Shri Rajendra Kumar Maroo, CHITTORGARH V. ITO, CHITTORGARH

ITA 305/JODH/2014

• Counselvise Citation: 30523314 RSA 2014
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-09-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THIS COMM ON
• Keywords: Unexplained investment; Search and seizure; Loose papers; Diversion of income; Bonafide belief; Source of fund; Proportionate interest; Difference of opinion; Corroborative evidences; Bonafide mistake
• Section: 143(3); 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NOS. 3 05 TO 311/ J O DH/ 201 4 [AYS. 2000 - 2001 TO 2006 - 07] SHRI RAJENDRA KUMAR MAROO, V S. ITO WARD - 2 NIMBAHERA (RAJ) CHITTORGARH PAN : ADXPM 6234 C (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI SHYAM SINGHVI DEPARTMENT B Y : SHRI O.P. MEENA , CIT - DR DATE OF H EARING : 03 . 0 9 .201 4 DATE OF PRONOUNCEMENT : 17 . 0 9 . 201 4 ORDER PER BENCH : - THE ABOVE - CAPTIONED APPEALS, PERTAINING TO A.YS 200 0 - 01 UPTO 2006 - 07 (SEVEN IN NUMBER), HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF LD. CIT(A), CENTRAL CIRCLE, JAIPUR, DATED 2 0 .02.2014 . THERE APPEALS HAVE EMANATED FROM THE PENALTY ORDERS DATED 15.03.2011 PASSED U/S. 271(1) (C) OF THE INCOME TAX ACT (THE ACT FOR 2 SHORT). WE PROCEED TO DECIDE ALL THESE APPEALS BY THIS COMMON ORDER FOR THE SAKE OF CONGRUENCE, BREVITY AND CONVENIENCE. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THIS ASSESSEE ORIGINALLY FILED RETURNS OF INCOME FOR THE DIFFERENT ASSESSMENT YEARS AS DEPICTED IN THE FOLLOWING CHART: A.Y. DATE OF FILING OF RETURN RETURNED INCOME 2000 - 01 20 .10.200 0 1,98,1 6 5 2001 - 0 2 10 .10.2001 1,6 6 , 49 1 2002 - 03 17 .10.2002 1,5 5 ,7 08 2003 - 04 22.10.2003 1, 68 , 235 2004 - 05 2 7 .10.2004 1 , 87 , 5 91 2005 - 06 14 .10.2005 2, 01 ,4 1 8 2006 - 07 31.10.2006 73 , 069 2.1 A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CARRIED OUT ON 09.11.2005 AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE. ON THE BASIS OF INCRIMINATING MATERIAL FOUND AND SEIZED DURING THIS SEARCH NOTICES U/S. 153 A OF THE ACT WERE ISSUED ON 21.06.2006 FOR THESE YEARS TO THE ASSESSEE. IN RESPONSE TO WHICH THE ASSESSEE FILED HIS RETURN OF INCOME DETAILED AS UNDER: - A.Y. DATE OF FILING OF RETURN RETUNED INCOME 2000 - 01 31.10.2006 1,98,165 2001 - 02 31.10.2006 1,6 6 , 49 1 3 2002 - 03 31.10.2006 1,5 5 ,7 08 2003 - 04 31.10.2006 1, 68 , 235 2004 - 05 31.10.2006 1 , 87 , 5 91 20 05 - 06 31.10.2006 2, 01 ,4 1 8 2006 - 07 31.10.2006 73 , 069 2.2 THE ASSESSMENTS IN ALL THESE YEARS WERE COMPLETED ON 27.12.2007 U/S 153 A READ WITH SECTION 143(3) OF THE ACT, AT THE TOTAL INCOMES FOR DIFFERENT ASSESSMENT YEARS AT RS. 2,86,570/ - , 2,39,062/ - , RS . 5,33,014/ - RS. 2,43,617/ - , RS. 2,75,028/ - , RS. 2,92,779/ - AND RS. 15,54,313/ - RESPECTIVELY FOR ASSESSMENT YEARS 2000 - 01 TO 2006 - 07. DURING THE SEARCH AND POST - SEARCH PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE GROUP IS FOLLOWING A PRACTICE OF DECLARING INCOME FROM TRADING - BUSINESS OF KIRANA, SPICES AND MASALAS, IN THE NAMES OF LADIES OF THE FAMILY. IN THEIR STATEMENTS RECORDED U/S 132(4), THE LADIES DENIED THAT THEY WERE CARRYING ON ANY SUCH BUSINESS. THIS FACT WAS ALSO ACCEPTED BY THIS ASSESSEE IN HIS STATEMENT RECORDED U/S132(4) OF THE ACT, ON 09.11.2005. THEREFORE, HE HAD SURRENDERED UNDISCLOSED INCOME OF RS.1,00,000/ - IN THE NAME OF EACH LADY OF THE FAMILY WHILE REPLYING Q.NO.40. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, THE UNDISCLOSED INC OME EARNED BY THE ASSESSEE HAS BEEN COMPUTED BY INCLUDING RETURNED INCOME BY THE WIFE OF THIS ASSESSEE ALONGWITH THE RELATED INTEREST INCOME. THE DETAILS OF WHICH IS AS UNDER: - 4 NAME OF LADY INCOME SHOWN BY HER FROM TRADING BUSINESS PROPORTIONATE INTEREST INCOME THEREON TOTAL INCOME TO BE CONSIDER IN THE HANDS OF SMT. ANITA MAROO KIRANA, SPICES & MASAL AS SHRI SURENDRA KUMAR MAROO A.Y. 2000 - 01 14214 5302 19516 A.Y. 2001 - 02 57468 6478 63246 A.Y. 2002 - 03 51755 10551 62306 A.Y. 2003 - 04 18105 341 27 52232 A.Y. 2004 - 05 30332 33925 64257 A.Y. 2005 - 06 39650 27331 66981 A.Y. 2006 - 07 100000 40192 140192 AGGRIEVED, THE ASSESSEE FILED APPEAL AND LD .CIT (A) VIDE HIS ORDER DATED 20 .04.2009 HAS DELETED INTEREST INCOME OF RS. 5302 / - SHOWN BY ANITA M AROO ON INCOME OF RS. 1 4214 - / FROM TRADING BUSINESS. HOWEVER, HE HAS CONFIRMED DIVERSION OF INCOME BUT THE PROPORTIONATE INTEREST INCOME THEREON HAS BEEN DELETED. CONSEQUENTLY PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) ON ACCOUNT OF CONCEALMENT OF I NCOME. 2.3 THE ASSESSEE OBJECTED TO THE LEVY OF PENALTY U/S 271(1)(C) BY RAISING THE FOLLOWING MAIN CONTENTIONS: I. THE QUANTUM ADDITION EVEN IF SUSTAINED MAY NOT BE A GOOD PROPOSITION AS TO THE LEVY OF PENALTY FROM THE FACTS ADDITION RELATED TO PROPO RTIONATE INTEREST AS ABOVE IS NOTIONAL ONE NEI THER INVOLVE ANY CONCEALMENT OF PARTICULARS OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AT ANY STAGE BUT 5 TANTAMOUNT TO DIFFERENCE OF OPINION IN CONSIDERATION OF PROPORTIONATE ELEMENT OF ASSUMED INTEREST HAVE BEEN CREDITED IN THE BOOKS OF SPOUSE. II. PENALTY PROCEEDING BEING A QUASI JUDICIAL NATURE THAT FACTS NECESSARY TO ATTRACT THE PROVISION SHOULD BE PROVED THAT THE ASSESSEE HAS CONSCIOUSLY MADE THE CONCEALMENT OR FURNISH ING THE INACCURATE P ARTICULAR OF INCOME. IT IS FOR THE INCOME TAX AUTHORITY TO ESTABLISH OUT OF INQUIRY IN THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME WITH INTENT TO DEFRAUD REVENUE. HOWEVER, THE A.O. WAS NOT CONVINCED AND IMPOSED IMPUGN ED PENALTIES IN DIFFERENT ASSESSMENT YEARS. THE LD CIT(A) HAS ALSO CONFIRMED PENALTIES IMPOSED FOR DIFFERENT ASSESSMENT YEAR VIDE COMMON - ORDER DATED 28.02.2014. THE ASSESSEE HAS CHALLENGED THE SAME IN THIS SECOND APPEAL. 3. WE HAVE HEARD RIVAL SUBMISSION S AND HAVE CAREFULLY PERUSED THE ENTIRE RECORD. AFTER TREADING THROUGH THE ENTIRE RECORD WE HAVE NOTICED THE FOLLOWING FACTS: 6 1. SPOUSE OF THE APPELLANTS SMT. MAMTA MAROO, SMT. ANITA MAROO AND SMT. RASHMI MAROO ARE REGULARLY ASSESSED TO TAX WITH ITO/WARD - III/ CHITTORGARH SINCE 1999 - 2000 DECLARING MASALA INCOME IN THEIR ROIS. (PG. 21 OF ASST. ORDER.) 2. IN REPLY TO QUES TION NO. 6 OF STATEMENT DATED 09.11.2005 SHRI RAJENDRA KUMAR MAROO STATED SOURCE OF INCOME OF FEMALE MEMBERS WERE STITCHING, MEHANDI AND INTERES T INCOME . (PG. 22 OF ASST. ORDER) 3. IN REPLY TO QUES NO. 32 IT WAS STATED THAT SOURCE OF INCOME WAS FROM STITCHING AND THERE WAS NO MASALA INCOME IN THE NAME OF FEMALE MEMBERS AND IT WAS STATED THAT DUE TO MISTAKE OF COUNSEL INCORRECT PARTICULARS OF INCOME WERE SHOWN IN ROI AND THEREFORE SHRI RAJENDRA KUMAR MAROO OFFERED RS. 1 LAKH EACH IN THE HANDS OF ALL THREE BROTHERS AS UNDISCLOSED INCOME . (PG. 22 OF ASST. ORDER) 4. IN STATEMENT U/S 132(4) SMT. MAMTA MAROO, SMT. ANITA MAROO AND SMT. RASHMI MAROO HAVE CATEG ORICALLY STATED ABOUT EARNING OF INCOME TO BE FROM STITCHING KNITTING, MEHANDI AND INTEREST INCOME AND FILED AFFIDAVITS ALSO . (PG. 21 OF ASST. ORDER) 5. IN ASSESSMENT PROCEEDINGS, THESE FACTS WERE EXPLAINED VIDE DATED 23.8.2007 & 26.9.2007. (PG. 23 TO 26 OF ASST. ORDER) 6. ON THE BASIS OF DIFFERENT NOMENCLATURE OF SOURCE OF INCOME IN THE STATEMENTS REFERRED ABOVE THEN DECLARED IN THE ROIS OF 7 SMT. MAMTA MAROO, SMT. ANITA MAROO AND SMT. RASHMI MAROO, ADDITION WAS MADE IN THE AY 2000 - 01 TO 2006 - 07 ON THE BASIS OF STATEMENT U/S 132(4) OF SHRI RAJENDRA KUMAR MAROO. (PG. 26 OF ASST. ORDER) 7. DIFFERENT NOMENCLATURE OF SOURCE OF INCOME CAUSED DUE TO MISTAKE OF THE COUNSEL AS THE NAMED FEMALE MEMBERS DID NOT MAINTAIN REGULAR BOOKS AND FILING OF THE ROI WAS LOOKED AFTER B Y THE HUSBAND, MIS - COMMUNICATION TOOK PLACE HAVE BEEN STATED IN STATEMENT U/S 132 (4) AND FILED AFFIDAVITS OF FEMALE MEMBERS IN ASSESSMENT PROCEEDINGS. 8. INCOME ASSESSED IN THE HANDS OF FEMALE MEMBERS HAVE NEITHER BEEN DISPROVED BY POSITIVE EVIDENCES NOR RE LATABLE EVIDENCE HAVE BEEN FOUND IN THE SEARCH OF DIVERSION OF UNDISCLOSED FUNDS BY THE APPELLANTS TO THEIR SPOUSES NOR INCOME ASSESSED IN THE HANDS OF SPOUSES HAVE BEEN IGNORED IN THEIR ASSESSMENT AT ANY STAGE. 9. ADDITION MADE AND FINALLY SUSTAINED ARE ES TIMATIONS ON THE BASIS OF STATEMENTS BY THE LD AO HAVE BEEN RE - ESTIMATED BY LD CIT(APPEALS) ON THE BASIS OF PROBABLE INCOME EARNED WORKED OUT AS PER STATEMENTS I.E. STITCHING, MEHANDI, KNITTING, INTEREST INCOME ETC. IN RE - ESTIMATIONS THE LD. CIT WAS NOT EV EN SURE AND THEREFORE STATED IT APPEARS THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY FEMALE MEMBERS. THE APPELLANT DID NOT APPEAL BEFORE 8 ITAT TO AVOID LITIGATION AND FOR MENTAL PEACE. (PARA 8.3 OF CIT (A) ORDER.) 10. STATEMENT U/S 132(4) FOR SURRENDER OF IN COME OF RS. 1.00 LAC IN EACH HAND WAS WITHDRAWN BY THE APPELLANT AT THE TIME OF FILING OF ROI. (PG. 25 OF ASST. ORDER.) 4. THE LD. CIT(A) HAS REPEATED THE REASONS GIVEN BY THE A.O. HOWEVER, WE ARE NOT IN AGREEMENT WITH THE FINDING OF THE LD. CIT(A) IN V IEW OF THE FOLLOWING SUBMISSIONS MADE BY THE LD. A.R AS : 1. THIS IS NOT A CASE OF NON - EXISTENCE OF EARNING BUT ONLY SHOWING IT UNDER WRONG HEAD OF INCOME. LD. CIT (APPEAL) ERRONEOUSLY HOLDS THE STATEMENT OF APPELLANT TO BE SUFFICIENT EVIDENCE TO PROVE AN ACT OF COMMISSION BY FILING INCORRECT INCOME. THUS NON - EXISTENCE OF EARNING IN THE HANDS OF SPOUSES OR UNDISCLOSED INCOME IN THE HANDS OF APPELLANT IS NOT PROVED. (PG. 7 OF ENCL CIT (A) ORDER.) 2. THE LD CIT (A) FURTHER RELIED ON FINDING OF LD CIT (APPE ALS) IN QUANTUM TO SUSTAIN ADDITIONS. WHEREAS HIS FINDING AT PARA 8.3 SPEAKS ABOUT PROBABILITY OF DOING NO BUSINESS ACTIVITY BY FEMALE MEMBERS AS STATEMENT ONLY SPEAK ABOUT WRONG NOMENCLATURE OF SOURCE OF INCOME AND NOT REAL INCOME AS SUCH. (PARA 8.3 OF CI T (A) ORDER) 3. EVEN ALLEGED ADDITION SO ESTIMATED ON THE BASIS OF STATEMENTS HAVE BEEN RE - ESTIMATED BY THE LD. CIT (APPEAL) AS 9 THERE IS NO CONCRETE AND PROVED BASIS FOR THE ADDITIONS. AND THEREFORE IT COULD NOT BE GOOD PROPOSITION TO LEVY PENALTY U/S 271 (1)(C) UNLESS DIVERSIFICATION OF INCOME IN THE NAME OF FEMALE MEMBERS AND GENERATION OF INCOME BEYOND BOOKS IS EVIDENCED FROM SEARCH RECORDS. 4. THE LD AO DID NOT DID ANY FURTHER EXERCISE TO PROVE THAT DIVERSION OF INCOME IN THE NAME OF FEMALE MEMBERS HA VE ACTUALLY TAKEN PLACE AND HAS SIMPLY LEVIED PENALTY ON THE BASIS OF FINDINGS IN THE QUANTUM ORDER . LEVY OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE WHEN AN ADDITION IS MADE BY NOT ACCEPTING INTERPRETATION GIVEN BY ASSESSEE. THE LD. CIT (APPEALS) UPHELD TH E FINDING OF LD. AO WITHOUT CONSIDERING ARGUMENTS PLACED BEFORE HIM IN THIS REGARD. RELIANCE IS PLACED ON THE RATIO OF FOLLOWING CASE LAWS: A. (2013) 92 DTR (KAR) 111 CIT VS. MANJUNATHA COTTON & GINNING FACTORY B. (2013) 261 CTR (DEL) 449: SHERVANI HOSPITALITIES LTD. VS. CIT C. (2000) 244 ITR (MAD) 367: CIT V/S TRADERS & TRADERS: D. (2010) 323 ITR (DEL) 358: CIT V/S BHARTESH JAIN: E. (2010) 4 ITR (AHD - TB) 313: DHIRAJ LAL MAGAN LAL SHAH V/S ITO: F. 36 TW 156 (JP): BHAGWAN SAHAI & CO V/S ITO: G. (2002) 256 ITR 447 (P&H); CIT VS. DHILLON RICE MILLS 10 5. THE APPELLANT ACTED UNDER BONAFIDE BELIEF AS NOWHERE ILL INTENTION OF THE APPELLANT IS PROVED TOWARDS ADDITION SUSTAINED. IF EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED, BURDEN LIES ON THE DEPARTMENT TO ESTABLISH THAT ASSESSEE HAD CONCEALED HIS INCOME. THE VERY BASIS OF ADDITION TO BE DIFFERENT NOMENCLATURE OF SOURCES OF INCOME IN THE CASE OF THEIR SPOUSES AND REASON FOR THE MISTAKE STATED TO BE OF THE COUNSEL STATED IN STATEMENT U/S 132 (4) , HAS BEEN UN - INTENTIONAL MISTAKE . THE DEPARTMENT DID NOT DIS - PROVE VERSION OF THE APPELLANT . MORE SO, T HE LEVY OF PENALTY IS BASED ONLY ON STATEMENTS U/S 132(4) NOT BACKED BY ANY EVIDENCE THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME INVOLVED AND THEREFORE LEVY OF PENALTY INVOKING EXPLANATION 1 TO 271(1) (C) IS NOT SUSTAINABLE. RELIANCE IS PLACED ON THE RATIO OF FOLLOWING CASE LAWS; J. (2007) 210 CTR (SC) 259; T ASHOK PAI V/S CIT: K. (2007) 288 ITR (DEL) 570:CIT V /S INTERNATIONAL AUDIO VISUAL CO: L. (2008) 296 ITR (MAD) 408: CIT V/S CHOLAMANDALAM SECURITIES: M. (2000) 243 ITR (GUJ) 812: JAMBU BHAI PREM CHAND V/S CIT: 2.1 PENALTY ON ADDITION FOR EXCESS STOCK: (SURENDRA MAROO RS. 33,574/ - & RAJENDRA MAROO RS. 4,12,290/ - IN AY 2006 - 07) 11 6. ALL THE THREE APPELLANTS WERE IN IDENTICAL BUSINESS OF KIRANA & MASALA FROM SINGLE AND & ADJOINING PREMISES IN PROPRIETORSHIP IN CHAND MAL RAJENDRA KUMAR MAROO, CHAND MAL SURENDRA KUMAR MAROO, CHAND MAL GAJENDRA KUMAR MAROO RESPECTIVEL Y. (PARA 12 & PARA 6 OF ASSESSMENT ORDER IN RAJENDRA MAROO & SURENDRA MAROO SELF EXPLAINS ABOUT COMMON STOCK AT SAME LOCATIONS.) 7. STOCK HAS FOUND INTER - MIXED AND THEREFORE INVENTORY OF PHYSICAL STOCK WAS PREPARED COMMON - LIKE AT RS 14,15,800/ - & RS. 14, 40,600/ - AND VALUE OF BOOK STOCK DETERMINED BY TEAM AT RS 13,82,226/ - & RS. 10,21,320/ - WITH EXCESS STOCK AT RS. 4,12,290/ - IN RAJENDRA MAROO AND RS. 33,574/ - IN SURENDRA MAROO AND VALUATION OF BOOK STOCK HAS BEEN AT ARRIVED AT SELLING RATES. (PG NO. 6 & 5 OF THE ASST. ORDER IN RAJENDRA MAROO & SURENDRA MAROO.) 8. THE AO PARTIALLY ACCEPTED SUBMISSIONS AND MADE ADDITION OF RS 3,20,493/ - IN SURENDRA KUMAR MAROO AND RS 109771/ - IN RAJENDRA KUMAR MAROO HOWEVER LD CIT (APPEALS) APPRECIATED THE FACT OF INTER - MIX ED STOCK AND VALUATION AT SELLING RATES AND REDUCED THE EXCESS AT RS 1,38,343/ - & RS 11758/ - RESPECTIVELY AS PER WORKING GIVEN BY THE APPELLANT IN ASSESSMENT PROCEEDINGS. 9. IN VIEW OF NUMEROUS ITEMS, MEASUREMENT IN TERMS OF WEIGHTS AND NUMBERS AND SURVE Y TEAM NOT SUBJECT - EXPERT, PROBABILITY OF HUMAN ERROR IN MEASUREMENT, ITEMISED VALUATION AND CONCERN - WISE SEGREGATION OF STOCK BOUND TO OCCUR AND THEREFORE MEAGRE DIFFERENCE WAS LIABLE TO BE 12 IGNORED. DIFFERENCE SO DETERMINED CANNOT BE AMOUNTS TO CONCEALMEN T OF INCOME OR CAUSED DUE TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, UNLESS PROVED. 10. IN VIEW OF ERROR CAUSED IN STOCK TAKING BY SURVEY TEAM, THE AO IGNORED THE SURRENDER OFFERED AND MADE ADDITION ON THE BASIS OF WORKINGS. HAD IT BEEN ACCEPTED, THERE WAS HARDLY ANY DIFFERENCE IN AGGREGATION AS STATED ABOVE. 11. ALLEGED AMOUNT OF EXCESS IN STOCK EVIDENTLY VARIED AT EVERY STAGE I.E. BY SURVEY TEAM, IN ASSESSMENT AND IN APPELLATE DUE TO DIFFERENT VIEW POINT AS TO STOCK TAKING, SEGREGATION AND VALUA TION DOES NOT PROVE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 12. THE LD AO DID NOT D O ANY FURTHER EXERCISE TO PROVE THE EXCESS STOCK ALLEGED SUSTAINED AND HAS SIMPLY LEVIED PENALTY ON THE BASIS OF FINDINGS IN THE QUANTUM O RDER . THE LD. CIT (A) DID NOT GIVE ANY FINDING ON THIS POINT. RELIANCE IS PLACED ON THE RATIO OF FOLLOWING CASE LAWS; A. (2013) 92 DTR (KAR) 111 CIT VS. MANJUNATHA COTTON & GINNING FACTORY B. (2013) 261 CTR (DEL) 449: SHERVANI HOSPITALITIES LTD. VS. CIT C. (200 0) 244 ITR (MAD) 367: CIT V/S TRADERS & TRADERS: D. (2010) 323 ITR (DEL) 358: CIT V/S BHARTESH JAIN: E. (2010) 4 ITR (AHD - TB) 313: DHIRAJ LAL MAGAN LAL SHAH V/S ITO: F. 36 TW 156 (JP): BHAGWAN SAHAI & CO V/S ITO: G. (2002) 256 ITR 447 (P&H); CIT VS. DHILLON RICE MILL S 13 13. THE APPELLANT ACTED UNDER BONAFIDE BELIEF AS NOWHERE ILL - INTENTION OF THE APPELLANT IS PROVED TOWARDS EXCESS SO DETERMINED. IF EXPLANATION OFFERED BY ASSESSEE IS NOT ACCEPTED, BURDEN LIES ON DEPARTMENT TO ESTABLISH THAT ASSESSEE HAS CONCEALED HIS I NCOME. WHEN STOCK REGISTRAR IS NOT MAINTAINED AND CLOSING STOCK IS VALUED CONSTANTLY AT THE YEAR END, ANY DIFFERENCE CANNOT BE UNDISCLOSED INCOME OF THE YEAR. IT CAN ONLY BE SAID UNINTENTIONAL MISTAKE. RELIANCE IS PLACED ON THE RATIO OF FOLLOWING CASE LAW S; J. (2007) 210 CTR (SC) 259; T ASHOK PAI V/S CIT: K. ( 2007) 288 ITR (DEL) 570:CIT V/S INTERNATIONAL AUDIO VISUAL CO: L. (2008) 296 ITR (MAD) 408: CIT V/S CHOLAMANDALAM SECURITIES: M. (2000) 243 ITR (GUJ) 812: JAMBU BHAI PREM CHAND V/S CIT: 2.1 TRADING ADDITION: ( IN RAJENDRA KUMAR MAROO RS. 80,110/ - IN AY 2006 - 07) 14. SUM TOTAL OF UN - DATED AND UN - SPECIFIED DEAF & DUMB LOOSE PAPERS FOUND IN SEARCH VIDE LETTER DATED 23.08.2007 AND 13.11.2007 HAVE BEEN EXPLAINED BUT LD AO HAVE TREATED THEM ASSUMED SALES AND APPLIED GP THEREON AND IN RESULT TRADING ADDITION MADE. (PG NO.15 - 16 OF ASST. ORDER.) 14 15. CONTENTS OF THESE PAPERS MENTIONED AT PARA NO. 15 OF CIT (A) ORDER ARE SELF EXPLANATORY TO BE UNSPECIFIED IN NATURE HAVE BEEN ADMITTED BY LD. CIT ALSO TO BE UN - DATED BILL S. HOWEVER THE ADDITION WAS HYPOTHETICALLY SUSTAINED WITHOUT REASONING. THE APPELLANT DID NOT PREFER THE SECOND APPEAL TO AVOID LITIGATION. (PARA 15 OF APPEAL ORDER.) 16. THE LD AO DID NOT D O ANY FURTHER EXERCISE TO PROVE THE UNACCOUNTED SALES ACTUALLY TA KEN PLACE BY CORRELATING THESE WITH UNDISCLOSED RECEIPT FOUND IN SEARCH AND HAS SIMPLY LEVIED PENALTY ON THE BASIS OF FINDINGS IN THE QUANTUM ORDER. THE LD. CIT (APPEALS) DID NOT GIVE ANY FINDING ON THIS POINT. RELIANCE IS PLACED ON THE RATIO OF FOLLOWI NG CASE LAWS; A. (2013) 92 DTR (KAR) 111 CIT VS. MANJUNATHA COTTON & GINNING FACTORY B. (2013) 261 CTR (DEL) 449: SHERVANI HOSPITALITIES LTD. VS. CIT C. (2000) 244 ITR (MAD) 367: CIT V/S TRADERS & TRADERS: D. (2010) 323 ITR (DEL) 358: CIT V/S BHARTESH JAIN: E. (20 10) 4 ITR (AHD - TB) 313: DHIRAJ LAL MAGAN LAL SHAH V/S ITO: F. 36 TW 156 (JP): BHAGWAN SAHAI & CO V/S ITO: G. (2002) 256 ITR 447 (P&H); CIT VS. DHILLON RICE MILLS 15 17. TRADING ADDITION MADE BEING RESULT OF ESTIMATION CANNOT BE TREATED AS CONCEALED INCOME SO A S TO ATTRACT PENALTY UNDER S. 271(1)(C); MORE SO IT IS RELATED WITH SEARCH TAKEN PLACE AND ASSESSMENT HAS BEEN MADE ON THE BASIS OF EVIDENCES FOUND IN SEARCH, NO CORRESPONDING RECEIPTS/INVESTMENT HAS BEEN FOUND BEYOND BOOKS, THERE IS NO QUESTION OF EITHER CONCEALMENT OF THE ALLEGED INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREFORE PENALTY COULD NOT BE LEVIED. RELIANCE IS PLACED ON THE RATIO OF FOLLOWING CASE LAWS; H. (2002) 253 ITR 17 (P&H); CIT VS. M. M. RICE MILLS I. (2003) 78 TTJ (JD) 5 73; ITO VS. MADAN LAL UNEXPLAINED INVESTMENT IN GOLD ORNAMENTS: (IN RAJENDRA KUMAR MAROO IN AY 2006 - 07 RS. 90,667/ - ) 18. THE APPELLANT IS JOINT FAMILY OF FOUR FEMALES, FOUR MALES AND SIX CHILDREN WAS FOUND 1513.7 GRAMS GOLD ORNAMENTS AGAINST HOLDING OF 3400 GRAMS GOLD ORNAMENTS TO BE REASONABLE LIMITS SET BY CBDT IN THEIR GUIDELINES. 19. IN STATEMENT U/S 132(4) FOUR FEMALE MEMBERS HAVE STATED 1455 GRAMS GOLD ORNAMENTS TO BE THEIR STRIDHAN ADDITION TO THAT OWNED BY CHILDREN AND MALE MEMBERS GOLD ORNAMEN TS WERE FULLY EXPLAINED. IN VIEW THEREOF, THE SEARCH TEAM DID NOT SEIZE GOLD ORNAMENTS. (PG NO 3 OF ASST ORDER) 16 20. VERIFICATION OF GOLD ORNAMENT BY COMBINED GOLD JEWELLERY STATEMENT SUBMITTED NOT ACCEPTED BY LD AO. O THE LD. AO MADE ADDITION OF 391.84 GR AMS (RS. 204112/) AS UNDISCLOSED ORNAMENTS ON THE BASIS OF FAMILY WISE HOLDING AND FOR WANT OF EVIDENCE OF ACQUISITION AND CREDIT WORTHINESS OF PARENTS. THE LD CIT (A) DELETED ADDITION ON THE BASIS OF CBDT NOTIFICATION AND SUSTAINED RS. 113445/ (I.E. 100 G RAMS). HOWEVER FAILED TO COMPARE THE GOLD ORNAMENTS OF THE ENTIRE FAMILY WITH LIMITS AS PRESCRIBED IN CBDT CIRCULAR. THE APPELLANT DID NOT PREFER SECOND APPEAL IN VIEW OF PROTRACTING THE LITIGATION AND TO HAVE MENTAL PEACE. O IN VIEW OF JOINT FAMILY AND IT S STATUS, SUCH MEAGER QUANTITY OF GOLD ORNAMENTS SHOULD NOT HAVE WARRANTED ANY SUSPICION OR DISBELIEVE IN THE LEVY OF PENALTY UNLESS PROVED BY POSITIVE COGENT EVIDENCES ON RECORDS. O THE LD AO DID NOT DID ANY FURTHER EXERCISE TO PROVE THAT ALLEGED UNEXPLA INED GOLD ORNAMENTS HAVE BEEN ACQUIRED FROM UNDISCLOSED INCOME PARTICULARLY WHEN SEARCH HAS TAKEN PLACE AND NO FURTHER ADDITIONAL INCOME HAS BEEN FOUND ON RECORD AND THEREFORE HE HAS SIMPLY LEVIED PENALTY ON THE BASIS OF FINDINGS IN THE QUANTUM ORDER . LEV Y OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE WHEN AN ADDITION IS MADE BY NOT ACCEPTING INTERPRETATION GIVEN BY ASSESSEE. THE LD. CIT (APPEALS) UPHELD THE FINDING OF LD. AO WITHOUT 17 CONSIDERING ARGUMENTS PLACED BEFORE HIM IN THIS REGARD. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS; A. (2013) 92 DTR (KAR) 111 CIT VS. MANJUNATHA COTTON & GINNING FACTORY B. (2013) 261 CTR (DEL) 449: SHERVANI HOSPITALITIES LTD. VS. CIT C. (2000) 244 ITR (MAD) 367: CIT V/S TRADERS & TRADERS: D. (2010) 323 ITR (DEL) 358: CIT V/S B HARTESH JAIN: E. (2010) 4 ITR (AHD - TB) 313: DHIRAJ LAL MAGAN LAL SHAH V/S ITO: F. 36 TW 156 (JP): BHAGWAN SAHAI & CO V/S ITO: G. (2002) 256 ITR 447 (P&H); CIT VS. DHILLON RICE MILLS 21. IF EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED, BURDEN LIES ON DEPARTM ENT TO ESTABLISH THAT ASSESSEE HAS ACQUIRED GOLD ORNAMENTS BEYOND BOOKS BY CONCEALING HIS INCOME. THE APPELLANT ACTED BONAFIDE IN EXPLANATION HAS BEEN WELL PROVED AND THEREFORE IT CANNOT BE A CASE OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTI CULARS OF INCOME, EVEN THOUGH ADDITION WAS SUSTAINED. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS; H. (2007) 210 CTR (SC) 259; T ASHOK PAI V/S CIT: I. (2007) 288 ITR (DEL) 570:CIT V/S INTERNATIONAL AUDIO VISUAL CO: J. (2008) 296 ITR (MAD) 408: CIT V/S CHOLAM ANDALAM SECURITIES: K. (2000) 243 ITR (GUJ) 812: JAMBU BHAI PREM CHAND V/S CIT: 18 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. B EFORE WE ANALYZE AND CONSIDER THE FACTUAL MATRIX OF THIS CASE TO ASCERTAIN WH ETHER IN THE EYES OF THE PROVISIONS OF THE ACT , AS EXPLAINED BY CATENA OF JUDICIAL PRONOUNCEMENTS, PENALTY CAN BE LEVIED IN TH ESE CASE S OR NOT, WE WOULD LIKE TO DISCUSS IN NUT SHELL THE RELEVANT LEGAL POSITION REGARDING SCHEME OF IMPOSITION OF A PENALTY U/ S 271(1)(C) OF THE ACT . WE MAY DISCUSS UNDER WHAT CIRCUMSTANCES AND IN WHAT CONDITIONS PENALTY CAN BE LEVIED UNDER THIS SECTION. THERE ARE NO TWO OPINIONS ABOUT THE SETTLED POSITION OF LAW THAT REGULAR ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO ENTIRELY DIFFERENT SUBJECTS WHICH OPERATE IN DISTINCT AND SEPARATE SPHERES SO MUCH SO THAT ENTIRELY DIFFERENT PARAMETERS ARE APPLICABLE FOR MAKING QUANTUM ADDITION AND FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THERE IS NO DISPUTE REGARD ING T HE POSITION OF LAW THAT UNDER SECTION 271(1)(C) PENALTY CAN BE LEVIED ONLY IF EITHER THE ACT OF 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IS FOUND TO HAVE BEEN COMMITTED BY THE ASSESSEE. THESE ARE TWO DIFFERENT OMISSIONS OR DEFAULTS , ALBEIT , THEY REFER TO A DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF EITHER SUPPRESSIO VERI OR SUGGESTIO FALSY. BY THE 19 MERE REASON OF SUCH CONCEALMENT OR OF FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOES NOT, IPSO FACTO, BECOME LIABLE TO A PENALTY. IMPOSITION OF PENALTY IS NOT AT ALL AUTOMATIC. MEANING THEREBY, ANY ADDITION IN QUANTUM WOULD NOT LEAD TO AUTOMATIC LEVY OF PENALTY AND THIS IS ALSO TRUE IN RESPECT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. NOT ONLY IS THE LEVY OF PENALTY DISCRETIONARY IN NATURE BUT THE DISCRETION HAS TO BE EXERCISED KEEPING THE RELEVANT FACTORS IN MIND AND THE APPROACH OF THE TAXMAN MUST BE FAIR AND OBJECTIVE. THIS SUBJECT HAS BEEN A MATTER OF GREAT CONTROVERSY. FINALLY, AFTER REFERRING TO DECISIONS IN THE CASE S OF DILIP N. SHROFF VS JCIT & ANOTHER, 291 ITR 519, UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS [2008] 13 SCC 369, AS WELL AS UNION OF INDIA VS RAJASTHAN SPG. & WVG. MILLS [2009] 13 SCC 448, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD, 322 ITR 158, HAS RECENTLY HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C) OF THE INCOME - TAX ACT, 196 1, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECT ION 271(1) (C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR 20 INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTI CULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALT Y, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS . THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEP END UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCU MENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIE D IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION O F INVITING THE PENALTY UNDER SECTION 271 (1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 6. IN THIS CASE, PENALTY PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 274 READ WITH SECTION 271(1) (C) OF THE ACT ON 17.12.2007. IN RESPONSE TO THIS NOTICE, SUBMISSIONS WERE MADE. THE A.O. HAS NOT 21 FOUND THE REP LY OF THE ASSESSEE CONVINCING DUE TO THE FOLLOWING REASONS: - I. DURING THE COURSE OF SEARCH AND POST SEARCH INVESTIGATIONS THE A.O. NOTED THAT THE MEMBERS OF THE GROUP HAD SHOWN THE INCOME FROM BUSINESS OF KIRANA AND SPICES IN THE NAME OF LADIES OF THE F AMILY BUT WHEN - THE STATEMENTS OF LADIES WERE RECORDED THEY DENIED HAVING ANY SUCH BUSINESS. THE LADIES ADMITTED THAT THEY HAD INCOME FROM SEWING, KNITTING AND MAHENDI. SMT. ANITA MAROO WIFE OF SH. SURENDRA KUMAR MAROO ADMITTED THE SAME. EVEN SH. RAJENDRA MAROO WHEN CONFRONTED WITH THE STATEMENTS OF THE LADIES OF THE FAMILY ADMITTED IN HIS STATEMENT U/S 132(4) THAT THE INCOME SHOWN FROM TRADING IN SPICES WAS WRONGLY SHOWN IN THE RETURNS OF THE LADIES. THUS THE SOURCE OF INCOME SHOWN IN THE RETURNS WAS NOT C ORRECT. IT WAS CONCLUDED THAT NO BUSINESS WAS CARRIED OUT BY THE LADIES OF THE ASSESSEES FAMILY. IT WAS OBSERVED THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO VERIFY THE SOURCE OF INCOME REFLECTED HI HIS WIFES RETURN WITH ANY SUPPORTING EVIDENCE. I) TH E LD. C1T (A) AGREED WITH THE VIEWS OF THE A.O. AND CONFIRMED THE ADDITIONS OF RS. 1 4 , 214 / - , 5 7 , 468 / - , RS. 51,755 / - , 18 , 105 / - , 3 0 , 332 / - , 3 9 , 650 / - AND 1 LAKH IN ALL 7 A.YS. IT WAS HELD THAT THERE WAS A DELIBERATE CONCEALMENT OF PARTICULARS OF INCOME. THE A. O. HELD THAT THE CASE OF THE ASSESSEE WAS CLEARLY COVERED BY THE PROVISIONS OF SECTION 271( 1 )(C) AND HE IMPOSED PENALTY OF RS. 4,690 / - , RS. 20,580/ - , RS. 17 , 540 / - , RS. 5 ,7 00 / - , RS. 9 ,1 0 0/ - , RS. 1 2 ,3 10/ - & RS. 5 7 , - 815 / - IN ALL 7 A.YS. RELYING ON 22 THE VARIOUS CASE LAWS. 7. ADVERTING TO THE FACTS OF THIS CASE, WE FIND THAT EITHER THE ADDITIONS ARE ESTIMATED ONES OR NO CONCEALMENT OF INCOME HAS BEEN PROVED IN RESPECT OF OTHER ADDITIONS WHICH ARE BASED SOLELY ON THE STATEMENT OF ONE ASSESSEE TAKEN DURING SEARCH PROCEEDINGS WHICH WAS LATER WITHDRAWN ALSO. THE A.O HAS NEITHER PROVED THAT THESE ARE CASES OF EITHER CONCEALMENT OF INCOME OR OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ADMISSION MADE BY THE ASSESSEE DURING SEARCH WAS RETRACTED BY FILING AF FIDAVITS AS IS EVIDENT FROM THE ABOVE MENTIONED FACTS. NON FILING OF THE APPEAL AGAINST SUSTAINED ADDITION IS NOT A GROUND FOR IMPOSING PENALTY. THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS TO DETERMINE QUANTUM OF INCOME ARE TWO SEPARATE PROCEEDING S WHICH OPERATE IN ENTIRELY DIFFERENT SPHERES. THE ADDITIONS SUSTAINED DO NOT AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY U/S 271(1)(C). 23 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE IN ITA NOS. 29 8 TO 304/JU/2014 [AYS. 2000 - 2001 TO 2006 - 07] STAND ALLOWED. ORDER PRON OUNCED IN THE COURT ON 17 TH SEPTEMBER , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 17 TH SEPTEMBER , 201 4 V L/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR SENIOR PRIVATE SECRETARY ITAT, JODHPUR