Sh. Naresh Pujari, Jammu V. The Asstt. Commissioner of Income-tax, Jammu

ITA 528/ASR/2011

• Counselvise Citation: 52820914 RSA 2011
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Loose papers; Difference of opinion; Avoidance of tax; Documents seized
• Section: 143(3); 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NOS.528 & 529(ASR)/2011 ASSESSMENT YEARS:2006-07 & 2007-08 PAN :ABFPP9177 SH. NARESH PUJARI VS. THE ASSTT. COMMR. OF INCOME- TAX, S/O SH. AMIR CHAND, CENTRAL CIRCLE, JAMMU. KATRA. (APPELLANT) (RESPONDENT) I.T.A. NOS.573 & 574(ASR)/2011 ASSESSMENT YEARS:2006-07 & 2007-08 PAN :ABFPP9177 THE ASSTT. COMMR. OF INCOME-TAX, VS. SH. NARESH PUJ ARI, CENTRAL CIRCLE, JAMMU. KATRA. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH.ASHWANI KUMAR, CA RESPONDENT BY:SH. TARSEM LAL, DR DATE OF HEARING:11.10.2012 DATE OF PRONOUNCEMENT:16/10/2012 ORDER PER BENCH ; THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS AP PEALS AGAINST THE ORDERS PASSED BY THE LD. CIT(A)-1, LUDHIANA DATED 0 6.09.2011 & 07.09.2011 FOR THE ASSESSMENT YEARS 2006-07 & 2007- 08 RESPECTIVELY. AS THE 2 ISSUES INVOLVED IN THESE CROSS APPEALS ARE IDENTICA L, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED FOLLOWING COMMON GROUND OF APPEALS: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY LD. CIT(A)-1, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE PENALTY U/S 271(1)(C) TO THE EXTENT OF 100% AS AGAINST LEVIED B Y THE LD. AO AT 300%. 3. THE REVENUE HAS FOLLOWING COMMON GROUNDS OF APP EALS: 1. WHETHER THE LD. CIT(A)-1, WAS RIGHT IN LAW AND ON FACTS IN REDUCING THE AMOUNT OF PENALTY LEVIED U/S 271(1) (C ) FROM 300% TO 100% BY IGNORING THE FACTS THAT BELATED RETURN O F INCOME FILED BY THE ASSESSEE WAS NEITHER INCLUSIVE OF SURR ENDERED AMOUNT NOR THE TAXES DUE THEREON WERE PAID, WHICH A TTRACTS IMPOSITION OF HIGHER PENALTY. 2. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSE D OFF. 3. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET -ASIDE AND THAT OF THE A.O. BE RESTORED. 4. THE FACTS OF THESE CASES ARE ALMOST IDENTICAL IN ALL THE AFORESAID APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE. THE REFORE, FOR THE SAKE OF CONVENIENCE, WE ARE NARRATING THE FACTS OF ONE APPE AL I.E. ITA 3 NO.528(ASR)/2011 FOR THE A.Y. 2006-07. THE ASSESSEE FILED HIS RETURN OF INCOME OF RS.1,93,377/- ON 03.03.2008 IN RESPONSE TO NOTICE U/S 153A DATED 25.01.2007 SERVED UPON THE ASSESSEE ON 02.02. 2007. SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE RESIDENCE OF THE ASSESSEE AT KATRA . DURING SEARCH PROCEEDINGS INCRIMINATING DOCUMENTS M ARKET ANNEUXRE-1 & ANNEXURE-2, CASH AMOUNTING TO RS.8,55,700/- AND JEW ELLERY WEIGHING 1019 GMS VALUING RS.9,68,070/- WERE FOUND FROM THE RESI DENCE OF THE ASSESSEE ON 2.2.2007. THE ASSESSEE DERIVES INCOME FROM CONTRACT BUSINESS FROM PROPRIETORSHIP CONCERN M/S. SARVAYGA ENTERPRISES. T HE AO ISSUED NOTICE U/S 143(2)/142(1) ALONGWITH QUESTIONNAIRE DATED 10.10.2 008 WHICH WAS SERVED UPON THE ASSESSEE THROUGH SPEED POST DATED 13.10.20 08 FOR HEARING OF THE CASE ON 04.10.2008. IN COMPLIANCE TO STATUTORY NOTI CES AND THE QUESTIONNAIRE, THE PROCEEDINGS WERE ATTENDED BY THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE ALONGWITH THE ASSESSEE HIMSELF. THE AO STA TED THAT AT PAGES 99 TO 100 AND 103 OF ANNEXURE A-I SEIZED FROM THE RESIDEN CE OF ASSESSEE REVEALS THAT THE LORRY ADD CONTRACT KATRA WAS ALLOTTED TO T HE ASSESSEE BY MUNICIPAL COMMITTEE, KATRA IN MARCH, 2006 FOR THE FINANCIAL YEAR 2006-07 FOR AN AMOUNT OF RS. 98 LAKHS. THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR IN DISPUTE REVEALS THAT THE ASSESSEE INTRODUCED CAP ITAL AS OPENING BALANCE FOR THE YEAR ENDING 31.3.2006 AT RS.12,00,409/- WHEREAS THERE WAS NO SUCH 4 CLOSING BALANCE AS ON 31.3.2005. THERE WAS ALSO UNS ECURED LOANS AMOUNTING TO RS.29,75,000/- ON THE LIABILITY SIDE OF THE BALA NCE SHEET OF M/S. SARVAGYA ENTERPRISES AS ON 31.3.2006. THE AO ASKED THE ASSES SEE TO EXPLAIN THE SOURCE OF CAPITAL INTRODUCED OF RS.12,00,409/- AND TO FILE CONFIRMATION LETTERS IN RESPECT OF UNSECURED LOANS AMOUNTING TO RS.29,75 ,000/-. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN THE SOURCE OF PAYMENT OF BID MONEY AMOUNTING TO RS.41,10,000/- PAID TO MUNICIPAL COMMITTEE, KATRA D URING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2006-07. IN RESPONSE TO THE QUERY RAISED BY THE AO, THE ASSESSEE FILED HIS REPLY DATED 07.11.2008, 14.11.2008 & 21.11.2008 THE CONFIRMATION LETTERS IN RESPECT OF UNSECURED LO ANS AMOUNTING TO RS.29,75,000/- AND REGARDING INTRODUCTION OF CAPITA L AMOUNTING TO RS.12,00,409/-,. HE ALSO SUBMITTED HIS REPLY DATED 14.11.2008, WHICH THE AO HAS REPRODUCED AT PAGE 2 OF HIS ASSESSMENT ORDER IN WHICH THE ASSESSEE HAS STATED THAT HE HAS SURRENDERED AN AMOUNT OF RS. 25 LACS AND OUT OF THIS RS.25 LAKHS, AN AMOUNT OF RS. 12 LAKHS FOR THE ASS ESSMENT YEAR 2006-07, WHICH IS REFLECTED BY WAY OF CAPITAL INTRODUCTION I N THE FIRM M/S. SARVAGYA ENTERPRISES AND THE BALANCE AMOUNT OF RS. 13 LAKHS HE HAS SURRENDRED FOR THE ASSESSMENT YEAR 2007-08 AND SAME HAS BEEN REFLECTED ALSO BY WAY OF ADDITION TO THE CAPITAL, THIS INCLUDES RS. 7 LAKHS BEING CASH SEIZED AT THE TIME OF SEARCH. THE AMOUNT OF RS. 13 LAKHS HAS BEEN SURR ENDERED TO COVER ALL AND 5 ANY INCOME THAT MAY BE CONSIDERED AS OUTSIDE THE BO OKS AS PER THE DOCUMENTS SEIZED AT THE TIME OF SEARCH. THE ASSESSE E HAS ALSO EXPLAINED IN THE REPLY THAT HE HAS EXPLAINED THE SOURCE OF BID M ONEY AMOUNTING TO RS.41.75 LAKHS AND DISCLOSURE OF RS. 25 LAKHS VIDE STATEMENT DATED 2.2.2007 U/S 132(4) OF THE ACT. AS REGARDS ANNEXURE A-1 SEI ZED FROM THE RESIDENCE OF THE ASSESSEE, THE ASSESSEE ALSO STATED THAT THES E ENTRIES ARE REGARDING LOANS AND ADVANCES RECEIVED BY HIM FROM VARIOUS PERSONS A MOUNTING TO RS.41.75 LAKHS FROM 16.03.2006 TO 22.03.2006. SOME OF THESE LOANS AND ADVANCES HAVE BEEN RECEIVED THROUGH CHEQUE AND SOME LOANS WE RE RECEIVED IN CASH . ALL THESE LOANS HAVE BEEN DEPOSITED IN BANK ACCOUNT NO.A/A 42 MAINTAINED WITH ALLAHABAD BANK, KATRA. THE ASSESSEE ALSO STATE D THAT SINCE HE IS UNABLE TO EXPLAIN SOME OF THE CASH LOANS RECEIVED AND OTHE R ENTRIES RECORDED ON THOSE PAPERS FOUND AND SEIZED AT THE TIME OF SEARCH , HE HAS SURRENDERED A SUM OF RS. 25 LAKHS AS ADDITIONAL INCOME OVER AND A BOVE THE NORMAL BOOKS PROFIT FOR CURRENT FINANCIAL YEAR RELEVANT TO ASSES SMENT YEAR 2007-08 SUBJECT TO NO PENALTY OR PROSECUTION. LASTLY, THE ASSESSEE ALSO REPLIED THAT THIS INCOME HAS BEEN DERIVED FROM THE EXECUTION OF VARIO US CONTRACTS AND DUE TAXES WILL BE PAID ON SURRENDERED INCOME IN DUE TIM E. 6 4.1 THE AO PERUSED THE REPLY FILED BY THE ASSESSEE AND DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AND LASTLY HELD THA T THE ADDITION OF RS. 12 LAKHS WILL BE MADE TO THE TOTAL INCOME FOR THE ASSE SSMENT YEAR 2006-07 AND RS. 13 LAKHS WILL BE MADE TO THE TOTAL INCOME OF TH E ASSESSEE FOR THE A.Y. 2007-08 AS WELL AS PENALTY PROCEEDINGS UNDER SECTIO N 271(1)(C) OF THE ACT ARE ALSO INITIATED FOR CONCEALMENT OF SURRENDERED I NCOME AND HE COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS. 5. AT THE TIME OF HEARING, IT IS ADMITTED BY BOTH T HE PARTIES THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE ASSES SMENT COMPLETED BY THE A.O. FOR THE ASSESSMENT YEARS IN DISPUTE. BUT ON T HE SURRENDERED INCOME I.E. RS. 25 LAKHS, RS. 12 LAKHS FOR THE ASSESSMENT YEAR 2006-07 AND RS. 13 LAKHS FOR THE ASSESSMENT YEAR 2007-08, THE AO INITIATED P ENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT FOR CONCEALMENT OF INCOME OF THE AMOUNT IN DISPUTE AS THE SAID INCOME HAD NOT BEEN DISCLOSED IN THE RE TURN OF INCOME FOR THE ASSESSMENT YEAR IN DISPUTE BY ISSUING SHOW CAUSE NO TICE TO THE ASSESSEE WHICH WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE AR OF THE ASSESSEE APPEARED BEFORE THE AO AND F ILED HIS WRITTEN SUBMISSIONS WHICH THE AO HAS REPRODUCED AT PAGES 4 TO 6 AND CONTENDED THAT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT , ARE NOT ATTRACTED IN THE 7 CASE OF THE ASSESSEE AND CONTENDED THAT FROM THE PE RUSAL OF THE EXPLANATION (5) TO SECTION 271(1)(C) OF THE ACT, IT IS EVIDENT THAT IN THE CIRCUMSTANCES WHICH OTHERWISE DID NOT ATTRACT THE PENALTY PROVISI ONS OF SECTION 271(1)(C) OF THE I.T. ACT, NOW A DEEMING PROVISION WAS INTRODUCE D AS TO ATTRACT THE PENALTY PROVISIONS TO THOSE CASES AS WELL. BUT AN EXCEPTION IS PROVIDED TO CLAUSE (2) OF THE EXPLANATION-5 WHERE THE DEEMING P ROVISION WILL NOT APPLY IF DURING THE COURSE OF SEARCH THE ASSESSEE MAKES T HE STATEMENT UNDER SECTION 132(4) OF THE INCOME-TAX ACT, 961 THAT ANY ASSETS O WNED ON HIS POSSESSION HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT B EEN DISCLOSED SO FAR IN THE RETURN OF INCOME TO BE FURNISHED BEFORE THE EXP IRY OF TIME SPECIFIED IN SECTION 139 OF THE ACT AND ALSO SPECIFY IN THE STA TEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAY THE TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. THE EXCEPTION AP PEARS TO BE TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO MAKE A CLEAN AND FAI R CONFESSION AND TO SURRENDER HIS INCOME AND ALSO DEPOSIT THE TAX AND I NTEREST THEREON WHICH MAY RESULT IN AN AGREED ASSESSMENT. THE PARAMOUNT INTEN TION IN THE CASE OF FAIR AND CLEAN CONFESSION AND SURRENDER HIS INCOME DURIN G THE COURSE OF SEARCH IS FOR THE PURPOSES THAT FURTHER LITIGATION MAY BE AVO IDED AND THE DEPARTMENT MAY GET THE TAX AND INTEREST AT AN EARLIEST AND TH E ASSESSEE MAY BE SAVED FROM FURTHER LITIGATION. THE AO HELD THAT ON THE PE RUSAL OF THE ASSESSMENT 8 RECORD, IT TRANSPIRES THAT THE ASSESSEE HAS NOT INC LUDED THIS INCOME IN HIS RETURN SPECIFICALLY WHICH FACT GET CORROBORATED FRO M THE ASSESSMENT ORDER, WHEREIN THE RETURN OF INCOME PLUS SURRENDERED INCO ME BY THE ASSESSEE ADDED AT THE TIME OF SEARCH AND HE IS OF THE VIEW T HAT THE ASSESSEE SEEMS TO HOLD A MISTAKEN NOTION THAT HE HAD DISCHARGED ONUS OF INCLUDING SURRENDERED INCOME IN HIS RETURN OF INCOME BY GIVING FOOT NOTE BELOW COMPUTATION SHEET UNDER THE SIGNATURE OF HIS COUNSEL WHICH THE AO HA S REPRODUCED IN THE PENALTY ORDER AT PAGE 7. THE AO ALSO STATED THAT TH E RETURN OF INCOME FOR WHICH A DISCLOSURE HAS BEEN MADE IN THE STATEMENT U /S 132(4) OF THE ACT, SHOULD BE FILED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 139(1) OF THE ACT. HENCE, DECLARATION OF UNDISCLOSED INCOME FOR T HE ASSESSMENT YEAR IN DISPUTE CANNOT BE COVERED UNDER PARA (2) EXPLANATIO N (5) OF SECTION 271(1)(C) OF THE ACT. THE AO LASTLY HELD THAT DUE D ATE FOR FILING RETURN OF INCOME IN ACCORDANCE WITH SECTION 139(1) OF THE ACT WAS ALREADY EXPIRED. 6. AFTER CONSIDERING VARIOUS DECISIONS OF HONBLE H IGH COURTS, THE AO WAS OF THE OPINION THAT THE PENALTY TO THE EXTENT O F 300% OF TAX SOUGHT TO BE EVADED IN RESPECT OF THE SURRENDERED INCOME BE LEVI ED UPON THE ASSESSEE SINCE IT IS HELD TO BE A GRAVE MISTAKE ON HIS PART AND MENSREA IS CLEARLY EXIGIBLE AS DISCUSSED IN THE FOREGOING PARAGRAPHS A ND HE FINALLY LEVIED 9 PENALTY OF RS.12,11,760/- FOR THE A.Y. 2006-07 AND RS.13,12,740/- FOR THE A.Y. 2007-08 U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 7. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORD ER DATED 06.09.2011 & 07.09.2011UPHELD THE PENALTY LEVIED BY THE A.O. BUT LASTLY HE HELD THAT HE IS NOT AGREED WITH THE AO ON THE LEVY OF PENALTY @ 300 % BUT REDUCED THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED AND P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8. NOW THE ASSESSEE HAS FILED THE PRESENT APPEAL RE QUESTING FOR CANCELLATION OF THE PENALTY IN DISPUTE AND THE REVE NUE HAS FILED THE PRESENT APPEAL FOR ENHANCING THE PENALTY @ 300% AND UPHOLDI NG THE ORDER OF THE AO IN WHICH HE HAS LEVIED PENALTY @ 300%. 9. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE HAD DISCLOSED A SUM OF RS. 25 LAKHS IN HIS STATEMENT U/ S 132(4) OF THE ACT ON 0.2.02.2007. AT THE TIME OF SEARCH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE, THE ASSESSEE HAS ALSO SUBMITTED A DET AILED REPLY AND CLARIFICATION RELATING TO SURRENDERED AMOUNT OF RS. 25 LAKHS FOR THE 10 ASSESSMENT YEARS 2006-07 & 2007-08 BY EXPLAINING AN D SPECIFICALLY STATING THAT THE ASSESSEE IS UNABLE TO EXPLAIN SUM OF CASH LOANS RECEIVED AS PER ENTRIES RECORDED ON LOOSE PAPERS FOUND AND SEIZED, AS SUCH HE HAS SURRENDERED A SUM OF RS.25 LAKHS AS ADDITIONAL INCO ME OVER AND ABOVE THE NORMAL BOOK PROFIT FOR THE ASSESSMENTS IN DISPUTE S UBJECT TO NO PENALTY OR PROSECUTION UNDER SECTION 132(4) READ WITH SECTION 271(1)(C) EXPLANATION (5) OF THE ACT AND THIS INCOME HAS BEEN DERIVED FRO M EXECUTION OF VARIOUS CONTRACTS, DUE TAXES ON THE SURRENDER AMOUNT WILL B E PAID IN DUE COURSE OF TIME. HE FURTHER STATED THAT RS. 12 LAKHS HAS BEEN SURRENDERED FOR THE ASSESSMENT YEAR 2006-07 AND RS.13 LAKHS FOR THE ASS ESSMENT YEAR 2007-08. THIS INCLUDES RS. 7 LAKHS BEING CASH SEIZED AT THE TIME OF SEARCH.. THE AMOUNT OF RS. 12 LAKHS ON ACCOUNT OF SURRENDER WAS DULY DISCLOSED IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2006- 07 BUT THE AO BY HIS ORDER PROCEEDED TO LEVY PENALTY U/S 271(1)(C) OF TH E ACT @ 300% OF TAX SOUGHT TO BE EVADED. THE AO, HOWEVER, ADDED THE SU RRENDER AMOUNT BEING THE UNDISCLOSED INCOME FOR THE ASSESSMENT YEARS IN DISPUTE, BY HOLDING THAT THE ASSESSEE DID NOT INCLUDE UNDISCLOSED INCOME AS PURPORTEDLY DECLARED BY THE HIM AT THE TIME OF SEARCH. HE FURTHER STATED TH AT THE ASSESSEE HAD DISCHARGED HIS ONUS OF INCLUDING THE SURRENDER AMOU NT IN HIS RETURN OF INCOME GIVING A FOOT NOTE IN THE COMPUTATION SHEET UNDER THE SIGNATURE OF HIS COUNSEL. 11 BESIDES, IN ORDER TO SECURE IMMUNITY FROM PENALTY L EVIABLE U/S 271(1)(C) READ WITH EXPLANATION 5 PARA (2) THEREOF, IT WAS I MPERATIVE FOR THE ASSESSEE AFTER HAVING MADE THE STATEMENT U/S 132(4) OF THE A CT ON 02.02.2007 TO HAVE DECLARED THE UNDISCLOSED INCOME ONLY FOR THE YEAR F OR WHICH THE FILING OF RETURN IN ACCORDANCE WITH SECTION 139(1) OF THE ACT , WAS PENDING ON THAT DATE. THE PRESENT ASSESSMENT YEARS DID NOT FALL WI THIN THE PURVIEW OF THE YEAR IN WHICH RETURN OF INCOME WAS FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SECTION 139(1) OF THE ACT, AS DUE DATE OF FILING THE RETURN AS HELD EXPIRED ON 21.07.2007. HENCE, ANY DECLARATION BASED ON THE STATEMENT U/S 132(4) OF THE ACT, PERTAINING TO THE YEAR UNDER CON SIDERATION, WOULD NOT ATTRACT THE IMMUNITY FROM PENALTY U/S 271(1)(C), RE AD WITH EXPLANATION 5 PARA (2) THEREOF. HE ALSO DREW OUR ATTENTION TOWARD S THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND THE RELEVANT EXPLANATION T HERETO AND STATED THAT NO CASE FOR CONCEALMENT CAN BE MADE OUT SO AS TO ATTRA CT THE LIABILITY OF PENALTY U/S 271(1)(C) OF THE ACT, BECAUSE THE DIFFERENCE BE TWEEN THE RETURNED INCOME AND THE ASSESSED INCOME AROSE ON ACCOUNT OF SURREND ERED INCOME BY THE ASSESSEE AND IN RESPECT OF WHICH ADEQUATE AND COMPL ETE DISCLOSURE HAD BEEN MADE. LASTLY, HE STATED THAT THE PENALTY PROCEEDING S ARE TO BE INITIATED AND 12 THE PENALTY HAS TO BE LEVIED ONLY IN CASES WHERE TH E CONDUCT OF THE ASSESSEE IS OF SUCH A NATURE TO BRING OUT A WILLFUL OR DELIB ERATE ATTEMPT AT CONCEALMENT OF INCOME OR AVOIDANCE OF TAX.. BUT IN THE CASE OF THE ASSESSEE, THE AO HAS FAILED TO ESTABLISH THAT THERE WAS ANY WILLFUL OR D ELIBERATE DEFAULT ON THE PART OF THE ASSESSEE. HE REQUESTED THAT PENALTY IN DISPU TE MAY BE DELETED AND THE APPEALS FILED BY THE ASSESSEE MAY BE ALLOWED AND TH E APPEALS OF THE REVENUE FOR ENHANCING THE PENALTY MAY ALSO BE DISMISSED. IN SUPPORT OF HIS CONTENTION, HE ALSO CITED VARIOUS JUDGMENTS: I) HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) II) C.I.T. VS. SURESH CHANDRA MITTAL (2001) 251 IT R 9 (SC) III) C.I.T. VS. SURAJ BHAN (2007) 159 TAXMAN 26 (P & H) IV) UDAYAN MUKHERJJE VS. CIT (2007) 291 ITR 319 (CAL) V) CIT VS. P.H.I. SEEDS INDIA LTD. (2007) 159 TAXMAN 9 (DELHI) VI) K.C. BUILDERS AND ANOTHER VS. ACIT (2004) 265 ITR 5 62 (SC) VII) CIT VS. ASHIM KUMAR AGARWAL (2006) 153 TAXMAN 226 (JHARKHAND). VIII) CIT VS. ASHOK KUMAR JAIN (2004) 140 TAXMAN 625 (MP) IX) CIT-II, CHANDIGARH VS. MS. JAGRITI AGGARWAL, IN IT A NO.176 OF 2011 DATED 3.10.2011 ( P & H) X) ACIT VS. GEBILAL KANHAIA LAL (2012) 252 CTR (SC) 34 5 XI) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). 10. ON THE CONTRARY, THE LD. DR, RELIED UPON THE OR DER PASSED BY THE ASSESSING OFFICER AND STATED THAT THE AO HAS RIGHTL Y LEVIED PENALTY IN 13 DISPUTED BECAUSE THE ASSESSEE HAS SURRENDERED A SU M RS. 25 LAKHS AFTER SEIZURE OF ANNEXURE A-1 AND SEIZED FROM THE RESIDEN CE OF THE ASSESSEE. HE FURTHER STATED THAT THE ASSESSEE HAS NOT PAID THE T AX DUE OF THE SURRENDERED INCOME IN DUE TIME, THEREFORE, NO LENIENT VIEW SHOU LD BE TAKEN IN THE CASE OF THE ASSESSEE. THE LD. DR FURTHER STATED THAT ENTRIE S REGARDING LOANS AND ADVANCES RECEIVED BY THE ASSESSEE FROM VARIOUS PERS ONS AMOUNTING TO RS.41,75,000/- FROM 16.3.2006 TO 22.3.2006 HAVE NO T BEEN EXPLAINED BY THE ASSESSEE IN THE ALLAHABAD BANK, KATRA. THE PENALT Y IN DISPUTE HAS RIGHTLY BEEN LEVIED U/S 271(1)(C) OF THE ACT. AS REGARDS TO THE CITATIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE, HE STATED THAT THESE ARE NOT APPLICABLE IN THE CASE OF THE CASSESSEE BECAUSE THE FACTS OF ALL THE CASES RELIED UPON BY THE ASSESSEE ARE NOT IDENTICAL TO THE FACTS OF THE PRESENT CASE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES, ALONGWITH DOCUMENTARY EVIDENCE FILED BY THE ASSESSE E IN THE SHAPE OF PAPER BOOK. IN THE PRESENT APPEALS, IT IS AN ADMITTED FAC T THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM CONTRACT BUSINES S FROM PROPRIETORSHIP CONCERN M/S. SARVAYGA ENTEPRISES AND SEARCH AND SEI ZURE OPERATION WAS CONDUCTED ON THE BUSINESS AS WELL RESIDENTIAL PREMI SES OF THE ASSESSEE ON 02.02.2007. IT IS ALSO AN ADMITTED FACT THAT DURING THE COURSE OF SEARCH 14 OPERATION, THE ASSESSEE HAD OFFERED AN ADDITIONAL A MOUNT OF RS.25 LAKHS WHILE MAKING A STATEMENT U/S 132(4) OF THE ACT AND ENTIRE AMOUNT WAS OFFERED AS INCOME FOR THE ASSESSMENT YEAR 2007-08. BUT SUBSEQUENTLY, IT WAS CLARIFIED THAT OUT OF THE ADDITIONAL INCOME OF RS.2 5 LAKHS, RS.12 LAKHS WAS SURRENDERED FOR THE ASSESSMENT YEAR 2006-07 AND RS. 13 LAKHS FOR THE ASSESSMENT YEAR 2007-08. THIS DISCLOSURE WAS ALSO M ADE BY VIRTUE OF A NOTE APPENDED TO THE COMPUTATION OF INCOME FILED ALONGWI TH THE INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2006-07. THE AO COMP LETED THE ASSESSMENT UNDER SECTION 153A(B) READ WITH SECTION 143(3) OF T HE ACT VIDE HIS ORDER DATED 21.11.2008, WHEREIN HE ASSESSED THE INCOME OF THE ASSESSEE AT A FIGURE OF RS.13,93,377/- ON THE RETURNED INCOME OF THE ASS ESSEE I.E. RS.1,93,377/-, WHICH WAS FILED ON 03.03.2008. THE AO INITIATED PEN ALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR THE CONCEALMENT OF INCOME TO THE TUNE OF RS.12 LAKHS FOR THE ASSESSMENT YEAR 2006-07 AND RS. 13 LA KHS FOR THE ASSESSMENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE, THE STAT EMENT OF THE ASSESSEE U/S 132(4) OF THE ACT DATED 02.02.2007 SURRENDERING RS. 25 LAKHS FOR THE ASSESSMENT YEARS IN DISPUTE IS REPRODUCED AS UNDER: DURING THE COURSE OF SEARCH U/S 132 OF THE INCOME- TAX ACT, 1961 AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE APPELL ANT ON 02.02.2007, THE APPELLANT HAD DISCLOSED A SUM OF RS. 25 LAKHS I N HIS STATEMENT U/S 132(4) OF THE INCOME-TAX ACT, ON 02.02.2007 AS UNDE R: Q. AS PER DOCUMENT 31 OF ANNEXURE A-1, YOU HAVE WR ITTEN CERTAIN NOTINGS. PLEASE EXPLAIN THE NATURE OF THESE NOTINGS. 15 ANS. THESE ENTRIES ARE REGARDING LOANS AND ADVANCES RECEIVED BY ME FROM VARIOUS PERSONS AMOUNTING TO RS.41,75000 /- FROM 16.03.2006 TO 22.03.2006. SOME OF THESE LOANS AND A DVANCES HAVE BEEN RECEIVED THROUGH CHEQUE AND SOME LOANS WE RE RECEIVED IN CASH. ALL THESE LOANS HAVE BEEN DEPOSIT ED IN BANK ACCOUNT CA42 MAINTAINED IN ALLAHABAD BANK, KATRA. S INCE, I AM NOT ABLE TO EXPLAIN SOME OF THE CASH LOANS RECEI VED AS PER THE ENTRIES RECORDED ON LOOSE PAPERS FOUND AND SEIZ ED, AS SUCH I HEREBY SURRENDER A SUM OF RS.25,00,000/- AS ADDITI ONAL INCOME OVER AND ABOVE NORMAL PROFIT FOR THE CURRENT FINANC IAL YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 SUBJECT TO NO P ENALTY OR PROSECUTION U/S 132(4) READ WITH SECTION 271(1)(C)( EXPLANATION 5). THIS INCOME HAS BEEN DERIVED FROM EXECUTION OF VARIOUS CONTRACTS MENTIONED ABOVE. DUE TAXES ON THE SURREND ER AMOUNT WILL BE PAID IN DUE COURSE OF TIME. 11.1. SUBSEQUENT, AT THE TIME OF THE ASSESSMENT, TH E ASSESSEE SUBMITTED A DETAILED REPLY AND CLARIFICATION RELATING TO THE SU RRENDERED AMOUNT OF RS. 25 LACS AS UNDER: THAT THE PROCEEDINGS WERE CONDUCTED U/S 153A(B) AN D IN REPLY TO THE QUERY RAISED BY THE A.O. MY COUNSEL HAD SUBM ITTED A DETAILED REPLY TO THE SURRENDER AMOUNT OF RS.25,00, 000/-, IT IS SUBMITTED THAT OUT OF THE ABOVE AMOUNT THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 12 LACS FOR THE A.Y.20 06-07, PREVIOUS YEAR 2005-06 WHICH IS REFLECTED BY WAY OF CAPITAL INTRODUCTION IN THE FIRM M/S. SARVAGYA ENTERPRISES. THAT THE BALANCE AMOUNT OF RS.13 LACS HAS BEEN SURR ENDERED FOR THE A.Y. 2007-08, PREVIOUS YEAR 2006-07 AND THE SAM E HAVE BEEN REFLECTED ALSO BY WAY OF ADDITION TO THE CAPIT AL. THIS INCLUDES RS.7 LACS BEING CASH SEIZED AT THE TIME OF SEARCH. THE AMOUNT OF RS.13 LACS HAS BEEN SURRENDERED TO COVER ALL AND ANY INCOME THAT MAY BE CONSIDERED AS OUTSIDE THE BOOKS AS PER THE DOCUMENTS SEIZED AT THE TIME OF SEARCH. THAT AT THE TIME OF SEARCH ON 02.02.2007, AN AMOUNT OF RS.7.00 LACS CASH WAS ALSO SEIZED. IT HAS BEEN EARLIER REQ UESTED TO TREAT 16 THE SAME AS TAX FOR THE A.Y. 2006-07 AGAINST THE TA X LIABILITY THAT MAY BE DETERMINED AFTER CONSIDERING THE SURREN DER AMOUNT OF RS.12.00 LACS AS INCOME. IT IS FURTHER SUBMITTED THAT THE SAID AMOUNT OF RS.7.00 LACS MAY KINDLY BE CONSIDERED AS PAYMENT OF TAX U/S 140A AS ON 02.02.2007 AND INTEREST MAY BE D ETERMINED ACCORDINGLY. THE BALANCE CASH SEIZED MAY KINDLY BE ADJUSTED TOWARDS THE TAX LIABILITY FOR THE A.Y. 2007-08 OR R EFUNDED AS THE CASE MAY BE AFTER INCLUDING THE SURRENDER AMOUNT OF RS.13.00 LACS AS INCOME. THE AMOUNT OF RS. 12,00,000/- SURRENDERED WAS DULY DISCLOSED IN THE COMPUTATION OF INCOME FOR A.Y. 2006-07 WITH THE FOLLOWING REMARKS: IN ADDITION TO THE TOTAL INCOME DECLARED ABOVE TH E ASSESSEE HAS ALSO SURRENDERED RS.12 LACS ( OUT OF T OTAL RS. 25 LACS) DURING THE YEAR 2005-06 (AT 2006-07). THE INC OME-TAX MAY ACCORDINGLY, BE CALCULATED AND ADJUSTED FROM CA SH SEIZED RS.7 LACS AT THE TIME OF SEARCH. 11.2. AFTER CONSIDERING THE STATEMENT DATED 02.02.2 007 MADE BY THE ASSESSEE U/S 132(4) OF THE ACT AS WELL AS THE CLARI FICATION TO THE SURRENDERED AMOUNT OF RS. 25 LACS, THE AO DID NOT AGREE WITH TH E AVERMENTS MADE BY THE ASSESSEE AND HE LEVIED THE PENALTY OF RS.12,11,760/ - U/S 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 AND RS.13,12,740/- FOR THE ASSESSMENT YEAR 2007-08 U/S 271(1)(C) OF THE ACT @ 300% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED BY THE PENALTY IMPOSED BY THE AO, THE ASS ESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER HELD THAT THE AO HAS IMPOSED PENALTY AT MAXIMUM POSSIBLE RATE OF 300% OF TAX SOUGHT TO BE EVADED BUT HE DID NOT AGREE WITH THE AO, AS THE FA CTS OF THE CASE DID NOT 17 POINT OUT ANYTHING IN TERMS OF ASSESSES ATTITUDE OR OTHER CIRCUMSTANCES TO WARRANT THE WORST CASE SCENARIO OF 300% PENALTY AND HE REDUCED THE PENALTY TO 100% OF THE TAX SOUGHT TO BE EVADED. 11.3. WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS NOT THOROUGHLY GONE THROUGH THE RELEVANT PROVISIONS OF THE ACT I.E. SECTION 271(1)(C) OF THE ACT, AS WELL AS THE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE. FOR THE SAKE OF CONVENIENCE, PROVISIONS OF SE CTION 271(1)(C) OF THE ACT REPRODUCED AS UNDER: IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON A) . B) HAS FAILED TO COMPLY WITH A NOTICE UNDER SUB-SECTIO N (2) OF SECTION 115WD OR UNDER SUB-SECTION (2) OF SECTION 1 15WE OR UNDER SUB SECTION (1) OR SECTION 142 OR SUB-SECTION (2) OF SECTION 143 ( OR FAILS TO COMPLY WITH A DIRECTION I SSUE UNDER SUB-SECTION (2A) OR SECTION 142 OR C) HAS CONCEALED THE PARTICULARS OF THE FRINGE BENEFIT S OR FURNISHED INACCURATE PARTICULARS OF SUCH FRINGE BENEFITS HE M AY DIRECT THAT SUCH PERSONS SHALL BY WAY OF PENALTY (I) .. (II) IN THE CASES REFERRED TO IN CLAUSE (B) (IN ADDITION TO TAX, IF ANY PAYABLE) BY HIM ( A SUM OF TEN THOUSAND RUPEES) FOR EACH SUCH FAILURE; (III) IN THE CASES REFERRED TO IN CLAUSE (C) [OR CLAUSE (D)], IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHIC H SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED (THREE TIMES) THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INACCURATE PARTICULAR S OF SUCH INCOME OR FRINGE BENEFITS; 18 EXPLANATION 1. WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT (A) SUCH PERSON FAILS TO OFFER ANY EXPLANATION OR OFFER S AN EXPLANATION WHICH IS FOUND BY THE A.O. OR THE COMMI SSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE (AND FAILS TO PROVE THAT SUCH EXPLANAT ION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM) THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. 11.4. AFTER GOING THROUGH THE AFORESAID PROVISIONS, WE ARE OF THE VIEW THAT THE OBJECTS OF THE SAID PROVISIONS ARE TO IMPOSE AD DITIONAL MONETARY BURDEN ON A PERSON WHO HAS CONCEALED TRUE PARTICULARS OF T HEIR INCOME. FURTHER, EXPLANATION TO SUB-SECTION (1) OF SECTION 271 HAS B EEN INSERTED TO CLARIFY THAT WHERE A TAX PAYEES EXPLANATIONS IN RESPECT OF ANY R ECEIPT, DEPOSIT, OUTGOING OR INVESTMENT IS FOUND TO BE FALSE, THE AMOUNT REPR ESENTED BY SUCH RECEIPT ETC. SHALL BE DEEMED TO BE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED. THE ABOVE POSITION OF LAW AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE WOULD CLEARLY MAKE OUT THAT NO CASE FOR CONCEALMENT CAN BE MADE O UT SO AS TO ATTRACT THE LEVIABILITY OF PENALTY U/S 271(1)(C) BECAUSE THE DI FFERENCE BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME AROSE ON AC COUNT OF AN ADDITION OF RS.12 LACS FOR THE A.U. 2006-07 AND RS. 13 LACS FOR THE A.Y. 2007-08, WHICH 19 WAS SURRENDERED BY THE ASSESSEE AND IN RESPECT OF W HICH ADEQUATE AND COMPLETE DISCLOSURE HAD BEEN MADE. THE PENALTY PROC EEDINGS ARE TO BE INITIATED AND PENALTY IS TO BE LEVIED ONLY IN CASES WHERE THE CONDUCT OF THE ASSEEE IS OF SUCH A NATURE AS TO BRING OUT A WILLFU L OR DELIBERATE ATTEMPT AT CONCEALMENT OF INCOME OR AVOIDANCE OF TAX. THE PENA LTY PROVISIONS HAVE BEEN INCORPORATED INTO THE ACT IN ORDER TO PENALIZE AND DEAL WITH CASES AND ASSESSEE WHO HAVE RESORTED TO ACTIONS WHICH CAN BE TERMED AS MALAFIDE AND IN CONTRAVENTION OF THE PROVISIONS OF THE ACT. THEY ARE MEANT TO BE STRICTLY CONSTRUED AND ARE NOT MEANT TO COVER CASES WHERE DI FFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME HAS ARISEN ONLY ON A MATTER OF DIFFERENCE OF OPINION AND WHERE IT CANNOT BE CLEARL Y ESTABLISHED THAT THERE WAS A WILLFUL AND DELIBERATE DEFAULT ON THE PART OF THE ASSESSEE. IN THE PRESENT CASE, THE REVENUE AUTHORITY HAS FAILED TO ESTABLISH WITH COGENT REASON AND EVIDENCE THAT THE ASSESSEE HAS CONCEALED HIS PARTIC ULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME RESULTIN G IN THE EVASION TAX. WE ALSO FOUND THAT IN THE CONCLUDING PARAGRAPH OF THE IMPUGNED ORDER, THE LD. CIT(A) HAS ALSO HELD THAT HE DID NOT AGREE WITH THE AO AS THE FACTS OF THE CASE DO NOT POINT OUT ANYTHING IN TERMS OF ASSESSEE S ATTITUDE OR OTHER CIRCUMSTANCES TO WARRANT THE WORST CASE SCENARIOS O F 300% PENALTY AND HE REDUCED THE PENALTY @ 100%. EVEN OTHERWISE, THE LD. FIRST APPELLATE AUTHORITY 20 HAS NOT CLEARLY HELD THAT THE ASSESSEE HAS CONCEALE D ANY PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF H IS INCOME IN THE RETURN FILED BY HIM AND HAS NOT PROVED THAT THERE WAS A WI LLFUL OR DELIBERATE DEFAULT ON THE PART OF THE ASSESSEE FOR EVASION OF TAX DUE. 11.5. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS THE CASE LAWS RELIED UPON BY THE ASSESSEE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY LEVIED THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED. THEREFORE, W E CANCEL THE IMPUGNED ORDERS OF THE LD. FIRST APPELLATE AUTHORITY DATED 06.09.2011 & 07.092011 FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. THUS, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 12. AS REGARDS THE APPEALS FILED BY THE DEPARTMENT IN ITA NOS. 573 & 574(ASR)/2011 FOR THE ASSESSMENT YEARS 2006-07 & 2 007-08 FOR ENHANCEMENT OF PENALTY, THE SAME ARE ALSO DISMISSED , SINCE WE HAVE ALLOWED THE APPEALS OF THE ASSESSEE BY CANCELING THE IMPUG NED ORDERS OF THE LD. FIRST APPELLATE AUTHORITY FOR LEVYING PENALTY @ 100% OF T HE TAX SOUGHT TO BE EVADED. THUS, THERE IS NO QUESTION OF ENHANCEMENT O F PENALTY. ACCORDINGLY, BOTH THE APPEALS OF THE DEPARTMENT ARE DISMISSED. 21 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH OCTOBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16TH OCTOBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. NARESH PUJARI, KATRA. 2. THE ACIT, CENTRAL CIRCLE, JAMMU. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.