DCIT, C.C.-I, Kolkata, Kolkata v. Sushma Devi Agarwal, Kolkata

ITA 876/KOL/2008 | 2004-2005
Pronouncement Date: 18-07-2011

Appeal Details

RSA Number 87623514 RSA 2008
Assessee PAN ACMPA2228A
Bench Kolkata
Appeal Number ITA 876/KOL/2008
Duration Of Justice 3 year(s) 2 month(s) 2 day(s)
Appellant DCIT, C.C.-I, Kolkata, Kolkata
Respondent Sushma Devi Agarwal, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 18-07-2011
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 18-07-2011
Assessment Year 2004-2005
Appeal Filed On 16-05-2008
Judgment Text
1 C IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : KOLKATA [ . . . . . . . . . ! ! ! ! . '# '# '# '# ) [BEFORE HONBLE SRI B.R. MITTAL J.M. & HONBLE SRI C.D. RAO A.M.] $ $ $ $ / I.T.A NO. 876/KOL/2008 %& '( / ASSESSMENT YEAR : 2004-2005 DY.COMMISSIONER OF INCOME-TAX -VS- SUSHMA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (ACMPA2228A ) [ APPELLANT ] [ RESPONDENT ] $ $ $ $ /I.T(SS)A.NO. 90 (KOL) OF 2008 %& '( / ASSESSMENT YEAR 2005-06 DY.COMMISSIONER OF INCOME-TAX -VS- SUSHMA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (ACMPA2228A ) [ APPELLANT ] [ RESPONDENT ] $ $ $ $ /I.T(SS)A.NO. 89 (KOL) OF 2008 %& '( / ASSESSMENT YEAR 2004-05 DY.COMMISSIONER OF INCOME-TAX -VS- MONIKA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (AAAPM8685P ) [ APPELLANT ] [ RESPONDENT ] ( . .. . ! ! ! !. .. . ) '# (C.D. RAO) ACCOUNTANT MEMBER : SINCE THERE WAS A DIFFERENCE OF OPINION BETWEEN T HE LD. MEMBERS CONSTITUTING C BENCH OF I.T.A.T. KOLKATA WITH REGARD TO THE FOLLO WING ISSUE THE MATTER WAS REFERRED TO THIRD MEMBER U/S.255(4) OF I.T. ACT 1961 FOR HIS O PINION :- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE ABO VE CASES/APPEALS THE LEARNED CIT(A) WAS JUSTIFIED IN CANCELLING THE PENALTY U/S . 271(1)(C) OF THE INCOME TAX ACT 1961 ? 2. HONBLE VICE-PRESIDENT (KZ) AS THIRD MEMBER IN THESE CASES AFTER HEARING THE PARTIES AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE CONCURRED WITH THE PROPOSED ORDER OF THE LD. A.M. VIDE ORDER DATED 2 3/6/2011 FOR ASSESSMENT YEARS 2004- 05 AND 2005-06 BY OBSERVING AS UNDER :- 2 16. CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE ARGUMENTS OF BOTH THE SIDES AND ON CAREFUL PERUSAL OF THE PROPOSED ORDERS OF BOTH THE LD. MEMBERS AND THE JUDICIAL PRONOUNCEMENTS REF ERRED TO ABOVE I AM OF THE OPINION THAT THE ASSESSEE HAS FAILED TO ESTABLISH T HAT DISCLOSURE OF ADDITIONAL INCOME IN THE REVISED RETURN BY WAY OF DECLARING G. P. RATE AT 15% AS AGAINST 6.93% SHOWN IN RETURN FILED U/S. 153A OF THE ACT WAS VOLU NTARY AND IN GOOD FAITH TO BUY PEACE WITH THE DEPARTMENT. ON THE OTHER HAND THE ASSESSEE FILED THE REVISED RETURN ONLY AFTER THE CONCEALMENT WAS DETECTED BY T HE AO AND HE CONFRONTED THE ASSESSEE WITH THE SAME. IN SUCH CIRCUMSTANCES PEN ALTY U/S. 271(1)(C) OF THE ACT OF RS.14 61 678/- FOR CONCEALMENT OF INCOME HAS RIGHTL Y BEEN LEVIED BY THE A.O. AND THE LD. C.I.T.(A) WAS NOT JUSTIFIED IN CANCELING TH E SAME. I THEREFORE CONCUR WITH THE CONCLUSION ARRIVED AT BY THE LD. A.M. IN UPHOLD ING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. THEREFORE IN ACCORDANCE WITH THE MAJORITY VIEW TH E APPEALS OF THE DEPARTMENT ARE ALLOWED. ) '* #+' +% - ). THIS ORDER IS PRONOUNCED IN OPEN COURT ON 18.07.2011. SD/- SD/- ( . . . . . . . . ) ( . .. . ! ! ! !. .. . ) '# (B.R.MITTAL) JUDICIAL MEMBER (C.D.RAO) ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATE: 18 -07-2010 '* 1 23 4'3'5- COPY OF THE ORDER FORWARDED TO : 1. 89 / THE APPELLANT : 1) SMT. SUSHMA DEVI AGARWAL 121 PARK ST. KOLKATA. 2) SMT.MONIKA DEVI AGARWAL 121 PARK ST. KOLKATA. 2 2;89 / THE RESPONDENT : DCIT CC-I KOLKATA. 3. *% () : THE CIT(A) CENTRAL-III KOLKATA. 4. *%/ THE CIT KOL- 5 . >- 2% / DR ITAT KOLKATA BENCHES KOLKATA 6 . GUARD FILE . ;3 2/ TRUE COPY '*%+/ BY ORDER (DKP) ? @ / DY/ASSTT. REGISTRAR . 3 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : KOLKATA [ BEFORE SHRI G.D.AGRAWAL V.P. AS THIRD MEMBER ] I.T.A.NO. 876 (KOL) OF 2008 ASSESSMENT YEAR 2004-05 DY.COMMISSIONER OF INCOME-TAX -VS- SUSHMA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (ACMPA2228A ) [ APPELLANT ] [ RESPONDENT ] I.T(SS)A.NO. 90 (KOL) OF 2008 ASSESSMENT YEAR 2005-06 DY.COMMISSIONER OF INCOME-TAX -VS- SUSHMA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (ACMPA2228A ) [ APPELLANT ] [ RESPONDENT ] I.T(SS)A.NO. 89 (KOL) OF 2008 ASSESSMENT YEAR 2004-05 DY.COMMISSIONER OF INCOME-TAX -VS- MONIKA DE VI AGARWAL CENTRAL CIRCLE-I KOLKATA. KOLKATA (AAAPM8685P ) [ APPELLANT ] [ RESPONDENT ] APPELLANT BY : SRI D.R. SINDHAL ( CIT-DR) RESPONDENT BY : SRI D.R. AGARWAL O R D E R SINCE THERE WAS A DIFFERENCE OF OPINION BETWEEN T HE LD. MEMBERS CONSTITUTING THE DIVISION BENCH OF I.T.A.T. KOLKATA IN RESPECT OF T HE AFORESAID APPEALS I WAS NOMINATED AS THIRD MEMBER BY THE HONBLE PRESIDENT I.T.A.T. U/S . 255(4) OF I.T. ACT 1961. AS THE FACTS AND CIRCUMSTANCES OF THESE CASES AND THE ISSU E INVOLVED THEREIN ARE IDENTICAL THESE APPEALS ARE DEALT WITH BY THIS CONSOLIDATED ORDER. THE COMMON QUESTION REFERRED TO ME READS AS UNDER :- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE ABO VE CASES/APPEALS THE LEARNED CIT(A) WAS JUSTIFIED IN CANCELING THE PENAL TY U/S 271(1)(C) OF THE INCOME TAX ACT 1961 ? 4 2. BOTH THE PARTIES MAINLY ARGUED ON APPEAL IN THE CASE OF SUSHMA DEVI AGARWAL [ITA NO. 876 (KOL)/2008 FOR A.Y. 2004-05] AND SUBMITTED THAT THE DECISION WHICH MAY ARRIVE IN THIS CASE SHALL ALSO BE FOLLOWED IN OTHER CASES. T HEREFORE APPEAL IN RESPECT OF SMT. SUSHMA DEVI AGARWAL FOR ASSESSMENT YEAR 2004-05 IS TAKEN FIRST. I.T.A.NO. 876 (KOL) OF 2008 (A.Y. 2004-05 ): 3. THE FACTS IN BRIEF ARE THAT A SEARCH & SEIZURE OPERATION U/S. 132 OF THE ACT WAS CONDUCTED ON 24/1/2005 IN RITWIKA GROUP OF CASES AN D THE ASSESSEE SMT. SUSHMA DEVI AGARWAL IS ONE OF THE ASSOCIATES OF THE GROUP AND PROPRIETOR OF M/S. RITWIKA CREATIONS. THE ASSESSEE DEALS IN WHOLESALE SAREE BUSINESS. DU RING THE SAID SEARCH ACTION SOME DOCUMENTS WERE FOUND AND IMPOUNDED. IN RESPONSE TO NOTICE ISSUED U/S. 153A OF THE ACT THE ASSESSEE FILED RETURN SHOWING INCOME OF RS.2 11 297/- WITHOUT DISCLOSING ANY UNACCOUNTED INCOME WHICH WAS ALSO THE TOTAL INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED U/S. 139(1) OF THE ACT. ON THE BASIS OF THE SEIZED DOCUMENTS THE A.O. MADE ENQUIRIES DURING ASSESSMENT PROCEEDINGS AND ISSUED SHOW-CAUSE NOTICES ON SEVERAL OCCASIONS TO THE ASSESSEE REQUIRING HER TO EXPLAIN INTER ALIA AS TO WHY PURCHASES MADE FROM ABOUT 20 PARTIES SHOULD NOT BE TREATED AS BOGU S THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED AND THE EXPENSES RECORDED IN THE SEIZED DO CUMENTS SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE. THE ASSESSEE FILED REVISE D RETURN DECLARING A GROSS PROFIT @ 15% AS AGAINST 6.93% DECLARED IN THE RETURN FILED U /S. 153A OF THE ACT. THE A.O. OBSERVED THAT EVEN THOUGH THE ASSESSEE CLAIMED TO H AVE MADE PURCHASES FROM ABOUT 20 PARTIES AND CHEQUES WERE SHOWN TO HAVE BEEN ISSUED IN THE NAMES OF RESPECTIVE PARTIES IN THE BOOKS BUT ULTIMATELY ALL THE CHEQUES OF THE VA LUE OF ABOUT 3.17 CRORES WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEES HUSBAND SRI SURESH KR. AGARWAL. THE ASSESSEE STATED THAT SHE USED TO ISSUE CHEQUES FOR PAYMENTS TO BE MADE TO KARIGARS AND THE CHEQUES WERE HANDED OVER TO HER HUSBAND FOR DEPOSIT ING IN HIS BANK ACCOUNT AND MAKING PAYMENTS TO THE KARIGARS BY WITHDRAWING THE MONEY F ROM HIS BANK ACCOUNT. THE A.O. COMPLETED THE ASSESSMENT BY TAKING GROSS PROFIT @ 1 5% DECLARED BY THE ASSESSEE IN HER REVISED RETURN AND INITIATED PENALTY PROCEEDING U/S . 271(1)(C) OF THE ACT. DURING THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE STATED THAT AFTER SHE RECEIVED PHOTO COPIES 5 OF SEIZED DOCUMENTS REVISED RETURN DECLARING ADDIT IONAL INCOME WAS FILED TO BUY PEACE AND TO AVOID LITIGATION. THE A.O. HOWEVER DID NOT AC CEPT THE ABOVE EXPLANATION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS SURREND ERED THE HIGHER INCOME IN THE REVISED RETURN ONLY AFTER THE INVESTIGATION WAS CARRIED OUT BY THE DEPARTMENT AND AFTER THE ASSESSEE WAS CONFRONTED WITH THE SAME. HE THEREFOR E LEVIED PENALTY OF RS.14 61 678/- U/S. 271(1)(C) OF THE ACT WHICH WAS EQUAL TO TAX S OUGHT TO BE EVADED BY THE ASSESSEE ON THE UNDISCLOSED INCOME. 4. BEING AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. C.I.T.(A) AGITATING LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AND THE L D. C.I.T.(A) DELETED THE PENALTY. . BEING DISSATISFIED WITH THE SAID ORDER OF LD. C.I.T.(A) THE DEPARTMENT CAME IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS :- I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN CANCELING THE ORDER OF PENALTY U/S. 27 1(1) (C) OF THE I.T. ACT 1961 DATED 02.04.2007. II) WHETHER ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE RATIO OF THE JUDGMENT O F THE HONBLE SUPREME COURT IN THE CASE OF CIT -VS- SURESH CHANDRA MITTAL [2001] 2 51 ITR 9 (SC) WHICH IS DISTINGUISHABLE ON FACTS FROM THE INSTANT CASE. III) WHETHER ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE THE LD. CIT(A) HAD CONSIDERED THAT THE ASSESSEE WHO HAD FILED THE ORI GINAL RETURN IN RESPONSE TO NOTICE U/S 153A DECLARING INCOME OF RS.2 11 297/- WAS COMPELLED TO FILE A REVISED RETURN OF RS. 50 66 896/- IN THE FACE OF IN DEPTH I NVESTIGATION BY THE ASSESSING OFFICER AND FURTHER EVIDENCE AGAINST THE ASSESSEE A ND THE DISCLOSURE WAS NOT AN ACT OF VOLUNTARY SURRENDER BY THE ASSESSEE IN GOOD FAITH. 5. AFTER HEARING THE PARTIES AND CONSIDERING THE E VIDENCE ON RECORD THE LD. J.M. IN HIS PROPOSED ORDER CONFIRMED THE ORDER OF LD. C.I.T .(A) DELETING THE PENALTY OF RS.14 61 678/- LEVIED U/S. 271(1)(C) OF THE ACT BY HOLDING AS UNDER :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT DURING THE COURSE OF SEARCH CER TAIN INCRIMINATING PAPERS WERE RECOVERED WHICH EXPLAINED THAT THE ASSESSEE MADE PA YMENTS TO THE PURCHASERS/ KARIGARS THROUGH HER HUSBAND BECAUSE THE CHEQUES WE RE DEPOSITED IN THE ACCOUNT OF THE HUSBAND OF THE ASSESSEE AND FROM WHERE PAYME NTS WERE MADE TO THE KARIGARS. THE SALES AND PURCHASES SHOWN BY THE ASSE SSEE IN THE BOOKS OF ACCOUNT ARE NOT DISPUTED BY THE A.O. THE A.O. ACCEPTED THE REVISED RETURN AS IT IS ON ENHANCED GP RATE SHOWN BY THE ASSESSEE. DURING THE COURSE OF SEARCH THE SEIZED 6 PAPERS RELATING TO THIS ISSUE WERE NOT CONFRONTED A ND THE ISSUE WAS ALSO NOT PROPERLY EXPLAINED. COPIES OF THE ORDER SHEETS ARE FILED IN THE PAPER BOOK TO SHOW THAT ON 7.12.06 THE SEIZED DOCUMENTS ON THE ABOVE ISSUE ON WHICH PENALTY WAS IMPOSED WERE SUPPLIED TO THE ASSESSEE. THE A.O. REC ORDED IN THIS ORDER SHEET THAT THE ASSESSEE EXPLAINED THAT ON THE BASIS OF THE SEI ZED DOCUMENTS THE ASSESSEE WOULD FILE REVISED RETURN OF INCOME SHOWING HIGHER GROSS PROFIT. THE ORDER SHEET DATED 15 TH DECEMBER 2006 ALSO SHOWS THAT THE A.O. RECORDED IN THE ORDER SHEET THAT THE XEROX COPIES OF THE SEIZED DOCUMENTS ARE S UPPLIED TO THE ASSESSEE ON THE AFORESAID ISSUE. THUS THE REPLY OF THE ASSESSEE IS CLEARLY SUPPORTED BY THE ORDER SHEETS OF THE A.O. THAT THE PHOTO COPIES OF THE SEI ZED DOCUMENTS ON THE ABOVE ISSUES WERE MADE AVAILABLE TO THE ASSESSEE ONLY IN DECEMBER 2006. THE A.O. IN THE LETTER DATED 13 TH DECEMBER 2006 ON THE ABOVE ISSUE DIRECTED THE ASS ESSEE AS TO WHY BOOK RESULTS OF THE ASSESSEE SHOULD NOT BE REJE CTED AND WHY THE SAME PURCHASES SHOULD NOT BE TREATED AS UNDISCLOSED EXPE NDITURE OF THE ASSESSEE. THE LEARNED CIT(A) SPECIFICALLY NOTED IN THE IMPUGNED O RDER THAT SEIZED DOCUMENTS RC 1 TO RC 10 AND RI/1 TO RI/21 ARE RELATED TO THE TRANS ACTIONS IN QUESTION. IT WOULD THEREFORE PROVE THAT COMPLETE SEIZED PAPERS WERE N OT SUPPLIED TO THE ASSESSEE AT THE TIME OF ISSUING NOTICE U/S 153A OF THE INCOME T AX ACT. THE ORDER SHEETS RECORDED BY THE A.O. ALSO SUPPORT THE CONTENTION OF THE ASSESSEE THAT COMPLETE SEIZED DOCUMENTS ON THIS ISSUE OF PAYMENT TO THE KA RIGARS THROUGH HUSBAND OF THE ASSESSEE WERE SUPPLIED TO THE ASSESSEE ONLY IN DECE MBER 2006. THEREFORE THERE WAS NO OCCASION FOR THE ASSESSEE TO MAKE SURRENDER THE ADDITIONAL INCOME AT THE TIME OF FILING ORIGINAL RETURN OF INCOME. AT THE MO ST IT MAY HE TAKEN THAT IN CASE THE ASSESSEE WOULD NOT HAVE SURRENDERED THE ADDITIO NAL INCOME BY ENHANCING GROSS PROFIT RATE THE A.O. WOULD HAVE REJECTED BOOK RESU LTS OF THE ASSESSEE AND ENHANCED THE INCOME BY ENHANCING THE GROSS PROFIT O F THE ASSESSEE. THERE WOULD NOT HAVE BEEN ANY CONCEALMENT OF INCOME OR FURNISHI NG INACCURATE PARTICULARS IN SUCH A SITUATION BECAUSE IT IS SETTLED LAW THAT ON MERE REVISION OF INCOME TO A HIGHER FIGURE BY A.O. DID NOT AUTOMATICALLY WARRANT AN INFERENCE OF CONCEALMENT OF INCOME. ON ESTIMATED INCOME ALSO NO PENALTY WOULD B E JUSTIFIED. WE ARC FORTIFIED IN OUR VIEW BY THE JUDGMENTS OF THE HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASES OF DHILLO RICE MILLS (256 ITR 447) AND HARI GOPAL S INGH (258 ITR 85). WE MAY ALSO MENTION THAT THE HONBLE SUPREME COURT IN THE RECEN T DECISION IN THE CASE OF M/S RAJASTHAN SPINNING AND WEAVING MILLS (2009) TIOL 63 HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. NOW COMING TO THE FACTS O F THE CASE IT IS CLEAR THAT PENALTY IS IMPOSED ON SURRENDER OF ADDITIONAL INCOM E BY ENHANCING GROSS PROFIT RATE BECAUSE PAYMENTS TO THE KARIGARS FOR PURCHASES ARE MADE THROUGH ACCOUNTS OF THE HUSBAND OF THE ASSESSEE. ADMITTEDLY THE A.O. DID N OT MAKE ANY ADDITION ON ACCOUNT OF BOGUS PURCHASES. EVEN OTHERWISE THE A.O. COULD N OT HAVE MADE ANY ADDITION ON ACCOUNT OF BOGUS PURCHASES BECAUSE THERE COULD NOT BE ANY SALES WITHOUT PURCHASES. THE FACTS AND CIRCUMSTANCES NOTED ABOVE CLEARLY PRO VE THAT THE ASSESSEE AT THE EARLIEST OPPORTUNITY ON BEING SUPPLIED THE COMPLET E SEIZED PAPERS MADE THE SURRENDER OF ADDITIONAL INCOME. THEREFORE IT WAS N OT A FIT CASE FOR HOLDING CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS IN THE RETURN OF INCOME. THUS THE FINDING OF FACT RECORDED BY THE C1T(A) DOE S NOT SUFFER FROM ANY 7 PERVERSITY . THE DECISIONS RELIED UPON BY THE LEARN ED D.R. ARE CLEARLY DISTINGUISHABLE ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT APPEA L. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). 6. THE LD. A.M. DISAGREED WITH THE SAID VIEW OF LD . J.M. AND PROPOSED A SEPARATE ORDER. THE LD. A.M. HAS EXTENSIVELY DISCUSSED THE S UBMISSIONS MADE BY THE LD. DEPARTMENTAL REPRESENTATIVE AND CASE LAWS RELIED UP ON BY HIM AS ALSO THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AT PAGES 3 TO 10 OF HIS PROPOSED ORDER. AFTER HEARING THE PARTIES AND TAKING INTO CONSIDERATIONS THE FOLLOWIN G DECISIONS VIZ. - SAMUNDER BHAN SADH VS. CIT [188 ITR 638 (ALL.)] VIDYA SAGAR OSWAL VS. CIT [108 ITR 861 (P&H)] DCIT VS. GLAMOUR RESTAURANT [80 TTJ 763 (MUM)] ACIT VS. KIRIT DAHYABHAI PATEL [121 ITD 159 (AHD- TM)] THE LD. A.M. HELD THAT LEVY OF PENALTY UNDER SECTON 271(1)(C) WAS JUSTIFIED. HE THEREFORE IN HIS PROPOSED ORDER HAS SET ASIDE THE ORDER OF LD . C.I.T.(A) AND RESTORED THAT OF THE A.O. WITH THE FOLLOWING OBSERVATIONS :- AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD IT IS OBSERVED THAT THE ASSESS EE WAS SUBJECTED TO SEARCH UNDER SECTION 132 OF THE I.T. ACT ON 24.01.2005 AND AFTER FILING THE RETURN IN RESPONSE TO NOTICE UNDER SECTION 153A(1)(A) OF THE I.T.ACT. WHEN THE AO HAS CONFRONTED THE ASSESSEE THE OUTCOME OF THE ENQUIRI ES MADE BY HIM ON THE BASIS OF THE SEIZED DOCUMENT THE ASSESSEE HAS FILED A RE VISED RETURN AFTER A GAP OF MORE THAN ONE YEAR AND. OFFERED THE G.P. RATE AT 15 % AS AGAINST 6.93%. IN MY CONSIDERED OPINION THE LD. DR HAS CONTRADICTED THE VARIOUS FINDINGS GIVEN BY THE LD. CIT(A) WHILE DELETING THE PENALTY BASED ON TH E VARIOUS JUDICIAL PRONOUNCEMENTS WHICH ARE REFERRED TO IN PRECEDING P ARA NOS. 7.1 TO 7.17. 9.1 IN MY OPINION THERE IS NO RULE THAT PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) CANNOT BE IMPOSED WHERE INCOME IS ESTIMAT ED. THE LEVY OF PENALTY UNDER SECTION 271(1)(C) DEPENDS ON THE FACTS AND CIRCUMST ANCES OF EACH CASE. IF THE CONCEALMENT OF INCOME IS APPARENT FROM THE RECORD THERE IS NO REASON WHY THE PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED F OR CONCEALMENT OF INCOME. RELIANCE HAS BEEN PLACED ON (I) 188 ITR 638 OF THE HONBLE ALLAHABAD HIGH COURT AND (II) 108 ITR 861 OF THE HONBLE PUNJAB & HARYAN A HIGH COURT. 7. AT THE TIME OF HEARING BEFORE ME THE LD. DEPAR TMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER PROPOSED BY LD. J.M. IS NOT A SPEAKI NG ORDER. HE FURTHER SUBMITTED THAT THE 8 REVISED RETURN WAS FILED ONLY AFTER THE A.O. ISSUED SHOW-CAUSE NOTICE WHEN THE ASSESSEE WAS CAUGHT AND CONFRONTED WITH THE SEIZED DOCUMENTS . THAT ORIGINAL RETURN U/S. 139(1) WAS FILED ON 11/8/2004 SHOWING TOTAL INCOME OF RS.2 11 297/-. THAT EVEN AFTER RECEIPT OF NOTICE U/S. 153A OF THE ACT AND SEIZED MATERIAL SUP PLIED TO HER IN DECEMBER 2005 THE ASSESSEE DID NOT DISCLOSE HER UNACCOUNTED INCOME AN D FILED RETURN U/S. 153A OF THE ACT ON 05/5/2006 SHOWING THE INCOME WHICH WAS ORIGINALLY S HOWN BY HER IN 139(1) RETURN. REFERRING TO SEVERAL NOTICES ISSUED BY THE A.O. IN PARTICULAR NOTICE DATED 13/12/2006 COPIES OF WHICH ARE PLACED IN THE DEPARTMENTS PAPE R BOOK THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE VIDE HER REPLY DATED 20/12/2006 IN RESPONSE TO NOTICE DATED 13/12/2006 HAS SURRENDERED HIGHER R ATE OF GROSS PROFIT @ 15% AS AGAINST 6.93% DECLARED IN THE RETURN FILED U/S. 153A OF THE ACT AND ACCORDINGLY FILED REVISED RETURN ON 22/12/2006. FURTHER THERE WAS NO SPECIF IC DECLARATION OF UNDISCLOSED INCOME AND SOURCE THEREOF IN THE STATEMENT RECORDED U/S. 1 32(4) OF THE ACT FROM THE HUSBAND OF THE ASSESSEE. REFERRING TO PAGE 5 PARA 7.3 OF LD. A.M.S ORDER THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE WAS CLEAR PROOF OF NON-EXISTENCE OF PARTIES AND CONCEALMENT OF INCOME BY WILLFULLY INFLATING THE EX PENSES DETECTED DUE TO SEARCH OPERATION. HE SUBMITTED THAT THE BURDEN LIES ON TH E ASSESSEE TO ESTABLISH THAT THE ADDITIONAL INCOME THAT HAD NOT BEEN DISCLOSED WAS N OT DUE TO FRAUD OR NEGLECT AND HE RELIED ON THE DECISIONS IN THE CASES OF CIT VS. C. ANANTHAN CHETTIAR [273 ITR 401 (MAD)] AND KAMAL CHAND JAIN VS. ITO [277 ITR 429 (DEL)]. HE FURTHER SUBMITTED THAT THE LD. J.M. IN HIS PROPOSED ORDER DID NOT CONSIDER THE DEC ISIONS RELIED UPON BY THE DEPARTMENT IN PROPER PERSPECTIVE; AND THE DECISIONS CITED BY LD. J.M. ARE DISTINGUISHABLE ON FACTS. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO PAGES 2 8 TO 30 OF THE DEPARTMENTS PAPER BOOK WHICH ARE COPIES OF STATEMENT RECORDED U/S. 1 32(4) OF THE ACT FROM SRI SURESH KR. AGARWAL HUSBAND OF THE ASSESSEE DURING THE COURSE OF SEARCH OPERATION AND REFERRING TO QUESTIONS NO. 5 & 11 AND ANSWERS THEREOF HE POINTE D OUT THAT SRI SURESH KR. AGARWAL HAS ADMITTED THAT THE ENTRIES IN THE BOOKS OF ACCOUNT M ARKED RI/20 ARE UNDISCLOSED IN NATURE AND HE WILL BE FILING A DISCLOSURE PETITION COVERIN G ALL UNACCOUNTED SALES AND PURCHASES. HOWEVER NO SUCH DISCLOSURE WAS MADE. IN THIS CONN ECTION THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISIONS IN THE CASES OF CIT VS. HANDLOOM EMPORIUM [282 9 ITR 431 (ALL.)] AND CIT VS. MAHABIT PRASAD BAJAJ [2 98 ITR 109 (JHARKHAND)]. HE THEREFORE SUBMITTED THAT ON THE ABOVE FACTS AND CI RCUMSTANCES OF THE CASE AND SETTLED POSITION IN LAW THE LD. A.M. HAS RIGHTLY HELD THAT PENALTY U/S.271(1)(C) WAS RIGHTLY LEVIED BY THE A.O. HIS ORDER SHOULD THEREFORE BE UPHELD. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OT HER HAND SUPPORTED THE ORDER PROPOSED BY LD. J.M. HE FURTHER SUBMITTED THAT THE ASSESSEE IS THE WHOLE SELLER OF FASHION SAREE. JOB WORK ON SUCH SAREES IS DONE FROM KARIGAR S AND DIRECT PURCHASES ARE ALSO MADE FROM KARIGARS. THE ASSESSEES ACCOUNTS ARE DULY AU DITED AND AUDIT REPORT WAS FILED ALONG WITH THE ORIGINAL RETURN FILED U/S. 139(1) OF THE A CT. THE A.O. DID NOT DISPUTE SALES. HIS ONLY SUSPICION WAS ABOUT PURCHASES FROM PARTIES/KAR IGARS. THE LEARNED COUNSEL SUBMITTED THAT KARIGARS ARE UNORGANIZED WORKING PERSONS WHO M OSTLY RESIDE IN REMOTE VILLAGE AND THEY DO NOT ACCEPT CHEQUE. THEREFORE AS PER ARRAN GEMENT MADE WITH HER HUSBAND SURESH KR. AGARWAL THE ASSESSEE USED TO ISSUE CHEQ UES IN THE NAME OF SHRADHA FASHION WHICH IS THE PROPRIETARY CONCERN OF HER HUSBAND. I N THE BOOKS OF ACCOUNT THE ASSESSEE DEBITED THE PAYMENTS IN THE NAME OF THE RESPECTIVE PARTIES AND NOT SHRADHA FASHION. REFERRING TO PAGES- 8 & 9 OF ASSESSEES PAPER BOOK WHICH IS A COPY OF A.O.S NOTICE U/S. 142(1) DATED 13/12/2006 THE LEARNED COUNSEL SUBMIT TED THAT THE SHOW-CAUSE NOTICE DOES NOT RECORD EVEN A PRIMA FACIE BELIEF OF CONCEALMENT AND EVEN IF THE A.O. HAD AT ALL PRIMA FACIE BELIEF ABOUT CONCEALMENT OF INCOME IT WOULD NOT MEAN THAT CONCEALMENT HAS BEEN DETECTED. IN THIS CONNECTION THE LD. COUNSEL RELIED ON C.B.D.T. CIRCULAR NO. 451 DATED 17/2/1986. FURTHER REFERRING TO PAGES 17 & 18 OF DEPARTMENTS PAPER BOOK WHICH IS COPY OF ASSESSEES REPLY IN RESPONSE TO THE AFORESAID NO TICE DATED 13/12/2006 THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS EXPLAINED T HE MODUS OPERANDI FOR HANDING OVER THE CHEQUES TO HER HUSBAND FOR ONWARD PAYMENTS TO K ARIGARS BY WITHDRAWING CASH FROM HIS BANK ACCOUNT AND THIS WOULD BE EVIDENT THAT THERE W AS NO CONCEALMENT IN SUBSTANCE. FURTHER INCOME DISCLOSED IN THE REVISED RETURN HAS BEEN ACCEPTED. THE GROSS PROFIT SHOWN AT 15% WAS NEVER THE PROFIT OF THE ASSESSEE I N EARLIER YEARS AND THE HIGHER G.P. WAS SHOWN IN THE REVISED RETURN TO BUY PEACE AND AVOID LITIGATION. HE THEREFORE SUBMITTED THAT EXPLANATION 1 OF SEC. 271(1)(C) OF THE ACT SHA LL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE ASSESSEES EXPLANATION WAS NOT FO UND TO BE FALSE. THE LD. COUNSEL 10 FURTHER SUBMITTED THAT THE ASSESSEE ON GETTING COPI ES OF SEIZED DOCUMENTS FILED REVISED RETURN SHOWING HIGHER INCOME AND AS PER SEC. 139(5) OF THE ACT REVISED RETURN CAN BE FURNISHED AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASS ESSMENT WHICHEVER IS EARLIER. HE THEREFORE SUBMITTED THAT ON THE FACTS AND CIRCUMST ANCES OF THE CASE CONDITIONS CONTAINED IN SEC. 271(1)(C) OF THE ACT FOR LEVYING PENALTY ARE NOT SATISFIED IN THE CASE OF THE ASSESSEE AND THE LD. J.M. HAS RIGHTLY DELETED T HE PENALTY WHICH SHOULD BE UPHELD AND PROPOSED ORDER OF LD. A.M. BE QUASHED. 9. IN HIS REJOINDER THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THERE WAS NO DISPUTE TO THE FACT THAT CONCEALMENT WAS ALREADY DE TECTED AND ONLY QUANTIFICATION OF THE EXTENT OF CONCEALMENT WAS PENDING. IN THIS CONNECT ION HE HAS REFERRED TO PARAS 1 & 2 OF SHOW-CAUSE NOTICE DATED 13/12/2006 OF THE A.O. PLAC ED AT PAGE-8 OF THE ASSESSEES PAPER BOOK WHEREBY THE ASSESSEE WAS ASKED TO EXPLAIN AS T O WHY PURCHASES SHOULD NOT BE TREATED AS BOGUS AND BOOKS OF ACCOUNT BE NOT REJECT ED. THE A.O. ALSO EXPRESSED HIS VIEW THAT RC/1 TO RC/10 REPRESENTS UNDISCLOSED EXPENDITU RE OF THE ASSESSEE. HE FURTHER SUBMITTED THAT IF THE TAX AUDIT WOULD HAVE REFLECTE D THE CORRECT PICTURE OF THE AFFAIRS OF THE ASSESSEE THERE WOULD HAVE BEEN NO NEED TO R EVISE GROSS PROFIT WHICH THE ASSESSEE DID IN HER REVISED RETURN AFTER DETECTION OF CONCEA LMENT BY THE A.O. 10. I HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. I HAVE ALSO CAREFULLY GONE THROUGH THE DISSENTING ORDERS PROPOS ED BY THE LD. MEMBERS. THE UNDISPUTED FACTS OF THE CASE ARE THAT SEARCH OPERAT ION U/S. 132 OF THE ACT TOOK PLACE IN THE PREMISES OF THE ASSESSEE ON 24/1/2005. AS PER ASSESSEES LETTER DATED 16/5/2006 ADDRESSED TO THE A.O. IT IS SEEN THAT THE ASSESSEE HAS STATED THAT SHE WAS SUPPLIED WITH PHOTO COPIES OF SEIZED DOCUMENTS IN DECEMBER 2005. IN RESPONSE TO NOTICE U/S. 153A OF THE ACT DATED 11.11.2005 THE ASSESSEE FILED HER RE TURN ON 05/5/2006 DISCLOSING INCOME AT RS.2 11 297/- WHICH WAS THE TOTAL INCOME DECLARED B Y THE ASSESSEE IN THE RETURN FILED U/S.139(1). THEREAFTER ON THE BASIS OF SEIZED DOC UMENTS THE A.O. ISSUED SEVERAL SHOW- CAUSE NOTICE TO THE ASSESSEE COPIES OF WHICH ARE P LACED IN THE DEPARTMENTS PAPER BOOK SEEKING HER EXPLANATION ON THE PURCHASES MADE FROM ABOUT 20 PARTIES AND THE EXPENDITURE FOUND RECORDED IN THE SEIZED DOCUMENTS. I OBSERVE FROM THE ORDER SHEET ENTRY DATED 11 07/12/2006 THAT LD. A/R OF THE ASSESSEE APPEARED BE FORE THE A.O. AND ASKED FOR XEROX COPIES OF SOME SEIZED DOCUMENTS SO AS TO FILE REVIS ED RETURN SHOWING SUITABLE GROSS PROFIT WHICH WOULD BE MUCH HIGHER THAN THE DISCLOSED G.P. WHICH WAS HANDED OVER TO HIM ON 15/12/2006. THE REVISED RETURN SHOWING G.P. AT 15% AS AGAINST 6.93% DECLARED IN THE RETURN FILED U/S. 153A WAS FILED ON 22/12/2006. IT WAS ALSO STATED BY THE ASSESSEE BEFORE THE A.O. THAT AS PER ARRANGEMENT WITH HER HU SBAND SHE USED TO ISSUE CHEQUES TO HER HUSBAND FOR PAYMENTS TO BE MADE TO KARIGARS WH O USED TO DEPOSIT THOSE CHEQUES TO HIS BANK ACCOUNT AND IN TURN MADE PAYMENTS TO KARIG ARS IN CASH. ACCORDING TO THE A.O. THE ASSESSEE DID NOT DISCLOSE THE HIGHER GROSS PROFIT I N GOOD FAITH BUT SHE HAS SURRENDERED THE HIGHER INCOME IN THE REVISED RETURN ONLY AFTER THE INVESTIGATION WAS CARRIED OUT BY THE DEPARTMENT AND AFTER SHE WAS CONFRONTED WITH THE SA ME. THE A.O. HOWEVER COMPLETED THE ASSESSMENT ON THE BASIS OF REVISED RETURN DECLA RING HIGHER GROSS PROFIT AT 15%. HE ALSO FOUND THE CASE OF THE ASSESSEE TO BE A GOOD CA SE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. PENALTY OF RS.14 61 678/- WAS THUS LEVIED BY THE A.O. U/S. 271(1)(C) OF THE ACT WHICH WAS CANCELLED BY THE LD. C.I.T.(A). 11. ON THE AFORESAID ADMITTED FACTS IT IS EVIDENT THAT SOME INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED DURING SEARCH OPERATION CO NDUCTED U/S. 132 OF THE ACT AT THE ASSESSEES PREMISES. THE ASSESSEE FILED HER RETURN OF INCOME U/S. 139(1) OF THE ACT BEFORE THE SEARCH TOOK PLACE DECLARING INCOME OF RS .2 11 297/- AND GROSS PROFIT AT 6.93%. XEROX COPIES OF SEIZED DOCUMENTS WERE MADE AVAILABL E TO THE ASSESSEE IN DECEMBER 2005. IN RESPONSE TO NOTICE ISSUED U/S. 153A OF THE ACT THE ASSESSEE FILED RETURN ON 5/5/2006 SHOWING INCOME OF RS.2 11 297/- WITHOUT DISCLOSING ANY UNACCOUNTED INCOME. I FURTHER OBSERVE THAT THERE WAS A GAP OF ABOUT 12 MONTHS BET WEEN SUPPLY OF XEROX COPIES OF SEIZED DOCUMENTS IN DECEMBER 2005 AND ASKING FOR F URTHER COPIES OF SOME OTHER SEIZED DOCUMENTS ON 7/12/2006 AND DURING THIS PERIOD AS P ER ORDER SHEET ENTRIES SEVERAL NOTICES WERE ISSUED BY THE A.O. AND REPLIES GIVEN B Y THE ASSESSEE. SEVERAL HEARINGS ALSO TOOK PLACE BEFORE THE A.O. DURING THIS PERIOD. COP IES OF NOTICES ISSUED BY THE A.O. AND REPLIES GIVEN BY THE ASSESSEE AFTER FILING OF RETUR N U/S. 153A OF THE ACT ON 05/5/2006 HAVE BEEN FILED IN THE DEPARTMENTS PAPER BOOK WHI CH ARE AS UNDER :- 12 NOTICE / REPLY PAGE IN P/B A) ASSESSEES LETTER DATED 16/5/2006 IN RESPON SE 7 - 8 TO NOTICE OF THE A.O. DATED 10/5/2006. B) NOTICE DATED 12/9/2006 U/S. 142(1) SEEKING V ARIOUS 9 - 10 DETAILS/INFORMATION AND COPIES THEREOF. C) NOTICE DATED 18/10/2006 U/S. 142(1) REQUIRIN G 11 ASSESSEE TO SUBMIT DETAILED REPLY OF THE QU ERIES MADE. D) NOTICE DATED 20/11/2006 U/S. 142(1) REQUIRIN G 12 ASSESSEE TO SUBMIT DETAILED REPLY OF FURTHE R QUERIES. E) ASSESSEES REPLY DATED 24/11/2006 IN RESPONS E TO 13 NOTICE DATED 20/11/2006 IN (D) ABOVE. F) NOTICE DATED 04/12/2006 U/S. 142(1) REQUIRIN G THE 14 ASSESSEE TO SUBMIT DETAILS AS MENTIONED IN THE NOTICE. G) NOTICE DATED 13/12/2006 U/S. 142(1) REITERAT ING 15 - 16 EXPLANATION FROM ASSESSEE IN RESPECT OF PUR CHASES & EXPENSES RECORDED IN THE SEIZED DOCUMENTS . H) ASSESSEES REPLY DATED 20/12/2006 IN RESPONS E TO 17 - 18 NOTICE DATED 13/12/2006 EXPRESSING DESIRE T O DISCLOSE ADDITIONAL INCOME BY WAY OF G.P. AT 15% TO BUY PEACE. IT IS THUS EVIDENT THAT AFTER SERIES OF ENQUIRIES M ADE BY THE A.O. AND CONFRONTING THE ASSESSEE WITH THE SAME AND IN PARTICULAR AFTER RECE IPT OF NOTICE U/S. 142(1) DATED 13/12/2006 THE ASSESSEE ULTIMATELY FILED REVISED R ETURN AND OFFERED ADDITIONAL INCOME BY WAY OF ENHANCING G.P. FROM 6.93% TO 15% ON THE TURN OVER. 12. IN THE NOTICE DATED 13/12/2006 THE A.O. HAS S UMMARIZED THE FINDING OF INQUIRY/INVESTIGATION CONDUCTED BY HIM. THE CONTEN TS OF THE SAID NOTICE IS REPRODUCED BELOW :- SUB: REQUIREMENT IN TERMS OF NOTICE UNDER SECTION 142(1) OF INCOME-TAX ACT 1961 FOR ASSESSMENT YEAR 2004-05. WITH REFERENCE TO ABOVE YOU ARE REQUESTED TO FURNISH FOLLOWING DOCUMENTS/DETAILS ON 15.12.2006 AT 01:00 P.M.: 1. IN THE BOOKS OF ACCOUNT OF M/S RITWIKA CREATION PURCHASES FROM PARTIES LIKE (I) SHYAM SAREE KENDRA (II) M.S. TEXTILES (III) INDIA S AREE (P) LTD. (IV) ALAUDDIN & SONS (V) CHOUDHURY TEXTILES (VI) VICHITRA HANDLOOMS (VII) NA VRANG SAREES (VIII) PANNALAL SAREES (P) LTD. (IX) RAJMAL PARASKUMAR SAREES (P) LTD. (X) SHR EE SAREE CENTRE (XI) ANUPARN SAREES 13 (XII) CHERRY FAB TRADE (P) LTD. (XIII) JAGRITI MERC ANTILE (P) 1TD. (XIV) PUSHPANJALI FASHIONS (XV) UNITED SALES CORPORATION AND (XVI) O M SHANTI TEXTILES (XVII) GEETANJALI SAREE HOUSE (XVIIII) VAISHALI-JAIPUR AND (XIX) TIR UPATI AGENCIES ARE SHOWN. IN THE BOOKS OF M/S RITWIKA CREATION PAYMENTS BY WAY OF CHEQUES TO THESE PARTIES ARE SHOWN. HOWEVER ON ENQUIRIES (FROM BANK & OTHER SOURCES) IT WAS FOUND THAT IN REALTY NO PAYMENT WAS MADE TO ABOVE PARTIES. INSTEAD CHEQUES WERE DEPOSITED IN THE ACCOUNT NUMBER 61CA7001777 OF BANK OF PUNJAB LTD. (NOW CENT URION BANK OF PUNJAB LTD.) WHICH IS MAINTAINED BY SHRI SURESH KUMAR AGARWAL. IN VIEW OF THIS YOU ARE REQUIRED TO GIVE EXPLANATION AS TO WHY THE CLAIM OF PURCHASE FROM AB OVE MENTIONED PARTIES SHOULD NOT BE TREATED AS BOGUS. FURTHER YOU ARE ALSO REQUIRED TO EXPLAIN AS TO WHY THE BOOKS OF ACCOUNT OF M/S RITWIKA CREATION SHOULD NOT BE REJEC TED. 2.1 IN SEVERAL SUBMISSIONS MADE ON VARIOUS DATES BY YOUR HUSBAND SHRI SURESH KUMAR AGARWAL HE HAS CLAIMED THAT SEIZED DOCUMENT WITH I DENTIFICATION MARK RC/L TO RC/10 BELONG TO HIM AND THESE DOCUMENTS CONTAIN DETAIL OF EXPENSES INCURRED ON MANUFACTURING OF SAREES. HOWEVER ON THE BASIS OF MATERIAL ON REC ORD IT IS ESTABLISHED THAT IN INDIVIDUAL CAPACITY SHRI SURESH KUMAR AGARWAL WAS NOT HAVING ANY SAREE MANUFACTURING ACTIVITY. IN FACT CREDIT ENTRIES IN THE BANK ACCOUNT OF SHRI AGA RWAL IN BANK OF PUNJAB LTD. (ACCOUNT NUMBER 61CA7001777) HAS NOTHING TO DO WITH THE SARE E MANUFACTURING ACTIVITY OF SHRI AGARWAL IN HIS PERSONAL CAPACITY. I AM OF THE VIEW THAT RC/1 TO RC/10 REPRESENTS UNDISCLOSED EXPENDITURE OF M/S RITWIKA CREATION. FE W REASONS OF SUCH VIEW IS MENTIONED BELOW: (I) IN HUNDREDS OF DOCUMENTS M RC/1 TO RC/10 LET TER HEAD AND LOGO OF M/S RITWIKA CREATION IS USED. SIMILARLY IN SEIZED DOCUMENTS WI TH IDENTIFICATION MARK RI/I TO RI/21 THERE ARE HUNDREDS OF LETTERS HEAD (INCLUDING CASH VOUCHERS) IN THE NAME OF M/S RITWIKA CREATION AND ALL ENTRIES AS PER THESE LETTER HEADS ARE REFLECTED IN RC/1 TO RC/1O. (II) THERE ARE HUNDREDS OF BILLS RAISED BY VARIOUS KARIGAR IN THE SEIZED DOCUMENT RC/1 AND RC/10 AND EACH OF THESE BILLS NAME OF M/S RITWI KA CREATION IS WRITTEN. SIMILAR BILLS ARE THERE IN RI/1 TO RI/21 WHICH ARE REFLECTED IN R C/1 TO RC/10 AND ALL SUCH BILLS ARE RAISED IN THE NAME OF M/S RITWIKA CREATION. (III) RC/1 TO RC/10 CONTAINS DETAILS OF EXPENDITUR E INCURRED ON KARIGAR. SIMILARLY MANY OF SEIZED BUNCHES IN RI/1 TO RI/21 RELATES TO PAYME NT MADE TO KARIGAR. ALL OF THESE DOCUMENTS ARE REFLECTED IN RI/11. IN OTHER WORDS R I/11 SUMMARISES UNDISCLOSED EXPENDITURES IN RESPECT OF KARIGAR. THE PRINT OUT O F RI/11 IS TAKEN FROM THE COMPUTER OF M/S RITWIKA CREATION. (IV) ALL OF THE SEIZED DOCUMENTS FROM RI/1 TO RI/2 1 AND RC/L TO RC/10 WERE FOUND IN THE PREMISE OF M/S RITWIKA CREATION. (V) DURING THE COURSE OF SEARCH OPERATION SHRI AS HWINI AGARWAL STATED ON OATH THAT SEIZED DOCUMENT WITH IDENTIFICATION MARK RC/1 TO RC /10 ARE UNDISCLOSED CASH VOUCHERS BILLS ETC. OF M/S RITWIKA CREATION. (VI) RI/1 TO RI/21 CONTAINS DOCUMENTS RELATED WITH BOTH DISCLOSED AND UNDISCLOSED ACTIVITIES OF M/S RITWIKA CREATION. BOTH TYPE OF DO CUMENTS ARE INTERMINGLED AND CAN NOT 14 BE SEPARATED. IN FACT MOST OF THE TRADING ACTIVITI ES IN SAREE ARE DISCLOSED BUT BUSINESS ACTIVITY RELATED WITH KARIGAR IS NOT DISCLOSED. THE FACT THAT BOTH TYPE OF DOCUMENTS ARE INSEPARABLE FURTHER ESTABLISHES THAT BOTH ACTIVITIE S WERE CARRIED OUT BY M/S RITWIKA CREATION. 2.2 IN VIEW OF REASONS MENTIONED IN PARA 2.1 YOU ARE REQUESTED TO EXPLAIN AS TO WHY EXPENSES AS PER RC/L TO RC/10 RI/1 RI/2 RI/4 TO R I/15 AND RI/20 SHOULD NOT BE TREATED AS YOUR UNDISCLOSED EXPENDITURE. 13. ON PERUSAL OF THE ABOVE SHOW CAUSE NOTICE IT I S EVIDENT THAT NOT ONLY DURING THE COURSE OF SEARCH SEVERAL INCRIMINATING DOCUMENTS W ERE FOUND AND SEIZED BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO THE AO MADE THOROUGH INVESTIGATION. AS A RESULT OF INVESTIGATION IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN TO HAVE MADE PAYMENT BY CHEQUES FOR PURCHASE TO 19 PARTIES. HOWEVER ON IN QUIRY FROM THE BANK AND OTHER SOURCES IT WAS DETECTED BY THE AO THAT THE PAYMENTS WERE NO T MADE TO THE ABOVE PARTIES. ON THE OTHER HAND THE CHEQUES WERE DEPOSITED IN THE BANK ACCOUNT WHICH BELONGED TO SHRI SURESHKUMAR AGRAWAL HUSBAND OF THE ASSESSEE. THUS IT IS EVIDENT THAT THE BOOKS OF ACCOUNTS WHICH WERE CLAIMED TO HAVE BEEN AUDITED WE RE NOT CORRECT. IN THE BOOKS OF ACCOUNTS THE PAYMENTS HAVE BEEN SHOWN IN THE NAMES OF VARIOUS PARTIES AND IN FACT NO CHEQUES WERE ISSUED TO THOSE PARTIES. WHEN THE ASS ESSEE WAS CONFRONTED WITH THE ABOVE FACTS SHE CAME OUT WITH THE EXPLANATION THAT ALTHO UGH THE ENTRIES IN THE BOOKS OF ACCOUNTS HAVE BEEN MADE FOR CHEQUE PAYMENTS TO KARIGAR BUT ACTUALLY CHEQUES WERE ISSUED IN THE NAME OF THE FIRM OF HER HUSBAND WHO DEPOSITE D THESE CHEQUES IN HIS BANK ACCOUNT AND WITHDREW CASH FOR MAKING THE PAYMENT TO KARIGAR . IT WAS THUS EXPLAINED THAT PAYMENT WAS ACTUALLY MADE IN CASH TO THE KARIGARS . FROM THE ABOVE IT IS EVIDENT THAT THE PAYMENT FOR PURCHASE TO 19 PARTIES AMOUNTING TO RS.3.17 CRO RES WERE SHOWN IN THE BOOKS OF ACCOUNTS AS HAVING BEEN MADE BY CHEQUES BUT IN FA CT THOSE CHEQUES WERE ENCASHED BY THE ASSESSEES HUSBAND. ON INQUIRY NONE OF THE ABOVE MENTIONED PARTIES WERE FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE. THUS IT IS EVIDEN T THAT IN BOOKS OF ACCOUNTS PAYMENTS HAVE BEEN SHOWN BY CHEQUE TO GIVE COLOUR OF GENUINE NESS TO THOSE TRANSACTIONS OF PURCHASE. IN THE SHOW CAUSE NOTICE DATED 13-12-2006 THE AO ALSO POINTED OUT THAT THE SEIZED DOCUMENTS WITH IDENTIFICATION MARK RC1 TO RC 10 CONTAINED DETAILS OF EXPENDITURE INCURRED ON MANUFACTURING OF SARIS. IN SEVERAL EXP LANATION FURNISHED BY SHRI SURESH 15 AGRAWAL HUSBAND OF THE ASSESSEE HE CLAIMED THAT T HE SEIZED DOCUMENTS WITH IDENTIFICATION MARK RC1 TO RC10 BELONGED TO HIM. HOWEVER IT WAS NOTICED BY THE AO THAT SHRI SURESH AGRAWAL WAS NOT HAVING ANY SARI MANUFAC TURING ACTIVITY AND MOREOVER IN HUNDREDS OF DOCUMENTS IN RC1 TO RC10 THE LETTER HE AD AND LOGO OF M/S.RITWIK CREATION I.E. PROPRIETARY CONCERN OF THE ASSESSEE WAS FOUND. THU S THE EXPLANATION OF THE ASSESSEE THAT SEIZED DOCUMENTS RC1 TO RC10 BELONGED TO HER H USBAND SHRI SURESH AGRAWAL WAS FOUND TO BE FALSE BY THE AO. THE AO ALSO NOTICED T HAT APART FROM RC1 TO RC10 THERE IS ANOTHER BUNCH OF SEIZED DOCUMENTS WITH THE IDENTIFI CATION MARK R11 TO R21 WHICH SHOWS PAYMENTS TO KARIGARS AND BOTH THESE BUNCH OF DOCUMENTS BELONGED TO THE ASSESSEES PROPRIETARY BUSINESS. ADMITTEDLY THESE DOCUMENTS WERE NOT RECORDED IN THE ASSESSEES BOOKS OF ACCOUNTS. THUS IN THIS CASE ON THE SEAR CH OF THE ASSESSEES BUSINESS PREMISES SEVERAL INCRIMINATING DOCUMENTS WERE FOUND AND SEIZ ED AND THE ASSESSEES EXPLANATION WITH REFERENCE TO THOSE DOCUMENTS WERE FOUND TO BE FALSE DURING THE ASSESSMENT PROCEEDINGS. MOREOVER DURING THE ASSESSMENT PROCEEDINGS IT WAS ALSO DETECTED THAT THE PAYMENTS CLAIMED TO HAVE BEEN MADE BY CHEQUE AND DEBITED IN THE ASSESSEES BOOKS OF ACCOUNTS AS SUCH WAS ALSO FALSE BECAUSE SUCH PAYMENTS WERE ENCA SHED BY THE ASSESSEES HUSBAND. WHEN ALL THESE FINDINGS WERE CONFRONTED TO THE ASSE SSEE THEN ONLY THE ASSESSEE FURNISHED THE REVISED RETURN DISCLOSING HIGHER INCOME. THERE FORE THE CONTENTION OF THE ASSESSEE THAT THE REVISED RETURN WAS FURNISHED BEFORE THE DE TECTION BY THE DEPARTMENT AND WAS MADE TO BUY PEACE CANNOT BE ACCEPTED. THE REVISED RETURN WAS FURNISHED BY THE ASSESSEE ONLY WHEN AFTER THOROUGH INVESTIGATION THE AO ESTAB LISHED THAT THE SEIZED DOCUMENTS WHICH RECORDED VARIOUS EXPENDITURE WERE BELONGING T O THE ASSESSEE AND ALSO THAT THE ASSESSEES BOOKS OF ACCOUNT IS INCORRECT AND FALSE AND WHEN RESULT OF THE INVESTIGATION WAS CONFRONTED TO THE ASSESSEE THEN ONLY THE ASSESSEE FURNISHED THE REVISED RETURN. 14. IDENTICAL ISSUE HAS BEEN CONSIDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. C. ANANTHAN CHETTIAR (SUPRA). IN THAT CASE THE DEPARTMENT IN A SEARCH AND SEIZURE OPERATION CONDUCTED IN THE ASSESSEES SHOP AND RESI DENCE SEIZED CASH JEWELLERY AND CERTAIN DOCUMENTS. THEREAFTER THE ASSESSEE FILED A REVISED RETURN FOR THE A.Y. 1986-87 DISCLOSING ADDITIONAL INCOME WHICH WAS ACCEPTED AND ASSESSMENT WAS MADE ON THE BASIS OF 16 REVISED RETURN. THE ASSESSEE TOOK THE STAND THAT TH ERE WAS NO CONCEALMENT AND IT WAS ONLY FOR THE PURPOSE OF BUYING PEACE WITH THE DEPARTMENT THAT THE ADDITIONAL INCOME WAS DISCLOSED AND REVISED RETURN WAS FILED. THE TRIBUNA L ACCEPTED THIS PLEA OF THE ASSESSEE AND HELD THAT NO PENALTY IN THE CIRCUMSTANCES WAS LEVIABLE BY RELYING ON THE SUPREME COURT DECISION IN SIR SHADILAL SUGAR AND GENERAL MI LLS LTD. VS. CIT [168 ITR 705 (SC)]. ON THE REFERENCE THE HONBLE MADRAS HIGH COURT SET AS IDE THE ORDER AND OBSERVED AS UNDER:- LEARNED COUNSEL FOR THE REVENUE SUBMITTED THAT THE ORDER OF THE TRIBUNAL IS NOT IN ACCORDANCE WITH LAW AS IT HAS IGNORED THE EXPLANAT ION TO S. 271(1)(C) OF THE ACT. LEARNED COUNSEL ALSO PLACED RELIANCE ON THE DECISIO N IN THE CASE OF K.P. MADHUSUDHANAN VS. CIT (2001) 169 CTR (SC) 489 : (20 01) 251 ITR 99 (SC) WHEREIN IT WAS HELD THAT THE LAW DECLARED BY THE COURT IN T HE CASE OF SIR SHADI LAL SUGAR & GENERAL MILLS LTD. VS. CIT (1987) 64 CTR (SC) 199 ( 1987) 168 ITR 705 (SC) WAS NO LONGER APPLICABLE BY REASON OF THE ADDITION OF THE EXPLANATION TO S. 271. THAT EXPLANATION CASTS A BURDEN ON THE ASSESSEE TO SHOW THAT THE ADDITIONAL INCOME THAT HAD NOT BEEN DISCLOSED WAS NOT DUE TO FRAUD OR NEGL ECT. IN THIS CASE THE ASSESSEE OFFERED NO EXPLANATION A T ALL EXCEPT TO ASSERT THAT HE DISCLOSED THE INCOME ONLY TO BUY PEACE WITH THE DEP ARTMENT AND WHAT WAS DISCLOSED IN FACT WAS ADDITIONAL INCOME. THE REAS ON FOR NOT HAVING DISCLOSED THE INCOME EARLIER WAS NOT STATED. IN THESE CIRCUMSTANC ES THE TRIBUNAL WAS IN ERROR IN SETTING ASIDE THE PENALTY. THE QUESTION IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE IN THE LIGHT OF THE LATER DEC ISION OF THE THREE-JUDGE BENCH OF THE SUPREME COURT IN THE CASE OF K. P. MADHUSUDHANA N VS. CIT (SUPRA). 15. THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. MAHABIT PRASAD BAJAJ (SUPRA) RELYING ON THE AFORESAID DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF C. ANANTHAN CHETTIAR (SUPRA) AND ALSO RELYING ON ANOTH ER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHERATON APPARELS VS. ACIT [25 6 ITR 20 (BOM)] HAS HELD AS UNDER :- CONCEALMENT MEANS AN ATTEMPT TO HIDE AN ITEM OF INC OME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE IT AUTHORITIES. FROM A BA RE READING OF S. 139(5) AND S. 271(1)(C) IT IS MANIFESTLY DEAR THAT BOTH THE AFOR ESAID SECTIONS MEET TWO DIFFERENT SITUATIONS. SEC. 139(5) PROCEEDS ON THE B ASIS OF OMISSION OR WRONG STATEMENT WHICH HAD CREPT INTO THE ORIGINAL RETURN BEING INADVERTENT AND UNINTENTIONAL WHEREAS S. 271(1)(C) PROCEEDS ON THE BASIS OF CONCEALMENT BEING DELIBERATE AND THE FURNISHING OF INACCURATE PARTICU LARS BEING WILFUL AND INTENTIONAL. IN THE INSTANT CASE THE TRIBUNAL WHILE ALLOWING T HE APPEAL BY SETTING ASIDE THE ORDER OF PENALTY PROCEEDED ON THE BASIS THAT THE A SSESSEE DISCLOSED THE ADDITIONAL AMOUNT VOLUNTARILY IN CALL OF AMNESTY SC HEME AND THAT SUCH DISCLOSURE OF INCOME AND OFFERING THE SAME FOR TAX MAY BE FOR VAR IOUS REASONS. SUCH VOLUNTARY DISCLOSURE CANNOT BE SAID TO BE CONCEALED INCOME OF THE ASSESSEE. THE TRIBUNAL 17 FURTHER PROCEEDED ON THE BASIS THAT THE REVENUE HAS TO PROVE MENS REA ON THE PART OF THE ASSESSEE BY ADDUCING EVIDENCE. THE TRIB UNAL HAS TOTALLY MISCONSTRUED THE PROVISIONS OF THE ACT AND THE FINDING IS WHOLLY PERVERSE IN LAW. THE TRIBUNAL HAS NOT CONSIDERED THE EFFECT OF EXPLN. S TO S. 271 (1)(C). THE ASSESSEE DID NOT ACT VOLUNTARILY AND BONA FIDELY IN FILING THE REVISED R ETURN AND OFFERING THE ADDITIONAL INCOME. ADMITTEDLY THE REVISED RETURN WAS NOT FILE D WITHIN THE FINANCIAL YEAR OR EVEN BEFORE SEARCH AND SEIZURE WAS CONDUCTED AND IN CRIMINATING DOCUMENTS WERE RECOVERED SHOWING UNDISCLOSED INCOME OF THE ASSESSE E. EXPLANATION 5 WAS ADDED IN S. 271(1)(C) IN ORDER TO MEET SUCH SITUATIONS. THE AO WAS THEREFORE FULLY JUSTIFIED IN INITIATING PENALTY PROCEEDINGS AND LEVYING PENAL TY UNDER S. 271(1)(C). THE FINDING OF THE TRIBUNAL IS WHOLLY PERVERSE AND CANNOT BE SU STAINED IN LAW. 16. CONSIDERING THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE ARGUMENTS OF BOTH THE SIDES AND ON CAREFUL PERUSAL OF THE PROPOS ED ORDERS OF BOTH THE LD. MEMBERS AND THE JUDICIAL PRONOUNCEMENTS REFERRED TO ABOVE I AM OF THE OPINION THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT DISCLOSURE OF ADDITIONAL I NCOME IN THE REVISED RETURN BY WAY OF DECLARING G.P. RATE AT 15% AS AGAINST 6.93% SHOWN I N RETURN FILED U/S. 153A OF THE ACT WAS VOLUNTARY AND IN GOOD FAITH TO BUY PEACE WITH THE D EPARTMENT. ON THE OTHER HAND THE ASSESSEE FILED THE REVISED RETURN ONLY AFTER THE CO NCEALMENT WAS DETECTED BY THE AO AND HE CONFRONTED THE ASSESSEE WITH THE SAME. IN SUCH CIRCUMSTANCES PENALTY U/S. 271(1)(C) OF THE ACT OF RS.14 61 678/- FOR CONCEALMENT OF INC OME HAS RIGHTLY BEEN LEVIED BY THE A.O. AND THE LD. C.I.T.(A) WAS NOT JUSTIFIED IN CANCELIN G THE SAME. I THEREFORE CONCUR WITH THE CONCLUSION ARRIVED AT BY THE LD. A.M. IN UPHOLDING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 17. FOR THE ASSESSMENT YEAR 2005-06 THE ISSUE IS SIMILAR TO THAT OF ASSESSMENT YEAR 2004-05. THAT IS TO SAY WHETHER THE REVISED RETUR N FILED BY THE ASSESSEE WAS VOLUNTARY AND IN GOOD FAITH TO BUY PEACE WITH THE DEPARTMENT AND NO PENALTY U/S. 271(1)(C) OF THE ACT IS LEVIABLE ON SUCH CIRCUMSTANCES. BOTH THE PA RTIES HAVE ALSO ADMITTED THAT FACTS OF A.Y.2005-2006 ARE SIMILAR TO A.Y.2004-05 AND DECISI ON TAKEN IN A.Y.2004-05 WOULD BE APPLICABLE IN 2005-2006 ALSO. I HAVE DISCUSSED IN D ETAIL THIS MATTER WHILE DEALING WITH THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 AB OVE. FOR THE REASONS STATED THEREIN I AM OF THE OPINION THAT PENALTY U/S. 271(1)(C) OF THE ACT OF RS. 25 84 000/- THEREOF HAS RIGHTLY BEEN LEVIED BY THE A.O. AND THE LD. C.I.T.( A) WAS NOT JUSTIFIED IN CANCELING THE SAME. 18 I THEREFORE CONCUR WITH THE CONCLUSION ARRIVED AT BY THE LD. A.M. IN UPHOLDING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. I.T(SS)A.NO. 89 (KOL) OF 2008 (A.Y. 2004-05) SMT. MONIKA DEVI AGARWAL : 18. BOTH THE PARTIES HAVE STATED THAT THE FACTS OF THE CASE OF THIS ASSESSEE ARE IDENTICAL TO THOSE OF SMT. SUSHMA DEVI AGARWAL FOR ASSESSMENT YEAR 2004-05 VIDE ITA NO. 876 (KOL)/2008. IN THIS CASE PENALTY OF RS.13 43 999/- HAS BEEN LEVIED U/S. 271(1)(C) OF THE ACT WHICH WAS DELETED BY THE LD. C.I.T.(A). THE LD. J.M. IN HIS PROPOSED ORDER HAS UPHELD THE ORDER OF LD. C.I.T.(A) WHEREAS THE LD. A.M. IN HIS PROPOSED ORDER DISAGREEING WITH THE LD. J.M. HAS UPHELD THE PENALTY LEVIED BY THE A.O. U/S. 271(1)(C) OF THE ACT. FOR THE REASONS DISCUSSED ABOVE WHILE DEALING WITH THE CASE OF SMT. SUSHMA DEVI AGARWAL FOR ASSESSMENT YEAR 2004-05 IN ITA NO. 876 (KOL)/2008 I CONCUR WITH THE CONCLUSION OF LD. A.M. IN HIS PROPOSED ORDER. 19. THE MATTER WILL NOW GO TO THE REGULAR BENCH FO R PASSING THE ORDER AS PER THE MAJORITY VIEW. SD/- [G.D.AGRAWAL] VICE-PRESIDENT (AZ/KZ) AS 3 RD MEMBER. (DKP) DATED : 23-06-2011 .