ACIT, CHENNAI V. M/s. Silver Shoes Private Limited, CHENNAI

ITA 979/CHNY/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51897 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-08-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 18-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BATTI JAGANATHAN SENIOR
• Assessee Lawyers: C V RAJAN
• Keywords: Business income; Search and seizure; Wrong claim
• Section: 271(1)(c); 143(3); 274; 6; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NO. 107 & 979/MDS/2009 (ASSESSMENT YEARS : 1993-94 & 1994-95) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(3), CHENNAI 600 034. (APPELLANT) V. M/S SILVER SHOES PVT. LTD., T-62, ANNA NAGAR, CHENNAI 600 040. PAN : AAFCS3340F (RESPONDENT) APPELLANT BY : SHRI BATTI JAGANATHAN, SENIOR STANDING COUNSEL RESPONDENT BY : SHRI C.V . RAJAN, ADVOCATE DATE OF HEARING : 11.08.2011 DATE OF PRONOUNCEMENT : 12.09.2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER : THE ABOVE CAPTIONED APPEALS FOR ASSESSMENT YEARS 1 993-94 AND 1994-95 ARE BEING DISPOSED OF BY THIS COMMON OR DER AS IDENTICAL ISSUES ARE INVOLVED IN THE CASE OF SAME ASSESSEE. I.T.A. NOS. 107 & 979/MDS/09 2 I.T.A. NO. 107/MDS/2009 (FOR ASSESSMENT YEAR 1993-9 4) 2. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI, DATED 4.6.2008 AND EMANATING FROM THE PENALTY ORDER DATED 31 ST MARCH, 2006 PASSED UNDER SECTION 271(1)(C) OF INCOME-TAX ACT, 1961 (IN SHORT THE AC T). 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING AND SALE OF SHOE UPPERS FOR M/S TATA EXPORTS LIMITED, C HENNAI, BY PURCHASING LEATHER AND CONVERTING THE SAME INTO SHO E UPPERS. IN THIS PROCESS, CERTAIN AMOUNT OF LEATHER REMAINS BEHIND W HICH IS SOLD BY THE ASSESSEE IN THE OPEN MARKET, SEPARATELY. THE D IRECTOR MRS. VIJAYA INBASAGARAN KEEPS THE SALE PROCEEDS IN HER P ERSONAL CUSTODY. A SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF MRS. VIJAYA INBASAGARAN ON 13 TH /14 TH SEPTEMBER, 1993, DURING WHICH CASH AMOUNTING TO ` 29 LAKHS WAS FOUND AND SEIZED FROM THE BED ROOM OF MR. AND MRS. INBASAGARAN. THIS CASH WAS STATED TO BELONG TO MR. INBASAGARAN. CONSEQUENT UPON SEARCH AND SEIZURE OPERATION CONDUCTED AT ASSE SSEES OFFICE PREMISES, CERTAIN INVESTMENTS IN FIXED DEPOSITS AND VALUABLES WERE I.T.A. NOS. 107 & 979/MDS/09 3 ALSO FOUND. MRS. VIJAYA INBASAGARAN, WHO IS THE DI RECTOR OF THE COMPANY, HAS STATED THAT THESE INVESTMENTS BELONGED TO THE COMPANY M/S SILVER SHOES LTD. SHE COULD NOT SUBSTA NTIATE THIS FACT WITH THE HELP OF ANY PROOF, LIKE BOOKS OF ACCOUNTS, INVOICES AND BILLS OF THE COMPANY. THE ASSESSMENT ORDER WAS MADE UNDER S ECTION 143(3) OF THE ACT ON 29.3.96 AT A TOTAL INCOME OF ` 35,12,560/- AFTER TREATING CASH SALES OF ` 28,24,961/- AND SALES MADE TO M/S AVJ MARKETING SERVICES OF ` 6,87,600/-, AS ASSESSEES INCOME. HOWEVER, THE BOOKS OF ACCOUNTS, SEIZED BY THE DEPARTMENT, DI D NOT REVEAL ANY SUCH CASH SALES. THEREFORE, THESE AMOUNTS WERE ADD ED UNDER THE HEAD INCOME FROM OTHER SOURCES AND ASSESSED AS AS SESSEES CONCEALED INCOME. RESULTANTLY, PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE ACT READ WITH SECTION 274 OF THE A CT WAS INITIATED ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS ON INC OME BY MAKING A WRONG CLAIM OF CASH SALES OF ` 28,24,961/-, AND SALE OF LEATHER IN THE OPEN MARKET FOR ` 6,87,600/- TO M/S AVJ MARKETING SERVICES, THUS TOTALING TO ` 35,12,561/- DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1993-94. THESE ADDITIONS WERE ALSO CONFIRMED BY CIT(APPEALS). I.T.A. NOS. 107 & 979/MDS/09 4 4. THE STRAIGHT CASE OF THE ASSESSEE IS THAT THERE WAS AMPLE TIME LEFT FOR FILING OF THE RETURN FOR THE ASSESSMENT YE AR IN QUESTION AS PER LAW. THEREFORE, IT CANNOT BE CONCLUDED THAT BUT FO R THE SEARCH THESE AMOUNT WOULD NOT HAVE BEEN ACTUALLY DECLARED BY THE ASSESSEE- COMPANY. THE A.O. SIMPLY HAS REJECTED THIS EXPLANA TION AND HAS LEVIED A MINIMUM LEVY OF ` 20,19,722/- UNDER SECTION 271(1)(C) OF THE ACT. AGAINST THIS PENALTY, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(APPEALS), WHO HAS FOUND THAT NO PENALTY CAN BE LEVIED IN THIS CASE AND HENCE HE HAS DELETED THE ENTIRE PENALTY AM OUNT. NOW, THE REVENUE IS AGGRIEVED AND HAS PREFERRED APPEAL BEFOR E US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE CAREFUL LY PERUSED THE ENTIRE RECORDS. IT IS A FACT THAT ASSESSEE HAD CLA IMED BROUGHT FORWARD LOSS WHICH WAS SET OFF AGAINST BUSINESS INCOME. TH E A.O. HAS ASSESSED THIS INCOME UNDER THE HEAD INCOME FROM OT HER SOURCES. THE ASSESSEE HAD FILED RETURN OF ITS INCOME BEFORE DUE DATE, AND INCOME OFFERED BY THE ASSESSEE HAS BEEN ACCEPTED, B UT UNDER A DIFFERENT HEAD OF INCOME. THE ASSESSEE DID NOT PUR SUE THE QUANTUM APPEAL BEYOND CIT(APPEALS)S LEVEL DESPITE THE FACT THAT I.T.A. NOS. 107 & 979/MDS/09 5 CIT(APPEALS) HAD NOT GIVEN ANY RELIEF TO THE ASSESS EE. THE DEPARTMENT HAS RELIED ON EXPLANATION 5 APPENDED TO SECTION 271(1)(C) OF THE ACT. IT WAS NOTICED THAT THE ASSE SSMENT IN THIS CASE WAS MADE ON PROTECTIVE BASIS AND SUBSTANTIVE ADDITI ON HAS BEEN MADE IN THE ASSESSEES HUSBANDS HANDS. PENALTY HA S BEEN LEVIED ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS WITH REFERENCE TO CASH SALES OF EXCESS LEATHER. UNDISPUTEDLY, THE A. O. HAS ACCEPTED WHATEVER HAS BEEN OFFERED AS INCOME BY THE ASSESSEE IN THE RETURN UNDER ONE HEAD AND THE A.O. HAS ASSESSED THE SAME U NDER A DIFFERENT HEAD. THUS, IT CANNOT BE A CASE OF EITHE R CONCEALMENT OF INCOME OR OF FURNISHING OF INACCURATE PARTICULARS O F INCOME. THE APPROPRIATE HEAD UNDER WHICH THE DISCLOSED INCOME H AS TO BE ASSESSED, WOULD NOT LEAD TO LEVY OF A PENALTY UNDER SECTION 271(1)(C) OF THE ACT. EXPLANATION 5 APPENDED TO SECTION 271( 1)(C) OF THE ACT, PRESCRIBES THE CIRCUMSTANCES IN WHICH THE ASSESSEE CANNOT BE TAKEN AS HAVING CONCEALED INCOME, EVEN IF DURING SEARCH, HE MADE A STATEMENT, UNDER SECTION 132(4) THAT ANY MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING IF FOUND IN HIS POS SESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH H AS NOT BEEN I.T.A. NOS. 107 & 979/MDS/09 6 DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURN ISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECT ION 139 AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS DUE TAX THEREON TOGETHER WITH INTE REST. IN THE RETURN OF INCOME FILED DISCLOSING UNDISCLOSED INCOME THAT TOO WITHIN TIME AS SPECIFIED UNDER SECTION 139 OF THE ACT AND WHICH TH E A.O. HAS ACCEPTED, THE QUANTUM OF SUCH INCOME OFFERED TO TAX FOR THE PERIOD UNDER CONSIDERATION. ON IDENTICAL FACTS, THE HON'B LE MADRAS HIGH COURT HAS TAKEN A VIEW THAT NO PENALTY CAN BE LEVIE D WHILE DECIDING THE CASE OF CIT V. S.D.V. CHANDRU REPORTED IN 266 I TR 175, HOLDING THUS :- IN CASES WHERE AN ASSESSEE HAD NOT DISCLOSED HIS IN COME IN THE RETURNS FILED FOR THE PREVIOUS YEAR WHICH HAD ENDED PRIOR TO THE DATE OF SEARCH AND, IN THE STATEMENT GIVEN UNDER SE CTION 132(4) THE ASSESSEE ADMITS THE RECEIPT OF UNDISCLOSED INCO ME FOR THOSE YEARS AND ALSO SPECIFIES THE MANNER IN WHICH SUCH IN COME HAD BEEN DERIVED, AND THEREAFTER PAYS THE TAX ON THAT UN DISCLOSED INCOME WITH INTEREST, SUCH UNDISCLOSED INCOME WOULD GET IMMUNIZED FROM THE LEVY OF PENALTY. IN VIEW OF THE ABOVE DECISION, WHICH HAS A BINDING EFFECT, WE DO NOT FIND ANY REASON TO IMPOSE A PENALTY ON THIS ASSESSE E, UNDER IDENTICAL FACTS DISCUSSED ABOVE, UNDER SECTION 271(1)(C) OF T HE ACT. THE I.T.A. NOS. 107 & 979/MDS/09 7 PENALTY, THEREFORE, HAS BEEN RIGHTLY DELETED. HENC E WE CONFIRM THE ORDER OF CIT(APPEALS). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE F OR ASSESSMENT YEAR 1993-94 STANDS DISMISSED. I.T.A. NO. 979/MDS/2009 (FOR ASSESSMENT YEAR 1994-9 5) 7. THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YEAR 1994-95, IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)-IX, CHENNAI, DATED 6.11.2008. 8. THE ASSESSEE FILED A RETURN OF INCOME DECLARING NET PROFIT OF ` 18,24,542/-. IT HAS ALSO DECLARED UNACCOUNTED CASH SALES BY TREATING IT AS INCOME FROM BUSINESS. THE A.O. HAS ACCEPTE D THE QUANTUM OF INCOME OFFERED, BUT HAS TREATED THE UNACCOUNTED SAL ES AS INCOME FROM OTHER SOURCES. TO PUT IT IN SIMPLE WORDS, T HE SAME INCOME OFFERED UNDER THE HEAD INCOME FROM BUSINESS HAS B EEN ACCEPTED UNDER ANOTHER HEAD OF INCOME, VIZ. INCOME FROM OTH ER SOURCES. 9. THE CIT(APPEALS) HAS ALSO GIVEN A FINDING THAT T HE APPELLANT HAD NOT PROVED THE AMOUNT WHICH WAS DECLARED AS INC OME FROM SALES I.T.A. NOS. 107 & 979/MDS/09 8 OF LEATHER. THE A.O. HAS NOT ADDED ANY INCOME TO R ETURNED INCOME. IT WAS FOUND THAT THE ASSESSEE HAD DECLARED INCOME SUO MOTO AND ASSESSMENT WAS COMPLETED. THERE IS NO ADDITION IN THE RETURNED INCOME. SO, CONCEALMENT OF INCOME ATTRACTING THE P ROVISIONS OF SECTION 271(1)(C) OF THE ACT WAS FOUND TO BE NOT PO SSIBLE. 10. THE FACTS, CIRCUMSTANCES, REASONING AND ARGUMEN TS OF THE PARTIES IN THIS YEAR ARE SIMILAR TO THE YEAR 1993-9 4, WHICH WE HAVE DECIDED HEREINABOVE. THEREFORE, WITH SIMILAR AND I DENTICAL REASONINGS, WE CONFIRM THE DELETION OF PENALTY IMPO SED UNDER SECTION 271(1)(C) OF THE ACT AND DISMISS THIS APPEAL OF REV ENUE, AS WELL. 11. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE S TAND DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 12 TH SEPTEMBER, 2011. SD/- SD/- (DR. O.K. NARAYANAN) (HARI OM MARATHA) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 12 TH SEPTEMBER, 2011. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-V, CHENNAI-34 / CIT(A)-IX, CHENNAI-34/CIT, CHENNAI-III, CHENNAI/ D.R./GUARD FILE