IN INCOME TAX APPELLATE TRIBUNAL B BENCH, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA No.1180/Bang/2015 (Assessment year: 201-011) Asst. Commissioner of Income-tax, Circle- 3(1) Hubballi-580025. Appellant Vs. Shri Raju H Patadia, Prop.M/s.Gold Palace, Durgadbail, Hubballi. Respondent PAN: ACVPP 8998B AND Cross Objn.No.12/Bang/2016 (In ITA No.1180/Bang/2015) (Assessment year: 201-011) Shri Raju H Patadia, Hubballi. Cross-Objector Vs. Asst. Commissioner of Income-tax, Hubballi. Respondent Revenue by : Shri V.Sridhar, CA Assessee by : Smt.Meera Srivastava, Addl.CIT(DR) Date of hearing : 29/09/2016 Date of pronouncement : 19/10/2016 O R D E R Per INTURI RAMA RAO, AM : This is appeal filed by revenue directed against order of Commissioner of Income-tax (Appeals)[CIT(A)], Hubballi, dated 29/05/2015 for assessment year 2010-11 ITA No1180/B/2015 & CO 12/Bang/2016 Page 2 of 10 deleting penalty levied u/s 271(1)(c) of Income-tax Act,1961 [ Act for short]. assessee has come up in cross objections. 2. revenue raised following grounds of appeal: 3. Briefly facts of case are as under: assessee is individual and is engaged in business of dealing in gold ornament , buillion/stones. Return of income for assessment year 2010-11 was filed on 15/10/2010 declaring total income of Rs.21,55,710/-. Subsequently, survey operations u/s 133A of Act were conducted on 21/10/2010 in business premises of respondent-assessee. During course of survey proceedings assessee made declaration of additional income ITA No1180/B/2015 & CO 12/Bang/2016 Page 3 of 10 of Rs.38,19,474/- on account of under-valuation of closing stock. respondent-assessee also undertaken to file revised return offering additional income but failed to do so. Further, sum of Rs.7,60,800/- was detected on account of undervaluation during course of assessment proceedings. Thus, Assessing Officer [AO] made addition of Rs.45,80,274/- to returned income. However, additions have not been agitated before appellate authorities. Thus, assessment reached finality. 4. Subsequently, AO issued show cause notice calling upon assessee to show cause why order imposing penalty for concealment of particulars of income. In response to show cause, it was submitted that assessee had not concealed any particulars of income and addition was made only on account of disallowance of expenditure on estimate basis and therefore penalty should not be levied. above explanation was not accepted by AO by holding that addition was not made on estimate basis but addition was made on ground of undervaluation of stock. AO further inferred that had intention of assessee had not been to conceal particulars of income, assessee would have chosen to file revised return declaring additional income. It is only due to survey operations u/s 133A undervaluation was detected. Therefore he proceeded to levy penalty of Rs.13,23,380/- vide order dated 27/9/2013. ITA No1180/B/2015 & CO 12/Bang/2016 Page 4 of 10 5. Being aggrieved, appeal was preferred before CIT(A) who had deleted penalty by holding that penalty is not leviable on account of additions made on estimate basis. In support of this proposition, he relied on plethora of decisions. 6. Being aggrieved, revenue is in appeal before us. 6.1 Learned Departmental Representative vehemently contended that assessee had declared additional income only on account of detection made by department on account of survey operations. Had survey operations not taken place, assessee would not have disclosed additional income and thus it is clear case of concealment of particulars of income and therefore penalty is leviable. Thus, he prayed for sustenance of order of penalty. 6.2 On other hand, learned AR of assessee contended that additional income was disclosed only on account of undervaluation of closing stock. There is no difference in quantitative stock. assessee has been following Last-in-first- out [LIFO] for purpose of valuation but for insistence of AO, above has been valued at First-in-first-out [FIFO] method. On account of this, addition was offered on condition not to levy penalty u/s 271(1)(c) of Act. He prayed that there was no particulars of income have been furnished by assessee. Therefore penalty cannot be levied. ITA No1180/B/2015 & CO 12/Bang/2016 Page 5 of 10 7. We heard rival submissions and perused material on record. only issue in present appeal is whether AO is justified in levying penalty of Rs.13,23,380/- u/s 271(1)(c) of Act. No doubt additions have been made by AO based on disclosure made by assessee during course of survey operations u/s 133A of Act. There was no allegation by assessee hat disclosure was made by him out of duress and coercion by department. No doubt, addition was on account of undervaluation of closing stock and it is no body case there is any difference in quantitative closing stock. submission of assessee that addition was offered to tax on account of change in method of closing stock from LIFO and FIFO at insistence of AO, is not borne out of record. Therefore, it follows that difference in valuation arisen on account of adopting wrong method of valuation of closing stock which amounts to concealment of particulars of income. Therefore, in our considered opinion, AO was justified in levying penalty u/s 271(1)(c) of Act. reasoning of CIT(A) that penalty cannot be levied in estimate basis, cannot be applied to facts of present case as no addition was made on estimate basis and CIT(A) has allowed appeal on wrong premise. We reverse finding of CIT(A) and in this context ratio of decision of Hon ble Supreme Court in case of MAK Data (P) Ltd. vs. CIT (2013) 358 ITR 598 is squarely applicable wherein, it has been held that ITA No1180/B/2015 & CO 12/Bang/2016 Page 6 of 10 addition made on voluntary disclosure does not absolve assessee from penal provisions of Act. relevant paras. are reproduced below: 6. We have heard counsel on either side. We fully concur with view of High Court that Tribunal has not properly understood or appreciated scope of Explanation 1 to Section 271(1)(c) of Act, which reads as follows :- "Explanation 1 - Where in respect of any facts material to computation of total income of any person under this Act, - (A) Such person fails to offer explanation or offers explanation which is found by Assessing Officer or Commissioner (Appeals) or Commissioner to be false, or (B) Such person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income have been disclosed by him, then amount added or disallowed in computing total income of such person as result thereof shall, for purposes of clause (c) of this sub-section, be deemed to represent income in respect of which particulars have been concealed." 7. AO, in our view, shall not be carried away by plea of assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. question is whether assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises presumption of concealment, when difference is noticed by AO, between reported and assessed income. burden is then on assessee to show otherwise, by cogent and reliable evidence. When initial onus placed by explanation, has been discharged by him, onus shifts on ITA No1180/B/2015 & CO 12/Bang/2016 Page 7 of 10 Revenue to show that amount in question constituted income and not otherwise. 8. Assessee has only stated that he had surrendered additional sum of Rs.40,74,000/- with view to avoid litigation, buy peace and to channelize energy and resources towards productive work and to make amicable settlement with income tax department. Statute does not recognize those types of defences under explanation 1 to Section 271(l)(c) of Act. It is trite law that voluntary disclosure does not release Appellant- assessee from mischief of penal proceedings. law does not provide that when assessee makes voluntary disclosure of his concealed income, he had to be absolved from penalty. 9. We are of view that surrender of income in this case is not voluntary in sense that offer of surrender was made in view of detection made by AO in search conducted in sister concern of assessee. In that situation, it cannot be said that surrender of income was voluntary. AO during 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 transfer deeds duly signed, have been impounded in course of survey proceedings under Section 133A conducted on 16.12.2003, in case of sister concern of assessee. survey was conducted more than 10 months before assessee filed its return of income. Had it been intention of assessee to make full and true disclosure of its income, it would have filed return declaring income inclusive of amount which was surrendered later during course of assessment proceedings. Consequently, it is clear that assessee had no intention to declare its true income. It is statutory duty of assessee to record all its transactions in books of account, to explain source of payments made by it and to declare its true income in return of income filed by it from year to year. AO, in our view, has recorded categorical finding that he was satisfied that assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of Income Tax Act, 1961. ITA No1180/B/2015 & CO 12/Bang/2016 Page 8 of 10 8. Respectfully following decision of Hon ble Supreme Court in case of MAK Data (P) Ltd. (supra) appeal filed by revenue is allowed. 9. assessee has raised following grounds of cross objections : 15. We shall deal with very maintainability of present cross-objections. From grounds of cross objections, it is clear that assessee has raised issue of validity of show cause issued u/s 274 r.w.s. 271(1)(c) of Act. provisions governing filing of cross-objections are found at sub-sec.(4) of sec.253 of Act which read as under: Appeals to Appellate Tribunal. 253(4) Assessing Officer or assessee, as case may be, on receipt of notice that appeal against order of Deputy Commissioner (Appeals) or, as case may be, Commissioner (Appeals) or Assessing Officer in pursuance ITA No1180/B/2015 & CO 12/Bang/2016 Page 9 of 10 of directions of Dispute Resolution Panel has been preferred under sub-section (1) or sub-section (2) or sub-section (2A) by other party, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of receipt of notice, file memorandum of cross-objections, verified in prescribed manner, against any part of order of Assessing Officer (in pursuance of directions of Dispute Resolution Panel) or Deputy Commissioner (Appeals) or, as case may be, Commissioner (Appeals), and such memorandum shall be disposed of by Appellate Tribunal as if it were appeal presented within time specified in sub-section (3) or sub- section (3A). 16. From bare perusal of above provision, it is clear that legislature has chosen to use expression against such order or any part thereof which means that cross-objections can be filed with reference to same ground of appeal which is adversely decided against respondent in appeal. If, there has been no adjudication on any of grounds of appeal raised before CIT(A), cross objections cannot be filed on such ground, though raised but not decided specifically. If assessee is aggrieved by non-adjudication per se, assessee can come before Tribunal only by way of appeal only. Thus, having regard to plain provisions of statute, in absence of non- adjudication of ground by CIT(A), assessee can come only by way of appeal before Tribunal, not by way of cross objections. In present case, CIT(A) had no occasion to deal with issue raised by way of cross objections, as assessee never contested this issue either before AO or before CIT(A). cross objections do not widen scope of subject matter of ITA No1180/B/2015 & CO 12/Bang/2016 Page 10 of 10 appeal. Therefore, cross objections are not maintainable and dismissed as such. Order pronounced in open court on 19th October, 2016 sd/- sd/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Place : Bangalore D t e d : 19/10/2016 srinivasulu, sps Copy to : 1 Appellant 2 Respondent 3 CIT(A)-II Bangalore 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order Assistant Registrar Income-tax Appellate Tribunal Bangalore Asst. Commissioner of Income-tax, Circle- 3(1), Hubballi v. Raju H Patadia