ASST CIT CIR 1, KALYAN V. JAI SHREE RAM DEVELOPERS, BHIWANDI

ITA 3634/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2400 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH PATHADEDR
• Assessee Lawyers: PRANAV M PHADKE
• Keywords: Bogus purchase; Search and seizure; Revised return
• Section: 40A(3); 153A

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL JBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER ./I.T.A./3417 TO 3419/MUM/2014 , /AY.: ( 2008-09, 2009-10 & 2010-11) M/S. JAI SHREERAM DEVELOPERS JAI SHREERAM COMPLEX, MANKOLI, ANJUR PHATA ROAD, TALUKA BHIWANDI, DIST. THANE-421 302. PAN:AAEFJ 5850 H VS. INCOME TAX OFFICER(CENTRAL) THANE. ./I.T.A./3634 & 3635/MUM/2014 , /AY.: 2008-09 & 2009-10 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-1, KALYAN, 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN. VS. M/S. JAI SHREERAM DEVELOPERS THANE-421 302. ( /APPELLANT ) ( / RESPONDENT ) RE VENUE BY: SHRI PRAKASH PATHADE-DR ASSESSEE BY: SHRI PRANAV M. PHADKE AR / DATE OF HEARING: 20.06.2016 / DATE OF PRONOUNCEMENT: 22.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS OF CIT(A)-II,THANE,THE THE A SSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE AY.2008-09 AND 200 9 -10.FOR THE AY. 2010-11,ONLY THE ASSESSEE HAS FILED THE APPEAL.AS,THE ISSUE IN ALL T HE APPEALS IS LEVY OF PENALTY OR DELETION OF PENALTY,SO,WE ARE ADJUDICATING THEM BY A SINGLE COM MON ORDER. DETAILS OF THE DATES OF FILING OF RETURN,DATES OF ORDERS OF THE AO.S. AND ASSESSED INCOME ETC. CAN BE SUMMARIZED AS UNDER : A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF ORDERS OF CIT(A) 2008-09 29.09.2008;REVISED RETURN FILED ON 30.05.2011 22,14,900/- ; REVISED RETURN AMOUNT RS. 26,64,903/- 26.12.2011 81,13,400/- 11.03.2014 2009-10 29.09.2009; REVISED RETURN FILED ON 18.11.2011 17,78,130/-; REVISED RETURN AMOUNT RS.38,28,130/- 26.12.2011 75,18,500/- 11.03.2014 2010-11 15.10.2010;REVISED RETURN FILED ON 07.06.2011 4,03,95,590/REVISED RETURN AMOUNT RS. 4.03 CRORES 26.12.2011 4.05CRORES 10.03.2014 ITA/3417/MUM/2014 & ITA/3634/ITA/MUM-AY.2008-09: 3417-19 &3634-35/M/14-JAISHREERAMGROUP 2 2. IN THE GROUP CASES OF THE ASSESSEE, A SEARCH AND SE IZURE ACTION, WAS CARRIED OUT U/S.132 OF THE ACT, IN 10/12/2009, INCLUDING THE RESIDENCES OF THE PARTNERS. A SURVEY ACTION U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE. AS A RESULT OF SUCH A DISCLOSURE OF RS.4.50 LAKHS WAS MADE BY THE ASSESSEE ON THE BASIS OF THE MATERIAL GATHERED DURING SEARCH/ SURVEY OPERATIONS.ACCORDINGLY, A NOTICE U/S.153C OF THE ACT WAS ISSUED REQUIRING THE ASSESSEE TO FURNISH RETURN OF INCOME FOR SIX AY.S.IN RESPONS E TO THE NOTICE ISSUED,THE ASSESSEE FILED A RETURN OF INCOME AS STATED IN THE ABOVE-MENTIONED T ABLE.WHILE COMPLETING THE ASSESSMENT U/S.143(3) R.W.S.153C OF THE ACT,THE AO MADE ADDITI ON OF RS. 54.24 LAKHS U/S.40A(3) OF THE ACT AND FURTHER DISALLOWED AN AMOUNT OF RS. 24,000/ -UNDER THE HEAD DONATION.PENALTY PROCEEDINGS WERE INITIATED U/S.271 IN RESPECT OF TH E DISSALLOWANCE MADE IN THE RETURN OF INCOME AND ALSO ADDITION MADE U/S.40A (3). 3 .IN RESPONSE TO THE PENALTY SHOW CAUSE NOTICE, THE ASSESSEE STATED THAT THE OFFER TO DISCLOSE INCOME WAS MADE VOLUNTARILY TO AVOID PROTRACTED LIT IGATION ,T HAT THE CASH PAYMENTS IN VIOLA - TION OF SEC.40A(3)WERE MADE DUE TO URGENCY OF PAYME NTS.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE AO WAS OF THE VIEW THAT THE DIS CLOSURE OF RS. 4.50 LAKHS IN THE RETURN OF INCOME WAS MADE AS A RESULT OF FINDING DURING THE C OURSE OF SURVEY CARRIED OUT AS A RESULT OF SEARCH AND SEIZURE OPERATIONS, THAT THE DISCLOSURE MADE IN RETURN OF INCOME WAS NOT A VOLUNTARY,THAT THE ASSESSEE HAD NOT BROUGHT FORTH A NY ARGUMENT TO JUSTIFY THE CLAIM OF HAVING MADE PAYMENTS IN CASH,AMOUNTING TO RS. 54.24 LAKHS, FOR THE PURPOSE OF PURCHASE, THAT THERE WAS NO JUSTIFICATION FOR THE URGENCY OF SUCH PAYMEN TS, THAT THE PROVISIONS OF SECTION 40 A(3) WERE RIGHTLY INVOKED, THAT THE ASSESSEE HAD WITHDRA WN APPEAL AGAINST THE ASSESSMENT ORDER FILED BEFORE THE FIRST APPELLATE AUTHORITY (FAA).IN VOKING THE PROVISIONS OF EXPLANATION TO SECTION 271(1)(C),THE AO LEVIED A MINIMUM PENALTY O F RS. 18.15 LAKHS. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA. BEFORE HIM,IT WAS ARGUED THAT THE ASSESSMENT ORDER WAS COM PLETED U/S.143 (3) R.W.S.153C OF THE ACT, THAT THE AO HAD ISSUED A SHOW CAUSE NOTICE FOR PENA LTY U/S.271AAA, THAT THE PENALTY NOTICE ISSUED WAS BAD IN LAW, THAT THERE WAS NO CONCEALMEN T OF INCOME. WITH REGARD TO DISALLOWANCE MADE U/S.40A (3), THE ASSESSEE ARGUED THAT IT HAD N OT MADE ANY CLAIM OF BOGUS PURCHASES, THAT DISCLOSURE MADE IN THE RETURN OF INCOME WAS VOLUNTA RY TO AVOID LITIGATION.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,PENALTY ORDER AND TH E ASSESSMENT ORDER, THE FAA HELD THAT SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT IN T HE GROUP OF THE ASSESSEE ON 10/12/09, THAT THE SEARCH ACTION WAS ALSO CARRIED OUT AT THE RESID ENCES OF THE PARTNERS OF THE ASSESSEE-FIRM, 3417-19 &3634-35/M/14-JAISHREERAMGROUP 3 THAT BUNDLES NUMBER FIVE AND SIX HAD BEEN SEIZED FR OM THE RESIDENCES OF ONE OF THE PARTNERS I.E. SHRI BHARAT MARU,THAT THE SEIZED MATERIAL CONT AINED UNACCOUNTED ON- MONEY RECEIVED ON SALE OF VARIOUS GALAS TOTALING TO RS. 3.98 CRORES, THAT IT WAS CRYSTAL CLEAR THAT THE MATERIAL WAS SEIZED DURING THE COURSE OF SEARCH FROM THE PARTNER S OF THE FIRM REQUIRING INITIATION OF PROCEEDINGS U/S.153C, THAT AS A RESULT OF NOTICE IS SUED U/S.153C OF THE ACT THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING A SUM SOME OF RS. 4.50 LAKHS, THAT THE DISCLOSURE WAS MADE ON THE BASIS OF FINDINGS RECORDED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS AS WELL AS SURVEY OPERATION CARRIED OUT U/S.133A OF THE ACT, T HAT THE PROVISIONS OF SECTION 271(1)(C ) READ WITH EXPLANATION 5A WERE APPLICABLE IN THE CAS E OF THE ASSESSEE, THAT IT HAD ALREADY FILED ITS RETURN OF INCOME ON 29.9.2008 I.E. BEFORE THE D ATE OF SEARCH WITHOUT DISCLOSING THE INCOME OF RS.4.50 LAKHS, THAT THE AO HAD SPECIFICALLY INIT IATED PENALTY PROCEEDINGS IN RESPECT OF THE DISCLOSURE IN THE ASSESSMENT ORDER, THAT THE ASSESS EE HAD DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME IN RESPECT OF RS.4.50 LAKHS A ND RENDERED ITSELF LIABLE FOR THE PENALTY U/S.271(1)(C ),THAT PENALTY U/S.271 AAA WAS IMPOSSI BLE ONLY FOR THE YEAR IN WHICH SEARCH WAS CONDUCTED AND NOT IN THE EARLIER AY.S. AS REGARDS THE DISALLOWANCE U/S.40A(3), THE FAA OBSERVED THAT THE DISALLOWANCE WAS MADE ON ACCOUNT OF TECHNICAL BREACH OF PROVISIONS, THAT THE AO HAD NOT RECORDED ANY FINDING AS TO WHETHER T HE CASH PAYMENT MADE ON ACCOUNT OF PURCHASES WAS FOR BOGUS PURCHASES, THAT IN THE ABSE NCE OF SUCH FINDING THE SAME COULD NOT BE CONSIDERED AS INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED,THAT NO PENALTY U/S.271(1)(C) WAS IMPOSABLE IN RESPECT OF THE SAID DISALLOWANCE.FINALLY, HE UPHELD THE PENALTY IN RESPECT OF THE INCOME DISCLOSING THE RETURN OF I NCOME I.E. FOR RS. 4.50 LAKHS ONLY. 5. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) MADE THE SAME ARGUMENTS THAT WERE ADVANCED BEFORE THE FAA.THE DEP ARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA FOR CONFIRMING THE P ENALTY ORDER FOR RS.4.50 LAKHS.WITH REGARD TO PENALTY LEVIED FOR VIOLATION OF SECTION 4 0(A)(3),HE STATED THAT MATTER COULD BE DECIDED ON MERIT. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD LEVIED PENALTY FOR THE UNDISCLOSED INCOME SHOWN IN THE REASONS FILED IN RESPONSE TO THE NOTICE ISSUED U/S.153C OF THE ACT AND FOR VIOLATION OF PRO VISIONS OF SECTION 40A(3),THAT THE FAA UPHELD THE PENALTY WITH REGARD TO UNDISCLOSED INCOM E OF RS. 4.50 LAKHS WHEREAS HE DELETED THE PENALTY IMPOSED FOR VIOLATION OF PROVISIONS OF SECTION 40A(3). THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION OF PENALTY FOR RS. 4.50 LAKHS A ND THE AO HAS FILED THE APPEAL FOR THE 3417-19 &3634-35/M/14-JAISHREERAMGROUP 4 PENALTY DELETED BY THE FAA. AS THE ASSESSEE HAS DEC LARED ADDITIONAL INCOME WHILE FILING THE RETURN AFTER THE SEARCH AND SEIZURE OPERATIONS AND HAS NOT FURNISHED ANY REASONABLE EXPLANATION FOR NOT INCLUDING THE INCOME IN ITS ORI GINAL RETURN, SO, IN OUR OPINION THE FAA WERE JUSTIFIED IN CONFIRMING THE ORDER OF THE AO IM POSING PENALTY FOR THE SAID AMOUNT. AS FAR AS THE DELETION OF PENALTY FOR VIOLATION OF PROVISIONS OF SECTION 40A(3) IS CONCERNED, WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO UNDER THE SAID SECTION CANNOT BE TERMED AS FILING OF INACCURATE PARTICULARS OR CONSI DERING THE PARTICULARS OF INCOME. ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS MAY BE JUSTI FIED IN THE QUANTUM APPEAL, BUT, EACH AND EVERY DISALLOWANCE/ADDITION SHOULD NOT OR CANNO T RESULT IN AUTOMATIC LEVY OF PENALTY U/S.271(1)(C ).THE OBJECT BEHIND INTRODUCING THE SE CTION WAS TO CURB THE PRACTICE OF THE ASSESSEES TO MAKE PURCHASES IN CASH. BUT INFRINGEME NT OF THAT SECTION CANNOT BE EQUATED WITH FURNISHING OF INACCURATE PARTICULARS. IN OUR OPINIO N.THE ORDER OF THE FAA, IN THAT REGARD, DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.THEREFORE, ENDO RSING HIS ORDER WE HOLD THAT THERE IS NO NEED TO INTERFERE WITH HIS ORDER. EFFECTIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND THE AO FOR THE YEAR UNDER CONSIDERATION STAND DISMISSED . ITA.S/3418/MUM/2014& 3635/MUM/2014-AY. 2009 10 6.THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE AS SESSEE AND THE AO ARE SIMILAR TO THE GROUNDS OF THE EARLIER YEAR-THE ONLY DIFFERENCE IS OF THE AMOUNTS INVOLVED. FOLLOWING OUR ORDER FOR THE AY.2008-09,WE DECIDE THE EFFECTIVE GR OUNDS OF APPEAL AGAINST THE AO AND THE ASSESSEE RESPECTIVELY. ITA/3419/MUM/2014-AY.2010-11: 7. THE EFFECTIVE GROUND OF APPEAL FOR THE YEAR UNDER C ONSIDERATION IS PENALTY LEVIED U/S.271 AAA OF THE ACT.THE FACTS OF THE CASE HAVE BEEN DISC USSED IN THE EARLIER PART OF OUR ORDER. AFTER COMPLETING THE ASSESSMENT ORDER,THE AO INITIA TED PENALTY PROCEEDINGS. HE IMPOSED PENALTY OF RS. 39.82 LAKHS HOLDING THAT THE ASSESSE E HAD FAILED TO EXPLAIN AND JUSTIFY THE REASONS FOR NON-PAYMENT OF TAXES ON THE ADMITTED UN DISCLOSED INCOME. 8. DURING THE APPELLATE PROCEEDINGS,BEFORE THE FAA,THE ASSESSEE ARGUED THAT THE AO HAD ISSUED PENALTY NOTICE MECHANICALLY, THAT THE ASSESS MENT WAS COMPLETED U/S.143 (3)INSTEAD OF SECTION 153A OF THE ACT, THAT PENALTY U/S.271 AAA C OULD BE INITIATED ONLY IN THE CASES WHERE THE ASSESSMENT WAS COMPLETED U/S.153A(1)(B)FOR SECT ION 153C OF THE ACT, THAT THE ASSESSMENT UNDER CONSIDERATION WAS BEYOND THE PERIOD OF SUCH A SSESSMENTS, THAT NO PROCEEDINGS U/S.271 AAA COULD BE INITIATED,THAT THE ASSESSEE HAD PAID T HE ENTIRE TAX AMOUNT WITH INTEREST, AMOUNTING TO RS. 1.53 CRORES WITHIN THE TIME LIMIT PRESCRIBED BY THE ACT. HOWEVER, THE FAA 3417-19 &3634-35/M/14-JAISHREERAMGROUP 5 HELD THAT THE AY.UNDER CONSIDERATION WAS SEARCH YEA R, THAT PROCEEDINGS U/S.153 WERE NOT REQUIRED TO BE INITIATED. BEFORE US,THE AR MADE THE SAME ARGUMENTS THAT WERE ADVANCED BEFORE THE FAA. THE DR SUPPORTED THE ORDER OF THE FAA.WE FIND THAT ASSESSM ENT ORDER FOR THE YEAR UNDER CONSIDERA - TION WAS COMPLETED U/S.143 (3) OF THE ACT AND NOT U /S.153. PENALTY U/S.271 AAA COULD BE IMPOSED ONLY WHEN ASSESSMENT IS MADE U/S.153. THE S AID SECTION WAS INTRODUCED TO THE SPECIFIC PURPOSE AND DEALS WITH THE SEARCH AND SEIZ URE ACTIONS CARRIED OUT AFTER PARTICULAR DATE. THEREFORE, REVERSING THE ORDER OF FAA WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEALS FILED BY THE ASSESSEE AND THE A O FOR THE AY.S 2008-09 AND 2009-10 STAND DISMISSED.APPEAL OF THE ASSESSEE FOR THE AY. 2010-1 1 ALLOWED . .2008-09 2009-10 . . .2010-11 . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2016. 22 , 2016 SD/- SD/- /PAWAN SINGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 22.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.