M/S. HARISH P. MASHRUWALA HUF, MUMBAI V. THE ACIT 15(1), MUMBAI

ITA 4996/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7163 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 24-02-2010
• Assessment Year: 1996-1997
• Appeal Filed On: 16-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MOHANTY
• Assessee Lawyers: V G GINDE
• Keywords: Gift; Retrospective amendment; Surrender of tenancy right
• Section: 271(1)(c); 147; 131; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F: MUMBAI BEFORE SHRI D MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.4996/MUM/2007 ASSESSMENT YEARS 1996-97 HARISH P MASHRUWALA, HUF 78, VITHALWADI, MUMBAI -400 002 PAN AADPM 0812 H VS ASSTT COMMISSIONER OF INCOME-TAX -15(1), MATRU MANDIR, 1 ST FLOOR, GRANT ROAD, MUMBAI -400 007 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI V G GINDE FOR RESPONDENT : SHRI S K MOHANTY ORDER PER RAJENDRA SINGH, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1.5.2007 OF THE CIT (A) FOR THE ASSESSMENT YE AR 1996-97. THE DISPUTE RAISED BY THE ASSESSEE RELATES TO PENALTY I MPOSED U/S 271(1)(C) FOR CONCEALMENT OF INCOME. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT, IT WAS FOUND THAT THE ASSESSEE ALONG WITH TWO OTHER HUFS WHOSE KARTAS WERE BROTHERS HAD SHOWN GIFTS FROM NRIS THR OUGH SOURCES NON- RESIDENT INTERNAL ACCOUNT TOTALING TO RS 69 LAKHS. THE CHARTERED ACCOUNTANT OF THE ASSESSEE, AUTHORIZED BY THE FAMI LY MEMBERS DEPOSED BEFORE THE INVESTIGATION WING IN STATEMENT MADE U/S 131 THAT SUCH GIFTS WERE BOGUS AND OFFERED AMOUNT OF RS 69 L AKHS INVOLVED IN THESE GIFTS AS ADDITIONAL INCOME IN THE HANDS OF DI FFERENT HUF ASSESSES. HARISH P MASHRUWALA, HUF ITA 4996/M/2007 2 THE STATEMENT HAD BEEN RECORDED ON 26.2.1996. IN C ASE OF THE ASSESSEE HUF, GIFT WAS RECEIVED WAS TO THE TUNE OF RS 17 LAKHS MUCH HAD BEEN DECLARED AS UNDISCLOSED ADDITIONAL INCOME. HOWEVER, IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 FI LED ON 24.6.1996, THE ASSESSEE DECLARED TOTAL INCOME OF RS 17 LAKHS U NDER THE HEAD LONG TERM CAPITAL GAIN ARISING FROM TRANSFER OF TENANCY RIGHTS AND THE ASSESSEE ACCORDINGLY PAID TAX @ 20%. THE ASSESSEE DID NOT DECLARE ADDITIONAL INCOME ON ACCOUNT OF BOGUS GIFTS, AS STA TED BEFORE THE INVESTIGATION WING. THE ASSESSING OFFICER, THEREFO RE, REOPENED THE ASSESSMENT U/S 147 BY ISSUING A NOTICE U/S 148. TH E ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT HAD RECEIVED A SUM OF RS 17 LAKHS IN CASH FROM TRANSFER OF TENANCY RIGHTS AN D THE SAME AMOUNT HAD BEEN CHANNELISED IN THE FORM OF NRI GIFT. THE ASSESSEE HAD ACCORDINGLY DECLARED THE CAPITAL GAIN AND PAID TAX @ 20%. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CLAI M. IT WAS OBSERVED BY HIM THAT AGREEMENT FOR SURRENDER OF TENANCY RIGH T HAD BEEN ENTERED INTO ON 7.10.1995 WHEREAS, THE DRAFTS THROU GH WHICH THE GIFTS HAD BEEN RECEIVED WERE MADE DURING APRIL TO JULY 20 05. THE AGREEMENT DID NOT CONFIRM EITHER PAYMENT OR RECEIPT OF CONSIDERATION. THE ASSESSEE NEITHER FILED ANY CONFIRMATION NOR PRO DUCED THE PARTY, FROM WHOM THE AMOUNT IS SAID TO HAVE BEEN RECEIVED FOR SURRENDER OF TENANCY RIGHT. ASSESSING OFFICER, THEREFORE, TREAT ED THE SAID SUM OF RS 17 LAKHS AS UNDISCLOSED INCOME OF THE ASSESSEE AND TAXED IT @ 30%. THE FINDING OF THE ASSESSING OFFICER WAS CONFIRMED BY THE CIT (A) AND ALSO BY TRIBUNAL BY ORDER DATED 31.1.2006 IN ITA NO .4338/MUM/2002. 2.1 THE ASSESSING OFFICER HAD ALSO INITIATED PENALT Y PROCEEDINGS FOR CONCEALMENT OF INCOME U/S 271(1)(C). THE ASSESSEE SUBMITTED THAT IT HAD NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE ALS O POINTED OUT THAT GROUND FOR INITIATING PENALTY PROCEEDINGS WERE NOT PRECISE AND THE NOTICE WAS VAGUE AND, THEREFORE, NO PENALTY COULD B E IMPOSED. IT WAS HARISH P MASHRUWALA, HUF ITA 4996/M/2007 3 ALSO SUBMITTED THAT THE PENALTY COULD NOT BE IMPOSE D ON THE GROUND OF FURNISHING OF INACCURATE PARTICULARS WHEN THE PROCE EDINGS HAD BEEN INITIATED ON GROUND OF CONCEALMENT OF PARTICULARS O F INCOME. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CONT ENTION RAISED BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT THE CLAIM OF THE ASSESSEE THAT IT HAD RECEIVED RS 17 LAKHS ON SURRENDER OF TENANCY RIGHT WAS NOT SUPPORTED BY ANY EVIDENCE. THE ASSESSEE NEITHER FI LED ANY CONFIRMATION NOR PRODUCED THE PERSON FROM WHOM THE CASH IS SAID TO HAVE BEEN RECEIVED. THE ASSESSING OFFICER ALSO OBS ERVED THAT THE THERE WAS CONCEALMENT OF PARTICULARS OF INCOME FOR WHICH THE PENALTY WAS LEVIABLE. AS REGARDS THE MERIT OF THE CASE, HE OBSERVED THAT THE INCOME HAD BEEN RIGHTLY ASSESSED AS INCOME FROM OTH ER SOURCES WHICH HAD ALSO BEEN CONFIRMED BY THE TRIBUNAL. HE, THERE FORE, IMPOSED PENALTY U/S 271(1)(C) @ 100% OF TAX SOUGHT TO BE EV ADED. 3. THE ASSESSEE DISPUTED THE ORDER OF THE ASSESSIN G OFFICER AND ARGUED BEFORE CIT (A) THAT PENALTY WAS LEGALLY INVALID AS ASSESSING OFFICER HAD NOT RECORDED ANY SATISFACTION OF CONCEA LMENT IN THE ASSESSMENT ORDER. IT WAS ALSO SUBMITTED THAT THE R ETURNED INCOME AND THE ASSESSED INCOME WERE THE SAME AND, THEREFOR E, EXPLANATION 1 TO SECTION 271(1)(C) WAS NOT ATTRACTED IN THE CASE OF THE ASSESSEE AS THERE HAD BEEN NO ADDITION MADE IN THE ASSESSMENT. CIT (A) REJECTED THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSING OFF ICER HAD NOT RECORDED ANY SATISFACTION OF CONCEALMENT. AS REGAR DS THE APPLICABILITY OF EXPLANATION 1 TO SECTION 271(1)(C), CIT (A) OBSE RVED THAT THE EXPLANATIONS ONLY HARMONIZED THE MAIN PROVISION FOR AVOIDING AMBIGUITIES AND THE EXPLANATION CANNOT BE CONSTRUED TO WIDEN THE SUBSTANTIVE PROVISIONS. THE EXPLANATION ONLY CLARI FIED THE EXISTING LAW TO CLEAR ANY AMBIGUITY SURROUNDING THE MEANING OF T HE PROVISION AND THESE CANNOT BE TREATED AS SUBSTANTIVE PROVISION. CIT (A) REFERRED TO SEVERAL JUDGMENTS IN THIS REGARD. IT WAS HELD BY H IM THAT THE ASSESSEE IN THIS CASE HAD CONCEALED PARTICULARS OF INCOME FO R WHICH, THE PENALTY HARISH P MASHRUWALA, HUF ITA 4996/M/2007 4 WAS LEVIABLE UNDER THE MAIN PROVISION OF SECTION 27 1(1)(C) AND NOT UNDER THE EXPLANATIONS. THE ASSESSEE ALSO ARGUED T HAT THE EXPLANATION 4, WHICH EXPLAINED THE MEANING OF THE P HRASE AMOUNT OF TAX SOUGHT TO BE EVADED WAS NOT WORKABLE AS THERE WAS NO DIFFERENCE BETWEEN RETURNED INCOME AND THE ASSESSED INCOME AND , THEREFORE, IT WAS POINTED OUT THAT MACHINERY PROVISION FOR WORKIN G OUT OF CONCEALMENT FAILED AND ON THIS GROUND ALSO NO PENAL TY COULD BE IMPOSED IN VIEW OF THE JUDGMENT OF THE HONBLE SUPR EME COURT IN CASE OF B C SRINIVAS SHETTY (128 ITR 294). CIT (A) REJE CTED THIS ARGUMENT ALSO ON THE GROUND THAT THE CASE OF THE ASSESSEE WA S COVERED BY THE MAIN PROVISION AND NOT THE EXPLANATION 4. AS REGAR DS THE ARGUMENT RELATING TO THE MERIT OF THE CASE, CIT (A) REFERRED TO THE DECISION OF THE TRIBUNAL IN THE QUANTUM CASE IN WHICH THE TRIBUNAL IN PARA 21 HELD THAT THE CLAIM OF THE ASSESSEE THAT THE CASH RECEIVED ON ACCOUNT OF SURRENDER OF TENANCY OF RIGHT WAS BROUGHT BACK AS N RI GIFT WAS NOT ACCEPTABLE AS IT WAS NOT PROVED THAT THE ASSESSEE H AD RECEIVED ANY SUCH MONEY. THE TRIBUNAL ALSO OBSERVED THAT THE SU RRENDER AGREEMENT WAS DATED 17.10.1995 WHEREAS DRAFTS NRI G IFTS WERE PURCHASED BETWEEN JUNE 1995 TO AUGUST 1995. THE TR IBUNAL ALSO OBSERVED THAT IT WAS OF THE VIEW THAT UNDISCLOSED I NCOME IN PURCHASE OF NRI GIFTS OUGHT TO HAVE BEEN ASSESSED IN ADDITIO N TO LONG TERM CAPITAL GAIN. CIT (A), ACCORDINGLY, HELD THAT PENA LTY WAS LEVIABLE AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER, AGGRI EVED BY WHICH, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE DID NOT PRESS THE ARGUMENT RELATING TO NON -RECORDING OF SATISFACTION IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE IN THE PROVISIONS. ON OTHER HAND, THE SUBMISSIONS MADE BE FORE THE CIT (A) WERE REITERATED. THE LEARNED AUTHORIZED REPRESENTA TIVE, PARTICULARLY EMPHASIZED THE ARGUMENT THAT THE ASSESSING OFFICER HAD ISSUED SHOW CAUSE FOR CONCEALING PARTICULARS OF INCOME BUT PENA LTY HAD BEEN HARISH P MASHRUWALA, HUF ITA 4996/M/2007 5 IMPOSED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS, THE PENALTY IMPOSED WAS ON A GROUND DIFFERENT FROM THE GROUND ON WHICH THE PENALTY HAD BEEN INITIATED AND, THEREFORE, THE PENALTY WAS VITIATED AND SHOULD BE DELETED. HE PLACED RELIANCE ON THE F OLLOWING DECISION IN SUPPORT OF HIS CASE : I) 193 ITR 379 (GUJ) IN CASE OF K M BHATIA (QUARRY) II) 122 ITR 306 (GUJ) IN CASE OF MANU ENGINEERING WORK III) 85 ITR 77 (GUJ) IN CASE OF LAKHDHIR LALJI 4.1 ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE RE SPECTIVE ORDERS. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. DISPUTE IS REGARDING LEVIAB ILITY OF PENALTY FOR CONCEALMENT OF INCOME U/S 271(1)(C). THE ASSESSEE HAD SHOWN GIFTS OF RS 17 LAKHS FROM AN NRI AND INVESTIGATION MADE B Y THE INVESTIGATION WING OF DEPARTMENT SHOWED THE GIFTS W ERE BOGUS AND THIS FACT WAS ADMITTED BY THE ASSESSEE WHO OFFERED THE SAME AS UNDISCLOSED INCOME IN THE STATEMENT GIVEN ON 26.2.1 996. HOWEVER, IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 1996 -97 ON 24.6.1996, THE ASSESSEE DECLARED THE INCOME OF RS 17 LAKHS AS LONG TERM CAPITAL GAIN ARISING FROM TRANSFER OF TENANCY RIGHT AND PAI D TAX @ 20% APPLICABLE TO LONG TERM CAPITAL GAIN. AS THE ASSES SEE HAD NOT DECLARED THE INCOME OF RS 17 LAKHS AS INCOME FROM UNDISCLOSE D SOURCES FOR WHICH TAX PAYABLE WAS @ 30% AS ADMITTED BEFORE THE INVESTIGATION WING, THE ASSESSMENT WAS REOPENED AND THE INCOME WA S ASSESSED AS INCOME FROM OTHER SOURCES AND TAX WAS LEVIED @ 30%. PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) AND PENALT Y WAS IMPOSED @ 100% OF TAX SOUGHT TO BE EVADED. CIT (A) CONFIRMED THE PENALTY. HARISH P MASHRUWALA, HUF ITA 4996/M/2007 6 6. THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY ON THREE GROUNDS. FIRSTLY, THE ASSESSEE HAS ARGUED THAT THE PENALTY PROCEEDINGS HAVE BEEN INITIATED FOR CONCEALING THE PARTICULARS OF INCOME BUT THE PENALTY HAS BEEN IMPOSED FOR FURNISH ING INACCURATE PARTICULARS OF INCOME AND, THEREFORE, PENALTY IS LE GALLY INVALID. RELIANCE HAS PLACED ON SEVERAL JUDGMENTS OF HONBLE HIGH COURT OF GUJARAT, AS MENTIONED IN PARA 4 EARLIER. WE ARE UN ABLE TO ACCEPT THE ARGUMENT ADVANCED BECAUSE THE HONBLE HIGH COURT OF GUJARAT IN THE JUDGMENTS CITED HELD THAT PENALTY IMPOSED ON THE GR OUND DIFFERENT FROM THE GROUND ON WHICH IT WAS INITIATED WAS NOT P ROPER BECAUSE IN SUCH A CASE IT COULD NOT BE SAID THAT THE ASSESSEE HAD BEEN GIVEN REASONABLE OPPORTUNITY OF HEARING IN RELATION TO TH E GROUND ON WHICH PENALTY HAD BEEN IMPOSED. THE POSITION IN THE PRES ENT CASE IS DIFFERENT. IN THIS CASE THE ASSESSEE HAD BEEN GIVE N OPPORTUNITY. IN FACT, THE ASSESSEE HAD ITSELF RAISED THIS GROUND BE FORE THE ASSESSING OFFICER DURING THE PROCEEDINGS U/S 271(1)(C) AND, T HEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD NO OPPORTUNITY IN THE MATTER. SECONDLY, IT HAS BEEN ARGUED THAT EXPLANATION 1 TO SECTION 27 1(1)(C) AND IS NOT APPLICABLE AS THERE IS NO ADDITION TO THE TOTAL INC OME AND THIRDLY IT HAS BEEN SUBMITTED THAT THE EXPLANATION 4 RELATING TO C OMPUTATION OF TAX SOUGHT TO BE EVADED IS ALSO NOT APPLICABLE AS THE R ETURNED INCOME AND ASSESSED INCOME REMAINED THE SAME. ON CAREFUL CONS IDERATION WE DO NOT FIND ANY MERIT IN THESE ARGUMENTS. WE AGREE WI TH THE VIEW TAKEN BY THE CIT (A) THAT THE VARIOUS EXPLANATIONS ONLY E XPLAIN THE AMBIGUITY IN THE PROVISIONS RELATING TO IMPOSITION OF PENALTY AND MERELY BECAUSE THE CASE OF THE ASSESSEE IS NOT COVE RED BY ANY PARTICULAR EXPLANATION, DOES NOT MEAN THAT PENALTY CANNOT BE IMPOSED WHEN THERE IS NO DIFFICULTY IN DETERMINING THE TAX SOUGHT TO BE EVADED. UNDER THE PROVISIONS OF SECTION 271(1)(C) PENALTY I S PRESCRIBED FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME AND QUANTUM OF PENALTY IS BAS ED ON TAX SOUGHT TO BE EVADED. IN THIS CASE, TAX SOUGHT TO BE EVADE D IS VERY CLEAR AS HARISH P MASHRUWALA, HUF ITA 4996/M/2007 7 THE TAX RATE APPLICABLE IS 30% WHEREAS THE ASSESSEE HAS PAID 20%. THE TAX SOUGHT TO BE EVADED WAS BECAUSE OF THE LOWE R RATE OF TAX PAID AND NOT BECAUSE OF ANY ADDITION TO THE INCOME AND, THEREFORE, PROVISIONS OF EXPLANATION 1 ARE NOT APPLICABLE. TH E PENALTY IS IMPOSABLE UNDER THE MAIN PROVISION AND THERE IS NO NEED TO REFER TO ANY EXPLANATIONS. AS REGARDS THE MERIT OF THE CASE , THE CLAIM OF THE ASSESSEE THAT AMOUNT PAID FOR RECEIVING THE GIFT WA S FROM THE CASH RECEIVED ON SURRENDER OF TENANCY RIGHT IS NOT SUPPO RTED BY ANY EVIDENCE. THE GIFTS HAD ALSO BEEN RECEIVED MUCH BE FORE THE SURRENDER OF TENANCY. THE AMOUNT HAS THEREFORE BEEN RIGHTLY ASSESSED AS INCOME FROM OTHER SOURCES ATTRACTING TAX RATE OF 30 % , WHICH HAS ALSO BEEN AFFIRMED BY THE TRIBUNAL IN THE QUANTUM APPEAL . THE ASSESSEE HAD SOUGHT TO EVADE TAX BY PAYING TAX AT LOWER RATE . THE PENALTY IN OUR VIEW IS IMPOSABLE AS HELD EARLIER UNDER THE MAI N PROVISIONS OF SECTION 271(1)(C). 7. IN VIEW OF THE FOREGOING DISCUSSION, WE SEE NO INFIRMITY IN THE ORDER OF CIT (A) IN CONFIRMING THE PENALTY AND THE SAME IS, THEREFORE, UPHELD. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 30TH DAY OF MARCH 20 10. SD/- SD/- (P MADHAVI DEVI) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE: 30TH MARCH, 2010 . COPY TO 1. THE APPELLANT. 2. THE RESPONDENT HARISH P MASHRUWALA, HUF ITA 4996/M/2007 8 4. CIT(A)-XXIV, MUMBAI. 5. CIT MC-VIII, MUMBAI. 6. D R F BENCH, MUMBAI. 7. GUARD FILE. BY ORDER / / TRUE COPY / / ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI *CHAVAN/- HARISH P MASHRUWALA, HUF ITA 4996/M/2007 9 SNO DATE INITIALS 1 DRAFT DICTATED ON 15-03-2010 25.03.2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 17-03-2010 23-03-2010 30-03-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER