MADHO DAS BANGARD, Jaipur V. DCIT, Jaipur

ITSSA 1/JPR/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2213 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALIKA SINGHCIT DHK
• Assessee Lawyers: NARESH GU PTA
• Keywords: Search and seizure; Loose papers; Document seized; Principle of natural justice; Opportunity of cross examination; Peak credit; Source of fund; Fair market value; Bad and doubtful debts; Corroborative evidences; Third party statement; Onus to prove; Documents seized
• Section: 132; 28; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUM AR, JM VK;DJ VIHY LA-@ ITSSA NO. 01/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 1997-98 TO 2003-04 MADHO D AS BANGARD, 483, HANUMAN JI KA RASTA, TRIPOLIA BAZAR, JAIPUR CUKE VS. ACIT, CENTRAL CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPB 7702 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI NARESH GUPTA (ADV.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KALIKA SINGH(CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/06/2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 14/07/2016 VKNS'K@ ORDER PER: LALIET KUMAR, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) (CENTRAL), JAIPUR DATED 28.01.2013 FOR THE A .Y. 1997-98 TO 2003- 04, WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GR OUNDS OF APPEAL: (1) THAT THE LD. ASSESSING AUTHORITY (ACIT, CC-I, JAIPUR AND THE LD. CIT(A), CENTRAL JAIPUR HAS GROSSLY ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN IMPOSING THE PENALTY AS WELL AS CONFIRMING THE PE NALTY IMPOSED ON THE APPELLANT TO THE EXTENT OF RS. 10,00,000/- FOR THE BLOCK PERIOD (A.YS. 1997-98 TO 2003- 04) UNDER REFERENCE WITHOUT ADEQUATELY APPRECIATING THE LAW, FACTS AND CIRCUMSTANCES MADE BEFORE THEM AND WITHOUT CONSIDERING THAT THE APPELLANT HAD AT NO ST AGE 2 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 2 ADMITTED THE ADDITION TO INCOME MADE BY THE LD. AO, ADDITION CONFIRMED BY THE LD.CIT(A) AND BY THE HON BLE ITAT. (2) THAT THE ADDITION TO INCOME RS.10,63,184/- WAS CONFIRMED FINALLY BY THE LD. ITAT AFTER PROVIDING T HE RELIEF RS. 8,50,000/-. AS PER LAW THE TAX AMOUNT @ 60% ON THIS ADDITION IS CALCULATED TO RS. 6,37,911/-. THE PENALTY CAN BE EITHER NIL OR 100% OF THE TAX AMOUNT. THE LD . AO IMPOSED PENALTY @ 156.76% WHICH IS MUCH EVEN MORE THAN THE 100%. THE APPELLANT IS IN APPEAL BEFORE TH E HONBLE ITAT FOR SEEKING TOTAL RELIEF FROM THE PENA LTY IMPOSED. 2. IN THE PRESENT APPEAL, THE APPELLANT-ASSESSEE HA S CHALLENGED THE PENALTY OF RS. 10,00,000/- IMPOSED AND SUSTAINED AG AINST HIM U/S. 158BFA (2) OF THE INCOME TAX ACT, 1961 (IN SHORT, ACT OF 1961) ON THE ADDITIONS MADE AND REDUCED BY THE APPELLATE AUTHORI TIES BASED ON PREPONDERANCE OF PROBABILITIES OR ASSUMED INFERENCE S DRAWN FROM THE LOOSE PAPERS OR MATERIAL COLLECTED BY THE REVENUE A DMITTEDLY FROM THE POSSESSION OF THE THIRD PERSON THAT TOO WITHOUT HAV ING PROVED ANY NEXUS THEREOF WITH THE APPELLANT. 2(I) THAT THE ASSESSEE, BEING AN INDIVIDUAL, IS A F INANCE BROKER, EARNING COMMISSION FROM FINANCE PROVIDING ADVANCES/LOANS. T HE ASSESSEE HAS BEEN DERIVING HIS INCOME FROM BROKERAGE, SPECULATIO N AND INTEREST ETC. 3. THAT DURING THE SEARCH & SEIZURE OPERATION CONDU CTED ON 10 TH FEBRUARY, 2003 ON THE PREMISES OF THIRD PARTY, NAME LY, M/S ASHISH INTERNATIONAL GROUP (IN SHORT, AI GROUP), THE REV ENUE AUTHORITIES ALLEGED 3 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 3 TO HAVE FOUND SOME LOOSE PAPERS, CEFARI NOTE BOOK A ND COMPUTER PRINTOUTS ETC. FROM THE POSSESSION OF SUCH THIRD PE RSON AI GROUP CONTAINING CERTAIN ENTRIES OF TAKING LOANS FROM ONE MR. B.H. (AS PER REVENUE BHAGWAT SHARAN BHANDARI). DURING SUCH SEARC H OPERATION ON III PARTY AND ALSO ON 13-01-2005 BEFORE THE ASSISTANT C OMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JAIPUR, THE STATEMEN T OF SHRI VINAY GUPTA, ALLEGED TO BE THE KEY PERSON, WAS RECORDED WHEREIN HE HAS NOT NAMED THE APPELLANT AND CATEGORICALLY STATED THAT HE DID NOT KNOW EVEN THE APPELLANT-ASSESSEE OR ANY PERSON OF APPELLANTS NAM E. HE FURTHER STATED THAT ALL THE ENTRIES IN THE LOOSE PAPERS, DIARIES A ND OTHER COMPUTER DATA IN NAME OF BH IN FACT DO NOT BELONG TO SHRI BHAGWAT SH ARAN BHANDARI. HE FURTHER STATED THAT HE DID NOT TAKE RS. 18 LACS FRO M SHRI B. S. BHANDARI AND NO PROMISSORY NOTE WAS GIVEN TO HIM. 4. A SEARCH AND SEIZURE PROCEEDING UNDER SECTION 13 2 OF THE ACT OF 1961 WAS ALSO CARRIED OUT AT THE PREMISE OF THE ASS ESSEE ON 10-02-03 BUT NOTHING INCRIMINATING, RELEVANT TO THE PRESENT APPE AL, WAS FOUND AND SEIZED FROM THE POSSESSION OF THE APPELLANT-ASSESSE E. 5. APPELLANT-ASSESSEE FILED HIS RETURN OF INCOME FO R THE BLOCK PERIOD FROM 1-04-1996 TO 31-03-2002 TILL 10 TH FEBRUARY 2003 UNDER SECTION 158BC OF THE ACT OF 1961 DECLARING HIS INCOME AT RS .4,52,220/-. 4 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 4 6. DURING THE ASSESSMENT PROCEEDINGS FOR THE BLOCK PERIOD U/S. 158BC OF THE ACT OF 1961 (APB-75), THE AO ON THE EXTRANEO US AND IRRELEVANT CONSIDERATIONS AND CONTRARY TO THE STATEMENT OF SHR I VINAY GUPTA, ASSUMED AND PRESUMED THAT THE ENTRIES OF RECEIPT OF ADVANCES FOUND IN THE NAME OF BH IN LOOSE PAPERS SO SEIZED FROM THE P OSSESSION OF III PERSON-AI GROUP, BELONGED TO APPELLANT-ASSESSEE ON THE GROUND THAT SHRI BHAGWAT SHARAN BHANDARI (MR. BHANDARI) WAS THE EMPL OYEE AND RELATIVE OF THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE NOTI CE ISSUED BY THE AO, THE ASSESSEE, VIDE ITS REPLY DATED 16-02-2005 DENIE D SUCH ENTRIES AND FINANCIAL TRANSACTIONS WITH AI GROUP OR ANY RELATIO N THEREOF WITH HIM OR HIS BROTHER-IN-LAW OR EMPLOYEE SHRI B. S. BHANDARI. EVEN VIDE LETTER DATED 22-02-2005 FILED BY SH B.S. BHANDARI BEFORE THE AO, SH. B.S. BHANDARI ALSO DENIED THE TRANSACTI ONS CONTAINED IN SUCH LOOSE PAPERS AND EMPHATICALLY STATED THAT THESE TRA NSACTIONS IN ANY MANNER DO NOT BELONG EITHER TO THE ASSESSEE OR TO H IM. WITH REGARD TO ONE LOOSE PAPER, HE SIMPLY STATED THAT THE CONTENTS OF SUCH LOOSE PAPER WERE COPIED BY HIM ON THE REQUEST OF SOME PERSON AT THE BUSINESS PREMISE OF M/S AI GROUP; BUT DENIED ANY RELATION TH EREOF WITH HIM. 7. HOWEVER, THE AO VIDE ITS ASSESSMENT ORDER DATED 28-02-2005 PASSED U/S. 158BC OF THE ACT OF 1961 CONTRARY TO TH E STATEMENT OF SH. VINAY GUPTA RECORDED ON OATH AND ALSO THE REPLY STA TEMENTS OF THE 5 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 5 APPELLANT-ASSESSEE AND SH. B.S. BHANDARI AS SUBMITT ED HEREINBEFORE AND WITHOUT PROVING NEXUS WITH THE APPELLANT OF SUCH LO OSE PAPERS, SO SEIZED FROM III PERSON, AND ENTRIES CONTAINED THEREIN, ALL EGED THE SAME BELONGED TO THE APPELLANT-ASSESSEE. THE AO ASSUMED THAT THE ENTRIES IN SUCH LOOSE PAPERS ARE IN THE NAME OF BH, SO ALL ENTRIES PERTAI N TO SH. B.S. BHANDARI; HOWEVER, TREATED SUCH SH. B.S. BHANDARI TO BE A BEN AMI PERSON OF THE APPELLANT-ASSESSEE ON THE PRETEXT THAT HE IS AN EMP LOYEE AND RELATIVE OF THE APPELLANT-ASSESSEE. ON EXTRANEOUS AND IRRELEVAN T CONSIDERATIONS AND MERELY BASED ON PREPONDERANCE OF PROBABILITIES, ASS UMED AND PRESUMED THAT THE ADVANCES OF RS. 53,82,768/- TO AI GROUP WA S MADE BY THE APPELLANT-ASSESSEE; AND ACCORDINGLY, MADE AN ADDITI ON OF RS. 53,82,768/- IN THE HANDS OF APPELLANT-ASSESSEE ON SUBSTANTIVE B ASIS AND IN THE HANDS OF SH. BHANDARI ON PROTECTIVE BASIS. THE ADDITIONS SO MADE BY THE AO CONSISTS OF THE FOL LOWING (APB - 107) - PARTICULARS AMOUNT (INNER COL) RS ON ACCOUNT OF ASHISH INTERNATIONAL GROUP TOTAL RS.53,82,768/- AS PER FOLLOWING BREAK UP (GROUNDS OF APPEAL NOS.1 TO 7 (A) ON ACCOUNT OF ALLEGED UNDISCLOSED INTEREST ON ALLEGED LOAN RS.18,00,000/- TO SHRI VINAY GUPTA 11,34,000/- (B) ON ACCOUNT OF ALLEGED UNDISCLOSED LOAN TO ASHISH INTERNATIONAL GROUP 18,65,000/- 6 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 6 (C) ON ACCOUNT OF ALLEGED UNDISCLOSED CREDITS APPEARING IN BHANDARI JI ACCOUNT 17,12,100/- (D) ON ACCOUNT OF ALLEGED UNDISCLOSED TRANSFER CHARGES 1,13,898/- (E) ON ACCOUNT OF ALLEGED UNDISCLOSED INTEREST 5,14,982/- (F) CASH DIFFERENCE IN M.D. BANGARD ACCOUNT 42,188/- TOTAL 53,82,768/- 8. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEA LS) VIDE ITS ORDER DATED 23-11-2007 HAVING OBSERVED THE ASSESSME NT ORDER DATED 13- 02-2004 PASSED IN CASE OF SHRI B. S. BHANDARI WHERE IN THE REVENUE HAD ACCEPTED THAT SHRI B. S. BHANDARI HAD NOT GIVEN ANY MONEY TO SHRI VINAY GUPTA AND THAT THERE WAS NO TRANSACTION OF RS. 18 L ACS ON THE STRENGTH OF THE ALLEGED PROMISSORY NOTE AND ALSO THE MATERIAL O N RECORD, DELETED ALL THE ADDITIONS SO MADE BY THE AO. THE CIT (A), DURIN G THE APPELLATE PROCEEDINGS, DIRECTED THE APPELLANT-ASSESSEE TO WOR K OUT THE PEAK ON THE BASIS OF THE REMAINING LOOSE PAPERS FOUND FROM THE POSSESSION OF AI GROUP. AND IT WAS ONLY ON THE DIRECTIONS OF THE CIT (A), THE ASSESSEE WORKED OUT THE PEAK TO BE RS.10,63,084/-. THE APPEL LANT-ASSESSEE DID NOT ADMIT OR SURRENDER ANYTHING. HOWEVER, THE CIT (A), ON THE DIFFERENT METHODOLOGY, SUSTAINED THE ADDITIONS OF RS.10,63,18 4/- AND RS.8,50000 /- PERTAINING TO THE ENTRIES FOUND IN NAME OF MUKESH P C TOTALING TO RS.19,13,184/-, MERELY ON THE BASIS OF PREPONDERANC E OF PROBABILITIES. 7 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 7 9. AGGRIEVED WITH THE ORDER OF THE CIT (A), BOTH TH E APPELLANT AND REVENUE PREFERRED AN APPEAL BEFORE THE INCOME TAX A PPELLATE TRIBUNAL, JAIPUR BENCH JAIPUR (IN SHORT, ITAT OR TRIBUNAL ). THIS HONBLE TRIBUNAL HAVING PERUSED THE MATERIAL ON RECORD AND ALSO THE STATEMENTS OF SHRI VINAY GUPTA SO QUOTED BY THE CIT (A) AND ALSO THE S TATEMENTS OF THE APPELLANT-ASSESSEE SO OBSERVED BY THE AO, HELD THAT THE ADDITION OF RS. 8,50000/- MADE BY THE LD. CIT (A) WAS NOT JUSTIFIED . ACCORDINGLY, THIS HONBLE TRIBUNAL, VIDE ITS ORDER DATED 13.04.2011, DELETED THE ADDITION OF RS. 8,50000/-. ON THE BASIS OF MERE PREPONDERANCE O F PROBABILITIES, THIS HONBLE TRIBUNAL SUSTAINED THE ADDITION OF RS.10,63 ,184/-. 10. THE REVENUE FURTHER FILED D.B. INCOME TAX APPEA L NO. 361/2011 BEFORE THE HONBLE RAJASTHAN HIGH COURT, AT JAIPUR BENCH, JAIPUR; HOWEVER, THE SAME HAS BEEN DISMISSED VIDE ORDER DAT ED 11-08-2014. THE COPY OF THE ORDER OF THE HONBLE HIGH COURT WILL BE PRODUCED IMMEDIATELY ON DEMAND. 11. THE ASSESSING OFFICER INITIATED THE PENALTY PRO CEEDINGS UNDER SECTION 185 BFA(2) OF THE ACT OF 1961 AND IMPOSED T HE PENALTY VIDE ITS ORDER DATED 25.10.2011 ASSUMING THAT THE APPELLANT -ASSESSEE HAS ADMITTED ADDITION OF RS.10,13,184/- WORKED OUT BY H IMSELF AS PEAK CREDIT BEFORE THE CIT(A) THE FINDING OF THE A.O. IN ASSUMI NG ADMISSION OF THE APPELLANT IS CONTRARY TO RECORD AS APPARENTLY, THE APPELLANT NEVER ADMITTED 8 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 8 SUCH ADDITION, RATHER, THE PEAK CREDIT WAS WORKED O UT ONLY ON THE DIRECTIONS OF THE CIT(A) AS PER RECORD MADE AVAILAB LE TO HIM. THE RELEVANT FINDINGS OF THE A.O. IN PARA 5 AT PAGE 64 ARE REPRO DUCED HEREIN BELOW:- 05 . ESUS FU/KKZFJRH DS VF/KDZR IZFRFUF/K DS FYF[KR DFK U RFKK RDKSZA IJ IWJK FOPKJ FD;K GS LKFK GH MU LHKH U;KF;D FU.KZ;KSA DK LKO/KKUHIWOZD VOYKSDU FD;K GS FU/KKFJZRH LOA; DS LKFK CFG;KSA DS CKGJ YSU&NSU FU/KKFJZRH LOA; DS LKFK CFG;KSA DS CKGJ YSU&NSU FU/KKFJZRH LOA; DS LKFK CFG;KSA DS CKGJ YSU&NSU FU/KKFJZRH LOA; DS LKFK CFG;KSA DS CKGJ YSU&NSU LOHDKJ DJRSA GQ, IHD DZSFMV DSA VK/KKJ IJ # 10]13 ]184 DH IHD TEK LOHDKJ DJRSA GQ, IHD DZSFMV DSA VK/KKJ IJ # 10]13 ]184 DH IHD TEK LOHDKJ DJRSA GQ, IHD DZSFMV DSA VK/KKJ IJ # 10]13 ]184 DH IHD TEK LOHDKJ DJRSA GQ, IHD DZSFMV DSA VK/KKJ IJ # 10]13 ]184 DH IHD TEK DKS LGH EKUK GSA BLYH, FU/KKZFJRH DS EKEYS ESA DH X BZ OZF} LILV #I LS DKS LGH EKUK GSA BLYH, FU/KKZFJRH DS EKEYS ESA DH X BZ OZF} LILV #I LS DKS LGH EKUK GSA BLYH, FU/KKZFJRH DS EKEYS ESA DH X BZ OZF} LILV #I LS DKS LGH EKUK GSA BLYH, FU/KKZFJRH DS EKEYS ESA DH X BZ OZF} LILV #I LS VK; DK NQIK;K TK VK; DK NQIK;K TK VK; DK NQIK;K TK VK; DK NQIK;K TKUK GSA UK GSA UK GSA UK GSA 12. ON APPEAL, THE CIT(A) SUSTAINED THE PENALTY SO IMPOSED BY THE A.O. HAVING RECORDED THE CONTRADICTORY FINDINGS. ON ONE HAND, THE CIT(A) ADMITTED THAT IT IS CORRECT THAT NO SPECIFIC INCRIM INATING DOCUMENTS WERE FOUND OR SEIZED FROM THE POSSESSION OF THE APPELLAN T AND FURTHER THAT THE ADDITIONS SO SUSTAINED WAS ON THE BASIS OF PEAK WOR KED OUT BY THE APPELLANT ON THE DIRECTIONS OF THE FIRST APPELLATE AUTHORITY; HOWEVER, THE CIT(A), ASSUMED THE UNDISCLOSED INCOME OF THE APPEL LANT WITHOUT PROVING NEXUS OF THE LOOSE PAPERS OR DIARIES SO SEIZED FROM III PERSON AI GROUP. THOUGH, THE CIT(A) ADMITTED THAT THE PROVISIONS OF SECTION 158 BFA(2) OF THE ACT OF 1961 ARE ANALOGOUS TO THE PROVISIONS C ONTAINED IN SECTION 271(1) (C) OF THE ACT OF 1961; HOWEVER, THE CIT(A) DID NOT RECORD THE FINDINGS PROVING CONTUMACIOUS CONDUCT, CONCEALMENT, FURNISHING OF 9 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 9 INACCURATE PARTICULARS OF INCOME AND THE EVASION OF TAX POSITIVELY ON THE PART OF APPELLANT. 13. AGGRIEVED WITH THE ORDER OF THE CIT (A), IN THE PRESENT APPEAL BEFORE THIS HONBLE TRIBUNAL, THE APPELLANT HAS IMP UGNED THE PENALTY SO IMPOSED AND SUSTAINED. 2.1 THE LD. CIT(A) GIVEN HIS FINDING STATING THAT : I HAVE CAREFULLY CONSIDERED ALL THE CONTENTIONS RAI SED BY THE APPELLANT AS ALSO THE FINDING OF THE AO, THE FIRST APPELLANT AUTHORITY AND HONBLE ITAT. FIRST OF ALL REGARDING TECHNICAL OBJECTION OF THE APPELLANT THAT WHILE COMPLETING TH E ASSESSMENT THE AO HAS NOT MENTIONED ANYTHING IN RES PECT OF CONCEALMENT OF INCOME OR FURNISHING THE INACCURA TE PARTICULARS OF INCOME, IT MAY BE STATED THAT THE AO HAS CLEARLY MENTIONED THAT THE PENALTY PROCEEDINGS U/S 158BFA(2) ARE INITIATED AGAINST THE UNDISCLOSED IN COME DETERMINED IN ASSESSMENT ORDER. AS PENALTY WAS VE RY WELL INITIATED U/S 158BFA(2) WHILE COMPLETING THE ASSESS MENT THEREFORE INHERENTLY THE SATISFACTION OF THE AO WAS CONTAINED AND THE INTENTION OF THE AO WAS CLEARLY MANIFESTED THAT THE APPELLANT HAS NOT DISCLOSED ITS INCOME PROPERLY. WHEN HE APPELLANT HAS NOT DISCLOSED ITS INCOME CORRECTLY THEN IT CAN BE VERY WELL PRESUMED THAT IT IS EITHER BY WAY OF CONCEALMENT OF INCOME OR BY WAY OF FURNIS HING OF INACCURATE PARTICULARS OF INCOME. THE IMPORTANT THING WAS THE FINDING OF THE AO FOR INITIATION OF PROCEED INGS U/S 158 BFA(2) THEN IT CANNOT BE SAID THAT THE INITIATI ON OF 10 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 10 PENALTY ARE VITIATED ON ACCOUNT OF NON MENTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THEREFORE SUCH OBJECTION CAN NOT BE SUSTAINED. AS REGARDS ANOTHER OBJECTION OF THE A O THAT AT ANY STAGE THE APPELLANT HAS NOT ACCEPTED THE FI NDING OF THE AO OR APPELLATE AUTHORITIES AND THAT SUCH FINDI NG IS NOT SUPPORTED BY ANY INCRIMINATING DOCUMENTS, IT MAY BE NOTED THAT THE FINDINGS OF THE AO THAT INCOME ARISING ON THE BASIS OF TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNTS O F M/S ASHISH INTERNATIONAL IN THE NAME OF BHANDARI AND MR. BHANDARI WAS BENAMI OF HIS APPELLANT IS CONFIRMED BY THE FIRST APPELLATE AUTHORITY AND SUCH FINDING OF THE F IRST APPELLATE AUTHORITY IS FURTHER SUSTAINED BY THE HON BLE ITAT THOUGH IT IS CORRECT THAT NO SPECIFIC INCRIMINATING DOCUMENTS WERE FOUND OR SEIZED FROM THE POSSESSION OF THE APPELLANT BUT ON THE BASIS OF CORROBORATIVE EVI DENCES THE FIRST APPELLATE AUTHORITY VERY SPECIFICALLY GAV E THE FINDING THAT INCOME ARISING ON THE BASIS OF THAT TR ANSACTION WITH ASHISH INTERNATIONAL AND BHANDARI WAS ESSENTIA LLY PERTAINING TO THE APPELLANT. THEREFORE EVEN THIS CO NTENTION OF THE APPELLANT CANNOT BE ACCEPTED. ANOTHER MAIN OBJECTION OF THE APPELLANT IS THAT ALL SUCH ADDITI ONS HAS BEEN MADE ON THE BASIS OF ESTIMATION IN AS MUCH A S ADDITIONS MADE BY THE AO AMOUNTING TO RS. 53,82,768 /- WERE SUBSTANTIALLY REDUCED BY THE FIRST APPELLATE AUTHORITY TO RS. 19,83,184/- AND FURTHER BY HONBLE ITAT TO R S. 10,63,194/-, IT MAY BE STATED THAT THE FIRST APPELL ATE AUTHORITY HAS CONFIRMED ONE ADDITION OF RS. 10,63,1 84/-ON THE BASIS OF PEAK INCOME/ INVESTMENT WHICH WAS 11 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 11 DETERMINED BY THE APPELLANT ITSELF. THOUGH IT IS CO RRECT THAT SUCH PEAK CALCULATION WAS DETERMINED BY THE ASSESSE E AT THE DIRECTION OF CIT(A) BUT THE FACT REMAINS THAT O N THE BASIS OF TRANSACTION ON RECORD IN THE BOOKS OF ACCO UNTS OF ASHISH INTERNATIONAL INCOME TO SUCH EXTENT WAS DEFI NITELY THERE. EVEN THE FACT THAT THE AO HAS NOT DETERMINE D SUCH PEAK OR COOPERATED IN THE APPELLATE PROCEEDINGS MAY NOT ALTER SUCH FINDING INASMUCH AS DETERMINATION OF SUC H PEAK INCOME AT RS. 10,63,184/- WAS DONE BY THE APPELLAN T AND THERE CANNOT BE ANY DISPUTE ON SUCH QUANTUM AMOUNT. THE ANOTHER ADDITION OF RS. 8,50,000/- MADE BY THE FIR ST APPELLATE AUTHORITY WAS NOT SUPPORTED BY THE HONBL E ITAT AND THEREFORE FOR IMPOSITION OF PENALTY ONLY SUCH Q UANTUM OF RS. 10,63,184/- HAS ONLY BEEN CONSIDERED. THE IMPORTANT POINT TO BE NOTED IS THAT EVEN IF SUCH UN DISCLOSED INCOME HAS BEEN DETERMINED BY THE APPELLANT T THE DIRECTION OF FIRST APPELLATE AUTHORITY ON THE BASIS OF PEAK IT CANNOT SAID THAT NO SUCH UNDISCLOSED INCOME WAS DE TECTED IN THE HANDS OF THE APPELLANT. THE ANOTHER MAIN CONTENTION OF THE APPELLANT IS THAT SUCH ADDITION O F RS.10,63,184/- WAS CONFIRMED BY THE FIRST APPELLATE AUTHORITY BECAUSE THE APPELLANT WANTED TO PURCHASE PEACE AND AVOID PROTRACTED LITIGATION DID NOT CONSIDER IT PROPER TO DEFEND THE SAME BEFORE THE HONBLE ITAT. IN THIS CONNECTION IT MAY BE NOTED THAT THE FACTS AND CIRCUMSTANCES IN RESPECT OF TRANSACTIONS FOUND REC ORDED IN THE BOOKS OF ACCOUNTS OF M/S ASHISH INTERNATIONAL A ND MR. BHANDARI ESSENTIALLY AND STRONGLY INDICATED THAT IN COME WAS ARISING/ EARNED BY THE APPELLANT BY WAY OF MAKING S UCH 12 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 12 TRANSACTIONS IN THE NAME OF MR. BHANDARI WHO HAPPE NED TO BE CLOSE ASSOCIATE/EMPLOYEE OF THE APPELLANT. SUCH STRONG CORROBORATIVE EVIDENCE MUST HAVE CONVINCED THE APPE LLANT NOT TO DEFEND SUCH ISSUE BEFORE THE HONBLE ITAT. I T IS NOT THE CASE THAT THE APPELLANT DID NOT DEFEND SUCH ISS UE JUST TO PURCHASE OR TO AVOID ANY FURTHER LITIGATION. SU CH OBSERVATION ALSO FIND STRONG SUPPORT FROM THE FACT THAT AS THE TRANSACTION WERE VERY MUCH THERE IN THE BOOK OF ACCOUNTS OF ASHISH INTERNATIONAL IN THE NAME OF MR. BHANDARI AND BHANDARI HAPPENED TO BE CLOSE ASSOCIAT E EMPLOYEE OF THE APPELLANT AND IN THE CASE OF MR. BH ANDARI ALSO THE DEPARTMENT HAS TAXED SUCH INCOME ON PROTEC TIVE BASIS AND IN ANY CASE ANY ONE OF THE TWO HAS TO BEA R THE TAX LIABILITY. AS REGARDS THE CONTENTION OF THE APPELLANT HAT THER E WAS NO MENS-REA ON THE PART OF THE ASSESSEE TO EVAD E THE TAX, IT MAY BE STATED THAT THE HONBLE SUPREME COUR T IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCE SSORS & ORS (2008)306 ITR 270 HAS HELD THAT THE EXPLANATION APPENDED TO SECTION 271(1)(C) OF THE IT ACT INDICAT E THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CON CEALMENT FOR GIVING INACCURATE PARTICULARS OF INCOME. THE H ONBLE COURT HAS HELD THAT PENALTY U/S 271(1)(C) OF THE IT ACT IS A CIVIL LIABILITY AND WILFUL CONCEALMENT IS NOT AN ES SENTIAL IN GRADIENT FOR IMPOSITION OF PENALTY US/ 271(1)(C), S UCH FINDING HAS FURTHER BEEN REITERATED BY HONBLE APEX COURT IN THE CASE OF CIT VS. ATUL MOHAN JINDAL (2009) 317 ITR 1 WHEREIN THE HONBLE COURT HELD THAT THE PENALTY PRE FERRED 13 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 13 TO IN SEC. 271(1)(C) OF IT ACT IS NEITHER CRIMINAL NOR QUASI CRIMINAL BUT A CIVIL LIABILITY ALBEIT A STRICT LIAB ILITY AND THEREFORE MENS-REA IS NOT ESSENTIAL. THOUGH THE HO NBLE APEX COURT IN THE CASE OF UNION OF INDIA VS. RAJAS THAN SPINNING WEAVING MILLS, 224 CTR 1 EXPLAINED THAT TH OUGH MENS-REA IS NOT ESSENTIAL EVEN THEN LEVY OF PENALTY IS NOT AUTOMATIC AND REQUIREMENT OF SECTION 271(1)(C) SHOU LD BE SATISFIED I.E. EITHER THERE SHOULD BE CONCEALMENT O F INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ADMITTEDLY THE PROVISIONS OF SECTION 158BFA(2) ARE ANALOGOUS TO PROVISIONS OF SECTION 271(1)(C) AND WI TH THE CONFIRMATION OF ADDITION AMOUNTING TO RS. 10,63,184 /- BY THE FIRST APPELLATE AUTHORITY AS WELL AS SECOND APP ELLATE AUTHORITY THE CONCEALMENT OF INCOME/UNDISCLOSED INC OME TO SUCH EXTENT IS PROVED. IT MAY ALSO BE NOTED THAT TH OUGH THE APPELLANT HAS RELIED ON VARIOUS CASE LAWS BUT S UCH CASE LAWS ARE IN THE BACKGROUND OF ISSUES/CONTENTIONS AL READY DISCUSSED ABOVE AND THEREFORE THE FACTS AND CIRCUMS TANCES OF SUCH CASE LAWS AS ALSO THE FINDING THEREIN ARE NOT EXACTLY SIMILAR TO OR COMPARABLE TO FACTS AND CIRCU MSTANCES OF THE APPELLANTS CASE. KEEPING VIEW THE ABOVE FACTS AND CIRCUMSTANCES AND PARTICULARLY THE FACT THAT SUCH FINDING OF UNDISCLO SED INCOME IN THE HANDS OF THE APPELLANT IS CONFIRMED BY THE F IRST APPELLATE AUTHORITY AS WELL AS THE HONBLE ITAT, TH E CASE OF THE APPELLANT WAS DEFINITELY COVERED U/S 158BFA(2) IN RESPECT OF UNDISCLOSED INCOME TO THE EXTENT OF RS. 10,63,184/-. THEREFORE THE AO HAS RIGHTLY IMPOSED SUCH 14 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 14 PENALTY AMOUNTING TO RS. 10 LACS. THE ACTION OF THE AO IS ACCORDINGLY CONFIRMED. 14. THE LD. AR OF THE APPELLANT SUBMITTED THAT AS T HE ENTIRETY OF THE FACTS, EVIDENCES AND CIRCUMSTANCES OF FOUND AND OBS ERVED IN QUANTUM PROCEEDINGS ARE RELEVANT TO THE PENALTY PROCEEDINGS IN VIEW OF THE UNDER MENTIONED AUTHORITATIVE PRONOUNCEMENTS OF THE HONB LE SUPREME COURT, RAJASTHAN HIGH COURTS AND VARIOUS OTHER HIGH COURTS OF THE COUNTRY, HENCE, IN ORDER TO BRING ALL SUCH FACTS, EVIDENCE A ND CIRCUMSTANCES ON RECORD, DURING THE COURSE OF HEARING ON 31-05-2016, THE APPELLANT- ASSESSEE SUBMITTED A PAPER-BOOK TO THIS HONBLE TRI BUNAL, ONE COPY DULY SUPPLIED TO THE D/R, CONTAINING THE ASSESSMENT ORDE R DATED 28-02-2005, ORDER DATED 23-01-2007 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) (IN SHORT, CIT(A)) AND ORDER DATED 13-01-2011 OF THIS HONBLE TRIBUNAL PASSED IN QUANTUM PROCEEDINGS. IT IS SETTLED LAW TH AT BEFORE THE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES OF TH E QUANTUM PROCEEDINGS MUST REASONABLY BE POINT TO THE CONCLUS ION THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS IN COME OR HAD FURNISHED INACCURATE PARTICULARS TO EVADE TAX WILLFULLY OR WH ETHER THE ADDITIONS MADE BY THE ASSESSING OFFICER (IN SHORT, AO) WAS MERE ON PREPONDERANCE OF PROBABILITIES OR ESTIMATION DRAWING INFERENCES ON E XTRANEOUS OR IRRELEVANT CONSIDERATIONS ?; OR WHETHER SUCH ADDITION WAS REDU CED BY THE APPELLATE AUTHORITIES?; AND IF SO, WHAT IS THE IMPACT OF SUCH REDUCED ADDITIONS ON 15 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 15 THE PENALTY PROCEEDINGS?. EVEN FOR THE PURPOSES OF PENALTY U/S. 158BFA (2) OF THE ACT OF 1961, IT HAS ALSO TO FORM OPINION THAT THE ADDITIONS SO MADE ON PREPONDERANCE OF PROBABILITIES DRAWING MERE INFERENCES FROM THE LOOSE PAPERS SEIZED FROM THE III PARTY, AS REDUCED BY THE APPELLATE AUTHORITIES, CAN BE SAID TO BE THE ASSESSMENT OF UN DISCLOSED INCOME WITHIN THE MEANING OF SECTION 158BB OF THE ACT OF 1 961 WHEREIN THE ASSESSMENT HAS BEEN MADE U/S. 158BC AND NOT U/S. 15 8BD OF THE ACT OF 1961. IN THE CASE OF COMMISSIONER OF INCOME-TAX V. ANWAR ALI REPORTED IN [1970] 76 ITR 696 (SC) AT PAGE NO. 701 THE HON'BLE SC HAS HELD '...BEFORE PENALTY CAN BE IMPOSED THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSI ON THAT THE DISPUTED AMOUNT REPRESENTED INCOME AND THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS.... ' IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. KHODAY ESWARSA AND SONS REPORTED IN [1972] 83 ITR 369 (SC) THE FACTS BEFORE THE HONBLE SC WERE THAT THE EXPLANATION OFFERED BY THE ASSESSEE REGARDING PHARMACEUTICALS SECTION RS. 77,518.00 AND CHEMICALS SECTION RS. 9,900.00 WAS NOT ACCEPTED BY THE AO. THE TRIBUNAL SUSTAINED THE ADDITIONS. THE AO IMPOSED THE PENALTY ON THE REASONS RECORDED IN A SSESSMENT ORDER THROUGH WHICH THE AMOUNT WAS ADDED IN THE HANDS OF ASSESSEE. ON APPEAL, THE PENALTY WAS CONFIRMED. ON FURTHER APPE AL BEFORE THE LD. 16 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 16 TRIBUNAL THE MAIN GRIEVANCE OF THE ASSESSEE WAS THA T THERE HAS BEEN NO INDEPENDENT CONSIDERATION BY THE INCOME-TAX OFFICER OR THE APPELLATE ASSISTANT COMMISSIONER WHETHER EVEN ON THE BASIS TH AT THERE HAS BEEN AN OMISSION BY IT TO INCLUDE CERTAIN ITEMS IN ITS RETU RN, SUCH OMISSION CAME WITHIN SECTION 28(1)(C) OF THE ACT, SO AS TO ATTRAC T THE LEVY OF PENALTY. THE ASSESSEE ALSO CONTENDED THAT BOTH THE INCOME-TAX OF FICER AND THE APPELLATE ASSISTANT COMMISSIONER HAVE MAINLY RELIED ON THE REASONS GIVEN IN THE ORDER OF ASSESSMENT FOR ADDING THESE TWO ITE MS IN THE TOTAL INCOME. ACCORDING TO THE ASSESSEE, THERE HAS BEEN NO PROPER EXERCISE OF JURISDICTION UNDER SECTION 28 OF THE ACT. THE LD TR IBUNAL SET-ASIDE THE PENALTY. AT PAGE 376 THE HONBLE COURT OBSERVED FROM THE ABOVE IT IS CLEAR THAT PENALTY PROCEEDINGS BEING PENAL IN CHARACTER, THE DEPARTMENT MUST ESTABLISH T HAT THE RECEIPT OF THE AMOUNT IN DISPUTE CONSTITUTES INCOME OF THE ASSESSEE. APART FROM THE FALSITY OF THE EXPLANATION GIVEN BY THE ASSESSEE, THE DEPARTMENT MUST HAVE BEFORE IT BE FORE LEVYING PENALTY COGENT MATERIAL OR EVIDENCE FROM WH ICH IT COULD BE INFERRED THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELI BERATELY FURNISHED INACCURATE PARTICULARS IN RESPECT OF THE SAME AND THAT THE DISPUTED AMOUNT IS A REVENUE RECEIPT. NO D OUBT THE ORIGINAL ASSESSMENT PROCEEDINGS, FOR COMPUTING THE TAX MAY BE A GOOD ITEM OF EVIDENCE IN THE PENALTY PROCE EDINGS BUT THE PENALTY CANNOT BE LEVIED SOLELY ON THE BASI S OF THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT. APPARENTLY AND PATENTLY, AS PER PARA 10 OF THE ASS ESSMENT ORDER AND APPELLATE ORDER PASSED IN QUANTUM PROCEED INGS, FOLLOWING FACTS ARE ADMITTED ON RECORD :- THERE WAS A SEARCH AND SEIZURE PROCEEDING ON THE PREMISES OF THIRD PERSON, NAMELY, AI GROUP; AND 17 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 17 (A) LOOSE PAPERS, CEFARI DIARIES AND THE COMPUTER PRINTOUT OR DATA WERE SEIZED FROM THE POSSESSION OF SUCH AI GROUP; AND (B) THE ADDITION RELEVANT TO THE PENALTY IMPUGNED IN PRESENT APPEAL WAS MADE AND SUSTAINED DRAWING INFER ENCES FROM THE LOOSE PAPERS, CEFARI DIARIES AND OTHER COM PUTER DATA FOUND AND SEIZED FROM THE POSSESSION OF AI GRO UP; AND (C) AS PER REVENUE ITSELF IN SUCH LOOSE PAPERS, TH ERE WAS NO NAME APPEARING OF THE APPELLANT-ASSESSEE MADHO D AS BANGARD; AND (D) ANY OF THE LOOSE PAPER OR MATERIAL COLLECTED D URING SEARCH FROM THE PREMISES OF THIRD PERSON AI GROUP, WERE NOT IN HAND WRITING OF THE APPELLANT-ASSESSEE; AND (E) SHRI VINAY GUPTA, THE KEY PERSON OF THE AI GRO UP, IN HIS STATEMENT, AS MENTIONED HEREINBEFORE, HAS NOT ALLEG ED THE NAME OF APPELLANT-ASSESSEE MADHO DAS BANGARD; AND (F) RATHER, IN ANSWER TO QUESTION NO.9, HE HAS SPE CIFICALLY DENIED TO HAVE ANY KNOWLEDGE ABOUT ANY PERSON NAMED MADHO DAS BANGARD; AND FURTHER, IN ANSWER TO QUESTI ON NO.10 HAS CATEGORICALLY STATED THAT HE DOES NOT HAV E ANY KNOWLEDGE ABOUT THE RELATION OF APPELLANT AND SHRI BHANDARI; AND (G) EVEN IN ANSWER TO QUESTION NO.11, SHRI VINAY G UPTA CATEGORICALLY DEPOSED THAT ALL THE ENTRIES IN THE N AME OF SHRI BHANDARI, IN FACT, DO NOT BELONG TO SHRI BHAND ARI, RATHER BELONG TO SOME OTHER PERSONS ALSO; AND (H) DURING THE SEARCH OPERATION CONDUCTED IN THE P REMISES OF THE APPELLANT-ASSESSEE, NO MATERIAL WAS FOUND AN D SEIZED OR COLLECTED SUPPORTING THE ADDITION SUSTAIN ED ON PREPONDERANCE OF PROBABILITIES RELEVANT TO THE PENA LTY IMPUGNED IN THE PRESENT APPEAL; AND (I) THE LOOSE PAPERS OR OTHER MATERIALS PERTAINING TO THE ADDITIONS RELEVANT TO THE PENALTY IMPUGNED HEREIN, WERE SEIZED FROM THE POSSESSION OF AI GROUP AND NOT FROM APPELLANT-ASSESSEE; AND FURTHER, EVEN NOT FROM THE POSSESSION OF SHRI BHANDARI; AND 18 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 18 THE RELEVANT PART OF THE STATEMENT OF SHRI VINAY G UPTA, THE KEY PERSON OF AI GROUP, AS REPRODUCED IN THE ORDER OF THE CIT(A) IS ALSO BEING REPRODUCED HEREIN- BELOW FOR T HE READY REFERENCE. LKIFK C;KU JH FOU; XQIRK IQ= JH CH ,L XQIRK LE{K L GK;D VK;DJ VK;QDR DSUNHZ; OZR&2] T;IQJ FNUKAD 13&01&2005 JH EK/KKSNKL CKAXM DS EKEYS ESAA ESAAKIFK YSRK GWA TKS DQN DGWAXK LR; DGWAXK] LR; DS FLOK DQN UGHA DGWAXK VKSJ DKSBZ HKH RF; TKS ESJH TKUDKJH ESA GS] UGHA FNIKMAXKA G . @& G . @& GLRK{KJ KIFK FNYKUS OKYK GLRK{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|FI MUDK LECU/K GEKJS O;KIKFJD VKZATSDKU LS GS IJARQ TSLK FD ESUS LPZ DS NKSJKU FN, X, C;KUKSA ESA HKH DGK FKK FD ;S QKBYSA VH ,Q ,Y ,AO VH ,Q ,Y 2&DS&3 DS FOOJ.K IW.KZ UGHA GSA LKFK GH ES AJK ;G HKH DGUK GS FD LPZ DS NKSJKU GEKJS FOFHKUU IZFRBKUKSA LS VYX&VYX DEI;WVJ ,AO MUDH GKMZ FMLD LHTM DH X;H FKHA MUESA NTZ FOOJ.KKAS DS VK/KKJ IJ HKH DQN ,UVHZT DJUH CKDH FKHA 2 ESUS IZU 12 DS MRRJ ESA ;G DGK FKK FD ESUS JH CH ,L HK.MKJH LS 18 YK[K #I;S UDN O;OLK; DS FY, 02&02&96 DKS FY, GSA TKS F D LGH UGHA FKK D;KSFD ESUS BL IZKDJ DH DKSBZ JDE JH CH ,L HKA.MKJH LS ML LE; UGHA YH FKHA MIJKSDR NKS CKRKSA DS VFRFJDR BU C;KUKSA ESA ESUS T KS HKH DGK FKK MLLS ESA VKT HKH LGER GWWA ESJS FNUKDA 04&03&2003 DKS FN, X, C;K U MIJ MYYSF[KR NKS CKRKSA DKS NKSMDJ IW.KZR;K LGH GSA 19 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 19 IZ . 3 TSLK FD VKIUS VIUS C;KUKSA ESA FNUKAD 04&03&20 03 DKS DGK FKK VKSJ VKT HKH LOHDKJK GS FD QKBZYKSA VH ,Q ,Y ,OA VH ,Q , Y 2&DS &3 ESA NTZ FOOJ.K VKIDS O;KIKFJD XFRFOF/K;KSA LS LECFU/KR GSA ESA BU QKBZYKS LS FY, X, RHU FIZUV VKMVL FTLESA VKIDH CSYUL KHV GS] FN[KK J GK GWW ;S RHU FIZUV VKMV FUEU IZDKJ GSA%& 1 . ,USDTJ IH&2 IST&1 2 . ,USDTJ IH&1 IST&1 3 . 08&07&2004 DKS FY, FIZUV VKMV DK IST 75 MIJKSDR RHUKSA ISTKSA IJ TKS FD VKIDH CSYSUL KHV G S] DH YKBZFCFYVHT LKBM ESA HK.MKJH YKSU VDKMUV FN[KK JGK GS DZI;K CRK;SA F D ;S FDL IZDKJ DK VDKMUV GSA ,AO JH HK.MKJH DKSU GS\ MRRJ TSLK FD ESAUS VIUS FNUKAD 04&03&2003 DS C;KUK SA ESA DGK FKK] JH CH ,L HK.MKJH GEKJS IKFJOKFJD FE= GSA JH HK.MKJH FOFHKUU IKFVZ;KSA LS QKBUSUL DJKUS ESA GEJH ENN DJRS FKSA ENN DK RKRI;Z ;G GS FD TC HK H GESA ISLS DH T#JR GKSRH MUDKS DG NSRS VKSJ JH HK.MJH ISLS DK BURTKE D J NSRS FKSA MIJKSDR RHUKSA CSYSUL KHV ESA TKS VEKMAV HK.MKJH YKSU VDKM UV FN[KK;K X;K GS OG MUGH JH CH ,L HK.MKJH DS EK/;E LS FY, X, YKSU VKMVL VSF.MX CSYUL GS TKS FD YKBZFCFYFVT LKBM ES ,IH;J GKS JGK GSA IZ . 4 DZI;K CRK;SA FD ;G ISLK FDL IZDKJ LS IZKIR GKSRK FKK ,AO ;FN ;G ISLK JH HK.MKJH DK U GKSDJ VU; IKFVZ;KSA DK GKSRK FKK RKS M L FLFFR ESA D;K VKI MU IKFVZ;KSA DS UKE ,O AIRS CRK LDRS GSA DZI;K ;G HKH CRK;SA FD ;FN JH HK.MKJH YKSU, NYKYH DS EK/;E LS FNYKRS FKS RKS MUDKS D;K FD LH IZDKJ DH NYKYH DK HKQXRKU HKH FD;K TKRK FKK\ MRRJ TSLK FD ESUS IGYS DGK FD GE QKBUSUL DH VKO;D RK,A JH HK.MKJH DS EK/;E LS IWJH FD;K DJRS FKSA GE JH HK.MKJH DKS VIUH FOFRR; VKO;DRKVKSA DS CKJS ESA CRK FN;K DJRS FKS ,OA JH HK.MKJH GEKJS FY, VYX&VYX IKFVZ;KSA LS YKSU ,USUT FD;K DJRS FKSA JH HK.MKJH ;S ISLK DGKA L S YKRS FKS GE BL CKJS ESA DKBZ TKUDKJH UGHA J[KRSA TGKA RD NYKYH DK IZU GS] ES BL CKJS ESA DKSBZ TKUDKJH BLFY, UGHA NS LDRK D;KSFD GE C;KT DH TKS HK H JDE JH HK.MKJH DKS FN;K DJRS FKS MLDS VFRFJDR DKSBZ JKFK GEUS JH HK.MKJH DKS UGHA NHA ;FN DKSBZ NYKYH GKSXH RKS OS BUVJSLV VEKMUV ESA KKFEY GKSXHA IZ . 5 DZI;K CRK;SA FD TC HKH VKI JH HK.MKJH LS DKSBZ Y KSU FY;K DJRS FKS RKS FDL IZDKJ DK NLRKOST RS;KJ FD;K TKRK FKK\ MRRJ TC HKH GE JH CH ,L HK.MKJH LS ISLK FY;K DJRS FKS RKS FDLH IZDKJ DH FY[KK IS BL CKJS ESA DKSBZ TKUDKJH UGHA GSA 21 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 21 IZ . 11 ES VKIDKS JH IQ#KKSRE [K.MSYOKY DS ;GKA LS LH TM ,USDTJ&,7 DKS FN[KK JGK GW FTLESA HK.MKJH DS UKE IJ DBZ ,UVHZT NTZ GSA DZI; K CRK;SA FD LS FDL IZDKJ DH ,UVHZT GSAA MRRJ MIJKSDR VUSDLJ&7 ESUS HKYHHKKAFR NS[K FY;K GSA ;G GEKJH JQ MS CQD FKH FTLDS VK/KKJ IJ DEI;WVJ ESA ,UVHZT DH TKRH FKHA BLD H LELR ,UVHZT DEI;WVJ ESA UGHA GKS IKRH FKH D;KSFD DQN ,UVHZT IGY S GHA [KRE GKS TKRH FKH BL MS CQD ESA YSQV LKBZM ESA FOFHKUU O;FDR;KSA LS F EYUS OKYH JKFK RFKK JKGZV GS.M LKBZM ESA [KPSZ ,OA HKQXRKUKSA DK FOOJ.K NTZ G SA BL MS CQD ESA HK.MKJH DS UKE LS TKS ,UVHT ,IH;J GKS JGHA GSA OS LELR CH ,L H KA.MKJH LS LAECFU/KR ,UVHZT UGHA GSAA GAKYKFD ESA ;G LOHDKJ DJRK GWA FD DQN ,AVHZT MULS LECAF/KR GKS LDRH GSA THE APPELLANT-ASSESSEE, IN ITS REPLY DATED 16-02-20 05, CATEGORICALLY AND SPECIFICALLY DENIED ALL SUCH TRANSACTIONS APPEA RING IN SUCH LOOSE PAPERS AND DIARIES AND MATERIAL COLLECTED DURING SU CH SEARCH OPERATION CONDUCTED ON SUCH THIRD PERSON AI GROUP A ND DENIED THE FINANCIAL RELATIONS WITH THE AI GROUP EITHER WITH H IMSELF OR SHRI BHANDARI. THE STATEMENT OF THE ASSESSEE MADE VIDE HIS REPLY D ATED 16-02- 2005, AS QUOTED IN ASSESSMENT ORDER FOR READY REFER ENCE IS BEING QUOTED HERE-IN-BELOW:- 1. IT IS TRUE THAT THE NAME OF MY BROTHER IN LAW (BROT HER OF MY WIFE) IS SH. BHAGWAT SHARAN BHANDARI AND HE IS EMPL OYED IN MY FIRM M/S M.D. BANGARD. BUT I STATE THAT WHATEVER TRANSACTIONS AS HAS BEEN FOUND ENTERED IN THE SEIZE D PAPERS/BOOKS OR OTHER RECORDS OF AND FOUND FROM SO CALLED M/S ASHISH INTERNATIONAL GROUP DO NOT HAVE ANY FINANCIA L RELATIONS WITH MY BROTHER IN LAW SH. B.S. BHANDARI OR WITH ME OR WITH MY FIRM M/S M.D. BANGARD. I FURTHER STATE THAT THIS FA CT I HAVE ALREADY STATED IN MY STATEMENTS ON OATH BEFORE YOU ON DATED 10/02/05. 22 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 22 2. MY BROTHER IN LAW SH. BHAGWAT SHARNA BHANDARI H AS ALSO STATED THE SAME FACTS IN HIS STATEMENTS ON OATH BEFORE ON YOU DATED 31/01/2005 AND 8/02/2005 THAT WHATEVER TRANSACTIONS AS HAS BEEN FOUND ENTERED IN SEIZED PAPERS/BOOKS OR OTHER RECORDS OF AND FOUND FROM SO CALLED M/S ASHISH INTERNATIONAL G ROUP DO NOT HAVE ANY FINANCIAL RELATIONS WITH HIM OR WITH ME OR WITH MY FIRM M/S M.D. BANGARD. 3. AS FAR AS YOUR STATEMENT THAT SH. B.S. BHANDARI IS BENAMI OF MINE AND HAVE DONE FINANCIAL TRANSACTIONS ON MY BEH ALF WITH M/S ASHISH INTERNATIONAL GROUP IS COMPLETELY UNDER WRONG PRESUMPTIONS. THERE IS NO PAPER FOUND IN MY OR MR. B.S. BHANDARIS HANDWRITING DURING THE SEARCH AT MY PLAC ES OR AT THE PLACES OF M/S ASHISH INTERNATIONAL GROUP IN THIS RE GARD, AS HAD THERE BEEN THIS CASE OF AVAILABILITY OF SUCH PAPERS WITH YOUR OFFICE, THE COPY OF THE SAME WOULD HAVE BEEN PROVID ED TO US WITH THE PHOTO STATE COPY OF THE SEIZED PAPERS FROM M/S ASHISH INTERNATIONAL GROUP PROVIDED TO US ALONG WITH THE A BOVE REFERRED NOTICE. 4. HOWEVER, WE AGREE WITH THE TRANSACTIONS OF RS.1 9497/- AND RS.4614/- GIVEN IN THE LAST TABLE OF YOUR ABOVE REF ERRED TABLE WHICH ARE PERTAINING TO PURCHASE OF WOODEN MATERIAL I.E. PLYWOOD ETC. 5. WE STRONGLY OBJECT FOR YOUR MAKING ADDITION TO MY INCOME BASED ON THE TRANSACTIONS AS REFERRED TO IN YOUR AB OVE LETTER AND HUMBLY REQUEST THAT WHEN I DO NOT HAVE ANY RELA TION WITH THE TRANSACTIONS, I SHOULD NOT BE PUT IN TROUBLE. I AM ENGAGED IN THE BUSINESS OF FINANCE BROKERSHIP, I DO NOT HAV E SOURCES OF MINE INCLUDING ALL MEMBERS OF MY FAMILY AS WELL AS OF MY BROTHER IN LAW MR. B.S. BHANDARI, WHO CAN HAVE POSI TION OF HAVING FUNDS TO FINANCE TO THE MAGNITUDE AS HAS BEE N GIVEN IN THE LETTER REFERRED TO HEREIN ABOVE TO SAID M/S ASH ISH INTERNATIONAL GROUP. NO DOUBT THAT WE HAVE AGRICULT URE LAND IN MY NAME AND IN THE NAME OF MY FAMILY MEMBERS, BUT T HE SOURCE OF PURCHASE OF THE LAND IS BASICALLY ON LOAN S. HAD THERE BEEN OUR OWN FUNDS AVAILABLE TO FINANCE THEN WHY SH OULD WE HAVE TAKEN LOANS FOR PURCHASE OF AGRICULTURE LAND, THIS ALONE IS CONCLUSIVE PROOF THAT THE TRANSACTIONS DO NOT HAVE ANY RELATIONS WITH ME AND SH. B.S. BHANDARI. 23 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 23 6. IT APPEARS THAT M/S ASHISH INTERNATIONAL GROUP HAVE WRONGLY USED THE NAME OF SH. B.S. BHANDARI ( IF SAID SH. BH ANDARI IS MY BROTHER IN LAW) FOR THE TRANSACTIONS AS REFERRED TO IN YOUR LETTER UNDER REFERENCE. WHY HAS M/S ASHISH INTERNATIONAL G ROUP USED THE NAME OF SH. B.S. BHANDARI, IT IS THE MATTER REL ATED TO THEM ONLY AND NOT TO ME AND MY BROTHER IN LAW SH. B.S. B HANDARI. EVEN SHRI B. S. BHANDARI ALSO DENIED SUCH FINANCIAL TRANSACTIONS WITH ASHISH INTERNATIONAL GROUP AND DENIED ANY RELATION THEREOF WITH THE APPELLANT-ASSESSEE OR HIMSELF. SHRI BHANDARI HIMSEL F HAS CLEARLY EXPLAINED THE ONLY LOOSE PAPER ALLEGED TO BE IN HIS HAND WRITING THAT HE SIMPLY COPIED THE CONTENTS OF A BAD WRITTEN PAPE R ON THE REQUEST OF SOME PERSON AT THE PREMISE OF AI GROUP AND DENIE D ANY FINANCIAL TRANSACTION THEREOF IN THIS REGARD. THE RELEVANT PART OF THE STATEMENT SO GIVEN BY SH. B.S. BHANDARI VIDE HIS LETTER DATED 22-02-2005, AS QUOTED IN ASSESSMEN T ORDER ITSELF IN PARA 10.12 (APB 79 TO 80), IS BEING REPRODUCED HERE -IN-BELOW FOR READY REFERENCE. REGARDING PAGE NO.21 OF ANNEXURE A-5 FOUND FROM TH E PREMISES OF M/S ASHISH INTERNATIONAL GROUP (AS PER YOUR ABOVE REFERRED LETTER) PAGE NO.21 IS SAID TO BE A CALCULA TION OF VARIOUS AMOUNT, THE TOTAL APPEARING IN THE DEBIT AND CREDIT IS 8555/00 YOUR GOOD SELF HAVE MENTIONED THAT THE TRANSACTIONS APPEARING RELATES IN THE NAME OF SH. BHANDARI/BH. I HAVE BEEN CALLED UPON TO EXPLAIN THE ENTRIES AND SOURCE OF FUNDS APP EARING IN BHANDARI ACCOUNT. I HAVE SEEN THE COPY OF THE PAPER ALONG WITH THE EN CLOSURES, I STATE THAT ONCE I HAVE GONE TO THE BUSINESS PREMISE S OF M/S ASHISH INTERNATIONAL GROUP, THERE WAS A PAPER IN BA D HANDWRITING LYING THERE HAVING SOME ENTRIES THEREIN AND I WAS REQUESTED BY SOME PERSON THERE TO MAKE THE FAIR COP Y OF THE 24 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 24 PAPER. AS A MATTER OF COURTESY I COPY THE ENTRIES O N ANOTHER PAPER AND IT APPEARS THAT THE SAME COPIES PAPER WAS FOUND IN SEARCH BY YOUR DEPARTMENT FROM THE SAID M/S ASHISH INTERNATIONAL GROUP. I STATE THE HAND WRITING ON TH E PAPER APPEARS TO BE OF MINE BUT THE CONTENTS OF THE PAPER HAS NO RELATION WITH ME. SINCE I DO NOT HAVE ANY KIND OF C ONNECTION WITH THE CONTENTS OF THE PAPER, I CAN NOT EXPLAIN A NYTHING ABOUT THE ENTRIES THEREIN INCLUDING THE SOURCE ETC. THE A.O. IN ASSESSMENT ORDER PASSED DURING QUANTUM PROCEEDINGS HAS TOTALLY FAILED TO PROVE SUCH LOOSE PAPERS OR MA TERIAL COLLECTED FROM AI GROUP TO BELONG TO APPELLANT-ASSESSEE IN AN Y MANNER. THERE WAS NO MATERIAL WITH THE A.O. ON RECORD TO PROVE NE XUS OF SUCH LOOSE PAPERS AND MATERIAL SEIZED FROM THIRD PERSON AND EN TRIES CONTAINED THEREIN BELONGING TO THE APPELLANT-ASSESSEE. THE RE VENUE UTTERLY FAILED TO PROVE SO. EVEN SHRI VINAY GUPTA IN HIS ST ATEMENT DID NOT ALLEGE THE NAME OF THE APPELLANT, WHICH IS CORROBOR ATED BY THE MATERIAL SEIZED FROM THE THIRD PERSON BEING NOT CON TAINING THE NAME OF APPELLANT-ASSESSEE MADHO DAS BANGARD AT ANYWHERE . SUCH LOOSE PAPERS OR ENTRIES CONTAINED THEREIN DO NOT BELONG T O APPELLANT IS ALSO CORROBORATED BY THE STATEMENT OF SHRI BHANDARI FILE D VIDE HIS REPLY DATED 22-02-2005. PURCHASES OF WOODEN MATERIAL BY T HE APPELLANT WERE THROUGH CHEQUES OF RS. 19,497/- AND RS. 4614/- WHICH WERE EXPLAINED WELL DURING THE QUANTUM PROCEEDINGS. AS P ER ANSWER TO QUESTION NO.11 OF SHRI VINAY GUPTA AS AFORESAID, IT IS EXPLICITLY PROVED ON RECORD THAT THE AI GROUP HAD MISUSED THE NAME OF SHRI BHANDARI 25 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 25 FOR THE ENTRIES OR FINANCIAL TRANSACTIONS BELONGING TO SOME OTHER PERSONS. DESPITE ABOVE, THOUGH THE A.O. ADMITTED THAT THE EN TRIES IN SUCH LOOSE PAPERS ARE APPEARING IN NAME OF SHRI BHANDARI , YET THE AO ASSUMED THE SAME TO BELONG TO APPELLANT-ASSESSEE. T HE A.O. TREATED SHRI BHANDARI AS A BENAMI PERSON OF APPELLANT MER ELY ON THE GROUND THAT SHRI BHANDARI IS THE RELATIVE AND EMPLOYEE OF THE APPELLANT. THERE WAS NO MATERIAL WITH THE A.O ON RECORD TO HOL D EVEN SHRI BHANDARI TO BE BENAMI PERSON OF APPELLANT-ASSESSEE; RATHER, THE FINDINGS OF THE A.O ARE CONTRARY TO RECORD. AFTER C OMING INTO OPERATION OF THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988, THE THEORY OF BENAMI IS FOREIGN CONCEPT IN THE CONTEXT OF THE INDIAN LAWS UNLESS THE CASE FALLS IN THE EXCEPTIONS PROVIDED TH EREIN SECTION 3 & 4 OF THAT ACT. THE BURDEN TO PROVE THAT THE TRANSACTI ONS ARE BENAMI AS ALLEGED ALWAYS LIES ON THE REVENUE; AND FURTHER, TO PROVE THAT WHAT THE ASSESSEE CLAIMS IS WRONG AND TO PROVE THE INCOM E OF ANY PERSON, THE BURDEN ALWAYS LIES ON THE REVENUE IN VIEW OF TH E AUTHORITATIVE PRONOUNCEMENTS IN CASE OF K. P. VERGHESE REPORTED IN 131 ITR 597 (SC) AND 210 ITR 250 (RAJ.) RAJA NARENDRA. HOWEVER, IN THE QUANTUM PROCEEDINGS, THE ADDITION WAS SUSTAINED AT REDUCED FIGURE ON PREPONDERANCE OF PROBABILITIES. THE RELEV ANT EXTRACT FROM THE ASSESSMENT ORDER (APB-85-86) IS REPRODUCED HERE IN BELOW:- 26 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 26 THE TRANSACTION MADE IN THE NAME OF BHANDARI, C AN NOT BE ATTRIBUTED TO THE TRANSACTION MADE BY SH. B. S. BHANDARI IN ITS INDIVIDUAL CAPACITY AS SH. BHANDARI IS A FULL TIME EMPLOYEE WITH THE ASSES SEE. SH. BHANDARI IS A PERSON OF NO MEANS AND THE ONLY S OURCE OF HIS LIVELY HOOD IS THE SALARY WHICH HE GETS FROM YO UR CONCERN. THEREFORE IT IS REQUIRED THAT THE TRANSACTIONS MADE IN THE NAME OF BHANDARI SHOULD BE CONSIDER IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS AND PROTECTIVE BASIS IN THE HANDS OF SHRI B. S. BHANDARI, FOR WHICH REFERENCE TO THE ASSESSING OFFI CER OF SHRI B. S. BHANDARI IS BEING MADE. FURTHER, THE CIT (A) HIMSELF IN QUANTUM PROCEEDINGS HAS DELETED ALL THE ADDITIONS; AND DIRECTED THE APPELLANT TO WORK O UT THE PEAK CREDIT ON THE BASIS OF MATERIAL PROVIDED TO THE APPELLANT. IT WAS ONLY ON THE DIRECTIONS OF THE CIT(A), THE APPELLANT WORKED OUT THE PEAK OF THE ENTRIES REFLECTED IN SUCH LOOSE PAPERS; ON THE BASI S OF WHICH THE ADDITION WAS SUSTAINED ON PREPONDERANCE OF PROBABIL ITIES. THE RELEVANT FINDINGS OF CIT (A) (RELEVANT AT APB - 120-121) ARE REPRODUCED HERE IN BELOW:- 4.34 CONCLUSION:- ADDITION OF RS.11,34,000/- ON ACCOUNT OF UNDISCLOSE D INTEREST ON SUCH LOAN OF RS. 18,00,000/- TO SHRI VINAY GUPTA I. THE LD COUNSEL HAS FILED THE COPY OF THE ASSESSMENT ORDER DATED 13/2/2004 PASSED BY THE ITO WARD (1) (1) JAIP UR IN THE CASE OF SHRI B S BHANDARI, WHO HAD ACCEPTED IN THIS CASE THAT HE (SHRI B S BHANDARI) HAD NOT GIVEN ANY MONEY TO SHRI VINAY GUPTA. BE AS IT MAY, SINCE THE AO ACC EPTED THAT NO TRANSACTION TOOK PLACE ON THE STRENGTH OF T HE PROMISSORY NOTE OF RS.18,00,000/- HENCE THERE REMAI NS NO SCOPE FOR ADDITION OF RS.11,34,000/- ON ACCOUNT OF 27 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 27 UNDISCLOSED INTEREST ON SUCH LOAN OF RS.18,00,000/- TO SHRI VINAY GUPTA, HENCE THE SAME HAS TO DELETED. II. THE AO MADE ADDITION OF RS.18.65 LAC ON ACCOUNT OF UNEXPLAINED LOANS AND FURTHER OF 17.12 LAC BEING TH E PEAK OF ALL TRANSACTIONS ( BHANDARI LOAN, BHANDARI JI ACCOU NT, TRANSFER CHARGES, INTEREST PAID ACCOUNT, BH. COMM) AND AGAIN ADDITION OF RS.5 LAC ON ACCOUNT OF INTEREST A ND 1.13 LAC ON ACCOUNT OF UNDISCLOSED TRANSFER CHARGES. THE LEARNED COUNSEL EXPRESSED HIS DIFFICULTY IN UNDERSTANDING T HE BASIS OF VARIOUS ADDITIONS AND ALSO PEAK WORKING. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WAS REQUESTED TO FIND OUT THE RELEVANT PAPERS AND SUPPLY THEM TO THE APPELLANT ON THE BASIS OF WHICH VARIOUS ADDITIONS WERE MADE AND HOW THE WORKING OF THE DIFFERENT ADDITIONS HAVE BEEN DONE V IDE ORDER SHEET NOTING DATED 26.06.2007 BUT THE SAME HA S NOT BEEN SUPPLIED. DUE TO NON LINKING PROBLEM OF THE AD DITIONS WITH THE RELEVANT PAPERS THE LD COUNSEL WAS REQUEST ED TO WORK OUT THE PEAK OF CASH/INVESTMENT. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE A.O. HAS MADE THE ADDI TION ON THE BASIS OF THE ABOVE PAPERS IN A DIFFERENT MANNER THOUGH THE TRANSACTIONS ARE OVER LAPING. IN VIEW OF THE AB OVE FACTS THE APPELLANT WAS ASKED TO CALCULATE THE PEAK OF TH E TRANSACTIONS MENTIONED IN THE ABOVE (I) TO (VII) HE ADS IN THE SEIZED FILES MENTIONED IN THE ASSESSMENT ORDER AND COPY PROVIDED TO THE APPELLANT. THE APPELLANT CALCULATED THE PEAK AT RS.10,631.84 O N 29.11.2002 THIS AMOUNT IS BASED ON THE CODE FIGURE OF M/S ASHISH INTERNATIONAL GROUP AND WOULD BE RS.10,63,18 4/-. THE LD A/R STATED THAT IN THIS PEAK HE HAS NOT CONSIDER ED ENTRIES WHICH ARE REFLECTED ON PAGE 77 WHICH IS ALSO BHANDA RI LOAN ACCOUNT FOR THE PERIOD OF 1/4/2001 TO 31/3/2002. TH ERE IS ONE ADJUSTMENT CREDIT ENTRY OF RS.350000 ON 2/7/2001 AN D ALSO OF RS.500000 IN THE NAME MUKESH (PC). IN RESPECT THIS AMOUNT IT IS SUBMITTED THAT IT DID NOT IN THE NAME OF BHANDAR I AND IT HAD ALSO BEEN ADMITTED BY SHRI VINAY GUPTA THAT IN THE ACCOUNT OF BHANDARI THE AMOUNT BELONGING TO OTHERS WERE ALSO A PPEAR. SINCE THERE IS NO PROPER AND SPECIFIC EXPLANATION T HEREFORE I HAVE NO OPTION TO FURTHER ADD THIS AMOUNT. THUS TOT AL PEAK COMES TO RS.1913184. I HOLD THAT RS.1913184/- SHALL BE ADDED IN THE INCOME ON ACCOUNT OF TRANSACTIONS WITH ASHI SH 28 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 28 INTERNATIONAL GROUP AND THE FOLLOWING ADDITIONS MADE IN THE BLOCK PERIOD INCOME BY THE LEARNED A.O. ARE DEL ETED ON ACCOUNT OF ALLEGED UNDISCLOSED LOAN TO RS.18,65,000/- AHSISH INTERNATIONAL GROUP ON ACCOUNT OF ALLEGED UNDISCLOSED CREDITS RS.17,12,100/- APPEARING IN BHANDARI JI ACCOUNT ON ACCOUNT OF ALLEGED UNDISCLOSED RS.1,13,898/- TRANSFER CHARGES ON ACCOUNT OF ALLEGED UNDISCLOSED INTEREST RS.5,14,982/- THIS DECIDES THE GROUNDS OF APPEAL NO.2 TO 6. GROUN D OF APPEAL NO.1 IS TOTAL OF GROUNDS OF APPEAL NOS.2 TO 7. THIS HONBLE TRIBUNAL IN QUANTUM PROCEEDINGS HELD T HUS:- 12. AFTER GOING THROUGH THESE FINDINGS, WE FIND T HAT THE AO WAS REQUIRED TO GIVE PAPERS TO THE ASSESSEE TO WORK OUT THE PEAK CASH/INVESTMENT AS THERE WERE OVER LAPPING ENTRIES IN THE COMPUTER OF M/S. ASHISH INTERNATIONA L GROUP. HOWEVER, NO WORKING OF RELEVANT PAPERS WERE GIVEN BY THE AO TO THE ASSESSEE. THEREAFTER, THE AS SESSEE WAS REQUIRED TO WORK OUT THE PEAK AND THE PEAK WAS WORKED OUT AT RS. 10,63,184/-. THEREAFTER, THE LD. CIT (A) BY OBSERVING THAT CREDIT OF RS. 3,50,000/- ON 2.7.2 001 AND RS. 5,00,000/- IS IN THE NAME OF MUKESH (PC), C OULD NOT BE EXPLAINED. THEREFORE, THESE ENTRIES ARE ALSO LIABLE TO BE ADDED IN THE HANDS OF ASSESSEE. ACCORDINGLY, A FURTHER ADDITION OF RS. 8,50,000/- WAS MADE BY LD. CIT(A). IN THIS WAY TOTAL ADDITION WAS SUSTAINED BY LD. CIT(A) AT RS. 19,13,184/-. SINCE THERE IS A CLEAR E NTRY IN 29 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 29 THE NAME OF MUKESH (PC), THEREFORE, THERE IS NO JUSTIFICATION IN ADDING THIS ENTRY IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 8,50,000 /- AND REMAINING ADDITION OF RS. 10,63,184/- IS SUSTAINED WHICH IS MADE ON THE BASIS OF PEAK ENTRY. IT IS A SETTLED POSITION OF LAW THAT IF THE ENTRIES ARE OVER LAPPING, THEN P EAK ENTRY IS BEST ENTRY. IN VIEW OF THESE FACTS AND CIRCUMSTA NCES, WE ALLOW THE GROUND OF THE ASSESSEE IN PART AND DISMISSED THE GROUND OF THE DEPARTMENT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, APPAR ENTLY AND PATENTLY, THERE WAS NO ADMISSION OF THE APPELLANT. EVEN, ABOUT THE ADDITION MADE ON THE BASIS OF PEAK CREDIT AND THE P EAK CREDIT WAS WORKED OUT BY THE APPELLANT BEING A BONAFIDE LITIGA NT JUST TO HONOR THE DIRECTIONS OF THE CIT (A). EVEN, IN THE PENALTY PROCEEDINGS, THE CIT (A) AT PAGE 54 OF ITS ORDER HAS OBSERVED THUS:- ..I HAVE CAREFULLY CONSIDERED ALL THE CONTENTIONS RAISED BY THE APPELLANT AS ALSO THE FINDING OF THE AO, THE FI RST APPELLANT AUTHORITY AND HONBLE ITAT. . .. THOUGH IT IS CORRECT THAT NO SPECIFIC INCRIMINATING DOCUMENTS WERE FOUND OR SEIZED FROM T HE POSSESSION OF THE APPELLANT BUT ON THE BASIS OF CORROBORATIVE EVIDENCES THE FIRST APPELLATE AUTHORI TY VERY SPECIFICALLY GAVE THE FINDING THAT INCOME ARISING O N THE BASIS OF SUCH TRANSACTION WITH ASHISH INTERNATIONAL AND BHAN DARI WAS ESSENTIALLY PERTAINING TO THE APPELLANT. THE IMPORTANT POINT TO BE NOTED IS THAT EVEN IF SUCH UNDISCLOSED INCOME HAS BEEN DETERMINED BY THE APPELLANT AT THE DIRECTION OF FIRST APPELLAT E AUTHORITY ON THE BASIS OF PEAK IT CANNOT SAID THAT NO SUCH UNDISCLOSED INCOME WAS DETECTED IN THE HANDS OF THE APPELLANT. .. IN THE CASE OF MR. BHANDARI ALSO THE DEPARTMENT HAS TAXED SUCH INCOME 30 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 30 ON PROTECTIVE BASIS AND IN ANY CASE ANY ONE OF THE TWO HAS TO BEAR THE TAX LIABILITY. THE FINDINGS OF THE CIT(A) IN PENALTY PROCEEDINGS A RE SELF CONTRADICTORY. ON ONE HAND, THE CIT(A) ADMITTED THA T IT IS CORRECT THAT NO SPECIFIC INCRIMINATING DOCUMENTS WERE FOUND OR SEIZED FROM THE POSSESSION OF THE APPELLANT AND FURTHER THAT TH E ADDITIONS SO SUSTAINED WAS ON THE BASIS OF PEAK WORKED OUT BY TH E APPELLANT ON THE DIRECTIONS OF THE FIRST APPELLATE AUTHORITY; HO WEVER, THE CIT(A), ASSUMED THE UNDISCLOSED INCOME OF THE APPELLANT WIT HOUT PROVING NEXUS OF THE LOOSE PAPERS OR DIARIES SO SEIZED FROM III PERSON AI GROUP WITH THE APPELLANT. THERE WAS NO MATERIAL WIT H THE CIT (A) OR THE AO TO HOLD THAT THE TRANSACTIONS APPEARING IN L OOSE PAPERS FOUND AND SEIZED FROM THE AI GROUP PERTAINS TO THE APPELL ANT. THE FINDINGS OF THE A.O. AND CIT (A), BEING PERVERSE IN IMPOSING THE PENALTY, IGNORING THAT THE ADDITIONS WERE MADE AND SUSTAINED MERE ON PREPONDERANCE OF PROBABILITIES DRAWING HYPOTHETICAL INFERENCE, ARE LIABLE TO BE QUASHED AND THE PENALTY IS LIABLE TO B E CANCELLED ON THIS COUNT ALONE. THE ADDITIONS MADE AND SUSTAINED WERE ON PREPONDERA NCE OF PROBABILITIES, WHICH IS PROVED BY THE FINDINGS OF T HE A.O. AND CIT (A) ITSELF; INASMUCH AS, APPARENTLY AS PER ORDER OF CIT (A) ITSELF, IN THE ASSESSMENT ORDER DATED 13-02-2004 PASSED IN CASE OF SHRI B.S. 31 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 31 BHANDARI, THE REVENUE HAD ACCEPTED THAT SHRI BHANDA RI HAD NOT GIVEN ANY MONEY TO SHRI VINAY GUPTA. CIT (A) DELETED ALL THE ADDITIONS MADE BY THE A.O. FURTHER, THE CIT (A) HAVING ADOPTE D DIFFERENT METHODOLOGY, DIRECTED THE ASSESSEE TO WORK OUT THE PEAK CREDIT AND, ON SUCH PEAK CREDIT, CIT(A) MADE THE ADDITION. IT I S PERTINENT TO MENTION HERE THAT THE ADDITIONS MADE AFRESH BY THE CIT (A) REGARDING ENTRY FOUND IN THE NAME OF SHRI MUKESH (P C), HAD BEEN DELETED BY THIS HONBLE TRIBUNAL VIDE ITS ORDER DAT ED 13-01-2011, AGAINST WHICH THE APPEAL OF THE REVENUE FILED BEFOR E THE HONBLE HIGH COURT HAS ALSO BEEN DISMISSED BY THE HONBLE HIGH C OURT VIDE ITS ORDER DATED 11-08-2014. THE ADDITIONS SO MADE BY THE A.O WERE MADE ON THE B ASIS OF PREPONDERANCE OF PROBABILITIES, IS PROVED BY THE FA CTUM THAT THE REVENUE ITSELF WAS NOT FIRM AS TO WHOM SUCH LOOSE P APERS OR ENTRIES THEREIN OR THE FINANCIAL TRANSACTIONS INVOLVED THER EIN BELONG TO; INASMUCH AS THE REVENUE ITSELF MADE THE ADDITIONS O N SUBSTANTIVE BASIS IN THE HANDS OF APPELLANT AND ON PROTECTIVE B ASIS IN THE HANDS OF MR. B.S. BHANDARI. FURTHER, AS STATED HEREINBEFO RE, IN CASE OF SHRI B.S. BHANDARI, AS OBSERVED BY THE CIT (A), THE REVE NUE HAD ACCEPTED THAT SHRI B.S. BHANDARI HAD NOT GIVEN ANY MONEY TO SHRI VINAY GUPTA THAT FACT ALSO PROVES THE ADDITION MADE AND SUSTAIN ED WAS MERELY ON HYPOTHETICAL INFERENCES DRAWN FROM ILLUSORY INFORMA TION GATHERED 32 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 32 FROM THE POSSESSION OF III PERSON. THE MEAGER ADDIT IONS WERE LATER SUSTAINED BY THE CIT(A) ONLY ON THE GROUND THAT THE FINANCIAL TRANSACTIONS INVOLVED IN SUCH LOOSE PAPERS HAVE TO BE ASSESSED AT LEAST ANY ONE PERSON AND IN ANY CASE ANYONE OF THE TWO HAS TO BEAR THE TAX LIABILITY. THE REVENUE HAD IGNORED THIS IMP ORTANT ASPECT THAT OTHERWISE ALSO, SUCH FINANCIAL TRANSACTION OUGHT TO HAVE BEEN TAXED ONLY IN THE HANDS OF AI GROUP AS THE PRESUMPTION OT HERWISE UNDER SECTION132 (4A) RISES ONLY AGAINST AI GROUP AND NOT AGAINST APPELLANT. THE PENALTY IS LIABLE TO BE CANCELLED ON THIS COUNT ALONE. THE PENALTY SO IMPOSED, OTHERWISE ALSO, IS NOT SUST AINABLE IN VIEW OF THE FACT THAT THE SATISFACTION TO LEVY PENALTY HAS TO BE RECORDED BY THE REVENUE REGARDING ADDITIONS ON WHICH THE PENALT Y HAS BEEN PROPOSED. IN THE INSTANT CASE, APPARENTLY WHEN ALL THE ADDITIONS MADE BY THE A.O WERE DELETED BY THE CIT (A), NO PEN ALTY CAN BE INITIATED ON SUCH ADDITIONS IN VIEW OF THE SETTLED LAW IN THIS REGARD. IT WAS THE LD. CIT (A) WHO HAVING EXERCISED THE POWERS CONFERRED TO CIT (A) UNDER SECTION 251 OF THE ACT OF 1961, ADOPT ED DIFFERENT METHODOLOGY TO MAKE THE ADDITIONS AFRESH ON PREPOND ERANCE OF PROBABILITIES OF PEAK CREDIT THEORY; AS SUCH, THE C IT (A) BEING THE SUPERIOR ASSESSING OFFICER AND BEING THE POWERS OF THE CIT (A) CO- TERMINUS AND CO-EXTENSIVE WITH THAT OF THE A.O, HAD TO RECORD HIS SATISFACTION AFRESH UNDER SECTION 158BFA OF THE ACT OF 1961. AS SUCH, 33 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 33 THE PENALTY SO IMPOSED AND SUSTAINED IS ALSO LIABLE TO BE DELETED ON THAT COUNT ALONE. THE ADDITION SO MADE AND SUSTAINED AT THE REDUCED F IGURE WAS ON ESTIMATE OR PREPONDERANCE OF PROBABILITIES IS PROVE D BY THE FACT THAT THE THIRD PARTY STATEMENT HAS NO RELEVANCE AGAINST THE APPELLANT IN ABSENCE OF CROSS-EXAMINATION; THOUGH IN THE PRESENT CASE, IN SUCH THIRD PARTY STATEMENT, OTHERWISE ALSO, NOTHING INCR IMINATING HAS BEEN ALLEGED OR STATED AGAINST THE APPELLANT. FURTHER, O THERWISE ALSO, THE LOOSE PAPERS AND LOOSE DIARIES OR ARTICLES SEIZED F ROM THE POSSESSION OF THIRD PERSON HAVE NO EVIDENTIARY VALUE AGAINST T HE APPELLANT IN VIEW OF SECTION 34 OF THE EVIDENCE ACT, 1872, THE B OOKS OF ACCOUNT OR THE MATERIAL FOUND IN POSSESSION OF THIRD PERSON AR E NOT ALONE SUFFICIENT TO CHARGE THE APPELLANT WITH LIABILITY. APPARENTLY, THERE IS NO MATERIAL ON RECORD TO CORROBORATE THE HYPOTHETICAL INFERENCES DRAWN BY THE REVENUE FROM THE LOOSE PAPERS FOUND FROM THE POSSESSION OF AI GROUP THAT THE FINANCIAL TRANSACTIONS CONTAINED THEREIN BELONG TO APPELLANT. IN THIS REGARD, THE APPELLANT RELIES ON THE FOLLOWING PRONOUNCEMENTS OF THE HONBLE SUPREME COURT AND HIG H COURTS: - IN THE CASE OF CBI VS. V.C. SHUKLA, REPORTED IN AIR 1998 SC 1406 , THE CBI AUTHORITIES SEARCHED THE PREMISE OF JAIN BROTHE RS AND FOUND AND SEIZED DIARIES AND SOME LOOSE PAPERS FROM THE POSSE SSION OF SHRI J.K. JAIN. HAVING DECODED THE ENTRIES CONTAINED THEREIN, THE CBI ALLEGED 34 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 34 HAWALA TRANSACTIONS AND ALLEGED NUMBER OF POLITIC IANS, BUREAUCRATS AND EXECUTIVES TO HAVE INVOLVED IN SUCH HAWALA TR ANSACTIONS. THE CBI BOOKED AS MANY AS 34 PERSONS ON THE BASIS OF SU CH LOOSE PAPERS OR DIARIES SO SEIZED FROM THE POSSESSION OF SHRI J. K. JAIN AND FILED CHARGE-SHEET BEFORE THE COURT. THE TRIAL COURT FRAM ED CHARGES. THE CHARGES SO FRAMED, WERE CHALLENGED BY WAY OF A PETI TION UNDER SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE BEFOR E THE HIGH COURT AND THE MATER ULTIMATELY TRAVELLED TO HONBLE SUPRE ME COURT. THE HONBLE SUPREME COURT, HAVING EXAMINED THE PROBATIV E VALUE OF SUCH LOOSE PAPERS AND DIARIES, IN PARA 16 TO 19 VIS--VI S SECTION 34 OF THE EVIDENCE ACT, 1872, HELD THAT LOOSE PAPERS ARE NOT BOOKS OF ACCOUNT MAINTAINED IN REGULAR COURSE OF BUSINESS; AND IN PA RA 19 TO 31, HAVING CONSIDERED PLETHORA OF PRECEDENTS AND CASE L AWS OF THE LAND, HELD THE SAME TO HAVE NO EVIDENTIARY VALUE BEING NO T THE BOOKS OF ACCOUNT OR BEING NOT MAINTAINED THE REGULAR COURSE OF BUSINESS. FURTHER, REGARDING ENTRIES FOUND IN THE LOOSE PAPER S OR OTHERWISE IN MATERIAL POSSESSED BY THIRD PERSON, THE HONBLE SUP REME COURT IN PARA 34 OF THAT JUDGMENT OBSERVED THAT 34. THE RATIONALE BEHIND ADMISSIBILITY OF PARTIES BOOKS OF ACCOUNT AS EVIDENCE IS THAT THE REGULARITY OF HABIT , THE DIFFICULTY OF FALSIFICATION AND THE FAIR CERTAINTY OF ULTIMATE DETECTION GIVE THEM IN A SUFFICIENT DEGREE A PROBABILITY OF TRUSTW ORTHINESS (WIGMORE ON EVIDENCE A1546). SINCE, HOWEVER, AND EL EMENT OF SELF INTEREST AND PARTNERSHIP OF THE ENTRANT TO MAK E A PERSON BEHIND WHOSE BACK AND WITHOUT WHOSE KNOWLEDGE THE E NTRY 35 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 35 MADE LIABLE, CANNOT BE RULED OUT THE ADDITIONAL SAF EGUARD OF INSTANCES UPON OTHER INDEPENDENT EVIDENCE TO FASTEN HIM SUCH LIABILITY HAS BEEN PROVIDED FOR IN SECTION 34 OF TH E EVIDENCE ACT, 1872, BY INCORPORATING THE WORDS SUCH STATEMEN TS SHALL NOT ALONE BE SUFFICIENT TO CHARGE ANY PERSON WITH L IABILITY. THE HONBLE SUPREME COURT IN THAT CASE OF CBI VS. V . C. SHUKLA ( SUPRA ) RELIED ON THE CASE OF YESHUVADAYAN VS. SUBBA NAIC KER, REPORTED IN AIR 1919 MADRAS 132, WHEREIN IT HAS BEE N OBSERVED THAT S. 34, EVIDENCE ACT, LAYS DOWN THAT THE ENTRIES IN BOOKS OF ACCOUNT, REGULARLY KEPT IN THE COURSE OF BUSINESS A RE RELEVANT, BUT SUCH A STATEMENT WILL NOT ALONE BE SUFFICIENT T O CHARGE ANY PERSON WITH LIABILITY. THAT MERELY MEANS THAT THE P LAINTIFF CANNOT OBTAIN A DECREE BY MERELY PROVING THE EXISTE NCE OF CERTAIN ENTRIES IN HIS BOOKS OF ACCOUNT EVEN THOUGH THOSE BOOKS ARE SHOWN TO BE KEPT IN THE REGULAR COURSE OF BUSINESS. HE WILL HAVE TO SHOW FURTHER BY SOME INDEPENDENT EV IDENCE THAT THE ENTRIES REPRESENT REAL AND HONEST TRANSACT IONS AND THAT THE MONEYS WERE PAID IN ACCORDANCE WITH THOSE ENTRI ES. THE LEGISLATURE HOWEVER DOES NOT REQUIRE ANY PARTICULAR FORM OR KIND OF EVIDENCE IN ADDITION TO ENTRIES IN BOOKS OF ACCOUNT, AND I TAKE IT THAT ANY RELEVANT FACTS WHICH CAN BE TREA TED AS EVIDENCE WITHIN THE MEANING OF THE EVIDENCE ACT WOU LD BE SUFFICIENT CORROBORATION OF THE EVIDENCE FURNISHED BY ENTRIES IN BOOKS OF ACCOUNT IF TRUE. WHILE CONCURRING WITH THE ABOVE OBSERVATIONS THE OT HER LEARNED JUDGE STATED AS UNDER: ..IF NO OTHER EVIDENCE BESIDES THE ACCOUNTS, WERE GIVEN, HOWEVER STRONGLY THOSE ACCOUNTS MAY BE SUPPORTED BY THE PROBABILITIES, AND HOWEVER STRONG MAY BE THE EVIDEN CE AS TO THE HONESTY OF THOSE WHO KEPT THEM, SUCH CONSIDERAT ION COULD NOT ALONE WITH REFERENCE TO SECTION 34, EVIDENCE AC T, BE THE BASIS OF A DECREE. FINALLY IN THAT CASE OF CBI VS. V. C. SHUKLA ( SUPRA ), IN PARA 39, THE HONBLE SUPREME COURT HELD THUS:- 36 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 36 39. A CONSPECTUS OF THE ABOVE DECISIONS MAKES IT E VIDENT THAT EVEN CORRECT AND AUTHENTIC ENTRIES IN BOOKS OF ACCO UNT CANNOT WITHOUT INDEPENDENT EVIDENCE OF THEIR TRUSTWORTHINE SS, FIX A LIABILITY UPON A PERSON. KEEPING IN VIEW THE ABOVE PRINCIPLES, EVEN IF WE PROCEED ON THE ASSUMPTION THAT THE ENTRI ES MADE IN MR 71/91 ARE CORRECT AND THE ENTRIES IN THE OTHER B OOKS AND LOOSE SHEETS (WHICH WE HAVE ALREADY FOUND TO BE NOT ADMISSIBLE I EVIDENCE UNDER SECTION 34) ARE ADMISSI BLE UNDER SECTION 9 OF THE ACT TO SUPPORT AN INFERENCE ABOUT THE FORMERS CORRECTNESS \STILL THOSE ENTRIES WOULD NOT BE SUFFI CIENT TO CHARGE SHRI ADVANI AND SHRI SHUKLA WITH THE ACCUSATIONS LE VELED AGAINST THEM FOR THERE IS NOT AN IOTA OF INDEPENDEN T EVIDENCE IN SUPPORT THEREOF. IN THAT VIEW OF THE MATTER WE N EED NOT DISCUSS, DELVE INTO OR DECIDE UPON THE CONTENTION R AISED BY MR. ALTAF AHMED IN THIS REGARD. SUFFICE IT TO SAY THAT HET STATEMENTS OF THE FOUR WITNESSES, WHO HAVE ADMITTED RECEIPTS O F HE PAYMENTS AS SHOWN AGAINST THEM IN MR/71/91, CAN AT BEST BE PROOF OF RELIABILITY OR THE ENTRIES SO FAR THEY ARE CONCERNED AND NOT OTHERS. IN OTHER WORDS, THE STATEMENTS OF THE A BOVE WITNESSES CANNOT BE INDEPENDENT EVIDENCE UNDER SECT ION 34 AS AGAINST THE ABOVE TWO RESPONDENTS. SO FAR AS SHRI A DVANI IS CONCERNED SECTION 34 WOULD NOT COME IN AID OF THE P ROSECUTION FOR ANOTHER REASON. ACCORDING TO THE PROSECUTION CA SE ITSELF HIS NAME FINDS PLACE ONLY IN ONE OF THE LOOSE SHEETS (S HEET NO. 8) AND NOT IN MR 71/91. RESULTANTLY, IN VIEW OF OUR EA RLIER DISCUSSION, SECTION 34 CANNOT AT ALL BE PRESSED INT O SERVICE AGAINST HIM. IN THE CASE OF STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER ETC. REPORTED IN AIR 1977 SC 1627 , THE SALES TAX AUTHORITIES FOUND THAT IN THE BOOKS OF ACCOUNT OF ONE HAJI USMA N KUTTI, ONE WHOLESALE DEALER, THERE WERE CERTAIN ENTRIES, ACCOR DING TO WHICH, ASSESSEE MIGHT HAVE EFFECTED SALE; HOWEVER, SUCH SA LE ENTRIES WERE NOT FOUND IN THE BOOKS OF ASSESSEE. THE CROSS-EXAMI NATION OF HAJI USMAN KUTTI WAS NOT OFFERED TO THE ASSESSEE AND ON THE BASIS OF SUCH ENTRIES SO FOUND IN BOOKS OF HAJI USMAN KUTTI, THE ASSESSMENT ORDER 37 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 37 MADE AGAINST THE ASSESSEE. A LARGER BENCH OF THE HO NBLE SUPREME COURT IN PARA 5 OF THE CASE HELD THAT IN ABSENCE OF THE CROSS- EXAMINATION, THE ENTRIES OF THIRD PERSON, CANNOT BE BELIEVED TO BE TRUE AGAINST ASSESSEE. 5. THE SECOND PART OF HER PROVISO LAYS DOWN THAT WHERE A RETURN HAS BEEN SUBMITTED, THE ASSESSEE SHOULD BE G IVEN A REASONABLE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF SUCH RETURN THIS REQUIREMENT OBVIOU SLY APPLIES AT THE FIRST STAGE OF THE ENQUIRY BEFORE THIS SALES TAX OFFICER COMES TO THE CONCLUSION THAT THE RETURN SUBMITTED B Y THE ASSESSEE IS INCORRECT OR INCOMPLETE SO AS TO WARRAN T THE MAKING OF A BEST JUDGMENT ASSESSMENT. THE QUESTION IS WHAT IS THE CONTENT OF THIS PROVISION WHICH IMPOSES AN OBLIGATI ON ON THE SALES TAX OFFICER TO GIVE AND CONFERS A CORRESPOND ING RIGHT ON THE ASSESSEE TO BE AFFORDED, A REASONABLE OPPORTUNI TY TO PROVE THE CORRECTNESS OR COMPLETENESS OF SUCH RETUR N. NOW, OBVIOUSLY TO PROVE MEANS TO ESTABLISH THE CORRECT NESS OR COMPLETENESS OF THE RETURN BY ANY MODE PERMISSIBLE UNDER LAW./ THE USUAL MODE RECOGNIZED BY LAW FOR PROVING FACT IS BY PRODUCTION OF EVIDENCE AND EVIDENCE INCLUDES ORAL E VIDENCE OR WITNESSES. THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN, WOULD, THEREFORE, NECES SARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT WOU LD INCLUDE EQUALLY THE RIGHT TO CROSS-EXAMINE WITNESSES EXAMIN ED BY THE SALES TAX OFFICER. HERE, IN THE PRESENT CASE THE RE TURN FILED BY THE ASSESSEE APPEARED TO THE SALES TAX OFFICER TO B E INCORRECT OR INCOMPLETE BECAUSE CERTAIN SALES APPEARING IN TH E BOOKS OF HAZI USMANJUTTY AND OTHER WHOLESALE DEALERS WERE NO T SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE SALES TAX OFFICER RELIED ON THE EVIDENCE FURNISHED BY THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USMANKUTTY AND OTHER WHOLESALE DEAL ERS FOR THE PURPOSE OF COMING TO THE CONCLUSION THAT THE RE TURN FILED BY THE ASSESSEE WAS INCORRECT OR INCOMPLETE. PLACED IN THESE CIRCUMSTANCES, THE ASSESSEE COULD PROVE THE CORRECT NESS AND COMPLETENESS OF HIS RETURN ONLY BY SHOWING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USAMKUTTY AND OTHER WH OLESALE DEALERS WERE FALSE, BOGUS OR MANIPULATED AND THAT T HE RETURN SUBMITTED BY THE ASSESSEE SHOULD NOT BE DISBELIEVED ON THE BASIS OF SUCH ENTRIES, AND THIS OBVIOUSLY, THE ASSE SSEE COULD 38 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 38 NOT DO, UNLESS HE WAS GIVEN AN OPPORTUNITY OF CROSS -EXAMINING HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS WITH RE FERENCE TO THEIR ACCOUNTS. SINCE THE EVIDENTIARY MATERIAL PROD UCED FROM OR PRODUCED BY HAZI USMANKUTTY AND OTHER WHOLESALE DEA LERS WAS SOUGHT TO BE RELIED UPON FOR SHOWING THAT THE RETUR N SUBMITTED BY THE ASSESSEE WAS INCORRECT AND INCOMPLETE, THE A SSESSEE WAS ENTITLED TO AN OPPORTUNITY TO HAVE HAZI USMANKU TTY AND OTHER WHOLESALE DEALERS SUMMONED AS WITNESSES FOR C ROSS- EXAMINATION. IT CAN HARDLY BE DISPUTED THAT CROSS-E XAMINATION IS ONE OF THE MOST EFFICACIOUS METHODS OF ESTABLISH ING TRUTH AND EXPOSING FALSEHOOD. HERE, IT WAS NOT DISPUTED O N BEHALF OF THE REVENUE THAT THE ASSESSEE IN BOTH CASES APPLIED TO THE SALES TAX OFFICER FOR SUMMONING HAZI USMAN KUTTY AN D OTHER WHOLESALE DEALERS FOR CROSS-EXAMINATION, BUT HIS AP PLICATION WAS TURNED BY THE SALES TAX OFFICER. THIS ACT OF TH E SALES TAX OFFICER IN REFUSING TO SUMMON HAZI USMANKUTTY AND O THER WHOLESALE DEALERS FOR CROSS-EXAMINATION BY THE ASSE SSEE CLEARLY CONSTITUTED INFRACTION OF THE RIGHT CONFERRED ON TH E ASSESSEE BY THE SECOND PART OF THE PROVISO AND THAT VITIATED TH E ORDERS OF ASSESSMENT MADE AGAINST THE ASSESSEE. CROSS EXAMINATION OF THE THIRD PERSON, WHOSE STATEM ENT OR BOOKS OF ACCOUNT, ARE RELIED AGAINST THE ASSESSEE, IS ESSENT IAL IN VIEW OF THE PRINCIPLE OF NATURAL JUSTICE. IT IS SETTLED LAW THA T, IN ABSENCE OF CROSS- EXAMINATION, ANY STATEMENT OF THIRD PERSON OR THE M ATERIAL COLLECTED FROM THE POSSESSION OF THIRD PERSON, CANNOT BE UTIL IZED AGAINST THE ASSESSEE, AS ONLY THE CROSS-EXAMINATION IS THE MOST EFFICACIOUS METHOD OF ESTABLISHING TRUTH AND EXPOSING FALSEHOOD . IN THE CASE OF CIT VS. SHAKUNTLA DEVI KHETAN REPOR TED IN 2013 352 ITR 482 (MADRAS), THE REVENUE AUTHORITIES ASSUMED H IGHER TURNOVER OF THE ASSESSEE THAN THAT DISCLOSED BY HIM IN HIS B OOKS OF ACCOUNT ON 39 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 39 THE BASIS OF THE INFORMATION COLLECTED IN SEARCH OP ERATION CONDUCTED IN CASE OF THIRD PERSON. IN PARA 8, THE HONBLE COU RT HELD THUS:- 8. THE TRIBUNAL, THEREFORE, RIGHTLY FOUND THAT THE DEPARTMENT COULD NOT HAVE MADE THE ADDITION MERELY ON THE BASI SI OF THE STATEMENT OF THIRD PARTIES. CONSEQUENTLY, THE TRIBU NAL SET ASIDE THE ORDER OF THE FIRST APPELLATE AUTHORITY AN D DIRECTED THE ASSESSING OFFICER TO ADOPT THE FIGURES OF TURNO VER FINALLY ASSESSED BY THE SALES TAX AUTHORITIES AND APPLY THE G. P. RATE ACCORDINGLY. WE FIND THAT THE ORDER PASSED BY THE T RIBUNAL FOLLOWING THE ORDER PASSED BY THIS COURT IN ANANDHA METAL CORPORATION CASE IS PERFECTLY IN ORDER AND DOES NOT WARRANT ANY INTERFERENCE. IN VIEW OF THE AFORESAID JUDGMENTS AND THE SETTLED PREPOSITION OF LAW IN THIS REGARD, THERE BEING NO DIRECT EVIDENCE WITH THE REVENUE, AS STATED HEREINBEFORE, WHATEVER THE ADDITIONS SO MADE OR SUSTAINED AT REDUCED FIGURE, WERE ON PREPONDERANCE OF PROBABILIT IES AND ON ESTIMATE BASIS. OTHERWISE ALSO, THE ADDITIONS SUSTAINED BY THE LD. CIT (A) AND THIS HONBLE TRIBUNAL DO NOT EVEN WARRANT IMPOSITION OF PENALTY UNDER SECTION 158 BFA(2) OF THE ACT OF 1961 IN LAW; INASM UCH AS, THERE WAS NO ASSESSMENT OF UNDISCLOSED INCOME UNDER SECTION 1 58BC READ WITH SECTION 158BB OF THE ACT OF 1961. NEVERTHELESS, THE ASSESSMENT OF THE APPELLANT HAS BEEN MADE UNDER SECTION 158BC OF THE ACT OF 1961, HOWEVER, AS SUBMITTED HEREINBEFORE, THE ADDIT IONS SO MADE AND SUSTAINED AT REDUCED FIGURE, BEING ON PREPONDER ANCE OR PROBABILITIES AND ON ESTIMATED BASIS, IS NOT APPARE NTLY AND PATENTLY 40 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 40 ON THE BASIS OF MATERIAL COLLECTED AND SEIZED FROM THE POSSESSION OF APPELLANT. AS SUCH, BEING THE ADDITIONS ON PREPONDE RANCE OR PROBABILITIES AND ON ESTIMATED BASIS, THERE IS NO A SSESSMENT OF UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 15 8BB OF THE ACT OF 1961. WITH REGARD TO THE IMPUGNED PENALTY, THERE IS NO DETERMINATION OF UNDISCLOSED INCOME UNDER CLAUSE (C ) OF SECTION 158 BC READ WITH SECTION 158 BB OF THE ACT OF 1961. ACC ORDINGLY, SECTION 158BFA (2) OF THE ACT OF 1961, BEING NOT ATTRACTED AT ALL IN ANY MANNER ON THE ESTIMATED ADDITION, THE PENALTY IS LI ABLE TO BE CANCELLED ON THE COUNT ALONE. IT APPEARS THAT THE REVENUE HAS MADE THE ADDITIONS MERELY ON THE BASIS OF THE FACT THAT THE AI GROUP HAD APPROACHED THE SETTLEMENT COMMISSIONER BY FILING APPLICATION UNDER SECTION 24 5C OF THE ACT OF 1961; AND IT WAS THE REASON THAT THE CIT (A) GAVE T HE FINDING THAT IN CASE OF MR. BHANDARI ALSO THE DEPARTMENT HAS TAXED SUCH INCOME ON PROTECTIVE BASIS AND, IN ANY CASE, ANYONE OF THE TW O HAS TO BEAR THE TAX LIABILITY. THE DEPARTMENT HAS NOT PROCEEDED ON THE BASIS OF PRESUMPTIONS LIES AGAINST THE AI GROUP UNDER SECTIO N 132 (4A) OF THE ACT OF 1961 THAT WHATEVER THE ADVANCES ALLEGED TO H AVE BEEN TAKEN BY THE AI GROUP, IN FACT, THE SAME MIGHT BELONG TO ITS OWN INCOME OF AI GROUP; INASMUCH AS IN ANSWER TO QUESTION NO.11, AS REPRODUCED 41 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 41 HEREINBEFORE, SHRI VINAY GUPTA HAS CATEGORICALLY AD MITTED THAT ALL THE ENTRIES FOUND IN LOOSE PAPERS FROM THEIR POSSESSION , DO NOT BELONG TO MR. BHANDARI. THE POSSIBILITY OF ESCAPING FROM THE TAX LIABILITY BY THE AI GROUP COULD NOT BE RULED OUT, WHICH ASPECT HAD T OTALLY BEEN IGNORED BY THE REVENUE IN QUANTUM PROCEEDINGS; AND THE SAME BEING HAVING RELEVANCE DIRECT NEXUS WITH THE IMPUGNED PEN ALTY RELEVANT TO THE ADDITIONS HAS TO BE CONSIDERED IN THE PENALTY P ROCEEDINGS. MERELY THAT THE ADDITIONS MADE AT THE REDUCED FIGURE BY TH E APPELLATE AUTHORITIES IN QUANTUM PROCEEDINGS, DO NOT NECESSAR ILY LEAD TO IMPOSITION OF PENALTY UNDER SECTION 158BFA(2) OF TH E ACT OF 1961 FOR WANT OF DETERMINATION OF UNDISCLOSED INCOME. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HARKA RAN DAS VED PAL, IN THE SEARCH OPERATION CONDUCTED ON ONE JMD G ROUP, SOME MATERIAL WAS GATHERED, AND ACCORDING TO DEPARTMENT THE SAME REFLECTED FINANCIAL TRANSACTION OF THE JMD GROUP WI TH THE ASSESSEE. HOWEVER, IN SEARCH STATEMENT, THE PERSONALS OF JMD GROUP STATED THAT THEY DID NOT KNOW THE ASSESSEE AND HIS NAME WA S APPEARING IN BOOKS OF ACCOUNT, AS INSTRUCTED BY BROKER. EXCEPT S OME LOOSE PAPERS DENOTING NAME OF ASSESSEE, NO OTHER EVIDENCE WAS AG AINST ASSESSEE; HOWEVER, ASSESSEE SURRENDERED RS.8 LAKH BY ITSELF T O AVOID LITIGATION. NEVERTHELESS, THE REVENUE IMPOSED PENALTY ON SUCH S URRENDERED 42 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 42 AMOUNT, BASED ON SUCH LOOSE PAPERS, UNDER SECTION 1 58BFA (2); HOWEVER, THE TRIBUNAL DELETED THE PENALTY HOLDING T HAT SURRENDER WAS BONA FIDE AND IN TRUE SPIRIT OF AVOIDING PROTRACTED AND LONG DRAWN LITIGATION. THE HONBLE HIGH COURT, HAVING RELIED O N THE CASE REPORTED IN 168 ITR 705 (SC) - SIR SHADILA SUGAR AND GENERAL MILLS LTD., DISTINGUISHING THE CASE REPORTED IN 251 ITR PAGE 99 - KP MADHUSUDAN AND CONSIDERING THE PROVISIONS CONTAINED IN SECTION 158BC, 158BB AND 158 BFA IN DETAIL IN PARA 15 TO 31 , HELD THAT THE ADDITION ON THE BASIS OF SURRENDER DOES NOT MEAN AD DITION ON THE BASIS OF SEARCH MATERIAL AND SO THE PENALTY UNDER S ECTION 58 BFA CANNOT BE IMPOSED. 28. THIS PROVISION CLEARLY STIPULATES THAT THE UNDI SCLOSED INCOME OF THE BLOCK PERIOD HAS TO BE DETERMINED OR COMPUTED 'ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEAR CH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE.' THIS COURT IN RAVI KANT JAIN [2001] 250 ITR 141 , AS INDICATED ABOVE, HAS ALREADY OBSERVED THAT THE PROCEDURE OF ASSESSMENT U NDER CHAPTER XIV-B IS A SPECIAL PROCEDURE INTENDED TO PR OVIDE A MODE OF ASSESSMENT OF UNDISCLOSED INCOME WHICH HAS BEEN DETECTED AS A RESULT OF SEARCH. THE PROCEDURE UNDER CHAPTER XIV-B IS NOT INTENDED AS A SUBSTITUTE TO REGULAR AS SESSMENT AND ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIALS UNEARTHED DURING THE SEARCH. AS POINTED OUT IN RAVI KANT JAIN [2001] 250 ITR 141 , THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RE SULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAI LABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENC E. IT IS, THEREFORE, CLEAR THAT THE UNDISCLOSED INCOME, WHICH IS TO BE DETERMINED UNDER CHAPTER XIV-B, HAS TO BE DETERMINE D ON 43 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 43 THE BASIS OF EVIDENCE DISCOVERED DURING THE SEARCH. IT IS OBVIOUS THAT WHERE THE COMPUTATION OF UNDISCLOSED I NCOME IS BASED ON MATERIAL OTHER THAN WHAT WAS FOUND IN THE COURSE OF THE SEARCH, THE SAME COULD NOT BE TREATED AS UNDISC LOSED INCOME DETERMINED UNDER CLAUSE (C) OF SECTION 158BC . 29. GOING BACK TO SECTION 158BFA(2), THE ASSESSING OFFICER HAS BEEN EMPOWERED TO IMPOSE PENALTY ON A PERSON WH EN THE UNDISCLOSED INCOME DETERMINED UNDER CLAUSE (C) OF SECTION 158BC, IS IN EXCESS OF THE UNDISCLOSED INCO ME RETURNED BY SUCH PERSON IN PURSUANCE OF A NOTICE UN DER SECTION 158BD/158BC. IN OTHER WORDS, A PRE-CONDITIO N FOR THE IMPOSITION OF PENALTY UNDER SECTION 158BFA(2) IS TH AT THERE MUST BE A DETERMINATION OF THE UNDISCLOSED INCOME B Y THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC OF THE SAID ACT. IF THIS IS NOT SATISFIED, THEN THERE WOUL D BE NO QUESTION OF IMPOSING ANY PENALTY. NEVERTHELESS, AS ADMITTED BY THE CIT (A) THAT THE P ROVISIONS OF SECTION 158BFA (2) OF THE ACT OF 1961 ARE ANALOGOUS TO THE PROVISIONS CONTAINED IN SECTION 271(1)(C) OF THE AC T OF 1961, THE REVENUE HAS UTTERLY FAILED TO PROVE CONCEALMENT OR CONTUMACIOUS CONDUCT ON THE PART OF THE APPELLANT. EVEN IT HAS N OT BEEN PROVED BY THE REVENUE THAT THE APPELLANT HAS ACTED IN DEFIANC E OF LAW OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. EVE N THERE IS NO FINDING AS SUCH IN THE PENALTY ORDER OR IN THE ORDE R OF THE CIT (A). THE APPELLANT-ASSESSEE HAS SUCCESSFULLY EXPLAINED H IS CASE AND HIS DEFENCE TO BE BONAFIDE AND THAT THE REVENUE HAS NOT BROUGHT ANY MATERIAL TO NEGATE THE EXPLANATION OF THE APPELLANT ON RECORD. THE PENALTY UNDER SECTION 158BFA(2) IS DISCRETIONARY AN D NOT MANDATORY; AND FURTHER CIRCUMSCRIBED BY THE LIMITATIONS IMPOSE D UNDER THE STATUE 44 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 44 VIS--VIS TO PROVE THE INGREDIENTS OF SECTION 271(1 ) (C) OF THE ACT OF 1961. APPELLANT THOUGH NOT ADMITTED THE ADDITIONS SO SUSTAINED AGAINST HIM, HOWEVER, BY ITSELF IN ORDER TO AVOID P ROTRACTED LITIGATION, HAS PAID TAX AT THE RATE OF 60% PLUS SURCHARGE ON S UCH REDUCED ADDITIONS SO MADE AND SUSTAINED ON PREPONDERANCE OF PROBABILITIES AND ON ESTIMATED BASIS. THEREFORE THE PENALTY IS LI ABLE TO BE DELETED AND CANCELLED. APPELLANT ALSO RELIES ON FURTHER PRONOUNCEMENT IN C ASE OF CIT VS DR. GIRIRAJ KUMAR GIRI REPORTED IN (2012) 346 ITR 152 ( RAJ), COPY OF WHICH IS PLACED ON RECORD, WHEREIN THE HONBLE HIGH COURT AT JAIPUR BENCH, HAVING DISTINGUISHED THE CASE REPORTED IN 30 6 ITR PAGE 277 (SC) - DHARMENDRA TEXTILE, IN PARA 8 AND 9 HAS HELD THAT PENALTY ON ESTIMATED ADDITIONS ARE NOT LEVIABLE. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL FOR THE APPELLANT AND EXAMINED THE IMPUGNED ORDER AND OTHER DOCUMENTS, PLACED ON RECORD. 9. SO FAR AS THE CASE LAW REFERRED TO BY THE LEARNE D COUNSEL FOR THE APPELLANT IS CONCERNED, IT IS SUFFICIENT TO MENTION THAT THE HON'BLE APEX COURT IN UNION OF INDIA V. DHARAME NDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC) ; [2008] 231 ELT 3 (SC), WAS DEALING WITH THE PROVISIONS OF THE CENT RAL EXCISE ACT, 1944, AND THE LEARNED COUNSEL FOR THE APPELLAN T IS UNABLE TO POINT OUT THAT THE PROVISIONS OF SECTION 11AC OF THE CENTRAL EXCISE ACT, 1944, AND SECTION 158BFA(2) OF THE INCO ME-TAX ACT ARE IN PARIMATERIA. THAT APART, IT IS ALSO RELE VANT TO MENTION THAT IMPOSITION OF PENALTY DEPENDS ON THE F ACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE, TH E ASSESSING OFFICER IMPOSED THE PENALTY ON SO-CALLED THREE 45 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 45 ITEMS OF SO-CALLED CONCEALED INCOME. EACH ITEM WAS EXAMINED, THOROUGHLY AND IN DETAIL, BY THE COMMISSI ONER OF INCOME-TAX (APPEALS) AS WELL AS THE INCOME-TAX APPE LLATE TRIBUNAL AND BY A REASONED ORDER, BOTH CAME TO A CO NCLUSION THAT ADDITIONS ARE BASED ON ESTIMATION ONLY. AFACT OR ALLEGATION BASED ON ESTIMATION, CANNOT BE SAID TO B E CORRECT ONLY, IT CAN BE INCORRECT ALSO. THEREFORE, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, PENALTY WAS WRONGLY IMPO SED BY THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, WE F IND THAT THE JUDGMENT OF THE HON'BLE APEX COURT, REFERRED TO BY THE LEARNED COUNSEL FOR THE APPELLANT, IS NOT APPLICABL E, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THE CASE OF ACIT VS SHANTI KUMAR CHABRA REPORTED IN (2009) 121 TTJ 985 ITAT- JAIPUR), THIS HONBLE TRIBUNAL IN PAR A 7-9 ALSO HELD THAT WHEN UNDISCLOSED INCOME HAS BEEN ASSESSED ON E STIMATED BASIS THEN PENALTY UNDER SECTION 158 BFA (2) CANNOT BE SU STAINED. 9. THE ADDITION OF RS. 2 LACS ON ACCOUNT OF STOCK I S BASED ON ESTIMATION. THE ADDITION ON ACCOUNT OF JEWELLERY AT RS. 57,377 IS ALSO BASED ON ESTIMATION. SIMILAR IS THE POSITION WITH THE ADDITION ON ACCOUNT OF DEBTORS AT RS. 2,02 ,284. THE ASSESSEE IN HIS BLOCK RETURN HAD DECLARED THE UNDIS CLOSED TRADE DEBTORS AT RS. 96,71,194. THE AO ACCEPTED THE TOTAL TRADE DEBTORS ON THE BASIS OF TRIAL BALANCE PREPARE D ON SEARCH ON THE BASIS OF BOOKS OF ACCOUNT FOUND AT RS. 2,48, 93,060. THE AO ALLOWED THE CLAIM OF RS. 4,63,000 ON ACCOUNT OF BAD DEBTS ON THE BASIS OF AFFIDAVIT AND ALSO ALLOWED TH E BENEFIT OF RS. 19,52,149 FOR THE DEBIT BALANCE REPRESENTING PA YMENTS MADE TO THE SUPPLIERS OR SERVICES RENDERED FOR WHIC H JOURNAL ENTRIES WERE NOT MADE IN THE ACCOUNT. HOWEVER, WHIL E CONSIDERING THE CLAIM OF ASSESSEE FOR THE DEFECTIVE AND DAMAGED GOODS RETURNED BACK WORTH RS. 1,30,13,008, AO HAD ALLOWED THIS CLAIM ONLY ON THE BASIS OF SEIZED DOCUMENTS FOR THE PERIOD OF 44.5 MONTHS AT RS. 37,58,941. THE LEARNED CIT(A) HAS FURTHER ALLOWED THE RELIEF ON ACCOUNT OF DEFECTIVE AND DAMAGED GOODS @ 3 PER CENT ON THE BASIS OF SEIZ ED, DOCUMENTS SHOWING SALES OF RS. 18,77,802. THE TRIBU NAL CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE HAS ESTIMATED THE RETURN OF DEFECTIVE AND DAMAGED GOODS AT RS. 46 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 46 1,10,81,250. THE FINALLY SUSTAINED ADDITION ON ACCO UNT OF TRADE DEBTORS AT RS. 2,02,284 IS THUS BASED ON ESTI MATION. REGARDING ADDITION OF RS. 44,421 ON ACCOUNT OF BANK BALANCE, THE EXPLANATION OF THE ASSESSEE REMAINED THAT IT WA S DUE TO BONA FIDE MISTAKE OF THE ASSESSEE SINCE THE PHOTOCO PY PROVIDED BY THE DEPARTMENT WAS NOT CLEAR. CONSIDERI NG THESE MATERIAL ASPECTS OF THE CASE IN TOTALITY WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE PENALTY LEVIED UNDER S. 158BFA(2) OF THE ACT SINCE ADMITTEDLY IT I S NOT THE INTENTION OF LEGISLATURE TO IMPOSE PENALTY UNDER TH E SAID PROVISIONS ON EVERY FINALLY SUSTAINED ADDITION IN U NDISCLOSED INCOME AND THE CONDITION PRECEDENT FOR IMPOSING PEN ALTY UNDER S. 158BFA(2) IS THAT THERE MUST BE CONCEALMEN T OR SUPPRESSION OF INCOME ON THE PART OF THE ASSESSEE T O AVOID PAYMENT OF TAX THEREON. IN ABSENCE OF A POSITIVE FI NDING IN THIS REGARD, THE AO WAS NOT JUSTIFIED IN IMPOSING T HE PENALTY. THE FIRST APPELLATE ORDER IS THUS UPHELD. IN THE CASE OF CIT VS SATYDNDRA KUMAR DOSHI REPORTE D IN (2009) 315 ITR 172 (RAJ), THE HONBLE HIGH COURT IN PARA 10 TO 12 HELD THAT THE PENALTY UNDER SECTION 158BFA (2) IS NOT MANDATORY OR AUTOMA TIC. IT HAS BEEN HELD THAT FROM THE PLAIN READING OF SECTION 158BFA(2), I T DOES NOT APPEAR THAT IN ALL THE CASES WHERE THE UNDISCLOSED INCOME IS DE TERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC , THE IMPOSITION OF PENALTY AS SPECIFIED UNDER SECTION 158 BFA SHALL FO LLOW AS A NATURAL CONSEQUENCE THEREOF. DISCRETION IS VESTED WITH THE ASSESSING OFFICER TO LEVY THE PENALTY IN RESPECT OF THE UNDISCLOSED INCO ME BUT IT CANNOT BE INFERRED FROM SUCH PROVISION THAT THE LAW OF PENALT Y IS AUTOMATIC. OF COURSE, THE PROVISO TO SECTION 158 BFA (2) ENUMERAT ES THE CIRCUMSTANCES WHEREIN NO PENALTY IS LEVIABLE BUT FROM THAT ALSO I T CANNOT BE INFERRED THAT 47 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 47 THE ABSENCE OF THE CIRCUMSTANCES SO ENUMERATED WILL ATTRACT THE PROVISION OF PENALTY AUTOMATICALLY. IN THE CASE OF CIT VS DODSAL LTD. REPORTED IN (2009 ) 312 ITR PAGE 172 (BOM.), THE HONBLE BOMBAY HIGH COURT ALSO HELD THA T THE PENALTY UNDER SECTION 158 BFA (2) IS DISCRETIONARY AND NOT MANDAT ORY. THE DISCRETION APPLIED BY THE ITAT IN DELETING PENALTY, DOES NOT C ALL FOR INTERFERENCE FOR THE REASONS SO RECODED. AGAINST THE JUDGMENT OF THE BOMBAY HIGH COURT, THE SLP FILED BY THE REVENUE HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT ON MARCH 20, 2009, AFFIRMING THE VIEW OF THE BOMBAY HIGH COURT, WHICH IS REPORTED IN (2009) 312 ITR (STAT) 332. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD A. O. WHILE PASSING THE ASSESSMENT ORDER, HAS DISCUSSED THE IMPOSITION OF P ENALTY IN PARAGRAPH NO. 22 OF THE ASSESSMENT ORDER AND IN THE SAID ASSE SSMENT ORDER, IT WAS MENTIONED AS UNDER:- 22.2 KINDLY REFER TO YOUR BLOCK RETURN FILED ON 25 /08/2004 IN WHICH YOU HAVE SHOWN UNDISCLOSED INCOME OF RS. 4,52,220/- AND TAX LIABILITY THEREON COMES TO RS.2,84,899/-. AS PER CO LUMN 23 OF THE BLOCK RETURN YOU HAVE SHOWN BALANCE TAX AND INT EREST PAYABLE IS NIL WHILE PERUSAL OF THE RETURN IT CAME TO NOTICE THAT YOU HAVE NOT ENCLOSED ANY PROOF OF PAYMENT OF TAX LIABILITY. 48 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 48 IN CASE YOU HAVE ALREADY PAID TAX, FURNISH THE EVI DENCE OF THE SAME. YOUR ATTENTION IS INVITED TO THE PROVISIONS OF SEC TION 158 BFA (2) WHICH READS AS UNDER:- 2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, M AY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHI CH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHI CH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABL E IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE M ADE IN RESPECT OF A PERSON IF- (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAU SE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN H AS BEEN PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST T HE TAX PAYABLE; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMEN T OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PROCEE DING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERM INED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SH OWN IN THE RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOS ED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS I N EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RE TURN. 49 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 49 IT IS RELEVANT TO MENTION HERE THAT AS YOU HAVE NO T FURNISHED PROOF OF TAX PAID ALONG WITH RETURN THE PROVISIONS WILL BE ACCORDINGLY APPLICABLE TO YOU. HOWEVER, NO REPLY TO THE NOTICE HAS BEEN RECEIVED I N THE OFFICE OF THE A.O., THUS THE LD A.O. PROPOSED TO LEVY OF PENALTY U/S 158BFA(2) FOR THE INCOME DISCLOSED IN THE RETURN. AS PER SECTION 158B FA(2) OF THE ACT AS MENTIONED IN THE FOREGOING PARAGRAPHS IN THE SUBMIS SIONS OF THE ASSESSEE. NO INCRIMINATING MATERIAL FOUND OR SEIZED FROM THE POSSESSION OF THE APPELLANT DURING THE COURSE OF PROCEEDINGS O N THE BASIS OF WHICH THE ADDITION WAS MADE. EVEN THE BASIS FOR FILING TH E BLOCK RETURN HAS SHOWN THE UNDISCLOSED INCOME OF RS.4,52,220/- AND T AX LIABILITY AS RS. 2,84,889/- HAS BEEN CHANGE. SUBSEQUENT TO THE PASSI NG OF THE ASSESSMENT ORDER, THE MATTER WAS TAKEN UP BY THE AS SESSEE BEFORE THE LD CIT(A). THE FIRST APPELLATE AUTHORITY HAS REDUCED T HE ADDITION OF RS. 53,82,768/- TO RS. 19,83,184/-. THIS FIGURE OF ARRI VING AT RS. 19,83,184/- WAS ARRIVED AFTER TAKING INTO CONSIDERING THE SUBMI SSION OF THE ASSESSEE. THEREAFTER THE TRIBUNAL HAS FURTHER REDUCED THE AMO UNT OF RS. 19,83,184/- OF THE CIT(A) TO RS. 10,63,184/-. THE R EDUCTION IN AMOUNT WAS ON THE BASIS OF PEAK INCOME INVESTMENT DETERMIN ED BY THE ASSESSEE HIMSELF ON THE BASIS OF DIRECTION ISSUED BY THE LD CIT(A). IN OUR VIEW, THE BASIS FOR ADDITION MADE BY THE A.O. WAS ON ACCOUNT OF DIARIES AND ENTRIES MADE IN THE NAME OF BHANDARI ON THE ASSUMPTION THAT MR. BHANDARI WAS 50 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 50 THE BENAMI OF THE APPELLANT. HOWEVER, THIS VERY BAS IS WAS SUBSEQUENTLY MODIFIED BY THE LD CIT(A) AND BY THE TRIBUNAL , WHE REBY BOTH THE AUTHORITIES INSTEAD OF DECIDING THE QUANTUM ADDITIO N ON THE BASIS OF BENAMI TRANSACTION IN THE NAME OF BHANDARI , HAVE E STIMATED THE INCOME OF THE ASSESSEE ON THE BASIS OF THE PEAK DERIVED ON THE BASIS OF THE DOCUMENTS GIVEN TO THE ASSESSEE. THUS, IN OUR VIEW, THERE IS A TOTAL CHANGE ON THE BASIS OF INITIATION OF THE PENALTY. T HE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHADIRAM BALMUKUND (1972) 84 ITR 183 (ALL), AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF ANA NDA BAZAR PATRIKA PVT. LTD. (1979) 1 TAXMAN 445 (CAL) HAS HELD THAT WHEN T HE VERY BASIS OF INITIATION OF PENALTY HAS CHANGED THEN THE INITIATI ON OF PENALTY IS NO MORE SUSTAINABLE IN THE EYES OF LAW. BESIDES THIS, WE HAVE GONE THROUGH THE ORDER PASSED BY THE LD A.O. ON THE QUANTUM PROCEEDING, NO SATISFACTION HAS BEEN ME NTIONED BY THE LD A.O. IN THE ASSESSMENT ORDER BEFORE ISSUING SHOW CA USE NOTICE AND REFERRING THE MATTER FOR INITIATION OF PENALTY. 15.1 EVEN OTHERWISE, IN OUR VIEW, THE PENALTY AS SO UGHT TO BE IMPOSED WAS ON THE BASIS OF SECTION 158BFA(2). AS PER THE S AID PROVISION, THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. THE SATISFA CTION FOR IMPOSITION OF PENALTY IS REQUIRED TO BE RECORDED BY THE LD A.O IN THE ASSESSMENT ORDER. THE LD A.O. HAS DETERMINED THE UNDISCLOSED INCOME A T RS. 67,77,020/- AS 51 ITSSA NO. 01/JP/13 MADHO DAS BANGARD , VS. ACIT 51 AGAINST RS. 4,52,220/- UNDISCLOSED SHOWN IN THE BLO CK OF RETURN, WHEREAS IN APPELLATE PROCEEDING IT WAS REDUCED TO RS. 10,63 ,184/- ON ESTIMATE BASIS. THEREFORE, THE PROCEEDINGS FOR IMPOSITION O F PENALTY WERE INITIATED ON THE BASIS OF EARLIER FINDING BY THE AO. HOWEVER, AS MENTIONED HEREINABOVE, NOT ONLY UNDISCLOSED INCOME HAS BEEN R EDUCED BUT THE BASIS FOR CALCULATING THE UNDISCLOSED INCOME HAS ALSO BEE N CHANGED, IN OUR VIEW, THE IMPOSITION OF PENALTY, WAS NOT WARRANTED, THEREFORE, WE DEEM IT APPROPRIATE TO DELETE THE SAME. ACCORDINGLY, THE PE NALTY CONFIRMED BY THE LD CIT(A) IS DELETED. 16. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- HKKXPAN YFYR DQEKJ (BHAGCHAND) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 14 TH JULY, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MADHO DAS BANGARD, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CC-1, JAIPUR 3. VK;DJ VK;QDR@ CIT , JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-(CENTRAL), JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITSSA NO.01/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR