The ACIT.Central Circle-2, Surat V. Shri Shreenarayan Sitaram Mundra, Surat

ITA 2878/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5816 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MAJUMDAR
• Keywords: Income from undisclosed sources
• Section: 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2878/AHD/2013 ( / ASSESSMENT YEAR : 2010-11) THE ACIT CENTRAL CIRCL-2 MAJURAGATE, SURAT / VS. SHRI SHREENARAYAN SITARAM MUNDRA 7 TH FLOOR AMBAJI MARKET RING ROAD, SURAT $ ./ ./ PAN/GIR NO. : ABVPM 9707 C ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SHRI PRADEEP KUMAR MAJUMDAR, SR.DR ($'*) / RESPONDENT BY : SHRI HARDIK VORA, AR +,*- / DATE OF HEARING 02/05/2017 ./0*- / DATE OF PRONOUNCEMENT 18/ 05/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE PRESENT APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, AHMEDAB AD [CIT(A) IN SHORT] DATED 30/09/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11 WHEREIN PENALTY IMPOSED UNDER S.271AAA OF THE INCOM E TAX ACT, 1961 ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 2 - (HEREINAFTER REFERRED TO AS 'THE ACT') RS.20 LAKHS WAS DELETED BY THE CIT(A). 2. BRIEFLY STATED, THE ASSESSEE IS AN INDIVIDUAL EN GAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TEXTILES. A SEARCH ACTION UNDER S.132 OF THE I.T.ACT WAS CARRIED OUT ON 11/03/2010 IN THE CA SE OF ASSESSEE. DURING THE COURSE OF SEARCH, THE ASSESSEE ADMITTED AN UNACCOUNTED INCOME OF RS.2 CRORES AND INCLUDED THE AFORESAID UN ACCOUNTED INCOME WHILE FILING THE RETURN OF INCOME PURSUANT TO NOTIC E UNDER S.153A OF THE ACT. THE INCOME RETURNED AT RS.2,21,69,566/- UNDER S.153A OF THE ACT WAS ASSESSED AT THE SAME FIGURE AND PENALTY UNDER S .271AAA WAS IMPOSED BY THE ASSESSING OFFICER (AO) FOR AY 2010-1 1 VIDE ORDER DATED 29/05/2012 ON THE GROUND THAT CONDITIONS SPECIFIED IN SECTION 271AAA FOR EXONERATION FROM PENALTY HAS NOT BEEN SATISFIE D BY THE ASSESSEE. HE ACCORDINGLY IMPOSED PENALTY OF RS.20 LAKHS ON THE U NDISCLOSED INCOME FOUND AS A RESULT OF SEARCH AT RS.20LAKHS. 3. THE ASSESSEE PREFERRED APPEAL AGAINST THE AFORES AID PENALTY ORDER OF THE AO BEFORE THE CIT(A). 4. THE CIT(A) ANSWERED THE APPEAL IN FAVOUR OF THE ASSESSEE WITH OUTRIGHT DELETION OF PENALTY UNDER S.271AAA OF THE ACT. THE CIT(A) FOUND THAT EXCEPTION PROVIDED IN SECTION 271AAA FOR NON-IMPOSITION OF ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 3 - PENALTY HAS BEEN DULY FULFILLED. THE RELEVANT PARA OF THE ORDER OF THE CIT(A) READS AS UNDER:- 6. I HAVE CAREFULLY PERUSED THE PENALTY ORDER AS W ELL AS WRITTEN SUBMISSIONS MADE BY THE A.R. ON BEHALF OF THE APPEL LANT AND OTHER MATERIAL ON RECORD. IT IS OBSERVED THAT DURING THE COURSE OF SEARCH IN THE CASE OF THE APPELLANT GROUP OF CASES, RS. 6 CRORES WAS ADMITTED U/S. 132(4) AS UNDISCLOSED INCOME OF THE APPELLANT GROUP WHEREIN THE APPELLANT'S SHARE WAS RS. 2 CRORE. IT WAS ADMITTED IN THE STATEMENT THAT THE INCOME WAS DERIVED FROM THE TAXABLE BUSINESS. I T IS SEEN THAT THE PROVISIONS OF SECTION 271AAA CLEARLY SPECIFY THAT - SECTION 271AAA(2) - 271 AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF : JUNE, 2007 [BUT BEFORE THE 1ST DAY OF JULY, 2012], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION T O TAX, IF ANY, PAYABLE BY HIM, A SUM COMPUTED AT THE RATE OF TEN P ER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB-SECTION (4) OF SECTION 132. ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (I) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOS ED INCOME WAS DERIVED; AND ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 4 - (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME.' 6.1 IN THE CASE OF THE APPELLANT, IT IS SEEN THAT T HE UNDISCLOSED INCOME OF RS. 2 CRORE WAS ADMITTED DURING THE COURSE OF SEARC H AND IT WAS MENTIONED BY THE ASSESSEE IN HIS STATEMENT THAT IT WAS EARNED FROM TAXABLE BUSINESS. IT WAS ALSO ADMITTED THAT THIS IN COME OF RS.6 CRORES WAS UNACCOUNTED INCOME OF THE GROUP AND THE SAME WAS NO T REFLECTED IN ANY BOOKS OF ACCOUNTS OF ANY PERSON OR CONCERN OF THE A PPELLANT GROUP. MOREOVER, IT HAS ALSO BEEN CLEARLY SUBSTANTIATED BY THE APPELLANT IN HIS STATEMENT THAT THE DECLARATION OF SAID UNDISCLOSED INCOME EARNED WAS BASED ON ENTRIES AS MENTIONED IN THE IMPOUNDED DOC UMENTS INVENTORIZED AS ANNEXURE B1-1, B1-2 & B-1-3 IN THE FORM OF 'RECE IVABLES' AND DUE TAXES HAVE BEEN PAID ON SAID DECLARED INCOME WHILE FILING THE RETURN OF INCOME. THEREFORE, IN MY CONSIDERED VIEW, THE PRE R EQUISITES AS MENTIONED IN SECTION 271 AAA ARE SEEN TO HAVE BEEN FULFILLED IN THE CASE OF THE APPELLANT. 6.2 VARIOUS COURT DECISIONS HAVE ALSO ADJUDICAT ED ON THIS ISSUE E.G. - A) IN THE CASE OF CIT VS. MAHENDRA C.SHAH (2008) 299 I TR 305 (GUJ.) THOUGH THIS DECISION WAS ON PENALTY U/S.271(1)(C), IT WAS HELD BY THE HON'BLE COURT THAT IT WAS INCUMBENT UPON THE AU THORIZED OFFICER TO EXPLAIN THE PROVISIONS EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZED OFFICER CANNOT STOP SH ORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REVENUE TO TAK E ADVANTAGE OF SUCH LAPSE IN THE STATEMENT AND IT WAS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE WHETHER LITERATE OR ILLITERATE, TO BE S PECIFIC AND TO THE POINT REGARDING CONDITIONS STIPULATED BY EXCEPTION NO.2 WHILE MAKING THE STATEMENT U/S. 132(4) OF THE ACT, ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 5 - ACCORDING TO THE HON'BLE COURT THAT EVEN IF THE STA TEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND THE TAX THEREON IS PAID, THERE WOULD B E SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL UNDER EXCEPTION 2 OF EXPLANATION 5. IT IS ALSO NOTICED THAT THE SPIRIT OF RATIO OF HON' BLE HIGH COURT IN THE CASE OF MAHENDRA C.SHAH, IS CLEAR AND BY ANALOG Y, THE PENALTY U/S.271AAA IS NOT LEVIABLE IN THE EASE OF THE APPEL LANT AS THE FACTS IN THE INSTANT CASE ARE APPLICABLE ALL THE MORE, AP PLYING WITH THE EXEMPTION PROVISIONS OF SUB SECTION (2) OF SECTION 271AAA. B) THERE ARE FEW MORE COURT DECISIONS WHERE THE HON 'BLE COURTS HAVE HELD THAT - I) SULOCHANADEVI A. AGRAWAL (ITA NO. 1052/AHD/2012) IN THIS CASE, THE ASSESSEE HAD VOLUNTARILY DISCLOSE D A SUM OF RS.50 LACS DURING THE SEARCH WITH A REQUEST THAT THE PENA LTY SHOULD NOT BE LEVIED AND THE THE POST SEARCH PROCEEDINGS, THE S PECIFIC QUESTION REGARDING MANNER OF EARNING OF UNDISCLOSED IN COME OR SUB- STANTIATION THEREOF WAS NOT PUTFORTH BY THE REVE NUE AND THE TAXES WERE DULY PAID. II) SIMILAR VIEW HAS BEEN HELD BY THE HON'BLE ITAT., MUMBAI IN THE CASE OF GULABRAI V. GANDHI V. ACIT (2003) 84 IT D 370 (MUM.). IT SAID THAT IF THE AUTHORIZED OFFICER HAS NOT RAISED ANY QUERY REGARDING MANNER OF EARNING INCOME, THE ASSES SEE NOT BEING BLAMED LATER ON FOR NOT SPECIFYING THE MANNER IN WH ICH THE INCOME HAD BEEN DERIVED. 6.3. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE AND THE SETTLED VIEWS OF VARIOUS HON'BLE COURTS ESPECIALLY JURISDICTIONAL ITAT & HIGH COURT WHICH HAS BEEN FOLLOWED BY OTHER CSLT(A) IN OTHER CASES ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 6 - ALSO, AS REFERRED TO BY THE LEARNED A.R. IN HIS SUB MISSIONS (SUPRA), I AM OF THE CONSIDERED VIEW THAT SINCE ALL THE PRE REQUI SITES OF SECTION 271AAA(2) HAVE BEEN FULFILLED, I.E. THERE WAS DISCL OSURE OF THE AMOUNT DURING THE SEARCH, THE MANNER OF WHICH WAS CLEARLY SPECIFIED AND IT WAS SUBSTANTIATED ALSO BY WAY OF SUPPORTING DOCUMENTS A ND THE DUE TAX WAS PAID. HENCE, THERE WAS NO CASE FOR LEVY OF PENALTY U/S.271AAA OF THE ACT WHICH IS HEREBY DELETED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD.DR FOR THE REVENUE SUBMITTED THAT THE CON DITIONS PRESCRIBED UNDER S.271AAA(2) OF THE ACT HAS NOT BEE N SATISFIED BY THE ASSESSEE. THE ASSESSEE FAILED TO SATISFY THE PRE-R EQUISITES LAID DOWN IN SECTION 271AAA(2) AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXCEPTION FROM PENALTY UNDER THE AFORESAID PROVISIO N. 7. THE LD.AR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE CIT(A) AND DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN ITA NO.1147/AHD/2012 ORDER DATED 6/11/2015. THE LD.AR SUBMITTED THAT NO SPECIFIC QUESTION HAS BEEN PUT IN THE STATEMENT REC ORDED UNDER S.132(4) ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME HA S BEEN DERIVED. THE SO-CALLED UNDISCLOSED INCOME AS PER STATEMENT UNDER S.132(4) OF THE ACT WAS INCLUDED IN THE RETURN OF INCOME AND TAXES DUE THEREON HAS BEEN PAID ALONG WITH RETURN OF INCOME. THEREFORE, THERE IS NO WARRANT FOR THE ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 7 - AO TO INVOKE SECTION 271AAA AND IMPOSE PENALTY OF R S.20 LAKHS ON THE ASSESSEE. THE LD.AR SUBMITTED THAT THE CIT(A) APPR ECIATED THE FACTS IN PERSPECTIVE AND DELETED THE PENALTY. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. 9. THE GROUND OF APPEAL RAISED BY REVENUE READS A S UNDER:- THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE PENALTY OF RS.20,00,000/- IMPOSED UNDER SECTION 271 AAA OF THE I.T.ACT, 1961, EVEN THOUGH THE ASSESSEE HAS FAILED TO SATISFY THE PREREQUISITE LAID DOWN IN SECTION 271AAA(2)(I) OF T HE ACT FOR BEING ELIGIBLE TO BE EXEMPTED FROM PENALTY UNDER THIS SEC TION. 9.1. WE FIND FROM THE GROUND OF APPEAL RAISED BY THE REVENUE NOTED ABOVE THAT THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) ON THE GROUND THAT PRE-REQUISITES AS SPECIFIED UNDER S.271 AAA(2)(I) HAS NOT BEEN SATISFIED. AS A COROLLARY, THE REVENUE IS N OT AGGRIEVED BY NON- FULFILLMENT OF OTHER CONDITIONS STIPULATED IN CLAUS E (II) & (III) OF SECTION 271AAA(2). 9.2. FOR THE SAKE OF CONVENIENCE, RELEVANT PORTIO N OF SECTION 271AAA(2) IS REPRODUCED HEREUNDER:- (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 8 - (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLO SED INCOME WAS DERIVED; AND (III) . 9.3. AS OBSERVED EARLIER, THE REVENUE IS AGGRIEVED BY NON-COMPLIANCE OF THE SECTION 271AAA(2)(I) OF THE ACT. AS PER SE CTION 271AAA(2)(I), ONE OF THE CONDITIONS FOR OBTAINING RELIEF FROM THE IMPOSITION OF PENALTY UNDER S.271AAA IS THAT THE ASSESSEE IN THE STATEMEN T RECORDED UNDER S.132(4) OF THE ACT ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. SEC TION 271AAA(2)(II) CASTS OBLIGATION ON THE PART OF THE ASSESSEE TO SU BSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. THUS, SU B-SECTION (2)(II) FINDS ITS GENESIS FROM SUB-SECTION 2(I) OF THE ACT. ADMITTEDLY, THE REVENUE IS NOT AGGRIEVED BY THE CONDITION STIPULATE D IN SUB-SECTION 2(II) OF THE ACT. IMPLIEDLY, THE REVENUE ADMITS THAT THE ASSESSEE HAS NOT FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME DERIVED. THIS BEING SO, IT FOLLOWS BY NECESSARY IMPLICATION THAT THE ASSESSEE HAS NOT FAILED TO SPECIFY THE MANNER AT THE FIRST PLACE WHEN SUBSTANTIATION THEREOF HAS NOT BEEN CALLED INTO QUESTION BY THE RE VENUE. THUS, THE CASE OF THE REVENUE REQUIRES TO BE SUMMARILY DISMISSED O N THIS GROUND ALONE. NOTWITHSTANDING, WE FURTHER NOTE THAT THE ASSESSEE HAS REPLIED TO THE QUERY RAISED WHILE RECORDING THE STATEMENT AS CALLE D FOR. THE REVENUE DOES NOT APPEAR TO HAVE QUIZZED THE ASSESSEE FOR SA TISFYING THE MANNER IN WHICH THE PURPORTED UNDISCLOSED INCOME HAS BEEN DER IVED. THE INCOME ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 9 - CONSIDERED AS AN UNDISCLOSED INCOME IN THE STATEMEN T UNDER S.132(4) HAS BEEN DULY INCORPORATED IN THE RETURN FILED PURSUANT TO SEARCH. THEREFORE, THE REVENUE IN OUR VIEW NOW CANNOT PLEAD DEFICIENCY ON THE PART OF THE ASSESSEE TO SPECIFY THE MANNER WHICH HAS NOT BEEN CALLED INTO QUESTION AT THE TIME OF SEARCH. WE SIMULTANEOUSLY NOTE THAT NO WHERE IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER, THE REVEN UE HAS MADE OUT A CASE THAT THE MANNER OF EARNING UNDISCLOSED INCOME WAS E NQUIRED INTO POST SEARCH STAGE EITHER. THE REVENUE HAS NOT POINTED O UT ANY QUERY WHICH REMAINED UNREPLIED OR EVADED IN THE COURSE OF SEARC H OR POST SEARCH INVESTIGATION. THEREFORE LOOKING FROM ANY ANGLE, I T IS DIFFICULT TO HOLD IN FAVOUR OF THE REVENUE. ACCORDINGLY, WE DECLINE TO INTERFERE IN THE ORDER OF THE CIT(A). 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 18/ 05/2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 18/ 05 /2017 4..+,.+../ T.C. NAIR, SR. PS ITA NO.2878/AHD /2013 ACIT VS. SHRI SHREENARAYAN SITARAM MUNDRA ASST.YEAR 2010-11 - 10 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-II, AHMEDABAD 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 8.5.17 (DICTATION-PAD 11- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11.5.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.18.5.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18.5.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER