The ACIT, Central Circle-1, Surat V. M/s. Ambica Enterprise, Surat

ITA 1066/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6317 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 142(1); 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.1066/AHD/2014 %& ' ()'/ ASSTT. YEAR: 2011-12 ACIT, CENT.CIR.1 SURAT. VS. M/S.AMBI C A ENTERPRISES WESTERN BUSINESS PARK NR.SOUTH GUJARAT UNIVERSITY VESU CHAR RASTA SURAT 390 051. PAN : AAMFA 0316 P ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI JAMES KURIAN, SR.DR ASSESSEE BY : SHRI MEHUL SHAH, AR / DATE OF HEARING : 27/03/2017 / DATE OF PRONOUNCEMENT: 06/04/2017 67/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-II, AHMEDABAD DATED 12.1.2014 PASSED FOR THE ASSTT.YEAR 2011-12. 2. SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.11,40,000/- WHICH WAS IM POSED BY THE AO UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AS WELL AS RESIDENTIAL PREMISES OF THE PARTNERS ON 19.1.2011. DURING THE SEARCH, ONE ITA NO.1066/AHD/2014 2 SMALL POCKET DIARY I.E. KP DIARY WAS FOUND AND RE COVERED FROM RESIDENCE OF SHRI MANISH KANTILAL SHAH. THIS DIARY WAS SEIZED A S ANNEXURE BF & S. PAGE NO.1 TO 7 OF THIS DIARY CONTAINED CERTAIN DETAILS. WHEN MAIN PARTNER OF THE INFRASTRUCTURE GROUP WAS CONFRONTED WITH DIARY, THE N HE ADMITTED UNDISCLOSED INCOME OF RS.23 CRORES WHICH HAS BEEN WRITTEN IN TH IS DIARY IN CODED-WORD. FOR THE PRESENT ASSESSEE THIS INCOME WAS ADMITTED A T RS.1.14 CRORES. THOUGH ORIGINALLY THE ASSESSEE HAS DISCLOSED TOTAL INCOME AT RS.6,86,980/- IN THE RETURN FILED ON 15.2.2012, BUT LATER ON IT HAD OFFE RED A SUM OF RS.1.14 CRORES IN THE RETURN FILED IN RESPONSE TO THE NOTICE UNDER SE CTION 142(1) OF THE CT. THE AO HAS ACCEPTED THIS RETURN AND PASSED ASSESSMENT O RDER ON 22.3.2013. THE RELEVANT DISCUSSION ABOUT INITIATION OF PENALTY UND ER SECTION 271AAA OF THE ACT AND THE ADDITION OF RS.1.14 CRORES HAS BEEN MAD E IN PARA-4 OF THE ASSESSMENT ORDER. IT READS AS UNDER: 4 . THE ASSESSEE FIRM HAS CARRIED ON THE CONSTRUCTION OF ITS OWN GOING PROJECT 'WESTERN HEIGHT'. BESIDE ABOVE THE FIRM HAS SOLD SEVERAL UNITS IN THE SAID PROJECTS. HENCE ASSESSEE FIRM DERIVES I NCOME FROM THE SELLING OF THE FLATS. THE ASSESSEE HAS OFFERED UNDI SCLOSED INCOME OF RS.1,14,00,000/- DURING THE YEAR UNDER CONSIDERATIO N AND DETAILS OF WHICH ARE AS UNDER:- DURING THE SEARCH OPERATION U/S.132 OF THE IT ACT, 1961 ONE SMALL POCKET DIARY (I.E. K. P DIARY) WAS RECOVERED FROM T HE RESIDENCE OF SHRI MANISH KANTILAL SHAH (I.E., 41/42 SHANTI PALACE SOC IETY, RANDER ROAD, SURAT) AND SEIZED AS PER BF & S (PAGE 1 TO 7). ON C ONFRONTATION HE HAS ADMITTED IN HIS STATEMENT THAT PAGES OF DIARY CONTA INS THE ENTRIES OF TAXABLE INCOME RELATING TO VARIOUS FIRMS AND NAMES OF THE PROJECTS ARE ALSO WRITTEN IN THE PAGES OF THE SAID DIARY . SHRI MANISH KANTILAL SHAH ALSO ADMITTED THAT THESE ENTRIES ARE RECORDED IN CO DES BY DELETING 2 ZEROS FROM THE END OF ACTUAL FIGURES AND SAME ARE N OT RECORDED IN THE BOOKS OF ACCOUNT. HE HAS OFFERED THE UNACCOUNTED IN COME OF RS.23.15 CRORES FOR TAXATION FOR THE A.Y 2011-12 IN HANDS OF VARIOUS FIRMS/CONCERNS. DETAILS OF OFFERED INCOMES ARE AS U NDER:- ITA NO.1066/AHD/2014 3 SR. NO PAGE NO. NAME OF THE CONCERN NAME OF THE PROJECT TOTAL AMOUNT [CODED] TOTAL AMOUNT [ACTUAL] 1 1 ANANT ENTERPRISE WESTERN SHETRUNJAY 325000 3,25,00,000 2 2 AVANI CORPORATION WESTERN SOMCHINTAMANI 785000 7,85,00,000 3 3 AMAR DEVELOPER WESTERN SHIKHARJI 275000 2,75,00,000 4 4 AMBICA DEVELOPER WESTERN BUSINESS PARK & WESTER RESIDENCY 165000 1,65,00,000 5 5 ADITYA DEVELOPERS VIRBHADRA AVENUE 151000 1,51,00,000 6 6 AMBICA ENTERPRISES WESTERN HEIGHT 114000 1,14,00,000 7 7 AMBICA DEVELOPER WESTERN BUSINESS PARK & WESTERN RESIDENCY 500000 5,00,00,000 TOTAL 2315000 23,15,00,000 IT IS CLEAR FROM THE ABOVE THE ASSESSEE FIRM HAS OF FERED UNDISCLOSED INCOME OF RS.1,14,00,000/- FOR TAXATION FOR THE A.Y .2011-12. FROM THE STATEMENT OF SHRI MANISH K SHAH IT IS CLEAR THAT TH E OFFERED UNDISCLOSED INCOME IS UNEXPLAINED INCOME EARNED OUTSIDE THE BOO KS OF ACCOUNTS PERTAINING TO THE FIRM. THE ASSESSEE HAS OFFERED UNDISCLOSED INCOME OF RS.1 .14 CRORE AND HAS BEEN UNABLE TO SUBSTANTIATE THE SAID OFFERED INCOME AND MANNER FROM WHICH THE INCOME WAS EARNED. HENCE PENALTY PROCEEDI NGS U/S.271AAA OF THE I.T ACT ARE BEING INITIATED ON THIS ISSUE. 4. HE OBSERVED THAT THE ASSESSEE FAILED TO DISCLOSE MANNER OF EARNING ADDITIONAL INCOME WHICH WAS DISCLOSED IN THE STATEM ENT RECORDED UNDER SECTION 132(4) IN THE ASSESSMENT PROCEEDINGS. HE A LSO OBSERVED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT MANNER, AND TH EREFORE, IT CANNOT CLAIM ITA NO.1066/AHD/2014 4 IMMUNITY FROM PENALTY AS PROVIDED IN SUB-SECTION 2 OF SECTION 271AAA OF THE ACT. ACCORDINGLY, HE IMPOSED PENALTY OF RS.11.40 L AKHS. 5. ON APPEAL, THE LD.CIT(A) RE-APPRECIATED THE FACT S AND CIRCUMSTANCES AND OBSERVED THAT THE ASSESSEE HAS FULFILLED BOTH T HESE CONDITIONS, AND THEREFORE, IT CANNOT BE VISITED WITH PENALTY. BEF ORE US, THE LD.DR RELIED UPON THE ORDER OF THE AO AS WELL AS STATEMENT OF FACTS F ILED BY THE REVENUE. HE CONTENDED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN WHICH THIS INCOME WAS EARNED. IT WAS ALSO CONTENDED THAT THE LD.CIT(A) HAS RELIED UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF CIT VS. MAHENDRA C. SHAH, 299 ITR 305 (GUJ), BUT THIS JUDGM ENT WAS IN CONNECTION WITH THE LEVY OF PENALTY UNDER SECTION 271(1)(C) WI TH AID OF EXPLANATION 5 TO SECTION 271(1)(C). 6. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE TOOK US THROUGH REPLY TO QUESTION NO.13 OF THE STATEMENT RECORDED UNDER S ECTION 132(4) OF THE ACT. SUCH REPLY IS AVAILABLE AT PAGE NO.11 OF THE PAPER BOOK. ON THE STRENGTH OF THIS REPLY, IT WAS CONTENDED THAT THE ASSESSEE HAS DISCLOSED COMPLETE DETAILS, AND THEREFORE, IT IS ENTITLED FOR IMMUNITY AVAILABL E UNDER SECTION 271AAA (2) OF THE ACT. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. FOR APPRECIATING THE CONTROVERSY INVOLVED, IT IS INCUMBENT UPON US TO TAKE NOTE OF SECTION 271AAA. THE RELEVANT PART OF THIS SECTION READS AS UNDER: 271AAA. PENALTY WHERE SEARCH HAS BEEN INITIATED.( 1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, A SUM ITA NO.1066/AHD/2014 5 COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCL OSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, (I ) IN THE COURSE OF THE SEARCH, IN A S TATEMENT UNDER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II ) SUBSTANTIATES THE MANNER IN WHICH T HE UNDISCLOSED INCOME WAS DERIVED; AND (III ) PAYS THE TAX, TOGETHER WITH INTERES T, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN R ESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). 8. A BARE PERUSAL OF THIS SECTION WOULD INDICATE TH AT SUB-SECTION (1) AUTHORISE THE AO TO LEVY PENALTY AT THE RATE OF 10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. SUB-SECTION (2) PR OVIDES CONDITIONS ON WHOSE FULFILLMENT THE ASSESSEE COULD BE ABSOLVED FROM THE LEVY OF PENALTY. A PERUSAL OF SUB-SECTION (2) WOULD INDICATE THAT IT POSTULATE S THREE CONDITIONS FOR AN ASSESSEE ON WHOSE FULFILLMENT HE WILL BE ABSOLVED F ROM LEVY OF PENALTY. IN THE PRESENT CASE, WE HAVE PERUSED THE STATEMENT OF SHRI MANISH K. SHAH RECORDED UNDER SECTION 132(4) OF THE ACT AT THE TIM E OF SEARCH. THUS, SO FAR AS FIRST CONDITIONS IS CONCERNED, THE ASSESSEE SHOULD ADMIT THE UNDISCLOSED INCOME IN A STATEMENT GIVEN UNDER SUB-SECTION (4) O F SECTION 132 THAT CONDITION HAS BEEN FULFILLED THE ASSESSEE HAS ADMI TTED ADDITIONAL INCOME OF RS.23 CRORES WHOSE BREAK UP HAS BEEN GIVEN IN THE S TATEMENT ITSELF. NAME OF THE ASSESSEE IS AVAILABLE AT SERIAL NO6. THIS STAT EMENT IS BASED ON THE NOTING FOUND IN THE DIARY. DEPONENT HAS DULY EXPLAINED TH AT AMOUNTS MENTIONED AGAINST EACH ENTITY WAS IN CODED WORD VIZ. INSTEAD OF RS.5 LAKHS IT SHOULD BE READ AS 5 CRORES TWO OS ARE TO BE ADDED. HE FURT HER DISCLOSED THAT THIS IS THE NET TAXABLE INCOME WRITTEN IN THIS DIARY. THUS, HE HAS OFFERED AN INCOME OF ITA NO.1066/AHD/2014 6 RS.1.14 CRORES. AS FAR AS CONDITION NO.3 IS CONCER NED, THIS IS NOT IN DISPUTE. THE ASSESSEE HAS PAID TAXES AS WELL AS INTEREST. T HE DISPUTE BETWEEN THE ASSESSEE AND REVENUE PERTAINED TO CONDITION NO.2 TH AT IS WHETHER THE ASSESSEE HAS DISCLOSED MANNER AND SUBSTANTIATE THAT MANNER. IN ORDER TO EVALUATE CIRCUMSTANCES PERTAINED TO THIS CONDITION, WE FIND THAT REPLY TO QUESTION 15 WOULD SHOW THAT GROUP HAD DIFFERENT PROJECTS WHICH HAVE CONSTRUCTED BUILDING, THEREAFTER, THEY HAVE EXCLUDED CERTAIN AM OUNTS ON A NET BASIS FROM THESE PROJECTS, WHICH WERE NOT ACCOUNTED IN THE BOO KS. ON ACCOUNT OF SEARCH AND SEIZURE OF THE INCRIMINATING MATERIAL, THIS NET INCOME WAS OFFERED FOR TAXATION. THE MANNER WAS DISCLOSED AS OUT OF VARIO US HOUSING PROJECTS CONSTRUCTED BY THE GROUP. APART FROM THESE QUESTIO NS, NO OTHER QUESTION RELATING TO MANNER AND SUBSTANTIATE EARNING OF SUCH INCOME WAS ASKED FROM THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS. SIMILARLY, WE HAVE EXTRACTED RELEVANT PART OF THE ASSESSMENT ORDER. T HE AO HAS NOWHERE ASKED THE ASSESSEE TO DEMONSTRATE THE MANNER OR SUBSTANTI ATE THAT MANNER. THUS, TAKING INTO CONSIDERATION FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE PENALTY, AND ACCO RDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 6 TH APRIL, 2017 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 06/04/2017