MUNIR M. KHAN, MUMBAI V. DCIT- CC -7(1), MUMBAI

ITA 7138/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5811 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Assessee Lawyers: MANI JAIN A R S
• Keywords: Unexplained expenditure; Search and seizure; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 153A; 274; 73; 13; 27; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MU MBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEM BER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.7138/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) MUNIR KHAN 1404, A WING RAJ CLASSIC BLDG OFF. YARI ROAD, VERSOVA ANDHERI(W) MUMBAI-400 061 VS. DCIT, CENTRAL CIRCLE-7(1) 654, 6 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. A SGPK3313A (APPELLANT ) .. (RESPONDENT ) & ITA NO.6755/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) DCIT, CENTRAL CIRCLE-7(1) 654, 6 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. MUNIR KHAN 1404, A WING RAJ CLASSIC BLDG OFF. YARI ROAD, VERSOVA ANDHERI(W) MUMBAI-400 061 PAN/GIR NO. ASGPK3313A ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI PRATEEK JAIN & SHRI MANI JAIN, ARS REVENUE BY SHRI ABHIJIT PATANKAR, CIT-DR DATE OF HEARING 2 0/01/2020 DATE OF PRONOUNCEME NT 10 /02/2020 / O R D E R PER G.MANJUNATHA (A.M) : THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS)-49, DATED 28/09/2018 AND THEY PERTAINS TO AY ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 2 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN T'S CASE AND IN LAW, THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTI ON 271(L)(C) BY THE LD. ASSESSING OFFICER WITHOUT RECORDING ANY SATISFACTIO N IS BAD IN LAW AND THE CONSEQUENTIAL PENALTY ORDER PASSED UNDER SECTION 27 1(L)(C) OF THE ACT IS BAD IN LAW AND NOT SUSTAINABLE IN THE EYES OF LAW . 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN T'S CASE AND IN LAW, LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT Q UASHING THE PENALTY LEVIED U/S 271(L)(C ) INSPITE OF THE FACT THAT PENA LTY PROVISIONS OF 271(L)(C) ARE NOT APPLICABLE CO THE FACTS SINCE ASSESSES FALL UNDER THE PROVISIONS OF SECTION 271AAAOFTHEACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN T'S CASE AND IN LAW THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CO NFIRMING THE ACTION OF LD. ASSESSING OFFICER'S IN IMPOSING PENALTY OF R S. 51,66,000/- (APPROX.) BY INVOKING PROVISIONS OF SECTION 271(L)( C) OF THE INCOME TAX ACT, 1961. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN LIMITING THE PENALTY U/S 271(1 )(C) OF RS. 4,43,49, 1 49/- TO RS.58,46,280/- STATING THAT THE CONCEALED INCOME AS PER ASSESSMENT ORDER WAS REDUCED BY ITAT FROM RS. 13,04,77,050 TO RS. L,72,20,000/- WITHOUT APPRECIATING THAT THE DEPARTMENT HAS FILED APPEAL U/S 260 A BEFO RE THE HONBLE HIGH COURT WITH RESPECT TO THE SAME AND THE DECISION IS PENDING 4. THE BRIEF FACTS OF THE CASE ARE THAT IN THE CASE OF THE ASSESSEE A SEARCH AND SEIZURE ACTION U/S 132 OF THE I.T.ACT, 1961 WAS CONDUCTED ON 28/02/2009. DURING THE COURSE OF SEARC H, VARIOUS INCRIMINATING MATERIALS FOUND, WHICH INCLUDES ROUGH CASH BOOKS INVESTMENTS IN MUTUAL FUNDS AND FIXED DEPOSITS. DU RING THE COURSE OF SEARCH, A STATEMENT U/S 132(4) OF THE ACT WAS RE CORDED ON 28/02/2009, WHERE THE ASSESSEE HAS OFFERED CREDIT E NTRIES APPEARING ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 3 IN THE BANK ACCOUNTS, AS ITS UNDISCLOSED INCOME. TH E ASSESSEE HAD ALSO, INCLUDED CASH WITHDRAWALS FOR HOUSEHOLD EXPEN SES AND CEREMONIAL EXPENSES ETC. CONSEQUENT TO A SEARCH, TH E ASSESSEE HAS FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 30 /09/2009, DECLARING TOTAL INCOME OF RS.38,07,89,861/-. THE AS SESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 153A OF THE I.T.AC T, 1961, ON 23/12/2010, DETERMINING THE TOTAL INCOME AT RS. 56, 69,06,808/- BY MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED CASH DEP OSITS IN BANK ACCOUNTS OF RS. 18,61,16,947/-. THE ASSESSEE HAS FI LED APPEAL AGAINST ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 15 3A OF THE I.T.ACT, 1961, BEFORE THE LD.CIT(A). THE LD.CIT(A), FOR THE REASONS STATED IN HIS APPELLATE ORDER, DATED 27/02/2014 RES TRICTED THE TOTAL INCOME OF THE ASSESSEE AT RS. 51,12,66,911/-, THERE BY ALLOWED A RELICT OF RS. 5,56,39,897/- TOWARDS ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN BANKS AND SUSTAINED TH E BALANCE OF ADDITIONS OF RS. 13,04,77,050/-. THE ASSESSEE HAS F ILED, FURTHER APPEAL AGAINST THE ORDER OF THE LD.CIT(A) BEFORE TH E ITA. THE ITAT, VIDE ITS ORDER DATED 10/11/2017 IN ITA NO. 3247/MUM /2014 HAS ALLOWED FURTHER RELIEF TO THE ASSESSEE AND OUT OF TOTAL ADDITIONS MADE BY THE LD. AO ON ACCOUNT OF UNEXPLAINED CASH D EPOSITS IN BANK ACCOUNT OF RS. 18,61,16,947/- SUSTAINED ADDITI ONS OF RS. 1,72,20,000/-, ON THE BASIS OF ESTIMATION OF CASH W ITHDRAWALS FOR HOUSEHOLD EXPENSES AND CEREMONIAL EXPENSES ETC AND BALANCE AMOUNT OF RS. 16,88,96,947/- HAS BEEN DELETED. 5. THEREAFTER, THE LD. AO HAS INITIATED PENALTY PRO CEEDINGS, U/S 271(1)(C) OF THE I.T.ACT, 1961 AND ISSUED A SHOW CA USE NOTICE U/S 274 R.W.S. 271(1)(C) AND CALLED UPON THE ASSESSEE T O EXPLAIN, AS TO WHY PENALTY SHALL NOT BE LEVIED FOR CONCEALMENT OF PARTICULARS OF ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 4 INCOME. IN RESPONSE, THE ASSESSEE HAS FILED DETAIL ED WRITTEN SUBMISSION AND SUBMITTED THAT, HE HAS NEITHER CONCE ALED PARTICULARS OF INCOMER NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD. AO, AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE A SSESSEE AND ALSO, TAKEN SUPPORT FROM CERTAIN JUDICIAL PRECEDENT S, INCLUDING THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF U NION OF INDIA VS DHARMENDRA TEXTILE PROCESSORS ( 2008) 13 SCC 369, O PINED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I.T.ACT, 1961AN D ACCORDINGLY, LEVIED PENALTY OF RS. 4,43,49,149/-, WHICH IS EQUI VALENT TO 100% OF TAX SOUGHT TO BE EVADED. 6. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED THE PENALTY LEVIED BY THE LD. AO ON TECHNICAL GROUND, IN LIGHT OF CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 248 AND ARGUED THAT T HE PENALTY ORDER PASSED BY THE LD. AO IS VOID AB-INITIO AND LIABLE TO BE QUASHED, BECAUSE THE LD. AO HAS INITIATED PENALTY P ROCEEDINGS, WITHOUT STRIKING OF INAPPLICABLE PART OF SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C), WHICH CLEARLY INDICATES THAT THE LD. AO HAS NOT APPLIED HIS MIND BEFORE INITIATION OF PENALTY PROCE EDINGS. THE ASSESSEE HAD ALSO, TAKEN ANOTHER LEGAL ARGUMENT, IN LIGHT OF THE PROVISIONS OF SECTION 271AAA AND ARGUED THAT THE PE NALTY ORDER PASSED BY THE LD. AO U/S 271AAA OF THE I.T.ACT, 196 1, IS BAD IN LAW AND LIABLE TO BE QUASHED, BECAUSE THE LD. AO HAS LE VIED PENALTY UNDER INCORRECT PROVISIONS OF THE ACT, IN A CASES, WHERE SEARCH IS ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 5 CONDUCTED, BECAUSE THE CORRECT PROVISIONS OF THE A CT, UNDER WHICH PENALTY CAN BE LEVIED IN A CASES, WHERE SEARCH IS C ONDUCTED IS SECTION 271AAA . THE ASSESSEE HAD ALSO ARGUED THE CASE ON MERITS AND SUBMITTED THAT THE ADDITIONS MADE BY THE LD. AO TOWARDS UNDISCLOSED INCOME ON ACCOUNT OF UNEXPLAINED CASH D EPOSITS IN BANK ACCOUNT IS PURELY ON ESTIMATION BASIS, WHICH I S EVIDENT FROM THE FACT THAT THE ADDITIONS MADE BY THE LD. AO HAS BEEN FINALLY SUSTAINED BY THE APPELLATE AUTHORITIES TO THE EXTENT OF RS. 1 ,72,00,000/-, AS AGAINST TOTAL ADDITIONS MADE BY THE LD. AO OF RS. 1 8,61,16,947/-, THAT TOO ON ESTIMATION OF UNEXPLAINED EXPENDITURE I NCURRED BY THE ASSESSEE FOR HOUSEHOLD AND CEREMONIAL EXPENSES. THE REFORE, THE RIGORS OF PENALTY PROVISIONS OF SECTION 271(1)(C) O F THE I.T.ACT, 1961, CANNOT BE INVOKED. 7. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SION OF THE ASSESSEE AND ALSO, TAKEN NOTE OF THE PROVISIONS OF SECTION 271(1)(C) AND 271AAA OF THE ACT, REJECTED LEGAL ARGUMENTS TAK EN BY THE ASSESEE, ON THE GROUND THAT ALTHOUGH, PENALTY IS LE VIABLE U/S 271AAA, IN A CASES, WHERE SEARCH IS CONDUCTED ON OR AFTER 01/06/2007, BUT, FACT REMAINS THAT IN THIS CASE, T HE ADDITION HAS BEEN MADE ON ESTIMATED INCOME. THEREFORE, PENALTY I F ANY ON SUCH ADDITIONS CAN BE LEVIED ONLY UNDER SECTION 271(1)(C ) OF THE ACT, BUT NOT U/S 271AAA OF THE ACT. AS REGARDS, PENALTY LE VIED BY THE LD. AO TOWARDS ADDITIONS MADE ON ACCOUNT OF UNDISCLOSED IN COME, THE LD.CIT(A) OBSERVED THAT THE ADDITIONS MADE BY THE L D. AO TOWARDS ESTIMATION OF UNDISCLOSED INCOME, ON THE BASIS OF C REDITS FOUND IN BANK ACCOUNT FOR THE REMAINING PART OF THE YEAR IS ON SOUND FOOTING, BECAUSE DURING COURSE OF SEARCH, INCRIMINATING DOCU MENTS IN THE FORM OF ROUGH CASH BOOK FOR PART OF THE YEAR HAS B EEN FOUND, AS PER ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 6 SAID DOCUMENT, THE ASSESSEE HAS AGREED UNDISCLOSED INCOME ON ACCOUNT OF CASH RECEIPTS FROM HIS PROFESSION, WHICH WAS DEPOSITED IN UNDISCLOSED BANK ACCOUNTS. HE, FURTHER NOTED THAT A LTHOUGH, THE LD. AO HAS LEVIED PENALTY ON TOTAL ADDITIONS MADE IN AS SESSMENT PROCEEDINGS, BUT, FACT REMAINS THAT THE ITAT HAS FI NALLY SUSTAINED ADDITIONS TO THE EXTENT OF RS. 1,72,20,000/-. THER EFORE, HE OPINED THAT PENALTY, IF AT ALL IS LEVIABLE, IT CAN BE LEVI ED ONLY ON THE ADDITIONS FINALLY SUSTAINED BY THE ITAT AND ACCORDINGLY, SUS TAINED PENALTY LEVIED BY THE LD. AO U/S 271(1()(C) OF THE ACT, TO THE EXTENT OF ADDITIONS FINALLY SUSTAINED BY ITAT AND BALANCE PEN ALTY LEVIED ON THE ADDITIONS, WHICH HAS BEEN DELETED BY THE ITAT HAS B EEN DELETED. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDE R:- 6.5 IT IS SEEN FROM THE ABOVE PROVISIONS THAT PENALTY UNDER SECTION 271AAA IS LEVIABLE ON THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR IN THIS CASE, ASSESSMENT YEAR 2009-10 IS THE S PECIFIED PREVIOUS YEAR AS THE SEARCH HAPPENED ON 29.02,2009. THERE IS NO D ISPUTE REGARDING THE SPECIFIED PREVIOUS YEAR. BUT THE DISPUTE IS ABO UT THE INCOME ON WHICH PENALTY HAS BEEN LEVIED. THE ASSESSEE'S CONTENTION IS PENALTY HAS TO BE LEVIED UNDER SECTION 271AAA. PENALTY UNDER SECTION 271AAA IS LEVIABLE ON THE UNDISCLOSED INCOME DETECTED DURING THE SEARC H. IN THIS CASE PENALTY HAS BEEN LEVIED ON THE ADDITION MADE BY THE AO IN THE ASSESSMENT ORDER. THIS ADDITION HAS BEEN MADE BY TH E AO ON ESTIMATED BASIS DEPENDING UPON THE BANK ACCOUNT CREDITS OF TH E ASSESSEE. THE ESTIMATION OF RS.4 CRORES PER MONTH BY THE AO HAS N O BEARING TO THE SEARCH PROCEEDING, FOR THE PERIOD 01,09.2008 TO 26.02.2009, THE PRIMARY RECORDS SHOWED RECEIPTS OF RS.38,78,32,431. THIS FIGURE HAS NOT BEEN DISTURBED BY THE ASSESSING OFFICER HE MADE AN ADDITION OF RS-24 CRORES TO THE RECEIPTS OF THE ASSESSEE WHICH RESULT ED IN A NET ADDITION TO THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.18,61, 16,947/-. ULTIMATELY PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFICER ON THE INCOME ESTIMATED AND ADDED BY HIM. THEREFORE PENALTY IF ANY ON SUCH ADDITION CAN BE LEVIED ONLY UNDER SECTION 271(1)(C) AND NOT UN DER 271AAA. FOR ANY SPECIFIED YEAR IT IS POSSIBLE TO LEVY PENALT IES BOTH UNDER 271AAA AND 27L(1){C}, THE FIRST ON THE UNDISCLOSED INCOME DETECTED DURING THE SEARCH AND THE SECOND FOR ANY REGULAR INCOME/ADDITI ONS MADE BY THE AO. IN THIS CASE PENALTY HAS BEEN LEVIED ON THE INCOME ESTIMATED AND ADDED BY THE AO WHICH HAS NO BEARING TO THE SEARCH. THERE FORE THE AO HAS RIGHTLY LEVIED PENALTY UNDER SECTION 271(1X0- THIS PLEA OF THE LEARNED COUNSEL IS REJECTED. ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 7 6.6 THE SECOND PLEA OF THE LEARNED COUNSEL IS TH AT THE ASSESSING OFFICER HAS NOT SPECIFIED THE LIMB OF THE SECTION UNDER WHI CH PENALTY HAS BEEN LEVIED. THIS APPEARS TO BE A MERE ALLEGA TION AS IT COULD BE SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSI NG OFFICER HAS INITIATED PENALTY UNDER SECTION 271(1)(C) FOR CO NCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME- BOTH THE LIMBS HAVE BEEN MENTIONED AND AS COULD BE SEEN FROM THE PENALT Y ORDER, PENALTY HAS BEEN LEVIED FOR BOTH THE LIMBS. NOTHING IN LAW BARS THE ASSESSING OFFICER TO INITIATE FOR BOTH THE LIMBS AND LEVY FOR BOTH THE LIMBS. IT HAS BEEN HELD BY THE HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 T HAT PENALTY CANNOT BE LEVIED FOR ONE LIMB WHEN IT IS INITIATED FOR THE OTHER LIMB. IN THIS CASE IT HAS BEEN INITIATED FOR BOTH THE LIMBS AND THE ASSES SEE WAS VERY WELL AWARE OF THE SAME AS THE ASSESSMENT ORDER CLEARLY S PEAKS OF IT. THE ASSESSEE HAS BEEN GIVEN ADEQUATE OPPORTUNITY TO DEF END HIS CASE. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AO HA S ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE BUT THE ASSESSEE FAILED TO F ILE ANY RESPONSE, IN THE ABSENCE OF ANY REPLY FROM THE ASSESSEE, THE AO LEVI ED PENALTY UNDER SECTION 271(1)(C) FOR CONCEALMENT OF PARTICULARS A S WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THIS PLEA OF THE LEARNED COUNSEL IS ALSO REJECTED. 6.7 THE THIRD PLEA TAKEN BY THE LEARNED COUNSEL IS THAT ON MERITS ALSO THE PENALTY CANNOT BE SUSTAINED AS IT HAS BEEN LEVIED O N THE BASIS OF AN INCOME WHICH HAS BEEN ESTIMATED- THE LEARNED COUNSE L ARGUED THAT THE BASIC REASONING OF BANK DEPOSIT AS WELL AS STATEMEN T RECORDED UNDER SECTION 132(4), ON THE BASIS OF WHICH THE PENALTY W AS LEVIED, HAS BEEN QUASHED BY THE TRIBUNAL. THE TRIBUNAL PREFERRED TO ESTIMATE CERTAIN INCOMES ON AD HOC BASIS OF EXPENDITURE AND CONFIRME D AN ADDITION OF RS.28,70,000/-PER MONTH, HERE AGAIN, THE LEARNED CO UNSEL HAS TAKEN TWO ARGUMENTS, ONE THAT NO PENALTY CAN BE LEVIED WHEN A DDITIONS ARE MADE ON ESTIMATIONS AND TWO WHEN THE MOOT BASIS ON WHICH THE PENALTY WAS LEVIED WAS QUASHED IN APPEAL, THE PENALTY DOESN'T S URVIVE. FOR THIS ARGUMENT HE PLACED RELIANCE ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDERMAL MANAJI VIDE 1TR NUMBE R 10/2001 DATED 6.07.2017. IT IS TRUE THAT THE ADDITION HAS BEEN MA DE ON THE BASIS OF ESTIMATION BUT IN THIS CASE THERE IS NO OTHER WAY T O ARRIVE AT THE INCOME OF THE ASSESSEE FOR THE PERIOD FOR WHICH NO RECORD HAS BEEN FOUND. HOWEVER THE BASIS ON WHICH ESTIMATION IS MADE, WHICH IS THE BANK ACCOUNT CREDITS AND THE RECORDS FOUND FOR THE REMAINING PART OF THE YEAR IS ON SOUND FOOTING. MOREOVER, THE ESTIMATION TO THE TUNE OF RS . 1,72,20,000/- HAS BEEN CONFIRMED BY BOTH THE APPELLATE AUTHORITIES. THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAS CONCEALED INCOME TO THE TUNE OF RS. I,72,20,000/- AND MADE HIMSELF LIABLE FOR PENALTY UN DER SECTION 271(1)(C). MOREOVER, THE ASSESSEE'S CONDUCT IN THE WHOLE SCENA RIO, WHICH IS DESTROYING THE PRIMARY RECORDS, NOT MAINTAINING BOO KS OF ACCOUNT AND NOT DECLARING THE CORRECT RECEIPTS, ITSELF CALLS FOR IM POSITION OF PENALTY. REGARDING THE SECOND ARGUMENT, THAT THE ITAT HAS QU ASHED THE BASIS FOR ESTIMATION THE LEARNED COUNSEL RELIED UPON THE JUDG MENT IN THE CASE OF INDERMAL MANAJI. HOWEVER A PERUSAL OF THE SAID JUD GMENT SHOWS THAT THE FACTS ARE COMPLETELY DIFFERENT FROM THE INSTANT CAS E. IN THE CASE OF ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 8 INDERMAL MANAJI, THE ASSESSING OFFICER HELD THAT TH E ASSESSEE WAS NOT IN THE BUSINESS OF DRAFT DISCOUNTING WHEREAS THE HON'B LE ITAT UPHELD THE CONTENTION OF THE ASSESSEE THAT HE CARRIES ON THE B USINESS OF DRAFT DISCOUNTING. THERE WAS A DIFFERENCE IN THE VERY FUN DAMENTAL PRINCIPLE ABOUT THE BUSINESS OF THE ASSESSEE. THE ADDITIONS W ERE MADE BY THE AO TREATING THAT THE ASSESSEE IS NOT IN THE BUSINESS O F DRAFT DISCOUNTING WHEREAS THE HON'BLE ITAT HAS REVERSED THI! DECISION . IN THE CASE OF OUR ASSESSEE THERE IS NO SUCH CONFLICT. THERE IS NO EVE N A CONFLICT IN THE FACT THAT INCOME HAS TO BE ESTIMATED, THE ONLY DIFFERENCE IS THE AMOUNT OF INCOME AND HOW IT IS TO BE ESTIMATED. WHILE THE ASSESSING OFFICER ESTIMATED THE ADDITION AT RS, 18,61,61,947/- THE HO N'BLE ITAT ESTIMATED THE ADDITION AT RS,L,72,20,000/-. SO THE RATIO OF T HE JUDGMENT IN THE CASE OF INDERMAL MANAJI IS NOT APPLICABLE TO THE INSTANT CASE. 6.8 COMING TO THE QUANTUM OF PENALTY, THE ASSESSING OFFICER HAS LEVIED A PENALTY OF RS.4,43,49,149/-ON A CONCEALED INCOME OF RS. 13,04,77,050/-, THIS CONCEALED INCOME HAS BEEN REDUCED TO RS.L,72,2 0,000/-BY THE HON'BLE ITAT. THE ASSESSING OFFICER IS THEREFORE DI RECTED TO REDUCE THE PENALTY ACCORDINGLY. THIS MEANS THE PENALTY ON THE DIFFERENTIAL AMOUNT OF RUPEES RS.11,32,57,050 (13,04,77,050 - 1,72,20,000) IS DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT PENALTY LEVIED BY THE LD. AO U/S 271(1(C) OF T HE I.T.ACT, 1961 IS ILLEGAL AND VOID AB-INITIO, BECAUSE THE LD. AO HAS NOT RECORDED SATISFACTION, AS REQUIRED UNDER THE LAW BEFORE INIT IATION OF PENALTY PROCEEDINGS, WHICH IS EVIDENT FROM THE FACT THAT TH E LD. AO HAS ISSUED SHOW CAUSE NOTICE U/S 274 R.W.S. 271(1)(C) O F THE ACT, WITHOUT STRIKING OF INAPPLICABLE PART OF SHOW CAUSE NOTICE . THE LD. AR, FURTHER SUBMITTED THAT THE PENALTY LEVIED BY THE LD . AO U/S 271(1)(C) IS ILLEGAL AND VOID AB-INITIO, AND THE LD. AO HAS LEVIED PENALTY U/S 271(1)(C) OF THE ACT, IN SPITE OF THE FACT THAT PEN ALTY PROVISION OF SECTION 271(1)(C) OF THE ACT, ARE NOT APPLICABLE, I N A CASES WHERE SEARCH IS CONDUCTED U/S 132 AND THE ASSESSMENT YEAR INVOLVED IS A SPECIFIED ASSESSMENT YEAR AND IN SUCH SITUATIONS P ENALTY, IF AT ALL IS LEVIABLE, IT CAN BE LEVIABLE UNDER THE PROVISION OF SECTION 271AAA OF THE I.T.ACT, 1961. THE LD. AR, FURTHER SUBMITTED TH AT WITHOUT PREJUDICE TO THE ABOVE LEGAL ARGUMENTS, THE PENALTY LEVIED BY THE LD. ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 9 AO U/S 271(1)(C) OF THE ACT, ON MERITS IS ALSO CANN OT BE SUSTAINED UNDER THE ACT, BECAUSE THE LD. AO HAS LEVIED PENALT Y ON ESTIMATED ADDITIONS MADE IN ASSESSMENT PROCEEDINGS, WHICH HAS BEEN FINALLY REDUCED BY THE APPELLATE AUTHORITIES, THAT TOO ON E STIMATION BASIS. THEREFORE, IN THESE FACTS, IT CANNOT BE CONSIDERED THAT THE ASSESSEE CASE IS HIT BY THE PROVISION OF SECTION 271(1)(C) O F THE I.T.ACT, 1961. IN THIS REGARD, HE HAS RELIED UPON THE FOLLOWING JU DICIAL PRECEDENTS. 1. COPY OF ITAT ORDER PASSED IN THE APPELLANTS CAS E FOR AY 2009-10 VIDE ITA NO.3247/MUM/2014, DATED 10.11.2017 2. COPY OF JUDGMENT OF HONBLE DELHI TRIBUNAL IN TH E CASE OF ASHWANI KUMAR ARORA VS ACIT REPORTED IN 81 TAXMANN.COM 440. 9. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E LD.CIT(A) WAS ERRED IN LIMITING THE PENALTY US/ 271(1)(C) OF THE ACT, TO RS. 58,46,280/- FROM RS. 4,43,49,149/-, STATING THAT TH E CONCEALED INCOME, AS PER ASSESSMENT ORDER WAS REDUCED BY THE ITAT FROM RS. 18,61,16,947/- TO RS. 1,72,20,000/-, WITHOUT APPREC IATING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE TR IBUNAL AND FURTHER, APPEAL HAS BEEN FILED BEFORE THE HONBLE H IGH COURT AND THE SAID APPEAL IS PENDING FOR ADJUDICATION. THE LD. DR , FURTHER SUBMITTED THAT INSOFAR AS, LEGAL ARGUMENTS TAKEN BY THE ASSESSEE CHALLENGING VALIDITY OF PENALTY PROCEEDINGS, IN LIG HT OF SHOW CAUSE NOTICE ISSUED BY THE LD. AO U/S 274 R.W.S 271(1)(C) OF THE ACT, IS INCORRECT, BECAUSE, THE LD. AO HAS ARRIVED AT CLEAR SATISFACTION IN THE ASSESSMENT PROCEEDINGS BEFORE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT, 1961. INSOFAR AS, ANOTHER ARGUMENTS OF THE ASSESSEE THAT PENALTY CAN BE LEVIED U/S 271AAA, BUT NOT UNDER SECTION 271(1)(C) OF THE I.T.ACT, 1961, HE SUBMITTE D THAT THOUGH, THERE IS NO DISPUTE WITH REGARD TO THE LAW APPLICAB LE IN THE CASES, ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 10 WHERE SEARCHES CONDUCTED U/S 132, PENALTY CAN BE LE VIED U/S 271AAA, BUT FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFERENT, BECAUSE ADDITION IN THIS CASE HAS BEEN MADE ON THE BASIS OF ESTIMATION OF INCOME, WHERE PENALTY, IF ANY CAN BE LEVIED IT CAN BE LEVIED ONLY U/S 271(1)(C), BUT NOT U/S 271AAA OF THE I.T.ACT, 1961. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. INSOFAR AS, FIRST ARGUMENTS OF THE ASSESEE THAT PENALTY PRO CEEDINGS INITIATED U/S 271(1)(C) OF THE ACT, CONSEQUENT TO SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT IS ILLEGAL AND VOID AB-INITIO, WE FIND THAT THE LD. AO HAS RECORDED CLEAR SATISFACTION AS REQUIRED UNDER THE LAW DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BE FORE INITIATE PENALTY PROCEEDINGS U/S 271(1)(C). THEREFORE, WE AR E OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN LEGAL ARG UMENTS TAKEN BY THE ASSESSEE AND ACCORDINGLY, GROUND NO.1 OF ASSESE E APPEAL IS REJECTED. INSOFAR AS, THE SECOND LEGAL ARGUMENTS O F THE ASSESSEE THAT PENALTY LEVIED U/S 271(1)(C), IS ILLEGAL AND VOID AB-INTIO, BECAUSE PENALTY, IF ANY IS LEVIABLE IN A CASES, WHERE SEAR CH IS CONDUCTED U/S 132, THEN IT CAN BE LEVIED ONLY U/S 271AAA OF THE A CT, BUT NOT U/S 271(1)(C), WE FIND THAT AS PER THE PROVISIONS OF SE CTION 271AAA OF THE ACT, WHERE SEARCH ACTION HAS BEEN CONDUCTED ON OR AFTER 01/06/2007, PENALTY FOR CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME CAN BE LEVIED U/S 271AAA, IF THE ASSESSMENT YEAR INVOLVED IS A SPECIFIED PREVIOUS YE AR. AS PER THE SAID PROVISIONS, THE LD. AO MAY, NOTWITHSTANDING AN YTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT IN A CASE, WHERE SEARCH HAS BEEN INITIATED U/S 132 ON OR AFTER THE FIRST DA Y OF JUNE, 2007, BEFORE THE FIRST DAY OF JULY 2012, THE ASSESSE SHAL L PAY BY WAY OF ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 11 PENALTY IN ADDITION TO TAX, IF ANY PAYABLE BY HIM, A SUM COMPUTED @10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PRE VIOUS YEAR. THE TERM UNDISCLOSED INCOME HAS BEEN DEFINED, AS PER WHICH ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELRY OR OTHER VAL UABLE ARTICLE OR THINGS OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHE R DOCUMENTS FOUND IN THE COURSE OF SEARCH U/S 132, WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING SEARCH PREVIOUS YEAR. THE TERMS SPECIFIED PREVIOUS YEAR HAS BEEN DEFINED, WHICH MEANS THE PREVIOUS YEAR, WHICH HAS ENDED BEFORE THE DATE OF SEARCH, AND THE DATE OF FILING THE RETURN OF INCO ME UNDER SUB- SECTION (1) OF SECTION 139 FOR SEARCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESEE HAS NOT FURNISHED R ETURN OF INCOME FOR THE PREVIOUS YEAR, BEFORE THE SAID DATE OR IN W HICH SEARCH WAS CONDUCTED. IN THIS CASE, THE SEARCH WAS CONDUCTED O N 28/02/2009, WHICH COMES WITHIN THE RELEVANT ASSESSMENT YEAR 200 9-10. THE ADDITION MADE IN ASSESSMENT PROCEEDINGS IS CONSEQUE NT TO SEARCH PROCEEDINGS CONDUCTED U/S 132 AND ON THE BASIS OF I NCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THUS, T WO REQUIREMENTS OF THE PROVISIONS OF SECTION 271AAA I.E, THE UNDIS CLOSED INCOME AND SPECIFIED PREVIOUS YEAR ARE FULFILLED. THEREF ORE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY, IF AT ALL IS LEVIABLE , IT CAN BE LEVIED ONLY U/S 271AAA OF THE I.T.ACT, 1961, BUT NOT U/S 271(1) (C) OF THE I.T.ACT, 1961. INSOFAR AS, THE ARGUMENTS OF THE LD. DR THAT ALTHOUGH, PROVISION OF SECTION 271AAA IS APPLICABLE FOR SPECI FIED PREVIOUS YEAR, BUT ADDITIONS MADE IN THE ASSESSMENT IS ON ES TIMATION BASIS, AND THEREFORE, THE CONDITIONS PRESCRIBED U/S 271AAA ARE NOT FULFILLED IN ORDER TO LEVY PENALTY UNDER SAID SECTION IS INCO RRECT, BECAUSE ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 12 WHETHER ADDITION IS MADE ON ESTIMATION BASIS OR ON THE BASIS OF CERTAIN EVIDENCES, FACT REMAINS THAT THE ADDITIONS MADE IN THE ASSESSMENT IS PURSUANT TO SEARCH CONDUCTED U/S 132 AND SUCH INCOME IS ON THE BASIS OF INCRIMINATING MATERIAL FO UND, AS A RESULT OF SEARCH. THEREFORE, WE ARE OF THE CONSIDERED VIEW TH AT THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS, IS TOWARDS UNDI SCLOSED INCOME OF A SPECIFIED YEAR AND HENCE, PENALTY IF AT ALL IS LEVIABLE, IT CAN BE LEVIED ONLY U/S 271AAA OF THE ACT, BUT NOT U NDER SECTION 271(1)(C) OF THE I.T.ACT, 1961. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF ITAT, DELHI BENCH, IN THE CASE OF ASWAN I KUMAR ARORA VS ACIT (2016) 50 ITR 337 DELHI TRIBUNAL, WHERE IT WAS HELD THAT ASSESSEE DURING SEARCH AND SEIZURE PROCEEDINGS, HA D ADMITTED CERTAIN UNDISCLOSED INCOME, PENALTY IF ANY SHOULD B E LEVIED U/S 271AAA AND NOT U/S 271(1)(C) OF THE I.T.ACT, 1961. THE ITAT AHMADABAD BENCH, IN THE CASE OF DR. NAMAN A. SHASTR IA VS ACIT (2015) 155 ITD 1003 HELD THAT PROVISIONS OF SECTION 271AAA AND 271(1)(C) ARE MUTUALLY EXCLUSIVE AND THUS, ONCE PE NALTY INITIATED U/S 271AAA FOR SPECIFIED PREVIOUS YEAR, THERE CANNOT BE ANY OCCASION TO IMPOSE PENALTY U/S 271(1)(C) OF THE I.T.ACT, 1961. 11. IN THIS VIEW OF THE MATTER AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE CONSIDERE D VIEW THAT THE LD. AO WAS ERRED IN LEVYING PENALTY U/S 271(1)(C) O F THE I.T.ACT, 1961, IN A CASES, WHERE THE ASSESSMENT HAS BEEN COM LETED FOR A SPECIFIED PREVIOUS YEAR AND ADDITION HAS BEEN MADE TOWARDS UNDISCLOSED INCOME UNEARTHED DURING THE COURSE OF SEARCH CONDUCTED U/S 132 OF THE I.T.ACT, 1961. HENCE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY LEVIED BY THE LD. AO U /S 271(1)(C) ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 13 CANNOT BE SUSTAINED UNDER THE LAW AND HENCE, WE DIR ECT THE LD. AO TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT, 1961. 12. COMING BACK TO THE ISSUE ON MERITS. THE LD. AO HAS MADE ADDITIONS TOWARDS UNDISCLOSED INCOME ON ACCOUNT OF CASH DEPOSITS IN UNDISCLOSED BANK ACCOUNT TOWARDS PROFESSIONAL RE CEIPTS FOR THE RELEVANT YEAR, ON THE BASIS OF INCRIMINATING MATERI AL FOUND DURING THE COURSE OF SEARCH. FURTHER, DURING THE COURSE OF SE ARCH A ROUGH CASH BOOK MAINTAINED BY THE ASSESSEE, FOR ACCORDING PROF ESSIONAL RECEIPTS RECEIVED IN CASH WAS FOUND FOR A PERIOD OF PART OF THE YEAR. ON THE BASIS OF SAID INCRIMINATING MATERIAL, THE IN COME FOR THE REMAINING PERIOD HAS BEEN ESTIMATED BY THE LD. AO T OWARDS UNDISCLOSED INCOME ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT. ALTHOUGH, THE ADDITIONS MADE BY THE L D. AO WAS FINALLY SUSTAINED BY THE ITAT TO THE EXTENT OF RS. 1,72,20,000/-, BUT SUCH ADDITION IS ONLY ON ESTIMATION BASIS THAT TOO ON THE BASIS OF EXPENDITURE INCURRED BY THE ASSESEE IN CASH FOR HOU SEHOLD EXPENSES, CEREMONIAL EXPENSES ETC. THEREFORE, WE AR E OF THE CONSIDERED VIEW THAT WHEN, ADDITION IS MADE ON ESTI MATION BASIS THAT TOO ON THE BASIS OF MATERIAL FOUND DURING THE COURS E OF SEARCH FOR PART OF THE PERIOD, THEN LEVYING PENALTY U/S 271(1) (C) OF THE I.T.ACT, 1961, ON SUCH ESTIMATED ADDITION IS INCORRECT. THE LD. AO HAS MADE ADDITIONS TOWARDS UNDISCLOSED CASH DEPOSITS IN BANK ACCOUNT WITHOUT ESTABLISHING FULLY THAT ASSESSEE HAS DEPOSITED CASH INTO BANK ACCOUNT FOR THE REMAINING PERIOD OF THE FINANCIAL Y EAR. FURTHER, ALTHOUGH, THE TRIBUNAL HAS FINALLY SUSTAINED ADDITI ONS TO THE EXTENT OF RS 1,72,20,000/-, BUT SAID ADDITIONS WAS SUSTAINED ON THE BASIS OF ESTIMATION OF HOUSEHOLD EXPENSES, CEREMONIAL EXPENS ES ETC. FROM THE ABOVE, IT IS VERY CLEAR THAT THE LD. AO HAS NOT MADE OUT A CLEAR ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 14 CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FUR NISHING INACCURATE PARTICULARS OF INCOME, WHICH WARRANTS LEVY OF PENAL TY U/S 271(1)(C) OF THE I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDE RED VIEW THAT THE LD. AO WAS INCORRECT IN LEVYING PENALTY U/S 271(1)( C), IN RESPECT OF ADDITIONS MADE TOWARDS UNDISCLOSED INCOME ON THE BA SIS OF ESTIMATION. ALTHOUGH, THE LD.CIT(A) HAS DELETED ADD ITIONS MADE BY THE LD. AO TO THE EXTENT OF PENALTY LEVIED ON ADDIT IONS DELETED BY THE ITAT, BUT, SUSTAINED PENALTY LEVIED, IN RESPECT OF ADDITIONS CONFIRMED BY THE ITAT, WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTION 271(1)(C) OF THE I.T.ACT, 1961, CANNOT BE I NVOKED, WHERE THE ADDITIONS WAS MADE ON ESTIMATION BASIS. HENCE, WE ARE OF THE CONSIDERED VIEW THAT ON THIS GROUND ALSO PENALTY LE VIED BY THE LD. AO U/S 271(1)(C) OF THE I.T.ACT, 1961 CANNOT BE SUS TAINED AND ACCORDINGLY, WE DIRECT THE LD. AO TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE I.T.ACT, 1961. 13. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS A LLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 /02/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/02/2020 THIRUMALESH SR.PS ITA NOS.7138 & 6755/MUM/2018 MUNIR M.KHAN 15 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//