ACIT, New Delhi V. Sh. S.K. Sethi, New Delhi

ITSSA 16/DEL/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8956 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-08-2010
• Assessment Year: misc
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Keywords: Unexplained investment; Search and seizure; Block assessment
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER IT(SS)A.NO.16/DEL./2010 (BLOCK PERIOD : 1.4.1996 TO 19.2.1997) ACIT, CIRCLE 17 (1), VS. SHRI S.K. SETHI, NEW DELHI. 18/13, WEA, GANGA PLAZA, KAROL BAGH, NEW DELHI. (PAN : AAUPS5020L) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI GAJANAND MEENA, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER OF CIT (APPEALS)-XIX, NEW DELHI DATED 7.12.2009 FOR THE BL OCK PERIOD 1.4.1996 TO 19.2.1997. THE GROUND OF APPEAL TAKEN BY THE REVEN UE READ AS UNDER :- THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.3,00,000/- IMPOSED U/S 158BFA (2) OF THE INCOME- TAX ACT, 1961, WITHOUT CONSIDERING THE FACT THAT THE INCOME DETERMINED BY THE A.O. IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND HENCE AS PER THE SECOND PROVISO TO SUB SECTION 2 OF THE SECTION 158BFA, THE PENALTY U/S 158BFA (A2) IS IMPOSABLE ON THE EXCESS UNDISCLOSED INCOME. ITA NO.16/DEL./2010 2 2. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT THE PREMISES OF ASSESSEE ON 19.2.1997. DURING THE SEARCH, JEWELLERY AND VAR IOUS OTHER DOCUMENTS WERE FOUND AND THE PANCHNAMA WAS DRAWN IN THIS REGARD. THE SEIZURE WAS ALSO EFFECTED. THE ASSESSEE SUBMITTED BLOCK PERIOD RETU RN DECLARING UNDISCLOSED INCOME OF RS.70 LACS ON 14.5.1997. THE ASSESSMENT WAS FINALIZED U/S 143(3) AND 148BC ON 29.2.1999 AT AN INCOME OF RS.2,23,42,2 70/-. FINALLY, THE ADDITION SUSTAINED OVER AND ABOVE THE UNDISCLOSED I NCOME FILED IN THE RETURN WERE OF RS.3,51,267/-, OUT OF WHICH RS.3,50,000/- W AS TOWARDS THE JEWELLERY AND RS.1,270/- WAS TOWARDS THE DIFFERENCE IN THE CA SH. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS AND LEVIED THE PE NALTY OF RS.3 LACS BY HOLDING AS UNDER : 6. SINCE THE UNDISCLOSED INCOME DETERMINED BY THE AO IN THIS CASE IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND HENCE AS PER THE SECOND PROVISO ATTACHED TO SUB-SECTION 2 OF THE SEC TION 158BFA, THE PENALTY UNDER SECTION 158BFA(2) OF THE ACT SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS I N EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. K EEPING IN VIEW ALL RELEVANT FACTS OF THIS CASE, I HOLD THAT PENALTY U/ S 158BFA(2) OF THE ACT IS IMPOSABLE IN THIS CASE WHICH IS COMPUTED AS UNDE R :- AMOUNT OF UNDISCLOSED INCOME DETERMINED RS.73,51,270/- AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN RS.70,00,000/- AMOUNT OF EXCESS UNDISCLOSED INCOME RS. 3 ,51,270/- (73,51,270-70,00,000/-) AMOUNT OF TAX LEVIABLE RS.2,10,762/-(60% OF 3,51, 270/-) PENALTY MINIMUM LEVIABLE RS.2,10.762/-(AMOUNT OF T AX LEVIABLE) M LEVIABLE PENALTY MAXIMUM LEVIABLE RS.6,32,286/-(3 TIMES OF THE TAX LEVIABLE) ITA NO.16/DEL./2010 3 7. AFTER HAVING CONSIDERED FACTS OF THE CASE, A PEN ALTY OF RS.3,00,000/- IS IMPOSED IN THIS CASE U/S 158BFA(2) OF THE I.T. ACT, 1961. 3. CIT (A) DELETED THE LEVY OF PENALTY BY HOLDING A S UNDER :- 5. I HAVE GONE THROUGH THE ASSESSMENT ORDER, CIT(A ) ORDER, PENALTY ORDER AND THE DETAILED WRITTEN SUBMISSIONS IN THIS REGARD FILED BY THE AR. 6. SEARCH & SEIZURE OPERATIONS WERE CARRIED OUT AT THE PREMISES OF THE APPELLANT ON 19TH FEBRUARY, 1997. D URING THE SAID SEARCH, JEWELLERY AND VARIOUS OTHER DOCUMENTS ETC. WERE FOUND AND PANCHNAMA WAS DRAWN IN RELATION TO THE SE IZURE EFFECTED. THE APPELLANT FILED THE RETURN OF INCOME FOR THE BLOCK PERIOD SHOWING UNDISCLOSED INCOME OF RS.70,00,000/- ON 14TH MAY, 1997. ASSESSMENT ORDER U/S 143(3)/158BC WAS PA SSED ON 29TH FEBRUARY, 1999, DETERMINING TOTAL UNDISCLOSED INCOME OF THE APPELLANT AT RS.2,23,42,270/-. THE APPELLANT FI LED APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE SECOND APPEAL WAS ALSO FILED TO THE ITAT AND THE AD DITIONS MADE BY THE ASSESSING OFFICER WERE REDUCED CONSIDER ABLY. AFTER GIVING NECESSARY APPEAL EFFECT, THE UNDISCLOS ED INCOME FOR THE BLOCK PERIOD STOOD DETERMINED AT RS.73,51,2 70/-. 7. THE ASSESSEE DECLARED RS. 70,00,000/- AS UNDISC LOSED INCOME FOR THE BLOCK PERIOD THE BREAKUP OF WHICH IS AS UNDER : ITEM AMOUNT AGAINST CASH FOUND 15,49,000 AGAINST JEWELLERY 28,50,000 AGAINST RENOVATION OF FARM HOUSE 26,01,000 TOTAL 70,00,000 8.1 THE AO WHILE MAKING THE ASSESSMENT ON 26.02.199 9 U/ S 143/ 158BC INTER ALIA THE FOLLOWING ADDITIONS WERE MADE. VALUE OF JEWELLARY 5,00,000 CASH DIFFERENCE 1,267 ITA NO.16/DEL./2010 4 8.2 THE CIT(A) VIDE ORDER DATED 03.02.2004 REDUCED THE ADDITION OF 5,00,000/- TO RS.3,50,000/- BY OBSERVIN G AS UNDER: 'THE SECOND GROUND OF APPEAL IS REGARDING THE ADDIT ION OF VALUE OF JEWELLERY OF RS. 5 LAKHS FOR ASSESSMENT YE AR 1996-97. THE AO HAS MADE THE ADDITION ON THE BASIS THAT THOUGH THE APPELLANT HAD SHOWN JEWELLERY WORTH RS. 5 LAKHS IN HIS WEALTH-TAX RETURN FOR THE FIRST TIME, BUT THE AO HAS STATED THAT THERE WAS NO CORROBORATIVE EVIDE NCE IN THE INCOME-TAX RETURN TO SHOW THAT INVESTMENT OF RS . 5 LAKHS HAS BEEN MADE FOR JEWELLERY. THE APPELLANT'S COUNSEL HAS STATED IN HIS REPLY THAT IT CANNOT BE D ENIED THAT THE WIFE OF THE ASSESSEE WOULD BE IN POSSESSIO N OF JEWELLERY OF RS. 5 LAKHS. SHE WAS REGULARLY ASSESSE D TO INCOME-TAX FOR THE PAST SEVERAL YEARS AND HAD BEEN SHOWING SUBSTANTIAL AMOUNT OF INCOME AND THE ASSESS EE WOULD BE ALSO ENTITLED TO RELIEF DUE TO BOARD'S CIR CULAR NO. 1916 DATED 15, 1994. LOOKING TO THE FACTS OF TH E CASE SINCE THE JEWELLERY HAS BEEN SHOWN FOR THE FIRST TI ME IN 1996-97 WITHOUT ANY PROOF OF PURCHASE DURING THE YE AR, THE AO'S ADDITION CANNOT BE SUSTAINED FOR THE FULL AMOUNT OF RS. 5 LAKHS BUT BECAUSE EVERY HINDU MARRIED LADY OF SOME STATUS WOULD BE HAVING SOME JEWELLERY. HENCE CREDIT TO THE JEWELLERY TO THE TUNE OF RS. 1.5 LAKH S IS GIVEN WHICH SHE WOULD HAVE RECEIVED AT THE TIME OF HER MARRIAGE AN OTHER OCCASIONS. THE BALANCE RS.3,50,00 0/- ADDITION ON ACCOUNT OF JEWELLERY IS SUSTAINED.' 8.3 THE AO TOOK INTO ACCOUNT THE FOLLOWING TWO ITEM S OF ADDITIONS FOR LEVY OF PENALTY. VALUE OF JEWELLERY 3,50,000/- CASH DIFFERENCE 1,267/- 9. THE MAIN CONTENTION OF THE AO IS THAT THE DIFFER ENCE BETWEEN THE DETERMINED INCOME AND RETURNED INCOME C ALL FOR LEVY OF PENALTY U/S 158BFA(2) AUTOMATICALLY. 10.1 THE HON'BLE ITAT, IN THE CASE OF DR. HAKEEM S. A. SYED SATHAR VS. ACIT 120 ITD 1 (CHENNAI), OBSERVED AS UN DER WITH REGARD TO LEVY OF PENALTY U/S 158BFA(2). ITA NO.16/DEL./2010 5 '11. IN THE SCHEME OF THE ACT, THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATING FROM PROCEEDINGS OF ASSESSMENT ARE ESSENTIALLY INDEPENDE NT AND A SEPARATE ASPECT OF THE PROCEEDINGS WHICH CLOS ELY FOLLOW THE ASSESSMENT PROCEEDINGS. PENALTY PROCEEDI NGS ARE QUASI-CRIMINAL. FINDINGS GIVEN IN ASSESSMENT PROCEEDINGS ARE CERTAINLY RELEVANT AND HAVE PROBATI VE VALUE, BUT SUCH FINDINGS ARE MATERIAL ALONE AND MAY NOT JUSTIFY THE IMPOSITION OF PENALTY IN A GIVEN CASE, BECAUSE THE CONSIDERATIONS THAT ARISE IN PENALTY PROCEEDING S ARE DIFFERENT FROM THOSE THAT ARISE IN ASSESSMENT PROCE EDINGS. THE FINDINGS RECORDED IN THE ASSESSMENT ORDER CONST ITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE P URPOSE OF THE PENALTY PROCEEDINGS. 12. IT CANNOT BE SAID THAT THE PROCESS OF IMPOSITIO N OF PENALTY IS AUTOMATIC IN THE EVENTUALITY OF ESTIMATE D INCOME. ALL THE ATTENDANT CIRCUMSTANCES OF THE CASE MUST BE CAREFULLY SCRUTINIZED. THE QUESTION WHETHER PENA LTY SHOULD BE LEVIED MUST BE CONSIDERED ON THE BASIS OF THE JUDICIAL DETERMINATION. IT MUST BE PROVED BEYOND TH AT SHADOW OF DOUBT THAT THERE WAS ACTUALLY INCOME AND FURTHER THAT INCOME WAS NOT DISCLOSED. THE MERE FAC T OF ADDITION ON ESTIMATED BASIS, PARTICULARLY WHEN THE ASSESSMENT IS MADE ON THE INFERENCE FLOWING FROM TH E INABILITY OF THE ASSESSEE TO ESTABLISH THE CASE PLE ADED BY HIM, WILL NOT BE SUFFICIENT FOR THE PURPOSE OF IMPO SITION OF PENALTY. THE DEGREE OF PROOF REQUIRED FOR THE IMPOSITION OF PENALTY IS QUITE DIFFERENT FROM AND I S OF A MUCH HIGHER ORDER THAN THAT REQUIRED FOR THE PURPOS E OF MAKING ADDITION ON ESTIMATE BASIS. BESIDES, ADDITIO N ON THE BASIS OF ESTIMATE DOES NOT IPSO FACTO SUPPLY EV IDENCE OF CONCEALMENT SO AS TO JUSTIFY PENALTY. THE MAXIM OF ENGLISH LAW AS PROPOUNDED BY JUSTICE HOLROYD J. PRESCRIBES: 'IT IS BETTER THAT TEN GUILTY MEN SHOUL D ESCAPE RATHER THAN ONE INNOCENT SHOULD SUFFER.' FINDING OF CONCEALMENT CANNOT BE BASED ON ESTIMATION ALONE. WE HAVE CONSIDERED THE ENTIRE CONSPECTUS OF THE CASE. WE FIND THAT IN THE FACTS OF THE PRESENT CASE, THE FAC TUM OF CONCEALMENT WAS NOT PROVED BEYOND THE SHADOW OF DOUBT. ADDITIONS WERE MADE SOLELY ON THE BASIS OF ITA NO.16/DEL./2010 6 QUOTATIONS IN CONSULTATION REGISTER. CASH RECEIPTS CANNOT BE DETERMINED CORRECTLY ON THE BASIS OF QUOTATIONS ALONE. NO ENQUIRY WAS MADE TO FIND OUT THE TRUTH. JUSTICE IS TRUTH IN ACTION. DE HORS SUFFICIENT EVIDENCE PENALTY CANN OT BE LEVIED. THEREFORE, IN OUR OPINION, IT IS NOT A FIT CASE FOR THE MAINTENANCE OF PENALTY. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME.' 10.2 THE HON'BLE ITAT, IN THE CASE OF SALUJA HIRE P URCHASE LTD. VS. ACIT 120 ITD 394 (LUCKNOW), OBSERVED AS UN DER WITH REGARD TO LEVY OF PENALTY U/S 158BFA(2). 'PENALTY CAN BE LEVIED ONLY WHEN A DUTY IS CAST ON THE ASSESSEE TO DISCLOSE CERTAIN INCOME IN THE BLOCK RE TURN AND NOT BECAUSE CERTAIN INCOME IS FINALLY ASSESSED IN THE BLOCK ASSESSMENT. MERELY BECAUSE A PARTICULAR INCOM E IS ASSESSED IN THE BLOCK ASSESSMENT, IT DOES NOT LEAD TO THE INFERENCE THAT IT WAS DUTY OF THE ASSESSEE TO DISCL OSE THE SAME IN THE BLOCK RETURN. ONCE IT IS NOT ESTABLISHE D THAT THE ASSESSEE WAS DUTY-BOUND TO DISCLOSE SHARE APPLI CATION MONEY OF RS. 5,55,000/- IN THE BLOCK RETURN THE QUE STION OF LEVYING PENALTY ON ACCOUNT OF IT BEING AGREED TO BE ASSESSED DOES NOT ARISE. AS A RESULT, WE FIND THAT EXPLANATION OF THE ASSESSEE IS SATISFACTORY. THE RE VENUE HAS NOT MADE OUT A CASE FOR SUSTAINING THE PENALTY. THE PENALTY SO LEVIED IS, ACCORDINGLY, CANCELLED. THERE FORE, THE APPEAL OF THE ASSESSEE IS ALLOWED.' 10.3 THE HON'BLE ITAT, IN THE CASE OF CH. SURESH RE DDY VS. ACIT 120 ITD 428 (CHENNAI), OBSERVED AS UNDER WITH REGARD TO LEVY OF PENALTY U/S 158BFA(2). '11. IN THE LIGHT OF THE ABOVE OBSERVATIONS, WE ARE OF THE VIEW THAT EVEN IF THE ASSESSEE HAD NOT STRICTLY COMPLIED WITH THE CONDITIONS IMPOSED BY THE FIRST P ROVISO AND EVEN WHERE THE SECOND PROVISO IS ATTRACTED, STI LL IT WOULD BE WITHIN THE POWERS OF THE INCOME - TAX AUTHORITIES NOT TO LEVY THE PENALTY HAVING REGARD T O THE BONA FIDE CONDUCT OF THE ASSESSEE, COOPERATION SHOW N IN THE COMPLETION OF THE BLOCK ASSESSMENT AND GENERAL CONDUCT OF THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SUCH OTHER RELEVANT FACTORS. IN OUR ITA NO.16/DEL./2010 7 OPINION, IN THE PRESENT CASE, THE CONDUCT OF THE AS SESSEE IS BONA FIDE. 12. IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9, THE HON'BLE SUPREME COURT HELD TH AT WHERE THE ASSESSEE CLAIMED THAT HE OFFERED ADDITION AL INCOME ONLY TO BUY PEACE AND AVOID LITIGATION AND T HE DEPARTMENT DID NOT PROVE CONCEALMENT BUT SIMPLY RES TED ITS CONCLUSION ON THE VOLUNTARY SURRENDER OF INCOME BY ASSESSEE IN GOOD FAITH, NO PENALTY FOR CONCEALMENT OF INCOME CAN BE LEVIED. IN OUR OPINION, THE FACTS OF THE CASE BEFORE US ARE FULLY COVERED BY THIS DECISION OF THE HON'BLE APEX COURT.' 11. THE STATUTE HAS RECOGNIZED THAT ASSESSMENT PROC EEDINGS AND PENALTY PROCEEDINGS ARE DISTINCT AND INDEPENDEN T OF EACH OTHER. 11.2 FROM THE ABOVE DECISIONS IT IS VERY CLEAR THAT ANY ADDITION MADE TO THE RETURNED INCOME WOULD NOT AUTO MATICALLY CALL FOR LEVY OF PENALTY. STRINGENT PROOF IS REQUIR ED TO IMPOSE PENALTY IN RESPECT OF THE ITEMS OF ADDITIONS TAKEN INTO CONSIDERATION FOR LEVY OF PENALTY. THE CASE IS EXAM INED IN THE BACKDROP OF THE LEGAL POSITION LAID DOWN BY HIGHER JUDICIAL AUTHORITIES. IN THE CASE ON HAND NO MATERIAL WAS BR OUGHT ON RECORD TO PROVE THAT THERE IS UNDISCLOSED INVESTMEN T IN THE JEWELLERY. MOREOVER THE ASSESSEE HAS OFFERED AN AMO UNT OF RS.28,50,000/- IN THE RETURN FILED FOR BLOCK PERIOD AFTER SEARCH & SEIZURE OPERATION. THERE IS ESTIMATE WITH REGARD TO UNACCOUNTED INVESTMENT MADE IN THE JEWELLERY. CONSI DERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSIT ION CITED, THERE IS NO CASE FOR LEVY OF PENALTY U/S 158BFA (2) ON THE DIFFERENCE AMOUNT OF RS.3,51,270/- (73,51,270 -70,0 0,000). 12. IN VIEW OF THE FACTS BROUGHT ON RECORD AND THE LEGAL POSITION CITED, THERE IS NO CASE FOR LEVY OF PENALT Y. THE PENALTY LEVIED IS HEREBY CANCELLED. 4. AFTER HEARING THE REVENUE, WE FIND THAT THE REVE NUE HAS FAILED TO CONTROVERT THE FINDING MADE BY THE CIT (A) WHILE DE LETING THE PENALTY. NONE ITA NO.16/DEL./2010 8 ATTENDED ON BEHALF OF THE ASSESSEE. SINCE THE REVE NUE HAS FAILED TO CONTROVERT THE FINDING OF LEARNED CIT (A) FOR DELETING THE PEN ALTY, THEREFORE WE UPHOLD THE ORDER OF CIT (A) AND DISMISS THE GROUND TAKEN B Y THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF AUGUST, 2010. SD/- SD/- (I.P. BANSAL) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF AUGUST, 2010 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XIX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.