ACIT CEN CIR 20, MUMBAI V. PURNANDU JAIN, MUMBAI

ITA 3521/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101300 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 31-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2012
• Court: TRIBUNAL
• Department Lawyers: DEVENDRA MEHTA
• Assessee Lawyers: B S BIST
• Keywords: Income from undisclosed sources; Search and seizure
• Section: 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 3521 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 5 - 20 0 6 ) DCIT, CENTRAL CIR - 20, MUMBAI VS. SHRI PURNANDU JAIN, B - 201, MINOO MINAR, VEERA DESAI ROAD, ANDHERI(W), MUMBAI - 400053 ./ ./ PAN/GIR NO. : A A CPJ 7016 P ( / APPELLA NT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI B.S.BIST /REVENUE BY : SHRI DEVENDRA MEHTA / DATE OF HEARING : 11 /0 8 / 2015 / DATE OF PRONOUNCEMENT 9/10 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE A GAINST THE ORDER OF CIT (A) , MUMBAI , FOR THE ASSESSMENT YEAR 200 5 - 0 6 , IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T.ACT . 2 . THERE IS A DELAY OF 66 DAYS IN FILING TH E APPEAL BY REVENUE. CONSIDERING THE REASONS GIVEN FOR DELAY , WE CONDONE THE DELAY OF 66 DAYS IN FILING THE APPEAL BY THE REVENUE AND THE APPEAL IS HEARD ON MERITS. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT A SEARCH A ND SEIZURE ACTION U/S.132 OF THE ACT, WAS CONDUCTED I N THE CASE OF ANKUR GROUP ON 26 - 4 - 2007. THE ASSESSEE IS A MEMBER OF ANKUR GROUP. IN RESPONSE TO THE NOTICE U/S.153A OF THE ACT, ITA NO. 3521 /20 1 2 2 THE ASSESSEE FILED RETURN OF INCOME ON 31 - 3 - 2009 DECLARING TOTAL INCOME OF RS.69,97,496/ - . ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE U/S.139(1) ON 10 - 10 - 2005 DECLARING TOTAL INCOME OF RS.36,05,133/ - . FURTHER DURING THE COURSE OF THE SEARCH IN THE CASE OF THE SEARCH IN THE CASE OF THE ASSESSEES BALANCE SHEETS OF 3 COMPA NIES VIZ. ITALIC TECHNO F INANCIAL CONSULTANTS PVT . LTD., ATTALIKA IMPEX PVT. LTD. AND TATER FIN - VEST PVT. LTD. WERE FOUND. ON ENQUIRY, THE ASSESSEE INFORMED THAT THESE COMPANIES WERE CONTROLLED BY HIS U NCLE WHO IS THE MAJOR SHAREHOLDER IN ALL THE THREE COM PANIES. THE ASSESSEE ALSO INFORMED THAT NEITHER HE NOR ANY OF HIS FAMILY MEMBERS IS DIRECTOR AND/ OR SHAREHOLDER OF THESE COMPANIES. FROM THE PERUSAL OF THE BALANCE SHEETS OF THESE COMPANIES, THE AO FOUND THAT THESE COMPANIES HAD EARNED HUGE CAPITAL GAINS ON SALE OF SHARES OF M/S. ANKUR DRUGS & PHARMA LTD. THE ASSESSEE WAS ASKED BY THE A,O, TO FURNISH THE DETAILS OF PURCHASE VALUE AND SALE OF VALUE OF THESE SHARES A ND ALSO THE DETAILED WORKING OF LONG TERM CAPITAL GAINS FROM THE SALE OF SHARES. FROM THE DE TAILS SUBMITTED BY THE ASSESSEE, THE A.O. FOUND THAT THESE COMPANIES HAD SHOWN THE PURCHASE VALUE OF MOST OF THE SHARES AT RS,2/ - OR RS.3/ - . ON ENQUIRY THE A.O. FOUND THAT THE MARKET PRICE OF SHARES OF M/S ANKUR DRUGS & PHARMA PREVAILING IN BOMBAY STOCK E XCHANGE ON THE DATE OF PURCHASE WAS MUCH HIGHER THAN THE PURCHASE VALUE SHOWN BY THESE COMPANIES IN THEIR BOOKS OF ACCOUNTS. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE PURCHASE PRICE OF THESE SHARES IS AT LOWER PRICE COMPARED TO THE MARKET PRICE . THE ASSESS EE SUBMITTED BEFORE THE A.O. THAT IN ALL THE THREE COMPANIES, HIS UNCLE MR. ITA NO. 3521 /20 1 2 3 RISHABH RAJ MOHNOT IS THE MAJORITY SHAREHOLDER AND THAT HE AND HIS FAMILY MEMBERS ARE NOT SHAREHOLDERS AND/OR DIRECTORS OF THESE THREE COMPANIES. THE ASSESSEE SUBMITTED THAT ANKUR DRUGS AND PHARMA LTD. OF WHICH HE IS THE MAN AGING DIRECTOR CAME OUT WITH PU BLIC ISSUE IN FEBRUARY 1996 AND THE EQUITY SHARES WERE ISSUED AT THE PRICE OF RS.10/ - PER SHARE (FACE VALUE, NO PREMIUM). THE ASSESSEE STATED BEFORE THE A.O. THAT THE ISSUE WAS NOT AT ALL A SUCCESS AND AS SUCH THE COMPANY WAS NOT IN GOOD FINANCIAL POSITION F OR UPTO FINANCIAL YEAR 2003 - 04. THE ASS ESSEE RECONFIRMED BEFORE THE A.O . THAT HE WAS OFFERING THIS ADDITIONAL INCOME AS UNDER IN ORDER TO OBVIATE UNDUE LITIGATION AND TO HAVE PEA CE PROVIDED NO PENALTY AND PROSECUTION PROCEEDINGS WERE INITIATED AND FURTHER NO DOUBLE TAXATION OF THE RELEVANT AMOUNT IN THE HANDS OF THE RESPECTIVE COMPANIES. A.Y.2002 - 03 RS. 6,43,700/- A.Y.2004 - 05 RS. 11,38,050/- A.Y. 2005 - 06 RS.2,06,67,820 / - THE ASSESSEE HAD ALSO SUBMITTED THE REQUISITE CERTIFICATE FROM THE COMPANY SECRETARY OF ANKUR DRUGS AND PHARMA LTD. ABOUT THE SHAREHOLDING OF THE THREE COMPANIES AS ON 30TH SEPT., 2004 AND HAD ALSO FURNISHED THE SAID CERTIFICATE ALSO THE CERTIFICATE FROM THE SHARE AGENT ABOUT THE DATE OF TRANSFER OF THE SHARES BEFORE THE A. O . THE AO ON THE BASIS. OF THE ABOVE DISCUSSION AND DISCLOSURE OF RS.2,06,67,820/ - , ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS ' INCOME FROM UNDISCLOSED SOURCES. THE AO ALSO L EVIED PENALTY U/S.271(1)(C) OF THE ACT. ITA NO. 3521 /20 1 2 4 4 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER : - 8. I HAVE CONSIDERED THE ISSUE. IN THIS CASE PENALTY HAS BEEN LEVIED WITH RESPECT TO THE FOLLOWING ADDITIONS MADE: I) ADDITIONA L INCOME ADMITTED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS WITH REGARD TO THE PURCHASE OF SHARES OF M/S. ANKUR DRUG & PHARMA LTD., BELONGING TO HIS UNCLE AMOUNTING TO RS.2,06,67,820/ - . II) THE FOLLOWING UNACCOUNTED INCOME ADMITTED BY THE APPELL ANT IN THE RETURN FILED U/S.153A OF THE I.T. ACT: I) SHORT TERM CAPITAL GAIN RS. 5,92,512/ - II) CAR HIRE CHARGES RS. 97,762/ - III) INCOME FROM HOUSE PROPERTY RS. 57,906/ - IV) SHORTFALL IN CASH RS.26,15,000/ - 8. 1 WITH REGARD TO THE ADDITION MADE IN THE ASSESSMENT ORDER OF RS.2,06,67,820/ - , IT IS TO BE NOTED THAT IN THIS GROUP OF CASES DURING THE ASSESSMENT PROCEEDINGS, THE A.O FOUND T HAT THE THREE COMPANIES NAMELY M/S. ITALIC TECHNO FINANCIAL CONSULTANTS PVT. LTD ., ATTALIKA IMPEX PVT. LTD. AND TATER FIN - VEST PVT. LTD. HAVE EARNED HUGE CAPITAL GAIN ON SALE OF SHARES OF M/S. ANKUR DRUGS & PHARMA LTD. THE A.O ALSO FOUND THAT THESE COMPANIES HAVE PURCHASED SHARES OF M/S. ANKUR D RUGS & PHARMA LTD. AT THE COST OF RS. 2 OR 3 WHEREAS THE PRICE QUOTED IN THE STOCK MARKET WAS AROUND RS. 6. THE A.O ENQUIRED WITH THE ASSESSEE HOW IT WAS POSSIBLE TO PURCHASE THE SHARES OF M/S ANKUR DRUGS & PHARMA LTD. AT RS.2 OR 3 WHEN THE MAR KET RATE WAS AT RS. 6. WITH REGARD TO THIS QUESTION T HE APPELLANT SUBMITTED TO THE A. O THAT THE APPELLANT WAS CONTINUOUSLY UNDER PRESSURE FROM FRIENDS AND ASSOCIATES WHO SUBSCRIBED TO THE PUBLIC ISSUE OF M/S. ANKUR DRUGS & PHARMA LTD. AS THEY WERE NOT ABLE TO SELL THE SHARES AFTER LISTING. DUE TO THIS PRESSU RE THE APPELLANT'S GROUP WAS FORCED TO PURCHASE THE SHARES FROM THE RELATIVES AND FRIENDS. THE APPELLANT ALSO SUBMITTED THAT EVEN THOUGH THE MARKET PRICE IS SAID TO BE HAVE BEEN RS. 6 J - , THE VOLUME OF PURCHASE IN THE STOCK MARKET WAS VERY THIN AND THE AP PELLANT'S RELATIVES AND FRIENDS COULD NOT SELL THROUGH THE OPEN MARKET AND THE APPELLANT'S GROUP WAS FORCED TO PURCHASE THESE SHARES. THE APPELLANT SUBMITTED THAT HIS UNCLE CAME FORWARD TO SUPPORT THE APPELLANT AND HIS UNCLE PURCHASED THE SHARES OF M/ S. AN KUR DRUGS & PHARMA LTD. FROM THE RELATIVES AND FRIENDS OF THE APPELLANT AT AN AGREED PRICE WITH THE SELLERS WHICH IS RECORDED IN THE BOOKS OF ACCOUNTS OF THESE THREE COMPANIES. SINCE THE A.O HAS RAISED THE ISSUE, IN ORDER TO PURCHASE PEACE WITH THE DEPARTM ENT AND TO AVOID UNNECESSARY INCONVENIENCE TO THE APPELLANTS UNC L E, THE APPELLANT CAME FORWARD AND OFFERED THE INCOME IN HIS THE APPELLANT HAS ALSO STATED THAT HIS OFFERING OF THIS ADDITIONAL INCOME IS IN ORDER TO ITA NO. 3521 /20 1 2 5 PURCHASE PEACE WITH THE DEPARTMENT AND AL SO TO AVOID UNDUE LITIGATION AND THE APPELLANT HAS ALSO MADE A CONDITION IN THE OFFER LETTER THAT NO PENALTY AND PROSECUTION SHOULD BE INITIATED. THE A.O HAS EXTRACTED THE COPY OF THE LETTER FILED BY THE APPELLANT IN PAGE 2,3,4,5 OF THE ASSESSMENT ORDER AN D IT IS ALSO DISCUSSED IN PAGE 3,4,& 5 OF THIS APPELLATE ORDER. IN THIS GROUP OF CASES SEARCH AND SEIZURE ACTION HAS BEEN CONDUCTED. THERE WAS NO EVIDENCE FOUND TO SHOW THAT EITHER THE APPELLANT OR HIS UNCLE OR THE ABOVE MENTIONED THREE COMPANIES PAID ANY EXTRA THREE COMPANIES. DURING THE ASSESSMENT PROCEEDINGS TO AVOID INCONVENIENCE AND ADDITIONS IN THE HANDS OF HIS UNCLE AND HIS THREE COMPANIES WHICH WILL LEAD TO PROTRACTED LITIGATION, THE APPELLANT HAS ADMITTED ADDITIONAL INCOME IN HIS ASSESSMENT. DISCLO SURE OF THIS ADDITIONAL INCOME SEEMS TO BE VOLUNTARY AND ADDITIONS ARE NOT BASED ON ANY SEIZED MATERIAL FOUND DURING THE SEARCH . F U RTHER IT IS ALSO TO BE APPRECIATED THAT IF AT ALL ANY ADDITIONS IS TO BE MADE IT SHOULD BE IN THE HANDS OF THE THREE COMPANIE S SINCE THE SHARES WERE PURCHASED BY THE SAID THREE COMPANIES AND NOT BY THE APPELLANT. SO FROM THESE FACTS, IT IS VERY CLEAR THAT THE ADDITIONS MADE IN THE APPELLANT'S HANDS IS PURELY ON THE BASIS OF THE VOLUNTARY OFFERING OF ADDITIONAL INCOME IN THE APPE LLANT'S HANDS. THERE WAS NO MATERIAL FOUND EITHER DURING THE SEARCH PROCEEDINGS OR SUBSEQUENT ENQUIRIES TO SHOW THAT THE ASSESSEE UTILIZED ANY OF HIS UNACCOUNTED INCOME AND PAID EXTRA MONEY TO THE INVESTORS OF SHARES IN THE COMPANY M/ S. ANKUR DRUGS & PHAR MA LTD. WHO SOLD THE SHARES TO THE SAID THREE COMPANIES. IT IS ALSO TO BE NOTED THAT THE ASSESSEE HAS OFFERED AN EXPLANATION FOR ADMITTING THE ADDITIONS IN THE HANDS OF THE APPELLANT AND IT WAS NOT FOUND TO BE MALAFIDE OR FALSE. IN VIEW OF THIS I HOLD THAT THE CONDITIONS LISTED IN EXPLANATION 1 (A) TO EXPLANATION 1 (8) OF SECTION 271 (1 )(C) ARE NOT SATISFIED IN THIS CASE. EXPLANATION 1 TO SECTION 271(1)(C) OF THE I T ACT IS NOT APPLICABLE IN THE APPELLANT'S CASE. FURTHER THERE IS NO MATERIAL TO SHOW THAT TH E APPELLANT HAS CONCEALED HIS PARTICULARS OF INCOME AS CONTEMPLATED IN THE MAIN PROVISIONS OF SECTION 271(1)(C) OF THE I T. ACT. IN VIEW OF THIS I HOLD THAT PENALTY 271(1)(C) CANNOT BE LEVIED IN THIS CASE FOR THIS ASSESSMENT YEAR. THE A.O IS DIRECTED TO DEL ETE THE PENALTY LEVIED U/ S. 271 (1)(C) WITH REGARD TO THIS ADDITION OF RS. 2,06,67,820/ - . 5 . AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THERE WAS NO EVIDEN CE FOUND BY THE DEPARTMENT TO SHOW THAT EITHER THE ASSESSEE OR HIS UNCLE OR THE THREE COMPANIES PAID ANY EXTRA MONEY THAN THE PURCHASE PRICE MENTIONED BY THE THREE COMPANIES. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, TO AVOID INCONVENIENCE AND ADDITIONS ITA NO. 3521 /20 1 2 6 IN THE HANDS OF HIS UNCLE AND THE THREE COMPANIES, THE ASSESSEE HAS ADMITTED THE ADDITIONAL INCOME IN HIS ASSESSMENT. THE DISCLOSURE OF THIS ADDITIONAL INCOME WAS VOLUNTARY AND THE ADDITIONS ARE NOT BASED ON ANY SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH. THE DETAIL ED FINDING RECORDED BY THE CIT(A) AS PER PARA - 8 OF HIS APPELLATE ORDER HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) DELETING T HE PENALTY IMPOSED WITH RESPECT TO THE ADDITIONAL INCOME OFFERED DURING THE ASSESSMENT PROCEEDINGS. 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09/10 / 201 5 . SD/ - SD/ - ( ) ( PAWAN SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09/10 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. //TRUE COPY//