Sh. Sukhdarshan Kumar, Ludhiana V. DCIT, CC-1, Ludhiana

ITA 1239/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8347 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Valuation report
• Section: 132; 14A; 22; 20

Judgement Text

ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 14 17. FROM THE PLAIN READING OF SECTION 271AAB WE FIN D THAT THE LEVY OF PENALTY IS PERMISSIBLE IF AND ONLY IF T HERE EXISTS UNDISCLOSED INCOME. FINDING OR UNEARTHING OF UNDI SCLOSED INCOME IN THE COURSE OR AS A RESULT OF SEARCH CONDU CTED U/S 132 OF THE ACT IS SINE QUA NON FOR INVOKING PEN AL PROVISIONS OF SECTION 271AAB OF THE ACT. DISCOVERY AND CONSEQUENT ASSESSMENT OF UNDISCLOSED INCOME IS A CONDITION PRECEDENT FOR LEVY OF PENALTY UNDER SECTI ON 271AAB OF THE ACT. IT HAS TO BE BORNE IN MIND THAT EVERY OFFER OF THE ASSESSEE TO PAY TAX ON HIS OR HER INCO ME IN THE COURSE OF RECORDING OF STATEMENT U/S 132 DOES NOT A MOUNT TO FINDING OF UNDISCLOSED INCOME. A MERE OFFER OR DISCLOSURE BY AN ASSESSEE TO PAY TAX ON SOME ADDITI ONAL AMOUNT WITH A VIEW TO AVOID PROTRACTED LITIGATION C ANNOT AND DOES NOT AMOUNT TO DISCOVERY OF UNDISCLOSED INC OME FOR THE PURPOSES OF LEVY PENALTY U/S 271AAB OF THE ACT. THE LEGISLATURE HAS ALL ALONG BEEN CONSCIOUS IN PRO VIDING FOR LEVY OF PENALTY ONLY IN RESPECT OF UNDISCLOSED INCOME. WE FIND THAT IN ALL PENAL PROVISIONS SUCH AS EXPLANATION 5A OF SECTION 271(1)(C), SECTION 271AAA & SECTION 271AAB, THE LEGISLATURE HAS RESTRICTED THE SCOPE OF PENAL PROVISION ONLY TO UNDISCLOSED INCOME AND NOT ASSESSED TOTAL INCOME. MOREOVER THE TERM/EXPRESSION UNDISCLOSED INCOME HAS BEEN DEFINED BY THE LEGISL ATURE IN ALL SUCH PENAL PROVISIONS IN A SPECIFIC AND REST RICTED MANNER AND NOT IN AN INCLUSIVE MANNER. FOR THAT REA SON THE DEFINITION OF UNDISCLOSED INCOME NOWHERE PROVID ES THAT THE SAID EXPRESSION SHALL INCLUDE ALL AND EV ERY SPECIES OF INCOME BUT THE WORD USED IS UNDISCLOSED INCOME MEANS. THE CONSCIOUS USE OF THE EXPRESSION MEANS IN CONTRADISTINCTION TO THE USE OF WORD INCLUDES IND ICATE THAT THE LEGISLATURE INTENDED TO RESTRICT THE SCOPE OF PENAL PROVISIONS ONLY TO INCOME WHICH CAME WITHIN THE KEN OF THE SAID EXPRESSION AND NOT BEYOND. APPLYING THE DEFINITION OF UNDISCLOSED INCOME TO THE INCOME OF R S.69 CRORES, WE FIND THAT SUCH INCOME WAS OFFERED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT AT THE TIM E OF SEARCH. HOWEVER ONLY FOR THE SAID REASON, IT COULD NOT BE BROUGHT WITHIN THE AMBIT OF UNDISCLOSED INCOME PARTICULARLY WHEN SUCH INCOME WAS NOT REPRESENTED B Y ANY VALUABLE ASSET OR ENTRY IN BOOKS OF ACCOUNTS OR WHI CH WAS NOT FOUND AS A RESULT OF SEARCH NOT RECORDED IN THE BOOKS. WE THEREFORE FIND MUCH FORCE IN THE LD. ARS ARGUME NTS THAT SINCE THE SUM OF RS.69 CRORES VOLUNTARILY OFFE RED TO TAX WAS NOT IN THE NATURE OF UNDISCLOSED INCOME, TH E LEVY OF PENALTY U/S 271AAB WAS UNSUSTAINABLE. ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 16 ACIT VS MARVEL ASSOCIATES (SUPRA) WHEREIN IT WAS H ELD AS FOLLOWS: 9. PENALTY U/S 271AAB ATTRACTS ON UNDISCLOSED INCO ME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4 ). THE AO MUST ESTABLISH THAT THERE IS UNDISCLOSED INC OME ON THE BASIS OF INCRIMINATING MATERIAL. IN THE INST ANT CASE A LOOSE SHEET WAS FOUND ACCORDING TO THE A.O., IT WAS INCRIMINATING MATERIAL EVIDENCING THE UNDISCLOS ED INCOME. IN THE PENALTY ORDER THE AO OBSERVED THAT LOOSE SHEET SHOWS THE COST PER SQUARE FEET IS RS.35 71/- PER SFT. AND ASSESSEE STATED TO HAVE SUBMITTED IN S WORN STATEMENT COST PER SQ. FEET AT RS.2200/- TO RS.2300 /- PER SQ. FEET. HOWEVER NEITHER THE AO NOR THE LD.CIT (A) HAS VERIFIED THE COST OF CONSTRUCTION WITH THE BOOK S AND PROJECTIONS FOUND AT THE TIME OF SEARCH. THE COUNSEL ARGUED THAT IT WAS MERE PROJECTION BUT NOT THE ACTUALS. THE WRITE UP HEADING ALSO MENTIONED THAT SUMMARY OF THE PROJECTED PROFITABILITY STATEMENT. THERE IS NO EVIDENCE TO ESTABLISH THAT PROJECTIONS REFLECTED IN THE LOOSE SHEET IS REAL. NO OTHER MATE RIAL WAS FOUND DURING THE COURSE OF SEARCH INDICATING TH E UNDISCLOSED INCOME. THERE WAS NO MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE OR THING OR ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENTS TRANSACTIONS WERE FOUND DURING THE COURSE OF SEARCH INDICATING THE AS SETS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, WHOLLY O R PARTLY. THE REVENUE DID NOT FIND ANY UNDISCLOSED AS SET, ANY OTHER UNDISCLOSED INCOME OR THE INFLATION OF EXPENDITURE DURING THE SEARCH/ ASSESSMENT PROCEEDINGS. THOUGH A LOOSE SHEET OF PAGE NO.107 OF ANNEXURE A/GS/MA/1 WAS FOUND THAT DOES NOT INDICATE ANY SUPPRESSION OF INCOME BUT IT IS ONLY PROJECTION OF PROFIT STATEMENT. THE AMOUNT OF RS.3571/- MENTIONED IN THE PROJECTIONS REFERS TO COST AND PROFIT WHICH IS APPROXIMATE SALE PRICE BUT NOT THE COST AS STATED B Y THE AO IN THE PENALTY ORDER. THE COST OF CONSTRUCTI ON IN THE PROJECTIONS PROJECTED AT RS.2177/- WHICH IS IN SYNCH WITH THE STATEMENT GIVEN BY THE ASSESSEE. THE AO WAS HAPPY WITH THE DISCLOSURE GIVEN BY THE ASSESSEE AND DID NOT VERIFY THE FACTUAL POSITION WITH THE BO OKS OF ACCOUNTS AND PROJECTIONS AND BRING THE EVIDENCE TO UNEARTH THE UNDISCLOSED INCOME. NEITHER THE A.O. NO R THE INVESTIGATION WING LINKED THE COST OF PROFIT OR COST OF ASSET TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OR TO THE SALES CONDUCTED BY THE ASSESSEE TO THE SALE DEE DS. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION O F THE REVENUE THAT THE LOOSE SHEET FOUND DURING THE COURSE OF SEARCH INDICATES ANY UNDISCLOSED INCOME O R ASSET OR INFLATION OF EXPENDITURE. THE HON'BLE ITAT DELHI BENCH IN THE CASE OF AJAY SHARMA V. DY. CIT [2013] 30 TAXMANN.COM 109 HELD THAT WITH RESPECT TO ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 18 RECORD AS PRODUCED BEFORE US BY THE LD. DR THAT THE VALUATION REPORT IS BASED ON THE MARKET PRICE OF TH E GOLD JEWELLERY PREVAILING ON THE DATE OF SEARCH AS AGAINST THE COST OR REALIZATION WHEREVER IS LESS. THEREFORE, THE COMPUTATION OF EXCESS STOCK BASED ON THE MARKET PRICE OF THE STOCK CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE AS IT IS THE SUB JECT MATTER OF REGULAR ASSESSMENT AND CANNOT BE REGARDED AS UNDISCLOSED INCOME BASED ON INCRIMINATING MATERIAL. THERE IS NO SUCH FACT EITHER RECORDED DUR ING THE SEARCH AND SEIZURE PROCEEDING OR IN THE ASSESSM ENT ORDER OR IN THE PENALTY PROCEEDING TO SHOW THAT THE RE WAS DISCREPANCY IN THE STOCK AS RECORDED IN THE BOO KS OF ACCOUNT AND FOUND AT THE TIME OF SEARCH. IN THE ABSENCE OF ANY DISCREPANCY IN THE QUANTITY OF STOCK THE VALUATION OF THE STOCK IS PURELY A QUESTION OF ASSESSMENT AND CANNOT BE HELD AS UNDISCLOSED INCOME DETECTED DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDING. THEREFORE, TO THE EXTENT OF EXCESS STOC K BASED ON THE VALUATION REPORT THE DISCLOSURE OF THE INCOME BY THE ASSESSEE WOULD NOT FALL IN THE CATEGO RY OF UNDISCLOSED INCOME AS PER EXPLANATION TO SECTION 271AAB OF THE ACT. IT IS NOT THE CASE OF THE REVENU E THAT ANY STOCK OF JEWELLERY WAS FOUND WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT BUT THE VALUE OF S TOCK IS COMPUTED BASED ON THE VALUATION REPORT OF THE DEPARTMENTAL VALUER. ONCE THE DIFFERENCE IN THE VAL UE OF STOCK IS ONLY DUE TO MARKET PRICE AS AGAINST THE COST OF THE SAID STOCK, THE SAME WILL NOT FALL IN THE AM BIT OF UNDISCLOSED INCOME AS DEFINED UNDER CLAUSE-(C) OF EXPLANATION -1 OF SECTION 271AAB OF THE ACT. 19. SIMILARLY THE ACCRUED INTEREST OF RS. 20,00,000 /- IS ALSO ONLY ESTIMATED AND NOT BASED ON ANY INCRIMINATING DOCUMENTS. THIS AMOUNT WAS ESTIMATED AS THERE WERE ADVANCES AS PER THE ENTRIES OF THE SE IZED MATERIAL. EVEN OTHERWISE ACCRUED INTEREST IS DEPEND ENT ON THE OUTCOME OF THE LEVY OF PENALTY IN RESPECT OF ADVANCES GIVEN BY THE ASSESSEE. WE HAVE CONSIDERED THE ISSUE OF ADVANCES FOR THE ASSESSMENT YEAR 2013- 14 AND ACCORDINGLY IN VIEW OF OUR FINDING ON THE SAID ISSUE THE PENALTY U/S 271AAB OF THE ACT IS NOT SUSTAINABL E IN RESPECT OF THE SURRENDER AMOUNT OF RS. 1,65,38,920/ -. 22. WE ALSO RELY ON THE DECISION OF THE COORDINATE BENCH AT RANCHI IN THE CASE OF RINKU AGARWAL IN ITA NO. 262/RAN/2017 DATED 30.11.2018. IN THE INSTANT CASE AS WELL IN THE COURSE OF SEARCH OPERATIONS CONDUCTED A T THE MICA MOD GROUP ON 21.11.2012, THE ASSESSEE HAD ADMITTED ADDITIONAL INCOME OF RS.5,00,000/- U/S 132 (4) WHICH SHE HAD OFFERED TO TAX IN HER RETURN OF INCOM E. THE AO LEVIED PENALTY U/S 271AAB ON SUCH ADDITIONAL INC OME ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 20 UNDER SECTION 14A OF THE ACT WHICH WAS IN ADDITION TO THE SUO MOTU DISALLOWANCE OF RS. 3,45,49,868/- RETURNED BY THE ASSESSEE IN THIS RESPECT IN HIS INCOME TAX RETU RN. THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS. 2,25,54,011/- U/S 36 (1)(III) OF THE ACT. THOUGH TH E ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTE D THAT THE SET OFF OF RS. 14 CRORES DECLARED ON ACCOUNT OF DISALLOWANCE BY THE ASSESSEE OF EXPENSES/ADDITIONS BE GIVEN TO THE ASSESSEE, HOWEVER, THE ASSESSING OFFIC ER REJECTED THE ABOVE CONTENTION OF THE ASSESSEE SINCE THE ASSESSEE HAD NOT GIVEN ANY BIFURCATION OF ANY SURRENDERED INCOME OF RS. 14 CRORES. APART FROM THAT, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 9,23,231/- U/S 36(1) (V) OF THE INCOME TAX ACT AND ASSESSED THE TOTAL INCOME AT A LOSS OF RS. 33,73,75,950/- AS AGAINST THE LOSS DECLARED / RETURNED BY THE ASSE SSEE AT RS. 41,50,72,313/-. 11. THE RELEVANT FACT IN THIS CASE IS THAT THOUGH T HE ASSESSING OFFICER EXAMINED INDIVIDUALLY EACH AND EV ERY ITEM OF INCOME AND EXPENDITURE AND MADE SEPARATE DISALLOWANCES, HOWEVER, THE ASSESSING OFFICER DID N OT POINT OUT ANY EXCESS OR WRONG EXPENDITURE CLAIMED S O FAR AS THE SURRENDER OF RS. 14 CRORES ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE / ADDITION WAS CONCERNE D. EVEN THE ASSESSING OFFICER DID NOT ALLOW THE TELESC OPIC BENEFIT / SET OFF OF THE AMOUNT SURRENDERED AS AGAI NST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER TH E PROVISIONS OF SECTION 40A, 36 (1)(III) AND 36 (1)(V ) OF THE ACT. THERE IS NO MENTION IN THE ASSESSMENT ORDER TH AT THE ASSESSEE HAD CLAIMED ANY EXTRA OR INADMISSIBLE EXPENDITURE IN RESPECT OF ANY OTHER ITEM. IT ALSO APPARENT FROM THE FACTS ON THE FILE THAT EVEN DURIN G THE SEARCH ACTION, NO INCRIMINATING MATERIAL IN RESPECT OF EXCESSIVE OR INADMISSIBLE EXPENDITURE WAS FOUND DUR ING THE SEARCH ACTION. THE ASSESSEE SIMPLY SURRENDERED THE AMOUNT OF RS. 14,39,99,158/- AND IN THE BIFURCATION ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 22 CONVEY THROUGH THE AFORESAID DISCUSSION IS THAT EVE N DESPITE CERTAIN DISALLOWANCES MADE BY THE ASSESSING OFFICER, AS DISCUSSED ABOVE, IT CANNOT BE SAID THAT ASSESSEE HAD CLAIMED ANY INADMISSIBLE EXPENDITURE WHICH WOULD FALL WITHIN THE DEFINITION OF UNDISCLO SED INCOME AS DEFINED UNDER THE PROVISIONS OF SECTION 271AAB OF THE ACT. EXCEPT THE AFORESAID DISALLOWANC E MADE BY THE ASSESSING OFFICER ON DEBATABLE ISSUES, THERE IS NO CASE OF THE DEPARTMENT IN RESPECT OF ANY INADMISSIBLE EXPENDITURE CLAIMED BY THE ASSESSEE WH ICH WOULD COVER THE SURRENDERED INCOME OF RS. 14 CORES. FROM THE FACTS ON THE FILE, IT IS ESTABLISHED THAT THE AFORESAID SURRENDER OF RS. 14 CRORES WAS BASED ON THE MERE STATEMENT OF THE ASSESSEE AND NOTHING INCRIMIN ATING MATERIAL WHICH WOULD CONSTITUTE UNDISCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB OF THE ACT WAS DETECTED OR FOUND DURING THE SEARCH ACTION. IN VIEW OF THE VARIOUS CASE LAWS AS DISCUSSED ABOVE, THE AFORE SAID AMOUNT FOR RS. 14 CORES WOULD NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME AS DEFINED UNDER SECTION 271AA B OF THE ACT AND, HENCE, THE PENALTY IS NOT LEVIABLE ON THE SAID AMOUNT UNDER THE PROVISIONS OF SECTION 271AAB OF THE ACT. 13. SO FAR AS THE RELIANCE OF THE LD. DR ON THE DEC ISION IN THE CASE OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. SHRI SANDEEP CHANDAK AND ORS . (SUPRA) IS CONCERNED, AS DISCUSSED IN THE AFORESAID DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN DCIT VS. RASHMI CEMENT LTD, (SUPRA) THE FACTS IN THE CASE OF PRINCIPAL CIT VS. SHRI SANDEEP CHANDAK AND ORS (SUPRA) ARE DISTINGUISHABLE AND DO NOT APPLY T O THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND IN THE LIGHT OF THE DISCUSSION MADE IN THE ABOVE REFERRED TO DEC ISION OF THE KOLKATA BENCH OF THE TRIBUNAL. 14. HOWEVER, SO FAR AS THE SURRENDERED AMOUNT OF RS. 39.99 LACS IS CONCERNED, SAME WAS OFFERED ON ACCOUN T OF ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 24 10. HOWEVER,, LD. COUNSEL FOR THE ASSESSEE HAS BEE N FAIR ENOUGH TO ADMIT THAT IT IS NOT IN ALL THE CASES THAT NO INCRI MINATING MATERIAL WAS FOUND. THAT CERTAIN ITEMS OF JEWELLERY OF SILVER WE RE FOUND / NOTICED DURING THE SEARCH ACTION, THE SOURCE OF INCOME FROM WHICH AS HELD BY THE ASSESSING OFFICER ALSO STOOD EXPLAINED AND ALSO THE MANNER OF EARNING OF THE INCOME WAS ALSO SUBSTANTIATED. HE, THEREFORE, HAS BEEN FAIR ENOUGH TO ADMIT THAT PENALTY UNDER THE PROVISI ONS OF SECTION 271AAB (1)(A) OF THE ACT WAS LIABLE TO BE CONFIRMED TO THE EXTENT OF THE PROPERTY / MATERIAL FOUND DURING SEARCH ACTION. HE, IN THIS RESPECT HAS GIVEN A CHART, WHICH FOR THE SAKE OF READY REFERENC E, IS REPRODUCED AS UNDER:- S.NO. PARTICULARS SUKHDARSHAN KUMAR RAMA RANI VENNA RANI R.D. PLACE PRIVATE LIMITED 1 JEWELLERY 0 133 54.23 0 2 SILVER 0 0 8.40 0 3 INCOME DECLARED 230 67 27.37 300 TOTAL 230 200 190 300 11. IN THE CASE OF MRS. RAMA RANI, (ITA NO. 1240/CH D/2018) FOR ASSESSMENT YEAR 2016-17, AS NOTED FROM THE ABOVE CH ART, JEWELLERY WORTH RS. 1.33 CRORES WAS FOUND, WHEREAS, INCOME SURREND ERED BY HER DURING THE SEARCH ACTION WAS OF RS. 2 CRORES. IN VIEW OF T HE DISCUSSION MADE ITA NOS. 1238 TO 1242-C-2018- VEENA RANI & OTHERS, LUDHIANA 26 DURING THE SEARCH ACTION, HENCE, THE PENALTY IS NOT LEVIABLE IN THESE CASES AND THE SAME IS ACCORDINGLY ORDERED TO BE DELETED. IN THE RESULT, THE APPEALS OF THE ASSESSEES IN ITA NO. 1240 & 1238/CHD/2018 IN THE CASES OF MRS. RAMA RANI AND SM T.VEENA RANI RESPECTIVELY ARE PARTLY ALLOWED, WHEREAS, ITA NOS. 1239/CHD/2018 IN THE CASE OF SUKHDASRSHAN KUMAR AND ITA NO. 1241 & 1 242/CHD/2018 IN R.D. PALACE PVT LTD., STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.07.2019 SD/- SD/- ( . . / N.K. SAINI) ( / SANJAY GARG) / VICE PRESIDENT / JUDICIAL MEMBER DATED : 12.07.2019 .. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / CIT 4. ( )/ THE CIT(A) 5. , ! ' , #$%& / DR, ITAT, CHANDIGARH 6. %'() / GUARD FILE * / BY ORDER, *+,- / ASSISTANT REGISTRAR