ACIT (OSD) CEN RG -7, MUMBAI V. KANAKIA SPACES P. LTD, MUMBAI

ITA 6763/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 26-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2011
• Court: TRIBUNAL
• Section: 40A(3); 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 6763/MUM/2011 ASSESSMENT YEAR : 2007-08 ACIT(OSD) C.C.23 CENTRAL RANGE-7 ROOM NO.409, 4 TH FLOOR AAYAAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. KANAKIA SPACES PVT. LTD. 349, BUSINESS POINT 5 TH FLOOR, OFF W.E. HIGHWAY ANDHERI(E) MUMBAI. PAN NO.AAACK 2629 J (APPELLANT) (RESPONDENT) ASSESSEE B Y : SHRI VIJAY MEHTA REVENUE BY : SHRI SURINDER JIT SINGH DATE OF HEARING : 26.06.2013 DATE OF PRONOUNCEMENT : 10 .07.2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-40, MUMBAI DATED 24.08.2011. THE REVENUE HAS RAISED THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING PENALTY LEVIED U/S. 27 1AAA OF THE I.T. ACT, 1961 OF RS.55,00,000/- WITHOUT APPRECIATING THE FAC T THAT ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLO SED INCOME WAS DERIVED SO AS TO QUALIFY FOR NON-LEVY OF PENALTY WI THIN THE MEANING OF SUB-SECTION(2) OF SECTION 271AAA OF THE I.T. ACT, 1 961. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT P ROCEEDINGS U/S. 132 WERE CONDUCTED AT THE PREMISES OF KANAKIA GROUP OF CASES ON 19 TH ITA NO6763/M/11 A.Y.07-08 M/S. KANAKIA SPACES PVT. LTD. 2 JULY, 2007. DURING THE COURSE OF SEARCH PROCEEDING S, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND. AFTER ANALYSIS OF THE SAME, A SUM OF RS.5,50,00,000/- WAS DECLARED AS ADDITIONAL INCO ME U/S. 132(4) OF IT ACT. THE BREAK UP OF THE DECLARATION AS UNDER: S.NO. HEAD OF DECLARATION AMOUNT (RS. IN LACS) 1. INCOME U/S.68 500.00 2. 20% DISALLOWANCE U/S.40A(3) 99.40 3. TO COVER UP ANY DISCREPANCIES, IF ANY 47.62 4. UNDISCLOSED INCOME IN THE HANDS OF HIMANSHU KANAKIA 2.98 TOTAL 650.00 LESS : REDUCTION IN WIP ON ACCOUNT OF 40A(3) 110.00 NET DECLARATION 550.00 2.1 THE DECLARED INCOME WAS OFFERED TO TAX AND ASSE SSEE PAID TAXES THERE ON. THE AO ALSO ACCEPTED THE SAME. HOWEVER TH E LD. A.O REFERRED TO THE PROVISIONS OF SECTION 271AAA AND INITIATED PENA LTY PROCEEDINGS. ASSESSEE SOUGHT IMMUNITY FROM PENALTY UNDER SUBSECT ION 2 OF SECTION 271AAA. SUB-SECTION (2) THEREOF PROVIDES THAT PENAL TY UNDER THE SECTION SHALL NOT APPLY IF- (I) IF THE ASSESSEE SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DISCLOSED U/S.132(4) OF THE IT ACT, 1961. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED. (III) PAY THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RES PECT OF THE UNDISCLOSED INCOME. 2.2 IT WAS OBSERVED BY THE LD. A.R THAT DURING THE COURSE OF SEARCH AND POST SEARCH PROCEEDINGS, THE ASSESSEE COULD NOT EXPLAIN THE SOURCES OF ASSETS REFERRED IN THE TABLE AND DID NOT SUBSTA NTIATE THE MANNER IN WHICH IT WAS DERIVED. ACCORDINGLY, PENALTY U/S. 271 AAA WAS LEVIED. ITA NO6763/M/11 A.Y.07-08 M/S. KANAKIA SPACES PVT. LTD. 3 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAD SURRENDERED THE AMOUNT OF RS.5.50 CRORES ON THE BAS IS OF ENTRIES CONTAINED IN THE WORK-IN-PROGRESS SHEET SEIZED DU RING THE COURSE OF SEARCH AND STATEMENT UNDER SECTION 132(4) WAS ACCOR DINGLY GIVEN AND ASSESSEE FILED RETURNS AND PAID TAXES ALSO. THEREFO RE, PROVISIONS OF SECTION 271AAA(2) WILL APPLY TO ASSESSEE FOR GRANT ING IMMUNITY. 3.1 LD. CIT(A) AFTER CONSIDERING THE SUBMISSION DEL ETED THE PENALTY BY STATING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE APPELLANT IN RESPECT OF THE PENALTY LEVIED BY THE LD.AO. IT IS SEEN THAT THE LD.AO HAS WRITTEN TWO SENTENCES AT PARA- 8 TO CONCLUDE T HAT THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE THE SOURCE OF AC QUISITION OF THE MOVABLE ASSETS. THE FACT OF THE MATTER IS THAT THE REQUIREMENT ON THE PART OF AN ASSESSEE TO SUBSTANTIATE THE SOURCE OF I NCOME CANNOT BE TAKEN TO MEAN THAT ALL EVIDENCES IN THE RESPECT HA S TO BE PRODUCED. THE VERY FACT THAT THE DISCLOSURE IS MADE IN RESPEC T OF UNDISCLOSED INCOME, ALL THAT CAN BE REQUIRED OF AN ASSESSEE IS THAT THE PROXIMATE NATURE OF ACQUISITION CAN BE MENTIONED BY HIM. IT CANNOT BE THE CASE THAT VERY MINUTE DETAIL THEREOF WOULD BE PRESERVE W ITH EVIDENCE WHICH IS POSSIBLE ONLY FOR THE REGULAR INCOME BEING DISCLOSED BY HIM. THE REQUIREMENT AS PER SECTION (2) OF SECTION 27IA AA IS ONLY THAT THE MANNER OF EARNING INCOME SHOULD BE SPECIFIED SO TH AT UNDUE ADVANTAGE OF TELESCOPING OR SOME OTHER INCOME BEIN G BROUGHT WITHIN THE TOTAL AMBIT OF UNDISCLOSED INCOME SURRENDERED D OES NOT HAPPEN. FROM THE ORDER OF THE LD. A.O ALSO, IT IS APPARENT THAT THE PENALTY IS NOT LEVIED BY HIM ON ACCOUNT OF SOME CONVICTION BUT HAS BEEN JUST LEVIED TO COMPLETE THE PROCEEDINGS. IN FACT THERE ARE NO MATERIAL FACTS WARRANTING THE LEVY OF PENALTY AND, ACCORDINGLY, TH E PENALTY OF RS.55,00,000/- LEVIED UNDER SECTION 271AAA IS DIREC TED TO BE DELETED. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO N OT SEE ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A). THE ORDER IS IN TUNE WITH THE PRINCIPLES LAID DOWN BY VARIOUS CO-ORDINATE BENCHES AND HIGH COURTS PARTICULARLY WITH REFERENCE TO DISCLOSURE MADE UNDE R SECTION 132(4). IN THE CASE OF CIT VS. MAHENDRA C. SHAH (299 ITR 305) THE HONBLE GUJARAT ITA NO6763/M/11 A.Y.07-08 M/S. KANAKIA SPACES PVT. LTD. 4 HIGH COURT CONSIDERED SIMILAR STATEMENT UNDER SECTI ON 132(4) TO GRANT IMMUNITY UNDER SECTION 271(1)(C). THE HON'BLE HIGH COURT HELD AS UNDER:- WHEN THE STATEMENT IS BEING RECORDED BY THE AUTHO RIZED OFFICER IT IS INCUMBENT UPON THE AUTHORIZED OFFICER TO EXPLAIN THE PROVISIONS OF EXPLANATION 5 IN ENTIRETY TO THE ASSESSEE CONCERNED AND THE AUTHORIZED OFFICER CANNOT STOP SHORT AT A PARTICUL AR 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 THE F IRST 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 I S NOT POSSIBLE TO EXPECT FROM AN ASSESSEE, WHETHER LITERATE OR ILLI TERATE, TO BE SPECIFIC AND TO THE POINT REGARDING THE CONDITIONS STIPULATE D IN THE SECOND EXCEPTION WHILE MAKING STATEMENT UNDER SECTION 132( 4). EVEN IF THE STATEMENT DOES NOT SPECIFY THE MANNER IN WHICH THE INCOME IS DERIVED, IF THE INCOME IS DECLARED AND TAX THEREON PAID, THERE WOULD BE SUBSTANTIAL COMPLIANCE NOT WARRANTING ANY FURTHE R DENIAL OF THE BENEFIT. 4.1 IN THIS CASE, THE ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES IN THE WORK-IN-PROGRESS SHEET AND ASSESSEE IN THE COURSE OF STATEMENT OFFERED THE INCOME WITH A PLEA NOT TO INITIATE PENALTY PROC EEDINGS. THE ASSESSEE WAS NOT ASKED ABOUT THE MANNER IN WHICH SUCH INCOME WAS EARNED AND ALSO TO SUBSTANTIATE THE MANNER IN WHICH UNDISCLOSE D INCOME WAS DERIVED. THE PROVISION OF CLAUSE-2 OF EXPLANATION-V APPENDED TO SECTION 271(1)(C) ARE SIMILAR TO SECTION 271AAA(2). THE SC OPE AND MEANING HAS BEEN LUCIDLY EXPLAINED BY THE HON'BLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. RADHA KISHAN GOEL (2005) 278 ITR 454 (ALL.) , WHICH WAS FOLLOWED BY THE HON'BLE GUJARAT HIGH COURT IN THE ABOVE REFERRED CASE. IN VIEW OF THE ABOVE PRINCIPLES LAID DOWN, WE ARE OF T HE OPINION THAT IMMUNITY PROVIDED UNDER S/S.(2) OF SECTION 271AAA I S APPLICABLE AND ITA NO6763/M/11 A.Y.07-08 M/S. KANAKIA SPACES PVT. LTD. 5 ACCORDINGLY, THE ORDER OF CIT(A) DOES NOT REQUIRE A NY MODIFICATION. REVENUES GROUNDS ARE REJECTED. 5. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.07.2013. SD/- SD/- (VIVEK VARMA ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 10.07.2013. JV. 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.