S.Jayaram, CHENNAI V. DCIT, CHENNAI

ITSSA 1/CHNY/2013

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8767 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 08-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Gift; Income from undisclosed sources; Block assessment; Reason to believe

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER IT(SS)A NO.1(MDS)/2013 BLOCK PERIOD : 1-4-1996 TO 17-7-2002 SHRI S.JAYARAM, 9A, N.N.LAKSHMI STREET, VALASARAVAKKAM, CHENNAI-600 087. PAN AFAPS5678H. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE II(1), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRI SHNAN, FCA RESPONDENT BY : SHRI S.DAS GUPTA, IRS, JCIT DATE OF HEARING : 20 TH MARCH, 2013 DATE OF PRONOUNCEMENT : 20 TH MARCH, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE PENALTY LEVIED UNDER SECTION 158BFA(2) OF THE INCOM E-TAX ACT, 1961. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II AT CHENNAI, DATED - - IT(SS)A NO.1 OF 2013 2 30-10-2012, DISMISSING THE FIRST APPEAL FILED BY TH E ASSESSEE AGAINST THE LEVY OF PENALTY OF ` 10,05,709/-. 2. THE ASSESSEE IS A FILM STAR. THERE WAS A SEARC H ACTION ON 17-7-2002. IN THE LIGHT OF THE MATERIAL COLLECTED IN THE COURSE OF THE SEARCH, NOTICE UNDER SECTION 158BC WA S ISSUED TO THE ASSESSEE. THE ASSESSEE FILED HIS BLOCK RETURN ON A TOTAL UNDISCLOSED INCOME OF ` 80,75,843/-. THE ASSESSMENT WAS COMPLETED ON AN UNDISCLOSED INCOME OF ` 1,35,00,995/-. THE ADDITION MADE IN THE ASSESSMENT WAS ` 54,25,152/-. THE ASSESSMENT WAS TAKEN IN FIRST APPEAL. THE COMMISSI ONER OF INCOME-TAX(APPEALS) HAS GIVEN RELIEFS ON DIFFERENT COUNTS. HE GAVE A RELIEF OF ` 38,28,788/- AND MODIFIED THE ADDITIONAL INCOME TO ` 15,96,364/-. THUS, THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS CONFIRMED AN ADDITION OF ` 15,96,364/- TO THE RETURNED INCOME OF ` 80,75,843/-. THE TOTAL UNDISCLOSED INCOME AS DETERMINED BY THE COMMISSIONER OF INCOME-TAX(APP EALS) WORKS OUT TO ` 96,72,207/-. THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) WAS AGAIN TAKEN IN SECOND APPEA L BEFORE - - IT(SS)A NO.1 OF 2013 3 THE TRIBUNAL. THE TRIBUNAL CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). 3. CONSEQUENT TO THIS, THE ASSESSING OFFICER PROCEEDED TO FINALISE HIS EARLIER PROPOSAL OF LEVYI NG PENALTY UNDER SECTION 158BFA(2). HE HELD THAT THE ADDITIONAL INC OME CONFIRMED BY THE TRIBUNAL IS ` 15,96,364/- AND THE ASSESSEE IS LIABLE FOR PENALTY ON THAT ADDITIONAL INCOME. THUS HE PASSED AN ORDER LEVYING A PENALTY OF ` 10,05,709/-. 4. WE HEARD SHRI B.RAMAKRISHNAN, THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI S.DAS GUPTA, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE. 5. THE ADDITIONAL INCOME SUSTAINED IN THE PRESENT CASE IS ` 15,96,364/-. THE DETAILS OF THE ABOVE ADDITIONAL AMOUNT ARE AS FOLLOWS:- 1. INVESTMENT IN HOUSE PROPERTY AT NN LAKSHMI ST.,VALASARAVAKKAM,CHENNAI ` 2,20,510/- - - IT(SS)A NO.1 OF 2013 4 2. INVESTMENT IN GOLD ` 7,02,084/- 3. INVESTMENT IN FLAT AT SALIGRAMAM ` 89,150/- 4. INVESTMENT IN CHIT ` 5,84,620/- ----------------- ` 15,96,364/- ---------------- 6. IN THE MATTER OF INVESTMENT IN HOUSE PROPERTY A T VALASARAVAKKAM, THE ASSESSEE HAD SHOWN AN UNDISCLOS ED INCOME OF ` 53,54,541/-. THE UNDISCLOSED INCOME CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) UNDER THIS HEAD IS ` 55,75,051/-. THAT IS HOW THE DIFFERENTIAL AMOUNT HAS COME TO ` 2,20,510/-. EVEN THOUGH THIS DIFFERENTIAL AMOUNT HAS BEEN TREATED AS ADDITIONAL TAXABLE INCOME IN THE HANDS O F THE ASSESSEE, IT IS NOT POSSIBLE TO HOLD A VIEW THAT TH IS DIFFERENTIAL AMOUNT CONTRIBUTES TO ANY WITHHOLDING OF INCOME OR INFORMATION BY THE ASSESSEE. THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN THE CONSTRUCTION OF THE HOUSE PROPERTY WAS WORKED O UT ON THE BASIS OF THE INFORMATION COLLECTED FROM DIFFERENT P IECES OF PAPER. THE ACCOUNT OF THE INVESTMENT WAS NOT PROPERLY ARRA NGED. WHEN THE TOTAL INVESTMENT HAS BEEN COMPUTED IN BITS AND PIECES, IT IS - - IT(SS)A NO.1 OF 2013 5 QUITE NATURAL THAT THERE WOULD BE CERTAIN AMOUNTS W HICH ARE ADDED TO BY THE REVENUE FOR WANT OF SATISFACTORY EX PLANATION FROM THE ASSESSEE. TO THAT EXTENT, THERE WAS AN ELE MENT OF ESTIMATION. THEREFORE, THIS DIFFERENTIAL AMOUNT OF ` 2,20,510/- DOES NOT PARTAKE THE CHARACTER OF INCOME WITHHELD B Y THE ASSESSEE FROM THE BLOCK RETURN. 7. IN RESPECT OF THE INVESTMENT IN GOLD, THE ASSES SEE HAS NOT DISCLOSED ANY AMOUNT, BUT THE SAME WAS ESTI MATED BY THE AUTHORITIES AT ` 7,02,084/-. IT WAS THE CONTENTION OF THE ASSESSEE THAT HE HIMSELF BEING A FILM STAR AND HIS SON ALSO HAS ACTED IN CERTAIN FILMS; THEY HAD RECEIVED A NUMBER OF GIFTS FROM PUBLIC AND ADMIRERS, WHICH ALSO INCLUDED GOLD COINS . ACCORDING TO THE ASSESSEE, NO INVESTMENT WAS MADE BY HIM IN A CQUIRING THE GOLD COINS, BUT THEY WERE GIFTED BY THE PUBLIC IN APPRECIATION OF THE CONTRIBUTION MADE TO THE MEDIA. IT IS TO BE SEEN THAT THE ASSESSING OFFICER HIMSELF HAS ALLOWED A DEDUCTION I N THIS REGARD. THE EXPLANATION OFFERED BY THE ASSESSEE IS A PLAUSI BLE ONE. THERE IS NO CASE THAT ALL THE GOLD COINS HAVE BEEN ACCUMULATED AT A PARTICULAR POINT OF TIME. THEY HAVE COME INTO THE - - IT(SS)A NO.1 OF 2013 6 POSSESSION OF THE ASSESSEE OVER A LONG PERIOD OF YE ARS. THEREFORE, THE VALUE IS ALSO ESTIMATED. SUCH ESTIM ATION ALSO CANNOT BE TREATED AS A CLEAR CASE OF WITHHOLDING IN FORMATION FROM THE RETURN FILED BY THE ASSESSEE. 8. THE NEXT IS THE ADDITION OF ` 89,150/-, WHICH RELATED TO THE REGISTRATION CHARGES OF THE FLAT PURCHASED B Y THE ASSESSEE AT SALIGRAMAM. THE ASSESSEE HAS ALREADY SHOWN THE INVESTMENT IN FLAT AND IT IS BROUGHT TO THE KNOWLED GE OF THE DEPARTMENT. A PORTION OF THE EXPENDITURE WAS NOT D ISCLOSED OR PROPERLY EXPLAINED. WHEN THE PROPERTY ITSELF IS DI SCLOSED, IT IS VERY DIFFICULT TO HOLD A VIEW THAT THE PERIPHERAL E XPENSES INCURRED IN ACQUIRING THE ASSET WAS NOT DISCLOSED, IN LAW. WHEN A PROPERTY IS PURCHASED, THE INCIDENTAL EXPENSES ARE INHERENT AND THEY MIGHT HAVE BEEN ACCIDENTALLY OMITTED FROM THE SIGHT OF THE ASSESSEE, WHICH CANNOT BE TREATED AS A CASE OF NOT FULLY DISCLOSING THE UNACCOUNTED INCOME. 9. THIS IS THE CASE IN RESPECT OF INVESTMENT IN CH IT FUND ALSO. THE AMOUNT STANDING TO THE CREDIT OF THE ASS ESSEE IS NOT - - IT(SS)A NO.1 OF 2013 7 MADE UP BY ONE DAY. THE ASSESSEE WAS SUBSCRIBING T O THE CHIT FUND FOR A NUMBER OF YEARS AND HE WAS GIVING THE IN STALMENTS ON A MONTHLY BASIS, FOR WHICH HE HAS NOT MAINTAINED SE PARATE ACCOUNT OTHER THAN THE PASSBOOK ISSUED BY THE CHIT FUND COMPANY. THE ASSESSEE HAD EVERY REASON TO BELIEVE THAT THE TOTAL UNDISCLOSED INCOME OF ` 80,75,843/- OFFERED BY HIM AT THE TIME OF SEARCH WOULD TAKE CARE OF THIS TYPE OF INVE STMENT. IT IS TO BE SEEN THAT AT THE TIME OF SEARCH ITSELF THE ASSES SEE HAD COME FORWARD TO OFFER AN UNDISCLOSED INCOME OF ` 80,75,843/-. THEREFORE, WE CANNOT HOLD A VIEW THAT THE ASSESSEE HAS NOT FULLY DISCLOSED THE AFFAIRS OF HIS INCOME WITH REFERENCE TO THE INVESTMENT IN CHIT FUND. 10. ON A DETAILED EXAMINATION OF EVERY COMPONENT, WHICH MADE UP THE TOTAL ADDITIONAL INCOME, WE FIND THAT THEY ARE NOT IN THE NATURE OF ANY SPECIFIC INCOME EXCLUDED A S SUCH BY THE ASSESSEE FROM THE BLOCK RETURN FILED BEFORE THE AUT HORITIES. THAT ADDITIONAL INCOME HAS BEEN WORKED OUT MAINLY ON THE BASIS OF ESTIMATION, ACCIDENTAL OMISSION AND ALSO NOT ACCEPT ING THE EXPLANATION. IT IS TO BE SEEN THAT THE TOTAL UNDIS CLOSED INCOME - - IT(SS)A NO.1 OF 2013 8 MODIFIED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AND CONFIRMED BY THE TRIBUNAL IS ` 96,72,207/- AS AGAINST THE UNDISCLOSED INCOME CONCEDED BY THE ASSESSEE AT ` 80,75,843/-. THE ABOVE FIGURES SHOW THAT THE ASSESSEE HAS COME F ORWARD TO MAKE A VERY FAIR DISCLOSURE OF HIS UNDISCLOSED INCO ME WITH A BONA FIDE HOPE THAT THE DISCLOSURE WOULD COVER ALMO ST THE ENTIRE UNDISCLOSED INCOME IMPUTABLE TO HIM. 11. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE DO NOT FIND THAT THERE IS ANY REASON TO LE VY A PENALTY UNDER SECTION 158BFA(2) OF THE ACT. THE IMPOSITION OF PENALTY IN A BLOCK ASSESSMENT IS NOT MANDATORY. PENALTY IS TO BE IMPOSED ONLY AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTAN CES OF EACH CASE. IF THE PENALTY IS AUTOMATIC, THEN IT LOSES T HE CHARACTER OF PENALTY ITSELF. NO PENALTY IN THAT WAY IS AUTOMATI C. THE CIRCUMSTANCE UNDER WHICH AN ASSESSEE CARRIED ON HIS CONDUCT, IS AN IMPORTANT ASPECT TO BE LOOKED INTO BEFORE DECIDI NG WHETHER PENALTY IS TO BE IMPOSED OR NOT. - - IT(SS)A NO.1 OF 2013 9 12. FURTHER, THE STATUTE ITSELF PROVIDES CERTAIN CIRCUMSTANCES IN WHICH PENALTY CANNOT BE LEVIED, AS STATED IN THE PROVISO TO SECTION 158BFA(2) OF THE ACT. THE PROVI SO READS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RESPECT OF A PERSON IF SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE(A) OF SECTION 158BC; THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEEN PAID; EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN. 13. IN THE PRESENT CASE, THE ASSESSEE HAS FILED A RETURN UNDER SECTION 158BC; HAS PAID TAX THEREON; HAS FURN ISHED EVIDENCE FOR PAYMENT OF TAX AND ALSO STOOD BY THE I NCOME DISCLOSED BY HIM IN THE RETURN. THE APPEAL WAS FIL ED NOT AGAINST THE INCOME RETURNED BY THE ASSESSEE, BUT AGAINST TH E ADDITION MADE BY THE ASSESSING OFFICER. THEREFORE, IT IS TO BE SEEN THAT THE ASSESSEE HAS SATISFIED ALL THE FOUR CONDITIONS STATED IN THE PROVISO TO SECTION 158BFA(2). THEREFORE, ON THE ST RENGTH OF THE STATUTORY EXCEPTIONS ITSELF, THERE IS NO REASON TO LEVY PENALTY IN THE PRESENT CASE. - - IT(SS)A NO.1 OF 2013 10 14. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE PENALTY OF ` 10,05,709/- LEVIED UNDER SECTION 158BFA(2) OF THE INCOME-TAX ACT, 1961. 15. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON WEDNESDAY, THE 20 TH OF MARCH, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 20 TH MARCH, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.