CAMAY WAFER (INIDA) P. LTD, MUMBAI V. ACIT CEN CIR 9, MUMBAI

ITA 5205/MUM/2009

• Counselvise Citation: 520519914 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Search and seizure; Loose papers; Document seized; Revised return; Documents seized; Reassessment proceedings
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 5204 & 5205/MUM/2009 (ASSESSMENT YEARS: 2004-05 & 2005-06) M/S. CAMAY WAFER (INDIA) P. LTD. ACIT, CENTRAL CIRC LE 9 4B, ANJEERWADI, DR. MACARENHAS AAYAKAR BHAVAN, M.K . ROAD ROAD, MUMBAI 400010 VS. MUMBAI 400020 PAN - AACCC 1630 M APPELLANT RESPONDENT APPELLANT BY: SHRI HARI S. RAHEJA RESPONDENT BY: SHRI M.R. KUBAL DATE OF HEARING: 10.08.2011 DATE OF PRONOUNCEMENT: 09.09.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A), CENTRAL VII, MUMBAI DATED 22.06.2009 FOR TH E RESPECTIVE ASSESSMENT YEARS. 2. IN THIS CASE, A SEARCH UNDER SECTION 132(1) WAS CAR RIED OUT ON 25.11.2005 AND THE INSTANCES OF SUPPRESSION OF SALE S WERE DETECTED. DURING THE SEARCH PROCEEDINGS, STATEMENT OF ONE OF THE DIR ECTORS WAS RECORDED IN WHICH HE ADMITTED THAT 75% OF SALE PROCEEDS WERE RE CEIVED WITH CASH MEMO AND BY OMITTING CERTAIN CASH SALES AVERAGE 25% OF SALE PROCEEDINGS IN CASH EVERY DAY WERE NOT RECORDED IN THE BOOKS OF THE ASS ESSEE, WHICH MANUFACTURES AND SELLS SWEETS AND BAKERY PRODUCTS. ON THIS BASIS, ASSESSEE HAD DISCLOSED ADDITIONAL SALES VARYING FROM ` 1,05,00,000/- AND ` 1,50,00,000/- AND ADDITIONAL PROFIT VARYING FROM ` 7,00,000/- TO ` 7,50,000/- RESPECTIVELY FOR ABOVE ASSESSMENT YEARS RESPECTIVELY. THIS ADDITIONAL PROFIT WAS INCLUDED IN THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT AND TAXED ACCORDINGLY . IN RESPONSE TO SHOW CAUSE NOTICE PROPOSING LEVY OF PENALTY UNDER SECTIO N 271(1)(C), IT WAS ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 2 CLAIMED BY ASSESSEE BEFORE THE A.O. THAT HE HAD FIL ED THE REVISED RETURNS OF INCOME SHOWING ADDITIONAL INCOME IN PURSUANCE TO NO TICE UNDER SECTION 153A, WHICH WAS FINALLY ASSESSED ON THE SAME FIGURE OF INCOME RETURNED. IN THE CIRCUMSTANCES THERE WOULD BE NO QUESTION OF ANY CONCEALMENT IN THE RETURN OF INCOME FILED AND THEREFORE, PENALTY UNDER SECTION 271(1)(C) WAS NOT ATTRACTED. RELIANCE WAS ALSO PLACED ON SURESH CHAND RA MITTAL REPORTED IN 251 ITR 9 (SC) AND AVR PRASAD 97 ITD 325 (HYD) AS A LSO ON SIR SHADILAL SUGAR & GENERAL MILLS LTD. 168 ITR 705. RELIANCE WA S ALSO PLACED ON SEVERAL OTHER DECISIONS. HOWEVER, THE A.O. DID NOT ACCEPT T HE CONTENTIONS OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE FILED RETUR N UNDER SECTION 139(1) DECLARING INCOME MUCH LOWER THAN DECLARED NOW WHIC H WAS SUBSTANTIALLY REVISED AT HIGHER FIGURE UNDER SECTION 153A AFTER S EARCH AND THAT TOO AFTER DETECTION OF SUPPRESSION OF SALES DURING THE COURSE OF SEARCH. IT WAS HELD THAT THE PROVISIONS OF EXPLANATION 5 TO PROVISIONS OF SECTION 271(1)(C) WERE CLEARLY APPLICABLE TO THE CASE AND ASSESSEE HAD CON CEALED PARTICULARS OF INCOME, WHICH WAS ADMITTED BY ASSESSEE IN THE RETUR N OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 153A. RELIANCE WAS ALSO PLACED ON CIT VS. JEEVANLAL SHAH 205 ITR 244 (SC). IT WAS CONCLUDED T HAT ASSESSEE HAD CONCEALED PARTICULARS OF HIS INCOME AND THE EXPLANA TION OFFERED WAS NOT BONA FIDE AND ALL THE FACTS AND MATERIAL RELATING T O THE COMPUTATION OF HIS TOTAL INCOME HAD NOT BEEN DISCLOSED BY HIM. 3. BEFORE THE CIT(A), ASSESSEE HAS CONTENDED THAT THER E WAS A SEARCH CONDUCTED BY THE INCOME TAX DEPARTMENT ON 25.11.200 5 DURING THE COURSE OF WHICH SOME LOOSE PAPERS WERE SEIZED FROM THE RES IDENCE OF ONE OF THE DIRECTORS, SHRI ASHOK MISHRA. THESE PAPERS REVEALED THAT THERE WERE SOME CASH SALES AND ALSO CASH PURCHASES AND IN EFFECT, S OME INCOME HAD REMAINED THAT HAD NOT BEEN DECLARED. IN RESPONSE TO THE NOTICE UNDER SECTION 153A, ASSESSEE FILED RETURNS FOR THE BLOCK PERIOD WHEREIN IT DISCLOSED INCOME OVER AND ABOVE THE INCOME THAT HAD BEEN PREV IOUSLY DECLARED. THE ADDITIONAL INCOME WAS BASED ON THE FACT THAT THE SE IZED PAPERS SHOWED SOME PURCHASES AND SALES, AND THE SAME RESULTED IN SOME ADDITIONAL INCOME. THE ADDITIONAL INCOME WAS WORKED OUT MOSTLY ON ESTIMATE D BASIS AS NO PROPER RECORDS FOR THE SAME WERE AVAILABLE. THE ADDITIONAL INCOME INCLUDED IN THE ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 3 RETURN FILED WAS ACCEPTED BY THE A.O. BUT HE MADE S OME FURTHER DISALLOWANCES AND ADDITIONS. THE DISALLOWANCES AND ADDITIONS WERE DELETED IN APPEAL AND THE A.O. HAS NOW LEVIED A PENALTY IN RESPECT OF THE ADDITIONAL INCOME DECLARED IN THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SECTION 153A. IT WAS FURTHER SUBMITTED THAT ONCE THE NOTICE UNDER SECTION 153A WAS ISSUED ALL ASSESSMENT OR REASSESSMENT PROCEEDINGS A BATE, AND THE RETURN OF INCOME FILED IN THE PAST IS OF NO CONSEQUENCE. AS S UCH, A RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 153A IS T O BE TREATED AS THE FIRST RETURN FILED BY THE ASSESSEE AND THE INCOME DECLARE D THEREIN IS TO BE TREATED AS THE INCOME FILED AND DECLARED VOLUNTARILY, AND A NY ADDITION OVER AND ABOVE THE INCOME RETURNED IN THE RETURNS FILED UNDE R SECTION 153A IS ONLY TO BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE WHICH IS ASSUMED TO HAVE EMERGED FROM THE MATERIAL SEIZED DURING THE CO URSE OF THE SEARCH WHICH HAS NOT BEEN ADMITTED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 153A. IT IS ALSO STATED THAT THE DIFFERENCE BETWEEN THE INCOME ASSESSED AND THE INCOME RETURNED IN RESPONSE TO THE NOTICE UNDER SECTION 153A IS TO BE TAKEN INTO CONSI DERATION FOR THE PURPOSE OF LEVY OF PENALTY. IN THIS CASE, THE FINAL INCOME IS THE SAME AS HAS BEEN RETURNED IN THE RETURN FILED IN RESPONSE TO THE NOT ICE UNDER SECTION 153A. HENCE, THERE IS NO UNDISCLOSED INCOME OR INCOME DET ECTED BY THE A.O. IN THE COURSE OF SEARCH. ACCORDINGLY, THE ASSESSEE IS NOT LIABLE TO ANY PENALTY, AND THE PENALTY LEVIED BY THE A.O. NEEDS TO BE DELETED. 4. THE CIT(A) DID NOT AGREE WITH THE CONTENTIONS AND A FTER CONSIDERING VARIOUS LEGAL PRINCIPLES UPHELD THE PENALTY BY STAT ING IN PARA 5.3 AS UNDER: - 5.3 THE OTHER CONTENTION OF THE APPELLANT THAT IN VIEW OF THE RETURN SHOWING ENHANCED INCOME FILED U/S 153A OF THE ACT, NO PENALTY COULD BE IMPOSED AS THE ORIGINAL RETURN SHOWING LOWER INC OME WOULD ABATE. AS A RESULT, THE INCOME SHOWN IN RETURN FILED AFTER SEARCH WOULD BE TREATED AS VOLUNTARY SURRENDER, NOT ATTRACTING ANY PENALTY. MOREOVER, THE RETURNED INCOME AND THE ASSESSED INCOME BEING S AME, NO PENALTY COULD BE QUANTIFIED EITHER. HOWEVER, SUCH A CONTENT ION OF THE APPELLANT HAS NO MERIT IN VIEW OF THE PROVISIONS OF SECTION 153A AND MORE SPECIFICALLY IN EXPLANATION THEREOF IN WHICH I T IS CLEARLY PROVIDED THAT SAVE THE PROVISIONS OF SECTION 153B AND 153C, ALL OTHER PROVISIONS OF THE ACT WOULD BE APPLICABLE. IN THE P RESENT CASE, THE DEEMING PROVISIONS OF SECTION 271(1)(C) ARE CLEARLY ATTRACTED FOR WHICH ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 4 THE APPELLANT HAS NO EXPLANATION. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE SUPPRESSION OF INCOME WAS BONAFIDE OR THE ALL NECESSARY DETAILS FOR ASSESSMENT WERE FURNISHED. CO NSIDERING ALL SUCH FACTS AND THE PROVISIONS OF LAW AS EMERGING FR OM THE ABOVE CITED DECISION, IT IS HELD THAT THE AO WAS FULLY JUSTIFIE D IN IMPOSING PENALTY. THE PENALTY ORDERS ARE, THEREFORE, UPHELD . 5. BEFORE US THE LEARNED COUNSEL TOOK US THROUGH THE F ACTS OF THE CASE, THE STATEMENT RECORDED FROM THE DIRECTOR AND THE SE IZED PAPERS ON THE BASIS OF WHICH ADDITIONAL INCOME WAS OFFERED AND SUBMITTE D THAT ASSESSEE OFFERED INCOME VOLUNTARILY AND, THEREFORE, PENALTY CANNOT B E LEVIED. IT WAS HIS SUBMISSION THAT THE SEIZED PAPERS DO NOT INDICATE A NY SUPPRESSION OF INCOME IN THE HANDS OF COMPANY AS THEY DO NOT RELAT E TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE EVEN THOUGH INC ORPORATED ON11-04-02 AFTER NAME CHANGE BUSINESS HAS STARTED ONLY ON 25-0 6-03 AND THE SEIZED DOCUMENTS BESIDES BEING DUMB DOCUMENTS RELATED TO T HE FIRM FOR A PERIOD OF 19 DAYS ( 01-04-03 TO 19-04-03) WHICH FIRM WAS SUBS EQUENTLY WAS CLOSED DOWN. IT WAS FURTHER SUBMITTED THAT NO ENQUIRY OR I NVESTIGATION WAS MADE EITHER BY THE SEARCH PARTY OR BY THE AO. IT WAS FUR THER SUBMITTED THAT ASSESSEE VOLUNTARILY OFFERED ADDITIONAL TURNOVER AT 33% AS AGAINST 25% STATED IN THE SEARCH PROCEEDINGS AND THE ENTIRE DIS CLOSURE WAS MADE BASED ON VARIOUS ASSUMPTIONS AND ESTIMATES OF TURNOVER AN D EXPENSES. FURTHER THERE IS OTHER INCRIMINATING MATERIAL EITHER AT THE SHOP OR AT THE RESIDENCE. LD. COUNSEL RELIED ON THE COORDINATE BENCH DECISION GIVEN IN THE CASE OF THE DIRECTORS IN THEIR INDIVIDUAL CAPACITY DELETING THE PENALTY. HOWEVER, HE WAS FAIR ENOUGH TO ADMIT THAT THE SAID ORDER CLEARLY ST ATES IN PARA 7 THAT THE OBSERVATIONS MADE THEREIN DOES NOT HAVE ANY BEARING ON THE DECISION IF ANY TO BE TAKEN IN THE HANDS OF THE COMPANY. HE ALSO R ELIED ON THE ORDER OF THE ITAT IN ITA NO. 1757TO 1769/MUM/2009 DATED 20.08.20 10 IN THE CASE OF NARENDRA J ASHAR (HUF) AND OTHERS WHEREIN THE PENAL TY WAS DELETED. 6. THE LEARNED D.R., HOWEVER, REFERRING TO THE ASSESSM ENT ORDER SUBMITTED THAT ASSESSEE WAS CONSISTENTLY SUPPRESSIN G SALES BY 25% AND ALSO HAVE A COMPUTE PACKAGE WHEREIN BY PRESSING A BUTTON THE ENTIRE INFORMATION THERE WAS BEING DELETED SYSTEMATICALLY. IT WAS HIS SUBMISSION THAT CONSEQUENT TO THE SEARCH AND SEIZURE PROCEEDIN GS AND AFTER CONFRONTING ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 5 WITH THE INFORMATION OBTAINED FROM THE CENTRAL FORE NSIC LABORATORY AFTER RETRIEVING THE DELETED DATA, ASSESSEE ADMITTED ADDI TIONAL INCOME. THEREFORE, HE SUPPORTED THE ORDERS OF THE AUTHORITIES LEVYING AND CONFIRMING PENALTY. HE ALSO RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. 191 TAXMAN 179. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS . THERE IS NO DOUBT THAT IN THE COURSE OF SEARCH PROCEEDINGS CERT AIN INCRIMINATING PAPERS WERE SEIZED WHEREIN SUPPLIES OF MANUFACTURING/TRADI NG PRODUCTS WERE DETAILED FROM 01.04.2003 TO 19.04.2003. WHEN QUESTI ONED ABOUT THE TRANSACTIONS THEREIN, IT WAS ADMITTED BY THE DIRECT OR OF THE ASSESSEE THAT THEY WERE SUPPRESSING SALES AND THE MODUS OPERANDI WAS EXPLAINED AS UNDER: - Q.5 WHAT IS THE MODUS OPERANDI ADOPTED BY YOU IN R UNNING BUSINESS OF CAMY WAFER (I) PVT. LTD. FROM PRODUCTIO N OF GOODS (I.E. EATABLE) TO SALE OF GOODS & DEPOSITING SALE P ROCEEDS? ANS. CAMY WAFER (I) PVT. LTD. BUYS RAW MATERIAL FRO M MARKET PARTIES MANUFACTURE FARSAN, BAKERY PRODUCTS AND SWEETS AT M AZGAON MUMBAI 10 AND SUPPLY IT TO THE THREE OUTLETS AND TWO FRANCHISES AT THREE PLACES IN MUMBAI, BABUBAI ALIAS MOHD. HANEEF BATATAWALA LOOKS AFTER PRODUCTION OF GOODS A T FACTORY ON DAY TO DAY BASIS. RAFIQ GHANIWALA LOOKS AFTER TH E DISPATCH OF MANUFACTURED GOODS I.E. FARSAN, BAKERY PRODUCTS AND SWEETS AND PREPARE A DISPATCH MEMO OF VARIOUS FOOD ITEMS CATEGORY WISE I.E. BAKING, FARSAN, SWEETS ETC. AND BRANCHES/ LOCATION/FRANCHISES WISE ON COMPUTER AND DISPATCHES THESE GOODS BY TEMPO TO VARIOUS PLACES IN COLABA, GOWALIA TANK, KHAR, VILE PARLE (E) AND ANDHERI (W). WE ALSO SUPPL Y THESE EATABLES DIRECTLY TO COMPANIES, CLUBS AND INSTITUTI NS AND ISSUE FARSAN INVOICE. THESE GOODS ARE RECEIVED BY SALES O UTLETS/ FRANCHISES AND M/S SWETA AGENCIES AT COLABA AND LOKHANDWALA AND OUR OWN OUTLET AT GOWALIA TANK AND KHAR AND REMITS AVERAGE 75% (SEVENTY FIVE) OF SALE PROCE EDS AND BY PREPARING A SEPARATE SALES CASH MEMO BY OMITTING CE RTAIN CASH SALES. BALANCE AVERAGE 25% (TWENTY FIVE) OF SALE PR OCEEDS IN SALES BY EVERYDAY, ARE RETUNED BACK TO ME IN CASH A ND THESE ARE NOT ACCOUNTED FOR IN CASH SALES BY ME IN BOOKS OF CAMY WAFER (I) PVT. LTD.. MR. RAFIQ THE DISPATCH CLERK A T FACTORY PREPARE ONLY ONE COPY OF THE DELIVERY CHALLAN MENTI ONING ITEM, QUALITY, RATE AND TOTAL PRICE AND SEND IT WITH THE TRANSPORTER AND HE DOES NOT KEEP THE SECOND COPY OR MAINTAIN AN Y RECORDS ON THE COMPUTER. HE DELETES THE ENTIRE DAYS DISPAT CH RECORDS ON COMPUTER BY GIVING IT A COMPUTER COMMAND, WHICH DELETES ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 6 THE DATA. THE SALES OUTLETS OF SWETA AGENCIES DESTR OY THE DISPATCH MEMOS SENT ALONGWITH THE GOODS AND SEND TH EIR OWN SALES MEMO STATEMENTS WITH CASH WHICH IS NORMALLY 2 0 TO 25% LESS FROM THE TOTAL VALUE MENTIONED IN THE DISPATCH MEMOS SENT BY THE FACTORY. 8. THUS THERE WAS AN ADMISSION BY THE DIRECTOR THAT TH EY WERE SYSTEMATICALLY SUPPRESSING SALES AND ALSO DELETING DATA FROM COMPUTER. THE QUESTION WAS ASKED SPECIFICALLY ABOUT THE ASSESSEE ONLY AND REPLY ALSO PERTAINS TO ASSESSEE. THEREFORE THE ARGUMENT THAT T HE SEIZED PAPERS DOES NOT BELONG TO ASSESSEE BUT TO A FIRM WHICH WAS CLOSED S UBSEQUENTLY CAN NOT BE ACCEPTED. IT WAS ALSO NOT ON RECORD THAT ASSESSEE S TARTED THE BUSINESS LATER ON 25-06-03, THE ARGUMENT OF WHICH WAS MADE IN THE COURSE OF THESE PROCEEDINGS BEFORE US, SO AS TO INDICATE THAT SEIZE D PAPERS DOES NOT BELONG TO THE ASSESSEE. THERE IS NO DENIAL OF SEIZED MATER IAL BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS. THE M ODUS OPERANDI WAS EXPLAINED IN DETAIL. EVEN THE ITAT IN THE PENALTY P ROCEEDINGS OF DIRECTORS INDIVIDUAL APPEALS HAS CONSIDERED AND ACCEPTED THAT THE SEIZED MATERIAL BELONG TO COMPANY REFERRING TO ASSESSEE IN THAT P ROCEEDINGS. THESE INDICATE THAT SEIZED MATERIAL DO BELONG TO THE COMPANY. N OT ONLY THAT THE SEARCH PARTY HAS SEIZED THE COMPUTER DATA AND SENT IT TO T HE CENTRAL FORENSIC LABORATORY, HYDERABAD FOR RETRIEVING THE DELETED DA TA. THE A.O. HAD GIVEN THE FOLLOWING FINDINGS WITH REFERENCE TO THE ABOVE IN PARA 7 OF HIS ORDER: - 7. THE ASSESSEE DURING THE COURSE OF SEARCH PROCEE DINGS HAS ADMITTED THAT HE WAS SUPPRESSING SALES OF ABOUT 25% PRIOR TO USE OF COMPUTER. HOWEVER, THE ASSESSEE HAS DECLARED SUPPRE SSION OF SALES OF RS.1,05,00,000/-, DURING THE YEAR AND OFFERED FO R TAXATION AN ADDITIONAL INCOME OF RS.4,00,000/- ON ADDITIONAL SA LES AND RS.3,00,000/- AS AN ADDITIONAL INCOME ON MANUFACTUR ING ACTIVITIES. THE ASSESSEE COMPANY HAS OFFERED FOR TAXATION ADDIT IONAL INCOME OF RS.7,00,000/- IN ITS RETURN OF INCOME FILED. SINCE THE UNACCOUNTED SALES ARE ON MUCH HIGHER SIDE THAN AS PER THE REPOR TS OF CFSL, HYDERABAD, NO FURTHER ADDITION IS CALLED FOR. THERE FORE, THIS AMOUNT OF RS.7,00,000/- IS BROUGHT TO TAX. 9. ANOTHER FACT WHICH IS TO BE NOTED WAS THAT ASSESSEE COMPANY HAS ORIGINALLY FILED RETURN AND RETURNS IN RESPONSE TO NOTICE U/S 153A FOR THE RESPECTIVE ASSESSMENT YEARS AS UNDER: - ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 7 A.Y. 2004-05 A.Y. 2004-06 ORIGINAL RETURN 1,09,146 1,10,185 FIRST RETURN U/S 153A 4,59,146 6,08,370 TAX PAID 1,56,690 1,86,638 REVISED RETURN 8,09,150 9,33,370 ADDL. TAX PAID 1,17,541 1,22,003 AS CAN BE SEEN FROM THE ABOVE ASSESSEE HAS ORIGINAL LY FILED RETURNS FOR THE RESPECTIVE ASSESSMENT YEARS ADMITTING ONLY INCOME A T AROUND ` 1,00,000/-. IN RESPONSE TO THE NOTICE UNDER SECTION 153A ADDITI ONAL INCOME WAS DISCLOSED AT ` 3,50,000/- AND ` 4,25,000/- FOR THE RESPECTIVE YEARS AND FILED RETURNS ACCORDINGLY. CONSEQUENT TO THE ENQUIRIES RE VEALED BY THE CENTRAL FORENSIC LABORATORY AND ISSUANCE OF NOTICE UNDER SE CTION 143(2) VIDE LETTER DATED 21.12.2007 ASSESSEE FURTHER INCREASED THE DEC LARATION BY AN AMOUNT OF ` 4,00,000/- FOR A.Y. 2004-05 AND ` 3,00,000/- FOR A.Y. 2005-06 THEREBY OFFERING ADDITIONAL PROFIT OF ` 7,50,00 AND 7,25,000 IN THE RESPECTIVE ASSESSMENT YEARS. AS CAN BE SEEN FROM THE ABOVE, TH E SEARCH HAS YIELDED EVIDENCE REGARDING SUPPRESSION OF SALES FOR A PARTI CULAR PERIOD AND THE SEIZED COMPUTER DATA WHICH WAS SENT FOR EXAMINATION BY THE CENTRAL FORENSIC LABORATORY REVEALED FURTHER SUPPRESSION OF SALES DATA, THEREFORE, ASSESSEE HAS ADMITTED INCOMES AT TWO DIFFERENT POIN TS AFTER SEARCH IN THE PROCEEDINGS UNDER SECTION 153A. 10. IN VIEW OF THE FACTS STATED, WE ARE OF THE VIEW THA T ASSESSEE HAS NOT VOLUNTARILY DISCLOSED ADDITIONAL INCOME. FIRST OF A LL IN THE ORIGINAL RETURN FILED IN THE COURSE OF ASSESSEES BUSINESS MEAGRE I NCOMES WERE OFFERED. CONSEQUENT TO THE SEARCH AND CONFRONTING WITH THE E VIDENCE PERTAINING TO THE COMPANY AND ALSO SUBSEQUENT EXAMINATION OF SEIZ ED DATA ASSESSEE HAS OFFERED ADDITIONAL INCOME WHICH THE A.O. ACCEPTED A S INCOMES OFFERED WERE MORE THAN THE UNACCOUNTED SALES AS PER THE REPORT O F CENTRAL FORENSIC LABORATORY, HYDERABAD. THEREFORE, WE ARE OF THE OPI NION THAT THE DISCLOSURE ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 8 OF INCOME IN TWO STAGES AFTER THE SEARCH AND SEIZUR E PROCEEDINGS DOES NOT SUPPORT ASSESSEES CONTENTION THAT THE INCOMES WERE OFFERED VOLUNTARILY. 11. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF JYOTI LAXMAN KONKAR VS. CIT 292 ITR 163 CONSIDERED FILING OF REVISED RE TURN. IN THAT CASE ASSESSEE FILED REVISED RETURN DISCLOSING ADDITIONAL INCOME A FTER A DISCREPANCY WAS NOTICED IN THE STOCK DURING SURVEY OPERATION UNDER SECTION 133A. THE HON'BLE HIGH COURT HAS UPHELD THE LEVY OF PENALTY A S THERE WAS SUPPRESSION OF INCOME. IN THIS CASE, IT IS THE SEARCH AND SEIZU RE OPERATION IN WHICH ASSESSEE WAS CONFRONTED WITH THE EVIDENCE OF SUPPRE SSION OF SALES, WHICH WAS ACCEPTED AND THE MODUS OPERANDI WAS ALSO EXPLAI NED. AS CAN BE SEEN FROM THE STATEMENT GIVEN DURING THE SEARCH PROCEEDI NGS ASSESSEE IS SYSTEMATICALLY DELETING THE SALES THEREBY SUPPRESSI NG SALES AND CONCEALING INCOMES. IN FACT THEY HAVE A PACKAGE SPECIALLY CREA TED FOR THIS PURPOSE WHICH SHOWS THAT IT IS A SYSTEMATIC AND REGULAR ACT IVITY UNDERTAKEN WITH AN INTENTION TO REDUCE THE TURNOVER AND CORRESPONDING PROFITS. THEREFORE, THE CONTENTION THAT THERE IS NO SEIZED MATERIAL AND INC OMES WERE OFFERED ON ESTIMATION BASIS HAS NO BASIS AS ASSESSEE ADMITTEDL Y HAS DELETED THE ENTIRE EVIDENCE. IT SO HAPPENED THAT FOR A PARTICULAR PERI OD THE ENTRIES ARE AVAILABLE. EVEN THE NOTINGS ALSO ARE MADE SOME CHIL DS SCHOOL NOTE BOOK, IN WHICH SUPPRESSION OF SALES WAS IDENTIFIED AS BELONG ING TO THE COMPANY. FURTHER THE REPORT OF THE CENTRAL FORENSIC LABORATO RY WAS ALSO CONFRONTED TO THE ASSESSEE, THE DETAILS OF WHICH WERE NOT PLACED ON RECORD BUT THE A.O. IS SATISFIED THAT ASSESSEE OFFERED ADDITIONAL TURNOVER AND ADDITIONAL INCOME WHICH WAS MORE THAN THE TURNOVER IDENTIFIED BY THE SAID ORGANIZATION ON RETRIEVED DATED FROM THE COMPUTERS. THEREFORE, WE A RE OF THE OPINION THAT THE A.O. MADE EFFORTS IN MAKING ENQUIRY ON SUPPRESSED S ALES AND CONSEQUENTLY ASSESSEE HAD NO OPTION THAN TO OFFER THE INCOME. TH E QUANTUM OF INCOME WAS OFFERED ON ESTIMATION BUT THE FACT THAT ASSESSE E HAS ADMITTED THE AMOUNT IN TWO INSTALMENTS DO INDICATE THAT THE DISC LOSURE WAS NOT BONAFIDE. ONLY WHEN CONFRONTED WITH THE EVIDENCE ASSESSEE OFF ERED MORE INCOME THAN REQUIRED BUT THAT DOES NOT TAKE AWAY THE INITIAL CU LPABILITY OF SUPPRESSING TURNOVERS AND INCOMES, WHICH WAS DONE IN A SYSTEMAT IC MANNER AS ADMITTED. IN VIEW OF THIS, WE ARE OF THE OPINION TH AT THE A.O. IS JUSTIFIED IN ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 9 LEVYING PENALTY UNDER SECTION 271(1)(C). THE COORDI NATE BENCH IN THE CASE OF THE DIRECTORS IN THEIR INDIVIDUAL CASES DELETED THE PENALTY AS THERE IS NO EVIDENCE PERTAINING TO SUPPRESSION OF SALE IN THEIR CASES, EVENTHOUGH THE AMOUNTS WERE OFFERED IN THE RESPECTIVE ASSESSMENT Y EARS. THE FINDINGS GIVEN IN PARA 7 IN THE CASE OF THE INDIVIDUAL DIRECTORS B Y THE COORDINATE BENCH IS WORTH EXTRACTING HERE: - 7. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THERE IS NO MATERIAL WORTH THE NAME FOUND AT THE TIME OF SEARCH DIVULGING THE UNDISCLOSED INCOME EARNED BY THE ASSESSEE BY WAY OF UNRECORDED SALES. SEIZED MATERIAL RELATES TO UNRECORDED SALE B Y THE `COMPANY AND THAT TOO FOR A PERIOD OF 18 DAYS FROM 01.04.200 3 TO 18.04.2003. NEITHER THERE IS ANY MENTION OF SUCH SEIZED MATERIA L CONTAINING THE UNRECORDED SALES OF THE ASSESSEES PROPRIETORSHIP C ONCERN, NOR IT IS THE CASE OF THE ASSESSING OFFICER THAT THERE WAS AN YTHING ELSE TO SHOW THAT THE ASSESSEE WAS ALSO INDULGING IN RECORD ING SALES PARTLY ONLY. HERE ALSO THE ASSESSEE, AS A GROUP, SURRENDER ED A PARTICULAR SUM, WHICH WAS HONORED BY DULY OFFERING THE ADDITIO NAL INCOME FOR TAXATION BY FILING REVISED RETURNS CONTAINING SUCH INCOME. IT IS FURTHER IMPORTANT TO NOTE THAT IT IS A CASE OF SEARCH AND T HERE IS NO REFERENCE TO ANY OTHER UNDISCLOSED INCOME HAVING BEEN EARNED BY THE ASSESSEE OR ANY UNDISCLOSED ASSETS IN THE SHAPE OF STOCK OR OTHERWISE FUND TO HAVE BEEN POSSESSED AT THE TIME OF SEARCH. THE OFFE RING OF RS.8,00,000 BY THE ASSESSEE IN THE SHAPE OF ADDITIO NAL INCOME IN THESE SIX YEARS WAS A VOLUNTARY SURRENDER UNCOUPLED WITH ANY ADVERSE MATERIAL WHICH COULD FORM THE BASIS OF CONC EALING OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME B Y THE ASSESSEE. IN OUR CONSIDERED OPINION, NO CASE HAS BEEN MADE OUT F OR THE LEVY OF PENALTY U/S 271(1)(C). WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS FOR THESE SIX YEARS AND ORDER FOR THE DELETION OF P ENALTY. BEFORE PARTING WITH THESE APPEALS, WE WOULD LIKE TO MAKE I T CLEAR THAT THE OBSERVATIONS MADE ABOVE AND THE FINDINGS SO RECORDE D BY US SHOULD NOT BE CONSIDERED TO HAVE ANY BEARING ON TAKING A D ECISION ON THE QUESTION OF PENALTY IN THE HANDS OF `COMPANY, FOR WHICH THE FACTS ARE REQUIRED TO BE EXAMINED INDEPENDENTLY. IN VIEW OF THIS FINDING GIVEN BY THE COORDINATE BEN CH IN THE CASE OF THE DIRECTORS, IT DOES NOT HELP ASSESSEES CASE AS THER E IS EVIDENCE IN THE FORM OF SUPPRESSION OF SALES IN THE SEIZED MATERIAL RELATIN G TO THE COMPANY. 12. THE LEARNED COUNSEL IN THE COURSE OF ARGUMENT RELI ED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF MR. NARENDRA J. ASHAR, HUF AND ORS. ITA NO. 1757 TO 1769/MUM DATED 20 TH AUGUST 2010. IN THE SAID CASE EXCEPT SEIZURE OF 11 BILLS PERTAINING TO PURCHASE OF COMMO DITIES THERE WERE NO OTHER ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 10 INCRIMINATING MATERIALS AND NO ENQUIRIES WERE CONDU CTED. THE PENALTY IN THE SAID CASE WAS DELETED ON THE FOLLOWING FINDINGS: - 23. IT MAY BE SEEN FROM THE ABOVE NARRATION THAT NO ENQUIRY INTO THE METHODS OF CALCULATING THE ADDITIONAL INCOME WA S SERIOUSLY MADE BY THE AO. THE DECLARATION MADE BEFORE THE SEARCH W ING WAS FIRST RS.214.7 LAKHS AS PER THE STATEMENT OF MR RAJAL N A SHAR UNDER SECTION 132(4) OF THE ACT. THEREAFTER DECLARATION O F RS.2.50 CRORES WAS MADE WHICH INCLUDED RS.1,79,88,269/- AS ADDITIONAL INCOME ON ACCOUNT OF LOCAL PURCHASES. AGAIN THIS WAS REVISED TO RS.2,68,34,154/- WHICH INCLUDED RS.2,36,68,976/- AS ADDITIONAL INCOME ON ACCOUNT OF LOCAL PURCHASES. DIFFERENT CAL CULATIONS AND WORKINGS OF THE ADDITIONAL INCOME WERE SUBMITTED AT DIFFERENT STAGES OF THE PROCEEDINGS. OUR ATTENTION WAS NOT DRAWN TO ANY ENQUIRY MADE INTO THOSE CALCULATIONS BY THE AO AND IT APPEARS TO US THAT HE WAS SATISFIED SO LONG AS HIGHER INCOME WAS OFFERED BY T HE ASSESSEES. THERE IS FORCE IN THE ARGUMENT OF THE LEARNED COUNS EL FOR THE ASSESSEES THAT THERE IS NO PRECISION OR DEFINITENES S IN THE METHOD OR MANNER IN WHICH THE ADDITIONAL INCOME WAS OFFERED A T THREE DIFFERENT STAGES. THE AMOUNT OF RS.214.7 LAKHS REPRESENTED TH E AMOUNT REFLECTED IN THE LEDGER ACCOUNTS OF THE ELEVEN PART IES FROM WHOM LOCAL PURCHASES WERE MADE. THE DISCLOSURE OF RS.2.50 CROR ES IS BASED ON A DIFFERENT METHOD AND THE LAST DISCLOSURE OF RS.2.68 CRORES WAS MADE ON YET ANOTHER BASIS, TAKING THE DIFFERENCE BETWEEN THE AVERAGE SALE RATE AND THE AVERAGE PURCHASE RATE, ON THE ASSUMPTI ON THAT IN ORDER TO OFFSET THE HIGHER SALE PRICES SHOWN, THE LOCAL U NSUPPORTED PURCHASES WERE SHOWN AT A HIGHER PRICE ON AVERAGE B ASIS. ALL THE WORKINGS ARE BASED ON VARIOUS ASSUMPTIONS AND ESTIM ATES. THE TURN OF EVENTS STARTING FROM THE SEARCH TILL THE CULMINA TION OF THE ASSESSMENT PROCEEDINGS BROADLY INDICATES THAT THE A DDITIONAL INCOME WAS CALCULATED ONLY ON ESTIMATES AND THE ATTEMPT WA S TO SOMEHOW ARRIVE AT A MUTUALLY ACCEPTED FIGURE OF ADDITIONAL INCOME. 13. IN VIEW OF THE SET OF FACTS THEREIN WHERE THERE IS NO EVIDENCE WITH REFERENCE TO EITHER SUPPRESSION OF SALES OR INCOMES PENALTIES WERE DELETED. IN THE PRESENT CASE THE FACTS DO INDICATE THAT THERE W AS EVIDENCE WITH REFERENCE TO SUPPRESSION OF INCOMES BOTH IN THE FORM OF SEIZE D DOCUMENTS AND ALSO IN THE FORM OF RETRIEVED DATA FROM THE COMPUTER WHICH WAS SUPPORTED BY THE MODUS OPERANDI AS STATED BY THE DIRECTOR. THEREFORE WE ARE OF THE OPINION THAT THE ABOVE DECISION OF THE COORDINATE BENCH DOE S NOT APPLY TO THE FACTS OF THE CASE. CONSIDERING THAT THE ASSESSEE OFFERED INCOMES IN TWO INSTALMENTS EVEN IN THE COURSE OF PROCEEDINGS UNDER SECTION 153A, WHICH INDICATES THAT THE OFFER OF ADDITIONAL INCOME IS NO T BONAFIDE BUT ONLY WHEN CONFRONTED WITH THE EVIDENCES, WE ARE OF THE OPINIO N THAT PENALTIES UNDER ITA NO. 5204 & 5205/MUM/2009 M/S. CAMAY WAFER (INDIA) P. LTD. 11 SECTION 271(1)(C) ARE WARRANTED. THEREFORE WE UPHOL D THE ORDERS OF THE CIT(A) CONFIRMING THE PENALTY OF ` 2,60,632/- FOR A.Y. 2004-05 AND ` 2,27,444/- FOR A.Y. 2005-06 AND REJECT THE GROUNDS RAISED BY THE A SSESSEE IN THIS REGARD. 14. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 9 TH SEPTEMBER 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL VII, MUMBAI 4. THE CIT CENTRAL I, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.