M.Rakesh Kumar, CHENNAI V. DCIT Central Circle 1(3), CHENNAI

ITA 785/CHNY/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2738 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AR V SREENIVASANJCITD R
• Assessee Lawyers: T BANUSEKARC A
• Keywords: Unexplained investment; Business income; Search and seizure
• Section: 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.785/CHNY/2019 / ASSESSMENT YEAR :2011-12 MR.RAKESH KUMAR, 61,N.S.C.BOSE ROAD, CHENNAI-79. VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), CHENNAI. [PAN AAFPK 4365 F ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.T.BANUSEKAR,C.A !' /RESPONDENT BY : MR.AR.V.SREENIVASAN,JCIT,D.R & / DATE OF HEARING : 29 - 08 - 201 9 & / DATE OF PRONOUNCEMENT : 29 - 08 - 201 9 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-16, CHENN AI IN ITA NO.53/C.I.T(A)-18/2015-16 DATED 13.02.2019 FOR TH E ASSESSMENT YEAR 2011-12 CONFIRMING THE LEVY OF PENALTY U/S.27 1AAA OF THE ACT. ITA NO.785/CHNY/2019 :- 2 -: 2. SHRI T.BANUSEKAR REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI AR.V.SREENIVASAN REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY LD.AR THAT THE ASSESSEE IS AN INDIVIDUAL, WHO IS A PARTNER IN THE FIRM M/S.SWARNA SHILPI. THE ASSESSEE IS ALSO MANUFACTURER AND TRADER IN GOLD JEWELLERY. THERE WA S A SEARCH AND SEIZURE OPERATION ON 06.01.2011. IN THE COURSE OF SEARCH, THE ASSESSEE WAS FOUND WITH EXCESS GOLD JEWELLERY OF 27 ,645 GRAMS. IT WAS A FURTHER SUBMISSION THAT THE ASSESSEE HAD IN T HE COURSE OF SEARCH ADMITTED AN UNDISCLOSED INCOME ON ACCOUNT IS THE SA ID JEWELLERY AND HAD OFFERED THE ENTIRE GOLD JEWELLERY OF 27,645 GRA MS @ RS.1,450/- PER GRAM AMOUNTING TO RS.4,06,94,450/-. IN THE RETU RN OF INCOME FILED ON 30.11.2011. ADVANCE TAX ALREADY PAID AT RS.1,40, 00,000/- AND THE BALANCE TAX AT THE TIME OF FILING THE RETURN OF INC OME. IT WAS SUBMITTED THAT THE ASSESSMENT WAS COMPLETED BY APPL YING THE RATE RS.1,872/- PER GRAM AND ACCORDINGLY AN ADDITION OF RS.1,20,07,385/- CAME TO BE MADE ON ACCOUNT OF DIFFERENCE IN THE RAT E OF GOLD JEWELLERY. THOUGH APPEAL HAD BEEN FILED AGAINST THE ADDITION MADE BY ASSESSING OFFICER TAKING THE ENHANCED RATE IN RESPE CT OF VALUATION OF GOLD JEWELLERY, THE SAME WAS CONFIRMED ON APPEAL AN D NO FURTHER APPEAL HAS BEEN PREFERRED BY THE ASSESSEE. IT WAS A SUBMISSION THAT IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASS ESSING OFFICER, THE ITA NO.785/CHNY/2019 :- 3 -: ASSESSEE HAD CATEGORICALLY GIVEN THE REASONS AND HA D SPECIFICALLY DRAWN OUR ATTENTION TO SUB-SECTION (1) OF SECTION 2 71AAA OF THE ACT. LD.AR SUBMITTED THAT AS THE ASSESSEE HAD COMPLIED W ITH ALL THE CONDITIONS SPECIFIED IN SUB-SECTION (1) OF SEC.271A AA OF THE ACT, NO PENALTY U/S.271AA OF THE ACT WAS LIABLE TO BE LEVIE D ON THE ASSESSEE. THE CONDITIONS BEING (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U/S .132(4) OF THE ACT ADMITS THE UNDISCLOSED INCOME AND SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. ADMITTEDLY, THIS COND ITION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. (II) THE ASSESSEE SUBSTANTIATES THE MANNER IN WHI CH THE INCOME WAS DERIVED; AND (III) THE ASSESSEE SUBSTANTIATES THE MANNER IN WHI CH THE UNDISCLOSED INCOME WAS DERIVED; AND (IV) THE ASSESSEE PAYS THE TAX, TOGETHER WITH INTE REST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD TAK EN THE VIEW THAT CONDITION NOS. 2, 3 & 4 HAD NOT BEEN COMPLIED WITH AND CONSEQUENTLY LEVY OF PENALTY U/S.271AAA OF THE ACT. THE LD.AR D REW OUR ATTENTION TO THE STATEMENT RECORDED U/S.132(4) OF THE ACT WHICH WAS SHOWN AT ITA NO.785/CHNY/2019 :- 4 -: PAGE-4 OF THE PAPER BOOK WHEREIN IN REPLY TO QUESTI ON NO.12. THE ASSESSEE HAS MENTIONED AS FOLLOWS:- Q.12. DURING THE COURSE OF SEARCH & SEIZURE OPERA TION TODAY AT YOUR PREMISE, WE HAVE FOUND PHYSICAL STOCK OF GOLD OF 192.646 KGS. AS PER YOUR STOCK REGISTER, YOUR STOCK AS ON TODAY IS 154.377 KGS. IN THIS PREMISE. PLEASE EXPLAIN THE DIFFERENCE OF STOC K OF 38.269 KGS AVAILABLE IN THIS PREMISE. ANSWER: WE MAINTAIN OUR STOCK IN NET WEIGHT OF G OLD. YOU HAVE MENTIONED GROSS WEIGHT IN YOUR QUESTION. NET WIEIG HT OF STOCK AVAILABLE IN THIS PREMISE TODAY IS 183.744 KGS. IF YOU TAKE NET WEIGHT OF GOLD, DIFFERENCE IN STOCK WILL COME TO 29.367 KG S. I AM ACCEPTING THESE 29.367 KGS OF GOLD AS MY UNDISCLOSED INVESTME NT IN STOCK. AS ON TODAYS RATE OF RS.1850/- PER GRAM, I AM ADMITTI NG RS.5,43,28,950/- AS UNDISCLOSED INCOME OF MYSELF. I SHALL PAY THE TAX WITHIN A SHORT PERIOD TO AVOID INTEREST AND PENALTY . THIS JEWELLERY OF MINE HAS BEEN KEPT IN THE SHOP FOR SAFETY REASON. IT WAS FURTHER SUBMITTED THAT CLEARLY, THIS WAS A S TATEMENT RECORDED U/S.132(4) OF THE ACT AND IN REPLY TO QUESTION NO.1 2, THE ASSESSEE HAD ACCEPTED THE UNDISCLOSED INCOME IN RESPECT OF 29.36 7 KGS OF GOLD, THOUGH IN FACT, THE SAME WAS ONLY 27.645 KGS OF GOL D. IT WAS SUBMITTED THAT THE RATE HAD BEEN MENTION IN THE SAI D REPLY AT RS.1,850/- PER GRAM BEING THE RATE AS ON THE DATE O F SEARCH, BEING 06.1.2011. THE LD.AR FURTHER DREW OUR ATTENTION TO AUESTION NO.13 AND THE ANSWER TO QN.NO.13 IS AS FOLLOWS:- Q.13. HOW YOU EARNED THIS AMOUNT AND OWNED THE JE WELLERY? ITA NO.785/CHNY/2019 :- 5 -: ANS. I HAVE EARNED THIS INCOME FROM COMMISSION B USINESS ON VARIOUS COMMISSION BUSINESSES. IT WAS SUBMITTED THAT THE ASSESSEE HAD CATEGORICALL Y EXPLAINED THE MANNER IN WHICH THE ASSESSEE HAD DERIVED SUCH INCOM E AND THE SAME WAS ALSO SUBSTANTIATED IN RESPECT OF THE SOURCE OF INCOME AND THIS WAS ALSO NOT DISPUTED. IT WAS THUS, THE SUBMISSION THA T CONDITIONS NO.2 & 3 HAD BEEN COMPLIED WITH. IN THE RETURN FILED, THE 4 TH CONDITION BEING PAYMENT OF TAXES TOGETHER WITH THE INTEREST WAS ALS O COMPLIED IN SO FAR AS THE ASSESSEE HAD ADOPTED THE RATE OF RS.1,450/- PER GRAM, BEING THE COST AT WHICH ASSESSEE HAD ACQUIRED THE SAID JE WELLERY. IT WAS A SUBMISSION THAT THE RATE OF RS.1,850/- WAS THE RATE AS ON THE DATE OF SEARCH AND OBVIOUSLY THE UNDISCLOSED INVESTMENTS RE PRESENTING THE GOLD JEWELLERY WAS NOT PURCHASED OR ACQUIRED ON THE SAME DATE. IT WAS SUBMITTED THAT THE TAXES IN RESPECT OF THE SAID UND ISCLOSED INVESTMENTS HAD ALSO BEEN PAID BEFORE FILING OF THE RETURN FOR THE RELEVANT ASSESSMENT YEAR. IT WAS THUS A PRAYER THAT THE PEN ALTY U/S.271AAA OF THE ACT WAS NOT LEVIABLE IN SO FAR AS THE ASSESSEE HAD COMPLIED WITH THE CONDITIONS PRESCRIBED IN SUB-SECTION (1) OF SEC TION 271AAA OF THE ACT. FURTHERMORE, IT WAS SUBMITTED BY LD.AR THAT L D.CIT(A) DID NOT CONSIDER THE SUBMISSIONS OF THE ASSESSEE AND HAD CO NFIRMED THE LEVY OF PENALTY U/S.271AAA OF THE ACT. ITA NO.785/CHNY/2019 :- 6 -: 4. IN REPLY, LD.DR SUBMITTED THAT IN RESPECT OF FO URTH CONDITION BEING TAXES SHOULD BE PAID IN RESPECT OF THE UNDISC LOSED INVESTMENTS, THE CONDITION WAS NOT COMPLIED WITH IN SO FAR AS TH E ASSESSEE HAD REDUCED THE RATE TO RS.1450/- AS AGAINST RS.1872/- AS HAS BEEN DETERMINED IN THE COURSE OF ASSESSMENT. TO A SPECIF IC QUERRY FROM THE BENCH, AS TO WHETHER THERE HAS BEEN ANY VARIATION I N THE QUANTUM OF JEWELLERY BOTH PERSONAL JEWELLERY AND STOCK IN RESP ECT OF BUSINESS, WHICH HAS BEEN TREATED AS UNEXPLAINED INVESTMENT. T HE LD.DR SUBMITTED THAT THE VARIATION HAD TAKEN PLACE ONLY I N RESPECT OF THE RATE. THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE FOUR CONDITIONS REQUIRED UNDER SUB-SECTION (1) OF SECTION 271AAA OF THE ACT FOR NON-LEVY OF PENALTY U/S.271AAA OF THE ACT THAT (I) THE ASSESSE E SHOULD HAVE ADMITTED THE UNDISCLOSED INCOME IN A STATEMENT REC ORDED U/S.132(4) OF THE ACT IN THE COURSE OF SEARCH, (II) HE MUST SP ECIFY THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED AND IT SHOULD BE SUBSTANTIATED, (III) THE MANNER IN WHICH THE SAID UNDISCLOSED INCOME WA S DERIVED SHOULD BE SUBSTANTIATED AND (IV) HE SHOULD PAY TAX, TOGETH ER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. ADMITTE DLY, THERE IS NO DISPUTE IN RESPECT OF THE FIRST CONDITION, I.E. THA T THE ASSESSEE HAS ITA NO.785/CHNY/2019 :- 7 -: ADMITTED THE UNDISCLOSED INCOME IN THE STATEMENT RE CORDED U/S.132(4) OF THE ACT IN THE COURSE OF SEARCH. ANSWER TO QN. N O.13 AS HAS BEEN EXTRACTED ABOVE CLEARLY SHOWS THAT THE ASSESSEE HAS SUBSTANTIATED THE MANNER IN WHICH HE HAS DERIVED THIS INCOME AND HE H AS SUBSTANTIATED THE MANNER IN WHICH IT WAS DERIVED BEING THE COMMIS SION INCOME FROM VARIOUS COMMISSION BUSINESSES. ADMITTEDLY, NO FURTH ER QUESTION HAS ALSO BEEN ASKED TO FURTHER PROBE OR INTO THE ISSUE, AS OBVIOUSLY, THE SEARCH HAS REVEALED THE VARIOUS BUSINESS INCOMES AN D SOURCE OF INCOME OF THE ASSESSEE. THEREFORE, CONDITIONS NOS.2 & 3 HAVE ALSO BEEN COMPLIED WITH. IN RESPECT OF CONDITION NO.4, T HE FACT REMAINS THAT THE ASSESSEE HAS DISCLOSED QUANTITIES AND SUBSTANTI ATED THE QUANTITIES AND THE VARIATION IN THE ASSESSMENT AND THE RETURNE D INCOME IS ONLY ON ACCOUNT OF RATES IN RESPECT OF THE GOLD JEWELLERY. THE QUANTUM OF THE JEWELLERY REPRESENTING THE UNDISCLOSED INVESTMENT I N THE JEWELLERY HAS NOT BEEN VARIED AND THE RATE WHICH HAS BEEN ADOPTED BY THE ASSESSEE IS NOT A RATE, WHICH IS IMPROBABLE OR UNSUSTAINABLE . IN FACT, THE ASSESSEE HAS GIVEN HIS EXPLANATION FOR ADOPTING THE RATE OF RS.1450/- AS AGAINST RS.1,850/- MENTIONED IN THE STATEMENT RE CORDED AND EVEN THE RATE OF RS.1850/- AS STATED BY THE ASSESSEE TO BE THE RATE ON THE DATE OF SEARCH, HAS ALSO BEEN DISCARDED AND THE ASS ESSING OFFICER HAD ADOPTED THE RATE OF RS.1872/- WHICH IS AGAIN A HIGH ER FIGURE. THIS HAS ALSO BEEN ACCEPTED BY THE ASSESSEE AFTER THE FIRST APPEAL. THE ITA NO.785/CHNY/2019 :- 8 -: DIFFERENCE IS ALSO AN ADMITTED FACT AND TAXES AND I NTEREST IN RESPECT OF ADDITION REPRESENTING THE UNDISCLOSED INCOME IN RES PECT OF 27.645 KGS OF GOLD AS DISCLOSED BY THE ASSESSEE AT RS.1450/- PER GRAM, HAS ALSO BEEN PAID BY THE ASSESSEE. TAXES ON THE SAME HAS A LSO BEEN PAID BY THE ASSESSEE BEFORE FILING OF THE RETURN, THUS, THE CONDITION NO.4 ALSO STANDS COMPLIED. THIS BEING SO, WE ARE OF THE VIEW THAT NO PENALTY U/S.271AAA OF THE ACT IS LIABLE TO BE LEVIED ON THE ASSESSEE AND CONSEQUENTLY, DELETE THE PENALTY AS LEVIED BY THE A SSESSING OFFICER AND CONFIRMED BY THE LD.CIT(A). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 29 TH AUGUST, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER / CHENNAI * / DATED: 29 TH AUGUST, 2019. K S SUNDARAM !,- .- / COPY TO: 1 . / APPELLANT 3. / () / CIT(A) 5. - !4 / DR 2. !' / RESPONDENT 4. / / CIT 6. / GF