The ACIT, Circle-5, RAJKOT-GUJARAT V. Shri Lakhabhai M. Jaria, Morbi

ITA 630/RJT/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94065 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: MJ RANPURA
• Keywords: Business income; Income from undisclosed sources
• Section: 143(3); 153A; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ITA NO.630/RJT/2012 / ASSTT. YEAR: 2007-08 ACIT, CIR.5 RAJKOT. VS SHRI LAKHABHAI M. JARIA SHREE RAVECHI KRUPA ST. NO.4, AVENUE PARK SOCIETY RAVAPAR ROAD, MORVI. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI AVINASH KUMAR, AR ASSESSEE BY : SHRI M.J. RANPURA, CA / DATE OF HEARING : 18/05/2015 / DATE OF PRONOUNCEMENT: 22/05/2015 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS)-IV AHMEDABAD DATED 1-9-2012. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I N THIS APPEAL IS THAT THE CIT(A) ERRED IN LAW AND ON FACTS IN DELETI NG THE PENALTY OF RS.17,34,000/-LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH WAS CA RRIED OUT IN THE CASE OF THE ASSESSEE ON 27-09-2006. IN THE STATEME NT RECORDED UNDER SECTION 132(4) THE ASSESSEE ADMITTED ADDITIONAL INC OME OF RS.51 LAKHS FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE FILE D A RETURN OF INCOME IN PURSUANCE TO NOTICE UNDER SECTION 153A DE CLARING INCOME OF RS.51 LAKHS. THE ASSESSING OFFICER COMPLETED THE AS SESSMENT UNDER ITA NO.630/RJT/2012 2 SECTION 143(3) READ WITH SECTION 153A(A) ON 29-12-2 008 AT AND INCOME OF THE RS.52,51,178/-. 4. THEREAFTER, THE AO LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT OF RS.17,34,000/-FOR CONCEALMENT OF INCOME. 5. ON APPEAL THE COMMISSIONER OF INCOME TAX APPEALS DELETED THE PENALTY BY OBSERVING AS FOLLOWS: 6.2 IN THE PRESENT CASE, THE ASSESSEE HAS BEEN FOU ND TO BE THE OWNER OF UNACCOUNTED ASSETS IN THE FORM OF CASH AND THE RETURN OF INCOME FOR THE PREVIOUS YEAR 2006-07 WAS YET TO BE FILED AND THEREFORE, UNDISCLOSED INCOME DISCLOSED IN THE RETU RN OF INCOME FILED IN RESPECT OF THE PREVIOUS YEAR 2006-07 I.E. ASSESSMENT YEAR 2007-08, THE ASSESSEE IS DEEMED TO HAVE CONCEALED T HE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PART ICULARS OF INCOME IN TERMS OF EXPLANATION 5 TO SECTION 271(1)( C) OF THE ACT. CONSIDERING THE PROVISIONS OF EXPLANATION 5 WHICH A RE APPLICABLE TO PRESENT CASE, THE ASSESSEE HAS DEEMED TO HAVE CO NCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME EVEN IF THE ASSESSEE HAS DISCLOSED UNACCOUNTED INCO ME OF RS.51,00,000/-IN THE RETURN FILED SUBSEQUENT TO THE DATE OF SEARCH SO FAR AS ASSESSMENT YEAR 2007-08 IS CONCERNED. 6.3 NOW THE ISSUE ARISES AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR IMMUNITY IN TERMS OF EXPLANATION 5 TO SECTION 2 71(1)(C) OF THE ACT OR NOT. IN THE PRESENT CASE, THE DATE OF SUCH B EING 27-09- 2006, THE RELEVANT PREVIOUS YEAR IS 2006-07 THAT IS ASSESSMENT YEAR 2007-08. THE DUE DATE FOR FILING THE RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 IS 31-07-2007. THEREFORE, T HE IMMUNITY FROM PENALTY UNDER SECTION 271(1)(C) IS AVAILABLE T O THE ASSESSEE FOR ASSESSMENT YEAR 2007-08. HOWEVER, THE IMMUNITY FROM LEVY OF PENALTY UNDER SECTION 271 (1) (C) OF THE ACT IS POSSIBLE ONLY IF THE ASSESSEE FULFILS ALL THE CONDITIONS CUMULATIVEL Y. 6.4 IT IS NOTICED THAT THE ASSESSING OFFICER IN THE PENALTY ORDER HAS NOT EXAMINED THE CASE WITH REFERENCE TO THE AVA ILABILITY OF IMMUNITY IN TERMS OF EXPLANATION 5 (2) TO SECTION 2 71 (1) (C) OF THE ACT. IT IS THE CLAIM OF THE ASSESSEE THAT DISCL OSURE OF INCOME OF RS.1,15,00,000/-IS MADE IN THE STATEMENT RECORDE D UNDER SECTION 132 (4) OF THE ACT. IT IS NOTED THAT THE SA ID DISCLOSURE HAS BEEN MADE BY THE ASSESSEE BY WAY OF LETTER DATED 17 -11-2006 ADDRESSED ADDITIONAL DIRECTOR OF INCOME TAX (INVEST IGATION), RAJKOT. IT HAS BEEN CLEARLY MENTIONED IN THE SAID L ETTER THAT THE CONTENTS OF THE LETTER ARE TO BE TREATED AS PART OF THE STATEMENT ITA NO.630/RJT/2012 3 RECORDED UNDER SECTION 132(4)OF THE ACT. IN MY VIEW , THE DISCLOSURE MADE BY WAY OF LETTER DATED 17-11-2006 H AS TO BE TREATED AS DISCLOSURE MADE AS PER STATEMENT UNDER S ECTION 132 (4) OF THE ACT MAINLY IN VIEW OF THE FACT THAT PROP ER SCRUTINY OF SEIZED MATERIAL IS NOT POSSIBLE FOR MAKING DISCLOSU RE IN THE STATEMENT RECORDED ON THE DATE OF SEARCH. IN VIEW O F THE CATEGORICAL ASSERTION OF THE APPELLANT THAT THE DIS CLOSURE MADE IN THE LETTER ARE TO BE TREATED AS PART OF THE STATEME NT RECORDED UNDER SECTION 132 (4) OF THE ACT, IT IS ACCEPTED TH AT THE APPELLANT HAS MADE THE DISCLOSURE OF INCOME BASED ON THE SEIZ ED INCRIMINATING MATERIAL IN TERMS OF SECTION 132 (4) OF THE ACT. 6.4 SO FAR AS THE MANNER OF EARNING THE SAID UNDISC LOSED INCOME IS CONCERNED, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY SUCH QUESTION WAS ASKED TO THE APPELLANT EITHER IN THE S TATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT OR EVEN AF TER SUBMISSION OF LETTER DISCLOSING UNACCOUNTED INCOME OR EVEN DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT IS NOTED THAT THE APPELLANT HAS RESPONDED TO ALL THE QUESTIONS ASKED UNDER SECTION 132 (4) OF THE ACT RELATING TO HIS FINANCIAL AFFAIRS. UNLESS SPECI FIC QUESTION IS ASKED TO THE APPELLANT EITHER IN THE STATEMENT RECO RDED UNDER SECTION 132 (4) OR EVEN DURING THE COURSE OF ASSESS MENT PROCEEDINGS, IT MAY NOT BE PROPER TO ATTRIBUTE THE FAILURE, IF ANY, FOR NOT SPECIFYING THE MANNER IN WHICH UNACCOUNTED INCOME WAS EARNED BY THE APPELLANT. IT IS ALSO NOTED THAT SUBS EQUENT TO THE DISCLOSURE OF UNACCOUNTED INCOME BY WAY OF SUBMISSI ON OF LETTER DATED 17-11-2006, THE APPELLANT HAS NOT BEEN SUBJEC TED TO ANY QUESTION BY THE ASSESSING OFFICER WITH REFERENCE TO THE MANNER OF EARNING THE UNDISCLOSED INCOME. IN THE SAID LETTER, THE APPELLANT HAS CLEARLY SPECIFIED THE UNDISCLOSED INCOME OF RS. 1,15,00,000/- HAS BEEN EARNED FROM VARIOUS BUSINESS TRANSACTIONS CARRIED OUT IN THE APPELLANTS NAME OR IN THE NAME OF HIS FAMILY M EMBERS. IN THIS REGARD, THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF MAHINDRA C. SHAH (2008) 299 ITR 305 (GU J) WHICH HAS BEEN RELIED UPON BY THE APPELLANT IS QUITE RELE VANT. IT HAS BEEN HELD THAT THE ASSESSEE IS NOT REQUIRED TO SPEC IFY AND SUBSTANTIATE THE MANNER OF EARNING UNDISCLOSED INCO ME UNLESS THE SAME IS SPECIFICALLY ASKED BY THE AUTHORISED OFFICE R DURING THE STATEMENT RECORDED UNDER SECTION 132 (4). FURTHER, THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VERSUS KISHAN GOEL (2 005) 278 ITR 454 HAS ALSO OBSERVED THAT NON DISCLOSURE OF MANNER OF EARNING THE UNDISCLOSED INCOME IS NOT RELEVANT FOR THE PURP OSE OF AVAILING BENEFIT UNDER EXPLANATION 5 BELOW SECTION 271(1)(C) OF THE ACT. 6.5 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OP INION THAT SO FAR AS THE MANNER OF EARNING THE INCOME IS CONCERNE D, THE APPELLANT HAS, IN MY VIEW, SPECIFIED THE MANNER OF EARNING THE ITA NO.630/RJT/2012 4 UNDISCLOSED INCOME AS WELL AS SUBSTANTIATED THE SAM E TO THE EXTENT OF QUESTIONS HAVING BEEN ASKED IN THIS REGAR D IN THE STATEMENT RECORDED UNDER SECTION 132 (4) OF THE ACT . THERE IS NOTHING ON RECORD TO SUGGEST THAT THE APPELLANT HAS FAILED TO RESPOND ANY OF THE QUESTIONS RELATING TO THE MANNER AS WELL AS SUBSTANTIATING THE SAME EVEN DURING THE COURSE OF A SSESSMENT PROCEEDINGS. IN VIEW OF THIS, THE APPELLANT HAS FUL FILLED THE FIRST CONDITIONS FOR AVAILING OF IMMUNITY FROM PENALTY PR OCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 6.6 SO FAR AS TAX PAYMENT TOGETHER WITH INTEREST IS CONCERNED, IT IS NOTICED THAT BEFORE FILING THE RETURN OF INCOME, THE APPELLANT HAS WIDE LETTER DATED 13-11-2008 SPECIFICALLY REQUESTED THE APPROPRIATE AUTHORITY TO APPROPRIATE THE SEIZED CAS H TOWARDS SELF ASSESSMENT TAX LIABILITY OF THE APPELLANT FOR THE Y EAR UNDER CONSIDERATION. IN THE RETURN OF INCOME FILED ON 14- 11-2008 ALSO, THE APPELLANT HAS CLAIMED THE PAYMENT OF SELF ASSES SMENT TAX OUT OF CASH SEIZED. THE PROCEDURE OF TREATMENT OF SEIZE D CASH IS DESCRIBED IN SECTION 132B OF THE INCOME TAX ACT. TH E SEIZED CASH CAN BE APPROPRIATED AGAINST ANY EXISTING LIABILITY UNDER THE INCOME TAX ACT, THE WEALTH TAX ACT, ETC. AND THE AM OUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT IN TERMS OF SECTION 132B(1) OF THE ACT. THE APPELLANT HAS CLAIM ED FOR ADJUSTMENT OF SEIZED CASH AGAINST TAX PAYABLE IN TH E RETURN OF INCOME. THE TAX LIABILITY OF THE APPELLANT HAS COME TO EXISTENCE AS PER SECTION 140 A (3) OF THE ACT FROM THE DATE OF F ILING OF RETURN OF INCOME AND IS ACCORDINGLY AND EXISTING LIABILITY. THEREFORE, THE APPELLANT IS ENTITLED TO ADJUSTMENT OF SEIZED CASH AGAINST SELF- ASSESSMENT TAX LIABILITY OF THE APPELLANT WHICH HAS COME INTO EXISTENCE FROM THE DATE OF FILING OF RETURN IN TERM S OF SECTION 140A(3) OF THE ACT. THEREFORE, THE THIRD CONDITION FOR MAKING THE PAYMENT OF TAX ALONG WITH INTEREST ALSO STANDS SATI SFIED SO FAR AS APPELLANTS CASE IS CONCERNED. 6.7 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OP INION THAT THE APPELLANT HAVING FULFILLED ALL THE THREE CONDIT IONS FOR AVAILING IMMUNITY FROM LEVY OF PENALTY IN TERMS OF EXPLANATI ON 5 (2) TO SECTION 271(1)(C) OF THE ACT IS ENTITLED TO IMMUNIT Y FROM LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN VIEW OF THE ABOVE, PENALTY LEVIED BY THE AO IN RESPECT OF DISCLOSED IN COME OF RS.51,00,000/-IN THE RETURN OF INCOME FILED SUBSEQU ENT TO DATE OF SEARCH IS HEREBY CANCELLED SINCE THE APPELLANT IS E NTITLED TO THE BENEFIT OF IMMUNITY IN TERMS OF EXPLANATION 5 (2) T O SECTION 271 (1) (C) OF THE ACT. 6.8 SO FAR AS THE PENALTY LEVIED IN RESPECT OF ADDI TION OF RS.1,51, 178/-IS CONCERNED, I AM IN AGREEMENT WITH THE ASSESSING ITA NO.630/RJT/2012 5 OFFICER THAT THE DISCLOSURE OF UNDISCLOSED INCOME C ANNOT BE SAID TO BE INCLUSIVE OF PROFIT AS PER PROFIT AND LOSS ACCOU NT BEING THE REGULAR BUSINESS INCOME. THE APPELLANT HAS ALSO NEV ER INDICATED THIS FACT THAT THE DISCLOSED INCOME INCLUDES THE RE GULAR BUSINESS INCOME. HOWEVER, THE DETAILS OF BIFURCATION OF UNDI SCLOSED INCOME OF RS.51,00,000/-HAS NOT BEEN DISCUSSED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER AT ALL. EVEN OTHERWISE, THE REGULAR INCOME AS PER PROFIT AND LOSS ACCOUNT IS DULY DISCLOSED BY THE APPELLANT. THE FAILURE TO INCLUDE SUCH A REGULAR BUSINESS INCO ME IN THE COMPUTATION OF INCOME CAN AT BEST BE TREATED AS A B ONA FIDE MISTAKE ON THE PART OF THE APPELLANT. THEREFORE, EV EN IF THE CONTENTION OF THE APPELLANT IS NOT SUBSTANTIATED, S TILL THE BONA FIDES BELIEF OF THE APPELLANT CANNOT BE DOUBTED. IT IS AN ESTABLISHED POSITION IN LAW THAT EVEN A MISTAKEN BE LIEF, IF BONA FIDE, CANNOT BE VISITED WITH PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, IN ABSENCE OF DETAILED BIFURCATION OF INCOME OF RS.51,00,000/-, I GRANT THE BENEFIT OF DOUBT TO THE APPELLANT BY TREATING HIS CONTENTION AS BONA FIDE EVEN IF THE SA ME IS NOT DULY SUBSTANTIATED. IN VIEW OF THE ABOVE, THE PENALTY LE VIED BY THE ASSESSING OFFICER UNDER SECTION 271 (1) (C) OF THE ACT IN RESPECT OF ADDITION OF RS.1,51,178/-IS ALSO CANCELLED. IN THE RESULT, THE APPEAL IS ALLOWED. 6. BEFORE US THE DR RELIED ON THE ORDER OF THE AO. NO SPECIFIC ERROR IN THE ABOVE QUOTED ORDER OF THE CIT(A) WOULD BE POINT ED OUT BY THE DEPARTMENTAL REPRESENTATIVE. FURTHER, WE FIND THAT DURING THE COURSE OF SEARCH ON 27-09-2006 ALSO DISCLOSURE WAS MADE BY TH E ASSESSEE FOR ASSESSMENT YEAR 2004-05 RS.17,00,000/-, 2005-06 RS. 15,00,000/-AND 2006-07 RS.23,00,000/-AND PENALTY WAS LEVIED BY THE ASSESSING OFFICER IN THOSE YEARS. THE SAID PENALTY WAS DELETED BY THE COMMISSIONER OF INCOME TAX APPEALS. THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL ACCEPTED THE ORDER OF THE CIT(A) AND D ISMISSED THE APPEALS OF THE REVENUE BY CONSOLIDATED ORDER DATED 20-01-20 12, PASSED IN ITA NOS.75, 76 & 77/RJT/2010 AND WHILE DOING SO HELD AS UNDER: 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF PA RTIES, RECORD PERUSED AND GONE THROUGH DECISIONS CITED. WE FIND THAT THE DECISION CITED BY THE ID. D.R. ARE DISTINGUISHA BLE ON THE FACTS AS IN THOSE DECISIONS, SECTION 153A OF THE AC T HAS NOT BEEN CONSIDERED. WE FIND THAT CIT(A) HAS RIGHTLY CA NCELLED THE PENALTY FOLLOWING THE VARIOUS DECISIONS OF ITAT INC LUDING DCIT VS. M/S. BALAJI MULTIFLEX P. LTD. ORDER DATED 10-08 -2010. WE ITA NO.630/RJT/2012 6 ALSO NOTICED THAT THE ISSUE IS ALSO COVERED BY THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SURE SH CHAND BANSAL 329 ITR 330 (CAL.) FURTHER THIS ISSUE IS ALS O COVERED BY THE ORDER OF ITA T, RAJKOT BENCH IN THE CASE OF SHR I SHANTILAL JERAMBHAI MAHESHWARI, ITA.NO.68/RJTL2009 ORDER DATE D 27- 05-2011. THE RELEVANT FINDINGS OF THE ITAT IS REPRO DUCED AS UNDER: '4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE DISCLOSED AN UNDISCLOSED I NCOME OF RS.9,25,000. THE INCOME WAS DISCLOSED CONSEQUENT UPON THE SEARCH OPERATION CONDUCTED BY THE DEPARTME NT, THE CONTENTION OF THE REVENUE IS THAT BUT FOR THE S EARCH OPERATION THE ASSESSEE WOULD NOT HAVE DISCLOSED THE INCOME OF RS.9,25,000. THE FACT REMAINS THAT THE ASSESSEE DISCLOSED THE INCOME IN THE RETURN FILED I N RESPONSE TO NOTICE U/S.153A OF THE ACT. ONCE THE ASSESSEE DISCLOSED THE INCOME IN RESPONSE TO NOTICE ISSUED U/S. 153A ALL PENDING PROCEEDINGS SHALL STAN D ABATED AND THEREFORE, THE INCOME HAS TO BE COMPUTED ONLY ON THE BASIS OF RETURN FILED BY THE ASSESSEE U /S.153A OF THE I.T ACT. SINCE, ADMITTEDLY, THE ASSESSEE HAS DISCLOSED UNDISCLOSED INCOME OF RS.9,25,000 IN THE RETURN OF INCOME, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY PART OF THE INCOME. THEREFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE PENALTY . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AU THORITY. ACCORDINGLY, THE SAME IS CONFIRMED. ' 7. IN THE LIGHT OF THE ABOVE FACT, WE CONFIRM THE ORDER OF CIT(A). 7. THE DR COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE QUOTED ORDER OF THE TRIBUNAL IN THE CASE OF T HE ASSESSEE ITSELF WAS VARIED IN APPEAL BY ANY HIGHER AUTHORITIES. 8. IN VIEW OF OUR ABOVE DISCUSSION, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVE NUE. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 22 ND MAY, 2015 AT RAJKOT. SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 22/5/2015