M/s. ANAND TRADERS, Ujjain V. THE ACIT 2(1), Ujjain

ITA 536/IND/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1935 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V I MEHTA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Unexplained cash credit; Search and seizure; Loose papers; Notional interest
• Section: 69C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO. 534 & 536/IND/2014 A.Y. : 2003-04 & 2004-05 M/S.ANAND TRADERS, ACIT, UJJAIN VS. 2(1), UJJAIN APPELLANT RESPONDENT PAN NO. AACFA4861B APPELLANT BY : SHRI S.S.DESHPANDE, CA RESPONDENT BY : SHRI V.I.MEHTA, DR DATE OF HEARING : 15 . 0 6 .201 5 DATE OF PRONOUNCEMENT : 19 . 0 8 .201 5 -:2:- O R D E R PER GARASIA, J.M. THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 26.06.2014 AND 27.6 .2014 FOR THE ASSESSMENT YEARS 2003-04 & 2004-05. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE ASSESSEE FIRM DEALS IN MILK AND MILK PRODUCTS. IN THIS CASE, SEARCH OPERATION U/S 132(1) WAS CARRIED OUT ON 25.09.2003. DURING SEARCH AND SEIZURE OPERATION, RE GISTER AND LOOSE PAPERS WERE FOUND WHEREIN CERTAIN TRANSACTION S RELATED TO PURCHASE SALES WERE RECORDED IN ADDITION TO REGU LAR BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT PRODUCE PURCHASE & SALES, BILLS AND VOUCHERS OF THE EXPENSES. THEREFORE, THE AO COULD NOT VERIFY THE GENUINENESS OF THE TRANSACTIONS AND EXPENSES. ON THIS BASIS, THE BOOKS OF ACCOUNT WERE REJECTED U /S 145 AND THE SALES WERE ESTIMATED AT RS. 1,49,76,488/- AND R S. 1,75,50,000/- AS AGAINST RS. 1,42,87,043/- AND RS. 1,35,35,124/- AND PROFIT WAS ESTIMATED @ 15.4 % AND 15 % -:3:- AGAINST DECLARED RATE OF 12.64 % AND 12.52 % RESPEC TIVELY. THUS, GROSS PROFIT ADDITION WAS MADE AT RS. 5,00,59 4/- AND RS. 5,08,739/- FOR THE ASSESSMENT YEARS 2003-04 & 2 004-05 RESPECTIVELY. SIMILARLY, DURING SEARCH AND SEIZURE OPERATION, REGISTER AND LOOSE PAPERS WERE FOUND WHEREIN CERTAI N TRANSACTIONS RELATED TO PURCHASE SALES WERE RECORDE D IN ADDITION TO REGULAR BOOKS OF ACCOUNT. UNEXPLAINED CREDITS/ADVANCES GIVEN TO AGRICULTURISTS WERE WORKE D OUT ON THE BASIS OF THE TWO REGISTERS AT RS. 70,96,466/- A ND RS. 22,55,751/- AND ADDITION OF RS.93,52,217/- FOR THE ASSESSMENT YEAR 2003-04 WAS MADE TO THE TOTAL INCOM E OF THE ASSESSEE. FURTHER, THE ASSESSEE HAD GIVEN ADVANCE A ND EARNED INTEREST INCOME FROM THE TWO REGISTERS FOUND DURING SEARCH AND SEIZURE OPERATION WHICH WAS IN ADDITION TO REGU LAR BOOKS OF ACCOUNT ON THE BASIS OF WHICH THE AO HAS MADE TH E ADDITION OF RS. 7,10,784/- AS UNDISCLOSED INCOME. IN THE ASS ESSMENT YEAR 2004-05, DURING THE COURSE OF SEARCH OPERATION , REGISTER BS-1/37 AND 1/38 WAS FOUND, WHICH WAS MAINTAINED BY THE ASSESSEE IN ADDITION TO REGULAR BOOKS OF ACCOUNT. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE -:4:- ASSESSING OFFICER, THAT THE ASSESSEE HAS GIVEN ADVA NCES OUT OF BOOKS AND EARNED INTEREST INCOME THEREON, THEREFORE , THE AO HAS MADE THE ADDITION OF RS. 3,04,367/- AS UNDISCLO SED INCOME TO THE TOTAL INCOME OF THE ASSESSEE. THE I.T .A.T. HAS DELETED THE ADDITION OF RS. 2,84,078/- AND ADDITION OF RS. 1 LAC HAS BEEN MADE ON ACCOUNT OF EXCESS CASH FOUND DURIN G THE SEARCH OPERATION. THE SAME HAS BEEN UPHELD BY THE L D. CIT(A) THE AO HAS LEVIED THE PENALTY. 4. THE MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THE LD. CIT(A ) HAS CONFIRMED THE AOS ACTION IN IMPOSING PENALTY ON AC COUNT OF GROSS PROFIT ADDITION OF RS. 3,69,215/- AND PEAK AD DITION OF RS. 13 LACS AND NOTIONAL INTEREST OF RS. 7,10,742/- . THUS, THE LD. CIT(A) HAS CONFIRMED THE PENALTY OF RS. 7,38,94 8/-. 5. FOR ASSESSMENT YEAR 2004-05, THE LD. CIT(A) HAS CONFIRMED THE PENALTY ON ACCOUNT OF GROSS PROFIT AD DITION OF RS. 4,05,562/- AND ADDITION OF RS. 1 LAC ON ACCOUNT OF EXCESS CASH FOUND DURING THE SEARCH, WAS CONFIRMED. 6. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HA S DISMISSED THE APPEAL FOR THE ASSESSMENT YEAR 2003-0 4. THE -:5:- MATTER CARRIED TO LD. CIT(A) FOR THE ASSESSMENT YEA R 2004-05. THE LD. CIT(A) HAS CONFIRMED THE ADDITION ON ACCOU NT GROSS PROFIT ADDITION AND AND RS. 1 LAC CASH FOUND DURING THE SEARCH IS CONFIRMED AND PENALTY AMOUNT OF RS. 2,84,078/- W AS ALLOWED. THE LD. CIT(A) HAS DISMISSED THE APPEAL. 7. LD. AUTHORIZED REPRESENTATIVE SUBMITTED FOR ASSESSMENT YEAR 2003-04 THAT THE GROSS PROFIT ADDIT ION OF RS. 3,69,215/- IS A NOTIONAL ADDITION AND PEAK ADDITION OF RS. 13 LACS WHICH HAS BEEN AGREED TO BY THE ASSESSEE TO AV OID COMPLICATIONS AND NOTIONAL INTEREST OF RS. 7,10,742 /-. ALL THESE ADDITIONS WERE IN DISPUTE BEFORE THE I.T.A.T ., INDORE. THE LD. AUTHORIZED REPRESENTATIVE IN THE APPEAL FOR ASSESSMENT YEAR 2004-05 ALSO CONTENDED THAT THE ADD ITION ON ACCOUNT OF GROSS PROFIT IS A NOTIONAL ADDITION. IT IS TO BE MENTIONED HERE THAT THE ADDITION OF GROSS PROFIT IN THIS CASE HAS BEEN ARRIVED BY CALCULATING THE ENTRIES IN THE REGISTERS AND LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. HAD SEARCH & SEIZURE ACTION WOULD NOT HA VE BEEN THERE, THESE TRANSACTIONS WOULD HAVE GONE UNDETECTE D. THEREFORE, THIS IS NOT THE ESTIMATION BUT ACTUAL CO NCEALMENT. -:6:- THIS ADDITION HAS BEEN UPHELD BY CIT(A) AND I.T.A.T ., INDORE BENCH. THE PROVISIONS OF SECTION 271(1)(C) ARE NOT APPLICABLE TO ALL THESE ADDITIONS, AS TWO OF THESE ARE NOTIONAL A DDITIONS AND THIRD ONE IS ACCEPTED TO AVOID LITIGATION AND BUY P EACE. THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT ES TIMATION OF PROFIT AT HIGHER RATE WOULD NOT LEAD TO THE CONC LUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOM E OR THAT THERE WERE CONSCIOUS CONCEALMENT OF INCOME. THE PE NALTY CANNOT BE LEVIED ON ESTIMATED BASIS. THE RELIANCE W AS PLACED ON THE DECISIONS OF HARIGOPAL SINGH VS. CIT, (2002) 258 ITR 85/125 TAXMAN 252 ( P & H ). SIMILARLY, ITO VS. BHG AT SINGH, PROP. CHOUDHARY BUILDERS, (2003) 172 TAXMAN 109. TH E LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT U/S 271(1) (C) WHILE IMPOSING THE PENALTY, IF THE ASSESSEE GIVES EXPLANA TION AND IF IT IS TREATED AS BONA FIDE, THE PENALTY CANNOT BE IMPO SED FOR FURNISHING THE ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BE AN INACCURATE PARTICULARS OF INCOME. BEFORE RECOURS E TO PENALTY, THE AO MUST ARRIVE AT TO THE CONCLUSION TH AT THE EXPLANATION OFFERED BY THE ASSESSEE WAS FALSE. THE ASSESSEE SHOULD HAVE FAILED TO PROVE THAT EXPLANATION WAS NO T BONA FIDE -:7:- AND ALL FACTS RELATING TO THE INCOME WERE NOT DISCL OSED BY HIM. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E PENALTY IS NOT IMPOSABLE. THERE IS NO CONSCIOUS BREACH OF L AW AND HE RELIED UPON THE DECISION OF CIT VS. MEENAKSHI KUTT Y, (2003) 180 CTR 190. 8. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT T HE PENALTY CANNOT BE IMPOSED IN BOTH THE ASSESSMENT YE ARS IF THE ASSESSEE FAILED TO PERFORM STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDI CIOUSLY AND ON CONSIDERATION OF ALL RELEVANT CIRCUMSTANCES. 9. THE LD. D.R. RELIED UPON THE ORDER OF CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN ASSESSMENT YEAR 2003-04, THE AO HAS IMPOSED THE PENALTY OF RS. 7,38,948/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961, FOR CONCEALMENT BY FURNISHING INACCURATE PARTICULARS OF INCOME. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, THE REGISTERS BS-1/37 AND 1/38 AND LOOSE PAPERS WERE FOUND IN ADDITION TO REGULAR BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO -:8:- PRODUCE THE BILLS AND VOUCHERS PERTAINING TO PURCHA SE AND SALE. THE ASSESSEE FAILED TO FURNISH SUCH PRIMARY D ETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREF ORE, THE AO HAS ADOPTED THE PROFIT @ 15.4 % AND GROSS PROFIT ADDITION OF RS. 5,00,594/- HAS BEEN MADE. THE GROSS PROFIT A DDITION IS MADE ON ESTIMATE BASIS. THE GROSS PROFIT ADDITION H AS BEEN CONFIRMED UP TO I.T.A.T., BUT WE ARE OF THE VIEW TH AT THE PROFIT WAS ESTIMATED BY THE ASSESSING OFFICER, THEREAFTER THE GROSS PROFIT ADDITION WAS ESTIMATED BY THE LD. CIT(A) AND GROSS PROFIT ADDITION IS NOTIONAL ADDITION, THEREFORE, THIS IS A N ESTIMATED SUM OF GROSS PROFIT. THEREFORE, NO PENALTY CAN BE L EVIED ON THIS. THEREFORE, WE DELETE THE PENALTY ON ACCOUNT O F GROSS PROFIT. THEREFORE, WE DIRECT THE AO TO RECALCULATE THE PENALTY ON AMOUNT OF RS. 3,69,215/- AND DELETE THE PENALTY. WE FIND THAT DURING THE SEARCH AND SEIZURE OPERATION, BS-1/37 AN D 1/38 REGISTER WAS FOUND. THESE REGISTERS WERE MAINTAINED BY THE ASSESSEE IN ADDITION TO REGULAR BOOKS OF ACCOUNT. T HE ADDITION WAS OF RS. 93,52,217/- WAS MADE AFTER MAKING THE CA LCULATION OF THE PEAK. THE LD. CIT(A) HAS RESTRICTED THE ADDI TION UP TO RS. 13 LACS AND THE SAME HAS BEEN UPHELD BY THE I.T.A.T . DURING -:9:- THE COURSE OF SEARCH AND SEIZURE OPERATION A REGIST ER BS-1/37 & 1/38 WAS FOUND. THIS REGISTER WAS MAINTAINED BY T HE ASSESSEE IN ADDITION TO REGULAR BOOKS OF ACCOUNT. D URING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS GIVEN ADVANCE OUT OF BOOKS AND EARNED THE INTEREST AND ADDITION OF RS. 7,10,784/- WAS MADE. WE FIND THAT THIS ADDITION IS CONFIRMED UP TO I.T.A .T. AND THIS ADDITION HAS BEEN MADE ON THE BASIS OF REGISTER FOU ND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. IF THER E SHOULD HAVE BEEN NO SEARCH AND SEIZURE OPERATION, THIS INC OME SHOULD NOT HAVE ASSESSED. THEREFORE, WE ARE OF THE VIEW THAT THIS INCOME IS CONCEALED BY THE ASSESSEE. THEREFORE , THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE PENALTY. 11. IN ASSESSMENT YEAR 2004-05, THE AO HAS IMPOSED THE PENALTY ON ADDITION OF RS. 1 LAC FOUND DURING THE S EARCH OPERATION. THE AO HAS ALSO IMPOSED THE PENALTY ON A DDITION ON ACCOUNT OF GROSS PROFIT OF RS. 4,05,562/-. AS WE HA VE HELD FOR ASSESSMENT YEAR 2003-04 THAT NO PENALTY CAN BE IMPO SED ON ACCOUNT OF GROSS PROFIT ADDITION. THEREFORE, ON THE SAME REASONING, WE DIRECT TO DELETE THE PENALTY ON ACCOU NT OF GROSS -:10:- PROFIT. WE CONFIRM THE PENALTY ON ACCOUNT OF EXCESS CASH OF RS. 1 LAC FOUND DURING THE COURSE OF SEARCH . 12. THE LD. CIT(A) UPHELD THE IMPOSITION OF PENALTY IN THE BOTH THE YEARS BY OBSERVING AS UNDER . THE POSITION OF LAW WITH REGARD TO LEVY OF PENALTY U/S. 271 (1)(C) HAS UNDERGONE A SUBSTANTIAL CHANGE AFTER THE INSERTION OF EXPLANATION (1) TO SECTION 271(1)( C) W.E.F. 01.04.1976. EXPLANATION (1) TO SECTION 271(1 )(C) RAISES A PRESUMPTION THAT AS AND WHEN ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME T HE SAME SHALL BE DEEMED OR REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. FURTHER W.E.F. 10.09.1986 AMENDMENT HAS BEEN MADE IN EXPLANATION 1-B TO SECTION 271(L)(C). AFTER THIS AMENDMENT FURTHER ONUS HAS BEEN PLACED ON THE ASSESSEE TO PROVE THAT THE EXPLANATION FURNISHED BY HIM WAS BONA FIDE. THE POSITION NOW IS THAT UNLESS AND , UNTIL THE ASSESSEE SUBSTANTIATE THE EXPLANATI ON -:11:- AND PROVES THAT SUCH AN EXPLANATION WAS BONA FIDE T HE ADDITION MADE TO HIS INCOME SHALL DEEMED TO REPRESE NT THE CONCEALED INCOME. ON THE ANALYSIS OF THE PROVISIONS OF SECTION 271(1)(C) IT IS OBSERVED THAT THE EXPLANATION 1 TO SECTION 271(1) PROVIDES FOR THE SITUATION WHERE NO EXPLANATION FOR THE FAILURE IS OFFERED BY THE ASSESSEE OR WHERE THE EXPLANATION TH AT HAS BEEN OFFERED IS FOUND TO BE FALSE OR WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM. IN ALL THESE CASES, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OF SUCH PERSON SHALL BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. A S PER THE PROVISO TO THIS EXPLANATION, THE ONUS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONA FIDE AND FACTS RELATIN G TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HIM WILL BE ON THE PERSON CHARGED FOR CONCEALMENT. AS PER THE PROVISION OF EXPLANATION (1)(B), NOW THE ENTIRE ONUS IS ON THE ASSESSEE TO NOT ONLY OFFER AN EXPLANATION BUT ALSO TO SUBSTANTIATE AND TO PROVE THAT THE PRESUMPTION WAS BANA FIDE. -:12:- AT THE SAME TIME THE PRESUMPTION SO RAISED BY THE E XPLANATION (1) IS REBUTTABLE. THE EFFECT IS THAT UNLESS AND UN TIL THE ASSESSEE REBUTS THE PRESUMPTION, HE WOULD BE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT IS N OW AN ESTABLISHED LAW THAT THE PRESUMPTION WOULD NOT STAN D REBUTTED MERELY BY FURNISHING ANY GENERAL OR FANTASTIC OR FA NCIFUL OR UNREASONABLE EXPLANATION BY ASSESSEE. THE EXPLANATI ON SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL AND SHOU LD BE ACCEPTED TO THE AUTHORITIES. IN THIS CONNECTION REF ERENCE MAY BE MADE TO THE DELHI HIGH COURTS DECISION IN THE CASE OF CIT VS. GURBACHAN LAL REPORTED IN 250 ITR 157 (DELHI) THE APEX COURT HAS APPROVED THE INTERPRETATION PLACED UPON T HE EXPLANATION BY A FULL BENCH OF THE PUNJAB AND HARYA NA HIGH COURT IN VISWAKARMA INDUSTRIES VS. CIT (1982) 135 ITR 652. SIMILAR VIEW HAS BEEN EXPRESSED BY THE KERALA HIGH COURT IN THE CASE OF CIT VS. K.P. MADHUSUDAN REPORTED IN 246 ITR 218. THIS DECISION HAS BEEN AFFIRMED BY THE SUPREME COURT IN 251 ITR 99. AFFIRMING THE AFORESAID DECISION, THE HONBLE SUPREME COURT HAS FURTHER HEL D THAT AFTER INSERTION OF EXPLANATION ITS EARLIER DECISION IN TH E CASE OF SIR -:13:- SHADI LAI SUGAR AND GENERAL MILLS LTD. VS. CIT REPO RTED IN 168 ITR 705 (SC) WAS NO LONGER APPLICABLE. THE KERALA H IGH COURT AT PAGE 244 HAS OBSERVED AS UNDER:- THE QUESTION OF ONUS IS OF PRIMARY AND ADDED IMPOR TANCE IN LEGAL ACRIMONY. IN CIT VS. ANWAR ALI (1970) 76 I TR 696, THE APEX COURT LAID DOWN THAT, BEFORE A PERSON COUL D BE VISITED WITH A PENALTY FOR CONCEALMENT, ETC., THE R EVENUE MUST PROVE THAT THE AMOUNT IN QUESTION WAS THE INCO ME OF THE ASSESSEE AND HE HAD CONCEALED IT WITH A MOTIV E. IT WAS FURTHER HELD THAT PENALTY COULD NOT BE IMPOSED MERELY BECAUSE ANY EXPLANATION GIVEN BY THE ASSESSEE IN RE GARD TO THE ITEMS IN QUESTION WAS NOT BELIEVED TO THE TRUE. THE POSITION OF LAW ON OR AFTER APRIL 1, 1976, IT THAT WHERE IN RESPECT OF ANY ITEM OF CREDIT, (A) THE ASSESSEE FAI LS TO OFFER A EXPLANATION OR (B) THE ASSESSEE OFFERS AN EXPLANATI ON WHICH THE TAXING OFFICER CONSIDERS TO THE FALSE, OR (C) T HE ASSESSEE OFFERS AN EXPLANATION BUT NO MATERIAL OR EVIDENCE T O SUBSTANTIATE IT, HE SHALL BE DEEMED TO HAVE CONCEAL ED SUCH INCOME WITHIN THE MEANING OF SECTION 27L(L)(C). WHA T SECTION 68, 69, 69A, 69B AND 69C DEEM FOR THE PURPOSE OF -:14:- ASSESSMENT WAS INJECTED FOR THE ' PURPOSE OF PENALT Y BY OPERATION OF A DEEMING PROVISO. A PROVISO WAS ADDED TO THE NEW EXPLANATION. IT CONCERNS CASES WHERE THE ASSESS EE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBST ANTIATE. CONSEQUENTIALLY THE PROVISIONS ARE INTENDED TO SAVE SUCH AMOUNT FROM IMPOSITION OF PENALTY ALTHOUGH THE SAME HAD BEEN ADDED TO THE ASSESSEES INCOME IN THE ASSESSME NT. IF THE ASSESSEES EXPLANATION IS FOUND TO BONA-FIDE AN D ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE VIEWS SIMILAR TO THE ABOVE DECISION OF DELHI AN D KERALA HIGH COURTS WERE EXPRESSED BY THE ALLAHABAD HIGH COURT IN THE CASE OF SUSHIL KUMAR SHARAD KUMAR 232 ITR 588 (ALLD.). SIMILARLY, THE DELHI HIGH COURT IN THE CASE OF CIT VS SOHAN SINGH 254 ITR 170 HAS HELD THAT FOR THE PURPOSE OF PENALTY MATTER HAS TO BE EXAMINED IN THE BACKGRO UND OF EXPLANATION TO SECTION 271(1 )(C). IT HAS ALSO BEEN HELD THAT EVIDENCE RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THROUGH NOT CONCLUSIVE, ARE NOT TOTALL Y IRRELEVANT. THEY COULD BE TAKEN NOTE OF. ACCORDING TO THE HIGH COURT WHAT -:15:- WAS REQUIRED WAS THAT THE ASSESSEE MUST OFFER AN EX PLANATION WHICH, IF FOUND TO BE UNTENABLE OR UNACCEPTABLE, TH EN THE PENALTY CAN BE LEVIED UNDER SECTION 271(1) (C) OF T HE I.T. ACT. IT IS AN OBLIGATORY DUTY CAST UPON A PERSON FILING THE RETURN OF INCOME TO DISCLOSE ALL HIS INCOME DERIVED FROM ANY SOURCE UNDER VARIOUS HEADS AND INDICATE THE INCOME UNDER E ACH HEAD, WHICH IS CHARGEABLE TO INCOME-TAX, AFTER MAKI NG THE PERMISSIBLE DEDUCTIONS. DISCLOSURE OF INCOME WOULD BE DISCLOSURE OF PARTICULARS OF INCOME, WHICH A PERSON IS DUTY BOUND TO DISCLOSE IN FULFILLMENT OF HIS STATUTORY O BLIGATIONS TO PAY TAX ON THE INCOME CHARGEABLE TO TAX. AFTER THE RETURN IS FILED UNDER SECTION 139(1), THE ASSESSMENT OF TAX I S TO BE MADE AND FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER T HE ACT, THE ITO MAKES AN ENQUIRY CONTEMPLATED BY SECTION 14 2, UNDER WHICH NOTICE IS ISSUED ON THE PERSON WHO HAS MADE T HE RETURN TO PRODUCE ACCOUNTS, DOCUMENTS OR FURNISH VERIFIED INFORMATION IN WRITING INCLUDING STATEMENT OF ALL ASSETS, ETC. HOWEVER, WHERE THE AO IS SATISFIED THAT THE RETURN IS CORREC T AND COMPLETE, AS WERE THE WORDINGS OF SECTION 143(1) AT THE RELEVANT TIME, HE HAS TO ASSESS THE TOTAL INCOME WI THOUT -:16:- REQUIRING THE PRESENCE OF THE ASSESSEE OR PRODUCTIO N BY HIM OF ANY EVIDENCE THAT |THE RETURN IS CORRECT AND COMPLE TE, HE IS REQUIRED TO ISSUE NOTICE ENABLING THE ASSESSEE TO P RODUCE EVIDENCE ON WHICH HE MAY RELY IN SUPPORT OF THE RET URN. THE TOTAL INCOME IN SUCH CASES OF REGULAR ASSESSMENT IS , ASSESSED AFTER HEARING THE EVIDENCE ADDUCED AND CONSIDERING ALL MATERIAL GATHERED BY THE AO AS PROVIDED IN SECTION 143(3). IT, THEREFORE, FOLLOWS THAT IN THE ASSESSMENT PROCEEDIN GS UNDER SECTION 143, THE AO CAN FIND OUT WHETHER THE RETURN OF INCOME IS CORRECT AND COMPLETE. IF HE HOLDS THAT THE RETUR N OF INCOME IS NOT CORRECT OR THAT IT IS NOT COMPLETE IN RESPECT O F THE PARTICULARS OF INCOME WHICH ARE REQUIRED TO BE STAT ED IN THE RETURN, HE WILL REACH THE CORRECT FIGURE OF TOTAL I NCOME AND DETERMINE THE SUM PAYABLE BY THE ASSESSEE OR REFUND ABLE ON THE BASIS OF SUCH ASSESSMENT. IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, BY REASON OF OMISSION OR FAILURE OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT, REASSESSMENT PROCEEDING CAN BE INITIATE D AS PROVIDED UNDER SECTION 147. THIS AGAIN SHOWS THA T -:17:- FULL AND TRUE DISCLOSURE OF INCOME IS PRIMARY OBLIG ATION OF THE ASSESSEE. IF A PERSON OBLIGED TO FURNISH THE PARTICULARS OF H IS INCOME OMITS TO FURNISH THEM, HE THEREBY CONCEALS T HE PARTICULARS. THE CONCEALMENT MAY TAKE VARIOUS FORMS . A GLARING ILLUSTRATION OF CONCEALMENT WOULD BE WHERE THE ASSESSEE DOES NOT DISCLOSE OR FULLY DISCLOSE IN THE RETURN T HE INCOME DERIVED BY HIM WHICH WOULD FALL CORRECTLY AND COMPL ETELY. IF WHILE DISCLOSING THE PARTICULARS OF INCOME IN THE R ETURN HE PUTS THEM UNDER A WRONG HEAD, HE CAN BE SAID TO BE FURNI SHING INACCURATE PARTICULARS OF INCOME. THE PARTICULARS O F INCOME CAN BE MADE INACCURATE IN A VARIETY OF WAYS, A GLARING ILLUSTRATION OF WHICH WOULD BE WHERE THE ASSESSEE WHILE STATING THE INCOME UNDER A PARTICULAR HEAD, WORKS OUT THE INCOME CHARG EABLE TO TAX AFTER MAKING DEDUCTIONS WHICH ARE FALSELY MADE. SUC H A PROCESS WOULD MAKE THE PARTICULARS OF INCOME INACCU RATE. IN ALL SUCH CASES, WHETHER THE INCOME IS NOT DISCLOSED AGA INST THE CONSTITUENT ITEM OF THE RETURN IN WHICH IT FALLS OR IS PARTLY NOT DISCLOSED, OR THE PARTICULARS OF INCOME GIVEN IN TH E RETURN ARE INCORRECTLY STATED BY ANY MACHINATION, THE IMPACT I S BOUND TO BE -:18:- ON THE FIGURE OF GROSS TOTAL INCOME TO BE MENTIONED UNDER VARIOUS HEADS OF INCOME AND ALSO ON THE TOTAL INCOME CHARGEABLE TO TAX. IN FACT, REDUCING THE FIGURE OF INCOME THAT WOULD BE CHARGEABLE TO TAX WOULD BE FOR THE PURPOSE OF CONCEALMENT OF PARTICULARS OF INCOME OR GIVING INAC CURATE PARTICULARS OF INCOME. THE EXPRESSION PARTICULARS OF INCOME WOULD HAVE RELEVANCE TO ALL THE PARTICULARS OF INCO ME WHICH THE ASSESSEE IS REQUIRED TO GIVE IN HIS RETUR N FULLY AND TRULY, INCLUDING THE PARTICULARS OF INCOME CHAR GEABLE TO TAX UNDER VARIOUS HEADS AND THE TOTAL INCOME. THEREFORE, ANY CONCEALMENT OR INACCURACY IN THE PARTICULARS OF INCOME IN THE RETURN OCCURRING AT AN Y STAGE UP TO AND INCLUSIVE OF THE ULTIMATE STAGE OF WORKING OUT OF TOTAL INCOME, WOULD ATTRACT THE PENALTY PROV ISION OF SECTION 271(L)(C) OF THE ACT. EVERY FIGURE IN THE RETURN WHICH IS SET OPPOSITE TO THE ITEM OF INCOME IS A PARTICUL AR OF INCOME, WHETHER THE FIGURE IS ONE WHICH IS STATED INDEPENDE NTLY OF ANYTHING ELSE THAT APPEARS IN THE RETURN OR THE DOC UMENTS ACCOMPANYING IT OR WHETHER IT IS SOMETHING DERIVED FROM OTHER FIGURES ELSEWHERE STATED IN SUCH RETURN OR DOCUMENT S. FALSE -:19:- RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MOR E OF THE CONSTITUENT ITEMS IN THE RETURN. THE WORDS INACCURA TE PARTICULARS WOULD COVER FALSITY IN THE FINAL FIGURE AS ALSO THE CONSTITUENT ELEMENTS OR ITEMS. THEY SIMPLY WOULD MEAN INACCURAT E IN SOME SPECIFIC OR DEFINITE RESPECT WHETHER IN THE CONSTIT UENT OR SUBORDINATE ITEMS OF INCOME OR THE END RESULT. 13. THEREFORE, IN VIEW OF THIS PROPOSITION OF LAW, WE ARE OF THE VIEW THAT THE ASSESSEE DURING THE COURSE OF SEARCH OPERATION, HE WAS MAINTAINING REGISTERS OUT OF REGU LAR BOOKS OF ACCOUNT AND ASSESSEE HAS EARNED THE INCOME OF RS. 1 3 LACS, WHICH WAS NOT DISCLOSED BY THE ASSESSEE. THEREFORE, IN OUR OPINION, THE ASSESSEE CONCEALED THIS INCOME. THEREF ORE, THE LD. CIT(A) IS RIGHT IN HOLDING THAT THE ASSESSEE HAS NO T DELIBERATELY AND INTENTIONALLY DISCLOSED TRUE AND CORRECT INCOME AND HELD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME WITH INTENTION TO AVOID THE TAX. HENCE, THE AO AND LD. C IT(A) IS JUSTIFIED IN IMPOSING THE PENALTY ON ACCOUNT OF PEA K ADDITION OF RS. 13 LACS AND PENALTY IMPOSED ON RS. 2,84,078/ - ON -:20:- ACCOUNT OF INTEREST ON ADVANCE GIVEN. WE DIRECT THE AO TO RECALCULATE THE PENALTY ACCORDINGLY. 14. IN RESPECT OF THE ADDITION OF HIGHER PROFIT RATE, W E FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DU RING THE SEARCH AND SEIZURE OPERATION, REGISTER AND LOOSE PA PERS WERE FOUND, WHEREIN CERTAIN TRANSACTION RELATED TO PURCH ASE/SALES WERE RECORDED IN ADDITION TO REGULAR BOOKS OF ACCOU NT. THE ASSESSEE COULD NOT PRODUCE THE PURCHASE AND SALE BI LLS AND VOUCHERS OF EXPENSES WERE NOT PRODUCED. THEREFORE, THE AO COULD NOT VERIFY THE GENUINENESS OF THE TRANSACTION AND EXPENSES. ON THIS BASIS, THE BOOKS OF ACCOUNT WERE REJECTED U/S 145 AND SALES WERE ESTIMATED AT RS. 1,49,76,48 8/- AS AGAINST RS. 1,42,87,043/- AND PROFIT WAS ESTIMATED @ 15.3 % AGAINST THE RATE DECLARED 12.64 %. THUS, THE GROSS PROFIT ADDITION WAS MADE AT RS. 5,00,594/-. 15. FROM THE ABOVE ADDITION, WE FIND THAT THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT, BUT THE ASSESSEE H AS ALSO MAINTAINED TWO SETS OF BOOKS OF ACCOUNT. THEREFORE, ON THE BASIS OF THESE TWO BOOKS OF ACCOUNT, THE AO HAS EST IMATED THE SALES AND ESTIMATED THE GROSS PROFIT ON THE BASIS O F -:21:- PRESUMPTION, THE ADDITION HAS BEEN MADE. THE ADDITI ON MAY BE JUSTIFIED, BUT PENALTY ON ESTIMATE BASIS IS NOT JUSTIFIED, WHICH IS HELD IN THE CASE OF HARIGOPAL SINGH VS. CI T, 258 ITR 85. THEREFORE, WE ARE OF THE VIEW THAT THE TRIBUNAL IS TAKING THE CONSISTENT VIEW THAT IF THE INCOME IS ESTIMATED , NO PENALTY CAN BE LEVIED. THEREFORE, WE CANCEL THE PENALTY REL ATING TO THE GROSS PROFIT ADDITION. 16. IN THE RESULT, FOR ASSESSMENT YEAR 2003-04, WE DELE TE THE PENALTY ON ACCOUNT OF GROSS PROFIT ADDITION OF RS. 3,69,215/- AND WE CONFIRM THE PENALTY ON PEAK ADDIT ION OF RS. 13 LACS AND INTEREST ON ADVANCE GIVEN OF RS. 7,10,7 42/-. IN ASSESSMENT YEAR 2004-05, WE DELETE THE PENALTY ON A CCOUNT OF GROSS PROFIT ADDITION OF RS. 4,05,562/- AND WE CONF IRM THE PENALTY ON AMOUNT OF RS. 1 LAC EXCESS CASH FOUND DU RING THE SEARCH. WE, THEREFORE, DIRECT THE AO TO RECALCULATE THE PENALTY ACCORDINGLY. -:22:- 17. IN THE RESULT, THE APPEALS ARE ALLOWED PARTLY FOR STATISTICAL PURPOSES THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 19 TH AUGUST, 2015. CPU*