Shri Devilal Kasturchand Shah, Surat v. The Income tax Officer,Ward-3(3),, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) IT(SS)A NO.463/AHD/2010 [ASSTT. YEAR : 2003-2004] DEVILAL KASTURCHAND SHAH AVDHI BUNGALOW KHANDWALA ESTATE ATHWALINES SURAT PAN : ACTPS 6436 M VS. ITO WARD-3(3) SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.N.VEPARI REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER BENCH : THIS APPEAL IS AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF THE CIT(A)-II SURAT DATED 25.02. 2010. AS PER THE GROUNDS OF APPEAL THE APPELLANT HAS CHALLENGED THE CONFIRMATI ON OF PENALTY OF RS.72 433/- LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX AC T 1961. 2. THE FACTS IN BRIEF AS EMERGED FROM THE ORDER PAS SED UNDER SECTION 271(1)(C) DATED 27.03.2009 AND THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. SECTION 153A DATED 30.11.2006 WERE TH AT THE ASSESSEE IN HIS INDIVIDUAL CAPACITY WAS COVERED BY A SEARCH OPERATI ON UNDER SECTION 132 DATED 22-12-2004. IT WAS NOTED BY THE AO THAT INITIALLY A RETURN WAS FILED ON 30-9- 2003 FOR A.Y.2003-04 DECLARING TOTAL INCOME OF RS.1 65 662/-. LATER ON IN COMPLIANCE OF NOTICE UNDER SECTION 153A (A) OF THE ACT AGAIN A RETURN WAS FILED ON 16-5-2005 DECLARING A TOTAL INCOME OF RS.1 15 66 2/-. AFTER GIVING THESE DETAILS THE AO CATEGORICALLY MENTIONED THAT THE RE TURN FILED BY THE ASSESSEE DID NOT CONTAIN THE IMPUGNED AMOUNT OF ADDITION WHICH WAS SUBJECT MATTER OF PENALTY PROCEEDINGS. AS PER THE SEIZED MATERIAL M ARKED AS ANNEXURE-A PAGE NO.41 THERE WAS CERTAIN MENTIONS OF CREDIT AND DEBI T ENTRIES TITLED AS BHANPURA SANGH. IN THIS REGARD THE OBSERVATION OF THE AO AFTER REPRODUCING THE ALLEGED ENTRIES AND THE REPLY OF THE ASSESSEE WAS AS UNDER: IT(SS)A NO.463/AHD/2010 -2- THE ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES DURI NG THE COURSE OF STATEMENT U/S.131(1A) OF THE ACT ON 18.01.2005. THE ASSESSEE COULD NOT SUBMIT ANY EXPLANATION IN RESPECT OF THE ENTRIES CO NTAINED IN SAID PAPER AND SUBMITTED THAT THE ENTRIES DO NOT BELONG TO HIM BUT TO BHANPURA SANGH OF RAJASTHAN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS AGAIN ASKED TO DECODE THE FIGURES AND EXPLAIN AS TO WHOM THE SAME BELONGS TO. IF THE ENTRIES BELONG TO SOMEB ODY ELSE THE ASSESSEE WAS ASKED TO FURNISH THE EVIDENCE TO SUBSTANTIATE T HE CLAIM. THE ASSESSEE'S REPRESENTATIVE ATTENDED AND SUBMITTED TH AT THE FIGURES HAVE TO BE READ REMOVING DECIMAL FROM THE NOTINGS MADE. THE ASSESSEE ALSO OFFERED THE ENTIRE AMOUNT FOR TAXATION AND SUBMISSI ONS WERE MADE AS BELOW: - '2) DURING THE SEARCH PROCEEDINGS THE LOOSE PAPER NO.41 OF BS- 1 CONTAINS DETAILS OF BHANPURA SANGH FOR THE F.Y. 2 002-03. THOUGH IT WAS EXPLAINED THAT THE SAID PAPER BELONG TO BHANPURA SANGH OF RAJASTHAN TO AVOID LITIGATION AND TO BUY PEACE OF MIND I SURRENDER RS.2 41 443/- ON ACCOUNT OF THE A BOVE SAID PAPER. THE FIGURES LYING ON THIS PAGE IS DECODED A T RS.2 41 443/- . IN VIEW OF THE ASSESSEE'S ADMISSION THE SUM OF RS. 2 41 443/- IS BROUGHT TO TAX AS EXPENSES INCURRED BY THE ASSESSEE OUT OF HIS UNDISCLOSED SOURCES OF INCOME DURING THE FINANCIAL YEAR 2002-03 RELEVANT TO A.Y. 2003-04. THE SAME IS BROUGHT TO TAX IN THE A.Y. 200 3-04. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT ARE INITI ATED ON THIS POINT. WHILE LEVYING PENALTY AGAIN A SHOW CAUSE NOTICE WAS ISSUED AND IN COMPLIANCE THE SUBMISSIONS OF THE ASSESSEE WAS THAT THE EXPEND ITURE IN QUESTION WERE NOT INCURRED BY HIM. IT HAS ALSO BEEN CONTESTED THAT M ERELY BY SURRENDERING THE AMOUNT DID NOT MEAN THAT HE HAD CONCEALED THE INCOM E. CERTAIN CASE LAWS AND PROVISIONS OF THE ACT HAVE BEEN NARRATED IN THE EXP LANATION AND PLEADED THAT THE PENALTY MUST NOT BE IMPOSED. HOWEVER THE AO WAS N OT CONVINCED AND HELD THAT THE SAID SURRENDER WAS NOT DISCLOSED SUO MOTTO BY THE ASSESSEE. THE SAID AMOUNT OF RS.2 41 443/- WAS DETECTED AS CONCEALED I NCOME AFTER VERIFICATION OF THE SEIZED PAPER FOUND DURING THE COURSE OF SEARCH. THE AO HAS ALSO MENTIONED THAT SIMPLY BY STATING THAT THE AMOUNT WA S SURRENDERED TO AVOID LITIGATION AND TO BUY PEACE OF MIND; THE ASSESSEE H AS NOT DISCHARGED THE BURDEN OF EXPLAINING THE SOURCE AND THE NATURE OF THE EXPE NDITURE. MOREOVER AS PER IT(SS)A NO.463/AHD/2010 -3- A.O. THE SAID AMOUNT WAS NOT EVEN DISCLOSED AT THE TIME OF FILING OF THE RETURN. AS A RESULT IT WAS HELD THAT THE ASSESSEE HAD WILL FULLY INTENTIONALLY AND WITHOUT REASONABLE CAUSE FURNISHED THE INACCURATE PARTICULA RS AS INCOME AND RESULTANTLY A PENALTY OF RS.72 433/- WAS IMPOSED. 3. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE T HE FIRST APPEAL AUTHORITY. AFTER EXAMINING THE FACTS CIRCUMSTANCES AND THE R EPLY OF THE ASSESSEE THE LEARNED CIT(A) HAS PLACED RELIANCE ON A DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF K.P.MADHUSUDANAN 2512 ITR 99 PAWAN CONSTRUCTION VS. ITO 78 ITD 1276 (RAJ) AND DHARMENDRA TEXTILE PROCE SSORS 306 ITR 277 AND HAS HELD THAT THE ASSESSEE HAD FAILED TO DISCLOSE T HE SOURCE OF SUCH EXPENDITURE AND ALSO FURNISHED INACCURATE PARTICULARS IN THE RE TURN THEREFORE THE PENALTY WAS RIGHTLY IMPOSED. SINCE THE ACTION OF THE AO WAS SU STAINED NOW THE ASSESSEE IS IN FURTHER APPEAL. 4. ON BEHALF OF THE ASSESSEE SHRI V.N.VEPARI APPEA RED AND ARGUED THAT THE ASSESSEE HAS HAILED FROM BHANPURA RAJASTHAN AND TH E PAPER IN QUESTION WAS IN RESPECT OF RELIGIOUS FUNCTIONS. HE HAS CONTESTED T HAT THE SAID PAPER DID NOT MENTION THE NAME OF THE ASSESSEE. THE PAPER WAS WR ONGLY LINKED WITH THE ASSESSEE. IN SUPPORT HE HAS CITED FEW CASE LAWS AS PER THE WRITTEN SUBMISSIONS FURNISHED. 4.1 ON THE OTHER HAND FROM THE SIDE OF T HE REVENUE SHRI K.MADHUSUDAN SR. DR APPEARED AND VEHEMENTLY SUPPOR TED THE FINDINGS OF THE AUTHORITIES BELOW. APART FROM THE CASE LAWS MENTI ONED BY THE LEARNED CIT(A) FURTHER DECISION OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF CIT VS. ANANTHAN CHETTIAR 273 ITR 401 HAS ALSO BEEN CITED. 4. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. SEA RCH WAS CONDUCTED ON 22-12- 2004. IT WAS AN ADMITTED FACT THAT PRIOR TO THE DA TE OF SEARCH A RETURN WAS FILED BY THE ASSESSEE ON 30-9-2003 DECLARING TOTAL INCOME OF RS.1 65 662/-. LATER ON IT(SS)A NO.463/AHD/2010 -4- IN COMPLIANCE OF A STATUTORY NOTICE UNDER SECTION 1 53A(A) THE ASSESSEE HAS FILED ANOTHER RETURN ON 16-5-2005 DECLARING INCOME OF RS.1 15 662/- . IT IS AN ADMITTED FACT THAT IN BOTH THE RETURNS THERE WAS N O MENTION OF THE IMPUGNED EXPENDITURE OF RS.2 41 443/-. A SPECIFIC FINDING HA S BEEN GIVEN BY THE A.O. THAT NO ADDITIONAL INCOME WAS OFFERED OR DISCLOSED IN THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 153A(A) OF THE ACT. THIS FACT HAS ALSO NOT BEEN DENIED THAT SOME PAPERS WERE FOUND IN POSSESSION OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES DURING TH E COURSE OF STATEMENT UNDER SECTION 131(1A) OF THE ACT HOWEVER ADMITTED THE EX PENDITURE. LATER ON DURING THE COURSE OF ASSESSMENT PROCEEDINGS ANOTHER CHANCE WAS GIVEN TO THE ASSESSEE TO EXPLAIN THE NATURE OF ENTRIES AND IN CO MPLIANCE IN SHORT SUBMISSIONS IT WAS STATED THAT THE SAID PAPER DID NOT BELONG TO THE ASSESSEE. IT WAS CONTENDED THAT THE ENTRIES NOTED THEREIN ALSO B ELONGED TO SOMEBODY ELSE AND THE SAID OFFER OR ADMISSION WAS MERELY TO AVOID LITIGATION AND TO BUY PEACE OF MIND. WITH THIS BRIEF FACTUAL POSITION WE HAVE TO EXAMINE WHETHER THE ADMISSION OF THE ASSESSEE WAS MADE VOLUNTARILY OR W ITH GOOD INTENTION. WE HAVE NOTICED THAT THE AMOUNT IN QUESTION WAS UNEART HED CONSEQUENCE UPON SEARCH ACTION CONDUCTED AT THE ASSESSEES PREMISES. HAD THE ASSESSEE WANTED TO SUO MOTTO OFFER THE IMPUGNED AMOUNT THEN HE HAD THE CHANCE TO INCLUDE THE SAID AMOUNT WHILE FILING THE RETURN IN COMPLIANCE O F A STATUTORY NOTICE ISSUED AFTER THE SEARCH. BUT THE FACTS HERE REVEALED THAT NO SUCH RECOURSE WAS ADOPTED BY THE ASSESSEE. FURTHER IT IS ALSO WORTH TO MENT ION THAT NO SATISFACTORY EXPLANATION WAS OFFERED BY THE ASSESSEE AND THE SAI D EXPLANATION WAS ALSO WITHOUT ANY CORROBORATIVE EVIDENCE. DURING THE COU RSE OF PENALTY PROCEEDINGS THE ASSESSEE HAS MERELY STATED THAT TO AVOID LITIGA TION AND TO BUY PEACE OF MIND THE SAID OFFER WAS MADE. HOWEVER THE SAID EXPLANA TION WAS NOTHING BUT COVER UP THE CONCEALMENT PROCEEDINGS. SINCE THE AMOUNT I N QUESTION WAS DETECTED AFTER THE SEARCH AND THE ADMISSION WAS ALSO NOT MAD E WITH BONA FIDE INTENTION OR VOLUNTARILY THEREFORE SUCH A GENERAL EXPLANATIO N HAS NO FORCE AND THUS DESERVES TO BE REJECTED. THIS IS A CASE WHERE EXPLANATION 1 TO SECTION IT(SS)A NO.463/AHD/2010 -5- 271(1)(C) CAN BE INVOKED BECAUSE ACCORDING TO SUB-C LAUSE-A THE EXPLANATION OFFERED BY THE ASSESSEE WAS FOUND TO BE INCORRECT A ND FURTHER AS PER SUB-CLAUSE- B THE ASSESSEE WAS UNABLE TO SUBSTANTIATE ITS EXPLA NATION. THE ASSESSEE HAS ALSO FAILED TO PROVE SUCH EXPLANATION WAS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SEIZED MATERIAL HAVE EVER BEEN DISCLOSED BY HIM . PLACING RELIANCE ON K.P. MADHUSUDAN AND ANANDHAN CHETTIAR (SUPRA) WE HOLD T HAT THE CONDITIONS AS LAID DOWN IN THE EXPLANATION TO SECTION 271(1)(C) WERE SQUARELY APPLICABLE TO T HE ASSESSEE. ADMITTEDLY THE ASSESSEE HAS FAILED TO FIL E CORRECT RETURN HENCE CONCEALED THE PARTICULARS OF INCOME THEREFORE COR RECTLY PENALISED UNDER SECTION 271(1)(C) OF THE ACT. HONBLE MADRAS HIGH C OURT HAS HELD IN THE CASE OF C.ANANTHAN CHETTAIR (SUPRA) QUOTE IN THIS CASE THE ASSESSEE OFFERED NO EXPLANATION AT ALL EXCEPT TO ASSERT THAT HE DISCLOS ED THE INCOME ONLY TO BUY PEACE WITH THE DEPARTMENT AND WHAT WAS DISCLOSED IN FACT WAS ADDITIONAL INCOME . THE REASON FOR NOT HAVING DISCLOSED THE IN COME EARLIER WAS NOT STATED. IN THESE CIRCUMSTANCES THE TRIBUNAL WAS IN ERROR I N SETTING ASIDE THE PENALTY.THE QUESTION IS ANSWERED IN FAVOUR OF THE R EVENUE AND AGAINST THE ASSESSEE IN THE LIGHT OF THE LATTER DECISION OF TH E THREE JUDGE BENCH OF THE SUPREME COURT IN THE CASE OF K.P.MADHUSUDAN VS.CIT( SUPRA). UNQUOTE. RESULTANTLY THE VIEW TAKEN BY THE AUTHORITIES BELO W IS HEREBY AFFIRMED AND THE IMPUGNED PENALTY IS HEREBY CONFIRMED. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 TH FEBRUARY 2011. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 11-02-2011 IT(SS)A NO.463/AHD/2010 -6- COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD