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TMI Blog2012 (8) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... g the levy of penalty of ₹ 7,62,882/- u/s 158BFA (2). 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to the assessee. 2. Facts, in brief, as per relevant orders are that a search u/s 132(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was conducted at the residence and school premises belonging to the Bhatnagar Group on 15.1.1999. During the search, a number of incriminating documents were seized. Consequently, in response to a notice dated 22nd October, 1999 issued u/s 158BC of the Act, the assessee filed return declaring undisclosed income of ₹ 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 ₹ 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR that the nature of goods details of which have been given in para 2.1 of this order clearly shows that these were the electronic goods which were introduced in the Indian market in the 90 s and which showed that these were acquired in the block period. The assessee had produced no evidence to show that these were purchased before the block period. The source has therefore to be explained by the assessee. The value of the goods estimated by the Assessing Officer at ₹ 2,50 lacs considering the nature and number of items found is also considered reasonable. The assessee had declared total withdrawal for family expenses during the block period at ₹ 12.75 lacs. The learned DR argued that this also included the expenditure on daughter of the assessee amounting to ₹ 1.03 lacs and the foreign travel expenses. However, as is clear from the submission of the assessee in para 2.3 earlier, the expenditure on daughter s marriage as well as foreign travel expenses had been shown by the assessee separately. Still considering the status of the assessee, total withdrawal of ₹ 12.75 lacs for the house hold expenses, is considered normal and the expenditure on acquisition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as basic material found during search indicating that cash from schools was being brought to the residence of the assessee and the blank receipted stamp papers found indicated the attempt to claim bogus expenses, the material collected on further inquiries in relation to the parties from whom the bills had been produced or in whose names expenses had been booked, is relevant material for the purpose of block assessment as it is a settled legal position that material information available with the A.O. in relation to the evidence gathered during search can be used for framing of block assessment. Even if the amounts are entered in the books of accounts, in case it is found that the entries are bogus and the claim is false, amount can be taken as undisclosed income in view of the provisions of section 158B(b). The total amount of expenditure claimed during the search period under these heads as pointed out by the A.O. was ₹ 94 lacs. The disallowance has been made to the extent of ₹ 10 lacs, which is little over 10% and which in our opinion, is justified on the facts of the case. The Ld. A.R. has pointed out that unvouched expenses were found only to the tune of ₹ 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial amounts and the assessee must have also made investment in the business, details of which were not given. The addition made was therefore, legally in order. 9.2.1 We have perused the records and considered the mater carefully. There is no dispute that the assessee was running the poultry farm during 1994-99 and supplied eggs to various parties. The seized documents also showed that the cash to tune of ₹ 11.43 lacs and ₹ 17.29 lacs had been received from Jan 1997-Dec 1998. The assessee could not give details of investment in this business as well as yearly receipt and expenses and this fact is also not disputed. Therefore, on the basis of material found, the A.O. is entitled to estimate income for the entire period. Considering the receipt of money amounting to about ₹ 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 ₹ 3 lacs for the entire period from 1994-99 is justified. The order of CIT(A), therefore, cannot be sustained. The same is reversed and the addition made is confirmed. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r furnishing inaccurate particulars of such income. However, it is to be noted that penalty proceedings u/s 158BFA(2) is separate from Chapter XXI. The whole new simplified procedure for search assessment was introduced in the Act and option was given to the assessee to file true and correct return of income disclosing the true and correct undisclosed income and pay taxes at a flat rate of 60%. If someone did not do so penalty was imposable u/s.158BFA(2) on the additions made. It is pertinent to note that in order to levy penalty u/s.158BFA(2) there is no mention of reasonable cause of the default. Therefore, in order to levy penalty u/s.158BFA(2), it is sufficient that some additions were made and assessed income was more than returned income. Moreover, in the instant case, the assessee has not been able to prove as to why the penalty should not be levied. Hence, I have reason to believe that the assessee has concealed its taxable income and is liable for penalty Uls.158BFA(2) of the Income-tax Act, 1961. 7. The assessee has not stated as to what was the reasonable cause for failure on its part to disclose the true statement of income in the return for the block period. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, I am satisfied that a penalty of ₹ 86.37,830/-. being 100% of tax sought to be evaded. should be imposed in the case towards concealment of income and furnishing of inaccurate particulars of income. Accordingly. a penalty of ₹ 86.37.830/- is Imposed U/s 158BFA(2) of IT Act. 5. On appeal, the ld. CIT(A) reduced the penalty to ₹ 7,62,882/- in the following terms:- 4. I have considered the facts of the case. The submission of the appellant has also been gone through very carefully. There is difference between provisions of section 271(1)(c) and section 158BFA(2) of the Act. The penalty u/s 271 (1)(c) is leviable if in the course of assessment proceedings, the AO is satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In such cases minimum penalty of 100% and maximum 300% of the amount of tax sought to be evaded is to be levied. The term the amount of tax sought to be evaded has been defined as per Explanation 4 which deals the various circumstances which for ready reference is reproduced as under: a) in any case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and then compute undisclosed income in excess of undisclosed income returned by the appellant and then show cause appellant why on such excess undisclosed income, penalty u/s 158BFA(2) may not be levied. Instead of doing that, he has considered each item of undisclosed income and came to the conclusion that penalty u/s 158BFA(2) is to be levied on an undisclosed income of ₹ 1,43,96,389/-. This is not correct as on going through the assessment records collected from the AO, it is seen that after giving effect to the order of the ITAT the undisclosed income has been worked out by the A.O. at ₹ 62,71 ,470/- vide order dated 3/8/2009. For ready reference the computation of undisclosed income as per order of CIT(A) and order giving effect to the order of ITAT is reproduced as under: By CIT(A) Undisclosed income as declared [In Rs.] By the assessee in block return: Rs.50,00,000 Unexplained assets found at the Residence : ₹ 2,50,000 Unexplained Foreign currency ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60000 i) On account of payment made to Gulshan 90000 j) On account of payment made to V. Bhargava: 75000 k) On account of purchase of shawl 16000 3,87,120 Total relief Rs.11,60,045 Balance income Rs.53,27,271 Addition confirmed by ITAT 1. On account of income from Virendra Paultry Farm 3,00,000 2. On account of addition on the basis of seized account. a) On account of payment remains Unexplained: 70,200 b) On account of investment with Anand Pratyabhoot Vit Nigam Limited. 1,55,000 c) On account of amount collected From parents. 1,45,000 d) On account of payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessed will also be undisclosed income. But in such situation AO may use his discretion to decide as to whether on such difference penalty u/s 158BFA(2) possibly can be levied or not. Thus in case of 158BFA(2) penalty, there is a heavy burden on the assessee to establish that it was beyond his control to offer undisclosed income even after search to the extent determined by the AO and upheld by highest fact finding authority namely ITAT. In the instant case the basis of undisclosed income declared by the appellant and the finally assessment made as per direction of CIT(A) and as revised by ITAT are totally different. From the perusal of the order of CIT(A) and order giving effect to the order of ITAT(as reproduced above), it cannot be worked out as pertaining to which addition the difference between the returned undisclosed income and finally determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 addition of ₹ 3 lacs while bogus expenses were estimated on two counts; unvouched expenses and bogus expenses, genuineness of which was not established by the assessee. Though, the amount of such expenses exceeded the amount of ₹ 10 lacs, the addition finally was restricted to ₹ 10 lacs. Since the assessee did not furnish break up of ₹ 50 lacs disclosed in the return, the levy of penalty was justified, the ld. DR vehemently argued. To a query by the Bench, the ld. DR stated that the Revenue is not in appeal before us against the findings of the ld. CIT(A). 8. We have heard both the parties and gone through the facts of the case. As is apparent from the aforesaid facts, the assessee declared undisclosed income of ₹ 50 lacs in his return while undisclosed determined in pursua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the undisclosed income or request to the Officer to adjust full tax against cash if any seized and held by the Department sufficient to adjust the tax and if the assessee files statement that no appeal will be filed against the undisclosed income returned and assessed based on return filed, no penalty could be levied. However, penalty would be leviable in all cases where undisclosed income finally assessed under sub-sec. (c) of section 158BC is in excess of the undisclosed income returned by the assessee in the return filed under clause (a) of section 158BC. In such cases, there is no complete immunity from penalty on the tax payable on the undisclosed income returned by the assessee even though the assessee has complied with all the conditions of clauses (i) to (iv) of the 1st proviso as stated above. If on final assessment under sub-section (c) of Sect ion 158BC it is found that the addition made to the undisclosed income returned by the assessee is substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 shown. When the assessee did not furnish relevant details of income and expenditure, the AO was perfectly justified tin making the addition on the strength of seized documents. In these circumstances, particularly when the assesee did not furnish details of receipts and expenditure on account of admitted supply of eggs to various parties, claim that explanation submitted by the assessee is bonafide, is not borne out from any material on record and consequently, cannot been accepted. Indisputably, determination of undisclosed income has attained finality after the order of the ITAT. 8.3 Likewise, in respect of addition in respect of addition of ₹ 10 lacs towards bogus expenses, the AO during the course of assessment proceedings,not iced that the assessee was running a centralized office at his residence to monitor and control the expenditure of various schools. Various seized documents revealed receipt of cash in packets at his ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such income. Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textiles Processors [2008] 166 TAXMAN 65 (SC) , held that in civil liabilities like imposition of penalty under section 271(1)(c) of the Act there is no necessity of proving mens rea on the part of the assessee. Therefore, after the decision of Hon'ble Supreme Court in the case of Dharmendra Textiles Processors even in case of imposition of penalty u/s. 271(1)(c), the Revenue is not required to prove that assessee had wilfully concealed the income or had furnished inaccurate particulars of such income. The concept of mens rea cannot be imported in the provisions of section 158BFA(2) of the Act . The effect of such legal position is that onus is not on the Revenue either to prove the guilty mind or the sufficient cause on the part of assessee. The onus is entirely on the assessee to prove his bona fides on the basis of facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 which as laid down by the Explanation to s. 271(1)(c) have to be excluded for the purpose of determining whether the Explanation is applicable and estimated income of ₹ 8,000 in Pakistan subject to rectification on production of Pakistan assessment order which is not liable to tax here in view of the Indo-Pakistan Avoidance Agreement and was besides an estimate and that too subject to rectification on the basis of the Pakistan assessment order. Accordingly, the Hon ble High Court upheld the findings of the Tribunal that there could not be any charge of concealment of income or furnishing of inaccurate particulars thereof or fraud or gross or wilful neglect, and, therefore, penalty under s. 271(1)(c) could not be imposed. But such are not the facts and circumstances in the instant case nor any explanation similar to explanation to sec 271(1)( c )has been invoked and nor even the ld. AR demonstrated b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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