TaxTMI 
TaxTMI 
TaxTMI 
2015 (8) TMI 805
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....t of the letters sent by the department for confirmation came back undelivered which at the most can raise suspicion only which cannot lead to imposition of penalty u/s 27191) (c) and as such the penalty levied is ill3gal, unjustified and arbitrary. 5 That the addition made leading to imposition of penalty was based on a few statement recorded at the back of the assessee without any opportunity of cross examination flouting the principals of natural justice and as such the penalty imposed and upheld by CIT(A) is illegal, arbitrary and unjustified." 3 In this case the assessee has moved an application dated 16.7.2012 for admission of additional evidence under Rule 29 of Income Tax (Appellate Tribunal) Rules 1963. The ld. counsel of the assessee referred to the application and submitted that these documents may be admitted. He pointed out that the time available during assessment proceedings was not sufficient to procure these documents and therefore, this application is being filed. 4 On the other hand, the ld. DR for the revenue strongly opposed the admission of additional evidence mainly on the basis that no reason has been given why these documents could not be filed before th....
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.... proceedings before the Assessing Officer and the Commissioner of Income Tax (Appeals), the assessee had repeatedly stated that some stock of Diamond Jewellery was lying with the assessee on consignment basis for approval. One of such supplier was M/s Ira Diamond who has since sent a certified copy of the statement of stock lying with the assessee as on the date of search i.e. 27.10.2006. The same is placed at Pages 56-58 of additional evidence. This evidence could not be submitted earlier for want of proper professional guidance. It is, therefore, respectfully prayed that in view of the peculiar facts of the instant appeal, the additional evidence may please be admitted and adjudicated upon." 6. First of all it would be seen clearly that whatever documents have been given, could have been procured earlier and filed before the Assessing Officer or the ld. CIT(A). Secondly all these documents pertained to proceedings which have already been finalized and the present appeal is regarding confirmation of levy of penalty u/s 271 (1) (c) of the Act through the impugned order. It is settled position of law that assessment proceedings and the penalty proceedings are independent. It....
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.... by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. The Court observed : "It must be remembered that the proceedings under s. 28 are of a penal nature and the burden is on the Department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." [Emphasis, supplied] A reading of the above observations shows that while assessment proceedings may constitute good evidence in penalty proceedings, they are not conclusive. The statutory authority dealing with penalty proceedings must be ....
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.... (ii) Excess gold stock of M/s NMBR Rs. 75,34,000/- (iii) Excess diamond stock of NMBR Rs. 1,20,00,000/- This disclosure according to the ld. CIT(A), was voluntary without any force or pressure in the statement recorded u/s 132 (4) of the Act. It is also recorded by the ld. CIT(A) that the disclosure was made by the assessee after consulting the facts with his Lawyers and the assessee promised to pay tax accordingly. In response to the notice u/s 153A of the Act, however, the assessee declared total income only at Rs. 1,06,48,173/- which consisted of Rs. 48,27,928/- on account of regular income and the balance on account of discrepancies found in stock and cash found during search operations. This shows that the assessee had retracted from his statement. In response to question raised to questionnaire dated 4.6.2008 why full income has not been declared. It was mainly stated that the assessee had filed correctified (expression used by the assessee) declaration before the ADIT and the assessee filed his return of income as per such correctified statement. According to the Assessing Officer, gist of such letter filed before the ADIT, was that diamond jewellery of the a....
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....85,600 and thus there was a discrepancy of Rs. 2,37,597/-. When the assessee was confronted with this discrepancy it was stated in the written reply as under: "the unexplained difference in the value of platinum amounting to Rs. 2,37,597/- we are ready to surrender the difference of amount at Rs. 2,37,597/- subject to no penalty/penal action." Similarly some jewellery was found at home of the assessee. The assessee stated that some items (S No. 54 to 59) represents stock in trade of the firm, M/s Nikka Mal Babu Ram Jain which was kept at the residence. Since the assessee had not included the value of items at S No. 54 to 57 for the purpose of disclosure. The value of such Stone jewellery was Rs. 25,000/- and Silver jewellery weighing 130 kgs at Rs. 15,60,000/-. When the assessee was asked why this sum of Rs. 15,85,000/- should not be added to the income, it was stated that some of the jewellery had been declared by Smt. Manju Jain, Shri Rohit Jain and Shri Neeraj Jain under VDIS. After verification of the five declarations it was found that there was an excess of Silver jewellery upto Rs. 4,80,000/- and ultimately the assessee submitted that this difference of Silver Jewellery m....
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....letter dated 3.6.2009 which reads as under: "2. Reply Letter dated 03.06.2009 In this letter assessee has submitted that " in continuation of earlier submissions, it is most humbly and respectfully prayed that apart from book profit of Rs. 48,27,928/-, I made a disclosure of Rs. 2,50,00,000/-, which I realized was not correct disclosure. I , therefore, wrote a letter to Ld. ADIT to make necessary correction in that disclosure and filed my return of income keeping in view the correction in the disclosed amount. The following are the particulars of income disclosed in the originally filed return of income. Computation chart of total income Computat ion chart of total income Net Profit as per profit & Los s A/ c 48,27,92 8/ - Add: Charity and Don at ion 13,700/ - Add: Total Excess Gold Stock 75,3 4,330/ - Total Excess of Diamond Stock 1,19,94,588/ - Total Excess cash found at home 50,0 0,000/ - 2,45,28,928/ - Total Surrender 2,50,00,00 0/ - Less value of excess stock found during search operation for separate considerat ion 1,74,65,67 0 Add profiton sale of excess gold sto....
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....Hon'ble Allahabad High Court in case of Mohd. Ibrahim Azimulla V CIT, 131 ITR 680 (All) and held that mere filing of the revised return does not rule out the applicability of Section 271 (1) (c) because whatever is disclosed by way of filing revised return may relate back to become part of the total income provided it is covered by Section 139(5) i.e. same has been filed because of bonafide mistake. The ld. CIT(A) ultimately confirmed the penalty vide paras 11 & 12 which are as under: "11 The broader factual picture is that the appellant was searched u/s 132 of the I.T.Act 1961 and disclosed an amount of Rs. 2.5 Crores u/s 132(4) in order to account for the discrepancies on various issues confronted to him at the time of search operation. The return of income was however filed without including the amount disclosed u/s 132(4) and it was claimed that the alleged discrepancies were explained as detailed at para 4 of this order. The investigation conducted by the AO in order to verify the genuineness of retraction made by the assessee made it abundantly clear that explanation submitted by the assessee to account for the discrepancies was only intended to evade the pay....
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....the ratio of Hon'ble Apex Court in the case of Dharmendra Textile has been diluted only to that extent. Further the reliance on the case of CIT Karnal Vs. Rajiv Garg (Punjab & Haryana High Court) is also misplaced as in the said case the AO had not placed on record any evidence or material to discharge his burden of proving concealment and had rested his conclusion simply on the Act of assessee having offered additional income. Whereas in the case under consideration the AO has conducted detailed investigation and proved the falsity of claim made by the assessee during the course of the assessment proceedings and the assessee disclosed additional income only when he had no explanation in the face of evidence found during the course of search operation as well as confirmed by the investigation carried out by the AO. Here it is relevant to point out that the AR has quoted close to 40 cases in support of his claim but has not submitted as to how the judgments in said cases help his case. In view of the above I have no hesitation in confirming the penalty imposed by the AO." 11 Before us, the ld. counsel of the assessee submitted that the assessee did not declare the whole income of s....
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....cts clearly show that the assessee was right in claiming that some of the stock belongs to the customers and or was received on consignment basis. However, the assessee later on declared the whole surrendered income in the revised return to buy peace of mind, therefore, this is not a fit case for levy of penalty because it has not been proved that the assessee has concealed the particulars of income. On the other hand, the ld. DR for the revenue strongly supported the orders of Assessing Officer and the ld. CIT(A). We have heard the rival submissions carefully and do not find any force in the submissions of the ld. counsel of the assessee. First of all admittedly during search excess cash, stocks of excess gold, diamond, platinum, silver was found and initially assessee voluntarily agreed to surrender all these items of cash and stock by way of surrender of Rs. 2.5 crores. During statement recorded no objection was raised to the valuation. In the statement itself it was clarified that the assessee has discussed with his Lawyer before making the surrender. In this regard it would be pertinent to refer the statement recorded u/s 132 (4) of the Act. Relevant portion of the statement....
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....s and Valuation report = 5641.74 Gms = Valuation of above gold is = 5641.74 x 800 =4513392 Making Charges @ 7% of Rs. 45,13,392 = Rs. 48,29,330.00 Please state whether the excessive stock found is acceptable to you ? Ans- I accept after the working of quantity and value thereof that there is an excess stock of gold amounting to Rs. 48.30 Lacs. Q 5- Do you accept the valuation of the diamond amounting to Rs. 6,57,72,737.00 while as per the books of accounts, it amounts to Rs. 5,37,78,149.00 thereby giving a difference of Rs. 1,19,94,588.00 ? Ans- I accept that there is a difference of stock worth Rs. 1.2 Crores (approx). The stock of diamond is more by Rs. 1.2 crores (approx). Q6- Did you keep any stock of gold or diamond at any other place, please state ? Ans- A consignment of gold was received at residence on 26th Oct, 2006 (late evening ). The same was identified during the valuation of jewellary of Mrs. Manju Jain W/o Sh. Jawahar Lal Jain at Item No. 55,56,58 and 59. The total valuation as per valuation report amounts to Rs. 27,05,000/ The total stock of excess of gold amounts to Rs. 75,44,330/ Q7- I am showing you the provisions of section 132 (4) read with....
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....ess stocks & cash which has been further confronted to the assessee through question no. 4, 5 & 6. 16 Before us, the ld. counsel of the assessee had stated that gold was received from some customers. Atleast few persons have accepted of such deposit. The Assessing Officer has given his finding in para 8 at page 11 which reads as under: "To verify the claim of the assessee that 9037.81 Gms belonged to the customers, summons were issued to the customers u/s 131(1) of the Act. The summons were sent to the customers whose name and address had been given by the assessee. A total of 34 summons were issued and served. Out of this 34 summons were sent three summons were received back undelivered with the postal comments "that no such person is at the given address". A total of 21 persons did not attend the proceedings and seven persons have stated on oath that they have not deposited any gold with the said firm." The above clearly shows that out of total 34 persons, 24 persons either did not attend and/or summons came back and seven denied having given any gold. The fate of other three persons is not discussed in the assessment order but it clearly shows that on the basis of large numbe....
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.... there. But no good reasons have been given after having accepted excess cash and stock of excess gold and diamond jewellery. Even valuation and the process of valuation by S/Shri Bhartesh and R.K. Gupta was accepted in the statement recorded u/s 132 (4) as noted above. In this regard we recall the decision of Hon'ble Supreme Court (by three judges) in case of G.C. Agarwal V CIT, 186 ITR 571 (S.C) wherein their Lordships have confirmed the order of Hon'ble Gauhati High Court in case of F.C. Agarwal V. CIT, 102 ITR 408 wherein it was clearly held that merely because return has been revised without pointing out any omission or mistake in the original return then penalty cannot be deleted simply because revised return has been filed. 18 Thus the combined reading of Section 132 (4) and explanation 5 to Section 271 (1) (c) would clearly show that immunity is available if the income is surrendered during search and the manner of earning such income is also disclosed and the assessee based on such disclosure paid tax on the same. In case before us after having made surrender the assessee simply retracted from the statement and did not include the amount of surrender in the return....