Baijnath Agrawal, Sambalpur V. ACIT, Sambalpur

ITA 368/CTK/2011

• Counselvise Citation: 36822114 RSA 2011
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 16-08-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: SACHIDANANDA PADHEEAR
• Keywords: Business income; Income from undisclosed sources; Search and seizure

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 368/CTK/2011 (ASSESSMENT YEAR 2003 - 04) SRI BAIJNATH AGRAWAL, PROP. PAWAN KUMAR KRISHNA KUMAR, KHETRAJPUR, SAMBALPUR PAN: AC EPA 5099 B VERSUS ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), SAMBALPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SACHIDANANDA PADHEE,AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR DATE OF HEARING : 21.09.2011 DATE OF PRON OUNCEMENT : 22.09.2011 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE AGITATES PART RELIEF GRANTED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE PENALTY LEVIED BY THE ASSESSING OFFICER AT 300% UNDER THE PROVISIONS OF SECTION 271 ( 1 )(C) OF THE INCOME - TAX ACT,1961 WHEN IN THE QUANTUM APPEAL, THE LEARNED CIT(A) HAD ALREADY REDUCED THE ESTIMATION OF INCOME ON ACCOUNT OF PURPORTED CONCEALED SALES AND CORRESPONDING INVESTMENT IN SUCH SALES WHICH THE ASSESSING OFFICER HAD PREFERRED TO TAX AT THE GROSS MARGIN ONLY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS SUBJECTED TO A SEARCH AND SEIZURE OPERATION ON 4.7.2003 WHEN CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. ON THE BASIS OF SEIZED MATERIALS UNACCOUNTED SUPPRESSED SALES WAS WORKED OUT AT 64,91,020 AND THE NET INCOME THERE FROM WAS ESTIMATED AT 3% REJECTING THE BOOKS OF ACCOUNT UNDER THE PROVISIONS OF SECTION 145(3). A FURTHER ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL INVESTMENT U/S.69 AMOUNTING TO 2 LAKHS ON THE SALES WAS MADE AS UNDISC LOSED INCOME FROM OTHER SOURCES . THIS WAS SUBSEQUENT TO THE NOTICE ISSUED U/S.153A WHEN THE ASSESSE HIMSELF CHOSE TO DISCLOSE THE UNACCOUNTED SALES OF 13,38,193 ON THE BASIS OF THE SEIZED MATERIALS. THE QUANTUM OF INCOME COMPUTED BY THE ASSESSING OFFICE R ON ACCOUNT OF UNACCOUNTED SALES ITA NO.368/CTK/2011 2 INCOME AND THE INVESTMENT WAS REDUCED BY THE LEARNED CIT(A) BY MORE THAN 50% WHICH WAS NOT FURTHER APPEALED AGAINST BEFORE THE TRIBUNAL. THE ASSESSING OFFICER HAVING GIVEN APPEAL EFFECT ON QUANTUM COMPUTED THE UNDISCLOSED INCOME AT 2,65,000 APPROXIMATELY AS PER THE APPEAL EFFECT ORDER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE. HOWEVER, PENALTY PROCEEDINGS COMMENCED AFTER THE ASSESSMENT PROCEEDINGS, HE CHOSE TO LEVY PENALTY OF 3,77,523 AT 300% OF THE TAX SOUGHT T O BE EVADED WHICH WAS APPEALED AGAINST BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) CORRECTED HIMSELF ON THE QUANTUM WHEN HE CHOSE THE QUANTUM OF PENALTY ONLY ON THE CONFIRMED PORTION OF THE SALES AND THE INVESTMENT WHICH HE HAD REDUCED BY MORE THAN 50%. HE FURTHER REDUCED THE PENALTY LEVIED AT 300% OF THE TAX SOUGHT TO BE EVADED BY DIRECTING THE ASSESSING OFFICER TO LEVY PENALTY AT 100% ON CONCEALED INCOME O F 2,65,921 BY PARTLY ALLOWING THE ASSESSEES APPEAL AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE SEARCH AND SEIZURE OPERATION CARRIED OUT BY THE ASSESSING OFFICER RES ULTED IN FURNISHING THE PURPORTED UNACCOUNTED SALES ON THE BASIS OF THE SEARCH MATERIAL AS RELIED UPON BY THE ASSESSING OFFICER BEING BA - 3, BA - 4, BA - 6 AND BA - 36 WHICH ONLY RELATED TO THE DAILY SALES MADE BY THE ASSESSEE AS WAS SUGGESTED TO BE INCORPORATED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHEN ON THE TOTAL SALES OF 79,09,902 DECLARED HE CONSIDERED SUPPRESSION OF SALES AMOUNTING TO 61,55,127. IN OTHER WORDS, THE SALES SO COMPUTED WERE NOT UNDISCLOSED SALES AS THE ASSESSING OFFICER HIMSELF ACCEPTED THAT ONLY 3% THEREON CAN BE TAXED IN THE HANDS OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES PURSUANT TO SEARCH AND SEIZURE OPERATION CARRIED OUT ON THE ASSESSEES PREMISES. THE ASSESSING OFFICER, THEREFORE, CONTRADICTED HIS OWN FACTUAL FINDING BY ESTIMATING THE INCOME AT A CERTAIN PERCENTAGE WHICH ITA NO.368/CTK/2011 3 W AS MUCH LESS THAN THE SALES REMAINING UNDISCLOSED AND SOUGHT TO TAX AS INCOME U/S.69 BEING THE INVESTMENT MADE FOR EARNING THE SALES. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE SALES RENDER INCOME AND NOT FOR THE PURPOSE OF ADDITION U/S.69 A S INVESTMENT THAT OUGHT TO HAVE BEEN MADE WHEN THE ASSESSING OFFICER HIMSELF AGREE D TO THE PROPOSITION THAT 97% OF THE EXPENSES ON THE SALES HAD ALREADY BEEN DISCLOSED. IT WAS A CASE OF PURE ESTIMATION AND MISINTERPRETATION OF THE FINDING THAT THE SALES IN VOLVE INVESTMENT OF 2 LAKHS WHEN THE PURCHASES ARE INVESTMENT WHICH HAS BEEN OTHERWISE ACCEPTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THIS ADDITION HAS BEEN MADE ON THE BASIS OF LOOSE SHEETS WHICH ONLY INDICATED A CERTAIN PORTION OF SALES WHICH REMAINED UNACCOUNTED - FOR AT THE TIME OF SEARCH BUT WERE DISCLOSED BY THE ASSESSEE BY RENDERING INCOME TO BEC O ME PART AND PARCEL OF THE TRADING ACCOUNT ON WHICH 3% HAS ALREADY BEEN ACCEPTED BY THE ASSESSING OFFICER AS INCOME FOR LEVY OF PENALTY . THE PENALTY COULD NO T HAVE BEEN LEVIED ON ESTIMATION OF INCOME, WHICH THE LEARNED AR OF THE ASSESSEE BY PLACING RELIANCE ON PLETHORA OF JUDGMENTS SUPPORT ED THE CASE OF THE ASSESSEE IN THE LIGHT THAT WHEN ASSESSING AUTHORITIES MAKE THEIR OWN ESTIMATION OF THE PURPORTED CONCEAL MENT OF INCOME SUPPLEMENTED BY THE CIT(A) , CANNOT BE CONSIDERED FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 271(1)(C) WAS DECIDED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH V. CIT [2002] 258 ITR 85 (P & H) . HE SUBMITTE D THAT THE LEARNED CIT(A) WAS THEREFORE CLEAR THAT THE INCOME SOUGHT TO BE TAXED IN THE HANDS OF THE ASSESSEE WAS NOT CONCEALED BUT WAS AN ESTIMATION OF THE ASSESSING OFFICER AND BEING A SENIOR AUTHORITY THE LEARNED CIT(A) WAS LIBERAL IN REDUCING THE QUANT UM ASSESS ED AND ALSO THE QUANTUM OF I NVESTMENT SO COMPUTED BY THE ASSESSING OFFICER. THERE WAS NO WILLFUL NEGLIGENCE OR GROSS MISCONDUCT ON THE PART OF THE ASSESSEE TO HAVE NOT DECLARED THE INCOME SO ITA NO.368/CTK/2011 4 COMPUTED INSOFAR AS THE SALES WHICH WERE ON THE BASIS OF FINDING OF THE SEARCH MATERIAL HAD ALREADY BEEN RENDERED TO TAX BY THE ASSESSEE IN FURNISHING THE RETURN ON PURSUANCE TO NOTICE U/S.153A. HE PRAYED THAT THE PENALTY SO LEVIED AND PARTLY CONFIRMED BY THE LEARNED CIT(A) IS LIABLE TO BE CANCELLED. 4. THE LE ARNED DR SUBMITTED THAT IT WAS ASSESSEES OWN RENDERING OF CONCEALED SALES AND THE SOURCE OF INVESTMENT WHICH RESULTED IN ESTIMATION OF THE INCOME THEREIN THEREFORE CANNOT NOW BE ONUS SHIFTED TO THE ASSESSING OFFICER FOR ESTIMATION WHEN THE ASSESSING OFFIC ER HAD DISCHARGED THE ONUS OF COMPUTING THE INCOME ON THE BASIS OF SEARCHED MATERIAL. NO CONTROVERTING MATERIAL HAS BEEN SUBMITTED BY THE LEARNED COUNSEL AS OF NOW TO STATE THAT THE INCOME SO CONCEALED AS COMPUTED BY THE ASSESSING OFFICER WAS UNJUSTIFIED A S THE ASSESSEE CHOSE NOT TO FILE THE APPEAL AGAINST THE QUANTUM CONFIRMATIONS HAVING ACCEPTED THE QUANTUM AS CONFIRMED BY THE LEARNED CIT(A). THE REVENUE IS NOT IN APPEAL AGAINST THE PART RELIEF GRANTED BY THE LEARNED CIT (A) WHICH MAY KINDLY BE NOTED. 5. W E HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO FIND FAVOUR IN THE PRAYER OF THE LEARNED COUNSEL FOR THE ASSESSEE SIMPLY BECAUSE THE ASSESSEE HAD ALREADY DECLAR ED UNDISCLOSED SALES WHICH WERE FOUND AT THE TIME OF SEARCH IN THE RETURN PURSUANT TO NOTICE U/S.153A. THE ASSESSING OFFICER COMPUTING INCOME UNDER THE PROVISIONS OF SECTION 143 ( 3 ) THEREFORE ESTIMATED THE INCOME WHEN THE TOTAL SALES DECLARED BY THE ASSESSE E WAS MUCH MORE THAN THE PURPORTED 3% SOUGHT TO BE TAXED BY THE ASSESSING OFFICER AS CONCEALED INCOME ON WHICH PENALTY HAS BEEN LEVIED. WE ALSO FIND FAVOUR IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT SALES DO NOT REQUIRE INVESTMENT TO TH E EXTENT THAT THE PURCHASES OR THE STOCK ITA NO.368/CTK/2011 5 THAT HAD BEEN SOLD , THE ASSESSEE BEING A TRADER , CANNOT BE SAID TO HAVE EARN ED 3% MARGIN ON AN INVESTMENT WHICH STOOD ACCEPTED BY THE ASSESSING OFFICER. THE ADDITION U/S.69 THEREFORE IS A PURE ESTIMATE AND THE ASSES SEE WAS NOT TO EXPLAIN THE PURPORTED UNDISCLOSED INVESTMENT AT ANY POINT OF TIME. THE PURCHASES HAVING BEEN ACCEPTED AND THE STOCK FOUND AT THE TIME OF SEARCH HAVING BEEN ACCEPTED COULD NOT RESULT IN SALES OVER AND ABOVE WHAT THE ASSESSEE HAS DECLARED IN P URSUANT TO NOTICE U/S.153A. THE INVESTM ENT, THEREFORE, IS A CONSEQUENTIAL ESTIMATION THERETO CANNOT BE BROUGHT TO TAX INSOFAR AS THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE OF PURCHASES REMAINING UNACCOUNTED AS A COROLLARY . THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE IN THE CASE OF HARIGOPAL SINGH V. CIT [2002] 258 ITR 85 (P & H) WHICH CLEARLY INDICATES THAT THERE HAS TO BE A POSITIVE ACT OF CONCEALMENT OF INCOME ON THE ASSESSEES PART WHICH ONUS WAS TO BE PROVE D BY THE REVENUE AUTHORITIES WHEN THEY THEMSELVES AGREED TO THE PROPOSITION THAT THE INCOME WAS TO BE REDUCED CONSIDERABLY. IN THIS VIEW OF THE MATER, LEVY OF PENALTY U/S.271(1(C) IN THE INSTANT CASE IS NOT JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND CANCEL THE PENALTY SO LEVIED U/S.271(1)(C). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 22 ND SEPTEMBER, 2011 H.K. PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.368/CTK/2011 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI BAIJNATH AGRAWAL, PROP. PAWAN KUMAR KRISHNA KUMAR, KHETRAJPUR, SAMBALPUR 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), S AMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.