M/s. Desai Brothers & Associates, Ahmedabad V. The Income tax Officer, Ward-7(3), Ahmedabad

ITA 4085/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6024 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-06-2010
• Assessment Year: 1992-1993
• Appeal Filed On: 07-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: A C SHAH
• Keywords: Unexplained investment; Income from undisclosed sources; Corroborative evidences; Set aside
• Section: 271(1)(c); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 03/06/2010 DRAFTED ON: 04/ 06/2010 ITA NO.4085/AHD/2007 ASSESSMENT YEAR : 1992-93 M/S. DESAI BROTHERS & ASSOCIATES 2 ND FLOOR NIRAV COMPLEX OPP.NAVRANG HIGH SCHOOL SIX ROAD JUNCTION NARANPURA AHMEDABAD-380 013 VS. THE ITO WARD-7(3) AHMEDABAD PAN/GIR NO. :AAFFD 3164 B (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI A.C. SHAH RESPONDENT BY: SHRI M.C. PANDIT, SR.D.R. O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIII, AHMEDA BAD DATED 13/06/2006 AND THE ONLY ISSUE WHICH HAS EMERGED F ROM THE NUMBER OF GROUNDS RAISED IS IN RESPECT OF CONFIRMATION OF PEN ALTY OF RS.1,28,732/- LEVIED U/S. 271(1)(C) OF THE I.T.ACT, 1961. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S. 271(1)(C) OF THE I.T.ACT, 1961 DATED 29/05/2006 AND THE ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 2 - ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 254 OF TH E I.T. ACT, 1961 DATED 15/12/2006 WERE THAT RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 29/01/1993 DECLARING TOTAL INCOME OF R S.34,33,953/-. IT IS ALSO WORTH TO MENTION THAT IN THE FIRST ROUND CONSE QUENCE UPON THE SEARCH AN ORDER U/S.143(3) HAD ALREADY BEEN PASSED ON 28/0 2/1995 FOR ASSESSMENT YEAR 1992-93, THE YEAR UNDER APPEAL; WHI CH WAS SET ASIDE, THEREFORE, THE PRESENT ORDER AS REFERRED ABOVE, IS THE SUBJECT MATTER OF THE CURRENT PENALTY PROCEEDINGS. IN RESPECT OF THE FIR M UNDER CONSIDERATION A DISCLOSURE OF RS.1 CRORE WAS MADE VIDE A STATEMENT U/S.132(4) OF THE I.T. ACT, 1961. IN THE FIRST ROUND OF ASSESSMENT, AS R EFERRED ABOVE, VIDE AN ORDER U/S.143(3) OF THE I.T. ACT, 1961 DATED 28/02/ 1995 AN ADDITION OF RS.4,45,000/- WAS MADE UNDER THE HEAD OUT OF UNACC OUNTED INVESTMENT IN HOUSEHOLD EQUIPMENTS. THE MATTER HAD REACHED TO LEARNED CIT(APPEALS) WHO HAS PARTLY ALLOWED THE CLAIM TO TH E EXTENT OF RS.3,39,000/- AND CONFIRMED THE ADDITION OF RS.1,06 ,000/- VIDE AN ORDER DATED 11/09/1996. THE REVENUE DEPARTMENT HAS FILED AN APPEAL BEFORE THE ITAT BEARING ITA NO.4632/AHD/1996 AND RESPECT ED CO-ORDINATE BENCH A AHMEDABAD VIDE ITS ORDER DATED 25/07/2005 HAS SET ASIDE SOME OF THE GROUNDS, HOWEVER, IN RESPECT OF THE ADD ITION PERTAINING TO THE UNACCOUNTED INVESTMENT OF HOUSEHOLD EQUIPMENTS REVE RSED THE FINDINGS OF THE LEARNED CIT(APPEALS) AND RESTORED THE ADDITI ON AS MADE BY THE ASSESSING OFFICER. 3. FROM THE FACTS, IT HAS ALSO BEEN BORNE OUT THAT A LIST OF HOUSEHOLD EQUIPMENTS WAS PREPARED AND AN ENQUIRY WAS MADE BY THE SEARCH PARTY. THE ASSESSING OFFICER HAS NOTED WHILE IMPOSING THE PENALTY THAT THE ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 3 - SUPPORTING EVIDENCES FOR THE ACQUISITION OF THOSE H OUSEHOLD EQUIPMENTS HAVE ALSO BEEN FURNISHED BY THE ASSESSEE. AS PER A SSESSING OFFICER, UNACCOUNTED INVESTMENT TOWARDS HOUSEHOLD GOODS WAS DETECTED FROM THE RESIDENCE OF ONE SHRI DILIP D.DESAI OF RS.5 LACS. OUT OF WHICH AS PER ASSESSING OFFICER, THE ASSESSEE HAS DISCLOSED RS.0. 55 LACS IN THE RETURN OF INCOME. IN RESPECT OF THE DIFFERENCE OF RS.4.45, T HE ASSESSEE HAS GIVEN ONE STATEMENT AT THE TIME OF SEARCH BUT CONTRADICTE D THE SAID STATEMENT DURING THE COURSE OF PROCEEDINGS U/S.132(5) OF THE I.T. ACT, 1961. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE WAS UN ABLE TO EXPLAIN THE IMPUGNED INVESTMENT MADE IN THE HOUSEHOLD EQUIPMENT S. MAINLY RELYING UPON THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFIC ER HAS HELD THAT THE HOUSEHOLD EQUIPMENTS WERE NOTHING BUT UNACCOUNTED I NVESTMENT, THEREFORE, TO THAT EXTENT LIABLE FOR CONCEALMENT PE NALTY. WITH THESE REMARKS A PENALTY OF RS.97,200/- HAS BEEN LEVIED. THE SAID PENALTY ORDER WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY . 4. WHILE DEALING WITH THE ISSUE, AT THE OUTSET, THE LEARNED CIT(APPEALS)HAS CLARIFIED THAT THE MINIMUM PENALTY U/S. 271(1)(C) OF THE I.T.ACT, 1961 WAS WRONGLY CALCULATED BY THE ASSESSI NG OFFICER, THEREFORE, SUBSEQUENTLY AN ORDER U/S.154 R.W.S. 271 (1)(C) OF THE I.T.ACT, 1961 WAS PASSED BY RECTIFYING THE MISTAKE AND THE PENALTY AMOUNT WAS INCREASED TO RS.1,28,732/-, THE AMOUNT OF PENALTY N OW UNDER CONSIDERATION IN THE PRESENT APPEAL BEFORE US. ON MERITS, THE LEARNED CIT(APPEALS) NARRATED THE FACTS OF THE CASE AND HEL D THAT AS A RESULT OF SEARCH IT WAS FOUND THAT THE APPELLANT HAD INDULGED IN EARNING OF ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 4 - UNACCOUNTED INCOME. ADMITTEDLY, THE APPELLANT HAD FOUND RECEIVED 'ON-MONEY' AND, THEREFORE, CAME FORWARD TO DISCLOSE SUCH 'ON-MONEY' WHICH WAS ALLEGED TO HAVE BEEN RECEIVED BY THE APP ELLANT. THE LEARNED CIT(APPEALS) THEN REFERRED THE DISCLOSURE AMOUNT OF RS.1 CRORE IN RESPECT OF THE APPELLANT-FIRM. AS FAR AS THE SAID DISCLOSU RE WAS CONCERNED, THE LEARNED CIT(APPEALS) HAS GIVEN A CATEGORICAL FINDIN G THAT QUOTE THE DISCLOSURE SO MADE HAS NEVER BEEN RETRACTED AT ANY STAGE NOR THE APPELLANT HAS EVER DENIED HAVING RECEIVED THE ON-MONEY UNQUO TE. THEREAFTER, THE LEARNED CIT(APPEALS) MENTIONED THAT INSTEAD OF FULF ILLING THE SAID COMMITMENT OF DISCLOSURE THE APPELLANT TRIED TO WRI GGLE OUT OF HIS COMMITMENT ON THE PRETEXT THAT THE INVESTMENT TO TH E EXTENT OF RS.4,45,000/- TOWARDS ACQUISITION OF HOUSEHOLD EQUI PMENTS COULD BE EXPLAINED. ACCORDING TO LEARNED CIT(APPEALS), THE APPELLANT HAD IGNORED THE FACT THAT THE INVESTMENT OF THE DISCLOS URE AMOUNT EITHER IN THE ACQUISITION OF HOUSEHOLD EQUIPMENTS OR ELSEWHERE WA S ONLY AN APPLICATION OF INCOME. HE HAS ALSO REJECTED THE O THER ARGUMENT THAT THE REVENUE HAS NOT PROVED THAT THE INVESTMENT FOR HOUS EHOLD EQUIPMENTS WAS MADE OUT OF THE CONCEALED UNACCOUNTED INCOME. HE HAS DRAWN A CONCLUSION THAT ONCE IT WAS AN ACCEPTED FACT THAT T HE APPELLANT HAD RECEIVED 'ON-MONEY' WHICH WAS DISCOVERED AS A RESUL T OF SEARCH, THEREFORE, THE DISCLOSURE OF UNACCOUNTED INCOME U/ S.132(4) OF THE I.T. ACT, 1961 HAS AFFIRMED THE CONCEALMENT OF INCOME AN D WHICH HAS ALREADY BEEN CONFIRMED BY THE TRIBUNAL. WITH THE RESULT, T HE ACTION OF THE ASSESSING OFFICER WAS AFFIRMED. BEING AGGRIEVED N OW THE ASSESSEE IS IN FURTHER APPEAL. ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 5 - 5. FROM THE SIDE OF THE APPELLANT SHRI A.C.SHAH AND FROM THE SIDE OF THE REVENUE SHRI M.C.PANDIT APPEARED. BOTH THE PAR TIES HAVE BEEN HEARD AT SOME LENGTH. 6. ON CAREFUL HEARING OF THE RESPECTIVE PLEADINGS T HIS FACT CANNOT BE DENIED THAT THE IMPUGNED ADDITION WAS ONCE DELETED BY LEARNED CIT(APPEALS), THOUGH THE SAID DELETION WAS THE SUBJ ECT MATTER OF APPEAL BEFORE THE TRIBUNAL. IN THAT ORDER, THE LEARNED C IT(APPEALS) HAS MADE AN OBSERVATION THAT IN VIEW OF ASSESSEES OWN CONFE SSION AND IN VIEW OF THE MATERIAL FACT THAT THE HOUSEHOLD EQUIPMENTS WER E DISCLOSED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S.132( 4) OF THE I.T. ACT, 1961 IT COULD BE HELD THAT AS AGAINST THE ADDITION OF RS.4.45 LACS MADE BY THE ASSESSING OFFICER THE ADDITION TO THE EXTENT OF RS.1.06 LACS WAS TO BE RETAINED AND THE BALANCE OF RS.3.39 LACS WAS DIRECT ED TO BE DELETED. IN THAT ORDER IT HAS ALSO BEEN OBSERVED THAT THE SEARC H PARTY HAD NOT FURNISHED ANY VALUATION OF THE VARIOUS ITEMS OF HOU SEHOLD EQUIPMENTS FOUND AT THE TIME OF SEARCH. IN THAT CONTEXT A FI NDING WAS GIVEN THAT IT WOULD BE PROPER TO ACCEPT THE VALUATION AS MENTIONE D BY THE APPELLANT. NOW BEFORE US, THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE HAS AGAIN VEHEMENTLY ARGUED THAT A LIST OF EQUIPMEN T WAS MADE THROUGH WHICH THE NAME OF THE ARTICLE, DATE OF PAYMENT, THE AMOUNT OF INVESTMENT AS WELL AS THE MODE OF PAYMENT WAS DULY DISCLOSED. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO MENTIONED THAT THE INVESTMENT WAS MADE OUT OF THE WITHDRAWALS FROM THE BANK AND IN THAT RESPECT HE HAS DRAWN OUR ATTENTION TOWARDS SOME OF THE BANK ACCOUNTS THROUGH WHICH IT WAS DEMONSTRATED THAT THE WITHDRAW ALS FROM THE BANK ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 6 - HAVE MATCHED WITH THE IMPUGNED INVESTMENTS TOWARDS HOUSEHOLD EQUIPMENTS. THIS IS ONE OF THE BASIC REASONS FOR A RGUING FOR DELETION OF PENALTY. THE OTHER PLANK OF THE ARGUMENT OF THE LE ARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS BASED UPON THE IM PUGNED STATEMENT U/S.132(4) OF THE I.T. ACT, 1961 OF SHRI DILIP D.D ESAI DATED 27/03/1992, I.E. ON THE DATE OF SEARCH. FOR THE SAKE OF CLAR ITY, WE HEREBY REPRODUCE QUESTION NO.46 OF THE SAID STATEMENT WHICH WAS STRO NGLY RELIED UPON BEFORE US AS FOLLOWS:- Q.46 I DRAW YOUR ATTENTION TO EXPLANATION 5 TO SE C.271(1)(C) OF THE INCOME-TAX ACT AND WHICH IS EXPLAINED TO YOU. DO Y OU WISH TO DECLARE ANY UNDISCLOSED INCOME BY TAKING ADVANTAGE OF THIS SECTION? ANS. YES, I HAVE UNDERSTOOD THE PROVISIONS OF SECTI ON EXPLAINED BY YOU AND I DECLARE RS.1.5 CRORES AS UNDISCLOSED INCOME O F CURRENT YEAR IN DESAI BROTHERS ASSOCIATES AND DESAI BROTHER S & MAHADEVIA ASSOCIATES AND I AM PREPARED TO PAY TAX O N SUCH INCOME. OUT OF THIS, I DECLARE CURRENT YEAR UNDISC LOSED INCOME OF RS.1 CRORE IN DESAI BROTHERS ASSOCIATES AND RS.5 0 LAS IN DESAI BROTHERS & MAHADEVIA ASSOCIATES. THIS INCOME IS RECEIVED TOWARDS ON MONEY IN CASH FROM TULIP-I & II WHICH IS INVESTED AS UNDER: UNACCOUNTED CASH : SEIZED FROM THE RESIDENCE OF SHRI DILIP D.DESAI 10,30,000 SEIZED FROM THE RESIDENCE OF SHRI BHARAT S.DESAI 25,000 10,55,000 ------------ UNACCOUNTED ORNAMENTS : SEIZED FROM THE RESIDENCE OF SHRI DILIP D.DESAI 13,52,629 SEIZED FROM THE RESIDENCE OF SHRI BHARAT S.DESAI 1,02,471 14,55,100 ------------ UNACCOUNTED SILVER ARTICLES : ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 7 - SEIZED FROM THE RESIDENCE OF SHRI DILIP D.DESAI 1,20,000 SEIZED FROM THE RESIDENCE OF SHRI BHARAT S.DESAI 8,100 1,28,100 ----------- UNACCOUNTED HOUSEHOLD EQUIP. FOUND AT THE RESIDENCE OF SHRI DILIP D.DESAI 5,00,000 LABOUR EXPENSES, REGARDING CONSTRUCTION 33,65, 000 SUNDRY RECEIVABLE FROM MEMBERS 85, 00,000 --------------- 1,50,03,200 6.1. THEREFORE BANKING UPON THE SAID STATEMENT, IT IS VEHEMENTLY CONTESTED THAT THE DECLARANT HAS CATEGORICALLY STAT ED THAT THE INCOME SO RECEIVED TOWARDS 'ON-MONEY' IN CASH WAS INVESTED IN THE ASSETS AS DISCLOSED, THEN AND THERE AT THE TIME OF SEARCH. U NDISPUTEDLY THERE WAS A DISCLOSURE OF UNACCOUNTED HOUSEHOLD EQUIPMENTS FOUN D AT THE RESIDENCE OF SHRI DILIP D.DESAI OF RS.5 LACS. 7. ONCE A DISCLOSURE HAS BEEN MADE AND ON THE BASIS OF SAID DISCLOSURE THEREAFTER, THE ASSESSEE HAD ACTED UPON , THEN IN SUCH A CIRCUMSTANCE WHEN THE IMPUGNED ADDITION HAD A CHE CKERED HISTORY, THE IMPOSITION OF LEVY OF CONCEALMENT OF PENALTY HAD BE COME DOUBTFUL. UNDER THESE CIRCUMSTANCES, THE ASSESSEE HAS TAKEN S HELTER OF EXPLANATION- 5 TO SECTION 271 OF THE I.T. ACT, 1961; THE RELEVAN T PORTION IS REPRODUCED FOR REFERENCE. ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 8 - EXPLANATION 5 OF SECTION 271 .-WHERE IN THE COURSE OF A SEARCH UNDER SECTION 132 BEFORE THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOLLY OR IN PAR T) HIS INCOME,- (A) .. (B) (1) SUCH INCOME IS, OR THE TRANSACTIONS RESULTING I N SUCH INCOME ARE RECORDED,- (I) IN A CASE FALLING UNDER CLAUSE (A), BEFORE THE DATE OF THE SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B), ON OR BEFO RE SUCH DATE, IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE SAID DATE; OR (2) HE, IN THE COURSE OF THE SEARCH, MAKES A STATEM ENT UNDER SUB-SECTION (4) OF SECTION 132 THAT ANY MONEY, BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER H IS CONTROL, HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCL OSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECTION 139, AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PA YS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. 8. IN THE LIGHT OF THE ABOVE DISCUSSION AND THE LEG AL POSITION WE CAN APPROVE THE ARGUMENT OF LEARNED AUTHORISED REPRESEN TATIVE OF THE ASSESSEE THAT THIS IS NOT THE CASE WHERE THE REVENU E HAS PROVED TO THE HILT THAT THERE WAS AN APPLICATION OF UNACCOUNTED INCOME TOWARDS INVESTMENT OF HOUSEHOLD EQUIPMENTS BUT THE EVIDENCES IN THE FO RM OF BANK PASSBOOK HAVE CATEGORICALLY ESTABLISHED THAT IT WAS NOTHING BUT THE SAVINGS OF THE PAST, THEREFORE, VERY MUCH COVERED BY THE STATEMENT RECORDED U/S.132(4) OF THE I.T. ACT, 1961. KEEPING IN MIND THE FACTS P LACED ON RECORD AND THE ITA NO.4085/AHD/2007 M/S.DESAI BROTHERS & ASSOCIATES VS. ITO ASST.YEAR - 1992-1993 - 9 - SURROUNDING CIRCUMSTANCES OF THE CASE AS WELL AS TH E PAST HISTORY, WE HEREBY REVERSE THE FINDINGS OF THE LEARNED CIT(APPE ALS) AND DIRECT TO DELETE THE PENALTY. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/ 06 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MUKUL SHRAWA T ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11 / 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIII, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD