Shri Pravin P. Agrawal, GANDHIDHAM V. The Assistant Commissioner of Income Tax, Circle, GANDHIDHAM

ITSSA 50/RJT/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8355 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-03-2011
• Assessment Year: misc
• Appeal Filed On: 22-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Keywords: Unexplained investment; Gift; Salary income
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T(SS)A. NO.50/RJT/2009 (BLOCK PERIOD 01-04-1995 TO 06-02-2002) SHRI PRAVIN P AGRAWAL VS ACIT, GANDHIDHAM CIRCLE PLOT NO.24 GANDHIDHAM SECTOR NO.1, GANDHIDHAM PAN : ABKPA8899A (APPELLANT) (RESPONDENT) I.T(SS)A. NO.98/RJT/2009 (BLOCK PERIOD 01-04-1995 TO 06-02-2002) ACIT, GANDHIDHAM CIRCLE VS SHRI PRAVIN P AGRAWAL GANDHIDHAM GANDHIDHAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIMAL DESAI REVENUE BY : SHRI SL MEENA O R D E R PER AL GEHLOT, AM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 21-08-2008 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- II, RAJKOT FOR THE BLOCK PERIOD 01-04-1995 TO 06-02-2002 WHEREBY THE CIT(A) PARTLY CONFIRMED THE PENALTY IMPOSED U/S 158BFA(2) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH U/ S 132 WAS CARRIED OUT ON 06-02-2002. THE ASSESSEE FILED BLOCK RETURN DECLAR ING UNDISCLOSED INCOME OF RS.3 LAKHS. THE ASSESSING OFFICER, HOWEVER, DETERM INED UNDISCLOSED INCOME OF RS. 8,20,612. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE REVENUE FI LED SECOND APPEAL BEFORE THE TRIBUNAL WHICH HAS BEEN DECIDED VIDE ITSS NO.44/RJT /2004 ORDER DATED 02-12- 2005. THE ITAT HAS CONFIRMED THE FOLLOWING THREE A DDITIONS: ITSS 50/RJT/2009 ITSS 98/RJT/2009 2 SR. NO NATURE OF ADDITION AS PER A.OS ORDER AS PER CIT(A)S ORDER AS PER ITATS ORDER 1 UNEXPLAINED CASH 1,50,000/- 1,50,000/- 1,50,000/- 2 UNACCOUNTED DEPOSITS (SHRI SURAJRAM CHAUDHARI & SHRI HANUMAN CHAUDHARI) 1,05,000/- 1,05,000/- 1,05,000/- 3. UNACCOUNTED DEPOSITS 90,612/- NIL 44,612/- 2.1 THE ASSESSING OFFICER LEVIED MAXIMUM PENALTY BE ING 300% OF TAX SOUGHT TO BE EVADED ON THE GROUND THAT THE CONDUCT OF THE ASSESSEE RIGHT FROM THE BEGINNING WAS TO MISLEAD THE DEPARTMENT REGARDING H IS FRAUDULENT ACTIVITIES AND EVASION OF TAX. THE ASSESSEE WAS ALSO FOUND GUILTY OF KEEPING TRANSACTION OUTSIDE THE BOOKS OF ACCOUNT. HE WAS HELD GUILTY O F CHANNELISING HIS UNACCOUNTED MONEY THROUGH DUBIOUS MEANS WHICH ARE N OT PERMISSIBLE. IF THE ASSESSEES ARE ALLOWED IN LATITUDE THEY WILL AGAIN I NDULGE IN SIMILAR UNLAWFUL ACTIVITIES. 3. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSI ON CONFIRMED THE PENALTY IN RESPECT OF UNEXPLAINED CASH OF RS.1,50,000 AND U NEXPLAINED BANK DEPOSITS REPRESENTING BOGUS GIFT OF RS.1,05,000 FROM SHRI SU RAJRAM CHAUDHARI & SHRI HANUMAN CHAUDHARI BUT THE PENALTY WAS REDUCED TO 10 0%/150% IN PLACE OF 300% IMPOSED BY THE ASSESSING OFFICER. IN RESPECT OF UNEXPLAINED BANK DEPOSITS IN THE NAME OF SHRI RAMESH PATEL THE CIT(A) CANCELL ED THE PENALTY. THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF P ENALTY ON TWO ADDITIONS, I.E. RS.1,50,000 AND RS.1,05,000 AND THE REVENUE IS IN A PPEAL AGAINST THE DIRECTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO LEVY PENALTY AT 100%/150%INSTEAD OF 300% AND CANCELING THE PENALTY ON ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.44,612. THE CIT(A) WHI LE DECIDING INDIVIDUAL ITEM REDUCED PENALTY TO 150% BUT IN CONSOLIDATED FINDING IT WAS STAREED. 100% FOR THE SAKE OF CLARITY, THE EFFECTIVE GROUNDS RAISED IN BO TH THE APPEALS ARE REPRODUCED BELOW: ASSESSEES APPEAL 1. THE ORDER U/S 158BFA(2) IS BAD IN LAW. ITSS 50/RJT/2009 ITSS 98/RJT/2009 3 2. THE A.O. HAS ERRED IN LAW AS WELL AS ON FACTS IN LEVYING PENALTY U/S 158BFA(2) OF RS.5,39,301/- @ 300% OF TH E TAX SOUGHT TO BE EVADED. THE LD.CIT(A) HAS ERRED IN CO NFIRMING IT TO THE EXTENT OF 100% ON THE ADDITION OF RS.1,50 ,000/- (UNEXPLAINED CAH CREDIT) & RS.1,05,000/- (UNACCOUNT ED DEPOSITS). REVENUES APPEAL: 1. THE LD.CIT(A)-II HAS ERRED IN LAW AND ON FACT O F THE CASE IN RESTRICTING PENALTY @150% AS AGAINST @300% LEVIED B Y THE AO ON THE CONFIRMED ADDITION OF RS.1,50,000/- ON AC COUNT OF UNEXPLAINED CASH AND RS.1,05,000/- ON ACCOUNT OF UNACCOUNTED DEPOSITS FROM SURJARAM CHAUDHARI & SH.HANUMAN CHAUDHARI. 2. THE LD.CIT(A)-II HAS ERRED IN LAW AND ON FACT OF HE CASE IN DELETING THE PENALTY LEVIED ON THE CONFIRMED ADDITI ON ON ACCOUNT OF UNEXPLAINED BANK DEPOSITS OF RS.44,612/- . 4. THE LD.AR SUBMITTED THAT GROUND NO.1 IS GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. IN RESPECT OF ADDITION O F RS.1,50,000 THE LD.AR SUBMITTED THAT THE ITAT HAS CONFIRMED THE ADDITION ON THE BASIS OF PROBABILITY AND UNREASONABLE TIME GAP IN THE DATE OF WITHDRAWAL AND DATE OF SEARCH AND THAT THE ADDITION WAS CONFIRMED BY TAKING THE VIEW ON THE BA SIS OF PROBABILITY, BUT NOT FOUND EXPLANATION OF THE ASSESSEE FALSE AND NOT DIS PROVED. THE CIT(A) CONFIRMED THE PENALTY TO THE EXTENT OF 100%, WHO FA ILED TO APPRECIATE THE REPLY GIVEN BY THE ASSESSEE AT THE TIME OF SEARCH THAT TH E ASSESSEE WAS UNDER MENTAL PRESSURE. HOWEVER, AT THE TIME OF ASSESSMENT PROCE EDINGS, THE ASSESSEE FURNISHED SUPPORTING DOCUMENTARY EVIDENCE. THEREFO RE, UNDER THESE CIRCUMSTANCES, THE PENALTY U/S 158BFA(2) IS NOT LEV IABLE. THE LD.AR IN SUPPORT OF HIS CONTENTION HAS RELIED UPON THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF EKTA JEWELLERS IN ITA NO.02/RJT/2006 OR DER DATED 07-07-2006 AND ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF G ANDHI SERVICE STATION 100 TTJ 143. IN RESPECT OF ADDITION OF RS.1,05,000 BE ING GIFT RECEIVED FROM SHRI SURAJRAM CHAUDHARI & SHRI HANUMAN CHAUDHARI THE LD. AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS DUR ING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF PENALTY PROCEEDINGS, COPY OF ITSS 50/RJT/2009 ITSS 98/RJT/2009 4 DECLARATION OF GIFTS OF BOTH THE DONORS, COPY OF PR OOF OF INCOME OF BOTH THE DONORS, SOURCE OF INCOME, SALARY INCOME AND AGRICUL TURAL INCOME, COPY OF BANK STATEMENT OF BOTH THE DONORS. THE LD. AR SUBMITTED THAT THE ITAT HAS CONFIRMED THE ADDITION ON THE GROUND THAT CREDITWORTHINESS OF THE DONORS HAS NOT BEEN PROVED. THE LD.AR SUBMITTED THAT DONORS HAVE NOT B EEN DENIED THE GIFT OR THE GIFT IS DISPROVED BY ANY CONTRADICTORY EVIDENCE ON RECOR D. THE ASSESSING OFFICER LEVIED THE PENALTY MERELY BECAUSE THE ADDITION WAS CONFIRMED BY APPELLATE AUTHORITY. THERE IS NO SEPARATE FINDING OR INVESTI GATION. THE CIT(A) CONFIRMED THE PENALTY TO THE EXTENT OF 150%. HE FAILED TO APPREC IATE THAT AN ADVERSE INFERENCE DRAWN FROM THE FACT OF THE CASE WILL NOT BY ITSELF BE A GROUND OF LEVY OF PENALTY. IT MAY BE GOOD FOR ADDITION BUT NOT FOR IMPOSITION OF PENALTY. THE LD.AR IN SUPPORT OF HIS CONTENTION RELIED UPON THE JUDGMENT OF THE G UJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILE CORPORATION VS CIT 259 ITR 145 (GUJ). IN RESPECT OF ADDITION OF RS.44,612 SUSTAINED IN THE QUANTUM APPEAL ON WHI CH THE PENALTY HAS BEEN CANCELLED BY THE CIT(A) AGAINST WHICH THE DEPARTMEN T IS IN APPEAL, THE LD.AR SUBMITTED THAT THE ITAT HAS CONFIRMED THE ADDITION BY TAKING A VIEW THAT THE ASSESSEE HAS OPERATED THE BANK ACCOUNT IN THE NAME OF SHRI RAMESH PATEL. THE VIEW OF ITAT IS NOT SUPPORTED BY ANY DIRECT EVI DENCE. THE POSSIBILITY OF THE OPPOSITE VIEW THAT THE ASESSEE HAS NOT OPERATED THE BANK ACCOUNT OF SHRI RAMESH PATEL AND HAS NOT DERIVED ANY BENEFIT BY GET TING PASS BOOK IN HIS CUSTODY CANNOT BE RULED OUT IN TOTO. THE LD.AR IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING DECISIONS: NEMICHAND VS ACIT (INV) 93 TTJ 564 (ITAT BANG) SMT. MALA DAYANITHI VS DCIT 92 TTJ 270 (ITAT BANG) ITO VS SMT. PREMILA PRATAP SHAH 100 ITD 160 5. THE LD.DR, ON THE OTHER HAND RELIED UPON THE ORD ER OF THE ASSESSING OFFICER. ITSS 50/RJT/2009 ITSS 98/RJT/2009 5 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. THE FIRST ADDITION ON WHICH PENALTY HAS BEEN LEVIED IS RS.1,50,000 ON ACCOUNT OF UNEXPLAINED. CASH. THE BRIEF FACTS OF THIS ISSUE I S THAT OUT OF TOTAL CASH OF RS.1,68,860 FOUND FROM THE RESIDENCE A SUM OF RS.1, 50,000 WAS CLAIMED TO BE WITHDRAWN FROM ONE M/S LAXMI TRADING CO IN WHICH TH E ASSESSEE WAS A PARTNER. ON PERUSAL OF QUANTUM ORDERS INCLUDING THE ORDER OF ITAT, THE ITAT HAS CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 3. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ALLEGED CASH HAS BEEN WITHDRAWN BY THE ASSESSEE ON 20.12.2001 WHEREAS SEARCH HAD TAKEN PLACE ON 6.2.2002, SO IT I S HIGHLY IMPROBABLE THAT THE ASSESSEE WOULD KEEP CASH FOR AL MOST TWO MONTHS IN HIS RESIDENCE. DUE TO UNREASONABLE TIME GAP IN THE DATE OF WITHDRAWAL AND DATE OF SEARCH, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES FOR MAKING THE ADDIT ION OF RS.1,50,000, 7. THE SECOND ADDITION ON WHICH PENALTY IS LEVIED I S RS.1,05,000 ON ACCOUNT OF UNACCOUNTED DEPOSIT IN THE NAME OF SURAJRAM CHAU IDHARI & SHRI HANUMAN CHAUDHARI. THE BRIEF FACTS OF THIS ADDITION IS THA T DURING THE COURSE OF SEARCH, THE PASSBOOK OF EMPLOYEES OF THE ASSESSEE SHRI SURAJRAM CHAUDHARI AND SHRI HANUMAN CHOUDHARY WERE FOUND AT THE RESIDENCE OF TH E ASSESSEE. AFTER PERUSING THE BANK STATEMENT OF THESE TWO PERSONS, T HE ASSESSING OFFICER FOUND THAT THEY DEPOSITED CASH IN BANK ACCOUNT AND ISSUED CHEQUES IN FAVOUR OF THE ASSESSEE AND HIS FAMILY MEMBERS BY WAY OF GIFTS. D URING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED AFFIDAVITS OF THESE TWO PERSONS STATING THAT THEY WERE WORKING IN THE BUSINESS CONCERN OF THE ASSESSE E SINCE 10 YEARS AND DECIDED TO GIVE GIFT TO THE ASSESSEE AND HIS FAMILY MEMBERS OUT OF LOVE AND AFFECTION. IN THE QUANTUM MATTER, THE ADDITION HAS BEEN SUSTAINED BY THE ITAT. REFERRING TO THE FINDING OF THE ASSESSING OFFICER T HAT THE BANK ACCOUNTS OF THESE TWO PERSONS WERE DEPOSITED WITH CASH AND ON THE VER Y SAME DAY THEY WERE TRANSFERRED IN THE NAME OF VARIOUS PERSONS OF THE A SSESSEE GROUP. THE ACCOUNTS WERE OPENED ON 21-01-1998 WITH A CASH OF RS.500 AND THERE WAS NO OTHER TRANSACTION IN THE ACCOUNTS EXCEPT FOR INTEREST CRE DIT. THE ITAT OBSERVED THAT THE ITSS 50/RJT/2009 ITSS 98/RJT/2009 6 ASSESSING OFFICER HAS BEEN ABLE TO PROOF THE ASSOCI ATION OF THESE PASSBOOKS WITH THE ASSESSEE GROUP AS THE AMOUNT DEPOSITED IN THE B ANK HAVE GONE TO THE FAMILY MEMBERS OF THE GROUP AND ALSO THE CREDITWORTHINESS OF THE SO-CALLED DONORS HAVE NOT BEEN PROVED. THE ASSESSEE FAILED TO BRING OUT ANY RECORD BEFORE THE ITAT TO DEVIATE FROM THE FINDINGS OF THE LOWER AUTHORITIES. 8. THE THIRD ADDITION ON WHICH PENALTY HAS BEEN LEV IED BY THE ASSESSING OFFICER IS RS.44,612 SUSTAINED BY THE ITAT OUT OF T HE TOTAL ADDITION MADE BY THE ASSESSING OFFICER AT RS.90,612. IN QUANTUM ORDER, THE ITAT WHILE DECIDING THE ISSUE RELATING TO THIS ADDITION HELD AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS OPERATED THE BANK ACCOUNT IN THE NAME OF SHRI RAMESH N PATEL. THE PASS BOOK WAS FOUND IN THE POS SESSION OF THE ASSESSEE DURING THE COURSE OF SEARCH. SHRI RAM ESH N PATEL IS AN EMPLOYEE OF THE ASSESSEE. THE PEAK AMOUNT OF TR ANSACTIONS IS RS./44,612. THEREFORE, CONSIDERING THE FACTS AND C IRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE CI T(A) IS NOT JUSTIFIED IN DELETING THE SAME. WE, THEREFORE, REV ERSE THE FINDINGS OF THE CIT(A) BUT AT THE SAME TIME WE FOUND THAT ADMIT TEDLY, THE PEAK AMOUNT OF TRANSACTIONS IN THE PASS BOOK IS RS.44,61 2 AND AS SUCH WE DIRECT THE ASSESSING OFFICER TO MAKE ADDITION OF ONLY RS.44,612 ON THIS COUNT. 9. SO, IN NUTSHELL THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ABOVE ADDITIONS CONFIRMED BY THE ITAT SHOULD BE VISITED W ITH PENALTY U/S 158BFA(2) OF THE ACT. WE, EXAMINE THE CORRECTNESS OF THE ACTION S OF THE AUTHORITIES BELOW IN THE FOLLOWING PARAGRAPHS: 10. PROVISIONS OF SECTION 158BFA(2) OF THE ACT READ AS BELOW: (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY D IRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHAL L NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED ITSS 50/RJT/2009 ITSS 98/RJT/2009 7 INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HA S BEEN PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED B Y THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON T HAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. ON A PLAIN READING OF THE ABOVE SECTION IT IS UNDER STOOD THAT PENALTY U/S 158BFA(2) IS NOT LEVIABLE IF THE FOLLOWING CONDITIO NS ARE SATISFIED:- I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEEN PAID OR, IF THE ASSETS SEIZED CONSISTS OF MONEY, THE ASSESSEE OFFER S THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; III) EVIDENCE OF TAX PAID IS FURNISHED ALONGWITH TH E RETURN; AND IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT O F THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN . PROVIDED FURTHER TH AT THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EX CESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PE NALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETER MINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. ITSS 50/RJT/2009 ITSS 98/RJT/2009 8 HENCE, THE PROVISIONS OF SECTION 158BFA(2) ARE VERY CLEAR AND THERE IS IMMUNITY FROM LEVY OF PENALTY U/S 158BFA(2), IF THE ABOVE CO NDITIONS ARE FULFILLED, OTHERWISE THERE IS NO IMMUNITY REGARDLESS OF NATURE OF ADDITI ON. 11. WE ALSO FIND THAT THE ASSESSEE IS VESTED WITH D ISCRETION TO LEVY PENALTY U/S 158BFA(2) OF THE ACT AND THEREFORE, THE SAME COULD NOT BE IMPOSED IN A MECHANICAL MANNER. THE LEVY OF PENALTY UNDER THIS SECTION CAN NEVER BE AUTOMATIC IRRESPECTIVE OF THE FACTS AND CIRCUMSTANC ES OF THE CASE. THE REVENUE AUTHORITIES MUST TAKE INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE LEVYING ANY PENALTY. THE DISCRETION VE STED IN THE REVENUE AUTHORITIES MUST BE EXERCISED JUDICIOUSLY AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. THE USE OF WORD MAY IN SUB SECTION 158B FA(2) CLEARLY SHOW THAT THE ASSESSING OFFICER IS VESTED WITH DISCRETIONARY POWE RS TO LEVY OR NOT TO LEVY PENALTY. PROVIDING OPPORTUNITY TO THE ASSESSEE BEF ORE LEVY OF PENALTY IS NOT A MERE FORMALITY. THE ASSESSEE MAY DEMONSTRATE WITH THE HELP OF THE FACTS AND CIRCUMSTANCES THAT PENALTY U/S 158BFA(2) IS NOT LEV IABLE. THE ITAT IN THE CASE OF EKTA JEWELLERS ITSS NO.02/RJT/2006 ORDER DATED 0 7-07-2006 WHILE DECIDING THE ISSUE OF LEVY OF PENALTY U/S 158BFAS(2) HAS OBS ERVED THAT THE PROVISIONS OF LAW WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) O F THE ACT ESPECIALLY EXPLANATION 1 TO PROVISIONS OF SECTION 271(1)(C), ACCORDING TO WHICH IF THE ASSESSEES EXPLANATION IS FOUND TO BE FALSE, THEN PENALTY SHOU LD BE IMPOSED, FULLY APPLICABLE TO LEVY OF PENALTY U/S 158BFA(2) ALSO. 12. IN THE LIGHT OF ABOVE DISCUSSION, IF WE CONSIDE R THE FACTS OF THE CASE UNDER CONSIDERATION WE FIND THAT THE ADDITION OF RS.1,50, 000 WAS SUSTAINED BY THE ITAT IN QUANTUM MATTER ON THE GROUND THAT THERE WAS SOME TIME GAP BETWEEN THE WITHDRAWAL AMOUNT FROM ONE M/S LAXMI TRADING COMPAN Y IN WHICH THE ASSESSEE WAS PARTNER AND CASH FOUND AT THE TIME OF SEARCH. THE GAP OF TIME BETWEEN WITHDRAWAL AND CASH FOUND MAY BE THE REASON FOR SUS TAINING ADDITION BUT THERE IS NO FINDING ON RECORD THAT THE EXPLANATION FURNISHED BY THE ASSESSEE WAS FALSE ITSS 50/RJT/2009 ITSS 98/RJT/2009 9 EXPLANATION. IN VIEW OF THIS BONA FIDE EXPLANATIO N, WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY U/S 158BFA(2) IS NOT LEVIABLE. TH EREFORE, PENALTY LEVIED ON ADDITION OF RS.1,50,000 BEING UNACCOUNTED CASH IS H EREBY CANCELLED. 13. AS REGARDS THE PENALTY OF RS.1,05,000 WE FIND A N UNUSUAL SITUATION NORMALLY PREVAILING IN THE SOCIETY. NORMALLY THE E MPLOYER GIVES GIFTS TO THEIR EMPLOYEES, BUT IN THE CASE UNDER CONSIDERATION, THE EMPLOYEES HAVE GIVEN GIFTS TO THE EMPLOYERS AND THEIR FAMILY MEMBERS. THE EXP LANATION FURNISHED BY THE ASSESSEE IS APPARENTLY AND ADMITTEDLY A FALSE EXPLA NATION. IT MAY BE SUPPORTED BY SOME MUTUALLY PREPARED DOCUMENTS IN THE FORM OF GIFT DECLARATION, BANK STATEMENT AND OTHERS. THE JUDGMENT OF HONBLE JURI SDICTIONAL HIGH COURT RELIED UPON BY THE LD.AR IN CASE OF NATIONAL TEXTILE CORPO RATION LTD VS CIT 249 ITR 145 (GUJ) IS NOT APPLICABLE TO THE FACTS OF THE CASE UN DER CONSIDERATION. WE FIND THAT THIS ITEM OF ADDITION IS FIT FOR LEVY OF PENALTY U/ S 158BFA(2) OF THE ACT. WE ACCORDINGLY CONFIRM THE ORDERS OF REVENUE AUTHORITI ES. HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WILL BE FAI R AND JUST IF THE PENALTY IS LEVIED AT 100% INSTEAD OF 300% OR 150% OF TAX SOUGHT TO BE EVADED. THE ASSESSING OFFICER IS DIRECTED TO RECALCULATE THE PENALTY @100 % OF THE TAX SOUGHT TO BE EVADED ON THIS AMOUNT OF ADDITION OF RS.1,05,000. 14. THE THIRD ITEM OF ADDITION AGAINST WHICH PENALT Y LEVIED IS RS.44,612. THE CIT(A) WHILE DELETING THE ADDITION OBSERVED THAT IN THE QUANTUM MATTER THE CIT(A) WAS OF THE VIEW THAT IT WAS NOT ESTABLISHED THAT BY KEEPING THE PASSBOOK IN ASSESSEES POSSESSION DERIVED BENEFIT WHILE THE ITA T WAS OF THE VIEW THAT THE ASSESSEE OPERATED THE BANK ACCOUNTS IN THE NAME OF EMPLOYEE. BOTH THE VIEWS ARE POSSIBLE AS THERE WAS NO DIRECT EVIDENCE IN FAV OUR OF OR AGAINST THE ASSESSEE. THIS OBSERVATION OF THE CIT(A) IS FURTHE R FORTIFIED BY THE FACT THAT THE ITAT HAS SUSTAINED THE ADDITION ON THE BASIS OF PEA K AMOUNT FOR RS.44,612 OUT OF THE ADDITION MADE BY ASSESSING OFFICER AT RS.90,612 . IN THE LIGHT OF DETAILED DISCUSSION MADE WHILE CANCELING THE PENALTY LEVIED IN RESPECT OF RS.1,50,000 WE ITSS 50/RJT/2009 ITSS 98/RJT/2009 10 DO NOT FIND ANY ERROR IN THE ORDER OF CIT(A). THE O RDER OF THE CIT(A) FOR DELETING THE PENALTY LEVIED ON ADDITION OF RS.44,612 IS CONF IRMED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-04-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 29 TH APRIL, 2011 PK/- COPY TO: 1. SHRI PRAVIN P.AGRAWAL, GANDHIDHAM 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, GANDHI DHAM CIRCLE. GANDHIDHAM 3. THE CIT(A)-II, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT