ACIT CEN CIR 38, MUMBAI V. BOMBAY RAYON FASHION LTD, MUMBAI

ITA 5288/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9601 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Income from undisclosed sources
• Section: 143(3); 153A; 14A; 115JB; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 5288 / M/ 20 1 4 ( / ASSESSMENT YEAR: 20 10 - 11 ) ACIT, CENT, CIR. - 38, R.NO.32(1), GROUND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400020 / VS. M/S BOMBAY RAYON FASHION LD. D - WING 1 ST FLOOR OBEROI GARDEN ESTATE CHANDIVALI FARMS ROAD, CHANDIVALI ANDHERI (E)MUMBAI - 72 ./ ./ PAN/GIR NO. : AAACM 3447 J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 15 .0 6 .2017 / DATE OF PRONOUNCEMENT : 13 . 09 .2017 / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 30.05 .201 4 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 41 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 20 10 - 11 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT PENALTY U/S 271AAA OF THE ASSESSEE BY: SHRI DHARMESH SHAH SHRI DHAVAL SHAH DEPARTMENT BY: SHRI SUMAN KUMAR , DR ITA. NO.5288/M /2014 A.Y. 2010 - 11 2 I.T. ACT IS NOT LEVIABLE ON THE GROUND THAT THE ASSEESEE HAD FULFILLED ALL THE CONDIT IONS LAID DOWN IN SECTION 271AAA WHILE OFFERING ADDITIONAL INCOME IN STATEMENT RECORDED U/S 132(4) OF THE I.T. ACT AND ALSO ADMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEREAS THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THE MANNER OF EARNING I NCOME AS LAID DOWN U/S 271AAA. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETUR N OF INCOME ON 15 .1 0 .20 10 DECLARING TOTAL INCOME TO THE TUNE OF RS. 5,60,70,930 / - (BOOK PROFIT U/S 115JB (MAT) RS. 2,36,93,54,757/ - ) . DURING THE COURSE OF SEARCH PROCEEDING , THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME OF RS.8,00,79,000/ - . THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 18.03.2013 AFTER MAKING AN ADDITION OF RS.11,1 7,55,254/ - U/S 14A OF THE ACT. T OTAL INCOME WAS ASSESSED TO THE TUNE OF RS.16,78,26,180/ - (BOOK PROFIT WAS ASSESSED RS.2,25,75,99,503/ - ). THE PENALTY WAS INITIATED ON UNDISCLOSED INCOME OF RS.800,79,000/ - . THE UNDISCLOSED INCOME WAS ASSESSED AS ON THE BASIS OF THE FACT THAT THE ASSESSEE DID NOT FULLY ACCOUNTED FOR ITS STOCK IN THE BOOKS OF ACC OUNTS. THE ASSESSEE HAS TAKEN THE BANK LOAN AND W AS SEND ING THE MONTHLY STOCK STATEMENT WITH THE BANK. ON VERIFICATION , VARIATION WAS FOUND IN THE STOCK AND FOR RECONCILIATION THE STATEMENT OF THE SHRI. PRASHANT AGARWAL OF THE BOMBAY RAYON FASHION LTD. WAS RECORDED U/S 132(4) OF THE ACT ON 13.08.2009 IN WHICH THE ASSESSEE DISCLOSED ADDITIONAL INCOME TO THE TUNE OF ITA. NO.5288/M /2014 A.Y. 2010 - 11 3 RS.8,00,79,000/ - . THEREAFTER, THE PENALTY PROCEEDING WAS INITIATED AND FINDING NO JUSTIFIABLE EXPLANATION , THE ASSESSING OFFICER LEVIED THE PENA LTY TO THE TUNE OF RS. 90,72,950/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED THE SAME THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 4 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETION OF THE PENALTY LE VIED BY THE AO U/S 271AAA OF THE I.T. ACT, 1961. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE ASSESSEE HAS ADMITTED THE ADDITIONAL INCOME TO THE TUNE OF RS.8,00,79,000/ - ON ACCOUNT OF VARIATION OF STOCK IN HIS STATEMENT DATED 13.08.2009, T HEREFORE, IN THE SAID CIRCUMSTANCES, THE AO HAS RIGHTLY LEVIED THE PENALTY WHICH IS NOT LIABLE TO BE SET ASIDE BY THE CIT(A) BUT THE LD. CIT(A) HAS SET ASIDE THE PENALTY WRONGLY AND ILLEGALLY, HENCE, THE ORDER OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS A ND IS LIABLE TO BE SET ASIDE. ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY IN ACCORDANCE WITH LAW , THEREFORE, THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED . IT IS SPECIFICALLY ARGUED THAT IN THE CASE OF GROUP CASES OF ASSESSEE TITLE AS: - ACIT VS. MUDRA LIFEST Y LE LTD. ITA. NO.520/M/2014 FOR THE A.Y. 2010 - 11, T HE PENALTY HAS BEEN DELETED BY THE HONBLE ITAT VIDE ORDER DATED 21.04.2017 AND THE CASE OF THE ASSESSEE HAS DULY BEEN COVERED BY THE SAID ORDER THEREFORE, THE FINDING OF THE CIT(A) IS ITA. NO.5288/M /2014 A.Y. 2010 - 11 4 QUITE JUSTIFIABLE WHICH IS NOT LIABLE TO BE SET ASIDE IN ACCORDANCE WITH LAW. 5 . WITH DUE CONSIDERATION OF THE ARGUMENT ADVANCED BY THE LD. R EPRESENT ATIVE OF THE PARTIES AND PERU SING THE RECORD. WE NOTICED THAT THE PENALTY U/S 271AAA OF THE ACT WAS LEVIED ON ACCOUNT OF DIFFERENCE OF STOCK AND ON THE BASIS OF RECORDING T HE STATEMENT OF THE ASSESSEE U/S 132(4) ON 13.08.2009 IN WHICH THE ASSESSEE HAS ADMITTED THE STOCK DIFFERENCE TO THE TUNE OF RS. 800,79,000/ - AND OFFERED THE SAME FOR TAX FOR THE A.Y. 2010 - 11. THE CIT(A) DELETED THE PENALTY BEING NOT LEVIABLE IN VIEW OF THE PROVISION U/S 271AAA OF THE ACT . T HE HONBLE ITAT IN THE CASE OF GROUP CASE OF THE ASSESSEE TITLE AS ACIT VS. MUDRA LIFESTYLE LTD. ITA. NO.520/M/2014 HAS HELD THAT THE PENALTY IS NOT JUSTIFIABLE IN THE SE SPECIFIC FACTS AND CIRCUMSTANCES . T HE FINDING OF THE HONBLE ITAT IS HEREBY REPRODUCED AS UNDER: - WE HAVE CONSIDERED THE LEVEL CONTENTION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER HAS NOT SPECIFIED AS TO WHY THE PENALTY PROCEEDING UNDER SECTION 271AAA IS BEING INITIATED AGAINST THE ASSESSEE. HOWEVER, DURING THE PENALTY PRO CEEDING THE AO NOTED THAT MERELY OFFERING INCOME U/S 132(4) DID NOT GIVE THE ASSESSEE THE RELIEF FROM LEVY OF PENALTY U/S 271AAA. THE AO RECORDED THAT THE ASSESSEE HAD NOT SPECIFIED THE MANNER IN WHICH SUCH UNDISCLOSED STOCK WAS ACQUIRED FROM UNACCOUNTED S OURCES. ASSESSEE HAS NOT EXPLAINED AS TO HOW UNACCOUNTED FUNDS WERE GENERATED TO PRODUCE SUCH UNDISCLOSED STOCK. THE AO FURTHER CONCLUDED THAT THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS AND SPECIFY THE MANNER IN WHICH RS.22,32,200/ - WAS GIVEN TO MR. JK BAJ AJ AND MR. PUNIIT BAJAJ. WITH THE ABOVE OBSERVATION THE ASSESSING OFFICER LEVIED [HE PENAL@ 10% OF THE UNDISCLOSED ITA. NO.5288/M /2014 A.Y. 2010 - 11 5 INCOME. DURING THE APPELLATE PROCEEDINGS BEFORE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE SUBMITTED THAT ENTIRE ADDITION IN THE ASSESSMENT ORDER DATED 30.11201 PASSED UNDER SECTION 14,30) R.W.S. 153A HAVE BEEN MADE BY ASSESSING OFFICER ON THE BASIS OF INVENTORY, SHEET WHICH WAS PREPARED AT THE TIME OF SEARCH AND WITHOUT ANY ACTUAL INVENTORY BEING VERIFIED. THE INVENTORY OF SUCH A STOCK DURING THE COURSE OF SEARCH COULD NOT HAVE BEEN VERIFIED INASMUCH AS THE STOCKS W ERE LOCATED AT DIFFERENT LOCATION IN MUMBAI, BHIWANDI. PARTIAL AND BANGALORE ETC. THE ASSESSEE HAD OFFERED INCOME OF RS.2M.57,60940I - ON ACCOUNT DISCREPANCY IN THE PHYSICAL STOCK IN THE PREMISES OF ASSESSEE AS ON 31 JULY 2009. SINCE, THERE WAS ACTUAL STOCK OF RS. 128,39,44.196/ - AGAINST RS.103,14,8M561 AS SHOWN IN THE STOCK STATEMENTS SUBMITTED TO THE BANK FOR THE MONTH OF JULY 2009. THE ASSESSEE SPECIFICALLY POINTED OUT THAT THERE WERE NEITHER DISCREPANCY FOUND IN THE HOOKS OF ACCOUNT NOR ANY INCRIMINATING DOCUMENT FOUND DURING THE SEARCH. WHICH MAY SUGGEST THE PURCHASE OF UNACCOUNTED STOCK. THE CONTENTION OF ASSESSEE AND THE INCOME OFFERED VOLUNTARY WAS ACCEPTED BY THE ASSESSING OFFICER. THE STOCK STATEMENT GIVEN PRIOR TO 30 JULY 2009 HAS NOT BEEN FOUND TO BE FALSE BY ASSESSING OFFICER. THE ASSESSEE HAD SUBMITTED THAT ALL CONDITION OF SECTION 271AAA(2) HAS BEEN SATISFIED. THE ASSESSEE DISCLOSE THE ADDITIONAL INCOME AND PAID THE DUE TAX ALONG WITH INTEREST BEFORE DATE OF FILING OF THE RETURN OF INCOME THE SN OW PENALTY WAS LEVIABLE AGAINST THE ASSESSEE. THE ASSESSEE ALSO RELIED UPON THE STATEMENT RECORDED BY THE AUTHORISED PERSON UNDER SECTION 132(4) OF THE ACT. AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE THE LANDED COMMISSIONER APPEALS OBSERVED THAT THE PROVISIONS OF SECTION 271 AAA A HAVE BEEN INSTEAD IN THE ACT WITH EFFECT FROM FIRST APPELLATE 2007 AND ALE APPLICABLE IN RESPECT OF UNDISCLOSED INCOME AN ARTIST AS A RESULT OF SEARCH OPERATION CARRIED OUT ON OR SLIER I JUNE 2007, THE PERUSAL OF PROVISIONS OF SECTION 271 AAA WILL NOT BE ATTRACTED IF IN THE STATEMENT UNDER SECTION 132(4), THE ASSESSEE ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND ALSO SUBSTANTIATES THE MANNER IN WHICH UNDISCLOSED INCOME WAS D ERIVED AND PAYS THE TAX, TOGETHER WITH INTEREST, ACE IN RESPECT OF THE SAD UNDISCLOSED INCOME THE SCHEME UNDER SECTION 271 AAA IS A COMPLETE PARADIGM AS FAR AS PENALTY IN RESPECT OF UNACCOUNTED INCOME AND AT AS A RESULT OF SEARCH OPERATION CORNED OUT ON OR AFTER I JUNE 2007 IS CONCERNED. UNLIKE A CASE OF PENALTY INNER SECTION27 (I) (C), SECTION 271 AAA, DAY THE ANY REFERENCE TO ITA. NO.5288/M /2014 A.Y. 2010 - 11 6 THE FINDING OR PRESUMPTIONS OF CONCEALMENT OF INCOME ETC. HOWEVER, SUB - SECTION (2) OF SECTION 271 AAA,OF THIS PENALTY PROVISION. TH E LEARNED COMMISSIONER (APPEALS) EXTRACTED WHETHER THE FUNCTIONSATISFIED THE CONDITION LAID DOWN UNDER SUB - SECTION (2) OF SECTION 27 AAA, RELAXES THE RIGOUR OF THIS PENALTY PROVISION. THE GAINED APPEAL) OBSERVED THAT ASSESSING OFFICER HAD ACCEPTED THE STA TEMENT OF ASSESSEE AND ASSESSED THE UNDISCLOSED AT BUSINESS INCOME, FURTHER, THERE IS NO DISPUTE THE ASSESS HAS PAID CLUE THE IN RESPECT OF THE AMOUNT DISCLOSED DURING THE COURSE OF SUCH. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS NOT SPECIFIED THE MAN NER OR COULD NOT SUBSTANTIATES THE MANNER IN WHICH INCOME WAS DERIVED. 6. BEFORE, US IT WAS ARGUED BY LD. AR OF THE ASSESSEE THAT AT THE RINSE OF RECORDING OF THE STATEMENT UNDER SECTION 132(4), THE AUTHORISED OFFICER HAS NOT ASKED A SPECIFIC QUESTION WITH REGARD TO A SPECIFYING THE MANNER, THEN IT CANNOT HE EXPECTED FROM THE ASSESSEE TO SPECIFY THE MANNER, BECAUSE THE ASSESSEE ONLY ANSWER THE QUESTION PUT FORTH BY THE AUTHORISED OFFICER. AS THE ASSESSEE HAS NO OCCASION WHEN THE ADDITIONAL INCOME OFFERED WA S ACCEPTED BY THE ASSESSING OFFICER WITHOUT ANY VARIATION TO EXPLAIN FURTHER. EVEN OTHERWISE THE ASSESSEE HAS EXPLAINED THAT UNACCOUNTED STOCK WAS GENERATED DUE TO THE BUSINESS ACTIVITIES OF THE ASSESSEE. WE HAVE SEEN THAT THE LEARNED COMMISSIONER (APPEALS ) AFTER CONSIDERING THE DECISION OF VARIOUS HIGH COURT AND TRIBUNAL DELETED THE PENALTY LEVIED BY ASSESSING OFFICER. THE ID COMMISSIONER FOLLOWED THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN MAHENDRA C, SHAH, ALLAHABAD HIGH COURT IN RADHA KISHAN GOEAL AN D FURTHER THE DECISION OF DELHI HIGH COURT IN NEERAJ JINDAL (SUPRA). WE HAVE SEEN THAT DECISION OF COMMISSIONER (APPEAL) IS BASED ON SOUND REASONING AND DOES NOT REQUIRE ANY INTERFERENCE AT OUR END. THUS WE DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL R AISED BY THE REVENUE. 6 . ON APPRAISAL OF THE ABOVE FINDING, WE NOTICED THAT IN THE CASE OF GROUP COMPANY THE HONBLE ITAT IN ITA. NO. 520/M/2014 FOR THE A.Y. 2010 - 11 TITLE D AS ACIT VS. MUDRA LIFESTYLE LTD. HAS CONFIRMED THE FINDING OF THE CIT(A) IN WHI CH THE PENALTY HAS BEEN ORDERED TO BE DELETED. THE CIT(A) HAS DELETED THE ITA. NO.5288/M /2014 A.Y. 2010 - 11 7 PENALTY ON THE BASIS OF THE FINDING OF HONBLE ITAT IN THE ABOVE MENTIONED CASE. THE PRESENT CASE HAS DULY BEEN COVERED BY ABOVE MENTIONED CASE . THE STATEMENT OF THE ASSESSEE IN BOTH THE CASES WERE RECORDED ON 13.08.2009 AND THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE QUITE SIMILAR. NO DISTINGUISHABLE MATERIAL HAS BEEN PLACED ON RECORD . TAKING INTO ACCOUNT OF ALL THE FACTS AND CIRCUMSTANCES WE NOTICED THAT THE THE CASE OF TH E ASSESSEE HAS DULY BEEN COVERED BY THE DECISION OF THE HONBLE ITAT IN THE CASE TITLE AS ACIT VS. MUDRA LIFESTYLE LTD. ITA. NO.520/M/2014 DATED 21.04.2017. ACCORDINGLY, WE CONFIRMED THE FINDING OF THE CIT(A) IN QUESTION AND DISMISSED THE APPEAL OF THE REV ENUE. 7 . IN RESULT, APPEAL OF THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 13. 09. 2017 SD/ - SD/ - ( B.R BHASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 13. 09. 201 7 V.P SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - ITA. NO.5288/M /2014 A.Y. 2010 - 11 8 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI