DDIT (E)-II(2), MUMBAI v. ST. XAVIERS EDUCTION TRUST, MUMBAI

ITA 38/MUM/2009 | 1989-1990
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 3819914 RSA 2009
Assessee PAN AACTS0244E
Bench Mumbai
Appeal Number ITA 38/MUM/2009
Duration Of Justice 2 year(s) 6 month(s) 27 day(s)
Appellant DDIT (E)-II(2), MUMBAI
Respondent ST. XAVIERS EDUCTION TRUST, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-07-2011
Date Of Final Hearing 16-06-2011
Next Hearing Date 16-06-2011
Assessment Year 1989-1990
Appeal Filed On 02-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI R.S. PADVEKAR (JM) AND SHRI RAJENDRA S INGH (AM) ITA NO.38/MUM/2009 ASSESSMENT YEAR : 1989-90 ITA NO.39/MUM/2009 ASSESSMENT YEAR : 1990-91 DY. DIRECTOR OF INCOME TAX(EXEMPTION) RANGE-II(2) 5 TH FLOOR PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012. ..( APPELLANT ) VS. ST. XAVIERS EDUCATION TRUST RATTAN NAGAR DAULAT NAGAR BORIVLI(EAST) MUMBAI-400 068. ..( RESPONDENT ) P.A. NO. (AACTS 0244 E) APPELLANT BY : SHRI G.P. TRIVEDI RESPONDENT BY : SHRI F ARROKH V. IRANI O R D E R PER RAJENDRA SINGH (AM). THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFE RENT ORDERS BOTH DATED 17.10.2008 OF CIT(A) FOR ASSESSMENT YE ARS 1989-90 AND 1990-91. THE ONLY DISPUTE RAISED IN THE TWO APPE ALS IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT 1961. AS THE DISPUTE RAISED IS IDENTICAL IN BOTH THE APPEALS THESE ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE. ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSE SSEE TRUST HAD BEEN CREATED AS AN EDUCATIONAL TRUST WHICH WAS REGI STERED WITH CHARITY COMMISSIONER MUMBAI AS WELL AS UNDER SECTION 12 A OF THE ACT. THE ASSESSEE HAD DECLARED NIL INCOME IN THE RETURNS F ILED FOR ASSESSMENT YEAR 1989-90 AND 1990-91. HOWEVER IN THE OR IGINAL ASSESSMENT COMPLETED UNDER SECTION 143(3) FOR THE TWO YEA RS TOTAL INCOME HAD BEEN DETERMINED AT RS.86 72 180/- AND RS.1 19 34 400/- RESPECTIVELY. IN APPEAL CIT(A) ALLOWED PART RELIEF A ND SOME ISSUES WERE SET ASIDE TO THE ASSESSING OFFICER AND IN THE FRESH A SSESSMENT DATED 30.3.1995 THE ASSESSING OFFICER DETERMINED TOTAL INCOME AT RS.60 03 460/- AND RS.64 31 780/- RESPECTIVELY. AGGRIE VED BY THE ORDER OF THE CIT(A) BOTH THE PARTIES FILED APPEAL BE FORE THE TRIBUNAL WHO VIDE CONSOLIDATED ORDER DATED 24.8.2006 CONFIRMED CERTAIN ADDITIONS AND THE TOTAL INCOME WAS FINALLY ASSESSED AT RS.2 2 44 691/- AND RS.11 47 533/- RESPECTIVELY FOR THE TWO ASSESSMENT YEA RS. THE POSITION REGARDING THE ADDITIONS CONFIRMED IN THE TWO YEARS WAS AS UNDER :- S.NO. NATURE OF ADDITION A.Y. 1989-90 A.Y. 1990-91 1. UNACCOUNTED DONATION NIL RS.11 25 000/- 2. CASH DEPOSIT IN BANK RS .8 00 000/- NIL 3. PAYMENT TO MR. MANSOOR VIRANI RS .10 25 000/- NIL 4. NOTINGS IN DIARY A/19 & A/20 RS .3 95 211/- NIL 5. DONATION GIVEN RS .21 180/- RS.6 000/- 6. MISCELLANEOUS EXPENSES NIL RS.16 533/- TOTAL RS RSRS RS .22 44 691/- RS.11 47 533/- 2.1 THE ASSESSING OFFICER HAD ALSO INITIATED PENALTY PRO CEEDINGS FOR CONCEALMENT OF INCOME UNDER SECTION 271(1)(C) OF THE INCOM E TAX ACT. IN RESPONSE TO PENALTY NOTICE THE ASSESSEE SUBMITTED THAT ADDITION ON ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 3 ACCOUNT OF UNACCOUNTED DONATIONS HAD BEEN MADE ON THE BA SIS OF ADMISSION OF THE TRUSTEE MR. ABRAHAM CHACKO WHICH HA D BEEN RETRACTED SUBSEQUENTLY. FURTHER THE CIT(A) HAD ALLOW ED PARTIAL RELIEF AND DIRECTED THE ASSESSING OFFICER TO ASSESS UNACCOUNTED DONAT IONS @ 20% OF TOTAL DONATIONS AGAINST 40% ORIGINALLY ASSESSED B Y THE ASSESSING OFFICER. THUS THE ADDITION WAS BASED ONLY ON BA SIS OF STATEMENT OF THE TRUSTEE WITHOUT ANY CORROBORATIVE MAT ERIALS. IN REGARD TO CASH DEPOSIT IN THE BANK ACCOUNT IT WAS SUBMIT TED THAT THE AMOUNT DEPOSITED REPRESENTED CASH COLLECTIONS FROM STUDENT S ON ACCOUNT OF UNIFORMS BOOKS NOTEBOOKS ETC. ON BEHALF OF SUPPLIERS AND DEPOSIT IN BANK WAS FOR SAFEGUARDING AGAINST POSSIBLE TH EFT OR PILFERAGE. THE PAYMENT TO MR. MANSOOR VIRANI WAS EXP LAINED AS PAYMENTS MADE OUT OF UNACCOUNTED DONATIONS FOR THE PUR POSE OF CONSTRUCTION OF SCHOOL BUILDINGS. AS REGARDS THE NOTINGS IN DIARY A-19 AND A/20 IT WAS SUBMITTED THAT NOTINGS WERE EITHER R EIMBURSEMENT OF CERTAIN EXPENSES OR MONEY GIVEN TO TRUSTEE FOR INCURRING EXPENSES FOR THE TRUST. THE DONATIONS GIVEN WERE DULY RECORDED I N THE BOOKS OF ACCOUNT AND ADDITION HAD BEEN MADE ONLY ON THE GROUND THAT BENEFITS OF SECTION 11 AND 12 WERE DENIED TO THE ASSESSEE. IT WA S FURTHER SUBMITTED THAT MERE ADDITIONS IN THE ASSESSMENT DID NOT E STABLISH CONCEALMENT. MOREOVER THE DIFFERENCE BETWEEN RETURNE D INCOME AND ASSESSED INCOME WAS ON ACCOUNT OF MERE DIFFERENCE OF OPINION AND THE ISSUE WAS HIGHLY DEBATABLE AS THE MATTER HAD BEEN REFE RRED TO 3 RD MEMBER. IN SUCH CASES IT WAS POINTED OUT THAT NO PENA LTY COULD BE LEVIED. THE ASSESSEE TRUST HAD BEEN CREATED SOLELY FOR ED UCATIONAL PURPOSES AND WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10 (22) OF THE ACT. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CO NTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT IT WAS AN ADMITTE D FACT THAT THE ASSESSEE HAD NOT ACCOUNTED FOR DONATIONS AND PAYMENTS MADE TO MR. ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 4 MANSOOR VIRANI. THE ADDITIONS HAD BEEN CONFIRMED BY C IT(A) AS WELL AS THE TRIBUNAL. THERE WAS THUS NO DIFFERENCE OF OPINI ON WITH REGARD TO THE ADDITIONS MADE. ALL THESE ADDITIONS HAD BEEN FIN ALLY CONFIRMED BY THE TRIBUNAL. THE DIFFERENCE OF OPINION WAS ONLY WIT H REGARD TO ISSUE OF ALLOWABILITY OF EXEMPTION UNDER SECTION 10(22) OF THE ACT WHICH HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE LD. THIRD MEMBER . THE ASSESSEE HAD THUS ATTEMPTED TO EVADE INCOME AND PENALTY W AS LEVIABLE. THE ASSESSING OFFICER ACCORDINGLY LEVIED THE P ENALTY @100% OF TAX SOUGHT TO BE EVADED WHICH CAME TO RS.11 56 675/- AND RS.5 96 880/- RESPECTIVELY FOR THE TWO YEARS UNDER CONSID ERATION. 