Late Shri Prakash Dhere, Pune V. Dy. Comm. of Income-tax, Pune

ITA 475/PUN/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59974 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-11-2011
• Assessment Year: misc
• Appeal Filed On: 16-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 475/PN/2005 (BLOCK PERIOD: 1996-97 TO 2002-03) LATE SHRI PRAKASH DHERE .. . APPELLANT L/H VIJAY DHERE 179, GURUWAR PETH PUNE 411042 PAN : ADUPD2961N V. DCIT CENTRAL CIRCLOE 1 (1), PUNE RESPONDENT APPELLANT BY : SHRI. NIKHIL PATHAK RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING :22.11.10.11 DATE OF PRONOUNCEMENT: . 1.12 ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON FOLLOWING GROUNDS : 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE C APITAL GAINS ARISING ON THE SALE OF PLOTS FOR A.YS. 2001-02 AND 2002-03 SH OULD BE TAXED AS AN UNDISCLOSED INCOME OF THE APPELLANT. 1.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A] IN RESPECT OF FIRST SALE OF PLOT IN FINANCIAL YE AR 2000-01, THE APPELLANT HAD PAID ADVANCE TAX OF RS. 2,02,000/- WH ICH SHOWED HIS INTENTION OF DISCLOSING THE CAPITAL GAINS TO THE DE PT. AND THUS, THE CAPITAL GAIN ARISING ON THE SALE OF THE FIRST PLOT COULD NOT BE HELD TO BE UNDISCLOSED INCOME. B] THE SECOND PLOT WAS SOLD IN FINANCIAL YEAR 2001 -02 I.E. RELEVANT TO ASST. YEAR 2002-03 AND THE SEARCH HAD TAKEN PL ACE ON 8.1.2002 ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 2 AND THE DUE DATE FOR FILING THE RETURN FOR THE A.Y. 2002-03 HAD NOT EXPIRED AND THE APPELLANT HAD CREDITED THE SALE PRO CEEDS THEREOF TO THE BANK ACCOUNT AND THUS, THE SAME DID NOT CONSTIT UTE UNDISCLOSED INCOME OF THE APPELLANT. 2] WITHOUT PREJUDICE, THE APPELLANT SUBMITS THAT T HE LONG TERM CAPITAL GAINS ON SALE OF PLOTS OUGHT TO HAVE BEEN C OMPUTED AT RS.6,37,013/- FOR A.Y. 2001-02 AND RS. 13,97,256/- FOR A.Y. 2002-03 AS PER THE COMPUTATIONS SUBMITTED TO THE CIT(A). 3] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, APPELLA NT SUBMITS THAT IF AT ALL, THE CAPITAL GAINS HAD TO BE TAXED, TH EY SHOULD HAVE BEEN TAXED @ 20% INSTEAD OF 60%. 4] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A. O. WAS JUSTIFIED IN LEVYING SURCHARGE WITHOUT FOLLOWING THE DECISIO N OF PUNE ITAT IN THE CASE MRS. ARUNA KATARA 82 TTJ 363. 5] THE APPELLANT PRAYS FOR DELETION OF INTEREST U /S 158BFA(1). 2. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF SEARCH CARRIED OUT AT THE PREMISES OF THE ASSESSEE CERTAIN INCRIMINATING DOCU MENTS WERE SEIZED. THE DOCUMENTS COMMUNICATED THAT THE ASSESSEE HAD INCUR RED CERTAIN EXPENSES FROM SOURCES NOT DISCLOSED TO THE REVENUE. THE A.O. ALS O MENTIONED THAT IN THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND WHICH COMMU NICATED THAT THE ASSESSEE HAD SOLD SOME PROPERTY AT AUNDH THROUGH M/S. PINAK HOUS ING FINANCE. ACCORDING TO THE A.O, THE PROPERTY WAS PURCHASED BY THE ASSESSEE I N THE YEAR 1993-94 AND THE SAID PLOT WAS SOLD IN 2 PARTS. ONE OF THE SALE DEEDS IN DICATE TRANSFER OF PROPERTY ON 29.4.2000 FOR A CONSIDERATION OF RS. 24 LAKHS AND T HE REMAINING PART WAS SOLD ON 1.4.01 FOR RS. 2,00,000/-. ON QUERY RAISED ABOUT T HE SOURCE OF EXPENDITURE INCURRED, THE ASSESSEE EXPLAINED TO THE A.O THAT S UCH EXPENDITURE WAS INCURRED FROM THE SAME CONSIDERATION OF RS. 44 LAKHS RECEIVE D FROM THE SALE OF PLOT TO M/S. PINAK HOUSING FINANCE, PUNE. THE A.O DID NOT AGREE WITH THIS OBSERVATION THAT THE ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 3 TRANSACTION TO SALE AND RESULTANT CONSIDERATION HA S NOT BEEN DISCLOSED TO THE DEPARTMENT. THE A.O CONCLUDED THAT THE EXPENSES WE RE INCURRED OUT OF UNDISCLOSED BANK ACCOUNT AND REPRESENTED THE UNDISC LOSED EXPENDITURE BECAUSE THE SALE CONSIDERATION OF THE PROPERTY WAS NOT DISC LOSED TO THE DEPARTMENT. THE A.O. ACCORDINGLY PROCEEDED TO ASSESS INCOME AT RS. 44 LAKH BEING THE UNDISCLOSED EXPENDITURE INCURRED BY THE ASSESSEE DURING THE BL OCK PERIOD. BEFORE US, THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER IN T REATING THE CAPITAL GAINS ARISING OF THE SALE OF PLOTS FOR A.Y. 2001-02 AND 2002-03 AS UNDISCLOSED INCOME OF THE ASSESSEE TO BE TAXED. GROUND NOS. 1 & 1.1 ARE THE RELATED GROUNDS RAISING THE ISSUE. 3. THE REMAINING GROUNDS 2 & 3 ARE ALTERNATIVE GROU NDS AND IN GROUND NO. 4, THE ASSESSEE HAS QUESTIONED THE FIRST APPELLATE OR DER WHEREBY THE LD CIT (A) HAS JUSTIFIED THE ACTION OF THE A.O IN LEVYING OF SUR CHARGE. IN GROUND NO. 5, THE ASSESSEE HAS PRAYED FOR DELETION OF INTEREST CHARGE D U/S. 158BFA(1). 4. IN SUPPORT OF GROUND NOS. 1 AND 1.2, THE LD. A. R. SUBMITTED THAT AS PER COMPUTATIONS OF UNDISCLOSED INCOME MADE BY THE A.O FURNISHED AT PAGE 3 OF THE PAPER BOOK, IT IS CLEAR THAT IN THE A.Y. 2001-02, THE ASSESSEES TOTAL INCOME CONSTITUTED OF LONG TERM CAPITAL GAINS OF RS. 6,37 ,013/- ONLY. ON THIS INCOME, THE TAX INSTANCE AT THE NORMAL RATE WAS TO THE TUNE OF 20%, WHICH WOULD HAVE COME TO RS.1,27,402/- AND SURCHARGE OF RS.15,288/- THEREON TOTALING TO RS. 1,46,690/-. AS AGAINST THIS, THE ADVANCE TAX PAID BY THE ASSESSE E BEFORE THE SEARCH WAS RS. 2 LAKH, WHICH WAS MUCH MORE THAN THE TAX INSTANCE OF THIS INCOME. THE LD. A.R. SUBMITTED THAT THE SAID ADVANCE TAX WAS PAID ON CAP ITAL GAINS OF RS. 6,37,013/- IN THE A.Y. 2001-02, THERE IS NO QUESTION OF TREATI NG THE CAPITAL GAIN OF RS. 6,37,013/- AS AN UNDISCLOSED INCOME. HE CONTENDED THAT IF THE ADVANCE TAX IS PAID BY AN ASSESSEE BEFORE THE SEARCH ON ITS INCOME, THE N EVEN IF THE RETURN IS FILED FOR THAT YEAR PRIOR TO THE SEARCH, THE INCOME IS THE DI SCLOSED INCOME WHICH CANNOT BE ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 4 TAXED IN THE BLOCK ASSESSMENT. IN SUPPORT HE PLACE D RELIANCE ON THE FOLLOWING DECISIONS : 1) SHAMLAL BALRAM GURBANI 249 ITR 501 (BOMB ) 2) CIT VS. MRS. KUMKUM KHOLI, 276 ITR 589(DELH.) 3) NILESH SHAH VS. ACIT, 253 ITR 34 (AT) 4) ACIT VS. A.R. ENTERPRISES , 274 ITR 110 (MAD.) 5) DR. ALKA GOSWAMI & ANOTHER VS. CIT, 268 ITR 178 (GUA) 6) CIT VS. SUBRAMANIAN (LATE) L/H S. VEERASWAMY, 305 ITR 289 (MAD) 7) P.S. MANI, 311 ITR 463(MAD.) 8) SMT. LALITABENTHAKKAR, ITA NO. 1152/PN/03(BLOC K PERIOD 1991-92 TO 2001-02) ORDER DATED 31.5.07 5. REGARDING THE PROPERTY SOLD IN THE A.Y. 2002-03 AND CAPITAL GAINS ARISING THEREOF AT RS. 13,97,256/- TREATING AS UNDISCLOSED INCOME, BY THE A.O , THE LD. A.R. SUBMITTED THAT THE SALE PROCEEDS ON THE SALE OF PLO T IN THIS YEAR WAS DEPOSITED IN THE SAME BANK ACCOUNT IN PUNE MERCHANT CO-OPERATIV E BANK WHEREIN THE ASSESSEE HAD DEPOSITED THE SALE PROCEEDINGS IN THE EARLIER Y EAR A.Y. 2001-02. HE INVITED OUR ATTENTION OF THE BENCH TO PAGE NOS. 16 TO 22 OF T HE PAPER BOOK I.E. COPY OF BANK ACCOUNT NO. 2798 & 3235. THE LD. A.R. SUBMITTED TH AT NOW FOR CAPITAL GAIN, THE BOOKS ARE NOT REQUIRED TO BE MAINTAINED. CLAUSE (D) OF SECTION 158 BB(1) NORMALLY STATES THAT THE INCOME ON THE BASIS OF ENTRIES IN BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN NORMAL COURSE WOULD BE CON SIDERED TO BE DISCLOSED INCOME. HE POINTED OUT THAT IN THE PRESENT CASE I F THE SEARCH WAS TAKEN ON 8/1/2002, THE PREVIOUS YEAR FOR A.Y. 2002-03 HAD NO T ENDED AND THE CLAUSE (D) OF SECTION 158 BB (1) IS APPLICABLE. IT WAS THERE FORE SUBMITTED BY MAKING THE ADVANCE TAX FOR A.Y. 2001-02, THE INTENTION OF THE ASSESSEE THAT HE WANTED TO DISCLOSE THE INCOME WAS MADE ABSOLUTELY CLEAR AND AS THE SALE PROCEEDS OF THE PLOT IN THE FIRST YEAR ARE DEPOSITED IN THE SAME BANK ACCOUNT, THE ASSESSEE HAD THE ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 5 INTENTION TO DISCLOSE THIS CAPITAL GAIN AS WELL TO THE DEPARTMENT. OTHERWISE, HE WOULD NOT HAVE DEPOSITED THE SALE PROCEEDS OF THIS PLOT IN THIS BANK ACCOUNT ONLY. SECONDLY, A BANK PASS BOOK HAD TO BE CONSIDERED MAINTAINED IN NORMAL COURSE BY AN ASSESSEE FOR THE PURPOSE OF CLAUSE (D) OF SECTI ON 158 BB(1). THE LD A.R. SUBMITTED FURTHER THAT BOTH THE PLOTS I.E. PLOTS SO LD IN A.Y. 2001-02 AND A.Y. 2002- 03 HAVE BEEN SOLD TO THE SAME PARTIES. THE LD. A. R PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRADHA CONSTRUCTION VS. ACIT, 76 ITD 85 (PUNE). 6. THE LD D.R. ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE DECISIONS RELIED UP ON BY THE LD A.R. ARE HAVING DISTINGUISHABLE FACTS AS IN THOSE CASES, ASSESSEES WERE FILING REGULAR RETURN OF INCOME. HE PLACED RELIANCE ON A THIRD MEMBER BENC H DECISION OF TRIBUNAL IN THE CASE OF ACIT VS. KALYAN CHANDRA DEY ( 2011) 57 DTR (GAU) ( TM ) (TRIB ) 137. 7. SO FAR AS THE CONTENTIONS OF THE ASSESSEE REGARD ING THE TREATMENT OF CAPITAL GAINS IN THE A.Y. 2001-02 AS UNDISCLOSED INCOME IS CONCERNED, WE FIND SUPPORT FROM THE CITED DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS P.S. MANI (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS APPROV ED THE DECISION OF THE TRIBUNAL HOLDING THAT THERE WAS NO UNDISCLOSED INCOME FOR THE YEARS IN WHICH ADVANCE TAX HAD BEEN PAID, EVEN THOUGH THE RETURNS WERE NOT FIL ED WITHIN THE TIME LIMIT SPECIFIED UNDER SECTION 139(1). SIMILAR VIEW HAS BEEN EXPRESSED AGAIN BY THE HONBLE MADRAS HIGH COUIRT IN ITS RECENT DECISION IN THE CASE OF CIT VS. V. SUBRAMANIAN (LATE) (SUPRA). THE HONBLE GAUHATI HI GH COURT IN THE CASE OF DR. MRS. ALKA GOSWAMI & ANR. VS. CIT (SUPRA) HAS ALSO BEEN PLEASED TO EXPRESS SIMILAR VIEW. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MRS. KUMKUM KOHLI (SUPRA) HAS ALSO REMAINED OF THE SIMILAR VIEW ON THE ISSUE. THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAMLAL BALRAM GURBANI (SUPRA) IS ALSO HELPFUL TO T HE ASSESSEE. IN THAT CASE, THE ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 6 ASSESSEE HAD NOT FILED RETURNS FOR THREE YEARS AND WAS SUBJECTED TO SEARCH ACTION. THE A.O. TREATED THE INCOME OF THE BLOCK PERIOD. THE TRIBUNAL FOUND THAT THE ASSESSEES INCOME F ROM INTEREST, SALARY AND RENT WAS REFLECTED IN THE BALANCE SHEET OF THE RESPECTIVE A SSESSMENT YEARS OF THE FIRM AND THEREFORE, THERE WAS NO REASON FOR TREATING INCOME AS UNDISCLOSED INCOME FOR THE PURPOSE OF BLOCK ASSESSMENT. THE HONBE HIGH COURT APPROVED THE DECISION OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THESE DECISIONS, W E THEREFORE DIRECT THE A.O TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE TAX INCIDENCE O N THE LONG TERM CAPITAL GAINS AROSE IN THE A.Y. 2001-02 COMES TO RS. 1,42,690/- A GAINST WHICH, THE ASSESSEE HAS CLAIMED TO HAVE PAID THE ADVANCE TAX OF RS.2 LAKH. IF THE A.O FINDS THE SAID CLAIM OF THE ASSESSEE AS CORRECT, THEN HE IS DIRECTED TO TREAT THE LONG TERM CAPITAL GAINS ARISING OUT OF SALE OF FIRST PLOT IN A.Y. 2001-0 2 AS DISCLOSED FOR THE PURPOSE OF ASSESSMENT U/S.158 BC OF THE ACT AND MAKE ASSESSMEN T ACCORDINGLY. 8. SO FAR AS THE TREATMENT TO BE GIVEN TO THE CAPIT AL GAIN AROSE IN THE ASSESSMENT A.Y. 2003-04 ON THE SALE OF THE PLOT IS CONCERNED, WE ALSO FIND SUBSTANCE IN THE CONTENTION OF THE LD. A.R. THAT A S PER CLAUSE (D) TO SECTION 158 BB(1), THE INCOME ON THE BASIS OF ENTRIES IN BOOK OF ACCOUNT OR THE OTHER DOCUMENTS MAINTAINED IN NORMAL COURSE WOULD BE CO NSIDERED TO BE DISCLOSED INCOME. ADMITTEDLY, IN THE PRESENT CASE, THE SEARC H WAS CONDUCTED ON 8/1/2002, HENCE THE PREVIOUS YEAR I.E. A.Y. 2002-03 HAD NOT E NDED. THE BANK PASS BOOK HAD TO BE CONSIDERED AS A DOCUMENT MAINTAINED IN THE NO RMAL COURSE BY THE ASSESSEE FOR THE PURPOSE OF CLAUSE (D) OF SECTION 158 BB(1). IT IS ALSO PERTINENT TO MENTION OVER HERE THAT BY MAKING PAYMENT OF ADVANCE TAX FOR A.Y.2001-02, THE INTENTION OF THE ASSESSEE THAT HE WAS WANTED TO DISCLOSE THE IN COME WAS MADE CLEAR AND AS THE SALE PROCEEDS IN THE PLOT IN THE NEXT YEAR WERE DEPOSITED IN THE SAME BANK ACCOUNT, THERE IS NO REASONS TO DOUBT THE INTENTION OF THE ASSESSEE TO DISCLOSE THIS CAPITAL GAINS AS WELL TO THE DEPARTMENT. AT PAGE NOS. 16 TO 20 OF THE PAPER BOOK, THE ASSESSEE HAS FILED THE RELATED BANK ACCOUNT NOS . 2978 & 3235. IN THE CASE OF ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 7 SHRADHA CONSTRUCTION VS. ACIT (SUPRA), IT HAS BEEN HELD BY THE PUNE BENCH OF THE TRIBUNAL THAT SINCE DUE DATE FOR FILING RETURN OF INCOME HAD NOT EXPIRED ON DATE OF SEARCH, QUESTION OF HOLDING THAT ASSESSEE WOULD NOT HAVE DISCLOSED INCOME DESPITE OF YEAR IN QUESTION, BUT FOR SEARCH, DID NOT ARISE AND AS SUCH A.O WAS HELD NOT JUSTIFIED IN TREATING SUMS IN QUESTION AS UNDISCLOS ED INCOME OF THE BLOCK PERIOD. RESPECTFULLY FOLLOWING THIS DECISION OF THE PUNE BE NCH OF THE TRIBUNAL, WE DIRECT THE A.O TO TREAT THE CAPITAL GAINS IN QUESTION AROSE IN THE A.Y. 2002-03 AS DISCLOSED INCOME OF THE ASSESSEE AND MAKE ASSESSMENT ACCORDIN GLY. 9. SO FAR AS DECISION OF THIRD MEMBER BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. KALYANCHANDRA DEY, 57 DTR 137 ( GAUHAUTI) (T M ) RELIED UPON BY LD. D.R. IS CONCERNED, IT WAS NOT HELPFUL TO THE REVENUE AS IT WAS HAVING DISTINGUISHABLE FACTS AND DIFFERENT ISSUE. IN THAT CASE, THE RETURNS FILE D BY ASSESSEE WERE BELATED RETURNS. THE TRIBUNAL HELD THAT INCOME RETURNED IN SUCH NON-EST RETURN, IS TO BE TREATED AS ASSESSEES UNDISCLOSED INCOME AND IT IS NOT DEDUCTIBLE FROM THE UNDISCLOSED INCOME. THE A.O. WAS, HOWEVER, DIRECTE D BY THE TRIBUNAL TO GIVE CREDIT FOR THE INCOME COVERED BY TDS. THUS TO SOME EXT ENT, IT SUPPORT THE CASE OF ASSESSEE WHERE INCOME EARNED IN A.Y. 2001-02 ON SAL E OF PLOT WAS COVERED BY THE PAYMENT OF ADVANCE TAX. 10. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE GR OUND NO. 1 & 1.1 OF THE APPEAL ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 11. IN VIEW OF THE ABOVE FINDING, ALL GROUND NOS. 1 & 1.1 OF THE APPEAL, THE REMAINING GROUND NOS. 2 TO 5 DO NOT SURVIVE AND THE SE ARE DISPOSED OFF AS SUCH. 12. IN RESULT, APPEAL IS ALLOWED. ITA . NO 475/PN/2005 LATE SHRI PRAKASH DHERE B.P.1996-97 TO 2002-03 PAGE OF 8 8 THE ORDER PRONOUNCED IN THE OPEN COURT ON 20TH JA NUARY 2012. SD/- SD/- ( D. KARUNAKARA RAO) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 20 TH JANUARY, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE CIT(A)-I, PUNE 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE