The ACIT,Vapi Circle, Vapi V. Fatehsinh Mohansinh Chauhan, SILVASSA

ITA 1122/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0126 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Retraction

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL. NO(S) ITA NO(S) ASSESSMENT YEAR APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 917 /AHD/201 3 2007-08 ASSTT.CIT VAPI CIRCLE VAPI FATEHSINH MOHANSINH CAHUHAN HAVELI SWAMINARAYAN MARG SILVASSA PAN: ABPPC 6997C 2. 1121/AHD/2013 2007-08 -DO- -DO- 3. 1122/AHD/2013 2007-08 -DO- -DO- REVENUE BY : MR.SANJAY AGRAWAL, CIT-DR WITH MS.ANITA HARDASANI, SR.DR ASSESSEE BY : MR. HARDIK VORA, AR !' / DATE OF HEARING 18/10/2016 #$%&!' / DATE OF PRONOUNCEMENT 08/11/2016 / O R D E R PER PRADIP KUMAR KEDIA, AM: THESE THREE CAPTIONED APPEALS BY THE REVENUE IN ITA NOS.971, 1121 AND 1122/AHD/2013 IN THE CASE OF SAME ASSESSEE ARE DIRE CTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-II AHMEDABAD (CIT(A) IN SHORT) DATED 30/01/2013, 08/02/2013 AN D 08/02/2013 RESPECTIVELY, ALL PERTAINING TO ASSESSME NT YEAR (AY) 2007- ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 2 - 08. THE ASSESSEE AND ASSESSMENT YEAR BEING SAME IN ALL THESE APPEALS, THESE ARE BEING DISPOSED OF BY WAY OF THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1121/AHD/2013 FOR AY 2007-08: 2. FIRST WE SHALL TAKE UP THE APPEAL, I.E. REVENUE S APPEAL IN ITA NO.1121/AHD/2013 FOR ADJUDICATION PURPOSES. 2.1. IN THE PRESENT REVENUES APPEAL, THE ASSESSIN G OFFICER (AO) IS AGGRIEVED BY THE ORDER OF THE CIT(A) DATED 08/02/20 13 IN DELETING THE QUANTUM ADDITION OF RS.56,16,510/- MADE BY THE AO. 3. GROUND OF APPEAL BY THE REVENUE READS AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.56,16,510/- MADE BY AO ON ACCOUNT OF RETRACTION OF INCOME ADMIT TED DURING THE COURSE OF STATEMENT RECORDED U/S.132(4) OF THE ACT. 4. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE INVOLVED ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING IN LAND AND REAL ESTATE. A SEARCH WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 27/12/2006. IT IS THE CASE OF THE AO THAT IN THE C OURSE OF SEARCH PROCEEDINGS UNDER S.132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'), A STATEMENT OF THE ASSES SEE WAS RECORDED UNDER ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 3 - S.132(4) WHEREIN THE ASSESSEE HAS PURPORTEDLY ADMIT TED A SUM OF RS.3,33,00,000/- AS UNDISCLOSED INCOME OF THE REAL ESTATE BUSINESS CARRIED ON BY HIM EXCLUDING THE RENTAL INCOME RECEIVED FROM THE INDUSTRIAL ESTATE. THE AO OBSERVED THAT AS AGAINST THE AFORES AID UNDISCLOSED INCOME OF RS.3,33,00,000/- VOLUNTARILY OFFERED IN T HE STATEMENT UNDER S.132(4), THE ASSESSEE HAS RETURNED LESSER INCOME F ROM BUSINESS OF LAND DEALINGS WHICH IS PEGGED AT RS.2,76,83,490/- ONLY. THE AO ALLEGED THAT THE ASSESSEE HAS THUS WILLFULLY RETRACTED FROM THE VOLUNTARY DISCLOSURE MADE IN THE COURSE OF SEARCH AND HAS UNDER REPORTED THE INCOME FROM THE LAND DEALINGS TO THE TUNE OF RS.56,16,510/- IN THE RETURN FILED SUBSEQUENT TO SEARCH. HE ACCORDINGLY MADE AN ADDITION OF RS.5 6,16,510/- TO THE TOTAL INCOME OF THE ASSESSEE ALLEGING SUPPRESSION AND UND ER REPORTING OF UNDISCLOSED INCOME INITIALLY OFFERED BY IT IN THE COURSE OF SEARCH. 5. AGGRIEVED BY THE IMPUGNED ACTION OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) TOOK NOTE OF THE PHRASEOLOGY OF THE STATEMENT RECORDED UNDER S.132(4) OF THE ACT AN D ALSO DETAILED SUBMISSIONS MADE BY THE ASSESSEE THEREON AND OBSERV ED THAT THE ASSESSEE HAS ABIDED BY THE COMMITMENT ABOUT THE PAYMENT OF T AX OF RS.1 CRORE OFFERED IN THE COURSE OF SEARCH. THE CIT(A) ALSO NO TED THAT THE COMMITMENT TO PAY AFORESAID TAX OF RS. 1 CRORE WAS BASED ON INCOME WHICH WAS YET TO ACCRUE AT THE TIME OF SEARCH. HAVI NG NOTED THE FACTS AND CIRCUMSTANCES IN PERSPECTIVE, HE TOOK A VIEW THAT T HE ASSESSEE HAS ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 4 - COMPLIED WITH THE OFFER MADE UNDER S.132(4) OF THE ACT. THE CIT(A) ACCORDINGLY DELETED THE IMPUGNED ADDITION OF RS.56, 16,510/-. THE RELEVANT OPERATIVE PARA OF THE CIT(A) IS REPRODUCED HEREUNDER:- 6. DECISION: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D SUBMISSION FILLED BY THE APPELLANT. THE ADDITION OF RS.56,16, 510/- HAS BEEN MADE ONLY ON THE BASIS OF QUESTION NO.7 & 8 OF THE STATEMENT OF THE APPELLANT RECORDED DURING THE COURSE OF SEARCH. TH E STATEMENT HAS BEEN MADE ON 27.12.2006 FOR THE INCOME EARNED AND T O BE EARNED FOR THE PERIOD 1.4.2006 TO 3.3.2007. 6.1. THE APPELLANT IN REPLY TO Q.NO.7 HAS STATED TH AT AROUND RS.1.65 CRORES OF NET INCOME/PROFIT HAS BEEN EARNED BY HIM IN LAND TRANSACTIONS WITH NITCO WHICH HAS BEEN AGREED TO BE SOLD FOR A TOTAL CONSIDERATION OF RS.3.72 CRORES AND APART FRO M THIS, THERE ARE TWO OTHER SALES MADE FROM SAMAR VERANU LAND AND SIL LI LAND. FOR THESE TRANSACTIONS, HE AGREED TO PAY RS.50 LACS AS ADVANCE TAX. THE APPELLANT HAS SHOWN SALE OF LAND TO NITCO FOR R S.4.032 CRORES ON 12.2.2007 AND NAROLI LAND OF RS.24,30,000 /- ON 19.2.2007 AND SILLI LAND OF RS.13.02 LACS ON 05.02. 2006. THE APPELLANT HAS SHOWN NET PROFIT OF RS.2,37,58,890/- ON THE SALE OF LAND OF RS.4,41,20,000/- IN THE CURRENT YEAR. THER EFORE, THE APPELLANT HAS SHOWN MORE PROFIT THAN STATED IN ANS. 7 OF HIS STATEMENT RECORDED U/S.132(4) OF THE ACT. 6.2. THE APPELLANT IN REPLY TO Q.NO.8 HAS STATED TH AT IN THE CURRENT YEAR, APART FROM RS.50 LACS WHICH HE HAD CO MMITTED TO PAY AS TAX LIABILITY, HE WOULD PAY RS.50 LACS AS TAX LI ABILITY RELATING TO THE INCOME EARNED BY HIM WHICH HAS NOT BEEN ACCOUNT ED FOR IN HIS ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 5 - BOOKS OF ACCOUNTS AND WHICH HE HAS APPLIED INTO SEV ERAL EXPENSES, HOUSEHOLDS OR OTHERWISE AS HIS INVESTMENT RELATING TO THE LAND OR OTHERWISE AND ALSO IN ADVANCES, CREDITS AND JEWELLE RY ETC. THUS, IN ALL, HE COMMITTED TO PAY RS.1 CRORE AS HIS TAX LIAB ILITY FOR THE CURRENT YEAR WHICH AS PER THE STATEMENT CORRESPOND TO THE INCOME OF RS.3.33 CRORES. THE APPELLANT AFTER THE SEARCH, VIDE HIS LETTER DATED JANUARY 15, 2007 HAS CLARIFIED THAT HE HAS NO T EARNED ANY INCOME WHICH HAS NOT BEEN ACCOUNTED IN HIS BOOKS OF ACCOUNT. THE APPELLANT IN THE RETURN OF INCOME HAS COMPUTED TAX OF RS.1,01,12,848/- EXCLUDING THE TDS ON THE RENT OF R S.20,57,390/-. 6.3. THE ASSESSING OFFICER HAS NOT BROUGHT OUT DETA ILS OF ANY EXPENSES, HOUSEHOLDS, INVESTMENT, ADVANCES, CREDITS AND JEWELLERY ETC. WHICH CORRESPOND TO THE ADDITION OF RS.56,16,5 10/- MADE IN THE ASSESSMENT. THE ADDITION WAS MADE SOLELY, INTE RPRETING STATEMENT, WITHOUT ANY MATERIAL/EVIDENCE TO BACK. THIS BEING A SEARCH CASE AND DISCLOSURE RELATED TO THE FINANCIAL YEAR WHICH HAD NOT ENDED YET, THE ASSESSING OFFICER SHOULD HAVE BR OUGHT OUT THE MATERIAL/EVIDENCES TO SUPPORT THE ADDITION BUT THER E ARE NONE. THE APPELLANT HAS FILED TOTAL INCOME OF RS.3,63,86,090/ -, WITH TAX PAYABLE OF RS.1,21,80,238/-. THE APPELLANT HAS PAI D THE TAX OF MORE THAN 1 CRORE EXCLUDING THE TDS ON RENTAL AS PE R REPLY TO QUESTION 8 OF STATEMENT, THEREFORE, THE ASSESSING O FFICER WAS NOT RIGHT IN MAKING ADDITION OF RS.56,16,510/-. IT IS SETTLED LAW THAT THE ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF THE STATEMENT UNLESS IT IS BACKED BY SOME MATERIAL/EVIDENCE. ACC ORDINGLY, THE ADDITION OF RS.56,16,510/-, IS DELETED. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 6 - 7. THE LD.DR FOR THE REVENUE, MR.SANJAY AGRAWAL REL IED ON THE ORDER OF THE AO AND SUBMITTED THAT THE CIT(A) WAS N OT JUSTIFIED IN ENTERTAINING THE VARIOUS PLEAS RAISED BY THE ASSESS EE. THE ASSESSEE HAS UNDER REPORTED THE UNDISCLOSED INCOME QUA THE STATEMENT RECORDED UNDER 132(4) OF THE ACT. THE LD. DR OBSERVED THAT THE A CTION OF THE AO IS THUS IN CONSONANCE WITH THE VOLUNTARY STATEMENT OF THE ASSESSEE HIMSELF GIVEN IN THE COURSE OF SEARCH AND OUGHT NOT TO HAVE BEEN FAULTED BY CIT(A). 8. PER CONTRA, THE LD. AR FOR THE ASSESSEE MR. HARD IK VORA, REFERRED TO THE STATEMENT RECORDED UNDER S.132(4) OF THE ACT AND SUBMITTED THAT THE ASSESSEE HAD COMMITTED TO PAY RS.1 CRORE AS HIS TAX LIABILITY FOR THE IMPUGNED ASSESSMENT YEAR IN VIEW OF ONGOING LAND DE ALINGS IN PIPELINE AND TAX COMMITMENT WAS PREDOMINANTLY BASED ON PROBA BLE INCOME WHICH WERE TO BE ACCRUED AFTER SEARCH. THE LD.AR SUBMITT ED THAT BASED ON THE TAX PAYMENT COMMITTED, UNDISCLOSED INCOME OF RS.3.3 3 CRORES WAS DERIVED BY WAY OF REVERSE WORKING ON THE TAX AMOUNT OF RS.1 CRORE. 8.1. THE LD.AR CONTENDED THAT THE ASSESSEE HAS NOWH ERE DISCLOSED UNACCOUNTED INCOME OF RS.3.33 CRORE PER SE NOR IS THERE ANY TANGIBLE BASIS FOR SUCH INCOME. THE LD.AR FURTHER POINTED O UT THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS DULY SHOWN INCOME FROM ALL THE LAND TRANSACTIONS WITH VARIOUS PARTIES, NAMELY NITCO, SA MAR VERNU LAND AND ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 7 - SILLY LAND IN CONSONANCE WITH STATEMENT RECORDED U NDER S.132(4) OF THE ACT WHICH REMAINS UNDISPUTED. THE ASSESSEE HAS DIS CLOSED FACTS ON INCOME LIKELY TO ARISE FROM SPECIFIC LAND TRANSACTI ONS TO BE PART OF HIS TOTAL INCOME AND DISCLOSED APPROXIMATE AMOUNT TOWAR DS INCOME FROM SUCH LAND DEALS, MAJORITY OF WHICH HAD NOT ACTUALLY HAPPENED AT THE TIME OF SEARCH AND WERE AT THE NEGOTIATION STAGE. THE M AJORITY OF THE LAND DEALS I.E. EXCEPT TRANSACTIONS OF SILLY LAND HAVE O CCURRED ONLY AFTER THE DATE OF SEARCH. THIS FACT FURTHER SUBSTANTIATES TH AT THE ASSESSEE HAD MADE ONLY APPROXIMATE DISCLOSURE. THE LD.AR NEXT CONTEND ED THAT THE AFORESAID AMOUNT WAS NOT DISCLOSED ON THE BASIS OF ANY PARTICULAR DOCUMENT FOUND DURING THE SEARCH PROCEEDINGS TOWARD S ACCRUAL OF INCOME AND THUS WAS NOT A PRECISE OR AN ASCERTAINED AMOUNT. THE LD.AR SUBMITTED THAT FROM BARE PERUSAL OF THE STATEMENT R ECORDED, ONE CAN DERIVE THAT ASSESSEE HAS DISCLOSED INCOME IN TERMS OF TAX LIABILITIES AND NOT IN TERMS OF INCOME AMOUNT. 8.2 THE LD.AR ACCORDINGLY CONTENDED THAT THE ORDER OF THE CIT(A) IS BASED ON OBJECTIVE ANALYSIS OF FACTS SUBSISTING IN THE CASE AND NO INTERFERENCE THEREWITH IS CALLED FOR. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THE REVENUES APPEAL IS WHETHER THE IMPUGNED ADDITION OF RS.56,16 ,510/- ON THE BASIS ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 8 - OF STATEMENT UNDER S.132(4) IS JUSTIFIED OR NOT. W HILE THE REVENUE HAS CONTENDED THAT THE ASSESSEE HAS RETRACTED FROM THE VOLUNTARY STATEMENT RECORDED UNDER S.132(4) AND HAS UNDER REPORTED THE INCOME DERIVED FROM LAND DEALINGS TO THE EXTENT OF RS.56,16,510/- WHILE FILING RETURN OF INCOME, THE ASSESSEE, IN CONTRAST, HAS CONTENDED TH AT THE AO HAS MISDIRECTED ITSELF IN ERRONEOUS INTERPRETATION OF T HE STATEMENT RECORDED UNDER S.132(4) AND IN WRONGLY APPRECIATING THE ATTE NDANT FACTS. WE FIND THAT THE AFORESAID ISSUE IS ESSENTIALLY BASED ON IN TERPRETATION OF STATEMENT DEPOSED BY THE ASSESSEE IN THE COURSE OF SEARCH PRO CEEDINGS UNDER S.132(4) OF THE ACT. 9.1. IN THE BACKDROP OF THE CONTROVERSY NARRATED AB OVE, IT WILL BE RELEVANT TO REPRODUCE THE RELEVANT PORTION OF THE STATEMENT RECORDED UNDER S.132(4) HEREUNDER:- Q-7. WHAT IS PROFIT EARNED BY YOU/ESTIMATED TO BE EARNED BY YOU IN THIS YEAR, FROM THE LAND SOLD BY YOU TO NITCO AN D OTHER CONCERNS. HOW MUCH ADVANCE TAX ARE YOU LIABLE TO P AY IN REGARDS TO THE PROFIT ORIGINATING FROM LAND THIS SALE TO TH ESE CONCERNS? A-7. AROUND 1.65 CRORES OF NET INCOME/PROFIT HAS BEEN EARNED BY ME IN THE LAND TRANSACTIONS WITH NITCO, WHICH HAS B EEN AGREED TO BE SOLD FOR A TOTAL CONSIDERATION OF 3.72 CRORES. APART F ROM THIS TRANSACTION, THERE ARE TWO OTHER SALES MADE BY ME F OR SAMAR VERNU LAND AND SILLY LAND. I AM REQUIRED AND COMMI TTING TO PAY RS.50 LACS, AS ADVANCE TAX ON THIS INCOME. I HAVE N OT ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 9 - COMPLETED/UPDATED MY BOOKS OF ACCOUNTS WHICH I SHAL L UPDATE AND WORK OUT ALL THE LIABILITIES ACCORDINGLY. Q-8. LOOKING INTO THE ENTIRE SEARCH PROCEEDINGS AN D THE FACTS BROUGHT ON TO NOTICE DURING THESE PROCEEDINGS, AND FROM THE RECORD SEIZED AND FOUND DURING THE SEARCH, DO YOU I NTEND TO DISCLOSE ANY AMOUNT WHICH YOU HAVE NOT ACCOUNTED FO R IN THE CURRENT YEARS AND ON WHICH YOU WANT TO PAY THE TAX? A-8. IN THE CURRENT YEAR, APART FROM RS.50 LACS WH ICH I HAVE COMMITTED TO PAY AS MY TAX LIABILITY IN THE ABOVE A NSWER, I ALSO COMMIT TO PAY RS.50 LACS AS TAX LIABILITIES RELATIN G TO THE INCOME EARNED BY ME IN THE CURRENT YEARS WHICH I HAVE NOT ACCOUNTED FOR IN MY BOOKS, AND WHICH I HAVE APPLIED INTO SEVERAL EXPENSES, HOUSEHOLD OR OTHERWISE, AS MY INVESTMENT RELATING T O THE LAND OR OTHERWISE AND ALSO IN ADVANCES, CREDITS AND JEWELLE RY ETC. THUS, IN ALL, I COMMIT TO PAY RS.1 CRORES AS MY TAX LIABILIT Y FOR THE CURRENT YEAR WHICH CORRESPOND TO THE INCOME OF RS.3.33 CRORES. I ALSO WANT TO BRING TO YOUR KIND NOTICE THAT TDS IS DEDUC TED ON THE RENTAL INCOME RECEIVED BY ME FROM THE INDUSTRIAL ES TATE; THEREFORE THERE IS NO NEED TO PAY ANY ADDITIONAL TAX ON THAT REGARD. [UNDERLINE IS OURS] 9.2. ON A BARE PERUSAL OF THE STATEMENT RECORDED (S UPRA), WE FIND OURSELVES IN COMPLETE AGREEMENT WITH THE ARGUMENTS MARSHALED ON BEHALF OF THE ASSESSEE. IN THE AFORESAID STATEMENT SO REC ORDED UNDER S.132(4) OF THE ACT, THE ASSESSEE HAS DISCLOSED SPECIFIC FACT T OWARDS IDENTIFIED LAND TRANSACTIONS ENTERED AND PROPOSED TO BE ENTERED AND APPROXIMATE GAINS ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 10 - LIKELY TO ARISE THEREFROM. THE ESSENCE OF THE STAT EMENT WAS COMMITMENT TO PAY A SUM OF RS.1 CRORE TOWARDS TAX LIABILITY BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR WHICH WOULD CORRESPOND TO INCOME OF RS.3.33 CRORES DETERMINED ON THE BASIS OF REVERSE WORKING. THE TAX COMMITMENT IS ROUNDED OFF TO A AFORESAID SUM OF RS. 1 CRORE WH ICH CLEARLY GIVES IMPRESSION OF THRUST ON TAX COMMITMENT. IT IS MANIF EST EVEN FROM CURSORY READING OF THE STATEMENT THAT THE DISCLOSURE WAS MA DE IN TERMS OF TAX LIABILITIES AND NOT IN TERMS OF THE INCOME AMOUNT. WE ALSO FIND MERIT IN THE ARGUMENT ADVANCED BY THE ASSESSEE BEFORE LOWER AUTHORITIES THAT WHEN LAND TRANSACTIONS HAD NOT BEEN CONCLUDED IN TW O OUT OF THE THREE CASES AT THE TIME OF SEARCH, IT WOULD HAVE NOT BEEN POSSIBLE TO DETERMINE THE EXACT INCOME OF SUCH TRANSACTIONS. WE ALSO NOT E THAT THE ASSESSEE HAS FAIRLY ABIDED HIS COMMITMENT OF PAYMENT OF TAX LIAB ILITY OF RS.1 CRORE ON LAND DEALS IN CONSONANCE WITH THE STATEMENT RECORDE D. A BARE AND SIMPLE READING OF STATEMENT WOULD ITSELF REVEAL TH AT COMMITMENT WAS MADE TOWARDS PAYMENT OF TAX WHICH WAS AGREED AT A R OUNDED SUM OF RS. ONE CRORE. THERE IS NO SCOPE WHATSOEVER TO READ TH E STATEMENT IN A MANNER THAT IT WAS THE UNDISCLOSED INCOME THAT HAS BEEN DECLARED AT RS.3.33 CRORES. WE ALSO SIMULTANEOUSLY NOTE THAT TH E ADDITION HAS BEEN SOLELY MADE ON THE BASIS OF THE INTERPRETATION OF T HE STATEMENT WITHOUT ANY COGENT MATERIAL TO CORROBORATE ANY INCOME PURPO RTEDLY ACCRUED IN THE HANDS OF ASSESSEE AND ALLEGEDLY UNDER REPORTED. IN VIEW OF THE ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 11 - AFORESAID FACTS, WE DO NOT FIND ANY INFIRMITY IN TH E CONCLUSION ARRIVED BY THE CIT(A). THUS, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 9.3 BEFORE WE PART WITH, WE OBSERVE WITH SOME DISQUIET THAT THE REVENUE APPEAL, SUCH AS PRESENT ONE, RAISES SERIOUS QUESTIONS ON THE APPLICATION OF MIND AND DISCRETION USED BY THE AO W HILE PROPOSING APPEAL BEFORE TRIBUNAL AND THEREAFTER BY THE COMMIS SIONER CONCERNED WHILE GRANTING APPROVAL UNDER S. 253(2) OF THE ACT. AS WE HAVE NOTED ABOVE THAT THE STATEMENT MADE UNDER S. 132(4) WAS P LAIN AND SIMPLE AND DOES NOT SUFFER FROM ANY COMPLEXITIES TO CALL FOR A NY INTERPRETATIVE PROCESS. THE FACT THAT THE LAND DEALS WERE NOT COMP LETE AND WERE CONCLUDED AFTER THE SEARCH IS ALSO VERIFIABLE FROM RECORDS AS SUBMITTED BY THE ASSESSEE BEFORE LOWER AUTHORITIES. THUS, THE ST ATE OF AFFAIRS AT THE TIME OF SEARCH WAS QUITE FLUID AND TAX COMMITMENT I TSELF WAS DEPENDENT ON OCCURRENCE OF FUTURE EVENTS AND HAPPENING OF CON TINGENCIES. NEEDLESS TO SAY, THE TAX COMMITMENT TAKING INTO ACC OUNT PROBABLE INCOME WHICH WAS YET TO ACCRUE IN THE HANDS OF THE ASSESSEE ON THE DATE OF SEARCH WOULD NOT HAVE OPERATED AS ESTOPPEL AGAIN ST THE ASSESSEE HAD THE LAND DEALS WERE NOT FRUCTIFIED. IT IS ALSO EVIDENT FROM THE RECORD THAT OTHER THAN THE COMMITMENT FROM THE ASSESSEE, THE RE VENUE HAS NOT BROUGHT ANY DOCUMENT ON RECORD TO CORROBORATE THE I MPUGNED INCOME OF RS. 3.33 CRORE ALLEGEDLY ARISING TO ASSESSEE AT THE TIME OF SEARCH. THE ESTIMATION OF INCOME ON A ROUNDED SUM OF TAX COMMIT MENT BY WAY OF ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 12 - REVERSE WORKING IS UNMISTAKABLE. IN SUCH A SCENARI O, WE OBSERVE WITH DISMAY THAT WHERE THE ASSESSEE HAD COME FORWARD WIT H CLEAN HANDS AND ABIDED BY HIS STATED COMMITMENT, DRAGGING THE ASSES SEE TO FURTHER LITIGATION IN A MUNDANE AND PERFUNCTORY MANNER WITH OUT ANY TANGIBLE BASIS COULD HAVE BEEN EASILY AVOIDED. IN OUR VIEW, THE CIT CONCERNED OUGHT TO HAVE BEEN CIRCUMSPECT AND OUGHT NOT TO HAV E ACTED MECHANICALLY WHILE EXERCISING POWERS UNDER S. 253(2) OF THE ACT. WE LEAVE IT AT THIS. 10. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 1121/AHD/2013 FOR AY 2007-08 IS DISMISSED. ITA NO.1122/AHD/2013 FOR AY 2007-08 11. WE SHALL NOW TAKE UP THE REVENUES APPEAL IN IT A NO.1122/AHD/2013. 12. IN THIS APPEAL, THE AO HAS ASSAILED THE ORDER O F THE CIT(A) IN DELETING THE PENALTY OF RS.18,68,100/- LEVIED BY TH E AO UNDER S.271(1)(C) OF THE ACT. 13. THE AFORESAID PENALTY WAS IMPOSED BY THE AO FOR CONCEALMENT OF PARTICULARS OF INCOME TO THE EXTENT OF RS.56,56,510 /- AS DISCUSSED IN ITA ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 13 - NO.1121/AHD/2013 FOR AY 2007-08(SUPRA). THE CIT(A) DELETED THE PENALTY AS THE ADDITION GIVING RISE TO PENALTY PROC EEDINGS WAS DELETED BY HIM IN QUANTUM APPEAL. IN VIEW OF THE CONCLUSION A RRIVED IN ITA NO.1121/AHD/12(SUPRA), THE ACTION OF THE CIT(A) IN DELETING THE QUANTUM ADDITION STANDS AFFIRMED BY THE TRIBUNAL. THUS, THE FOUNDATION FOR IMPOSITION OF PENALTY ITSELF CEASES TO EXIST ON DEC IDING THE QUANTUM APPEAL IN FAVOUR OF ASSESSEE. IN CONSEQUENCE, WE UP HOLD THE ORDER OF THE CIT(A) IN DELETING IMPOSED UNDER S.271(1)(C) OF THE ACT. 14. IN THE RESULT, REVENUES APPEAL IN ITA NO.1122/ AHD/2013 FOR AY AY 2007-08 IS DISMISSED. ITA NO.917/AHD/2013 FOR AY 2007-08 15. NOW WE SHALL TAKE UP THE REVENUES APPEAL IN IT A NO.917/AHD/2013 FOR AY 2007-08. 16. IN THE CAPTIONED APPEAL, THE AO HAS ASSAILED TH E ACTION OF THE CIT(A) IN DELETING THE PENALTY OF RS.15 LACS LEVIED BY THE AO BY RESORTING TO PROVISIONS OF S.221 OF THE ACT. ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 14 - 17. IN THIS CASE, THE RETURN OF INCOME FOR AY 2007- 08 WAS FILED BY THE ASSESSEE SHOWING TOTAL INCOME OF RS.3,75,60,120/- O N 08/12/2008. THE ASSESSEE DID NOT PAY SELF ASSESSMENT TAX QUANTIFIED AT RS.1,42,22,590/- AS REQUIRED UNDER SECTION 140A OF THE ACT WHILE FILING THE RETURN OF INCOME. AN OFFICE LETTER DATED 12/02/2009 WAS ISSUED BY THE AO PROPOSING PENALTY UNDER S.221 OF THE ACT. FORMAL NOTICE FO R IMPOSITION OF PENALTY UNDER S.221 OF THE ACT WAS ISSUED THEREAFTER ON 25/ 08/2010. THE ASSESSEE FILED REPLY THERETO ON 02/09/2010 BEFORE A O CITING LIQUIDITY CRUNCH AS A REASON FOR NON-PAYMENT OF SELF ASSESSME NT TAX WHILE FILING THE RETURN OF INCOME. IN THE SAME VAIN, THE ASSESS EE EXPLAINED THAT THE SELF ASSESSMENT TAX WAS ULTIMATELY PAID ALBEIT IN TRUNCATED INSTALLMENTS FROM THE VERY NEXT MONTH FROM THE FILING OF RETURN OF INCOME AND THE OBLIGATION OF PAYMENT ARISING UNDER S. 140A WAS COM PLETELY DISCHARGED BY SEPTEMBER-2009 I.E. MONTHS PRIOR TO THE ISSUE OF NOTICE UNDER S.221 OF THE ACT. THE AO, HOWEVER, IN ITS ORDER PASSED UNDER S.221 DATED 28/02/2011 AND IMPOSED PENALTY OF RS.15 LACS FOR TH E DEFAULT COMMITTED FOR NON-PAYMENT OF SELF ASSESSMENT TAX IN TERMS OF SECTION 140A OF THE ACT. WHILE DOING SO, THE AO HAVING REGARD TO THE F ACTS OF THE CASE AND HAVING REGARD TO THE MEAGRE/NEGATIVE BANK BALANCE V OUCHING LIQUIDITY CRUNCH DID OBSERVE THAT A LENIENT VIEW IS DESERVED IN THE CASE OF THE ASSESSEE. HOWEVER, HE THEREAFTER RELIED UPON EXPLA NATION TO SECOND PROVISO TO SECTION 221 OF THE ACT WHICH READS AS UN DER:- ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 15 - FOR THE REMOVAL OF DOUBT, IT IS HEREBY DECLARED TH AT AN ASSESSEE SHALL NOT CEASE TO BE LIABLE TO ANY PENALTY UNDER T HIS SUB-SECTION MERELY BY THE REASON OF THE FACT THAT BEFORE THE LE VY OF SUCH PENALTY HE HAS PAID THE TAX. THE AO TOOK A VIEW THAT IN VIEW OF AFORESAID EXPLA NATION, THE ASSESSEE IS LIABLE TO PENALTY CONTEMPLATED UNDER S. 221 OF THE ACT. THE AO ACCORDINGLY REFUSED TO EXONERATE THE ASSESSEE FR OM THE CLUTCHES OF THE AFORESAID PENALTY PROVISION. 18. IN THE FIRST APPEAL, THE CIT(A) HOWEVER DELETED THE PENALTY IMPOSED BY THE AO. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CT(A) IS SELF EXPLANATORY AND READS AS UNDER: 6. DECISION: I HAVE CONSIDERED THE PENALTY ORDER AND THE SUBMIS SIONS OF THE APPELLANT. THE APPELLANT HAS FILED RETURN OF I NCOME ON 08.12.2008 WITHOUT PAYING THE SELF ASSESSMENT TAX. THE APPELLANT HAS MADE THE PAYMENT OF SELF ASSESSMENT TAX FROM 28 /01/2009 TO 17.09.2009. THEREFORE, AS PER SECTION 140A(3), THE APPELLANT WAS DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF T AX AND INTEREST REMAINING UNPAID FROM 08.12.2008 TO 17.09.2009. TH E ASSESSING OFFICER ISSUED NOTICE U/S.221 ON 25.08.2010 FOR DEF AULT OF NON PAYMENT OF SELF ASSESSMENT TAX. IN ORDER TO INITIA TE PENALTY U/S.221, THE ASSESSEE HAS TO BE AN ASSESSEE IS IN D EFAULT OR DEEMED TO BE AN ASSESSEE IN DEFAULT ON THE DATE OF INITIAT ION OF PENALTY. THE PENALTY U/S.221 IS NOT AUTOMATIC, THEREFORE FIR ST PROVISION TO SECTION 221 PROVIDES FOR GIVING REASONABLE OPPORTUN ITY OF BEING ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 16 - HEARD BEFORE LEVY OF PENALTY. THE SECOND PROVISO F URTHER PROVIDES THAT WHERE ASSESSEE PROVES TO THE SATISFACTION OF T HE ASSESSING OFFICER THAT DEFAULT WAS FOR GOOD AND SUFFICIENT RE ASON PENALTY SHALL NOT BE LEVIED. THE EXPLANATION TO SECTION 221 DECL ARES THAT AN ASSESSEE SHALL NOT CEASE TO BE LIABLE TO ANY PENALT Y MERELY BY REASON OF FACT THAT BEFORE THE LEVY OF SUCH PENALTY HE HAS PAID THE TAX. THE EXPLANATION NO WAY OVERRIDE THE SECOND PR OVISO OR MAKES IT MANDATORY TO LEVY PENALTY U/S.221 IN A CASE WHER E ASSESSEE BEFORE LEVY OF PENALTY MAKES PAYMENT OF TAXES. IN THE INSTANT CASE THE APPELLANT HAD MADE PAYMENT LONG BEFORE INITIATI ON OF PENALTY AND THE ASSESSING OFFICER HAS NOTED THE BUSINESS CO NSTRAINT AND LIQUIDITY CRUNCH AND INABILITY OF APPELLANT TO PAY THE TAXES AT THE TIME OF FILLING RETURN OF INCOME. I AGREE WITH THE ASSESSING OFFICERS FINDING ON LIQ UIDITY CRUNCH AND APPELLATE INABILITY TO PAY THE TAXES. THE APPELLAN T CASE IS COVERED BY SECOND PROVISO TO SECTION 221, WHERE THE APPELLA NT HAS PROVEN THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASON . I THEREFORE, CANCEL THE PENALTY OF RS.15,00,000/- LEVIED U/S.221 OF THE I.T.ACT. 7. IN THE RESULT, THE APPEAL STANDS ALLOWED. 19. AT THE OUTSET, WE FIND THAT BOTH THE AO AS WELL AS THE CIT(A) HAVE CONCURRENTLY ACCEPTED THE FACT OF LIQUIDITY CRUNCH EXISTING IN THE CASE OF ASSESSEE. THEREFORE, INABILITY TO PAY THE SELF ASS ESSMENT TAX OWING TO PAUCITY OF FUNDS CANNOT BE SAID TO BE FOR THE INSUF FICIENT CAUSE. COUPLED WITH THIS, WE NOTE THAT THE ASSESSEE HAS STARTED DI SCHARGING HIS OBLIGATION TOWARDS PAYMENT OF OUTSTANDING TAX IN INSTALLMENT P ROMPTLY FROM THE VERY NEXT MONTH OF FILING OF RETURN OF INCOME AND E VENTUALLY CLEARED ALL ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 17 - THE TAX DUES WITHIN A PERIOD OF SIX MONTHS OR SO. T HE DEFAULT WAS NEITHER CONTINUING NOR SUBSISTING AT THE TIME OF ISSUANCE OF NOTICE UNDER S.221 OF THE ACT. HAVING REGARD TO THESE FACTS, THE ACTION O F THE CIT(A) IN DELETING THE PENALTY CANNOT BE FAULTED. SECTION 221, IN OUR VIEW, OPERATES AS A DETERRENT FOR THOSE WHO COMMITS WILLFUL DEFAULT AND SEEKS TO ABUSE OBLIGATION CAST UPON THEM TO PAY TAXES IN TIME DELI BERATELY. THE APPLICABILITY OF S. 221, IN OUR CONSIDERED VIEW, IS THUS REQUIRED TO BE WEIGHED ON THE TOUCHSTONE OF EXISTENCE OF BONAFIDES OR OTHERWISE. THE BONAFIDES IN THE PRESENT CASE IS SELF EVIDENT. THE EXPLANATION INSERTED TO THE SECOND PROVISO TO SECTION 221 HEAVILY RELIED UPON BY THE AO IS OF NO CONSEQUENCE IN THE FACTS. THE AFORESAID EXPLANA TION MERELY DECLARES THAT AN ASSESSEE SHALL NOT CEASE TO BE LIABLE TO PA Y ANY PENALTY UNDER SUB- SECTION(1) OF SECTION 221 MERELY BY REASON OF THE F ACT THAT BEFORE THE LEVY OF SUCH PENALTY HE HAS PAID THE TAX. THUS, EXPLANA TION DOES NOT IN ANY MANNER, OBLITERATES THE RELIEF AVAILABLE TO ASSESSE E UNDER 2 ND PROVISO TO S.221 ON SHOWING SUFFICIENT CAUSE FOR DEFAULT IN PA YMENT OF SELF- ASSESSMENT TAX. THE EXPLANATION HAS TO BE READ IN CONJUNCTION WITH THE SECOND PROVISO WHICH PROVIDES IN UNEQUIVOCAL TERMS THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PENALTY SHALL BE LE VIED UNDER SECTION. THE EXPLANATION RELIED UPON BY AO IS THUS MERELY EN ABLING IN NATURE AND DOES NOT OBLIGE THE AO TO FASTEN THE PENALTY IN EVERY CASE OF DEFAULT WHERE GOOD AND SUFFICIENT REASONS DO EXIST. IN T HE INSTANT CASE, THE AO ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 18 - HIMSELF HAS ADMITTED THE EXISTENCE OF LIQUIDITY CRU NCH AND BONAFIDE ACT OF THE ASSESSEE IN DISCHARGING THE OUTSTANDING TAX LIA BILITY PROMPTLY. IN THESE CIRCUMSTANCES, WE FIND NO JUSTIFICATION TO EN DORSE THE IMPUGNED ACTION OF THE AO IN IMPOSING PENALTY BY INVOKING TH E SECTION 221 OF THE ACT. 20. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 917/AHD/2013 FOR AY 2007-08 IS DISMISSED. 21. IN THE COMBINED RESULT, ALL THE THREE APPEALS O F THE REVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 08 / 1 1 /2016 SD/- SD/- () () (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 08/ 11 /2016 ,..,.../ T.C. NAIR, SR. PS ITA NOS.917, 11 21 & 1122/AHD/2013 CIT VS. FATEHSINH M. CHAUHAN ASST.YEAR 2007-08 - 19 - ! ' / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT. 3. 234' 5' / CONCERNED CIT 4. 5' ( . ) / THE CIT(A)-II, AHMEDABAD 5. 678'34 , ..34& , .2 / DR, ITAT, AHMEDABAD 6. 8: / GUARD FILE. / BY ORDER, 16'' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.11.16 (DICTATION-PAD 28 +PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3.11.16/7.11.2016 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 08.11.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 08.11.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER