The DCIT, Central Circle-1(4), Ahmedabad V. M/s.Madhav Developers, Ahmedabad

ITA 915/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6011 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RUDHIKA NAGAR
• Keywords: Search and seizure
• Section: 143(3); 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.915/AHD/2016 &' ( )*(/ ASSTT. YEAR: 2012-13 DCIT, CENT.CIR.1(4) AHMEDABAD. VS. M/S.MADHAV DEVELOPERS 219, RADHE CHAMBERS PRANAMINAGASR VASTRAL ROAD VASTRAL AHMEDABAD 382 418. PAN : AARFM 6748 C ( APPLICANT ) ( RESPONENT ) REVENUE BY : MS.MEENAKSHI DOHRE, SR.DR ASSESSEE BY : SHRI RUDHIKA NAGAR, CA / DATE OF HEARING : 14/02/2018 / DATE OF PRONOUNCEMENT: 01 /03/2018 78/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-11, AHMEDABAD DATED 3.12.2015 PASSED FOR THE ASSTT.YEAR 2012- 13. 2. SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.33,53,650/- WHICH WAS IM POSED BY THE AO UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-FIRM I S ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF HOUSES AND COMME RCIAL PROJECTS. A ITA NO.915/AHD/2016 2 SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AS WELL AS RESIDE NTIAL PREMISES OF THE PARTNERS ON 21.7.2011. DURING THE SEARCH, AN INCOM E OF RS.3,35,36,465/- EARNED FROM SALE OF LAND SITUATED AT GATRAD VILLAGE DURING THE PREVIOUS YEAR REMAINED UNCLOSED, WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNTS. STATEMENTS OF THE PARTNERS OF THE ASSESSEE FIRM WER E RECORDED UNDER SECTION 132(4) OF THE ACT , IN WHICH THEY ADMITTED UNDISCLO SED INCOME AND OFFERED FOR TAXATION. THE ASSESSEE FURNISHED THIS UNDISCLOSED INCOME IN THE RETURN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 153A OF THE AC T, WHICH WAS ACCEPTED BY THE AO. THEREAFTER, THE AO INITIATED PENALTY UNDER SECTION 271AAA OF THE ACT ON THE GROUND THAT THE ASSESSEE DID NOT SPECIFY THE MANNER IN WHICH THE UNDISCLOSED INCOME OF RS.3,35,36,465/- WAS EARNED O R SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED. ACCORDINGLY, HE LEVIED THE IMPUGNED PENALTY. THE ORDER OF THE AO READS A S UNDER: 2. THE ASSESSMENT PROCEEDINGS WERE FINALIZED BY OR DER U/S. 143(3) DATED 31/01/2014 DETERMINING INCOME AT RS.5,11,70,2 80/-. PENALTY PROCEEDINGS U/S. 2 71 AAA WERE INITIATED WITH REGAR D TO THE UNDISCLOSED INCOME OF RS. 3,3 5,36,465/- SHOWN BY T HE ASSESSEE, BY ISSUE OF NOTICE U/S. 271 AAA DATED 31/01/2014 AND 1 0/07/2014 AND WERE SERVED TO THE ASSESSEE. 3. AS THERE IS A CHANGE IN INCUMBENT, A FRESH NOTIC E U/S.271AAA WAS ISSUED TO THE ASSESSEE ON 25/07/2014 AND SERVED TO THE ASSESSEE. THE ASSESSEE'S REPLY IS AS UNDER PARA 5. AFTER SCRUTINY OF THE SEIZED MATERIAL, THE ADDIT IONAL INCOME IN THIS A.Y. OF THE ASSESSEE WAS ESTIMATED AT RS. 3,35 ,36,465/-. THE SAID INCOME IS DULY SHOWN IN THE RETURN OF INCOME IN RES PONSE TO THE NOTICE ISSUED U/S 153A OF THE ACT. NECESSARY TAX ALONG-WITH INTEREST THEREON HAS ALSO BEEN PAID. THE ADDITIONAL INCOME A T RS. 3,35,36,465/- FOR THIS A.Y. IS A PART OF DISCLOSURE MADE OF RS. 4 0 CRORES BY THE PARTNERS. ITA NO.915/AHD/2016 3 PARA 6. AT THE END, THE ASSESSEE WOULD LIKE TO SUBMIT THAT HE WILL NOT BE PENALIZED FOR THE ALLEGED CONCEALMENT PENALTY PR OCEEDINGS U/S 271AAA OF THE ACT FOR THE FOLLOWING REASONS: I) THE AUTHORISED OFFICER INSISTED THE ASSES SEE TO MAKE DISCLOSURE OF INCOME AND EXPLAINED THE ASSESSEE THAT THE ASSES SEE CAN BE RELIEVED FROM LAVING OF PENALTY IF THE DISCLOSURE IS MADE IN THE STATEMENT RECORDED U/S.132(4).THE PARTNERS AS WELL AS MADHAV GROUP HAS CO- OPERATED TO THE DEPARTMENT AND MADE HUGE DISCLOSURE OF AN INCOME OF RS. 40 CRORE AS INSTRUCTED BY THE AUTHORIZED OFFICE R. II) THE PARTNERS HAVE DISCLOSED THE SAID HUGE AMOUNT TO BUY PEACE OF MIND AND AVOID LITIGATION AND SUBJECT TO IMMUNIT Y IN PENALTY PROCEEDING AS PROMISED BY THE AUTHORIZED OFFICER WH ILE EXTRACTING THE STATEMENT UNDER SECTION 132(4). III) THE DISCLOSURE OF INCOME WAS MADE IN THE COURSE OF SEARCH, IN THE STATEMENT UNDER SUB SECTION 4 OF THE SECTION 13 2, AND SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. IT IS ALSO TO BE NOTED THAT THE ASSESSEE AND HIS GROUP HAS SUBSTANTIATE TH E MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED, AND IMPORTANTLY THE MADHAV GROUP PERSONS HAVE TO PAID TAX TOGETHER WITH INTERE ST IN RESPECT OF THE DECLARED INCOME. IV) IMPORTANTLY, THE GROUP COULD WORKED OUT (O N THE BASIS OF INCRIMINATING MATERIAL) ONLY 32.50 CRORE OF ADDITIO NAL INCOME OUT OF THE HUGE DISCLOSURE OF RS. 40 CRORE. THE ASSESSEE A ND THE GROUP COULD RETRACT THE BALANCE OF RS. 7.50 CRORE AND SAVE THE TAX ALONG-WITH INTEREST. HOWEVER, THE PARTNERS AND THE GROUP PERSO NS HAVE NOT RESORTED TO IT. INSTEAD, THEY FELT TO KEEP THE PROM ISE GIVEN AT THE TIME OF SEARCH PROCEEDINGS THAT THE DISCLOSURE WILL BE OFFE RED IN THE RETURN OF INCOME AND NECESSARY TAX ALONG WITH INTEREST WILL B E PAID BY THE PARTNERS AND THE MADHAV GROUP PERSONS. V) THE PROMISE GIVEN BY THE PARTNERS AS WELL AS MADHAV GROUP PERSONS TO OFFER THE DISCLOSURE INCOME IN THE RETUR N OF INCOME AND PAY NECESSARY TAX THEREON, THE ASSESSEE AND MADHAV GROU P EXPECT FROM THE DEPARTMENT TO KEEP PROMISE GIVEN AT THE TIME OF MAK ING DISCLOSURE OF INCOME IN THE SEARCH PROCEEDINGS. ITA NO.915/AHD/2016 4 4. THE ASSESSEE'S REPLY IS DULY CONSIDERED BUT NOT ACCEPTABLE AS PENALTY U/S. 271AAA STIPULATES THAT PENALTY SHALL BE LEVIAB LE AT THE RATE OF TEN PERCENT IN RESPECT OF UNDISCLOSED INCOME. SUB SECTI ON 2 OF SECTION 271AAA STIPULATES THAT PENALTY LEVIABLE U/S. 271AAA (1) SHALL NOT APPLY IF THE ASSESSEE, IN A STATEMENT U/S. 13 2(4) OF THE ACT RECORDED DURING THE COURSE OF SEARCH, ADMITS THE UNDISCLOSED INCOME , SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ALSO SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS DERIVED AND PAYS THE TAX, TOGETHER WITH INTEREST, IN RESPECT OF THE UNDISCLOS ED INCOME. IN THIS CASE AN INCOME OF RS. 3,35,36,465/- WAS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME BUT DOES NOT SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND THE SAME WAS NOT RECORD ED IN THE BOOKS OF ACCOUNT UNTIL THE SEARCH ACTION CARRIED ON 21/07/20 11. THEREFORE, THE DISCLOSURE OF RS. 3,35,36,465- FALLS WITHIN THE MEA NING OF 'UNDISCLOSED INCOME' AS PER THE PROVISIONS OF SECTION 271AAA. 5. TOTAL UNDISCLOSED INCOME DECLARED BY THE ASSESSE E IN HIS RETURN OF INCOME IS RS.3,35,36,465/-. PENALTY IS LEVIABLE AT 10% OF THE UNDISCLOSED INCOME. ACCORDINGLY, A PENALTY OF RS.33 ,53,650/- IS HEREBY LEVIED U/S. 271AAA OF THE I.T. ACT, 1961 ISSUE DEMA ND NOTICE AND CHALLAN ACCORDINGLY. 4. ON APPEAL, THE LD.CIT(A) RE-APPRECIATED THE FACT S AND CIRCUMSTANCES AND OBSERVED THAT THE ASSESSEE HAS FULFILLED CONDIT IONS PROVIDED IN SECTION 271AAA(2), AND THEREFORE, IT CANNOT BE VISITED WITH PENALTY. 5. BEFORE US, THE LD.DR RELIED UPON THE ORDER OF TH E AO AND CONTENDED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE MANNER IN WHICH THIS INCOME WAS EARNED. 6. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE TOOK US THROUGH STATEMENT OF SHRI MOTIBHAI PRAJAPATI RECORDED UNDER SECTION 132(4) WHEREIN IN ANSWER TO QUESTION NO.7 THAT HE ALONG WITH HIS PART NERS OF THE FIRM HAS EARNED COMMISSION INCOME OF RS.8 CRORES FROM SALE OF LAND AT GATRAD LAND ON 2010- 11. BESIDES THAT HE SOLD BUNGALOW NO.14 IN NIMLI C TM, KOKHARA, AHMEDABAD AND EARNED INCOME OF RS.43.00 LAKHS IN TH E YEAR 2010-11. THE ITA NO.915/AHD/2016 5 GROUP HAS ALSO EARNED INCOME FROM THE PROJECTS OF B UILDING CONSTRUCTION FOR RS.7,29,00,000/-. SIMILARLY, INCOME OF RS.24,30,00 ,000/- WAS ALSO EARNED BY THE GROUP CONCERNS FROM THEIR BUSINESS OF REAL ESTA TE. ALL THESE INCOMES WERE DISCLOSED IN THE STATEMENT UNDER SECTION 132(4) AND DECLARED IN THE RETURNS FILED BY GROUP CONCERNS AND IN INDIVIDUAL RETURNS A ND PAID TAX ALONG WITH INTEREST. IT WAS FURTHER SUBMITTED BY THE ASSESSEE BEFORE THE LD.CIT(A) THAT THOUGH THE ASSESSEE HAS DECLARED UNDISCLOSED INCOME OF RS.40 CRORES AT THE TIME OF STATEMENT RECORDED DURING THE COURSE OF SEA RCH, BUT AS PER SEIZED MATERIAL SUCH INCOME WAS RS.32.50 CRORES ONLY. BUT IN ORDER TO BUY PEACE AND TO AVOID LITIGATION, AS ALSO TO HONOUR THE DISC LOSURE MADE AT THE TIME OF SEARCH, THE ASSESSEE OFFERED RS.40 CRORES FOR TAXAT ION, WHICH WAS ACCEPTED BY THE AO WITHOUT ANY ADDITION. IT IS THEREFORE CONTE NDED THAT THE ASSESSEE HAS DISCLOSED COMPLETE DETAILS, AND THEREFORE, IT IS EN TITLED FOR IMMUNITY AVAILABLE UNDER SECTION 271AAA (2) OF THE ACT. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. FOR APPRECIATING THE CONTROVERSY INVOLVED, IT IS INCUMBENT UPON US TO TAKE NOTE OF SECTION 271AAA. THE RELEVANT PART OF THIS SECTION READS AS UNDER: 271AAA. PENALTY WHERE SEARCH HAS BEEN INITIATED.( 1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCL OSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, (I ) IN THE COURSE OF THE SEARCH, IN A S TATEMENT UNDER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ITA NO.915/AHD/2016 6 (II ) SUBSTANTIATES THE MANNER IN WHICH T HE UNDISCLOSED INCOME WAS DERIVED; AND (III ) PAYS THE TAX, TOGETHER WITH INTERES T, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN R ESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). 8. A BARE PERUSAL OF THIS SECTION WOULD INDICATE TH AT SUB-SECTION (1) AUTHORISE THE AO TO LEVY PENALTY AT THE RATE OF 10% OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. SUB-SECTION (2) PR OVIDES CONDITIONS ON WHOSE FULFILLMENT THE ASSESSEE COULD BE ABSOLVED FROM THE LEVY OF PENALTY. A PERUSAL OF SUB-SECTION (2) WOULD INDICATE THAT IT POSTULATE S THREE CONDITIONS FOR AN ASSESSEE ON WHOSE FULFILLMENT HE WILL BE ABSOLVED F ROM LEVY OF PENALTY. IN THE PRESENT CASE, WE HAVE PERUSED THE STATEMENT REC ORDED UNDER SECTION 132(4) OF THE ACT AT THE TIME OF SEARCH. THUS, SO FAR AS FIRST CONDITION IS CONCERNED, THE ASSESSEE SHOULD ADMIT THE UNDISCLOSED INCOME IN A STATEMENT GIVEN UNDER SUB-SECTION (4) OF SECTION 132, THAT CONDITION HAS BEEN FULFILLED THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME OF RS.40 CRORES WHOS E BREAK UP HAS BEEN GIVEN IN THE EXPLANATION GIVEN BEFORE BOTH THE REVE NUE AUTHORITIES. THE ASSESSEE HAS PAID TAXES AS WELL AS INTEREST. THE D ISPUTE BETWEEN THE ASSESSEE AND REVENUE PERTAINED TO CONDITION NO.2 THAT IS WHE THER THE ASSESSEE HAS DISCLOSED MANNER AND SUBSTANTIATE THAT MANNER. ON ACCOUNT OF SEARCH AND SEIZURE OF THE INCRIMINATING MATERIAL, THIS INCOME WAS OFFERED FOR TAXATION. THE MANNER WAS DISCLOSED AS ON-MONEY RECEIVED OUT O F VARIOUS HOUSING PROJECTS CONSTRUCTED BY THE GROUP. APART FROM THIS QUESTION, NO OTHER QUESTION RELATING TO MANNER AND SUBSTANTIATE EARNING OF SUCH INCOME WAS ASKED FROM THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS. SIMILARLY, WE HAVE GONE THROUGH THE ASSESSMENT ORDER. THE AO HAS NOWH ERE ASKED THE ASSESSEE TO DEMONSTRATE THE MANNER OR SUBSTANTIATE THAT MANN ER. THUS, TAKING INTO ITA NO.915/AHD/2016 7 CONSIDERATION FACTS AND CIRCUMSTANCES, WE ARE OF TH E VIEW THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE PENALTY, AND ACCORDINGLY, W E DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 1 ST MARCH, 2018 AT AHMEDABAD. SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER S D - (RAJPAL YADAV) JUDICIAL MEMBER