M/s. Snita Transport Pvt. Ltd.,, Baroda v. The ACIT., Circle-4,, Baroda

ITA 999/AHD/2006 | 2001-2002
Pronouncement Date: 16-02-2012 | Result: Dismissed

Appeal Details

RSA Number 99920514 RSA 2006
Assessee PAN AAFCS4221D
Bench Ahmedabad
Appeal Number ITA 999/AHD/2006
Duration Of Justice 5 year(s) 9 month(s) 22 day(s)
Appellant M/s. Snita Transport Pvt. Ltd.,, Baroda
Respondent The ACIT., Circle-4,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 16-02-2012
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 16-02-2012
Date Of Final Hearing 25-01-2012
Next Hearing Date 25-01-2012
Assessment Year 2001-2002
Appeal Filed On 24-04-2006
Judgment Text
-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY AM ITA NO.999/AHD/2006 (ASSESSMENT YEAR:-2001-2002) M/S SNITA TRANSPORT PVT. LTD. OPP. YOGESHWAR PETROL PUMP DUMAD CHOKDI VADODARA V/S THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-4 BARODA PAN: AAFCS 4221 D [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR AR REVENUE BY:- SHRI VINOD TANWANI SR. DR DATE OF HEARING:- 25-01-2012 DATE OF PRONOUNCEMENT:- 16-02-2012 O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 28-02-2006 PASSED BY THE LEARNED CIT(A) -III BARODA FOR ASSESSMENT YEAR 2001-02 WHEREBY THE LEARNED CI T(A) HAS CONFIRMED THE ACTION OF AO IN LEVYING PENALTY OF RS .43 16 890/- U/S 271(1)(C) OF THE INCOME-TAX ACT 1961. 2 BRIEF FACTS OF THE CASE AS THEY EMERGE FROM THE P ENALTY ORDER ARE THAT THE RETURN OF INCOME WAS FILED BY TH E ASSESSEE ON 19.10.2001 DECLARING TOTAL INCOME AT RS.9 86 384/- WHICH WAS PROCESSED U/S 143(3) ON 24.12.2002 DETERMINING THE RETURNED INCOME. NOTICE U/S 143(2) ISSUED ON 26.12.2002 WHIC H WAS 2 SERVED ON 29.10.2002. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 30.01.2003. 3 THE ASSESSEE COMPANY HAD FILED REVISED RETURN OF INCOME ON 11.03.2003 DECLARING TOTAL INCOME AT RS.90 69 750/- .THE REGULAR ASSESSMENT U/S 143(3) WAS COMPLETED ON 13.03.2003 D ETERMINING THE TOTAL INCOME AT RS.93 59 280/-. THIS TOTAL INCO ME INCLUDE FOLLOWING AMOUNTS FOR WHICH PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED. (1) RS.1 06 45 488/- ON ACCOUNT OF BOGUS EXPENSES DEBITED TO P&L A/C. (2) RS. 2 60 526/- ON ACCOUNT OF SHORTAGE CLAIM 4 DURING THE COURSE OF SURVEY IT WAS DETECTED THAT AUDITED BOOKS OF ACCOUNTS DID NOT CONTAIN THE NAME OF 34 CR EDITORS WHICH IN FACT APPEARED IN THE DETAILS FILED ALONG WITH THE RETURN AND THE CREDIT AMOUNT HAVE ACCUMULATED BECAUSE OF T HE CLAIM OF EXPENSES ON THE PART OF THE ASSESSEE. THESE NAMES O F THE CREDITORS APPEARED IN THE TRIAL BALANCE WHICH WAS F OUND DURING THE COURSE OF SURVEY. ON VERIFICATION/EXAMINATION O F THE ACCOUNTS ETC. IT TRANSPIRED THAT THE EXPENSES CLA IMED AGAINST THESE CREDITORS WERE BOGUS AND IN FACT THE SAME WAS ADMITTED BY THE ASSESSEE. THE TOTAL OF SUCH EXPENSES WAS CALCUL ATED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT AT RS.1 06 45 448/- AND ADDITION TO THAT EXTENT WAS MADE IN THE ASSESSM ENT ORDER. THE ASSESSEE HAD ADMITTED THIS ADDITION OF BOGUS CLAIM. 5 FURTHER ON EXAMINING THE TRIAL BALANCE THE ASSESS ING OFFICER FOUND THAT THE 'SHORTAGE ACCOUNT' WAS DEBI TED BY RS.11 11 281/- AND CREDITED BY RS.13 80 807/- AND T HE CREDIT 3 BALANCE OF RS.2 69 525/- WAS SHOWN IN THE LIST OF S UNDRY CREDITORS. THE ASSESSEE CLAIMED THAT THIS AMOUNT WA S TO BE PAID TO DRIVERS. HOWEVER NO DOCUMENTARY EVIDENCE OF ANY SUCH PAYMENT WAS FOUND AT THE TIME OF SURVEY OR PRODUCED DURING THE ASSESSMENT. ASSESSEE HAD NOT MAINTAINED A SEPARATE ACCOUNT FOR THE DRIVER'S CLAIM. THE ASSESSEE COULD NOT ESTABLIS H/EVIDENCE THAT THE ASSESSEE HAD MADE ANY SUCH PAYMENT IN THE PAST TO ANY DRIVER IN THIS REGARD. THE ASSESSING OFFICER THEREFORE C ONSIDERED THE SAID BALANCE TO BE THE ASSESSEE'S INCOME. 6 THE ASSESSEE HAD PREFERRED APPEAL TO CIT(A) BARO DA. THE ID. CIT(A) HAS DECIDED THE APPEAL OF THE ASSESSEE V IDE ORDER DATED 21.08.2003. BOTH THE ADDITIONS MADE BY THE AS SESSING OFFICER ARE CONFIRMED BY CIT(A) BARODA. 7 THEREAFTER THE AO PROCEEDED TO LEVY PENALTY WITH THE FOLLOWING OBSERVATIONS:- 7 THE NOTICES U/S 271(1)(C) OF THE ACT WERE AGAIN ISSUED TO ASSESSEE ON 03.01.2001 AND 13.01.2006. THE ASSESSEE HAD SUBMITTED ITS WRITTEN SUBMISSION WHEREIN THE ASSESSEE HAS PLE ADED THAT BOOKS OF ACCOUNTS MAINTAINED BY THE COMPANY WERE PROPER BECA USE THE ENTRY FOR NON-EXISTENT OF CREDITORS IS NOT ENTERED. THE A SSESSEE HAS ALSO PLEADED THAT IT HAD FILED REVISED RETURN OR INCOME AS A RESULT OF SURVEY AND THUS IT DOES NOT TANTAMOUNT TO CONCEALMENT. THE ASSESSEE ALSO HAD CITED SOME CASE LAWS IN LAVOUR OF ITS CASE I HAVE CAREFULLY GONE THROUGH THE SUBMISSION TILED BY THE ASSESSEE BUT IT IS NOT ACCEPTABLE ON FOLLOWING GROUNDS:- * THE ASSESSEE ITSELF ADMITTED DURING THE COURSE OF SURVEY PROCEEDINGS ABOUT THE BOGUS CREDITORS AND THAT IT H AS DEBITED THE TOTAL AMOUNT UNDER VARIOUS HEADS IN ITS BOOKS OF AC COUNTS. * THE PLEA OF ASSESSEE THAT BOOKS OF ACCOUNTS WERE PROPER AS ENTRIES AGAINST THE NON-EXISTING CREDITORS WAS NOT FOUND LACKS 4 FORCE WHILE THE ENTRIES MAY BE ABSENT IN THE MANUAL BOOKS THE ENTRIES WERE MADE IN COMPUTERIZED ACCOUNT AND RETUR N WAS FILED ACCORDINGLY. THUS THE BOGUS CREDITORS AND BOGUS EX PENSES WERE VERY MUCH PRESENT IN THE RETURN OF INCOME. IN FACT THIS REINFORCES THE FINDING THAT THERE WAS CONCEALMENT B Y THE ASSESSEE. * THE REVISED RETURN PER SE HAS BEEN TREATED NONEST AS IT WAS REVISED AFTER THE DEPARTMENT POINTED OUT THE CONCEA LMENT. THUS THE PLEA OF ASSESSEE ON GROUND OF REVISED RETURN IS NOT ACCEPTED. IT MAY BE MENTIONED HERE THAT THE LD. CIT (APPEALS) HAS DISCUSSED THE ISSUES AT LENGTH IN HIS ORDER AND HAS UPHELD THAT THE SECOND RETURN CAN NOT BE TREATED AS REVISED RET URN. * THE ASSESSEE HAD PUT FORWARD FEW CASE LAWS WHICH ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. IN THIS CASE THE REVISED RETURN WAS NOT 'REVISED' AS PER I .T. ACT 1961. IN THE ASSESSEE'S CASE THE CASE WAS ALREADY UNDER SCRUTINY AND FURTHER VERIFICATION SURVEY ACTION WAS CARRIED OUT. THE ASSESSEE FILED SECOND RETURN OF INCOME ONLY AFTER THE DEPART MENT DETECTED CONCEALMENT. THE CITED CASE LAWS DO NOT PE RTAINS TO THESE KINDS OR FACTS AND THEREFORE DO NOT ASSIST TH E ASSESSEE. * THE LD. CIT(A) HAS NOT ONLY CONFIRMED THE ADDITIO NS MADE BY THE ASSESSING OFFICER ON WHICH PENALTY PROCEEDINGS ARE INITIATED BUT ALSO GIVEN CLEAR FINDING THAT THE SE COND RETURN CAN NOT BE TREATED AS REVISED RETURN. 