ACIT CEN CIR 8, MUMBAI V. CAMBATA VIATION P. LTD, MUMBAI

ITSSA 1/MUM/2012

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9479 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-09-2013
• Assessment Year: misc
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S D SRIVASTAVA J K
• Keywords: Search and seizure; Principle of natural justice
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , / !' , # $ % BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER IT(SS)A NO.01/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) THE ACIT, CEN. CIR.8, ROOM NO.260A, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 / VS. M/S.CAMBATA AVIATION PVT. LTD., HANGER NO.3, JUHU AERODROME, MUMBAI 400054 D # ./ EF ./ PAN/GIR NO. : AAACC 6450B ( DG / APPELLANT ) .. ( HIDG / RESPONDENT ) IT(SS)A NO.02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) M/S.CAMBATA AVIATION PVT. LTD., HANGER NO.3, JUHU AERODROME, MUMBAI 400054 / VS. THE ACIT, CEN. CIR.8, ROOM NO.260A, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 D # ./ EF ./ PAN/GIR NO. : AAACC 6450B ( DG / APPELLANT ) .. ( HIDG / RESPONDENT ) APPELLANT BY SHRI VIJAY MEHTA RESPONDENT BY : SHRI S.D.SRIVASTAVA J K# / DATE OF HEARING : 23/09//2013 LMN J K# / DATE OF PRONOUNCEMENT : 23/09/2013 + O / O R D E R IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 2 PER I.P.BANSAL, JM: THESE ARE CROSS APPEALS DIRECTED AGAINST ORDER PA SSED BY LD. CIT(A)-16 DATED 11/10/2011 FOR THE BLOCK PERIOD FROM 1/4/199 1 TO 1/5/2001. THE GROUNDS OF APPEAL READ AS UNDER: GROUND OF APPEAL IN IT(SS)A NO.01/MUM/2012(REVENUE S APPEAL): ON FACTS AND CIRCUMSTANCES OF THE CASE AND THE IN LAW, THE LD. CIT(A) ERRED IN PARTLY ALLOWING THE APPEAL IN FAVOUR OF THE ASSESSE E IN RESPECT OF THE PENALTY U/S. 158 BFA(2) OF THE ACT, LEVIED BY THE A.O. GROUNDS OF APPEAL IN IT(SS)A NO.02/MUM/2012(ASSESSE ES APPEAL): 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN UPHOLDING THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 158BFA(2) OF THE ACT WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN UPHO LDING PENALTY AT 175% ON ADDITIONS TO INCOME. 2. IN THIS CASE SEARCH AND SEIZURE ACTION UNDER SEC TION 132 WAS CARRIED OUT ON 1/5/2001, WHEREIN THE ASSESSEE HAD ADMITTED UNDI SCLOSED INCOME OF RS. 1,74,41,821/-. HOWEVER, WHILE FILING THE RETURN UN DISCLOSED INCOME WAS DECLARED AT RS.65,18,092/- AND IT WAS FOUND BY THE AO THAT THE BALANCE AMOUNT OF RS.1,09,23,730/- WAS NOT DISCLOSED IN THE RETURN AS PER DECLARATION MADE UNDER SECTION 132(4) OF THE INCOME TAX ACT,196 1 (THE ACT). THIS POSITION HAS BEEN SUMMARIZED BY THE AO IN THE PENALTY ORDER AS PER FOLLOWING TABLE: PARTICULARS UNDISCLOSED INCOME SHOWN IN RETURN FOR BLOCK PERIOD. DISCLOSED U/S. 132(4) AMOUNT NO DISCLOSED IN THE RETURN OF BLOCK. RENT PAID RS. 5,90,000 RS. 50,09,500 RS. 44, 19,500 IOU RS. 7,80,841 RS. 53,10,200 RS. 45,29,359 SEIZED PAPERS FILE A-1 RS. 47,32,070 RS. 47,32,010 -- EXPENSES OF MR. SAM RS. 2,10,181 RS. 3,37,05 2 RS. 1,26,871 R.E.MEHARJI-VOUCHES RS. 20,000 RS. 20, 000 -- MR.B.NICHOLSON RS. 35,000 RS. 35,000 -- PAYMENT TO MILAN RS. 1,50,000 RS. 1,50,000 -- CASH PAYMENTS RS. NIL RS. 18,48,000 RS. 18 ,48,000 TOTAL RS. 65,18,092 RS.1,74,41,822 RS.1,09,23,730 IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 3 THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1,8 4,44,179/-. THE ADDITIONS ARE AS FOLLOWS: RENT PAID IN CASH (AS PER PARA NO.14) RS. 50,09, 500 PAYMENTS ON ACCOUNT FOR IOU (AS PER PARA NO.20) R S. 53,10,200 PAYMENTS TO SETTLE LITIGATION TO MR.DILP PAREKH (AS PER PARA NO.22) RS. 7,00,000 PAYMENTS ON ACCOUNT OF MR. SAM CAMBATA (AS PER PARA . NO.24) RS. 3,37,052 EXPENDITURE INCURRED ON SPEED MONEY: (AS PER PARA N O.29) RS. 2,71,500 EXPENDITURE IN RESPECT OF BOGUS PARTIES (AS PER PAR A. NO.31) RS. 1,16,857 CASH SHORTAGE/UNACCOUNTED AS PER PARA NO.31) RS. 17,62,000 CASH ENTRIES ALREADY DISCLOSED IN BLOCK RETURN (AS PER PARA NO.35) RS. 47,32,070 CASH PAYMENTS ALREADY DISCLOSED IN BLOCK RETURN (AS PER PARA NO.35) RS. 2,05,000 UNDISCLOSED INCOME RS.1,84,44,179 IT MAY BE FURTHER MENTIONED THAT AS PER PARA 15 OF IMPUGNED PENALTY ORDER THE AO WHILE COMPUTING PENALTY HAS CONSIDERED CONCEALE D INCOME OF RS..1,19,26,087/- I.E. DIFFERENCE BETWEEN RS.1,84,4 4,179/- BEING INCOME ASSESSED AND RS.65,18,0921/- BEING INCOME DISCLOSED IN THE RETURN. THE AO HAS LEVIED PENALTY @175% OF THE TAX SOUGHT TO BE EV ADED AGAINST MINIMUM PENALTY LEVIABLE @100% AND COMPUTED PENALTY AMOUNT AT RS.1,27,72,839/- UNDER THE PROVISIONS OF SECTION 158BFA(2) OF THE AC T. 2.1 ALL THESE ADDITIONS WHICH HAVE BEEN CONSIDERED FOR LEVY OF CONCEALMENT PENALTY I.E. AMOUNTING TO RS. 1,19,26,087/- WERE SU BJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AND ADDITIONS WHICH HAVE BEEN F INALLY SUSTAINED ARE AS FOLLOWS: (1) A SUM OF RS. 1,26,871/- (BEING PART OF TOTAL A MOUNT DISCLOSED OF RS.3,37,052/- IN RESPECT OF EXPENSES OF MR. SAM AS A SUM OF RS.2,10,181/- WAS ALREADY DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME. THIS CAN BE FOUND FROM PARA 3.2.7 OF CIT(A)S ORDER) (2) RS.7.00 LACS WITHIN A TOTAL SUM OF RS.18,48,00 0/- BEING CASH PAYMENT OUT OF WHICH ADDITION TO THE EXTENT OF RS.11,48,000/- W AS DELETED. THIS CAN BE FOUND FROM ORDER OF LD. CIT(A) IN PARA 3.2.6 2.2 LD. CIT(A) HAS UPHELD THE PENALTY LEVIED @175% ON BOTH OF THE ABOVE ADDITIONS AND DELETED REST OF THE PENALTY ON THE GR OUND THAT THE ADDITIONS HAVE IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 4 BEEN DELETED IN THE QUANTUM PROCEEDINGS. ASSESSEE S APPEAL PERTAINS TO LEVY OF PENALTY ON AFOREMENTIONED TWO ADDITIONS AND DEPARTM ENTAL APPEAL PERTAINS TO THE PENALTY WHICH HAS BEEN DELETED BY LD. CIT(A). 3. SO FAR AS IT RELATES TO ASSESSEES APPEAL IT IS THE CASE OF LD. AR THAT DUE TO THE SMALLNESS OF THE AMOUNT, TO SET CONTROVERSY AT REST AND TO BUY PEACE FROM LITIGATION, THE ASSESSEE DOES NOT DISPUTE IF PENALT Y ON AFOREMENTIONED TWO ADDITIONS IS UPHELD TO THE EXTENT OF MINIMUM PENALT Y LEVIABLE @100%. 4. ON THE OTHER HAND, IT IS THE CASE OF THE REVENUE THAT ASSESSEE DOES NOT DESERVE ANY FURTHER RELIEF EVEN SO AS TO THE RATE O F PENALTY LEVIED UPON BY AO @175%. 5. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. LOOKING INTO THE FACT THAT ALL THE MAIN ADDITIONS DO NOT SURVIVE, THE ARGUMENT OF LD. AR REGARDING LEVY OF PENALTY AT MINIMUM RATE IS REASONABLE AND ACCEPTED. THE AO IS DIRECTED TO RECOMPUTE PENALTY @100% ON THE AFOREMENTIONED TWO ADDITIONS TO THE EXTEND T HEY HAVE BEEN SUSTAINED IN THE QUANTUM PROCEEDINGS.. WE DIRECT ACCORDINGLY. THEREFORE, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORES AID. 6. NOW COMING TO THE DEPARTMENTAL APPEAL, IT WAS VE HEMENTLY SUBMITTED BY LD. DR THAT PENALTY PROCEEDINGS ARE DISTINCT AND SE PARATE PROCEEDINGS AND PENALTY HAS WRONGLY BEEN DELETED BY LD. CIT(A) DESP ITE THE FACT THAT ADDITIONS HAVE BEEN DELETED. LD. DR HAS SUBMITTED BEFORE US A NOTE TO SUPPORT HIS ARGUMENTS, WHICH IS REPRODUCED BELOW: THE SUBMISSIONS OF THE DEPARTMENT AS REGARDS DELET ION (PART) OF PENALTY BY LD. CIT(A) ARE AS FOLLOWS: 1. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS ARE I NDEPENDENT AND DISTINCT FROM ASSESSMENT PROCEEDINGS AND THEREFORE REVENUE I S ENTITLED TO CANVASS THE POINT THAT HONBLE ITAT, MUMBAI C BENCH IN TH E SUBSTANTIVE APPEAL IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 5 IT(SS) A NO.85/MUM./2009 ORDER DATED 24.6.2011 HAS ERRED IN STATING THAT ASSESSEE IS ENTITLED TO BENEFIT OF TELESCOPING OF THE ADDITION OF ADDITIONAL INCOME OFFERED BEFORE THE SETTLEMENT COM MISSION - WHEN THE HONBLE SETTLEMENT COMMISSION HAS CLEARLY HELD AS F OLLOWS (PARA 28 OF THE ORDER) - (MENTIONED IN PAGE 13 OF HONBLE ITATS OR DER): 28. FACTS ON RECORD CLEARLY INDICATE THAT APPLICAN T HAS INDULGED IN UNRELIABLE FINANCIAL PRACTICES FOR ALL THE YEARS UN DER CONSIDERATION. THE BOOKS OF ACCOUNT MAINTAINED BY THE APPLICANT CANNOT BE RELIED UPON. BOTH IN THE PROCEEDINGS CONNECTED WITH THE SEARCH AND IN THE PRESENT PROCEEDINGS THE APPLICANT HAS CATEGORICALLY ACCEPTE D HAVING INCURRED EXPENDITURE NOT RECORDED IN THE BOOKS OF ACCOUNT. T HE APPLICANT HAS ALSO, IN NO UNCERTAIN TERMS, HAS CONCEDED THAT THEY WERE INFLATING EXPENDITURE BY RAISING BOGUS BILLS AND CASH GENERATED THEREBY H AVE BEEN UTILIZED FOR FUNDING THOSE UNRECORDED EXPENDITURE. HOWEVER, THE APPLICANT HAS NOT CLEARLY INDICATED AS TO THE FINAL DESTINATION OF TH E ENTIRE CASH GENERATED FROM INFLATION OF EXPENDITURE BY DEBITING BOGUS BIL LS. THE ABOVE CLEARLY SHOWS THAT ASSESSEE COULD NOT EXP LAIN THE FINAL DESTINATION OF THE ENTIRE CASH GENERATED FROM INFLATION OF EXPENDI TURE BY DEBITING BOGUS BILLS. HENCE THE PENALTY HAS BEEN RIGHTLY INITIATED AND IM POSED BY AO SINCE NO BENEFIT OF TELESCOPING CAN BE GIVEN WHEN ASSESSEE COULD NOT EXPLAIN THE FINAL DESTINATION OF THE ENTIRE CASH GENERATED FROM INFLATION OF EXPE NDITURE. 2. SINCE HONBLE ITAT HAS ERRED IN NOT TAKING COGNI ZANCE OF THE ABOVE PARA 28 OF THE SETTLEMENT COMMISSION ORDER CORRECTLY - A ND THEREFORE MISDIRECTED ITSELF - THIS CANNOT BE APPLIED IN PENA LTY PROCEEDINGS WHICH ARE INDEPENDENT AND DISTINCT FROM ASSESSMENT PROCEEDING S AND THEREFORE BASED UPON THE ABOVE PARA 28 OF SETTLEMENT COMMISSI ON THE PENALTY AS IMPOSED BY THE AO DESERVES TO BE CONFIRMED IN TOTAL ITY AND ORDER OF CIT(A) GIVING PARTIAL RELIEF DESERVES TO BE SET ASIDE. 7. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT THE VERY BASIS OF LEVY OF PENALTY UNDER SECTION 158BFA DOES NOT SURVIVE TH EREFORE, LEVY OF PENALTY IS NOT JUSTIFIED DESPITE THE WELL ESTABLISHED LAW THAT THE PENALTY PROCEEDINGS ARE DIFFERENT AND DISTINCT FROM THE ASSESSMENT PROCEEDI NGS. 8. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WE HAVE ALSO CAREFULLY GONE THROU GH THE PROVISIONS OF SECTION 158BFA(2) UNDER WHICH THE IMPUGNED PENALTY HAS BEEN LEVIED. SUB-SECTION (2) OF SECTION 158 BFA AUTHORIZE THE AO/CIT(A) TO DIREC T A PERSON TO WHOM SUCH IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 6 PROVISIONS ARE APPLICABLE TO PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE TO WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CLAUSE (C) OF SECTION 158BC OF THE ACT. T HEREFORE, THE QUANTUM OF PENALTY DEPEND UPON TAX LEVIABLE WITH REFERENCE T O UNDISCLOSED INCOME WHICH IS DETERMINED BY THE AO UNDER CLAUSE (C) OF SECTION 158BC. WHEN AFTER DELETION NO SUCH UNDISCLOSED INCOME REMAINS TO BE D ETERMINED EXCEPT AFOREMENTIONED TWO ADDITIONS ON WHICH PENALTY @100% HAS BEEN UPHELD, NO AMOUNT REMAINS TO BE ASSESSED AS UNDISCLOSED INC OME ON WHICH THE PENALTY CAN BE LEVIED. THEREFORE, ARGUMENTS PUT FORTH BY L D. DR ARE DEVOID OF MERITS AND ARE LIABLE FOR REJECTION. THE REMEDY SOUGHT TO BE AVAILED BY LD. DR DOES NOT LIE IN THE PRESENT PROCEEDINGS. IF IT IS THE G RIEVANCE OF THE REVENUE THAT QUANTUM HAS WRONGLY BEEN DELETED THEN THE REMEDY LI ES TO TAKE APPROPRIATE STEP AGAINST QUANTUM ORDER VIDE WHICH UNDISCLOSED I NCOME DETERMINED BY THE AO HAS BEEN DELETED. WITH THESE OBSERVATIONS, FIND ING NO MERITS IN THE ARGUMENTS OF LD. DR, WE REJECT THE DEPARTMENTAL APP EAL. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/09/2013 O J LMN # Q RS 23 /09/2013 M J T % SD/- SD/ - ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; R DATED 23 /09/2013 O O O O J JJ J HKUV HKUV HKUV HKUV WVNK WVNK WVNK WVNK / COPY OF THE ORDER FORWARDED TO : 1. DG / THE APPELLANT IT(SS)A NO.01 & 02/MUM/2012 (BLOCK PERIOD 01/04/1991 TO 01/05/2001) 7 2. HIDG / THE RESPONDENT. 3. X ( ) / THE CIT(A)- 4. X / CIT 5. VYT HK , , / DR, ITAT, MUMBAI 6. TZ [ / GUARD FILE. O O O O / BY ORDER, IVK HK //TRUE COPY// \ \\ \ / ] ] ] ] E E E E (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS