ITO 13(2)(2), MUMBAI V. VIVEK ARYA (HUF), MUMBAI

ITA 4796/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3138 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Surrender of tenancy right; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAMIT KOCHAR, AM , I.T.A. NOS.4792 TO 4797/MUM/2013 ( / ASSESSMENT YEARS : 2000-01 TO 2005-06 INCOME TAX OFFICER 13(2)(2), ROOM NO. 412, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400 020. VS. SHRI VIVEK ARYA (HUF), 401, DEVKRUPA, 28, RAICHUR STREET, MUMBAI 400 009. PAN : AABHV7184F ( ! / APPELLANT ) .. ( '#! RESPONDENT ) A PPELLANT BY SHRI ABANI KANTA NAYAK R E SPONDENT BY : SHRI HARI OM TU LSIYAN $ %&' ( / DATE OF HEARING : 16-09-2015 )*+, &' ( / DATE OF PRONOUNCEMENT :30.09.2015 6 APPLS- VIVEK ARYA 2 O R D E R PER BENCH : THESE SIX APPEALS BY THE REVENUE PREFERRED AGAINST SIX SEPARATE ORDERS PASSED BY THE CIT(A) 24 ALL DATED 25-3- 2015, MUMBAI PERTAINING TO ASSESSMENT YEARS 2000-01 TO 2005-06 WHEREBY HE DELETED THE ADDITIONS ON ACCOUNT OF INTEREST INCOME. SINCE COMMON ISSUE IS INVOLVED IN ALL THESE APPEALS, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. WE SHALL TAKE UP ITA NO. 4792/MUM/2013 FOR A.Y. 200 0-01 AS LEAD APPEAL AND THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- (1) (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OFRS. 19,95,487/- ON ACCOUNT OF INTEREST INCOME. (II) WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO A PPRECIATE THAT DURING THE COURSE OF SEARCH AT THE OFFICE OF T HE ETO, IT WAS FOUND THAT THE FIRM WAS RECORDING ACCOUNTED AND UNACCOUNTED TRANSACTIONS IN LOOSE PAPERS AND THE BO OKS OF ACCOUNTS OF ETO WERE NEVER PRODUCED BEFORE THE AO F OR VERIFICATION. (III) THE LD. CIT(A) HAS FURTHER FAILED TO APPRECIA TE THAT THE ASSESSEE FAILED TO BRING ANY MATERIAL AND/OR DOCUME NTARY EVIDENCE ON RECORD TO SUBSTANTIATE ITS CLAIM. 6 APPLS- VIVEK ARYA 3 (IV) THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE T HAT IT WOULD BE UNDISCLOSED/UNEXPLAINED EXPENDITURE IN THE HANDS OF THE FIRM, WHILE IT WOULD BE UNDISCLOSED INCOME IN THE H ANDS OF ASSESSEE. (2) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESS MENT OFFICER BE RESTORED. 2. BRIEF FACTS OF THE CASE INVOLVED IN ALL THESE AP PEALS ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED ON 07/08-2-2006 AT THE RESIDENTIAL PR EMISES OF THE ASSESSEE AT 2 ND FLOOR, VIOLET VILLA, SANTACRUZ (W), MUMBAI AS THE ASSESSEE WAS A DIRECTOR IN M/S WESTERN ARYA GROUP O F COMPANIES WHICH WAS COVERED U/S 132 OF THE ACT ALONG WITH ECO NOMIC TRANSPORT ORGANISATION (ETO) AND KESHAV TRAVELS PVT . LTD. SINCE THE ASSESSEE IS A PARTNER IN ETO, PROCEEDINGS U/S 1 53C OF THE ACT WERE INITIATED. THE ASSESSEE FIRM M/S ETO CONSISTED 20 PARTNERS TILL 31-08-1999. AFTER THE DEATH OF MR. C.M. ARYA IN 1999, HIS SON, VIVEK C. ARYA (HUF) WAS ADMITTED AS PARTNER. DURIN G THE COURSE OF SEARCH AT THE OFFICE OF M/S ETO AT ECONOMIC HOUS E, CHINCH BUNDER, MUMBAI CONDUCTED ON 7.2.2006 AND 5.4.2006, IT WAS FOUND THAT THE FIRM HAD BEEN RECORDING BOTH ACCOUNT ED AND UNACCOUNTED TRANSACTIONS IN THE LOOSE PAPERS SEIZED DURING THE SEARCH. THE REGULAR BOOKS OF ACCOUNT OF M/S ETO WE RE NOT FOUND AT THE PRINCIPAL PLACE OF BUSINESS OR ANY OF ITS BR ANCHES AND WERE NEVER PRODUCED FOR VERIFICATION. CAPITAL ACCOUNT OF VARIOUS 6 APPLS- VIVEK ARYA 4 PARTNERS WERE FOUND RECORDED IN THE FILE NO. A-10 S EIZED FROM ECONOMIC HOUSE ON 5.4.2006. THE ENTRIES IN THESE C APITAL ACCOUNTS WERE TOTALLY DIFFERENT FROM THE CAPITAL AC COUNT OF RESPECTIVE PARTNERS SHOWN IN THEIR RETURN OF INCOME . THE AMOUNT OF PROFIT CREDITED TO CAPITAL ACCOUNT OF VARIOUS PA RTNERS REFLECTED IN THE SEIZED PAPERS WAS COMPLETELY AT VARIANCE WITH T HE PROFIT OF THE FIRM DISCLOSED IN THE RETURN OF INCOME. INTEREST A T THE RATE OF 8% AND 6% & 3% WAS PROVIDED ON THE CREDIT BALANCES OF THE PARTNERS AND 6% INTEREST WAS CHARGED ON THE WITHDRAWALS MADE BY THE PARTNERS. THESE PROVISIONS FOR INTEREST WERE NOT TH ERE IN THE CAPITAL ACCOUNT OF THE PARTNERS FILED ALONG WITH THE RETURN OF INCOME FOR THE RESPECTIVE PERIOD BY THE FIRM. SIMILARLY, THE A MOUNT OF WITHDRAWAL RECORDED IN THE CAPITAL ACCOUNT OF THE S EIZED PAPERS WERE TOTALLY DIFFERENT FROM THE WITHDRAWAL RECORDED IN THE CAPITAL OF THE PARTNERS AS PER THE ANNUAL ACCOUNT OF M/S ETO F ILED ALONG WITH THE RETURN OF INCOME. THE CASHIER OF M/S ETO, MR. RAMPAL SHARMA IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT ON 7-2- 2006 HAD ADMITTED THAT THE TRANSACTIONS IN THE ASSE SSEES CAPITAL ACCOUNTS OF PARTNERS SEIZED DURING THE COURSE OF SE ARCH WERE TOTALLY UNACCOUNTED. 3. NOTICE U/S 153-C R.W.S. 153A OF THE ACT WAS ISSU ED ON 31-7- 2006 AND IN RESPONSE TO WHICH THE ASSESSEE HAD FILE D RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,67,710/- ON 7.9.2006. THE RETURN WAS ACCOMPANIED WITH STATEMENT OF COMPUTATIO N OF TOTAL INCOME AND STATEMENT OF LONG TERM CAPITAL GAIN. SU BSEQUENTLY, 6 APPLS- VIVEK ARYA 5 NOTICE U/S 143(2) OF THE ACT DATED 26.6.2007 WERE S ERVED ON THE ASSESSEE AND THEREAFTER NOTICE U/S 143(2) AND 142(1 ) OF THE ACT WERE ISSUED ON 12.9.2007 WERE SERVED ON THE ASSESSE E. IN RESPONSE TO THE SAID NOTICES, THE LD. A.R. FOR THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS AND ULT IMATELY ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153C OF THE ACT ON 28.12.2007 DETERMINING TOTAL INCOME AT RS. 28,30,95 0/- AFTER MAKING FOLLOWING ADDITIONS:- (I) UNACCOUNTED INTEREST RS. 19,95,487(INTEREST ON CA PITAL FROM ETO) (II) UNACCOUNTED INCOME - RS. 6,67,755/- (SHARE OF PRO FIT FROM M/S ETO). APPEAL WAS PREFERRED AGAINST THE SAID ORDER BY THE ASSESSE BEFORE THE CONCERNED CIT(A) WHO VIDE ORDER DATED 9.2.2009 DISMISSED THE APPEAL OF THE ASSESSEE. THE ASSESEE PREFERRED FURTH ER APPEAL BEFORE THE TRIBUNAL IN ITA NO. 1987 TO 1992/MUM/2009 DATED 30.9.2010 AND THE TRIBUNAL SET ASIDE THE MATTER TO THE ASSESS ING OFFICER BY OBSERVING AS UNDER:- WE THEREFORE DEEM IT FIT AND PROPER TO REMIT THE M ATTER FOR AY 2000-01 TO 2005-06 BACK TO THE FILE OF THE A O WITH A DIRECTION TO DECIDE THE ISSUES AFRESH CONSID ERING THE FINAL OUTCOME OF THE ORDER OF THE SETTLEMENT COMMISSION IN CASE OF THE FIRM M/S ETO AND IN ACCORDANCE WITH THE LAW AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 6 APPLS- VIVEK ARYA 6 4. MEANWHILE, THE INCOME TAX SETTLEMENT COMMISSION (IT & WT) ADDITIONAL BENCH, KOLKATA HAS PASSED AN ORDER U/S 2 45D(4) OF THE INCOME TAX ACT, 1961 IN THE CASE OF M/S ECONOMIC TR ANSPORT ORGANISATION VIDE THEIR ORDER DATED 28.01.2011. TH E ASSESSING OFFICER IN THE SET ASIDE PROCEEDINGS OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO BRING OUT ANY MATERIAL AND D OCUMENTARY EVIDENCES ON RECORD TO SUBSTANTIATE HIS CLAIMS, THE ASSESSEES CONTENTION WAS NOT ACCEPTABLE. THE TOTAL INCOME WAS COMPUTED AS PER THE ORIGINAL ASSESSMENT ORDER U/S 143(3) R.W.S. 153A OF THE ACT DATED 28.12.2007. 5. IN FACT, THE A.O. IN HIS ASSESSMENT ORDER HELD A S UNDER:- 'ADDITION OF RS. 19,95,487/- WAS MADE ON ACCOUNT OF INTEREST PROVIDED IN THE CREDIT BALANCE BY THE FIRM M/S ECONOMIC TRANSPORT ORGANIZATION WHEREIN THE ASSESSE E WAS A PARTNER ON THE BASIS OF THE CAPITAL ACCOUNT O F THE ASSESSEE AS APPEARING IN SEIZED DOCUMENTS A-10 AND IN THE APPLICATION FILED BY THE FIRM ETO BEFORE THE SETTLEMENT COMMISSION. IT WAS NOTICED THAT IN THE R ETURN OF INCOME FILED, THE ASSESSEE HAD NOT OFFERED ANY I NTEREST RECEIVED FROM PARTNERSHIP FIRM FOR TAXATION AND ACCORDINGLY THE SAME WAS TREATED AS ASSESSEE'S UNDISCLOSED INCOME FROM BUSINESS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HAD NOTICED THAT THE ASSESSEE HAD CLAIRNED THAT IN THE CAPITAL ACCOUNT F ILED BY THE FIRM BEFORE THE ITSC, KOLKATA THE SHARE OF P ROFIT OF THE ASSESSEE WAS SHOWN AT RS. 15,66,654/- WHEREA S THE ASSESSEE HAS SHOWN AT RS. 8,98,899/-. SINCE THE ASSESSEE HAD NOT DECLARED HIS SHARES OF PROFIT FROM THE FIRM TRULY AND CORRECTLY IN HIS RETURN OF INCOME. T HE 6 APPLS- VIVEK ARYA 7 DIFFERENCE BETWEEN THE PROFIT SHOWN BY THE FIRM AND AMOUNT SHOWN BY THE ASSESSEE'S CAPITAL ACCOUNT AND AMOUNT SHOWN BY THE ASSESSEE IN HIS RETURN OF INCOM E WAS TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE A ND ADDITION OF RS. 6,67,755/- WAS ACCORDINGLY MADE. THE HON'BLE INCOME TAX SETTLEMENT COMMISSION (IT & WT) ADDITIONAL BENCH, KOLKATA HAVE PASSED AN ORDER U/S 245D(4) OF THE IT ACT, 1961 IN THE CASE O F M/S ECONOMIC TRANSPORT ORGANISATION VIDE THEIR ORDER DA TED 28.01.2011. ACCORDINGLY, THE ASSESSEE VIDE HIS OFFICE LETTER DATED 23.09.2011 WAS REQUESTED TO ATTEND THIS OFFIC E ALONGWITH THE SUBMISSION ON 03. 10.2011. IN RESPONS E, SHRI ALOK SINGHANIA, CHARTERED ACCOUNTANT ATTENDED ON BEHALF OF THE ASSESSEE AND STATED THAT, ASSESSMENTS IN THIS CASE HAVE TO BE COMPLETED ON THE BASIS OF SETTLEMENT COMMISSIONS ORDER IN THE CASE OF M/S ECONOMIC TRANSPORT ORGANIZATION (ETO) AS PER THE DIRECTION OF ITAT AND FURTHER CLAIMED THAT RETURNED INCOME SHOULD BE ACCEPTED, SINCE THE SETTLEMENT COMMISSIONS HAS DELETED THE ADDITIONS MADE ON THE BASIS OF SEIZED DOCUMENTS. ON CAREFUL PERUSAL OF THE HON'BLE SETTLEMENT COMMISSIONS ABOVE CITED ORDER, IT IS NOTICED THAT T HE HONBLE SETTLEMENT COMMISSION IN THEIR ORDER HAVE N OT DISCUSSED AND DECIDED THE ISSUES ON WHICH GROUNDS ADDITIONS/DISALLOWANCE WAS MADE IN ASSESSEE'S CASE FOR THE RELEVANT ASSESSMENT YEAR. IN THEIR ORDER, THE H ON'BLE SETTLEMENT COMMISSION HAVE DISCUSSED AND DECIDED TH E FOLLOWING POINTS: I) COMPUTATION OF UNACCOUNTED INCOME FOR A.Y. 2006-07 II) UNDISCLOSED INCOME ON SURRENDER OF TENANCY RIGHTS. 6 APPLS- VIVEK ARYA 8 III) TAXATION OF CAPITAL GAINS ON TRANSFER OF PROPERTIES TO THE RETIRING PARTNERS. IV) PAYMENT OF CASH TO PARTNERS AS PER FAMILY SETTLEMENT OUT OF UNACCOUNTED FUND. V) INCOME BY WAY PAGRI. VI) LOW NET PROFIT RATE AND ITS TAXATION. APART FROM THE ABOVE POINTS, THERE IS NO DISCUSSION AND DECISION IN THE SETTLEMENT COMMISSION'S ORDER. THE ASSESSEE'S REPRESENTATIVE HAS NOT BROUGHT ANY MATER IAL ON RECORD TO SUBSTANTIATE HIS CLAIM THAT THE ADDITI ONS MADE ON THE BASIS OF SEIZED DOCUMENTS HAVE BEEN DELETED BY THE SETTLEMENT COMMISSION. THEREFORE, TH E ARGUMENT OF THE ASSESSEE'S REPRESENTATIVE THAT THE RETURNED INCOME SHOULD BE ACCEPTED, IS NOT ACCEPTAB LE. AS REGARDS THE DISALLOWANCE ON THE SECOND GROUND, I T IS SEEN THAT THE ASSESSEE HAD NOT FILED ANY DOCUMENTAR Y PROOF FOR PURCHASE AND SALE OF SHARES DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDING AND EXPRESS HIS INABILITY TO FURNISH THE DETAILS AND DOCUMENTARY EVIDENCE DURING THE PRESENT ASSESSMENT PROCEEDINGS. SINCE THE ASSESSEE HAS FAILED TO BRING OUT ANY MATERIAL AND DOCUMENTARY EVIDENCES ON RECORD TO SUBSTANTIATE HIS CLAIMS, THE ASSESSEES CONTENTION IS NOT ACCEPTABLE. THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS PER THE ORIGINAL ASSESSMENT ORDER U/S 143(3) R.W.S. 153A OF THE I.T. ACT, DATED 28.12.200 7. THE TOTAL TAXABLE INCOME (AS PER ORDER DATED 28.12.2007) : RS. 28,30,950/-. 6. THE MATTER CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE 6 APPLS- VIVEK ARYA 9 AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS HELD AS UNDER:- IN THE LIGHT OF ABOVE FACTS, IN MY OPINION, THE AS SESSING OFFICER IS NOT JUSTIFIED IN TAXING THE INTEREST IN THE HANDS OF ASSESSEE PRESUMING THAT THE ASSESSEE RECEIVED INTEREST. IT IS CLEAR, THAT WHATEVER NOTINGS MADE I N THE SEIZED RECORDS, COMPUTED BY THE FIRM, ETO AND ADMIT TED BY IT BEFORE THE HON'BLE ITSC AND ACCEPTED BY HON'B LE ITSC IN ITS ORDER U/S 245D( 4). APART FROM THIS, TH E DECISION OF HON'BLE ITSC IN THE CASE OF ONE OF THE PARTNERS I.E. SHRI S. P. ARYA WITH IDENTICAL FACTS HAS ALSO TO BE FOLLOWED. IN THESE CIRCUMSTANCES THE ADDITION MADE BY THE ASSESSING OFFICER DOES NOT STAND. IN THE LIGHT OF ABOVE, THE ASSESSEE'S SUBMISSION THAT UNACCOUNTED INTEREST APPEARING IN THE SEIZED RECORDS HAS ALREADY BEEN CONSIDERED BY THE FIRM IS FOUND TO BE CORRECT. THEREFORE, THE AO IS NOT JUSTI FIED IN TAXING THESE AMOUNTS IN THE HANDS OF THE PARTNER, T HE ASSESSEE. THE ADDITION OF RS. 19,95,487/- MADE BY T HE AO IS DELETED. AS REGARDS, GROUND NO.3 OF THE ASSESSEE, IT IS SUBMITTED THAT DURING THE YEAR SHRI CHANU MOHAN ARY A DIED AND M/S VIVEK ARYA (HUF) WAS ADMITTED AS PARTN ER IN THE ETO. IT IS SUBMITTED THAT A SUM OF RS. 6,67, 754/- WAS ADMITTED BY LATE C. M. ARYA IN HIS RETURN OF IN COME FILED FOR THE A.Y. 2000-01 AND AS M/S VIVEK ARYB (H UF) HAS BEEN ADMITTED IN HIS PLACE. THE REMAINING AMOUN T OF RS. 8,98,899/- WAS ADMITTED BY (HUF) AS SHARE OF PROFIT TOTALING TO RS. 15,66,653/- WHICH HAS BEEN DECLARED AS SHARE OF PROFIT OF THE ASSESSEE FROM TH E FIRM. PRIMA FACIE THE ASSESSEE'S CONTENTION APPEARS TO BE CORRECT, THAT LATE SHRI C. M. ARYA ADMITTED PART OF SHARE OF PROFIT AND THE ASSESSEE ADMITTED THE SHARE OF PR OFIT FOR THE BROKEN PERIOD. THEREFORE, I DON'T SEE ANY R EASON TO TAX THE AMOUNT OF RS. 6,67,754/- AS UNDISCLOSED 6 APPLS- VIVEK ARYA 10 INCOME AND THEREFORE THE AO IS DIRECTED TO DELETE T HE ADDITION MADE ON THIS COUNT. HOWEVER, THE AO IS DIRECTED TO VERIFY THE RECONSTITUTION DEED OF PARTN ERSHIP AND ALSO RETURNS OF INCOME OF BOTH LATE SHRI C.M. A RYA AND ASSESSEE AND ALLOW THE CLAIM. SUBJECT TO THIS VERIFICATION, THE GROUND OF APPEAL IS ALLOWED. 7. THE LD. D.R., BEFORE US SUBMITTED THAT THE CIT(A ) ERRED IN DELETING THE ADDITION OF RS. 19,95,487/- ON ACCOUNT OF INTEREST INCOME. THE CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEE DURING THE COURSE OF SEARCH AT OFFICE PREMISES OF THE ETO, IT WAS FOUND THAT THE FIRM WAS RECORDING ACCOUNTED AND UNACCOUNT ED TRANSACTIONS IN LOOSE PAPERS AND THE BOOKS OF ACCOU NT OF ETO WERE NEVER PRODUCED BEFORE THE ASSESSING OFFICER FOR VER IFICATION. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ASSESS EE FAILED TO BRING ANY MATERIAL AND/OR DOCUMENTARY EVIDENCE ON RECORD TO SUBSTANTIATE ITS CLAIM. HE ALSO FAILED TO APPRECIA TE THAT IT WOULD BE UNDISCLOSED/UNEXPLAINED EXPENDITURE IN THE HANDS OF THE FIRM, WHILE IT WOULD BE UNDISCLOSED INCOME IN THE HANDS O F THE ASSESSEE AND ACCORDING HE PRAYED THAT THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LD. A.R. SUPPORTED THE ORDER OF CIT(A). 8. AFTER HAVING CONSIDERED THE RIVAL SUBMISSION AN D PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE BEFO RE US IS WHETHER THE INTEREST CREDITED BY THE FIRM IN ASSESSEES CAP ITAL ACCOUNT HAS BEEN OFFERED FOR TAXATION IN THE APPLICATION/ADMISS ION BEFORE THE ITSC, CALCUTTA OR NOT. THE ASSESSING OFFICER WHILE COMPLETING THE 6 APPLS- VIVEK ARYA 11 ASSESSMENT PROCEEDINGS CONSEQUENT TO THE DIRECTIONS OF THE ITAT, HAS OBSERVED THAT THE ITSC HAS NOT CONSIDERED THE I SSUE OF INTEREST ACCRUED TO THE ASSESSEE FROM THE CAPITAL A CCOUNT. ACCORDING TO HIM THE ASSESSEE DID NOT BRING ANY MAT ERIAL ON RECORD TO SUBSTANTIATE ITS CLAIM. HOWEVER, IN THE APPELLA TE PROCEEDINGS, THE CIT(A) CALLED FOR COPY OF THE APPLICATION MADE BY THE FIRM ETO IN WHICH THE ASSESSEE IS A PARTNER U/S 245 C OF THE ACT BEFORE THE ITSC FOR ADMISSION OF APPLICATION U/S 245D(1) OF TH E ACT. THE ASSESSEE SUBMITTED A COPY OF THE COMPUTATION OF INC OME WITH REGARD TO PARTNERS CAPITAL ACCOUNT ENCLOSED TO THE APPLICATION MADE BEFORE THE ITSC AS ANNEXURE I WHEREIN THE DET AILS SUCH AS ADDITIONAL AMOUNT DECLARED BEFORE ITSC BY THE FIRM ETO OVER AND ABOVE THE INCOME DECLARED IN THE RETURNS OF INCOME FOR ASSESSMENT YEARS 2000-01 TO 2007-08 WERE GIVEN. THIS CHART IS ENCLOSED TO THE ORDER AS ANNEXURE I. THE LD. AUTHORISED REPRE SENTATIVE OF THE ASSESSEE ALSO SUBMITTED A CHART (ANNEXURE 2) FILED BEFORE THE ITSC WHICH GIVES THE DETAILS OF UNDISCLOSED INCOME IN RE SPECT OF PARTNERS OF ETO CONSIDERED BY THE FIRM ETO. THIS C HART IS ENCLOSED TO THIS ORDER AS ANNEXURE -2 TO HIS ORDER. IN ORDER TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE THAT THE FIRM ETO HAD ALREADY CONSIDERED THESE AMOUNTS OF INTERES T AND SHARE OF PROFIT TO PARTNERS BEFORE THE ITSC, VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE WAS DONE AND THE FINDINGS ARE AS UN DER:- 6 APPLS- VIVEK ARYA 12 4.3.2 I HAVE PERUSED THE DETAILS SUBMITTED AND ALS O CALLED FOR THE COPY OF THE APPLICATION MADE BY THE FIRM ETO IN WHICH THE ASSESSEE IS A PARTNER U/S 245C BEF ORE HONBLE ITSC FOR ADMISSION OF APPLICATION U/S 245D( 1) OF 1.T. ACT, 1961. THE ASSESSEES AR SUBMITTED A CO PY OF THE COMPUTATION OF INCOME WITH REGARD TO PARTNERS' CAPITAL A/C ENCLOSED TO THE APPLICATION MADE BEFORE HON'BLE ITSC AS ANNEXURE-I WHEREIN THE DETAILS, SUC H AS ADDITIONAL AMOUNT DECLARED BEFORE HON'BLE ITSC BY T HE FIRM ETO, OVER AND ABOVE THE INCOME DECLARED IN THE RETURNS OF INCOME FOR THE A.YRS, 2000-01 TO 2007-08 , ARE GIVEN. THIS CHART IS ENCLOSED TO THIS ORDER AS ENCLOSURE-L. THE ASSESSEE'S AR ALSO SUBMITTED A CHA RT (ANNEXURE-2) FILED BEFORE HON'BLE ITSC WHICH GIVES THE DETAILS OF UNDISCLOSED INCOME IN RESPECT OF PARTNER S OF ETO CONSIDERED BY THE FIRM ETO THIS CHART IS ENCLOSED TO THIS ORDER AS ENCLOSURE-2. IN ORDER TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE, THAT THE FIRM ETO HAD ALREADY CONSIDERED THESE AMOUNTS OF INTEREST AND SHARE OF PROFIT TO PARTNERS BEFORE HONBLE ITSC, VERIFICATION OF THE DETAILS FI LED BY THE ASSESSEE IS DONE AND THE FINDINGS ARE AS UNDER :- A) IT IS SEEN FROM THE ANNEXURE-I THAT THE SUM OF R S. 79,66,148/- IS REFLECTED AGAINST ASSESSMENT YEAR 20 00- 01 IN COLUMN NO.2 ENCLOSED TO THIS ORDER AS ENCLO:~ I. B) IT IS ALSO SEEN THAT, THE HON'BLE ITSC HAS REPRO DUCED THE ANNEXURE-I IN PARA 2 OF ORDER U/S 245D(4) (DISCLOSURE MADE IN THE APPLICATION U/S 245C(1)) WH ILE PASSING THE ORDER U/S 2450(4). C) IT IS ALSO BROUGHT TO MY NOTICE THAT THE HON'BLE ITSC HAS CONSIDERED THESE UNDISCLOSED AMOUNTS FOR SETTLEMENT, SAME ARE MENTIONED IN THE ORDER OF HON BLE ITSC U/S 245D(4) IN PARA 6 AS UNDER:- 6 APPLS- VIVEK ARYA 13 6. THE APPLICATION BY THE APPLICANT SHOWS THAT THE SAME HAS BEEN FILED BY SHRI S. P. ARYA, S/0 LATE SHRI RAMA NAND ARYA, AS KARTA OF SATYA PRAKASH ARYA (HUF). THE CASE OF THE APPLICANT IS THAT OF T HE PARTNERSHIP FIRM. IN RESPECT OF A.YS. 2000-01 TO 2005-06, ASSESSMENT PROCEEDINGS U/S 153A ARE PENDING W.E.F. 15-02-2006. THE ASSESSMENT FOR A.YS. 2006-07 AND 2007-08 ARE REGULAR ASSESSMENT AND THEY ARE PENDING W.E.F. 16-04- 2007 AND 24-05-2007 RESPECTIVELY. THE ISSUES TO BE SETTLED IN THE SETTLEMENT APPLICATION ARE AS FOLLOWS :- A. TAXING OF INCOME THAT HAS ESCAPED ASSESSMENT FOR THE A. YS. 2000-01 TO 2007-08 WITH REFERENCE TO SEIZED RECORDS (WHEREVER APPLICABLE) AND FACTS AND CIRCUMSTANCES OF THE CASE. B. WAIVER OF INTEREST CHARGEABLE UNDER ANY SECTION OF THE INCOME-TAX ACT 1961, AS MAY BE APPLICABLE. C. GRANTING OF EASY INSTALLMENTS FOR PAYMENT OF ADDITIONAL TAX. D. GRANTING OF IMMUNITY FROM PENALTY AND PROSECUTION UNDER VARIOUS SECTIONS OF THE INCOME- TAX ACE 1961 AND ALL OTHER CENTRAL ACTS, AS MAY BE APPLICABLE. E. ALL OTHER RELATED ISSUES THAT MAY ARISE IN COURS E OF SETTLEMENT PROCEEDINGS. ' D) IT IS SEEN FROM POINT NO. (A) ABOVE THAT THE ENT RIES MADE IN THE SEIZED RECORDS (WHEREVER APPLICABLE) HA VE BEEN CONSIDERED FOR SETTLEMENT; THE UNACCOUNTED INTEREST ON CAPITAL OF THE ASSESSEE IN THE FIRM ETC HAS ALSO EMANATED FROM THE SEIZED RECORDS. 6 APPLS- VIVEK ARYA 14 E) THE AR ALSO BROUGHT TO MY NOTICE THE BREAK-UP OF INTEREST DETAILS AND THE WORKING THEREOF; HOW THE FIGURE OF RS. 79,66,148/- IS ARRIVED AT AS PER ANNEXURE- 2 TO APPLICATION MADE U/S 245C TO HON'BLE ITSC, THE SAME IS ALSO PERUSED AND ENCLOSED TO THIS ORDER AS ENCLO SURE- 2 . F) IT IS SEEN FROM THIS ANNEXURE -2 (ENCLOSURE -2 T O THIS ORDER) AT SL NO. 2 OF FIRST HALF OF THE TABULA R CHART THE INTEREST CREDIT OF RS. 17,66,096/- AND RS. 2,27,391/- IS REFLECTED AGAINST THE ASSESSEES NAME . (I) AT S1. NO.2 OF SECOND HALF OF THE CHART, DEBIT AMOUNTS OF RS. 6,53,108/~ AND RS. 35,960/- ARE REFLECTED AGAINST THE ASSESSEE'S NAME. II) IN THE NOTE 1 BELOW THE CHART (ANNEXURE-2) IS G IVEN THE WORKING OF AGGREGATE AMOUNT OF ALL THE PARTNERS AND INTEREST CREDIT AS REDUCED BY THE INTEREST ON DRAWI NGS. III) THE NOTE 6 BELOW THE TABULAR CHART (ANNEXURE- 2) REFLECTS THE CONSOLIDATED FIGURE OF RS. 79,66,146/- WHICH WAS DISCLOSED BEFORE HON'BLE ITSC. THE ABOVE AMOUNT OF RS. 79,66,146/- HAS BEEN ADMITTED BY THE FIRM ETO I N ITS APPLICATION BEFORE HONBLE ITSC AND THE SAME HA S BEEN CONSIDERED BY HONBLE ITSC FOR SETTLEMENT IN T HE ORDER U/S 245D' 8.1. THE ASSESSEE HAS ALSO FURNISHED FURTHER SUBMIS SIONS DURING THE APPELLATE PROCEEDINGS REGARDING AVAILABILITY OF EVIDENCE AGAINST THE ASSESSEE TO ESTABLISH THAT THE INTEREST WAS REC EIVED OVER AND ABOVE THE INTEREST DECLARED IN THE RETURN OF INCOME . THE SUBMISSIONS ARE AS UNDER:- IT IS FURTHER SUBMITTED THAT THE SAID PARTNERSHIP FIRM `HAD ALREADY FILED SETTLEMENT APPLICATION BEFORE TH E COMMISSION KOLKATTA. WHILE FILING THE SAID APPLICAT ION 6 APPLS- VIVEK ARYA 15 THEY HAVE CONSIDERED THE ENTIRE SEIZED MATERIAL INCLUDING THE THESE CAPITAL ACCOUNTS OF THE PARTNER S. WE HAVE ALREADY EXPLAINED THAT THE FIRM HAD OFFERED IT S INCOME IN THE APPLICATION ON THE GROSS UNDISCLOSED PROFIT & LOSS ACCOUNT WITHOUT DEDUCTING THE NET ON THE PARTNERS CAPITAL ACCOUNT AS PER SEIZED RECORD. THE NET INTEREST HAS BEEN CREDITED AS WELL AS DEBITED TO TH E PARTNERS RE-CASTED CAPITAL ACCOUNT. FURTHER THE APPELLANT HAS NEITHER RECEIVED ANY SUCH ADDITIONAL AMOUNT FROM THE FIRM BY WAY OF INTEREST AS NOTED IN THE SAID CAPITAL ACCOUNTS. SINCE NO INCOME HAS BEEN EAR NED THERE IS NO QUESTION OF MAKING ANY ADDITION IN THE HANDS OR APPELLANT ON THE BASIS OF SAID SEIZED APER S, MORE PARTICULARLY NOTHING WAS FOUND FROM APPELLANT S PREMISES AGAINST THE SAME. WE ARE ENCLOSING THE UNDISCLOSED RE-CASTED CAPITAL ACCOUNT OF THE PARTNE RS WHICH WAS PART OF SETTLEMENT APPLICATION. ON PERUS AL OF THE SAME YOUR HONOUR WOULD APPRECIATE THAT THE INTEREST WAS CREDITED AS WELL AS DEBITED TO THE PAR TNERS CAPITAL ACCOUNT WHICH ITSELF PROVES THE FACT THAT T HE FIRM HAD PAID THE TAX ON THE GROSS UNDISCLOSED INCOME AN D PARTNER DID NOT RECEIVE ANY CREDIT IN RESPECT OF TH E ADDITIONAL INTEREST. WITHOUT PREJUDICE IT IS FURTHE R SUBMITTED THAT THE SAID SEIZED DOCUMENT WAS NEITHER FOUND NOR SEIZED FROM THE PREMISES OF THE APPELLANT . IT WAS FOUND FROM THE PREMISES OF THE PARTNERSHIP FIRM . MOREOVER THERE WAS NO CORROBORATIVE EVIDENCE FOUND DURING THE COURSE OF SEARCH AT' THE APPELLANT'S PRE MISES TO PROVE OR ESTABLISH THAT THE APPELLANT HAD IN FAC T EARNED ADDITIONAL INTEREST FROM THE FIRM OVER AND A BOVE WHAT IS RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THE APPELLANT WAS NOT EVEN ASKED DURING THE COURSE OF SEARCH ABOUT THE SEIZED MATERIAL FOUND IN THE PREMI SES OF THE FIRM. THE FIRM MUST HAVE PREPARED THE SAID R E- CASTED/RESTRUCTURED CAPITAL ACCOUNT OF THE PARTNERS FOR ANY REASONS NOT KNOWN TO THE APPELLANT. UNDER SUCH CIRCUMSTANCES THE ADDITION BASED ON THE SAID SEIZED 6 APPLS- VIVEK ARYA 16 DOCUMENTS IN THE HANDS OF APPELLANT IS NOT AT ALL JUSTIFIED. 8.2 IN SUPPORT OF THE SUBMISSION, THE ASSESSEES AU THORISED REPRESENTATIVE ALSO SUBMITTED THE ORDER OF ITSC U/S 245D(4) OF THE ACT IN THE CASE OF SHRI S.P. ARYA, ONE OF THE PARTN ERS OF THE FIRM ETO AND HIS NAME ALSO APPEARED IN THE SEIZED MATERI AL REFERRED TO ABOVE WHEREIN THE INTEREST ON CAPITAL WAS SHOWN AGA INST HIS NAME. IN THIS CASE, THE INTEREST @ 18%,6% AND 3% WAS NOTE D IN THE ANNEXURE 2 IN COLUMN 2 AT SL NO. 10. IN THIS BACKG ROUND, AS PER THE ABOVE NOTINGS IN ANNEXURE 2 AGAINST SHRI S.P. A RYAS NAME, THE INTEREST CREDITED AND INTEREST DEBITED WERE SHO WN,. HOWEVER, THESE IMPUGNED INTEREST AMOUNTS HAVE NOT BEEN INCLU DED IN THE APPLICATION MADE BY SHRI S.P. ARYA OR IN THE FINAL ORDER OF ITSCS ORDER U/S 245D(4) DATED 9.3.2011. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARA 7 IS REPRODUCED BELOW:- IN VIEW OF THE FACTS AS STATED ABOVE, THERE DOES N OT APPEAR ANY FURTHER ISSUE THAN WHAT HAS BEEN DISCLOSED BY T HE APPELLANT. THE INCOME OF THE APPELLANT IS, THEREFOR E, SETTLED AT RS. 6,45,0000 AS DISCLOSED. THE TOTAL INCOME OF TH E APPLICANT IS COMPUTED AS PER ANNEXURE A AND SETTLED: COMPUTATION OF TOTAL INCOME AS SOF ASST.YE AR RETURNE D INCOME INCOME OFFERED IN THE ORIGINAL S.O.F. ENHANCED/C ORRECT DEDUCTION U/S 80G, 16(1) & 80D ADDITI ON MADE BY THE BENCH REVISED TOTAL INCOME AGRIC ULTU RAL INCOME (FOR RATE PURPOSE) 2000 - 01 276,780 40,000 - - 316,780 55,718 2001 - 02 330,430 40,000 - - 370,430 35,000 2002 - 03 100,000 (920) - 393,160 - 6 APPLS- VIVEK ARYA 17 294,080 2003 - 04 103,690 150,000 - - 253,690 - 2004 - 05 55,080 150,000 (80) - 205 .000 - 2005 - 06 32.020 85,000 - - 117,020 - 2006 - 07 907,120 50,000 (18,885) - 938,235 - 2007 - 08 163,650 30,000 - - 196,650 - 8.2. IT WAS ALSO EXPLAINED BEFORE THE CIT(A) BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT SHRI S.P. ARYA ADMITTED AMOUNTS OVER AND ABOVE THE INCOME DECLARED IN THE R ETURN OF INCOME WAS NOT INCLUSIVE OF THE IMPUGNED INTEREST A MOUNTS APPEARING IN SEIZED RECORDS AS ENUMERATED IN ANNEXU RE -2, AS THE AMOUNTS IN ANNEXURE -2 WAS MUCH HIGHER THAN THE AMO UNTS OF ADMISSION IN COLUMN -3 ABOVE. IT WAS ADMITTED BY S HRI S.P. ARYA BEFORE THE ITSC DO NOT INCLUDE THE NOTINGS APPEAR I N THE ANNEXURE 2, WAS NOT RECEIVED BY THE PARTNERS, THEREFORE, T HEY WERE NOT CONSIDERED IN THE APPLICATIONS MADE BEFORE ITSC BY THE PARTNERS AND THE SAME HAS ALSO BEEN ACCEPTED BY THE ITSC IN THE FINAL ORDER U/S 245D(4) OF THE ACT. THE LD. AUTHORISED REPRESEN TATIVE OF THE ASSESSEE ALSO SUBMITTED A COPY OF GIVING EFFECT ORD ER TO ITSC ORDER U/S 245D(4) BY THE ASSESSING OFFICER. AFTER CONSIDE RING THE ELABORATE SUBMISSIONS MADE BY THE ASSESSEE AND EVID ENCE PRODUCED IN SUPPORT OF ITS CLAIM THAT THE IMPUGNED INTEREST APPEARING IN THE SEIZED RECORDS AND ENUMERATED IN A NNEXURE 2, THE FOLLOWING POINTS EMERGE FOR CONSIDERATION:- 6 APPLS- VIVEK ARYA 18 1. THE FIRM ETO MADE CERTAIN NOTINGS WHEREIN THE PARTNERS NAMES ARE APPEARING-THE SAME WERE SEIZED DURING SEARCH AND SEIZURE PROCEEDINGS. 2. THE ETO COMPUTED INCOME EMANATING/APPEARING IN THESE SEIZED PAPERS AND ADMITTED BEFORE HONBLE ITSC FOR CONSIDERATION. 3. THE DETAILS OF COMPUTATION AND SURPLUS AMOUNT ADMITTED ARE ENUMERATED IN ANNEXURE-2 (ENCLOSED TO THIS ORDER AS ENCLOSURE-2 TO THIS ORDER). 4. DURING THE COURSE OF SEARCH PROCEEDINGS NO INCRIMINATING MATERIAL WAS FOUND IN THE PREMISES OF THE ASSESSEE WITH RESPECT TO UNACCOUNTED INTEREST ON UNACCOUNTED CAPITAL. 5. THE ASSESSEE WAS NOT QUESTIONED ABOUT THE EVIDENCES PERTAINING TO INTEREST APPEARING IN THE S EIZED RECORDS. 6. THE ASSESSING OFFICER DID NOT BRING ANY CORROBORATIVE EVIDENCE WITH RESPECT TO RECEIPT. OF THE IMPUGNED INTEREST BY THE ASSESSEE. ON THE CONTRARY THE ASSESSING OFFICER MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE 'FAILED TO BRING OUT ANY MATERIAL AND DOCUMENTARY EVIDENC:ES ON RECORD TO SUBSTANTIATE HI S CLAIMS, ' THE ASSESSING OFFICER SHOULD HAVE ATLEAST CALLED FOR THE DETAILS TO ASCERTAIN AS TO THE TREAT MENT GIVEN BY THE FIRM ETO AND THE MANNER IN WHICH THE HON'BLE ITSC SETTLED THE ISSUE, AS THE SAME WAS AVAILABLE ON RECORD AT THE TIME OF COMPLETION OF SE T-ASIDE PROCEEDINGS, 7. ONE OF THE PARTNERS, SHRI S. P. ARYA, WHOSE NAME IS APPEARING IN THE RELEVANT SEIZED RECORDS ALONGWI TH THE ASSESSEE HAS ALSO NOT INCLUDED THIS IMPUGNED INTERE ST 6 APPLS- VIVEK ARYA 19 AS EITHER ACCRUED OR RECEIVED BY HIM WHILE FILING T HE APPLICATION BEFORE HON'BLE ITSC. 8. IT IS ALSO SEEN FROM THE ORDER OF HON'BLE ITSC U /S 245D(4) THAT THE ADMISSION MADE BY THE ASSESSEE HAS BEEN ACCEPTED BY THE HON'BLE ITSC WITHOUT ANY ENHANCEMENT. , 8.4 IN THE LIGHT OF ABOVE FACTS, THE CIT(A) HELD T HAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAXING THE INTEREST IN THE HANDS OF THE ASSESSEE PRESUMING THAT THE ASSESSEE RECEIVED INTER EST. THE CIT(A) FOUND THAT WHATEVER NOTINGS MADE IN THE SEIZED RECO RDS, COMPUTED BY THE FIRM, ETO AND ADMITTED BY IT BEFORE THE ITSC AND ACCEPTED BY ITSC IN ITS ORDER U/S 245D(4) OF THE ACT. APART FROM THIS, THE DECISION OF ITSC IN THE CASE OF ONE OF THE PARTNERS I.E. SHRI S.P. ARYA WITH IDENTICAL FACTS HAS ALSO TO BE FOLLOWED. IN THESE CIRCUMSTANCES, THE ADDITION MADE BY THE ASSESSING O FFICER WAS NOT FOUND JUSTIFIED. IN THE LIGHT OF THE ABOVE, THE AS SESSEES SUBMISSION THAT UNACCOUNTED INTEREST APPEARING IN T HE SEIZED RECORDS HAS ALREADY BEEN CONSIDERED BY THE FIRM IS FOUND TO BE CORRECT. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAXING THESE AMOUNTS IN THE HANDS OF THE PARTNER, THE ASSE SSEE. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFF ICER OF RS. 19,95,487/- WAS RIGHTLY DELETED BY THE CIT(A). THIS FACTUAL LEGAL FINDING NEEDS NO INTERFERENCE FROM OUR SIDE. WE UP HOLD THE SAME. 9. SIMILAR ISSUES AROSE IN OTHER APPEALS WHEREIN TH E FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, THE ORDER S OF CIT(A) ARE 6 APPLS- VIVEK ARYA 20 UPHELD IN ALL THESE CASES, WHEREBY THEY HAVE DELETE D THE IMPUGNED ADDITIONS MADE BY THE CONCERNED ASSESSING OFFICER. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. & )*+, -$ . .. SEPTEMBER, 2014 *&/% SD/- SD/- (RAMIT KOCHAR) (SHAILEND RA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER 0% MUMBAI; -$ DATED 30/09/2015 [ $ R.K. , EX SR. PS 6 APPLS- VIVEK ARYA 21 ! ' #$%& ' &$ COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. 1' 2 3 / THE CIT(A) 6, MUMBAI 4. 1' / CIT- 2, MUMBAI 5. 45 /''$67 (67 , 0% / DR, ITAT, MUMBAI E BENCH 6. / 89: % GUARD FILE. ! ( / BY ORDER, # 4''' //TRUE COPY// )/(* + (DY./ASSTT. REGISTRAR) , 0% / ITAT, MUMBAI