TaxTMI 
TaxTMI 
2011 (7) TMI 765
X X X X Extracts X X X X
X X X X Extracts X X X X
....ongs to this group. She filed the return u/s 153A without disclosing any unaccounted income. It is only later when the assessee received copies of seized documents that the return u/s 153A filed on 5th May, 2006, was revised with the letter dated 22.12.06 declaring the total income of Rs. 50,66,896. The income is related to the gross profit from allegedly unaccounted purchases. The declared total income at 15% of unaccounted purchase was accepted after scrutiny by the A.O. However, penalty proceedings were separately initiated. According to the assessee in the light of Explanation 5 to Section 271(1)(c) and in the light of Supreme Court judgments in the cases of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 and Hindustan Steel Ltd. v State of Orissa [1972] 83 ITR 26 there was no concealment and no penalty was leviable. It is stated in the penalty order that the assessee is a proprietor of M/s Ritwika Creation. The assessee declared total income of Rs. 2,11,297 in response to notice u/s 153A. It was declared in the return u/s 139(1). The assessee was found to have purchased from 20 different suppliers and payments to them are shown through cheques. It was, however, found that the ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reasons that the cheques issued against the purchases were deposited in the bank account of the husband of the assessee. The cheque should have been given to the suppliers directly. The seized documents are C.R/1 to R.C/10 and cannot belong to the husband of the assessee because they refer to manufacturing expenses. These documents were also in the name of M/s Ritwika Creation. The payments to karigars in these documents matched with the payments recorded in R.1/12 to R.1/21. The details of the activities of the karigars are not known. The assessee wanted to inspect the seized material in order to explain the issue and the assessee revised the rate of profit after copies of the of the seized documents were provided to the assessee. It was explained that since the karigars were the artisans and no payment could be made to them through cheques, therefore, the cheques were deposited in the account of the husband of the assessee for further payments to the karigars in order to avoid mischief of section 40A(3) of the Income Tax Act. It was in this context, husband of the assessee owned in the seized documents about the payments to the karigars. Husband of the assessee agreed to pay tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d documents RC/1 to RC/10 and R1/1 to R1-21 are related to these transactions. Now purchases of sarees cannot be doubled since the payments for turnover to the extent of Rs. 6.2 crores is made through cheques and is a part of audited books of account. It is the manner of payments to the suppliers or the purchases of stock in trade that appeared controversial. The appellant had a certain explanation about the method of payments to the suppliers and the reason for declaring that certain seized documents belonged to Sri Suresh Kr. Agarwal. The assessment order does not give a finding that the explanation about the cheques deposited in the bank account of Sri Suresh Kr. Agarwal and the claim made by him that the seized documents relating to manufacturing expenses belonged to him is false. The appellant on a perception of further litigation on account of the payments of purchases and manufacturing expenses, came forward with a proposal of declaring higher amount of profit by applying gross profit rate 15% for the purpose of declaration of additional income in place of 6.93% in the audited books of account. The assessment order merely states that copies of some seized documents were prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f income for the purpose of penalty u/s 271(1)(c). Accordingly, the order of penalty is cancelled." 5. Learned D.R. relied upon the order of the A.O. and submitted that the A.O. made detection of the fact that the assessee made payments to the Karigars through cheques deposited in the account of the husband of the assessee and accordingly investigated the facts even by issuing summons to the purchasers but the purchasers were found non-existent. Learned D.R. submitted that the assessee remained non-cooperative at the assessment stage and did not file proper explanation before the A.O. It, therefore, proved that the assessee made unaccounted purchases. Therefore, notice dated 13th December, 2006 was issued to the assessee as to why book results of the assessee should not be rejected and as to why the unaccounted purchases should not be treated as undisclosed expenditure. The assessee thereafter filed the revised return. Therefore, it was a fit case of concealment of income or filing inaccurate particulars of income. Learned D.R. referred to the order sheets in support of the contentions. Learned D.R. submitted that the husband of the assessee agreed to make surrender of income but ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of M/s Ahuja Sons Shawlwale Pvt. Ltd. in which the appeal of the assessee was dismissed on penalty u/s 158BFA (2). 8. Order of the ITAT, Mumbai Bench in the case of DCIT v. Indian Plywood Manufacturing Co. Pvt. Ltd. in which it was held that no addition made in search proceedings would have come out in the case of the assessee. If no such proceedings were made and in the absence of explanation of the assessee. 9. Decision of the Supreme Court in the case of CIT v. Abdul Mohan Bindal, in which the matter was remanded to the High Court to decide the issue in the light of its decision in the cases of Dharmendra Textiles and Rajasthan Spinning and Weaving Mills." 6. On the other hand, learned counsel for the assessee reiterated the submissions made before the authorities below and briefly submitted that no addition is made by the A.O. on account of unaccounted purchases. Assessee declared enhanced G.P. rate when seized documents were supplied to the assessee on 10.12.06 which is also evident from the reply of the assessee dated 22.12.06 (P.B. 17) and is also supported by the order sheet dated 15th December, 2006 (sic). He has submitted that Explanation 5 to sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is issue of payment to the karigars through husband of the assessee were supplied to the assessee only in December, 2006. Therefore, there was no occasion for the assessee to make surrender the additional income at the time of filing original return of income. At the most, it may be taken that in case the assessee would not have surrendered the additional income by enhancing gross profit rate, the A.O. would have rejected book results of the assessee and enhanced the income by enhancing the gross profit of the assessee. There would not have been any concealment of income or furnishing inaccurate particulars, in such a situation, because it is settled law that on mere revision of income to a higher figure by A.O. did not automatically warrant an inference of concealment of income. On estimated income also no penalty would be justified. We are fortified in our view by the judgments of the Hon'ble Punjab & Haryana High Court in the cases of CIT v. Dhillon Rice Mills [2002] 256 ITR 447 and Harigopal Singh v. CIT [2002] 258 ITR 85. We may also mention that the Hon'ble Supreme Court in the recent decision in the case of Union of India v. Rajasthan Spg. & Wvg. Mills 2009 (239) ELT 3 held ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e followed in the present appeal. Since the facts are admittedly the same as are considered in ITA No. 876 (Kol.)/08, therefore, by following the order in that case, we dismiss this departmental appeal also. 12. In the result, all the departmental appeals are dismissed. C.D. Rao, Accountant Member - I have carefully gone through the proposed order of my Ld. Brother on all these appeals preferred by the Revenue and I am not in agreement with the same. Therefore, I propose to write my separate order. 2. All the three appeals filed by the Revenue relating to two assessees arising out of two separate orders dated 13.03.2008 and 28.03.2008 of Ld. CIT(A), Central-III, Kolkata. In my opinion, the facts relating to the assessment years 2004-05 and 2005-06 in respect of Smt. Sushma Devi Agarwal are different and facts in respect of Monika Devi Agarwal for the assessment year 2004-05 are similar to that of the one in case of Smt. Sushma Devi Agarwal relating to assessment year 2004-05. Therefore, I would like to dispose of all the appeals individually. 3. At first, I want to discuss the facts relating to ITA No.876/Kol/08. In this appeal, the Revenue has raised the following grounds: "(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....return under section 153A was filed offering additional income to buy peace, avoid litigation and to extend a hand of co-operation to the department. However, the AO did not consider this reply by observing that the assessee has surrendered the higher income in the revised return only after the investigation was carried out by the department and only after the assessee was confronted with the findings. Therefore, he levied penalty of Rs. 14,16,678/- under section 271(1)(c) of the I. T. Act. 5. Aggrieved by this, the assessee went in appeal before the Ld. CIT(A). After taking into consideration of the various submissions made by the assessee, the Ld. CIT(A) has deleted the penalty mainly on the following grounds: "(i) That there is no dispute about the turnover of the assessee and that the cheques issued to the parties from whom the purchases alleged to have been made were deposited in the bank account of the husband of the assessee because the 'Karigars' would not accept payments through cheques and such payments were given to them in cash after withdrawing the cash from the account of her husband. CIT(A) also mentions that seized documents RC/1 to RC/10 and RI/1 to RI/21 are rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ized material even before December, 2005. Nowhere the assessee has made out a case that she had asked for photocopy of the seized material from the Department and such photocopies were refused to her. When the Assessing Officer gave further photocopies of seized documents on 15.12.06, he was acting in good faith and was following the Principles of Natural Justice to the fullest extent, even though the photocopy of the seized material was given earlier in December, 2005. Therefore, the contention of the assessee as regards the availability of photocopy of seized material only on 15.12.06 is totally incorrect. Also the reliance of CIT(A) on these submissions is totally misplaced. 7.2 During the course of search the statement of assessee's representative Shri Suresh Kumar Agarwal was recorded U/s. 132(4) which is at page nos.28 to 32 of the Paper Book filed by the assessee. In his statement he has stated that he looks after the business of M/s Ritwika Creations (which is a proprietary concern of the assessee Smt Sushma Devi Agarwal) and M/s Varhini (proprietary concern of Smt Monika Devi Agarwal) since its inception. He was asked to explain the documents seized at the time of search.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the intermediate investigation were also confronted by the AO to the assessee and she could not answer them correctly and satisfactorily. The Assessing Officer, by the show-cause notice, was obtaining the assesse's reply on the issues raised in the show cause notice. In the case of Union of India v. Banwari Lal Agarwal [1999] 238 ITR 461. Hon'ble Supreme Court has held that there is no provision in the Act sanctioning any compromise assessment which could be arrived at between the assessee and Department and Hon'ble Apex Court directed the Trial Court to proceed with the prosecution proceeding U/s.276C of Income Tax Act, 1961. This ratio laid down by the Hon'ble Apex Court has been relied upon by ITAT, Delhi Bench-'B', Delhi, in the case of C.P. Textile v. ITO [IT Appeal No. 1822 (Delhi) of 1998, dated 7-1-2003 wherein it has been held that there is no provision in Income Tax Act for mutual understanding between the Assessing Officer and the assessee to the effect that no penal action would be taken against the assessee. 7.5 The CIT(A) has wrongly relied upon Circular No.451 issued by CBDT. As per this Circular if the Assessing Officer had only prima facie belief of concealme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Kolkata in the case of Dy. CIT v. Samit Roy [IT Appeal No. 178 (Kol.) of 2009] has upheld levy of penalty as per the findings given below : "From the assessee's letter offering additional income, which is reproduced in the assessment order, it is evident that during the course of search of the assessee's premises, the payment for purchase of land was found recorded in the seized document at pages 20 and 24 of RPL/I4. Admittedly, the above purchase of land was made by the assessee without recording the same in the books of account. Such income was also not offered either in the statement recorded U/s. 132(4) or in the return of income filed by the assessee. The assessee offered this income only when during the course of assessment proceedings the A.O. asked the assessee to explain the notings on the loose papers. Therefore, in our opinion, the offering of such income during the assessment proceedings was not voluntarily and the A. O. has rightly treated the same as concealment of income liable for penalty U/s.271(1)(c). The various decisions relied upon by the learned counsel would not be applicable with regard to this part of undisclosed income as the facts are altogether differen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be established is only the undisclosed income in excess to the one disclosed in the block return - concealment of income like in Sec 271(1)(c) is not a pre-condition under this Section for imposing penally - this is more so in view the Apex Court decision in Dharmendra Textiles case where it is held that penalty is a civil liability and no mens rea is required to be established for imposing it Assessee's appeal dismissed." 7.13 Further, in the case of Dy. CIT v. Indian Plywood Mfg. Co. (P.) Ltd. (IT Appeal No. 654 (Mum.) of 2007, dated 6-2-2009], ITAT, Mumbai Bench "I", Mumbai has held as below: "Income tax - Penalty u/s 271(1)(c) - Held that as per the findings of the CIT(A) none of the additions made in search proceedings would have come out in case of no search proceedings were made and in absence of acceptable explanations--from the assessee, penalty is correctly levied." 7.14 The ratios as laid out by Co-ordinate Benches of Tribunal in the aforesaid cases are very much applicable in the case of the assessee. 7.15 The Ld, CIT(A) has relied upon the decision of Hon'ble Supreme Court in the case of CIT v Suresh Chandra Mittal [2001] 251 ITR 9 in which the decision of Hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ful concealment is not an essential ingredient for attracting civil liability - The object behind the enactment of Section 271(1)(c) read with Explanations indicates that the Section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Insofar as the present case is concerned, the High Court relied upon its earlier decision in Ram Commercial Enterprises which is said to have been approved by Supreme Court in Dillip N. Shroff. However, Dillip N. Shroff has been" held to be not laying down good law in Dharmendra Textiles. Dharmendra Textiles is explained by Supreme Court in Rajasthan Spinning and Weaving Mills. The matter needs to be reconsidered by the High Court in the light of the decisions of Supreme Court in Dharmendra Textiles and Rajasthan Spinning and Weaving Mills."[Emphasis supplied] 7.18 Considering the facts of the case and considering the position of law as above, the decision of CIT(A) needs to be set aside and the decision of the A.O. imposing penalty of Rs. 44,61,678/- U/s.271(1)(c) of Income-tax Act, 1961 needs to be confirmed. 8. On the other hand, the Ld. Counsel, appearing on behalf of the Assessee,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aled income of the assessee which had not been shown in the original return would not absolve the assessee from culpability under s. 271(1)(c). Since at the time of filing the original return the assessee must be taken to have been aware of its having earned much more income as was declared in the original return, but had nevertheless omitted to disclose the huge income in the original return, the second return filed by the assessee cannot be regarded as a "revised return" filed under s. 139(5) because there was no discovery by the assessee of any omission or wrong statement having been made by it by inadvertence in the original return. Therefore, the assessee was guilty of concealment of income under s. 271(1)(c). The submission of the revised return, in the case of assessee may be voluntary, but such voluntary filing by itself does not lead to conclusion that there was no intention on the part of the assessee to conceal its income when it filed the original return. That naturally depends upon the facts and circumstances which throw light on the mental process of the assessee at the time of submission of its original return. Thus, the filing of revised return would not be sufficie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch pursuant to declarations made under section 132(4) but it is his obligation to do so and the immunity conferred by Explanation 5(2) cannot be taken away or watered down. The view taken by the Madras High Court in S.D.V. Chandru's case (supra) has been noticed by the Ahmedabad Bench of the Tribunal in the group case of Rupesh Bholidas Patel (supra) but the Bench has preferred to follow the judgment of the Bombay High Court in the case of Sheraton Apparels (supra), a decision which has also been followed by the learned AM in the present appeals. The learned AM has also referred to the order of the Tribunal in the group case of Rupesh Bholidas Patel (supra) and in paragraph 13 of his order has held that since it is a case of the same group and the facts and circumstances of the assessees' cases are similar to those in the case before the Tribunal, he would draw support for his view from the said order. The learned JM does not appear to have referred to the order of the Tribunal in the case of Rupesh Bholidas Patel (supra). Since a view has already been taken as to the availability of the immunity under Explanation 5(2) to section 271(1)(c) by an order of the Ahmedabad Bench, that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich the previous year is yet to end or even though ended, the time for filing the return under section .139(1) is yet to expire. In the present case, the search took place on 4-9-2003. In respect of the assessment year 2003-04, for which the previous year would have ended on 31-3-2003, the return under section 139(1) would be due latest by 31-10-2003. In respect of all the earlier years, needless to add, the due dates for filing returns under section 139(1) would have ended much earlier. Returns were filed by the assessees after the search, in response to notices issued under section 153A on 31-5-2004. The additional income declared in these returns do not fall under the category of the return mentioned in Explanation 5(2) to section 271(1)(c). Therefore, the assessees are not entitled to the immunity from penalty. 13. I accordingly, agree with the view taken by the learned AM on this aspect of the matter and hold that the immunity is not available to the assessees under Explanation 5(2) to section 271(1)(c)." 9.4 Keeping in view of the above observations, I am of the considered view that the assessee is not entitled for any immunity under Explanation 5(2) to section 271(1)(c) of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aws cash from his Bank account. A copy of this order sheet was also handed over to the assessee on 22.5.06 itself. 4. Thereafter the Assessing Officer issued another notice U/s. 142(1) and detailed questionnaire dated 22.05.2006 (page nos. 3 to 16 of Paper Book filed by Sr. DR) asking explanation in detail referring to various pages and entries in the seized documents RI/1, RI/2, RI/3, RI/4, RI75, RI/6, RI/7, RI/8, Rl/9, Rl/10, RI/11, RI/12, RI/13, RI/14, Rl/15, RI/17, RI/18, RI/19 and RI/20. Once again the assessee was asked to explain as to why the cash payment of Rs.3,14,66,552/- should not be treated as unexplained expenditure U/s.69C of Income Tax Act, 1961. This questionnaire is a very detailed questionnaire consisting of 30- points and several sub-points running into 4 pages. The assessee's representative filed submissions vide letters dated 8.6.06, 28.7.06 and 11/18.8.06 which were placed at page nos.17 to 23 of Paper Book filed by Sr. DR. 5. Thereafter, the Assessing Officer continued investigation and issued another notice U/s. 142(1) and questionnaire dated 4.12.06 (page no.24 of the Paper Book filed by the Sr. DR) enquiring about assessee's transactions with Shradha F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....year also, I am of the view that the same observation is applicable. Therefore, I set aside the order of the Ld. CIT(A) and restore that of the AO in this appeal also. IT(SS) No. 89/Kol./2008 for the Assessment Year 2004-05 13. Since, the facts of this case are similar to that of the one which are narrated in ITA No.876/Kol/08 and the submissions of both the Representatives are the same, I hold that the Ld. CIT(A) is not justified in deleting the penalty. Therefore, I set aside the order of the Ld. CIT(A) and restore that of the AO in this appeal also. 14. In the result, all the three departmental appeals are allowed THIRD MEMBER ORDER G.D. Agrawal, Vice-President (As a Third Member) - Since there was a difference of opinion between the Ld. Members constituting the Division Bench of I.T.A.T., Kolkata in respect of the aforesaid appeals, I was nominated as Third Member by the Hon'ble President, I.T.A.T. u/s. 255(4) of I.T. Act, 1961. As the facts and circumstances of these cases and the issue involved therein are identical, these appeals are dealt with by this consolidated order. The common question referred to me reads as under :- "Whether, on the facts and circumstances of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tiated penalty proceeding u/s. 271(1)(c) of the Act. During the course of penalty proceedings, the assessee stated that after she received photo copies of seized documents, revised return declaring additional income was filed to buy peace and to avoid litigation. The A.O., however, did not accept the above explanation of the assessee by observing that the assessee has surrendered the higher income in the revised return only after the investigation was carried out by the department and after the assessee was confronted with the same. He, therefore, levied penalty of Rs.14,61,678/-u/s. 271(1)(c) of the Act, which was equal to tax sought to be evaded by the assessee on the undisclosed income. 4. Being aggrieved, the assessee preferred appeal before the ld. C.I.T.(A) agitating levy of penalty u/s. 271(1)(c) of the Act and the ld. C.I.T.(A) deleted the penalty. . Being dissatisfied with the said order of ld. C.I.T.(A), the department came in appeal before the Tribunal on the following grounds : "(i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in cancelling the order of penalty u/s. 271(1) (c) of the I.T. Act, 1961 dated 02.04.2007. (ii) Whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts on the above issues were made available to the assessee only in December, 2006. The A.O. in the letter dated 13th December, 2006 on the above issue directed the assessee as to why book results of the assessee should not be rejected and why the same purchases should not be treated as undisclosed expenditure of the assessee. The learned CIT(A) specifically noted in the impugned order that seized documents RC 1 to RC 10 and RI/1 to RI/21 are related to the transactions in question. It would, therefore, prove that complete seized papers were not supplied to the assessee at the time of issuing notice u/s 153A of the Income Tax Act. The order sheets recorded by the A.O. also support the contention of the assessee that complete seized documents on this issue of payment to the karigars through husband of the assessee were supplied to the assessee only in December, 2006. Therefore, there was no occasion for the assessee to make surrender the additional income at the time of filing original return of income. At the most, it may be taken that in case the assessee would not have surrendered the additional income by enhancing gross profit rate, the A.O. would have rejected book results of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....71(1)(c) was justified. He, therefore, in his proposed order has set aside the order of ld. C.I.T.(A) and restored that of the A.O. with the following observations :- "After hearing the rival submissions and on careful perusal of the materials available on record, it is observed that the assessee was subjected to search under section 132 of the I.T. Act on 24.01.2005 and after filing the return in response to notice under section 153A(1)(a) of the I.T. Act. When the AO has confronted the assessee, the outcome of the enquiries made by him on the basis of the seized document, the assessee has filed a revised return after a gap of more than one year and. offered the G.P. rate at 15% as against 6.93%. In my considered opinion, the Ld. DR has contradicted the various findings given by the Ld. CIT(A), while deleting the penalty, based on the various judicial pronouncements which are referred to in preceding para nos. 7.1 to 7.17. 9.1 In my opinion, there is no Rule that penalty for concealment under section 271(1)(c) cannot be imposed where income is estimated. The levy of penalty under section 271(1)(c) depends on the facts and circumstances of each case. If the concealment of income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aper book, which are copies of statement recorded u/s. 132(4) of the Act from Sri Suresh Kr. Agarwal, husband of the assessee, during the course of search operation and referring to questions No. 5 & 11 and answers thereof, he pointed out that Sri Suresh Kr. Agarwal has admitted that the entries in the books of account marked RI/20 are undisclosed in nature and he will be filing a disclosure petition covering all unaccounted sales and purchases. However, no such disclosure was made. In this connection, the ld. Departmental Representative relied on the decisions in the cases of CIT v. Handloom Emporium [2006] 282 ITR 431 (All.)] and CIT v. Mahabit Prasad Bajaj [2008] 298 ITR 109 (Jharkhand)]. He, therefore, submitted that on the above facts and circumstances of the case and settled position in law, the ld. A.M. has rightly held that penalty u/s.271(1)(c) was rightly levied by the A.O. His order should, therefore, be upheld. 8. The learned counsel for the assessee, on the other hand, supported the order proposed by ld. J.M. He further submitted that the assessee is the whole seller of fashion saree. Job work on such sarees is done from karigars and direct purchases are also made fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case, conditions contained in sec. 271(1)(c) of the Act for levying penalty are not satisfied in the case of the assessee and the ld. J.M. has rightly deleted the penalty which should be upheld and proposed order of ld. A.M. be quashed. 9. In his rejoinder, the ld. Departmental Representative submitted that there was no dispute to the fact that concealment was already detected and only quantification of the extent of concealment was pending. In this connection, he has referred to paras 1 & 2 of show-cause notice dated 13/12/2006 of the A.O. placed at page-8 of the assessee's paper book whereby the assessee was asked to explain as to why purchases should not be treated as bogus and books of account be not rejected. The A.O. also expressed his view that RC/1 to RC/10 represents undisclosed expenditure of the assessee. He further submitted that if the Tax Audit would have reflected the correct picture of the affairs of the assessee, there would have been no need to revise gross profit, which the assessee did in her revised return after detection of concealment by the A.O. 10. I have heard the parties and perused the material available on record. I have also carefully gone thro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee filed her return of income u/s. 139(1) of the Act before the search took place declaring income of Rs.2,11,297/- and gross profit at 6.93%. Xerox copies of seized documents were made available to the assessee in December, 2005. In response to notice issued u/s. 153A of the Act, the assessee filed return on 5/5/2006 showing income of Rs.2,11,297/- without disclosing any unaccounted income. I further observe that there was a gap of about 12 months between supply of Xerox copies of seized documents in December, 2005 and asking for further copies of some other seized documents on 7/12/2006 and during this period, as per order sheet entries, several notices were issued by the A.O. and replies given by the assessee. Several hearings also took place before the A.O. during this period. Copies of notices issued by the A.O. and replies given by the assessee after filing of return u/s. 153A of the Act on 05/5/2006 have been filed in the department's paper book, which are as under :- Notice / Reply Page in P/B (a) Assessee's letter dated 16/5/2006 in response to notice of the A.O. dated 10/5/2006. 7 - 8 (b) Notice dated 12/9/2006 u/s. 142(1) seeking various details/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es were deposited in the account number 61CA7001777 of Bank of Punjab Ltd. (now Centurion Bank of Punjab Ltd.) which is maintained by Shri Suresh Kumar Agarwal. In view of this you are required to give explanation as to why the claim of purchase from above mentioned parties should not be treated as bogus. Further you are also required to explain as to why the books of account of M/s Ritwika Creation should not be rejected. 2.1 In several submissions made on various dates by your husband, Shri Suresh Kumar Agarwal, he has claimed that seized document with identification mark RC/l to RC/10 belong to him and these documents contain detail of expenses incurred on manufacturing of sarees. However, on the basis of material on record, it is established that in individual capacity, Shri Suresh Kumar Agarwal was not having any saree manufacturing activity. In fact credit entries in the bank account of Shri Agarwal in Bank of Punjab Ltd. (account number 61CA7001777) has nothing to do with the saree manufacturing activity of Shri Agarwal in his personal capacity. I am of the view that RC/1 to RC/10 represents undisclosed expenditure of M/s Ritwika Creation. Few reasons of such view is mentio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n inquiry from the bank and other sources it was detected by the AO that the payments were not made to the above parties. On the other hand, the cheques were deposited in the bank account which belonged to Shri Sureshkumar Agrawal, husband of the assessee. Thus, it is evident that the books of account which were claimed to have been audited were not correct. In the books of account, the payments have been shown in the names of various parties and in fact no cheques were issued to those parties. When the assessee was confronted with the above facts, she came out with the explanation that although the entries in the books of account have been made for cheque payments to karigar, but actually cheques were issued in the name of the firm of her husband who deposited these cheques in his bank account and withdrew cash for making the payment to karigar. It was thus explained that payment was actually made in cash to the karigars. From the above it is evident that the payment for purchase to 19 parties amounting to Rs.3.17 crores were shown in the books of account, as having been made by cheques, but in fact those cheques were encashed by the assessee's husband. On inquiry, none of the abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en result of the investigation was confronted to the assessee, then only the assessee furnished the revised return. 14. Identical issue has been considered by Hon'ble Madras High Court in the case of C. Ananthan Chettiar (supra). In that case, the department in a search and seizure operation conducted in the assessee's shop and residence, seized cash, jewellery and certain documents. Thereafter, the assessee filed a revised return for the A.Y. 1986-87 disclosing additional income which was accepted and assessment was made on the basis of revised return. The assessee took the stand that there was no concealment and it was only for the purpose of buying peace with the Department that the additional income was disclosed and revised return was filed. The Tribunal accepted this plea of the assessee and held that no penalty, in the circumstances, was leviable by relying on the Supreme Court decision in Sir Shadilal Sugar & General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC)]. On the reference, the Hon'ble Madras High Court set aside the order and observed as under:- "Learned counsel for the Revenue submitted that the order of the Tribunal is not in accordance with law, as it has ignored ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to be concealed income of the assessee. The Tribunal further proceeded on the basis that the Revenue has to prove mens rea on the part of the assessee by adducing evidence. The Tribunal has totaly misconstrued the provisions of the Act and the finding is wholly perverse in law. The Tribunal has not considered the effect of Expln. 5 to section 271(1)(c). The assessee did not act voluntarily and bona fidely in filing the revised return and offering the additional income. Admittedly, the revised return was not filed within the financial year or even before search and seizure was conducted and incriminating documents were recovered showing undisclosed income of the assessee. Explanation 5 was added in section 271(1)(c) in order to meet such situations. The AO was therefore, fully justified in initiating penalty proceedings and levying penalty under section 271(1)(c). The finding of the Tribunal is wholly perverse and cannot be sustained in law." 16. Considering the totality of the facts and circumstances of the case, arguments of both the sides and on careful perusal of the proposed orders of both the ld. Members and the judicial pronouncements referred to above, I am of the opinion ....