GHANSHYAM L. BODANI, MUMBAI V. ASST CEN CIR 24 & 26, MUMBAI

ITA 4021/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3278 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 01-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Search and seizure; Cost of acquisition
• Section: 132

Judgement Text

1 ITA NO.4021 /MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACOUNTANT MEMBER) I.T.A. NO.ITA NO.4021/MUM/2014 (ASSESSMENT YEAR : 2005-06) GHANSHYAM L BODANI B-35M LUCKY APARTMENTS BEHIND SHNTI ASHRM, EKSAR ROAD BORIVALI (W), MUMBAI 400 103 VS ACIT, CENTRAL CIR. 21, MUMBAI PAN :AAUPB9196Q (APPELLANT) (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SHRI A RAMACHANDRAN DATE OF HEARING : 01-06-2016 DATE OF PRONOUNCEMENT : -0602016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER C ALLED LD.CIT(A)] DT 07-03- 2014 PASSED AGAINST THE PENALTY ORDER U/S 271(1)(C) DATED 30 TH MARCH, 2012 CHALLENGING THE LEVY OF PENALTY OF RS.41,71,188. 2. DURING THE COURSE OF HEARING, NONE ATTENDED ON B EHALF OF THE ASSESSEE. IT IS NOTED THAT NOTICE WAS SERVED BY REGISTERED PO ST. ON EARLIER OCCASIONS ALSO 2 ITA NO.4021 /MUM/2014 MANY DATES HAVE BEEN FIXED, BUT NONE HAS ATTENDED O N BEHALF OF THE ASSESSEE DESPITE THE FACT THAT ON ALL THE DATES NOTICES WERE DULY SERVED ON THE ADDRESS GIVEN IN THE APPEAL MEMO FILED BY THE ASSESSEE. L D. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE MADE THE ARGUMENTS O N THE BASIS OF MATERIAL ON RECORD. UNDER THESE CIRCUMSTANCES, WE HAVE NO O PTION BUT TO PROCEED EX PARTE QUA THE ASSESSEE. 3. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WITH REGARD TO PENALTY OF RS.41,71,188 LEVIED BY THE ASSESSING OFFICER ON THE AMOUNT OF CASH PAID BY THE ASSESSEE FOR ACQUISITION OF SHOPS OUT OF UNDISCLOSE D SOURCES. 4. THE BRIEF FACTS NOTED FROM THE ORDERS OF THE LOW ER AUTHORITIES ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND A PARTNER IN M/S SATNAM SAKHI & ASSOIATES. THE PARTNERSHIP FIRM M/S SATNAK SAKHI ASSOCIATES CO MPRISES OF THREE PARTNERS, WITH SHARE OF PROFIT AS SHOWN HEREUNDER:- NAME SHARE OF PROFIT MR. UMEWSH ISRANI FAMILY 24% MR. GHANSHUAM BODANI FAMILY 36% MR. LAXMICHND ROHIRA FAMILY 40% TOTAL 100% 5. THERE WAS A SEARCH AND SEIZURE ACTION ON SHRI L AXMICHAND ROHIRA ON 08.05.2007, DURING THE COURSE OF WHICH, LOOSE PAPER S NUMBERED 14 TO 21 (AS CONTAINED IN FOLDER MARKED ANNEXURE 'A') WERE FOUND . ON AN ANALYSIS OF THE LOOSE SHEETS, THE A.O FOUND THAT THE APPELLANT HAD MADE CASH PAYMENTS AGGREGATING TO RS. 3,44,02,000/- FOR ACQUISITION OF SHOPS, IN THE NAME OF THE FIRM, AND THE SAME WAS KEPT OUTSIDE THE BOOKS OF A CCOUNT. THE A.O HELD THAT 3 ITA NO.4021 /MUM/2014 36% SHARE IS THAT OF THE APPELLANT, ON THE BASIS OF THE PROFIT SHARING RATIO. ACCORDINGLY A SUM OF RS.1,23,84,720/- WAS BROUGHT T O TAX IN THE HANDS OF THE APPELLANT ON SUBSTANTIVE BASIS. THE A.O HAS ASSESSE D THE SAME ON PROTECTIVE BASIS IN THE HANDS OF THE FIRM. PENALTY PROCEEDINGS WERE INITIATED UNDER S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIONS OF THE ASSESSEE AND LEVIED THE PENALTY. 6. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD .CITA) CHALLENGING THE LEVY OF PENALTY AND MADE DETAILED SUBMISSIONS BEFOR E HIM. THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD.CIT(A) CHALLENGI NG THE LEVY OF PENALTY ARE REPRODUCED BELOW: A. DURING THE COURSE OF SEARCH ACTION UNDER S. 132 ON THE PREMISES OF THE PARTNER SHRI LAXMICHAND ROHIRA ON 08.08.2007, L OOSE PAPERS NUMBERING 14 TO 31 KEPT IN LOOSE PAPER FOLDER ANNEX URE A (PAGE 1 TO 6) WERE FOUND AND SEIZED. THESE PAPERS CONTAINED CE RTAIN FIGURES AGGREGATING TO RS. 3,44,02,000/- (REFER PAGE 14) AN D RS. 1,97,89,286/- (REFER PAGE 20) AGAINST EACH OF THE PARTNER ON THEI R PROFIT SHARING RATIO. ALL THE PAGES NUMBERING 14 TO 21 WERE WRITTE N IN THE SAME HANDWRITING. B. A CLOSE EXAMINATION OF THE SEIZED PAPERS NUMBERI NG FROM 14 T021 WILL REVEAL THAT PAGE NO. 14 IS THE SUMMARIZING PAP ER FROM PAGE NO. 15 TO 17 AND THE SAME IS RELATED TO FIGURE OF RS. 3 ,44,02,000/- WHICH IS ADDED IN THE HANDS OF THE PARTNERS IN THEIR PROFIT SHARING RATIO. PAGE 18 TO 21 RELATE TO ACQUISITION OF AFORESAID SHOP PR EMISES AND RENTAL INCOME OUT OF THEM. C. THERE IS. NO DISPUTE THAT PAGE NO. 18 TO 21. ARE RELATED TO ACQUISITION OF 4 SHOP PREMISES BY PARTNERSHIP FIRM M/ S. SATNAM SAKHI & ASSOCIATES AND THE SAME ARE ACCOUNTED FOR IN THE BOOKS. ALSO THERE 4 ITA NO.4021 /MUM/2014 IS NO DISPUTE THAT SAME ARE WRITTEN IN SINGLE HANDW RITING BUT NOT BY APPELLANT OR HIS EMPLOYEES. 7. THE LD.CIT(A) CONSIDERED THE SUBMISSIONS BY THE ASSESSEE BUT WAS NOT CONVINCED WITH THE ARGUMENTS OF THE ASSESSEE AND, THEREFORE, HE CONFIRMED THE LEVY OF PENALTY WITH FOLLOWING OBSERVATIONS: 5. I HAVE VERY CAREFULLY CONSIDERED THE FACTS AND THE LEGAL POSITION. I HAVE TAKEN INTO ACCOUNT THE FINDINGS O F THE A.A AS WELL AS THE COUNTER ARGUMENTS OF THE APPELLANT. I HAVE A LSO EXAMINED THE COPIES OF THE SEIZED MATERIAL WHICH IS CRUCIAL TO UNDERSTAND THE ISSUE AT STAKE. FOUR SHOPS WERE ACQUIRED BY THE FIRM IN EVEREST CHAMBER, ANDHERI EAST. THE APPELLANT HAS NO QUARREL ABOUT THE ACQUISITION COST AS REFLECTED IN THE BOOK S AT A FIGURE OF RS. 1,90,51,074/-. THE SAID PAYMENTS TO THE EXTENT OF RS.1,90,51,074/- WERE MADE BY CHEQUE. FROM A CLOSE EXAMINATION OF THE EXPLANATION FURNISHED BY THE APP ELLANT, IT CAN BE SEEN THAT APPELLANT CONTENDS THAT PAGES 18 TO 21 PROVIDES DATA FROM THE PAST BOOKINGS OF THE ACQUIRING PREMIS ES. THIS CAN BE JUXTAPOSED WITH THE FINING OF THE A.O THAT THE F IGURE AS APPEARING THEREIN CORRESPONDS WITH THE ACCOUNTED FI GURES IN THE BOOKS OF ACCOUNT. THEREFORE A REASONABLE AND LOGICA L CONCLUSION THAT CAN BE DRAWN IS THAT THE APPELLANT IN FACT HAS NO QUARREL WITH THE FININGS OF THE A.O THAT THE NOTINGS IN PAG E 20 REFER TO THE FIGURES AS APPEARING IN THE BOOKS OF ACCOUNTS, AND WHICH ARE AGREED TO BE PAYMENTS MADE THROUGH CHEQUE. HENCE WH AT IS TO BE EXAMINED IS THE NOTINGS AS PER PAGES 14 TO 17, W HICH, 5 ITA NO.4021 /MUM/2014 ACCORDING TO THE A.O, REPRESENTS THE CASH COMPONENT OF THE RS. 3,44,02,000/-. ACCORDING TO THE APPELLANT, THE A.O MIS- INTERPRETED 'C' WRITTEN ON PAGE 14 AS 'CASH' WHICH IN FACT IS 'CONFIRMATION'. AS PER THE APPELLANT, THE NOTINGS A T PAGE 14 TO 17 ARE WITH REFERENCE TO A PROPOSED PROJECT FOR ACQ UIRING ADDITIONAL OFFICE/SHOP PREMISES AND THAT THEY GIVE THE LIKELY COST OF THE PROJECT, RESPECTIVE SHARES OF PARTNERS, THEI R COMMITMENT FOR CONTRIBUTION TO PROJECT, DEFICIT/ SURPLUS WITH RESPECT TO THE RESPECTIVE SHARES AND LIKELY PAYMENT SCHEDULE TO BU ILDER. THE APPELLANT THUS MAKES OUT A CASE THAT THE FIGURES AP PEARING IN PAGES 14 TO 17 ARE WITH REFERENCE TO A PROPOSED PRO JECT AND THE FIGURES AS NOTED ARE MERE APPROXIMATIONS OR ESTIMAT IONS OF THE COST AS PROJECTED. BUT THE FIGURES AS NOTED, ESPECI ALLY AS NOTED IN PAGE 14, DO NOT IN ANY MANNER GIVE THE APPEARANCE O F MERE PROJECTION OR ESTIMATES. THE NOTINGS AS IN PAGE 14 ARE REPRODUCED HEREUNDER:- LAKHI RECEIVED 2,03,50,000 40% SHARE 1,37,60,800 EXCESS RECEIVED 65,89,200 -, UMESH C. RECEIVED 48,52,000 LESS: SHARE 24% 82,56,480 SHORT RECEIVED 34,04,480 GANSHYAM C RECD. 92JOO~000 LESS: SHARE 36% 23,84,720 SHORT RECEIVED 31,84,720 - GANSHYAM TO LAKHI 31,84,720 UMESH TO LAKHI 34.04,480 65,89,200 6 ITA NO.4021 /MUM/2014 FROM THE ABOVE, IT CAN BE OBSERVED THAT THE WORDS NOTED ARE 'C. RECD WHICH IS, AS PER NORMAL UNDERSTANDING OR AS PE R PREPONDERANCE OR PROBABILITY AS OBSERVED BY THE A.O , CAN ORDINARILY BE 'CASH RECEIVED'. IF IT WERE ONLY PROJ ECTION, THE WORD 'RECEIVED' IS CERTAINLY OUT OF PLACE, WOULD BE REND ERED MEANINGLESS AND WOULD NOT BE IN ACCORDANCE WITH THE STATE OF AFFAIRS AS PROJECTED BY THE APPELLANT. THE WORD 'RE CEIVED' HAS NO PLACE IN A SCHEME OF THINGS WHICH ARE MEANT TO BE ' PROJECTIONS'. THE SAID EXPLANATION OF THE APPELLANT BELIES LOGIC. THE EXPLANATION AS GIVEN BY THE APPELLANT IS UNACCEPTAB LE IN THE GIVEN FACTS AND CIRCUMSTANCES. THE APPELLANT HAS OFFERED AN EXPLANATION WHICH HE HAS NOT BEEN ABLE T O SUBSTANTIATE. WHEN THE APPELLANT FAILS TO SUBSTANTI ATE THE EXPLANATION, THE PROVISIONS OF EXPLANATION 1 TO SEC TION 271(1)(C) ARE APPLICABLE. 6. THE APPELLANT HAS RAISED A GROUND THAT THE AO HA S HEAVILY RELIED ON THE FINDINGS IN THE QUANTUM ASSESSMENT WI THOUT BRINGING ANY DIRECT OR COGENT EVIDENCE ON RECORD. 6.1 I HAVE CONSIDERED THE SAID ISSUE RAISED. IT IS TO BE STATED THAT CERTAINLY QUANTUM ASSESSMENT DOES NOT AUTOMATI CALLY TRIGGER THE LEVY OF PENALTY. PENALTY PROCEEDINGS AR E SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE FINDI NGS IN THE ASSESSMENT ARE CERTAINLY VALID THOUGH HAVE ONLY PRO BATIVE VALUE. THE FACTS OF THIS CASE HAVE BEEN INDEPENDENTLY CONS IDERED BEARING IN MIND THE PROVISIONS IN RESPECT OF LEVY O F PENALTY UNDER S. 271(1)(C). SO ALSO, IN PENALTY PROCEEDINGS, CONC EALMENT NEED NOT BE PROVED TO THE HILT. THE CIRCUMSTANTIAL EVIDE NCES ARE CERTAINLY VALID AND MATERIAL ESPECIALLY SO WHEN WIL LFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING PENALTY, WHICH IS A CIVIL LIABILITY. IT HAS BEEN HELD IN CIT VS. MASTER SUNIL R. KALVO [2007] 292 ITR 0086 (KARNATAKA) THAT EVIDENCE TO ESTABLISH TO THE HILT IS UNNECESSARY FOR THE PURPOSE OF LEVY OF PENALTY. ALL THAT THE SECTION REQUIRES IS TO CONSIDER THE EXPLAN ATION. IN THIS CASE THE MATERIALS SEIZED ARE STARING AGAINST THE A SSESSEE. THIS IS 7 ITA NO.4021 /MUM/2014 IN ITSELF DIRECT EVIDENCE AGAINST THE ASSESSEE. A F URTHER CONTENTION RAISED IS THAT THE NOT RECORDED. THE ASS ESSEE HAD BEEN HEARD IN THE MATTER, HE WAS GIVEN REASONABLE O PPORTUNITY DURING THE ASSESSMENT AND PENAL PROCEEDINGS. ALL TH AT THE ASSESSEE WANTED TO STATE HAS ALREADY BEEN STATED AN D THEREFORE THE OBJECTION THAT HIS STATEMENT WAS NOT TAKEN CANN OT BE A VALID GROUND. 6.2 IN THE INSTANT CASE, THE EXPLANATION AS SUBMIT TED HAS NEITHER BEEN SUBSTANTIATED NOR IS FOUND TO BE BONAF IDE. THE EXPLANATION 1 TO S. 271(1)(C) IS SQUARELY ATTRACTED IN THIS CASE. THE PENALTY IMPOSED IN A SUM OF RS.41,71,188/- IS U PHELD. 8. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE US . FROM THE ORDER OF HE LD.CIT(A), IT IS SEEN THAT FACTUAL FINDINGS H AVE BEEN RECORDED THAT ELEMENT OF CASH WAS INVOLVED IN THE TRANSACTION OF ACQUISITION OF SHOPS. THE ASSESSING OFFICER HAS GIVEN A FINDING AFTER VER IFYING THE EVIDENCES THAT CASH COMPONENT OF PAYMENTS AGGREGATING TO RS.3,44,0 2,000 WAS INVOLVED IN THE TRANSACTION. AMOUNT-WISE BREAK UP AND DETAI LS WAS ALSO GIVEN BY LD.CIT(A) ON PAGE 6 OF HIS ORDER WHEREIN UNDER THE NAME OF THE ASSESSEE SPECIFIC AMOUNTS HAVE BEEN MENTIONED. NOTHING HAS BEEN BROUGHT BEFORE US TO REBUT THESE FACTUAL FINDINGS. UNDER THESE CI RCUMSTANCES, WE FIND THE LD.CIT(A) HAS RIGHTLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. IN VIEW OF THE SAME, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS CONFIRMED. 9. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE COURT ON THIS 10 TH DAY OF JUNE, 2016. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 10 TH JUNE, 2016