3. THE ASSESSEE DISPUTED THE DECISION OF THE ASSESSING OFFICER. IN APPEAL THE CIT(A) OBSERVED THAT THERE WAS DIFFERENCE OF OPINION ON THE ISSUE OF ADDITION AT EVERY STAGE RIGHT FROM THE ASSE SSING OFFICER. IN FACT IN THE APPEAL AGAINST FRESH ASSESSMENT CIT(A) H AD ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BUT THE ADDITIONS WERE CONFIRMED BY THE TRIBUNAL. ON MERIT OF THE CASE CIT(A) OBSERVED T HAT THE ASSESSEE HAD EXPLAINED THE NATURE AND SOURCE OF CASH DEPOSITS IN T HE BANK ACCOUNT. THE ASSESSEE HAD ALSO EXPLAINED THE PURPOSE AND SO URCE OF PAYMENT TO MR. MANSOOR VIRANI. THE NOTINGS IN THE DIA RY WERE EXPLAINED EITHER AS REIMBURSEMENT OF EXPENSES OR MONEY GIVEN TO TRUSTEES FOR INCURRING DAY TO DAY EXPENSES. AS FOR THE DONATIONS GIVEN THESE WERE FULLY RECORDED IN THE BOOKS OF ACCOUNT. CIT(A ) ALSO OBSERVED THAT PENALTY PROCEEDINGS WERE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND FINDINGS GIVEN IN PENALTY PROCEEDINGS W ERE NOT CONCLUSIVE AND THEREFORE ONLY ON THE BASIS OF ADDITIONS MADE IN ASSESSMENT PENALTY COULD NOT BE LEVIED. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE TRUST WAS REGISTERED UNDER SECTION 12A OF THE A CT AND WAS ENTITLED TO EXEMPTION UNDER SECTION 10(22) IN RESPE CT OF ENTIRE ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 5 INCOME. THERE WAS ALSO NOTHING ON RECORD TO SHOW THAT THE RECEIPTS OR DONATIONS WERE UTILIZED FOR ANY PERSONAL BENEFIT OTHE R THAN THE OBJECT OF THE TRUST. CIT(A) THEREFORE HELD THAT PENALTY UN DER SECTION 271(1)(C) WAS NOT JUSTIFIED. HE ACCORDINGLY DELETED THE PENALTY LEVIED FOR BOTH THE YEARS AGGRIEVED BY WHICH THE REVENUE IS I N APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US THE LD. AR FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT MERE ADDITIO N IN THE ASSESSMENT OR THE FACT THAT THE ASSESSEE HAD NOT FILED ANY A PPEAL CANNOT AUTOMATICALLY LEAD TO CONCEALMENT. IT WAS ALSO SUB MITTED THAT ADDITIONS MADE WERE DEBATABLE AND IN SUCH CASES NO PENA LTY FOR CONCEALMENT OF INCOME COULD BE IMPOSED. IT WAS FURTHER SUBMITTED THAT EVEN IF THE ADDITIONS WERE CORRECTLY MADE ENTIR E INCOME WAS EXEMPT UNDER SECTION 10(22) OF THE INCOME TAX ACT AND T HERE WAS NO TAX LIABILITY. EVEN IF EXEMPTION UNDER SECTION 10(22) WAS NOT GRANTED THE ISSUE WHETHER ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SECTION 10(22) OF THE ACT WAS HIGHLY DEBATABLE WHICH WAS CLEAR F ROM THE FACT THAT THERE WAS DIFFERENCE OF OPINION ON THIS ISSUE BET WEEN THE TWO MEMBERS OF THE BENCH AND THE ISSUE HAD TO BE REFERRED TO 3 RD MEMBER. THOUGH THE LD. 3 RD MEMBER DECIDED THE ISSUE AGAINST THE ASSESSEE AND HELD THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION IN RELATION TO ADDITIONS MADE THE ISSUE REMAINED DEBATABLE. IN SUCH CA SES IT WONT BE APPROPRIATE TO LEVY PENALTY. THE LD. AR REFERRE D TO THE DECISION OF THE TRIBUNAL IN CASE OF ASIA SATELLITE TELECOMMUNICAT ION CO. LTD. VS. DCIT IN ITA NO.488/DEL/2005 IN WHICH IT WAS HELD THAT NO PENALTY WAS LEVIABLE IN CASE TAXABILITY OF INCOME WAS DEBATABLE. 4.1. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. IT WAS SUBMITTED THAT THERE WAS NO DIFFERENCE ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 6 REGARDING THE ADDITIONS MADE WHICH HAD BEEN CONFIRMED BOTH BY CIT(A) AND THE TRIBUNAL AND THE ASSESSEE HAD ACCEPTED TH E SAME. THE DIFFERENCE OF OPINION WAS ONLY IN RELATION TO THE APP LICABILITY OF THE PROVISIONS OF SECTION 10(22). THEREFORE IN CASE TAX WAS F OUND PAYABLE IN RESPECT OF ADDITIONS MADE PENALTY HAD TO BE LEVIED . IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NOT ACCOUNTED TRANSACTIONS W HICH WERE FOUND ONLY DURING THE COURSE OF SEARCH AND THEREFO RE IT WAS A FIT CASE FOR LEVY OF PENALTY. IT WAS ACCORDINGLY URGED THAT THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY FOR CONCEALMENT OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE IS AN EDUCATIONAL TRUST REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT. THERE WAS A SEARCH IN CASE OF ONE OF THE TRUSTEES DURING THE COURSE OF WHICH SEVERAL INCRIMINATING DOCUMEN TS WERE FOUND WHICH AMONG OTHERS SHOWED UNACCOUNTED TRANSACTIONS BY THE TRUST. THE TRUSTEE ALSO ADMITTED HAVING NOT ACCOUNTED PART OF THE DONATIONS RECEIVED BY THE TRUST. IN THE ORIGINAL ASSESSME NT COMPLETED UNDER SECTION 143(3) OF THE ACT THE TOTAL INCOME HAD B EEN DETERMINED AT RS.86 72 180/- AND RS.1 19 34 400/- RESPECTIVELY FOR THE TWO YEARS. THE CIT(A) HAD GIVEN PART RELIEF AND HAD RESTORED SOM E OF THE ISSUES TO THE ASSESSING OFFICER AND IN THE FRESH ASSESSMENT TOTAL I NCOME HAD BEEN DETERMINED AT RS.60 03 460/- AND RS.64 31 780/- RESPECTIVELY. FINALLY THE ADDITIONS CONFIRMED BY THE TRIBUNAL WERE TO THE TUNE OF RS.22 44 691/- AND RS.11 47 533/- RESPECTIVELY FOR THE TWO YEARS DETAILS OF WHICH HAVE BEEN GIVEN IN PARA-2 OF THIS ORD ER EARLIER. IN RELATION TO THESE ADDITIONS WHICH HAVE BEEN CONFIRMED THE ASSESSING OFFICER LEVIED PENALTY FOR CONCEALMENT OF INCOME @100% OF TAX SOUGHT ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 7 TO BE EVADED. THE ISSUE IS WHETHER ON THE FACTS OF TH E CASE LEVY OF PENALTY CAN BE JUSTIFIED. THERE IS NO DISPUTE THAT TH E ADDITIONS CONFIRMED BY THE TRIBUNAL HAVE BEEN ACCEPTED BY THE ASSE SSEE AS NO FURTHER APPEALS HAVE BEEN FILED BEFORE THE HIGH COURT . THE CASE OF THE ASSESSEE IS THAT MERE ADDITIONS IN THE ASSESSMENT OR THE FACT THAT THE ASSESSEE DID NOT FILE APPEAL CANNOT BE THE BASIS FOR LEVY OF PENALTY. 5.1 IT IS TRUE THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AS HELD BY HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM (123 ITR 457) AND THE FINDINGS GIVEN IN T HE ASSESSMENT ARE NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS IN WHICH IT IS OPEN TO THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME. EACH CASE HAS TO BE EVALUATED ON ITS OWN FACTS AND THE CASE OF P ENALTY HAS TO BE CONSIDERED UNDER THE PROVISIONS OF EXPLANATION(1) TO SECTION 271(1)(C). IT IS ALSO A SETTLED LEGAL POSITION AS HELD B Y THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSO RS AND OTHERS (2008) 306 ITR 277(SC) THAT WILLFUL CONCEALMENT IS NOT REQUIRED TO BE PROVED BY THE REVENUE AND THAT PENALTY UNDER SECTION 271(1)(C) IS ONLY A CIVIL LIABILITY. THUS MENSREA IS NOT REQUIRED TO BE PROVED BY THE REVENUE. THE CASE OF THE PENALTY HAS TO BE EVALUAT ED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. EXPLANATION- I TO SECTION 271(1)(C) DEEMS CERTAIN ADDITIONS/DISALLOWANCES IN COMPUT ATION OF TOTAL INCOME TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. AS PER EXPLANATION-I IF IN RESPE CT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME ASSESSEE F AILS TO OFFER AN EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBS TANTIATE AND ALSO FAILS TO PROVE THAT THE EXPLANATION IS BONAFIDE THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME IN R ELATION TO ADDITIONS/DISALLOWANCE MADE IN THE TOTAL INCOME. ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 8 5.2 IN THE PRESENT CASE THE FACTS MATERIAL TO THE COMPUT ATION OF INCOME WERE UNACCOUNTED DONATIONS CASH DEPOSITS IN THE BA NK ACCOUNT UNACCOUNTED PAYMENTS TO MANSOOR VIRANI UNACCOUNTE D NOTINGS IN DIARIES ETC. THE ASSESSEE HAD EXPLAINED THAT T HE AMOUNT DEPOSITED IN THE BANK ACCOUNT REPRESENTED CASH COLLECTIONS F ROM STUDENTS ON ACCOUNT OF UNIFORMS BOOKS NOTEBOOKS ETC. ON B EHALF OF SUPPLIERS. HOWEVER THE EXPLANATION WAS NOT SUBSTANTIATE D. THERE WAS ALSO NO EXPLANATION AS TO WHY THE AMOUNTS RECEIVED W ERE NOT ACCOUNTED AS THERE WAS NO MATERIAL FOUND DURING SEARCH SHO WING THAT THESE REPRESENTED AMOUNTS RECEIVED FROM STUDENTS. THE P AYMENTS MADE TO MR. MANSOOR VIRANI WERE ADMITTEDLY UNACCOUNTED . THE ASSESSEE EXPLAINED THAT THE PAYMENTS WERE MADE FROM UNA CCOUNTED DONATIONS. IT IS PERTINENT TO NOTE THAT ON THE ONE HAND THE ASSESSEE CLAIMED THAT THERE WERE NO UNACCOUNTED DONATIONS AND O N THE OTHER HAND IT WAS EXPLAINED THAT UNACCOUNTED PAYMENTS TO MR. MANSOOR VIRANI WERE FROM UNACCOUNTED DONATIONS. MOREOVER THE RE WAS NO ADDITION ON ACCOUNT OF UNACCOUNTED DONATIONS IN ASSESSMENT YEAR 1989-90 IN WHICH THE UNACCOUNTED PAYMENTS TO MR. MANSOOR VIRANI WERE MADE. THE EXPLANATION OF THE ASSESSEE THEREFORE CANNOT BE CONSIDERED AS BONAFIDE. 5.3 IN REGARD TO THE UNACCOUNTED DONATIONS RECEIVED IN 1990-91 IT HAS BEEN SUBMITTED THAT THE SAME WERE BASED ON THE STATE MENT OF THE TRUSTEE WHICH WAS RETRACTED LATER. IT HAS ALSO BEEN SUBM ITTED THAT UNACCOUNTED DONATIONS WERE BASED ON ESTIMATE AND THERE W AS NO EVIDENCE. THE RETRACTION OF THE TRUSTEE HAS NOT BEEN FOUND RELIABLE BY THE AUTHORITIES BELOW AS THE TRUSTEE HAD CLEARLY STATED THAT UNACCOUNTED DONATIONS WERE RECEIVED AND THEREFORE RETRA CTION WAS ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 9 CONSIDERED AFTER THOUGHT. FURTHER FINALLY THE ASSESSEE ACCEPTED THE ADDITION ON ACCOUNT OF UNACCOUNTED DONATIONS BY NOT FILI NG FURTHER APPEAL IN THE HIGH COURT AND THEREFORE THE RETRACTIO N HAS NO RELEVANCE. IT IS ALSO TO BE NOTED THAT THE SEIZED DOCU MENTS REVEALED UNACCOUNTED TRANSACTIONS WHICH ALSO SUPPORT THE STATEMENT OF THE TRUSTEE THAT A PART OF DONATIONS RECEIVED WERE NOT ACCOU NTED. UNDER THESE CIRCUMSTANCES THE EXPLANATION OF THE ASSESSEE THAT T HERE WERE NO UNACCOUNTED DONATIONS CANNOT BE CONSIDERED BONAFIDE. T HE EXPLANATION OF THE ASSESSEE IN RELATION TO OTHER ADDITI ONS ALSO CANNOT BE CONSIDERED AS BONAFIDE AS THE ADDITIONS WERE BASED ON SEIZED DOCUMENTS AND THE EXPLANATIONS ARE NOT SUPPORTED BY AN Y EVIDENCE. HOWEVER THE ADDITIONS OF RS.21 180/- AND RS.6 000/- ON ACCOUNT OF DONATIONS GIVEN HAVE BEEN MADE ONLY ON THE GROUND T HAT THE ASSESSEE HAD BEEN DENIED EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. THERE IS NO DISPUTE THAT THE DONATIONS GIVEN WERE ACCOUNTED. THEREFORE IN OUR VIEW IT WOULD NOT BE APPROPRIATE TO LEVY PENAL TY IN RESPECT OF ADDITIONS ON THE BASIS OF DONATIONS GIVEN. WE THEREFOR E HOLD THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME WITHIN THE MEANING OF THE PROVISIONS OF EXPLANATION-I TO SECTION 271(1)(C) TO THE EXTENT OF ADDITIONS CONFIRMED BY THE TRIBUNAL EXCEPT THE ADDITIO NS IN RELATION TO DONATIONS GIVEN 5.4 THE LD. AR FOR THE ASSESSEE HAS ARGUED THAT THE ADDI TIONS MADE WERE DEBATABLE AND THEREFORE IN SUCH CASES THE EXPLANAT ION OF THE ASSESSEE HAS TO BE CONSIDERED BONAFIDE AND NO PENALTY SHOU LD BE LEVIED. WE FIND THAT THERE WAS NO DIFFERENCE OF OPIN ION BETWEEN THE AUTHORITIES BELOW IN RELATION TO ADDITIONS WHICH HAVE BEEN FINALLY CONFIRMED AND IN RESPECT OF WHICH PENALTY HAS BEEN LEVIE D. THESE ADDITIONS HAD BEEN CONFIRMED BOTH BY CIT(A) AND THE T RIBUNAL. THE ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 10 CIT(A) HAD DELETED THE ADDITIONS IN THE SECOND ROUND O F APPEAL ON THE GROUND THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDE R SECTION 10(22) AND NOT ON MERIT. THEREFORE IT CANNOT BE SAI D THAT THE MERIT OF ADDITIONS WAS DEBATABLE. THE DEBATABLE ISSUE WAS ONLY I N RELATION TO ALLOWABILITY OF EXEMPTION TO THE ASSESSEE UNDER SECTION 10(22) OF THE ACT WHICH WILL AFFECT THE TAX LIABILITY OF THE ASSESSEE AN D NOT IN RELATION TO CONCEALMENT OF PARTICULARS OF INCOME. THERE ARE TWO STAGES IN THE PROCESS OF LEVY OF PENALTY UNDER SECTION 271(1)(C). THE FIRST STAGE REQUIRES DETERMINATION OF INCOME IN RESPECT OF WHICH PAR TICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FILED. THE SECOND STAGE IS THE COMPUTATION OF PENALTY WHICH IS BASED ON TAX SOUGHT TO BE EVADED IN RELATION TO SUCH INCOME. ONCE THERE IS CONCEALM ENT OF INCOME PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE. BU T ACTUAL LEVY OF PENALTY WILL DEPEND UPON THE TAX PAYABLE IN RELATIO N TO CONCEALED INCOME AS QUANTUM OF PENALTY IS BASED ON TAX SOUGHT TO B E EVADED. IT IS POSSIBLE THAT IN A GIVEN SITUATION THOUGH THERE IS CO NCEALMENT OF INCOME NO PENALTY IS LEVIABLE DUE TO THE CONCEALED INCO ME BEING COVERED BY SOME EXEMPTION PROVISIONS AND TAX LIABILITY BEING NIL. WE HAVE ALREADY HELD THAT THERE HAS BEEN CONCEALMENT OF P ARTICULARS OF INCOME TO THE EXTENT OF ADDITIONS CONFIRMED BY THE TRI BUNAL EXCEPT THE ADDITIONS RELATING TO THE DONATIONS GIVEN. AS REGARDS THE TAX PAYABLE IN RESPECT OF SUCH INCOME THE TRIBUNAL HAS ALREADY THROUGH A THIRD MEMBER DECISION HELD THAT TAX IS LEVIABLE IN RESPECT OF ADDITIONS MADE IN THE ASSESSMENT AS THE PROVISIONS OF SECTION 10(22) ARE NO T APPLICABLE IN RELATION TO ADDITIONS MADE IN THE ASSESSMEN T. THEREFORE THE PENALTY IS LEVIABLE. THE CASE WOULD HAVE BEEN DIF FERENT HAD THE ASSESSEE ACCOUNTED THE INCOME AND CLAIMED EXEMPTION UNDER SE CTION 10(22) AS IN THAT CASE THE ISSUE OF EXEMPTION UNDER SECTI ON 10(22) BEING DEBATABLE IT COULD BE ARGUED THAT THE CLAIM MA DE BY THE ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 11 ASSESSEE WAS BONAFIDE AND NO PENALTY COULD BE IMPOSED IN SU CH CASES. BUT THIS IS NOT THE POSITION IN THIS CASE. IN THIS CASE AS W E HAVE SEEN EARLIER THE ASSESSEE HAD NOT ACCOUNTED THE INCOME AND HAD CONCEALED PARTICULARS OF INCOME. PENALTY IS THEREFORE LEVIABLE ON THE BASIS OF TAX SOUGHT TO BE EVADED IN RELATION TO THE CONCEALED I NCOME. SINCE TAX HAS BEEN FOUND TO BE PAYABLE IN RELATION TO CONCEALED INCOME THE PENALTY HAS BEEN CORRECTLY LEVIED BY ASSESSING OFFICER @ 10 0% OF TAX SOUGHT TO BE EVADED. 5.5 THE LD. AR OF THE ASSESSEE HAS RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD. (SUPRA). IN THIS CASE THE ASSESSEE A NON-RESIDENT COMPANY HAD DERIVED INCOME FROM LEASE OF SATELLITE TRANSPONDERS CAPA CITY. THE ASSESSEE HAD NOT RETURNED THE INCOME ON THE GROUND THAT THE INCOME WAS NOT TAXABLE. BOTH THE ASSESSING OFFICER AND CIT(A) HAD HELD THAT INCOME WAS NOT TAXABLE UNDER SECTION 9 (1)(I) BUT WAS T AXABLE AS ROYALTY UNDER SECTION 9(1)(VI). THE APPEAL AGAINST TH E ORDER OF THE TRIBUNAL HAD BEEN ADMITTED BY THE HIGH COURT ON THE SUBSTANTIAL QUESTION OF LAW AND THE ISSUE WAS THUS DEBATABLE. IT WAS UNDER THESE CIRCUMSTANCES THAT ITAT HELD THAT EXPLANATION OF THE ASSESSE E THAT INCOME WAS NOT TAXABLE WAS BONAFIDE AND THE PENALTY W AS DELETED. THE CASE IS OBVIOUSLY DISTINGUISHABLE AS IN THAT CASE INCOME HAD BEEN ACCOUNTED BUT CLAIMED EXEMPT. BUT IN THE PRESENT CASE T HE INCOME HAD NOT BEEN ACCOUNTED AND THE ASSESSEE AS HELD EARLIER HAD CONCEALED THE PARTICULARS OF INCOME. 5.6 THE ORDER OF CIT(A) DELETING THE PENALTY IN VIE W OF THE FORE-GOING DISCUSSION CANNOT BE UP HELD. THE SAME IS THEREFORE SET ASIDE. WE ITA NO.38 & 39/M/09 A.Y:89-90 & 90-91 12 ACCORDINGLY UPHOLD THE PENALTY IN RELATION TO THE ADD ITIONS CONFIRMED BY THE TRIBUNAL EXCEPT THE ADDITIONS ON ACCOUNT OF DON ATIONS GIVEN. 6. IN THE RESULT THE APPEALS OF THE REVENUE ARE PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011 SD/- SD/- (R.S. PADVEKAR) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.