Dr. R.P.Patel, Kottayam V. ACIT, Kottayam

ITA 936/COCH/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96718 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 31-08-2015
• Assessment Year: 1991-1992
• Appeal Filed On: 17-11-2008
• Court: TRIBUNAL
• Department Lawyers: V R GOPAKUMAR
• Assessee Lawyers: K I JOHN
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Search and seizure; Document seized; Principle of natural justice; Initiation of penalty proceedings; Block assessment; Documents seized
• Section: 143(3); 27; 132; 12; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NOS.936-941/COCH/2008 ASSESSMENT YEARS : 1991-92 TO 1995-96 DR. R.P. PATEL, HAHNEMAN HOUSE, COLLEGE ROAD, KOTTAYAM. [PAN:AEVPP 8606G] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI K.I. JOHN, CA REVENUE BY SHRI V.R. GOPAKUMAR, SR. DR DATE OF HEARING 31/08/2015 DATE OF PRONOUNCEMENT 21/09/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: ALL THESE APPEALS OF THE ASSESSEE ARISE FROM THE C ONSOLIDATED COMMON ORDER OF THE CIT(A)-IV, KOCHI DATED 29 TH SEPTEMBER, 2008 FOR THE ASSESSMENT YEARS 1991-92 TO 1995-96. 2. SINCE THE ISSUES IN ALL THE APPEALS ARE IDENTICA L IN NATURE, THEREFORE, WE ARE PROCEEDING TO TAKE UP ALL THE APPEALS TOGETH ER BY THIS CONSOLIDATED COMMON ORDER. I.T.A. NOS./936-941COCH/2008 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS A WORLD RENOWNED HOMEOPATHIC DOCTOR HAVING BEEN IN PRACTICE FOR MORE THAN TWO DECADES. A SEARCH AND SEIZURE ACTION U/S. 132 OF THE I.T. ACT WAS CARRIED OUT AT THE PROFESSIONAL CUM RESIDENTIAL PREMISES OF THE ASSESS EE ON 30 TH DECEMBER , 1994. IT WAS FOUND THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT FOR HIS PRIVATE PRACTICE. THE BOOKS OF ACCOUNT WERE MAINTAI NED ONLY WITH RESPECT TO THE PHARMACY RUN BY HIM UNDER THE NAME AND STYLE OF HAH NEMAN HOMEOPATHIC PHARMACY. DURING THE COURSE OF SEARCH, CASH WORTH RS. 6 LAKHS , INDIRA VIKAS PATRAS (IVPS) WORTH RS.6 LAKHS, PROMISSORY NOTES W ERE SEIZED U/S. 132(1) OF THE ACT. A SHEET OF PAPER CONTAINING DETAILS OF INVESTM ENTS IN IVPS, PREPARED AND KEPT BY THE ASSESSEE HIMSELF IN HIS OWN HANDWRITING WERE FOUND. INVESTMENTS IN IVPS WERE TRACED TO LOCKERS OF THE BANK HAVING FACE VALUE OF RS.67.60 LAKHS. IT WAS FOUND THAT THE ASSESSEE WAS MAINTAINING HISTORY SHEET FOR EACH PATIENT, WHEREIN PROFESSIONAL CHARGES COLLECTED WERE NOTED I N DETAIL. THE CHARGES WERE NOTED ON THE SHEET IN THE CODED FORM SUCH AS H, N, S, F WHICH DENOTED HUNDRED, NINETY, SIXTY, FIFTY RESPECTIVELY. ON THE BASIS OF THE SAID NOTINGS, THE ASSESSING OFFICER ESTIMATED THE PROFESSIONAL RE CEIPTS OF THE ASSESSEE AND ESTIMATED THE OVERHEAD EXPENSES AT 20% OF THE PROFE SSIONAL RECEIPTS OF THE ASSESSEE. THE ASSESSING OFFICER COMPLETED THE ASSE SSMENT VIDE ORDER DATED 23/12/1997 U/S. 143(3) R.W.S. 147 AND 144A OF THE A CT. THE ADDITIONS WERE MADE, INTER ALIA, UNDER THE HEAD INCOME FROM PROFE SSION, UNEXPLAINED INVESTMENTS IN IVPS, INTEREST ACCRUED ON IVPS, EXC ESS STOCK OF MEDICINES. THE I.T.A. NOS./936-941COCH/2008 3 ASSESSING OFFICER RECORDED IN HIS ORDER THAT PENAL TY PROCEEDINGS U/S. 271(1) HAVE BEEN INITIATED. THEREAFTER, THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE U/S. 271(1(C) R.W.S. 274 OF THE ACT TO SHOW CAUSE A S TO WHY PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME MAY NOT BE IMPOSED ON THE ASSESSEE. THE ASSESSEE FILED LETTER DATED 31 ST JANUARY, 1998 REQUESTING THAT THE PENALTY PROCEEDINGS MAY BE DROPPED SINCE APPELLATE PROCEEDINGS HAD BEGUN. MEANWHILE, THE ASSESSMENT OR DER WAS CARRIED OUT IN APPEAL BEFORE THE CIT(A) AND THEREAFTER, BEFORE THE ITAT. THE APPEAL OF THE ASSESSEE BEFORE THE ITAT WAS PARTLY ALLOWED FOR STA TISTICAL PURPOSES VIDE ORDER DATED 24 TH JANUARY, 2007 AND THE GROUND RAISED BY THE ASSESSE E WITH RESPECT TO THE QUANTUM OF PROFESSIONAL RECEIPTS ARRIVED AT BY THE ASSESSING OFFICER WAS DISMISSED. THE ASSESSEE WAS ALLOWED GREATER OVERHE AD EXPENSES THAN 20% FIXED BY THE ASSESSING OFFICER. THE ADDITIONS WITH RESPECT TO UNEXPLAINED INVESTMENTS IN IVP AND INTEREST ACCRUED THEREOF WAS ALSO CONFIRMED. 4 . IN THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER F ILED LETTER DATED 7 TH JULY 2005 GIVING OPPORTUNITY TO THE ASSESSEE OF BEING HE ARD. THE SAME WAS NOT REPLIED TO BY THE ASSESSEE. THE ASSESSING OFFICER, AFTER GIVING APPEAL AFFECT TO THE ORDER OF THE ITAT, ISSUED NOTICE U/S. 271(1)(C) TO THE ASSESSEE ON 20 TH AUGUST 2007. THE ASSESSEE REPLIED TO THE SAME VIDE LETTER DATED 21 ST AUGUST, 2007. THE ASSESSING OFFICER VIDE ORDER DATED 30 TH AUGUST, 2007 IMPOSED MINIMUM PENALTY LEVIABLE U/S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER I.T.A. NOS./936-941COCH/2008 4 RECORDED THAT THE FACT OF CONCEALMENT OF PROFESSION AL INCOME HAD BEEN CONFIRMED IN BOTH THE APPELLATE STAGES OF QUANTUM P ROCEEDINGS. ASSESSMENT UNDER THE HEAD UNEXPLAINED INVESTMENT IN IVPS AND A CCRUED INTEREST ON IVPS HAD BEEN CONFIRMED BY THE CIT(A) AS WELL AS BY THE ITAT . THE ASSESSING OFFICER FURTHER OBSERVED THAT NO CONVINCING AND SATISFACTOR Y EXPLANATION WAS OFFERED BY THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDIN GS. 5. THE ASSESSEE CHALLENGED THE AFORESAID ORDE R PASSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT BEFORE THE CIT(A) . THE CIT(A) CONFIRMED THE IMPUGNED ORDER ON 29 TH SEPTEMBER, 2008 DISMISSING THE APPEALS OF THE ASSE SSEE FOR THE ASSESSMENT YEARS 1991-92 TO 1994-95 AND FOR ASSESSMENT YEAR 1995-96, THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED AND T HE PENALTY ON ACCOUNT OF EXCESS STOCK OF BOOKS STOOD DELETED. 6. BEFORE DECIDING THE ISSUES RAISED BY THE A SSESSEE AGAINST THE IMPUGNED ORDER PASSED BY THE CIT(A), IT IS PERTINENT TO NOTE HEREIN THAT THE ASSESSEE HAD FILED CERTIFICATE OF INTIMATION U/S. 90(1) OF THE F INANCE (NO.2) ACT, 1998 IN RESPECT OF KAR VIVAD SAMADHAN SCHEME. THE CIT VIDE ORDER D ATED 26-02-1999 DETERMINED CERTAIN AMOUNT PAYABLE BY THE ASSESSEE T OWARDS FULL AND FINAL SETTLEMENT OF TAX ARREARS UNDER THE SCHEME. THE AS SESSEE CHALLENGED THE AMOUNT DETERMINED THEREOF BY THE CIT UNDER THE SCH EME BEFORE THE HONBLE HIGH COURT OF KERALA IN THE WRIT PROCEEDINGS IN O.P . NO. 7661 OF 1999 WHEREIN I.T.A. NOS./936-941COCH/2008 5 THE HONBLE HIGH COURT VIDE ITS JUDGMENT AND ORDER DATED 21 ST DECEMBER, 2004 DIRECTED THE REVENUE TO RECONSIDER WHEREVER RECOVER Y OF ASSESSED TAX HAVE BEEN MADE THROUGH MATURED IVP BEFORE THE EXPIRY OF THE DUE DATE FOR PAYMENT. AGGRIEVED BY THE AFORESAID JUDGMENT DATED 21 ST DECEMBER, 2004, THE ASSESSEE CHALLENGED IT IN WRIT APPEAL IN W.A. NO. 352/2005 B EFORE THE HONBLE HIGH COURT OF KERALA AND THE DIVISION BENCH OF THE HONBLE HIG H COURT VIDE ORDER DATED 7 TH FEBRUARY, 2005 STAYED THE OPERATION OF THE ORDER OF THE LD. SINGLE JUDGE. IT IS ALSO TO BE MENTIONED HEREIN THAT THE ASSESSEE HAD A PPROACHED THE HONBLE HIGH COURT OF KERALA IN WRIT PETITION NO. 38101/2008 AGA INST THE RECOVERY OF PENALTY IMPOSED FOR THE RELEVANT ASSESSMENT YEARS. THE HON BLE HIGH COURT VIDE JUDGMENT DATED 18 TH FEBRUARY, 2015 HAD DIRECTED THE TRIBUNAL TO DISPOS E OF THE PENALTY APPEALS ON MERITS WITHIN A PERIOD OF SIX MO NTHS FROM 03/03/2015. FURTHER, THE HONBLE HIGH COURT EXTENDED THE TIME F OR DISPOSAL OF THE APPEALS FOR A FURTHER PERIOD OF THREE MONTHS. THE EXTENSION OF TIME LIMIT BY THREE MONTHS BY THE HONBLE HIGH COURT WAS INTIMATED TO THE TRIBUNA L BY LD. AR VIDE LETTER DATED 12-09-2015. IT IS IN THIS CONTEXT THAT THESE APPEA LS WERE HEARD AND DISPOSED OF ON MERITS BY THIS CONSOLIDATED ORDER. 7. HAVING DISCUSSED THE FACTS, NOW WE SHALL ADVERT TO THE ISSUES RAISED IN THE PRESENT APPEAL. THE ASSESSEE IS IN APPEAL BEFO RE US CHALLENGING THE ORDER DATED 29 TH SEPTEMBER, 2008 PASSED BY THE CIT(A) WHEREIN THE F OLLOWING GROUNDS OF APPEAL WHICH ARE IDENTICAL IN NATURE IN ALL THE APPEALS HAVE BEEN RAISED.: I.T.A. NOS./936-941COCH/2008 6 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IS OPPOSED TO LAW FACTS AND CIRCUMSTANCES OF THE CASE WHICH IS AL SO A NON REASONED ORDER IN THE LIGHT OF THE APEX COURT JUDGMENT IN (2 008) 16 VST 181. 2. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERR ED IN CONFIRMING THE PENALTY ORDER WHICH IS BARRED BY LIMITATION. 3. THE C.I.T(APPEALS) HAS ERRED IN DISPOSING OFF TH E APPEAL WITHOUT DEALING WITH THE STATEMENT OF FACTS, THE DECISIONS REFERRED TO THEREIN, THE ARGUMENT NOTE FILED AND THE DECISIONS REFERRED TO T HEREIN COPY OF ARGUMENT NOT IS ANNEXED AS ANNEXURE A. 4. THE C.I.T.(APPEALS) OUGHT TO HAVE FOUND THAT I N VIEW OF ANNEXURE II, ANNEXURE-III AND ANNEXURE IV JUDGMENTS REFERRED TO IN THE ARGUMENT NOTE THE ASSISTANT COMMISSIONER HAD NO JURISDICTION TO PASS THE PENALTY ORDER. 5. THE C.I.T.(APPEALS) HAS ERRED IN CONFIRMING T HE LEVY OF PENALTY WHICH IS BASED ON A NON-EXISTING ORIGINAL ASSESSMENT ORDE R AND WITHOUT DEALING WITH THE JURISDICTIONAL DEFECT ARGUED BASED ON ANNE XURES V TO XI OF THE ARGUMENT NOTE AND IGNORING THE STATUTORY PROVISION IN SECTION 271(1) WHICH REFERS TO COURSE OF ANY PROCEEDINGS UNDER THE ACT. 6. THE CIT(APPEALS) HAS ERRED IN CONFIRMING THE LE VY OF PENALTY ON THE ALLEGED CONCEALMENT OF PROFESSIONAL INCOME WITHOUT DEALING WITH THE ARGUMENTS AND THE DECISION AS PER ANNEXURE XII TO X IV OF THE ARGUMENT NOTE AND WITHOUT DEALING WITH THE JUDGMENTS IN 2004 (3) KLT 105 AND 228 ITR 354. 7. C.I.T.(APPEALS) HAS ERRED IN CONFIRMING THE PEN ALTY ON ALLEGED CONCEALMENT BY WAY OF UNEXPLAINED INVESTMENT WHICH IS AGAINST THE FINDINGS OF THE HON. TRIBUNAL IN PARA 33 OF THE ORD ER AND BY NOT DEALING WITH ANNEXURE XV JUDGMENT AS PER ARGUMENT NOTE. 8. THE CIT(APPEALS) OUGHT TO HAVE FOUND THAT LEVY OF PENALTY WAS WITHOUT ANY CLEAR CUT FINDING ON CONCEALMENT, WHICH IS ALSO EVIDENCED BY THE DIRECTION GIVEN TO AO TO COMPUTE THE PENALTY BA SED ON ORDER OF HON. TRIBUNAL IN PARA 4 OF THE ORDER. 9. THE CIT(APPELS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY ON THE ALLEGED ACCRUED INTEREST ON IVP WITHOUT DEALING WIT H THE JUDGMENT AS PER ANNEXURE XVI TO XVIII TO THE ARGUMENT NOTE. I.T.A. NOS./936-941COCH/2008 7 10. THE CIT(APPEALS) HAS ERRED IN GIVING DIRECTI ON TO PASS FRESH ORDERS WHICH IS NOT PERMITTED U/S. 251(1)(B). 8. THE LD. COUNSEL FOR THE ASSESSEE HAS CON TENDED BEFORE US THAT THE ORDER U/S. 271(1)(C) WAS PASSED BY THE ACIT, CIRCLE-1, KO TTAYAM WHEREAS THE JURISDICTION WAS VESTED ONLY WITH ACIT, INVESTIGATI ON CIRCLE, KOTTAYAM. IT IS THE CASE OF THE ASSESSEE THAT THE PENALTY ORDER OUGHT T O HAVE BEEN PASSED BY THE SAME ASSESSING OFFICER WHO CARRIED OUT SEARCH AND S EIZURE ACTION. WE ARE NOT IN AGREEMENT WITH THE CONTENTION RAISED BY THE ASSESSE E. THE ASSESSEE IS TRYING TO IMPORT A NEW CONDITION IN THE STATUTE BOOK FOR INVO KING PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. IT IS NOT A CASE WHERE THE AS SESSMENT PROCEEDINGS WERE TRANSFERRED FROM ONE CIT TO ANOTHER AND THERE WAS A REQUIREMENT OF AGREEMENT BETWEEN THE CITS. THE JUDGMENT OF THE HONBLE HIGH COURT OF MADRAS RELIED UPON BY THE ASSESSEE IN THE CASE OF NOORUL ISLAM EDU CATIONAL TRUST VS. CIT & ORS. REPORTED IN 241 CTR (MAD.) 136 IS ON THE DISP UTE CONCERNING REQUIREMENT OF TRANSFER OF CASES FROM ONE ASSESSING OFFICER TO ANOTHER ASSESSING OFFICER UNDER THE CONTROL OF DIFFERENT CITS U/S. 124 AND 12 7 OF THE ACT. THE PRESENT CASE IS IN NO WAY CONNECTED WITH THE ISSUE ADJUDICA TED IN THE AFORESAID JUDGMENT RENDERED BY THE HONBLE MADRAS HIGH COURT. THE JUD GMENT OF THE HONBLE HIGH COURT OF KERALA RELIED UPON BY THE ASSESSEE IN THE CASE OF ALLEPPEY FINANCIAL ENTERPRISES VS. CIT REPORTED IN 313 ITR 389 IS ALSO DISTINGUISHABLE ON THE FACTS WHEREIN THE QUESTION WAS WHETHER THE ASSESSING OFFI CER THEREIN HAD JURISDICTION I.T.A. NOS./936-941COCH/2008 8 TO COMPLETE BLOCK ASSESSMENT. IN THE FACTS AND CIRC UMSTANCES OF THE CASE, THE GROUND RAISED BY THE ASSESSEE IS REJECTED. 9. THE ASSESSEE SUBMITTED THAT THE HONBLE HIGH COURT VIDE JUDGMENT DATED 21 ST DECEMBER, 2004 IN O.P. NO. 7661/1999 GAVE DIRECTIO N TO THE REVENUE TO RE- CONSIDER THE AMOUNT PAYABLE DETERMINED. VIDE INTIMA TION U/S. 90(1) OF THE FINANCE ACT, 1998 AND SINCE NO ORDER HAS BEEN PASSE D BY THE REVENUE, THEREFORE, PENALTY CANNOT BE LEVIED ON THE ASSESSEE . ACCORDING TO THE ASSESSEE, THE IMPOSITION OF PENALTY IS NON-EST AS THE ASSESSE E HAD IMMUNITY UNDER KAR VIVAD SAMADHAN SCHEME, 1998 FROM IMPOSITION OF PEN ALTY. FURTHER, IT WAS SUBMITTED THAT INSPITE OF STAY ORDER AGAINST THE OR DER PASSED BY LD. SINGLE JUDGE BY THE DIVISION BENCH OF THE HONBLE HIGH COURT, TH E ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY WAS IMPOSED HAS MERGED WITH THE JUDGMENT OF THE HONBLE HIGH COURT DATED 21 ST DECEMBER, 2004 AND THE SAME IS BINDING UNDER ARTICLE 141 OF THE CONSTITUTION. 10. THE LD. DR, ON THE OTHER HAND, OPPOSED THE AFORESAID GROUND AND RELIED UPON THE ORDER OF THE CIT(A) TO PUT FORTH HIS SUBMI SSIONS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE JUDGMENTS REFERRED THERETO. THE JUDGMENT OF THE HONBLE SINGLE JUDGE OF THE HONBLE HIGH COURT OF KERALA DATED 21ST DECEMBER, 2004 WAS STAYED BY THE HONBLE DIVISION BENCH I.T.A. NOS./936-941COCH/2008 9 IN AN APPEAL OF THE ASSESSEE, VIDE ORDER DATED 7 TH FEBRUARY, 2005. THE CONTENTION OF THE ASSESSEE THAT THE ORDER OF THE LD . SINGLE JUDGE CONTINUES TO BE BINDING ON THE COURTS EVEN DURING THE COURSE OF STA Y, IS MISPLACED. THE RATIO OF JUDGMENT OF THE HONBLE HIGH COURT OF KERALA RELIED UPON BY THE ASSESSEE IN THE CASE OF BHAHULEYAN VS. STATE OF KERALA REPORTED IN 2007(4) KLT 402 IS NOT APPLICABLE TO THE PRESENT CASE. IT WAS A CASE WHERE IN THE HONBLE COURT HELD THAT ON SUSPENSION OF EXECUTION OF THE ULTIMATE DIRECTIO N IN A JUDGMENT, DECLARATION OF LAW IN THAT JUDGMENT IS BINDING. THE DOCTRINE OF ME RGER AS PROPOSED BY THE ASSESSEE IN THE PRESENT CASE CANNOT BE APPLIED AS T HE JUDGMENT OF THE SINGLE JUDGE OF THE HONBLE HIGH COURT WAS STAYED BY THE D IVISION BENCH OF THE HONBLE HIGH COURT. IN THE CASE OF KUNHAYAMMED & ORS VS. S TATE OF KERALA & ANR. DATED 19 TH JULY, 2000, (2000) SCC 356 196, THE HONBLE SUPREM E COURT HAS HELD AS UNDER: INSPITE OF A PETITION FOR SPECIAL LEAVE TO APPEAL HAVING BEEN FILED, THE JUDGMENT, DECREE OR ORDER AGAINST WHICH LEAVE TO APPEAL HAS BEEN SOUGHT FOR, CONTINUES TO BE FINAL, EFFECTIVE AND BINDING AS BETWEEN THE PARTIES. ONCE LEAVE TO APPE AL HAS BEEN GRANTED, THE FINALITY OF THE JUDGMENT, DECREE OR OR DER APPEALED AGAINST IS PUT IN JEOPARDY THOUGH IT CONTINUES TO B E BINDING AND EFFECTIVE BETWEEN THE PARTIES UNLESS IT IS A NULLIT Y OR UNLESS THE COURT MAY PASS A SPECIFIC ORDER STAYING OR SUSPENDI NG THE OPERATION OR EXECUTION OF THE JUDGMENT, DECREE OR O RDER UNDER CHALLENGE. EVEN OTHERWISE, IT IS NOWHERE PLEADED OR PROVED BY T HE ASSESSEE THAT THE CONDITION PRECEDENT U/S. 90 OF KAR SEVA VIVAD SAMAD HAN SCHEME, 1998, FINANCE I.T.A. NOS./936-941COCH/2008 10 ACT (NO.2), 1999 HAS BEEN COMPLIED WITH, SO AS TO S EEK IMMUNITY FROM THE PROVISIONS OF PENALTY UNDER THE ACT. SECTION 90(2) AND SECTION 91 UNDER KAR VIVAD SAMADHAN SCHEME ,1998 ARE EXTRACTED HEREINBEL OW: (2) THE DECLARANT SHALL PAY, THE SUM DETERMINED B Y THE DESIGNATED AUTHORITY WITHIN THIRTY DAYS OF THE PASS ING OF AN ORDER BY THE DESIGNATED AUTHORITY AND INTIMATE THE FACT O F SUCH PAYMENT TO THE DESIGNATED AUTHORITY ALONGWITH PROOF THEREOF AND THE DESIGNATED AUTHORITY SHALL THEREUPON ISSUE THE CERT IFICATE TO THE DECLARANT. 91. THE DESIGNATED AUTHORITY SHALL, SUBJECT TO TH E CONDITIONS PROVIDED IN SECTION 90, GRANT IMMUNITY FROM INSTITU TING ANY PROCEEDING FOR PROSECUTION FOR ANY OFFENCE UNDER AN Y DIRECT TAX ENACTMENT OR INDIRECT TAX ENACTMENT, OR FROM THE IM POSITION OF PENALTY UNDER ANY OF SUCH ENACTMENTS, IN RESPECT OF MATTERS COVERED IN THE DECLARATION U/S. 88. 12. FOR SEEKING GRANT OF IMMUNITY FROM IMPOSI TION OF PENALTY, THE ASSESSEE HAS TO FIRST PAY THE SUM DETERMINED UNDER THE SCHEM E AND OBTAIN A CERTIFICATE FROM THE DESIGNATED AUTHORITY. HOWEVER, IN THE PRE SENT CASE, THERE IS NO COMPLIANCE OF THE AFORESAID CONDITIONS PRIMARILY BE CAUSE THE CASE OF THE ASSESSEE IS STILL PENDING BEFORE THE HONBLE HIGH C OURT. THE PROVISIONS OF SECTION 91 OF KAR VIVAD SMADHAN SCHEME, 1998 CANNOT BE INVO KED AND IMMUNITY THEREOF CANNOT BE GRANTED TO THE ASSESSEE AT THIS STAGE. T HEREFORE, THERE IS NO BAR IN IMPOSING THE PENALTY PROCEEDINGS IN THE CASE OF THE ASSESSEE. THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KILLICK NI XON LTD. DATED 25 TH NOVEMBER, 2002 RELIED UPON BY THE ASSESSEE STATES THE AFORESA ID POSITION ONLY THAT ONCE THE CONDITION, I.E., THE DECLARANT MAKES PAYMENT OF THE AMOUNT DETERMINED U/S. 90 OF KAR VIVAD SAMADHAN SCHEME, IS SATISFIED, IMMUNIT Y U/S. 91 SPRINGS INTO EFFECT. I.T.A. NOS./936-941COCH/2008 11 THE SAID JUDGMENT DOES NOT HELP THE CASE OF THE ASS ESSEE. THE ASSESSEE HAS FURTHER ARGUED THAT PENALTY FOR THE ASSESSMENT YEAR 1991-92 TO 1993-94 CANNOT BE LEVIED AS CIT HAD DETERMINED THE AMOUNT DUE UNDE R KAR VIVAD SAMADHAN SCHEME AND HAD ALSO DETERMINED THE AMOUNT PAYABLE. THE CONTENTION IS MISPLACED AS THE SUM PAYABLE UNDER THE SCHEME IS NO T FINAL TILL DATE AND IS SUBJECT TO THE ORDER OF THE HONBLE HIGH COURT IN T HE WRIT APPEAL. THE ASSESSEE IN THE WRIT PETITION HAD CHALLENGED THE DETERMINATI ON OF THE AMOUNT PAYABLE FOR ALL THE ASSESSMENT YEARS, I.E., 1991-92 TO 1995-96. THE SAME IS INDICATED IN PARA 1 OF THE JUDGMENT OF THE HONBLE HIGH COURT DA TED 21ST DECEMBER, 2004 WHICH IS REPRODUCED HEREINBELOW: IT IS THE DENIAL OF BENEFIT OF KVSS TO THE PETITI ONER FOR THE ASSESSMENT YEARS 1994-95 AND 1995-96 AND PARTIAL DE NIAL OF THE CLAIM FOR THE OTHER YEARS UNDER EXT.P5 THAT IS THE C HALLENGE RAISED IN THIS O.P. 13. THE AFORESAID JUDGMENT AND ORDER DATED 21 ST DECEMBER, 2004 HAS BEEN STAYED BY THE DIVISION BENCH OF THE HONBLE HIGH CO URT. THEREFORE, IT IS NOT AS IF THAT THE CERTIFICATE OF INTIMATION U/S. 90(1) OF TH E FINANCE (NO.2) ACT, 1998 IN RESPECT OF KAR VIVAD SAMADHAN SCHEMEIV DATED 26-02- 1999 FOR DETERMINATION OF AMOUNT PAYABLE UNDER THE KVSS HAD BECOME FINAL WITH RESPECT TO THE IMPUGNED ASSESSMENT YEARS 1991-92 TO 1994-95. MOREOVER, IN THE ABSENCE OF PAYMENT MADE UNDER THE SCHEME AND ISSUANCE OF CERTIFICATE T HEREOF, SECTION 91 WILL NOT SPRING INTO ACTION. IN THE PRESENT CASE, THE STAGE OF PAYMENT HAS NOT ARRIVED AS EVEN THE SUM PAYABLE HAS NOT BEEN DETERMINED TILL D ATE AND THE ISSUE IS PENDING I.T.A. NOS./936-941COCH/2008 12 CONSIDERATION BEFORE THE HONBLE HIGH COURT IN THE WRIT APPEAL. IN VIEW THEREOF, GROUND NO. 4 RAISED BY THE ASSESSEE IS DISMISSED. 14. THE ASSESSING OFFICER CONTENDS THAT THE ORD ER GIVING THE APPEAL EFFECT TO THE ITAT ORDER WAS SERVED ON THE ASSESSEE ON 29 TH SEPTEMBER, 2007 WHEREAS THE PENALTY NOTICE WAS ISSUED ON 20TH AUGUST, 2007 AND THEREFORE, PENALTY COULD NOT HAVE BEEN INITIATED AND THE SAME LED TO VIOLATI ON OF PRINCIPLES OF NATURAL JUSTICE. THE CONTENTION RAISED BY THE ASSESSEE IS NOT ACCEPTABLE TO US. THE ORDER GIVING APPEAL EFFECT TO THE TRIBUNAL ORDER WA S PASSED ON 10 TH MAY, 2007. THE ASSESSING OFFICER IS DUTY BOUND TO GIVE APPEAL EFFECT TO THE ORDER OF THE ITAT. IN THE PRESENT CASE, THERE IS NO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE SO AS TO INVOKE PENALTY PROCEEDINGS. THE SAID REQUIRE MENT DOES NOT ARISE OUT OF THE STATUTE AND HAS IN NO WAY CAUSED PREJUDICE TO T HE ASSESSEE. THE IMPUGNED ORDER IS AS PER LAW AND WE SEE NO NEED TO INTERFERE WITH THE SAME ON THIS GROUND. 15. THE ASSESSEE HAS FURTHER CONTENDED THAT THERE IS NO SATISFACTION RECORDED IN THE ORDER GIVING APPEAL EFFECT OR IN THE ASSESSMENT ORDER DATED 23 RD DECEMBER, 1997. MOREOVER, THERE IS NO MENTION IN THE ORDER GIVING APPEAL EFFECT THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME. WE ARE NOT IN AGREEMENT WITH THE CONTEN TION RAISED BY THE ASSESSEE. THERE IS NO SEPARATE REQUIREMENT UNDER THE ACT FOR THE ASSESSING OFFICER TO I.T.A. NOS./936-941COCH/2008 13 RECORD SATISFACTION FOR INVOKING PENALTY IN THE OR DER GIVING APPEAL EFFECT. THE PROCEEDINGS HAD ALREADY BEEN INITIATED IN THE ASSES SMENT ORDER DATED 23 RD DECEMBER, 1997. THE ASSESSMENT ORDER DATED 23-12-1 997 WAS NOT SET ASIDE IN THE APPEAL EITHER BEFORE THE CIT(A) OR BEFORE THE I TAT. THE ASSESSMENT ORDER IS STILL IN EXISTENCE. THE ONLY THING THAT HAS HAPPEN ED IS THAT THE DIRECTIONS OF THE HONBLE HIGH COURT ARE MERGED WITH THE ASSESSMENT O RDER DATED 23 RD DECEMBER, 1997. INITIATION OF PENALTY PROCEEDINGS THEREIN I S VALID AND THERE IS NO SEPARATE REQUIREMENT OF INITIATING PENALTY PROCEEDINGS IN TH E ORDER GIVING APPEAL EFFECT. IT IS FOR THIS REASON THAT LIMITATION OF SIX MONTHS FO R PASSING THE PENALTY ORDER IS PRESCRIBED U/S. 275(1) OF THE ACT. THE SAME WOULD BE RENDERED MEANINGLESS IF THERE IS SEPARATE REQUIREMENT OF RECORDING SATISFAC TION IN THE ORDER GIVING APPEAL EFFECT. THE REQUIREMENT AS STATED BY THE ASSESSEE CANNOT BE IMPORTED INTO THE STATUTE. IN THE FACTS OF THE PRESENT CASE, AS FAR AS THE ASSESSMENT ORDER DATED 23 RD DECEMBER, 1997 IS CONCERNED, THE ASSESSING OFFICER HAS SPECIFICALLY RECORDED THAT PENALTY PROCEEDINGS UNDER SECTION 27 1(1)(C) HAVE BEEN INITIATED. MOREOVER, A PERUSAL OF PARA 4 AND 18 OF THE ASSESSM ENT ORDER DATED 23 RD DECEMBER, 1997 PASSED BY THE ASSESSING OFFICER LEAV ES NO MANNER OF DOUBT THAT THE ASSESSING OFFICER WAS SATISFIED WITH THE CONCEA LMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. THERE IS NO SEPARATE REQUIREMENT OF RECORDING SATISFACTION IF THE SAME C AN BE DISCERNED FROM THE ASSESSMENT ORDER. MOREOVER, THERE IS NO REQUIREMENT OF RECORDING THE SATISFACTION IN A PARTICULAR MANNER. THE ASSESSEE H AS RELIED UPON VARIOUS I.T.A. NOS./936-941COCH/2008 14 JUDGMENTS TO CANVASS HIS SUBMISSION THAT SATISFACTI ON SHOULD BE RECORDED SEPARATELY IN THE ASSESSMENT ORDER ITSELF. THE CON TROVERSY HAS BEEN PUT TO REST BY THE HONBLE SUPREME COURT IN VARIOUS JUDGMENTS I NCLUDING JUDGMENT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROC ESSORS (2008) 13 SCC 369 AND CIT VS. ATUL MOHAN BINDAL (2009) 9 SCC 589. TH E HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. VS. CIT-II IN CIVIL AP PEAL NO. 9772 OF 2913 DATED 30 TH OCTOBER, 2013, HAS HELD AS UNDER: 10. THE ASSESSING OFFICER HAS TO SATISFY WHETHER THE PENALTY PROCEEDINGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSES SMENT PROCEEDINGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT INTO WRITING. THE SCOPE OF SECTION 271( 1)(C) HAS ALSO BEEN ELABORATELY DISCUSSED BY THIS COURT IN UNION OF IN DIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 13 SCC 369 AND CIT VS. ATUL MOHAN BINDAL 2009) 9 SCC 589. THUS GROUND NOS. 5 AND 8 RAISED BY THE ASSESSEE AR E DISMISSED. 16. THE ASSESSEE HAS SUBMITTED THAT SINCE THE ADD ITION MADE AGAINST THE PROFESSIONAL INCOME IS PURELY ON ESTIMATE BASIS AND THEREFORE, PENALTY CANNOT BE LEVIED. THE ASSESSEE HAS RELIED UPON VARIOUS JUDGM ENTS TO SUPPORT HIS SUBMISSION INCLUDING THE JUDGMENT OF THE HONBLE RA JASTHAN HIGH COURT IN THE CASE OF CIT VS. KRISHI TYRE RETREADING AND RUBBER I NDUSTRIES (2014) 360 ITR 580. 17. WE ARE NOT IN AGREEMENT WITH THE SUBMISSIO N PUT FORTH BY THE ASSESSEE FOR THE REASONS STATED HEREIN. IT IS A CASE WHERE THE ASSESSEE HIMSELF HAD I.T.A. NOS./936-941COCH/2008 15 ESTIMATED HIS PROFESSIONAL INCOME WHILE FILING HIS INCOME TAX RETURNS. THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOUNT FOR PR IVATE PRACTICE. DURING THE COURSE OF SEARCH, VARIOUS INCRIMINATING DOCUMENTS I NCLUDING IVPS WORTH RS. 67 LAKHS, MEDICAL HISTORY SHEETS CONTAINING CASH RECEI PTS IN THE FORM OF CODES HAVE BEEN UNEARTHED FROM THE PREMISES OF THE ASSESSEE. P ROFESSIONAL RECEIPTS HAVE BEEN DETERMINED BY THE ASSESSING OFFICER ON THE BAS IS OF THE MEDICAL SHEETS MAINTAINED BY THE ASSESSEE HIMSELF (NOT DISCLOSED) AND NOT ON THE BASIS OF GUESS WORK OR ESTIMATE. TO ARRIVE AT THE REAL INCO ME OF THE ASSESSEE, THE ASSESSING OFFICER ALLOWED 20% OF OVERHEAD EXPENSES AND DETERMINED THE PROFESSIONAL RECEIPTS WHICH WERE SUBSEQUENTLY ENHAN CED BY THE CIT AND THE ITAT. THE CONTENTION OF THE ASSESSEES THAT THE PEN ALTY CANNOT BE LEVIED AS THE INCOME HAS BEEN PURELY DERIVED FROM GUESS WORK, CAN NOT BE ACCEPTED. THERE IS NO LOGIC IN SUCH CONTENTION. HAD IT BEEN THE CASE, NO PENALTY COULD EVER BE LEVIED ON ASSESSEES WHO NEVER MAINTAINED BOOKS OF A CCOUNTS AND DID NOT DISCLOSE INCOME IN THEIR INCOME TAX RETURNS. THE A SSESSMENT ORDER CLEARLY SHOWS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME BY HAVING NOT DISCLOSED PROFESSIONAL RECEIPTS FROM PRI VATE PRACTICE AND SOURCE OF INCOME FOR INVESTMENT IN IVPS. THE ASSESSEE CANNOT ESCAPE PENALTY ACTION U/S. 271(1)(C) OF THE ACT MERELY BY FILING A RETURN SHO WING AN ESTIMATED INCOME BUT WITHOUT THERE BEING ANY REAL BASIS FOR THAT INCOME. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND WHICH CA NNOT BE DENIED. THE FACTS OF THE CASE CLEARLY SHOWS THAT THE ASSESSEE HAD DEL IBERATELY UNDERESTIMATED HIS I.T.A. NOS./936-941COCH/2008 16 INCOME FOR THE YEARS UNDER CONSIDERATION. THE ASSE SSEE HAD FAILED TO DISCREDIT THE FACTUAL POSITION ON THE BASIS OF WHICH ADDITION S WERE MADE. IT IS NOT THE CASE WHERE PENALTY HAS BEEN LEVIED ON THE MERE REJECTION OF THE EXPLANATION GIVEN BY THE ASSESSEE. THE JUDGMENT OF THE HONBLE RAJASTH AN HIGH COURT IN THE CASE OF CIT VS. KRISHI TYRE RETREADING AND RUBBER INDUSTRIE S (CITED SUPRA) RELIED UPON BY THE ASSESSEE IS A CASE WHEREIN BOOKS OF ACCOUNTS MA INTAINED BY THE ASSESSEE THEREOF WERE REJECTED AND THE ASSESSING OFFICER EST IMATED THE ENTIRE INCOME OF THE ASSESSEE. THE PRESENT CASE IS CLEARLY DISTINGU ISHABLE ON FACTS AND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 18. THE AFORESAID PROPOSITION OF LAW FINDS SUPPO RT BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAL INDI RAIL NIRMAN ENGG. LTD. (365 ITR 304) WHEREIN IT WAS HELD THAT AS UNDER: 8. THE LEARNED COUNSEL FOR THE ASSESSEE WOULD HAVE BEEN RIGHT IF IT WAS A SIMPLE CASE OF ONE ESTIMATE AGAINST ANOTHER. HOWEV ER, INCRIMINATING MATERIALS ARE GATHERED IN THE COURSE OF SEARCH COND UCTED BY THE TAX AUTHORITIES AND THE SPECIAL AUDIT REPORT, WHICH IS BASED ON THOSE MATERIALS, REPORTS A NUMBER OF DISCREPANCIES AND IRREGULARITIE S IN THE MAINTENANCE OF BOOKS OF ACCOUNTS, THE CASE CEASES TO BE A SIMPLE C ASE OF ESTIMATE OF INCOME AND IT IS OPEN TO THE ASSESSING OFFICER EVEN TO MAKE A FLAT RATE ASSESSMENT PITCHING THE PERCENTAGE AT HIGH FIGURE T O COVER UP THE DISCREPANCIES NOTICED IN THE SPECIAL AUDIT REPORT A ND REVEALED BY THE SEIZED MATERIAL, INSTEAD OF MAKING SEPARATE ADDITIO NS. THIS IS WHAT HAS HAPPENED IN THE PRESENT CASE. THE SEARCH TOOK PLAC E ON 14-03-1995, TOWARDS THE CLOSE OF THE RELEVANT COUNTING PERIOD. DESPITE THE SEARCH, IN THE RETURN FILED ON 29-11-1995, THE ASSESSEE CHOSE TO DECLARE ITS INCOME AT AN ESTIMATED 3% OF THE CONTRACT RECEIPTS OF RS.2 0,30,74,024/- ; NO ATTEMPT WAS MADE IN THE COURSE OF THE ASSESSMENT PR OCEEDINGS TO JUSTIFY THE SAID ESTIMATE. THE ASSESSING OFFICER, ARMED WI TH THE SEIZED MATERIAL AND THE SPECIAL AUDIT REPORT, DID COMPLY WITH THE R ULES OF NATURAL JUSTICE AND CALLED UPON THE ASSESSEE TO JUSTIFY THE INCOME RETURNED AND EXPLAIN I.T.A. NOS./936-941COCH/2008 17 THE DISCREPANCIES AND IRREGULARITIES NOTICED BY THE SPECIAL AUDITOR. WHEN THE ASSESSEE WAS UNABLE TO DO SO, THE ASSESSING OFF ICER HAD NO OPTION BUT TO MAKE AN ESTIMATE OF THE PROFITS BY ADOPTING A P ERCENTAGE SUFFICIENT IN HIS OPINION TO COVER THE DISCREPANCIES REVEALED BY THE SPECIAL AUDITOR AND THE SEIZED MATERIAL. IN DOING THIS, HE COMMITTED N O ERROR; HE ALSO COMMITTED NO ERROR OF LAW IN CONCLUDING THAT THERE WAS GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE IN FAILING TO R ETURN THE CORRECT INCOME. THE BURDEN TO SHOW THE CONTRARY WAS, ACCORDING TO T HE ASSESSING OFFICER, ON THE ASSESSEE WHICH THE ASSESSEE FAILED TO DISCHA RGE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE IS NOT RIGH T IN HIS CONTENTION THAT WHENEVER AN ASSESSMENT IS MADE BY APPLYING A FLAT R ATE OF PROFIT TO THE DECLARED TURNOVER OR RECEIPTS, WHICH IS HIGHER THAN THE RATE ADOPTED BY THE ASSESSEE IN THE RETURN OF INCOME, THERE CAN BE NO INFERENCE THAT THE ASSESSEE CONCEALED HIS PROFITS. THERE IS NO SUCH A BSOLUTE PROPOSITION AND THIS HAS BEEN BROUGHT OUT BY THE MADRAS HIGH COURT IN BASHU SAHIB VS. CIT (1997) 108 ITR 736. THERE THE ASSESSEE WHO WAS A BUS OPERATOR FILED A RETURN IN WHICH HE ESTIMATED THE INCOME AT RS.8,000/- PER BUS WHICH WAS ON THE BASIS OF THE INCOME DETERMINED BY THE TRIBUNAL IN HIS OWN CASE FOR AN EARLIER ASSESSMENT YEAR. IN THE CO URSE OF THE ASSESSMENT PROCEEDINGS HE DENIED HAVING MAINTAINED BOOKS OF AC COUNTS AND ALSO DID NOT PRODUCE THE TRIP SHEETS, INVOICES AND CORRESPON DENCE WITH THE REGIONAL TRANSPORT AUTHORITIES. THE ASSESSING OFFI CER, THEREFORE, ENHANCED THE INCOME FROM EACH BUS TO RS.19,245/-. SUCH ESTI MATED ASSESSMENTS WERE MADE FOR TWO ASSESSMENT YEARS AND IN THE LATER ASSESSMENT YEAR THE INCOME WAS ESTIMATED AT RS.22,000/- PER BUS. PENAL TY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME. THE MADRAS HI GH COURT HELD THAT THE ASSESSEE DID NOT PRODUCE THE RELEVANT EVIDENCE DESP ITE BEING CALLED UPON AND THERE WAS A FINDING BY THE TRIBUNAL THAT THE AS SESSEE CHOSE TO WITHHOLD THE BOOKS OF ACCOUNTS. THE ASSESSEE KNEW THAT THE METHOD ADOPTED BY HIM DID NOT DISCLOSE THE REAL INCOME. T HOUGH HE WAS IN A POSITION TO KNOW HIS REAL INCOME, HE DELIBERATELY E STIMATED IT AT A LOWER AMOUNT. THE HIGH COURT, THEREFORE, HELD THAT THE P ENALTY PROCEEDINGS WERE JUSTIFIED. DEALING WITH THE ARGUMENT THAT IN CASES OF ESTIMATE OF PROFITS THERE CAN BE NO CONCEALMENT , AND REJECTING THE SAME, THE HIGH COURT OBSERVED AS UNDER:- WE ARE UNABLE TO AGREE WITH THE ARGUMENT THAT IN A LL CASES WHERE THE TAXING AUTHORITIES ESTIMATED THE INCOME AT A HIGHE R FIGURE THAN WHAT WAS ESTIMATED BY AN ASSESSEE, NO PENALTY WAS LEVIABLE. WHERE THE ESTIMATE OF THE ASSESSEE AMOUNTS TO DELIBERATE UNDER-ESTIMATE, AN INFERENCE OF CONCEALMENT OF INCOME COULD CERTAINLY BE DRAWN. T HE FACTS IN THE PRESENT CASE CLEARLY SHOW THAT THE ASSESSEE HAD DELIBERAT ELY UNDER-ESTIMATED HIS INCOME IN THE TWO YEARS UNDER APPEAL. I.T.A. NOS./936-941COCH/2008 18 1 0. A DIVISION BENCH OF THIS COURT WAS SEIZED WITH THE QUESTION IN QAMMAR- UD-DIN & SONS VS. CIT (1981) 129 ITR 703, RANGANATH AN, J. (AS HE THEN WAS) HELD AS FOLLOWS:- THE OBLIGATION OF FILING OF A RETURN IS A SOLEMN A ND IMPORTANT ONE AND SHOULD NOT BE UNDERTAKEN IN A LIGHTHEARTED AND CARE LESS MANNER. IT MAY BE THAT, IN SOME CIRCUMSTANCES, AN ASSESSEE MAY HAV E TO ESTIMATE ITS INCOME, BUT IF SO, SUCH ESTIMATE SHOULD HAVE SOME B ASIS THEREFORE. AN ASSESSEE CANNOT ESCAPE ITS RESPONSIBILITY OR ESCAPE PENAL ACTION MERELY BY FILING A RETURN SHOWING AN ESTIMATED INCOME BUT WIT HOUT THERE BEING ANY REAL BASIS FOR THAT INCOME. (UNDERLINING OURS) 11. IN THAT CASE THE PENALTY WAS ULTIMATELY CANCE LLED BY THIS COURT ON THE GROUND THAT THERE WAS NO FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE AND THAT THE TRIBUNALS FINDING TO THE CON TRARY WAS VITIATED BY FAILURE TO CONSIDER CERTAIN MATERIAL FACTS. 12. WE ARE BOUND BY RATIO OF THE DECISION OF THIS COURT. THE NUMBER OF DISCREPANCIES AND IRREGULARITIES LISTED BY THE SPEC IAL AUDITOR IN HIS REPORT WHICH ARE REPRODUCED IN THE ASSESSMENT ORDER BEAR T ESTIMONY TO THE FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WE RE WHOLLY UNRELIABLE. IF THEY WERE SO, THERE CAN BE NO SANCTITY ATTACHED TO THE FIGURE OF GROSS CONTRACT RECEIPTS OF RS.20,30,74,024/- ON WHICH THE ASSESSEE ESTIMATED 3% AS ITS INCOME. IT IS TRUE THAT THE ASSESSING OFFIC ER DID NOT ENHANCE THE FIGURE OF GROSS RECEIPTS BUT THAT IS NOT BECAUSE HE GAVE A CLEAN CHIT IN THE FACE OF THE DEFECTS, DISCREPANCIES AND IRREGULARITIES REPOR TED BY THE SPECIAL AUDITOR. IN ORDER TO TAKE CARE OF THOSE DISCREPANCIES HE RES ORTED TO A MUCH HIGHER ESTIMATE OF THE PROFITS BY ADOPTING 11% ON THE GROS S CONTRACT RECEIPTS. HE GAVE DUE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE DISCREPANCIES AND ALSO TO SHOW WHY THE PROFIT RATE OF 11% CANNOT BE ADOPTED B UT THESE OPPORTUNITIES WERE NOT AVAILED OF BY THE ASSESSEE. HE ALSO HAS R ECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE WAS PERMITTED TO INSPECT TH E SEIZED DOCUMENTS AND WAS GIVEN PHOTOCOPIES OF THE DESIRED DOCUMENTS (PAR A 7). THIS IS NOT DENIED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE MERE FACT THAT THE ESTIMATE WAS REDUCED BY THE TRIBUNAL TO 8% WOULD IN NO WAY T AKE AWAY THE GUILT OF THE ASSESSEE OR EXPLAIN ITS FAILURE TO PROVE THAT T HE FAILURE TO RETURN THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON ITS PART. IT APPEARS TO US THAT THE ASSESSEE WAS T AKING A CHANCE SITTING ON THE FENCE DESPITE THE FACT THAT THERE WAS A SEARC H TOWARDS THE CLOSE OF THE RELEVANT ACCOUNTING YEAR IN THE COURSE OF WHICH INC RIMINATING DOCUMENTS WERE FOUND. IT APPEARS TO US THAT THE INTENTION OF THE ASSESSEE WAS TO TAKE A I.T.A. NOS./936-941COCH/2008 19 RISK AND DISCLOSE A LESSER INCOME THAN WHAT IS ACTU ALLY EARNED AND RELY UPON THE MINOR VARIATIONS IN THE RATE OF PROFITS ADOPTED BY THE TAXING AUTHORITIES AND THE TRIBUNAL AS A DEFENCE IN THE PENALTY PROCEE DINGS. THE PLEA ACCEPTED BY THE TRIBUNAL THAT THE ASSESSEE AGREED TO BE ASSESSED AT 11% OF THE GROSS RECEIPTS ONLY TO BUY PEACE AND AVOI D LITIGATION CANNOT BE ACCEPTED BY US IN VIEW OF THE JUDGMENT OF THE SUPRE ME COURT IN MAK DATA P. LTD. (SUPRA). THE TRIBUNAL IN OUR VIEW WAS IN ERRO R IN UPHOLDING THE ORDER OF THE CIT (APPEALS) CANCELLING THE PENALTY. WE ACCOR DINGLY ANSWER THE SUBSTANTIAL QUESTIONS OF LAW FRAMED BY US AGAINST T HE ASSESSEE AND IN FAVOUR OF THE REVENUE. 19. THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. BACHU & CO. (2008) 174 TAXMAN 0511) HAS HELD AS UNDER: DURING SEARCH, THE AO HAS ESTABLISHED BOGUS CREDIT ENTRIES AND SUPPRESSION OF ACCOUNTS AND THE SAME WERE RECONFIRMED IN THE AU DIT REPORT OBTAINED BY THE AO BY APPOINTING AN AUDITOR U/S. 142(2A) OF THE ACT. SIMILARLY, THE AO ESTABLISHED A CASE OF UNEXPLAINED INVESTMENT IN THE NAMES OF THE PARTNERS, RELATIVES AND UNEXPLAINED EXPENDITURE BY THEM. EVEN THOUGH THE ASSESSMENTS WERE MODIFIED IN APPEAL BY CANCELING TH E SPECIFIC ADDITIONS BUT BY ESTIMATING INCOME, THE NET RESULT IS CONCEALMENT OF INCOME IN TERMS OF EXPLN. 1(B) TO S. 271(10(C) OF THE ACT, BECAUSE THE INCOME ESTIMATED BY THE CIT(A), WHICH HAS BECOME FINAL FOR THE YEAR 1988-89 , IS OVER FOUR TIMES OF THE RETURNED INCOME AND FOR THE YEAR 1990-91 IT IS AROUND THREE TIMES OF THE RETURNED INCOME. THEREFORE, BY VIRTUE OF OPERATION OF EXPLN. 1(B) TO S. 271)(1)(C), THE ASSESSEE IS DEEMED TO HAVE CONCEALE D THE PARTICULARS OF THE DIFFERENCE IN THE INCOME ASSESSED AND THE INCOME RE TURNED AND IT IS FOR THE ASSESSEE TO OFFER REASONABLE EXPLANATION. IT IS SE EN FROM THE RECORDS AND ORDERS THAT THE EARLIER EXPLANATION OF THE ASSESSEE WAS THAT THE SPECIFIC ADDITIONS HAVE BEEN CANCELLED BY THE APPELLATE AUTH ORITY AND THE ADDITIONAL INCOME ASSESSED IS BASED ON ESTIMATION MADE BY THE CIT(A). WE DO NOT FIND THIS AS AN ACCEPTABLE EXPLANATION FOR THE DIFFERENC E IN INCOME ASSESSED AND THE INCOME RETURNED AND THEREFORE, THE NET RESULT I S THAT THE ASSESSEE HAS NOT OFFERED ANY REASONABLE OR BONA FIDE EXPLANATION AS REQUIRED UNDER EXPLN. 1(B) TO S. 271(1)(C) OF THE ACT TO AVOID PENALTY. CONSEQUENTLY, LEVY OF PENALTY IMPOSED FOR CONCEALMENT OF INCOME FOR THE Y EAR 1988-89 IS PERFECTLY JUSTIFIED. FOR THE YEAR 1990-91, ASSESSEE FILED RE TURN AFTER THE DATE OF SEARCH AND DETECTION OF IRREGULARITIES AND THEREFORE PENAL TY WAS RIGHTLY LEVIED. WE, THEREFORE, SET ASIDE THE ORDERS OF THE TRIBUNAL AND ALSO OF THE CIT(A) AND UPHOLD THE PENALTY LEVIED ON ASSESSEE U/S. 271(1)(C ). SO FAR AS THE QUANTUM OF PENALTY IS CONCERNED, THERE IS NO SCOPE FOR THIS COURT TO INTERFERE WITH THE SAME, OR REMAND THE MATTER FOR RECONSIDERATION BY A PPELLATE AUTHORITY I.T.A. NOS./936-941COCH/2008 20 BECAUSE PENALTY LEVIED IS NOT MUCH IN EXCESS OF THE MINIMUM PENALTY THAT COULD BE LEVIED UNDER THE SECTION. WE, THEREFORE, ALLOW THE APPEALS FILED BY THE REVENUE BY VACATING THE ORDERS OF THE TRIBUNAL AND THAT OF THE CIT(A) AND RESTORING THE ORIGINAL PENALTY ORDERS ISSUED BY THE AO. 20. SIMILAR VIEW WAS TAKEN BY THE HONBLE HIGH CO URT OF ALLAHABAD IN THE CASE OF SUSHIL KUMAR SHARAD KUMAR VS. CIT (232 ITR 0588) WHEREIN IT WAS HELD AS UNDER : THERE IS NO SUBSTANCE IN THE CONTENTION THAT THE P ENALTY U/S. 271(1)(OF THE ACT CANNOT BE IMPOSED IN ALL CIRCUMSTANCES WHENEVER THE INCOME IS ASSESSED ON ESTIMATE REJECTING THE EXPLANATION OF THE ASSESS EE FOR LOW DOMESTIC WITHDRAWALS OR FOR ALIKE REASONS. IN OUR OPINION, THERE CANNOT BE ANY SUCH INFLEXIBLE RULE. THERE MAY BE CASES WHERE ADDITIONS MAY BE MADE PURELY ON ESTIMATE WITHOUT REFERENCE TO ANY EVIDENCE/MATERIAL S BEING ON RECORD. IN SUCH A CASE, IT COULD BE ARGUED THAT WITH SOME FORC E THAT PENALTY CANNOT BE LEVIED ON THE FIGURES WHICH ARE MERELY BASED ON GUE SS WORK OR ESTIMATE. BUT, IN A CASE LIKE THE PRESENT ONE, WHERE, AFTER A DETAILED INVESTIGATION, THE ASSESSEE WAS CONFRONTED WITH EVIDENCE AND MATERIALS AND HE FAILED TO DISLODGE THE FACTUAL POSITION ON THE BASIS OF WHICH ADDITIONS WERE MADE, THE CASE STANDS ON DIFFERENT FOOTING. IN SUCH A CASE, IT IS ALWAYS OPEN TO DRAW AN INFERENCE OF CONCEALMENT OR OF FURNISHING INACCURAT E PARTICULARS OF INCOME, RESULTING FROM DELIBERATE UNDERESTIMATE OF INCOME. IN OTHER WORDS, THE IT AUTHORITIES MUST BE SATISFIED ON EXAMINATION OF THE CUMULATIVE EFFECT OR THE ENTIRETY OF THE CIRCUMSTANCES THAT THE ONLY REASONA BLE INFERENCE FROM SUCH FACTORS OR MATERIAL THAT COULD BE DRAWN WAS THAT TH E DISPUTED AMOUNT ADDED AS A RESULT OF ESTIMATE, REPRESENTED INCOME AND THA T THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME OR HAD FURNISHED IN ACCURATE PARTICULARS THEREOF. 13. IN VIDYA SAGAR OSWAL VS. CIT 1977 CTR (P&H) 8: (1977) 108 ITR 861 (P&H): TC 50R, 158, THE FACTS WERE THAT RS.200 WERE DRAWN ON ACCOUNT OF HOUSEHOLD EXPENSES AND THAT AMOUNT WAS FOUND DEBITE D IN ACCOUNT BOOKS. THE ITO HELD THAT THE ASSESSEE SHOULD HAVE SPENT AT LEAST RS.500 PER MONTH FOR DOMESTIC EXPENSES AND CONSEQUENTLY, ADDED RS.4, 000 TO THE ASSESSEES TOTAL INCOME FOR THE PURPOSE OF ASSESSMENT. THAT A DDITION WAS CONFIRMED ON THE QUANTUM SIDE. THE PENALTY PROCEEDINGS U/S. 271 (1)(C) WERE ALSO TAKEN AND A PENALTY OF RS.6,061 WAS ALSO IMPOSED WHICH WA S CONFIRMED BY THE TRIBUNAL ON THE FINDINGS THAT THE WITHDRAWAL FOR HO USEHOLD EXPENSES WAS TOTALLY INADEQUATE AND THE ASSESSEE IN THAT CASE HA D SPENT MONEY OUT OF HIS I.T.A. NOS./936-941COCH/2008 21 UNDISCLOSED RESOURCES. THE PLEA OF THE ASSESSEE THA T HE HAD RECEIVED RS.1,000 FROM SMT. MIHAN DEVI WHICH WAS UTILIZED FO R HOUSEHOLD EXPENSES, WAS PROVED TO BE FALSE. THE FAMILY OF THE ASSESSEE IN THAT CASE CONSISTED OF HIMSELF, HIS WIFE, FOUR SONS AND ONE DAUGHTER. TWO SONS AND ONE DAUGHTER WERE OF SCHOOL GOING AGES. NONE OF THE FAMILY MEMBE RS BORE ANY OF THE HOUSEHOLD EXPENSES THOUGH HE OR SHE WAS EARNING SEP ARATELY. ON A REFERENCE, A DIVISION BENCH OF PUNJAB & HARYANA HIG H COURT HELD THAT THE TOTALITY OF THE CIRCUMSTANCES UNMISTAKABLY LED TO T HE IRRESISTIBLE CONCLUSION THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PAR TICULARS OF HIS INCOME AND HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS I N ORDER TO CONCEAL HIS INCOME. THE DOMESTIC EXPENSES ESTIMATED BY THE ITO WAS RATHER RIDICULOUSLY ON THE LOW SIDE THE TRIBUNAL WAS RIGHT IN HOLDING T HAT THE ASSESSEE WAS LIABLE TO PENALTY. IN RENDERING THAT DECISION, THE COURT HAD REFERRED TO THE DECISION IN ANWAR ALIS CASE (SUPRA) AND TO ANOTHER DECISION OF THE SUPREME COURT IN D.M. MANASVI VS. CIT 1972 CTR (SC) 437 : (1972) 86 ITR 557 (SC) : TC 49R.1199. 14. THE RATIO DECIDENDI OF THE CASE IN VIDYA SAGAR OSWAL (SUPRA) IS FULLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN FA CT, THE TRIBUNAL HAD ALSO RELIED UPON THAT DECISION IN REACHING ITS CONCLUSIO NS. 15. SO FAR AS THE DECISIONS RELIED UPON BY THE A SSESSEE ARE CONCERNED, THEY ARE CLEARLY DISTINGUISHABLE AND HAVE NO BEARING ON THE FACTS OF THE INSTANT CASE. 16. THE TRIBUNAL IN THE PRESENT CASE, HAS RECORD ED A CLEAR AND CATEGORICAL FINDING OF CONCEALMENT AFTER CONSIDERING THE TOTALI TY OF THE CIRCUMSTANCES AND MATERIALS. IT IS NOT A CASE WHERE PENALTY HAD BEEN IMPOSED ON MERE REJECTION OF THE EXPLANATION. THE REVENUE HAS AMPL Y DISCHARGED ITS BURDEN IN PROVING THAT IT WAS PURE AND SIMPLE CASE OF CONC EALMENT OF ITS INCOME. 21. IN VIEW THEREOF, GROUND NO. 6 RAISED BY TH E ASSESSEE IS DISMISSED. 22. THE ASSESSEE HAS CONTENDED THAT ONE OF THE ISSU ES ARISING OUT OF THE QUANTUM APPEAL WITH RESPECT TO INTEREST ACCRUED ON IVPS IS PENDING BEFORE THE HONBLE SUPREME COURT AND THEREFORE, NO PENALTY CAN BE LEVIED UNDER THAT HEAD. THE HONBLE SUPREME COURT VIDE ORDER DATED 20 TH NOVEMBER, 2009 HAS ONLY I.T.A. NOS./936-941COCH/2008 22 ISSUED NOTICE IN THE CASE OF THE ASSESSEE. IN FACT , NO LEAVE HAS BEEN GRANTED AGAINST THE JUDGMENT OF THE HONBLE HIGH COURT TILL DATE BY THE HONBLE SUPREME COURT. THEREFORE TO STATE THAT THE HONBLE SUPREME COURT HAS ADMITTED THE SLP IS INCORRECT WITHOUT LEAVE BEING GRANTED BY THE HON BLE COURT. WITH RESPECT TO INTEREST ON IVPS, THE ARGUMENT OF THE ASSESSEE IS B ASED ON THE POSITION OF LAW THAT IVPS HAVE TO BE TREATED AS CAPITAL ASSET AND I NTEREST IN NO CIRCUMSTANCE CAN BE TAXED. THE SAID ARGUMENT HAS BEEN SUITABLY DEAL T WITH BY THE ITAT IN ITS ORDER DATED 24TH JANUARY, 2007 IN THE QUANTUM APPEA L OF THE ASSESSEE. THE ITAT HAS HELD IN PARA 39.4 THAT THE ISSUE IS COVERE D AGAINST THE ASSESSEE BY THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF KANTILAL T. SANGHVI REPORTED IN 89 ITD 282 WHEREIN IT WAS HELD THAT IVP IS NEITHER A CAPITAL ASSET NOR THERE CAN BE ANY TRANSFER ON MATURITY OF THE IVP. T HE SUBMISSION OF THE ASSESSEE THAT THE AFORESAID ISSUE IS A DEBATABLE ISSUE AND T HEREFORE, PENALTY CANNOT BE LEVIED, IS REJECTED. ACCORDINGLY, GROUND NO. 9 RAI SED BY THE ASSESSEE IS DISMISSED. 23. GROUND NO. 1AND 3 ARE GENERAL IN NATURE AND REQUIRE NO ADJUDICATION. 24. GROUND NOS. 7AND 10 DO NOT REQUIRE ANY ADJUDI CATION. THE ASSESSEE HAS NOT ADVANCED ANY SUBMISSION WITH RESPECT TO GROUND NO. 2, THE SAME IS TAKEN AS NOT PRESSED. ALL THE GROUNDS RAISED BY THE ASSESSEE A RE DISMISSED. I.T.A. NOS./936-941COCH/2008 23 25. IN THE RESULT, THE APPEALS FILED BY THE ASSE SSEE IN I.T.A. NOS. 936- 941/COCH2008 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21-09-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 21ST SEPTEMBER, 2015 GJ COPY TO: 1. DR. R.P. PATEL, HAHNEMAN HOUSE, COLLEGE ROAD, K OTTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, KOCH I 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T., C OCHIN I.T.A. NOS./936-941COCH/2008 24