THE SUPREME INDUS. LTD., MUMBAI v. THE ASSTT. C.I.T. CENTRAL CIRCLE29, MUMBAI

ITSSA 125/MUM/2007 | misc
Pronouncement Date: 16-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 12519916 RSA 2007
Assessee PAN AAACT1344F
Bench Mumbai
Appeal Number ITSSA 125/MUM/2007
Duration Of Justice 3 year(s) 6 month(s) 26 day(s)
Appellant THE SUPREME INDUS. LTD., MUMBAI
Respondent THE ASSTT. C.I.T. CENTRAL CIRCLE29, MUMBAI
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 16-03-2011
Date Of Final Hearing 15-02-2011
Next Hearing Date 15-02-2011
Assessment Year misc
Appeal Filed On 20-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER IT(SS) A NO. 125/MUM/2007 (BLOCK PERIOD: 01.04.1991 TO 29.05.2001) THE SUPREME INDUSTRIES LTD. ACIT CENTRAL CIRCLE 29 612 RAHEJA CHAMBERS ROOM NO. 411 4TH FLOOR 213 NARIMAN POINT VS. AAYAKAR BHAVAN M.K. ROAD MUMBAI 400021 MUMBAI 400020 PAN - AAACT 1344 F APPELLANT RESPONDENT APPELLANT BY: SHRI NITESH JOSHI RESPONDENT BY: SMT. KUSUM INGLE O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CENTRAL-V MUMBAI DATED 23.03.2007 CONFIRMING THE PENALTY OF ` 32 00 000/- LEVIED BY THE A.O. UNDER SECTION 158BFA(2). 2. ASSESSEE HAS RAISED FOLLOWING 8 GROUNDS ON LEVY OF PENALTY. GROUND NOS. 1 2 3 5(B) 6 7 & 8 ARE GENERAL IN NATURE AND INCLUDES SUBMISSIONS AS WELL WHICH DOES NOT REQUIRE ADJUDICATION. GROUND NO S. 4 AND 5(A) ARE AS UNDER: - 4. THE APPELLANT SUBMITS THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE FINDING OF THE CIT (A) IN QUANTUM APPEAL AND THE ACTION OF THE ASSESSING OFFICER THAT THE APPELLANT HAD PAID UNACCOUNTED CASH OF RS.33 LAKHS FOR THE PU RCHASE OF LAND AND THEREBY UPHOLDING THE LEVY OF PENALTY UNDE R SECTION 158BFA(2). 5(A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN LE VYING PENALTY IN RESPECT OF THE ADDITION MADE UNDER SECTION 68 OF THE ACT AMOUNTING TO RS.14 79 976/- AS UNEXPLAINED CASH CRE DIT. BRIEFLY STATED THERE WAS A SEARCH AND SEIZURE OPER ATION UNDER SECTION 132 OF THE ACT AGAINST THE ASSESSEE COMPANY AND ITS DIRECT OR ON 29.05.2001. IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 2 DURING THE COURSE OF SEARCH VARIOUS DOCUMENTS WERE SEIZED FROM THE BUSINESS PREMISES OF THE COMPANY AND THE RESIDENTIA L PREMISES OF THE DIRECTOR. ON THE BASIS OF THE SEIZED DOCUMENTS THE A.O. MADE TWO ADDITIONS IN THE BLOCK ASSESSMENT UNDER SECTION 158BC: (A) UN EXPLAINED INVESTMENT IN CASH FOR PURCHASING A PLOT OF LAND AT VASAI ON THE BASIS OF DOCUMENT SEIZED VIDE ANNEXURE A-II PAGE. 65 ` 33 00 000/-; AND (B) UNEXPLAINED CASH CREDIT ON THE BASIS OF PAGE 52 OF DOCUMENT A-I SE IZED FROM THE RESIDENCE OF THE DIRECTOR SHRI M.P. TAPARIA ` 14 74 976/-. IN THE APPEAL FILED AGAINST THE ORDER UNDER SECTION 158BC ASSESSEE WITHDREW THE ISS UE REGARDING THE SECOND ADDITION OF ` 14 74 976/- WHEREAS THE ADDITION OF ` 33 00 000/- THOUGH CONTESTED WAS CONFIRMED BY THE CIT(A). CONS EQUENT TO THAT ASSESSEE WAS ISSUED SHOW CAUSE LETTER AND THE REPLY FROM THE ASSESSEE DATED 27.01.2006 WAS EXTRACTED BY THE A.O. IN PARA 4 OF T HE PENALTY ORDER. THE A.O. DID NOT AGREE WITH THE EXPLANATION OF THE ASSE SSEE AND LEVIED PENALTY. T HE A.O. IMPOSED A PENALTY OF `32 00 000/- UNDER SEC TION 158BFA(2) IN RESPECT OF THE ABOVE TWO ADDITIONS. 3. AT THE OUTSET IT WAS SUBMITTED THAT THE ADDITION OF ` 33 00 000/- ON WHICH PENALTY WAS LEVIED CONTESTED IN GROUND NO. 4 HAS BEEN DELETED BY THE ITAT VIDE ORDER IN IT(SS) NO.69/MUM/2009 DATED 24.0 9.2010. ACCORDINGLY THERE IS NO NEED FOR CONFIRMING THE PENALTY ON THE ABOVE SINCE THE ADDITION ITSELF WAS DELETED IN THE QUANTUM APPEAL. THEREFORE THE A.O. IS DIRECTED TO DELETE THE PENALTY LEVIED ON THE ABOVE AMOUNT. GROU ND NOS. 4 ON THE ABOVE ISSUE STAND ALLOWED. 4. GROUND NO. 5(A) IS WITH REFERENCE TO LEVY OF PENALT Y IN RESPECT OF ADDITION MADE UNDER SECTION 68 OF THE ACT. AMOUNTIN G TO ` 14 74 976/- AS UNEXPLAINED CASH CREDIT. AS STATED EARLIER ON THE BASIS OF THE SEIZED DOCUMENT A-I/52 FROM THE RESIDENCE OF THE DIRECTOR SHRI MP. TAPARIA THE A.O. ENQUIRED ABOUT THE ENTRIES THEREON. IT WAS STA TED BY SHRI TAPARIA THAT THIS PAPER PERTAINS TO THE ASSESSEE COMPANY. THIS L OOSE PAPER CONTAIN NOTINGS OF RECEIPT OF ` 14 74 976/- AND EXPENDITURE OF ` 9 61 658/- AND THE BALANCE AVAILABLE AS ON 09.05.2001 OF ` 5 13 318/-. IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 3 5. IT WAS ASSESSEES SUBMISSION THAT THE NOTINGS ON TH E LOOSE PAPER REPRESENT ITEMS OF ESTIMATED RECEIPTS/EXPENSES IN T HE NATURE OF BRIEF NOTINGS AND THEY INDICATE THE EXPECTED RECEIPTS/EXPENSES OF VARIOUS GROUP COMPANIES. ASSESSEE SUBMITTED THAT THE NOTINGS HAS BEEN MADE BY THE CASHIER FOR HIS INFORMATION AND FOR ASSESSING THE C ASH FLOW REQUIREMENTS WHICH COULD ARISE IN THE NEAR FUTURE. IT WAS FURTHE R SUBMITTED THAT THE ACTUAL RECEIPTS/EXPENSES IF ANY INCURRED WOULD OB VIOUSLY BE REFLECTED IN THE BOOKS OF ACCOUNT OF RESPECTIVE CONCERNS AS AND WHEN THE SAME COULD HAVE ACTUALLY OCCURRED. IT WAS FURTHER SUBMITTED TH AT THESE EXPENSES DID NOT FALL PART OF ITS REGULAR BOOKS OF ACCOUNT. THE A.O. TREATED THE SAID AMOUNT OF RECEIPT AT ` 14 74 976/- AS UNEXPLAINED CASH CREDIT BASED ON HIS INTERPRETATION OF THE NOTINGS IN THE LOOSE PAPER. T HE ASSESSEE SUBMITS THAT THE ADDITION HAS BEEN MADE BY TAKING A DIFFERENT IN TERPRETATION OF THE MATTER AND THIS CANNOT BE TAKEN FOR LEVY OF PENALTY. SINCE THE GROUND CONTESTED BEFORE THE CIT(A) ON THIS ISSUE WAS WITHDRAWN THE A .O. DID NOT ACCEPT ASSESSEES EXPLANATION AND LEVIED PENALTY. THE CIT( A) ON THE EXPLANATION GIVEN BY THE ASSESSEE WAS OF THE OPINION THAT ON T HE ADDITION OF ` 14 74 976/- WAS NOT DISCUSSED BY THE CIT(A) IN THE QUANTUM APPEAL AS THE ASSESSEE DID NOT PRESS THIS GROUND AND THE SUBMISSI ONS MADE BY THE LEARNED A.R. WERE NOT BORN OUT OF THE RECORD. HE R EJECTED THE CONTENTIONS STATING THAT A TENTATIVE ESTIMATE OF RECEIPTS AND E XPENSES MADE BY THE CASHIER FOR HIS INFORMATION WOULD NORMALLY BE FOUND WITH THE CASHIER IN THE OFFICE WHEREAS THE IMPUGNED PAGE WAS FOUND IN THE R ESIDENCE OF THE DIRECTOR. FURTHER ON PERUSAL OF THE ENTRIES ON THE IMPUGNED DOCUMENT HE WAS OF THE OPINION THAT IT GAVE EXACT AMOUNT OF REC EIPTS FROM EACH PERSON AND ALSO THE CASH BALANCE AS ON 09.05.2001. THE ENT RIES ON THE RECEIPT SIDE ARE THE EXACT AMOUNTS OF ` 2 12 981/- ` 10 794/- ETC. WHICH CANNOT BE HELD TO BE AN ESTIMATE OF RECEIPT WHICH WOULD NORMALLY B E IN ROUND FIGURES. SIMILARLY THE EXPENDITURE SIDE ALSO SHOWS EXACT FIG URE OF EXPENDITURE WHICH WAS AGAINST THE SUBMISSION OF THE ASSESSEE THAT THE NOTINGS ARE ESTIMATED EXPENSES. HE ALSO OBSERVED THAT IF THE NOTINGS ARE ESTIMATED RECEIPTS AND EXPENDITURE THERE WOULD BE NO NECESSITY OF PROVIDI NG THE CASH BALANCE AND THAT TOO OF AN EXACT FIGURE OF ` 5 13 318/- AS ON 09.05.2001. THEREFORE THE IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 4 CIT(A) CONCLUDED THAT IT IS EVIDENT THAT THE NOTING S ON THIS PAGE REPRESENT UNACCOUNTED RECEIPTS AND EXPENDITURES. SINCE NO SUB MISSIONS REGARDING THE SOURCE OF THESE ENTRIES WERE FURNISHED HE UPHELD TH E LEVY OF PENALTY HOLDING THAT THE A.O. WAS FULLY JUSTIFIED IN TREATING THE R ECEIPT AS UNEXPLAINED CASH CREDIT. 6. CONTESTING THE ABOVE FINDINGS OF THE CIT(A) THE LE ARNED COUNSEL MADE CERTAIN PROPOSITIONS STATING THAT THE ADDITION COUL D NOT HAVE BEEN MADE UNDER SECTION 158BC AND THE SAID DOCUMENT WAS SEIZE D FROM THE RESIDENCE OF THE DIRECTOR AND THE PROCEEDINGS COULD HAVE BEEN DONE ONLY UNDER SECTION 158BD. FURTHER IT WAS HIS ARGUMENT THAT THE LOOSE P APER CANNOT BE CONSIDERED AS BOOKS OF ACCOUNT AND SO THE QUESTION OF MAKING ADDITION UNDER SECTION 68 DOES NOT ARISE AS IT IS NOT A CRED IT IN THE BOOKS OF ACCOUNT. IT WAS HIS SUBMISSION THAT THERE CAN BE NO ADDITION ON THE LOOSE DOCUMENT AS THERE IS NO CORROBORATIVE EVIDENCE TO JUSTIFY TH E ADDITION. HE RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F MANISH MAHESHWARI VS. ACIT 289 ITR 341 FOR THE PROPOSITION THAT THE A .O. HAS NOT RECORDED ANY SATISFACTION WHILE ASSESSING THE AMOUNT IN THE HAND S OF THE ASSESSEE. HE FURTHER SUBMITTED THAT WITH REFERENCE TO THE JURISD ICTION OF ADDITION MADE IN THE QUANTUM APPEAL THE SAME CAN BE RAISED IN THE PENALTY PROCEEDINGS AS PENALTY PROCEEDINGS ARE SEPERATE PROCEEDINGS. HE RE LIED ON THE DECISION IN THE CASE OF CIT VS. DHARAMCHAND L. SHAH 204 ITR 462 AND SUBMITTED THAT THE ADDITION IN THE ASSESSMENT WOULD NOT AUTOMATICA LLY ENTITLE THE REVENUE TO IMPOSE PENALTY. HE FURTHER RELIED ON THE DECISIO N OF THE ITAT BENCH D IN THE CASE OF S.P. GOYAL VS. DCIT 82 ITD 85 (MUM) (TM ) FOR THE PROPOSITION THAT THE ENTRIES FOUND ON LOOSE SHEETS OR DIARIES S EIZED DURING THE COURSE OF SEARCH CANNOT BE CONSIDERED AS BOOKS OF ACCOUNT FO R THE PURPOSE OF SECTION 68. IT WAS HIS SUBMISSION THAT THERE IS NO EVIDENTI ARY VALUE OF THE DOCUMENT TO SUPPORT UNACCOUNTED INCOME SO AS TO ATTRACT PENA LTY UNDER SECTION 271(1)(C). HE ALSO RELIED ON THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND H. GANDHI 141 ITR 67 THAT LOOSE SHEET CANNOT BE CONSIDERED AS BOOKS OF ACCOUNT MAINTAINED AS THE RE ARE NO SUPPORTING EVIDENCES IN SUPPORT OF SUCH ENTRIES. IT WAS FURTHE R SUBMITTED THAT MERE ENTRIES IN DOCUMENTS ARE NOT SUFFICIENT TO ATTRACT PENALTY AND REFERRED TO THE IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 5 DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. MAULIKKUMAR K. SHAH 307 ITR 137. HE FURTHER RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE P&H HIGH COURT IN THE CA SE OF ITO VS. MOHANLAL VIG AND ANR 139 ITR 681 THAT THERE SHOULD BE SOME O THER EVIDENCE TO GIVE CREDENCE TO THE ENTRIES MADE IN THE BOOKS OF ACCOUN T. IT WAS HIS SUBMISSION THAT THE ENTRIES IN THE LOOSE DOCUMENT DOES NOT GIV E RISE TO PRESUMPTION THAT THERE IS CONCEALED INCOME AND PENALTY CAN BE LEVIED ON SUCH ENTRIES IN THE LOOSE DOCUMENTS. 7. THE LEARNED D.R. IN REPLY SUBMITTED THAT THE LOOSE DOCUMENT WAS A SEIZED DOCUMENT ON WHICH ENTRIES WERE CONFRONTED TO THE DIRECTOR WHO ADMITTED THAT THIS DOCUMENT REFERS TO THE ENTRIES O F COMPANY. IT WAS ALSO SUBMITTED THAT THE ASSESSEE ADMITTED THAT THE ENTRI ES IN THE DOCUMENT ARE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. WHEN THE ADDITION IS MADE ON THE BASIS OF THIS DOCUMENT THE ASSESSEE CHOOSE TO WITHD RAW THE GROUND BEFORE THE CIT(A). THUS THE ADDITION STANDS CONFIRMED AS T HE ASSESSEE HAS NOT CONTESTED THE SAME. IT WAS HIS SUBMISSION THAT MANY OF THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL WITH REFERENCE TO JURIS DICTION OF ASSESSING THE AMOUNT AND GENUINENESS OF THE ADDITION CANNOT BE AG ITATED/CHALLENGED IN THESE PROCEEDINGS AS THE ASSESSEE ACCEPTED THE GENU INENESS OF THE DOCUMENT AND ENTRIES THEREIN. THEREFORE RELYING OF THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF BHARAT RICE MILL VS. CIT 278 ITR 599 THE LEARNED D.R. SUBMITTED THAT THE ASSESSMENT ORDER HAVING NOT BEEN CHALLENGED TO THE EXTENT OF ADDITION MADE ON THE BA SIS OF THE SAID DOCUMENT IT CANNOT BE SAID TO BE A VOID ORDER IN A COLLATERA L PROCEEDING UNDER SECTION 158BFA(2). HE FURTHER RELIED ON THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF S.S. RATTANCHAND BHOLANAT H VS. CIT 210 ITR 682 TO SUBMIT THAT THE ASSESSMENT BASED ON THE ACCEPTAN CE OF THE ASSESSEE THAT A PARTICULAR AMOUNT WAS INCLUDABLE IN ITS TOTAL INC OME AND HAVING BECOME FINAL THE ASSESSMENT CANNOT BE OBJECTED TO IN PENA LTY PROCEEDINGS. HE FURTHER RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAM NIWAS AGRAWAL 124 ITR 432 THAT IMPOSITION OF PENALTY IS VALID WHEN ON THE BASIS OF THE ADMISS ION THE PROCEEDINGS WERE TAKEN UP AND CONCLUDED. HE FURTHER REFERRED TO THE PROVISIONS OF SECTION IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 6 132(4A) TO SUBMIT THAT THE BURDEN IS ON THE ASSESSE E TO EXPLAIN THE TRANSACTION AND ONCE THE TRANSACTIONS ARE NOT EXPLA INED PROVISIONS OF SECTION 158B(B) WOULD APPLY. HE FURTHER RELIED ON T HE CO-ORDINATE BENCH DECISIONS IN THE CASE OF HAJI NAZIR HUSSIAN & CO. V S. ITO 91 ITD 42 (ASR) (TM) WITH REFERENCE TO THE ENTRIES IN THE CASH BOOK ABOUT THE GENUINENESS OF THE TRANSACTION IN NAPAR DRUGS PVT. VS. DCIT 98 ITD 285 (DEL) (TM) AND REGARDING ENTRIES IN THE DIARIES IN RATI RAM GOTEWA LA VS. DCIT 89 ITD 14 (DEL). 8. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THERE I S DIFFERENCE IN ENTRIES IN THE DIARY/NOTINGS AND ENTRIES IN THE DOC UMENTS WHICH STAND AT A DIFFERENT FOOTING. IT WAS HIS SUBMISSION THAT THE E NTRIES IN THE DOCUMENT CANNOT BE EQUATED WITH THE BOOKS OF ACCOUNT SO AS T O ATTRACT PROVISIONS OF SECTION 68. 9. WE HAVE CONSIDERED THE ISSUE. MANY OF THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL WITH REFERENCE TO THE ADDITION WERE MADE ON THE BASIS OF THE DOCUMENTS ARE NOT DIRECTLY APPLICABLE TO THE F ACTS OF THE GIVEN CASE AS THE SAID DOCUMENT WAS SEIZED FROM THE RESIDENCE OF THE DIRECTOR WHO STATED THAT THE TRANSACTIONS PERTAIN TO THE ASSESSEE COMP ANY. IT IS ALSO ON RECORD THAT THESE TRANSACTIONS WERE ADMITTED TO BE UNACCOU NTED FOR AND ASSESSEE CHOOSE TO WITHDRAW THE GROUND WHEN THE ADDITION WAS MADE ON THE SAID DOCUMENT INSTEAD OF CONTESTING. IT WAS ALREADY STAT ED EARLIER THAT ASSESSEE CHOOSE TO CONTEST ONLY THE ADDITION OF ` 33 00 000/- MADE ON THE BASIS OF SIMILAR DOCUMENT AND THE ITAT AFTER EXAMINATION OF ENTRIES AND INTERPRETATION THEREIN AND ALSO THE LEGAL PROPOSITI ONS DELETED THE ADDITION SO MADE. THE REASONS FOR NOT CONTESTING THE ENTRIES IN THIS DOCUMENT ARE BETTER KNOWN TO THE ASSESSEE BUT THE FACT IS THAT THE ASSE SSEE CHOOSE TO WITHDRAW THE GROUND BEFORE THE CIT(A) WHO HAD NO OCCASION TO EXAMINE THE MERITS OF THE ADDITION AS POINTED OUT BY THE CIT(A) IN HIS OR DER WHILE CONFIRMING THE PENALTY. NOW THE PROVISIONS OF SECTION 158B(B) DEFI NES THE UNDISCLOSED INCOME AS UNDER: - 158B. IN THIS CHAPTER UNLESS THE CONTEXT OTHERWISE REQ UIRES (A) .. IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 7 (B) UNDISCLOSED INCOME INCLUDES ANY MONEY BULLI ON JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS WHERE SUCH MONEY BULLIO N JEWELLERY VALUABLE ARTICLE THING ENTRY IN THE BO OKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT O R ANY EXPENSE DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. 10. ACCORDING TO THE ABOVE THE UNDISCLOSED INCOME INCL UDED ANY INCOME BASED ON ANY ENTRY IN THE DOCUMENTS WHICH HAS NOT B EEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. THE ENT RIES FOUND IN THE DOCUMENT INCLUDES CERTAIN CREDITS WHICH HAVE NOT BE EN EXPLAINED WITH REFERENCE TO THE BOOKS OF ACCOUNT MAINTAINED. THAT MAY BE THE REASON WHY THE ASSESSEE ADMITTED THE ENTRIES IN THE SAID DOCUM ENT AS INCOME AND DID NOT PURSUE CONTESTING THE SAME IN APPEAL. THEREFORE AS FAR AS ADDITION OF THE ENTRIES IN THE SAID DOCUMENT AS UNDISCLOSED INC OME WAS CONCERNED THAT HAS BECOME FINAL. THEREFORE THE VARIOUS PROPOSITIO NS RAISED BY THE LEARNED COUNSEL UNDER SECTION 68 AND IT APPLICABILITY DOES NOT ARISE IN THIS CASE AS THE AMOUNT IS DEFINED AS UNDISCLOSED INCOME UNDER THE PROVISIONS OF SECTION 158B(B) AND THIS DOCUMENT WAS SEIZED IN THE COURSE OF SEARCH PROCEEDINGS. HAVING ACCEPTED THE ENTRIES IN THE BOO KS OF ACCOUNT AS BELONGING TO THE COMPANY AND HAVING BEEN ACCEPTED T HE SAME IN THE QUANTUM APPEAL WE ARE OF THE OPINION THAT THE ASSE SSEE CANNOT CHALLENGE IN THE PENALTY PROCEEDINGS THE GENUINENESS OF THE DOCU MENT OR THE GENUINENESS OF THE ENTRIES THEREIN. HAD ASSESSEE CH ALLENGED IT IS ON THE REVENUE TO PROVE THE GENUINENESS OF THE TRANSACTION WHILE LEVYING PENALTY. HOWEVER IN THIS CASE THE ASSESSEE HAVING NOT CONTE STED THE SAME EARLIER CAN NOT CHALLENGE NOW STATING THAT THE REVENUE HAS NOT DISCHARGED THE BURDEN. IN VIEW OF THIS MANY OF THE PROPOSITIONS R ELIED UPON BY THE LEARNED COUNSEL DO NOT APPLY. 11. ASSESSEE HAS ALSO CONTESTED THAT THE ASSESSMENT COU LD HAVE BEEN MADE UNDER SECTION 158BD AND NOT UNDER SECTION 158B C. ON THIS WHEN IT WAS ENQUIRED THE ASSESSEES COUNSEL ADMITTED THAT THERE WAS JURISDICTION IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 8 UNDER SECTION 158BC IN THE CASE OF THE COMPANY AS W ELL AS THERE WAS SEARCH IN THE ASSESSEE PREMISES ASWELL. SINCE THE SAME A.O . IS CONSIDERING THE ASSESSMENT OF THE COMPANY AS WELL AS THE DIRECTOR WE ARE OF THE OPINION THAT INITIATION OF SEPARATE 158BD PROCEEDINGS ARE N OT REQUIRED WHEN 158BC PROCEEDINGS WERE OPEN BEFORE THE SAME OFFICER. EVE N THE PROCEEDINGS U/S 158 BD ALSO REQUIRE THAT THE A.O. SHALL PROCEED ONL Y UNDER SECTION 158BC AND PROVISIONS OF CHAPTER SHALL APPLY ACCORDINGLY. SINCE BOTH 158BC PROCEEDINGS AND 158BD PROCEEDINGS ARE SIMILAR IN PR OCEDURE AND ASSESSEE HAVING BEEN COVERED BY SEARCH AND IS BEING ASSESSED UNDER PROVISIONS OF SECTION 158BC WE ARE OF THE OPINION THAT THIS LEGA L CHALLENGE NOW DOES NOT SURVIVE. EVEN OTHERWISE THE ASSESSEE HAS NOT CHALLE NGED THE SAME IN THE QUANTUM APPEAL AND HAVING BECOME FINAL THE SAME CA NNOT BE CHALLENGED IN COLLATERAL PROCEEDINGS AS HELD BY THE HON'BLE ALLAH ABAD HIGH COURT IN THE CASE OF BHARAT RICE MILL VS. CIT 278 ITR 599 RELIED UPON BY THE LEARNED D.R. 12. THE PENALTY WAS LEVIED U/S 158BFA(2). PROVISIONS OF SECTION 158BFA(2) ARE AS UNDER: - 158BFA (1) .. (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER MAY DIRECT T HAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED T HREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCL OSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C ) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HA S BEEN PAID OR IF THE ASSETS SEIZED CONSIST OF MONEY THE ASSE SSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN : PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED B Y THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RET URN AND IN SUCH IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 9 CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 13. PROVISIONS OF SUB-SECTION (3) PROVIDES EXCEPTIONS T O THE LEVY OF PENALTY AND THE ASSESSEES CASE DOES NOT FALL IN ANY OF THE EXCEPTIONS. IT IS ADMITTED THAT THE ASSESSEE HAS NOT INCLUDED THE SAID SUM AT THE TIME OF FILING THE RETURN AND THE ADDITION WAS MADE IN THE RETURN AND HAS BECOME FINAL. THEREFORE THERE IS A DIFFERENCE BETWEEN THE UNDISC LOSED INCOME DETERMINED AND UNDISCLOSED INCOME SHOWN IN THE RETURN ON WHIC H SECOND PROVISO OF THE SECTION WOULD APPLY. PENALTY SHALL BE IMPOSED O N THAT PORTION OF UNDISCLOSED INCOME DETERMINED. 14. THE ONLY WAY TO GET OVER THE PENALTY IS TO GIVE A B ONAFIDE EXPLANATION FOR THE SUM INCLUDED. THE EXPLANATION WITH REFERENC E TO THE ABOVE ADDITION GIVEN BEFORE THE A.O. AS EXTRACTED BY THE A.O. IN T HE PENALTY ORDER AT PARA 4 WHICH IS RELEVANT IS AS UNDER: - 4. .. IN THE MATTER WE SUBMIT THAT WE ARE IN THE PROCES S OF PREFERRING AN APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL AGA INST THE ORDER OF THE COMMISSIONER (APPEALS) UPHOLDING THE ASSESSMENT ORDER UNDER SECTION 158BC OF THE ACT GIVING RISE TO THE PENALTY PROCEEDINGS. WE THEREFORE REQUEST YOU TO KINDLY KEEP THE PENALTY P ROCEEDINGS IN ABEYANCE AS PER THE PROVISIONS OF SECTION 275 OF TH E ACT TILL THE FINAL DISPOSAL OF APPEAL BY THE INCOME-TAX APPELLATE TRIB UNAL. WITHOUT PREJUDICE TO THE AFORESAID AND ON PERUSAL OF OUR RECORDS WE SUBMIT AS UNDER: - 1. A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT WAS CONDUCTED IN THE CASE OF SUPREME INDUSTRIES GROUP O N 29 TH MAY 2001. AS A PART OF THE GROUP WE WERE ALSO COVERED UNDER SECTION 132 OF THE ACT. DURING THE COURSE OF THE SEARCH ACT ION CERTAIN DOCUMENTS WERE SEIZED FROM OUR VARIOUS PREMISES. 2. THE MAJOR AREAS OF DISPUTE/ADDITIONS/DISALLOWANCES TO INCOME UNDER SECTION 158BC OF THE ACT ARE ON ACCOUNT OF FO LLOWING: (A) .. (B) TREATING A SUM OF RS.14 74 976/- AS UNEXPLAINED CAS H CREDIT BASED ON INTERPRETATION OF CERTAIN NOTINGS ON A SEI ZED PAPER AND THEREBY TAXING THE SAME AS UNDISCLOSED INCOME F OR THE BLOCK PERIOD. 3(A) IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 10 4(A) DURING THE COURSE OF THE SEARCH AT THE RESIDE NCE OF THE TAPAIRA FAMILY AT 71 GIRIKUNJ 6 TH FLOOR NETAJI SUBHASH ROAD MUMBAI A LOOSE PAPER WAS SEIZED ON 29 TH MAY 2001 WHICH WAS MARKED AS PAGE 52 OF ANNEXURE A/1. THIS LOOSE P APER WAS EXPLAINED BY MR. M.P. TAPARIA AS BELONGING TO T HE COMPANY WHICH HAS BEEN CONFIRMED BY OUR COMPANY MANAGEMENT. THE SAID PAPER CONTAINED NOTINGS OF RS.14 74 976/- AND RS.5 13 318/-. (B) WE GAVE NECESSARY EXPLANATION FOR THE SAID LOO SE PAPER. HOWEVER THE SUM OF RS.14 74 976/- WAS ADDED AS OUR UNEXPLAINED CASH CREDIT TREATING THE SAME AS UNDISC LOSED INCOME FOR THE BLOCK PERIOD. (C) WE SUBMIT THAT THE NOTINGS ON THE LOOSE PAPER REPRESENT ITEMS OF ESTIMATED RECEIPTS/EXPENSES IN THE NATURE OF ROUGH NOTINGS AND THEY INDICATED EXPECTED RECEIPTS/EXPENS ES OF VARIOUS GROUP COMPANIES. WE SUBMIT THAT THE NOTINGS WERE MADE BY THE CASHIER FOR HIS INFORMATION AND FOR ASS ESSING THE CASH FLOW REQUIREMENTS WHICH COULD ARISE IN TH E NEAR FUTURE. WE FURTHER SUBMIT THAT THE ACTUAL RECEIPTS/ EXPENSES IF ANY INCURRED WOULD OBVIOUSLY BE REFLECTED IN TH E BOOKS OF ACCOUNT OF THE RESPECTIVE CONCERNS AS AND WHEN THE SAME WOULD HAVE ACTUALLY OCCURRED. WE SUBMIT THAT ACCORD INGLY THESE NOTINGS DID NOT FORM PART OF OUR REGULAR BOOK S OF ACCOUNT. WE SUBMIT THAT A SUM OF RS.14 74 976/- HAS BEEN T REATED AS OUR UNEXPLAINED CASH CREDIT BASED ON INTERPRETATIO N OF NOTINGS ON THE SAID LOOSE PAPER AND THEREBY TAXING THE SAME AS OUR UNDISCLOSED INCOME FOR THE BLOCK PERIOD. WE SUBMIT THAT IN THE ABSENCE OF ANY OTHER CORROBORATING EVID ENCE MERELY ON THE BASIS OF CERTAIN NOTINGS ON THE LOOSE PAPER AND ITS INTERPRETATION IT CANNOT BE CONCLUDED THAT THE RE WAS ANY UNDISCLOSED INCOME. THOUGH WE HAVE WITHDRAWN THE GR OUND OF APPEAL PERTAINING TO THIS ADDITION BEFORE THE C OMMISSIONER (APPEALS) THAT IS ONLY ON ACCOUNT OF LACK OF AVAILA BLE DETAILS AND NOT AS A MATTER OF ACCEPTANCE OF THE CASH CREDI T. AS THERE COULD NOT BE ANY CORROBORATIVE EVIDENCE FOR PROJECT ED EXPENSES AS PER THE NOTINGS OF THE CASHIER WE DID NOT PURSUE THE MATER IN APPEAL. 5. FROM THE AFORESAID YOU WILL APPRECIATE THAT TH E ADDITIONS MADE ARE ON ACCOUNT OF A NOTING ON LOOSE PAPERS AND ITS INTERPRETATION. THE ADDITIONS HAVE BEEN MADE BY TAK ING A DIFFERENT INTERPRETATION AND THIS CANNOT BE A GROUN D FOR INITIATION OF THE PENALTY PROCEEDINGS. 6. WE SUBMIT THAT FULL CORRECT AND COMPLETE PARTI CULARS OF OUR INCOME WERE FURNISHED IN THE RETURN OF INCOME FILED UNDER IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 11 SECTION 158BC OF THE ACT AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE THEREFORE REQUEST YOU T O KINDLY DROP THE PENALTY PROCEEDINGS INITIATED BY YOU. WE R EITERATE THAT WE HAVE NEITHER CONCEALED PARTICULARS OF OUR I NCOME NOR FILED INACCURATE PARTICULARS THEREOF. HENCE THE QU ESTION OF LEVYING ANY PENALTY DOES NOT ARISE. 15. THIS EXPLANATION WAS EXAMINED BY THE CIT(A) TO FIND THAT THE TRANSACTIONS ARE NOT ESTIMATION OF THE RECEIPTS AND EXPENDITURE BUT THEY ARE GENUINE RECEIPTS AND PAYMENT WITH A CASH BALANCE ON 09-05-2001. WE ALSO PURSUED THE SAID DOCUMENT WHICH WAS PLACED ON RECOR D. AS SEEN FROM THE DOCUMENT THE CREDIT ENTRIES TITLED AS CASH CREDIT INDICATE THAT THERE WAS RECEIPT OF ` 14 74 976/-. THE ENTRIES ARE AS UNDER: - 47325 - DURGI 150000 - SHARMA JA 422750 - JONK 46150 - VKTJI 10794 - . KHAJD 45750 - . 24/4 264.226 - SILFN? PRSTON 986995 212981 - SHARMA 1199976 150000 - . DO. 125000 - (SCRIBBLING) 1474976 ====== THIS INDICATE THAT THERE WAS PERIODICAL TOTALLING A LSO. AS AGAINST CASH CREDIT THE EXPENDITURE SIDE INDICATE PERIODIC PAYMENTS WHI CH INCLUDED EXTRA MARCH SALARY FOR DRIVER WATCHMAN MARCH OVERTIME SALES TAX ( ` 54 000/-) KORE ADV. LIC. SUFL ( ` 4 000) SALES TAX SILTAP-ORISSA-SWHC ( ` 15 250) PREPIPE- JALGAON- JANUARY 9 TH APRIL ( ` 1 87 630). ENTRIES OF THESE TOTAL TO THE AMOUNT OF ` 6 67 664/-. FURTHER TO THAT AGAIN BSES PAYMENT AND OTHER PAYMENTS WERE MADE WHICH AGAIN GAVE A TOTAL OF ` 6 98 170/-. AFTER THAT FURTHER ENTRIES INDICATE WATCHMAN O-T APRIL ( ` 3989) AND SJTJI (PCS) ( ` 1 50 000). FURTHER EXPENDITURE INCLUDING RADHIKAS BDAY GYM BILL SUB TOTAL ` 29 804 AS SJTS PERSONAL A/C WERE ACCOUNTED FOR TOT ALLING THE EXPENDITURE AT ` 9 51 158/-. FURTHER TO THAT ANOTHER ENTRY OF ` 10 000/- SJTS OFFICIAL WAS ACCOUNTED FOR MAKING THE TOTAL EXPEND ITURE TO ` 9 61 658/- IT(SS)A NO. 125/MUM/2007 THE SUPREME INDUSTRIES LTD. 12 LEAVING A CASH WITH GALA ON 09.05.2001 AT ` 5.13 318/-.THESE ENTRIES DO INDICATE THAT THESE ARE ACTUAL RECEIPTS AND PAYMENT S AND NOT ESTIMATES OF THE EXPENDITURES AND RECEIPTS AS EXPLAINED BY THE A SSESSEE DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE PENALT Y PROCEEDINGS. SINCE THE EXPLANATION IS NOT BONAFIDE AND AS ADMITTED THAT TH E TRANSACTIONS ARE NOT ACCOUNTED IN THE BOOKS OF ACCOUNT VIDE PARA 4 (C) I N THE EXPLANATION WE ARE OF THE OPINION THAT THE PENALTY UNDER SECTION 158BF A(2) ON THE ABOVE AMOUNT IS WARRANTED AS THE SAID ENTRIES COMES WITHI N THE DEFINITION OF UNEXPLAINED INCOME AND HAVING BEEN FOUND IN THE C OURSE OF SEARCH PROCEEDINGS AND HAVING BEEN ACCEPTED BY THE ASSESSE E WITHOUT ANY CONTEST IN THE QUANTUM APPEAL. THEREFORE KEEPING THE SECON D PROVISO OF THE SECTION 158BFA(2) IN CONSIDERATION THE PENALTY LEVIED TO T HAT EXTENT COVERED BY GROUND NO. 5 IS CONFIRMED. 16. A.O. IS DIRECTED TO MODIFY THE QUANTUM OF PENALTY A CCORDINGLY. 17. IN THE RESULT APPEAL IS CONSIDERED PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 16 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL-V MUMBAI 4. THE CIT CENTRAL -II MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.