USHA NARENDRA ASHAR, NAVI MUMBAI v. DCIT CEN CIR-23, MUMBAI

ITA 1769/MUM/2009 | 2004-2005
Pronouncement Date: 20-08-2010 | Result: Allowed

Appeal Details

RSA Number 176919914 RSA 2009
Assessee PAN AAAHN2029J
Bench Mumbai
Appeal Number ITA 1769/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 2 day(s)
Appellant USHA NARENDRA ASHAR, NAVI MUMBAI
Respondent DCIT CEN CIR-23, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 20-08-2010
Date Of Final Hearing 16-06-2010
Next Hearing Date 16-06-2010
Assessment Year 2004-2005
Appeal Filed On 18-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER S.NO I T A NO. ASSESSMENT YEAR APPELLANT RESPONDENT 1. 1757/MUM/2009 2003-04 NARENDRA J ASHAR HUF NAVI MUMBAI (PAN: AAAHN2029J) DEPUTY COMMI- SSIONER OF INCOME TAX CENTRAL CIRCLE 23 MUMBAI 2. 1758/MUM/2009 2001-02 MR NARENDRA J ASHAR NAVI MUMBAI (PAN: AABPA1921H) -DO- 3. 1759/MUM/2009 2002-03 -DO- -DO- 4. 1760/MUM/2009 2003-04 -DO- -DO- 5. 1761/MUM/2009 2004 - 05 - DO - - DO - 6. 1762/MUM/2009 2005-06 -DO- -DO- 7. 1763/MUM/2009 2006-07 -DO- -DO- 8. 1764/MUM/2009 2000-01 MR RAJAL NARENDRA ASHAR NAVI MUMBAI (PAN: AABPA1919K) -DO- 9. 1765/MUM/2009 2003-04 -DO- -DO- 10. 1766/MUM/2009 2004-05 -DO- -DO- 11. 1767/MUM/2009 2005-06 -DO- -DO- 12. 1768/MUM/2009 2003-04 MRS USHA NARENDRA ASHAR NAVI MUMBAI (PAN: AABPA1918J) -DO- 13. 1769/MUM/2009 2004-05 -DO- -DO- APPELLANTS BY: S/SHRI G C SRIVASTAVA / GIRISH DAVE / H S RAHEJA RESPONDENT BY: S/SHRI VIKRAM GAUD / S S RANA O R D E R PER BENCH: THESE ARE A BATCH OF THIRTEEN APPEALS DIRECTED AGA INST PENALTIES IMPOSED UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT 1961 CONSEQUENT TO BLOCK ASSESSMENTS MADE ON THE R ESPECTIVE ASSESSEES. IN THE CASE OF MR NARENDRA J ASHAR (IND IVIDUAL) THERE ARE SIX APPEALS AND ONE APPEAL IN HIS HUF STATUS. IN THE CASE OF MR RAJAL NARENDRA ASHAR WHO IS THE SON OF MR NARENDRA J ASHAR THERE ARE FOUR APPEALS AND IN THE CASE OF MRS USHA NAREND RA ASHAR THERE ITA NO: 1757 TO 1769/MUM/2009 2 ARE TWO APPEALS MAKING A TOTAL OF THIRTEEN APPEALS IN ALL. SINCE ALL OF THEM WERE HEARD TOGETHER AND INVOLVE COMMON FACT S THEY ARE DISPOSED OF BY A SINGLE ORDER FOR THE SAKE OF CONVE NIENCE. 2. THE COMMON FACTS GIVING RISE TO THE APPEALS MAY BE BRIEFLY NOTICED. TYPICALLY WE CAN TAKE THE CASE OF NARENDR A J ASHAR (HUF) IN ITA NO: 1757/MUM/2009 AS A REPRESENTATIVE CASE. ALL THE ASSESSEES WERE CARRYING ON BUSINESS IN DATES. THE ABOVE PARTICULAR ASSESSEE WAS CARRYING ON THE SAID BUSINE SS IN THE NAME AND STYLE OF M/S BAIT AL TAMUR AT NO.E-42 APMC MAR KET VASHI. THERE WAS A SEARCH OPERATION IN THE PREMISES UNDER SECTION 132 OF THE ACT ON 25.11.2005. IN THE COURSE OF THE SEARCH CERTAIN DOCUMENTS WERE SEIZED WHICH ARE REFERRED TO IN THE ASSESSMENT ORDER AS ANNEXURE 2. THE PAGES IN THESE DOCUMENTS CONTAINED THE PURCHASE BILLS OF WET DATES FROM VARIOUS PARTIES. IN ALL THERE WERE ELEVEN BILLS FROM SIX PARTIES. THE SEARCH PARTY AL SO FOUND SOME ORIGINAL PAN CARDS AND PHOTOS OF SOME PERSONS. IT WOULD APPEAR THAT A STATEMENT WAS RECORDED ON OATH FROM MR RAJAL N ASHAR AND HE WAS ASKED TO PERUSE THE COPIES OF THE LEDGER ACC OUNTS OF THE ELEVEN PARTIES IN THE BOOKS OF ACCOUNT PERTAINING T O THE LAST FEW YEARS AND EXPLAIN THE SAID BILLS SINCE THEY DID NOT CARRY THE SALES TAX REGISTRATION NUMBER AND THEY ALSO BORE THE SAME ADDRESS AND HE WAS ALSO ASKED TO STATE WHETHER THOSE PARTIES CA N BE PRODUCED FOR VERIFICATION. MR RAJAL N ASHAR GAVE THE FOLLOW ING ANSWER: - ANS: THE ABOVE BILLS ARE PURCHASE BILLS FOR WHICH I MAY NOT BE ABLE TO PRODUCE THE PARTIES AS THEY ARE NON EXISTENT. THE GOODS MENTIONED THEREIN WERE NOT ACTUALLY PURCHASED BUT THE BILLS WERE ARRANGED TO INFLATE THE PURCHASES. THE AMOUNT REFLECTED IN THE LEDGER ACCOUNT AMOUNTING TO RS.214.7 LACS REPRESENT S ITA NO: 1757 TO 1769/MUM/2009 3 MY ACCOUNTED INCOME AND I THEREFORE OFFER THE SAME FOR TAXATION IN A PERIOD APPEARING IN THE LEDGER ACCOUNT. I WOULD ALSO LIKE TO OFFER AN ADDITIONAL AMOUNT OF RS.7 LACS TOWARDS GOLD CHAIN BANGLES LYI NG IN THE LOCKER NO.1466 AT INDIA SAFETY VAULT KEMPS CORNER STANDING IN THE NAME OF USHA N ASHAR. I WOULD FURTHER LIKE TO OFFER SUM OF RS.28.30 LACS TOWARDS OTHER ASSORTED JEWELLERY LYING IN THE THREE LOCKERS ATTACHED BY YOU LYING AT HOME WHICH I MAY N OT BE ABLE TO TALLY AND TOWARDS OTHER MISCELLANEOUS EXPENSES INVESTMENTS OR DISCREPANCIES IN RESPECT O F MY INCOME/ASSETS AND OF THE FAMILY AND ALSO TOWARD S ANY ITEM I AM NOT ABLE TO EXPLAIN FROM THE LOOSE PA PER SEIZED AT OUR OFFICE PREMISES E-42 NEW MUMBAI AND OTHER OFFICE AT MUMBAI RESIDENCE WHICH COULD RELAT E TO EITHER ME OR THE FAMILY MEMBER IN RESPECT OF ANY OF THE PREVIOUS YEARS . DURING THE SEARCH THE ASSESSEE FILED A DECLARATION WHICH WAS GIVEN TO THE SEARCH WING DECLARING A SUM OF RS.2.50 CRORE S AS INCOME OF ALL THE FOUR ASSESSEES. THE BREAKUP OF THE DISCLOS ED INCOME WAS GIVEN BOTH ASSESSEE-WISE AS WELL AS ASSESSMENT YEAR -WISE. A COPY OF THIS DECLARATION HAS BEEN FILED BEFORE US I N THE COURSE OF THE HEARING. THIS DECLARATION WAS EXPLAINED BY WAY OF A NOTE WHICH IS REPRODUCED IN PAGES 2 TO 4 (PARA 3.2) OF THE ASSESS MENT ORDER. BRIEFLY STATED WHAT WAS EXPLAINED IN THE NOTE IS TH AT THE IMPORTED DATES GENERALLY COST AROUND RS.10/- TO RS.15/- PER KG AND AFTER SORTING THEY ARE SOLD AT PRICES RANGING FROM RS.30/ - TO RS.60/- PER KG. THE INFERIOR QUALITY OF DATES ARE SOLD AT PRIC ES RANGING BETWEEN RS.8/- AND RS.10/- PER KG. IN THE PAST UNSUPPORTED PURCHASES HAD BEEN MADE AT RATES RANGING AROUND RS.54/- A KG AND THE CORRECT PROFIT ON THE SALES WERE NOT DECLARED. THE SALES O F SUCH SUPERIOR QUALITY DATES WERE BOOKED AT RS.10/- TO RS.15/- PER KG INSTEAD OF THE HIGHER SALE VALUES REALIZED AND TO BALANCE THE SALES AT HIGHER RATES CORRESPONDING PURCHASE BILLS WERE TAKEN AT R S.54/- A KG. IN ITA NO: 1757 TO 1769/MUM/2009 4 SHORT WHAT WAS STATED IN THE NOTE WAS THAT THE HIG HER SALE PRICES OF SUPERIOR QUALITY DATES WERE SOUGHT TO BE OFFSET BY SHOWING HIGHER PURCHASE PRICES. IT WAS FURTHER STATED IN THE NOTE THAT THE BILLS SHOWING PURCHASES AT RS.54/- PER KG WERE TAKEN LOCA LLY AND THE ASSESSEES WERE NOT IN A POSITION TO FULLY SUBSTANTI ATE THE SAME. THE ASSESSEES ATTACHED A LIST OF SUCH UNSUPPORTED P URCHASES YEAR- WISE AND THEY WERE OFFERED AS INCOME OF THE RESPECT IVE ASSESSMENT YEARS FORMING PART OF THE TOTAL DECLARATION OF RS.2 .50 CRORES. ACTUALLY THE DECLARATION OF INCOME ON THE ABOVE BAS IS CAME TO RS.1 79 88 269/-. IN ADDITION TO THIS FIGURE SEVE RAL ITEMS WERE ADDED IN THE HANDS OF MR NARENDRA J ASHAR AND MR RA JAL ASHAR SUCH AS BROKERAGE PAYMENT IN CASH INCOME FROM TRAD ING WITH STC SCRAP SALES CASH LOANS INVESTMENT IN NERUL PROPER TY AND JEWELLERY ETC. AND AFTER ADDING ALL THESE ITEMS THE TOTAL DIS CLOSURE CAME TO RS.2 35 94 143/-. IN ORDER TO REACH THE DISCLOSED FIGURE OF RS.2.50 CRORES THE BALANCING FIGURE OF RS.14 05 857/- WAS ADDED AS ANY OTHER IF FOUND AND THUS THE TOTAL DISCLOSED FIGURE OF RS.2.50 CRORES WAS REACHED. 3. RETURNS OF INCOME WERE FILED PURSUANT TO NOTICE UNDER SECTION 153A OF THE ACT ON THE ABOVE BASIS. IN TH E COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEES WERE ASKED TO PRODUCE THE DETAILS OF THE WORKING OF THE UNDISCLOSED INCOME ON ACCOUNT OF BOGUS TRANSACTIONS ALONG WITH ALL SUPPORTING DOCUME NTS. IT APPEARS THAT THE ASSESSEES FILED REVISED RETURNS. THE COMP ARATIVE POSITION OF THE INCOME DISCLOSED IN THE ORIGINAL AND REVISED RETURNS ASSESSEE-WISE AND ASSESSMENT YEAR-WISE IS AS UNDER: - ITA NO: 1757 TO 1769/MUM/2009 5 A.Y. MR NARENDRA J ASHAR (INDIVIDUAL) MR RAJAL NARENDRA ASHAR MRS USHA NARENDRA ASHAR NARENDRA ASHAR (HUF) FIRST RETURN OF INCOME REVISED RETURN FIRST RETURN OF INCOME REVISED RETURN FIRST RETURN OF INCOME REVISED RETURN FIRST RETURN OF INCOME REVISED RETURN 2000-01 1 07 907 4 43 478 - - - - - - 2001-02 2 62 997 3 38 321 - - - - - - 2002-03 5 36 059 13 20 109 - - - - - - 2003-04 77 91 803 93 25 688 91 440 16 16 634 3 39 0 18 4 03 533 3 33 059 3 33 059 2004-05 55 84 967 70 37 720 16 98 260 10 69 565 1 9 1 392 2 41 229 - - 2005-06 2 04 991 10 50 144 10 46 376 4 89 196 - - - - 11 42 88 724 1 95 15 440 28 36 076 31 75 395 5 30 410 6 45 062 3 33 059 3 33 059 IT MAY BE SEEN FROM THE ABOVE THAT WHEREAS IN THE F IRST RETURNS AN AGGREGATE INCOME OF RS.1 79 88 269/- WAS SHOWN IN T HE AGGREGATE IN THE REVISED RETURNS THE INCOME SHOWN WAS RS.2 36 68 976/- IN THE AGGREGATE. AS REGARDS THE OTHER ITEMS THERE WA S NO CHANGE EXCEPT THAT NO INCOME WAS DISCLOSED AS ANY OTHER I F FOUND WITH THE RESULT THAT THE AGGREGATE INCOME DISCLOSED IN T HE REVISED RETURNS CAME TO RS.2 68 34 154/-. 4. ASSESSMENTS WERE COMPLETED UNDER SECTION 153A OF THE ACT BY THE AO AND THE ADDITIONAL INCOMES DISCLOSED IN T HE REVISED RETURNS WERE BROUGHT TO TAX AS PART OF THE BUSINESS INCOME OF THE ASSESSEES. THE ASSESSMENTS WERE ACCEPTED BY THE AS SESSEES AND NO APPEALS WERE FILED. CONSEQUENT TO THE ASSES SMENTS THE AO INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF IN COME AND CALLED UPON THE ASSESSEES TO SHOW CAUSE WHY PENALTIES CANN OT BE IMPOSED. THE ASSESSEES SUBMITTED THAT ONCE NOTICES UNDER SECTION 153A WERE ISSUED ALL THE ASSESSMENT OR REASSESSMEN T PROCEEDINGS WHICH WERE PENDING WOULD ABATE AND THE RETURNS OF INCOME FILED IN THE PAST ARE OF NO CONSEQUENCE WITH THE RESULT THAT THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTIO N 153A IS TO BE ITA NO: 1757 TO 1769/MUM/2009 6 TREATED AS THE ONLY RETURN FILED BY THE ASSESSEE AN D CONSEQUENTLY THE INCOME INCLUDED THEREIN SHOULD BE TAKEN TO HAVE BEEN INCLUDED VOLUNTARILY AND SINCE THE ASSESSMENTS WERE MADE IN ACCORDANCE WITH THESE RETURNS THERE CAN BE NO QUESTION OF ANY CONCEALMENT OF INCOME. IT IS ONLY THE ADDITION MADE BY THE AO IN THE ASSESSMENTS OVER AND ABOVE WHAT HAS BEEN DECLARED AS THE UNDISC LOSED INCOME WHICH CAN BE CONSIDERED IF AT ALL AS CONC EALED INCOME FOR PURPOSES OF LEVYING PENALTY. IT WAS SUBMITTED THAT THE ASSESSEES WERE ENTITLED TO THE BENEFIT OF IMMUNITY UNDER EXPL ANATION 5 TO SECTION 271(1)(C) OF THE ACT SINCE ALL THE RELEVANT TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT. IT WAS FURTHER S UBMITTED THAT IT IS ONLY A CASE OF THE ASSESSEES NOT BEING IN A POSITIO N TO PROVE THE PURCHASES OF DATES ON ACCOUNT OF ANTICIPATED NON CO OPERATION FROM THE ELEVEN PARTIES AND THAT FOR THE ASSESSEES INAB ILITY TO PROVE THE TRANSACTIONS IN THE MANNER REQUIRED BY THE DEPARTME NT NO PENALTY WAS IMPOSABLE. 5. THE AO DID NOT ACCEPT THE ASSESSEES SUBMISSION. ACCORDING TO HIM THE PROFIT ON THE SALE AND PURCHAS E OF DATES HAD NOT BEEN DISCLOSED IN THE ORIGINAL RETURNS OF INCOM E AND SINCE THEY WERE DISCLOSED IN THE RETURNS FILED UNDER SECTION 1 53A THE ASSESSEES WERE LIABLE TO PENALTIES FOR CONCEALMENT OF INCOME. ACCORDING TO HIM THE INTENTION OF THE LAW WAS NOT T O PUT AN HONEST TAXPAYER AT A DISADVANTAGEOUS POSITION AS AGAINST A PERSON ON WHOM SEARCH ACTION WAS TAKEN. THE AO FURTHER POINT ED OUT THAT THE ASSESSMENTS WERE ACCEPTED. AS REGARDS THE ASSESSEE S CONTENTION THAT THEY WERE MERELY UNABLE TO PROVE THE LOCAL PUR CHASES DUE TO ITA NO: 1757 TO 1769/MUM/2009 7 NON COOPERATION FROM THE PARTIES AND THE FURTHER C ONTENTION THAT NO CORRESPONDING ASSETS WERE FOUND DURING THE SEARCH THE AO HELD THAT EVEN AT THE TIME OF SEARCH THE AUTHORITIES HAD IDENTIFIED THE LOCAL SUPPLIERS AS BOGUS PARTIES AND IT WAS ONLY BE CAUSE OF THIS THAT THE ASSESSEES HAD COME FORWARD WITH FURTHER DECLARA TION OF INCOME AND THAT THE ABSENCE OF ANY ASSETS REPRESENTING THE CONCEALED INCOME DURING THE SEARCH WAS NOT RELEVANT IN JUDGIN G THE ASSESSEES GUILT. AS REGARDS THE CONTENTION THAT T HE TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE THE IMMUNITY FROM PENALTY WAS AVAILABLE THE AO OPINED THAT THOU GH THEY WERE RECORDED BUT THEY WERE NOT PROPERLY RECORDED IN THE BOOKS AND THAT IS THE REASON WHY THE ASSESSEES HAD TO COME FORWARD WITH ADDITIONAL DISCLOSURE OF INCOME. HE HELD THAT THE ASSESSEES COULD NOT ESTABLISH THE CORRECTNESS OF THE RECORDED TRANS ACTIONS IN THE BOOKS OF ACCOUNT. HE REFERRED TO SEVERAL AUTHORITI ES TO CONCLUDE THAT THIS IS A CASE WHERE ADDITIONAL INCOME HAD BEE N OFFERED ONLY AS A RESULT OF THE SEARCH AND THEREFORE THE ASSESSEE S WERE LIABLE TO PENALTY FOR CONCEALMENT OF INCOME. ACCORDINGLY HE IMPOSED THE FOLLOWING PENALTIES: - ASSESSEE ASSESSMENT YEAR PENALTY (RS.) NARENDRA J ASHAR (HUF) 2003-04 1 04 914 MR NARENDRA J ASHAR (INDIVIDUAL) 2001-02 1 55 699 - DO - 2002 - 03 1 32 421 -DO- 2003-04 4 15 808 -DO- 2004-05 37 38 850 -DO- 2005-06 23 84 112 -DO- 2006-07 2 84 484 MR RAJAL NARENDRA ASHAR 2000 - 01 2 75 616 -DO- 2003-04 28 804 -DO- 2004-05 5 60 426 -DO- 2005-06 3 60 140 MRS USHA NARENDRA ASHAR 2003-04 1 06 790 - DO - 2004 - 05 57 418 ITA NO: 1757 TO 1769/MUM/2009 8 6. THE CIT(A) PASSED ORDERS CONFIRMING THE LEVY OF PENALTIES. HE AGREED WITH THE AO THAT THE ADDITIONS MADE IN TH E ASSESSMENTS WERE BASED ON DETECTION OF CONCEALED INCOME DURING THE SEARCH OPERATION. ACCORDING TO HIM THE DISCLOSURE MADE BY THE ASSESSEES WAS NOT AN HONEST DISCLOSURE AS IT CAME ONLY AFTER THE DISCOVERY OF PARTICULARS OF INCOME DURING THE SEARCH. THE CIT(A ) ALSO AGREED WITH THE AOS CONCLUSION THAT SINCE THE ASSESSEES H AD NOT PROPERLY RECORDED THE PURCHASE TRANSACTIONS IN THE BOOKS OF ACCOUNT THEY WERE NOT ENTITLED TO THE IMMUNITY FROM PENALTY OFFE RED BY EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. ON THE QUESTION WHETHER THE RETURNS FILED BY THE ASSESSEES IN RESPO NSE TO THE NOTICE UNDER SECTION 153A SHOULD BE TAKEN AS THE FIRST RET URNS BECAUSE THE EARLIER PROCEEDINGS WHICH WERE PENDING WOULD ABATE THE CIT(A) HELD THAT THE ORIGINAL RETURN WOULD BE STILL RELEVA NT TO SEE IF THERE WAS ANY SUPPRESSION OF INCOME THEREIN VIS--VIS THE RETURN FILED UNDER SECTION 153A OF THE ACT. HE THUS AGREED WITH THE AO AND CONFIRMED THE LEVY OF PENALTIES EXCEPT FOR A DIRECT ION REGARDING THE QUANTUM OF PENALTY VIS--VIS THE CONTENTION OF THE ASSESSEES THAT IT CONTAINED CERTAIN ERRORS OF WORKING. 7. IT IS AGAINST THE AFORESAID ORDERS OF THE CIT(A) THAT ALL THE ASSESSEES ARE IN FURTHER APPEAL BEFORE THE TRIBUNAL . THE LEARNED COUNSEL FOR THE ASSESSEES TOOK US THROUGH THE CHRON OLOGICAL EVENTS STARTING FROM THE SEARCH AND THE VARIOUS WORKING SH EETS FILED BY THE ASSESSEES IN SUPPORT OF THE DISCLOSURE OF INCOME FI LED BEFORE THE SEARCH AUTHORITIES AS ALSO IN THE RETURNS FILED UND ER SECTION 153A. HE ALSO FILED A COPY OF THE STATEMENT OF MR RAJAL N ASHAR SON OF MR ITA NO: 1757 TO 1769/MUM/2009 9 NARENDRA J ASHAR SAID TO HAVE BEEN RECORDED UNDER SECTION 132(4) ON 26.11.2005 AT 9.30 AM. COPIES OF THE ELEVEN BIL LS FOR PURCHASE OF THE DATES WHICH ARE THE BONE OF CONTENTION WER E ALSO FILED BEFORE US. HE CONTENDED THAT THERE WAS NO DEFINITI VENESS IN THE PASSING OF THE PENALTY ORDERS IN THE SENSE THAT THE RE WAS NO FINDING OF CONCEALMENT OF INCOME ON THE PART OF THE ASSESSE ES. ACCORDING TO HIM THE GIST OF THE PENALTY ORDERS WAS MERELY TH AT THE ASSESSEES WERE UNABLE TO PROVE THE LOCAL PURCHASES IN THE MAN NER REQUIRED BY THE DEPARTMENT FOR WHICH NO PENALTY CAN BE IMPOSED. IT WAS POINTED OUT THAT IT WAS ONLY WHEN THE DEPARTMENT AS KED THE ASSESSEES WHETHER THE PARTIES COULD BE PRODUCED THA T THE ASSESSEES ANTICIPATING THAT THE PARTIES WILL NOT C OOPERATE CAME FORWARD WITH THE DISCLOSURE OF INCOME AND THAT SHOU LD NOT BE TAKEN AS AN ADMISSION OF GUILT. IT WAS SUBMITTED THAT TH E PARTIES HAD BEEN ISSUED PAN CARDS BY THE INCOME TAX DEPARTMENT WHICH WAS EVIDENCE THAT THEY WERE REAL AND EXISTING PARTIES A ND THEREFORE THERE IS NO SUBSTANCE IN SAYING THAT THE PURCHASES FROM THEM WERE NOT GENUINE. THE LEARNED COUNSEL FOR THE ASSESSEES SUBMITTED THAT THE ANSWER OF MR RAJAL N ASHAR TO QUESTION NO.12 IN THE STATEMENT SHOULD BE READ AS A WHOLE AND THE STATEMENT THEREIN THAT THE GOODS WERE NOT ACTUALLY PURCHASED BUT THE BILLS WERE ARRA NGED TO INFLATE THE PURCHASES SHOULD BE READ IN CONTEXT AND SOUGHT TO EXPLAIN THAT THE STATEMENT ONLY MEANT THAT THE ASSESSEES CANNOT PRODUCE THE PARTIES OR OTHERWISE PROVE THE PURCHASES AND IN THE LIGHT OF THE SURROUNDING CIRCUMSTANCES AND THE PAN CARDS ISSUED BY THE DEPARTMENT THE STATEMENT CANNOT BE READ TO MEAN TH AT THE ITA NO: 1757 TO 1769/MUM/2009 10 PURCHASES WERE BOGUS. THE LEARNED COUNSEL FOR THE ASSESSEES IN THIS CONNECTION DREW OUR ATTENTION TO PAGE 105 OF T HE PAPER BOOK WHICH IS ACTUALLY THE ASSESSMENT ORDER OF MR NAREND RA J ASHAR (INDIVIDUAL) FOR THE ASSESSMENT YEAR 2001-02. SINC E THE ASSESSMENT ORDERS ARE ALMOST IDENTICAL IN ALL THE C ASES WE MAY TAKE THIS AS REPRESENTATIVE OF ALL THE ASSESSMENT O RDERS. THE STATEMENT REFERRED TO BY THE LEARNED COUNSEL FOR TH E ASSESSEES IS THE STATEMENT MADE BY THE AO IN THIS PARAGRAPH OF T HE ASSESSMENT ORDER THAT THE ASSESSEE HAD BOOKED BOGUS PURCHASES AS WELL AS BOGUS LOCAL SALES BUT THE BOGUS LOCAL SALES WERE SH OWN AT A LOWER RATE THAN THE COST OF PURCHASE AND BY THIS METHOD T HE ASSESSEE HAD BOOKED LOSSES. IT WAS SUBMITTED BY THE LEARNED COU NSEL FOR THE ASSESSEES THAT THESE ARE ONLY INFERENCES BY THE AO BUT NOT FINDINGS BECAUSE THE ASSESSEES AT NO STAGE OF THE PROCEEDING S HAD DECLARED THAT THE SALES WERE BOGUS. OUR ATTENTION WAS DRAWN TO THE BILLS (ELEVEN OF THEM) ON THE BASIS OF WHICH THE AS SESSEES HAD DECLARED ADDITIONAL INCOME. IT WAS SUBMITTED ON BE HALF OF THE ASSESSEES THAT THE BILLS BY THEMSELVES DID NOT INDI CATE ANY CONCEALMENT OF INCOME OR THAT THE PURCHASES SHOWN I N THEM WERE BOGUS. THEY CONTAINED THE NAME AND ADDRESS OF THE PARTY THE NATURE OF THE BUSINESS THE BILL NUMBER DESCRIPTIO N AND RATE OF THE GOODS TELEPHONE NUMBERS ETC. IT WAS FURTHER POIN TED OUT THAT NO VERIFICATION WAS CARRIED OUT BY THE INCOME TAX AUTH ORITIES OR THE SEARCH AUTHORITIES ON THE BASIS OF THE BILLS AND IT WAS NOT ESTABLISHED BY THEM THAT THE PARTIES WERE NON-EXIST ENT AND IT WAS NOT EVEN THEIR CASE THAT THE PAN CARDS ISSUED TO TH EM WERE WRONGLY ITA NO: 1757 TO 1769/MUM/2009 11 ISSUED. ALL THE BILLS IT WAS POINTED OUT FELL IN THE FINANCIAL YEAR ENDED 31.03.2005 AND RELATED TO THE ASSESSMENT YEAR 2005-06. THE ASSESSEES HAD DECLARED THE INCOME WITH REFERENC E TO THE BILLS OF THE ABOVE FINANCIAL YEAR IN THE ASSESSMENT YEAR 2004-05 BUT THE AO HAD MECHANICALLY ACCEPTED AND HAD ALSO IMPOSED T HE IMPUGNED PENALTIES WHICH SHOWED THE PERFUNCTORY NAT URE OF THE PENALTY ORDERS. THE LEARNED COUNSEL FOR THE ASSESS EES SUBMITTED FURTHER THAT NO SHORTAGE OF STOCK WAS FOUND DURING THE SEARCH AND NOTHING TO THAT EFFECT HAD BEEN MENTIONED IN THE PA NCHNAMA AND WHAT WAS REFERRED TO AS SHORTAGE IN THE ASSESSMENT ORDER IS THE REGULAR SHORTAGE IN THE DATES CLAIMED ON ACCOUNT OF HANDLING WASTAGE ETC. IT WAS URGED THAT THE ASSESSEES OFF ER OF ADDITIONAL INCOME WAS VOLUNTARILY MADE AND IN GOOD FAITH AND T HE AO WAS NOT IN A POSITION TO SHOW ANY INCRIMINATING MATERIAL AT THE TIME WHEN THE DECLARATION WAS MADE. ACCORDING TO THE LEARNED COU NSEL FOR THE ASSESSEES APART FROM THE DECLARATION OF THE ASSESS EE THERE WAS NO OTHER MATERIAL BEFORE THE AO ON THE BASIS OF WHI CH THE INCOME COULD BE ASSESSED UNDER SECTION 153A OF THE ACT AN D THE DECLARATION HAVING BEEN MADE VOLUNTARILY AND IN GOO D FAITH AND BEFORE ANY DETECTION AND WITHOUT CONFRONTING THE AS SESSEES WITH ANY MATERIAL FOUND DURING THE SEARCH THERE WAS NO JUSTIFICATION FOR THE CONCLUSION THAT THE ASSESSEES HAD CONCEALED THE IR INCOME. 8. IT WAS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEES THAT EVEN ON THE WORKING OF THE ADDITIONA L INCOME NO DISPUTE WAS RAISED BY THE AO. IT WAS POINTED OUT T HAT WHEN THE FIRST DECLARATION WAS MADE TO THE SEARCH WING DECLARING I NCOME OF ITA NO: 1757 TO 1769/MUM/2009 12 RS.2.5 CRORES THERE WAS NO VERIFICATION THEREOF BY THE AO. BASED ON THIS DECLARATION THE ASSESSEES HAD FILED RETURNS OF INCOME UNDER SECTION 153A OF THE ACT. IN THESE RETURNS A PARTIC ULAR METHOD OF WORKING OUT THE ADDITIONAL INCOME WAS FOLLOWED AS EXPLAINED IN THE WORKING SHEETS FILED BEFORE US. THE METHOD FOLLOWE D WAS TO FIRST ARRIVE AT THE AVERAGE PURCHASE PRICE OF THE DATES A T RS.56.51 PER KG. THESE DATES WHICH WERE PURCHASED FOR A PRICE O F ABOVE RS.55/- PER KG WERE SHOWN TO HAVE BEEN SOLD AT THE AVERAGE PRICE OF RS.63.54 PER KG. THE DIFFERENCE IN THE AVERAGE SELLING AND PURCHASE PRICES CAME TO RS.7.03 PER KG AND FOR 1722 0 KGS THE INCOME OFFERED WAS RS.1 21 057/-. IT WAS ON THIS B ASIS THAT THE ORIGINAL DECLARATION AS WELL AS THE FIRST RETURNS U NDER SECTION 153A WERE FILED. THESE RETURNS WERE REVISED ON THE BASI S THAT THE AVERAGE PURCHASE PRICE OF RS.56.51 PER KG WAS NOT C ORRECT AND THE CORRECT AVERAGE WAS RS.30.75 PER KG ONLY. THERE WA S THUS A DIFFERENCE OF RS.25.75 PER KG AND FOR 17220 KGS TH E FIGURE CAME TO RS.4 43 477/-. THIS WAS THE FIGURE SHOWN IN THE RE VISED RETURNS. THESE FIGURES HAVE BEEN TAKEN BY THE ASSESSEE WITH REFERENCE TO THE CASE OF MR NARENDRA J ASHAR (INDIVIDUAL) FOR TH E ASSESSMENT YEAR 2000-01. THE LEARNED COUNSEL FOR THE ASSESSEE S POINTED OUT THAT THE REVISED RETURNS FILED UNDER SECTION 153A W ERE PREPARED AND FILED ON THIS METHOD IN ALL THE CASES. THE CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEES ON THE BASIS OF THE ABOV E EXAMPLE WAS THAT THE ATTEMPT OF BOTH THE ASSESSEES ON THE ONE H AND AND THE AO ON THE OTHER HAND WAS TO SOMEHOW REACH THE FIGURE O F RS.2.50 CRORES WHICH WAS THE DECLARATION MADE BEFORE THE SE ARCH WING. IT ITA NO: 1757 TO 1769/MUM/2009 13 WAS POINTED OUT THAT THE FOCUS AND ATTENTION OF THE AO WAS ONLY TOWARDS ADJUSTING THE FIGURES OF ADDITIONAL INCOME IN SUCH A MANNER THAT SOMEHOW THE ASSESSEES DECLARED INCOME OF RS.2 .50 CRORES IN THE RETURNS IS CONSISTENT WITH THEIR DECLARATION MA DE BEFORE THE SEARCH WING. HE DREW OUR ATTENTION TO PAGE 2 OF TH E WORKING SHEET FILED BEFORE US AND POINTED OUT THAT THE AGGREGATE INCOME DECLARATION IN THE REVISED RETURNS WAS STILL ONLY R S.2 36 68 976/- WHICH FELL SHORT OF RS.2.50 CRORES BUT THE ASSESSES CHOSE TO STICK TO THE DECLARATION OF OTHER ITEMS SUCH AS BROKERAGE IN CASH TRADING WITH STC SCRAP SALES NERUL PROPERTY JEWELLERY E TC. AND ADDING THE INCOMES DECLARED ON THESE COUNTS TO THE INCOME DECL ARATION IN THE REVISED RETURNS THE AGGREGATE CAME TO RS.2 68 34 1 54/-. IN SHORT WHAT THE LEARNED COUNSEL FOR THE ASSESSEES SUBMITTE D WAS THAT BOTH PARTIES MERELY TRIED DIFFERENT METHODS OF WORKING O UT THE ADDITIONAL INCOME SO THAT THE OFFER OF ADDITIONAL INCOME AT TH E TIME OF THE SEARCH WAS HONOURED AND IT WAS NEVER IN THE MIND OF THE AO AT ANY STAGE DURING THE ASSESSMENT PROCEEDINGS THAT THE F IGURES HAVE TO BE VERIFIED SO AS TO ASCERTAIN THEIR CORRECTNESS OR ACCURACY AND IT WAS ALSO NOT POSSIBLE FOR THE AO TO DO SO FOR THE S IMPLE REASON THAT THERE WAS NO MATERIAL OR EVIDENCE WHICH HAD BEEN CO LLECTED BY HIM EITHER DURING THE SEARCH OR DURING THE ASSESSMENT P ROCEEDINGS ON THE BASIS OF WHICH THE ADDITIONAL INCOME COULD BE A SSESSED AS UNDISCLOSED INCOME. IT WAS SUBMITTED THAT IN ANY C ASE THE AO MERELY ACCEPTED THE WORKING PRODUCED BY THE ASSESSE ES ON ESTIMATE WITHOUT ANY MATERIAL OR EVIDENCE WHICH CA N HARDLY GIVE RISE TO THE FINDING THAT THE ASSESSEES CONCEALED TH EIR INCOME. ITA NO: 1757 TO 1769/MUM/2009 14 9. HAVING MADE THE AFORESAID SUBMISSIONS ON FACTS THE LEARNED COUNSEL FOR THE ASSESSEES RAISED TWO LEGAL CONTENTI ONS. THE FIRST WAS THAT ON THE DATE OF SEARCH I.E. 25.11.2005 TH E ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06 WERE PENDIN G AND THOSE PROCEEDINGS ABATED UNDER THE SECOND PROVISO TO SUB- SECTION (1) OF SECTION 153A OF THE ACT WITH THE CONSEQUENCE THAT THE RETURNS FILED ORIGINALLY CANNOT BE LOOKED INTO FOR THE PURPOSE OF COMPARISON WITH THE RETURNS OF INCOME FILED UNDER SECTION 153A. TH E FURTHER CONTENTION IS THAT IF THOSE RETURNS CANNOT BE LOOKE D INTO THEN THE INCOME OFFERED IN THE RETURNS AND THE REVISED RETUR NS FILED UNDER SECTION 153A HAVING BEEN ACCEPTED AND THE ASSESSMEN TS HAVING BEEN COMPLETED ON THAT BASIS THERE IS NO QUESTION OF ANY CONCEALMENT OF INCOME. IN SUPPORT OF THIS LEGAL SU BMISSION STRONG RELIANCE WAS PLACED ON THE JUDGMENT OF THE JHARKHAN D HIGH COURT IN ABHAY KUMAR SHROFF VS. CIT (2007) 290 ITR 114 (JHAR KHAND). 10. THE SECOND LEGAL CONTENTION RAISED WAS THAT THE ASSESSEE IS ENTITLED TO THE IMMUNITY FROM PENALTY UNDER EXPLANA TION 5 BELOW SECTION 271(1)(C) OF THE ACT. IT WAS SUBMITTED THA T THIS PLEA HAD BEEN RAISED BY THE ASSESSEE IN THE LETTER DATED 24. 06.2008 WRITTEN TO THE AO IN REPLY TO THE PENALTY NOTICE A COPY OF WHICH IS AT PAGE 54 OF THE PAPER BOOK. THE ARGUMENT IS APPLICABLE T O ALL THE ASSESSEES AND ALL THE ASSESSMENT YEARS INVOLVED IN THE APPEALS. IT IS TWO-FOLD. THE FIRST PLEA IS THAT THE ENTRIES RE LATING TO THE PURCHASES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUN T AND THEREFORE THE PROVISIONS OF EXPLANATION 5(B)(1) BEL OW SECTION 271(1)(C) APPLIES AND IN SUPPORT OF THIS ARGUMENT I T IS POINTED OUT ITA NO: 1757 TO 1769/MUM/2009 15 THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO IN ANY OF THE CASES AND FURTHER THE ORDER OF THE JABALPUR BENCH OF THE TRIBUNAL IN ACIT VS. DULICHAND DEVENDRA KUMAR (1998 ) 64 ITD 67 (JAB) IS CITED. THE SECOND PART OF THE ARGUMENT IS THAT EXPLANATION 5(B)(2) BELOW SECTION 271(1)(C) APPLIES AND IT IS S UBMITTED THAT UNDER THIS PROVISION THE ASSESSEE IN ORDER TO GET IMMUNITY FROM PENALTY CAN FILE RETURNS INCLUDING THE INCOME FOR ALL THE YEARS AND NOT MERELY THE INCOME OF THE YEAR FOR WHICH THE RET URN OF INCOME UNDER SECTION 139(1) WAS YET TO BE FILED. IN SUPPO RT OF THIS CONTENTION STRONG RELIANCE WAS PLACED ON THE JUDGME NT OF THE MADRAS HIGH COURT IN CIT VS. S.D.V. CHANDRU (2004) 266 ITR 175 (MAD) AND THAT OF THE RAJASTHAN HIGH COURT IN CIT V S. KANHAIYALAL (2008) 299 ITR 19 (RAJ). REFERENCE WAS ALSO MADE T O THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN CIT VS. MIS HRIMAL SONI (2007) 289 ITR 77 (RAJ) IN WHICH CASE IT WAS HELD T HAT THE DISCLOSURE OF THE INCOME IN THE RETURNS FILED BY TH E ASSESSEE NEED NOT RELATE TO TANGIBLE ASSETS ONLY SUCH AS MONEY B ULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN THE ASS ESSEES POSSESSION OR CONTROL. THE ALTERNATIVE SUBMISSION ON THIS PAR T OF THE ARGUMENT WAS THAT IN ANY CASE TO THE EXTENT THE JEWELLERY D ECLARED BY THE ASSESSEE WAS TELESCOPED INTO THE INCOME NO PENALTY CAN BE LEVIED EVEN ASSUMING THAT THE JUDGMENT OF THE RAJASTHAN HI GH COURT IN CIT VS. KANHAIYALAL CITED ABOVE IS HELD TO BE NOT A PPLICABLE TO THE PRESENT CASE. ITA NO: 1757 TO 1769/MUM/2009 16 11. ON THE BASIS OF THE ABOVE FACTUAL AND LEGAL SUB MISSIONS THE LEARNED COUNSEL FOR THE ASSESSEES STRONGLY URGED TH AT THE PENALTIES IMPOSED WERE NOT JUSTIFIED AND SHOULD BE CANCELLED. 12. ON THE OTHER HAND THE CONTENTION OF THE DEPARTM ENT ARTICULATED BY MR S S RANA THE LEARNED CIT DR AND MR VIKRAM GAUD THE LEARNED SENIOR DR ARE AS FOLLOWS. DURING THE SEARCH ELEVEN BILLS RELATING TO SIX PARTIES FOR PURCHASE O F DATES WERE FOUND AND ALONG WITH THEM THE ORIGINAL PAN CARDS AND PHOT OS OF SOME OF THEM WERE ALSO FOUND IN THE SEARCH OF THE RESIDENTI AL PREMISES OF THE ASSESSEES. IT IS NOTEWORTHY ACCORDING TO THE DEPARTMENT THAT ALL THE BILLS HAD THE SAME ADDRESS NAMELY 93/95 K AZI SAYEED STREET SUGAR HOUSE 4 TH FLOOR MUMBAI 400 003 AND EVEN SOME COMMON TELEPHONE NUMBERS. IN ANSWER TO QUESTION NO .9 MR RAJAL N ASHAR HAD STATED IN THE STATEMENT RECORDED UNDER SECTION 132(4) THAT THEY HAVE PURCHASED SOME QUANTITY OF WET DATES FROM THE ABOVE PARTIES AND HAD ASKED THEM TO GIVE US THE ZER OX COPY OF THE PAN CARDS BUT THOSE PARTIES SENT THE ORIGINAL PAN C ARDS WHICH HAVE TO BE RETURNED TO THEM. THE PHOTOGRAPHS ACCO RDING TO MR RAJAL N ASHAR HAD BEEN SENT BY THOSE PARTIES TO OP EN SOME DEMAT ACCOUNTS BUT HE WAS NOT AWARE WHY THE PHOTOGRAPHS O F THE CHILDREN WERE SENT. ACCORDING TO THE DEPARTMENT THIS ANSWE R CREATES SUSPICION ABOUT THE EXISTENCE OF THE PARTIES IN THE SENSE THAT IT DOES NOT PROPERLY EXPLAIN WHY THEIR PAN CARDS AND PHOTOG RAPHS SHOULD BE FOUND WITH THE ASSESSEES. REFERRING TO THE ANSW ER TO QUESTION NO.12 WHICH WE HAVE ALREADY EXTRACTED IT WAS ARGU ED THAT IT CONTAINED AN ADMISSION ON THE PART OF THE ASSESSEES THAT THE ITA NO: 1757 TO 1769/MUM/2009 17 PURCHASES WERE NOT GENUINE. IT WAS CONTENDED THAT THE ASSESSEES OBVIOUSLY DID NOT WANT THE DEPARTMENT TO CARRY OUT INVESTIGATIONS INTO THE PURCHASES AND HAVING PREEMPTED THE DEPARTM ENT FROM DOING SO IT IS NOW NOT OPEN TO THE ASSESSEES TO CO NTEND THAT THE PURCHASES HAVE NOT BEEN FOUND BY THE DEPARTMENTAL A UTHORITIES TO BE NON GENUINE. IT WAS CLARIFIED THAT IT IS NOT TH E CASE OF THE DEPARTMENT THAT THE PARTIES TO WHOM PAN CARDS WERE ISSUED BY THE DEPARTMENT NEVER EXISTED BUT THE ARGUMENT IS THAT THE ISSUE OF PAN CARDS DOES NOT NECESSARILY VOUCH FOR THE GENUIN ENESS OF THE TRANSACTIONS WHICH THE ASSESSEES CLAIM TO HAVE HAD WITH THEM. A PAN CARD IT WAS CLARIFIED IS ISSUED BY THE DEPART MENT ON APPLICATION AND THE ISSUE OF A PAN CARD DOES NOT NE CESSARILY ESTABLISH THAT ALL THE TRANSACTIONS CARRIED OUT WIT H THE HOLDER OF THE PAN CARD ARE NECESSARILY GENUINE. 13. IT WAS FURTHER CONTENDED ON BEHALF OF THE DEPAR TMENT THAT IT WAS OPEN TO THE AO TO ASSESS THE ENTIRE INFLATED PU RCHASES AGGREGATING TO RS.214.7 LAKHS AS THE ASSESSEES INC OME HAVING REGARD TO THE JUDGMENT OF THE DELHI HIGH COURT IN C IT VS. LA MEDICA (2001) 250 ITR 575 (DEL). ON THE QUESTION AS TO TH E ENQUIRIES CONDUCTED BY THE DEPARTMENT INTO THE LOCAL PURCHASE S THE LEARNED DR PRODUCED LETTERS ISSUED BY THE AO TO THE PARTIES UNDER SECTION 133(6) WHICH WERE ALL RETURNED UNSERVED THOUGH THE ADDRESSES WERE PROVIDED BY THE ASSESSEES. ACCORDING TO THE L EARNED DR IN THE BACKGROUND OF THE STATEMENT OF MR RAJAL N ASHAR THAT THE PARTIES NEVER EXISTED IT IS NOT SURPRISING THAT TH E LETTERS CAME BACK UNSERVED ON THEM. THIS CIRCUMSTANCE ACCORDING TO THE LEARNED ITA NO: 1757 TO 1769/MUM/2009 18 DR SHOWS THAT THE PARTIES DID NOT HAVE ANY TRANSAC TIONS WITH THE ASSESSEES. 14. WITH REFERENCE TO THE ARGUMENT OF THE LEARNED C OUNSEL FOR THE ASSESSEES THAT THE ADDITIONS WERE MADE ON ESTIMATE THE LEARNED DR SUBMITTED THAT THREE DIFFERENT WORKINGS OF THE A DDITIONAL INCOME HAD BEEN SUBMITTED BY THE ASSESSEES BEFORE THE SEAR CH WING AS WELL AS THE AO BY EXTRAPOLATING THE FIGURES AND BY ADOPTING DIFFERENT METHODS OF WORKING OUT THE ADDITIONAL INC OME AND THERE WAS NOTHING WRONG IN THE AO ACCEPTING THE FINAL WOR KING OF THE ADDITIONAL INCOME WHICH WAS ALSO REFLECTED IN THE R ETURNS OR THE REVISED RETURNS FILED UNDER SECTION 153A OF THE ACT . IT WAS SUBMITTED THAT ONCE CONCEALMENT IS ESTABLISHED THE FACT THAT THE PRECISE AMOUNT OF THE CONCEALED INCOME CANNOT BE AS CERTAINED AND AN ESTIMATE ON REASONABLE BASIS HAS TO BE RESORTED TO DOES NOT MEAN THAT THERE IS NO CONCEALMENT. ACCORDING TO TH E LEARNED DR THE ASSESSEE WAS IN THE FULL AND COMPLETE KNOWLEDGE OF THE FACTS AND IT WAS FOR HIM TO COME CLEAN ABOUT THE ADDITION AL INCOME TO BE ASSESSED AND INACCURACIES IN THE ESTIMATE OF THE AD DITIONAL INCOME CAN BE NO GROUND TO SAY THAT THERE IS NO CONCEALMEN T. IN THIS CONNECTION THE DEPARTMENT CONTENDED THAT A RETURN OF INCOME FILED UNDER SECTION 153A IN RESPONSE TO THE NOTICE ISSUED BY THE AO CANNOT BE REVISED SINCE THERE WAS NO PROVISION TO D O SO IN THE SECTION WHICH WAS A CODE BY ITSELF. IT WAS CONTEND ED THAT THE OTHER PROVISIONS OF THE INCOME TAX ACT INCLUDING SECTION 139(5) WHICH PERMITS A REVISED RETURN TO BE FILED IN CERTAIN CIR CUMSTANCES APPLY TO AN ASSESSMENT MADE UNDER SECTION 153A ONLY SO FAR AS MAY BE ITA NO: 1757 TO 1769/MUM/2009 19 AS STATED IN CLAUSE (A) OF SUB-SECTION (1) OF SECTI ON 153A. IT WAS ARGUED THAT EVEN IF SECTION 139(5) IS HELD APPLICAB LE TO AN ASSESSMENT TO BE MADE UNDER SECTION 153A A REVISED RETURN CAN BE FILED ONLY IF ANY OMISSION OR WRONG STATEMENT IN THE RETURN IS DISCOVERED BY THE ASSESSEE AND THE REVISED RETURN I S TO BE FILED WITHIN A PERIOD OF ONE YEAR FROM THE END OF THE REL EVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT WH ICHEVER IS EARLIER. IN THE PRESENT CASES THE ORIGINAL RETURN S WERE FILED SOMETIME IN OCTOBER 2006 AND THE REVISED RETURNS WE RE FILED ON 24.12.2007. THE REVISED RETURNS WERE THEREFORE FIL ED BEYOND THE TIME AND HENCE NOT VALID. THE JUDGMENT OF THE SUPR EME COURT IN G C AGARWAL VS. CIT (1991) 186 ITR 571 (SC) WAS CITED IN SUPPORT OF THE PROPOSITION. IT WAS FURTHER ARGUED THAT EVEN I F THE ADDITION IS MADE ON ESTIMATE PENALTY CAN BE IMPOSED SO LONG AS CONCEALMENT OF INCOME IS ESTABLISHED. IN SUPPORT OF THIS CONTE NTION THE JUDGMENT OF THE GUJARAT HIGH COURT IN CIT VS. CHAND RA VILAS HOTEL (2007) 291 ITR 202 (GUJ) AND THAT OF THE PUNJAB & H ARYANA HIGH COURT IN VIDYA SAGAR OSWAL VS. CIT (1977) 108 ITR 8 61 (P&H) WERE CITED. 15. IN THE ALTERNATIVE IT WAS ARGUED BY THE DEPARTM ENT THAT EVEN IF THE REVISED RETURNS WERE VALIDLY FILED THEY WER E NOT FILED VOLUNTARILY BUT WERE FILED IN THE FACE OF ENQUIRIES MADE BY THE DEPARTMENT AND THEREFORE THEY WERE NOT BONA FIDE. IN SUPPORT OF THIS SUBMISSION THE LEARNED DR PRODUCED A FILE CONT AINING A NOTICE ISSUED ON 06.11.2007 BY THE AO AND IT WAS SUBMITTED THAT THIS WAS AN EXAMPLE OF THE ENQUIRIES LAUNCHED BY THE DEPARTM ENT AND THE ITA NO: 1757 TO 1769/MUM/2009 20 REVISED RETURNS FILED ON 24.12.2007 WERE PROMPTED B Y THE ENQUIRIES AND HENCE WERE NOT BONA FIDE. SUPPORT WAS SOUGHT T O BE DERIVED FROM THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF K P MADHUSUDHANAN VS. CIT (2001) 251 ITR 99 (SC). 16. WITH REFERENCE TO THE LEGAL CONTENTION TAKEN ON BEHALF OF THE ASSESSEES TO THE EFFECT THAT WHEN ACTION IS TAKEN U NDER SECTION 132 ALL EARLIER PENDING PROCEEDINGS ABATE AND THE RETUR NS FILED EARLIER ALSO ABATE THE LEARNED DR STRONGLY OPPOSED THE SAM E ON THE BASIS OF THE ORDER OF THE KOLKATA BENCH OF THE TRIBUNAL I N LMJ INTERNATIONAL LTD. VS. DCIT (2008) 22 SOT 315 (KOL) AND THE ORDER OF THE THIRD MEMBER AHMEDABAD BENCH IN ACIT VS. KI RIT DAHYABHAI PATEL (2009) 125 TTJ (AHD) (TM) 145. AS REGARDS THE ARGUMENT OF THE ASSESSEES THAT IMMUNITY FROM PENALT Y WAS AVAILABLE UNDER EXPLANATION 5(2) BELOW SECTION 271( 1)(C) THE LEARNED DR SUBMITTED THAT THE ASSESSEE WAS NOT ENTI TLED TO THE IMMUNITY BECAUSE THE ASSESSEES WERE NOT FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELLERY OR ANY OTHER VALUABLE ARTICLE OR THING WHICH IS A NECESSARY PRE-CONDITION FOR GETTING THE IMMUNITY. FOR THIS ARGUMENT ALSO THE LEARNED DR DREW SUPPORT FROM THE THIRD MEMBER ORDER OF THE AHMEDABAD BENCH CITED ABOVE. 17. IN ADDITION TO THE ABOVE COMMON ARGUMENTS AN A DDITIONAL ARGUMENT WAS RAISED BY THE DEPARTMENT IN ITA NO: 17 64/MUM/2009 (ASSESSMENT YEAR 2000-01) WHERE THE ADDITIONAL INCO ME INCLUDED INVESTMENT IN PROPERTY AT NERUL. IT WAS SUBMITTED THAT THE PENALTY WAS RIGHTLY LEVIED WITH REFERENCE TO THE EXTRA PAYM ENTS MADE BY THE ASSESSEE IN RESPECT OF THE ABOVE PROPERTY AND STRON G RELIANCE WAS ITA NO: 1757 TO 1769/MUM/2009 21 PLACED ON PARA 2.2 OF THE ORDER OF THE CIT(A). OUR ATTENTION WAS DRAWN TO THE FACT THAT THE ASSESSEE IN THAT APPEAL (MR RAJAL N ASHAR) HAD PAID ON-MONEY OF RS.7 75 200/- WITH RESP ECT OF THIS PROPERTY AS DECLARATION UNDER SECTION 132(4) AND TH EREFORE PENALTY WAS RIGHTLY IMPOSED ON THIS AMOUNT ALSO. 18. ON THE BASIS OF THE ABOVE SUBMISSIONS FACTUAL AND LEGAL THE DEPARTMENT MADE A FERVENT PLEA FOR RETENTION OF THE PENALTIES. 19. THE LEARNED COUNSEL FOR THE ASSESSEES PUT FORWA RD A FAIRLY DETAILED ARGUMENT BY WAY OF HIS REPLY. (A) AS REGARDS THE PAN CARDS OF THE PARTIES WHO HA D ISSUED BILLS TO THE ASSESSEES FOR SUPPLY OF DATES THE CONTENTIO N WAS THAT THEY PROVED THE EXISTENCE OF THE PARTIES. THE ASSESSEES EXPLANATION FOR POSSESSION OF THE PAN CARDS IN THE REPLY GIVEN BY M R RAJAL N ASHAR TO QUESTION NO.9 IN THE STATEMENT UNDER SECTION 132 (4) WAS NOT PROBED FURTHER BY THE INCOME TAX AUTHORITIES. THER E IS NOTHING IN THE ASSESSMENT ORDER OR THE PENALTY ORDER ON THIS A SPECT AND NO MATERIAL HAS BEEN BROUGHT ON RECORD TO LINK THE PAN CARDS WITH THE BILLS IN AN ATTEMPT TO SHOW THAT THE BILLS WERE NOT GENUINE. IT IS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE S THAT NO PASSBOOKS OR CHEQUE BOOKS OF THE PAN CARD HOLDERS W ERE FOUND IN THE ASSESSEES PREMISES. THE PRESENCE OF THE PAN C ARDS IN THE ASSESSEES PREMISES THEREFORE IS NOT RELEVANT AT AL L FOR THE PURPOSE OF LEVYING PENALTY. (B) AS REGARDS THE EXISTENCE OR OTHERWISE OF THE P ARTIES WHO ISSUED THE BILLS TO THE ASSESSEES IT WAS ARGUED T HAT THE STATEMENT OF MR RAJAL N ASHAR THAT THOSE PARTIES WERE NOT IN EXISTENCE IS ITA NO: 1757 TO 1769/MUM/2009 22 CLEARLY CONTRADICTED OR NEGATIVED BY THE DOCUMENTS SUCH AS PAN CARDS ISSUED BY THE DEPARTMENT ITSELF AND THEREFORE THE STATEMENT CANNOT BE TAKEN AS GOSPEL TRUTH ESPECIALLY WHEN IT IS NOT THE CASE OF THE DEPARTMENT ITSELF AS STATED BY THE LEARNED DR THAT THE PARTIES CANNOT BE SAID TO BE NON-EXISTENT IN THE LI GHT OF ISSUE OF PAN CARDS. THE EXISTENCE OF THE PARTIES IS ALSO PROVED BY OTHER MEANS SUCH AS THE FACT THAT THEY WERE PAID BY CHEQUES AND IN THIS CONNECTION OUR ATTENTION WAS DRAWN TO PAGES 49 AND 52 OF THE PAPER BOOK. PAGE 49 IS PART OF THE LETTER DATED 24 .03.2007 WRITTEN BY MR NARENDRA J ASHAR TO THE AO IN RESPONSE TO THE QUESTIONNAIRE ISSUED BY THE AO. ITEM NO.13 OF THE LETTER (AT PAG E 49 OF THE PAPER BOOK) STATES THAT ALL THE PAYMENTS WERE MADE BY CRO SSED CHEQUES / DEMAND DRAFTS / PAY ORDERS AND THAT SINCE THERE IS HUGE VOLUME OF BUSINESS IF OTHER RELEVANT DOCUMENTS WERE REQUIRED THEY WILL BE FURNISHED IN DUE COURSE. PAGE 52 IS ANOTHER LETTER WRITTEN BY THE ASSESSEES REPRESENTATIVE TO THE AO IN WHICH YEAR-W ISE DETAILS OF LOCAL PURCHASES INTER ALIA WERE FURNISHED. IT WA S SUBMITTED THAT BANK ACCOUNTS CANNOT POSSIBLY BE OPENED BY THE PART IES WITHOUT PROVING THEIR IDENTITY AND SINCE NO LINK HAS BEEN E STABLISHED BETWEEN THE ASSESSEES AND THE BANK ACCOUNTS OF THE PARTIES ISSUING THE BILLS ALL THESE CIRCUMSTANCES SHOULD B E TAKEN INTO CONSIDERATION WHILE EVALUATING THE CORRECTNESS OF T HE STATEMENT MADE BY SHRI RAJAL N ASHAR UNDER SECTION 132(4) VIS --VIS EXISTENCE OF THE PARTIES. (C) THE STATEMENT OF SHRI RAJAL N ASHAR IS TO BE RE AD WITH THE NOTE RELATING TO DECLARATION WHICH IS REPRODUCED IN THE ITA NO: 1757 TO 1769/MUM/2009 23 ASSESSMENT ORDERS. SINCE THE NOTE HAS NOT BEEN FOU ND TO BE FALSE AND HAS NOT BEEN REJECTED AS UNTRUE THE ASSESSEES STATEMENT MUST BE READ ALONG WITH THE SAME. IN THIS NOTE IT WAS NEVER STATED THAT THE PARTIES ARE NON-EXISTENT AND ALL THAT WAS STATED THEREIN WAS THAT THE ASSESSEES WERE NOT IN A POSITION TO SUBSTA NTIATE THE PURCHASES. (D) ON THE QUESTION WHETHER THERE WAS INFLATION OF PURCHASES IT WAS CONTENDED THAT ALL THE ELEVEN BILLS CONTAINED T HE DETAILS OF THE WEIGHT AND VALUE AND SINCE THE WEIGHT OF THE DATES IS MENTIONED IN THE BILL AND THERE IS A QUANTITY TALLY THE DEPARTM ENT IS NOT RIGHT IN SAYING THAT THE VALUE ALONE HAS BEEN INFLATED. IT IS AGAIN SUBMITTED THAT NO DISCREPANCY IN THE STOCK OF DATES WAS NOTIC ED OR RECORDED DURING THE SEARCH. THE CASE OF CIT VS. LA MEDICA ( SUPRA) WAS SOUGHT TO BE DISTINGUISHED ON THE GROUND THAT THERE WERE VERY STRONG FACTS AGAINST THE ASSESSEE IN THAT CASE INCL UDING THE FINDING THAT IT WAS THE ASSESSEE WHO HAD OPENED AND OPERATE D THE BANK ACCOUNTS OF THE SUPPLIERS. THERE IS NO SUCH LINK B ETWEEN THE ASSESSEES HEREIN AND THE BANK ACCOUNTS OF THE PARTI ES ISSUING THE BILLS. IT IS THEREFORE CONTENDED THAT THE DEPARTME NTS CLAIM THAT THE VALUE ALONE IS INFLATED HAS NO LEGS TO STAND. (E) AS REGARDS THE LETTERS ISSUED BY THE AO UNDER S ECTION 133(6) TO THE SIX PARTIES WHICH RETURNED UNSERVED IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEES THAT IN RESPECT O F FOUR PARTIES THE POSTAL REMARK MADE ON29.09.2007 AND 01.10.2007 WAS ALWAYS FOUND CLOSED AND EVEN WITH REGARD TO THE OTHER TWO PARTIES SIMILAR POSTAL REMARKS WERE FOUND ON 03.10.2007 AND 14.10.2 007. FROM ITA NO: 1757 TO 1769/MUM/2009 24 THIS IT WAS ARGUED THAT THE BILLS WERE ALL ISSUED D URING THE FINANCIAL YEAR 2004-05 AND THE ENQUIRY LETTERS WERE ISSUED BY THE AO AFTER THREE YEARS I.E. IN 2007 BY WHICH TIME IT WAS QUI TE POSSIBLE THAT THOSE PARTIES HAD CHANGED THEIR BUSINESS LOCATION. WHEN THE AO ASKED FOR CONFIRMATION OF THE PURCHASES THE ASSESS EES PRODUCED LEDGER ACCOUNTS OF THE PARTIES IN ITS BOOKS OF ACCO UNT SIGNED BY THOSE PARTIES WITH PAN NUMBERS. IT IS SUBMITTED TH AT AFTER THESE CONFIRMATIONS WERE FILED NO FURTHER QUERY WAS RAIS ED BY THE AO. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEES IS THAT THIS IS NOT A CASE OF THE AO ACCEPTING THE ASSESSEES AL LEGED ADMISSION WITHOUT MAKING ANY FURTHER ENQUIRY. (F) THE LEARNED COUNSEL FOR THE ASSESSEES REITERATE D HIS PLEA THAT THERE WAS NO DEFINITE FINDING IN THE PENALTY O RDERS THAT THE PURCHASES WERE FOUND TO BE BOGUS. THERE WAS NO PRE CISE QUANTIFICATION OF THE SO CALLED BOGUS PURCHASES OR SALES EXCEPT ON THE BASIS OF A HYPOTHETICAL FORMULA BASED ON VARIOU S ASSUMPTIONS WHICH ACCORDING TO HIM IS GOOD ENOUGH FOR MAKING AN ADDITION BUT IS NOT SUFFICIENT FOR THE PURPOSE OF LEVYING PENALT Y ON THE GROUND OF CONCEALMENT OF INCOME. (G) THE POINTS RAISED BY THE ASSESSEES IN REPLY TO THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271(1)(C) HAVE NO T BEEN CONTROVERTED IN THE PENALTY ORDERS. (H) IT WAS STRONGLY CONTENDED THAT THE ASSESSEE DID NOT MAKE THE OFFER OF ADDITIONAL INCOME IN THE FACE OF ANY I NCRIMINATING MATERIAL OR EVIDENCE. ALL THAT WAS ASKED BY THE SE ARCH AUTHORITIES IN QUESTION NO.12 WAS THAT THE ASSESSEE SHOULD EXPL AIN THE BILLS IN ITA NO: 1757 TO 1769/MUM/2009 25 VIEW OF THE FACT THAT THEY DID NOT CARRY IN SALES T AX REGISTRATION NUMBER CARRIED THE SAME ADDRESS AND WHETHER THE PA RTIES CAN BE PRODUCED FOR VERIFICATION. IT WAS AT THIS STAGE TH AT MR RAJAL N ASHAR AGREED TO OFFER RS.214.7 LAKHS AS UNACCOUNTED INCOM E. IT WAS THEREFORE NOT CORRECT ON THE PART OF THE DEPARTMENT AL AUTHORITIES TO SAY THAT THE OFFER OF ADDITIONAL INCOME CAME IN THE FACE OF INCRIMINATING OR DAMNING MATERIAL. (I) EVEN THE REVISED RETURNS WERE FILED VOLUNTARILY AND NOT AFTER ANY DETECTION. THEY WERE FILED ON THE BASIS OF THE REVISED WORKING OF THE ADDITIONAL INCOME ON ESTIMATE BASIS AND EVEN AT THAT STAGE THE AO HAD NOT COLLECTED ANY MATERIAL OR EVIDENCE A GAINST THE ASSESSEES. IT WAS FAIRLY STATED THAT PENALTY FOR C ONCEALMENT OF INCOME CAN BE IMPOSED EVEN WHEN THE INCOME IS ESTIM ATED BUT THAT WOULD DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT WAS CONTENDED THAT WHERE THE FACT OF CONCEALMENT HAS BE EN CLEARLY ESTABLISHED THE MERE DIFFICULTY IN ARRIVING AT THE EXACT INCOME CONCEALED SHOULD NOT BE AN IMPEDIMENT TO THE LEVY O F PENALTY AND IN SUCH A CASE IT WAS POSSIBLE TO RESORT TO AN ESTI MATE OF AN INCOME CONCEALED ON THE BASIS OF THE AVAILABLE MATERIAL AN D THE SURROUNDING CIRCUMSTANCES. HOWEVER IF THE FACT OF CONCEALMENT ITSELF IS NOT AN ESTABLISHED ONE AND THE DEPARTMENT PROCEEDS TO ACT ON THE OFFER OF ADDITIONAL INCOME MADE BY THE ASSES SEE AN ESTIMATE OF INCOME HOWEVER WELL FOUNDED IT MAY BE CANNOT RESULT IN PENALTY BEING IMPOSED FOR CONCEALMENT OF INCOME. THE ESTIMATE MAY BE GOOD ENOUGH FOR ASSESSMENT PURPOSES BUT NOT FOR THE PURPOSE OF LEVYING PENALTY. ITA NO: 1757 TO 1769/MUM/2009 26 (J) AS REGARDS THE SUBMISSION OF THE DEPARTMENT THA T A RETURN OF INCOME FILED UNDER SECTION 153A CANNOT BE REVISED THE LEARNED COUNSEL FOR THE ASSESSEES SUBMITTED THAT SUCH A RET URN CAN BE REVISED IN VIEW OF THE AFFIRMATIVE STATEMENT IN SEC TION 153A(1)(A) THAT ALL THE PROVISIONS OF THE ACT WOULD APPLY TO T HE RETURN WHICH INCLUDES SECTION 139(5) ALSO. HE SUBMITTED THAT IN ALL THESE CASES THE ASSESSMENTS UNDER SECTION 153A HAVE BEEN MADE O NLY ON THE BASIS OF THE REVISED RETURNS AND SUCH REVISED RETUR NS WHICH WERE GOOD ENOUGH FOR MAKING THE ASSESSMENTS CANNOT BECOM E INVALID WHEN IT COMES TO THE QUESTION OF APPLYING THE PENAL TY PROVISIONS OF SECTION 271(1)(C) OF THE ACT. (K) COMING TO THE LEGAL ISSUE OF ABATEMENT OF THE E ARLIER RETURNS WHICH WERE PENDING IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEES THAT UNDER THE SECOND PROVISO TO SECT ION 153A(1) THE ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSME NT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS R EFERRED TO IN THE SUB-SECTION PENDING ON THE DATE OF INITIATION OF TH E SEARCH UNDER SECTION 132 SHALL ABATE AND IF THE ASSESSMENT OR RE ASSESSMENT PROCEEDINGS ABATE IT IS NOT POSSIBLE TO CONCEAL OF A SITUATION WHERE THE ORIGINAL RETURNS WOULD SURVIVE. ACCORDING TO T HE LEARNED COUNSEL WHEN THE ASSESSMENT OR REASSESSMENT PROCEE DINGS WHICH ARE PENDING ON THE DATE OF SEARCH ABATE THE RETURN S ALSO ABATE AND THEY ARE NO LONGER RETURNS IN THE EYE OF LAW. IN T HIS CONNECTION HE SUBMITTED THAT THE POINT DECIDED BY THE KOLKATA BEN CH OF THE TRIBUNAL IN LMJ INTERNATIONAL LTD. VS. DCIT (2008) 22 SOT 315 (KOL) WAS DIFFERENT IN THE SENSE WHAT WAS DECIDED THERE W AS WHETHER AN ITA NO: 1757 TO 1769/MUM/2009 27 ADDITION CAN BE MADE IN AN ASSESSMENT UNDER SECTION 153A WHICH IS NOT SUPPORTED BY ANY SEIZED MATERIAL. THE PRECI SE QUESTION ABOUT ABATEMENT OF THE ORIGINAL RETURNS DID NOT ARI SE IN THAT CASE ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEES. (L) WITH REFERENCE TO THE OTHER LEGAL CONTENTION TH AT THE ASSESSEES ARE ELIGIBLE FOR THE IMMUNITY CONFERRED U NDER EXPLANATION 5 TO SECTION 271(1)(C) THE LEARNED COUNSEL FOR THE ASSESSEES REITERATED HIS SUBMISSION MADE ON THE BASIS OF THE JUDGMENT OF THE MADRAS HIGH COURT IN CIT VS. S.D.V. CHANDRU (SUPRA) . AS REGARDS THE CONTENTION OF THE DEPARTMENT THAT IN THE ABSENC E OF ANY ASSETS SUCH AS MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN THE POSSESSION OR CONTROL OF THE ASSESSEE THE ASSESSEE WILL NOT BE ENTITLED TO THE IMMUNITY IT WAS SUBMIT TED BY THE LEARNED COUNSEL FOR THE ASSESSEES THAT THIS WAS NOT A CONDI TION PRECEDENT FOR OBTAINING THE IMMUNITY AS HELD BY THE RAJASTHAN HIGH COURT IN CIT VS. KANHAIYALAL (SUPRA). HE DREW OUR ATTENTION TO THE PANCHNAMA AT PAGES 5 AND 39 OF THE PAPER BOOK AND S UBMITTED THAT JEWELLERY WAS IN FACT FOUND AT THE RESIDENCE A ND THE LOCKER OF MR NARENDRA J ASHAR AND HIS WIFE MRS USHA N ASHAR A ND THEY WERE RELEASED ON PAYMENT OF RS.33.00 LAKHS. OUR ATTENTI ON WAS ALSO DRAWN TO THE ASSESSMENT ORDER FOR THE ASSESSMENT YE AR 2006-07 IN THE CASE OF MR NARENDRA J ASHAR (INDIVIDUAL) WHERE IN PARAGRAPH 5 THERE IS A DISCUSSION OF UNEXPLAINED JEWELLERY AND THERE IS ALSO A REFERENCE TO THE FACT THAT DURING THE SEARCH OF THE ASSESSEES RESIDENCE BUSINESS PREMISES AND LOCKERS JEWELLERY AMOUNTING TO RS.2 22 12 673/- WAS FOUND. IT WAS ALSO POINTED OU T BY THE LEARNED ITA NO: 1757 TO 1769/MUM/2009 28 COUNSEL FOR THE ASSESSEES THAT PENALTY PROCEEDINGS WERE INITIATED WITH REFERENCE TO THE JEWELLERY BUT ULTIMATELY NO P ENALTY WAS LEVIED. (M) WITH REFERENCE TO THE CASE OF MR RAJAL N ASHAR (ITA NO: 1764/MUM/2009) FOR THE ASSESSMENT YEAR 2000-01 AND THE ARGUMENT OF THE LEARNED DR THAT PENALTY FOR ON-MONE Y PAYMENT FOR NERUL PROPERTY WAS RIGHTLY IMPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEES WAS THAT NO INVESTIGATION HAD BEEN CARRIED OUT BY THE DEPARTMENT THAT NO INCRIMINATIN G MATERIAL HAD BEEN FOUND DURING THE SEARCH OR LATER AND THAT THE DECLARATION MADE BY MR RAJAL N ASHAR AND GIVEN TO THE INVESTIGATION WING AFTER THE SEARCH CONTAINED THE DECLARATION OF CASH AMOUNT PAI D FOR PURCHASE OF THE FLAT. IT WAS SUBMITTED THAT IN THESE CIRCUM STANCES NO CONCEALMENT CAN BE INFERRED AND THE PENALTY LEVIED WITH REFERENCE TO THE ALLEGED ON-MONEY PAYMENT FOR THE PROPERTY SH OULD ALSO BE CANCELLED. 20. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. IT APPEARS TO US THAT NO STRONG GROUN DS HAVE BEEN MADE OUT FOR IMPOSING PENALTIES FOR CONCEALMENT OF INCOME. THE ASSESSEE NARENDRA J ASHAR (HUF) IS THE PROPRIETOR OF M/S BAIT AL TAMUR. HIS SON RAJAL N ASHAR IS THE PROPRIETOR OF DATES R DELICIOUS. MRS USHA N ASHAR IS ALSO IN THE SAME B USINESS. ALL THE THREE CONCERNS IMPORT DATES. IN THE CASE OF M/S BA IT AL TAMUR THE SALES ARE GENERALLY ON WHOLESALE BASIS AND SO ALSO IN THE CASE OF MRS USHA N ASHAR WHEREAS IN THE CASE OF DATES R D ELICIOUS THE SALE IS BOTH BY WAY OF WHOLESALE AND RETAIL. DURIN G THE SEARCH ITA NO: 1757 TO 1769/MUM/2009 29 CONDUCTED ON 25.11.2005 THE CRUCIAL MATERIAL WHICH WAS FOUND WERE THE ELEVEN PURCHASE BILLS SHOWING PURCHASE OF DATES AS FOLLOWS: - SR.NO. NAME OF THE PARTY BILL DATE / NO. AMOUNT 1. KANAK PRIYA ENTERPRISES 12.01.05/001 46 570/ - 2. -DO- 18.01.05/002 25 032/- 3. AISHWARYA TRADING CO. 29.03.05/021 1 27 354/- 4. -DO- 29.03.05/022 1 28 680/- 5. GEETA PRIYA ENTERPRISES 10.07.04/931 4 03 700/- 6. - DO - 12.07.04/936 1 28 650/ - 7. RENUGA SALES CORPN. 30.04.04/013 3 36 075/- 8. -DO- 07.05.04/015 1 53 150/- 9. BHAWYA TRADING CO. 29.03.05/018 58 370/- 10. -DO- 22.03.05/017 1 42 909/- 11. AISHWARYA TRADING CO. 18.03.05/013 2 50 223/- COPIES OF THE BILLS HAVE BEEN FILED AT PAGES 913 TO 923 OF THE PAPER BOOK. A STATEMENT WAS RECORDED FROM MR RAJAL N ASH AR AT 9.30 AM ON 26.11.2005 AND IT IS STATED TO BE UNDER SECTION 132(4) OF THE ACT. HE STATED THAT ALL THE THREE CONCERNS WERE CARRYING ON BUSINESS FROM THE SAME PREMISES NAMELY E-42 APMC MARKET TURBHE NAVI MUMBAI. HE ALSO STATED THAT ALL THE THREE CON CERNS HAVE FILED THE INCOME TAX RETURNS UP TO THE ASSESSMENT YEAR 20 05-06 IN CENTRAL CIRCLE 23 MUMBAI. HE WAS ASKED TO EXPLAIN THE CONTENTS OF PAGES 1 TO 19 OF ANNEXURE A-1 WHICH HE DID AND NOTH ING MUCH TURNS ON HIS ANSWER. HOWEVER WHAT IS IMPORTANT FO R OUR PURPOSES IS HIS REPLIES TO QUESTION NOS 4 AND 12. WE HAVE A LREADY REFERRED TO THESE REPLIES. TO RECAPITULATE HE WAS ASKED BY QUESTION NO.4 TO EXPLAIN WHY THE PAN CARDS AND SOME PHOTOGRAPHS WERE LYING IN THE PREMISES DURING THE SEARCH. MR RAJAL N ASHARS ANS WER WAS AS BELOW: WE HAVE PURCHASED SOME QUANTITY OF WET DATES FROM THESE PARTIES AND THUS HAD ASKED THEM TO GIVE US T HE ZEROX COPY OF PAN CARD BUT THE PARTIES SENT US THE ORIGINAL PAN CARD WHICH WE HAVE TO BE RETURNED TO THEM. THE PHOTOGRAPHS HAD BEEN SENT BY THEM TO ITA NO: 1757 TO 1769/MUM/2009 30 OPEN SOME DEMAT ACCOUNT HOWEVER I AM NOT AWARE WHY PHOTOGRAPHS OF THE CHILDREN HAVE BEEN SENT. IN REPLY TO QUESTION NO.12 BY WHICH HE WAS ASKED TO FURNISH THE DETAILS OF THE ELEVEN BILLS AND ALSO ASKED TO PRODU CE THE PARTIES FOR VERIFICATION HE REPLIED AND THIS HAS BEEN REPRODU CED IN THE EARLIER PART OF OUR ORDER TO THE EFFECT THAT HE MAY NOT BE ABLE TO PRODUCE THEM AS THEY WERE NON-EXISTENT AND THAT THE GOODS M ENTIONED THEREIN WERE NOT ACTUALLY PURCHASED BUT BILLS WERE ARRANGED TO INFLATE THE PURCHASES. HE ALSO STATED THAT HE IS O FFERING THE AMOUNT OF RS.214.7 LAKHS REFLECTED IN THE LEDGER ACCOUNTS (FOR ALL THE SIX YEARS) AS HIS UNACCOUNTED INCOME. HE ALSO OFFERED ADDITIONAL INCOME IN RESPECT OF GOLD CHAINS AND BANGLES ASSOR TED JEWELLERY MISCELLANEOUS EXPENSES INVESTMENTS AND OTHER DISCR EPANCIES IN THE INCOME OR ASSETS WHICH HE WAS NOT ABLE TO EXPLA IN. 21. PURSUANT TO THE AFORESAID STATEMENT A NOTE REL ATING TO THE DECLARATION WAS FILED BEFORE THE SEARCH WING A COP Y OF WHICH IS AT PAGES 40 TO 42 OF THE PAPER BOOK FILED BY THE ASSES SEE. IT REFERS TO THE FACT THAT A SUM OF RS.2.50 CRORES WAS DECLARED BY THE ASSESSEES IN THE COURSE OF THE SEARCH AND SEIZURE A CTION. A BREAKUP THEREOF WAS ATTACHED TO THE NOTE AND THESE ARE AVAILABLE AT PAGES 43 TO 45 OF THE PAPER BOOK. A PERUSAL OF THE NOTE SHOWS THAT IT WAS PREPARED ON THE FOLLOWING PHASES. THE IMPOR T COST OF DATES RANGES FROM RS.10/- TO RS.15/- PER KG AND AFTER SOR TING AND GRADING THE BEST DATES ARE SOLD FOR RS.30/- TO RS.60/- PER KG. DATES OF INFERIOR QUALITY ARE SOLD FOR RS.8/- TO RS.10/- PER KG. DATES OF MIXED QUALITY WERE SOLD AT THE BEST RATES FETCHABLE IN TH E MARKET. IT IS FURTHER STATED THAT THE THREE CONCERNS IN THE PAST HAD MADE ITA NO: 1757 TO 1769/MUM/2009 31 UNSUPPORTED PURCHASES AT RATES RANGING AROUND RS.54 /- PER KG AND HAVE THUS NOT DECLARED THE CORRECT PROFIT. IT IS F URTHER STATED THAT THE SALES OF SUPERIOR QUALITY DATES WERE BOOKED AT RS.1 0/- TO RS.15/- PER KG INSTEAD OF HIGHER SALE PRICE REALIZED. IN ORDER TO BALANCE THE SALE AT HIGHER RATES IT WAS STATED THAT THE CORRES PONDING PURCHASE BILLS WERE TAKEN AT RS. 54/- PER KG AND THESE ARE T HE BILLS WHICH WERE LOCALLY TAKEN. IT WAS ALSO STATED THAT THE TH REE CONCERNS WERE NOT IN A POSITION TO FULLY SUBSTANTIATE THE LOCAL P URCHASES. IT WAS FURTHER STATED THAT SINCE THE GOODS WHICH WERE SOLD AT HIGHER PRICE WERE BOOKED AT LOWER PRICE THE DIFFERENCE ON ACCOU NT OF BOOKING OF THE SALE AT THE HIGHER PRICE WAS MADE UP BY THE LOC AL UNSUPPORTED PURCHASES AT HIGHER PRICE. IN ADDITION TO THE ABOV E DECLARATION CERTAIN OTHER ITEMS WERE ALSO DISCLOSED WHICH WE H AVE ALREADY REFERRED TO. ATTACHED TO THE NOTE WAS THE WORKING OF THE DECLARATION ON ACCOUNT OF LOCAL PURCHASES WHICH CAME TO RS.1 42 28 725/- IN THE HANDS OF M/S BAIT AL TAMUR RS.28 36 076/- IN T HE HANDS OF DATES R DELICIOUS AND RS.5 30 410/- IN THE HANDS OF MRS USHA N ASHAR. THE DETAILS OF THE DECLARATION AND THE CALC ULATIONS WERE ALSO GIVEN AS WORKING SHEETS AND COPIES OF THE SAME HAVE BEEN GIVEN TO US ALSO. THE TOTAL DECLARATION CAME TO RS.2.50 CRO RES IN THE AGGREGATE. 22. THE AFORESAID DECLARATION WAS REVISED AND REVIS ED RETURNS WERE FILED DECLARING AGGREGATE INCOME OF RS.2 68 34 154/-. IN THESE REVISED RETURNS THE DECLARATION ON ACCOUNT OF THE L OCAL PURCHASES CAME TO RS.2 36 68 976/- AND THE DETAILS THEREOF HA VE ALREADY BEEN GIVEN BY US IN THE FORM OF A CHART. ACCORDING TO T HE WORKING SHEETS ITA NO: 1757 TO 1769/MUM/2009 32 FILED IN SUPPORT OF THE REVISED RETURNS A DIFFEREN T WORKING OF THE ADDITIONAL INCOME WAS ADOPTED IN THE SENSE THAT THE AVERAGE SALE PRICE AND THE AVERAGE PURCHASE PRICE WAS TAKEN AND THE DIFFERENCE WAS SHOWN AS ADDITIONAL INCOME. THIS RESULTED IN H IGHER INCOMES BEING SHOWN IN THE REVISED RETURNS THAN WHAT WAS SH OWN IN THE DECLARATION FILED BEFORE THE SEARCH WING. TO TAKE A TYPICAL CASE IN THE CASE OF MR NARENDRA J ASHAR FOR THE ASSESSMENT YEAR 2001-02 (ITA NO: 1758/MUM/2009) THE REVISED WORKING HAS BEE N REFERRED TO IN PARAGRAPH 5.4 OF THE ASSESSMENT ORDER. IN THIS CASE WHEREAS AS PER THE DECLARATION MADE BEFORE THE SEARCH WING THE ADDITIONAL INCOME CAME TO RS.1 07 907/- THE ADDITIONAL INCOME AS PER THE WORKING MADE FOR THE PURPOSE OF FILING REVISED RETU RN CAME TO RS.4 43 587/-. AFTER REFERRING TO THE ASSESSEES W ORKING IN PARAGRAPH 5.4 OF THE ASSESSMENT ORDER THE AO IN PA RAGRAPH 5.5 HAS STATED AS UNDER: - 5.5 ACCORDINGLY AN AMOUNT OF RS.4 43 587/- IS BROUGHT TO TAX AS UNDISCLOSED INCOME OF THE ASSESS EE ON ACCOUNT OF BOGUS TRANSACTIONS AS AGAINST RS.1 07 907/- ALREADY OFFERED BY THE ASSESSEE IN I TS RETURN OF INCOME FILED IN PURSUANCE TO NOTICE U/S 153A OF THE INCOME-TAX ACT. HENCE A FURTHER ADDITION OF UNDISCLOSED INCOME OF RS.3 35 680/- IS MADE ON ACCOUNT OF BOGUS TRANSACTIONS. HOWEVER THE ASSESSEE HAS ALREADY OFFERED THE ABOVE UNDISCLOSED INCOME VIDE REVISED RETURN OF INCOME FILED ON 24.12.2007. AS PER SUB-SECTION (5) OF SECTION 139 OF THE INCOME-TAX ACT............ THEREAFTER THE AO HAS HELD THAT THE REVISED RETURN WAS NOT VALID. HOWEVER THE REVISED RETURN HAS BEEN ACTED UPON AND THE INCOME DECLARED THEREIN HAS BEEN TAKEN FOR THE PURPOSE OF COMPUTING THE TAXABLE INCOME. ITA NO: 1757 TO 1769/MUM/2009 33 23. IT MAY BE SEEN FROM THE ABOVE NARRATION THAT NO ENQUIRY INTO THE METHODS OF CALCULATING THE ADDITIONAL INCOME WA S SERIOUSLY MADE BY THE AO. THE DECLARATION MADE BEFORE THE SE ARCH WING WAS FIRST RS.214.7 LAKHS AS PER THE STATEMENT OF MR RAJAL N ASHAR UNDER SECTION 132(4) OF THE ACT. THEREAFTER DECLAR ATION OF RS.2.50 CRORES WAS MADE WHICH INCLUDED RS.1 79 88 269/- AS ADDITIONAL INCOME ON ACCOUNT OF LOCAL PURCHASES. AGAIN THIS W AS REVISED TO RS.2 68 34 154/- WHICH INCLUDED RS.2 36 68 976/- AS ADDITIONAL INCOME ON ACCOUNT OF LOCAL PURCHASES. DIFFERENT CA LCULATIONS AND WORKINGS OF THE ADDITIONAL INCOME WERE SUBMITTED AT DIFFERENT STAGES OF THE PROCEEDINGS. OUR ATTENTION WAS NOT DRAWN TO ANY ENQUIRY MADE INTO THOSE CALCULATIONS BY THE AO AND IT APPEA RS TO US THAT HE WAS SATISFIED SO LONG AS HIGHER INCOME WAS OFFERED BY THE ASSESSEES. THERE IS FORCE IN THE ARGUMENT OF THE L EARNED COUNSEL FOR THE ASSESSEES THAT THERE IS NO PRECISION OR DEF INITENESS IN THE METHOD OR MANNER IN WHICH THE ADDITIONAL INCOME WAS OFFERED AT THREE DIFFERENT STAGES. THE AMOUNT OF RS.214.7 LAK HS REPRESENTED THE AMOUNT REFLECTED IN THE LEDGER ACCOUNTS OF THE ELEVEN PARTIES FROM WHOM LOCAL PURCHASES WERE MADE. THE DISCLOSUR E OF RS.2.50 CRORES IS BASED ON A DIFFERENT METHOD AND THE LAST DISCLOSURE OF RS.2.68 CRORES WAS MADE ON YET ANOTHER BASIS TAKIN G THE DIFFERENCE BETWEEN THE AVERAGE SALE RATE AND THE AV ERAGE PURCHASE RATE ON THE ASSUMPTION THAT IN ORDER TO OFFSET THE HIGHER SALE PRICES SHOWN THE LOCAL UNSUPPORTED PURCHASES WERE SHOWN A T A HIGHER PRICE ON AVERAGE BASIS. ALL THE WORKINGS ARE BASED ON VARIOUS ASSUMPTIONS AND ESTIMATES. THE TURN OF EVENTS STAR TING FROM THE ITA NO: 1757 TO 1769/MUM/2009 34 SEARCH TILL THE CULMINATION OF THE ASSESSMENT PROCE EDINGS BROADLY INDICATES THAT THE ADDITIONAL INCOME WAS CALCULATED ONLY ON ESTIMATES AND THE ATTEMPT WAS TO SOMEHOW ARRIVE AT A MUTUALLY ACCEPTED FIGURE OF ADDITIONAL INCOME. 24. THAT STILL HAS TO EXPLAIN THE STATEMENT MADE BY MR RAJAL N ASHAR ESPECIALLY HIS ANSWER TO QUESTION NO.12 WHE REIN HE HAS STATED THAT THE GOODS MENTIONED IN THE BILLS WERE N OT ACTUALLY PURCHASED BUT WERE ARRANGED TO INFLATE THE PURCHASE S AND THAT THE PARTIES WERE NON-EXISTENT. SO FAR AS THE STATEMENT THAT THE PARTIES WERE NON-EXISTENT IS CONCERNED IT MUST BE STATED I N FAIRNESS TO THE LEARNED SENIOR DR WHO APPEARED BEFORE US THAT HE DI D NOT CONTEND THAT THE PARTIES WERE NON-EXISTENT AND THIS WAS BEC AUSE PAN CARDS HAVE BEEN ISSUED TO THEM AND IT WOULD BE PREPOSTERO US TO SUGGEST THAT THE DEPARTMENT WOULD HAVE ISSUED PAN CARDS WIT HOUT DULY VERIFYING THE EXISTENCE OF THE PARTIES AND THEIR CR EDENTIALS. THE AO HAD ALSO WRITTEN LETTERS UNDER SECTION 133(6) TO TH E ELEVEN PARTIES BUT THEY WERE ALL RETURNED UNSERVED. ENQUIRIES WER E THUS MADE THOUGH IN A LIMITED MANNER BUT COULD NOT PROCEED F URTHER BECAUSE THE LETTERS COULD NOT BE SERVED ON THE ELEVEN PARTI ES. THE EXISTENCE OF THE PARTIES IN THE LIGHT OF THE ISSUE OF PAN CAR DS TO THEM CANNOT THEREFORE BE SERIOUSLY DOUBTED. MR RAJAL N ASHAR H AD STATED UNDER SECTION 132(4) THAT HE HAD ASKED THE PARTIES FROM W HOM WET DATES WERE PURCHASED TO GIVE THE ZEROX COPY OF THE PAN CA RDS BUT THE PARTIES HAD SENT THE ORIGINAL PAN CARDS WHICH REMAI NED TO BE RETURNED TO THEM. THIS STATEMENT WAS NOT FOUND INC ORRECT OR FALSE. IN THE LIGHT OF THIS STATEMENT BY MR RAJAL N ASHAR IN ANSWER TO ITA NO: 1757 TO 1769/MUM/2009 35 QUESTION NO.4 HIS ANSWER TO QUESTION NO.12 THAT TH E PARTIES WERE NOT EXISTING AND THAT BILLS WERE ARRANGED TO INFLAT E PURCHASES CANNOT BE TAKEN AT FACE VALUE BUT HAS TO BE VIEWED WITH SO ME RESERVATIONS. THE MORE REASONABLE INFERENCE WOULD BE TO UNDERSTAN D THE STATEMENT TO MEAN THAT IT WOULD BE DIFFICULT FOR TH E ASSESSEE TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN THE A FORESAID CIRCUMSTANCES AND THEREFORE THE PURCHASES FOR SIX YEARS AGGREGATING TO RS.214.7 LAKHS AS PER THE LEDGER ACC OUNTS WILL BE OFFERED AS ADDITIONAL INCOME. IN ADDITION TO THE A BOVE IS THE FACT THAT THE PURCHASES WERE PAID FOR BY CHEQUES AS WE H AVE NOTED FROM PAGES 49 AND 52 OF THE PAPER BOOK WHICH ARE REPLIE S MADE BY THE ASSESSEE TO THE AOS QUESTIONNAIRE. IT IS NOBODYS CASE THAT THE AMOUNTS HAVE NOT REACHED THE SUPPLIERS OF THE DATES OR HAVING REACHED THEM THEY HAVE FOUND THEIR WAY BACK TO THE COFFERS OF THE ASSESSEES. THE FACT THAT CHEQUES WERE ISSUED TO TH E ELEVEN PARTIES AND THAT THEY HAD BANK ACCOUNTS ALSO SHOW THAT THEY ARE NOT PERSONS WHO CAN BE SAID TO BE NON-EXISTENT. ALL TH AT IT BOILS DOWN TO IS THAT THE ASSESSEES WERE UNABLE TO PROVE THE PURC HASES IN THE MANNER REQUIRED BY THE DEPARTMENT. IT MAY BE RECAL LED THAT IN QUESTION NO.12 THE AO HAD CALLED UPON MR RAJAL N AS HAR TO EXPLAIN THE BILLS WHICH DID NOT BEAR THE SALES TAX REGISTRATION NUMBER AND BORE THE SAME ADDRESS BY PRODUCING THE PARTIES FOR VERIFICATION. THE ASSESSEE WAS UNABLE TO PRODUCE T HEM FOR VERIFICATION AND IT WAS MORE ON THIS SCORE THAT ADD ITIONAL INCOME OF RS.214.7 LAKHS WAS OFFERED IN THE STATEMENT. IT TH EREFORE APPEARS TO US THAT THIS IS MORE A CASE WHERE THE PENALTIES WERE BEING LEVIED ITA NO: 1757 TO 1769/MUM/2009 36 FOR THE INABILITY OF THE ASSESSEES TO PROVE THE LOC AL PURCHASES IN THE MANNER REQUIRED BY THE DEPARTMENT THAN AN ADMISSION THAT THE ASSESSEES CLAIMED BOGUS OR INFLATED PURCHASES AND T HEREBY SUPPRESSED THE INCOME. 25. IT IS ALSO NOTEWORTHY THAT IN THE BILLS THE WEI GHT AND RATE WERE MENTIONED. ACCORDING TO THE DEPARTMENT IT IS ONLY THE VALUE THAT HAS BEEN INFLATED AND NOT THE WEIGHT. THE CONSEQUE NCE OF THE ARGUMENT IS THAT THE PURCHASES WERE REAL QUANTITY-W ISE BUT THE RATES WERE INFLATED TO CLAIM HIGHER DEDUCTION. IF THAT I S THE CASE THAT WOULD HAVE TO BE STRICTLY PROVED. THE LEARNED COUN SEL FOR THE ASSESSEES IS RIGHT IN HIS SUBMISSION THAT NO DISCRE PANCY IN THE STOCK WAS FOUND DURING THE SEARCH AND THAT SINCE TH E ASSESSEES WERE UNABLE TO PRODUCE THE PARTIES FOR VERIFICATION AND THUS PROVE THE PURCHASES THEY SHOULD BE TAKEN AS UNSUPPORTED PURCHASES AND THE INCOME MAY BE ADDED. IN CIT VS. LA MEDICA (SUP RA) THE DELHI HIGH COURT HELD THAT THERE CAN BE NO ARGUMENT THAT TO OFFSET BOGUS PURCHASES THE ASSESSEE INDULGED IN BOGUS SALES AND THAT ADDITIONS WERE PERMISSIBLE REJECTING THE ARGUMENT. HOWEVER IN THE CITED CASE THERE WERE VERY STRONG FACTS AGAINST THE ASSES SEE IN THE SENSE THAT THERE WAS EVIDENCE FOUND TO PROVE THAT IT WAS THE ASSESSEE WHO OPENED AND OPERATED THE BANK ACCOUNTS OF THE PA RTIES AND THUS THERE WAS A CLEAR LINK ESTABLISHED BETWEEN THE ASSESSEE IN THAT CASE AND THE PARTIES. IN THE PRESENT CASES TH E DEPARTMENT HAS NOT BEEN ABLE TO SHOW ANY SUCH LINK. IN FACT WHEN THE AO ASKED FOR CONFIRMATION FROM THE PARTIES FOR THE PURCHASES TH E ASSESSEE PRODUCED THE LEDGER ACCOUNTS OF THE PARTIES IN ITS BOOKS DULY SIGNED ITA NO: 1757 TO 1769/MUM/2009 37 BY THE PARTIES WITH PAN NUMBERS. AFTER THESE CONFI RMATIONS WERE FILED THE AO DID NOT MAKE ANY FURTHER ENQUIRY. I T IS THUS NOT A CASE OF THE AO ACCEPTING THE ASSESSEES ADMISSION WITHOU T MAKING ANY FURTHER ENQUIRY. NOT ONLY DID THE AO ASKED FOR CON FIRMATION FROM THE PARTIES BUT HE ALSO ISSUED ENQUIRY LETTERS UNDER S ECTION 133(6) TO ALL THE ELEVEN PARTIES. 26. IT IS ALSO SIGNIFICANT THAT AT THE TIME WHEN MR RAJAL N ASHAR MADE THE STATEMENT THE ONLY MATERIAL THAT HAS BEEN FOUND BY THE SEARCH AUTHORITIES WAS THE ELEVEN BILLS ISSUED FOR THE LOCAL PURCHASES AND NOTHING ELSE. THERE WAS NO OTHER INC RIMINATING EVIDENCE OR MATERIAL TO SHOW THAT THE PURCHASES WER E NOT GENUINE OR THEY WERE INFLATED. THE OFFER OF ADDITIONAL INC OME IN SUCH CIRCUMSTANCES WAS VOLUNTARY IN OUR OPINION AND NOT PROVOKED BY ANY ADVERSE MATERIAL AFTER THE ASSESSEES WERE CORN ERED. 27. WE MAY NOW TAKE UP THE CONTENTION OF THE REVENU E THAT THE REVISED RETURNS FILED BY THE ASSESSEES ON 24.12.200 7 WERE OUT OF TIME AND THAT IN ANY CASE SECTION 153A DOES NOT PER MIT REVISED RETURNS TO BE FILED. THE REVISED RETURNS WERE ACTE D UPON BY THE AO FOR THE PURPOSES OF MAKING THE ASSESSMENTS AND WE H AVE CITED THE EXAMPLE OF THE CASE OF MR RAJAL N ASHAR FOR THE ASS ESSMENT YEAR 2001-02. IT IS A FACT THAT THE ADDITIONAL INCOME O FFERED IN THE REVISED RETURNS WERE ACCEPTED FOR ASSESSMENT PURPOSES BUT W HEN IT COMES TO THE PENALTY PROCEEDINGS THE REVENUE RAISES THE C ONTENTION THAT THEY ARE INVALID. WE ARE NOT HERE CONCERNED WITH T HE VALIDITY OF THE REVISED RETURNS THAT MUCH AS WE ARE CONCERNED WITH THE BONA FIDE OF THE ASSESSEES IN FILING THE REVISED RETURNS. WE HA VE ALREADY SEEN ITA NO: 1757 TO 1769/MUM/2009 38 THAT THE CALCULATIONS OF ADDITIONAL INCOME TO BE OF FERED BY THE ASSESSEES KEPT ON CHANGING. WHEREAS THE INITIAL OF FER WAS MADE IN NOVEMBER 2005 DURING THE SEARCH THE FIRST RETURNS WERE FILED IN OCTOBER 2006 AND IN THOSE RETURNS THE INCOME OFFERE D HAD GONE UP TO RS.2.50 CRORES. THIS FIGURE WAS FURTHER REVISED UPWARD TO RS.2.68 CRORES IN THE REVISED RETURNS FILED IN DECE MBER 2007. THE PARTIES BOTH THE ASSESSEES AS WELL AS THE AO WE RE INTO THE EXERCISE OF ESTIMATING ON A REASONABLE BASIS THE AD DITIONAL INCOME TO BE OFFERED ON THE ASSUMPTION THAT THE LOCAL PURC HASES CANNOT BE SUBSTANTIATED. IN CARRYING OUT THIS EXERCISE DIFFE RENT METHODS WERE ADOPTED IN AN ATTEMPT TO APPROXIMATE TOWARDS A MUTU ALLY ACCEPTABLE FIGURE OF ADDITIONAL INCOME. ULTIMATELY WHEN BOTH SIDES WERE AGREEABLE TO THE FIGURE OF RS.2.68 CRORES ASS ESSEES FILED REVISED RETURNS INCORPORATING THE ENHANCED FIGURES THEREIN. IT WAS IN THIS SPIRIT THAT THE AO HAD ACCEPTED THE REVISED RETURNS FOR ASSESSMENT PURPOSES. IT IS OUR HUMBLE VIEW THAT EV EN FOR PENALTY PURPOSES THE REVISED RETURNS SHOULD BE VIEWED IN TH E SAME SPIRIT. IT IS NOT NECESSARY FOR US TO EXAMINE THE QUESTION WHE THER A RETURN FILED UNDER SECTION 153A CAN BE REVISED AT ALL NOR THE QUESTION AS TO WHETHER THE REVISED RETURNS FILED IN DECEMBER 2007 WERE OUT OF TIME OR NOT. AS A STEP IN SHOWING THEIR BONA FIDE THE ASSESSEES FILED REVISED RETURNS WHICH WERE ACCEPTED IN THE BACKGROU ND OF THE FACT THAT THE ATTEMPT OF BOTH THE SIDES WAS TO ARRIVE AT A REASONABLE FIGURE OF ADDITIONAL INCOME ON ACCOUNT OF LOCAL PUR CHASES. THUS EVEN IF THERE IS NO POSSIBILITY OF FILING A REVISED RETURN UNDER SECTION 153A OR EVEN IF SUCH A RETURN WAS OUT OF TIME IT C ERTAINLY SERVED TO ITA NO: 1757 TO 1769/MUM/2009 39 UNDERLINE THE SINCERITY AND EAGERNESS OF THE ASSESS EES TO ESTIMATE THE ADDITIONAL INCOME IN SUCH A MANNER THAT IT IS A CCEPTABLE TO THE AO. IN THIS VIEW OF THE MATTER WE HOLD THAT THE FI LING OF THE REVISED RETURNS CANNOT BE HELD AGAINST THE ASSESSEES BUT SH OULD BE LOOKED UPON AS AN ACT SHOWING THE SINCERITY AND BONA FIDE OF THE ASSESSEES. THE REVISED RETURNS WERE ALSO NOT PROMP TED BY ANY INCRIMINATING MATERIAL OR EVIDENCE GATHERED BY THE AO BECAUSE THE OFFER OF ADDITIONAL INCOME HAD ALREADY BEEN MADE ON 26.11.2005 BY MR RAJAL N ASHAR. WHAT HAPPENED SUBSEQUENTLY TILL THE COMPLETION OF THE ASSESSMENTS WAS ONLY AN ATTEMPT TO TRY OUT D IFFERENT CALCULATIONS FOR THE PURPOSE OF REACHING THE FIGURE OF RS.2.50 CRORES. IT NEEDS TO BE CLARIFIED THAT THOUGH IN THE STATEME NT MADE BY MR RAJAL N ASHAR UNDER SECTION 132(4) HE HAD REFERRED TO RS.214.7 LAKHS AS LOCAL PURCHASES AND RS.28.30 LAKHS FOR ASS ORTED JEWELLERY IT APPEARS THAT IN THE AGGREGATE A SUM OF RS.2.50 C RORES HAD BEEN DECLARED AS ADDITIONAL INCOME. THIS IS CLEAR FROM THE NOTE RELATING TO DECLARATION (PAGE 40 OF THE PAPER BOOK) WHICH RE FERS TO THIS SUM IN THE VERY FIRST SENTENCE. THE NOTE HAS BEEN REPR ODUCED IN THE ASSESSMENT ORDERS AND NO OBJECTION OR DISPUTE HAS B EEN RAISED BY THE AO TO THE CONTENTS THEREOF. IN THE REVISED RET URNS AS WE HAVE ALREADY SEEN THE AGGREGATE INCOME OFFERED WAS RS.2 68 34 154/- WHICH IS HIGHER THAN THE INITIAL OFFER OF ADDITIONA L INCOME. THUS AT DIFFERENT STAGES OF THE PROCEEDINGS STARTING FROM T HE SEARCH THE FIGURE OF ADDITIONAL INCOME WENT ON MOVING UPWARDS PRESUMABLY AFTER MUTUAL DISCUSSIONS AND IN A SPIRIT OF COOPERA TION. IT NEEDS TO BE ADDED THAT THERE WAS NO EXACT QUANTIFICATION OF THE ADDITIONAL ITA NO: 1757 TO 1769/MUM/2009 40 INCOME BUT IT WAS MADE MORE ON AN ESTIMATED OR HYP OTHETICAL BASIS. THIS WOULD BE SUFFICIENT FOR ASSESSMENT PUR POSES AND MAY EVEN CONSTITUTE GOOD EVIDENCE FOR PURPOSES OF LEVYI NG PENALTY BUT CANNOT CONSTITUTE CONCLUSIVE EVIDENCE OF CONCEALMEN T OF INCOME. THIS IS THE WELL SETTLED LEGAL POSITION WHICH APPLI ES TO THE PRESENT CASES. THERE IS IN THE ORDERS OF THE INCOME TAX A UTHORITIES NO CLEAR OR PRECISE FINDING THAT THE PURCHASES ARE BOG US. 28. IN THE ABOVE CIRCUMSTANCES WE ARE UNABLE TO SAY THAT THE DEPARTMENTAL AUTHORITIES WERE JUSTIFIED IN IMPOSING THE PENALTIES. WE CANCEL THE SAME. 29. IN THE CASE OF MR RAJAL N ASHAR FOR THE ASSESSM ENT YEAR 2000-01 THE PENALTY HAS ALSO BEEN IMPOSED FOR ALLEG ED ON-MONEY PAYMENT FOR THE NERUL PROPERTY. IN THE NOTE RELATI NG TO THE DECLARATION FILED BEFORE THE SEARCH AUTHORITIES (PA GES 40 TO 42 OF THE PAPER BOOK) THE ASSESSEE DECLARED CERTAIN OTHER ITE MS WHICH INCLUDED CASH AMOUNT PAID FOR PURCHASE OF FLAT BY M R RAJAL N ASHAR AMOUNTING TO RS.7 31 290/-. ACCORDING TO THE ASSES SMENT ORDER CERTAIN DOCUMENTS SEIZED DURING THE SEARCH SHOWED U NACCOUNTED PAYMENTS FOR PURCHASE OF THE PROPERTY. NO SUCH INC RIMINATING DOCUMENTS HAVE BEEN REFERRED TO IN THE STATEMENT MA DE BY MR RAJAL N ASHAR UNDER SECTION 132(4) OF THE ACT. WHA T THOSE DOCUMENTS ARE HAS NOT BEEN STATED IN THE PENALTY OR DER. THE ASSESSMENT ORDER HOWEVER REFERS TO PANCHNAMA (ANNEX URE A-7). IT STATES THAT AS PER THE SEIZED DOCUMENTS THE ASSESSE E HAD MADE UNACCOUNTED CASH PAYMENTS FOR PURCHASE OF THE PROPE RTY AT BALAJI TOWER NERUL NAVI MUMBAI. THE ASSESSEE DECLARED U NACCOUNTED ITA NO: 1757 TO 1769/MUM/2009 41 INCOME OF RS.7 75 200/- IN THE RETURN FILED PURSUAN T TO NOTICE UNDER SECTION 153A OF THE ACT. THIS INCLUDED CASH OF RS. 7 31 290/- PAID IN RESPECT OF THE AFORESAID PROPERTY. THOUGH THE ASSE SSMENT ORDER REFERS TO ANNEXURE A-7 OF THE PANCHNAMA OUR ATTENT ION WAS NOT DRAWN TO ANY SUCH ANNEXURE IN THE COURSE OF THE ARG UMENTS NOR WERE WE REFERRED TO ANY EVIDENCE OR MATERIAL TO SHO W THAT THE DEPARTMENT HAD UNEARTHED THE FACT THAT THE ASSESSEE MADE UNACCOUNTED PAYMENTS FOR PURCHASE OF THE PROPERTY. THE LEARNED DR HAD DRAWN OUR ATTENTION TO PAGE 2 OF THE ORDER O F THE CIT(A) WHICH SHOWS THAT THE ON-MONEY PAYMENT WAS TAKEN AT RS.8 35 200/- IN THE ASSESSMENT ORDER AS AGAINST RS .7 31 290/- DECLARED IN THE RETURN FILED UNDER SECTION 153A OF THE ACT. HOWEVER THERE IS NO SPECIFIC FINDING EITHER IN THE PENALTY ORDER OR IN THE ORDER OF THE CIT(A) AS TO WHAT WAS THE SEIZED MATERIAL ON THE BASIS OF WHICH THE PENALTY WAS SOUGHT TO BE LEVIED. THERE D OES NOT APPEAR TO BE ANY FURTHER ENQUIRY MADE BY THE AO ON THIS AS PECT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. TAKING ALL T HESE FACTS INTO CONSIDERATION AND HAVING REGARD TO THE DECLARATION OF THE ASSESSEE EVEN AT THE TIME OF THE SEARCH AND THE NOTE ON DECL ARATION FILED BEFORE THE SEARCH AUTHORITIES WE ARE OF THE VIEW T HAT THERE IS NO JUSTIFICATION FOR LEVYING PENALTY ON MR RAJAL N ASH AR FOR THE ASSESSMENT YEAR 2000-01 FOR ALLEGED ON-MONEY PAYMEN T FOR NERUL PROPERTY. FOR THESE REASONS WE CANCEL THE PENALTY LEVIED ON THIS SCORE. 30. IN THE VIEW WE HAVE TAKEN ON THE MERITS OF THE MATTER WE DO NOT CONSIDER IT NECESSARY OR PROPER TO DECIDE THE L EGAL QUESTIONS ITA NO: 1757 TO 1769/MUM/2009 42 SUCH AS THE CLAIM FOR IMMUNITY FROM PENALTY UNDER E XPLANATION 5 TO SECTION 271(1)(C) OR THE QUESTION WHETHER THE RETUR NS ORIGINALLY FILED BY THE ASSESSEE ABATE BY VIRTUE OF THE SECOND PROVI SO TO SUB- SECTION (1) OF SECTION 153A OF THE ACT. 31. IN THE RESULT THE PENALTIES ARE CANCELLED AND THE APPEALS OF THE ASSESSEES ARE ALLOWED WITH NO ORDER AS TO COSTS . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 20 TH AUGUST 2010 SALDANHA COPY TO: 1. NARENDRA J ASHAR HUF 2. MR NARENDRA J ASHAR 3. MR RAJAL NARENDRA ASHAR 4. MRS USHA NARENDRA ASHAR E-42 APMC MARKET-1 PHASE II TURBHE NAVI MUMBAI 400 705 5. DCIT CENTRAL CIRCLE 23 MUMBAI 6. CIT-CENTRAL II MUMBAI 7. CIT(A)-CENTRAL V MUMBAI 8. DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI