BALKRISHNA T. SHETTY, MUMBAI V. ACIT CIR 23(2), MUMBAI

ITA 2698/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49080 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 07-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: KIRAN MEHTA
• Keywords: Gift; Revised return
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGHA VAN (JM) I.T.A. NO.2698/MUM/2010 (A.Y.2002-03 ) SHRI BALKRISHNA T. SHETTY, 120, RAMGOPAL INDL. ESTATE, DR.R.P. ROAD, MUMBAI-400 080. PAN: AABPS5017N VS. ASST. COMMR. OF INCOME-TAX, CIR. 23(2), MUMBAI. APPELLANT RESPONDENT I.T.A. NO.2818/MUM/2010 (A.Y.2002-03 ) ASST. COMMR. OF INCOME-TAX, CIR. 23(2), MUMBAI. VS. SHRI BALKRISHNA T. SHETTY, 120, RAMGOPAL INDL. ESTATE, DR.R.P. ROAD, MUMBAI-400 080. PAN: AABPS5017N APPELLANT RESPONDENT ASSESSEE BY SHRI KIRAN MEHTA. DEPARTMENT BY SHRI R .K. GUPTA. O R D E R PER R.S. SYAL, AM : THESE TWO CROSS APPEALS - ONE BY THE ASSESSEE A ND THE OTHER BY THE REVENUE - ARISE OUT OF THE ORDER PASSED BY THE CIT( A) ON 18-01-2010 RESTRICTING THE PENALTY IMPOSED BY THE AO U/S.271(1)(C) IN RELA TION TO THE ASSTT. YEAR 2002- 03. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CARRIED ON THE BUSINESS OF MANUFACTURE OF PILFERAGE PROOF BOTTLE CAPS UNDER THE NAME & STYLE OF BHAWANI WADSEAL PRODUCTS. THE ASSESSEE ALSO CARR IED ON EXPORT BUSINESS UNDER THE NAME & STYLE OF M/S. RESHAM EXPORTS. THE ASSESSMENT IN THIS CASE ITA NOS.2698 & 2818/M/10 B.T. SHETTY 2 WAS COMPLETED U/S.143(3) ON TOTAL INCOME OF RS.29,3 5,750/-, INTER ALIA, REDUCING THE BENEFIT OF DEDUCTION OF 80HHC AND ASSESSING CER TAIN AMOUNTS UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A ) ON THE QUESTION OF DEDUCTION U/S.80HHC. THE AO INITIATED PENALTY PROCE EDINGS BY WAY OF NOTICE U/S. 274 READ WITH SEC. 271(1)(C). HERE, IT IS IMPORTANT TO MENTION THAT NO PENALTY WAS IMPOSED QUA THE REDUCTION IN DEDUCTION U/S.80HHC. PENALTY PROC EEDINGS WERE INITIATED IN RELATION TO THE FOLLOWING AMOUNTS , WHICH WERE TAXED BY THE AO UNDER THE HEAD INCOME FROM OTHER SOURCES : 1. INTEREST AND DIVIDEND RS. 5,396/- 2. S.B.I. INTEREST RS. 2,552/- 3. KDR INTEREST RS. 5,297/- 4. CASH LOANS RS.17,60,000/- RS.17,73,245/- ------------------- 4. NO PENALTY WAS IMPOSED IN RESPECT OF THE FI RST ITEM OF INCOME FROM THE ABOVE TABLE, BEING INTEREST AND DIVIDEND AMOUNTING TO RS.5,396/-. THE SECOND AND THIRD ITEMS ARE INTEREST FROM SBI AND KDR AMOUN TING TO RS.2,552/- AND RS.5,297/- RESPECTIVELY WHICH WERE NOT OFFERED FOR TAXATION BY THE ASSESSEE. SINCE THIS AMOUNT WAS CHARGEABLE TO TAX, THE AO INC LUDED THESE TWO AMOUNTS IN THE COMPUTATION OF TOTAL INCOME UNDER THE HEAD INC OME FROM OTHER SOURCES AND ALSO IMPOSED PENALTY ON THESE TWO AMOUNTS BECAUSE O F CONCEALMENT. THE LAST ITEM IN THE ABOVE TABLE IS CASH LOANS OF RS.17,60,0 00/-. THESE LOANS WERE NOT REFLECTED IN THE BALANCE SHEETS OF THE TWO PROPRIET ORSHIP CONCERNS. THE ASSESSEE, THOUGH MAINTAINED HIS PERSONAL ACCOUNTS BUT DID NOT FILE HIS PERSONAL BALANCE- SHEET (DISTINCT FROM TWO PROPRIETORSHIP CONCERNS AS NOTED ABOVE), ALONG THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE SAME WAS ITA NOS.2698 & 2818/M/10 B.T. SHETTY 3 CALLED FOR AND EXAMINED IN THE LIGHT OF BANK ACCOUN T OF THE ASSESSEE. IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN TO HAVE OBTAI NED LOANS OF RS.17,60,000/- FROM 10 DIFFERENT PARTIES AS UNDER : SR.NO. NAME AMOUNT OF LOAN 1. VIRBALA P. SHAH RS. 1,51,000/- 2. ASHA V. MEHTA RS. 1,51,000/- 3. POONAM PUNJABI RS. 2,01,000/- 4. DEENABEN VAKARIA RS. 1,51,000/- 5. ANIL RAGHVAN RS.2,01,000/- 6. HITESH JOSHI RS.1,51,000/- 7. JAGRUTI JHAVERI RS.1,51 ,000/- 8. RAMKANTILAL DELHIWALA RS.1,51,000/- 9. AWDESH VARMA RS.2,01,000/- 10. JAYESH C.SHAH RS.2,51,000/- RS.17,60,000/- ========== 5. THE ASSESSEE WAS CALLED UPON TO PRODUCE CONFIRMATIONS IN RESPECT OF THESE LOAN CREDITORS AND ALSO THE EVIDENCE OF THE G ENUINENESS OF THESE CREDITORS. INITIALLY, SOME SELF-MADE CONFIRMATIONS OF LOANS WE RE FILED ALONG WITH THE INCOME- TAX RETURNS OF THESE PERSONS FOR SOME EARLIER YEARS TOGETHER WITH COPY OF PASS BOOKS. THE ASSESSEE WAS REQUIRED TO FURNISH COPY OF ACKNOWLEDGEMENT OF INCOME-TAX RETURNS FOR THE YEAR UNDER CONSIDERATION TOGETHER WITH CAPITAL ACCOUNT, BALANCE-SHEET AND IMMEDIATE SOURCE OF LOAN S ETC. OF THESE ALLEGED CREDITORS. IN THE MEANTIME, THE AO ALSO SENT LETTER S OF ENQUIRY DATED 13-12-2004 TO THESE CREDITORS, SOME OF WHICH WERE RECEIVED BA CK AS UNSERVED AND THERE WAS NO RESPONSE FROM THE REMAINING PERSONS. ON 25-01-2 005, THE ASSESSEE FILED A REVISED RETURN INCLUDING THE AFORESAID LOANS OF RS. 17,60,000/- IN ITS INCOME UNDER THE HEAD `INCOME FROM OTHER SOURCES. A NOTE WAS A TTACHED WITH SUCH RETURN STATING THAT THE ASSESSEE HAD TREATED THE SAME AS L OANS IN HIS BOOKS. AS THESE FRIENDS OF THE ASSESSEE HAD TREATED THESE AMOUNTS A S GIFTS AND THERE WAS NO INTENTION TO REPAY THE SAID AMOUNT, HE WAS, THEREFO RE, VOLUNTARILY OFFERING THE SAID AMOUNT AS INCOME LIABLE TO TAX IN THE YEAR IN QUESTION. THE AO INCLUDED THE ITA NOS.2698 & 2818/M/10 B.T. SHETTY 4 SUM OF RS.17,60,000/- IN THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. NO SECOND APPEAL WAS PREFERRED AS THE ASSESSEE HAD ACCEPTED THE ADDITION BY FILING THE RE VISED RETURN. THE AO ALSO IMPOSED PENALTY U/S. 271(1) ON THESE AMOUNT OF ALL EGED LOANS TOTALING RS.17,60,000/-. THUS, PENALTY U/S.271(1) AMOUNTING TO RS.8,11,443/- WAS IMPOSED ON INCOME OF RS.17,67,849/- (RS.17,60,000/ - ALLEGED LOANS ASSESSED AS INCOME FROM OTHER SOURCES + SBI INTEREST OF RS.2, 552/- + KDR INTEREST OF RS.5,297/-) AT THE RATE OF 150% ON THE AMOUNT OF TA X SOUGHT TO BE EVADED ON SUCH INCOME OF RS.17,67,849/-. THE LD. CIT(A) REST RICTED THE PENALTY TO 100% OF THE TAX SOUGHT TO BE EVADED AS AGAINST 150% LEVIED BY THE AO. BOTH THE SIDES ARE IN APPEAL AGAINST THEIR RESPECTIVE STANDS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT IN SO FAR AS SBI INTERES T AND KDR INTEREST AMOUNTING TO RS.2,552/- AND RS.5,2297/- RESPECTIVELY ARE CONC ERNED, THE ASSESSEE DID EARN SUCH INTEREST INCOME BUT DID NOT INCLUDE IT IN ITS TOTAL INCOME. THE AMOUNT WAS RIGHTLY CHARGEABLE TO TAX AS HAS BEEN FINALLY ACCEP TED BY THE ASSESSEE ALSO. NON- OFFERING OF AN INCOME WHICH IS OTHERWISE LIABLE TO TAX, AMOUNTS TO CONCEALMENT OF INCOME UNLESS THERE ARE CIRCUMSTANCES TO SUGGEST TH AT THIS AMOUNT COULD HAVE BEEN CONSTRUED AS NON-CHARGEABLE TO TAX. UNDISPUTED LY, THESE TWO AMOUNTS ARE LIABLE TO TAX AND THE ASSESSEE BY NOT INCLUDING THE M IN HIS TOTAL INCOME IS CAUGHT WITHIN THE MISCHIEF OF SEC. 271(1). WE, THEREFORE, AGREE WITH THE LD. CIT(A) THAT PENALTY IS SUSTAINABLE ON THESE TWO AMOUNTS. 7. COMING TO THE ALLEGED LOANS AMOUNTING OF RS.17,6 0,000/-, IT IS NOTICED THAT THE ASSESSEE DID NOT FURNISH THEIR INDIVIDUAL BAL ANCE-SHEETS ALONG WITH THE RETURNS OF INCOME AND THE SOURCE OF ALLEGED LOANS. IT WAS ONLY ON VERIFICATION OF ITA NOS.2698 & 2818/M/10 B.T. SHETTY 5 THE BALANCE-SHEET OF THE ASSESSEE, NOT FURNISHED AL ONG WITH THE RETURN BUT CALLED FOR BY THE AO DURING THE COURSE OF ASSESSMENT PROCE EDINGS ALONG WITH THE COPY OF BANK STATEMENT, THAT IT CAME TO LIGHT THAT THE ASSESSEE HAD SHOWN THE SUM OF RS.17,60,000/- AS LOANS. WHEN THE ASSESSEE COULD NO T SUBSTANTIATE HIS CLAIM ABOUT THE GENUINENESS OF THE CASH CREDITS, HE FILED REVISED RETURN ON 25-01-2005 INCLUDING THE AFORESAID AMOUNT OF RS.17,60,000/- IN HIS TOTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES . HERE, IT IS IMPO RTANT TO MENTION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE W AS CALLED UPON TO FURNISH EVIDENCE ABOUT THE GENUINENESS OF THE LOAN TRANSACT IONS ALONG WITH COPY OF INCOME-TAX RETURN ETC. OF THESE PERSONS FOR THE YEA R IN QUESTION, WHICH WERE NOT FILED. THE AO SENT LETTERS OF ENQUIRY DATED 13-12-2 004 WHICH WERE EITHER RECEIVED BACK AS UNSERVED OR REMAINED UNCOMPLIED WI TH. IT WAS UNDER SUCH CIRCUMSTANCES THAT WHEN THE ASSESSEE WAS CORNERED B Y THE AO, HE CAME OUT WITH A REVISED RETURN ON 25-01-2005 ADMITTING THE AMOUNT OF AFORESAID LOANS AS HIS INCOME FROM OTHER SOURCES. PRIMARILY, THE RETURN F ILED ON 25-01-2005 IS ITSELF INVALID BECAUSE OF THE REASON THAT NEITHER ANY OMIS SION NOR ANY WRONG STATEMENT WAS DISCOVERED BY THE ASSESSEE IN THE ORIGINAL RETU RN OF INCOME. SECONDLY, IT WAS FILED BEYOND THE PRESCRIBED TIME. IT WAS ONLY WHEN THE ASSESSEE COULD NOT LEAD ANY EVIDENCE TO SUBSTANTIATE HIS SO CALLED CLAIM OF GENUINE LOAN CREDITORS, THAT HE CAME OUT BY SURRENDERING THIS AMOUNT FOR TAXATIO N. BY NO STANDARD THIS OFFERING OF INCOME CAN BE CONSIDERED AS VOLUNTARY. WE, THEREFORE, HOLD THAT THE INCLUSION OF THE ABOVESAID AMOUNT OF RS.17.60 LAKHS BY THE ASSESSEE IN HIS TOTAL INCOME IS AN EVIDENCE OF THE ADMISSION ABOUT THE FU RNISHING OF INACCURATE PARTICULARS OF INCOME IN THE ORIGINAL RETURN. IN FA CT, THIS AMOUNT WAS ASSESSEES OWN INCOME WHICH WAS INTRODUCED IN THE BOOKS OF ACC OUNT IN THE GARB OF LOAN CREDITORS. WE, THEREFORE, HOLD THAT THE LD. CIT(A) WAS CORRECT IN CONFIRMING THE IMPOSITION OF PENALTY ON THIS AMOUNT AS WELL. ITA NOS.2698 & 2818/M/10 B.T. SHETTY 6 8. THE REVENUE IS AGGRIEVED AGAINST THE REDUCTION I N THE PENALTY FROM 150% TO 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. I T IS SEEN THAT THE LEGISLATURE HAS ITSELF PROVIDED A MINIMUM PENALTY OF 100% OF TH E TAX SOUGHT TO BE EVADED. ONLY IN SPECIAL CIRCUMSTANCES, THE AO CAN IMPOSE P ENALTY AT A HIGHER PERCENTAGE OF THE AMOUNT OF TAX SOUGHT TO BE EVADED, BEYOND TH E PRESCRIBED MINIMUM. IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS JUSTIFIE D IN RESTRICTING THE PENALTY TO 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER IN ENTIRETY. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THE 03 RD DAY OF JUNE, 2011. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI: 03RD JUNE , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-33,MUMBAI. 4 CIT-23,MUMBAI. 5.DR,B BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NOS.2698 & 2818/M/10 B.T. SHETTY 7 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 31-05-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 01-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *