M.Uma Maheswari, CHENNAI V. ACIT, Madurai

ITA 335/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77404 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 24-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2014
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM; SAILENDRA MAMIDI
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure; Document seized; Question of law; Revised return; Reason to believe; Documents seized
• Section: 142(1); 153A; 132; 15

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CH ENNAI. . . . , . !' !' !' !' , # # # # $% $% $% $% $& $& $& $& BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER $ ./ I.T.A.NOS.332, 333, 334, 335 & 336/MDS/2014 # ' '' / ASSESSMENT YEARS :2004-05, 05-06, 06-07, 07-08 & 08-09 SMT. M. UMA MAHESHWARI, NO. 196, WEST MASI STREET, MADURAI. [PAN : AANPU4807G] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, MADURAI. ( () () () () /APPELLANT ) ( *+() *+() *+() *+() / RESPONDENT ) () , $ / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE *+() , $ / RESPONDENT BY : SHRI SAILENDRA MAMIDI, CIT-DR & SHRI GURU BHASHYAM, JCIT $ , -. / DATE OF HEARING : 24.07.2014 /0' , -. /DATE OF PRONOUNCEMENT : 28.08.2014 1 1 1 1 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE FIVE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I, MADURAI, BOTH DATED 07.01.2014 RELEVANT TO THE ASSE SSMENT YEARS 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 PASS ED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 2 I.T.A.NOS.332, 333, 334 & 335/MDS/2014[A.Y. 2004-05 TO2007-08 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, RUNNING A RESTAURANT UNDER THE NAME AND STYLE OF M/S MURUGA N IDLI SHOP. SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED ON 2 9.03.2008 IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASS ESSEE. IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT, THE ASSESSEE FIL ED RETURN OF INCOME ON 16.06.2009 ADMITTING RETURNED INCOME OF . 1,23,960/-. SEVERAL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION INDICATED UNACCOUNTED SALES IN VARIOUS OUTLE TS OF ASSESSEE. AFTER APPRECIATING RELEVANT SEIZED MATERIALS AND AS SESSEE'S EXPLANATION, THE ASSESSMENT WAS COMPLETED BY MAKING AN ADDITION OF .4,54,430/- WHICH IS 20% OF THE UNACCOUNTED SALES Q UANTIFIED OF .22,72,153/-. 3. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(APPEALS) OBSERVED THAT THE PROFIT ESTIM ATED AT THE RATE OF 20% WAS ON THE HIGHER SIDE AND DIRECTED THE ASSESSI NG OFFICER TO ADAPT 15% NET PROFIT ESTIMATED. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 3 4. THE ASSESSEE PREFERRED APPEALS AGAINST THE ORDE RS OF THE LD. CIT(APPEALS) AND THE TRIBUNAL VIDE ITS ORDER IN I.T .A. NOS. 1501 TO 1505/MDS/2011 DATED 08.12.2011, DISMISSED THE APPEA LS FILED BY THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER INITIAT ED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT BY I SSUING NOTICE DATED 18.07.2011. IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE HAS FILED A REPLY ON 12.03.2012, WHERE IN IT WAS STATED THAT HER HUSBAND HAS ACCEPTED SUPPRESSION IN SALE AS WELL AS IN PURCHASES, EXPENSES, MAINTENANCE, WAGES, ETC. AT TH E TIME OF SEARCH ITSELF. THIS WAS DONE WITHOUT HER KNOWLEDGE AND APP ROVAL BY THE MANAGERS WHO WERE GIVEN FULL OPERATIONAL FREEDOM. I T WAS ALSO SUBMITTED THAT AN ADDITION AT THE RATE OF 20% OF TH E SUPPRESSED SALE HAD BEEN MADE DUE TO HER INABILITY TO SUBSTANTIATE AND PROVE DUE TO CIRCUMSTANCES BEYOND HER CONTROL. A PERUSAL OF HER COMPETING SIMILAR HOTEL WOULD CONFIRM THE FACT THAT ESTIMATED NET PRO FIT HAD BEEN DETERMINED AT A MUCH HIGHER PERCENTAGE. IT WAS SUBM ITTED THAT IN VIEW OF THE FACTS SHE WAS FULLY AWARE OF THE DIFFERENCE IN SALES AS WELL AS EXPENSES BUT SHE COULD NOT INCLUDE THE SAME WHILE F ILING THE RETURN IN PURSUANCE OF NOTICE UNDER SECTION 153A. IT WAS CONT ENDED THAT THE FACT AN ADDITION HAD BEEN ADDED AND SUSTAINED WOULD NOT ITSELF ATTRACT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 4 PENALTY. SHE REITERATED THAT SHE NEVER HAD MALAFIDE INTENTION OF CONCEALING THE SUPPRESSION IN SALE AND THE RESULTAN T PROFIT BUT COULD NOT DO DUE TO THE PECULIAR CIRCUMSTANCES MENTIONED. 5. THE ASSESSING OFFICER, AFTER CONSIDERING THE EX PLANATION OF THE ASSESSEE, OBSERVED THAT THE LD. CIT(APPEALS) CONFIR MED THAT THE ASSESSEE HAS MADE UNACCOUNTED SALES TO THE TUNE OF .22,72,153/- AND THE ORDER OF THE LD. CIT(APPEALS) WAS FURTHER C ONFIRMED BY THE TRIBUNAL AND IT WAS ESTABLISHED THAT THE ASSESSEE H AS FURNISHED INACCURATE PARTICULARS WHICH TANTAMOUNT TO CONCEALM ENT OF INCOME AND HAS NOT PUT FORWARD ANY VALID REASON AS TO WHY PENA LTY SHOULD NOT BE LEVIED. AS THERE WAS REASON TO BELIEVE THAT THE ASS ESSEE HAD INTENTION TO EVADE PAYMENT OF TAX PAYABLE BY CONCEALING THE P ARTICULARS OF HER INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(APPEALS). THE LD. CIT(APPEALS) CONSIDERED THE E NTIRE FACTS OF THE CASE IN A THREAD BEAR AND ALSO PASSED A DETAILED OR DER BY CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER. THE RELE VANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 5 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE LEARNED COUNSEL FOR THE APPELLANT WITH REFERENCE TO THE FAC TUAL MATRIX OF THE CASE AND THE LEGAL POSITION AS APPLICABLE TO THE YEAR UN DER APPEAL. THE PENALTY U/S.271(1)(C) WAS IMPOSED IN THE PRESENT CA SE IN RESPECT PROFIT EARNED ON SUPPRESSED SALES WHICH WERE BROUGHT TO TA X DURING THE ASSESSMENT PROCEEDINGS, BASED ON THE MATERIALS IMPO UNDED DURING THE COURSE OF SEARCH. 7.1 IN ORDER TO DECIDE THE ISSUE, IT IS NECESSARY T O FIRST REFER TO THE RELEVANT PORTION OF S.271(1)(C) AND EXPLANATION 1 T HERETO, AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION, WHICH READ AS FOL LOWS: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC.-(1) IF THE AO OR THE CI T(A) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED THAT ANY PERSON (A) AND (B) .................. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (I) AND (II) .................. (III) IN THE CASES REFERRED TO IN CL. (C) OR CL. (D ), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LE SS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS THE FURNISHING OF INACCURATE PAR TICULARS OF SUCH INCOME OR FRINGE BENEFITS: 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 AO OR THE CIT(A) OR THE CIT 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 BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSES OF CL. (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 6 7.1.1 A PLAIN READING OF THE ABOVE PROVISION OF LAW MAKES IT CLEAR THAT THE SCHEME OF SEC. 271(1)(C) VISUALIZES IMPOSITION OF PENALTY WHEN THE ASSESSEE HAS CONCEALED INCOME OR WHEN THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN ADDITION TO TH ESE TWO SITUATIONS, PENALTY CAN ALSO BE IMPOSED, INTER ALIA, WHEN ASSES SEE IS DEEMED TO HAVE CONCEALED PARTICULARS OF INCOME UNDER EXPLANATION1 TO SEC. 271(1)(C). A DEEMING FICTION UNDER EXPLANATION 1 TO SEC. 271(1)( C) ENVISAGES TWO SITUATIONS-(A) FIRST, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OF FERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE AO OR THE CIT(A); AND, (B) SECOND, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THIS ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SU CH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. IN THE FIRST SITUATION, THE DEEMING FICTION IS TRIGGER ED BY THE INACTION OF THE ASSESSEE BY HIS NOT GIVING THE EXPLANATION WITH RES PECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, OR BY ACTION OF THE AO OR THE CIT(A) BY GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUA TION, THE DEEMING FICTION IS TRIGGERED BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CL. (B) OF EXPLANATION1 NAM ELY THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AN EXPLANATION IN RESPE CT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, AND THE ASSESSE E IS ALSO NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTA L INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. WHEN THIS DEEMING FICTIO N COMES INTO PLAY, WHICH CAN ONLY HAPPEN IN ONE OF THE ABOVE SITUATION S, THE RELATED ADDITION IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, FOR THE PURPOSES OF S. 271(1)(C), IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. THUS, I T IS BY VIRTUE OF EXPLANATION 1 TO SEC. 271(1)(C) ONLY THAT THE ASSES SING OFFICER HAS BEEN GIVEN A RIGHT TO RAISE A PRESUMPTION TO DEEM CERTAI N SUM ADDED TO INCOME OR DISALLOWED IN COMPUTING THE INCOME OF A P ERSON, TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEE N CONCEALED, IF THE ASSESSEE DID NOT FURNISH AN EXPLANATION OR WHEN EXP LANATION FURNISHED WAS FOUND TO BE FALSE; AND ALSO WHEN SUCH PERSON OF FERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM. THE PENALTY UNDER SEC. 271(1)(C) IS A PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS, OR, UNDER THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 7 EXTENDED DEFINITION BY THE VIRTUE OF EXPLN. 1 TO S. 271(1)(C), FOR A DEEMED CONCEALMENT OF INCOME. 7.2 THE FACTS OF THE PRESENT CASE ARE NOW TESTED VI S-A-VIS THE ABOVE LEGAL POSITION TO EXAMINE WHETHER THE PRESENT CASE IS COVERED UNDER THE MAIN PART OF THE PROVISIONS OR UNDER THE DEEMING PR OVISIONS OF EXPLANATION 1OF SECTION 271(1)(C) OR BOTH OR NOT. 7.3 THE FACTUAL MATRIX IS AS UNDER: A) THERE WAS A SEARCH U/S 132 OF THE ACT IN THE RES IDENCE OF THE ASSESSEE BASED ON THE WARRANT ISSUED IN THE CASE OF ASSESSEE'S HUSBAND AND SURVEY IN THE BUSINESS PREMISES OF ASSE SSEE AND HER HUSBAND. B) DURING THE COURSE OF SEARCH/SURVEY EVIDENCES WIT H REGARD TO THE UNCOUNTED SALES OF THE BUSINESS WERE FOUND AND SEIZ ED. C) ASSESSEE FILED RETURNS IN RESPONSE TO THE NOTIC ES ISSUED AFTER THE SEARCH, ADMITTING SOME INCOME. D) THE INCOME FROM THE UNCOUNTED SALES FROM THE RES TAURANT FOR WHICH EVIDENCES WERE FOUND AND SEIZED WAS NOT ADMIT TED FULLY. E) THE AO, DURING THE COURSE OF ASSESSMENT ADDED AD DITIONAL INCOME BEING THE INCOME FROM UNACCOUNTED SALES WHIC H IN TURN IS BASED ON THE MATERIAL FOUND AND IMPOUNDED DURING TH E COURSE OF SEARCH/SURVEY. F) ASSESSEE NOW MENTIONS THAT SHE DID NOT TAKE COPI ES OF THE SEIZED MATERIAL RELATING TO THE UNACCOUNTED SALES AND HENC E THE INCOME WAS NOT DISCLOSED IN THE RETURNS FILED AFTER THE SE ARCH. G) MAJOR PART OF THE ADDITION WAS UPHELD BY CIT (A) AND ITAT. H) THE PENALTY UNDER THIS APPEAL IS BASED ON THE QU ANTUM CONFIRMED BY CIT(A) AND IT AT. I) ASSESSEE NOW ADMITS THAT THERE WERE UNACCOUNTED SALES BUT MENTIONS THAT IT WAS DONE WITHOUT HER KNOWLEDGE. 7.4 ASSESSEE'S EXPLANATION IN PARA 5.1 AND PARA 6 AGAINST LEVYING OF THE PENALTY IS TOO NAIVE. SIMILAR SUBMISSIONS WERE MADE BEFORE THE COMMISSIONER OF INCOME TAX (A) AND ITAT DURING THE APPEAL ON QUANTUM ADDITION WHICH WERE REJECTED. ASSESSEE CANN OT SHIFT THE RESPONSIBILITY FOR UNACCOUNTED SALES TO THE MANAGER S THAT THEY HAVE DONE ON THEIR OWN. ASSESSEE IS AWARE THAT EVIDENCES RELATING TO THE UNACCOUNTED SALES WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH. NOTHING PREVENTED HER NOR IS THERE ANY REASONABLE C AUSE FOR THE ASSESSEE FROM TAKING COPIES OF THE IMPOUNDED MATERI AL (WHICH IS DONE BY MANY OTHER TAX PAYERS IN A ROUTINELY) AND DISCLOSE TRUE INCOME BASED ON I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 8 THE IMPOUNDED MATERIAL. IT IS SAID THAT 'WHERE THER E IS A WILL THERE IS A WAY' AND HER REPLY POINTS THAT SHE HAD NO WILL TO D ISCLOSE THE CORRECT INCOME. INSTEAD SHE TOOK A CHANCE AND FILED RETURNS WITHOUT DISCLOSING CORRECT INCOME WHICH IS REFLECTED IN THE IMPOUNDED MATERIAL. THE PROFIT RATE OF 15% ON THE SALES IS VERY REASONABLE CONSIDE RING THAT ASSESSEE IS A HOTELIER. AS CAN BE SEEN FROM THE FINAL ORDERS WH ICH ARE CONFIRMED BY ITAT THE SALES SUPPRESSION/PROFIT EARNER IS NOT MEA GER AS STATED BY THE ASSESSEE. 7.5 TURNING TO THE CASE LAWS CITED BY THE ASSESSEE IT IS HUMBLY SUBMITTED BY THE APPELLANT THAT MERE D ISBELIEF OF AN ADDITION IS NO GROUND FOR IMPOSITION OF PENALTY. TH E CIRCUMSTANCES OF THE CASE MUST BE SUCH AS TO LEAD T O THE REASONABLE AND POSITIVE CONCLUSION THAT THE AMOUNT REPRESENTS THE ASSESSEE'S INCOME. CIT VS. RAMASAMY NAIDU (1994) 208 ITR 377 (MAD) CIT VS. SMT K. MEENAKSHIKUTTY (2002) 258 ITR 494 (M AD) PRICE WAREHOUSE COOPERS PVT. LTD. VS. CIT (2012) 34 8 ITR 306(SC) THE FACTS IN THE CASE OF CIT VS. RAMASAMY NAIDU (19 94) 208 ITR 377 (MAD) AND THE DECISION IS AS UNDER THE ASSESSEE CLAIMED THAT HE HAD BORROWED CERTAIN A MOUNT FROM ONE 'N'. THIS CLAIM OF THE ASSESSEE WAS NOT ACCEPTE D BY THE ITO AND CONSEQUENTLY THAT AMOUNT WAS INCLUDED IN THE AS SESSEE'S INCOME. THE ITO ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C). ON APPEAL, THE TRIBUNAL CANCELLED THE PENALTY HOLDI NG THAT BY MERELY DISBELIEVING THE EVIDENCE OF 'N'S SON THERE WAS NO GROUND FOR THE LEVY OF PENALTY UNDER SECTION 271(1)(C). THE FACTS IN THE CASE OF CIT VS. SMT. K. MEENAKSHIK UTTY (2002) 258 ITR 494 (MAD) AND THE DECISION IS AS UNDER THE ASSESSEE WAS PLYING BUSES AND HAD NOT MAINTAINE D ACCOUNTS, BUT SUBMITTED RETURNS ON THE BASIS OF ESTIMATED INC OME. SHE WAS REQUIRED TO FURNISH DETAILS REGARDING NUMBER OF DAY S ON WHICH THE VEHICLES PLIED ON THE ROUTE; THE TAX PAID FOR EACH OF THE VEHICLES, ETC. ON THE BASIS OF THE SAID INFORMATION, THE ASSE SSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE TO BE AN AMOUN T MUCH HIGHER THAN WHAT WAS ESTIMATED BY THE ASSESSEE. THE ASSESSING OFFICER INFERRED THAT THE ASSESSEE HAD DELIBERATELY CONCEALED THE TRUE INCOME AND LEVIED A PENALTY UNDER SECTION 271( 1)(C). ON I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 9 APPEAL, THE COMMISSIONER (APPEALS) HELD THAT THE AS SESSEE HAD NOT DELIBERATELY CONCEALED INCOME ON THE GROUND THA T THE BUSES WERE OLD AND THERE HAD BEEN A BONA FIDE REDUCTION I N THE ASSESSEE'S INCOME. SINCE THE ASSESSEE HAD OFFERED S ATISFACTORY EXPLANATION AND THEREBY REBUTTED THE PRESUMPTION RA ISED AGAINST HER UNDER THE EXPLANATION TO SECTION 271(1)(C), SHE COULD NOT BE CHARGED WITH FRAUD OR GROSS OR WILLFUL NEGLECT ON H ER PART. ON THE REVENUE'S APPEAL, THE TRIBUNAL UPHELD THE ORDER S OF THE COMMISSIONER (APPEALS). IT HELD THAT, IN THE ABSENC E OF ANY SPECIFIC DISCREPANCY BEING DETECTED OR ANY SPECIFIC OMISSION BEING ESTABLISHED, IT COULD NOT BE HELD THAT THERE WAS ANY GROSS OR WILLFUL NEGLIGENCE ON THE PART OF THE ASSESSEE I N RETURNING THE INCOME ON THE BASIS OF THE ESTIMATE MADE BY HER IN THE EARLIER YEARS. THE FACTS IN THE CASE OF PRICE WAREHOUSE COOPERS PV T. LTD. VS. CIT (2012) 348 ITR 306(SC) AND THE DECISION IS AS UNDER SECTION 271(1)(C). READ WITH SECTION 37(1), OF THE INCOME-TAX ACT, 1961 PENALTY - FOR CONCEALMENT OF INCOME - BONA FID E MISTAKE - ASSESSMENT YEAR 2000-01 - ASSESSEE FIRM FILED ITS R ETURN OF INCOME ALONG WITH TAX AUDIT REPORT - IN ITS TAX AUD IT REPORT IT WAS INDICATED THAT PROVISION TOWARDS PAYMENT OF GRATUIT Y WAS NOT ALLOWABLE BUT IT FAILED TO ADD PROVISION FOR GRATUI TY TO ITS TOTAL INCOME - WHETHER IT WAS A BONA FIDE AND INADVERTENT ERROR - HELD, YES - WHETHER ASSESSEE WAS NOT GUILTY OF EITH ER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME HELD, YES - WHETHER IMPOSITION OF PENALTY WAS UNJUSTIFIED - HELD, YES AS CAN BE SEEN THE FACTS OF ALL THE ABOVE CASE LAWS ARE VERY DIFFERENT FROM THAT OF ASSESSEE AND ARE NOT APPLICABLE. IN TH IS CASE THE UNACCOUNTED INCOME OF ASSESSEE ON WHICH PENALTY IS LEVIED IS ARRIVED AT BASED ON EVIDENCES RELATING TO THE UNACCOUNTED S ALES FOUND AND SEIZED DURING THE COURSE OF SEARCH/SURVEY. THE UNAC COUNTED INCOME IS CONFIRMED BY BOTH CIT(A) AND ITAT. DURING THE APPEA L HEARING ASSESSEE ADMITTED THE FACT OF UNACCOUNTED SALES. 7.6 HON'BLE SUPREME COURT IN THE CASE OF DHARMENDR A TEXTILE PROCESSORS LTD. 306 ITR 277 HELD THAT MENS REA IS N OT AN ESSENTIAL INGREDIENT OF SEC. 271(1)(C). 7.7 ON THE OTHER HAND THE LATEST DECISION OF THE H ON'BLE SUPREME COURT IN MAK DATA (P.) LTD. V. COMMISSIONER OF INCO ME-TAX - II 38 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 10 TAXMANN.COM 448 (SC) 2013 IS APPLICABLE FOR THE FAC TS OF THIS CASE. APEX COURT HELD THE ASSESSING OFFICER, SHALL NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE LIKE 'VOLUNTARY DISCLOSURE', 'BUY PEAC E', 'AVOID LITIGATION'. 'AMICABLE SETTLEMENT', ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED AN Y EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOM E OR FURNISHING INACCURATE PARTICULARS OF INCOME. EXPLAN ATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE ASSESSING OFFICER, BET WEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSE SSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WH EN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DI SCHARGED BY HIM, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT TH E AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. ASSESSEE HAS ONLY STATED THAT HE HAD SURRENDERED TH E ADDITIONAL SUM WITH A VIEW TO AVOID LITIGATION, BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AN D TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEPARTMENT. STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENCES UNDER TH E EXPLANATION 1 TO SECTION 271(1)(C). IT IS TRITE LAW THAT THE VOLUNTARY DISCLOSURE DOES NOT RELEASE THE ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS UNDER SECTION 271(1)( C). THE LAW DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKES A VOLU NTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HAS TO BE AB SOLVED FROM PENALTY. [PARA 7] IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN TH E SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THIS DECISION OF THE APEX COURT IS SQUARELY APPLICA BLE IN THIS CASE AS THE PENALTY IS LEVIED ON ACCOUNT OF INCOME DETECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IS BASED ON THE EVIDE NCES SEIZED DURING THE COURSE OF SEARCH RELATING TO UNACCOUNTED SALES NOT RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND THAT ACCEPTIN G THE ADDITIONAL INCOME CANNOT RELEASE ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS UNDER SECTION 271(1)(C). I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 11 7.8 HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS SUDARSHAN SILKS AND SAREES (2002) [2531TR 145] (KAR), HELD WHERE IT WAS HELD THAT THE FILING OF A REVISED RETU RN BY THE ASSESSEE DOES NOT ITSELF EITHER ESTABLISH HIS BONA FIDES NOR DOES IT NECESSARILY IMPLY THAT HE HAD CONCEALED HIS INCO ME. THE CIRCUMSTANCES IN WHICH THE REVISED RETURN IS FILED ARE WHAT REALLY MATTER. SEARCH AND SEIZURE OPERATIONS INDICA TED THAT THE ASSESSEE HAD CONCEALED ITS INCOME. REVISED RETURNS WERE FILED SHOWING GREATER INCOME. IT WAS HELD THAT THE TRIBUN AL WAS NOT JUSTIFIED IN CANCELLING PENALTY. THE REVISED RETURN S WERE FILED AFTER THE SEARCH AND SEIZURE OPERATIONS WERE CARRIE D OUT. THE PARTY CONDUCTING THE SEARCH HAD COME ACROSS MATERIA L SHOWING LARGE SCALE CONCEALMENT OF THE TRUE TURNOVER. THE R EVISED RETURNS IN THE PRESENT CASES WERE TO PRE-EMPT ANY A CTION ON THE PART OF THE DEPARTMENT FOR REOPENING THE EARLIER AS SESSMENTS ON THE BASIS OF SEIZURE AND DISCLOSURES MADE IN THE CO URSE OF SEARCH PROCEEDINGS. IMPOSITION OF PENALTY WAS HELD TO BE VALID. 7.9 HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS . HCIL KALINDEE ARSSPL UPHOLDING LEVY OF PENALTY U/S 271(1) HELD A S UNDER WHILE IT IS TRUE THAT THE INCOME-TAX ACT, 1961 IS O NE OF MOST VEXED AND COMPLICATED LEGISLATION AND REQUIRES HIGH EST DEGREE OF INTERPRETATIVE SKILLS AND THERE ARE DIVERGENT VI EWS ON INTERPRETATION OF ITS PROVISIONS AND WHILE IT IS AL SO TRUE THAT PENALTY FOR CONCEALMENT CANNOT BE IMPOSED MERELY BE CAUSE ASSESSEE'S INTERPRETATION OR CLAIM IS REJECTED, SUC H CASES HAVE TO BE DISTINGUISHED FROM CASES WHERE THE CLAIM OF THE ASSESSEE IS FARCICAL OR FARFETCHED. DUBIOUS AND FANCIFUL CLAIMS UNDER THE GARB OF INTERPRETATION ARE A MERE PRETENSE AND NOT BONA FIDE. ABSURD OR ILLOGICAL INTERPRETATIONS CANNOT BE PLEAD ED AND BECOME PRETENSE AND EXCUSES TO ESCAPE PENALTY. 'BON A FIDES' HAVE TO BE SHOWN AND CANNOT BE ASSUMED. 7.10 IT WAS IN THE KNOWLEDGE OF THE APPELLANT WHO H AS PLANNED AND EXECUTED THE TAX EVASION STRATEGY. HAD THE SEARCH A ND SEIZURE OPERATIONS NOT BEEN CARRIED OUT THIS MODUS OPERANDI WOULD NEVER HAVE BEEN DISCOVERED AND THE TAX EVASION WOULD NOT HAVE COME TO LIGHT. THE SEIZED DOCUMENTS PROVIDE A CLEAR GLIMPSE OF THE ACT UAL AFFAIRS OF THE BUSINESS OF THE APPELLANT. IN OTHER WORDS, THE EVID ENCE AT HAND CLEARLY INDICATES HOW THE BUSINESS OF THE APPELLANT IS BEIN G CARRIED OUT AND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 12 WHAT THE QUANTUM OF ACTUAL SALES IS. WHEN STATUTORY NOTICES WERE ISSUED CONSEQUENT TO THE SEARCH OPERATION, THE APPE LLANT FILED HER RETURN OF INCOME WITHOUT ADMITTING TRUE TURNOVER OR THE TRUE PROFIT PERCENTAGE. IF SHE HAD DISCLOSED THE TRUE SALES AND TRUE INCOME IT WOULD HAVE ESTABLISHED TO AN EXTENT HER BONA FIDES. 7.11 THE ENTIRE STRATEGY IS NOT A HUMAN ERROR BUT A WELL THOUGHT OUT AND PLANNED STRATEGY TO EVADE TAXES. AT MANY STAGES THE APPELLANT HAD THE CHOICE TO ADMIT THE TRUTH AND COME OUT WITH A F ULL AND TRUE DISCLOSURE. HOWEVER, RATHER THAN ACCEPTING THE TRUT H OR SUPPLYING THE CORRECT STATEMENTS THE APPELLANT PERSISTED WITH UNT RUTHS. I FIND THAT THE ENTIRE CONDUCT AND ARRANGEMENT MADE BY THE APPELLAN T IS AIMED AT TAX EVASION AND IN FILING INACCURATE PARTICULARS OF INC OME. 7.12 THE PROCESS OF ENQUIRY INTO THE CORRECTNESS, T RUTHFULNESS OR ACCURACY OF THE PARTICULARS FURNISHED BY THE ASSESS EE CANNOT BE CLOSED AT THE THRESHOLD BY LOOKING AT THE RETURN. THAT WOU LD NEGATIVE AND RENDER OTIOSE THE VERY PROVISIONS OF THE STATUTE. A S PER THE RULE OF EVIDENCE, THERE IS DISTINCTION BETWEEN SET OF FACTS 'NOT PROVED' AND FACTS 'DISPROVED' AND FACTS PROVED. ENQUIRY WILL HAVE T O BE UNDERTAKEN OF THE DISCLOSURE MADE IN THE RETURN OR IN THE STATEME NTS, ANNEXED TO IT AND ARRIVE AT A FINDING WHETHER THE PARTICULARS DIS CLOSED ARE TRUTHFUL OR FALSE OR NOT PROVED TO BE SATISFACTORY. IN THE F IRST CASE, IT WOULD BE POSITIVE CASE OF NO CONCEALMENT, IN THE SECOND CASE , IT WOULD BE A POSITIVE CASE OF CONCEALMENT AND IN THE THIRD CASE, BENEFIT OF DOUBT WOULD GO IN FAVOR OF THE ASSESSEE. IN THIS CASE IT IS A POSITIVE CASE OF CONCEALMENT AS THE DISCLOSURES MADE IN THE RETURN A BOUT THE INCOME ARE FALSE PARTICULARLY CONSIDERING THAT ASSESSEE IS AWARE THAT EVIDENCES ARE AVAILABLE WITH THE DEPARTMENTS TOWARD S INCOME FROM UNACCOUNTED SALES WHICH WERE IMPOUNDED DURING THE S EARCH/SURVEY ARE AVAILABLE WITH THE DEPARTMENT. 7.13 NOW, THE CASE OF THE APPELLANT IS EXAMINED UN DER THE DEEMING PROVISIONS OF EXPLANATION 1 TO SEC. 271(1)(C) OF TH E I.T. ACT. THIS DEEMING FICTION, AS MENTIONED EARLIER IN THIS ORDER , COMES INTO PLAY WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT. (I) WHEN THE A SSESSEE FAILS TO PROVIDE AN EXPLANATION, (II) WHEN THE ASSESSEE PROV IDES AN EXPLANATION WHICH IS FOUND TO BE FALSE, AND (III) WHEN THE ASSE SSEE PROVIDES AN EXPLANATION WHICH HE FAILS TO SUBSTANTIATE AND HE F AILS TO PROVE THAT THE EXPLANATION WAS BONA FIDE AND THAT ALL THE FACTS NE CESSARY FOR THE SAME AND MATERIAL FOR COMPUTATION OF INCOME HAVE BEEN DU LY DISCLOSED BY THE ASSESSEE. THE APPELLANT HAD NOT BEEN ABLE TO DI SCHARGE ITS BURDEN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 13 UNDER EXPLANATION 1 TO SECTION 271(1)(C). ACCORDING LY, IN ADDITION TO THE MAIN SECTION OF 271(1)(C), THE CASE OF THE APPE LLANT IS ALSO COVERED UNDER THE DEEMING PROVISIONS OF EXPLANATION 1 TO SE C. 271(1)(C) AND THE APPELLANT IS DEEMED TO HAVE FURNISHED INACCURAT E PARTICULARS OF INCOME. 7.14 TO SUM UP, THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF BUSINESS AND THIS WAS DETECTED DURING THE ASSESSMENT PROCEEDINGS BASED ON THE MATERIALS IMPOU NDED DURING THE SEARCH. SHE DID NOT COME CLEAN AT THAT TIME THOUGH HE HAD ONE LAST CHANCE. IT IS EVIDENT THAT THE APPELLANT DELIBERATE LY AND CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME BY NOT D ISCLOSING THE CORRECT TURNOVER AND PROFIT. IN SUCH A SITUATION, THE CASE OF THE APPELLANT IS C LEARLY COVERED UNDER THE PROVISIONS OF SEC. 271(1)(C) AND I AM OF THE CONSIDERED OPINION THAT THIS IS A FIT CASE FOR LEVY OF PENALTY UNDER SEC. 271(1)(C) AND THE ASSESSING OFFICER IS JUSTIFIED IN PRINCIPLE IN LEVYING THE PENALTY FOR FURNISHING INACCURATE PARTI CULARS OF INCOME BY THE APPELLANT. 7. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL B EFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ADDITION SUSTAINED IN THE QUANTUM APPEAL WAS ONLY 15% AND TH AT THE ADDITION WAS MADE ON ESTIMATE BASIS. HE HAS FURTHER SUBMITTE D THAT THE ASSESSEE HAS FILED DETAILED EXPLANATION BEFORE THE ASSESSING OFFICER AS WELL AS LD. CIT(APPEALS) AND WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE, BOTH THE AUTHORITIES HAVE REJECTED TH E SAME. HE HAS ALSO SUBMITTED THAT THE DIFFERENCE IN SALE AROSE ONLY BE CAUSE THE DIFFICULTIES IN MAINTAINING THE RECORD SINCE THERE ARE RESTAURAN T SALES AS WELL AS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 14 OUTSIDE SALES. FURTHER, THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE ASSESSEE NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS AND THE HONBLE JURISDICTIONAL HIGH COU RT HAS ADMITTED THE APPEAL AND ON THIS COUNT ALONE, THE ASSESSEES APPE ALS HAS TO BE ALLOWED. HE RELIED ON THE FOLLOWING CASE LAW: I) PRICE WATERHOUSE COOPERS PVT. LTD. V. CIT 348 IT R 306 II) CIT V. RELIANCE PETROPRODUCTS PVT.LTD.[2010] 32 2 ITR 158 (SC) III) DCIT V. SATYA PRAKASH ARORA [2010] 127 ITD 327 (DELHI) IV) G. RAMKUMAR V. DCIT 132 ITD 195 (CHENNAI) V) S AND S FOUNDATIONS P. LTD.[2011]11 ITR (TRIB) 1 36 (CHENNAI) VI) CIT V. GEM GRANITES-TAX CASE (APPEAL) NO.504 O F 2009(MAD) VII) JHPL HOLDING (P) LTD. V. ACIT IN ITA NO.6472/D EL/2012 9. THE LD. DR HAS STRONGLY ARGUED THAT THE ASSESSE E HAS SUPPRESSED ACTUAL SALES AND FILED INACCURATE PARTIC ULARS, WHICH AMOUNTS TO CONCEALMENT OF INCOME. HE FURTHER SUBMIT TED THAT THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE H AS NO APPLICATION IN THE PRESENT CASE. HE ALSO STRONGLY RELIED ON THE DE CISION IN THE CASE OF TRIUMPH INTERNATIONAL FINANCE I LTD. V. ACIT IN IT( SS)A NO. 160/MUM/2007 VIDE ORDER DATED 30.06.2011. 10. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A SSESSEE SMT. M. UMA MAHESHWARI, WIFE OF SHRI S. MANOHARAN RUNNING A RESTAURANT UNDER THE NAME AND STYLE OF M/S. MURUGAN IDLI SHOP. A SEARCH ACTION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 15 UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 29.03 .2008 IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASS ESSEE. SEVERAL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION INDICATED UNACCOUNTED SALES IN VARIOUS OUTLE TS OF ASSESSEE. AFTER APPRECIATING THE SEIZED MATERIALS AND ASSESSE ES EXPLANATION, THE ASSESSMENT WAS COMPLETED BY MAKING ADDITION OF .4,54,430/- WHICH IS 20% OF THE UNACCOUNTED SALES QUANTIFIED OF .22,72,153/-. WHEN THE MATTER WENT IN APPEAL, THE LD. CIT(APPEALS) REDUCED THE ADDITION ON ACCOUNT OF UNACCOUNTED SALES FROM 20% TO 15%. THERE AFTER, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UND ER SECTION 271(1)(C) OF THE ACT AND CALLED EXPLANATION FROM THE ASSESSEE . THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT HE R HUSBAND HAS ACCEPTED SUPPRESSION IN SALE AS WELL AS IN PURCHASE S, EXPENSES, MAINTENANCE, WAGES, ETC. AT THE TIME OF SEARCH ITSE LF. THIS WAS DONE WITHOUT HER KNOWLEDGE AND APPROVAL BY THE MANAGERS WHO WERE GIVEN FULL OPERATIONAL FREEDOM. IT WAS ALSO SUBMITTED THA T AN ADDITION AT THE RATE OF 20% OF THE SUPPRESSED SALE HAD BEEN MADE DU E TO HER INABILITY TO SUBSTANTIATE AND PROVE DUE TO CIRCUMSTANCES BEYO ND HER CONTROL. A PERUSAL OF HER COMPETING SIMILAR HOTEL WOULD CONFIR M THE FACT THAT ESTIMATED NET PROFIT HAD BEEN DETERMINED AT A MUCH HIGHER PERCENTAGE. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 16 IT WAS SUBMITTED THAT IN VIEW OF THE FACTS SHE WAS FULLY AWARE OF THE DIFFERENCE IN SALES AS WELL AS EXPENSES BUT SHE COU LD NOT INCLUDE THE SAME WHILE FILING THE RETURN IN PURSUANCE OF NOTICE UNDER SECTION 153A. IT WAS SUBMITTED THAT AN ADDITION HAD BEEN ADDED AN D SUSTAINED WOULD NOT ITSELF ATTRACT PENALTY. SHE NEVER HAD MALAFIDE INTENTION OF CONCEALING THE SUPPRESSION IN SALE AND THE RESULTAN T PROFIT BUT COULD NOT DO DUE TO THE PECULIAR CIRCUMSTANCES MENTIONED. TH E ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE AS SESSEE CAME TO A CONCLUSION THAT THE ASSESSEE HAD FURNISHED INACCURA TE PARTICULARS, WHICH TANTAMOUNT TO CONCEALMENT OF INCOME. ACCORDIN GLY, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED. ON A PPEAL, THE LD. CIT(APPEALS) BY FOLLOWING VARIOUS CASE LAW DECIDED EACH AND EVERY ITEM IN THREAD BEAR AND CONFIRMED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. WE FIND THAT IN THIS CASE, THE A SSESSEE HERSELF ACCEPTED THAT THERE WAS SUPPRESSION IN SALES AS WEL L AS PURCHASE OF RAW MATERIALS AND THE EXPLANATION GIVEN BY THE ASSE SSEE THAT THE SUPPRESSION OF SALES HAD BEEN MADE DUE TO HER INABI LITY TO SUBSTANTIATE AND PROVE DUE TO CIRCUMSTANCES BEYOND HER CONTROL I S NOT ACCEPTABLE AND IT IS UNBELIEVABLE WITHOUT ANY BASIS AND THE AS SESSEE WAS NOT ABLE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 17 TO SUBSTANTIATE WITH SUPPORTIVE EVIDENCE. WE FIND T HAT IT IS A FIT CASE TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 11. THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. V. CIT ( SUPRA) HAS NO APPLICATION. IN THIS CASE, THE HONBLE SUPREME COUR T HAS HELD THAT THE ASSESSEE HAS COMMITTED AN INADVERTENT BONAFIDE ERRO R AND HAD NOT INTENDED OR ATTEMPTED TO CONCEAL ITS INCOME OR FURN ISH INACCURATE PARTICULARS. WHEREAS, IN THE PRESENT CASE, THE DEPA RTMENT HAS IMPOUNDED INCRIMINATING MATERIALS DURING THE COURSE OF SEARCH AND THEREAFTER THE ASSESSEE HAS ACCEPTED SUPPRESSION OF SALES AND FURNISHING OF INACCURATE PARTICULARS. THEREFORE THE CASE LAW CITED BY THE ASSESSEE HAS NO APPLICATION. 12. IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS P VT. LTD. (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT TANTAMOUN T TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSE SSEE, WHICH HAS NO RELEVANCE TO THE PRESENT CASE IN HAND. 13. IN THE CASE OF DCIT V. SATYA PRAKASH ARORA (SU PRA), IT HAS NO APPLICATION AT ALL AND IT IS NOT RELATING TO PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 18 14. IN THE CASE OF G. RAMKUMAR V. DCIT (SUPRA), TH E COORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE ASSESSING O FFICER IS BOUND TO SHOW CASE THE ASSESSEE SEPARATELY FOR THE PURPOSE O F IMPOSING PENALTY AND AFTER CALLING FOR AND CONSIDERING THE E XPLANATION SO TENDERED IN THE LIGHT OF PROVISIONS OF SECTION 271( 1)(C) OF THE ACT ONLY CAN LEVY THE PENALTY, OTHERWISE, NOT. IN THE PRESEN T CASE SINCE THE ASSESSING OFFICER HAS CALLED FOR THE EXPLANATION FR OM THE ASSESSEE BEFORE LEVYING PENALTY AND HENCE IT HAS NO APPLICAT ION. 15. IN THE CASE OF S AND S FOUNDATIONS P. LTD. (SU PRA), THE COORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE LAND SOLD WAS ALWAYS ACCOUNTED, BUT BASED ON A CONSISTENT POLICY ADOPTED BY IT THE VALUE OF THE STOCK OF SUCH LAND WAS SHOWN AT NIL AND THAT THE VALUE ARRIVED AT BY THE ASSESSING OFFICER WAS ONLY AN EST IMATE AND THEREFORE, THERE WAS NO QUESTION OF LEVY OF PENALTY UNDER SECT ION 271(1)(C) OF THE ACT. IT IS ALTOGETHER A DIFFERENT CASE AND HAS NO A PPLICATION TO THE PRESENT CASE IN HAND. 16. IN THE CASE OF CIT V. GEM GRANITES (SUPRA), TH E HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE INITIAL ONUS HAS BEEN DISCHARGED BY THE ASSESSEE, AND ONUS SHIFTS ON REVE NUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THEIR INCOME AND NOT OTHERWISE. IN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 19 THE PRESENT CASE, THE ASSESSEE HAS FAILED TO DISCHA RGE THE BASIC ONUS CAST UPON HER/HIM AND THEREFORE, THE DECISION HAS N O APPLICATION. 17. IN THE CASE OF JHPL HOLDING (P) LTD. V. ACIT ( SUPRA), THE DELHI BENCHES OF ITAT HAS HELD WHEN THE HIGH COURT HAS FR AMED SUBSTANTIAL QUESTION OF LAW, THE SAME HAS BECOME DEBATABLE THEN NO PENALTY IS LEVIABLE THEREON. THIS CASE LAW HAS ALSO NO APPLICA TION FOR THE REASON THAT NO MATERIAL HAS BEEN PLACED BEFORE US TO SHOW THAT THE HONBLE HIGH COURT GAVE A FINDING THAT THERE IS A SUBSTANTI AL QUESTION OF LAW IN THIS CASE. 18. THE LD. DR HAS PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF ITAT MUMBAI IN THE CASE OF TRIUMPH INTERNA TIONAL FINANCE I LTD. IN IT(SS)A NO. 160/MUM/2007 FOR THE BLOCK PERI OD 01.04.1990 TO 23.03.2001 VIDE ORDER DATED 30.06.2011., WHEREIN, I T HAS BEEN DISCUSSED ELABORATELY WITH REGARD TO THE APPEAL ADM ITTED BY THE HONBLE JURISDICTIONAL HIGH COURT, WHETHER THE PENA LTY PROCEEDINGS CAN BE INITIATED BY THE ASSESSING OFFICER OR NOT. THE T RIBUNAL HAS HELD THAT BY FILING AN APPEAL BEFORE THE HONBLE JURISDICTION AL HIGH COURT DOES NOT AUTOMATICALLY MAKE OUT OF CASE IN FAVOUR OF THE ASSESSEE UNTIL AND UNLESS THE CIRCUMSTANCE EXISTS IN THE CASE DOES NOT WARRANT PENALTY AT ALL. WE FIND THAT THE ABOVE OBSERVATION OF THE TRIB UNAL IS MORE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 20 REASONABLE AND WE ARE ALSO OF THE OPINION THAT SIMP LY FILING OF APPEAL DOES NOT BAR THE ASSESSING OFFICER TO INVOKE PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 19. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FI ND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) AND ACCORD INGLY, THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004 -05 TO 2007-08 ARE DISMISSED. I.T.A.NO. 336/MDS/2014 [A.Y. 2008-09 20. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE SMT. M. UMA MAHESHWARI, WIFE OF SHRI S. MANOHARAN RUNNING A RE STAURANT UNDER THE NAME AND STYLE OF M/S. MURUGAN IDLI SHOP. A SEARCH ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 29.03.2008 IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASSESSEE. SEVER AL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEA RCH ACTION INDICATED UNACCOUNTED SALES IN VARIOUS OUTLETS OF A SSESSEE AND INVESTMENT IN LAND. IN RESPONSE TO THE NOTICE UNDER SECTION 142(1) OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME ON 04. 08.2009 ADMITTING RETURNED INCOME OF .2,74,872/-. THE ASSESSING OFFICER, AFTER CONSIDERING ASSESSEES EXPLANATION AND SEIZED MATER IALS, ASSESSMENT WAS COMPLETED BY MAKING FOLLOWING ADDITIONS: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 21 I) INCOME FROM UNACCOUNTED SALES .6,01,395/- II) COST OF IMMOVABLE ASSET OMITTED TO BE UNACCOUNT ED .92,700/- 21. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE LD. CIT(APPEALS) AND THE LD. CIT(APPEALS) CONFIRMED THE ADDITION TOWARDS COST OF IMMOVABLE ASSET PURCHASED AND ALSO CONFIRME D THE ADDITION TO THE EXTENT OF 4,51,046/- TOWARDS SUPPRESSED SALES. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL FURTHER CONFIRMED THE ORDER PASSED BY THE LD. CIT(APPEALS). SUBSEQUENTLY, THE ASSESSING O FFICER HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT BY ISSUING NOTICE DATED 18.07.2011. IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE HAS FILED A REPLY D ATED 12.03.2012, WHEREIN IT WAS STATED THAT HER HUSBAND HAS ACCEPTE D SUPPRESSION IN SALE AS WELL AS IN PURCHASES, EXPENSES, MAINTENANCE , WAGES, ETC. AT THE TIME OF SEARCH ITSELF. THIS WAS DONE WITHOUT HE R KNOWLEDGE AND APPROVAL BY THE MANAGERS WHO WERE GIVEN FULL OPERAT IONAL FREEDOM. IT WAS ALSO SUBMITTED THAT AN ADDITION AT THE RATE OF 20% OF THE SUPPRESSED SALE HAD BEEN MADE DUE TO HER INABILITY TO SUBSTANTIATE AND PROVE DUE TO CIRCUMSTANCES BEYOND HER CONTROL. A PERUSAL OF HER COMPETING SIMILAR HOTEL WOULD CONFIRM THE FACT THAT ESTIMATED NET PROFIT HAD BEEN DETERMINED AT A MUCH HIGHER PERCENTAGE. IT WAS SUBMITTED THAT IN VIEW OF THE FACTS SHE WAS FULLY AWARE OF TH E DIFFERENCE IN SALES I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 22 AS WELL AS EXPENSES BUT SHE COULD NOT INCLUDE THE S AME WHILE FILING THE RETURN IN PURSUANCE OF NOTICE UNDER SECTION 153A. I T WAS CONTENDED THAT THE FACT AN ADDITION HAD BEEN ADDED AND SUSTAI NED WOULD NOT ITSELF ATTRACT PENALTY. SHE REITERATED THAT SHE NEVER HAD MALAFIDE INTENTION OF CONCEALING THE SUPPRESSION IN SALE AND THE RESULTAN T PROFIT BUT COULD NOT DO DUE TO THE PECULIAR CIRCUMSTANCES MENTIONED. 22. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON VAR IOUS CASE LAW AS DETAILED HEREINABOVE FOR PREVIOUS ASSESSMENT YEARS AND SUBMITTED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS ADMI TTED THE APPEAL AND ON THIS COUNT ALONE, THE ASSESSEES APPEALS HAS TO BE ALLOWED. 23. ON THE OTHER HAND, THE LD. DR HAS STRONGLY SUP PORTED THE ORDERS OF AUTHORITIES BELOW AND ALSO RELIED ON THE DECISIO N IN THE CASE OF TRIUMPH INTERNATIONAL FINANCE I LTD. V. ACIT IN IT( SS)A NO. 160/MUM/2007 VIDE ORDER DATED 30.06.2011. 24. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A SSESSEE SMT. M. UMA MAHESHWARI, WIFE OF SHRI S. MANOHARAN RUNNING A RESTAURANT UNDER THE NAME AND STYLE OF M/S. MURUGAN IDLI SHOP. A SEARCH ACTION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 23 UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 29.03 .2008 IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASS ESSEE. SEVERAL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION INDICATED UNACCOUNTED SALES IN VARIOUS OUTLE TS OF ASSESSEE. AFTER APPRECIATING THE SEIZED MATERIALS AND ASSESSE ES EXPLANATION, THE ASSESSMENT WAS COMPLETED BY MAKING ADDITION OF .6,01,395/- WHICH IS 20% OF THE UNACCOUNTED SALES QUANTIFIED OF .30,06,974/- AND .92,700/- TOWARDS UNACCOUNTED INVESTMENT IN LAND. W HEN THE MATTER WENT IN APPEAL, THE LD. CIT(APPEALS) REDUCED THE AD DITION ON ACCOUNT OF UNACCOUNTED SALES FROM 20% TO 15%. THE LD. CIT(APPE ALS) HAS ALSO CONFIRMED THE UNACCOUNTED INVESTMENT IN LAND OF .92,700/-. THEREAFTER, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND CALLED EXPLANATION FROM THE ASSESSEE. THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFF ICER THAT HER HUSBAND HAS ACCEPTED SUPPRESSION IN SALE AS WELL AS IN PURCHASES, EXPENSES, MAINTENANCE, WAGES, ETC. AT THE TIME OF S EARCH ITSELF. THIS WAS DONE WITHOUT HER KNOWLEDGE AND APPROVAL BY THE MANAGERS WHO WERE GIVEN FULL OPERATIONAL FREEDOM. IT WAS ALSO SU BMITTED THAT AN ADDITION AT THE RATE OF 20% OF THE SUPPRESSED SALE HAD BEEN MADE DUE TO HER INABILITY TO SUBSTANTIATE AND PROVE DUE TO C IRCUMSTANCES BEYOND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 24 HER CONTROL. A PERUSAL OF HER COMPETING SIMILAR HOT EL WOULD CONFIRM THE FACT THAT ESTIMATED NET PROFIT HAD BEEN DETERMINED AT A MUCH HIGHER PERCENTAGE. IT WAS SUBMITTED THAT IN VIEW OF THE FA CTS SHE WAS FULLY AWARE OF THE DIFFERENCE IN SALES AS WELL AS EXPENSE S BUT SHE COULD NOT INCLUDE THE SAME WHILE FILING THE RETURN IN PURSUAN CE OF NOTICE UNDER SECTION 153A. IT WAS SUBMITTED THAT AN ADDITION HAD BEEN ADDED AND SUSTAINED WOULD NOT ITSELF ATTRACT PENALTY. SHE NEV ER HAD MALAFIDE INTENTION OF CONCEALING THE SUPPRESSION IN SALE AND THE RESULTANT PROFIT BUT COULD NOT DO DUE TO THE PECULIAR CIRCUMSTANCES MENTIONED. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE CAME TO A CONCLUSION THAT THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS, WHICH TANTAMOUNT TO CONCEALMENT OF INC OME. ACCORDINGLY, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVI ED. ON APPEAL, THE LD. CIT(APPEALS) PASSED A DETAILED ORDER DISTINGUIS HING VARIOUS CASE LAW AT PAGE 4 TO 12 OF HIS ORDER AND CONFIRMED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. WE FIND THAT IN TH IS CASE, THE ASSESSEE HERSELF ACCEPTED THAT THERE WAS SUPPRESSIO N IN SALES AS WELL AS PURCHASE OF RAW MATERIALS AND THE EXPLANATION GI VEN BY THE ASSESSEE THAT THE SUPPRESSION OF SALES HAD BEEN MAD E DUE TO HER INABILITY TO SUBSTANTIATE AND PROVE DUE TO CIRCUMST ANCES BEYOND HER I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 25 CONTROL IS NOT ACCEPTABLE AND IT IS UNBELIEVABLE WI THOUT ANY BASIS AND THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE WITH SUPP ORTIVE EVIDENCE. WE FIND THAT IT IS A FIT CASE TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 25. THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE HAVE NO APPLICATION TO THE PRESENT CASE SINCE IN THE PRE SENT CASE, THE DEPARTMENT HAS CONDUCTED SEARCH ACTIVITIES UNDER SE CTION 132 OF THE ACT AND SEVERAL INCRIMINATING MATERIALS FOUND AND S EIZED DURING THE COURSE OF SEARCH ACTION INDICATING UNACCOUNTED SALE S IN VARIOUS OUTLETS OF THE ASSESSEE AND SUBSEQUENTLY, ADDITIONS WERE MA DE AND CONFIRMED BY THE LD. CIT(APPEALS) AS WELL AS TRIBUNAL. IN THE CASE LAW RELIED ON BY THE LD. DR IN THE CASE OF TRIUMPH INTERNATIONAL FIN ANCE I LTD. V. ACIT (SUPRA), THE TRIBUNAL HAS HELD THAT BY FILING AN AP PEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT DOES NOT AUTOMATI CALLY MAKE OUT OF CASE IN FAVOUR OF THE ASSESSEE UNTIL AND UNLESS THE CIRCUMSTANCE EXISTS IN THE CASE DOES NOT WARRANT PENALTY AT ALL. WE FIN D THAT THE ABOVE OBSERVATION OF THE TRIBUNAL IS MORE REASONABLE AND WE ARE ALSO OF THE OPINION THAT SIMPLY FILING OF APPEAL DOES NOT BAR T HE ASSESSING OFFICER TO INVOKE PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .332 332332 332- -- -336 336336 336 /M/ /M/ /M/ /M/1 11 14 44 4 26 26. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FI ND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) AND ACCORD INGLY, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008- 09 IS ALSO DISMISSED. 27. IN THE RESULT, ALL THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 28 TH OF AUGUST, 2014 AT CHENNAI. SD/- SD/- ( . . . ) (DR. O.K. NARAYANAN) / VICE-PRESIDENT ( . !' !' !' !' ) (V. DURGA RAO) # # # # $% $% $% $% / JUDICIAL MEMBER DATED: 28.08.2014. VM/- 1 , *#-23 43'- /COPY TO: 1. () / APPELLANT, 2. *+() / RESPONDENT, 3. 5 ( ) /CIT(A), 4. 5 /CIT, 5. 36! *#-# /DR & 6. !' 7 /GF.