Dr. Surendrabhai D. Patel, Anand V. The ACIT., Anand Circle, Anand

ITA 3754/AHD/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5966 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-06-2010
• Assessment Year: 1992-1993
• Appeal Filed On: 22-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Bogus purchase; Unexplained investment; Gift; Deemed to accrue or arise in india; Reasonable cause; Corroborative evidences; Retraction
• Section: 69C; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:2.06.10 DRAFTED ON:2.06.10 ITA NO.3754/AHD/2004 ASSESSMENT YEAR : 1992-1993 DR. SURENDRABHAI D. PATEL BARDANWALA COMPLEX, ANAND. VS. ASST. C.I.T., ANAND CIRCLE, ANAND. PAN/GIR NO. : AEQTP0548C (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI J.P.SHAH A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, BA RODA, DATED 21.10.2004. 2. THE ONLY ISSUE IN THIS APPEAL IS THAT THE CIT(A PPEALS) ERRED IN UPHOLDING THE PENALTY OF RS.4,11,000/- IMPOSED BY T HE ASSESSING OFFICER UNDER SECTION 271(1)(C). 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH O PERATION U/S. 132 WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSE SSEE ON 14TH MARCH 1992 AND SIMULTANEOUSLY A SURVEY ACTION U/S. 133A WAS CONDUC TED AT HIS HOSPITAL PREMISES. AS A CONSEQUENCE OF SAID ACTION THE ASSES SEE MADE A DISCLOSURE OF RS.18,00,000/- DURING THE SEARCH OPERATION ON 15TH MARCH, 1992 AND THEREAFTER RS.1,00,000 AT THE TIME OF OPERATION OF BANK LOCKER ON 23RD MARCH, 1992. THE ASSESSEE SUBSEQUENTLY, RETRACTED FROM THIS DISCLOSU RE AND FILED A PETITION ON 28TH - 2 - MAY, 1992 BEFORE THE CIT, BARODA MAKING DISCLOSURE OF SUM OF RS.2,28,830/-. THE ASSESSMENT U/S. 143(3) WAS MADE DETERMINING INC OME AT RS.22,60,580/- REJECTING THE RETRACTION PLEA OF THE ASSESSEE. IN O THER WORDS, AGAINST THE RETURNED INCOME OF RS.3,76,756/- THE TOTAL INCOME IN ASSESSM ENT WAS FINALISED AT RS.22,60,580/-. IN THE FIRST APPEAL THE C.I.T. (APP EALS) ALLOWED THE RELIEF OF RS.14,14,200/- AS UNDER- (I) LUMP SUM ADDITION ON ACCOUNT OF LESS RECORDING OF FEES. RS. 50,000 (II) UNACCOUNTED OF BETROTHED EXPENSES. RS. 30 ,000 (III) UNACCOUNTED INVESTMENT IN GOLD ORNAMENTS RS .2,54,000 (IV) UNACCOUNTED INVESTMENT IN FURNITURE & HOUSEHOLD ARTICLES RS.10,79,900 TOTAL RS.14,14,200 IN FURTHER APPEAL BEFORE ITAT AHMEDABAD, THE ITAT V IDE ORDER IN ITA NO. 4028/AHD./1995 DATED 23.06.2003 CONFIRMED THE ADDIT IONS MADE IN THE ASSESSMENT ORDER TO THE EXTENT OF RS.7,78,450 THE B REAKUP OF WHICH IS AS FOLLOWS- (A) UNRECORDED CONSULTANCY FEES PERTAINING TO THE PERIOD APRIL 91 TO SEPT. 1991. RS. 30, 000 (B) UNRECORDED OPERATION CHARGES FEES PERTAINING TO THE PERIOD APRIL 91 TO SEPT. 91. RS. 50,00 0 (C) UNACCOUNTED INVESTMENT IN GOLD ORNAMENTS RS.1 ,67,650 (D) UNACCOUNTED INVESTMENT IN DIAMOND RS. 85,4 00 (E) UNACCOUNTED INVESTMENT IN SILVER ARTICLES RS. 1,12,400 (F) UNACCOUNTED CASH TRANSACTION RS. 1 3,000 (G) UNACCOUNTED EXPENSES AT THE OCCASION OF BETROTHAL OF DAUGHTER. RS. 20,000 (H) UNACCOUNTED INVESTMENT IN FURNITURE, VALUABLES AND INTERIOR DECORATION. RS. 3,00,000 TOTAL: RS.6,98,450 BASED ON THE ADDITIONS CONFIRMED BY THE ITAT AS ABO VE, THE AO VIDE HIS ORDER 30TH JANUARY 2004 IMPOSED PENALTY U/S.271(1)(C) OF RS.4,11,000 AGAINST WHICH THE ASSESSEE IS IN APPEAL. - 3 - 4. BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS), LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E MADE DISCLOSURE OF RS.18,00,000/- DURING THE SURVEY OPERATION ON 15TH MARCH, 1992 AND THEREAFTER RS.1,00,000/- ON OPERATION OF BANK LOCKER. THE DISC LOSURE WAS RETRACTED WITH CONCLUSIVE PROOF AND EVIDENCES BY FILING THE PETITI ON ON 28TH MAY, 1992 BEFORE THE COMMISSIONER OF INCOME-TAX, BARODA MAKING THE R EVISED NET DISCLOSURE OF RS.2,28,530. A COPY OF THE DISCLOSURE PETITION HAS BEEN FILED AT THE TIME OF APPEAL HEARING. SUBSEQUENTLY ON 30TH SEPT., 1992 TH E RETURN WAS FILED DECLARING INCOME OF RS.3,76,560/- INCLUDING DISCLOSURE AMOUNT OF RS.2,28,830/-. THE ACIT IN THE ASSESSMENT ORDER MADE HUGE ADDITIONS PU RELY ON ESTIMATE BASIS DISREGARDING THE RETRACTION PETITION DATED 28.05.19 92 FILED BY APPELLANT BEFORE CIT., BARODA. IN IMPOSING THE PENALTY THE AO HAS TA KEN INTO ACCOUNT THE ADDITION OF RS.7,78,450/- WHICH HAVE BEEN CONFIRMED AT THE TRIBUNAL STAGE. THE BREAK UP OF ITEMS OF INCOME WHICH HAVE BEEN UPHELD BY THE ITAT ARE MENTIONED IN PARA 10 ON PAGE 26 OF THE PENALTY ORDE R. IT IS ALSO CONTENDED BY THE AUTHORISED REPRESENTATIVE THAT WHILE IMPOSING T HE PENALTY THE AO HAS IGNORED ALL ROOFS, EVIDENCES AS WELL AS EXPLANATION S OFFERED AT THE TIME OF ASSESSMENT, APPELLATE PROCEEDINGS AND SUBMISSIONS M ADE TO THE SHOW CAUSE NOTICE TO THE PENALTY ORDER. IT IS FURTHER SUBMITTE D THAT NO BENEFIT OF IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(L)(C) HAS BEEN A FFORDED TO THE ASSESSEE INSPITE OF THE FACT THAT IN THE DISCLOSURE PETITION FILED BEFORE THE CIT BARODA THE ASSESSEE HAD WORKED OUT THE DISCLOSURE AMOUNT IN A REASONABLE MANNER. THE AUTHORISED REPRESENTATIVE EXPLAINED THAT THE ADDITI ONS WHICH HAVE BEEN SUSTAINED TILL THE ITAT STAGE WERE BASED PURELY ON ESTIMATION. HOWEVER, IN THE DISCLOSURE PETITION IN WHICH THE EXTENT OF UNDISCLO SED INCOME HAS BEEN OFFERED FOR TAX IS BASED ON DETAILS AND EVIDENCES PROVIDED TO THE AO STARTING FROM THE ASSESSMENT STAGE. IT IS STATED THAT THERE IS NOTHIN G ON THE PART OF AO TO ESTABLISH THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS. THE COUNSEL FURTHER OBJECTED TO THE IM POSITION OF PENALTY BY STATING THAT THE PENALTY PROCEEDINGS ARE QUASI CRIMINAL PRO CEEDINGS AND BY NO STRETCH OF - 4 - IMAGINATION THE LEVEL OF ESTIMATION CAN BE DEEMED A ND TREATED AS CRIMINAL OFFENSE IN THE INCOME-TAX MATTERS. 5. THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS : - C.I.T.V/S.ANWARALI(1970)76ITR.696(S.C.) - ANANTHARAM VEERASINGHALAH & CO. V/S. CIT.A.P.(980 ) 123 - K. C. BUILDERS V/S. ACIT. 265 ITR 562 (S.C.) 6. THE LEARNED AUTHORISED REPRESENTATIVE BASED ON T HE ABOVE DECISIONS EXPLAINED THAT MERE FACT THAT THE EXPLANATION OF TH E ASSESSEE IS FALSE DOES NOT NECESSARILY GIVE RISE TO THE INFERENCE THAT THE EST IMATED AMOUNT REPRESENTS INCOME OF THE ASSESSEE AND CONSEQUENTLY ASSESSEE HA D CONCEALED PARTICULARS OF HIS INCOME OR DELIBERATELY FURNISHED INACCURATE PAR TICULARS. IT IS POINTED OUT THAT WHERE THE ESTIMATION OF INCOME IS BASED PURELY ON E STIMATE BASIS, WITHOUT ADEQUATE MATERIAL OR SUPPORTING EVIDENCE, NO PENALT Y U/S. 271(1)(C) IS ATTRACTED. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THA T INSPITE OF SURRENDER OF INCOME U/S.132(4) IN ORDER TO BUY PEACE, NO BENEFIT OF IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(L)(C) HAS BEEN PROVIDE D TO THE APPELLANT BY THE A.O. FURTHER RELIANCE WAS PLACED ON THE FOLLOWING D ECISIONS : - (I) CIT V/S. KOHINOOR IMPEX P. LTD. (2004) 188 CTR (DEL.) 77. (II) CIT V/S. S.D.V. CHANDRU (2004) 266 ITR 175 (MA D.) (III) SIR SHADILAL SUGAR & GENERAL MILLS LTD V/S. C .I.T. (1987 )165 ITR 705 (S.C.) 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE CONCLUDED THAT WHILE DETERMINING THE INCOME FOR CONCEALMENT PURPOS E, THE AO HAS FOLLOWED ONLY THE ESTIMATION FORMULA, IGNORING THE BASED PRO OFS AND EVIDENCES PRODUCED FOR VERIFICATION. AS PER THE COUNSEL MOST ALARMING ISSUE IS THAT THE QUANTUM AND CHANGING LEVEL OF ESTIMATION OF INCOME WHICH IS RED UCED STEP BY STEP IN APPELLATE PROCEEDINGS CAN BY NO STRETCH OF IMAGINAT ION BE TREATED OR DEEMED TO BE FILING INACCURATE PARTICULARS OR CONCEALING THE PARTICULARS OF INCOME. IT IS - 5 - PLEADED THAT IN VIEW OF THE ABOVE SUBMISSIONS AND L EGAL PRONOUNCEMENT, THE PENALTY U/S. 271(1)(C) BE DELETED. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE PENALTY BY OBSERVING AS UNDER:- 3.9. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED COUNSEL OF THE APPELLANT. THE ARGUMENTS OF THE AO AND FINDINGS IN PENALTY ORDER IS ALSO CONSIDERED. BESIDES, ARGUMENTS MADE, THE DECIS IONS RELIED UPON HAVE ALSO BEEN PERUSED. REGARDING CONTENTION OF THE APPELLANT THAT NO BENEFIT OF IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(1)(C) HAS BEEN PROVIDED TO THE APPELLANT INSPITE OF MAKING A DISCL OSURE OF RS.2,28,830, THE SAME IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT THE APPELLANT HAD MADE DISCLOSURE U/S.132(4) DURING THE COURSE OF SEARCH O F RS.19 LACS AND IN THE PETITION THE DISCLOSURE HAS BEEN REDUCED TO RS.2,28 ,830. THUS, THE APPELLANT HAS RETRACTED FROM THE DISCLOSURE AND DID NOT PAY TAX ON THE AMOUNT OF RS.19 LACS DECLARED AS ADDITIONAL INCOME DURING THE COURSE OF SURVEY. IN THE CIRCUMSTANCES, THE APPELLANT'S CONTE NTION THAT CONCEALMENT PENALTY PROCEEDINGS HAVE BEEN INITIATED ON THE AMOU NT OF CONCEALMENT DETERMINED IN THE ESTIMATION OF RS.21,12,650 IGNORI NG THE INCOME DISCLOSED IN THE RETRACTION PETITION FILED BEFORE C IT BARODA AND DECLARED IN THE RETURN OF INCOME IS THEREFORE, NOT ACCEPTABL E AS DISCUSSED BY THE AO IN PARA 9 ON PAGE 26 OF PENALTY ORDER. IT IS WOR TH MENTIONING THAT BENEFIT OF IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(1)(C) CAN BE ALLOWED ONLY WHEN THE APPELLANT HONOUR THE DISCLOSU RE BY PAYING TAX ON THE AMOUNT DISCLOSED DURING THE COURSE OF SEARCH. I THEREFORE HOLD THAT THE AO IS JUSTIFIED IN DENYING THE BENEFIT OF IMMUN ITY. THIS PLEA IS THEREFORE, REJECTED. 3.10. REGARDING PLEA OF THE APPELLANT THAT THE LEVY OF PENALTY IS NOT JUSTIFIED ON THE ADDITIONS WHICH WERE BASED ON ESTI MATION AND THE QUANTUM OF SUCH ESTIMATION HAS BEEN REDUCED IN THE APPELLATE PROCEEDINGS, IT IS OBSERVED THAT THE ADDITIONS MADE UNDER VARIOUS ITEMS WHICH HAVE BEEN CONFIRMED BY THE HON'BLE ITAT., AHM EDABAD, HAVE BEEN SUSTAINED ON THE BASIS OF SEIZED MATERIAL AND DOCUMENTS AND THE INFORMATION ELICITED FROM THE MATERIALS THAT WERE S EIZED DURING THE COURSE OF SEARCH CARRIED OUT U/S.132 OF THE I.T. AC T. IN PARA NO. 8 PAGES 18 TO 26 THE A.O. IN THE PENALTY ORDER HAS DISCUSSE D IN DETAILED THE INDIVIDUAL ASPECTS OF EACH CONFIRMED ADDITION BEFOR E LEVYING THE PENALTY. BASED ON THE DETAILED OBSERVATIONS MADE BY THE A.O. IN HIS ORDER, I HOLD THAT THE A.O. WAS FULLY JUSTIFIED IN IMPOSING THE P ENALTY U/S. 271(1)(C) OF THE ACT. THIS PLEA OF THE APPELLANT IS ALSO REJECTE D. - 6 - 3.11 IN THE CASE OF LMP PRECESSION ENGG. CO LTD VS DCIT (1997) 58 TTJ 704 (PAGE 319 OF ITAT DIGEST 2 ND EDITION 2002) IT IS HELD AS UNDER 'CONCEALMENT - ASSESSEE FOUND MAKING BOGUS PURCHASE S DURING THE COURSE OF SURVEYS-RETURN WAS FILED AFTER DETECT ION DISCLOSING ADDITIONAL INCOME IN ASST YEAR 1985-86 AND FOR THRE E SUBSEQUENT YEARS-THUS, DISCLOSURES WERE MADE BY ASSESSEE AFTER DETECTION OF CONCEALMENT BY DEPARTMENT AS A RESULT OF EXTENSIVE INVESTIGATION CONDUCTED DURING THE COURSE OF TWO SURVEYS - HENCE, DISCLOSURES WERE NOT VOLUNTARY - THERE IS ALSO NO EVIDENCE THAT THE REVENUE COMPELLED THE ASSESSEE TO MAKE DISCLOSURE WITH AN A SSURANCE THAT NO PENAL ACTION WOULD BE TAKEN - LEVY OF PENALTY JU STIFIED.' 3.12. THE CBDT CIRCULAR NO 469 DATED 23.9.1986 [ 59 CTR (ST) 9 ]CLARIFIES THE POSITION AS UNDER '........ONE OF THE REASONS FOR UNSATISFACTORY PERF ORMANCE OF THE INCOME TAX DEPARTMENT IN THE MATTER OF SUCCESSFULLY LEVYING PENALTY AND OF PROSECUTING THE DEFAULTERS IS THAT I NVARIABLY APPELLATE AUTHORITIES AND THE COURTS HAVE CAST UPON THE DEPARTMENT THE NEAR IMPOSSIBLE BURDEN OF PROVING TH E EXISTENCE OF A CULPABLE STATE OF MIND ON THE PART OF THE DEFA ULTERS. ON A CONSIDERATION OF THE RELEVANT FACTORS IN THIS REGARD, IT WAS ANNOUNCED IN THE LONG TERM FISCAL POLICY THAT IN OR DER TO EFFECTIVELY TACKLE THE PROBLEM OF TAX EVASION, THE INCOME TAX DEPARTMENT WILL IMPLEMENT A STRATEGY CONSISTING, IN TERALIA, OF REMOVING THE WEAKNESS IN LAW WHICH HIDER EFFECTIVE PROSECUTION OF TAX EVADERS.........' 3.13. ACCORDINGLY, THE INTENTION OF THE GOVERNMENT WAS ANNOUNCED BY THE LONG TERM FISCAL POLICY TO AMEND THE DIRECT TAX LAWS ALSO TO PROVIDE THAT ONCE EVASION WAS PROVED, THE INTENTION TO EVAD E NEED NOT BE PROVED BY THE INCOME TAX DEPARTMENT. CASTING THIS BURDEN O N THE TAX PAYER WAS ALSO CONSIDERED JUSTIFIED AS NEARLY 97% RETURNS AS PER THE REVISED SCHEME OF ASSESSMENT AS AMENDED BY THE DIRECT TAX LAWS (AM ENDMENT) ACT 1987, WERE TO BE ACCEPTED BY THE DEPARTMENT AND THE REFORE II IS LOGICAL TO CAST THE BURDEN ON THE TAX PAYER TO PROVE HIS IN NOCENCE IF THERE ARE PRIMA FACIE, FACTORS TO SHOW THAT HE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR TO ESTABLISH THE EXISTENCE OF REASONABLE CAUSE IF HE HAS COMMITTED ANY OTHER DEFAULT UNDER THE TAX LAWS. 3.14. COMING TO THE FACTS OF THE APPELLANT, THE APP ELLANT THOUGH DISCLOSED RS.19 LAC DURING SEARCH PROCEEDINGS, THE SAME IS NO T HONOURED AND THE MATTER WAS DISPUTED BY THE APPELLANT. THE ADDITIONS FINALLY SUSTAINED BY ITAT CANNOT BE SAID TO BE BASED ON ESTIMATES BUT SA ME ARE FOUND TO BE UNACCOUNTED/UNDISCLOSED INCOME OF THE APPELLANT. IN THESE FACTS AND - 7 - CIRCUMSTANCES OF THE APPELLANT'S CASE, LEVY OF PENA LTY BY THE AO IS FULLY JUSTIFIED. THE SAME STANDS CONFIRMED. 9. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT ADDITION OF RS.30,000/- ON ACCOUNT OF UNRECORD ED CONSULTANCY FEES PERTAINING TO APRIL 1991 TO SEPTEMBER 1991 AND RS.5 0,000/- ON ACCOUNT OF UNRECORDED OPERATION FEES PERTAINING TO APRIL 1991 TO SEPTEMBER 1991 WAS MADE ON ESTIMATE BASIS AND THERE WAS NO MATERIAL WI TH THE LEARNED ASSESSING OFFICER TO SHOW THAT THE ASSESSEE HAS ACTUALLY CONC EALED ITS INCOME. THEREFORE, THE PENALTY CANNOT BE LEVIED. AS REGARDS ADDITION OF RS.1,67,650/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN GOLD ORNAMENTS, RS.85, 400/- ON ACCOUNT OF UNRECORDED INVESTMENT IN DIAMOND, RS.1,12,400/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN SILVER ARTICLES, RS.13,000/- ON ACCOU NT OF UNACCOUNTED CASH TRANSACTION, RS.20,000/- ON ACCOUNT OF UNACCOUNTED EXPENSES ON THE OCCASION BETROTHAL OF DAUGHTER AND RS.3,00,000/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN FURNITURE, VALUABLES AND INTERIOR DECORATION WAS MADE UNDER SECTION 69, 69A, 69B AND 69C OF THE ACT WHICH ARE DEEMING PROVISIONS AND WHEN THE ASSESSEE FILED ITS RETURN OF INCOME, HE COULD NOT HAVE VISUA LIZED THAT ADDITION WOULD BE MADE TO THE INCOME OF THE ASSESSEE. THE ADDITION IS MADE IN THE FINANCIAL YEAR IN WHICH THE LEARNED ASSESSING OFFICER COMES TO THE CONCLUSION OF ABOVE DEEMING INCOME OF THE ASSESSEE. THEREFORE, THERE CA NNOT BE CONCEALMENT OF INCOME BY THE ASSESSEE AT THE TIME OF FILING OF RET URN OF THE INCOME BY THE ASSESSEE. HENCE, NO PENALTY CAN BE LEVIED FOR THE S AME. 10. FOR HIS ARGUMENTS , HE RELIED ON THE DECISION O F HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. VINAYCHAND HARILAL (19 79) 120 ITR 752 (GUJ), WHEREIN IT WAS HELD THAT BURDEN CAST ON ASSESSEE UN DER THE EXPLN. TO S. 271(1)(C) WOULD BE CLEARLY DISCHARGED THE MOMENT IT WAS POINT ED OUT ON BEHALF OF THE ASSESSEE IN THE PENALTY PROCEEDINGS THAT IT WAS BY VIRTUE OF THE DEEMING PROVISIONS AFTER THE ASSESSEE'S VERSION WAS REJECTE D THAT THE AMOUNT WAS BROUGHT TO TAX UNDER S. 69A. - 8 - 11. HE ALSO RELIED ON THE DECISION OF HON'BLE GUJAR AT HIGH COURT IN THE CASE OF NATIONAL TEXTILE VS. CIT (2001) 249 ITR 125 (GUJ ) WHEREIN IT WAS HELD THAT IN ORDER TO JUSTIFY LEVY OF PENALTY FOR ADDITION OF CASH CREDITS, THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO REASONABL E CONCLUSION THAT THE AMOUNT DOES REPRESENT ASSESSEE S INCOME AND THE C IRCUMSTANCES MUST SHOW THAT THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURN ISHING OF INACCURATE PARTICULARS; EXPLN. 1 DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE 12. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE FURTHER ARGUED THAT AS REGARDS ADDITION ON ACCOUNT OF UNACCOUNTED INVESTMENT IN GOLD ORNAMENTS RS.1,67,650/-, THE HUSBAND OF THE ASSESSE E WAS NOT ALLOWED ANY BENEFIT OF THE CBDT CIRCLER WHICH PROVIDES THAT 250 GM. OF GOLD JEWELLERY FOR MALE MEMBER FOUND AT THE TIME OF SEARCH SHOULD BE T REATED AS EXPLAINED. FOR THIS HE RELIED ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF SMT. PATI DEVI VS. ITO & ANR. (1999) 240 ITR 727(KA R), WHEREIN IT WAS HELD THAT CBDT INSTRUCTION DT. 11TH MAY, 1994, DIRECTING THE AUTHORITIES NOT TO SEIZE SPECIFIED QUANTITY OF GOLD JEWELLERY APPLIES IRRESP ECTIVE OF DATE OF ACQUISITION OF JEWELLERY; BENEFIT OF INSTRUCTION CANNOT BE DENIED SIMPLY BECAUSE IN A PARTICULAR CASE THE SEIZURE IS MADE ON A DATE EARLIER TO DATE OF SAID INSTRUCTION. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, SEARCH AND SEIZER OPERATION WAS CONDUCTED ON 14.03.1992. THEREAFTER, THE ASSESSMENT OF THE ASSES SMENT YEAR UNDER CONSIDERATION WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AFTER MAKING VARIOUS ADDITIONS. ON APPEAL, THE TRIBUNAL CONFIRM ED CERTAIN ADDITIONS. THEREAFTER THE LEARNED ASSESSING OFFICER LEVIED PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT OF RS.4,11,000/- IN RESPECT OF THE ADDIT IONS WHICH WERE CONFIRMED BY - 9 - THE TRIBUNAL IN THE QUANTUM APPEAL . THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ACTION OF THE LEARNED AS SESSING OFFICER. 15. BEFORE US, THE ASSESSEE CHALLENGED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ISSUE INVOLVED RELATES TO VARIOUS ADDITIONS AND THEREFORE, THE SAME IS DISCUSSED ON THE BASIS OF TH E VARIOUS ADDITIONS MADE SEPARATELY AS UNDER. 16. IN RESPECT OF THE ADDITIONS OF RS.30,000/- IN R ESPECT OF CONSULTANCY FEES AND RS.50,000/- IN RESPECT OF OPERATION CHARGES FEE S, THE TRIBUNAL CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE MATERIAL ON RECORD, WE FIND THE ASSESSEE HAS HIMSEL F SHOWN UNRECORDED CONSULTATION FEES ON RS.58,560/- FOR THE MONTHS OF OCTOBER, 1991TO MARCH, 1992, WHICH WAS NEITHER DISCLOSED NOR WOULD HAVE BEEN DISCLOSED. IT IS AN UNDISPUTED FACT THAT THE ASSESS EE WAS OUT OF INDIA FOR TWO MONTHS. THUS, AS PER THE CONDUCT OF THE ASSESSE E HIMSELF THERE SHOULD HAVE BEEN UNRECORDED CONSULTATION FEES FOR R EMAINING 4 MONTHS AND ON THE BASIS OF HIS CONDUCT THE SAME HAS TO BE ESTIMATED AS UNDER:- (1) 58,560 X 10 MONTHS (TOTAL MONTHS OF PRACTICE) 6(OCTOBER 91 TO MARCH 92) TAKING ALL FACTORS INTO CONSIDERATION THE ADDITION ON THIS COURT IS RESTRICTED TO RS.30,000/-. 6. . 7. . 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS S HOWN UNRECORDED OPERATION FEES OF RS.93,120/- FOR PERIOD OCTOBER, 1 991 TO MARCH, 1992 BUT THE ASSESSEE HAS NOT SHOWN THE UNRECORDED OPERA TION FEES FOR THE FIRST HALF OF THE RELEVANT PRECIOUS YEAR, WHICH WAS NEITH ER DISCLOSED NOR WOULD HAVE BEEN DISCLOSED. SO, THE AO WAS JUSTIFIED IN MA KING THE ADDITION FOR REMAINING MONTHS AFTER GIVING BENEFIT OF TWO MONTHS WHEN THE ASSESSEE WAS OUT OF INDIA. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION FOR REMAINING PART OF THE YEAR CAN BE ESTIMATED AS UNDER:- 93,120 X 10 (MONTHS) 6(OCTOBER91 TO MARCH92) - 10 - = 1,55,200(-) 93,120 =62,080/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE REST RICT THIS ADDITION ON ACCOUNT OF UNRECORDED OPERATION FEES TO RS.50,000/- . 17. ON THE ABOVE FACTS, THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ABOVE ADDITIONS WERE MA DE NOT ON THE BASIS OF ANY MATERIAL FOUND BY THE DEPARTMENT BUT WAS MADE ON TH E HYPOTHESIS THAT SIMILAR CONDUCT WOULD HAVE BEEN FOLLOWED BY THE ASSESSEE IN EARLIER FOUR MONTHS ALSO. THE ADDITIONS BEING WITHOUT ANY POSITIVE MATERIAL, NO PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE IN RESPECT OF ABOVE ADDITIONS . THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE ABOVE SUBMI SSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. WE FIND THAT DIFFERENT CONSIDERATIONS APPLY IN PENALTY PROCEEDINGS AND ASSESSMENT PROCEED INGS. IN THE INSTANT CASE, WE FIND THAT NO POSITIVE MATERIAL COULD BE BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE ACTUALLY EARNED RS.30,000/- AS CONSULTANCY CHARGES AND RS.50,000/- AS OPERATION CHARGES FEES WHICH WAS NOT DISCLOSED IN T HE RETURN OF INCOME. THEREFORE, IN OUR CONSIDERED OPINION, PENALTY UNDER SECTION 271(1)(C) IS NOT EXIGIBLE IN RESPECT OF THE ABOVE ADDITIONS OF RS.30 ,000/- AND RS.50,000/-. WE THEREFORE, DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) IN RESPECT OF THE AFORESAID TWO ADDITIONS. 18. IN RESPECT OF ADDITIONS OF RS.1,67,650/- FOR GO LD ORNAMENTS, RS.85,400/- FOR DIAMONDS AND RS.1,12,400/- FOR SILVER ARTICLES IT IS OBSERVED THAT IN QUANTUM APPEAL THE TRIBUNAL CONFIRMED THE ABOVE ADDITIONS WHICH REPRESENTED SUCH ARTICLES FOUND IN POSSESSION OF THE ASSESSEE AND TH E SOURCE OF WHICH COULD NOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE LE ARNED ASSESSING OFFICER LEVIED PENALTY IN RESPECT OF THE ABOVE ADDITIONS WH ICH WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). BEFOR E US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT 403.0 GMS OF GOLD ORNAMENTS FOUND DURING THE COURSE OF THE SEARCH WAS TREATED AS BELONGING TO THE ASSESSEE AND IN VIEW OF THE C.B.D.T. INSTRUCTION NO .1916 DATED 11 TH MAY,1994 - 11 - IF IT IS TAKEN THAT THE ORNAMENTS ALSO BELONGS TO T HE OTHER MALE MEMBERS OF THE FAMILY OF THE ASSESSEE THEN NO ADDITION COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE. IN RESPECT OF DIAMONDS OF RS.85,400 T HE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE D IAMONDS FOUND DURING THE COURSE OF THE SEARCH IN TERMS OF THE CARATS TALLIES WITH THE TOTAL CARATS OF DIAMOND ALREADY DISCLOSED BY THE ASSESSEE. IN RESPE CT OF SILVER ARTICLES OF RS.1,12,400/-THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE EXPLAINED THAT THE SAME WERE RECEIVED AS GIFTS ON DIFFERENT O CCASIONS. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE FOR HIS ABOVE SUBMISSIONS EITHER BEFOR E THE LOWER AUTHORITIES OR BEFORE US EVEN AFTER THE FACT THAT ADDITIONS IN RES PECT OF SUCH VALUABLES WERE CONFIRMED IN QUANTUM APPEAL. THE ABOVE SHOWS THAT THE EXPLANATION FURNISHED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE HAS NO BASIS. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE A LSO CONTENDED THAT ATHE ABOVE ADDITIONS WERE MADE UNDER SECTION 69, 69A AN D 69B OF THE ACT. HE CONTENDED THAT THESE ARE DEEMED INCOME AND THE SAME CANNOT BE ANTICIPATED BY THE ASSESSEE AT THE TIME OF THE FILING OF THE RETUR N AND THEREFORE, PENALTY CANNOT BE LEVIED IN RESPECT OF THESE ADDITIONS. WE DO NOT FIND ANY FORCE IN THE ABOVE CONTENTIONS OF THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE. IT IS NOT IN DISPUTER THAT THE VALUABLES IN QUESTION WERE FOU ND IN THE POSSESSION OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR IN QUESTION AND THUS FACTS WERE WITHIN THE KNOWLEDGE OF THE ASS ESSEE AT THE TIME OF THE FILING OF THE RETURN. THE ADDITIONS WERE MADE ONLY IN RESPECT OF THOSE AMOUNTS OF VALUABLES SOURCE OF WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE OR EXPLANATION WAS FOUND TO BE NOT SATISFACTORY. THUS , THE ASSESSEE KNEW THAT IT HAS NO SATISFACTORY EXPLANATION ABOUT THE SOURCE OF ACQUISITION OF THESE VALUABLES AT THE TIME OF THE FILING OF THE RETURN A ND THE ASSESSEE WAS DUE BOUND TO DISCLOSED THE SAME AS ITS INCOME UNDER RELEVANT SECTIONS. WE THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDE R OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). WE THEREFORE, CONFIRM THE LEVY OF PENALTY IN RESPECT OF THE ADDITIONS OF RS.1,67,560/ -, RS.85,400/-, AND - 12 - RS.1,12,400/- ON ACCOUNT OF GOLD ORNAMENTS, DIAMOND S AND SILVER ARTICLES RESPECTIVELY. 20. ADDITION OF RS.13,000/- IN RESPECT OF CASH TRAN SACTIONS WAS MADE BY THE LEARNED ASSESSING OFFICER BY OBSERVING THAT CREDITS OF RS.8,000/- AND RS.5,000/- WAS MADE IN THE CASH BOOK OF THE ASSESSE E WITHOUT MENTIONING ANY NAME OR DESCRIPTION AND THE SAME WAS CONFIRMED BY T HE TRIBUNAL ON APPEAL FILED BY THE ASSESSEE. BEFORE US THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT RS.8,000/- WAS RECEIVED FRO M SHRI NAGINBHAI M. PATEL. WE FIND THAT NO MATERIAL IN SUPPORT OF THIS COULD B E BROUGHT ON RECORD BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. FURTHER NO EXPLANATION WAS GIVEN IN RESPECT OF INTRODUCTION OF RS. 5,000/- WHICH WAS INTRODUCED AS CASH IN THE BOOKS O F THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, WE FIND NO ERROR IN THE ORDERS OF TH E LOWER AUTHORITIES IN IMPOSING PENALTY UNDER SECTION 271(1)(C) IN RESPEC T OF THE ABOVE ADDITION OF RS.13,000/-. 22. IN RESPECT OF ADDITION OF RS.20,000/- FOR EXPEN SES INCURRED AT THE OCCASION OF BETROTHAL OF DAUGHTER, THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) HAS OBSERVED AS UNDER:- 2(V). VIDE THE IMPUGNED ASSESSMENT ORDER, THE ASSE SSING OFFICER HAS MENTIONED THAT THE APPELLANT HAD SHOWN THE SUM OF R S.20,000/- INCURRED ON THE OCCASION OF BETROTHAL EXPENSE OF HIS (THE AP PELLANT) DAUGHTER. HOWEVER, THE LEARNED ASSESSING OFFICER HAS MADE AN ESTIMATED ADDITION OF RS.50,000/- ON ACCOUNT OF UNEXPLAINED EXPENSES A S AGAINST THE SUM OF RS.20,000/- OFFERED BY THE APPELLANT FOR TAXATION I N THIS REGARD. HOWEVER, THE APPELLANT HAS OBJECTED TO THE ASSESSING OFFICER S ACTION. IT IS THE APPELLANTS CONTENTION THAT HE HAS SHOWN THE EXPENS ES INCURRED ON THE OCCASION OF HIS DAUGHTER AND THAT THE ASSESSING OFF ICER HAS WRONGLY MADE THE IMPUGNED ADDITION. WITHOUT SUPPORTING HIS ACTIO N BY ANY MATERIAL. CONSIDERING THE APPELLANTS SUBMISSIONS AND ALSO CO NSIDERING THE FACT THAT THE ASSESSING OFFICERS ACTION IS NOT SUPPORTE D BY ANY MATERIAL, THE ADDITION MADE ON ACCOUNT OF BETROTHAL EXPENSES OF T HE APPELLANTS DAUGHTER IS REDUCED TO RS.20,000/-. THEREFORE, THE APPELLANT GETS A RELIEF OF RS.30,000/- IN THIS REGARD. - 13 - 23. WE THUS FIND THAT RS.20,000/- UNDER THE ABOVE H EAD WAS ASSESSED AS PER DISCLOSURE MADE BY THE ASSESSEE IN ITS RETURN OF IN COME. NO OTHER MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE IN SUPPORT OF THE ABOVE ADDITION. THEREFORE, IN OUR CONSIDERED OPINION NO PENALTY UNDER SECTION 271(1)(C) IS EXIGIBLE IN RESPECT OF THE ABOVE ADDITION OF RS.20,000/- WE THE REFORE, DIRECT THE A.O. TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE ABOVE ADDITION OF RS.20,000/- 24. IN RESPECT OF ADDITIONS OF RS.3,00,000/- FOR FU RNITURE, VALUABLES AND INTERIOR DECORATION, THE TRIBUNAL CONFIRMED THE ADD ITION BY OBSERVING AS UNDER:- 26. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GO ING THROUGH THE MATERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFER E WITH THE FINDINGS OF CIT(A) WHO HAVE OBSERVED THAT THE AO HAS NOT GIVEN ANY BASIS FOR HIS VALUATION WHILE MAKING THE IMPUGNED ADDITION. THE A SSETS FOUND DURING THE COURSE OF SEARCH WERE NOT PROPERLY VALUED. IN O UR OPINION THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS RIG HTLY REDUCED THE SAME AFTER GIVING ADVANTAGE OF SET OFF ON ACCOUNT O F UNRECORDED CONSULTATION FEES AND UNRECORDED OPERATION FEES. WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. IT IS PERTINENT TO MENTION HE RE THAT WE HAVE REDUCED THE SAID ADDITIONS SUSTAINED ON ACCOUNT OF UNRECORD ED CONSULTATION FEES AND UNRECORDED OPERATION FEES. THE SAME SHOULD BE T AKEN INTO CONSIDERATION WHILE GIVING ADVANTAGE OF SET OFF OF THE SAME. THE LEARNED ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 25. WE THUS FIND THAT THE ABOVE ADDITION WAS MADE B Y THE LEARNED ASSESSING OFFICER AFTER VALUING FURNITURE AND OTHER HOUSEHOLD ARTICLES FOUND DURING THE SEARCH PROCEEDINGS ON ESTIMATE BASIS. NO MATERIAL W AS BROUGHT TON RECORD TO SHOW THAT THE ASSESSEE ACTUALLY INVESTED THE AMOUNT IN QUESTION FOR ACQUIRING HOUSEHOLD FURNITURES DURING THE YEAR UNDER CONSIDER ATION. IN OUR CONSIDERED OPINION, THE CONSIDERATION WHICH APPLIES IN A PENAL TY PROCEEDING IS DIFFERENT FROM THE CONSIDERATION WHICH APPLIES IN ASSESSMENT PROCEEDINGS. IN ABSENCE OF ANY SCIENTIFIC OR PROPER BASIS FOR VALUATION OF FUR NITURES ETC., IN OUR CONSIDERED OPINION PENALTY LEVIED ON ADDITION OF RS.3,00,000/- IS NOT JUSTIFIED. WE THEREFORE, DIRECT THE LEARNED ASSESSING OFFICER TO NOT TO LEVY PENALTY UNDER - 14 - SECTION 271(1)(C) IN RESPECT OF ADDITION OF RS 3,00 ,000/-. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 11 TH DAY OF JUNE, 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 02.06.2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 07.06.2010 ---- --------------- 3. DRAFT PROPOSED & PLACED 07.06.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 07.06.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 08.06.2010 -------- ------------ 6. KEPT FOR PRONOUNCEMENT ON 11.06.2010 --------- ----------- 7. FILE SENT TO THE BENCH CLERK 11.06.2010 ------ -------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------