Smt. Vasantiben Kanaiyalal Patel, Surat V. The Dy.CIT.,Cent.Circle-3, Surat

ITA 83/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0284 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• 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 SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.83/AHD/2012 / ASSTT. YEAR: 2009-2010 VASANTIBEN KANAIYALAL PATEL GHANTIWALA COMPOUND NR.A.S. MOTORS A.K. ROAD SURAT. PAN : ADQPP 0310 D. VS DCIT, CENT.CIR.3 SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH, AR REVENUE BY : SHRI SUMIT KUMAR VERMA, DR / DATE OF HEARING : 01/09/2016 / DATE OF PRONOUNCEMENT: 17 /10/2016 $%/ O R D E R ASSESSEE IS IN APPEAL AGAINST ORDER OF THE LD.CIT(A )-II, AHMEDABAD DATED 19.10.2011 PASSED FOR THE ASSTT.YEAR 2009-10. 2. THOUGH GROUNDS OF APPEAL TAKEN BY THE ASSESSEE A RE NOT IN CONSONANCE WITH RULE 8 OF INCOME TAX (APPELLATE) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF HER GRIEVANCE I S THAT THE LD.AO OUGHT TO HAVE GRANTED A REFUND OF RS.5,28,801/- IN RESPECT O F AMOUNT OF RS.15 LAKHS, WHICH WAS OFFERED FOR TAXATION CONDITIONALLY. 3. THE LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUT SET, SUBMITTED THAT AN IDENTICAL ISSUE WAS HEARD IN THE DIVISION BENCH IN THE CASE OF ITA NO.81 & ITA NO.83/AHD/2012 2 82/AHD/2012 DATED 6.9.2016 AND OUTCOME OF THOSE APP EALS IS TO BE FOLLOWED IN THE PRESENT APPEAL. THE LD.DR WAS UNABLE TO CON TROVERT THIS CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE. 4. I FIND THAT DIVISION BENCH HAS DECIDED THOSE APP EALS VIDE ORDER DATED 6.9.2016. THE ORDER READS AS UNDER: 1. ITA NOS.81 & 82/AHD/2012 ARE APPEALS BY TWO DIFFERE NT ASSESSEES DIRECTED AGAINST THE ORDER OF LD. CIT(A)- II, AHMEDABAD DATED 18.10.2011 PERTAINING TO A.Y. 2009- 10. 2. AS COMMON GRIEVANCE IS INVOLVED IN BOTH THESE APPEA LS, THOUGH QUANTUM MAY DIFFER, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER 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 YEA R UNDER CONSIDERATION SO AS TO COVER ANY DISCREPANCIES, ERR ORS, OMISSIONS, MISTAKES ETC., IN THE SEIZED DOCUMENTS A ND SEIZED ASSETS VIS--VIS THE REGULAR BOOKS. 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 T O 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 GROUP VOLUNTARILY DISCLOSED A TOTA L INCOME OF RS. 1.10 CRORES WHICH WAS SUBSEQUENTLY INCREASED TO RS. 2.25 CRORES COVERING ALL THE ASSESSEES OF MANISH GROUP. 5. BEFORE TRANSMITTING THE RETURN OF INCOME ELECTRONIC ALLY, THE ASSESSEE FILED EXPLANATORY NOTES BEFORE THE A.O. ST ATING THAT 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.83/AHD/2012 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 M AY ALSO BE TREATED FOR REGISTERING RETRACTION OF THE PRELIMINA RY DISCLOSURE MADE TO THE EXTENT IT REMAINS UNIDENTIFIED DURING A SSESSMENT. 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 UNEXPLAI NED INVESTMENT/EXPENDITURE FOUND AT THE TIME OF SEARCH, NO UNDISCLOSED ASSETS WERE FOUND NOR IT IS A CASE OF T HE REVENUE THAT THE DISCLOSURE MADE BY THE ASSESSEES HAVE ANY NEXUS WITH THE UNEXPLAINED INCOME FOUND AT THE TIME OF SEARCH. 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 SAME 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 T HE COURSE OF SEARCH 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 U NDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SUR VEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, A RE LATER RETRACTED BY THE CONCERNED ASSESSEE WHILE FILING RETURNS OF INCO ME. IN THESE CIRCUMSTANCES, ON CONFESSION DURING THE COURSE OF S EARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPO SE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATIO N ON COLLECTION OF ITA NO.83/AHD/2012 4 EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WH AT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE T HE INCOME-TAX DEPARTMENTS, SIMILARLY, WHILE RECORDING STATEMENT D URING THE COURSE OF SEARCH AND SEIZURES AND SURVEY OPERATIONS NO ATTEMP T SHOULD BE MADE TO OBTAIN CONFESSION 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 RELEVANT ASSESSMENT ORDERS 11. IF THE FACTS OF THE CASES IN HAND ARE TO BE CONSIDE RED IN THE LIGHT OF THE AFOREMENTIONED CBDT CIRCULAR, I N OUR CONSIDERED OPINION, SINCE THERE IS NO CO-RELATION B ETWEEN THE ALLEGED DISCLOSURES OF THE APPELLANTS QUA THE S EIZED MATERIAL, WE DO NOT FIND ANY REASON WHY ADDITION SH OULD BE MADE AND WHY THE TAX PAID ON SUCH 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 I N THEIR RESPECTIVE RETURNS OF INCOME. THIS PROVES THAT THE ASSESSEE NEVER HAD ANY INTENTION TO INCLUDE THE ALLEGED VOLU NTARY DISCLOSURE IN THE RETURN OF INCOME. 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 DISCLOSED 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 IN ITA NOS. 78 & 973/AHD/2012 HAD CONSIDERED SIMILA R 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 VOLUNTARY, UNCONDITIONAL, UNEQUIVOCAL AND PRECISE WHICH COULD NOT BRUSHED ASIDE IN ASSESSEE'S RETURN AS CONDITIONAL. HIS VIEW WAS T HAT AT MOST, THE ABOVE STATED DEEMED DIVIDEND AMOUNT THEREIN (SUPRA) COULD BE HELD AS A CONDITIONAL DISCLOSURE. SHRI PATEL'S STATEMENTS WER E TAKEN AS THAT OF A FULLY CONSCIOUS ONES SINCE ADMINISTERED UNDER 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 A DVICE ONLY. THE ASSESSING OFFICER TOOK INTO ACCOUNT ALL THESE CONCL USIONS FOR REJECTING ASSESEE'S RETRACTION QUA THE IMPUGNED SUM OF RS. 1. 48 LACS AND HELD THAT THE ENTIRE SUM OF RS. 1.75 CRORES (SUPRA) WAS ITS U NACCOUNTED INCOME. ITA NO.83/AHD/2012 5 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 CONDITIONAL DISALLOWANCE AND NOT A CATEGORIC ONE. HE SUBMITS TH AT THE SAME LACKS ANY SUPPORTIVE EVIDENCE AS WELL I.E. THE FOUR BASIC INGREDIENTS OF THE CONCERNED ASSESSEE'S IDENTITY OUT OF THE ABOVE STAT ED FOUR ENTITIES (SUPRA), CORRESPONDING ASSESSMENT YEAR, SOURCE THER EOF 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) STAN D ON IDENTICAL FOOTING BEING BASED ON SHRI PATEL'S STATEMENTS. IT HIGHLIGHTS THE FACT THAT THE LATTER DEEMED DIVIDEND AMOUNT WAS FINALLY DISCL OSED AS OF RS. 31,15,897/- ONLY. IT REFERS TO BOARD'S CIRCULAR NO. 286/02/2003 DATED 10-03-2003 DEALING WITH THE ISSUE OF DISCLOSURE MAD E IN SEARCHES AND SEIZURES THEREBY DIRECTING THE REVENUE AUTHORITIES TO KEEP FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME L EADING TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NO T LIKELY TO DISCLOSE BEFORE THE DEPARTMENT. THE ASSESSING AUTHORITY IN P ENDING ASSESSMENTS HAVE ALSO BEEN DIRECTED TO RELY UPON EVIDENCES/MATE RIALS COLLECTED DURING SEARCH/SURVEY OPERATIONS. THE ASSESSEE QUOTE S A CATENA OF CASE LAW IN SUPPORT OF ITS PLEA THAT THE IMPUGNED ADDITI ON OF RS. 1.48 CRORES IS NOT SUSTAINABLE BEING MERELY BASED ON ITS CONDIT IONAL 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 P RESENT APPEAL. 12. THE ASSESSEE SUBMITS IN REBUTTAL THAT THE INVES TIGATION AUTHORITIES NOWHERE PIN POINT ANY SPECIFIC INCRIMINATING EVIDEN CE DURING SEARCH TO SHRI PATEL. NOR IS THERE ANY QUESTION IN THIS REGAR D. IT ACCORDINGLY REITERATES ITS EARLIER SUBMISSIONS. 13. WE HAVE HEARD BOTH THE PARTIES. CASE RECORDS A ND JUDICIAL PRECEDENTS STAND PERUSED. WE COME TO ADMITTED FA CTS FIRST. THE DEPARTMENT COMMENCED THE IMPUGNED SEARC H OPERATION IN ASSESSEE'S BUSINESS PREEMIES. AND CONCLUDED THE SA ME ON 03-10-2008. THIS TIME SPAN OF 10 DAYS INVOLVES FOUR STATEMENTS BEING OBTAINED FROM SHRI PATEL (SUPRA) INTER ALIA DISCLOSING UNACCOUNTE D BUSINESS INCOME OF RS. 2.25 CRORES ALONG WITH DEEMED DIVIDEND OF RS. 4 CRORES. WE HAVE EXTRACTED RELEVANT PORTIONS THEREOF IN PREC EDING PARAGRAPHS. THE SAME DO NOT REVEAL ANY SPECIFIC INCRIMINA TING MATERIAL UNEARTHED IN THE COURSE OF SEARCH OR THEREAFTER HIG HLIGHTING UNACCOUNTED BUSINESS INCOME. THE ABOVE STAT ED DISCLOSURE STATEMENTS ARE VERY MUCH VAGUE ONES AND CONDITIONAL AS WELL WITHOUT VERIFYING NECESSARY BOOKS AND RECORDS. THE RELE VANT ARRAY OF QUESTIONS FORMING PART OF THE PAPER BOOK ARE FOUND TO BE NOT THROWING LIGHT ON ANY SPECIFIC MATERIAL WITH CON TENTS THEREOF; WHATSOEVER. THE SAME FACTUAL POSITION CONTINUES IN ASSESSMENT, LOWER ITA NO.83/AHD/2012 6 APPELLATE ORDER AND IN THE COURSE OF ARGUMENTS BEFO RE US. IT IS NOT OUT OF PLACE TO REITERATE THAT WE ARE DEALING WITH THE ISSUE OF IMPUGNED UNACCOUNTED BUSINESS INCOME OF RS. 1,48,00,000/-. WE OBSERVE IN THESE PECULIAR CIRCUMSTANCES THAT THERE IS NO SPECIFIC IN CRIMINATING MATERIAL SUPPORTIVE OF THE ABOVE STATED ADDITION RIGHT FROM SEARCH TILL DATE. WE QUOTE BOARD'S CIRCULAR (SUPRA) ISSUED MUCH PRIOR TO THE SEARCH IN QUESTION DIRECTING THE INVESTIGATING OFFICERS TO FO CUS ON COLLECTION OF EVIDENCE POINTING TOWARDS UNACCOUNTED INCOME RATHER THAN REQUESTING SUCH CONFESSIONAL DISCLOSURE STATEMENTS. WE ACCORDI NGLY HOLD THAT THE REVENUE HAS NOT COLLECTED ANY SPECIFIC MATERIAL SUP PORTING 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. TH E DEPARTMENT HAD RECORDED DISCLOSURE STATEMENT AT MIDNIGHT HOURS . THE SAME STOOD RETRACTED AFTER TWO MONTHS. THERE WAS NO EVIDENCE C OLLECTED IN SUPPORT OF THE SAID DISCLOSURES. WE FIND THAT THEIR LORDSHI PS ACCEPTED RETRACTION SINCE THE STATEMENT WAS RECORDED IN VERY MUCH ODD H OURS. IT HAS BEEN HELD THEREAFTER THAT THE ADDITIONS IN QUESTION ARE NOT SUSTAINABLE SINCE NO MATERIAL EVIDENCE SUPPORTING THE SAME ARE FORTHC OMING. IT IS FURTHER EVIDENT THAT THIS CASE LAW PERTAINS TO A SEARCH CON DUCTED WELL BEFORE THE BOARD'S CIRCULAR (SUPRA) QUOTED THEREIN. WHEN WE AP PLY THIS RATIO VIS-A- VIS FACTS BEFORE US, IT IS APPARENT THAT THERE IS N O INCRIMINATING 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 RETRACTED ON 02-09-2011 I.E. ALMOST ON E AND HALF YEARS THEREAFTER. THE LEARNED CO-ORDINATE BENCH QUOTES AB SENCE OF SPECIFIC MATERIAL EVIDENCE SUPPORTING THE DISCLOSURE STATEME NT FOR DECIDING THE ISSUE AGAINST THE REVENUE. WE HAVE AFFORDED THE REV ENUE DUE OPPORTUNITY TO POINT OUT ANY DISTINCTION ON FACTS O R LAW. IT IS UNABLE TO DO SO. 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 ACCORDINGLY THE REVENUE HAS FAILED TO PRODUCE ANY MATERIAL EVIDENCE SUPPORTING THE IMPUGNED ADDITION AMOUNT OF RS. 1.48 CRORES ADDED M ERELY ON THE BASIS OF A VERY MUCH VAGUE AND CONDITIONAL DISCLOSURE STA TEMENT OF SHRI PATEL WHICH STANDS RETRACTED LATER ON. WE HOLD IN THESE F ACTS THE ASSESSING OFFICER AND THE CIT(A) HAVE ERRED IN MAKING THE ABO VE STATED ADDITIONS IN ASSESSEE'S AS ITS UNACCOUNTED INCOME. THE SAME S TANDS DELETED. OTHER ARGUMENTS NARRATED IN PRECEDING PARAGRAPHS HAVE BEE N RENDERED INFRUCTUOUS. ITA 78/AHD/2012 SUCCEEDS. ITA NO.83/AHD/2012 7 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. 5. A PERUSAL OF THE ABOVE ORDER WOULD INDICATE THAT THE AMOUNT DISPUTED BY THE PRESENT ASSESSEE HAS ALSO BEEN MENTIONED AT SR.NO.3 ON PAGE NO.3 OF THE ORDER, WHILE TAKING NOTE OF THE DETAILS IN TABU LAR FORM. THERE IS NO DISPARITY OF ANY FACT. THEREFORE, RESPECTFULLY FOL LOWING THE ABOVE, I ALLOW APPEAL OF THE ASSESSEE, AND DIRECT THE AO TO GRANT REFUND AS CLAIMED BY THE ASSESSEE ON THE AMOUNT OF RS.15 LAKHS, WHICH WAS OF FERED CONDITIONALLY. THIS AMOUNT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE , AND TAX PAID ON THIS AMOUNT IS TO BE REFUNDED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 17 TH OCTOBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER