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KPC Medical College & Hospital and others Versus Dy. CIT, CC-XXIV, Kolkata

2015 (7) TMI 6 - ITAT KOLKATA

Penalty under section 271(1)(c) - unaccounted donations - notice under section 153C - argument of the ld. Departmental Representative was that if AO of the searched person and the assessee is the same it does not make any difference whether satisfaction is recorded in the case of the searched person or the other person - Held that:- The ITAT had arrived at a conclusion that satisfaction was recorded while taking up the cases of other person. This conclusion has been drawn on the basis of materia .....

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hat case. It had not interpreted any provision. We have considered this aspect under the fore going paragraph. Therefore, we do not find any merit in the first fold of submission made by the ld. counsel of the assessee.

On examination of the facts, we find that firstly, there is no explanation at the end of assessee, why it has not disclosed these donations in the original return(s)? There is no bona fide in the alleged explanation of the assessee that it had received the money throug .....

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hat it cannot be a co-incidence or a chance that five companies managed by a common director, having assets of less than ₹ 1 lac, not done any business but would give donations of ₹ 33 crores. These circumstances in itself suggest a well designed scheme at the behest of the assessee, because it is the assessee who is ultimately getting the benefit. Therefore, there was no explanation at the end of assessee for not showing these donations as its income in the original return(s) or in .....

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nt. Direction given by the ld. Commissioner in pargraph 6.3 to 6.7 are contrary to the provisions of law and, therefore, this finding of the ld. CIT(A) is quashed. The penalty imposed by the AO in the cases of KPC Medical College & Hospital is confirmed in all the three years. The appeals are treated as partly allowed for statistical purpose. - ITA Nos. 1832 to 1834/Kol/2014,ITA No.1835/Kol/2014 - Dated:- 24-6-2015 - S/Shri Rajpal Yadav & B.P. Jain, JJ. For the Petitioner : Shri N. K. Poddar .....

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ated 31st July, 2014 passed for AY 2011-12. The common issues are involved in all these appeals, therefore, we heard them together and deem it appropriate to dispose of them of by this common order. The grounds of appeals taken by the assessee in all the four appeals are not in consonance with Rule- 8 of the I.T.A.T. Rules, 1963. They are descriptive and argumentative in nature. In brief, the grievance of the assessee is that ld. CIT(A) has erred in confirming the levy of penalty imposed under s .....

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der dated 25th February, 2005 whose copy has been placed on page 73 of the Paper Book Volume -1. The assessee had filed its return of income on 29.10.2007, 30th September, 2008 and 31st March, 2010 declaring a loss of ₹ 17,74,325, ₹ 12,59,29,557 and ₹ 21,99,09,834 in AYs 2007-08 to AY 2009-10 respectively. A search action under section 132 of the Act was carried out in the case of one Shri Bhaskar Ghosh on 12th July, 2010. During the search at his residence, a cash of ₹ 3 .....

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it came to the notice of the Revenue department that 5 companies had given a loan totaling to ₹ 33.21 crores to Shri Kali Pradip Chaudhari Foundation Trust, who on the same day had given that loan to the assessee. Later on, these loans were converted into donations and according to the assessee it was a corpus donation. The AO had harbored an opinion that the assessee/its group entities were indulging in routing of its funds of suspicious origin via some five private companies. The modus .....

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The ld. first appellate authority has reproduced the copies of the resolution passed by the Board of Directors of all these 5 companies whereby it was resolved that a donation to KPC Foundation of Kolkata which is to be further forwarded towards the corpus of medical colleges were passed. These resolutions have also been reproduced by the ld. first appellate authority in the impugned order in pages 6 to 10. During the course of assessment proceedings Shri Uttam Chakraborty, Director (Finance) of .....

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has furnished the returns. Exemption under section 12AA was claimed and the returns were showing losses. The ld. first appellate authority has noticed the income/losses declared by the assessee in original returns vis-à-vis in the returns filed in response to notice under section 153C of the Act. It reads as under :- AY Original return of income Return filed in response to notice u/s 153C 2007-08 (-) 17,74,325/- (-) 17,74,325/- 2008-09 (-)12,59,29,557/- (-) 15,47,21,356/- 2009-10 (-) 21, .....

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disclosure on pages 21 to 22 of the impugned order. According to the AO, assessee had filed self-styled revised returns on 6th February, 2013 offering the donation for taxation. However, in the computation, the depreciation and business losses were set off. These are hereunder :- AY Original return of income u/s 139(1) /139(4) Return filed in response to notice u/s 153C Self-styled revised return 2007-08 (-)17,74,325 (-)17,74,325 2,59,19,793 2008-09 (-)12,59,29,557 (-)15,47,21,356 4,50,60,443 2 .....

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/s 271(1)(c) of the Act amounting to ₹ 98,57,100/-, ₹ 58,11,950/- and ₹ 4,49,00,790/- In AYs 2007-08 to 2009-10 respectively. 3.2 Appeal to the CIT(A) did not bring any relief to the assessee. 4. With the assistance of ld. representatives we have gone through the record carefully. Before we embark upon an enquiry as to whether assessees deserve to be visited with penalty under section 271(1)(c) or not ?, in the given facts and circumstances, we think it appropriate to bear in m .....

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ate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** ** ** (iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits: E .....

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total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed. 5. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisf .....

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uation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the e .....

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ming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total inco .....

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urpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished. 6. Shri Poddar has apprised us the meaning of expression concealment employed in section 271(1)©. He made reference to a large number of cases, more particularly the decision of Hon ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519, Ashok Pai vs. CIT 292 ITR page 11. The observation of Hon ble Supreme Court in the case of Ashok Pai re .....

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mpt to hide an item of income or a portion thereof from the knowledge of the Income-tax authorities. In Webster s Dictionary, inaccurate has been defined as : not accurate, not exact or correct; not according to truth; erro neous; as an inaccurate statement, copy or transcript. 17. It signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. 18. The term inaccurate parti .....

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the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which were material to the computation of his income. 19. The explanation having regard to the decisions of this court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose .....

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ings. It is not the continuation of assessment proceedings. If an assessee had not objected for initiation of an assessment proceedings by issuance of a notice under section 153C during the course of assessment proceedings, then, it does not mean that the assessee has been denuded from his rights to challenge the validity of notice issued under section 153C of the Act. The assessee can challenge the validity of notice served upon him under section 153C and if it is established that the condition .....

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m service of a valid notice under section 153C. The jurisdiction in the AO cannot be infused by consent i.e., that assessee has not challenged the service of notice under section 153C in the regular assessment proceedings, therefore, assessee has given a deemed consent for taking up proceedings against him under section 153C and, therefore, assessee is precluded from raising any such plea. For buttressing his contentions on his multiple submissions, he filed six compilations of case laws, whereb .....

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all these case laws which are running into 984 pages in the six compilations that will make the order repetitive and bulky. It is by and large settled that penalty proceedings is an independent proceedings. The assessee is at liberty to raise any defence for exonerating itself from the vigorous of the penalty provisions. It is also settled that consent would not be infused jurisdiction in a statutory authority. The jurisdiction will flow in the AO by virtue of the provisions of the Act. 7.1. Th .....

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s or re-assess his income. A bare perusal of the provisions would indicate that before handing over such documents etc. to the AO of other person, a satisfaction has to be recorded by the AO of the searched person demonstrating that money, bullion or jewellery found from the person searched belonged to the other person. Only when such satisfaction is recorded by the AO of the searched person and such documents or assets seized, etc., are handed over to the AO of the other person then, the latter .....

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recedent for the AO of the other person to acquire jurisdiction. Unless such jurisdictional condition is satisfied there can be no question of making assessment or reassessment of the other person. Shri Poddar in order to buttress his contention took us through the judgement of Hon ble Supreme Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341, in the case of Pepsi Foods Pvt. Ltd. vs. ACIT 367 ITR 112. He also relied upon the judgment in the case of CIT vs. Calcutta Knitwears 362 ITR 67 .....

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e contended that the AO has made a reference to the statement of Shri Bhaskar Ghosh and Shri Uttam Chakraborty. In this so-called satisfaction note, on the basis of statement of Shri Bhaskar Ghosh, an inference was drawn that a sum of ₹ 35,10,400 found at his residential premises were belonging to the assessee. However, the disclosure made on the date of search has been retracted by this person. He has surrendered this amount and assessment order has been passed in his case whereby this am .....

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ey belonged to a third person unearthed during the course of a search which are to be assessed in the hands of other person. With regard to the statement of Shri Uttam Chakraborty, ld. counsel for the assessee contended that the copy of the statement is available on page 171 of the Paper Book. He has nowhere alleged that the amount found during the course of search at the residence of Shri Bhaskar Ghosh was withdrawn from the account of KPC Medical College & Hospital, SBI, Jadavpur Branch, K .....

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ddar in his second limb of arguments on this fold of submission contended that satisfaction was not recorded by the AO of the searched person. The satisfaction ought to have been recorded by the AO of the searched person and copy of such satisfaction should be available in the record of searched person. He emphasized that record of Shri Bhaskar Ghosh was called upon by the Tribunal and he has inspected the record in the office of the CIT, DR. The record does not contain any satisfaction. Therefo .....

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as under :- KPC Medical College & Hospital, 1F, Raja F. C . Mullick Road, Jadavpur. 10/10/2011 A search & seizure operation u/s 132 of the I.T. Act, 1961 was conducted on Shri Bhaskar Ghosh on 12/07/2010. Cash ₹ 35,10,400/- was found in his residence situated at P-169, Regent Estate, 2nd Floor, Kolkata-92. In the statement under oath, Shri Bhaskar Ghosh stated that the money belonged to the KPC Group of Companies. M/s KPC Medical College & Hospital is the main organization of t .....

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t the money seized during the search conducted in the premises of Shri Bhaskar Ghosh belongs to M/s KPC Medical College & Hospital. It satisfies the condition of section 153C of the I.T. Act, 1961. In view of above, I am satisfied about the grounds of issuance of Notice u/s 153C of the I.T. Act, 1961 in this case. Sd/- Sd/- Sailen Samadder Dhrubajyoti Ray Dy. CIT, CC -XXIV, Kolkata A.C.I.T.,CC-XXIV,Kolkata 13. Section 153C has direct bearing, therefore, it is pertinent to take note of this s .....

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seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assessee or reassess income of such other person in accordance with the provisions of section 153A. 14. At this stage it is apt worthy to make reference to section 158BD which is a predecessor of section 153C and most of the authoritative pronouncement brought to our notice f .....

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A, then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. A bare perusal of these two sections would reveal that where the AO of the searched person is satisfied that any money, bullion, jewellery, books of account or other documents, etc., b .....

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assessment of the other person only when satisfaction was recorded by the AO of the searched person exhibiting that documents and assets belonging to other persons so found and it is transmitted to the AO of the other person having jurisdiction over such other person. The Hon ble Supreme Court recently in the case of CIT vs. Calcutta Knitwears (supra) has silenced the controversy even about the stage at which satisfaction has to be recorded. Following conclusions are worth to note :- Having said .....

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g such satisfaction, may transmit the records/documents/chits/papers etc. to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of the said other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue a notice for the purpose of completion of the assessments under section 158BD of the Act, the other provisions of Chapter XIV-B shall apply. 15. Now in the present case, the l .....

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second limb ld. counsel for the assessee submitted that no cogent material was found at the time of search and, therefore, no satisfaction is to be termed. 16. There is built-in fallacy in the arguments of the ld. counsel for the assessee. The fallacy became evident if the argument if tested by envisioning to the facts of the present case. There is no dispute that notice under section 153C was issued by the AO after recording the satisfaction extracted supra. The AO is the same AO who has jurisd .....

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the assessee, therefore notice under section 153C is to be issued in the case of assessee. The question is, where this paper was placed by him? Whether in the order sheet entries of Shri Bhaskar Ghosh s assessment proceedings; in a separate file or in cupboard available in his room. There is no dispute raised by the ld. representatives that this satisfaction was not recorded within the stages contemplated by the Hon ble Supreme Court in the case of CIT vs. Calcutta Knitwears (extracted supra). T .....

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satisfaction be recorded and it should be during the period propounded by Hon ble S.C. in Calcutta Knitwears, that has been recorded in the present case. It is available on page 74 of the Paper Book. The second scenario can also happen that seized material of KPC group might be kept in a common bundle, wrapped in a cloth where all the files are emanating from search and survey are being placed. If the above satisfaction note was found to be tagged with other file would it be held that no satisf .....

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tion of Shri Bhaskar Ghosh was asked. His reply was I am Company Executive, C.E.O. of KPC Karma Co.(P) Ltd. I am drawing salary from the same. 18. He further disclosed his bank accounts and also deposed that he is not associated with any other company. He was director with M/s S. R. Cable (P) Ltd. but did not draw any remuneration from there. Question No.6 relates to the cash found at the time of search. This question reads as under :- Q. No.6 : During the course of search operation u/s 132 of t .....

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the Finance Director of the assessee Shri Uttam Chakraborty. The challenge of the ld. counsel for the assessee to this evidence was that statement of Shri Bhaskar Ghosh was not supplied to the assessee. Shri Bhaskar Ghosh has ultimately retracted this statement and surrendered this amount for taxation in his hands. Therefore, this evidence is to be excluded from consideration. With regard to Shri Uttam Chakraborty, -he drew our attention towards page 171 of the Paper Book, where copy of his stat .....

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hat the money belongs to a person other than the searched person. As far as the statement of Shri Uttaam Chakraborty referred by the ld. counsel for the assessee is concerned, this statement has not been referred to by the AO in the satisfaction note. The statement is dated 8th September, 2010. It was recorded under section 131 of the Act whereas the statement referred to by the AO in the satisfaction note is the statement recorded on the date of search, when we confronted Shri Poddar with regar .....

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and their reply are relevant. They read as under :- Q. 7 Are there any other cash transaction made with Mr. Bhaskar Ghosh from any of the concerns as mentioned in answer of Q. No.2? Ans. Yes. Q.8 When did you give that money and source of fund. Ans: It was withdrawn from the SBI, Jadavpur (College) Branch of ₹ 50,00,000/- and it was paid by cash to Mr. Bhaskar Ghosh. Q.9 However, as per your cash book there was no reflection of payment of ₹ 50,00,000/- to Mr. Bhaskar Ghosh. Moreover .....

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presence of Shri S. Chattopadhyay, HOD(F &A) and Shri Arun Chatterjee, Deputy Manager, Accounts. Q.11 Whether Mr. Ghosh an employee of KPC Medical College & Hospital Society, Jadavpur. If not, in what capacity the society KPC Medical College & Hospital has paid ₹ 50,00,000/- by cash? Ans: No. He is not an employee, but being the COO of KPC Karma (P) Ltd. the company formed recently with the purpose of coordinating monitoring and supervising of all the construction of the group .....

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ial collected during the course of search exhibiting that money belonging to the assessee was found at the premises of the searched person. Therefore, the material exhibiting the recovery of money along with fact that information about the money and the money was handed over to the AO who has jurisdiction over the assessee. A satisfaction was recorded for initiating proceedings under section 153C of the Act. It was recorded as per procedure provided in the section and a notice u/s 153C was right .....

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argument of the ld. Departmental Representative was that if AO of the searched person and the assessee is the same it does not make any difference whether satisfaction is recorded in the case of the searched person or the other person. The ITAT had arrived at a conclusion that satisfaction was recorded while taking up the cases of other person. This conclusion has been drawn on the basis of material supplied under query made as per RTI Act. It is a factual issue. We are conscious of this fact b .....

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g paragraph. Therefore, we do not find any merit in the first fold of submission made by the ld. counsel of the assessee. 21. In the next fold of submissions Shri Poddar contended that in order to prove that assessee has concealed its income, the only evidence possessed by the department is the statement of Shri Kamala Shankar Pandey recorded on 30th August, 2010 which has been relied upon by the ld. Commissioner also in the impugned order. He made reference to page no.11 of the CIT(A) s order. .....

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ence would remain with the AO. The assessee has voluntarily disclosed the alleged donation amount as its income and paid the taxes. The AO did not make any addition over and above the disclosed amount. The alleged amount of donation was received through account payee cheque from KPC Foundation. The KPC Foundation also received the cheque from these five companies. The AO has not simply accepted the disclosure made by the assessee rather he continued the enquiry and issued summons to one of the d .....

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relied upon being not put for cross-examination, he relied upon the decision of Hon ble Supreme Court in the case of Kishan Chand Chelaram 125 ITR 713. He drew our attention towards page 331 to 333 and 339 of the Paper Book Volume-2. He also made references to pages 144 to 148, 156 to 170, 86 to 103 of Volume -1. 22. On the other hand, the ld. DR submitted that 5 paper companies in a concerted manner passed resolution to convert the companies advances to KPC Foundation as corpus donation to KPC .....

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contended that KPC Group was involved in so many irregularities for taking sanction from the Government for admitting the students. He further relied upon the order of CIT(A) wherein every material has been taken into consideration. 23. We have duly considered the rival contentions and gone through the record carefully. As stated earlier, the ld. counsel for the assessee has referred 106 judgments running into more than 1000 pages, his efforts were to indulge the Bench in an academic debate ins .....

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deposer. Primarily, we are also not putting the reliance upon the statement of Shri Kamala Shankar Pandey, but it is such a piece of evidence which highlights the modus operandi of the group as a whole. The statement of Shri Kamala Shankar Pandey was recorded on 30th August, 2010. He was stated to be died on 10th of January, 2013. This fact was brought to the notice of the AO by other director in the alleged 5 donor companies who placed on record the death certificate of Shri Kamala Shankar Pand .....

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there is no dispute that if, deposer was not put to cross examination then his deposition cannot be used against the interest of any one, except the deposer. But in the present case ld. AO had issued notice u/s 142(1) on 3/10/2012 and called for details of donation with confirmation, PAN, and nature of donation. Now the assessee had offered the donation for taxation. The question of cross-examining Shri Kamala Shankar Pandey would have arisen, had assessee justified genuineness of its donations .....

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that nobody should be charged with liability on the basis of statement of third person unless opportunity of cross examination is given Thus we take this statement as an information with the AO, which is required to be substantiated. We will refer the evidence on the record in the later part. 24. The contention of ld. counsel for the assessee was that there is no evidence with the revenue demonstrating the fact that assessee has concealed the particulars of income. In theory, the plea taken by .....

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g up of petitions in all five companies would indicate that these companies had never conducted any business. For example M/s Sunview Properties Pvt. Ltd. was incorporated on 5th March, 2007. Its main object was to carry on the business to acquire assets by purchase, lease, exchange etc. Its authorized capital was of ₹ 50 lacs dividend into 50000 equity shares of ₹ 10/- and paid up capital was of ₹ 43,90,000/-. It has total value of assests is of ₹ 95,747/-. This company .....

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entire share capital to the assessee. During the course of hearing we have directed the ld. counsel for the assessee to give us the details of common persons who are managing the affairs of KPC Foundation as well as the KPC Medical College & Hospital but no such details were submitted by the assessee. The facts on the record do speak themselves, the alleged argument of the ld. counsel for the assessee that money was received through account payee cheques. The assessee has filed confirmation .....

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ivate limited companies not doing any business, do not have asset of more than 1 lakcs, all of a sudden gave a donation of ₹ 33 crores is quite unbelievable. These are the hard facts flowing from the accounts of 5 companies. They do not require corroborative support from the statement of Shri Kamala Shankar Pandey. 25. Let us test on different analogy also. The Explanation-1 appended to section 271(1)(c), create a deeming fiction, which postulates two situations; (a) where in respect of an .....

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material to the computation of the total income. It is pertinent to mention that in the resolution passed by these companies it was resolved that though the money is being given to Foundation but it will be forwarded to the assessee . For this reason we have asked the ld. counsel for the assessee to show us the list of management who are managing the affairs of Foundation as well as the KPC Medical College & Hospital, because the common manager must have knowledge of these factual issues. A .....

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hat Shri Rajat Roy as trustee of the KPC Medical College & Hospital was aware about the statements of various persons and the documentary evidence collected by the Revenue against the assessee. Had the assessee not disclosed income, the AO would have specifically controverted the assessee with this material. 26. At the cost of repetition we would like to observe that the other most important features of section 271(1)(c) is deeming provisions regarding concealment of income. The section not .....

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explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT( Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under fir .....

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utation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of t .....

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are genuine. This explanation is wholly for the sake of explanation. The assessee failed to spell out specific facts and circumstances or reason which operated in the minds of its managing director, finance while preparing the return and treating these donations as genuine. Looking to the facts of these five donors, no prudentman would, however, harbor a belief that such companies can give donation. It is pertinent to note that it cannot be a co-incidence or a chance that five companies managed .....

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mmissioner has rightly confirmed the penalty upon the assessee. We do not find merit in the contentions of the ld. counsel for the assessee. 27. In the next fold of submissions, the ld. counsel for the assessee has contended that CIT(A) has issued directions to the AO for exploring to make addition of these unexplained donations under section 115BBC of the I.T. Act. Section 115BBC provides that if an assessee being educational institution, hospital, or any trust or institution referred to in sec .....

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peal the Commissioner shall have the following powers. Sub-clause (b) of section 251(1) is relevant for our purpose which reads as under :- (b) in an appeal against an order imposing a penalty he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. A perusal of the above would indicate that powers of the Commissioner while dealing with penalty appeal are restricted to the penalty proceedings only. He may confirm or cancel the imposition of penalty. He may .....

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In this case, the assessee did not file the return within the due date provided under section 139(1) of the I.T. Act. The assessee has filed the return under section 139(4) of the Act on 14.10.2011 which is a belated return because the due date for filing of return was 30th September, 2010. The assessee sought to file a revised return under section 139(5) which was not entertained by the AO for the reasons that original return was not filed within the due date. However, ld. AO has made an addit .....

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