TMI Blog2011 (12) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... mount before the department. It is also held that subsequent act of disclosure of an income would not make any difference and it cannot be said that the assessee had not concealed particulars of their income or had not furnished inaccurate particulars of such income. Thus, in light of the discussion made above and conduct of the assessee, order of CIT(A) in confirming the penalty imposed is upheld - Decided against the assessee. - IT APPEAL NOS. 3036 & 4083(DELHI) OF 2007 - - - Dated:- 16-12-2011 - RAJPAL YADAV, A.N. PAHUJA, JJ. For the Appellant: Raj Kumar Gupta For the Respondent: Smt. S. Mohanty ORDER A.N. Pahuja, Accountant Member These two appeals - quantum appeal filed on 19.6.2007 against an order dated 30.11.2005 penalty appeal filed on 10.10.2007 against an order dated 16th July, 2007 of the learned CIT(A)-X, New Delhi, raise the following grounds:- ITA no. 3036/Del/07 1. The learned Commissioner of Income Tax (Appeals)-X the learned Income Tax Officer have erred in making an addition of ₹ 10,00,000/- as income from undisclosed sources. 2. The learned Commissioner of Income Tax (Appeals)-X the learned Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany appeared and he was informed that the office of Shri Sanjay Rastogi was surveyed u/s 133A of the IT Act 1961 on 4th March, 2003, when it transpired that Shri Sanjay Rastogi along with his father Shri M.S. Rastogi and Associates Shri Ashwani Uppal his employees, was running concerns, which were engaged in giving bogus/accommodating entries. The address of most of these concerns was at 210, Vakil Chambers, A-115, Shakarpur, Delhi. The residential addresses of Shri Sanjay Rastogi, 37- Saini Enclave, Delhi was found to have been used for same purpose of giving bogus entries. In his statement recorded by investigation wing, Shri Sanjay Rastogi in reply to question no. 14 admitted that he was providing certain services in connection with companies/concern/entities, which were not doing the real genuine business exclusively. Few Private Ltd./Ltd. companies were used as front companies as conduit for execution of such entries/transactions, which were not doing business in actual. Shri Sunil Agarwal Director of the company was confronted with the aforesaid question and reply of Shri Sanjay Rastogi and he was handed over a copy of the above statement to read for himself with the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol. Although the directors in these companies were my associates but the control was of my self and my father, and commission income received on giving these bogus entries through our various companies was received by us. I also confirm that the bank accounts stated in the question were operated in the name of M/s. Aadhunik Systems Pvt. Ltd., M/s. Frenzy Products Pvt. Ltd. and M/s. M.S. Leasing Pvt. Ltd. by me in the name of my associates. I also confirm that the below mentioned loan/advance/share application entries appearing in the name of various companies were given by us from bank accounts of different companies operated from my office on charging of commission for giving the entry and on receipt of equivalent amount of cash and these entries were given as bogus/accommodation entries. (i) The bogus entry of ₹ 1000000/- (Ten Lacs) was given to M/s. Sanjay Enterprises Pvt. Ltd. by our company M/s. Frenzy Products Pvt. Ltd. vide cheque No. 0323197 dated 2.5.2000. ( ii ) ** ** ** 4.1 In reply to question no. 6, Shri Sanjay Rastogi replied as under :- The share application money was given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITAT, vide their order dated 10th December, 2008 concluded on the aforesaid addition of ₹ 10 lac in the following terms :- 2.3 We have considered the facts and rival submissions. We find that the statement of Shri M.S. Rastogi was recorded on 27.09.2005 by the Assessing Officer, in which it was deposed that the entry of ₹ 10,00,000/- was merely an accommodation entry and that he was charging commission at the rate 0.25% of the amount for furnishing such entries. Thereafter, the amount was surrendered by the assessee for taxation and the addition was made, inter alia, on the ground that the amount was surrendered by the assessee in the course of assessment proceedings by way of a written letter. In view thereof, it was not necessary to afford an opportunity of cross-examination to the assessee as the statement was not the primary basis for making the addition. Therefore, it is held that the learned CIT(Appeals) was right in upholding the addition of ₹ 10,00,000/-. The letter of the assessee dated 22.11.2005 did not admit that any commission was paid for obtaining the entry. Thus, the addition of ₹ 20,000/- emanates from the statement of Shri S.M. Rast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., which was managed by him. Thus, there was a direct evidence to show that the appellant had used the services of Mr. Sanjay Rastogi for the purpose of bringing into its accounts its undisclosed income in the guise of loans. When the statement of Shri Sanjay Rastogi was confronted to the appellant, the appellant instead of rebutting the contents of the statement, had surrendered the amount before the AO and, hence, in a way admitted the fact that the amount of ₹ 10,00,000/- shown as loan from M/s. Frenzy Products (P) Ltd. was not a genuine loan and was only a bogus accommodation entry obtained through Shri Sanjay Rastogi. The appellant came forward to surrender the amount only when the appellant was cornered with cogent evidence gathered by the department that the loan of ₹ 10,00,000/- shown was not a genuine transaction. Thus, it was proved beyond doubt by the department that the amount of ₹ 10,00,000/- shown to have been obtained as loan from M/s. Frenzy Products (P) Ltd. was nothing but an accommodation entry obtained with the help of Shri Sanjay Rastogi. Hence, it was a fit case for levying penalty u/s 271(1)( c) as there was a definite finding of concealme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the penalty of ₹ 4,03,410/-levided u/s 271(1)(c) by the AO for A.Y. 2001-02 is confirmed. 10. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee while carrying us through the impugned order contended that though the AO and the Ld. CIT(A) have mentioned in the order that copy of the statement of Shri Sanjay Rastogi recorded on 27th September, 2005 was supplied to the assessee, in fact, it was never supplied. He pointed out that the assessee had already returned an amount of ₹ 5,00,000/- to M/s. Frenzy Products (P) Ltd. The ld. AR added that surrender was made in the quantum proceedings only to buy peace of mind and therefore, penalty should not be levied. In support, the ld. AR relied upon the decision in CIT v. D H Secheron Electrodes Ltd. [2008] 296 ITR 193/[2006] 157 Taxman 463 (MP). On the other hand, the ld. DR pointed out that before the investigation wing during the course of survey, Shri Sanjay Rastogi admitted the bogus entries given to the assessee and subsequently in the statement recorded by the AO on 27.9.2005 at the behest of Ld. CIT(A), Shri Sanjay Rastogi categorical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the above statement to read for himself with the request to furnish their reply. Since the assessee received from M/s Frenzy Product (P) Ltd. an accommodation entry of ₹ 10 lacs and the assessee did not controvert the statement of Shri Sanjay Rastogi, after considering the reply of the assessee, the AO added an amount of ₹ 10,00,000/- by way of unexplained credits besides an amount of ₹ 20,000/- by way of commission @ 2%. On appeal, the ld. CIT(A) directed the AO to summon to all the concerned parties including Managing Director of M/s. Frenzy Products (P) Ltd. from whom the alleged loan was claimed to have been received and record their statements. In terms of these directions, the AO recorded the statement of Shri Sanjay Rastogi on oath on 27.9.2005 as reproduced in the impugned order on page 3 to 7.In this statement, Shri Sanjay Rastogi specifically pointed out the name of the assessee company and admitted that he had given a bogus accommodation entry of ₹ 10,00,000/- as loan to the assessee through M/s. Frenzy Products (P) Ltd., which was managed by him. When the statement of Shri Sanjay Rastogi was confronted to the assessee, instead of rebutti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 11.1 As is evident from the aforesaid cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under s. 271(1)(c) of the Act. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. The opportunity of hearing given by the notice under section 271(1)(c), obviously is against such concealment and inaccuracy as is detected in the assessment proceedings . 11.3 Indisputably, the assessee, instead of rebutting the statement of Shri Sanjay Rastogi recorded on 27.9.2005 on oath during the remand proceedings, surrendered the amount and sought to wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first time an affidavit dated 26.6.2008 has been filed by Shri Sunil Agarwal, Director the assessee company before the ITAT in quantum proceedings wherein it is stated that the said statement of Shri Sanjay Rastogi was not made available to them.. However, Shri S.K. Sarkar, who appeared before the ITAT on 30.7.2008 was specifically informed that the affidavit is not of the appropriate person, Shri S.K. Sarkar, AR, having obtained copy of the statement on his request dated 18.10.2005. Thereafter, the assessee did not file any affidavit of Shri S.K. Sarkar nor disputed the findings of the ld. CIT(A) in quantum proceedings before the ITAT. In penalty proceedings also, the assessee did not submit any reply before the AO. It is only on 30.7.2008 that Shri Sunil Agarwal, Director of the company filed affidavit, seeking copy of the statement. Since the facts on record establish that the assessee was supplied a copy of the aforesaid statement recorded on oath on 27.9.2005 and only thereafter, amount was surrendered during the remand proceedings and the assessee sought to withdraw their appeal before the ld. CIT(A), the plea made before us that copy of the said statement was not made av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o adverse action by the Department. In a case where the assessee has disclosed not only the income regarding which the Department has incriminating material, but has also disclosed the income with regard to which no incriminating material was seized by the Department, the disclosure of the income with regard to which the Department has no incriminating material, is liable to be treated as voluntary. For example, if an assessee is having five accounts and the Department has incriminating material with regard to one of those accounts only, the disclosure of income relating to four accounts with regard to which the Department has no incriminating material, is voluntary, because it was made without any constraint or compulsion, even though the disclosure of the income relating to the account regarding which the Department has incriminating material, is liable to be treated as non-voluntary.' Dictionary:- 42. Black's Law Dictionary (Seventh Edition) defines voluntarily as intentionally or without coercion. It shall be appropriate to reproduce meaning of voluntarily and voluntary as given in Black's Law Dictionary, which is as under:- Voluntarily, adv. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se amount of ₹ 5 lacs has been paid in subsequent year, does not make a ingenuine transaction, genuine. The assessee miserably failed to rebut the incriminating statement of Shri Sanjay Rastogi recorded during the course of survey and that recorded during the remand proceedings in relation to transaction of ₹ 10 lacs, in the reassessment proceedings as also in penalty proceedings. In fact, no explanation was filed before the AO during the penalty proceedings. Thus, the assessee miserably failed to discharge the initial onus laid down upon the assessee in terms of Explanation 1 to sec. 271(1)(c) of the Act. 11.5 We find that the legal position is squarely covered by the decision of the Hon'ble Apex Court in K.P. Madhusudhanan (supra). Therein, the Hon'ble Court affirmed the decision of the Kerala High Court in CIT v. K.P. Madhusudanan [2000] 246 ITR 218/[2002] 125 Taxman 265. Considering the effect of the addition of the Explanation to section 271(1) of the Act and the amendment to section 271(1)(c) of the Act by deletion of the word deliberately , the Hon'ble Kerala High Court came to the conclusion that whether penalty was liable to be imposed in a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide for such a requirement either directly or inferentially. In Sir Shadilal's case [1987] 168 ITR 705, what the Supreme Court observed was that there may be several reasons for which the assessee may have offered an amount for addition, but that itself is not sufficient to infer concealment. It has not laid down as a rule of general application that whenever such is the case, penalty cannot be imposed. On the contrary, in such cases also the assessee is required to discharge the burden placed by the Explanation appended to section 271(1)(c). In case an explanation is offered, the Assessing Officer is to examine it and find out whether the assessee has been able to establish that there was no concealment. Held, that, in the case at hand, no explanation worth the name was offered by the assessee. The statement made by the assessee was to the effect that hand loans were obtained which were intended to be refunded immediately and, therefore, the entries were not made, but, later on, the arrangement did not work out. Therefore, the amount was offered for taxation. There was a clear admission that the entries were not made on the relevant dates. It was not a case where ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . By following the aforesaid judgment of Punjab Haryana High Court in the case of Rajeshwar Singh (supra) the ITAT, Chandigarh Bench in the case of Roshan Lal Madan v. Asstt. CIT [1998] 67 ITD 33 (Chd.) (TM)., has taken the same view that Explanation 1 to section 271(1)(c) can be invoked for the first time by the Tribunal. 12. As regards decision in D H Secheron Electrodes Ltd. (supra) relied upon by the ld. AR, facts in the cited decision were altogether different. In the said case, the assessee had claimed expenses under various heads, like sales promotion, lease rent, bad debts, entertainment expenses, etc. The AO was of the view that the expenses claimed by the assessee were on the higher side. During the course of assessment proceedings vide letter dt. 2nd Jan., 1994 it was stated by the assessee that though all the expenses and purchases, etc. are genuine, fully vouched and are fully allowable but in order to avoid protracted litigation with the Department, and to purchase peace an additional income of ₹ 25 lacs was offered with the understanding that no penalty proceedings would be initiated. It is with reference to the above surrendered amount of ₹ 25 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud or neglect. In this case, the assessee offered no explanation at all except to assert that he disclosed 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 income earlier was not stated. In these circumstances, the ITAT was in error in setting aside the penalty. The question is answered in favour of the Revenue and against the assessee, in the light of the later decision of the three judge Bench of the Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99. 12.1 In H. V. Venugopal Chettiar (supra), relied upon by the ld. DR, it was held that so long as the admission made by the assessee in the assessment proceedings had not been retracted and so long as there is a variation between the statement made at the stage of the original assessment proceedings and the admission made at the stage of the reassessment proceedings leading to an inference that the suppression of income was intentional or wilful, the assessing authority is entitled to rely on, the discrepancy in the statement made by the assessee and act on the admission made by the assessee at the reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty proceedings. Thus, in the light of view taken in the aforesaid two decisions relied upon by the ld. DR, we are of the opinion that the ld. CIT(A) rightly upheld the levy of penalty. 13. Therefore, in view of the facts and circumstances and in the light of above noted authoritative pronouncements, when the assessee failed to discharge the onus laid down upon him in terms of Explanation 1 to section 271(1)(c) of the Act and did not offer any explanation during the penalty proceedings before the AO, we have no option but to uphold the findings of the ld. CIT(A), confirming the levy of penalty. Even otherwise the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide SEBI v. Shriram Mutual Fund [2006] 131 Comp Cas 591/68 SCL 216 (SC). This view has been reiterated by the Hon'ble Supreme Court in their decision dated 29.9.2008 in the case of Union of India v. Dharmendra Textile Processors [civil appeal nos.10289 -10303 of 2003]. 14. Hon'ble jurisdictional High Court in Jaswa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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