The DCIT, Central Circle-4, Surat V. Shri Bharat L.Shah, Surat

ITA 1145/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94241 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN KUMAR
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Income from undisclosed sources
• Section: 5(2); 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI RAJPAL YADAV, J.M. & SHRI ANIL CHATURV EDI, A.M.) I.T. A. NO. 1145/AHD/2012 (ASSESSM ENT YEAR: 2009-10) THE D.C.I.T., CENTRAL CIRCLE- 4, SURAT V/S SHRI BHARAT L. SHAH 102, VISHAL HOUSE, WORLD TRADE CENTRE, RING ROAD, SURAT-395002 (APPELLANT) (RESPONDENT) PAN: AFSPS3703B APPELLANT BY : SHRI PRAVIN KUMAR, D.R RESPONDENT BY : SHRI RASESH SHAH, A.R. ( )/ ORDER DATE OF HEARING : 06-08-2015 DATE OF PRONOUNCEMENT : 13 -08-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-II, AHMEDABAD DATED 19.03.2012 FOR A.Y. 2009-10. TH 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. A SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED O UT AT THE PREMISES OF ASSESSEE ON 20.1.2009 AND STATEMENT OF SHRI. DIPESH SHAH, THE MAIN DIRECTOR OF VISHAL FASHIONS PRIVATE LIMITED UNDER SECTION 13 2 (4) OF THE ACT WAS ITA NO 1145/ AHD/2012 . A.Y. 2009-10 2 RECORDED ON 20.1.2009 WHEREIN TOTAL DISCLOSURE OF R S. 7.56 CRORES WAS MADE BY HIM WHICH INCLUDED RS. 1 CRORE MADE IN THE NAME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED INCOME INVESTMENT, ADVANCE, ASSETS EXPENDITURE ETC. SUBSEQUENTLY ASSESSMENT WAS FRAMED UNDER SECTION 14 3(3) BY ORDER DATED 28.12.2010 AND THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1,34,82,050/- WHICH INCLUDED THE UNDISCLOSED INC OME OF RS 1 CRORE. ON THE AFORESAID UNDISCLOSED INCOME OF RS 1 CRORE A.O WAS OF THE VIEW THAT DURING THE COURSE OF SEARCH, ASSESSEE HAD FAILED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND THEREFORE VI DE ORDER DATED 20.6. 2011 LEVIED PENALTY OF RS 10 LACS UNDER SECTION 271 AAA(1) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 19 TH MARCH 2012 DELETED THE PENALTY THEREBY DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS U NDER:- 5.I HAVE CONSIDERED THE FACTS OF THE CASE MENTIONED BY THE AO, THE BASIS OF LEVY OF PENALTY, SUBMISSIONS MADE BY LD. AR ON BEHALF OF TH E ASSESSEE AND THE CASE LAWS RELIED UPON. 5.1THE LD. AR'S ARGUMENT THAT THE INCOME DISCLOSED BY THE ASSESSEE COULD NOT BE COVERED UNDER THE DEFINITION OF 'UNDISCLOSED INCOME' AS DEF INED IN EXPL.(A) TO SECTION 271 AAA OF THE ACT, CANNOT BE ACCEPTED BECAUSE DIPESH L. SHAH (BROTHER OF ASSESSEE) HIMSELF MADE DISCLOSURE OF UNACCOUNTED INCOME WHILE RECORDING TH E STATEMENT U/S.132(4) OF THE I.T. ACT. HE HAS ALSO ADMITTED THAT UNDISCLOSED INCOME W AS REPRESENTED BY RECEIVABLES AND OTHER DISCREPANCIES AND UNDISCLOSED INCOME WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THE DISCLOSURE MADE BY THE ASSESSEE FOR UNDISCLOSED INCOME OF RS.1,00,00,000/-, IS CLEARLY COVERED UNDER THE DEFINITION OF 'UNDISCLOSE D INCOME' AS PER EXPL.(A) TO SECTION 271AAA OF THE I.T. ACT. 5.2THE AO HAS LEVIED THE PENALTY U/S 271 AAA OF THE ACT BECAUSE THE FIRST TWO CONDITIONS OF SECTION 271AAA(2) ARE NOT FULFILLED B Y THE APPELLANT. THE THREE CONDITIONS PROVIDED IN SUB-SECTION (2) OF SECTION 271AAA ARE R EPRODUCED AS UNDER: ITA NO 1145/ AHD/2012 . A.Y. 2009-10 3 (I)IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SU B-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHIC H SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLO SED INCOME WAS DERIVED AND (III) PAYS THE TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. CLAUSE (I) LAYS DOWN THE FIRST CONDITION THAT UNDIS CLOSED INCOME SHOULD HAVE BEEN ADMITTED BY DIPESH L. SHAH (BROTHER OF ASSESSEE) IN THE STATEMENT U/S 132(4) AND ASSESSEE SHOULD SPECIFY THE MANNER IN WHICH IT HAS BEEN DERI VED. SHRI DIPESH L SHAH, IN THE STATEMENT RECORDED ON 20.01.2009, IN THE COURSE OF SEARCH STATED IN REPLY TO QUESTIONS NO.34 THAT HE WAS DISCLOSING RS.1 CRORE FOR THE ASS ESSEE FOR FINANCIAL YEAR 2008-09 REPRESENTING CURRENT YEAR INCOME. HE CLEARLY MENTIO NED THAT UNDISCLOSED INCOME WAS DECLARED ON ACCOUNT OF CURRENT, YEAR INCOME. THIS C LEARLY IMPLIES THAT THE INCOME IS EARNED IN CURRENT YEAR FROM BUSINESS. THE ASSESSEE IN HIS STATEMENT RECORDED U/S 132(4) DISCLOSED RS.100.00 LACS AS CURRENT YEAR'S INCOME A ND TO COVER ANY DISCREPANCIES AND TO BUY PEACE OF MIND SO ASSESSEE SPECIFIED THE MANNER IN WHICH UNDISCLOSED INCOME WAS EARNED. CLAUSE (II) LAYS DOWN THE SECOND CONDITION THAT ASS ESSEE SHOULD SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME HAS BEEN DERIVED. THE A UTHORISED OFFICER DID NOT ASK ANY SPECIFIC QUESTION ON SUBSTANTIATING THE MANNER IN W HICH INCOME WAS DERIVED, HOWEVER THE ASSESSEE CLEARLY MENTIONED IN A STATEMENT RECORDED IN SECTOR 132(4) THAT UNDISCLOSED INCOME WAS CURRENT YEAR BUSINESS INCOME. IT IS FURT HER ARGUED THAT THE PRINCIPLES LAID DOWN BY THE HON'BLE HIGH COURTS IN THE CASES OF CIT V. MAHENDRA C. SHAH [2008] 299 ITR 305 (GUJ.) AND CIT V. RADHA KRISHNA GOEL [2005] 278 ITR 454/[2006] 152 TAXMAN 290 (ALL.), ARE ALSO SQUARELY APPLICABLE TO THE FAC TS AND CIRCUMSTANCES OF THE APPELLANT'S CASE . IN THE CASE OF CIT V. MAHENDRA C. SHAH, HON' BLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHORIZED OFFICER, IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN TH E PROVISION OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZ ED OFFICER CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REVENUE TO TAK E ADVANTAGE OF SUCH LAPSE IN THE STATEMENT. THE REASON IS NOT FAR TO SEEK. IN THE FI RST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QUESTION AND ANSWER FORM AND THERE WOULD BE NO OCCASION FOR AN ASSESSEE TO STATE AND MAKE AVERMENTS IN THE EXACT F ORMAT STIPULATED BY THE PROVISIONS ITA NO 1145/ AHD/2012 . A.Y. 2009-10 4 CONSIDERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED. SECONDLY, CONSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDI NG THE CONDITIONS STIPULATED BY THE SECOND EXCEPTION WHILE MAKING STATEMENT UNDER SECTION 132( 4). EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE WOULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT. 5.3 IN THE CASE OF CIT V. RADHA KRISHNA GOEL [2005] 278 ITR 454, THE HON'BLE ALLAHABAD HIGH COURT GAVE SIMILAR FINDINGS AND LAID DOWN SIMILAR PRINCIPLES AS UNDER:- '...FROM A PERUSAL EXPLANATION 5, IT IS EVIDENT THA T THE CIRCUMSTANCES WHICH OTHERWISE DID NOT ATTRACT THE PENALTY PROVISIONS OF SECTION 271(1 )(C), NOW BY A DEEMING PROVISION ATTRACT PENALTY PROVISIONS. BUT AN EXCEPTION IS PRO VIDED IN CLAUSE (2) OF EXPLANATION 5 WHERE THE DEEMING PROVISION WILL NOT APPLY IF DURIN G THE COURSE OF SEARCH THE ASSESSEE MAKES THE STATEMENT UNDER SUB-SECTION (4) OF SECTIO N 132 THAT THE MONEY, BULLION, JEWELLERY ETC. FOUND IN HIS POSSESSION HAS BEEN ACQ UIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME AND A LSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND-PA YS THE TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME....UNDER SECTION 132 (4) OF THE ACT, UNLESS THE AUTHORIZED OFFICER PUTS A SPECIFIC QUESTION WITH REGARD TO THE MANNER IN WHICH INCOME HAS BEEN DERIVED, IT IS NOT EXPECTED FROM THE PERSON TO MAKE A STATEMENT IN THIS REGARD AND IN CASE IN THE STATEMENT THE MANNER IN WHICH INCOME HAS BEE N DERIVED HAS NOT BEEN STATED BUT HAS BEEN STATED SUBSEQUENTLY, IT AMOUNTS TO COMPLIA NCE WITH EXPLANATION 5(2). IF THERE IS NOTHING TO THE CONTRARY IN THE STATEMENT RECORDED U NDER SECTION 132(4) OF THE ACT, IN THE ABSENCE OF ANY SPECIFIC STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, IT CAN BE INFERRED THAT SUCH UNDISCLOSED I NCOME WAS DERIVED FROM THE BUSINESS WHICH HE WAS CARRYING ON. THE OBJECT OF THE PROVISI ON IS ACHIEVED BY MAKING THE STATEMENT ADMITTING THE NON-DISCLOSURE OF MONEY, BU LLION, JEWELLERY, ETC. THUS, MUCH IMPORTANCE SHOULD NOT BE ATTACHED TO THE STATEMENT ABOUT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT CAN BE INFERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN ITA NO 1145/ AHD/2012 . A.Y. 2009-10 5 THE ABSENCE OF ANYTHING TO THE CONTRARY. THEREFORE, MERE NON-STATEMENT OF THE MANNER IN WHICH SUCH INCOME WAS DERIVED WOULD NOT MAKE EXPLAN ATION 5(2) INAPPLICABLE.'(P.454).' 5.4 AFTER GOING THROUGH THE STATEMENT RECORDED UNDE R SECTION 132 (4) OF THE IT ACT AND THE PRINCIPLES LAID DOWN BY THE HONORABLE GUJARAT H IGH COURT AND ALLAHABAD HIGH COURT, IT IS HELD THAT THE AO HAS WRONGLY REJECTED THE ASSESSEE'S ARGUMENTS. THE HONORABLE COURTS HAVE LAID DOWN THE PRINCIPLE THAT THE AUTHORIZED OFFICER IS TO EXPLAIN THE PROVISION TO THE ASSESSEE AND ASK THE RELEVANT QUESTIONS ON THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS EARNED AND IN THE PRESENT CA SE IT IS APPLICABLE FOR SECTION 271AAA INSTEAD OF EXPLANATION 5 OF SECTION 271(1). IN THE WHOLE, STATEMENT RECORDED UNDER SECTION 132(4) ON 20.01.2009, THE AUTHORIZED OFFICER HAS NOT ASKED ANY FURTHER QUESTION BUT WAS SATISFIED WITH THE MANNER THE INCO ME WAS EARNED BY THE ASSESSEE. THE LEARNED DCIT HAS NEVER GIVEN THE APPELLANT ANY SHOW CAUSE NOTICE OR AN OPPORTUNITY DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH RE GARD TO HIS RESERVATION AND CONTRARY OPINION ABOUT THE EXPLANATIONS, INFORMATION AND SPE CIFIC MANNER IN WHICH THE UNACCOUNTED INCOME HAS BEEN DERIVED BY THE APPELLAN T. THEREFORE, IN ABSENCE THEREOF, IT IS A CONSTRUCTIVE AND UNDISPUTED ACCEPTANCE OF THE SAID DISCLOSURE, THE SPECIFIC MANNER THEREOF AND THE SUBSTANTIATION THEREOF BY THE APPEL LANT. CLAUSE (III) LAYS DOWN THE THIRD CONDITION REGARDIN G THE PAYMENT OF TAX ALONG WITH INTEREST ON UNDISCLOSED INCOME ADMITTED IN THE COUR SE OF SEARCH. IT IS UNDISPUTED FACT THAT THE TAX AND INTEREST HAD BEEN PAID BY THE ASSESSEE. THE ASSESSING OFFICER HIMSELF STATED THE SAME IN THE PENALTY ORDER. ON THE BASIS OF PRINCIPLES LAID DOWN BY THE HONORAB LE JURISDICTIONAL HIGH COURT AND BY THE ALLAHABAD HIGH COURT IN THE ABOVE CITED CASES T HE ASSESSEE HAS MADE DISCLOSURE OF UNACCOUNTED INCOME WHILE RECORDING A STATEMENT UNDE R SECTION 132(4) OF THE INCOME TAX ACT AND PAID THE TAXES WITH INTEREST. THE RETURNED INCOME INCLUDED DISCLOSURE AMOUNT OF RS.1,00,00,000/- MADE DURING SEARCH WHILE RECORDING STATEMENT U/S.132(4) OF THE ACT. THE A.O. HAS NOT MADE ANY COMMENT OR OBSERVATION ABOUT THE SOURCE .AND NATURE OF INCOME, MANNER IN WHICH INCOME WAS DERIVED OR SUBSTANTIATIN G THE MANNER. THIS SHOWS THAT THE A.O. HIMSELF WAS SATISFIED ABOUT THE INCOME OFFERED IN RETURN OF INCOME. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CAS E AND THE PRINCIPLES LAID DOWN IN THE DECISIONS BY THE HON'BLE HIGH COURTS NARRATED ABOVE IN PARAS 4.1 AND 5.3 OF THIS ORDER, IT ITA NO 1145/ AHD/2012 . A.Y. 2009-10 6 IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN LEVYING THE PENALTY U/S 271AAA OF THE ACT AND HENCE THE SAME IS DELETED. 4. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NO W IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING THE AO TO DELETE THE PENALTY OF RS. 10,00,000/- LEVIED BY THE ASSESSING OFFICER U/S.271AAAOFTHE ACT. 5. BEFORE US, LEARNED DR SUPPORTED THE ORDER OF AO. O N THE OTHER HAND LEARNED A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LEVY O F PENALTY UNDER SECTION 271AAA. WE FIND THAT LD. CIT(A) WHILE DELETING THE PENALTY HAS NOTED THAT THE DISCLOSURE OF UNDISCLOSED INCOME OF RS. 1 CRORE MADE WAS COVERED UNDER THE DEFINITION OF 'UNDISCLOSED INCOME' AS PER EXPLA NATION (A) TO SECTION 271AAA OF THE ACT. LD. CIT(A) WITH RESPECT TO THE SATISFACTION OF THE REQUIREMENT OF CLAUSE (I) OF SUB SECTION 2 TO SECTI ON 271AAA HAS GIVEN A FINDING THAT SHRI DIPESH SHAH, THE BROTHER OF THE A SSESSEE, IN THE STATEMENT RECORDED UNDER SECTION 132(4), HAD IN REPLY TO QUES TION NUMBER 34, WHILE DISCLOSING RS. 1 CRORE FOR THE ASSESSEE, HAD MENTIO NED THAT IT WAS DECLARED ON ACCOUNT OF CURRENT YEAR INCOME WHICH IMPLIED THAT T HE INCOME IS FROM BUSINESS. WITH RESPECT TO THE FULFILLING THE REQUIR EMENT OF CLAUSE (II) OF SUB SECTION 2 TO SECTION 271AAA, LD. CIT(A) HAS NOTED THAT THE SAME WAS ALSO SATISFIED AS DURING THE COURSE OF SEARCH THE AUTHOR IZED OFFICER DID NOT ASK ANY SPECIFIC QUESTION ON SUBSTANTIATING THE MANNER IN W HICH INCOME WAS DERIVED, ITA NO 1145/ AHD/2012 . A.Y. 2009-10 7 BUT HOWEVER THE ASSESSEE HAD CLEARLY MENTIONED IN T HE STATEMENT RECORDED UNDER SECTION 132(4) THAT THE UNDISCLOSED INCOME WA S CURRENT YEAR'S BUSINESS INCOME. LD. CIT(A) HAS ALSO NOTED THAT CLAUSE (II I) OF SUBSECTION 2 OF SECTION 271AAA WAS ALSO SATISFIED BY THE ASSESSEE A S THE ASSESSEE HAD PAID THE TAX ALONG WITH INTEREST. LD. CIT(A) HAS THUS GIVEN A FINDING THAT THAT THE 3 CONDITIONS SPECIFIED UNDER SECTION 271AAA WERE SA TISFIED BY THE ASSESSEE IN THE LIGHT OF DECISIONS OF HONBLE GUJARAT HIGH C OURT AND ALLAHABAD HIGH COURT CITED THEREIN AND THEREFORE NO PENALTY WAS LE VIABLE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDINGS OF LD. CIT(A) NOR HAS PLACED ON RECORD ANY CONTRARY BI NDING DECISION. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 08 - 2015. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD