HITEN R. MEHTA, MUMBAI V. ASST CIT CEN CIR 35, MUMBAI

ITA 8000/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1789 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 04-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 19-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: CHETAN KARIA
• Keywords: Unexplained investment; Gift; Search and seizure

Judgement Text

ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.8000/MUM/2010 (ASSESSMENT YEAR: 2006-07) HITEN R. MEHTA, 1/B JARIWALA MANSION, 58/60 N S PATKAR MARG, MUMBAI 400007 PAN: AADPM 0756 C VS. ASSTT. CIT, CENTRAL CIRCLE-35, ROOM NO.656, 6 TH FLOOR, AAYAKAR BHAVAN, MK MARG, MUMBAI 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI CHETAN KARIA, DEPARTMENT BY: SMT. NEERAJA PRADHAN, DR DATE OF HEARING: 04/02/2013 DATE OF PRONOUNCEMENT: 07/02/2013 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE LEVY OF P ENALTY UNDER SECTION 271(1)(C) OF ` 2,05,770 AGAINST THE ORDERS OF THE CIT (A)-41 MUMBAI, DATED, 05.08.2010. 2. BRIEFLY STATED, THERE WAS SEARCH AND SEIZURE OPERAT ION AT THE RESIDENCE OF ASSESSEE. IN THE LOCKER NO.2131 WITH T HE STANDARD CHARTERED BANK, BREACH CANDY BRANCH, MUMBAI, JOINTL Y WITH HIS WIFE, JEWELLERY WORTH ` 31.00 LAKHS WAS FOUND. ASSESSEE FILED RECONCILIATION WITH REFERENCE TO VARIOUS ITEMS AND OUT OF THEM, ONE RING - EMERALD CUT VALUED AT ` 1,28,100 COULD NOT BE RECONCILED AND SO THE SAME WAS OFFERED TO TAX. THERE ARE TWO MORE ITEMS, ONE MOTI- UNCUT DIAMOND NECKLACE VALUED AT ` 42,800 STATED TO BE GIFT BY THE MOTHER OF ASSESSEES WIFE AND FILED A CONFIRMATION TO THAT EXTENT. AO DID NOT ACCEPT AND BROUGHT THE SAME TO TAX. ANOTHER ITEM WAS JADAV SET FOUND TALLYING WITH ITEM NO.35 OF THE WEALTH TA X RETURN OF ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 2 OF 6 ASSESSEES FATHER MR. R.K. MEHTA BOTH IN DESCRIPTIO N AND GROSS WEIGHT. HOWEVER, WHILE RECORDING THE SAME THAT ITEM TALLIES, AO DID NOT ACCEPT THE CLAIM ON THE REASON THAT THE CARATAG E WAS DIFFERENT OF ABOUT 8.5 CARATS. THEREFORE, THE SAME WAS ALSO A DDED VALUED AT ` 32,000. THUS, THE UNEXPLAINED INVESTMENT OF ` 2,00,900 WAS ADDED IN THE ASSESSMENT. 3. THE NEXT ITEM OF ADDITION WAS WITH REFERENCE TO CAS H FOUND OF ` 1.00 LAKH AND ` 3.00 LAKHS IN RESPECT OF LOCKER NO.121 WITH THE UCO BANK, CHOWPATTI BRANCH AND LOCKER NO.1845A OF B ANK OF INDIA, OPERA HOUSE. IT WAS ASSESSEES EXPLANATION T HAT THE LOCKERS HAVE BEEN OPENED WAY BACK IN 1998 AND EVER SINCE TH E LOCKERS WERE NOT OPERATED. AO INQUIRED FROM THE BANKS TO INFORM THE DATE OF LAST OPERATION. SINCE THE DETAILS WERE NOT FURNISHED BY THE TIME THE ASSESSMENT WAS COMPLETED MENTIONING THAT AO HAS NO OPTION THAN TO BRING IT TO TAX AN AMOUNT OF ` .4.00 LAKHS. HE ALSO LEFT A NOTE IN THE ASSESSMENT ORDER THAT THE YEAR OF THE ASSESSMEN T WILL BE DECIDED AFTER THE BANK CONFIRMS THE DATE OF LAST OP ERATION. 4. THE THIRD ITEM WHICH WAS CONSIDERED IN THE ASSESSME NT IS WITH REFERENCE TO AN AMOUNT OF ` .85,000 BROUGHT TO TAX AS UNEXPLAINED OUT OF THE MONEY FOUND WITH THE WIFE OF ASSESSEE, WHO IN THE COURSE OF STATEMENT UNDER SECTION 132(4) SUB MITTED THAT IT WAS THE SAVING OUT OF THE AMOUNTS GIVEN TO HER FOR HOUSEHOLD EXPENSES. AO NOTICED THAT ASSESSEE HAS WITHDRAWN AB OUT ` 26,000 P.M. DURING THE YEAR WHEREAS THE EXPENDITURE STATED TO BE ABOUT ` 35,000, SO HE DID NOT ACCEPT THE EXPLANATION GIVEN AND CONSIDERED THE AMOUNT OF ` 85,000 OUT OF ` .1,20,450 FOUND WITH MRS. MEHTA, AS UNEXPLAINED. 5. EVEN THOUGH ASSESSEE CONTESTED THE ABOVE ADDITIONS, EXCEPT THE JEWELLERY AMOUNTING TO ` 1,28,100 OFFERED BY HIM, IN THE ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 3 OF 6 ABSENCE OF ANY FURTHER EVIDENCE THE CIT (A) CONFIRM ED THE ABOVE ADDITIONS. ASSESSEE DID NOT PREFER ANY FURTHER APPE AL. 6. IN THE PENALTY PROCEEDINGS, AO CONSIDERED THE ABOVE AND LEVIED A PENALTY OF ` 2,05,770 AT 100% OF THE AMOUNT SOUGHT TO BE EVADED. THE LEARNED CIT (A) REPEATING THE SAME OBSE RVATIONS CONFIRMED THE PENALTY. 7. THE LEARNED COUNSEL DRAWING OUR ATTENTION TO THE EX PLANATION GIVEN BEFORE AO AND THE RECONCILIATION STATEMENTS M ADE, ALONG WITH THE PANCHNAMA ETC., SUBMITTED THAT EXCEPT THE UN-RE CONCILED AMOUNT OF ` 1,28,100, THERE WAS PROPER EXPLANATION GIVEN TO AO BOTH AT THE TIME OF THE ASSESSMENT AS WELL AS AT TH E TIME OF APPELLATE PROCEEDINGS. IT WAS SUBMITTED THAT THE NE CKLACE WORTH ` 42,800 WAS A GIFT BY THE MOTHER TO THE DAUGHTER AND CONFIRMATION TO THAT EXTENT WAS ALSO FILED. IT WAS SUBMITTED THA T ASSESSEES FATHER-IN-LAW IS A BIG BUSINESSMAN OF LONGSTANDING AND THE AMOUNT OF GIFT IS SMALL AND INSIGNIFICANT. WITH REFERENCE TO ` 30,000 ADDED, THE ITEM IS EXACTLY TALLYING WITH ASSESSEES FATHER S WEALTH TAX RETURN AND AO NOTED THAT ONLY CARATAGE WAS VARYING. IT WAS SUBMITTED THAT THE VALUATION OF THE NECKLACE WAS DO NE DURING THE COURSE OF SEARCH BY THE DEPARTMENTAL VALUER WHO EST IMATED THE CARATAGE AT 24.5 CARAT WHICH GIVE RISE TO VARIATION . IT WAS ASSESSEES EXPLANATION THAT THE DIFFERENCE ROSE OUT OF THE FAC T THAT THE VILANDI DIAMONDS STUDDED TO THE NECKLACE ARE OF IRREGULAR S HAPE AND WHEN FIXED ON NECKLACE, IT IS DIFFICULT TO ESTIMATE THE CARATAGE. SINCE IT IS TALLYING WITH THE WEALTH TAX RETURN OF HIS FATHER, THE SAME SHOULD HAVE BEEN ACCEPTED AS GENUINE EXPLANATION. 8. REFERRING TO THE UNEXPLAINED CASH OF ` 4.00 LAKHS, HE REFERRED TO THE PARA 3 OF THE ASSESSMENT ORDER WHEREIN AO HI MSELF HAS WRITTEN TO THE BANK TO FURNISH THE DATE OF LAST OPE RATION AND MADE AN ADDITION TO PROTECT THE INTEREST OF THE REVENUE. IT IS ALSO FURTHER ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 4 OF 6 NOTED THAT IN ORDER TO AVOID COMPLICATIONS, THE AMO UNT WAS ADDED IN ASSESSEES HANDS EVEN THOUGH THE LOCKERS ARE IN JOINT NAME. THERE WAS ALSO FURTHER NOTING THAT THE ASSESSMENT I N RESPECT OF THIS UNEXPLAINED CASH IS SUBJECT TO RECTIFICATION WITH R EFERENCE TO THE ASSESSMENT YEAR IN WHICH IT IS CHARGEABLE, BASED ON THE FACTS CONTAINED AND REPLIES TO BE RECEIVED FROM THE BANKS . REFERRING TO THE ABOVE, IT WAS SUBMITTED THAT THE BANKS HAVE UNF ORTUNATELY NOT REPLIED SO FAR AND ASSESSEE HAS NO OPTION THAN TO A CCEPT THE ADDITIONS MADE IN THE ASSESSMENT. 9. WITH REFERENCE TO THE THIRD ITEM OF CASH OF RS.85,0 00, IT WAS POINTED OUT THAT THE AMOUNT WAS PIN MONEY OF THE WI FE WHO ADMITTED THAT THESE ARE HOUSEHOLD SAVINGS, THE EXPL ANATION OF WHICH WAS ACCEPTED IN THE COURSE OF SEARCH BUT NOT ACCEPT ED IN THE COURSE OF THE ASSESSMENT. IT WAS FURTHER SUBMITTED THAT NO CASH SEIZURE WAS MADE OUT OF THIS AMOUNT AND EVEN THOUGH ASSESSE E EXPLAINED THAT IN A SIX YEAR PERIOD BEFORE THE SEARCH, THERE WAS CASH WITHDRAWAL TO THE EXTENT OF ` 34,61,000 BETWEEN ASSESSEE AND HIS FATHER AND IN VIEW OF THE CASH WITHDRAWAL TO THAT E XTENT, THE EXPLANATION OF ASSESSEE COULD HAVE BEEN ACCEPTED. I T WAS FURTHER SUBMITTED THAT THIS IS ALSO ONLY AN ESTIMATION OF A O AND AN AMOUNT OF ` 85,000 WAS BROUGHT TO TAX OUT OF ` 1,20,450 FOUND DURING THE SEARCH. 10. IT WAS FURTHER SUBMITTED THAT VARIOUS ADDITIONS ARE MADE IN ASSESSEES HANDS EVEN THOUGH THEY BELONG TO OTHER F AMILY MEMBERS AND ASSESSEE DID NOT CONTEST THEM TO SIMPLIFY THE P ROCEEDINGS, BUT MOST OF THE AMOUNTS BROUGHT TO TAX IN ASSESSEES HA NDS ARE NOT HIS INCOME. 11. THE LEARNED DR HOWEVER, RELIED ON THE FACTS STATED BY AO AND THE CIT (A). ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 5 OF 6 12. WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE ADDITIO NS IN THE ASSESSMENT ARE CONCERNED, IT IS NOTICED THAT ASSESS EES EXPLANATION WAS NOT ACCEPTED BY AO FOR THE VARIOUS REASONS DISC USSED ABOVE. HOWEVER, WHAT WE NOTICE IS THAT AO REJECTED EXPLANA TION, BUT THERE IS NO ATTEMPT TO PROVE THAT THESE EXPLANATIONS WERE NOT BONAFIDE. OUT OF THE ENTIRE ADDITIONS MADE BY AO, ASSESSEE HI MSELF HAS ACCEPTED THE ADDITION OF AN AMOUNT OF ` 1,28,100 WHICH HAS BEEN OFFERED TO TAX. REST OF THE AMOUNTS WERE ON THE BAS IS OF REJECTION OF ASSESSEES EXPLANATION. AS FAR AS JEWELLERY IS CONC ERNED, ONE ITEM WAS GIFT FROM MOTHER IN LAW TO ASSESSEES WIFE WHIC H WAS NOT ACCEPTED. THE OTHER WAS BROUGHT TO TAX AS CARATAGE WAS NOT TALLYING EVEN THOUGH THE ITEM WAS TALLYING WITH WT RETURN OF FATHER OF ASSESSEE. IN OUR VIEW, THESE TWO ADDITIONS DOES NOT CALL FOR ANY PENALTY AS IT IS A BONAFIDE EXPLANATION. ASSESSEE W AS ABLE TO RECONCILE JEWELLERY WORTH ` 30.00 LAKHS AND HAS OFFERED ONE ITEM WHICH COULD NOT BE RECONCILED. WITH REFERENCE TO TH E CASH BROUGHT TO TAX AS FOUND IN THE LOCKER, AO HIMSELF HAS MADE INQ UIRIES ABOUT THE LAST DATE OF OPERATION ACCEPTING ASSESSEES EXPLANA TION THAT THEY WERE LAST OPERATED IN 1998 AND SINCE THE BANKS COUL D NOT INFORM THE YEAR OF LAST OPERATION, THE AMOUNTS WERE BROUGH T TO TAX IN ORDER TO PROTECT THE INTEREST OF REVENUE. SINCE THE YEAR OF THE ASSESSMENT IS ITSELF IN DOUBT, JUST BECAUSE ASSESSEE HAS ACCEP TED THE SAME IN THIS YEAR, IN OUR VIEW MAY NOT LEAD TO LEVY OF PENA LTY. 13. THE LAST ITEM IS AN ESTIMATION OF UNEXPLAINED CASH OUT OF PIN MONEY SOUGHT TO BE BELONGING TO HIS WIFE IN ASSESSE ES HANDS. THEREFORE, IN ALL THESE ADDITIONS MADE, THE ADDITIO NS COULD BE SUSTAINED, BUT IN OUR VIEW THAT MAY NOT LEAD TO PEN ALTY UNDER SECTION 271(1)(C). AN ADDITION PER SE CAN NOT AUTOM ATICALLY LEAD TO LEVY OF PENALTY. WHAT IS REQUIRED IS TO TEST THE EX PLANATION OF ASSESSEE AND ESTABLISH THAT EXPLANATION WAS NOT BON AFIDE. THIS WAS NOT DONE BY AO. EXCEPT ON THE ITEM WHICH ASSESSEE HAS OFFERED IN ITA NO.8000 OF 2010 HITEN R. MEHTA, MUMBAI PAGE 6 OF 6 THE COURSE OF THE ASSESSMENT OF RS.1,28,100, REST O F THE AMOUNTS DOES NOT CALL FOR ANY PENALTY. THEREFORE, WE DIRECT AO TO RESTRICT THE PENALTY ONLY TO THE ITEM OF JEWELLERY WORTH OF ` 1,28,100 NOT DISCLOSED IN THE RETURN FILED AND DELETE THE PENALT Y ON THE BALANCE OF AMOUNTS. GROUNDS ARE PARTLY ALLOWED. 14. IN THE RESULT APPEAL FILED BY ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY, 2013 SD/- SD/- (AMIT SHUKLA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 7 TH FEBRUARY, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI