Chandran K., Palakkad V. DCIT, Palakkad

ITSSA 33/COCH/2008

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8113 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 13-03-2008
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T M SREEDHARAN SR ADV
• Keywords: Reasonable cause; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM IT(SS)A NO. 33/COCH/2008 BLOCK ASSESSMENT YEAR:1.4.1990 TO 29.8.2000 CHANDRAN K. PROP. BUILTECH GAS AGENCY, FORT SOUTH ROAD, PALAKKAD. [PAN: ABFPC 1361A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-, PALAKKAD. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI T.M.SREEDHARAN, SR.ADV.-AR REVENUE BY MS. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 27/07/2011 DATE OF PRONOUNCEMENT 25/08/2011 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE, CONTESTING THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCHI (CIT(A) FOR SHORT) DATED 11.1.2008, CONFIRMING THE LEVY OF PENALTY U/S. 158BFA(2) OF THE INCOME-TAX AC T, 1961 ('THE ACT' HEREINAFTER) VIDE ORDER DATED 24.9.2007. 2. THE FACTS OF THE CASE TO THE EXTENT RELEVANT ARE THAT THE ASSESSEE, CONSEQUENT TO A SEARCH ACTION IN ITS CASE U/S. 132 OF THE ACT ON 29 .8.2000 AND 18.9.2000, LEADING TO VARIOUS INCRIMINATING DOCUMENTS BEING FOUND AND SEI ZED, WAS ASSESSED (VIDE ORDER DATED 27.9.2002) AT ` 22.15 LAKHS AS AGAINST THE RETURNED UNDISCLOSED INC OME OF ` 1672150/-, FILED IN RESPONSE TO NOTICE U/S. 158BC. IN APPEAL, THE ASSESSEES INCOME WAS FINALLY ASSESSED AT ` 1746100/-, AN ADDITION OF ` 469350/- BEING DELETED BY THE LD. CIT(A) AND CONFIRMED BY THE TRIBUNAL IN SECOND APPEAL PREFERRE D BY THE REVENUE. THE ASSESSING IT(SS)A. NO.33/COCH/2008 2 OFFICER (AO) ON PART CONFIRMATION OF HIS ORDER PROC EEDED TO LEVY PENALTY U/S.158BFA(2), INITIATED PER THE ASSESSMENT ORDER, ON THE SURVIVIN G ADDITION OF ` 73950/- TO THE RETURNED INCOME ( ` 1746100 ` 1672150). THE SAID ADDITION IS IN RESPECT OF THE G ROSS PROFIT - AT THE DISCLOSED RATE OF 23.29% - ON THE UNACCOUNTED SALES OF ` 3,17,552/- DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR (A.Y.) 2000-01 , FORMING PART OF THE BLOCK PERIOD. THE ASSESSEE, IT WAS OBSERVED BY THE AO, THOUGH HAD RETURNED A SUM OF ` 5,48,036/- AS PROFIT ON THE UNACCOUNTED SALES OF GAS STOVES DURIN G THE PREVIOUS YEAR 2000-01 (I.E., RELEVANT TO A.Y. 2001-02), HAD OMITTED TO LIKEWISE DISCLOSE THE PROFIT ON THE UNACCOUNTED SALES OF THE STOVES DURING THE PREVIOUS YEAR 1999-2 000 IN FORM 2B. ON THE SAME BEING POINTED OUT TO THE ASSESSEE DURING THE ASSESSMENT P ROCEEDINGS, HE AGREED TO THE ADDITION FOR THE SAME, AMOUNTING TO ` 73958/-. THE ASSESSEE CONTESTS THE LEVY OF PENALTY U/S. 158BFA(2) AT ` 45,000/- ON THIS ADDITION; THERE BEING CONSEQUENTLY A DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME BY THAT AMOUNT . THE SAME STOOD CONFIRMED IN APPEAL AS THE LD. CIT(A) FOUND THE ASSESSEES CASE TO BE FULLY COVERED BY THE PROVISION OF S. 158BFA(2), AND THE CASE LAW RELIED UPON BEING NO T APPLICABLE. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3. BEFORE US, THE LD. AR, THE ASSESSEES COUNSEL, W OULD SUBMIT THAT THE ASSESSEE COULD NOT BE PENALISED FOR HAVING AGREED IN GOOD FAITH TO THE ADDITION FOR A PALTRY SUM, WHICH WAS TO PURCHASE PEACE WITH THE REVENUE. IN FACT, T HE APPELLATE AUTHORITIES HAD CLEARLY CONFIRMED THAT THE DIFFERENCE IN THE STOCK OF GAS S TOVES (335 NOS.) WAS NOT AN UNACCOUNTED STOCK, LEADING TO THE DELETION OF THE A DDITION OF ` 4.69 LAKHS IN ITS RESPECT IN APPEAL. THE ASSESSEE WAS PRECLUDED FROM APPEALING A GAINST THE BALANCE ADDITION IN VIEW OF THE SAME HAVING BEEN AGREED TO IN ASSESSMENT. SO , HOWEVER, THE SAME COULD NOT OPERATE TO ITS PREJUDICE IN THE PENALTY PROCEEDINGS , WHICH ARE SEPARATE AND DISTINCT, WITH THE AO BEING VESTED WITH THE DISCRETION TO NOT LEVY THE PENALTY; THE PROVISION BEARING THE WORD MAY DIRECT AND NOT SHALL DIRECT. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT THE PENALTY STANDS LEVIED ONLY ON THE UNDECLAR ED PORTION OF THE UNDISCLOSED INCOME, SO THAT THE SAME STANDS CORRECTLY LEVIED IN TERMS O F THE RELEVANT PROVISION. IT(SS)A. NO.33/COCH/2008 3 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WITHOUT DOUBT, THE PENALTY U/S. 158BFA(2) I S NOT AUTOMATIC OR MANDATORY, AND BONA FIDES COULD SAVE ITS LEVY. SO, HOWEVER, IN OUR VIEW, WH ERE THE SAME STANDS LEVIED, IT BECOMES INCUMBENT ON THE APPELLATE AUTHORITY TO, I. E., WHERE CHALLENGED, EXAMINE WHETHER THE DISCRETION VESTED WITH THE AUTHORITY LE VYING THE PENALTY HAS BEEN JUDICIOUSLY EXERCISED OR NOT. THAT IS, TO SEE WHETHER THE CIRCU MSTANCES FOR NOT LEVYING THE PENALTY EXISTED. THIS IS FOR THE REASON THAT THE SECTION IS CAST IN NEGATIVE TERMS, OBLIGING THE AO TO LEVY THE PENALTY, SPECIFYING THE CIRCUMSTANCES WHER E-UNDER THE SAME WOULD NOT BE LEVIED. THE SECOND PROVISO TO S. 158BFA(2); READS AS UNDER:- PROVIDED FURTHER THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASE PENALTY SHALL BE IMPOSED ON THAT PORTION OF THE UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. AS SUCH, THE AO IS OBLIGED TO LEVY THE PENALTY UNLE SS THE CONDITIONS STATED IN THE FIRST PROVISO TO S 158BFA(2) ARE SATISFIED, I.E., AT A MINIMUM O F ONE AND A MAXIMUM OF THREE TIMES THE TAX LEVIABLE ON THE INCOME DETERMIN ED BY HIM U/S. 158BC(C). THE SECOND PROVISO CASTS A FURTHER EXCEPTION, SO THAT THE PENALTY SHA LL BE RESTRICTED TO ONLY THE EXCESS AMOUNT WHERE THE INCOME AS ASSESSED EXCEEDS THE RET URNED UNDISCLOSED INCOME. THE LAW IS CAST IN STRICT TERMS, AS ANY FURTHER ADDITION TO THE RETURNED UNDISCLOSED INCOME REPRESENTS A FAILURE BY THE ASSESSEE TO COME CLEAN IN SPITE OF THE EVIDENCE BEING FOUND OF UNDISCLOSED INCOME IN SEARCH. IT WOULD BE RELEVANT TO STATE THAT EVEN THE GATEWAY OF `REASONABLE CAUSE, PROVING WHICH WOULD SAVE PENALT Y U/S. 273B, IS NOT AVAILABLE FOR PENALTY U/S. 158BFA(2). THE ONUS THEREFORE TO ESTAB LISH ITS BONA FIDES IS HEAVY ON THE ASSESSEE. 4.2 COMING TO THE FACTS OF THE PRESENT CASE, THE AS SESSEE PLEADS FOR THE ABSENCE OF ANY INCRIMINATING MATERIAL IN RESPECT OF THE `IMPUGNED ADDITION. WE ARE UNABLE TO AGREE; THE ASSESSEE RATHER HAVING CONCEDED TO THE OMISSION DUR ING THE COURSE OF THE ASSESSMENT IT(SS)A. NO.33/COCH/2008 4 PROCEEDINGS ITSELF, AND NEITHER ADMITTEDLY CARRIED THE MATTER IN APPEAL. NO CASE AS TO THE `AGREEMENT HAVING BEEN BASED ON INCORRECT ASSUMPTI ON OF FACTS OR THROUGH ERROR HAS BEEN MADE OUT AT ANY STAGE. IN FACT, THE ASSESSEE HAD ITSELF DISCLOSED THE PROF IT OF ` 5.48 LAKHS ON UNACCOUNTED SALES OF STOVES DURING THE FOLLOWING YEAR, AND ON BEING POINTED OUT OF AN TO OMISSION TO SIMILARLY RETURN PROFIT QUA THE UNACCOUNTED SALES FOR THE RELEVANT, IMMEDIATELY PRECEDING YEAR, AGREED TO THE ADDITION AT THE SUM ADDED . THE SAME CONTRADICTS ITS CONTENTION OF THE ADDITION BEING ON LY A MERE ESTIMATE; ANY AMOUNT WOULD ONLY BE DETERMINED ON SOME BASIS, WHILE THE PROFIT RATE APPLIED IS AS DISCLOSED BY THE ASSESSEE FOR THE RELEVANT YEAR. THIS ALSO GIVES CRE DENCE TO THE OBSERVATION BY THE LD. CIT(A) THAT IT APPEARS VERY LIKELY THAT BUT FOR THE DETECTION BY THE AO, THE ADDITION UNDER REFERENCE WOULD HAVE ESCAPED ASSESSMENT. THE SAME, IT MAY BE CLARIFIED, HAS NOTHING TO DO WITH THE OTHER ADDITION, DELETED IN APPEAL, WHIC H WAS FOR THE REASON THAT THE ASSESSEE COULD SUBSTANTIATE ITS CLAIM OF THE SAID STOCK HAVI NG, THOUGH RECEIVED BY, BEEN BILLED TO IT BY THE SUPPLIER ONLY SUBSEQUENT TO, THE DATE OF SEA RCH. ALL, THEREFORE, THAT CAN BE REASONABLY INFERRED FROM THE FACTUM OF AN AGREED AD DITION IS THAT THE ASSESSEE HAD NO EXPLANATION FOR THE FAILURE TO RETURN THE CORRECT U NDISCLOSED INCOME, I.E., AMOUNTS TO AN ADMISSION THEREOF. THERE IS THUS NO QUESTION OF THE ASSESSEE HAVING AGREED FOR THE ADDITION ONLY TO BUY PEACE, WHICH CANNOT OPERATE AS AN ALIBI , AND HAS TO BE BORNE OUT BY THE FACTS AND CIRCUMSTANCES OF THE CASE. EVEN AS PO INTED OUT BY THE LD. CIT(A), IT CANNOT BE SAID TO BE A CASE TO WHICH THE CONCEPT OF `AGREE MENT FOR BUYING PEACE COULD APPLY; THE ASSESSEE HAVING BEEN FOUND TO HAVE NOT RETURNED THE CORRECT INCOME. THE CONCEPT BECOMES APPLICABLE WHERE THERE ARE NO DEFINITE MATE RIALS WITH THE REVENUE, AND NOT WHERE, ON THE CONTRARY, THE SUPPRESSION OR UNDER-RE PORTING OF INCOME IS NOT IN DOUBT, AND WHICH ALSO FORMS THE BASIS OF THE ASSESSEES NOT CA RRYING THE MATTER IN APPEAL, I.E., ASSUMING SO; THERE BEING NO MATERIAL BEFORE US IN I TS RESPECT, AND WHICH IT ADMITTEDLY DID FOR THE OTHER ADDITION. THE ASSESSEE WAS AS A MATTE R OF FACT CARRYING ON UNACCOUNTED BUSINESS, AND THE ADDITION SUBSEQUENTLY DELETED IN APPEAL ALSO IN FACT STOOD ADMITTED TO IN PART (315 NOS.) AS BEING OUT OF UNACCOUNTED STOCK, THOUGH WAS SOUGHT TO BE EXPLAINED LATER. THE AGREEMENT TO THE ADDITION, AS WELL AS T HE DECISION NOT TO APPEAL, I.E., IF SO, COULD THUS ONLY BE SAID TO HAVE BEEN GUIDED BY THE MERITS OF THE CASE. THE SAME, UNDER IT(SS)A. NO.33/COCH/2008 5 THE CIRCUMSTANCES, THEREFORE RATHER THAN SUPPORTING THE ASSESSEES CASE, DEBILITATES IT. FURTHER, THE PENALTY STANDS LEVIED AT THE MINIMUM R ATE. THE DECISIONS RELIED UPON BY THE ASSESSEE, VIZ. CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC); CIT (DY.) VS. HEERA CONSTRUCTION CO. (P) LTD . (2009) 121 ITD 407 (COCHIN); AND CH. SURESH REDDY VS. ACIT (2009) 120 ITD 528 (CHENNAI), WHICH STAND PERUSED, ARE COMPLETELY DISTINGUISHABLE ON FACTS, EVEN AS POINTED OUT BY THE LD. CIT(A). WE D ECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. SD/- SD/ - (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 25TH AUGUST, 2011 GJ COPY TO: 1. SHRI CHANDRAN K., PROP. BUILTECH GAS AGENCY, FOR T SOUTH ROAD, PALAKKAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, PALAKKAD. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .