DCIT, Chandigarh V. M/s Nectar Life Science Ltd., New Delhi

ITA 107/CHANDI/2015

• Counselvise Citation: 10721514 RSA 2015
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 30-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.107/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. M/S NECTOR LIFE SCIENCE LTD., CENTRAL CIRCLE, 40, 2 ND FLOOR, GK II, CHANDIGARH. NEW DELHI. PAN: AABCS6468G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 18.11.2015 DATE OF PRONOUNCEMENT : 27.11.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON DATED 28.11.2014 FOR ASSESSMENT YEAR 2011-12, WHEREBY THE LEARNED CIT (APPEALS) HAS DELETED THE PENALTY AMOUNTING TO RS.1.25 CRORES LEVIED UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED AT THE RESIDENCE AND 2 BUSINESS PREMISES OF THE ASSESSEE. THE ASSESSEE G ROUP HAD MADE A TOTAL SURRENDER OF RS.15 CRORES AS UNDIS CLOSED INCOME OVER AND ABOVE THE REGULAR INCOME UNDER SECT ION 132(4) OF THE ACT. FURTHER, VIDE LETTER DATED 11. 10.2010, SPECIFIC DISCLOSURE OF RS.12.50 CRORES IN THE HANDS OF M/S NECTOR LIFE SCIENCE LTD FOR ASSESSMENT YEAR 2011-2 WAS MADE. AS PER THIS LETTER, IT WAS MENTIONED THAT TH IS INCOME WAS DERIVED FROM REAL ESTATE TRANSACTIONS. IN THE RETURN FILED IN PURSUANCE TO NOTICE UNDER SECTION 153A OF THE ACT, THE ASSESSEE DISCLOSED THE SAID SURRENDERE D AMOUNT IN ITS RETURN OF INCOME AND PAID DUE TAXES O N THE SAME. WHILE PASSING THE ORDER UNDER SECTION 153B( 1)B) READ WITH SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271AAA OF THE ACT. AFTER CONSIDERING THE REPLIES MADE BY THE AS SESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER FORM ED THE VIEW THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE T HE MANNER UNDER WHICH THE SURRENDERED INCOME WAS DERIV ED AT THE TIME OF ASSESSMENT PROCEEDINGS. THEREFORE, PENALTY AMOUNTING TO RS.1.25 CRORES WAS IMPOSED UND ER SECTION 271AAA OF THE ACT. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE REITERATED THAT THE SURRENDERED AMOUNT WAS ADMITTED UNDER SECTION 132(4) OF THE ACT AND THE SAME WAS AL SO ACCEPTED BY THE ASSESSING OFFICER. IT WAS FURTHER STATED THAT DUE TAXES ALSO STOOD PAID. IT WAS ALSO STRE SSED 3 BEFORE THE LEARNED CIT (APPEALS) THAT THE SAID INCO ME WAS EARNED FROM VARIOUS SPECULATIVE REAL ESTATE TRANSAC TIONS. IT WAS CONTENDED THAT THE DISCLOSURE, IF NOT RELATA BLE TO SOME ASSETS, DOCUMENTS OR ENTRY, THEN IT WOULD NOT FALL IN THE DEFINITION OF UN-DISCLOSED INCOME. IT WAS TH E ASSESSEES CONTENTION THAT HE HAD FULFILLED ALL THE THREE CONDITIONS AS LAID DOWN IN SUB-SECTION (2) OF SECTI ON 271AAA OF THE ACT. RELIANCE WAS PLACED ON THE ORD ER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF MUNI SH KUMAR GOYAL, 45 TAXMANN.COM 563. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON A NUMBER OF ORDERS OF VARIO US BENCHES OF THE TRIBUNAL DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 4. AGGRIEVED BY THE SAID ORDER OF THE LEARNED CIT (APPEALS), THE DEPARTMENT HAS COME UP IN APPEAL BEF ORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED D.R. SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAD ATTRIBUTED THE DISCLOSURE OF ADDITIONAL INCOME TO SPECULATIVE REAL ESTATE TRANSACTIONS BUT FAILED TO FILE ITS DOCUMENTARY EVIDENCE, LIKE NAME, ADDRESS OF SELLER AND PURCHASER, PLACE, LOCATION, AREA, CAPITAL ACCOUNT, TRANSACTION DATES, AMOUNT OF PROFIT, NAME OF BROKER S THROUGH WHOM THE REAL ESTATE TRANSACTION WAS DONE A ND BROKERAGE PAID IN THE COURSE OF SUCH SPECULATIVE BU SINESS AND, THEREFORE, FAILED TO SUBSTANTIATE THE MANNER 4 OF EARNING THE UNDISCLOSED INCOME. IN THIS WAY, I T WAS SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE MANNER IN WHICH THE INCOME WAS DER IVED. THEREFORE, ONE OF THE THREE CONDITIONS PRESCRIBED U NDER SECTION 271AAA OF THE ACT WAS NOT SATISFIED BY THE ASSESSEE. THEREFORE, IT IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES A ND FURTHER PLACED RELIANCE ON THE ORDER OF THE CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF SUNIL KUMAR B ANSAL VS. DCIT IN ITA NO.874 & 875/CHD/2013 FOR ASSESSMEN T YEARS 2009-10 AND 2010-11 DATED 18.11.2014. IT WA S PRAYED THAT THE ACTION OF THE LEARNED CIT (APPEALS) IN DELETING THE PENALTY UNDER SECTION 271AAA OF THE AC T IMPOSED BY THE ASSESSING OFFICER BE CONFIRMED. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE TOTAL SURRENDER OF RS.15 CRORES AS UNDISCLOSED INCOME OVE R AND ABOVE THE REGULAR INCOME WAS MADE BY THE ASSESSEE G ROUP IN THE COURSE OF SEARCH AND SEIZURE OPERATION. IN THE SURRENDER LETTER IT WAS MENTIONED THAT THE BREAK-UP OF THE SURRENDER AND THE MEANS OF INCOME WILL BE GIVEN IN THE DUE COURSE. FURTHER, AS PER LETTER DATED 11.10.20 10, SPECIFIC DISCLOSURE OF RS.12.50 CRORES WAS MADE IN THE 5 HANDS OF THE ASSESSEE. IT WAS ALSO MENTIONED IN T HIS LETTER THAT THIS INCOME WAS DERIVED FROM REAL ESTAT E TRANSACTIONS. IN THE REPLY TO A QUESTIONNAIRE ISS UED BY THE ASSESSING OFFICER DATED 29.2.2012, VIDE LETTERS 11.1.2013 AND 18.1.2013, THE ASSESSEE STATED THAT I T WAS CARRYING OUT SOME TRANSACTIONS IN ORAL PURCHASE AND SALES OF VARIOUS REAL ESTATE PROPERTIES, LIKE AGRICULTURA L LAND, URBAN LAND, ETC. IT WAS ALSO STATED IN THIS LETTE R THAT THIS IS COMMON PRACTICE IN THIS TRADE TO BOOK SOME REAL ESTATE DEAL BY GIVING INITIAL ADVANCE AND SELLING THE SAME DURING THE AGREEMENT PERIOD TO ACTUAL BUYER OR INVESTOR WI THOUT GETTING THE TITLE OF LAND TRANSFERRED IN ASSESSEES FAVOUR. THE ASSESSEE HAD MADE PROFIT OF APPROXIMATELY RS.12 .50 CRORES IN SUCH DEALS AND OFFERED THE SAME AS ADDITI ONAL INCOME TO COME CLEAN. THE ADDITIONAL INCOME WAS DEC LARED IN THE RETURN FILED IN PURSUANCE OF NOTICE UNDER S ECTION 153A OF THE ACT WITH A NOTE IN THE AUDIT REPORT STA TING IT AS MISCELLANEOUS INCOME AS PART OF SCHEDULE-XVI PERTAINING TO OTHER INCOME. THE SAME IS REFLECTED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2011 . FURTHER, THROUGH A LETTER DATED 24.6.2013, THE ASSE SSEE STATED BEFORE THE ASSESSING OFFICER AGAIN THAT IT H AD EARNED INCOME FROM REAL ESTATE TRANSACTIONS, WHICH IS THE MANNER IN WHICH SUCH INCOME HAS BEEN EARNED AND HAD ALSO PAID APPLICABLE TAXES. THE ONLY REASON FOR W HICH THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271 AAA OF THE ACT WAS THAT BY MERELY STATING THAT THE UNDI SCLOSED INCOME HAS ARISEN FROM REAL ESTATE TRANSACTIONS, I S NOT 6 GOOD ENOUGH AND THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS STAND BY GIVING FULL DETAILS AS TO THE NAMES & ADDRESSES OF THE SELLERS, NAMES & ADDRESSES OF THE PROPERTIES AND THE EVIDENCES AS REGARD TO THE C HEQUE TRANSACTIONS, ETC. 8. THE PROVISIONS OF SECTION 271AAA OF THE ACT ARE APPLICABLE TO AN ASSESSEE, WHICH DISCLOSES ANY INCO ME OVER AND ABOVE WHAT IS RECORDED IN ITS BOOKS OF ACC OUNT. HOWEVER, THE ASSESSEE IS ENTITLED TO EXEMPTION FROM LEVY OF PENALTY UNDER SECTION 271AAA OF THE ACT, IF IT S ATISFIES THE THREE CONDITIONS PRESCRIBED UNDER SUB-SECTION ( 2) OF SECTION 271AAA OF THE ACT, WHICH ARE THAT IN THE CO URSE OF SEARCH IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT, THE ASSESSEE ADMITS THE UNDISCLOSED INCOME AND SPEC IFY THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED. SECONDLY, THE ASSESSEE SUBSTANTIATES THE MANNER IN WHICH SUCH INCOME HAS BEEN EARNED. THIRDLY, THE ASSESSEE PAYS THE DUE TAXES WITH INTEREST ON SUCH UNDISCLOSED INC OME. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT QUARREL ABOUT 1 ST AND 3 RD CONDITIONS BEING SATISFIED. THE ONLY ISSUE IS SUBSTANTIATING THE MANNER IN WHICH THE INC OME IS DERIVED. FROM THE FACTS AS NARRATED BY US ABOVE, IT IS QUITE CLEAR THAT AT VARIOUS STAGES OF THE PROCEEDIN GS STARTING FROM THE DATE OF SEARCH TO THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE PENALTY PROCEEDINGS, THE ASSESSEE HAS TIME AND AGAIN STATED TO THE AUTHORITI ES THAT THE SURRENDERED INCOME HAS BEEN DERIVED FROM THE RE AL 7 ESTATE DEALS. FURTHER, IT HAS ALSO EXPLAINED THE COMMON PRACTICE INVOLVED IN REAL ESTATE TRADE, WHEREBY INI TIAL ADVANCE IS GIVEN AND DURING THE AGREEMENT PERIOD TH E SALE IS MADE WITHOUT GETTING THE TITLE OF LAND TRANSFERR ED. IN THIS BACKGROUND AND UNDER THE CIRCUMSTANCES IN WHIC H THE ASSESSEE SURRENDERED THE INCOME NOTHING MORE TH AN THAT CAN BE EXPECTED FROM THE ASSESSEE. THE ASSESS EE HAVING PAID FULL TAXES WITH INTEREST ON THE SAID UNDISCLOSED INCOME CANNOT BE PUNISHED BY LEVYING PE NALTY UNDER SECTION 271AAA OF THE ACT. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT DISCLOS ED THE DETAILS, LIKE NAME, ADDRESS, LOCATION, CAPITAL TRAN SACTION AND PROFITS, ETC, IS VERY FARFETCHED IN VIEW OF THE FACT THAT THESE ARE THE TRANSACTIONS WHICH ARE NOT RECORDED I N THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT HAS BEEN VERY CATEGORICALLY EXPLAINED BY THE ASSESSEE THAT THIS I NCOME IS OUTCOME OF CERTAIN ORAL AGREEMENTS AND TRANSACTIONS . FURTHER RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE ORDER OF THE CHANDIGARH BENCH OF TH E TRIBUNAL IN THE CASE OF MUNISH KUMAR GOYAL (SUPRA) IS NOT OUT OF PLACE, WHEREBY IT HAS BEEN HELD THAT ONC E THE INCOME WAS SURRENDERED DURING THE COURSE OF SEARCH UNDER SECTION 132(4) OF THE ACT, IT CAN BE SAFELY ASSUMED THAT DURING THE DISCUSSION THE ASSESSEE MUST HAVE DISCLO SED THE MANNER. IN ANOTHER ORDER OF THE CHANDIGARH BE NCH OF THE TRIBUNAL IN THE CASE OF SUNIL KUMAR BANSAL (SU PRA), IT HAS BEEN HELD THAT IF NO QUESTION IS ASKED DURING T HE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, THEN 8 THE ASSESSEE CANNOT BE EXPECTED TO FURTHER SUBSTANT IATE THE MANNER OF EARNING OF INCOME SINCE TAXES HAVE AL READY BEEN PAID. IN THIS ORDER RELIANCE WAS PLACED ON A JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. MOHINDER C. SHAH, 299 ITR 305 (GUJ). THE PRESENT CASE IS ON BETTER FOOTING IN THE SENSE THAT THE MANNER WAS DISCLOSED BY THE ASSESSEE WHILE THE ONLY CONTENTION OF THE ASSESSING OFFICER WAS THAT IT HAS NOT SUBSTANTIATED THE MANNER. THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) WHILE DELETING THE PENALTY UNDER SECTION 271AAA OF THE AC T LEVIED BY THE ASSESSING OFFICER. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF NOVEMBER, 2015. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED : 27 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9