ACIT CEN CIR 13, MUMBAI V. HARMONY INVESTMENT & PROPERTIES LTD, MUMBAI

ITA 6793/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84252 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 18-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Search and seizure; Deemed to accrue or arise in india; Commercial expediency
• Section: 143(3); 133A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALH BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI D. KARUNAKARA RAO, AM ITA NOS.6793/MUM/2012 ASSESSMENT YEARS-2009-10 THE DCIT, CENT. CIR-13, ROOM NO.1006, 10 TH FLOOR, OLD CGO ANNEXE BLDG, MUMBAI-400020 / VS. M/S HARMONY INVESTMENT & PROPERTIES LIMITED, ESA-501, KOTIA NIRMAN, NEW LINK ROAD, ANDHERI(W), MUMBAI-400053, ! ./ PAN :AAEFH5314E ( / REVENUE ) .. ( '#!$ / RESPONDENT ) % & / REVENUE BY: SHRI JEETENDRA KUMAR - DR '#!$ % & / RESPONDENT BY : SHRI DR.K.SHIVARAM & SHRI RAHUL K. HAKANI ' () % * + / DATE OF HEARING 19/11/2014 ,- % * + / DATE OF PRONOUNCEMENT : 25/11/2014 / / O R D E R PER JOGINDER SINGH, JM: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 14/08/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUM BAI. THE REVENUE HAS RAISED FOLLOWING GROUNDS;- 2 M/S HARMONY INVESTMENT AND PROPERTIES I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) RELYING ON THE DECISION OF HONBLE APE X COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LIMITED 322 ITR 158, WITHOUT APPRECIATING THE FACT THAT THE DECISION RELI ED UPON WAS NOT SQUARELY APPLICABLE IN THE INSTANT CASE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN ALLOWING TH E APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT IT ONLY AFTER THE SURVEY ACTION THE ASSESSEES ACT OF EXCESS CASH WI THDRAWALS WAS DETECTED , WHICH REMAIN NOT ONLY AN ADMITTED FACT ON RECORD BUT ALSO SUBSTANTIATED BY THE INCRIMINATING EVIDENCE. 2. AT THE TIME OF HEARING, THE LD. DR SHRI JEETENDR A KUMAR, DEFENDED THE IMPOSITION OF PENALTY U/S. 271(1)(C) O F THE ACT AS THE ASSESSEE HAS NOT EXPLAINED THE SOURCE OF RS.5 CRORE AND IN THE ABSENCE OF SURVEY, THE ASSESSEE WOULD HAVE GONE SCOT FREE, CAUSING HUGE LOSS TO THE REVENUE, THEREFORE, THE IN TENTION OF THE ASSESSEE WAS TO DEFRAUD THE REVENUE, CONSEQUENTLY, THE ADDITION WAS RIGHTLY MADE LEADING TO IMPOSITION OF PENALTY. IT WAS ALSO SUBMITTED THAT THE RELIANCE UPON THE DECISION IN THE RELIANCE PETRO PRODUCT LTD. 322 ITR 158 (SC), BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IS WITHOUT APPRECIATING THE FACTS AS PURSUANT TO SURVE Y ACTION THE EXCESS CASH WITHDRAWALS WAS DETECTED. RELIANCE WAS PLACED UPON THE DECISION OF THE TRIBUNAL OF THE MUMBAI BENCH IN THE CASE OF SHREEJI TRADERS VS DCIT (2012) 21 TAXMAN.COM 541 (MUM). 2.1. ON THE OTHER HAND, DR. K. SHIVARAM ALONGWITH S HRI RAHUL HAKANI, LD. COUNSEL FOR THE ASSESSEE DEFENDED THE C ONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BY CONTENDING THAT IT 3 M/S HARMONY INVESTMENT AND PROPERTIES IS A LOSS CASE AND THE ASSESSEE SURRENDERED THE IMP UGNED AMOUNT, WHICH WAS ALLEGED TO BE UNEXPLAINED, THEREFORE, PEN ALTY WAS RIGHTLY DELETED. IT WAS ALSO CONTENDED THAT SINCE THE SURV EY WAS CARRIED OUT U/S 133A OF THE ACT ON 09/02/2009, THERE WAS STILL TIME LEFT WITH THE ASSESSEE TO FILE THE RETURN, CONSEQUENTLY, PENALTY WAS RIGHTLY DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). R ELIANCE WAS PLACED UPON THE DECISION FROM HONBLE DELHI HIGH COURT IN CIT VS S.A.S. PHARMACEUTICALS (2011) 335 ITR 259 (DEL.) AND ACIT VS CRESCENT PROPERTY DEVELOPERS (ITA NO.2770/MUM/2012) ORDER DA TED 19/06/2014 (MUMBAI ITAT). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IF THE OBSERVATION M ADE IN THE ASSESSMENT ORDER, LEADING TO IMPOSITION OF PENALTY, REASONS OF LEVYING THE PENALTY MENTIONED IN THE PENALTY ORDER, CONCLUS ION DRAWN IN THE IMPUGNED ORDER, ASSERTIONS MADE BY THE LD. RESPECTI VE COUNSELS AND THE MATERIAL AVAILABLE ON RECORD, IF KEPT IN JUXTAP OSITION, AND ANALYZED, THE FACTS IN BRIEF ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 AND SURVEY U/S 133A OF THE ACT WERE CARRIED OUT IN THE CASE OF PRAKASH STEELAGE GROUP ON 09/02/2009, WHEREIN THE B USINESS AND RESIDENTIAL PREMISES OF THE GROUP AND ALSO OF THE D IRECTORS WERE COVERED. PURSUANT TO THE AFORESAID ACTION CERTAIN INCRIMINATING MATERIAL, PERTAINS TO THE ASSESSEE, WERE IMPOUNDING , WHICH ARE AVAILABLE ON PAGES 1 TO 38 AS ANNEXURE 1-A TO THE A SSESSMENT ORDER. THE ASSESSEE DECLARED RS. 5 CRORE ON ACCOUNT OF EXC ESS CASH WITHDRAWALS AS UNEXPLAINED MONEY. PURSUANT TO NOTI CES, THE ASSESSEE, ATTENDED THE PROCEEDINGS FROM TIME TO TIM E AND FILED THE DETAILS. 4 M/S HARMONY INVESTMENT AND PROPERTIES 3.1. THE ASSESSEE CARRIED FORWARD THE BUSINESS LOSS OF THE PREVIOUS YEAR AND THUS DECLARED NIL INCOME. FROM THE BALANCE SHEET, IT WAS NOTICED, BY THE ASSESSING OFFICER THAT THE ASSESSEE SHOWED UNSECURED LOANS AMOUNTING TO RS.193,23,57,669/- AND SHOWED RS.184,38,22,653/- AS LOANS, ADVANCES AND DEPOSITS. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HA S SHOWED RS.17,94,82,965/- AS INTEREST PAID ON LOANS AND RS. 13,49,13,050/- AS INTEREST RECEIVED. THE ASSESSEE WAS ASKED TO EXPLA IN AS WHY THE INTEREST IS NOT CHARGED EVEN THOUGH THE ASSESSEE IS PAYING INTEREST ON UNSECURED LOANS AND FURTHER THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF INTEREST PAID AND RECEIVED ALONGWITH PER CENTAGE OF INTEREST CHARGED AND PAID AND ALSO EXPLANATION FOR GIVING IN TEREST FREE LOANS. THE ASSESSEE VIDE COMMUNICATION DATED 21/12/2010 EX PLAINED AS UNDER:- EXPLANATION REGARDING INTEREST FREE LOANS GIVEN & TAKEN :- OUR CLIENT M/S HARMONY INVESTMENT & PROPERTIES IS DOING THE BUSINESS OF FINANCE & INVESTMENTS IN PROPERTIES. DURING THE COURSE OF BUSINESS, THEY HAVE MADE MANY TRADE ADVANCES IN THE INTEREST OF BUSINESS. WE STATE THAT ALL THE ADVANCE S GIVEN ARE OUT OF BUSINESS EXPEDIENCY & OR IN THE NATURE OF TRADE/BUSINESS ADVANCES. HOWEVER, WE ARE GIVING HEREWITH THE LIST OF INTEREST FREE ADVANCES GIVEN DURING 2008-09 ALONG WITH LEDGER COPIES OF THE PARTI ES & WORKING OF INTEREST CALCULATION, IF GIVEN @ 9%. ON PERUSAL OF THE LIST YOUR HONOUR WILL SEE THAT ON TH E LOAN GIVEN PARTIES OF SR. NO.1 TO 9 ARE AS PER TRADE/BUSI NESS AGREEMENTS MADE WITH THEM. THE COPIES OF SAID AGREEMENTS ARE ALREADY FILED WITH YOUR HONOUR IN OUR 5 M/S HARMONY INVESTMENT AND PROPERTIES EARLIER SUBMISSION. THEREFORE THERE SHOULD NOT BE ANY ADDITION ON THIS COUNT AS IT IS PURELY GIVEN AS PER AGREEMENTS & FOR BUSINESS INTEREST. THE LIST OF TH E PARTIES GIVEN IN B SECTION OF THE LIST SR. NO.1 TO 2 6 ARE THE PARTIES WHO ARE HELPING OUR CLIENT FOR THE BUSI NESS I.E. FOR OBTAINING & GIVING LOANS & ADVANCES, FINAN CES, IDENTIFYING INVESTMENTS, PROPERTIES. THEREFORE, THE SE ARE FOR THE PURPOSE BUSINESS ONLY. BESIDES ABOVE WE STATE THAT OUR CLIENT HAS TAKEN THE INTEREST FREE LOANS ALSO FROM THE PARTIES AS PER LI ST THE INTEREST ON WHICH IF CALCULATED @ 9% COMES TO RS.14,06,742/-. THE LIST OF SUCH PARTIES ALONG WIT H INTEREST & LEDGER COPIES OF SUCH PARTIES ARE ENCLOSE D HEREWITH FOR PERUSAL & RECORD. ADVANCE GIVEN: S. NO PARTICULARS ADVANCE GIVEN INTEREST RECEIVED INTERE ST CALCULATION AT 9% ON THE ADVANCES GIVEN 1. INTEREST BEARING FUNDS 130,67,36,507/ - 13 , 49,13,050/- ------ 2. INTEREST FREE LOANS PROPERTY ADVANCES 50,37,01,093/ - ------ 2,08,04,880/- 3. INTEREST FREE LOANS TRADE ADVANCES 3,33,8 5 ,053/- -------- 2 1, 53 , 679/- TOTAL 184,38,22,653/- 13,49,13,050/- 2 ,29,58, 5 59/- UNSECURED LOAN S TAKEN: S. PA R T IC ULAR S UN SEC U RED INTEREST PAID INTEREST NO. LOAN S CA L C U L A T I O N AT G% ON T HE UNSE C UR ED LOANS R E C EIVED 1 INTEREST BEARING FUNDS 191,24,72,384/ - 1 7 , 9 4,8 2 , 965 / - -- 2 INTEREST FREE FUNDS 1 98,85,285/ - - - 14 0 6 ,74 2 /- T O TAL 193 , 23 , 57 , 669/ 1 7 ,94,8 2 ,96 5 / - 14,06,742/ - 6 M/S HARMONY INVESTMENT AND PROPERTIES 3.2. AS PER THE ASSESSING OFFICER/LD. DR, THERE WAS NO EXPLANATION REGARDING EXCESS CASH WITHDRAWALS AND I N THE ABSENCE OF SURVEY THE ASSESSEE SHOULD NOT HAVE SURR ENDERED RS.5 CRORES. THE INCOME WAS CALCULATED AT RS.54,85,112/ -. AS PER THE ASSESSING OFFICER, THE ASSESSEE KEPT THE DEPART MENT IN DARK. THE PENALTY PROCEEDING U/S 271(1)(C) WERE INITIATED VIDE PENALTY ORDER DATED 29/06/2011, WHEREIN THE LD. ASSESSING O FFICER OBSERVED AS UNDER:- 5. THE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CO NSIDERED. THE A SSE SSEE HAS A N UNSECURED LOAN OF RS.193,23,57 , 669/- FOR WHICH ASSESSEE IS HAVING AN INT ERE ST LIABILITY OF RS.17 , 94,82,965/-. THE INTEREST BEARING LOANS ARE TO BE U SED FOR THE DEVELOPME N T OF BUS I NESS RATHER THAN PROVIDING I T INT E R E ST FREE TO OTHER PART I ES. THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO THE PARTIES OUT OF INTEREST BEARING F UNDS. CLEARLY, THIS HAS BEE N D O NE T O R E DUCE PROF I TS. ALSO THE AS S ESSEE HA S NOT F I LED AN APPEA L A G A I NST THE SAI D A DDITION W H ICH COULD MEAN THA T THE ASSESSEE HAS ACC E PTED THE SA I D ADDITION. IN VIEW OF T H E AB O V E T HE A S SESSEE HAS FILED I NACCURAT E PART I CU L ARS OF INCOME TO REDUCE THE P ROFIT OF THE C ONCERN. 5.1. ON ACCOUNT OF ADD I TION OF R S .34, 5 7,OOO/ - , I T I S TO BE STAT E D T H AT TH E AS SESS E E H AS A HUGE INTEREST LIAB I LITY OF RS 17,94 , 82,965 DURING THE RELEVANT A SSESSMENT YEA R. T H I S I S O N ACCOUNT OF OUTSTAND I NG UNSECURED LOAN OF RS.193,23,57,669/- WHICH THE ASSES S E E H AS T AKEN DUR I NG T HE COURSE OF IT S BUS I NESS. BUT, THE PA R TNERS HAVE WITHDR A W N H UG E AMOU NTS A N D R E SULTANTLY THERE IS A DEB I T BALANCE I N THEIR CAP I TAL ACC O UNT 7 M/S HARMONY INVESTMENT AND PROPERTIES OF THE FIRM. THE ENTIRE AMOUNT WI THDRAWN IS NOT USED F OR THE P UR P OS E OF BUS I NESS. THI S HAS BEEN D O N E TO R ED U CE T H E P R OF I TS OF THE FIRM. ALSO THE A S SESSE E HAS NOT F I LED A N A PP E A L A G A IN ST T H E S AI D A D DITI O N WHI C H CO UL D MEAN THAT THE ASSESSEE HAS A C CEPTED T H E SAID ADDITION . IN VI E W OF T H E A B O V E T H E A S SESSE E HAS FILED INA C CURATE PA R TI C ULA R S OF INCOME TO REDUCE THE PROFIT OF THE C O NC E RN . 5.2. THE ASSESSEE HAS ALSO FAILED TO CLEARLY SUBSTA NTIATE THE DECLARATION OF RS.5 CRORE MADE DURING THE COURSE OF SURVEY. THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF CA SH WITHDRAWAL AND EXCESS CASH FOUND. THE SURVEY WAS CONDUCTED ON THE ASSESSEE DURING THE RELEVANT A.Y. AND EVIDENCE COLLECTED DURING THE SURVEY REPORT CLEARLY SUGGESTS THAT THE CASH ENTRIES WERE NOT RECORDED IN THE BOOK S OF ACCOUNTS. THE PARTNER OF THE FIRM, SHRI DHANPAT SE TH HAS ALSO ACCEPTED UNDER STATEMENT ON OATH, THAT THE CASH EXP ENDITURE AND THE CASH WITHDRAWALS WAS NOT RECORDED IN THE BO OKS OF ACCOUNT. HENCEFORTH, IT IS TO BE NOTED THAT IF THE SURVEY ACTION HAD NOT TAKEN PLACE, THIS INCOME OF RS.5 CRORE WOUL D NOT COME IN TO THE LIGHT. HENCE, THE INTENTION OF THE ASSES SEE WAS TO CONCEAL THE INCOME OF RS.5 CRORE. ALSO, SINCE THE ASSESSEE HAS FAILED TO ADDUCE SUFFICIENT EXPLANATION FOR AMOUNT OF RS.5 CRORE DECLARED INTEREST HE SURVEY, THE ASSESSEE IS LIABLE FOR PENALTY U/S 271(1)(C) FOR CONCEALMENT OF INCOME. THE LD. ASSESSING OFFICER CONCLUDED THAT THE ASSES SEE COMMITTED DEFAULT U/S 271(1)(C) OF THE ACT AND THUS THE LEVIE D PENALTY OF RS.1,67,49,017/-. 3.3. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED AS UNDER:_ 8 M/S HARMONY INVESTMENT AND PROPERTIES IN VIEW OF THE ABOVE, I HAVE NO HESITATION IN CANC ELLING THE PENALTY IMPOSED BY THE LD. ASSESSING OFFICER ON THAT PART OF INCOME DECLARED DURING THE COURSE OF SURVEY W HICH HAS BEEN ACCEPTED BY THE LD. ASSESSING OFFICER IN TH E ASSESSMENT MADE U/S. 143(3) WITHOUT MAKING ANY FURT HER ADDITION ON THAT ACCOUNT. PENALTY COULD ONLY BE IMP OSED BY THE LD. ASSESSING OFFICER IF HE HAD MADE ANY ADD ITION IN THIS REGARD. HAVING ACCEPTED THE INCOME OFFERED, HE COULD NOT SAY THAT IF THE SURVEY ACTION WAS NOT COND UCTED, THE INCOME WOULD NOT HAVE COME TO LIGHT AND THEREFORE , THERE WAS A CASE OF CONCEALMENT. SUCH A CONSTRUCTI ON OF LAW IS IMPERMISSIBLE. ACCORDINGLY, PENALTY ON THIS PART OF INCOME IS ALSO CANCELLED. 3.4. AGAINST THE AFORESAID CONCLUSION, THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. UNDER THE F ACTS NARRATED HEREINABOVE AND ALSO WHICH ARE AVAILABLE ON RECORD, THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE LOAN AND ADV ANCES WERE GIVEN INTEREST FREE, DUE TO COMMERCIAL EXPEDIENCY , WE FIND THAT ASSESSEE WAS HAVING INTEREST LIABILITY OF RS.17,94, 82,965/- ON UNSECURED LOANS OF RS.193,23,57,669/- AND SUCH INTE REST BEARING LOANS WERE TO BE USED FOR BUSINESS PURPOSE S RATHER THAN PROVIDING INTEREST FREE TO OTHER PARTIES THAT TO OUT OF INTEREST BEARING FUNDS, WHICH CLEARLY INDICATES THAT THE ASS ESSEE DID THIS WITH A PURPOSE TO REDUCE PROFIT AND NO BUSINESS EXP EDIENCY WAS EXPLAINED. IT IS PERTINENT TO MENTION HERE THAT NO APPEAL WAS FILED BY THE ASSESSEE, MEANING THEREBY, THE DECISIO N OF THE REVENUE FOR MAKING THE ADDITION ON THIS ACCOUNT WAS ACCEPTED BY THE ASSESSEE. THUS, THE ASSESSEE CONCEALED ITS I NCOME WITH AN 9 M/S HARMONY INVESTMENT AND PROPERTIES INTENTION TO REDUCE PROFIT, CONSEQUENTLY, THE PENAL TY WAS RIGHTLY IMPOSED, BECAUSE FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT EITHER THERE SHOULD BE CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF SUCH INCOME. 3.5. SO FAR AS, THE ADDITION OF RS.34,57,000/- IS C ONCERNED. WE NOTE THAT (AS DISCUSSED IN PARA 3.4) THE ASSESSEE W AS HAVING HUGE INTEREST LIABILITY OF RS.17,94,82,965/- AND AT THE SAME TIME THE PARTNERS WITHDREW HUGE AMOUNTS, RESULTING IN TO DEBIT BALANCE IN THEIR CAPITAL ACCOUNT OF THE FIRM. UNCO NTROVERTEDLY, THE AMOUNT, WHICH WAS WITHDRAWN WAS NOT USED FOR BU SINESS PURPOSES AGAIN RESULTING INTO REDUCING THE PROFIT O F THE FIRM. AGAINST THE SAID ADDITION ALSO NO APPEAL WAS FILED BY THE ASSESSEE MEANING THEREBY THE ADDITION WAS ACCEPTED. 3.6. SO FAR AS, DECLARATION OF RS.5 CRORES AS UNEXP LAINED CASH WITHDRAWALS/EXCESS CASH FOUND, DURING SURVEY, WE NO TE THAT THERE WERE NO CASH ENTRIES RECORDED IN THE BOOKS OF ACCOUNT. THIS FACTUAL MATRIX WAS ACCEPTED TO BE CORRECT AT T HE TIME OF RECORDING THE STATEMENT, BEFORE THE DEPARTMENT, BY ONE OF THE PARTNERS OF THE FIRM, SHRI DHANPAT SHETH, WHO TENDE RED ON OATH THAT THE CASH EXPENDITURE AND CASH WITHDRAWALS WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. THUS, IN THE AB SENCE OF THE SURVEY BY THE DEPARTMENT, THE ASSESSEE WOULD HAVE G ONE SCOT FREE THUS THE ASSESSEE CONCEALED ITS INCOME. 3.7. ANOTHER ARGUMENT WAS TAKEN BY THE LD. COUNSEL FOR THE ASSESSEE THAT NO SATISFACTION WAS RECORDED BY THE A SSESSING 10 M/S HARMONY INVESTMENT AND PROPERTIES OFFICER. WE NOTE THAT IN THE PENALTY ORDER IT HAS BEEN OBSERVED/HELD BY THE ASSESSING OFFICER. I AM THEREBY FULLY CONVINCED AND SATISFIED THAT TH E ASSESSEE HAS COMMITTED DEFAULT WITHIN THE MEANING OF SECTION 271 (1)(C) OF THE ACT 1961 AND MADE HIMSELF LIABLE FOR PENALTY. EVEN IN THE ASSESSMENT ORDER DATED 28/12/2010, THE LD. ASSESSING OFFICER HAS CONCLUDED AS UNDER:- THE ASSESSEES EXPLANATION HAS BEEN CAREFULLY CONSIDERED. IT CAN BE SEEN FROM THE EXPLANATION OF T HE ASSESSEE THAT AS THERE WAS NO EXPLANATION TO THE CA SH WITHDRAWALS AND EXCESS CASH FOUND, THE ASSESSEE HAD OFFERED AN AMOUNT OF RS.5 CRORE AS INCOME. HOWEVER, ON PERUSAL OF THE P & L ACCOUNT FILED FOR THE YEAR UND ER REFERENCE, THE ASSESSEE HAD ALREADY OFFERED THE AMOUNT OF RS.5 CRORE TO TAX. HENCE, NO SEPARATE ADDITION IS CALLED FOR ON THIS ISSUE. IF THE SURVEY ACTION COULD NOT B E CONDUCTED, THIS INCOME MAY NOT HAVE COME INTO THE LIG HT AND KEEPS REMAIN IN THE DARK. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT,1961 ARE INITIATED SEPARATELY FOR CONCEALMENT OF INCOME . IN VIEW OF THE ABOVE, IT CAN BE CONCLUDED THAT DUE SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFF ICER AND EVEN OTHERWISE THE INTENTION OF THE ASSESSEE IS CLEAR EI THER TO REDUCE THE PROFIT, (AS WE HAVE DISCUSSED IN THE PRECEDING PARAS) CONCEALING THE TRUE INCOME RESULTING IN TO DEFRAUDI NG/LOSS TO THE REVENUE. THUS, FROM THIS ANGLE ALSO THE ASSESSEE I S HAVING A 11 M/S HARMONY INVESTMENT AND PROPERTIES WEAK CASE. EVEN OTHERWISE, IT IS NOT THE CASE EITH ER THE ASSESSMENT ORDER OR THE PENALTY ORDER WAS PASSED WI THOUT PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. IN LATER PART OF PARA 6.1 (AT PAGE 3) OF THE ASSESSMENT ORDER, IT HA S BEEN SPECIFICALLY MENTIONED THAT PENALTY PROCEEDING U/S 271(1)(C) OF THE INCOME TAX ACT,1961 ARE INITIATED SEPARATELY FO R CONCEALMENT OF INCOME . SIMILAR OBSERVATION HAS BEEN MADE IN THE CONCLU DING PORTION OF PARA 6.2 WITH REGARD TO NEGATIVE CAPITAL IN PARTNERS CAPITAL ACCOUNT, WHEREIN, IT HAS BEEN CONCLUDED THA T THE DEBIT BALANCE IN THE CAPITAL ACCOUNT HAS HAPPENED BECAUSE OF EXCESS WITHDRAWALS BY THE PARTNERS MORE SPECIFICALLY WHEN THE FIRM HAS BORROWED UNSECURED LOANS AMOUNTING TO RS.193,23,57, 669/- AND PAID INTEREST OF RS.17,94,82,965/-. THE DAYWISE AN D PARTNERWISE INTEREST DETAILS, HAVE BEEN REPRODUCED IN PARA 3.2 OF THE ASSESSMENT ORDER WHICH CLEARLY INDICATES THAT THE A SSESSEE HAS NOT ESTABLISHED ANY BUSINESS EXIGENCIES (AS HAS B EEN CLAIMED BY THE ASSESSEE) RATHER IT IS A CLEAR CUT CASE OF R EDUCING THE PROFIT WHICH RESULTED INTO LOSS TO THE REVENUE. IN VIEW OF THESE FACTS, IT CAN BE CONCLUDED THAT THE PENALTY PROCEEDINGS WERE RIGHTLY INITIATED/IMPOSED. 3.8. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) M ERE DELETED THE PENALTY ON FLIMSY GROUNDS BECAUSE BEFORE PENALT Y IS IMPOSED THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENT THE I NCOME AND THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICUL ARS OF INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULAR S AS WAS HELD BY HONBLE APEX COURT IN CIT VS ANWAR ALI 76 ITR 69 6. 12 M/S HARMONY INVESTMENT AND PROPERTIES PROCEEDINGS CAN BE INITIATED AT ANY TIME AS WAS HEL D IN JYOTI PRAKASH MITTER VS UOI 112 ITR 378 (CAL.). IN AM SH AH AND COMPANY VS. CIT 108 TAXMAN 137 (GUJ). IT WAS HELD THAT CONCEALMENT/INACCURACY MUST BE CONSIDERED UP TO FIN AL STAGE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE SHERET ON APPARELS VS ACIT 256 ITR 20 (BOM.) HELD THAT BOOKS OF ACCOUNT R EFERS TO THOSE BOOKS WHICH ARE MAINTAINED FOR INCOME TAX PUR POSES. THE ASSESSEE HAS MAINTAINED ITS BOOKS OF ACCOUNTS IN SU CH A MANNER SO THAT THE LEGITIMATE TAXES, DUE TO THE DEPARTMENT, A RE REDUCED WITHOUT THE PERMISSION OF THE LAW MEANING THEREBY WITH WRONG INTENTION AND SUCH BOOKS ARE NOT DEPICTING TRUE PICTURES OF I TS ACCOUNTS. 3.9. NOW, WE SHALL TAKE UP THE CASE LAWS RELIED UPO N FROM BOTH SIDES. THE LD. COUNSEL FOR THE ASSESSEE PLACED REL IANCE UPON THE DECISION FROM HONBLE DELHI HIGH COURT IN SAS PHARM ACEUTICALS (SUPRA) WHEREIN, PENALTY PROCEEDINGS WERE INITIATED AS DISCREPANCIES WERE FOUND DURING SURVEY AND ASSESSEE MADE A SURRENDER OF THE ENTIRE AMOUNT IN THE RETURN DULY F ILED. THE HONBLE COURT OBSERVED S UNDER:- UNLESS IT WAS FOUND THAT THERE WAS ACTUALLY CONCEAL MENT OR NONE DISCLOSURE OF THE PARTICULARS OF INCOME, PE NALTY COULD NOT BE IMPOSED. THERE WAS NO SUCH CONCEALMENT OR NON DISCLOSURE AS THE ASSESSEE HAS MADE COMPLETE DISCLOSURE IN THE RETURN AND OFFERED THE SURRENDERE D AMOUNT FOR THE PURPOSES OF TAX . HOWEVER, IN THE PRESENT APPEAL, THE FACTS ARE DIFFE RENT BECAUSE IT IS NOT MERELY THE CASE OF SURRENDER RATHER FROM THE BEGINNING ITSELF THE ASSESSEE TRIED TO CONCEAL ITS INCOME AS HAS BEEN 13 M/S HARMONY INVESTMENT AND PROPERTIES DETAILED IN PARAS 5 TO 5.2 OF THE PENALTY ORDER AND THE ASSESSEE KNOWING FULLY WELL THAT IT HAS CONCEALED ITS INCOME , ACCEPTED THE ADDITION AND NO APPEAL WAS FILED, THEREFORE, NO REL IEF CAN BE EXTENDED TO THE ASSESSEE AS THE FACTS ARE DISTINGUI SHABLE. EVEN OTHERWISE THE FACTUAL MATRIX WAS ACCEPTED BY THE PA RTNERS OF THE ASSESSEE FIRM WHILE TENDERING STATEMENT BEFORE THE DEPARTMENT 23/01/2009. OUR VIEW FIND SUPPORT FROM THE DECISIO N OF THE TRIBUNAL DATED 13/01/2012 IN THE CASE OF SHREEJI TR ADERS VS DCIT (2012) 21 TAXMAN.COM 541 (MUMBAI ITAT). THERE IN ALSO ADDITIONAL INCOME WAS FILED U/S 153A, PURSUANT TO A SEARCH LEADING TO DETECTION OF INCRIMINATING DOCUMENTS, SH OWING SUPPRESS SALES/PURCHASES, IT WAS HELD THAT ASSESSEE WOULD NOT HAVE DISCLOSED THE INCOME WHICH WAS FOUND DURING TH E COURSE OF SEARCH. THE PENALTY WAS HELD TO BE RIGHTLY IMPOSED . IT IS PERTINENT TO MENTION HERE THAT THE AFORESAID CONCLU SION WAS ARRIVED AT BY THE TRIBUNAL EVEN AFTER CONSIDERING T HE FOLLOWING CASES. I. K.P. MADHUSUDAN VS CIT (2001) 251 ITR 99 (SC)(PARA -3 ) II. CIT VS RELIANCE PETRO PRODUCT LTD. 322 ITR 158 (SC) ( PARA-5). III. SHERATON APPEALERS VS. ACIT 256 ITR 20 (BOM) (PARA-6 ) IV. CIT VS KANHAIYALAL SARUPAIA 299 ITR 19 (RAJ.)(PARA- 11) V. ACIT VS KIRIT DAHYABHAI PATEL 121 ITD 159 (AHD.)(P ARA-12) VI. CIT VS S.D.V. CHANDRU 266 ITR 175 (MAD.)(PARA-12) VII. AJIT B. ZOTA VS ACIT 40 SOT543 (MUM)(PARA-12) VIII. MAHENDRA MITTAL VS. ACIT 132 ITD 80 (MUM) (PARA-12) 14 M/S HARMONY INVESTMENT AND PROPERTIES IX. CIT VS SHRI SUNIL V.SANGOI (ITA NOS. 615 TO 619/MUM/2 010) (PARA-12) X. ACIT VS RUPESH BHALIDAS PATEL 309 ITR (AT) 217 (AHD ) (PARA-14) XI. CIT VS AVINASH CH. GUPTA 40 SOT 85 (KOL.) (PARA-14) XII. DCIT VS OMKARESHWAR R. KALANTRI 42 DTR 489 (PUNE) XIII. SARLA M. AHUJA VS DCIT (ITA NO.1301/PN/2007 (PARA-1 6) 3.10. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRO NOUNCEMENTS DISCUSSED HEREINABOVE INCLUDING RELIED UPON BY THE LD. REPRESENTATIVES FROM BOTH SIDES ARE ANALYZED, WE FI ND THAT THE PENALTY WAS IMPOSED BY THE ASSESSING OFFICER FOR CO NCEALMENT OF INCOME, WHEREAS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SAME BY WRONGLY OBSERVING THAT PENALTY COULD ONLY BE IMPOSED BY THE ASSESSING OFFICER, IF, HE HAS NOT MA DE ANY ADDITION IN THIS REGARD. RATHER, WE NOTE THAT WHIL E MAKING THE ADDITION JUSTIFIABLY THE ASSESSING OFFICER HAS OBSE RVED THAT THE ASSESSEE CONCEALED ITS INCOME AND REACHED TO A PART ICULAR CONCLUSION BOTH AT ASSESSMENT STAGE VIDE ORDER DATE D 28/12/2010 AND ALSO WHILE PASSING THE PENALTY ORDER ON 29/06/2011. THERE WAS CATEGORICAL FINDING/MENTIONE D IN THE TABLE AVAILABLE AT PAGE 3 OF THE ASSESSMENT ORDER W HICH HAS BEEN REPRODUCED BY US AT PAGE 5 OF THIS ORDER FROM WHICH IT IS CLEARLY OOZING OUT THAT THE ASSESSEE ADVANCE INTEREST FREE LOANS OF RS.50,37,01,093/- AND ADVANCED BEARING FUNDS WERE T O THE TUNE OF RS.130,67,36,507/-. THUS, THE TOTAL ADVANCES WE RE 15 M/S HARMONY INVESTMENT AND PROPERTIES RS.184,38,22,653/-. SIMILARLY, THE ASSESSEE TOOK U NSECURED LOANS OF RS.190,24,72,384/- ON WHICH THE ASSESSEE P AID INTEREST OF RS.17,94,82,965/-. THERE IS UNCONTROVERTED FIND ING IN THE ASSESSMENT ORDER THAT ASSESSEE NEITHER FILED ANY DO CUMENTARY EVIDENCE FOR THE GENUINENESS OF THE TRANSACTIONS NO R PROVED THAT THE PRINCIPLE AMOUNT WERE GIVEN AS TRADE ADVANCES A S BUSINESS EXIGENCIES. LIKEWISE, THERE WAS NEGATIVE CAPITAL OF PARTNERS WHICH STOOD AT RS.10,45,95,482/- BECAUSE OF EXCESS WITHDR AWALS BY THE PARTNERS, MOREOVER, THE FIRM BORROWED UNSECURED LOA NS AMOUNTING TO RS.193,23,57,669/- AND PAID INTEREST O F RS.17,94,82,965/- THEREUPON, AS IS EVIDENT FROM THE CAPITAL ACCOUNT MENTIONED AT PAGE 4 OF THE ASSESSMENT ORDER ONWARD (PARA 6.2). THUS, THE TOTALITY OF FACTS CLEARLY IN DICATES THAT FROM THE BEGINNING ITSELF THE ASSESSEE TRIED TO CONCEAL ITS INCOME IN SUCH A WAY SO THAT THE LEGITIMATE TAX, DUE TO THE D EPARTMENT, CAN BE REDUCED WITH AN INTENTION TO DEFRAUD THE REV ENUE. THERE IS A DIFFERENCE BETWEEN TAX PLANNING AND TAX AVOIDA NCE. IT IS A CLEAR CASE OF CONCEALMENT OF INCOME, THEREFORE, IN OUR HUMBLE OPINION, EVEN THE DECISION FROM HONBLE APEX COURT IN RELIANCE PETRO PRODUCTS (322 ITR 158)(SC) CANNOT COME TO THE RESCUE OF THE ASSESSEE. IT IS NOT A CASE OF BONA-FIDE MISTAKE WHEREIN A BENEFIT OF THE DECISION IN CIT VS SKYLINE AUTO PROD UCTS PVT. LTD. 271 ITR 335 (MP) CAN BE EXTENDED TO THE ASSESSEE, R ATHER IT IS A CASE OF INTENTIONAL CONCEALMENT OF INCOME. FOR IMP OSING PENALTY U/S 271(1)(C) OF THE ACT EITHER THERE SHOULD BE CON CEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE TERM BOOKS OF ACCOUNT REFERRED TO IN SUB-CLAUSE(1 ) OF 16 M/S HARMONY INVESTMENT AND PROPERTIES EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT MEANS BOOKS OF ACCOUNT WHICH HAVE BEEN MAINTAINED FOR DETERMINING ANY SOURCE OF INCOME FOR THE PURPOSES OF COMPUTATION OF TOTAL INCOME AND FOR CHARGING INCOME TAX THEREON. MEANING THEREBY, IN S UCH BOOKS OF ACCOUNT THE ASSESSEE IS EXPECTED TO PROVIDE CREDIB LE DATA AND INFORMATION WITH THE PURPOSE OF FILING TAX RETURN. A CREDIBLE ACCOUNTING RECORD PROVIDES THE BEST FOUNDATION FOR FILING RETURN OF BOTH DIRECT AND INDIRECT TAXES. THIS IS NOT POSSIB LE UNLESS THE MAIN OBJECTIVES OF THE BOOKS OF ACCOUNTS ARE TO MAI NTAIN A RECORD OF BUSINESS: TO CALCULATE PROFIT EARNED OR LOSS SUF FERED DURING THE RELEVANT PERIOD, TO DEPICT THE FINANCIAL POSITION O F THE BUSINESS, TO PORTRAY THE LIQUIDITY POSITION, TO PROVIDE UPTODATE INFORMATION OF ASSETS AND LIABILITIES WITH A VIEW TO DERIVE INFORM ATION SO AS TO PREPARE PROFIT AND LOSS ACCOUNT AND DRAW A BALANCE SHEET TO DETERMINE INCOME AND SOURCE THEREOF. IT CANNOT BE UNDERSTOOD TO MEAN TO COMPILATION ARE COLLECTION OF SHEETS IN ONE VOLUME, THUS BOOKS OF ACCOUNTS ARE THOSE BOOKS OF ACCOUNT WHICH ARE MAINTAINED FOR THE PURPOSES OF INCOME TAX ACT AND N OT DIARIES MAINTAINED FOR PRIVATE RECORD. POWER TO IMPOSE PENA LTY U/S 271(1)(C) OF THE ACT DEPENDS UPON THE SATISFACTION OF THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT P ROCEEDINGS. OUR VIEW FINDS SUPPORT FROM THE RATIO LAID DOWN BY THE FULL BENCH OF HONBLE DELHI HIGH COURT IN CIT VS RAMPUR ENGINE ERING COMPANY LTD. (2009) 309 ITR 143 (DEL.)(FB). EVEN O THERWISE, THE WORD INCOME IS READ TO INCLUDE LOSSES. IT BECOME S CRYSTAL CLEAR THAT EVEN IN A CASE WHERE ON ACCOUNT OF ADDITION CO NCEALED INCOME IS RETURNED LOSS STAND REDUCED AND EVEN IF F INAL ASSESSED 17 M/S HARMONY INVESTMENT AND PROPERTIES INCOME IS LOSS PENALTY IS LEVIABLE BECAUSE INCOME I NCLUDES DEEMED INCOME ALSO. OUR VIEW FIND SUPPORT FROM THE DECISION IN CIT VS UNIPOL CHEMICALS INTERMEDIATES LTD. 211 TAXM AN 45 (SC), CIT VS GOLD COIN HEALTH FOOD PVT. LTD. 304 ITR 308 (SC) AND CIT VS RMP PLASTO (P.) LTD. (2009) 184 TAXMAN 372 (SC). BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANC ES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTE D AMOUNT REPRESENTED INCOME AND THE ASSESSEE HAS CONSCIOUSLY CONCEALED AS WAS HELD IN CIT VS ANWAR ALI 76 ITR 696 (SC). IN VIEW OF THESE FACTS AND THE FOREGOING DISCUSSIONS, THE STAND OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS REVERSED. APPEAL OF THE REVENUE IS ALLOWED. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER, 2014 SD/- SD/- D.KARUNAKARA RAO JOGINDER SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER ' 0) MUMBAI; 1 ( DATED.- 25/11/2014 F{X~{T? P.S/. ( . . !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. 23!$ / THE APPELLANT 2. '#!$ / THE RESPONDENT. 3. ' 4* ( 23 ) / THE CIT(A)- CONCERNED, MUMBAI 4. ' 4* / CIT CONCERNED, MUMBAI 18 M/S HARMONY INVESTMENT AND PROPERTIES 5. 56 '*(7 , 23+ 27 , ' 0) / DR, ITAT, MUMBAI E BENCH 6. 8 9) / GUARD FILE. % / BY ORDER, #53* '* //TRUE COPY// & / %' ( (DY./ASSTT. REGISTRAR) , ' 0) / ITAT, MUMBAI.