M/s. Navdeep Jewellers Pvt.Ltd., Delhi V. ACIT, Faridabad

ITA 1346/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6405 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR SENIOR
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers; Documents seized
• Section: 153A; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI L.P. SAHU, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1346/DEL./2014 (ASSESSMENT YEAR : 2010-11) M/S. NAVDEEP JEWELLERS PVT. LTD., VS. ACIT, 6/1166, KUCHA MAHAJANI, CENTRAL CIRCLE II, SHANKAR MARKET, NEW DELHI. CHANDNI CHOWK, DELHI 110 006. (PAN : AABCN5784E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, ADVOCATE REVENUE BY : SHRI RAJESH KUMAR, SENIOR DR DATE OF HEARING : 05.10.2016 DATE OF ORDER : 26.10.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. NAVDEEP JEWELLERS PVT. LTD. (HERE INAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESE NT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 18.12.2013 PASS ED BY THE COMMISSIONER OF INCOME-TAX (APPEALS (CENTRAL), GURG AON QUA THE ASSESSMENT YEAR 20010-11 CONFIRMING THE PENALTY LEV IED U/S 271AAA ON THE GROUNDS INTER ALIA THAT :- ITA NO.1346/DEL./2014 2 1. A SEARCH & SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED ON THE APPELLANT AS ON 30.07.200 9. 2. DURING THE COURSE OF SEARCH, THE APPELLANT ADMIT S THE UNDISCLOSED INCOME IN A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 AND SPECIFIES THE MANNER IN WHICH SUCH INCOME H AS BEEN DERIVED; AND ALSO SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND PAID THE TAX AND INTEREST IN DUE TIME IN RESPECT OF UNDISCLOSED INCOME. 3. THE APPELLANT FILED ITS RETURN OF INCOME DECLARI NG TAXABLE INCOME OF RS.L,74,98,810/- INCLUSIVE OF THE AFORESA ID UNDISCLOSED INCOME DECLARED DURING THE COURSE OF SEARCH. 4. THAT THE ASSESSMENT U/S 153(1)(B) WAS COMPLETED ON THE TAXABLE INCOME OF RS.1,74,98,810/- AS DECLARED IN T HE RETURN OF INCOME. 5. THAT BEFORE FINALIZING THE ASSESSMENT PROCEEDIN GS U/S 153 A, A SHOW CAUSE NOTICE WAS GIVEN TO THE APPELLANT R EGARDING INITIATION OF PENALTY U/S 271 AAA. 6. THE APPELLANT AGAINST SUBMITTED ITS REPLY ALONG WITH THE EVIDENCES SHOWING THE INCOME AS WELL AS INVESTMENT IN THE UNDISCLOSED ASSETS OF THE APPELLANT. AND THE AFORES AID EVIDENCES WERE SEIZED BY INCOME TAX DEPARTMENT DURING THE COU RSE OF SEARCH AND ARE STILL LYING WITH THE DEPARTMENT. 7. A PENALTY OF RS.17,04,317/- HAS BEEN IMPOSED ON THE APPELLANT BY OBSERVING THE FOLLOWING THINGS: 'THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY DETAILS AS REQUIRED IN THE SHOW CAUSE NOTICE TO SUBSTANTIATE ITS CLAIM. TH E ASSESSEE HAS MERELY STATED THAT THE SURRENDERED INCOME PERTAINS TO JEWELLERY BUSINESS CONSISTING OF UNACCOUNTED JOB-WORK, UNACCO UNTED PURCHASE OF OLD JEWELLERY AT CHEAP RATE AND UNACCOU NTED INCOME RECEIVED FROM OTHER JEWELERS. HOWEVER, NO DOCUMENTA RY EVIDENCE HAVE BEEN PRODUCED BY THE ASSESSEE IN SUPPORT OF HI S CLAIM. IN VIEW OF THE ABOVE, IT IS SEEN THAT ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME HAS BEEN DERIVED AND THEREFORE I AM SATISFIED THAT THE ASSES SEE IS LIABLE FOR FACING PENALTY PROCEEDINGS U/S 271 AAA OF THE I T. ACT, WITH REGARDS TO SURRENDER OF UNDISCLOSED INCOME MADE OF RS.17,04,317/- AND ACCORDINGLY PENALTY PROCEEDING ARE BEING INITIA TED SEPARATELY BY THE ISSUE OF NOTICE U/S 274 OF THE I T. ACT. ' 8. AGGRIEVED AGAINST THE PENALTY ORDER U/S 271 AAA, THE ASSESSEE FILED APPEAL WITH CIT (A), GURGAON AND LD. CIT APPEAL ITA NO.1346/DEL./2014 3 DISMISSED THE APPEAL OF THE APPELLANT COMPANY BY OB SERVING THE FOLLOWING REMARKS: 'IN THE CASE IN HAND THERE IS NO DISPUTE THAT THE S EARCH OPERATION TOOK PLACE AFTER 1 ST JUNE, 2007. TO REITERATE, THERE IS NO DISPUTE THAT THE ASSESSEE DURING THE STATEMENT RECORDED U/S 132( 4) HAS ADMITTED THE UNDISCLOSED INCOME. HOWEVER, AND VERY IMPORTANT LY, THE ASSESSEE HAS NOT SAID HOW EXACTLY THE UNDISCLOSED I NCOME WAS DERIVED DESPITE THE QUERIES BY THE AO. THE DETAILS OF EACH TRANSACTION, THE PERSONS INVOLVED HAVE NOT BEEN DIS CLOSED. SIMILARLY IT HAS ALSO NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED FURTHER, THE ASSESSE E WHEN ASKED TO FURNISH EVIDENCE TO THESE ADMITTED TRANSACTIONS STATED THAT THE UNDISCLOSED INCOME WAS INVESTED IN STOCK AND SHOW-R OOM AND THAT THE DISCLOSURE WAS EVIDENCED BY THE DIFFERENT LOOSE PAPERS/DOCUMENTS SEIZED AND ANNEXED IN DIFFERENT AN NEXURES PREPARE DURING THE SEARCH ON 30.07.2009. THIS STATE MENT IS NOT SUFFICIENT AS SOMETHING MORE WAS REQUIRED ON THE PA RT OF THE ASSESSEE TO ELUCIDATE THE MANNER OF EARNING SUCH LA RGE INCOME WHICH WAS DISCLOSED IN HIS RETURN OF INCOME, ONLY C ONSEQUENT TO THE SEARCH OPERATION. THE PROVISIONS OF SECTION 271 AAA AS ENVISAGED IS FOR THE ASSESSEE TO COME OUT CLEAN BY SPECIFYING AND SUBSTANTIATING THE MANNER OF DERIVING SUCH INCOME U /A 132(4) REGARDING ANY SUCH UNDISCLOSED INCOME RELATING TO T HE SPECIFIED YEAR SO AS TO AVAIL OF THE IMMUNITY UNDER THE ACT. AS HELD IN PIONEER(SUPRA), THERE HAS BEEN A PARADIG M SHIFT IN THE TREATMENT OF UNDISCLOSED INCOME WHICH GETS UNEARTH DURING THE SEARCH OPERATIONS. THE BURDEN CAST UPON THE ASSESSE E IS MUCH HIGHER AS UNLIKE IN SEE 271 (1)(C) EXPLANATION 5 IF THE ASSESSEE FAILS TO DIVULGE SUCH FINER DETAILS OF THE EARNING OF INC OME, THEN THE REQUIREMENTS OF IMMUNITY CAN BE HELD TO BE NOT MET. THE QUESTIONS POSED BY THE AO WERE CATEGORICAL. TO REITERATE, THE PROVISIONS OF THE SUB SEC. 2 (I) (II) AND (III) OF SECTION 271AAA ARE VERY CLEAR. THESE THREE CONDITIONS NEED TO BE SATISFIED TOGETHE R. THERE IS NO DISPUTE REGARDING SUB SEE (I) AND (III). IN THIS CA SE AS THE ASSESSEE CANNOT BE SAID TO HAVE DISCHARGED THE ONUS OF SUBST ANTIATING THE MANNER IN WHICH THE INCOME WAS DERIVED, THE CONDITI ON LAID DOWN IN SUB SECTION (II) REMAINS UNFULFILLED IN VIEW OF THE DISCUSSION ABOVE AND THE FACTS OF THE CASE, I HAVE NO REASON N OT TO UPHOLD THE IMPUGNED ORDER OF THE LD AO 9. THAT UPON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. ASSESSING OFFICER AS WELL AS CIT APPEAL ARE NOT JUS TIFIED TO IMPOSE A PENALTY UNDER SECTION 271AAA OF THE INCOME TAX AM OUNTING TO RS.17,04,317/- WHICH IS ARBITRARY, ILLEGAL AND BAD IN LAW AND BASED ON THE SURMISES AND CONJECTURE. 10. THE APPLICANT CRAVES LEAVE TO MAKE ADDITION OR ALTERATION, IF ANY ON THE GROUNDS OF APPEAL AT THE TIME OF HEARING , IF REQUIRED. ITA NO.1346/DEL./2014 4 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ON T HE BASIS OF SEARCH AND SEIZURE CONDUCTED UNDER SECTION 132 (1) OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) AT THE BUSINESS PREMISES OF THE ASSESSEE ON 30.07.2009, NOTICE U/S 153A OF THE ACT WAS SERVED UPON THE ASSESSEE AND IN RESPONSE THERETO, THE ASSE SSEE COMPANY BY FILING RETURN OF INCOME DECLARING ITS INCOME TO THE TUNE OF RS.1,74,98,810/- BY MAKING TOTAL SURRENDER AMOUNTIN G TO RS.1,70,43,170/-. ASSESSMENT WAS COMPLETED U/S 153 B(1)(B) OF THE ACT, PENALTY PROCEEDINGS U/S 271AAA WERE INITIATED IN RESPECT OF THE SURRENDERED INCOME ON ACCOUNT OF EXCESS STOCK-I N-TRADE. ASSESSEE FILED COMPREHENSIVE SUBMISSIONS DURING PEN ALTY PROCEEDINGS PRIMARILY TAKING DEFENCE THAT THE ASSES SEE HAS NOT HIDDEN ANY INCOME AND THE ASSESSMENT HAS BEEN COMPL ETED U/S 153B(1)(B) WITHOUT MAKING ANY ADDITION. HOWEVER, A O HAS NOT ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE AND I MPOSED THE PENALTY TO THE TUNE OF RS.17,04,317/- U/S 271AAA (1 ) OF THE ACT. 3. ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT (A) WHO HAS AFFIRMED THE PENALTY ORDER BY DISMISSING TH E APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.1346/DEL./2014 5 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IT IS NOT IN DISPUTE THAT DURING THE SEARCH AND SEIZURE OPERATION, THE ASSESSEE HAS MADE FOLLOWING DISCLOSU RE :- INCOME RELATING TO ASSESSMENT YEAR AMOUNT OF UNACCOUNTED INCOME NATURE OF INVESTMENT OF UNACCOUNTED INCOME 2009-10 35,00,000/- INVESTED IN SHOWROOM (BUILDING CONSTRUCTION, FURNITURE AND FIXTURE 2010-11 1,38,33,000/- STOCK IN TRADE (JEWELLERY) 2010-11 32,10,170/- STOCK IN TRADE (JEWELLERY) TOTAL 2,05,43,170/- 6. DURING THE APPELLATE PROCEEDINGS QUA THE PENALTY ORDER DATED 30.01.2001 FOR AY 2009-10 PASSED U/S 271AAA ON THE BASIS OF DISCLOSURE OF INCOME OF RS.35,00,000/- MADE DURING THE SAME SEARCH AND SEIZURE OPERATION CONDUCTED ON 30.07.200 9, IT IS OBSERVED BY CIT (A) THAT WHEN THE REVENUE HAS NOT A SKED THE ASSESSEE TO DISCLOSE THE MANNER IN WHICH SUCH INCOM E WAS EARNED, PARTICULARLY WHEN INCOME IS SURRENDERED DURING THE COURSE OF SEARCH U/S 132 (4), IT CAN BE ASSUMED THAT DURING T HE DISCUSSION, THE ASSESSEE MUST HAVE BEEN MADE AWARE OF THE PROVISION S CONTAINED U/S 271AAA (2)(II). ITA NO.1346/DEL./2014 6 7. HOWEVER, IN THE INSTANT CASE, THE AO HAS NOT MAD E THE ASSESSEE AWARE ABOUT THE PROVISIONS CONTAINED U/S 2 71AAA (2)(II) TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. SO, IN THESE CIRCUMSTANCES, IT IS PROVED THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH THE SURRENDER ED INCOME WAS DERIVED AND AO BY ADMITTING HIS EXPLANATION ACCEPTE D THE RETURN OF INCOME FILED BY THE ASSESSEE U/S 153B(1)(B) OF THE ACT. 8. UNDISPUTEDLY, CONSEQUENT TO THE SEARCH AND SEIZU RE OPERATION CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE COMPANY ON 30.07.2009, SURRENDER TO THE TUNE OF RS.1,70,43,170 /- HAS BEEN MADE AND THEREAFTER ASSESSMENT WAS COMPLETED U/S 15 3B(1)(B) OF THE ACT AT RS.1,74,98,810/- AND THE ASSESSEE HAS D EPOSITED THE DUE TAX ALONG WITH INTEREST. 9. TO PROCEED FURTHER, WE WOULD LIKE TO REPRODUCE T HE PROVISIONS CONTAINED U/S 271AAA OF THE ACT FOR READ Y PERUSAL:- 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SEC TION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM , A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCO ME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, ( I ) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDE R SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS B EEN DERIVED; ITA NO.1346/DEL./2014 7 ( II ) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSE D INCOME WAS DERIVED; AND ( III ) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE ( C ) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE I N RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). 10. UNDER SECTION 271AAA(2)(I) OF THE ACT, PENALTY @ 10% OF THE UNDISCLOSED INCOME SHALL NOT BE IMPOSED IF THE ASSESSEE, IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. 11. IN THE INSTANT CASE, WHEN WE REFER TO FINDINGS RETURNED BY THE CIT (A) AT PARA 1 OF PAGE 9, THE ASSESSEE VIDE DISC LOSURE LETTER SUBMITTED THAT, THE EARNING OF THE AFORESAID UNACC OUNTED INCOME DURING FY 2008-09 AND 2009-10 I.E. FROM 01.04.2009 TILL 30.07.2009 WAS FROM THE JEWELLERY BUSINESS AND THAT THE LOOSE PAPER BEING DOCUMENTS SEIZED DURING THE SEARCH OPER ATION ARE RELATED TO UNACCOUNTED INCOME WHICH WAS INVESTED IN THE SHOWROOM AND STOCK OF JEWELLERY. HOWEVER, AO HAS P ROCEEDED TO INVOKE THE PROVISIONS CONTAINED U/S 271AAA ON THE G ROUND THAT THE ASSESSEE HAS NOT DISCLOSED HOW EXACTLY THE UNDI SCLOSED INCOME WAS RETURNED BUT UNDISPUTEDLY THE AO HAS NOT EXAMIN ED THE ASSESSEE ON OATH AS REQUIRED U/S 132(4) OF THE ACT TO SUBSTANTIATE ITA NO.1346/DEL./2014 8 THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERI VED, RATHER PROCEEDED ON THE BASIS OF DISCLOSURE LETTER GIVEN B Y THE ASSESSEE. 12. WHEN THE ASSESSEE HAS GIVEN DETAILS OF UNACCOUN TED MONEY AVAILABLE WITH HIM DURING THE SEARCH OPERATION SUBS TANTIATED WITH LOOSE PAPER/DOCUMENTS SEIZED DURING SEARCH AND SEIZ URE OPERATION AND THE AO HAS NOT QUESTIONED THE ASSESSEE BY RECOR DING HIS STATEMENT U/S 132(4) OF THE ACT ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED TO SUBSTANTIATE THE SAME, THERE IS NO JUSTIFICATION TO IMPOSE THE PENALTY U/S 271AAA. 13. BARE PERUSAL OF THE PENALTY ORDER AND THE ORDER PASSED BY LD. CIT (A) GOES TO PROVE THAT THE AO GOT HIMSELF SATIS FIED THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED BECAUSE HE HAS NOT RAISED ANY QU ERY WHATSOEVER TO THE ASSESSEE TO SUBSTANTIATE THE MANN ER OF EARNING OF THE UNDISCLOSED INCOME. 14. IDENTICAL ISSUED HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE CIT ED AS NEERAJ SINGHAL VS. ACIT (2014) 146 ITD 152 AND SUNIL KUMAR BANSAL VS. DCIT (2015) 37 ITR 576 . SO, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 153B( 1)(B) OF THE ACT AT RS.1,74,98,810/- (INCLUDING SURRENDERED AMOU NT OF ITA NO.1346/DEL./2014 9 RS.1,70,43,170/-) AND THE ASSESSEE HAS PAID TAX DUE WITH INTEREST WHICH HAS NOT BEEN QUESTIONED BY THE AO TO SUBSTANT IATE THE MANNER IN WHICH THE SAID UNDISCLOSED INCOME WAS DER IVED, THE ASSESSEE IS ENTITLED FOR TO AVAIL OF THE BENEFIT OF THE AMNESTY PROVISIONS CONTAINED U/S 271AAA (2) READ WITH SECTI ON 132 (4) OF THE ACT. CONSEQUENTLY, APPEAL FILED BY THE ASSESSE E STANDS ALLOWED AND PENALTY STANDS DELETED. ORDER PRONOUNCED IN OPEN COURT ON THIS DAY 26 TH OF OCTOBER, 2016. SD/- SD/- (L.P. SAHU) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF OCTOBER, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) (CENTRAL), GURGAON. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.