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TMI Blog2012 (8) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer (A.O. in short) noticed that the assessee derived rental income from running of two restaurants at A-1, NDSE, Part-I, New Delhi beside running five schools in proprietorship capacity. On the basis of seized documents, the AO determined undisclosed income of Rs. 1,64,75,600/- vide order dated 30.1.2001 as under:- [In Rs.] 1. Unexplained assets found at the residence Viz. television, refrigerator,, video camera etc.. Rs. 2,50,000/- 2. Unexplained foreign currency USD 750 Rs.33,750/- 3. Unexplained jewellery Rs.5,07,477/- 4. Unexplained household expenses Rs.4,00,000/- 5. Bogus expenses under the head Transport., refreshment etc. & salary Rs.10,00,000/- 6. Bogus expenses under the head legal, Professional, repair etc. Rs.3,05,000/- 7. Income from Virendra Poultry farm Rs.3,00,000/- 8. Unexplained investment in Bhatnagar designs. Rs.1,70,000/- 9. Addition on the basis of seized documents: 3,36,39,262/-. Less: Adjustment allowed as Rs.1,68,03,997/- Gross total income: Rs. 1,98,01,492/- Less: Undisclosed income declared in the block retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent was, therefore, available with the assessee to explain various amounts. Moreover, the assessee also disclosed in the block return a sum of Rs. 8,37,253/- on account of misc. balancing figures not relating to any acquisition of assets etc. We have also confirmed addition of Rs. 25 lacs on account of amounts collected from parents vide para 8.67.1 of this order and further sum of Rs. 1,39,524/- on account of withdrawal from bank accounts in para 8.12.1. The amount on acquisition of various assets is, therefore, easily covered by these additions and no separate addition is required to be made. The order of CIT(A) is set aside and the addition made is deleted. .......................................................................................... 5.2 We have perused the records and considered the rival contentions carefully. The dispute raised is in relation to disallowance of bogus expenses under the head transport, refreshment and salary. It is an undisputed fact that the assessee is mastermind behind running of several schools even though he is not proprietor of those schools. This is also an admitted fact that the assessee was running a centralized office at his residence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evidence to substantiate the expenditure. Therefore, higher disallowance made by the A.O. was justified. Ld. A.R. has also raised the issue of cross-examination of parties. But we find that at the time of inquiry by the A.O., the parties were found non-existent and this had been brought to the notice of the assessee. The issue of cross-examination is, therefore; not relevant." We also hold that estimated disallowance on the facts of the case, based on the relevant material found during search and material collected on further inquiry is justified in block assessment. Accordingly, we uphold the disallowance of Rs.I0 lacs. The order of CIT(A) is accordingly confirmed. ................................................................................. 9.2 The ground no.2 is regarding addition of Rs. 3 lacs on account of Virender Poultry Products Farms. The seized document showed that the bank account had been opened in this proprietary concern on 1.10.1994 and closed on 19.7.1999. As per MS-I0, Annexure A-5, page 49-57, 107 & 128 cash amounting to Rs. 11.43 lacs was received between 6.6.1997 to Dee 1998 from CRJ. Similarly, payment of Rs. 17.29 lacs had been received from various sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt persons as per AA-5(MR-1) page 9 & 10 of the seized documents; Rs. 2,74,000/ pn a/c of payments to certain persons as per Annexure-A-11, Rs. 1,55,000/- on a/c of unexplained investment in Anand Pratyabhoot VIT Nigam Ltd; Rs. 3 lacs on a/c of receipt of payment from Satish Batra; Rs. 1,45,000/- on a/c payments from schools; Rs. 1,39,524/- on a/c of page 2 of Annexure AA-47 of the seized documents and Rs. 1,20,12,665/-, comprising Rs. 18,20,000, Rs. 25,00,000 & Rs. 76,85,000/- on a/c donations & Rs. 7,665/- on account of expenditure on airtickets were upheld by the ld. CIT(A)/ITAT, the AO showcaused the assessee before levy of penalty u/s 158BFA(2) of the Act. In response to show cause notice dated 21st July, 2008, the assessee replied vide letter dated 12th August, 2008, contending, inter alia, that the disallowances having been made on estimate and the AO having not identified bogus parties to whom payments were made, penalty could not be levied. Inter alia, the assessee relied upon the decisions in Shiv Lal Tak Vs. CIT 251 ITR 373 (Raj.); Harigopal Singh Vs. CIT 258 ITR 85 (P&H); CIT Vs. Ajaib Singh & Co. 253 ITR 630 (P&H); CIT Vs. Inden Bislers 240 ITR 943 (Madras). However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Supreme Court [(1987) 165 ITR 14. 