DEVANG R. SHAH, MUMBAI V. ASST CIT CEN CIR 47, MUMBAI

ITA 1663/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4846 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: KENTAN L VAJANI
• Keywords: Unexplained investment; Search and seizure; Bonafide belief; Revised return
• Section: 27; 6; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM ITA NO. 1663 /MUM/ 2017 (ASSESSMENT YEAR: 2012 - 13 ) SHRI DEVANG R. SHAH LOWER BASEMENT NO. 1, MY HOME APARTMENTS, V. N. NAIK CROSS LANE,GOWALIA TANK, MUMBAI - 400 036 VS. ASST. CIT, CENTRAL CIRCLE 47, AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 PAN/GIR NO. ALWPS 4905 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI KENTAN L. VAJANI RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 03.12.2018 DATE OF PRONOUNCEMENT : 13.02 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 50, MUMBAI (LD.CIT(A) FOR SHORT) DATED 26.12.2016 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: OBJECTION AGAINST CONFIRMING PENALTY OF RS. 2,94,688/ - LEVIED U/S. 271AAA OF THE INCOME - TAX ACT. 1961 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME - TAX (APPEAL), HEREINAFTER REFERRED TO AS THE 'CIT (A)', HAS ERRED IN CONFIRMING THE PENALTY OF RS. 2,94,688/ - LEVIED U/S. 271 AAA OF THE INCOME - TAX ACT, 1961. (B) YOUR APPELLANT RESPECTFULLY SUBMITS THAT HIS CASE IS COVERED BY THE PROVISIONS OF SUB - SECTION (2) OF SECTION 271 AAA OF THE ACT AND ACCORDINGLY THE APPELLANT IS ELIGIBLE TO GET THE IMMUNITY AS PROVIDED IN THE SAID SUB - SECTION. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS E RRED IN CONFIRMING THE LEVY OF PENALTY FOR THE REASON THAT THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND HENCE HE IS NOT ENTITLED TO THE IMMUNITY PROVIDED BY SUB - SECTION (2) OF SECTION 271 AAA. 2 ITA NO. 1663/MUM/2017 ( D) THE APPELLANT, RESPECTFULLY SUBMITS THAT ON HARMONIOUS INTERPRETATION OF THE PROVISIONS OF SUB - SECTION (2) OF SECTION 271 AAA, THE APPELLANT CANNOT BE MADE TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED SPECIALLY WHEN DURIN G THE COURSE OF THE SEARCH, THE APPELLANT WAS NOT ASKED TO EVEN SPECIFY THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS EARNED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') WAS CARRIED OUT IN CASE OF THE ASSESSEE ON 26.05.2011. SEARCH ACTION WAS ALSO CARRIED OUT AT LOCKER NO. 223 AT ORIENTAL BANK OF COMMERCE BELONGING TO THE APPELLANT ON 10.06.2 011. AFTER THE SEARCH, ON 13.07. 2012, THE ASSESSEE F ILED HIS RETU RN OF INCOME U/S 139 OF THE AC T DECLARING TOTAL INCOME OF RS. 1,70,707/ - FOR THE A.Y. 2012 - 13. THEREAFTER , THE ASSESSEE FILED - A REVISED RETURN OF INCOME ON 09.03.2013 DECLARING TOTAL INCOME OF RS. 31,17,584/ - . A T THE TIME OF SEARCH ACTION, THE ASSESSEE HAS DECLARED RS.29,41,015/ - AS HIS UNDISCLOSED INVESTMENT. HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE HAS NOT OFFERED TO TAX THE SAID UNDISCLOSED DECLARED INCOME - IN HIS RETURN OF INCOME FILED U/S 139 OF THE ACT ON 30.07.2012. THEREAFTER, THE ASSE SSEE FILED HIS REVISED RETURN OF I NCOME ON 09 .03.2013 AND OFFERED TO TAX RS. 29 , 41 , 015/ - ON ACCOUNT OF HIS UNDISCLOSED INVESTMENT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, PENALTY PROCEEDINGS U/S 271AAA WAS INITIATED AND A NOTICE U/S 274 WAS ISSUED REQUIRING THE ASSESSEE TO SHOW CAUSE WHY PENALTY U/S 271AAA SHOULD NOT BE IMPOSED IN H IS CASE . 4. I N RESPONSE TO THE ABOVE, THE ASSESSEE FILED ITS SUBMISSION VIDE LETTER DATED 12.09.2014 WHEREIN THE ASSESSEE STRESSED THAT ASSESSEE HAS AVAILABLE PROVISIONS IN THE ACT TO REVISE THE RETURN OF INCOME AND HENCE THIS SHOULD NOT BE TREATED AGAIN ST THE ASSESSEE. SECONDLY, THE ASSESSEE STRESSED THAT HE HAS PAID THE TAXES IN THE FORM OF PAY ORDERS DATED 3 ITA NO. 1663/MUM/2017 22.07.2011 AGGREGATING TO RS.29,41,015/ - . THIRDLY THE ASSESSEE STATED THAT INCOME OF RS.29,41,015/ - WAS OFFERED TO TAX TO BUY PEACE OF MIND AND AVOI D LITIGATION. 5. HOWEVER, THE ASSESSING OFFICER (A.O. FOR SHORT) WAS NOT SATISFIED. HE LEVIED THE PENALTY OF RS.3 , 03 , 528 U/S. 27 1 AAA OF THE ACT. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 7. THE LD. CIT(A) NOTED THE ASSESSEES SUBMISSIONS AS UNDER: 5.2 IN THE COURSE OF THE APPEAL PROCEEDINGS, THE APPELLANT CONTENDED THAT: (I) THE CASE OF THE APPELLANT IS' COVERED BY SUB SECTION (2) OF SECTION 271AAA WHICH PROVIDES IMMUNITY FROM PENALTY 271 AAA(1). (II) THERE IS NO STIPULATION IN SUB SECTION (2) OF SECTION 271AAA AS REGARDS INCLUDING THE INCOME EITHER IN THE ORIGINAL RETURN OR REVISED RETURN ETC. (III) THE APPE LLANT HAD PAID THE TAX ON RS. 29 , 41 , 015/ - ON 14 - 7 - 2011. (IV) DURING THE COURSE OF THE SEARCH ACTION, THE APPELLANT OFFERED UNDISCLOSED INCOME OF. RS. 29,41,015/ - , BEING THE VALUE OF UNEXPLAINED JEWELLERY. (V) THE UNDISCLOSED INCOME HAD BEEN OFFERED WITH A VIEW TO BUY PEACE OF MIND. (VI) THE CONDUCT OF THE APPELLANT HAS BEEN BONAFIDE A ND CO - OPERATIVE .IN THE MATTER. (VII) THE UNDISCLOSED INCOME WAS OFFERED BECAUSE OF DETECTION OF UNEXPLAINED INVESTMENT IN THE JEWELLERY AND NOT BECAUSE OF DETECTION OF ANY SOURCE OF INCOME DURING THE SEARCH AND THEREFORE, THE CONDITION OF SUBSTANTIATING THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED IS NOT RELEVANT IN THE APPELLANT'S CASE AND THEREFORE NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE APPELLANT ON THE ABOVE GROUND. (VIII) DURING THE COURSE OF RECORDING OF THE STATEMENT U/S. 132( 4) OF THE ACT, THE APPELLANT WAS NOT ASKED ANY QUESTION AS REGARDS THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED BY THE APPELLANT. (IX) EVEN DURING THE ASSESSMENT PROCEEDINGS OR PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS ALSO NOT ASKED A NY QUESTIONS AS REGARDS THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED. (X) THE APPELLANT COULD NOT HAVE DESCRIBED THE MANNER OF EARNING THE UNDISCLOSED INCOME BECAUSE HE WAS NEVER ASKED TO DO SO AND THEREFORE, THE APPELLANT CANNOT BE FAULTED FOR NOT FUL FILLING THE CONDITION LAID DOWN IN CLAUSE (A) OF SECTION 271AAA AND IMMUNITY ENVISAGED IN SUB SECTION (2) OF THE SECTION 271AAA CANNOT BE DENIED TO THE APPELLANT. (XI) ONCE THE INCOME DISCLOSED HAS BEEN INCLUDED IN THE RETURN OF INCOME AND THE' TAX AND IN TEREST ON THE SAME IS PAID BY THE ASSESSEE, THE PENALTY U/S. 271(L)FC), OF THE ACT CANNOT BE LEVIED EVEN IF THE STATEMENT U/S. 132(4) DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED. CIT VS. MAHENDRA C. SHAH 299 1TR 305 (GUJ) ' (XII) IN A CASE WHERE THE ASSESSEE ADMITS CERTAIN INCOME DURING THE COURS E OF SEARCH, INCLUDES THE SAME IN THE RETURN OF INCOME AND PAYS TAX ON THE SAME, THE ASSESSEE SHALL BE NORMALLY ENTITLED TO IMMUNITY AS PROVIDED UNDER SUB SECTION (2) OF 4 ITA NO. 1663/MUM/2017 SECTION 271AAA. IF THE REVENUE HAS NOT ASKED ANY QUESTION TO THE ASSESSEE ABOUT THE MANNER IN WHICH THE INCOME IS DERIVED, THEN NON DISCLOSURE OF THE MANNER TO DERIVE THE UNDISCLOSED INCOME SHALL NOT WORK AGAINST THE IMMUNITY AVAILABLE TO THE ASSESSEE. ASST. CIT VS. MUNISH KUMAR GOVAL 152 ITD 453 (C HANDIGARH ). (XIII) IN A CASE WHERE NO QUESTION IS ASKED TO THE ASSESSEE AS REGARDS THE MANNER OF EARNING THE INCOME DURING THE COURSE OF RECORDING A STATEMENT U/S, 132(4), THE ASSESSEE CANNOT BE EXPECTED TO FURTHER SUBSTAN TIATE THE MANNER OF EARNING INCOME. SUNIL KUMAR BANSAL VS. DY. CIT 70 SOT 137 (CHANDIGARH]. 8. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED. HE REFERRED TO THE PROVISION OF SECTION 271AAA SUB SECTION (2) FOR THE FOLLOWING PROPOSITION: 5.4 SUBSECTION (2) OF SECTION 271AAA STIPULATES THAT NO PENALTY UNDER SECTION 271AAA SHALL BE IMPOSED IF THE ASSESSEE - (I) IN THE COURSE OF SEARCH, IN HIS STATEMENT UNDER SUB - SECTION (4) OF SECTION 132, A DMITS THE. UNDISCLOSED INCOME AN D SPECIFIED THE MANNER IN WHI CH SEARCH INCOME HAS BEEN DERIVED; (II) SUBS TANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. 9. HE FOUND THAT THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS AND HE OBSERVED AS UNDER: 5.5 THUS, TWO OF THE NECESSARY CONDITIONS FOR THE ASSESSEE TO ESCAPE THE PROVISIONS OF SUBSECTION (1) OF SECTION 271AAA ARE - (I) THE ASSESSEE IN THE COURSE OF SEARQH, IN HIS STATEMENT UNDER SUB - SECTION (4) OF SE CTION 132, SPECIFIED THE MANNER IN SUCH INCOME HAS BEEN DERIVED AND (II) SUBSTAN TIATE THE MANNER IN WHICH THE SUCH INCOME WAS DERIVED. AS REGARDS THE CONDITION IN CLAUSE (I), THE APPELLANT CONTENDS THAT HE WAS NOT ASKED TO EXPLAIN THE MANNER IN WHICH THE U NDISCLOSED INCOME WAS DERIVED IN THE STATEMENT RECORDED U/S 132(4) AND, THEREFORE, IT WAS WRONG TO ATTRIBUTE ANY OMISSION TO HIM (THE APPELLANT) IN THIS REGARD AND TO DENY HIM THE IMMUNITY - ENVISAGED IN SECTION 271AAA(2). 1 FIND THAT EVEN IF, THIS CONTENTIO N OF THE APPELLANT IS ACCEPTED, HE (THE APPELLANT) WILL STILL BE INELIGIBLE FOR THE IMMUNITY BECAUSE OF HIS FAILURE TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. THE APPELLANT WAS FREE TO SUBSTANTIATE THE MA NNER OF EARNING THE UND ISCLOSED INCOME AT ANY POINT OF TIME AND NOT NECESSARILY IN THE COURSE OF THE STATEMENT RECORDED U/S 132(4}. IN THIS CASE, THE APPELLANT DID NOT DO SO AT ANY POINT OF TIME. 10. ACCORDINGLY, HE REJECTED THE ASSESSEES CONTENTION THAT THE ASSESSEES CASE IS COVERED UNDER THE PROVISION OF SECTION 271AAA OF THE ACT. ACCORDINGLY, HE CONFIRMED THE LEVY OF PENALTY. 11. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5 ITA NO. 1663/MUM/2017 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). HE PLEADED THAT THE ASSESSEE HAS DULY REVISED THE RETURN TO BUY PIECE OF MIND. THAT THE ASSESSEE WAS NOT ASKED TO SUBSTANTIATE THE MANNER OF DERIVING THE UNDISCLOSED INCOME. 13. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON THE FOLLOWING CASE LAWS: 1. ASST. CIT VS. A. N. ANNAMALAISAMY HU F [135 TTJ 98 (CHENNAI)] 2. CIT VS. MAHENDRA C. SHAH [299 ITR 305 (GUJ)]; 3. PR. CIT VS. MUKESHBHAI RAMANLAL PRAJAPATI [398 ITR 170 (GU J.)]; 4. ACIT VS. EMIRATES TECHNOLOGIES PVT. LTD . (IN ITA NO. 476/DEL/2014 VIDE ORDER DATED 28.10.2016); 5. PR. CIT VS. EMIRATES TECHNOLOGIES PVT. LTD . [399 ITR 189 (DEL.)] 14. THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) SUBMITTED THAT THE PENALTY U/S. 271AAA HAS BEEN RIGHTLY LEVIED. HE SUBMITTED THAT DESPITE ACCEPTING THE UNDISCLOSED INCOME IN THE SEARCH PROCEEDINGS, THE ASSESSEE HAS NOT DISCLOSED THE SAME IN THE RETU RN OF INCOME. THAT IT WAS ONLY SUBSEQUENT THAT THE RETURN WAS REVISED. HE SUBMITTED THAT THE AUTHORITIES BELOW ARE CORRECT IN LEVYING THE PENALTY. 15. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE HAVE ALSO CONSIDERED THE PRECEDEN TS RELIED UPON. WE FIND THAT THE ASSESSEES SOURCE OF INCOME IS SALARY AND INCOME FROM OTHER SOURCE . IN THE COURSE OF SEARCH, CERTAIN JEWELLER IES WERE FOUND. THE ASSESSEE DISCLOSED THE SUM OF RS.29,41,015/ - ON SEARCH ON 13.07.2012 AND ALSO PAID THE TAX DU E T HEREON ON 14.07.2012, MUCH BEFORE THE FILING OF THE RETURN OF INCOME PURSUANT TO SEARCH. THESE FACTS ARE UNDISPUTED. THIS DULY CORROBORATES THE BONAFIDE OF THE CONDUCT OF THE ASSESSEE IN TERMS OF THE PROVISIONS OF SECTION 271AAA. THE PENALTY LEVIED SURV IV E S 6 ITA NO. 1663/MUM/2017 ONLY ON THE TECHNICAL ISSUE THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE MANNER OF EARNING OF INCOME. THE ASSESSEE S RESPONSES TO THIS IS THAT NEITHER ANY QUESTION IN THIS REGARD WAS RAISED DURING SEARCH NOR IT IS AN ISSUE OF SOURCE OF INCOME AS THE ITEM DISCOVERED WERE ONLY CERTAIN JEWELLERY . ON CAREFUL CONSIDERATION, WE FIND THAT THE CONDUCT OF THE ASSESSEE IN THIS CASE IS NOT CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. WE FURTHER PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA [1972] 83 ITR 26 (SC) WHEREIN IT WAS HELD THAT 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI - CRIMINAL PROCE EDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT T HE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY . 7 ITA NO. 1663/MUM/2017 16. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 . 0 2 . 2 0 1 9 S D / - S D / - ( SANDEEP GOSAIN ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1 3 . 0 2 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI