K.P. MADHUSUDANAN [2000] 246 ITR 218 . CONSIDERING THE EFFECT OF THE ADDITION OF THE EXPLANATION TO SECTION 271(1) OF THE ACT AND THE AM ENDMENT TO SECTION 271(1)(C) OF THE ACT BY DELETION OF THE WORD 'DELIBERATELY', THE HONBLE KERALA HIGH COURT CAME TO THE CONCLUSION THAT WHETHER PENALTY WAS LIA BLE TO BE IMPOSED IN A CASE WHERE THE ASSESSEE COULD OFFER NO ACCEPTABLE EXPLAN ATION FOR THE INCOME NOT DISCLOSED OR THE INACCURATE PARTICULARRS HE HAD FUR NISHED IN HIS RETURN, HAD TO BE EXAMINED AND IF FOUND UNACCEPTABLE, PENALTY WAS LIA BLE TO BE IMPOSED. THE HONBLE KERALA HIGH COURT OBSERVED AS FOLLOWS : 'SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IS ATTRACTED WHERE, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, THE ASSESS ING OFFICER OR THE FIRST APPELLATE AUTHORITY IS SATISFIED THAT: (A) ANY PERS ON HAS CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) HAS FURNISHED INA CCURATE PARTICULARS OF SUCH INCOME. THE EXPRESSIONS 'HAS CONCEALED' AND 'HAS FU RNISHED INACCURATE PARTICULARS' HAVE NOT BEEN DEFINED EITHER IN THE SE CTION OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING DIFFERENCES IN THE TWO CIR CUMSTANCES, THEY LEAD TO THE SAME EFFECT, VIZ., KEEPING OFF A CERTAIN PORTIO N OF INCOME. THE FORMER IS DIRECT WHILE THE LATTER MAY BE INDIRECT IN ITS EXEC UTION. A CONSPECTUS OF THE EXPLANATION ADDED BY THE FINANC E ACT, 1964, AND THE SUBSEQUENT SUBSTITUTED EXPLANATIONS MAKES IT CLEAR THAT THE STATUTE VISUALIZED THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN ESSENCE, THE EXPLANAT ION (BOTH AFTER 1964 AND 1976) IS A RULE OF EVIDENCE. PRESUMPTIONS WHICH ARE REBUTTABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHA RGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE. EXPLANATION 1 AUTOMATICALLY COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPL ANATION IS OFFERED WHICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE F IRST APPELLATE AUTHORITY, OR AN EXPLANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME I S DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. AS PER THE PROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH T HAT THE EXPLANATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HI M WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. THE ASSESSING OFFICER IS NOT OBLIGED TO INTIMATE THE ASSESSEE THAT EXPLANATION 1 TO SECTION 271(1)(C) IS PROPOSED TO BE APPLIED. ITA NO. 3036&4083/DEL/07 18 THE SCHEME OF THE PROVISIONS DOES NOT PROVIDE FOR S UCH A REQUIREMENT EITHER DIRECTLY OR INFERENTIALLY. IN SIR SHADILAL'S CASE [ 1987] 168 ITR 705 , WHAT THE SUPREME COURT OBSERVED WAS THAT THERE MAY BE SEVERA L REASONS FOR WHICH THE ASSESSEE MAY HAVE OFFERED AN AMOUNT FOR ADDITION, B UT THAT ITSELF IS NOT SUFFICIENT TO INFER CONCEALMENT. IT HAS NOT LAID DO WN AS A RULE OF GENERAL APPLICATION THAT WHENEVER SUCH IS THE CASE, PENALTY CANNOT BE IMPOSED. ON THE CONTRARY, IN SUCH CASES ALSO THE ASSESSEE IS REQUIR ED TO DISCHARGE THE BURDEN PLACED BY THE EXPLANATION APPENDED TO SECTION 271(1 )(C). IN CASE AN EXPLANATION IS OFFERED, THE ASSESSING OFFICER IS TO EXAMINE IT AND FIND OUT WHETHER THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THA T THERE WAS NO CONCEALMENT. HELD, THAT, IN THE CASE AT HAND, NO EXPLANATION WOR TH THE NAME WAS OFFERED BY THE ASSESSEE. THE STATEMENT MADE BY THE ASSESSEE WA S TO THE EFFECT THAT HAND LOANS WERE OBTAINED WHICH WERE INTENDED TO BE REFUNDED IMMEDIATELY AND, THEREFORE, THE ENTRIES WERE NOT MADE, BUT, LAT ER ON, THE ARRANGEMENT DID NOT WORK OUT. THEREFORE, THE AMOUNT WAS OFFERED FOR TAXATION. THERE WAS A CLEAR ADMISSION THAT THE ENTRIES WERE NOT MADE ON THE REL EVANT DATES. IT WAS NOT A CASE WHERE ENTRIES WERE MADE ON THE RELEVANT DATES AND THE SOURCE OF MONEY WAS OMITTED. THE ENTRIES ON THE CONTRARY WERE MADE ON DATES WHEN THERE WAS SUFFICIENT CASH BALANCE. THE INTENTION TO HIDE THE ACTUAL STATE OF AFFAIRS WAS CLEAR. THE EXPLANATION OFFERED WAS FANCIFUL AND VAG UE. THE IMPOSITION OF PENALTY WAS VALID AND THE TRIBUNAL ERRED IN CANCELL ING IT.' 11.6 HONBLE SUPREME COURT IN THE CASE OF K.P.M ADHUSUDANAN VS. CIT,251 ITR 99(SC) WHILE AFFIRMING THE AFORESAID VIEW HELD THAT WE FIND IT DIFFICULT TO ACCEPT AS CORRECT THE TWO JUDGMENTS AFOREMENTIONED. THE EXPLANATION TO SECTION 271(1)(C) IS A PART OF SECTI ON 271. WHEN THE INCOME-TAX OFFICER OR THE APPELLATE ASSISTANT COMMISSIONER ISS UES TO AN ASSESSEE A NOTICE UNDER SECTION 271, HE MAKES THE ASSESSEE AWA RE THAT THE PROVISIONS THEREOF ARE TO BE USED AGAINST HIM. THESE PROVISION S INCLUDE THE EXPLANATION. BY REASON OF THE EXPLANATION, WHERE THE TOTAL INCOM E RETURNED BY THE ASSESSEE IS LESS THAN 80 PER CENT. OF THE TOTAL INCOME ASSES SED UNDER SECTION 143 OR 144 OR 147, REDUCED TO THE EXTENT THEREIN PROVIDED, THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS THEREOF, UNLESS HE PROVES THAT THE FAILURE TO RETUR N THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR NEGLECT ON HIS PART. THE AS SESSEE IS, THEREFORE, BY VIRTUE OF THE NOTICE UNDER SECTION 271 PUT TO NOTIC E THAT IF HE DOES NOT PROVE, IN THE CIRCUMSTANCES STATED IN THE EXPLANATION, THAT H IS FAILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS THEREOF AND, CONSEQUENTLY, BE LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCATION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE UNDER SECTION 271 IS, IN OUR VIEW, NECESSARY BEFORE THE PROVISIONS OF THE EXPLANATION THEREIN ARE APPLIED. THE HIGH COURT AT BOMBAY WAS, THEREFORE, I N ERROR IN THE VIEW THAT IT TOOK AND THE DIVISION BENCH IN THE IMPUGNED JUDGMEN T WAS RIGHT. ITA NO. 3036&4083/DEL/07 19 11.7 WE FIND THAT WHILE IMPOSING PENALTY UNDER SECTION 271(1)(C), THE ASSESSING OFFICER HAS NOT INVOKED EXPLANATION 1 TO SECTION 27 1(1)(C). BUT THEIR LORDSHIPS OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. RAJESHWAR SINGH [1986] 162 ITR 173 , HAVE HELD THAT EXPLANATION 1 TO SECTION 271(1)(C) CAN BE INVOKED FOR THE FIRST TIME BY THE ITAT. BY FOLLOWING THE AFORES AID JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF RAJESHWAR SINGH THE ITAT, CHANDIGARH BENCH IN THE CASE OF ROSHAN LAL MADAN VS. ASSTT. CIT (1998) 62 TTJ (C HD)(TM) 1 : (2000) 245 ITR 36 (AT)(CHD)., HAS TAKEN THE SAME VIEW THAT EXPLANATIO N 1 TO SECTION 271(1)(C) CAN BE INVOKED FOR THE FIRST TIME BY THE TRIBUNAL. 12. AS REGARDS DECISION IN D & H SECHERON ELECTR ODES LIMITED.(SUPRA) RELIED UPON BY THE LD. AR, FACTS IN THE CITED DECISION WERE ALT OGETHER DIFFERENT. IN THE SAID CASE, THE ASSESSEE HAD CLAIMED EXPENSES UNDER VARIOUS HEA DS, LIKE SALES PROMOTION, LEASE RENT, BAD DEBTS, ENTERTAINMENT EXPENSES, ETC. THE AO WAS OF THE VIEW THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE ON THE HIGHER SIDE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DT. 2ND JAN., 19 94 IT WAS STATED BY THE ASSESSEE THAT THOUGH ALL THE EXPENSES AND PURCHASES, ETC. AR E GENUINE, FULLY VOUCHED AND ARE FULLY ALLOWABLE BUT IN ORDER TO AVOID PROTRACTED LI TIGATION WITH THE DEPARTMENT, AND TO PURCHASE PEACE AN ADDITIONAL INCOME OF RS. 25 LACS WAS OFFERED WITH THE UNDERSTANDING THAT NO PENALTY PROCEEDINGS WOULD BE INITIATED. IT IS WITH REFERENCE TO THE ABOVE SURRENDERED AMOUNT OF RS. 25 LACS THAT TH E AO IMPOSED THE IMPUGNED PENALTY. HOWEVER, THE CIT(A) AND LATER TRIBUNAL SE T IT ASIDE BY HOLDING THAT NO CASE FOR PENALTY IS MADE OUT ON FACTS AND THAT EXPLANATI ON OFFERED BY THE ASSESSEE IS ACCEPTABLE. IT WAS FURTHER HELD THAT IN SOMEWHAT SI MILAR CIRCUMSTANCES, THE AO HAD IMPOSED PENALTY FOR THE ASST. YR. 1991-92 AND THE S AME WAS SET ASIDE BY THE TRIBUNAL FOR THAT YEAR ON SAME FACTS. IT WAS ALSO N OT DISPUTED THAT THE SAID ORDER WAS NOT QUESTIONED IN APPEAL BY THE REVENUE AND THE SAM E THUS ATTAINED FINALITY. IN THESE CIRCUMSTANCES, THE TRIBUNAL WHILE UPHOLDING T HE ORDER OF CIT(A) QUASHED THE PENALTY WHICH WAS IMPOSED BY THE AO ON THE ASSESSEE FOR THE ASSESSMENT YEAR. ON APPEAL, HONBLE HIGH COURT WHILE RELYING ON DECISIO N IN SIR SHADILAL SUGAR & GENERAL MILLS LTD. V. CIT [1987] 168 ITR 705,FOLLOWED IN G IRDHARILAL SONI VS. CIT (1990) 82 CTR (CAL) 73 : (1989) 179 ITR 111 (CAL),UPHELD THE FINDINGS OF THE ITAT. HOWEVER, ITA NO. 3036&4083/DEL/07 20 FACTS IN THE INSTANT CASE ARE ALTOGETHER DIFFERENT. IN THIS CASE, INCRIMINATING MATERIAL WAS GATHERED DURING THE COURSE OF SURVEY AND THE RE SULT OF ENQUIRIES WAS CONFRONTED TO THE ASSESSEE. WHEN SH SANJAY RASTOGI REITERATED IN THE REMAND PROCEEDINGS ,THE FACTS NARRATED BY HIM DURING THE COURSE OF SURVEY, THE ASSESSEE SURRENDERED THE AMOUNT OF ` ` 10 LACS IN THE PROCEEDINGS BEFORE THE AO, REMANDED TO HIM BY THE LD. CIT(A). EVEN OTHERWISE DECISION IN SIR SHADILAL SUG AR & GENERAL MILLS LTD. IS NO LONGER GOOD LAW AFTER THE INSERTION OF EXPLANATION AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF K.P. MADHUSUDHANAN V. CIT [200 1] 251 ITR 99.. IN THE CASE OF CIT V. C. ANANTHAN CHETTIAR [2005] 273 ITR 401, THE HONBLE MADRAS HIGH COURT WAS CONSIDERING A SIMILAR ISSUE & CONCLUDED AS UND ER: 'LEARNED COUNSEL FOR THE REVENUE SUBMITTED THAT THE ORDER OF THE TRIBUNAL IS NOT IN ACCORDANCE WITH LAW, AS IT HAS IGNORED THE EXPLANAT ION TO SECTION 271(1)(C) OF THE ACT. LEARNED COUNSEL ALSO PLACED RELIANCE ON THE DECISIO N IN THE CASE OF K.P. MADHUSUDHANAN V. CIT [2001] 251 ITR 99 (SC), WHEREIN IT WAS HELD THA T THE LAW DECLARED BY THE COURT IN THE CASE OF SIR SHADILAL SUGAR & GENERAL MILLS LTD. V. CIT [1987] 168 ITR 705 (SC) WAS NO LONGER APPLICABLE BY REASON OF THE ADDITION OF THE EXPLANATION TO SECTION 271. THAT EXPLANATION CASTS A BURDEN ON THE ASSESSEE TO SHOW THAT THE ADDITIONAL INCOME THAT HAD NOT BEEN DISCLOSED WAS NOT DUE TO FRAUD OR NEGLECT. IN THIS CASE, THE ASSESSEE OFFERED NO EXPLANATION A T ALL EXCEPT TO ASSERT THAT HE DISCLOSED THE INCOME ONLY TO BUY PEACE WITH THE DEPARTMENT AND WH AT WAS DISCLOSED, IN FACT, WAS ADDITIONAL INCOME. THE REASON FOR NOT HAVING DISCLO SED THE INCOME EARLIER WAS NOT STATED. IN THESE CIRCUMSTANCES, THE ITAT WAS IN ERROR IN SETTI NG ASIDE THE PENALTY. THE QUESTION IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE A SSESSEE, IN THE LIGHT OF THE LATER DECISION OF THE THREE JUDGE BENCH OF THE SUPREME CO URT IN THE CASE OF K.P. MADHUSUDHANAN V. CIT [2001] 251 ITR 99.' 12.1 IN H. V. VENUGOPAL CHETTIAR.(SUPRA), RELIED UPON BY THE LD. DR, IT WAS HELD THAT SO LONG AS THE ADMISSION MADE BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS HAD NOT BEEN RETRACTED AND SO LONG AS T HERE IS A VARIATION BETWEEN THE STATEMENT MADE AT THE STAGE OF THE ORIGINAL ASS ESSMENT PROCEEDINGS AND THE ADMISSION MADE AT THE STAGE OF THE REASSESSMENT PRO CEEDINGS LEADING TO AN INFERENCE THAT THE SUPPRESSION OF INCOME WAS INTENT IONAL OR WILFUL, THE ASSESSING AUTHORITY IS ENTITLED TO RELY ON, THE DISCREPANCY I N THE STATEMENT MADE BY THE ASSESSEE AND ACT ON THE ADMISSION MADE BY THE ASSES SEE AT THE REASSESSMENT STAGE. ITA NO. 3036&4083/DEL/07 21 12.2 IN CHIRAG METAL ROLLING MILLS LIMITED.( SUP RA) RELIED UPON BY THE LD. DR, IT WAS HELD AS UNDER: 12. THE COMBINED READING OF EXPLN. 1 TO S. 271(1) (C) OF THE ACT AND THE VERDICT OF HON'BLE APEX COURT IN THE MATTER OF SIR SHADILAL AN D K.P. MADHUSUDHANAN IT IS CRYSTAL CLEAR THAT PRIOR TO EXPLN. 1, THE POSITION OF LAW W AS IF ASSESSEE AGREES FOR ADDITION OF HIS INCOME TO BUY PEACE THEN IT WILL NOT FOLLOW THA T AGREED AMOUNT TO BE ADDED WAS CONCEALED INCOME AND THE REVENUE WAS REQUIRED TO PR OVE THE MENS REA. BECAUSE OF THIS VIEW TAKEN BY HON'BLE APEX COURT IN THE MATTER OF SIR SHADILAL THE EXPLN. 1 TO S. 271(1)(C) OF THE ACT WAS ADDED TO THE IT ACT AND AF TER TAKING INTO CONSIDERATION THE EXPLANATION, HON'BLE APEX COURT IN THE MATTER OF K. P. MADHUSUDHANAN HAS LAID DOWN THAT NO SEPARATE ENQUIRY IS NECESSARY FOR IMPOSING THE PENALTY. HOWEVER, FROM PLAIN READING OF EXPLANATION, IT IS EVIDENT THAT SOME SOR T OF ENQUIRY IS NECESSARY, THEREFORE, THE PROCEEDINGS INITIATED BY THE REVENUE FOR IMPOSI NG THE PENALTY UNDER S. 271(1)(C) OF THE ACT SHALL BE TREATED AS PROCEEDINGS AND THE ASSESSEE IS AT LIBERTY TO SHOW HIS BONA FIDES IN THAT PROCEEDING. IF THE ASSESSEE FAIL S TO SHOW HIS BONA FIDES, IN THAT CASE PENALTY CAN BE IMPOSED BY THE REVENUE. 13. THIS COURT IS OF THE VIEW THAT THE LEARNED TRIB UNAL WAS NOT JUSTIFIED IN HOLDING THAT THE ONUS IS ON THE REVENUE TO PROVE MALA FIDE, EVEN WHEN THE PRIMARY ONUS WAS ON THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT IN VIEW OF EXPLN. 1 TO S. 271(1)(C) OF THE ACT. IN VIEW OF THE ANSWER TO FIRS T QUESTION IT APPEARS THAT NO SEPARATE ENQUIRY IS NECESSARY BEFORE IMPOSING THE P ENALTY. IN THE PENALTY PROCEEDINGS ITSELF, INITIATED BY THE REVENUE, THE A SSESSEE CAN EXPLAIN HIS BONA FIDES AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THUS, THE ANSWER TO QUESTION NO. 2 IS NO SEPARATE ENQUIRY IS NECESSARY. 12.3 IN THE INSTANT CASE, SURRENDER MADE BY THE ASS ESSEE DURING THE REMAND PROCEEDINGS, WHEN THE ASSESSEE WAS CONFRONTED WITH THE STATEMENT OF SHR. SANJAY RASOGI RECORDED ON OATH ON 27.9.2005, HAS NEVER BE EN RETRACTED EITHER DURING THE REASSESSMENT PROCEEDINGS OR DURING THE PENALTY PROC EEDINGS AT ANY STAGE. THE ASSESSEE HAS NOT EVEN ATTEMPTED TO ESTABLISH ITS BO NAFIDE NOR SUBMITTED ANY EXPLANATION BEFORE THE AO DURING THE PENALTY PROCEE DINGS. THUS, IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID TWO DECISIONS RELIED UPON BY THE LD. DR, WE ARE OF THE OPINION THAT THE LD. CIT(A) RIGHTLY UPHELD THE LEVY OF PENA LTY. 13. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMS TANCES AND IN THE LIGHT OF ABOVE NOTED AUTHORITATIVE PRONOUNCEMENTS, WHEN THE ASSESS EE FAILED TO DISCHARGE THE ONUS LAID DOWN UPON HIM IN TERMS OF EXPLANATION 1 T O SECTION 271(1)(C) OF THE ACT ITA NO. 3036&4083/DEL/07 22 AND DID NOT OFFER ANY EXPLANATION DURING THE PENAL TY PROCEEDINGS BEFORE THE AO, WE HAVE NO OPTION BUT TO UPHOLD THE FINDINGS OF T HE LD. CIT(A), CONFIRMING THE LEVY OF PENALTY . EVEN OTHERWISE THE BREACH OF CI VIL OBLIGATION WHICH ATTRACTS A PENALTY UNDER THE PROVISIONS OF AN ACT WOULD IMMEDI ATELY ATTRACT THE LEVY OF PENALTY IRRESPECTIVE OF THE FACT WHETHER THE CONTRA VENTION WAS MADE BY THE DEFAULTER WITH ANY GUILTY INTENTION OR NOT, VIDE CH AIRMAN, SEBI V. SHRIRAM MUTUAL FUND [2006] 131 COMP CAS 591 (SC) ; [2006] 5 SCC 36 1. THIS VIEW HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THEIR DE CISION DATED 29.9.2008 IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA T EXTILE PROCESSORS AND OTHERS, IN CIVIL APPEAL NOS.10289 -10303 OF 2003. 14. HONBLE JURISDICTIONAL HIGH COURT IN JA SWANT RAI & ANOTHER VS. CBDT,133 ITR 19(DEL.) HELD THAT THE SUBSEQUENT ACT OF DISCLO SURE OF AN INCOME WOULD NOT MAKE ANY DIFFERENCE AND IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT CONCEALED PARTICULARS OF THEIR INCOME OR HAD NOT FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. 15. A VERY HEAVY ONUS WAS PLACED ON THE ASSESSE E TO EXPLAIN THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND RETURNED INCOME AND THE ASSESSEE DID NOT DISCHARGE THE SAID ONUS. IN THE LIGHT OF THE DISCU SSION MADE ABOVE AND CONDUCT OF THE ASSESSEE, IT IS THUS CLEAR THAT ALL THE MATERIA L FACTS AND PARTICULARS RELATING TO THE ASSESSEE'S COMPUTATION OF INCOME WERE NEVER DIS CLOSED BY THE ASSESSEE, AND IT IS FURTHER CLEAR THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATION AT ALL BEFORE THE AO DURING THE PENALTY PROCEEDINGS. IN THESE CIRCUMS TANCES AND IN THE LIGHT OF DECISIONS OF THE HONBLE SUPREME COURT AND JURISDI CTIONAL HIGH COURT REFERRED TO ABOVE, WE ARE OF THE OPINION THAT THE ASSESSEE HA S NOT BEEN ABLE TO DISCHARGE THE BURDEN THAT LAY UPON THEM BY EXPLANATION 1 TO S . 271(1)(C) OF THE ACT. THEREFORE, WE HAVE NO HESITATION IN UPHOLDING THE O RDER OF THE LD. CIT(A) IN CONFIRMING THE PENALTY IMPOSED BY THE AO UNDER S. 2 71(1)(C) OF THE ACT . CONSEQUENTLY, GROUND NO.1 IN THE APPEAL IS DISMISSE D. ITA NO. 3036&4083/DEL/07 23 16. GROUND NO.3 IN THE QUANTUM APPEAL, BEING GEN ERAL NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROU ND ,DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITION AL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 17. NO OTHER PLEA OR ARGUMENT WAS RAISED BEFOR E US. 18. IN THE RESULT, BOTH THESE APPEALS ARE DISMISSED . . SD/- S D/- (RAJPAL YADAV) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY FORWARDED TO: - 1. M/.S SANJAY ENTERPRISES PVT.LTD.,20, ANSARI ROAD , DARYAGANJ, NEW DELHI. 2. I NCOME TAX OFFICER, WARD-7 (3),NEW DELHI 3. CIT CONCERNED 4. CIT (A)-X,NEW DELHI 5. DR, ITAT G BENCH,NEW DELHI 6. GUARD FILE. TRUE COPY BY O RDER, D EPUTY REGISTRAR, ITAT