21-22 (SC)] that the initial burden of discharging the onus of rebuttal is on the assessee. Once that initial burden is discharged, the assessee would be out of the mischief unless further evidence was adduced. As to the nature of the explanation to be rendered by the assessee, the Supreme Court expressed their agreement [p.22] with the Patna High Court's view to the effect that it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. It was further agreed that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact-finding body. Thus, it is true that the presumption that arose was a rebuttable presumption that there was concealment of income and if there was cogent material to rebut the evidence that was acceptable, then the presumption would not stand [CIT v. K. R. Sadayappan, (1990) 185 ITR 49, 54-55 (SC), CIT v, K. Govindarajulu Naidu, (1991) 190 ITR 318, 321 (Mad): Addl.CIT v. Irshad Ali, (1992) 197 ITR 144 (Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealed or inaccurate particulars have been furnished had such income been the total income.; b) in any case to which Explanation 3 applies, means the tax on the total income assessed (as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148; c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished. 4.1. But in the case of 158BFA(2) the legal provisions are little different. In section 158BFA(2), penalty is leviable on undisclosed income and not with reference to the income for which inaccurate particulars have been filed are concealed. As per section 158BFA(2) the penalty is leviable in respect of undisclosed income determined by the A.O. which is in excess of the undisclosed income shown in return and penalty shall be imposed on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. Rs.22,25,896 Rs.64,87,316 The order giving effect to the order of ITAT Income revised u/s 250 dt. 26.05.2005: Rs.64,87,316 Less: Relief given by ITAT 1. On account of unexplained Assets found at the residence Viz. television refrigerators, Video camera etc. 2,50,000 2. On account of unexplained investment in Bhatnagar designs 1,40,400 3. On account of unexplained foreign Currency USD 750 33,750 4. On account of totaling mistake 3,48,775 5. On account of additions on the Basis of seized documents. a) On account of payment for air ticket 4060 b) On account of payment made for household expenses 6920 c) On account of receipt of cash treated as undisclosed. 50000 d) On account of payment made to C.L. Sharma 35000 e) On account of payment for bill of florist 15000 f) On account of payment made to Collex foam 34140 g) On account of payment made to Dharam Pal 5000 h) On account of payment for cement in respect of Virendra Gram 60000 i) On account of payment made to Gulshan 90000 j) On account of payment made to V. Bhargava: 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry rare cases where appellant could establish that but for search, the income which due to special provisions of the block assessment u/s 158BB has to be treated as undisclosed income, the appellant could have offered that income as and when the return would have become due or where there is a question of element of estimation in working out undisclosed income. For example if the evidence for the undeclared sales has been found during the course of search and AO adopts a particular percentage of GP while determining undisclosed income in the block assessment whereas the assessee has estimated lesser G.P. and offered undisclosed income accordingly then as per provisions of the Act, the difference so assessed will also be undisclosed income. But in such situation AO may use his discretion to decide as to whether on such difference penalty u/s 158BFA(2) possibly can be levied or not. Thus in case of 158BFA(2) penalty, there is a heavy burden on the assessee to establish that it was beyond his control to offer undisclosed income even after search to the extent determined by the AO and upheld by highest fact finding authority namely ITAT. In the instant case the basis of undisclosed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the ld. AR reiterated their submissions before the ld.CIT(A) and contended that nothing has been brought on record by the AO as to whom the payments were made in relation to alleged bogus parties. 7. On the other hand, the ld. DR supported the findings of ld. CIT(A) while contending that levy of penalty u/s 158BFA(2) is different from penalty levied u/s 271(1)(c) of the Act. While carrying us through the impugned order, the ld. DR contended that additions were made on the basis of seized documents and were not purely estimated. While carrying us through the findings of the ITAT in the quantum appeal, the ld. DR submitted that there is nothing to suggest that two views were possible on the addition of Rs. 3 lacs while bogus expenses were estimated on two counts; unvouched expenses and bogus expenses, genuineness of which was not established by the assessee. Though, the amount of such expenses exceeded the amount of Rs. 10 lacs, the addition finally was restricted to Rs. 10 lacs. Since the assessee did not furnish break up of Rs. 50 lacs disclosed in the return, the levy of penalty was justified, the ld. DR vehemently argued. To a query by the Bench, the ld. DR stated that the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the preceding proviso shall not apply where the undisclosed income determined by the AO is in excess of the incomes shown in the return and in such cases the penalty shall be imposed on that port ion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return." 8.1 As is apparent from the aforesaid provisions, in a case where the income finally assessed u/s 158BC(c) of the Act is the only undisclosed income returned by the assessee, based on return filed under sub-clause(a) of section 158BC of the Act and the assessee fulfills all the conditions stipulated in clause (i) to (iv) of the first proviso, i.e. payment of tax on the undisclosed income or request to the Officer to adjust full tax against cash if any seized and held by the Department sufficient to adjust the tax and if the assessee files statement that no appeal will be filed against the undisclosed income returned and assessed based on return filed, no penalty could be levied. However, penalty would be leviable in all cases where undisclosed income finally assessed under sub-sec. (c) of section 158BC is in excess of the undisclosed income returned by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings concluded that" Considering the receipt of money amounting to about Rs. 28 lacs during the two year period from Jan 1997 to Dec. 1998 and the fact that some investment is definitely required for staring the business, the estimate of income on these accounts to the tune of Rs. 3 lacs for the entire period from 1994-99 is justified.. "During the penalty proceedings before the AO or the ld. CIT(A), though the assessee pleaded that certain amount is reflected in the balancesheet under the head 'loans & advances 'on 31.3.1995,but no reasons have been adduced as to why despite receipt of cash in the bank account on account of supply of eggs to various parties, no income was shown. When the assessee did not furnish relevant details of income and expenditure, the AO was perfectly justified tin making the addition on the strength of seized documents. In these circumstances, particularly when the assesee did not furnish details of receipts and expenditure on account of admitted supply of eggs to various parties, claim that explanation submitted by the assessee is bonafide, is not borne out from any material on record and consequently, cannot been accepted. Indisputably, determination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar to explanation 1 of section 271(1)(c) of the Act where penalty is imposable when the assessee fails to offer an explanation or offers an explanation, which is found by the AO or the ld. CIT (Appeals) to be false or offers an explanation, which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. The provisions of section 158-BFA (2) are based on determination of undisclosed income admitted by the assessee under section 158-BC (1)(a) of the Act and not on concealment of income or furnishing of inaccurate particulars of such income. Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textiles Processors [2008] 166 TAXMAN 65 (SC), held that in civil liabilities like imposition of penalty under section 271(1)(c) of the Act there is no necessity of proving mens rea on the part of the assessee. Therefore, after the decision of Hon'ble Supreme Court in the case of Dharmendra Textiles Processors even in case of imposition of penalty u/s. 271(1)(c), the Revenue is not required to prove that assessee had wilfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are excluded, then the Explanation to section 271(1)(c) leading to a presumption of concealment of income or deliberate furnishing of incorrect particulars of income will be excluded, has not been challenged. in Jagbandhu Sen Poddar(supra), Tribunal concluded that there was no material to show that the account represented by the cash deposits was the assessee's taxable income of the said year. Another finding of the Tribunal was that the only other items which accounted for the difference between the total income shown in the return and the total income assessed were expenses which were claimed as deduction in computing the income but were disallowed in the assessment which as laid down by the Explanation to s. 271(1)(c) have to be excluded for the purpose of determining whether the Explanation is applicable and estimated income of Rs. 8,000 in Pakistan subject to rectification on production of Pakistan assessment order which is not liable to tax here in view of the Indo-Pakistan Avoidance Agreement and was besides an estimate and that too subject to rectification on the basis of the Pakistan assessment order. Accordingly, the Hon'ble High Court upheld the findings of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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