AMRISH T JAIN, MUMBAI V. ACIT 23(2), MUMBAI

ITA 6146/MUM/2009

• Counselvise Citation: 614619914 RSA 2009
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 24-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: N M PORWAL
• Keywords: Gift; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI R.V. EASWAR, (PRESIDENT) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.6146/MUM/2009 ASSESSMENT YEAR :2004-05 SHRI AMRISH T. JAIN 605-606, THE CORPORATE CENTRE NIRMAL LIFESTYLE MALL L.B.S. ROAD, MULUND WEST MUMBAI-400 080. ..( APPELLANT ) P.A. NO. (AACPJ 2674 G) VS. ASSTT. COMMISSIONER OF INCOME TAX -23(2) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI N.M. PORWAL RESPONDENT BY : SHRI C .G.K. NAIR O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 28.8.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2004-05. T HE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C). 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSIN G OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE IN THE BALANCE SHEET HAD SHOWN INVESTMENT IN SHOP AT POONA. HE THEREFORE, ASKED ASSESSEE AS TO WHY NO INCOME FROM THE SHOP WAS SHOWN. AS PER ITA NO.6146/M/09 A.Y:04-05 2 ASSESSING OFFICER ASSESSEE COULD NOT EXPLAIN AND ACCORDINGLY ASSESSING OFFICER ESTIMATED ANNUAL LETTING VALUE (ALV) OF THE SH OP AT RS.50,000/- ON THE BASIS OF THE INVESTMENT IN THE SHOP O F RS.9.24 LACS AND AFTER ALLOWING DEDUCTION OF 30% UNDER SECTION 24( A), THE ASSESSING OFFICER COMPUTED INCOME FROM HOUSE PROPERTY AT RS.35,000/- THE ASSESSING OFFICER ALSO NOTED THAT MINOR SO NS OF THE ASSESSEE RECEIVED GIFTS OF RS.3.00 LACS EACH FROM DIFFERENT DONORS. THE SON, AYUSH JAIN HAD RECEIVED GIFT OF RS.1.00 LACS FRO M JYOTI SHAH AND RS.2.00 LACS FROM S.J. KAUSHIK. SIMILARLY OTHER SON NIPUN JAIN RECEIVED GIFT OF RS.1.00 LACS FROM SUSHILA GOGRI AND RS. 2.00 LACS FROM M.H. GARG. THE ASSESSING OFFICER ASKED THE ASSESSEE TO ESTABL ISH THE IDENTITY AND CAPACITY OF DONORS AND ALSO PROVE GENUINEN ESS OF TRANSACTIONS. THE ASSESSEE FILED COPY OF BANK STATEMENT, P. A. NO. AND COPY OF ACKNOWLEDGE SLIP OF RETURN OF INCOME, COMPUTATIO N SHEET AND BALANCE SHEET IN RESPECT OF DONORS ALONGWITH THE GIFT DE ED. THE ASSESSING OFFICER OBSERVED THAT TOTAL INCOME OF JYOTI SHAH , SMT. SUSHILA GOGRI WAS APPROXIMATELY RS.79,000/- AND CAPITAL WAS RS.6.3 LACS. FURTHER THEIR ACCOUNTS HAD BEEN CREDITED BY A SUM OF RS.1.00 LACS JUST TWO DAYS BEFORE GIFT. IN RESPECT OF OTHER TWO DONORS ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT FURNISH BANK STATEMENT AND ALSO DID NOT PRODUCE THE DONORS. THE ASSESSI NG OFFICER THEREFORE DID NOT ACCEPT THE GENUINENESS OF GIFT AND MA DE AN ADDITION ITA NO.6146/M/09 A.Y:04-05 3 OF RS.6.00 LACS TO THE TOTAL INCOME. FURTHER THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE ON ACCOUNT OF LABOUR AT RS .5.99 CRORES. THE ASSESSING OFFICER ON EXAMINATION OF BIL LS AND VOUCHERS NOTED THAT THE ASSESSEE COULD NOT PRODUCE ALL LABO UR CARDS FOR VERIFICATION. HE THEREFORE, DISALLOWED RS.10.00 L ACS ON ESTIMATE AND ADDED TO THE TOTAL INCOME. THE ASSESSEE HAD NOT FIL ED APPEAL AGAINST THE ADDITION MADE IN THE ASSESSMENT. 2.1 ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDING FO R CONCEALMENT OF INCOME. IN RESPONSE TO PENALTY NOTICE, T HE ASSESSEE EXPLAINED THAT IT HAD RECEIVED POONA SHOP IN SETTLEMEN T OF BILL WITH LLOYES FOR THE WORK DONE FOR THEM IN THE YEAR 2000. THE ADDITION HAD BEEN MADE ON ESTIMATE AND THEREFORE, NO PENALTY SHOUL D BE LEVIED. IN RELATION TO ADDITION ON ACCOUNT OF GIFTS, THE ASSESSEE SUBM ITTED THAT IT HAD FILED ALL NECESSARY DETAILS INCLUDING ADDRESS AND P.A . NO. OF THE PARTIES ALONGWITH ACKNOWLEDGMENT SLIP FOR FLING RETURN OF INCOME. THERE WAS NO CONCEALMENT OF INCOME. THE AMOUNT HAD BE EN RECEIVED BY CHEQUE. THE ASSESSING OFFICER HAD MADE ADDITION WITH OUT ANY ENQUIRY/VERIFICATION OF THE DETAILS GIVEN. THUS NO PE NALTY SHOULD BE LEVIED. IN RELATION TO ADDITION ON ACCOUNT OF LABOU R CHARGES, IT WAS SUBMITTED THAT THE ASSESSEE HAD PROVIDED ALL DETAILS AND ONLY SOME CARDS WERE MISSING. ADDITION HAD BEEN MADE ON ESTIMAT E AND, ITA NO.6146/M/09 A.Y:04-05 4 THEREFORE, NO PENALTY WAS REQUIRED TO BE LEVIED. TH E ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN. IT W AS OBSERVED BY HIM THAT THE ASSESSEE HAD SHOWN PURCHASE COST OF SHOP AT RS.9.24 LACS AND EVEN IF SHOP WAS VACANT, THE ALV WAS TO BE DETERMINED U/S.23(1)(A) AS THE SUM FOR WHICH THE PROPERTY MAY BE REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE INCOME HAD BEEN DETER MINED ON REASONABLE BASIS AND PENALTY WAS LEVIABLE. THE ASSESSING O FFICER FURTHER OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED COPY OF BANK STATEMENT OF THE TWO DONORS, AND IN RESPECT OF OTHER TW O DONORS THERE WERE DEPOSITS JUST BEFORE THE GIFT. THE ASSESSEE ALSO COUL D NOT PRODUCE THE DONORS. THE ASSESSEE HAD FAILED TO PROVE THE CREDIT WORTHINESS AND GENUINENESS. THE PENALTY WAS THUS LEVIABL E. SIMILARLY ADDITION ON ACCOUNT OF LABOUR CHARGES HAD BEEN MADE AS A SSESSEE COULD NOT GIVE COMPLETE DETAILS. HE THEREFORE, LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED IN RESPECT OF ADDITIONS MADE WHICH CAME TO RS .5,10,950/-. 2.2 IN APPEAL, THE ASSESSEE SUBMITTED THAT AGREEMENT IN RESPECT OF SHOP WAS ENTERED ON 28.9.2007 AND IT WAS REGISTERED ON 4.10.2007 AND AS PER CLAUSE 8 OF THE AGREEMENT THE POSSESSION OF THE SHOP WAS TO BE GIVEN ON OR BEFORE 3.9.2007. SINCE THE SHOP WA S NEITHER REGISTERED IN THE NAME OF THE ASSESSEE NOR POSSESSION WAS TAK EN DURING THE YEAR, PENALTY WAS NOT JUSTIFIED. IN REGARD TO LABOUR CHARGES ITA NO.6146/M/09 A.Y:04-05 5 IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD NOT GIVEN INSTANCES IN RESPECT OF WHICH LABOUR CARDS WERE NOT GIVEN. AS REGARD S ADDITION ON ACCOUNT OF GIFTS, IT WAS SUBMITTED THAT THE ASSESSEE HAD GI VEN COMPLETE DETAILS AND THE PENALTY COULD NOT BE IMPOSED O NLY ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE DONORS. CIT( A) HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED AND AGREED WITH T HE ASSESSING OFFICER THAT IT WAS A FIT CASE FOR LEVY OF PENALTY. ACCORDINGLY HE CONFIRMED THE PENALTY LEVIED AGGRIEVED, BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR FOR THE ASSESSEE ARGUED THAT PEN ALTY PROCEEDINGS WERE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND MERELY BECAUSE ADDITIONS WERE CONFIRMED OR NO APPEALS WERE FILE D BY THE ASSESSEE, PENALTY COULD NOT BE LEVIED. IT WAS POINTED O UT THAT ADDITION ON ACCOUNT OF HOUSE PROPERTY AND LABOUR CHARGES HAD BEEN MADE BY ESTIMATE AND PENALTY COULD NOT BE LEVIED IN SUCH CASES. AS REGARDS ADDITION WITH REGARD TO GIFTS, THE LD. AR SUBMITTED THAT ASSESSEE HAD FILED THE CONFIRMATION, THE GIFT DEED, P.A. NO. OF D ONORS AS WELL AS ACKNOWLEDGE RECEIPT OF FILING RETURN OF INCOME. THE A SSESSEE HAD THEREFORE, ESTABLISHED THE IDENTITY, CAPACITY AND GENU INENESS OF TRANSACTIONS. THERE WAS NO MATERIAL PLACED ON RECORD BY ASSESSING OFFICER TO SHOW THAT ANY OF THE GIFTS GIVEN WERE FALSE. IN RELATION TO THE SHOP IT WAS SUBMITTED THAT POSSESSION HAD BEEN TAKEN I N 2007 AND ITA NO.6146/M/09 A.Y:04-05 6 THEREFORE, NO INCOME COULD BE ESTIMATED. THE LD. AR PLACED RELIANCE ON THE JUDGMENTS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHREE NIRMAL COMMERCIAL LIMITED VS. CIT(BOM) (218 CTR 581) AND IN THE CASE OF CIT VS. BHIMJI BHANJEE & CO. (146 ITR 145). I T WAS URGED THAT THE PENALTY LEVIED SHOULD BE DELETED. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT THE SHOP HAD BEEN SHOWN IN THE BALANCE SHEET AND THEREF ORE INCOME WAS REQUIRED TO BE SHOWN. THE LABOUR CARDS WERE ADMITT EDLY MISSING AND THEREFORE, ADDITION ON ACCOUNT OF LABOUR CHARGES WA S JUSTIFIED. IN RELATION TO GIFTS IT WAS SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE DONORS. THE ASSESSEE HAD THUS CONCEALED THE PARTICULARS OF INCOME. IT WAS ACCORDINGLY URGED THAT THE PENALTY SHOULD BE UPHELD . 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS APPEA L IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. TH E PENALTY HAS BEEN LEVIED ON ACCOUNT OF ADDITIONS MADE IN THE ASSESSMENT AMOUNTING TO RS.35,000/- ON ACCOUNT OF INCOME FROM SHOP; RS.6.00 LACS ON ACCOUNT OF GIFTS RECEIVED IN THE NAME OF MINOR SON S; AND RS.10.00 LACS OUT OF DISALLOWANCE OF LABOUR CHARGES. PENA LTY HAS BEEN LEVIED @ 100% OF TAX SOUGHT TO BE EVADED IN RESPECT OF ABOVE ADDITIONS WHICH HAVE BECOME FINAL AS NO FURTHER APPEAL HAS BEEN FILED BY THE ASSESSEE. THE ISSUE IS WHETHER ON THE FACTS AND CIRCUM STANCES ITA NO.6146/M/09 A.Y:04-05 7 OF THE CASE, LEVY OF PENALTY FOR CONCEALMENT OF INCOME CA N BE JUSTIFIED. IT IS A SETTLED LEGAL POSITION AS HELD BY HON'BLE SUPRE ME COURT IN THE CASE OF ANANTHRAM (123 ITR 457) THAT PENALTY PROCEEDIN GS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS GIV EN IN ASSESSMENT THOUGH IT MAY CONSTITUTE GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS IN WHICH THE ASSESSEE IS FREE TO ARGUE THAT ON FACTS OF THE CASE THERE IS NO CASE FOR AN Y PENALTY. FURTHER, MERELY BECAUSE ADDITIONS HAVE BEEN CONFIRMED IN APPEAL OR NO APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ADDITIO NS, CANNOT BE THE SOLE GROUND FOR COMING TO THE CONCLUSION THAT ASSESSEE HAD CONCEALED ANY INCOME. THOUGH PENALTY IS ONLY A CIVIL LI ABILITY AND MENSREA IS NOT REQUIRED TO BE PROVED BY THE REVENUE A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA PROCESSOR S PVT. LTD. (306 ITR 77), EACH AND EVERY ADDITION MADE IN ASSESSMENT CANNOT AUTOMATICALLY LEAD TO PENALTY. A CASE OF PENALTY FOR CONCEALMENT OF INCOME HAS TO BE EVALUATED IN TERMS OF THE PROVISIONS OF EXPLANATION I TO SECTION 271(1)(C) AS PER WHICH IF IN RELATION TO ANY ADDITION IN ASSESSMENT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXP LANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTANTIA TE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, ADDITION MADE WOULD AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOM E. ITA NO.6146/M/09 A.Y:04-05 8 4.1 WE HAVE NOW TO DEAL WITH THE INDIVIDUAL ADDITI ONS AND EVALUATE THE CASE WHETHER THE SAME REPRESENTED CONCEALMENT OF INCOM E OF THE ASSESSEE. WE FIRST TAKE THE ADDITION OF RS.6.00 LACS ON ACCOU NT OF GIFTS OF RS.3.00 LACS EACH RECEIVED IN THE NAME OF MINOR SONS. TO SUBSTANTIATE THE GIFTS, THE ASSESSEE HAD FILED GIFT DEED F ROM THE DONORS, THEIR P.A. NOS. AND ACKNOWLEDGE SLIP OF THEIR F ILING OF RETURN OF INCOME INCLUDING THEREWITH COMPUTATION OF INCOME AND B ALANCE SHEET. THE ASSESSEE HAD THUS FILED DETAILS AND EVIDENCE TO SUBSTANT IATE THE RECEIPT OF GIFTS. THE ASSESSING OFFICER HAD NOT CONDUCTED A NY ENQUIRY TO PROVE THAT THE EXPLANATION GIVEN BY THE ASSESSEE WA S FALSE. THE ASSESSING OFFICER ALSO DID NOT SUMMON THE DONORS TO EXAMIN E THEM FURTHER. THOUGH THE ASSESSING OFFICER MENTIONED THAT T HERE WERE DEPOSITS IN THE BANK ACCOUNTS OF DONORS JUST BEFORE GIVIN G OF GIFTS, NO ENQUIRY WAS CONDUCTED AND NO MATERIAL PLACED ON RECORD TO SHOW THAT THE DONORS HAD NO EXPLANATION FOR THE SOURCE OF DEPOSI TS. THEREFORE IN OUR VIEW, NO PENALTY CAN BE LEVIED IN RESPECT OF ADDIT IONS ON ACCOUNT OF GIFTS. AS REGARDS THE INCOME FROM SHOP THE ASSESSEE SUBMITT ED BEFORE CIT(A) THAT THE SHOP HAD BEEN RECEIVED AS PER AGREEMEN T ENTERED INTO IN 2007 AND THE POSSESSION WAS TO BE TAKEN IN THE YEAR 2 007 AS PER SPECIFIC CLAUSE OF THE AGREEMENT. NO ENQUIRY HAS BEEN CON DUCTED TO PROVE THAT THE CLAIM OF THE ASSESSEE WAS FALSE. EVEN IF T HE ASSESSEE HAD NOT HAVE FILED SUCH AGREEMENT BEFORE ASSESSING OFFICER , CIT(A) ITA NO.6146/M/09 A.Y:04-05 9 WAS REQUIRED TO CONDUCT THE ENQUIRY TO ASCERTAIN THE TRU TH. THERE IS NOTHING ON RECORD TO CONTROVERT THE CLAIM OF THE ASSESSEE THAT THE POSSESSION HAD BEEN TAKEN ON LATER AND NOT IN THE RELEV ANT YEAR. PENALTY CANNOT BE LEVIED ONLY ON THE GROUND THAT TH E ADDITION HAS BEEN MADE IN THE ASSESSMENT WHICH HAS BECOME FINAL. ADDIT ION OF RS.10.00 LACS HAS BEEN MADE ON ACCOUNT OF DISALLOWANCE OF LABOUR CHARGES ON THE GROUND THAT SOME LABOUR CARDS WERE MISSING. THERE IS NO FINDING THAT THE LABOUR CHARGES CLAIMED WERE EXCESSIV E COMPARED TO EARLIER YEARS. EVEN IF LABOUR CHARGES WERE NOT PROPER LY SUPPORTED BY VOUCHERS, THE DISALLOWANCE HAS TO BE MADE ON SOME REASONA BLE BASIS. ROUND FIGURE ADDITION PURELY ON ESTIMATE WITHOUT ANY REASONABLE BASIS CANNOT BE THE BASIS OF PENALTY FOR CONCEALMENT OF INCOM E. THEREFORE, IN OUR VIEW THOUGH THE ADDITIONS IN THE ASSESSMENT HAVE BECOME FINAL, THERE IS NO CASE FOR PENALTY MADE OUT ON THE BASIS OF FA CTS AVAILABLE ON RECORD. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) AND DELETE THE PENALTY LEVIED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011. SD./- SD/- (R.V. EASWAR) (RAJENDRA SINGH ) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 29.7.2011. JV. ITA NO.6146/M/09 A.Y:04-05 10 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.