TaxTMI 
TaxTMI 
2015 (8) TMI 805
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...., the addition was made was for the reason that most 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 be....
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....or 18-D, Chandigarh. 43-45 17. Shri Onkar Singh # 1381/6, Derabassi, Punjab. 46-48 18. Shri. Rajesh Dhi r #171, Sector 6, Panchkula 49-51 19. Mrs. Simran Chahal #598, Phase 3, Mohal i. 52-55 During the course of 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 p....
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....n in question is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest and held that if there is no evidence on the record except the explanation given 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 ....
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....ted that he is not in a position to reconcile various discrepancies as well as stock and cash and therefore, surrendered a sum of Rs. 2.50 crores as undisclosed income for Assessment year 2007-08. A detailed disclosure is as under: (i) Excess cash found at his residence Rs. 50,00,000/- (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 sta....
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....jewellery was also found during search and the assessee prepared a trading account. As per the trading account prepared by the assessee the stock for platinum jewellery at Rs. 48,003/whereas the stock found was valued by the Government approved valuer, Shri R.K. Gupta and Shri Bhartesh Jain at Rs. 2,85,600 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....
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..... Copies of computation chart originally furnished and that of correctified particulars are enclosed herewith for your honor's kind immediate consideration." In addition to above the assessee also relied on the decision of Hon'ble Supreme Court in case of Dilip N Shroff V JCIT, 291 ITR 519. Further reply was also given vide 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 ....
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....to buy peace also the assessee revised the return of income to Rs. 2,98,41,628/ which included surrendered amount of Rs. 2.5 crores. Certain decisions were also relied upon including the decision of Dilip N Shroff V JCIT (supra) and CIT V. Reliance Petroproduct, 328 ITR 158. The ld. CIT(A) observed that whether revised return filed by the assessee would be treated as validly revised return u/s 139 (3) or not? In this regard he discussed the decision of 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....
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....ction 271 (1) (c) has to be kept in mind before deciding such cases. A strict liability has been cast upon the assessee in view of these judgments. None of the judgments quoted by the AR of the appellant apply to the facts of the case and in fact most of them are favouring the imposition of penalty in the instant case. For instance the case of reliance petroproducts only excludes imposition of penalty in cases of legal deductions claimed and disallowed and 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 cour....
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....rence to in the said letter shows that the said firm has simply stated that no stock has been given on consignment basis in Financial Year 2008-09 whereas period under consideration was much earlier because the search itself was conducted on 27.2.2006. He also referred to a letter of Ira Diamond Jewellery (Page 338 of paper book) and the details given by them at page 339 to 341 clearly shows that some items have been sent by them on approval basis. All these facts 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....
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....72737 53778149.00 Do you accept the quantitative determination of gold and valuation of diamonds as given above. Ans- Yes, I accept the above figures of valuation report and Books of accounts as true and correct. I accept the excessive quantity of gold and excessive value of diamond, in my closing stock. Q- As per your statement relating to valuation of closing stock recorded on 25th October, 2006, the excessive value of gold is as follows: Difference in quantity per Books of Accounts 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 ....
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.... a chance to object to the method of valuation. During valuation process itself the assessee clearly accepted that S/Shri Bhartesh and R.K. Gupta were doing the valuation in a professional and ethical manner then he can not later on turn around and say that there was some mistake in the valuation of diamond. This was re-confirmed in the statement recorded on 30.10.2006 vide answer to Question no. 2. In Answer to question no. 3, he has accepted the amounts of valuation. Through answer to question no. 3 he has further accepted the existence of excess 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 w....
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....vant Assessment year or before the completion of the assessment, 2whichever is earlier." The above clearly show that right to file the revised return is available only if an assessee discovers any omission or any wrong statement therein. In the case before us, there is no justification at all in revising the return. Firstly the assessee surrendered the income during search on account of excess cash and stock then retracted from the same and submitted before the Investigation Wing that value of diamond jewellery is not correct and some other mistakes are 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 omissi....