- (1.) THESE are two appeals by the assessee, one against levy of penalty under Section 271(1)(c) and another against levy of penalty under Section 273(2)(a) of the Income-tax Act, 1961. Since facts involved in both these appeals are common, therefore, for the sake of convenience, these appeals are being disposed of by this consolidated order. First, we shall take up the appeal relating to penalty under Section 271(1)(c).
(2.) The assessee is a HUF, Shri Deepak Singh is karta of HUF. The assessee derives income from business i.e., 67% share in a partnership firm known as Varun Enterprises and income from other sources. The assessee filed original return on 30th June, 1983 declaring net income of Rs. 4,28,190 after taking into consideration deduction under Section 35CCA at Rs. 5,00,000 claimed to have been made to Ramakrishna Vivekananda Mission, Gramsewa Parishad, as per Note 4 appended to the statement of assessable income of the assessee. Later on, the assessee revised return of income on 5-11-1983 wherein he withdrew the claim for deduction under Section 35CCA/80GGA mentioning that "it has come to their notice that the person who had collected the donation on behalf of the Mission did not give the money so collected to the mission. The matter is under investigation. In the meanwhile, however, they are filing the revised return to exclude deduction for a sum of Rs. 5 lakhs claimed in the original return under Section 35CCA/80GGA". The assessee in original return had declared share of profit 67% from Varun Enterprises at Rs. 9,11,399 and also appended below a note mentioning:- The share of profit has provisionally been added at Rs. 9,11,399 in the return of income. If, however, there is any change on completion of the firm's assessment, the same will be revised. In the revised return the assessee declared its share of profit from Varun Enterprises at Rs. 12,80,312 with the following note:- share of profit from Varun Enterprises has been adopted as per statement annexed. Before the revised return was filed, the assessee had paid additional self assessment tax on withdrawing the claim of donation on 2-11-1983. The Assessing Officer completed the assessment under Section 143(3) wherein he held that the assessee had made bogus claim for Rs. 5 lakhs in his original return of income to reduce the tax liability and by adopting such practice the assessee had tried to conceal particulars of his income and also furnished inaccurate particulars of such income. It was also mentioned that after the Income-tax Department conducted series of searches under Section 132 of the Income-tax Act at the premises of persons connected with the racket of making false claims under Section 35CCA in respect of certain bogus donations which never reached the genuine trust. In the present case cheques of donations have been endorsed and deposited in the account of Manav Seva Charitable Foundation which in no way was connected with the trust. It is the case of the Department that after becoming aware of searches conducted by the department and after the Income-tax Department had discovered the bogus nature of donations, the assessee revised the return on 5-11-1983. The Assessing Officer adopted the business income as declared in the revised return as share income in partnership firm Varun Enterprises subject to rectification under Section 154/155 of the Income-tax Act and simultaneously initiated penalty proceedings on the assessee for having concealed income at the time of filing of the original return. The assessee was given an opportunity of being heard and during the course of penalty proceedings the assessee was asked to explain as to why penalty should not be imposed in respect of these two items. The assessee filed its detailed submissions vide letter dated 15-5-1986 in which he has raised objections with regard to initiation of penalty proceedings pointing out that with the withdrawal of claim under Section 35CCA and revising the return and in view of rectificatory order passed under Section 154/155 of the Income-tax Act there was no offence of concealment of income. The Assessing Officer discussed the circumstances regarding the claim of the assessee for Rs. 5,00,000 as also the circumstances responsible for the variation in income of Varun Enterprises in his order at paragraph 7 of his order in which broadly he has discussed his view points. Two crossed cheques through which the donation was purportedly given were dated 19-11-1982 and 15-12-1982 for Rs. 3 lakhs and Rs. 2 lakhs respectively. They have been issued by Shri Deepak Singh. These cheques have been simply crossed in order to facilitate the diversion of the amount of cheque from Ramakrishna Vivekananda Mission to Manav Sewa Charitable Foundation. Someone signed as Murli Mohan as Manager for Ramakrishna Vivekananda Mission and this endorsement was confirmed by one Shri Vipin Mehra. The bank account of Manav Sewa Charitable Foundation was operated by Shri Vipin Mehra and Shri Prem Prakash Verma. It was further observed that Shri Vipin Mehra had no authority to collect donation on behalf of the Mission and that authority was given to Shri Vipin Mehra only on 19-12-1982. The amounts collected earlier to the date of authorisation did not reach the Mission. This was all the part of a scheme hatched to defraud the revenue. In this connection, reference was made to the statement of Shri Prem Prakash to whom the assessee claims to have handed over the cheques and it was observed that Shri Vipin Mehra was never authorised by the Mission to collect donation prior to 19-12-1982. Reference to a conspiracy by the assessee with Shri Prem Prakash, Shri P.P. Verma and Shri Vipin Mehra, was also made and it was observed that, but for the result of search, investigation and survey operation carried out by the department on the various premises of the companies of Shriram Group which included Inalsa (P.) Ltd., Meghdoot Enterprises (P.) Ltd. and Kama Commercial (P.) Ltd. the revised return would not have been filed. It. was also revealed that in these companies Shri Deepak Singh was actively involved in the management. Therefore, the assessee was aware that the department had been able to discover the modus operandi involved in the malafide donation claims. There are similar bogus claims made by other companies and executives of Charat Ram Group of companies also. If they were genuine donations, the assessee would have definitely contacted the office of the Mission or to whom the cheques of donation were handed over. In this case, the assessee and his associates deliberately prepared simple crossed cheques and then instead of sending them over to the trust through Registered Post or contacting some trustees or other responsible officers of the trust conveniently handed them over to Shri Vipin Mehra whose services were utilised to siphon back the funds. It was further observed that the assessee is connected with Shriram Group which itself has some organisations within its control and management enjoying exemption under Section 35 of the Income-tax Act. In the normal course if the donations were genuine, they should go to the organisations controlled by Shriram Group rather than to Ramakrishna Vivekananda Mission. Referring to the searches conducted on Shri Vipin Mehra and Shri Prem Prakash on 13-9-1983 and 26-11-1983, it was observed that during these searches and seizure operations at their residences, no substantial cash or bearer bonds were found nor did Shri Vipin Mehra admit any locker containing the substantial cash involved in the donation transactions of the assessee. The conduct of the assessee subsequent to the departmental enquiry also shows that the assessee was actively involved in creating circumstances to enable him to make mala fide claim in which S/Shri Vipin Mehra, Prem Prakash and P.P. Verma conspired together. In case the assessee became aware in September/October 1983 regarding defalcation of this amount, he would have lodged Police report against these persons, instead no report was lodged. The entire correspondence between these participants of the conspiracy shows that they planned to avoid payment of tax through mala fide claims and that is how they tried to fabricate evidence for the same. Regarding difference in income from Varun Enterprises as declared in the original return and as declared in the revised return, the Assessing Officer attributed this to mala fide claim made in the accounts of the firm for the reasons given in para 8 of his order. Thus he concluded that the assessee a partner with 67 per cent share in the profits of the firm and was actively engaged in the day-to-day working of the firm. Therefore, the assessee is equally guilty of deliberately concealing the true share of his income from Varun Enterprises. Therefore, the Assessing Officer held the assessee guilty of concealment in furnishing the particulars of his income. So he levied penalty in view of Explanation 1 to Section 271(1)(c) of the Income-tax Act and imposed the penalty at the maximum rate of 2 per cent of the tax sought to be evaded.
(3.) WHEN the matter came before the CIT (Appeals), the CIT (Appeals) basically on the same reasons, confirmed the levy of penalty. The assessee is aggrieved against that order.;