SH. ASHWANI JAIN,NEW DELHI vs. ACIT, NEW DELHI

ORDER PER INTURI RAMA RAO, A.M.: This is an appeal filed by the assessee directed against the order of CIT(A)-XXII, New Delhi, dated 31.12.2012 passed for the assessment year 2007-08. The assessee raised the following grounds of appeal: i. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty of Rs.6,23,046/- and that too without assuming jurisdiction as per law and without considering the facts and circumstances of the case and the impugned penalty order being illegal and void ab-initio. ii. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the penalty order framed by Ld. AO is beyond jurisdiction and without considering the facts and circumstances of the case and the impugned penalty order being illegal and void ab-initio and the impugned penalty order has been framed without considering the submissions/evidences of the assessee and without providing any adverse 2 material on record and without establishing that there was concealment or furnishing of inaccurate particulars of income on the part of the assessee. iii. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned penalty order being contrary to law as the assessment order framed under section 143(3) dated 24-12-2009 and additions made therein were also illegal, beyond jurisdiction and void ab- initio. iv. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s 271(1)(c) on the additions made in the assessment order u/s 143(3) dated 24-12-2009 as these additions are also contrary to law and facts. v. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s 271 (l)( c) is bad in law being beyond jurisdiction and barred by limitation and contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and without giving adequate opportunity to the assessee and without considering the submissions/evidences of the assessee and without providing any adverse material on record and the same is not sustainable on various legal and factual grounds. vi. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned penalty order framed by Ld. AO that too without recording mandatory "satisfaction" as per law. vii. That the assessee craves the leave to add, alter or amend the grounds of appeal

at any stage and all the grounds are without prejudice to each other.

“8.1 I have considered the Observations of the Assessing Officer and Submissions of the Appellant. It is seen that the Appellant is basically challenging 'the imposition of the tax upon him claiming that the addition made on account of unaccounted investment in construction of property. It has been repeatedly claimed that no such documents/paper were found during survey which could justify the investment made by the Appellant and his wife on the construction of the building during F. Y. 2006-07 and therefore there is no justification for addition in the case of the Appellant or in the case of his wife Smt. Kamini Jain. However, these arguments do not give the true picture of the case which is discussed hereunder. 8.2 It is further seen that this is not a case of a forced surrender followed by a retraction. In fact, in this case the surrender had been made was entirely on the basis of documents found in the Survey and subsequently the Assessee and his wife gave letters seeking retraction of the surrender on 6 25.10.2007. However, subsequently it is seen that as per the first two paragraphs on page 5 of the written submissions of the Appellant the retraction of 25.10.2007 was withdrawn. Thus in this case there was a surrender followed by a retraction which was followed by a withdrawal of the retraction. The abovementioned two paragraphs on page 5 of the written submissions of the Appellant have been typed in bold letters in this order on page 14 show that the Assessee withdrew the retraction during the assessment proceedings. In such a situation when the retraction has been withdrawn, there is no point in talking about the retraction as now it is clear that the Assessee has clearly admitted the unaccounted income invested in the construction of property. It is noteworthy that the Assessee himself has stated that the withdrawal of the retraction was done taking the advice of his Counsel. Thus in these circumstances the Assessee cannot even claim that the withdrawal of the retraction was under any duress as it was after due deliberation and after seeking advice of his Counsel. In view of this situation any discussion about the taxability of the amount involved and about the legal position involved in cases of retraction is not at all required. 8.3 It is seen that during the penalty proceedings the Appellant has tried to rake up the issues relating to the quantum of addition and also about the retraction and thus has tried to show the facts as different from what they actually are. However, perusal of the Assessment Order u/s 143(3) dated 24.12.09 in the case shows that Survey u/s 133 A of the Income Tax Act, 1961 was conducted on 20.03.2007 when in addition to excess cash and excess stock being found, some vouchers of expenditure of Rs.45,02,000/- relating to construction were found and as these vouchers were not accounted for in the Books of Account, the Assessee and his wife surrendered this amount of Rs.45,02,000/-, being Rs.22,51,000/- in the hands of the Assessee and Rs.22,51,000/- in the hands of his wife Smt. Kamini Jain. It is seen that after about 8 months on 25.10.2007 the Assessee retracted the surrender. Perusal of the Assessment Order further shows that the property in question i.e. B-14, Industrial Area G.T. Karnal Road was referred to the Valuation Cell for determination of cost of construction on the Plot as on 31.03.2007 and the Valuation Officer vide his report dated 16.12.2009 determined the cost of investment 1 construction as on 31.03.2007 at Rs. l,61,01,272/- as against declared value of only Rs. l,08,29,8591-. The relevant part from the Assessment Order dated 24.12.09 from page 3 and page 4 of the Assessment Oder is reproduced below:- "Further, as per the directions of Addl. CIT, Range-20, New Delhi the property at B-14, Industrial Area, G.T. Karnal Road was referred to the valuation cell for determination of cost of construction on the plot as on 31.3.2007. The Valuation Officer vide his report dated 16.12.2009 has 7 determined the cost of investment/construction as on 31.3.2007 at Rs. 1,61,01,272/- as against declared value of Rs. 1,08,29,859/-. The assessee was provided copy of valuation report for his comments. In compliance thereto the AR of the assessee Sh. Sanjay Aggarwal attended on 23.12.2009 and requested that the DVO has allowed deduction of sale supervision at the rate of 5% only. You are requested to enhance this deduction. The AR of the assessee also requested that the addition of Rs. 22,51,060/- on account of investment in the property as admitted in the statement during the course of survey be made and remaining difference be considered in the case of assessee' wife Smt. Kamini lain. Accordingly, the case was referred to the Addl. CIT, Range-20 for his directions u/s 144A for making proposed addition of Rs. 22,51,000/- on account of investment in the property on the basis of vouchers of expenses found at the time of survey. The Addl. CIT vide letter No. 1185 dated 23.12.2009 approved the proposed additions as per directions reproduced hereunder- "On the basis of facts mentioned in your above referred letter as well as on personal discussion held in my chamber today, where the assessee's AR Shri Sanjay Aggarwal, CA was also present, the additions proposed by you in the case of Sh. Ashwani Kumar lain and Smt. Kamini lain are hereby approved. " In view of all these facts noted above an addition of Rs. 22,51,000/- was made on account of unaccounted investment in construction of property as surrendered by the assessee treated the same as his income from undisclosed sources within the meaning of section 69C. Since the assessee has furnished inaccurate particulars of income/concealed particulars of income, penalty proceedings U/S 271 (J)(c) are initiated separately. " 8.4 Thus it is seen that as against the disclosed value of only Rs.l,08,29,8591-, the value was determined by the Valuation Officer at Rs. l,61,01,272/-, as per which the excess investment amounted to Rs. 52,71,413/-. It is seen that as against this excess amount invested in the construction determined by the Valuation Officer, an addition of only Rs.45,02,0001- was made, being Rs.22,51 ,0001- in the hands of the Assessee and Rs.22,51,0001- in the hands of his wife Smt. Kamini lain after seeking directions u/s 144 A of the LT. Act, 1961 from the Addl. CIT, Range-20. This was done primarily to account for higher deduction for supervision and also to bring the addition in line with the investment in the property as admitted in the statement during the course of Survey. It was on this basis that as against the excess investment determined by the Valuation Cell at Rs.52,71,413/-, addition of only Rs.45,02,0001- was made, 8 Rs.22,5l,000/- in the case of the Assessee and another amount of Rs.22,5l,000/- in the case of his wife Smt. Kamini lain. Thus the claim of the Appellant that the addition of Rs.22,5l,000/- was made merely on the basis of his admission is false as the addition was based not only on the basis of the admission by the Appellant but also on the basis of the documents found during Survey and also on the basis of the actual unaccounted investment made in construction which was determined by the Valuation Cell at Rs. 52,71,413/-, but an addition of only Rs.45,02,0001- was made towards unaccounted investment in the hands of the Assessee and his wife. 8.5 Perusal of the penalty order shows that it was the fault of the Assessee that the documents were not produced. Perusal of the second paragraph on page 1 of the penalty order dated 30.06.2010 shows the following narration:- "In the instant case a survey uls 133A was conducted at the assessee's business premises on 20.3.2007, the assessee surrendered an amount of Rs.45,02,0001- being unaccounted expenditure incurred on construction at B-l4, G.T Karnal Road, Delhi in F. Y 2006-07. This amount was surrendered on the basis of certain vouchers found at the time of survey, copies of which were promised to be produced by the assessee before the AO within a couple of days but which were never produced. " 8.6 Thus it is seen that the addition made on account of unexplained expenditure for construction of property was made not just on the basis of the statement or admission of the Assessee but rather there were vouchers which gave evidence for this unaccounted investment which were found during the course of Survey. These documents were to be produced by the Appellant before the Income Tax Authorities but were never produced. No benefit can be given to the Assessee for his own default. Further, it is seen that the addition was made not just on the basis of the admission of the Assessee and the vouchers found during the course of Survey but rather these were based on the actual unaccounted construction on the site which was determined by the Valuation Officer at Rs. 52,71,413/- but after seeking instructions u/s 144A from the Addl. CIT the addition was restricted to Rs. 45,02,000/-. Thus the addition made in the case is on the basis of 3 aspects i.e. the statement of the Assessee, the vouchers found during the Survey (which were promised to be produced by the Assessee but were never produced again) and the actual unaccounted construction on the site which was determined by the Valuation Officer. 8.7 The Assessee relied upon several judicial decisions in the penalty proceedings before the Assessing Officer and also in the appellate 9 proceedings. The Assessing Officer has observed in the second paragraph on page 4 of the penalty order as under:- " .. .facts of the assessee's case are entirely different from the facts of cases referred by him. Therefore, these decisions did not come to rescue him. Further the AR of the assessee vide letter dated 9.6.2010 also referred decision of Hon'ble Supreme Court in the case of Qilip N. Shroff vs. ClT 291 ITR-519 (SC). The facts of the above referred case of Hon'ble Supreme Court are estimation of investment on the basis of ova whereas in the instant case the assessee surrendered certain investment in construction of properties on the basis of vouchers of expenditure/investment were found during the course of survey and also deposited tax on the surrendered amount but later on retracted from the surrendered and also demanded in his application u/s 144A dated 23.12.2009 that the property in question be get valued from the ova and accordingly to ascertain veracity of facts the case was referred to the ova and the ova confirmed the undisclosed investment in construction as surrendered by the assessee. In view of all these facts the decision referred by the assessee are not applicable in this case. Moreover, the Apex Court's judgment in the case of Dilip N. Shroff vs. ClT (supra) has been reversed by the later judgment in the case of Union of India Vs. Dharmendra Textiles Products (306 ITR 277) (SC)." 8.8 The Assessing Officer has also discussed several other judicial decisions and on the basis of these judicial decisions and the facts of the case, held as under in the last paragraph of page 5 and the first paragraph of page 6 of the penalty order :- "Thus it is clear from the above that the assessee had knowingly, intentionally and fraudulently concealed particulars of income on account of unaccounted investment in construction of property as surrendered during the course of survey and neither proved during the assessment proceedings nor penalty proceedings the assessee could adduce any evidence in support of its claim. Accordingly, in view of the above facts and further deriving support from the judicial decision supra, 1 hold that the assessee has furnished inaccurate particulars of income and thereby concealed its income for the year under consideration. Consequently, as the default of the assessee U/S 271(l)(c) is established. " 8.9 It is seen that the Assessee has tried to twist the facts of the case to claim that it was only on the basis of the statement of the Assessee that the addition was made and that the penalty was imposed only because the addition was made. However, this is not the case as seen above and it is 10 held that the Assessee deliberately concealed the particulars of his income, and furnished in-accurate particulars of such income. It is seen that not only unaccounted construction in property was done by the assessee but also the Assessee very actively tried to evade the imposition of tax. The vouchers evidencing the unaccounted investment in construction were found during the Survey and the Assessee in an attempt to evade the taxes surrendered the income and promised to produce the vouchers, which he never produced. Subsequently after about 8 months the Assessee retracted his admission. However, after the valuation by the Valuation Officer determined the unaccounted investment in construction at Rs. 52,71,413/-, the Assessee withdrew the retraction and requested the income tax authorities to make the addition in line with his earlier statement to restrict the addition to only Rs.45,02,000/ -. Now the Appellant seeks to claim as if the addition was made only because of his statement whereas that is far from the truth and the addition had been made for the unaccounted income invested in the construction. In view of the entire facts and circumstances of the case it is held that penalty u/s 271(l)(c) is imposable upon. the Assessee and the penalty of Rs. 6,23,046/- imposed by the Assessing Officer vide order u/s 271(1)(c) dated 30.06.2010 upon the Assessee for A.Y. 2006-07 is hereby confirmed.

Being aggrieved by the order of CIT(A), the assessee is before us with the present appeal.

“83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations.