The ACIT, Ahmedabad Circle-3, Ahmedabad V. Shri Bankim Chandulal Modi, Ahmedabad

ITA 3431/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9443 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Income from undisclosed sources; Revised return
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D.AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA NO.3431/AHD/2007 [ASSTT. YEAR : 2005-2006] ACIT, CIR.3 AHMEDABAD. VS. SHRI BANKIM CHANDULAL MODI 1462/1, NR.MUNICIPAL LIBRARY PANDITJIS POLE, RAIPUR AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAILENDRA SHARMA ASSESSEE BY : SHRI VIJAY RANJAN O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-X, AHMEDABAD DATED 15-6-2007 ARISING OUT OF THE ORDER OF THE DCIT, CENT.CIR.1, AHMEDABAD PASSED UNDER SECTION 271(1)(C) OF THE ACT . IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING SOLE GROUND: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS.10,15,000/- 2. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT DURING THE ROUTINE CHECK ON THE NIGHT OF 4 TH OCTOBER, 2004, THE POLICE OFFICIALS OF VATWA, GIDC POLICE STATION FOUND THAT THE ASSESS EE WAS CARRYING A SUM OF RS.31,00,000/- IN TWO COTTON BAGS. DURING THE INTE RROGATION, THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE AND THE OWNER SHIP OF THE MONEY SO FOUND. THEREFORE, ON 5-10-2004, THE POLICE AUTHORITIES INF ORMED THE INCOME TAX DEPARTMENT ABOUT THE INCIDENCE. ON RECEIPT OF THE INFORMATION, THE DEPARTMENT TOOK ACTION UNDER SECTION 132(4) OF THE ACT AND SEI ZED THE SUM OF RS.31 LAKHS. DURING THE COURSE OF STATEMENT UNDER SECTION 132(4) , THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF A SUM OF RS.31 LAKHS. IN THE RETURN OF ITA NO.3431/AHD/2007 -2- INCOME, THE ASSESSEE DECLARED THE INCOME OF RS.18 L AKHS ONLY AND TRIED TO EXPLAIN THE SOURCE OF REMAINING AMOUNT OF RS.13 LAK HS. HOWEVER, WHEN DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF REMAINING RS.13 LAKHS, HE FILED REVISED RETURN OF I NCOME FOR ENTIRE SUM OF RS.31 LAKHS AS INCOME OF THE ASSESSEE. THE ASSESSM ENT WAS COMPLETED ON THE UNDISCLOSED INCOME OF RS.31 LAKHS WHICH WAS ACCEPTE D BY THE ASSESSEE. THAT THE AO LEVIED PENALTY UNDER SECTION 271(1)(C) OF TH E ACT AMOUNTING TO RS.10,15,000/-. HOWEVER, THE CIT(A) CANCELLED THE PENALTY FOLLOWING EXPLANATION-5 TO SECTION 271(1)(C). THE LEARNED DR SUBMITTED TH AT ON THE FACTS OF THE ASSESSEES CASE, EXPLANATION-5 TO SECTION 271(1)(C) IS NOT APPLICABLE BECAUSE THE ASSESSEE DID NOT DECLARE THE SOURCE OF INCOME AND MOREOVER, THE ASSESSEE ALSO DID NOT PAY THE TAX ON THE INCOME OF THE RS.31 LAKHS OFFERED BY THE ASSESSEE. IN SUPPORT OF ITS CONTENTION, HE REL IED UPON THE FOLLOWING DECISIONS. I) COMMISSIONER OF INCOME-TAX VS VIDYAGAURI NATVERLAL (GUJ) 238 ITR 91 II) ASHOK KUMAR GUPTA VS COMMISSIONER OF INCOME-TAX (P &H) 287 ITR 376 III) INDUS ENGG. CO. VS. ACIT (INVEST), 184 TAXMAN 269 ( BOM) 3. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, RELIED UPON THE ORDER OF THE CIT(A) AND HE HAS STATED THAT NOW THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH, 299 ITR 305 ( GUJ). THAT THE HONBLE GUJARAT HIGH COURT HAS SPECIFICALLY CONSIDERED THE IDENTICAL ISSUE AND HELD THAT EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER I N WHICH THE INCOME IS DERIVED, THE ASSESSEE WOULD BE ENTITLED TO BENEFIT PROVIDED UNDER EXPLANATION-5 TO SECTION 271(1)(C). WITH REGARD TO PAYMENT OF TA X, IT IS STATED BY THE LEARNED COUNSEL THAT THE CASH OF RS.31 LAKHS OF THE ASSESSE E WAS SEIZED. IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE ALONG W ITH REVISED RETURN, IT WAS MENTIONED THAT THE TAX PAYABLE ON THE INCOME OF RS. 31 LAKHS WAS RS.10,14,238/- AND AFTER ADJUSTING THE CASH SEIZED OF RS.31 LAKHS, THE ASSESSEE ITA NO.3431/AHD/2007 -3- IS ENTITLED TO REFUND OF RS.20,85,712/-. THUS, THE ASSESSEE MADE A REQUEST FOR THE ADJUSTMENT OF CASH SEIZED AGAINST TAX PAYABLE O N THE RETURN OF INCOME. IN THE CASE OF GOPAL CHAND KHANDELWAL VS. ACIT, 52 ITD 661, THE ITAT DELHI BENCH HAS HELD THAT THE CASH SEIZED MUST BE ADJUSTE D AGAINST THE TAX PAYABLE BY THE ASSESSEE. THE ITAT HAS ALSO HELD THAT IF THE A SSESSEE REQUESTS, THE SAME SHOULD BE TREATED AS ADVANCE TAX PAYABLE BY THE ASS ESSEE. IN VIEW OF THE ABOVE, IT IS CONTENDED BY THE LEARNED COUNSEL THAT THE ASS ESSEE HAS FULFILLED BOTH THE CONDITIONS AS SPECIFIED BY THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH, 299 ITR 305 (GUJ). 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE CIT(A) HAS CANCELLED THE PENALTY FOLLOWING THE DECISION OF ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL, 278 ITR 454 (ALL). THE RELE VANT FINDINGS OF THE CIT(A) READS AS UNDER: 5. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLANT AND ALSO THE VARIOUS CASE LAWS IN SUPPORT OF HIS CONTENTION AND I FIND THAT EXPLANATION-I IS NOT ATTRACTED IN T HE CASE OF APPELLANT BECAUSE THERE IS NO ADDITION/DISALLOWANCE AS SUCH M ADE IN THE ORDER. WHATEVER WAS RETURNED BY THE APPELLANT IN THE REVIS ED RETURN HAS BEEN ACCEPTED BY THE AO. EXPLANATION-I IS APPLICABLE ON LY WHEN THERE ARE ADDITIONS OR DISALLOWANCES MADE BY HE AO. SO,, THE RE IS NO QUESTION OF EXPLANATION TO BE OFFERED BECAUSE THERE IS NO ADDIT ION OR DISALLOWANCE. THEREFORE, APPLICATION OF EXPLANATION-1 TO SECTION 271(1)(C) IS NOT RELEVANT IN THIS CASE. EXPLANATION-5 TO SECTION 27 1(1)(C) IS RIGHTLY INVOKED. HOWEVER, IN THE CASE OF THE APPELLANT IS DULY COVERED UNDER CLAUSE-2 TO EXPLANATION-5. THE APPELLANT HAS GIVEN A STATEMENT U/S.132(4) BEFORE THE DDIT ON THE DATE OF SEARCH TH AT THE CASH SEIZED BELONGS TO HIM AND IT HAS EARNED BY HIM THROUGH UND ISCLOSED SOURCES. HE HAS ADMITTED THAT THERE IS NO BOOKS OF ACCOUNTS MAINTAINED BY HIM FOR THIS INCOME. IN THE STATEMENT U/S.132(4) ON TH E DATE OF SEARCH, THERE IS ADMISSION BY THE APPELLANT REGARDING THE CASH OF RS.31,00,000/-. HOWEVER DURING THE PROCEEDINGS BEFORE THE AO, HE CH ANGED HIS STAND. BUT, ULTIMATELY HE SURRENDERED THE TOTAL INCOME AS HIS CASH INCOME FROM UNDISCLOSED SOURCES PARTLY THROUGH ORIGINAL RETURN AND FINALLY IN THE REVISED RETURN. SO, WHATEVER HE STATED IN HIS STAT EMENT U/S.132(4) HAS BEEN FINALLY COMPLETED BY FILLING THE REVISED RETUR N AND THE STAND OF THE ITA NO.3431/AHD/2007 -4- APPELLANT IS FULLY COVERED BY THE ALLAHABAD HIGH CO URT DECISION CITED SUPRA, 278 ITR 454. HOWEVER, WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MA HENDRA C. SHAH (SUPRA). IN THAT CASE ALSO THE REVENUE AUTHORITIES HAVE LEVIED PENALTY BECAUSE THE ASSESSEE HAS NOT SPECIFIED THE MANNER IN WHICH THE INCOME WA S EARNED. THE PENALTY WAS CANCELLED BY THE ITAT AND ON APPEAL BY THE REVENUE, HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE CANCELLATION OF PENALTY BY THE TRIBUNAL IS VALID. THE RELEVANT FINDINGS OF THE HONBLE JURISDICTIONAL HIG H COURT ARE AS UNDER: WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHOR ISED OFFICER IT IS INCUMBENT UPON THE AUTHORISED OFFICER TO EXPLAIN TH E PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUT HORISED OFFICER CANNOT STOP SHORT AT A PARTICULAR STAGE SO AS TO PERMIT THE REV ENUE TO TAKE ADVANTAGE OF SUCH A LAPSE IN THE STATEMENT. THE REASON IS NOT FA R TO SEEK. IN THE FIRST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QU ESTION AND ANSWER FORM AND THERE WOULD BE NO OCCASION FOR AN ASSESSEE TO STATE AND MAKE AVERMENTS IN THE EXACT FORMAT STIPULATED BY THE PROVISIONS CONSIDERI NG THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED. SECONDLY, CONSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LI TERATE OR ILLITERATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY THE SECOND EXCEPTION WHILE MAKING STATEMENT UNDER SECTION 132( 4). EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE WOULD BE SUBST ANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT. SEARCH OPERATIONS TOOK PLACE AT THE PLACE OF D ON J ULY 3, 1987. ADMITTEDLY, THE ASSESSEE WAS ALSO PRESENT AT THAT POINT OF TIME AT THE SAID PREMISES. A PERSONAL SEARCH OF THE ASSESSEE WAS UNDERTAKEN AND DIAMONDS WORTH RS. 5,06,712 WERE FOUND FROM THE PERSON OF THE ASSESSEE AND SEIZED. O N FEBRUARY 25, 1991, ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED ON A TOTAL INCOME OF RS. 5,77,600. A RETURN OF INCOME DECLARING TOTAL IN COME OF RS. 20,880 WAS FILED ON OCTOBER 17, 1989. THIS WAS FOLLOWED BY A R EVISED RETURN FILED ON SEPTEMBER 27, 1990, DECLARING TOTAL INCOME OF RS. 5 ,27,600, INCLUDING THE VALUE OF DIAMONDS FOUND FROM THE PERSON OF THE ASSE SSEE, I.E., WORTH RS. 5,06,712. THE ASSESSING OFFICER INITIATED PENALTY P ROCEEDINGS AND LEVIED PENALTY. THE TRIBUNAL CANCELLED THE PENALTY. ON A R EFERENCE : HELD ,_ THAT IN THE PRESENT CASE, ADMITTEDLY THE AS SESSMENT YEAR BEING 1988-89 AND THE SEARCH HAVING TAKEN PLACE ON JULY 3, 1987, THE RETURN OF INCOME WAS NOT DUE BEFORE JULY 31, 1988. SO FAR AS THE VALUE O F DIAMONDS WAS CONCERNED, THE ASSESSEE, HAVING MADE A DECLARATION UNDER SECTI ON 132(4) AND PAID TAXES THEREON, HAD FULFILLED ALL THE CONDITIONS FOR AVAIL ING OF THE BENEFIT OF IMMUNITY ITA NO.3431/AHD/2007 -5- FROM LEVY OF PENALTY AS PROVIDED UNDER EXPLANATION 5 TO SECTION 271(1)(C). CANCELLATION OF THE PENALTY WAS VALID. 5. FROM THE ABOVE, WE FIND THAT IN THE ABOVE CASE A LSO THE ASSESSEE IN THE ORIGINAL RETURN DID NOT DISCLOSE THE VALUE OF DIAMO ND SEIZED. BUT THE SAME WAS DISCLOSED BY FILING THE REVISED RETURN. MOREOVER, IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT, THE MANNER IN WHICH THE INCOME W AS EARNED WAS ALSO NOT DISCLOSED. HOWEVER, HONBLE JURISDICTIONAL HIGH CO URT HAS HELD THAT IF THE INCOME IS DECLARED AND TAX PAID THEREON, THERE WOUL D BE SUBSTANTIAL COMPLIANCE AND EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANN ER IN WHICH THE INCOME WAS DERIVED, THE BENEFIT OF EXPLANATION-5 TO SECTION 271(1)(C) CANNOT BE DENIED. THE FACT OF THE ASSESSEES CASE IS IDENTICAL. IN T HE ASSESSEES CASE ALSO IN THE STATEMENT RECORDED UNDER SECTION 132(4), THE ASSESS EE ADMITTED THAT THE ENTIRE SUM OF RS.31 LAKHS FOUND AND SEIZED IS HIS UNDISCLO SED INCOME. IN THE ORIGINAL RETURN OF INCOME, HE DECLARED ONLY THE INCOME OF RS .18 LAKHS OUT OF THE RS.31 LAKHS. HOWEVER, IN THE REVISED RETURN THE ENTIRE I NCOME OF RS.31 LAKHS WAS DECLARED AND THE TAX THEREON WAS REQUESTED TO BE AD JUSTED AGAINST THE CASH SEIZED. IN THE CASE OF GOPAL CHAND KHANDELWAL (SUP RA), THE ITAT DELHI BENCH HAS HELD AS UNDER: .... THE ONLY PURPOSE OF THE ASSETS SEIZED BY THE REVENUE UNDER SECTION 132(1) AND RETAINED UNDER SECTION 132(5) WAS TO UTILISE TH E SAME AGAINST THE TAX LIABILITY OF THE ASSESSEE WHENEVER IT MIGHT ARISE. THEREFORE, WHEN THE ASSESSEE HIMSELF REQUESTED THAT THE AMOUNT SEIZED MAY BE TRE ATED AS TAX PAID BY HIM, THERE COULD NOT BE AND SHOULD NOT BE ANY OBJECTION TO THE REVENUE IN ACCEPTING SUCH A REQUEST. ADMITTEDLY, THE CASH SEIZED FROM THE ASSESSEE WAS M UCH MORE THAN THE TAX PAYABLE ON THE RETURN OF INCOME. IN VIEW OF THE ABOVE, WE HOL D THAT THE ASSESSEE HAS DULY SATISFIED ALL THE CONDITIONS AS PROVIDED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE MENTIONED ABOVE VIZ. (I) THE ASSESSEE HAS DISC LOSED THE INCOME IN THE STATEMENT UNDER SECTION 132(4), (II) DECLARED INCOME IN THE R ETURN FILED BY HIM, AND (III) PAID TAX ON THE INCOME RETURNED. IN VIEW OF THE ABOVE, IN OUR OPINION, THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLI CABLE TO THE FACTS OF THE ASSESSEES CASE. ITA NO.3431/AHD/2007 -6- 6. THE LEARNED DR HAS ALSO RELIED UPON ON OTHER DEC ISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VIDYAGUARI NATVERLAL (SUPRA). HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE MENTIONED CASE WER E ALTOGETHER DIFFERENT. IN THAT CASE, THE ASSESSEE HAS CLAIMED THE SUM OF RS.1,35,000/- A S CASH CREDIT WHICH HE WAS UNABLE TO PROVE. THE ASSESSEES CONTENTION IN THE PENALTY PROCEEDINGS WAS THAT SUCH CASH CREDIT WAS DULY DISCLOSED IN PART-III OF THE RETURN OF INCOME AND THEREFORE THERE WAS NO CONCEALMENT OF INCOME. HOWEVER, HONBLE JURISDI CTIONAL HIGH COURT DID NOT AGREE WITH THIS CONTENTION OF THE ASSESSEE AND HELD AS UN DER: .. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , SOLELY ON THE GROUND THAT THE ASSESSEE HAD DISCLOSED RECEIPTS IN PART III OF THE RETURN FILED BY HIM A CONCLUSION COULD NOT BE REACHED THAT THE ASSESSEE W AS NOT GUILTY OF CONCEALING PARTICULARS OF HIS INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVER, FACTS IN THE CASE OF THE ASSESSEE WERE ALT OGETHER DIFFERENT. THEREFORE, THE ABOVE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LEARNED DR WOULD NOT BE APPLICABLE TO THE FACTS OF THE ASSESSE ES CASE. THE LEARNED DR HAS ALSO RELIED UPON THE DECISION OF PUNJAB & HARYANA HIGH C OURT IN THE CASE OF ASHOK KUMAR GUPTA (SUPRA) AND THE BOMBAY HIGH COURT DECISION IN THE CASE OF INDUS ENGG. CO. (SUPRA). HOWEVER, WE HAVE ALREADY HELD THAT THE FA CTS OF THE ASSESSEE ARE SQUARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE MAHENDRA C. SHAH (SUPRA). IT IS SETTLED LAW THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IS TO BE FOLLOWED IN PREFERENCE TO THE DECISION OF OTH ER HIGH COURTS. IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHENDRA C. SHAH (SUPRA) UPHOLD THE ORD ER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH NOVEMBER, 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 04-11-2010 ITA NO.3431/AHD/2007 -7- COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD