ITO, Jaipur V. RAHUL FOOTWEAR P LTD., Jaipur

ITA 919/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47946 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 14-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R PAREEK
• Keywords: Gift; Search and seizure; Accommodation entries; Bogus loan; Revised return
• Section: 143(3); 133A; 68; 27; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.919/JP/2010 ASSESSMENT YEAR 2004-05 PAN: AAACR 88849 M THE ITO VS. M/S. RAHUL FOOTWAR (P) LTD. WARD- 4(2) G-483-484, ROAD NO. JAIPUR VKI AREA, JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI G.R. PAREEK ASSESSEE BY : SHRI P.C. PARWAL ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A)- II, JAIPUR DATED 07-05-2010 FOR THE ASSESSMENT YE AR 2004-05. 2.1 THE GROUND OF APPEAL RAISED BY THE REVENUE IS A S UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (1) DELETING PENALTY OF RS. 8.25 LACS LEVIED U/S 27 1(1) ( C) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE D ID NOT OFFER THE SAID INCOME VOLUNTARILY FOR INCLUSION IN INCOME BUT AS A RESULT OF ACTION OF THE DEPARTMENT. (2) NOT FOLLOWING THE SUPREME COURT JUDGEMENT IN CASE OF DHARMENDRA TEXTILE PROCESSORS 285 ITR 244 WHEREIN IT HAS BEEN HELD THAT PENALTY U/S 271(1) ( C) IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN E SSENTIAL INGREDIENT FOR ATTRACTING THIS CIVIL LIABILITY. 2 (3) NOT FOLLOWING DECISION OF ITAT, JODHPUR BENCH GIVEN IN CASE OF LATE SHRI B.L. DHING ITA NO.180/ JU/208 DATED 28-10-2009 HAVING SIMILAR FACTS. 2.2 THE ASSESSEE DERIVES INCOME FROM BUSINESS OF MA NUFACTURING OF RUBBER CHAPPALS (SLIPPER) & SHOES. THE DEPARTMENT C ONDUCTED A SEARCH AND SEIZURE OPERATION IN THE CASE OF B.C. PUROHIT GROUP . DURING THE COURSE OF SEARCH OPERATION, THE REVENUE CAME TO KNOW THAT B.C . PUROHIT GROUP WAS CHARGING CERTAIN AMOUNT FOR PROVIDING ENTRIES. THE SAME WAS CONFIRMED BY THE PERSONS WHO WERE CONTROLLING THE SAID RACKET DU RING THEIR STATEMENT IN THE COURSE OF SEARCH AND SEIZURE IN THEIR CASE. AS A RESULT OF SEARCH OPERATION IN THE CASE OF B.C. PUROHIT GROUP, SURVEY WAS CONDU CTED AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURV EY, THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE LOANS FROM M/ S. KOTPUTLI INVESTMENT AND M/S. K.K. PETROCHEM. HOWEVER, THE DIRECTOR OF S HRI BHAGWATI PRASAD DHANDHARIA SURRENDERED RS. 22,15,611/- WHICH INCLUD ED PRINCIPAL AMOUNT OF RS. 20,53,000/- AND INTEREST OF RS. 1,62,611/-) AFT ER CONSULTATION WITH HIS BROTHER SHRI RADHEYSHYAM DHANDHARIA DIRECTOR AND CO UNSEL. THE REVISED RETURN WAS FILED AFTER SURVEY ACTION. THE AO ALSO A DDED A SUM OF RS. 50,000/- AS EXPENDITURE INCURRED FOR GETTING THE EN TRIES. SINCE THE AMOUNT WAS SHOWN IN THE REVISED RETURN OF INCOME, THEREFOR E, THE ADDITION WAS NOT DISPUTED IN APPEAL. HOWEVER, THE ADDITION OF RS. 50 ,000/- WAS DISPUTED. THE 3 TRIBUNAL VIDE ORDER DATED 31-07-2008 RESTRICTED THE ADDITION TO RS. 25,000/- AS AGAINST RS. 50,000/- MADE BY THE AO. THE PENALTY PROCEEDINGS U/S 271(1) ( C ) WERE INITIATED AT THE TIME OF ASSESSMENT PROC EEDINGS. THE AO ISSUED THE SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY THE PENALTY U/S 271(1) ( C ) BE NOT IMPOSED.. THE ASSESSEE FILED THE REPLY ON 06-02-2009. THE SUBMISSIONS ARE SUMMARIZED AS UNDER:- 1. THE ASSESSEE SURRENDERED THE INCOME DURING THE C OURSE OF SURVEY JUST TO AVID LITIGATION AND TO BUY PEACE OF MIND. IN THE REVISED RETURN, IT WAS MENTIONED THAT THE LOANS IN THE NAME OF M/S. KOTPUTLI INVESTMENT AND M/S. K.K. PETROCHEM WE RE GENUINE BUT THE SAME WERE OFFERED FOR TAXATION SUBJ ECT TO THE CONDITION THAT NO PENALTY BE IMPOSED ON THIS VOLUNT ARY OFFERING OF INCOME. 2. THE FINDINGS IN THE ASSESSMENT PROCEEDINGS MAY B E RELEVANT IN PENALTY PROCEEDINGS BUT ARE NOT CONCLUS IVE IN PENALTY PROCEEDINGS. THERE MUST BE INTENTIONAL SUPP RESSION OF TRUTH OR FACTS FOR HOLDING THAT THERE IS A CASE OF CONCEALMENT. IN RESPECT OF FURNISHING INACCURATE PARTICULARS OF IN COME, THERE SHOULD BE SOME INACCURACY IN THE BOOKS OF ACCOUNTS 3. THERE IS NO CONCEALMENT ON THE BASIS OF RETURN O F INCOME AND ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. 4. M/S. KOTPUTLI INVESTMENT (P) LTD. AND M/S. K.K. PETROCHEM (P) LTD. ARE GENUINE CONCERNS AND THE ASS ESSEE FILED THE CONFIRMATIONS FROM BOTH THE PARTIES. THE LD. CI T(A) IN THE CASE OF M/S. SPYNOX CONSORTIUM LTD. HELD THAT M/S. K.K. 4 PETROCHEM IS A GENUINE CONCERN AND THE APPEAL OF TH E DEPARTMENT WAS DISMISSED BY THE TRIBUNAL. 5. THE AMOUNT OF LOAN WAS TAKEN AFTER REPAYMENT OF EARLIER LOANS. THE LOANS WERE TAKEN THROUGH CHEQUES. THERE IS NO POSITIVE EVIDENCE TO SUGGEST THAT ASSESSEE COMPANY HAS NOT TAKEN ANY LOAN EXCEPT THE SURRENDER MADE BY THE ASS ESSEE. 6. THE ASSESSEE HAS MADE THE CONDITIONAL SURRENDER AND THE SAME CANNOT BE THE BASIS FOR IMPOSITION OF PENALTY. 7. THE ASSESSEE ACCEPTED THE LOANS OF RS. 12.50 LAC S FROM 09 PARTIES DURING FINANCIAL YEAR 1998-99. SUCH LOANS W ERE REPAID FROM 22-08-2003 TO 02-09-2003. AFTER REPAYMENT OF A LL THESE LOANS, ASSESSEE COMPANY HAS ACCEPTED THE LOAN FROM M/S. KOTPUTLI INVESTMENT (P) LTD. AND M/S. K.K. PETROCHE M (P) LTD. FROM 06-09-2003 TO 11-09-2001 I.E. IMMEDIATELY AFTE R REPAYMENT OF LOANS. THE ORIGIN OF MONEY FROM FINANC IAL YEAR 1998-99 AND THEREFORE, THIS COULD NOT HAVE BEEN CON SIDERED FOR IMPOSITION OF PENALTY. 8. THERE IS NO POSITIVE EVIDENCE TO SUGGEST THAT TH E ASSESSEE MADE PAYMENT OF RS. 25,000/- FOR GETTING THE ENTRI ES. 2.3 THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED AS UNDER:- (1) THE SURRENDER MADE BY THE ASSESSEE IS NOT VOLUNTARI LY. (2) SEARCH AND SEIZURE OPERATION WERE CARRIED OUT IN B. C. PUROHIT GROUP OF CASES ON 12-04-2005 AND IT WAS FOU ND FROM THE EVIDENCE THAT THIS GROUP WAS PROVIDING 5 ACCOMMODATION ENTRIES IN THE FORM OF CASH CREDITS, GIFTS, LTCG ON SHARES. THE SURVEY WAS CONDUCTED AS A RESUL T OF EVIDENCE FOUND DURING THE COURSE OF SEARCH IN B.C. PUROHIT GROUP. (3) THE AO HAS REFERRED TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF G.C. AGARWAL VS. CIT, 186 ITR 571 AND HON'BLE MUMBAI HIGH COURT IN THE CASE OF KRISHANKUMAR CHANDANMAL & ANOTHER VS. CIT, 217 ITR 645 TO SHOW THAT IF INCOME IS SURRENDERED AFTER THE SEARCH OPERATION THEN PENALTY IS IMPOSABLE . (4) SINCE THE ASSESSEE DID NOT COME UP WITH CLEAN H ANDS, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTIO N FROM PENALTY. THE ASSESSEE HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE FUNDS REPAID TO SO CALLED 09 PERSONS AN D THE AMOUNT BORROWED FROM THESE TWO COMPANIES. THE ASSESSEE HAS NOT MADE ANY EFFORT TO PROVE THE SAME. THE BURDEN WAS ON THE ASSESSEE TO PROVE THAT EXPLANATIO N IS CORRECT AND BONA FIDE. THE AO THEREFORE, HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT BONA FID E. THE AO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- THAKUR VS. HARIPRASAD VS. CIT, 167 ITR 603 (A.P. ) K.P. MADHUSUDAN VS. CIT , 252 ITR 99 (SC) THE AO ACCORDINGLY IMPOSED THE MAXIMUM PENALTY. 2.4 THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION S OF THE LD. AR CANCELLED THE PENALTY AFTER OBSERVING AS UNDER:- 6 I HAVE CONSIDERED FACTS OF THE CASE AND ARGUME NTS TAKEN BY SHRI PARWAL AND SHRI NUHAL QUITE CAREFULLY. IT I S A FACT THAT TO BEGIN WITH THE APPELLANT COMPANY HAD FILED RETURN OF INC OME DECLARED INCOME OF RS. 2,30,280/-. THEREAFTER, ON ACCOUNT OF SALARY/ SEARCH IN CASE OF B.C. PUROHIT GROUP REVISED RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME OF RS. 24, 45,890/- WHICH INCLUDED THE LOANS CLAIMED TO HAVE BEEN TAKEN FROM M/S. KOTPUTLI INVES TMENT LTD. AND M/S. K.K. PETROCHEM LTD. OF RS. 20,53,000/- AND C ORRESPONDING INTEREST CLAIM TO THESE 02 COMPANIES OF RS. 1,62,61 1/-. HOWEVER, IT IS ALSO A FACT THAT SAID AMOUNT OF LOAN WAS RECEIVED T HROUGH ACCOUNT PAYEE CHEQUE AND CONFIRMATION FROM THESE TWO COMPAN IES WAS ALSO FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THOUGH THE APPELLANT COMPANY IN ITS OWN WISDOM HAS PREFERRED T O PAY THE TAX ON SUCH AMOUNT OF LOAN AND INTEREST OF RS. 22,15,611/- BUT EXCEPT THE FACT THAT IT WAS OFFERED IN REVISED RETURN OF INCOME IND EPENDENTLY IT HAS NOT BEEN PROVED IN PENALTY PROCEEDINGS THAT THE AFORESA ID AMOUNT WAS CONCEALED INCOME ON WHICH PENALTY U/S 271(1) ( C ) OF INCOME TAX ACT CAN BE LEVIED PARTICULARLY WHEN IT IS ARGUED BY THE COMPANY THAT THE SURRENDER WAS MADE VOLUNTARILY TO AVOID LITIGAT ION AND TO BYE BUY PEACE OF MIND. ON THIS ISSUE WHERE THE INCOME WAS O FFERED AFTER SEARCH / SURVEY ACTION IN CASE OF B.C. PUROHIT & CO . THE PENALTY LEVIED U/S 271(1) ( C ) OF INCOME TAX ACT UNDER SIMILAR CI RCUMSTANCES HAS BEEN CANCELLED BY HON'BLE ITAT JAIPUR BENCH IN THE CASE OF SMT. ARCHANA JAIN VS. DCIT, CIRCLE- 6, JAIPUR IN ITA NO. 701/ JP/2008 DATED 29-08-2008. SIMILAR VIEW HAS ALSO TAKEN BY IT AT DELHI G THIRD MEMBER BENCH IN THE CASE OF ADDL. CIT VS. PRE M CHAND GARG 119 ITD 97 IN WHICH AFTER THE VOLUNTARY OFFER WHEN THE PENALTY WAS 7 LEVIED U/S 271(1) ( C ) OF INCOME TAX ACT THE SAME WAS CANCELLED. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE M.P. HIGH CO URT IN THE CASE OF CIT VS. SHYAMLAL SONI 276 ITR 156 IN WHICH IT W AS HELD THAT NO PENALTY U/S U/S 271(1) ( C ) COULD BE LEVIED WHERE INCOME RETURN IN THE REVISED RETURN WAS ACCEPTED AND ASSESSED IN THE HAN DS OF ASSESSEE EVEN THOUGH THE REVISED RETURN WAS FILED AFTER SEAR CH AND SUBSEQUENT TO ENQUIRIES MADE BY THE DEPARTMENT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THERE IS NO POSITIVE EVIDENCE WHICH SU GGEST THAT THE APPELLANT COMPANY HAS NOT TAKEN ANY LOAN FROM THESE TWO COMPANIES PARTICULAR WHEN THE CONFIRMATIONS FROM THESE PARTIE S WERE FILED, AMOUNT OF LOAN WAS RECEIVED BY ACCOUNT PAYEE CHEQUE AND TAX WAS DEDUCTED AT SOURCE ON THE INTEREST PAYMENT. FURTHER HON'BLE ITAT JAIPUR BENCH IN ANOTHER CASE OF ACIT CIRCLE- 6, JAI PUR VS. SPINOX CONSORTIUM LTD. IN ITA NO. 1443/JP/2008 HAS DELETED THE ADDITIONS MADE U/S 68 OF INCOME TAX ACT AND ONE SUCH PARTY IN WHOSE NAME SUCH ADDITION WAS MADE WAS K.K. PETROCHEM FROM WHIC H THE APPELLANT HAS SHOWN TO HAVE TAKEN LOAN WHICH IS OFF ERED AS INCOME IN THE REVISED RETURN OF INCOME FILED. WITH THIS DISCU SSION AND RELYING UPON AFORESAID JUDICIAL DECISION IN MY CONSIDERED V IEW THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY OF RS. 8.25 LACS U/S 271(1) ( C ) OF THE INCOME TAX ACT ON AFORESAID LOANS CLAIMED TO HAVE B EEN TAKEN FROM TWO PARTIES AND CORRESPONDING INTEREST CLAIM AND TH E AFORESAID PENALTY LEVIED BY AO OF RS. 8.25 LACS IS HEREBY CANCELLED. 2.5 THE LD. DR HAS FILED THE WRITTEN SUBMISSION AND THESE ARE REPRODUCED AS UNDER:- 8 1. LD. CIT(A) HAS THOUGH RELIED UPON THE DECISION O F THIS BENCH AND M.P. HIGH COURT BUT HE HAS NOT DIFFERENTIATED IN ANY WAY THE CASES RELIED UPON BY THE AO IN THE PENALTY ORDER SPECIFICALLY THE CASE OF G.C. AGARWAL , 186 ITR 476 (SC) SQUARELY COVERING THE ISSUE INVO LVED. 2. LD. CIT(A) WAS NOT JUSTIFIED IN OBSERVING THAT T HE ASSESSEE MADE A VOLUNTARY SURRENDER. THE FACTS PROV E THAT THE SURRENDER WAS MADE ONLY AFTER SURVEY CONDUCTED BY THE DEPARTMENT. THE CASE OF THE ASSESSEE COULD HAVE BEEN VOLUNTARY IF THE SURRENDER OF INCOME OR REVISING OF INCOME WOULD HAVE BEEN MADE BEFORE SURVEY ACTION AN D NOT AFTER THAT. 3. BY WAY OF SURVEY ACTION AND SEARCH ACTION IN THE CASE OF B.C. PUROHIT GROUP THE ASSESSEE WAS CORNERE D AND AFTER FINDING THE FACT THAT DEPARTMENT HAS CAUG HT THEIR CONCEALMENT ACTION IT HAS MADE SURRENDER, WHI CH CANNOT BE SAID VOLUNTARILY SURRENDER. 4. LD. CIT(A) WAS ALSO NOT JUSTIFIED THAT AO HAS FA ILED TO PROVE THE CONCEALMENT BECAUSE THE BURDEN OF PROO F LIES UPON THE ASSESSEE AND FURTHER THE ACTION OF THE ASS ESSEE ITSELF INDICATE CONCEALMENT OF INCOME BY WAY CLAIMI NG BOGUS LOAN LIABILITY. 5. THE FACT OF LOANS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE AND CONFIRMATION OF THE TWO CREDITORS IS OF NO MEANS WHEN THE CREDITORS IN SEARCH ACTION AND ASSES SEE IN 9 SURVEY ACTION HAVE ADMITTED THAT LOANS WERE BOGUS A ND ONLY ENTRIES WERE PROVIDED BY THE SAID CREDITORS. T HIS FINDING STANDS CONFIRMED IN QUANTUM BY THE ITAT AND NOW IT CANNOT BE CLAIMED THAT LOANS WERE GENUINE. 6. VARIOUS CASES WERE RELIED UPON BY THE LD. CIT(A) ARE NOT APPLICABLE WHEN THE AO HAS RELIED UPON THE JUDGEMENT OF HON'BLE SUPREME COURT. 7. BESIDES THE CASE LAWS RELIED UPON BY THE AO IN T HE PENALTY ORDER AND IN GROUNDS OF APPEAL OF THE DEPAR TMENT FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUDGMEN TS. (I) AFTER DETECTION OF CONCEALMENT BY THE DEPARTMENT ,FILING OF REVISED RETURN IS OF NO HELP FOR PENALTY U/S 271(1) ( C ) 163 ITR 440(RAJ) BADRI PRASAD OM PRAKASH (II) SURVEY OF BUSINESS PREMISES ASSESSEE AGREES FOR ADDITION IMPOSITION OF PENALTY VALID 273 ITR 401 (MAD) CIT VS. ANANTAM CHETTIAR 197 ITR 232 (KAR.)CIT VS. KA SAMPATH REDDY 171 ITR 390(ALL) BILAND RAM HARGAN DAS VS. CIT 238 ITR 229 (MAD) CIT VS. POPULAR LUNGHI CO. 243 ITR 818 (KER) PC JOSPEH AND BROS VS. CIT 283 ITR 254 (MAD) M.S. MOHD MARZOOK VS. ITO 260ITR650(MAD) CIT VS. DRA.MOHD.ABDUL KEDDAR 10 298 ITR 109 (JHAR) CIT VS. MAHABIR PD. BAJAJ (III) ASSESSEE HIMSELF ADMITTED CONCEALMENT BY FILING REVISED RETURN. HE CANNOT PLEAD THAT INCOME WAS OFFERED TO PURCHASE PEACE. THERE IS NO ESTOPPEL OR AGREEMENT AGAINST THE STATUTE 64 ITD 149 (ITAT MAD.) (IV) ADMISSION OF THE ASSESSEE REGARDING ADDITION NO INDEPENDENT ENQUIRY IS NEEDED TO PROVE CONCEALMENT IN PENALTY PROCEEDINGS. 153 ITR 376 (MAD) H V VENUGOPAL CHETTIAR 305 ITR 29 (MP) DDIT VS. CHIRAG METAL ROLLING MILLS. 2.6 ON THE OTHER HAND, THE LD. AR HAS RELIED UPON T HE ORDER OF THE LD. CIT(A). THE LD. AR HAS FILED THE PAPER BOOK CONTAIN ING 32 PAGES. IT ALSO CONTAINS THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) . THE LD. AR DREW OUR ATTENTION TO PAGE 4 OF THE WRITTEN SUBMISSION FILED BEFORE THE LD. CIT(A). THE LOANS OF 09 PARTIES WERE REPAID TO THE EXTENT O F RS. 21,11,658/-. THE REPAYMENT HAS BEEN MADE FROM 22-08-2003 TO 01-09-20 03. THE ASSESSEE HAS RAISED FRESH LOANS FROM 05-09-2003 TO 10-09-2003. I T WAS THEREFORE, SUBMITTED THAT THE AMOUNT SO CREDITED IN THE YEAR W AS THE SAME AS WAS REPAID AND THE AMOUNT SO REPAID WERE RECEIVED IN THE ASSES SMENT YEAR 1998-99. 11 HENCE, THE AMOUNT CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND PENALTY CANNOT BE LEVI ED. FOR THIS PROPOSITION, THE LD. AR RELIED UPON THE DECISION OF HON'BLE GUJA RAT HIGH COURT IN THE CASE OF NAVNEET LAL POCHALAL, 213 ITR 69. 2.7 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE APE X COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 285 ITR 244 HAS HE LD THAT PENALTY U/S U/S 271(1) ( C ) IS A CIVIL LIABILITY. HENCE, WE HAVE T O CONSIDER THE IMPOSITION OF PENALTY ON THE BASIS OF THE EXPLANATION FILED BY TH E ASSESSEE . BEFORE CONSIDERING THE EXPLANATION, IT WILL BE USEFUL TO CONSIDER THE FINDING GIVEN BY THE TRIBUNAL WHILE DECIDING THE QUANTUM APPEAL. BEFORE THE TRIBUNAL IN THE QUANTUM APPEAL, THE LD. AR CONTENDED THAT THE A MOUNT RECEIVED REPRESENTED THE PROCEEDS OF REPAYMENT OF LOAN TO 09 PARTIES. THE PRINCIPAL AMOUNT OF RS. 12.50 LACS ACCEPTED DURING THE FINANC IAL YEAR 1998-99 CANNOT BE BROUGHT TO TAX AS THE SAME IS BARRED BY LIMITATI ON. IT WAS FURTHER SUBMITTD THAT VOLUNTARY OFFER SO MADE WAS IN ORDER TO AVOID LITIGATION AND TO BUY PEACE BY WAY OF FILING REVISED RETURN OTHERWISE THE OFFER SHOULD BE TREATED AS WITHDRAWN AND ORIGINAL RETURN SHOULD BE TREATED AS FINAL RETURN. THE TRIBUNAL RECORDED THE FOLLOWING FINDING IN THE QUANTUM APPEA L. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE DO NOT F IND SUBSTANCE IN THE CONTENTION OF THE LD. A/R ESPECIAL LY WHEN THE ASSESSEE ITSELF CAME FORWARD TO SURRENDER THE LOAN ENTRY AND 12 INTEREST STATED TO HAVE BEEN RECEIVED THEREON FOR C HARGING OF TAX, SINCE ASSESSEE FAILED TO FURNISH SOURCE THEREOF BEF ORE THE AO. WHATEVER EXPLANATION THE ASSESSEE IS NOW FURNISHING ABOUT THE SOURCE OF THAT AMOUNT OF RS. 20,53,000/- IS NOTHING BUT AN AFTER THOUGHT IN ABSENCE OF PROPER EVIDENCE IN SUPPORT. WE THUS DO NOT FIND REASON TO INTERFERE IN THIS REGARD WITH TH E ORDERS OF THE LOWER AUTHORITIES MAKING AND UPHOLDING THE ADDITION OF RS. 22,15,611/-. THE GROUND NO. 2 IS THUS REJECTED. 5.1 SO FAR AS THE ADDITION OF RS. 50,000/- ON ACCOU NT OF ALLEGED PAYMENT TO B.C. PUROHIT FOR ALLEGED PURCHAS E OF FAKE LOAN ENTRY RAISED IN GROUND NO. 1 IS CONCERNED, WE FIND THAT THE AO HAS MADE THIS ADDITION ON THE BASIS OF ESTIMATIO N AND A REASONABLE INFERENCE THAT FOR PROCURING THE ACCOMMO DATING ENTRIES OF LOAN THE ASSESSEE MIGHT HAVE PAID COMMIS SION TO THE SAID GROUP FOR PROVIDING SUCH LOAN ENTRIES. WE, HO WEVER, ARE OF THE VIEW THAT PAYMENT OF THE ESTIMATED COMMISSION @ 2.5% IS ON HIGHER SIDE AND THUS RESTRICT THE SAME AT RS. 25 ,000/- TO MEET THE ENDS OF JUSTICE IN VIEW OF THE CONTENTION OF TH E LD. A/R THAT THE ADDITION MADE ON ACCOUNT OF PAYMENT OF COMMISSI ON IS PURELY BASED ON SURMISES AND PRESUMPTION. IN THIS REGARD WE ARE OF THE VIEW THAT IF A GENERAL PRACTICE OF PAYME NT OF COMMISSION IN ARRANGING ACCOMMODATING ENTRY OF LOAN IS THERE AND WHEN THE PARTY FROM WHOM THE ASSESSEE HAD PROCU RED SUCH ENTRIES ARE STRANGERS TO THE ASSESSEE, PAYMENT OF S UCH COMMISSION CANNOT BE TOTALLY RULED OUT. THE GROUND NO. 1 IS THUS PARTLY ALLOWED. 13 THUS THE TRIBUNAL NOT ONLY ACCEPTED THE ADDITION MA DE BY THE AO BUT ALSO ACCEPTED THAT THE ASSESSEE HAS ARRANGED ACCOMMODATI ON ENTRIES BY PAYING COMMISSION. IT IS TRUE THAT THE FINDINGS GIVEN IN T HE QUANTUM APPEAL ARE NOT CONCLUSIVE BUT DEFINITELY THESE ARE RELEVANT. IN VI EW OF THE FINDINGS OF THE TRIBUNAL, THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THAT EXPLANATION IS BONA FIDE. THE AO IN HIS ORDER HAS CLEARLY MENTIONED THA T THE ASSESSEE HAS FAILED TO ESTABLISH THE NEXUS BETWEEN THE LOAN REPAYMENT T O 09 PARTIES AND THE LOANS RECEIVED FROM 02 PARTIES DURING THIS YEAR. IF EARLI ER LOANS WERE NOT GENUINE THEN THE EVIDENCE WILL BE WITH THE ASSESSEE THAT AS TO HOW REPAYMENT OF LOANS THROUGH CHEQUES WERE RECEIVED BACK AND ROUTED THROU GH THE LOANS RECEIVED DURING THE YEAR. IF AN EVIDENCE IS IN THE POSSESSIO N OF THE ASSESSEE AND SUCH EVIDENCE IS NOT PLACED THEN THE ADVERSE INFERENCE I S TO BE TAKEN AGAINST THE ASSESSEE. 2.8 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE BENCH REQUIRED THE LD. AR TO STATE AS TO WHETHER THE ASSESSEE HAS DEBITED THE ACCOUNTS OF THE CREDITORS AS A RESULT OF SURRENDER MADE BY THE ASSE SSEE OR THE ASSESSEE HAS ACTUALLY REPAID THE AMOUNTS TO THESE TWO PARTIES. H OWEVER, NO SPECIFIC REPLY WAS GIVEN. ONCE THE AMOUNT HAS BEEN OFFERED FOR TAX ATION THEN THE CREDITORS ACCOUNTS ARE LIABLE TO BE SQUARED UP BY DEBITING TH EIR ACCOUNT AND CREDITING EITHER THE RESERVES OR PROVISIONS. 14 2.9 BEFORE THE AO, THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIV LAL T AK VS. CIT, 251 ITR 373. IN THAT CASE, THE ISSUE WAS IN RESPECT OF IMPOSITI ON OF PENALTY ON THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND THE RETU RNED INCOME. IN THE INSTANT CASE , THE ASSESSEE HAS FILED THE REVISED R ETURN. HOWEVER, IT IS TRUE THAT THE SUM OF RS. 25,000/- STANDS CONFIRMED BY THE TRI BUNAL IN RESPECT OF COMMISSION PAID FOR OBTAINING ENTRIES. THE ASSESSEE ITSELF HAS ACCEPTED THE RECEIPT OF ENTRIES AS IT TRIED TO ARGUE THAT THE AM OUNT WAS FROM REPAYMENT OF LOANS TO 09 CREDITORS AND THE FACTS FOUND DURING TH E COURSE OF SEARCH IN B.C. PUROHIT GROUP SHOWS THAT THEY WERE RECEIVING COMMIS SION FOR PROVIDING ENTRIES. THUS THE ADDITION OF RS. 25,000/- CANNOT B E CONSIDERED AS WITHOUT ANY BASIS. THE LD. AR RELIED UPON THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANT DAS NIHAL CHAND, 135 CTR 174 / 226 ITR 224. IN THIS CASE THE ISSUE BEFORE THE HON'BLE JURISDICTION AL HIGH COURT WAS AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED IN CANCELLING TH E PENALTY. THE HON'BLE JURISDICTIONAL HIGH COURT DISMISSED THE REFERENCE F ILED BY THE REVENUE AND HELD THAT THE FINDING RECORDED BY THE TRIBUNAL ARE FINDINGS BASED ON PROPER APPRECIATION OF EVIDENCE. HENCE THIS CASE LAW RELIE D UPON BY THE LD. AR IS OF NO HELP TO THE ASSESSEE. 15 2.10 THE LD. AR HAS RELIED ON THE ORDER OF THE TRIB UNAL IN THE CASE OF SYNOX CONSORTIUM LTD. IN ITA NO. 1443/JP/2008 FOR THE ASS ESSMENT YEAR 2004-05. IN THAT CASE THE ISSUE WAS IN RESPECT OF SHARE APP LICATION MONEY TO BE ADDED U/S 68 OF INCOME TAX ACT. ONE OF THE SHARE APPLICAN T WAS M/S. K.K. PETROCHEM. THE LD. CIT(A) NOTICED THE FACTS GIVEN BY THE ASSESSEE THAT NO EVIDENCE WAS FOUND AGAINST THE ASSESSEE. IT WAS FUR THER SUBMITTED THAT NO ACCOMMODATION ENTRY WAS TAKEN. THE DECISION REFERRE D TO BY THE LD. AR IS NOT APPLICABLE AS FACTS IN THE INSTANT CASE ARE DI FFERENT. THE ASSESSEE HAS FILED THE REVISED RETURN AND ALSO STATED THAT FUNDS RECEIVED ARE THE SAME WHICH WERE RECEIVED IN ASSESSMENT YEAR 1998-99. 2.11 THE LD. AR HAS RELIED ON THE DECISION OF THE T RIBUNAL IN THE CASE OF SMT. ARCHANA JAIN IN ITA NO. 701 JP/2008. IN THIS C ASE, GIFTS WERE SURRENDERED BY THE ASSESSEE AND REVISED RETURN WAS FILED. NOTICE U/S 148 WAS ISSUED TO REGULARIZE THE RETURN. IN THAT CASE, NO A DDITION ON ACCOUNT OF ARRANGING ENTRIES WAS MADE. HOWEVER, IN THE INSTANT CASE, THE TRIBUNAL HAS GIVEN A FINDING THAT ENTRIES WERE OBTAINED AND EXPE NDITURE WAS ALSO INCURRED. HENCE, THE DECISION IS OF NO HELP TO THE ASSESSEE. 2.12 WE HAVE ALSO CONSIDERED THE DECISIONS REFERRE D TO BY THE LD. DR. THE FINDINGS RECORDED IN THESE DECISIONS ARE AS UNDER:- 16 1. CIT V ANANTAM CHETTIAR 273 ITR 401 (MAD) : THE HON BLE HIGH COURT AFTER CONSIDERING THE DECISION OF HONBL E APEX COURT IN THE CASE OF K.P. MADHUSUDAN V CIT 251 ITR 99 HELD T HAT EXPLANATION CASTS A BURDEN ON THE ASSESSEE TO SHOW THAT ADDITIO NAL INCOME THAT HAD NOT BEEN DISCLOSED WAS NOT DUE TO FRAUD OR NEGLECT. IN THIS CASE REVISED RETURN FILED AFTER SEARCH AND SEIZURE VIDE WHICH AD DITIONAL INCOME WAS DISCLOSED. PENALTY CONFIRMED ON THE GROUND THAT ASS ESSEE HAS OFFERED NO EXPLANATION FOR NOT HAVING DISCLOSED INCOME EARL IER. 2. CIT V MAHABIT PRASAD BAJAJ 298 ITR109 (JHAR) IN THIS CASE INCRIMINATING DOCUMENTS WERE FOUND DUR ING SEARCH AND ASSESSEE STATED THAT REVISED RETURN HAS BEEN ACCEPT ED. THE HONBLE HIGH COURT HELD THAT REVISED RETURN IS NOT VOLUNTAR ILY AND HENCE PENALTY WAS UPHELD. IN THIS CASE, THE PENALTY WAS U PHELD KEEPING IN VIEW OF EXPLANATION . 5 TO SECTION 271(1)(C). HOWEV ER REFERENCE IS MADE TO DECISION OF APEX COURT IN THE CASE OF GUJAR AT TRAVANCORE AGENCY VA CIT 177 ITR 455 IN WHICH THE HONBLE APEX COURT REFERRED TO STATEMENT IN CORPUS JURIS SECUNDUM VOL 85 PAGE 580 PARAGRAPH 1023. 17 A PENALTY IMPOSED FOR A TAX DELINQUENCY IS A CIVIL OBLIGATION, REMEDIAL AND COERCIVE IN ITS NATURE AND FAR DIFFERENT FROM THE PENALTY FOR A CRIME OR A FINE OR FORFEITUR E PROVIDED AS PUNISHMENT FOR THE VIOLATION OF CRIMINAL OR PENAL L AWS. 3.M.S.MOHAMAD MARZOOK V ITO 238 ITR 254 (MAD) IN THIS CASE REVISED RETURN FILED AFTER SEARCH. THE OMISSION OR WRONG STATEMENT IN THE ORIGINAL RETURN WAS NOT DUE TO ANY BONAFIDE OR INADVERTENCE OR MISTAKE ON HIS PART, BU T THE REVISED RETURN WAS FILED ONLY AFTER THE SEARCH ACTION. IN T HIS CASE THE TRIBUNAL HELD THAT THERE IS NO MATERIAL WITH THE AS SESSEE TO SHOW THAT MISTAKE IN THE ORIGINAL RETURN HAD CREPT ACCID ENTALLY WITHOUT ANY INTENTION AND ACCORDINGLY THE HONBLE HIGH COUR T UPHELD THE PENALTY. 4. CIT V DR A. MOHAMAD ABDUL KADER 260 ITR 650 (M AD) DURING SEARCH OPERATIONS, THE ACCOUNTANT OF ASSESSE E ADMITTED THAT THERE HAD BEEN CONCEALMENT OF INCOME. SUBSEQUE NT FILING OF REVISED RETURN IS NOT VOLUNTARILY AND IS NOT UNC ONNECTED WITH THE SEARCH PENALTY WAS UPHELD. 5. P.C. JOSEPH & BROS V CIT 240 ITR 818 (KER) (CORRECT CITATION IS 243 ITR 818) 18 SEARCH OPERATIONS SHOWED THAT ASSESSEE HAS CONCEALE D THE INCOME AND IN RESPONSE TO NOTICE U/S 148, THE ASSES SE FILED THE RETURN INCLUDING THE AGREED CONCEALED INCOME. FILIN G OF RETURN IN RESPONSE TO NOTICE U/S 148 AND SHOWING CONCEALED INCOME DOES NOT CONSTITUTE A MITIGATING CIRCUMSTANCE AND P ENALTY WAS HELD AS RIGHTLY IMPOSED. 6. CIT V POPULAR LUNGHI CO. 238 ITR 229 (MAD) ASSESSMENTS RE-OPENED AFTER SURVEY AND ASSESSEE FIL ED THE RETURN DISCLOSING THE ADDITIONAL INCOME. SINCE THE ASSESSEE HAS DISCLOSED THE INCOME AND AGREED FOR INCLUSION THEN NO EVIDENCE IS NEEDED TO SHOW THAT THE AMOUNT DISCLOSED IN THE RE- ASSESSMENT PROCEEDINGS IS ITS INCOME AND REPRESENTE D CONCEALED INCOME. 7. CIT V K.A. SAMPATH REDDY 197 ITR 232 (KAR) SURVEY U/S 133A WAS CONDUCTED AND IMPOUNDED BOOKS O F ACCOUNT SHOWED SEVERAL ERRONEOUS ENTRIES. FROM THES E AND CONSIDERATION OF SEVERAL FACTORS INCOME FOR THE YEA RS 72-73 TO 77-78 WAS ESTIMATED AT RS.6,00,000/-. FOR THE ASSES SMENT YEAR UNDER CONSIDERATION I.E. FOR A.Y. 76-77 INCOME ALLO CATED WAS RS.1,44,000/- AND THE ASSESSEE GAVE A LETTER TO A.O . AGREEING TO 19 TOTAL INCOME OF RS.6,00,000/- AS ESTIMATED BY THE A .O. AND THE A.O. CONCLUDED THE ASSESSMENT ORIGINAL RETURN WAS R S.11,310/-. THE ASSESSMENT ORDER IS NOT BASED ON ANY CONCESSION BY THE ASSESSEE AND CONCEALMENT OF INCOME IN THE RETURN FI LED BY THE ASSESSEE IS A GLARING FACT. PENALTY WAS UPHELD. 8. BILAND RAM HARGAN DASS V CIT 171 ITR 390 (ALL) REVISED RETURN FILED SHOWING HIGHER INCOME THAT SHO WN IN ORIGINAL RETURN AFTER SEARCH. REVISED RETURN FILED IS NOT DUE TO BONAFIDE INADVERTENCE OR OMISSION: SURRENDER OF INC OME IS NOT VOLUNTARILY BUT DUE TO DETECTION MADE BY A.O. 9. BADRI PRASAD OM PRAKASH VS. CIT, 163 ITR 440 (RA J.) WHERE THERE ARE QUERIES BY TRIBUNAL OR THE AUTHORIT Y CONCERNED AND THE ASSESSEE DISCLOSES FACTS ON DIRECTIONS OF T HE ASSESSING AUTHORITY AND SUBSEQUENTLY FILES A REVISED RETURN T HEN HE CAN NOT ESCAPE LIABILITY FOR PENALTY BY FILING SUCH REVISED RETURN. 2.13 ON THE BASIS OF THE FACTS NOTICED BY THE TRIBU NAL IN THE QUANTUM APPEAL AND CONSIDERING THE FACT THAT THE ASSESSEE H AS FILED THE REVISED RETURN, IT IS INFERRED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE EXPLANATION THAT THE AMOUNT WAS NOT INCOME OF THE Y EAR UNDER REFERENCE THEREFORE, THE AO WAS JUSTIFIED IN IMPOSING THE PEN ALTY. 20 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10-06 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 10 /06/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO, WARD- 4 (2) , JAIPUR 2. M/S. RAHUL FOOTWAR (P) LTD. ., JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.919/JP /10) BY ORDER A.R, ITAT, JAIPUR