DCIT, Nashik V. Shri Madhavrao Tulshiram Patil, Nashik

ITA 783/PUN/2009

• Counselvise Citation: 78324514 RSA 2009
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-10-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 02-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Unexplained cash credit; Search and seizure; Reasonable cause; Corroborative evidences
• Section: 40A(3); 143(3); 153A; 148; 139

Judgement Text

. IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO S . 783, 784 & 785 / P N/ 20 09 ASSESSMENT YEAR S : 2002 - 03, 2003 - 04 & 2004 - 05 DY. C OMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, NASHIK VS. SHRI MADHAVRAO TULSHIRAM PATIL SHESHADRI, KULKARNI COLONY, SHARANPUR ROAD, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AHBPP1178J APPELLANT BY: MS. ANN KAPTHUAMA RESPONDENT BY: SHRI NIKHIL PATH AK ORDER P ER R.S. PADVEKAR , JM : - THIS BATCH OF THREE APPEALS ARE FILED BY THE REVENUE CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE LD. CIT(A) - I, NASHI K DATED 15 - 04 - 2009 FOR THE A.YS. 2002 - 03, 2003 - 04 AND 2004 - 05. THE LD. CIT(A) HAS DELET ED THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT IN ALL THESE THREE ASSESSMENT YEARS . 2. WE FIRST TAKE UP THE APPEAL FOR THE A.Y. 2002 - 03 BEING ITA NO. 783/PN/2009 . THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS: 1. WHETHE R ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEVIED BY THE AO AT RS.5,22,801/ - U/S. 271(1)(C) OF THE I.T. ACT FOR A.Y. 2002 - 03. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE L D. CIT(A) WAS JUSTIFIED IN HOLDING THAT NO PENALTY U/S. 271(1)(C) IS TO BE LEVIED IN RESPECT OF INCOME WHICH HAS ALREADY BEEN DECLARED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A OF THE I.T. ACT. 3. THE FACTS WHICH ARE REVEALED FRO M THE RECORD ARE AS UNDER. THE ASSESSEE IS AN INDIVIDUAL AND HE UNDERTAKES GOVERNMENT CIVIL CONTRACT S. THERE WAS A SEARCH AND SEIZURE ACTION U/S. 132(1) OF THE ACT AGAINST THE 2 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK ASSESSEE ON 21 - 01 - 2004. DURING THE COURSE OF THE SEARCH ACTION, STATEMENT WAS RECORDED U/S. 132(4) ON 10 - 03 - 2004 WHEREIN INCOME ON ACCOUNT OF UN - VOUCHED EXPENDITURE OF RS.28,37,500/ - (I.E. FOR THE A.YS. 2002 - 03, 2003 - 04 AND 2004 - 05) INCLUDING RS.2,75,000/ - FOR THE A.Y. 2004 - 05 AND ON ACCOUNT OF INVESTMENT IN GOLD JEWELLERY OF RS.2, 00,000/ - AND FARMHOUSE OF RS.50,000/ - WAS OFFERED TO TAX. THE ASSESSEE HAS FILED RETURN OF INCOME ON 29 - 10 - 2002 I.E. PRIOR TO THE DATE OF SEARCH DECLARING TOTAL INCOME OF RS.49,21,651/ - . THE RETURN IN RESPONSE TO NOTICE U/S. 153A WAS FILED ON 28 - 05 - 2004 DECL A RING INCOME OF RS.66,09,151/ - . THE ASSESSING OFFICER WHILE ASSESSING THE INCOME OF THE ASSESSEE MADE ADDITION TOWARDS UNRECORDED BUSINESS RENT EXPENSES RS.20,500/ - AND UNACCOUNTED PART - PAYMENT FOR PLOT RS.500/ - . THE ASSESSING OFFICER HAS LEVIED PENA LTY U/S. 271(1)(C) OF THE ACT ON THE ABOVE SAID ADDITIONS MADE IN THE SCRUTINY ASSESSMENT. FURTHER, THE ASSESSING OFFICER HAS ALSO LEVIED PENALTY U/S. 271(1)(C) ON ALLEGED UNACCOUNTED UN - VOUCHED EXPENDITURE RS.16,87,500/ - WHICH HAS BEEN O FFERED TO TAX BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153A OF THE ACT. 4. IN SUM AND SUBSTANCE, THE ASSESSING OFFICER CONSIDERED THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILE D IN RESPONSE TO NOTICE U/S. 1 53 A AS WELL AS THE ADDITIO NS MADE I.E. IN RESPECT OF ONE UNACCOUNTED PAYMENT OF RENT RS.20,500/ - AND UNACCOUNTED PAYMENT OF PLOT NO. 3 FOR RS.500/ - . THE ASSESSING OFFICER WORKED OUT THE TOTAL PENALTY OF RS. 5,22,801/ - . THE ASSESSEE CHALLENGED THE PENALTY BEFORE THE LD. CIT(A), THE LD. CIT(A) DELETED THE PENALTY. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE LEARNED COUNSEL SUBMITS THAT TO THE EXTENT OF THE INCOME OFFERED AND DECLARED BY THE ASSESSEE IN THE RETURN FILED IN RESP ONSE TO NOTICE U/S. 153A IS COVERED BY THE DECISION OF THIS HON'BLE TRIBUNAL IN THE CASE OF CHANDAN 3 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK K. SHEWANI VS. DCIT, PUNE BEING ITA NO. 235 & 236/PN/2010. HE SUBMITS THAT SO FAR AS ADDITIONS MADE BY THE ASSESSING OFFICER ARE CONCERNED THOSE ARE ONLY O N THE PRESUMPTION BASED. THERE IS NO SUBSTANTIAL PROOF AGAINST THE ASSESSEE. HE PLEADED FOR CONFIRMING THE ORDERS OF THE LD. CIT(A). PER CONTRA THE LD. DR PLEADED FOR RESTORING THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. 6. WE FIND THAT WHILE FILING THE RETURN OF INCOME THE ASSESSEE DECLARED RS.16,87,500/ - THAT WAS IN RESPECT OF AMOUNT TO COVER UN - VOUCHED EXPENDITURE RELATING TO THE WORK ALLOTTED BY THE M/S. AMBA CONSTRUCTION. ADMITTEDLY NO INCOME IS OFFERED OR BROUGHT TO TAX IN RESPECT OF ANY CASH, BULLION AND JEWELLERY WHICH IS MENTIONED IN THE EXPLANATION 5 TO SEC. 271(1)(C) OF THE ACT TO THE EXTENT INCOME OFFERED OF RS.16,87,500/ - . THE ASSESSEE S CASE IS SQUARELY COVERED BY DECISION IN THE CASE OF CHANDAN K. SHEWANI (SUPRA) IN WHICH IDENTI CAL ISSUE HAS COME FOR THE CONSIDERATION BEFORE THE TRIBUNAL AND THE TRIBUNAL HELD AS UNDER: 8. WHILE DECIDING ASSESSEES APPEAL FOR A.YS. 1999 - 2000 AND 2001 - 02, THE PENALTY LEVIED ON THE INCOME OFFERED TOWARDS THE PERSONAL EXPENDITURE OF THE ASSESSEE A ND HIS DIVORCEE SISTER HAS BEEN DELETED. EVEN THOUGH THE PARLIAMENT HAS INSERTED EXPLANATION 5A TO SEC. 271(1)( C ), SAID EXPLANATION IS APPLICABLE IN RESPECT OF THE SEARCH INITIATED U/S. 132 ON OR AFTER 1 ST JUNE 2007. SECTION 5A IS INTRODUCED TO PATCH OUT THE LACUNAE IN THE EXISTING PROVISIONS MORE PARTICULARLY TO OVERCOME THE JUDICIAL INTERPRETATION OF EXPLANATION - 5. IF THE SEARCH IS INITIATED U/S. 132 ON OR AFTER 1 ST JUNE 2007 THEN THERE IS A LEGAL PRESUMPTION THAT ANY INCOME BASED ON ANY ENTRY IN T HE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHICH IS CLAIMED AS INCOME BY THE ASSESSEE, THE SAME WOULD BE TREATED AS DEEMED CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. SO FAR AS THE PRESENT ASSESSE E IS CONCERNED, THE DATE OF SEARCH IS 15.6.2004 AND HENCE, EXPLANATION 5A TO SEC. 271(1)((C ) IS NOT APPLICABLE. IT IS WELL SETTLED RULE OF INTERPRETATION OF THE PENALTY PROVISIONS THAT THE SAME SHOULD BE STRICTLY INTERPRETED AND THERE IS NO SCOPE FOR AN Y PRESUMPTION FOR LEVY OF THE PENALTY UNLESS STATUTE SPECIFICALLY PROVIDES SAME. 9. SO FAR AS THE EXPLANATION - 3 TO SEC. 271(1)(C) IS CONCERNED, WHICH READS AS UNDER : EXPLANATION 3. - WHERE ANY PERSON FAILS, WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED IN SUB - SECTION (1) OF SECTION 153 A RETURN OF HIS INCOME WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1989, AND UNTIL THE EXPIRY OF THE PERIOD AFORESA ID, NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) OF SUB - SECTION (1) OF SECTION 142 OR SECTION 148 AND THE ASSESSING OFFICER OR 4 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK THE COMMISSIONER (APPEALS) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR SUCH PERSON HAS TAXABLE INCOME, THEN, SUCH PERSONAL SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB - SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR, NOTWITHSTANDING THAT SUCH PERSON FURNISHES A RETURN OF HIS INCOME AT ANY TIME AFTER THE EXPIR Y OF THE PERIOD AFORESAID IN PURSUANCE OF A NOTICE UNDER SECTION 148. THE SAID EXPLANATION PRESUMES THAT THERE IS A CONCEALMENT OF PARTICULARS OF INCOME OR FILING OF THE INACCURATE PARTICULARS OF INCOME IN THE SITUATION WHERE THE ASSESSEE DID NOT FILE RETURN OF INCOME U/S. 139 OR WITHIN THE TIME LIMIT PRESCRIBED U/S. 153(1) OF THE ACT BUT FILES THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 148. THE SAID EXPLANATION IS ALSO SILENT IN THE SITUATION IF THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME FOR ANY PARTICULAR A.Y. BUT FILED THE RETURN OF INCOME FOR THE FIRST TIME IN RESPONSE TO NOTICE U/S. 153A, THEN WHAT WOULD BE THE LEGAL PRESUMPTION ? IN OUR OPINION, EXPLANATION - 3 HAS NO APPLICATION, WHEN THE RETURN IS FILED IN RESPONSE TO NOTICE U/S. 153A. WE, THEREFORE, HOLD THAT AS PER THE FACTS OF THIS CASE AND LAW APPLICABLE, THERE IS NO JUSTIFICATION TO LEVY THE PENALTY FOR THE A.Y. 2002 - 03 IN THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 153A EVEN FOR THE SAID INCOME IS BASED ON SOME ENTRIES FOUND IN THE DIARIES OR OTHER DOCUMENTS OR EVEN BANK ACCOUNT DURING THE COURSE OF SEARCH. WE, ACCORDINGLY DELETE THE PENALTY SUSTAINED BY THE LD CIT(A). 10. NOW WE TAKE UP THE ASSESSEES APPEAL FOR A.Y. 2003 - 04 BEING ITA NO. 236/PN/2010. IN THIS YEAR, THE ASSESSEE FILED THE RETURN OF INCOME DISCLOSING THE TOTAL INCOME OF RS. 37,99,170/ - AND THE A.O DETERMINED THE TOTAL INCOME AT RS. 38,39,170/ - BY MERELY MAKING ADHOC ADDITION OF RS. 50,000/ - . THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN IS AS UNDER : SR.NO. PARTICULARS AMOUNT RS. . 1. INCOME FROM HOUSE PROPERTY 2,19,000/ - 2. INCOME FROM BUSINESS 1,25,910/ - 3. SHORT TERM CAPITAL GAINS OF SALE OF SHARES 1,59,478/ - 4. INTEREST INCOME 40,882/ - 5. UTI MEP RED EMPTION 10,000/ - 6. UNEXPLAINED CASH CREDITS 32,00,000/ - 7. UNEXPLAINED ENTRY 55,000/ - GROSS TOTAL 38,11,170/ - LESS : DEDUCTION U/SEC. 80 L 12,000/ - TOTAL RS. 37,95,170 11. IN SUM OF RS. 32,00,000/ - DECLARED BY THE ASSESSEE, SAID DECLARED INCOME COMPRISED OF THE FOLLOWING ITEMS : 1) DRAWING OF THE FAMILY RS. 1,71,193/ - 2) CITI BANK A/C. NO.5 - 103635 - 707 RS. 5 ,00,000/ - 3) CITI BANK A/C. 15 - 103636 - 703 RS. 9,75,000/ - 4) HDFC BANK A/C. NO.148100006216 RS.13,75,000/ - 5) TIRUPATI FINANCE NAGARI SOCIETY RS.1,00,000/ - 6) CASH BALANCE RS.75,807/ - TOTAL RS. 32,00,000/ - SO FAR AS THE DEPOSITS IN THE BANK A/C. ARE CONCERNED, THE BANK ACCOUNTS WERE DETECTED IN THE COURSE OF SEARCH. ASSESSEE CONTENDED THAT IT WAS DIFFICULT FOR HIM TO EXPLAIN THE DEPOSITS MADE IN THE BANK ACCOUNTS. THE ASSESSEE FURTHER SUBMITTE D THAT HE OFFERED IMPUGNED CREDIT AS LIVING EXPENSES OF FAMILY MEMBERS AS INCOME WITH A VIEW TO BUY PEACE OF MIND 5 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK BUT HE COULD NOT PROVE THE SOURCE OF THE SAID CREDIT. THE EXPLANATION OF THE ASSESSEE WAS TURNED DOWN BY BOTH THE AUTHORITIES BELOW. 7. W E T HEREFORE CONFIRMED THE ORDER OF THE LD. CIT(A) BY FOLLOWING DECISIONS OF THE TRIBUNAL IN THE CASE OF CHANDAN K. SHEWANI (SUPRA) . S O FAR AS THE ADDITIONS MADE BY THE ASSESSING OFFICER THAT IS IN RESPECT OF UNACCOUNTED PAYMENT OF RENT RS.20,500/ - AND UNACCO UNTED PAYMENT OF PLOT NO. 3 RS.500/ - . IN OUR OPINION AS RIGHTLY ARGUED BY THE LEARNED COUNSEL THERE IS NO SUBSTANTIAL EVIDENCE AGAINST THE ASSESSEE FOR THE SAID ADDITIONS WHEREBY THE LEVY OF THE PENALTY ON THAT AMOUNT CAN BE SUPPORTED. WE THEREFORE CONFI RMED THE ORDER OF THE LD. CIT(A) AND DISMISSED THE GROUNDS TAKEN BY THE REVENUE. 8 . NOW WE TAKE UP REVENUES APPEAL FOR THE A.Y. 2003 - 04 BEING ITA NO. 784/PN/2009 . THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTED THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE I.T. ACT FROM RS.5,80,384/ - TO RS.9,364/ - AND THEREBY ALLOWED RELIEF OF RS.5,71,020/ - TO THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT NO PENALTY U/S. 271(1)(C) IS TO BE LEVIED IN RESPECT OF INCOME WHICH HAS ALREADY BEEN DECLARED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A OF THE I.T. ACT . 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED WHILE RESTRICTING THE PENALTY ON ADDITION TOWARDS UNRECORDED BUSINESS RENT AND ON ACCOUNT OF UNRECORDED PAYMENT OF ADVANCES TO THE EMPLOYEES TO RS.2,44,800/ - IGNOR ING THE FACT THAT THE AO HAS REJECTED CLAIM OF THE ASSESSEE AS THE SAME WAS WITHOUT CASH FLOW STATEMENT SUPPORTED WITH VERIFIABLE EVIDENCE. 9 . IN THE A.Y. 2003 - 04 THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS ON THE FOLLOWING AMOUNTS OF THE ADD ITIONS AS MENTIONED IN THE PENALTY ORDER (1) UN - VOUCHED PAYMENT OF EXPENDITURE RS.5,00,000/ - , (2) UN - VOUCHED EXPENDITURE IN RESPECT OF M/S. AMBA CONSTRUCTION RS.10,25,000/ - , (3) CASH PAYMENT DISALLOWED RS.37,702/ - , (4) ADDITION ON ACCOUNT OF UNRECORDED REN T EXPENDITURE RS.6,000/ - AND (5) 6 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK UNRECORDED PAYMENT OF ADVANCE TO EMPLOYEES RS.2,73,726. THE ASSESSEE OFFERED THE AMOUNT RS.10,25,000/ - IN THE RETURN FILE IN RESPONSE TO NOTICE U/S.153A WHICH IS RESPECT OF AMOUNT COVERED BY U N - VOUCHED EXPENSES OF M/S. AMB A CONSTRUCTION. THE ASSESSEE ALSO OFFERED RS.5,00,000/ - TOWARDS UN - VOUCHED PAYMENT WHICH WAS IN RESPECT OF THE EXPENSES. AS PER THE ASSESSEE SAID INCOME WAS OFFERED TO CO - OPERATE THE DEP ARTMENT . AS NOTED BY THE ASSESSING OFFICER IN PENALTY ORDER THE SEI ZED MATERIAL SHOWS THAT SOME EXPENDITURE IS INCURRED FOR WHICH VOUCHERS WERE NOT AVAILABLE AND HAVE NOT RECORDED IN F.Y. 2002 - 03. THE ASSESSEE FURTHER STATED THAT THE SAID PAYMENTS WERE MADE OUT OF CASH BALANCE AVAILABLE OUT OF DRAWING AFTER REDUCING HOUS E HOLD EXPENSE S AS PER CHART. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE BY GIVING REASONS THAT THERE WAS NO SUPPORTING EVIDENCE IN THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER MADE SOME OTHER ADDITIONS AS MENTIONED ABOVE. THE A SSESSING OFFICER LEVIED THE PENALTY ON THE INCOME OFFERED BY THE ASSESSEE IN THE RETURN FILE IN RESPONSE TO NOTICE U/S. 153A AS WELL AS ON THE ADDITIONS WHICH ARE TO THE EXTENT OF RS.5,80,384/ - . THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT (A) . T HE LD. CIT(A) SUSTAINED THE PENALTY PARTLY ON THE EXPENDITURE OF RS.2,73,726/ - AND BALANCE PENALTY IS DELETED. NOW THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD THE PARTIES. IN THE A.Y. 2003 - 04, THE ASSESSEE OFFERED THE INCOME IN THE RE TURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153A IN RESPECT AMOUNT TO COVER UN - VOUCHED EXPENSES OF M/S. AMBA CONSTRUCTION RS.10,25,000/ - AND UN - VOUCHED EXPENDITURE OF OWN BUSINESS RS.5,00,000/ - . THE ASSESSING OFFICER MADE THE 3 ADDITIONS I.E. (1) CASH PAYMENTS DISALLOWED U/S. 40A(3) RS.37.702, (2) UNRECORDED BUSINESS RENT RS. 6,000/ - AND (3) UNRECORDED PAYMENT OF ADVANCES TO EMPLOYEES RS. 2,73,726/ - . SO FAR AS THE INCOME OFFERED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153A THE A SSESSEES CASE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF CHANDAN K. SHEWANI 7 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK (SUPRA) THAT TO THE EXTENT OF RS.10,25,000/ - FOR UN - VOUCHED EXPENSES OF M/S. AMBA CONSTRUCTION AND UN - VOUCHED PAYMENT OF RS.5,00,000/ - , EXPLANATION - 5 OF SEC. 271(1)(C) IS NOT APPLICABLE AS NO INCOME IS OFFERED RELATING TO ANY GOLD, JEWELLERY, CASH ETC. F OR THE REASONS GIVEN IN THE A.Y. 2002 - 03 , WE CONFIRM THE ORDER OF THE LD. CIT(A) FOR DELETING PENALTY ON THE INCOME OFFERED BY THE ASSESSEE. SO FAR AS THE PENALTY LEVIED F OR VIOLATION OF SEC. 40A(3) IN OUR OPINION THIS CANNOT BE THE SUBJECT MATTER OF THE PENALTY IN THE SEARCH PROCEEDINGS AS THIS DISALLOWANCE CAN BE MADE IN THE NORMAL PROCEEDINGS. SO FAR AS PENALTY LEVIED ON UNRECORDED PAYMENT OF RS.6,00,000/ - IN OUR OPINIO N THE LD. CIT(A) RIGHTLY DELETED THE PENALTY IN RESPECT OF THE PENALTY ON UNRECORDED ADVANCES TO THE EMPLOYEES. THE LD. CIT(A) HAS PARTLY SUSTAINED THE PENALTY WITH THE DETAILED REASONING. THE REASONING GIVEN BY LD. CIT(A) HAS NOT BEEN CONTROVERTED BEFOR E US . W E THEREFORE CONFIRMED TO THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF RELIEF GIVEN . I N THE LIGHT OF ABOVE DISCUSSION , THE GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 1 1 . NOW WE TAKE UP REVENUES APPEAL FOR THE A.Y. 2004 - 05 BEING ITA NO. 78 5 /PN/2 009 . IN THIS YEAR THE ASSESSEE OFFERED RS. 13,50,000/ - IN HIS RETURN FILE IN RESPONSE TO NOTICE U/S. 153A WHICH IS AS UNDER: 1. INVESTMENT IN GOLD RS.500,000/ - 2. AD HOC ADDITION RS.650,000/ - 3. EXCESS STOCK RS.200 ,000/ - _____________________ TOTAL RS.13,50,000/ - 12 . THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.45,93,512/ - AND AGRICULTURAL INCOME OF RS.60,700/ - . THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS WHILE COMPLETING THE ASSESSMENT OF THE ASSESSEE U/S. 143(3) R.W.S. 139(1). 1. SALE OF LAND AT SURVEY NO. 13/2/1B AT VILHOKI RS. 2,81,160/ - 2. AMOUNT OF PENALTY DEBITED TO PROFIT AND LOSS ACCOUNT RS.19,300/ - . 3. CASH PAYMENT DISALLOWED U/S. 40A(3) RS. 27,800/ - . 8 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK 4. EXPENDITURE OF WORK ALLOTTED BY M/S. AMBA CONST RUCTION RS.2,75,000/ - . 1 3 . THE ASSESSING OFFICER LEVIED THE PENALTY ON THE QUANTUM OF INCOME OFFERED BY THE ASSESSEE IN CONSEQUENCE OF THE SEARCH AND SEIZURE ACTION U/S. 132(1) AS MENTIONED HERE - IN - ABOVE. IN THIS YEAR NO NOTICE U/S. 153A WAS ISSUED AS T HE SEARCH WAS CARRIED OUT ON 25 - 01 - 2004. THE ASSESSEE FILED THE REGULAR RETURN U/S.139(1) AND THE ASSESSEE DECLARED RS.13,50,000/ - REFERRED ABOVE IN THE RETURN AND ALSO PAID THE TAX ON THE ADMITTED INCOME. THE LEARNED COUNSEL ARGUES THAT SO FAR AS THE IN COME OFFERED IN RESPECT OF THE GOLD JEWELLERY OF RS.5,00,000/ - EXPLANATION 5 TO SEC. 271(1)(C) IS NOT APPLICABLE IN VIEW OF THE IMMUNITY GRANTED TO THE ASSESSEE BY CLAUSE ( 2 ) TO EXPLANATION - 5 . HE FURTHER ARGUES THAT SO FAR AS THE DECLARATION IN RESPECT OF AD HOC INCOME AND EXCESS STOCK , NO PENALTY CAN BE LEVIED IN VIEW OF THE DECISION IN THE CASE OF CHANDAN K. SHEWANI (SUPRA). HE FURTHER ARGUES THAT THE ASSESSEE HAS FURTHER DECLARED AD HOC INCOME OF RS.6,50,000/ - AND THE BENEFIT OF THE SET OF MAY BE GIVEN AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER AND ASSESSEE MAY NOT BE PENALIZED AGAIN. HE PLEADED FOR CONFIRMING THE ORDER OF THE LD. CIT(A). PER CONTRA THE LD. DR PLEADED FOR RESTORING THE PENALTY ORDER. 14. IN THIS YEAR ADMITTEDLY THE ASSESSE E OFFERED RS.5,00,000/ - WHICH WAS IN RESPECT OF GOLD JEWELLERY. IN THE CASE OF THE ASSESSEE, DATE OF SEARCH IS 21 - 01 - 2004 AND PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004 - 05 WAS NOT ENDED BEFORE THE DATE OF THE SEARCH . SO FAR THE INCOME OFFERED ON THE AD HOC BASIS OF RS.6,50,000/ - AND INCOME OFFERED TOWARD EXCESS STOCK OF RS.2,00,000/ - NO PENALTY CAN BE LEVIED IN VIEW OF THE DECISION IN THE CASE OF CHANDAN K. SHEWANI (SUPRA) AS A LEGAL PRINCIPLE LAID DOWN IN THE SAID DECISION ARE SQUARELY APPLICABL E TO THESE TWO ITEMS OF INCOME. IN RESPECT OF THE INCOME OFFERED TOWARDS GOLD JEWELLERY OF RS.5,00,000/ - , THE SAME OFFERED OF INCOME IS TO BE CONSIDERED IN VIEW OF THE EXPLANATION 5. EXPLANATION 5 SPECIFIC DEALS WITH A SITUATION WHERE 9 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK ANY MONEY, BILLION, JEWE LLERY OR OTHER VALUABLE ARTICLES WHICH ARE FOUND DURING THE COURSE OF THE SEARCH WHICH ARE OWNED BY HIM AND UNLESS THE ASSESSEE FULFILLS THE CONDITIONS PROVIDED IN THE SAID EXPLANATION THEN ASSESSEE GETS IMMUNITY . THERE IS A LEGAL PRESUMPTION THAT THE ASSESSEE HAS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE ASSESSEE PLEADED FOR CONSIDERING IN CLAUSE ( 2 ) TO EXPLANATION 5. THE SAID CLAUSE PROVIDES THAT IF IN THE COURSE OF THE SEAR CH, ASSESSEE MADE THE STATEMENT U/S.132(4) THAT ANY MONEY, BILLION, JEWELLERY OR OTHER VALUABLE ARTICLES ARE FOUND IN HIS POSSESSION AND WHICH ARE CLAIMED TO HAVE ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED AND HE DECLARES THE SAME IN HIS RETUR N OF INCOME WHICH IS TO BE FURNISHED BEFORE THE EXPIRY OF THE TIME SPECIFIED IN SEC. 139(1) AND ALSO SPECIFIES IN THE STATEMENT THE MANNER OF ACQUISITION, IN THAT CASE THERE WILL NOT BE PRESUMPTION AGAINST THE ASSESSEE THAT HE HAS CONCEALED THE PARTICULARS OF INCOME. ADMITTEDLY ASSESSEE MADE THE DECLARATION IN THE RETURN FILED U/S. 139(1) AND ALSO PAID THE TAX . T HE QUESTION REGARDING DISCLOSURE OF THE SOURCE NOTHING HAS BEEN FILED BEFORE US TO SHOW THAT SPECIFIC QUESTION WAS PU T TO THE ASSESSEE I N RESPECT OF THE SAID GOLD JEWELLERY. UNLESS THE ASSESSEE HAS BEEN ASKED THE SOURCE THERE IS NOTHING IN THE SAID PROVISION TO SUGGEST THAT THE ASSESSEE SHOULD VOLUNTARILY COME OUT WITH THE EXPLANATION OF THE SOURCE. 1 5 . IN OUR OPINION ASSESSEES CASE IS SQUAREL Y COVERED BY CLAUSE ( 2 ) TO EXPLANATION 5 BELOW SEC. 271(1)(C). ON THIS REASON WE HOLD THAT NO PENALTY IS LEVIABLE ON THE INCOME OFFERED IN RESPECT OF GOLD JEWELLERY OF RS.5,00,000/ - . SO FAR AS THE ADDITIONS MADE BY THE ASSESSING OFFICER WHICH ARE DISCUSS HERE - IN - ABOVE , THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS OFFERED AD HOC INCOME IN THE RETURN FILE U/S. 139(1) TO THE EXTENT OF RS.6,50,000/ - E VEN THOUGH NO INCRIMINATING MATERIAL WAS FOUND AND HE PLEADS FOR GIVING THE SET OF F OF THAT AMOUNT A GAINST THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE 10 ITA NOS. 783, 784 & 785/PN/2009, SHRI MADHAVRAO TULSHIRAM PATIL, NASHIK ADDITIONS WHICH ARE IN RESPECT OF SALE OF LAND, CASH PAYMENT IN VIOLATION OF SEC. 40A(3), UNRECORDED ADVANCES TO THE EMPLOYEES AND EXPENDITURE IN RESPECT OF WORK ALLOTTED BY M/S. AMBA CONSTRUCTION. LAW IS WELL SETTLED THAT THE PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM ASSESSMENT PROCEEDINGS AND T HE ASSESSEE CAN TAKE ANY LEGAL PLEA F OR GETTING THE PENALTY DELETED. IN OUR OPINION WHY THE BENEFIT OF THE SET OF F IN RES PECT OF AD HOC INCOME DECLARED BY THE ASSESSEE TO THE EXTENT OF RS.6,50,000/ - SHOULD NOT BE GIVEN TO THE ASSESSEE. WE , THEREFORE , GIVING THE BENEFIT OF THE SET O F F THE AD HOC INCOME DECLARE D OF RS.6,50,000/ - AGAINST THE ADDITIONS MADE BY THE ASSESSING OFF ICER AND DELETE THE PENALTY ON THOSE ADDITION S . IN THE RESULT, GROUNDS ARE TAKEN BY THE REVENUE ARE DISMISSED. 1 6 . IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 14 - 06 - 20 1 3 SD/ - SD/ - ( G .S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 14 TH JUNE, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I, NASHIK 4 THE CIT(C), NAGPUR 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE