Palace Jewellers Pvt.Ltd, Ludhiana V. The Dy.Commissioner of Income Tax, Ludhiana

ITA 697/CHANDI/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5854 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 20-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANITA SINHA
• Keywords: Business income; Loose papers; Revised return
• Section: 153A; 139(5); 274; 139(1); 132; 139

Judgement Text

, , ' , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 697/CHD/2017 / ASSESSMENT YEAR : 2013-14 M/S PALACE JEWELLERS PVT LTD., B-XIX-546, COLLEGE ROAD, CIVIL LINES, LUDHIANA VS. THE DCIT, CENTRAL CIRCLE-III, LUDHIANA ./PAN NO: AADCG9237H / APPELLANT /RESPONDENT ! /ASSESSEE BY : SH. TEJ MOHAN SINGH, ADVOCATE ' ! / REVENUE BY : SMT. ANITA SINHA, CIT DR # $ % /DATE OF HEARING : 27.09.2018 &'() % / DATE OF PRONOUNCEMENT : 20.12.2018 (*/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 14.2.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)] AGI TATING THE CONFIRMATION OF PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271A AB OF THE ACT. 2. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT A SEARCH WAS CARRIED OUT U/S 132 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AT THE PREMISES OF THE ASSESSEE. DURING THE SEARCH ACTION, THE ASSESSE E SURRENDERED AN AMOUNT OF RS. 4 CRORES ON ACCOUNT OF CERTAIN LOOSE PAPERS FOUND DURING THE SEARCH ACTION AND ON ACCOUNT OF CERTAIN DISCREPANCIES IN T HE ACCOUNT OF THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 11.1.2013 STATED THAT THE ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 2 ADDITIONAL INCOME HAD BEEN DECLARED AS A RESULT OF BUSINESS TRANSACTIONS WHICH WERE NOT RECORDED IN THE REGULAR BOOKS OF AC COUNT / FOR DISCREPANCIES IN THE BOOKS OF ACCOUNT. 3. THE ASSESSEE, HOWEVER, DID NOT DEPOSIT THE DUE T AXES ON THE AFORESAID SURRENDER AND MADE A STATEMENT THAT THE SAME BE ADJ USTED THROUGH P.D./ SEIZED ASSETS. HOWEVER, THE ASSESSING OFFICER DID N OT ADJUST THE AMOUNT OF TAX FROM THE SEIZED AMOUNT ON THE GROUND THAT AS PE R THE PROVISIONS OF SECTION 132B (1)(I) OF THE ACT, ONLY EXISTING LIAB ILITY UNDER THE INCOME TAX ACT, 1961 AND AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT CAN BE ADJUSTED AGAINST THE P.D. ACCOUNT . FURTHER, THE ASSESSING OFFICER NOTICED THAT THE MANNER AND MODE OF EARNING OF AFORESAID DISCLOSED INCOME HAS NOT BEEN SUBSTANTIATED. THAT THE ASSESSE E HAD GIVEN A GENERAL DISCLOSURE. THE ASSESSING OFFICER , THEREFORE, LEV IED THE PENALTY U/S 271AAB(3) OF THE ACT @ 30% OF THE UNDISCLOSED INCO ME. 4. THE ASSESSEE CONTESTED THE AFORESAID LEVY OF PEN ALTY BEFORE THE LD. CIT(A) BUT REMAINED UNSUCCESSFUL. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBM ITTED THAT NO UNDISCLOSED INCOME OF THE ASSESSEE WAS FOUND DURING THE SEARCH ACTION. THE AFORESAID SURRENDER OF RS. 4 CRORES OF BUSINESS INCOME WAS TO BUY PEACE ONLY AND TO COVER THE DISCREPANCY, IF ANY, FO UND IN THE ACCOUNT OF THE ASSESSEE. IT HAS BEEN FURTHER PLEADED THAT THE SUR RENDERED INCOME WAS DULY ACCOUNTED FOR IN THE ORIGINAL RETURN OF INCOME FILE D ON 30.9.2013 AND FURTHER THAT THE ASSESSING OFFICER WAS REQUESTED TO ADJUST THE TAX LIABILITY ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 3 RELATING TO SUCH SURRENDER OUT OF THE SEIZED ASSETS . HOWEVER, THE ASSESSEE WAS NOT POSSESSED OF SUFFICIENT FUNDS TO PAY THE TA X ON THE SURRENDERED INCOME. IT HAS BEEN FURTHER PLEADED THAT THE ASSESS EE, HOWEVER, HAS FIELD REVISED RETURN OF INCOME ON 12.2.2014 I.E. WITHIN T HE TIME SPECIFIED U/S 139(5) READ WITH SECTION 139(1) OF THE INCOME TAX A CT AND PAID THE DUE TAXES. IT HAS, THEREFORE, BEEN PLEADED THAT IT IS NOT A CASE OF LEVY OF ANY PENALTY U/S 271AAB OF THE ACT. FURTHER, AT THE MO ST THE PENALTY CAN BE LEVIED U/S 271AAB(1) OF THE ACT @ 10% OF THE UNDI SCLOSED INCOME AND NOT U/S 271AAB (3) OF THE ACT @30% 6. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO GONE THROUGH THE RECORDS. ADMITTEDLY, THIS IS NOT A CASE WHERE T HE ASSESSEE WAS FOUND TO BE POSSESSED OF CASH AMOUNT OF WHICH THE ASSESSEE C OULD NOT DISCLOSE THE SOURCE. IT IS A CASE WHERE THE ASSESSEE DURING THE SEARCH ACTION HAD SURRENDERED AN AMOUNT OF RS. 4 CORES ON ACCOUNT OF DISCREPANCIES IN THE ACCOUNTS / UNACCOUNTED SALES ETC. THE ASSESSEE EXPL AINED THAT THE AFORESAID SURRENDER OF INCOME WAS ON ACCOUNT OF UNRECORDED BU SINESS INCOME. THE ASSESSEE HAS ALSO RETURNED THE SAID AMOUNT AS BUSIN ESS INCOME WHICH HAS BEEN ADMITTED BY THE ASSESSING OFFICER AS SUCH EVEN IN THE ASSESSMENT ORDER. IN RESPECT OF UNDISCLOSED INCOME, THE ASSESS EE IS NOT SUPPOSED TO PROVE THE SOURCE OF EACH AND EVERY PENNY OR ONE BY ONE UNACCOUNTED ENTRY, RATHER, WHAT IS REQUIRED IS THAT THE ASSESSEE MUST SPECIFY THE MANNER OF EARNING OF SUCH INCOME AND HAS TO SUBSTANTIATE THE SAID MANNER. FROM THE FACTS OF THIS CASE, IT IS APPARENT THAT THE ASSESSE E HAD DISCLOSED / ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 4 SURRENDERED THE AFORESAID AMOUNT OF RS. 4 CRORES O N ACCOUNT OF UNDISCLOSED BUSINESS INCOME AND HAS ALSO EXPLAINED THAT THE SAME WAS ON ACCOUNT OF CERTAIN DISCREPANCY / UNRECORDED BUSINES S TRANSACTIONS. FOR THE SAKE OF CONVENIENCE, THE PROVISIONS OF SECTION 271A AB ARE REPRODUCED AS UNDER:- 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR A FTER THE 1ST DAY OF JULY, 2012 [BUT BEFORE THE DATE ON WHICH THE TAXATION LA WS (SECOND AMENDMENT) BILL, 2016 RECEIVES THE ASSENT OF THE PR ESIDENT], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFI ED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB-SECTION (4) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME F URNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM [COMPUTED AT THE RATE OF SIXTY PER CENT ] OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF [SECTION 2 70A OR] CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPO N THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SU B-SECTION (1) [OR SUB- SECTION (1A)]. (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, A S FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION . ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 5 EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNISH ING OF RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SEC TION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS Y EAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BU T THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETUR N OF INCOME FOR THE PREVIOUS YEAR BEFORE THE DATE OF SEA RCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REP RESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COU RSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEA RCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REP RESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPE CIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED . 8. THE PROVISIONS OF SECTION 271AAB (1) ARE LITTLE BIT AKIN TO PROVISIONS OF SECTION 271AAA OF THE ACT. HOWEVER, THE DIFFERE NCE IS THAT IF THE ASSESSEE SURRENDERED THE UNDISCLOSED INCOME IN A S TATEMENT U/S 132(4) OF THE ACT AND SPECIFY AND SUBSTANTIATE THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED AND PAYS THE DUE TAXES TOGETHER WITH I NTEREST IN RESPECT TO SUCH UNDISCLOSED INCOME BEFORE THE SPECIFIED DATE , THEN, AS PER THE PROVISIONS OF SECTION 271AAB OF THE ACT, THE ASSESS ING OFFICER MAY LEVY PENALTY @ 10% OF THE SUCH UNDISCLOSED INCOME, WHERE AS, AS PER THE PROVISIONS OF SECTION 271AAA OF THE ACT, IN THE EV ENT OF ASSESSEE ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 6 COMPLYING THE AFORESAID CONDITION, NO PENALTY IS L EVIABLE . SINCE THE SEARCH IN THE CASE WAS CONDUCTED ON 31.10.2012, HENCE, THE PROVISIONS OF SECTION 271AAB ARE ATTRACTED IN THIS CASE. 9. SO FAR AS THE NON-DEPOSIT OF TAX BY THE DUE DATE IS CONCERNED, THE ASSESSEE MADE A STATEMENT TO THE ASSESSING OFFICER TO ADJUST THE DUE TAXES AGAINST PD. ACCOUNT / SEIZED ASSETS. HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE CONTENTION STATING THAT THE SEIZ ED ASSETS CAN BE ADJUSTED ONLY AGAINST THE EXISTING LIABILITY. AS PER THE PRO VISIONS OF SECTION 271AAB OF THE ACT, ON SURRENDERING OF THE AFORESAID AMOUNT OF RS. 4 CRORES, THERE WAS A LIABILITY ON THE ASSESSEE TO D EPOSIT THE DUE TAXES BEFORE THE SPECIFIED DATE TO FALL WITHIN IN THE PROVISION S OF SECTION 271AAB(1) OF THE ACT WHICH PROVIDES FOR MINIMUM LEVY OF PENAL TY @ 10% OF THE UNDECIDED / SURRENDERED INCOME. HENCE, IN THIS CASE THERE WAS AN EXISTING TAX LIABILITY ON THE ASSESSEE TO PAY THE TAXES AND , THEREFORE, THE ASSESSING OFFICER SHOULD HAVE ADJUSTED THE TAX FROM THE SEIZE D ASSETS , HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT COMPLIED T HE AFORESAID REQUIREMENT OF PROVISIONS OF SECTION 271AAAB OF THE ACT . EVEN OTHERWISE, THE ASSESSEE HAS ALSO EXPLAINED THAT IT WAS NOT POSSES SED OF SUFFICIENT FUNDS AND THE MOMENT IT GOT POSSESSED OF FUNDS, IT FILED THE REVISED RETURN ON 12.2.2014 AND PAID DUE TAXES. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE AFORESAID SURRENDER CAN NOT / DOES NOT FALL WITHIN THE DEFINITION OF THE UNDISCLOSED INCOME, AS DEFINED UNDER THE PROVISIONS OF SECTION 271AAB IS CONCERNED, WE DO NOT AGREE WITH THE ABOVE SUBMISSI ONS. THE ASSESSEE HAS DULY MADE A STATEMENT THAT THE AFORESAID DISCLOSURE WAS ON ACCOUNT OF ITA NO. 697-CHD-2017- PALACE JEWELLERS PVT LTD, LUDHIANA 7 UNRECORDED TRANSACTIONS / DISCREPANCIES IN THE ACCO UNTS AND ON ACCOUNT OF CERTAIN LOOSE PAPERS FOUND DURING THE SEARCH ACTION . 10. IN VIEW OF THIS, THE AFORESAID DISCLOSURE, IN O UR VIEW, FALLS WITHIN THE SCOPE OF UNDISCLOSED INCOME AS PROVIDED UNDER EXPL ANATION (C) TO SECTION 271AAB OF THE ACT. IN VIEW OF THIS, WE HOLD THAT T HE CASE OF THE ASSESSEE DOES NOT FALL UNDER THE PROVISIONS OF SECTION 271AA B(3)OF THE ACT BUT UNDER THE PROVISIONS OF SECTION 271AAB(1) OF THE A CT AND MINIMUM PENALTY@ 10% OF THE UNDISCLOSED INCOME IS LEVIABLE. WE ORDER ACCORDINGLY. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.1.2018. SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 20.12.2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR