CHOICE INTERNATIONAL LTD, MUMBAI V. ASST CIT CEN CIR 29, MUMBAI

ITA 6987/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3695 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, M UMBAI BEFORE SHRI RAJENDRA, AM AND SHRI PAWAN SINGH, JM / I.T.A. NO.6987/MUM/2014 ( / ASSESSMENT YEAR: 2011-12) M/S CHOICE INTERNATIONAL LTD. SHREE SJAMLAMBHARI CORPORATE PARK, 156-158 CHAKRAVARTY ASHOK COMPLEX, JB NAGAR, ANDHERI (E), MUMBAI-400099 / VS. ACIT CC -29 ROOM NO.476, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 ./ ./PAN/GIR NO. : AAACC4600K ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 20.06.2016 /DATE OF PRONOUNCEMENT : 12.08.2016 / O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY ASSESSEE, CHALLENGIN G THE ORDER OF CIT(A)-40, MUMBAI DATED 29 SEPTEMBER 2014 FOR AY 201112, WHER EIN THE PENALTY ORDER UNDER SECTION 271 AAA WAS PARTIALLY CONFIRMED. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR, DECLARING TOTAL INCOME OF RS 2,08, 88,520/-. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED AT M/S. VAKRANGE SOFTWARE LTD AND ITS GROUP ON 13 DECEMBER 2010. DURING THE SEARC H AND SEIZURE STATEMENT OF SHRI KAMAL PODDAR WAS RECORDED UNDER SECTION 132(4) OF THE ACT, WHEREIN SHRI KAMAL PODDAR OFFERED AN AMOUNT OF RS 2.00/- CRORE A S UNDISCLOSED INCOME IN THE HANDS OF ASSESSEE-COMPANY. THE SAID AMOUNT OF RS 2. 00/- CRORE WAS DULY INCLUDED IN THE RETURN OF INCOME FILED BY ASSESSEE FOR THE Y EAR UNDER CONSIDERATION. WHILE COMPLETING THE ASSESSMENT, THE AO MADE ADDITION OF RS.29,19,753/-. THE AO ASSESSEE BY: NONE DEPARTMENT BY: SHRI M. DAYASAGAR CIT. DR ITA 6987/M/2014 AY -2011-12 CHOICE I NTERNATIONAL 2 OBSERVED THAT, HAD THE SEARCH NOT BEEN CONCLUDED, T HE ASSESSEE WOULD HAVE SUCCESSFULLY CONCEALED ITS INCOME. THE AO INITIATED PENALTY U/S 271AAA OF THE ACT. AFTER CONSIDERING THE CONTENTION OF THE ASSESS EE, THE AO AND CONCLUDED THAT THE CONDITION SPECIFIED IN SECTION 271 AAA (2) ARE NOT FULLY SATISFIED .ACCORDINGLY, AO LEVIED THE PENALTY OF RS 19,34,494 /-. THE AO HAS LEVIED THE PENALTY UNDER SECTION 271 AAA IN RESPECT OF AN AMOU NT OF RS 1,93,44,937/-, WHICH WERE IN RESPECT OF ADDITION ON ACCOUNT OF BOG US CLAIM OF DEPRECIATION (RS.1,0395,000/-), DISALLOWANCE OF NOTIONAL INTERES T (RS.15,95,548/-). DISALLOWANCE UNDER SECTION 40(A) (IA) (RS 573534) A DDITION ON ACCOUNT OF CASH SEIZED (RS. 10,00,000/-) AND DISALLOWANCE OUT OF EX PENSES FOR THE WANT OF BILLS (RS.57,80,855/-). AGGRIEVED BY THE ORDER OF AO ASSE SSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX APPEALS, WHEREIN THE PEN ALTY WAS RESTRICTED ONLY RESPECT OF UNACCOUNTED CASH OF RS. 10.00/- LACS FOU ND DURING THE COURSE OF SEARCH, DISALLOWANCE OF RS 15,94,548/- AND UNDISCLO SED INCOME OF RS.70,10,452/-. FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER APPE ALS, THE ASSESSEE HAS APPROACHED US IN THIS APPEAL. 3. WE HAVE HEARD LD AR OF ASSESSEE AND LD DR FOR REVEN UE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD AR OF THE ASSESSEE ARGUED T HAT ASSESSEE HAD OFFERED UNDISCLOSED INCOME OF RS 2.00/- CRORE DURING THE SE ARCH AND THE SAME WAS ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT AND TH E TAX THEREON HAS BEEN PAID BEFORE FILING RETURN OF INCOME. THE LEARNED AR FURT HER ARGUED THAT THE ASSESSEE HAS SATISFY THE CONDITIONS SPECIFIED UNDER SECTION 271AAA (2) OF THE ACT, AND HENCE THE PENALTY IS NOT LEVIABLE. LD AR OF ASSESSE E FURTHER ARGUED THAT NO PENALTY COULD BE LEVIED IN RESPECT OF THE DISALLOWANCE AS T HERE WAS NO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME ON THE PART OF THE ASSESSEE. LD AR FOR ASSESSEE PRAYED THAT THE ENTIRE PENALTY L EVIED UPON THE ASSESSEE SHOULD BE DELETED. LD DR FOR THE REVENUE ARGUED THAT THE A SSESSEE HAS NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERI VED AND MERE PAYMENT OF TAX WOULD NOT ABSOLVE THE ASSESSEE FROM THE PENALTY PROVIDED U/S 271AAA OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE SEEN THAT WHILE PASSIN G THE PENALTY ORDER AO COMPLETELY FAILED TO ADHERE THE PROVISIONS OF SUBSE CTION (2) OF SECTION 271AAA OF THE ACT. THE AO NOT DISCUSSED IN ITS ORDER, IF THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED OR NOT. THE ORDER OF AO IS ABSOLUTELY ILLEGAL. HOWEVER, THE LEARNED CIT(A) WHI LE CONSIDERING THE CONTENTION OF THE ASSESSEE DISCUSSED THE SCOPE OF SECTION 271 AAA OF THE ACT, AND DELETED THE PENALTY, EXCEPT ON UNACCOUNTED CASH OF RS. 10. 00/- LACS FOUND DURING THE COURSE OF SEARCH, DISALLOWANCE OF RS 15.94,548/- AN D UNDISCLOSED INCOME OF ITA 6987/M/2014 AY -2011-12 CHOICE I NTERNATIONAL 3 RS.70,10,452/-. WE HAVE NOTICED THAT DURING THE FIR ST APPELLATE PROCEEDINGS, LD CIT(A) ASKED THE ASSESSEE TO SPECIFY THE MANNER IN WHICH THE UNDISCLOSED INCOME OF SIZED CASH OF RS.10.00/- LAC AND RS.70,10 ,452/- WERE DERIVED. THE CONTENTS OF IMPUGNED ORDER PASSED BY LD. CIT(A) SHO WS THAT ASSESSEE FAIL TO PROVIDE ANY SATISFACTION. THE LD CIT(A) HAS NOT REF ERRED IN ITS ORDER AS TO WHAT EXPLANATION WAS OFFERED BY ASSESSEE. SIMILARLY, THE IMPUGNED ORDER DOES NOT DISCLOSED AS TO HOW, THE UNDISCLOSED INCOME WAS C ONFRONTED WITH THE ASSESSEE TO SUBSTANTIATE THE MANNER IN WHICH THIS INCOME WAS D ERIVED. THE ORDER OF LD. CIT(A) FURTHER DISCLOSED THAT DISALLOWANCE OF INTER EST WAS WORKED OUT BY ASSESSING OFFICER FOR CALCULATING NOTIONAL INTERES T@ 15% ON THE AMOUNT OF RS.1.25 CRORE AND WAS TO BE DISALLOWED U/S 36 (I)(I II) OF THE ACT. AS PER OUR CONSIDERED OPINION THE ADDITION ON ACCOUNT OF NOTIO NAL INTEREST CANNOT BE A PART OF PENALTY U/S 271 AAA OF THE ACT. CONSIDERING THE VA GUENESS IN THE ORDER OF LD. CIT(A) IN CONFIRMING THE PENALTY IN RESPECT OF UNAC COUNTED CASH OF RS. 10.00/- LAC, DISALLOWANCE OF INTEREST OF RS.15,94,548/- AND UNDISCLOSED INCOME OF RS.70,10,452/- ARE RESTORED TO THE FILE OF ASSESSIN G OFFICER TO DECIDE THE MATTER AFRESH AND IN ACCORDANCE WITH THE PROVISIONS OF SUB SECTION (2) OF SECTION 271 AAA OF THE ACT. THE ASSESSING OFFICER SHALL ALSO C ONSIDER THE STATEMENT OF SH KAMAL PODDAR RECORDED DURING THE SEARCH, THE MANNER IN WHICH UNDISCLOSED INCOME OFFERED AND SUBSTANTIATED BY HIM. WITH THIS OBSERVATION THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2016. SD/- SD/- (RAJENDRA) (PAWAN SINGH) / ACCOUNTANT MEMBER #$ /JUDICIAL MEMBER MUMBAI; ' DATED : 12 TH AUGUST, 2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ( ) / THE CIT(A)- 4. ( / CIT 5. )*+ $$,- , ,- , / DR, ITAT, MUMBAI 6. +./ 0 / GUARD FILE. / BY ORDER, / /(DY./ASSTT. REGISTRAR) #$ , / ITAT, MUMBAI