8 THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCE S AVAILABLE ON RECORDS AND DECISION GIVEN BY CIT(A) BARODA I LEV Y THE PENALTY ON ADDITION SUSTAINED AT RS.1 09 15 013/- BY THE LD. C IT(A) BARODA KEEPING IN VIEW THAT THE ASSESSEE HAD CONCEALED PAR TICULARS OF INCOME AND LEVY MINIMUM PENALTY @ 100% OF TAX SOUGHT TO BE EVADED COMES TO RS.43 16 890/- AND MAXIMUM PENALTY @ 300% OF TAX SOUGHT TO BE EVADED COMES TO RS.1 29 50 670/-. LOOKING TO THE FA CTS AND CIRCUMSTANCES OF THE CASE I HEREBY LEVY PENALTY OF RS.43 16 890/- U/S 271(1)(C) OF THE ACT. 8 AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED CIT(A) THE ASSESSEE SUBMITTED AS UNDER:- 5 7 BEFORE ME THE APPELLANT SUBMITTED THAT THE EXPE NSES DEBITED WERE INCURRED FOR BUSINESS PURPOSE ONLY AND THEREFO RE THESE CANNOT BE TERMED AS BOGUS. THE APPELLANT REFERRED TO THE FOLL OWING QUESTION NO. 4 OF THE STATEMENT DATED 30-1-2003 OF SHRI VIJAY NA IR AND FOR READY REFERENCE THE REPLY OF THE APPELLANT TO QUESTION N O. 4 IS GIVEN BELOW: 'QS. 4: THIS MEANS THAT THERE IS NO GENUINE CONCERN AND THE EXPENSES DEBITED IN THEIR NAMES ARE BOGUS? ANS. 4: THE EXPENSES ARE DEBITED UNDER THE HEAD REP AIRING AND MAINTENANCE HOWEVER THE SAME IS EXPENDED FOR OTHER BUSINESS PURPOSE.' 7.1 IT WAS ALSO SUBMITTED THAT NON AVAILABILITY OF VOUCHERS/BILLS MAY BE VALID FOR THE PURPOSE OF MAKING ADDITION. HOWEVE R THE SAME MAY NOT BE VALID FOR THE PURPOSE OF LEVYING PENALTY. TH E APPELLANT ARGUED THAT IT IS NOT A CASE WHERE THE APPELLANT HAS NOT O FFERED AN EXPLANATION; THAT THE APPELLANT HAD OFFERED AN EXPLANATION; THAT THERE IS NO ALLEGATION THAT THE SAID EXPENSES DEBITED BY THE A PPELLANT ARE INCOME OF THE APPELLANT; THAT EXCEPT THE NON AVAILABILITY OF THE VOUCHERS/BILLS THERE IS NO MATERIAL ON RECORD TO PROVE THAT THE AM OUNTS REPRESENT THE INCOME OF THE APPELLANT; THAT THE EXPLANATION GIVEN BY THE APPELLANT AT THE TIME OF SURVEY IS NOT FOUND TO BE FALSE. THE AP PELLANT ARGUED THAT THE FACT OF HAVING INCURRED THIS EXPENDITURE IS APP ARENT AS NO EXCESS CASH OR UNACCOUNTED ASSETS OR OTHER THINGS WERE FOU ND DURING THE COURSE OF SURVEY. 7.2 THE APPELLANT CONTENDED THAT EXPLANATION-1 TO S ECTION 271(1)(C) IS NOT APPLICABLE AS THE ASSESSEE OFFERED AN EXPLAN ATION WHICH WAS NOT FOUND TO BE FALSE AND WHICH IT WAS ABLE TO SUBSTANT IATE AND IT WAS ONLY AFTER THE PARTICULARS PROVIDED BY THE APPELLANT THA T THE ASSESSMENT WAS FINALIZED. THE APPELLANT ALSO CONTENDED THAT AT NO POINT OF TIME ANY INFORMATION FURNISHED BY THE ASSESSEE WAS FOUND TO BE INACCURATE. 7.3 IT WAS ARGUED THAT THE CLAIMS OF THE ASSESSING OFFICER ARE ALTHOUGH VALID FOR MAKING ADDITIONS UNDER REGULAR A SSESSMENT BUT ARE NOT VALID FOR INITIATION OF PENALTY PROCEEDINGS [SH IV LAL TAK V. CIT (251 ITR 373 RAJ.)]. 7.4 THE APPELLANT ALSO ARGUED THAT IT WOULD NOT BE CORRECT FOR THE AO TO LEVY PENALTY ON THE AMOUNT ALREADY DECLARED I N THE REVISED 6 RETURN FILED BY THE APPELLANT BEFORE COMPLETING THE ASSESSMENT; THAT THE APPELLANT FILED THE REVISED RETURN UNDER A BONAFIDE BELIEF THAT THE SAME WOULD TAKE CARE OF MISTAKES IN THE ACCOUNTS AND WOU LD BRING AN END TO THE LITIGATION; THAT IT WAS CATEGORICALLY STATED AT THE TIME OF SURVEY ITSELF THAT THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSE. 7.5 THE APPELLANT FURTHER STATED THAT THE APPELLANT COMPANY IS MANAGED BY 3 DIRECTORS. NONE OF THE DIRECTORS HAVE ANY KNOWLEDGE OF ACCOUNTS OR INCOME TAX. THE DIRECTORS ARE NOT EVEN 10TH PASS. DUE TO INADEQUATE KNOWLEDGE THEY WERE NOT AWARE OF THE MIS TAKES IN THE ACCOUNTS AND AS SOON AS THE AO POINTED OUT THE MIST AKES THE ACCOUNTS WERE RECTIFIED AND REVISED RETURN WAS FILED. THE AP PELLANT ARGUED THAT IT HAD ACTED IN A GOOD FAITH AND THEREFORE IT WOULD NOT BE CORRECT TO PENALIZE IT BY LEVYING A HUGE PENALTY OF RS.43 16 8 90/-IT WAS SUBMITTED THAT THE APPELLANT IN ORDER TO AVOID LITI GATION FILED A REVISED RETURN ON 11-3-2003 (BEFORE THE COMPLETION OF ASSES SMENT) AND DECLARED THE AMOUNT FOR WHICH THE BILLS/VOUCHERS WE RE NOT AVAILABLE IN THE REVISED RETURN. IT WAS SUBMITTED THAT THE HON'B LE SC IN THE CASE OF CIT V. SURESH CHANDRA MITTAL 251 ITR 9 HELD THAT AD DITIONAL INCOME DECLARED BY THE ASSESSEE TO AVOID LONG DRAWN LITIGA TION AND TO BUY PEACE CAN BE TREATED AS BONAFIDE GROUND TO DELETE T HE PENALTY. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS IN SUPPO RT OF THE CONTENTION THAT PENALTY IS NOT LEVIABLE FOR MERE FI LING OF REVISED RETURN: A. K DEEDAR AHMED V ITO 97 ITD 240 (HYD) B. A V R PRASAD V ITO 97 ITD 325 (HYD) C. HARIKRISHNA SILK MILLS V. ACIT 107 TAXMAN 78 (A HD) (MAG.) D. E R TRUST V. ACIT 73 ITD 426 (MUM) (SM) E. ACIT V. SMT. GEETA DEVI 79 ITD 347 (DELHI) (SMC - II) 7.6 THE APPELLANT ALSO INVITED MY ATTENTION TO EXPL ANATION 5 TO SECTION 271(1)(C) OF THE ACT AND STATED THAT AS PER THE SAID EXPLANATION 5 WHEN AN ASSESSEE DURING THE-COURSE OF SEARCH A ND WHILE RECORDING STATEMENT U/S 132 (4) MAKES THE DISCLOSURE ABOUT TH E INCOME FOUND DURING THE COURSE OF SEARCH THEN NO PENALTY IS LEV IABLE. THE APPELLANT SUBMITTED THAT IN THE PRESENT CASE THERE WAS A SUR VEY AT THE PREMISES OF THE APPELLANT. DURING THE COURSE OF SURVEY THE APPELLANT MADE A DISCLOSURE OF THE ADDITIONAL INCOME AND ALSO FILED THE RETURN OF INCOME INCLUDING THE SAID AMOUNT DISCLOSED AND PAID TAXES THEREON. IT WAS ARGUED THAT THE CASE IS THEREFORE SQUARELY COVERED BY THE PROVISIONS OF EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT AND T HEREFORE NO PENALTY 7 CAN BE LEVIED ON THE APPELLANT. IT WAS STATED THAT IN THE PRESENT CASE THE APPELLANT HAD ALREADY FILED THE RETURN OF INCOM E BUT THE INCOME DISCLOSED DURING THE COURSE OF SURVEY WAS NOT DISCL OSED IN THE RETURN OF INCOME. IT WAS SUBMITTED THAT THE BENEFIT OF EXP LANATION 5 TO SECTION 271 (1)(C) IS ALSO AVAILABLE IN CASES WHERE THE RETURNS OF INCOME HAVE BEEN FURNISHED BEFORE THE DATE OF SEARC H. RELIANCE WAS PLACED ON THE DECISION OF ALLAHABAD TRIBUNAL IN THE CASE OF SHYAM BIRI WORKS PVT. LTD. V. ACIT 70 TTJ (ALL) 880. IT W AS STRONGLY ARGUED THAT IF AN ASSESSEE MAKES A DISCLOSURE DURING THE C OURSE OF SEARCH HE IS GIVEN IMMUNITY FROM THE PENALTY THERE IS NO REASON WHY THE SAME IMMUNITY SHOULD NOT BE GIVEN TO THE ASSESSEE WHEN H E MAKES A DISCLOSURE OF THE INCOME AND MAKES A CLEAN BREAST O F THE INCOME NOT DISCLOSED DURING THE COURSE OF SURVEY. 7.7 AS REGARDS THE LEVY OF PENALTY ON THE ADDITION MADE ON ACCOUNT OF SHORTAGES OF RS.2 69 525/- THE APPELLANT SUBMIT TED THAT IT IS IN THE BUSINESS OF TRANSPORTATION OF CHEMICALS IN TRUCKS. THERE IS PREDEFINED PERCENTAGE OF LOSS IN TRANSPORTATION OF CHEMICALS W HICH IS TERMED AS NORMAL LOSS. IF THE LOSS ON ACCOUNT OF TRANSPORTATI ON IS MORE THAN THE NORMAL LOSS THEN THE APPELLANT IS PAID LESS BY THE PARTY. THE PARTY DEDUCTS THE AMOUNT OF LOSS-FROM THE PAYMENT TO BE M ADE TO THE APPELLANT AND THAT THE ACCOUNT OF SHORTAGES IN FACT REPRESENTS LOSS INCURRED BY THE APPELLANT. 7.8 THE APPELLANT ALSO ARGUED THAT IN THE ASSESSMEN T ORDER OR IN THE PENALTY ORDER THE CHARGE HAS NOT BEEN SPECIFIED AS TO WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT O R FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 7.9 RELIANCE WAS PLACED ON FOLLOWING DECISIONS: > CIT V. MANU ENGINEERING WORKS 122 ITR 306 (GUJ) > RAMILA R. SHAH 60 TTJ 1.71 (AHD) > NAVIN M PATEL 27 ITD 411 (AHD) > K. M. BHATIA 193 ITR 379 (GUJ) > ADVANCE CONSTRUCTION CO. PVT. LTD. V. ACIT (ITA N O. 5033/A/1994) 9 AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE ASSESSEE THE LEARNED CIT(A) HAS CONFIRMED THE LEVY OF PENALTY WITH THE FOLLOWING OBSERVATIONS: 8 8 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AND THE APPELLANT'S SUBMISSIONS. IN THE PRESENT CASE THE A SSESSEE HAD FILED ORIGINAL RETURN DISCLOSING INCOME OF RS.9 86 384/-. IT WAS DURING THE COURSE OF SURVEY THAT IT WAS DETECTED BY THE DEPART MENT THAT THE AUDITED BOOKS OF ACCOUNTS DID NOT CONTAIN THE NAME OF 34 CREDITORS WHOSE NAMES WERE APPEARING IN THE TRIAL BALANCE. WH EN CONFRONTED BY THE DEPARTMENT THE MANAGING DIRECTOR OF THE COMPAN Y ADMITTED THAT THESE PARTIES WERE NON-EXISTENT AND NON-GENUINE AND THAT IT HAD DEBITED BOGUS EXPENSES IN THE NAME OF THESE PARTIES . NOT ONLY DURING THE COURSE OF SURVEY BUT EVEN ONE MONTH AFTER THE SURVEY THE MANAGING DIRECTOR ADMITTED THAT THESE CREDITORS WER E NON-GENUINE. THE APPELLANT ARGUED THAT EVEN AT THE TIME OF SURVE Y IT WAS EXPLAINED BY THE MANAGING DIRECTOR THAT THE EXPENSES WERE DEB ITED UNDER THE HEAD 'REPAIRS AND MAINTENANCE' BUT WERE EXPENDED FO R SOME OTHER BUSINESS PURPOSE AND THEREFORE THE AMOUNT REPRESEN TED BY THE ENTRIES IN THE ACCOUNTS OF CREDITORS DOES NOT REPRESENT ASS ESSEE'S INCOME. THIS CONTENTION OF THE ASSESSEE IS NOT CORRECT. A PERUSA L OF SCHEDULE J- (DIRECT OPERATING & TRANSPORTING EXPENSES) TO THE B ALANCE SHEET AS ON 31-3-2001 SHOWS THAT THE ASSESSEE HAD DEBITED ONLY AN AMOUNT OF RS.33 58 258/-UNDER THE HEAD 'REPAIRS AND MAINTENAN CE' WHEREAS THE EXPENSES DEBITED IN THE NAME OF 34 NON-GENUINE CRED ITORS AMOUNTED TO RS.1 06 45 488/-. THEREFORE THE ASSESSEE'S CONTENT ION THAT THE EXPENSE WERE DEBITED UNDER THE HEAD 'REPAIRS AND MAINTENANC E' IS A FALSE STATEMENT. FURTHER THE ASSESSEE HAS ALSO NOT EXPLA INED AND PRODUCED ANY EVIDENCE AS TO FOR WHICH BUSINESS PURPOSE THE EXPENSES WERE INCURRED. NO DETAILS OF THESE EXPENSES WERE ALSO FU RNISHED. THUS THE APPELLANT'S RELIANCE ON THE REPLY TO QUESTION NO.4 OF THE STATEMENT ON OATH DOES NOT HELP THE CASE OF THE ASSESSEE. 8.1 THE APPELLANT ARGUED THAT IT HAD FILED REVISED RETURN OF INCOME TO BUY PEACE AND THEREFORE NO PENALTY OUGHT TO HAV E BEEN LEVIED. IT HAS BEEN HELD BY VARIOUS HIGH COURTS IN LARGE NUMBE R OF CASES [VADILAL ICHHACHAND V. CIT 32 ITR 569 (BOM) CALICU T TRADING CO. V. CIT 178 ITR 430 (KER) SPECIAL LEAVE PETITION DISM ISSED BY SUPREME COURT (180 ITR) (STATUTE 40) (SC) BACHHUMAL UTTAMM AL V. CIT 111 TAXATION 424 (RAJ)] THAT THE SUBSEQUENT FILING OF REVISED RETURN OR SURRENDER OF INCOME IN THE REVISED RETURN WHICH WA S NOT VOLUNTARY BUT WAS A RESULT OF DETECTION BY THE ASSESSING OFFICER IS OF NO HELP AS FAR AS LEVY OF PENALTY IS CONCERNED [BILANDRAM HARGANDA S V. CIT 171 ITR 390 (ALL)]. IT HAS BEEN HELD BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF JUGAL KISHORE HARGOPALDAS 243 ITR 220 THAT: 9 'THERE IS NO GENERAL PRINCIPLE LAID DOWN IN THE SAI D CASE [ SIR SHADILAL SUGAR & GENERAL MILLS LTD. V. CIT [(1987) 168 ITR 705 (SC)] THAT WHENEVER ADDITION IS MADE OF AN AMOU NT OFFERED BY ASSESSEE TO BE ADDED THERE CANNOT BE ANY LEVY O F PENALTY OR THAT THE ASSESSEE IS NOT REQUIRED TO EXPLAIN SOURCE S. THE ACTUAL POSITION IN LAW IS THAT MERELY BECAUSE THE ASSESSEE HAD AGREED TO THE ASSESSMENT THAT CANNOT AUTOMATICALLY BRING IN LEVY OF PENALTY. IF THE ASSESSEE OFFERS AN EXPLANATION THE REVENUE AUTHORITIES HAVE TO CONSIDER THE ACCEPTABILITY OF T HE EXPLANATION AND PASS NECESSARY ORDERS. IF THE EXPLANATION IS FO UND ACCEPTABLE NOTWITHSTANDING THE ADDITION MADE BY TR EATING THE AMOUNT OFFERED BY THE ASSESSEE AS INCOME FROM UNDIS CLOSED SOURCES PENALTY MAY NOT BE LEVIED. BUT IF THE EXPL ANATION IS FOUND TO BE VAGUE OR FANCIFUL AND WITHOUT ANY FOUND ATION OR BASIS IT IS CERTAINLY OPEN TO THE REVENUE AUTHORIT IES TO IMPOSE PENALTY. IT WOULD ALL DEPEND UPON THE ACCEPTABILITY OF THE EXPLANATION OFFERED BY THE ASSESSEE IN THE BACKGROU ND OF THE STATUTORY PROVISIONS AS PREVAILING AT THE RELEVANT TIME.' 8.2 ON THE ISSUE OF LEVY OF PENALTY IN CASE OF SURR ENDER OF INCOME THE HON'BLE SUPREME COURT IN THE CASE OF K.P.MDHUSU DAN 251 ITR 99 OBSERVED THAT: 'LEARNED COUNSEL FOR THE ASSESSEE THEN DREW OUR ATT ENTION TO THE JUDGMENT OF THIS COURT IN SIR SHADILAL SUGAR AND GE NERAL MILLS LTD V. CIT [1987] 168 ITR 705. HE SUBMITTED THAT TH E ASSESSEE HAD AGREED TO THE ADDITIONS TO HIS INCOME REFERRED TO HEREINABOVE TO BUY PEACE AND IT DID NOT FOLLOW THER EFROM THAT THE AMOUNT THAT WAS AGREED TO BE ADDED WAS CONCEALE D INCOME. THAT IT DID NOT FOLLOW THAT THE AMOUNT AGREED TO B E ADDED WAS CONCEALED INCOME IS UNDOUBTEDLY WHAT WAS LAID DOWN BY THIS COURT IN THE CASE OF SIR SHADILAL SUGAR AND GENERAL MILLS LTD. [1987] 168 ITR 705 AND THAT THEREFORE THE REVENUE WAS REQUIRED TO PROVE THE MENS REA OF A QUASI-CRIMINAL OFFENCE. BUT IT WAS BECAUSE OF THE VIEW TAKEN IN THIS AND OTHER JUDGMENTS THAT THE EXPLANATION TO SECTION 271 WAS ADDED. BY R EASON OF THE ADDITION OF THAT EXPLANATION THE VIEW TAKEN IN THI S CASE CAN NO LONGER BE SAID TO BE APPLICABLE.' ACCORDINGLY IN THIS CASE EVEN THOUGH THE ASSESSEE HAD SURRENDERED THE INCOME LEVY OF PENALTY WAS UPHELD BY THE HON'B LE SUPREME COURT. 10 8.3 IN THE PRESENT CASE THE REVISED RETURN WAS NOT FILED BY THE ASSESSEE ON ITS VOLITION AND BEFORE THE CONCEALMENT WAS DETECTED BY THE DEPARTMENT BUT WAS FILED ONLY WHEN THE DEPARTM ENT HAD CONDUCTED SURVEY AND HAD FOUND DISCREPANCIES IN THE BOOKS OF ACCOUNT AND WHICH DISCREPANCIES THE ASSESSEE COULD NOT EXP LAIN AND THEREFORE ADMITTED THAT IT HAD DEBITED BOGUS EXPENSES IN THE NAME OF CERTAIN PARTIES. IT IS NOT A SIMPLE CASE WHERE THE ASSESSEE COMMITTED A BONAFIDE MISTAKE IN NOT DISCLOSING INCOME OR IN CLA IMING EXCESS EXPENDITURE BUT IT IS CASE WHERE THE ASSESSEE DELIB ERATELY DEBITED EXPENSES IN THE NAME OF NON-EXISTENT PARTIES AND DI D NOT RECORD THESE TRANSACTIONS IN THE AUDITED BOOKS OF ACCOUNTS. THER EFORE SINCE THE REVISED RETURN WAS FILED ONLY WHEN THE ASSESSEE WAS CORNERED AND HAD NO EXPLANATION OR SUPPORTING DOCUMENTS THAT THE AS SESSEE DECIDED TO WITHDRAW THE CLAIM AND FILED A REVISED RETURN. IT I S ALSO NOT A SIMPLE CASE OF NON-AVAILABILITY OF VOUCHERS BUT A CASE WH ERE THE ASSESSEE IN A WELL-THOUGHT OUT MANNER DEBITED EXPENSES IN THE NAM E OF NON- EXISTENCE ENTITIES IN ORDER TO SUPPRESS ITS CORRECT TAXABLE INCOME. THE APPELLANT ARGUED THAT THE ASSESSING OFFICER HAS NOT SHOWN THAT THE BOGUS EXPENDITURE WAS ASSESSEE'S INCOME THIS ARGUM ENT OF THE ASSESSEE DOES NOT HAVE ANY FORCE. BY CLAIMING BOGUS EXPENDITURE THE ASSESSEE HAS REDUCED ITS TOTAL INCOME AND THEREFORE THOUGH THE EXPENSES PER-SE ARE NOT INCOME THE CORRECT PARTICU LARS OF INCOME WERE CONCEALED BY CLAIMING THESE EXPENSES. THUS THE TAX WAS EVADED. IT IS ALSO SEEN THAT THE ASSESSING OFFICER'S CASE OF ADDI TION TO INCOME AND LEVY OF PENALTY IS NOT DEPENDENT UPON ONLY THE STAT EMENT MADE BY THE ASSESSEE. AT THE TIME OF SURVEY IT WAS DETECTED TH AT EXPENSE IN THE NAME OF CERTAIN CONCERNS WERE DEBITED IN BOOKS OF A CCOUNT. NO VOUCHERS FOR EXPENSES WERE FOUND AT THE TIME OF SUR VEY. EVEN SUBSEQUENTLY DURING ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS GIVEN OPPORTUNITY BY THE ASSESSING OFFICER AND WAS ASKED TO JUSTIFY THE CLAIM OF EXPENSES IN THE NAME OF THESE ENTITIES. HO WEVER EVEN IN SUBSEQUENT STATEMENT THE MANAGING DIRECTOR ADMITTE D THAT THESE PARTIES WERE NON-EXISTENT 8.4 THE ASSESSEE ALSO ARGUED THAT THE ASSESSING OFF ICER WAS NOT CORRECT IN OBSERVING THAT THE REVISED RETURN WAS NO T A VALID RETURN U/S. 139(5). THIS CONTENTION OF THE ASSESSEE IS ALSO NOT CORRECT. SECTION 139(5) HAS APPLICATION TO A LIMITED CATEGORY OF CAS ES I.E. CASES WHERE IN THE ORIGINAL RETURN THERE WAS ANY OMISSION OR WR ONG STATEMENT. SECTION 139(5) IS APPLICABLE ONLY WHEN A PERSON DIS COVERS THAT INADVERTENT OMISSION OR AN UNINTENDED WRONG STATEME NT HAD CREPT IN 11 THE RETURN FILED BY HIM. IF A PERSON WHO FURNISHED THE RETURN WAS AWARE OF THE FALSITY OF THE STATEMENT AND THE CORRECTNESS OF THE PARTICULARS OF INCOME EVEN AT THE TIME WHEN HE FILED THE ORIGINAL RETURN THERE WAS NO QUESTION OF THAT PERSON SUBSEQUENTLY DISCOVERING TH E EXISTENCE OF THE OMISSION OR CREEPING IN OF THE WRONG STATEMENT IN T HE RETURN ALREADY FILED BY HIM [CIT V. J.K.A SUBRAMANIA CHETTIAR (19 77) 110 ITR 602 614-15 609 (MAD)]. A RETURN FILED SO AS TO INCLUDE CONCEALED INCOME CANNOT BE TREATED AS A REVISED RETURN U/S. 139(5) B ECAUSE OMISSION TO FILE THE CORRECT INCOME IN THE ORIGINAL RETURN CANN OT BE SAID IN SUCH CIRCUMSTANCES DUE TO ANY BONAFIDE MISTAKE OR OMISS ION [GANGAPRASAD V. CIT 123 ITR 349 (ALL) BADSHAH PRASAD V. CIT 127 ITR 601 (PATNA)]. 8.5 IN THE PRESENT CASE THE REVISED RETURN HAS BEE N FILED NOT BECAUSE THERE WAS INADVERTENT OMISSION UNINTENDED WRONG STA TEMENT BUT WAS FILED BECAUSE IN THE ORIGINAL RETURN THE ASSESSEE HAD CLAIMED BOGUS EXPENDITURE AND THEREFORE THE REVISED RETURN CANNO T BE CONSIDERED AS VALID RETURN U/S.139(5) OF THE ACT. 8.6 THE APPELLANT FURTHER ARGUED THAT THE EXPENSE I N THE NAME OF NON-GENUINE PARTIES WERE CLAIMED AS THE DIRECTORS W ERE UNEDUCATED AND ILLITERATE AND DID NOT UNDERSTAND THE ACCOUNTS OR INCOME-TAX LAW. THIS EXPLANATION OF THE ASSESSEE IS TOTALLY UN-CONV INCING. THE DIRECTORS OF THE COMPANY HAD BEEN RUNNING FAIRLY BI G BUSINESS AND DEALING WITH REPUTED CLIENTS. THE VOLUME OF THE ASS ESSEE IS ALSO QUITE HIGH (TOTAL TURNOVER 5.94 CRORES). SUCH TURNOVER CO ULD NOT HAVE BEEN ACHIEVED UNLESS THE DIRECTORS HAD FULL CONTROL OVER THE AFFAIRS OF THE COMPANY. THEREFORE IT IS DIFFICULT TO BELIEVE THAT BOGUS EXPENSES WERE CLAIMED IN THE NAME OF NON-GENUINE ENTITIES WITHOUT THEIR KNOWLEDGE. IN FACT NO SUCH EXPLANATION WAS GIVEN AT THE TIME OF SURVEY AND WHEN THE DIRECTOR WAS CONFRONTED HE IMMEDIATELY ACCEPTE D THAT THE ALLEGED CREDITORS WERE NON-GENUINE. ALSO THE QUANTUM OF NO N-GENUINE EXPENDITURE IS SO BIG AS COMPARED TO THE RETUNED IN COME THAT THE DIRECTOR WOULD HAVE IMMEDIATELY COME TO KNOW REGARD ING THE FALL IN PROFIT. IN ANY CASE THE EMPLOYEES OR THE ACCOUNTAN T DID NOT HAVE ANYTHING TO GAIN BY CLAIMING EXPENDITURE AND ULTIMA TELY IT IS THE DIRECTORS WHO WERE THE BENEFICIARIES OF THE BENEFIT OBTAINED BY CONCEALING THE INCOME AND BY EVADING THE TAXES. THE REFORE FROM THE FACTS IT IS SEEN THAT THE ASSESSEE HAD IN A WELL-T HOUGHT OUT MANNER MADE AN ATTEMPT TO DEBIT BOGUS EXPENDITURE. IN FACT BOGUS EXPENDITURE IN THE NAME OF THREE ASSOCIATE CONCERNS WAS ALSO DEBITED AND IT COULD NOT HAVE BEEN WITHOUT THE KNOWLEDGE OF THE ASSESSEE. IF 12 THE MANAGING DIRECTORS DID NOT KNOW ABOUT THE DEBIT ING OF BOGUS EXPENSES IN THE NAME OF NON-GENUINE PARTIES HOW CO ULD HE AT THE TIME OF SURVEY SAY THAT THESE WERE NON-EXISTING PARTIES AND HOW COULD HE OFFER THE INCOME FOR TAX. THUS IT IS NOT A SIMPLE CASE OF MISTAKE IN ACCOUNTS BUT A CASE OF FALSIFICATION OF ACCOUNTS BY DEBITING THE BOGUS EXPENDITURE AND THUS INFLATING THE EXPENDITURE BUT AT THE SAME TIME NOT MAKING THE ENTRIES REGARDING THE ALLEGED CREDIT ORS IN THE BOOKS OF ACCOUNT. 8.7 THE APPELLANT ALSO ARGUED THAT IN VIEW OF EXPLA NATION 5 TO SECTION 271(L)(C) NO PENALTY OUGHT TO HAVE BEEN LE VIED. THIS CONTENTION OF THE ASSESSEE IS WITHOUT ANY BASIS. EX PLANATION 5 IS APPLICABLE ONLY WHEN DURING THE COURSE OF SEARCH T HE ASSESSEE IS FOUND TO BE OWNER OF ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. THUS EXPLANATION 5 IS NOT APPLIC ABLE IN CASE OF SURVEY. THE ASSESSEE HAS NOT BROUGHT TO MY NOTICE A NY COURT DECISION WHEREIN IT HAS BEEN HELD THAT EXPLANATION 5 IS APPL ICABLE IN CASE OF STATEMENT GIVEN EVEN DURING THE COURSE OF SURVEY. 8.8 THE APPELLANT ARGUED THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS NOT SPECIFIED THE DEFAULT. HOW EVER A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT IN PARA 3.10 THE A SSESSING OFFICER HAS CATEGORICALLY RECORDED THAT THE EXPENSES OF RS. 1 06 45 488/- WERE BOGUS. FURTHER IN THE SAME PARAGRAPH HE RECORDED THE SATISFACTION REGARDING INITIATION OF PENALTY PROCEEDINGS U/S. 27 1(1)(C) OF THE ACT. SIMILAR SATISFACTION WERE RECORDED IN PARA 4.3 OF T HE ASSESSMENT ORDER REGARDING ADDITION OF RS.2 69 525/- ON ACCOUNT OF C REDIT BALANCE IN SHORTAGE ACCOUNT. THUS THE1 SATISFACTION REGARDIN G CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME WAS RECORDED DURING THE COURSE OF ASSESSMENT PROCEE DINGS WHICH CULMINATED ON PASSING OF ASSESSMENT ORDER. 8.9 THE APPELLANT ALSO ARGUED THAT IN THE ASSESSEE' S CASE EXPLANATION 1 TO SECTION 271(1)(C) IS NOT APPLICABLE AS THE ASS ESSEE OFFERED AN EXPLANATION AND SUCH EXPLANATION WAS NOT FOUND TO B E FALSE. IN MY OPINION THE ASSESSEE'S CASE IS COVERED UNDER THE M AIN SECTION ITSELF I.E. SECTION 271(1)(C) OF THE ACT. THE FACTS DISCOVERED DURING THE COURSE OF SURVEY AND THE ASSESSEE'S FURTHER ADMISSION OF INFL ATING THE EXPENSE BY DEBITING BOGUS EXPENDITURE CLEARLY PROVE THAT THE A SSESSEE HAD CONCEALED THE PARTICULARS OF ITS TRUE INCOME AND HA D ALSO FURNISHED INACCURATE PARTICULARS REGARDING THE EXPENDITURE CL AIMED. IN ANY CASE 13 EVEN EXPLANATION 1 IS ALSO APPLICABLE. THE EXPLANAT ION OFFERED BY THE ASSESSEE THAT IT HAD INCURRED EXPENSES ON VARIOUS I TEMS BUT DEBITED THE EXPENSES UNDER THE HEAD 'REPAIRS AND MAINTENANCE' H AS BEEN SHOWN TO BE FALSE. FURTHER THE ASSESSEE COULD NOT SUBSTANTIA TE THE EXPLANATION THAT THE EXPENDITURE WAS IN FACT INCURRED FOR BUSIN ESS PURPOSE. ALSO FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME W ERE NOT DISCLOSED IN THE ORIGINAL RETURN OF INCOME OR EVEN IN THE REVISE D RETURN. 8.10 THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER 'S CLAIM OF DISALLOWANCE OF EXPENDITURE CAN BE VALID FOR ASSESS MENT PURPOSES BUT THE SAME IS NOT VALID FOR LEVY OF PENALTY. IN THE A PPELLANT'S CASE IT HAS BEEN PROVED BEYOND DOUBT BY THE DEPARTMENT THAT THE EXPENSES DEBITED IN THE NAME OF NON-GENUINE PARTIES WERE BOG US. THE ASSESSEE ACCEPTED THIS FACT AT THE TIME OF SURVEY AS WELL AS SUBSEQUENTLY. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE AT THE TIME OF ASSESSMENT OR PENALTY PROCEEDINGS OR APPELLATE PROCEEDINGS TO SHO W THAT THE EXPENSES CLAIMED IN THE NAME OF THE PARTIES WERE GE NUINE EXPENSES. THEREFORE THE ASSESSING OFFICER WAS NOT REQUIRED T O PROVE ANYTHING FURTHER. AS PER*JUDICIAL OPINION THE ASSESSEE COUL D HAVE ADDUCED FURTHER EVIDENCE DURING PENALTY PROCEEDINGS. HOWEVE R THE ASSESSEE DID NOT MAKE ANY SUCH ATTEMPT. 8.11 THE APPELLANT HAS RELIED ON A LARGE NUMBER OF DECISIONS. THE LEVY OF PENALTY IS ESSENTIALLY A QUESTION OF FACT. HOWEVER SOME OF THE DECISIONS RELIED UPON BY THE ASSESSEE ARE BRIEFLY D ISCUSSED. IN THE CASE OF GITADEVI (SURPA) IT WAS HELD ON FACTS THAT THE SALES WERE INADVERTENTLY RECORDED IN EARLIER MONTHS WHEREAS TH E PURCHASES WERE AFFECTED IN SUBSEQUENT MONTHS. IN THE CASE OF A.V.R PRASAD (SURPA) THE PENALTY WAS DELETED ON THE GROUND THAT THE DEPA RTMENT COULD NOT PROVE THAT THE DIFFERENTIAL INCOME DECLARED IN THE REVISED RETURN WAS DETECTED BY THE DEPARTMENT BEFORE THE ASSESSEE CAME FORWARD TO FURNISH THE REVISED RETURN. IN THE CASE OF E.R.TRUS T (SURPA) PENALTY WAS LEVIED ON NOTIONAL INTEREST ON DEBIT BALANCES O F CERTAIN PARTIES OFFERED FOR TAX IN REVISED RETURN IN ORDER TO AVOID LITIGATION. IN THE CASE OF HARIKRISHNAN SILK MILLS (SURPA) THE PENALTY WAS DELETED ON THE GROUND THAT BUT FOR THE ASSESSEE HAVING FILED THE R EVISED RETURN AND AGREEING TO THE ADDITION EVEN THE AMOUNT OF RS.5 L AKHS OFFERED BY THE ASSESSEE COULD NOT HAVE BEEN ADDED TO THE TOTAL INC OME . IN THE CASE OF K.DEEDAR AHMED (SURPA) WHILE DELETING THE PENALTY THE HON'BLE ITAT OBSERVED THAT THE VERY FACT THAT THE INCOME RE TURNED IN RESPONSE TO NOTICE U/S.148 WAS ASSESSED ON PROTECTIVE BASIS GOES TO SHOW THAT ON THE DATE OF FILING REVISED RETURN THE ASSESSING OF FICER HAD NOT DETECTED 14 CONCEALMENT OF INCOME OF THE ASSESSEE. AS REGARDS T HE CASE OF SURESHCHANDRA MITTAL (SURPA) A PERUSAL OF HON'BLE SUPREME COURT & HIGH COURT ORDER SHOWS THAT COMPLETE FACTS OF THE C ASE LEADING TO FILING OF REVISED RETURN HAVE NOT BEEN DISCUSSED IN THE DECISION. IN CONTRAST IN THE PRESENT CASE THE DEPARTMENT DURIN G THE COURSE OF SURVEY FOUND SUFFICIENT EVIDENCE THAT EXPENSES IN T HE NAME OF NON- GENUINE CONCERNS WERE DEBITED. THIS FACT WAS ADMITT ED BY THE MANAGING DIRECTOR IN THE COURSE OF SURVEY AS WELL A S SUBSEQUENTLY. NO BILLS OR VOUCHERS IN THE NAME OF THESE PARTIES WERE FOUND AT THE TIME OF SURVEY. EVEN DURING ASSESSMENT PROCEEDINGS THE ASS ESSEE COULD NOT LEAD ANY EVIDENCE TO SHOW THAT THESE PARTIES WERE G ENUINE PARTIES OR THE EXPENSES CLAIMED WERE IN FACT INCURRED BY IT. I T IS ONLY WHEN THE ASSESSEE WAS CORNERED BY THE DEPARTMENT THAT THE AS SESSEE FILED A REVISED RETURN WITHDRAWING THE CLAIM OF BOGUS EXPEN DITURE. SUCH REVISED RETURN IS THEREFORE NOT A VOLUNTARY ACT. THUS THE COURT DECISIONS RELIED UPON BY THE ASSESSEE ARE DISTINGU ISHABLE ON FACTS. 8.12 AS REGARDS PENALTY WITH REGARD TO ADDITION OF RS.2 69 525/- THE APPELLANT STATED THAT THE ACCOUNT OF SHORTAGES REPR ESENTS LOSS INCURRED BY THE APPELLANT. THE ASSESSEE HAD EXPLAINED TO THE ASSESSING OFFICER THAT THE SHORTAGES ARE RECOVERED FROM THE DRIVERS A ND THE CREDIT AMOUNT REPRESENTS SUCH RECOVERY. THE ASSESSEE COULD NOT PR ODUCE ANY EVIDENCE BEFORE THE A.O REGARDING EXCESS CREDIT IN THAT ACCOUNT AND WHY THAT AMOUNT WAS NOT TREATED AS INCOME. THEREFOR E THE CREDIT IN SHORTAGE ACCOUNT ALSO REPRESENTS ASSESSEE'S CONCEAL ED INCOME. 8.13 CONSIDERING THE TOTALITY OF FACTS AND CIRCUMST ANCES OF THE CASE AND THE ABOVE DISCUSSION IT IS HELD THAT THE ASSES SING OFFICER WAS JUSTIFIED IN LEVYING PENALTY OF RS.43 16 890/- FOR CONCEALING THE PARTICULARS OF TRUE INCOME AS WELL AS FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME BY DEBITING BOGUS EXPENDITURE AND BY NOT OFFERING THE EXCESS CREDIT BALANCE IN THE SHORTAGE ACCOUNT. THE PENALTY LEVIED IS CONFIRMED. 10 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) NO W THE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEA RING THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ON S IMILAR FACTS PENALTY IMPOSED BY THE AO HAS BEEN DELETED BY THE L EARNED CIT(A) DURING AY 2002-03 AND THE REVENUE HAS NOT FI LED ANY 15 APPEAL AGAINST THAT ORDER BEFORE THE TRIBUNAL THUS ACCEPTING DELETION OF THE PENALTY. THEREFORE THIS PENALTY DE SERVES TO BE DELETED. HE FURTHER SUBMITTED THAT THE AO WHILE INI TIATING THE PENALTY PROCEEDINGS HAS NOT CATEGORICALLY MENTIONED WHETHER THE PENALTY PROCEEDINGS HAVE BEEN INITIATED FOR CONCEAL MENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREFORE THIS PENALTY ORDER DESERVES TO BE CANCEL LED IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF 122 ITR 306. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N SHROFF VS. JOI NT CIT (2007) 291 ITR 519 (SC) IN WHICH SAME PROPOSITION HAS BEE N UPHELD. HE ALSO RELIED ON THE DECISION OF THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF K M BHATIA VS. CIT (1992) 193 ITR 37 9 (GUJ) WHEREIN PENALTY PROCEEDINGS WERE INITIATED FOR FILI NG OF INACCURATE PARTICULARS OF INCOME BUT PENALTY WAS LE VIED FOR CONCEALMENT OF INCOME WHICH WAS NOT HELD TO BE VALI D. HE ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF 113 ITD 13 AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) FOR THE PROPOSITION THAT IF ALL THE FACTS HAVE BEEN DISCLOSED AS HAS BEEN DONE BY THE ASSESSE E BY WAY OF FILING REVISED RETURN OF INCOME NO PENALTY CAN BE LEVIED FOR CONCEALMENT OF INCOME. THE LEARNED COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT OUT OF TOTAL ADDITION OF RS.1 06 45 480/- ON ACCOUNT OF BO GUS EXPENSES DEBITED TO P&L ACCOUNT ATLEAST EXPENSES DEBITED AG AINST THE NAMES OF THREE INHOUSE COMPANIES VIZ. BACHHU GAURA GE AUTO 16 LINK AND AUTO CARE BE NOT CONSIDERED FOR LEVY OF P ENALTY AS IN THEIR CASES ONLY VOUCHERS IN RESPECT OF EXPENSES WE RE NOT PRODUCED AND SINCE THESE PARTIES WERE IN EXISTENCE UNLIKE THE OTHER BOGUS PARTIES EXPENSES DEBITED AGAINST THEM CANNOT BE TREATED AS BOGUS EXPENSES. AS REGARDS LEVY OF PENALTY WITH REGARD TO THE ADDIT ION OF RS.2 69 525/- ON ACCOUNT OF SHORTAGE OF MATERIAL SU PPLIED BY THE ASSESSEE THE ASSESSEES SUBMISSION WAS THAT IT WAS IN THE BUSINESS OF TRANSPORTATION OF CHEMICALS IN TRUCKS. THERE IS PRE- DEFINED PERCENTAGE OF LOSS IN TRANSPORTATION OF CHE MICALS WHICH IS TERMED AS NORMAL LOSS. IF THE LOSS ON ACCOUNT OF TRANSPORTATION IS MORE THAN THE NORMAL LOSS THEN THE ASSESSEE I S PAID LESS BY THE PARTY. THE PARTY DEDUCTS THE AMOUNT OF LOSS FRO M THE PAYMENT TO BE MADE TO THE ASSESSEE AND THAT THE ACCOUNT OF SHORTAGE IN FACT REPRESENTS THE LOSS INCURRED BY THE ASSESSEE. SINCE SIMILAR LOSS HAS BEEN CLAIMED BY THE ASSESSEE DURING THIS Y EAR FOLLOWING THE PRACTICE OF EARLIER YEARS EVEN IF THE ADDITION HAS BEEN MADE ON THIS ACCOUNT PENALTY FOR CONCEALMENT IS NOT LEV IABLE. CONCLUDING HIS ARGUMENTS HE SUBMITTED THAT THE PEN ALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) MAY K INDLY BE DELETED. 11 THE LEARNED DR ON THE OTHER HAND SUBMITTED THA T THE ARGUMENT OF THE LEARNED COUNSEL THAT THE REVENUE HA S ACCEPTED THE ORDER OF THE LEARNED CIT(A) FOR AY 2002-03 DELE TING THE PENALTY ON SIMILAR FACTS IS MISPLACED AS APPEAL HA S NOT BEEN FILED 17 BEFORE THE ITAT BY THE REVENUE DUE TO PENDENCY OF R ECTIFICATION APPLICATION BY THE AO BEFORE THE LD. CIT(A) ON THE GROUND THAT THE ORDER PASSED BY HIM IS ON WRONG FACTS. THE OUTC OME OF THIS RECTIFICATION APPLICATION IS BEING AWAITED. THE LEARNED DR FURTHER SUBMITTED THAT IN VIEW OF TH E FACT THAT THE REVISED RETURN FILED BY THE ASSESSEE WAS HELD TO BE INVALID BY THE ITAT IN QUANTUM APPEAL THE REVISED INCOME SHOWN BY THE ASSESSEE CANNOT ABSOLVE THE ASSESSEE FROM PENALTY P ROCEEDINGS. IN REPLY TO THE ARGUMENT OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE AO WHILE INITIATING PENALTY PROCEEDINGS HA S NOT MENTIONED AS TO WHETHER PENALTY PROCEEDINGS HAVE BE EN INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME THE LEARNED DR SUBMITTED THA T AFTER THE INSERTION OF SECTION 271(1)(1B) W.E.F. 01-04-1989 FOR INITIATING PENALTY PROCEEDINGS NO SUCH REQUIREMENT IS THERE. FOR MAKING THESE SUBMISSIONS THE LEARNED DR RELIED UPON THE F OLLOWING CASE-LAWS:- (I) MS. MADHUSHREE GUPTA VS. UNION OF INDIA (2009) 317 ITR 107 (DEL) (II) DCIT VS. MS. MADH RAJ LALWANI (2011) 132 ITD 209 (DEL) (III) KAILASHBHAI AMBALAL SHAH VS. ITO (2011) 129 ITD 135 (AHD) (IV) GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACIT (201 0) 39 SOT 570 (AHD) (V) PEAREY LAL & SONS (EP) LTD. (2009) 308 ITR 438 (P&H) 18 HE FURTHER SUBMITTED THAT AS FAR AS THE PENALTY ORD ER IS CONCERNED THERE IS NO SUCH DISCREPANCY AS THE AO HAS IMPOSED THE PENALTY FOR CONCEALMENT OF INCOME. CONCLUDING HIS ARGUMENTS THE LEARNED DR SUBMITTED THAT THE PENALTY IMPOSED BY TH E AO AND SUSTAINED BY THE LEARNED CIT(A) MAY BE CONFIRMED AS THE ADDITIONS ON THE BASIS OF WHICH PENALTY HAS BEEN LE VIED HAVE BEEN CONFIRMED BY THE ITAT ALSO IN QUANTUM APPEAL. 12 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH VARIOUS DECISIONS RELIED UPO N BY THE PARTIES BEFORE US. WE FIND THAT ON THE BASIS OF THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY AND THEIR COMPAR ISON WITH THE AUDITED BOOKS OF ACCOUNTS IT WAS DETECTED THAT AUD ITED BOOKS OF ACCOUNTS DID NOT CONTAIN THE NAMES/ACCOUNTS OF 34 C REDITORS. STATEMENT ON OATH OF SHRI VIJAY R. NAIR MANAGING D IRECTOR OF THE COMPANY WAS RECORDED. HE WAS ASKED TO EXPLAIN A BOUT THE DISCREPANCY FOUND IN THE TRIAL BALANCE VIS-A-VIS AU DITED BOOKS OF ACCOUNT. SHRI VIJAY NAIR ADMITTED THAT ALL THE 34 P ARTIES (EXCEPT 3 RELATED PARTIES VIZ. BACHHU GARAGE AUTOLINK & AUT OCARE) WHOSE NAMES WERE APPEARING IN THE TRIAL BALANCE BUT NOT I N THE AUDITED ACCOUNTS WERE NONEXISTENT AND NON-GENUINE. SHRI NA IR EXPLAINED THAT THE ENTRIES DEBITING BOGUS EXPENSES AND CREDIT ING NON- GENUINE PARTIES WERE DIRECTLY FED ON COMPUTERS BY WAY OF JOURNAL ENTRIES. NO VOUCHERS WERE ALSO PREPARED BY THE ASSESSEE. ANOTHER STATEMENT OF SHRI NAIR WAS RECORDED ON 24-2 -2003 WHEREIN SHRI VIJAY NAIR FURTHER ADMITTED THAT ONE M ORE PARTY VIZ. M/S. PERFECT SALES 8R SERVICE WAS ALSO A NON-GENUIN E CREDITOR IN ADDITION TO THE 34 BOGUS CREDITORS IDENTIFIED ON TH E DATE OF 19 SURVEY. THE ASSESSEE FILED A REVISED RETURN ON 11-3 -2003 WHEREIN THE BOGUS EXPENDITURE OF RS.L 06 45 488/- APPEARING IN THE NAME OF THESE NON-GENUINE PARTIES WAS ADDED BACK. THE AS SESSING OFFICER HOWEVER HELD THAT THE REVISED RETURN WAS NOT A VALID RETURN U/S 139(5) AS THERE WAS NO OMISSION OR WRON G STATEMENT IN THE ORIGINAL RETURN AND IT WAS ONLY DUE TO DETECTIO N OF NON- EXISTENT CREDITORS THAT THE ASSESSEE FILED A REVISE D RETURN AND THEREFORE IT CANNOT ESCAPE THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS ALSO NOTICED THAT 'SHORTAGE ACCOUNT' WAS DEBITED BY RS.11 11 281 /- AND CREDITED BY RS.13 80 807/- LEAVING THE CREDIT BALAN CE OF RS.2 69 525/-. THE ASSESSEE EXPLAINED TO THE ASSESS ING OFFICER THAT AS PER THE UNDERSTANDING WITH THE CONSIGNOR I T HAD TO COMPENSATE TO THE CONSIGNOR FOR THE LOSS ON ACCOUNT OF SHORTAGE OF MATERIAL IF ANY DURING TRANSPORTATION OF GOODS AND SUCH SHORTAGE WAS RECOVERED FROM THE DRIVERS. THE AMOUNT S RECOVERED FROM DRIVERS WERE ADJUSTED AGAINST THE SHORTAGES. I T WAS ALSO EXPLAINED THAT THE AMOUNT RECEIVED FROM DRIVERS IS FINALLY ADJUSTED OR PAID AT THE TIME OF TERMINATION OF SERV ICES OF THE DRIVERS. SINCE NO PRIMARY RECORD OF REPAYMENT OF S UCH CREDIT BALANCE TO THE DRIVERS WAS FOUND DURING THE COURSE OF SURVEY NOR SUCH PROOF WAS PRODUCED DURING ASSESSMENT PROCEEDIN GS THE ASSESSING OFFICER TREATED THE CREDIT BALANCE OF RS. 2 69 525/- AS INCOME OF THE COMPANY. PENALTY PROCEEDINGS U/S 271( 1)(C) OF THE ACT ON BOTH THE ABOVE DISCUSSED ISSUES WERE INITIA TED. 20 IN RESPONSE TO PENALTY SHOW-CAUSE THE ASSESSEE ARG UED BEFORE THE ASSESSING OFFICER THAT AS IT HAD FIELD REVISED RETU RN OF INCOME AND THEREFORE THERE WAS NO CONCEALMENT. THE ASSESSI NG OFFICER HOWEVER HELD THAT THE ASSESSEE ADMITTED THAT IT HA D DEBITED BOGUS PURCHASES IN ITS BOOKS OF ACCOUNT; THAT THE B OOKS OF ACCOUNTS WERE NOT PROPER AS ENTRIES AGAINST THE NON -EXISTING CREDITORS WERE MADE IN THE BOOKS OF ACCOUNT; THAT T HE REVISED RETURN WAS FILED ONLY WHEN THE CONCEALMENT WAS DETE CTED DURING SURVEY AND THAT THE ADDITIONS MADE WERE CONFIRMED B Y THE CIT(A). THE ASSESSING OFFICER LEVIED PENALTY OF RS. 43 16 890/- BEING 100% OF THE TAX SOUGHT TO BE EVADED WHICH HA S BEEN CONFIRMED BY THE LEARNED CIT(A) IN APPEAL. IN THE M EANWHILE THE ADDITIONS ON WHICH PENALTY HAS BEEN LEVIED HAVE BE EN CONFIRMED BY THE ITAT VIDE ORDER DATED 26-10-2007 IN QUANTUM APPEAL. 13 BEFORE US THE ORDER OF THE LEARNED CIT(A) HAS B EEN CHALLENGED MAINLY ON LEGAL GROUNDS. THE FIRST ARGUM ENT ADVANCED BY THE LEARNED COUNSEL OF THE ASSESSEE IS REGARDING THE INITIATION OF PENALTY PROCEEDINGS BY THE AO BEING VAGUE IN NAT URE AS ACCORDING TO THE LEARNED COUNSEL THE AO HAS NOT CAT EGORICALLY MENTIONED WHETHER THE PENALTY PROCEEDINGS HAVE BEEN INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCUR ATE OF PARTICULARS OF SUCH INCOME. RELIANCE WAS PLACED BY THE ASSESSEE ON VARIOUS CASE LAW WHICH ACCORDING TO US ARE NO M ORE GOOD LAW IN VIEW OF INSERTION OF SECTION 271(1)(1B) WITH EFF ECT FROM 1-4- 1989. FOR INITIATING PENALTY PROCEEDINGS NO SUCH RE QUIREMENT IS THERE. THE CONTENTION OF THE LEARNED DR GETS SUPPOR T FROM THE DECISION IN THE CASE OF MS. MADHUSHREE GUPTA VS. UN ION OF INDIA 21 (2009) 317 ITR 107 (DELHI). THE RELEVANT PORTION OF THE JUDGMENT WITH HEAD-NOTE READS AS UNDER: PENALTY - CONCEALMENT OF INCOME - PROVISION INTRODUCING FICTION WITH RETROSPECTIVE EFFECT THAT DIRECTION IN ASSESMENT ORDER TO INITIATE PENALTY PROCEEDINGS TO BE DEEMED SATISFACTION OF ASSESSING OFFICER - VALID - BUT SUCH SATISFACTION MUST BE DISCERNIBLE FROM ASSESSMENT ORDER - SATISFACTION ONLY PRIMA FACIE - RETROSPECTIVE OPERATION GIVEN TO SECTION NOT VIOLATIVE OF ARTICLE 14 - INCOME-TAX ACT 1961 SS. 271(1) (C) (IB) 274 275 - CONSTITUTION OF INDIA ARTS. 14 226. BY A DEEMING FICTION IN SECTION 271(1B) INSERTED IN THE INCOME-TAX ACT 1961 BY THE FINANCE ACT 2008 WITH RETROSPECT IVE EFFECT FROM APRIL 1 1989 WHERE ANY AMOUNT IS ADDED OR DISALLOW ED IN COMPUTING THE TOTAL INCOME OR LOSS OF ANY ASSESSEE IN ORDER OF ASSESSMENT OR REASSESSMENT AND IF SUCH ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SUB-SECTION (1) SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONST ITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENA LTY PROCEEDINGS UNDER SUB-SECTION (1). THERE IS NO COGENT REASON ARTICULATED AS TO WHY SEC TION 271(1B) OF THE ACT WAS MADE EFFECTIVE RETROSPECTIVELY FROM APRIL 1 1989. BUT THE CUT OFF DATE OF APRIL 1 1989 DOES NOT CREATE DISCRIMIN ATION NOR IS IT A VIOLATION OF THE EQUALITY CLAUSE UNDER ARTICLE 14 O F THE CONSTITUTION FOR THE REASON THAT IF AN ASSESSEE HAS FALLEN FOUL OF T HE LAW THAT IS PENALTY PROVISIONS ARE OTHERWISE APPLICABLE TO HIM HE CANN OT BE HEARD TO SAY THAT THE RIGOURS OF LAW OUGHT NOT TO APPLY HIM BECA USE ANOTHER PERSON SIMILARLY PLACED HAS NOT BEEN EXPOSED TO SUCH A RIG OUR. THERE IS NO EQUALITY IN ILLEGALITY. SECTION 271 (IB) OF THE ACT IS NOT VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION. WHILE CONSIDERING A CHALLENGE TO THE VIRES OF A STA TUTE THE COURT IS REQUIRED TO LEAN IN FAVOUR OF ITS VALIDITY PREFERR ING AN INTERPRETATION THAT WOULD PRESERVE ITS CONSTITUTIONALITY AS THE LE GISLATURE IT IS PRESUMED DOES NOT EXCEED ITS JURISDICTION. 22 THE LEGAL POSITION THAT POWER TO IMPOSE PENALTY UND ER SECTION 2711 ACT DEPENDS UPON THE SATISFACTION OF THE INCOME-TAX OFFICER IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT REMAINS THE CASE EVEN AFTER THE INSERTION OF SECTION 271(1B). PRIMA FACIE SATIS FACTION OF THE ASSESSING OFFICER AS REFLECTED IN THE RECORD AS AGA INST HIS 'FINAL CONCLUSION' SHOULD BE DISCERNIBLE CLEARLY FROM THE ORDER PASSED DURING THE COURSE OF SUCH PROCEEDINGS. THE PROVISION ONLY PROVIDES THAT AN ORDER INITIATING PENALTY CANNOT BE DECLARED BAD IN LAW ONLY BECAUSE IT STATES THAT PENALTY PROCEEDINGS ARE INITIATED IF O THERWISE IT IS DISCERNIBLE FROM THE RECORD THAT THE ASSESSING OFF ICER HAS ARRIVED AT PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE IS OF DISCERNIBILITY OF THE 'SATISFACTION' ARRIVED AT BY THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDING BEFORE HIM. SECTION 271(1)(C) HAS TO BE READ IN CONSONANCE WITH SECTION 272(1B). THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT. THE CONTENTION THAT PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER NEED NOT BE R EFLECTED THE STAGE OF INITIATION BUT ONLY AT THE STAGE OF IMPOSITION OF P ENALTY WOULD RENDER THE PROVISION ARBITRARY. THE ASSESSING OFFICER WOUL D IN SUCH A SITUATION BE IN A POSITION TO PICK A CASE FOR INITI ATION OF PENALTY MERELY BECAUSE THERE IS AN ADDITION OR DISALLOWANCE WITHOU T ARRIVING AT A PRIMA FACIE SATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT. 'PRIMA FACIE' SATISFACTION OF THE ASSESSING OFFICER THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERN IBLE FROM THE ORDER PASSED DURING THE COURSE OF THE PROCEEDINGS. OBVIOU SLY THE ASSESSING OFFICER WOULD ARRIVE AT A DECISION I.E. A FINAL C ONCLUSION ONLY AFTER HEARING THE ASSESSEE. THE INITIATION OF PENALTY PRO CEEDINGS CANNOT BE SET ASIDE ONLY ON THE GROUND THAT THE ASSESSMENT OR DER STATES 'PENALTY PROCEEDINGS ARE INITIATED SEPARATELY' IF OTHERWISE IT CONFORMS TO THE PARAMETERS SET OUT. IF THERE IS NO MATERIAL TO INITIATE PENALTY PROCEED INGS AN ASSESSEE WILL BE ENTITLED TO HAVE RECOURSE TO A COURT OF LAW. ON THE OTHER HAND IF THE ASSESSING OFFICER'S PRIMA FACIE SATISFACTION IS DIS CERNIBLE FROM THE RECORD ORDINARILY AN ASSESSEE WOULD BE REQUIRED TO APPROACH THE AUTHORITIES UNDER THE STATUTE. AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS T HE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS-A-VIS EACH AND 23 EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERA LL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLE D FOR. THE INTER- RELATION OF ADDITIONS OR DISALLOWANCE IF ANY MAY BE UNRAVELLED ONLY AT THE CONCLUSION OF THE PENALTY PROCEEDINGS. IT WOULD BE SUFFICIENT COMPLIANCE WITH THE LAW THAT THERE IS PRIMA FACIE E VIDENCE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS IS SO AS THE LEGISLATUR E DOES NOT ENJOIN A FULL FLEDGED INVESTIGATION AT THE STAGE OF INITIATI ON OF PENALTY PROCEEDINGS. TO THAT EXTENT THE CONTENTION THAT THE PROVISION GIVES ARBITRARY POWER TO THE ASSESSING OFFICER TO PICK AN D CHOSE ASSESSEES AGAINST WHOM PENALTY PROCEEDINGS MAY BE INITIATED E VEN THOUGH SIMILAR ADDITIONS AND DISALLOWANCES ARE MADE OR THA T EVEN THOUGH THERE ARE FIVE OR SIX ITEMS OF ADDITIONS AND DISALLOWANCE S AND INFRACTION OF CLAUSE (C) OF SECTION 271(1) IS VIS-A-VIS ONLY ONE OR TWO SUCH ITEMS OF INCOME OR DEDUCTION NOTICE FOR INITIATION UNDER TH E IMPUGNED PROVISION WILL ISSUE IN RESPECT OF ALL IS NOT TENA BLE AS PURPORTED HARDSHIP CANNOT BE A GROUND FOR STRIKING DOWN THE P ROVISION. HOWEVER THIS WOULD NOT DEBAR AN ASSESSEE FROM FURN ISHING EVIDENCE TO REBUT THE 'PRIMA FACIE' SATISFACTION OF ASSESSIN G OFFICER SINCE PENALTY PROCEEDING ARE NOT A CONTINUATION OF ASSESS MENT PROCEEDINGS. UNDER SECTION 271(1)(C) TO INITIATE PENALTY PROCEED INGS THE FOLLOWING PRE-REQUISITES SHOULD OBTAIN: (1) THE ASSESSING OFF ICER SHOULD BE 'SATISFIED' THAT: (A) THE ASSESSEE HAS EITHER CONCE ALED PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF HIS INCOME; OR (C) INFRACTED BOTH (A) AND (B). (II) THIS SATISFACTION SHOULD BE ARRIVED AT DURING THE COURSE OF 'ANY' PROCEEDINGS. THESE COULD BE ASSESSMENT REASSESSMENT OR RECTIFICATION PROCEEDINGS BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO SHOW CAUSE UNDER SECTION 274 OF THE ACT SHALL ISSUE SETT ING OUT THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITTED. THE NOTICE UNDER SECTION 274 OF THE ACT CAN BE ISSUED BOTH DURING OR AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS BUT THE SATIS FACTION OF THE ASSESSING OFFICER THAT THERE HAS BEEN AN INFRACTION OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHOULD PRECEDE CONCL USION OF THE PROCEEDINGS PENDING BEFORE THE ASSESSING OFFICER. ( IV) THE ORDER IMPOSING PENALTY CAN BE PASSED ONLY AFTER ASSESSMEN T PROCEEDINGS ARE COMPLETED. THE TIME FRAME FOR PASSING THE ORDER IS CONTAINED IN SECTION 275 OF THE ACT. DUE COMPLIANCE WOULD BE REQ UIRED TO BE MADE IN RESPECT OF THE PROVISIONS OF SECTIONS 274 AND 27 5 OF THE ACT. 24 THE LEGISLATURE HAS PLENARY POWERS TO ENACT A LAW B OTH PROSPECTIVELY AND RETROSPECTIVELY SUBJECT TO CERTAIN CONSTITUTION AL LIMITATIONS AS LONG ITS COMPETENCY TO DO SO IS NOT UNDER CHALLENGE AND IT IS NOT UNFAIR OR UNREASONABLE I.E. FALLS FOUL ARTICLE 14 OF THE CO NSTITUTION. THE LEGISLATURE HAVING EXPRESSLY MADE A RETROSPECTIVE A MENDMENT BY INSERTING SECTION 271(1B) WITH EFFECT FROM APRIL 1 1989 THE FACT THAT RETROSPECTIVELY IS LIMITED TO THIS DATE CANNOT ENSU RE TO THE BENEFIT OF THOSE TO WHOM THE AMENDMENT LAW IS TO APPLY. THE OF FENCE OF CONCEALMENT IS COMMITTED ON THE DATE ON WHICH THE O RIGINAL RETURN IS FILED. 14 IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN TH E INITIATION OF PENALTY PROCEEDINGS BY THE AO IN THIS CASE. 15 THE SECOND ARGUMENT ADVANCED BY THE LEARNED COUN SEL OF THE ASSESSEE WAS THAT IN VIEW OF THE REVISED RETURN FILED BY THE ASSESSEE THE ASSESSEE HAS DISCLOSED ALL THE MATERI AL FACTS RELEVANT TO ASSESSMENT AT THE STAGE OF ASSESSMENT PROCEEDING S AND THEREFORE IN VIEW OF THE DECISION IN THE CASE OF RE LIANCE PETROCHEMICALS NO PENALTY IS LEVIABLE BECAUSE FULL PARTICULARS WERE DISCLOSED BEFORE THE AO. THIS ARGUMENT OF THE ASSESSEE IS ALSO NOT ACCEPTABLE AS THE TRIBUNAL IN THE QUANTUM APPEAL HAS HELD THE REVISED RETURN FILED BY THE ASSESSEE TO BE NOT VALID RETURN. SO IT CANNOT BE SAID THAT THE ASSESSEE DISC LOSED ALL THE MATERIAL FACTS RELEVANT TO ASSESSMENT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. FOR THE SAKE OF CONVENIENCE THE RELEVANT PORTION OF THE TRIBUNALS ORDER IS REPRODU CED AS UNDER:- 5 FROM THE ABOVE FT IS NOTICED THAT THE ASSESSEE FILED REVISED RETURN ON 11.03.2003 AFTER SURVEY WAS CONDUCTED BY THE DEPARTMENT UNDER SECTION 133A OF THE ACT ON 30 0142003. THE RE VENUE HAS FOUND THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENSES IN THE ORIGINAL RETURN AND DECLARED IMMEDIATELY AN INCOME OF RS.9 86 384/- BY FIFING THE RETURN 25 OF INCOME ON 19.10.2001. BEFORE US AS WELL AS BEFOR E CIT(A) IT WAS CONTENDED THAT THE MISTAKE WAS NOT DELIBERATE BECAU SE OF ANY FAULT ON THE PART OF ASSESSEE AND IT HAPPENED THAT THE DIREC TOR* OF THE COMPANY ARE SOMEWHAT ILLITERATE AND THEY DO NOT UNDERSTAND INTRICACIES OF INCOME-TAX LAW AS WELL AS OF THE ACCOUNTS. FROM THE RECORDS IT IS SEEN THAT ASSESSEE COMPANY'S TURNOVER WAS AT RS.5 94 36 301/- AND THEY ARE DEALING WITH BIG CORPORATE LIKE IPCL ASIAN PAINTS BERGER PAINTS DEEPAK NITRITE ETC. IT SEEMS THAT THE DIRECTORS HAV E VAST EXPERIENCE IN. THE LINE OF BUSINESS AND PARTICULARLY CLAIMING THIS HUGE EXPENDITURE IT CANNOT BE SAID THAT THIS IS DUE TO MISTAKE AND THAT TO THE EXTENT OF RS.1 06 45 488/-. WE AGREE WITH THE FINDING OF THE CIT(A) THAT THE DIRECTORS WERE FULLY AWARE OF THE BOGUS CLAIM OF EX PENSES AND IN FACT THE THREE OF SUCH CREDITORS NAMELY - BACHHU GAURAGE AUTO LINK AND AUTO CARE ARE IN-HOUSE CONCERNS AND BILLS/INVOICES FOR MAINTENANCE AND REPAIRING EXPENSES IN THEIR NAMES WERE PREPARE D IN THE ASSESSEES OFFICE ITSELF. IT IS ALSO A FACT THAT ASSESSES HAS NOT DISCOVERED THE OMISSION OR WRONG STATEMENT IN THE ORIGINAL RETURN BUT IT WAS DETECTED BY THE REVENUE DURING THE COURSE OF SURVEY UNDER SE CTION 133A OF THE ACT WHERE THE ASSESSEE ACCEPTED THE WRONG STATEMENT . IN VIEW OF THESE FACTS WE ARC IN FULL AGREEMENT WITH THE FINDING OF CIT(A) THAT THE WRONG STATEMENT IN CLAIMING BOGUS EXPENSES IN THE O RIGINAL RETURN WAS NOT BONA FIDE OR DUE TO MISTAKE. ACCORDINGLY CIT(A) AS WELL AS THE ASSESSING OFFICER HAS RIGHTLY REFUSED TO RECOGNIZE REVISED RETURN THERE BEING NO OMISSIONS OR ANY WRONG STATEMENT* THEREFOR E REVISED RETURN FILED BY THE ASSESSEE AFTER DETECTION BY THE REVENU E CAN BE NO REVISED RETURN IN THE EYES OF LAW. ACCORDINGLY THIS ISSUE O F THE ASSESSEES APPEAL IS DISMISSED AND THE ORDER OF THE CIT(A) IS CONFIRMED. AS REGARDS THE SUBMISSION OF THE ASSESSEE IN RESPEC T OF THREE INHOUSE COMPANIES THAT ATLEAST EXPENSES DEBITED AGA INST THEIR NAMES BE NOT CONSIDERED FOR LEVY OF PENALTY WE FIN D NO MATERIAL DIFFERENCE ABOUT THE EXPENSES DEBITED TO THE ACCOUN TS OF THESE THREE COMPANIES OR IN THE NAMES OF BOGUS COMPANIES ACCEPTED BY THE ASSESSEE IN HIS STATEMENT AT THE TIME OF SURVEY PROCEEDINGS. THE ASSESSEES EXPLANATION THAT THESE EXPENSES WERE DEBITED UNDER THE HEAD REPAIRS AND MAINTENANCE BUT WERE E XPENDED FOR OTHER BUSINESS PURPOSES AND THEREFORE THE AMOUNT RE PRESENTED BY 26 THE ENTRIES IN THE ACCOUNTS OF CREDITORS DID NOT RE PRESENT HIS INCOME WAS FOUND TO BE FALSE BY THE AO AS THE ASSE SSEE COULD NOT SUBSTANTIATE THIS CLAIM MADE BY HIM IN RESPECT OF ALL THE PARTIES INCLUDING THESE THREE INHOUSE COMPANIES. WE ARE THEREFORE NOT INCLINED TO ACCEPT THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE EXPENSES DEBITED A GAINST THESE THREE PARTIES SHOULD NOT BE TREATED AS BOGUS EXPENS ES AND THEREFORE SHOULD NOT BE CONSIDERED FOR LEVY OF PENA LTY. AS REGARDS OTHER ADDITION OF RS.2 69 525/- WE FIND THAT THE ARGUMENT ADVANCED BY THE LEARNED COUNSEL OF THE ASS ESSEE BEFORE US WAS NOT BEFORE THE AO WHICH IS CLEAR FROM PARA-8 .12 OF THE ORDER OF THE LEARNED CIT(A) WHICH IS AS UNDER: 8.12 AS REGARDS PENALTY WITH REGARD TO ADDITION O F RS.2 69 525/- THE APPELLANT STATED THAT THE ACCOUNT OF SHORTAGES REPR ESENTS LOSS INCURRED BY THE APPELLANT. THE ASSESSEE HAD EXPLAINED TO THE ASSESSING OFFICER THAT THE SHORTAGES ARE RECOVERED FROM THE DRIVERS A ND THE CREDIT AMOUNT REPRESENTS SUCH RECOVERY. THE ASSESSEE COULD NOT PR ODUCE ANY EVIDENCE BEFORE THE A.O REGARDING EXCESS CREDIT IN THAT ACCOUNT AND WHY THAT AMOUNT WAS NOT TREATED AS INCOME. THEREFOR E THE CREDIT IN SHORTAGE ACCOUNT ALSO REPRESENTS ASSESSEE'S CONCEAL ED INCOME. OR EVEN BEFORE ITAT IN QUANTUM APPEAL AS IS CLEAR FROM PARA-6 OF ITATS ORDER DATED 26-10-2007 WHICH READS AS UN DER: :6. THE NEXT ISSUE IN THE APPEAL IS THAT THE LD CIT (A) III BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITIO N OF RS.2 69 525/- BEING THE AMOUNT RECOVERED AS DEPOSIT FROM THE DRIV ERS OF THE APPELLANT COMPANY AGAINST THE SHORTAGES THAT ARE FO UND IN THE MATERIAL TRANSPORTED ON BEHALF OF THE APPELLANTS CLIENT. TH E ADDITION OF RS.2 69 525/- BEING CONTRARY TO FACTS AND BEING BAD IN LAW DESERVES TO 27 BE DELETED. AT THE OUTSET THE LD. COUNSEL OF THE AS SESSEE HAS NOT PRESSED THIS ISSUE AND HENCE THE SAME IS DISMISSED AS NOT P RESSED. THE PLEA NOW TAKEN BY THE ASSESSEE BEFORE US IS THE REFORE NOT TENABLE. 16 IN VIEW OF ABOVE DISCUSSION WE FEEL NO NEED TO INTERFERE WITH THE WELL REASONED SPEAKING ORDER PASSED BY THE LEARNED CIT(A) AND THE SAME IS HEREBY UPHELD. 17 IN THE RESULT THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE COURT TODAY ON 16-02-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 16-02-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S SNITA TRANSPORT PVT. LTD. OPP. YOGESHWAR PE TROL PUMP DUMAD CHOKDI VADODARA 2. THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-4 BARODA 3. CIT CONCERNED 4. CIT(A)-III BARODA 5. DR ITAT AHMEDABAD BENCH-C AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD