DINESH BHAGWANLAL MODY, MUMBAI V. ACIT CEN CIR-8, MUMBAI

ITA 5246/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6283 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 14-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: D R RAIYANI
• Keywords: Income from undisclosed sources; Search and seizure; Valuation report; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI S V MEHROTRA, ACCOUNTANT MEMBER I T A NO: 5246/MUM/2009 (ASSESSMENT YEAR: 2007-08) DINESH BHAGWANLAL MODY, MUMBAI APPELLANT (PAN: AABPM9043Q) VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CENTRAL CIRCLE 8, MUMBAI I T A NO: 5248/MUM/2009 (ASSESSMENT YEAR: 2007-08) SHIRISH BHAGWANLAL MODY, MUMBAI APPELLANT (PAN: AACPM9193N) VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CENTRAL CIRCLE 8, MUMBAI I T A NO: 5242/MUM/2009 (ASSESSMENT YEAR: 2007-08) JYOTINDRA BHAGWANLAL MODY, MUMBAI APPELLANT (PAN: AACPM9191Q) VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CENTRAL CIRCLE 8, MUMBAI APPELLANTS BY: SHRI D R RAIYANI RESPONDENT BY: SHRI VIRENDRA OJHA O R D E R R V EASWAR, PRESIDENT: THESE ARE THREE APPEALS FILED BY THE ASSESSEES AGA INST THE LEVY OF PENALTIES UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961. SINCE THEY ARISE OUT OF COMMON FACTS AND WER E ALSO HEARD TOGETHER, THEY ARE DISPOSED OF BY A SINGLE ORDER. ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 2 2. THE BRIEF FACTS GIVING RISE TO THE LEVY OF PENAL TIES ARE AS FOLLOWS. A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) WAS CONDUCTED IN THE CASE OF M/S J B CHEMICALS AND PHAR MACEUTICALS LIMITED AND ITS GROUP CONCERNS, THEIR DIRECTORS, RE LATIVES AND KEY EMPLOYEES ON 10 TH JANUARY 2007. THE ASSESSEES WERE ALSO COVERED BY THE SEARCH. IN THE COURSE OF THE SEARCH , JEWELLERY WAS FOUND FROM THE PREMISES AND LOCKERS BELONGING TO TH E ASSESSEES AND THEIR FAMILY MEMBERS. THE TOTAL JEWELLERY FOUN D IN THE CASE OF DINESH BHAGWANLAL MODY AND HIS FAMILY MEMBERS WAS ` 3,27,46,822/-. A STATEMENT WAS RECORDED FROM HIM U NDER SECTION 132(4) ON 7 TH FEBRUARY 2007, IN WHICH HE ADMITTED THAT THE EXCES S JEWELLERY FOUND IN THE POSSESSION OF HIMSELF AND HI S FAMILY MEMBERS AMOUNTED TO ` 99,96,001/-, COMPRISING OF DIAMOND JEWELLERY AMOUNTING TO ` 96,35,950/- AND 423.59 GMS OF GOLD JEWELLERY AMOUNTING TO ` 3,60,051/-. 3. IN THE CASE OF SHIRISH BHAGWANLAL MODY AND HIS F AMILY, THE TOTAL VALUE OF THE JEWELLERY FOUND DURING THE SEARC H WAS ` 3,10,28,770/-. IN THE STATEMENT RECORDED FROM HIM UNDER SECTION 132(4), HE ADMITTED EXCESS JEWELLERY BELONGING TO H IMSELF AND HIS FAMILY MEMBERS AMOUNTING TO ` 71,72,880/- WHICH COMPRISED OF EXCESS DIAMOND JEWELLERY OF ` 20,36,025/-, 5055.10 GMS OF GOLD JEWELLERY AMOUNTING TO ` 42,96,835/- AND 48.32 KGS OF SILVERWARE VALUED AT ` 8,40,020/-. 4. SIMILARLY, IN THE CASE OF JYOTINDRA BHAGWANLAL M ODY, JEWELLERY VALUED AT ` 3,10,28,770/- WAS FOUND DURING THE SEARCH AND IN THE STATEMENT RECORDED FROM HIM UNDER SECTION 13 2(4), HE ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 3 ADMITTED EXCESS JEWELLERY IN HIS POSSESSION AND IN THE POSSESSION OF HIS FAMILY MEMBERS, AMOUNTING TO ` 1,98,54,023/- COMPRISING OF DIAMOND JEWELLERY OF ` 1,63,07,108/-, 2635.51 GMS OF GOLD JEWELLERY AMOUNTING TO ` 22,41,540/- AND 75 KGS OF SILVERWARE VALUED AT ` 13,05,375/-. 5. THEREAFTER RETURNS WERE FILED BY THE ASSESSEES I N WHICH EFFECT WAS GIVEN TO THE DISCLOSURES MADE IN THE STA TEMENTS. THE RETURNS WERE REVISED TO ELIMINATE CERTAIN MISTAKES. THE REVISED RETURNS WERE EXAMINED BY THE ASSESSING OFFICER IN T HE COURSE OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3). THE A SSESSEES WERE ASKED AGAIN TO ACCOUNT FOR AND EXPLAIN THE JEW ELLERY FOUND AND INVENTORISED DURING THE SEARCH. THE ASSESSEES SUBMITTED THEIR WEALTH TAX RETURNS, VALUATION REPORTS AND BILLS FOR MAKING CHARGES RELATING TO THE JEWELLERY FOUND AND INVENTORISED DU RING THE SEARCH. FROM THE DETAILS SUBMITTED BY THE ASSESSEES, THE AS SESSING OFFICER NOTICED THAT SOME JEWELLERY, BOTH DIAMOND AND GOLD WERE NOT REFLECTED IN THE WEALTH TAX RETURNS OF THE ASSESSEE S AND THEIR FAMILY MEMBERS. THE DIFFERENCE OF THE GOLD AND DIAMOND JE WELLERY AS WELL AS THE SILVERWARE WERE ASKED TO BE RECONCILED. ON THE GROUND THAT THE ASSESSEES COULD NOT RECONCILE AND EXPLAIN THE J EWELLERY (AS PER THE VALUATION REPORT MADE DURING THE SEARCH) WITH S ATISFACTORY EVIDENCE, THE VALUE OF THE DIFFERENTIAL JEWELLERY W AS TAKEN AS THE UNACCOUNTED INCOME OF THE ASSESSEES. THE ASSESSMEN T ORDERS CONTAIN THE RELEVANT DETAILS AND THEY ARE NOT REPRO DUCED HERE FOR THE SAKE OF BREVITY. THE FOLLOWING CHART WOULD FUR THER SHOW THE BROAD PICTURE: - ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 4 FIRST RETURN OF INCOME FILED DINESH BHAGWANLAL MODY SHIRISH BHAGWANLAL MODY JYOTINDRA BHAGWANLAL MODY 31.07.2007 31.07.2007 31.07.2007 INCOME DISCLOSED ` 7,96,79,190 ` 8,01,92,320 ` 8,88,01,870 REVISED TO ` 7,85,79,190 ` 7,90,92,320 ` 8,74,22,300 EXCESS JEWELLERY DECLARED ` 99,96,001 ` 71,72,880 ` 1,98,54,023 EXCESS JEWELLERY ASSESSED ` 1,18,63,039 ` 74,37,480 ` 2,01,35,169 DIFFERENCE ` 18,67,038 ` 2,64,600 ` 2,81,146 PENALTY IMPOSED ` 6,27,325 ` 88,906 ` 94,466 THE DIFFERENTIAL AMOUNTS OF ` 18,67,038/-, ` 2,64,600/- AND ` 2,81,146/- WERE ADDED IN THE ASSESSMENTS OF DINESH BHAGWANLAL MODY, SHIRISH BHAGWANLAL MODY AND JYOTINDRA BHAGWAN LAL MODY RESPECTIVELY UNDER THE HEAD INCOME FROM OTHER SOUR CES. 6. PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALME NT OF INCOME AND IN RESPONSE TO THE SHOW CAUSE NOTICE, TH E ASSESSEES CLAIMED THAT THERE WAS NO CONCEALMENT ON THEIR PART , THAT THE DIFFERENCE IN MATCHING THE JEWELLERY WAS DUE TO SOM E ERROR ON THE PART OF THE VALUER AND THE DISCREPANCY WAS SMALL CO MPARED TO THE TOTAL DISCLOSURE MADE BY EACH OF THE ASSESSEES IN R ESPECT OF THE JEWELLERY. IT WAS ALSO REPRESENTED THAT IT WAS ONL Y A CASE OF UNINTENTIONAL AND BONA FIDE MISTAKE WITHOUT ANY INT ENTION TO CONCEAL THE INCOME. THE ASSESSEES REPLY WAS HOWEVER NOT A CCEPTED BY THE ASSESSING OFFICER WHO HELD THAT THE REPLY WAS T OO GENERAL TO BE ENTERTAINED AND THAT HAD THE REVENUE NOT DETECTED T HE DIFFERENCE IN THE JEWELLERY IN THE COURSE OF THE ASSESSMENT PROCE EDINGS, THERE WOULD HAVE BEEN LOSS OF REVENUE. HE, THEREFORE, CO NCLUDED THAT THE ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 5 ASSESSEES CONCEALED THE PARTICULARS OF THEIR INCOME INVITING THE IMPUGNED PENALTIES. HE ACCORDINGLY LEVIED PENALTIE S OF ` 6,27,325/-, ` 88,906/- AND ` 94,466/- RESPECTIVELY ON THE THREE ASSESSEES, NAMELY, DINESH BHAGWANLAL MODY, SHIRISH BHAGWANLAL MODY AND JYOTINDRA BHAGWANLAL MODY. THE PENALTIES HAVING BEEN CONFIRMED BY THE CIT(A), THE ASSESSEES ARE IN FURTH ER APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. BOTH SIDES HAVE REITERATED THEIR STAN D TAKEN IN THE EARLIER PROCEEDINGS. ON A CAREFUL CONSIDERATION OF THE MATTER, WE ARE OF THE VIEW THAT IT CANNOT BE CONCLUDED THAT TH E ASSESSEES CONCEALED THE PARTICULARS OF THEIR INCOME OR FURNIS HED INACCURATE PARTICULARS THEREOF. AS POINTED OUT ON BEHALF OF T HE ASSESSEES, DURING THE SEARCH SUBSTANTIAL AMOUNT OF JEWELLERY W AS FOUND, WHICH AMOUNTED TO ` 3.27 CRORES IN THE CASE OF DINESH BHAGWANLAL MODY, ` 3.10 CRORES IN THE CASE OF SHIRISH BHAGWANLAL MODY AND ` 3.10 CRORES IN THE CASE OF JYOTINDRA BHAGWANLAL MODY. I N TERMS OF BOTH VALUE AND QUANTITY THESE ARE CERTAINLY VERY SUBSTAN TIAL AND WOULD HAVE CONSISTED OF MANY ITEMS OF JEWELLERY, BOTH GOL D AND DIAMOND, AS WELL AS SILVER ARTICLES. THE DEPARTMENTAL AUTHO RITIES HAD INVENTORISED THE JEWELLERY, WHICH OBVIOUSLY WAS POS SIBLE WITH THE HELP OF THEIR VALUERS ONLY. AT THAT TIME, I.E. DUR ING THE SEARCH PROCEEDINGS, THE ASSESSEES HAD COME OUT WITH DISCLO SURES IN THEIR STATEMENTS RECORDED UNDER SECTION 132(4) AND THESE DISCLOSURES WERE ALSO SUBSTANTIAL AS THE FIGURES SHOWN IN THE T ABLE ABOVE WOULD INDICATE. RETURNS WERE FILED BY THE ASSESSEES CON SISTENT WITH THE ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 6 DECLARATIONS MADE IN THE STATEMENTS IN RESPECT OF T HE JEWELLERY. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH TOOK PLACE SOMETIME LATE IN THE YEAR 2008, AFTER MORE THAN FIF TEEN MONTHS FROM THE DATE OF SEARCH, THE ASSESSEES WERE AGAIN ASKED BY THE ASSESSING OFFICER TO ACCOUNT FOR AND EXPLAIN THE JE WELLERY FOUND AND INVENTORISED AT THE TIME OF THE SEARCH. THE ASSESS EES DID NOT DEMUR BUT FROM THE ASSESSMENT ORDERS IT APPEARS THA T THEY COOPERATED WITH THE ASSESSING OFFICER BY SUBMITTING THEIR WEALTH TAX RETURNS, VALUATION REPORT AND THE BILLS FOR MAKING CHARGES IN RESPECT OF THE JEWELLERY FOUND AND INVENTORISED. IT WAS ON LY FROM THE DETAILS SUBMITTED BY THE ASSESSEES THAT THE ASSESSING OFFIC ER NOTICED THAT A PART OF THE JEWELLERY FOUND AND INVENTORISED HAD NOT BEEN INCLUDED IN THE WEALTH TAX RETURNS. THIS JEWELLERY WAS IN A DDITION TO THE JEWELLERY DISCLOSED IN THE STATEMENTS MADE DURING T HE SEARCH. THE DIFFERENTIAL AMOUNTS WERE ADDED IN THE ASSESSMENTS AS UNDISCLOSED INCOME. IT SEEMS REASONABLE AND PLAUSIBLE TO US TH AT WHERE A HUGE QUANTITY OF JEWELLERY, BOTH GOLD AND DIAMOND ARE IN VOLVED, THERE IS BOUND TO BE SOME DIFFERENCES EITHER IN RESPECT OF T HE VALUE OR IN RESPECT OF THE QUANTITY. AS FAR AS GOLD JEWELLERY IS CONCERNED, THE ASSESSMENT ORDERS DO NOT CONTAIN ANY DETAILS REGARD ING THE ITEMS AND WHAT THE ASSESSING OFFICER HAS DONE IS TO SIMPL Y ADD THE VALUE OF THE WEIGHT OF THE GOLD JEWELLERY REPRESENTING TH E DIFFERENCE BETWEEN THE GOLD JEWELLERY DECLARED IN THE RETURNS AND THE GOLD JEWELLERY DECLARED IN THE STATEMENTS UNDER SECTION 132(4). SO FAR AS THE DIAMOND JEWELLERY IS CONCERNED, THE ASSESSME NT ORDERS CONTAIN THE DETAILS OF THE ITEMS. FOR EXAMPLE, IN PARA 5.4 OF THE ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 7 ASSESSMENT ORDER IN THE CASE OF DINESH BHAGWANLAL M ODY, THE FOLLOWING TABLE IS GIVEN: - SL. NO. ITEM WT (CTS) AS PER VALUATION REPORT (RELIED BY ASSESSEE) WT (CTS) AS PER VALUATION REPORT (OF SEARCH TEAM) VALUATION DONE (DURING SEARCH ACTION) 1 NECLACE 8.5 3.4 1,86,180/- 2 A PAIR OF DIAMOND STUDDED KADA 2.8 4.5 69,840/- 3 A PAIR OF DIAMOND STUDDED COUPLING 1.5 0.60 34,440/- 4 DIAMOND PENDENT, CHAIN & BRACELET 4.2 2.00 1,25,640/- 5 SOLITAIRE NECKLACE WITH DIAMOND 9.75 1.5 2,85,800/- TOTAL 7,01,540/- IT WILL BE SEEN FROM THE ABOVE THAT WHEREAS AS PER THE VALUATION REPORT PREPARED BY THE SEARCH AUTHORITIES THE WEIGH T OF DIAMOND JEWELLERY IN CARATS WAS LESS, THE WEIGHT IN CARATS WAS MORE AS PER THE VALUATION REPORT RELIED UPON BY THE ASSESSEE. IT IS THE VALUATION AUTHORITIES OF THE SEARCH TEAM THAT TOOK THE WEIGHT OF THE DIAMOND JEWELLERY AT A LESSER FIGURE AND NOT THE ASSESSEE. THE ASSESSEES MERELY PRODUCED THEIR VALUATION REPORTS ALONG WITH THE WEALTH TAX RETURNS FROM WHICH IT WAS FOUND THAT THE WEIGHT OF THE DIAMOND JEWELLERY WAS MORE AND THE DIFFERENCE WAS SIMPLY AD DED IN THE ASSESSMENTS. THERE IS NO ALLEGATION IN THE ASSESSM ENT ORDERS THAT SO FAR AS THE DIAMOND JEWELLERY IS CONCERNED, THE A SSESSEES SUPPRESSED CERTAIN JEWELLERY. IT SEEMS TO US THAT IT WAS ONLY A QUESTION OF THE DIFFERENCE IN WEIGHT (IN CARATS), T HE VALUATION REPORT OF THE SEARCH TEAM SHOWING A LESSER WEIGHT AND THE VALUATION REPORT OF THE ASSESSEES SHOWING A HIGHER WEIGHT. NO CONC EALMENT CAN BE SAID TO HAVE BEEN COMMITTED BY THE ASSESSEES IN THE SE ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 8 CIRCUMSTANCES. AS ALREADY NOTED, EVEN IN RESPECT O F THE GOLD JEWELLERY THERE IS NO ALLEGATION IN THE ASSESSMENT ORDERS THAT THE ASSESSEES DID NOT ADMIT CERTAIN ITEMS ALTOGETHER. THE DIFFERENCE IN THE WEIGHT OF THE GOLD JEWELLERY ALONE HAS BEEN GIV EN AND MADE THE BASIS OF ASSESSMENTS WITHOUT ANY SPECIFIC ALLEGATIO N EITHER IN THE ASSESSMENT ORDERS OR IN THE PENALTY ORDERS THAT THE ASSESSEES DID NOT DECLARE CERTAIN ITEMS OF GOLD JEWELLERY. FURTH ER, THE ALLEGATION MADE IN THE ASSESSMENT ORDERS IS ONLY THAT THE ASSE SSEES COULD NOT RECONCILE AND EXPLAIN THE JEWELLERY (AS PER THE VAL UATION REPORTS MADE DURING THE SEARCH ACTION) WITH SATISFACTORY EV IDENCE. WHEN A HUGE AMOUNT OF JEWELLERY IS INVOLVED CONSISTING OF NUMEROUS ITEMS WHICH HAVE TO BE WEIGHED AND VALUED, BONA FIDE ERRO RS CANNOT BE RULED OUT. THE DIFFERENCE BETWEEN THE VALUE OF THE JEWELLERY ASSESSED AND THAT DECLARED BY THE ASSESSEES IS SMAL L IN THE CASES OF SHIRISH BHAGWANLAL MODY AND JYOTINDRA BHAGWANLAL MODY. IN THE CASE OF DINESH BHAGWANLAL MODY, THE DIFFERENCE IS ` 18,67,038/- BUT CONSIDERING THE FACT THAT IN THE AS SESSMENT ORDER THERE IS NO FINDING THAT CERTAIN ITEMS OF JEWELLERY WERE ALTOGETHER OMITTED FROM CONSIDERATION AND ALSO NOT RULING OUT THE POSSIBILITY OF BONA FIDE ERRORS, MIXING UP OF THE JEWELLERY ETC., IT DOES NOT SEEM PROBABLE THAT THE ASSESSEES HAD CONCEALED THEIR INC OME OR FURNISHED INACCURATE PARTICULARS THEREOF. THEY HAV E MADE LARGE AMOUNTS OF DISCLOSURE IN THE STATEMENTS RECORDED DU RING THE SEARCH AND HAD ALSO BACKED THEM BY FILING THE RETURNS ON T HAT BASIS. IN THESE CIRCUMSTANCES WE ARE UNABLE TO UPHOLD THE FIN DING OF THE DEPARTMENTAL AUTHORITIES THAT THE ASSESSEES CONCEAL ED THEIR INCOME ITA NO: 5246/MUM/2009 ITA NO: 5248/MUM/2009 ITA NO: 5242/MUM/2009 9 OR FURNISHED INACCURATE PARTICULARS THEREOF. ACCOR DINGLY THE PENALTIES ARE CANCELLED AND THE APPEALS ARE ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2010. SD/- SD/- (S V MEHROTRA) (R V EASWAR) ACCOUNTANT MEMBER PRES IDENT MUMBAI, DATED 24 TH NOVEMBER 2010 SALDANHA COPY TO: 1. DINESH BHAGWANLAL MODY SHIRISH BHAGWANLAL MODY JYOTINDRA BHAGWANLAL MODY 83 B & C, SHETH GOVINDRAO SMRUTI BUILDING DR ANNIE BESANT ROAD, WORLI, MUMBAI 400 018 2. ACIT, CENTRAL CIRCLE 8 3. CIT-CENTRAL 2 4. CIT(A)-CENTRAL II 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI