Shri Fidahussain N.Hazariwala, Baroda V. The Income tax Officer,Ward-5(1), Baroda

ITA 2611/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2028 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 17-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Unexplained investment; Gift; Difference of opinion
• Section: 142(1); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.2611/AHD/2008 (ASSESSMENT YEAR:-1995-96) SHRI FIDAHUSSAIN NAZAFALI HAZARIWALA, C/O CAMPHO CHEM INDUSTRIES, D-1, PATEL INDUSTRIAL ESTATE, YAMUNA MILL ROAD, BARODA V/S INCOME-TAX OFFICER, WARD- 5(1), BARODA AAYAKAR BHAVAN, RACE COURSE, BARODA PAN: AAHPH 4785 J [APPELLANT] [RESPONDENT] ASSESSEE BY :- SMT. URVASHI SHODHAN, AR REVENUE BY:- SHRI R K DHANESTA, DR O R D E R A N PAHUJA: THIS APPEAL FILED BY THE ASSESSEE AGAINST AN ORDER DATED 23-05-2008 OF THE CIT(A)-V, BARODA RAISES THE FOLLOWING GROUNDS:- 1 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELL ANT HAD CONCEALED INCOME IN RESPECT OF INVESTMENT IN HOUSEHOLD ARTICL ES AMOUNTING TO RS.46,000/- AND INVESTMENT IN GOLD ORNAMENTS AMOUNT ING TO RS.64,296/-. 2 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPE LLANT HAD FILED INACCURATE PARTICULARS OF INCOME AND THEREFORE WAS LIABLE FOR PENALTY. 3 THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS.45,000/-. 4 THE APPELLANT CRAVES LEAVE, ADD OR ALTER ANY OF T HE GROUNDS MENTIONED ABOVE. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE T HAT THE ASSESSEE DID NOT FILE ANY RETURN FOR THE YEAR UNDER CONSIDER ATION EVEN IN PURSUANCE TO A NOTICE U/S 142(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT]..EVE N SUBSEQUENT NOTICE DATED 27.8.1997 U/S 142(1) OF THE ACT WENT U NRESPONDED. LATER RETURN DECLARING INCOME OF RS.8,01,040/- WAS FILED BY THE ASSESSEE ON 30-09-1997. SINCE THE RETURN WAS FILED BEYOND THE STIPULATED TIME LIMITS, A NOTICE U/S 148 OF THE ACT WAS SERVED UPON ITA N O.2611/A/08 2 THE ASSESSEE ON 1.10.1997.IN RESPONSE, THE ASSESSEE STATED THAT RETURN ALREADY FILED ON 30.9.1997 MAY BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE. IN THIS CASE A SEARCH IN THE PREMISES OF THE ASSESSEE WAS CONDUCTED ON 20.10.1994 U/S 132 OF THE ACT. DURING THE COURSE OF SEARCH, EVEN THOUGH A DISCLOSU RE OF RS. 53,19,639/- WAS MADE IN THE CASE OF FIRM M/S CHEM PHOCHEM AND ITS PARTNERS IN REPLY TO QUESTION NO.34 OF THE STAT EMENT OF THE ASSESSEE RECORDED ON 21.10.1994 U/S 132(4) OF THE A CT, THIS DISCLOSURE WAS SUBSEQUENTLY RETRACTED. THE SAID DI SCLOSURE INCLUDED AN AMOUNT OF RS. 2 LACS TOWARDS UNEXPLAINED INVESTM ENT IN VALUABLE ITEMS AND RS.1,79,853/- IN JEWELLERY. ON THE BASIS OF MATERIAL FOUND DURING THE SEARCH AND SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT WAS COMPLETED ON AN INCOME OF RS.41,94,035/-. INTER ALIA, AN AMOUNT OF RS.1,79,853/- TOWARDS UNEXPLAINED INVESTM ENT IN ORNAMENTS AND JEWELLERY AS PER NOTE 2 IN THE RETURN AND RS.1,09,000/- TOWARDS UNEXPLAINED INVESTMENT IN HOU SEHOLD FURNITURE, FIXTURES AND VALUABLES AS PER NOTE 5 IN THE RETURN, OFFERED BY THE ASSESSEE IN HIS RETURN FORMED PART OF THE T OTAL INCOME. BESIDES, ON THE BASIS OF ANNEXURE Z TO THE PANCHNAM A, THE AO FOUND THAT AN AMOUNT OF RS. 3,50,000/- WAS ATTRIBUT ED TO HOUSEHOLD VALUABLES AND FIXTURES. EVEN THOUGH AT THE TIME OF SEARCH AN AMOUNT OF RS. 2 LACS WAS DISCLOSED TOWARDS UNEXPLAINED IN VESTMENT IN VALUABLES, ONLY AN AMOUNT OF RS.1,09,000/- WAS OFFE RED TO TAX IN THE RETURN. SINCE THE ASSESSEE DID NOT SUBMIT ANY COGE NT EXPLANATION, THE AO ADDED THE DIFFERENCE OF RS. 2,41,000/- IN TE RMS OF PARA 3.4 OF THE ASSESSMENT ORDER. 2.1 THE AO FURTHER NOTICED THAT JEWELLERY WEIGHI NG 1321 GMS. VALUED AT RS.5,95,043/- WAS FOUND IN POSSESSION OF THE ASSESSEE DURING THE COURSE OF SEARCH. HOWEVER, ONLY 420 GMS VALUED AT RS.1,79,853/- WAS SEIZED. AS MENTIONED ABOVE, UNEXP LAINED INVESTMENT IN SEIZED JEWELLERY WAS OFFERED TO TAX IN THE RETURN. ON THE BASIS OF STATEMENT OF WIFE OF THE ASSESSEE THA T SHE HAD GIFTED ITA N O.2611/A/08 3 25 TOLAS OF JEWELLERY TO HER DAUGHTER, THE AO PRESU MED THAT WIFE OF THE ASSESSEE ALSO MUST HAVE RECEIVED 25 TOLAS OF JE WELLERY AT THE TIME OF HER MARRIAGE. THOUGH THE ASSESSEE CONTEND ED THAT ENTIRE JEWELLERY BELONGED TO THE WIFE AND HIS DAUGHTER, NO SOURCE OF INVESTMENT IN THIS JEWELLERY WAS EXPLAINED BEFORE T HE AO. ACCORDINGLY, EXCLUDING THE VALUE OF THE SEIZED JEWE LLERY OFFERED TO TAX IN THE RETURN AS ALSO JEWELLERY OF 25 TOLAS BEL ONGING TO THE WIFE OF THE ASSESSEE, THE AO CONCLUDED THAT ENTIRE REMAININ G JEWELLERY WAS UNACCOUNTED, RESULTING IN ADDITION OF RS.2,76,287/- . INTER ALIA, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE A LSO INITIATED. 2.1 ON APPEAL, THE LD. CIT(A) IN HIS ORDER DATED 18-12-1998 OBSERVED THAT THE AUTHORIZED OFFICER MERELY ESTIMAT ED THE VALUE OF FURNITURE AND FIXTURES, WITHOUT GIVING ANY BREAKUP OF ITEMS OF FURNITURE AND OTHER VALUABLES. ON THE BASIS OF LIST OF ITEMS OF FURNITURE AND OTHER HOUSE HOLD GOODS SUBMITTED BY T HE ASSSSEE BEFORE HIM AND VALUE ATTRIBUTED TO EACH OF THESE, THE LD. CIT(A) REDUCED THE ADDITION OF RS.2,41,000/- TO RS.20,000/ - REJECTING THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF A SONY T V CLAIMED TO HAVE BEEN TAKEN ON HIRE BY HIM ON 18.10.84. AS REG ARDS JEWELLERY, THE LD. CIT(A) DELETED THE ENTIRE ADDITION, RELYING , INTER ALIA, ON THE DECISIONS IN 47 TTJ 488 & 58 TTJ 283 OF AHMEDABAD B ENCH AND THE AO HAVING NOT REBUTTED THE STATEMENT OF WIFE OF THE ASSESSEE DURING THE SEARCH. 2.2 ON APPEAL BY THE REVENUE, THE ITAT NOTICED T HAT THE ASSESSEE HAD DISCLOSED A COMPLETE BREAKUP OF THE IT EMS INVENTORISED AS PER PANCHNAMA(ANNEXURE-Z) ON 21.10. 1994 AND PLACED THEIR VALUES WHICH IN HIS ESTIMATE WAS REAS ONABLE. AS SUCH, THE ITAT OBSERVED THAT IT WAS NOT CORRECT ON THE PA RT OF THE AO TO HAVE SUMMARILY REJECTED THE SAME WITH REFERENCE TO THE VALUE PLACED IN THE PANCHNAMA. ACCORDINGLY, CONSIDERING THE FACT THAT THE ASSESSEE DISCLOSED AN AMOUNT OF RS. 2 LACS AT THE T IME OF SEARCH ITA N O.2611/A/08 4 WHILE ONLY AN AMOUNT OF RS.1,09,000/- WAS OFFERED T O TAX IN THE RETURN, THE TRIBUNAL VIDE THEIR ORDER DATED 25-08- 05 IN ITA NO.573/AHD./1999, CONSIDERING THE TOTALITY OF FACTS TREATED AN AMOUNT OF RS.1,75,000/- TOWARDS UNEXPLAINED ITEMS O F FURNITURE, THEREBY SUSTAINING AN ADDITION OF RS. 66,000/- INST EAD OF RS. 20,000/- BY THE LD. CIT(A). AS REGARDS UNEXPLAINED INVESTMENT IN JEWELLERY, THE ITAT IN THE LIGHT OF CIRCULAR ISSUED BY THE CBDT TO THE AUTHORIZED OFFICERS REGARDING SEIZURE OF JEWELLERY DURING THE SEARCH HELD THAT 500 GMS OF GOLD JEWELLERY WAS REASONABLY EXPLAINED AS THE PROPERTY OF THE WIFE BESIDES 250.7 GMS OF HER DAUGH TER AND ACCORDINGLY, CONCLUDED THAT JEWLLERY WEIGHING 571.1 GMS.(1321.8- 750.7) WAS PART OF UNDISCLOSED INCOME OF THE ASSES SEE. IN NUTSHELL, ACCORDING TO THE AO, THE FOLLOWING ADDITIONS WERE S USTAINED BY THE ITAT:- (I) INVESTMENT IN HOUSEHOLD ARTICLES - RS.46,000 /- (II) INVESTMENT IN GOLD ARTICLES - RS.64,296/- 2.3 AFTER THE RECEIPT OF ORDER OF THE ITAT, IN RE SPONSE TO A SHOWCAUSE NOTICE, THE ASSESSEE VIDE A DETAILED REP LY DATED 27-04- 06, CONTENDED THAT ADDITIONS WERE SUSTAINED ON PRES UMPTIONS AND DIFFERENT WORKING AND THERE WAS NO EVIDENCE OF ANY UNACCOUNTED INVESTMENT. SINCE HE HAD FURNISHED THE PARTICULARS CORRECTLY AN D COMPLETELY AND THERE WAS NO ATTEMPT TO CONCEAL ANY PARTICULARS OF INCOME, NO P ENALTY COULD BE LEVIED. INTER ALIA, THE ASSESSEE RELIED UPON DECISIONS IN ANANTHRAM VEERASINGAIAH &.CO. VS. CIT, 123 ITR 457(SC),CIT VS. KHODAY ESWARSA & SONS 83 ITR 369(SC) AND CIT VS. SHADIRAM BALMUKUND (1972) 84 ITR 183, 186 (ALL) . HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND IMPOSED A PENALTY OF RS.45,000/- ON THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS.11 0296/- ,INVOKING EXPLANATION 4 TO SECTION 271(1)(C) OF THE ACT . 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE LEVY O F PENALTY IN THE FOLLOWING TERMS:- ITA N O.2611/A/08 5 3. THE APPELLANT HAS FILED A PAPER BOOK CONTAINING ORDER OF THE APPELLATE-AUTHORITY AND SUBMISSIONS MADE BEFORE THE AO. THE APPELLANT HAS ARGUED THAT AS TWO APPELLATE AUTHORITIES HAVE H ELD DIVERGENT VIEWS REGARDING THE SAME ADDITIONS, THERE CAN BE NO ROOM FOR IMPOSING PENALTY. THE APPELLANT HAS ALSO RELIED ON THE CASE OF KC BUI LDERS VS. CIT 265 ITR 562(SC) AND THE CASE OF ANANTHRAM VEERASINGAIAH & C O.,123 ITR 457(SC).IT HAS BEEN ARGUED THAT THE PENALTY IS NOT A GUESS WORK AND THE AO MUST HAVE REASONABLE EVIDENCE OF CONCEALMENT. 4. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENTS OF THE AO ALONG WITH THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT. THE ADDITIONS MADE ARE RELATING TO INVESTMENT IN HOUS EHOLD ARTICLES AND INVESTMENT IN GOLD. THE ITAT BEING THE ULTIMATE FAC T FINDING AUTHORITY, HAS CONFIRMED THAT THE VALUE OF THE ARTICLES ARE UNDOUB TEDLY HIGHER THAN WHAT HAS BEEN DISCLOSED BY THE APPELLANT. IN THESE CIRCU MSTANCES, IT CANNOT BE SAID THAT THE PARTICULARS FILED BY THE APPELLANT WE RE ACCURATE. AS AFTER PROPER EXAMINATION OF THE FACTS, HONBLE ITAT HAS C OME TO A CONCLUSION THAT THE VALUE OF INVESTMENT WAS HIGHER THAN WHAT H AS BEEN DISCLOSED, THE IMPOSITION OF PENALTY WAS QUITE JUSTIFIED. THEREFOR E, THIS GROUND OF APPEAL IS DISMISSED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE CARRYING US THROUGH THE IMPUGNED ORD ER AND THE CONTENTS OF THE PAPER BOOK REITERATED THEIR SUBMISS IONS BEFORE THE LEARNED CIT(A) WHILE THE LEARNED DR SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 5. . WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE F IND THAT PENALTY U/S 271(1)(C) HAD BEEN LEVIED BY THE AO ON THE GROUND T HAT THE ASSESSEE FURNISHED WRONG PARTICULARS OF INCOME ON ACCOUNT OF VALUATIO N OF INVENTORY OF HOUSEHOLD ARTICLES TO THE EXTENT OF RS. 46,000/- AND CONCEALE D THE PARTICULARS OF INCOME ON ACCOUNT OF INVESTMENT IN JEWELLERY TO THE EXTENT OF RS 64,296/-. THE LD. CIT(A) UPHELD THE LEVY OF PENALTY MERELY BECAUSE ADDITIONS DELETED BY THE LD. CIT(A) HAD BEEN RESTORED BY THE ITAT. WE FIND THAT THE ITAT RE STORED THE ADDITIONS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN HOUSEHOLD ARTI CLES AND JEWELLERY, CONSIDERING THE TOTALITY OF FACTS IN RESPECT OF ES TIMATES MADE BY THE ASSESSEE DURING THE SEARCH AND IN THE LIGHT OF A CBDT CIRCUL AR. THE LD. CIT(A) AND THE ITAT ON DIFFERENT INTERPRETATIONS, ADOPTED VARIED APPROA CH. WHEN TWO VIEWS ARE ITA N O.2611/A/08 6 POSSIBLE, NO PENALTY CAN BE IMPOSED, IS A PRINCIPLE THAT HAS BEEN ENUNCIATED IN THE DECISION IN THE CASE OF CIT V. P.K. NARAYANAN [1999] 238 ITR 905 (KER).. 5.1 IT IS WELL SETTLED THAT ASSESSMENT PROCEE DINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND AS HELD BY HON'BLE SU PREME COURT IN THE CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT, 123 ITR 4 57; THE FINDING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLU SIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. IT IS, THEREFORE, NECESSAR Y TO REAPPRECIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETH ER THE ADDITION MADE IN THE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEAL MENT ON THE PART OF THE ASSESSEE AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY. THE ISSUE OF UNEXPLAINED INVESTMENTS IN HOUSEHOLD ARTICLES AND J EWELLERY HAS BEEN ADJUDICATED ON ESTIMATES ONLY. THE EXPLANATION GIVE N BY THE ASSESSEE IN SUPPORT OF THEIR CLAIM FOR VALUATION OF HOUSEHOLD ARTICLES OR JEWELLERY WAS NOT FOUND TO BE FALSE. IT IS WELL SETTLED THAT THE CRITERION AND YA RDSTICKS FOR THE PURPOSE OF IMPOSING PENALTY ARE DIFFERENT THAN THOSE APPLIED FOR MAKING OR CONFIRMING THE ADDITIONS. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM AND H AS ALSO FURNISHED ALL THE MATERIAL FACTS RELEVANT THERETO, THE DISALLOWANCE O F SUCH CLAIM CANNOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS CONCEALMENT ON THE PART OF THE ASSESSEE ,WARRANTING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT . A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING ON DIFFERENT I NTERPRETATIONS DOES NOT AMOUNT TO CONCEALMENT OF THE PARTICULARS OF INCOME OR FURN ISHING INACCURATE PARTICULARS OF INCOME, BY THE ASSESSEE. THE PROVISIONS OF SEC. 271 (1)(C) OF THE ACT ARE NOT ATTRACTED IN CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN. 6. IN THE LIGHT OF AFORESAID DISCUSSION, WE ARE OF THE OPINION THAT WHATEVER ADDITIONS HAD BEEN SUSTAINED, WERE ON ESTIMATE BASIS NOT CALL ING FOR IMPOSITION OF ANY PENALTY, SINCE THE DIFFERENCE IN ESTIMATES BY LOWER AUTHORIT IES OR EVEN BY THE ITAT WAS BASED ON A DIFFERENCE OF OPINION AND THERE WAS NO POSITIV E PROOF REGARDING CONCEALMENT OF INCOME BY THE ASSESSEE. THIS BEING SO, WE HAVE NO H ESITATION IN CONCLUDING THAT IT IS NOT A CASE FIT FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND THAT THE PENALTY LEVIED BY THE AO IS CANCELLED . THEREFORE, GROUND NOS.1 TO 3 IN THE APPEAL ARE ALLOWED. ITA N O.2611/A/08 7 7. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TER MS OF THE RESIDUARY GROUND NO.4 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS DISMISSED. 8. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 22 -02-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 22 -02-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI FIDAHUSSAIN NAZAFALI HAZARIWALA, C/O CAMPHO CHEM INDUSTRIES, D-1, PATEL INDUSTRIAL ESTATE, YAMUNA MI LL ROAD, BARODA 2. INCOME-TAX OFFICER, WARD-5(1), BARODA, AAYAKAR B HAVAN, RACE COURSE, BARODA 3. CIT CONCERNED 4. CIT(A)-V, BARODA 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD