Shayourajsingh B. Chauhan, Ahmedabad v. The ACIT.,Circle-2,, Ahmedabad

ITA 523/AHD/2008 | 2002-2003
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 52320514 RSA 2008
Assessee PAN AARPC8119P
Bench Ahmedabad
Appeal Number ITA 523/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 18 day(s)
Appellant Shayourajsingh B. Chauhan, Ahmedabad
Respondent The ACIT.,Circle-2,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 13-05-2010
Next Hearing Date 13-05-2010
Assessment Year 2002-2003
Appeal Filed On 12-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI T K SHARMA JM & SHRI A N PAHUJA AM] ITA NO.523/AHD/2008 (ASSESSMENT YEAR:-2002-03) SHYOURAJSINGH B CHAUHAN PROP. OF PERFECT SECURITY SERVICES 240 2 ND FLOOR SARVODAYA COMMERCIAL CENTRE SALAPOSE ROAD NEAR GPO AHMEDABAD [PAN: AARPC 8119 P] V/S ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-2 AHMEDABAD [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI SAKAR SHARMA AR REVENUE BY:- SMT. NEETA SHAH DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 24-12-2007 OF THE LD. CIT(APPEALS)-VII AHMEDABAD UPHOLDING PENALTY OF RS.5 52 040/- LEVIED U/S 271( 1)(C) OF THE INCOME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.19 72 930/- FILED ON 31.10.2002 BY THE ASSESSEE AN INDIVIDUAL ENGAGED IN PROVIDING SECURITY PERSONNEL TO VARIOUS ORGANIZATIO NS IN PRIVATE AND PUBLIC SECTOR WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961[HER EINAFTER REFERRED TO AS THE ACT]. IN THIS CASE A SURVEY U/S 133A OF THE ACT HAD BEEN CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 24-1-2002. CONSEQUENTLY THE CASE WAS S ELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 22-10-2003 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOT ICED A WIDE GAP BETWEEN THE RECEIPTS SHOWN AND THE INCOME DECLARED. THE AO NOT ICED THAT EVEN IN THE EARLIER YEARS SIMILAR WAS THE POSITION. THE RELEVANT DETA ILS EXTRACTED IN THE ORDER OF THE AO REVEAL AS UNDER: ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 2 AY RECEIPTS SHOWN INCOME DECLARED EXP.- OVERTIME LEAVE ENCASHMENT MESSING CHARGES BONUS 1999-2000 20658111 406470 4826909 408970 1586653 1164376 2000-2001 26345298 549460 4758975 450916 2091306 1640572 2001-2002 29089550 636430 5798593 690318 2106545 1388250 3. IN THE LIGHT OF AFORESAID DETAILS OF EARLIER Y EARS DURING THE COURSE OF SURVEY STATEMENTS OF VARIOUS EMPLOYEES OF THE ASSESSEE WER E RECORDED AS EXTRACTED ON PAGE NOS.3 TO 7 OF THE ASSESSMENT ORDER. SHRI SUBHA SHBHAI KANTILAL DAVE CASHIER IN HIS STATEMENTS RECORDED ON 24.1.2002 & 25.1.2002 AD MITTED THAT NO BOOKS HAD BEEN WRITTEN FOR THE YEAR UNDER CONSIDERATION UNTIL THE DATE OF SURVEY. THE ASSESSEE ALSO IN HIS STATEMENT RECORDED ON 26.2.2002 ADMITTED THAT N O BOOKS OF ACCOUNTS HAD BEEN WRITTEN FOR THE YEAR UNDER CONSIDERATION SO FAR. S HRI KAPOORCHAND BABULAL GUPTA ITP ALSO IN HIS STATEMENT ON 24.1.2002 CONCEDED THAT H E WAS WRITING BOOKS FOR THE ASSESSEE FOR THE LAST 8 YEARS AND FOR THE RELEVANT ASSESSMENT YEAR BOOKS OF A/CS HAD NOT BEEN WRITTEN. IT WAS ALSO STATED BY HIM THA T BOOKS OF ACCOUNTS FOR THIS FINANCIAL YEAR WERE TO BE WRITTEN ONLY AFTER COMPLE TION OF MARCH AND HE ALSO CONFESSED THAT ALL THE BOOKS OF THE ASSESSEE WERE W RITTEN AFTER COMPLETION OF FINANCIAL YEAR AS REGULAR PRACTICE EVERY YEAR. HE ALSO STA TED THAT FOR VARIOUS EXPENSES CASH IS GIVEN. IN RESPECT OF BONUS OVERTIME LEAVE ENC ASHMENT AFTER COUNTING ON AVERAGE BASIS HE DEBITS THESE EXPENSES IN THE BOOKS OF ACC OUNT WITHOUT ANY BILLS OR VOUCHERS FOR SUCH EXPENSES. HE FURTHER MENTIONED THAT HE W AS NOT VERIFYING OR PREPARING ANY VOUCHERS OR BILLS IN RESPECT OF EXPENSES RELATING T O LEAVE ENCASHMENT AND MESSING EXPENSES SINCE LAST EIGHT YEARS AND HE WAS DEBITING THESE EXPENSES AS PER THE INSTRUCTION OF SHRI SHYOURAJSINGH CHAUHAN THE ASS ESSEE. REGARDING HIS FEES ALSO HE MENTIONED THAT HE HAD NOT RECEIVED RS.40 000/- WHICH HAD BEEN SHOWN AS DEBITED IN PETTY CASH BOOK ON 22.12.2001. HE HAD R ECEIVED ONLY RS.10 000/- AS FEE FOR PRECEDING ASSESSMENT YEAR AND HAD TAKEN ADVANCE OF RS.25 000/- IN THE MONTH OF MAY 2001 FOR THE MARRIAGE OF HIS SISTER. HE ALSO CONFIRMED THAT THE ENTRY OF RS.40 000/- IN THE PETTY CASH BOOK WAS NOT TRUE AND WAS BOGUS ENTRY. THE STATEMENTS OF OTHER EMPLOYEES REVEALED THAT THEY WERE NOT RECE IVING BONUS OR ESI/PF BENEFIT OR ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 3 OVERTIME LEAVE ENCASHMENT OR MESSING CHARGES ETC. . WHEN CONFRONTED THE ASSESSEE EXPLAINED THAT SOMETIMES VOUCHERS WERE NOT SIGNED BY THE EMPLOYEES. IN THE LIGHT OF FACTS FOUND DURING THE COURSE OF SURVE Y AND ON THE BASIS OF STATEMENTS OF VARIOUS EMPLOYEES ITP AND THE ASSESSEE THE AO CON CLUDED THAT THE ASSESSEE SUPPRESSED HIS PROFIT BY CLAIMING HUGE EXPENSES UND ER DIFFERENT HEADS VIZ. BONUS SALARY ESI CONTRIBUTION PF CONTRIBUTION STAFF EX PENSES OVERTIME EXPENSES AND LEAVE ENCASHMENT. THE AO ALSO OBSERVED THAT OVERTI ME AND MESSING CHARGES THOUGH CLAIMED IN THE RETURN WERE IN FACT NOT PA ID TO THE EMPLOYEES. SECURITY GUARDS EMPLOYED BY THE ASSESSEE WERE IN FACT GE TTING ONLY CONSOLIDATED SALARY AND NOT GETTING SUCH MESSING EXPENSES. NOT ONLY TH AT THE AO NOTICED THAT PF AND ESI CONTRIBUTION FOR THE EARLIER YEARS WERE NOT PAI D IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF PF AND ESI LAWS. THE AO ALSO DID NOT FIND ANY EVIDENCE IN SUPPORT OF THE VARIOUS EXPENSES INCURRED. IN NUTSHELL THE AO SUMMARISED THE FOLLOWING DISCREPANCIES : I) IN THE BONUS REGISTERS REVENUE STAMPS WERE AFFI XED AND SIGNATURES OBTAINED IN ENGLISH WITHOUT EVEN MENTIONING THE AM OUNT OF BONUS ETC. ALL THE COLUMNS IN THE BONUS REGISTER WERE BLANK; II) IN THE CASE OF OVERTIME REGISTER THOUGH THE AM OUNT OF OVERTIME WAS MENTIONED BUT THE SIGNATURES OF THE EMPLOYEES AND THE DATE ON WHICH THE AMOUNT WAS PAID WERE NOT OBTAINED AGAINST ANY OF THE ENTRY IN THE REGISTER; III) IN THE VOUCHERS FOR THE PERIOD 5.9.01 TO 11.1. 01 IN THE COLUMN OF THE VOUCHER DENOTING RECEIVED BY HAS BEEN SIGNED BY A SINGLE PERSON IN SOME OF THE VOUCHERS/BILLS/RECEIPTS. IN SOME OF TH E VOUCHERS THERE WERE NO SIGNATURES ON THE RECEIPTS AND IN SOME OTHE RS THE DATES OF THE VOUCHERS WERE NOT WRITTEN. IV) FOR THE WAGES FOR MAY 2001 SOME OF THE PAYMEN TS DID NOT BEAR ANY SIGNATURE NOR REVENUE STAMP AFFIXED THOUGH THE SALA RY EXCEEDS MORE THAN RS.1000/-; V) SIMILAR INSTANCES WERE ALSO NOTICED FOR WAGE BIL LS FOR PERIOD APRIL JUNE JULY SEPTEMBER AND NOVEMBER 2001; ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 4 VI) IN THE SALARY STATEMENTS FROM APRIL 2001 TO DEC EMBER 2001 THERE WERE NO SIGNATURES OF THE EMPLOYEES TO WHOM SALARY WAS PAID. 4. THE AO FURTHER NOTICED THAT FOR THE YEAR UN DER CONSIDERATION THE ASSESSEE REFLECTED GROSS RECEIPTS OF RS. 3 26 65 319/- AND NET PROFIT OF RS. 15 69 062/- WHICH INCLUDED OTHER INCOME OF RS.1 60 279/-. EXCLUDING O THER INCOME NET PROFIT WORKED OUT TO 4.34% OF THE RECEIPTS. IN THE LIGHT OF STATEMENT S OF THE ASSESSEE AND HIS EMPLOYEES THAT BOOKS OF ACCOUNTS HAD NOT BEEN WRITTEN UNTIL T HE DATE OF SURVEY AND ON THE BASIS OF ENQUIRIES MADE IN CONSEQUENCE OF SURVEY ESPECI ALLY WHEN GENUINENESS OF VARIOUS EXPENSES WAS NOT PROVED WHILE THE ASSESSEE HAD DECLARED ADDITIONAL INCOME BEFORE THE SETTLEMENT COMMISSION IN THE PREC EDING ASSESSMENT YEARS THE AO REJECTED THE BOOK RESULTS FOR THE YEAR UNDER CON SIDERATION HAVING RECOURSE TO PROVISIONS OF SEC. 145(3) OF THE ACT AND ESTIMATED 10% OF THE RECEIPTS AMOUNTING TO RS. 32 48 902 AS NET BUSINESS INCOME FOR THE YEAR U NDER CONSIDERATION. INTER ALIA PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIAT ED. ON APPEAL THE FINDINGS OF THE AO WERE UPHELD BY THE LD. CIT(A). AFTER RECEIPT OF ORDER OF THE LD. CIT(A) IN RESPONSE TO A SHOWCASE NOTICE ISSUED BY THE AO O N 15/03/2007 BEFORE LEVY OF THE PENALTY THE ASSESSEE SUBMITTED THAT (I) ALL THE DOCUMENTS / PAPERS REQUIRED FOR MAKING THE ASSESSMENT WERE AVAILABLE ON RECORD. (II) THE ESTIMATION OF NET PROFIT @ 10% OF THE RECE IPT IS ARBITRARY AND WITHOUT CONSIDERING THE FACTS AND DETAILS WITH OUT VERIFYING THE DOCUMENTARY RECORDS AND PAPERS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR HAS FURNISH ED ANY INACCURATE PARTICULARS OF INCOME. (III) IN VIEW OF THE ABOVE PENALTY U/S 271(1)(C ) OF THE ACT WAS NOT LEVIABLE. 5 HOWEVER THE AO DID NOT ACCEPT THE AFORESAID SUBM ISSIONS OF THE ASSESSEE ON THE GROUND THAT DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE ASSESSEE HAD DEBITED EXPENDITURE/PAY MENT ON ACCOUNT OF OVERTIME EXPENSES LEAVE ENCASHMENT EXPENSES SALAR Y MESSING EXPENSES BONUS PF CONTRIBUTION ETC. IN THE INCOME AND EXPEN DITURE STATEMENT AND THE ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 5 ASSESSEE WAS NOT MAKING PAYMENTS FOR THESE EXPENSE S AND HAD INFLATED THE EXPENSES AS ADMITTED BY VARIOUS PERSONS WORKING FOR THE ASSESSEE. IN FACT THE ASSESSEE WAS NOT WRITING HIS BOOKS OF ACCOUNTS REGU LARLY AND THE SAME WERE ALSO NOT RELIABLE. ACCORDINGLY BOOKS OF THE ASSESSEE WE RE REJECTED AND THE NET PROFIT WAS ESTIMATED @ 10% OF THE GROSS RECEIPTS I.E. AT RS.32 48 902/- R ESULTING IN ADDITION OF RS.18 40 137/-. THUS THE ASSESSEE SUP PRESSED HIS INCOME BY CLAIMING INFLATED EXPENSES. HAD THE SURVEY U/S. L33 A OF THE ACT NOT BEEN CARRIED OUT THE ASSESSEE DEFINITELY WOULD HAVE EVADED THE TAX ON THE INCOME OF RS.18 40 137/-. ACCORDINGLY THE AO IMPOSED PENALTY OF RS.5 52 040/- U/S 271(1)(C) OF THE ACT @ 100% OF THE TAX SOUGHT TO EV ADED ON THE AFORESAID INCOME SINCE THE ASSESSEE CONCEALED THE INCOME TO THE AFO RESAID EXTENT BY DELIBERATELY FURNISHING INACCURATE PARTICULARS THEREOF. 6. ON APPEAL THE ASSESSEE CONTENDED THAT THE SETTL EMENT COMMISSION ADDITIONAL BENCH MUMBAI FOR THE AY 19 99-2000 TO AY 2001-02 IN THEIR CASE DIRECTED TO ASSESS THE INCOME @ 7% OF T HE GROSS RECEIPTS FROM THE SECURITY BUSINESS. IT WAS SUBMITTED THAT NOT A SING LE DEFICIENCY IN THE BOOKS OF ACCOUNTS WAS POINTED OUT BY THE AO AND THAT THE AO OVER ASSESSED THE INCOME . MOREOVER THE AO WHILE APPLYING NET PROFIT RATE OF 10% HAD NOT GIVEN ANY COMPARABLE CASE. THE AO HAD INITIATED PENALTY PROC EEDINGS FOR CONCEALMENT OF INCOME WHEREAS PENALTY HAS BEEN LEVIED FOR FURNISHI NG INACCURATE PARTICULARS OF INCOME AND AS SUCH ON THIS GROUND ALONE PENALTY SO LEVIED NEEDS TO BE QUASHED IT WAS ARGUED. HOWEVER THE LD. CIT(A) AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE FINDINGS OF THE AO IN T HE FOLLOWING TERMS: 5 I HAVE CONSIDERED THE SUBMISSIONS MADE. I FIND T HAT AT THE TIME OF SURVEY A LOT OF DISCREPANCIES WERE NOTED BY THE AO BECAUSE IT WAS FOUND THAT EXPENDITURE CLAIMED BY THE ASSESSEE UNDER DIFF ERENT HEADS WERE NOT AT ALL PROVED AND IT WAS ALSO ADMITTED THAT ACCOUNT S OF THE ASSESSEE WAS NOT BEING WRITTEN PROPERLY AND IT WAS CONFESSED THA T ALL THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE WRITTEN AFTER THE CLO SE OF THE FINANCIAL YEAR I.E. PREVIOUS YEAR. APPARENTLY ENTIRE BOOKS OF ACC OUNT OF THE ASSESSEE ARE UNRELIABLE AND IF INCOME IS WORKED OUT IN SUCH A SI TUATION IT WOULD BE CLEAR THAT THE ASSESSEE IS LIABLE TO PENALTY FOR CONCEALM ENT. THIS IS FOR THE ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 6 SIMPLE REASON THAT THE ASSESSEE MANIPULATED THE ENT IRE BOOKS OF ACCOUNT BY WRITING THE BOOKS AS PER ITS WHIMS AND FANCY AFT ER THE CLOSE OF THE PREVIOUS YEAR. IT WOULD BE RELEVANT TO NOTE THE FAC TS WHICH HAS BEEN INCORPORATED IN THE PENALTY ORDER THAT FOR VARIOUS EXPENSES CASH AMOUNT WAS GIVEN AND ON AN AVERAGE BASIS EXPENSES WERE DEB ITED IN THE BOOKS OF ACCOUNT. IN FACT THE AO HAS RECORDED STATEMENT OF VARIOUS PERSONS WHICH SHOWS THAT THERE WAS VIDE VARIATION BETWEEN THE EXP ENSES DEBITED IN THE BOOKS AND EXPENSES ACTUALLY CLAIMED. ALL THIS SHOWS THAT THE ASSESSEE HAD DELIBERATELY MANIPULATED ITS BOOKS OF ACCOUNT I N SUCH A FASHION THAT THERE WAS NO OTHER WAY BUT TO ESTIMATE THE INCOME O F THE ASSESSEE. HOWEVER THIS IS NOT A CASE OF PURE AND SIMPLE ESTI MATION BUT A CASE OF ESTIMATION FOR THE REASON THAT THE EXPENDITURE CLAI MED WAS DELIBERATELY INFLATED AND THERE WERE VARIOUS WRONG CLAIMS. THUS THIS IS A CASE WHICH IS FIT FOR LEVY OF PENALTY FOR CONCEALMENT BECAUSE EVE N THE SURVEY TOOK PLACE DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMEN T YEAR. I THEREFORE FIND NO MERIT IN THE EXPLANATION OF THE ASSESSEE AND PEN ALTY LEVIED IS CONFIRMED. 7. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE RELYING UPON THE DECISIONS IN THE CASE OF SHIVLAL TAK VS. CIT 251 ITR 373 CIT VS. SHIVNARAYAN JAMNALAL & CO. 232 ITR 311(MP) CI T VS. RELIANCE PETRO PRODUCTS 322 IT 158(SC) CIT VS. INDIAN METAL & FERRO ALLOYS LTD. 211 ITR 35(ORISSA). THE LEARNED DR ON THE OTH ER HAND SUPPORTED THE IMPUGNED ORDERS OF THE AO AND THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON ON BEHALF OF THE ASS ESSEE. AT THE OUTSET WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SECTION 2 71(1)(C) OF THE ACT WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS COMPLY WITH NOTICES CO NCEALMENT OF INCOME ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT IS SATISFIED THAT ANY PERSON- .. ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 7 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY - (III) IN THE CASES REFERRED TO IN CLAUSE (C) IN ADDITION TO ANY TAX PAYABLE BY HIM A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INC OME OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE DEPUTY COMMISSIONER (APPEALS) OR THE COMMISSIONER (APPEALS) TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE P URPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. AS IS EVIDENT FROM THE AFORESAID CL. (C) OF S. 271(1) OF THE ACT THE WORDS USED ARE 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' O R FURNISHED 'INACCURATE PARTICULARS OF SUCH INCOME'. THUS BOTH IN CASE OF CONCEALMENT AND INACCURACY THE PHRASE 'PARTICULARS OF INCOME' HAS BEEN USED. T HE LEGISLATURE HAS NOT USED THE WORDS 'CONCEALED HIS INCOME'. FROM THIS IT WOUL D BE APPARENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY OR TRULY ALL THE PARTICULARS. THE WORDS 'PARTICULARS OF INCOME' REFE R TO THE FACTS WHICH LEAD TO THE CORRECT COMPUTATION OF INCOME IN ACCORDANCE WITH TH E PROVISIONS OF THE ACT. SO WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN I TEM AS INCOME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER S. 271(1) (C) OF THE ACT. IF THE INCOME ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 8 HAD TO BE ASSESSED UNDER SECTION 145 OF THE ACT TH EN THE PRESUMPTION WOULD BE THAT THE INCOME WAS NOT PROPERLY RETURNED AS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. CHANDRA VILAS HOTEL 291 ITR 202(GU J). IN THIS DECISION THE HONBLE HIGH COURT FOUND THAT THE ASSESSEE WAS NOT MAINTAINING ITS ACCOUNT FOR SIX YEARS AND EVERY YEAR ASSESSMENTS WERE FRAMED W ITH THE HELP AND ASSISTANCE OF SECTION 145(1) OF THE ACT. ACCORDINGLY THE HON BLE JURISDICTIONAL HIGH COURT OBSERVED THAT AT LEAST SOME ORDER SHOULD HAVE WORK ED AS AN EYE-OPENER FOR THE ASSESSEE AND THAT EVERY YEAR THE ASSESSEE WAS REPEA TING THE SAME TREND AND STILL IT WANTED TO SAY THAT IT HAD NOT CONCEALED TH E INCOME OR THERE WAS NO FRAUD OR GROSS OR WILFUL NEGLECT ON ITS PART. IN THE INSTANT CASE ALSO THE ASSESSEE WAS NOT MAINTAINING THE ACCOUNTS DURING THE COURSE OF THE B USINESS YEAR AFTER YEAR AND IN FACT THE ASSESSEE WAS WRITING THE ACCOUNTS AFTER T HE CLOSE OF THE YEAR AND INFLATING THE EXPENSES SO AS TO SHOW THE INCOME AT HIS WILL. IN THESE CIRCUMSTANCES IT DOES NOT LIE IN THE MOUTH OF THE ASSESSEE THAT IT WAS NOT CONCEALING HIS INCOME BY FURNISHING INACCURATE PAR TICULARS THEREOF AS CONCLUDED BY THE AO AND THE LD. CIT(A). 8.1 AS MENTIONED ALREADY N THE CASE UNDER CONSI DERATION DURING THE COURSE OF SURVEY STATEMENTS OF VARIOUS EMPLOYEES OF THE ASSE SSEE WERE RECORDED AS EXTRACTED ON PAGE NOS.3 TO 7 OF THE ASSESSMENT ORDE R. IT WAS FOUND THAT BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION YEAR WERE TO BE WRITTEN ONLY AFTER COMPLETION OF MARCH AND EVEN THE BOOKS OF THE ASSE SSEE FOR THE PRECEDING YEARS WERE WRITTEN AFTER COMPLETION OF FINANCIAL YEAR BY WAY OF REGULAR PRACTICE. IT WAS ALSO NOTICED THAT INFLATED EXPENSES WERE DEBITED TO ACC OUNTS UNDER THE INSTRUCTIONS OF SHRI SHYOURAJSINGH CHAUHAN THE ASSESSEE EVEN WHEN PAYMENT FOR SUCH EXPENSES WAS NOT BEING MADE. IN THE LIGHT OF FACTS FOUND DU RING THE COURSE OF SURVEY AND ON THE BASIS OF STATEMENTS OF VARIOUS EMPLOYEES ITP A ND THE ASSESSEE THE AO CONCLUDED THAT THE ASSESSEE SUPPRESSED HIS PROFIT B Y CLAIMING HUGE EXPENSES UNDER VARIOUS HEADS. AS A RESULT BOOKS OF ACCOUNTS WERE R EJECTED AND NET PROFIT WAS ESTIMATED @ 10% IN THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) ALSO UPHELD THE REJECTION OF BOOKS AND RATE APPLIED BY THE AO WHILE THE TRIBUNAL REDUCED THE RATE TO 7% ON THE BASIS OF RATE ADOPTED BY THE SETTLEMENT COMMISSION IN THE PERIOD ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 9 RELEVANT TO THE ASSESSMENT YEARS 1999-2000 TO 2001- 02. HAD THERE BEEN NO SURVEY OPERATIONS IN THE PREMISES OF THE ASSESSEE THE PAR TICULARS WHICH WERE MADE THE BASIS OF ADDITION IN THE ASSESSMENT WOULD NOT HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER. IN FACT THE MATERIAL PARTICULAR S WERE NOT DISCLOSED . THE EXPRESSION ''CONCEAL'' AS DEFINED IN DILIP N SHROFF CASE 291 I TR 519(SC) MEANS TO HIDE OR KEEP SECRET. THE WORD CONCEAL IS CON PLUS CELARE WHICH I MPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SI GHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE ASSESSEE HAVING CLAIMED INFLATED EXPENSES IN THE BOOKS WRITTEN WELL AFTER THE CLOSE YEAR AND THAT TOO YEA R AFTER YEAR LEADS TO ONLY ONE CONCLUSION THAT THE INCOME WAS NOT PROPERLY RETURN ED AND THEREFORE LEVY OF PENALTY HAS TO BE UPHELD AS CONCLUDED BY HONBLE JURISDICT IONAL HIGH COURT IN CIT VS. CHANDRA VILAS HOTEL 291 ITR 202(GUJ) IN SIMILAR CIR CUMSTANCES. R ESORTING TO ESTIMATE IN THIS CASE WAS NOT AN ESTIMATE WITHOUT B ASIS BUT WITH A CLEAR CUT BACKGROUND OF MATERIAL WHEREFROM IT WAS NOTICED T HAT THE ASSESSEE WAS INFLATING EXPENSES YEAR AFTER YEAR. THE EXPLANATION OF THE AS SESSEE COULD NOT BE VERIFIED FROM ITS OWN RECORDS AND APPARENTLY THE ASSESSEE FAILED TO DISCHARGE THE ONUS PLACED ON IT REGARDING PROFIT REFLECTED IN ITS BOOKS WRITTEN WELL AFTER THE SURVEY AND CLOSE OF THE YEAR. AS A RESULT ADDITION @7% OF THE RECEIPTS FRO M SECURITY SERVICES HAS BEEN SUSTAINED BY THE TRIBUNAL FOLLOWING THE BASIS AD OPTED BY THE SETTLEMENT COMMISSION IN THE PRECEDING YEARS. IN THE COURSE OF PENALTY PROCEEDINGS ALSO THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL BEFORE THE AS SESSING OFFICER TO REBUT THE INFERENCES DRAWN BY THE ASSESSING OFFICER IN THE CO URSE OF ASSESSMENT PROCEEDINGS. SO IN OUR CONSIDERED VIEW THE PROVISIONS OF EXPLA NATION 1 TO SECTION 271(1)(C) WHEN THE ASSESSEE FAILED TO SUBSTANTIATE HIS OWN EXPLAN ATION GET ATTRACTED. WE FIND THAT AFTER THE INSERTION OF EXPLANATION 1 TO SECTION 271 (1)(C) OF THE ACT BY THE TAXATION LAWS (AMENDMENT) ACT 1975 IF THE EXPLANATION OFFE RED BY THE ASSESSEE REGARDING THE ADDITIONS IS EITHER FOUND TO BE FALSE AND REMAI NED UNSUBSTANTIATED THE ADDITIONS SO MADE ARE DEEMED TO BE THE CONCEALED INCOME AND THEREFORE THE PENALTY PROVISIONS ARE ATTRACTED. HON'BLE SUPREME COURT IN THE CASE OF B.A. BALASUBRAMANIAM & BROS. CO. V. CIT [1999] 157 CTR 5 56 HELD THAT PENALTY CAN BE IMPOSED EVEN ON ESTIMATED ADDITION ALSO. RELEVANT H EAD NOTES AND CONCLUSION AS DRAWN BY THE HON'BLE SUPREME COURT ARE REPRODUCED A S UNDER- ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 10 ' PENALTY UNDER SECTION 271 (1)(C) EXPLANATION - BUR DEN OF PROOF - DIFFERENCE BETWEEN INCOME ASSESSED AND INCOME RETURNED WAS MOR E THAN 20 PER CENT - ASSESSEE NOT ABLE TO DISCHARGE THE ONUS WHICH WAS O N IT UNDER THE EXPLANATION TO SECTION 271(1)(C) - ITO JUSTIFIED IN IMPOSING PE NALTY NOTWITHSTANDING THE FACT THAT INCOME WAS ASSESSED ON ESTIMATE BASIS - CIT V. B.A. BALASUBRAMANIAM & BROS. [1984] 40 CTR (MAD.)/[1985] 152 ITR 529 (MAD.) AFFIRMED; CIT V. MUSSADILAL RAM BHAROSE [1987] 60 CTR (SC) 34/[ 1987 ] 165 ITR 14 (SC); TC 50 R. 474; CIT V. K.R. SADAYAPPAN [1990] 86 CTR (SC) 1 20; [1990] 185 ITR 49 (SC); TC 50 R. 795 AND ADDL. CIT V. JEEVAN LAL SAH [1994] 117 CTR (SC) 130; [1994] 205 ITR 244 (SC); TC 50 R. 973 FOLLOWED. CONCLUSION DIFFERENCE BETWEEN THE INCOME ASSESSED AND THE INCO ME RETURNED BEING MORE THAN 20 PER CENT THE EXPLANATION TO SECTION 271 (1 )(C) BECAME APPLICABLE AND THE ITO WAS JUSTIFIED IN IMPOSING PENALTY BECAUSE THE A SSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONUS WHICH WAS ON IT UNDER THE SAID E XPLANATION NOTWITHSTANDING THE FACT THAT INCOME WAS ASSESSED ON ESTIMATE BASIS .' 8.2 HONBLE SUPREME COURT IN THE CASE OF K.P.MA DHUSUDANAN VS. CIT 251 ITR 99(SC) HELD THAT WE FIND IT DIFFICULT TO ACCEPT AS CORRECT THE TWO JUDGMENTS AFOREMEIITIONED. THE EXPLANATION TO SECTION 271(1)(C) IS A PART OF SECTI ON 271. WHEN THE INCOME-TAX OFFICER OR THE APPELLATE ASSISTANT COMMISSIONER ISS UES TO AN ASSESSEE A NOTICE UNDER SECTION 271 HE MAKES THE ASSESSEE AWARE THAT THE PROVISIONS THEREOF ARE TO BE USED AGAINST HIM. THESE PROVISIONS INCLUDE TH E EXPLANATION. BY REASON OF THE EXPLANATION WHERE THE TOTAL INCOME RETURNED BY THE ASSESSEE IS LESS THAN 80 PER CENT. OF THE TOTAL INCOME ASSESSED UNDER SECTIO N 143 OR 144 OR 147 REDUCED TO THE EXTENT THEREIN PROVIDED THE ASSESSEE IS DEE MED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS THEREOF UNLESS HE PROVES THAT THE FAILURE TO RETURN THE CORRECT INCOM E DID NOT ARISE FROM ANY FRAUD OR NEGLECT ON HIS PART. THE ASSESSEE IS THEREFORE BY VIRTUE OF THE NOTICE UNDER SECTION 271 PUT TO NOTICE THAT IF HE DOES NOT PROVE IN THE CIRCUMSTANCES STATED IN THE EXPLANATION THAT HIS FAILURE TO RETURN HIS CO RRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT HE SHALL BE DEEMED TO HAVE CONCEALED TH E PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF AND CONSE QUENTLY BE LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCA TION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE UNDER SECTION 271 IS IN OUR VIEW NECESSARY BEFORE THE PROVISIONS OF THE EXPLANATION THEREIN ARE APPLIED. THE HIGH COURT AT BOMBAY WAS THEREFORE IN ERROR IN THE VIEW THAT IT TOOK AND TH E DIVISION BENCH IN THE IMPUGNED JUDGMENT WAS RIGHT. 8.3 THEREFORE IN VIEW OF THE FACTS AND CIRCUMS TANCES AND IN THE LIGHT OF ABOVE NOTED AUTHORITATIVE PRONOUNCEMENTS WHEN THE ASSESS EE FAILED TO DISCHARGE THE ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 11 ONUS LAID DOWN UPON HIM IN TERMS OF EXPLANATION 1 T O SECTION 271(1)(C) OF THE ACT THE ORDER OF THE CIT(A) IS UPHELD TO THE EXTENT PEN ALTY IS IMPOSABLE IN THIS CASE ON THE DIFFERENCE BETWEEN THE INCOME WORKED OUT @ 7% OF THE RECEIPTS FROM SECURITY SERVICES AND THAT RETURNED BY THE ASSESSE E IN ITS PROFIT AND LOSS ACCOUNT. EVEN OTHERWISE IT IS A SETTLED LAW THAT IN ECONOMIC OFFENCES THE STATUTORY LIABILITY TO PAY EITHER DUTY OR TAX IS NOTHING BUT A STRICT L IABILITY WHERE THE QUESTION OF PROVING BEYOND THE SHADOW OF DOUBT ONE'S EXISTENCE OF BONA FIDE BELIEF THAT SUCH DUTY OR INTEREST IS NOT TAXABLE DOES NOT ARISE. IT GOES WITHOUT SAYING THAT ANY VIOLATION OF THE LAW OR RULES RELATING TO ECONOMIC OFFENCES EITHER RELATING TO THE PAYMENT OF DUTY OR TAX AS THE CASE MAY BE THE THEO RY OF MENS REA IS NOT ATTRACTED. IN SUCH MATTERS THE RULES OF INTERPRETA TION CONTEMPLATE A STRICT INTERPRETATION RATHER THAN A LIBERAL AND WIDER INTE RPRETATION. 8.31 THE RULE OF MENS REA HAS TO BE ESTABLISHED B EYOND ALL REASONABLE DOUBT IN CRIMINAL CASES BUT IT IS NOT SO IN THE CASE OF AN ECONOMIC OFFENCE. THE CLASSICAL VIEW THAT 'NO MENS REA NO CRIME' HAS LONG AGO BEEN ERODED ESPECIALLY REGARDING ECONOMIC CRIMES. IN ECONOMIC OFFENCES TH E NOTION THAT A PENALTY OR A PUNISHMENT CANNOT BE CAST IN THE FORM OF AN ABSOLUT E OR NO FAULT LIABILITY BUT MUST BE PRECEDED BY MENS REA MUST BE REJECTED. A RULE OF STRICT LIABILITY OR ABSOLUTE LIABILITY SHOULD BE IMPOSED WITHOUT INSISTING MENS REA TO DEAL WITH SUCH SOCIO ECONOMIC CRIMES VIDE S. BAGAVATHY V. STATE OF TAMI L NADU [2007] 1 LW 892. 8.32 MENS REA IS NOT AN ESSENTIAL INGREDIENT FOR CONTRAVENTION OF THE PROVISIONS OF THE CIVIL ACT. UNLESS THE LANGUAGE OF THE STATUT E INDICATES THE NEED TO ESTABLISH THE ELEMENT OF MENS REA IT IS GENERALLY SUFFICIENT TO PROVE THAT A DEFAULT IN COMPLYING WITH THE STATUTE HAS OCCURRED AND IT IS W HOLLY UNNECESSARY TO ASCERTAIN WHETHER SUCH A VIOLATION WAS INTENTIONAL OR NOT. 8.33 THE BREACH OF CIVIL OBLIGATION WHICH ATTRACT S A PENALTY UNDER THE PROVISIONS OF AN ACT WOULD IMMEDIATELY ATTRACT THE LEVY OF PEN ALTY IRRESPECTIVE OF THE FACT WHETHER THE CONTRAVENTION WAS MADE BY THE DEFAULTER WITH ANY GUILTY INTENTION OR NOT VIDE CHAIRMAN SEBI V. SHRIRAM MUTUAL FUND [20 06] 131 COMP CAS 591 (SC) ; [2006] 5 SCC 361. THIS VIEW HAS BEEN REITERA TED BY THE HONBLE SUPREME ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 12 COURT IN THEIR DECISION DATED 29.9.2008 IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILE PROCESSORS AND OTHERS IN CI VIL APPEAL NOS.10289 -10303 OF 2003. 8.4 IN THE LIGHT OF PROVISIONS OF SEC. 271(1)(C) OF TH E ACT READ WITH EXPLANATION 1 THERETO AND THE AFORESAID JUDICIAL PRONOUNCEMENTS IT IS WELL ESTABLISHED THAT WHENEVER THERE IS DIFFERENCE BETWEEN THE RETURNED A ND ASSESSED INCOME THERE IS INFERENCE OF CONCEALMENT. THE EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT RAISES A PRESUMPTION THAT CAN BE REBUTTED BY THE ASSESSEE WI TH REFERENCE TO FACTS OF THE CASE. THUS THE ONUS IS ON THE ASSESSEE TO REBUT TH E INFERENCE OF CONCEALMENT. THE ABSENCE OF EXPLANATION ITSELF WOULD ATTRACT PEN ALTY. THE EXPLANATION OFFERED BY THE ASSESSEE SHOULD NOT BE FALSE. IF THE ASSESSE E IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION PENALTY WOULD NOT BE ATTRACTED AUTOMAT ICALLY IF SUCH EXPLANATION IS BONAFIDE AND ALL THE MATERIAL FACTS TO THE COMPUTAT ION OF INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THE ONUS LAID DOWN UPON THE ASSESSEE TO REBUT THE PRESUMPTION RAISED UNDER EXPLANATION 1 WOULD NOT BE DISCHARGED BY ANY FANTASTIC OR FANCIFUL EXPLANATION. IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION HAS TO BE ACCEPTED WHILE MERE OFFER OF INCOME BY THE ASSESSEE CAN NOT JUSTIFY CANCELLATION OF PENALTY. 8.5 IN THE CASE UNDER CONSIDERATION THE DESIRE T O CONCEAL IS APPARENT WHEN THE ASSESSEE WAS NOT MAINTAINING THE ACCOUNTS IN THE CO URSE OF BUSINESS AND INFLATED EXPENSES WERE BEING DEBITED YEAR AFTER YEAR IN THE BOOKS WRITTEN WELL AFTER THE CLOSE OF THE YEAR EVEN WHEN PAYMENTS FOR SUCH EXPEN SES WAS NOT BEING MADE. THE ASSESSEE FAILED TO SUBSTANTIATE THE EXPENDITURE DEBITED IN HIS OWN ACCOUNTS. A VERY HEAVY ONUS WAS PLACED ON THE ASSESSEE TO EXP LAIN THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND RETURNED INCOME AND THE ASS ESSEE DID NOT SUBSTANTIATE THE EXPENDITURE DEBITED IN HIS BOOKS OF ACCOUNTS A T ANY STAGE. IN VIEW OF THE FOREGOING THE DECISIONS RELIED UPON ON BEHALF OF T HE ASSESSEE DO NOT SUPPORT THE ASSESSEE. THE LD. AR ON BEHALF OF THE ASSESSEE MERE LY RELIED ON CERTAIN DECISIONS WITHOUT DEMONSTRATING AS TO HOW THESE DEC ISIONS HELP THE ASSESSEE. IN SHIVLAL TAK(SUPRA) RELIED UPON ON BEHALF OF THE ASS ESSEE THE ASSESSEE SUBMITTED ITS RETURN FOR THE ASSESSMENT YE AR 1978-79 SHOWING TOTAL ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 13 INCOME AT RS. 99 164. THE INCOME-TAX OFFICER NOTICE D VARIOUS DEFECTS IN THE MAINTENANCE OF ACCOUNTS. AFTER DISCUSSION WITH THE ASSESSING OFFICER AND FINDING UNVOUCHED NATURE OF EXPENSES THE ASSESSEE AGREED F OR APPLICATION OF GROSS PROFIT AT THE RATE OF 12 PER CENT ON CONTRACT RECEI PTS SO DECLARED BY THE FIRM TO BE TAKEN AS ASSESSABLE INCOME AND ACCORDINGLY THE AS SESSEE'S INCOME CAME TO RS. 1 27 680.IN RESPECT OF THE SAID ADDITIONS THE ASSESSING OFFICER TAKING SUPPORT FROM EXPLANATION 1 APPENDED TO SECTION 271( 1)(C)(III) INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR LEVYING PENALT Y BY RAISING THE PRESUMPTION UNDER THE EXPLANATION THAT THE ADDITIONS MADE IN TH E TOTAL INCOME RETURNED REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED AND ULTIMATELY LEVIED PENALTY ON FINDING THAT SOME OF T HE EXPENSES REFERRED TO IN THE ORDER HAVING BEEN NOT PROPERLY EXPLAINED EQUAL TO THE AMOUNT OF INCOME HELD TO BE SUCH IN RESPECT OF WHICH PARTICULARS HAVE BEEN C ONCEALED. IN THE LIGHT OF THESE FACTS THE HONBLE HIGH COURT CANCELLED THE PENALT Y SINCE FROM THE PETTY NATURE OF EXPENSES REFERRED TO IN THE ORDER OF RS. 40 RS. 80 RS. 1 480 ETC. THE TRIBUNAL WAS HELD TO BE NOT JUSTIFIED IN HOLDING THAT THE E XPLANATION FURNISHED BY THE ASSESSEE WAS NOT BONAFIDE THE SAME BEING NOT BASE D ON ANY MATERIAL PARTICULARLY WHEN THE ASSESSEE AGREED FOR APPLYING OF GROSS PROFIT RATE PRECISELY FOR THE REASON THAT HE WAS NOT IN POSITION TO VOUCH FOR EACH AND EVERY DETAIL OF THE EXPENSES ENTERED IN THE BOOKS OF ACCOUNT TO SUBSTA NTIATE THE RESULT SHOWN BY HIM. HONBLE HIGH COURT OBSERVED THAT IT WAS NOT P ERMISSIBLE FOR THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS FOR ONE SPE CIFIC BREACH AND DIRECTING ENQUIRY TO ANOTHER SET OF CIRCUMSTANCES WHICH WERE NOT THE FOUNDATION FOR INITIATING PENALTY PROCEEDINGS. BUT SUCH ARE NOT TH E FACTS IN THE PRESENT CASE .IN THE INSTANT CASE AS ALREADY STATED THE ASSESSEE W AS YEAR AFTER YEAR INFLATING EXPENSES IN THE BOOKS WRITTEN WELL AFTER THE CLOSE OF THE YEAR AND NOT WRITING THE BOOKS IN THE COURSE OF HIS BUSINESS. IF THE INCOME HAD TO BE ASSESSED UNDER SECTION 145 OF THE ACT THEN THE PRESUMPTION WOULD BE THAT THE INCOME WAS NOT PROPERLY RETURNED AS HELD BY HONBLE JURISDICTIONA L HIGH COURT IN CIT VS. CHANDRA VILAS HOTEL 291 ITR 202(GUJ) AND LEVY OF PENALTY HA S TO BE UPHELD. IN VIEW THEREOF RELIANCE ON BEHALF OF THE ASSESSEE ON TH E DECISION IN SHIVLAL TAK(SUPRA) IS TOTALLY MISPLACED. ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 14 8.51 LIKEWISE IN SHIVNARAYAN JAMNALAL & CO.(SUP RA) HONBLE MP HIGH COURT HELD THAT THAT THERE WAS NO FRAUDULENT A TTEMPT ON THE PART OF THE ASSESSEE AND THE ASSESSE HAD NOT WITHHELD OR CONCE ALED ANY MATERIAL OR MADE ANY DELIBERATE ATTEMPT TO DEFRAUD THE AUTHORITIES. IN RELIANCE PETRO PRODUCTS(SUPRA) PENALTY WAS IMPOSED FOR CLAIMING EX PENDITURE ON ACCOUNT INTEREST ON THE LOANS INCURRED BY THE ASSESSEE BY WHICH AMOUNT THE ASSESSEE PURCHASED SOME IPL SHARES BY WAY OF ITS BUSINESS PO LICIES. HONBLE APEX COURT HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED T HE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IN IN DIAN METAL & FERRO ALLOYS LTD(SUPRA) THE ASSESSEE CLAIMED DEPRECIATION AND DEVELOPMENT REBATE ETC. IN YEAR BEFORE COMMENCEMENT OF PRODUCTION. HONBLE ORISSA HIGH COURT HELD THAT THE TRIBUNAL WAS JUSTIFIED IN DELETING PENALTY UND ER S. 271(1)(C) LEVIED FOR MAKING A WRONG CLAIM THE CLAIM BEING BONA FIDE. AS IS A PPARENT FROM THE FACTS IN THE CITED DECISIONS THESE DECISIONS ARE NOT OF ANY HEL P TO THE ASSESSEE SINCE FACTS IN THE CASE UNDER CONSIDERATION ARE QUITE AT VARIANCE WITH THE FACTS IN THE CITED DECISIONS. IN THE INSTANT CASE THE ASSESSEE WAS YEA R AFTER YEAR INFLATING EXPENSES IN THE BOOKS WRITTEN WELL AFTER THE CLOSE OF THE YE AR AND NOT WRITING THE BOOKS IN THE COURSE OF HIS BUSINESS. HAD THERE BEEN NO SURVE Y TRUE INCOME WOULD HAVE NOT COME TO LIGHT .THIS IS NOT A CASE OF MERE OMISSION OR NEGLIGENCE. THUS RELIANCE ON THE SAID DECISIONS IS TOTALLY MISPLACED . MOREOVER IN THIS CONNECTION OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD. 198 ITR 257 ARE RELEVA NT WHEN THE HONBLE SUPREME COURT OBSERVED: IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT DIVORCED FROM THE CONTE XT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE ' LAW ' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERV ATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS COURT TAKES I TS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND W HILE APPLYING THE DECISION TO A LATER CASE THE COURTS MUST CAREFULLY TRY TO A SCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 15 FROM THE JUDGMENT DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT TO SUPPORT THEIR REASO NINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA [1971] 3 SCR 9; AIR 1971 SC 530 THIS COURT CAUTIONED (AT PAGE 578 OF AIR 1971 SC). 8.52 IN VIEW OF THE AFORESAID DECISION THE RELIANC E BY THE LD. AR ON VARIOUS DECISIONS REFERRED TO ABOVE IS TOTALLY MISPLACED. 8.6 IN THE CASE OF CIT V. PRATHI HARDWARE STORES [1993] 203 ITR 641 (ORI.) HON'BLE ORISSA HIGH COURT HAVE LAID DOWN THE FOLLOW ING PROPOSITION OF LAW: I). EXPLANATION TO SECTION 271(1)(C) IS THE RULE O F EVIDENCE. II) . THE INITIAL BURDEN OF REBUTTAL IS ON THE ASSE SSEE BECAUSE THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTI ON 106 OF THE INDIAN EVIDENCE ACT. 1872 GIVES STATUTORY RECOGNITION TO THIS UNIV ERSALLY ACCEPTED RULE OF EVIDENCE. III) THERE IS NO DISCRETION ON THE ASSESSING OFFICE R AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. 8.7 IN THE CASE OF USHA FERTILISERS VS. CIT 269 ITR 591(GUJ) WHILE UPHOLDING THE LEVY OF PENALTY HONBLE JURISDICTIONAL HIGH CO URT OBSERVED THAT .THE SUPREME COURT IN THE CASE OF MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 HAS SPECIFICALLY LAID DOWN THE SCOPE OF THE EXPLAN ATION IN THE FOLLOWING WORDS: 'THE POSITION THEREFORE IN LAW IS CLEAR. IF THE R ETURNED INCOME IS LESS THAN 80 PER CENT OF THE ASSESSED INCOME THE PRESUMPTION IS RA ISED AGAINST THE ASSESSEE THAT THE ASSESSEE IS GUILTY OF FRAUD OR GROSS OR WI LLFUL NEGLECT AS A RESULT OF WHICH HE HAS CONCEALED THE INCOME BUT THIS PRESUMPTION CA N BE REBUTTED. THE REBUTTAL MUST BE ON MATERIALS RELEVANT AND COGENT.' AS TO WHAT COULD BE THE EXPLANATION BY WHICH THE AS SESSEE CAN REBUT THE PRESUMPTION RAISED AGAINST IT IS STATED BY THE APE X COURT IN THE SAME DECISION IN THE FOLLOWING WORDS WHILE CONFIRMING THE VIEW EXPRE SSED BY THE FULL BENCH OF THE PATNA HIGH COURT IN THE CASE OF CIT V. NATHULAL AGA RWALA AND SONS [1985] 153 ITR 292 : 'THE PATNA HIGH COURT EMPHASISED THAT AS TO THE NAT URE OF THE EXPLANATION TO BE RENDERED BY THE ASSESSEE IT WAS PLAIN ON PRINCIPLE THAT IT WAS NOT THE LAW THAT THE ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 16 MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION WA S GIVEN THE BURDEN PLACED UPON HIM WOULD BE DISCHARGED AND THE PRESUMPTION RE BUTTED WE AGREE. WE FURTHER AGREE THAT IT IS NOT THE LAW THAT ANY AND E VERY EXPLANATION BY THE ASSESSEE MUST BE ACCEPTED. IT MUST BE AN ACCEPTABLE EXPLANAT ION ACCEPTABLE TO A FACT- FINDING BODY. WE ARE AWARE THAT IT WOULD NOT BE POSSIBLE FOR THE HIGH COURT TO ENTER INTO A FACT- FINDING EXERCISE OR REAPPRECIATE THE EVIDENCE AND W E DO NOT PROPOSE TO DO SO. HOWEVER AT THE SAME TIME IT IS APPARENT THAT THE BURDEN WHICH IS CAST ON THE ASSESSEE REMAINS UNDISCHARGED WHEN ONE APPLIES THE PRINCIPLES LAID DOWN BY THE APEX COURT. AS OBSERVED THE EXPLANATION HAS TO BE ONE WHICH IS NOT FANTASTIC OR UNACCEPTABLE. IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION BY THE ASSESSEE MUST BE ACCEPTED. .' 8.8 THERE IS NO SUBSTANCE IN THE CONTENTION THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED IN ALL CIRCUMSTANCES W HENEVER THE INCOME IS ASSESSED ON ESTIMATE REJECTING THE EXPLANATION OF T HE ASSESSEE. EVEN ON ESTIMATED ADDITIONS LEVY OF PENALTY HAS BEEN UPHEL D.[CIT VS. WARAST HUSSAIN 171 ITR 405(PATNA) COMMISSIONER OF INCOME- TAX TAMIL NADU I MADRAS. VS E. V. RAJAN 151 ITR189(MAD) COMMISSIONE R OF INCOME-TAX.VS HOSHIARPUR EXPRESS TRANSPORT CO. LIMITED. 162 ITR 3 93(PUNJAB & HARYANA) COMMISSIONER OF INCOME-TAX.VS FAZILKA DABWALI TRANS PORT CO. PVT. LIMITED 178 ITR 656 (PUNJAB & HARYANA) ADDL. CIT VS. CHNDRAKAN THA & ANOTHER 205 ITR 607(MP) AM SHAH & CO. VS. CIT 238 ITR 415(GUJ) CIT VS. KRISHNASWAMY & SONS 219 ITR 157(MAD.) ADDL. CIT VS. LAKSHMI INDUST RIES & COLD STORAGE CO. LTD. 146 ITR 492(ALL) AND CIT VS. SWARUP COLD STORA GE & GENERAL MILLS 136 ITR 435(ALL.)]. 8.9 EVEN THE FEEBLE PLEA ON BEHALF OF THE ASSESSEE THAT PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF INCOME WHILE HAS BEEN LEVIED FOR FURNISHING INACCURATE PARTICULARS OF THEREOF IS NOT CORRECT SI NCE BOTH THE AO AND THE LD. CIT(A) HAVE LEVIED PENALTY BECAUSE THE ASSESSEE CON CEALED HIS INCOME BY CLAIMING INFLATED EXPENDITURE I.E FURNISHING INACC URATE PARTICULARS OF SUCH CLAIM OF EXPENDITURE. THE LD. CIT(A) HELD THAT THE ASSESSEE HAD DELIBERATELY MANIPULATED ITS BOOKS OF ACCOUNT IN SUCH A FASHION THAT THERE W AS NO OTHER WAY BUT TO ESTIMATE THE INCOME OF THE ASSESSEE AND THAT THE ASSESSEEE CONCEALED HIS INCOME BY CLAIMING THE INFLATED EXPENDITURE IN HIS BOOKS OF A CCOUNTS. WE AGREE WITH THE LD. ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 17 CIT(A) THAT THIS WAS NOT A CASE OF PURE AND SIMPLE ESTIMATION BUT A CASE OF ESTIMATION FOR THE REASON THAT THE EXPENDITURE CLAI MED WAS DELIBERATELY INFLATED AND THERE WERE VARIOUS WRONG CLAIMS. 8.10 IN THE LIGHT OF THE DISCUSSION MADE ABOVE I T IS THUS CLEAR THAT ALL THE MATERIAL FACTS AND PARTICULARS RELATING TO THE ASSE SSEE'S COMPUTATION OF INCOME WERE NEVER DISCLOSED BY THE ASSESSEE AND IT IS FUR THER CLEAR THAT THE EXPLANATION OFFERED BY THE ASSESSEE HAS NOT BEEN SUBSTANTIATED AND AS WELL AS IT IS NOT FOUND TO BE PLAUSIBLE AND BONA FIDE ONE AND IT IS AGAINST ALL HUMAN PROBABILITIES ESPECIALLY WHEN THE CONDUCT OF THE ASSESSEE SHOWS THAT HE HAS BEEN INFLATING EXPENSES AND HAD BEEN WRITING BOOKS WELL AFTER THE CLOSE OF THE YEAR NOT ONLY IN THE YEAR UNDER CONSIDERATION BUT EVEN IN THE PRECED ING THREE ASSESSMENT YEARS ALSO. IN THIS VIEW OF THE MATTER AND IN THE LIGHT O F DECISIONS OF THE HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT REFERRE D TO ABOVE WE ARE OF THE OPINION THAT THE ASSESSEE HAS NOT BEEN ABLE TO DIS CHARGE THE BURDEN THAT LAY UPON HIM BY EXPLANATION 1 TO S. 271(1)(C) OF THE AC T. WE THEREFORE HAVE TO UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE PE NALTY IMPOSED BY THE AO UNDER S. 271(1)(C) OF THE ACT AND WE ACCORDINGLY UPHOLD T HE SAME. HOWEVER QUANTUM OF PENALTY MAY BE REWORKED IN THE LIGHT OF OUR DEC ISION DATED 24.3.2009 IN ITA NO.545/AHD./2006. 9. IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31-05-2 010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-05-2010 ITA NO.523/AHD/2008 SHYOURAJSINGH B CHAUHAN 18 COPY OF THE ORDER FORWARDED TO : 1. SHYOURAJSINGH B CHAUHAN PROP. OF PERFECT SECURIT Y SERVICES 240 2 ND FLOOR SARVODAYA COMMERCIAL CENTRE SALAPOSE ROAD NR. GPO AHMEDABAD 2. THE ACIT CIRCLE-2 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD