Shri Ramesh Kaila, Chandigarh V. ACIT, CC-II, Chandigarh

ITA 449/CHANDI/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8785 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH CIT DR
• Keywords: Unexplained expenditure; Loose papers; Document seized; Opportunity of being heard; Documents seized; Set aside
• Section: 271(1)(c); 69C; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH SMC CHANDIGARH !', # BEFORE: SMT. DIVA SINGH, JM ./ ITA NO. 449/CHD/2019 / ASSESSMENT YEAR : 2011-12 SHRI RAMESH KAILA, HOUSE NO. 1383, SECTOR 33-C, CHANDIGARH. VS THE ACIT, CENTRAL CIRCLE-II, CHANDIGARH. ./ PAN NO: ADOPK1141R / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI VINEET KRISHAN, ADVOCATE # ! ' / REVENUE BY : SHRI MANJIT SINGH, CIT (DR) $ % ! &/ DATE OF HEARING : 12.09.2019 '()* ! &/ D ATE OF PRONOUNCEMENT : 17.09 .2019 $%/ ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE WHEREIN THE CORRECTNESS OF THE ORDER DATED 29.01.20 19 OF CIT(A)-3, GURGAON PERTAINING TO 2011-12 ASSESSMENT YEAR IS ASSAILED ON THE FOLLOWING GROUNDS : 1. THAT THE ORDER PASSED UNDER SECTION 250(6) BY THE L D. COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON IN APPEAL NO.241/CLT(A)-3/ GGN/2016-17 DATED 29.01.2019 IS CONTRARY TO LAW AND FACTS OF THE CASE . 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN NOT AFFORDIN G REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING TH E PENALTY OF RS. 3,33,120/- ITA 449/CHD/2019 A.Y. 2011-12 PAGE 2 OF 7 IMPOSED BY THE LD. ASSESSING OFFICER UNDER SECTION 271 AAA OF THE INCOME TAX ACT, 1961. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CRYPTIC AND NON-SPEAKING ORDER. 5. THAT THE APPELLANT CRAVES TO ADD, AMEND OR ALTER AN Y GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL, WITH THE PERMI SSION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL. 2. THE APPEAL OF THE ASSESSEE CAME UP FOR HEARING O N 11.09.2019. ON THE SAID DATE LD. AR INVITING ATTEN TION TO THE ORDER DATED 03.07.2019 IN ITA 204/CHD/2015 PASSED B Y THE ITAT IN THE QUANTUM PROCEEDINGS SUBMITTED THAT SINC E THE ISSUE HAS BEEN REMANDED TO THE AO, THE APPEAL OF TH E ASSESSEE MAY BE SET ASIDE BY HOLDING THAT THE ORDER PASSED BY THE AO IS INFRUCTUOUS, THE PRESENT ORDER CANNOT BE IMPLEMENTED AS THE VERY ADDITIONS ARE IN FLUX. 3. THE LD. CIT-DR INVITING ATTENTION TO THE IMPUGNE D ORDER SUBMITTED THAT THE ASSESSEE FAILED TO MAKE ANY SUBM ISSIONS BEFORE THE CIT(A) AND INFACT HAS NOT PUT IN ANY APP EARANCE EVEN BEFORE THE AO IN THE PENALTY PROCEEDINGS ALSO AND THUS, THE MATTER MAY BE REMANDED BACK TO THE CIT(A). ALT ERNATELY IT WAS HIS PRAYER THAT TIME MAY BE GRANTED TO HIM T O GO THROUGH THE ORDER PASSED IN THE QUANTUM PROCEEDINGS . 4. ACCEPTING THE SAID PRAYER OF THE LD. CIT-DR, APP EAL WAS ADJOURNED TO 12.09.2019. 5. ON THE NEXT DATE, LD. AR REPEATED HIS PRAYER. I NVITING ATTENTION TO THE IMPUGNED ORDER, ATTENTION WAS INVI TED TO THE ITA 449/CHD/2019 A.Y. 2011-12 PAGE 3 OF 7 FACT THAT THE PENALTY HAS BEEN LEVIED ON THE BASIS OF THESE THREE ADDITIONS MENTIONED AT PAGE 11 PARA 4.4 : 4.4. (I) THE AO IN THE ASSESSMENT ORDER U/S 153A(1)(B) R.W.S . 143(3) FOR THE YEAR UNDER CONSIDERATION HAD MADE FOLLOWING ADDITIONS ON THE BASIS OF SEIZED DOCUMENTS FOUND DURING THE SEARCH. (A) RS. 13,58,500/- U/S 69C OF THE ACT ON ACCOUNT OF UN EXPLAINED EXPENDITURE. (B) RS. 4,50,000/- U/S 69C OF THE ACT ON ACCOUNT OF UNE XPLAINED EXPENDITURE. (C) RS. 15,22,710/- U/S 69C OF THE ACT ON ACCOUNT OF UN EXPLAINED EXPENDITURE 5.1 RELYING ON THE ORDER DATED 03.02.2019 PASSED BY THE ITAT IN THE QUANTUM PROCEEDINGS, IT WAS SUBMITTED T HAT THE ISSUES HAVE BEEN REMANDED. ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE AO ONLY AFTER THE PASSING OF TH E ORDER WAS OF THE VIEW THAT PENALTY WAS TO BE LEVIED OR NO T WOULD BE A VIEW WHICH THE AO HAS TO TAKE IN THE FRESH PROCEE DINGS. 6. THE LD. CIT-DR REFERRING TO THE ORDER PASSED BY THE ITAT IN THE QUANTUM PROCEEDINGS SUBMITTED THAT ON EACH O F THE ADDITIONS REFERRED TO IN THE PENALTY PROCEEDINGS, T HE ITAT IN THE QUANTUM PROCEEDINGS HAS NEGATED THE ASSESSEE'S PRAYER THAT THESE WERE DUMB DOCUMENTS. HE AGREED THAT THE MATTER HAS BEEN REMANDED BY THE ITAT, ACCORDINGLY, IT WAS HIS PRAYER THAT THE ISSUE MAY BE SET ASIDE TO THE AO TA KING NOTE OF THESE FACTS. 7. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. IT IS SEEN THAT IN THE FACTS OF THE PRE SENT CASE THE CO-ORDINATE BENCH IN THE QUANTUM PROCEEDINGS IN THE ITA 449/CHD/2019 A.Y. 2011-12 PAGE 4 OF 7 AFORESAID ORDER OF THE ITAT HAS MAINTAINED THE STAN D THAT THESE WERE DOCUMENTS FULLY IN THE KNOW OF THE ASSES SEE AND HENCE CANNOT BE TREATED TO BE DUMB DOCUMENTS. IT I S SEEN ON PERUSAL OF THE ORDER THAT THE ASSESSEE'S SUBMISS IONS DESCRIBING THESE SPECIFIC DOCUMENTS, 1) A-1 PAGE 3 (BACKSIDE); AND 2) A-1 PAGE-4 (BACK SIDE) ON THE B ASIS OF WHICH ADDITION OF RS. 13,58,000/- AND RS. 4,50,000/ - HAS BEEN ORIGINALLY MAINTAINED, THE CO-ORDINATE BENCH H AS NOT AGREED WITH THE SUBMISSIONS THAT THESE WERE DUMB DOCUMENTS. THE SPECIFIC CONCLUSIONS ARE EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS: 10. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ISSUE BEFORE US RELATES TO ADDITION MADE ON ACCOUNT OF CERTAIN NOTINGS/ENTRIES IN THE DOCUMENTS FOUND DURING SEARCH CONDUCTED AT THE ASSESSEES PREMISES. 11. AS PER SECTION 292C OF THE ACT, WHERE ANY DOCUM ENT IS FOUND IN THE POSSESSION OF A PERSON DURING SEARCH, THE PRESUMPTI ON IS THAT IT BELONGS TO THE ASSESSEE AND THE CONTENTS THEREOF ARE TRUE. THERE I S NO DISPUTE VIS--VIS THIS POSITION OF LAW. THE ONUS, THEREFORE, TO EXPLAIN TH E CONTENTS OF THE DOCUMENTS FOUND DURING SEARCH RESTS SQUARELY ON THE ASSESSEE AND WHERE THE ASSESSEE FAILS TO OFFER ANY EXPLANATION, MEANING TO THE CONTENTS OF THE DOCUMENT HAVE TO BE GIVEN ON THE BASIS OF SURROUNDING CIRCUMSTANCES REL ATING TO THE SAID DOCUMENTS. IN OTHER WORDS, THE DOCUMENTS AND ITS CONTENTS HAVE TO BE READ AS A WHOLE. MEANING CAN ALSO BE DERIVED FROM ANY CORROBORATIVE MATERIAL FOUND RELATING TO THE CONTENTS OF THE DOCUMENTS. ACCORDINGLY, AFTER G IVING MEANING TO THE DOCUMENT AND ITS CONTENTS IT IS TO BE SEEN WHETHER ANY ADDITION HAS TO BE MADE WITH RESPECT TO THE SAME IN THE HANDS OF THE ASSES SEE AS PER LAW. A DUMB DOCUMENT, AS A COROLLARY THEREFORE IS ONE TO WHICH NO MEANING CAN POSSIBLY BE ASCRIBED. 12. APPLYING THE ABOVE POSITION OF LAW TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE DOCUMENTS IN DISPUTE I.E. DOCUMENT A- 1 AND A-3 WERE FOUND AT THE ASSESSEES PREMISES DURING SEARCH. FURTHER, UNDENIA BLY THE ASSESSEE HAD NOT DENIED BEING IN KNOW OF THE SAID DOCUMENTS HAVING E XPLAINED THE MAJORITY OF THE CONTENTS IN THE SAID DOCUMENTS VIDE ITS LETTER FILE D TO THE A.O. DATED 6.3.2013, 11.3.2013 AND 13.3.2013, AS REPRODUCED ABOVE. IT WA S STATED THAT THE DOCUMENT CONTAINED CASH AND BANK ENTRIES RELATING TO CERTAIN FIRMS WHOSE NAMES FIND ITA 449/CHD/2019 A.Y. 2011-12 PAGE 5 OF 7 MENTION THEREIN. THE SAID EXPLANATION OF THE ASSESS EE HAS BEEN ACCEPTED BY THE REVENUE ALSO. IT WAS ONLY CERTAIN CONTENTS/ENTRIES IN THE TWO DOCUMENTS, WHICH WERE STRUCK OFF, FOR WHICH THE ASSESSEE OFFERED NO EXPENDITURE AND CLAIMED THEM TO BE DUMB DOCUMENTS/ENTRIES, WITH NO DATE OR DESCR IPTION OF THE ENTRY MADE THEREIN. 13. CONSIDERING THE FACT THAT MAJORITY OF THE CONTE NTS OF THE DOCUMENTS WERE IN THE KNOWLEDGE OF THE ASSESSEE AND OWNED BY HIM AS B EING SO, WE FAIL TO UNDERSTAND HOW HE COULD HAVE BRUSHED OFF THE STRUCK OFF ENTRIE S AS BEING MERE SCRIBBLINGS WITH THEIR NATURE AND DATE UNKNOWN AND THUS DUMB ENTRIES . AS RIGHTLY POINTED OUT BY THE LD.CIT(A) ,THE ENTRIES WERE DECIPHERABLE. THE LD.CI T(A) HAS DECIPHERED THE SAME ALSO, WHICH HAS NOT BEEN REBUTTED BY THE LD.COUNSEL FOR THE ASSESSEE. IT IS IMPOSSIBLE THAT A DOCUMENT CONTAINING A RECORDING OF CERTAIN T YPE OF TRANSACTION BY THE ASSESSEE MAJORILY, WOULD CONTAIN SCRIBBLING OR MEANINGLESS N OTINGS IN BETWEEN FOR NO RHYME OR REASON. UNDOUBTEDLY, ALONGWITH OTHER ENTRIES THE SE STRUCK OFF ENTRIES WERE ALSO MADE BY THE ASSESSEE WHICH FACT HE HAD NOT DENIED A ND, THEREFORE, WHEN HE KNEW THE NATURE OF OTHER ENTRIES, HE MUST BE FULLY AWARE OF THE NATURE OF THESE STRUCK OFF ENTRIES ALSO. A DOCUMENT CANNOT BE TREATED PARTLY A S SPEAKING AND PARTLY AS DUMB WITHOUT GIVING ANY BASIS FOR THE SAME, AND MERELY ON THE WHIMS AND FANCIES OF THE ASSESSEE. THE ASSESSEE HAS TO COME UP WITH A PLAUSI BLE EXPLANATION FOR STATING THAT CERTAIN ENTRIES DID NOT REVEAL ANYTHING OR WERE CLE ARLY DUMB ENTRIES, WHILE ADMITTING THE REST TO BE MEANINGFUL. THE ASSESSEE HAD CORRELA TED THE CONTENTS OF OTHER ENTRIES ALSO WITH ENTRIES IN THE BOOKS OF ACCOUNT OF SOME F IRM AS MENTIONED IN THE LETTERS FILED TO THE A.O. AND THE ENTRIES RELATED TO A SPEC IFIED PERIOD. THEREFORE, FOR THE ABOVE REASONS, WE ARE NOT IN AGREEMENT WITH THE CONTENTI ON OF THE LD.COUNSEL FOR THE ASSSESSEE THAT THE ENTRIES IN DOCUMENTS-A-1, BACKSI DE OF PAGES 3 AND 4 OF THE PAPER BOOK AMOUNTING IN ALL TO RS.13,58,500/- AND RS.4,50 ,000/- RESPECTIVELY WERE DUMB ENTRIES WHOSE NATURE AND PERIOD WAS UNKNOWN. THE RELIANCE PLACED BY THE LD.COUNSEL FOR THE ASSESSEE ON VARIOUS CASE LAWS, W E FIND, ARE OF NO ASSISTANCE TO THE ASSESSEE SINCE THEY ARE ALL DISTINGUISHABLE ON FACTS. IN THE SAID CASES THE DOCUMENTS WERE COMPLETELY DISOWNED BY THE ASSESSEE, WHILE IN THE IMPUGNED CASE THE ASSESSEE HAS OWNED THE DOCUMENTS, EXPLAINE D MAJORITY OF ITS CONTENTS AND TREATED ONLY A FEW ENTRIES AS DUMB. 14. BUT HAVING SAID SO, WE FIND THAT THE REVENUE HA S TREATED THE SAME AS UNEXPLAINED EXPENDITURE WITHOUT GIVING ANY BASIS FO R TREATING THEM SO. NEITHER THE A.O. NOR THE CIT(A) HAS RECORDED ANY FINDINGS V IS--VIS THE NATURE OF THE CONTENTS OF THE DOCUMENT-A-1 TO THIS EFFECT, ON THE BASIS OF WHICH ALONE THEY COULD HAVE ARRIVED AT THIS CONCLUSION, NOR THERE IS ANY FINDING OF ANY CORROBORATIVE MATERIAL OR EVIDENCE FOUND BY THEM TO HOLD THE ENTRIES AS BEING IN THE NATURE OF UNEXPLAINED EXPENDITURE. 15. WHAT IS EVIDENT, THEREFORE, IS THAT NEITHER THE ASSESSEE HAD DISCHARGED ITS ONUS OF EXPLAINING THE SAID ENTRIES WHETHER DUMB/OT HERWISE, NOR HAS THE REVENUE GIVEN ANY BASIS FOR ARRIVING AT THE CONCLUS IONS THAT THEY WERE IN THE NATURE OF UNEXPLAINED EXPENDITURE U/S 69C OF THE AC T. THERE IS THEREFORE, WE FIND, NO BASIS FOR ARRIVING AT ANY CONCLUSION REGAR DING THE NATURE OF THESES ENTRIES. IN THESE CIRCUMSTANCES, THE ONLY JUSTIFIED COURSE OF ACTION, IN OUR VIEW, IS TO RESTORE THE ISSUE BACK TO THE A.O. TO ADJUDIC ATE IT AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AO IS DIRECTED TO GIVE A CLEAR FINDING AND BASIS FOR ARRIVING AT WHATEVER CONCLUSION HE AR RIVES AT REGARDING THE NATURE OF ITA 449/CHD/2019 A.Y. 2011-12 PAGE 6 OF 7 THE IMPUGNED CONTENTS OF THE DOCUMENTS AND THEREAFT ER ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THE ASSESSEE, IS FREE TO SUBMI T WHATEVER EVIDENCE HE CONSIDERS FIT IN SUPPORT OF ITS EXPLANATION.. ( EMPHASIS SUPPLIED) 7.1. IT IS SEEN THAT THE CO-ORDINATE BENCH ADDRESSI NG THE DOCUMENT NO. A-3 (PAGE NO. 9) WHEREIN ADDITION OF R S. 15,22,710/- HAD BEEN MADE, HAS ALSO REMANDED THE IS SUE BACK WITH THE FOLLOWING OBSERVATIONS : 16. NOW TAKING UP PAGE NO.9 ONE DOCUMENT A-3, W E FIND THAT THE ASSESSEE HAS OWNED THE DOCUMENT AND EVEN GIVEN A GENERAL DES CRIPTION OF ITS AS BEING SOME CASH GENERATED OUT OF SALE OF DIESEL AND PETRO LEUM PRODUCTS, WHICH WAS DEPOSITED IN THE BANK FROM TIME TO TIME. THE ASSESS EE HAS REITERATED THIS EXPLANATION TIME AND AGAIN IN THE LETTERS FILED TO THE A.O. AND AS NOT RETRACTED THE SAME. THEREFORE, THE DOCUMENT, IN THE FACE OF THE GENERAL EXPLANATION OF THE CONTENTS OF THE SAME, CANNOT BE TREATED AS DUMB DOC UMENT. HAVING GIVEN A GENERAL EXPLANATION, THE ASSESSEE CANNOT NOW TAKE A U TUR N AND SAY THAT IT WAS A DUMB DOCUMENT. AT THE MOST, THE ASSESSEE MAY NOT BE IN A POSITION TO GIVE A COMPLETE EXPLANATION REGARDING THE SAME BUT HE CANNOT SAY THAT THE DOCUMENT HAS NO MEANING. WE THEREFORE REJECT THE ASSESSEES CONTENT ION VIS--VIS THIS DOCUMENT ALSO THAT IT WAS A DUMB DOCUMENT. 17. FURTHER AS IN THE CASE OF DOCUMENT A-1 PAGE 3 A ND 4, BACKSIDE, THE REVENUE IN THE CASE OF THIS DOCUMENT ALSO HAS GIVEN NO BASIS FOR ARRIVING AT THE CONCLUSION THAT THE ENTRIES IN THE DOCUMENT REPRESE NTED UNEXPLAINED EXPENDITURE OF THE ASSESSEE THEREFORE, AS HELD BY US IN THE CASE OF ANNEXURE-A- 1, PAGE 3 AND 4, BACKSIDE IN THE ABSENCE OF ANY EXPLAN ATION VIS--VIS THE CONTENTS AND DOCUMENT BOTH BY THE ASSESSEE AND THE REVENUE, WE C ONSIDER IT FIT TO RESTORE THIS ISSUE ALSO BACK TO THE A.O. TO ADJUDICATE THE SAME AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO ADD, THE ASSESSEE BE GIVEN DUE OPPORTUN ITY OF HEARING AND IS FREE TO ADDUCE ALL EVIDENCES IT WISHES TO RELY UPON IN SUPP ORT OF HIS CONTENTIONS. (EMPHASIS SUPPLIED) 7.2 IT IS SEEN ON A PERUSAL OF THE ABOVE THAT THE ARGUMENTS OF THE ASSESSEE THAT THESE WERE DUMB DOCUMENTS, ON THE BASIS OF WHICH, ADDITIONS COULD NOT HAVE BEEN MADE HAVE NOT BEEN UPHELD BY THE CO-ORDINATE BENCH. THUS, I FIND THAT ITA 449/CHD/2019 A.Y. 2011-12 PAGE 7 OF 7 SINCE THE ADDITION ITSELF STANDS INFLUX, THE OCCASI ON TO CONSIDER THE CORRECTNESS OF THE IMPUGNED ORDER UPHO LDING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT DOES N OT ARISE. ACCORDINGLY, IN TERMS OF THE PRAYERS OF THE PARTIES BEFORE THE BENCH, THE ORDERS ARE SET ASIDE AND THE ISSUES ARE RESTORED BACK TO THE FILE OF THE AO TO PASS AN ORDER IN ACCO RDANCE WITH LAW AFTER THE ORDER IN THE QUANTUM PROCEEDINGS HAS BEEN PASSED. NEEDLESS TO SAY THAT THE ASSESSEE SHAL L BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEA RING ITSELF. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPT.,2019. SD/- ( !' ) (DIVA SINGH) # / JUDICIAL MEMBER POONAM (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ( )/ THE CIT(A) 5. -01 2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 # / ASSISTANT REGISTRAR