ASST CIT CEN CIR 3, THANE V. AKSHAR DEVELOPERS, NAVI MUMBAI

ITA 6251/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9611 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KASHYAP
• Assessee Lawyers: AJAY R SINGH
• Keywords: Search and seizure; Loose papers
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6251 /MUM/201 4 ASSESSMENT YEAR: 20 08 - 09 A CIT C EN CIR 3 R. NO. 11 , A WING 6 TH FLOOR ASHAR IT PARK RD. NO. 16Z, WAGLE INDL ESTATE, THANE (E) THANE VS. AKSHAR DEVELOPERS SHOP NO. 7 & 3 PLO. NO. 42, SHREEJI SEVA NERUL, NAVI MUMBAI PAN NO. AA KFA0455B (APPELLANT) (RESPONDENT) APPELLANT BY: MR. PURUSHOTTAM KASHYAP , D R RESPONDENT BY: MR. AJAY R. SINGH , A R DATE OF HEARING: 08 /06/2017 DATE OF ORDER: 05/09/2017 ORDER PER N.K. PRADHAN, A . M . WHO WOULD HAVE DREAMED THAT HE WOULD BE VISITED WITH PENALTY AFTER PAYING TAX AND INTEREST ON THE SAME DISCLOSED AND ASSESSED INCOME? BUT THAT IS WHAT THIS CASE IS ALL ABOUT. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 20 08 - 09 . THE APPEAL IS DIRECTED AGAINST THE O RDER COMMISSIONER (APPEALS) 2 , THANE AND ARISES OUT OF PENALTY ORDER U/S 271AAA OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1 . ON THE FACTS AND THE CIRCUMSTAN CES OF THE CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE PENALTY LEVIED U/S. 271AAA OF THE I.T. ACT BY HOLDING THAT THE CONDITIONS FOR IMMUNITY FOR PENALTY AS MENTIONED IN SUB - ITA NO. 6251/MUM/2014 2 SECTION (2) OF SECTION 271AAA WERE SATISFIED, WHEREAS THE CONDITIONS F OR IMMUNITY FOR PENALTY AS MENTIONED IN SUB - SECTION (2) OF SECTION 271AAA WERE NO SATISFIED. 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING PENALTY LEVIED U/S. 271AAA OF THE I.T. ACT WHEN THE ASSESSEE FAILED TO S PECIFY THE MANNER IN WHICH THE UNDISCLOSED INCO ME HAS BEEN DERIVED AND FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 WAS CONDUCTED BY THE DEPARTMENT IN PATEL GROUP OF CASES ON 17.01.2008 IN WHICH THE ASSESSEE WAS ALSO COVERED. THE ASSESSEE IS A BUILDER, DEVELOPER AND CONTRACTOR. SUBSEQUENT TO THE SEARCH THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2008 - 09 ON 30.09.2008 DECLARING TOTAL INCOME OF RS.5,94,33,381/ - . HOWEVER, THE AO CAME TO A FINDING THAT THE ASSESSEE IN THE INSTANT CASE FAILED TO SUBSTANTIATE THE MANNER IN WHICH THE UNDIS CLOSED INCOME WAS DERIVED. AS PER HIM THE ASSESSEE DID NOT QUALIFY FOR IMMUNITY FROM LEVY OF PENALTY U/S 271AAA OF THE ACT. THEREFORE, HE IMPOSED PENALTY @ 10% ON RS.4,29,96,250/ - [(TOTAL UNDISCLOSED INCOME OFFERED U/S 132(4) OF THE ACT]. THUS THE PENALTY COMES TO RS.42,99,625/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT (I) SHRI BHARAT B. PATEL, THE PARTNER OF THE ASSESSEE - FIRM IN HIS STATEMENT RECORDED U/S 132(4) ON 18.01.2008 HA S CLEARLY EXPLAINED THE ENTRIES RECORDED ON PAGE 109 AND 110 OF THE SEIZED MATERIAL AND STATED THAT SUCH ENTRIES PERTAINED TO ON MONEY RECEIVED AT RS.150/ - SQ. FT. ON SALE OF COMMERCIAL UNITS MEASURING 51,700 SQ. FT. AND SALE OF RESIDENTIAL UNITS ITA NO. 6251/MUM/2014 3 ADMEASU RING 2,25,000 SQ. FT., (II) THE ASSESSEE ALSO QUANTIFIED THE TOTAL AMOUNT OF ON MONEY RECEIVED FROM SALE OF SHOPS AND RESIDENTIAL UNITS AT RS.4,15,05.000/ - , (III) THE ASSESSEE DISCLOSED THE ABOVE INCOME IN THE RETURN OF INCOME AND PAID THE TAXES AND INTE REST THEREON, (IV) THE AO HAS ALSO ACCEPTED THE NATURE OF INCOME DISCLOSED WHILE PASSING THE ASSESSMENT ORDER. THE FACTS DELINEATED BY THE LD. CIT(A) AT PARA 2.2 OF THE APPELLATE ORDER DATED 01.07.2014 IS EXTRACTED BELOW: DURING THE COURSE OF SEARCH ACT ION AT THE RESIDENCE OF SH. BHARAT B. PATEL, PARTNER OF THE ASSESSEE FIRM, CERTAIN INCRIMINATING LOOSE PAPERS WERE FOUND AND SEIZED. THE STATEMENT OF SH. BHARAT B. PATEL WAS ALSO RECORDED ON 18/01/2008 U/S. 132(4) OF THE ACT. IN RESPONSE TO THE QUESTION NO .7, SH. BHARAT B. PATEL, PARTNER OF THE ASSESSEE FIRM, ADMITTED THAT THE TRANSACTIONS IN RESPECT OF ON MONEY RECEIVED IN RESPECT OF SALE OF COMMERCIAL UNITS (SHOPS) OF THE BUILDING SHREEJI HEIGHTS AT NERUL HAVE BEEN NOTED BY HIM ON PAPER NO.109 ON 09/11/ 2007. FURTHER IT WAS STATED THAT ON MONEY WAS RECEIVED AT AN AVERAGE OF RS.150/ - PER SQ. FT. FOR TOTAL BUILT UP AREA OF 51,700 SQ. FT. ACCORDINGLY, SALE CONSIDERATION ON ACCOUNT OF ON MONEY ON SALE OF SHOPS WAS RS.77,55,000/ - . SIMILARLY, ON PAGE NO.110 , THE ENTRIES OF ON MONEY AT AN AVERAGE OF RS.150/ - PER SQ. FT. FOR RESIDENTIAL UNITS OF 2,25,000 SQ. FT. WERE RECORDED. THESE TRANSACTIONS WERE ALSO RECORDED ON THE SAME DATE RESULTING INTO TOTAL ON MONEY RECEIVED FROM RESIDENTIAL UNITS AT RS.3,37,50,000/ - . THE PARTNER OF THE ASSESSEE FIRM HAD FINALLY STATED THAT TOTAL ON MONEY RECEIVED DURING FINANCIAL YEAR 2007 - 08 WAS RS.4,15,05,000/ - . IN RESPONSE TO THE QUESTION NO.8, HE HAS STATED THAT ON MONEY TRA NSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND ACCORDINGLY THE ADDITIONAL INCOME OF THE FIRM M/S. AKSHAR DEVELOPERS IS BEING DECLARED FOR TAXATION OVER AND ABOVE REGULAR INCOME WITH THE REQUEST NOT TO LEVY THE PENALTY U/S. 271AAA. THESE FACTS HAV E BEEN RECORDED BY THE A.O. IN THE ASSESSMENT AND PENALTY ORDERS. ITA NO. 6251/MUM/2014 4 IN VIEW OF THE ABOVE, THE LD. CIT(A) CANCELLED THE PENALTY OF RS.42,99,625/ - LEVIED BY THE AO U/S 271AAA. 5. BEFORE US, THE LD. DR SUBMITS THAT THE ASSESSEE IN THE INSTANT CASE THE ASSESS EE HAS NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED AND THEREFORE, THE AO HAS RIGHTLY IMPOSED THE PENALTY U/S 271AAA. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. IT IS STATED BY HIM THAT THE AO HAS MENTIONED IT IN THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER. THE ASSESSEE HAS PAID TAX AND INTEREST ON THE INCOME DISCLOSED DURING THE COURSE OF SEARCH. THEREFORE, IT IS SUBMITTED BY HIM THAT THE AO SHOULD NOT HAVE IMPOSED PENALTY U/S 271AAA. THE LD. COUNSEL RELIES ON THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE REASONS FOR OUR DECISION ARE GIVEN IN SUCCEEDING PARAGRAPHS. WE FIND THAT SECTION 271AAA IS APPLICABLE IF (A) A SEARCH IS INITIATED U/S 132 ON OR AFTER JUNE 1, 2007, BUT BEFORE JULY 1, 2012 (B) THERE IS SOME UNDISCLOSED INCOME AND (C) UNDISCLOSED INCOME PERTAINS TO A SPECIFIED PREVIOUS YEAR. WHAT IS THE QUANTUM OF CONCEALMENT PENALTY ? IF THE ABOVE CONDITIONS ARE SATISFIED, 10 % OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR IS CONCEALMENT PENALTY WHICH CAN BE IMPOSED BY THE AO IN ADDITION TO TAX. THE AFORESAID PENALTY OF 10 % OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR CAN BE AVOIDED IF THE FOLLOWING CONDITIONS ARE SATISFIED - ITA NO. 6251/MUM/2014 5 I. IF THE ASSESSEE IN A STATEMENT U/S 132(4) IN THE COURSE OF THE SEARCH, ADMITS THE UNDISCLOSED INCOME. FURTHER, HE SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. II. HE SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. III. HE PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. IF THE ABOVE THREE CONDITIONS ARE SAT ISFIED PENALTY U/S 271AAA ( I.E. 1 0 % OF UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR) CAN BE AVOIDED. 7.1 LET US GO BACK TO THE FACTS IN THE INSTANT CASE. WE HAVE EXTRACTED AT PARA 4 HERE - IN - ABOVE THE FACTS DELINEATED BY THE LD. CIT(A) . THE LD. CIT(A) HAS ALSO REFERRED TO THE FACTS NARRATED BY THE AO IN THE ASSESSMENT ORDER AND THE PENALTY ORDER . IT IS QUITE EVIDENT FROM A READING OF THE ABOVE THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. BO TH THE AO AND THE LD. CIT(A) HAVE MENTIONED THAT THEREAFTER THE ASSESSEE HAD PAID TAX AND INTEREST ON THE DECLARED AMOUNT OF RS.4,29,96,250/ - . 7.2 IN CIT VS. SUDHIR JAIN [2014] 41 TAXMANN.COM 234 (DEL.), THE HONBLE DELHI HIGH COURT HAS HELD THAT N O PENAL TY U/S 271AAA IS LEVIABLE WHERE TAXES AND APPLICABLE INTEREST WERE PAID ON UNDISCLOSED INCOME AND DETAILS OF NATURE OF UNDISCLOSED INCOME AND MANNER OF EARNING WAS RECORDED. 7.3 A SIMILAR ISSUE AROSE BEFORE ITAT A BENCH , MUMBAI IN THE CASE OF ACIT VS. M /S. KANAKIA SPACES PVT. LTD . (ITA NO. 6763/MUM/2011) FOR ITA NO. 6251/MUM/2014 6 THE A.Y. 2007 - 08 . THE GROUND RAISED BY THE REVENUE BEFORE THE TRIBUNAL WAS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING PENALTY LEVIED U/ S. 271AAA OF THE I.T. ACT,1961 OF RS.55,00,000/ - WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED SO AS TO QUA LIFY FOR NON - LEVY OF PENALTY WITHIN THE MEANING OF SUB - SECTION(2) OF SECT ION 271AAA OF THE I.T. ACT, 1961. THE TRIBUNAL FOLLOWED THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN CIT VS. MAHENDRA C. SHAH (299 ITR 305) AND THAT OF HONBLE ALLAHABAD HIGH COURT IN CIT VS. RADHA KISHAN GOEL (2005) 278 ITR 454 (ALL.) AND DISMISSED THE APPEAL FILED BY THE REVENUE. 7.4 ALSO A SIMILAR ISSUE AROSE IN SITA RAM GUPTA VS. ACIT [2014] 48 TAXMANN.COM 327 (DELHI - TRIB.). THE TRIBUNAL HELD THAT WHERE ASSESSING OFFICER HAVING COMPLETED ASSESSMENT, PASSED A PENALTY ORDER UNDER SECTI ON 271AAA FOR DEFAULT OF NOT SUBSTANTIATING MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED, IN VIEW OF FACT THAT ASSESSEE MADE STATEMENT THAT HE HAD EARNED UNDISCLOSED INCOME FOR VARIOUS TRANSACTIONS OF SALE/PURCHASE OF LAND WHICH DID NOT FACE ANY REBUTTAL AND, MOREOVER, ASSESSEE HAD PAID DUE TAX ON SAID INCOME, IMPUGNED PENALTY ORDER DESERVED TO BE SET ASIDE. 8. IN VIEW OF THE OBTAINING FACTUAL MATRIX AND THE LEGAL PRINCIPLES, WE UPHOLD THE ORDER OF THE LD. CIT(A). ITA NO. 6251/MUM/2014 7 9. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/09/2017. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 05/09/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI