M/s. H.M. Associates, Anand V. The Income tax Officer, Ward-1, Anand

ITA 2475/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1204 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-06-2016
• Assessment Year: 2000-2001
• Appeal Filed On: 06-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: MRS ARTI N SHAH
• Keywords: Unexplained investment; Loose papers; Deemed to accrue or arise in india; Retraction
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2475/AHD/2012 / ASSTT. YEAR: 2000-2001 M/S.H.M. ASSOCIATES C/O. KACHINS OPP: BANK OF BARODA STATION ROAD ANAND 388 001. PAN : AACFH 5652 D. VS ITO, WARD - 1 ANAND. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : MRS.ARTI N. SHAH REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 21/06/2016 / DATE OF PRONOUNCEMENT: 12/07/2016 $%/ O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-IV, BARODA DATED 7.2.2011 PASSED FOR THE ASSTT.YEAR 2000-01. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,03,890/- IMPOSED UPO N THE ASSESSEE BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED UPON THE PREMISE S OF THE ASSESSEE ON 17.10.200. DURING THE COURSE OF SURVEY, IT REVEALE D THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HILL PARK BUNGALOW SCHEME. STATEMENTS OF PARTNERS WERE ALSO RECORDED. SHRI MA NHARBHAI M. DALWADI HAS ADMITTED THE ALLEGED UNEXPLAINED INVESTMENT IN HILL PARK BUNGALOW SCHEME. ITA NO.2475/AHD/2012 2 ULTIMATELY, THE ADDITION OF RS.7,91,925/- WAS MADE BY THE AO, THOUGH THE AO HAS BIFURCATED THE ACCOUNTS IN TWO PARTS. THE DISPU TE TRAVELLED UPTO THE TRIBUNAL AND ULTIMATELY THE ADDITION WAS CONFIRMED. THE RELEVANT FINDING OF THE TRIBUNAL READS AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, THE PARTNER OF THE FIRM SHRI MA NHERBHAI MOHANBHAI DALWADI DURING THE COURSE OF SURVEY U/S 1 33A OF THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17.10.2001 , ON THE BASIS OF LOOSE PAPERS NO.1 & 2 IN ANNEXURE B- 9 WHEREIN DE TAILS OF INVESTMENT OF RS.38,20,044/-WERE REFLECTED UNTIL 31 -03- 2000, IN REPLY TO SPECIFIC QUESTIONS NO.6 TO 11 OF HIS STATEMENT A DMITTED THAT INVESTMENT AMOUNTING TO RS.27,89,497/- WERE RECORDE D IN THE BOOKS OF ACCOUNTS OF THE FIRM AND ALSO ADMITTED IN HIS REPLY TO QUESTION NO.8 THAT TOTAL INVESTMENT IN THE SCHEME UNTIL 31-03-2000 WAS RS.38,20,044/-. ACCORDINGLY, HE ADMITTED THAT THE DIFFERENCE OF RS. 10,30,547/- IN THE INVESTMENT WAS OUT OF UNDISCLOSED INCOME OF THE FIR M AS WELL AS OF ITS PARTNERS (REPLY TO QUESTION NO.11 OF THE STATEMENT) AND ACCORDINGLY AGREED TO MAKE DISCLOSURE OF RS. 7,30,547/- IN THE HANDS OF THE ASSESSEE AND PAY TAX ACCORDINGLY. HOWEVER, THE SAID AMOUNT W AS NOT DECLARED AS INCOME IN THE RETURN AND INSTEAD AS OBSERVED BY THE LD. CIT(A), THE ASSESSEE DID NOT HONOUR THE DISCLOSURE ON THE GROUN D THAT CERTAIN FIGURES DID NOT PERTAIN TO THE PERIOD UNDER CONSIDE RATION AS WELL AS SOME AMOUNT HAD BEEN INCURRED OUT OF WITHDRAWALS OF PARTNER AND FINALLY, THE ASSESSEE FILED RETURN OPTING FOR PRESU MPTIVE TAX SCHEME BY PAYING TAX ON DEEMED INCOME @8% OF RECEIPTS. MOREOV ER, THE DVO ESTIMATED THE COST OF CONSTRUCTION OF THE AFORESAID PROJECT HILL PARK BUNGALOW AT RS.41.26 LACS WHILE THE COST OF CONSTR UCTION AS DERIVED BY DVO FOR THE PERIOD UNDER CONSIDERATION WAS RS.37 ,03,594/-. THE SAME WAS DULY CONFRONTED TO THE ASSESSEE BY THE AO AND AFTER CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE, THE AO MADE THE ADDITION AS STATED IN PARA 18 ON PAGE 24 OF ASSESSM ENT ORDER. SINCE THE ASSESSEE FAILED TO SUBSTANTIATE ITS PLEA THAT EXPEN SES INCURRED WERE PROPERLY RECORDED IN BOOKS OF ACCOUNTS, THE ADDITIO NS OF RS.6,69,247/- AND RS.1,22,678/- AGGREGATING TO RS.7,91,925/- WERE UPHELD BY THE LD. CIT(A). THOUGH THE LD. AR ARGUED BEFORE US THAT CER TAIN AMOUNTS PERTAINED TO THE SUCCEEDING YEARS, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE SAID AMOUNT PERTAINED TO THE SUCCEEDING YE ARS WHILE THE PARTNER IN HIS STATEMENT ON THE BASIS OF DOCUMENTS FOUND DURING THE ITA NO.2475/AHD/2012 3 COURSE OF SURVEY ADMITTED UNDISCLOSED INVESTMENT OF RS.7,30,547/- IN THE YEAR UNDER CONSIDERATION AND AGREED TO PAY TAX THEREON. EVEN PLEA OF THAT LD. AR THAT DIFFERENCE IN VALUATION DOES NO T EXCEED 5% IS NOT CORRECT. THE ASSESSEE DISCLOSED AN AMOUNT OF RS. 25 ,50,369/- IN THE BOOKS AND THE DVO VALUED RS.37,03,594/- FOR THE YEA R UNDER CONSIDERATION AND THE PARTNER DURING THE COURSE OF SURVEY ADMITTED UNDISCLOSED INVESTMENT. IN THESE CIRCUMSTANCES, THE RE IS NO MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VI EW IN THE MATTER. 5.1 EVEN OTHERWISE WE FIND THAT THE ADDITIONS WERE MADE BY THE AO NOT MERELY ON THE BASIS OF STATEMENT OF THE PARTNER DUR ING THE COURSE OF SURVEY. IN FACT, STATEMENT OF THE PARTNER WAS RECOR DED IN THE LIGHT OF DOCUMENTS FOUND DURING THE COURSE OF THE SURVEY AND THE PARTNER HIMSELF VOLUNTEERED TO OFFER THE UNDISCLOSED INCOME FOR TAX. 4. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS UNDE R SECTION 271(1)(C) OF THE ACT. HE OBSERVED THAT THE ASSESSEE HAS CONCEAL ED PARTICULARS OF INCOME TO THE EXTENT OF RS.7,91,925/-. AFTER HEARING THE ASS ESSEE, THE AO IMPOSED PENALTY OF RS.3,04,890/- WHICH IS EQUIVALENT TO THE TAX SOUGHT TO BE EVADED ON AN ADDITION OF RS.7,91,925/-. 5. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. THE FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 4. I HAVE CONSIDERED THE MATTER. ADDITIONAL INCOME OF RS.7,30,547/- IN THE HANDS OF APPELLANT FIRM WAS DISCLOSED AT THE TI ME OF SURVEY ON THE BASIS OF DIFFERENCE BETWEEN INVESTMENT OF RS.38,20, 044/-AS PER LOOSE PAPERS FOUND DURING SURVEY AND AMOUNT OF EXPENDITUR E INCURRED UPTO 31.3.2000 OF RS.27,89,497/-. APPELLANT'S RETRACTION OF THIS DISCLOSURE LATER WAS NOT ACCEPTED BY THE CIT(A) AS WELL AS ITA T ON THE FACTS OF THE CASE. DVO'S REPORT CORROBORATED THE DIFFERENCE DETE CTED AT THE TIME OF SURVEY AS PER LOOSE PAPERS FOUND AND IS NOT THE SOL E BASIS OF ADDITION OR ITS CONFIRMING BY CIT(A)/ITAT. THE ADDITIONS IN QUE STION WERE BASED ON DOCUMENTS FOUND AT THE TIME OF SURVEY AND HAVE B EEN CONFIRMED UPTO ITAT AFTER DEALING WITH APPELLANT'S VARIOUS OBJECTI ONS INCLUDING THOSE RAISED NOW. IN THIS SITUATION, IT IS HELD THAT THE ADDITIONS REPRESENT INCOME IN RESPECT OF WHICH PARTICULARS WERE CONCEAL ED. PENALTY U/S.271(L)(C) OF RS.3,04,890/- IS CONFIRMED. ITA NO.2475/AHD/2012 4 6. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDER OF THE LD.CIT(A) CONTENDED THAT THE ADDITION FOR THE UNEXP LAINED INVESTMENT IN CONSTRUCTION OF HILL PARK BUNGALOW SCHEME IS CONCER NED, IT IS BASED ON DVOS REPORT. OPINION OF THE EXPERT CAN BE JUSTIFI ABLE FOR MAKING ADDITION, BUT SUCH AN ESTIMATED OPINION CANNOT BE USED AGAINS T THE ASSESSEE FOR VISITING WITH PENALTY. SHE CONTENDED THAT TO THIS EXTENT, P ENALTY DESERVES TO BE DELETED. 7. ON THE OTHER HAND, THE LD.DR CONTENDED THAT ADDI TION WAS NOT MADE SIMPLY ON THE BASIS OF DVOS REPORT. THE LD.FIRST APPELLATE AUTHORITY HAS CONSIDERED THIS ASPECT AND HELD THAT DVOS REPORT W AS ONLY A CORROBORATIVE PIECE OF EVIDENCE TO PROVE UNEXPLAINED INVESTMENT. 8. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HAS A DIRE CT BEARING ON THE CONTROVERSY, THEREFORE, WE TAKE NOTE RELEVANT PROVI SION, WHICH READS AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: ITA NO.2475/AHD/2012 5 EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 9. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE ITA NO.2475/AHD/2012 6 COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 10. IN THE LIGHT OF THE ABOVE, IF I EXAMINE THE FAC TS OF THE PRESENT CASE, THEN, IT WILL REVEAL THAT DURING THE COURSE OF SURVEY, LO OSE PAPERS WERE FOUND EXHIBITING THE UNDISCLOSED INVESTMENT MADE BY THE A SSESSEE. WHEN THIS ASPECT WAS CONFRONTED TO THE PARTNERS OF THE ASSESS EE, THEN, IT WAS ADMITTED BY THEM. IN SPITE OF THIS FACT, WHILE FILING OF THE R ETURN, THE ASSESSEE DID NOT INCLUDE THIS AMOUNT IN ITS RETURN OF INCOME. THERE FORE, THE ASSESSEE HAS NO EXPLANATION AS TO WHY IT HAS CONCEALED THE PARTICUL ARS OF ITS INCOME BY NOT ITA NO.2475/AHD/2012 7 INCLUDING THE INCOME SO DISCLOSED DURING THE COURSE OF SURVEY. THE AO HAS RIGHTLY IMPOSED THE PENALTY UPON THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE ASSESSEE IS DISMISSED . 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 12 TH JULY, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 12/07/2016