DILIP D. KAPOOR, MUMBAI V. DCIT CEN CIR 30, MUMBAI

ITA 2060/MUM/2011

• Counselvise Citation: 206019914 RSA 2011
• Duration Of Justice: 4 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 24-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 14-03-2011
• Court: TRIBUNAL
• Keywords: Loose papers
• Section: 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL ME MBER ./ I.T.A. NO S . 2060 TO 2063 /MUM/2011 ( / ASSESSMENT YEAR S : 2004 - 05 TO 2007 - 08 ) DILIP D. KAPOOR DILKAP CHAMBERS, 1 ST FLOOR, PLOT NO. A - 7, BEHIND BALAJI TELEFILMS, VEERA DESAI ROAD, ANDHERI (W), MUMBAI - 400 053 / VS. DY. C IT, CENTRAL CIRCLE - 30, AAYAKAR BHAVAN, 4 TH FLOOR, NEW MARINE LINES, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABPK 1570 E ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO S . 2053 TO 2056/MUM/2011 ( / ASSESSMENT YEAR S : 2004 - 05 TO 2007 - 08 ) GORKAP PROPERTIES &INVESTMENTS PVT. LTD. DILKAP CHAMBERS, 1 ST FLOOR, PLOT NO. A - 7, BEHIND BALAJI TELEFILMS, VEERA DESAI ROAD, ANDHERI (W), MUMBAI - 400 053 / VS. DY. CIT, CENTRAL CIRCLE - 30, AAYAKAR BHAVAN, 4 TH FLOOR, NEW MARINE LINES, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACG 6114 C ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO S . 2057 TO 2059/MUM/2011 ( / ASSESSMENT YEAR S : 2004 - 05 TO 2006 - 07 ) ARVIK PROPERTIES &INVESTMENTS PVT. LTD. DILKAP CHAMBERS, 1 ST FLOOR, PLOT NO. A - 7, BEHIND BALAJI TELEFILMS, VEERA DESAI ROAD, ANDHERI (W), MUMBAI - 400 053 / VS. DY. CIT, CENTRAL CIRCLE - 30, AAYAKAR BHAVAN, 4 TH FLOOR, NEW MARINE LINES, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABCA 4506 H ( / APPELLANT ) : ( / RESPONDENT ) 2 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI V. K. BORA / DATE OF HEARING : 07.08. 2015 / DATE OF PRONOUNCEMENT : 19 .08.2015 / O R D E R PER R. C. SHARMA , A. M.: TH ESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE O RDER BY THE LD. CIT(A) , MUMBAI , IN THE MATTER OF ORDER PASSED BY THE A.O. IMPOSING PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR S (A.Y S .) 2004 - 05 TO 2007 - 08. 2. COMMON GROUNDS HAVE BEEN TAKEN IN THE CASE OF ALL THE ASSESSESS IN ALL THE YEAR S UNDER CONSIDERATION. AS THE FACTS AND CIRCUMSTANCES ARE S A ME IN ALL THE APPEAL S, WE TAKE APPEAL IN ITA NO. 2053/MUM/2011 FOR THE A.Y. 2004 - 05, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASS ESSEE : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS ON RECORDS IN UPHOLDING THE A.O.S ACTION OF LEVYING UN DER SECTION 271(1) (C) OF RS.1,11,213/ - EVEN THOUGH, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WITHIN THE MEANING OF EXPLANATION 1 TO SEC. 271(1) (C) OF THE ACT. 2. THE LD. CIT(APPEALS) HAS ERR ED IN LAW IN APPLYING THE DECISION OF DHARMENDRA TEXTILE 306 ITR 277 (SC) AND ALSO ERRED IN NOT APPLYING/FOLLOWING THE LATEST DECISION OF HONBLE SUPREME COURT IN CAS E OF RELIANCE PETROPRODUCTS P VT. LTD. 322 ITR 158 (SC) AND VARIOUS DECISIONS OF HONBLE MU MBAI TRIBUNAL FOLLOWING RELIANCE PETROPRODUCTS DECISION. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A REAL ESTATE DEVELOPER AND ENGAGED IN CONSTRUCTION OF BUILDINGS. A SEARCH AND 3 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 SEIZURE ACTION U/S.132 (1) OF THE ACT WAS CONDUCTED IN THE CASE OF SHRI DILIP KAPOOR GROUP OF CASES ON 06.11.2006. IN CONNECTION WITH THE SEARCH & SEIZURE, THE. PREMISES OF THE ASSESSEE COMPANY, WHICH IS ONE OF THE ABOVE GROUP CASE, WAS SURVEYED U/ S 133A OF THE ACT. IN THE COUR SE OF THE SURVEY OPERATIONS, C ERTAIN LOOSE PAPERS HAVING NOTIN GS OF SEVERAL ENTRIES OF MONEY TRANSACTIONS RELATED TO THE BUSINESS OF THE ASSESSEE WERE IMPOUNDED. THE ASSESSMENT U/S. 143(3 ) R.W.S. 147 WAS COMPLETED WITH AN ADDITION OF RS.3,10,000/ - ON ACCOUN T OF UNEXPLAINED ENTRIES NOTED ON THE BELOW MENTIONED LOOSE PAPERS IMPOUNDED FROM THE ASSESSEE U/S 133A OF THE ACT: - 1) A - 4.PAGE NO.39 AS DISCUSSED AT PARA 4 RS. 2 ,45,000/ - 2) A - 4 PAGE NO.53 AS DISCUSSED AT PARA 5 RS. 35,.000/ - 3) A - 6 PAGE NO.25 AS DISCUS SED AT PARA 6 RS. 30,000/ - TOTAL RS.3,10,000/ - PENALTY PROCEEDINGS U/S 271(1)( C) WERE ALSO INITIATED BY ISSUING NOTICE U/S 274 R.W.S. 271 DT. 31.12.2008. 4. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE A. O . ISSUED A SHOW CAUSE NOTICE TO TH E ASSESSEE ASKING IT TO EXPLAIN AS TO WHY PENALTY U / S 271(1)(C) SHOULD NOT BE LEVIED ATTRIBUTABLE TO THE SAID ADDITION OF RS.3, 10,000/- FOR UNEXPLAINED AMOUNTS FOUND NOTED ON LOOSE PAPERS IMPOUNDED FROM THE PREMISES OF THE ASSESSEE. I N RE S PONSE TO THE SHOW CAUSE NOTICE, T HE ASSESSEE COMPANY SUBMI T TED TO THE A.O. . THAT THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS ARE MERELY ON THE BASIS OF PREPONDERANCES AND NOT ON THE FINDING OF ACTUAL CONCEALMENT. THE ASSESSEE SUBMITTED TO THE A. O . THAT THEY NEVER CON CEDE THAT THE DECLARED AMOUNT IN QUES TION WAS CONCEALED INCOME, AND THAT THE DECLARATION WAS MADE TO BUY PEACE OF MIND AND TO AVOID PROTRACTED L ITIGATION 5. T HE A.O. HAS NOT ACCEPTED THE ASSESSEES CONTENTION. THE A.O. OBSERVED THAT THE ASSESSEE HAD CONC EDED THE ENTRIES/NOTINGS TOTALING TO RS.3,10,000/ - AND HAS SHOWN INABILITY TO FURNISH PROPER EXPLANATION AND FINDING ITSELF UNABLE TO TENDER PROPER EXPLANATION, THE ASSESSEE HAD OFFERED THE AMOUNT FOR TAXATION ON THE PRETEXT TO AVOID THE 4 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 LITIGATION AND BUY PEACE. THE A.O. HELD THAT THE REASON BEHIND THIS OFFER OF INCOME AT RS.3,10,000/ - IS NOT IN THE ORDINARY COURSE BUT BECAUSE OF THE ASSESSEE S INABILITY TO SUBMIT EXPLANATION TO THE NOTED AMOUNT S SUBSTANTIATING WITH EVIDENCE. IN THE CIRCUMSTANCES, THE A. O . DID NOT ACCEPT THE ASSESSEE S EXPLANATION AND THE A. O . FURTHER FOUND THAT THE ASSESSEE AT THE ASSESSMENT STAGE HAD DENIED HAVING KNOWLEDGE OF SEVERAL NOTINGS OF RECEIPTS AND PAYMENTS INCLUDING AFORESAID NOTINGS FOR WHICH ADDITION OF RS.3,10,000/ - WAS MADE . THUS, THE A.O . CAME TO THE CONCLUSION .THAT THE ASSESSEE HAD SURRENDERED THIS AMOUNT FOR TAXATION FINDING ITSELF UNABLE TO EXPLAIN. ACCORDINGLY, THE A.O . LEVIED THE PENALTY OF RS.1,11,213/ - U/S.271(1)(C) . 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRM ED THE ACTION OF THE A.O. , AGAINST WHICH THE ASS ESSEE IS IN FURTHER APPEAL BEFORE US. 7. SHRI VIJAY MEHTA, CA APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE A DDITION WAS MADE ONLY DUE TO A.O . S TREATMENT OF RS.3,10,000 / - AS INCOME DUE TO NON ACCEPTANCE OF THE ASSESSEE S EXPLANATION AND NOT BECAUSE OF ANY CONCEALMENT AS SUCH. THE AR ALSO SUBMITTED THAT PENALTY PROCEEDINGS IS DISTINCT AND DIFFERENT FROM THE ASSESSMENT PROCEEDINGS AND PENALTY IS NOT LEVIABLE MERELY BECAUSE ANY AMOUNT IS ASSESSED AS 'INCOME' EVEN THOUGH THE SAME DOES NOT REPRESENT 'REAL INCOME' AS HAS BEEN HELD IN VARIOUS CASE LAWS. THE AR FURTHER SUBMITTED THAT IT WAS NEVER BE THE LEGISLATIVE INTENT TO PENALIZE THE ASSE E SEE ON CHARGE OF CONCEALMENT MERELY BECAUSE CERTAIN ADDITION IS ACCEPTED BY THE ASSESSEE JUST TO AVOID LITIGATION AND TO BUY PEACE AND HAD THAT BEEN SO, ALL THE ASSESSEE WOULD HAVE INDULGED IN LONG LITIGATION AND NO ASSESSEE WOULD EVER TRIED TO AVOID THE LITIGATION TO BUY PEACE OF MIND. THE LD. AR INVITED OUR ATTE NTION TO THE SEIZED PAGES PLACED AT PG. 39 OF ANNEXURE A - 4, PG. 52 AND 54 OF ANNEXURE A - 4 AND PG. 25 OF ANNEXURE A - 6 TO INDICATE THAT THESE WERE ONLY ROUGH PAPERS AND EVEN ENTRIES WHICH HAVE BEEN CUT DOWN HAVE BEEN TAKEN BY THE A.O. FOR ADDITION. HE FURTHE R CONTENDED THAT THE DIARIES/LOOSE PAPERS SO FOUND WAS NOT MAINTAINED BY THE ASSESSEE NOR BY ANY DIRECTOR OF 5 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 ASSESSEE COMPANY NOR WERE IN THE HANDWRITING OF DIRECTOR. IN RESPECT OF A - 4, PG. 39, THE REPLY OF THE ASSESSEES ACCOUNTANT WAS AS UNDER: THIS PAG E CONTAINS THE REMINDER OF PAYMENTS TO BE MADE/RECEIVED FROM VARIOUS PARTIES TOWARDS PURCHASE OF CEMENT, GRILL, MARBLE MOULDING CONTRACTOR, CIVIL CONTRACTOR, PURCHASER OF PLUMBING MATERIAL ETC. THESE PAYMENTS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT. VIDE LETTER DATED 12.08.2008 NOTING ON A - 4, PAGE 53 AMOUNTING TO RS .35,000/ - WAS EXPLAINED AS UNDER: THIS PAGE CONTAINS THE DETAILS OF CEHQUE GIVEN TO PARTIES FOR PURCHASE OF MATERIALS. LATER ON, THE MATERIAL WAS FOUND DEFECTIVE AND REQUEST WAS MADE TO L IFT BACK THE MATERIALS ON THEIR RESISTANCE, OUTSIDE AGENCY WAS INVOLVED TO RECOVER AMOUNT ON COMMISSION BASIS. BUT THE PAYMENT WAS NEVER RECEIVED AND ULTIMATELY THE MATERIAL WAS FINALLY USED. EXPLANATION OF A - 6, PG. 25 AMOUNTING TO RS .30,000/ - WAS EXP LAINED AS UNDER: THIS PAGE REFLECTS THE NOTINGS OF SOME RENT RECEIVED FROM KIZ MEDIA. IT IS SUBMITTED THAT KIZ LTD. HAS TAKEN OUR PREMISES ON RENT FOR WHICH RENT IS RECEIVED FROM THEM. HOWEVER ON VARIOUS OCCASION PAYMENT OF THE RENT WAS IRREGULAR AND MANY TIMES CHEQUES WERE DISHONOURED AND WHATEVER THE AMOUNT RECEIVED AS RENT IS REFLECTED IN THE RENT AMOUNT OF THE COMPANY. THE OTHER WORKINGS ARE PERTAINING TO PENDING RENT TO BE REALIZED. HOWEVER DUE TO BAD FINANCIAL CONDITION OF KIZ MEDIA WE COULD NOT RECO VER THE FULL RENT WHATEVER RENT RECEIVED HAS BEEN DISCLOSED IN THE BOOKS. COPY OF THE RENT AMOUNT IS ENCLOSED HEREWITH. 8. AS PER LD. AR DECLARATION WAS MADE TO BUY PEACE OF MIND AND TO AVOID PROTECTED LITIGATION. I F THERE ARE BONA FIDE VIEWS AND INFER ENCE IS TO BE DRAWN ON THE BASIS OF FACTS AS ALSO INTERPRETATION OF LAW IN WHICH THE VIEW CANVASSED BY THE ASSESSEE IS NOT ACCEPTABLE TO THE REVENUE, THE EXISTENCE OF THE OPPOSITE VIEW WOULD NOT BY ITSELF JUSTIFY THE IMPOSITION OF PENALTY. FOR THIS PROPOSI TION, WE RELY ON THE FOLLOWING DECISIONS: - A) CIT VS. CAMLIN POINT LABORATORIES LTD. (2007) 293 ITR 524 (MAD). B) CIT VS. AJAIB SINGH & CO.(2002) 253 ITR 630 (P&H). C) CIT VS. SIVANANDA STEELS LTD. (2002) 256 ITR 683 (MAD). D) DURGA KAMAL RICE MILLS VS. CIT (2004 ) 265 ITR 25 (CAL). 6 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 E) CIT VS. SOHAN PAL HUF (2008) 302 ITR 262 (P&H). F) CIT VS. BACARDI MARITINI INDIA LTD. (2007) 288 ITR 285 (DEL). G) NUCHEM LTD. VS. CIT (1994) 49 TTJ 177 (DEL). 9. AS PER LD. AR, CHENNAI BENCH IN THE CASE OF SURESH REDDY VS. ACIT (2008) 120 TTJ 523 (CHENNAI) A NALYSED VARIOUS DECISIONS VIZ 83 ITR. 26 ( SC) , 251 ITR 9 ( SC) , 83 ITR 369 (SC), 282 I T R 435 (SC) , 265 ITR 327 (KER), 254 ITR 45 (KER), 265 ITR 562 ( SC) , 88 ITR 192 (SC), 203 ITR 792 (BOM ), FINA L LY DREW SUPPORT FROM THE H ONBLE SUPREM E COURT DECISION IN CASE OF KARTAR SINGH VS. STATE OF PUNJAB J T 1994 (2) SC 432.P. 466 : 1994 (3) SCC 569 LAYING DOWN THE FOLLOWIN G PRINCIPLES --- O THE PRINCIPLE APPLIED IN CONSTRUING A PENAL ACT IS THAT IF, IN CONSTRUING THE RELEVANT PROVISIONS, THERE APP EARS ANY REASONABLE DOUBT OR AMBIGUITY, IT WILL BE RESOLVED IN FAVOUR OF THE PERSON WHO WOULD BE LIABLE TO PENALTY; O IF THERE IS REASONABLE INTERPRETATION, WHICH WILL AVOID THE PENALTY IN ANY PARTICULAR CASE, THAT CONSTRUCTION MUST BE ADOPTED; O IF THERE ARE TWO CONSTRUCTIONS, THE MORE LENIENT ONE MUST BE ADOPTED; O IF THE LANGUAGE OF THE STATUTE IS EQUIVOCAL AND THERE ARE TWO REASONABLE MEANINGS OF THAT LANGUAGE, THE INTERPRETATION THAT WILL AVOID THE PENALTY IS TO BE ADOPTED. APPLYING THESE PRINCIPLES, LD. AR CONTENDED THAT THE HONBLE TRIBUNAL CANCELLED THE PENALTY AND ALLOWED THE ASSESSEES APPEAL. 10 . ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 11 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY AND GONE THROUGH T HE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE A.O. HAS LEVIED THE PENALTY OF RS. 1,11,213 / - UNDER SECTION 271(1)(C) BY TREATING A SUM OF RS.3,10,000/ - AS ALLEGED CONCEALED INCOME MERELY ON THE BASIS OF DIARY NOTING. THIS IS DESPITE THE FACT THAT THE SAID AMOUNT DOES NOT REPRESENT INCOME OF THE ASSESSEE NOR THE SAME WAS CAPITALIZED IN THE BOOKS OF ACCOUNT. 7 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 WE FOUND THAT VIDE LETTER DATED 15.01.2009, THE ASSESSEE HA S EXPLAINED THAT THE ADDITION HAS BEEN MADE MERELY ON THE BASIS OF PREPONDERANCE OF PRO BABILITY AND NOT ON FINDING OF ANY CONCEALMENT, EVEN THOUGH THE SAME WAS BASED ON THE NOTINGS IN LOOSE SHEETS WHICH WERE ROUGHLY MAINTAINED. 12. THERE IS ALSO NO DISPUTE TO THE PROPOSITION THAT T HE LEGALITY OF THE LEVY OF PENALTY MUST BE CONSIDERED INDEP ENDENTLY AND UNINFLUENCED BY THE TREATMENT MADE IN THE ASSESSMENT ORDER. THE PROCEEDINGS RELATING TO THE ASSESSMENT AND APPEAL ON T HE QUANTUM OF INCOME ASSESSED/ ASSESSABLE CANNOT AND SHOULD NOT BE THE BASIS NOR THE FINDINGS GIVEN THEREIN, TO SUSTAIN PENALT Y ON THE ASSESSEE. SO LONG AS THE THE ASSESSEE OFFERS PLAUSIBLE EXPLANATION ALTHOUGH THE SAME IS REJECTED IN ASSESSMENT OR APPEAL, THE SAME MUST NOT BE TAKEN AS THE BASIS FOR LEVYING PENALTY FOR THIS PROPOSITION, RELIANCE CAN BE PLACED ON THE FOLLOWING DEC ISIONS : - I. CEMENT MARKETING CO. OF INDIA LTD. VS.ACIT 124 ITR 15 (SC) II. M/S VIP INDUSTRIE S LTD. VS. ACI T (ITA NO. 4383/MUML2006)(ITAT - MUM) III. MIMOSA INVESTMENT CO. LTD. VS. ITO (ITA.NO.298.3/MLIM/2007)(ITAT - MUM) IV. MRS. NAJMA M. KANCHWALA VS. ITO ( 2009) 24 DTR 369 (ITAT - MUM) 1 3 . WE ALSO FOUND THAT EXPLANATION GIVEN BY THE ASSESSEE IN RESPECT OF ENTRIES IN LOOSE PAPER/DIARY HAS NOT BEEN PROPERLY APPRECIATED SO AS TO BRING THE ASSESSEE IN THE PURVIEW OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE SET ASIDE TH E ORDER OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR ANALYZING THE NOTINGS IN SEIZED DIARY/LOOSE PAPERS WHICH WAS ALLEGED TO BE ROUGH NOTINGS AND TO RECONSIDER THE ASSESSEES REPLY AND FOR DECIDING AS TO WHETHER IT IS FI T CASE FOR LEVY OF PENALTY U /S.271(1)(C) CONSIDERING THE PRO POSITION OF LAID DOWN IN THE ABOVE JUDICIAL PRONOUNCEMENT. WE DIRECT ACCORDINGLY. 1 4 . AS THE FACTS AND CIRCUMSTANCES IN ALL THE APPEALS UNDER CONSIDERATION ARE SAME, FOLLOWING THE REASONING GIVE N HEREINABOVE , OTHER APPEALS ARE ALSO RESTORED BACK TO THE FILE OF THE A.O. FOR DECIDING AFRESH IN TERMS INDICATED HEREINABOVE. 8 ITA NO S . 2060 TO 2063/M/2011 , 2053 TO 2 056/M/2011 & 2057 TO 2059/M/2011 1 5 . IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST , 201 5 SD/ - SD/ - ( SANJAY GARG ) ( R. C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI ; / DATED : 19 . 0 8 .201 5 . . ./ 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 F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI