Satnam Singh Chhabra, Kanpur V. DCIT, Kanpur

ITA 435/LKW/2004

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9096 (ITAT-LUCKNOW)
• Duration Of Justice: 6 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-03-2011
• Assessment Year: misc
• Appeal Filed On: 30-06-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K GARG
• Keywords: Unexplained investment; Value adopted by valuation officer; Capital asset; Search and seizure; Difference of opinion; Valuation report; Block assessment; Retraction
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.435(LUC.)/2004 B.P. ENDING 17.10.,1997 FROM A.Y. 88-89 TO 1997-98 & 1998-99 (FROM 1.4.1997 TO 17.10.1999) SARDAR SATNAM SINGH CHHABRA, VS. THE DY.C.I.T., CC- III, 122/170, SAROJINI NAGAR, KANPUR. KANPUR. PAN/ GIR 3-S (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. GARG, ADVOCATE AND SHRI AMIT SHUKLA, ADVOCATE RESPONDENT BY : SHRI PRAVEEN KUMAR, SR.D.R. O R D E R PER H.L.KARWA, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-I, KANPUR DATED 7.5.2004 SUSTAINING THE PENALTY OF RS.2,94,500 IMPOSED UNDER SECTION 158BFA(2)OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT) FOR THE BLOCK PERIOD ENDING 17.10.1997 . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED IN THE CASE OF THE ASSE SSEE ON 17.10.1997. RETURN DECLARING UNDISCLOSED INCOME AT RS.7,04,820 WAS FILED BY THE ASSESSEE AND THE ASSESSMENT WAS COMPLETED ON THE TO TAL UNDISCLOSED INCOME OF RS.23,10,108 ON 29.10.1999. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ALSO INITIATED PENALTY PROCEEDI NGS UNDER SECTION 2 158BFA(2) OF THE ACT. THE ASSESSMENT ORDER DATED 2 9.10.1999 WAS CHALLENGED IN APPEAL BEFORE THE LD.CIT(A) AND THE L D.CIT(A) ALLOWED A RELIEF OF RS.1,22,172 AND ACCORDINGLY UNDISCLOSED INCOME W AS REVISED AT RS.21,87,936. THE ASSESSEE FILED SECOND APPEAL BEFO RE THE TRIBUNAL AND THE TRIBUNAL ALLOWED A RELIEF OF RS.13,63,770 VIDE ITS ORDER DATED 31.10.2001,THE UNDISCLOSED INCOME WAS RESTRICTED T O RS.8,24,166. THE AO HAS MENTIONED IN THE ORDER THAT THE TAX ON RETURNED INCOME CAME TO RS.4,22,892,BUT AT THE TIME OF FILING THE RETURN OF UNDISCLOSED INCOME, TAX OF RS.50,000 WAS PAID. A FURTHER REQUEST TO ADJUST THE CASH AMOUNTING TO 1,50,000 AGAINST THE ADMITTED TAX WAS ALSO MADE. T HEREFORE, THE ASSESSEE CAN HAVE THE BENEFIT OF RS.2 LACS AS ADMITTED TAX DEPOSITED TILL THE DATE OF FILING THE RETURN. BY APPLYING THE PROVISO TO SECTI ON 158BFA(2), THE AO LEVIED A PENALTY OF RS.3 LACS AS THE MINIMUM AND M AXIMUM PENALTY WORKED OUT TO RS.2,94,500 AND RS.8,83,500 RESPECTIVELY. ON APPEAL, THE LD.CIT(A) RESTRICTED THE PENALTY TO RS.2,94,500 OBSERVING AS UNDER : 7. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE L EARNED COUNSEL OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER AN D THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AND APPELLATE ORDER S PASSED BY CIT(APPEALS) AND HON'BLE ITAT LUCKNOW BENCH, LUCKN OW. AS FAR AS, THE CONTENTION OF THE COUNSEL THAT THE ADDITIONS CO NFIRMED BY APPELLATE AUTHORITIES DO NOT TRANSPIRE THAT THERE W AS ANY CULPABLE INTENTION OF ASSESSEE TO CONCEAL HIS UNDISCLOSED IN COME WAS THERE IS CONCERNED, SECTION 158BFA(2) DOES NOT SPEAK ABOUT T HE CONCEALMENT OF INCOME AS SECTION 271(1)(C) SPEAKS ABOUT. THERE IS A VAST DIFFERENCE BETWEEN THESE TWO SECTIONS. THERE IS NO QUESTION O F ANY CONCEALMENT OF UNDISCLOSED INCOME. WHEN THE INCOME WAS CONCEAL ED IT BECAME UNDISCLOSED INCOME, FOR WHICH THE ASSESSEE WAS REQU IRED TO FILE HIS RETURN OF INCOME AS PER PROVISIONS OF SECTION 158BC . IF THE ASSESSEE DOES NOT FILE RETURN OF SUCH UNDISCLOSED INCOME THE N CERTAINLY HE IS LIABLE FOR LEVY OF PENALTY AS PER THE PROVISION OF SECTION 158BFA(2). THESE PROVISIONS CANNOT BE EQUATED WITH THE PROVISI ONS OF SECTION 271 (1)(C). 3 8. THE PROVISIONS OF SECTION 158BF A(2) AS MENTION ED BY THE ASSESSING OFFICER ARE VERY CLEAR. THESE PROVISIONS HAVE BEEN INSERTED BY INCOME-TAX (AMENDMENT) ACT, 1997 WITH EFFECT FRO M 01.01.1997 TO MAKE THE SEARCH ASSESSMENT PROCEEDINGS MORE EFFECTI VE. PRIOR TO INSERTION OF THIS SECTION, THE ASSESSEES USED TO FI LE NIL RETURN OF INCOME AND NO TAXES WERE BEING PAID BY THEM. THIS S ECTION CLEARLY IMPLIES THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WITH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH S HALL NOT EXCEED THREE TIMES OF THE AMOUNT OF TAX SO LEVIABLE IN RES PECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER UNDER CLAUSE (C) OF SECTION L58BC. THIS SUB-SECTION HAS TWO PROV ISOS. FIRST PROVISO DEALS WITH THE CASES WHERE A RETURN HAS BEEN FURNIS HED, TAXES HAVE BEEN PAID ON THE BASIS OF SUCH RETURN, EVIDENCE OF TAX PAID IS FURNISHED ALONGWITH THE RETURN AND NO APPEAL IS FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN, W HILE THE SECOND PROVISO MAKES IT CLEAR THAT FIRST PROVISO SHALL NOT APPLY IN THE CASES WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSE SSING OFFICER IS IN EXCESS OF INCOME SHOWN IN THE RETURN OF INCOME A ND IN SUCH CASES, THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UND ISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF AMOUNT OF UNDISCLO SED INCOME SHOWN IN THE RETURN. 9. IN VIEW OF ABOVE DISCUSSION, I AM OF THE CONSID ERATE OPINION THAT THE PENALTY U/S 158 BFA(2) IS LEVIABIE IN THE PRESENT CASE AND THE ARGUMENT OF THE LEARNED COUNSEL OF THE APPELLANT TH AT THERE IS NO CONSCIOUS CONCEALMENT OF UNDISCLOSED INCOME OR THE NATURE OF THE ADDITIONS SUSTAINED IN APPEAL ARE NOT SUCH WHICH CO ULD SUGGEST THAT THERE WAS ANY CULPABLE INTENTION OF ASSESSEE TO CON CEAL HIS UNDISCLOSED INCOME, HAVE NO FORCE. 10. NOW CORNING TO THE QUESTION OF QUANTUM OF PENA LTY LEVIABLE U/S 158BFA(2). THE ASSESSING OFFICER HAS WORKED OUT THE PENALTY LEVIABLE AS PER THE FIRST PROVISO OF SUB-SECTION (2) OF SECT ION 158BFA. IN THE PRESENT CASE, THERE ARE TWO DEFAULTS ON THE PART OF THE APPELLANT. FIRST IS THAT THE TAX WHICH WORKED OUT ON THE BASIS OF RE TURNED INCOME HAS NOT BEEN PAID AND THE SECOND DEFAULT IS THAT THE UN DISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN. THEREFORE, FOR THE FIRST DEFAULT THE PENALTY HAS TO BE IMPOSED AS PER FIRST PROVISO WHILE FOR THE SECOND I T HAS BEEN IMPOSED 4 AS PER SECOND PROVISO. HOWEVER, THERE WILL BE NO DI FFERENCE IN THE QUANTUM OF PENALTY. IN THE PRESENT CASE, THE ASSES SING OFFICER HAS LEVIED A PENALTY OF RS.3,00,000 WHILE THE MINIMUM P ENALTY WORKED OUT TO RS.2,94,500. HE HAS NOT GIVEN ANY REASON FOR THE DEVIATION FROM MINIMUM PENALTY. THEREFORE, LOOKING INTO THE FACTS OF THE CASE, THE PENALTY IMPOSED BY THE ASSESSING OFFICER IS RESTRIC TED TO RS.2,94,500 BEING THE MINIMUM PENALTY LEVIABLE IN THIS CASE. IN THIS WAY, THE APPELLANT GETS A RELIEF OF RS.5,500. 3. BEFORE US, SHRI S.K.GARG, ADVOCATE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BLOCK ASSESSMENT ORDER WAS CHALL ENGED BEFORE THE LD.CIT(A) AND THEN BEFORE THE TRIBUNAL. THE TRIBUNA L DECIDED THE SECOND APPEAL VIDE ORDER DATED 31.12.2001.AFTER CONSIDERIN G THE EFFECT OF THE SAID ORDER, INCOME CAME TO BE DETERMINED AT RS.8,24,166 RESULTING INTO A DIFFERENCE OF RS.1,19,544, WHICH IS MADE UP OF THE FOLLOWING : (I) ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT I N HOUSE PROPERTY (A) RESIDENTIAL HOUSE NO.122/170, SAROJANI NAGAR, KANPUR DETERMINED AS PER DVO REPORT 41,310 (B) HOUSE PROPERTY NO.147, SAFIPUR, KANPUR 19,734 ---------- 61,044 (II) DISALLOWANCE OUT OF EXPENSES INCURRED ON TRANSFER OF CAPITAL ASSET IN THE ASSTT. YEARS FALLING IN THE BLOCK PERIOD : (A) MAP CHARGES PAID TO KDA 8,500 (B) MALVA CHARGES PAID TO KDA 9,617 (C) ARCHITECT FEES PAID 2,500 (D) BROKERAGE AND MISC. EXPENSES 7,883 -------- 28,500 (III) ON ACCOUNT OF UNEXPLAINED CASH IN HAND 30,000 ------------ 1,19,544 ------------ 5 3.1 ON THE ISSUE OF ADDITION OF RS.61,044 (ON ACCOU NT OF CONSTRUCTION OF HOUSE), IT WAS SUBMITTED THAT THE ASSESSEE HAD DISC LOSED THE INVESTMENT IN CONSTRUCTION OF TWO PROPERTIES ON THE BASIS OF REP ORT PREPARED BY SHRI G.N.DUBEY, AN APPROVED VALUER. THE AO HAD MADE T HE ADDITION OF RS.1,78,989 (RS.1,01,671 + RS.77,315) ON ACCOUNT OF HIS OWN ESTIMATES. THE SAID ESTIMATES WERE MODIFIED AT THE STAGE OF FI RST APPEAL AND FINALLY BY THE TRIBUNAL AT THE STAGE OF SECOND APPEAL AS A RES ULT OF WHICH THE ADDITION THAT REMAINED SUSTAINED WAS RS.61,044. 3.2 AS REGARDS THE ADDITION ON ACCOUNT OF UNEXPLAI NED CASH OF RS.30,000 OUT OF CASH AGGREGATING TO RS.2,63,300 FOUND AT THE TIME OF SEARCH, THE ASSESSEE SUBMITTED BEFORE THE AO AS UNDER : ADDITION OF RS.30,000/- RELATED TO TOTAL CASH FOUN D IN SEARCH : (A) DURING THE COURSE OF SEARCH TOTAL CASH FOUND WA S RS.2,63,300/- OUT OF WHICH RS.1,50,000/- WAS SEIZED. THE TOTAL CASH A S FOUND EXCEPT RS.30,000/- HAS BEEN ACCEPTED IN ASSESSMENT. (B) AS REGARDS RS.30,000/- THE ASSESSEE IN HIS STAT EMENT U/S 132(4) AVERRED THAT THIS AMOUNT WAS OUT OF WITHDRAWAL FROM BANK ACCOUNT WHICH COULD NOT BE SUBSTANTIATED BY BANK A/C. (C) ASSESSEE CONTRARY TO VERSION OF STATEMENT U/S 1 32(4) DURING THE COURSE OF ASSESSMENT EXPLAINED IT OUT OF AVAILABLE CASH IN HAND OF RS.84,995/- ON DATE OF SEARCH OWNED BY HUF OF ASSES SEE WHICH WAS ASSESSED TO INCOME-TAX HAVING ITS INCOME FROM P CO BEFORE SEARCH. THE CASH IN HAND AS DECLARED BY HUF IN ITS RETURN FOR 3 YEARS I.E. 1996-97, 1997-98 AND 1998-99 ARE RS.40,7 18, 70,956/- & 84,721/- RESPECTIVELY. DURING THE COURSE OF BLOCK A SSESSMENT AVAILABILITY OF CASH IN HAND RS.84,995/- AS ON DATE OF SEARCH WAS WORKED OUT IN STATEMENT FURNISHED. THE ASSESSMENT O F HUF, AS ABOVE HAVE BEEN COMPLETED U/S 143(I)(A). (D) THE EXISTENCE OF CASH IN HAND IS ACCEPTED BY TH E DEPARTMENT AT THE HANDS OF HUF OF ASSESSEE. THE SAME IS SUBSTANTIATED BY STATEMENT OF AFFAIRS ENCLOSED WITH RETURN OF AY 199 6-97 TO 1998- 99. THE SOLE BASIS OF REJECTION OF THIS EXPLANATION BY THE AO AND 6 SUBSTAINED BY APPELLATE AUTHORITIES CIT(A) & ITAT I S THAT ASSESSEE IN HIS STATEMENT U/S 132(4) HAD NOT STATED THE OWNE RSHIP OF HUF OVER PART OF CASH IN HAND I.E.30,000/- FOR WHICH AD DITION IS MADE. (E) THE ASSESSEE DURING THE COURSE OF FIRST APPEAL BEFORE CIT(A) HAS CONTENDED AGAINST THE FINDING OF AO THAT THE STATEM ENT RECORDED U/S 132(4) IS NOT CONCLUSIVE EVIDENCE. AS REGARDS O F RS.30,000/-, THE AVERMENT OF STATEMENT U/S 132(4) HAS THE PROBAT IVE VALUE OF ADMISSION MADE BY THE ASSESSEE OF FACT AS AVERRED B Y THE STATEMENT. (F) IT WAS CONTENDED BEFORE THE CIT(A) BY WRITTEN S UBMISSION. IT IS SETTLED LAW AS LAID DOWN BY THE SUPREME COURT IN PU LLANGODE RUBBER PRODUCT VS. STATE OF KERLA 91 ITR 18(SC) HEL D THAT IT IS ALWAYS OPEN TO ASSESSEE WHO MADE ADMISSION OF CERTA IN FACT, TO CONTRADICT IT BY COGENT EVIDENCES THAT ADMISSION MA DE BY HIM WAS INCORRECT. ADMISSIONS MADE BY ASSESSEE ARE NOT CONC LUSIVE BUT REBUTTABLE EVIDENCE. THE BOTH APPELLATE AUTHORITIES I.E. CIT(A) & ITAT HAVE NOT CONSIDERED THE CONTENTION OF ASSESSEE TO ABOVE EFFECT BUT ONLY RELIED ON STATEMENT U/S 132(4) AND SUSTAINED THE ADDITION OF RS.30,000/- AS MADE BY AO. WHEREAS BY A DDUCING EVIDENCES OF AVAILABILITY OF CASH IN HAND OWNED BY HUF OF ASSESSEE, THE ADMISSION OF FACT AS MADE BY STATEMEN T U/S 132(4) IS LAWFULLY REBUTTED. (G) ANY WAY IN VIEW OF FACTS AND LAW AS CONTENDED I N APPEAL EFFECT OF FINDINGS OF APPELLATE AUTHORITIES AT THE BEST CONFI RM THE ADDITION AS MADE BY THE AO. HOWEVER, IN VIEW OF COGENT MATERIAL EVIDENCING THE OWNERSHIP OF HUF OF ASSESSEE OVER THE CASH IN H AND FOR WHICH ADDITION IS MADE THE ASSESSEE CAN NOT BE HELD GUILT Y, SO AS TO THE IMPOSITION OF PENALTY U/S 158 BFA(2) SECOND PROVISO . ALSO VIDE PARA NO.9.2.1 TO 9.2.3 (INFRA). 3.3 SHRI S.K.GARG, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE SUM AND SUBSTANCE OF THE SAID EXPLANATION GIVEN DURING THE COURSE OF PENALTY PROCEEDINGS WAS THAT THE ASSESSEE HAD CLARIFIED/COR RECTED HIS STATEMENT UNDER SECTION 132(4) TO THE EFFECT THAT THE CASH I N QUESTION WAS NOT ON ACCOUNT OF ANY WITHDRAWAL FROM THE BANK, BUT THE S AME REPRESENTED CASH-IN- HAND AS WAS AVAILABLE WITH SATNAM SINGH, HUF, WHIC H WAS SUBJECTED TO ASSESSMENT EVEN PRIOR TO THE SEARCH AND SEIZURE ACT ION. AS PER THE CASH FLOW 7 STATEMENT, THE SAID HUF HAD WITH IT AVAILABLE CASH AS CASH-IN-HAND AMOUNTING TO RS.84,995 AND IN VIEW OF THE SAID CLA RIFICATION, WHICH WAS SUPPORTED BY COGENT MATERIAL AND INFORMATION, TH E SAID EXPLANATION SHOULD BE ACCEPTED. SHRI S.K. GARG,LD. COUNSEL FOR THE AS SESSEE FURTHER SUBMITTED THAT THE SAID EXPLANATION WAS NOT GIVEN FOR THE F IRST TIME DURING THE COURSE OF PENALTY PROCEEDINGS, BUT IN THE BLOCK ASSESSMENT PROCEEDINGS ALSO, THE SAID PLEA HAD DULY BEEN RAISED. HOWEVER, THE SAME WAS NOT ACCEPTED; IN THE QUANTUM PROCEEDINGS, SIMPLY ON THE GROUND THAT IT W AS THE FIRST STATEMENT UNDER SECTION 132(4) WHICH WAS SACROSANCT. SHRI S. K. GARG, LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION TO PARA 8 O F THE TRIBUNALS ORDER WHEREIN THE TRIBUNAL ITSELF HAS OBSERVED THAT SUBS EQUENT RETRACTION/CLARIFICATION IS PERMISSIBLE IF THE SAME IS BASED ON COGENT MATERIAL AND EVIDENCE. SHRI S.K.GARG, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE HUF WAS ASSESSED TO TAX EVEN IN PAST AND THE RETURNS FILED BY IT FOR THE ASSESSMENT YEARS 1996-97, 1997-98 AND 1998-99 D ISCLOSED AN INCOME OF RS.40,718, RS.70,956 AND RS.84,721 AND AVAILABILITY OF CASH OF RS.84,721 ON THE DATE OF SEARCH STOOD SUBSTANTIATED BY THE SAID RETURNS, WHICH WERE ACCEPTED ALSO. ACCORDINGLY, SHRI S.K.GARG, LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE AFORESAID EXPLANATION OF THE ASS ESSEE DESERVES TO BE ACCEPTED AND PENALTY ON THIS ITEM OF ADDITION MAY BE DELETED. 3.4 AS REGARDS THE THIRD ADDITION OF RS.28,500, S HRI S.K.GARG, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE BLOC K RETURN, THE ASSESSEE ITSELF HAD OFFERED LONG TERM CAPITAL AT RS.56,745 AFTER CLAIMING DEDUCTION FOR EXPENSES AGGREGATING RS.43,500 MADE UP AS UNDE R : 8 (RS.) (I) BROKERAGE 15,000 (II) FOR APPROVAL OF MAP BY KDA 8,500 (III) COST OF BOUNDARY WALL 20,000 ---------- 43,500 3.4.(I) SHRI S.K. GARG, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE A.O HAS ALLOWED RELIEF OF RS.15,000 ONLY ON ACCOUNT OF COST OF CONSTRUCTION OF BOUNDARY WALL AND DISALLOWED THE REMAINING EXPENS ES AGGREGATING RS.28,500 MADE UP AS UNDER : (RS.) (I) BROKERAGE 15,000 (II) MAP CHARGES PAID TO KDA 8,500 (III) COST OF COST OF BOUNDARY WALL CLAIMED 5,00 0 RS.20,000 ---------- 28,500 ----------- 3.4.(II)SHRI S.K. GARG, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT DURING THE COURSE OF HEARING OF FIRST APPEAL (IN THE QUANTUM PROCEEDINGS) BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT A SUM OF RS .15,000 HAD BEEN SHOWN BY MISTAKE UNDER THE HEAD BROKERAGE WHEREAS IT WAS ATTRIBUTABLE TO THE FOLLOWING EXPENSES: (I) BROKERAGE 3,000 (II) PAYMENT TO KDA (A) FOR SANCTION OF BUILDING PLAN BY KDA 8,500 (B) MALWA CHARGES 9,617 (III) FEE TO ARCHITECT FOR PREPARATION OF BUILDING PLAN 2,500 --------- 15,117 3.4.(III) IN SUPPORT OF THE SAID EXPENSES AS ALSO T HE EXPENSES INCURRED ON SANCTION OF MAP BY KDA, ALL THE DOCUMENTARY EVIDENC ES WERE SUBMITTED. A PETITION UNDER RULE 46A OF THE INCOME-TAX RULES, 19 62 WAS FILED IN SUPPORT OF THE PAYMENTS MADE TO KDA RELEVANT BILLS ( DEMA ND NOTE AND RECEIPT ETC.) 9 WERE FILED. SHRI S.K.GARG, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT DURING THE COURSE OF PENALTY PROCEEDINGS AND IN THE EXPLAN ATION DATED 13.6.2002, THE SAID PETITION UNDER RULE 46A AND DOCUMENTARY EV IDENCES SUBMITTED ALONGWITH THE SAME WERE DULY REFERRED TO. 3.5 SHRI S.K.GARG, LD. COUNSEL FOR THE ASSESSEE FUR THER SUBMITTED THAT IN ANY CASE INDEPENDENT OF THE ASSESSMENT PROCEEDINGS, THE MATERIAL AND INFORMATION AS REFERRED TO ABOVE IS LIABLE TO BE CO NSIDERED, EVEN THOUGH IT CONSTITUTES FRESH MATERIAL DURING THE COURSE OF PEN ALTY PROCEEDINGS AND ON A DUE CONSIDERATION OF THE SAME, THE PENALTY IN RELAT ION TO THE SAID TWO ITEMS OF RS.28,500 AND RS.30,000 DESERVES TO BE DELETED. IN SUPPORT OF THIS CONTENTION, SHRI S.K.GARG, LD. COUNSEL FOR THE ASSE SSEE RELIED ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF BANARAS TEXTORIUM VS. CIT (1988) 169ITR 782(ALL.) WHEREIN AT PAGE 791, TH EIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER : 'THE REGULAR ASSESSMENT ORDER IS NOT THE FINAL WORD IN PENALTY PROCEEDINGS UPON THE PLEAS WHICH CAN BE TAKEN AT TH E PENALTY STAGE AND HOWSOEVER RELEVANT AND GOOD THE FINDINGS IN THE AS SESSMENT PROCEEDINGS MAY BE, THEY ARE NOT CONCLUSIVE SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED. IN ADJUDGING AS TO WHETH ER THE ASSESSEE IS GUILTY OF CONCEALMENT OR OF FURNISHING OF INACCU RATE PARTICULARS THEREOF, THE MATTER HAS TO BE EXAMINED AFRESH AND I S NOT TO BE GUIDED SOLELY BY THE FINDINGS GIVEN ON THE QUANTUM SIDE. THE ASSESSEE MAY ADDUCE FRESH EVIDENCE IN PENALTY PROCEEDINGS TO EST ABLISH BY MATERIAL AND RELEVANT FACTS WHICH MAY GO TO AFFECT HIS LIABI LITY OR THE QUANTUM OF PENALTY. HE CANNOT BE DEBARRED FROM TAKING APPRO PRIATE PLEAS SIMPLY ON THE GROUND THAT SUCH A PLEA WAS NOT TAKEN IN REGULAR ASSESSMENT PROCEEDINGS OR THE MATERIAL BROUGHT ON T HE RECORD HAS ALREADY BEEN DISBELIEVED IN THE ASSESSMENT PROCEEDI NGS. EVEN WHERE HE DOES NOT CHOOSE TO ADDUCE EVIDENCE OR PRODUCE SU CH MATERIAL, HE MAY STILL RELY UPON THE EXISTING MATERIAL ITSELF, T O PROVE THAT ON THE EXISTING MATERIAL ITSELF, THE PRESUMPTION RAISED BY THE EXPLANATION 10 WOULD STAND REBUTTED AND HE WAS NOT GUILTY OF ANY C ONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS, OR THERE WAS NO FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON HIS PART TO RETURN THE CORRECT INCOME AS ENVISAGED UNDER THE EXPLANATION. THE FACT THAT THE EVIDENCE WAS NOT ACCEPTED ON THE QUANTUM SIDE WOULD NOT CONSTITUTE R ES JUDICATA IN THE WAY OF THE ASSESSEE IN REQUIRING THE TAX AUTHORITIE S TO EXAMINE THE MATTER AFRESH FOR THE PURPOSES OF PENALTY PROCEEDIN GS.' (PAGE 791) 3.6 SHRI S.K.GARG, LD. COUNSEL FOR THE ASSESSEE ALS O SUBMITTED THAT THE PROVISIONS OF SECTION 158BFA(2) ARE NOT MANDATORY, BUT DISCRETIONARY AND ARE AT PARI MATERIA WITH THE PROVISIONS OF SECTION 271(1)(C). RELIANCE IN THIS REGARD, WAS PLACED ON VARIOUS CASE LAWS, WHICH ARE AS UNDER : 1. C I T VS. D OD S A L LIMI TED (2 0 09) 31 2 I TR 112 (BOM), 2. CIT VS. SA TYE N D RA K UM AR D OS I & AN OTHE R, (2009) 3 15 IT R 172 (RAJ.), 3. CIT V S . H ARKA R A N D A S VED P A L ( 2009) 222 CTR 4 3 8 (DEL.), 4. THE OR DER PASSED BY THE I.T.A.T., LUCKNOW BENCH IN THE C ASE OF S AL U JA HIRE PURC HAS E R LI MIT E D V S . AC IT ( 2009) 120 ITD 394, 5. THE ORDER PASSED BY THE I.T.A.T., LUCKNOW BENCH IN THE CASE OF S MT. BITOLI DEVI VS. ACIT (2007) 110 TTJ 735, 6. THE ORDER PASSED BY THE I.T.A.T. CHENNAI BENCH I N THE CASE OF SURESH REDDY (CH.) VS. ACIT, (2009) 120 ITD 428 , 7. ITO VS. VINOD DANCHAND GHODAWAT, (2001) 247 ITR 448 (BOM). 3.7 SHRI S.K.GARG, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE PRINCIPLE LAID DOWN IN THE CASE OF DILIP N.SHROFF V S. JCIT, 291 ITR 519(SC) IS FULLY APPLICABLE AND ON A DUE CONSIDERATION OF T HE SAME, PENALTY UNDER SECTION 158BFA(2) EVEN IN RELATION TO (A) DISALLOWA NCE OF EXPENDITURE AGGREGATING RS.28,500 IN THE MATTER OF COMPUTATION OF CAPITAL GAIN; AND (B) 11 ADDITION ON ACCOUNT OF CASH AMOUNTING TO RS.30,000 FOUND AT THE TIME OF SEARCH AND ALLEGED TO HAVE REMAINED UNEXPLAINED IS NOT LEVIABLE. 4. SHRI PRAVEEN KUMAR, LD.CIT(D R) HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, TOTAL ADDITION SUSTAINED AT THE LEVEL OF THE TRIBUNAL IS RS.1,19,544. OUT OF THIS, THE AMOUNT OF RS.61,044 RELATES TO EXCESS VALUATION OF COST OF CONSTRUCTIO N OF IMMOVABLE PROPERTIES. THE ASSESSEE FILED VALUATION REPORT. THE APPROVED VALUER CLAIMED 36% DEDUCTION FOR VARIOUS ITEMS OF TOTAL COST OF CONSTR UCTION. AFTER CONSIDERING THE RELEVANT MATERIAL AS ALSO THE RATES OF C.P.W.D. & P.W.D., THE AO REJECTED THE CLAIM OF THE ASSESSEE. HOWEVER, IN AP PEAL, THE LD.CIT(A)HELD THAT THE DEDUCTION AT THE RATE OF 20% INSTEAD OF 36 % CLAIMED BY THE ASSESSEE WILL BE REASONABLE. ON THIS BASIS, THE LD.CIT(A) GA VE RELIEF OF RS.36,553. IN SECOND APPEAL, THE TRIBUNAL HELD THAT THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DEDUCTION AT 20%. IT IS WELL SETTLE D LAW THAT THE PROVISIONS OF SECTION 158BFA(2) ARE NOT MANDATORY, BUT DISCRETIO NARY AND ARE AT PARI MATERIA WITH THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IN OUR VIEW, THE FINDINGS GIVEN IN ASSESSMENT PROCEEDINGS ARE RELEVA NT BUT NOT CONCLUSIVE IN PENALTY PROCEEDINGS. AS PER THE INCOME-TAX ACT, THE PROCEEDINGS FOR IMPOSITION OF PENALTY, THOUGH EMANATING FROM PROCEE DINGS OF ASSESSMENT, ARE ESSENTIALLY INDEPENDENT AND A SEPARATE ASPECT O F THE PROCEEDINGS, WHICH CLOSELY FOLLOW THE ASSESSMENT PROCEEDINGS. FINDING S GIVEN IN THE ASSESSMENT PROCEEDINGS ARE CERTAINLY RELEVANT AND HAVE PROBATI VE VALUE, SUCH FINDINGS ARE MATERIAL ALONE AND MAY NOT JUSTIFY IMPOSITION OF PENALTY IN A GIVEN CASE, 12 BECAUSE THE CONSIDERATIONS THAT ARISE IN PENALTY P ROCEEDINGS ARE DIFFERENT FROM THOSE THAT ARISE IN ASSESSMENT PROCEEDINGS. IN THE INSTANT CASE, THE APPROVED VALUER CLAIMED 36% DEDUCTION FOR VARIOUS I TEMS OF TOTAL COST OF CONSTRUCTION. HOWEVER, AFTER CONSIDERING THE RELEVA NT MATERIAL AS ALSO THE RATES OF CPWD & PWD, THE AO REJECTED THE CLAIM OF T HE ASSESSEE. THE AO HAD MADE THE ADDITION OF RS.1,78,989 ON ACCOUNT OF HIS OWN ESTIMATES. THE SAID ESTIMATES WERE MODIFIED AT THE STAGE OF FIRST APPEAL AND FINALLY BY THE TRIBUNAL AT THE STAGE OF SECOND APPEAL AS A RESULT OF WHICH THE ADDITION THAT REMAINED SUSTAINED WAS RS.61,044. ON APPEAL, THE LD .CIT(A) HELD THAT DEDUCTION AT THE RATE OF 20% INSTEAD OF 36% CLAIMED BY THE ASSESSEE WILL BE REASONABLE. THUS, THERE WAS DIFFERENCE OF OPINION ABOUT THE VARIOUS DEDUCTIONS CLAIMED BY THE ASSESSEE. THE ASSESSEE C LAIMED 36% DEDUCTION WHEREAS THE LD.CIT(A) HAS ESTIMATED THE SAME AT 20% . IN SECOND APPEAL, THE TRIBUNAL REDUCED THE ADDITION. IN OUR VIEW, WHEN TH E INCOME IS ESTIMATED, NO PENALTY UNDER SECTION 158BFA(2) OF THE ACT IS LEVI ABLE. ACCORDINGLY, WE HOLD THAT NO PENALTY UNDER SECTION 158BFA(2) IS LEV IABLE ON THE AMOUNT OF RS.61,044. 5.1 AS REGARDS THE ADDITION OF RS.30,000, THE ASSE SSEE, IN HIS STATEMENT UNDER SECTION 132(4) OF THE ACT STATED THAT THIS A MOUNT WAS OUT OF WITHDRAWAL FROM BANK ACCOUNT, WHICH COULD NOT BE SU BSTANTIATED BY BANK ACCOUNT. HOWEVER, THE ASSESSEE, CONTRARY TO VERSION OF STATEMENT UNDER SECTION 132(4) DURING THE COURSE OF ASSESSMENT PROC EEDINGS, EXPLAINED IT OUT OF AVAILABLE CASH-IN-HAND OF RS.84,995 ON DATE OF S EARCH OWNED BY HUF OF ASSESSEE, WHICH WAS ASSESSED TO INCOME-TAX HAVING ITS INCOME FROM PCO BEFORE SEARCH. THERE IS NO DISPUTE THAT CASH-IN-HAN D AS DECLARED BY HUF IN ITS RETURNS FOR THREE YEARS I.E. 1996-97, 1997-98 AND 1998-99 ARE RS.40,718, 13 RS,.70,956 AND RS.84,721 RESPECTIVELY. THERE IS NO DISPUTE THAT THE ASSESSMENT OF HUF, AS ABOVE, HAVE BEEN COMPLETED UN DER SECTION 143(I)(A) OF THE ACT. IT IS APPARENT FROM THE RECORD THAT TH E ADDITION WAS MADE ON THE BASIS OF STATEMENT OF ASSESSEE RECORDED UNDER SECT ION 132(4)OF THE ACT, WHEREIN THE ASSESSEE DID NOT SAY ABOUT THE OWNERSHI P OF THE HUF OVER A PART OF CASH-IN-HAND I.E. RS.30,00 FOR WHICH ADDITION WA S MADE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CONT ENDED THAT THE AMOUNT IN QUESTION REPRESENTED CASH-IN/HAND AS WAS AVAILABLE WITH SATNAM SINGH,HUF, WHICH WAS SUBJECT TO ASSESSMENT EVEN PRIOR TO THE S EARCH AND SEIZURE ACTION. AS PER THE CASH FLOW STATEMENT, THE SAID HUF HAS W ITH IT AVAILABLE CASH AS CASH-IN-HAND AMOUNTING TO RS.84,995. IN VIEW OF THE CLARIFICATION, WHICH WAS SUPPORTED BY COGENT MATERIAL AND INFORMATION, T HE EXPLANATION DESERVES TO BE ACCEPTED. IT SEEMS THAT THE AFORESAID PLEA OF THE ASSESSEE WAS REJECTED IN THE QUANTUM PROCEEDINGS SIMPLY ON THE GROUND THA T IT WAS THE FIRST STATEMENT UNDER SECTION 132(4), WHICH WAS SACROSANC T. IN OUR VIEW, SUBSEQUENT RETRACTION/CLARIFICATION IS PERMISSIBLE IF THE SAME IS BASED ON COGENT MATERIAL AND EVIDENCE. THERE IS NO DISPUTE T HAT THE HUF WAS ASSESSED TO TAX EVEN IN THE PAST AND THE RETURNS FILED BY IT FOR THE ASSESSMENT YEARS 1996-97, 1997-98 AND 1998-99 DISCLOSED SUBSTANTIAL AMOUNT AND AVAILABILITY OF CASH OF RS.84,721 ON THE DATE OF SEARCH SUBSTAN TIATED BY THE SAID RETURNS, WHICH WERE ACCEPTED ALSO. CONSIDERING THE ENTIRE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT ON THE A DDITION OF RS.30,000 ALSO, NO PENALTY UNDER SECTION 158BFA(2) CAN BE VALIDLY LEVIED. ACCORDINGLY, WE CANCEL THE PENALTY ON THE ADDITION OF RS.30,000. 5.2 AS REGARDS THE ADDITION OF RS.28,500, THE ASESS EE CLAIMED THAT IN THE BLOCK RETURN, THE ASSESSEE ITSELF HAD OFFERED LONG TERM CAPITAL GAIN AT 14 RS.56,745 AFTER CLAIMING DEDUCTION FOR EXPENSES AGG REGATING RS.43,500. HOWEVER, THE AO ALLOWED A RELIEF OF RS.15,000 ONLY ON ACCOUNT OF COST OF CONSTRUCTION OF BOUNDARY WALL AND DISALLOWED THE RE MAINING EXPENSES AGGREGATING RS.28,500. IT IS ALSO APPARENT FROM THE RECORD THAT DURING THE COURSE OF HEARING OF FIRST APPEAL (IN THE QUANTUM P ROCEEDINGS) BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT A SUM OF RS .15,000 HAD SHOWN BY MISTAKE UNDER THE HEAD BROKERAGE WHEREAS IT WAS AT TRIBUTABLE TO THE FOLLOWING EXPENSES: (I) BROKERAGE 3,000 (II) PAYMENT TO KDA (A) FOR SANCTION OF BUILDING PLAN BY KDA 8,500 (B) MALWA CHARGES 9,617 (III) FEE TO ARCHITECT FOR PREPARATION OF BUILDING PLAN 2,500 --------- 15,117 IN SUPPORT OF THE SAID EXPENSES AS ALSO THE EXPEN SES INCURRED ON SANCTION OF MAP BY THE KDA ALL THE DOCUMENTARY EVIDENCES WERE SUBMITTED. IT IS ALSO APPARENT FROM THE RECORD THAT A PETITION UNDER SEC TION 46A WAS FILED AND IN SUPPORT OF THE PAYMENTS MADE TO KDA, RELEVANT BILLS (DEMAND NOTE AND RECEIPT ETC.) WERE FILED. THE PETITION UNDER SECTIO N 46 IS AVAILABLE AT PAGES 85 AND 86 OF THE PAPER BOOK AND RELEVANT PORTION IS REPRODUCED HEREUNDER: 6. KINDLY ACCEPT THE EVIDENCE AS ADDITIONAL EVIDEN CE WHICH ARE FILED WITH THE PAPER BOOK WITH FOLLOWING REFERENCE :- (A) PHOTOCOPY OF ACKNOWLEDGEMENT OF PAYMENT PAGE . TO KDA (I) SANCTION OF BUILDING MAP RS.8,085 116 (II) MALWA CHARGES RS.9,617 118& 119 (III) FEE PAID TO ARCHITECT FOR PREPARATION OF BUILDING PLAN RS.2,500 117 (IV) CONFIRMATION OF BROKERAGE PAID RS.3,000 15 5.2(I) IT IS ALSO APPARENT FROM THE RECORD THAT DU RING THE PENALTY PROCEEDINGS AND IN THE EXPLANATION DATED 13.6.2002, THE AFORES AID PETITION UNDER RULE 46A AND DOCUMENTARY EVIDENCE WERE FURNISHED BEFORE THE LOWER AUTHORITIES. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT IS CLEAR THAT THE ASSESSEE HAS ESTABLISHED THAT HE HAD DISC HARGED THE ONUS THAT LIED ON IT BY GIVING A PLAUSIBLE EXPLANATION. THERE IS NO MATERIAL ON RECORD TO REBUT THE EXPLANATION OF THE ASSESSEE. IN OUR VIEW, IN A NY CASE, INDEPENDENT OF THE ASSESSMENT PROCEEDINGS, MATERIAL AND INFORMATION, A S REFERRED TO ABOVE, IS LIABLE TO BE CONSIDERED EVEN THOUGH IT CONSIDERED F RESH MATERIAL DURING THE COURSE OF PENALTY PROCEEDINGS AND ON A DUE CONSIDE RATION OF THE SAME, THE PENALTY IN RELATION TO ADDITION OF RS.28,500 DESER VES TO BE CANCELLED. IN VIEW OF THE ABOVE DISCUSSION, WE CANCEL THE PEN ALTY AND ACCEPT THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.3.11 . SD/ SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT MARCH 21ST, 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.