ABDULLA MOHAMMED, NAVI MUMBAI V. DCIT 8(3), MUMBAI

ITA 4729/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62355 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS USHA NAIR
• Assessee Lawyers: SURESH SUBRAMANIAN
• Keywords: Income from undisclosed sources
• Section: 37(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI S.S. GODARA (JM) I.T.A. NO.4729/MUM/2011 (A.Y. 1989-90) SHRI ABDULLA MOHAMMED, C/O. P.N. SUBRAMANIAN & CO., 703-704, COMMODITY EXCHANGE BLDG., SECTOR 19, PLOT 2, 3 & 4, VASHI, NAVI MUMBAI-400 705. AFBPG9454L. VS. ASST. COMMR. OF INCOME-TAX- 15(3), MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI-400 007. APPELLANT RESPONDENT APPELLANT BY SHRI SURESH SUBRAMANIAN. RESPONDENT BY MRS. USHA NAIR. DATE OF HEARING 26-04-2012 DATE F PRONOUNCEMENT 30-04-2012 O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 16-03-2011 IN RELATION TO A SSESSMENT YEAR 1989-90. ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.2,83,11,475/- BY NOT ALLOWING DEDUCTION OF THE SAID SUM. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE OFFICERS OF AIR INTELLIGENCE UNIT OF COLLECTORATE OF CUSTOMS SEIZED 750 GOLD BARS OF FOREIGN ORIGIN ON 11-11-1988. THESE GOLD BARS WE RE DETECTED FROM THE UNACCOMPANIED BAGGAGE ARRIVED AT SAHAR AIR PORT FROM DUBAI. SHRI V.P. BHASKARANA WAS THE CONSIGNOR AND CONSIGNEE OF THE GOODS. HE WAS INTERROGATED BY THE CUSTOMS OFFIC IALS. FROM SUCH INVESTIGATION, IT TRANSPIRED THAT THE ASSESSEE WAS THE MASTERMIND AND THE ENTIRE OPERATION WAS CONCEIVED A ND PERPETRATED BY HIM ONLY. RESULTANTLY, THE AO MADE A DDITION FOR THE SAID SUM OF RS.2.83 CRORES IN THE HANDS OF THE ASSESSEE U/S 69A. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT W AS CLAIMED THAT IF THE ASSESSEE WAS TO BE CONSIDERED AS OWNER OF SUCH GOLD BARS, THEN DEDUCTION SHOULD BE ALLOWED FOR THE SAME SUM BY TREATING IT AS BUSINESS LOSS BECAUSE OF ITS CONFISC ATION. IT IS BORNE OUT FROM RECORDS THAT THIS MATTER CAME UP BEFORE TH E TRIBUNAL IN SEVERAL ROUNDS. THE LAST SUCH ORDER WAS PASSED BY T HE TRIBUNAL IN ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 3 ITA NO.1505/MUM/2004 ON 06-11-2008 FOR THE ASSESSME NT YEAR UNDER CONSIDERATION. THEREAFTER, THE ASSESSEE MOVED MISC. APPLICATION AGAINST THIS ORDER, WHICH CAME TO BE DI SPOSED OF BY THE TRIBUNAL VIDE ITS ORDER U/S 254(2) DATED 30-06- 2009 IN M.A. NO.177/MUM/2009. BOTH THE SIDES ARE IN AGREEMENT TH AT THIS ORDER PASSED BY THE TRIBUNAL HAS ATTAINED FINALITY INASMUCH AS NO PARTY HAS ASSAILED IT BEFORE THE HONBLE HIGH COURT . IN THIS ORDER U/S 254(2) READ WITH THE ORDER U/S 254(1), THE TRIB UNAL HAS HELD THAT THE ASSESSEE IS LIABLE TO BE CONSIDERED AS OWN ER OF THE GOLD BARS FOR WHICH ADDITION IS REQUIRED TO BE MADE. AT THE SAME TIME, THE ASSESSEES CONTENTION FOR ALLOWING DEDUCTION TO WARDS BUSINESS LOSS HAS ALSO BEEN ACCEPTED. IN THE SAID ORDER PASS ED BY THE TRIBUNAL U/S. 254(2) ON 30-06-2009, THE TRIBUNAL HA S FINALLY DECIDED THE QUESTION OF GRANTING DEDUCTION FOR LOSS AS UNDER : PARA 15 IS ALSO ACCORDINGLY MODIFIED AS UNDER : 15. NOW THE ISSUE IS REGARDING ALLOWABILITY OF AMOUNT INVESTED IN THE SMUGGLING ACTIVITIES. LEARNED COUNSEL SUBMITTED THAT THE ENTIRE AMOUNT REPRESENTED THE VALUE OF THOSE ARTICLES AND, THEREFORE, THE ENTIRE AMOUNT SHOULD BE DELETED. IN OUR OPINION, THIS ASPECT HAS NOT BEEN CONSIDERED BY THE LOWER REVENUE AUTHORITIES AND, THEREFORE, FOR THE LIMITED PURPOSE OF DETERMINING THE AMOUNT ACTUALLY INVESTED IN THE ACTIVITIES, THE MATTER IS RESTORED TO THE FILE OF T HE ASSESSING OFFICER. ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 4 5. WHILE GIVING EFFECT TO THE TRIBUNAL ORDER, THE AO DID NOT ALLOW DEDUCTION BY GIVING THE FOLLOWING REASONS WH ICH HAVE BEEN SUMMARIZED BY HIM IN PARA 15 OF HIS ORDER DATED 31- 12-2009 : 15. THE SUBMISSIONS OF THE ASSESSEE, AS NARRATED ABOVE, HAVE BEEN PERUSED AND CONSIDERED BUT THE SAME ARE NOT ACCEPTABLE IN VIEW OF THE FOLLOWING GROUNDS; (I) IN THE COURSE OF PROCEEDINGS BEFORE THE CUSTOMS OFFICIALS, IT WAS FOUND THAT THE ASSESSEE WAS THE MASTERMIND AND THAT THE ENTIRE OPERATION WAS CONCEIVED AND PERPETRATED BY HIM ONLY. BY VIRTUE OF SUCH A FINDING, THE ASSESSEE WAS HELD TO HAVE BEEN INVOLVED IN SMUGGLING ACTIVITY AND AS SUCH HE WAS HELD TO BE OWNER OF THE CONFISCATED GOODS. (II) THE CEGAT HAS SET ASIDE THE ORDER OF THE CUSTOMS AUTHORITIES AND HAS DIRECTED DO NOVO PROCEEDINGS. BUT THE HONBLE ITAT, IN ITS ORDER DATED 30.06.2009 IN M.A.NO.177/MUM/09 (ARISING OUT OF ITA NO.1505/MUM/2004), HAS CATEGORICALLY HELD THAT FROM THE ORDER OF THE CEGAT, IT CANNOT BE INFERRED THAT THE PROCEEDINGS UNDER THE CUSTOMS ACT HAVE BEEN DECIDED IN ASSESSEES FAVOUR. (III) THE ASSESSEES CONTENTION WITH REGARD TO THE LOSS ON ACCOUNT OF SEIZURE & CONFISCATION OF GOLD BARS WORTH RS.2,83,11,475/- BY THE CUSTOMS AUTHORITIES, SETTING OFF THE INCOME FROM UNDISCLOSED SOURCES U/S. 69A IS AN INGENIOUS ADDENDUM OR AFTERTHOUGHT. BUT IT DOES NOT SERVE ASSESSEES CAUSE, BECAUSE THE SO-CALLED LOSS DUE TO SEIZURE ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 5 AND CONFISCATION BY THE CUSTOMS AUTHORITIES IS IN THE NATURE PENALTY, WHICH IS NOT ALLOWABLE AS AN EXPENSES UNDER THE I.T. ACT. (IV) THE CASE LAWS CITED AND RELIED UPON BY THE ASSESSEE ALSO DO NOT LEND MUCH CREDENCE TO THE ASSESSEES CONTENTION, BECAUSE TILL DATE THE ASSESSEE HAS NOT ACCEPTED THE CHARGE OF SMUGGLING/ILLEGAL IMPORT OF GOLD BARS WHICH IS EVIDENT FROM THE APPELLATE ORDER OF THE CEGAT. FURTHER, THE CASES PERTAIN TO THE PERIOD PRIOR TO INTRODUCTION OF EXPLANATION TO SECTION 37(1) BY THE FINANCE ACT, 1998. (V) THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN AT ANY TIME ABOUT THE NATURE AND SOURCE OF MONEY/INCOME WHICH HAS BEEN UTILIZED IN PROCURING THE SAID GOLD BARS WORTH RS.2,83,11,475/-. THUS, THE SAID SUM ALSO SATISFIES THE CRITERIA MENTIONED IN SECTIONS 69 & 69B. (EMPHASIS SUPPLIED BY US) 6. IN THE ULTIMATE ANALYSIS, IT CAN BE SEEN THAT THE AO, WHILE GIVING EFFECT TO THE TRIBUNAL ORDER, HAS MADE THE A DDITION OF RS.2.83 CRORES AS UNDISCLOSED INCOME BUT DID NOT AL LOW ANY DEDUCTION AS DIRECTED BY THE TRIBUNAL. THE LD. CIT( A) ECHOED THE ASSESSMENT ORDER ON THIS POINT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT HAS BEEN BROUGHT TO OUR NOTICE THAT THIS CASE HAS COME UP BEFORE THE TRIBUNAL SEVERAL T IMES EARLIER ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 6 AND THE PRESENT PROCEEDINGS ARE IN FIFTH ROUND. THE RELEVANT PARAGRAPH OF THE FINAL ORDER PASSED BY THE TRIBUNAL HAS BEEN REPRODUCED ABOVE, AS PER WHICH THE TRIBUNAL RESTORE D THE MATTER TO THE FILE OF AO FOR THE LIMITED PURPOSE OF DETER MINING THE AMOUNT ACTUALLY INVESTED IN THE ACTIVITIES. THE LD . DR HAS FAIRLY CONCEDED THAT THIS ORDER PASSED BY THE TRIBUNAL HAS NOT BEEN ASSAILED BY THE REVENUE BEFORE THE HONBLE HIGH CO URT. IN THAT VIEW OF THE MATTER, IT BECOMES ABUNDANTLY CLEAR THA T THE SCOPE OF THE PROCEEDINGS BEFORE THE AO WAS A RESTRICTED ONE IN GIVING EFFECT ONLY TO THE FINDING RETURNED BY THE TRIBUNAL TO DET ERMINE THE AMOUNT ACTUALLY INVESTED IN THE ACTIVITIES SO THAT DEDUCTION COULD BE ALLOWED FOR THE SAID SUM AS PER THE ORIGINAL ORD ER PASSED BY THE TRIBUNAL ON 06-11-2008 IN I.T.A.NO.1505/MUM/200 4. IN SUCH PROCEEDINGS, IT WAS NOT OPEN TO THE AO TO DECI DE ANY ISSUE OTHER THAN THAT WHICH WAS RESTORED TO HIM BY THE TR IBUNAL OR NOT TO DECIDE THE MERITS OF THE QUESTION AS TO WHETHER SUCH DEDUCTION IS PERMISSIBLE OR NOT. FROM THE ASSESSMENT ORDER SO PASSED BY THE AO, THE RELEVANT PARAGRAPH OF WHICH HAS BEEN REPROD UCED ABOVE, IT IS SEEN THAT THE AO HAS EMBARKED UPON CONFIRMING THE ADDITION U/S.69A BY TREATING THE ASSESSEE AS OWNER WHICH FAC T WAS ALREADY DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL, BUT W ITHOUT GIVING ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 7 EFFECT TO THE DIRECTION OF ALLOWING DEDUCTION AS BU SINESS LOSS. AS CAN BE SEEN FROM THE PARA 15(III) OF THE ORDER AS H IGHLIGHTED ABOVE, THAT HE PROCEEDED TO DECIDE THE QUESTION OF ALLOWA BILITY OR OTHERWISE OF THE DEDUCTION, WHERE AS THE POINT FOR HIS DETERMINATION WAS ONLY THE QUANTUM OF DEDUCTION. W HEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE ALSO FOLLO WED THE SUIT BY NOT ALLOWING ANY DEDUCTION ON THE GROUND THAT THE FINAL DECISION OF THE CUSTOMS DEPARTMENT ABOUT THE AMOUNT OF THE GOLD CONFISCATED WAS NOT YET TAKEN. WE ARE UNABLE TO APP RECIATE THE DIRECTION IN WHICH THE AUTHORITIES BELOW HAVE MOVED IN UTTER DISREGARD TO THE DIRECTION GIVEN BY THE TRIBUNAL. W HEN THE ORDER SO PASSED BY THE TRIBUNAL WAS ACCEPTED BY THE REVEN UE, THE ONLY COURSE OPEN TO THE AUTHORITIES WAS TO GIVE EFFECT T O THE ORDER IN LETTER AND SPIRIT, INTER ALIA , BY ALLOWING DEDUCTION FOR THE AMOUNT ACTUALLY INVESTED BY THE ASSESSEE IN SUCH ACTIVITIE S. ON THE CONTRARY THEY KEPT ON HARPING ON THE QUESTION OF NO N-DEDUCTIBILITY OF THE AMOUNT AS BUSINESS LOSS. 8. AN AFFIDAVIT HAS BEEN FILED BY THE ASSESSE E DATED 23-04- 2012, A COPY OF WHICH IS AVAILABLE ON RECORD, AS P ER WHICH IF THE ASSESSEE WAS TO BE TREATED AS OWNER OF THE GOLD BAR S CONFISCATED, ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 8 THEN THE ACTUAL INVESTMENTS SO MADE SHOULD ALSO BE CONSIDERED AS THE SAME VALUE FOR WHICH THE ADDITION HAS BEEN MAD E. THE LD. DR HAS NOT DRAWN OUR ATTENTION TOWARDS ANY MATERIAL IN DICATING THAT THE ACTUAL AMOUNT INVESTED IN GOLD BARS WAS AT A FI GURE LOWER THAN THAT FOR WHICH THE ADDITION HAS BEEN MADE. IN VIEW OF THE FOREGOING FACTS, WE ARE OF THE CONSIDERED OPINION T HAT THE ACTUAL AMOUNT INVESTED BY THE ASSESSEE IN GOLD BARS IS TO BE TAKEN AS THE SAME VALUE FOR WHICH THE ADDITION HAS BEEN MADE U/S .69A FOR THE REASON THAT THE GOLD BARS WERE BROUGHT FROM DUBAI TO INDIA BY SOME PERSON ON BEHALF OF THE ASSESSEE ALLEGEDLY FOR SMUGGLING. IF SUCH GOLD HAS BEEN VALUED AT RS.2.83 CRORES REPRESE NTING THE VALUE OF THE GOLD CONFISCATED, NATURALLY, THE SAME AMOUNT WILL HAVE TO BE TREATED AS THE AMOUNT INVESTED UNLESS PR OVED OTHERWISE. IT IS SO FOR THE REASON THAT IT HAS NOT BEEN SHOWN BY MEANS OF ANY RECORD THAT THE ASSESSEE, IN FACT, A CQUIRED THESE GOLD BARS AT A POINT OF TIME ANTERIOR TO ITS BRINGI NG FROM DUBAI, WHEN HIS REPRESENTATIVE WAS INTERCEPTED, WHICH COUL D HAVE WARRANTED THE ACTUAL INVESTMENT AT A DIFFERENT FIGU RE FROM THE ONE AT WHICH IT HAS BEEN VALUED FOR THE PURPOSES OF ADD ITION. IN THE ABSENCE OF ANY CONTRARY MATERIAL OR EVIDENCE ON REC ORD SHOWING ACTUAL INVESTMENT AT A LOWER VALUE, WE HOLD THAT TH E SAME VALUE AT ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 9 WHICH ADDITION HAS BEEN MADE AT RS. 2.83 CRORE BE C ONSIDERED AS THE AMOUNT INVESTED BY THE ASSESSEE IN PURCHASING I T AND CONSEQUENTLY FOR THE PURPOSE OF ALLOWING BUSINESS L OSS. 9. BEFORE PARTING WITH THIS APPEAL, WE WANT TO MAKE IT CLEAR THAT THAT IN THIS APPEAL, WE HAVE NOT DECIDED ABOUT THE ALLOWABILITY OR OTHERWISE OF SUCH BUSINESS LOSS, A S THE SAID ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN EARLIER PROCEEDINGS IN FAVOUR OF THE ASSESSEE WHICH HAS BEEN ACCEPTED BY T HE REVENUE AS WELL. IN THE PRESENT APPEAL, WE ARE ONLY CONCERN ED WITH GIVING EFFECT TO THE ORDER PASSED BY THE TRIBUNAL IN DETER MINING THE AMOUNT INVESTED BY THE ASSESSEE IN GOLD BARS SO THA T EFFECT COULD BE GIVEN TO THE DIRECTION OF THE TRIBUNAL RENDERED EARLIER. 10. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THE 30TH DAY OF APRIL, 2012 . SD/- SD/- (S.S. GODARA) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30TH APRIL , 2012. NG: ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 10 COPY TO : 1. ASSESSEE. 2. DEPARTMENT. 3 CIT(A)-18,MUMBAI. 4 CIT-8,MUMBAI. 5.DR,A BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NO.4729/MUM/2011 ABDULLA MOHAMMED. 11 DETAILS DATE INITIAL S DESIG NATIO N 1. DRAFT DICTATED ON 26-04-12 SR.PS / 2. DRAFT PLACED BEFORE AUTHOR 26-04-12 SR.PS / 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/A M 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS / 6. KEPT FOR PRONOUNCEMENT ON SR.PS / 7. FILE SENT TO THE BENCH CLERK SR.PS / 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH OF ORDER *