DCIT, BIKANER v. M/s. Bhanwar Lal Mahendra Kumar Soni, BIKANER

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR B EFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI V.D.RAO JUDICIAL MEMBER ITA NO:159 / JU / 2010 ASSTT. YEAR: 2006 07 DEPUTY COMMISSIONER OF INCOME-TAX VS M/S BHANWAR L AL MHAHENDRA CIRCLE-1 BIKANER. KUMAR SONI SUNRON KI BADI G UWAR BIKANER. PAN: AAFFB9794F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVDESH KUMAR D.R RESPONDENT BY: SHRI N.R. MERTIA A.R ORDER PER V. D. RAO: JM 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINS T THE ORDER OF THE CIT (APPEALS) BIKANER DATED 08-01-2010. 2. THE FACTS ARE IN BRIEF THAT THE ASSESSEE FILED T HE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 2 50 290/- SUBSE QUENTLY AFTER THE SURVEY THE ASSESSEE INCOME WAS DETERMINED AS TOTAL INCOME OF RS. 12 66 010/-. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSE RVED THAT A SURVEY ACTION U/S 133 A CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 30-11-2005 WHEREIN IT WAS SURRENDERED RS. 14 00 000/- AS AN AD DITIONAL INCOME FOR TAXATION BUT IN THE RETURN OF INCOME DECLARED ONLY RS.4 00 000/-. THE 2 ASSESSING OFFICER FURTHER OBSERVED THAT THE ADDITIO NAL INCOME ASSESSED ONLY IN THE RESULT OF DEEP SCRUTINY. THE TRADING ADDITIO N WAS CLEARLY IN CONCEALMENT NATURE. THE EXCESS STOCK AND CASH FOUN D DURING THE COURSE OF SURVEY PROCEEDINGS REPRESENTED THE UNDISCLOSED INCO ME OF THE FIRM. THE CASH CREDITS WERE ALSO FOUND IN THE NAME OF THE PAR TNER SMT. DURGA DEVI WAS ALSO UNEXPLAINED BUT NO SEPARATE ADDITION WAS MADE SINCE SAME WAS DEEMED TO BE COVERED UNDER THE TRADING ADDITION. DURING T HE COURSE OF THE PENALTY PROCEEDINGS IT WAS SUBMITTED BEFORE THE ASSESSING O FFICER THAT THE ADDITIONS WERE MADE ON ESTIMATE BASIS. THE ADDITIONAL INCOME WAS VOLUNTARILY SURRENDERED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT WHEN IT WAS VOLUNTARILY SURRENDERED NO PENALTY CAN BE IMPOSED. IT WAS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF T HE PENALTY PROCEEDINGS THAT AT THE TIME OF THE SURVEY ON FIRM HAD MADE A S URRENDER OF ADDITIONAL INCOME FOR TAX WHICH WAS RETRACTED THROUGH A WRITTE N LETTER AND IN RETURN OF INCOME WAS FILED (INCLUDING RS.4 00 000/- OF SURREN DERED INCOME DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE ASS ESSING OFFICER). IN VIEW OF THE LOOSE PAPERS AND OTHER RELATED PAPERS THE A SSESSEE SURRENDERED RS. 14 00 000/- ON ACCOUNT NON MAINTAINING THE BOOK S OF ACCOUNTS TO BUY MENTAL PEACE. HOWEVER THE ASSESSING OFFICE R HAS NOT ACCEPTED THE 3 SUBMISSIONS AND THE EXPLANATIONS OF THE ASSESSEE I MPOSED PENALTY U/S 271 (1) (C) OF THE ACT. 3. ON APPEAL THE LD. CIT (A) BY CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AND VARIOUS CASE LAWS RELIED BY ASSESSEE THE LD. CIT (A) DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. ON B EING AGGRIEVED REVENUE CARRIED THE MATTER BEFORE THE HONBLE TRIBUNAL. 4. THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUBMITT ED THAT IF THE SCRUTINY HAS NOT TAKEN PLACE THE ASSESSEE COULD NOT HAVE BEEN DECLARED THE AMOUNT OF RS.14 00 000/-. THE ASSESSEE INITIALLY O NLY DECLARED RS. 4 00 000/- AND ONLY BECAUSE OF SCRUTINY HE DISCLOSE D RS.14 00 000/-. IT IS NOT VOLUNTARY DISCLOSURE MADE BY THE ASSESSEE AND T HE ADDITIONAL INCOME DISCLOSED BY THE ASSESSEE RELATING TO CONCEALED INC OME SECTION 271(1) (C) HAS TO BE APPLIED. HE STRONGLY SUPPORTED THE PENAL TY ORDER PASSED BY THE ASSESSING OFFICER. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE ASSESSEE IS A SMALL BUSINESS MAN AND TO BUY A P EACE HE HAS DISCLOSED THE AMOUNT OF RS.14 00 000/- AS HIS TRADING INCOME. IN FACT THE ASSESSING OFFICER HAS NOT MADE INVESTIGATION WITH REGARD TO T RADING ACTIVITY OF THE ASSESSEE AND NOTHING WAS FOUND MORE THAN WHAT HAS B EEN DECLARED BY THE ASSESSEE AND THE SAME WAS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THE 4 REASONS FOR DISCLOSURE AND HE SUBMITTED THAT THE AS SESSING OFFICER HAS NOT FOUND THAT THE EXPLANATION OF THE ASSESSEE IS FALSE AND THEREFORE NO PENALTY CAN BE IMPOSED AND HE STRONGLY SUPPORTED THE ORDER OF THE CIT (A). WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE ORDE RS BELOW. 6. THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT THE TRADING ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE E STIMATED BASIS. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL TO SHOW THAT THE ITEMS MENTIONED IN THE APPROVAL MEMO HAS IN FACT BE EN CONCEALED BY THE ASSESSEE OUT SIDE THE REGULAR BOOKS OF ACCOUNT. TH E EXCESS CASH AND STOCK FOUND DURING THE COURSE OF SURVEY HAD ALREADY BEEN OFFERED FOR TAXATION BY THE ASSESSEE DURING THE COURSE OF SURVEY ITSELF. NO ADDITION WAS MADE IN RESPECT OF CASH CREDITS OF THE PARTNERS AND THE LAB OUR RECEIPTS WERE ALSO ADDED ON ESTIMATE BASIS ONLY. THE ASSESSEE EXPLAINE D IN RESPECT OF EACH AND EVERY ITEM ON WHICH PENALTY WAS LEVIED BY THE ASSES SING OFFICER AND IT WAS NOT FOUND BY THE ASSESSING OFFICER THAT THE EXPLANA TION WAS FALSE; THEREFORE THE LD. CIT (A) DELETED THE PENALTY BY OBSERVING AS UNDER. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS IONS MADE. FROM THE PERUSAL OF THE ASSESSMENT AND PENALTY ORDER IT IS SEEN THAT THE TRADING ADDITION MADE BY THE ASSESSING OFFICER IS ONLY ON E STIMATE BASIS. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL TO SHOW THAT THE 5 ITEMS MENTIONED IN THE APPROVAL MEMO HAD IN FACT HA S BEEN SOLD BY THE APPELLANT OUTSIDE THE REGULAR BOOKS OF ACCOUNT. TH E EXCESS CASH AND STOCK FOUND DURING THE COURSE OF SURVEY HAD ALREADY BEEN OFFERED FOR TAXATION BY THE APPELLANT DURING THE COURSE OF SURVEY ITSELF. NO ADDITION WAS MADE IN RESPECT OF THE CASH CREDITS OF THE PARTNER. THE LA BOUR RECEIPTS WERE ALSO ADDED ON ESTIMATE BASIS ONLY. ALL SUCH ADDITIONS W ERE ACCEPTED BY THE APPELLANT AS IS EVIDENT FROM THE SURRENDER LETTER F URNISHED DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT HAD FURNISHE D EXPLANATION IN RESPECT OF EACH AND EVERY ITEM ON WHICH PENALTY WAS LEVIED BY THE ASSESSING OFFICER BUT IN THE PENALTY ORDER THERE IS NOTHING TO SUGGES T THAT THE EXPLANATION FURNISHED BY THE APPELLANT WAS FALSE. NON SUBSTANT IATION OF EXPLANATION FURNISHED COULD LEAD TO ADDITION BUT CANNOT BE SAID TO JUSTIFY THE IMPOSITION OF PENALTY U/S 271 (1) (C). THE ITAT AMRITSAR IN CASE OF DR. RAVI PAUL CITED ABOVE AND THE DECISION OF PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT V/S METAL PRODUCTS OF INDIA (150 ITR 714) HAD HELD THAT ADDITION MADE ONLY ON ESTIMATE BASIS CANNOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THE FAILURE TO RETURN CORRECT INCOME BY THE APPELLANT WAS DUE T O ANY GROSS OR WILLFUL NEGLECT ON ITS PART. FURTHER THE ITAT JODHPUR IN THE CASE OF ITO WARD-2 BARMER VS SHRI NARENDER KUMAR IN ITA NO.37 / JU / 2 004 DATED 19-05- 2006 HAD HELD THAT NO PENALTY CAN BE IMPOSED U/S 27 1 (1) (C) IF THE 6 SURRENDER WAS MADE DURING THE COURSE OF SURVEY AND THE AMOUNT WAS DULY OFFERED FOR TAXATION. IN THE INSTANT CASE IT IS S EEN THAT THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER ONLY ON THE ESTIMATE BASIS WITHOUT CONCLUSIVELY PROVING THAT THE APPELLANT WAS GUILTY OF ANY GROSS OR WILLFUL NEGLECT. THE APPELLANT HAD SURRENDERED THE INCOME DURING THE COURSE OF SURVEY AND REITERATED DURING THE ASSESSMENT PROCEED INGS. CONSIDERING THE TOTALITY OF THE FACTS IT IS HELD THAT THE PENALTY L EVIED BY THE ASSESSING OFFICER WAS NOT PROPER. THE SAME IS THEREFORE CANCELLED. 7. THE ASSESSEE HAS EXPLAINED DETAILED EXPLANATI ON BEFORE THE ASSESSING OFFICER AS WELL AS CIT (A). THE ASSESSING OFFICER HAS NOT FOUND THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS A FA LSE. THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT THE ADDITION ON WH ICH PENALTY WAS IMPOSED NOT SUSTAINABLE ON THE GROUND THAT THE ADDITIONS AR E ON ESTIMATED BASIS. WE ARE AGREEING WITH THE FINDING OF THE CIT (A) THAT N O PENALTY CAN BE IMPOSED ON THE BASIS OF MERE ESTIMATION. AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE EXPLANAT ION GIVEN BY THE ASSESSEE IS BONAFIDE AND THE FINDINGS GIVEN BY THE CIT (A) W ERE ALSO JUSTIFIED WE THEREFORE OF THE OPINION THAT NO INTERFERENCE IS REQUIRED IN THE ORDER PASSED 7 BY THE CIT (A). IN VIEW OF THE ABOVE THE APPEAL FI LED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT DATED ON 09 -02-2011 SD/- SD/- (S.V. MEHROTRA) (V. D. RAO) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 09-02-2011 KAMAL KUMAR COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE CIT (A)/TH E D.R.