ACIT CENT. CIR. 3(2), CENT. RANGE - 3, MUMBAI V. SHRI NITIN M. SHAH, MUMBAI

ITA 2863/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5503 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Search and seizure
• Section: 271(1)(c); 143(3); 27

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE SH. G. S. PANNU, VP & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2863/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) ACIT CEN CIR - 3(2 ) , CENT. RANGE - 3, R. NO. 1913 , 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT. MUMBAI - 400 020 / VS. SHRI NITIN M. SHAH, B/5/6/8, NEELKANTH DHARA, 90 FEET ROAD, GHATKOPAR (EAST) M UMBAI - 400077 . ./ ./ PAN NO. AA BPS9344L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI B. S. BIST, DR / RESPONDENTBY : DR. P. DANIEL, AR / DATE OF HEARING : 31.10 .2018 / DATE OF PRONOUNCEMENT : 01.11.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 51, MUMBAI DATED 30.01.17 F OR AY 20 12 - 13 . 2 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH 2. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRECTOR AND KEY PERSON OF M/S NITIN FIRE PROTECTION INDUSTRIES LTD . A SEARCH SEIZURE ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT ON THE ASSESSEE AND HIS GROUP CONCERNS I.E. NITIN GROUP ON 06.09.2007. THE ASSESSEE IS THE CHAIRMAN AND MANAGING DIRECTOR OF M/S NITIN FIRE PROTECTION INDUSTRIES LTD. AND M/S NITIN FIRE PR OTECTION INDUSTRIES LTD . THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCOME AT RS.6,24,50,246/ - . CONSEQUENTLY THE ASSESSMENT U/S 143(3) HAD BEEN COMPLETED ON 30.09.2008 AT THE ASSESSED INCOME OF RS.12,06,72,926/ - DURING THE COURS E OF ASSESSMENT - PROCEEDINGS THE AO HAD MADE THE FOLLOWING ADDITIONS: - 1. INCOME EARNED BY WAY OF INFLATION OF EXPENSES FOR ACQUISITION OF FIXED ASSETS IN THE CASE OF M/S NITIN CYLINDERS LTD. 3,13,38,798/ - 2 INCOME EARNED BY WAY OF BOGUS EXPENDITURE SHOWI NG PURCHASE OF STEEL. 2,66,03,042/ - 3. VALUATION OF PERQUISITES 1,65,840/ - PENALTY PROCEEDINGS U/S 271(1) C WERE ALSO INITIATED IN RESPECT OF THE ABOVE ADDITIONS. AGGRIEVED BY THE ABOVE ADDITION 3 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH MADE BY THE AO, THE ASSESSEE HAD FILED QUANTUM APPEAL BEFORE THE THEN C IT(A). THE LD CIT(A) HAD CONFIRM ED THE FOLL OWING ADDITIONS VIDE HIS ORDER DATED 05.03.2013. 1 INCOME EARNED BY WAY OF BOGUS EXPENDITURE SHOWING PURCHASE OF STEEL. 2,66,03,042/ - 2. VALUATION OF PERQUISITES 1,65,840/ - AGAINST THE ORDER OF THE FIRST APPELLATE AU THORITY, THE DEPARTMENT HAD FILED AN APPE AL BEFORE THE HON'BLE ITAT, MUMB AI. THE HONBLE ITAT, MUMBAI B - BENCH UPHELD THE ORDER OF CIT(A) VIDE ORDE R DATED 30.06.2015. LATER, THE AO LEVIED PENALTY U/S 27 1(1)(C ) AMOUNT ING TO RS. 91 ,00,000/ - AT THE RATE OF 100% OF TAX SOUGHT LO BE EVADED ON THE ABOVE UNDISCLOSED INCOME OF RS. 2,67,68,882/ - . 3 . AGGRIE VED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES , ALLOWED THE APPEAL OF THE ASSESSEE . 4 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH 4 . NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL . 5 . THE SOLITARY GROUND RAISED BY THE REVENUE RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN DELETING THE PENALTY LEVIED BY THE AO, WITHOUT APPRECIATING THE FACT THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT BONAFIDE AS AFTER SEARCH ACTION, INCRIMINATING MATERIAL WAS FOUND AND SEIZED TO INDICATE THAT THE ASSESSEE HAD DEFRAUDED THE REVENUE AND NOT OFFERED THE TRUE AND CORRECT INCOME IN THE RETURN FILED AND HENCE EXPLANATION TO SECTION 271(1)(C) WAS CLEARLY ATTRACTED. 6 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE W E DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 5 TO 10 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. 5 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH CIT(A) IS CONTAI NED IN PARA NO. 8 TO 10 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 8. AS A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) HAS BEEN CARRIED OUT IN THE CASE OF THE ASSESSEE AS ON 06/09/2007 , WHICH FALLS AFTER 01/07/2007 , THE ASSESSEE'S CASE FOR LEVY OF PENALTY COULD BE CONSIDERED ONLY UNDER SECTION 271AAA OF THE ACT AND NOT UNDER SECTION 271(1) (C) . NEEDLESS TO SAY THAT SUB CLAUSE 3 TO THIS SECTION CLEARLY PROHIBITS INITIATION OF ANY PENALTY U/S 271 (1)(C) OF THE ACT, WHICH IS REPRODUCED AS UNDER FOR THE SAKE OF CLARITY: - (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB SECTION(1). SINCE THE AO HAS INITIATED PENALTY U/S 271(1)( C) AND HAS ALSO LEVIED PENALTY U/S. 271(L)(C ), THE SAME BECOMES UNSUSTAINABLE IN LAW AND THEREFORE THE SAME IS DIRECTED TO BE DELETED . 9. FROM THE FACTS OF THE CASE, IT FURTHER APPEARS THAT THE ASSESSEE HAD ADMITTED A SUM OF RS. 10,00,00,000/ - DURING THE COURSE OF SEARCH AND HAD LATER GIVEN BIFURCATION OF SUCH AMOUNT SURRENDERED WHICH INCLUDES BOGUS PURCHASES MADE, ON WHICH THE ABOVE PENALTY HAS 6 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH BEEN LEVIED . SUBSEQUENTLY THESE AMOUNTS HAVE BEEN INCLUDED BY THE ASSESSEE IN THE RETURN FILED SUBSEQUENT TO S EARCH AND DUE TAXES ON THE SAME HAVE BEEN PAID AND -- THEREFORE THE ASSESSEE IS ALSO ELIGIBLE FOR IMMUNITY UNDER SUB CLAUSE (2) TO SECTION 271AAA . HOWEVER THAT IS NOT THE ISSUE I AM DECIDING HERE . THE MAIN ISSUE REMAINS THAT THE AO INITIATED PENALTY UNDER WRONG PROVISIONS OF SECTION 271(1) C OF THE ACT AS AGAINST THE CORRECT PROVISIONS OF SECTION 271AAA AND THEREFORE THE SAME BECOMES UNSUSTAINABLE IN LAW. 10. IN VIEW OF THE ABOVE DISCUSSION AND LEGAL POSITION I HOLD THAT THE PROVISIONS OF SECTION 271(1) C WERE INCORRECTLY INVOKED BY THE AO AND THE APPROPRIATE PROVISIONS FOR LEVY OF PENALTY WERE U/S 271AAA OF THE ACT AND THEREFORE SUCH PENALTY IS UNSUSTAINABLE IN LAW . ACCORDINGLY PENALTY OF RS. 91,00,000/ - LEVIED U/S 271(1) C OF THE ACT IS DIRECTED TO BE DE LETED . 11. IN THE RESULT, THIS APPEAL IS ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT A SEARCH AND SEIZURE ACTION U/S 132(1) WAS CARRIED OUT IN THE CASE OF THE 7 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH ASSESSEE ON 06/09/2007 AND THE PENALTY U/S 271(1)(C) WAS LEVIED BY THE REVENUE AMOUNTING TO RS. 91 LAKHS @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE UNDISCLOSED INCOME OF RS. 2,67,68,882/ - . WHEREAS LD . CIT(A) AFTER APPRECIATING THE FACTS OF THE PRESENT CASE HAD RIGHTLY CONCLUDED THAT IN ASSESSEE'S CASE , THE LEVY OF PENALTY COULD ONLY BE CONSIDERED U/S 271AAA OF THE A CT AND NOT U /S 271(1) (C). SUB - CLAUSE 3 OF SECTION 271AAA CLEARLY PROHIBITS INITIATION O F ANY PENALTY U/S 271 (1)(C) OF THE ACT, WHICH IS REPRODUCED BELOW : - (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB SECTION(1). SINCE , IT IS AN ADMITTED FACT THAT THE AO HAD INITIATED AND LEVIED PENALTY U/S 271(1)(C) , WHICH IS UNSUSTAINABLE IN THE EYES OF LAW, THEREFORE IN VIEW OF SUB CLAUSE - 3 OF SECTION 271AAA, THE SAID PENALTY LEVIED BY AO U/S. 271(L)(C ) CORRECTLY HELD TO BE UNS USTAINABLE IN LAW AND WAS THUS DELETED. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE 8 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH FINDINGS SO RECORDED BY LD . CIT(A). THEREFORE, WE SEE NO REASON S TO INTERFERE INTO OR DEVIATE FR OM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , CONSIDERING THE FACTS OF THE CASE AS WELL AS FOLLOWING THE DECISION OF THE COORDINATE BENCHES AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY TH E LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . 7 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST NOV , 2018 SD/ - SD/ - ( G. S. PANNU ) (SANDEEP GOSAIN) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED : 01 . 11 .201 8 SR.PS . DHANANJAY 9 I.T.A. NO. 2863 /MUM/201 7 SHRI NITIN M. SHAH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI