Gopal Krishan Kwartra, Panipat v. ITO Ward-2, Panipat

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI G.E VEERABHADRAPPA VICE PRESIDENT AND SHRI RAJPAL YADAV JUDICIAL MEMEBR I.T.A NO. 2579/DEL/08 ASSTT. YEAR 2000-01 SMT. KANTA KWATRA 12 HUDA SECTOR 11 & 12 PHASE-1 PANIPAT VS. INCOME TAX OFFICER WARD-3 PANIPAT (APPELLANT) (RESPONDENT) ITA NOS. 2577 2578/DEL/08 ASSTT. YEARS 1999-2000 2000-01 SH. GOPAL KRISHAN KWATRA VS. INCOME TAX OFFICER 666-A/7 AMAR BHAWAN CHOWK WARD-2 PANIPAT PANIPAT APPELLANT BY: DR. RAKESH GUPTA ADVOCATE SHRI ASHW ANI CA RESPONDENT BY: SHRI N.K. CHAND DR ORDER PER RAJPAL YADAV JM: THE PRESENT THREE APPEALS ARE DIRECTED AT THE INSTA NCE OF ASSESSES AGAINST THE SEPARATE ORDERS OF EVEN DATE I.E. 6.6.2008 PASSED B Y THE LD. CIT(A) IN ASSTT. YEAR 2000-01 IN THE CASE OF SMT. KANTA KWATRA AND IN ASS TT. YEARS 1999-2000 2000-01 IN ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 2 THE CASE OF HER HUSBAND SHRI GOPAL KRISHAN KWATRA. THE COMMON GRIEVANCE OF BOTH THE ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN CONFIR MING THE PENALTY OF RS. 8 25 000/- IN THE CASE OF SMT. KANTA KWATRA AND A PENALTY OF R S. 1 50 000/- AND RS. 7 80 000/- IN THE CASE OF HER HUSBAND SHRI GOPAL KRISHAN KWATR A IN ASSTT. YEARS 1999-2000 2000-01 RESPECTIVELY. SINCE THE COMMON ISSUES ARE I NVOLVED WE HEARD ALL THESE APPEALS TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OFF THEM BY THIS COMMON ORDER. THE FACT LEADING TO THESE PENALTIES ON ALL VITAL POINTS ARE COMMON THEREFORE FOR THE FACILITY OF REFERENCE MAINLY WE ARE TAKING UP THE FACTS FROM THE APPEAL OF SMT. KANTA KWATRA. 2. THE BRIEF FACTS OF THE CASE ARE THAT SMT. KANTA KWATRA HAS FILED A RETURN OF INCOME FOR ASSTT. YEAR 2000-01 ON 28.6.2000 DECLARI NG A TOTAL INCOME OF RS. 3 25 510/-.SIMILARLY HER HUSBAND SHRI GOPAL KRISHNA KWATRA HAS FILED HIS RETURN OF INCOME FOR ASSTT. YEARS 1999-2000 ON 28.6.1999 DECL ARING AN INCOME OF RS. 3 72 650/- FOR ASSTT. YEAR 2000-01 HE FILED THE RE TURN OF INCOME ON 26.6.2000 DECLARING AN INCOME OF RS. 910420/-. THEIR RETURNS FOR ALL THE ASSTT. YEARS WERE PROCESSED U/S 143(1) OF THE INCOME TAX ACT. INFORMATI ONS WERE RECEIVED FROM ADDITIONAL DIRECTOR OF INCOME TAX ACT. INFORMATION WE RE RECEIVED FROM ADDITIONAL DIRECTOR OF HARYANA FARIDABAD VIDE LETTER DATED 25 TH MAY 2005 ALONG WITH AN ENCLOSURE FROM ADDITIONAL DIT INVESTIGATION MEERUT. ACCORDING TO THE INFORMATION IT REVEALED TO THE DEPARTMENT THAT ONE SHRI SANJAY MOH AN AGGARWAL HAVING RESIDENTIAL ADDRESS AT 4674 SHORA KOTHI PAHAR GANJ NEW DELHI AND OFFICE ADDRESS 1598 MAIN ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 3 BAZAR PAHAR GANJ NEW DELHI WAS INVOLVED IN GIVING BOGUS GIFTS BOGUS LOANS BY CHEQUE/DD IN LIEU OF CASH RECEIVED FROM INTENDING B ENEFICIARIES. THE ALLEGED SHRI SANJAY MOHAN AGGARWAL HAS BEEN OPERATING A LARGE NU MBER OF CURRENT AND OD ACCOUNT IN VIJAY BANK ANSARI ROAD NEW DELHI IN T HE NAME OF HIMSELF HIS FAMILY MEMBERS AND LARGE NUMBER OF COMPANIES/FIRMS MANAGED AND CONTROLLED BY HIM. ACCORDING TO THE AO THE ASSESSEES HAVE RECEIVED A G IFT OF RS. 56 LACS FROM SHRI SANJAY MOHAN AGGARWAL VIDE HIS ACCOUNT NO. 2017. TH E DETAILS OF GIFT READ AS UNDER:- BOGUS GIFTS/LOANS SCAM-SANJAY MOHAN AGARWAL-DELHI-F .Y.2003-04-STATUS OF INQUIRY- ADDL. DIT (INV.) MEERUT ACC. NO. ACCOUNT HOLDERS NAME AND ADDRESS NAME OF BANK AND ADDRESS IBT NO. DD NO. DATE NAME OF BENEFICIARY STATION CLEARING BANK CODE AMOUNT 2017 SANJAY MOHAN 4674 SHORA KOTHI PAHAR GANJ DELHI VIJAYA BANK ANSARI ROAD NEW DELHI. 7 4499 84 30.03. 1999 HIMANSHU KAWATRA PANIPAT 8307 500080 2017 SNAJAY MOHAN 4674 SHORA KOTHI PAHAR GANJ DELHI VIJJAYA BANK ANSARI ROAD NEW DELHI. 9 169 07.04. 1999 JIMMY KAWATRA PANIPAT 8307 1500000 2017 SANJAY MOHAN 4674 SHORA KOTHI PAHAR GANJ DELHI VIJAYA BANK ANSARI ROAD NEW DELHI 10 337 12.4. 1999 KANTA KAWATRA PANIPAT 8307 2500000 2017 SANJAY MOHAN 4674 SHORA KOTHI PAHAR GANJ VIJAYA BANK ANSARI ROAD 12 729 01.05. 1999 HIMANSHU KAWATRA PANIPAT 8307 1100000 ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 4 DELHI NEW DELHI 5600000 3. ON THE BASIS OF ABOVE INFORMATION A NOTICE U/S 1 48 WAS ISSUED AFTER RECORDING REASONS ON 23.3.2006 WHICH WAS DULY SERVED UPON SMT . KANTA KWATRA ON 24 TH MARCH 2006 AND UPON SHRI GOPAL KRISHN KWATRA ON 27 TH MARCH 2006. THE ASSESSEES HAVE ASKED FOR COPY OF THE INFORMATION AS WELL AS COPY O F THE REASONS RECORDED BY THE AO. THERE WAS LOT OF CORRESPONDENCE BETWEEN THE ASSESSE ES AND THE DEPARTMENT IN THIS CONNECTION WHICH HAS DULY BEEN REFERRED BY THE AO I N THE ASSTT. ORDERS. THE AO ULTIMATELY DIRECTED THE ASSESEEES TO SHOW THE OCCAS ION ON WHICH THE GIFT WAS MADE PURPOSE OF THE GIFT CAPACITY OF THE SO CALLED DONO R AND THE RELATIONSHIP OF THE ASSESSEE WITH ALLEGED DONOR. HE ALSO DIRECTED SHRI GOPAL KRISHAN KWATRA TO SHOW REASON FOR THE PURPOSE AND SHOW JUSTIFICATION FOR SPLITTING UP THE GIFTS. THE ASSESSEES WERE FURTHER DIRECTED TO PRODUCE GIFT DEE D IN RESPECT OF GIFT STATED TO BE RECEIVED AND ACCOUNT OF ALL FAMILY MEMBERS EXPLAINI NG THE SOURCE OF DEPOSITS AND PURPOSE OF WITHDRAWAL. ON 27.12.2006 SMT. KANTA KWA TRA HAD WRITTEN A LETTER WHICH HAS BEEN REPRODUCED BY THE AO ON PAGE 6 WHEREBY S HE SURRENDERED A SUM OF RS. 25 LACS WITH A RIDER THAT NO PENAL ACTION WOULD BE TAKEN UP AGAINST HER. SIMILARLY SHRI GOPAL KRISHAN KWATRA HAS MADE THE SURRENDER FO R THE GIFT ALLEGED TO HAVE BEEN RECEIVED BY HIS MINOR SONS IN BOTH ASSTT. YEARS. LD . AO WITHOUT GETTING INFLUENCED FROM THE CONCESSION GIVEN BY BOTH THE ASSESSEE IN R ESPECT OF SURRENDERING THE AMOUNTS CONCLUDED THAT SHRI SANJAY MOHAN AGGARWALL HAD ISSUED DDS TO THE EXTENT ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 5 OF 6.05 CRORE FROM HIS CURRENT ACCOUNT NO. 2017 OPE RATED IN VIJAYA BANK ANSARI ROAD NEW DELHI. ACCORDING TO THE AO THESE WERE NOT THE GIFTS RATHER THESE WERE BOGUS ENTRIES BY THE ASSESSEE BY MAKING PAYMENT OF THEIR UNEXPLAINED CASH TO THE ALLEGED ENTRY PROVIDER. THEY HAVE COME WITH A PROPO SAL FOR SURRENDER OF THE AMOUNT ONLY WHEN THEY WERE UNABLE TO PROVE THE GENUINENESS OF GIFTS IN RESPECT OF THESE ENTRIES. APART FROM THE ABOVE INGREDIENTS AO FURTH ER FOUND THAT SHRI SANJAY MOHAN AGGARWAL HAD DISTRIBUTED ENTRIES OF MORE THAN 76 C RORES DURING THIS PERIOD. IN HIS UNDERSTANDING IT IS APPARENT THAT THERE WAS NO EXPL ANATION WITH THE ASSESSEE IN SUPPORT OF THE ALLEGED GIFTS HENCE HE MADE THE ADDI TION AND INITIATED THE PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME AND FOR FURNI SHING INACCURATE PARTICULARS. 4. IN THE PENALTY PROCEEDING THE STAND OF THE ASSES SEE THAT THEY HAVE FILED THE RETURN WHICH WERE PROCESSED U/S 143(1)(A) OF THE AC T. IN THE BALANCE SHEET THEY HAVE DULY DISCLOSED THE FACTUM FOR GIFT. IN THE CASE OF SMT. KANTA KWATRA BALANCE SHEET AS ON 31 ST MARCH 2000 WAS FILED ALONG WITH THE RETURN WHERE SUCH GIFTS HAVE BEEN DISCLOSED. IN THE BANK ACCOUNT THE GIFTS HAVE BEEN SHOWN AS CREDITED IN THE ACCOUNTS. THE ASSESSEES HAVE FILED BANK STATEM ENT OF SHRI SANJAY MOHAN AGGARWAL THE ALLEGED DONOR SHOWING THAT A DRAFT W AS PREPARED BY HIM AS APPEARING IN THE DETAILS EXTRACTED SUPRA. COPY OF THE GIFT DE ED IN WHICH DONOR HAS CONFIRMED IN RESPECT OF GIFT MADE WERE FILED. SHIR SANJAY MOHAN AGGARWAL WAS AN INCOME TAX ASSESSEE AND EVIDENCE IN THIS RESPECT WAS ALSO FIL ED. SIMILARLY DETAILS WERE FILED IN THE CASE OF SHRI GOPAL KRISHAN KWATRA PERSONAL BAL ANCE SHEET OF MINOR CHILD ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 6 DISCLOSING ALL ASSETS LIABILITIES AND SOURCE OF THE RECEIPT ALOGNWITH NECESSARY EVIDENCE WAS SUBMITTED. FACED WITH A DIFFICULTY THAT ASSESSE E WOULD NOT BE IN A POSITION TO PRODUCE SHRI SANJAY MOHAN AGARWAL THEY HAVE SURREN DERED THE AMOUNT. OTHERWISE THERE WAS A COMPLETE DOCUMENTATION IN RESPECT OF TH ESE GIFTS. ON THE STRENGTH OF THESE DETAILS IT WAS CONTENDED THAT IT WAS A CASE W HERE NOTHING WAS CONCEALED AND ASSESSEE DISCLOSED COMPLETE PARTICULARS EVEN IN THE ORIGINAL RETURN HENCE THERE WOULD BE NO CASE FOR THE AO TO CHARGE THE ASSESSEE FOR CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. IT WAS ALSO POINTED OUT THAT AO FAILED TO BRING ANY MATERIAL IN THE ASSTT. ORDER WHICH CAN DEMONSTRATE THAT THE IMPUGNED GIFT WERE BOGUS. HE IS ONLY POSSESSING THE REPORT OF ADDITIONAL DIT WHICH IS NOT ENOUGH TO PROVE THAT IMPUGNED GIFT WAS NOT G ENUINE. ACCORDING TO THE ASSESSEE THIS REPORT WAS A GENERAL INFORMATION MEAN T FOR ALL THE ASSESSEE. THE ASSESSEE HAS CITED A NUMBER OF JUDGMENT BEFORE THE AO. LD. AO WAS NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE AND HE AFTER TAKIN G COGNIZANCE OF JUDGMENT CITED BY THE ASSESSEE AS WELL AS RELIED UPON BY HIM HELD THAT ASSESSEE DESERVES TOBE VISITED WITH PENALTY U/S 271 (1)(C). HE IMPOSED A M INIMUM PENALTY @ 100% ON THE TAX SOUGHT TOBE EVADED ON BOTH THE ASSESSEES. 5. AGGRIEVED WITH THE ORDER OF AO THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THEY HAVE TAKEN A NUMBER OF PLEAS. THE FIRST PLEA TAKEN BY THE ASSESSEE WAS THAT PENALTY PROCEEDING HAS BEEN I NITIATED WITHOUT RECORDING THE SATISFACTION. LD. CIT(A) REJECTED THIS ARGUMENT OF THE ASSESSEE ON THE GROUND THAT ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 7 ONLY ADDITION MADE BY THE AO TO THE DECLARED INCO ME IS ON ACCOUNT OF BOGUS GIFTS RECEIVED BY SMT. KANTA KWATRA AND MINOR SONS. THUS ACCORDING TO THE LD. CIT(A) AO HAS MADE ELABORATE DISCUSSION IN THE ASSTT. ORDER A ND THE PENALTY PROCEEDING HAS BEEN PROPERLY INITIATED AT THE END OF THE ORDER. TH E NEXT ARGUMENT RAISED BY THE ASSESSEE BEFORE LD. CIT(A) WAS THAT PENALTY HAS BEE N IMPOSED BY THE AO ON TWIN CHARGES I.E CONCEALMENT OF PARTICULARS OF INCOME AN D FURNISHING OF INACCURATE PARTICULARS WHEREAS BOTH ARE CLAIMED TO BE MUTUALL Y EXCLUSIVE. ACCORDING TO THE LD. CIT(A) THE ASSESSEE CLAIMED THE AMOUNT RECEIVED AS GIFT KNOWING WELL THAT THIS IS A BOGUS CLAIM AND THE ALLEGED DDS ARE ACCOMMODATION E NTRIES FOR WHICH THEY HAVE PAID CASH. THUS AS FAR AS THE ASSESSEE CLAIMED THE AMOUNT RECEIVED AS A GIFT THEY FILED INACCURATE PARTICULARS AND THEY HAVE CONCEALE D THE CORRECT PARTICULARS IN RESPECT OF ACCOMMODATION ENTRIES SHOWN AS GIFT. THE LD. CIT (A) HAS HELD THAT EVEN THESE TWO CHARGES ARE MUTUALLY EXCLUSIVE THE ASSESSEES HA VE BEEN CORRECTLY HELD GUILTY ON BOTH THE COUNTS. THE NEXT OBSERVATION MADE BY THE L D. CIT(A) IS THAT ASSESSEES HAVE CLAIMED THAT THEY HAVE DISCHARGED THE ONUS BY FILING ALL THE DETAILS OF GIFTS WHEREAS THE FACT IS THAT THEY HAVE SURRENDERED THE GIFT AMOUNT AND COULD NOT FILE ANY EVIDENCE IN SUPPORT OF THEIR CLAIM. THE AO ON T HE OTHER HAND HAS PROVED THAT THE ACCOUNTS FROM WHERE CHEQUES WERE RECEIVED WERE USED BY SHRI SANJAY MOHAN AGGARWAL FOR DEPOSITING THE CASH RECEIVED FROM PER SONS LINE ASSESSEE AND ISSUED BOGUS GIFT CHEQUE AND ASSESSEE IS ALSO A BENEFICIAR Y OF SUCH A BOGUS GIFT. IN THIS WAY LD. COMMISSIONER HAS REJECTED THE APPEALS OF THE AS SESSEE. ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 8 6. BEFORE US WHILE IMPUGNING THE ORDERS OF REVENUE AUTHORITIES LD. COUNSEL FOR THE ASSESSEE REITERATED HIS SUBMISSION AS WERE MADE BEFORE THE AO AS WELL AS BEFORE LD. CIT(A). IN BRIEF HIS FIRST PREPOSITION WAS THAT AO HAS NOT RECORDED HIS SATISFACTION BEFORE INITIATION OF THE PENALTY PROCE EDING. IN HIS SECOND FOLD OF SUBMISSION HE CONTENDED THAT SECTION 271(1)(C) CONT EMPLATES TWO FACT SITUATION I.E. ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AN D WHERE ASSESSEE HAS FAILED TO FURNISH ACCURATE PARTICULARS OF INCOME. THE FIRST SITUATION PROCEEDS ON THE GROUND THAT PARTICULARS OF INCOME HAVE NOT BEEN FURNISHED LATER PROCEEDS ON THE FOOTING THAT SUCH PARTICULARS HAD NO DOUBT BEEN FURNISHED BY THE ASSESSEE BUT THE SAME HAS BEEN FOUND INACCURATE. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE BOTH THESE FACTS SITUATIONS CANNOT RUN TOGETHER AND THEY ARE M UTUALLY EXCLUSIVE. THE AO IN THE PENALTY ORDER HAS NOWHERE PROPOUNDED THE SPECIFIC C HARGE AGAINST THE ASSESSEE. THEREFORE HIS ORDER DESERVES TO BE SET ASIDE. FOR B UTTERACING HIS CONTENTION HE RELIED UPON THE DECISION OF HONBLE GUJRAT HIGH COURT IN T HE CASE OF CIT VS. LAKHDHIR LALJI 85 ITR 77 (GUJRAT) AND IN THE CASE OF NAVIN BHAI M. PATEL VS ITO 27 ITD 411 (AHD). HE FURTHER CONTENDED THAT ASSESSEES HAVE DISCLOSED ALL THE MATERIAL FACTS IN THEIR RETURN OF INCOME. BEFORE ISSUANCE OF NOTICE U/S 148 THE BALANCE SHEET EXHIBITING THE FACT OF RECEIPT OF GIFT WERE DULY FILED BY THE ASSE SSEES. HE FURTHER CONTENDED THAT INFORMATION RECEIVED BY THE AO IN RESPECT OF ALLEGE D ACCOMMODATION ENTRIES PROVIDED BY ALLEGED SHRI SANJAY MOHAN AGGARWAL WAS PERTAINING TO THE PERIOD NOVEMBER 1999 TO SEPTEMBER 2001 WHEREAS THE ASSES SEES HAVE ALREADY RECEIVED THE GIFT PRIOR TO APRIL 1999 I.E. IN THE CASE OF S MT KANTA KWATRA AND MAY 1999 IN THE CASE OF HIMANSHU WHO IS THE MINOR SON OF ASSESSEE AND WHOSE INCOME HAS BEEN ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 9 ASSESSED IN THE HANDS OF SHRI GOPAL KRISHAN KATRA. HE FURTHER CONTENDED THAT ADDITIONS WERE MADE ONLY FOR THE REASON THAT ASSESS EES HAVE FAILED TO PROVE THE GIFTS BUT THAT IS NOT IPSO FACTO SUFFICIENT FOR THE AO TO VISIT THE ASSESSEE WITH PENALTY. HE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF CSIT VS. PRADEEP KUMAR GUPTA 303 ITR 95. 7. IN THE CASE OF SHRI GOPAL KRISHAN KWATRA LD. COUN SEL FOR THE ASSESSEE HAS CONTENDED THAT REOPENING OF ASSESSMENT IS BAD IN LA W AND CONSEQUENTLY NO PENALTY ORDER OUGHT TO BE PASSED IN THIS CASE. ACCORDING TO THE LD. COUNSEL THE INFORMATION RECEIVED FROM ADIT MEERUT RELATES TO THE PERIOD NOV EMBER 1999 TO SEPTEMBER 2001WHEREAS THE GIFTS RECEIVED BY THE ASSESSEE WERE PRIOR TO THIS PERIOD. THUS THERE IS NO DIRECT NEXUS BETWEEN THE INFORMATION AND THE BELIEF OF AO FOR REOPENING OF THE ASSESSMENT. THE LD. COUNSEL FOR THE ASSESSEE EMPHAS ISED THAT EVEN IF ASSESSEE HAS NOT TAKEN UP THE ISSUE OF REOPENING IN THE QUANTUM PROCEEDING THE ASSESSEE CAN DEFEND HIS PENALTY PROCEEDING ON THIS ISSUE ALSO. A S FAR AS OTHER ASPECTS ARE CONCERNED HE REITERATED HIS CONTENTION AS WERE RAIS ED BEFORE THE REVENUE AUTHORITIES BELOW. 8. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F LD. CIT(A). HE HAS FIELD WRITTEN SUBMISSIONS RUNNING INTO 14 PAGES WHEREIN B ASICALLY HE APPRISED US AS TO HOW SECTION 271(1)(C) IS TOBE CONSTRUED AND INTERPR ETED. ACCORDING TO HIS SUBMISSION DEPARTMENT IS NOT OBLIGED TO PROVE THAT ASSESSEE HA S CONCEALED THE PARTICULARS OF ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 10 INCOME OR FURNISHED INACCURATE PARTICULARS WITH A GUILTY MIND OR DELIBERATELY. HE REFERRED A LARGE NUMBER OF DECISION OF HONBLE SUPR EME COURT RIGHT FROM 165 ITR 14 IN THE CASE OF MUSSADILAL RAM BHAROSE UPTO THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE 306 ITR 277 . HE HAS ALSO EXPLAINED AS TO HOW A SITUATION IS TO BE APPRECIATED WHEN RETURN IS REVISED UPWARD AND REVISED INCOME IS ACCEPTED. IN THE WRITTEN SUBMISSION THE NE XT STEP TAKEN BY THE LD. DR IS IN RESPECT OF THE CASES WHERE ADDITION WAS MADE ON THE BASIS OF SURRENDER OF AMOUNT MADE BY THE ASSESSEE. 9. THOUGH IN OUR TO UNDERSTANDING IT IS NOT A VERY COMPLICATED ISSUE WHERE INTERPRETATION OF SECTION 271(1) IS INVOLVED BUT B OTH THE COUNSELS HAVE DEVOTED LOT OF ENERGY FOR MAKING A REFERENCE TO THE CASE LAW. T HEY HAVE CITED A LARGE NUMBER OF CASES FOR THE FACILITY OF REFERENCE WE ARE TAKING T HEIR CITATION AS UNDER :- BY COUNSEL FOR ASSESSEE 1. COPY OF JUDGMENT OF CIT VS. SIDHARTHA ENTERPRISE S (P&H) 2. COPY OF JUDGMENT OF PUNEET SEHGAL (DELHI) ITAT 3. COPY OF JUDGMENT OF DR. SANJAY CHUG IN ITA 330-3 31/08 4. COPY OF JUDGMENT OF ITO VS. DR. SAMEER KANT AGAR AL 113 TTJ 252 5. COPY OF JUDGMENT OF RANBIR CHEMICALS (P) LTD. 91 TTJ 692 6. COPY OF JUDGMENT OF CITVS BALBIR SINGH 304 ITR 1 25 7. COPY OF JUDGMENT OF SMT. SANDHYA VERMA 114 TTJ 9 33 ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 11 8. COPY OF JUDGMENT OF KAMAL CHEMICAL INDUSTRIES 27 7 ITR 150 (P &H) 9. COPY OF JUDGMENT OF CIT VS AGGARWAL PIPE CO. 240 ITR 880 (DEL) 10. COPY OF JUDGMENT OF NATIONAL TEXTILE VS CIT 249 ITR 125 (GUJ) BY DEPARTMENT 11. 137 ITR 722 (CAL) 12. 163 ITR 440 (RAJ) 13. 130 ITR 602 (CAL) 14. 2009-TIOL-755-ITAT-BANG 15. (2000)109 TAXMAN267 (KER) 16. ITAT IN ITA NO. 2633/DEL/09 ASHOK MAHINDRA VS. ITO 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1) HAS A DIRECT BEARING ON THE CONTROVERSY IN HAND. THEREFORE IT IS SALUTARY UPON US TO TAKE NOTE OF TH IS SECTION WHICH READ AS UNDER :- 271. FAILURE TO FURNISH RETURNS COMPLY WITH NOTIC ES CONCEALMENT OF INCOME ETC. (1)IF THE ASSESSING OFFICER OR THE COMMISSIONER (AP PEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON (A) AND (B)******** ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 12 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY (I) AND (II) ********** (II) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLAU SE (D) IN ADDITION TO TAX IF ANY PAYABLE BY HIM A SUM WHIC H SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS THE FURNISHING OF INACCURATE PARTICULARS O F SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1 WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT. (A) SUCH PERSON FAILS TO OFFER ANY EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. 11. A BARE PERUSAL OF THE ABOVE PROVISION WOULD MAK E IT CLEAR THAT IN ORDER TO IMPOSE THE PENALTY THE AO OR THE LD. CIT(A) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SHOULD BE SATISFIED THAT THE ASSESSEE H AS (I) CONCEALED HIS INCOME OR (II) FURNISHED INACCURATE PARTICULARS OF INCOME. AS REGARDS THE QUANTUM OF PENALTY THE PENALTY IMPOSED UNDER SECTION 271(1)(C) CAN RAN GE BETWEEN 100% TO 300% OF ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 13 THE TAX SOUGHT TO BE AVOIDED BY THE ASSESSEE AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE NEXT AND MOST IMPORTANT FEATURE OF THIS SECTION IS DEEMING PROVISION REGARDING CONC EALMENT OF INCOME. NOT ONLY THAT THE PENALTY PROVISONS COVER THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED THE INACCURATE PARTICULARS IN CERTAIN SITUATION EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME WOULD COME INTO ACTION. A DEEMING FICTION P ROVIDED BY WAY OF EXPLANATION 1 TO SECTION 271(1)(C) POSTULATE TWO SITUATIONS (1) W HERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER P ROVISIONS OF THE ACT THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLA NATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE AO OR THE LD. CIT(A) WHER EIN IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER T HE PROVISION OF THIS ACT THE ASSESSEE HAS NOT SUBSTANTIATE THE EXPLANATION AND T HE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS A BONAFIDE AND ASSESSEE HAS DIS CLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTAL I NCOME. THUS IN THE FIRST POSITION THE DEEMING FICTION WOULD COME INTO PLAY BY THE INA CTION AT THE END OF ASSESSEE BY HIS NOT GIVING HIS EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE AO OR LD. CIT(A) B Y GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE EXPLANATION GIVEN BY THE ASSESSEE I S FALSE WHEREAS IN THE SECOND CONDITION THE DEEMING FICTION WOULD COME INTO PLAY BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CLAUSE B OF EXPLANATION 1 TO SECTION 271 (1)(C) I.E. ASSESSEE IS NOT ABLE TO SUBSTANTIAT E AN EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AN D IN ADDITION TO THIS THE ASSESSEE ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 14 IS ALSO NOT ABLE TO PROVE THAT SUCH EXPLANATION AS GIVEN IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THUS WHEN THIS DEEMING F ICTION COMES INTO PLAY WHICH CAN ONLY HAPPEN IN ONE OF THE ABOVE SITUATION THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR T HE PURPOSE OF SECTION 271(1)(C) IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 12. THE CASE OF THE ASSESSEES BEFORE US IS THAT THE Y HAVE RECEIVED GENUINE GIFTS AND HAVE DULY DISCLOSED ALL THESE DETAILS IN THEIR INCOME TAX RETURN. THEREFORE THEY SHOULD NOT BE VISITED WITH PENALTY. IT IS ALSO PLEAD ED BY THEM THAT IN THE DETAILS FILED ALONGWITH THE ORIGINAL RETURN THE GIFTS HAVE BEEN D ISCLOSED IN THE BALANCE SHEET. THE AMOUNTS HAVE BEEN CREDITED IN THE BANK. THEY ARE HA VING AFFIDAVIT OF THE DONOR HIS PERMANENT ACCOUNT NUMBER. THE ONLY THING WHICH THEY COULD NOT COMPLY WITH DURING THE ASSTT. PROCEEDING WAS THAT THEY FAILED TO PRODU CE SHRI SANJAY MOHAN AGGARWAL IN ORDER TO SUBSTANTIATE ALL THESE DOCUMENTS. ON THE S TRENGTH OF HONBLE PUNJAB AND HARYANA HIGH COURT DECISION IN THE CASE OF CIT VS. SIDHARTHA ENTERPRISES IN ITA NO. 908 OF 2008. IT WAS ALSO CONTENDED BY THE COUNSEL FO R THE ASSESSEE THAT HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE IMPACT OF HONBLE SUPREME COURTS DECISION IN THE CASE OF DHARMENDRA TEXTILE AND THE HIGH COURT HAS HELD THAT JUDGMENTS OF HONBLE SUPREME COURT CANNOT BE READ A S LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE PE NALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IN THAT QUALITATIVE DIFFERENCE BETWEEN CR IMINAL LIABILITY U/S 276 AND ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 15 PENALTY U/S 271(1) HAD TO BE KEPT IN MIND AND APPR OACH ADOPTED TO THE CRIMINAL CASE NEED NOT TO BE ADOPTED WHILE CONSIDERING THE L EVY OF PENALTY. ACCORDING TO THE HONBLE HIGH COURT CONCEPT OF PENALTY HAS NOT UNDER GONE CHANGE BY VIRTUE OF THIS JUDGMENT OF HONBLE SUPREME COURT. PENALTY IS TO BE IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT THE MERE MISTAKE. WE HAVE CONSIDERED THE FACTS OF THE PRESENT CASE IN THE LIGHT OF PREPO SITION LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF SIDDHARTHA ENTERPRISES. 13. ACCORDING TO THE ASSESEE THEY HAVE RECEIVED A G IFT OF RS. 56 LACS FROM SHRI SANJAY MOHAN AGGARWAL. THIS VERY FACT DOES NOT IN SPIRE ANY CREDENCE IN THE STORY PUT FORTH BY THE ASSESSEE. IN THE PRESENT MATERIALI STIC WORLD WE HAVE TO COME ACROSS A PHILANTHROPIST WHO CAN DONATE RS. 56 LACS TO ANY STRANGER. NOT ONLY THIS RS. 56 LACS THE DEPARTMENT HAS COME OUT WITH AN INF ORMATION THAT DDS OF RS. 6.5 CRORE WERE GOT ISSUED FROM ACCOUNT NUMBER 2017 AN D THE ALLEGED DONOR WAS FOUND TO BE A MAN OF NO MEANS. THESE FACTS LEAD US TO OBS ERVE THAT WHATEVER DOCUMENTARY EVIDENCE ASSESSEES HAVE FILED ALONG WIT H ORIGINAL RETURN WERE MANIPULATED ONE. WHEN SUCH TYPE OF ENTRIES ARE BEIN G OBTAINED WITH DUE CONSULTATION THEN HARDLY THERE WILL BE ANY DEFECT I N THEIR DOCUMENTATION. THE ASSESSEES ARE CAUGHT ONLY WHEN THESE DOCUMENTS AND FACTS WERE PUT FOR VERIFICATION. THE STAGE TO SUBSTANTIATE THOSE DOCUMENTS WHEN ARR IVED AT THE ASSTT. PROCEEDINGS THE ASSESSEES HAVE IMMEDIATELY SURRENDERED THE AMOU NT THE VERACITY OF THESE DOCUMENTS WERE NEVER TO PUT TO TEST THUS THE ARGUME NT ABOUT THE DISCLOSURE OF THESE DETAILS IN THE RETURN IS MEANINGLESS. IT IS DI FFICULT FOR US TO BELIEVE THAT ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 16 ASSESSEES WERE NOT AWARE ABOUT THESE BOGUS GIFTS WH EN THEY FILE THE RETURN. THE FACTS FOUND FROM THE RECORD LEAD US TO SAY THAT THE GIFTS HAVE BEEN ARRANGED BY THEM BY GIVING THEIR UNEXPLAINED MONEY. THEY WERE F ULLY AWARE THAT IT IS A FALSE CLAIM BUT INSPITE OF THAT THEY TOOK THE RISK OF THE ADDITION AS WELL AS PENALTY PROCEEDINGS. WE HAVE NO DOUBT IN OUR MIND ON THE BA SIS OF THE DETAILS AVAILABLE FROM THE RECORD THAT IT WAS A DELIBERATE ATTEMPT AT THE END OF ASSESSEES TO PORTRAY THEIR BOGUS CLAIM AS GENUINE ONE IN THE RETURN OF I NCOME. IT IS NOT THE CASE THAT ASSESSEES HAVE TAKEN SOME LOAN WHICH WAS CREDITED I N THEIR BOOKS WHICH COULD NOT BE PROVED WITH THE HELP OF EVIDENCE. IN THE PRESENT CASE THE ASSESSEES HAVE SHOWN RECEIPT OF GIFTS WHICH THEY WERE AWARE THAT SUCH A CLAIM IS BOGUS ONE. THE DEPARTMENT WAS ABLE TO COLLECT THE INFORMATION EXHI BITING THAT SHRI SANJAY MOHAN AGGARWAL WAS INVOLVED IN PROVIDING ACCOMMODATION EN TRIES TO VARIOUS INDIVIDUAL AND OTHER CONCERN. HE HAS PROVIDED THE ENTRIES OF RS. 76 CRORES OUT OF THAT ENTRIES OF RS. 6.5 CRORE WAS PROVIDED FROM THE BANK ACCOUNT BE ARING NO. 2017 FROM WHERE ASSESSEES HAVE ALSO RECEIVED THE GIFTS. IT IS SUCH A BRAZEN ATTEMPT AT THE END OF ASSESSEE WHERE THERE CAN BE NO DOUBT OR TWO OPINION THAT ASSESSEES HAVE SHOWN THESE GIFTS DELIBERATELY KNOWING TO THE FACT THAT T HEY ARE BOGUS. 14. DURING THE COURSE OF HEARING LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT A SIMILAR GIFT WAS RECEIVED BY SHRI PUNEET SEHGAL AN D OTHERS. IN THEIR CASES PENALTIES HAVE BEEN DELETED BY THE TRIBUNAL. HE PLACED ON REC ORD COPIES OF THE TRIBUNALS ORDER. WE HAVE GONE THROUGH THE ORDERS AND WE ARE O F THE OPINION THAT NO RATIO OF LAW HAS BEEN LAID DOWN IN THAT ORDER. IT IS AN ORDE R ON THE FACTS OF THOSE CASES. IN THOSE CASES AO HAS DIRECTED THE ASSESSEES TO PRODUC E SHRI SANJAY MOHAN AGGARWAL. ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 17 WHEN AO HAS GIVEN THIS DIRECTION BY THAT TIME THE A LLEGED SHRI SANJAY MOHAN AGGARWAL HAD ALREADY DIED AND THEREFORE ASSESEES W ERE NOT IN POSSESSION TO COMPLY WITH THE DIRECTION OF THE AO. THE TRIBUNAL AT THE E ND HAS OBSERVED THAT DEPARTMENT HAS NOT MADE ANY OTHER EFFORTS TO COME TO THE CONCL USION THAT THE GIFTS IN QUESTION IN NO CIRCUMSTANCE HAVE BEEN AMOUNTS RECEIVED AS GI FT FROM SHRI SANJAY MOHAN AGGARWAL. ACCORDING TO THE TRIBUNAL THE ASSESSEES HAVE SURRENDERED THESE GIFTS AS INCOME UNDER THE SITUATION WHERE THEY COULD NOT PRO DUCE SHRI SANJAY MOHAN AGGARWAL BECAUSE OF HIS DEATH OCCURRED BEFORE THE STARTING OF REOPENING PROCEEDING. NO SUCH CIRCUMSTANCES ARE AVAILABLE IN THE PRESENT CASE. THE AO HAS NEVER ASKED THE ASSESSEES TO PRODUCE SHRI SANJAY MO HAN AGGARWAL. HE SIMPLY ASKED THE ASSESSEES TO PROVE THEIR GIFTS. APART FROM THE ABOVE WE DO NOT FIND ANY DISCUSSION IN THE ORDER WHETHER INFORMATION COLLECT ED IN THE PRESENT CASE AND DISCUSSED BY US WERE AVAILABLE ON THOSE CASES OR NO T. THEREFORE THE ORDER OF THE TRIBUNAL IN THE CASE OF SHRI PUNIT SEHGAL DOES NOT LAY DOWN THAT IN EVERY CASE OF ACCOMMODATION ENTRIES TAKEN FROM SHRI SANJAY MOHAN AGGARWAL NO PENALTY COULD BE IMPOSABLE. IN THE CASE OF SHRI GOPAL KRISHAN KWA TRA THE ARGUMENT THAT REOPENING OF ASSESSMENT WAS NOT JUSTIFIED IS CONCER NED WE ARE OF THE OPINION THAT ASSESSEE HAS NOT DISPUTED REOPENING OF THE ASSESSME NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE HIMSELF SURRENDERED THE AMOUNT ADDITIONS HAVE BEEN CONFIRMED NOW AT THIS SECOND APPELLATE STAGE ASSES SEE CANNOT MAKE OUT ALTOGETHER A NEW CASE. THE VALIDITY OF ASSESSMENT IS VERY MUCH INTACT. THE ONE OF THE ARGUMENT BY THE LD. COUNSEL FOR THE ASSESSEE IS IN RESPECT O F CHARGE FRAMED BY THE ASSESSEE I.E. WHETHER THEY HAVE FURNISHED INACCURATE PARTICU LARS OR THEY HAVE CONCEALED THE ITA NOS. 2579 2577 2578/DEL/08 ASSTT. YEARS 2000-01 1999-2000 2000-01 18 PARTICULARS OF INCOME. THE LD. CIT(A) HAS DEALT THI S ISSUE AND WE DO NOT FIND ANY ERROR IN HIS ORDER. APART FROM THAT WE ARE OF THE O PINION THAT THERE IS NO AMBIGUITY IN THE CHARGE WHICH ASSESSEES WERE REQUIRED TO EXPL AIN. FROM THE ASSESSMENT STAGE IT WAS VERY CLEAR THAT ASSESSEES HAVE TO EXPLAIN WH Y THEY HAVE INTRODUCED THEIR UNEXPLAINED MONEY IN THE GARB OF BOGUS GIFT AND TRI ED TO AVOID THE PAYMENT OF TAX. THERE IS NO CONFUSION ON THIS ASPECT. WE COULD UNDE RSTAND ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE IF ON ACCOUNT OF SOME CONFUSION A PREJUDICE HAS BEEN CAUSED TO THE ASSESSEE FOR EXPLAINING THEIR POSITION. IN FACT THEY DO NOT HAVE ANY EXPLANATION. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY M ERIT IN THESE APPEALS. THEY ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.4.2010. [G.E.VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED: 30.4.2010 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT