Shri Mangulal pagaria, Ratlam V. The ACIT, Ratlam

ITA 112/IND/2010

• Counselvise Citation: 11222714 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Keywords: Unexplained investment; Loose papers
• Section: 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER IT(SS)A NOS. 8/IND/2008 AND 112/IND/2010 ASSESSMENT YEAR 2005-06 SHRI MANGULAL PAGARIA JAORA PAN ABSPP-3261F APPELLANT VS ACIT CIRCLE RATLAM RESPONDENT APPELLANT BY : SHRI MANJEET SACHDEVA RESPONDENT BY : SHRI KESHAV SAXENA DATE OF HEARING : 12.9.2011 DATE OF PRONOUNCEMENT : 29.09.2011 O R D E R PER JOGINDER SINGH BOTH THESE APPEALS ARE BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 CHALLENGING THE ORDERS OF T HE LEARNED 2 COMMISSIONER OF INCOME TAX (APPEALS) DATED 23.11.20 07 AND 4.12.2009, RESPECTIVELY. FIRST, WE SHALL TAKE UP IT(SS) A NO. 8/IND/2008 WHEREIN THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING SET OFF OF UN EXPLAINED GIRVI ORNAMENTS OF RS.7,28,929/- FROM THE SURRENDER AMOUN T OF RS. 18,05,656/-. THE ASSESSEE HAS ALSO CHALLENGED THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING SET OFF OF EX CESS CASH OF RS. 11,56,800/- FROM THE SURRENDER MADE VIDE LPS-2. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF PAWNING AND MONEY LENDING SINCE LAST 30 YEARS AND WAS FILING HIS RETURNS REGULARLY. THE ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. THERE WAS SEAR CH U/S 132 OF THE ACT ON 27.7.2004 DURING WHICH VARIOUS LOOSE PAPERS, DIARIES, ETC. WERE FOUND AND SEIZED. DURING THE CO URSE ORF SEARCH, THE STATEMENT WAS RECORDED U/S 132 OF THE A CT WHEREIN THE ASSESSEE HAS ACCEPTED THE UNDISCLOSED INCOME OF RS. 1,00,46,656/-. THE RETURN OF INCOME FOR THE ASSESS MENT YEAR 2005-06 WAS FILED AT AN INCOME OF RS.43,72,675/- WH ICH 3 INCLUDED DISCLOSURE OF RS.18,05,656/- ON ACCOUNT OF LPS-2 PAGES 18 TO 33. IN THE RETURN FILED DURING THE YEA R THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS. 43,72,675/- INCLUD ING SURRENDER INCOME OF RS. 42,20,036/-. THE OTHER INC OME SO DECLARED RELATED TO OTHER YEARS AND RETURN FILED FO R THOSE OF THE YEARS WERE ACCEPTED BY THE ASSESSING OFFICER IN THE RESPECTIVE YEARS. DURING THE COURSE OF SCRUTINY ASSESSMENT FO R THE ASSESSMENT YEAR 2005-06 THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT OF EXCESS CASH FOUND. IT WAS E XPLAINED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS ALREADY MADE DISCLOSURE OF RS. 18,05,656/- ON ACCOUNT OF L PS-2 PAGES 18 TO 33 WHICH COMPRISED OF SURRENDER ON ACCOUNT OF EXCESS CASH OF RS. 10,76,747/- AND SURRENDER ON ACCOUNT OF INVESTMENT IN PAWNING BUSINESS AMOUNTING TO RS.7,28 ,929/-. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH THE ASSESSEES CONTENTION AND MADE THE ADDITION ON ACCO UNT OF EXCESS CASH AND INVESTMENT IN PAWNING BUSINESS. BY THE IMPUGNED ORDER, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED VARIUS ADDITIONS MADE BY THE ASSE SSING 4 OFFICER. HOWEVER, THE ADDITION ON ACCOUNT OF EXCE SS CASH AND INVESTMENT IN PAWNING BUSINESS WAS UPHELD BY LEARNE D COMMISSIONER OF INCOME TAX (APPEALS). THE REVENUE I S NOT IN APPEAL BEFORE US WITH RESPECT TO THE ADDITIONS DELE TED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS). HOWE VER, THE ASSESSEE IS IN FURTHER APPEAL WITH RESPECT TO THE A DDITIONS SUSTAINED BY LEARNED COMMISSIONER OF INCOME TAX (AP PEALS). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. WE HAVE ALSO GONE THROUGH THE STATEMENT RECORDED U/S 132(4) AND VARIOUS RECORD AN D SEIZED DOCUMENT MARKED AS LPS-2 PAGES 18 TO 33 WHEREIN THE ASSESSEE HAS MADE DISCLOSURE OF RS.18,05,656/-. ON ANALYSING THE LPS-2 PAGES 18 TO 33 WE FIND THAT IT CONTAINED VARIOUS ENTRIES FOR ADVANCING MONEY UNDER PAWNING BUSINESS AND RECOVERY OUT OF THIS BUSINESS. MANY ENTRIES IN THE SE DOCUMENTS WERE CUT OUT AS THE AMOUNTS WERE RECEIVED BACK FROM THE RESPECTIVE CREDITORS. NEITHER ADVANCING OF MONEY N OR RECEIPT OF SUCH MONEY BACK FROM THE CREDITORS WERE ENTERED IN THE REGULAR BOOKS, THEREFORE, THE ASSESSEE SURRENDERED TOTAL OF THESE 5 ENTRIES IN THE RETURN OF INCOME FILED AFTER THE SEA RCH. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RE JECTED THE ASSESSEES CONTENTION ON THE PLEA THAT THE FACT S WERE BEFORE THE ASSESSEE AT THE TIME OF SEARCH REGARDING RECEIPT OF MONEY BACK IN RESPECT OF ENTRIES SO CUT IN THE LOOS E SHEETS THEN WHY THE ASSESSEE HAS NOT SUBMITTED CLEARLY THAT THE SE AMOUNTS WERE RECEIVED BACK. IT WAS SUBMITTED THAT DUE TO M ENTAL PRESSURE AND CONFUSION AT THE TIME OF SEARCH, THE A SSESSEE COULD NOT CO-RELATE THE FACT OF EXCESS CASH AVAILAB LE OUT OF RECEIPT OF MONEY FROM THE CREDITORS REPRESENTED BY THE CUT ENTRIES IN THE LOOSE SHEETS MARKED AS LPS-2 PAGES 1 8 TO 33 AS WELL AS THE DIFFERENCE IN THE INVESTMENT IN PAWNING BUSINESS. AFTER CAREFUL PERUSAL OF LPS-2 WE FIND THAT THE ENT RIES IN THE LOOSE SHEETS INDICATED MONEY ADVANCED UNDER PAWNING BUSINESS. THE CUT ENTRIES IN THESE DOCUMENTS REPRE SENTED THE MONEY ADVANCED AND RECEIVED BACK WHEREAS THE OTHER ENTRY REPRESENTED MONEY STILL UNDER ADVANCE. DURING THE COURSE OF SEARCH, IT WAS FOUND THAT AS PER REGULAR BOOKS OF A CCOUNT, INVESTMENT IN GIRVI BUSINESS WAS OF RS. 68,43,825/- AND AS PER 6 LPS-2 RS.18,05,656/- TOTAL OF WHICH COMES TO RS. 86 ,49,487/-. HOWEVER, AGAINST THE TOTAL SUM ADVANCED OF RS. 86, 49,481/- THE ORNAMENTS FOUND DURING THE COURSE OF SEARCH WER E TO THE TUNE OF RS. 75,72,754/-. THUS, THERE WAS A SHORT FA LL OF RS. 10,76,727/-. IT CAN REASONABLY BE ACCEPTED THAT TH E DIFFERENCE REPRESENTED THE AMOUNT REALISED IN PAWNING BUSINESS THROUGH RELEASE OF JEWELLERY WHICH WAS FOUND SHORT. SINCE T HIS AMOUNT WAS ALREADY SURRENDERED THROUGH LPS-2 MENTIONING CO MPLETE DETAILS, CANNOT BE REJECTED AT THE TIME OF ASSESSME NT. SIMILARLY, THE AMOUNT OF RS. 7,28,929/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GIRVI BUSINESS WAS ALSO D ISCLOSED THROUGH LPS-2. THE SAME CANNOT BE ADDED AGAIN WHILE FRAMING THE ASSESSMENT. THE LEARNED CIT DR DID NOT CONTROV ERT THIS FINDING OF DISCLOSURE VIDE LPS-2 PAGES 18 TO 33 AMO UNTING TO RS.18,05,656/- WHICH WAS TOWARDS EXCESS CASH FOUND AND UNEXPLAINED INVESTMENT IN GIRVI BUSINESS. SURRENDER MADE DURING SEARCH IN RESPECT OF LPS2 AMOUNTING TO RS.18 ,05,656/- WHICH WAS OFFERED IN RETURN OF INCOME FOR THE ASSES SMENT YEAR 2005-06 WAS NOT DISPUTED BY THE LEARNED CIT DR NOR IT WAS 7 DISPUTED BY THE LEARNED CIT DR THAT THIS DISCLOSURE WAS TOWARDS EXCESS CASH FOUND AND DIFFERENCE OF INVESTM ENT IN PAWNING BUSINESS. SINCE BOTH THE AMOUNTS OF ADDITI ONS MADE WERE DULY COVERED BY THE DISCLOSURE MADE DURING SEA RCH AS WELL AS FILED IN THE RETURN OF INCOME, THERE WAS NO JUSTIFICATION IN TAXING IT AGAIN. ACCORDINGLY, WE DO NOT FIND ANY M ERIT IN THESE TWO ADDITIONS. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAME. 4. GROUND NO. 3 WITH REGARD TO CONFIRMATION OF ADDITION OF RS.63,100/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE. WE, T HEREFORE, DISMISS THE SAME IN LIMINE. 9. NOW WE SHALL TAKE UP IT(SS) A NO. 112/IND/2010 W HEREIN CONFIRMING THE PENALTY U/S 271(1) OF THE ACT HAS B EEN CHALLENGED BY THE ASSESSEE ON THE SUSTAINED ADDITIO N OF RS.18,84,929/-. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE PENALTY WAS WRONGLY IMPOSED AN D FURTHER IT WILL DEPEND ON THE OUTCOME OF APPEAL OF IT(SS) A NO . 8 8/IND/2008 (SUPRA). THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) DEFENDED THE IMPOSITION OF PENALTY. WITH OUT GOING INTO MUCH DELIBERATION AND THE FACT THAT THE ADDITI ON ON THE BASIS OF WHICH THE PENALTY WAS IMPOSED HAS BEEN DEL ETED BY US WHILE DEALING WITH IT(SS) A NO. 8/IND/2008, WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY DOES NOT SURVIV E BECAUSE PENALTY CANNOT BE CALCULATED WITHOUT REFERENCE TO T AX ASSESSED. THE ADDITIONS MADE IN THE ASSESSMENT ORDER, ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT WAS LEVIED, ARE DELET ED, THERE IS NO BASIS ATALL FOR LEVYING THE PENALTY FOR CONCEALM ENT, CONSEQUENTLY, THE PENALTY DOES NOT SURVIVE AND IS L IABLE TO BE CANCELLED. ACCORDINGLY, WE CANCEL THE SAME. FINALLY, APPEAL IN IT(SS) A NO. 8/IND/2008 IS PART LY ALLOWED AND THE APPEAL IN IT(SS) A NO. 112/IND/2010 IS ALLO WED. SD SD (R.C.SHARMA) (JOGINDER SI NGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.09.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-