Mirza Farhatullah Baig, Hyd, Hyderabad V. ACIT, Cirlce-4(1), Hyd, Hyderabad

ITA 470/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6340 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: B SHANTHI KUMAR
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 470/HYD/2016 ASSESSMENT YEAR: 2013-14 MIRZA FARHATULLAH BAIG, HYDERABAD. PAN AJHPB 6087 E VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 4(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B. SHANTHI KUMAR REVENUE BY : SHRI K.E. SUNIL BABU DATE OF HEARING 02-08-2016 DATE OF PRONOUNCEMENT 10-08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 1, HYDE RABAD FOR AY 2013-14. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE THE A SSESSEE SHRI MIRZA FARHATULLAH BAIG, 2-2-134, KUMMARWADI, AMBERP ET, HYDERABAD, WAS APPREHENDED ALONG WITH CASH OF RS. 49,95,000/- BY THE POLICE AT HYDERABAD. THIS INFORMATION WAS RECEIVED BY THE INC OME TAX DEPARTMENT AND A WARRANT U/S. 132A(1) OF THE INCOME TAX ACT WAS ISSUED AND THE CASH OF RS. 49,95,000/- WAS REQUISIT IONED FROM THE POLICE AUTHORITIES. AO OBSERVED THAT AS PER THE PRO VISIONS OF SEC. 132(4A) OF IT ACT, MONEY FOUND IN POSSESSION OF THE PERSON IS HELD TO BELONG TO HIM I.E., IN THIS CASE THE MONEY WAS IN C ONTROL OF THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 25.03.2013 , STATED THAT THE 2 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG CASH BELONGED TO HIM. ACCORDINGLY THE ASSESSEE FILE D HIS RETURN OF INCOME FOR A.Y. 2013-14 ON 26.04.2013 DECLARING INC OME OF RS. 49,95,043/- . 2. THE AO ISSUED A NOTICE U/S. 143(2) ISSUED ON 31. 10.2013 TO THE ASSESSEE. THEREAFTER, AN ORDER U/S. 143(3) OF THE I NCOME TAX ACT WAS PASSED ON 22.04.2014 ASSESSING THE INCOME AT RS. 49 ,95,040/-. 3. THEREAFTER, SINCE THE ASSESSEE COULD NOT SUBSTAN TIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED, NEITHER DURING THE SEARCH NOR DURING THE ASSESSMENT PROCEEDINGS, T HE AO ISSUED PENALTY NOTICE U/S. 274 R.W.S. 271AAA AND PENALTY P ROCEEDING WAS INITIATED REQUIRING THE ASSESSEE TO EXPLAIN AS TO W HY THE PENALTY SHOULD NOT BE LEVIED. THE ASSESSEE WAS ASKED TO APP EAR OR SUBMIT HIS EXPLANATION IN THIS REGARD ON 06.05.2014. THE A SSESSEE MADE HIS SUBMISSIONS VIDE LETTER DATED 06.05.2014 . 4. IN REPLY TO PENALTY NOTICE U/S. 271AAA FOR A.Y. 2013-14 DATED 22.04.2014, ASSESSEE EXPLAINED HOW THE INCOME WAS E ARNED, THE MANNER IN WHICH THE INCOME EARNED AND ABOUT PAYMENT OF TAXES THEREON AS UNDER: THE ASSESSEE HAS TAKEN PREMISES IN THE BUILDING KN OWN AS CITY CENTER IN PLOT BEARING NO. 7 SY. NO. 7 (7/C), SITUA TED AT MARGADARSI COLONY.KOTNAPET, HYDERABAD, FROM M/S. SI RI MAHAMART TRADING PRIVATE LIMITED, HAVING REGISTERED OFFICE AT H.NO. 4-1/2, MARUTHI NAGAR, KOTHAPET, HYD ERABAD - 500 060, REPRESENTED BY ITS DIRECTOR K. SRI RAM. M/S. S IRI MAHAMART TRADING PVT. LTD. IS LEASE AGREEMENT HOLDER OF THE PREMISES FROM SHRI KETAN SANGHVI AND 5 OTHERS VIDE AGREEMENT TO L EASE MADE AND EXECUTED ON 19.08.2005. SUBSEQUENT TO LEASE/ SU B-LEASE, THERE WERE DISPUTES AMONG LESSORS AND LESSEES. LESS ORS/ OWNERS SHRI KETAN SANGHVI & OTHERS FILED SUIT IN CASE NO. 0.5. NO. 479/2010 IN THE COURT OF VIII ADDL. DISTRICT JUDGE, RANGA REDDY DISTRICT. THE MATTER WAS COMPROMISED BETWEEN THE PA RTIES BEFORE THE LOK ADALAT HELD AT L.B. NAGAR, RANGA REDDY, DIS TRICT, ON 26.05.2012. THE SUIT WAS DISPOSED OFF BY THE LOK AD ALAT IN TERMS OF COMPROMISE AS PER ORDER DATED 26.05.2012. ON THE DAY OF COMPROMISE, THE PLAINTIFFS PAID RS. 50 LAKHS TO THE DEFENDANTS 3 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG VIZ., (1) WAH MAGNA RETAILS PVT. LTD., (2) ASSESSEE MIRZA FARHATULLAH BAIG AND (3) Y. V. RAMANA. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE AO OBSERVED THAT THE ASSESSEE HAS ONCE AGAIN FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. HE HAS NOT BEEN ABLE TO EXPLAIN WHY NO DOCUMENT WAS FOUND IN H IS POSSESSION IN SUPPORT OF HIS CLAIM. EVEN IF THE ARGUMENT THAT THE LOK ADALAT DISPOSED OF THE SUIT IN TERMS OF COMPROMISE, THERE IS NO EXPLANATION OR PROOF THAT THE CASH WAS THE SAME WHICH WAS RECEI VED IN LIEU OF THE COMPROMISE. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO FULFILL THE CONDITION LAID DOWN IN SEC. 271AAA(2)(II) , THE PEN ALTY U/S. 271AAA IS CHARGED @ 10% ON THE UNDISCLOSED INCOME OF RS. 49,9 5,004/-, WHICH COMES TO RS. 4,99,504/-. 6. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A), THE CIT(A) UPHELD THE PENALTY LEVIED BY AO BY OBSERVING AS UNDER: IT IS SEEN THAT FROM THE ASSESSMENT ORDER DT. 22-04 -2014 THAT THIS CASE HAS BEEN HANDLED AND MONITORED INVESTIGATION W ING, UNIT-II, HYD. AS PER ORDER U/S. 271AAA DT. 28.05.2014, IT IS CATEGORICALLY SAID THAT, THOUGH THE CASH WAS FOUND BY THE POLICE ,SUBSEQUENTLY, A WARRANT U/S. 132 A(L) WAS ISSUED. SINCE A WARRANT WAS ISSUED IN NAME OF THE ASSESSEE THERE IS NO DOUBT THAT THERE W AS A SEARCH / ACTION AS PER S- 132 IN THIS CASE. THIS FULFILS TH E CRITERIA OF LEVYING THE PENALTY. ASSESSEE CONTENTION IS FOUND I NCORRECT, THAT THERE WAS NO SEARCH. HENCE, I UPHELD THE PENALTY LE VIED BY THE ASSESSING OFFICER. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE PENALTY OF RS. 4,99,504/- LEVIED U/S 271AAA. 2. THE CIT(APPEALS) ERRED IN CONFIRMING THE PENALTY WITHOUT TAKING INTO CONSIDERATION THE FACTS OF THE CASE AND THE GROUNDS OF APPEAL RAISED. 4 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG 3. THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT PENALTY UNDER SECTION 271AAA IS NOT ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF ASSESSEE'S CASE. 4. THE CIT(APPEALS) OUGHT TO HAVE CANCELLED THE PEN ALTY OF RS. 4,99,504/- IN THE FACTS AND CIRCUMSTANCES OF ASSESS EE'S CASE. 8. BEFORE US, THE LD. AR SUBMITTED THAT THE PENALT Y IS RELATED TO ASSESSMENT OF INCOME OF RS.49,95,000/-. AS EXPLAINE D, THIS IS THE AMOUNT WHICH THE ASSESSEE GOT BY THE TERMS OF A COM PROMISE AS PER ORDER OF LOK ADALAT DATED 26.05.2012. WHILE CARRYIN G THE CASH, THE POLICE INTERCEPTED AND SEIZED THE ENTIRE CASH. ON P ASSING THE INFORMATION, THE INCOME TAX DEPARTMENT INITIATED AC TION U/S 132 AND TOOK CUSTODY OF THE CASH ON 30.05.2012. HE SUBMITTE D THAT THE ASSESSEE EXPLAINED THE FACTS AND THE MANNER IN WHIC H THE INCOME WAS DERIVED BOTH BEFORE THE POLICE PERSONNEL AND TH E INCOME TAX DEPARTMENT. REFERRING TO THE PROVISIONS OF SECTION 271AAA, LD. AR SUBMITTED THAT THE AMOUNT OF RS.49,95,000/- IS THE LONE RECEIPT AND THE ASSESSEE HAS NO OTHER INCOME DURING THE PREVIOU S YEAR. HE HAS NO BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTI ONS. THE IMPUGNED INCOME WAS ASSESSABLE IN ASST. YEAR 2013-1 4 AND THE ASSESSEE FILED THE RETURN OF INCOME ON 26.04.2013 D ISCLOSING THE ENTIRE INCOME OF RS.49,95,000/-. AS FOR PAYMENT OF ADVANCE-TAX, THE ONLY SOURCE OF INCOME WAS THE AMOUNT OF RS.49,95,00 0/- RECEIVED ON COMPROMISE AND THIS WAS' ALREADY IN THE CUSTODY OF DEPARTMENT. THIS COVERS BOTH THE TAX AND INTEREST. FURTHER, THE ADVA NCE-TAX LIABILITY ACTUALLY ARISES ON 15.09.2012 BUT THE DEPARTMENT TO OK CUSTODY OF THE ENTIRE AMOUNT ON 30.05.2012 ITSELF. THE DUE DATE FO R DISCLOSURE OF THE IMPUGNED INCOME WAS 31.07.2013 WHEREAS THE ASSESSEE DISCLOSED THE SAME ON 26.04.2013 ITSELF. THE CASH WAS RECEIVE D ON26-05-2012 AND SEIZED ON 26-05-2012 WHILE TAKING TO HIS PLACE OF BUSINESS. THERE IS NO TIME FOR THE ASSESSEE NEITHER TO DECLAR E NOR TO BRING INTO BOOKS BEFORE THE SEIZURE OF THE CASH BY THE POLICE. THEREFORE, IT IS UNFAIR AND PREMATURE TO TERM THE AMOUNT OF RS.49,95 ,000/- AS UNDISCLOSED INCOME. 5 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG 8.1 LD. AR SUBMITTED THAT THE ASSESSEE HAS CLEARLY STATED BOTH BEFORE THE POLICE PERSONNEL AS WELL AS THE INCOME T AX DEPARTMENT OFFICIALS THAT THE CASH OF RS.49,95,000/- WAS RECEI VED IN LIEU OF THE COMPROMISE BY ALL THE PARTIES ON THE DAY THE LOK AD ALAT PASSED ORDERS OF COMPROMISE. THE RELEVANT TERM OF COMPROMI SE FOR THE ASSESSEE IS THE WITHDRAWAL OF THE SUIT FILED BY THE ASSESSEE AGAINST THE PLAINTIFFS IN O.S.NO.1446/2010 ON THE FILE OF I I SR. CIVIL JUDGE, RR DISTRICT AT L.B. NAGAR. THIS VERY CASH WAS RECEIVED AND WAS BEING CARRIED. AT THAT VERY TIME, THE POLICE INTERCEPTED AND SEIZED THE CASH WHICH WAS LATER REQUISITIONED BY INCOME TAX DEPARTM ENT AND TAKEN CUSTODY OF. THUS, THE ASSESSEE FULFILLED HIS OBLIGA TION OF SUBSTANTIATING THE MANNER IN WHICH THE INCOME WAS D ERIVED. THIS INCOME WAS ADMITTED IN THE RETURN OF INCOME FILED O N 26.04.2013 FOR THE RELEVANT ASST. YEAR. THEREFORE, THE AO'S REMARK THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE MANNER IN WHICH INCOME W AS EARNED IS NOT CORRECT. THIS IS PARTICULARLY SO IN VIEW OF THE AO HIMSELF CLEARLY MENTIONED IN ASSESSMENT ORDER THAT THE INCOME RETUR NED WAS FOUND TO BE IN ORDER. FURTHER, NO OTHER INCOME HAS BEEN BROU GHT TO TAX. THE LD. AR RELIED ON THE FOLLOWING CASE LAWS: 1. ACIT VS. HICONS DEVELOPERS IN ITA NO. 913/ MUM/ 2014 DATED 30.12.2015 2. HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, REPOR TED IN (1970) AIR 253, 1970 SCR (1) 753 DATED 04.08.1969 WHEREIN IT WAS HELD: 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMINAL PROCEE DING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONS CIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENAL TY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATI ON IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIA LLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EV EN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO 6 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELI EF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE.' 9. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 10. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. THE ASSESSEE HAD CARRIED THE CASH ON 2 6/05/2012 AFTER REACHING THE COMPROMISE WITH THE LAND LORD IN LOK A DALAT. THE ASSESSEE DID NOT HAVE ANY DOCUMENTARY PROOF WHILE C ARRYING THE CASH. AFTER CONFISCATION OF CASH, ASSESSEE HAD DISC LOSED BEFORE POLICE AND AO ABOUT THE SOURCE OF THE CASH. HE HAD SUBSTANTIATED THE CLAIM BY SUBMITTING THE RELEVANT ORDER OF LOK ADALA T BEFORE THE AUTHORITIES. THE PROVISIONS OF SECTION 271AAA(2) AR E AS BELOW: (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APP LY IF THE ASSESSEE,-- (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UND ER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLO SED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. 10.1 AS PER THE PROVISION, TO AVOID PENALTY, ASSESS EE HAD TO ADMIT THE UNDISCLOSED INCOME AND SPECIFY THE MANNER IN WH ICH INCOME WAS DERIVED, HE HAS TO SUBSTANTIATE THE MANNER IN WHICH INCOME WAS DERIVED AND PAY TAX, TOGETHER WITH INTEREST IN RESP ECT OF THE UNDISCLOSED INCOME. IN THE PRESENT CASE, THE ASSESS EE HAD DISCLOSED THE INCOME AND SPECIFIED AS WELL AS DISCLOSED THE M ANNER IN WHICH THE UNDISCLOSED INCOME WAS ARRIVED AND ALSO PAID TH E TAX WITH INTEREST. THE CASH WAS VERY MUCH WITH THE DEPARTMEN T AS CAN BE SEEN FROM THE ASSESSMENT ORDER. HE HAS FULFILLED THE REQ UIREMENT AS PER SECTION 271AAA(2) OF THE ACT. EVEN THOUGH, IN THE L OK ADALAT ORDER, 7 ITA NO. 470/H/16 MIRZA FARHATULLAH BAIG THERE IS NO MENTION ABOUT THE DETAILS OF THE COMPRO MISE, THE CIRCUMSTANTIAL EVIDENCE POINTS TO THE CLAIM OF THE ASSESSEE, WE HAVE TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE IN THIS CASE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FULFILLED THE REQUIREMENT OF SUB-SECTION (2) OF SECTION 271AAA. HENCE, THE PENAL TY LEVIED U/S 271AAA IS ACCORDINGLY DELETED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 10 TH AUGUST, 2016 KV COPY TO:- 1) MIRZA FARHATULLAH BAIG, C/O SHRI B. SHANTTHI KU MAR, ADVOCATE, 111, TARAMANDAL COMPLEX, 5-9-13, SAIFABAD, HYDE RABAD. 2) ACIT, CIRCLE 4(1), AAYAKAR BHAVAN, BASHEERBAGH , HYDERABAD 04. 3) CIT(A) - I, HYDERABAD 4 PR. CIT 1, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.