The judgment of the court was delivered by
Ajay Kumar Mittal,J.- This order shall dispose of ITA Nos.386, 390 and 412 of 2014 as according to the learned counsel for the parties, the issue involved in all these appeals is identical. However, the facts are being extracted from ITA No.386 of 2014.
2. ITA No.386 of 2014 has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.3.2014, Annexure A.9 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' in ITA No.1062/CHD/2012, for the assessment year 2002-03, claiming following substantial question of law:-
“Whether on the facts and circumstances of the case, the Tribunal order is unreasonable, while justifying the levy of penalty under section 271(1)(c) on estimated brokerage income and qua non discharge of burden under section 271(1)(c) Explanation 1 w.e.f 1.4.1976 in accordance with National Textiles vs. CIT (2001) ITR 125 (Gujarat)?”
3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.386 of 2014 may be noticed. The appellantassessee is a Fellow Chartered Accountant by profession and operating from his office cum residence at 94-D, BRS Nagar, Ludhiana. A survey was conducted under Section 133A of the Act at the premises of the appellant. The statement of the appellant was recorded on 15.6.2004. Thereafter on 6.7.2004, notice under section 148 of the Act was issued to the appellant on 13.7.2004. The appellant made a surrender of Rs. 27,00,000/- in the assessment years 2004-05 and 2005-06 i.e Rs. 15,00,000/- and Rs. 12,00,000/- respectively. Thereafter, in response to the notice dated 6.7.2004 under section 148 of the Act, the appellant filed return of income on 30.3.2005 declaring an income of Rs. 45,000/- and the assessment under Section 147 read with section 143(3) of the Act was completed on 30.3.2006 at an amount of Rs. 1,16,94,211/-. Penalty proceedings were initiated and notice under Section 274 read with section 271 of the Act was issued on 30.3.2006 which was served on the assessee on 31.3.2006. Aggrieved by the quantum order dated 30.3.2006, the appellant filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] who vide order dated 29.9.2008, Annexure A.4 partly allowed the appeal. Both the appellant and the revenue filed appeals before the Tribunal. On 15.6.2009, the appellant requested that the penalty proceedings should be kept in abeyance till the decision of the appeal in the Tribunal. Subsequently, again a show cause notice dated 26.2.2010 qua penalty under section 271(1)(c) of the Act was issued to the appellant on 3.3.2010 and in response to the notice, the appellant on 22.3.2010 prayed to keep the penalty proceedings pending till the decision of the Tribunal. On 31.3.2010, Annexure A.5, the Assessing Officer imposed penalty of Rs. 27,95,170/- under section 271(1)(c) of the Act for concealment and furnishing inaccurate particulars of income. Vide quantum order dated 29.4.2010, Annexure A.6, the Tribunal partly allowed the appellant's appeal and dismissed the revenue's appeal. Aggrieved by the quantum order of the Tribunal dated 29.4.2010, the revenue filed appeal before this court as ITA No.36 of 2011 and against the same quantum order of the Tribunal, the appellant filed cross appeal i.e. ITA No.365 of 2011. ITA No.36 of 2011 was dismissed on 14.11.2011 and ITA No.365 of 2011 was dismissed vide order dated 21.5.2014. Aggrieved by the penalty order dated 31.3.2010, the appellant filed appeal before the CIT(A) inter alia on various grounds like income of the appellant had been taken on estimation basis; no penalty could be levied on such estimation of income etc. The assessee filed written submissions. The CIT(A) dismissed the penalty appeal vide order dated 17.7.2012, Annexure A.8. The appellant filed appeal before the Tribunal which was also dismissed vide order dated 24.3.2014, Annexure A.9. Hence the instant appeals by the appellant-assessee.
4. We have heard learned counsel for the parties.
5. Learned counsel for the appellant-assessee submitted that income of the assessee was determined on the basis of estimate only. In such a situation, levy of penalty for concealment of income under Section 271(1) (c) was uncalled for. The Tribunal was thus in error in maintaining the levy of penalty on the assessee. Reliance was placed on judgment of Gujarat High Court in National Textiles vs. CIT, (2001) 249 ITR 125.
6. Learned counsel for the revenue while supporting the findings recorded by the Tribunal urged that there was concealment of income by the assessee and penalty under Section 271(1)(c) of the Act had been rightly imposed.
7. A perusal of the findings recorded by the Tribunal show that the assessee had not furnished his return of income for the year under consideration within the time allowed under section 139 of the Act. Survey operations were carried out under Section 133A of the Act at the office premises of the appellant who was engaged in giving accommodation/book entries on account of long/short term capital gains/gifts/loans by charging commission. The modus operandi was that cash received from different beneficiaries was deposited in various bank accounts of the appellant, his family members and other share brokers from where cheques were issued in favour of clients for bogus capital gains/share profits/gifts etc. The appellant in his statement recorded during the course of survey operation on 15.6.2004 admitted to have issued cheques/drafts for bogus profits in return of the cash provided to him by his clients. The appellant also disclosed the names of various concerns under which he was carrying on his business and also the bank accounts from where cheques/drafts were issued. The appellant after the conclusion of the survey vide letter dated 1.3.2005 made surrender of Rs. 27 lacs i.e. Rs. 15 lacs relating to the assessment year 2004-05 and Rs. 12 lacs relating to the assessment year 2005-06. The income surrendered by the appellant was disclosed in the return of income furnished for the assessment years 2004-05 and 2005-06. The appellant had not furnished any return of income since after the assessment year 1996-97 till the date of survey on 25.6.2004. Information was collected during the survey operation that the business was being carried out in the earlier years also. In view of the information gathered during the survey, the Assessing Officer found that the appellant's income relevant to the assessment year 2002-03 had escaped assessment within the meaning of section 147 of the Act and hence proceedings under Section 148 of the Act were initiated. The investments made by the assessee were not declared and thus there was clear cut case of concealment. The relevant findings recorded by the Tribunal read thus:- -
“17. Now only question which is required to be considered whether the penalty can be levied in cases where income has been estimated. We are of the opinion that the learned CIT(A) has correctly observed that it would depend on the facts of each case. In this regard let us consider the case laws relied on by the learned counsel for the assessee. We may observe that the learned counsel for the assessee has relied on many judgments, therefore,we are discussing them in short. Firstly we consider the decisions of Tribunal relied on by the learned counsel for the assessee.
i) First decision relied on is in case of Aggarwal Construction Co. vs. ACIT, ITA No.843/Chd/2009. In this case the assessee has declared net profit at 10% which was ultimately estimated at 12%. Penalty was levied under section 271(1)(c) and the matter travelled to the Tribunal which observed that it was mainly a case of substitution of one estimate by another, therefore penalty consequences were not attracted. Thus in this case purely estimate was made instead of 10% - 12%.
ii)Second case relied on is in case of Bharti Airtel Limited vs. CIT(supra). In that case the addition was made on account of disallowances under Section 14A read with Rule 8D. The Tribunal observed that applicability of rule 8D itself was doubtful in assessment year 2007-08 and therefore penalty was deleted particularly because the assessee had made all the disclosure. We find rule 8D was held not to be applicable in assessment year 2007-08 by Hon'ble Bombay High Court in case of Godrej and Boycee vs. DCIT 328 ITR 81 (Bom.). Therefore, even if addition was made it was made on account of doubtful item and in any case the particulars have been disclosed by the assessee, therefore, penalty was correctly deleted.
iii)Next case relied on is in case of Fine Line Construction Pvt. Limited vs. ACIT (supra) of Delhi Bench of the Tribunal. In that case the books of account were rejected and net profit rate of 5% was applied. Penalty was deleted as it was a case of simply estimate.
iv)Next case relied on is in case of Deepshikha Maheshwari vs. ITO(supra) where the addition was made on account of undisclosed investment in construction on the valuation made by DVO. The DVO had applied CPWD rates which was revised by the Tribunal and it was directed to apply PWD rates. In these circumstances penalty was deleted.
v)Next case relied on by the learned counsel for the assessee is that of PPP Associates vs. ACIT (supra). In that case also a survey was conducted and certain business income was unearthed during survey for various years. Ultimately profit was estimated at 1.5%. Ultimately even the Tribunal confirmed the penalty in respect of assessment year 1988-89 and 2001-02. However, penalty was deleted for assessment year 2003-04 to 2005-06 because the assessee still had not filed the return. Other decisions relied on by the learned counsel for the assessee are of similar pattern.
18. Now let us consider the decisions of various Hon'ble High Courts relied on by the learned counsel for the assessee.
i) CIT vs. Metal Products of India (supra). The assessee filed return of income for Rs. 52416/- on the basis of books of account maintained. The books of account were rejected and addition of Rs. 149624/- was made which was reduced to Rs. 8000/- by AAC. On the balance amount penalty of Rs. 12000/- was levied. The penalty was deleted by observing that merely because the addition has been made on estimated basis by adopting a view that gross profit shown in the books was too low did not automatically lead to the conclusion that there was a failure to return the correct income by means of fraud, gross or wilful income. This decision is totally distinguishable because later on Exp. (i) was inserted to Section 271(1)(c) which shifted the burden to the assessee to prove that there was no concealment. Moreover Full Bench of the Hon'ble Supreme Court in case of Union of India vs. Dharmendra Textiles (supra) has clearly held that there is no need to prove means rea in case of penalty leviable under different statutes.
ii)Next case relied on is CIT vs. M.M.Rice Mills (supra). In this case the assessee had filed return of income for Rs. 63310/-. Additions were made to the tune of Rs. 145200/- on account of khundi phak and on account of chhilka. Penalty was deleted by the court by confirming the order of CIT that no concealment was established. As observed earlier there is no need to establish the concealment by the department. This aspect we shall discuss later on.
iii)Next case relied on is CIT vs.Dhillon Rice Mills (supra). In this case also the decision of CIT vs. Metal Products has been followed and it was observed that concealment was not proved, therefore penalty could not be imposed.
iv)Next case relied on by the learned counsel for the assessee is that of CIT vs. Valimkbhai H.Patel (supra). In this case the assessee has filed return of income declaring loss of Rs. 337414/-. Income was assessed at Rs. 294480/-. The addition was mainly on account of loss of salt for which a certificate from Deputy Commissioner was filed. However, the Assessing Officer accepted the loss but reduced the value of the salt from Rs. 118 to Rs. 80. Penalty was deleted mainly by following the earlier decision of Hon'ble Punjab and Haryana High Court in case of CIT vs. Prithipal Singh and co. 183 ITR 69 wherein it was observed that mere reduction in loss would not lead penal consequences. ..........
In case before us also the surrender was not made voluntarily and the documents were found in this assessment year, still the assessee had not bothered to file any return. Even in assessment year 2004- 05 and 2005-06, only part of income was declared therefore the assessee has clearly concealed the particulars of his income which would attract penal consequences.”
The Tribunal after considering the case law on the point recorded the finding and concluded as under:-
“In case before us also the surrender was not made voluntarily and the documents were found in this assessment year still the assessee had not bothered to file any return. Even in Assessment year 2004- 05 and 2005-06 only part of income was declared therefore the assessee has clearly concealed the particular of his income which would attract penal consequences.”
This said finding has not been shown to be illegal or perverse in any manner by the learned counsel for the appellant-assessee.
8. Adverting to judgment in National Textiles's case (supra) relied upon by learned counsel for the assessee therein, it was held that in order to justify levy of penalty for addition of cash credits, there must be some material or circumstances leading to reasonable conclusion that the amount does represent assessee's income and the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars. Explanation 1 to Section 271(1)(c) does not make the assessment order conclusive evidence that the amount assessed was infact the income of the assessee. There is no quarrel with the proposition of law enunciated. However, in the present case, there is concealment of income by the assessee as rightly held by the authorities below.
9. Learned counsel for the appellant has not been able to show that the findings recorded by the Tribunal are perverse or erroneous in any manner. Thus, no substantial question of law arises. Consequently, the appeals stand dismissed.