DCIT, Chandigarh V. Sh. Surinder Singh Saini, Chandigarh

ITA 113/CHANDI/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7022 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGHDR
• Assessee Lawyers: ATUL GOEL
• Keywords: Business income; Search and seizure; Loose papers; Document seized; Documents seized
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.113/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. SH.SURINDER SINGH SAINI, CENTRAL CIRCLE 1, H.NO.1183, SECTOR 8, CHANDIGARH. CHANDIGARH. PAN: AFCS8196L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH,DR RESPONDENT BY : SHRI ATUL GOEL, CA DATE OF HEARING : 06.07.2017 DATE OF PRONOUNCEMENT : 01.08.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT (APPEALS)(CENTRAL), GURGAON DAT ED 18.11.2014, RELATING TO ASSESSMENT YEAR 2011-12, DE LETING THE PENALTY LEVIED UNDER SECTION 271AAA OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE ASSESSEE IS RUNNING A PROPRIETARY CONCERN DOING CON TRACTOR BUSINESS IN THE NAME AND STYLE OF M/S SURINDRA BUIL DERS AND IS ALSO RUNNING A SCHOOL BY THE NAME OF M/S GUR U TEG BAHADUR SCHOOL, ANANDPUR SAHIB. SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT AT THE RESIDENTIAL/BUSI NESS PREMISES OF MEHTA & ZANDER GROUP OF CASES ON 18.2.2 011 AND THE ASSESSEE WAS ONE OF THE PERSONS COVERED IN IT. THE 2 ASSESSEE MADE A SURRENDER OF RS.2.5 CRORES AS UNDIS CLOSED INCOME OVER AND ABOVE THE REGULAR INCOME FOR THE YE AR WHICH WAS ACCEPTED, BUT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE MANNER OF EARNING THE INCOME, PENA LTY UNDER SECTION 271AAA OF THE ACT OF RS.25 LACS WAS L EVIED. 3. AGGRIEVED BY THE SAME, THE MATTER WAS CARRIED I N APPEAL BEFORE THE LD.CIT (APPEALS) WHO DELETED THE PENALTY LEVIED STATING THAT SINCE THE SURRENDER WAS ADMITTE D IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, WAS DULY INCLUDED IN THE RETURN OF INCOME AND ACCEPTED BY THE ASSESSING OFFICER ALSO, DUE TAXES ON THE SAME PAID AND IT WAS REPEATEDLY STRESSED BY THE ASSESSEE THAT THE SU RRENDER WAS ON ACCOUNT OF BUSINESS INCOME, THE ASSESSEE HA D FULFILLED ALL THE CONDITIONS LAID DOWN IN SUB-SECTI ON (2) OF SECTION 271AAA OF THE ACT FOR GRANT OF IMMUNITY FRO M PENALTY. THE LD.CIT (APPEALS) RELIED UPON THE ORDE R OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF ACIT VS. MUNISH KUMAR GOYAL REPORTED IN 45 TAXMANN.COM 563 IN THIS REGARD. 4. AGGRIEVED BY THE SAME, REVENUE HAS NOW COME UP IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE TOTAL PENALTY AMOUNTING TO RS.25,00,000/- LEVIED U/S271AAA OF THE ACT IMPOSED BY THE AO WITHOUT APPRECIATING THE FACTS OF THE CASE. II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS RIGHT IN GRANTING RELIEF TO THE ASSESSEE WHEN EVEN THE BASIC REQUIREMENT OF THE SECTION 271AAA IS NOT FULFILLED I.E. THE ASSESSEE FAILED TO 3 ELABORATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. 5. DURING THE COURSE OF HEARING BEFORE US, THE LD. D.R. POINTED OUT THAT PENALTY IN THE PRESENT CASE H AD BEEN LEVIED BY THE ASSESSING OFFICER SINCE THE ASSESSEE HAD FAILED TO SUBSTANTIATE AND SPECIFY THE MANNER IN WHICH THE INCOME SURRENDERED WAS DERIVED. THE LD. D.R. CONTENDED TH AT DESPITE SPECIFICALLY CONFRONTING THE ASSESSEE WITH LEVY OF PENALTY UNDER SECTION 271AAA THE ASSESSEE HAD FAILE D TO SUBSTANTIATE THE MANNER IN WHICH THE INCOME WAS DER IVED. THE LD. D.R. DREW OUR ATTENTION TO THE SPECIFIC QUE RY RAISED TO THE ASSESSEE AND HIS RESPONSE THERETO IN HIS STA TEMENT RECORDED DURING THE COURSE OF SEARCH CONDUCTED WHIC H IS REPRODUCED IN THE PENALTY ORDER AT PAGE 2 AS UNDER: 6. THE LD. D.R. THEREAFTER POINTED OUT THAT ALL TH E CASE LAWS RELIED UPON BY THE ASSESSEE WERE DISTINGU ISHABLE SINCE IN THE SAID CASES THE ASSESSEE WAS SPARED FRO M THE RIGOURS OF PENALTY FOR THE REASON THAT IT WAS FOUND THAT THE ASSESSEE HAD NOT BEEN ASKED ANY QUESTION REGARDING THE MANNER OF EARNING THE UNDISCLOSED INCOME AND REGARD ING THE SUBSTANTIATION OF THE SAME. THE LD. D.R. POINT ED OUT THAT SINCE IN THE PRESENT CASE SPECIFIC QUERY IN TH IS REGARD 4 WAS ASKED DESPITE WHICH THE ASSESSEE HAD NOT COMPLI ED WITH THE REQUIREMENTS OF SECTION 271AAA OF THE ACT, THE PENALTY LEVIED, THEREFORE, BY THE ASSESSING OFFICER WAS JUSTIFIED AND THE LD.CIT (APPEALS) HAD ERRED IN DEL ETING THE SAME. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD.CIT (APPEALS) A ND STATED THAT THE CASE WAS SQUARELY COVERED BY THE DECISION OF I.T.A.T., CHANDIGARH BENCH IN THE CASE OF MUNISH KU MAR GOYAL (SUPRA). 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. THE ISSUE BEFORE US IS LEVY OF PENALTY UN DER SECTION 271AAA OF THE ACT ON UNDISCLOSED INCOME FOUND IN TH E COURSE OF SEARCH CONDUCTED, SUB-SECTION (2) OF WHIC H GRANTS IMMUNITY FROM THE LEVY OF SUCH PENALTY ON THE FULFI LLMENT OF CONDITIONS SPECIFIED THEREIN WHICH ARE; A) THE ASSESSEE ADMITS UNDISCLOSED INCOME AND SPECIFIES THE MANNER OF DERIVING SUCH INCOME IN THE STATEMENT RECORDED UNDER SUB-SECTION (4) OF SECTION 132(2); B) SUBSTANTIATES THE MANNER OF DERIVING UNDISCLOSED INCOME; AND C) PAYS TAXES ALONGWITH INTEREST ON THE UNDISCLOSED INCOME. 9. IN THE PRESENT CASE UNDISPUTEDLY THE ASSESSEE H AS SURRENDERED RS.2.5 CRORES IN THE STATEMENT RECORDED UNDER 5 SECTION 132(4) AND INCLUDED THE SAME IN HIS RETURN OF INCOME AND PAID TAXES ON THE SAME. PENALTY HAS BEE N LEVIED BY THE ASSESSING OFFICER FOR NOT DISCLOSING THE MANNER IN WHICH THE INCOME WAS DERIVED AND FOR NOT SUBSTANTIATING THE SAME ALSO. 10. ON PERUSING THE ASSESSMENT ORDER FRAMED IN ASSESSEES CASE UNDER SECTION 153B(1)(B) R.W.S.143( 3) OF THE ACT IN PURSUANCE TO THE PROCEEDINGS CONDUCTED AFTER SEARCH TOOK PLACE, WE FIND THAT THE ASSESSEE WAS SPECIFICA LLY ASKED THE QUERY OF FURNISHING THE DETAILS OF THE TOTAL DI SCLOSURE MADE BY HIM AND TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS EARNED VIDE QUESTIONNAIRE DA TED 16.1.2013. IN RESPONSE TO THE SAME THE ASSESSEE SU BMITTED VIDE HIS REPLY DATED 7.2.2013 THAT THE SURRENDER H AD BEEN MADE TO COVER UP ANY DISCREPANCY/ERROR/OMISSION IN THE BOOKS OF ACCOUNT THAT MAY BE FOUND. THE RELEVANT R EPLY IS REPRODUCED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS VOLUNTARY SURRENDERED A SUM OF RS .2.50 CRORES IN RESPECT OF THE M/S SURINDRA BUILDERS PROP . SURINDER SINGH. THE ABOVE SURRENDER OF RS.2.5 CRORES WAS MAD E ON THE ADVICE OF THE RAIDING PARTY TO GET PEACE OF MIND AND ALSO TO COVER ANY DISCREPANCY/ERRORS/OMISSION IN THE BOOKS OF ACC OUNTS THAT MAY BE FOUND, IF ANY, DURING THE SCRUTINY ASSESSMEN T PROCEEDINGS. IT IS THEREFORE HUMBLY REQUESTED AND P RAYED TO KINDLY ADJUST THIS AMOUNT AGAINST ANY ERROR/MISTAKE /OMISSION THAT MAY BE FOUND DURING THE ASSESSMENT PROCEEDINGS . THE ASSESSEE HAS DULY PAID ADDITIONAL TAX RS.1,00,10,000/- (ONE CRORE TEN THOUSAND ONLY) INCLUDING INTEREST ON THE A BOVE SURRENDERED AMOUNT OF RS.2.5 CRORES. 11. THEREAFTER IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS CONFRONTED WITH THE DOCUMENTS WHICH WE RE 6 FOUND DURING THE COURSE OF SEARCH. PARA 6 OF THE ASSESSMENT ORDER FINDS MENTION OF A DOCUMENT AT PAG E 88 OF A-13 WHICH WAS SEIZED FROM THE RESIDENCE OF THE ASS ESSEE AND WAS A HAND WRITTEN SHEET SHOWING RECEIPT OF AMO UNT IN CASH OF RS.8,27,000. THE ASSESSEE RESPONDED TO THE SAME BY STATING THAT THE SAME RELATED TO CASH RECEIVED O N DIFFERENT DATES DURING THE IMPUGNED YEAR RELATING T O SCHOOL FEES RECEIVED FROM STUDENTS OF THE SCHOOL RUN BY HI M M/S TEG BAHADUR SCHOOL, ANANDPUR SAHIB. THE ASSESSEE A LSO PRODUCED HIS CASH BOOK FROM THE BOOKS OF ACCOUNTS, SHOWING THE FEES RECEIVED IN HIS HANDS. THE ASSESS ING OFFICER DID NOT GIVE ANY CREDIT TO THE SAME FOR THE REASON THAT THESE BOOKS WERE NOT FOUND AT THE TIME OF SEAR CH, NOR WAS THIS EXPLANATION GIVEN DURING SEARCH. THEREFO RE, THE SAID AMOUNT OF RS.7,02,000/- WAS ADDED BACK UNDER S ECTION 68 OF THE ACT. 12. THEREAFTER PAGES 1 TO 404 OF ANNEXURE A-12 SEI ZED FROM SCF-2, SECTOR 34, CHANDIGARH WHICH WERE HAND W RITTEN SELF DRAWN VOUCHERS OF CASH PAYMENTS AMOUNTING TO RS.2,03,23,635/- WERE CONFRONTED TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE SUBMITTED THAT H E MAKES PAYMENT IN RESPECT OF LABOURERS/WORKERS FOR T HE EXECUTION OF CONTRACT WORK THROUGH HEAD OF THE LABOURERS/WORKERS (IN COMMON LANGUAGE CALLED AS JAMADAR). THE ASSESSEE SUBMITTED THAT THE ABOVE SELF DRAWN CASH VOUCHERS FOUND, WAS PART OF THE SAID PAY MENTS MADE AND FURTHER SUBMITTED THAT THE SAID VOUCHERS/B ILLS 7 WERE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT IN THE YEAR TO WHICH IT PERTAINED. THE ASSESSEE FURTHER POINTE D OUT THAT EVEN AS PER BOOKS OF ACCOUNT IN SOFT COPY, A SIMILAR BREAK UP OF PAYMENTS MADE TO LABOURERS HAD BEEN WOR KED OUT WHICH SHOWED THAT THE ASSESSEE WAS REGULARLY FO LLOWING THIS MODE OF PAYMENT FOR MAKING PAYMENT TO LABOURERS/WORKERS. THE ASSESSING OFFICER AGAIN DID NOT ACCEPT THE ASSESSEES EXPLANATION FOR THE REASON TH AT NO SUCH EXPLANATION WAS OFFERED AT THE TIME OF SEARCH NOR COMPLETE BOOKS OF ACCOUNT WERE PRODUCED AT THE TIME OF SEARCH OR EVEN BEFORE THE DDIT. HE, THEREFORE, MAD E ADDITION ON ACCOUNT OF THE SAID PAYMENTS. 13. THEREAFTER THE ASSESSEE WAS ASKED TO PRODUCE H IS COMPLETE BOOKS OF ACCOUNT AND THE ASSESSING OFFICER FOUND VARIOUS ANOMALIES IN THE SAME. HE THEREFORE REJECT ED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AN D APPLIED A NET PROFIT RATE OF 7% TO THE GROSS TURN O VER OF THE ASSESSEE AND MADE ADDITION TO THE INCOME OF THE ASS ESSEE ON ACCOUNT OF THE ESTIMATION OF NET PROFIT, AMOUNTI NG TO RS.73,15,030/-. THE ASSESSING OFFICER THEREAFTER AD JUSTED THE ABOVE ADDITIONS AGAINST THE SURRENDER MADE BY T HE ASSESSEE OF RS.2.5 CRORES. 14. IT IS CLEAR FROM THE ABOVE THAT THE ASSESSEE H AD MADE SURRENDER ON ACCOUNT OF LOOSE PAPERS AND DISCREPANCIES FOUND DURING THE COURSE OF SEARCH, WH ICH IS EVIDENT FROM THE STATEMENT RECORDED UNDER SECTION 1 32(4) OF THE ACT REPRODUCED ABOVE. WHEN THE INCRIMINATING 8 DOCUMENTS FOUND DURING THE COURSE OF SEARCH WERE CONFRONTED TO HIM DURING ASSESSMENT PROCEEDINGS, HE EXPLAINED ALL DOCUMENTS COMPLETELY AND EVEN DEMONST RATED THAT FIGURES REFLECTED IN THE SAID SEIZED DOCUMENTS WAS DULY REFLECTED IN HIS BOOKS OF ACCOUNT. NEITHER THE ASS ESSING OFFICER, NOR LD.CIT(A) OR EVEN THE LD.DR HAS BEEN A BLE TO CONTROVERT THIS FACT. THE ASSESSING OFFICER, WE FI ND, REJECTED THE EXPLANATION FOR THE REASON THAT THE SA ME WAS NOT GIVEN DURING SEARCH PROCEEDING OR EVEN DURING P OST SEARCH INVESTIGATION. WHAT EMERGES, THEREFORE, IS THAT NO INFIRMITY WAS FOUND IN THE EXPLANATION OF THE ASSES SEE WHO HAD CLEARLY DEMONSTRATED THE NATURE OF THE TRANSACT IONS RECORDED IN THE DOCUMENTS SEIZED AND HAD ALSO DEMONSTRATED THE FACT THAT THEY WERE REFLECTED IN T HE BOOKS OF ACCOUNT. THERE REMAINS, THEREFORE, NO DOUBT ABO UT THE FACT THAT THE ASSESSEE HAD DISCLOSED THE MANNER OF EARNING THE UNDISCLOSED INCOME AND HAD ALSO SUBSTANTIATED T HE MANNER OF EARNING THE INCOME. FOR THE ABOVE REASON S, WE DO NOT AGREE WITH THE CONTENTION OF THE LD. D.R. TH AT THE ASSESSEE FAILED TO EXPLAIN THE MANNER OF EARNING TH E INCOME AND SUBSTANTIATE THE MANNER, DESPITE SPECIFIC QUERY RAISED IN THIS REGARD DURING THE RECORDING OF STATEMENT DU RING SEARCH. AS PER SECTION 271AA ONLY THE REQUIREMENT OF ADMITTING THE UNDISCLOSED INCOME AND SPECIFYING THE MANNER OF DERIVING THE SAME HAS TO BE COMPLIED WITH IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT WHICH IN THE PRESENT CASE THE ASSESSEE HAS DONE. THE OTHER TWO CONDITIONS OF SUBSTANTIATING THE MANNER OF DERIVING THE 9 UNDISCLOSED INCOME AND PAYING TAX THEREON ARE NOT SUBJECTED TO THIS CONDITION AND CAN, THEREFORE, BE COMPLIED WITH EVEN DURING SUBSEQUENT ASSESSMENT PROCEEDINGS. IN FACT THE CONDITION OF PAYING TAX CANNOT NECESSARILY BE COMPLIED WITH AT THE TIME OF RECORDING STATEMENT U/ S 132(4) OF THE ACT, SINCE IT IS ONLY AFTER INCLUDING THE UN DISCLOSED INCOME IN THE REST OF THE INCOME OF THE ASSESSEE WH ICH IS TO BE CALCULATED AFTER THE END OF THE PREVIOUS YEAR, T HAT TAX TO BE PAID, THEREFORE, CAN BE COMPUTED AND ULTIMATELY PAID. IN HE PRESENT CASE, THEREFORE, SUBSTANTIATION OF MANNE R OF EARNING UNDISCLOSED INCOME DURING ASSESSMENT PROCEE DINGS IS, THEREFORE, HELD TO BE IN COMPLIANCE WITH THE CO NDITION STIPULATED U/S 271AAA OF THE ACT, THUS ENTITLING TH E ASSESSEE TO CLAIM IMMUNITY FROM LEVY OF PENALTY U/S 271AAA OF THE ACT. FOR THE ABOVE REASONS, WE UPHOL D THE ORDER OF THE LD.CIT (APPEALS) AND DISMISS THE GROUN DS OF APPEAL RAISED BY THE REVENUE. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 ST AUGUST, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH