Sh. Jawahar Lal Jain (HUF), Chandigarh V. ACIT, Chandigarh

ITA 725/CHANDI/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68417 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Valuation report; Retraction; Revised return; Bonafide mistake; Reassessment proceedings
• Section: 11A; 153A; 133(6); 139(5); 132; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 725/CHD/2011 ASSESSMENT YEAR : 2007-08 JAWAHAR LAL JAIN (HUF) V A.C.I.T. PROP. M/S NIKKA MAL BABU RAM CENTRAL CIRCLE SCF 18-19, SECTOR 22-D CHANDIGARH CHANDIGARH AABHJ 6142 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING 10.7 .2013 DATE OF PRONOUNCEMENT 27.8.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 26.5.2011 OF THE LD. CIT(A)-I, LUDHIANA. 2 IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE IMPOSITION OF PENALTY OF RS. 67,75,500/- U/S 271(1) (C OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 2 THAT THE ASSESSEE HAVING SURRENDERED THE AMOUNT SUBJECT TO NO PENALTY AND PROSECUTION DOES NOT INVI TE LEVY OF PENALTY AS THE TAXES DUE ON THE SURRENDERED 2 AMOUNT HAVE BEEN DULY PAID ANODES SUCH THE PENALTY LEVIED AND UPHELD IS ILLEGAL, ARBITRARY AND UNJUSTI FIED. 3 THAT AGREEMENT FOR SURRENDER HAS TO BE FULLY COMPLIED WITH AS THE ASSESSEE HAS FULFILLED HIS PAR T WHILE THE DEPARTMENT FAILED TO FULFILL ITS COMMITME NT OF NOT LEVYING PENALTY AND AS SUCH THE PENALTY LEVIED MERITS DELETION 4 WITHOUT PREJUDICE TO THE ABOVE, EVEN OTHERWISE, THE ADDITION WAS MADE WAS FOR THE REASON THAT MOST OF THE LETTERS SENT BY THE DEPARTMENT FOR CONFIRMATION CAME BACK UNDELIVERED WHICH AT THE MOST CAN RAISE SUSPICION ONLY WHICH CANNOT LEAD TO IMPOSITION OF PENALTY U/S 27191)(C) AND AS SUCH THE PENALTY LEVIE D IS ILL3GAL, UNJUSTIFIED AND ARBITRARY. 5 THAT THE ADDITION MADE LEADING TO IMPOSITION OF PENALTY WAS BASED ON A FEW STATEMENT RECORDED AT TH E BACK OF THE ASSESSEE WITHOUT ANY OPPORTUNITY OF CRO SS EXAMINATION FLOUTING THE PRINCIPALS OF NATURAL JUST ICE AND AS SUCH THE PENALTY IMPOSED AND UPHELD BY CIT(A ) IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 3 IN THIS CASE THE ASSESSEE HAS MOVED AN APPLICATIO N DATED 16.7.2012 FOR ADMISSION OF ADDITIONAL EVIDENC E UNDER RULE 29 OF INCOME TAX (APPELLATE TRIBUNAL) RULES 19 63. THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE APPLICA TION AND SUBMITTED THAT THESE DOCUMENTS MAY BE ADMITTED. HE POINTED OUT THAT THE TIME AVAILABLE DURING ASSESSME NT PROCEEDINGS WAS NOT SUFFICIENT TO PROCURE THESE DOC UMENTS AND THEREFORE, THIS APPLICATION IS BEING FILED. 3 4 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE MAINLY ON THE BASIS THAT NO REASON HAS BEEN GIVEN WHY THESE DOCUM ENTS COULD NOT BE FILED BEFORE THE ASSESSING OFFICER OR THE LD. CIT(A). 5 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. T HE RELEVANT CONTENTS OF THE APPLICATION DATED 16.7.201 2 READS AS UNDER: THE ABOVEMENTIONED APPEAL STANDS FIXED FOR HEARING TOMORROW THE 17 TH OF JULY, 2012. THE ASSESSEE IS IN APPEAL BEFORE THE HONBLE BENCH AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS. 67,75,500/ - WHICH HAS BEEN CONFIRMED BY THE LD. COMMISSIONER OF INCOM E TAX (APPEALS). THE PREMISES OF THE ASSESSEE WERE SUBJECTED TO SEAR CH ON 27.10.2006. DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF IN COME TAX (APPEALS), IT WAS SUBMITTED BY THE ASSESSEE FIR M THAT EXCESS STOCK FOUND AT THE TIME OF SEARCH WAS BELONG ING TO CUSTOMERS AND SUPPLIERS WHOSE STOCK WAS LYING WITH THEM FOR APPROVAL. THE ASSESSEE HAS SINCE PROCURED AFFIDAVITS FROM A F EW CUSTOMERS WHOSE GOLD WAS LYING WITH THE ASSESSEE FI RM AND THEY HAVE CONFIRMED HAVING DEPOSITED THE SAME WITH THE ASSESSEE. THE LIST OF CUSTOMERS WHO HAVE GIVEN THES E AFFIDAVITS ARE AS UNDER: SR. NO. NAME ADDRESS PAGES 1. SHRI MANISH KHANNA` # 290-C, GREEN AVENUE, AMRITSAR 1-3 2. MRS. MONICA GOYAL ABM AVENUE, BOAT CLUB ROAD, CHENNAI. 4-5 4 3. MRS. SANTOSH REIKHY # 1513, SECTOR 18, CHANDIGARH 6 4. SHRI RAJPAL GUPTA # 51, WARD NO. 10. SODHI COLONY, KURALI (PUNJAB) 7-9 5. SHRI ASHU VERMA # 159,SECTOR 15-A, CHANDIGARH 10-13 6 MS. ANU # 159, SECTOR 15-A, CHANDIGARH 14-16 7 SHR M.K. BHATIA # 1021, SECTOR 15-A, CHANDIGARH 17-20 8. SHRI AMIT KAPOOR # 613, SECTOR 8, PANCHKULA 21-2 4 9. MRS. MANJU JAIN (FIVE AFFIDAVITS) # 67, SECTOR 8A, CHANDIGARH 25-29 10 SHRI RAJ BHULLAR # 1769, BEAR CROFT COURT KAMLOOPS, B.C. CANADA 30 11 MRS. BINA BANSAL #17216, FOUNDERS MILL DR. ROCKVILLE, MD-20855, USA 31-34 12. MRS. NEERU PABBY # 2520, RUDOLPH DR. SIMI VALLEY, CA USA 35-37 13 SHRI. BALJIT SINGH #1564, SECTOR 38B, CHANDIGARH 38 14. MRS. RACHNA JAIN # 1195, PHASE 3B2, MOHALI. 39-41 15. MRS. SUMAN JAIN #4467, DELAFIELD CT., ROSEWELL, GA, 30074 USA 42 16. MRS. SHWETA MOHINDRA # 1614, SECTOR 18-D, CHANDIGARH. 43-45 17. SHRI ONKAR SINGH # 1381/6, DERABASSI, PUNJAB. 4 6-48 18. SHRI. RAJESH DHIR #171, SECTOR 6, PANCHKULA. 49 -51 19. MRS. SIMRAN CHAHAL #598, PHASE 3, MOHALI. 52-55 DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSI NG OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS ), THE ASSESSEE HAD REPEATEDLY STATED THAT SOME STOCK OF D IAMOND JEWELLERY WAS LYING WITH THE ASSESSEE ON CONSIGNMEN T BASIS FOR APPROVAL. ONE OF SUCH SUPPLIER WAS M/S IRA DIAM OND WHO HAS SINCE SENT A CERTIFIED COPY OF THE STATEMEN T OF STOCK LYING WITH THE ASSESSEE AS ON THE DATE OF SEA RCH I.E. 27.10.2006. THE SAME IS PLACED AT PAGES 56-58 OF ADDITIONAL EVIDENCE. THIS EVIDENCE COULD NOT BE SUBMITTED EARLIER FOR WA NT OF PROPER PROFESSIONAL GUIDANCE. IT IS, THEREFORE, RES PECTFULLY PRAYED THAT IN VIEW OF THE PECULIAR FACTS OF THE IN STANT 5 APPEAL, THE ADDITIONAL EVIDENCE MAY PLEASE BE ADMIT TED AND ADJUDICATED UPON. 6. FIRST OF ALL IT WOULD BE SEEN CLEARLY THAT WHATE VER DOCUMENTS HAVE BEEN GIVEN, COULD HAVE BEEN PROCURED EARLIER AND FILED BEFORE THE ASSESSING OFFICER OR THE LD. CIT(A). SECONDLY ALL THESE DOCUMENTS PERTAINED TO ASSESSMENT PROCEEDINGS WHICH HAVE ALREADY BEEN FINA LIZED AND THE PRESENT APPEAL IS REGARDING CONFIRMATION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT THROUGH THE IMPUGN ED ORDER. IT IS SETTLED POSITION OF LAW THAT ASSESSMENT PROCE EDINGS AND THE PENALTY PROCEEDINGS ARE INDEPENDENT. IT IS FUR THER WELL SETTLED THAT ANY PROCEEDINGS WHICH HAVE BECOME FINA L, CAN NOT BE AGITATED IN ANY OTHER PROCEEDINGS LATER ON. SINCE THE ASSESSEE HAS HIMSELF FIRSTLY MADE SURRENDER OF THE INCOME WHICH HAVE BEEN ASSESSED AND SECONDLY THE ASSESSEE HAS NOT FILED ANY APPEAL IN THE QUANTUM PROCEEDINGS WHI CH MEANS THE ASSESSEE HAS ACCEPTED THE ASSESSMENT PROCEEDINGS AND THEREFORE, THE ASSESSEE HAS NO REA SON TO AGITATE THE ASSESSMENT PROCEEDINGS DURING PENALTY PROCEEDINGS. THIS ISSUE CAME UP FOR CONSIDERATION OF HON'BLE MADHYA PRADESH HIGH COURT IN CASE OF S.S. RATANCHAND BHOLANATH V CIT, 210 ITR 682 (M.P). DU RING 6 PENALTY PROCEEDINGS QUESTION NO. 2 REGARDING VALIDI TY OF THE ASSESSMENT WAS RAISED AS UNDER: QUESTION NO. 2 - IF THE ANSWER TO QUESTION NO. (1) IS IN THE AFFIRMATIVE WHETHER THE QUESTION OF LEGAL ITY OF THE ASSESSMENT COULD BE GONE INTO IN PENALTY PROCEEDINGS? DEALING WITH THIS QUESTION HON'BLE HIGH COURT OBSER VED AND HELD AS UNDER: QUESTION NO. 2 : IT IS CONTENDED FOR THE REVENUE T HAT EVEN ASSUMING THAT THE ADDITION OF RS. 11,027 IN THE INCOME WAS E RRONEOUS, THE ASSESSEE CANNOT RAISE THIS QUESTION IN PENALTY PROC EEDINGS SINCE THE REASSESSMENT ORDER WAS NOT CHALLENGED IN APPEAL. TH E ANSWER OF THE ASSESSEE IS THAT PENALTY PROCEEDINGS ARE QUASI-CRIM INAL IN NATURE, THAT THE DEPARTMENT HAS TO ESTABLISH IN PENALTY PROCEEDI NGS THAT THERE HAS BEEN CONCEALMENT OF INCOME, THAT THOUGH THE FINDING S IN THE ASSESSMENT ORDER CONSTITUTE EVIDENCE IN PENALTY PRO CEEDINGS THEY ARE NOT CONCLUSIVE AND THE MATTER HAS TO BE DECIDED AFR ESH IN PENALTY PROCEEDINGS. THEREFORE, IT IS SUBMITTED THAT THE AS SESSEE CAN CHALLENGE THE ASSESSMENT ORDER IN THE PENALTY PROCEEDINGS. TH E ASSESSEE RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN JAINARA YAN BABULAL VS. CIT (1988) 69 CTR (BOM) 201 : (1988) 170 ITR 399 (B OM). THIS DECISION RELIES ON AN EARLIER DECISION OF THE BOMBA Y HIGH COURT IN CIT VS. GOKULDAS HARIVALLABHDAS (1958) 34 ITR 98 (BOM), WHICH IS APPROVED BY THE SUPREME COURT IN CIT VS. ANWAR ALI (1970) 76 ITR 696 (SC). IN ANWAR ALI'S CASE (SUPRA), THE SUPREME COURT HAS INDICATED THAT THE PROVISION IN QUESTION IS PENAL IN THE SENSE THAT IT S CONSEQUENCES ARE INTENDED TO BE AN EFFECTIVE DETERRENT WHICH WILL PU T A STOP TO PRACTICES WHICH THE LEGISLATURE CONSIDERS TO BE AGAINST THE P UBLIC INTEREST AND HELD THAT IF THERE IS NO EVIDENCE ON THE RECORD EXC EPT THE EXPLANATION GIVEN BY THE ASSESSEE, WHICH EXPLANATION HAS BEEN F OUND TO BE FALSE, IT DOES NOT FOLLOW THAT THE RECEIPT CONSTITUTES HIS TA XABLE INCOME. THE COURT OBSERVED : 'IT MUST BE REMEMBERED THAT THE PROCEEDINGS UNDER S . 28 ARE OF A PENAL NATURE AND THE BURDEN IS ON THE DEPARTMENT TO PROVE THAT A PARTICULAR AMOUNT IS A REVENUE RECEIPT. IT WOULD BE PERFECTLY LEGITIMATE TO SAY THAT THE MERE FACT THAT THE EXPLANATION OF T HE ASSESSEE IS FALSE 7 DOES NOT NECESSARILY GIVE RISE TO THE INFERENCE THA T THE DISPUTED AMOUNT REPRESENTS INCOME. IT CANNOT BE SAID THAT THE FINDI NG GIVEN IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE. HOWEVER, IT IS GOOD EVIDENCE. BEFORE PE NALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONA BLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTED INC OME AND THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS.' [EMPHASIS, SUPPLIED] A READING OF THE ABOVE OBSERVATIONS SHOWS THAT WHIL E ASSESSMENT PROCEEDINGS MAY CONSTITUTE GOOD EVIDENCE IN PENALTY PROCEEDINGS, THEY ARE NOT CONCLUSIVE. THE STATUTORY AUTHORITY DE ALING WITH PENALTY PROCEEDINGS MUST BE SATISFIED THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME WHICH ATTRA CTS THE PENAL PROVISIONS OF THE ACT. IN THE PRESENT CASE, THE ASS ESSEE HIMSELF TOLD THE ASSESSING OFFICER THAT THERE WAS A SUPPRESSION OF I NCOME TO THE EXTENT OF RS. 11,027. THIS WAS ALSO VERIFIED BY THE ASSESS ING OFFICER, AND HENCE THE QUESTION OF THE AUTHORITY IN PENAL PROCEE DINGS COMING TO ANY CONCLUSION DIFFERENT FROM THE ONE ARRIVED AT IN THE REASSESSMENT PROCEEDINGS DOES NOT ARISE. THE ABOVE DECISION IS N OT AN AUTHORITY FOR THE PROPOSITION THAT WHERE THE REASSESSMENT IS NOT CHALLENGED IN APPEAL, THE ORDER AS SUCH CAN BE COLLATERALLY CHALL ENGED IN PENALTY PROCEEDINGS. IF THE ASSESSMENT ORDER OR REASSESSMENT ORDER BECOMES FINAL, THAT IS BINDING ON BOTH THE PARTIES AND NEITHER PARTY CAN SEEK TO REOPEN IT IN A PENALTY PROCEEDING . THIS CONCLUSION, OF COURSE, DOES NOT AFFECT THE SETTLED POSITION OF LAW THAT THE ASSESSMENT ORDER OR REASSESSMENT ORDER IS NOT C ONCLUSIVE IN PENALTY PROCEEDING. WE, THEREFORE, HOLD THAT QUESTI ON NO. 2 HAS TO BE ANSWERED IN FAVOUR OF THE REVENUE. FROM ABOVE IT BECOME ABSOLUTELY CLEAR THAT THE ASSE SSMENT PROCEEDINGS CAN NOT BE CHALLENGED IN THE PENALTY PROCEEDINGS. SINCE ADDITIONAL EVIDENCE IS SOUGHT T O BE FILED IN RESPECT OF ASSESSMENT PROCEEDINGS AND AS OBSERVE D EARLIER THE SAME HAVE BECOME FINAL, NO PURPOSE WOUL D BE SERVED IF SUCH ADDITIONAL EVIDENCE IS ADMITTED. AC CORDINGLY WE DECLINE TO ADMIT THIS ADDITIONAL EVIDENCE. 8 7 THOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT ON LY DISPUTE BEFORE US IS REGARDING CONFIRMATION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 8 BRIEF FACTS OF THE CASE ARE THAT M/S NIKKA MAL BA BUL RAM IS A PROPRIETARY CONCERN OF SHRI JAWAHAR JAIN ( HUF). THE ASSESSEE IS A JEWELER AND A SEARCH ACTION WAS T AKEN AGAINST THE ASSESSEE ON 27.10.2006. DURING SEARCH, EXCESS CASH AND STOCK WAS FOUND AND SOME OF THIS HAS BEEN SEIZED ALSO. A STATEMENT OF THE ASSESSEE WAS RECORDED DURI NG SEARCH THROUGH WHICH THE ASSESSEE WAS CONFRONTED WI TH THE DISCREPANCIES IN RESPECT OF CASH AS WELL AS EXCESS STOCK FOUND DURING THE SEARCH. THE ASSESSEE STATED THAT HE IS NOT IN A POSITION TO RECONCILE VARIOUS DISCREPANCIES AS WELL AS STOCK AND CASH AND THEREFORE, SURRENDERED A SUM OF RS. 2.50 CRORES AS UNDISCLOSED INCOME FOR ASSESSMENT YEAR 20 07-08. A DETAILED DISCLOSURE IS AS UNDER: (I) EXCESS CASH FOUND AT HIS RESIDENCE RS. 50,00,000/- (II) EXCESS GOLD STOCK OF M/S NMBR RS. 75,34,000/- (III) EXCESS DIAMOND STOCK OF NMBR RS. 1,20,00,000/- 9 THIS DISCLOSURE ACCORDING TO THE LD. CIT(A), WAS V OLUNTARY WITHOUT ANY FORCE OR PRESSURE IN THE STATEMENT RECO RDED U/S 132(4) OF THE ACT. IT IS ALSO RECORDED BY THE LD. CIT(A) THAT THE DISCLOSURE WAS MADE BY THE ASSESSEE AFTER CONSU LTING THE FACTS WITH HIS LAWYERS AND THE ASSESSEE PROMISE D TO PAY TAX ACCORDINGLY. IN RESPONSE TO THE NOTICE U/S 153 A OF THE ACT, HOWEVER, THE ASSESSEE DECLARED TOTAL INCOME ON LY AT RS. 1,06,48,173/- WHICH CONSISTED OF RS. 48,27,928/- ON ACCOUNT OF REGULAR INCOME AND THE BALANCE ON ACCOUNT OF DISCREPANCIES FOUND IN STOCK AND CASH FOUND DURING SEARCH OPERATIONS. THIS SHOWS THAT THE ASSESSEE HAD RETRA CTED FROM HIS STATEMENT. IN RESPONSE TO QUESTION RAISED TO QUESTIONNAIRE DATED 4.6.2008 WHY FULL INCOME HAS NO T BEEN DECLARED. IT WAS MAINLY STATED THAT THE ASSESSEE HAD FILED CORRECTIFIED (EXPRESSION USED BY THE ASSESSEE) DECL ARATION BEFORE THE ADIT AND THE ASSESSEE FILED HIS RETURN O F INCOME AS PER SUCH CORRECTIFIED STATEMENT. ACCORDING TO T HE ASSESSING OFFICER, GIST OF SUCH LETTER FILED BEFORE THE ADIT, WAS THAT DIAMOND JEWELLERY OF THE ASSESSEE FOUND DU RING SEARCH WHICH HAS BEEN VALUED BY SHRI BHARTESH JAIN AND SHRI R.K. GUPTA AT RS. 6,53,08,517/- HAS NOW BEEN VALUED BY MR. MANOJ KAKKAR. PROPRIETAR OF M/S M.K. JEWELLER ON 8. 11.2006 AT RS. 5,25,94,746/-. THE ASSESSING OFFICER HAD FO UND NO 10 FORCE IN THE SUBMISSIONS BECAUSE JEWELLERY HAD BEEN EARLIER VALUED BY TWO GOVERNMENT APPROVED VALUERS AND SUCH VALUATION WAS MADE IN THE PRESENCE OF THE ASSESSEE AND TWO INDEPENDENT WITNESSES AND THE ASSESSEE HAD REPEATED LY ADMITTED METHOD AND PROCEDURE USED BY THE GOVERNMEN T VALUERS TO BE CORRECT IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT. IT IS FURTHER EXPLAINED IN THE RETURN THA T SOME OF THE GOLD WAS RECEIVED ON CONSIGNMENT BASIS AND SOME OF THE GOLD WAS RECEIVED FROM THE CUSTOMERS AND SOME GOLD WAS LYING WITH THE GOLDSMITHS ALSO. THE ASSESSING OFFIC ER HAD ISSUED SUMMONS TO VARIOUS PARTIES AND MOST OF THEM HAD BEEN RETURNED WITH THE COMMENTS THAT NO SUCH PERSON WAS THERE ON THE GIVEN ADDRESSES. THE PERSON WHO WERE PRODUCED BEFORE THE ASSESSING OFFICER HAD CLEARLY S TATED THAT THEY HAVE NOT DEPOSITED ANY GOLD WITH THE FIRM . THE ASSESSING OFFICER HAD ISSUED THREE INQUIRY LETTERS U/S 133(6) OF THE ACT TO THE PARTIES FROM WHO THE GOODS WERE S TATED TO HAVE BEEN RECEIVED ON CONSIGNMENT BASIS. OUT OF TH ESE THREE PARTIES TWO HAVE DENIED HAVING SENT ANY GOODS TO THE ASSESSEE ON CONSIGNMENT BASIS AND ONE PARTY I.E. IR A DIAMOND JEWELLERY, MUMBAI HAD INFORMED THAT THEY HA VE ISSUED JEWELLERY WORTH RS. 25,000/- TO THE ASSESSEE . BECAUSE OF THE FAILURE OF THE ASSESSEE TO SUBSTANTI ATE THE 11 CLAIM REGARDING GOLD HAVING BEEN RECEIVED FROM THE CUSTOMERS AS WELL AS FROM OTHER PARTIES ON CONSIGNM ENT BASIS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE CLAIM. IN THE MEANTIME ON 2.12.2008 THE ASSESSEE FILED A REVISED RETURN DECLARING TOTAL INCOME OF RS. 2,98,41,628/- WHICH W AS TREATED AS NONEST BECAUSE THE SAME WAS FILED BEYOND LIMITATION PRESCRIBED UNDER THE ACT. IN THIS BACKG ROUND, THE INCOME OF THE ASSESSEE CAME TO BE ASSESSED AT RS. 3,07,70,525/-. THIS IS BECAUSE SOME PLATINUM JEWEL LERY WAS ALSO FOUND DURING SEARCH AND THE ASSESSEE PREPARED A TRADING ACCOUNT. AS PER THE TRADING ACCOUNT PREPAR ED BY THE ASSESSEE THE STOCK FOR PLATINUM JEWELLERY AT RS. 48 ,003/- WHEREAS THE STOCK FOUND WAS VALUED BY THE GOVERNMEN T APPROVED VALUER, SHRI R.K. GUPTA AND SHRI BHARTESH JAIN AT RS. 2,85,600 AND THUS THERE WAS A DISCREPANCY OF RS . 2,37,597/-. WHEN THE ASSESSEE WAS CONFRONTED WITH T HIS DISCREPANCY IT WAS STATED IN THE WRITTEN REPLY AS U NDER: THE UNEXPLAINED DIFFERENCE IN THE VALUE OF PLATINU M AMOUNTING TO RS. 2,37,597/- WE ARE READY TO SURREND ER THE DIFFERENCE OF AMOUNT AT RS. 2,37,597/- SUBJECT TO NO PENALTY/PENAL ACTION. SIMILARLY SOME JEWELLERY WAS FOUND AT HOME OF THE A SSESSEE. THE ASSESSEE STATED THAT SOME ITEMS (S NO. 54 TO 59 ) 12 REPRESENTS STOCK IN TRADE OF THE FIRM, M/S NIKKA MA L BABU RAM JAIN WHICH WAS KEPT AT THE RESIDENCE. SINCE TH E ASSESSEE HAD NOT INCLUDED THE VALUE OF ITEMS AT S N O. 54 TO 57 FOR THE PURPOSE OF DISCLOSURE. THE VALUE OF SUC H STONE JEWELLERY WAS RS. 25,000/- AND SILVER JEWELLERY WEI GHING 130 KGS AT RS. 15,60,000/-. WHEN THE ASSESSEE WAS ASKE D WHY THIS SUM OF RS. 15,85,000/- SHOULD NOT BE ADDED TO THE INCOME, IT WAS STATED THAT SOME OF THE JEWELLERY HA D BEEN DECLARED BY SMT. MANJU JAIN, SHRI ROHIT JAIN AND SH RI NEERAJ JAIN UNDER VDIS. AFTER VERIFICATION OF THE FIVE DEC LARATIONS IT WAS FOUND THAT THERE WAS AN EXCESS OF SILVER JEWELL ERY UPTO RS. 4,80,000/- AND ULTIMATELY THE ASSESSEE SUBMITTE D THAT THIS DIFFERENCE OF SILVER JEWELLERY MAY BE CONSIDER ED AS UNEXPLAINED AND HE SURRENDERED THE SUM FOR TAXATION . SIMILARLY STONE JEWELLERY VALUING RS. 25,000/- WAS ALSO SURRENDERED. THUS TOTAL INCOME WHICH WAS ASSESSED BECAME RS. 3,07,70,525/-. 9 ON THE BASIS OF ABOVE CONCLUSIONS THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD SURR ENDERED VARIOUS ITEMS OF INCOME U/S 132(4) OF THE ACT BUT F AILED TO DECLARE THE INCOME IN THE RETURN AS WELL AS PAY TAX LIABILITY. THEREFORE, PENALTY PROVISIONS ARE CLEARLY ATTRACTE D AND 13 ACCORDINGLY HE INITIATED PENALTY PROCEEDINGS U/S 2 71(1)(C). IN RESPONSE TO SHOW CAUSE NOTICE AGAINST PENALTY PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE VIDE L ETTER DATED 2.6.2009 BEFORE THE ASSESSING OFFICER AS UNDE R: 1. REPLY LETTER DATED 02.06.2009 IN ADDITION TO THE BOOK PROFIT ASSESSEE MADE DISC LOSURE OF RS. 2,50,00,000/- IN THE RETURN OF INCOME, IN WHICH THERE WERE SOME MISTAKES WHICH THE ASSESSEE BROUGHT TO TH E NOTICE OF YOUR LD. PREDECESSOR AO AND MADE A REQUES T FOR CORRECTIFICATION OF THOSE MISTAKES IN THE INCOME DI SCLOSED U/S 132(4) OF THE INCOME TAX ACT. THE MISTAKES POINTED OUT TO THE LD. PREDECESSOR AO WERE AS UNDER. I) EXCESS STOCK FOUND DURING THE SEARCH OPERATION. II) PROFIT ON SALE OF EXCESS GOLD STOCK FOUND DURIN G SEARCH OPERATION. III) STOCK ON CONSIGNMENT AND APPROVAL BASIS RECEIV ED BY ME WHICH WAS NOT PROPERLY ADJUDICATED UPON BY ARRIVING AT THE SURRENDERED AMOUNT. IV) CALCULATION MISTAKE IN CALCULATING THE VALUE OF DIAMOND AND ADVANCE GOLD DEPOSIT RECEIVED FROM THE CUSTOMERS. I CLAIMED DEDUCTIONS OF ALL THESE FROM T HE ABOVE REFERRED DECLARED INCOME. V) THE GOODS DEPOSITED BY THE CUSTOMERS FOR REMAKIN G ALSO HAVE BEEN WRONGLY FORMED PART OF THE DISCLOSED INCOME WHICH OBVIOUSLY NEEDED CORRECTIFICATION. IT IS SUBMITTED THAT ALL EFFORTS OF CORRECTIFICATIO N OF DISCLOSURE WERE CORRECT AND BONAFIDE. I REALIZED THAT THE CORRECTIFICATION IN THE DISCLOS ED PARTICULARS OF INCOME MAY NOT BE MORE LEGITIMATE, T HEREFORE, I REVISED MY RETURN OF INCOME DISCLOSING THEREIN TO TAL INCOME INCLUSIVE OF THE BOOK PROFIT AT RS. 2,98,41, 628/-. COPIES OF COMPUTATION CHART ORIGINALLY FURNISHED AN D THAT OF CORRECTIFIED PARTICULARS ARE ENCLOSED HEREWITH FOR YOUR HONORS KIND IMMEDIATE CONSIDERATION. 14 IN ADDITION TO ABOVE THE ASSESSEE ALSO RELIED ON TH E DECISION OF HON'BLE SUPREME COURT IN CASE OF DILIP N SHROFF V JCIT, 291 ITR 519. FURTHER REPLY WAS ALSO GIVEN VIDE LET TER DATED 3.6.2009 WHICH READS AS UNDER: 2. REPLY LETTER DATED 03.06.2009 IN THIS LETTER ASSESSEE HAS SUBMITTED THAT IN CON TINUATION OF EARLIER SUBMISSIONS, IT IS MOST HUMBLY AND RESPE CTFULLY PRAYED THAT APART FROM BOOK PROFIT OF RS. 48,27,928 /-, I MADE A DISCLOSURE OF RS. 2,50,00,000/-, WHICH I REA LIZED WAS NOT CORRECT DISCLOSURE. I , THEREFORE, WROTE A LETTER TO LD. ADIT TO MAKE NECESSARY CORRECTION IN THAT DISCL OSURE AND FILED MY RETURN OF INCOME KEEPING IN VIEW THE C ORRECTION IN THE DISCLOSED AMOUNT. THE FOLLOWING ARE THE PART ICULARS OF INCOME DISCLOSED IN THE ORIGINALLY FILED RETURN OF INCOME. COMPUTATION CHART OF TOTAL INCOME NET PROFIT AS PER PROFIT & LOSS A/C 48,27,928/ - ADD: CHARITY AND DONATION 13,700/- ADD: TOTAL EXCESS GOLD STOCK 75,34,330/- TOTAL EXCESS OF DIAMOND STOCK 1,19,94, 588/- TOTAL EXCESS CASH FOUND AT HOME 50,00,000/- 2,45,28,928/- TOTAL SURRENDER 2,50,00,000/- LESS VALUE OF EXCESS STOCK FOUND DURING 1,74,65,67 0 SEARCH OPERATION FOR SEPARATE CONSIDERATION ADD PROFIT ON SALE OF EXCESS GOLD STOCK FOUND 1883 582 DURING SEARCH BY APPLYING GROSS PROFIT RATE 193492 52 LESS: STOCK ON CONSIGNMENT & APPROVAL BASIS 299558 3 LESS: CALCULATION MISTAKE IN CALCULATING DIAMOND ST OCK 3317380 LESS: ADVANCES GOLD DEPOSITS FORM CUSTOMER 7229744 5806545 (WT.9037.180 GMS @ 800 RS. PER GMS.) THE RETRACTION MADE BY SH. JAWAHAR LAL JIN BEFORE T HE LD. ADI AND ALSO IN THE RETURN OF INCOME WAS A VALID RE TRACTION. AFTER DISCUSSION WITH THE LD. AO, I AGREED TO REVIS E MY RETURN OF INCOME, WHICH I FILED AS UNDER:- INCOME AS P&L ACCOUNT RS.48,27,928 ADD:- INCOME SURRENDERED DURING THE SEARCH 2,50,00,000 AS DISCUSSED IN PARA I ABOVE ADDITION AS DISCUSSED IN PARA II ABOVE 2,37,597 ADDITION AS DISCUSSED IN PARA III ABOVE 5,05,000 RS. 2,58,42,597 TOTAL INCOME RS. 3,07,70,525 15 THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS AND OBSERVED THAT INITIALLY THE ASSESSEE HAD SURREN DERED A SUM OF RS. 2.5 CRORES WHEN EXCESS JEWELLERY STOCK A ND CASH WAS FOUND BUT LATER ON RETRACTED FROM THE SAME IN T HE SENSE THAT THE ASSESSEE DID NOT DISCLOSE THIS INCOME IN T HE RETURN OF INCOME. WHEN FURTHER INQUIRIES WERE CONDUCTED A ND THE ASSESSEE WAS FULLY CORNERED AND THE ASSESSEE FILED REVISED RETURN WHICH WAS BELATED AND ACCORDINGLY REJECTED. THE ASSESSING OFFICER REFERRED TO CERTAIN CASE LAWS AND ULTIMATELY LEVIED A PENALTY AT THE MINIMUM RATE OF 100% AND ACCORDINGLY LEVIED A PENALTY U/S 271(1)(C) AMOUNTI NG TO RS. 67,75,500/-. 10 ON APPEAL IT WAS MAINLY STATED THAT DISCLOSURE M ADE DURING THE SEARCH WAS UNDER EXTREMELY STRESSFUL CIRCUMSTANCES AND AT THE TIME OF FILING OF RETURN O F INCOME, MISTAKES MADE IN THE VALUATION OF STOCK, WERE BROUG HT ON RECORD AND A LETTER WAS WRITTEN TO DIT(INVG) EXPLAI NING SUCH MISTAKES. AS SUCH RETURN WAS FILED IN RESPONSE TO NOTICE U/S 153A DECLARED TOTAL INCOME AT RS. 1,06,48,173/-. H OWEVER, IN ORDER TO AVOID ANY LITIGATION AND TO BUY PEACE A LSO THE ASSESSEE REVISED THE RETURN OF INCOME TO RS. 2,98,4 1,628/- 16 WHICH INCLUDED SURRENDERED AMOUNT OF RS. 2.5 CRORES . CERTAIN DECISIONS WERE ALSO RELIED UPON INCLUDING T HE DECISION OF DILIP N SHROFF V JCIT (SUPRA) AND CIT V . RELIANCE PETROPRODUCT, 328 ITR 158. THE LD. CIT(A) OBSERVED THAT WHETHER REVISED RETURN FILED BY THE ASSESSEE WOULD BE TREATED AS VALIDLY REVISED RETURN U/S 139(3) OR NOT ? IN THIS REGARD HE DISCUSSED THE DECISION OF HON'BLE ALLAHAB AD HIGH COURT IN CASE OF MOHD. IBRAHIM AZIMULLA V CIT, 131 ITR 680 (ALL) AND HELD THAT MERE FILING OF THE REVISED RETU RN DOES NOT RULE OUT THE APPLICABILITY OF SECTION 271(1)(C) BEC AUSE WHATEVER IS DISCLOSED BY WAY OF FILING REVISED RETU RN MAY RELATE BACK TO BECOME PART OF THE TOTAL INCOME PROV IDED IT IS COVERED BY SECTION 139(5) I.E. SAME HAS BEEN FILED BECAUSE OF BONAFIDE MISTAKE. THE LD. CIT(A) ULTIMATELY CON FIRMED THE PENALTY VIDE PARAS 11 & 12 WHICH ARE AS UNDER: 11 THE BROADER FACTUAL PICTURE IS THAT THE APPELLANT W AS SEARCHED U/S 132 OF THE I.T.ACT 1961 AND DISCLOSED AN AMOUNT OF RS. 2.5 CRORES U/S 132(4) IN ORDER TO ACC OUNT FOR THE DISCREPANCIES ON VARIOUS ISSUES CONFRONTED TO H IM AT THE TIME OF SEARCH OPERATION. THE RETURN OF INCOME WAS HOWEVER FILED WITHOUT INCLUDING THE AMOUNT DISCLOSED U/S 13 2(4) AND IT WAS CLAIMED THAT THE ALLEGED DISCREPANCIES WERE EXPLAINED AS DETAILED AT PARA 4 OF THIS ORDER. THE INVESTIGATION CONDUCTED BY THE AO IN ORDER TO VERIF Y THE GENUINENESS OF RETRACTION MADE BY THE ASSESSEE MADE IT ABUNDANTLY CLEAR THAT EXPLANATION SUBMITTED BY THE ASSESSEE TO ACCOUNT FOR THE DISCREPANCIES WAS ONLY INTENDED TO EVADE THE PAYMENT OF DUE TAXES ON THE I NCOME DISCLOSED U/S 132(4). THE ASSESSEE, THEREFORE, FELT CORNERED AND CHOSE TO REVISE HIS RETURN OF INCOME WHEREIN TH E 17 DISCLOSURE MADE U/S 132(4) TO THE TUNE OF RS. 2.5 C RORE WAS RETURNED AS INCOME. IN THE CIRCUMSTANCES THE ASSESS EE HAS NO EXPLANATION FOR RETURNING AN INCOME OF RS. 1,06, 84,173/- AS AGAINST THE ASSESSED INCOME OF RS. 3,07,70,525/- . THE REVISION OF RETURN CAN NOT BE SAID TO BE VOLUNTARY AS THE SAME HAD BEEN REVISED AFTER DETAILED INVESTIGATION CARRIED OUT BY THE A.O. WHEREIN ALL THE CLAIMS SUBMITTED BY THE ASSESSEE TO EXPLAIN THE DISCREPANCIES HAD BEEN PROV ED AS FALSE AND CONCOCTED. 12 THE FACTS OF CASE MAKE IT VERY CLEAR THAT THE RE TURN HAS BEEN REVISED BUT THE SAME DOES NOT FULFILL THE REQUIREMENT OF PROVISIONS OF SECTION 139(5) AND THE REFORE CAN NOT TAKE THE PLACE OF RETURN FILED U/S 139(1). THIS BEING THE CASE, THE PENALTY LEVIED BY THE A.O. W.R.T THE ASSESSED INCOME HAS BEEN CORRECTLY LEVIED, AS THE EXPLANATIO N SUBMITTED BY THE APPELLANT FOR NOT DISCLOSING THE C ORRECT INCOME U/S 139(1) HAS BEEN PROVED TO BE FALSE. THE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE THE INITIA L BURDEN CAST UPON HIM IN VIEW OF EXPLANATION TO SECTION 271 (1)(C). IT WOULD ALSO BE IMPORTANT TO PLACE ON RECORD THE VIEW OF THE APEX COURT IN RECENT JUDGMENTS IN THE CASE OF DHARM ENDRA TEXTILE PROCESSORS 306 ITR 277 , WHEREIN IT HAS BEE N CATEGORICALLY HELD THAT PENALTY UNDER SECTION 271(1 )(C) WAS A CIVIL LIABILITY AND DID NOT REQUIRE ESTABLISHING OF MENS REA. IT WAS FURTHER HELD THAT THE OBJECT BEHIND THE ENAC TMENT OF SECTION 271(1)(C) READ WITH EXPLANATION WAS TO PROV IDE A REMEDY FOR LOSS OF REVENUE. THE DECISION OF APEX CO URT IN THIS CASE HAS BEEN FURTHER CONFIRMED IN THE LATER D ECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD . 322 ITR 158. THE PURPOSE OF REFERRING TO THE ABOVE MENT IONED CASES OF APEX COURT IS THAT THE CURRENT VIEW WITH R EGARD TO IMPOSITION OF PENALTY UNDER SECTION 271(1) (C) HAS TO BE KEPT IN MIND BEFORE DECIDING SUCH CASES. A STRICT L IABILITY HAS BEEN CAST UPON THE ASSESSEE IN VIEW OF THESE JUDGMENTS. NONE OF THE JUDGMENTS QUOTED BY THE AR O F THE APPELLANT APPLY TO THE FACTS OF THE CASE AND IN FAC T MOST OF THEM ARE FAVOURING THE IMPOSITION OF PENALTY IN THE INSTANT CASE. FOR INSTANCE THE CASE OF RELIANCE PETROPRODUC TS ONLY EXCLUDES IMPOSITION OF PENALTY IN CASES OF LEGAL DE DUCTIONS CLAIMED AND DISALLOWED AND THE RATIO OF HONBLE APE X COURT IN THE CASE OF DHARMENDRA TEXTILE HAS BEEN DILUTED ONLY TO THAT EXTENT. FURTHER THE RELIANCE ON THE CASE OF CI T KARNAL VS. RAJIV GARG (PUNJAB & HARYANA HIGH COURT) IS ALS O MISPLACED AS IN THE SAID CASE THE AO HAD NOT PLACED ON 18 RECORD ANY EVIDENCE OR MATERIAL TO DISCHARGE HIS BU RDEN OF PROVING CONCEALMENT AND HAD RESTED HIS CONCLUSION S IMPLY ON THE ACT OF ASSESSEE HAVING OFFERED ADDITIONAL IN COME. WHEREAS IN THE CASE UNDER CONSIDERATION THE AO HAS CONDUCTED DETAILED INVESTIGATION AND PROVED THE FAL SITY OF CLAIM MADE BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE DISCLOSED ADDITIONAL INCOME ONLY WHEN HE HAD NO EXPLANATION I N THE FACE OF EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION AS WELL AS CONFIRMED BY THE INVESTIGATION CARRIED OUT BY THE AO. HERE IT IS RELEVANT TO POINT OUT THA T THE AR HAS QUOTED CLOSE TO 40 CASES IN SUPPORT OF HIS CLAI M BUT HAS NOT SUBMITTED AS TO HOW THE JUDGMENTS IN SAID CASES HELP HIS CASE. IN VIEW OF THE ABOVE I HAVE NO HESITATION IN CONFIRMING THE PENALTY IMPOSED BY THE AO. 11 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE ASSESSEE DID NOT DECLARE THE WHOLE INCOME OF SU RRENDERED AMOUNT IN THE RETURN BECAUSE THERE WERE SOME MISTAK ES IN THE VALUATION OF THE DIAMOND JEWELLERY. THE ASSESSEE H AD DULY INCLUDED THE UNACCOUNTED CASH IN THE RETURN OF INCO ME WHICH WAS SURRENDERED DURING THE YEAR. IN THIS REGARD HE REF ERRED TO PAGE 370 TO 372 OF PAPER BOOK WHICH CLEARLY SHOWS SOME P ART OF THE SURRENDERED INCOME AMOUNTING TO RS. 58,06,545/- WAS DECLARED IN THE RETURN. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD CLAIMED DURING THE ASSESSMENT PROCEEDINGS THAT 34 PERSONS H AVE DEPOSITED GOLD WITH THE ASSESSEE FOR REMAKING ETC. THE ASSESSING OFFICER HAD ISSUED SUMMONS TO ALL THOSE P ERSONS OUT OF WHICH THREE WERE RETURNED WITH THE COMMENTS NO SUC H PERSON IS AT THE GIVEN ADDRESS. TWENTY ONE PERSONS DID NOT ATTEND THE PROCEEDINGS AND SEVEN OTHERS STATED ON OATH THAT TH EY HAVE NOT 19 GIVEN ANY GOLD TO THE SAID FIRM. THIS MEANS ATLEAS T THREE PERSONS HAVE ADMITTED HAVING GIVEN GOLD TO THE ASSESSEE. 12 HE FURTHER CONTENDED THAT IT WAS ALSO CLAIMED DU RING THE ASSESSMENT PROCEEDINGS THAT SOME GOLD HAS BEEN RECE IVED ON CONSIGNMENT BASIS AND ALL THE EVIDENCES IN THIS REG ARD HAVE BEEN WRONGLY REJECTED BY THE ASSESSING OFFICER. IN THIS REGARD HE REFERRED TO PAGE NO. 346 OF THE PAPER BOOK WHICH IS COPY OF A LETTER FROM CYGNUS DATED 25.11.2008 IN RESPONSE TO INFORMATION SOUGHT BY THE ASSESSING OFFICER U/S 133(6) OF THE A CT, THEREFORE, THIS LETTER FROM CYGNUS HAVE STATED THAT THEY HAVE NOT EFFECTED ANY SALES OR PURCHASE WITH M/S NIKKA MAL BABU RAM S INCE ITS INCEPTION. THIS IS A WRONG STATEMENT BECAUSE AT PA GE 93 OF THE PAPER BOOK IS A COPY OF BILL OF SAME FIRM I.E. CYGN US WHICH IS A COPY OF BILL NO. 243 THROUGH WHICH THE FIRM HAS SE NT ON CONSIGNMENT BASIS ITEMS LIKE RINGS, PENDANTS AND EA R RINGS WORTH RS. 12,24,667/-. SIMILARLY THE REPLY GIVEN BY CALY X CORPORATION VIDE LETTER DATED 24.11.2008 AT PAGE 349 OF THE PAP ER BOOK IS NOT CORRECT BECAUSE AT PAGE 350 WHICH IS A COPY OF ANN EXURE REFERRED A. REFERENCE TO IN THE SAID LETTER SHOW S THAT THE SAID FIRM HAS SIMPLY STATED THAT NO STOCK HAS BEEN GIVEN ON CONSIGNMENT BASIS IN FINANCIAL YEAR 2008-09 WHEREAS PERIOD UNDER CONSIDERATION WAS MUCH EARLIER BECAUSE THE SE ARCH ITSELF 20 WAS CONDUCTED ON 27.2.2006. HE ALSO REFERRED TO A LETTER OF IRA DIAMOND JEWELLERY (PAGE 338 OF PAPER BOOK) AND THE DETAILS GIVEN BY THEM AT PAGE 339 TO 341 CLEARLY SHOWS THAT SOME ITEMS HAVE BEEN SENT BY THEM ON APPROVAL BASIS. ALL THES E FACTS CLEARLY SHOW THAT THE ASSESSEE WAS RIGHT IN CLAIMING THAT S OME OF THE STOCK BELONGS TO THE CUSTOMERS AND OR WAS RECEIVED ON CONSIGNMENT BASIS. HOWEVER, THE ASSESSEE LATER ON DECLARED THE WHOLE SURRENDERED INCOME IN THE REVISED RETURN TO B UY PEACE OF MIND, THEREFORE, THIS IS NOT A FIT CASE FOR LEVY O F PENALTY BECAUSE IT HAS NOT BEEN PROVED THAT THE ASSESSEE HAS CONCEA LED THE PARTICULARS OF INCOME. 13 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDERS OF ASSESSING OFFICER AND THE L D. CIT(A). 14 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND DO NOT FIND ANY FORCE IN THE SUBMISSIONS OF THE LD. COUNSE L OF THE ASSESSEE. FIRST OF ALL ADMITTEDLY DURING SEARCH E XCESS CASH, STOCKS OF EXCESS GOLD, DIAMOND, PLATINUM, SILVER WA S FOUND AND INITIALLY ASSESSEE VOLUNTARILY AGREED TO SURRENDER ALL THESE ITEMS OF CASH AND STOCK BY WAY OF SURRENDER OF RS. 2.5 CR ORES. DURING STATEMENT RECORDED NO OBJECTION WAS RAISED TO THE V ALUATION. IN THE STATEMENT ITSELF IT WAS CLARIFIED THAT THE ASSE SSEE HAS DISCUSSED WITH HIS LAWYER BEFORE MAKING THE SURREN DER. IN THIS 21 REGARD IT WOULD BE PERTINENT TO REFER THE STATEMENT RECORDED U/S 132(4) OF THE ACT. RELEVANT PORTION OF THE STATEME NT RECORDED U/S 132(4) ON 28.10.2006 AND 30.10.2006 IS AS UNDER: Q-3- DO YOU HAVE ANY GOODS RECEIVED ON CONSIGNMENT BASIS OR BELONGING TO SOME OTHER PERSONS AND WHICH ARE NOT PART OF YOUR CLOSING STOCK ? ANS- ALL THE ORNAMENTS OF GOLD & DIAMOND, PLATINUM PENS AND WATCHES BELONG TO MY BUSINESS PROPRIETARY CONCE RN AND THESE HAVE BEEN ACCOUNTED IN THE CLOSING STOCK FIGU RES. Q-6 MR. BHARTESH JAIN GOVT. REGISTERED VALUES FOR JEWELLERY PROP. M/S BHARTESH GEMS, NEW DELHI AND MR . R.K. GUPTA, GOVT. APPROVED VALUES, PROP. M/S SHIBBA N LAL GUPTA SARAF, DELHI ARE DOING THE VALUATION OF YOUR STOCK IN YOUR PRESENCE AND IN THE PRESENCE OF YOUR EMPLOYEES AND SON MR. ROHIT JAIN. DO YOU HAVE ANY DIFFERENCE OF O PINION AS A PROFESSIONAL IN THE WORKING OF EITHER THE VAL UERS. ANS- I HAVE OBSERVED THE VALUATION TECHNIQUE AND PROCEDURE BEING FOLLOWED BY MR. BHARTESH JAIN AND M R. R.K. GUPTA BOTH OF THEM ARE WORKING WITH FULL PROFESSION COMPETENCE AND ETHICS, THE PROCEDURE AND METHOD ADO PTED IS ACCEPTABLE TO ME SO FAR DURING THE VALUATION I H AVE NO OBJECTION AND IN CASE ANY DIFFERENCE IN VALUATION I S OBSERVED THE SAME WILL BE NOTED AS A PROTEST IN TH E INVENTORY TO BE DULY SETTLED TO MY SATISFACTION. RELEVANT PORTION OF THE STATEMENT RECORDED ON 30.10 .2006 IS AS UNDER: Q2- I AM AGAIN GIVING YOU AN OPPORTUNITY TO GO THRO UGH THE STOCKS AND VALUATION REPORT. THE STOCK IS STILL KEP T IN AN ORDERLY MANNER AND THE VARIOUS ITEMS VALUED CAN BE MATCHED WITH THE VALUATION REPORT AND ANY ITEM WRIT TEN IN THE VALUATION REPORT CAN BE MATCHED WITH THE ITEMS KEPT IN THE BUSINESS PREMISES. ANS- I HAVE CROSS CHECKED MY SELF AND FULLY SATISFI ED WITH THE VALUATION. 22 Q3- THE VALUE OF DIAMONDS AND GOLD DETERMINED BY MR . BHARTESH JAIN, AND MR. R.K. GUPTA GOVT. APPROVED VA LUES IS AS FOLLOWS: DIAMOND 65772737 53778149.00 DO YOU ACCEPT THE QUANTITATIVE DETERMINATION OF GO LD AND VALUATION OF DIAMONDS AS GIVEN ABOVE. ANS- YES, I ACCEPT THE ABOVE FIGURES OF VALUATION R EPORT AND BOOKS OF ACCOUNTS AS TRUE AND CORRECT. I ACCEPT THE EXCESSIVE QUANTITY OF GOLD AND EXCESSIVE VALUE OF D IAMOND, IN MY CLOSING STOCK. Q- AS PER YOUR STATEMENT RELATING TO VALUATION OF C LOSING STOCK RECORDED ON 25 TH OCTOBER, 2006, THE EXCESSIVE VALUE OF GOLD IS AS FOLLOWS: DIFFERENCE IN QUANTITY AS PER BOOKS OF ACCOUNTS = 5641.74 GMS AND VALUATION REPORT = VALUATION OF ABOVE GOLD IS = 5641.74 X 800 = 4513392 MAKING CHARGES @ 7% OF RS. 45,13,392 = RS. 48,29,330.00 PLEASE STATE WHETHER THE EXCESSIVE STOCK FOUND IS ACCEPTABLE TO YOU ? ANS- I ACCEPT AFTER THE WORKING OF QUANTITY AND VA LUE THEREOF THAT THERE IS AN EXCESS STOCK OF GOLD AMOUN TING TO RS. 48.30 LACS. Q 5- DO YOU ACCEPT THE VALUATION OF THE DIAMOND AMO UNTING TO RS. 6,57,72,737.00 WHILE AS PER THE BOOKS OF ACC OUNTS, IT AMOUNTS TO RS. 5,37,78,149.00 THEREBY GIVING A DIFF ERENCE OF RS. 1,19,94,588.00 ? ITEM WEIGHT AS PER VALUATION REPORT WEIGHT AS PER BOOKS OF ACCOUNTS GOLD 83029.500 77387.760 23 ANS- I ACCEPT THAT THERE IS A DIFFERENCE OF STOCK W ORTH RS. 1.2 CRORES (APPROX). THE STOCK OF DIAMOND IS MORE B Y RS. 1.2 CRORES (APPROX). Q6- DID YOU KEEP ANY STOCK OF GOLD OR DIAMOND AT AN Y OTHER PLACE, PLEASE STATE ? ANS- A CONSIGNMENT OF GOLD WAS RECEIVED AT RESIDEN CE ON 26 TH OCT, 2006 (LATE EVENING ). THE SAME WAS IDENTIFIED DURING THE VALUATION OF JEWELLARY OF MRS. MANJU JAI N W/O SH. JAWAHAR LAL JAIN AT ITEM NO. 55,56,58 AND 59. THE T OTAL VALUATION AS PER VALUATION REPORT AMOUNTS TO RS. 27 ,05,000/- . THE TOTAL STOCK OF EXCESS OF GOLD AMOUNTS TO RS. 75,44,330/- Q7- I AM SHOWING YOU THE PROVISIONS OF SECTION 132( 4) READ WITH EXPLANATION 5 OF SECTION 271(1)(C). DO YOU WANT TO STATE ANYTHING UNDER THE SAID PROVISIONS ? ANS- I HAVE GONE THROUGH THE PROVISIONS AND UNDERST OOD THE SAME. I DID CONSULT MY LEGAL ADVISOR ON THE SAI D PROVISIONS. THEREFORE, I HEREBY STATE THAT THE FOLL OWING ASSETS HAVE BEEN FOUND IN EXCESS THAN RECORDED IN M Y REGULAR BOOKS OF ACCOUNTS. (I) EXCESS CASH AT HOME = RS. 50 LAKHS, (II) EXCESS GOLD STOCK OF = RS. 75.34 LAKHS, M/S NIKKA MAL BABU RAM (III) EXCESS STOCK OF DIAMOND = RS. 120 LAKHS THEREFORE, I HEREBY ADMIT AN AMOUNT OF RS. 2.5 CROR ES AS INCOME IN EXCESS OF MY REGULAR INCOME IN THE CURREN T YEAR AND I PROMISE TO PAY THE TAXES VOLUNTARILY ON THE I NCOME OF RS. 2.5 CRORES IN THE CURRENT ASSESSMENT YEAR. I FU RTHER REQUEST THAT THE AMOUNT OF RS. 50 LAKHS, WHICH HAS BEEN SEIZED FROM MY RESIDENCE MAY BE ADJUSTED TOWARDS PA YMENT OF TAXES. 15 ANSWER TO QUESTION NO. 3 VERY CLEARLY SHOW THAT THE ASSESSEE HAS CLEARLY ADMITTED THAT WHOLE OF THE ORN AMENTS OF GOLD, DIAMOND, PLATINUM, STONE, BELONG TO THE BUSIN ESS OF THE 24 CONCERN OF THE ASSESSEE. THEN HOW CAN THE ASSESSEE SET UP A CASE THAT SOME OF THE GOLD HAS BEEN RECEIVED FROM C USTOMERS WHICH SEEMS TO BE CLEARLY AN AFTER-THOUGHT AND CANN OT BE ENTERTAINED AT THIS STAGE. PARTICULARLY THE ASSESS EE HIMSELF BEING CORNERED DURING ASSESSMENT PROCEEDINGS PREFERRED TO DECLARE THE SURRENDER INCOME BY WAY OF BELATED REVISED RETURN. THROUGH QUESTION NO. 6 THE ASSESSEE WAS SPECIFICALLY ASKED WHETHER HE HAS ANY OBJECTION TO THE METHOD OF VALUATION BEING DONE BY SHRI BHARTESH AND SHRI R.K. GUPTA WHICH WAS BEING DONE I N THE PRESENCE OF THE EMPLOYEES OF THE ASSESSEE AS WELL A S SHRI ROHIT JAIN WHO IS THE SON OF THE ASSESSEE. THE ASSESSEE HAD CLEARLY REPLIED THAT VALUATION WAS BEING DONE BY THESE TWO PERSONS IN A FULLY PROFESSIONAL AND ETHICAL MANNER. THEREFORE, THE ASSESSEE WAS GIVEN A CHANCE TO OBJECT TO THE METHOD OF VALUA TION. DURING VALUATION PROCESS ITSELF THE ASSESSEE CLEARLY ACCEP TED THAT S/SHRI BHARTESH AND R.K. GUPTA WERE DOING THE VALUATION IN A PROFESSIONAL AND ETHICAL MANNER THEN HE CAN NOT LAT ER ON TURN AROUND AND SAY THAT THERE WAS SOME MISTAKE IN THE V ALUATION OF DIAMOND. THIS WAS RE-CONFIRMED IN THE STATEMENT RE CORDED ON 30.10.2006 VIDE ANSWER TO QUESTION NO. 2. IN ANSWE R TO QUESTION NO. 3, HE HAS ACCEPTED THE AMOUNTS OF VALUATION. T HROUGH ANSWER TO QUESTION NO. 3 HE HAS FURTHER ACCEPTED TH E EXISTENCE OF 25 EXCESS STOCKS & CASH WHICH HAS BEEN FURTHER CONFRON TED TO THE ASSESSEE THROUGH QUESTION NO. 4, 5 & 6. 16 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE HAD S TATED THAT GOLD WAS RECEIVED FROM SOME CUSTOMERS. ATLEAST FEW PERSONS HAVE ACCEPTED OF SUCH DEPOSIT. THE ASSESSING OFFIC ER HAS GIVEN HIS FINDING IN PARA 8 AT PAGE 11 WHICH READS AS UND ER: TO VERIFY THE CLAIM OF THE ASSESSEE THAT 9037.81 G MS BELONGED TO THE CUSTOMERS, SUMMONS WERE ISSUED TO T HE CUSTOMERS U/S 131(1) OF THE ACT. THE SUMMONS WERE SENT TO THE CUSTOMERS WHOSE NAME AND ADDRESS HAD BEEN GI VEN BY THE ASSESSEE. A TOTAL OF 34 SUMMONS WERE ISSUED AND SERVED. OUT OF THIS 34 SUMMONS WERE SENT THREE SUM MONS WERE RECEIVED BACK UNDELIVERED WITH THE POSTAL COMM ENTS THAT NO SUCH PERSON IS AT THE GIVEN ADDRESS. A T OTAL OF 21 PERSONS DID NOT ATTEND THE PROCEEDINGS AND SEVEN PE RSONS HAVE STATED ON OATH THAT THEY HAVE NOT DEPOSITED AN Y GOLD WITH THE SAID FIRM. THE ABOVE CLEARLY SHOWS THAT OUT OF TOTAL 34 PERSO NS, 24 PERSONS EITHER DID NOT ATTEND AND/OR SUMMONS CAME BACK AND SEVEN DENIED HAVING GIVEN ANY GOLD. THE FATE OF OT HER THREE PERSONS IS NOT DISCUSSED IN THE ASSESSMENT ORDER BU T IT CLEARLY SHOWS THAT ON THE BASIS OF LARGE NUMBER OF PERSONS SOME DID NOT ATTEND OR DENIED THE FACT OF GIVING ANY GOLD TO THE ASSESSEE, CLEARLY SHOW THAT THIS THEORY IS ALSO NOT CORRECT. FURTHER IN ANY CASE AS OBSERVED EARLIER THE ASSESSEE HAD SURRENDER ED WHOLE OF THE AMOUNT OF EXCESS STOCK DURING SEARCH. IF THE A SSESSEE WAS HAVING GOOD EXPLANATION WE FAIL TO UNDERSTAND WHY A NY APPEAL 26 HAS NOT BEEN FILED AND THE ASSESSEE HAS SIMPLY REVI SED THE RETURN. IN ANY CASE AS OBSERVED WHILE ADJUDICATING THE ISSUE REGARDING ADMISSION OF ADDITIONAL EVIDENCE ISSUES A RISING IN THE ASSESSMENT PROCEEDINGS CANNOT BE CHALLENGED IN PENA LTY PROCEEDINGS SINCE THE ASSESSEE HAS NOT FILED ANY AP PEAL AGAINST THE ASSESSMENT PROCEEDINGS AND THEREFORE, SAME HAV E BECOME FINAL AND CANNOT BE DISPUTED NOW. 17 IN NUTSHELL IT CAN BE SAID THAT THE ASSESSEE HAD SURRENDERED A SUM OF RS. 2.5 CRORES AND HE COULD HAVE EASILY SO UGHT IMMUNITY AGAINST THE PENALTY UNDER EXPLANATION 5 TO SECTION 271(1)(C). HOWEVER, THE ASSESSEE DID NOT OWNED HIS COMMITMENT AND RETRACTED FROM THE DECLARATION MADE DURING SEARCH A ND DID NOT INCLUDE THE AMOUNT OF SURRENDERED INCOME IN THE ORI GINAL RETURN FILED BY HIM. THE ASSESSEE FILED REVISED RETURN ON 2.12.2008 THROUGH WHICH SURRENDER AMOUNT HAS BEEN INCLUDED IN THE RETURN BUT THIS HAS CLEARLY BEEN DONE AFTER THE ASSESSEE W AS AGAIN CORNERED DURING THE ASSESSMENT PROCEEDINGS. IN ANY CASE AS OBSERVED BY THE LD. CIT(A) MERE FILING OF REVISED R ETURN WOULD NOT GRANT ANY IMMUNITY TO THE ASSESSEE FROM LEVY OF PEN ALTY. IN THIS REGARD HE REFERRED TO SECTION 139(5) WHICH READS AS UNDER: (5) IF ANY PERSON, HAVING FURNISHED A RETURN UNDER SUB- SECTION (1), OR IN PURSUANCE OF NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142, DISCOVERS ANY OMISSION OR ANY W RONG STATEMENT THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE R ELEVANT 27 ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASS ESSMENT, 2WHICHEVER IS EARLIER. THE ABOVE CLEARLY SHOW THAT RIGHT TO FILE THE REVIS ED RETURN IS AVAILABLE ONLY IF AN ASSESSEE DISCOVERS ANY OMISSIO N OR ANY WRONG STATEMENT THEREIN. IN THE CASE BEFORE US, TH ERE IS NO JUSTIFICATION AT ALL IN REVISING THE RETURN. FIRST LY THE ASSESSEE SURRENDERED THE INCOME DURING SEARCH ON ACCOUNT OF EXCESS CASH AND STOCK THEN RETRACTED FROM THE SAME AND SUBMITTE D BEFORE THE INVESTIGATION WING THAT VALUE OF DIAMOND JEWELLERY IS NOT CORRECT AND SOME OTHER MISTAKES ARE THERE. BUT NO GOOD REAS ONS HAVE BEEN GIVEN AFTER HAVING ACCEPTED EXCESS CASH AND S TOCK OF EXCESS GOLD AND DIAMOND JEWELLERY. EVEN VALUATION AND THE PROCESS OF VALUATION BY S/SHRI BHARTESH AND R.K. GU PTA WAS ACCEPTED IN THE STATEMENT RECORDED U/S 132(4) AS NO TED ABOVE. IN THIS REGARD WE RECALL THE DECISION OF HON'BLE SU PREME COURT (BY THREE JUDGES) IN CASE OF G.C. AGARWAL V CIT, 18 6 ITR 571(S.C) WHEREIN THEIR LORDSHIPS HAVE CONFIRMED THE ORDER OF HON'BLE GAUHATI HIGH COURT IN CASE OF F.C. AGARWAL V. CIT, 102 ITR 408 WHEREIN IT WAS CLEARLY HELD THAT MERELY BEC AUSE RETURN HAS BEEN REVISED WITHOUT POINTING OUT ANY OMISSION OR MISTAKE IN THE ORIGINAL RETURN THEN PENALTY CANNOT BE DELETED SIMPLY BECAUSE REVISED RETURN HAS BEEN FILED. 28 18 THUS THE COMBINED READING OF SECTION 132(4) AND EXPLANATION 5 TO SECTION 271(1)(C) WOULD CLEARLY SH OW THAT IMMUNITY IS AVAILABLE IF THE INCOME IS SURRENDERED DURING SEARCH AND THE MANNER OF EARNING SUCH INCOME IS ALS O DISCLOSED AND THE ASSESSEE BASED ON SUCH DISCLOSURE PAID TAX ON THE SAME. IN CASE BEFORE US AFTER HAVING MA DE SURRENDER THE ASSESSEE SIMPLY RETRACTED FROM THE ST ATEMENT AND DID NOT INCLUDE THE AMOUNT OF SURRENDER IN THE RETURN OF INCOME. THE INCOME WAS INCLUDED THROUGH REVISED RE TURN WHICH HAS NOT BEEN ACCEPTED BY THE ASSESSING OFFICE R BECAUSE SAME WAS LATE. IN ANY CASE THE REVISED RET URN WAS FURNISHED ONLY WHEN THE ASSESSEE WAS FULLY CORNERED DURING THE ASSESSMENT PROCEEDINGS. IN ADDITION SOME MORE ITEMS OF INCOME WERE ALSO FOUND TO BE CONCEALED PARTICULARLY IN RESPECT OF PLATINUM AND SILVER JEWELLERY. THEREFO RE, IT IS A CLEAR CASE OF CONCEALMENT AND PENALTY HAS BEEN RIGH TLY LEVIED AND CONFIRMED BY THE LD. CIT(A). 19 WE MAY ALSO LIKE TO MENTION THAT BEFORE THE LD. CIT(A) RELIANCE WAS PLACE ON TWO MAIN CASE LAWS I.E. IN CA SE OF CIT V. RELIANCE PETROPRODUCTS PVT LTD. (SUPRA) AND DILI P N SHROFF (SUPRA). THE RATIO OF RELIANCE PETROPRODUCTS PVT L TD WOULD BE APPLICABLE ONLY IF AN ASSESSEE HAS MADE DISCLOSU RE OF A PARTICULAR ITEM IN HIS RETURN AND IN THE CASE BEFOR E US 29 DESPITE HAVING SURRENDERED THE INCOME AND THE SAME WAS NOT DISCLOSED IN THE RETURN OF INCOME THEREFORE, IT CA NNOT BE SAID THAT THE ASSESSEE HAS DISCLOSED THE PARTICULAR S OF INCOME IN HIS RETURN OF INCOME. AS FAR AS THE DECI SION OF DILIP N SHROFF (SUPRA) IS CONCERNED, THE SAME WAS D OUBTED BY ANOTHER BENCH OF HON'BLE SUPREME COURT AND THE M ATTER WAS REFERRED TO A LARGER BENCH OF HON'BLE APEX COUR T IN CASE OF UNION OF INDIA AND OTHERS V. DHARMENDRA TEXTILE PROCESSORS AND OTHERS, 306 ITR 277 AND IN THAT DECI SION MAIN ISSUE WAS REGARDING LEVY OF PENALTY U/S 11A OF CENTRAL EXCISE ACT, 1944. HOWEVER, THE HON'BLE SUPREME COU RT MADE VARIOUS OBSERVATIONS WITH REFERENCE TO THE CAS E OF DILIP N SHROFF (SUPRA) TO SECTION 271(1)(C) OF INCO ME-TAX ACT, 1961. THE COURT AT PARA 27 HAS OBSERVED AS UNDER: THE EXPLANATIONS APPENDED TO SECTION 271(1)(C) OF THE INCOME-TAX ACT ENTIRELY INDICATE THE ELEMENT OF STR ICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACC URATE PARTICULARS WHILE FILING THE RETURN. THE JUDGMENT IN DILIP N SHROFFS CASE (2007) 8 SCALE 304 (S.C) HAS NOT CONS IDERED THE EFFECT AND RELEVANCE OF SECTION 276C OF THE INC OME-TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271 (1)(C) READ WITH THE EXPLANATIONS INDICATES THAT THE SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS O F REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIV IL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MA TTER OF PROSECUTION U/S 276C OF THE INCOME-TAX ACT. 30 THE ABOVE CLEARLY SHOW THAT THE JUDGMENT IN CASE OF DILIP N SHROFF (SUPRA) WAS NOT APPROVED BY THE HON'BLE APEX COURT ITSELF. 20 IN VIEW OF ABOVE DETAILED DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT PENALTY HAS BEEN RIGHTLY LEVIE D BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) A ND THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 21 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.8.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.8.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR