NARESH G. PAHUJA, MUMBAI V. ASST CIT CEN CIR 9, MUMBAI

ITA 2847/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8447 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Bonafide belief
• Section: 133A

Judgement Text

ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.2847/MUM/2011 (ASSESSMENT YEAR: 2007-08) SHRI NARESH G. PAHUJA, PROP. OF GIRIDHARILAL & SONS, SHOP NO.25, GEETANEEL ARCADE, 44 HILL ROAD, BANDRA (W) MUMBAI 400050 PAN: AACPP 5135 H VS. ASSTT. CIT, CENTRAL CIRCLE-9 MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY: DR. K. SHIVARAM DEPARTMENT BY: SHRI PARTHASARATHI NAIK, DR DATE OF HEARING: 24/09/2012 DATE OF PRONOUNCEMENT: 23/10/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE LEVY OF P ENALTY OF ` .2,69,000/- UNDER SECTION 271(1)(C) BY AO WHICH WAS CONFIRMED BY THE CIT (A), CENTRAL-7, MUMBAI. 2. THIS APPEAL WAS PREFERRED WITH A DELAY OF 509 DAYS. IT SEEMS THE APPEAL WAS HEARD BY THE CIT (A) ON 28.8.2009. A SSESSEE WAS NOT AWARE ABOUT THE PASSING OF THE ORDER WITH THE DATE 26.8.2009. ASSESSEE WROTE A LETTER TO THE CIT (A) ON 28 TH MARCH, 2011 INQUIRING ABOUT THE STATUS OF THE APPEAL BEFORE THE CIT (A). ON INSPECTION OF THE FILE IT WAS NOTED THAT THE ORDER WAS PASSED EA RLIER AND IT WAS POSTED AND RECEIVED BY ASSESSEES SISTER-IN-LAW ON 19.09.2009 AS PER THE RECORD OF THE CIT (A). ASSESSEE OBTAINED A COPY OF THE ORDER AS THE SAID ORDER ORIGINALLY SERVED ON ASSESSEES S ISTER-IN-LAW WAS ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 2 OF 6 NOT HANDED OVER TO ASSESSEE AND ASSESSEE WAS TOTALL Y UNAWARE OF RECEIPT OF THE ORDER. COPY OF THE ORDER WAS TAKEN O N 5.4.2011 AND AN APPEAL WAS PREFERRED ON 11.4.2011 IMMEDIATELY. T HE SAME FACTS WERE REITERATED BY WAY OF AN AFFIDAVIT BY ASSESSEE SUPPORTED BY AN AFFIDAVIT FROM THE SISTER-IN-LAW MRS. RICHA M. PAHU JA WHO IS STATED TO BE NOT EDUCATED FULLY AND NOT CONVERSANT WITH TH E IMPORTANCE OF THE ORDER AND THE PROCEEDINGS OF THE INCOME TAX. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE AFF IDAVITS ON RECORD AND THE FACT THAT THE APPEAL WAS PREFERRED A FTER GETTING COPIES OF THE ORDERS FROM THE CIT (A)S OFFICE AND ALSO THAT THE APPEAL WAS PREFERRED IMMEDIATELY WITHIN A WEEK OF RECEIVIN G THE COPY OF ORDER FROM THE CIT (A)S OFFICE, WE CONDONE DELAY A S PRAYED BY ASSESSEE AND ADMIT THE APPEAL. 4. THE FACTS RELATING TO THE LEVY OF PENALTY ARE THAT THE LOCKER NO.955 WITH M/S SECURE SAFE VAULTS LTD WAS SEARCHED AND GOLD AND DIAMOND JEWELLERY WORTH ` .22,35,010/- WAS FOUND. SURVEY PROCEEDINGS WERE CONDUCTED AT THE PROPRIETARY BUSIN ESS PREMISES OF ASSESSEE IN THE NAME OF M/S GIRIDHARILAL & SONS WHE REIN FURTHER JEWELLERY OF ` .14,15,037/- WAS FOUND. OUT OF THE TOTAL AMOUNT OF JEWELLERY FOUND AT ` .36,50,047/- IN THE COURSE OF THE STATEMENT RECORDED BY THE INVESTIGATION DEPARTMENT, ASSESSEE EXPLAINED THAT THE JEWELLERY OF ` .8 LAKHS PERTAIN TO ASSESSEES PARENTS, BROTHER, BROTHERS WIFE AND TWO DAUGHTERS OF ASSESSEES BROT HER ACQUIRED IN THEIR MARRIAGES LONG BACK. ACCORDINGLY, ASSESSEE DE CLARED AN AMOUNT OF ` .28,50,047/- AND FILED RETURN OF INCOME. IN THE COU RSE OF THE ASSESSMENT PROCEEDINGS AO ASKED FOR DOCUMENTARY EVIDENCE WITH REFERENCE TO ` .8 LAKHS OF AMOUNT CLAIMED TO BE BELONGING TO OTHER FAMILY MEMBERS. SINCE NO DOCUMENTARY EVIDENCE COULD BE ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 3 OF 6 FURNISHED, THE AMOUNT WAS BROUGHT TO TAX WITHOUT GI VING ANY CREDIT TO ASSESSEE AND ASSESSEE HAS NOT FILED ANY APPEAL A GAINST ADDITION OF ` .8 LAKHS. ON THE REASON THAT ASSESSEE HAS NOT FILED APPEAL AGAINST THE ADDITION OF ` .8 LAKHS WHICH INDICATE THAT HE HAD ACCEPTED THE ADDITION, AO CONCLUDED THE PENALTY PRO CEEDINGS BY LEVYING A PENALTY OF ` .2,69,000/-. THE CIT (A) AFTER ELABORATELY DISCUSSING THE FACTS AND THE CASE LAW CONFIRMED THE SAME THAT ASSESSEE HAS NO BONAFIDE EXPLANATION. 5. IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT ASSESS EE WAS ON BONAFIDE IMPRESSION THAT AN AMOUNT OF ` .8 LAKHS STATED TO BE BELONGING TO THE FAMILY MEMBERS WAS ACCEPTED BY THE INVESTIGATION DEPARTMENT AND ACCORDINGLY HE FILED THE RETURN AS A DMITTED IN THE STATEMENT UNDER SECTION 133A. IT WAS FURTHER SUBMIT TED THAT HAD THE INVESTIGATION DEPARTMENT NOT ACCEPTED ASSESSEE S STATEMENT ON THE DAY OF SURVEY, ASSESSEE COULD HAVE FILED THE RE TURN FOR THE WHOLE AMOUNT. SINCE RELYING ON THE BOARDS CIRCULAR, THE AMOUNTS BELONGING TO FAMILY MEMBERS WERE EXCLUDED AT THE TI ME OF SURVEY ITSELF, ASSESSEE WAS UNDER THE BONAFIDE IMPRESSION THAT THE ASSETS WHICH WERE NOT HIS WERE RIGHTLY EXCLUDED. THE LEAR NED COUNSEL REFERRING TO THE INVENTORY OF THE ITEMS, STATEMENT RECORDED DURING THE COURSE OF SURVEY AND THE RETURN OF INCOME FILED ALONG WITH THE QUESTIONNAIRE ISSUED DURING THE SCRUTINY ASSESSMENT , SUBMITTED THAT ASSESSEE WHEN ASKED FOR DOCUMENTARY EVIDENCE C OULD NOT FURNISH ANY EVIDENCE AND THEREFORE, ACCEPTED THE AD DITION OF ` .8 LAKHS. IT WAS SUBMITTED THAT PENALTY PROCEEDINGS AN D THE ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTINCT AN D ONLY BECAUSE AN ADDITION IS MADE IN ASSESSMENT PROCEEDINGS IT DO ES NOT NECESSARILY ATTRACT LIABILITY ON ACCOUNT OF PENALTY . THE LEARNED COUNSEL RELIED ON VARIOUS CASE LAW WHICH WERE RELIE D UPON BEFORE THE CIT (A) ENCLOSED IN THE PAPER BOOK FROM PAGE NO .16 TO 19. ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 4 OF 6 6. THE LEARNED DR IN REPLY HOWEVER, SUBMITTED THAT ASS ESSEE ACCEPTED THE ADDITION AND THEREFORE NON-DISCLOSURE OF ` .8 LAKHS ATTRACTS PENALTY UNDER SECTION 271(1)(C). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND THE PAPER B OOK FILED ON RECORD. AO RECORDED THE FOLLOWING WHILE MAKING A N ADDITION OF ` .8 LAKHS VIDE PARA 3 OF THE ASSESSMENT ORDER AS UND ER: 3. DURING THE COURSE OF SEARCH & SEIZURE ACTION UN DER SECTION 132(1) IN RESPECT OF LOCKER NO.955 WITH SEC URE SAFE VAULTS LTD., GOLD ORNAMENTS OF NET WEIGHT OF 2,663.400 GMS VALUED AT ` .18,62,970/-, DIAMOND JEWELLERY OF NET WEIGHT OF 177.500 GMS VALUED AT ` .3,53,372 AND SILVER ARTICLES OF 1.100KG VALUED AT ` .18,315/- WAS FOUND. SIMILARLY SURVEY UNDER SECTION 133A WAS TAKEN IN THE BUSINESS PREMISES OF ASSESSEE AND JEWELLERY OF NET WEIGHT OF 1814.150GMS VALUED A T ` .14,15,037/- WAS FOUND. THUS, TOTAL JEWELLERY WORTH ` .36,50,047/- WAS FOUND. ASSESSEE HAS DISCLOSED JEWELLERY OF ` .28,50,047/- AGAINST JEWELLERY FOUND OF ` .36,50,047/- DURING THE ACTION AND THE SAME HAS BEE N DECLARED IN THE RETURN OF INCOME FOR ASSESSMENT YEA R 2007-08 IN THE FORM OF CAPITAL ACCOUNT. IN RESPECT OF THE BALANCE JEWELLERY OF ` .8,00,000/- IT IS STATED THAT THESE JEWELLERY PERTAINS TO ASSESSEES PARENTS, BROTHER, BROTHERS WIFE AND TWO DAUGHTERS OF ASSESSEES BROT HER WHICH IS ACQUIRED IN THEIR MARRIAGE LONG BACK. HOWE VER, ASSESSEE HAS NO PROOF OF WHATSOEVER NATURE. THEREFO RE, THE BALANCE JEWELLERY OF ` .8,00,000/- FOUND IS ADDED TO THE TOTAL INCOME OF ASSESSEE AS UNEXPLAINED INVESTM ENT IN GOLD JEWELLERY FOR THE ASSESSMENT YEAR 2007-08. THE PENAL PROCEEDINGS UNDER SECTION 271(1)(C) ARE SEPAR ATELY INITIATED. 8. AS SEEN FROM THE ABOVE ORDER, IT IS VERY CLEAR THAT IN THE COURSE OF SURVEY AND THE SEARCH & SEIZURE IN LOCKER NO.955, TOTAL GOLD AND JEWELLERY WORTH ` .36,50,047/- WAS FOUND AND IN THE COURSE OF STATEMENT RECORDED AT THAT POINT OF TIME ASSESSE E DISCLOSED ` .28,50,047/-ONLY AND ACCORDINGLY FILED RETURN OF IN COME ON WHICH NO PENALTY PROCEEDINGS WERE INITIATED AS ASSESSEE H AS DISCLOSED THE AMOUNT. THE ONLY ISSUE IS WHETHER THE AMOUNT OF ` .8 LAKHS ADDED BY AO ATTRACT PENALTY UNDER SECTION 271(1)(C). AS C AN BE SEEN FROM ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 5 OF 6 THE SEQUENCE OF EVENTS ASSESSEE AT THE TIME OF SURV EY ITSELF HAS CLAIMED CREDIT OF JEWELLERY OF ` .8 LAKHS BELONGING TO THE FAMILY MEMBERS AND THE INVESTIGATION TEAM ALLOWED THE SAME . THEREFORE, IT CAN BE CONSIDERED THAT ASSESSEE WAS UNDER THE BONAF IDE IMPRESSION THAT PART OF THE JEWELLERY BELONGING TO OTHER FAMIL Y MEMBERS NEED NOT BE DISCLOSED AS HIS INCOME AND TO THE EXTENT AS SESSEE DISCLOSED THE INCOME DURING SURVEY/SEARCH HE FILED RETURN OF INCOME WITHOUT ANY FAILURE. AS SEEN FROM THE ASSESSMENT PROCEEDING S AND THE ORDER OF AO, AO DID NOT DO ANYTHING EXCEPT ASKING FOR EVI DENCE ABOUT THE JEWELLERY OF FAMILY MEMBERS. HE ALSO RECORDED THAT ASSESSEE HAS NO PROOF OF WHATSOEVER NATURE. THEREFORE, THE ABOVE AM OUNT WAS ADDED TO THE TOTAL INCOME OF ASSESSEE. SINCE THE ADDITION IS ONLY MADE ON THE REASON THAT THERE IS NO DOCUMENTARY EVIDENCE TO PROVE THAT THE JEWELLERY BELONGS TO THE FAMILY MEMBERS, THE ADDITI ON ALONE CANNOT MAKE IT A GOOD AND SUFFICIENT REASON FOR LEVY OF PE NALTY UNDER SECTION 271(1)(C). IN THE COURSE OF SURVEY/ SEARCH ITSELF, THE CLAIM WAS MADE WHICH WAS ACCEPTED BY THE INVESTIGATION OF FICER AT THE TIME OF RECORDING THE STATEMENT. HAD HE HAS ANY DOU BT ABOUT THE CLAIM OF ASSESSEE, THE DISCLOSURE COULD HAVE BEEN O N THE FULL AMOUNT. JUST BECAUSE ASSESSEE DID NOT HAVE ANY EVID ENCE TO PROVE THAT THE JEWELLERY BELONG TO OTHER FAMILY MEMBERS A ND AN ADDITION WAS MADE, IN OUR OPINION THE SAME CANNOT BE A BASIS FOR LEVY OF PENALTY. SINCE ASSESSEE HAS BONAFIDE BELIEF AND ASS ESSEES EXPLANATION THAT IT BELONGS TO THE FAMILY MEMBERS H AS NOT BEEN DISPROVED AS SUCH, WE ARE OF THE OPINION THAT THE F ACTS OF THE CASE DOES NOT ATTRACT PENALTY UNDER SECTION 271(1)(C). 9. EVEN THOUGH THE CIT (A) RELIED ON VARIOUS CASE LAW WHILE CONFIRMING THE ORDER, WE DO NOT INTEND TO DISCUSS T HE LEGAL PRINCIPLES AS BOTH THE PARTIES RELIED ON VARIOUS CA SE LAW. SUFFICE TO SAY THAT THERE IS A BONAFIDE BELIEF ON THE PART OF ASSESSEE THAT THE AMOUNT OF ` .8 LAKHS BELONGING TO THE FAMILY MEMBERS NEED NOT B E ITA NO.2847 OF 2011NARESH G. PAHUJA MUMBAI PAGE 6 OF 6 DISCLOSED. ON THESE FACTS, WE ARE OF THE OPINION TH AT LEVY OF PENALTY UNDER SECTION 271(1)(C) IS NOT WARRANTED. ACCORDING LY THE SAME IS CANCELLED. 10. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2012. SD/- SD/- (B.R. MITTAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 23 RD OCTOBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI