SHRI POONAMCHAND SONI, Ujjain V. THE ITO Ward 1(2), Ujjain

ITA 89/IND/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0380 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Unexplained investment; Loose papers; Tax effect
• Section: 69C; 143(3); 133A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO.89/IND/2015 A.Y. : 2004-05 SHRI POONAMCHAND SONI, ITO, WARD 1(2), 137, JAWAHAR MARG, VS. UJJAIN MAHIDPUR DISTRICT UJJAIN APPELLANT RESPONDENT PAN NO. AELPS9902G APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 0 1 . 0 6 .201 5 DATE OF PRONOUNCEMENT : 30 . 0 7 .201 5 -: 2: - 2 O R D E R PER GARASIA, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 17.11.2014 FOR THE ASSESS MENT YEAR 2004-05. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINE SS OF MAKING AND TRADING OF GOLD AND SILVER ORNAMENTS AND JEWELLERY. SURVEY U/S 133A HAS BEEN CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.12.2013. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE THE F OLLOWING ADDITIONS :- A. UNEXPLAINED INVESTMENT IN PURCHASES OUT OF UNDISCLOSED INCOME RS.5,23,437/- B. DISALLOWANCE OF INTEREST ON ALLEGED LOAN OF RS. 5 LACS RS. 33,104/- C. UNDISCLOSED INCOME ON THE BASIS ENTRIES IN THE DIARIES NOT RECORDED IN THE BOOKS RS.49,126/- D. UNDERVALUATION OF CLOSING STOCK RS. 1,71,635/- TOTAL RS. 7,77,302/- -: 3: - 3 4. THE ABOVE ADDITIONS HAVE BEEN CONFIRMED BY THE LD. CIT(A) AND I.T.A.T. THEREFORE, ON ABOVE ADDITIONS, THE AO HAS IMPOSED THE PENALTY OF RS. 2,71,280/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 5. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HA S DISMISSED THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. 7. SURVEY U/S 133A WAS CARRIED OUT AT THE BUSINES S PREMISES OF THE APPELLANT. THE EXCESS STOCK OF RS.5,23,437/- WAS FOUND DURING THE COURSE OF SURVEY . THE APPELLANT OFFERED THIS AMOUNT AS ADDITIONAL INCOME DURING THE COURSE OF SURVEY. WHILE FILING THE RETURN, THE APPELLANT HAS NOT DISCLOSED THIS AMOUNT IN THE RETURN OF INCO ME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APP ELLANT SUBMITTED THAT HE HAS TAKEN A LOAN OF RS.5,00,000/- FROM BANK OF INDIA, MAHIDPUR ON 01-10-2003 AND UTILIZES THE SAME FOR PURCHASE OF JEWELLERY. THIS FACT HAS BEEN -: 4: - 4 EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SUBSEQUENTLY AT APPELLATE STAGE BUT FOUND INCORRECT. THE AO ALSO DISALLOWED CORRESPONDING INT EREST OF RS.33,104/- ON THE LOAN OF RS.5,00,000/-. THIS HAS ALSO BEEN UPHELD AT THE APPELLATE STAGE. DURING THE COUR SE OF SURVEY SOME DIARIES AND LOOSE PAPERS WERE ALSO FOUN D AND IMPOUNDED. ON EXAMINATION OF THOSE PAPERS AND DIARI ES UNDISCLOSED INCOME OF RS.49,126/- WAS DETECTED AND THE SAME HAS BEEN ADDED TO THE TOTAL INCOME OF THE APPE LLANT. THIS HAS ALSO BEEN UPHELD AT THE APPELLATE STAGE. T HE VALUATION OF THE CLOSING STOCK HAS BEEN EXAMINED AS PER THE MARKET RATES OF THE GOLD ON 21-03-2004 AS PER B OMBAY BULLION ASSOCIATION LTD. THE TOTAL UNDERVALUATION O F STOCK IN RESPECT OF THE GOLD AND SILVER WAS RS. 1,71,635/ -. THE AO MADE THE ADDITION ON THIS ACCOUNT AND THE SAME H AS BEEN UPHELD AT APPELLATE STAGE. HAD THE CASE HAS NO T BEEN SCRUTINIZED U/S 143(3) AND THE SAME HAS NOT BEEN PO INTED OUT BY THE AO DURING THE COURSE OF ASSESSMENT PROCE EDINGS AN AMOUNT OF RS.7,77,302/- WOULD HAVE BEEN ESCAPED FROM TAXATION. -: 5: - 5 8. 9. 8. THE POSITION OF LAW REGARDING LEVY OF PENALTY U /S 271(1)(C) HAS UNDERGONE A SUBSTANTIAL CHANGE AFTER INSERTION OF EXPLANATION I TO SECTION 271(1)(C) WITH EFFECT FROM 01.04.1976. EXPLANATION 1 TO SECTION 271(1)(C) RAISES A PRESUMP TION THAT AS AND WHEN ANY AMOUNT IS ADDED OR DISALLOWED IN CO MPUTING THE TOTAL INCOME, THE SAME SHALL BE DEEMED OR REPRE SENT THE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEE N CONCEALED. FURTHER WITH EFFECT FROM 10.9.1986 AMEND MENT HAS BEEN MADE TO EXPLANATION 1(B) TO SECTION 271(1)(C), AFTER THIS AMENDMENT FURTHER ONUS HAS BEEN PLACED ON THE ASSES SEE TO PROVE THAT EXPLANATION FURNISHED BY HIM WAS BONA FI DE. THE POSITION NOW IS THAT UNLESS AND UNTIL THE ASSESSEE SUBSTANTIATES THE EXPLANATION AND PROVES THAT THE E XPLANATION WAS BONA FIDE, THE ADDITION MADE TO HIS INCOME SHAL L BE DEEMED TO REPRESENT THE CONCEALED INCOME. ON ANALYS IS OF PROVISIONS OF SECTION 271(1)(C), IT IS OBSERVED THA T EXPLANATION 1 TO SECTION 271(1)(C) PROVIDES THE SITUATION, WHER E NO EXPLANATION FOR THE FAILURE IS OFFERED BY THE ASSES SEE OR WHERE THE EXPLANATION THAT HAS BEEN OFFERED IS FOUND TO B E FALSE OR -: 6: - 6 WHERE THE ASSESSEE IS NOT ABOUT TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM. IN ALL THE CASES, THE A MOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSONA SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. AS PER PROVISO TO THIS EXPLANATION, THE ONUS TO ESTABLISH THAT EXPLANATION OFFERED WAS BONA FIDE AND FACTS RELATING TO SAME AND MATERIAL T O THE COMPUTATION OF HIS INCOME EVEN DISCLOSED BY HIM WIL L BE ON THE PERSONS CHARGED FOR CONCEALMENT. 9. AS PER THE PROVISIONS 2 TO EXPLANATION 1(B) NOW THE ENTIRE ONUS IS ON THE ASSESSEE TO NOT ONLY OFFER AN EXPLANATION BUT ALSO TO SUBSTANTIATE IT AND TO PROVE THAT THE P RESUMPTION WAS BONA FIDE. AT THE SAME TIME THE PRESUMPTION SO RAISED BY THE EXPLANATION 1 IS REBUTTABLE. THE EFFECT IS THAT UNLESS AND UNTIL REBUTS THE PRESUMPTION, HE WOULD BE LIABLE TO PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. IT IS NO W ESTABLISHED LAW THAT PRESUMPTION WOULD NOT STAND RE BUTTED MERELY BY FURNISHING ANY GENERAL OR FANTASTIC OR FA NCIFUL OR UNREASONABLE EXPLANATION BY THE ASSESSEE, THE EXPLA NATION -: 7: - 7 SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL AND SHOULD BE ACCEPTED TO THE AUTHORITIES. IN THIS CONNECTION , REFERENCE MAY BE MADE TO THE DELHI HIGH COURTS DECISION IN T HE CASE OF CIT VS. GURBACHAN LAL REPORTED IN 250 ITR 157 (DELH I). 10. THE APEX COURT HAS APPROVED THE INTERPRETATION PLAC ED UPON THE EXPLANATION BY A FULL BENCH OF THE PUNJAB AND HARYANA HIGH COURT IN VISHWAKARMA INDUSTRIES VS. CI T, (1982) 135 ITR 652. SIMILAR VIEW HAS BEEN EXPRESSE D BY THE KERALA HIGH COURT IN THE CASE OF CIT VS. K.P. MADHUSUDAN REPORTED IN 246 ITR 218. THIS DECISION HAS BEEN AFFIRMED BY THE SUPREME COURT IN 251 ITR 99. AFFIRMING THE AFORESAID DECISION, THE HONBLE SUPREME COURT HAS FURTHER HEL D THAT AFTER INSERTION OF EXPLANATION ITS EARLIER DECISION IN THE CASE OF SIR SHADI LAI SUGAR AND GENERAL MILLS LTD. VS. CIT REPORTED IN 168 ITR 705 (SC) WAS NO LONGER APPLICABLE. THE KERA LA HIGH COURT AT PAGE 244 HAS OBSERVED AS UNDER:- THE QUESTION OF ONUS IS OF PRIMARY AND ADDED IMPORTANCE IN LEGAL ACRIMONY. IN CIT VS. ANWAR ALI -: 8: - 8 (1970)M 76 ITR 696, THE APEX COURT LAID DOWN THAT, BEFORE A PERSON COULD BE VISITED WITH A PENALTY FOR CONCEALMENT, ETC., THE REVENUE MUST PROVE THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE AND THE HE HAD CONCEALED IT WITH A MOTIVE. IT WAS FURTHER HELD THAT PENALTY COULD NOT BE IMPOSED MERELY BECAUSE ANY EXPLANATION GIVEN BY THE ASSESSEE IN REGARD TO THE ITEMS IN QUESTION WAS NOT BELIEVED TO THE TRUE. THE POSITION OF LAW ON OR AFT ER APRIL 1, 1976, IT THAT WHERE IN RESPECT OF ANY ITEM OF CREDIT, (A) THE ASSESSEE FAILS TO OFFER A EXPLANATI ON OR (B) THE ASSESSEE OFFERS AN EXPLANATION WHICH THE TAXING OFFICER CONSIDERS TO THE FALSE, OR (C) THE ASSESSEE OFFERS AN EXPLANATION BUT NO MATERIAL OR EVIDENCE TO SUBSTANTIATE IT, HE SHALL BE DEEMED TO HAVE CONCEALED SUCH INCOME WITHIN THE MEANING OF SECTION271 (L)(C). WHAT SECTION 68, 69, 69A, 69B AN D 69C DEEM FOR THE PURPOSE OF ASSESSMENT WAS INJECTED FOR THE PURPOSE OF PENALTY BY OPERATION OF A DEEMING PROVISO. A PROVISO WAS ADDED TO THE NEW -: 9: - 9 EXPLANATION. IT CONCERNS CASES WHERE THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE SUBSTANTIATE. CONSEQUENTIALLY, THE PROVISIONS ARE INTENDED TO SAVE SUCH AMOUNT FROM IMPOSITION OF PENALTY ALTHOUGH THE SAME HAD BEEN ADDED TO THE ASSESSEES INCOME IN THE ASSESSMENT. IF THE ASSESSEES EXPLANATION IS FOUND TO BONA-FIDE AND AL L THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 11. THE VIEWS SIMILAR TO THE ABOVE DECISION OF DELHI AND KERALA HIGH COURTS WERE EXPRESSED BY THE ALLAHABAD HIGH COURT IN THE CASE OF SUSHIL KUMAR SHARAD KUMAR 232 ITR 588 (ALLD.). SIMILARLY, THE DELHI HIGH COURT IN THE CASE OF CIT VS SOHAN SINGH 254 ITR 170 HAS HELD THAT FOR THE PURPOSE OF PENALTY, MATTER HAS TO BE EXAMINED IN THE BACKGROUN D OF EXPLANATION TO SECTION 271(1 )(C). IT HAS ALSO BEEN HELD THAT EVIDENCE RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THROUGH NOT CONCLUSIVE, ARE NOT TOTALL Y IRRELEVANT. THEY COULD BE TAKEN NOTE OF. ACCORDING TO THE HIGH COURT WHAT -: 10: - 10 WAS REQUIRED WAS THAT THE ASSESSEE MUST OFFER AN EX PLANATION WHICH, IF FOUND TO BE UNTENABLE OR UNACCEPTABLE, TH EN THE PENALTY CAN BE LEVIED UNDER SECTION 271(L)(C) OF TH E INCOME-TAX ACT, 1961. 12. IT IS AN OBLIGATORY DUTY CAST UPON A PERSON FILING THE RETURN OF INCOME TO DISCLOSE ALL HIS INCOME DERIVED FROM ANY SOURCE UNDER VARIOUS HEADS AND INDICATE THE INCOME UNDER EACH HEAD, WHICH IS CHARGEABLE TO INCOME-TAX, AFTER MAKING THE PERMISSIBLE DEDUCTIONS. DISCLOSURE OF INCOME WO ULD BE DISCLOSURE OF PARTICULARS OF INCOME, WHICH A PERSON IS DUTY BOUND TO DISCLOSE IN FULFILLMENT OF HIS STATUTORY O BLIGATIONS TO PAY TAX ON THE INCOME CHARGEABLE TO TAX. AFTER THE RETURN IS FILED UNDER SECTION 139(1), THE ASSESSMENT OF TAX I S TO BE MADE AND FOR THE PURPOSE OF MAKING AN ASSESSMENT UN DER THE ACT, THE 1TO MAKES AN ENQUIRY CONTEMPLATED BY SECTI ON 142, UNDER WHICH NOTICE IS ISSUED ON THE PERSON WHO HAS MADE THE RETURN TO PRODUCE ACCOUNTS, DOCUMENTS OR FURNISH VE RIFIED INFORMATION IN WRITING INCLUDING STATEMENT OF ALL A SSETS, ETC. HOWEVER, WHERE THE AO IS SATISFIED THAT THE RETURN IS CORRECT AND COMPLETE, AS WERE THE WORDINGS OF SECTION 143(1 ) AT THE -: 11: - 11 RELEVANT TIME, HE HAS TO ASSESS THE TOTAL INCOME WI THOUT REQUIRING THE PRESENCE OF THE ASSESSEE OR PRODUCTIO N BY HIM OF ANY EVIDENCE THAT THE RETURN IS CORRECT AND COMPLET E, HE IS REQUIRED TO ISSUE NOTICE ENABLING THE ASSESSEE TO P RODUCE EVIDENCE ON WHICH HE MAY RELY IN SUPPORT OF THE RET URN. THE TOTAL INCOME IN SUCH CASES OF REGULAR ASSESSMENT IS , ASSESSED AFTER HEARING THE EVIDENCE ADDUCED AND CONSIDERING ALL MATERIAL GATHERED BY THE AO AS PROVIDED IN SECTION 143(3). IT, THEREFORE, FOLLOWS THAT IN THE ASSESSMENT PROCEEDIN GS UNDER SECTION 143, THE AO CAN FIND OUT WHETHER THE RETURN OF INCOME IS CORRECT AND COMPLETE. IF HE HOLDS THAT THE RETUR N OF INCOME IS NOT CORRECT OR THAT IT IS NOT COMPLETE IN RESPEC T OF THE PARTICULARS OF INCOME WHICH ARE REQUIRED TO BE STAT ED IN THE RETURN, HE WILL REACH THE CORRECT FIGURE OF TOTAL I NCOME AND DETERMINE THE SUM PAYABLE BY THE ASSESSEE OR REFUND ABLE ON THE BASIS OF SUCH ASSESSMENT. IF THE INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, BY REASON OF OMISSION OR FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, REASSESSMENT PROCEEDING CAN BE INITIATED AS PROVIDE D UNDER -: 12: - 12 SECTION 147. THIS AGAIN SHOWS THAT FULL AND TRUE DI SCLOSURE OF INCOME IS PRIMARY OBLIGATION OF THE ASSESSEE. 13. IF A PERSON OBLIGED TO FURNISH THE PARTICULARS OF HIS INCOME OMITS TO FURNISH THEM, HE THEREBY CONCEALS T HE PARTICULARS. THE CONCEALMENT MAY TAKE VARIOUS FORMS . A GLARING ILLUSTRATION OF CONCEALMENT WOULD BE WHERE THE ASSESSEE DOES NOT DISCLOSE OR FULLY DISCLOSE IN THE RETURN THE INCOME DERIVED BY HIM WHICH WOULD FALL UNDER A PART ICULAR HEAD, E.G., INCOME FROM OTHER SOURCES, WHILE DISCLO SING HIS INCOME FALLING UNDER OTHER HEADS OF INCOME PRESCRIB ED BY SECTION 14. TO THE EXTENT HE DOES NOT DISCLOSE THAT INCOME; HE CONCEALS THE PARTICULARS OF INCOME. THE OBLIGATION IS NOT ONLY TO DISCLOSE PARTICULARS OF INCOME BUT TO DISCLOSE T HEM CORRECTLY AND COMPLETELY. IF WHILE DISCLOSING THE P ARTICULARS OF INCOME IN THE RETURN HE PUTS THEM UNDER A WRONG HEA D, HE CAN BE SAID TO BE FURNISHING INACCURATE PARTICULARS OF INCOME. THE PARTICULARS OF INCOME CAN BE MADE INACCURATE IN A VARIETY OF WAYS, A GLARING ILLUSTRATION OF WHICH WOULD BE W HERE THE ASSESSEE WHILE STATING THE INCOME UNDER A PARTICULA R HEAD, WORKS OUT THE INCOME CHARGEABLE TO TAX AFTER MAKING -: 13: - 13 DEDUCTIONS WHICH ARE FALSELY MADE. SUCH A PROCESS W OULD MAKE THE PARTICULARS OF INCOME INACCURATE. IN ALL S UCH CASES, WHETHER THE INCOME IS NOT DISCLOSED AGAINST THE CON STITUENT ITEM OF THE RETURN IN WHICH IT FALLS OR IS PARTLY N OT DISCLOSED, OR THE PARTICULARS OF INCOME GIVEN IN THE RETURN ARE I NCORRECTLY STATED BY ANY MACHINATION, THE IMPACT IS BOUND TO B E ON THE FIGURE OF GROSS TOTAL INCOME TO BE MENTIONED UNDER VARIOUS HEADS OF INCOME AND ALSO ON THE TOTAL INCOME CHARGE ABLE TO TAX. IN FACT, REDUCING THE FIGURE OF INCOME THAT WO ULD BE CHARGEABLE TO TAX WOULD BE FOR THE PURPOSE OF CONCE ALMENT OF PARTICULARS OF INCOME OR GIVING INACCURATE PARTICUL ARS OF INCOME. THE EXPRESSION PARTICULARS OF INCOME WOULD HAVE RELEVANCE TO ALL THE PARTICULARS OF INCOME WHICH TH E ASSESSEE IS REQUIRED TO GIVE IN HIS RETURN FULLY AND TRULY, INCLUDING THE PARTICULARS OF INCOME CHARGEABLE TO TAX UNDER VARIO US HEADS AND THE TOTAL INCOME. THEREFORE, ANY CONCEALMENT OR INACCURACY IN THE PARTICULARS OF INCOME IN THE RETU RN OCCURRING AT ANY STAGE UP TO AND INCLUSIVE OF THE U LTIMATE STAGE OF WORKING OUT OF TOTAL INCOME, WOULD ATTRACT THE PENALTY PROVISION OF SECTION 271(L)(C) OF THE ACT. EVERY FI GURE IN THE -: 14: - 14 RETURN WHICH IS SET OPPOSITE TO THE ITEM OF INCOME IS A PARTICULAR OF INCOME, WHETHER THE FIGURE IS ONE WHI CH IS STATED INDEPENDENTLY OF ANYTHING ELSE THAT APPEARS IN THE RETURN OR THE DOCUMENTS ACCOMPANYING IT OR WHETHER IT IS SOME THING DERIVED FROM OTHER FIGURES ELSEWHERE STATED IN SUCH RETURN OR DOCUMENTS. FALSE RESULT MAY BE PRODUCED BY THE FALS ITY OF ONE OR MORE OF THE CONSTITUENT ITEMS IN THE RETURN. THE WORDS INACCURATE PARTICULARS WOULD COVER FALSITY IN THE F INAL FIGURE AS ALSO THE CONSTITUENT ELEMENTS OR ITEMS. THEY SIMPLY WOULD MEAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPEC T WHETHER IN THE CONSTITUENT OR SUBORDINATE ITEMS OF INCOME O R THE END RESULT. 14. WE FIND THAT IN THIS CASE THE ASSESSEE HAS OFFERED THE ADDITIONAL INCOME OF RS. 7,10,968/-. THE ASSESSEE H AS FILED THE RETURN OF INCOME OF RS. 6,45,843/-. THEREFORE, THERE IS A DIFFERENCE OF RS. 66,835/- AND TAX EFFECT IS ONLY RS. 20,050/-. AS WE HAVE ALREADY CONFIRMED THE PENALTY FOR VALUAT ION OF STOCK, WE ARE OF THE VIEW THAT PENALTY CAN BE IMPOS ED ONLY TO THE DIFFERENCE OF RS. 66,835/-. THEREFORE, WE RESTO RE THIS ISSUE TO THE FILE OF AO FOR CALCULATION OF PENALTY. -: 15: - 15 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 30 TH JULY, 2015. CPU* 1.27