RUCHI JEWELLERS PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(4), MUMBAI

ITA 1859/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5416 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 22-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Section: 132

Judgement Text

1 ITA 1859/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO. 1859/MUM/2018 (ASSESSMENT YEAR : 2013-14) RUCHI JEWELLERS PVT LTD 1 ST PHOPHALWADI, ROOM NO.2 BUILDING NO.5, KALBADEVI, MUMBAI 400 002 PAN : AAACR0007M VS ACIT, CENT.CIR.2(4), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI RAKESH JOSHI RESPONDENT BY SHRI D.G. PANSARI DATE OF HEARING 30-04-2018 DATE OF PRONOUNCEMENT 15-05-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-48, MUMBAI DATED 29-01-2018 AND IT PERTAINS TO AY 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE LEARNED ASSESSING OFFICER IN LEVYING A PENALTY OF RS.9,00,000/- U/S. 271AAB OF THE INCOME TAX ACT, 1961, BEING 30% OF THE ADDITIONAL INCOME OF RS .30,00,0007-, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE LEARNED ASSESSING OFFICER IN IMPOSING THE PENALTY OF RS.9,00,000/- ON THE ALLEGED PLEA THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE OR SUBSTANT IATE THE MANNER IN WHICH 2 ITA 1859/MUM/2018 SUCH INCOME IS EARNED, WITHOUT CONSIDERING THE FACT S AND CIRCUMSTANCES OF THE CASE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE LEARNED ASSESSING OFFICER IN IMPOSING A PENALTY OF RS.9,00,000/- WITH OUT APPRECIATING THE FACT THAT THE QUANTUM OF PENALTY IMPOSED BY HIM IS NOT IN ACC ORDANCE WITH THE PROVISION OF SECTION 271AAB OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE ACTION U/S 132 OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT IN THE CAS E OF M/S GOLDSUKH SAFETY VAULTS LTD ON 08-11-2012, IN WHICH THE CASE OF THE ASSESSEE WAS ALSO COVERED. DURING THE COURSE OF SEARCH CASH AMOUNTING TO RS.30 LAKHS WAS SEIZED. THE ASSESSEE DECLARED THE SAME AS UNDISCLOSED INCOME EA RNED FROM BULLION TRADING IN THE STATEMENT RECORDED U/S 132(4) OF THE INCOME- TAX ACT, 1961. CONSEQUENT TO SEARCH, THE ASSESSEE HAS FILED RETURN OF INCOME AND DISCLOSED UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SEARCH TOWARDS CASH SEIZED AND PAID TAX THEREON. THE AO COMPLETED ASSESSMENT U/S 143(3), O N 20-03-2015 DETERMINING TOTAL INCOME OF THE ASSESSEE AS PER RETURN OF INCOM E FILED ACCEPTING INCOME DISCLOSED DURING THE COURSE OF SEARCH. THEREAFTER, PENALTY PROCEEDINGS U/S 271AAB WAS INITIATED AND CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHALL NOT BE LEVIED FOR FAILURE TO SUBSTANTIATE THE INCOME OFFERED DURING THE COURSE OF SEARCH AND EXPLAIN THE MANNER IN WHICH SU CH INCOME HAS BEEN EARNED. IN RESPONSE TO NOTICE, THE ASSESSEE VIDE ITS LETTER DATED 14-09-2015 SUBMITTED THAT THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME I N ITS STATEMENT RECORDED 3 ITA 1859/MUM/2018 U/S 132(4) AND ALSO SUBSTANTIATED THE MANNER IN WHI CH UNDISCLOSED INCOME WAS DERIVED BY EXPLAINING THE SOURCE OF INCOME; THEREFO RE, ALTHOUGH THE LEVY OF PENALTY U/S 271AAB IS APPLICABLE, BUT SUCH PENALTY CANNOT BE LEVIED WHEN THE ASSESSEE HAS DISCLOSED SUCH INCOME IN ITS RETURN OF INCOME AND PAID TAXES THEREON. THE AO, AFTER CONSIDERING RELEVANT FACTS AND ALSO TAKING NOTE OF THE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE T HE MANNER IN WHICH SUCH INCOME IS DERIVED, LEVIED PENALTY @30% OF TOTAL UND ISCLOSED INCOME UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 271AAB OF THE ACT WHICH WORKS OUT TO RS.9,00,000/- PENALTY. 3. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERR ED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS RE-ITE RATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT NO PENALTY CAN BE LEVIE D WHEN THE ASSESSEE HAS OFFERED UNDISCLOSED INCOME DURING THE COURSE OF SEA RCH IN STATEMENT RECORDED U/S 132(4) AND ALSO DISCLOSED SUCH UNDISCLOSED INCO ME IN HIS RETURN OF INCOME BY PAYING NECESSARY TAX. THE ASSESSEE ALSO RELIED UPO N CERTAIN JUDICIAL PRECEDENTS. THE LD.CIT(A), AFTER CONSIDERING RELEVANT FACTS AND ALSO TAKING NOTE OF CERTAIN JUDICIAL PRECEDENTS UPHELD PENALTY LEVIED BY THE AO U/S 271AAB BY HOLDING THAT ALTHOUGH THE ASSESSEE HAS ADMITTED UNDISCLOSED INCO ME AND DECLARED SUCH INCOME IN ITS STATEMENT OF TOTAL INCOME, BUT FAILED TO SUBSTANTIATE THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; THEREFORE, THER E IS NO ERROR IN THE FINDINGS 4 ITA 1859/MUM/2018 RECORDED BY THE AO WHILE LEVYING PENALTY UNDER CLAU SE (A) SUB SECTION (1) OF SECTION 271AAB. AGGRIEVED BY THE ORDER OF LD.CIT(A ), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD .CIT(A) WAS ERRED IN CONFIRMING THE ACTION OF THE AO IN LEVYING A PENALT Y OF RS.9 LAKHS U/S 271AAB OF THE I.T. ACT, 1961 BEING 30% OF THE ADDITIONAL INCO ME OF RS.30 LAKHS OFFERED DURING THE COURSE OF SEARCH WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH SUCH UNDISCLOSED INCOME HAS BEEN DERIVED, DURING THE COURSE OF SEARCH, ITSELF. THE LD.AR FUR THER SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE EXPLANAT IONS OFFERED BY THE ASSESSEE DURING SEARCH PROCEEDINGS AS WELL AS PENALTY PROCEE DINGS WHILE LEVYING PENALTY UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 271A AB OF INCOME-TAX ACT, 1961. THE LD.AR, REFERRING TO PROVISIONS OF SECTION 271AA B SUBMITTED THAT AS PER THE PROVISIONS, IF THE ASSESSEE ADMITS UNDISCLOSED INCO ME AND SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED DURING THE CO URSE OF SEARCH IN A STATEMENT RECORDED U/S 132(4) AND ALSO SUBSTANTIATE D THE MANNER IN WHICH SUCH UNDISCLOSED INCOME WAS DERIVED, COUPLED WITH PAYMEN T OF TAXES APPLICABLE ON SUCH UNDISCLOSED INCOME BEFORE FURNISHING RETURN OF INCOME, THEN PENALTY @10% OF THE UNDISCLOSED INCOME IS LEVIABLE, BUT NOT @30% UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 271AAB OF THE ACT. 5 ITA 1859/MUM/2018 5. THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THERE IS NO DISPUTE WITH REGARD TO APPLICABILITY OF PROVISIONS OF SECTI ON 271AAB OF THE INCOME-TAX ACT, 1961. THE ONLY DISPUTE IS WITH REGARD TO SUB CLAUSE UNDER WHICH PENALTY IS IMPOSABLE. THE AO LEVIED PENALTY UNDER SUB CLAUSE (A) TO SUB SECTION (1) OF SECTION 271AAB ON THE GROUND THAT ALTHOUGH THE ASSE SSEE HAS ADMITTED UNDISCLOSED INCOME AND PAID TAXES ON SUCH INCOME BE FORE FILING RETURN OF INCOME, BUT FAILED TO SUBSTANTIATE THE MANNER IN WH ICH UNDISCLOSED INCOME WAS DERIVED. THEREFORE, HE OPINED THAT IT IS A FIT CAS E FOR LEVY OF PENALTY @30% OF UNDISCLOSED INCOME UNDER SUB CLAUSE (A) OF SECTION 271AAB OF THE ACT. THE ASSESSEE CONTENDS THAT IF AT ALL PENALTY CAN BE LEV IED, WHICH CAN BE LEVIED UNDER SUB CLAUSE (A) TO SUB SECTION (1) OF SECTION 271AAB @10%, BECAUSE THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME AND SPECIFIED THE M ANNER IN WHICH SUCH INCOME HAS BEEN DERIVED IN THE STATEMENT RECORDED U /S 132(4) OF THE ACT. THE ASSESSEE ALSO SUBSTANTIATES THE MANNER IN WHICH SUC H UNDISCLOSED INCOME WAS DERIVED AND PAID TAX TOGETHER WITH INTEREST, IF ANY , IN RESPECT OF UNDISCLOSED INCOME AND FURNISHED RETURN OF INCOME IN THE SPECIF IED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME. WE FIND THAT THE ASSESSEE HAS ADMITTED UNDISCLOSED 6 ITA 1859/MUM/2018 INCOME IN ITS STATEMENT RECORDED U/S 132(4) AND ALS O SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED WHILE ANSWERING A SPECIFIC QUESTION DURING THE COURSE OF SEARCH, WHERE IT WAS CATEGORICALLY ST ATED THAT IT HAS EARNED UNDISCLOSED INCOME FROM BULLION TRADING ACTIVITY. ONCE, THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME IN THE STATEMENT RECORD ED U/S 132(4) AND SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND ALSO SUBSTANTIATES THE MANNER IN WHICH SUCH UNDISCLOSED INCOME WAS DERIVED, THEN ONCE THE ASSESSEE PAYS TAX TOGETHER WITH INTEREST A ND FURNISHES THE RETURN OF INCOME DECLARING SUCH UNDISCLOSED INCOME, PENALTY U /S 271AAB COULD BE IMPOSED UNDER SUB CLAUSE (A) TO SUB SECTION (1) OF SECTION 271AAB, BUT NOT UNDER SUB CLAUSE (C) OF SUB SECTION (1) OF SECTION 271AAB. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN LEVYIN G PENALTY @30% EVEN THOUGH THE ASSESSEE HAS EXPLAINED AND SUBSTANTIATED THE MANNER IN WHICH SUCH UNDISCLOSED INCOME WAS DERIVED. HENCE, WE DIRECT T HE AO TO LEVY PENALTY @10% OF TOTAL UNDISCLOSED INCOME U/S 271AAB OF INCOME-TA X ACT, 1961. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 -05-2019 . SD/- SD/- (SANDEEP GOSAIN) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH MAY, 2019 PK/- 7 ITA 1859/MUM/2018 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI