GULALAM MUSTAFA KHATRI, NAVI MUMBAI V. ACIT 22(3), NAVI MUMBAI

ITSSA 1/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9904 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 16-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SOMAIYA
• Keywords: Search and seizure; Reasonable cause; Block assessment
• Section: 143(3); 132

Judgement Text

P A G E | 1 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) IN THE INCOME TAX APPELLATE TRIBUNAL ' G ' BENCH, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER IT (SS) NO. 01/MUM/2017 (ASSESSMENT YEAR: 01.04.1989 TO 08.12.1999 ) SHRI GULAM MUSTAFA KHATRI, PLOT NO. 134, KHATRI VILLA, SECTOR - 8, VASHI, NAVI MUMBAI. VS. ACIT, 22(3) ITO ABOVE VASHI RAILWAY STATION, VASHI, NAVI MUMBAI PAN AAJPK7942C ASSESSEE REVENUE ASSESSEE BY: NONE REVENUE BY: SHRI NISHANT SOMAIYA, D.R DATE OF HEARING: 24 .09.2018 DATE OF PRONOUNCEMENT: 2 6 .09.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 26 , MUMBAI, DATED 14.12.2016 WHICH IN TURN ARISES FROM THE PENALTY IMPOSED BY THE A.O UNDER SEC. 158 BFA(2) /271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 09.05.2012 FOR THE BLOCK PERIOD 01.04.1989 TO 08.12.1999. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) HAS SERIOUSLY ERRED IN NOT CONSIDERING THE CONTENTION RAISED TO THE EFFECT THAT PENALTY ORDER PASSED IS BAD - IN - LAW. 2. THE LEARNED CIT (A) BOTH ON FACTS AND IN LAW HAS ERRED IN CONFIRMING THE PENALTY LEVIED U/S. 158 BFA (2) OF THE I.T. ACT, 1961 WITHOUT CONSIDERING ALL THE RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE APPELL ANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/ OR VARY ANY OF THE GROUNDS AT THE TIME OR BEFORE THE HEARING OF THIS APPEAL. 4. THE APPELLANT THEREFORE PRAYS THAT PENALTY LEVIED BY THE LEARNED ASSESSING OF FICER A ND CONFIRMED BY THE LEARNED CIT (A) MAY PLEASE BE CANCELLED . P A G E | 2 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) 2. BRIEFLY STATED, SEARCH AND SEIZURE ACTION UNDER SEC. 132 OF THE ACT WAS CONDUCTED IN KHATRI GROUP OF CASE S ON 08.12.1999. THE ASSESSEE I S ENGAGED IN THE BUSINESS OF UNDERTAKING CONTRACTS FORM CIDCO, NBSA, NMMC, APMC AND OTHER GOVERNMENT DEPARTMENT. THE GENESIS OF THE AFORESAID SEARCH PROCEEDING S WAS CERTAIN INFORMATION RECEIVED BY THE INCOME TAX DEPARTMENT , THAT CERTAIN OFFICIALS O F CIDCO V IZ. SHRI SUBHASH GOVIND PINGALE, SHRI RAMAKANT JHA & SHRI R.P. YAUL HAD BEEN INSTRUMENTAL IN CORNERING SOME OF THE MAJOR CONTRACT S OF CIDCO IN FAVOUR OF M/S G.H. KHATRI & CO. , A PROPRIETARY CONCERN OF THE ASSESSEE. FURTHER, IT WAS ALSO GATHERED THAT THOUG H THE ASSESSEE ALONG WITH HIS FAMILY MEMBERS HAD EARNED SUBSTANTIAL PROFITS FROM THE AFORESAID GOVERNMENT CONTRACTS, BUT HAD NOT DISCLOSED THE TRUE AND CORRECT INCOME TO THE INCOME TAX DEPARTMENT. 3. THE ASSESSEE IN COMPLIANCE TO THE NOTICE ISSUED UNDER SEC. 158BC OF THE ACT ON 29.10.2001 FILED HIS RETURN OF INCOME FOR THE BLOCK PERIOD 01.04.1989 TO 08.12.1999 ON 26.12.2001, DECLARING AN UNDISCLOSED INCOME OF RS.33,85,300/ - . THE A.O VIDE HIS ORDER PASSED UNDER SEC. 158BC (C) R.W.S. 143(3) OF THE ACT, DATED 31.12.2001 , ASSESSED THE INCOME OF THE ASSESSEE AT RS.47,63,612/ - . THE A.O WHILE CULMINATING THE ASSESSMENT ALSO INITIATED PENALTY PROCEEDINGS UNDER SEC. 158BFA(2) IN THE HANDS OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE ASSAILED SOME OF THE ADDITIONS M ADE BY THE A.O BEFORE THE CIT(A). SUBSEQUENTLY, ON THE BASIS OF THE ORDER PASSED BY THE ITAT BENCH G, MUMBAI, DATED 30.09.2011 THE AS SESSED INCOME OF THE ASSESSEE WAS FINALLY CRYSTALLIZED AT AN AMOUNT OF RS.10,29,213/ - . THE A.O AFTER RECEIVING THE AFORESAID ORDER OF THE TRIBUNAL, THEREIN CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SEC.158BFA(2) OF THE ACT MAY NOT BE IMPOSED ON HIM . THE ASSESSEE VIDE HIS REPLY DATED 27.04.201 2 , TRIED TO IMPRESS UPON THE A.O THAT NO PENALTY UNDER SEC. 158BFA(2) WAS L IABLE TO BE IMPOSED . HOWEVER, THE A.O AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE WAS NOT PERSUADED TO SUBSCRIBE TO THE SAME. THE A.O WAS OF THE VIEW , THAT AS THE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION AS REGARDS CERTAIN ADDITIONS MADE IN HIS HANDS VIZ. (I) PERSONAL AND ILLEGAL P A G E | 3 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) GRATIFICATION PAYMENTS (RS. 8,45,000/ - ) ; (II) PAYMENT TO CIDCO ENGINEERS (RS.7,018/ - ); (III) PAYMENT MADE TOWARDS DANDIYA RAS (RS. 21 ,000/ - ); AND (IV) PURCHASE OF CEMENT (RS.1,57,195/ - ) , OBSERVED THAT THE CONCEALMENT OF PARTICULARS IN RESPECT OF THE SAID EXPENSES WAS CLEARLY ESTABLISHED. ON THE BASIS OF HIS AFORESAID DELIBERATIONS, THE A.O HOLDING A CONVICTION THAT THE ASSESSEE HAD CONC EALED THE PARTICULARS OF HIS INCOME AND ALSO FAILED TO OFFER AN EXPLANATION THAT A REASONABLE CAUSE EXISTED, THUS , VIDE HIS ORDER DATED 09.05.2012 IMPOSED A PENALTY OF RS.6,29,281/ - ( BEING 100% FOR TAX SOUGHT TO BE EVADED ) UNDER SEC. 271(1)(C) OF THE ACT . THE A.O WHILE IM POSING THE AFORESAID PENALTY OBTAINED THE APPROVAL OF THE JOINT CIT UNDER SEC. 274(2)(B) OF THE ACT, VIDE HIS OFFICE LETTER DATED ADDL. CIT - 22(3)/PENALTY APPROVAL/2011 - 12, DATED 08.05.2012. 5. AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY I MPOSED BY THE A.O UNDER SEC. 158BFA(2) BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANCED BY THE ASSESSEE, HOWEVER , DID NOT FIND FAVOUR WITH THE SAME AND DISMISSED THE APPEAL. 6. THE ASSESSEE BEING AGGRIEVED WITH THE OR DER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE ASSESSEE APPELLANT HAD PLACED ON RECORD A LETTER DATED 29.08.2018 , WHEREIN IT IS REQUESTE D BY HIM THAT HIS W RITTEN SUBMISSIONS MAY BE CONSIDERED WHILE DECID ING THE APPEAL. PER CONTRA, T HE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D . R) RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ADDITIONS WERE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF INCRIMINATING DOCUMENTS, THUS , THE A.O HAD RIGHTLY IMPOSED PENALTY IN THE HANDS OF THE ASSESSEE. IT WAS AVERRED BY THE LD. D.R THAT AS THE APPEAL OF THE ASSESSEE WAS DEVOID OF ANY MERITS, THUS THE SAME MAY BE DISMISSED. 7. WE HAVE HEARD THE LD. D.R , PERUSED THE WRITTEN SUBMISSIONS OF THE ASSESSEE , AS W ELL AS THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE A.O WHILE FRAMING THE ASSESSMENT, HAD VIDE HIS ORDER PASSED UNDER SEC. 158BC(C) R.W.S. 143(3), DATED 31.12.2001 INITIATED PENALTY PROCEEDINGS UNDER SEC. 158B F A (2) OF THE ACT. HOWEVER, A P A G E | 4 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) PERUSAL OF THE IMPUGNED PENALTY ORDER , THOUGH TITLED AS PENALTY ORDER U/S 158BFA(2) OF THE I.T ACT, 1961 , DATED 09.05.2012 , REVEALS THAT THE PENALTY OF RS.6,79,281/ - HA D BEEN IMPOSED ON THE ASSESSEE UNDER SEC.271(1)(C) OF THE ACT FOR CONCEALING THE PARTICULARS OF HIS INCOME AND FAILURE TO OFFER EXPLANATION THAT A REASONABLE CAUSE EXISTED . THE RELEVANT OBSERVATIONS OF THE A.O AT PAGE 14 OF HIS ORDER, ARE REPRODUCED AS UNDER: 5. I N VIEW OF THE ABOVE DISCUSSION IT IS CLEAR THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME AND FAILED TO OFFER AN EXPLANATION THAT A REASONA BLE CAUSE EXISTED. HENCE, PENALT Y U/S. 271(1)(C) IS LEVIED AS UNDER : CONCEALED - INCOME RS. 10 , 29,213/ - TAX + SC + EDUCATION CESS, RS. 679,281/ - 100% OF TAX SOUGHT TO BE EVADED RS. 6,79,281/ - 300% OF TAX SOUGHT TO BE EVADED RS.20,37,843/ - CONSIDERING THE FACT S OF THE CASE, I LEVY PENALTY OF RS.6,79,281/ - BEING 100% OF TAX SOUGHT TO BE EVADED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. T HE ORDER IS PASSE D AFTER OBTAINING APPROVAL OF JT . CIT U/S 274(2)(B) OF THE INCOME TAX ACT, 1961 VIDE HIS OFFICE LETTER NO. ADDL. C IT - 22(3)/PENALT Y APPROVAL/2011 - 12 DATED 08 /05/2012. ISSUE DEMAND NOTICE (D.D. YADAV) ASSTT. COMMISSIONER OF INCOME TAX - 22(3) MUMBAI. FURTHER, THE A.O WHILE IMPOSING THE AFORESAID PENALTY HAD OBTAINED THE APPROVAL OF THE JOINT CIT UNDER SEC. 274(2)( B) OF THE ACT, VIDE HIS OFFICE LETTER NO. ADDL. CIT - 22(3)/PENALTY APPROVAL/2011 - 12, DATED 08.05.2012. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND FIND IT BEYOND OUR COMPREHENSION , THAT NOW WHEN THE PENALTY PROCEEDINGS WERE INITIATED UNDER SEC. 158BFA(2 ) OF THE ACT, THEN HOW THE SAME HAD CRYSTALLIZED INTO IMPOSITION OF THE SAME UNDER SEC. 271(1)(C) OF THE ACT? WE MAY HEREIN OBSERVE , THAT C HAPTER XIV - B WHICH LAYS DOWN THE SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES , WAS MADE AVAILABLE ON THE STATUT E BY THE LEGISLATURE, VIDE THE F INANCE ACT, 1995, WITH EFFECT FROM 01.07.1995. AS PER SEC.158BF (AS WAS AVAILABLE ON THE STATUTE SINCE INCEPTION), IN THE CASE OF P A G E | 5 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) AN ASSESSEE WHOSE UNDISCLOSED INCOME WAS DETERMINED IN THE BLOCK ASSESSMENT, NO PENALTY UNDER SEC. 271(1)(C) WAS TO BE LEVIED. HOWEVER, THE LEGISLATURE IN ALL ITS WISDOM , THEREAFTER INSERTED SEC.158BFA(2) , AS PER WHICH THE A.O OR THE CIT(A) IN THE COURSE OF ANY PROCEEDINGS UNDER THE CHAPTER XIV - B , WERE VESTED WITH THE DISCRETION TO DIRECT THAT THE ASSESSEE SHALL PAY BY WAY OF PENALTY , A SUM , WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE, BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE A.O UNDER SUB - SEC. (C) TO SEC. 158BC. FURTHER, ON A CONJOINT SATISFACTION OF THE FOUR CONDITIONS CONTEMPLATED IN THE FIRST PROVISO TO SEC. 158BFA(2) , IT WAS OBLIGATORY ON THE PART OF THE A.O NOT TO LEVY ANY PENALTY IN THE HANDS OF THE ASSESSEE. WE FURTHER FIND , THAT AS PER THE MANDATE O F CLAUSE (B) OF SUB - S EC.(3) OF SEC.158BFA, NO ORDER IMPOSING A PENALTY UNDER SEC. 158BFA(2) SHALL BE MADE BY THE ASSISTANT COMMISSIONER [ OR DEPUTY COMMISSIONER ] OR THE ASSISTANT DIRECTOR [OR DEPUTY DIRECTOR], AS THE CASE MAY BE, WHERE THE AMOUNT OF PENALTY EXCEEDS OF RS.20,000/ - , EXCEPT WITH THE PREVIOUS APPROVAL OF THE JOINT COMMISSIONER OR THE JOINT DIRECTOR, AS THE CASE MAY BE. FURTHER, THE LIMITATION WITHIN WHICH THE PENALTY UNDER SEC.158BFA(2) COULD BE IMPOSED IS ALSO CONTEMPLATED IN CLAUSE (C) TO ( F ) OF S UB - S EC.( 3 ) TO SEC.158BFA OF THE ACT. THUS , ON A BARE PERUSAL OF THE AFORESAID SCHEME OF C HAPTER XIV - B , WHICH THEREIN CONTEMPLAT ES THE SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES , IT CAN SAFELY BE GATHERED , THAT THE LEVY OF PENALTY IN THE CASE OF AN ASSESSEE WHOSE U NDISCLOSED INCOME HA D BEEN SUBJECTED TO BLOCK ASSESSMENT WAS EXCLUSIVELY GOVERNED BY SEC.158BFA(2) W .E.F 01.01.1997. RATHER, A CONJOINT OF PERUSAL OF SEC. 158BFA(2) R.W. SEC.158BF, THEREIN MAKES IT ABUNDANTLY CLEAR BEYOND ANY SCOPE OF DOUBT , THAT IN A CASE WHERE THE UNDISCLOSED INCOME OF THE ASSESSEE HAD BEEN SUBJECTED TO BLOCK ASSESSMENT PROCEDURE, NO PENALTY UNDER SEC. 271(1)(C) WOULD BE LEVIABLE. 9. WE THUS, IN TERMS OF OUR AFORESAID OBSERVAT IONS , BEING OF THE CONSIDERED VIEW THAT AS THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C), IS PALPABLY DIVORCED OF ANY SANCTION OF LAW, HENCE QUASH THE SAME. THE P A G E | 6 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3) PENALTY OF RS.6,79,281/ - IMPOSED BY THE A.O UNDER SEC.271(1)(C) OF THE ACT IS DELETED. OR DER OF THE CIT(A) SUSTAINING THE PENALTY IMPOSED BY THE A.O IS SET ASIDE. 9. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT O N 2 6 .09.2018 S D / - S D / - ( B.R.BASKARAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 2 6 .09 .2018 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 7 ITA NO. 01/MUM/2017 SHRI GULAM MUSTAFA KHATRI VS. ACIT, 22(3)