ACIT, Circle-6(1), Hyderabad V. M/s, Siddhi Jewellers, Hyderabad

ITA 381/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2856 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: RAJENDRA KANKARIYA
• Keywords: Unexplained investment; Search and seizure
• Section: 143(3); 131; 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.381/HYD/2012 ASSESSMENT YEAR 2006-07 ACIT, CIR-6(1), -VS- M/ S. SIDDI JEWELLERS HYDERABAD. HYDERABAD. PAN:AAGFS4330P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. SUDHAKAR RAO RESPONDENTS BY : SHRI RAJENDRA KANKARIYA DATE OF HEARING : 04-06-2013 DATE OF PRONOUNCEMENT: 17- 06-2013 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGA INST THE ORDER DATED 30-12-2011 OF CIT (A)-IV, HYDERABAD PER TAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE DEPARTMENT HAS FILED THE AFORESAID APPEAL ON TH E FOLLOWING TWO EFFECTIVE GROUNDS:- 1. THE LD CIT (A) OUGHT TO HAVE UPHELD THE PENALTY U/S 271(1)(C) LEVIED ON ACCOUNT OF ADDITION OF RS.97,74,968/- CON FIRMED IN RESPECT OF UNEXPLAINED INVESTMENT IN STOCK. 2. THE DIRECTION OF CIT (A) TO DELETE PENALTY ON TH E ISSUE OF UNEXPLAINED INVESTMENT IN STOCK IS PERVERSE TO THE FACTS OF THE CASE, IN AS MUCH AS THE INCOME-TAX APPELLATE TRIBUN AL WHILE DISPOSING OF THE ASSESSEES APPEAL AGAINST ASSESSME NT, HELD AT 2 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. PARA-9 OF ITS ORDER DATED 30-9-2010 THAT THE ALLEGE D PURCHASES MADE BY THE ASSESSEE FIRM FROM KALPATHARU JEWELLERS HAVING CONTINUOUS BILL NOS. 74 TO 77 ISSUED DURING THE PER IOD FROM 24-89- 2005 TO 27-8-2005 APPEAL TO BE ACCOMMODATIVE ONE BY CONSIDERING HUMAN PROBABILITIES. 3. AS CAN BE SEEN FROM THE AFORESAID GROUNDS RAISED BY THE DEPARTMENT, THE ONLY GRIEVANCE IS WITH REGARD TO TH E CIT (A) NOT SUSTAINING PENALTY U/S 271(1)(C ) ON THE ADDITION O F RS.97,74,968/- CONFIRMED BY THE INCOME-TAX APPELLATE TRIBUNAL. 4. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, THE ASSESSEE A PARTNERSHIP FIRM IS ENGAGED IN THE BUSINESS OF TRAD ING IN GOLD JEWELLERY. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED IN CASE OF THE ASSESSEE AND OTHER GROUP CONCERNS ON 30-8-2005. IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASS ESSEE FILED ITS RETURN OF INCOME ON 27-8-2007 DECLARING A TOTAL INCOME OF RS. 63,22,751/-. THE ASSESSING OFFICER HOWEVER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 28-2-2007 DETERMINING THE TOTAL INCOME AT R S.28,75,42,130/- BY MAKING THE FOLLOWING ADDITIONS:- I) UNEXPLAINED CASH RS.13,47,980 II) UNEXPLAINED INVESTMENT IN STOCK RS.1,34,47, 756 III) UNEXPLAINED INVESTMENT IN PURCHASE OF BULLION RS. 26,61,20,004 IV) DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80 G R S.3,10,641 5. AGAINST THE ASSESSMENT ORDER PASSED, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT (A). 6. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE RESTRICTED THE ADDITION MADE UNDER THE HEAD UNACCOU NTED CASH TO 3 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. RS.54,123/- OUT OF ADDITION MADE OF RS.13,47,980/-. SO FAR AS THE ADDITION MADE OF RS.26,61,20,000/- ON ACCOUNT OF IN VESTMENT IN PURCHASE OF BULLION IS CONCERNED, IT WAS FULLY DELETED BY TH E CIT (A). OUT OF THE ADDITION MADE OF RS.1,34,40,756/- ON ACCOUNT OF UNE XPLAINED INVESTMENT IN STOCK, THE CIT (A) GRANTED RELIEF OF RS.36,65,7 88/- THEREBY SUSTAINING THE ADDITION TO THE EXTENT OF RS.97,74,968/-. AGAI NST THE AFORESAID ORDER PASSED BY THE CIT (A), THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD. THE ASSE SSEE ALSO FILED A CROSS OBJECTION BEFORE THE TRIBUNAL AGAINST THE ORD ER PASSED BY THE CIT (A) SUSTAINING THE ADDITION. 7. IN THE MEANWHILE, THE ASSESSING OFFICER ISSUED A NOTICE FOR IMPOSITION OF PENALTY U/S 271(1)(C ) OF THE ACT. T HE ASSESSEE SUBMITTED ITS EXPLANATION STRONGLY REFUTING THE ALLEGATION OF EITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INC OME SO AS TO INVITE PENALTY U/S 271(1)(C ) OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE THAT THERE WAS NO DELIBERATE CONCEALMENT ON ITS PART WHI CH COULD ATTRACT LEVY OF PENALTY. THE ASSESSING OFFICER DID NOT ACCEPT T HE EXPLANATION SUBMITTED BY THE ASSESSEE AND PROCEEDED TO IMPOSE P ENALTY U/S 271(1)(C) OF THE ACT ON THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER EVEN IMPOSED PENALTY ON THOSE ADDITIONS WHICH WERE DELETED BY THE FIRST APP ELLATE AUTHORITY. AS A RESULT, AN AMOUNT OF RS.9,46,58,443/- WAS IMPOSED A S PENALTY U/S 271(1)(C ) VIDE ORDER PASSED ON 29-3-2010 BY THE A SSESSING OFFICER. THE ASSESSEE BEING AGGRIEVED OF THE ORDER PASSED I MPOSING PENALTY PREFERRED AN APPEAL BEFORE THE CIT (A) . 8. DURING PENDENCY OF APPEAL BEFORE THE CIT (A), TH E APPEAL OF THE DEPARTMENT AND THE C.O OF THE ASSESSEE WERE HEARD A ND DISPOSED OF BY THE INCOME-TAX APPELLATE TRIBUNAL VIDE ORDER DATED 30-9-2010 IN ITA NO.35/HYD/2009 AND C.O. NO.2/HYD/09. THE INCOME-TA X APPELLATE 4 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. TRIBUNAL UPHELD THE ORDER OF THE CIT (A) BY DISMISS ING BOTH APPEAL AND CROSS OBJECTION OF THE ASSESSEE. THUS, IN EFFECT T HE ADDITION OF RS.97,74,968/- SUSTAINED BY THE CIT (A) WAS CONFIRM ED BY THE INCOME- TAX APPELLATE TRIBUNAL. 9. IN COURSE OF HEARING OF APPEAL AGAINST PENALTY O RDER BEFORE THE CIT (A), IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSE SSEE IN COURSE OF ASSESSMENT PROCEEDINGS HAS PUT ALL THE FACTS BEFOR E THE ASSESSING OFFICER WITH REGARD TO PURCHASE OF JEWELLERY AND THE SAME W ERE CONFIRMED BY THE THIRD PARTY M/S KALPATARU JEWELLERS AFTER ISSUANCE OF SUMMONS U/S 131 OF THE ACT. IT WAS CONTENDED THAT THE ASSESSING OFFIC ER WHILE COMPLETING THE ASSESSMENT HAS NEVER SAID THAT THE EVIDENCES WERE F ALSE BUT ONLY OBSERVED THAT IT IS DIFFICULT TO COMPREHEND THAT TH E ASSESSEE HAD TAKEN DELIVERY AT MUMBAI, CONTINUOUSLY ON 4 DAYS, WHEN TH E ENTIRE CONSIGNMENT COULD HAVE BEEN TAKEN IN ONE DAY ONLY. IT WAS FURT HER CONTENDED THAT THE CONFIRMATION OF ADDITIONS OF RS.97,74,968 BY THE IN COME-TAX APPELLATE TRIBUNAL WOULD ALSO NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD EITHER CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AS THE INCOME-TAX APPELLATE TRIBUNAL HAS CONFIRMED THE ADDITION ONLY ON CONSIDERING HUMAN PROBABILITIES. THE CIT (A) THEREFORE DELETED THE IMPOSITION OF PENALTY ON THE ADDITION M ADE OF RS.97,74,968 OBSERVING AS UNDER:- 7.8 AS REGARDS THE ADDITION OF RS. 1,34,40,756/- ON ACC OUNT OF UNEXPLAINED INVESTMENT IN STOCK MADE BY THE ASSESSI NG OFFICER, IT IS SEEN THAT THE HONBLE ITAT HAVE UPHELD THE DECISION OF THE CIT(A), RESTRICTING THE ADDITION ON THIS ISSUE TO R S. 97,74,968/- ONLY. 7.8.1 HOWEVER, FROM THE ORDER OF THE HONBLE ITAT, IT CAN BE SEEN THAT THEY HAVE TAKEN NOTE OF THE FACT THAT THE APPELLANT , DURING THE COURSE OF SEARCH, HAD CATEGORICALLY SUBMITTED THAT ITS ACCOUN TS HAD NOT BEEN UPDATED FOR THE LAST 15 DAYS PRIOR TO THE SEARCH. T HEREFORE, THEY FELT THAT IT WAS UNFAIR ON THE PART OF THE ASSESSING OFF ICER TO REJECT THE APPELLANT'S CLAIM ENTIRELY. THEY FURTHER NOTED THAT THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS HAD MADE A CLAIM REGARDI NG PURCHASES NOT HAVING BEEN ENTERED IN THE BOOKS OF ACCOUNTS, AND T HEREFORE, THEY OPINED THAT THE APPELLANT'S CLAIM COULD NOT HAVE BE EN REJECTED BY THE ASSESSING OFFICER BY HOLDING IT AS AN AFTERTHOUGHT. 5 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. 7.8.2 EVEN IN RESPECT OF UPHOLDING OF THE ADDITION TO THE EXTENT OF RS. 97,74,968/ -, IT CAN BE SEEN FROM THE ORDER OF THE HON'BLE ITAT THAT THEY TOO A SPECIFIC NOTE OF THE FACT THAT THE ALLE GED PURCHASES MADE BY THE APPELLANT FROM M/S. KALPATARU JEWELLERS HAD CON TINUOUS BILL NOS. 74 TO 77, AND HAD BEEN ISSUED DURING THE PERIOD 24 .8.2005 TO 27.8.2005. THEY CONSIDERED IT TO BE ACCOMMODATIVE I N NATURE ON THE GROUND OF HUMAN PROBABILITIES, AS THEY FELT THAT IT WAS DIFFICULT TO AGREE THAT M/ S. KALPATARU JEWELLERS DID NOT HAVE A NY BUSINESS WITH ANY OTHER CONCERN DURING THE SAID PERIOD, AND THAT TOO A SINGLE BILL IN WHOLE OF THE DAY WAS ISSUED ONLY TO THE APPELLANT F IRM. THEY OPINED THAT THE SAID TRANSACTION WAS QUITE UNUSUAL AND ABN ORMAL, AND APPEARED TO BE COLLUSIVE. THEY FELT THAT THE INVOIC ES APPEARED TO BE ACCOMMODATIVE IN NATURE FOR JUSTIFYING THE EXCESS S TOCK FOUND DURING THE COURSE OF SEARCH. IN VIEW OF THESE OBSERVATIONS , THE HON'BLE ITAT HELD THAT THE PURCHASES RELATING TO 4 BILLS DID NOT CONFORM TO THE NORMAL HUMAN BEHAVIOUR. 7.8.3 HOWEVER, IT IS SEEN THAT, AT THE SAME TIME, T HE HON'BLE ITAT OBSERVED THAT THE ASSESSING OFFICER HAD NOT BROUGHT ANY ADVERSE MATERIAL ON RECORD IN RESPECT OF BILL NOS. 66 TO 70 ISSUED BY THE SAME M/ S. KALPATARU JEWELLERS, AS ALSO THE BILLS ISSUED BY M/ S. ADARSH KUMAR JEWELLERS AND OTHERS. EVEN THESE BILLS HAD BE EN CONSIDERED BY THE APPELLANT IN THE RECONCILIATION SUBMITTED FOR E XPLAINING THE EXCESS STOCK. IT IS, THEREFORE, CLEAR THAT WHILE THE PURCH ASES CLAIMED BY THE APPELLANT AS MADE FROM M/S. KALPATARU JEWELLERS, MU MBAI VIDE BILLS NOS. 66 TO 70 HAVE BEEN CONSIDERED AS GENUINE, THE OTHER 4 BILLS, BEING BILL NOS. 74 TO 77 IN RESPECT OF PURCHASES OF RS. 97,74,968/ -, HAVE BEEN CONSIDERED AS ACCOM MODATIVE ONLY ON THE GROUND OF HUMAN PROBABILITIES AND NORMAL HUMAN BEHAVIOUR, CONSIDERI NG THE TOTALITY OF THE FACTS AND CIRCUMSTANCES. 7.8.4 IT CAN BE SEEN THAT WHILE THE ADDITION OF RS. 1,34,40,756/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK WAS FINA LLY RESTRICTED TO RS. 97,74,968/- AS DISCUSSED ABOVE, THE ASSESSING OFFICER HAS CONSIDERED THE ENTIRE ADDITION OF RS. 1,34,40,756/ - MADE IN THE ASSESSMENT ORDER AS THE BASIS FOR LEVY OF PENALTY U /S. 271(I)(C). HOWEVER, FROM THE ABOVE DISCUSSION, IT IS AMPLY CLE AR THAT THE RECONCILIATION OF STOCK, SHOWING THAT IN ALL 8 PURC HASE BILLS, INCLUDING 6 FROM M/ S. KALPATARU JEWELLERS, MUMBAI, HAD NOT 'BE EN ENTERED INTO THE STOCK REGISTER, HAS BEEN PARTLY ACCEPTED AS COR RECT. IT IS ONLY THE PURCHASES TO THE EXTENT OF RS. 97,74,968/-, VIDE BI LL NO. 74 TO 77 THAT HAVE BEEN CONSIDERED AS NOT CONFORMING TO NORM AL HUMAN BEHAVIOUR, RESULTING THE UPHOLDING OF THE DISALLOWA NCE. 7.8.5 HOWEVER, FROM RECORDS IT EMERGES THAT THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD ISS UED SUMMON U/S 131 TO M/ S. KALPATARU JEWELLERS, REQUIRING THEM TO PRODUCE THEIR BOOKS OF ACCOUNTS AND BILLS ETC. SUCH BOOKS OF ACCO UNTS, BILLS ETC. WERE DULY PRODUCED BY THEM BEFORE HIM AND THOSE WERE EVE N EXAMINED BY THE ASSESSING OFFICER. IN ADDITION TO SUCH EVIDENCE REGARDING THE SALES MADE BY THEM TO THE APPELLANT, IT WAS ALSO STATED A ND SHOWN IN THEIR SALES TAX RETURNS AS WELL. IN SPITE OF SUCH EVIDENC E, THE ASSESSING OFFICER CONSIDERED THE ENTIRE EXCESS STOCK OF RS. 1 ,34,40,756/- AS UNEXPLAINED. 7.8.6 HOWEVER, FROM THE ABOVE, IT CLEARLY EMERGES T HAT THE APPELLANT HAD DISCHARGED ITS BURDEN OF GIVING EXPLANATION IN RESPECT OF THE EXCESS STOCK, AND HAD ALSO SUPPORTED ITS EXPLANATIO N BY FURNISHING THE 8 BILLS UNDER CONSIDERATION. THE SAID BILLS WERE FO UND DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE COUNTER PARTIES. ACCOR DINGLY, EVEN IF PART OF THE ADDITIONS ON THIS ISSUE WAS UPHELD BY THE HON'BLE ITAT ON THE 6 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. GROUND OF HUMAN PROBABILITIES, THE BURDEN WAS ON TH E ASSESSING OFFICER TO SEPARATELY INVESTIGATE THE ISSUE IN THE COURSE OF PENALTY PROCEEDINGS, AND TO PROVE THAT THE EXPLANATION SO O FFERED BY THE APPELLANT WAS FALSE. HOWEVER, IT IS NOT CLEAR THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOR IN THE COURSE OF SUBSEQ UENT PENALTY PROCEEDINGS, IT HAS BEEN PROVED THAT THE EVIDENCE F URNISHED IN RESPECT OF THE EXCESS STOCK WAS FALSE OR INACCURATE. 7.8.7 FROM THE ABOVE, IT IS CLEAR THAT THE LEVY OF PENALTY EVEN ON THIS ISSUE IS BASED MERELY ON THE VIEW TAKEN REGARDING A DDITION IN THE ASSESSMENT ORDER. HOWEVER, IT IS AN ESTABLISHED JUD ICIAL PROPOSITION, AS EVIDENCED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ARIANTHRARN VEERASINGAIAH & CO. VS. CIT (123 ITR 457), THAT THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR HE PURPOSE OF PENALTY PROCEEDINGS. I T IS ALSO CLEAR THAT THE EXPLANATION 1 TO C SEC. 271(1)(C) OF THE ACT RAISES A PRESUMPTION OF CONCEALMENT, WHICH THE ASSESSEE IS BOUND TO REBUT. THE HON'BLE CHENNAI BENCH OF THE ITAT IN THE CASE OF ITO VS. DR . V. MURALI KRISHNAN DTD. 19.3.2010 IN ITA NO. 697(MDS) OF 2007 (2010-TM I-207842-ITAT, CHENNAI) HAVE NOTED THAT THE CIRCUMSTANCES IN WHICH THE PRESUMPTION ARISES ARE AS UNDER: (I) WHEN THE ASSESSEE FAILED TO OFFER AN EXPLANATIO N OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE CIT (A) OR CIT TO BE FALSE, OR (II) SUCH PERSON OFFERS AN EXPLANATION, BUT CANNOT SUBSTANTIATE THE SAME AND FAILS TO PROVE THAT SUCH EXPLANATION I S BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM; THE HORI'BLE ITAT HAVE OBSERVED THAT IN THE ABOVE CIRCUMSTANCES ONLY THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF SEC. 271(1), BE DEEMED TO REPRESENT THE INCOME OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7.8.8 SIMILARLY, IT IS SEEN THAT THE HON'BLE AHMEDA BAD ITAT, IN THE CASE OF GANDHI SERVICE STATION VS. ACIT (100 TTJ 11 43), HAVE OPINED THAT THE QUANTUM AND THE PENALTY PROCEEDINGS ARE DI STINCT AND SEPARATE, AND WHILE DECIDING THE ISSUE OF PENALTY, FACTS HAVE TO BE RECONSIDERED. THEY HAVE OPINED THAT THE FACTUM OF C ONCEALMENT NEEDS TO BE PROVED. THEY OBSERVED THAT THE EXPLANATION OF THE ASSESSEE IN THE SAID CASE HAD BEEN REJECTED ON ASSUMPTIONS, DRAWING ADVERSE INFERENCE BASED ON PROBABILITIES. HOWEVER, IN THE LIGHT OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. ORISSA CORPORATION (159 ITR 78), IT WAS REQUIRED TH AT THE ASSESSEE'S EXPLANATION PROVED TO BE FALSE ON FACTS AND NOT MER ELY ON ASSUMPTIONS. 7.8.9 LIKEWISE, THE HON'BLE I TAT, AHMEDABAD ALSO, IN THE CASE OF JAYENDRA G. SONI VS. ITA (2011)(16 TAXMANN.COM 87), HAVE OPINED THAT WHERE PURSUANT TO THE SEARCH PROCEEDINGS, CERT AIN ADDITIONS WERE MADE ON ESTIMATE OR PREPONDERANCE OF PROBABILITIES, IT WOULD NOT BE A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C). 7.8.10 WHEN EXAMINED M THE LIGHT OF THE JUDICIAL PR ONOUNCEMENTS CITED ABOVE, IT EMERGES THAT THE ADDITION TO THE EX TENT OF RS.97,74,968/- WAS SUSTAINED BY THE CIT(A), AS ALSO THE HON'BLE ITAT, IN THE APPELLANT'S CASE, ON THE ONLY GROUND THAT TH E PURCHASES IN RESPECT OF THE 4 BILLS ( 74 TO 77 ) FROM M/ S. KALP ATARU JEWELLERS, 7 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. MUMBAI, WERE AGAINST NORMAL HUMAN BEHAVIOUR AND PRO BABILITIES. IT WAS FELT THE TRANSACTION UNDER CONSIDERATION WERE U NUSUAL AND ABNORMAL, AND THEREFORE, APPEARED TO BE ACCOMMODATI VE AND COLLUSIVE IN NATURE. HOWEVER, IT IS SEEN THAT EVEN DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS NOT BROUGHT ANY FURTHER EVIDENCE TO PROVE THE ABOVE CONCLUSION, WHICH IS PU RELY BASED ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE. HE HA S NOT BEEN ABLE TO PROVE THE INFERENCE THAT THE SAID TRANSACTIONS WERE INDEED OF A COLLUSIVE NATURE OR THAT THOSE WERE ACCOMMODATIVE, AND THAT NO ACTUAL PURCHASES HAD EVER BEEN MADE BY WAY OF THE BILL NO. 74 TO 77. IN FACT, NOTHING FURTHER HAS BEEN DONE TO ESTABLISH THE DOUB TS RAISED IN RESPECT OF THE SAID PURCHASED. IN VIEW OF THE JUDICIAL PRON OUNCEMENTS REFERRED TO ABOVE, THEREFORE, NO PENALTY CAN BE LEVIED IN RESPECT OF THE ADDITION OF RS. 1,35,40,756/- OR EVEN OF RS. 97,74, 968/- FINALLY SUSTAINED BY THE HON'BLE ITAT, AS ALL OF SUCH ADDIT ION IS ONLY BASED ON PREPONDERANCE OF PROBABILITIES AND NORMAL HUMAN BEHAVIOUR. 10. BEING AGGRIEVED OF THE AFORESAID ORDER OF THE C IT (A), THE DEPARTMENT IS IN APPEAL BEFORE US. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED BEFORE US THAT THE ADDITION OF RS.97,74,968/- HAVING BEEN CONFIRME D NOT ONLY BY THE CIT (A) BUT ALSO BY THE INCOME-TAX APPELLATE TRIBUNAL P ROVES THE FACT THAT THE ASSESSEE HAS CONCEALED HIS INCOME TO THAT EXTENT. HENCE, PENALTY IMPOSED U/S 271(1)(C ) SHOULD HAVE BEEN CONFIRMED B Y THE CIT (A) TO THE EXTENT OF ADDITION OF RS.97,74,968. IT WAS SUBMIT TED THAT BOTH THE CIT (A) AND INCOME-TAX APPELLATE TRIBUNAL HAVING CONFIR MED THE FACT THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT IN STOCK, IMPOSITION OF PENALTY U/S 271(1)(C ) IS FULLY JUSTIFIED ON THE AD DITION MADE ON ACCOUNT OF SUCH UNEXPLAINED INVESTMENT IN STOCK. 12. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT (A) DELETING PENALTY. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE REITERATING THE STAND TAKEN BEFORE THE CIT (A) SUBMITTED THAT THE A SSESSING OFFICER IN THE ORDER PASSED IMPOSING PENALTY HAS MERELY RELIED UPO N THE OBSERVATION MADE AT THE TIME OF MAKING ADDITION IN THE ASSESSME NT ORDER WHICH CANNOT BE A GROUND FOR IMPOSITION OF PENALTY AS THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DIFFERE NT AND DISTINCT 8 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. PROCEEDINGS. IN SUPPORT OF HIS CONTENTION, THE LEA RNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KHODAY ESWARSA & SONS (83 ITR 369). HE FURTHER SUBMITTED THAT WHILE IMPOSING PEN ALTY, THE ASSESSING OFFICER MUST GIVE A CONCLUSIVE FINDING THAT THERE I S EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTAT IVE FOR THE ASSESSEE RELIED UPON A DECISION OF INCOME-TAX APPELLATE TRIB UNAL, HYDERABAD BENCH IN CASE OF HOE LEATHER GARMENTS LTD. VS. DCIT (201 0) 5 TAXMAN CO. 6 AND THE TRIBUNAL, DELHI BENCH IN CASE OF VIJAY POWE R GENERATORS LTD. VS. ITO, 6 DTR 64 (DEL). IT WAS FURTHER SUBMITTED THAT PENALTY ALSO CANNOT BE IMPOSED U/S 271(1) (C ) ONLY BECAUSE THE ADDITION H AS BEEN UPHELD BY THE TRIBUNAL. IT WAS SUBMITTED THAT MERE FACT OF CONFI RMATION OF ADDITION CANNOT PER SE LEAD TO THE IMPOSITION OF PENALTY AS THE ASSESSMENT AND PENALTY PROCEEDINGS ARE INDEPENDENT OF EACH OTHER. IN THE PENALTY PROCEEDINGS, IF THE ASSESSEE SUBMITS A SATISFACTORY EXPLANATION MAKING OUT A CASE FOR NON IMPOSITION OF PENALTY THEN NO PE NALTY CAN BE IMPOSED ONLY ON THE BASIS OF FINDING MADE IN THE ASSESSMENT PROCEEDINGS. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE CASE OF ACIT VS. VIP INDUS TRIES LTD., (122 TTJ 289), CHEMPURE VS. ITO (40 SOT 164) (MUM), 219 ITR 267, 102 ITR 787, JAIN GARNETS VS. DY.CIT (18 TDR 358). THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELYING UPON THE DE CISION OF HONBLE SUPREME COURT IN CASE OF HINDUSTAN STEEL IN 83 ITR 27 SUBMITTED THAT ORDER IMPOSING PENALTY IS A RESULT OF A QUASI CRIMI NAL PROCEEDINGS, UNLESS IT IS PROVED THAT THERE IS A CONSCIOUS AND DELIBERA TE ACT ON THE PART OF THE ASSESSEE TO CONCEAL HIS INCOME OR FURNISH INACCURAT E PARTICULARS OF ITS INCOME, NO PENALTY CAN BE IMPOSED. IN THIS REGARD, THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE FOLLOWING CASES:- I) ANANTHARAM VEERASINGHIAH & CO. VS. CIT (123 ITR 457) 9 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. II) DILIP N. SHROFF V. JCIT (291 ITR 519) III) UOI VS. RAJASTAN SPG. & WVG. MILLS (2009) 180 TAXMA NN 609 IV) T. ASHOKA PAI VS. CIT 292 ITR 11 13. WE HAVE HEARD CONTENTIONS OF THE PARTIES AND PERUSE D THE MATERIALS ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DE CISIONS RELIED UPON BY BOTH THE PARTIES. THE ISSUE BEFORE US IS WHETHER T HE CONFIRMATION OF ADDITION OF RS.97,74,968/- WOULD BE TREATED AS CON CEALED INCOME OF THE ASSESSEE SO AS TO ATTRACT LEVY OF PENALTY U/S 271( 1)(C ) OF THE ACT. AS CAN BE SEEN FROM THE FACTS AND MATERIALS ON RECORD, DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER AFTER VERIFYING THE STOCK RECONCILIATION STATEMENT FOUND THAT TOTAL EIGHT P URCHASE BILLS INCLUDING SIX PURCHASE BILLS FROM M/S KALPATARU JEWELLERS, BO MBAY WERE NOT ENTERED IN THE STOCK REGISTER WHICH WAS TAKEN INTO ACCOUNT IN THE STOCK RECONCILIATION STATEMENT. IT WAS OBSERVED BY THE A SSESSING OFFICER THAT FOUR OF THE BILLS OF M/S KALPATARU JEWELLERS, BOMBA Y I.E. BILL NOS. 74 TO 77 ARE CONTINUOUS NUMBERS WHICH ACCORDING TO THE ASSES SING OFFICER SHOWS THAT ONLY THE ASSESSEE HAS PURCHASED JEWELLERY FROM KALPATARU JEWELLERS, BOMBAY FROM 24 TH TO 27 TH AUGUST, 2005. THESE FOUR BILLS AMOUNTED TO PURCHASE OF STOCK OF RS.97,74,968/-. THE ASSESSIN G OFFICER THEREFORE CAME TO A CONCLUSION THAT THESE BILLS WERE ACCOMMOD ATIVE IN NATURE AND ACCORDINGLY HE MADE THE ADDITION OF ENTIRE AMOUNT OF PURCHASES MADE FROM KALPATARU JEWELLERS UNDER EIGHT PURCHASE BILLS AMOUNTING TO RS.1,34,40,756/-. 14. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE TRANSACTIONS COVERING BILL NOS. 74 TO 77 W ERE QUITE UNUSUAL AND ABNORMAL AND APPEARS TO BE COLLUSIVE. HE THEREFORE HELD THAT THE PURCHASES IN RESPECT OF THE SAID FOUR BILLS DID NOT CONFORM TO THE NORMAL HUMAN BEHAVIOUR AND THEREFORE WHAT WAS APPARENT WAS NOT REAL. 10 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. ACCORDINGLY, THE CIT (A) RESTRICTED THE ADDITION TO RS.97,74,968/- UNDER BILL NOS. 74 TO 77 ONLY AND DELETED THE REST OF THE ADDITIONS. THIS FINDING OF THE CIT (A) WAS ALSO CONFIRMED BY THE INCOME-TAX APPELLATE TRIBUNAL. FROM THE ORDER PASSED BY BOTH THE CIT (A) AS WELL AS INCOME-TAX APPELLATE TRIBUNAL, IT CAN BE SEEN THAT THE ASSESSE ES CLAIM OF PURCHASE FROM KALPATARU JEWELLERS IN BILL NOS. 74 TO 77 WAS DISBELIEVED AND HELD TO BE ACCOMMODATIVE IN NATURE ONLY BECAUSE IT WAS FOUN D TO BE OPPOSED TO NORMAL HUMAN BEHAVIOUR. HOWEVER, AS COULD BE SEEN, NEITHER THE CIT (A) NOR THE INCOME-TAX APPELLATE TRIBUNAL COMPLETELY DI SBELIEVED THE FACT THAT THE ASSESSEE HAD IN FACT PURCHASED JEWELLERY FROM KALPATARU JEWELLERS AND IN FACT THE ASSESSEE S PURCHASES FROM KALPATAR U JEWELLERS IN RESPECT OF BILL NOS. 66 TO 70 WERE ACCEPTED BY BOTH THE CIT (A) AND INCOME-TAX APPELLATE TRIBUNAL. THEREFORE, THE ADDITION SUSTAI NED BY THE CIT (A) AND THE INCOME-TAX APPELLATE TRIBUNAL WERE ON THE BASIS OF PECULIAR FACTS AND CIRCUMSTANCES INVOLVED CONSIDERING THE HUMAN PROBAB ILITIES. HOWEVER, SUCH CONFIRMATION OF ADDITION MADE IN THE QUANTUM A SSESSMENT PROCEEDINGS WOULD IPSO FACTO NOT LEAD TO THE CONCL USION THAT THE ASSESSEE HAS EITHER CONCEALED PARTICULARS OF INCOME OR FURNI SHED INACCURATE PARTICULARS OF HIS INCOME. ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DISTINCT AND INDEPENDENT TO EACH OT HER. THE REASONING ON THE BASIS OF WHICH ADDITIONS ARE MADE IN THE ASS ESSMENT PROCEEDINGS WOULD NOT BE ENOUGH VALID FOR IMPOSING PENALTY U/S 271(1)(C ) OF THE ACT. IN CASE OF IMPOSITION OF PENALTY, THE ASSESSING OFF ICER HAS TO GIVE A CONCLUSIVE FINDING OF FACT THAT THE ASSESSEE HAS CO NSCIOUSLY MADE AN ATTEMPT TO CONCEAL HIS INCOME OR FURNISH INACCURATE PARTICULARS OF HIS INCOME. UNLESS THIS FACT IS ESTABLISHED ON RECORD BY BRINGING SUFFICIENT EVIDENCE, NO PENALTY CAN BE IMPOSED U/S 271(1) (C ) OF THE ACT. AS IS OBVIOUS FROM THE ORDER PASSED U/S 271(1)(C ) OF THE ACT, THE ASSESSING OFFICER HAS ONLY RELIED UPON THE REASONING OF THE A SSESSING OFFICER IN THE ASSESSMENT ORDER WHILE MAKING ADDITIONS. 11 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. 15. THE ASSESSING OFFICER HAS NOT CONSIDERED THE IS SUE INDEPENDENTLY IN THE PROCEEDINGS U/S 271(1)(C ). IN FACT, THE FIND ING RECORDED BY THE ASSESSING OFFICER WHILE IMPOSING PENALTY U/S 271(1) (C ) OF THE ACT WOULD REVEAL THAT THERE IS NO CONCLUSIVE FINDING AT ALL B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAS EITHER CONCEALED HIS INCOME O R HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. AS CAN BE GAT HERED FROM THE DISCUSSIONS MADE BY THE CIT (A) IN HIS ORDER WHILE DELETING THE PENALTY, THE ASSESSEE DID PROVE THE FACT THAT HE HAD ENTERED INTO THE TRANSACTIONS WITH M/S KALPATARU JEWELLERS AND IN COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER ALSO HAD EXAMINED THE BOOKS O F ACCOUNTS, BILLS AND VOUCHERS OF M/S KALPATARU JEWELLERS. WHEREIN THE TR ANSACTION UNDER THOSE RIGHT BILLS WERE FOUND TO BE DULY RECORDED IT IS ANOTHER FACT THAT THE PURCHASES MADE UNDER BILL NOS. 74 TO 77 WERE NOT AC CEPTED ON THE GROUND OF HUMAN PROBABILITIES BUT THAT ITSELF WOULD NOT LE AD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED HIS INCOME WHEN IT IS NO T DISPUTED THAT WHEN ASSESSEES BUSINESS TRANSACTION WITH M/S KALPATARU JEWELLERS IS NOT DISPUTED AND IT IS ALSO FACT THAT ALL THE TRANSACTI ONS IN THE SAID BILLS WERE RECORDED IN THE BOOKS OF ACCOUNTS OF M/S KALPATARU JEWELLERS. AS HAS BEEN HELD IN THE DECISIONS RELIED UPON BY THE LEAR NED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE UNLESS THERE IS A C ONCLUSIVE FINDING BY THE ASSESSING OFFICER THAT THERE IS CONSCIOUS ATTEMPT O N THE PART OF THE ASSESSEE TO CONCEAL HIS INCOME OR FURNISH INACCURAT E PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED MERELY ON THE BAS IS OF THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDING. AS HAS BEEN HEL D BY THE HONBLE SUPREME COURT IN CASE OF HINDUSTAN STEELS (83 ITR 2 7), AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT STATUTORY OBLIGATION IS THE RESULT OF QUASI CRIMINAL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED UNDER THE ACT HAS EITHER A CTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. CONSIDERING THE FACTS OF THE PRESENT CASE AND IN THE LIGHT OF RATIO LAID DOWN BY THE HON BLE SUPREME COURT AND 12 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD. OTHER DECISIONS OF THE INCOME-TAX APPELLATE TRIBUNA L, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAVING NOT PROVED THE FA CT OF EITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME, PENALTY U/S 271(1)(C) CANNOT BE IMPOSED. THE ORDER PASSED BY THE CIT (A) DELETING THE PENALTY, BEING FOUNDED ON SOUND RE ASONING AND AS PER THE RATIO LAID DOWN IN THE JUDICIAL PRECEDENTS, NEE DS NO INTERFERENCE AND ACCORDINGLY CONFIRMED. 16. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 17 -6-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 17 TH JUNE, 2013 COPY TO:- 1) ACIT, CIR-6(1), IT TOWERS, MASAB TANK, HYDERABAD . 2) M/S. SIDDI JEWELLERS, DR. NO.6-3-862, LAL BUNGLO W, AMEERPET, HYDERABAD. 3)CIT (A)-IV, HYDERABAD.. 4.THE CIT CONCERNED, HYDERABAD 5.THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERA BAD. JMR* I T, ' ' R :R 13 ITA NO. 381 OF 2012 M/S. SIDDI JEWELLERS, HYD.