IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER SN IT(SS)A No. AY Appellant Respondent Ishwarbhai Ambalal Prajapati, 2006-07 43, Vaibhav Bunglow, Vibhag-3, ACIT, 328 & 1-2 2009-10 Near Gulab Tower, Sola Road, Central Circle-2(2), 329/Ahd/2013 Ahmedabad Ahmedabad PAN : ALWPP 0878 Q Chandubhai Ambalal Prajapati, Prop. of M/s. Jay Khodiyar 2007-08 ACIT, 3-5 330 to Bricks Works, Khodiyar Krupa 2008-09 Central Circle-2(2), 332/Ahd/2013 Bungalow, Nr. SB Trust Vadi, 2009-10 Ahmedabad New Vadaj, Ahmedabad-13 PAN: AEIPP 9281 J Assessee(s) by : Shri P.F. Jain, AR Revenue by : Shri Aditya Shukla, Sr. DR Date of Hearing : 12/07/2016 Date of Pronouncement: 21/09/2016 O R D E R These appeals by two different assessees are directed against orders of ld. CIT(A)-III, Ahmedabad dated 27.06.2013 in case of Shri Iswarbhai Ambalal Prajapati for AYs 2006-07 & 2009-10 and against common order of ld. CIT(A)-III, Ahmedabad dated 27.06.2013 in case of Shri Chandulal Ambalal Prajapati for AYs 2007-08 to 2009-10. Assessees have filed these appeals for respective assessment years challenging imposition of penalty levied by Assessing Officer u/s 271(1)(c) of Act as under:- Assessee AY Penalty u/s 271(1)(c) 1) Shri Ishwarbhai Ambalal Prajapati 2006-07 Rs. 59,466/- 2009-10 Rs. 73,780/- 2) Shri Chandubhai Ambalal Prajapati 2007-08 Rs.1,39,870/- 2008-09 Rs.1,65,611/- 2009-10 Rs. 50,596/- 2. brief facts, as culled out from record, are as under:- SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati AYs: 2006-07 to 2009-10 2 2.1 Search u/s 132 of Act was conducted in case of Prajapati family on 08.12.2009 and thereafter assessees filed return of income in response to notice issued u/s 153A. During course of search, in case of Ishwarbhai A. Prajapati, it was found that assessee has sold residential property for total sale consideration of Rs.5,40,000/- for AY 2006- 07, but no capital gain was declared in return. Therefore, AO made addition of Rs.2,91,500/- on account of Long Term Capital Gain which was accepted by assessee. Thereafter, ld. AO levied penalty of Rs.59,466/- u/s 271(1)(c) for AY 2006-07 on ground that assessee failed to submit any proof to substantiate cost of acquisition claimed by it. Similarly, in AY 2009-10, AO levied penalty u/s 271(1)(c) of Act of Rs.73,780/- on account of unaccounted receipts of Rs.2,94,360/- found during course of search. 2.2 Similarly, in case of Chandulal Ambalal Prajapati also, during course of search, assessee admitted some unexplained receipts for assessment years under consideration and accordingly he made additions in respect of AYs 2007-08 to 2009-10. Thereafter, AO levied penalty of Rs.1,39,870/-, Rs.1,65,611/- and Rs.50,596/- for AYs 2007-08, 2008-09 and 2009-10 respectively u/s 271(1)(c) of Act for concealment of particulars of income. 3. Aggrieved by aforesaid penalty orders, assessees preferred First Appeals, where ld. CIT(A) dismissed these appeals by following observations:- Shri Ishwarbhai Ambalal Prajapati AY 2006-07 10. When facts of case are examined in view of this legal position, it is found that during course of search it was found that appellant has sold residential property but not declared capital gain on same in his return. In return filed by appellant, sum of Rs.2,91,500/- was not included and it was only during course of assessment that appellant agreed for SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati AYs: 2006-07 to 2009-10 3 addition of this amount on account of capital gain for year. In such situation, it cannot be held that he made true and full disclosure of his income in return filed by him. Moreover, if there was no search in his case he would have never disclosed this amount. 11. From above mentioned facts, it is clear that appellant furnished inaccurate particulars of his income in return filed. I therefore, hold that levy of penalty u/s 271(1)(c) in such situation is justified and same is confirmed. Shri Ishwarbhai Ambalal Prajapati AY 2009-10 10. When facts of case are examined in view of this legal position, it is found that during course of search details of unaccounted sales made by appellant were found. On basis of these details AO made addition of Rs.2,94,360/- which was also admitted as income for AY 2009-10 by appellant. In return filed by appellant this income was not included and it was only during course of assessment that appellant agreed for addition of this amount of Rs.2,94,360/-. In such situation, it cannot be held that he made true and full disclosure of his income in return filed by him. Moreover, if there was no search in his case he would have never disclosed this amount. 11. I therefore, hold that levy of penalty of Rs.73,780/- in such situation is justified and same is confirmed. Chandubhai Ambalal Prajapati AYs 2007-08 to 2009-2010 11. When facts of case are examined in view of this legal position, it is found that during course of search loose paper was found on basis of which appellant admitted that certain sum has been advanced by him which is not recorded in regular books. On basis of notings on this page, interest income was also admitted as income for these three years by appellant. In return filed by appellant this interest income was not included and it was only during course of assessment that appellant agreed for addition of interest income for these three years. In such situation, it cannot be held that he made true and full disclosure of his income in returns filed by him. Moreover, if there was no search in his case he would have never disclosed this amount. 12. From above mentioned facts it is clear that appellant furnished inaccurate particulars of his income in returns filed for these three years. I therefore, hold that levy of penalty u/s 271(1)(c) in such situation is justified and same is confirmed for all three years. Ground No. 1 & 2 of appeal are thus dismissed for all three years. SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati AYs: 2006-07 to 2009-10 4 4. Aggrieved by orders of ld. CIT(A) confirming penalty imposed by AO u/s 271(1)(c), assessees are now in appeal before Tribunal. 5. ld. Counsel for assessee contends that ld. CIT(A) was not justified in upholding penalty u/s 271(1)(c) of Act. He submits that property has been allotted to assessees as per division of family assets and thus, said property is HUF property and not liable to tax in assessees hands. It was not known as to whether any sale deed in this regard has been executed giving rise to capital gain because except one letter there was no document to support capital gain which is on presumption only. Otherwise also even if capital gain is assumed it will be taxable in hands of HUF of assessee. Therefore, assessee did not show any capital gain in his individual return filed and therefore question of concealing particulars of income in respect of capital gain on alleged sale of ancestral property does not arise. Further, assessee has placed reliance on following judgments of Hon ble High Courts and contended that gross amount of sale cannot be treated as income:- CIT vs. President Industries, 258 ITR 654 (Gujarat) CIT vs. Balchand Ajitkumar, 263 ITR 610 (MP) Manmohan Sadani vs. CIT, 304 ITR 52 (MP) Further, ld. Counsel for assessee contended that assessee has agreed for addition only to buy piece and avoid litigation, otherwise no tax was payable on this amount and AO has wrongly added gross sale as income instead of net profit thereon. Further, it is contended that quantum addition is not based on any direct evidence but on estimate and penalty u/s 271(1)(c) should not be imposed on estimated income. Reliance is placed on ITAT, Nagpur Bench judgment in case of ACIT vs. SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati AYs: 2006-07 to 2009-10 5 Malu Electrodes (P) Ltd, reported in (2011) 7 ITR 0256, wherein it was held as under:- Mere fact of agreed addition does not result into conclusion that amount agreed to be added as income is concealed income; in such case, AO should further bring some material on record so that it is conclusively established that such surrender, in fact, represented real income or undisclosed income of assessee; on facts of case, penalty was not leviable in respect of surrender of share capital as income. Thus, ld. Counsel for assessee pleaded that in view of above facts and decisions of Hon ble High Courts and ITAT, penalty levied by Assessing Officer u/s 271(1)(c) may be cancelled. 6. Ld. Departmental Representative, on other hand, supported orders of authorities below and vehemently contends that assessees themselves have accepted undisclosed income and fact that it was not declared either in books of accounts or in returns of income. fact about concealed income came to surface only when search was conducted and relevant incriminating material was unearthed. incriminating materials have not been disputed by assessee in any manner. In these circumstances, it cannot be held that assessees offered income for buying peace and avoiding litigation. assessees were made repeated attempts of concealment of income. Therefore, there is no justification in assessees claim that disclosure was made to buy peace. Similarly, decision of ITAT, Nagpur Bench in case of ACIT vs. Malu Electrodes (P) Ltd (supra) has no application in assessee s case. assessee s case, on other hand, is covered by judgment of Hon ble Supreme Court in case of MAK Data P. Ltd. vs. CIT, reported (2013) 358 ITR 593, where Hon ble Supreme Court held that disclosure is prima facie evidence of concealment and unless assessee gives satisfactory explanation to justify concealment, penalty is imposable. SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati AYs: 2006-07 to 2009-10 6 7. I have heard rival contentions, perused material on record and gone through orders of lower authorities. a) It is undisputed from record that both assessees were engaged in concealed transactions from year to year. b) transactions and income in question were neither disclosed in bank account nor in returns of income. Thus, there were deliberate and repeated attempts to indulge in concealing transactions and income there from. c) Merely because assessees have not challenged additions does not mean that it is benevolent act of buying peace. facts clearly spell out that assessees were left with no alternative but to accept undisclosed transactions and income. d) In these peculiar facts, decision of ITAT, Nagpur Bench in case of ACIT vs. Malu Electrodes (P) Ltd (supra) is not applicable to assessees cases and imposition of penalty is covered by judgment of Hon ble Supreme Court in case of MAK Data P. Ltd. (supra). In view of foregoing, I see no infirmity in orders of ld. CIT(A) in confirming these penalties which are upheld. 8. In result, all appeals filed by assessees are dismissed. Order pronounced in Court on 21st September, 2016 at Ahmedabad. Sd/- R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 21/09/2016 ITAT, Ahmedabad (Dy./Asstt.Registrar) TRUE COPY BY ORDER, Guard file. 6. DR, ITAT, Ahmedabad 5.The CIT(A) (4. Concerned CIT 3. Respondent. 2. Appellant 1. Copy of Order forwarded to : 7 AYs: 2006-07 to 2009-10 - Ishwarbhai A. Prajapati & Chandubhai A. Prajapati SMC-IT(SS)A Nos. 328 to 332/Ahd/2013 Ishwarbhai Ambalal Prajapati v. ACIT, Central Circle-2(2), Ahmedabad