DCIT CEN CIR -1, MUMBAI V. PANNALAL K. BANTHIA, PANVEL

ITA 6145/MUM/2010

• Counselvise Citation: 614519914 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAURYA
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Unexplained investment
• Section: 132; 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO.6145/MUM/2010 (ASSESSMENT YEAR: 1999-2000) ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -1, PAWAR INDUSTRIAL ESTATE, 2ND FLOOR, EDULJI ROAD, CHARAI, THANE (W) ....... APPELLANT VS SHRI PANNALAL K. BANTHIA, 776, KESHAR ANAND NIWAS, M.G. ROAD, PANVEL MUMBAI -410 206 ..... RESPONDENT PAN: ABJPB 0818 M APPELLANT BY: SHRI M.S. MAURYA RESPONDENT BY: SHRI SUBODH RATNAPARKHI DATE OF HEARING: 12.07.2012 DATE OF PRONOUNCEMENT: 25.07.2012 O R D E R PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) -1, THANE DATED 15.03.2010 WHEREBY HE C ANCELLED THE PENALTY OF ` 52,94,190/- IMPOSED BY THE AO U/S.271(1)(C) OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF MONEY LENDING. A SEARCH ACTIO N U/S.132 WAS CONDUCTED IN THE CASE OF THE ASSESSEE AS WELL AS IN OTHER CASES BELONGING TO THE SAME GROUP. DURING THE COURSE OF THE SEARCH, UNACCOUNTED TRANSACTIONS OF THE ASSESSEE WERE UNEAR THED REVEALING UNDISCLOSED INCOME OF THE ASSESSEE. IN THE STATEME NT RECORDED DURING THE COURSE OF SEARCH U/S.132(4), THE ASSESSEE OFFER ED HIS UNDISCLOSED ITA 6145/MUM/2010 SHRI PANNALAL K. BANTHIA 2 INCOME AS A RESULT OF SEARCH AGGREGATING TO ` 1,59,14,761/-. THE SAID AMOUNT OFFERED WAS COMPRISING OF A SUM OF ` 70 LAKHS ADVANCED AS LOANS TO VARIOUS PERSONS ONSIDE THE BOOKS OF ACCOUN T, UNACCOUNTED CASH OF ` 40,31,000/- FOUND DURING THE COURSE OF SEARCH, UNA CCOUNTED JEWELLERY OF ` 22,26,317/- FOUND DURING THE COURSE OF SEARCH AND UNEXPLAINED INVESTMENT OF ` 25 LAKHS MADE IN THE CONSTRUCTION OF THE HOUSE PROPERTY. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 31.10.2007, THE INCOME SURRENDERED IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S. 132(4) ON 04.10.2006 WAS DECLARED BY THE ASSESSEE AND THE ASS ESSMENT WAS COMPLETED BY THE AO ON THE SAME INCOME AS RETURNED BY THE ASSESSEE BY AN ORDER PASSED ON 30.12.2008 U/S.143(3) R.W.S.1 58B(B) OF THE ACT. 3. THEREAFTER, PENALTY PROCEEDINGS U/S.271(1)(C) WE RE INITIATED BY THE AO AND IN RESPONSE TO NOTICE ISSUED BY THE AO D URING THE COURSE OF THE SAID PROCEEDINGS, THE ASSESSEE CLAIMED IMMUN ITY AVAILABLE AS PER EXPLANATION 5 TO SEC.271(1)(C) BY STATING THAT THE UNDISCLOSED INCOME FOUND AS A RESULT OF SEARCH WAS SURRENDERED IN THE STATEMENT RECORDED U/S.132(4) AND THE SAME WAS OFFERED TO TAX IN THE RETURN OF INCOME AFTER PAYMENT OF TAX IN RESPECT OF SUCH INCO ME. THE AO, HOWEVER, DID NOT FIND MERIT IN THIS STAND OF THE AS SESSEE. ACCORDING TO HIM, THE ASSESSEE HAD NOT DISCLOSED THE MANNER IN W HICH SUCH INCOME WAS DERIVED BY HIM IN THE STATEMENT RECORDED DURING THE COURSE OF THE SEARCH U/S.132(4) AND SINCE THIS CONDITION AS STIPU LATED IN EXPLANATION 5 WAS NOT SATISFIED, THE ASSESSEE WAS N OT ENTITLED TO CLAIM IMMUNITY AVAILABLE UNDER THE SAID EXPLANATION. HE, THEREFORE, DENIED THE SAID IMMUNITY CLAIMED BY THE ASSESSEE AND PROCE EDED TO IMPOSE PENALTY OF ` 52,94,190/- U/S.271(1)(C) BEING 100% OF THE TAX SO UGHT TO BE EVADED BY THE ASSESSEE ON THE TOTAL INCOME AT ` 1,59,14,760/-. 4. THE PENALTY IMPOSED BY THE AO U/S.271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT (A) WHO ALLOWED THE CLAIM OF THE ASSESSEE FOR IMMUNITY AS PER THE RELEV ANT PROVISIONS ITA 6145/MUM/2010 SHRI PANNALAL K. BANTHIA 3 CONTAINED IN EXPLANATION 5 TO SEC.271(1)(C) FOR THE FOLLOWING REASONS GIVEN IN PARA NO.8 OF HIS IMPUGNED ORDER: 8. AFTER EXAMINING THE PENALTY ORDER, FACTS OF THE MATTER AND THE LEGAL POSITION, I FIND THAT THE ACTION OF THE A .O. IN LEVYING PENALTY CANNOT BE UPHELD. THE APPELLANT HAS DISCLOSED INCOME IN THE COURSE OF SEARCH ACTION VID E STATEMENT U/S 132(4) RECORDED ON 06.10.06 IN RESPEC T OF ASST. YEAR 2007-08 FOR WHICH RETURN WAS NOT DUE ON THE DATE OF SEARCH. SUBSEQUENTLY, SUCH DECLARED INCOME HAS BEEN OFFERED TO TAX VIDE RETURN FILED AND THE TAX L IABILITY AND INERTEST HAS BEEN PAID BEFORE FILING OF RETURN. THE A.O HAS COMPLETED THE ASSESSMENT BY ACCEPTING THE RETURN FI LED. EXAMINATION OF THE STATEMENT U/S 132(4) RECORDED ON 06.10.06 REVEALS THAT THE EXAMINING OFFICER NEVER E NQUIRED WITH THE APPELLANT ABOUT THE MANNER OF EARNING THE UNDISCLOSED INCOME. NO SUCH QUESTION WAS PUT TO THE APPELLANT BY THE SEARCH OFFICER. ON THIS BACKGROUND THE APPELLANT CANNOT BE HELD TO HAVE FAILED IN EXPLAINI NG THE MANNER OF EARNING THE UNDISCLOSED INCOME. IT IS NOT THE CASE THAT THE APPELLANT WAS ASKED TO EXPLAIN THE MA NNER OF EARNING THE UNDISCLOSED INCOME AND HE HAS FAILED IN DOING SO. FURTHER, THE NATURE OF INCOME DECLARED BY THE A PPELLANT ITSELF IS A POINTER TO THE FACT THAT SUCH UNDISCLOS ED INCOME HAS TO BE INFERRED TO ARISE FROM THE APPELLANTS BU SINESS AS A JEWELLER/MONEY LENDER. IN LIEU OF THE ABOVE I HOL D THAT THE APPELLANT IS ENTITLED FOR IMMUNITY FROM LEVY OF PEN ALTY U/S 271(1)(C) ON ACCOUNT OF EXPRESS PROVISIONS CONTAINE D IN EXPLANATION 5 TO THE SAID SECTION. I ALSO FIND SUPP ORT FOR THE ABOVE FROM THE DECISIONS IN THE CASE. 5. FOR THE REASONS GIVEN ABOVE AND RELYING INTER ALIA ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL 278 ITR 454 AND THAT OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH 299 ITR 305, THE LD. CI T (A) CANCELLED THE PENALTY IMPOSED BY THE AO U/S.271(1)(C). AGGRI EVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE HAS PREFERRED THIS A PPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, THE LD. DR HAS RELIED ON THE ORDER OF THE AO IMPOSING THE PENALTY U/S.271(1)(C) WHEREAS THE LD. ITA 6145/MUM/2010 SHRI PANNALAL K. BANTHIA 4 COUNSEL FOR THE ASSESSEE HAS RELIED ON THE IMPUGNED ORDER OF THE LD. CIT (A) IN SUPPORT OF THE ASSESSEES CASE STATING T HAT THE SAME IS WELL REASONED AND WELL DISCUSSED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT I N HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S.132(4), TH E UNDISCLOSED INCOME FOUND AS A RESULT OF SEARCH WAS SURRENDERED BY THE ASSESSEE AND AFTER PAYMENT OF TAX IN RESPECT OF SUCH INCOME, THE SAME WAS DULY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FO R THE YEAR UNDER CONSIDERATION. IN THE ASSESSMENT COMPLETED U/S.143 (3) R.W.S. 153B(B) OF THE ACT, THE INCOME SO DECLARED IN THE RETURN OF INCOME BY THE ASSESSEE WAS ACCEPTED BY THE AO. SUBSEQUENTLY, THE AO HOWEVER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) AND ALS O IMPOSED PENALTY UNDER THE SAID PROVISION DENYING THE IMMUNITY CLAIM ED BY THE ASSESSEE AS PER THE RELEVANT PROVISIONS CONTAINED I N EXPLANATION 5 ON THE GROUND THAT IN HIS STATEMENT RECORDED U/S.132(4 ), THE MANNER IN WHICH UNDISCLOSED INCOME HAD BEEN EARNED WAS NOT SP ECIFIED BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF EXPLANATI ON 5. IT IS OBSERVED THAT A SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH (SUPRA) WHEREIN PENALTY U/S.271(1)(C) WAS LEVIED BY THE AO BY DENYING THE BENEFIT OF EXPLANATION 5 FOR THE REASON THAT THE AS SESSEE HAD NOT EXPLAINED IN THE STATEMENT RECORDED U/S.132(4), THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED AND THE PENALTY IMPO SED BY THE AO WAS HELD TO BE UNSUSTAINABLE BY THE HONBLE GUJARAT HIGH COURT ALLOWING THE BENEFIT OF IMMUNITY TO THE ASSESSEE AS PROVIDED UNDER EXPLANATION 5 TO SEC.271(1)(C) BY OBSERVING AS UNDE R: INSOFAR AS THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO SPECIFY IN THE IN THE STATEMENT U/S 132(4) REGARDIN G THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUFFICE IT T O STATE THAT WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHORI ZED OFFICER IT ITA 6145/MUM/2010 SHRI PANNALAL K. BANTHIA 5 IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPL. 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AN D THE AUTHORIZED OFFICER CANNOT STOP SHORT AT A PARTICULA R STAGE SO AS TO PERMIT THE REVENUE TO TAKE ADVANTAGE OF SUCH A LAPS E IN THE STATEMENT. THE REASON IS NOT FAR TO SEEK. IN FIRST INSTANCE, THE STATEMENT IS BEING RECORDED IN THE QUESTION AND ANS WER FORM AND THERE WOULD BE NO OCCASION FOR AN ASSESSEE TO STATE AND MAKE AVERMENTS IN THE EXACT FORMAT STIPULATED BY THE PRO VISIONS CONSIDERING THE SETTING IN WHICH SUCH STATEMENT IS BEING RECORDED. SECONDLY, CONSIDERING THE SOCIAL ENVIRONMENT IT IS NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLITE RATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATED BY EXCEPTION NO. 2 WHILE MAKING STATEMENT UNDER S. 132 (4). THE VIEW TAKEN BY THE TRIBUNAL TO THE EFFECT THAT EVEN IF THE STATEMENT DOES NO SPECIFY THE MANNER IN WHICH THE INCOME IS D ERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE WOUL D SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHER DENIAL OF THE BENEFIT UNDER EXCEPTION NO. 2 IN EXPL. 5 IS COMMENDABLE. HENCE, T HE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT INSO FAR AS THE VALUE OF DIAMONDS WAS CONCERNED, THE ASSESSEE HAVING MADE A DECLARATION UNDER S. 132(4) AND PAID TAXES THEREON, HAD FULFILLED ALL THE CONDITIONS FOR AVAILING THE BENEFIT OF IMMU NITY FROM LEVY OF PENALTY AS PROVIDED UNDER EXPI. 5 TO S. 271(1)(C). 8. TO THE SIMILAR EFFECT IS THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL (SUP RA) WHEREIN IT WAS HELD THAT MUCH IMPORTANCE SHOULD NOT BE ATTACHED TO THE STATEMENT ABOUT THE MANNER IN WHICH UNDISCLOSED INCOME HAS BE EN DERIVED AND MERE NON-STATEMENT OF THE MANNER IN WHICH SUCH INCO ME WAS DERIVED WOULD NOT MAKE EXPLANATION 5(2) TO SEC.271(1)(C) OF THE ACT INAPPLICABLE. KEEPING IN VIEW THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF MAHENDRA C. SHAH (SUPRA) AS WE LL AS THAT OF ALLAHABAD HIGH COURT IN THE CASE OF RADHA KISHAN GO EL (SUPRA) AND ITA 6145/MUM/2010 SHRI PANNALAL K. BANTHIA 6 HAVING REGARD TO THE FACTS OF THE CASE, WE ARE OF T HE VIEW THAT THE PENALTY IMPOSED BY THE AO U/S.271(1)(C) WAS RIGHTLY CANCELLED BY THE LD. CIT (A) ALLOWING THE BENEFIT OF IMMUNITY CONTAI NED IN THE PROVISIONS OF EXPLANATION 5 TO SEC.271(1)(C). IN T HAT VIEW OF THE MATTER, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT (A) CANCELLING THE PENALTY LEVIED BY THE AO AND DISMISS THIS APPEA L FILED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5TH JULY 2012. SD/- ( VIVEK VARMA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 25TH JULY, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)1, THANE. 4) THE CIT (CENTRAL), PUNE. 5) THE D.R. C BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN