Case Law Details
Hoover Builders (P) Ltd. was carrying on the business of constructing and sale of flats. The AO observed during assessment proceedings that the assessee had not disclosed the correct income in the return filed on 29.9.2004 with ITO ward 12 (4) as he has declared an income of Rs. 2,10,000/- in the asstt. years 2004-05, Rs. 3 lac in the asstt. year 2005-06 Rs. 5,55,746/- and Rs. 2,41,560/- was demanded for asstt. year 2007-08 hence subsequent to the search carried out at the premises of the assesee, the assesee filed its return u/s 153A showing an income of Rs. 3,35,000/- including an income of Rs. 1,25,000/- from undisclosed sources for the asstt. year 2004-05, in asstt year 2005-06 it showed income of Rs. 22 lacs which included an income of Rs. 19 lac from undisclosed sources in asstt. year 2006-07 it showed an income of Rs. 18,62,746/- which included undisclosed income of Rs. 12,75,000/-.
In asstt. year 2007-08 it returned income of Rs. 8,18,320/- was accepted in the assessment framed u/s 143(3) and disallowance of Rs. 15,000/- was made out of the payment made to the creditors. In all these years asstt. u/s 153A / 143(3) were framed on the income undisclosed by the assessee in its return of income filed in response to the notice issued u/s 153A of the Act.
During the course of appellate proceedings it was explained by the assesee that by Hoover Building (P) Ltd. flats are sold in finished and semi finished conditions. Finished flats are standardised. Some customers had purchased semi finished flats and wanted extra work for finishing. In order to maintain customers relations and good will and also to provide services with the underlying objective of selling the flats the said work for the customers on no profit no loss basis has to be undertaken.
Money are received from the customers for the purpose of finishing according to their satisfactions and the entire amount is spent for on the said job. This is an additional service which is being provided in order to boost sales of the flats. It was explained that this activity was being carried on by one of the Directors Mr. P.K. Gupta on an individual basis since there was no profit from this activity, no income from the same was shown in the original returns. But now he himself has offered to tax suo moto voluntarily and prior to any query in the matter, net amount appearing in the seized material ( receipt less expenses so stated) even though the same amounts are mere scribbling to which no meaning can be described in the absence of any corroborative evidence to support of the same. It was accordingly submitted that the income returned may be accepted without any penal action since the same is voluntary and bonafide and has been declared even though there is no evidence of the same having being earned.
Penal proceedings were initiated and the AO levied penalty u/s 271(1)© of the Act on the declared undisclosed income. The Ld. CIT(A) has also justified the action of the AO saying that the case of the assessee falls within the general provisions of section 271(1)(C) as well as within the Explanation 5 thereof.
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