SYNERGY ART FOUNDATION LTD, CHENNAI V. DCIT CEN CIR 44, MUMBAI

ITA 5025/MUM/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55352 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 24-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: J PRABHAKAR
• Keywords: Search and seizure; Additional evidence; Set aside
• Section: 142(1); 234B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI V.D. RAO, JUDICIAL MEMBER ITA NO.5025 TO 5029/MUM/2011 ASSESSMENT YEAR : 2002-03 TO 2006-07 M/S. SYNERGY ART FOUNDATION LIMITED. C/O. M/S. JAGDISH & CO. CHARTERED ACCOUNTANTS, RESIDENCY APARTMENTS, 245, T.T.K. ROAD, ALWARPET, CHENNAI-600 018 PAN NO: AABCS 7467F VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-44, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J. PRABHAKAR RESPONDENT BY : SHRI B. JAYA KUMAR DATE OF HEARING : 26.09.2011 DATE OF PRONOUNCEMENT : 30.09.2011 ORDER PER BENCH : THE ABOVE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE SEPARATE ORDERS DATED 17.02.2011 PASSED BY THE LD. CIT(A)-38, MUMBAI RELATING TO ASSESSMENT YEARS 2002-03 TO 2006-07 RE SPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN IN ALL THESE APPE ALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 2 ITA NO.5025/MUM/2011 ASSESSMENT YEAR 2002-03 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS IN THE BUSINESS OF SELLING PAINTINGS BY WAY OF ITS OWN TRADING AND AS CONSIGNEE AGENT OF THE ARTISTS FROM WHOM IT RECEIVES COMMISSION ON THE SALE VALUE. THE SALES ARE MADE THROUGH ITS OWN GALLERIES, EXHIBITIO N PARTICIPATION IN OTHER GALLERIES, AUCTION HOUSES LIKE CHIRSTIESS, S OTHEBYS ETC. AND ONLINE SALES THROUGH COMPANIES LIKE PLANETSAFFRON.COM INDI A P. LTD. THE SHAREHOLDING OF THE COMPANY IS DIVIDED BETWEEN THE TWO PROMOTER DIRECTORS NAMELY MS. GEETHA MEHRA AND SHRI V. SANJA Y KUMAR. MS. GEETHA MEHRA IS AN ART HISTORIAN WHO RUNS THE DAY-T O-DAY BUSINESS OF THE COMPANY, WHILE SHRI SANJAY KUMAR IS THE MAIN FI NANCIER OF THE BUSINESS. THE ASSESSEE IS AN ESTABLISHED ART INVEST OR AND TRADER, HAS DEALT WITH THE WORKS OF ARTISTS SUCH AS M.F. HUSSAI N, F.N. SOUZA, ANJOLIE ELA MENON, SYED HAIER RAZA, MANJIT BAWA, SATISH GUJ RAL, V.S. GAYTONDE ETC. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED O N THE BUSINESS PREMISES OF THE ASSESSEE AND ITS DIRECTORS ON 17.04 .2007, DURING WHICH VARIOUS INCRIMINATING DOCUMENTS WERE FOUND AND SEIZ ED. CONSEQUENTLY, NOTICE U/S.153(A) OF THE ACT WAS ISSUED TO THE ASSE SSEE, IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCOME ON 21.02. 2008 DECLARING INCOME OF `. 58,744/- WHICH WAS DECLARED BY IT IN THE ORIGINAL R ETURN FILED ON 31.10.2002. IN THE ABSENCE OF FILING OF FULL DET AILS AS CALLED FOR BY THE AO DURING THE COURSE OF ASSESSMENTS THE AO DETERMIN ED THE TOTAL INCOME AT `. 76,42,208/-. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 3 3. IN APPEAL, CERTAIN ADDITIONAL EVIDENCES WERE FIL ED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND REQUESTED HIM FOR ADMISSI ON OF THESE ADDITIONAL EVIDENCES. HOWEVER, THE LD. CIT(A) REJEC TED THE ADDITIONAL EVIDENCES FOR VIOLATION OF RULE 46A OF THE IT RULES . AFTER OBTAINING THE REMAND REPORT FROM THE AO, HE CONFIRMED THE ADDITIO NS AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING REVISED GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) IS NOT JUSTIFIED IN HOLDING THAT REASONABLE OPPORTUNIT IES WERE GRANTED DURING ASSESSMENT PROCEEDINGS TO OFFER EXPL ANATION ON THE ISSUES RAISED WHEN THE APPELLANTS CASES WER E CENTRALIZED WITH CENTRAL CIRCLE 46, MUMBAI INITIALL Y AND THEREAFTER TRANSFERRED TO CENTRAL CIRCLE 44 ONLY IN SEPTEMBER 2009 AND ASSESSMENTS WERE TAKEN UP EFFECTIVELY ONLY IN NOVEMBER 2009 AND THEREBY GIVING LESS THAN 2 MONTHS ONLY TO RAISE ISSUES AND GET THEM CLARIFIED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF `. 75,83,464/- UNDER SECTION 153 A OF THE ACT WITHOUT RECOURSE TO ANY SE IZED MATERIALS FOUND AT THE TIME OF SEARCH RELEVANT TO T HIS ASSESSMENT YEAR. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS, A LLEGEDLY UNDER SECTION 145 (3) IN AN ASSESSMENT FRAMED UNDER SECTION 153 A WHOSE MAIN SPRING OF ACTION IS BASED ON SEIZE D MATERIALS AND THE ALLEGED REFERENCE TO UNACCOUNTED SEIZED MATERIAL DOES NOT RELATE TO THIS ASSESSMENT YEAR. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN ADVERTING TO SWORN STATEMENTS NOT RELATING TO THIS ASSESSMENT YEAR AND ALLEGED SEIZED MATERIALS D EHORS THIS ASSESSMENT YEAR. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 4 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN ASSUMING 50% MARGIN ON ALLEGED UNA CCOUNTED SALES BASED ON EMPIRICAL WORKINGS WITHOUT ANY REFER ENCE TO THE ASSESSMENT YEAR IN QUESTION. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN REJECTING THE ADDITIONAL EVIDENCE FILED BEING RECONCILIATION OF FIGURES OF `. 13,74,978 WHICH FIGURE IS THE BASIS FOR THE ASSESSING OFFICER TO EXTRAPOLATE THE ALLEGED UNDISCLOSED PROFIT FOR EACH YEAR. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING THE LEVY INTEREST UNDER SECTION 234B IN THE SUM OF `. 26,32,777/-. 8. IN ANY EVENT, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS ILLEGAL AND WITHOUT REFERENCE TO T HE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND THE LAW A PPLICABLE THERETO. 9. FOR THESE GROUNDS AND FOR SUCH OTHER GROUNDS TH AT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) BE CANC ELLED. 5. THE ASSESSEE HAS ALSO TAKEN THE FOLLOWING ADDITI ONAL GROUNDS :- 2. GROUND NO.6 THE LEARNED CIT(A) IS NOT JUSTIFIED IN REJECTING T HE ADDITIONAL EVIDENCE FILED BEING RECONCILIATION OF FIGURES FOR `. 13,74,978 WHICH FIGURE IS THE ALLEGED BASIS FOR THE ASSESSING OFFICER TO EXTRAPOLATE THE ALLEGED UNDISCLOSED PROFIT FOR EACH YEAR. 3. YOUR PETITIONER SUBMITS THAT THE ADDITIONAL EVID ENCES PRODUCED AT THE TIME OF REJOINDER TO THE REMAND REP ORT OF ASSESSING OFFICER WAS TO DEMOLISH THE ARTIFICIAL TH EORY IN EXTRAPOLATING FIGURES INDULGED IN THE ASSESSMENT OR DER WHEN THE MATERIAL BEING RELIED UPON TO COME TO SUCH AN E RRONEOUS CONCLUSION IS RECONCILABLE TO EVIDENCES SEIZED FROM THE APPELLANTS PREMISES. 4. THE CIT(A) OUGHT TO HAVE PERUSED THE CLARIFICATI ONS RENDERED BY THE MATERIAL EVIDENCE PLACED IN THE APP ELLATE PROCEEDINGS DURING REMAND AND RECONCILE THE SAME WI TH THE SEIZED MATERIAL WHICH IS BEING RELIED UPON IN THE ASSESSMENTS TO MAKE ARTIFICIAL ADDITIONS YEAR UPON YEAR. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 5 5. YOUR PETITIONER SUBMITS THAT FAILURE TO APPRISE THE AFORESAID EVIDENCE IN PROPER PERSPECTIVE AND REJECT ING IT AS NOT GERMANE TO THE METHODOLOGY FOLLOWED TO ARRIVE A T ASSESSABLE INCOME IS BEGGING THE QUESTION, IN AS MU CH AS THE SAID RECONCILIATION DEMOLISHES THE THEORY ADOPTED B Y THE ASSESSING OFFICER THAT THE PARTICULAR SEIZED RECORD (A 2 PAGE 7) WHICH FORMS THE BASIS FOR THE IMAGINARY EXTRAPOLATI ON OF FIGURES FOR ALL YEARS IN THE BLOCK PERIOD IS ITSELF RECONCILABLE AND ACCOUNTED FOR IN THE SEIZED MATERIALS. 6. IT IS HUMBLY SUBMITTED THAT THE ABOVE ADDITIONAL EVIDENCES BEING RECONCILIATION STATEMENT BY MS. CHI NMAYI PANDYA CHARTERED ACCOUNTANT DATED 07.06.2010 IS INEXTRICABLY CONNECTED TO THE DETERMINATION OF CORR ECT ASSESSABLE INCOME FOR THE BLOCK PERIOD AND FAILURE TO CONSIDER THE SAME IN PROPER PERSPECTIVE WILL CAUSE INCALCULA BLE HARM AND PREJUDICE TO THE APPEAL FILED BY YOUR PETITIONE R BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL. 7. FOR THE AFORESAID REASONS THE HON'BLE INCOME TAX APPELLATE TRIBUNAL MAY BE PLEASED TO ADMIT THE AFOR ESAID ADDITIONAL / SUPPLEMENTAL GROUNDS OF APPEAL AND PAS S ORDERS ON THE MERITS OF THE CASE ON THE BASIS OF THE SAID ADDITIONAL EVIDENCE FURNISHED. 8. YOUR PETITIONER IS ENCLOSING GROUNDS OF APPPEAL (REVISED) TO INCORPORATE THE ABOVE ADDITIONAL/SUPPL EMENT GROUNDS OF APPEAL IN SERIATIM FOR EASIER DISPOSAL O F APPEAL. 5.1 AFTER HEARING BOTH THE SIDES THE ADDITIONAL GRO UNDS RAISED BY THE ASSESSEE ARE ADMITTED. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT NO PROPER OPPORTUNITY OF HEARING HAS BEEN GRANTED TO T HE ASSESSEE. HE SUBMITTED THAT THE NOTICE U/S.143(2) DATED 26.02.20 08 WAS RECEIVED BY THE ASSESSEE ON 10.03.2008. HE SUBMITTED THAT COPY OF THE NOTICE U/S.142(1) DATED 17.04.2008 IS PLACED AT PAPER BOOK PAGE NO. 33. THE SECOND NOTICE U/S.143(2) OF THE ACT IS DATED 30.06. 2009 AND IN BETWEEN ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 6 THERE WAS NO OTHER NOTICE ISSUED BY THE AO. HE SUBM ITTED THAT IN RESPONSE TO THE FIRST NOTICE U/S.142(1), FEW DETAIL S WERE FURNISHED BEFORE THE AO, BUT UNFORTUNATELY THERE IS NO COVERING LETT ER FOR WHICH THE ASSESSEE IS NOT IN A POSITION TO PRODUCE THE SAME. REFERRING TO PAPER BOOK PAGE NO.36, HE SUBMITTED THAT THE LD. CIT(A) V IDE ORDER U/S.127(1) DATED 18.09.2009 TRANSFERRED THE JURISDICTION OF TH E ASSESSEE FROM ACIT CC- 46 TO DCIT CC-44. REFERRING TO PAPER BOOK PAGE NO.38, HE DREW THE ATTENTION OF THE BENCH TO THE SHOW CAUSE NOTICE DAT ED 20.11.2009 ISSUED BY AO ASKING THE ASSESSEE TO FILE THE VARIOUS DETAI LS BY 26.11.2009. REFERRING TO THE COPY OF ASSESSMENT ORDER, HE SUBMI TTED THAT THE AO PASSED THE ORDER ON 30.11.2009. HE SUBMITTED THAT D UE TO LACK OF PROPER OPPORTUNITY, THE ASSESSEE COULD NOT COMPILE THE DETAILS AND BY THE TIME HE COULD FILE THE DETAILS BEFORE THE AO, T HE ORDER HAD ALREADY BEEN PASSED. HE SUBMITTED THAT THE LD. CIT(A) DID N OT ACCEPT THE ADDITIONAL EVIDENCES AND EVEN THE AO HAS NOT CONSID ERED THE FULL DETAILS, REMAND REPORT FURNISHED BY HIM. REFERRING TO VARIOU S PAGES OF THE PAPER BOOK HE SUBMITTED THAT FULL RECONCILIATION HAS BEEN MADE BY THE ASSESSEE AND GIVEN AN OPPORTUNITY HE CAN PRODUCE AL L THESE DETAILS BEFORE THE AO TO HIS SATISFACTION FOR COMPLETION OF THE ASSESSMENT. HE ACCORDINGLY, SUBMITTED THAT IN THE INTEREST OF JUST ICE THE MATTER MAY BE SET ASIDE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH. HE ALSO UNDERTOOK TO APPEAR BEFORE THE AO AND COOPE RATE IN FILING FULL DETAILS WITHOUT SEEKING UNNECESSARY ADJOURNMENT. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 7 7. THE LD. DR ON THE OTHER HAND, SUBMITTED THAT ADE QUATE OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE. HOWEVER HE DID NOT APPEAR BEFORE THE AO IN TIME. HE SUBMITTED THAT ALTHOUGH T HE TIME GIVEN BY THE SUCCESSOR AO IS VERY LITTLE, HOWEVER, NOTHING PREVE NTED THE ASSESSEE TO REPLY TO THE QUERIES RAISED BY THE AO IN THE INITIA L NOTICE. HE SUBMITTED THAT THE LD. CIT(A) HAS PASSED A REASONED ORDER CON SIDERING THE ISSUE ON MERIT ALSO. HE HOWEVER, SUBMITTED THAT IF THE MATTE R IS RESTORED TO THE FILE OF AO THEN A DIRECTION MAY BE GIVEN TO THE ASS ESSEE NOT TO TAKE UNNECESSARY ADJOURNMENT AND APPEAR BEFORE THE AO. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE VOLUMINOUS PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. ADMITTE DLY, THE ASSESSEE DID NOT FILE THE FULL DETAILS BEFORE THE AO IN RESPONSE TO THE NOTICE ISSUED U/S.142(1) DATED 17.04.2008. WE FIND AFTER 17.04.20 08 THE SUBSEQUENT NOTICE U/S. 142(1) DATED 30.06.2009 WAS RECEIVED BY THE ASSESSEE ON 03.07.2009. IN THE MEANT TIME THERE WAS A CHANGE OF JURISDICTION AND THE FILE WAS TRANSFERRED FROM ACIT CC- 46 TO DCIT C C-44 AS PER ORDER PASSED U/S.127(1) BY THE CIT CENTRAL-4 ON 18.09.200 9, AS PER COPY PLACED AT PAGE NO.36 OF THE PAPER BOOK. WE FIND THE NEW AO VIDE SHOW CAUSE NOTICE DATED 18.11.2009 ASKED THE ASSESSEE TO FURNISH VARIOUS DETAILS BY 26.11.2009 AND IN THE ABSENCE OF FILING OF DETAILS BY THE ASSESSEE, THE AO PASSED THE ORDER ON 30.11.2009. WE FIND THE LD. CIT(A) DID NOT ACCEPT THE VARIOUS ADDITIONAL EVIDENCES FIL ED BEFORE HIM AND AFTER ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 8 OBTAINING THE REMAND REPORT FROM THE AO DISMISSED T HE APPEAL OF THE ASSESSEE. 9. CONSIDERING THE TOTALITY OF THE FACTS OF THE CAS E AND IN THE INTEREST OF JUSTICE WE ARE OF THE CONSIDERED OPINION THAT ON E MORE OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE TO SUBSTANTIATE ITS CASE WITH EVIDENCE TO THE SATISFACTION OF THE AO. WE, THEREFORE, RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MORE OPPORTUNIT Y TO THE ASSESSEE TO SUBSTANTIATE ITS CASE AND DECIDE THE ISSUE AFRESH A ND IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO HEREBY DIRECTED TO CO-OPE RATE WITH THE DEPARTMENT AND NOT TO SEEK UNNECESSARY ADJOURNMENT, FAILING WHICH THE DEPARTMENT IS AT LIBERTY TO PASS APPROPRIATE ORDER. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ITA NO.5026 TO 5029/MUM/2011 ASSESSMENT YEAR : 2003-04 TO 2006-07 10. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS IN THE ABOVE APPEALS ARE IDENTICAL TO THE REVISED GROUNDS AS WEL L AS THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN ITA NO.5025/MUM/2 011. WE HAVE ALREADY DECIDED THE APPEAL AND THE SAME HAS BEEN RE STORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. FOLLOWING THE SAME R ATIO, THE ABOVE APPEALS ARE ALSO RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF DIRECTIONS GIVEN IN ITA NO.5025/MUM/20 11. ITA NO.5025 TO 5029/MUM/2011 M/S. SYNERGY ART FOUNDATION LIMITED . 9 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPTEMBER, 2011. SD/- ( V. D. RAO ) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 30.09.2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, E- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI