DCIT, CC-II, Chandigarh V. M/s Ind Swift Laboratories Ltd, Chandigarh

ITA 1304/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6584 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-04-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Document seized; Documents seized; Speculative transactions
• Section: 153A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ %! , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.739/CHD/2016 / ASSESSMENT YEAR : 2011-12 THE A.C.I.T., CENTRAL CIRCLE-II, CHANDIGARH. M/S HALCYON LIFE SCIENCES PVT. LTD., SCO 849, SHIVALIK ENCLAVE, NAC, MANIMAJRA, CHANDIGARH. ./PAN NO: AADCK4208J /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI VED JAIN, CA ! / REVENUE BY : SMT. CHANDERKANTA, SR. DR ./ ITA NO.1266/CHD/2017 / ASSESSMENT YEAR : 2012-13 M/S IND SWIFT LABORATORIES LTD., SCO 850, SHIVALIK ENCLAVE, NAC, MANIMAJRA, CHANDIGARH. THE A.C.I.T., CENTRAL CIRCLE-II, CHANDIGARH. ./PAN NO: AAACI6306G /APPELLANT /RESPONDENT & ./ ITA NO.1304/CHD/2017 / ASSESSMENT YEAR : 2012-13 THE D.C.I.T., CENTRAL CIRCLE-II, CHANDIGARH. M/S IND SWIFT LABORATORIES LTD., SCO 850, SHIVALIK ENCLAVE, NAC, MANIMAJRA, CHANDIGARH. 2 ./PAN NO: AAACI6306G /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI VED JAIN, CA ! / REVENUE BY : DR.ASHISH GUPTA, SR. DR ' # $ /DATE OF HEARING : 30.04.2019 %&'( $ /DATE OF PRONOUNCEMENT : 30.04.2019 /ORDER SANJAY GARG, JUDICIAL MEMBER : THESE THREE APPEALS PERTAIN TO THE DIFFERENT ASSESS EES. THE APPEAL IN ITA NO.739/CHD/2016 HAS BEEN PREFERRE D BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON [IN SHORT CIT(A)] DATED 28 .3.2016 UPHOLDING THE PENALTY LEVIED U/S 271AAA OF THE INCO ME TAX ACT, 1961 (IN SHORT ACT)., THE APPEAL IN ITA NOS.1266 & 1304/CHD/2017 ARE THE CROSS APPEALS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON DA TED 19.6.2017 AGAINST. 2. SINCE THE FACTS AND THE ISSUES INVOLVED IN ALL T HE APPEALS, ARE IDENTICAL, BEING THE LEVY OF PENALTY U/S 271AAA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), THESE AP PEALS, THEREFORE, HAVE BEEN HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 3 2. IN ALL THESE APPEALS, THE ISSUE INVOLVED IS REGA RDING VALIDITY OF LEVY OF PENALTY UNDER THE PROVISIONS OF SECTION 271AAA OF THE ACT. ITA NO.739/CHD/2016: 3. FIRST WE TAKE UP THE APPEAL OF THE DEPARTMENT IN THE CASE OF HALCYON LIFE SCIENCES PVT. LTD IN ITA NO.739/CHD /2016 AS LEAD CASE FOR THE PURPOSE NARRATION OF THE FACTS. 4. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT A SE ARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OU T ON 26.5.2011 ON THE BUSINESS AND RESIDENTIAL PREMISES OF IND- SWIFT GROUP OF CASES, WHEREIN THE ASSESSEE WAS ALSO COVERED. DURING SEARCH ACTION, THE ASSESSEE SURRENDERED ADDI TIONAL INCOME OF RS.5,57,24,400/- AS ITS BUSINESS INCOME. THE ASSESSEE THEREAFTER FILED RETURN U/S 139(1) OF THE ACT, WHICH INCLUDED THE AFORESAID INCOME ALSO. THE A.O. ACCEPT ED THE RETURNED INCOME IN THE ASSESSMENT PROCEEDINGS CARRI ED OUT U/S 153A OF THE ACT INCLUDING THE SURRENDERED INCOME. H OWEVER, THE A.O. THEREAFTER LEVIED THE PENALTY U/S 271AAA OF TH E ACT ON THE GROUND THAT THE ASSESSEE HAD NOT ACCOUNTED FOR THIS SURRENDERED INCOME IN HIS BOOKS OF ACCOUNT ON THE D ATE OF SEARCH AND FURTHER THE ASSESSEE HAS FAILED TO SPECI FY THE 4 MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND EV EN FAILED TO SUBSTANTIATE SUCH MANNER. 5. THE LD.CIT(A) ALSO CONFIRMED THE PENALTY, SO LEV IED BY THE A.O. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GON E THROUGH THE ORDERS OF THE LOWER AUTHORITIES. 7. THE LD. DR HAS RELIED UPON THE FINDINGS OF THE C IT(A) AND HAS SUBMITTED THAT SINCE THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE SURRENDERED IN COME OF RS.5,57,24,400/- WAS EARNED, HENCE THE PENALTY WAS RIGHTLY LEVIED BY THE A.O. AND FURTHER RIGHTLY CONFIRMED BY THE LD.CIT(A). 8. HOWEVER, ON THE OTHER HAND, THE LD. COUNSEL FOR ASSESSEE HAS INVITED OUR ATTENTION TO PAGE 3 OF THE IMPUGNED ORDER OF THE CIT(A), WHEREIN THE STATEMENT OF SHRI NAV RATTAN MU NJAL, PROMOTER AND DIRECTOR OF THE ASSESSEE COMPANY IN TH E FORM OF QUESTIONS AND ANSWERS WAS RECORDED, WHEREBY HE HAD SURRENDERED THE AFORESAID ADDITIONAL INCOME. 9. QUESTION NOS. 6 TO 11 OF THE STATEMENT ARE RELEV ANT, WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER : 5 Q-6 THERE ARE CERTAIN SHEETS MARKED AS A-11/1,2,3, 4. PLEASE SEE THESE EXPLAIN THE ENTRIES CONTAINED THEREIN. A-6 THESE SHEETS CONTAIN TRADING OF CMO (METHOL OIL ). Q-7 PLEASE EXPLAIN THE DETAILS OF THESE TRANSACTION S. A-7 THESE SHEETS CONTAIN DATEWISE SALE/PURCHASE OF CMO. Q-8 TO WHICH CONCERN DO THESE TRANSACTION PERTAIN? A -8 THESE PERTAIN TO M/S IND SWIFT LTD & M/S. HAL YCON LIFE SCIENCES LTD. A MENTIONED IN TITLE. Q-9 WHERE ARE THESE ENTRIES ACCOUNTED FOR IN THE BO OKS OF THE ABOVE COMPANIES? A-9 THESE TRANSACTIONS ARE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. Q-10 WHETHER THESE TRANSACTIONS ARE BY CHEQUE OR BY CASH? A-10 THESE ARE SPECULATIVE TRANSACTIONS. WE HAD PURCHASED CMO FROM U,P THROUGH BROKERS. THE PAYMENT WAS TO BE MADE ON DELIVERY, HOWEVER WE SOLD THESE LOTS FURTHER WITHOUT TAKING DELIVERY. THE PROFIT WAS REALIZED IN CASH. THIS CASH IS NOT RECORDED IN BOOKS OF ACCOUNTS. Q-11 WHAT IS THE EXPLANATION THAT YOU WOULD LIKE T O GIVE IN RESPECT OF THESE UNACCOUNTED TRANSACTIONS. PLEASE G IVE REPLY AFTER CONSULTING OTHER PROMOTERS AND RELEVANT EMPLOYEES. A-11 I HAVE CONSULTED WITH OTHER PROMOTERS AND DIRECTORS AND INFACT WE HAVE NO EXPLANATION TO OFFER IN THIS REGARD. TO COVER THIS DISCREPANCY WE HEREBY ADMIT UNDISCLOSED INCOME AS UNDER:- F.Y 10-11 F.Y 11-12 TOTAL IND SWIFT LTD. 10,85,34,600/- 13, 64,04,000 /- 24,49, 38,600 /- HALYCON LIFESCIENCES P. LTD. 5,5724,400/- - 5,57,24,400/- IND SWIFT LTD. NIL 12,73,41,000/- 12,73,41,000/- 42,80,04,000/ - 6 THUS AN AMOUNT OF RS.42,80,04,000/- ROUNDED OFF TO RS.43 CRORES IS HEREBY SURRENDERED FOR F.Y. 10-11 & 11-12 TOWARD UNACCOUNTED CASH PROFIT EARNED FROM UNACCOUNTED TRANSACTION IN CMO. 10. A PERUSAL OF THE ABOVE QUESTIONS AND ANSWERS RE VEALS THAT NO SUCH INCOME IN ANY FORM OF CASH OR OTHER VALUABL E ITEMS WAS FOUND DURING THE COURSE OF SEARCH ACTION, RATHER CE RTAIN DOCUMENTS WERE SEIZED, WHEREIN CERTAIN UNACCOUNTED TRANSACTIONS WERE RECORDED. THE QUESTIONS WERE PUT TO SHRI NAV RATTAN MUNJAL REGARDING UNACCOUNTED TRANSACTIONS AN D IN ANSWERS TO THOSE QUESTION, AS REPRODUCED ABOVE, THE DIRECTOR OF THE COMPANY EXPLAINED THAT THESE TRANSACTIONS CONTA INED TRADING OF CMO (CRUDE MENTHOL OIL) AND IT WAS ALSO EXPLAINED THAT THE TRANSACTIONS RECORDED WERE DATE-WISE DATA OF SALE AND PURCHASE TRANSACTIONS OF CMO. IT WAS ALSO EXPLAINED THAT THE AFORESAID CRUDE MENTHOL OIL WAS PURCHASED FROM U.P. THROUGH BROKERS, WHICH WAS FURTHER SOLD WITHOUT TAKING DELI VERY. THE PROFIT WAS REALIZED IN CASH AND THAT THE CASH WAS N OT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE DULY SURRENDE RED THE INCOME EARNED IN RESPECT OF THE AFORESAID TRANSACTI ONS, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. A PERUSA L OF THE AFORESAID STATEMENT ITSELF SHOWS THAT THE ASSESSEE DULY SPECIFIED AND SUBSTANTIATED THE MANNER OF EARNING O F THE AFORESAID ADDITIONAL INCOME, OFFERED FOR TAXATION. IT IS A CASE WHERE IN THE SEIZED DOCUMENTS, THE AFORESAID TRANSA CTIONS WERE 7 RECORDED, WHICH WHEN BEING CONFRONTED TO THE ASSESS EE, HE EXPLAINED ABOUT THE MODE AND MANNER OF EARNING OF S UCH INCOME, WHICH DULY STOOD SUBSTANTIATED IN THE SHAPE OF THE DOCUMENTS FOUND DURING SEARCH ACTION. IT IS NOT A C ASE WHERE ANY UNACCOUNTED INCOME IN THE SHAPE OF CASH OR OTHE RWISE, WAS FOUND, OF WHICH THE ASSESSEE COULD NOT EXPLAIN THE SOURCE, OR TO SAY, SPECIFY THE MODE AND MANNER OF THE EARNING. IN VIEW OF THIS, AS PER THE PROVISIONS OF SECTION 271AAA OF TH E ACT, THE ASSESSEES CASE SQUARELY FALLS WITHIN THE EXCEPTION AL CLAUSES OF SUB-SECTION (2) OF SECTION 271AAA OF THE ACT. THE A SSESSEE IN THE COURSE OF SEARCH HAS MADE A STATEMENT AND HAS A DMITTED THE UNDISCLOSED INCOME AND ALSO SPECIFIED THE MANNE R OF EARNING OF INCOME, WHICH ALSO STOOD SUBSTANTIATED F ROM THE DOCUMENTS SEIZED AND HAS ALSO PAID THE DUE TAXES TO GETHER WITH INTEREST IN RESPECT OF THE UNDISCLOSED INCOME. IN V IEW OF THIS, THE ACTION OF THE LOWER AUTHORITIES IN LEVYING THE IMPUGNED PENALTY CANNOT BE HELD TO BE JUSTIFIED. THE SAME IS ACCORDINGLY, ORDERED TO BE DELETED. THE APPEAL OF THE REVENUE IS DISMISSED. 11. NOW COMING TO THE CROSS APPEALS IN THE CASE OF M/S IND. SWIFT LABORATORIES LTD. IN ITA NO.1266/CHD/2017(ASS ESSEES APPEAL) AND IN ITA NO.1304/CHD/2017 (DEPARTMENTS A PPEAL), A 8 PERUSAL OF THE IMPUGNED ORDER OF THE CIT(A) REVEALS THAT THE LD.CIT(A) RELYING UPON THE AFORESAID STATEMENT OF S HRI NAV RATTAN MUNJAL, PROMOTER DIRECTOR OF IND. SWIFT GRO UP OF COMPANIES, HAS NOTED THAT THE PARENT COMPANY HAD SURRENDERED AN INCOME OF RS.14,50,41,000/- TO COVER ALL DISCREPANCIES IN SEIZED DOCUMENTS, INVENTORIES, ETC . HE FURTHER OBSERVED THAT WITH REGARD TO SEIZED DOCUMENTS, AN A MOUNT OF RS.12,73,41,000/- WAS SURRENDERED AS UNACCOUNTED CA SH PROFIT EARNED FROM THE TRADING FROM CRUDE MENTHOL OIL. HOW EVER, THE REMAINING AMOUNT OF RS.1,77,00,000/- WAS SURRENDERE D IN ORDER TO COVER DISCREPANCY, IF ANY, FOUND IN THE SE IZED DOCUMENTS. THE LD.CIT(A) THOUGH DELETED THE PENALTY IN RESPECT OF THE AMOUNT, WHICH TALLIED WITH THE TRANSACTIONS OF TRADING IN CRUDE MENTHOL OIL RECORDED IN THE SEIZED DOCUMENTS, HOWEVER, HE CONFIRMED THE PENALTY ON THE SURRENDERED AMOUNT OF RS.1,77,00,000/- ON THE GROUND THAT THE SAME WAS NO T REPRESENTED BY ANY SPECIFIC ASSET, NOR WITH ANY ENT RY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF SEARCH AND HENCE, DOES NOT FULFILL TH E CONDITIONS FOR GETTING IMMUNITY FROM PENALTY U/S 271AAA OF THE ACT. 12. THE REVENUE HAS AGITATED THE ACTION OF THE CIT( A) IN DELETING THE PENALTY IN RESPECT OF PART OF THE SURR ENDERED INCOME OF RS.12,73,41,000/-, RELATED TO THE SEIZED DOCUMENTS. 9 13. ON THE OTHER HAND, THE ASSESSEE HAS PREFERRED T HE PRESENT APPEAL AGITATING THE ACTION OF THE CIT(A) IN CONFIR MING THE PENALTY LEVIED ON THE REMAINING SURRENDERED AMOUNT OF RS.1,77,00,000/-. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO GO NE THROUGH THE FINDINGS OF THE LOWER AUTHORITIES. ADMITTEDLY, NO CASH OR OTHER VALUABLE ITEMS, WHICH MAY CONSTITUTE AS UNDIS CLOSED INCOME OF THE ASSESSEE, WAS FOUND DURING THE COURSE OF SEARCH ACTION EXCEPT THE SEIZED DOCUMENTS, WHEREIN THE AFO RESAID UNACCOUNTED TRANSACTIONS WERE RECORDED. THE ASSESSE E SURRENDERED A TOTAL SUM OF RS.14,50,41,000/- ON ACC OUNT OF THE AFORESAID DISCREPANCIES/UNACCOUNTED TRANSACTIONS FO UND DURING SEARCH ACTION. THE LD.CIT(A) DELETED THE PENALTY IN RESPECT OF THE INCOME SURRENDERED IN RESPECT OF UNACCOUNTED TRANSACTIONS, HOWEVER, HAS CONFIRMED THE PENALTY IN RESPECT OF WHICH EVEN NO DOCUMENT/EVIDENCE OF ANY UNACCOUNTED TRANSACTION WAS FOUND. THE ASSESSEE, HOWEVER, HAS S URRENDERED THE AFORESAID INCOME TO COVER UP FURTHER DISCREPANC IES, IF ANY, FOUND IN THE SEIZED DOCUMENTS. HOWEVER, IT IS NOT A CASE WHERE ANY, OTHERWISE, UNDISCLOSED INCOME WAS FOUND DURING SEARCH, OF WHICH THE ASSESSEE COULD NOT SPECIFY OR SUBSTANTIAT E THE MODE & MANNER OF EARNING. IN THE ABSENCE OF THE SEIZED D OCUMENTS, THERE IS NOTHING ON THE RECORD FROM WHICH IT COULD BE CONSTRUED 10 THAT THE AFORESAID AMOUNT OF RS.1,77,00,000/- WOUL D FALL WITHIN THE DEFINITION OF UNDISCLOSED INCOME, AS DEF INED UNDER THE PROVISIONS OF SECTION 271AAA OF THE ACT AS UNDE R: (A) UNDISCLOSED INCOME MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL C OMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAIN ED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YE AR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED; 15. A PERUSAL OF THE ABOVE DEFINITION OF UNDISCLOSE D INCOME WOULD SHOW THAT THERE MUST BE SOME INCOME FOUND DUR ING THE COURSE OF SEARCH ACTION EITHER IN THE FORM OF MONEY , BULLION OR JEWELLERY OR OTHER ITEMS OR THERE MUST BE SOME TRAN SACTION OR ENTRY EITHER NOT RECORDED IN THE BOOKS OF ACCOUNT O R IN THE FORM OF EXPENDITURE OR AN ENTRY OF ANY EXPENDITURE, ETC ., WHICH IS FOUND TO BE FALSE. HOWEVER, WE FIND THAT IN THE CAS E OF SURRENDER OF RS.1,77,00,000/- EXCEPT THE SEIZED DOC UMENTS, OTHERWISE NOTHING WAS FOUND DURING THE SEARCH ACTIO N WHICH 11 WOULD CONSTRUE UNDISCLOSED INCOME OF THE ASSESSEE A S DEFINED UNDER THE PROVISIONS OF SECTION 271AAA OF THE ACT. THOUGH THE ASSESSEE HAS HONORED ITS COMMITMENT AND HAS DULY OF FERED FOR TAXATION THE TOTAL SURRENDERED INCOME. HOWEVER, IN VIEW OF OUR FINDINGS GIVEN ABOVE, IT IS NOT A CASE OF LEVY OF P ENALTY EITHER IN THE CASE OF THE SURRENDERED AMOUNT, THE MODE AND MA NNER OF REMAINING OF WHICH HAS BEEN STOOD SPECIFIED AND SUB STANTIATED, AS HELD BY THE CIT(A), NOR IN RESPECT OF THE REMAIN ING AMOUNT OF RS.1,77,00,000/-, WHICH WOULD OTHERWISE, NOT FAL L WITHIN THE DEFINITION OF UNDISCLOSED INCOME. IN VIEW OF THIS, THE APPEAL OF THE REVENUE IS HEREB Y DISMISSED, WHERE THE APPEAL OF THE ASSESSEE IS HERE BY ALLOWED. 16. IN THE RESULT; I) THE APPEAL OF THE DEPARTMENT IN ITA NO.739/CHD/2016 IS DISMISSED. II) THE APPEAL OF ASSESSEE IN ITA NO.1266/CHD/2017 IS ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO.1304/CHD/2017 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.04.2019. SD/- SD/- ' # $ %! (ANNAPURNA GUPTA) (SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER )' /DATED: 30 TH APRIL, 2019 * ! * 12 &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR