TaxTMI 
TaxTMI 
2012 (8) TMI 223
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....eturn declaring undisclosed income of Rs. 50 lacs. The Assessing Officer (A.O. in short) noticed that the assessee derived rental income from running of two restaurants at A-1, NDSE, Part-I, New Delhi beside running five schools in proprietorship capacity. On the basis of seized documents, the AO determined undisclosed income of Rs. 1,64,75,600/- vide order dated 30.1.2001 as under:- [In Rs.] 1. Unexplained assets found at the residence Viz. television, refrigerator,, video camera etc.. Rs. 2,50,000/- 2. Unexplained foreign currency USD 750 Rs.33,750/- 3. Unexplained jewellery Rs.5,07,477/- 4. Unexplained household expenses Rs.4,00,000/- 5. Bogus expenses under the head Transport., refreshment etc. & salary Rs.10,00,000/- 6. Bogus expenses under the head legal, Professional, repair etc. Rs.3,05,000/- 7. Income from Virendra Poultry farm Rs.3,00,000/- 8. Unexplained investment in Bhatnagar designs. Rs.1,70,000/- 9. Addition on the basis of seized documents: 3,36,39,262/-. Less: Adjustment allowed as Rs.1,68,03....
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....m the family withdrawal. However, we have upheld the addition of Rs. 10 lacs on account of bogus expenses vide para 5.2 of this order and the money to that extent was, therefore, available with the assessee to explain various amounts. Moreover, the assessee also disclosed in the block return a sum of Rs. 8,37,253/- on account of misc. balancing figures not relating to any acquisition of assets etc. We have also confirmed addition of Rs. 25 lacs on account of amounts collected from parents vide para 8.67.1 of this order and further sum of Rs. 1,39,524/- on account of withdrawal from bank accounts in para 8.12.1. The amount on acquisition of various assets is, therefore, easily covered by these additions and no separate addition is required to be made. The order of CIT(A) is set aside and the addition made is deleted. .......................................................................................... 5.2 We have perused the records and considered the rival contentions carefully. The dispute raised is in relation to disallowance of bogus expenses under the head transport, refreshment and salary. It is an undisputed fact that the assessee is mastermind behind running of se....
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....report. But even in case of expenses where vouchers were there, the parties were not found to be in existence and the assessee on being confronted could produce no evidence to substantiate the expenditure. Therefore, higher disallowance made by the A.O. was justified. Ld. A.R. has also raised the issue of cross-examination of parties. But we find that at the time of inquiry by the A.O., the parties were found non-existent and this had been brought to the notice of the assessee. The issue of cross-examination is, therefore; not relevant." We also hold that estimated disallowance on the facts of the case, based on the relevant material found during search and material collected on further inquiry is justified in block assessment. Accordingly, we uphold the disallowance of Rs.I0 lacs. The order of CIT(A) is accordingly confirmed. ................................................................................. 9.2 The ground no.2 is regarding addition of Rs. 3 lacs on account of Virender Poultry Products Farms. The seized document showed that the bank account had been opened in this proprietary concern on 1.10.1994 and closed on 19.7.1999. As per MS-I0, Annexure A-5, page 49-57,....
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....rmed. 4. Since additions of Rs. 3 lacs on account of income from Virendra Poultry Farms; Rs. 10 lacs towards bogus expenses; Rs. 70,270/- on a/c of payments to different persons as per AA-5(MR-1) page 9 & 10 of the seized documents; Rs. 2,74,000/ pn a/c of payments to certain persons as per Annexure-A-11, Rs. 1,55,000/- on a/c of unexplained investment in Anand Pratyabhoot VIT Nigam Ltd; Rs. 3 lacs on a/c of receipt of payment from Satish Batra; Rs. 1,45,000/- on a/c payments from schools; Rs. 1,39,524/- on a/c of page 2 of Annexure AA-47 of the seized documents and Rs. 1,20,12,665/-, comprising Rs. 18,20,000, Rs. 25,00,000 & Rs. 76,85,000/- on a/c donations & Rs. 7,665/- on account of expenditure on airtickets were upheld by the ld. CIT(A)/ITAT, the AO showcaused the assessee before levy of penalty u/s 158BFA(2) of the Act. In response to show cause notice dated 21st July, 2008, the assessee replied vide letter dated 12th August, 2008, contending, inter alia, that the disallowances having been made on estimate and the AO having not identified bogus parties to whom payments were made, penalty could not be levied. Inter alia, the assessee relied upon the decisions in Shiv Lal Tak....
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....3 (Pat.)] it was held that it was for the assessee to show that he had reasonable cause for not complying with the provisions of the Act. It has also been laid down by the Hon'ble Supreme Court [(1987) 165 ITR 14. 21-22 (SC)] that the initial burden of discharging the onus of rebuttal is on the assessee. Once that initial burden is discharged, the assessee would be out of the mischief unless further evidence was adduced. As to the nature of the explanation to be rendered by the assessee, the Supreme Court expressed their agreement [p.22] with the Patna High Court's view to the effect that it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. It was further agreed that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact-finding body. Thus, it is true that the presumption that arose was a rebuttable presumption that there was concealment of income and if there was cogent material to rebut the evidence that was acceptable, then the presumption would....
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....s the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income.; b) in any case to which Explanation 3 applies, means the tax on the total income assessed (as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148; c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished. 4.1. But in the case of 158BFA(2) the legal provisions are little different. In section 158BFA(2), penalty is leviable on undisclosed income and not with reference to the income for which inaccurate particulars have been filed are concealed. As....
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....nfirmed on account of Seized documents Rs.28,88,419 Addition confirmed on account Bhatnagar Designs Rs. 1,40,400 Less: Adjustment on account of items Already included in the block Return as allowed by the A.O. Rs.22,25,896 Rs.64,87,316 The order giving effect to the order of ITAT Income revised u/s 250 dt. 26.05.2005: Rs.64,87,316 Less: Relief given by ITAT 1. On account of unexplained Assets found at the residence Viz. television refrigerators, Video camera etc. 2,50,000 2. On account of unexplained investment in Bhatnagar designs 1,40,400 3. On account of unexplained foreign Currency USD 750 33,750 4. On account of totaling mistake 3,48,775 5. On account of additions on the Basis of seized documents. a) On account of payment for air ticket 4060 b) On account of payment made for household expenses 6920 c) On account of receipt of cash treated as undisclosed. 50000 d) On account of payment made to C.L. Sharma 35000 e) On account o....
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....O is very narrow in the case of 158BFA(2) as compared to section 271 (1)(c). As in the case of penalty uls 271(1)(c) the penalty is leviable on the income which has been concealed or about which inaccurate particulars have been filed, but the same is not true in the case of 158BFA(2) where the penalty is leviable on the difference of undisclosed income (undisclosed income determined by the AO and undisclosed income determined by the appellant in the block return). Thus only in very very rare cases where appellant could establish that but for search, the income which due to special provisions of the block assessment u/s 158BB has to be treated as undisclosed income, the appellant could have offered that income as and when the return would have become due or where there is a question of element of estimation in working out undisclosed income. For example if the evidence for the undeclared sales has been found during the course of search and AO adopts a particular percentage of GP while determining undisclosed income in the block assessment whereas the assessee has estimated lesser G.P. and offered undisclosed income accordingly then as per provisions of the Act, the difference so ass....
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....not be levied, the ld. AR argued. It was further pointed out that the loans and advances to Virendra Poultry Products were disclosed in the balancesheet as evident from page 78 & 79 of the paper book wherein an amount of Rs. 6,85,790/- is mentioned as on 31.3.1995. In this connection, the ld. AR relied upon the decision in CIT Vs. Calcutta Credit Corporation,166 ITR 29 (Cal) and CIT Vs. Jagbandhu Sen Poddar,133 ITR 156 (Cal). As regards penalty levied in relation to amount of Rs. 10 lacs, the ld. AR reiterated their submissions before the ld.CIT(A) and contended that nothing has been brought on record by the AO as to whom the payments were made in relation to alleged bogus parties. 7. On the other hand, the ld. DR supported the findings of ld. CIT(A) while contending that levy of penalty u/s 158BFA(2) is different from penalty levied u/s 271(1)(c) of the Act. While carrying us through the impugned order, the ld. DR contended that additions were made on the basis of seized documents and were not purely estimated. While carrying us through the findings of the ITAT in the quantum appeal, the ld. DR submitted that there is nothing to suggest that two views were possible on the addit....
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....ax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable; (iii) evidence of tax paid is furnished along with the return; and (iv) an appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the AO is in excess of the incomes shown in the return and in such cases the penalty shall be imposed on that port ion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return." 8.1 As is apparent from the aforesaid provisions, in a case where the income finally assessed u/s 158BC(c) of the Act is the only undisclosed income returned by the assessee, based on return filed under sub-clause(a) of section 158BC of the Act and the assessee fulfills all the conditions stipulated in clause (i) to (iv) of the first proviso, i.e. payment of tax on t....
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....uth extension and payments were made to poultry farms, the assessee did not declare any income in the block return. Accordingly, the AO added an amount of Rs. 3 lacs while the ld. CIT(A) deleted the addition on the ground that same had been added on guess work. Apparently, the ld. CIT(A) ignored the various seized documents. Before the ITAT, in quantum appeal, the assessee agreed that seized documents reflected supply of eggs between 94 to 99. It is only in these circumstances that the ITAT in quantum proceedings concluded that" Considering the receipt of money amounting to about Rs. 28 lacs during the two year period from Jan 1997 to Dec. 1998 and the fact that some investment is definitely required for staring the business, the estimate of income on these accounts to the tune of Rs. 3 lacs for the entire period from 1994-99 is justified.. "During the penalty proceedings before the AO or the ld. CIT(A), though the assessee pleaded that certain amount is reflected in the balancesheet under the head 'loans & advances 'on 31.3.1995,but no reasons have been adduced as to why despite receipt of cash in the bank account on account of supply of eggs to various parties, no income was show....
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....he onus laid down upon him at the assessment stage and even at the penalty stage. 8.4 We may further point out that the provisions of section 271(1)(c) of the Act are applicable where concealment is detected during the course of assessment proceedings or the assessee furnished inaccurate particulars of income. Whereas in respect penalty under section 158-BFA (2) of the Act, the penalty is imposable in respect of undisclosed income determined by the AO. There is no parallel provision in section 158BFA(2) similar to explanation 1 of section 271(1)(c) of the Act where penalty is imposable when the assessee fails to offer an explanation or offers an explanation, which is found by the AO or the ld. CIT (Appeals) to be false or offers an explanation, which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. The provisions of section 158-BFA (2) are based on determination of undisclosed income admitted by the assessee under section 158-BC (1)(a) of the Act and not on concealment of income or furnishing of inaccurate particulars of s....
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....ichand by way of interest. On appeal, AAC deleted the addition while on further appeal, the ITAT restored the addition to the extent of Rs. 40,000. The claim for deduction of Rs. 10,846 alleged to have been paid by way of interest was also disallowed and the addition of the said amount was restored. In these circumstances, the Hon'ble High Court following the view in Jagbandhu Sen Poddar(supra)concluded that the finding of the Tribunal that if the expenses incurred by the assessee in earning the income in dispute are excluded, then the Explanation to section 271(1)(c) leading to a presumption of concealment of income or deliberate furnishing of incorrect particulars of income will be excluded, has not been challenged. in Jagbandhu Sen Poddar(supra), Tribunal concluded that there was no material to show that the account represented by the cash deposits was the assessee's taxable income of the said year. Another finding of the Tribunal was that the only other items which accounted for the difference between the total income shown in the return and the total income assessed were expenses which were claimed as deduction in computing the income but were disallowed in the assessment ....