Shri Mayank Gupta L/H of Late Shri Suresh Chand Gupta, Bhopal V. The ACIT, Bhopal

ITSSA 67/IND/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9447 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-03-2010
• Assessment Year: misc
• Appeal Filed On: 04-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: PRADEEP GUPTA
• Keywords: Rejection of books of accounts; Search and seizure; Principle of natural justice; Difference of opinion; Revised return
• Section: 143(3); 142(1); 27

Judgement Text

1 IN THE INCOME TA X APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH AND SHRI V.K. GUPTA, AM IT(SS)A NO. 67/IND/09 BLOCK PERIOD 1.4.1996 TO 13.06.2002 SHRI MAYANK GUPTA L/H OF LATE SHRI SURESH CHAND GUPTA BHOPAL APPELLANT PAN AAZPG-5362J VS ASSTT. COMMR. OF INCOME TAX 1(1) BHOPAL RESPONDENT APPELLANT BY : SHRI PRADEEP GUPTA RESPONDENT BY : SMT. APARNA KARAN, SR. DR O R D E R PER JOGINDER SINGH, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE LEARNED CIT(A) DATED 3 RD MARCH, 2009 ON THE GROUND THAT THE LD. FIRST APPEL LATE AUTHORITY WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE AO LEVYING PENALTY U/S 158BFA(2) OF THE ACT. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I PRADEEP GUPTA, LD. COUNSEL FOR THE ASSESSEE, AND SMT. APARNA KARAN, LE ARNED SENIOR DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT RS.1 LAC WAS DEPOSITED IN THE BANK 2 WHICH WAS TREATED AS UNEXPLAINED BY THE AO. IT WAS POINTED OUT THAT THE AMOUNT WAS DEPOSITED ON 4.12.1996 BY THE FATHER OF THE ASSESSEE (FATHER DIED ON ON 8.12.2000). IT WAS POINTED OUT THAT THE IMPUGNE D AMOUNT IS FROM PAST SAVINGS AND THE FAMILY IS ALSO HAVING AGRICULTURAL INCOME. ON THE OTHER HAND, THE LEARNED SR. DR CONTENDED THAT PENALTY IS MANDAT ORY AND THE TRIBUNAL EVEN COMFIRMED THE QUANTUM APPEAL. THE RESPECTIVE CASES RELIED UPON IN THE IMPUGNED ORDER WERE REITERATED BY THE LEARNED SR. D R AS WELL AS BY THE LEARNED COUNSEL FOR THE ASSESSEE. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. RE PRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATION U/S 132(1) WA S CARRIED OUT AT THE BUSINESS PREMISES OF M/S LAXMANDAS PRANCHAND AND M/S GUPTA B ROTHERS ON 13.6.2002 AND ALSO AT THE RESIDENTIAL PREMISES OF THE ASSESSE E. THE FATHER OF THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF GOLD JEWE LLERY AND ALSO MONEY LENDING BUSINESS. THE AO COMPLETED THE BLOCK ASSESS MENT PROCEEDINGS U/S 158BC OF THE ACT READ WITH SECTION 143(3) VIDE ORDE R DATED 28.6.2004 ON THE TOTAL INCOME AT RS.14,49,512/- AND INITIATED PENALT Y PROCEEDINGS U/S 158BFA(2) OF THE ACT FOR DISCLOSING INACCURATE PARTICULARS OF INCOME. IT IS SEEN THAT ON RECEIPT OF APPELLATE ORDER FROM THE TRIBUNAL SHOW C AUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 16.5.2008 AS TO WHY PENALTY U/S 158BFA( 2) SHOULD NOT BE IMPOSED. THE ASSESSEE IN REPLY CLAIMED THAT THE MATERIAL FAC TS FOR COMPUTATION OF UNDISCLOSED INCOME WERE TRULY DISCLOSED AND NOTHING WAS CONCEALED FROM THE 3 DEPARTMENT. IT WAS FURTHER CLAIMED THAT THE ADDITIO N OF RS. 1 LAC DEPOSITED IN BANK ACCOUNT ON 4.12.2006, SUSTAINED BY THE TRIBUNA L, IS NOT ITSELF SUFFICIENT TO LEVY THE PENALTY. IN THE PRESENT APPEAL, SEARCH TO OK PLACED ON 13.6.2002 AT THE RESIDENTIAL PREMISES WHEN THE PRESENT ASSESSEE WAS LIVING WITH OTHER FAMILY MEMBERS ALL AS HUF MEMBERS. SHRI SURESHCHAND GUP TA DIED ON 12.12.200 AND NOTICE U/S 158BC WAS RECEIVED BY HIS ONLY SON M AYANK GUPTA (WHO WAS HARDLY 20 YEARS OF AGE AT THE TIME OF DEATH OF HIS FATHER) ON 3.2.2003 WHO WAS REQUIRED TO FILE THE RETURN IN RESPECT OF DECEASED WHO DID NOT LEAVE BEHIND ANY MEMORANDUM OF AFFAIRS/STATEMENT OF AFFAIRS. THE LEG AL HEIR/PRESENT ASSESSEE WAS OF THE FEELING THAT THERE WAS NO INCOME WHICH REMAI NED UNDISCLOSED BY THE DECEASED WHO WAS INDIVIDUALLY RECEIVING COMPENSATIO N ON GAS TRAGEDY IN BHOPAL. HE WAS HAVING INCOME FROM JEEP HIRE CHARGES AND AGRICULTURAL INCOME AND NO BOOKS OF ACCOUNTS WERE MAINTAINED BY HIM. TH ERE WAS 1/6 TH SHARE WITH THE ASSESSEE (RS.1,01,016/-) ON THE SALE OF SILVER OF RS.24,06,097/-. UNDER THE AFOREMENTIONED FACTS, NOW THE QUESTION ARISES WHETH ER THE DEPOSITING OF RS.1 LAC ON 4.12.2006 SUSTAINED BY THE TRIBUNAL, CAN AUTOMAT ICALLY BE SAID TO BE SUFFICIENT FOR IMPOSITION OF PENALTY U/S 158BFA(2) OF THE ACT. ADMITTEDLY, THE QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE ALT OGETHER DIFFERENT. IT CAN BE SAID THAT IMPOSITION OF PENALTY IS NOT AUTOMATIC AN D THE DISCRETION CASTS UPON THE AO HAS TO BE JUDICIOUSLY EXERCISED BY KEEPIN G THE MATERIAL FACTS IN MIND WHEREAS IT CAN BE SAID THAT SUSTENANCE OF ADDITION BY THE TRIBUNAL AUTOMATICALLY NOT SUFFICIENT THAT THERE WAS UNDISCLOSED CONCEALED 4 INCOME. THE SITUATION NARRATED ABOVE MAY BE GOOD FO R QUANTUM ADDITION BUT MAY NOT BE FOR IMPOSING PENALTY. IF THE LANGUAGE OF SECTION 158BFA(2) IS ANALYSED, IT IS NOT MANDATORY AND IT IS ALMOST IN P ARA MATERIA WITH SECTION 271(1) WHICH ALSO RELATES TO CONCEALMENT OF INCOME , THEREFORE, WE ARE REPRODUCING HEREUNDER THE ORDER OF THE TRIBUNAL IN THE CASE OF DEEPCHAND LADHARAM KOTWANI IN ITA NO. 123/IND/2008 ORDER DATE D 8 TH MARCH, 2010 :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 30.11.2007. THE SUM AND SUBSTANCE OF THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFI ED IN CONFIRMING THE PENALTY OF RS. 13,50,000/- LEVIED U/ S 271(1)(C) OF THE ACT, WHICH IS TOTALLY WRONG, ILLEG AL AND UNWARRANTED AS THE PENALTY HAS BEEN CONFIRMED ON TH E ISSUE OF GP ADDITION AND MEAGER AMOUNT OF FD INTERE ST OF RS.7,972/-. 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHRI S.S. DESHPANDE, LEARNED COUNSEL FOR THE ASSESSEE AN D SMT. APARNA KARAN, LEARNED ADDL. CIT DR. THE ARGUMENT ADVANCED BY MR. DESHPANDE, LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE IS A LIQUOR CONTRACTOR MADE SALE OF RS.22,69,30,850/- AND DECLA RED INCOME OF RS.15,64,470/- IN THE ORIGINAL RETURN WHI CH WAS REVISED FOR THE FIRST TIME TO RS.16,04,880/- BY INCLUDING THE BANK INTEREST. THE RETURN WAS AGAIN REVISED SUO MOTO BY DECLARING THE INCOME AT RS. 17,10,620/- BY INCLUDING THE EARLIER YEARS EXPENSE S. IT WAS PLEADED THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED, HOWEVER THE AO REJECTED THE BOOKS OF ACCOU NTS BY ADOPTING GP RATE AT 8.5% WHICH RESULTED INTO ADDITION OF RS. 82,08,372/- BY ACCEPTING THE SALES. IT WAS POINTED OUT THAT THE LEARNED CIT(A) RESTRICTED THE ADDITION BY ALLOWING RELIEF OF RS.10,21,189/-. IT WAS PLEADED THAT THE ASSESSEE AS WELL AS THE REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL WHERE THE GP R ATE WAS ADOPTED AT 7%. THE CRUX OF THE ARGUMENTS IS THA T THE PENALTY WAS LEVIED ON THE BASIS OF ADOPTION OF GP RATE WHICH IS UNJUSTIFIED. THE LEARNED COUNSEL PLAC ED 5 RELIANCE ON THE DECISION FROM THE HONBLE JURISDICT IONAL HIGH COURT IN CIT VS. SHIVNARAYAN JAMNALAL & CO.; 232 ITR 311(MP), DILIP N. SHROFF V. JCIT; 291 ITR 519 (SC), ON ESTIMATION OF INCOME THE DECISION IN C IT V. AJAIB SINGH & COMPANY; 253 ITR 630 (P&H) AND CIT V. DHILLON RICE MILLS; 256 ITR 447 (P&H). IT W AS POINTED OUT THAT THE ASSESSEE NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. ON THE OTHER HAND, THE LEARNED SR. DR HEAVILY RELIED UPON THE DECISION OF THE LEARNED CIT(A) BY FURTHER CONTENDING THAT THE ADDITION WAS EVEN CONFI RMED BY THE TRIBUNAL. IT WAS ALSO PLEADED THAT ASSESSEE HIMSELF REVISED THE RETURN AND THE CLOSING STOCK WA S NOT PROPERLY VALUED. RELIANCE WAS PLACED UPON THE DECIS ION IN MOOLJI JATMAL V. CIT; 160 ITR 475 (MP) BY FURTHE R PLEADING THAT THERE WAS DEFECT IN THE BOOKS OF ACCO UNTS OF THE ASSESSEE, THEREFORE, THE IMPOSITION OF PENAL TY WAS ARGUED TO BE JUSTIFIED. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A COUNTRY LIQUOR CONTRACTOR FOR KHANDWA DISTRICT . HE IS ENGAGED IN THE BUSINESS OF RETAIL SALE OF LIQUOR . THERE ARE 78 SHOPS AT DIFFERENT PLACES. IN REPLY TO THE QUERY OF THE AO AS TO HOW THE SALES OF DIFFERENT SHOPS ARE RECORDED, THE ASSESSEE SUBMITTED THAT THE SALE PRO CEEDS OF ALL THE SHOPS ARE COLLECTED DAILY AND RECORDED I N THE BOOKS OF ACCOUNTS. THE AO OBSERVED THAT THE TOTAL S ALES ARE NOT FULLY RECORDED IN THE BOOKS OF ACCOUNTS AS THE SAME ARE NOT SUPPORTED BY PROPER VOUCHERS/BILLS. TH E ASSESSEE ALSO ADMITTED THAT THE SALES ARE RECORDED ON THE BASIS OF CASH COLLECTED FROM DIFFERENT SHOPS. THE A O FURTHER OBSERVED THAT SINCE THE RECORDING OF SALES IS EXCLUSIVELY AT THE OPTION OF THE ASSESSEE, THERE IS NO CHECK TO THE AUTHENTICITY OF THE SALES RECORDED AS THE SAME ARE NOT OPEN TO VERIFICATION. THE AO ALSO NOTE D THAT THE AUDITORS IN THE TAX AUDIT REPORT EXPRESSED THEIR INABILITY TO GIVE THE QUANTITATIVE DETAILS OF STOCK BY MENTIONING IN ANNEXURE F TO FORM NO. 3CD OF THE TAX AUDIT REPORT THAT DUE TO NUMBEROUS ITEMS, IT I S NOT POSSIBLE TO ASCERTAIN THE SAME. THE AO ALSO OBSERV ED THAT THE AUDITORS IN THE TAX AUDIT REPORT CLEARLY S TATED THAT NO EXPENSES PERTAINING TO PREVIOUS YEAR WERE DEBITED/CREDITED IN THE P&L ACCOUNT. HOWEVER, THE 6 ASSESSEE, FOR THE REASONS BEST KNOWN TO HIM, HIMSEL F REVISED THE RETURN OF INCOME BY ADDING A SUM OF RS.1,05,745/- ON ACCOUNT OF EARLIER YEAR EXPENSES DEBITED/CLAIMED IN THE P&L ACCOUNT. THE AO FURTHER NOTED THAT THOUGH THE AUDITORS HAVE SPECIFIED THAT MERCANTILE SYSTEM OF ACCOUNTING HAS BEEN FOLLOWED, YET THE ACCRUED INTEREST ON FDRS WAS NEITHER CREDITED N OR SPECIFIED IN THE AUDITORS REPORT. SIMILARLY, INTER EST OF RS.1,70,458/- RECEIVABLE FROM STATE BANK OF INDORE WAS NEITHER TAKEN IN THE P&L ACCOUNT NOR WAS MENTIONED BY THE AUDITORS IN THE TAR. THE SAME WAS SUBSEQUENTLY DECLARED BY THE ASSESSEE VIDE THE FIRST REVISED RET URN. THE AO ALSO FOUND THAT THE TRANSPORT EXPENSES OF RS . 4,02,795/- ARE NOT SUPPORTED BY VOUCHERS. THE AO, THEREFORE, OBSERVED THAT THE TAX AUDIT REPORT COULD NOT BE CONSIDERED AS CORRECT AND COMPLETE AND ACCORDINGLY HELD THAT THE CORRECT PROFITS COULD NOT BE ASCERTAI NED FROM THE BOOKS. HE, THEREFORE, BY APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT, REJECTED T HE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMATED THE INCOME OF THE ASSESSEE AT @ 8.5% OF THE SALES DECLA RED RESULTING IN AN ADDITION OF RS.82,08,372/- ON THIS ACCOUNT. THE LEARNED CIT(A) AND THE TRIBUNAL CONFIRMED THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE. HOWEVER, THE ADDITION MADE ON THIS ACCOU NT WAS FINALLY WORKED OUT AT RS.48,04,751/-. THE ADDI TION OF RS. 7,972/- WAS ALSO MADE ON ACCOUNT OF ACCRUED INTEREST ON FIXED DEPOSITS WHICH WERE NOT DISCLOSED BY THE ASSESSEE. THIS ADDITION WAS ALSO CONFIRMED BY THE LEARNED CIT(A) AND THE TRIBUNAL IN APPEAL. IN VIEW OF THE ABOVE, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE INCOME TAX ACT, 1961. IN APPEAL, THE LEARNED CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ACTION OF THE AO IN IMPOSING THE PENALTY U/S 271(1)(C) OF THE AC T. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND THE MATERIAL AVAILAB LE ON RECORD. WE FIND THAT THE PENALTY HAS BEEN LEVIED BECAUSE THE TRIBUNAL CONFIRMED THE GP ADDITION OF R S. 48,04,751/- AND THE INTEREST OF RS. 7,972/- WAS NOT SHOWN IN THE RETURN OF INCOME FILED BY THE ASSESSEE . WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUN SEL 7 FOR THE ASSESSEE THAT SINCE THE GP ADDITION HAS BEE N MADE ON ESTIMATE BASIS AND THE INTEREST AMOUNT OF R S. 7,972/- ON FD THOUGH WAS NOT SHOWN IN THE RETURN OF INCOME BUT THE SAME WAS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THEREFORE, NO PENALTY CAN BE LEVIED. WE FURTHER FIND THAT FOR LEVYING PENALTY U/ S 271(1)(C ) OF THE ACT, EITHER THERE SHOULD BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE REVENUE HAS NOT PINPOINTED THAT EI THER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O R CONCEALED ITS INCOME. IN THE CASE OF CIT V. SHIVNAR AYAN JAMNALAL & COMPANY (SUPRA) THE FACTS ARE THAT THE ASSESSEE WHO HAD NINE LIQUOR SHOPS LOCATED IN SEVER AL PLACES MAINTAINED A SINGLE CASH BOOK AND LEDGER. T HE ASSESSING OFFICER HELD THAT IT WAS NOT POSSIBLE TO ACQUIRE DAILY ACCOUNT FROM ALL THE SHOPS REGULARLY AT A PARTICULAR PLACE AND THAT THE SALES OF ALL THESE SH OPS WERE RECORDED AT A STRETCH. HE, THEREFORE, ESTIMAT ED THE SALES AND NET PROFIT. HE INITIATED PENALTY PROCEED INGS UNDER SECTION 271(1) OF THE INCOMETAX ACT, 1961, F OR CONCEALMENT AND IMPOSED PENALTY. THE TRIBUNAL CANCELLED THE PENALTY. ON A REFERENCE, THE HONBL E HIGH COURT OF MADHYA PRADESH HELD AS UNDER :- HELD, THAT THE ASSESSEE HAD PLACED BEFORE THE AUT HORITIES WHATEVER BOOKS OF ACCOUNT IT HAD MAINTAINED WHETHE R THEY WERE PROPERLY MAINTAINED OR NOT AND IT HAD NO T WITHHELD OR CONCEALED ANY MATERIAL OR MADE ANY DELIBERATE ATTEMPT TO DEFRAUD THE AUTHORITIES. THE REFORE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PEN ALTY WAS NOT LEVIABLE. KEEPING IN VIEW THE FACTS AND THE CIRCUMSTANCES, THE AFORESAID RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT FAVOURS THE CASE OF THE ASSESSEE. THE ASSESSEE ALSO FINDS SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN HARIGOPAL SINGH V. CIT; 258 ITR 85 WHEREIN THERE WAS A DIFFERENCE OF OPINION AS REGARD S THE ESTIMATE OF INCOME. THE AO AS WELL AS THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSING THE INCOME OF THE ASSESSEE. ON REFERENCE, IT WAS HELD BY THE HON BLE HIGH COURT THAT PENALTY CANNOT BE LEVIED WHERE INCO ME 8 HAS BEEN ESTIMATED. IN THE PRESENT APPEAL ALSO, THE RE IS A DIFFERENCE OF ESTIMATION OF GP RATE BY THE AO AND T HE TRIBUNAL. DURING HEARING, THE LEARNED DR TOOK THE PLEA THAT SINCE QUANTUM ADDITION HAS BEEN SUSTAINED, THO UGH BY REDUCING THE GP RATE, THEREFORE, PENALTY PROVISI ONS ARE ATTRACTED IN THIS CASE. WE ARE NOT AGREEING WIT H THIS PROPOSITION BECAUSE QUANTUM AND PENALTY PROCEEDINGS ARE ALTOGETHER DIFFERENT. EVEN OTHERWISE, NORMALLY THE ESTIMATION DEPENDS UPON THE APPROACH OF THE INDIVI DUAL AUTHORITY FOR WHICH THE ASSESSEE SHOULD NOT SUFFER UNLESS AND UNTIL IT IS PROVED ON RECORD THAT THE AS SESSEE CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS OF SUCH INCOME. THEREFORE, THE PENALTY SHOULD BE LEVIED SPARINGLY BY OBJECTIVELY AND JUDICIOUSLY ANALYZING THE MATTER, WHICH THE AO HAS FAILED TO DO AND HAS MECHANICALLY IMPOSED. FOR THE SUBJECTIVE APPROA CH OF THE AUTHORITIES, ANY PERSON SHOULD NOT BE PUT TO HARDSHIP THAT TOO WITHOUT BRINGING COGENT MATERIAL ON RECORD. THE AO HAS NOT BROUGHT ON RECORD ANY POSITI VE MATERIAL JUSTIFYING ESTIMATION OF A PARTICULAR RATE OF GP. THE ESTIMATION OF GP CANNOT LEAD TO A CONCLUSION TH AT THE ASSESSEE HAS EITHER CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IN ORDER TO ATTRACT CLAUSE OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. WE ARE, THEREFORE, OF T HE CONSIDERED OPINION THAT THE PENALTY PROVISION IS NO T ATTRACTED TO THE CASES WHERE THE INCOME OF THE ASSE SSEE IS ASSESSED ON ESTIMATE BASIS AND CONSEQUENT ADDITI ONS ARE MADE THEREON. IDENTICAL RATIO WAS LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V AJAIB SINGH AND COMPANY (SUPRA) WHEREIN THE ADDITION TO THE INCOME WAS BASED ON ESTIMATE AND DISALLOWANCE OF EXPENDITURE, THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN CANCELLING THE PENALTY. WHILE COMIN G TO THIS CONCLUSION, THE HONBLE COURT ALSO CONSIDERED THE DECISIONS IN THE CASES OF ADDL.CIT V. SMT. CHANDRAKANTA (205 ITR 607) AND ADDL. CIT V. JEEVANLAL SHAH (205 ITR 244) (SC). THE DECISION IN THE CASE OF CIT V. GURBAX LAL & COMPANY (256 ITR 133( (P&H) CAN ALSO BE CITED WHEREIN THE REVISED RETURN WAS FILED VOLUNTARILY BY THE ASSESSEE EVEN AFTER ASSESS MENT. 9 THE TRIBUNAL WAS HELD TO BE JUSTIFIED BY THE HONBL E HIGH COURT IN CANCELLING THE PENALTY IMPOSED U/S 271(1) OF THE ACT. DURING HEARING THE LEARNED DR RELIED UPON THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT ITSELF IN THE CASE OF MOOLJI JATMAL V. C IT; 160 ITR 475 (MP) WHEREIN THE RETURNED INCOME WAS LESS THAN 80% OF THE ASSESSED INCOME AND THE ASSESS EE EVEN DID NOT APPEAR BEFORE THE ITO. IT WAS HELD THA T BURDEN IS ON THE ASSESSEE TO SHOW THAT NO CASE OF IMPOSITION OF PENALTY IS MADE OUT, THEREFORE, IT IS ON DIFFERENT FACTS, CONSEQUENTLY, MAY NOT HELP THE REV ENUE. THE HONBLE APEX COURT IN THE CASE OF DILIP N. SHRO FF (SUPRA), HELD THAT IMPOSITION OF PENALTY IS NOT AUT OMATIC AND IT IS A MATTER OF DISCRETION BECAUSE THE AO HAS TO BE FAIR AND OBJECTIVE. ON THE ISSUE OF CAPITAL GAINS, THE HONBLE COURT HELD THAT THE REPORT OF THE REGISTERE D VALUER CANNOT BE EXACT. IN THE PRESENT APPEAL ALSO , THE AO ESTIMATED THE GP BY ADOPTING THE RATE AT 8.5% WHICH WAS REDUCED TO 7% BY THE TRIBUNAL ON QUANTUM ADDITION. THE AO LEVIED THE PENALTY ON THE BASIS OF SUCH ESTIMATION. WE ARE OF THE VIEW THAT IT MAY BE A GOOD CASE FOR QUANTUM ADDITION BUT MAY NOT BE FOR IMPOSING PENALTY. IN THE IMPUGNED ORDER, THERE IS A MENTION THAT THE FREQUENT REVISION OF RETURNS BY TH E ASSESSEE IS SUFFICIENT FOR IMPOSING PENALTY. WE ARE NOT AGREEING WITH THIS PROPOSITION BECAUSE IT IS NOT TH E CASE THAT THE RETURN WAS REVISED WHEN SOMETHING CONTRARY WAS DETECTED BY THE DEPARTMENT RATHER THE ASSESSEE SUO MOTO REVISED ITS RETURNS, THEREFORE, IT CANNOT BE S AID THAT THE ASSESSEE WANTED TO CONCEAL ANYTHING RATHER THE BEHAVIOR OF THE ASSESSEE WAS MORE RESPONSIBLE THAT ANY PORTION OF THE INCOME MAY NOT LEFT UNRETURNED. SUO MOTO REVISION OF INCOME BY THE ASSESSEE ITSELF DOES NOT AMOUNT TO CONCEALMENT OF INCOME UNTIL AND UNLESS SO ME CONTRARY MATERIAL IS BROUGHT ON RECORD, WHICH THE REVENUE HAS FAILED TO DO SO. EVEN REJECTION OF BOOK S ITSELF IS NOT SUFFICIENT FOR LEVYING PENALTY UNLESS AND UNTIL IT IS BROUGHT ON RECORD THAT THE ASSESSEE CON CEALED ITS INCOME. IF THE INTENTION OF THE ASSESSEE WOULD HAVE BEEN TO HIDE SOMETHING, THE ASSESSEE WOULD NOT HAVE SUO MOTO FILED THE REVISED RETURN. ON THE ISSUE OF REVISING THE RETURN BEFORE DETECTION BY THE DEPARTM ENT, THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF 10 SHRI NIRAJ JAIN AND ALOK JAIN(ITANO. 1091 & 1092/CHD/08) ALLOWED THE APPEAL OF THE ASSESSEE. TH E RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUND ER: THESE APPEALS ARE BY THE DIFFERENT ASSESSEES FOR ASSESSMENT YEAR 2004-05 AGAINST THE ORDER OF THE LE ARNED CIT(A) DATED 7.10.2008 ON THE GROUND THAT THE LEAR NED FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED IN UPHOL DING THE LEVY OF PENALTY OF RS.64,818/- AND RS. 68,737/- IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 2. DURING ARGUMENTS, WE HAVE HEARD SHRI VISHAL MOHAN LD COUNSEL FOR THE ASSESSEE AND SMT. SARITA KUMARI, LEARNED DR. MR VISHAL MOHAN CONTENDED THA T THE FACTS AND THE ISSUE IN BOTH THE APPEALS ARE IDENTIC AL BY SUBMITTING THAT THE RESPECTIVE ASSESSEE FILED ORIGI NAL RETURN ON 1.11.2004 AND 31.10.2004, WHICH WERE SUBSEQUENT LY REVISED BEFORE ANYTHING DETECTED BY THE DEPARTMENT, THEREFORE, THE PENALTY WAS ARGUED TO BE NOT JUSTIFI ED. RELIANCE WAS PLACED IN CHEAP CYCLE STORES VS. CIT ( 281 ITR 166)(ALL.), CIT VS. GURBAX LAL & CO (256 ITR 13 3) (P&H), CIT VS. RAJENDRA PRASAD GUPTA (220 ITR 558) (PAT.) AND CIT VS. SURESH CHANDRA MITTAL (241 ITR 124) (M.P.). ON THE OTHER HAND, THE LEARNED DR DEFENDED THE PENALTY ORDER BY SUBMITTING THAT THE ASSESSEE REVIS ED THE RETURN AFTER NOTICE WAS ISSUED TO THE RESPECTIVE AS SESSEE. RELIANCE WAS PLACED IN THE CASE OF UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILES PROCESSORS AND OTHERS (306 ITR 277)(SC) 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. SINCE F ACTS / ISSUE IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, THESE CAN BE DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDE R. BRIEF FACTS IN THE CASE OF SHRI ALOK JAIN ARE THAT ORIGINAL RETURN DECLARING INCOME OF RS. 29,70,890/- INCLUDIN G CAPITAL GAINS OF RS. 28,73,659/- WAS FILED BY THE ASSESSEE ON 1.11.2004. THE CASE WAS SELECTED FOR SCRUTINY; TH EREFORE, NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED ON 5.8.2005. THE ASSESSEE REVISED ITS RETUR N OF INCOME ON 31.3.2006 BY DECLARING THE INCOME AT RS. 35,60,150/-. IT IS PERTINENT TO MENTION HERE THAT A SSESSMENT WAS COMPLETED UNDER SECTION 143(3) AT AN INCOME OF RS.35,60,105/- VIDE ORDER DATED 7.12.2006. THE LEA RNED ASSESSING OFFICER REJECTED THE EXPLANATION OF THE A SSESSEE AND LEVIED PENALTY OF RS. 64,818/- UNDER SECTION 27 1(1)(C) OF THE ACT. LIKEWISE, IN THE CASE OF SHRI NEERAJ JAIN, THE ASSESSEE SHOWED INCOME OF RS.28,01,050/- IN ITS RE TURN 11 FILED ON 31.10.2004. THE CASE WAS PROCESSED UNDER SECTION 143 (1) AT THE RETURNED INCOME ON 21.2.2005 . THE ASSESSEE LATER ON REVISED HIS INCOME RS. 33,65,860 /- ON 31.3.2006. THE CASE WAS SELECTED FOR SCRUTINY, CONSEQUENTLY, NOTICES UNDER SECTION 143(2) AND 142( 1) WERE ISSUED TO THE ASSESSEE TO WHICH THE ASSESSMENT PROCEEDINGS WERE ATTENDED FROM TIME TO TIME AND REQ UISITE DETAILS WERE FURNISHED. THE LEARNED ASSESSING OFFIC ER WAS OF THE VIEW THAT THE ASSESSEE HAS CONCEALED ITS INC OME BY FURNISHING INACCURATE PARTICULARS, THEREFORE, PENAL TY OF RS. 68,737/- WAS IMPOSED. ON APPEAL, THE LEARNED FIR ST APPELLATE AUTHORITY AFFIRMED THE PENALTY ORDER, WH ICH ARE UNDER CHALLENGE BEFORE THE TRIBUNAL. 4. NOW QUESTION ARISES WHETHER PENALTY CAN BE IMPOSED ON THE BASIS OF REVISED RETURN BEFORE DETECTING THE SAME BY THE DEPARTMENT . WE HAVE FOUND THAT IN THE ASSESSMENT ORDER, IT HAS BEEN MENTIONE D THAT THE ASSESSEE REVISED THE RETURN OF RS.35,60,150/- A ND RS. 33,65,860/- ON 31.3.2006 RESPECTIVELY. THERE IS NO MENTION IN THE ASSESSMENT ORDER THAT ANY NOTICE WAS SERVED UPON THE ASSESSEE BEFORE FILING THE REVISED RETURN. EVEN THE LEARNED ASSESSING OFFICER CONSIDERED THE R EVISED RETURN BY FRAMING THE ASSESSMENT UNDER SECTION 143( 3). IT IS NOT THE CASE OF THE REVENUE THAT REVISED RETURN WERE FILED BY THE ASSESSEE WHEN THEY WERE CORNERED BY TH E DEPARTMENT, THEREFORE, WE ARE OF THE VIEW, THAT IM POSITION OF PENALTY IS NOT JUSTIFIED. THE INITIAL BURDEN LI ES ON THE REVENUE TO ESTABLISH THAT THE ASSESSEE HAS CONCEALE D THE INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF S UCH INCOME BUT THE BURDEN SHIFTS TO ASSESSEE ONLY IF HE FAILED TO OFFER ANY EXPLANATION FOR THE UNDISCLOSED INCOME OR OFFERS AN EXPLANATION WHICH IS OTHERWISE FALSE. FOR THI S VIEW, WE ARE FORTIFIED BY THE FOLLOWING DECISIONS:- 1. CIT VS. SURESH CHANDRA MITTAL (241 ITR 124)(M.P. ) 2. CIT VS. RAJENDRA PRASAD GUPTA ( 220 ITR 558) (PA TNA) 3. CIT VS. GURBAX LAL & CO (256 ITR 133) (P&H) 4. CHEAP CYCLE STORES VS. CIT (281 ITR 166)(ALL.) IF THE AFORESAID JUDICIAL PRONOUNCEMENTS ARE KEPT I N JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, WE HAVE FOUND THAT IN THE PRESENT APPEAL, THE FINDING RECO RDED BY THE LEARNED ASSESSING OFFICER IS CONTRARY TO THE AR GUMENTS ADVANCED BY THE LEARNED DR TO THE EFFECT THAT REVIS ED RETURN WERE FURNISHED AFTER DETECTION BY THE DEPART MENT. IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS & OT HERS ((SUPRA), RELIED UPON BY THE LEARNED DR PERTAINS T O LEVY OF PENALTY ON THE BASIS THAT MENS REA IS NOT ESSENTI AL FOR ATTRACTING CIVIL LIABILITY OF PENALTY. HOWEVER, I N THE PRESENT APPEALS, THE ISSUE BEFORE US IS WHETHER PENALTY CA N BE LEVIED ON THE BASIS OF REVISED RETURN FILED BY THE ASSESSEE 12 BEFORE ANY CONCEALMENT IS DETECTED BY THE DEPARTMEN T. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW, THAT THE DECISION FROM THE HON'BLE APEX COURT IS NOT APPLICABLE TO TH E FACTS OF THE PRESENT APPEAL. EVEN OTHERWISE, PENALTY IS NOT IMPOSABLE, IF THERE IS CONSCIOUS BREACH OF LAW AS WAS HELD BY THE HON'BLE APEX COURT IN THE CASE OF HINDUSTAN STEELS LTD VS. STATE OF ORISSA (83 ITR 26). EVEN OTHERWISE , ANY CONCEALMENT OR INACCURACY, IF ANY, IN THE PARTICUL ARS OF INCOME HAS TO BE CONSIDERED UPTO ULTIMATE STAGE OF WORKING OUT OF TOTAL INCOME. THE HON'BLE MADHYA P RADESH HIGH COURT IN THE CASE OF CIT VS. SKYLINE AUTO PROD UCTS (P) LTD EVEN WENT TO THE EXTENT THAT PENALTY IS NOT IMPOSABLE WHEN MISTAKE IS BONAFIDE. EVEN IF WE PRE SUME THAT THE ASSESSEE WRONGLY CLAIMED SOMETHING DUE TO CERTAIN WRONG NOTIONS AND LATER ON REVISE THE RETUR N, BEFORE IT IS DETECTED BY THE DEPARTMENT, CERTAINLY IT IS N OT A CASE OF IMPOSITION OF PENALTY AND SPECIALLY WHEN THE REVISE D RETURN WAS PROCESSED UNDER SECTION 143(3) OF THE ACT. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, WE ARE OF THE VIEW THAT PENALTY IS NOT LEVIABLE, CONSEQUENTLY, B OTH THESE APPEALS OF THE ASSESSEE ARE ALLOWED. EVEN IN THE CASE OF PERSONS WHO ARE DEALING IN LIQU OR IT IS ALWAYS NOT POSSIBLE TO MAINTAIN THE BOOKS DAILY, IN THE REQUIRED MANNER, AS DIFFERENT SHOPS ARE LOCATED AT DIFFERENT PLACES AND THE SAME IS THE SITUATION OF S ALES. EVEN OTHERWISE, KEEPING IN VIEW THE NATURE OF THE BUSINESS, THE GROSS PROFIT/INCOME MAY NOT ALWAYS BE THE SAME. IN THE AFOREQUOTED DECISION OF NEERAJ JAIN & ALOK JAIN, THE CHANDIGARH BENCH HAS ALREADY CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS, BEING MATTER OF RECORD, THE SAME ARE NOT BEING REPEATED, THEREFORE, MAY BE READ AS PART AND PARCEL OF THIS O RDER. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY LEVIED U/S 271(1)(C ) OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 8 TH MARCH, 2010. 4. THE BASIC QUESTION FOR DETERMINATION IS WHETHER LEVY OF PENALTY IS AUTOMATIC IRRESPECTIVE OF FACTS AND CIRCUMSTANCES O F THE CASE. THERE ARE CERTAIN 13 FUNDAMENTAL PRINCIPLES WITH REFERENCE TO LEVY OF PE NALTY WHICH MUST BE LOOKED INTO AND CONSIDERED BEFORE TAKING ANY DECISION FOR LEVYING PENALTY. ADMITTEDLY, THE PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDEN T OF ASSESSMENT PROCEEDINGS, THEREFORE, FINDINGS RECORDED IN ASSESS MENT PROCEEDINGS, THOUGH RELEVANT, BUT NOT CONCLUSIVE FOR LEVY OF PENALTY. T HE SECOND PRINCIPLE IS THE FOREMOST PRINCIPLE OF RULE OF NATURAL JUSTICE I.E. NO PERSON SHOULD BE PENALIZED OR CONDEMNED WITHOUT GIVING A REASONABLE OPPORTUNITY T HOUGH THIS PRINCIPLE IS NORMALLY INCORPORATED IN PENAL PROVISIONS. THE THIR D PRINCIPLE IS THAT LEVY OF PENALTY IS DISCRETIONARY AND NOT MANDATORY. A CO-JO INT READING OF THESE PRINCIPLES LEADS TO ONLY ONE CONCLUSION THAT LEVY O F PENALTY IS NOT AUTOMATIC IRRESPECTIVE OF FACTS AND CIRCUMSTANCES, THEREFORE, THE TAX AUTHORITIES MUST TAKE INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANC ES BEFORE LEVYING ANY PENALTY. EVERY PERSON, AGAINST WHOM PENAL ACTION IS SOUGHT, HAS AN INHERENT RIGHT TO EXPLAIN THE FACTS AND CIRCUMSTANCES OF THE CASE TO PROVE HIS INNOCENCE. IN THE PRESENT APPEAL, THE SHARE FROM THE SILVER WAS AVAIL ABLE WITH THE ASSESSEE AND THE ASSESSEE WAS ALSO HAVING AGRICULTURAL INCOME. EVEN TELESCOPING HAS NOT BEEN PROVIDED TO THE ASSESSEE. A TOTAL OF 16.094 KG OF SILVER VALUING RS. 1,14,612/- WAS FOUND AND SHRI RAM PRAKASH GUPTA WHO WAS REPRES ENTING ALL THE BROTHERS WHEREIN ON 25.6.2002 HE CATEGORICALLY TENDERED THAT HE WILL EXPLAIN THE SAME ALONG WITH EVIDENCE IN ONE MONTH AND SHRI GUPTA VID E HIS STATEMENT DATED 14.8.2002, IN REPLY TO QUESTION NO. 22, EXPLAINED T HE SOURCE OF JEWELLERY AS 4184 GM DECLARED IN THE WEALTH TAX RETURN OF VARIOUS FAM ILY MEMBERS, 1800 GMS WAS 14 DECLARED BY SHRI RADHESHYAM GUPTA IN 1975 SCHEME, 2 292 GMS WAS DECLARED BY SMT. SANDHYA GUPTA UNDER VDIS BESIDES, 540 GMS O F GOLD JEWELLEY WAS BROUGHT HOME BY SHRI OMPRAKASH GUPTA WHICH ACTUALLY BELONGED TO LAXMANDAS PRANCHAND AND THE REMAINING JEWELLERY WAS CLAIMED T O BE BELONGED TO VARIOUS MEMBERS OF THE FAMILY RECEIVED BY THEM DURING MARRI AGE CEREMONY AND OTHER OCCASIONS. ANOTHER POINT PERTINENT TO MENTION HERE THAT THE ASSESSEE WAS JUST 20 YEARS OLD WHEN HIS FATHER DIED, THEREFORE, THIS ASP ECT HAS BEEN COMPLETELY IGNORED BY THE AO WHILE IMPOSING PENALTY AS IT IS A LWAYS MAY NOT BE POSSIBLE THAT THE BOY OF SUCH A TENDER AGE MAY BE KNOWING TH E FULL FACTS AND IS BURDENED WITH A PENALTY OF RS.1 LAC. AS WE HAVE MENTIONED E ARLIER, IT MAY BE A GOOD CASE FOR QUANTUM ADDITION BUT MAY NOT BE A GOOD CASE FOR LEVY OF PENALTY. THE PRESENT ASSESSEE MAY NOT BE AWARE OF THE FINANCIAL AFFAIRS OF HIS FATHER, THEREFORE, THE PENALTY HAS TO BE SPARINGLY EXERCISE D THAT TOO IN CASES OF CLEAR CONCEALMENT. THE BONA FIDES OF THE LEGAL HEIR COULD NOT BE DOUBTED AS FAR AS PENALTY IS CONCERNED. THE USE OF THE WORD MAY IN SECTION 158BFA(2) CLEARLY SHOWS THAT THE AO IS VESTED WITH THE DISCRETION WHI LE LEVYING PENALTY. THE ASSESSEE HAS DEMONSTRATED HIS INNOCENCE, THEREFORE, THERE IS AN INBUILT MECHANISM IN SECTION 158BFA TO THE EFFECT THAT PENA LTY MAY NOT BE LEVIED IF THE FACTS AND CIRCUMSTANCES OF THE CASE JUSTIFY THE BON A FIDES OF THE ASSESSEE, CONSEQUENTLY, LEVY OF PENALTY U/S 158BFA IS NOT AUT OMATIC. THE LEARNED AO MUST CONSIDER THE CIRCUMSTANCES OF THE CASE AND THE N SUPPOSED TO EXERCISE THE DISCRETION IN JUDICIOUS MANNER. OUR VIEW FINDS SUPP ORT FROM THE DECISION OF THE 15 MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. SMT. PRAMILA PRATAP SHAH (2006) 100 ITD 160 (MUM) WHEREIN VARIOUS OTHER JUDI CIAL PRONOUNCEMENTS HAVE ALREADY BEEN CONSIDERED BY THE BENCH. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LE VY OF PENALTY U/S 158BFA(2) OF THE ACT, CONSEQUENTLY, THE IMPUGNED PENALTY IS DELE TED, THEREFORE, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 15 TH MARCH, 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MARCH 15 TH , 2010 COPY TO : APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/-