Shri.Jaison J.Alappatt, Thrissur V. The ACIT, Circle-2(1), Thrissur

ITA 204/COCH/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7274 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-07-2018
• Assessment Year: 2000-2001
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHANARAJ A
• Assessee Lawyers: K KITTU
• Keywords: Unexplained investment
• Section: 143(3); 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., JM I .T.A. NO S . 2 05, 204 & 206 /COCH/ 201 8 ASSESSMENT YEAR S : 200 1 - 02 & 2000 - 01 JAISON J. ALAPPAT, ALAPPAT HOUSE, CHEROOR P.O., THRISSUR-680 631. [PAN:AQSPK 9358J] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), RANGE-2, THRISSUR. ( ASSESSE E - APPELLANT) ( REVENUE - RESPONDENT) S.P. NO. 21 /COCH/201 8 (ARSG. OUT OF I.T.A. NO.204 /COCH/2018 ASSESSMENT YEAR : 2006 - 07 JAISON J. ALAPPAT, ALAPPAT HOUSE, CHEROOR P.O., THRISSUR-680 631. [PAN:AQSPK 9358J] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), RANGE-2, THRISSUR. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHRI K. KITTU, ADV. REVENUE BY SHRI DHANARAJ A., SR. DR D ATE OF HEARING 1 0 / 0 7 /2018 DATE OF PRONOUNC EMENT 11 / 0 7 /2018 I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 2 O R D E R PER BENCH: THESE APPEALS AND STAY PETITION FILED BY THE AS SESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CIT(A), THRISSUR, PERTAININ G TO THE ASSESSMENT YEARS 2000-01 AND 2001-02. THE APPEAL IN ITA NO. 205/COCH /2018 IS RELATED TO QUANTUM ADDITION AND THE OTHER APPEALS IN ITA NOS. 204 & 207 ARE RELATED TO LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. 2. THE FACTS OF THE CASE IN ITA NO. 205/COCH/2018 ARE THAT THE ASSESSMENT PROCEEDINGS WERE INITIATED U/S. 143(3) OF THE I.T. ACT, 1961 ON THE BASIS OF INFORMATION RECEIVED FROM THE CIB WING OF THE DEPAR TMENT THAT THE ASSESSEE HAD INDULGED IN HUGE VOLUME OF BANK TRANSACTIONS THROUG H VARIOUS BANK ACCOUNTS IN MUMBAI AND KERALA. THE ASSESSEE WAS AN EMPLOYEE OF SHRI BHASKAR SAIT WHO WAS RUNNING SILVER AND GOLD REWFINERY AT TRICHUR. THE TRANSACTIONS OF HUGE AMOUNT OF MONEY WERE MADE THROUGH THE ASSESSEES BA NK ACCOUNT. THE AMOUNT OF TRANSACTIONS DURING THE RELEVANT YEAR WAS RS.1,0 7,70,636/-. THE ASSESSING OFFICER ON THE BASIS OF INVESTIGATION AND RECORDING OF STATEMENTS HELD THAT THE ASSESSEE IS A LINK IN THE CHAIN OF HAWALA ACTIVITIE S. UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER OBSERVED THAT IT WAS DIFFICULT TO BELIEVE THAT THE AMOUNT CREDITED TO THE ACCOUNT OF THE ASSESSEE IN HIS BANK ACCOUNT ACTUALLY BELONGED TO HIM AND HE HAD USED IT FOR HIS PERSONAL BENEFITS. THE ASSESSING OFFICER OBSERVED I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 3 THAT THE ASSESSEE CAN ONLY BE CONSIDERED AS A LINK IN THE CHAIN OF HAWALA. THE PROVISIONS OF SECTION 68/SEC.69 CANNOT THEREFORE BE FULLY INVOKED. ACCORDING TO THE ASSESSING OFFICER, SINCE IT COULD NOT BE ESTABL ISHED THAT THE ASSESSEE HAD MADE ANY INVESTMENT OR ACQUIRED ANY ASSET DURING TH E PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, IT IS HYPOTHETICAL TO BELIEVE THAT THE ENTIRE AMOUNT CREDITED IN HIS BANK ACCOUNT WAS THE INCOME OF THE ASSESSEE. THE ASSESSEE ARGUED THAT HE HAD NOT RECEIVED ANY BENEFIT BY DOING THE ABOVE MONEY TRANSACTION. THE ASSESSING OFFICER OBSERVED THAT IT MAY BE TRUE THAT THE ACCOUNTS WERE OPENED AND HAWALA BUSINESS WAS DONE AT THE DIRECTION OF HI S EMPLOYER, BUT AT THE SAME TIME, IT IS DIFFICULT TO BELIEVE THAT HE HAS NOT RE CEIVED ANY BENEFIT HOWEVER SMALL IT MAY. ACCORDING TO THE ASSESSING OFFICER, THE AS SESSEE HIMSELF HAD STATED IN HIS STATEMENT DATED 30/04/2002 THAT HE HAD RECEIVED RS.3,000/- AND RS.4,000/- WHICH SHOWS THAT HE HAD RECEIVED SOME BENEFITS. CO NSIDERING THE SERVICES BY THE ASSESSEE AND THE TAKING INTO ACCOUNT OTHER CIRC UMSTANCES, THE ASSESSING OFFICER ESTIMATED THE PROFIT @ 0.25% OF MONEY TRANS ACTED THROUGH HIS BANK ACCOUNTS AND THE TOTAL INCOME FROM HAWALA BUSINESS WAS CALCULATED AT RS.26,902/- (0.25% OF RS.1,07,60,636/-). THE ASSES SING OFFICER ALSO MADE ADDITION OF RS.33,500/- TOWARDS UNEXPLAINED BANK DE POSITS UN/S. 69 OF THE I.T. ACT. I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 4 3. ON APPEAL, THE CIT(A) CONFIRMED THE ESTIMATION OF INCOME FROM HAWALA BUSINESS AT RS.26,902/- AND DELETED THE ADDITION MA DE TOWARDS UNEXPLAINED BANK DEPOSITS OF RS.33,500/- U/S. 69 OF THE ACT. 4. AGAINST THE ISSUE OF ESTIMATION OF INCOME FROM HAWALA BUSINESS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. DR, IN THE CASE O F ASSESSEES EMPLOYER BHASKAR SAIT IN ITA NO. 356/COCH/2016, THE TRIBUNAL VIDE OR DER DATED 16/02/2017 HAD DISMISSED THE APPEAL BY OBSERVING AS FOLLOWS: 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE IN THE WRITTEN SUBMISSION HAS LIMITED HIS CONTENTION TO THE ISSUE OF ESTIMATION OF INCOME FROM HAWALA BUSINESS AT .25% INSTEAD OF 1% ESTIMATED BY THE ASSESSING OFFICER. THERE IS NO DOUBT THAT T HE ASSESSEE WAS INVOLVED IN HAWALA TRANSACTIONS AND A REASONABLE COMMISSION WAS EARNED BY HIM ON THE HAWALA TRANSACTIONS. THE ASSESSING OFFICER HAS CLEARLY ES TABLISHED THE ROLE OF THE ASSESSEE IN THE CHAIN OF TRANSACTIONS AND HAS FOUND THAT THE AS SESSEE WAS AN EMPLOYER OF THE FOLLOWING PERSONS WHO ARE INVOLVED IN THE HAWALA BU SINESS. 1. SRI JAISON J. ALAPATT 2. SRI K.V. JOY 3. SRI T. SANJAYAN 4. SRI M. JAYAPRAKASH IN THE NAME OF THE ABOVE PERSONS, SEVERAL BANK ACCO UNTS ARE OPENED AT THE INSTANCE OF THE ASSESSEE. THE ABOVE PERSONS HAVE ADMITTED TH AT THEY ARE EMPLOYEES OF THE ASSESSEE AND HAVE DONE HAWALA BUSINESS AT THE INSTA NCE OF THE ASSESSEE. THE ASSESSEES DENIAL OF HAWALA BUSINESS WITHOUT CROSS EXAMINING THE ABOVE SAID PERSONS ONLY SHOWS THE ASSESSEES INVOLVEMENT IN THE TRANSA CTIONS. THE ABOVE PERSONS WHO ARE ADMITTEDLY THE EMPLOYEES OF THE ASSESSEE HAVE B EEN ASSESSED TO INCOME AT .25% OF THE RESPECTIVE TRANSACTIONS UNDERTAKEN BY THEM. WHEN THE ASSESSEE IS THE I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 5 EMPLOYER, NECESSARILY BETTER PERCENTAGE OF COMMISSI ON OUGHT TO HAVE BEEN EARNED BY THE ASSESSEE. MOREOVER, THE CIT(A) HAS DIRECTED TEL ESCOPING OF UNEXPLAINED INVESTMENT WITH THE HAWALA INCOME ESTIMATED. THEREFORE, THE N ET INCOME FROM HAWALA BUSINESS WOULD BE FAR LESS THAN 1% OF THE TOTAL HAWALA TRANS ACTIONS. FOR THE AFORESAID REASONS, I AM OF THE VIEW THAT NO RELIEF IS TO BE GRANTED TO THE ASSESSEE. THEREFORE, GROUND NOS. 1 & 2 ARE ALSO REJECTED. IT IS ORDERED ACCORD INGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS DISMISSED. 5.1 HENCE, IT CANNOT BE CONSIDERED THAT THE ASSESS EE HAS NOT EARNED INCOME FROM THE HAWALA BUSINESS CARRIED ON BEHALF OF THE A SSESSEES EMPLOYER, SHRI BHASKAR SAIT. ACCORDINGLY, WE CONFIRM THE ADDITION MADE TOWARDS INCOME EARNED FROM HAWALA BUSINESS CARRIED ON BEHALF OF THE ASSES SEES EMPLOYER, SHRI BHASKAR SAIT. THUS, THE APPEAL OF THE ASSESSEE IN ITA NO. 205/COCH/2018 IS DISMISSED. 6. SINCE WE HAVE DISMISSED THE APPEAL OF THE ASSES SEE ON MERIT, THE STAY PETITION FILED BY THE ASSESSEE IN S.P.NO.21/COCH/20 18 HAS BECOME INFRUCTUOUS AND DISMISS THE SAME AS INFRUCTUOUS. 7. THE APPEALS IN ITA NOS. 204/COCH/2018 AND 20 6/COCH/2018 ARE RELATING TO THE CONFIRMATION OF LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IN RESPECT OF INCOME ESTIMATED FROM HAWALA BUSINESS. 8. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION IN THE ASSESSEES COLLEAG UE SHRI K.V. JOY WHO WAS ALSO I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 6 EMPLOYED WITH SHRI BHASKAR SAIT IN ITA NO.207/COCH/ 2018 WHEREIN THE TRIBUNAL VIDE ORDER DATED 05/07/2018 HELD AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD. ADMITTEDLY, IN THIS CASE, THE ASSESSEE FILED THE RETURN OF INCOME DECLA RING INCOME OF RS.48,000/- AS SALARY. LATER WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEPOSITED A SUM OF RS.1,11,65,080/ - INTO HIS BANK ACCOUNT. THE ASSESSING OFFICER FOUND THAT THE ASSESSEES SB ACCO UNT WITH SOUTH INDIAN BANK WAS USED TO DEPOSIT THE AMOUNT BELONGING TO THE ASSESSE ES EMPLOYER SHRI BHASKAR SAIT WHO IS IN HAWALA BUSINESS. ACCORDINGLY, THE ASSESSI NG OFFICER ESTIMATED THE INCOME AT 0.25% OF RS.1,11,65,080/- WHICH WORKED OUT TO RS.27 ,912/-. CONSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY ON THIS INCOME WH ICH WAS WORKED OUT TO RS.4600/- THE CONTENTION OF THE LD. DR IS THAT EVEN THOUGH TH E INCOME WAS ESTIMATED, THE PENALTY COULD BE LEVIED AND FOR THIS PURPOSE HE REL IED ON THE FOLLOWING HIGH COURT JUDGMENTS: 1)CIT(ADDL.) VS. SMT. CHANDRAKANTA AND ANOTHER ( 205 ITR 607) (MP) 2) A.M. SHAH & COMPANY VS. CIT 238 ITR 415 (GUJ.) 4.1 THE ADDITION WAS ESTIMATED BY THE ASSESSING O FFICER ON THE AMOUNT DEPOSITED INTO THE ASSESSEES BANK ACCOUNT. THE ASSESSING OF FICER ADOPTED THE FLAT RATE OF 0.25% AS INCOME OF THE ASSESSEE ON THE TOTAL DEPOSI TS MADE IN HIS BANK ACCOUNT. THE ASSESSING OFFICER DID NOT RECORD THE FINDING OF FRA UD OR GROSS OR WILLFUL NEGLIGENCE ON THE PART OF THE ASSESSEE. FURTHER, AS SEEN FROM TH E FACTS OF THE PRESENT CASE, THE ADDITION SUSTAINED BY THE CIT(A) IS MERELY BY ESTIM ATION OF INCOME MADE BY THE ASSESSING OFFICER. IT IS ALSO NOTED THAT THE ASSES SING OFFICER PROCEEDED TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT ON THE BASIS OF T HE FINDINGS UNDER THE QUANTUM PROCEEDINGS AND HAD NOT INDEPENDENTLY EXAMINED THE MATTER IN THE PENAL PROCEEDINGS FOR LEVY OF PENALTY U/S. 271(1)(C). EVEN ON THIS PR OCEDURAL COUNT, THE PENALTY LEVIED CANNOT BE SUSTAINED. THOUGH THE CIT(A) HAD SUSTAINE D THE ADDITION, THE ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THAT ORDER, THAT BY IT SELF DOES NOT PROVE THAT THERE IS ANY CONCLUSIVE MATERIAL TO SUGGEST THAT THE ASSESSEE HA S EARNED ADDITIONAL INCOME DETERMINED BY THE ASSESSING OFFICER. PENALTY CANNOT BE LEVIED IN THIS KIND OF SITUATION. FURTHER, UNLESS THE CLAIM OF THE ASSESSEE WAS PROVE D TO BE BOGUS OR THAT ANY AMOUNT WAS ACTUALLY EARNED BY THE ASSESSEE WAS PROVED BY T HE ASSESSEE, THE ADDITION ITSELF CANNOT BE REASON FOR LEVY OF PENALTY. THE ADDITION WAS ONLY ON ACCOUNT OF ASSESSMENT OF INCOME ON THE DEPOSITS MADE INTO THE ACCOUNT OF THE ASSESSEES BANK. THE ASSESSEE COULD NOT PROVE THAT THERE WAS WILLFUL OR GROSS NEGLIGENCE ON THE PART OF THE ASSESSEE, RESULTING THEREBY THE ASSESSEE CONCEALED THE INCOME TO THAT EXTENT. THERE WAS NO DELIBERATE CONCEALMENT ON THE PART OF THE AS SESSEE. IN OUR OPINION, WHEN THE INCOME IS ESTIMATED AS ABOVE, IT IS NOT PROPER TO L EVY PENALTY AS HELD BY DIFFERENT HIGH COURTS IN THE FOLLOWING CASES: 1) NEW PLAZA RESTAURANT VS. ITO (301 ITR 259) 2) SAJAY IKAKE VS. CIT (360 ITR 271) 3) VIJAY K.TALWAR VS. CIT (1 SCC 673) 4) COMMISSIONER CUSTOMS VS. STONE AND MARBLE (2011) (12 SCC 758) 5) CIT VS. TARGET CONSTRUCTION CO. LTD. 231 TAXMAN 55 (ALL.) 4.2 FURTHER, IT WAS HELD BY THE ALLAHABAD HIGH C OURT IN THE CASE OF CIT VS. RAJ BANS SINGH (276 ITR 351), THAT WHEN INCOME IS ESTIMATED BY DIFFERENT AUTHORITIES RIGHT FROM I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 7 ASSESSING OFFICER TO TRIBUNAL AND IT WAS A SIMPLE C ASE OF ONE ESTIMATE AGAINST ANOTHER ESTIMATE, AND THEREFORE, PENALTY CANNOT BE LEVIED. SIMILARLY, BOMBAY HIGH COURT IN THE CASE OF CIT VS. BADVE (138 ITR 82); PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. METAL PRODUCTS OF INDIA (150 ITR 714); D ELHI HIGH COURT IN THE CASE OF CIT VS. AJAY HARI DALMIA (157 ITR 145); AND MADRAS HIGH COURT IN THE CASE OF BOMBAY HARDWARE SYNDICATE VS. CIT (114 ITR 586) HAVE TAKEN A VIEW THAT PENALTY U/S. 271(1)(C) WAS NOT IMPOSABLE IN RELATION TO ESTIMATE D ADDITIONS BECAUSE THE FACTUM OF EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME, WERE NOT PROVED. 4.3 IN VIEW OF THE ABOVE JUDGMENTS, WE ARE INCLINE D TO DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 8.1 IN VIEW OF THE ABOVE FINDING OF THE TRIBUNAL, WE ARE INCLINED TO DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER AND CONFIRM ED BY THE CIT(A). THUS, THE APPEALS OF THE ASSESSEE IN ITA NOS. 204 & 206/COCH/ 2018 ARE ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.205/COCH/2018 IS DISMISSED AND THE STAY PETITION FILED BY THE ASSESS EE IS DISMISSED. THE APPEALS FILED BY THE ASSESSEE IN ITA NOS. 204 AND 206/COCH/ 2018 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 11 TH JULY, 2018. SD/- SD/- ( GEORGE GEORGE K.) (CHAN DRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 11 TH JULY, 2018 GJ COPY TO: 1. JAISON J. ALAPPAT, ALAPPAT HOUSE, CHEROOR P.O.,T HRISSUR-680 631. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2( 1), RANGE-2, THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), THRISSU R. I.T.A. NOS.204, 205 & 206/C/2018 & S.P. NO.21/COCH/2018 8 4. THE PR. COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN