DCIT, CHENNAI V. D.Selvaraj, CHENNAI

ITA 957/CHNY/2010

• Counselvise Citation: 95721714 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Agreed addition
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 957/MDS/2010 (ASSESSMENT YEAR : 2006-07 ) THE DY. CIT CENTRAL CIRCLE IV(1) CHENNAI VS SHRI D.SELVARAJ 2, SRINIVASA NAGAR MAIN ROAD KOLATHUR CHENNAI 99 [PAN ADEPS4523P ] (APPELLANT) (RESPONDENT) APPELLANT BY : DR.I.VIJAYAKUMAR, CIT/DR RESPONDENT BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 05-10-2011 DATE OF PRONOUNCEMENT : 13-10-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YE AR 2006-07, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 22.2.2010. THIS APPEAL HAS BEEN FILED AGAINST THE DELETION OF PENAL TY IMPOSED ON THE ASSESSEE VIDE ORDER DATED 30.5.2008 PASSED U/S 271( 1)(C) OF THE ACT. ITA 957/10 :- 2 -: 2. THE FACTS LEADING TO THE LEVY OF PENALTY ARE THAT A SEARCH U/S 132 OF THE ACT WAS CONDUCTED IN THE CASE OF THI S ASSESSEE ON 23.11.2005. THE ASSESSEE FILED HIS RETURN OF INCOM E FOR ASSESSMENT YEAR 2006-07 ON 11.5.2007 AND ORDER U/S 143(3) WAS PASSED WHEREIN AN ADDITION OF UNDISCLOSED LOANS OF ` 14,05,000/- WAS MADE AND ON THAT ACCOUNT PENALTY PROCEEDINGS U/S 271(1)(C) OF T HE ACT WAS INITIATED. ORDER LEVYING PENALTY OF ` 4,45,997/- WAS PASSED WHICH WAS CHALLENGED BEFORE THE LD. CIT(A), WHO HAS DELETED T HIS PENALTY. NOW THE REVENUE IS AGGRIEVED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE CAREFULLY GONE THROUGH THE RECORDS. DURING THE COU RSE OF SEARCH, A LOOSE SHEET CONTAINING NAMES AND AMOUNTS TOTALING T O ` 14,05,000/- WAS FOUND AND SEIZED VIDE ANN/JL/LS/S-76. A STATEM ENT OF THE ASSESSEE WAS RECORDED AND THIS SEIZED DOCUMENT WAS PUT TO HIM. THE ASSESSEE EXPLAINED THE ENTRIES IN THE LOOSE SHEET S TATING THAT THIS LOOSE SHEET IS IN THE HANDWRITING OF HIS SON AND IT CONTA INS FOLLOWING DETAILS: 1. M.A. 2,50, 000 THIS REFERS TO SH. VYAPURI ALSO KNOWN AS M.A RICE MERCHANT AT ARCOT. THIS SUM OF ` 2.5IAKHS WAS OUTSTANDING ON ACCOUNT OF CREDIT PURCHASE MADE AT V ARIOUS POINTS OF TIME. THE BALANCE OUTSTANDING IS ` 1.4 LAKHS. 2. AMAR ` 1,65,000 THIS REFERS TO AMAR JOTHI, MILAGAI MANDI AT PARRYS. THE BALANCE OUTSTANDING AS ON DATE IS AROUN D 80,000 TO 90,000. THIS IS ON ACCOUNT VARIOUS CREDIT PURCHA SE AT VARIOUS POINT OF TIME. ITA 957/10 :- 3 -: 3. GOMATHY ` 65, 000 THIS REFERS TO GINGELY OIL BRAND NAME AT ERODE. THE CREDIT PURCHASES MADE TILL DATE 75, 000. 4. CADD ` 1,20,000 THIS REFERS TO TOORDALL SUPPLIER, M/S SPK DALL MILLS OF WASHERMANPET, THEIR BRAND NAME IS CADIT. THE BALANCE OUTSTANDING IS ABOUT ` 1 IAKH. 5. VENKATESH ` 80,000 THIS REFERS TO VENTAKESWARA BUTTER SUPPLIED FROM KUNNRATHUR, NEAR ERODE. BALANCE AS ON DATE IS ` 75,000. 6. DGP ` 25,000 THIS REFERS TO DG PERUMAL RICE MANDY, TAMBARAM. THE BALACE OUTSTANDING IS ` 1 LAKH AS ON DATE. 7. CARRY BAGS ` 25, 000 THIS REFERS TO KKR, SIVAKASI. BALANCE OUTSTANDING ` 8, 000 AS ON DATE. 8. COVER ` 40, 000 THIS REFERS TO SAPTHAGIRE, SIVAKASI. THE BALANCE OUTSTANDING ` 40, 000. 9. CHILLARAI ` 1 LAKH THIS REFERS TO THE SALARY PAYMENTS MADE FROM TIME TO TIME TO THE EMPLOYEES. 10. ON THE REVERSE: 1. ANDAL ` 50, 000 THIS IS THE SUM GIVEN AS LOAN BY ANDAL MY WIFE'S RELATIVE. THIS IS OUTSTANDING AS ON DATE. 2. RAMDASS 1 LAKH MR. RAMDOSS IS MY WIFE SMT. PADMAVATHY'S BROTHER. HE HAS GIVEN ` 1 LAKH AS LOAN. THIS IS OUTSTANDING AS ON DATE. 3. RAMAKRISHNAN ` 2 LAKHS THIS REFERS TO MR. RAMAKRISHNAN OF PERAMBUR, THIS SUM HAS PAID LATE BY ME. 4. BOOBATHY ` 1.5 LAKHS. HE IS ONE OF THE SHOPKEEPERS IN THE COMPLEX. THIS SUM IS STILL OUTSTANDING. HE HAS GIVE N THIS SUM OVER A PERIOD TO US FOR SAFE KEEPING. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WITH REFERENCE TO BOOKS OF ACCOUNT AND CASH FLOW STATEME NTS ALONGWITH FUND FLOW STATEMENTS, THE ASSESSING OFFICER WANTED TO EXAMINE THIS LOOSE SHEET. BUT THE ASSESSEE WAS UNABLE TO PRODU CE THESE ITA 957/10 :- 4 -: DOCUMENTS ON THE REASONING THAT THESE WERE NOT MAIN TAINED BY HIM. CONSEQUENTLY, THE ASSESSING OFFICER TREATED THIS EN TIRE SUM OF ` 14,05,000/- AS UNEXPLAINED. THE ASSESSEE ALSO AGRE ED FOR THIS ADDITION WHEN A SHOW CAUSE LETTER PROPOSING THE SAM E WAS MADE TO HIM. THE REASON FOR AGREEING WITH THE PROPOSAL OF THE ASSESSING OFFICER HAS BEEN STATED TO BE AS FOR PURCHASE PEAC E WITH THE DEPARTMENT. DURING PENALTY PROCEEDINGS, THE ASSES SEE STRONGLY OBJECTED TO THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AND MADE THE FOLLOWING SUBMISSION: 'ADDITION OF 14.05 LAKHS: THIS REPRESENTS THE AMOUNT INDICATED IN THE SMALL PAPER IN THE HANDWRITING OF MY SON. OUT OF ` 14.05 LAKHS, A SUM OF ` 9. 05 LAKHS REPRESENTS THE AMOUNT OUTSTANDING FOR PURCHASE NOTED IN A PIECE OF PAPER FOR INFORMATION, WHICH WAS SETTLED IN THE NOR MAL COURSE OF BUSINESS. ONLY A PIECE OF PAPER IS REMAIN ING. THEREFORE IT WILL NOT REPRESENT UNDISCLOSED LOAN AN D AS INCOME FROM THE GROCERY BUSINESS HAS BEEN ASSESSED, THIS WILL AMOUNT TO DOUBLE ADDITION. HOWEVER, AS IT WAS DIFFICULT TO SEARCH OUT FOR A SMALL SCALE SUPPLIER AFTER A PERIOD OF 3 OR 4 YEARS, I HAD DECIDED TO ACCEPT THE ADDITION. IN THE CIRCUMSTANCES LEVY OF P ENALTY IS NOT WARRANTED. THE BALANCE OF ` 5 LAKHS REPRESENTS LOAN GIVEN TO VARIOUS RELATIVES. I HAVE OFFERED AND ASSESSED TO TAX A SUM OF ` 43.72 LAKHS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 03-04 AND ` 2. 84 LAKHS IN THE CURRENT YEAR. I HAVE BEEN EARNING INCOME IN THE EARLIER YEAR IN MY BUSINESS. IN THE CIRCUMSTANCES, I HAVE SUFF I CIENT RESOURCES TO MAKE THIS LOAN AND THE ADDIT I ON HAS BEE N ACCEPTED J ONLY TO BUY PEACE AND TO AVOID PROTRACTED LITIGATION . IN THE CIRCUMSTANCES PE N ALTY I S N OT L EVIABLE ON THIS ADDITION . ' ITA 957/10 :- 5 -: 5. THE ASSESSING OFFICER [ACIT, CENTRAL CIRCLE IV(1)] WAS NOT AGREEABLE AND DID NOT TREAT THE EXPLANATION OF THE ASSESSEE AS SATISFACTORY AND TAKING THE CLUE FROM THE FACT THAT THE ASSESSEE HAS AGREED FOR THE ABOVE, HE FOUND IT A FIT CASE FOR LE VY OF PENALTY U/S 271(1)(C) OF THE ACT AND LEVIED A MINIMUM PENALTY O F ` 4,45,997/-. BEFORE THE LD. CIT(A), SIMILAR STAND WAS TAKEN BY T HE ASSESSEE AND AFTER CONSIDERING THE ENTIRE GAMUT OF FACTS, HE HAS FOUND THAT NO CASE OF EITHER CONCEALMENT OF INCOME OR OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS SINE QUA NON FOR LEV Y OF PENALTY U/S 271(1)(C) OF THE ACT, IS MADE OUT, HENCE, HE HAS DE LETED THE ENTIRE PENALTY. WE HAVE FOUND TRUTH IN THE SUBMISSION OF THE LD.AR WHEN HE STATED THAT THE ENTRIES IN THE SEIZED MATERIAL DO N OT REPRESENT ANY INCOME OF THE ASSESSEE. WE HAVE TESTED THIS CONTEN TION OF THE LD.AR FROM THE REPLY OF THE ASSESSEE GIVEN REGARDING THE LOOSE SHEET WHICH HAS BEEN EXTRACTED IN THE ABOVE PORTION OF THE ORDE R. A CONTEXTUAL READING MAKES IT CLEAR THAT THE ASSESSEE HAD TRIED TO EXPLAIN ALL THE ENTRIES FOUND RECORDED IN THIS LOOSE SHEET. MICRO SCOPIC READING OF THE REPLY OF THE ASSESSEE JUSTIFIES THE CLAIM OF THE AS SESSEE. THE ASSESSEE HAD STATED THAT THE AMOUNTS REFERRED TO IN THE SEIZ ED MATERIAL DO NOT REFER TO ANY INCOME HAVING ARISEN TO THE ASSESSEE D URING THE RELEVANT YEAR BUT IT IS A FACT THAT THE ASSESSEE HAD AGREED FOR THIS ADDITION AND ITA 957/10 :- 6 -: THAT TOO WITH THE SPECIFIC INTENTION THAT HE DID NO T WANT TO INVOLVE HIMSELF IN PROTRACTED LITIGATION AND WANTS TO BUY P EACE WITH THE DEPARTMENT. THE ASSESSING OFFICER HAS NOT FOUND TH E STATEMENT OF THE ASSESSEE TO BE FALSE BUT HE HAS SIMPLY JUMPED THE G UN BY INFERRING EXISTENCE OF INGREDIENTS CONSTITUTING THE LEVY OF P ENALTY U/S 271(1)(C) OF THE ACT ONLY BECAUSE THE SE HAS AGREED FOR THIS ADDITION. IN OUR CONSIDERED OPINION, ONLY AGREEMENT FOR ADDITION OF ANY INCOME TO BUY PEACE WITH THE DEPARTMENT, SHOULD NOT BE TAKEN AS C ONCEALMENT AS HAS BEEN ENVISAGED IN THE SECTION. IN ANY CASE, I T IS ONLY A DEEMED ADDITION WHICH IS NOT FORTIFIED WITH ANY CONCRETE E VIDENCE BECAUSE THE ENTRIES WHEN EXPLAINED BY THE ASSESSEE DURING SEARC H DO NOT PROVE THAT THE ASSESSEE HAS EARNED SUCH AN INCOME DURING THE YEAR AND THE SAME WAS NOT DISCLOSED. THE ENTRIES IN THE SEIZED MATERIAL REFER TO ASSESSEES NORMAL BUSINESS TRANSACTION AND LOANS TA KEN OVER A PERIOD OF TIME AND NOT ANY UNDISCLOSED LOANS GIVEN BY THE ASSESSEE DURING THE RELEVANT PERIOD. THE AGREED ADDITION PER SE WO ULD NOT LEAD TO LEVY OF PENALTY UNLESS THE INGREDIENTS OF SECTION 271(1) (C) OF THE ACT ARE NOT SATISFIED. THE ASSESSING OFFICER HAS NOT INVOK ED EXPLANATION OF SECTION 271(1)(C) OF THE ACT IN THIS CASE. AS NO U NDISCLOSED INCOME WAS FOUND FROM HIS POSSESSION FROM WHICH IT COULD B E PRESUMED THAT THE ASSESSEE HAS EARNED INCOME DURING THE RELEVANT PERIOD. THE ITA 957/10 :- 7 -: ASSESSEE HAS NOT GIVEN ANY LOANS BUT HAS TAKEN LOAN S AND TAKING LOANS WOULD NOT AMOUNT TO CONCEALMENT OF INCOME. THE SEI ZED MATERIAL AS ENTRIES TOTALING TO ` 9,05,000/- ON ONE SIDE AND ENTRIES TOTALING TO ` 5 LAKHS ON THE OTHER SIDE AS UNDER: ` M.A 2,50,000 AMAR 1,65,000 GOMATHY 65,000 CADD 1,20,000 VENKATESH 80,000 DGP 60,000 CARRYBAG 25,000 COVER 40,000 CHILLARAI 1,00,000 TOTAL 9,05,000 ANDAL 50,000 RAMDOSS 1,00,000 RAMAKRISHNA 2,00,000 BOOPATHY 1,50,000 TOTAL 5,00,000 6. THE ASSESSEE HAS EXPLAINED EACH AND EVERY ENTRY REL ATING TO HIS NORMAL BUSINESS TRANSACTION DURING SEARCH IT SELF. WHEN SEIZED MATERIAL AND ASSESSMENT ORDER ARE TALLIED, IT BECOM ES CRYSTAL CLEAR THAT THIS ADDITION IS BASED ONLY ON THE ADMISSION OF THE ASSESSEE. THE CASE OF THE REVENUE IS ALSO THAT SINCE THE ASSESSEE HAD AGREED FOR THIS ADDITION, PENALTY IS LEVIABLE. BUT DEHORS ADMISSION OF THE ASSESSEE THERE IS NO EVIDENCE TO SUBSTANTIATE THE INGREDIENT S ON THE BASIS OF ITA 957/10 :- 8 -: WHICH PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIE D. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE APPELLATE ORDER AN D CONFIRM THE SAME. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 13-10-2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 13 TH OCTOBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR