CHARUDUTT B. SHAH, MUMBAI V. ITO 21(1)(1), MUMBAI

ITA 5742/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2622 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 1999-2000
• Appeal Filed On: 20-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LATA SUNDER
• Assessee Lawyers: ANUJ KISHANDWALA
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 143(3); 133A; 263; 144

Judgement Text

CHARUDUTT B SHAH ITA NO. 5742 /M UM /201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 5742 /MUM/20 1 3 (ASSESSMENT YEAR : 1999 - 2000 ) CHARUDUTT B SHAH , PROP MAHARASHTRA IMPEX CORPORATION, 32, AKASH KIRAN, AZAD ROAD, VILLE PARLE (E), MUMBAI - 400 0 57 .: PAN: AA P PS 5 7 18 Q VS ITO 21 (1) (1) , AAYAKAR BHAVAN, MUMBAI (APPELLANT (RESPONDENT) APPELLANT BY : SHRI ANUJ KISHANDWALA RESPONDENT BY : MS LATA SUNDER /DATE OF HEARING : 29 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 30 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 18 . 0 7 .201 3 , PASSED BY CIT(A) - 3 2 , MUMBAI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEAR 200 6 - 0 7 . THE ASSESSEE I S AGGRIEVED BY LEVY OF PENALTY OF RS. 3,93,231/ - ON ACCOUNT OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE OF RS. 22 LAKHS , WHICH COMPRISED OF UNRECORDED CASH SALES AMOUNTING TO RS. 13, 05,597/ - AND EXCESS STOCK OF RS. 8,9 1 ,250/ - . 2. THE BRIEF FACTS QUA THE ISSUE ARE THAT, ASSESSEE IS A PROPRIETOR OF M/S MAHARASHTRA IMPEX CORPORATION DEALING IN CHEMICALS. A SURVEY U/S 133A WAS CARRIED OUT IN THE PREMISES OF CHARUDUTT B SHAH ITA NO. 5742 /M UM /201 3 2 THE ASSESSEE ON 04.02.1999, DU RING THE COURSE OF WHICH , STATEMENTS OF CERTAIN PERSONS WERE RECORDED IN WHICH ASSESSEE ADMITTED THAT ENTRIES MADE IN PENCIL IN THE REGISTER MENTIONING THE DATES, NAMES OF THE PARTIES, ITEM N O S . AND VALUE REPRESENTED CASH SALES AGGREGATING TO RS. 13,05,597 / - FOR THE PERIOD 01.04.1998 TO 31.12.1998 WHICH WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. TO COVER UP THE DISCREPANCY ON ACCOUNT OF THESE UNRECORDED SALES AND EXCESS STOCK, THE ASSESSEE HAD OFFERED ADDITIONAL INCOME OF RS. 22 LAKHS OVER AND ABOV E HIS REGULAR INCOME. HOWEVER, WHILE PASSING THE ORDER U/S 143(3) ON 28.03.2002, THE UNRECORDED CASH SALES AND EXCESS STOCK FOUND WHICH WAS DISCLOSED BY THE ASSESSEE WAS NOT TAKEN INTO ACCOUNT. ACCORDINGLY, SUCH AN ASSESSMENT ORDER WAS CANCELLED/ SET ASIDE UNDER REVISIONARY JURISDICTION U/S 263 BY CIT - 21, MUMBAI. IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE DID NOT APPEAR AND ORDER U/S 144 R.W.S. 263 WAS PASSED DETERMINING THE TOTAL INCOME AT RS. 30,90,740/ - . 3. THE TRIBUNAL IN THE QUANTUM PROCEEDINGS HAD SET ASIDE THE MATTER TO THE FILE OF THE AO ON THE ISSUE OF ADDITIONAL INCOME OF RS. 22 LAKHS WITH A DIRECTION TO DETERMINE INVESTMENT IN THE SALES AND GROSS PROFIT EARNED ON THE TOTAL UNACCOUNTED SALES. HOWEVER, THE AO REPEATED THE SAME ADDITION AS MADE EARLI ER. I N THE FIRST APPEAL, THE CIT(A) HELD THAT GROSS PROFIT IS TO BE WORKED OUT AT RS. 1,20,090/ - ON UNACCOUNTED SALES AND INVESTMENT ON SUCH UNACCOUNTED SALES WAS TAKEN BY HIM AT RS. 1 LAKH. NOW, THE PENALTY OF RS. 3,93,231/ - HAS BEEN LEVIED ON ADDITION OF RS. 2,20,090/ - WHICH HAS BEEN CONFIRMED BY THE CIT(A) ALSO. 4. AFTER HEARING BO TH THE PARTIES AND ON PERUSAL OF VARIOUS ORDERS PASSED THE ENTIRE CHRONOLOGY OF EVENTS AS SUBM ITTED BY THE LD. COUNSEL CAN BE SUMMED UP AS UNDER: - CHARUDUTT B SHAH ITA NO. 5742 /M UM /201 3 3 CHARUDUTT B SHAH ITA NO. 5742 /M UM /201 3 4 5 . FROM THE AFORESAID EVENTS, LD COUNSEL SUBMITTED THAT ULTIMATELY THE ADDITION ON ACCOUNT OF ESTIMATED GROSS PROFIT AND ESTIMATED UNDISCLOSED INVESTMENT HAS BEEN MADE ON ESTIMATE BASIS , HENCE, NO PENALTY CAN BE LEVIED ON SUCH AN ESTIMATED ADDITION. SECONDLY, THERE CANNOT BE A PRESUMPTION THAT ASSESSEE MUST HAVE MADE SOME UNDISCLOSED INVESTMENT FROM UNEXPLAINED SOURCES FOR MAKING THE SALES. EVEN THE GP WORKED OUT IS ALSO PURELY ON ESTIMATE AND AD - HOC BASIS , THEREFORE , THERE CANNOT B E ANY PRESUMPTION OF ANY CONCEALMENT OF INCOME. 6 . ON THE OTHER HAND, LD. DR HAS STRONGLY RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT ULTIMATELY, ASSESSEE HAS BEEN FOUND DOING SALES OUTSIDE THE BOOKS AND EVEN IF SALES HAS NOT BEEN ADDED, THE GROSS PROFIT EARNED FROM SUCH SALES IS DEFINITELY CONCEALED INCOME, WHICH HAS NOT BEEN DISCLOSED AND WOULD NOT HAVE BEEN FOUND I F THE SURVEY HAD NOT TAKEN PLACE. 8. AFTER CONSIDERING THE RIVAL CONTENTION AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT AFTER VARIOUS ROUNDS OF LITIGATION, THE QUANTUM OF ADDITION ON ACCOUNT OF UNACCOUNTED INCOME FROM SALES AND UNDISCLOSED INVESTM ENT HAS BEEN DETERMINED AT RS. 1,20,090/ - + RS. 1 LAKH. THE ASSE S SEE WAS FOUND TO BE ENGAGED IN MAKING THE SALES OUTSIDE THE BOOKS I.E. THE SALES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. SO FAR AS THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IS CON CERNED, SAME IS BASED ON THE PRESUMPTION THAT FOR EFFECTING THE SALES OF RS.13.05 LAKHS SOME INVESTMENT IS REQUIRED WHICH HAS BEEN ESTIMATED AT RS. 1 LAKH. ON SUCH A ESTIMATED UNDISCLOSED INVESTMENT, NO PENALTY CAN BE LEVIED U/S 271(1)(C) , BECAUSE THERE IS NO MATERIAL TO SUBSTANTIATE THE SAME . THUS, PENALTY ON RS. 1 LAKH STANDS DELETED. SO FAR AS THE ADDITION OF RS. 1,20,090/ - ON ACCOUNT OF GROSS PROFIT, THE SAME IS DEFINITELY IN THE REALM OF UNDISCLOSED INCOME WHICH THE ASSESSEE CHARUDUTT B SHAH ITA NO. 5742 /M UM /201 3 5 HAS BEEN FOUND TO BE D OING OUTSIDE THE BOOKS. HOWEVER, SUCH AN ESTIMATE OF GROSS PROFIT CANNOT LEAD TO INFERENCE OR PRESUMPTION THAT ASSESSEE HAS ADMITTEDLY CONCEALED HIS INCOME SIMPLY FOR THE REASON THAT QUANTIFICATION OF GP IS BASED ON CERTAIN PRESUMPTION AND ESTIMATE. WHAT M UCH PROFIT COULD BE EARNED IS AGAIN GUESSWORK. THUS, PENALTY CANNOT BE LEVIED ON SUCH PRESUMPTION, ESPECIALLY WHEN THERE IS NO COMPLETE EVIDENCE THAT ASSESSEE HAS ACTUALLY EARNED GROSS PROFIT OF RS. 1,20,000/ - ON SALE OF RS. 13,05,597/ - . THUS, THE PENALTY LEVIED AND CONFIRMED BY THE CIT(A) ON THIS SCORE IS ALSO DELETED. 9. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH OCTOBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 32 , MUMBAI. 4 ) THE CIT - 21 , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS