CHAINS CORNER JEWELLERY (I) P.LTD, MUMBAI V. ACIT CC 22, MUMBAI

ITA 5703/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1612 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Document seized; Documents seized
• Section: 143(3); 153A; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5703/MUM/2013 ASSESSMENT YEAR 2010-11 M/S. CHAINS CORNER JEWELLERY (I) PVT. LTD. SHOP NO. 9, 1 ST FLOOR, KAPADIA BLDG., NO. 2, 31/33, S.M.STREET, ZAVERI BAZAR, MUMBAI- 400 002. VS. THE A CIT CC - 22, MUMBAI. PAN NO: AA BCC7451M ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING: 21 .11.201 6 DATE OF PRONOUNCEMENT: 28. 11 .2016 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. IT IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS)-39, MUMBAI AND ARISES OUT OF THE ORDER U/ S. 271AAA OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN THIS A PPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY WITHOUT APP RECIATING THAT THE APPELLANT HAD ADMITTED TO THE UNDISCLOSED INCOME DU RING THE COURSE OF SEARCH AND SPECIFIED THE MANNER IN WHICH THE SAME W AS DERIVED AND CONSEQUENTLY PAID THE TAXES THEREON, THEREFORE IT I S NOT A FIT CASE U/S APPELLANT BY: MRS. SANJUKTA CH OWDHURY , AR RESPONDENT BY: MR. MAURYA PRATAP , DR ITA NO. 5703/MUM/2013 2 271AAA AND THE PENALTY SO IMPOSED MAY BE DELETED. A LSO IT IS STATED THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT IN THE STA TEMENT U/S. 132(4) IT WAS CONDITIONALLY PRAYED THAT NO PENALTY BE LEVIED AND FULL CO-OPERATION WAS EXTENDED BY THE APPELLANT; HENCE IT IS NOT A FIT CA SE FOR THE LEVY OF PENALTY U/S. 271AAA AND THE SAME MAY BE DELETED. WITHOUT PREJUDICE TO ABOVE, IT IS STATED THAT THE WORD MAY DOES NOT AMOUNT TO S HALL AND THEREFORE, THE EXERCISE OF DISCRETION OUGHT NOT TO HAVE BEEN IN A ROUTINE MANNER AS THE LEVY OF PENALTY IS NOT AUTOMATIC AND UNDER THE CIRC UMSTANCES, NO PENALTY U/S. 271AAA COULD BE CALLED FOR AND HENCE, THE PENA LTY MAY BE DELETED. 3. IN A NUTSHELL, THE FACTS ARE THAT A SEARCH AND S EIZURE ACTION U/S 132 WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSES SEE ON 23/11/2009 AND ON THE SAME DAY SURVEY WAS CARRIED OUT AT SHOP NO. 9, KAPADIA BUILDING. SUBSEQUENTLY, RETURN OF INCOME WAS FILED BY THE ASSESSEEE FOR THE IMPUGNED ASSESSMENT YEAR ON 04/02/2010 DISCLOSING I NCOME AT RS. 1,91,54,710/-. DURING THE COURSE OF SEARCH, CASH OF RS. 1,48,00,000/- WAS FOUND IN THE ASSESSEES PREMISES, OUT OF WHICH CASH OF RS. 1,47,00,000/- WAS SEIZED. DURING THE COURSE OF ASSESSMENT, AFTER EXAM INING THE SEIZED DOCUMENTS AND OTHER STATEMENTS, THE AO FOUND THAT T HERE WAS STOCK DEFICIT OF RS. 15,85,994/-. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A , THE ASSESSEE OFFERED RS. 1,47,00,000/- AS UN DISCLOSED INCOME. THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 26/12/201 1 ASSESSING THE INCOME AT RS. 2,07,40,700/- THEN THE AO IMPOSED A P ENALTY OF RS.16,30,100/- U/S 271AAA OF THE ACT. THE ASSESSEE PREFERRED APPEAL AGAINST THE ORDER OF THE AO BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITS THAT MERELY BECAUSE QUANTUM IS CONFIRMED, IT DOES NOT BECOME AN AUTOMAT IC CASE FOR THE LEVY OF PENALTY U/S 271AAA. IT IS STATED THAT THE CASE OF T HE ASSESSEE FALLS IN SUB- ITA NO. 5703/MUM/2013 3 SEC.(2) OF SECTION 271AAA. SHE FURTHER CLARIFIES T HAT DURING THE RECORDING OF STATEMENT, THE DIRECTOR SHRI. PRAKASH K. JAIN HAS E XPLAINED ABOUT THE MANNER OF ACCUMULATION OF UNACCOUNTED CASH AND ITS SOURCES. SHRI JAIN HAD CLARIFIED THAT THEY HAD NOT ACCOUNTED THIS CASH ACC UMULATION, AS IT WAS IN THE MIDDLE OF THE YEAR. RELIANCE WAS PLACED BY HER ON T HE DECISION IN THE CASE OF CIT VS. ASK ENTERPRISES 230 ITR (BOM.); CIT VS. SHUBHAGAMAL MAHAVIRCHAND 142 ITR 747 (MAD); CIT VS. SMT. P.K.NOORJEHAN 237 ITR 570(SC); P.K.JAIN VS. DCIT 149 TTJ (CTK)(UO) 36; ASHOK KUMAR SHARMA VS. DCIT 149 TTJ (CTK)(UO) 33; ACIT VS. M/S. KANAKIA SPACES PVT. LTD . (ITA NO. 6763/MUM/2011) FOR THE A.Y. 2007-08 ; ACIT VS. SHRI. A.M. ANNAMALAISAMY (HUF) (ITA NO. 1634/MDS/2012) FOR THE A.Y. 2009-10; SARAT CHANDRA SAHOO VS. DY. CIT (2015) 152 ITD 326(CTK.); SUNIL KUMAR BANSAL VS. DY. CIT 37 ITR (TRIB) 576 (CHD.). 5. THE LD. DR SUPPORTS THE ORDER PASSED BY LD. CIT( A) UPHOLDING THE PENALTY OF RS. 16,30,100/- IMPOSED BY THE AO U/S 27 1AAA OF THE ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT SECTION 271AAA IS APPLICABLE IF (A) A SEARCH IS INITIATED U/S 132 ON OR AFTER JUNE 1, 200 7, BUT BEFORE JULY 1, 2012 (B) THERE IS SOME UNDISCLOSED INCOME AND (C) UNDI SCLOSED INCOME PERTAINS TO A SPECIFIED PREVIOUS YEAR. WHAT IS THE QUANTUM OF CONCEALMENT PENALTY ? IF THE ABOVE CONDITIONS ARE SATISFIED, 10 % OF U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR IS CONCEALMENT PENALTY WH ICH CAN BE IMPOSED BY THE ASSESSING OFFICER IN ADDITION TO TAX. THE AFORE SAID PENALTY OF 10 % OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEA R CAN BE AVOIDED IF THE FOLLOWING CONDITIONS ARE SATISFIED- I. IF THE ASSESSEE IN A STATEMENT U/S 132(4) IN TH E COURSE OF THE SEARCH, ADMITS THE UNDISCLOSED INCOME. FURTHER, HE SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. ITA NO. 5703/MUM/2013 4 II. HE SUBSTANTIATES THE MANNER IN WHICH THE UNDISC LOSED INCOME WAS DERIVED. III. HE PAYS THE TAX, TOGETHER WITH INTEREST, IF AN Y, IN RESPECT OF THE UNDISCLOSED INCOME. IF THE ABOVE THREE CONDITIONS ARE SATISFIED PENALTY U/S 271AAA (I.E. 10 PER CENT OF UNDISCLOSED INCOME OF THE S PECIFIED PREVIOUS YEAR) CAN BE AVOIDED. 6.1 AS POINTED OUT BY THE HONBLE SUPREME COURT IN ANANTHARAM VEERASINGHAIAH & CO VS. CIT (1980) 123 ITR 457,462 (SC), THE FINDINGS RECORDED IN THE ASSESSMENT ORDER CONSTITUTE GOOD EV IDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED A S CONCLUSIVE FOR THE PURPOSE OF THE PENALTY PROCEEDINGS. 6.2 THE ONLY DISPUTE HERE IS THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERI VED. WE FIND THAT DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE, CASH AMOUNTING TO RS. 1,48,00,000/- WAS FOUND OUT WHICH RS. 1,47,00,000/- WAS SEIZED. IN THE RETURN OF INCOME FILED IN RESPON SE TO NOTICE U/S 153A, THE ASSESSEE OFFERED RS. 1,47,00,000/- AS UNDISCLOS ED INCOME. IN THE STATEMENT RECORDED U/S 132(4) ON 23.11.2009, SHRI P RAKASH JAIN, DIRECTOR HAS STATED IN RESPONSE TO Q.10 REGARDING THE SOURCE OF EXCESS CASH THAT THE CASH IS GENERATED BY WAY OF UNACCOUNTED SALES IN GO LD ORNAMENTS. ALSO, SHRI BHAGWATILAL MOTILAL DHAKAD, DIRECTOR, M/S. CHA INS CORNER JEWELLERY (I) PVT. LTD. CONFIRMED ON 1/12/2009 THE SAID UNDIS CLOSED INCOME IN RESPONSE TO Q. 5 WHICH READS UNDER : I HAVE PERUSED ALL THE ABOVE 3 STATEMENTS GIVEN BY MY COLLEAGUE, SHRI. PRAKASH JAIN. I AGREE WITH HIS STATEMENTS AND CONFI RM THAT THE SUM OF RS. 1.47 CRORES REPRESENTS UNACCOUNTED CASH BELONGING TO M/S . CHAINS CORNER JEWELLERY (I) PVT. LTD. THE SAID SUM WAS DEPLOYED I N THE GOLD JEWELLERY BUSINESS, OUTSIDE THE BOOKS OF ACCOUNTS. HENCE, THE SUM OF RS. 1.47 CRORES HAS BEEN OFFERED AS ADDITIONAL INCOME FOR TAXATION IN F Y 2009-10 IN THE HANDS OF THE COMPANY. BESIDES, WE HAVE ALSO OFFERED A SUM OF RS. 15,000/- AS ITA NO. 5703/MUM/2013 5 ADDITIONAL INCOME ON ACCOUNT OF CASH SALARY PAID TO MR. MOTILAL LODHA. I HUMBLY REQUEST THAT NO PENALTY/PROSECUTION PROCEEDI NGS ARE LAUNCHED AGAINST OUR COMPANY, AND WE SHALL FULLY CO-OPERATE WITH THE INCOME TAX PROCEEDINGS. 6.3 A SIMILAR ISSUE AROSE BEFORE ITAT A BENCH MU MBAI IN THE CASE OF M/S. KANAKIA SPACES PVT. LTD . (SUPRA) . THE GROUND RAISED BY THE REVENUE BEFORE THE TRIBUNAL WAS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING PENALTY LEVIED U/S. 271AAA OF THE I.T. ACT,1961 OF RS.55,00,000/- WITHOUT APPRECIATING THE FACT T HAT ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED SO AS TO QUALIFY FOR NON-LEVY OF PENALTY WITHIN THE MEA NING OF SUB-SECTION(2) OF SECTION 271AAA OF THE I.T. ACT, 1961. THE TRIBUNAL FOLLOWED THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN CIT VS. MAHENDRA C. SHAH (299 ITR 305) AND THAT OF HONBLE ALLAHABAD HIGH COURT IN CIT VS. RADHA KISHAN GOEL (2005) 278 ITR 454 (ALL.) AND DISMISSED THE APPEAL FILED BY THE REVENU E. 6.4 ALSO A SIMILAR ISSUE AROSE IN SITA RAM GUPTA VS. ACIT [2014] 48 TAXMANN.COM 327 (DELHI - TRIB.). THE TRIBUNAL HELD THAT WHERE ASSESSING OFFICER HAVING COMPLETED ASSESSMENT, PASSED A PENAL TY ORDER UNDER SECTION 271AAA FOR DEFAULT OF NOT SUBSTANTIATING MA NNER IN WHICH UNDISCLOSED INCOME WAS DERIVED, IN VIEW OF FACT THA T ASSESSEE MADE STATEMENT THAT HE HAD EARNED UNDISCLOSED INCOME FOR VARIOUS TRANSACTIONS OF SALE/PURCHASE OF LAND WHICH DID NOT FACE ANY REB UTTAL AND, MOREOVER, ASSESSEE HAD PAID DUE TAX ON SAID INCOME, IMPUGNED PENALTY ORDER DESERVED TO BE SET ASIDE. 6.5 WE FIND THAT THE ASSESSEE-COMPANY HAS PAID TA XES TOGETHER WITH INTEREST IN RESPECT OF THE UNDISCLOSED INCOME DECLA RED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. AS NARRATED IN PARA 6.2 HERE-IN-ABOVE, IT HAS PROVIDED INFORMATION REGARDING THE MANNER IN WH ICH THE UNDISCLOSED ITA NO. 5703/MUM/2013 6 INCOME WAS DERIVED. THEREFORE, THE ORDER OF THE LD. CIT(A) UPHOLDING THE PENALTY OF RS. 16,30,100/- IMPOSED BY THE AO U/S 27 1AAA IS CANCELLED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 /11/2016 SD/- SD/- (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 28/11/2016 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI PRAMILA