THAKKAR POPATLAL VELJI SALES LTD., PANVEL V. DCIT, CENTRAL CIRCLE 25, MUMBAI

ITA 5796/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9047 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 14-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHAN
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Loose papers
• Section: 143(3); 153A; 27; 132

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5796 /MUM/2013 ( / ASSESSMENT YEAR : 2007-08) THAKKAR POPATLAL VELJI SALES LTD., OFFICE NO. 2, NEEL PRESIDENCY, OPP. TELEPHONE EXCHANGE, PANVEL 410 206 (RAIGAD) / V. DCIT- CENT. CIRCLE 25, 4 TH FLOOR, AAYAKAR BHAVAN, DR. M.K. ROAD, MUMBAI. ./ PAN :AABCT7939D ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI NEEL KHANDELWAL REVENUE BY : SHRI M.C. OMI NINGSHAN / DATE OF HEARING : 14-12-2016 / DATE OF PRONOUNCEMENT : 13-01-2017 / O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER : THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 20 TH JUNE, 2013 PASSED BY THE LD. CIT(A) 39, MUMBAI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271 AAA OF THE INCOME TAX ACT, 1961 FOR A.Y. 2007-08. 2. THE ASSESSEE IS MAINLY AGGRIEVED BY THE LEVY OF PENALTY OF RS. 30 LACS IMPOSED BY THE A.O. U/S 271 AAA OF THE ACT. BRIEF F ACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION WAS CARRIED OUT BY THE DE PARTMENT U/S 132 OF THE ACT ON 5 TH JUNE, 2007 AT THE RESIDENTIAL/BUSINESS PREMISES OF THE METRO GROUP ITA 5796/M/13 2 OF CASES WHICH INCLUDED THE ASSESSEE ALSO. IN RESPO NSE TO THE NOTICE U/S 153A OF THE ACT DATED 10 TH OCTOBER, 2008, THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 26 TH DECEMBER, 2008 DECLARING TOTAL INCOME AT RS. 1,86,53,260/- WHICH WAS THE SAME AS DECLARED IN THE ORIGINAL RETURN FILED U/S 139(1) OF THE ACT. AS AGAINST THIS, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT ON A TOTAL INCOME OF RS. 2,2 5,33,628/- VIDE ORDER DATED 24 TH NOVEMBER, 2009. IT IS PERTINENT TO NOTE THAT IN T HE SAID ASSESSMENT ORDER, NO PENALTY PROCEEDINGS WERE INITIATED U/S 27 1 AAA NOR ANY NOTICE WAS ISSUED FOR LEVY OF SUCH PENALTY AT THAT TIME. THE PENALTY WHICH WAS INITIATED IN THE ASSESSMENT PROCEEDINGS WAS U/S 271(1)(C) OF THE ACT. THE NATURE OF ADDITION MADE BY THE A.O. WAS FIRST OF ALL ON ACCOU NT OF UNACCOUNTED TURNOVER WHICH WAS BASED ON ESTIMATED UNACCOUNTED TURNOVER A ND THEREBY APPLYING GP RATIO RATE OF 4.81% ON ESTIMATE BASIS RIGHT FROM A.Y. 2003-04 TO A.Y. 2008-09. THE WORKING IS GIVEN AS UNDER :- A.Y. ESTIMATED UNACCOUNTED TURNOVER AVERAGE GP UNACCOUNTED INCOME 2003-04 19,80,00,000 4.81% 95,23,800 2004-05 19,80,00,000 4.81% 95,23,800 2005-06 19,80,00,000 4.81% 95,23,800 2006-07 19,80,00,000 4.81% 95,23,800 2007 - 08 19,80,00,000 4.81% 95,23,800 2008-09 3,30,00,000 4.81% 15,87,500 THE A.O. MADE FURTHER ADDITION OF RS. 31,31,340/- A S UNACCOUNTED CAPITAL BASED ON SOME LOOSE PAPERS FOUND DURING THE SEARCH; ADDITION OF RS. 1,61,67,568/- ON ACCOUNT OF UNEXPLAINED JEWELLERY W AS IN THE HANDS OF THE ASSESSEE; AND RS. 50,58,000/- ON ACCOUNT OF CASH FO UND DURING THE COURSE OF SEARCH. DURING THE COURSE OF SEARCH, THE ASSESSEE HAD DECLARED AN INCOME OF RS. 3 CRORES IN THE STATEMENT RECORDED U/S 132(4). ACCORDINGLY, THE A.O. COMPUTED THE UNDISCLOSED INCOME IN THE FOLLOWING MA NNER:- ITA 5796/M/13 3 ON ACCOUNT OF UNACCOUNTED INCOME AS DISCUSSED ABOVE 95,23,800 MAXIMUM UNACCOUNTED CAPITAL AS DISCUSSED ABOVE 31,31,000 UNEXPLAINED JEWELLERY FOUND AND SEIZED DURING THE COURSE OF SEARCH 50,58,000 3,38,80,368 LESS: INCOME DECLARED U/S 132(4) 3,00,00,000 FURTHER ADDITION REQUIRED TO BE MADE TO UNDISCLOSED INCOME 38,80,368 THE A.O. COMPUTED THE TOTAL INCOME AS FOLLOWS: TOTAL INCOME AS PER RETURN U/S 153A -RS.1,86,53, 260 ADD: UNDISCLOSED INCOME AS DISCUSSED ABOVE -RS. 38,80,368 TOTAL INCOME -RS.2,25,33,628 3. AGAINST THE SAID ASSESSMENT ORDER, FIRST APPEAL WAS FILED BY THE ASSESSEE, WHEREIN THE LD. CIT(A) GAVE PART RELIEF T O THE ASSESSEE AND DETERMINED THE UNACCOUNTED INCOME FOR A.Y. 2007-08 AS UNDER:- I) UNACCOUNTED INCOME FROM UNACCOUNTED SALES - RS. 95 ,23,800/- II) SEED CAPITAL - RS. 31,31,000/- III) JEWELLERY & BULLION - RS.1,61,57,568/- INCOME OFFERED BY THE ASSESSEE - RS.2,88,12,368/ - DIRECTING THE A.O. TO DELETE THE ADDITION OF RS.33, 80,368/- 4. IT HAS BEEN INFORMED BEFORE US BY THE LD. COUNSE L THAT IN THE SECOND APPEAL FILED BY THE DEPARTMENT BEFORE THE TRIBUNAL, THE DELETION OF UNDISCLOSED INCOME OF RS. 33,80,368/- HAD BEEN UPHE LD AND ACCORDINGLY, THE DEPARTMENT APPEAL HAS BEEN DISMISSED VIDE ORDER DAT ED 8 TH MAY, 2013. IN THE MEANWHILE SHOW CAUSE NOTICE U/S 271(1)(C) AND 271 A AA OF THE ACT WAS ISSUED ON 12 TH MARCH, 2012 BY THE A.O., IN RESPONSE TO SUCH NOTIC E, DETAIL REPLY WAS FILED BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS, THE A.O. REALIZED THAT THE PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE ENFORCED IN ITA 5796/M/13 4 ASSESSEES CASE AS THE DISCLOSURE MADE BY THE ASSES SEE BELONGS TO THE SPECIFIED PREVIOUS YEAR IN WHICH THE SEARCH TOOK PL ACE. ACCORDINGLY HE HELD THAT ONLY PENALTY U/S 271 AAA OF THE ACT CAN BE INI TIATED AND LEVIED. THE ASSESSEE OBJECTED THAT SUCH PENALTY CANNOT BE LEVIE D BECAUSE NO SUCH PENALTY U/S 271 AAA WAS INITIATED IN THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HELD THAT LEVY OF PENALTY U/S 271 AAA OF THE ACT IS NOT CONTINGENT ON ITS INITIATION DURING ANY PROCEEDINGS OF THE INCOME TAX ACT. ONCE THE UNDISCLOSED INCOME FALLS WITHIN T HE DEFINITION OF THIS SECTION AND THE CONDITIONS AS PRESCRIBED IN THIS SE CTION ARE APPLICABLE, PENALTY HAS TO BE LEVIED. ACCORDINGLY, HE LEVIED PE NALTY OF RS. 30 LACS BEING 10% OF UNDISCLOSED INCOME OF RS. 3 CRORES AND THE S AME HAS BEEN CONFIRMED BY THE LD. CIT (A) ALSO. 5. BEFORE THE LD. CIT(A), ASSESSEE MADE DETAIL SUBM ISSIONS AS TO WHY LEGALLY AND FACTUALLY SUCH PENALTY U/S 271 AAA OF T HE ACT CANNOT BE LEVIED IN THE CASE OF THE ASSESSEE. THE ASSESSEES SUBMISSIO N HAS BEEN INCORPORATED IN THE APPELLATE ORDER FROM PAGES 4 TO 8. HOWEVER, TH E LD. CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE THOUGH HAVE MADE DISCLOSURE OF UNDISCLOSED INCOME AND PAID TAXE S THEREON, HOWEVER, THE ASSESSEE HAD NOT SPECIFIED THE MANNER IN WHICH UN DISCLOSED INCOME HAS BEEN DERIVED AND ALSO MANNER HAS NOT BEEN SUBSTANT IATED. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE PENALTY AFTER OBSERVING AN D HOLDING AS UNDER:- IT IS INDEED A FACT THAT THE APPELLANT MADE DISCLOSURE OF UNDISCLOSED INCOME AND PAID TAXES/INTEREST THEREON. WITH REGARD TO THE MANNER IN WHICH UNDISCLOSED INCOME HAS BEEN DERIVED AND WHETHE R IT HAS BEEN SUBSTANTIATED, A CONTENTION HAS BEEN RAISED BY THE APP ELLANT THAT NEITHER IN THE COURSE OF THE SEARCH NOR IN THE ASSESS MENT PROCEEDINGS ANY SUCH QUERY OR QUESTION WAS RAISED. A FURTHER CON TENTION IS THAT WHEN THE UNDISCLOSED INCOME AS DECLARED HAS BEEN SH OWN UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' A ND THE DEPARTMENT HAS ACCEPTED THE SAME BY PASSING THE ASSESSMENT ORDER ACCORDINGLY, THE APPELLANT OUGHT TO BE DEEMED TO HAVE SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. IT IS HELD THAT SUCH ITA 5796/M/13 5 CONTENTIONS ARE DEVOID OF MERITS. ASSUMING THAT NO QUE RY OR QUESTION WAS RAISED IN THE EARLIER PROCEEDINGS WITH REGARD TO SUBSTANTIATING THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED, IT IS NOT KNOWN WHAT PREVENTED THE APPELLANT FROM FURNISHING THE REQU ISITE DETAILS IN THE COURSE OF THE HEARING OF THE CURRENT PENALTY PROCE EDINGS. FURTHER, APPELLANT CANNOT TAKE THE PLEA THAT THE INCOME AS DISCLOS ED HAS BEEN ACCEPTED BY THE A.O AND HENCE SHOULD NOT BE VISITED WITH PENALTY. DISCLOSURE OF CONCEALED INCOME AFTER SEIZURE OF INC RIMINATING MATERIAL WITH REGARD TO THE INCOME SO DISCLOSED CANNOT BE A VOL UNTARY ACTION SINCE IT IS MADE UNDER CONSTRAINT OF EXPOSURE TO ADVERS E ACTION BY THE DEPARTMENT; THE UNDERLYING OBJECT OF SUCH DISCLOSURE BEING TO AVOID ADVERSE CONSEQUENCES THAT MAY FOLLOW A NON DISCLOSU RE. THE CONCLUSION TO BE DRAWN IS THAT ALL THE THREE CONDITIONS AS MENTIONE D IN THE RELEVANT PROVISION HAS NOT BEEN CONSECUTIVELY EO PLIED WITH. EVEN IF ONE OF THE CONDITIONS IS NOT FULFILLED, THE APPELLANT IS LIABLE TO BE VISITED WITH PENALTY. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, MR. NEEL KHANDALWAL AFTER EXPLAINING THE ENTIRE FACTS OF THE CASE, REITERATED THAT PENALTY PROCEEDINGS U/S 271 AAA HAS TO BE INITIATED IN THE COURSE OF ASSESS MENT PROCEEDINGS ONLY, BECAUSE THAT IS THE DETERMINATIVE OF UNDISCLOSED IN COME WHICH HAS BEEN DECLARED BY THE ASSESSEE. IF THERE IS NO INITIATIO N THEN, NO PENALTY CAN BE LEVIED AND TOO AFTER A GAP OF FIVE YEARS FROM THE D ATE OF SEARCH. MORE SO, IN THIS CASE, AT THE TIME OF OFFER MADE BY THE DIRECTO R IN THE STATEMENT U/S 234(4), THE ASSESSEE HAD CLEARLY STATED THAT NO PEN AL PROVISION SHOULD BE INITIATED. IN SUPPORT, THE LD. COUNSEL DREW OUR AT TENTION TO THE QUESTION NO. 11 OF FIRST STATEMENT WHICH READS AS UNDER:- Q NO. 11 DO YOU WANT TO SAY ANYTHING ELSE: ANS. DURING THE COURSE OF SEARCH AT THESE PREMISES, CERTAIN INCRIMINATING EVIDENCE HAS BEEN FOUND AS MENTIONED ABOVE. CONSIDE RING THIS FACT AND TO BUY PEACE OF MIND AND TO AVOID PROTRACTED LITIGATION WITH THE DEPARTMENT, I AS A DIRECTOR OF TPVSL, VOLUNTARILY OFFER AN AMOUNT OF RS. 6.75 CRORES AS ADDITIONAL INCOME OF M/ S. THAKKAR POPATLAL VELJI SALES LTD. (T PVSL) AT PRESENT. IT MAY KINDLY BE KEPT ON RECORD THAT THIS DECLARATION OF RS . 6.75 CRORES IS INCLUSIVE OF RS. 1.25 CRORES DECLARED BY ME AT MY RESIDENCE. THE YEAR-WISE AND HEAD-WISE BIFURCATION OF THE ADDITIONAL INCOME WILL BE FURNISHE D AFTER GOING THROUGH THE SEIZED MATERIAL BUT NOT BEFORE 13.06.2007. I UNDERTAKE TO FILE THE RETURNS OF INCOME ACCORDINGLY AND PAY THE TAXES DUE. IT IS REQUES TED THAT DUE IMMUNITY MAY BE GRANTED FROM LEVY OF PENALTY AS PER PROVISIO NS OF THE 1. T. ACT 1961.' ITA 5796/M/13 6 THE LD. COUNSEL FURTHER SUBMITTED THAT EITHER DURIN G THE COURSE OF SEARCH OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO QUE STION OR QUERY WAS RAISED BY THE AUTHORITIES TO EITHER THE SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED OR TO SUBSTANTIATE THE SAME. THE ASSE SSEES UNDISCLOSED INCOME HAS BEEN ACCEPTED BY THE A.O. AS WELL AS BY THE LD. CIT(A) AND, THEREFORE, NOW IT CANNOT BE HELD THAT THE ASSESSEE HAS NOT SPECIFI ED THE MANNER OR UNABLE TO SUBSTANTIATE THE SAME. HERE, IN THIS CASE THE ASSE SSEE HAS INITIALLY OFFERED ADDITIONAL INCOME OF RS. 6.75 CRORES WHICH WAS LATE R ON MODIFIED IN THE RETURN OF INCOME TO RS. 3 CRORES WHICH HAS BEEN ACCEPTED B Y THE DEPARTMENT. THUS, THE ASSESSEES STAND STANDS ACCEPTED AND, THEREFORE , NO SUCH PENALTY SHOULD BE LEVIED. IN ANY CASE, THE LD. COUNSEL SUBMITTED THAT FROM THE BREAK-UP OF RS. 3 CRORES IT CAN BE SEEN THAT IT IS PARTLY FOR U NACCOUNTED INCOME WHICH HAS BEEN BASED ON ESTIMATED TURNOVER; PARTLY OUT OF JEW ELLERY AND BULLION WHICH WAS CATEGORICALLY EXPLAINED THAT THEY BELONG TO VAR IOUS FAMILY MEMBERS AND IS FULLY SUPPORTED BY DECLARATIONS MADE IN VDIS, 97. IN SUPPORT, THE LD. COUNSEL DREW OUR ATTENTION TO QUESTION NO. 3 OF THE SECOND STATEMENT RECORDED ON 27 TH JUNE, 2007. NONE OF THE INGREDIENT WHICH CONSTITUT ED SO CALLED UNDISCLOSED INCOME REQUIRED ANY SPECIFICATIO N OR SUBSTANTIATION OF THE MANNER, BECAUSE IT IS PURELY ON ESTIMATE BASIS AND IN THE CASE OF JEWELLERY, THE MANNER AND SUBSTANTIATION STANDS SATISFIED. TH US NO PENALTY ON MERIT CAN BE LEVIED. IN SUPPORT OF HIS CONTENTION, THE L D. COUNSEL HAD RELIED UPON THE FOLLOWING DECISIONS:- (I) PRAM OD KUMARJAIN VS. DY. CIT 149 TTJ (CTK.) (U O) 36 (II) ASHOK KUMAR SHARMA V/S. DY. CIT 149 TTJ (CTK.) (UO) 33 (III) DY. CIT V /S. PIONEER MARBLES & INTERIORS P. LTD. 50 SOT 571 (KO1.) (IV) MOTHERS PRIDE EDUCATION PERSONNA P. LTD. V/S. DCIT (ITA NO.3372/DE/2011) (V) CIT V / S. MAHENDRA C SHAH 299 ITR 305 (GUJ) (VI) ITO V /S. SHILPA V GUPTA (ITA. 1784/ AHD/2012) ITA 5796/M/13 7 (VII) DCIT V /S. SMT. SULOCHANADEVI A. AGARWAL (ITA NO.1052/ AHD/2012) 7. THE LD. D.R., ON THE OTHER HAND, RELYING UPON TH E ORDER OF THE LD. CIT(A) AND SUBMITTED THAT, HOW THE INCOME HAS BEEN EARNED AND HOW THE CAPITAL HAS BEEN DEPLOYED NEEDS TO BE EXPLAINED BY THE ASSESSEE WHICH IN THIS CASE HAS NOT BEEN DONE. THE ONUS IS ENTIRELY ON THE ASSESSEE TO PROVIDE THE EVIDENCE IN SUPPORT OF THE DISCLOSURE MADE AND IF THE SAME HAS NOT BEEN DONE, THEN, THE PENALTY U/S 271 AAA OF THE ACT IS CLEARLY ATTRACTED WHICH IS A DEEMED PENALTY. THE CONDITIONS LAID DOWN FOR ABSOLVING THE ASSESSEE FROM THE PENALTY UNDER THIS SECTION HAD TO BE STRICTLY FOLLOWED. THUS, TH E LD. D.R. SUBMITTED THAT THE PENALTY HAS BEEN RIGHTLY CONFIRMED BY THE LD. CIT(A ). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AS WELL AS T HE RELEVANT FINDINGS GIVEN BY THE AUTHORITIES BELOW AND THE MATERIAL AVA ILABLE ON RECORD INCLUDING THE CASE LAWS RELIED UPON BEFORE US. FROM THE RECO RD, IT IS SEEN THAT THE FIRST STATEMENT OF MR. YOGESH POPATLAL THAKKAR, DIRECTOR OF THE ASSESSEE COMPANY WAS RECORDED U/S 132(4) OF THE ACT ON 6 TH JUNE, 2007, WHEREIN IN RESPONSE TO QUESTION NO. 11, HE SUBMITTED THAT IN ORDER TO AVOI D PROTRACTED LITIGATION WITH THE DEPARTMENT, HE IS VOLUNTARILY OFFERING RS. 6.75 CRORES AS ADDITIONAL INCOME, ALTHOUGH, THE YEAR-WISE BIFURCATION WAS TO BE GIVEN SUBSEQUENTLY. IN THE SAID STATEMENT HE FURTHER REQUESTED THAT IMMUNI TY FROM LEVY OF PENALTY UNDER THE PROVISIONS OF INCOME TAX ACT SHOULD BE GR ANTED. THE RELEVANT QUESTION HAS ALREADY BEEN REPRODUCED ABOVE. LATER ON, IN THE SECOND STATEMENT RECORDED ON 27 TH JUNE, 2007, WITH REGARD TO THE JEWELLERY, THE STATEMENT OF THE DIRECTOR READS AS UNDER:- ANS:- I HAVE PRODUCED BEFORE YOU THE WEALTH TAX RETU RNS OF A.Y. 92-93 FOR MYSELF, YOGESH THAKKAR (HUF), HARSHA THAKKAR, H ANSABEN THAKKAR, NISHA THAKKAR, NITIN THAKKAR, VITIN THAKKAR (HUF); ALSO I AM PRODUCING THE VDIS PARTICULARS OF HARSHA THAKKAR AND HANSABEN THAKKAR, WHO HAVE DECLARED 1524.29 GMS GOLD JEWELLE RY IN VDIS 97. I AM ALSO PRODUCING BILLS (TWO) OF TWO DIAMOND JEWELL ERY PURCHASED ON ITA 5796/M/13 8 22-04-2007 OF RS. 3,41,000/- AND RS. 3,01,000/- WHI CH HAVE BEEN PAID BY CHEQUE EXCEPT FOR RS. 1,40,000/- IN CASH. SINCE THIS AMOUNT HAS BEEN PAID IN CASH FROM UNDISCLOSED SOURCES, I AM OF FERING THE AMOUNT OF RS. 1.4 LACS AS MU UNDISCLOSED INCOME AND SHOULD BE INCLUDED IN THE AMOUNT OF RS. 6.75 CRORES DISCLOSED ON 05-06-2007. FROM THE ABOVE STATEMENT, IT CAN BE DEDUCED THAT PA RT OF THE SOURCE OF JEWELLERY FOUND WAS EXPLAINED THROUGH DECLARATIONS UNDER VDIS 97 AND HENCE NO SUBSTANTIATION AS SUCH IS REQUIRED TO THIS EXTEN T. THE DISCLOSURE U/S 132(4) BY THE ASSESSEE HAD BEEN LATER CLARIFIED TO BE UNDISCLOSED INCOME (FOR THE PURPOSE OF DISCLOSURE) AT RS. 3 CRORES, CONSIST ING OF FOLLOWING ITEMS OF INCOME :- PARTICULARS AMOUNT MAXIMUM UNACCOUNTED CAPITAL 31,31,000 UNEXPLAINED JEWELLERY FOUND AND SEIZED DURING THE COURSE OF SEARCH (THE CORRECT AMOUNT IS RS. 1.81 LACS AND NOT RS. 1,61 LACS) 1,81,67,568 UNEXPLAINED CASH FOUND AND SEIZED DURING THE COURSE OF SEARCH 50,58,000 CASH RECEIPTS 20,00,000 MISCELLANEOUS 16,43,432 3,00,00,000 THE MANNER IN WHICH THE ASSESSMENT HAS BEEN COMPLET ED HAS ALREADY BEEN DISCUSSED ABOVE. FROM STAGE OF THE LD. CIT(A) THE UNACCOUNTED INCOME WAS COMPUTED AS UNDER:- I) UNACCOUNTED INCOME FROM UNACCOUNTED SALES - RS. 95 ,23,800/- II) SEED CAPITAL - RS. 31,31,000/- III) JEWELLERY & BULLION - RS.1,61,57,568/- INCOME OFFERED BY THE ASSESSEE - RS.2,88,12,368/ - DIRECTING THE A.O. TO DELETE THE ADDITION OF RS.33, 80,368/- FROM THE PERUSAL OF THE AFORESAID ITEMS OF INCOME, IT IS SEEN THAT, SO FAR AS THE UNACCOUNTED INCOME FROM UNACCOUNTED SALES IS CONCER NED, IT IS BASED PURELY ON ESTIMATED TURNOVER MADE AT RS. 19.80 CRORES ON W HICH ESTIMATED GP RATIO ITA 5796/M/13 9 AT 4.81% HAS BEEN APPLIED. ONCE THE INCOME HAS BEE N DETERMINED FINALLY BY THE LD. CIT(A) ON ACCOUNT OF ESTIMATED TURNOVER AND ESTIMATED GP AND NOT IN THE MANNER IN WHICH THE ASSESSEE HAS DISCLOSED, THE N THERE IS NO QUESTION OF LEVY OF PENALTY U/S 271 AAA ON THIS AMOUNT OF UNACC OUNTED INCOME. FURTHER, AS REGARD THE ADDITION ON ACCOUNT OF UNACCOUNTED CA PITAL OF RS. 31,31,000/-, IT IS SEEN THAT IT IS BASED ON DETERMINATION MADE B Y THE A.O., ON THE BASIS OF CERTAIN SEIZED MATERIAL BUT NOT QUANTIFIED. A.O. H AS HELD THAT, THIS MUCH AMOUNT WOULD BE THE MAXIMUM UNACCOUNTED CAPITAL FOR THE BUSINESS. ONCE IT IS PART OF THE INCOME DETERMINED UNDER THE HEAD BUSINESS OR PROFESSION, THEN INHERENT SUBSTANTIATION OF THE MANNER LIES IN THE COMPUTATION ITSELF, I.E. IT IS ON ACCOUNT OF BUSINESS INCOME WHICH HAS BEEN OFFERED. MOREOVER, THIS BIFURCATION APPEARS TO BE ON LUMPSUM BASIS WHICH WA S NOT MADE OR OFFERED AT THE TIME OF STATEMENT RECORDED U/S 132(4) OF THE AC T BUT MADE LATER ON. HOWEVER, EITHER AT THE TIME OF SEARCH OR AT THE TIM E OF ASSESSMENT, THE ASSESSEE WAS NOT EVEN ASKED TO SPECIFY THE MANNER I N WHICH THE UNDISCLOSED INCOME HAS BEEN DERIVED. IF SUCH A QUESTION WAS NOT CONFRONTED, THEN HOW PENALTY U/S 271 AAA CAN BE LEVIED, ESPECIALLY HERE IN THIS CASE. LATER AT THE TIME OF ASSESSMENT PROCEEDING ONLY SUCH INCOME WAS DETERMINED. THE A.O. DID NOT INITIATED OR ISSUED ANY NOTICE FOR INITIATI NG THE PENALTY PROCEEDING U/S 271 AAA. RATHER A.O. PROCEEDED TO INITIATE THE PEN ALTY U/S 271(1)(C), WHICH INTER ALIA MEANS THAT A.O. DID NOT FOUND SUFFICIENT REASON OR BASIS TO INITIATE PENALTY U/S 271 AAA. THE INITIATION OF PENALTY U/S 271 AAA CANNOT BE AT LIMBO AND SWEET WILL OF THE A.O., THAT HE MAY TAKE UP AFTER GAP 5 YEARS FROM THE DATE OF SEARCH. THE LAW OF LIMITATION PRESCRIB ED FOR PENALTIES U/S 275 ALSO APPLIES TO SECTION 271 AAA. IF THE LIMITATION IS T O BE RECKONED FROM THE DATE OF THE ASSESSMENT ORDER, THEN INITIATION HAS TO BE THE RE IN SUCH PROCEEDINGS OR ASSESSMENT ORDER. NOWHERE THE A.O. OR CIT HAS SPEC IFIED THAT, UNDER WHICH PROCEEDINGS, THIS PENALTY U/S 271 AAA HAS BEEN INIT IATED. IF IT IS NOT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THEN THE INITIATI ON ITSELF FAILS; AND IF IT IS TO BE RECKONED FROM THE DATE OF SEARCH PROCEEDINGS THE N ALREADY 5 YEARS HAVE ITA 5796/M/13 10 LAPSED. THUS, ON THIS COUNT ALSO PENALTY U/S 271 A AA CANNOT BE SUSTAINED. LASTLY, REGARDING THE UNEXPLAINED JEWELLERY OF RS. 1,61,67,568/-, IT HAS BEEN STATED THAT THESE BELONGS TO THE FAMILY MEMBERS FOR WHICH THE DECLARATION HAD BEEN MADE UNDER VDIS 97 AND SECONDLY, PART OF THE S AME WERE OUT OF GOLD COIN ISSUED BY VARIOUS CEMENT COMPANIES TO THE DIST RIBUTORS UNDER VARIOUS INCENTIVE SCHEMES, IN WHICH ASSESSEE WAS DEALING. T HEREFORE, NOT ONLY THE MANNER HAS BEEN SPECIFIED BUT ALSO IT STANDS SUBSTA NTIATED BY THE ASSESSEE. THIS ASPECT IS CLEARLY EVIDENT FROM THE STATEMENT A S REPRODUCED ABOVE AND ALSO THE FINDINGS OF THE LD. CIT(A), THE RELEVANT P ORTION OF WHICH IS EXTRACTED IN THE IMPUGNED PENALTY ORDER AT PAGES 1 TO 4. THUS, ON MERITS AS WELL AS ON LEGAL GROUND, WE DO NOT FIND ANY REASON TO CONFIRM THE PENALTY U/S 271 AAA AND ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED . 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017. # $% &' 13-01-2017 ( ) SD/- SD/- (RAJESH KUMAR (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER $ MUMBAI ; & DATED 13-01-2017 [ ./../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 5796/M/13 11 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 0 / CIT- CONCERNED, MUMBAI 5. 34( //56 , 56 , $ / DR, ITAT, MUMBAI H BENCH 6. (89 : / GUARD FILE. / BY ORDER, 3 / //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI