DCIT, Hyderabad v. M/s S.M.R. Builders Pvt. Ltd., Hyderabad

ITSSA 52/HYD/2009 | misc
Pronouncement Date: 03-02-2012 | Result: Dismissed

Appeal Details

RSA Number 5222516 RSA 2009
Assessee PAN AACCS8214K
Bench Hyderabad
Appeal Number ITSSA 52/HYD/2009
Duration Of Justice 2 year(s) 7 month(s) 16 day(s)
Appellant DCIT, Hyderabad
Respondent M/s S.M.R. Builders Pvt. Ltd., Hyderabad
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 03-02-2012
Date Of Final Hearing 13-06-2011
Next Hearing Date 13-06-2011
Assessment Year misc
Appeal Filed On 17-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER I.T(SS).A. NO. 50/HYD/2009 (BLOCK PERIOD A.Y. 1996-97 TO 2001-02 AND THE PERIOD 1.4.2001 TO 5.9.2001) M/S. SMR BUILDERS PVT. LTD. HYDERABAD PAN: AACCS8214K VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-3(2) HYDERABAD APPELLANT RESPONDENT I.T(SS).A. NO. 52/HYD/2009 (BLOCK PERIOD A.Y. 1996-97 TO 2002-03) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-3(2) HYDERABAD VS. M/S. SMR BUILDERS PVT. LTD. HYDERABAD PAN: AACCS8214K APPELLANT RESPONDENT A SSESSEE BY: SHRI C.S. SUBRAHMANYAM AND SHRI V. SIVA KUMAR R EVENUE BY: SHRI Y.V.S.T. SAI DATE OF HEARING: 02 . 0 1.201 2 DATE OF PRONOUNCEMENT: 03.02.2012 O R D E R PER CHANDRA POOJARI AM: THE ABOVE APPEALS ARE CROSS APPEALS BY THE ASSESS EE AND THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT( A)-IV HYDERABAD DATED 31.03.2009. 2. THE ASSESSEE IS IN APPEAL BEFORE FOR SUSTAINING THE PENALTY LEVIED U/S. 158BFA(2) OF INCOME-TAX ACT 1961 IN RE SPECT OF UNDISCLOSED INCOME ASSESSED FOR THE BLOCK PERIOD AT RS. 67 38 370 BEING THE PORTION NOT INCLUDED IN THE RETURN OF INC OME OUT OF THE ADMITTED UNDISCLOSED INCOME OF RS. 1 CRORE AND ALSO IN RESPECT OF UNDISCLOSED INCOME OF RS. 1 63 000 BEING ACCRUED IN TEREST NOT INCLUDED IN THE RETURN OF INCOME AND THE REVENUE IS IN APPEAL I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 2 BEFORE US AGAINST DELETION OF A PORTION OF PENALTY BY NOT TREATING THE ESTIMATED PROFIT AT PAR WITH AN UNACCOUNTED REC EIPT WHICH WAS ADMITTED BY THE MANAGING DIRECTOR OF THE COMPANY IN HIS SWORN STATEMENT AND ALSO RESTRICTING THE PENALTY TO 100% OF TAX PAYABLE ON CONCEALED INCOME INSTEAD OF RS. 1.50 CRORES LEVI ED BY THE ASSESSING OFFICER. 3. FIRSTLY LET US DEAL WITH ASSESSEE'S APPEAL. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE-COMPANY A DOMESTIC COM PANY CARRYING ON THE BUSINESS OF CONSTRUCTION AND SALE O F FLATS HAD BEEN SUBJECTED TO A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT ON 5.9.2001. IN RESPONSE TO A NOTICE ISSUED U/S. 1 58BC OF THE ACT THE ASSESSEE-COMPANY FILED A RETURN OF INCOME FOR THE BLOCK PERIOD 1.4.1995 TO 5.9.2001 COVERING THE ASSESSMEN T YEARS 1996- 97 TO 2002-03 ADMITTING UNDISCLOSED INCOME OF RS. 3 2 61 630. HOWEVER AFTER VERIFYING THE MATERIAL SEIZED DURING THE SEARCH ACTION AND ON THE BASIS OF THE INFORMATION GATHERED THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS IN THE ASSESSM ENT ORDER U/S. 158BC WHILE COMPUTING UNDISCLOSED INCOME FOR THE B LOCK PERIOD: I) UNACCOUNTED RECEIPTS TREATED AS UNDISCLOSED INCOME RS. 1 00 00 000 II) UNDISCLOSED PROFIT ON RECEIPTS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT RS. 2 02 50 960 III) ACCRUED INTEREST RS. 1 63 000 ------------------- TOTAL RS. 3 04 13 960 ============= 3.1 SINCE THE UNDISCLOSED INCOME WAS COMPUTED AT RS. 3 04 13 960 AS AGAINST THE UNDISCLOSED INCOME ADMIT TED AT RS. 32 61 630 THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME RELATI NG TO THE BLOCK PERIOD AND THEREFORE INITIATED PENALTY PROCEEDINGS U/S. 158BFA(2) OF THE ACT. WHILE THE CIT(A) ALLOWED PARTIAL RELIE F TO THE ASSESSEE IN THE FIRST APPEAL RELATING TO QUANTUM ADDITION THE TRIBUNAL PARTLY I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 3 ALLOWED THE APPEALS FILED BY THE ASSESSEE AS WELL A S THE DEPARTMENT. SUBSEQUENTLY DURING THE PENALTY PROCE EDINGS THE ASSESSEE'S REPRESENTATIVE FILED A DETAILED EXPLANAT ION WHICH ALONG WITH OTHER SEIZED MATERIAL AND RELEVANT FACTS HAS BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE PASSING THE PENALTY ORDER UNDER PRESENT APPEAL. 3.2 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D ADMITTED UNDISCLOSED INCOME OF RS. 32 61 630 IN THE RETURN FILED FOR THE BLOCK PERIOD UNDER THE HEAD 'INCOME FROM BU SINESS' RELATING TO A.YS. 1999-2000 2000-01 AND 2001-02. WHEN ASKED TO EXPLAIN THE BASIS FOR ARRIVING AT THE SAID UNDIS CLOSED INCOME SHRI S. RAM REDDY MANAGING DIRECTOR OF THE ASSESSE E-COMPANY STATED DURING ASSESSMENT PROCEEDINGS THAT THERE WAS NO BASIS FOR THE UNDISCLOSED INCOME ADMITTED. HOWEVER THE ASSE SSEE- COMPANY WANTED TO PAY SOME TAX AND IN THE PROCESS A DMITTED SUCH UNDISCLOSED INCOME TO AVOID ANY UNKNOWN SHORTC OMINGS AS A RESULT OF SCRUTINY OF SEIZED BOOKS OF ACCOUNT/DOCUM ENTS. THE ASSESSEE HAD THEREFORE ADMITTED CERTAIN AMOUNT OF INCOME AS UNDISCLOSED INCOME IN ITS RETURN FILED IN RESPONSE TO THE NOTICE U/S. 158BC OF THE ACT. THE ASSESSING OFFICER REFER RED TO THE SEIZED MATERIAL AS WELL AS THE BOOKS OF ACCOUNT WHILE WORK ING OUT THE UNDISCLOSED INCOME. HE REFERRED TO THE SWORN STATE MENT OF SHRI S. RAM REDDY DATED 5.9.2001 WHEREIN HE HAD ADMITTED TH AT CASH RECEIPTS RECEIVED FROM SOME OF THE BUYERS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-COMPANY. HE HAD S PECIFICALLY STATED THAT THE CASH RECEIPTS FROM SHRI JAYARAJ ON ACCOUNT OF ADVANCE FOR BOOKING OF FLAT IN SMR CASTLE BANGALOR E TO THE EXTENT OF RS. 9.8 LAKHS WAS NOT RECORDED IN THE BOOKS OF A CCOUNT. FURTHER AFTER GOING THROUGH THE SWORN DEPOSITION O F SRI S. GOPAL REDDY RESIDENT DIRECTOR AT BANGALORE SHRI S. RAM REDDY IN HIS STATEMENT DATED 8.10.2001 ADMITTED UNDISCLOSED INCO ME OF RS. 1 CRORE FOR THE BLOCK PERIOD STATING AS UNDER: I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 4 'ANSWER TO Q. NO. 8 IN THE SWORN DEPOSITION RECORDE D ON 8.10.2001. ANSWER: I ADMIT THAT THERE IS 'ON-MONEY RECEIPTS'. THIS IS MAINLY BECAUSE ON MANY OCCASIONS BUYERS WILL NOT HAVE SUFFICIENT WHILE MONEY BASE. THEY ALSO INSIST UPON US TO ACCEPT 'ON-MONEY' RECEIPTS TO COVER UP TAX BURDEN. HAVING GONE THROUGH ALL THESE STATEMENTS AND LETTERS I ACCEPT THAT THERE ARE 'ON- MONEY' TRANSACTIONS WHILE SELLING THE FLATS. Q. NO. 9 PLEASE QUANTIFY THE 'ON-MONEY' RECEIPTS FO R THE BLOCK PERIOD I.E. FROM 1.4.1995 TO 5.9.2001? ANSWER: THE ACCUMULATED 'ON-MONEY' PAYMENTS FOR THE BLOCK PERIOD ARE RS. 95 00 000 (RUPEES NINETY FIVE LAKHS ONLY) APPROXIMATELY. THE DETAILS WORKING SHALL BE SUBMITTED WITHIN TWO DAYS. Q.NO.11 PLEASE GO THROUGH THE STATEMENTS AND LETTER S SUBMITTED FROM VARIOUS PERSONS WHOM YOU HAVE MENTIONED AS LOAN CREDITORS IN YOUR AND YOUR FAMILY MEMBERS RETURNS OF INCOME AND OFFER YOUR COMMENTS? ANSWER: I AM TOTALLY IN AGREEMENT WITH THE STATEMENTS AND LETTERS SUBMITTED BY THEM. THESE AMOUNTS OF LOAN CREDITS HAVE BEEN INTRODUCED WITH THE INCOME-TAX RETURNS OUT OF THE ABOVE ACCUMULATED 'ON-MONEY'. HOWEVER I SHALL FURNISH A DETAILED LIST OF LOAN CREDITORS IN WHOSE NAME SUCH AMOUNTS HAVE BEEN INTRODUCED WITHIN TWO DAYS. Q.NO.12 DO YOU HAVE ANYTHING ELSE TO SAY? ANSWER: FROM THE ABOVE SUBMISSIONS MADE BY ME IT IS CLEAR THAT THE TOTAL UNACCOUNTED INCOME FOR THE BLOCK PERIOD I.E. FROM 1.4.1995 TO 5.9.2001 IS RS. 1 00 00 000/- (RUPEES ONE CRORE). THEREFORE THE SAME IS BEING VOLUNTARILY OFFERED FOR TAXATION FOR THE BLOCK PERIOD AND KINDLY IMMUNE ME FROM ALL PENAL AND PROSECUTION PROCEEDINGS AS I AM VOLUNTARILY COMING FORWARD TO OFFER THE ABOVE ON BEHALF OF THE COMPANY M/S. SMR I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 5 BUILDERS PVT. LTD. MYSELF AND MY FAMILY MEMBERS. SD/- S. RAM REDDY 08.10.2001 DEPONENT THE ABOVE STATEMENT WAS READ BY ME AND FOUND TO BE RECORDED CORRECTLY AS PER MY VERSION. THE ABOVE STATEMENT WAS GIVEN BY ME OUT OF MY FREE WILL AND N OT UNDER ANY FORCE THREAT OR COERCION. FACTS MENTION ED IN THE ABOVE STATEMENT TRUE TO MY KNOWLEDGE AND BELIEF. (IN THE HANDWRITING OF SHRI S. REDDY) SD/- S. RAM REDDY 08.10.2001' 3.3 FURTHER IN HIS ANOTHER SWORN STATEMENT DATED 22.10. 2001 SRI REDDY AFTER GOING THROUGH SEIZED DOCUMENTS ELAB ORATED HIS STATEMENT AS UNDER: Q.NO. 46 PLEASE GO THROUGH THE STATEMENT GIVEN BY YOU ON 8.10.2001 U/S. 132(4) OF THE IT ACT AND OFFER YOUR COMMENTS. ANSWER: I AM TOTALLY IN AGREEMENT WITH THE STATEMEN T GIVEN BY ME ON 8.10.2001. THERE IS ABSOLUTELY NO NEED OF ANY ALTERATION. Q.NO. 47 IN THE LIGHT OF STATEMENTS GIVEN BY YOU ON 8.10.2001 AND RECONFIRMATION OF THE SAME TODAY I.E. 22.10.2001 PLEASE GIVE THE DETAILED BIFURCATION OF THE ON-MONEY RECEIPTS WITH VENTURE WISE. ANSWER: AFTER METICULOUS ANALYSIS AND DISCUSSIONS WITH MY AUDITORS I AM GIVING THE ON-MONEY RECEIPTS VENTURE-WISE AS UNDER: RS. SMR MAJESTIC 15 00 000 SMR NIRANJAN VILLE 10 00 000 SMR SARTAJ 25 00 000 SMR KRISHNA 15 00 000 SMR VINAY VIHAR 5 00 000 SMR RESIDENCY 10 00 000 BANGALORE 5 00 000 SMR INSTYLE 5 00 000 SMR EMPIRE SMR SQUARE SMR RAM RESIDENCY SMR HABITAT 10 00 000 -------------- TOTAL 1 00 00 000 ========== THIS CALCULATION HAS BEEN DONE VERY CAREFULLY. I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 6 Q.NO. 48 HOW WILL YOU SAY THAT THE 'ON-MONEY' FROM VARIOUS VENTURES GENERATED FOR THE BLOCK PERIOD IS RS. ONE CRORE? ANSWER: THE ON MONEY HAS NOT BEEN ENTERED ANYWHERE IN THE BOOKS OF ACCOUNT. THE SAME HAS BEEN IN FORM OF CIRCULATING CAPITAL. Q.NO. 49 COULD YOU PLEASE GIVE THE BIFURCATION OF APPLICATION OF SUCH ON MONEY? ANSWER: THE MAJOR APPLICATION OF ON-MONEY IS IN THE FORM OF CREDITORS. THE MONEY HAS BEEN INTRODUCED IN THEIR NAMES IN THE FORM OF CREDITS GIVEN TO INDIVIDUAL DIRECTOR IN TURN THE DIRECTORS CONTRIBUTED IN THE FORM OF CREDITS TO THE COMPANY. Q.NO.50 PLEASE LIST OUT SUCH CREDITS? ANSWER: THE CREDITS INTRODUCED IN THE NAME OF SMT. SARITA: NAME AMOUNT (RS.) S.M. REDDY 90 000 P. CHINNA VEERA REDDY 1 00 000 K. RAMA DEVI (THIS IS AN ADDITIONAL AMOUNT OTHER THAN ADMITTED BY HER) 1 00 000 K. VENKATARAM REDDY 1 50 000 S. PRATAP REDDY 80 000 P. VEERA REDDY 1 00 000 S.R. REDDY 1 00 000 V. SATYANARAYANA 1 50 000 P. RAGHURAM REDDY 1 00 000 TOTAL 9 70 000 CREDITS INTRODUCED IN MY NAME: NAME AMOUNT (RS.) BHASKAR REDDY 1 00 000 ANTHI REDDY 1 50 000 K. VENKATRAM REDDY 1 00 000 S.R. REDDY 1 00 000 TOTAL 4 50 000 I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 7 CREDITS INTRODUCED IN THE NAME OF MY HUF NAME AMOUNT (RS.) B. YADAGIRI REDDY 65 000 SUSHMA 1 05 000 TOTAL 1 70 000 CREDITS INTRODUCED IN THE NAME OF S. CHANNA REDDY: NAME AMOUNT (RS.) MEENA 40 000 NAGAMANI 40 000 SATYANARAYANA 20 000 P. MALLA REDDY 1 00 000 K. SUSHEELA 75 000 K. VENKATRAM REDDY 1 00 000 S.R. REDDY 1 00 000 M. NARSA REDDY 1 00 000 TOTAL 5 75 000 CREDITS INTRODUCED IN THE NAME OF MRS. S. SAVITHRI: NAME AMOUNT (RS.) P. LOKA REDDY 50 000 THE ENTIRE AMOUNT OF CREDITS ABOVE ARE STILL OUTSTANDING AS ON THE DATE 5.9.2001. THESE ARE CAS H CREDITS. THE TOTAL AMOUNTS TO RS. 22 15 000/-. Q.NO. 51 ARE THERE ANY APPLICATION OF SUCH ON MONEY IN ANY OTHER FORM? ANSWER: AN AMOUNT OF RS. 3 13 000/- WAS INVESTED IN THE FORM OF FDRS BY MY BROTHER SHRI S. GOPAL REDDY. THESE FDRS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. Q.NO. 52 ARE THERE ANY FURTHER APPLICATION OF SUCH ON MONEY? ANSWER: THIS ON-MONEY HAS BEEN CIRCULATED INTO THE BUSINESS AT VARIOUS OCCASIONS. THE SAME HAS NOT BEEN ENTERED INTO BOOKS OF ACCOUNTS; THE APPLICATION CANNOT BE ASCERTAINED WITH ACCURACY. THE COMPANY HAS INVESTED I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 8 FURTHER AN AMOUNT OF RS. 20 LAKHS EACH IN CONSTRUCTION OF HOUSE AT JUBILEE HILLS AND SMR HOUSE AT PUNJAGUTTA. THESE INVESTMENTS ARE OVER AND ABOVE THE AMOUNTS RECORDED IN THE BOOKS OF ACCOUNT AND CORRESPOND TO THE ON-MONEY PAYMENTS RECEIVED IN THE VENTURES PROMOTED BY THE COMPANY. TO SUMMARISE IN A NUTSHELL THE ENTIRE ON-MONEY RECEIPTS TILL TODAY ON THE VENTURE BY M/S. SMR BUILDERS PVT. LTD. IS NET OF RS. ONE CRORE. Q.NO. 53 DO YOU WANT TO SAY ANYTHING FURTHER? ANSWER THE INTEREST PORTION ON FDRS HAS NOT BEEN CALCULATED. SINCE THESE FDRS THOUGH BELONG TO SHRI S. GOPAL REDDY THE SAME WERE PURCHASED FROM THE ON-MONEY GENERATED BY M/S. SMR BUILDERS PVT. LTD. THEREFORE I OFFER THE INTEREST PORTION OF RS. 1 63 000/- ALSO IN THE HANDS OF M/S. SMR BUILDERS PVT. LTD. I STRICTLY ABIDE BY THE ABOVE GIVEN STATEMENT AND FILE THE BLOCK RETURNS OF INCOME ACCORDINGLY. SHRI S. RAM REDDY ALSO FILED AN AFFIDAVIT DATED 30.10.2001 WHICH READS AS UNDER: AFFIDAVIT I SOLEMNLY HEREBY AFFIRM ON OATH THAT I HAVE GIVEN STATEMENT ON 8.10.2001 AND 22.10.2001. ON BOTH THE OCCASIONS I HAVE AFFIRMED THAT NET UNACCOUNTED INCOME IS RUPEES ONE CRORE FOR THE BLOCK PERIOD AND DECLARED THE SAME AS MY UNACCOUNTED INCOME FOR THE BLOCK PERIOD. I ONCE AGAIN DECLARE THE SAME THAT THE UNACCOUNTED INCOME OF M/S. SMR BUILDERS PVT. LTD. AND GROUP CONCERNS F OR THE BLOCK PERIOD IS RUPEES ONE CRORE. I STRICTLY A BIDE BY IT AND FILE THE RETURN IN FORM 28 FOR M/S. SMR BUILDERS PVT. LTD. AND GROUP CONCERNS AND PAY THE TAXES ACCORDINGLY. SD/- FOR SMR BUILDERS PVT. LTD. SD/- S. RAM REDDY 30.10.2001 MANAGING DIRECTOR.' I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 9 3.4 FROM THE ABOVE THE ASSESSING OFFICER OBSERVED THAT THE MANAGING DIRECTOR HAD NOT ONLY ADMITTED THE ADDITI ONAL INCOME EARNED BY THE ASSESSEE-COMPANY IN THE SHAPE OF ON-M ONEY BUT HAD ALSO FURNISHED A DETAILED DESCRIPTION WITH REGA RD TO SOURCE I.E. NAMES OF THE VENTURES FROM WHICH THE SAME WAS EARNED. HE ALSO MENTIONED CLEARLY AS TO HOW THE ON-MONEY RECEI PTS WERE BROUGHT INTO THE BOOKS OF ACCOUNT IN THE FORM OF CR EDITS IN THE NAMES OF VARIOUS PERSONS. THEREFORE BESIDES 'UNDI SCLOSED INCOME' OF RS. 1 CRORE THE SOURCE AND UTILISATION OF SUCH INCOME IN ASSESSEE'S BUSINESS WERE ALSO ADMITTED. HOWEVER T HE ASSESSEE LATER FOR THE REASONS BEST KNOWN TO IT DEVIATED F ROM THE STATEMENT WITHOUT FURNISHING ANY REASONABLE AND CO NVINCING EXPLANATION. THE SUBSEQUENT CONTENTIONS HOWEVER W ERE NOT ACCEPTED BY THE DEPARTMENT. THE DECISION OF THE AS SESSING OFFICER WAS LATER UPHELD BY THE CIT(A) AND EVEN ITAT HYDER ABAD CONCURRED WITH THE VIEW THAT THE ADDITION OF RS. 1 CRORE HAD BEEN MADE ON THE BASIS OF MATERIAL FOUND DURING THE COUR SE OF SEARCH OPERATIONS. THE ASSESSING OFFICER THEREFORE CONC LUDED THAT IT HAS CLEARLY BEEN ESTABLISHED THAT THE ASSESSEE-COMPANY CONCEALED THE TRUE PARTICULARS OF THEIR INCOME AT THE TIME OF FIL ING OF RETURN OF INCOME FOR THE BLOCK PERIOD AND ALSO CONCEALED PART ICULARS OF INCOME WHILE FURNISHING THE SAID RETURN. 3.5 THE ASSESSING OFFICER IN THE PENALTY ORDER OBSERVED THAT THE ASSESSEE IN ITS EXPLANATION FURNISHED DURING THE PE NALTY PROCEEDINGS HAD HAD CONTENDED THAT THE ADDITIONAL I NCOME HAD NOT BEEN WORKED OUT ON THE BASIS OF ANY AVAILABLE E VIDENCE AND THEREFORE NO PENALTY U/S. 271(1)(C) COULD HAVE BEE N LEVIED IN THE ABSENCE OF ANY EVIDENCE. IT WAS CLAIMED THAT THE A SSESSEE WAS FORCED TO DECLARE UNDISCLOSED INCOME THOUGH NO EVID ENCE WAS FOUND. HOWEVER THE ASSESSING OFFICER NOTED THAT T HE SAID CONTENTION WAS VAGUE AS THE ASSESSEE HAD NOT ONLY I DENTIFIED THE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 10 SOURCE OF SUCH UNACCOUNTED INCOME BUT HAD ALSO FURN ISHED FULL DETAILS OF UTILISATION THEREOF. HE FURTHER NOTED T HAT THE ASSESSEE- COMPANY WAS EXECUTING VARIOUS HOUSING PROJECTS AND SELLING FLATS DURING THE YEARS FALLING WITHIN THE BLOCK PERIOD. THEREFORE THERE WAS NO SCOPE TO BIFURCATE THE UNDISCLOSED INCOME AD MITTED BY THE ASSESSEE FOR VARIOUS ASSESSMENT YEARS. HE FELT THA T WHEN THE MD OF THE ASSESSEE-COMPANY HAD HIMSELF ADMITTED THE QU ANTUM OF UNDISCLOSED INCOME THE MODUS OPERANDI OF EARNING THE SAME AND UTILISATION THEREFORE WITHOUT ANY AMBIGUITY THER E WAS NO NEED FOR THE ASSESSING OFFICER TO GO BEYOND SUCH ADMISSIONS. HE FELT THAT SINCE HE HAD HIMSELF FURNISHED FULL AND CLEAR PICTU RE WITH REGARD TO EARNING OF UNACCOUNTED MONEY GIVING ALL MINOR DE TAILS THERE WAS NO FORCE IN THE ARGUMENT THAT THE DEPARTMENT SH OULD NOT HAVE ACTED UPON THE CONFESSIONAL STATEMENT GIVEN BY HIM SUBSEQUENT TO THE SEARCH. HE CONCLUDED THAT THOUGH THE ASSESSEE HAS CHOSEN TO DISCLOSE THE ADDITIONAL INCOME SUBSEQ UENT TO THE SEARCH AND SEIZURE OPERATIONS ON THE BASIS OF SEIZE D MATERIAL FOR THE REASONS BEST KNOWN TO IT ONLY A PART OF THE AM OUNT WAS DECLARED IN THE RETURN FOR THE BLOCK PERIOD. THE A SSESSEE COULD NOT EVEN FURNISH ANY REASONABLE AND CONVINCING WORKING FOR DECLARING THE AMOUNT OF RS. 32 61 630 AS 'UNDISCLOSED INCOME' . ACCORDINGLY HE CONCLUDED THAT THE ASSESSEE HAD DEV IATED FROM THE DECLARATION MADE WITHOUT ANY REASONABLE CAUSE/EVIDE NCE AND THEREFORE THE AMOUNT OF RS. 1 CRORE WAS TO BE TREA TED AS UNDISCLOSED INCOME FOR THE PURPOSE OF LEVYING PENAL TY U/S. 158BFA(2) OF THE ACT. 3.6 DURING THE PENALTY PROCEEDINGS THE ASSESSING OFFIC ER FURTHER NOTED THAT WHILE FRAMING THE ASSESSMENT ORD ER THE ASSESSING OFFICER HAD PROPOSED TO ESTIMATE UNDISCLO SED PROFIT IN RESPECT OF SALE OF FLATS ON THE BASIS OF SEIZED MAT ERIAL. HE NOTED THAT RECEIPT ON-MONEY ON SALE OF FLATS HAD BEEN VOL UNTARILY ADMITTED BY THE ASSESSEE. BESIDES THE SEIZED MATE RIAL ALSO I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 11 INDICATED RECEIPT OF ON-MONEY. EVEN POST SEARCH EN QUIRIES ESTABLISHED THIS FACT. HE ACCORDINGLY REPRODUCED P ARA 5.3(III) AT PAGE N. 26 OF THE ASSESSMENT ORDER DATED 30.9.2003 . '(III) THE POST SEARCH ENQUIRIES CONDUCTED FROM THE BUYERS OF THE FLATS INDICATED PAYMENT OF ON-MONEY T O THE ASSESSEE-COMPANY AS UNDER: SL. NO. NAME OF THE APARTMENT/FLAT NO. NAME OF THE BUYER AMOUNT PAID (RS.) AMOUNT SHOWN IN (RS.) DIFFERENCE (RS.) 1. SMR KRISHNA/102 A.N. RAO 9 75 000 7 57 000 2 18 00 0 2. SMR MAJESTIC/102 COL. VRK PRASAD 9 14 000 6 14 000 3 00 000 3. PLAZA/SARTAZ/307 B. SAIRAM 12 00 000 8 49 255 3 5 0 745 4. -DO-/203 D. ALIVELU- MANGATAYARAU 13 00 000 5 75 000 7 25 000 5. -DO-/204 T.N. MENON 14 00 000 12 65 000 1 35 000 6. -DO-/207 MRS. GAYATHRI & SUBRAHMANYAM 9 00 000 5 45 001 3 54 999 3.7 THE ASSESSING OFFICER NOTED THAT THE ABOVE MENTIONE D BUYERS HAD ADMITTED HAVING MADE ON-MONEY PAYMENTS I N CASH BESIDES ADMITTING THAT THE RECEIPTS ISSUED TO THEM TOWARDS THE SAME HAD BEEN TAKEN BACK BY THE ASSESSEE AT THE TIM E OF GIVING POSSESSION OF THE FLAT. HE NOTED THAT THE STATEMEN TS OF THE ABOVE PERSONS HAD ALSO BEEN CONFRONTED TO SHRI REDDY WHIL E RECORDING THE STATEMENT ON 8.10.2001. WHEREUPON HE STATED T HAT 'I ADMIT THAT THERE IS ON-MONEY RECEIPT. THIS IS MAINLY BEC AUSE ON MANY OCCASIONS BUYERS WILL NOT HAVE SUFFICIENT WHITE MON EY BILLS. THEY ALSO INSIST UPON US TO ACCEPT ON-MONEY RECEIPT TO C OVER UP TAX BURDEN. HAVING GONE THROUGH ALL THE STATEMENTS AND LETTERS I ACCEPT THAT THERE ARE ON-MONEY TRANSACTIONS WHILE S ELLING THE FLATS.'. 3.8 THE ASSESSING OFFICER OBSERVED THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AN OPPORTUNITY HAD BEEN GIV EN TO THE ASSESSEE TO PRODUCE THE ABOVE PERSONS TO PROVE THAT THE ASSESSEE HAD NOT RECEIVED ANY EXTRA CONSIDERATION NOT RECORD ED IN THE BOOKS OF ACCOUNT. HOWEVER SHRI S. RAM REDDY AND SHRI CH ENNA REDDY HAD MAINTAINED THAT IT WAS VERY DIFFICULT TO PRODUC E THOSE PERSONS AS MOST OF THEM WERE RELUCTANT TO COME TO THE DEPAR TMENT'S OFFICE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 12 AND GIVE ANY EVIDENCE OUT OF FEAR OF THE DEPARTMENT . IT WAS ALSO CLAIMED THAT SOME OF THEM WERE NOT AVAILABLE AT THE RELEVANT TIME AT HYDERABAD. THE SAID EXPLANATION WAS HELD AS AN AFTERTHOUGHT IN VIEW OF THE SWORN DEPOSITIONS ACCEPTING ON-MONEY RECEIPTS. 3.9 FURTHER REFERENCE WAS MADE BY THE ASSESSING OFFICE R TO THE SWORN STATEMENT OF SRI S. GOPAL REDDY DATED 5.9.200 1 WHEREIN HE ADMITTED RECEIPT OF ON-MONEY AND MEETING OF UNAC COUNTED EXPENDITURE OUT OF THE SAME ADMITTING THE SUPPRESS ION OF REAL CONSIDERATION ON SALE OF FLATS RANGING BETWEEN RS. 2 LAKHS TO RS. 3.5 LAKHS FOR EACH FLAT SOLD. 3.10 IN VIEW OF THE SEIZED MATERIAL AND THE POST SEARCH ENQUIRIES THE ASSESSING OFFICER FELT THAT THE RECEIPT OF UNAC COUNTED CONSIDERATION HAD BEEN CLEARLY ESTABLISHED. THE SA ME WAS ADMITTED BY THE MANAGING DIRECTOR AS WELL AS THE EX ECUTIVE DIRECTOR. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD SOLD THE FLATS AT SEMI FINISHED STAGE AND HAD U NDERTAKEN FURTHER CONSTRUCTION ON CONTRACTUAL AGREEMENT. NO BIFURCATION OF THE COMPLETED WORK AND SUBSEQUENT WORK TAKEN ON CON TRACT WAS AVAILABLE. THEREFORE THE WORK IN PROGRESS COULD N OT BE ARRIVED AT. CONSIDERING THESE DEFICIENCIES THE ASSESSING OFFIC ER WHILE FRAMING THE ASSESSMENT ORDER HAD INVOKED THE PROVISIONS OF SECTION 145. THE RECOURSE TO SECTION 145 WAS LATER UPHELD BY THE APPELLATE AUTHORITIES ALSO IN PRINCIPLE. HOWEVER THE ITAT F INALLY HELD THAT THE UNDISCLOSED PROFITS SHOULD BE ESTIMATED AT 10% AS AGAINST THAT ESTIMATED BY THE ASSESSING OFFICER AT 15%. THE UPH OLDING THE ESTIMATION AT THE RATE OF 10% HOWEVER VINDICATED THE ASSESSING OFFICER'S STAND THAT THERE WAS A SUPPRESSION OF PRO FIT IN THE ASSESSEE'S BUSINESS. THE SAID CONCLUSION REGARDING SUPPRESSION HAD BEEN ARRIVED AT AND ESTIMATED BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED MATERIAL. ACCORDINGLY THE ASSESSI NG OFFICER WHILE DECIDING THE ISSUE OF PENALTY FELT THAT THE ASSESSE E WAS LIABLE FOR I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 13 PENALTY U/S. 158BFA(2) IN RESPECT OF THE SUPPRESSED PROFITS ALSO. HE WAS OF THE VIEW THAT THE ASSESSEE HAD NOT BEEN A BLE TO FURNISH ANY CONVINCING EXPLANATION WHY SUCH PROFITS SHOULD NOT BE TREATED AS UNDISCLOSED INCOME. ACCORDINGLY THE EXPLANATIO N OF THE ASSESSEE IN THIS RECORD WAS REJECTED. 3.11 WHILE DECIDING THE LEVY OF PENALTY THE ASSESSING O FFICER FURTHER FOUND THAT AS PER THE ASSESSMENT ORDER DUR ING THE COURSE OF SEARCH AND SEIZURE OPERATION CERTAIN FDRS WERE NOTICED WHICH WERE TREATED AS PART OF UNDISCLOSED INCOME ALREADY COMPUTED. HOWEVER THE INTEREST COMPONENT IN RESPECT OF THE S AME AMOUNTING TO RS. 1 63 000 WAS TREATED AS FURTHER 'UNDISCLOSED INCOME' AS SHRI RAM REDDY IN HIS STATEMENT DATED 22.10.2001 CO ULD NOT FURNISH ANY EXPLANATION OR INFORMATION WITH REGARD TO THE DECLARATION OF SUCH INTEREST FOR TAX PURPOSE IN THE REGULAR RETURNS OF INCOME. THE SAID SUM WAS THEREFORE ALSO TAKEN INTO CONSIDERATION FOR THE PURPOSE OF LEVY OF PENALTY. ACCORDINGLY AFTER REDUCING THE INCOME OF RS. 31 61 630 BEING THE INCO ME ADMITTED IN THE RETURN FOR THE BLOCK PERIOD FROM THE TOTAL I NCOME COMPUTED AFTER GIVING EFFECT TO THE ORDER OF ITAT BEING RS. 2 13 27 070 THE CONCEALED INCOME WAS WORKED OUT AT RS. 1 80 65 440. TAX @ 60% AND SURCHARGE THEREON WERE CALCULATED AT RS. 1 10 5 6 049 WHICH WAS TO BE THE MINIMUM PENALTY WHEREAS THE MAXIMUM P ENALTY WOULD HAVE RS. 3 31 68 147. THE ASSESSING OFFICER HOWEVER LEVIED A PENALTY OF RS. 1 50 00 000. 4. ON APPEAL THE CIT(A) OBSERVED THAT IN THIS CASE IN COME FOR THE BLOCK PERIOD WHICH WAS WORKED OUT ON THE BASIS OF THE ITAT ORDER DATED 19.3.2008 IS AS FOLLOWS: RS. TOTAL TURNOVER/WORK-IN-PROGRESS DISCLOSED BY THE ASSESSEE-COMPANY FOR THE BLOCK PERIOD. 21 16 40 726 NET PROFIT ESTIMATED AT 10% AS HELD BY ITAT HYDERABAD 2 11 64 072 I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 14 LESS: INCOME ADMITTED BY THE ASSESSEE UNACCOUNTED FOR RECEIPTS TREATED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD AS PER ORDER U/S. 158BC 1 00 00 000 UNDISCLOSED PROFIT ON RECEIPTS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS MENTIONED ABOVE. 1 11 64 072 ADD: ACCRUED INTEREST THE SAME IS INCLUDED IN THE TOTAL INCOME SUBJECT TO VERIFICATION AND TO ARRIVE AT FINAL DECISION AS DIRECTED BY THE ITAT HYDERABAD. 1 63 000 --------------- REVISED TOTAL INCOME 2 13 27 072 --------------- ROUNDED OFF TO 2 13 27 070 =========== 5. OUT OF THE ABOVE THE CIT(A) OBSERVED THAT THOUGH T HE ASSESSEE ADMITTED RS. 1 CRORE AT THE TIME OF SEARCH ACTION IT HAS INCLUDED ONLY RS. 32 61 630 IN THE RETURN OF INCOME AND RS. 67 38 370 WAS NOT CONSIDERED BY THE ASSESSEE IN THE RETURN OF INCOME AND THIS PORTION OF RS. 67 38 370 HAS TO BE CONSIDERED FOR LEVY OF 158BFA(2) PENALTY. REGARDING UNDISCLOSED P ROFIT ON RECEIPT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT WHICH WORKED OUT AT RS. 1 11 64 072 WHILE PASSING THE CONSEQUENTIAL ORDER I T IS THE ESTIMATED INCOME AT 10% OF TOTAL UNDISCLOSED TURNOV ER. THIS BEING THE ESTIMATED INCOME THE CIT(A) OBSERVED THAT IT C ANNOT BE CONSIDERED AS 'COMPUTED INCOME' TO LEVY PENALTY U/S . 158BFA(2) OF THE ACT AND HE HAS NOT CONSIDERED THE SAME FOR L EVY OF PENALTY. HOWEVER REGARDING THE ACCRUED INTEREST OF RS. 1 63 000 THIS BEING THE ADMITTED UNDISCLOSED INCOME BY SHRI S. RAM REDD Y IN HIS SWORN STATEMENT THE SAME IS CONSIDERED FOR LEVY OF PENALTY U/S. 158BFA(2) OF THE ACT. FINALLY THE CIT(A) DIRECTED THE ASSESSING OFFICER TO LEVY PENALTY AT 100% OF THE AMOUNT OF TA X LEVIABLE IN RESPECT OF THE ABOVE UNDISCLOSED INCOME. AGAINST T HIS DIRECTION BOTH THE PARTIES ARE IN APPEAL BEFORE US. I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 15 6. THE LEARNED AR SUBMITTED THAT EXIGIBILITY OF PENALT Y ON ADMITTED INCOME OF RS 1 00 00 000: THE COMPONENT OF ESTIMATED INCOME WHICH WAS CONSIDERED FOR IMPOSITION OF PENAL TY RELATE TO ADMISSION OF RS 1 CRORE AS UNDISCLOSED RECEIPT / IN COME BY THE MANAGING DIRECTOR. THE COMMISSIONER OF INCOME-TAX ( APPEALS) HAS SUSTAINED PENALTY ON THIS PORTION OF INCOME AGAINST WHICH THE ASSESSEE IS IN APPEAL. A SUMMARY READING OF THE DE POSITIONS GIVEN BY THE MANAGING DIRECTOR AND HIS ASSOCIATE DIRECTOR S ADEQUATELY BRING OUT THE FACT THAT CERTAIN RECEIPTS AND PAYMEN TS RELATING TO THE CONSTRUCTION ACTIVITY HAVE NOT BEEN PROPERLY RE CORDED IN THE BOOKS OF ACCOUNT. PARA 5.3 (I) CLEARLY BRINGS OUT T HE FACT THAT THE AO HAD ALSO COME TO THE SAME CONCLUSION BASING UPON THE EXAMINATION OF THE BOOKS OF ACCOUNT AND SEIZED DOCU MENTS. HENCE THE PRINCIPLE THAT ESTIMATION IS THE ONLY ME ANS OF WORKING OUT THE TRUE INCOME OF THE ASSESSEE COMES OUT IN UN AMBIGUOUS TERMS. 6.1 THE AR SUBMITTED THAT THE AO EXPRESSED HIS INABILIT Y TO WORK OUT THE TRUE INCOME OTHERWISE THAN BY ESTIMATE IN THE FOLLOWING WORDS IN THE ASSESSMENT ORDER. 'THE BOOKS OF ACCOUNT MAINTAINED FOR THE PURPOSE OF I. T RETURNS BEREFT TOTAL RECEIPT DO NOT DISCLOSE THE TRUE STATE OF ACCOUNTS AND OBVIOUSLY NO CORRECT INCOME COULD HAVE BEEN DEDUCED. IT NOT POSSIBLE TO CORRECT LY COMPUTE THE UNDISCLOSED INCOME ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNT EITHER RECORDED OR NOT RECORDED. THIS IS BECAUSE THE ASSESSEE HAD NOT MAINTAINED PROPER RECORD OF RECEIPTS AND EXPENSES.' 6.2 FOLLOWING THE ABOVE PRINCIPLE THE AO THE COMPUTED T HE INCOME ON ESTIMATE BASIS AT PARAGRAPH 5.6 OF THE AS SESSMENT ORDER. OUT OF THE TOTAL INCOME SO DETERMINED AMOUNT ING TO RS 3 02 50 960 HE SET APART A SUM OF RS 1 CR AS UNDIS CLOSED RECEIPTS ESTIMATED AND TREATED AS UNDISCLOSED INCOME. IT IS PERTINENT TO NOTE THAT THE AO HIMSELF CATEGORICALLY TERMED THE U NDISCLOSED I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 16 INCOME OF RS 1 CRORE AS ESTIMATED. HENCE THE FACT THAT ESTIMATION IS THE UNDERLYING METHOD OF WORKING OUT THE TOTAL U NDISCLOSED INCOME COMES OUT IN CLEAR TERMS FROM THE AO CONCLUS IONS. THE LEARNED CIT (A) FAILED TO APPRECIATE THE PRINCIPLE OF ESTIMATION UPON WHICH UNDISCLOSED INCOME HAS BEEN ARRIVED AT I N THIS CASE. 6.3 REGARDING RELEVANCY OF SWORN STATEMENTS / AFFIDAVIT THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT: A. A STATEMENT WAS OBTAINED FROM THE MANAGING DIRE CTOR OF THE APPELLANT COMPANY ON THE DAY OF INITIATION OF SEARC H I.E. 5- 9-01 WHEREIN HE VAGUELY STATED THAT SOME ON-MONEY O F RS. 9.8 LAKHS WAS RECEIVED FROM ONE SRI JAYARAJ ON ACCO UNT OF ADVANCE FOR BOOKING OF FLAT IN SMR CASTLE BANGALORE . HOWEVER WHILE FURNISHING DETAILS OF THE VARIOUS VE NTURES IN RESPECT OF WHICH ON-MONEY RECEIPTS TOTALLING TO RS 1 CRORE WERE NARRATED THE NAME OF SMR CASTLE DID NOT FIGUR E IN THE SAID LIST. IT MAY THUS BE SEEN THAT THE DEPARTMENT HAS OBTAINED WHATEVER 'CONFESSIONS' COULD BE EXTRACTED FROM THE APPELLANT AND WAS NEITHER SINCERE NOR SERIOUS ABOUT THE VERACITY OF THESE CONFESSIONS NOR WERE THESE PURSUE D TO THEIR LOGICAL END. B. IN THE STATEMENT DATED 8-10-2001 (Q. NO. 9) TH E MANAGING DIRECTOR OF THE APPELLANT COMPANY 'ESTIMATED' THE ACCUMULATED ON-MONEY PAYMENTS FOR THE BLOCK PERIOD AT RS. 95 00 000. HOWEVER IMMEDIATELY THEREAFTER THE ANSW ER TO Q.NO. 12 WHICH WAS THE RESIDUAL QUESTION SHOWS THAT HE OFFERED 'UNACCOUNTED INCOME' OF RS. 1 CRORE RELATAB LE TO ON- MONEY RECEIPTS. IT MAY BE APPRECIATED THAT IT WOULD HAVE BEEN IMPOSSIBLE FOR ANY PERSON TO OFFER UNACCOUNTED INCOME OF RS. 1 CRORE OUT OF UNACCOUNTED ON-MONEY RECEIPTS OF RS. 95 00 000. THE LEGAL LANGUAGE IN WHICH THIS ANSWER IS I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 17 COUCHED CLEARLY DEMONSTRATES THAT THE STATEMENT WAS OBTAINED FROM THE MANAGING DIRECTOR AS PER THE DICT ATES OF THE DEPARTMENTAL AUTHORITIES. C. AGAIN ANOTHER STATEMENT WAS OBTAINED FROM THE M ANAGING DIRECTOR SRI RAM REDDY ON 22-10-2001 IN WHICH HE WA S ASKED TO CONFIRM HIS EARLIER STATEMENT DATED 082001 AND WAS AGAIN ASKED TO FURNISH BIFURCATION OF THE ON-MO NEY RECEIPTS IN RESPONSE TO WHICH HE FURNISHED VENTURE- WISE DETAILS OF ON-MONEY RECEIPTS WHICH WERE ONLY IN ROU ND FIGURES. D. THE MANAGING DIRECTOR WAS MADE TO FILE AN AFFID AVIT ON 30- 10-2001 MORE THAN A WEEK AFTER THE CONCLUSION OF S EARCH IN WHICH HE AFFIRMED THAT HE GAVE STATEMENTS ON 8-1 0-2001 AND 22-10-2001 DECLARING UNACCOUNTED INCOME AT RS. 1 CRORE. HE AGAIN AFFIRMED IN THIS AFFIDAVIT THAT THE UNACCOUNTED INCOME OF THE APPELLANT COMPANY WAS RS. 1 CRORE. IT MAY AT ONCE BE SEEN THAT THERE WAS NO NEC ESSITY FOR THIS AFFIDAVIT SINCE IT DID NOT BRING OUT ANY FRESH FACTS OR ADMISSIONS NOR WAS IT MEANT TO RECTIFY OR CLARIFY ANY FACTS ON RECORD. THE AFFIDAVIT CAN ONLY BE SEEN IN THE CO NTEXT OF THE CONTINUING EFFORT ON THE PART OF THE DEPARTMENT TO SUPERIMPOSE UPON THE INCONSISTENT FACTS OBTAINED FR OM THE ASSESSEE IN A FUTILE ATTEMPT TO BIND HIM AND TO USE IT AGAINST HIM. ALL ALONG THE DEPARTMENT WAS CONSCIOUS OF THE IN ADEQUACY OR TOTAL ABSENCE OF THE EVIDENCE OBTAINED AS A RESULT OF THE SEARCH SO THAT THE DEPARTMENTAL AUTHORITIES FELT CO MPELLED TO GET THE ASSESSEE TO MAKE CONFESSIONS TO BAILOUT THE DEPARTMENT TO JUSTIFY THE SEARCH. I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 18 THE SUCCESSIVE STATEMENTS WERE FULL OF INCONSIST ENCIES AND PERFUNCTORY IN NATURE AND THEREFORE SHOULD NOT HAVE BEEN UTILISED AGAINST THE APPELLANT. THE CONTRADICTIONS IN THE STATEMENTS CAST A SERIOUS DOUBT ABOUT THE ACCURACY OF FACTS STATED THEREIN. IN SUCH A SITUATION THE ASSESSING O FFICER SHOULD NOT HAVE PLACED UNNECESSARY RELIANCE ON SUCH STATEMENTS WITHOUT PURSUING FURTHER ENQUIRY WHICH L AW ENJOINS UPON HIM TO DO. IN THE LIGHT OF THE ABOVE THE ONLY OBVIOUS COURS E FOR THE APPELLANT WAS TO DISCLOSE TRUE INCOME AND FILE RETU RN ACCORDINGLY IT IS FURTHER SUBMITTED THAT EVEN AFTER FILING T HE RETURN OF INCOME ON 15-3-2002 THERE WAS AMPLE TIME FOR THE DEPARTMENT TO PURSUE ITS INVESTIGATION IN THE DIREC TION OF ESTABLISHING THAT THE UNDISCLOSED INCOME ADMITTED I N THE VARIOUS STATEMENTS OF THE MANAGING DIRECTOR WAS COR RECT. THE VERY FACT THAT THERE WAS NO CLEAR CUT FINDIN G ON ANY OF THE ISSUES IN THE ASSESSMENT ORDER EXCEPT RESORT TO ESTIMATE VINDICATES THE APPELLANT'S STAND ABOUT THE ADMISSIO NS OBTAINED FROM THE APPELLANT THE UNDISCLOSED INCOME AS WORKED OUT BY THE ASSE SSING OFFICER BASING ON SUCH ADMISSION DID NOT AND COULD NOT IN ANY MANNER LEND SUPPORT TO HIS CONCLUSION THAT THE ADMISSION IS TRUE AND CORRECT TO THE EXTENT OF INCO ME ADMITTED THEREIN. 6.4 THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT A COMPREHENSIVE READING OF THE STATEMENTS GIVEN BY THE MD OF THE APPELLANT COMPANY BRINGS OUT THE FOLLOWING : I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 19 THE APPELLANT HAD BEEN RECEIVING ON MONEY ON THE SA LE OF ITS APARTMENTS. THESE ON MONEY RECEIPTS WERE UTILISED TO MAKE CERTA IN PAYMENTS RELATING TO THE CONSTRUCTION ACTIVITY THE BOOKS OF ACCOUNT HAVE NOT BEEN ACCURATELY MAINT AINED AS SOME OF THE ON MONEY RECEIPTS / PAYMENTS WERE NO T RECORDED IN THE BOOKS OF ACCOUNT ESTIMATED ON MONEY RECEIPTS / INCOME IS RS. 1 CRORE 6.5 THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE BLOCK PERIOD BY ESTIMATING THE INCOME FROM ALL THE SOURCE S DISCLOSED DURING THE SEARCH PROCEEDINGS. AS THE APPELLANT WAS UNDER THE FIRM BELIEF THAT ON MONEY RECEIPTS THOUGH ADMITTED AS INCOME IN ONE OF THE STATEMENTS CANNOT BE CONSIDERED AS INCO ME AND HENCE ESTIMATED A PORTION OF RECEIPTS AS INCOME FOR THE B LOCK PERIOD. THE RETURN OF INCOME FOR THE BLOCK PERIOD IS A CONTINUA TION OF THE AFFIRMATION MADE BY THE ASSESSEE COMPANY IN THE SWO RN STATEMENTS AND AFFIDAVITS FILED. 6.6 DESPITE THE ABOVE OBSERVATIONS OF THE AO THE LEARN ED CIT (A) HELD THAT THE ASSESSEE HAVING ADMITTED UNDISCLOSED RECEIPTS OF RS 1 CRORE SHOULD HAVE PROCEEDED TO DECLARE THE SAID A MOUNT AS UNDISCLOSED INCOME IN ITS RETURN. AT THIS JUNCTURE IT IS NECESSARY TO APPRECIATE THE PROGRESSION OF SUCCESSIVE ADMISSIONS MADE BY/ OBTAINED FROM THE MD OF THE APPELLANT COMPANY WHICH HAVE BEEN HELD AGAINST THE APPELLANT IN THE ASSESSMENT AND PE NALTY PROCEEDINGS. 6.7 STATEMENTS WERE RECORDED FROM THE MD OF THE APPELLA NT COMPANY AT LEAST ON THREE OCCASIONS. ON THE DAY OF SEARCH I.E. 5.09.2001 THE APPELLANT ESTIMATED UNACCOUNTED RECEI PTS DURING THE ENTIRE BLOCK PERIOD TO BE OF RS. 95 LAKHS. SUBS EQUENTLY IN RESPONSE TO PERSISTENT INTERROGATIONS THE APPELLANT ADMITTED THESE ON MONEY RECEIPTS AS BEING INCOME. IN STRICT TERMS HE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 20 CONTRADICTED HIMSELF BY CALLING RECEIPTS AS INCOME WHICH IS A CLEAR POINTER TO THE CIRCUMSTANCES UNDER WHICH THE ADMISS ION WAS MADE. THE AO HAD BEEN CANDID ENOUGH TO BRING OUT TH E FACT IN SUCCINCT TERMS IN THE ASSESSMENT ORDER BY TERMING T HE AMOUNT OF RS. 1 CRORE AS 'UNACCOUNTED RECEIPTS TREATED AS UN DISCLOSED INCOME'. IT BEARS REPETITION THAT THIS AMOUNT OF R S. 1 CRORE WAS CLEARLY STATED BY THE ASSESSING OFFICER AS ' UNDISC LOSED RECEIPTS ESTIMATED AND TREATED AS UNDISCLOSED INCOME. 6.8 HENCE THE STATEMENT BY THE APPELLANT'S MD BRINGS O UT THE ESTIMATED RECEIPTS AND NOT THE ESTIMATED INCOME. HE NCE IT IS BUT NATURAL THAT THE APPELLANT HAD ESTIMATED ITS UNDISC LOSED INCOME BASING ON ALL THE MATERIAL AND RETURNED SUCH INCOME . IT GOES WITHOUT AMBIGUITY TO STATE THAT EITHER THE APPELLAN T OR THE AO HAD TO RELY ON ESTIMATION TO WORK OUT UNDISCLOSED INCOM E IN THE ABSENCE OF COGENT EVIDENCE IN THE CEASED MATERIAL. 6.9 AT THE OUTSET IT IS MENTIONED HERE THAT RS. 1 CROR E REPRESENTS A PORTION OF THE ESTIMATED INCOME AS QUA NTIFIED BY THE ASSESSING OFFICER. THUS THERE IS NO SUBSTANTIAL DIF FERENCE BETWEEN THE ESTIMATED INCOME AS DISCUSSED IN THE PRECEDING PARA AND THE SO CALLED ADMITTED AMOUNT. THE CASE WOULD HAVE BEEN DIFFERENT IF THE DEPARTMENT WOULD HAVE CAUSED ENQUIRY IN RELATIO N TO EACH ITEM OF ADMITTED INCOME AND PROVED THAT THE ADMISSI ON IS CORRECT. THIS HAS NOT BEEN DONE. THUS FOR THE PURPOSE OF IMP OSITION OF PENALTY THE CHARACTER OF INCOME OF RS 1 CRORE IS N O DIFFERENT THAN THE ESTIMATED INCOME. 6.10 IN COURSE OF SEARCH THE MD ADMITTED ON MONEY RECEI PT OF RS 1 CRORE ON SALE OF SOME FLATS. HOWEVER WHILE FILIN G THE INCOME THE APPELLANT COMPANY OFFERED INCOME OF RS 32.61 LAKHS IN THE BLOCK RETURN. THIS WAS CONSIDERED AS RETRACTION BY THE AS SESSING OFFICER. I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 21 6.11 IT IS SUBMITTED THAT IN COURSE OF POST SEARCH INVESTIGATION THE MD WAS NOT IN A POSITION T O HAVE THE BENEFIT OF ASCERTAINING THE CORRECT POSITION OF LAW AND FACTS OF THE CASE. THE PRESSURE WHICH WAS MOUNTED BY THE AUTHORI TIES IMMEDIATELY AFTER THE SEARCH BY WAY OF PERSISTENT I NVESTIGATION AND INTERROGATION COUPLED WITH THE FACT THAT THE BUYER S WERE SUMMONED TO GIVE EVIDENCE AFFECTED THE FUTURE BUSIN ESS PROSPECT OF THE APPELLANT COMPANY. IN A HURRY THE MD GAVE S OME STATEMENTS WHEN THERE WAS HARDLY ANY INCRIMINATING MATERIAL WHICH COULD HAVE FORMED THE BASIS OF ADMISSION. LAT ER THE ADMISSION WAS SCALED DOWN WHILE FILING THE RETURN O F INCOME AND INSTEAD OF RS 1 CRORE THE APPELLANT INCLUDED RS 32 61 630 /- ON A REAPPRAISAL OF EVIDENCE. ON THE ISSUE OF ADMISSION OF UNDISCLOSED INCOME THE APPELLANT SUBMITTED AS UNDER: (I) IT NEEDS TO BE APPRECIATED THAT NEITHER THE AD MITTED INCOME OF RS 1 CRORE NOR THE INCOME RS 32 61 630/- WHICH W AS DECLARED IN THE BLOCK RETURN WAS CREDITED IN THE BO OKS OF ACCOUNTS OF THE COMPANY SUBSEQUENT TO SEARCH ALTHOU GH LAW PERMITTED SUCH INCLUSION WHEN AN ASSESSEE ADMITS UNDISCLOSED INCOME U/S 132(4) OF THE IT ACT. (II) THE APPELLANT HAD DOUBT ABOUT THE TRUE NATURE OF THE INCOME ADMITTED. THAT THE SAID ADMISSION WAS MADE U NDER EXTRANEOUS CONSIDERATION IS APPARENT FROM THE FACT THAT WHEN THE APPELLANT WAS ASKED TO INDICATE THE APPLIC ATION OF ADMITTED INCOME THE MD COULD INDICATE APPLICATION OF THE INCOME TO THE EXTENT OF RS. 65 28 000 ONLY AND THAT TOO VAGUELY AND CONTRARY TO FACTS RECORDED IN THE BOOKS OF THE APPELLANT. THE MD FURTHER EXPRESSED HIS INABILITY T O QUANTIFY FURTHER APPLICATION IN THE ABSENCE OF ANY DETAIL WI TH HIM. I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 22 (III) EVEN WITH REFERENCE TO RS. 65 28 000 THE APP LICATION WAS INDICATED AS UNDER: A. CREDITORS RS. 22 15 000 B. INVESTMENT IN JUBILEE HOUSE RS. 20 00 000 C. INVESTMENT IN SMR HOUSE RS. 20 00 000 D. INVESTMENT IN FD RS. 3 13 000 THE APPELLANT WAS ALWAYS CONSCIOUS THAT THE ABOVE DECLARATION IS NOT BASED ON ANY EVIDENCE FOUND IN C OURSE OF SEARCH NOR SUPPORTED BY ITS BOOKS. IT WAS ONLY TO B UY PEACE WITH THE DEPARTMENT THAT THE MD MADE SOME DECLARATI ON WHEN PERSUADED. THE MANNER IN WHICH THE QUESTIONS W ERE PUT AND ANSWERS WERE RECORDED REFERRING TO 'BLOCK P ERIOD' 'UNDISCLOSED INCOME' 'APPLICATION OF INCOME' 'IMM UNITY FOR PENALTY' ETC WOULD INDICATE THAT WORDS WERE USED BY THE DEPARTMENT TO PERSUADE AND OBTAIN SOME DECLARATION WITHOUT BACKING OF EVIDENCE. FURTHER ALTHOUGH THE DECLARATION WAS MADE FOR RS. 1 CRORE NO ENQUIRY WA S MADE AS TO ITS APPLICATION WHEN THE MD ONLY INDICATED PA RTIAL APPLICATION OF THE SAME AND EXPRESSED HIS INABILITY TO GIVE FULL DETAILS IN THE ABSENCE OF EVIDENCE. THE POSITI ON REMAINED SAME TILL THE CONCLUSION OF THE ASSESSMENT / PENALT Y PROCEEDINGS. THIS SHOWS THAT THE DEPARTMENT WAS ALW AYS CONSCIOUS THAT THE ENQUIRY WILL NOT YIELD ANY FRUIT FUL RESULT. THE HALF HEARTED MANNER IN WHICH THE ASSESSING OFFI CER ADDRESSED HIMSELF TO THE FACTUAL ASPECT OF THE CASE SPEAKS FOR ITSELF. HENCE THE ADMISSION MADE BY THE ASSESS EE DE HORS ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AS NO EVIDENTIARY VALUE AND THE SAME CANNOT BE MADE USE IN THE ASSESSMENT OR MUCH LEES IN A PENALT Y PROCEEDING. 6.12 IT IS FURTHER SUBMITTED THAT ALTHOUGH DECLARATION W AS MADE WITH REFERENCE TO CREDITORS THEY CONTINUED IN THE BOOKS AND I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 23 PAYMENTS WERE EFFECTED LATER. AS SUBMITTED ABOVE T HE APPELLANT WAS ALWAYS AWARE THAT THE INCOME SO DECLARED WAS UN DER COMPULSION WHICH IS NOT FACTUALLY CORRECT. THEREFOR E IT HAD CHOSEN NOT TO TAKE BENEFIT OF THE INCOME WHETHER THE SAME IS ONE CRORE OR RS. 32.61 LAKHS. THIS JUSTIFIES THE RETRACTION. 6.13 THUS THE FACTUAL ASPECTS OF THE CASE JUSTIFY A RETR ACTION AND REFLECTING ACTUAL STATE OF AFFAIRS. IT IS NOT A CAS E WHERE DESPITE SEIZURE OF COGENT EVIDENCE AND ADMISSION BY THE ASS ESSEE OF INCOME RELATABLE TO SUCH EVIDENCE THAT THE APPELLAN T HAS RETRACTED FROM ADMISSION. THIS ASPECT NEEDS TO BE APPRECIATED . 6.14 LAW ON ADMISSION AND RETRACTION IS WELL SETTLED. IN THIS REGARD THE FOLLOWING PREPOSITION OF LAW MAY BE CONS IDERED: (I) IT IS HELD THAT STATEMENTS RECORDED DURING SEA RCH PROCEEDING WHICH CONTINUED FOR AN UNDULY LONG PERIOD CANNOT BE CONSIDERED TO BE FREE FEARLESS AND VOLUNTARY [DEE PCHAND AND CO VS ACIT 1995 51 TTJ BOM 421] THUS AN ELEMEN T OF COMPULSION IS DISCERNIBLE IN THE CASE OF THE APPELL ANT ON THE FACTS AND CIRCUMSTANCES OF CASE JUSTIFYING RETRACTI ON. (II) IT IS SUBMITTED THAT THE MEASURE OF SEARCH IS TO UNEARTH DOCUMENTS REVEALING CONCEALED INCOME AND WEALTH. S INCE STRICTLY SPEAKING INTERROGATION IS NOT A PART OF T HE OBJECT OF THE SEARCH IT IS EXPECTED THAT AN APPELLANT IS NOT PUT TO PRESSURE INTO MAKING AN ADMISSION AND THE STATEMENT SHOULD NOT GO BEYOND WHAT IS DISCOVERED IN COURSE O F SEARCH FROM THE PREMISES OF THE APPELLANT. (III) IT IS A SETTLED PRINCIPLE OF EVIDENCE THAT T HE APPROACH OF A COURT IS FIRST TO MARSHAL EVIDENCE AGAINST THE ACCU SED EXCLUDING CONFESSION ALTOGETHER AND SEE WHETHER THE ACCUSED CAN BE HELD GUILTY. THEREFORE THE ASSESSING OFFICER I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 24 OUGHT NOT HAVE PLACED UNDUE IMPORTANCE ON THE ADMIS SION WHICH WAS BEREFT OF ANY DOCUMENTARY EVIDENCE FOUND DURING THE COURSE OF SEARCH. AN ORAL EVIDENCE ONLY SUPPLEM ENTS DOCUMENTARY EVIDENCE CANNOT SUPPLANT THE SAME. (IV) IT IS ALSO A WELL ACCEPTED PRINCIPLE THAT AN ADMISSION IS NOT CONCLUSIVE EVIDENCE AS TO THE TRUTH OF THE MATTER S TATED THEREIN. IT IS ONLY A PIECE OF EVIDENCE THE RELEVA NCY OF WHICH IS REQUIRED TO BE JUDGED BASING ON THE MATERIAL EVI DENCE AND CIRCUMSTANCES IN WHICH IT IS MADE. (V) A MERE CONFESSIONAL STATEMENT WITHOUT THERE BE ING ANY DOCUMENTARY PROOF SHALL NOT BE USED AS EVIDENCE AGA INST THE APPELLANT. IN THE FOLLOWING CASE BEFORE THE COURT A STATEMENT OF MANAGING DIRECTOR WAS RECORDED IN COUR SE OF SEARCH WHEREIN HE ADMITTED UNDISCLOSED INCOME BUT L ATER RESILED FROM THE SAID STATEMENT AND ACCORDINGLY THE COURT HELD THAT WITHOUT DOCUMENTARY PROOF A STATEMENT AL ONE CANNOT BE UTILIZED AGAINST THE APPELLANT. [CIT V SH REE RAMDAS MOTOR TRANSPORT 238 ITR 177 (183) AP]. IN THE CASE OF APPELLANT NO EVIDENCE WHATSOEVER WAS FOUND IN COURSE OF SEARCH CONCLUSIVELY INDICATING RECEIPT OF ON MONEY. ONLY SOME ORAL EVIDENCE WAS OBTAINED BY WAY OF RECO RDING STATEMENTS OF SOME SIX BUYERS WITHOUT GIVING AN OPP ORTUNITY TO CROSS EXAMINE THEM. THEIR STATEMENTS WERE NOT MA DE AVAILABLE. (VI) IT IS SETTLED PRINCIPLE THAT IN CASE EVIDENCE IS IN THE FORM OF STATEMENT WHICH IS SOUGHT TO BE UTILIZED AGAINST TH E APPELLANT PERTAINS TO AN EX-PARTE STATEMENT OF WITN ESS THE SAME CANNOT BE UNILATERALLY UTILIZED AGAINST THE AP PELLANT WITHOUT THE WITNESS BEING PUT TO CROSS EXAMINATION. IN THIS REGARD THE APPELLANT PLACES RELIANCE IN THE ORDER IN THE CASE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 25 OF JAIKISHAN R AGARWAL VS. ACIT 2000 66 TTJ 704. IT WAS HELD THAT IN A CASE WHERE NO DOCUMENT WAS SEIZED IN COURSE OF A SEARCH SHOWING PAYMENT OF EXTRA CONSIDERATION FOR PURCHASE OF A PROPERTY WHETHER ADDITIONS CAN BE MA DE ON THE BASIS OF STATEMENT RECORDED FROM THIRD PARTIES. IT WAS HELD THAT ANY STATEMENT RECORDED AT THE BACK OF THE APPELLANT HAS NO EVIDENTIARY VALUE AND IN THE ABSEN CE OF ANY EVIDENCE SEIZED IN COURSE OF SEARCH INDICATING PAYM ENT OF EXTRA CONSIDERATION OVER AND ABOVE WHAT IS MENTIONE D IN THE DOCUMENT THE ADDITION CANNOT BE SUSTAINED. (VII) AS REGARDS RETRACTION THE PRINCIPLE IS THAT IT SHOULD BE RETRACTED BEFORE THE CONCERNED AUTHORITY DECIDES TH E MATTER. IN OTHER WORDS THE APPELLANT SHOULD NOT PLACE THAT AUTHORITIES IN SUCH A POSITION SO AS TO THWART THE PROCESS OF INVESTIGATION. IN THE CASE OF THE APPELLANT THE RE TRACTION WAS WELL EVIDENT FROM THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SECTION 158BC. THIS GAVE THE AUTHORITIES SUFF ICIENT TIME TO COLLECT CORROBORATIVE EVIDENCE WHICH THEY H AVE FAILED TO DO AS EXPLAINED IN THE PRECEDING PARAS. THAT A R ETRACTION CAN BE MADE BEFORE FILING THE RETURN IS ACCEPTED AS PRINCIPLE IN THE CASE OF R P MONGA VS DCIT 2004 269 ITR (AT) 1 DELHI. 6.15 THUS THE ADMISSION WHICH WAS MORE INFLUENCED BY EXTRANEOUS CONSIDERATION AND OTHER FACTORS AND WAS NOT SUPPORTED BY ANY INCRIMINATING MATERIAL AS EXPLAINED IN COURS E OF ASSESSMENT AND PENALTY PROCEEDINGS CANNOT BE A BAS IS TO IMPOSE A PENALTY FOR CONCEALMENT OF INCOME. IT WAS NO ADMI SSION AT ALL AS LEGALLY UNDERSTOOD. FURTHER THE DEPARTMENT HAS ONL Y RESTED ITS CONCLUSION BOTH IN THE ASSESSMENT AND PENALTY PROCE EDING ON THE STATEMENT OF THE MD. THIS STATEMENT ALONE IS NOT SU FFICIENT TO COMPUTE INCOME AS HELD BY JURISDICTIONAL HIGH COURT WHAT TO I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 26 SPEAK UP IMPOSITION OF PENALTY. ALTHOUGH SUFFICIENT TIME WAS AVAILABLE CAUSE FURTHER ENQUIRY TO DISCREDIT THE AS SERTION OF THE APPELLANT THIS WAS NOT DONE. IN SUCH A SITUATION NO PENALTY CAN BE IMPOSED ON THE ADMITTED AMOUNT. 6.16 IN THIS CONNECTION THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT EVEN GOING BY THE RATIO OF THE DECIS ION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS HARKARANDAS VED PA L [177 ITR 398 DEL] WHEREIN IT WAS HELD THAT WHERE IT WAS APPA RENT THAT UNDISCLOSED INCOME HAD BEEN COMPUTED MERELY ON THE BASIS OF THE SURRENDER MADE BY THE ASSESSEE IN THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS AND DE HORS THE SURRENDER T HERE WAS NO EVIDENCE WHICH COULD HAVE BEEN SAID TO HAVE BEEN FO UND AS A RESULT OF THE SEARCH AND THEREFORE THE 'COMPUTATI ON' OF UNDISCLOSED INCOME BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT PROCEEDINGS COULD NOT BE CONSTRUED AS A 'DETERMINATION' OF UNDISCLOSED INCOME CONTEMPLATED UNDER SECTION 158BC(C) PENALTY COULD NOT BE LEVIED. AS ALREADY S UBMITTED WHATEVER MATERIAL WAS FOUND DURING THE COURSE SEARC H WAS EITHER INSUFFICIENT OR TOO SKIMPY TO LEAD TO ENHANCEMENT O F TURNOVER. IT IS FOR THIS REASON THAT IN THE CASE OF THE ASSESSEE TH E DEPARTMENT DID NOT DISTURB THE TURNOVER RECORDED IN THE BOOKS OF A CCOUNT. IT IS OF UTMOST IMPORTANCE TO NOTE THAT THE ASSESSING OFFICE R STATED IN THE ASSESSMENT ORDER THAT THE AMOUNT OF ONE CRORE CONST ITUTED 'UNDISCLOSED RECEIPTS ESTIMATED AND TREATED AS UNDI SCLOSED INCOME FOR THE BLOCK PERIOD AS ADMITTED BY THE MANAGING DI RECTOR' IT BEARS REPETITION THAT THE AMOUNT OF RS. ONE CRORE WAS EST IMATED BY THE MANAGING DIRECTOR. THE FACT THAT THE AMOUNT OF RS. ONE CRORE WAS 'SET APART' BY CARVING OUT A SEPARATE STATUS FOR TH E SAME DID NOT MAKE IT ANY DIFFERENT FROM THE OTHER PORTION OF EST IMATED INCOME. SIMILARLY AS IN THE CASE OF HARAKCHAND VED PAL (SUP RA) DE HORS THE ADMISSION OF THE MANAGING DIRECTOR THAT TOO ON ESTIMATED BASIS THERE IS NO EVIDENCE AVAILABLE TO COMPUTE OR DETERMINE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 27 UNDISCLOSED INCOME OF RS. ONE CRORE IN THE SEIZED M ATERIAL. IT IS THEREFORE HUMBLY SUBMITTED THAT THE RATIO OF THE DE CISION OF THE DELHI HIGH COURT IN THE CASE OF HARAK CHAND VED PAL (SUPRA) ALSO APPLIES WITH EQUAL FORCE TO THE AMOUNT OF RS. ONE C RORE INCLUDED IN THE UNDISCLOSED INCOME. 6.17 WITHOUT PREJUDICE TO THE SUBMISSIONS MADE IN THE PR ECEDING PARAS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT IT HAD RETURNED UNDISCLOSED INCOME OF RS. 32 61 630/- TO A CCOUNT FOR ANY SHORT COMINGS AS A RESULT OF SCRUTINY OF SEIZED BOO KS AND DOCUMENTS. THIS INCLUDES THE INTEREST INCOME OF RS. 1 63 000 WHICH WAS BROUGHT TO TAX. ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE SUBMISSIONS MA DE ABOVE THE APPELLANT PRAYS THAT THE PENALTY SUSTAINED TO THE E XTENT OF RS. 67 38 370/- AND RS. 1 63 000/- U/S. 158BFA(2) MAY B E DIRECTED TO BE DELETED. 7. THE LEARNED DR RELIED ON THE ASSESSMENT ORDER AND A LSO ON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF PS B INDUSTRIES INDIA PVT. LTD. VS. CIT (2011-TIOL-437-HC-DEL-IT) W HEREIN IT WAS HELD AS UNDER: '++IT IS CLEAR FROM CLAUSE (A) OF SUB-SECTION (1) O F SECTION 23 THAT IN CASE THE ANNUAL RENT RECEIVED IS LESS TH AN THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR IT IS THE SAID S UM AND NOT THE ANNUAL RENT WHICH WOULD BE THE ANNUAL VALUE CHARGEABLE TO TAX. ONLY IN CASE WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY T HE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUN RE FERRED TO IN CLAUSE (A) THE AMOUNT SO RECEIVED OR RECEIVA BLE SHALL BE TAXED. THUS IT IS THE HIGHER OF THE TWO WHICH IS CHARGEABLE TO TAX. ALONG WITH THIS SPECIFIC PRO VISIONS U/S. 23 THERE IS NO DEFENCE OF THE ASSESSEE THAT DISCLOSING THE ANNUAL RENT AS THE ANNUAL LETTING VA LUE FOR THE PURPOSES OF TAX WAS BONA FIDE. IN THE INST ANT CASE THE ASSESSEE HAD ENTERED INTO AN AGREEMENT TO LEASE OUT THE PROPERTY TO BANK ON A SUM OF RS. 1 LA C PER ANNUM. THE TOTAL AREA OF CONSTRUCTED BUILDING LEAS ED OUT BY THE ASSESSEE IS GIVEN IN SECOND SCHEDULE TO THE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 28 LEASE AGREEMENT WHICH IS 1 23 490 SQ. FT. THE APPROVED VALUER HAS VALUED THE ANNUAL LETTING VALUE OF TOTAL CONSTRUCTED AREA OF 1 23 490 SQ FT. AT RS. 75 63 360/-. ++ THE ASSESSEE WAS CALLED UPON TO GIVE THE VALUATION. THE ASSESSEE HIMSELF FILED THE ANNUAL L ETTING VALUE BY THE APPROVED VALUER OF TOTAL CONSTRUCTED A REA OF 1 23 490 SQ. FT. AT RS. 75 63 360/-. THIS WAS D ONE AT THE INSTANCE OF THE AO WHEN THE ASSESSEE WAS EXPOSED AND CONFRONTED WITH THE AFORESAID FACTS. H AD THE ASSESSEE KEPT IN MIND THE PROVISIONS OF SECTION 23 WHICH IT WAS SUPPOSED TO THE ASSESSEE WOULD HAVE FOUND THAT THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED FROM YEAR TO YEAR IS ADJUSTM ENT THAN THE SUM DISCLOSED IN THE LEASE AGREEMENT. EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT WOULD BE FULLY APPLICABLE AND THE AO WAS JUSTIFIED IN IMPOSI NG THE PENALTY WHICH WAS UPHELD UP TO THE TRIBUNAL LEV EL.' 7.1 THE DR FURTHER RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE M/S. SYNTHETIC COLOUR CHEM INDUSTRIES VS. DCIT (2011-TIOL- 519-ITAT-MUM) WHEREIN IT WAS HELD AS UNDER: '++ IN CASE THE PARTNER HAD REALLY BEEN FORCED TO ADMIT ADDITIONAL INCOME AND PAPERS WERE COOKED UP BY THE SURVEY PARTY THE ASSESSEE WOULD HAVE IMMEDIATELY AFTER SURVEY COMPLAINED TO THE HIGHER AUTHORITIES. THE ASSESSEE ADMITTED THAT NO COMPLAINT HAD BEEN FILED BY THE ASSESSEE. IN FACT TWO WEEKS AFTER THE DATE OF SURVEY THE ASSESSEE HAD WRITTEN A LETTER TO THE AO REQUESTING FOR INSTALMENT AND EVEN IN THE LETTER NO ALLEGATION WAS MADE. THE LOOSE PAPERS FOUND HAVE BEEN DULY SIGNED BY THE PARTNERS AND THESE CLEARLY PAVE THE DETAILS OF UNACCOUNTED SALES AND UNACCOUNT ED COMMISSION. UNDER THESE CIRCUMSTANCES THE AFFIDAVI TS FILED RETRACTING THE STATEMENT AND MAKING ALLEGATIO NS SIX MONTHS LATER HAS TO BE TREATED AS A SELF SERVIN G STATEMENT BY THE PARTNER AND HIS EMPLOYEES AND THIS HAS TO BE REJECTED AS AN AFTERTHOUGHT.' 8. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE THERE W AS A SEARCH ACTION U/S. 132 OF THE INCOME-TAX ACT 1961 IN THE BUSINESS PREMISES OF THE ASSESSEE AS WELL AS RESIDENTIAL PRE MISES OF THE DIRECTOR OF THE ASSESSEE-COMPANY ON 5.9.2001. DURI NG THE COURSE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 29 OF SEARCH VARIOUS INCRIMINATING MATERIALS WERE FOU ND AND SEIZED. CONSEQUENT TO SEARCH THE ASSESSEE FILED A RETURN OF INCOME DECLARING UNDISCLOSED INCOME AT RS. 32 61 630. 8.1 ACCORDING TO THE ASSESSING OFFICER AS SEEN FROM TH E FACTS OF THE CASE THE ASSESSEE ADMITTED UNDISCLOSED INCOME OF RS. 1 CRORE FROM THE UNACCOUNTED RECEIPTS AND GAVE THE BIFURCAT ION OF THE ABOVE AMOUNT AS ON-MONEY RECEIVED FROM THE FOLLOWIN G PARTIES: RS. (A) SMR MAJESTIC 15 00 000 (B) SMR NIRANJAN VILLE 10 00 000 (C) SMR SARTAJ 25 00 000 (D) SMR KRISHNA 15 00 000 (E) SMR VINAY VIHAR 5 00 000 (F) SMR RESIDENCY 10 00 000 (G) BANGALORE 5 00 000 (H) SMR INSTYLE 5 00 000 (I) SMR EMPIRE SMR SQUARE SMR RAM RESIDENCY SMR HABITAT 10 00 000 -------------- TOTAL 1 00 00 000 ========== 8.2 FURTHER THE ASSESSING OFFICER CONSIDERED THE PROFIT FROM RECEIPTS RECORDED IN THE BOOKS OF ACCOUNT AS UNDISC LOSED INCOME AT RS. 2 02 50 960 AS FOLLOWS: A.Y. RECEIPT ON SALE OF FLATS AS RECORDED IN THE REGULAR BOOKS AND WORK IN PROGRESS. INFRA-STRUCTURE RECEIPTS AS RECORDED IN THE REGULAR BOOKS. TOTAL TURNOVER AS RECORDED IN REGULAR BOOKS (B+C) PROFIT @ 15% PROFIT DECLARED IN THE REGULAR/ BLOCK RETURN UN-DISCLOSED INCOME 1996-97 11154500 1337017 12491517 1873652 59433 181 4219 1997-98 18459330 1317500 19776830 2966524 173889 27 92635 1998-99 32155420 2644000 34799420 5219913 784630 44 35283 1999-00 30311248 2556801 32868049 4930207 (133863) 5064043 2000-01 11772111 11772111 1765817 416707 1349110 2001-02 51519299 51519299 7727895 138345 7589550 2002-03 UP TO 5.9.01 48414000 48414000 7262100 55980 7206120 TOTAL 1495148 30250960 8.3 THUS THE TOTAL INCOME ARRIVED AT BY THE ASSESSING OFFICER IS AS FOLLOWS: I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 30 SL. NO. DETAILS RS. I. UNACCOUNTED RECEIPTS TREATED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD 1 00 00 000 II. UNDISCLOSED PROFIT ON RECEIPTS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT 2 02 50 960 III. ACCRUED INTEREST 1 63 000 TOTAL UNDISCLOSED INCOME FOR THE BLOCK PERIOD 3 04 13 960 8.4 HOWEVER CONSEQUENT TO TRIBUNAL ORDER THE INCOME WA S DETERMINED AT RS. 2 13 27 070. PENALTY IS LEVIED O N THE FINAL AMOUNT OF UNDISCLOSED INCOME AS DETERMINED BY THE T RIBUNAL. THE PENALTY HAS BEEN LEVIED ON THE CONCEALED INCOME OF RS. 1 80 65 440 I.E. THE DIFFERENCE BETWEEN THE INCOME FINALLY DETERMINED CONSEQUENT TO TRIBUNAL ORDER AND THE RET URNED INCOME (RS. 2 13 27 070 RS. 32 61 630 = RS. 1 80 65 440) . THIS HAS BEEN REDUCED BY THE CIT(A) TO THE EXTENT OF RS. 67 38 370 IN RESPECT OF UNDISCLOSED INCOME AS ADMITTED BY THE MA NAGING DIRECTOR AND ANOTHER RS. 1 63 000 TOWARDS ACCRUED I NCOME. 8.5 IN OUR OPINION IN THE PRESENT CASE THE PENALTY HAS BEEN LEVIED ONLY ON THE BASIS OF ESTIMATED INCOME. THE INCOME OF THE ASSESSEE HAS BEEN ESTIMATED IN RESPECT OF VARIOUS T RANSACTIONS CARRIED ON BY THE ASSESSEE AS SEEN FROM THE ABOVE F ACTS. THE OTHER INCOME IS CONSIDERED AS UNDISCLOSED INCOME IS ON AC COUNT OF ADMISSION BY THE MANAGING DIRECTOR. FURTHER RS. 1 63 000 HAS BEEN CONSIDERED AS UNDISCLOSED INCOME ONLY ON ACCOU NT OF THE ACCRUAL OF INTEREST ON FDR. THE INCOME ON FDR THOU GH ACCRUED TO THE ASSESSEE NOT AT ALL RECEIVED BY THE ASSESSEE. IT IS VERY PREMATURE TO SAY THAT THE ASSESSEE WOULD NOT HAVE O FFERED THIS INTEREST INCOME TO TAX. BEING ON THIS COUNT ALSO P ENALTY CANNOT BE LEVIED. IN ENTIRETY IN THIS CASE THE INCOME OF TH E ASSESSEE HAS BEEN DETERMINED ON ESTIMATE BASIS. THERE IS NO CON CLUSIVE MATERIAL TO SHOW THAT THERE IS ACTUAL CONCEALMENT O F INCOME. THOUGH THE ADDITION IS CONFIRMED BY THE TRIBUNAL I T DOES NOT I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 31 PROVE THAT THE ASSESSING OFFICER HAS THE MATERIAL T O SUGGEST THAT THE ASSESSEE EARNED EXACT AMOUNT OF PROFIT AS DETER MINED BY THE ASSESSING OFFICER OUT OF THESE UNACCOUNTED TRANSACT IONS. IN OUR OPINION THE PENALTY U/S. 158BFA(2) IS NOT MANDATOR Y IF THE ASSESSEE OFFERS CONVINCING REASONS OR IF ANY REASON ABLE CAUSE DEMONSTRATED FOR NON-INCLUSION OF SUCH INCOME PENA LTY IS NOT ATTRACTED. IN THE CASE OF SMT. MALA DAYANIDHI VS. CIT (92 TTJ 270) (BANG.) IT WAS HELD THAT ADDITION NOT BASED ON MATE RIAL FOUND DURING THE SEARCH OR MATERIAL IN POSSESSION OF ASSE SSING OFFICER BUT BASED ON DIFFERENCE IN VALUATION OF PROPERTY A S DISCLOSED BY THE ASSESSEE AND AS ESTIMATED BY THE DVO THERE WAS NO CONCEALMENT ATTRACTING PENALTY U/S. 158BFA(2) OF TH E ACT. IN THE INSTANT CASE THERE WAS A ESTIMATE AT THE LEVEL OF A SSESSING OFFICER AS WELL AS AT THE LEVEL OF CIT(A) IN RESPECT OF THE UNDISCLOSED INCOME. FROM THE ENTIRE FACTS OF THE PRESENT CASE IT WOULD BE CLEAR THAT THE INCOME OF THE ASSESSEE WAS ESTIMATED AND MATERIAL ON RECORD BY THE ASSESSING OFFICER IS NOT ENOUGH TO LEVY PENALTY FOR CONCEALMENT OF INCOME. IN OUR OPINION UNLESS THER E IS CONCLUSIVE MATERIAL SHOWING THE EXACT AMOUNT OF CONCEALMENT OF INCOME NO PENALTY IS LEVIABLE ON THE ADDITION IF MADE ON ESTI MATE BASIS. WHILE TAKING SUCH A VIEW WE ARE FORTIFIED BY THE J UDGEMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PREM DAS (248 ITR 234) (P&H) WHEREIN IT WAS HELD AT PAGE 23 6 AS UNDER: 'WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE AND THE ASSESSEE. IT APPEARS THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF EXPENSES FROM THE GROSS FREIGHT RECEIPTS IN RESPECT OF HIS OWN TRUCKS ON ESTIMATE BASIS AND HAD SHOWN INCOME FROM COMMISSION AT 7 PER CENT OF THE GROSS RECEIPTS IN RESPECT OF THE TRUCKS OWNED BY OTHERS. THE AO HAD ALLOWED EXPENDITURE AT 80 PER CENT. THE CIT( A) ALLOWED EXPENDITURE AT 84 PER CENT. SIMILARLY WHER EAS THE AO HAD ESTIMATED INCOME FROM COMMISSION AT 10 PER CENT THE CIT ALLOWED IT AT 8 PER CENT. THE T RIBUNAL FOUND THAT THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME WAS DUE TO THE DIFFERENCE OF OPINIO N I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 32 ABOUT THE ESTIMATED RATES OF INCOME AND EXPENDITURE . INCOME HAD BEEN ENHANCED BY THE AO BY ADOPTING A LOWER ESTIMATE IN RESPECT OF THE EXPENDITURE AND HI GHER ESTIMATE WITH REGARD TO THE INCOME FROM COMMISSION. THE AO DETERMINED THE INCOME OF THE ASSESSEE ON ESTIMATE BASIS. THE TRIBUNAL NOTICED THAT SINCE THE DIFFERENCE IN ESTIMATES WAS BASED ON A DIFFERENCE O F OPINION THERE WAS NO POSITIVE PROOF REGARDING CONCEALMENT OF INCOME BY THE ASSESSEE. THE ASSESSEE HAD SHOWN EXPENDITURE AS ALSO THE INCOME FROM COMMISSION ON ESTIMATE BASIS. THE RATES OF ESTIMATE WERE VARIED BY THE AO. THESE WERE FURTHER VARIED BY THE CIT(A). THE TRIBUNAL THEREFORE CANCELLED THE PENALTY ON THE GROUND THAT THERE WAS NO POSITIVE EVIDENCE TO PROVE SUPPRESSION OF INCOME. ON A CONSIDERATION OF THE MATTER IT IS NOTICED THA T THE ASSESSEE HAD RETURNED INCOME ON ESTIMATE BASIS. THE AO AND THE CIT ADOPTED DIFFERENT ESTIMATES. IT WAS THUS A CASE OF DIFFERENCE OF OPINION.' 8.6 FROM THE ABOVE JUDGEMENT IT IS CLEAR THAT WHEN THE ASSESSING OFFICER AND THE CIT(A) ADOPTED DIFFERENT FIGURES OF INCOME ON ESTIMATE BASIS AND IT IS A CASE OF DIFFER ENCE OF OPINION BETWEEN THE ASSESSEE AS WELL AS THE DEPARTMENT AND THAT REASON CANNOT BE A BASIS FOR LEVY OF PENALTY. FURTHER TH E PROVISIONS OF SECTION 158BFA(2) IS ALMOST IN PARI MATERIA TO SECTION 271(1)(C) OF THE INCOME-TAX ACT WHICH RELATES TO LEVY OF PENALT Y FOR CONCEALMENT. BEING SO WHATEVER SAID BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE CITED SUPRA WITH REGARD TO P ROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT IS ALSO APP LICABLE IN RESPECT OF PROVISIONS OF SECTION 158BFA(2) OF THE ACT. FUR THER AS NOTED FROM THE ARGUMENT OF THE LEARNED COUNSEL FOR THE AS SESSEE VARIOUS TRIBUNALS HAVE HELD THAT UNLESS ANY POSITIVE CONCEA LMENT IS FOUND NO PENALTY IS LEVIABLE ON THE ADDITIONS MADE ON EST IMATE BASIS. IN THE CASE OF HARI GOPAL SINGH VS. CIT (258 ITR 85) ( P&H) IT WAS HELD THAT WHERE THE ASSESSMENT IS MADE ON ESTIMATE BASIS NO PENALTY U/S. 271(1)(C) OF THE ACT CAN BE IMPOSED. IN THAT CASE IT WAS OBSERVED THAT ON ACCOUNT OF MERE DIFFERENCE OF OPIN ION AS REGARDS I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 33 THE ESTIMATION OF INCOME PENALTY CANNOT BE LEVIED. SINCE THE ASSESSING OFFICER AND THE TRIBUNAL ADOPTED DIFFEREN T ASSESSMENTS FOR ASCERTAINING THE INCOME OF THE ASSESSEE IT COU LD NOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME SO AS TO ATTRACT PENALTY U/S. 271(1)(C) OF THE ACT. I N THE PRESENT CASE THERE IS A DIFFERENCE IN ESTIMATING THE INCOME OF T HE ASSESSEE BY THE ASSESSEE ITSELF AND BY THE DEPARTMENT AS WELL A S BY THE TRIBUNAL. BEING SO THE DIFFERENCE IS ONLY ON ACCO UNT OF DIFFERENCE IN OPINION IN DETERMINING THE INCOME. THAT DIFFERE NCE IN OPINION AMONG THE PARTIES CANNOT RESULT IN LEVY OF PENALTY. 8.7 FURTHER THE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (83 ITR 26) HELD AS UNDER: 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMI NAL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPO SED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS O BLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FA ILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM P ENALTY IS PRESCRIBED THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WH EN THERE IS A TECHNICAL OR VENIAL BREACH OF PROVISIONS OF THE ACT OR WHICH THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE.' 8.8 IN THE LIGHT OF THE ABOVE OBSERVATIONS WE ARE OF T HE OPINION THAT IT WOULD BE WITHIN THE POWER OF THE INCOME-TAX AUTHORITIES NOT TO LEVY PENALTY HAVING REGARD TO THE NATURE OF MIST AKE OR OMISSION COMMITTED BY THE ASSESSEE AND GENERAL CONDUCT OF TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SUCH OTHER RELEVANT FACTORS. 8.9 IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC) THE HONBLE SUPREME COURT HELD THAT WHERE TH E ASSESSEE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 34 CLAIMED THAT HE OFFERED ADDITIONAL INCOME ONLY TO B UY PEACE AND AVOID LITIGATION AND THE DEPARTMENT DID NOT PROVE C ONCEALMENT BUT SIMPLY RESTED ITS CONCLUSION ON THE VOLUNTARY SURRE NDER OF INCOME BY ASSESSEE IN GOOD FAITH NO PENALTY FOR CONCEALME NT OF INCOME CAN BE LEVIED. IN OUR OPINION THE FACTS OF THE CAS E BEFORE US ARE FULLY COVERED BY THIS DECISION OF THE HONBLE APEX COURT. 8.10 IN THE CASE OF CIT VS. KHODAY ESWARSA & SONS 1972 C TR (SC) 295 : (1972) 83 ITR 369 (SC) HONBLE APEX COUR T HELD THAT BEFORE LEVYING PENALTY THE DEPARTMENT MUST SHOW THA T ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS IN COME AND DELIBERATELY FURNISHED INACCURATE PARTICULARS OF TH E SAME. IN THE PRESENT CASE THE DEPARTMENT IS NOT ABLE TO ESTABLI SH EITHER CONSCIOUS OR DELIBERATE CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. T HE ASSESSEE UNDOUBTEDLY OFFERED THE INCOME IN THE ASSESSMENT ST AGE ITSELF AND NOT CONTESTED THE ADDITION AND EXTENDED CO-OPERATIO N AT THE STAGE OF ASSESSMENT. THE ASSESSEE DELIBERATELY HAS NOT CO NCEALED THE PARTICULARS. 8.11 IN OUR OPINION THE EXPLANATION GIVEN IN THE PRESEN T CASE FOR NON-RETURNING OF INCOME AS EXPECTED BY THE DEPARTME NT IS BONA FIDE. THE ASSESSEE HAS ACCEPTED THE ADDITION ONLY WITH THE SOLE INTENTION TO AVOID LITIGATION AND BECAUSE THE ASSES SEE HAS NOT GONE IN APPEAL AGAINST THE QUANTUM ADDITION IT DOES NOT AUTOMATICALLY QUALIFY FOR LEVY OF PENALTY AND IT DOES NOT ENTAIL THE DEPARTMENT TO LEVY PENALTY. PENALTY PROCEEDINGS ARE NOT AUTOMATI C AND THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO DIFFERENT PROCEEDINGS. THE REVENUE AUTHORITIES ARE REQUIRED TO EXAMINE THE PENALTY PROCEEDINGS INDEPENDENTLY AND O N THE BASIS OF MATERIAL AVAILABLE ON RECORD. AS SEEN FROM THE ARGUMENTS OF THE ASSESSEE IT IS AMPLY CLEAR THAT THE ASSESSEE HAD A CCEPTED THE ADDITION ONLY TO AVOID LITIGATION AND TO BUY PEACE WITH THE I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 35 DEPARTMENT. THE PROVISIONS OF SECTION 158BFA(2) GI VE DISCRETIONARY POWER TO THE ASSESSING OFFICER TO LEV Y PENALTY. THIS DISCRETION SHOULD HAVE BEEN USED BY THE ASSESSING O FFICER IN FAVOUR OF THE ASSESSEE BECAUSE THE ADDITIONS ARE CO NFIRMED EITHER BY THE CIT(A) OR BY THE TRIBUNAL ON ESTIMATED BASIS . BEING SO WHERE THE PROVISIONS BEGIN WITH THE WORD 'MAY' AND NOT 'SHALL' AND THE WORD 'MAY DIRECT' IN SECTION 158BFA(2) DO I NDICATE THAT A DISCRETIONARY POWER IS AVAILABLE WITH THE ASSESSING OFFICER AND THE CIT(A) TO LEVY PENALTY EVEN WHERE TECHNICALLY THE P ROVISIONS ARE ATTRACTED. BEING SO IN THE LIGHT OF THE JUDGEMENT OF SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. POSTULAT ES THE SITUATION THAT PENALTY SHOULD NOT BE LEVIED IN THE PRESENT CA SE. 8.12 IN OUR OPINION THIS CASE IS NOT FIT CASE TO LEVY P ENALTY THOUGH CERTAIN ADDITIONS MADE BY THE ASSESSING OFFI CER WERE CONFIRMED BY THE TRIBUNAL. ACCORDINGLY WE DELETE THE ENTIRE PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE. 8.13 AS WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE THE REVENUE APPEAL ON THE SAME ASPECT BECOMES INFRUCTUOUS AND ACCORDINGLY GETS DISMISSED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AN D THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED THE 3 RD FEBRUARY 2012 I.T(SS).A. NOS. 50 & 52/HYD/2009 M/S. SMR BUILDERS PVT. LTD. ========================= 36 COPY FORWARDED TO: 1. M/S. SMR BUILDERS PVT. LD. PLOT NO. 73 SMR HOUSE NAGARJUNA HILLS PUNJAGUTTA HYDERABAD-500 082. 2. THE DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE - 3(2) ROOM NO. 723 7 TH FLOOR I.T. TOWERS A.C. GUARDS HYDERABAD-500 004 3. THE CIT(A) - I V HYDERABAD 4 . THE CIT - I II HYDERABAD. 5. THE DR A BENCH ITAT HYDERABAD. TPRAO