CHHATRAPATI CLOTH STORES, MUMBAI V. ITO 23(2)(2), MUMBAI

ITA 543/MUM/2012

• Counselvise Citation: 54319914 RSA 2012
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 25-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Business income; Initiation of penalty proceedings; Wrong claim; Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.543/MUM/2012 : ASST.YEAR 2005-06 CHHATRAPATI CLOTH STORES, OPP MULUND RAILWAY STATION, MULUND (W), MUMBAI- 400 080 PAN AAAFC3520H VS. THE ITO 23(2)(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M SUBRAMANIAN RESPONDENT BY : SHRI M L PERUMAL DATE OF HEARING : 13.02.2014 DATE OF PRONOUNCE MENT : 14.02.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED APPEAL HAS BEEN PREFERRED BY THE A SSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 16.7.2008, CONFIRMING THE PENAL TY LEVIED BY THE AO UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT. THE GROUNDS OF THE APPEAL RAISED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE PENALTY ORDER PASSED U/S. 271(1)(C) LEVYING A PENAL TY OF RS.2,63,834/- IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL AND C ONFIRMING THE PENALTY LEVIED OF RS.2,63,834 U/S. 271(1)(C) OF THE I.T.ACT. ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL AND C ONFIRMING THE PENALTY LEVIED OF RS.2,63,834/- U/S. 271(1)(C) OF T HE IT ACT ALTHOUGH THERE HAS BEEN NEITHER ANY CONCEALMENT OF INCOME NO R FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2. THE FACTS OF THE CASE ARE THAT SOME STOCK DISCREPANCY WAS NOTICED DURING SURVEY PROCEEDINGS. ASSESSEES BOOKS OF ACCOUNTS WE RE NOT WRITTEN UP TO DATE. AS PER AUDIT REPORT, QUANTITATIVE DETAILS WER E NOT MAINTAINED. THE BOOK STOCK OF THE ASSESSEE HAD BEEN FIRST ESTIMATED AT R S.20 LACS AND IMMEDIATELY THEREAFTER ESTIMATED AT RS 25 LACS AND BOTH THE EST IMATES WERE NOT BASED ON ANY LOGICAL CONCLUSION. THE PHYSICAL STOCK WAS VALU ED AT RS. 33,03,690/-. THE ASSESSEE THUS VOLUNTARILY DECLARED THE UNDISCLOSED STOCK OF RS. 8,03,690/- U/S 133A, WHICH WAS ALSO CREDITED BY THE ASSESSEE IN TH E P&L A/C, APART FROM GROSS PROFIT OF RS. 16.19 LACS. HOWEVER, THE ASSES SEE COMPUTED THE NET PROFITS AT RS.8,51,495/- ONLY. THE AO OBSERVED THAT IF THE DISCLOSURE AMOUNT IN SURVEY WAS EXCLUDED, THE ACTUAL PROFIT WOULD BE REDUCED TO RS. 47,495/- ONLY, WHICH WAS VERY LOW. THE ASSESSEE AFTER CLAIMI NG THE DEDUCTION OF INTEREST AND SALARY PAID TO THE PARTNERS, RETURNED THE TAXABLE INCOME AT RS. 3,99,169/- ONLY. 3. THE AO ISSUED SHOW CAUSE NOTICE ASKING THE ASSES SEE TO EXPLAIN IN DETAIL THE UNACCOUNTED STOCK FOUND BY THE DEPARTMEN T DURING THE SURVEY ACTION AND ALSO TO FURNISH FULL DETAILS REGARDING T HE METHOD OF ACCOUNTING ADOPTED FOR THIS DISCREPANCY. HE POINTED OUT TO THE ASSESSEE, VARIOUS DISCREPANCIES IN THE RECONCILIATION STATEMENTS, IN ACCOUNTS AS WELL IN THE EVIDENCE PRODUCED BEFORE HIM. THE ASSESSEE THEREAFT ER FILED THE REVISED COMPUTATION DECLARING BUSINESS INCOME AT RS.3,66,00 0/- BEING 5% OF THE TOTAL SALES. THE ASSESSEE FURTHER CLAIMED DEDUCTION OF IN TEREST AND SALARY PAID TO THE PARTNERS AND RETURNED THE BUSINESS INCOME OF RS .1,07,872/-. THE ASSESSEE ALSO DECLARED, U/S 133A, THE UNDISCLOSED STOCK OF R S.15,04,000/- I.E. ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 3 8,04,000/- DISCLOSED DURING SURVEY + RS.7,00,000/- MORE. THE AO AFTER ALLOWING THE INTEREST DEDUCTION, ASSESSED THE BUSIN ESS INCOME AT RS. 2,67,286/- PLUS 50% OF THE UNDISCLOSED STOCK AS ASS ESSEES INVESTMENT IN UNACCOUNTED STOCK ON THIS ACCOUNT. PENALTY PROCEEDI NGS WERE ALSO INITIATED. THE ASSESSEE VIDE LETTER DATED 12.06.2008 TOOK THE FOLLOWING PLEA BEFORE THE AO: I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE AGREED TO FILE REVISED RETURN ON A CLEAR UNDERSTAND ING THAT THE PENALTY PROCEEDINGS U/S.271(1)( C) SHALL NOT BE INI TIATED. II) THE ASSESSEE HAD DURING THE COURSE OF ASSESSMEN T PROCEEDINGS SUBMITTED ALL THE RELEVANT VOUCHER ETC. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF TH E ASSESSEE AND LEVIED A PENALTY OF RS.2,63,834/- BEING 100% OF THE TAX OF C ONCEALED INCOME. 4. IN THE FIRST APPEAL, VIDE IMPUGNED ORDER, THE LE ARNED CIT(A) CONFIRMED THE PENALTY SO LEVIED BY THE AO. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORD. THE LEARNED COUNSEL FOR T HE ASSESSEE HAS CONTENDED THAT THE ASSESSEE ON HIS OWN HAD DECIDED TO DISCLO SE UNACCOUNTED STOCK IN ORDER TO BUY PEACE AND AVOID LITIGATION WITH THE DE PARTMENT AND TO COMPLETE THE ASSESSMENT ON THE CONDITION THAT THIS BEING A W ILLFUL DECLARATION, NO PENALTY U/S.271(1)(C) WOULD BE LEVIED. HE HAS FUR THER SUBMITTED THAT THE FACT OF VOLUNTARY DECLARATION HAS ALSO BEEN MENTIONED IN THE ASSESSMENT ORDER. HE HAS FURTHER CONTENDED THAT IT HAS NOT BEEN MENTIONE D IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED WRONG STATEMENTS WITH A MALA FIDE INTENTION TO EVADE TAX. THE ADDITIONAL DISCLOSURE WAS NOT ESTABLISHED FROM THE MATERIAL ON RECORD BUT WAS ACCEPTED AS PER THE SURRENDER MADE BY THE ASSESSEE ON VOLUNTARY BASIS. FURTHER THAT FOR THE LEVY OF PENALTY, THE SATISFACTION EITHER OF THE TWIN CONDIT IONS IS NECESSARY I.E. THE ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 4 ASSESSEE EITHER HAS CONCEALED THE PARTICULARS OF IN COME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HIS CONTENTION HA S BEEN THAT THE IN THIS CASE THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE RE LATING TO EITHER OF THE ABOVE TWO CONDITION. HE HAS FURTHER RELIED UPON THE VARIO US JUDGMENTS OF DIFFERENT HONBLE HIGH COURTS TO STRESS THE POINT THAT WHERE THE INCOME IS ASSESSED BY THE AO ON ESTIMATION BASIS, IT DOES NOT AMOUNT TO C ONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THUS PENALTY CANNOT BE LEVIED IN SUCH CASES AND FURTHER THAT IF THE INCOME IS DISCLOSED DURING SURVEY, PENALTY CANNOT BE LEVIED. 6. ON THE OTHER HAND, THE LEARNED DR HAS SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. HE HAS FURTHER RELIED UPON T HE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. L TD. VS. CIT [2013]358IT 593(SC). 7. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF THE PARTIES. IN OUR VIEW THE FA CTS OF THE ISSUE INVOLVED IN THE PRESENT CASE ARE SQUARELY COVERED WITH THE RECE NT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. (SUPR A). IN THE SAID CASE THE ASSESSEE HAD TAKEN THE PLEA THAT THE INCOME WAS VOL UNTARILY DISCLOSED WITHOUT ADMITTING ANY CONCEALMENT WHATSOEVER WITH ANY INTEN TION TO CONCEAL AND SUBJECT TO NON INITIATION OF PENALTY PROCEEDINGS AN D PROSECUTION. THE HONBLE SUPREME COURT WHILE UPHOLDING THE JUDGMENT OF THE H IGH COURT HELD THAT THE AO IN SUCH CASES SHALL NOT BE CARRIED AWAY BY THE P LEA OF THE ASSESSEE LIKE VOLUNTARY DISCLOSURE, BUY PEACE, AVOID LITIGATION, AMICABLE SETTLEMENT ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF I NCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE EXPLANATION T O SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NO TICED BY THE AO BETWEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN O N THE ASSESSEE TO SHOW ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 5 OTHERWISE BY COGENT AND RELIABLE EVIDENCES. WHEN T HE INITIAL ONUS PLACED BY THE EXPLANATION HAS BEEN DISCHARGED BY HIM, THE ONU S SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. THE HONBLE SUPREME COURT FURTHER OBSERVED THAT IN A SITUATION WHERE THE ASSESSEE OFFERS SURRENDER IN VIEW OF DETECTION MADE BY THE AO, THE SURRENDER OF INCOME CANNOT BE SAID TO BE VOLUNTARY. HAD IT B EEN THE INTENTION OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS IN COME, IT WOULD HAVE FILED THE RETURN DECLARING THE INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN THE SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE IT S TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THE HONB LE SUPREME COURT HAS FURTHER OBSERVED THAT THE AO HAS TO SATISFY WHETHER THE PENALTY PROCEEDINGS BE INITIATED OR NOT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTIC ULAR MANNER OR REDUCE IT INTO WRITING. 8. IN THE CASE IN HAND ALSO THE VOLUNTARY DISCLOSUR E WAS MADE BY THE ASSESSEE WHEN THE DEFECTS AND DISCREPANCIES IN ITS RETURN WERE POINTED OUT BY THE AO AND THE AO ALSO NOTED THAT IF THE VALUE OF T HE UNDISCLOSED STOCK DISCLOSED U/S. 133A DURING THE ASSESSMENT PROCEEDIN GS WAS EXCLUDED THEN THE RETURNED BUSINESS INCOME OF THE ASSESSEE WOULD BE E XCEPTIONALLY MEAGER. IT WAS ONLY WHEN THE AO POINTED OUT THE DEFECTS IN THE ACCOUNTS AND EVIDENCES PRODUCED BEFORE HIM, THE ASSESSEE AGREED TO DECLARE THE UNDISCLOSED STOCK OF RS. 7 LAC MORE IN ADDITION TO THE ALREADY DECLARED UNDISCLOSED STOCK OF RS.8 LACS. THE PLEA TAKEN BY THE ASSESSEE THAT THE INCO ME WAS VOLUNTARILY DISCLOSED ONLY TO AVOID LITIGATION AND BUY PEACE IS NOT TENABLE IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE C ASE OF MAK DATA P. LTD. (SUPRA). FURTHER THE ARGUMENT OF THE COUNSEL THAT THE ASSESSEE INCOME WAS ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 6 ASSESSED ON ESTIMATION BASIS AND, HENCE, PENALTY CA NNOT BE LEVIED, IN OUR VIEW HAS NO FORCE. THE INCOME WAS NOT ESTIMATED BY THE AO RATHER THE SAME WAS DISCLOSED BY THE ASSESSEE WHEN THE AO POINTED OUT V ARIOUS DISCREPANCIES AND DEFECTS RELATING TO THE RETURNED INCOME OF THE ASSE SSEE. AFTER THE SURVEY THE ASSESSEE WAS SUPPOSED TO DECLARE THE CORRECT FIGURE OF HIS INCOME, WHICH THE ASSESSEE FAILED TO DO SO. THE CO-ORDINATE BENCH OF THE TRIBUNAL WHEN FACED WITH SIMILAR CIRCUMSTANCES IN THE CASE OF INTEGRAT ED TECHNOLOGY SOLUTIONS PVT. LTD. IN ITA NO. 6021/MUM/2013 FOR A.Y. 2009-1 0 DECIDED ON 15.01.2014, RELYING UPON THE AUTHORITY OF THE HONB LE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. (SUPRA), HAS OBSERVED THAT WHERE THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT TH E WRONG CLAIM IN THE RETURN OF INCOME IS ACTUATED BY ANY BONA FIDE ACT OR ARISE S OUT OF DEBATABLE ISSUE, THEREFORE, THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) DOE S NOT APPLY AND FURTHER THAT IN SUCH TYPE OF CASES IF THE CONTENTION OF THE LEARNED AR HAS TO BE ADMITTED THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIM OF THIS NATURE WOULD OTHERWISE GET AWAY WITHOUT PAYING THE LEGALLY PAYABLE TAX IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. SO IN VIEW OF THE ABOVE STATED LEGAL POSITION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED C ITA) AND THE SAME IS HEREBY UPHELD. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2014 SD/- SD/- (N K SAINI) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 14 TH FEBRUARY, 2014 ITA NO.: 543/MUM/2012 ASSESSMENT YEAR: 2005-06 7 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. CONCERNED MUMBAI 4. THE CIT (A) CONCERNED MUMBAI 5. THE DR, C - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI