TMI Blog2012 (9) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... ld considered to be credits by earlier debit entries. However, in absence of dates of the receipts and payments such claim of the assessee cannot be accepted. Such claim can be taken into account only when the dates of the credit and debit entries are known. What is known in the present case is opening balance of ₹ 46.00 lacs as on 5/9/2005 and the dates of other entries are not known. Penalty u/s 271(1)(C) - Income for which the set off /telescoping was allowed by the Ld. CIT(A) in quantum appeal - Held that:- The nature of credit as well as debit entries has not been determined to take home the point that what is depicted on the seized paper is the income of the assessee. It is not the case of the department that the parties mentioned therein cannot be approached to determine the character of the amount stated in the seized documents. No such attempt has been made by the department to ascertain the character of receipts as well as payments. Therefore, the addition itself is only on the basis of presumption laid down in section 132(4). Further, for the purpose of levy of penalty it is to be established that what is assessed is the concealed income of the assessee. The am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be relevant to decide these appeals are that a search operation was conducted on the premises of the assessee and its groups on 10/01/2006. The return of income were originally filed under section 139(1) of the Act. Subsequently, consequent to search notices under section 153-A were issued, in response to which the assessee has been again assessed under section 143(3) r.w.s. 153-A of the Act. Concealment penalty has been imposed for all these years which have been confirmed by Ld. CIT(A). 3.1 As relevant facts for A.Y 2001-02, 2002-03 and 2003-04 are almost identical and the appeals relating to penalty under section 271(1)(c) have been disposed by Ld. CIT(A) by a consolidated order, we shall first advert to decide these appeals. ITA NO.409, 410 411/MUM/2009(A.Ys.2001-02, 2002-03 2003-04): 4. Grounds of appeal for all these three years are identically worded except difference in figures. Grounds of appeal for A.Y. 2001-02: 1. On the facts and circumstances of the appellant s case and in law the Ld. CIT(A) erred in confirming the penalty of ₹ 98,875/- levied by the AO under section 271(1)(c) of the Act. 2. The Ld. CIT(A) erred in confirmin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been taken place against the assessee, the assessee may not have declared this amount, therefore, aforementioned addition was liable for concealment penalty under section 271(1) (c) r.w. Explanation-5 thereof. 4.4 Apart from that certain other additions were also made in the shape of vehicles expenses, depreciation thereon and telephone expenses etc. on which no penalty under section 271(1)(c) of the Act has been initiated or levied. Therefore, those additions are not subject matter of penalty. 5. After narrating the facts it was submitted by Ld. A.R that for these years there is no variation in the income assessed and returned on the issues on which concealment penalty has been imposed. It was submitted that the impugned amount on which concealment penalty has been imposed has already been incorporated as income in the return filed in response to notice under section 153A of the Act, therefore, concealment penalty cannot be imposed. He submitted that this issue has recently been considered by Delhi ITAT in the case of Prem Arora vs. DCIT vide order dated 9/3/2012 in ITA No. 4702/(Del) of 2010 for assessment year 2004-05. He has placed copy of the said order on record and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in response to notice under section 153A of the Act. He submitted that in the aforementioned cases it has been held that in such cases penalty cannot be levied relying on the return filed under section 139(1). 6. On the other hand, Ld. D.R relied upon the order passed by AO as well as Ld. CIT(A). He submitted that default of concealment has to be considered with reference to original return and, therefore, Ld. CIT(A) has rightly upheld the levy of concealment penalty and his order should be upheld. 7. We have carefully considered the rival submissions in the light of the material placed before us. Penalty in these cases has been imposed on the income disclosed in the return of income filed in response to notice u/s. 153A. The reason for imposition of such penalty is that the act of concealment related to return filed u/s. 139(1) and not to return filed u/s. 153A. Therefore, the question in the present appeals is limited only to the extent that whether concealment penalty can be levied in such a case with reference to original return. The case of the AO is that assessee has committed this default while filing the original return of income , therefore, concealment has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing of various products of MDH Limited. He presumed certain entries on note pad for lot numbers as rates and quantities of certain spices/dry fruits and by multiplying the assumed quantities and rates estimates sales for the period from 10.4.2005 to 31.05.2005 at ₹ 3,35,19,690/- . He has completely ignored the other seized material which has been taken into consideration by the assessee while estimating undisclosed commission income. The assessing officer extrapolated sales based on estimation of sales of 52 days (10.4.2005 to 31.05.2005) for financial year 2005-06. He further extrapolated sales figures backward for the period relevant to assessment years 2001-02 to 2005-06 by presuming that there was 20% growth in business in each year. He has further estimated profits by presuming profits of 10%. Thus estimation of profits at ₹ 1,28,71,560/- for assessment year 2004-05 is based on multiple estimations and presumptions. The method of estimation of sales and profits for the assessment years covered by the period of six years has been rejected by the Tribunal in quantum appeal proceedings of the assessee as well as in the case of MDH Ltd. On the contrary the esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d simply accepted the returned income u/s 153A estimated by the assessee. Hence assessee s case is covered by the decisions referred to above and penalty u/s 271(1)(c) will not be imposable. 23. In CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC) the assessee filed revised returns showing higher income after search and notice for reopening of assessment, to purchase peace and avoid litigation and Department simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, High Court was justified in holding that no penalty could be levied. The assessee s case is on more strong footings as that of Suresh Chand Mittal decided by Hon ble Supreme Court. As held in earlier paragraphs there should be variation in assessed and returned income and such variation should be as a result of concealment. It is not the case of assessing officer that penalty u/s 271(1)(c) has been imposed on certain additions made based on seized material which had not been admitted by the assessee in the return filed in response to notice under sec. 153A of the Act. Rather it is a case where the statute has given an opportunity to the assessee to rectify the omissions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had disclosed income in the return of income filed determined on the basis of entries recorded in seized material. 27. Hon ble Delhi High Court in the case of M/S S.A.S. Pharmaceuticals (supra) while deciding the issue levy of penalty u/s 271(1)(c) in paragraph 15 16 has held as under: 15. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the income tax return filed by it. There is sufficient indication of this Court in the judgment in the case of Commissioner of Income Tax, Delhi-I Vs Mohan Das Hassa Nand 141 ITR 203 and in Reliance Petro products Pvt. Ltd (supra), the Supreme court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything would depend upon the income tax return filed by the assessee. This view gets supported by Explanation 4 as well as 5 and 5A of section 271 of the Act as contended by the learned counsel for the respondent. 16. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle or thing, and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income (a) for any previous year which has ended before the date of search but the return of income for such year has not been furnished before the said date or where such return has been furnished before the said date, such income has not been declared therein; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or before the date of search, he shall, for the purposes of imposition of a penalty under section 271(1)(c ) be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income unless the case falls in exceptions provided either under clause (1) or clause (2) of the Explanation 5. Clause (1) covers the cases where such income or transactions resulting in such income is/are recorded in the books of accounts maintained by him for any source of income before the date of search or such income is otherwise disclosed to chief commissioner or commissioner before the date of search. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 31. From above discussion it is clear that the provisions of Explanation 5 are ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) was not justified in confirming the penalty u/s 271(1)(c) of the Act. The assessing officer is, therefore, directed to delete the penalty. 34. In the result, the appeal filed by the assessee is allowed 7.1 The Tribunal in the case of Director of the assessee company (Shri Yogesh Parikh vs. ACIT (supra) ) has followed the aforementioned order and has held that penalty under section 271(1)(c) cannot be imposed on the income which was included by the assessee in the return filed in response to notice under section 153A of the Act. 7.2 In view of the above discussions, as there is no dispute regarding the fact that the income which has been made subject to levy of concealment penalty was already incorporated by the assessee in the return filed by it under section 153A of the Act, respectfully following the aforementioned decisions of the Co-ordinate Benches, we delete the penalty and these appeals filed by the assessee are allowed. ITA NO.290/M/09(A.Y. 2004-05): 8. Grounds raised in this appeal read as under: 1. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the penalty of ₹ 1,98,22,372/- levied by the AO u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cr is added as unexplained credit in the income of the assessee. This amount was not declared by the assessee in the original return of income and also in the return filed in response to notice issued u/s.153A of Income tax Act. Only during the assessment proceedings, the assessee filed a revised computation. They declared the amount of ₹ 2.10 crore in the revised computation. Penalty proceedings u/s. 271(1)(c) read with explanation 5 is initiated against the assessee. There is no statement u/s. 132(4) of Income tax Act wherein this amount is declared for A.Y 2004-- 05. 8.2 So far as it relates to penalty levied on account of bogus purchases and payment to Government Departments as as they were disclosed in the return of income filed under section 153A of the Act, the issue is covered by the decision rendered by us in respect of assessment years 2001-02,2002- 03 2003-04. Therefore, concealment penalty is not leviable in respect of these additions. 8.3 Now coming to the issue of leviablity or otherwise of concealment penalty in respect of addition of ₹ 2,10,00,000/-, it is the contention of the assessee that principal amount in respect of which interest relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady been reproduced above. Thus it is the case of the assessee that amount of ₹ 2,10,00,000/- is part and parcel of the income declared in the returns of income filed under section 153A of the Act. Therefore it was pleaded by Ld. A.R that no concealment penalty is warranted in respect of addition of ₹ 2,10,00,000/- as this income was part of the income disclosed in the returns filed in response to notice under section 153A relating to the block period and it is only a case of shifting the income from one year to another. Ld. A.R has also filed before us copies of the revised computation for Assessment years 2004-05, 2005-06 and 2006-07, from where the figures in the aforementioned chart were verified and it was found that the figures mentioned in the chart are correct. 9. On the other hand, Ld. D.R submitted that a sum of ₹ 2,10,00,000/- is not the part of the return filed under section 153A for A.Y 2004-05, therefore, to that extent the assessee has concealed the particulars of its income in respepct of A.Y 2004-05and penalty should be confirmed thereon. 10. We have heard both the parties and their submissions have carefully been considered. The relevant ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As discussed in para 9 ₹ 1,00,000/- ₹ 4,98,62,774/- ₹ 44,69,76,542/- 3) Less: Item allowed/considered (i) Separately from Point 1 to 8 Rs.26,05,22,397/- (ii)As discussed in para 7 ₹ 1,97,15,221/- (iii)Surrender of previous Years included in this Year ₹ 3,68,75,000/- ₹ 31,71,12,618/- ₹ 12,98,63,924/- Less : Deduction under chapter VIA ₹ 61,350/- Net taxable income ₹ 12,98,02,574/- Net taxable income rounded off to ₹ 12,98,02,570/- 10.1 From the above calculation it is clear that a substantial amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead as under: 1. On the facts and circumstances of the appellant s case and in law the Ld. CIT(A) erred in confirming the penalty of ₹ 92,12,079/- levied by the AO u/s. 271(1)(c) of the Act. 2. The Ld. CIT(A) erred in confirming the penalty of ₹ 92,12,079/- levied by the AO despite the fact that the additional income of ₹ 2,57,94,131/- was declared in the statement u/s. 132(4) and included in the return of income filed in response to notice issued u/s. 153A. 12.1 In this year penalty has been levied with respect to the following additions. i) Unexplained credits/receipts ₹ 23,00,000/- ii) Bogus purchases Rs.1,94,95,301/- iii) Payment to Govt. Depts. ₹ 32,61,842/- iii)Expenses attributable to Dividend income ₹ 10,000/- Total : Rs.2,58,04,143/- All these additions except the addition of ₹ 10,000/- u/s.14A were disclosed by the assessee in the return of income filed in response to notice under section 153A of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 Krishna Finechem 11 Ganesh Mandal 7000 Abhijeet 200 Mahesh Kaval 17675.45 C. Sales 2.4 Tavi (J.P) 3.5 Nasta 160 Shanti Shipping Agency 200 Real Callibration 2400 Padmavati Chemical 1200 J.M.Sharaff 3300 Mehul Bhai 5 Petrol 2.85 Zerox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT reported in 253 ITR 454 (Guj) 5. Smt. Bommana Swarna Rekha vs. ACIT reported in 94 TTJ 885 (Visak) 6. Om Prakash Suresh Kumar vs. ACIT reported in 91 TTJ 193 (Del) 7. Mange Ram Mittal vs. ACIT reported in 289 ITR (AT) 112 (Del) (SB) 13.3 Ld. CIT(A) has rejected the first contention of the assessee on the ground that under section 37 of the Act, in order to claim any deduction for expense , the onus is on the assessee to prove that the said payment represents expenses wholly and exclusively incurred for the purpose of business; there are certain substantial payments made by the assessee as described in the debit side of the seized documents to the concerns who are known parties to the assessee and in absence of any communication having been shown that those transaction were for business purpose, the claim of the assessee cannot be accepted. Thus, Ld. CIT(A) has held that AO was right in making addition of ₹ 1,22,67,545/- representing the entire credit side of the seized document. However, Ld. CIT(A) accepted the contention of the assessee that set off is required to be granted in respect of additional income declared by the assessee for a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents do not belong to it. It is also clear that the entries stated therein to be increased by two zeros as the same is clear from the statement of Shri Mahesh Kaval who is Associate Director Finance of the assessee company, who has admitted that the amount 200 written therein is a sum of ₹ 20,000/-. As the documents has been totaled the same will show that all the entries stated therein are to be similarly interpreted. Now the claim of the assessee is that set off of the debit entries should be granted to the assessee against credit side. This contention of the assessee has been rejected by the Ld. CIT(A) on the ground that such set off cannot be granted unless assessee proves that the debit entries stated in the documents are expenditure incurred by the assessee for the purpose of business. The documents being belonging to the assessee, the assessee is in a better position to explain the same and assessee chooses not to explain the same, therefore, the claim of the assessee cannot be accepted on the face of it. The set off can be granted only if assessee is able to explain that the amount shown on the debit side are the expenditure either incurred for the purpose of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said case AO estimated a sum of ₹ 40.00 lacs as onmoney on sale of flats relying on the statement of the partner of the assessee firm and some seized documents. Partner had admitted an undisclosed income of ₹ 40.00 lacs in respect of whole group and not in respect of the assessee firm alone. On these facts it was observed that since AO has not examined the parties who were believed to have paid on-money and has not brought any cogent material to corroborate such allegation, therefore, the conclusion drawn by the AO was based on surmises and conjectures. The facts in the present case are entirely different. Here it is not the case of the assessee that the parties mentioned in the seized documents are not known to the assessee. 16.3 In the case of Dhanvarsha Builders Developers Pvt. Ltd. (supra) though the proposition has been accepted that the documents should read as a whole if it has to be relied upon, but at the same time in the said case it was observed that expenditure being claimed by the assessee on the basis of seized documents was against the name of one Shri Rajender, who was carrying on the work of contractor for the assessee and his bill was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with sale of milk products from the Delhi Office of HDP to the exclusion of all other three partner of HDP and it was found that such plea of the assessee was corroborated from monthly peak credit of financial year 1992-93. The maximum peak of ₹ 45,08,832/- was in the month of November,1992 and admittedly by that time assessee S had withdrawn ₹ 1.29 crores. It was the contention of the revenue that amount withdrawn by S was not the same which was seized during the search operation and it was held by the Tribunal that in absence of any document or evidence found during the course of search that S or his family members were having any other source to generate funds, the withdrawal by S from the firm should have been accepted and it is in this context it was held that seized material was to be read as a whole. Therefore, the facts of that case are entirely different from the facts of the present case. 16.7 So far as the case of Mange Ram Mittal Vs. ACIT (supra) this issue is discussed by Special Bench in para 139 at page 231 of the report. The observations of the Special Bench in this regard are for assessment years 1996-97 and 1997-98. The Tribunal fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated Ld. A.R. It was submitted that penalty proceedings are different and the addition in assessment cannot solely be relied upon to uphold the penalty. It was submitted that assessee has been able to demonstrate that according to the well settled proposition of law seized document has to be read as whole and, therefore, the assessee is entitled to set off of expenditure mentioned in the seized document itself. He submitted that this was the view point supported by various judicial pronouncements and if the same is not accepted for the purpose of quantum proceedings but it is a valid argument for penalty proceedings for the reason that it is rejection a possible view taken by the assessee. Ld. A.R submitted that to cover the contingency of non-acceptance of such arguments of the assessee an additional amount of ₹ 79,70,191/- was declared in the return filed in response to notice under section 153A. He submitted that by taking both the amount together i.e. sum of ₹ 79,70,191/- declared in the return and ₹ 66,38,475/- mentioned as expenditure in the seized document then the returned income of the assessee is more than the income assessable. He submitted that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts stated on the seized document has also not been related to any cash or assets seized during the course of search. In absence of any such material and cogent evidence that the amount stated in the seized document is in the nature of income, we do not consider it just and proper to uphold the concealment penalty on the addition. We may also mention that Ld. CIT(A) has clearly given the set off of a sum of ₹ 79,70,191/- to the assessee on account of additional income declared by the assessee in the return field in response to section 153A of the Act, therefore, Ld. CIT(A) has wrongly rejected such claim of the assessee. Since we have held that it is not a fit case where levy of concealment penalty cannot be justified, the alternative claim of the assessee has became academic that penalty should not be levied with respect to amounts which has been held to be set off by Ld. CIT(A). 21. In view of above discussions we hold that it is not a fit case for levy of concealment penalty, therefore, the concealment penalty is deleted. The appeal filed by the assessee is allowed. 22. To sum up ITA No.292/Mum/2009 is dismissed and all other appeals are allowed. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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