RAJESH D DEDHIA ( HUF), MUMBAI V. ASST CIT CEN CIR 23, MUMBAI

ITA 2617/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7756 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: B V JHAVERI
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 143(3); 133A; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2617/MUM/2015 ASSESSMENT YEAR: 2010-11 M/S. RAJESH D. DEDHIA (HUF) VS. ASST CIT CEN CIR 2 3 C-308 SHREENATH DARSHAN ROOM NO. 409, 4 TH FLOOR, OFF. 30 TP ROAD, BORIVALI (WEST) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 092 MUMBAI 400 020 PAN NO. AACHR3840K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.V. JHAVERI, AR REVENUE BY: SHRI LOVE KUMAR, DR DATE OF HEARING : 23/0 1/2017 DATE OF PRONOUNCEMENT: 29/03/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 52, MUMBAI AND ARISES OUT OF THE ORDER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- 1. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING PENA LTY UNDER SECTION 271(1)(C) OF RS. 1,14,948/- INVOKING EXPLAN ATION 5A TO SECTION 271(1)(C) OF THE I.T. ACT 1961. 2. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T THE INCOME OF RS. 3,72,000/- IS ADDED TO THE INCOME OF THE ASSESS EE ON ESTIMATION OF GROSS PROFIT AT 25% OF THE GOODS SOLD. ITA NO. 2617/MUM/2015 2 3. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT PROVIDES THAT IN COME OFFERED IN THE RETURN OF INCOME SUBSEQUENT TO THE SEARCH WOULD ALS O AMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME AND THUS IT PREVENTS THE ASSESSEE FROM CONTENDING T HAT INCOME IS ALREADY OFFERED IN THE RETURN OF INCOME AND HENCE T HERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 4. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT DOES NOT PROHIBI T THE ASSESSEE FROM CONTENDING THAT THE INCOME OFFERED IN THE RETURN OF INCOME FILED SUBSEQUENT TO THE SEARCH IS BASED ON ESTIMATE OF GR OSS PROFIT ALLEGEDLY EARNED ON THE GOODS SOLD AND THEREFORE, THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. 5. THE COMMISSIONER (APPEALS) ERRED IN OBSERVING THAT FURTHER ADDITION OF RS. 58,000/- HAS BEEN MADE BY THE AO ON THE BASI S OF SEIZED DOCUMENTS ONLY. 6. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T THE ADDITION OF RS. 58,000/- WAS MADE BY THE AO BY ESTIMATING THE G ROSS PROFIT AT 25% OF THE GOODS SOLD AS AGAINST 22% ADOPTED BY THE ASS ESSEE WHILE OFFERING THE INCOME. 7. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THA T IN THE COURSE OF THE SEARCH THE ALLEGED STOCK REGISTER WAS FOUND FOR THE MONTHS OF JANUARY TO MARCH 2010 AND NO MATERIAL WAS FOUND FOR THE EARLIER PERIOD OF NINE MONTHS AND THEREFORE, INCOME VOLUNTA RILY OFFERED FOR THE SAID PERIOD OF NINE MONTHS CANNOT BE SAID TO HA VE BEEN CONCEALED AS THERE WAS NO MATERIAL FOUND IN THE COURSE OF THE SEARCH FOR THE SAID INCOME. 8. THE ORDER OF THE COMMISSIONER (APPEALS) CONFIRMING THE PENALTY IS BAD IN LAW AND WITHOUT JURISDICTION. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE- HUF IS PROPRIETOR OF M/S. NAVKAAR, WHICH IS ENGAGED IN THE BUSINESS O F TRADING IN SHIRTS. ORIGINALLY, THE RETURN OF INCOME WAS FILED BY THE A SSESSEE ON 23.09.2010 DECLARING TOTAL INCOME OF RS. 5,82,640/- . SUBSEQUENTLY, A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT BY THE REVENUE ON ZAMKUDI GROUP ON 09.10.2010. THE ASSESSI NG OFFICER ITA NO. 2617/MUM/2015 3 (AO) PASSED AN ORDER U/S 143(3) R.W.S 153C OF THE A CT ON 20.03.2013 ASSESSING THE INCOME OF THE ASSESSEE AT RS. 9,54,64 0/-. DURING THE COURSE OF SEARCH, THE ASSESSEE HAD DISCLOSED RS. 3, 14,000/- AS ITS UNDISCLOSED INCOME FROM BUSINESS. THE ESTIMATED GP WORKED OUT BY THE ASSESSEE WAS AT 22%. DURING THE COURSE OF SEARC H AND SURVEY ON THE ASSESSEES BUSINESS PREMISES, CERTAIN DOCUMENTS WERE FOUND. BASED ON THESE DOCUMENTS THE AO ESTIMATED THE GP AT THE RATE OF 27.60% ON THE UNACCOUNTED SALES AND THUS MADE AN AD DITION OF RS. 58,000/-. AS PER THE AO, THE TOTAL UNDISCLOSED INCO ME WAS ASSESSED AT RS. 3,72,000/-. THE ASSESSEE ACCEPTED THE ASSESSMEN T ORDER AND DID NOT FILE APPEAL AGAINST IT. THEN THE AO IMPOSED A M INIMUM PENALTY OF RS. 1,14,948/- ON THE ABOVE AMOUNT. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEAR NED CIT(A) AGAINST THE PENALTY ORDER PASSED BY THE AO. THE LEA RNED CIT(A) CAME TO A FINDING THAT WHERE SEARCH IS CARRIED OUT AFTER 01.06.2007, EXPLANATION 5 WILL NOT APPLY, AND IN SUCH CASES, EX PLANATION 5A WILL APPLY, AS PER WHICH ASSESSEE CANNOT BE GIVEN ANY IM MUNITY EVEN IF HE HAS SURRENDERED SUCH INCOME AND INCLUDED THE SAME I N THE RETURN FILED SUBSEQUENT TO SEARCH. THE LEARNED CIT(A) THUS CONFIRMED THE PENALTY OF RS. 1,14,948/- IMPOSED BY THE A.O. U/S 2 71(1)(C) OF THE ACT. 5. BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE SU BMITS THAT THE SEARCH ACTION WAS CONDUCTED BY THE REVENUE ON 09.10 .2010 I.E. AFTER THE FINANCIAL YEAR ENDING 31.03.2010. IT IS SUBMITT ED BY HIM THAT THE RETURN OF INCOME FOR THE A.Y. 2010-11 WAS DUE ON 30 .09.2010 AND THE SAME WAS FILED ON 24.09.2010. IT IS ALSO SUBMITTED BY HIM THAT THE ASSESSEE HAS ESTIMATED THE INCOME FOR THE ENTIRE YE AR EVEN THOUGH THE SEIZED PAPERS WERE FOUND SHOWING UNACCOUNTED SA LES ONLY FOR 3 MONTHS AND THIS METHOD OF ESTIMATION OF INCOME IS A LSO ACCEPTED BY ITA NO. 2617/MUM/2015 4 THE AO, THOUGH THE ESTIMATION WAS MADE BY ADOPTING SLIGHTLY HIGHER GP. THUS IT IS SUBMITTED THAT PENALTY U/S 271(1)(C) IS NOT LEVIABLE ON THE ABOVE ESTIMATED INCOME. FURTHER IT IS STATED TH AT THERE ARE NO SEIZED PAPERS SHOWING ACTUAL AMOUNT OF GP EARNED FR OM SALES MADE OUT OF BOOKS AND THE ASSESSEE HAS ESTIMATED GP TAKI NG AVERAGE GP OF LAST 3 YEARS WHICH COMES TO 22% WHEREAS THE AO ESTI MATED THE GP AT 27.60%. THUS IT IS SUBMITTED THAT THE PENALTY LEVIE D AMOUNTING TO RS. 1,14,948/- ON ESTIMATION OF INCOME FOR THE ENTIRE P ERIOD WITHOUT ANY JUSTIFICATION BE DELETED. 6. THE LEARNED DR SUPPORTS THE ORDER PASSED BY TH E LEARNED CIT(A) CONFIRMING THE PENALTY OF RS. 1,14,948/- IMP OSED BY THE AO U/S 271(1)(C) OF THE ACT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE SEARCH ACTION WAS CONDUCTED BY THE REVENUE ON 09.10.2010 I.E. AFTER THE FINANCIAL ENDING ON 31.03.2010. THE RETURN OF INCOME FOR THE A.Y. 2010- 11 WAS DUE ON 30.09.2010 AND THE SAME WAS FILED BY THE ASSESSEE O N 24.09.2010. THE ASSESSEE DECLARED ITS TOTAL INCOME OF RS. 5,82, 640/-. IN RESPONSE TO NOTICE ISSUED U/S 153C OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME ON 08.02.2012 DECLARING TOTAL INCOME OF RS. 8,96,640/- BY INCLUDING THE INCOME OF RS. 3,14,000/- COMPUTED BY ESTIMATING THE SAME FOR THE ENTIRE FINANCIAL YEAR ENDING ON 31.03. 2010 AS OFFERED IN THE COURSE OF SEARCH ACTION. 7.1 TO SUM UP, THE PENALTY IN THE INSTANT CASE, HA S BEEN IMPOSED BY THE AO ON (I) ADDITIONAL INCOME OF RS. 3,14,000/ - DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME FILED ON 08.02.20 12 IN RESPONSE TO NOTICE ISSUED U/S 153C OF THE ACT AND (II) RS. 58,0 00/- ESTIMATED BY ITA NO. 2617/MUM/2015 5 THE AO. THE ASSESSEE HAS NOT CONTESTED THE ADDITION MADE BY THE AO IN THE ASSESSMENT. 7.2 IN A CASE WHERE ASSESSMENT IS MADE ON BEST JUDG EMENT AFTER ESTIMATING THE TURN OVER AND RATE OF GROSS PROFIT, IT CANNOT BE SAID THAT PENALTY CANNOT BE IMPOSED. IT HAS TO BE EXAMINED WH ETHER THERE WAS MATERIAL TO IMPLICATE THE ASSESSEE FOR HAVING CONCE ALED, OR FURNISHED INACCURATE PARTICULARS OF INCOME, ALSO IN THE LIGHT OF EXPLANATION DURING THE PERIOD IT WAS EFFECTIVE. 7.3 LET US NOW DISCUSS THE DECISIONS RELIED ON BY T HE LEARNED COUNSEL OF THE ASSESSEE. IN AMIR CHAND VS. ITO (1994) 49 ITD 606 (DEL), IT HAS BEEN HELD THAT IT WAS NOT PERMISSIBLE TO PRESS INTO SERVICE EXPLANATION 5 TO SECTION 271(1)(C) WHILE DEALING WITH A CASE OF SURVEY U/S 133A OF THE ACT. IN THE INSTANT APPEAL WE ARE C ONCERNED WITH SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT. THERE FORE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE ABOVE CASE . IN PREM ARORA VS. DCIT (2012) 149 TTJ (DEL) 590, THE SEARCH WAS CARRIED OUT PRIOR TO INTRODUCTION OF EXPLANATIO N 5A W.E.F. 1 ST JUNE, 2007, THEREFORE, THE TRIBUNAL HELD THAT NO PENALTY COULD BE LEVIED UPON THE ASSESSEE U/S 271(1)(C). IN SMT. USHA ASHOK KUMAR SHAH VS. DCIT (ITA NO. 2766/MUM/2014) FOR THE A.Y. 2003-04 ; ANANT SHELTERS PVT. LTD. VS. ITO (ITA NO. 7473/MUM/2011) FOR THE A.Y. 2007-08; CIT VS. AARKAY SAREE MUSEUM (1991) 187 ITR 147 (BOM) AND CIT VS. MODI INDUSTRIAL CORPORATION (2010) 195 TAXMAN 68 (P&H) THE IMPOSITION OF PENAL TY AS PER EXPLANATION 5 TO SECTION 271(1)(C) WAS NOT THE ISSUE. 7.4 FOR CLARITY THE PROVISIONS OF EXPLANATION 5A TO SECTION 271(1)(C) ARE EXTRACTED AS UNDER: ITA NO. 2617/MUM/2015 6 EXPLANATION 5A. WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSE E IS FOUND TO BE THE OWNER OF ( I ) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOL LY OR IN PART) HIS INCOME FOR ANY PREVIOUS YEAR; OR ( II ) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESEN TS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND, ( A ) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR H AS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN D ECLARED THEREIN; OR ( B ) THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE ( C ) OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 7.5 IN STC VS. MODI SUGAR MILLS , AIR 1961 SC 1047, P. 1051, HIS LORDSHIP SHAH, J. HAS SAID THUS : IN INTERPRETING A TAXING STATUTE, EQUITABLE CONSIDERATIONS ARE ENTIRELY OUT OF PLACE. NOR CAN TAXING STATUTES BE INTERPRETED ON ANY PRESUMPTIONS OR ASSU MPTIONS. THE COURT MUST LOOK SQUARELY AT THE WORDS OF THE STATUT E AND INTERPRET THEM. IT MUST INTERPRET A TAXING STATUTE IN THE LIG HT OF WHAT IS CLEARLY EXPRESSED; IT CANNOT IMPLY ANYTHING WHICH IS NOT EX PRESSED; IT CANNOT IMPORT PROVISIONS IN THE STATUTE SO AS TO SUPPLY AN Y ASSUMED DEFICIENCY. 7.6 IN ACIT VS. SMT. J. MYTHILI [2013] 35 TAXMANN.COM 86 (CHENNAI - TRIB.), IT HAS BEEN HELD THAT WHERE THERE WAS A SE ARCH UPON ASSESSEE AND SHE SUBSEQUENT TO SEARCH, IN PURSUANCE OF NOTIC E ISSUED UNDER SECTION 153A, FILED RETURNS FOR RELEVANT ASSESSMENT YEARS AND AMOUNT SHOWN IN RETURNS FILED AS 'OTHER INCOME' WAS NOT A PART OF HER REGULAR ITA NO. 2617/MUM/2015 7 ACCOUNTS, SUCH AMOUNT WOULD SQUARELY COME WITHIN PU RVIEW OF CONCEALED INCOME LIABLE TO PENALTY UNDER SECTION 27 1(1)(C). 7.7 FOR THE REASONS DELINEATED AT PARA 7 TO 7.6 HER E-IN-ABOVE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/03/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 29/03/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI