YOGESH J. MEHTA, MUMBAI V. ITO 20(3)(4), MUMBAI

ITA 4372/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0567 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 09-05-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 16-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Recovery proceedings; Income from undisclosed sources; Bonafide belief
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA NO.4372/MUM./2015 (ASSESSMENT YEAR: 2001 - 0 2) YOGESH J. MEHTA 73, VAIBHAV APARTMENTS, S.K. BOLE MARG, AGR BAZAR NR. SIDHI VINAYAK TEMPLE, DADAR (W) MUMBAI 400026 PAN AAMPM1752F . APPELLANT V/S ITO, WARD 20(3)(4) PIRMAL CHAMBERS, LALBAUG, MUMBAI 400012 . RESPONDENT ASSESSEE BY : SHRI. HARESH SHAH REVENUE BY : SHRI. ARJU GARODIA DATE OF HEARING 09.05.2017 DATE OF ORDER - 24 .05.2017 O R D E R PER: MANJUNATHA G. THIS APPEAL FILED BY THE ASSESSEE I S DIRECTED AGAINST ORDER OF THE CIT(A) - 37, MUMBAI DATED 24.02.2010 AND IT PERTAINS TO THE YOGESH J. MEHTA ITA NO.4372/MUM./2015 2 ASSESSMENT YEAR 2001 - 02, CONFIRMING LEVY OF PENALTY U/S. 271 (1) (C) OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001 - 02 ON 24.07.2001 DECLARING TOTAL INCOME OF RS.1,91,620/ - . SUBSEQUENTLY ASSESSMENT WAS REOPENED U/S. 148 , ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961 , ON TH E GROUND THAT THE ASSESSEE HAS FILED A POLICE COMPLAINT AGAINST ONE SHRI. H .K JAIN, PROPRIETOR, M/S. ALPHA EXPORTS, FOR RECOVERY OF AMOUNT OUTSTANDING TOWARDS SALE OF POLISHED DIAMONDS AMOUNTING TO RS.15,16,616/ - WHICH HAS NOT BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT S FOR THE RELEVANT ASSESSMENT YEAR. T HE ASSESSMENT FOR THE YEAR WAS COMPLET ED U/S. 143 (3) R.W.S 147 OF THE ACT, ON 15.12.2016, TREATING THE ENTIRE SALE VALUE OF DIAMOND AMOUNTING TO RS.15,16,616/ - AS UNACCOUNTED INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), HOWEVER COULD NOT SUCCEEDED. THE ASSESSEE CARR IED THE MATTER IN FURTHER, APPEAL BEFORE THE ITAT. THE ITAT , VIDE ITS ORDER DATED 04.01.2012, UPHELD THE CIT(A), ORDER AND DISMISSED THE APPEAL. YOGESH J. MEHTA ITA NO.4372/MUM./2015 3 3. THEREAFTER, THE A . O INITIATED PENALTY PROCEEDINGS A ND ISSUED SHOW CAUSE NOTICE U/ S . 271 (1)(C) R.W.S. 274 OF THE ACT AND ASKED TO EXPLAIN WHY PENALTY SHALL NOT BE LEVIED FOR CONCEALMENT OF INCOME AND ALSO FURNISHING INACCURATE PARTICULAR S OF INCOME. IN REPLY TO SHOW CAUSE NOTICE , THE ASSESSEE SUBMITTED THAT HE HAS NEITHER CONCEALED PARTI CULAR S OF INCOME NOR FURNISHED INACCURATE PARTICULAR S OF INCOME, AS THE SALES MADE TO M/S . ALPHA EXPORTS WAS ON APPROVAL BASIS AS PER THE NORMAL PRACTICE FOLLOWED IN THE DIAMOND TRADE BUSINESS AND M/S. ALPHA EXPORTS NEITHER APPROVED THE SALES NOR RETURNED THE DIAMONDS, THEREFORE HE HAD TAKEN UP THE RECOVERY PROCEEDINGS BY PRESENTING CHEQUE GIVEN BY THE PARTY FOR SECURITY OF THE AMOUNT WHICH HAS BEEN RETURNED UNPAID FOR WANT OF FUNDS, THEREFORE HE HAD FILED A PETITION BEFORE THE COURT OF LA W U/S. 138 OF THE NEGOTIABLE INSTRUMENT A CT , TO RE COVER THE SALE PROCEEDS. BUT THE FACT REMAINS THAT , DURING RELEVANT FINANCIAL YEAR THE SALE HAD NOT BEEN TAKEN PALACE , THEREFORE HE HAD NOT BEEN ACCOUNTED THE SALES IN THE BOOKS OF ACCOUNT S , HOWEVER THE SAME HAS BEEN ACCOUNT ED IN THE ASSESSMENT YEAR 2003 - 04, THEREFORE THE QUESTION OF CONCEALMENT OF PARTICULAR S OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME DOESNT ARISE. 4. THE A.O AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE , OBSERVED THAT IT IS WORT H TO MENTION THAT THE ASSESSEE YOGESH J. MEHTA ITA NO.4372/MUM./2015 4 HIMSELF HAS STATED IN THE PETITION FILED UNDER THE NEGOTIABLE INSTRUMENT A CT , BEFORE THE COURT OF LAW THAT VIDE BILL NO. L/JUNE/1/2000 - 01 DATED 10.06.2000 HAD SOLD AND DELIVERED CUT AND POLISHED DIAMONDS WORTH RS.15,16,616/ - TO M/S . ALPHA EXPORTS, PROPRIETOR CONCERN OF SHRI. H.K. JAIN. THE A.O F URTHER OBSERVED THAT , THIS CLEARLY INDICATE THAT THE SALE IS COMPLETE AND HENCE , AS PER MERCANTILE SYSTEM OF ACCOUNTING THE SALE HAS TO BE ACCOUNTED IN THE BOOKS OF ACCOUNT S DURING RELEVANT FINANCIAL YEAR, BUT THE ASSESSEE FAILED TO ACCOUNT THE SE TRANSACTION IN HIS BOOKS OF ACCOUNTS AND ALSO DID NOT OFFER PROFIT FROM THE SAID TRANSACTION , THEREFORE OPINED THAT THIS IS A CASE OF CLEAR CONCEALMENT OF PARTICULAR S OF INCOME WHICH ATTRACTS PENALTY U/S. 271 (1)(C) OF THE ACT . A CCORDINGLY , LEVIED 100% TAX SOUGHT TO BE EVA DED AS PENALTY U/S. 271 (1) (C) OF THE ACT. 5 . AGGRIEVED BY THE PENALTY ORDER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) . BEFORE, THE CIT(A) , THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT, THE A.O WAS ERRED IN LEVYIN G PENALTY ON THE GROUND THAT THERE IS A CONCEALMENT OF PARTICULARS OF INCOME WITHOUT APPRECIATING THE FACTS THAT THE SALE HAS BEEN MADE ON APPROVAL BASIS AS PER THE PREVAILING PRACTICE IN THE LINE OF DIAMOND BUSINESS WHICH HAS NOT BEEN APPROVED BY THE PURCHASER , TH EREFORE HE HAD NOT CONSIDERED THE SAID TRANSACTION IN THE BOOKS OF A CCOUNT FOR THE YOGESH J. MEHTA ITA NO.4372/MUM./2015 5 RELEVANT FINANCIAL YEAR. HOWEVER, THE FACTS REMAINS THA T THE SAID TRANSACTION HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT S DURING THE ASSESSMENT YEAR 2003 - 04 WHICH CLEARLY INDICATES THAT THE ASSESSEE COULD NOT HAVE ANY INTENTION TO EVADE TAX, THEREFORE THE A.O WAS INCORRECT IN LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. 6. TH E CIT(A) AFTER CONSIDERING THE RELEVAN T SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN INTO ACCOUNT T HE OBSERVATION OF THE ITAT , IN THE QUANTUM APPEAL PROCEEDINGS , HELD THAT THE ASSESSEE HAD SOLD DIAMONDS WORTH RS. 15,16,616/ - TO M/S. ALPHA EXPORTS AND THAT THE SAID TRANSACTION WAS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OR THE RETURN OF INCOME FILED FOR RELEVANT FINANCIAL YEAR. THE EXPLANATION OFFERED BY THE ASSESS E E IN THIS REGARD WAS NOT FOUND SATISFACTORY OR SUBSTANTIATED AT ANY STAGE OF THE QUANTUM OR PENALTY PROCEEDINGS. THE ASSESSEE WAS UNABLE TO DISCHARGE THE ONUS CAST UPON HIM. THUS , ON PERUSAL OF THE ABOVE FACTS IN CONJUNCTION WITH THE JUDICIAL PRONOUNCEMENT S CITED, THE ASSESSEE LIABLE FOR LEVY OF PENALTY U/S. 271 (1) (C) OF THE ACT, ACCORDINGLY UPHELD PENALTY LEVIED BY THE A . O U/S. 271 (1) (C) OF THE ACT. A GGRIEVED BY THE CIT(A) ORDER , THE ASSESSEE IS IN APPEAL BEFORE US. 7 . THE LD. A . R FOR THE ASSESSEE SUBM ITTED , THAT THE LD. CI T(A) WAS ERRED IN CONFIRMING PENALTY U/S.271 (1)(C) , WITHOUT APPRECIATING YOGESH J. MEHTA ITA NO.4372/MUM./2015 6 THE FACT THAT THE ASSES SEE WAS UNDER A BONAFIDE BELIEF THAT THE ENTRY TO THE TRANSACTION IS TO BE DONE ONLY ON THE BASIS OF FINAL CONFIRMATION FROM THE PURCHASI NG PARTY, WHICH IS NORMALLY FOLLOWED IN DIAMOND TRADING BUSINESS. THE LD. AR FURTHER SUBMITTED THAT THE SAID SALE WAS MADE ON APPROVAL BASIS AND THE PARTY NEITHER APPROVED THE SALE, NOR RETURNED THE DIAMOND THEREFORE , THE ASSESSEE WAS COMPELLED TO GO FOR R ECOVERY PROCEEDINGS BY PRESENTING CHECK GIVEN BY THE PURCHASER FOR SECURITY OF THE DIAMONDS WHICH WAS DISHONOURED BY THE BANKER FOR IN SUFFICIENT FUNDS, THEREFORE THE ASSESSEE HAS FILED A S UIT BEFORE THE COURT OF LAW U/S. 138 OF TH E NEGOTIABLE INSTRUMENT A CT. BUT , THE FACTS REMAINS THAT THE SAID SALE WAS ON APPROVAL BASIS, THEREFORE THE ASSESSEE HAS NOT CONSIDERED THE SAID TRANSACTION IN THE BOOKS OF ACCOUNT S . THE A . R FURTHER SUBMITTED THAT , THE ASSESSEE HAS ACCOUNTED THE SAID TRANSACTION IN THE FINANCIAL YEAR RELEVANT ASSESSMENT YEAR 2003 - 04. TO THIS EFFECT FURNISHED COPY OF I . T RETURN FILE D FOR THE ASSESSMENT YEAR 2003 - 04. THE A.O AS WELL AS THE CIT(A) WITHOUT CONSIDERING THE BONAFIDE OF TH E ASSESSEE , SIMPLY OBSERVED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME WHICH WARRANTS LEVY OF PENALTY, REJECTING EXPLANATION S OF THE ASSESSEE THAT HE HAD CONSIDERED SAID TRANSACTION S IN THE BOOKS OF ACCOUNT S BEFORE COMPLETION OF ASSESSMENT FOR T HE RELEVANT ASSESSMENT YEAR. YOGESH J. MEHTA ITA NO.4372/MUM./2015 7 8 . THE LD. D.R , ON THE OTHER HAND , STRONGLY SUPPORTED ORDER OF THE CIT(A) . THE D . R FURTHER SUBMITTED THAT , THE ASSESSEE HAS NOT PROVED THE BONAFID E OF THE TRANSACTIONS WHICH IS EVIDENT FROM THE FACT THAT THE EXPLANATION S OFFER ED BY THE ASSESSEE HAS BEEN REJECTED BY THE CIT(A) AS WELL AS THE ITAT , IN THE QUANTUM APPEAL PROCEEDINGS. THE D.R FURTHER SUBMITTED THAT , THE ASSESSEE HAS MADE A ABSOLUTE SALE OF DIAMOND S WHICH IS EVIDENT FROM THE FACT THAT HE HIMSELF HAD ADMITTED BY FILI NG SUIT BEFORE THE COURT OF LAW FOR RECOVERY OF AMOUNT DUE FROM THE PURCHASER. THOUGH , THE ASSESSEE HAS MADE A SALE TRANSACTION S , FAILED TO ACCOUNT THE SAID TRANSACTION IN THE BOOKS OF ACCOUNT S WHICH IS CLEARLY A CASE OF CONCEALMENT OF PARTICULAR S OF INCOM E FOR EVASION OF PAYMENT OF TAXES, THEREFORE THE A . O WAS RIGHTLY LEVIED PENALTY U/S. 271 (1)(C) AND HIS ORDER SHOULD BE UPHELD. 9 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILAB LE ON RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. THE A.O LEVIED PENALTY U/S. 271 (1)(C) , ON THE GROUND TH AT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME WHICH WARRANTS LEVY OF PENALTY U/S.271(1)(C) OF THE ACT . T HE A . O FURTHER OBSERVED THAT , THE ASSESSEE HAS MADE A ABSOLUTE SALE OF DIAMONDS, HOWEVER FAILED TO A CCOUNT THE SAID TRANSACTION IN THE BOOKS OF ACCOUNTS, THEREFORE OPINED THAT IT IS CLEAR CASE OF CONCEALMENT OF PARTICULARS OF YOGESH J. MEHTA ITA NO.4372/MUM./2015 8 INCOME. IT IS THE CONTENTION OF THE ASSESSEE THAT THE SALE IS ON APPROVAL BASIS AND THE PURCHASER NE ITHER APPROVED THE SALE NOR RETURNS THE GOODS, THEREFORE THE ASSESSEE HAS NOT CONSIDERED IT AS SALE OF GOODS FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE FURTHER CONTENDED THAT HE HAD INITIATED RECOVER Y PROCEEDINGS BY FILLING A SUIT BEFORE THE COURT OF L AW , BECAUSE THE PURCHASER DID NOT RETURNED THE GOODS. BUT , THE FACT RE MAINS THAT THE SAID TRANSACTION HAS BEEN CONSIDERED IN THE BOOKS OF ACCOUNTS FOR THE NEXT FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2003 - 04, THEREFORE THE LOWER AUTHORITIES WERE ERRED I N TREATING THE SAID TRANSACTION AS ABSOLUTE SALE FOR THE PURPOSE OF LEVY OF PENALTY U/S. 271 (1)(C) OF THE ACT. 10 . THE A.O LEVIED PENALTY U/S. 271 (1)(C) , ON THE GROU ND THAT THE ASSESSEE WITH A MALAFIDE INTENTION WILFULLY CONCEALED PARTICULARS OF INCOME W HICH IS EVIDENT FROM THE FACT THAT HE DID NOT INCLUDED THE SAID SALE TRANSACTION IN THE BOOKS OF ACCOUNT , EVEN THOUGH THE SALE HAS BEEN MADE WITH A PROPER SALE INVOICE . THE A.O FURTHER OBSERVED THAT , THE ASSESSEE SOLD AND DELIVERED CUT AND POLISHED DIAMOND S WORTH RS.15,16,616/ - TO M/S. ALPHA EXPORTS VIDE SALE BILL NO. L/JUNE/1/2000 - 01 DATED 10.06.2000. THE A . O FURTHER OBSERVED THAT , IT IS FURTHER STRENGTHEN ED BY THE FACT THAT THE ASSESSEE HAD INITIATED RECOVERY PRO CEEDINGS BY PRESENTING THE CHEQUE ISSUED BY THE PURCHASER TO THE BANK AND ALSO FILLING A CASE BEFORE THE COURT OF YOGESH J. MEHTA ITA NO.4372/MUM./2015 9 LAW U/S. 138 OF THE NEGOTIABLE INSTRUMENT A CT. THE A.O , THUS OBSERVED THAT , THE ABOVE FACTS INDICATED THAT THE SALE OF DIAMONDS WAS COMPLETE AND AS PER THE MERCANTILE SYSTEM O F ACCOUNTING THE ASSESSEE SHOULD HAVE ACCOUNTED FOR THE TRANSACTION S DURING THE RELEVANT FINANCIAL YEAR. SINCE , THE ASSESSEE FAILED TO ACCOUNT THE SAID SALE TRANSACTION S , OPINED THAT IT IS CLEAR CASE OF CONCEALMENT OF PARTICULARS OF INCOME. 11 . HA VING HEA RD THE BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD , WE FIND THAT THE ASSESSEE HAS MADE A SALE OF CUT AND POLISHED DIAMONDS BY ISSUING VALID SALE INVOICE . WE FURTHER OBSERVED THAT , THE ASSESSEE HIMSELF HAD ADMITTED BEFORE THE COURT OF LAW THAT HE HAD S OLD CUT AND POLISHED DIAMOND S TO M/S. ALPHA ENTERPRISES WHICH IS EVIDENT FROM TH E FACT THAT HE HAD FILED A RECOVERY SUIT U/S. 138 OF NEGOTIABLE INSTRUMENT A CT. THOUGH , THE ASSESSEE HAS OFFERED AN EXPLANATION TO SUBSTANTIATE NON ACCOUNTING OF THE SAID TRANS ACTION IN THE BOOKS OF ACCOUNT S FOR THE RELEVANT FINANCIAL YEAR, THE LOWER AUTHORITIES HAVE REJECTED THE EXPLANATIONS OFFERED BY THE ASSESSEE ON THE GR OUND THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS EXPLANATION S WITH NECESSARY EVIDENCES. WE FURTHER OBSERVED THAT , THE ITAT , IN THE QUANTUM PROCEEDINGS HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM WITH NECESSARY EVIDENCE T HAT THE SAID SALE TRANSACTION IS ON APPROVAL BASIS . FROM YOGESH J. MEHTA ITA NO.4372/MUM./2015 10 THE ABOVE , IT IS VERY MUCH CLEAR THAT THE SALE MADE BY THE ASSE SSEE TO M/S. ALPHA ENTERPRISES I S A CONFIRMED SALE , BUT NOT SALE ON APPROVAL BASIS. ONCE THE SALE IS MADE , THE ASSESSEE OUGHT TO HAVE ACCOUNTED THE SAID SALE IN HIS BOOKS OF ACCOUNTS FOR THE RELEVANT ASSESSMEN T YEARS. SINCE , THE ASSESSEE HAS FAILED TO ACCOUNT THE SALE OF GOODS F OR THE RELEVANT FINANCIAL YEAR, W E ARE OF THE CONSIDERED VIEW THAT IT IS A CLEAR CASE OF CONCEALMENT OF PARTICULAR S OF INCOME. 12. THE PROVISION S OF SECTION 271 (1)(C) OF THE A CT READ W ITH EXPLANATION 1 PROVIDES FOR LEVY OF PENALTY, IF A PERSON FAILED TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY A SUCH PERSON IS FOUND TO BE FALLS OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTANTIATED AND ALSO SUCH PERSON FAILED TO PRO VE SUCH EXP LANATION IS BONAFIDE AND THAT ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAS B EEN DISCLOSED, THEN SUCH PERSON IS LIABLE FOR PENALTY, IN CASE ANY ADDITION IS MADE TO THE RETURNED INCOME. IN THIS CASE , THE EXPLANATION OFFE RED BY THE ASSESSEE HAS BEEN NEGATED BY THE AUTHORITIES INCLUDING THE ITAT. THEREFORE, WE ARE OF THE CONSIDER VIEW THAT THE ASSESSEE HAS CONCEALED PARTICULAR S OF HIS INCOME WHICH WARRANTS LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THOUGH , ASSESSEE RELIED UP ON CE RTAIN JUDICIAL DECISIONS, ON VERIFICATION S OF THE DECISIONS RELIED UPON BY THE ASSESSEE , WE FIND THAT THOSE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE CASE. THE YOGESH J. MEHTA ITA NO.4372/MUM./2015 11 CIT(A) AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE AND ALSO RELEVANT PR OVISIONS OF THE ACT, HAS RIGHTLY CONFIRMED PENALTY LEVIED BY THE A . O , U/S. 271 (1)(C) OF THE ACT. W E DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A). H ENCE , WE ARE INCLINED TO UPHELD THE CIT(A) ORDER AND DISMISSED APPEAL FILED BY THE ASSESSEE. 13 . IN T HE RESULT , APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 .05.2017 SD/ - SD/ - SAKTIJIT DEY MANJUNATHA G JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 .05.2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE. BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI YOGESH J. MEHTA ITA NO.4372/MUM./2015 12