ACIT, CHENNAI v. RMP Infotech Pvt. Ltd., CHENNAI

ITA 1098/CHNY/2010 | 2006-2007
Pronouncement Date: 20-07-2011 | Result: Dismissed

Appeal Details

RSA Number 109821714 RSA 2010
Assessee PAN AACCR1462N
Bench Chennai
Appeal Number ITA 1098/CHNY/2010
Duration Of Justice 1 year(s) 14 day(s)
Appellant ACIT, CHENNAI
Respondent RMP Infotech Pvt. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 20-07-2011
Assessment Year 2006-2007
Appeal Filed On 06-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER] I.T.A.NO.1098/MDS/2010 ASSESSMENT YEAR : 2006-07 THE ACIT COMPANY CIRCLE V(4) CHENNAI VS RMP INFOTECH PVT. LTD OLD NO.183 NEW NO.360 IST FLOOR THAMBU CHETTY STREET CHENNAI 600 001 [PAN - AACCR1462N ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B.SEKARAN CIT/DR RESPONDENT BY : SHRI S.SRIDHAR O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSESS MENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) CHENN AI DATED 26.4.2010 AND EMANATES FROM A PENALTY ORDER DATED 29.6.2009 P ASSED U/S 271(1)(C) OF THE ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE LEADING TO IMPOSITION OF THE IMPUGNED PENALTY ARE BEING NARRATED IN THE FOLLOWIN G LINES: ITA 1098/10 :- 2 -: THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DIRECT-MULTI- LEVEL-MARKETING OF GOODS AND SERVICES. FOR ASSESSM ENT YEAR 2006-07 THE ASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30.1.2008 DECLARING TOTAL INCOME OF ` 1 98 66 617/- AND FILED HARD COPY ON 6.2.2008. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT ITS BUSINESS PREMISES ON 27.2.2008. DURING THE COURSE OF SURVEY BOOKS AND CERTAIN OTHER DOCUMENTS WERE IMPOUNDED. A SWOR N STATEMENT OF SHRI DHAWAL CHANDAN CHAIRMAN AND DIRECTOR OF THE C OMPANY WAS RECORDED. IN THAT STATEMENT HE HAD OFFERED ADDITI ONAL INCOME OF ` 3 CRORES ON ACCOUNT OF OMISSIONS/MISTAKES AND MISSING VOUCHERS. THE ASSESSEE HAD FILED A COPY OF AUDITED ACCOUNTS IN RE SPONSE TO NOTICE ISSUED U/S 143(2) OF THE ACT. THE ASSESSING OFFIC ER HAD FOUND THAT THIS REPORT OF AUDITOR CONTAINED A QUALIFYING STATE MENT WHICH READS AS UNDER: 'THE COMPANY HAS NOT PRODUCED SEVERAL VOUCHERS FOR VARIOUS EXPENSES AND BANK RECONCILIATION OF BANK STATEMENTS. THE MANAGEMENT HAS EXPLAINED TO US THAT THE COMPANY HAS MISPLACED SUCH VOUCHERS AND BANK RECONCILIATION STATEMENT COULD NOT BE PREPARED DUE TO PAUCITY OF TIME TO COMPLETE THE AUDIT DUE TO ENORMI TY OF TRANSACTIONS. ALSO IT WAS EXPLAINED TO US THAT FEW COMPUTERS INCLUDING THE ONE IN WHICH THE BOOKS OF ACCOUNTS WERE MAINTAINED WERE CRASHED DUE TO A VIRU S ATTACK DURING DECEMBER 2004. AS A RESULT THE REPREPARATION AND FINALIZATION OF ACCOUNTS FOR THE FINANCIAL YEAR 004-05 WERE DELAYED. CONSEQUENTLY THIS RESULTE D IN DELAY IN FINALIZATION OF ACCOUNTS FOR THE FINANCIA L YEAR 2005-06. ITA 1098/10 :- 3 -: THE ASSESSEE OFFERED ` 3 CRORES IN RESPECT OF CERTAIN OMISSIONS/ MISTAKES REGARDING MISSING VOUCHERS ETC. DURING SUR VEY. THE ASSESSMENT WAS COMPLETED ON 31.12.2008 IN WHICH AD DITION OF ` 3 08 11 310/- WAS MADE AND TOTAL INCOME WAS ASSESSE D AT ` 5 14 24 693/-. THESE ADDITIONS INCLUDED INCOME DIS CLOSED BY THE ASSESSEE OF ` 3 CRORES DISALLOWANCE U/S 40A(IA) OF ` 7 81 446/- DISALLOWANCE U/S 14A OF ` 17 664/- AND DISALLOWANCE U/S 40A(3) OF ` 12 200/-. SINCE THE ASSESSEE-COMPANY HAD NOT RETU RNED CORRECT INCOME IN THE RETURN OF INCOME FILED ON 31.1.2008 AND ONLY DURING SURVEY IT HAD OFFERED ` 3 CRORES PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT WAS INITIATED BY ISSUING NOTICE U/S 274 OF THE ACT. THE ASSESSEE FILED A REPLY DATED 2.6.2009 AGAINST THE P ROPOSED ACTION ON 4.6.2009 REQUESTING FOR DROPPING OF THE PENALTY PR OCEEDINGS ON THE GROUND THAT THE ASSESSEE HAD OFFERED ADDITIONAL INC OME OF ` 3 CRORES DURING THE COURSE OF SURVEY DESPITE SURVEY TEAM HAD NOT FOUND ANY DEFECT MUCH LESS ANY SPECIFIC DEFECT IN THE BOOKS O F ACCOUNT. BUT BEING NOT SATISFIED BY ASSESSEES SUBMISSIONS THE ASSESSING OFFICER LEVIED A PENALTY OF ` 1 25 00 000/-. AGGRIEVED THE ASSESSEE-COMPANY FILED APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ENTIRE PENALTY AFTER OBSERVING THAT THE ASSESSEE HAD OFFERED ` 3 CRORES DESPITE THERE BEING NO SPECIFIC MISTAKE/FAULT BEING POINTED OUT B Y THE ASSESSING ITA 1098/10 :- 4 -: OFFICER AND HAS HONOURED THE SAME AND ALSO PAID TAX THEREON. NOW THE REVENUE IS AGGRIEVED AND HAS FILED THIS APPEAL BY RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE CIT(A) HAS ERRED IN DELETING THE LEVY OF P ENALTY U/S 271(1)(C) OF ` 1 25 00 000. 2.2. THE CIT(A) FAILED TO APPRECIATE THAT THE ASSES SEE OFFERED THE SUM OF ` 3 CRORES ONLY BECAUSE OF THE FACT THAT THAT THERE WAS A SURVEY DURING WHICH IT WAS FOUND OUT THAT THERE WERE DISCREPANCIES IN ITS BOOKS OF ALC AND THAT THE ASSESSEE COULD NOT RECONCILE ITS BANK ACCOUNTS WITH BOOKS. 2.3 THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE PENALTY ORDER OF THE A.O CONSIDERING THE DECISION OF THE HON'BLE KERALA HE IN THE CASE OF K MAHIM VS CIT (149 ITR 737) HAD HELD THAT THE MERE FACT THAT INVESTIGATION BY THE DEPARTMENT IS AFOOT THOUGH NOTHING TANGIBLE HAD COME INTO THE POSSESSION OF THE DEPARTMENT AT ANY PARTICULAR POINT OF TIME MAY INDUCE A DISHONEST ASSESSEE TO SUBMIT A REVISED RETURN AND SUCH AN EXERCISE WILL NOT ABSOLVE HIM OF THE CONSEQUENCES FLOWING FROM AN ACT WHICH ON HIS PART HAD ALREADY BEEN COMPLETED NAMELY THE CONCEALMENT OF INCOME OR THE PARTICULARS THEREOF.' 2.4 THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE PENALTY ORDER OF THE A.O CONSIDERING THE DECISION OF THE SUPREME COURT IN THE CASE OF K P MADHUSUDANAN (251 ITR 99) WHICH HELD WHICH HELD THAT THE ASSESSEE PUT TO NOTICE DOES NOT PROVE IN THE CIRCUMSTANCES THAT HIS FAILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF AND CONSEQUENTLY BE LIABLE TO THE PENALTY. ITA 1098/10 :- 5 -: FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. I T WAS ARGUED BY THE LD.CIT/DR SHRI P.B.SEKARAN THAT THE ASSESSEE HAD OFFERED ` 3 CRORES CONSEQUENT TO THE SURVEY PROCEEDINGS ONLY; HAD THE RE BEEN NO SURVEY THE ASSESSEE WOULD NOT HAVE DISCLOSED THI S INCOME AND WOULD NOT HAVE PAID REQUISITE TAX THEREON. THUS ACCORDI NG TO HIM THE ASSESSEE HAS EITHER CONCEALED THE PARTICULARS OF IN COME OR HAS FURNISHED INACCURATE PARTICULARS THEREOF AND CONSEQ UENTLY IS EXIGIBLE TO THE IMPUGNED PENALTY. HE HAS SUPPORTED HIS CONTENTI ON WITH SOME DECISIONS AND HAS ALSO RELIED ON THE DECISIONS MENT IONED IN THE GROUNDS OF APPEAL. FINALLY HE HAS PLEADED FOR SET TING ASIDE THE APPELLATE ORDER AND RESTORATION OF THE PENALTY. O N THE OTHER HAND THE LD.AR SHRI S.SRIDHAR ADVOCATE HAS VEHEMENTL Y CONTROVERTED THE ARGUMENTS OF THE LD. CIT/DR BY CLAMUORING THAT THE ASSESSING OFFICER WAS NOT EVEN SURE AS TO FOR WHAT DEFAULT HE WAS LE VYING THE PENALTY U/S 271(1)(C) OF THE ACT. HE WENT ON ARGUING THAT THE ASSESSEE HAD OFFERED ` 3 CRORES AND PAID TAXES THEREON ONLY TO BUY PEACE AND TO ITA 1098/10 :- 6 -: AVOID FURTHER LITIGATION DESPITE THE FACT THAT THE DEPARTMENT COULD NOT PINPOINT ANY SPECIFIC MISTAKE/DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. REGARDING QUALIFYING STATEMENT IT WAS A RGUED THAT THE ASSESSEE HAD EXPLAINED TRUTH TO THE AUDITORS AND N OTHING WAS HIDDEN. IT WAS ARGUED THAT A STATEMENT RECORDED DURING SURV EY HAS GOT NO EVIDENTIARY VALUE IN VIEW OF THE DECISION OF THE HO N'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS S.KHADER KHAN SON 300 ITR 157. 4. AFTER COGITATING THE RIVAL STANDS WE ARE CONVINC ED THAT THIS IS NOT A CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF TH E ACT. THE PERUSAL OF THE PENALTY ORDER FROM A TO Z NO ONE CAN TELL W ITH CERTITUDE AS TO FOR WHICH DEFAULT WHETHER FOR CONCEALMENT OF PARTICUL ARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME TH E IMPUGNED PENALTY HAS BEEN IMPOSED. ON THE CONTRARY THE OBSERVATION OF THE ASSESSING OFFICER IN PENALTY ORDER SPEAKS AGAINST THE VERY IM POSITION OF THIS PENALTY. WE WOULD REPRODUCE PARA VII AT PAGES 3 & 4 OF THE PENALTY ORDER IN WHICH THE ASSESSING OFFICER HAS REFERRED T O FACTS ON WHICH HE HAS RELIED. THIS PARA READS AS UNDER: VII THE FOLLOWING FACTS ARE PERTINENT TO THE CASE : (I) IT IS NOTICED FROM THE FORM 3CD ALONG WITH THE RETURN OF INCOME FOR ASST. YEAR 2004-05 THE ASSESSEE HAS NOT PRODUCED SEVERAL VOUCHERS FOR VARIOUS EXPENSES AND HENCE THE AUDITOR HAS IN ITA 1098/10 :- 7 -: HIS REPORT QUALIFIED THE AUDIT STATING THAT THE MANAGEMENT HAS EXPLAINED TO THE COMPANY THAT THE COMPANY HAS MISPLACED VOUCHERS AND HENCE BANK RECONCILIATION STATEMENT COULD NOT BE PREPARED DUE TO PAUCITY OF TIME TO COMPLETE THE AUDIT AND THE ENORMITY OF THE TRANSACTIONS. (II) FOR THE ASST. YEAR 2005-06 THE ASSESSEE HAS FILED ITS RETURN ONLY ON 30TH MARCH 2006 ALONG WITH THE AUDITED STATEMENTS AND THE AUDITOR HAS IN THE REPORT AGAIN MENTIONED THE FOLLOWING: 'THE COMPANY HAS NOT PRODUCED SEVERAL VOUCHERS FOR VARIOUS EXPENSES AND BANK RECONCILIATION OF HDFC BANK CHENNAI BRANCH HDFC BANK MARIAM CENTRE ABN AMRO BANK ICICI BANK AND CENTURION BANK. THE MANAGEMENT HAS EXPLAINED TO US THAT THE COMPANY HAS MISPLACED SUCH VOUCHERS AND THE BANK RECONCILIATION STATEMENT COULD NOT BE PREPARED DUE TO PAUCITY OF TIME TO COMPLETE THE AUDIT AND THE ENORMITY OF TRANSACTIONS. ALSO IT WAS EXPLAINED TO US THAT THE FEW COMPUTERS INCLUDING THE ONE IN WHICH THE BOOKS OF ACCOUNTS WERE MAINTAINED WERE CRASHED DUE TO A VIRUS DURING DECEMBER 2004.' (III) FOR THE RELEVANT ASST. YEAR I :E. 2006-07 ASSESSEE HAS FILED ITS RETURN ONLY ON 6.2.2008 . THE AUDIT REPORT IS DATED 31.1.2008 AND IN THE AUDIT REPORT THE ASSESSEE'S AUDITOR HAS AGAIN QUALIFIED THE REPORT AS UNDER: 'THE COMPANY HAS NOT PRODUCED SEVERAL VOUCHERS FOR VARIOUS EXPENSES AND BANK RECONCILIATION OF BANK STATEMENTS. THE MANAGEMENT HAS EXPLAINED TO US THAT THE COMPANY HAS MISPLACED SUCH VOUCHERS AND THE BANK RECONCILIATION STATEMENT COULD NOT BE PREPARED DUE TO PAUCITY OF TIME TO COMPLETE THE ITA 1098/10 :- 8 -: AUDIT AND THE ENORMITY OF TRANSACTIONS. ALSO IT WAS EXPLAINED TO US THAT THE FEW COMPUTERS INCLUDING THE ONE IN WHICH THE BOOKS OF ACCOUNTS WERE MAINTAINED WERE CRASHED DUE TO A VIRUS DURING DECEMBER 2004.' AS A RESULT THE RE PREPARATION AND FINALIZATION OF ACCOUNTS FOR THE FY 2004-05 WERE DELAYED. CONSEQUENTLY THIS RESULTED IN DELAY IN FINALIZATION OF ACCOUNTS FOR THE FY 2005-06.' (IV) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO FILE THE BANK RECONCILIATION STATEMENTS OF ALL THE BANKS TO VERIFY THE CORRECT DISCLOSURE OF INCOME. IN SPITE OF REPEATED OPPORTUNITIES THE ASSESSEE HAS NOT FILED BANK RECONCILIATION STATEMENTS FOR ALL THE BANKS FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE IS RELYING ON ITS STATEMENT THAT AS THE COMPUTERS HAD CRASHED IT IS DIFFICULT FOR IT TO RECONCILE THE BANK STATEMENTS. (V) THE COMPUTERS HAVE CRASHED IN DECEMBER 2004. HOWEVER INSPITE OF THE COMPUTERS HAVING CRASHED IN DECEMBER 2004 THE ASSESSEE HAS NOT TAKEN ANY STEPS TO RECONCILE THE BANK STATEMENTS EVEN UP TO DECEMBER 2008 FOR THE ASST. YEAR 2006-07. THE ASSESSEE HAS NOT ONLY FILED THE AUDIT REPORTS U/S 44AB BEYOND THE TIME ALLOWED TO IT UNDER THE ACT BUT HAS ALSO FILED THE SAME WITHOUT PREPARING THE BANK RECONCILIATION STATEMENTS. (VI) IN HIS SWORN STATEMENT TAKEN ON OATH ON 10.12.2008 SHRI DHAWAL CHANDAN DIRECTOR OF THE COMPANY HAS STATED THAT THE COMPUTERS HAVE DEVELOPED A VIRUS IN AUGUST/SEPTEMBER 2006 WHICH IS CONTRADICTORY TO THE AUDITOR'S STATENLENT FOR THE ASST. YEAR 2005-06 STATING THAT THE COMPUTER HAD CRASHED DUE TO VIRUS IN DECEMBER 2004. HE HAS ALSO ADMITTED THAT THE RETURN FILED FOR THE A Y 2006-07 ON FEBRUARY 2008 WAS FILED ON THE BASIS OF ACCOUNTS IN WHICH BANK RECONCILIATION WAS NOT MADE. ITA 1098/10 :- 9 -: 5. AFTER THAT THE CONCLUSION OF ASSESSING OFFICER IS CONTAINED IN PARA VIII [PAGE 4 OF THE PENALTY ORDER] WHICH READS AS UNDER: VIII. FROM THE FACTS OF THE CASE IT IS EVIDENT TH AT THE ASSESSEE BY NOT FURNISHING BANK RECONCILIATION STATEMENTS FROM ALL THE BANKS EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVING DISCLOSED ADDITIONAL INCOME TO THE TUNE OF ` 3 CRORES DURING THE COURSE OF SURVEY HAS NOT COOPERATED IN THE FULL SENSE WITH THE ASSESSMENT PROCEEDINGS AND IT CANNOT BE HELD THAT THE ASSESSEE HAS MADE A TRUE AND FULL DISCLOSURE OF ITS INCOME. IF THE SURVEY HAD NOT TAKEN PLACE THE ASSESSEE WOULD NOT HAVE DISCLOSED THE ADDITIONAL INCOME. THE INCOME RETURNED ORIGINALLY WAS ` 19866617/-. THE ADDITIONAL INCOME DISCLOSED AT THE TIME OF SURVEY WAS ` 3 CRORES. THE INCOME WAS ASSESSED AT ` 51424693/-. BY NOT FILING BANK RECONCILIATION STATEMENTS THE ASSESSEE HAS NOT FULFILLED ITS ONUS OF PROVING THAT THE INCOME DISCLOSED IS TRUE AND CORRECT. 6. THE PERUSAL OF THESE PARAGRAPHS EVINCES THAT THIS P ENALTY IS LEVIED ON ACCOUNT OF NON-FURNISHING OF BANK RECONCI LIATION STATEMENT AND ASSESSEE-S NON-COOPERATION. MOREOVER PARA VII REPRODUCED ABOVE EXPLAINS AS TO WHY NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE IMPOSED IN THIS CASE. IN THE PENALTY ORDER IT IS NOT CERTIFIED AS TO ON WHAT REASON WHETHER ON ACCOUNT OF CONCEALMENT OF INCOME OR ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INC OME IS BEING LEVIED. ITA 1098/10 :- 10 - : UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE AC T IT IS THE STATUTORY DUTY OF THE ASSESSING OFFICER TO SPECIFY AS TO WHAT IS THE REASON FOR LEVY OF PENALTY U/S 271(1)(C). UNDER THIS SECTION A PENALTY CAN BE LEVIED ONLY IF THE ASSESSEE HAS EITHER CONCEALED T HE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR HAS COMMITTED BOTH THE DEFAULTS. THESE TWO DEFAULTS A RE DIFFERENT AND DO NOT OVERLAP ON EACH OTHER. HOWEVER BOTH REFER TO DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGL IGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF EITHER SUPPRESSIO VE RI OR SUGGESTIO FALSY. THE LEVY OF PENALTY UNDER THIS SECTION IS NOT AUTOM ATIC. BY THE REASON OF SUCH CONCEALMENT OR FURNISHING OF INACCURATE PAR TICULARS ALONE THE ASSESSEE DOES NOT IPSO FACTO BECOME LIABLE TO A P ENALTY BUT HE HAS A RIGHT TO EXPLAIN AGAINST THE SAME. NOT ONLY IS THE LEVY OF PENALTY DISCRETIONARY IN NATURE BUT ALSO THE DISCRETION HAS TO BE EXERCISED KEEPING THE RELEVANT FACTORS IN MIND AND THE APPROA CH OF THE ASSESSING OFFICER MUST BE FAIR AND OBJECTIVE. THE ACCEPTA NCE OF A PARTICULAR AMOUNT OF INCOME OR OFFERING ADDITIONAL INCOME BY T HE ASSESSEE AND NOT FILING APPEAL AGAINST ANY SUCH ADDITION WOULD N OT ITSELF LEAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE STANDARD OF PROOF FOR MAKING QUANTUM ADDITION AND FOR LEVY OF PENALTY ARE ENTIR ELY DIFFERENT. A PENALTY PROVISION ACCEPTS REASONABLE CAUSE AS PROVI DED IN SECTION ITA 1098/10 :- 11 - : 273B OF THE ACT. IN THIS CASE DURING SURVEY A STA TEMENT WAS RECORDED ALTHOUGH THIS STATEMENT HAS NO EVIDENTIAR Y VALUE IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURTS DECISION ME NTIONED (SUPRA) YET THERE IS NO CLEAR CASE OF EITHER OF THE DEFAULTS OF THIS SECTION WHICH CAN BE SAID TO HAVE BEEN MADE OUT BY THE ASSESSING OFFI CER FOR IMPOSING A PENALTY. THIS SEEMS TO BE A SIMPLE CASE OF REJECTI ON OF EXPLANATION OFFERED BY THE ASSESSEE BEFORE AUDITOR AS WELL AS T HE ASSESSING OFFICER WHICH CANNOT BE MADE A BASIS FOR LEVY OF PENALTY. IN THIS REGARD DECISION OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD 322 ITR 158 AND T HAT OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS CH ANDRAKANT M. TOLIA 220 ITR 438 ARE RELEVANT. FURTHER EXPLANATION OF THE ASSESSEE IS THAT INSPITE OF ALL THE SEIZED DOCUMENTS BEING I N THE POSSESSION OF THE DEPARTMENT NO ADDITION APART FROM OFFERED INCO ME OF ` 3 CRORES HAS BEEN MADE. IT WAS ALSO SUBMITTED THAT THIS OFF ER WAS MADE ONLY TO BUY PEACE OF MIND AND AVOID FURTHER LITIGATION. IN OUR CONSIDERED OPINION THIS IS ALSO A MITIGATING FACTOR. ANY ADD ITION MADE ON THE BASIS OF OFFER WHICH IS MADE DESPITE THERE BEING AN Y SPECIFIC EVIDENCE AND BASED ON GUESSTIMATE OF THE ASSESSEE IN ORDE R TO AVOID FURTHER LITIGATION AND TO BUY PEACE CANNOT BE MADE A GROUN D FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. THE EXPLANATION BELOW 271(1)(C) OF ITA 1098/10 :- 12 - : THE ACT WILL NOT APPLY IN THIS CASE AS NOTHING SPEC IFIC HAS BEEN FOUND BY THE DEPARTMENT EVEN DURING SURVEY WHICH CAN ATTR ACT ANY DEEMING PROVISION WHICH ASSESSEE HAS TO DISPROVE. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUR ESH CHANDRA MITTAL 251 ITR 9 IS RELEVANT IN THIS REGARD. IN THIS CASE IT HAS BEEN HELD THAT WHEN THE ASSESSEE FILED A REVISED RETURN SHOWING HIGHER INCOME WITH A VIEW TO BUY PEACE AND TO AVOID FURTHE R LITIGATION PENALTY CANNOT BE IMPOSED MERELY ON ACCOUNT OF HIGH ER INCOME HAVING BEEN SUBSEQUENTLY DECLARED. WITH THE CUMULATIVE EF FECT OF OUR FOREGOING DISCUSSION AND RELYING ON THE ABOVE DECIS ION WE CAN SAFELY HOLD THAT THERE IS NO MERIT IN THE APPEAL OF THE RE VENUE. IF WE ACCEPT THIS APPEAL IT WOULD LAY DOWN A WRONG PRECEDENT WH ERE ANY OR EVERY ADDITION MADE TO THE DECLARED INCOME WOULD RESULT IN AUTOMATIC LEVY OF PENALTY WHICH PROPOSITION IS AGAINST THE ESTABL ISHED CANNONS OF LAW AND THE EXPRESS PROVISION OF SECTION 273B OF THE AC T. 7. THE DECISIONS ON WHICH THE LD. CIT/DR HAS RELIED ARE NOT APPLICABLE TO THE FACTS OF THIS CASE. THE DECISION S IN THE CASES OF K.MAHIM VS CIT AND K.P.MADHUSUDANAN ARE JUST BASE D ON CONTRARY FACTS. THE ASSESSING OFFICER HAS HIMSELF CULLED OU T FACTS OF THIS CASE ITA 1098/10 :- 13 - : WHICH ARE REPRODUCED IN EARLIER PART OF THIS ORDER WHICH ARE SELF- EXPLANATORY. 8. IN VIEW OF OUR FOREGOING DISCUSSIONS WE CANNOT ALL OW THIS APPEAL. 9. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.7.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 20 TH JULY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR