SHRI. JAIRAJ THACKER, MUMBAI V. ASST.CI.T., CIRCLE-21(1), MUMBAI

ITSSA 106/MUM/2008

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8942 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 21-09-2010
• Assessment Year: misc
• Appeal Filed On: 15-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: MANISH SANGHVI
• Keywords: Search and seizure; Salary income; Block assessment; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKO TAIAH,(AM) IT(SS)A NO.106/MUM/2008 ASSESSMENT YEAR : BLOCK PERIOD ENDED ON 30.7.1998 SHRI JAIRAJ THACKER NIRANT, 387, S.V. ROAD VILE PARLE (WEST) MUMBAI-400 506. ..( APPELLANT ) P.A. NO. (AAAPT 9441 J) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-21(1) C-10 BANDRA KURLA COMPLEX BANDRA MUMBAI-400 051. ..( RESPONDENT ) APPELLANT BY : SHRI MANISH SANGHVI RESPONDENT BY : SHRI S UMEET KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 29.8.2008 PASSED BY THE LD. CIT(A) FOR THE AS SESSMENT YEAR PERTAINING TO THE BLOCK PERIOD ENDED ON 30.7.1998. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE, AN INDIVIDUAL DERIVES INCOME FROM SALARY, DIVIDEND AND INTEREST. SEARCH AND SEIZURE OPERATION US/.132 OF THE INCOME TAX ACT, 1961(THE A CT) WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 24.7.19 98. DURING THE COURSE OF SEARCH, CASH OF RS.2,28,495/- WAS ALSO FOUND OUT OF WHICH CASH OF RS.1,75,000/- WAS SEIZED. IN RESPONSE TO NOTICE IS SUED U/S.158BC, THE ASSESSEE FILED RETURN FOR THE BLOCK PERIOD DECLARIN G TOTAL UNDISCLOSED INCOME AT RS. NIL. HOWEVER, THE ASSESSMENT WAS COMPLETED O N A TOTAL UNDISCLOSED ITA NO.106/M/08 A.Y:BP ENDED 31.7.98 2 INCOME FOR THE BLOCK PERIOD RS.78,79,990/-, VIDE OR DER DATED 27.7.2000 PASSED U/S.158 BC OF THE ACT. THE ASSESSING OFFICE R ALSO INITIATED PENALTY PROCEEDING U/S.158 BFA(2) OF THE ACT. IN RESPONSE T O SHOW CAUSE AS TO WHY PENALTY U/S.158 BFA(2) SHOULD NOT BE IMPOSED, IT WA S INTERALIA SUBMITTED BY THE ASSESSEE THAT THERE IS NO ADDITION WHICH REMAIN S AFTER ITAT ORDER AS ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER HAVE BE EN DELETED BY THE LD. CIT(A) AND THE ITAT HAS CONFIRMED THE ORDER OF THE LD. CIT(A), THEREFORE, PENALTY PROCEEDING INITIATED SHOULD BE DROPPED. HOW EVER, THE ASSESSING OFFICER OBSERVED THAT THIS IS NOT CORRECT. THE ASS ESSING OFFICER HAS MADE ADDITIONS OF RS.78,79,993/- ON VARIOUS ISSUES. ONE OF THE ADDITIONS WAS RS.2,28,495/- ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING THE COURSE OF SEARCH. THE RELEVANT PORTION OF THE ASSESSMENT ORD ER LAYING THE GROUND OF ADDITION OF THIS AMOUNT IS REPRODUCED AS UNDER: AT THE RESIDENTIAL PREMISES OF THE ASSESSEE , TOTAL CASH OF RS.2,28,495/- AS PER ANNEXURE C TO PANCHNAMA DATED 24/25/7.1998 WAS FOUND, OUT OF WHICH CASH OF RS.1,75,000/- WAS SEIZED AND BALANCE AMOUNT OF RS.53,49 5/- WAS RETURNED TO ASSESSEE . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE Q UESTIONNAIRE DATED 25.11.1999, THE ASSESSEE WAS REQUESTED TO EXPLAIN NATURE AND SOURCE OF THE CASH FOUND. THE ASSESSEE VIDE HIS LETTER DATED 26.6.2000, HA S FURNISHED THE FOLLOWING EXPLANATION. DURING THE COURSE OF SEARCH AT OUR RESIDENCE ON 24.7.1 998, CASH OF RS.2,28,495/- WAS FOUND. OUT OF THAT RS.1,75,000/- WE HAVE OFFERED FOR TAXATION AND BALANCE IS SAVING FROM MONTHLY WITHDRAWALS, FOR INFORMATION APRI L98 TO JULY98 THE WITHDRAWALS COMES TO RS.81,000/-. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ADD ITION OF RS.2,28,495/- WHICH COMPRISED OF RS.1,75,000/- OFFERED BY THE AS SESSEE IN COURSE OF ASSESSMENT PROCEEDINGS AFTER BEING CONFRONTED BY TH E ASSESSING OFFICER AND NOT VOLUNTARILY IN THE RETURN OF INCOME AND RS.53,4 95/- FOUND, INVENTORISED BUT NOT SEIZED DURING SEARCH. AGAINST THE ABOVE AD DITION OF RS.2,28,495/-, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) GAVE RELIEF ONLY ON ADDITION OF RS.53,495/- AND CONFIRME D THE ADDITION OF RS.1,75,000/-. THUS, THE AMOUNT OF RS.1,75,000/- R EPRESENTS THE EXESS PORTION OF THE UNDISCLOSED INCOME WHICH IS DETERMIN ED DURING THE BLOCK ASSESSMENT AFTER CONFRONTING THE ASSESSEE AND FOR W HICH THE ASSESSEE HAD NO ITA NO.106/M/08 A.Y:BP ENDED 31.7.98 3 EXPLANATION TO OFFER BUT TO ADMIT IT AS HIS UNDISCL OSED INCOME. THEREFORE, IT IS NOTHING BUT THE UNDISCLOSED INCOME DETECTED DURI NG THE ASSESSMENT ON WHICH PENALTY IS REQUIRED TO BE IMPOSED AS PER FURT HER PROVISO TO SECTION 158 BFA(2) OF THE ACT AND ACCORDINGLY HE IMPOSED A PENA LTY OF RS.1,05,000/- VIDE ORDER DATED 26.5.2006 PASSED U/S.158(2) BFA(2) OF T HE ACT. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT INITIATION OF PENAL TY U/S.158 BFA (2) IS ALMOST AUTOMATIC IN VIEW OF SECOND PROVISO TO SAID SUB-SEC TION AND ACCEPTANCE OF THE SAME AS UNDISCLOSED INCOME DURING THE ASSESSME NT PROCEEDING DOES NOT DISSOLVE THE APPELLANT OF PENAL CONSEQUENCES, C ONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER . 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTENANCE OF PENALTY IMPOSED BY THE ASSESSING OFFICER U/S.158 BFA(2) OF THE ACT. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THE PENALTY IS NOT AUTOMATIC AND THE SAME IS DISCRETIONARY AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DODSAL LTD. (2009) 312 ITR 112(BOM.). HE FURTHER SUBMITS THAT DU RING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAS OFFERED FOR TAXATION RS.1,75,000/- AND BALANCE WAS STATED TO BE SAVING FROM MONTHLY WI THDRAWALS, FOR INFORMATION APRIL 1998-JULY 1998 THE WITHDRAWALS CO MES TO RS.81,000/-. SINCE THE ASSESSEE HAS OFFERED RS.1,75,000/- VOLUNT ARILY, FOR TAXATION, THEREFORE, THERE IS NO CONCEALMENT ON THE PART OF T HE ASSESSEE. THE RELIANCE WAS ALSO PLACED IN M/S. MANU ENTERPRISES LTD. VS. A CIT IN IT(SS) NO.95/M/05 FOR THE BLOCK PERIOD 1.4.95 TO 2.11.01 O RDER DATED 11.6.2008 FOR THE PROPOSITION THAT IT IS NOT THE LAW THAT WHEREVE R THERE IS A DIFFERENCE BETWEEN THE UNDISCLOSED INCOME ASSESSED AND UNDISCL OSED INCOME RETURNED BY THE ASSESSEE IN ITS BLOCK RETURN, PENALTY IS LEV IABLE U/S. 158 BFA(2) OF THE ITA NO.106/M/08 A.Y:BP ENDED 31.7.98 4 ACT. HE THEREFORE, SUBMITS THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 5. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKED TO EXP LAIN NATURE AND SOURCE OF CASH FOUND. THE ASSESSEE VIDE HIS LETTER DATED 26.6.2000 HAS FURNISHED THE FOLLOWING EXPLANATION. DURING THE COURSE OF SEARCH AT OUR RESIDENCE ON 24.7.19 98 CASH OF RS .2,28,495/- WAS FOUND. OUT OF THAT RS .1,75,000/- WE HAVE OFFERED FOR TAXATION AND BALANCE IS SAVING FROM MONTHLY WITHDRAWALS. FOR INFORM ATION APRIL 98 TO JULY 98 THE WITHDRAWALS COMES TO RS.81,000/-. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANA TION OF THE ASSESSEE HAS HOWEVER, MADE THE ADDITION OF TOTAL AMOUNT OF CASH RS.2,28,495/- FOUND AT THE TIME OF SEARCH FOR ASSESSMENT YEAR 1999-00. ON APPEAL, THE LD. CIT(A) GAVE RELIEF ONLY ON THE ADDITION OF RS.53,995/- AND CONFIRMED THE ADDITION OF RS.1,75,000/- AS OFFERED BY THE ASSESSEE. THE ASSE SSING OFFICER WITHOUT BRINGING ANY OTHER MATERIAL ON RECORD HAS IMPOSED P ENALTY ON RS. 1,75,000/- WHICH HAS BEEN ASSESSED IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. SINCE THE ABOVE AMOUNT OF RS. 1,75,000/- WAS OFFERED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PR OCEEDING AND IN THE ABSENCE OF ANY PROVISIONS UNDER THE ACT FOR FILING THE REVISED RETURN OF INCOME FOR THE BLOCK PERIOD, AND KEEPING IN VIEW TH AT IT IS NOT THE CASE OF THE REVENUE THAT THE CASH OF RS.1,75,000/- FOUND AT THE TIME OF SEARCH AND OFFERED FOR TAXATION HAS COME FROM ANY UNDISCLOSED SOURCE OF INCOME WHICH WAS FOUND AT THE TIME OF SEARCH, WE ARE OF THE VIEW THAT MERELY BECAUSE THE ASSESSEE HAS SURRENDERED THE CASH OF RS.1,75,000/- AS UNDISCLOSED INCOME DOES NOT MEAN THAT THE ASSESSEE IS MANDATORILY LIAB LE TO PENALTY U/S.158 ITA NO.106/M/08 A.Y:BP ENDED 31.7.98 5 BFA(2). IN A RECENT JUDGMENT, IN DODSAL LTD. (SUPR A), THEIR LORDSHIPS HAVE HELD THAT THE SECTION IS DIRECTORY AND NOT MANDATOR Y. 7. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) THEI R LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SH ROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. DHARAMENDRA TEXT ILE PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HE ADNOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISH ED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIV EN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKIN G AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DET AILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRE CT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AND KEEP ING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE OFFER MADE BY THE ASSESSEE FOR TAXATION OF AN AMOUNT OF RS.1,75,000/- WAS NOT ACCEPTED BY THE REVENUE OR THERE WAS ITA NO.106/M/08 A.Y:BP ENDED 31.7.98 6 NO SUCH OFFER WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT LIABLE TO PENALTY U/S.158 BFA(2) OF THE ACT. ACCORDINGLY THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED. 8. IN THE RESULT, ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.9.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.9.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.