Ita/164/2014 Of Jawahar Lal Jain Huf Karta v. Commissioner Of Income Tax Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.164 of 2014 (O&M)Date of decision: 15.9.2014 Jawahar Lal Jain (HUF) Vs, ..-.-- Appe Commissioner of Income Tax, Chandigarh .....Responde CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Pankaj Jain, Sr.Advocate withMr. Divya Suri and Mr. Sachin Bhardwaj, Advocates for theappellant. Ajay Kumar Mittal,J. 1.|The delay in refiling the appeal is condoned. 2.This appeal has been preferred by the assessee under Section260A of the Income Tax Act, 1961 (in short, “the Act’) against the orderdated 27.8.2013, Annexure A.22 passed by the Income Tax AppellateTribunal, Chandigarh Bench ‘A’ (in short, “the Tribunal’) in ITANo.725/CHD/2011 for the assessment year 2007-08, claiming followingsubstantial questions of law:- “1. Whether under the facts and circumstances of the case, thepenalty proceedings under section 271(1)(c) are distinct fromthe quantum proceedings under section 143(3), thus requiringindependent examination and appreciation of material facts containing material particulars on merits thereof? i1) Whether under the facts and circumstances of the case and onconsideration of the additional evidences, the admission thereoffor case adjudication is necessarily to be examined? 3.A few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed. The business ofjewelleryis being carried by the HUF under the name and style of Nikka Mal BabuRam (JJ Group) and the constitution of the group is namely Nikka MalBabu Ram and Sons controlled by Shri Kamal Kant Jain and his sonMandeep Jain; Nikka Mal Babu Ram and Sons (the Jewellery Arcade) runby Akhil Jain and Smt.Pooja Jain and Nikka Mal Babu Ram and Sons (JJGroup) by appellant Jawahar Jain (HUF) and other coparcener Rohit Jain,Neeraj Jain (Sons) - proprietary concern of appellant (HUF). The appellantwas covered by action of search under Section 132 of the Act on27.10.2006. A consignment of gold belonging to the appellant being stockin trade (business asset) was received at residence No.67, Sector 8Chandigarh on 26.10.2006. The trading account dated 27.10.2006 atAnnexure A.2 was required to be prepared by the appellant during searchproceedings qua the value of stock of gold, diamond which had been valuedby the respondent department. Surrender of|“a250 crores was madeattributable to cash found 1.e.L50 lacs, excess gold |75.34 lacs, excessdiamond (stock)41.20 croes in statement made under section 132(4) of theAct on 30.10.2006. Thereafter, jurisdiction over the appellant wastransferred to Deputy Commissioner of Income Tax (DCIT), Central CircleI, Chandigarh under section 127 of the Act through order being effectivefrom 9.2.2007 as a consequence to search. The assessment proceedings wereinitiated on 24.6.2007 through issuance of notice under section 142(1) of the Act for preceding six years namely w.e.f assessment year 2001-02onwards. Notice under section 153A of the Act was issued requiring theassessee for filing the return of income in consequence to the searchproceedings. In pursuance thereof, return of income dated 31.7.2007 wasfiled at<a1,06,48,173/- containing the amount from regular sources ofincome amounting to.<48,27,928/- and the balance amount of<58,20,245/-attributable to the discrepancies found and after reconciling with thecorroborative material facts containing material particulars. A questionnairewas issued on 4.6.2008 to the assessee asking for reasons for variance of thedeclaration made being=2.90 crores whereas charged to tax wasLT58 lacs.Written submissions were furnished by the appellant on 26.12.2006submitting that chargeability was in consonance with the declaration madebefore the ADI conducting search proceedings. The appellant furthersubmitted written submissions before the respondent Director ofInvestigation to the effect that having made reconciliation withcorroborative material and on adopting the respondent department'svaluation report dated 8.11.2006 at L5,25,94,746/-, the difference came tozy57 lacs qua diamond jewellery. Subsequently, the revised return of incomewas filed on 2.12.2008 declaring income of.Ly2,98,41,628/- which includedthe amount of|“a48,41,628/- from the regular sources of income andadditionally LT2.90 crores attributable for the discrepancies for the purposeof settling the controversy but the said return had been treated as non estbeing beyond the permitted period under section 139(5) of the Act whichended on 31.3.2008. The assessment was completed under section 143(3)read with section 153A of the Act on 30.12.2008, Annexure A.13. Theaforesaid assessment order was accepted and the tax was paid on 8.12.2008, ITA No.164 of 2014 (O&M) A Annexure A.14 without having challenged the same in appellateproceedings before the Commissioner of Income Tax (Appeals) [CIT(A)],the Tribunal etc. Penalty proceedings under section 271(1)(c) of the Actwere initiated through notice issued on 30.12.2008, Annexure A.15. Writtensubmissions were furnished by the assessee. After examining the matter,penalty under section 271(1)(c) was levied on 23.6.2009, Annexure A.18 atLV67,/5,500/-. The said order was challenged before the CIT(A) by theassessee. Vide order dated 26.5.2011, Annexure A.20, the CIT(A) dismissedthe appeal. Still not satisfied, the assessee filed appeal before the Tribunaland prayer was made for admitting the additional evidences under Rule 29of the Income Tax (Appellate Tribunal) Rules, 1963. Vide order dated27.8.2013, Annexure A.22, the Tribunal dismissed the appeal, upholding thelevy of penalty under section 271(1)(c) of the Act and rejecting the prayerfor admission of additional evidences. Hence the instant appeal by theasseSS@e€. 4We have heard learned counsel for the appellant and perused the record.5.A perusal of application for additional evidence filed before theTribunal (copy appended as Annexure A.21) shows that the assessee hadtried to produce affidavits of certain customers to show that it was their goldwhich was lying with the assessee. Further, through the additional evidencethe stock of diamond jewellery lying with the assessee is sought to beestablished as belonging to the suppliers one of which was M/s IraDiamond. We find that not only these affidavits but also the statement ofstock furnished by M/s Ira Diamond are only a result of an after-thought and an attempt to show which otherwise does not appear to be existing on facts. The search was conducted at the premises of the assessee on 27.10.2006 andthe assessee had made a statement on oath under Section 132(4) of the Acton 30.10.2006. The assessee while admitting unaccounted income of||25crores had inter alia stated as under:- “IT have gone through the provisions and understood the same. did consult my legal adviser on the said provisions. Therefore, |hereby state that the following assets have been found in excessthan recorded in my regular books of account:- an attempt to show which otherwise does not appear to be existing on facts. The search was conducted at the premises of the assessee on 27.10.2006 andthe assessee had made a statement on oath under Section 132(4) of the Acton 30.10.2006. The assessee while admitting unaccounted income of||25crores had inter alia stated as under:- “IT have gone through the provisions and understood the same. did consult my legal adviser on the said provisions. Therefore, |hereby state that the following assets have been found in excessthan recorded in my regular books of account:- 1) Excess cash at home=a50 lakh 11) Excess gold stock ofLT75.34 lakh M/s Nikka Mal Babu Ram iv)Excess stock of diamondzy1.20 crores Therefore, | hereby admit an amount of LT25 crores asincome in excess of my regular income in the current yearand I promise to pay the taxes voluntarily on the income ofLT2.5 crores in the current assessment year. I further requestthat the amount of<50 lakh, which has been seized from myresidence may be admitted towards payment of taxes.” The application for additional evidence producing certain documents so as to retract from the said statement was filed under Rule 29 of the IncomeTax (Appellate Tribunal) Rules, 1963 in 2012 after almost expiry of sixyears and that too during the course of penalty proceedings at second appealstage. The additions of unexplained income had been made by the AssessingOfficer during the assessment proceedings and the assessee had acceptedthe tax liability and paid taxes amounting to’LT63,81,840/- as no appeal wasfiled against the assessment order. In the revised return filed on 2.12.2008,the surrendered amount of=a25 erores was shown therein when theassessee was cornered during the assessment proceedings. Even during thepenalty proceedings before the Assessing Officer and the CIT(A), there was ITA No.164 of 2014 (O&M) nothing to show that the jewellery tound at the premises of the assessee on27.10.2006 was accounted money with the assessee. No_ satisfactoryexplanation had been furnished to demonstrate why the material sought tobe produced now could not be produced earlier. Thus, in our opinion, inview of the above, the Tribunal was justified in rejecting the application for additional evidence filed by the assessee. onAdverting to the merits of the controversy, it may be noticedthat the Assessing Officer after appreciating the material evidence on recordconcluded as under:- “I have carefully gone through the submissions offered by theassessee and found that the explanation offered by the assesseewas found to be a false one and not bonafide. Further theexplanation is considered not to be correct and the same iswithout any merits on the following grounds:- 1) Assessee has not declared the surrendered amount which waoffered by him for taxation in his statement recorded undersection 132(4) during the course of search and seizureoperation.offered by him for taxation in his statement recorded undersection 132(4) during the course of search and seizureoperation. i1) He has not disclosed accurate particulars of taxable income ihis return of income filed for the assessment year 2007-08.his return of income filed for the assessment year 2007-08. i11)Assessee has made attempts to avoid taxes by way offurnishing a revised valuation report prepared by someunknown person in absence of any authorized officer of thedepartment.furnishing a revised valuation report prepared by someunknown person in absence of any authorized officer of thedepartment. iv)Assessee has retracted from his statement which wasrecorded during the course of search and seizure operation.He was specifically asked regarding the genuineness andauthentication of valuation report prepared in his presenceand also in presence of two independent witnesses.recorded during the course of search and seizure operation.He was specifically asked regarding the genuineness andauthentication of valuation report prepared in his presenceand also in presence of two independent witnesses. i11)Assessee has made attempts to avoid taxes by way offurnishing a revised valuation report prepared by someunknown person in absence of any authorized officer of thedepartment.furnishing a revised valuation report prepared by someunknown person in absence of any authorized officer of thedepartment. iv)Assessee has retracted from his statement which wasrecorded during the course of search and seizure operation.He was specifically asked regarding the genuineness andauthentication of valuation report prepared in his presenceand also in presence of two independent witnesses.recorded during the course of search and seizure operation.He was specifically asked regarding the genuineness andauthentication of valuation report prepared in his presenceand also in presence of two independent witnesses. v) Assessee has furnished inaccurate particulars in respect obogus claim of receipt of consignment, receipt of goods fromcustomers and claim of a calculation mistake in valuation ofbogus claim of receipt of consignment, receipt of goods fromcustomers and claim of a calculation mistake in valuation of jewellery. vi)Assessee has also made a wrong statement that the wholeStone jewellery and silver items were disclosed in VDIS1997 scheme.Stone jewellery and silver items were disclosed in VDIS1997 scheme. vil)Assessee has not disclosed the accurate value of platinumfound and valued during the course of search and seizureoperation.found and valued during the course of search and seizureoperation. Keeping in view the all above facts and circumstances, ithas been established that the assessee has failed to disclosethe true particulars of income in the return of income filed byhim. Moreover, he has also furnished inaccurate particularswhich were found wrong during the course of assessmentproceedings. Therefore, I am of the opinion that the default ofthe assessee is liable to impose a penalty under Section 27](1)(c) of the IT Act, 1961, therefore penalty is imposed in thiscase as per the provisions of the Income tax Act.” va vaThe CIT(A) aftirmed the aforesaid order of penalty, which wasupheld by the Tribunal with the following observations:- “14. We have heard the rival submissions carefully and do notfind force in the submissions of the learned counsel of theassessee. First of all admittedly during search excess cash,stocks of excess gold, diamond, platinum, silver was found andinitially assessee voluntarily agreed to surrender all these itemsof cash and stock by way of surrender ofa2.9 crores. Duringstatement recorded, no objection was raised to the valuation. Inthe statement itself it was clarified that the assessee hasdiscussed with his lawyer before making the surrender. J///////////////////17. In nutshell 1t can be said that the assessee had surrendered asum of.=a2.5 crores and he could have easily sought immunityagainst the penalty under explanation 5 to section 271(1)(c).However, the assessee did not own his commitment andretracted from the declaration made during search and did notinclude the amount of surrendered income in the original return filed by him. The assessee filed revised return on 2.12.2008through which surrender amount has been included in the returnbut this has clearly been done after the assessee was againcormered during the assessment proceedings. In any case asobserved by the learned CIT(A) mere filing of revised returnwould not grant any immunity to the assessee from levy ofpenalty. In this regard he referred to section 139(5) which readsas under:- (5) If any person, having furnished a return under sub section(1), or in pursuance of notice issued under sub section (1) ofsection 142 discovers any omission or any wrong statementtherein, he may furnish a revised return at any time before theexpiry of one year from the end of the relevant assessmentyear or before the completion of the assessment, whichever isearlier.” filed by him. The assessee filed revised return on 2.12.2008through which surrender amount has been included in the returnbut this has clearly been done after the assessee was againcormered during the assessment proceedings. In any case asobserved by the learned CIT(A) mere filing of revised returnwould not grant any immunity to the assessee from levy ofpenalty. In this regard he referred to section 139(5) which readsas under:- (5) If any person, having furnished a return under sub section(1), or in pursuance of notice issued under sub section (1) ofsection 142 discovers any omission or any wrong statementtherein, he may furnish a revised return at any time before theexpiry of one year from the end of the relevant assessmentyear or before the completion of the assessment, whichever isearlier.” The above clearly show that right to file the revised return isavailable only if an assessee discovers any omission or anywrong statement therein. In the case before us, there is nojustification at all in revising the return. Firstly, the assesseesurrendered the income during search on account of excess cashand stock then retracted from the same and submitted before theInvestigation Wing that value of diamond jewellery is_ correctand some other mistakes are there. But no good reasons havebeen given after having accepted excess cash and stock ofexcess gold and diamond jewellery. Even valuation and theprocess of valuation by S/Sh. Bhartesh and R.K.Gupta wasaccepted in the statement recorded under section 132(4) asnoted above. In this regard we recall the decision of Hon'bleSupreme court (by three judges) in case of G.C.Agarwal vs.CIT, 186 ITR 571 (SC) wherein their lordships have confirmedthe order of Hon'ble Gauhati High Court in case of F.C.Agarwalvs. CIT, 102 ITR 408 wherein it was clearly held that merelybecause return has been revised without pointing out anyomission or mistake in the original return then penalty cannot bedeleted simply because revised return has been filed. 18. Thus the combined reading of section 132(4) andexplanation 5 to Section 271(1)(c) would clearly show thatimmunity is available if the income is surrendered during searchand the manner of earning such income is also disclosed and theassessee based on such disclosure paid tax on the same. In thecase before us after having made surrender the assessee simplyretracted from the statement and did not include the amount ofsurrender in the return of income. The income was includedthrough revised return which has to be accepted by theAssessing officer because same was late. In any case the revisedreturn was furnished only when the assessee was fully corneredduring the assessment proceedings. In addition some moreitems of income were also found to be concealed particularly inrespect of platinum and silver jewellery. Therefore,it is a clearcase of concealment and penalty has been rightly levied andconfirmed by the learned CIT(A).” No error or perversity could be pointed out in the findings recorded by theAssessing Officer, CIT(A) and the Tribunal which may call for interferenceby this Court. S_The learned counsel for the appellant had inter alia placed reliance on the following case law:- (1)National Textiles vs. CIT, (2001) 249 ITR 125 (Gujarat);(11)MAK Data Private Limited vs, CIT, (2014) 1 SCC 674;(11)MAK Data Private Limited vs, CIT, (2014) 1 SCC 674; (111)CIT vs. Mahaveer Irrigation (P) Limited,(2011) 61 DTR218 (Delhi);218 (Delhi); (iv)Punjab Rice Mills vs. CIT and another,(2012) 71 DTR 79(All.);(All.); (v)Shervani Hospitalities Limited vs. CIT, (2013) 89 DTR 169 (Delhi); (v1)CIT vs, DCM Limited, (2013) 93 DTR 406 (Delhi). Suffice it to notice, in view of the findings of fact of concealment having been affirmed as noticed herein above, no advantage can be derived by ITA No.164 of 2014 (O&M) learned counsel from these pronouncements as the same were based onindividual factual matrix involved therein. Q Consequently, no substantial question of law arises. The appeal being devoid of any merit stands dismissed, September 15, 2014=5%= (111)CIT vs. Mahaveer Irrigation (P) Limited,(2011) 61 DTR218 (Delhi);218 (Delhi); (iv)Punjab Rice Mills vs. CIT and another,(2012) 71 DTR 79(All.);(All.); (v)Shervani Hospitalities Limited vs. CIT, (2013) 89 DTR 169 (Delhi); (v1)CIT vs, DCM Limited, (2013) 93 DTR 406 (Delhi). Suffice it to notice, in view of the findings of fact of concealment having been affirmed as noticed herein above, no advantage can be derived by ITA No.164 of 2014 (O&M) learned counsel from these pronouncements as the same were based onindividual factual matrix involved therein. Q Consequently, no substantial question of law arises. The appeal being devoid of any merit stands dismissed, September 15, 2014=5%= (Ajay Kumar Mittal)Judge(Fateh Deep Singh)Judge