PARESH R. SHAH, MUMBAI v. DCIT CC-I, MUMBAI

ITA 499/MUM/2010 | 2004-2005
Pronouncement Date: 28-09-2011 | Result: Dismissed

Appeal Details

RSA Number 49919914 RSA 2010
Assessee PAN AAIPS5030L
Bench Mumbai
Appeal Number ITA 499/MUM/2010
Duration Of Justice 1 year(s) 8 month(s) 7 day(s)
Appellant PARESH R. SHAH, MUMBAI
Respondent DCIT CC-I, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 28-09-2011
Date Of Final Hearing 12-09-2011
Next Hearing Date 12-09-2011
Assessment Year 2004-2005
Appeal Filed On 20-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 496 TO 501/MUM/2010 (ASSESSMENT YEARS: 2001-02 TO 2006-07) SHRI PARESH R. SHAH DCIT CENTRAL CIRCLE - I 225-227 J. DADAJI ROAD AAYAKAR BHAVAN M.K. ROAD TARDEO MUMBAI 400034 VS. MUMBAI 400020 PAN - AAIPS 5030 L APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY MEHTA RESPONDENT BY: SHRI D.S. SUNDER SINGH DATE OF HEARING: 12.09.2011 DATE OF PRONOUNCEMENT: 28.09.2011 O R D E R PER BEMCH THESE ARE SIX APPEALS BY THE ASSESSEE AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) BY THE A.O. WHICH WAS CONFIRMED BY THE CIT(A) XXXVI MUMBAI DATED 09.12.2009. THE LEAD ORDER BY THE CIT( A) IS IN A.Y. 2001-02 WHICH WAS FOLLOWED IN OTHERS SUMMARILY. SINCE COMMO N ISSUES ARE INVOLVED ALL THESE SIX APPEALS ARE CONSIDERED TOGETHER AND D ECIDED. 2. BRIEFLY STATED ASSESSEE IN THIS CASE PERTAINS TO A GROUP ON WHICH SEARCH AND SEIZURE ACTION WAS UNDERTAKEN ON 12.09.2 006. CONSEQUENT TO THE SEARCH OPERATIONS ASSESSEE HAD ADMITTED CERTAIN INCOMES AS PART OF M/S. LALLUBHAI AMICHAND GROUP BY FILING A WRITTEN D ECLARATION BEFORE THE INVESTIGATING TEAM ON 03.10.2006. CONSEQUENTLY THE SAME WAS REITERATED IN THE STATEMENT RECORDED UNDER SECTION 132(4) ON 07.1 1.2006. ACCORDINGLY ASSESSEE FILED RETURNS IN RESPONSE TO NOTICE UNDER SECTION 143(2) ON 13.03.2007 IN ALL THE YEARS DECLARING THE FOLLOWING INCOMES: - ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 2 A.Y. INCOME(IN ` `` ` ) 2001-02 6 57 889 2002-03 17 55 880 2003-04 31 85 880 2004-05 1 54 008 2005-06 3 89 010 2006-07 32 23 255 2007-08 4 18 013 3. THE A.O. IN THE COURSE OF ASSESSMENT PROCEEDINGS AC CEPTED THE INCOMES DECLARED BUT INITIATED PENALTY PROCEEDINGS 271(1)(C) AS ASSESSEE HAS ALREADY FILED RETURNS IN RESPECTIVE ASSESSMENT YEAR S UNDER SECTION 139(1) DECLARING INCOMES FROM SALARY AND OTHER SOURCES EXC EPT IN A.Y. 2007-08 FOR WHICH RETURN WAS NOT DUE. THE A.O. INITIATED PENALT Y PROCEEDINGS AS ASSESSEE DECLARED HIGHER INCOMES DUE TO SEARCH AND SEIZURE OPERATIONS CONDUCTED. 4. IT WAS THE CONTENTION OF THE ASSESSEE THAT HE OFFER ED THIS AMOUNT UNDER SECTION 132(4) AND HAS SATISFIED THE CONDITIO NS PERTAINING TO EXPLANATION 5 TO SECTION 271(1)(C) WITH REFERENCE T O ASSETS FOUND. HE RELIED ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASES OF CIT VS. S.D.V. CHANDRU 266 ITR 175 HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HEBILAL KANHALYALAL (HUF) 270 ITR 523 AND HON'BLE S UPREME COURT IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL 251 ITR 9. AS SESSEE ALSO RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF K. DEEDAR AHMED VS. ITO 97 ITD 240. IT WAS ASSESSEES CONTENTION THAT WHERE AN ASS ESSEE CAME FORWARD AND FILED RETURNS OF INCOME OFFERING ADDITIONAL INCOME THERE CANNOT BE ANY PENALTY UNDER SECTION 271(1)(C). THE A.O. IN THE DE TAILED ORDER DID NOT AGREE WITH ASSESSEES CONTENTIONS ON THE REASON THAT ASSE SSEE FAILED TO GIVE VALID REASONS FOR NOT DISCLOSING INCOME IN THE ORIGINAL R ETURN FILED UNDER SECTION 139(1) AND BUT FOR THE SEARCH ACTION HIS INCOME WO ULD HAVE BEEN ESCAPED ASSESSMENT. HE FURTHER CONSIDERED [VIDE PARA 3(IV)] THAT ASSESSEE HAD MADE DECLARATION BASED ON UNEXPLAINED CASH UNEXPLAINED JEWELLERY AND VARIOUS NOTINGS MADE ON THE PAPER SEIZED WHICH COULD NOT BE PROPERLY EXPLAINED BY ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 3 HIM EVEN DURING THE SEARCH OPERATIONS. AS SUCH IT C ANNOT BE SAID THAT ASSESSEE HAS SATISFIED CONDITIONS PRESCRIBED BY EXP LANATION 5 TO SECTION 271(1)(C). THE A.O. CONSIDERED THAT THE FACTS ARE S IMILAR TO THE FACTS OF THE CASE OF M/S. SHERATON APPARELS VS. ACIT 256 ITR 20( BOM) WHEREIN THE HON'BLE BOMBAY HIGH COURT CONFIRMED THE PENALTIES. HE LEVIED PENALTY IN RESPECT OF VARIOUS ASSESSMENT YEARS AS UNDER: - A.Y. INCOME(IN ` `` ` ) 2001-02 1 93 846 2002-03 5 21 475 2003-04 9 75 268 2004-05 45 916 2005-06 1 18 744 2006-07 10 35 538 5. BEFORE THE CIT(A) THE SAME CONTENTIONS WERE REITERA TED. THE LEARNED CIT(A) DID NOT ACCEPT THE CONTENTIONS AND RELIED ON THE HON'BLE ITAT( THIRD MEMBER) DECISION IN THE CASE OF ACIT VS. KIRIT DAHY ABHAI PATEL 28 DTR 380 (AHD.) (TM) AND FURTHER DISTINGUISHED THE DECISIONS RELIED UPON BY THE ASSESSEE AND CONFIRMED THE PENALTIES FURTHER RELYING ON THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF M/S. SHERATON APPAREL S VS. ACIT 256 ITR 20. ACCORDINGLY ASSESSEE IS AGGRIEVED AND FILED THE PRE SENT APPEALS. 6. THE LEARNED COUNSEL SUBMITTED THAT THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF M/S. SHERATON APPARELS (SUPRA) CONSIDERED THE ISSUE WITH REFERENCE TO CLAUSE (1) OF THE EXPLANATION-5 W ITH REFERENCE TO THE BOOKS OF ACCOUNTS WHEREAS ASSESSEES CASE IS WITH REFEREN CE TO ASSETS FOUND DURING THE SEARCH I.E. CLAUSE (2) OF EXPLANATION-5 THERE FORE APPLICABILITY OF HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF S HERATON APPARELS IS NOT CORRECT. WITH REFERENCE TO INTERPRETATION OF CLAUSE (2) OF THE EXCEPTION TO EXPLANATION 5 HE SUBMITTED THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S.D.V. CHANDRU 266 ITR 175 CONSIDERED TH AT IN A CASE WHERE ASSESSEE HAD NOT DISCLOSED HIS INCOME IN THE RETURN FILED FOR THE PREVIOUS YEAR WHICH HAS ENDED PRIOR TO THE DATE OF SEARCH AN D IN THE STATEMENT GIVEN UNDER SECTION 132(4) ASSESSEE ADMITS THE RECEIPT OF UNDISCLOSED INCOME FOR ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 4 THOSE YEARS AND ALSO SPECIFIES THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND THEREAFTER PAYS THE TAX ON THAT UNDISCL OSED INCOME WITH INTEREST SUCH UNDISCLOSED INCOME WOULD GET IMMUNIS ED FROM THE LEVY OF PENALTY. IT WAS HIS SUBMISSION THAT CLAUSE (2) OF E XPLANATION 5 AS INTERPRETED BY THE HON'BLE MADRAS HIGH COURT WAS A LSO FOLLOWED BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KANHAIYALAL & KANHAIYALAL SARUPARIA 299 ITR 19 WHEREIN IT WAS HEL D AS UNDER: - TO APPRECIATE THIS ASPECT WE MAY AGAIN REVERT TO THE OPENING PART OF EXPLANATION 5 WHICH ATTRACTS THE LIABILITY UNDER S ECTION 271(1)(C) BY PROVIDING EXPLANATION AND CLAUSE (A) THEREOF CLEAR LY CONTEMPLATES A SITUATION WHERE THE ASSESSEE MAY CLAIM THE UNDISCL OSED ASSETS TO HAVE BEEN ACQUIRED BY HIM FOR ANY PREVIOUS YEAR WH ICH HAS ENDED BEFORE THE DATE OF THE SEARCH BUT THE RETURN OF TH E INCOME OF SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE. F URTHER SIGNIFICANTLY IT IS CLAUSE (B) WHICH PROVIDES FOR THE OTHER EVENTUALITY OF THE ASSET HAVING BEEN ACQUIRED BY HIM FOR ANY PR EVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH. THIS IS A MILLION DOLLAR DISTINCTION. INASMUCH AS IN CASE COVERED BY CLAUSE (A) THE ASSET MAY HAVE BEEN ACQUIRED BY INCOME FOR ANY PREV IOUS YEAR WHICH CANNOT BE CONFINED TO ANY ONE PREVIOUS YEAR FOR THE RELEVANT ASSESSMENT YEAR OF WHICH PREVIOUS YEAR THE ASSESS EE MAY HAVE DEPOSED UNDER SECTION 132(4) TO BE SUBMITTING THE RETURN. OBVIOUSLY SUCH ASSETS MAY HAVE BEEN ACQUIRED AS OR FROM THE I NCOME FOR ANY ONE OR MORE NUMBER OF PREVIOUS YEARS WITHIN THE BL OCK PERIOD. THUS WHEN THE PARENT PROVISION CONTEMPLATES THE INCOME T O BE PERMISSIBLE IN ANY PREVIOUS YEAR OBVIOUSLY SUB-CLAUSE (1) AND (2) WHICH ARE IN THE NATURE OF THE PROVISO TO THIS EXPLANATION HAVE TO BE READ IN LINE THEREWITH AND THEREFORE IF THE DISCLOSURE OF THE ASSET HAS BEEN MADE THEN THE ASSESSEE CANNOT BE PROHIBITED FROM S HOWING THAT THE INCOME RELATED TO ANY ONE OR MORE OF THE PREVIOUS Y EARS BEFORE THE DATE OF THE SEARCH AT THE PAIN OF THE IMMUNITY CON FERRED BY SUB- CLAUSE (2) OF EXPLANATION 5 BEING TAKEN AWAY. 7. HE FURTHER SUBMITTED THAT SIMILAR VIEW WAS TAKEN BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. RAMESH C HAND GOYAL ITAT NO. 181 OF 2010 DATED 11 TH AUGUST 2010. HE FURTHER PLACED ON RECORD THE COORD INATE BENCH DECISION IN THE CASE OF ACIT VS. SHRI AMARDEE P SINGH DHANJAL IN ITA NO. 33 TO 37/KOL/2009 DATED 27/05/2009 WHEREIN ONE OF US (JUDICIAL MEMBER) IS A MEMBER WHICH HAD RELIED ON THE ABOVE REFERRED DECISIONS OF THE HON'BLE MADRAS HIGH COURT AND HON'BLE RAJASTHAN HIG H COURT TO PROVIDE IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(1)(C). WITH REFERENCE TO THE ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 5 THIRD MEMBER DECISION RELIED UPON BY THE CIT(A) IN THE CASE OF ACIT VS. KIRIT DAHYABHAI PATEL 28 DTR 380 (AHD.) (TM) IT WAS HIS SUBMISSION THAT THE JUDGEMENT WAS GIVEN ON THE FACT THAT THE DIVISION B ENCH HAS FOLLOWED THE HON'BLE BOMBAY HIGH COURT JUDGEMENT IN THE CASE OF M/S. SHERATON APPARELS VS. ACIT 256 ITR 20 AND THE JUDICIAL PRECEDENCE REQ UIRES THAT ANOTHER DIVISION BENCH SHOULD FOLLOW THE SAME THEREFORE T HE THIRD MEMBER AGREED WITH THE AM WHO FOLLOWED THE EARLIER DIVISION BENC H DECISION IN THE SAME GROUP AND THE DECISION WAS GIVEN IN A PARTICULAR SE T OF FACTS WITHOUT ANALYSING THE MERITS OF THE TWO HON'BLE HIGH COURT JUDGEMENTS . IT WAS FURTHER SUBMITTED THAT THE HON'BLE ITAT B BENCH KOLKATA IN THE CASE OF DCIT VS. AVINASH CH. GUPTA ITA NO. 414 & 415/KOL/ 2009 DATED 30.06.2010 REFEREED TO THE THIRD MEMBER DECISION RELIED UPON BY THE LEARNED D.R. BUT AGREED WITH THE VIEWS EXPRESSED BY THE HON'BLE MADRAS HIGH COURT AND HON' BLE RAJASTHAN HIGH COURT WHICH ARE IN FAVOUR OF THE ASSESSEE AND THE REFORE IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT IN VIEW OF DECISIONS OF THE HON'BLE HIGH COURT JUDGEMENTS FOLLOWED BY THE COORDINATE BENCH A T KOLKATTA THE IMMUNITY UNDER EXPLANATION 5 IS AVAILABLE TO ASSESSEE EVEN THOUGH THE INCOMES WERE EARNED IN THE EARLIER YEARS AS THE INCOME RELATES T O THE ASSETS FOUND DURING THE SEARCH AND ASSESSEE ADMITTED THE INCOMES UNDER SECT ION 132(4). 8. THE LEARNED D.R. HOWEVER SUBMITTED THAT ASSESSEE S FACTS OF THE CASE CLEARLY FALL UNDER THE DECISION OF THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF SHERATON APPARELS (SUPRA) RELIED UPON BY TH E A.O. AND FURTHER SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RATNASI DEOJI PATEL (HUF) 168 TAXMAN 74 FOLLOWED THE EARLIE R DECISION IN THE CASE OF SHERATON APPARELS (SUPRA) UPHOLDING THE LEVY OF PEN ALTY INVOKING EXPLANATION 5 THERETO AND RELIED ON THE ORDERS OF T HE A.O. AND CIT(A). 9. AS SEEN FROM THE ORDERS THERE WERE CONFLICTING FIN DINGS BY THE A.O. AND THE CIT(A) WITH REFERENCE TO THE ASSETS FOUND I N THE COURSE OF SEARCH. THE LEARNED A.R. WAS ASKED TO FURNISH THE STATEMENT OF ASSETS FOUND AND INCOMES DECLARED IN ORDER TO ANALYSE THE ISSUE IN I TS CORRECT PERSPECTIVE. ACCORDINGLY ASSESSEES COUNSEL FILED A STATEMENT DE CLARING INCOMES WHICH ARE AS UNDER: - ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 6 STATEMENT OF UNDISCLOSED SOURCE AND EXPENSES FOR TH E PERIOD 1-4-2002 TO 12-9-2006 COMPUTED FROM THE LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH FROM OFFICE AND RESIDENCE ON 12-9-200 PARTICULARS 00-01 01-02 02-03 03-04 04-05 05-06 06- 07 GROSS TOTAL OPENING CASH BALANCE - - 700 500 2 892 500 2 569 850 2 176 165 4 289 458 SOURCE INCOME 6145 000 1 392 000 3 185 500 150 000 348 000 335 000 200 000 6 225 500 PEAK NEGATIVE 42 889 363 800 - - - - - 406 769 INTEREST ON RD A/C - - - 4 008 4 040 4 010 - 12 028 PROFIT ON SALES - - - - 37 000 2 382 581 218 013 2 637 594 COMMISSION INCOME - - - - - 28 856 - 28 856 PROCESSING CHARGES - - - - - 472 808 - 474 808 TOTAL 657 889 1 755 880 3 886 000 3 046 508 2 958 860 5 399 420 4 707 471 9 783 555 APPLICATION JEWELLERY PURCHASE - - 25 500 - 151 185 90 917 1 370 277 1 637 879 WITHDRAWALS 657 889 1 055 380 913 000 412 650 567 500 955 035 2 157 790 6 719 255 INVESTMENT IN RD - - 55 000 64 008 64 010 64 010 - 247 038 TOTAL 657 889 1 055 380 993 500 476 658 782 695 1 109 962 3 528 067 8 604 151 CLOSING CASH BALANCE - 700 500 2 892 500 2 569 850 2 176 165 4 289 458 1 179 404 1 179 404 ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 7 10. WE HAVE CONSIDERED THE ISSUE AND ANALYSED THE FACTS . ASSESSEE HAS ADMITTED INCOMES ACCORDING TO THE STATEMENT EXT RACTED IN CIT(A)S ORDER UNDER SECTION 132(4). THE RELEVANT PORTION OF THE STATEMENT WAS REPRODUCED BY THE CIT(A) IN PARA 5.4 WHICH IS AS U NDER: - Q.3 FROM THE VARIOUS DETAILS AS WELL AS THE RECONC ILIATION STATEMENTS SUBMITTED BY YOU IT IS SEEN THAT DIAMON D JEWELLERY AMOUNTING TO SUM OF RS.14 52 718/- AS INVENTORIED H EREIN BELOW AS APPEARING AT THE FOLLOWING SERIAL NUMBERS OF THE VALUATION REPORTS OF DEPARTMENTAL VALUE DO NOT HAV E ANY SUPPORTING EVIDENCES .. .. SINCE THERE IS EXCESS JEWELLERY TO THE EXTENT O F RS.14 52 718/- IN RESPECT OF DIAMOND JEWELLERY AND AS NO EVIDENCES IN RESPECT OF THE AFORESAID DIAMOND JEWEL LERY HAVE BEEN FURNISHED BY YOU EXPLAIN WHY THE SAME SHOULD NOT BE TREATED AS ACQUIRED FROM YOUR UNDISCLOSED INCOME AN D SEIZED AS PER THE VARIOUS PROVISIONS OF INCOME-TAX ACT? ANS: SINCE I DO NOT HAVE ANY EVIDENCE AT PRESENT T O EXPLAIN THE ABOVE EXCESS JEWELLERY EXCEPT LAST TWO ITEMS VA LUED AT RS.26 000/- AND RS.22 795/- I WOULD LIKE TO DECLAR E THE DIAMOND JEWELLERY AMOUNTING TO RS.14 03 923/- AS HA VING BEEN ACQUIRED DURING THE CURRENT YEAR AND IT FORMS PART OF UNDISCLOSED INCOME DECLARED HEREIN BELOW AMOUNTING TO RS.97 83 555/- IN HANDS OF OUR FAMILY MEMBERS. IN R ESPECT OF LAST TWO ITEMS I.E. DIAMOND JEWELLERY BELONGING TO MR. KETAN SHAH AMOUNTING TO RS.22 795/- AND SMT. RENUKABEN SH AH AMOUNTING RS.26 000/- I HAVE SUBMITTED AFFIDAVIT IN SUPPORT OF THE SAME. I AM OFFERING THE ABOVE AMOUNT TO BUY PEACE OF MIND AND AVOID LITIGATION AND I UNDERSTAND THAT I W ILL GET IMMUNITY FROM CONCEALMENT PENALTY UNDER THE PROVISIONS FOR THE INCOME TAX ACT 1961 . (EMPHASIS SUPPLIED) Q. 4 DURING THE COURSE OF SEARCH ACTION LOOSE PAPER S FOUND AND SEIZED FROM THE RESIDENCE AND OFFICE PREMISES. KINDLY GIVE PAGE WISE EXPLANATION ALONGWITH SUPPORTING THEREOF. ANS: IN RESPECT OF THESE PAPERS I HAVE FILED DETAI LED EXPLANATION VIDE LETTER DATED 31-10-2006 ALONG WITH SUPPORTING EVIDENCE THEREOF. I RESPECT OF JOTTINGS/ENTRIES MEN TIONED ON THE LOOSE PAPERS WHICH I AM UNABLE TO EXPLAIN ALONGWITH SUPPORTING I HEREBY OFFER UNDISCLOSED INCOME OF RS.2 46 60 251/-. THE SAID INCOME INCLUDES SALE OF SCRAP ON DEMOLISHING OF FACTORY PREMISES OF LALLUBHAI AMICHA ND LTD. AMOUNTING TO RS.1 48 76 696/- WHICH WAS NOT ACCOUNT ED DUE TO VARIOUS REASONS BEYOND OUR CONTROL INCLUDING LABOUR PROBLEMS AND STAFF RETRENCHMENT. THE SALE OF SCRAP OF RS.1 4 8 76 696/- HAS NOW BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT AND FORMS PART ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 8 OF SALE PROCEEDS IN RESPECT OF FIXED ASSETS DISCLOS ED IN THE BALANCE SHEET FILED WITH THE DEPARTMENT GIVING YEAR WISE BREAK- UP OF THE INCOME. I REQUEST YOU TO KINDLY CONSIDER THIS AS MY DECLARATION UNDER SECTION 132(4) OF THE ACT AND I UNDERSTAND THAT IMMUNITY WOULD BE AVAILABLE FROM PENALTY IN RESPECT OF ABOVE AMOUNTS . (EMPHASIS SUPPLIED). 11. AS CAN BE SEEN FROM THE ABOVE STATEMENT ASSESSEE WA S FOUND WITH DIAMOND JEWELLERY AMOUNTING TO ` 14 03 923/- WHICH WAS DISCLOSED AS INCOME OF THE CURRENT YEAR. IN THE STA TEMENT DECLARING INCOMES ALSO THE TOTAL OF THE JEWELLERY PURCHASED W ERE SHOWN AT ` 16 37 879/- OUT OF WHICH ONLY ` 13 70 277/- WAS TAKEN TO A.Y. 2007- 08 WHICH IS NOT SUBJECT MATTER OF APPEAL. THE ONLY JEWELLERY SHOWN IN THE APPLICATION PART OF THE STATEMENT WAS ` 25 500/- IN A.Y. 2003-04 ` 51 185/- FOR A.Y. 2005-06 AND ` 90 917/- FOR A.Y. 2006-07. THE OTHER ASSETS FOUND WAS RECURRING DEPOSITS IN WHICH THE TO TAL ASSETS WERE ` 2 47 028/- BUT THESE WERE NOT PART OF STATEMENT U/ S 132(4). WITH ASSETS OF JEWELLERY THAT TOO PERTAINING TO THE YEAR OF SEARCH IT CANNOT BE STATED THAT ASSESSEE HAS DISCLOSED THE ENTIRE IN COME OF ` 62 25 500/- IN RELATION TO THE ASSETS FOUND IN THE COURSE OF SEARCH. 12. PROVISIONS OF SECTION 271(1)(C) AND EXPLANATION 5 A RE AS UNDER: - 271. (1) IF THE [ASSESSING] OFFICER OR THE [COMMISSION ER (APPEALS)] [OR THE COMMISSIONER] IN THE COURSE OF A NY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY P ERSON - (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF [SUCH INCOME OR] (D) .. (I) .. (II) .. (III) IN THE CASES REFERRED TO IN CLAUSE (C) [OR CL AUSE (D)] [IN ADDITION TO TAX IF ANY PAYABLE] BY HIM A SUM WHI CH 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 INC OME [OR FRINGE BENEFITS] OR THE FURNISHING OF INACCURAT E PARTICULARS OF SUCH INCOME [OR FRINGE BENEFITS. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 9 EXPLANATION 1. .. EXPLANATION 2. ... EXPLANATION 3. .. EXPLANATION 4. .. EXPLANATION 5.WHERE IN THE COURSE OF A [SEARCH INI TIATED UNDER SECTION 132 BEFORE THE 1ST DAY OF JUNE 2007] THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELL ERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLAN ATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASS ETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PAR T) HIS INCOME (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE TH E DATE OF THE SEARCH BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE OR WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE SUCH INCOM E HAS NOT BEEN DECLARED THEREIN ; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFT ER THE DATE OF THE SEARCH THEN NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH HE SHALL FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME [UNLESS (1) SUCH INCOME IS OR THE TRANSACTIONS RESULTING I N SUCH INCOME ARE RECORDED (I) IN A CASE FALLING UNDER CLAUSE (A) BEFORE THE DATE OF THE SEARCH ; AND (II) IN A CASE FALLING UNDER CLAUSE (B) ON OR BEFO RE SUCH DATE IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DI SCLOSED TO THE [CHIEF COMMISSIONER OR COMMISSIONER] BEFORE THE SAID DATE ; OR (2) HE IN THE COURSE OF THE SEARCH MAKES A STATEM ENT UNDER SUB-SECTION (4) OF SECTION 132 THAT ANY MONEY BULL ION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POS SESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INC OME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INC OME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SU B-SECTION (1) OF SECTION 139 AND ALSO SPECIFIES IN THE STATEMENT TH E MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 10 AS CAN BE SEEN FROM EXPLANATION 5 NOT WITHSTANDING THAT THE SAID INCOME WAS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH HE SHALL FOR THE PURPOSE S OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUCH-SECTION (1) OF SEC TION 271(1) BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXCEPTION TO THE ABOVE IS PROVIDED IN CLAUSE (1) AND (2). EXCEPTION (1) REFER S TO SUCH INCOME OR TRANSACTIONS RESULTING IN SUCH INCOME ARE RECORDED IN THE BOOKS OF ACCOUNT AND (2) THAT IN THE COURSE OF SEARCH ASSESS EE MAKES A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IF ANY IN RE SPECT OF SUCH INCOME. 13. EXPLANATIONS AND ARGUMENTS ARE BASED ON THE REASON THAT ASSETS FOUND DURING THE COURSE OF SEARCH AND THE AS SESSEE DISCLOSURE U/S 132(4) WAS COVERED BY CLAUSE (2) OF EXPLANATION 5 PROVIDING IMMUNITY FROM PENALTY. ON THE FACTS OF THE CASE EX CEPT THE DISCLOSURE OF JEWELLERY PURCHASED MOST OF THE DISCLOSURES PER TAIN TO THE WITHDRAWALS AND OTHER EXPENDITURE ON THE BASIS OF T HE LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH. IN FACT ASSESSEE S STATEMENT OF DECLARATION PLACED ON RECORD DO INDICATE THAT THE U NDISCLOSED SOURCES AND EXPENSES FOR THE PERIOD 01.04.2000 TO 12.09.200 6 WAS COMPUTED ON THE BASIS OF LOOSE PAPERS FOUND DURING THE COURS E OF SEARCH FROM THE OFFICE AND RESIDENCE ON 12.09.2006. THE STATEME NT EXTRACTED ABOVE CONSIDER THE INCOME WHICH WAS UNDISCLOSED AS IN T HE NATURE OF PEAK NEGATIVE PROFIT AND SALES COMMISSION INCOME PROCE SSING CHARGES ETC. AND ITS APPLICATION TOWARDS WITHDRAWALS AND THE SMA LL AMOUNT OF JEWELLERY PURCHASED AND INVESTMENTS IN RD IN THESE SIX YEARS. NO DOUBT SUBSTANTIAL ASSETS OF JEWELLERY WERE FOUND TO THE EXTENT OF ` 13 70 277/- ACCORDING TO THE STATEMENT IN A.Y. 2007 -08 FOR WHICH NO PENALTY WAS LEVIED/ LEVIABLE AS THE RETURN FOR THE YEAR WAS NOT DUE AND ASSESSEE GOT IMMUNITY VIDE CLAUSE (2) OF EXCEPTION TO EXPLANATION 5 OF SECTION 271(1)(C) PERTAINING TO ASSETS FOUND. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 11 14. EVEN THOUGH THE LEARNED COUNSEL MADE OUT A CASE WIT H THE ISSUE OF GRANTING IMMUNITY UNDER CLAUSE (2) OF EXCEPTION TO EXPLANATION 5 OF SECTION 271(1)(C) WE DID NOT FIND ANY ASSETS FOUND DURING THE SEARCH TO WHICH THIS IMMUNITY IS TO BE EXTENDED EXCEPT TO THE EXTENT OF THE ABOVE AMOUNTS MENTIONED OF JEWELLERY. AS ALREADY ST ATED SUBSTANTIAL DISCLOSURE IS WITH REFERENCE TO THE LOOSE PAPERS FO UND DURING THE COURSE OF SEARCH PERTAINING TO WITHDRAWAL AS CAN B E SEEN FROM THE ABOVE STATEMENT OF DISCLOSURE EXTRACTED. 15. THE A.O. WHILE LEVYING PENALTY HAS GIVEN THE FOLLO WING FINDINGS IN PARA 3(IV): - 3(IV) THE ASSESSEES CLAIM THAT HE HAD SATISFIED T HE CONDITIONS PRESCRIBED BY EXPLANATION 5 TO SECTION 2 71(1)(C) IS INCORRECT. IN THIS CONNECTION RELIANCE IS PLACED ON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SHERATON APPARELS VS. ACIT REPORTED IN 256 ITR 20 . THE HON'BLE HIGH COURT HAD HELD THAT AS PER EXISTING SUB CLAUSE 1 OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE I.T. ACT IF AT THE T IME OF SEARCH ASSETS WHICH WERE NOT RECORDED IN THE BOOKS OF ACCO UNTS ARE FOUND A TAX PAYER IS LIABLE TO PENALTY FOR CONCEAL MENT EVEN IF HE DECLARES THE FULL VALUE OF THOSE ASSETS AS HIS INCO ME IN THE RETURN FILED AFTER THE SEARCH. THE ASSESSEE HAD MAD E DECLARATION BASED ON UNEXPLAINED CASH UNEXPLAINED JEWELLERY AND VARIOUS NOTINGS MADE ON LOOSE PAPERS WHICH COUL D NOT BE PROPERLY EXPLAINED BY HIM FOUND DURING THE SEARCH O PERATION. AS SUCH IT CANNOT BE SAID THAT THE ASSESSEE HAS SAT ISFIED THE CONDITIONS PRESCRIBED BY EXPLANATION 5 TO SECTION 2 71(1)(C). 16. CONSIDERING THE FINDINGS OF THE A.O. IN PARA 3(IV) THAT ASSESSEE HAS NOT GIVEN ANY VALID REASONS FOR NOT DISCLOSING THE INCOME IN THE ORIGINAL RETURNS FILED UNDER SECTION 139(1) WE ARE OF THE OPINION THAT THE JUDGEMENT IN THE CASE OF SHERATON APPARELS VS. ACIT 256 ITR 20 OF THE HON'BLE JURISDICTIONAL HIGH COURT WOULD CLEARLY APPLY TO ASSESSEES CASE AS THESE TRANSACTIONS ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AND THERE IS NO PROPER EXPLANATION FOR DISCLOSING H IGHER INCOME CONSEQUENT TO SEARCH. IN ALL THE YEARS THE ASSESSEE HAS FILED REGULAR RETURNS OF INCOME DISCLOSING INCOMES UNDER SECTION 139(1) AND CONSEQUENT TO THE SEARCH HIGHER INCOMES AS STATED I N THE STATEMENT EXTRACTED EARLIER. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 12 17. EVEN THOUGH THE LEARNED COUNSEL MADE OUT A CASE THA T JUDGEMENT OF THE HON'BLE MADRAS HIGH COURT AND HON' BLE RAJASTHAN HIGH COURT FOLLOWED BY THE HON'BLE CALCUTTA HIGH CO URT REFERRED ABOVE ARE APPLICABLE TO THE FACTS OF THE CASE AND THE DEC ISION OF THE THIRD MEMBER WITH REFERENCE TO EXPLANATION 5 ARE NOT APPL ICABLE TO THE FACTS OF THE CASE WE ARE OF THE OPINION THAT IN VIEW OF THE ABSENCE OF ANY ASSETS FOUND DURING THE SEARCH FOR WHICH THE INCOME S DISCLOSED COULD BE CORRELATED IN THESE ASSESSMENT YEARS THERE IS N O NEED TO CONSIDER CLAUSE (2) OF THE EXCEPTION TO EXPLANATION-5 ON THE FACTS OF THE CASE. THEREFORE WITHOUT GOING INTO THE MERITS AND DEMERI TS OF THE ARGUMENTS OF THE LEARNED COUNSEL WE ARE OF THE OPI NION THAT CLAUSE (2) OF EXPLANATION 5 WITH REFERENCE TO THE ASSETS FOUND ARE NOT APPLICABLE TO ANY OF THESE YEARS. IT IS ALSO NOTICED THAT THE ASSESSEE DECLARED JEWELLERY AS INCOME OF CURRENT YEAR OF SEARCH U/S 1 32(4) AND NOT THAT OF EARLIER YEARS AND THERE WAS NO DECLARATION OF RE CURRING DEPOSITS IN THE STATEMENT AND ITS MODE OF EARNING THE SAME SO A S TO EXTEND THE IMMUNITY PROVIDED. THEREFORE THE ISSUE OF LEVY OF P ENALTY IS CONSIDERED YEAR-WISE WITH REFERENCE TO THE DISCLOSURES AND APP LICABLE CASE LAWS. 18. IN A.Y. 2001-02 THE ASSESSEE FILED RETURN OF INCOME ON 24-07-01 DISCLOSING AN INCOME OF RS.2 19 012. HE FILED RETUR N IN RESPONSE TO NOTICE U/S 153A DECLARING RS. 8 78 401 ON 13-03-07. THUS ASSESSEE HAD DISCLOSED AN AMOUNT OF ` 6 57 889/- WHICH INCLUDES PEAK NEGATIVE AND THERE ARE NO ASSETS FOUND PERTAINING TO THIS YE AR. THE ENTIRE INCOME PERTAINS TO WITHDRAWALS BASED ON LOOSE PAPER S AND THEREFORE THE ISSUE WITH REFERENCE TO CLAUSE (2) OF EXPLANATI ON 5 DOES NOT APPLY TO THIS YEAR. SINCE NO OTHER ARGUMENTS WERE RAISED WITH REFERENCE TO LEVY OF PENALTY OR ANY BONAFIDE EXPLANATION WAS GIV EN FOR NON- DISCLOSURE EARLIER WE CONFIRM THE FINDINGS OF THE CIT(A) THAT ASSESSEE HAS NOT GIVEN ANY BONAFIDE EXPLANATION WITH REFEREN CE TO THE UNDISCLOSED INCOMES AND ACCORDINGLY THE PENALTY LEV IED IN THAT YEAR OF ` 1 93 846/- AS CALCULATED BY THE A.O. IS UPHELD. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 13 19. IN A.Y. 2002-03 THE FACT IS THAT ASSESSEE HAS FILED ORIGINAL RETURN OF ` 1 76 289/- AND CONSEQUENT TO THE SEARCH FILED A RET URN IN RESPONSE TO NOTICE UNDER SECTION 153A OF ` 19 32 540/-. ASSESSEE DISCLOSED AN AMOUNT OF ` 17 55 880/- WHICH INCLUDES THE PEAK NEGATIVE. ASSE SSEE TOOK CREDIT FOR WITHDRAWALS OF ` 10 55 880/- IN THE YEAR AND CARRIED OVER CASH OF ` 7 00 000/- TO NEXT YEAR TO SET OFF AGAINST VARIOUS EXPENSES BUT THE DISCLOSED INCOME OF ` 17 55 880/- DOES NOT PERTAIN TO ANY ASSETS FOUND. ACCORDINGLY IMMUNITY AS PROVIDED IN CLAUSE (2) OF EXCEPTION TO EXPLANATION 5 DOES NOT APPLY. THEREFORE ON THE FIND INGS GIVEN BY THE A.O. THE PENALTY OF RS.5 21 475/- IS CONFIRMED. 20. IN A.Y. 2003-04 ASSESSEE FILED ORIGINAL RETURN ON 1 5.09.2003 DECLARING AN INCOME OF ` 1 89 801/-. CONSEQUENT TO SEARCH ON 13.03.2007 ASSESSEE FILED REVISED RETURN DECLARING AN INCOME OF ` 33 85 890/- OUT OF WHICH AN AMOUNT OF ` 31 85 500/- HAS BEEN DISCLOSED AS INCOME DURING THE YEAR. THE ONLY ASSET S RELATABLE TO THE ASSESSEE FOUND IN THE SEARCH ARE WITH REFERENCE TO THE JEWELLERY PURCHASED OF ` 25 500/- AND INVESTMENT IN RD OF ` 55 000/-. AS SEEN FROM THE STATEMENT PERTAINING TO JEWELLERY THE PUR CHASE OF JEWELLERY IN THIS YEAR MAY BE RELATED TO JEWELLERY BELONGING TO MR. KETAN SHAH AND SMT. RENUKABEN SHAH WHICH HAVE BEEN ADMITTED IN TH E STATEMENT. IT SEEMS THE ASSESSEE HAS OFFERED THE SAME IN ORDER TO BUY PEACE AND AVOID LITIGATION. EVEN THOUGH NEITHER THE STATEMEN T NOR THE SAID AFFIDAVIT ARE PLACED BEFORE US CONSIDERING THE AMO UNT OF ` 25 500/- DISCLOSED IN THIS YEAR WE ARE OF THE OPINION THE P ENALTY ON THIS AMOUNT CAN BE EXCLUDED. WITH REFERENCE TO THE RECURRING DE POSIT OF ` 55 000/- THERE IS NO EXPLANATION AND THE INCOME DISCLOSED O F `5 5 500/- HAS NO CORRELATION WITH REFERENCE TO THE ASSETS FOUND IN T HE SEARCH. THIS PERTAINS TO MOST OF THE ENTRIES IN THE LOOSE PAPER. MOREOVER THERE IS NO DISCLOSURE OF RDS IN STATEMENT U/S 132(4). THEREFO RE EXCEPTION CLAUSE (2) TO EXPLANATION 5 DOES NOT APPLY TO THIS YEAR. S INCE THERE IS NO OTHER EXPLANATION EXCEPT WITH REFERENCE TO EXPLANATION 5 PENALTY IS CONFIRMED ON THE FINDINGS OF THE A.O. AND CIT(A) S UBJECT TO REDUCTION OF PENALTY ON THE JEWELLERY OF ` 25 500/- DISCLOSED . ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 14 21. IN A.Y. 2004-05 ASSESSEE FILED RETURN ON 28.10.2004 DECLARING INCOME AT ` 1 55 720/-. CONSEQUENT TO SEARCH REVISED RETURN WAS FILED ON 13.03.2007 DECLARING THE INCOME AT ` 3 08 770/- ADMITTING AN INCOME OF ` 1 54 008/-. THERE IS NO JEWELLERY FOUND THAT WAS TA KEN CREDIT DURING THE YEAR AS SEEN IN THE STATEMENT OF DISCLOSURE. THEREFORE CLAUSE (2) OF EXPLANATION-5 DOES NOT APP LY TO THIS YEAR. ACCORDINGLY THE PENALTY LEVIED OF ` 45 916/- IS CONFIRMED ON THE BASIS OF FINDINGS OF AO AND CIT(A). 22. IN A.Y. 2005-06 ASSESSEE FILED ORIGINAL RETURN ON 3 1.08.2005 DECLARING AN INCOME OF ` 1 77 085/-. ASSESSEE FIELD REVISED RETURN IN RESPONSE TO NOTICE UNDER SECTION 153A DECLARING AN INCOME OF ` 5 65 140/- CONSISTING OF ADDITIONAL INCOME OF ` 3 89 010/-. ASSESSEE TOOK CREDIT OF JEWELLERY PURCHASED AT ` 1 51 095/- IN THIS YEAR. HOWEVER NO EXPLANATION WAS FILED NOT IT WAS INDICA TED WHETHER THIS JEWELLERY WAS PURCHASED BY VOUCHER OR BY ANY CORRES PONDING ASSET WAS FOUND. THE STATEMENT UNDER SECTION 132(4) INCLU DES DECLARATION OF DIAMOND JEWELLERY FOR WHICH NO EVIDENCES WERE AVAIL ABLE OF ` 14 03 923/- WHICH WAS MOSTLY STATED TO BE INCOME O F A.Y. 2006-07 IN THE STATEMENT U/S 132(4). THEREFORE AS STATED E ARLIER THE EXCEPTION PROVIDED IN CLAUSE (2) OF EXPLANATION 5 DO NOT APPL Y. THEREFORE THE PENALTY OF ` 1 18 744/- LEVIED UNDER SECTION 271(1)(C) IS CONFI RMED. 23. IN A.Y. 2006-07 ASSESSEE FILED ORIGINAL RETURN ON 2 7.07.2006 DECLARING AN INCOME OF ` 2 19 263/-. CONSEQUENT TO THE SEARCH AN INCOME OF ` 32 97 290/- WAS FILED IN RESPONSE TO NOTICE UNDER S ECTION 153A. AN AMOUNT OF ` 32 32 255/- WAS DISCLOSED CONSEQUENT TO THE SEARCH UNDER SECTION 132(4) AND AS SEEN FROM THE ST ATEMENT THIS MOSTLY PERTAINS TO PROFIT ON SALE AND PROCESSING CH ARGES. THIS DECLARATION OF INCOME DOES NOT PERTAIN TO ANY ASSET S FOUND DURING THE SEARCH. IN VIEW OF THIS WE ARE OF THE OPINION THAT DISCLOSURE OF ` 32 23 255/- CANNOT BE ATTRIBUTED TO ANY ASSETS FOUN D DURING THE COURSE OF SEARCH. IN VIEW OF THIS PENALTY OF ` 10 34 538/- IS TO BE CONFIRMED. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 15 24. IN THIS CASE ASSESSEE TRIED TO MAKE OUT A CASE THAT HIS CASE WILL NOT COME UNDER CLAUSE (1) OF EXCEPTION AS THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF M/S. SHERATON APPARELS VS. ACI T 256 ITR 20 HAS CONSIDERED EXPLANATION 5 WITH REFERENCE TO THE BOOK S OF ACCOUNT BUT UNDER CLAUSE (2) OF EXPLANATION-5 PERTAINING TO ASS ETS FOUND. AS STATED EARLIER THE DISCLOSURE OF SUBSTANTIAL INCOMES WAS N OT IN RELATION TO ASSETS FOUND IN THE SEARCH. SUBSTANTIAL UNDISCLOSED JEWELLERY FOUND WAS WITH REFERENCE TO A.Y. 2007-08 IN WHICH YEAR A SSESSEE HAS DISCLOSED INCOMES FOR WHICH PENALTIES WERE NOT INIT IATED. EVEN IF ONE WERE TO CONSIDER THAT ASSESSEE HAS TAKEN THE CREDIT OF JEWELLERY TO THE EXTENT OF THE INCOME EARNED IN EARLIER YEAR THIS I S IN VARIANCE WITH THE STATEMENT UNDER SECTION 132(4). IN THE STATEMENT UN DER SECTION 132(4) ASSESSEE ADMITTED UNDISCLOSED INCOME OF ` 14 03 923/- FOR THE YEAR AY 2007-08. FOR THE REASONS BEST KNOWN TO THE ASSESSEE THIS DISCLOSURE WAS NOT MADE IN THAT YEAR IN THE RETURN BUT TAKEN CREDIT FROM INCOMES DISCLOSED IN EARLIER YEARS TO SOME EXTENT. THIS IS AT VARIANCE TO THE STATEMENT GIVEN. IN THAT VIEW ALSO THE IMMUN ITY UNDER EXPLANATION 5 TO SECTION 271(1)(C) CANNOT BE EXTEND ED. HOWEVER AS STATED EARLIER SUBSTANTIAL INCOMES WERE DISCLOSED O N THE BASIS OF WITHDRAWALS TO THE EXTENT OF ` 67 19 244/- BASED ON THE LOOSE PAPERS WHICH CANNOT BE CORRELATED TO ANY ASSETS FOUND DURI NG THE SEARCH. EVEN THE ADMITTED INCOMES ARE ALSO SUBSTANTIALLY ON PROFIT OF SALES PROCESSING CHARGES AND INCOME THE SOURCE OF WHICH WERE NOT EXPLAINED IN THE STATEMENT U/S 132(4). THE 132(4) S TATEMENT INDICATES THAT THERE WAS SUBSTANTIAL AMOUNT OF ` 1 48 76 696/- PERTAINING TO SALE OF SCRAP AND DEMOLITION OF FACTORY PREMISES IN THE GROUP. HOWEVER CORRELATION OF THAT SALE OF SCRAP WITH ASSESSEES I NCOME HAS NOT BEEN EXPLAINED OR ANY DOCUMENTS WERE PLACED BEFORE US. I N THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY AND SINCE ASSESSEE REL IED ONLY ON CLAUSE (2) OF EXPLANATION 5 FOR CLAIMING IMMUNITY UNDER SE CTION 271(1)(C) WE ARE OF THE OPINION THAT ON THE FACTS OF THE CASE A SSESSEES CONTENTIONS CANNOT BE ACCEPTED. ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 16 25. IN THE CASE OF M/S. SHERATON APPARELS VS. ACIT 256 ITR 20 THE HON'BLE BOMBAY HIGH COURT CONSIDERED THE LEGISLATIV E INTENTION AS UNDER: - LEGISLATIVE INTENTION: PRIOR TO THE INSERTION OF EXPLANATION 5 TO SECTION 271 BY THE TAXATION LAWS (AMENDMENT) ACT 1984 WITH EFFECT FR OM OCTOBER 1 1984 AN ASSESSEE WHO IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELLERY ETC. RECOVERED DURING TH E COURSE OF SEARCH WAS ENTITLED TO EXPLAIN THAT SUCH ASSETS WE RE ACQUIRED BY HIM BY UTILISING HIS INCOME RELATING TO ANY PREV IUS YEAR WHETHER IT ENDED BEFORE THE DATE OF THE SEARCH OR I S TO END ON OR BEFORE THE DATE OF THE SEARCH. BY DOING SO THE ASS ESSEE COULD HAVE ESCAPED THE LIABILITY OF PENALTY UNDER SECTION 271(1)(C). IN ORDER TO PLUG THE AFORESAID LOOP HOLE EXPLANATI ON 5 HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT 1984 WITH EFFECT FROM OCTOBER 1 1984. THE NEWLY INSERTED EXP LANATION 5 ENACTS A DEEMING PROVISION AND HAS APPLICATION TO A SITUATION WHERE IN THE COURSE OF SEARCH UNDER SECTION 132 TH E ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEW ELLERY OR OTHER VALUABLE ARTICLES OR THINGS (ASSETS FOR SHO RT) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING WHOLLY OR IN PART HIS INCOME FOR ANY PRE VIOUS YEAR WHICH HAS ALREADY ENDED BEFORE THE DATE OF THE SEAR CH OR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH. IN SU CH A SITUATION NOTWITHSTANDING THE FACT THAT SUCH INCOME IS DECLAR ED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH HE FOR THE PURPOSES OF SECTION 271(1)(C) IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME EXCEPT IN CAS E WHERE SUCH INCOME OR THE TRANSACTION RESULTING IN SUCH INCOME IS RECORDED ON OR BEFORE THE DATE OF THE SEARCH IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE COMMISSIONER B EFORE THE DATE OF SEARCH IN OTHER WORDS AS PER EXISTING SUB-CLAUSE (1) OF E XPLANATION 5 TO SECTION 271(1)(C) OF THE ACT WITH WHICH WE ARE CONCERNED IF AT THE TIME OF SEARCH ASSETS WHICH WERE NOT RECORD ED IN THE BOOKS OF ACCOUNT ARE FOUND A TAXPAYER IS LIABLE TO PENALTY FOR CONCEALMENT EVEN IF HE DECLARES THE FULL VALUE OF T HOSE ASSETS AS HIS INCOME IN THE RETURN FILED AFTER THE SEARCH. TH IS PROVISION IS FOUND TO OPERATE EVEN IN CASES WHERE THE ASSESSEE H AS NO INTENTION TO FABRICATE ANY EVIDENCE AND HE INCLUDES IN HIS RETURN THE INCOME OUT OF WHICH SUCH ASSETS HAVE BEEN ACQUI RED. IT HAS ALSO BEEN PROVIDED THAT IF AN ASSESSEE IN SUCH CASE MAKES A STATEMENT DURING THE COURSE OF SEARCH ADMITTING THA T THE ASSETS FOUND AT HIS PREMISES OR UNDER HIS CONTROL HAD BEEN ACQUIRED ITA NO. 496 TO 501/MUM/2010 SHRI PARESH R. SHAH 17 OUT OF HIS INCOME WHICH HAVE NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF THE TIME PRESCRIBED IN CLAUSE (A) OR (B) OF SECTION 139(1) A ND SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED AND PAYS THE TAXES THAT ARE DUE THEREON NO PENALTY SHALL BE LEVIABLE. CONSIDERING THE ABOVE PRINCIPLE LAID DOWN BY THE HO N'BLE BOMBAY HIGH COURT THE FACTS REVEAL THAT THE PENALTY FOR CONCEA LMENT IS LEVIED UNDER SECTION 271(1)(C) WITH RESPECT TO UNDISCLOSED INCOM ES ARISING OUT OF VARIOUS NOTINGS IN THE LOOSE PAPERS. SINCE THESE EN TRIES ARE NOT RECORDED IN THE BOOKS OF ACCOUNT THE PRINCIPLES LAID DOWN B Y THE HON'BLE BOMBAY HIGH COURT IN M/S. SHERATON APPARELS VS. ACIT 256 I TR 20 RELIED UPON BY THE A.O. AND CIT(A) WILL SQUARELY APPLY TO THIS CASE. 26. ACCORDINGLY PENALTIES ARE CONFIRMED FULLY EXCEPT IN A.Y. 2003- 04 IN WHICH YEAR THE A.O. IS DIRECTED TO REDUCE TH E PENALTY CORRESPONDING TO THE JEWELLERY DISCLOSED AT ` 25 500/-. 27. IN THE RESULT ALL THE APPEALS EXCEPT APPEAL FOR A. Y. 2003-04 ARE DISMISSED. APPEAL FOR A.Y. 2003-04 IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2011. SD/- SD/- (B.R. MITTAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 28 TH SEPTEMBER 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXVI MUMBAI 4. THE CIT CENTRAL-1 MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.