DY. COMMISSIONER OF INCOME TAX Vs. SUNIL TOLARAM

JUDGEMENT

(1.) THE revenue has filed the present appeal against the order of the Commissioner (Appeals), Central -V, Mumbai, dated 3 -8 -1999, for assessment year 1995 -96, by which he cancelled penalty of Rs. 23,92,872 under section 271(1)(c) of the Income Tax Act, 1961, levied by the assessing officer.

(2.) THE assessee is an individual. He had filed his return of income on 30 -3 -1996, declaring an income of Rs. 40,26,400. The assessment was finalised under section 143(3) on 27 -3 -1998 determining total income at Rs. 40,50,620. The assessing officer observed in the penalty order that in this case search operations were carried out under section 132 of the Income Tax Act, 1961, at various business premises of the Kukreja group and at their residence on 25 -10 -1994. 'Kukrejas' are one of the prominent builders of Bombay and have to their credit several big building projects at New Bombay. The business is controlled by three brothers viz., Shri Omprakash T. Kukreja, Shri Mohan T. Kukreja and Shri Sunil T. Kukreja. The sources of income declared by the assessee for the year under consideration were share of profit from various partnership firms, rental income and disclosure under section 132(4) of the Income Tax Act, 1961, made during the course of search. The assessing officer further observed that during the course of search there were many incriminating pieces of evidence indicating charging of 'on -money' by Kukrejas on sale of flats, unaccounted expenses in various projects, loans taken by the group not recorded in books of account and Benami investments by Kukrejas. In the course of search, in his statement dated 6 -2 -1995, under section 132(4), Shri Sunil T. Kukreja, the assessee, had disclosed income of Rs. 40,00,000. In the assessment under section 143(3), the assessing officer made various additions on account of unaccounted cash found during the search, unexplained jewellery found during search, unexplained investment in electronic gadgets, unaccounted expenses appearing on p. 149 of Annex. A -1 and unaccounted expenses in Pali Hill bungalow.

(3.) IN response to notice under section 271 read with section 274 of the Income Tax Act, 1961, dated 27 -3 -1998, the assessee submitted vide letter dated 17 -4 -1998, that he had made voluntary disclosure of Rs. 40,00,000 under section 132(4) and had declared it in his income tax return and as such that amount is not liable for penal action. The assessee further submitted that an addition of Rs. 40,24,225 was made and the difference of Rs. 24,225 was on account of unforeseen addition of making charges of jewellery Rs. 23,050 and, therefore, he requested that penalty proceedings initiated may be dropped. One more opportunity was given by the assessing officer to the assessee to make further submissions, if any, and the assessee reiterated the same arguments. The assessing officer rejected the explanation of the assessee. She observed that during the course of search, in his statement dated 26 -10 -1994, under section 132(4), the assessee did not declare any income for tax. On the concluding day of the search, i.e., 6 -2 -1995, the main member of the Kukreja group, Shri Omprakash T. Kukreja, had declared income of Rs. 1 crore in the hands of the following family members: