Mr. Sudhir Sekhri, New Delhi V. DCIT, New Delhi

ITA 2251/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65970 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHARMENDER KUMAR
• Keywords: Income from undisclosed sources; Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.2251/DEL/2010 ASSESSMENT YEAR : 2006-07 SUDHIR SEKHRI, A-23, 24, MANGOLPURI, INDUSTRIAL AREA, PHASE II, NEW DELHI. PAN : ABIPS5612F VS. DCIT, CIRCLE 25 (1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATISH AGGARWAL, CA & SHRI DHARMENDER KUMAR, CA REVENUE BY : SHRI SANJAY KUMAR JAIN, SR.DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER: THE FIRST APPELLATE ORDER WHEREBY THE LD. CIT (A) H AS UPHELD THE PENALTY U/S 271 (1)(C) LEVIED BY THE ASSESSING OFFICER AT ` 23,68,542/- HAS BEEN QUESTIONED ON SEVERAL GROUNDS. THUS, THE ISSUE INVOLVED THEREIN IS AS TO WHETHER THE LD. CIT (A) WAS JUSTIFIE D IN SUSTAINING THE LEVY OF PENALTY AT THE STATED AMOUNT. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED B Y THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MA TERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. THE FACTS IN BR IEF ARE THAT RETURN OF INCOME DECLARING A SUM OF ` 4,47,76,930/- WAS SUBJECTED TO FRAMING OF ASSESSMENT U/S 143 (3) WHEREBY AN INCOME OF ` 5,48,13,834/- WAS ASSESSED ON 29.05.2008. ON 07.02.2006, A SURVEY U/S 133A WAS ITA NO.2251/DEL/2010 2 CONDUCTED AT THE PREMISES OF M/S K.S.P. INDIA AT GURGA ON, A PROPRIETORSHIP FIRM OF THE ASSESSEE. THE ASSESSEE DECLARED AN AMOUNT OF ` 5.27 CRORES IN HIS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2006- 07 AND ` 1,66,00,000/- IN REVISED RETURN OF INCOME FOR THE A SSESSMENT YEAR 2005-06 CONSEQUENT TO THE CONDUCTING OF AFORESAI D SURVEY. THE ASSESSEE HAD SURRENDERED COMMISSION INCOME AFTER CLAIMING AN EXPENDITURE OF ` 2,69,48,889/- FOR EARNING THE SAME. DURING THE COU RSE OF SURVEY, CASH BOOKS WERE IMPOUNDED. THESE CASH BOOKS W ERE NOT DISCLOSED FOR TAXATION PURPOSE BEFORE SURVEY AS NO ADVA NCE TAX ON THE INCOME DEDUCIBLE FROM THESE BOOKS OF ACCOUNT WAS EVER PAID EITHER IN THE RELEVANT YEAR OR IN THE EARLIER YEAR. THE DIFF ERENCE BETWEEN REVENUE RECEIPTS AND REVENUE EXPENSES WAS SURRENDERED A S INCOME DURING THE SURVEY. THE RETURN FOR ASSESSMENT YEAR 2005- 06 WAS REVISED KEEPING IN VIEW THE UNDISCLOSED INCOME RECORDE D IN THE ABOVE MENTIONED CASH BOOKS FOUND AND IMPOUNDED. THE ASSESSING OFFICER NOTICED THAT ALL EXPENDITURE DEBITED IN THOSE CASH BO OKS WERE NOT ALLOWABLE EXPENSES IN THE ACT. HENCE, HE HELD THAT T HE INCOME OFFERED BY THE ASSESSEE EVEN AFTER THE SURVEY IS NOT THE CORRECT AND TRUE INCOME OF THE ASSESSEE ASSESSABLE UNDER THE ACT. THE ASSESSIN G OFFICER, KEEPING IN VIEW ALL THE FACTS OF THE CASE IN TOTALITY, RESTRICTED THE ALLOWABLE EXPENSES AT 25% OF THE RECEIPT. IT RESU LTED INTO DISALLOWANCE OF ` 70,36,667/- ON WHICH THE ASSESSING OFFICER LEVIED PENALTY OF ` 23,68,542/- U/S 271 (1)(C) OF THE ACT. THE SAME HAS BEEN UPHELD BY THE LD. CIT (A) MAINLY ON THE BASIS THAT TH E ASSESSEE HAD CLAIMED INADMISSIBLE EXPENSES AND, THUS, HAD SUPPRESSED IT S INCOME. HE HELD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER WAS NOT QUESTIONED BY THE ASSESSEE AS THE SAME WAS NOT ACTUALLY AD HOC IN NATURE. THIS ACTION OF THE LD. CIT (A) HAS BEEN QUESTI ONED BEFORE THE TRIBUNAL. ITA NO.2251/DEL/2010 3 3. THE CONTENTIONS OF THE LD. AR REMAINED THAT THE G ROSS COMMISSION RECEIPT AND THE EXPENDITURE INCURRED THERE ON WERE DULY RECORDED IN THE ROUGH CASH BOOKS IMPOUNDED DURING THE COURSE OF SURVEY. THE IMPOUNDED CASH BOOKS FORMED THE BASIS OF SUR RENDER OF INCOME BY THE ASSESSEE WHICH WAS MADE AT THE SUGGESTION O F THE REVENUE OFFICIALS TO TAX REVENUE LEAKAGES AND WAS ACCE PTED BY THE DEPARTMENT. THE ASSESSEE HAD FILED THE HEAD-WISE EXPENDI TURE INCURRED BY IT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS ON THE BASIS OF IMPOUNDED CASH BOOKS IN WHICH NO DISCREPANCY WA S FOUND BY THE ASSESSING OFFICER. HE SUBMITTED THAT PENALTY U/S 271 (1)(C) OF ` 23,68,542/- HAS BEEN LEVIED ON AN AD HOC DISALLOWANCE OF ` 70,36,667/- MADE FROM EXPENDITURE CLAIMED AGAINST SURRENDERED COM MISSION INCOME BY RESTRICTING THE ALLOWANCE/EXPENDITURE TO 2 5% OF THE RECEIPTS AS AGAINST THE CLAIMED PERCENTAGE OF 33.83%. HE POIN TED OUT THAT PENALTY IN QUESTION HAS BEEN LEVIED BY REFERRING TO T HE OBSERVATIONS OF THE ASSESSING OFFICER IN THE QUANTUM PROCEEDINGS THAT NO COMPLETE DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPENDITURE C LAIMED AGAINST GROSS COMMISSION HAD BEEN FURNISHED. THE LD. AR SUBMITT ED THAT THE ASSESSING OFFICER DID NOT DOUBT THE INCURRING OF THE EX PENDITURE, BUT, DISALLOWED THE CLAIM OF EXPENDITURE ON AD HOC BASIS IN SPITE OF THE AMOUNT BEING RECORDED IN THE IMPOUNDED ROUGH CASH B OOKS BY CONTENDING THAT THE ENTIRE CLAIMED EXPENDITURE COUL D NOT BE ALLOWED IN THE ABSENCE OF REQUISITE DOCUMENTARY EVIDENCE. THE A SSESSING OFFICER HAS HIMSELF OBSERVED IN THE ASSESSMENT ORDER THAT FOR EAR NING UNACCOUNTED INCOME ONE HAS TO INCUR UNACCOUNTED EXPE NDITURE IN VIEW OF WHICH THE INCURRING EXPENDITURE HAS NOT BEEN DOUB TED BY THE DEPARTMENT. THE ASSESSEE DID NOT FILE ANY APPEAL AGAIN ST THE AD HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER TO BUY PEACE OF MIND AND TO AVOID LITIGATION WITH WHICH INTENTION THE SURREND ER OF INCOME WAS ALSO MADE. THE LD. AR POINTED OUT THAT IN HIS STATEM ENT RECORDED DURING THE COURSE OF SURRENDER, THE ASSESSEE HAD MADE IT CLEAR THAT THE ITA NO.2251/DEL/2010 4 INCOME BEING SURRENDERED U/S 133A WAS THE NET INCOME A FTER DEDUCTING THE EXPENSES RECORDED IN ROUGH CASH BOOKS IMP OUNDED BY THE DEPARTMENT. IN SUPPORT, HE REFERRED ANSWER TO QU ESTION NO.9 OF THE STATEMENTS MADE AVAILABLE AT PAGE NO.49 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE LD. AR SUBMITTED FURTHER T HAT THE DEPARTMENT HAS ALSO NOT DISPUTED THE AMOUNT OF SURREN DER RETURNED BY THE ASSESSEE WHICH WAS SPREAD OVER TO TWO ASSESSMENT YEAR S I.E., ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2006-07. IN TH E ASSESSMENT YEAR 2005-06 ALSO, THE ASSESSING OFFICER RESORTED TO AD HOC DISALLOWANCE OF EXPENDITURE CLAIMED AGAINST GROSS COMMISSION INCOME EARNED BY THE ASSESSEE AND INITIATED PENALTY PRO CEEDINGS. THE DEPARTMENT DID NOT LEVY ANY PENALTY U/S 271 (1)(C) F OR DISALLOWANCE OF AD HOC EXPENDITURE CLAIMED ON THE BASIS OF ENTRIES REC ORDED IN THE ROUGH CASH BOOK IMPOUNDED DURING THE COURSE OF SURVEY. HE REFERRED TO PAGE NO.5-10 OF THE PAPER BOOK I.E., COPY OF THE ORDER FOR THE ASSESSMENT YEAR 2005-06, PERUSAL OF WHICH SHOW THAT THE A SSESSING OFFICER HAD ALLOWED EXPENDITURE OF 25% OF GROSS COMMI SSION. THE LD. AR, THUS, ARGUED THAT THE ESTIMATED AD HOC DISALLOWANC E CANNOT FORM THE BASIS OF LEVY OF PENALTY, MORE SO WHEN THE DEPARTM ENT ITSELF IN THE SAME SET OF FACTS AND CIRCUMSTANCES OF THE CASE AS IN THE ASSESSMENT YEAR 2006-07 DID NOT LEVY ANY PENALTY U/S 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2005-06. UNDER THE CIRCUMSTANCES, THE APP ELLANT HAS NEITHER CONCEALED NOR FURNISHED INACCURATE PARTICULA RS OF HIS INCOME, CONTENDED THE LD. AR. HE ALSO PLACED RELIANCE ON TH E FOLLOWING DECISIONS:- I) ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT, 123 ITR 457 (SC); II) DILIP N. SHROFF VS. CIT, (2007) 291 ITR 519 (SC); III) P.D. ABRAHAM ALIAS APPACHAN AND ANR VS. CIT, (2012) 7 4 DTR (KER.) 34; ITA NO.2251/DEL/2010 5 IV) NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ); V) UNION OF INDIA VS. DHARMENDER TEXTILE PROCESSORS, 306 ITR 277 (SC); VI) UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MIL LS, (2009) 23 DTR (SC) 158. VII) CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. 230 CTR 320 (SC); VIII) CIT VS. GOYAL GASES (P) LTD.,(2000) 241 ITR 451 (DEL): AND OTHERS. 4. THE LD. DR, ON THE OTHER HAND, TRIED TO JUSTIFY T HE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT UNDISPUTEDLY, SU RRENDER WAS MADE AFTER SURVEY. BESIDES, ON SURRENDERED AMOUNT ADD ITION HAS ALSO BEEN MADE BY WAY OF DISALLOWANCE OF EXPENDITURE, ETC . HE SUBMITTED THAT THE ASSESSEE HAD CLAIMED INADMISSIBLE EXPENSES AGAINST THE COMMISSION INCOME TO SUPPRESS THE TAXABLE INCOME. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT SOME R ELEVANT FACTS ON THE CASE ARE TO BE KEPT IN MIND WHILE ADJUDI CATING THE APPLICABILITY OF PENAL PROVISIONS U/S 271 (1)(C) OF THE ACT ON THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE CLAIM ED EXPENDITURE. THESE RELEVANT UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD CLAIMED EXPENDITURE ON THE BASIS OF IMPOUNDED CASH BOOKS DURING THE COURSE OF SURVEY. THE FURTHER UNDISPUTED RELEVANT FACT IS THAT THE GROSS COMMISSION RECEIPTS AND THE EXPENDITURE INCURRED T HEREON WERE DULY RECORDED IN THOSE CASH BOOKS IMPOUNDED DURING THE COURSE OF SURVEY. ADMITTEDLY, THE IMPOUNDED CASH BOOKS FORMED T HE BASIS OF SURRENDER OF INCOME BY THE ASSESSEE DURING THE COURSE OF SURVEY. THE ASSESSING OFFICER HAS ALLOWED THE EXPENSES OF THE RECEIPTS RESTRICTING THE SAME AT 25% OF THE RECEIPT ON THE BASIS THAT NO CO MPLETE DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPENDITURE C LAIMED AGAINST ITA NO.2251/DEL/2010 6 GROSS COMMISSION HAD BEEN FURNISHED. WE, THUS, FIND SUBST ANCE IN THE CONTENTION OF THE LD. AR THAT DISALLOWANCE WAS MADE O N THE BASIS OF ESTIMATION, HENCE, IT WAS AD HOC IN NATURE. IN OTHER WORDS, THE ASSESSING OFFICER DID NOT DOUBT THAT FOR EARNING UNDISCL OSED COMMISSION INCOME SOME UNDISCLOSED EXPENDITURE WAS ALSO IN CURRED, BUT, THE ASSESSING OFFICER FOUND IT REASONABLE TO ALLOW SUCH EXPENDITURE ONLY UPTO 25% OF THE RECEIPTS. ONE MORE MATERIAL FACT IN THE PRESENT CASE IS THAT ALL SUCH EXPENDITURES WERE RECO RDED IN THE CASH BOOKS IN WHICH COMMISSION INCOME WERE ALSO ENTERED WHICH WAS FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY. TH E MOTIVE BEHIND NOT DISCLOSING THESE CASH BOOKS WAS EVASION OF TAX ON THE INCOME SHOWN EARNED IN THOSE CASH BOOKS. THUS, THERE WAS NO NEED FOR THE ASSESSEE TO RECORD INFLATED EXPENDITURE IN THOSE CASH BO OKS. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSING OFFICER HAS DISALL OWED THE CLAIMED EXPENDITURE ALREADY DISCLOSED IN THOSE CASH BOO KS. THUS, IT MAY BE A GOOD CASE FOR QUANTUM TO MAKE DISALLOWANCE ON THE CLAIMED EXPENDITURE ON THE BASIS OF ITS REASONABLENESS, BUT, WHEN ALL THE CLAIMED EXPENDITURES WERE DISCLOSED, IT CANNOT BE SAID BEYOND DOUBT THAT THE CLAIMED EXPENDITURE WHICH, AS PER THE ASSESSIN G OFFICER WAS EXCESSIVE OR INADMISSIBLE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF ON THE P ART OF THE ASSESSEE. IN THE ABSENCE OF MEETING OUT THESE INGREDIENTS OF THE PENAL PROVISIONS LAID DOWN U/S 271 (1)(C) OF THE ACT, WE ARE OF THE V IEW THAT PENALTY UNDER THOSE PROVISIONS CANNOT BE LEVIED. IN ITS RECEN T DECISION, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA) HAS BEEN PLEASED TO HOLD THAT THE ASSE SSEE CANNOT BE SUBJECTED TO PENALTY U/S 271 (1) (C) IN EVERY CASE WHE RE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTED BY THE ASSESSING OFFIC ER FOR ANY REASON. IT HAS BEEN HELD IN THE JUDGEMENT THAT A ME RE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOM E OF THE ASSESSEE. ITA NO.2251/DEL/2010 7 SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS, HELD THE HONBLE SUPREME COU RT. THE MERE ADDITION, THAT TOO AD HOC DISALLOWANCE WITHOUT ANY B ASIS BY THE ASSESSING OFFICER, CANNOT LEAD TO THE CONCLUSION THAT TH E ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE HONBLE KERALA HIGH COURT IN THE CASE OF P.D. AHRAHAM ALIAS APPACHAN & ANR. VS. CIT (SUPRA) HAS BEEN PLEASED TO HOLD THAT UNEXPLAINED EXP ENDITURE RECORDED IN A DIARY FOUND DURING THE SEARCH HAS TO B E TAKEN INTO ACCOUNT WHILE DETERMINING THE UNDISCLOSED INCOME OF T HE ASSESSEE. WE, THUS, DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND, THUS, WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN TH IS REGARD, DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IN QUESTION LEVIED U/S 271 (1)(C) OF THE ACT AT ` 23,68,542/-. THE GROUNDS INVOLVING THE ISSUE ARE, THUS, ALLOWED. 6. CONSEQUENTLY, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.20 12. SD/- SD/- [SHAMIM YAHYA] [I.C. SUDHIR] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 07.12.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES