DCIT CIR 7(1), MUMBAI V. PRADEEP K SHROFF, MUMBAI

ITA 4679/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92600 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-04-2015
• Assessment Year: misc
• Appeal Filed On: 14-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Unexplained investment; Additional evidence; Assessment record
• Section: 143(3); 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , . . , BEFORE SHRI JOGINDER SINGH , JM AND SHRI N. K. BILLAIYA , AM ./ I.T.A. NO. 4679 & 4680/MUM/2013 ( / ASSESSMENT YEAR: 2007 - 08) DY. CIT - 7(1), ROOM NO. 622, AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI 400 020 / VS. PRADEEP K. SHROFF, C/O. KAYANIWALLA AND MISTRY, CHARTERED ACCOUNTANTS, KALPANA HERITAGE, 127 M. G. ROAD, FORT, MUMBAI - 400 001 ./ ./ PAN/GIR NO. AAIPS 0794 B ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PREMANAND J. / RESPONDEN T BY : SHRI JITENDRA JAIN / DATE OF HEARING : 26.05.2015 / DATE OF PRONOUNCEMENT : 29 .05.2015 / O R D E R PER N. K. BILLAIYA, AM : TH ESE ARE THE APPEALS BY THE REVENUE AGAINST TWO SEPARATE ORDERS OF THE LD. CIT( A), PERTAINING TO ASSESSMENT YEAR (A.Y.) 2007 - 08. 2. ITA NOS. 4679/MUM/2013 IS AGAINST THE DELETION OF THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT AND ITA NO. 4680/MUM/2013 IS AGAINST THE DELETION OF THE ADDITION. 2 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF 3. WE PROCEED WITH ITA NO. 4680/MUM/20 13. THE G RIEVANCE OF THE REVENUE READ AS UNDER: (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ORDER U/S.144 OF THE INCOME TAX ACT, 1961 PASSED BY THE ASSESSING OFFICER IS NOT JUSTIFIED, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. (II) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.95,02,283/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEG AL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE RETURN FOR THE YEAR WAS FILED ON 31.03.2008, DECLARING THE TOTAL INCOME AT RS.65,26,066/ - . THE RETURN WAS PROCEEDED U/S. 143(3) OF THE ACT, TH EREAFTER THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. THE NOTICE U/S. 143(2) WAS ISSUED AND DULY SERVED ON THE ASSESSEE. NOTICE U/S. 142(1) WAS ALSO SERVED ON THE ASSESSEE. THE A.O. OBSERVED THAT NO ONE RESPONDED TO THE NOTICES ISSUED FROM TIME TO TIME . THE A.O. DECIDED TO PROCEED EX PART E AND AFTER CONSIDERING THE DETAILS ON T HE RECORD, FRAMED THE ASSESSMENT U/S. 144 OF THE ACT, BY TREATING RS.95,02,283/ - AS UNEXPLAINED INVESTMENT IN MUTUAL FUND MADE BY THE ASSESSEE. AGGRIEVED BY THIS, THE ASSESSEE CAR RIED THE MATTER BEFORE THE LD. CIT(A) AND STRONGLY CONTENDED THAT THE A.O. WAS WELL AWARE OF THE NEW ADDRESS OF THE ASSESSEE , YET THE A.O. DID NOT SERVE THE NOTICES ON THE NEW ADDRESS OF THE ASSESSEE WHICH WAS KNOWN TO HIM . I T WAS STRONGLY CONTENDED THAT T HE NOTICE S ISSUED BY THE A.O . WERE NEVER SERVED ON THE ASSESSEE. THE LD. CIT(A) CALLED FOR REPORT FROM THE A.O. TO EXPLAIN WHY SUCH NOTICES WERE NOT SERVED ON THE NEW ADDRESS WHEN THE NEW ADDRESS WAS IN THE KNOWLEDGE OF THE DEPARTMENT/A.O. , THE COPY OF THE LETTER I S EXHIBITED AT PGS. 3 AND 4 OF THE ORDER OF THE LD. CIT(A). 5. ON RECEIVING NO REMAND REPORT, THE LD. CIT(A) PROCEEDED BY CALLING FOR THE ASSESSMENT RECORD TO VERIFY THE FACTS. THE LD. CIT(A) FOUND THAT THE A.O. HAS FORWARDED HIS REMAND REPORT T O THE ADDL. CIT. HOWEVER, NO REPORT WAS FORWARDED FROM THE OFFICE OF ADDL. CIT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT THE CHANGE OF ADDRESS WAS ALREADY ON RECORD, WHILE THE A.O. HAS ISSUED AND SERVED 3 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF NOTICES ON THE A PPELLANTS OLD ADDRESS. THE LD. C ITA) CONCLUDED BY OBSERVING THAT THE A.O. WAS LEGALLY NOT CORRECT IN ASSUMING JURISDICTION FOR MAKING THE ASSESSMENT. THE LD. CIT(A) WENT ON TO TREAT THE ASSESSMENT ORDER MADE U/S. 144 OF THE ACT AS BAD IN LAW AND QUASHED. O N MERITS OF THE CASE, THE LD. CIT(A) DELETED THE ENTIRE ADDITION OF RS.95,02,283/ - , ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT THE INVESTMENTS HAVE BEEN MADE FROM HIS BANK ACCOUNT WHICH HAS BEEN DULY DISCLOSED IN THE RETURN OF INCOME. AGGRIEVED, BY THI S THE REVENUE IS BEFORE US. 6. THE LD. DR STRONGLY CONTENDED THAT ONCE THE NOTICES WERE ISSUED AND SERVED UPON THE A SSESSEE AT ITS OLD ADDRESS, THE ASSESSEE CANNOT CLAIM THAT THE NOTICES HAVE NOT BEEN ISSUED AND, TH E REFORE, THE LD. CIT(A) ERRED IN QUASHIN G THE ASSESSMENT ORDER. THE LD. DR FURTHER SUBMITTED THAT THE REMAND REPORT ON RECORD FOUND BY THE LD. CIT(A) WAS NOT A VALID REMAND REPORT AS IT HAD NO SANCTION FROM THE ADDL. CIT. 7. PER CONTRA, THE LD. C OUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY. IT IS THE SAY OF THE LD. COUNSEL THAT FROM SEPTEMBER, 2007 TILL DECEMBER, 2009, THE A.O. HAS ISSUED ASSESSMENT ORDERS/NOTICES/RECTIFICATION ORDER, AND IN ALL THESE ORDERS/NOTICES, THE ADDRESS MENTIONED IS K ALPATRU HERITAGE, WHICH IS THE ADDRESS OF THE ASSESSEE C/O. KALYA NIWALLA AND MISTRY & CO. IT IS THE SAY OF THE LD. COUNSEL THAT ONCE THE A.O. WAS AWARE OF THIS ADDRESS OF THE ASSESSEE, IT CANNOT BE SAID THAT THE A.O. HAS SERVED STATUTORY NOTICES PROPERLY AT THE OLD ADDRESS OF THE ASSESSEE. IN SUPPORT, THE LD. COUNSEL RELIED UPON SEVERAL DECISIONS OF DELHI H IGH COURT AND ALLAHABAD HIGH COURT AND TH E TRIBUNAL, MUMBAI B ENCH AND DELHI BENCH. IT IS IN THE FORM OF A PAPER BOOK PLACED ON RECOR D. 8 . HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE GIVEN A THOUGHTFUL CONSIDERATION, TO THE FACTS BROUGHT ON RECORD BEFORE US. IN OUR CONSIDERED OPINION, THIS CASE CAN BE CONSIDERED AS A CASE OF CONTRIBUTORY NEGLIGENCE , A S BOTH THE PARTIES HAVE CONTRIBUTED TO THE CAUSE . FIR STLY, THE ASSESSEE SHOULD HAVE EDITED HIS PAN DATA BASE BY FURNISHING THE NEW ADDRESS. WITH THE ADVENT OF P ERMANENT A CCOUNT N UMBER, THE A. O ./THE COMPUTER 4 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF SYSTEM OF THE REVENUE LIFTS THE ADDRESS FROM THE DATA BASE PROVIDED IN THE P ERMANENT A CCOUNT N UMBER. I T HAS TO BE UNDERSTOOD THAT WHEN THE RETURN OF INCOME IS SELECTED FO R SCRUTINY ASSESSMENT UNDER CASS , THE STATUTORY NOTICES ARE GENERATED BY THE COMPUTER SYSTEM CONTAINING ADDRESS TAKEN FROM THE PAN DATA BASE. SINCE THIS PROCEDURE HA S NOT BEEN DECLARED TO BE ULTRA VIRUS TO THE CONSTITUTION , IT HAS TO BE FOLLOWED , WHICH MEANS THAT THE ASSESSEE HAS BEEN GIVEN AN OPTION TO EDIT/CHANGE THE DETAILS PROVIDED BY HIM, WHILE APPLYIN G FOR PERMANENT ACCOUNT NUMBER. THUS, WHEN THE ASSESSEE INTENDS TO CHANGE HIS ADDRESS , HE HAS TO AM END ITS PAN DETAILS . 9 . IN THE CASE IN HAND WE FIND THAT THE ASSESSEE HAS GROSSLY FAILED. WE FIND THAT AFTER PROCESSING THE RETURN U/S. 143( 1 ) OF THE ACT, THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER COMPUTER AIDED SCRUTINY SELECTIO N PROCESS, WHICH MEANS THAT THE NOTICES GENERATED, ISSUED AND SERVED BY THE A.O. CONTAIN THE ADDRESS LIFTED FROM THE PAN DATA BASE. THE A. O . COULD NOT HAVE CHANGED THE ADDRESS. THIS IS ONE SIDE OF THE COIN. NOW COMING TO THE OTHER SIDE OF THE COIN, IT IS AN UNDISPUTED FACT THAT SINCE SEPTEMBER 2007 TILL DECEMBER, 2009, THE A.O. HAS PASSED ASSESSMENT ORDERS/RECTIFICATION ORDERS/NOTICES WHICH HAVE BEEN SERVED AT THE ADDRESS KALPAT RU HERITAGE C/O. KALYANIWALLA AND MISTRY & CO. THIS MEANS THAT WHEN THE ASSE SSEE WAS NOT ATTENDING THE PROCEEDINGS, THE A. O . COULD HAVE ISSUED ATLEAST ONE NOTICE AT THE NEW ADDRESS OF THE ASSESSEE. THUS IT CAN BE SEEN THAT BOTH THE PARTIES TO THIS APPEAL ARE AT FAULT. HOWEVER, AS MENTIONED ELSEWHERE, THE A.O. CANNOT CHANGE THE ADD RESS WHEN THE RETURN IS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS. 10 . NOW THE QUESTION THAT HAS TO BE CONSIDERED BY US IS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN QUASHING THE ENTIRE ASSESSMENT ORDER? IN OUR CONSIDERED OPINION, THE BENEFIT OF DOUBT SHOU LD GO TO THE REVENUE AS THE REVENUE IS NO T GOING TO BENEFIT ANYTHING BY NOT SERVING THE NOTICE AT THE PROPER ADDRESS. SECONDLY, AS MENTIONED ELSEWHERE, RULES OF THE CBDT IN RELATION TO THE PAN DATA BASE HAVE NOT BEEN S TRUCK DOWN BY THE HONBLE APEX COURT H AS TO BE FOLLOWED BY ALL AND SUNDRIES. SINCE THE ASSESSEE HAS NOT AMENDED HIS PAN DATA BASE BY NEW ADDRESS, HE CANNOT TAKE SHELTER BEHIND THE JUDICIAL DECISIONS RELIED UPON 5 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF BY HIM AS MENTIONED HEREINABOVE. T HE REVENUE IS NOT GOING TO BENEFIT IN ANY WAY, BY NOT SERVING THE NOTICE. WE, ACCORDINGLY, SET ASIDE THE FINDING OF THE LD. CIT(A) AND UPHOLD THE VALIDITY OF THE ORDER MADE U/S. 144 OF THE ACT. GROUND NO. 1 IS, ACCORDINGLY, ALLOWED. 11 . BEFORE PARTING, AS MENTIONED ELSEWHERE, THE LD. COUNSEL HAS RE LIED ON VARIOUS JUDICIAL DECISIONS WHICH HA VE BEEN PLACED BEFORE US IN THE FORM OF A PAPER BOOK. AFTER DISCUSSING FACTS OF THE CASE IN HAND, WE FIND THAT THE DECISIONS RELIED UPON BY THE LD. COUNSEL ARE ALTOG ETHER ON DIFFERENT SET OF FACTS, T HEREFORE , NOT CONS IDERED. 1 2 . GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITION OF RS.95,02,283/ - . WE FIND THAT WHIL E SCRUTINIZING THE RETURN OF INCOME ON THE BASIS OF THE AIR INFORMATION, THE A.O. NOTICED THAT THE ASSESSEE HAS MADE INVESTMENTS IN VARIOUS MUTUAL FUNDS AMOUNTING TO RS.95,02,283/ - . SINCE NO ONE ATTENDED THE ASSESSMENT PROCEEDINGS, THE A.O. PROCEEDED BY MAKING THE ADDITION. BEFORE THE LD. C IT(A) , THE ASSESSEE FURNISHED BANK STATEMENTS, SHOWING THAT ALL THE INVESTMENTS HAVE BEEN MADE FROM THE BANK ACCOUNT. ACCEPTING THE BANK STATEMENTS, THE SAME WERE FORWARDED TO THE A.O. FOR HIS COMMENT. THE LD. CIT(A) OBSERVED THAT THE A.O. HAS NOT OBJECTED FOR THE ADMISSION OF ADDITIONAL EVIDENCE, THEREFORE, THE ADDITION MADE BY THE A.O. WAS DELETED. 1 3 . BEFORE US, THE LD. DR SUBMITTED THAT THE LD. C IT(A) HIMSELF HAS NOT VERIFIED THE BANK STATEMENTS, BUT HAS SIMPLY ACCEPTED THE CLAIM OF THE ASSESSEE. THEREFORE , THE MATTER SHOULD BE SET ASIDE FOR VERIFICATION. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE INVESTMENTS H AVE BEEN MADE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT AND HAS BEEN PROPERLY EXPLAINED IN THE RETURN OF INCOME. THEREFORE, THERE IS NO ERROR IN THE FINDINGS OF THE LD. CIT(A). 1 4 . WE HAVE GIVEN A THOUGHTFUL CONSIDER ATION TO THE RIVAL SUBMISSIONS. I N OUR CONSIDERED OPINION, THE MATTER DESERVES TO BE LOOKED UPON AFRESH AT THE ASSESSMENT STAGE. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE A.O. T HE A.O. IS DIRECTED TO DECIDE THE 6 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF ISSUE AFRESH AFTER GIVING A REASONABLE AND FAIR OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE, KEEPING IN MIND THAT THE NOTICE HAS TO BE SERVED AS PER THE ADDRESS PROVIDED BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PROVIDE FOR HIS LATEST ADDRESS FOR THE SERVICE OF THE NOTICE. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE DE TAILS OF THE BANK ACCOUNT THROUGH WHICH THE INVESTMENTS HAVE BEEN MADE. GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSES. 1 5 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ITA NO. 4679/MUM/2013 (REVENUES AP PEAL) 1 6 . THE REVENUE IS AGGRIEVED BY THE DELETION OF THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 1 7 . THE PENALTY HAS BEEN LEVIED ON THE ADDITION OF RS.95,02,282/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. VIDE OUR ORDER OF EVEN DATE IN ITA NO. 4680/M UM/2013, WE HAVE RESTORED THE ADDITION TO THE FILES OF THE A.O. W E, THEREFORE, SET ASIDE THE PENALTY ORDER TO THE FILES OF THE A.O. TO BE DECIDED AFRESH AFTER DECIDING THE QUANTUM IN ASSESSMENT. 1 8 . IN THE RESULT, THE APPEAL FILED BY THE R EVENUE I S TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 29 TH , 201 5 SD/ - SD/ - ( JOGINDER SINGH ) ( N. K. BILLAIYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 29 . 0 5 .201 5 . . ./ ROSHANI , SR. PS 7 ITA NO. 4679 & 4680/MUM/2013 (A.Y. 2007 - 08) DY. CIT VS. PRADEEP K. SHROFF / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI