C I T ALWAR vs. ASHOK KUMAR JAIN

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 8 / 2013 The Commissioner of Income Tax, Alwar ----Appellant Versus Shri Ashok Kumar Jain, Prop. M/s Kumar Construction & M/s Jain Poles, 21, Scheme No. 10, Alwar ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain with Ms. Shiva goyal For Respondent(s) : Mr. Gunjan Pathak with Ms. Ishita Rawat _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 20/07/2017

(2 of 6) [ITA-8/2013] where return was filed on 1st November, 2007 and 25th December, 2008 and survey was conducted on 25th November, 2009 and disclosure was made for the assessment year 2007-08 in 2 crore, for 2008-09, 5 crores and for 2009-10, 1 crore in spite of the finding arrived at by the AO in proceedings which reads as under:- “On the basis of examination of account books and vouchers etc, it was noticed that the assessee has been claiming bogus expenses and showing bogus liabilities etc. it was also noticed that the undisclosed income of the assessee was brought back to his account books through accommodation entries taken by the assessee. All these facts were clearly admitted by him in his statement recorded during the course of survey in the presence of his C.A. and Accountant etc. He stated that he had booked bogus expenses to reduce the tax liability and shown non genuine liability on account of expenses. He admitted that he had non genuine liabilities of Rs. 2 Crores in the assessment year 2007-08, Rs. 1 Crore in the Asstt. Yead 2008-09 and Rs. 1 Crore in AY 2009-10. On the basis of highly incriminating cash book and other documents found, the assessee admitted to have obtained bogus accommodation entries of Rs. 4 Crores in the Asstt. Yead 2008-2009 through one Sh. Subhash Chand Gupta, Chartered Accountant, New Delhi, which have been surrendered as above. However, the assessee through a letter dated 10.12.2009 admitted undisclosed income of Rs. 1.50 Crores as against Rs. 2 Crores on account of bogus liabilities in the Asstt. Year 2007-08.” 4. After considering the matter, the AO has imposed penalty after considering the concealment and other documents. However, CIT(A) merely observing in para 4.3 which reads as under:- “4.3. I have gone through the penalty order as well as submission of the assessee and cases relied upon, the assessee originally surrendered Rs. 2 Crore which was finally revised in computation of income at Rs. 1.5 Crore on adhoc basis without reference to any specific creditor/employee. The list of creditor of Rs. 1.5

(3 of 6) [ITA-8/2013] Crore was not identified by the AO. Further, this liability paid by the assessee subsequently as the old items of the installation has to be deposited with JVVNL. The JVVNL also releases the payment after verifying the inventory. The payments to either creditor or the employee were made subsequently when payment received from JVVNL. The assessee has filed a liability chart of unpaid salary of staff, SD deposited from the employees, bonus payable and salary payable during the course of appellate proceedings. On verification of this chart it is found that the assessee has paid the liability subsequently. The adhoc disclosure was made to buy peace and was not concealed income of the assessee or in respect of inaccurate particulars. The assessee had admitted the additional income during the course of survey on the basis of adhoc outstanding liabilities. The accommodation entry mentioned in the penalty order are not specific wrt liabilities. If any accommodation entries were taken through the Shri Subhash Chand Gupta, CA New Delahi is pertained to AY 2008-09. The AO had not mentioned in penalty order any incriminating books of account found during the course of survey. The regular books were produced before the survey and after the survey. The AO himself had accepted the reduced disclosure without any obhjection. The assessee did not produce the exemption certificate to claim 80G deduction for Rs. 85,500/- but particulars of income had been disclosed and claimed by the assessee in his return. The AR relied upon various decisions in his explanation which supports the assessee’s claim. The assessee has disclosed the facts relating to the income before the AO. As penalty u/s 271(1)(c) is having quashi criminal nature, the burden lies on the department to establish that assessee has concealed income or furnish inaccurate particulars. In penalty proceedings the matter must be considered afresh from an angle different from assessment. The AO did not gather any incriminating material during the course of survey or during post survey inquiry. By mare surrendering the additional income does not amount to concealed income or inaccurate particulars. Therefore, penalty imposed by the AO of Rs. 50,77,800/- is deleted.” 5. Counsel for the appellant has relied upon the decision of Gujarat High Court in case of LMP Precision Engineering. Co. Ltd.

(4 of 6) [ITA-8/2013] vs. Deputy Commissioner of Income Tax reported in [2011] 330 ITR 93 (Guj.), in our considered opinion in view of the facts which are narrated in para 2 as under:- “2. The assessment years in question are 1985-86, 1986-87 and 1987-88. The respective accounting periods are years ended on 30th June, 1984, 30th June, 1985 and 30th June, 1986. The assessee, a private limited company, was assessed on total income of Rs. 34,75,190 on 28th May, 1986 under Section 143(3) of the Act for asst. yr. 1985-86. Similarly, the assessment was completed on 3rd June, 1987 at a total income of Rs. 56,14,730 for asst. yr. 1986-87. For asst. yr. 1987-88 the assessment was completed on 1st March, 1988 computing the total income at a sum of Rs. 46,10,500. Subsequently, for asst. yr. 1985-86 a revised return of income was filed on 14th Feb., 1989 disclosing additional income of Rs. 54,71,463. For each of the two subsequent years viz. asst. yrs. 1986-87 and 1987-88, revised returns were also filed on 14th Feb., 1989 disclosing additional income of Rs. 18 lacs for each of the two assessment years. Thereafter, on 30th March, 1990, the revised return of asst. yr. 1985-86 was further revised upward by disclosing additional income of Rs. 78,56,613 under forwarding letter dt. 30th March, 1990.” 6. It is clearly stated that after the reassessment the income comes to Rs. 2,26,03,078/- and the penalty was imposed. She has also relied upon the decision of Supreme Court in case of Mak Data P. Ltd. Commissioner of Income Tax reported in [2013] 358 ITR 593 (SC) wherein para 10 it has been held as under:- 10. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the Assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share

(5 of 6) [ITA-8/2013] transfer deeds duly signed, have been impounded in the course of survey proceedings Under Section 133A conducted on 16.12.2003, in the case of a sister concern of the Assessee. The survey was conducted more than 10 months before the Assessee filed its return of income. Had it been the intention of the Assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the Assessee had no intention to declare its true income. It is the statutory duty of the Assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the Assessee had concealed true particulars of income and is liable for penalty proceedings Under Section 271 read with Section 274 of the Income Tax Act, 1961. 7. Counsel for the respondent has taken us to the order of Tribunal and contended that in view of the observations made by the Tribunal and decision relied upon rendered by Madras High Court in the case of CIT vs. M/s Cafco Syndicate Shipping Co. 2007-TIOL-599-HC-MAD-IT, DCIT vs. Bhanwar Lal Mahendra Kumar Soni 54 DTR 271 (JD) (Trib) (2011) and Dilip Yeshwant Oad vs. ACIT 55 DTR 113 (Pune ‘B’) (2011), the Tribunal after discussing the law upheld the order of CIT(A) and dismissed the appeal. 8. We have heard counsel for both the sides. 9. Taking into consideration the first finding by the CIT(A) and affirmed by the Tribunal holding that mere concealment will not be the case for penalty but there should be some evidence to establish that it was a concealment. Mere disclosure on the contrary as facilitated by the AO is no reason for adding income.

(6 of 6) [ITA-8/2013] 10. We are in complete agreement with the view taken by the authorities. The issue is required to be answered in favour of the assessee against the department. 11. The appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/62