Raghubar Dayal Gupta, New Delhi V. ACIT, New Delhi

ITA 4417/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7265 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-05-2016
• Assessment Year: misc
• Appeal Filed On: 16-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Assessee Lawyers: PAHUJA
• Keywords: Loose papers; Document seized; Documents seized

Judgement Text

1 ITA NO. 4417/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI B ENCH: F NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT, AN D SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A .NO. 4417 /DEL/2012 (ASSESSMENT YEAR:- 01/04/1995 TO 20/12 /2001) SHRI RAGHUBAR DAYAL GUPTA 158, JAMMU MOHALLA, MAUJPUR, SHAHDARA NEW DELHI PAN :AFXPG0096G (APPELLANT) VS THE ACIT CENTRAL CIRCLE-XIV, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN NEW DELHI (RESPONDENT) APPELLANT BY SH RI PAHUJA, ADV RESPONDENT BY SMT. NANDITA KANCHAN, DR ORDER PER CHANDRA MOHAN GARG, JM THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A) XXXIII, NEW DELHI DATED 2/7/2012 PASSED IN FIRST APPEAL NO. 65/2010-11/61 FOR THE BLOCK PERIOD FROM 1/4/1995 TO 20/12/2001. DATE OF HEARING 01.06.2016 DATE OF PRONOUNCEMENT 2 9 .08.2016 2 ITA NO. 4417/DEL/2012 2. THE GROUNDS RAISED BY THE APPELLANT READ AS FOLL OWS: 1 . THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. ACIT, CC-XIV, NEW DELHI GROSSLY EARED IN IMPOSING T HE PENALTY OF RS.191,700/- U/S 158BFA (2) OF THE I.T, ACT, 1961 WHICH HAS BEEN WRONGLY UPHELD BY THE LD.CIT(A) XXXIII. 2. THAT THE PROVISIONS LAID DOWN IN PROVISO 1 & 2 A PPENDED TO SECTION 158 BFA (2) HAVE NOT BEEN PROPERLY APPLIED. 3. THAT THE LD.CIT(A) HAS GROSSLY ERRED IN HOLDING THAT THE UNDISCLOSED INCOME DETERMINED BY THE A.O IS RS.6,62 ,880/- AS AGAINST THE ADDITION OF RS.3,19,475/- MADE BY TH E LD. ACIT, CC-XIV. 3. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIALS PLACED ON THE RECORD OF THE TRIBUNAL, INTER ALIA, IMPUGNED ASSESSMENT ORDERS, PENALTY ORDER, ORDER OF THE CIT(A) AND PAPER BOOK FILED BY THE ASSESSEE SPREAD OVER 91 PAG ES. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE A.O PA SSED PENALTY ORDER WITHOUT APPLICATION OF MIND AS HE IMPOSED PENALTY O N THE TOTAL ASSESSED INCOME INCLUDING RETURNED IN CASE OF THE A SSESSEE WHICH CANNOT BE TAKEN FOR IMPOSING PENALTY U/S 158 BFA (2 ) OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT). THE LD. COUNSEL POINTED OUT THAT THE CIT(A) WRONGLY UPHELD PENALTY IN CONTRAVENTION TO P ROVISIONS OF SECTION 158BFA (2) OF THE ACT AS PROVISO 1 & 2 TO SAID SECT ION HAVE NOT BEEN PROPERLY APPLIED TO THE FACTS OF THE CASE. THE LD. COUNSEL PLACING 3 ITA NO. 4417/DEL/2012 RELIANCE ON THE RATING OF THE FOLLOWING DECISIONS C ONTENDED THAT PENALTY IS NOT SUSTAINABLE THUS THE SAME MAY BE DEL ETED: I. CIT VS. HARKARAN DAS VED PAL. DATED 12.11.2008 DELHI HIGH COURT II. DCIT VS. A.T. INVOFIN INDIA PVT. LTD III SUPER CASSETTES INDUSTRIES LTD VS JCIT, ITAT, D ELHI DATED 11.7.2013 IV. DR. G. RAVINDRANATH SORMA KADAPA VS. ACIT DATED 29.10.2010 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORT ED THE ACTION OF THE A.O AS WELL AS IMPUGNED FIRST APPELLATE ORDE R AND CONTENDED THAT THE CIT(A) WAS QUITE CORRECT AND JUSTIFIED IN UPHOLDING THE PENALTY ORDER. 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, A T THE VERY OUTSET WE NOTE THAT THE PROVISION OF SECTION 158BFA (2) OF THE ACT AND FIRST & SECOND PROVISO THERETO READS AS FOLLOWS: 2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY D IRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHAL L NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RESPECT OF A PERSON IF 4 ITA NO. 4417/DEL/2012 (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC ; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HA S BEEN PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSE SSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN : 6. IN VIEW OF SECTION PROVISION TO SECTION 158BFA ( 2) OF THE ACT THE FIRST PROVISION SHALL NOT APPLY WHERE THE UNDISCLOS ED INCOME DETERMINED BY THE A.O IS IN EXCESS OF THE INCOME SH OWN IN THE RETURN AND IN SUCH CASES PENALTY SHALL BE IMPOSED ON THAT PORTION OF THE UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 7. IN THE PRESENT CASE, AS PER FACTS NOTED BY THE A .O IN PARA 2 OF THE PENALTY ORDER ASSESSMENT U/S 158BC OF THE ACT WAS C OMPLETED AT AN INCOME OF RS.6,62,880/- AGAINST THE RETURNED INCOME OF RS.3,43,404/- AND THUS ADDITION OF UNDISCLOSED INCOME WAS MADE OF RS.3,19,475/-. FROM THE PARA 7 OF THE PENALTY ORDER IT IS VIVID TH AT THE A.O HAS IMPOSED PENALTY ON THE ENTIRE ASSESSED INCOME I.E. ON RS.6,62,880/- WHICH IS NOT CORRECT AS PER MANDATE OF SECOND PROVI SION TO SECTION 158BFA(2). IN OUR CONSIDERED OPINION PENALTY U/S 1 58 BFA(2) OF THE ACT CAN ONLY BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED 5 ITA NO. 4417/DEL/2012 WHICH IS IN EXCESS OF THE GRANT OF UNDISCLOSED INCO ME SHOWN IN THE RETURN I.E ON RS. 3,19,475/- AS THE ASSESSED INCOME U/S 158BC OF THE ACT RS.6,62,880/- INCLUDES RETURNED AMOUNT OF RS.3, 43,404/- AND TOTAL ADDITIONS UPHOLD BY THE CIT(A) ON 5 ISSUES, AS NOTE D BY THE A.O IN THE PENALTY ORDER PARA 2, ARE OF RS.3,19,475/-. THEREF ORE, WE ARE INCLINED TO HOLD THAT THE PENALTY WAS WRONGLY CALCULATED AND IMPOSED ON THE TOTAL ASSESSED INCOME AND PENALTY U/S 158 BFA (2) O F THE ACT CAN ONLY BE IMPOSED ON THE AMOUNT OF UNDISCLOSED INCOME DETE RMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN FILED BY THE ASSESSEE FOR THE RELEVANT BLOCK PERIOD . 8. NOW, WE PROCEED TO EVALUATE THE PENALTY ORDER AN D FIRST APPELLATE ORDER AS TO WHETHER THE PENALTY IMPOSED A ND UPHELD BY THE CIT(A) IS NOT SUSTAINABLE. 9. FIRST OF ALL, WE FIND IT APPROPRIATE TO CONSIDER THE RATIO OF THE DECISION RELIED BY THE ASSESSEE, AS LISTED ABOVE, I N THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN TH E CASE OF CIT VS. HARKARANDAS VEDPAL (SUPRA), THE HON'BLE HIGH COURT OF DELHI UPHELD THE ORDER OF THE TRIBUNAL WHICH CANCELLED THE PENALTY O N THE GROUND THAT THE ASSESSEE HIMSELF HAD SURRENDERED THE AMOUNT AND THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE HAD EITHER CONC EALED OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME WHICH IS NOT C ASE HERE AS THE A.O 6 ITA NO. 4417/DEL/2012 HAS ASSESSED INCOME U/S 158BC OF THE ACT WHICH IS I N EXCESS OF RS.3,19,475/- TO THE RETURNED INCOME. 10. IN THE CASE OF DCIT VS. M/S A.I. INFOVIN PVT. L TD (SUPRA) IT WAS HELD THAT THE AUDITED BALANCE SHEET AND P & L A/C W HICH HAVE WERE SEIZED IN THE COURSE OF SEARCH CONTAINED IN THE REC ORDING OF THE TRANSACTION OF SALE OF SHARES RESULTING CAPITAL GAI NS. IN THIS CASE IT WAS EVIDENT FROM THE UNDISPUTED FACT THAT THE INVESTMEN T OF IMPUGNED SHARES WERE DULY REFLECTED IN THE FINANCIAL STATEME NTS OF THE ASSESSEE IN THE YEAR OF PURCHASE AND THE SALE CONSIDERATION/ GAIN RECEIVED WAS DEPOSITED IN THE BACK ACCOUNT WHICH WAS DULY DISCLO SED TO THE REVENUE BY WAY OF FILING RETURN. HOWEVER, THE DUE TO DELAY IN FILING RETURN THE LONG TERM CAPITAL GAIN WAS ASSESSED AS UNDISCLOSED INCOME WITHIN THE MEANING OF 158 BB(1)(C) WHICH IS ALSO NOT THE FACT UM OF THE PRESENT CASE. ON CAREFUL PERUSAL OF THE ORDERS OF THE COOR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF SUPER CASSETTES INDUSTRIES LTD. U/S JCIT (SUPRA) AND DR. G. RAVINDER NATH SORANG VS. ACIT (SUPRA) IT APPARENT THAT THESE ARE THE CASES WHEREIN PENALTY U/S 158 BFA (2) OF THE ACT WAS DELETED BY HOLDING THAT THERE WAS MATERIAL WITHIN T HE A.O TO SHOW THAT THE IMPUGNED INCOME WHICH WAS BASIS OF IMPOSING PEN ALTY WAS NOT DISCLOSED IN THE RETURN OF INCOME MEANING THERE BY THE IMPUGNED INCOME ON WHICH PENALTY WAS IMPOSED WAS SHOWN IN TH E RETURN OF 7 ITA NO. 4417/DEL/2012 INCOME THUS PENALTY IS NOT LEVIABLE WHICH IS NOT TH E FACTUM OF THE PRESENT CASE AS IN THE PRESENT CASE THE ASSESSED IN COME U/S 158BC OF THE ACT WAS IN EXCESS OF RETURNED INCOME TO THE TUN E OF RS.3,19,475/- WHICH CERTAINLY ATTRACTS PENALTY U/S 158BFA (2) OF THE ACT. 11. HE MAY ALSO POINT OUT THAT ION THE PROVISION OF SECTION 158 BFA (2) OF THE ACT THE WORD MAY HAS BEEN USED WHICH S HOWS THAT IN THE VERY CASE PENALTY IS NOT MANDATORY BUT IT IS PURE D ISCRETION OF THE REVENUE AUTHORITIES AS PER FACTS OF A PARTICULAR CA SE. IN THE PRESENT CASE, THE A.O ASSESSED TAXABLE INCOME U/S 158BC OF THE ACT ON FIVE COUNTS VIZ. (I) UNEXPLAINED CASH, (II) EXPENDITUR E INCURRED ON THE OCCASION OF THE MARRIAGE OF THE CHILDREN OF THE ASS ESSEE (III) EXPENDITURE INCURRED ON THE FOREIGN VISITS BY THE T WO SONS AND INCIDENTAL EXPENSES, (IV) INVESTMENT MADE IN PURSUA NCE OF JEWELLERY AND (V) EXTRA COMMISSION INCOME. 12. FROM THE FACTS IT IS APPARENT THAT ADDITION ON ACCOUNT OF CASH FOUND OF RS.25,000/- WAS BASED ON THE CASH FOUND DU RING THE SEARCH OF RS.87,750/- WHICH IS NOT ESTIMATED. ADDITION ON AC COUNT OF MARRIAGES OF TWO SONS HAS BEEN MADE ON THE BASIS OF BILLS AND VOUCHERS FOUND DURING THE SEARCH WHICH CANNOT BE SAID ON PURE ESTI MATE BASIS. ADDITION ON ACCOUNT OF FOREIGN VISIT IS AGAIN ALSO ON THE BASIS OF ACTUAL EXPENDITURE INCURRED ON FOREIGN TRAVEL INCLUDING AI R TICKET, INCIDENTAL 8 ITA NO. 4417/DEL/2012 CHARGES OF STAY AND LOCAL TOUR AND POCKET EXPENSES INCLUDING EXPENSES INCURRED TOWARDS PURCHASE OF SONY MUSIC SYSTEM WHIC H WAS ALSO NOT PURELY ON ESTIMATE BASIS BUT BASED ON THE FACTS AND DOCUMENTS REVEALED DURING THE SEARCH AND POST SEARCH ENQUIRIE S DURING THE ASSESSMENT. THE ADDITION ON ACCOUNT OF PURCHASE OF JEWELLERY IS ALSO BASED ON THE SEIZED MATERIAL ANNEXURE A-5 AND OTHER DETAILS WHICH WAS ALSO NOT ON PURELY ESTIMATED BASIS. THE INCOME OF COMMISSION WAS ALSO MADE ON THE BASIS OF SEIZED DOCUMENTS/PAPERS FOUND DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE IN THE SH APE OF BUNCH OF LOOSE PAPERS, SPIRAL NOTE BOOK, POCKET NOTE BOOK ETC. TH US IT WAS ALSO BASED ON THE INCRIMINATING MATERIAL FOUND AND SEIZED DURI NG THE COURSE OF SEARCH THUS IT WAS ALSO NOT TO THE ESTIMATED BASIS BUT WAS MADE ON THE PREMISE OF SOUND EVIDENCE FOUND FROM THE POSSESSION OF THE ASSESSEE. 13. FROM THE PENALTY ORDER IS APPARENT THAT THE PEN ALTY U/S 158BFA(2) HAS BEEN IMPOSED BY OBSERVING THAT THE AS SESSEE HAS NOT FILED THE RETURN SHOWING HIS CORRECT INCOME BEFORE THE SEARCH AND THEREAFTER HE IMPOSED PENALTY ON THE ASSESSED INCOM E INCLUDING RETURNED INCOME WHICH IS NOT A PROPER APPROACH AND APPLICATION OF THE MANDATE OF SECURED PROVISO TO SECTION 158BFA(2) OF THE ACT. SINCE IN THE EARLIER PART OF THIS ORDER WE HAVE OBSERVED THA T THE PENALTY U/S 9 ITA NO. 4417/DEL/2012 158BFA (2) OF THE ACT CAN BE IMPOSED ON THE INCOME ASSESSED U/S 158BC OF THE ACT WHICH WAS IN EXCESS TO THE RETURNE D INCOME. FROM THE RELEVANT OPERATIVE PART OF THE FIRST APPELLATE ORDER WE ALSO OBSERVE THAT IT WAS THE ARGUMENT OF THE ASSESSEE TH AT SINCE THE UNDISCLOSED INCOME ASSESSED BY THE A.O WAS NOT IN E XCESS OF THE RETURNED INCOME PENALTY U/S 158 BFA (2) OF THE ACT CANNOT BE IMPOSED. BUT THERE WERE NO OTHER ARGUMENTS ON THE IMPOSITION OF PENALTY ON THE MERITS SHOWING THAT THE PENALTY IMPOSED ON THE ADDI TIONS MADE IN EXCESS TO RETURNED AMOUNT CANNOT BE IMPOSED. 14. ON THE BASIS OF FOREGOING DISCUSSION WE RESPECT FULLY NOTE THAT THE BENEFIT OF RATIO OF THE DECISIONS, RELIED BY THE AS SESSEE, IS NOT AVAILABLE FOR THE ASSESSEE AS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE CLEARLY DISTINCT FROM THE FACTUM OF CASES RELIED BY THE ASSESSEE. SECONDLY, AS THERE WAS ADDITIONS IN EXCESS OF RETUR NED INCOME WHICH IS CLEARLY UNDISCLOSED INCOME NOT PURELY BASED ON THE ESTIMATION BUT WAS BASED ON THE SEIZED MATERIAL FOUND DURING THE COUNS EL OF SEARCH THOSE PENALTY U/S 158BFA (2) OF THE ACT IS LEVIABLE. ON THE ACCOUNT OF ADDITIONS MADE AS UNDISCLOSED INCOME. BUT NOT ON T HE ENTIRE TAXABLE AMOUNT ASSESSED U/S 158BC OF THE ACT INCLUDING RETU RNED INCOME AS PER SECOND PROVISO TO SECTION 158 BGFA (2) OF THE ACT. THUS PENALTY U/S 158 BFA (2) OF THE ACT IS DIRECTED TO BE IMPOSED ON LY ON THE ACCOUNT OF 10 ITA NO. 4417/DEL/2012 ADDITIONS MADE IN EXCESS TO RETURNED INCOME AND THU S THE A.O IS DIRECTED TO RECALCULATE THE PENALTY. ACCORDINGLY, THEREFORE, APPEAL OF THE ASSESSEE IS DISMISSED WITH THE ABOVE DIRECTIONS TO THE A.O TO RECALCULATE PENALTY AS PER LETTER AND SPIRIT OF SEC OND PROVISO TO SECTION 158BFA (2) OF THE ACT. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER POUNCED IN THE OPEN COURT ON 29/08/2016. SD/- SD/- (G.D. AGRAWAL) (C. M. GARG) VICE PRESIDENT JUDICIAL MEMBER DATED: 29/08/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 11 ITA NO. 4417/DEL/2012 DATE 1. DRAFT DICTATED ON .08.2016 PS 2. DRAFT PLACED BEFORE AUTHOR .08.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 2 9 . 0 8 . 2 0 1 6 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 30.08.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 31.08.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.