TaxTMI 
TaxTMI 
2005 (7) TMI 344
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....in response to notice issued under s. 139(2) of the Act. The assessment was then completed under s. 143(1) on 5th Jan., 1989, on an income of Rs. 23,810. 4. The assessee is a yarn merchant doing business under the name and style as M/s Govindnath Vishwanath Tapadia, Malegaon, as sole proprietor. In the month of March, 1989, certain enquiries were conducted by the Investigation Wing of the IT Department in respect of the purchases of demand drafts by the yarn merchants including the assessee of Malegaon. It was noticed by the Investigation Wing that some demand drafts (DDs) purchased by the assessee were not recorded in the assessee's books of account and thus there was a pnma facie case of escaped income. Thereafter, on 30th March, 1989, the assessee filed one return of income declaring therein additional income of Rs. 3,26,970 on account of unexplained money utilized in the purchase of unaccounted demand drafts. The assessee also declared an additional income of Rs. 22,220 to cover up the omission of any income that might be resulted or earned by the assessee from the transactions of purchasing unaccounted demand drafts, which were utilized for the purpose of purchase of goods.....
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....as these transactions were very old, it was not possible on the part of the assessee to collect the information and to furnish its explanation. Hence, the amount was offered in the return of income filed on 30th March, 1989, which was filed voluntarily before issuing notice under s. 148 of the Act and as such, it was requested not to impose any penalty under s. 271(1)(c) of the Act. 5. After considering the explanation of the assessee, the AO imposed a penalty under s. 271(1)(c) by observing and stating as under: "I have carefully considered the assessee's submissions. The undisputed propositions relevant to the context of the facts of the recent case are that by filing revised return of income the assessee declared additional income of Rs. 3,26,970 on account of unaccounted demand drafts. Besides, he has also declared additional income of Rs. 22,222 to cover up the omissions, etc. The filing of revised return is certainly after the investigation made by the ITO (Inv.) regarding the purchase of unaccounted demand drafts. Once the assessee failed to explain satisfactorily the source and the nature of the purchase of drafts, it is not necessary for the Revenue to locate the exa....
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....e as the declaration of additional income was made by the assessee only after the Investigation Wing had detected concealed transactions as well as concealed income. (7) It is thus conclusively established and proved that the assessee did not file true and correct return of income originally and he was aware that his return of income filed originally did not show the correct income earned by him during the relevant period. (8) Admission of additional income in the return filed on 30th March, 1989, goes to show that the assessee had concealed its true income in the original return of income and furnished inaccurate particulars thereof. (9) Merely because the assessee had offered additional income in the re-assessment proceedings is not sufficient to show that no concealment of income was made by the assessee in the original return of income and as such penalty can be imposed. (10) The assessee has failed to prove that the additional income assessed in the reassessment proceedings was not concealed income of the assessee. (11) To impose penalty under s. 271(1)(c), it is no more necessary to establish mens Tea on the part of the assessee. 7. Being aggrieved with the ....
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....he bank in respect of the demand drafts purchased by the assessee. It is only when the assessee failed to explain the source of investments in the drafts purchased by him that the assessee had no other alternative except to declare the same as undisclosed income. Therefore, the assessee's declaration cannot be taken as voluntary, but as a result of Departmental enquiry. It was further submitted that unexplained investment of the assessee in the purchase of demand drafts was detected by the Department. Hence, it us a clear-cut case where the assessee had concealed his income to that much amount which is disclosed covering the amount of demand drafts purchased by the assessee out of unexplained money. He further submitted that there are many decisions where it is held that as a result of enquiries carried out by the Department, if the assessee discloses additional income, then penalty under s. 271(1)(c) is leviable. These decisions were cited by the learned Departmental Representative in the written submissions filed before us. 10. We have heard both the parties and have gone through the orders of the authorities below. We have deliberated upon the relevant provisions of law as we....
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....p; 61,710.00 11-11-1986 50,000.00 27-11-1986 52,977.50 27-11-1986 63,756.00 3-12-1986 1,07,450.10 9-3-1987 65,000.00 23-3-1987 50,000.00 31-3-1987 80,000.00 31-3-1987 54,155.00 31-3-1987 &nb....
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....1,000 shown by the assessee in the original return of income was also not credited in the P&L a/c or was not accounted for in the books of account maintained by the assessee. The transactions of purchasing drafts from the bank for the purpose of purchasing the goods from the owners were never disclosed by the assessee either in the return of income or in the books of account. These could be unearthed only after the investigation made by the Department. It is only after the assessee was cornered he had offered the additional income in the return of income filed on 30th March, 1989. This additional income shown in the return of income filed on 30th March, 1989, could not, by any stretch of imagination, be treated as voluntary or bona fide, inasmuch as this income has been offered by the assessee on the basis of total amount of the drafts purchased by the assessee but not recorded in the books of account and which were detected by the Department in the course of investigation as well as in the course of the survey conducted. Subsequent admission, after an investigation and survey, does not take away the effect of the wrongful conduct earlier displayed by the assessee by suppressing th....
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....o buy peace is without any merit. This explanation cannot be accepted in these peculiar facts and circumstances of the present case. This type of explanation given by the assessee is nothing but to be rejected. Having regard to the conduct of the assessee and to the background of this case, the explanation offered by the assessee that the amounts were given by the weavers appears to be false and concocted one. This explanation given by the assessee is held to be a mere afterthought. 13. In the case of K.P. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC), it was noticed that the assessee-firm had taken certain bank drafts for payment to suppliers of rice in Andhra Pradesh, but it had made entries in its accounts not on the dates on which they were obtained but a few days later. The explanation of the assessee was that since sufficient cash balance was not available on those dates, it had obtained hand loans from friends and, as it had expected to repay such loans within a short time, no entries were made in its books of account in respect thereof. The assessee also stated that since it was unable to furnish evidences for such loan, it offered the amount of ....
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....ncome filed by the assessee on 30th March, 1989, offering additional income was also not submitted within the time provided under s. 139(5) of the Act. In the present case, assessment was already completed under s. 143(1) on 15th Nov., 1989. No revised return under s. 139(5) can be filed after this date as would be clear from the provisions contained in s. 139(5) of the Act as it then stood. Therefore, the assessee cannot take benefit of the provisions contained in s. 139(5) of the Act. Moreover, offering of this additional income in the return of income filed on 30th March, 1989, is not as a result of any mistake or omission or any wrong statement made in the original return of income. This is a case where transactions were never disclosed by the assessee either in the books of account or in the return of income originally filed. Therefore, this is not a case of discovering any omission or any wrong statement in the original return of income. The assessee had deliberately kept the transactions hidden by not recording the same in the books of account. The conduct of the assessee is, therefore, found to be totally mala fide and dishonest one. The assessee's explanation can, by no st....