ACIT, CC- 1(3), Kolkata, Kolkata V. M/s. EMC Limited, Kolkata

ITA 1927/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4780 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 05-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: S M SURANA
• Keywords: Search and seizure
• Section: 22; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.1927/KOL/2018 ( / ASSESSMENT YEAR: 2013-14) ACIT, CC-1(2), KOLKATA VS. M/S EMC LTD. CONSTANTIA OFFICE COMPLEX, 11, ROWDON STREET, (DR. U. N. BHARMACHARI STREET), 8 TH FLOOR, (SOUTH BLOCK), KOLKATA-700017. ./ ./PAN/GIR NO.: AAACE 7582 J (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI RADHEY SHYAM, CIT RESPONDENT BY :SHRI S.M. SURANA, ADVOCATE / DATE OF HEARING : 19/12/2019 /DATE OF PRONOUNCEMENT : 21/02/2020 / O R D E R PER A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-20, KOLKATA IN APPEAL NO. CIT(A), KOLKATA- 20/12458/2015-16, WHICH IN TURN ARISES OUT OF A PENALTY ORDER PASSED BY THE AS SESSING OFFICER U/S 271AAB OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 2 8.09.2015. 2.THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE A S FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY U/S 271AAB BY HOLDING T HE INCOME DISCLOSED DURING SEARCH U/S 132(4) IS NOT UNDISCLOSED INCOME AND HEN CE, NOT LIABLE FOR PENALTY U/S M/S EMC LTD. ITA NO.1927/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 271AAB AFTER GIVING THE REASON THAT THE INCOME ON A CCOUNT OF CESSATION OF LIABILITY IS DECLARED U/S 132(4) TO CO-OPERATE WITH THE DEPARTMENT IGNORING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ABOVE DECLA RATION WAS MADE WHEN THE ASSESSEE COMPANY FAILED TO EXPLAIN GENUINENESS OF C ERTAIN LIABILITY SHOWN IN THE BOOKS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE DECLARATION MADE BY THE ASSESSEE U/SL32(4) IS ON ACCOUNT OF CESSATION OF LIABILITY AND HENCE, NOT UNDISCLOSED I NCOME FOR THE PURPOSE OF LEVYING PENALTY U/S 271AAB IGNORING THE FACT THAT THE DECLA RATION U/S 132(4) WAS MADE AFTER SEARCH & SEIZURE OPERATION WHEN THE ASSESSEE COULD NOT EXPLAIN THE GENUINENESS OF CERTAIN OUTSTANDING LIABILITIES WHIC H IN THE DISCLOSURE PETITION FILED BY THE ASSESSEE WAS GIVEN A COLOUR OF CESSATION OF LIABILITY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY WHEN ALL THE CONDITIONS SPECIFIED IN SEC 271AAB(1)(A)(I), SEC 271AAB(L)(A)(II) AND SEC 271AA B(1)(A)(III) WERE SATISFIED FOR IMPOSING THE PENALTY IN RESPECT OF THE AMOUNT O F RS.29,18,82,368/- AND OF SECTION 271AAB(C) IN RESPECT OF THE AMOUNT OF RS. 8 1,17,632/-. 4. THAT THE APPELLANT CRAVES TO ADD TO AND/OR ALTER , AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR HEARING OF THISAPPEAL . 3. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: A SEARCH & SEIZURE OPERATION WAS CONDUCTED U/S 132 OF THE AC T ON THE ASSESSEE ON 04.10.2012. IN THE STATEMENT RECORDED DURING THE S EARCH U/S 132(4) THE ASSESSEE DISCLOSED INCOME AT RS. 30 CRORES AS BEING TOWARDS NON-EXISTING LIABILITY / CESSATION OF LIABILITY. IN THE RETURN OF INCOME FUR NISHED, THE ASSESSEE OFFERED RS. 29,18,82,368/- BEING THE QUANTIFIED WRITE BACK OUT OF SUNDRY CREDITORS. HOWEVER, ASSESSING OFFICER ASSESSED THE SAID INCOME AT RS. 3 0 CRORES AS PER THE STATEMENT U/S 132(4) OF THE ACT AND HAS IMPOSED THE PENALTY U /S 271AAB OF THE ACT AS FOLLOWS: SL. UNDISCLOSED INCOME PENALTY RATE PENALTY QUANTU M A) AMOUNT OF RS. 29,18,82,368/- INCLUDED IN RETURN OF INCOME @10% U/S 271AAB(A) 2,91,88,237 B) 81,17,632[BEING 30 CRORES (-) 29,18,82,368] THIS INCOME WAS NOT INCLUDED IN RETURN OF INCOME. @30% U/S 271AAB(B) 24,35,290 TOTAL 3,16,23,527 M/S EMC LTD. ITA NO.1927/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE HAD DISCLOSED RS. 30CRORES AFTER GETTING CAUGHT WHILE SEARCH AND SEIZURE OPERA TION. THEREFORE, ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE FALLS UNDER E XPLANATION (C)(I) OF SECTION 271AAB OF THE ACT; AND HENCE HE IMPOSED PENALTY OF RS. 3,16,73,527/-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3 . FOREMOST-THERE IS NO EVIDENCE NOR MATERIAL; BUT THE STATEMENT RECORDED U/S 132(4). AND WHAT IS THE DISCLOSURE THAT OUT OF THE SUNDRY CREDITORS, THERE COULD NOT BE NO LONGER EXISTING / CESSATION OF LIA BILITY TO THE EXTENT OF RS. 30 CRORES. WHAT ARE THE DETAILS NOT KNOWN. BE AS IT MAY, THE WHOSOEVER NO LONGER EXISTING SUND RY CREDITORS- THESE CREDITORS HAD NOT BEEN DOUBTED; AND PERTINENTLY IN THE RELEVA NT A.Y. WHEN THE CREDIT LIABILITIES WERE ENTERED IN THE REGULAR BOOKS OF AC COUNTS. WHEN THE CREDITS ARE NOT DOUBTED OR DISPROVED OR FALSE- HOW CAN PURPORTED CE SSATION OF LIABILITY BE UNDISCLOSED INCOME? AND, IT WOULD BE IRONICAL IF IT WERE THAT THE SEAR CH U/S 132 WAS CARRIED OUT FOR CESSATION OF LIABILITY. IT BELITTLES THE SEARCH. BE AS IT MAY, CESSATION OF LIABILITY IS PURELY BET WEEN THE PARTIES. THE REVENUE HAS NO ROLE, NOR MENTOR, NOR ENFORCEMENT ROLE TO PLAY. THE 132(4) STATEMENT DISCLOSURE IS BUT THE USUA L, TO COOPERATE WITH THE SEARCH. AND IT WOULD NOT HAVE BEEN AN ISSUE FOR THE APPELLA NT TO COOPERATE FOR THE APPELLANT IS A 5- DECADE OLD REPUTED COMPANY IN BUS INESS AS A WORLD CLASS PROVIDER OF END-TO-END POWER SYSTEMS SOLUTIONS ACRO SS THE WORLD; WITH REVENUES FOR THIS AY 2013-14 AT ABOVE RS. 2,000 CRORES. AND THE APPELLANT HAD COOPERATED. WHEN THE RETURN O F INCOME WAS TO BE FURNISHED, IT HAD QUANTIFIED SUCH NO LONGER EXISTIN G SUNDRY CREDITOR LIABILITY TO ALMOST AS STATED IN THE STATEMENT U/S 132(4); AND T HE BALANCE WHICH THE DCIT A.O. ADDED IN THE ASSESSMENT, THE APPELLANT DID NOT PREFER TO DISPUTE. BUT, HOWEVER, THE APPELLANT COULD NOT FORESEE THAT FOR T ECHNICAL REASONS, THE ASSESSING OFFICER WOULD INITIATE PENALTY PROCEEDINGS U/S 271A AB. 5.4. THE IMPUGNED PENALTY ORDER- THERE IS NO TANGIB LE MATERIAL. IT IS ONLY MERE ARGUMENT AND SURMISES ONLY. 5.5 THUS, THE PURPORTED CESSATION OF LIABILITY TO BE CONSTRUED AS UNDISCLOSED INCOME IS TOO FAR-FETCHED; AND, IT IS NOT WITHIN THE MEANING OF UNDISCLOSED INCOME PER THE EXPLANATION (C ) IN THE SAID SECTIO N 271AAB. 5.6 THUS, THE IMPUGNED PENALTY ORDER IS HEREBY CANC ELLED. M/S EMC LTD. ITA NO.1927/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 6. THE LD. D.R FOR THE REVENUE HAS PRIMARILY REITER ATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY AND ON T HE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER OF THE LD. CIT( A). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE THAT THOUGH IN THE COURSE OF SEARCH ASSESSEE ADMITTED AND OFFERED A SUM OF R S. 30 CRORES AS INCOME FOR AY 2013-14 BUT THE SAID INCOME WAS NOT UNDISCLOSED INC OME. IT WAS BASED ON COMPREHENSIVE REVIEW EMANATING FROM REPORT OF THE I NTERNAL AUDITORS AND DELIBERATIONS OF AUDIT COMMITTEE AND DECISION OF BO ARD OF DIRECTORS OF THE COMPANY TAKEN MUCH BEFORE THE DATE OF SEARCH AND TH E SAME WAS DULY RECORDED IN PAPERS AND DOCUMENTS MAINTAINED IN NORMAL COURSE O F BUSINESS WHICH WAS SEIZED. BASED ON SUCH REVIEWS, TOTAL AMOUNT OF NON-EXISTING LIABILITY TO SUNDRY CREDITORS WAS WORKED OUT AT RS. 29,18,82,368/- AND THE SAID S UM WAS WRITTEN BACK AND INCLUDED IN THE INCOME OF ASSESSMENT YEAR 2013-14 A ND TAX PAYABLE ON THE RETURNEDINCOME FOR THE SAID ASSESSMENT YEAR WAS DUL Y PAID IN ACCORDANCE WITH LAW AND CREDIT FOR THE SAME HAS BEEN ALLOWED. WE NOTE T HAT THE INCOME WAS NOT DETECTED FROM ANY CONCEALED DOCUMENTS OR EVIDENCE B UT WAS BASED ON RECORDS MAINTAINED IN NORMAL COURSE OF BUSINESS. THE INCOME WAS NOT REPRESENTED BY ANY UNDISCLOSED MONEY, JEWELLERY OR ANY OTHER VALUABLE ASSET. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DIFFERENCE OF RS. 81,17,632/- (30 ,00,00,000 28,18,82,368) BETWEEN INITIAL DISCLOSURE AMOUNT OF RS. 30 CRORES AND RS. 28,18,82,368/- WRITTEN BACK AS INCOME.THE INITIAL DISCLOSURE WAS BASED ON APPROXIMATION ONLY THEREFORE, DIFFERENCE ARISES AT RS. 81,17,632/-. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). THAT BEING SO, WE DECLINE TO I NTERFERE IN THE ORDER PASSED BY LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY ACCE PTED AND GROUNDS OF APPEAL RAISED BY REVENUE IS DISMISSED. M/S EMC LTD. ITA NO.1927/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 21.02.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 21/02/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ACIT, CC-1(3), KOLKATA 2. M/S EMC LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATABENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES