S.Manoharan, CHENNAI V. ACIT, Madurai

ITA 338/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77402 (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: 2004-2005
• 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; Revised return; Documents seized
• Section: 153A; 132

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. 337, 338, 339, 340, 341 & 342/MDS/2014 # ' '' / ASSESSMENT YEARS :2002-03, 04-05, 05-06, 06-07, 07-08 & 08-09 SHRI S. MANOHARAN, PROP. M/S. MURUGAN IDLI KADAI, NO. 196, WEST MASI STREET, MADURAI. [PAN : AITPM1981H] 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 SIX APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I, MADURAI, ALL DATED 07.01.2014 RELEVANT TO THE ASSES SMENT YEARS 2002- 03, 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 PASSED 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. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 2 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. SEVERAL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION INDICATED UNACCOUNTED SALES IN VARIOUS OUTLE TS OF ASSESSEE. IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT, THE ASS ESSEE FILED RETURN OF INCOME ON 16.06.2009 ADMITTING RETURNED INCOME OF . 93,000/- AND AGRICULTURAL INCOME OF 1,49,000/-. AFTER APPRECIATING RELEVANT SEIZED MATERIALS AND ASSESSEE'S EXPLANATION, THE ASSESSMEN T FOR THE ASSESSMENT YEAR 2002-03 WAS COMPLETED BY MAKING AN ADDITION OF .5,00,000/- TOWARDS CASH PAID FOR PURCHASE OF 1.51 ACRES OF NANJAI LAND AT KALIKAPPAN VILLAGE. THE ADDITION MADE BY TH E ASSESSING OFFICER WAS CONFIRMED BY THE LD. CIT(APPEALS). 3. ON SIMILAR FACTS AND CIRCUMSTANCES, FOR THE ASS ESSMENT YEAR 2004-05, THE ASSESSING OFFICER MADE ADDITION TOWARD S UNACCOUNTED INVESTMENT OF .5,00,000/- AND SALE SUPPRESSION OF .22,98,047/-; FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSING OFFICER MADE ADDITIONS TOWARDS UNACCOUNTED INVESTMENT (LOANS ON PROMOTES) OF .6,66,000/- AND SALE SUPPRESSION OF .21,17,265/-; FOR THE ASSESSMENT YEAR 2006- I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 3 07, THE ASSESSING OFFICER MADE ADDITIONS TOWARDS IN TEREST RECEIPTS ON CASH PAID IN ADVANCE TOWARDS PURCHASE OF PROPERTIES OF .1,10,000/- AND SALE SUPPRESSION OF .47,69,800/-; FOR THE ASSESSMENT YEAR 2007- 08, THE ASSESSING OFFICER MADE ADDITIONS TOWARDS PU RCHASE OF LAND AT POONJERI VILLAGE OF .37,30,000/-, LAND DEVELOPMENT EXPENSES AT .25,00,000/-, DEFICIT STAMP DUTY PAYMENT OF .1,06,000/- AND SALE SUPPRESSION OF .37,24,253/-; AND FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER MADE ADDITIONS TOWARDS UNEXPL AINED INVESTMENT IN JEWELLERY OF .4,75,875/- AND SALE SUPPRESSION OF .16,61,646/-. 3. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(APPEALS) OBSERVED THAT IN THE ASSESSMEN T YEARS 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09, THE NET PROF IT ESTIMATED AT THE RATE OF 20% WAS ON THE HIGHER SIDE AND DIRECTED THE ASSESSING OFFICER TO ADAPT 15% NET PROFIT ESTIMATED. FOR THE REMAININ G ADDITIONS, THE ADDITIONS MADE TOWARDS UNACCOUNTED INVESTMENTS IN T HE ASSESSMENT YEARS 2004-05 AND 2005-06, WERE CONFIRMED; THE ADDI TION MADE TOWARDS UNACCOUNTED INTEREST RECEIPTS OF .1,10,000/- WAS DELETED; THE ADDITIONS MADE IN THE ASSESSMENT YEAR 2007-08 TOWAR DS UNACCOUNTED INVESTMENT IN PURCHASING LAND AT POONJERI VILLAGE O F .37,30,000/- AND .1,06,000/- MADE IN RESPECT OF DEFICIT STAMP DUTY W ERE CONFIRMED AND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 4 THE LAND DEVELOPMENT EXPENSES CLAIMED BY THE ASSESS EE WAS DELETED; AND FOR THE ASSESSMENT YEAR 2008-09, THE ADDITION M ADE TOWARDS UNEXPLAINED INVESTMENT IN JEWELLERY OF .4,75,875/- WAS ORDERED TO BE DELETED BY THE LD. CIT(APPEALS). 4. THE ASSESSEE PREFERRED APPEALS AGAINST THE ORDE RS OF THE LD. CIT(APPEALS) AGAINST CONFIRMATION OF VARIOUS ADDITI ONS AND THE TRIBUNAL VIDE ITS ORDER IN I.T.A. NOS. 1495 TO 1500/MDS/2011 DATED 08.12.2011, BY DISMISSING THE APPEALS FILED BY THE ASSESSEE, CO NFIRMED THE ADDITIONS MADE BY THE LD. CIT(APPEALS). THEREAFTER, THE ASSESSING OFFICER 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 REP LY ON 12.03.2012, WHEREIN IT WAS STATED THAT AS UNDER: I BEG TO SUBMIT THAT AN ADDITION @20% OF THE SUPPR ESSED SALES HAD BEEN MADE DUE TO MY INABILITY TO SUBSTANT IATE AND PROVE DUE TO CIRCUMSTANCES BEYOND MY CONTROL. A PER USAL OF MY COMPETING SIMILAR HOTEL WOULD CONFIRM THE FACT T HAT ESTIMATED NET PROFIT HAD BEEN DETERMINED AT A MUCH HIGHER PERCENTAGE. I SUBMIT THAT THE FACT AN ADDITION HAD BEEN ADDED AND SUSTAINED WOULD NOT ITSELF ATTRACT PENALT Y. I REITERATE THAT I NEVER HAD MALAFIDE INTENTION OF CO NCEALING THE SUPPRESSION IN SALE AND THE RESULTANT PROFIT BU T COULD NOT DO DUE TO THE PECULIAR CIRCUMSTANCES MENTIONED. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 5 5. THE ASSESSING OFFICER, AFTER CONSIDERING THE EX PLANATION OF THE ASSESSEE, OBSERVED THAT THE LD. CIT(APPEALS) CONFIR MED THE ADDITION OF UNACCOUNTED SALES TO THE EXTENT OF 15% NET PROFIT F OR TALL THE ASSESSMENT YEARS, WHICH WAS FURTHER CONFIRMED BY TH E TRIBUNAL AND IT WAS ESTABLISHED THAT THE ASSESSEE HAS FURNISHED INA CCURATE PARTICULARS WHICH TANTAMOUNT TO CONCEALMENT OF INCOME AND HAS N OT PUT FORWARD ANY VALID REASON AS TO WHY PENALTY SHOULD NOT BE LE VIED. AS THERE WAS REASONS TO BELIEVE THAT THE ASSESSEE HAD INTENTION TO EVADE PAYMENT OF TAX PAYABLE BY CONCEALING THE PARTICULARS OF INC OME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME AND LEVIED PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(APPEALS) AGAINST PENALTY ORDER. THE LD. CIT(APP EALS) CONSIDERED THE ENTIRE FACTS OF THE CASE IN A THREAD BEAR AND A LSO PASSED A DETAILED ORDER BY CONFIRMING THE ORDER PASSED BY THE ASSESSI NG OFFICER. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : 6. 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. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 6 6.1 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.' 6.1.1 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 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 7 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 EXTENDED DEFINITION BY THE VIRTUE OF EXPLN. 1 TO S. 271(1)(C), FOR A DEEMED CONCEALMENT OF INCOME. 6.2 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. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 8 6.3 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. 6.4 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 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. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 9 6.5 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 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 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 10 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. 6.6 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). 6.7 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 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. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 11 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). 6.8 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 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 12 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. 6.9 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. 6.10 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 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. 6.11 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 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 13 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. 6.12 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. 6.13 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 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. 6.14 TO SUM UP, THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF BUSINESS AND THIS WAS DETECTED DURING THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 14 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 CLEARLY COVERED UNDER THE PROVISIONS O F SEC. 271(1)(C) AND I AM OF THE CONSIDERED OPINION THAT THIS IS A F IT CASE FOR LEVY OF PENALTY UNDER SEC. 271(1)(C) AND THE ASSESSING OFFI CER IS JUSTIFIED IN PRINCIPLE IN LEVYING THE PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE APPELLANT. 7. ON BEING AGGRIEVED AGAINST CONFIRMATION OF PENA LTY ORDERS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FOR ALL T HE ASSESSMENT YEARS. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS MADE SAME SUBMISSIONS, WHICH HE MADE IN THE CASE OF SMT. UMA MAHESHWARI, W IFE OF THE ASSESSEE AND ALSO RELIED ON THE SAME CASE LAW. 9. ON THE OTHER HAND, THE LD. DR ALSO REITERATED S AME SUBMISSIONS, WHICH HE MADE IN THE CASE OF SMT. UMA MAHESHWARI. 10. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A SSESSEE SHRI S. MANOHARAN IS THE PROPRIETOR OF M/S. MURUGAN IDLI SH OP AND M/S. MURUGAN FAST FOODS. THERE WAS A SEARCH CONDUCTED IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASSESSEE UNDER SECTION 132 OF THE ACT. DURING THE COURSE OF SEARCH, SEVERAL INCRIMINA TING MATERIALS FOUND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 15 AND SEIZED. THOSE MATERIALS WERE INDICATING UNACCOU NTED INVESTMENTS AS WELL AS UNACCOUNTED SUPPRESSION OF SALES IN VARI OUS OUTLETS OF THE ASSESSEE. THE ASSESSING OFFICER MADE VARIOUS ADDITI ONS AGAINST WHICH THE ASSESSEE CARRIED THE MATTERS IN APPEAL BEFORE T HE LD. CIT(APPEALS) AND SOME OF THE ADDITIONS MADE BY THE ASSESSING OFF ICER ARE CONFIRMED AND SOME ARE DELETED. THE ASSESSEE FURTHE R WENT ON APPEAL BEFORE ITAT AND THE ITAT CONFIRMED THE ORDER PASSED BY THE LD. CIT(APPEALS) FOR ALL THE ASSESSMENT YEARS. SUBSEQUE NTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UND ER SECTION 271(1)(C) OF THE ACT. 11. WITH REGARD TO ASSESSMENT YEAR 2002-03, THE ASS ESSING OFFICER CALLED EXPLANATION FROM THE ASSESSEE, PARTICULARLY WITH REFERENCE TO ADDITION TOWARDS CASH PAID FOR PURCHASE OF 1.51 ACR ES OF NANJAI LAND AT KALIKAPPAN VILLAGE. IT WAS SUBMITTED BEFORE THE ASS ESSING OFFICER THAT THE ADVANCE OF .5,00,000/- WAS PAID BY MR. LAKSHMANA IYER TO MR. ARIFF THROUGH THE ASSESSEE. THE UNDERSTANDING WAS T HAT ONCE THE PAYMENTS WERE PAID TO MR. ARIFF, THE ASSESSEE HAS T O SECURE POWER OF ATTORNEY FROM MR. ARIFF AND IN DUE COURSE THE PROPE RTY BE DEALT IN ACCORDANCE WITH WISHES OF MR. LAKSHMANA IYER AND TH E DEAL NEVER MATERIALIZED AS MR. ARIFF ABSCONDED AND WAS WANTED BY POLICE IN FIR I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 16 FILED BY THE ASSESSEE. THE ASSESSEE HAS SUBMITTED T HAT HE WAS ONLY A NAME LENDER AND NONE OF THE MONEY WAS PAID FROM HIS ACCOUNT NOR DO HE REQUIRE THE LAND FOR HIS USE. IN THE PENALTY PRO CEEDINGS, THE ASSESSING OFFICER DID NOT BELIEVED THE ABOVE EXPLAN ATION OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE WAS FAILE D TO PRODUCE MR. LAKSHMANA IYER FOR VERIFICATION. EVEN IN THE ASSESS MENT ORDER, IT IS VERY CLEAR THAT THE ASSESSEE HAS FAILED TO SUBSTANT IATE THE EXPLANATION THAT THE AMOUNT OF .5,00,000/- WAS PAID BY MR. LAKSHMANA IYER THROUGH THE ASSESSEE. THE LD. CIT(APPEALS) BY HOLDI NG THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION WAS BO NAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. FROM T HE ABOVE, WE ALSO FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS UNBELIEVABLE AND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YE AR 2002-03. 12. WITH REGARD TO ASSESSMENT YEAR 2004-05, THE AS SESSING OFFICER HAS FOUND UNACCOUNTED INVESTMENT OF .5,00,000/- AND SUPPRESSION OF SALES OF .22,98,047/-. IN SO FAR AS UNACCOUNTED INVESTMENT I S CONCERNED, IT WAS SUBMITTED BEFORE THE ASSESSING OF FICER THAT MY PARENT HAD LEFT A HOUSE BUILDING AT DOOR NO. 196, C OMPRISED IN T.S.NO. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 17 918/2, 918/1, WEST MASI STREET, MADURAI 625 001 INT ESTATE. AFTER THEIR DEMISE, ALL MY FAMILY MEMBERS HAVE UNANIMOUSLY AGRE ED TO WAIVE THEIR UNDIVIDED RIGHTS OVER THE PROPERTY IN MY FAVO UR AND IN ORDER TO RECORD THE SAME IN LEGALLY, A SETTLEMENT DEED WAS E XECUTED BY ALL THE MEMBERS. EVEN THOUGH NO CONSIDERATION HAS PASSED TO ANY OF MY FAMILY MEMBERS, AT THE INSTANCE OF REGISTRAR, A SUM OF .5,00,000/- WAS MENTIONED AND THIS HAD BECOME THE BONE OF CONTE NTION FOR ADDITION. THE ALLEGED PAYMENT WAS SOUGHT TO BE EXPL AINED AND I DID NARRATE THE FACTS AND MY FAMILY MEMBER WHO WERE SIG NATORIES ALSO JOIN ME AND GAVE A SWORN AFFIDAVIT IN WRITING CONFIRMING THIS FACT . THIS ABOVE SUBMISSION OF THE ASSESSEE WAS NOT ACCEPTED B Y THE ASSESSING OFFICER ON THE GROUND THAT HE HAS NOT ABLE TO SUBST ANTIATE HIS SUBMISSIONS WITH COGENT MATERIALS. WE ALSO FIND FRO M THE ASSESSMENT ORDER THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIAT E THAT HE HAS NOT PAID TO HIS BROTHERS AND SISTERS. IN A DOCUMENT, IT IS VERY CLEAR THAT .5,00,000/- HAS BEEN PAID BY THE ASSESSEE. THEREFOR E, WHEN THE DOCUMENT IS VERY CLEAR WITH REGARD TO PAYMENT OF .5,00,000/-, UNLESS THERE IS CONTRARY MATERIAL TO SHOW THAT THE AMOUNT WAS NOT PAID, THE STORY OF THE ASSESSEE CANNOT BE BELIEVED. THE ADDIT ION MADE BY THE ASSESSING OFFICER WAS CONFIRMED BY THE LD. CIT(APPE ALS) AND FURTHER I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 18 THE TRIBUNAL ALSO CONFIRMED IT. SO FAR AS SUPPRESSI ON OF SALES IS CONCERNED, AGAINST THE ADDITION OF .22,98,047/- MADE BY THE ASSESSING OFFICER, WHICH IS 20% OF SUPPRESSED SALE OF .1,14,90,209/-, THE LD. CIT(APPEALS) RESTRICTED TO .17,23,536/- WHICH IS 15% OF THE SUPPRESSED SALE. THE APPELLATE AUTHORITY HAS ALTOGE THER CONFIRMED .22,23,536/- [ .17,23,536/- TOWARDS SUPPRESSION OF SALES + .5,00,000/- UNACCOUNTED INVESTMENT]. AGAINST THE PE NALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF THE ACT, THE A SSESSEE REITERATED THE SAME SUBMISSIONS IN RESPONSE TO THE NOTICE ISSUED A S WAS MADE IN THE EARLIER ASSESSMENT YEAR. THE LD. CIT(APPEALS) BY HO LDING THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION WAS BO NAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. FROM T HE ABOVE, WE ALSO FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS UNBELIEVABLE AND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YE AR 2004-05. 13. WITH REGARD TO THE ASSESSMENT YEAR 2005-06, TH E ASSESSING OFFICER MADE ADDITION IN RESPECT OF UNACCOUNTED INV ESTMENTS [LOANS ON PRO-NOTES] OF .6,66,000/- AND SALE SUPPRESSION OF .21,17,265/-. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT WITH RE GARD TO UNACCOUNTED I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 19 INVESTMENT THE PRO-NOTES HAD BEEN OBTAINED FROM EMP LOYEES WHO WERE IN CHARGE OF BRANCHES HANDLING CASH. IN NORMAL PRAC TICE, CONCERNS IN OUR FIELD HAVE BEEN OBTAINING SECURITY DEPOSITS FRO M THE EMPLOYEES. HOWEVER, AS THE CONCERNED EMPLOYEES WERE NOT IN A P OSITION TO REMIT CASH DEPOSITS, PRO-NOTES WERE TAKEN. THE ABOVE STOR Y OF THE ASSESSEE WAS NOT BELIEVED BY THE ASSESSING OFFICER. IN THE A SSESSMENT ORDER AS WELL AS IN THE ORDER OF THE LD.CIT(APPEALS), BOTH T HE AUTHORITIES HAVE OBSERVED THAT PRO-NOTES FORM PART OF SEIZED MATERIA L, IF IT IS ACTUALLY TOWARDS SECURITY DEPOSITS OF EMPLOYEES, WHY THE SAM E WAS NOT ROUTED THROUGH BOOKS OF ACCOUNTS OF THE ASSESSEE AND IT IS UNBELIEVABLE AND NO PROPER EXPLANATION WAS GIVEN BY THE ASSESSEE. WI TH REGARD TO ANOTHER SUBMISSION THAT INSTEAD OF SECURITY DEPOSIT , THE ASSESSEE HAS TAKEN PRO-NOTES FROM THE EMPLOYEES WAS NOT SUPPORTE D BY ANY EVIDENCE. THEREFORE, THE ADDITION MADE BY THE ASSES SING OFFICER WAS CONFIRMED BY THE LD. CIT(APPEALS) AND FURTHER SUSTA INED BY THE TRIBUNAL. SO FAR AS SUPPRESSION OF SALES IS CONCERN ED, AGAINST THE ADDITION OF .21,17,265/- MADE BY THE ASSESSING OFFICER, THE LD. CIT(APPEALS) RESTRICTED TO THE EXTENT OF .15,86,970/-. THE APPELLATE AUTHORITY HAS ALTOGETHER CONFIRMED .22,52,970/- [ .15,86,970/- TOWARDS SUPPRESSION OF SALES + .6,66,000/- UNACCOUNTED INVESTMENT]. AGAINST I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 20 LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALSO, IN RESPONSE TO THE NOTICE, THE ASSESSEE REITERATE SAME SUBMISSIONS . WE ARE OF THE OPINION THAT THE EXPLANATION OF THE ASSESSEE WAS NO T REAL, UNBELIEVABLE AND NO MATERIAL WAS PLACED TO SUBSTANTIATE THE ABOV E EXPLANATION. THE LD. CIT(APPEALS) BY HOLDING THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION WAS BONAFIDE, CONFIRMED THE PENALTY LEV IED BY THE ASSESSING OFFICER. FROM THE ABOVE, WE ALSO FIND THA T THE EXPLANATION GIVEN BY THE ASSESSEE IS UNBELIEVABLE AND UNACCEPTA BLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APP EALS) STANDS SUSTAINED FOR THE ASSESSMENT YEAR 2005-06. 14. WITH REGARD TO ASSESSMENT YEAR 2006-07, THE AS SESSING OFFICER MADE ADDITIONS IN RESPECT OF INTEREST RECEIPTS ON C ASH PAID IN ADVANCE TOWARDS PURCHASE OF PROPERTIES OF .1,10,000/- AND SALE SUPPRESSION OF .47,69,800/-. ON APPEAL, THE LD. CIT(APPEALS) DELET ED UNACCOUNTED INTEREST RECEIPTS OF .1,10,000/- AND CONFIRMED THE ADDITION ON SALES SUPPRESSION TO THE EXTENT OF .15,37,134/-, WHICH WAS FURTHER SUSTAINED BY THE TRIBUNAL. AGAINST LEVY OF PENALTY UNDER SECT ION 271(1)(C) OF THE ACT ALSO, IN RESPONSE TO THE NOTICE, THE ASSESSEE R EITERATE SAME SUBMISSIONS AND, WE ARE OF THE OPINION THAT THE EXP LANATION OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 21 ASSESSEE WAS NOT REAL, UNBELIEVABLE AND NO MATERIAL WAS PLACED TO SUBSTANTIATE THE ABOVE EXPLANATION. THE LD. CIT(APP EALS) BY HOLDING THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATI ON WAS BONAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. FROM THE ABOVE, WE ALSO FIND THAT THE EXPLANATION GIVEN BY THE ASSE SSEE IS UNBELIEVABLE AND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YE AR 2006-07. 15. WITH REGARD TO ASSESSMENT YEAR 2007-08, THREE ADDITIONS WERE SUSTAINED BY THE LD. CIT(APPEALS) I.E. UNACCOUNTED INVESTMENT IN PURCHASING LAND AT POONJERI VILLAGE OF .37,00,000/-, DEFICIT STAMP DUTY PAYMENT OF .1,06,000/- AND SALE SUPPRESSION OF .37,24,253/- TO THE EXTENT OF .21,75,091/-. IN RESPECT OF UNACCOUNTED PURCHASE OF LAND AT POONJERI VILLAGE, IT WAS SUBMITTED THAT THE ABOVE M ENTIONED AMOUNT WAS NOT INCLUDED IN THE BOOKS AS THERE WAS NO DOCUM ENTARY EVIDENCE HAVING PAID THE AMOUNT AND WAS UNDER THE IMPRESSION THAT NO ENTRY NEEDS TO BE MADE IN THE BOOKS. IN RESPECT OF DEFICI T IN STAMP DUTY, THE ASSESSEE HAS SUBMITTED THAT HE REGRETS FOR THE MIST AKE ON HIS PART IN ACCOUNTING THE SAME BY OVERSIGHT. THE ADDITION TOWA RDS SALE SUPPRESSION ALSO, THE ASSESSEE REITERATED SAME SUBM ISSIONS AS MADE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 22 FOR PREVIOUS ASSESSMENT YEAR. THE ABOVE EXPLANATION WAS NOT BELIEVED BY THE AUTHORITIES BELOW AND THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE CONFIRMED BY THE LD.CIT(APPEALS) AND S USTAINED BY THE TRIBUNAL. AGAINST LEVY OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT ALSO, IN RESPONSE TO THE NOTICE, THE ASSESSEE REITE RATE SAME SUBMISSIONS AND, WE ARE OF THE OPINION THAT THE EXP LANATION OF THE ASSESSEE WAS NOT REAL, UNBELIEVABLE AND NO MATERIAL WAS PLACED TO SUBSTANTIATE THE ABOVE EXPLANATION. THE LD. CIT(APP EALS) BY HOLDING THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATI ON WAS BONAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. FROM THE ABOVE, WE ALSO FIND THAT THE EXPLANATION GIVEN BY THE ASSE SSEE IS UNBELIEVABLE AND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YE AR 2007-08. 16. WITH REGARD TO ASSESSMENT YEAR 2008-09, THE AD DITION MADE TOWARDS UNACCOUNTED SALES SUPPRESSION OF .16,61,646/- WAS CONFIRMED TO THE EXTENT OF .12,46,235/- BEING 15% OF THE ADDITION MADE BY THE ASSESSING OFFICER, WHICH WAS ALSO FURTH ER CONFIRMED BY THE TRIBUNAL. AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALSO, IN RESPONSE TO THE NOTICE, THE ASSESSEE REITE RATE SAME I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 23 SUBMISSIONS AND, WE ARE OF THE OPINION THAT THE EXP LANATION OF THE ASSESSEE WAS NOT REAL, UNBELIEVABLE AND NO MATERIAL WAS PLACED TO SUBSTANTIATE THE ABOVE EXPLANATION. THE LD. CIT(APP EALS) BY HOLDING THAT THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATI ON WAS BONAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. FROM THE ABOVE, WE ALSO FIND THAT THE EXPLANATION GIVEN BY THE ASSE SSEE IS UNBELIEVABLE AND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE LD. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YE AR 2007-08. AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALSO, IN RESPONSE TO THE NOTICE, THE ASSESSEE REITERATE SAME SUBMISSIONS AND, WE ARE OF THE OPINION THAT THE EXPLANATION OF THE A SSESSEE WAS NOT REAL, UNBELIEVABLE AND NO MATERIAL WAS PLACED TO SUBSTANT IATE THE ABOVE EXPLANATION. THE LD. CIT(APPEALS) BY HOLDING THAT T HE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION WAS BONAFIDE, CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. FROM THE ABOVE, WE ALSO F IND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS UNBELIEVABLE A ND UNACCEPTABLE WITHOUT ANY BASIS AND THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE WITH EVIDENCE. THEREFORE, THE PENALTY CONFIRMED BY THE L D. CIT(APPEALS) STANDS SUSTAINED FOR THE ASSESSMENT YEAR 2008-09. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 24 17. THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE AS DETAILED IN ASSESSEES WIFES CASE HAVE NO APPLICAT ION TO THE PRESENT CASE. THE DEPARTMENT HAS CONDUCTED SEARCH ACTIVITIE S UNDER SECTION 132 OF THE ACT AND SEVERAL INCRIMINATING MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION INDICATING UNACC OUNTED SALES IN VARIOUS OUTLETS OF THE ASSESSEE AND VARIOUS UNACCOU NTED INVESTMENTS AND SUBSEQUENTLY, ADDITIONS WERE MADE AND CONFIRMED BY THE LD. CIT(APPEALS) AS WELL AS TRIBUNAL. IN THE CASE LAW R ELIED ON BY THE LD. DR IN THE CASE OF TRIUMPH INTERNATIONAL FINANCE I L TD. V. ACIT (SUPRA), THE TRIBUNAL HAS HELD THAT BY FILING AN APPEAL BEFO RE THE HONBLE JURISDICTIONAL HIGH COURT DOES NOT AUTOMATICALLY MA KE OUT OF CASE IN FAVOUR OF THE ASSESSEE UNTIL AND UNLESS THE CIRCUMS TANCE EXISTS IN THE CASE DOES NOT WARRANT PENALTY AT ALL. WE FIND 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. 18. 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 YEARS 2002 -03, 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 ARE DISMISSED . I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .33 3333 337 77 7- -- -342 342342 342 /M/ /M/ /M/ /M/1 11 14 44 4 25 19. 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.