Shri Santhoshkumar Vasant Shetty, Pune V. DCIT, Pune

ITA 1561/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3277 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 03-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJU AJWANI
• Keywords: Unexplained investment; Search and seizure; Loose papers; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUN AKARA RAO ITA NO. 1561/PN/07 (ASST. YEAR BP 1997-98 TO 2003-0 4) SHRI SANTOSHKUMAR VASANT SHETTY PROPRIETOR OF SUDAMA BAR & RESTAURANT A/3/ 2002 KOHINOOR ESTATE, MUMBAI PUNE ROAD KHADKI, PUNE 411003 PAN NO. ALEPS3709B .... APPELLANT VS. DY. CIT CENTRAL CIRCLE 2(3), PUNE . RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SMT. MANJU AJWANI ORDER PER D. KARUNAKARA RAO AM THIS IS THE APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 29.8.2007 AND IT RELATES TO THE CONFIRMING OF THE PEN ALTY U/S 271(1)(C) OF THE ACT. THE GROUNDS READ AS UNDER. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE IMPUGNED PENALTY OF RS. 5,00,000.00 LEVIED BY THE LEARNED ASSESSING OFFICER U/S. 158 BFA[2] OF THE I. T. ACT 1961. THE IMPUGNED PENALTY BEING BASED ON SURMISES, PRESUMPTIONS AND WITHOUT ANY BASIS AND BEING ARBITRARY AND LEGALLY U NSUSTAINABLE THE SAME MAY PLEASE BE DELETED. 2. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THA T THE DIFFERENCE IN RETURNED UNDISCLOSED INCOME AND ASSESSED UNDISCLOSE D INCOME HAD ARISEN DUE TO THE ESTIMATION OF INCOME AND NOT BECAUSE OF ANY WILLFUL DEFAULT ON THE PART OF THE APPELLANT OR NOT BECAUSE OF ANY MAT ERIAL FOUND DURING THE SEARCH AND SEIZURE ACTION. THE LEARNED CIT(A) HAS F AILED TO APPRECIATE THAT THE PENALTY U/S. 158 BFA [2] IS NOT AUTOMATIC AND T HE APPELLANT HAD GIVE BONAFIDE AND HONEST EXPLANATION ABOUT THE DIFFERENC E IN THE ASSESSED UNDISCLOSED INCOME AND RETURNED UNDISCLOSED INCOME. THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE IMPUGNED PENALTY. 2. RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE- INDIVIDUAL IS ENGAGED IN CONDUCTING BUSINESS OF RUNNING BAR AND RESTAURANT UNDER THE NAME OF STYLE OF ITA NO. 1561/PN/07 B.P 1997-98 TO 2003-04 PAGE PAGE 2 OF 5 SUDAMA . A SEARCH U/S. 133(1A) WAS CONDUCTED ON THE SAID SU DAMA ON 26.7.2002. THE BLOCK RETURN WAS FILED FOR RS. 5,63,200/- U/S. 158 BC OF THE INCOME-TAX ACT, 1961 WHILE THE ASSESSMENT WAS COMPL ETED DETERMINING THE ASSESSED INCOME AT RS. 25,84,735/- MAKING AN ADDITI ON OF RS. 20,21,535/-. THE ADDITION WAS CONFIRMED BY THE CIT(A). ASSESSED INCOME WAS RESTRICTED TO RS. 13,50,000/- BY THE ITAT PUNE BENCH-A VIDE ORDER NO. ITA/213/PN/05 DATED 11.8.2005. THUS THE NET ADDITION CONFIRMED AT THE LE VEL OF THE ITAT WORKS OUT TO RS. 7,86,800/-. AO INITIATED PENALTY PROCEEDINGS U/S . 158FA(2) OF THE ACT. THE ASSESSEES MADE VARIOUS SUBMISSIONS STATING THAT THE ADDITIONS IN QUESTION ARE RESULTED OUT OF ASSUMPTION/PRESUMPTIONS AND ESTIMATE BASIS. RELEVANT DISCUSSION AS GIVEN IN PARA 3.1 OF THE IMPUGNED ORDER IS AS UNDER. 3.1 IN THE PENALTY PROCEEDINGS RIGHTLY U/S. 158FA( 2) INITIATED AT THE TIME OF ASSESSMENT PROCEEDINGS AND NOW REVIVED ON T HE NET ADDITION OF RS. 7,86,800/- CONFIRMED BY THE ITAT, IT WAS STATED THAT THE UNDISCLOSED INCOME CONFIRMED WAS PURELY ON ASSUMPTION/ PRESUMP TIONS AND ESTIMATE BASIS ON THE BASIS OF STATEMENT RECORDED DURING THE SEARCH WITHOUT ANY CORROBORATIVE DOCUMENTS. AS THE INCRIMINATING DOCUM ENT WAS NEITHER FOUND NOR SEIZED, THE ADDITION WAS NOT BASED ON ANY DOCUMENT / PAPER SEIZED DURING THE SEARCH. THE ASSESSING OFFICER, HO WEVER, HELD THAT AT THE TIME OF SEARCH AT THE RESIDENTIAL PREMISES OF THE A SSESSEE CERTAIN LOOSE PAPERS WERE FOUND AND SEIZED WHICH CONTAINED PAGE N O. 88 TO 94 OF SEIZED BUNDLE NO. 5 OF PANCHANAMA DATED 27.6.2002, BEING COMPUTERIZED SHEETS OF CASH SALES OF HOTEL SUDAMA REFLECTED FOR 24.6.2002 AND 25.6.2002 AMOUNTING TO RS. 60,172/- AND RS. 52,444/- RESPECTIVELY. THE ASSESSEE WAS ASKED TO PRODUCE THE SIMILAR COMPU TERIZED CASH SALES SHEETS FOR THE EARLIER PERIOD. IN HIS STATEMENT REC ORDED U/S. 132(4) OF THE ACT, IT WAS STATED THAT THE COMPUTERIZED SHEETS FOR THE EARLIER PERIOD WERE DESTROYED AFTER ACCOUNTING / JOTTING ABOUT 40% OF THE ACTUAL SALES. THE AVERAGE CASH SALES RECORDED IN THE REGULAR BILLS OF ACCOUNT MAINTAINED FOR THE MONTH OF APRIL, MAY AND JUNE, 2002 WERE IN THE RANGE OF RS. 10,500/- TO RS 18,500/-. ON THE BASIS OF THE ABOVE, THE ASSE SSING OFFICER CAME TO THE FOLLOWING CONCLUSIONS: I) THAT THE ASSESSEE WAS IN THE HABIT OF SUPPRESSIN G SALES OF HIS PROPRIETORSHIP BUSINESS AS ADMITTED BY HIM WHILE DE CLARING UNDISCLOSED INCOME OF RS. 5,63,200/- IN HIS BLOCK RETURN FILED ON 22.12.2003. II) THE SEIZED LOOSE PAPERS AT PAGE NO. 88 TO 94 OF THE BUNDLE NO. 5 OF PANCHANAMA DATED 27.6.2002 ESTABLISHES THE FACT THAT, THE ACTUAL CASH SALES IN THE BUSINESS OF THE ASSESSEE WERE MUCH MOR E THAN THE CASH SALES RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED REGULA RLY BY THE ASSESSEE. III) THE STATEMENT OF THE ASSESSEE RECORDED ON 27.6 .2002 ESTABLISHES THAT THE WAS SUPPRESSING ABOUT 60% OF CASH SALES AN D THUS, CORROBORATED WITH THE SEIZED DOCUMENT, THE MODUS OPERANDI EMPLOY ED BY THE ASSESSEE FOR SUPPRESSION OF SALES BY DESTROYING THE PRIMARY EVIDENCES OF THE ACCOUNTS WAS ESTABLISHED. 3.2 IN VIEW OF THE ABOVE, IT WAS HELD THAT IT WAS N OT A CASE OF PROFIT PURELY ON THE ESTIMATED SUPPRESSED CASH SALES WITHO UT ANY ITA NO. 1561/PN/07 B.P 1997-98 TO 2003-04 PAGE PAGE 3 OF 5 CORROBORATIVE EVIDENCE FOUND DURING THE SEARCH AND THAT THE ADDITIONS WERE MADE ON THE BASIS OF ARITHMETICAL CALCULATIONS WITH THE AVAILABLE DOCUMENTARY EVIDENCE FOUND AND SEIZED DURING THE SE ARCH OPERATIONS AND THE ADMITTED STATEMENT OF THE ASSESSEE THAT HE WAS SUPPRESSING 60% CASH SALES IN THE REGULAR BOOKS OF ACCOUNTS. A PENA LTY OF RS. 5 LAKHS WAS, THEREFORE, IMPOSED. 3.3 IN THE APPELLATE PROCEEDINGS, IT WAS STATED THA T THE ACIT HAS COMPLETED THE BLOCK ASSESSMENT FOR THE ABOVE SAID B LOCK PERIOD ON 30/06/2004 BY WRONGLY MAKING HUGE ADDITION OF RS. 2 0,21,535/- BY ESTIMATING THE SALES & GP ON ASSUMPTIONS / PRESUMPT IONS AND ESTIMATED BASIS SIMPLY ON THE BASIS OF STATEMENT WITHOUT ANY AUTHENTICATE BONAFIDE GROUNDS IGNORING ENTIRELY THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IGNORING THE SUPPORTING CORROBORATIVE EVIDENCE/DOCU MENTS AND IN SPITE OF THE FACT THAT NO SUPPORTING OF SALES WERE FOUND FRO M THE DOCUMENT EITHER SEIZED OR FOUND. LATER ON, THE ITAT, PUNE VIDE THEI R JUDGMENT DTD. 11/08/2005 HAS RESTRICTED THE ABOVE SAID HUGE ADDIT ION TO THE TUNE OF RS. 7,86,800 /- ONLY. THE APPELLANT HAS SUBMITTED HIS BLOCK RETU RN FOR THE ABOVE SAID BLOCK PERIOD WITHIN STATUTORY TIME AND V OLUNTARILY DECLARED THE INCOME OF RS. 5,63,000/- IN THE BLOCK RETURN FILED FOR THE ABOVE SAID BLOCK PERIOD. THE APPELLANT STARTED THE RESTAURANT BUSINE SS FROM MARCH 2001 AND BLOCK PERIOD WAS ONLY FOR 15 MONTHS FOR WHICH A PPELLANT DECLARED RS. 5,63,000/- IN THE BLOCK RETURN FILED. THE APPELLANT HAS ALREADY PAID THE ENTIRE TAX CONSEQUENT TO JUDGMENT OF HON ITAT. THE APPELLANT FULLY CO- OPERATES AND DO NOT HAVE MALAFIDE INTENTION. THERE IS NO CONSCIOUS BREACH OF LAW OR ANY MALAFIDE INTENTION,. THE ADDITIONS IN THE ASSESSMENT ORDER WERE MADE PURELY ON ESTIMATED BASIS ON ASSUMPTION / PRESUMPTION AND WITHOUT ANY AUTHENTICATE BONAFIDE GROUND AND IN SPI TE OF THE FACT THAT NEITHER INCRIMINATING DOCUMENTS WERE FOUND / SEIZED NOR ANY UNEXPLAINED INVESTMENTS, ASSETS, CASH WAS FOUND/ SEIZED. THE APPELLANT RELIED UPON THE JUDGMENT OF HON. SUPR EME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC), WHERE IN IT IS NO CONSCIOUS BREACH OF LAW. FURTHER IT IS WELL SETTLED LEGAL POSITION THAT THE ESTIMATION OF INCOME/PROFIT DOES NOT AMOUN T TO CONCEALMENT. AS THERE WAS NO MALAFIDE INTENTION, PENALTY WAS NOT LE VIABLE. FURTHER I WISH TO DRAW YOUR KIND ATTENTION TO THE F OLLOWING VARIOUS JUDGMENT OF HON. ITAT, WHEREIN IT HAS BEEN DECIDED THAT LEVY OF PENALTY U./S. 158FA(2) MERELY ON THE BASIS OF ESTIMATED ADD ITIONS IN AO ON ASSUMPTION/PRESUMPTION IS NOT JUSTIFIED. SMT. MALA DAYANITHI VS. DCIT ITAT BANGALORE C BENCH (2005) 92 ITJ (BANG) 27; N EMICHAND VS. ACIT (INV.) (2005) 93 (BANG.) 564; SMT. JAYASHREE M PEHT ANI VS. DY. CIT (2006) 99 ITJ (AHD) 644; ON THE BASIS OF THE ABOVE, IT WAS STATED THAT THE P ENALTY LEVIED ON ESTIMATION / PRESUMPTION / ASSUMPTION BASIS BE DELE TED. 3. ON CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSES SEE, THE CIT(A) WAS OF THE VIEW THAT IT IS A FIT CASE FOR LEVY OF THE PENAL TY. ACCORDINGLY, CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. RELEVANT DISCUSSION A S GIVEN IN THE PARA 3.4 AND 3.5 OF THE IMPUGNED ORDER IS AS FOLLOWS. ITA NO. 1561/PN/07 B.P 1997-98 TO 2003-04 PAGE PAGE 4 OF 5 .FROM THE ABOVE CONCLUSIONS DRAWN BY THE HONB LE ITAT IT IS CLEAR THAT THERE WAS SUPPRESSION OF SALES AND SUCH SUPPRE SSION WAS VOLUNTARILY ADMITTED WITHOUT ANY PROMPTING OR PRESSURE BY THE A SSESSEE. THE ONLY QUESTION WHICH, THEREFORE REMAINS TO BE DECIDED IS AS TO WHAT SHOULD BE THE AMOUNT ON WHICH PENALTY U/S. 158BFA COULD BE IM POSED. THE ITAT HAS NOT ONLY HELD THAT THERE WAS EVIDENCE TO SHOW S UPPRESSION OF SALES SUCH SUPPRESSION WAS ACTUALLY COMPUTED ON THE BASIS NARRATED ABOVE WHICH CAME TO RS. 13,50,000/-. AS THE ASSESSEE HAD ALREADY SHOWN RS. 5,63,200/- THE REMAINING AMOUNT OF RS. 7,86,800/- B EING THE UNDISCLOSED INCOME WAS CORRECTLY TAKEN BY THE ASSESSING OFFICER FOR THE PURPOSE OF CALCULATING THE PENALTY U/S. 158BFA. 3.5 IT MAY BE STATED HERE THAT THE DECISIONS QUOT ED BY THE LD. AUTHORIZED REPRESENTATIVE IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, 83 ITR 26(SC) IS WELL SETTLED. THE PENALTY IS NOT IMPO SED BY THE ASSESSING OFFICER ONLY BECAUSE IT WAS LEVIABLE BUT BECAUSE IT WAS BASED ON THE FACTUAL POSITION CONCLUDED BY THE ITAT. THE ASSESSE ES CONTENTION THAT THERE WAS NO MALA FIDE CONTENTION IS NOT BORNE FROM THE RECORDS. THE FURTHER DECISIONS OF THE ITAT REFERRED BY THE APPEL LANT ARE NOT APPLICABLE FOR THEY WERE BASED ON DIFFERENT FACTS AND THE PENA LTY WAS IMPOSED IN THOSE CASES MERELY BECAUSE THERE WAS ESTIMATION OF UNDISCLOSED INCOME. IN THE CASE OF THE ASSESSEE AS HELD ABOVE THERE WAS NO ESTIMATION AS THE ESTIMATION MADE BY THE ASSESSING OFFICER WAS RESTRI CTED TO THE ACTUAL UNDISCLOSED ASSETS FOUND AT THE TIME OF SEARCH BY T HE ITAT. IN VIEW OF THE ABOVE, THE ACTION OF THE ASSESSING OFFICER IN IMPOS ING THE PENALTY IS CONFIRMED . 4. AGGRIEVED WITH THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL WITH SAID GROUNDS DURING THE PROCEEDINGS, LD COUNSEL FOR THE ASSE SSEE REITERATED THE ARGUMENTS MADE BEFORE THE LOWER AUTHORITIES AND FURTHER RE LIED ON VARIOUS CITATION TO MAKE OUT THAT WHERE THERE ARE ESTIMATIONS INVOLVED, THERE IS NO SCOPE FOR THE LEVY OF THE PENALTIES U/S 158BFA(2) OF THE A CT. ON THE OTHER HAND, LD DR FOR THE REVENUE ARGUED STATING THAT IT IS A CASE OF LE VY OF PENALTY MERELY BASED ON THE ESTIMATIONS WITHOUT THE SUPPORT OF THE CORROBORA TIVE EVIDENCES. IN THIS REGARD, DR RELIED ON THE PAGES 88 TO 94 ARE THE COMPUTE RIZED SHEETS OF CASH SALES AND ARGUED THAT THE ASSESSEES STATEMENT IS AN OPEN CONFESSION FOR THE CONCEALMENT OF THE CASH SALES FROM THE BOOKS OF THE ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF T HE REVENUE. ON PERUSAL OF THE SAME, WE ARE OF THE VIEW THAT THE SEIZ ED LOOSE PAPERS AT PAGE NO. 88 TO 94 OF THE BUNDLE NO. 5 OF PANCHANAMA DATED 27 .6.2002 ARE THE DIRECT EVIDENCES IN SUPPORT OF THE ALLEGATION OF SUPPRESSED CASH SALES. PAGES 88 TO 94 ARE THE COMPUTERIZED SHEETS OF CASH SALES OF HOTEL SU DAMA REFLECTED FOR ITA NO. 1561/PN/07 B.P 1997-98 TO 2003-04 PAGE PAGE 5 OF 5 24.6.2002 AND 25.6.2002 AMOUNTING TO RS. 60,172/- AND RS. 52,444/- RESPECTIVELY. THE ADDITIONS ATTRIBUTABLE TO THESE ADDITIONS CERTAIN LY ATTRACT THE PENALTY U/S 271(1) OF THE ACT AS THE SUPPRESSION OF THESE CASH SALES IS THE CASE OF CONCEALMENT OF INCOME AND THERE IS NO ESTIMATION OF CONCEALED INCOME INVOLVED HERE. WHEN COMES TO THE REST OF THE ADDITION S, THEY ARE BASED ON EITHER ESTIMATIONS AND BASED ON THE UN-CORROBATED STATEMENTS AND PROJECTIONS. THESE PROJECTIONS AND ESTIMATIONS MAY BE GOOD FOR MAKING AD DITIONS AS CONFIRMED BY THE TRIBUNAL DURING THE PROCEEDINGS ON MERITS. BUT, FOR THE PURPOSE OF PENALTY PROCEEDINGS, THERE IS NEED FOR DIRECT EVIDENCES WORTH TH AT OF THE IMPUGNED SEIZED LOOSE PAPERS SUCH AS PAGE NO. 88 TO 94 OF THE BUNDLE NO 5. IT IS WELL SETTLED ISSUE THAT THE PENALTY IS NOT LEVIED IN CAS ES OF ESTIMATIONS AND PROJECTIONS. THEREFORE, WE ARE OF THE OPINION, THE PEN ALTY MUST BE RESTRICTED TO THE CONCEALED INCOME ATTRIBUTABLE TO THE CONTENTS OF THE SUPPRESSED SALES UNEARTHED BY THE REVENUE VIDE THE PAGE NO. 88 TO 94 OF THE BUNDLE NO 5 ONLY. AO IS DIRECTED ACCORDINGLY . ASSESSEE IS ENTITLED TO RELIEF IN RESPECT OF THE RE ST OF THE INCOME CONFIRMED BY THE TRIBUNAL AS THE SAME I S DIRECTLY RELATABLE TO THE PAGE NO. 88 TO 94 OF THE BUNDLE NO 5; BUT THE SAME IS ATTRIBUTABLE TO THE INFERENCES AND PROJECTIONS BASED ON THE STRENGTH OF TH E CONTENTS OF SAID PAGE NO. 88 TO 94 OF THE BUNDLE NO 5 IE SECOND GENERATION NEXUS. ACCORDINGLY, THE GROUNDS 1 AND 2 ARE PARTLY ALLOWED . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 24 TH SEPTEMBER, 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 24 TH SEPTEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DCIT, CENTRAL CIRCLE 2(3), PUNE 3. CIT(A)-II, PUNE 4. CIT-CENTRAL, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE