Sri M Shyam, Visakhapatnam V. The ACIT, Circle-1(1), Visakhapatnam

ITA 407/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50250 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2011
• Assessment Year: misc
• Appeal Filed On: 19-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Search and seizure; Corroborative evidences

Judgement Text

ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.407/VIZAG/2010 BLOCK PERIOD 01.04.1986 TO 27.02.1997 M. SHYAM, VISAKHAPATNAM VS. ACIT CIRCLE-1(1) VISAKHAPATNAM (APPELLANT) PAN NO: AFQPM 0217 A (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI D.S. SUNDER SINGH, SR.DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.1.2010 PASSED BY LEARNED CIT(A), VISAKHAPATNAM C ONFIRMING THE PENALTY LEVIED UNDER SECTION 158BFA(2) OF THE ACT FOR THE B LOCK PERIOD ENDING 27- 02-1997. THE APPEAL IS BARRED BY LIMITATION BY 75 DAYS. THE ASSESSEE HAS FILED A PETITION SEEKING CONDONATION OF DELAY. HAV ING REGARD TO THE SUBMISSIONS MADE IN THE SAID PETITION, WE CONDONE T HE DELAY AND ADMIT THE APPEAL FOR HEARING. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. CONSEQUENT TO THE SEARCH AND SEIZURE OPERATIONS CONDUCTED UPON THE AS SESSEE, HE FILED HIS BLOCK RETURN ADMITTING UNDISCLOSED INCOME OF RS.6,5 5,420/-. THE ASSESSEE HAD INITIALLY AGREED TO OFFER UNDISCLOSED INCOME OF RS.20.00 LAKHS IN THE STATEMENT TAKEN FROM HIM DURING THE COURSE OF SEARC H, BUT HE FILED THE BLOCK RETURN BY DISCLOSING ONLY RS.6,55,420/- AS TH E UNDISCLOSED INCOME. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE FILED A LETTER OFFERING THEREIN ADDITIONAL UNDISCLOSED INCO ME. THE ASSESSING OFFICER ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 2 OF 8 COMPLETED THE ASSESSMENT BY DETERMINING THE UNDISCL OSED INCOME AT RS.21.02 LAKHS. IN THE APPEAL, THE LEARNED CIT(A) GRANTED RELIEF TO THE EXTENT OF RS.4.80 LAKHS. THERE AFTER THE ASSESSEE DID NOT FILE APPEAL BEFORE THE ITAT. HENCE THE UNDISCLOSED INCOME OF THE ASSE SSEE REACHED FINALITY AFTER THE ORDER OF LEARNED CIT(A). THEREAFTER, THE ASSESSING OFFICER LEVIED A MINIMUM PENALTY OF RS.5,80,440/- WITH THE OBSERVA TION THAT THE SEC. 158BFA(2) MANDATES LEVY OF PENALTY WHEREVER THE UND ISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN. WHEN THE MATTER REACHED THE ITAT, THE ASSE SSEE CONTENDED THAT THE PENALTY PRESCRIBED UNDER SECTION 158BFA IS NOT MANDATORY AND IN THIS REGARD, THE ASSESSEE HAD RELIED UPON THE FOLLOWING CASE LAW: A. DHIRAJ SURI VS. ADDL. CIT (2006) 98 ITD 187 ( DEL.) B. ENFIELD INDUSTRIES LTD. VS. D.C.I.T (2007) 107 I TD 1 (KOL). THE TRIBUNAL, VIDE ITS ORDER DATED 08-8-2008, HELD THAT THE ASSESSING OFFICER HAS DISCRETION EITHER TO REDUCE OR CANCEL THE PENAL TY AND RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. T HE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED BELOW: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE DECISIONS CITED BY THE LEA RNED COUNSEL, RENDERED ON AN ANALYSIS OF THE PROVISIONS OF SECTION 158BFA(2) OF THE ACT, LAY DOWN THE PRINCIPLES THAT PENALTY IS NOT MANDATORY AND, IN A GIVEN CASE, WHERE THE ASSES SEE EXPLAINS BONAFIDE CIRCUMSTANCES, THE ASSESSING OFFI CER HAS THE DISCRETION EITHER TO REDUCE OR CANCEL THE PENAL TY. IN THE ABSENCE OF CONTRARY DECISION ON THE POINT, WE PREFE R TO FOLLOW THE AFORE CITED DECISIONS AND THEREFORE SET ASIDE T HE ORDERS PASSED BY THE TAX AUTHORITIES, BEING CONTRARY TO TH E PRINCIPLE LAID DOWN IN THE ABOVE CASES. WE HEREBY DIRECT THE ASSESSING OFFICER TO CONSIDER THE EXPLANATION OF TH E ASSESSEE AND RECONSIDER THE ISSUE OF LEVY OF PENALTY IN ACCO RDANCE WITH LAW. 2.1 IN THE SET ASIDE PROCEEDING, THE ASSESSING OFFICER AGAIN LEVIED THE MINIMUM PENALTY OF RS.5,80,440/-, INTER ALIA, BY HO LDING THAT THE PENALTY WILL BE LEVIED UNDER SECTION 158BFA(2) WHERE THE UN DISCLOSED INCOME ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 3 OF 8 DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE BLOCK RETURN. THE ASSESSING OFFICER ALSO HELD THAT THE LETTER FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S CANNOT BE TAKEN AS VOLUNTARY OFFER. ON MERITS, THE ASSESSING OFFICER REJECTED THE EXPLANATIONS FILED BY THE ASSESSEE. THE LEARNED CIT(A) ALSO CON FIRMED THE PENALTY WITH THE FOLLOWING OBSERVATION: IT MAY BE SEEN THAT AS PER THE PROVISIONS OF SEC. 158BFA(2) WHERE THE UNDISCLOSED INCOME IS FOUND TO BE IN EXCE SS OF THE INCOME SHOWN IN THE BLOCK RETURN, THE PENALTY IS LE VIABLE. THE LEARNED CIT(A) ALSO ENDORSED THE VIEW OF THE AS SESSING OFFICER THAT THE SURRENDER MADE BY THE ASSESSEE IS NOT A VOLUNTARY S URRENDER. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE ASSESSEE IS IN APP EAL BEFORE US. 3. IT MAY BE NOTED THAT, EVEN THOUGH THE TRIBUNAL HAS ALREADY HELD IN THE ASSESSEES OWN CASE THAT THE PENALTY PRESCRIBED UND ER SECTION 158BFA(2) IS NOT MANDATORY, YET BOTH THE TAX AUTHORITIES HAVE TA KEN THE VIEW THAT THE PENALTY IS LEVIABLE WHERE THE UNDISCLOSED INCOME DE TERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THAT SHOWN IN THE BLOCK RETURN. ACCORDINGLY, CONSISTENT WITH THE VIEW TAKEN EARLIER IN THE ASSESSEES OWN HANDS, WE SET ASIDE THE ORDERS OF TAX AUTHORITIES O N THIS LEGAL POINT. 4. ON MERITS, THE LEARNED AUTHORISED REPRESENTA TIVE SUBMITTED THAT THE MAIN ADDITION MADE BY THE ASSESSING OFFICER PERTAIN S TO VALUE OF GOLD JEWELLERY FOUND DURING THE COURSE OF SEARCH. THE LEARNED A.R SUBMITTED THAT THE ASSESSEE CLAIMED THE SAID JEWELLERY AS BEL ONGING TO THE CUSTOMERS, GOLD SMITHS AND FAMILY MEMBERS. DURING THE COURSE OF SEARCH PROCEEDING, THE ASSESSEE OFFERED A SUM OF RS.20.00 LAKHS WHICH CONSISTED OF THE JEWELLERY CITED ABOVE. HOWEVER, THE ASSESSEE DID N OT CONSIDER THE VALUE OF THE SAID JEWELLERY AS HIS UNDISCLOSED INCOME WHILE FILING THE BLOCK RETURN, AS HE WAS HOPEFUL THAT THE SAID CLAIM COULD BE PROVED. HOWEVER, AFTER THE PASSAGE OF CONSIDERABLE TIME, THE ASSESSEE THOUGHT IT FIT TO OFFER THEM ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 4 OF 8 VOLUNTARILY IN ORDER TO PURCHASE PEACE FROM THE DEP ARTMENT AND ACCORDINGLY FILED A LETTER BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE VERY FACT THAT THE UNDISCLOSED INC OME FINALLY DETERMINED WAS LESS THAN THE ORIGINAL OFFER OF RS.20.00 LAKHS MADE DURING THE COURSE OF SEARCH PROCEEDINGS VINDICATES THE STAND OF THE ASSE SSEE. THE ASSESSEE HAS KEPT GOLD JEWELLERY BELONGING TO VARIOUS CUSTOMERS IN SEPARATE POCKETS NUMBERING 59. DURING THE COURSE OF SEARCH, THE OFF ICIALS VERIFIED THEM AND ON BEING SATISFIED WITH THE CLAIM OF THE ASSESSEE D ID NOT SEIZE THEM. THE GOLD BELONGING TO GOLD SMITHS WERE ALREADY RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSING OFFICER, AFTER MAKING ENQ UIRIES WITH SOME GOLD SMITHS, PARTIALLY ACCEPTED THE CLAIM OF THE ASSESSE E. HOWEVER, THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE STRE NGTH OF THE STATEMENTS OF TWO PERSONS WITH OUT AFFORDING ANY OPPORTUNITY T O CROSS EXAMINE THEM. WITH REGARD TO THE GOLD BELONGING TO THE FAMILY MEM BERS, THE ASSESSING OFFICER HAS MADE THE ADDITION SINCE HE DID NOT ACCE PT THE EXPLANATIONS OF THE ASSESSEE. THE ASSESSEE HAS PROPERLY EXPLAINED T HE REASONS FOR MAKING OFFER BY WAY OF A LETTER DURING THE COURSE OF ASSES SMENT PROCEEDINGS. ACCORDINGLY THE LEARNED AUTHORISED REPRESENTATIVE S UBMITTED THAT THE SURRENDER MADE BY THE ASSESSEE SHOULD BE CONSIDERED AS VOLUNTARY SURRENDER AND IN ANY CASE, THE ASSESSEE HAS OFFERED PROPER EXPLANATIONS IN RESPECT OF ALL THESE ADDITIONS AND THE SAME WERE NO T FOUND TO BE FALSE. ACCORDINGLY HE CONTENDED THAT THE SAID ADDITIONS WO ULD NOT GIVE RISE TO PENALTY. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE ASSESSEE HAD OFFERED A SUM OF RS.20.00 LAKHS DURING THE COUR SE OF SEARCH, BUT HAS RETRACTED FROM IT SUBSEQUENTLY. HENCE THE LETTER F ILED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDING CANNOT BE TAKEN AS A VOLUNTARY OFFER. ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 5 OF 8 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IT IS A WELL SETTLED PROPOSITION THAT IN THE PENALTY PROCEEDING, THE ENTIRE ADDITIONS ARE REQUIRED TO BE EXAMINED AFRESH IN THE LIGHT OF EXPLANATIONS OFFERED BY THE ASSESSEE VIS-A-VIS PENALTY PROVISION S. THE ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BY REJ ECTING THE EXPLANATIONS GIVEN BY THE ASSESSEE, WOULD NOT AUTOMATICALLY GIVE RISE TO PENALTY. DURING THE COURSE OF PENALTY PROCEEDING, THE EXPLANATIONS OF THE ASSESSEE HAVE TO BE EXAMINED INDEPENDENTLY WITHOUT BEING INFLUENCED BY THE DECISION TAKEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE F INDINGS RECORDED IN THE ASSESSMENT ORDER CONSTITUTE GOOD EVIDENCE IN PENAL TY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED AS CONCLUSIVE WHI LE DEALING WITH THE ADDITIONS IN THE PENALTY PROCEEDINGS. IF THE EXPLAN ATIONS APPEAR TO BE PLAUSIBLE, THEN, IN OUR VIEW, THERE IS NO NECESSITY OF LEVYING PENALTY UNDER SECTION 158BFA OF THE ACT. WITH THESE LEGAL PROPOS ITIONS IN MIND, WE SHALL EXAMINE THE EXPLANATIONS FURNISHED BY THE ASSESSEE. 7. AS AGAINST THE RETURNED INCOME OF RS.6,55,420/- , THE UNDISCLOSED INCOME FINALLY DETERMINED, AFTER THE ORDER OF LEARNED CIT( A), WAS RS.16,22,821/-. THE ADDITIONS THAT WERE CONFIRMED BY LEARNED CIT(A) , INTER ALIA, CONSISTS OF FOLLOWING ITEMS: A. DIFFERENCE IN CAPITAL GAIN COMPUTATION - 15, 718 B. LOW DRAWINGS - 53,290 C. INCOME AS PER ORIGINAL RETURN OF INCOME - 39,160 THESE ADDITIONS WOULD NOT GIVE RISE TO PENALTY AS T HEY HAVE BEEN ADDED EITHER ON ESTIMATED BASIS OR ON RE-WORKING OF COMPU TATIONS ON THE BASIS OF INFORMATION ALREADY GIVEN BY THE ASSESSEE. THE OTH ER TWO MAJOR ADDITIONS PERTAIN TO GOLD JEWELLERY AND SILVER ITEMS. THE ADD ITION TOWARDS GOLD JEWELLERY CONSISTED OF FOLLOWING GOLD ITEMS AND THE ASSESSEE CLAIMED THEM AS BELONGING TO OTHERS. A. GOLD BELONGING TO CUSTOMERS - 1022 GMS. B. GOLD BELONGING TO GOLD SMITHS - 422. 20 G MS. ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 6 OF 8 C. GOLD BELONGING TO FAMILY MEMBERS - 33 9.50 GRAMS WITH REGARD TO THE CLAIM OF GOLD BELONGING TO THE C USTOMERS, THE SUBMISSION OF THE ASSESSEE IS THAT THE VERY FACT THAT SAID GOL D JEWELLERY WERE KEPT IN 59 SEPARATE PACKETS ALONG WITH DESCRIPTION PROVES THAT THEY BELONG TO THE CUSTOMERS. ACCORDING TO THE ASSESSEE, THE SEARCH O FFICIALS, ON BEING SATISFIED WITH THE SAID CLAIM, DID NOT SEIZE THOSE PACKETS. ACCORDING TO THE ASSESSEE, HE DID NOT INCLUDE THE VALUE OF ABOVE CIT ED GOLD JEWELLERY IN THE BLOCK RETURN, AS HE WAS CONFIDENT OF PROVING THE SA ID CLAIM. HOWEVER, DUE TO PASSAGE OF TIME, HE PREFERRED TO ADMIT THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDING BY WAY OF FILING A LETTER. TH US, IT IS SEEN THAT THE ASSESSEE HAS OFFERED EXPLANATIONS IN RESPECT OF GOL D BELONGING TO CUSTOMERS AND THE SAME WAS NOT FOUND TO BE FALSE BY THE ASSES SING OFFICER. HENCE, WITHOUT ESTABLISHING THAT THE EXPLANATIONS OF THE A SSESSEE ARE TOTALLY FALSE, THE PENALTY UNDER SECTION 158BFA IS NOT LEVIABLE ON THIS ADDITION. 7.1 WITH REGARD TO THE GOLD CLAIMED TO BELONG T O THE GOLD SMITHS, THE SUBMISSION OF THE ASSESSEE IS THAT THEY HAVE ALREAD Y BEEN RECORDED IN THE BOOKS OF ACCOUNT AND HENCE HE DID NOT INCLUDE THE S AME IN THE BLOCK RETURN. THE ASSESSING OFFICER CONDUCTED ENQUIRIES AND HAVE GIVEN PARTIAL RELIEF, I.E. AS AGAINST THE CLAIM OF 515 GMS., THE ASSESSING OFF ICER HAS MADE ADDITION ONLY TO THE TUNE OF 422.20 GMS. THE GOLD WAS CLAIM ED TO BELONG TO FOUR GOLD SMITHS. THE ASSESSING OFFICER GAVE DEDUCTION I N RESPECT OF GOLD BELONGING TO ONE GOLD SMITH AND ADDED THE GOLD CLAI MED TO BELONG TO OTHER THREE PERSONS. OUT OF THE REMAINING THREE PERSONS, THE ASSESSING OFFICER ACTUALLY EXAMINED ONLY TWO PERSONS AND THEY DEPOSED AGAINST THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER MADE THE ADDITION WI THOUT ALLOWING THE ASSESSEE TO CROSS EXAMINE THEM. THE ASSESSING OFFIC ER MADE THE ADDITION OF GOLD CLAIMED TO BELONG TO THE THIRD PERSON WITHO UT ACTUALLY EXAMINING HIM. THUS, ACCORDING TO THE ASSESSEE, THE ADDITIO N OF GOLD JEWELLERY ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 7 OF 8 PERTAINING TO GOLD SMITHS HAS BEEN MADE WITHOUT CON CLUSIVELY ESTABLISHING THAT THE SAID EXPLANATIONS ARE FALSE. THE CONTENTI ON OF THE ASSESSEE IS THAT HE HAS ACCEPTED THIS ADDITION ONLY TO PURCHASE PEAC E FROM THE DEPARTMENT. THUS IT IS SEEN THAT QUANTITY OF GOLD CLAIMED TO BE LONG TO THE GOLD SMITHS HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT. THUS IT IS SEEN THAT THE EXPLANATIONS OF THE ASSESSEE IN THIS REGARD HAS NOT BEEN CONCLUSIVELY FOUND TO BE FALSE. HENCE, IN OUR VIEW, THE PENALTY UNDER SECTION 158BFA IS NOT EXIGIBLE IN RESPECT OF THIS ADDITION ALSO. 7.2 THE ASSESSEE CLAIMED 740 GMS OF GOLD AS BEL ONGING TO HIS MOTHER AND 390 GMS OF GOLD AS BELONGING TO HIS WIFE. THE ASSESSING OFFICER HAS ALLOWED CREDIT TO THE EXTENT OF 350 GMS FOR MOTHER OF THE ASSESSEE AND 51.50 GMS FOR THE WIFE OF THE ASSESSEE. BOTH THESE ADDITIONS HAVE BEEN MADE ONLY FOR WANT OF SUPPORTING EVIDENCES. OTHERW ISE THE EXPLANATION OF THE ASSESSEE IN THIS REGARD IS NOT FOUND TO BE FALS E. ACCORDINGLY WE HOLD THAT THE PENALTY UNDER SECTION 158BFA IS NOT LEVIAB LE IN RESPECT OF THIS ADDITION. 8. THE REMAINING ADDITION RELATES TO THE SILVER ARTICLES. THE TOTAL QUANTITY OF SILVER FOUND DURING THE COURSE OF SEARCH WAS 50. 589 KGS. HOWEVER IN THE BOOKS OF ACCOUNT THE STOCK WAS AVAILABLE ONLY TO TH E TUNE OF 3.000 KGS. THE ASSESSING OFFICER GAVE FURTHER DEDUCTION OF 12.62 K GS., DEPENDING UPON THE AVAILABILITY OF SOURCES. THE ASSESSEE OFFERED THE VALUE OF 31.38 KGS AS UNEXPLAINED IN HIS LETTER CITED EARLIER. THE BALAN CE QUANTITY WAS CLAIMED TO BELONG TO THE FAMILY MEMBERS. HOWEVER, THE ASSESSI NG OFFICER DID NOT ACCEPT THE SAME ONLY FOR WANT OF EVIDENCES. THE AS SESSEE IS A JEWELLER AND IT IS QUIET NATURAL FOR ANY JEWELLER TO POSSESS SIL VER ITEMS DEPENDING UPON THE FAMILY STATUS. HENCE THE CLAIM OF THE ASSESSEE CANNOT BE BRUSHED ASIDE ALTOGETHER. THOUGH THE ASSESSING OFFICER HAS MADE THE ADDITION AND THE SAME IS NOT BEING CONTESTED BY THE ASSESSEE, IN OUR VIEW, CONSIDERING THE ITA NO.407/VIZAG/2010 M SHYAM VISAKHAPATNAM PAGE 8 OF 8 EXPLANATIONS OF THE ASSESSEE AND ON A CONSPECTUS OF THE MATTER, THE PENALTY IS NOT LEVIABLE ON THIS ADDITION ALSO. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:15-06-2011 COPY TO 1 SRI M. SHYAM, D.NO. 25-08-45, MAIN ROAD, VISAKHAP ATNAM 2 THE ACIT, CIRCLE-1(1) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM