Shri Kanaiyalal Bhagwandas Patel, Surat V. The Dy.CIT.,Cent.Circle-3, Surat

ITA 81/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0762 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained expenditure; Business income; Income from undisclosed sources; Search and seizure; Document seized; Deemed dividend; Retraction; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 81 & 82/AHD/2012 (ASSESSMENT YEAR: 2009-10) KANAIYALAL BHAGWANDAS PATEL GHANTIWALA COMPOUND, NEAR A.S. MOTORS, A. K. ROAD, SURAT PAN NO. ADQPP0309J MANISH KANAIYALAL PATEL GHANTIWALA COMPOUND, NEAR A.S. MOTORS, A. K. ROAD, SURAT PAN NO. AANPP3239R V/S DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RASESH SHAH, AR RESPONDENT BY : SHRI SANJAY KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 01-09-201 6 DATE OF PRONOUNCEMENT : 06-09-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS.81 & 82/AHD/2012 ARE APPEALS BY TWO DIFFERE NT ASSESSEES DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, AHMEDA BAD DATED 18.10.2011 PERTAINING TO A.Y. 2009-10. ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 2 2. AS COMMON GRIEVANCE IS INVOLVED IN BOTH THESE APPEA LS, THOUGH QUANTUM MAY DIFFER, BOTH THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE COMMON GRIEVANCE IN BOTH THESE APPEALS RELATE T O THE NON- GRANTING OF REFUND IN RESPECT OF THE AMOUNT CONDITI ONALLY OFFERED BY THE ASESSEES AS THEIR INCOME FOR THE YEAR UNDER CONSIDE RATION SO AS TO COVER ANY DISCREPANCIES, ERRORS, OMISSIONS, MISTAKE S ETC., IN THE SEIZED DOCUMENTS AND SEIZED ASSETS VIS--VIS THE REGULAR B OOKS. 4. THE FACTS OF THE CASE ARE THAT A SEARCH ACTION U/S. 132 OF THE ACT WAS CARRIED OUT ON 24.09.2008 IN MANISH GROUP TO WHICH THE ASSESSEES ARE PART OF. DURING THE COURSE OF THE SEARCH OPERATION, SHRI KANAIYALAL B. PATEL WHO HAPPENS TO BE THE MAIN PERSON OF MANISH G ROUP VOLUNTARILY DISCLOSED A TOTAL INCOME OF RS. 1.10 CRORES WHICH W AS SUBSEQUENTLY INCREASED TO RS. 2.25 CRORES COVERING ALL THE ASSES SEES OF MANISH GROUP. 5. BEFORE TRANSMITTING THE RETURN OF INCOME ELECTRONIC ALLY, THE ASSESSEE FILED EXPLANATORY NOTES BEFORE THE A.O. STATING THA T THE EXPLANATORY NOTES SO FILED SHOULD BE CONSIDERED AS FORMING PART OF THE COMPUTATION OF INCOME. 6. THE CONTENTS OF THE EXPLANATORY NOTES CAN BE APPREC IATED BY THE FOLLOWING CHART:- SR. NO. NAME OF THE ASSESSEE ASS. YEAR STATUS PRELIMINARY VOLUNTARY DISCLOSURE AMT. IDENTIFIED DISCREPANCY AS PER THE AVAILABLE DETAILS UNIDENTIFIED DISCREPANCY REDUCED WHILE COMPUTING TOTAL INCOME TO REGISTER ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 3 THE CLAIM 1 MANISH PACKAGING PVT.LTD. (INCLUDING CASH ADJUSTED OF RS. 32.50 LACS) 2009- 10 COMPANY 1,75,00,000 27,00,000 1,48,00,000 2 KANAIYALAL B. PATEL 2009- 10 INDIVIDUAL 10,00,000 -- 10,00,000 3 VASANTIBEN K. PATEL 2009- 10 INDIVIDUAL 15,00,000 -- 15,00,000 4 MANISH K. PATEL 2009- 10 INDIVIDUAL 25,00,000 -- 25,00,000 TOTAL 2,25,00,000 27,00,000 1,98,00,000 7. WHILE FILING THE AFOREMENTIONED CHART, THE ASSESSEE S SPECIFICALLY STATED THAT THE AFOREMENTIONED CHART MAY ALSO BE TREATED F OR REGISTERING RETRACTION OF THE PRELIMINARY DISCLOSURE MADE TO TH E EXTENT IT REMAINS UNIDENTIFIED DURING ASSESSMENT. 8. THUS, THE UNIDENTIFIED DISCLOSURE OF SHRI KANAIYALA L B. PATEL WAS APPROPRIATED AT RS. 10 LACS AND THAT OF SHRI M.K. P ATEL WAS APPROPRIATED AT RS. 25 LACS. WE ARE CONSIDERING THE APPEALS OF THESE TWO PERSONS. 9. THE CLAIMS OF THE APPELLANTS ARE THAT THE DISCLOSUR E WAS ON ESTIMATE BASIS, THERE WAS NO CORROBORATIVE UNEXPLAINED INVES TMENT/EXPENDITURE FOUND AT THE TIME OF SEARCH, NO UNDISCLOSED ASSETS WERE FOUND NOR IT IS A CASE OF THE REVENUE THAT THE DISCLOSURE MADE BY T HE ASSESSEES HAVE ANY NEXUS WITH THE UNEXPLAINED INCOME FOUND AT THE TIME OF SEARCH. ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 4 10. AT THIS STAGE, IT WOULD BE PERTINENT TO UNDERSTAND THE VIEW OF THE CBDT ON DISCLOSURES MADE AT THE TIME OF SEARCH AND THE S AME READS AS UNDER:- THE CBDT CIRCULAR NO. 286/2/2003-IT (INV), DATED 10 -3-2003 IN REFERENCE TO THE CONFESSION OF INCOME MADE DURING THE COURSE OF SEAR CH PROCEEDINGS IS REPRODUCED HEREIN BELOW: INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHER E ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED IN COME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONF ESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCE RNED ASSESSEE WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON CONFE SSION DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SER VE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND C ONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WH AT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME-TAX DEPARTMENTS, SIMILARLY, WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH AND SEIZURES AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONF ESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES / MATERIALS GATHERED DURING THE COURSE OF SEARCH / SURVEY OPERATIONS OR THEREAFTER WHILE FRAMING THE R ELEVANT ASSESSMENT ORDERS 11. IF THE FACTS OF THE CASES IN HAND ARE TO BE CONSIDE RED IN THE LIGHT OF THE AFOREMENTIONED CBDT CIRCULAR, IN OUR CONSIDE RED OPINION, SINCE THERE IS NO CO-RELATION BETWEEN THE ALLEGED DISCLOS URES OF THE APPELLANTS QUA THE SEIZED MATERIAL, WE DO NOT FIND ANY REASON WHY ADDITION SHOULD BE MADE AND WHY THE TAX PAID ON SUC H DISCLOSURE SHOULD NOT BE REFUNDED. 12. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT NONE OF THE APPELLANTS HAVE INCLUDED THE INCOME DISCLOSED IN TH EIR RESPECTIVE RETURNS OF INCOME. THIS PROVES THAT THE ASSESSEE NE VER HAD ANY INTENTION TO INCLUDE THE ALLEGED VOLUNTARY DISCLOSU RE IN THE RETURN OF INCOME. ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 5 13. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE CBDT CIRCULAR (SUPRA), WE SET ASIDE THE FINDINGS OF THE LD. CIT(A ) AND DIRECT THE A.O. TO ISSUE REFUNDS ON SUCH ADDITIONS OF INCOME DISCLO SED BUT NOT SHOWN IN THE RETURN OF INCOME. 14. BEFORE PARTING, IN ONE OF THE LEAD CASES OF THE GRO UP NAMELY MANISH PACKAGING PVT. LTD., THE CO-ORDINATE BENCH I N ITA NOS. 78 & 973/AHD/2012 HAD CONSIDERED SIMILAR FACTS AND THUS HELD:- 8. THE ASSESSING OFFICER FRAMED A REGULAR ASSESSME NT ON 31-12-2010 INTER ALIA TREATING THE ABOVE EXTRACTED DISCLOSURES AS VOLUNTA RY, UNCONDITIONAL, UNEQUIVOCAL AND PRECISE WHICH COULD NOT BRUSHED ASIDE IN ASSESS EE'S RETURN AS CONDITIONAL. HIS VIEW WAS THAT AT MOST, THE ABOVE STATED DEEMED DIVI DEND AMOUNT THEREIN (SUPRA) COULD BE HELD AS A CONDITIONAL DISCLOSURE. SHRI PAT EL'S STATEMENTS WERE TAKEN AS THAT OF A FULLY CONSCIOUS ONES SINCE ADMINISTERED U NDER OATH. AND THAT THE SAME HAD GONE UN-REBUTTED FOR WANT OF TANGIBLE EVIDENCE. RETRACTION TIME PERIOD OF 11 MONTHS WAS HELD TO BE BASED ON LEGAL ADVICE ONLY. T HE ASSESSING OFFICER TOOK INTO ACCOUNT ALL THESE CONCLUSIONS FOR REJECTING ASSESEE 'S RETRACTION QUA THE IMPUGNED SUM OF RS. 1.48 LACS AND HELD THAT THE ENTIRE SUM O F RS. 1.75 CRORES (SUPRA) WAS ITS UNACCOUNTED INCOME. 9. THE CIT(A) HAS UPHELD THE ASSESSING OFFICER 'S ACTION UNDER CHALLENGE. 10. THE LEARNED AUTHORIZED REPRESENTATIVE INVITES O UR ATTENTION TO THE ABOVE EXTRACTED STATEMENT FOR TERMING THE SAME AS A CONDI TIONAL DISALLOWANCE AND NOT A CATEGORIC ONE. HE SUBMITS THAT THE SAME LACKS ANY S UPPORTIVE EVIDENCE AS WELL I.E. THE FOUR BASIC INGREDIENTS OF THE CONCERNED ASSESSE E'S IDENTITY OUT OF THE ABOVE STATED FOUR ENTITIES (SUPRA), CORRESPONDING ASSESSM ENT YEAR, SOURCE THEREOF ALONG WITH ITS APPLICATION AND UNEXPLAINED EXPENDITURE IS NOWHERE FORTHCOMING. THE ASSESSEE PLEADS THAT BOTH THE ALLEGED SUMS OF RS. 2 .25 CRORES AND DEEMED DIVIDEND AMOUNT OF RS. 4 CRORES (SUPRA) STAND ON ID ENTICAL FOOTING BEING BASED ON SHRI PATEL'S STATEMENTS. IT HIGHLIGHTS THE FACT THA T THE LATTER DEEMED DIVIDEND ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 6 AMOUNT WAS FINALLY DISCLOSED AS OF RS. 31,15,897/- ONLY. IT REFERS TO BOARD'S CIRCULAR NO. 286/02/2003 DATED 10-03-2003 DEALING W ITH THE ISSUE OF DISCLOSURE MADE IN SEARCHES AND SEIZURES THEREBY DIRECTING THE REVENUE AUTHORITIES TO KEEP FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE O F INCOME LEADING TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NO T LIKELY TO DISCLOSE BEFORE THE DEPARTMENT. THE ASSESSING AUTHORITY IN PENDING ASSE SSMENTS HAVE ALSO BEEN DIRECTED TO RELY UPON EVIDENCES/MATERIALS COLLECTED DURING SEARCH/SURVEY OPERATIONS. THE ASSESSEE QUOTES A CATENA OF CASE LA W IN SUPPORT OF ITS PLEA THAT THE IMPUGNED ADDITION OF RS. 1.48 CRORES IS NOT SUSTAIN ABLE BEING MERELY BASED ON ITS CONDITIONAL DISCLOSURES HEREINABOVE. IT ACCORDINGLY PRAYS FOR ACCEPTANCE OF THE INSTANT APPEAL. 11. THE REVENUE STRONGLY SUPPORTS THE CIT(A) REJECT ING ASSESSEE'S RETRACTION IN QUESTION. IT SEEKS DISMISSAL OF THE PRESENT APPEAL. 12. THE ASSESSEE SUBMITS IN REBUTTAL THAT THE INVES TIGATION AUTHORITIES NOWHERE PIN POINT ANY SPECIFIC INCRIMINATING EVIDENCE DURING SE ARCH TO SHRI PATEL. NOR IS THERE ANY QUESTION IN THIS REGARD. IT ACCORDINGLY REITERA TES ITS EARLIER SUBMISSIONS. 13. WE HAVE HEARD BOTH THE PARTIES. CASE RECORDS A ND JUDICIAL PRECEDENTS STAND PERUSED. WE COME TO ADMITTED FACTS FIRST. THE DEPARTMENT COMMENCED THE IMPUGNED SEARCH OPERATION IN ASSESSEE'S BU SINESS PREEMIES. AND CONCLUDED THE SAME ON 03-10-2008. THIS TIME SPAN OF 10 DAYS I NVOLVES FOUR STATEMENTS BEING OBTAINED FROM SHRI PATEL (SUPRA) INTER ALIA DISCLOS ING UNACCOUNTED BUSINESS INCOME OF RS. 2.25 CRORES ALONG WITH DEEMED DIVIDEN D OF RS. 4 CRORES. WE HAVE EXTRACTED RELEVANT PORTIONS THEREOF IN PREC EDING PARAGRAPHS. THE SAME DO NOT REVEAL ANY SPECIFIC INCRIMINATING MATERIAL UNEARTHED IN THE COURSE OF SEARCH OR THEREAFTER HIGHLIGHTING UNACCOUNTED BUSINESS INCOME. THE ABOVE STATED DISCLOSURE STATEMENTS ARE VERY MUCH VA GUE ONES AND CONDITIONAL AS WELL WITHOUT VERIFYING NECESSARY BOOKS AND RECORDS. THE RELEVANT ARRAY OF QUESTIONS FORMING PART OF THE PAPER BOOK ARE FOUND TO BE NOT THROWING LIGHT ON ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 7 ANY SPECIFIC MATERIAL WITH CONTENTS THERE OF; WHATSOEVER. THE SAME FACTUAL POSITION CONTINUES IN ASSESSMENT, LOWER APPELLATE O RDER AND IN THE COURSE OF ARGUMENTS BEFORE US. IT IS NOT OUT OF PLACE TO REI TERATE THAT WE ARE DEALING WITH THE ISSUE OF IMPUGNED UNACCOUNTED BUSINESS INCOME O F RS. 1,48,00,000/-. WE OBSERVE IN THESE PECULIAR CIRCUMSTANCES THAT THERE IS NO SPECIFIC INCRIMINATING MATERIAL SUPPORTIVE OF THE ABOVE STATED ADDITION RI GHT FROM SEARCH TILL DATE. WE QUOTE BOARD'S CIRCULAR (SUPRA) ISSUED MUCH PRIOR TO THE SEARCH IN QUESTION DIRECTING THE INVESTIGATING OFFICERS TO FOCUS ON CO LLECTION OF EVIDENCE POINTING TOWARDS UNACCOUNTED INCOME RATHER THAN REQUESTING S UCH CONFESSIONAL DISCLOSURE STATEMENTS. WE ACCORDINGLY HOLD THAT THE REVENUE HA S NOT COLLECTED ANY SPECIFIC MATERIAL SUPPORTING THE IMPUGNED ADDITION. 14.NOW WE COME TO RELEVANT CASE LAW QUOTED. THE FIR ST ONE (2010) 328 ITR 411 (GUJ) KAILASHBEN MANOHAR CHOKSI VS. CIT. THE DEPART MENT HAD RECORDED DISCLOSURE STATEMENT AT MIDNIGHT HOURS. THE SAME ST OOD RETRACTED AFTER TWO MONTHS. THERE WAS NO EVIDENCE COLLECTED IN SUPPORT OF THE SAID DISCLOSURES. WE FIND THAT THEIR LORDSHIPS ACCEPTED RETRACTION SINCE THE STATEMENT WAS RECORDED IN VERY MUCH ODD HOURS. IT HAS BEEN HELD THEREAFTER TH AT THE ADDITIONS IN QUESTION ARE NOT SUSTAINABLE SINCE NO MATERIAL EVIDENCE SUPPORTI NG THE SAME ARE FORTHCOMING. IT IS FURTHER EVIDENT THAT THIS CASE LAW PERTAINS T O A SEARCH CONDUCTED WELL BEFORE THE BOARD'S CIRCULAR (SUPRA) QUOTED THEREIN. WHEN W E APPLY THIS RATIO VIS-A-VIS FACTS BEFORE US, IT IS APPARENT THAT THERE IS NO IN CRIMINATING MATERIAL OR EVIDENCE AVAILABLE WITH THE REVENUE WHICH COULD SUPPORT THE IMPUGNED ADDITION. 15. THE NEXT CASE LAW IS DCIT VS. SHRI VIVEKANAND SHARMA ITA 1748/KOL/2012 DECIDED ON 01-08-2014. THIS SEARCH IS DATED 26-023- 2010 FOLLOWED A DISCLOSURE STATEMENT U/S. 132(4) ON 06-05-2010 SUBSEQUENTLY RE TRACTED ON 02-09-2011 I.E. ALMOST ONE AND HALF YEARS THEREAFTER. THE LEARNED C O-ORDINATE BENCH QUOTES ABSENCE OF SPECIFIC MATERIAL EVIDENCE SUPPORTING TH E DISCLOSURE STATEMENT FOR DECIDING THE ISSUE AGAINST THE REVENUE. WE HAVE AFF ORDED THE REVENUE DUE OPPORTUNITY TO POINT OUT ANY DISTINCTION ON FACTS O R LAW. IT IS UNABLE TO DO SO. ITA NO. 81 & 82/AHD/2012 . A.Y. 2009-1 0 8 16. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO ABOVE STATED FACTS, LOWER AUTHORITIES' FINDINGS, RIVAL CONTENTIONS AND OUR DI SCUSSION KEEPING IN MIND THE RELEVANT CASE LAWS. WE ARE OF THE OPINION ACCORDING LY THE REVENUE HAS FAILED TO PRODUCE ANY MATERIAL EVIDENCE SUPPORTING THE IMPUGN ED ADDITION AMOUNT OF RS. 1.48 CRORES ADDED MERELY ON THE BASIS OF A VERY MUC H VAGUE AND CONDITIONAL DISCLOSURE STATEMENT OF SHRI PATEL WHICH STANDS RET RACTED LATER ON. WE HOLD IN THESE FACTS THE ASSESSING OFFICER AND THE CIT(A) HA VE ERRED IN MAKING THE ABOVE STATED ADDITIONS IN ASSESSEE'S AS ITS UNACCOUNTED I NCOME. THE SAME STANDS DELETED. OTHER ARGUMENTS NARRATED IN PRECEDING PARAGRAPHS HA VE BEEN RENDERED INFRUCTUOUS. ITA 78/AHD/2012 SUCCEEDS. 15. OUR DECISION IS FORTIFIED BY THE DECISION OF THE CO -ORDINATE BENCH (SUPRA). 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EES ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 06- 09- 2 016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD