ACIT, Calicut V. Shri K.C. Ashraf, Calicut

ITA 589/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4422 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: K B MOHAMMED KUTTY
• Section: 143(3); 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.589/COCH/2008 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), CALICUT. VS. K.C. ASHRAF, KOZHIKODE. PA NO.AGNPA 7562 L (APPELLANT) ( RESPONDENT ) I.T.A.NO.590/COCH/2008 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), CALICUT. VS. SHRI P.T. SABITH, KOZHIKODE. PA NO.AANPI 3068 D (APPELLANT) (RESPONDENT) & I.T.A.NO.591/COCH/2008 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), CALICUT. VS. SHRI K. AZEEZ, KOZHIKODE. PA NO.AGYPA 9017 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI T.J.VINCENT, JR.D.R. RES PONDENT BY SHRI K.B. MOHAMMED KUTTY, SR. ADV. O R D E R PER N.VIJAYAKUMARAN,J.M: ALL THESE THREE APPEALS ARE BY THE DEPARTMENT AGAI NST THE ORDERS OF THE CIT(APPEALS)-I, KOCHI, DELETING T HE PENALTY ITA NOS. 589 TO 591/COCH/2008 2 LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX AC T,1961, IN RESPECT OF THE ABOVE THREE ASSESSES, VIZ. K.C. ASHRAF, SHRI P.T. SABITH AND SHRI K. AZEEZ, CALICUT. THE ASSESSMENT YEAR INVOLVED IN ALL THESE THREE APPEALS IS 2005-06. AS THE FACTS AND THE ISSUES ARE BEING COMMON, WE CLUBBED THESE T HREE APPEALS AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. FOR THE PURPOSE OF DISCUSSION, WE WILL TAKE THE CASE OF SHRI K. AZEEZ, KOZHIKODE. THE FACTS RELEVANT ARE THAT ON 02-11-2004, CUSTOMS AUTHORITIES SEIZED CASH OF RS.8,49,000/- FROM THE ASSESSEE SHRI K. AZEEZ. TH E SAID CASH WAS REQUISITIONED BY THE INVESTIGATION WING OF I.T. DEPARTMENT ON THE SAME DAY U/S.132A. 153A PROCEED INGS WERE INITIATED AGAINST THE ASSESSEE. IN RESPONSE TO NOTICE, ASSESSEE FILED RETURN OF INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH TH E REQUISITION WAS MADE. THE ASSESSEE SHOWED NIL IN COME. FOR THE ASSESSMENT YEAR 2005-06, THE RETURN OF INCO ME WAS FILED ON 02-08-2005 DECLARING A TOTAL INCOME OF RS.8,49,000/-. THIS INCOME WAS DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AMOUNT OF CASH SEIZED AND REQUISITIONED U/S.132A WAS OFFERED AS INCOME. 143(3) ITA NOS. 589 TO 591/COCH/2008 3 ASSESSMENT FOR THIS ASSESSMENT YEAR WAS COMPLETED B Y FIXING THE TOTAL INCOME AT RS.9,19,000/- VIDE ORDER DATED 31- 8-2006. THE ASSESSING OFFICER ISSUED NOTICE FOR L EVY OF PENALTY U/S.271(1)(C) FOR THE REASON OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE EXPLANATION OF THE ASS ESSEE WAS NOT FOUND SATISFACTORY. THEREFORE, THE ASSESSING OFFICER IMPOSED PENALTY OF RS.2,49,700/- U/S.271(1)(C) READ WITH EXPLANATION 5 TO THAT SECTION. 3. ON APPEAL TO THE CIT(APPEALS), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT IN THE COURSE OF ASSESS MENT PROCEEDINGS IN A STATEMENT RECORDED ON 03-08-2006, THE ASSESSEE EXPLAINED THAT HE DERIVES MEAGER INCOME AS A CHECKING INSPECTOR IN A PRIVATE BUS. VIDE LETTER D ATED 28- 09-2006, THE ASSESSEE EXPLAINED THE CIRCUMSTANCES U NDER WHICH HE OFFERED THE CASH OF RS.8,49,000/- AS INCO ME FROM OTHER SOURCES AND CONTENDED THAT IMMUNITY HAS TO B E GIVEN TO THE ASSESSEE AS PROVIDED UNDER EXPLANATION 5 TO SECTION 271(1)(C). THE CIT(APPEALS) FOUND THAT THE PRESEN T CASE IS NOT AS A RESULT OF SEARCH U/S.132. HOWEVER, REQUI SITION WAS MADE U/S.132A AS A DEEMED SEIZURE U/S.132(1). THEREFORE, ACCORDING TO THE LD. CIT(APPEALS), EXPLA NATION 5 TO SECTION 271(1)(C) IS APPLICABLE IN THIS CASE. ASSETS AS ITA NOS. 589 TO 591/COCH/2008 4 REFERRED IN THIS EXPLANATION WAS SEIZED FROM THE CU STODY OF THE ASSESSEE AND THE ASSESSEE VIDE HIS LETTERS DATE D 16-12- 2004 AND 15-3-2005 EXPLAINED THE WAY IN WHICH SUCH ASSETS WERE ACQUIRED BY HIM AND OFFERED SUCH ASSETS AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH THE REQUISITION U/S.1 32A WAS MADE. THEREFORE, ACCORDING TO THE LD. CIT(APPEAL S), THE DEEMING PROVISION OF CONCEALMENT OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME IS ATTRACTED. HO WEVER, ASSESSEES LETTERS DATED 16-12-2004 AND 15-3-2005 W HICH IS IN CONTINUATION OF HIS STATEMENT RECORDED BY THE AD I, CALICUT, HAVE TO BE TREATED AS HAVING MADE A STATEM ENT U/S.132(4) THAT THE CASH FOUND IN HIS POSSESSION HA S BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCL OSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SECTION 139(1) AND ALSO AS SPE CIFIED IN SUCH LETTERS THE MANNER IN WHICH INCOME HAS BEEN DE RIVED. BY WAY OF BOTH THE LETTERS MENTIONED ABOVE ADDRESSE D TO THE ADI AND ALSO IN THE STATEMENT OF INCOME ANNEXED TO THE RETURN OF INCOME FILED FOR THIS ASSESSMENT YEAR 200 5-06, THE ASSESSEE HAS REQUESTED TO ADJUST THE TAX DUE ON SUC H INCOME DECLARED FROM THE SEIZED CASH IN THE CUSTODY OF TH E I.T. DEPARTMENT. THIS UNCONDITIONAL REQUEST HAS TO BE TREATED AS CONSTRICTIVE PAYMENT OF TAX DUE. THE LD. CIT(A PPEALS) ITA NOS. 589 TO 591/COCH/2008 5 FURTHER OBSERVED THAT IT HAS TO BE NOTED THAT CLAUSE (A) AND (B) OF EXPLANATION 5 MAKES A CLEAR DISTINCTION BETWEEN THE PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND THE PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF SEARCH . PARA 2 IN EXPLANATION 5 DOES NOT MAKE ANY SUCH DISTINCTION. IT ONLY REFERS TO THE STATEMENT GIVEN BY THE ASSESSEE WITH REGARD TO THE ASSET FOUND AT THE TIME OF SEARCH BEING THE STATEMENT TO THE EFFECT THAT SUCH ASSETS HAVE BEEN ACQUIRED OUT OF HIS UNDISCLOS ED INCOME AND THE SPECIFICATION BY THE ASSESSEE IN SUCH STATEMENT WITH REGARD TO THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED AND THE SUBSEQUENT PAYMENT OF THE TAX DUE ON SUCH UNDISCLOS ED INCOME TOGETHER WITH INTEREST. THE WORDS IN PARA. (2) .. HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCL OSED IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB SECTION (1) OF SECTION 139 ARE AP PLICABLE TO BOTH THE CASES WHERE THE PREVIOUS YEAR HAS ENDED BEFORE THE DATE OF SEARCH FOR WHICH THE RETURN OF INCOME HAS NOT BEEN FURNISHED BEFORE SUCH DATE AS WELL AS FOR THE PREVIOUS YEAR W HICH IS TO END ON OR AFTER THE DATE OF THE SEARCH. THE ADDITIONA L WORDS WHICH REFER TO THE TIME SPECIFIED IN SECTION 139(1) ARE O NLY A REITERATION OF THE LEGAL REQUIREMENT REGARDING THE TIME WITHIN WHICH THE RETURNS SHOULD NORMALLY BE FILED. IN THIS CASE, P REVIOUS YEAR HAS NOT ENDED AS ON THE DATE OF THE SEARCH. THE DUE D ATE FOR FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER 139(1) WAS 31-7-2005. APPELLANT HAS FILED HIS RETURN OF INCO ME FOR THE ITA NOS. 589 TO 591/COCH/2008 6 ASSESSMENT YEAR 2005-06 ON 2 ND AUGUST 2005. AS PER PARA. 2 TO EXPLANATION 5, THERE IS NO SUCH CONDITION THAT RETU RN SHOULD BE FURNISHED BEFORE THE EXPIRY OF TIME ALLOWED UNDER S ECTION 139(1). THIS CLAUSE ALSO COVERS THE CASES OF BELATED RETURN S. THUS IN THIS CASE ALL CONDITIONS OF PARA. (2) TO EXPLANATIO N 5 STOOD SATISFIED. THEREFORE APPELLANT IS ELIGIBLE FOR IM MUNITY FROM THE DEEMING PROVISION OF CONCEALMENT AS ENVISAGED IN EX PLANATION 5 TO SECTION 271(1)(C). A.O. IS THEREFORE NOT JUSTI FIED IN LEVYING PENALTY UNDER SECTION 271(1)(C) READ WITH EXPLANATI ON 5 TO THAT SECTION IN RESPECT OF THE INCOME REPRESENTED BY THE CASH SEIZED AND REQUISITIONED. THIS PROMPTED THE LD. CIT(APPEALS) TO DELETE THE PENALTY AS THE ASSESSEE IS ELIGIBLE FOR IMMUNITY FROM THE DEEMING PROVISION OF CONCEALMENT AS ENVISA GED IN EXPLANATION 5 TO SECTION 271(1)(C). AGGRIEVED, TH E REVENUE IS ON APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NTS. TO CUT IT SHORT, THE IMMUNITY AS ENVISAGED UNDER EXPLA NATION 5 TO SECTION 271(1)(C) CAN BE INVOKED WHEN THE THREE CONDITIONS ARE SATISFIED, VIZ. SOURCE MUST HAVE BEE N ESTABLISHED AND PROVED. THIS SHOULD HAVE BEEN OFFER ED AS INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR. FUR THER, THE TAX HAS TO BE PAID IN FULL. ALL THE THREE CONDITI ONS BEING ITA NOS. 589 TO 591/COCH/2008 7 SATISFIED, THE IMMUNITY HAS TO BE GIVEN TO THE ASSE SSEE. ONCE THE IMMUNITY IS GIVEN PENALTY IS NOT EXIGIBLE. THE LD. SR. COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE TRIBUNAL DATED 12-08-2009 IN THE CASE OF SHRI P .K. SULFI, CALICUT, IN ITA NO.592/COCH/2008 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE TRIBUNAL HELD THAT THE LEVY OF PENALTY HAS BEEN RIGHTLY DELETED BY THE LD. CIT(APPEALS) AN D THUS DISMISSED THE APPEAL OF THE REVENUE. IN THAT CAS E ALSO, THE AMOUNT WAS SEIZED BY THE CUSTOMS AUTHORITIES AN D TOOK OVER THE POSSESSION BY THE I.T. AUTHORITIES. THE ASSESSEE BY WAY OF FILING THE RETURN OF INCOME DECLARED THIS AS INCOME FOR THE RELEVANT ASSESSMENT YEAR AND EXPLAINED THE SOURCE OF INCOME AND PAID THE TAX ACCORDINGLY. THEREFORE, T RIBUNAL FOUND THAT THERE WAS NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS). THE FACTS OF THE CASE IN HAND ARE IDENTICAL WITH THAT OF SHRI PK SULFI AND ONE OF US IS A PARTY TO THAT ORDER . FURTHER, THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS.CHHABRA EMPORIUM REPORTED IN 264 ITR 249 ALSO FORTIFIES THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. A BEAR READING OF THE S UB CLAUSE (2) TO EXPLANATION 5 MAKES IT CLEAR THAT IF, DURING THE COURSE OF SEARCH, A STATEMENT OF THE ASSESSEE IS RECORDED UNDER SUB SECTION (4) OF SECTION 132 IN RESPECT OF ANY AMOUNT , CASH, ITA NOS. 589 TO 591/COCH/2008 8 STOCK, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING , WHICH IS FOUND IN HIS POSSESSION OR CONTROL AND THE ASSESSEE ADMITS IN HIS STATEMENT THAT SUCH INCOME WAS ACQUIRED INCOME OR WAS ACQUIRED WITH THE UNDISCLOSED INCOME AND PAYS THE T AX, TOGETHER WITH INTEREST IF ANY ON THE SAID AMOUNT, H E IS GRANTED AN IMMUNITY FOR LEVY OF PENALTY U/S.271(1)( C) OF THE ACT. THE PRINCIPLE LAID DOWN BY THE HONBLE DELHI HI GH COURT IS ALSO APPLICABLE TO THE CASE PRESENT BEFORE US. 5. FURTHER, IN THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. VIDHYA METAL CORPORATION & OTHERS 224 ITR 614, THE APEX COURT OBSERVED THAT MERE UNEXPLAINED POSSESSION OF THE AMOUNT, WITHOUT ANYTH ING MORE, COULD HARDLY BE SAID TO CONSTITUTE INFORMATIO N WHICH COULD BE TREATED AS SUFFICIENT BY A REASONABLE PERS ON, LEADING TO AN INFERENCE THAT IT WAS INCOME WHICH WO ULD NOT HAVE BEEN DISCLOSED BY THE PERSON IN POSSESSION FOR PURPOSES OF THE ACTS. 6. THE OTHER DECISIONS RELIED BY THE LD. COUNSEL AR E THE DECISIONS OF THE INCOME-TAX APPELLATE TRIBUNAL, NAG PUR BENCH, IN THE CASE OF VINOD GOEL VS. ACIT (2008) 11 5 TTJ (NAG) 559; ITO VS. NURUL HUDA G. ABOOBKAR (1995) 55 ITD ITA NOS. 589 TO 591/COCH/2008 9 (BANG) 296; GULAMRASUL M PATHAN VS. ACIT (1996) 54 TTJ(AHD) 30 AND VINOD K BHAGAT VS ACIT (2009) 123 TTJ(MUM) 69. 7 . PER CONTRA, THE LD. JR.DR FOR HIS PART RELIED ON TH E DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ABOO MOHAMMED AND THE DECISION OF THE CHENNAI BENCH IN THE CASE OF MN RAJARAMAN VS. ACIT -310 ITR (AT) 88 AND THE DECISION OF THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT VS. R. KESAVAN NAIR 287 ITR 276. BUT THE DECISION RELIED ON BY THE LD. JR. DR HAS BE EN RIGHTLY DISTINGUISHED BY THE LD. COUNSEL IN THE REP LY THAT IN THOSE CASES IMMUNITY WAS REFUSED ON THE GROUND THAT EITHER THE ASSESSEE HAS NOT PROVED THE ACQUISITION OF MONE Y, NOR PAID THE TAXES NOR VOLUNTARILY SURRENDERED THOSE I NCOME AS HIS INCOME FOR THAT YEAR. THEREFORE, THE INGREDIE NTS ON THE GROUND OF IMMUNITY WERE NOT SATISFIED. UNDER THOS E CIRCUMSTANCES, THE DECISIONS RELIED ON BY THE LD. J R. DR IS DISTINGUISHABLE FROM THE FACTS OF THE CASE PRESENT BEFORE US, AS IN THESE CASES THE ASSESSEE WAS ABLE TO PROVE TH AT HE SATISFIED THE REQUIREMENTS FOR THE GROUND OF IMMUNI TY, I.E. SOURCE FROM WHICH HE EARNED THE INCOME WAS SATISFAC TORILY PROVED BY THE ASSESSEE, THAT INCOME WAS OFFERED ITA NOS. 589 TO 591/COCH/2008 10 IMMEDIATELY WITHOUT ANY HESITATION OR OBJECTION AS INCOME OF THE ASSESSEE AND THE ASSESSEE PAID THE TAXES EITHER BY WAY OF ADJUSTMENT LETTER OR DIRECTLY. HENCE, THE ASSE SSEE IS ENTITLED TO IMMUNITY, WHICH THE LD. CIT(APPEALS) A WARDED. UNDER THE ABOVE CIRCUMSTANCES, WE HAVE NO JUSTIFICA TION TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN RESPECT OF THESE THREE ASSESSES. 8. IN THE RESULT, ALL THESE THREE APPEALS OF THE DE PARTMENT ARE DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL MEMBER ERNAKULAM, DATED THE 28 TH APRIL,2010. PM. COPY FORWARDED TO: 1. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), CALICUT. 2. K.C. ASHRAF, KOROTHCHALLIL HOUSE, NARIKUNI, KOZHIKO DE. 3. SHRI P.T. SABITH, PONMERI PARAMBIL, VILLIAPPALY, VA TAKARA, KOZHIKODE. 4. SHRI K. AZEEZ,KOLLATHARA HOUSE, VADAKARA, KOZHIK ODE. 5. CIT(A)-I, KOCHI. 6. CIT, KOZHIKODE. 7. D.R.