CITYGOLD MANAGEMENT SERVICES P.LTD, MUMBAI V. ACIT / DCIT CEN CIR 36, MUMBAI

CO 236/MUM/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9599 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2013
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Keywords: Search and seizure; Opportunity of being heard
• Section: 69C; 40A(3); 132

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO.5361/M/2012 ( / ASSESSMENT YEAR: 2007 - 2008 ) DCIT, CENTRAL CIRCLE - 36, ROOM NO.11, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400 020. / VS. M/S. CITY GOLD MANAGEMENT SERVICES PVT LTD., AKRUTI TRADE CENTER, ROAD NO.7, MAROL, MIDC, ANDHERI (E), MUMBAI 400093. ./ PAN : AAABCC 5736 B ( / APPELLANT) .. ( / RESPONDENT ) C.O. NO.236/M/2013 (ARISING OUT OF I.T.A. NO.5361/M/2012) (ASSESSMENT YEAR: 2007 - 2008 ) M/S. CITY GOLD MANAGEMENT SERVICES PVT LTD., AKRUTI TRADE CENTER, ROAD NO.7, MAROL, MIDC, ANDHERI (E), MUMBAI 400093. / VS. DCIT, CENTRAL CIRCLE - 36, ROOM NO.11, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400 020. ./ PAN : AAABCC 5736 B ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI VIJAY MEHTA / REVENUE BY : SHRI MOURYA PRATAP, DR / DATE OF HEARING : 04 .04.2014 / D ATE OF PRONOUNCEMENT : 07.05 .2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION INVOLVING ASSESSMENT YEAR 2007 - 2008. ITA NO.5361/M/2012 IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) - 41, MUMBAI DATED 15.6.2012 AND CROSS OBJECTION NO.236/M/2012 IS FILED BY THE ASSESSEE. SINCE, THE GROUNDS RAISED IN BOTH THE APPEALS ARE CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 2 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THERE IS A DELAY OF 11 DAYS IN FILING THE CROSS OBJECTION BEFORE THE TRIBUNAL. IN THIS REGARD HE BROUGHT OUR ATTENTION TO THE AFFIDAVIT, DATED 21.10.2013, FILED BY SHRI PRITESH MEHTA, WHO IS A CHARTERED ACCOUNTANT BY PROFES SION AND WORKING AS TAX MANAGER TO ASSESSEE - COMPANY. IN THIS REGARD, HE READ OUT THE RELEVANT PORTIONS OF THE AFFIDAVIT WHICH READ AS UNDER: 1.. 2. I STATE THAT THE FORM NO.36 AND GROUNDS OF APPEAL FILED BY THE REVENUE FOR AY 2007 - 2008 IN THE CASE OF CITYGOLD MANAGEMENT SERVICES PRIVATE LIMITED WERE FORWARDED TO ME AN D I KEPT THE PAPERS WITH MYSELF FOR ATTENDING TO A LITTLE LATER AS I WAS INVOLVED IN SOME PRE - ASSIGNED WORK AND INCOME TAX RETURNS FILINGS. 3. I FURTHER STATE THAT I BECAME ILL IN THE LAST WEEK OF SEPTEMBER AND DOCTOR ADVISED ME TO TAKE COMPLETE REST FOR TWO WEEKS UNTIL FILLY RECOVERED. I HAD RESUMED OFFICE FROM 14 TH OCTOBER, 2013 AND IMMEDIATELY PREPARED THE CROSS OBJECTION OF CITYGOLD MANAGEMENT SERVICES PRIVATE LIMITED. I SAY THAT, THER EFORE, THE DELAY OF 11 DAYS IN FILING THE CAPTIONED CROSS OBJECTION WAS NOT DUE TO ANY NEGLIGENCE OR LAPSE ON THE PART OF THE COMPANY BUT DUE TO THE FACTS MENTIONED HEREINABOVE. 3. ON PERUSAL OF THE ABOVE, WE ARE OF THE OPINION THAT THERE IS A SUFFICIENT CAUSE FOR NOT FILING THE CROSS OBJECTION BEFORE THE TRIBUNAL WITH THE STIPULATED TIME. THEREFORE, CONSIDERING THE SMALLNESS OF THE DELAY OF 11 DAYS IN FILING THE CROSS OBJECTION, WE CONDONED THE DELAY AND PROCEED TO ADJUDICATE THE SAME ON MERITS. 4 . FIRST LY, WE SHALL TAKE UP THE APPEAL ITA NO.5361/M/2012 FILED BY THE REVENUE AND THE GROUNDS RAISED THEREIN READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT (A) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT STATED THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE CASE O F THE ASSESSEE IS COVERED BY EXPLANATION 5 TO SECTION 271(1)(C) OF THE IT ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT STATED THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED. 5 . BRIEFLY STATED RELEVANT FACTS OF THE CASE A RE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING PROFESSIONAL AND MANAGEMENT SERVICES. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 40,25,820/ - . A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT UNDER SECTION 132 OF TH E ACT IN AKRUTI GROUP OF CASES INCLUDING THE ASSESSEE ON 10.8.2006 . DURING THE COURSE OF SEARCH AT THE RESIDENCE OF THE MANAGING DIRECTOR OF THE COMPANY, TOTAL CASH OF RS. 1,44,96,831/ - 3 WAS FOUND AND OUT OF THE SAME , AN AMOUNT OF RS.1,23,78,000/ - WAS SEI ZED BY THE REVENUE . IN THIS REGARD, ASSESSEE EXPLAINED THAT THE CASH IN HAND , AS PER THE BOOKS OF THE DIFFERENT MEMBERS OF THE AKRUTI GROUP AS ON DATE OF SEARCH, WAS RS. 36,81,991/ - . T HUS, THE BALANCE OF RS. 1,08,14,840/ - WAS DECLARED AS UNDISCLOSED INCO ME U/S 132(4) OF THE ACT. THE SAID AMOUNT OF RS. 1,08,14,840/ - IS PART OF THE SUM OF RS. 1,11,00,000/ - OFFERED AS ADDITIONAL INCOME IN THE YEAR UN DER CONSIDERATION. FURTEHR, AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR CONCEALMENT OF INCOME SINCE THE INCOME COULD ONLY BE UNEARTHED DURING THE COURSE OF SEARCH CONDUCTED AT THE PREMISES OF THE ASSESSEE. FURTHER, DURING THE ASSESSMENT, THE AO NOTICED THAT THE ASSESSE E HAS CLAIMED DEDUCTION OF RS. 18,00,000/ - AS THE SAID INCOME WAS ALREADY DECLARED IN THE AY 2006 - 2007 U/S 132(4) OF THE ACT. ON PERUSAL OF THE P&L ACCOUNT, AO OBSERVED THAT THE ASSESSEE CREDITED THE ADDITIONAL INCOME OF RS. 18 LAKHS UNDER THE HEAD TENET CHARGES RECEIVED AND THE SAME WAS DEBITED TO THE P&L ACCOUNT AS TENET CHARGES PAID . THUS, THE AO CAME TO THE CONCLUSION THAT THIS ACT OF THE ASSESSEE IS NOTHING BUT CIRCUMVENT THE PROVISIONS OF SECTION 69C AND CLAIMED EXPENSES AND ACCORDINGLY HE DISAL LOWED THE SAME AND PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, PENALTY ORDER WAS ISSUED U/S 271(1)(C), DATED 29.3.2011 WHICH IS THE SUBJECT MATTER OF THE APPEAL BEFORE THE TRIBUNAL . AGG RIEVED, ASSESSEE WENT ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 6 . DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY , REGARDING THE UNDISALLOWED INCOME OF RS. 1.11 CRS, ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE IS COVERED BY PROVISO TO EXPLANATION 5 TO SECTION 271(1)(C) AS THE RETURN WAS FILED U/S 139(1) OF THE INCOME TAX ACT AFTER THE SEARCH AND WITHIN THE DUE DATES . THE SEARCH WAS CONDUCTED ON 10.8.2006 AND THE RETURN WAS FILED U/S 139(1) ON 14.11.2007 DECLARING THE UNDISCLOSED IN COME AND ALL THE TAXES WERE PAID ON IT. THUS, IT WAS ARGUED THAT THE ASSESSEES CASE IS COVERED BY EXPLANATION 5 TO SECTION 271(1)(C) AND NO PENALTY IS LEVIABLE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DELETED THE PENALTY LEVIED BY THE AO . PARA 2.4 OF THE CIT (A)S ORDER IS RELEVANT IN THIS REGARD WHICH READ AS UNDER: 2.4. FROM THE PERUSAL OF THE SUBMISSIONS OF THE APPELLANT AND FACTS OF THE CASE, IT IS NOTICED THAT THE SEARCH WAS CONDUCTED ON 10.8.2006 AND THE RETURN WAS DUE U/S 139( 1) ON 30.11.2007 BUT IN THE PRESENT CASE, THE ASSESSEE HAS SUBMITTED ITS RETURN OF INCOME ON 14.11.2007 DECLARING THE UNDISCLOSED INCOME SURRENDERED U/S 132(4) 4 DURING THE COURSE OF SEARCH. IN VIEW OF THESE FACTS, THE CASE OF THE APPELLANT IS COVERED BY EX PLANATION 5 TO SECTION 271(1)(C). SINCE, THE SURRENDER WAS MADE ON ACCOUNT OF CASH FOUND AND SEIZED DURING THE COURSE OF SEARCH WHICH WAS DECLARED U/S 132(4) AND DULY DECLARED IN THE RETURN FILED U/S 139(1) BEFORE THE DUE DATE, THEREFORE, THE CASE OF THE APPELLANT IS COVERED BY EXPLANATION 5 TO SECTION 271(1)(C). IN VIEW OF THESE FACTS, THE PENALTY LEVIED UNDER SECTION 271(1)(C) IS NOT SUSTAINABLE, HENCE DELETED. 7 . AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8 . REGARDING THE DISALLOWANCE OF RS. 18 LAKHS M ADE BY THE AO, IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT (A) THAT THE ADDITION MADE U/S 40A(3) WAS DELETED IN APPEAL, THEREFORE, NO PENALTY IS LEVYABLE AND IN THIS REGARD HE RELIED ON VARIOUS DECISIONS I.E., (I) CIT VS. AJAIB SINGH & CO [2001] (P&H); (II) CIT VS. INDEN BISLERS [2001] 118 TAXMANN 766 (MAD); (III) CIT VS. HARSHAVARDHAN CHEMICA LS & MINERALS [2003] 259 ITR 212 AND OTHERS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) UPHELD THE ORDER OF THE AO BY HOLDING THAT THE ASSESSEE HAS FAILED TO PROVE WITH ANY EVIDENCE THAT HE HAS CLAIMED WRONG EXPENSES NOT TO DEFRAUD THE REVENUE. IN SUPPORT OF HIS VIEW, THE CIT (A) HAS RELIED ON VARIOUS DECISIONS FOR THE PROPOSITION THAT THE EXPLANATION INTRODUCED W.E.F 1.4.1964 PLACES ONUS ON THE ASSESSEE OF PROVING THAT UNDERSTATEMENT OF INCOME WAS NOT ON ACCOUNT OF ANY FRAUD OR GROSS / WILL NEGLECT ON HIS PART . PARA 3.2 OF THE CIT (A)S ORDER IS RELEVANT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL VIDE CROSS OBJECTION NO.236/M/2013. 9. DURING THE PROCEEDINGS BEFORE US, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SUM OF RS. 1.11 CRS, WHICH IS AN ADDITIONAL INCOME OFFERED BY THE ASSESSEE, AND ADDITION OF RS. 18 LAKHS IS THE SUBJECT MATTER OF THE PENALTIES U/S 271(1)(C ) OF THE ACT. IN CONNECTION WITH THE ADDITIONAL INCOME OF RS. 1.11 CRS OFFERED U/ 132(4) OF THE ACT, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN VIEW OF THE PROVISIONS OF SECTION 271(1)(C), EXPLANATION 5 OF THE ACT, ASSESSEE IS ENTITLED TO IMMUNITY. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE RELEVANT PROVISIONS AND MENTIONED THAT ASSESSEE SOECUFUES UB TGE STATEMENT OF MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME (EXPLANATION 5(2)). TO SUPPORT THE SAME, HE BROUGHT OUR ATTENTION TO THE ASS ESSEES LETTER AD DRESSED TO THE 5 DEPUTY DIRECTOR OF INCOME 7 TAX (INV.), UNIT V(4), MUMBAI, DATED 22 ND SEPTEMBER, 2006 AND READ OUT THE RELEVANT LINES AS FOLLOWS: WE WOULD LIKE TO CLARIFY THAT THE SAID INCOME HAS BEEN EARNED BY CITY GOLD MANAGEMENT SERVICES PVT LTD DURI NG THE CURRENT FINANCIAL YEAR OUT OF THE SPECULATIVE ACTIVITY. 10. IF THE ASSESSEE SPECIFIED THE MANNER OF DERIVING OF INCOME AND FULFILLED THE OTHER CONDITIONS, PENALTY SHOULD NOT BE LEVIED. REFERRING TO THE ORDERS OF THE REVENUE, LD COUNSEL MENTIONED THAT REVENUE AUTHORITIES HAVE NO OBJECTION IN THIS REGARD, THEREFORE, THE DECISION OF THE CIT (A) IS FAIR AND REASONABLE AND SHOULD NOT BE DISTURBED CONSIDERING THE APPEAL OF THE REVENUE. 11. ON THE OTHER HAND LD DR FOR THE REVENUE BROUGHT OUR ATTENTION T O THE SAME STATEMENT AND THE RELEVANT PROVISIONS OF THE ACT AND MENTIONED THAT MERE STATING THAT THE INCOME IS EARNED FROM THE SPECULATIVE ACTIVITY DOES NOT FULFILL THE REQUIREMENT OF THE LAW. ASSESSEE IS UNDER OBLIGATION TO DEMONSTRATE HOW SUCH INCOME IS EARNED AND GIVING THE DETAILS OF WHO HAS PAID, WHEN PAID AND THE TRANSACTION WISE DETAILS OF THE SCRIPS TRANSACTED ETC. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE U S. SO FAR AS THE PENALTY ORDER IS CONCERNED, WE FIND THAT THE AO DOES NOT REFER TO THE SAID EXPLANATION 5 AT ALL. ON THE OTHER HAND, THE ORDER OF THE CIT (A) IN GENERAL, PARA 3.2 IN PARTICULAR MAKES AN OBLIQUE AND CASUAL REFERENCE AS CAN BE SEEN FROM LAS T LINE OF THE SAID PORTION WHICH READS AS UNDER: 3.2PENALTY LEVIED ON THE AMOUNT OF RS. 1,08,14,840/ - (PART OF RS. 1.11 CRS DECLARED AS ADDITIONAL INCOME U/S 132(4) IS DELETE D.. 13. OTHERWISE, THE PROVISIONS OF THE ACT IS VERY CLEAR THAT THE A SSESSEE IS ENTITLED TO IMMUNITY WITH CERTAIN CONDITIONS ATTACHED AND THE CONDITIONS ARE VERY SPECIFIC AS SEEN FROM EXCEPTIONS PROVIDED IN EXPLANATION 5 . THE 2 ND EXCEPTION IS PROVIDED AS UNDER: HE, IN THE COURSE OF THE SEARCH, MAKES A STATEMENT UNDER SUB - SECTION (4) OF SECTION 132 ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL, HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BE FORE THE EXPIRY OF TIME SPECIFIED IN SUB - SECTION (1) OF SECTION 139, ALSO SPECIFIES IN THE STATEMENT THE MANNER 6 IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. 14. THE SAID PROVISIONS ARE ALSO EXPLAINED BY THE DECISIONS OF THE TRIBUNAL AND THE HIGHER JUDICIARY RELIED UPON BY THE LD COUNSEL BEFORE US. THE EXPRESSION MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED SPECIFYING THE SAME STATEMENT AND ASSUMES VERY IMPORTANCE. THERE IS A NEED FO R EXAMINING THE SUBMISSIONS IN THE LIGHT OF THE EXPRESSIONS AND THE PROVISIONS OF THE ACT BEFORE TAKEN A CONCLUSIVE DECISION. IN ALL FAIRNESS, WE ARE OF THE OPINION THAT THIS MATTER SHOULD BE REEXAMINED BY THE AO AND THEREFORE, WE SET ASIDE THE SAME TO TH E FILE OF THE AO WHO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES . 15. REGARDING THE PENALTY IN RESPECT OF THE SUM OF RS. 18 LAKHS, WE HAVE CONSIDERED T HE ARGUMENTS OF BOTH THE PARTIES. IT IS THE CASE OF THE ASSESSEE THAT IT IS AN INADVERTENT MISTAKE THAT THE AMOUNT OF RS. 18 LAKHS WAS REDUCED IN THE STATEMENT OF INCOME FORGETTING THE FACT THAT THE SAID AMOUNT WAS ALREADY DEBITED AS CAN BE SEEN FROM SCHE DULE - K OF THE FINANCIAL STATEMENTS. ON PERUSAL OF THE SAID FINANCIAL STATEMENTS, WE FIND THAT THERE IS NO DEFAULT OF THE ASSESSEE SO FAR AS THE DISCLOSURE OF INFORMATION IS CONCERNED. ASSESSEE DISCLOSED ALL THE DETAILS IN THE RETURN. AO DUG OUT THE ISSU E BASED ON THE SAID DISCLOSED PARTICULARS IN THE RETURN. THE ONLY ISSUE IS WHETHER THE CLAIM OF DEDUCTION IS BONAFIDE OR OTHERWISE. IN OUR OPINION, DECISIONS RELIED UPON BY THE CIT (A) ARE MISPLACED. IF THE SAME IS NOT BONAFIDE, THE CLAIM WOULD NOT HAVE B EEN APPEARED ON THE VERY FACE OF THE STATEMENT OF INCOME. CONSIDERING THE DISCLOSURE OF INFORMATION, WE ARE OF THE OPINION, THE ORDER OF THE CIT (A) DESERVES TO BE REVERSED AND THE ASSESSEE IS ENTITLED FOR RELIEF. ACCORDINGLY, THE CROSS OBJECTION RAISED BY THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 0 7 T H M A Y , 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 0 7 T H M A Y , 2014 7 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI