A.C.I.T. CENTRAL CIRCLE 13, MUMBAI V. HARMONY INVESTMENT & PROPERTIES, MUMBAI

ITA 7498/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3979 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Search and seizure; Loose papers; Opportunity of cross examination; Third party statement; Assessment record
• Section: 69C; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 7498/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR: 2008-09 THE ACIT, CENTRAL CIRCLE-13, OLD CGO ANNEXE BLDG., MUMBAI-400 020 M/S. HARMONY INVESTMENT & PROPERTIES, ESSA-501, KOTIA NIRMAN, NEW LINK ROAD, ANDHERI(W), MUMBAI-400 053 ') % ./ *+ ./PAN/GIR NO. : AAEFH 5314E ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI ABHINAY KUMBHAR -.), 0 / /RESPONDENT BY : DR. K. SHIVRAM SHRI PARAS S. SAVLA 0 12% / DATE OF HEARING :24.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT : 24.07.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-37, MUMBAI DT.09.08.201 1 PERTAINING TO A.Y. 2008-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN DELETING THE ADDITION OF RS. 84,95,892/- REPRESENTI NG UNEXPLAINED EXPENSES U/S. 69C OF THE ACT. ITA NO.7498/M/2011 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT WAS CONDUCTED ON PRAKASH STEELAGE GROUP. DURING THE SEARCH ACTION, CERTAIN LOOSE PAPERS WERE FOUND FROM THE PREMISES OF THE PRAKASH STEELAGE. THESE PAPERS WER E LEDGER ACCOUNT COPIES OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S. KEY STONE INC AND M/S. SETH IRON & STEEL PVT. LTD., WHICH WERE GROUP COMPANIES OF PRAKASH STEELAGE. THE ASSESSING OFFICER FOUND CERT AIN ROUGH WORKINGS MADE ON THAT COPY OF ACCOUNT AND ON THE BASIS OF TH E SCRIBBLING FOUND ON SUCH LOOSE PAPER, THE AO SOUGHT EXPLANATION FROM T HE ASSESSEE. 3.1. THE ASSESSEE FILED A DETAILED REPLY EXPLAINING THAT THE SAID ROUGH WORKINGS ARE OF M/S. KEY STONE INC AND M/S. SETH IR ON & STEEL PVT. LTD.,AND ASSESSEE HAS NOTHING TO DO WITH THE CONTEN TS OF THE SAID SCRATCHING OF ROUGH WORKINGS. THE ASSESSEE STRONGL Y DENIED TO HAVE PAID ANY CASH TO THE TWO PARTIES I.E. M/S. KEY STONE I NC AND M/S. SETH IRON & STEEL PVT. LTD. THEREFORE, THERE IS NO QUESTION OF WORKING ANY ADDITION ON THIS ACCOUNT. 3.2. THE SUBMISSIONS OF THE ASSESSEE WERE REJECTED BY THE AO WHO WAS OF THE FIRM BELIEF THAT THE SAID TWO PARTIES I.E. M /S. KEY STONE INC AND M/S. SETH IRON & STEEL PVT. LTD., HAVE OFFERED THE AMOUNT WRITTEN ON THE LOOSE SHEET FOR INCOME TAX PURPOSES. THE AO CONCLU DED THAT SINCE THE TWO PARTIES HAVE OFFERED THE AMOUNT TO TAX, THEREF ORE, THE PAYMENTS MADE BY THE ASSESSEE IN CASH FOR THE REASONS BEST KNOWN TO IT ARE OUTSIDE THE BOOKS OF ACCOUNTS. THE AO FURTHER OBSERVED THAT TH E ASSESSEE COULD NOT PROVE THE SOURCE OF PAYMENT AND IF THE SOURCE IS NO T DISCLOSED, THE SAME NEEDS TO BE TAXED. THE AO WAS OF THE FIRM BELIEF T HAT CERTAIN PAYMENTS WERE MADE IN CASH BY THE ASSESSEE TO THE GROUP CON CERNS OF PRAKASH STEELAGE AND SINCE THE SAID PAYMENTS HAVE BEEN ALRE ADY TREATED AS UNDISCLOSED INCOME IN THE CASE OF RECIPIENT CONCER NS, THE SAME DESERVES ITA NO.7498/M/2011 3 TO BE TAXED AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT IN THE HANDS OF THE ASSESSEE AND TREATED THE SUM OF RS. 84,95,892/ - AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE. 4. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) AND REITERATED ITS STAND THAT THE ROUGH WORKING FOU ND ON LOOSE PAPER WERE AT THE PREMISES OF PRAKASH STEELAGE AND THEREFORE N O ADVERSE INFERENCE SHOULD HAVE BEEN DRAWN IN THE CASE OF THE ASSESSEE . AFTER CONSIDERING THE ENTIRE FACTS ON THE RECORD AND THE SUBMISSIONS OF THE ASSESSEE , THE LD. CIT(A) WAS CONVINCED THAT THERE IS NO MATERIAL EVID ENCE BROUGHT ON RECORD. THE LD. CIT(A) OBSERVED THAT THE IMPUGNED LOOSE SHEET WAS NEITHER FOUND NOR SEIZED FROM THE PREMISES OF THE A SSESSEE AND THE STATEMENT MADE BY THIRD PARTIES NEVER IMPLICATE THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED THAT EVEN IN THE SURVEY PR OCEEDINGS CONDUCTED AT THE PREMISES OF THE ASSESSEE, NO INCRIMINATING DOCUMENTS RELATING TO THE ALLEGED TRANSACTIONS WERE FOUND FROM THE PREMIS ES OF THE ASSESSEE. THE LD. CIT(A) CONCLUDED THAT THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE IN THE EYE OF LAW AND ON THE GIVEN FACT S AND CIRCUMSTANCES OF THE CASE AND DELETED THE ADDITION OF RS. 84,95,892/ - MADE BY THE AO U/S. 69C OF THE ACT. 5. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), REV ENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. COU NSEL FOR THE ASSESSEE FURTHER RELIED UPON THE DECISION OF DELHI HIGH COUR T IN THE CASE OF CIT VS. LUBTEC INDIA LTD. 202 TAXATION 484 AND ON THE D ECISION OF THE CO- ITA NO.7498/M/2011 4 ORDINATE BENCH OF AHMEDABAD IN THE CASE OF ACIT VS ABHISHEK EXPORTS 3 ITR 823 (AHM). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDICIAL DECISIONS RELIED UPON BY THE LD. COUNSEL AND OTHER MATERIAL EVIDENCES BROUGHT ON REC ORD IN THE FORM OF PAPER BOOK. THE UNDISPUTED FACTS EMERGING OUT OF T HE ASSESSMENT RECORD SHOW THAT THE AO HAS RELIED ON CERTAIN LOOSE SHEETS WHICH WERE FOUND AND SEIZED FROM THIRD PARTY PREMISES. IT IS ALSO NOT I N DISPUTE THAT THE IMPUGNED ADDITION HAS BEEN MADE SOLELY ON THE BASIS OF CERTAIN SCRIBBLING/ROUGH WORKINGS FOUND ON THOSE ROUGH PAPE RS. IT IS ALSO NOT IN DISPUTE THAT THE STATEMENT RECORDED U/S. 132(4) DUR ING THE SEARCH OPERATIONS IN THE THIRD PARTY PREMISES, NO ONE HAS MENTIONED THE NAME OF THE ASSESSEE NOR ANY WHISPER HAS BEEN MADE IN RESPE CT OF THE ALLEGED TRANSACTION. IT IS A WELL SETTLED PROPOSITION OF L AW THAT THIRD PARTY STATEMENT AND THE EVIDENCES FOUND IN THE THIRD PART Y PREMISES CANNOT BE USED WITH ADDITIONAL SAFEGUARD AND WITHOUT ANY IND EPENDENT EVIDENCE. WE DRAW SUPPORT FROM THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF CBI VS V.C. SHUKLA AND OTHERS (AIR) 1998 (SC) 14 06 WHEREIN THE HONBLE SUPREME COURT HAS OBSERVED THAT : WHERE THERE WAS NO INDEPENDENT EVIDENCE REGARDING PAYMENT OF THE AMOUNT IN QUESTION AS REPRESENTED BY ENTRIES TO THE ACCUSED AND THE EVIDENCE OF WITNESSES WHO HA D ADMITTED THE RECEIPTS OF PAYMENTS AS SHOWN AGAINST THEM IN THE BOOKS OF ACCOUNT IN QUESTION COULD NOT BE HELD TO BE AN INDEPENDENT EVIDENCE AGAINST THE ACCUSED. SECTION 3 4 CANNOT BE PRESSED INTO SERVICE SO AS TO HOLD THE SAID BOOK S OF ACCOUNT AS ADMISSIBLE IN EVIDENCE 9. THE EVIDENCES ON WHICH THE AO HAS MADE THE IMPUG NED ADDITIONS ARE MORE VULNERABLE THAN THE EVIDENCES WHICH WERE B EFORE THE HONBLE SUPREME COURT IN THE CASE OF V.C. SHUKLA (SUPRA). IT IS ALSO NOT ITA NO.7498/M/2011 5 UNDERSTANDABLE FROM THE PERUSAL OF THE ASSESSMENT O RDER HOW THE PROVISIONS OF SEC. 69C ARE APPLIED IN THE INSTANT C ASE. SECTION 69C PROVIDE AS UNDER: UNEXPLAINED EXPENDITURE, ETC.--WHERE IN ANY FINANCI AL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLA NATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. +PROVIDED THAT, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME SIMPLE PERUSAL OF THE AFOREMENTIONED SECTION SHOW THAT THE SINE-QUA-NON FOR THE APPLICABILITY OF THE SAID SECTION IS THAT THE ASSESSEE SHOULD HAVE INCURRED ANY EXPENDITURE FOR WHICH HE OFFERS NO EXP LANATION ABOUT THE SOURCE OF EXPENDITURE THEN ONLY PROVISIONS OF SEC. 69C COME INTO PLAY. 10. IN THE PRESENT CASE NOTHING HAS BEEN BROUGHT ON RECORD WHICH COULD SUGGEST THAT THE ASSESSEE HAS INCURRED SOME EXPENDI TURE. THE ADDITIONS CANNOT BE SUSTAINED MERELY ON THE PRESUMPTION OF TH E AO THAT WHAT HAS BEEN OFFERED FOR TAXATION BY M/S. KEY STONE INC AND M/S. SETH IRON & STEEL PVT. LTD ARE THE EXPENDITURE INCURRED BY THE ASSESSEE. MERELY BECAUSE SOME SCRIBBLING WERE FOUND ON PIECE OF PAPE R WOULD NOT BE A CONCLUSIVE EVIDENCE TO PROVE THAT CERTAIN EXPENDITU RE HAVE BEEN INCURRED AND THAT EXPENDITURE HAVE BEEN INCURRED BY THE ASSE SSEE. CONSIDERING ALL ITA NO.7498/M/2011 6 THESE UNDISPUTED FACTS ON RECORD, WE HAVE NO HESITA TION TO CONFIRM THE FINDINGS OF THE LD. CIT(A) 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2013 . &5 0 4( % 6 7&8 24.07.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 24/07/2013 . . ./ RJ , SR. PS &5 &5 &5 &5 0 -1! :!(1 0 -1! :!(1 0 -1! :!(1 0 -1! :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ * @ * @ * @ * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO.7498/M/2011 7 DATE INITIALS 1. DRAFT DICTATED ON: 24.07.2013 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 25.07.2013 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: