M/s Concorde Housing Corporation, Bangalore V. DCIT, Bangalore

ITA 777/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73394 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU
• Assessee Lawyers: B P SACHIN KUMAR
• Keywords: Depreciation; Search and seizure; Document seized; Initiation of penalty proceedings; Documents seized
• Section: 142(1); 131; 27; 132

Judgement Text

ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.777/BANG/2012 (ASSESSMENT YEAR: 2005-06) M/S. CONCORDE HOUSING CORPORATION, NO.46/A, 1 ST MAIN ROAD, 3 RD PHASE, JP NAGAR BANGALORE 560 078 PAN: AADFC 4185 H VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), 4 TH FLOOR, CR BUILDING ANNEX, QUEENS ROAD BANGALORE 560001 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI B.P. SACHIN KUMAR, CA DEPARTMENT BY: SHRI M.K. BIJU, (DR) DATE OF HEARING: 04/02/2014 DATE OF PRONOUNCEMENT: 28/02/2014 O R D E R PER GEORGE GEORGE K. J.M. 1. THIS APPEAL INSTITUTED, AT THE INSTANCE OF THE ASSESSEE FIRM, IS DIRECTED AGAINST THE ORDER OF THE CIT (A)- II, BANGALORE, DATED 26.3.2012. THE RELEVANT ASSESSMENT YEAR IS 2005-06 . THE ORDER OF CIT (A) ARISE OUT OF ORDER PASSED U/S 271( 1)(C) OF THE ACT. 2. THE ASSESSEE HAS, IN ITS MEMORANDUM OF APP EAL, RAISED A SOLITARY ISSUE, NAMELY, THAT THE AO AND THE CIT (A) FAILED TO APPRECIATE THAT ALL THE MATERIAL FACTS WERE MADE AVAILABLE DURING THE COURSE OF SEARCH AND ASSESSMENT PROCEEDI NGS AND, ACCORDINGLY, THE ASSESSEE HAD NOT FURNISHED ANY INA CCURATE PARTICULARS OF INCOME. ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 2 OF 14 3. BRIEFLY STATED, THE FACTS OF THE ISS UE ARE AS UNDER: THE ASSESSEE IS A PARTNERSHIP FIRM, CARRYING ON BUSINESS AS DEVELOPER AND BUILDER OF RESIDENTIAL HO USES. A RETURN OF INCOME FOR THE PERIOD UNDER CONSIDERATION , WAS FURNISHED ON 31.10.2005, ADMITTING AN INCOME OF RS. 2.65 CRORES. THERE WAS A SEARCH OPERATION U/S 132 OF THE ACT ON THE PREMISES OF THE ASSESSEE ON 13.4.2005. CONSEQUENT TO SEARCH U/S 132 OF THE ACT, THE ASSESSMENT WAS COMPLETED ON 28.12.2007 MAKING ADDITION OF RS.1.64 CRORES. THE AO HAD OBSERVED THA T SEIZED DOCUMENTS INDICATED PROFIT AT RS.4.21 CRORES WHEREA S NET PROFIT SHOWN IN THE RETURN WAS ONLY AT RS.2.56 CRORES AND, THUS, THE ASSESSEE HAD INFLATED THE EXPENDITURE AND NOT DECLA RED THE CORRECT PROFIT. ACCORDINGLY, THE DIFFERENCE OF RS. 1.64 CRORES [RS.4.21 CRORES RS.2.56 CRORES] WAS TREATED AS IN FLATION OF EXPENDITURE AND ADDED TO THE INCOME RETURNED. THIS ADDITION MADE IN QUANTUM ASSESSMENT WAS UPHELD BY THE TRIBUN AL IN ITA NO.336/BANG/2009 DATED 25.09.2009. 4. SIMULTANEOUSLY, THE ASSESSEE WAS REQUIRED TO SH OW- CAUSE U/S 271(1)(C) OF THE ACT, AS TO WHY IT SHOULD NOT BE PENALISED FOR FURNISHING OF INACCURATE PARTICULARS AND ALSO CONCEALMENT OF ITS INCOME ETC. AFTER HAVING CONSIDE RED THE ASSESSEES EXPLANATION, THE AO LEVIED A PENALTY OF RS.49,49,686/- U/S 271(1)(C) OF THE ACT. 5. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE BE FORE THE CIT (A) FOR ADJUDICATION. AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS, THE CIT (A) UPHELD THE PENA LTY IMPOSED U/S 271(1) (C) OF THE ACT FOR THE FOLLOWING REASONS , NAMELY: ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 3 OF 14 4. (ON PAGE 7)..IT IS CLEAR FROM THE FACTS ON RECORD THAT THERE WAS AN UNDER-DECLARATION OF PROFITS BY THE APPELLANT IN HIS (ITS) RETURN OF INC OME FILED AS AGAINST THE ACTUAL PROFITS EARNED WHICH WERE BRO UGHT TO LIGHT BY THE PAPERS AND DOCUMENTS FOUND AND SEIZ ED DURING THE COURSE OF SEARCH ACTION U/S 132 TAKEN UP IN THE APPELLANTS CASE. THIS HAS BEEN UPHELD BY THE HONBLE ITAT WHICH IS THE HIGHEST FACT-FINDING AUTH ORITY. NO EXPLANATION HAS BEEN OFFERED BY THE APPELLANT IN THE LIGHT OF THE OBSERVATIONS OF THE AO AT PARAS 3 AND 4 OF THE PENALTY ORDER. THE CASE LAWS CITED BY THE APPE LLANT ARE NOT RELEVANT AS IT IS A CLEAR CASE OF WILLFUL U NDER- DECLARATION OF INCOME BY THE APPELLANT WHICH HAS BE EN UNEARTHED BY ACTION U/S 132. I HOLD THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE AO HAD LEVIED MINIMUM PENALTY OF RS.49,49,686/-. THE SAME IS, THEREFORE, UPHELD. 6. AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE US WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARNED AR ARE SUMMARIZED A S UNDER: - THAT THE SEARCH WAS CONDUCTED APART FROM THE BUS INESS PREMISES OF THE ASSESSEE, THE FOLLOWING ASSESSEES BELONGING TO THE SAME GROUP WERE ALSO SEARCHED, NAMELY, (I) C ONCORDE DEVELOPERS, (II) CONCORDE GARDEN CITY; (III) CONCOR DE HOMES; (IV) CONCORDE SHELTERS PVT. LTD(V) GOPAL RED DY; & (VI) B.S.SHIVARAM - THAT THE ADDITION OF RS.1.64 CRORES WAS MADE ONL Y ON THE STRENGTH OF THE LOOSE SHEETS UNEARTHED DURING THE C OURSE OF SEARCH AND IT WAS EXPLAINED THAT THE CONTENTS OF LO OSE SHEETS WERE ROUGH WORKINGS OF ONE OF THE STAFF MEMB ERS OF THE GROUP AND THAT THE PROFIT ELEMENT THEREIN WAS T HE TOTAL PROFITS OF THE ENTIRE GROUP AND NOT THE PROFIT OF T HE ASSESSEE ALONE AND THAT THE NOTING AND ENTRIES IN THE LOOSE SHEETS WERE NOT A CONCLUSIVE PROOF OF INFLATED EXPENDITURE OF THE ASSESSEE AS THE ALLEGED LOOSE SHEETS DID NOT BEAR T HE NAME OF THE ASSESSEE; - THAT WHILE FILING THE RETURN OF INCOME, PROFIT R ETURNED BY THE ASSESSEE GROUP COMPANIES WAS MORE THAN RS.4 CRORES; - THAT THERE WAS CONFUSION REGARDING THE YEAR TO W HICH THIS ALLEGED LOOSE SHEETS BELONG; ON PAGE 72 OF THE SEIZ ED ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 4 OF 14 MATERIAL, IT WAS STATED AS 1.3.04 WHEREAS ON PAGE 7 4, IT WAS MENTIONED AS ADVANCE TAX FOR THE YEAR 2004-05; AND THAT EVEN IN RELATION TO THE YEAR 2004-05, THERE WAS NO REFERENCE AS TO IT AY OR PREVIOUS YEAR; - THAT THE ALLEGED LOOSE SHEET MENTIONS THAT A SUM OF RS.77 LAKHS AS TAX PAID WHEREAS THE ADVANCE-TAX PAID BY T HE ASSESSEE WAS RS.98 LAKHS AS OBSERVED IN THE ASST. O RDER [PAGE 39 OF THE PAPER BOOK] WHICH ALSO STRENGTHENS THAT THE LOOSE SHEET DOES NOT BELONG TO THE ASSSESSEE; - THAT THE ASSESSMENT IN THE ASSESSEES CASE WAS M ADE IN PURSUANCE OF SEARCH OPERATION AND IN FACT, THE AO H AD ALL THE RECORDS AT HIS DISPOSAL; AND THAT HE DID NOT FI ND ANY DEFECTS OR MISTAKES IN THE REGULAR BOOKS OF ACCOUNT S OF THE ASSESSEE; - THAT APART FROM AN INFERENCE, THERE WAS NO ANY E LEMENT OF GUILT OF CONCEALMENT AND THAT THE PENALTY IMPOSED F OR CONCEALMENT OF ALLEGED INCOME WAS MERELY ON THE BAS IS OF PRESUMPTION THAT THE DIFFERENCE BETWEEN THE BUSINES S INCOME ADMITTED IN THE RETURN AND THE ALLEGED PROFI T RECORDED IN THE LOOSE SHEETS AS INFLATION OF EXPEND ITURE; AND THAT THOSE LOOSE SHEETS WERE NOT-AUDITED AND THUS, NO GUARANTEE OF THE FIGURES IN THE ALLEGED LOOSE SHEET S WERE ARITHMETICALLY CORRECT; - THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE NET PROFITS [OF ABOUT 14%] ARRIVED AT BY THE IS LESS COMPARED T O THIS LINE OF BUSINESS; - THAT THERE WAS NO ASSURANCE THAT THE FIGURES IN THE LOOSE SHEERS WERE ARRIVED AT AS PER ACCOUNTANCY PRINCIPLE S AFTER TAKING INTO CONSIDERATION DEPRECIATION AND OTHER OU T- STANDING EXPENSES AND IN ANY EVENT THE CONCLUSIONS OF THE AO WAS NOT SUPPORTED BY ANY MATERIAL WHATSOEVER; - THAT PENALTY U/S 271(1)(C) CAN ONLY BE LEVIED IF IN THE COURSE OF PROCEEDINGS, THE AO IS SATISFIED THAT TH ERE IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. THE WORDS IN T HE COURSE OF PROCEEDINGS MEAN THE ASSESSMENT PROCEEDINGS BEC AUSE THERE IS NO QUESTION OF THE SATISFACTION OF THE AO IN SURVEY PROCEEDINGS; ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 5 OF 14 RELIES ON THE JUDGMENT OF THE HONBLE DELHI HC IN C IT V. SAS PHARMACEUTICALS LTD 335 ITR 259 (DEL); - THAT THE SATISFACTION U/S. 271(1)(C) OF THE ACT SHOULD BE ARRIVED AT DURING THE COURSE OF ANY PROCEEDINGS BUT NOT PENALTY PROCEEDINGS MADHUSHREE GUPTA V. UNION OF INDIA (2009) 183 TAXMAN 100 (DEL); - THAT FOR INVOKING EXPLANATION 1(B) TO S. 271(1)( C), THE FOLLOWING THREE INGREDIENTS ARE REQUIRED TO BE SATI SFIED CONCURRENTLY AND CUMULATIVELY, NAMELY: (I) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE; (II) HE FAILS TO PROVE THAT SUCH EXPLANATION IS BO NA-FIDE; AND (III) ALL THE FACTS RELATING TO THE SAME (EXPLANATI ON) AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DI SCLOSED BY HIM. - THAT THE AO HAD NOT GIVEN A FINDING ON THE BASIS OF MATERIAL ON RECORD THAT ALL THESE CONDITIONS ARE CUMULATIVEL Y AND SIMULTANEOUSLY SATISFIED AND, THUS, PENALTY U/S 27 1(1)(C) READ WITH EXPLANATION 1(B) CANNOT BE LEVIED DHOLU CONSTRUCTION AND PROJECTS V. CIT ITA NO.413/AHD/2 007 DT. 31.3.2010; - THAT MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTI ON OF CERTAIN EXPENDITURE WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S 271(1)(C) IS NOT ATTRACTED C IT V. RELIANCE PETRO PRODUCTS PVT LTD 322 ITR 158 (SC); - THAT THE ANTICIPATED PROFIT CANNOT BE CONCLUDED TO BE THE ACTUAL PROFIT FOR THE YEAR AS THIS WAS CONTINGENT A ND SUBJECT TO (I) THE SALE OF SITES; (II) SALE OF SITES AT THE DESIRABLE RATE; (III) ACCRUAL OR REVENUE IN THIS CASE EXECUTION O F SALE DEED AND COMPLETION OF REGISTRATION FORMALITIES; (IV) BO OKING CORRESPONDING EXPENDITURE LIKE DEVELOPMENT EXPENSES , LAND DEVELOPMENT EXPENSES AND MARKETING EXPENSES; - THAT THOUGH THE ASSESSEE CONCEDED THE ADDITION A RISING OUT OF THE ALLEGED LOOSE SHEETS DURING THE ASSESSMENT PROCEEDINGS, BUT, PENALTY PROCEEDINGS WERE SEPARATE ; AND THAT WHAT MERITS ADDITION DURING THE ASSESSMENT PROCEEDINGS NEED NOT NECESSARILY MERIT LEVY OF PENA LTY IN THE PENALTY PROCEEDINGS AS PENALTY U/S 271(1)(C) CA N COME ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 6 OF 14 INTO PLAY WHEN THE CONDITIONS LAID DOWN UNDER THAT SECTION ARE SATISFIED; - THAT DEBATABLE ADDITIONS DO NOT JUSTIFY PENALTY WHATSOEVER AND IN PENALTY PROCEEDINGS, AN INDEPENDENT FINDING HAS TO BE ARRIVED AT BY CONCLUSIVELY HOLDING THAT THE ASSE SSEE OWNS THE CONCEALMENT AND IN THE ABSENCE THEREOF, PE NALTY CANNOT BE LEVIED; RELIES ON THE JUDGMENT OF THE HONBLE JURISDICTIONA L HC IN VEERABAHDRAPPA SANGAPPA & CO ITA NO. 5020 OF 2209 DATED 13.12.2012; - THAT THE CHARGE AGAINST THE ASSESSEE WAS NOT CLE ARLY DISCERNIBLE FROM THE NOTICE U/S 274 R.W.S. 271 OF T HE ACT, AS IT WAS UNCLEAR WHETHER THE AO WAS CHARGING THE ASSE SSEE FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. INAPPROPRIATE WORDS WERE NEITHER STRUCK-OFF NOR DELETED AS THE AO WAS UNSURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME; IN CONCLUSION, IT WAS PLEADED THAT THE PENALTY IMPO SED U/S 271(1)(C) OF THE ACT REQUIRES TO BE CANCELLED. 6.1. ON THE OTHER HAND, THE LEARNED DR SUB MITTED THAT THE ASSESSEE HAD SOUGHT TO DISOWN THE CONTENT OF THE SE IZED MATERIAL CLAIMING THAT THE NOTING FOUND THEREIN WERE THE ROU GH WORKINGS OF ITS STAFF MEMBERS AND THAT THIS WAS EXPLAINED TO THE INVESTIGATION WING. HOWEVER, THIS CLAIM OF THE ASS ESSEE WAS REFUTED BY THE LEARNED DR FOR THE REASON THAT THE N OTING MADE INDICATE A SYSTEMATIC AND CONCRETE CALCULATION OF S ALE PRICE OF PLOTS, ALLOCATION OF PRICES ETC. IT WAS, FURTHER, D ISPUTED THE ASSESSEES OTHER CONTENTION THAT THE PROFITS SHOWN IN THE IMPUGNED LOOSE SHEETS RELATE TO PROFIT OF THE ENTIR E GROUP SINCE THE ENTRIES RELATE ONLY TO THE ASSESSEES BUSINESS. THE LEARNED ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 7 OF 14 DR HAD, THEREFORE, JUSTIFIED THE AOS STAND IN REJE CTING THE ASSESSEES EXPLANATION AND IMPOSING THE PENALTY U/S 271(1)(C) OF THE ACT. WITH REGARD TO THE ASSESSEES CONTENTION THAT THE IMPUGNED ADDITION WAS MADE ONLY ON THE STRENGTH OF LOOSE SHEETS FOUND DURING THE COURSE OF SEARCH OPERATION ETC., I T WAS SUBMITTED BY THE LEARNED DR THAT IN TERMS OF S. 132 (4A) OF THE ACT, THERE IS AN OBLIGATION CAST ON THE ASSESSEE TO EXPLAIN THE CONTENTS OF THE SEIZED MATERIALS WHICH HAVE BEEN SE IZED FROM THE PREMISES OF THE ASSESSEE. FURTHER ILLUSTRATING THE PROVISIONS OF S. 132(4) OF THE ACT, THE LEARNED DR SUBMITTED THAT TH E SAID SECTION STATES THAT WHERE ANY BOOKS OF ACCOUNTS, OTHER DOCU MENTS ETC., ARE FOUND IN THE POSSESSION OR CONTROL OF ANY PERSO N IN THE COURSE OF SEARCH, IT MAY BE PRESUMED THAT (I) SUCH BOOK OF ACCOUNTS, OTHER DOCUMENT BELONG TO SUCH PERSON; (II ) THE SIGNATURE AND EVERY PART OF SUCH BOOKS OF ACCOUNT O R DOCUMENTS SHALL BE PURPORTED TO BE IN THE HANDWRITING OF SUCH PERSON. THUS, THE LEGAL PRESUMPTION AS PER S. 132 (4A) WHIC H IS AS REBUTTABLE PRESUMPTION HAS NOT BEEN REBUTTED BY THE ASSESSEE WITH NECESSARY EVIDENCE. IT WAS, FURTHER, CONTENDED THAT AS THE ASSESSEE HAD MERELY CLAIMED THAT THE NOTING MADE TH EREIN WAS BY ITS STAFF WHICH WAS DEVOID OF ANY EVIDENCE HAS B EEN RIGHTLY REJECTED BY THE AO. IN RESPECT OF THE ASSESSEES A RGUMENT OF THE QUESTION OF SATISFACTION OF THE AO, IT WAS SUBMIT TED BY THE LEARNED DR THAT AS PER THE AMENDED PROVISIONS OF S. 271(1B) OF THE ACT WHICH HAS BEEN AMENDED W.E.F 1.4.1989, WHER E ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTA L INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR R E-ASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIAT ION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1), SU CH AN ORDER OF ASSESSMENT OR RE-ASSESSMENT SHALL BE DEEMED TO CONS TITUTE ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 8 OF 14 SATISFACTION OF THE AO FOR INITIATION OF PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE ACT. WITH REGARD TO THE ASSESSEE S CONTENTION THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABL E IN LAW, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS, ATTRACTING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE LEAR NED DR COUNTERED THE SAME BY SUBMITTING THAT AS PER EXPLAN ATION 1 TO S. 271(1)(C) OF THE ACT WHERE IN RESPECT OF ANY MATERI AL FACTS RELATING TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, S UCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANAT ION WHICH IS FOUND BY THE ASSESSING OFFICER TO BE FALSE OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE, T HEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE INCOME SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. FURTHER ILLUSTRATING, THE LEA RNED DR CONTENDED THAT IT IS EVIDENT FROM THE SECTION, THE ONUS LIES ON THE ASSESSEE TO OFFER EXPLANATION. THOUGH THE ASSESSEE HAD OFFERED EXPLANATION ABOUT THE SEIZED LOOSE SHEETS, IT COULD NOT SUBSTANTIATE THE SAME AND THEREFORE, THE AO TOOK A STAND THAT THE ASSESSEE HAD CONCEALED ITS INCOME. TO STRENGTH EN HIS SUBMISSION, THE LEARNED DR PLACED RELIANCE ON THE F INDINGS OF THE EARLIER BENCH OF THIS TRIBUNAL REPORTED IN 30 ITD 0 480. HE HAD, FURTHER, SUBMITTED THAT TAKING INTO ACCOUNT THE TOT ALITY OF THE CASE, IT WAS EVIDENT THAT THERE WAS A DELIBERATE AC T ON THE PART OF THE ASSESSEE IN WITH-HOLDING THE TRUE FACTS AND THA T THE ASSESSEE HAD CONSCIOUSLY MADE CONCEALMENT AND FURNISHED IN A CCURATE PARTICULARS OF ITS INCOME AND, THUS, THE ASSESSEES CASE SQUARELY FALLS UNDER EXPLANATION 1(B) OF S. 271(1)(C) OF THE ACT. IN CONCLUSION, IT WAS PLEADED THAT THE FINDING OF THE CIT (A) SUSTAINING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT BE UPHELD AND THE APPEAL OF THE ASSESSEE BE DISMISSED. ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 9 OF 14 7. WE HAVE CAREFULLY CONSIDERED THE RIV AL SUBMISSION, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO T HE CASE LAWS ON WHICH EITHER OF THE PARTY HAVE PLACED THEIR RELI ANCE. THE BUSINESS PREMISES OF THE ASSESSEE WERE SUBJECTED TO AN ACTION U/S 132 OF THE ACT ON 13.4.2005. ACCORDING TO THE ASSESSEE, THE SEARCH OPERATION COVERED ITS GROUP, NAMELY, (I) CON CORDE DEVELOPERS, (II) CONCORDE GARDEN CITY, (III) CONCOR DE HOMES, (IV) CONCORDE SHELTERS PVT. LTD, (V) GOPAL REDDY AND (VI ) B.S. SHIVARAM AS THE GROUP WAS HOUSED UNDER ONE ROOF. I T WAS THE STAND OF THE ASSESSEE ALL ALONG THAT THE ALLEGED LO OSE SHEETS UNEARTHED DURING THE COURSE OF SEARCH OPERATION DOE S NOT BELONG TO THE ASSESSEE, AS APPARENTLY, THEY DO NOT BEAR TH E NAME OF THE ASSESSEE. WHEN THE ASSESSEE WAS CONFRONTED DURING THE COURSE OF SEARCH OPERATION, IT TOOK A STAND THAT THOSE LOO SE SHEETS WERE ROUGH WORKING OF ONE OF THE STAFF MEMBERS AND THAT THE PROFITS MENTIONED THEREIN WERE THE PROFITS OF THE ENTIRE GR OUP. THIS HAS BEEN EXPLICITLY VOUCHED BY SRI B.S. SHIVARAM, PARTN ER OF CONCORDE DEVELOPERS IN HIS STATEMENT ON OATH ON 13. 6.2005 [COURTESY: PAGE 60 OF PB AR]. IT IS ALSO EVIDENT FROM THE FACT THAT THIS EXPLANATION HAS CONSISTENTLY BEEN ADOPTED BY THE ASSESSEE DURING THE COURSE OF SEARCH PROCEEDINGS, P OST SEARCH PROCEEDINGS, ASSESSMENT AND APPELLATE PROCEEDINGS A S WELL. MERGED P & L ACCOUNT FOR THE YEAR-ENDED 31.3.2005 H AS ALSO SHOWN THE TOTAL PROFIT AT RS.4.97 CRORES [REFER: PA GE 45 OF PB AR]. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS SERVED A LETTER DATED 29.11.2007 ACCOMPANIED BY A N OTICE U/S 142(1) OF THE ACT WHEREIN THE ASSESSEE WAS REQUIRED TO EXPLAIN THAT: IN THE COURSE OF SEARCH AND SEIZURE OPERATION, IT IS FOUND THAT YOU HAVE INFLATED EXPENDITURE TO THE EXT ENT ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 10 OF 14 OF RS.1.57 CRORES WHICH IS CLEAR FROM PAGE NO.72, 7 3 & 74 OF SEIZED DOCUMENT MARKED AS A/CD.4/4, THE SAME HAS NOT BEEN ADMITTED BY YOU IN THE RETURN OF INCOME FILED. YOU ARE REQUESTED TO SUBMIT YOUR EXPLANATION ALONG WITH NECESSARY EVIDENCE. THE ASSESSEE IN ITS LETTER FILED 17.12.2007 HAS REP LIED THAT THE ASSESSEE IS ALREADY ANSWERED DURING THE HEARING WITH THE ADIT. 3.2. THE ISSUE HAS BEEN EXAMINED WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD AND INFORMATION FURNISHED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME. AS REGARDS TO THE SAID EXHIBIT I.E., A/CD. 4/4 PAGE NO.72,73 & 74,A QUESTION WAS PUT TO THE MANAGING PARTNER SRI B.S. SHIVARAM, HE HAS REPLIED AS BELOW IN HIS SWORN STATEMENT IN PAGE 72 IT REPRESENTS THE VALUATION OF THE WORK IN PROGRESS. THIS IS WORKING OF ONE OF OUR WORKING STAFF WHILE REVIEW ING THE LEDGERS. ANS: PAGE 73 TO 79 THESE ARE ROUGH WORKING OF THE STAFF REGARDING THE TAX PAYABLE IN RESPECT OF EACH GROUP COMPANIES. AS SEEN FROM THE SAID LOOSE SHEET, THE ACTUAL PROF IT OF M/S. CONCORDE HOUSING CORPORATION IS WORKED AT RS.4,21,71,890. [COURTESY: P AGE 10 OF ASST. ORDER] 7.1. ACCORDINGLY, PENAL PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR THE FOLLOWING REASONS: PENALTY PROCEEDINGS U/S 271(1)(C): SINCE IT IS PROVED THAT THE ASSESSEE HAS CONCEALED PARTICULARS/FURNISHED INACCURATE PARTICULARS AS DISCUSSED ABOVE IN RESPECT OF CASH PAYMENT OF RS.43,24,000/- AND INFLATION OF EXPENDITURE OF RS.1,64,98,954/-. PROCEEDINGS U/S 271(1)(C) ARE INITIATED. [REFER: PAGE 10 OF ASST. ORDER] 7.2. DURING THE COURSE OF PENAL PROCEEDINGS U /S 271(1)(C) OF THE ACT, AFTER DUE CONSIDERATION OF THE ASSESSEES SUBMISSIONS AS RECORDED IN HIS PENALTY ORDER UNDER DISPUTE, THE AO HAD LEVIED ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 11 OF 14 PENALTY OF RS.49,49,686/- U/S 271(1)(C) OF THE ACT FOR THE FOLLOWING REASONS, NAMELY: 4. (ON PAGE 5) TO SUMMARIZE, IT IS EVIDENT FROM TH E SEIZED MATERIALS THAT THE ACTUAL BUSINESS PROFIT OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N WAS RS.4,21,71,890/-. THE ASSESSEE HAS, HOWEVER, DISCLOSED ITS PROFITS ONLY AT RS.2,56,72,936/- AND, THEREBY CONCEALED ITS INCOME TO THE TUNE OF RS.1,64,98,954/-. IT CAN BE DRAWN OR DEDUCED FROM THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE THA T THERE WAS A DELIBERATE ACT ON THE PART OF ASSESSEE IN WIT H HOLDING THE TRUE FACTS FROM THE DEPARTMENT. IT IS ALSO EVIDENT FROM THE MATERIALS AVAILABLE ON RECORDS THA T THE ASSESSEE HAS CONSCIOUSLY MADE THE CONCEALMENT OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE CASE SQUARELY FALLS UNDER EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE IT ACT. THEREFORE, IT IS HELD THA T THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME FOR TH E ASSESSMENT YEAR UNDER CONSIDERATION MAKING ITSELF LIABLE TO PENAL ACTION U/S 271(1)(C) OF THE INCOME- TAX ACT, 1961. 7.3. DURING THE COURSE OF HEARING, TH E LEARNED DR WAS DIRECTED TO PRODUCE THE ORIGINAL STATEMENT RECORDED ON OATH IN THE CASE OF SRI B.S. SHIVARAM TO ASCERTAIN THE VERA CITY OF THE ASSESSEES CONTENTION. ON A CAREFUL EXAMINATION OF THE STATEMENT OF SRI SHIVARAM, IT WAS NOTICED THAT THER E WERE VITAL DISCREPANCIES BETWEEN THE ORIGINAL STATEMENT RECORD ED U/S 131 OF THE ACT AND WHAT HAS BEEN EXTRACTED AND CONTAINED IN PARA 3.2 OF THE ASSESSMENT ORDER. FOR APPRECIATION OF F ACTS, THE RELEVANT PORTION OF THE ORIGINAL STATEMENT SRI SHIV ARAM IS REPRODUCED, VERBATIM, AS UNDER: [ON PAGES 13 AND 14 OF THE STATEMENT OF SRI SHIVARA M] PAGE 72 IT REPRESENTS THE VALUATION OF WORKING-I N- PROGRESS, PERHAPS, IT IS WORKING OF ONE ACCOUNTING STAFF WHILE REVIEWING THE LEDGER. ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 12 OF 14 PAGE 73 TO 79 THESE ARE ROUGH WORKING OF OUR STAF F REGARDING THE TAX PAYABLE IN RESPECT OF OUR GROUP O F COMPANIES. 7.4. HOWEVER, IN PARA 3.2 OF THE ASSESSM ENT ORDER, IT HAS EXPLICITLY BEEN MENTIONED AS UNDER [AT THE COST OF PETITION] 3.2. THE ISSUE HAS BEEN EXAMINED WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD AND INFORMATION FURNISHED BY THE ASSSESSEE ALONG WITH THE RETURN OF INCOME. AS REGARDS TO THE SAID EXHIBIT I.E., A/CD. 4/4 PAGE NO.72,73 & 74,A QUESTION WAS PUT TO THE MANAGING PARTNER SRI B.S. SHIVARAM, HE HAS REPLIED AS BELOW IN HIS SWORN STATEMENT IN PAGE 72 IT REPRESENTS THE VALUATION OF THE WORK IN PROGRESS. THIS IS WORKING OF ONE OF OUR WORKING STAFF WHILE REVIEWING THE LEDGERS. ANS: PAGE 73 TO 79 THESE AR E ROUGH WORKING OF THE STAFF REGARDING THE TAX PAYABL E IN RESPECT OF EACH GROUP COMPANIES .[EMPHASIS SUPPLIED] AS SEEN FROM THE SAID LOOSE SHEET, THE ACTUAL PROF IT OF M/S. CONCORDE HOUSING CORPORATION IS WORKED AT RS.4,21,71,890. 7.5. ANOTHER SIGNIFICANT FEATURE WHICH WE HAV E NOTICED THAT AS SEEN FROM THE SAID LOOSE SHEET, THE ACTUAL PROFIT OF M/S. CONCORDE HOUSING CORPORATION IS WORK ED AT RS.4,21,71,890.[SUPRA] WAS NOT FINDING A PLACE ALSO IN THE ORIGINAL STATEMENT OF SHRI SHIVARAM RECORDED. WHEN THE ABOVE DISCREPANCIES HAVE BEEN POINTED OUT, THE LEAR NED DR FAIRLY CONCEDED THAT THERE WERE MATERIAL DIFFERENCE S IN THE ORIGINAL STATEMENT OF SHRI SHIVARAM RECORDED AND WH AT HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER [PARAGRAPHS 3.2 OF THE ASST. ORDER]. 7.6. TAKING INTO CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DISCUSSED ABOVE, WE A RE OF THE ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 13 OF 14 VIEW THAT THE AO ARRIVED AT A CONCLUSION, ON MISCON CEPTION, THAT THE ACTUAL PROFIT OF THE ASSESSEE IS WORKED AT RS.4,21,71,890/- INSTEAD OF ITS GROUP OF COMPANIES AND, ACCORDINGLY, TREATED THE DIFFERENCE OF RS.1,64,98,954/- [RS.4,212,71,890 RS.2,56,72,936 (AS ADMITTED BY T HE ASSESSEE IN ITS RETURN OF INCOME)] AS INFLATED EXPE NDITURE. BASED ON THE ABOVE CONCLUSION AND FACTS, PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) OF THE ACT AND, SUBSEQUENTLY, IMPOSED A PENALTY OF RS.49.49 LAKHS O N THE ASSESSEE. WE HAVE, FURTHER, NOTICED THAT WHILE ISS UING A NOTICE U/S 274 R.W.S. 271 OF THE ACT DATED 28.12.20 07, AS RIGHTLY HIGHLIGHTED BY THE ASSESSEE, THE AO WAS NOT SURE AS TO WHETHER THE ASSESSEE HAD CONCEALED THE PARTICULA RS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND, THEREFORE, INAPPROPRIATE WORDS AND PARAGRAPHS IN THE SAID NOTICE HAD NOT BEEN STRUCK OFF. 7.7. REVERTING TO THE ISSUE, SINCE THE MA TTER NOW BEFORE THIS BENCH BEING LEVY OF PENALTY U/S 271(1)( C) OF THE ACT, WE ARE CONFINING OURSELVES TO THE ISSUE: WHETH ER THE AO WAS JUSTIFIED IN IMPOSING OF PENALTY U/S 271(1)(C) OF THE ACT, BASED ON THE WRONG ASSUMPTION THAT THERE WAS AN INF LATED EXPENSES IN THE ASSESSEES CASE TO THE TUNE OF RS.1 .64 CRORES? TO ILLUSTRATE FURTHER, THE AO, WHILE FRAMI NG THE ASSESSMENT ORDER, AS POINTED OUT EARLIER, ASSUMED W RONGLY THAT THE ROUGH WORKING OF THE TAX PAYABLE IN RESPEC T OF EACH GROUP COMPANIES INSTEAD OF GROUP OF COMPANIES WHICH ATTRIBUTED THE INITIATION OF PENALTY PROCEEDINGS AN D SUBSEQUENT LEVY OF PENALTY OF RS.49.49 LAKHS U/S 27 1(1)(C) OF THE ACT. ITA NO.777 OF 2012 CONCORD HOUSING CORPORATION BANG ALORE PAGE 14 OF 14 7.8. TAKING THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DISCUSSED IN THE FORE-GOING PARAGRAPHS, WE ARE O F THE VIEW THAT THE AO WAS NOT JUSTIFIED IN LEVY OF PENALTY OF RS.49.49 LAKHS U/S 271(1)(C) OF THE ACT BASED ON THE WRONG ASSUMPTION THAT THE TAX PAYABLE WAS IN RESPECT OF T HE ASSESSEE ALONE. IN SUBSTANCE, THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS CANCELLED. IT IS ORDERED A CCORDINGLY. 8. IN THE RESULT, THE ASSESSEES AP PEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2014. SD/- SD/- (JASON P. BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 28 TH FEBRUARY, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE