Deputy Commissioner of Income-tax, V. Shri Tushar H. Mehta, Pune

ITA 2281/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6943 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL CHAWARE
• Keywords: Unexplained investment; Deemed to accrue or arise in india
• Section: 133A; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, A M . / ITA NO.2233/PUN/2014 % % / ASSESSMENT YEAR : 2010-11 SHRI TUSHAR MEHTA (PROP. MEHTA P RESSING) S.116/1, MIDC, BHOSARI, PUNE 411 026 PAN :AAZPM6526G . / APPELLANT V/S THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE . /RESPONDENT . / ITA NO.2281/PUN/2014 % % / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE . / APPELLANT V/S SHRI TUSHAR MEHTA (PROP. MEHTA PRESSING) S.116/1, MIDC, BHOSARI, PUNE 411 026 PAN :AAZPM6526G . /RESPONDENT / APPELLANT BY : SHRI KISHORE PHADKE / RESPONDENT BY : SHRI ANIL CHAWARE, CIT / ORDER PER SUSHMA CHOWLA, JM : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF CIT(A)-V, PUNE, DATED 02-09.2014 RELAT ING TO ASSESSMENT YEAR 2010-11 PASSED UNDER SECTION 271(1)(C) OF THE INCOM E-TAX ACT, 1961 (IN SHORT THE ACT). / DATE OF HEARING :15.03.2017 / DATE OF PRONOUNCEMENT: 17.03.2017 2 ITA NOS.2233 AND 2281/PUN/2014 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.2233/PUN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A)-V, PUNE ERRED IN LAW & ON FACTS IN SUSTAINING THE CONCEALMENT PENALTY OF RS. 15,00,000/- LEVIED BY TH E LEARNED DCLT, CIRCLE-8, PUNE U/S 271(1)(C) OF THE ITA, 1961 FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2. THE LEARNED CIT(A)-V AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE STOCK RELATED DECLARATION OF RS. 50,00,000 MADE DURING THE SURVEY U/S 133A PROCEEDINGS WAS DULY ACTED UPON WHILE FILING O F RETURN OF INCOME AND AS SUCH, THERE WAS NO ANY CONCEALMENT OF INCOME BY FUR NISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE LEARNED CIT(A)-V AND THE LEARNED AO ERRED IN LAW AND ON FACTS IN OBSERVING THAT THE APPELLANT HAS TRIED TO INFLATE E XPENSES TO NULLIFY THE STOCK DECLARATION. THE I-T AUTHORITIES OUGHT TO HAVE SUBS TANTIATED THIS CONJECTURE, ESPECIALLY ON THE BACKGROUND, THAT THE EVIDENCES OF INCREASE IN EXPENSES WERE PRODUCED BEFORE THE AO, SCRUTINIZED BY HIM AND NO OBJECTIONS WERE RAISED THERETO. 4. THE APPELLANT CRAVES LEAVE TO ADD / MODIFY / DEL ETE / AMEND ALL / ANY OF THE GROUNDS OF APPEAL. 4. THE REVENUE IN ITA NO.2281/PUN/2014 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE PENALTY LEVIED U/S.271(1)(C) OF THE I.T. ACT TO RS.15,00,000/- IN RESPECT OF THE ADJUSTMENT OF DEEMED INCOME U/S.69 AGAINST BUSINESS LOSS WHEN CIT(A) HIMSELF UPHELD TH E ACTION OF THE AO IN NOT ALLOWING SET OFF OF BUSINESS LOSS AGAINST THIS DEEM ED INCOME AND HENCE ASSESSEE FILED INACCURATE PARTICULARS OF INCOME.? 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 5. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE HA D FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.12,71,180/-. S URVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THE PREMISES OF ASSESSE E ON 19-03-2010. THE 3 ITA NOS.2233 AND 2281/PUN/2014 ASSESSEE HAD DECLARED TOTAL INCOME OF RS.50 LAKHS D URING THE COURSE OF SURVEY, ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FUR NITURE AND CONSTRUCTION OF OFFICE BUILDING ETC. THE ASSESSEE ALSO DISCLOSED A NOTHER RS.50 LAKHS ON ACCOUNT OF SHORTAGE IN VALUE OF STOCK. THE ASSESSE E HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.12,71,180/-. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSEE WAS SHOW CAUSED AS T O WHY THE ADDITIONAL INCOME OF RS.1 CRORE DECLARED DURING THE COURSE OF SURVEY BE NOT INCLUDED IN THE RETURN OF INCOME. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CREDITED RS.50 LAKHS BEING THE VALUE OF ADDITIONAL STOCK DECLARED AND ARRIVED AT GROSS PROFIT OF RS.2,26,90,520/-, HOWEVER, THE A SSESSEE DECLARED NET LOSS OF RS.40,29,891/-. THE ASSESSING OFFICER FURTHER NOTE D THAT IN THE COMPUTATION OF INCOME ASSESSEE HAD WORKED OUT THE TOTAL INCOME OF RS.12,71,180/- AFTER CONSIDERING NET LOSS OF RS.40,29,891/-, INCOME FROM HOUSE PROPERTY OF RS.3,55,069/- AND RS.50 LAKHS DECLARED AS ADDITIONA L INCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FURNITURE AND OFFICE BUIL DING/FACTORY SHEDS ETC. 6. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR HEAVY LOSSES ALLEGED TO HAVE BEEN INCURRED DURING THE YEAR, SUBSTANTIALL Y IN VIEW OF THE FACT THAT ASSESSEE HAD DECLARED INCOME OF RS.51,02,830/- IN T HE IMMEDIATELY PRECEDING YEAR, I.E. ASSESSMENT YEAR 2009-10. THE ASSESSEE F ILED A COMPARATIVE ANALYSIS OF EXPENDITURE FOR THE ASSESSMENT YEARS 20 08-09 AND 2009-10 AND THE REASONS FOR DIFFERENCE IN THE EXPENDITURE WHICH IS TABULATED AT PAGE 4 OF THE ASSESSMENT ORDER. THE CLAIM OF THE ASSESSEE WA S THAT ALMOST ALL MAJOR ITEMS OF EXPENSES HAD INCREASED SUBSTANTIALLY BUT T HERE WAS NO PROPORTIONATE INCREASE IN SALES, WHICH RESULTED IN HEAVY LOSSES. THE ASSESSEE ALSO EXPLAINED THAT IN THE PRECEDING YEAR THERE WAS WRIT E BACK OF SUNDRY CREDITORS OF RS.19,61,189/- AND THERE WAS FOREIGN EXCHANGE FLUCT UATION GAIN OF 4 ITA NOS.2233 AND 2281/PUN/2014 RS.8,45,798/- WHICH WAS MISSING IN THE YEAR UNDER C ONSIDERATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ADDITION AL INCOME OF RS.50 LAKHS DECLARED ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FU RNITURE AND CONSTRUCTION OF OFFICE BUILDING AND FACTORY SHED ETC. COULD NOT BE ADJUSTED AGAINST ANY LOSS EITHER CURRENT LOSS OR BROUGHT FORWARD LOSS. THE S AID INCOME WAS TO BE TAXED UNDER THE DEEMING PROVISIONS OF SECTION 69 OF THE I NCOME TAX ACT. FURTHER THE INCOME DISCLOSED ON ACCOUNT OF UNEXPLAINED INVESTME NT COULD NOT BE ADJUSTED AGAINST BUSINESS LOSSES OF THE SAME YEAR, OR BROUGH T FORWARD LOSS AND IN THE ABSENCE OF SAME THERE WAS NO QUESTION OF ADJUSTING THE DEEMED INCOME AGAINST THE LOSS OF THE CURRENT YEAR OR EVEN THE BR OUGHT FORWARD LOSSES OF THE EARLIER YEARS. THE ASSESSING OFFICER HELD SO AND C ONSIDERED THE SAID INCOME SEPARATELY FOR THE PURPOSE OF COMPUTATION OF ASSESS EES TOTAL INCOME. 7. AS FAR AS THE OTHER DECLARATION OF RS.50 LAKHS O N ACCOUNT OF DIFFERENCE IN THE VALUE OF CLOSING STOCK WAS CONCERNED, THE AS SESSEE HAD INCLUDED THE SAID AMOUNT IN THE CLOSING OF STOCK AND ACCORDINGLY CREDITED TO THE MANUFACTURING AND TRADING ACCOUNT AND NOT CONSIDERE D THE SAME IN THE COMPUTATION OF TOTAL INCOME. THE ASSESSING OFFICER HELD THAT THE SAID ADDITIONAL INCOME OF RS.50 LAKHS BEING THE VALUE OF SHORTAGE OF STOCK WAS TO BE DECLARED IN THE COMPUTATION OF TOTAL INCOME. THI S PROPOSITION WAS CONFRONTED TO THE ASSESSEE. THE LD. AUTHORISED REP RESENTATIVE FOR THE ASSESSEE AGREED TO INCLUDE THE ADDITIONAL INCOME IN THE COMPUTATION OF TOTAL INCOME ALONG WITH INCOME FROM HOUSE PROPERTY, OTHER SOURCES AS WELL AS NET LOSSES FROM THE PROFIT AND LOSS ACCOUNT. ACCORDING LY, THE INCOME OF THE ASSESSEE WAS COMPUTED. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF PARTICULAR S OF INCOME. THE 5 ITA NOS.2233 AND 2281/PUN/2014 ASSESSING OFFICER HELD THE ASSESSEE TO HAVE CONCEAL ED THE INCOME BY DECLARING THE SAID INCOME IN THE MANNER DISCUSSED A BOVE. THE ASSESSING OFFICER HELD THE CASE OF THE ASSESSEE TO BE FIT CAS E FOR LEVY OF PENALTY WITHIN THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND ACCORDINGLY PENALTY OF RS.30 LAKHS WAS LEVIED UPON THE ASSESSEE. 8. THE CIT(A) CONSIDERED THE TWO ADDITIONS SEPARATE LY. IN RESPECT OF THE FIRST ADDITIONAL INCOME OF RS.50 LAKHS, I.E. ON ACC OUNT OF SHORTAGE OF STOCK THE CIT(A) NOTED THAT THE SUM OF RS.50 LAKHS WAS CONSID ERED AS DEEMED INCOME AND WAS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME, HOWEVER, THE SET OFF OF BUSINESS LOSS AGAINST THE SAID DEEMED INCOME WAS NOT ALLOWED BY THE ASSESSING OFFICER. THE DENIAL OF SET OFF EFFECTED BY THE ASSESSING OFFICER, AS PER THE CIT(A), COULD NOT BE SAID TO BE FILING OF I NACCURATE PARTICULARS OF INCOME, PARTICULARLY WHEN THE SAME WAS SHOWN IN THE RETURN OF INCOME OFFERING THE AMOUNT FOR TAXATION. ACCORDINGLY, THE ASSESSIN G OFFICER WAS HELD TO BE NOT JUSTIFIED IN LEVYING PENALTY UNDER SECTION 271(1)(C ) OF THE ACT IN RESPECT OF SET OFF OF BUSINESS LOSS AGAINST DEEMED INCOME OFFERED IN THE RETURN OF INCOME. 9. IN RESPECT OF THE SECOND ISSUE, I.E. THE DECLARA TION MADE ON ACCOUNT OF INVESTMENT IN FURNITURE, OFFICE BUILDING ETC. TO TH E TUNE OF RS.50 LAKHS IN THE COMPUTATION OF INCOME DIRECTLY, THE CIT(A) NOTED TH E OBSERVATIONS OF ASSESSING OFFICER IN THIS REGARD THAT THE EFFECT OF DECLARATION WAS NULLIFIED BY THE ASSESSEE BY CLAIMING HUGE LOSSES FOR THE YEAR. THE CIT(A) ALSO NOTED THE SUBMISSION OF THE ASSESSEE AGREEING TO THE SAID ADD ITION. 10. BEFORE CIT(A) FURTHER EXPLANATION WAS FILED BY THE ASSESSEE THAT THE SAID SURRENDER OF RS.50 LAKHS WAS MADE IN THE SPIRI T OF REACHING QUIETUS AND PUTTING AN END TO THE LITIGATION. HOWEVER, THE ASS ESSING OFFICER HAS IGNORED 6 ITA NOS.2233 AND 2281/PUN/2014 THE SAME AND LEVIED THE PENALTY. THE CIT(A) UPHELD THE LEVY OF PENALTY IN RESPECT OF THIS ADDITION OF RS.50 LAKHS. 11. BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL AGA INST THE RESPECTIVE PORTION OF ORDER OF THE CIT(A). 12. THE ONLY GRIEVANCE OF THE REVENUE WAS NON-LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ADDITIONAL INCO ME OFFERED ON ACCOUNT OF SHORTAGE OF STOCK. THE ASSESSEE HAD INCLUDED THE S AID INCOME IN HIS HANDS AND HAD CLAIMED SET OFF OF BROUGHT FORWARD LOSSES, HOWEVER, THE SAME WAS DENIED TO THE ASSESSEE. MERELY BECAUSE THE SET OFF HAS BEEN DENIED TO THE ASSESSEE DOES NOT JUSTIFY THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. UPHOLDING THE ORDER OF CIT(A) IN THIS REGARD WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 13. NOW COMING TO THE APPEAL FILED BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED WITH THE ORDER OF CIT(A) IN RESTRICTIN G THE ADDITION OF RS.50 LAKHS, WHICH WAS ADDED IN THE HANDS OF THE ASSESSEE ON ACC OUNT OF UNEXPLAINED INVESTMENT IN FURNITURE AND OFFICE BUILDING. THE A SSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AGREED TO THE ADDITION OF SU M OF RS.50 LAKHS AS PART OF HIS COMPUTATION OF INCOME AND ITS NON ADJUSTMENT AGAINST THE CURRENT BUSINESS LOSS. THE OFFER MADE BY THE ASSESSEE WAS IN THE SPIRIT OF REACHING QUIETUS AND TO END THE LITIGATION WHICH HAD ARISEN IN THE INSTANT CASE. THE ASSESSEE HAD INFACT CLAIMED THE SET OFF OF THAT INC OME AGAINST THE BUSINESS LOSS ARISEN FOR THE YEAR UNDER CONSIDERATION AND ME RELY BECAUSE THE SAME HAS NOT BEEN SET OFF, IT CANNOT BE SAID TO BE CONCEALME NT OF INCOME. THE VIEW OF THE ASSESSEE HAVE NOT BEEN ACCEPTED BY THE ASSESSIN G OFFICER, BUT THE SAME DOES NOT JUSTIFY LEVY OF PENALTY UNDER SECTION 271( 1)(C) OF THE ACT. ACCORDINGLY, 7 ITA NOS.2233 AND 2281/PUN/2014 WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS ALLOWED. 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 17 TH DAY OF MARCH, 2017. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE ; # DATED : 17 TH MARCH, 2017 . SATISH ' (*+ ,+ / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE CIT(A) - 11 , PUNE ; 4. THE CIT CENTRAL , PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // ASSISTANT REGISTRAR % , / ITAT, PUNE