M/S. SUREBHI HOUSING PVT. LTD, V. THE DCIT 9(3),

ITA 617/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49298 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 20-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Income from undisclosed sources; Loose papers; Retraction
• Section: 133A

Judgement Text

1 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI PRAMOD KUMAR, AM & SHRI VIJAY PAL RAO, JM ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) M/S SUREBHI HOUSING P LTD SURBHI HOUSE BEHIND DIMPLE ARCADE ASHA NAGAR THAKUR COMPLEX, KANDIVLI (E) MUMBAI 101 VS THE DY COMMR OF INCOME TAX 9(3), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAGCS8574A A SSESSEE BY SHRI NARAYAN ATAL REVENUE BY SHRI S K SINGH PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 19.11.2007 OF THE CIT(A) ARISING FROM THE PENALTY ORDER U/S 271(1 ) (C ) FOR THE ASSESSMENT YEAR 2004-05. 2 THE ASSESSEE IS A BUILDER AND DEVELOPER AND CARRY ING ON A PROJECT UNDER SRA SCHEME AT KANDIVALI (W) MUMBAI. A SURVEY ACTION U/ S 133A OF THE I T ACT WAS CONDUCTED ON 9.9.2005 IN THE OFFICE PREMISES OF THE ASSESSEE COMPANY. DURING THE COURSE OF SURVEY, CERTAIN LOOSE PAPERS CONTAINING I NCRIMINATING MATERIAL WAS FOUND AND IMPOUNDED. THEREUPON, DURING THE SURVEY ACTION , A STATEMENT OF SHRI A K SINHA, DIRECTOR OF THE ASSESSEE COMPANY WAS RECORDED, WHO DECLARED ADDITIONAL INCOME OF RS. 2 CRORES ON ACCOUNT OF UNEXPLAINED CASH CRED IT AND EXPENDITURE IN CASH FOUND IN THE LOOSE PAPERS. FURTHER, HE AGREED TO O FFER 10% OF THE RECEIPT RECEIVED FROM THE CUSTOMERS DURING THE FY 2003-04 RELEVANT T O THE ASSESSMENT YEAR FOR 2 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) TAXATION. SUBSEQUENTLY, THE DIRECTOR OF THE ASSESS EE COMPANY FILED AFFIDAVIT DATED 11.10.2005 WHEREIN, HE RETRACTED THE STATEMENT THAT WAS RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF SURVEY ON 10.9.2005. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WITHDRAWN THE SAID RETRACTION MADE IN THE AFFIDAVIT DT 11.10.205 AND AGAIN SURRENDERED/DECLAR ED THE INCOME OF RS. 2 CRORES AND 10% OF THE RECEIPT BY WAY OF ADVANCES ON SALE OF FLATS, TO BUY PEACE OF MIND AND TO AVOID LITIGATION WITH THE DEPARTMENT. 2.1 THE ASSESSING OFFICER, ACCORDINGLY, FRAMED ASSE SSMENT WHEREBY MADE THE ADDITION OF RS. 2 CRORES AS WELL AS RS. 35,10,956/- BEING 10% OF THE ADVANCES RECEIVED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY OF RS. 71,75,000/- I N RESPECT OF ADDITION MADE OF RS. 2 CRORES DISCLOSED AND SURRENDERED BY THE ASSES SEE IN PURSUANT TO THE SURVEY AND INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SURVEY. 2.2 THE ASSESSEE CHALLENGED THE PENALTY LEVIED BY T HE ASSESSING OFFICER BEFORE THE CIT(A, WHO HAS CONFIRMED THE ACTION OF THE ASSE SSING OFFICER VIDE THE IMPUGNED ORDER. 3 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE HAS SURRENDERED THE INCOME OF RS. 2 CRORES ONLY TO BUY PEACE OF MIND AND TO AVOID LITIGATION WITH THE DEPARTMENT AND ALSO WITH A REQU EST TO GRANT THE IMMUNITY FROM LEVY OF PENALTY. HE HAS FORCEFULLY CONTENDED THAT THE ADDITION HAS BEEN MADE ONLY 3 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) ON THE BASIS OF THE STATEMENT OF THE DIRECTOR OF TH E ASSESSEE COMPANY, WHICH HAS NO EVIDENTIARY VALUE. THEREFORE, THE ADDITION MADE ON THE BASIS OF THE STATEMENT CANNOT BE A BASIS FOR LEVY OF PENALTY. HE HAS FURT HER CONTENDED THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING A ND THEREFORE, THE ASSESSEE DID NOT DECLARE ANY INCOME FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION AS THE PROJECT WAS NOT COMPLETED. HOWEVER, TO BUY PEACE AND TO A VOID LITIGATION WITH THE DEPARTMENT, THE ASSESSEE ALSO OFFERED 10% OF THE RE CEIPT OF ADVANCE ON SALE OF FLATS. HE HAS VEHEMENTLY CONTENDED THAT AS PER THE LOOSE SHEET FOUND DURING THE COURSE OF SURVEY, THE UNACCOUNTED CASH OF RS. 3,47, 13,861/- AND PAYMENT OF RS. 2,71,25,942/ WAS DECLARED; THEREFORE, IF AT AL L THE PENALTY IS LEVYABLE, THE SAME CAN BE LEVIED ONLY ON THE DIFFERENCE OF THE RECEIPT AND THE PAYMENTS RECORDED IN THE LOOSE SHEET. HE HAS CONTENDED WHEN THE ASSESSE ES UNACCOUNTED CASH RECEIPTS FOUND IN THE LOOSE SHEET, THEN, THE UNACC OUNTED PAYMENT MADE HAS TO BE ADJUSTED AGAINST THE SAME AND NET AMOUNT CAN BE CON SIDERED FOR THE PURPOSE OF LEVY OF PENALTY U/S 271(1) (C) OF THE ACT. THUS, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE DIFFERENCE OF TWO FIGURES COMES TO RS. 75,87,919/-, WHICH CAN BE TAKEN AS CASH COMPONENT RECEIVED OUT OF BOOKS. 3.1 THE LD AR HAS SUBMITTED THAT THE ASSESSEE RECON CILED THE DISCREPANCY FOUND DURING THE COURSE OF SURVEY AND THEREFORE, ONLY THE DIFFERENCE AMOUNT CAN BE TREATED AS UNACCOUNTED CASH RECEIVED BY THE ASSESSE E. HE HAS MAINLY EMPHASIZED THAT WHEN THE ADDITION IS MADE ON THE BA SIS OF THE STATEMENT, WHICH HAS NO EVIDENTIARY VALUE THEN THE SAME CANNOT AUTOM ATICALLY RESULTANT INTO LEVY OF PENALTY. IT IS FURTHER SUBMITTED THAT THE ASSESSEE SURRENDERED THE ADDITIONAL INCOME OF RS. 2 CRORES TO BUY PEACE AND TO AVOID LITIGATIO N WITH THE DEPARTMENT WITH A 4 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) REQUEST NOT TO INITIATE PENALTY PROCEEDINGS AGAINST THE ASSESSEE. WHEN THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING ABOUT T HE CONCEALING OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE N MAINLY BECAUSE THE ASSESSEE SURRENDERED THE ADDITIONAL INCOME, DOES NOT WARRANT LEVY OF PENALTY. 3.2 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT WH EN THE ASSESSEE ADMITTED THE ADDITIONAL INCOME BEING UNACCOUNTED RECEIPTS THEN, THERE IS NO QUESTION OF FURTHER INVESTIGATION BY THE ASSESSING OFFICER. THE ADDITI ON MADE BY THE ASSESSING OFFICER ATTAINED THE FINALITY AND THE ASSESSEE CANNOT QUEST ION THE MERITS OF THE ADDITION IN THE PENALTY PROCEEDINGS. HE HAS FURTHER CONTENDE D THAT THE INCOME WAS SURRENDERED BY THE ASSESSEE ONLY BECAUSE OF THE INC RIMINATING MATERIAL FOUND DURING THE COURSE OF SURVEY, WHICH CLEARLY SHOWS THAT THE INCOME IS AN UNACCOUNTED INCOME. THEREFORE, THIS ADDITION IS NOT SIMPLY SAI D TO BE ON THE BASIS OF THE STATEMENT BUT A SUFFICIENT MATERIAL WAS ALSO AVAILA BLE FOR MAKING SUCH ADDITION. 4 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERU SED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE STATEMENT R ECORDED DURING THE SURVEY ALONE HAS NO EVIDENTIARY VALUE UNTIL AND UNLESS THERE IS SOME CORROBORATIVE DOCUMENTARY EVIDENCE. HOWEVER, IN THE CASE IN HAND, THE STATEM ENT U/S 133A WAS RECORDED AFTER THE INCRIMINATING MATERIAL IN THE SHAPE OF LOOSE SH EET FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY. THE ASSESSEES SURRENDER AND ADMISSION OF ADDITIONAL INCOME OF R. 2 CRORES CANNOT BE LOOKED INTO OR CONSIDERED IN ISOLATION; BUT IT HAS TO BE CONSIDERED IN THE LIGHT OF THE INCRIMINATING MATERI AL FOUND AND IMPOUNDED DURING THE SURVEY WHICH CLEARLY SHOWS THE UNACCOUNTED RECE IPT AND EXPENDITURE ON THE 5 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) PART OF THE ASSESSEE. THE ASSESSEE DID NOT DISPUTE THE CORRECTNESS OF THE AMOUNT RECORDED IN THE LOOSE SHEET FOUND AND IMPOUNDED DUR ING THE COURSE OF SURVEY. THEREFORE, THERE WAS ENOUGH MATERIAL TO SHOW THAT T HE ASSESSEE HAD RECEIVED UNACCOUNTED MONEY. IT IS ALSO NOT A SIMPLE CASE O F THE STATEMENT RECORDED DURING THE COURSE OF SURVEY BUT CONSEQUENT TO THE SURVEY, THE ASSESSEE VIDE ITS AFFIDAVIT DATED 11.10.2005 RETRACTED THE STATEMENT RECORDED D URING THE SURVEY AND THEREAFTER AGAIN HE HAS WITHDRAWN THE STATEMENT AND AGAIN SU RRENDERED AND ADMITTED THE ADDITIONAL INCOME ON ACCOUNT OF UNACCOUNTED RECEIPT S DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE ADDITION MAD E BY THE ASSESSING OFFICER CANNOT BE SAID ON THE BASIS OF THE STATEMENT RECORD ED DURING THE COURSE OF SURVEY U/S 133A. THE ADDITION WAS MADE WHEN THE ASSESSEE OFFERED THE ADDITIONAL INCOME OF RS. 2 CRORES ON ACCOUNT OF UNACCOUNTED RECEIPTS AND THEREFORE, THE CONTENTION OF THE LD AR OF THE ASSESSEE CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. 4.1 AS FAR AS THE ADJUSTMENT OF THE EXPENDITURE AGA INST THE RECEIPTS IS CONCERNED, WE NOTE THAT THE EXPENDITURE, WHICH WAS FOUND IN TH E LOOSE SHEET AND OUT OF BOOKS OF ACCOUNT PRIMA FACIE DOES NOT RELATES TO THE BUS INESS OF THE ASSESSEE AND THEREFORE, THE SAID EXPENDITURE APPEARS TO BE NOT I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. EVEN OTHERWISE, THE A SSESSEE FAILED TO EXPLAIN AND ESTABLISH THAT THE SAID EXPENDITURE WAS INCURRED FO R THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. WHEN THE ASSESSEE DID NOT BRING ANY MATERIAL OR EXPLANATION TO ESTABLISH THAT THE SAID EXPENDITURE HAVE NEXUS WIT H THE BUSINESS ACTIVITY OF THE ASSESSEE OR INCURRED FOR THE PURPOSE OF THE BUSINES S, THEN THE SAME CANNOT BE CONSIDERED AS AN EXPENDITURE FOR EARNING UNACCOUNTE D INCOME AS PER THE LOOSE 6 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) SHEET. ACCORDINGLY, THE ASSESSEE HAS NOT MADE OUT ANY CASE FOR ADJUSTMENT OF THE SAID EXPENDITURE AGAINST THE UNACCOUNTED INCOME. 4.2 THOUGH THE PENALTY PROCEEDINGS ARE SEPARATE AND IMPENDENT FROM THE ASSESSMENT PROCEEDINGS; HOWEVER, THE ASSESSMENT ORD ER AS WELL AS THE EVIDENCE GATHERED FOR THE PURPOSE OF ASSESSMENT PROCEEDINGS CAN BE A GOOD EVIDENCE AND RELEVANT MATERIAL FOR THE PURPOSE OF LEVY OF PENALT Y U/S 271(1)( C) UNTIL AND UNLESS THE ASSESSEE FURNISH AN EXPLANATION TO SHOW THE BONAFI DE REASON FOR NOT DECLARING THE INCOME AT THE TIME OF FILING OF THE RETURN. IN V IEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DO NOT FIND ANY MERIT IN THE A PPEAL OF THE ASSESSEE; ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A) O N THIS ISSUE. 5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED ON THE 30 TH DAY OF JUNE 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 30 TH JUNE 2011 RAJ* 7 ITA NO. 617/MUM/2008 (ASST YEAR 2004-05) COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI