A.C.I.T. C.C. 22, MUMBAI V. RANI MUKERJI, MUMBAI

ITSSA 16/MUM/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0255 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 07-07-2014
• Assessment Year: misc
• Appeal Filed On: 17-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Unexplained expenditure; Search and seizure; Question of law
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM) .. , , ./I.T.(SS)A. NO.16/MUM/2012 ( / ASSESSMENT BLOCK PERIOD : 1990-91 TO 2001-02) ASSTT. COMMISSIONER OF INCOME TAX, CC- 22, ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. MS. RANI MUKERJI 701, VIDYA APARTMENT, 7 TH FLOOR, JANKI KUTIR, CHURCH ROAD, JUHU, MUMBAI-400049. ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ %& ./PAN/GIR NO. :AALPM8973B !' ' / APPELLANT BY : SHRI SANTOSH KUMAR #$!' ( ' /RESPONDENT BY : SHRI B V JHAVERI ) * ( +, / DATE OF HEARING : 10.7.2014 -. ( +, /DATE OF PRONOUNCEMENT : 31.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 16.01.2012 PASSED BY LD CIT(A)-39, MUMBAI AND IT RE LATES TO THE BLOCK PERIOD FROM 1990-91 TO 2001-02. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE PENALTY LEVIED U/S 158BFA(2) OF THE ACT IN RESPECT OF THE FOLLOWING TWO ITEMS OF INCOME:- (A) DIFFERENCE IN REMUNERATION RECEIVED RS.9.00 LAKHS I.T(SS)A NO.16/MUM/2012 I I T I T A 2 (B) UNACCOUNTED EXPENDITURE ON RENOVATION OF FLAT RS.5.00 LAKHS. 3. A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CONDUCTED IN THE HANDS OF THE ASSESSEE ON 26-09-2000. THE ASSESSEE FILED HER BLOCK RETURN DECLARING UNDISCLOSED INCOME AT RS.26,17,283/-. THE AO, HOWE VER, DETERMINED THE AMOUNT OF UNDISCLOSED INCOME AT RS.1,58,41,635/-. THE ASSESSMENT ORDER WAS CHALLENGED BY THE ASSESSEE BEFORE LD CIT(A) AND ALS O BEFORE THE ITAT. THE TRIBUNAL PASSED THE ORDER ON 07.01.2010 CONFIRMING CERTAIN ADDITIONS MADE BY THE AO. SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY U/S 158BFA(2) OF THE ACT ON THE ADDITIONS CONFIRMED BY THE TRIBUNAL, WHI CH INTER ALIA, INCLUDED FOLLOWING ITEMS:- (A) ADDITION RELATING TO DIFFERENCE IN THE REMUNERA TION IN RESPECT OF THE FILM NAMED BUS ITNA SA KHWAB HAI RS.9.00 LAKHS. (B) ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT M ADE IN INTERIOR DECORATION OF FLAT RS.5.00 LAKHS. THE LD CIT(A), HOWEVER, DELETED THE PENALTY BY HOLD ING THAT BOTH THE ABOVE SAID ADDITIONS HAVE BEEN MADE / CONFIRMED ON ESTIMATED B ASIS. AGGRIEVED BY THE ORDER OF LD CIT(A), THE REVENUE HAS FILED THIS APPE AL BEFORE US. 4. THE FACTS RELATING TO THE FIRST ITEM OF ADDI TION OF RS.9.00 LAKHS ARE THAT THE ASSESSEE HAD SHOWN THE REMUNERATION RECEIVED FOR TH E FILM CITED ABOVE AT RS.27.00 LAKHS. BASED ON THE SEIZED MATERIAL, THE AO HELD THAT THE ASSESSEE HAS RECEIVED RS.48.00 LAKHS AS REMUNERATION FOR THE ABO VE SAID FILM AND ACCORDINGLY ADDED THE DIFFERENCE TO THE UNDISCLOSED INCOME OF T HE ASSESSEE. THE SAME WAS CONFIRMED BY LD CIT(A). THE TRIBUNAL, HOWEVER, GAV E A FINDING THAT THE REMUNERATION FOR THE FILM WAS RS.36.00 LAKHS AND AC CORDINGLY RESTRICTED THE I.T(SS)A NO.16/MUM/2012 I I T I T A 3 ADDITION TO RS.9.00 LAKHS. AGAINST THIS ADDITION, THE AO HAS LEVIED PENALTY U/S 158BFA(2) OF THE ACT. 5. THE FACTS RELATING TO THE SECOND ITEM OF ADD ITION OF RS.5.00 LAKHS ARE THAT THE ASSESSEE HAD INCURRED EXPENSES ON RENOVATION OF FLAT NOS. 404, 405 AND 305, ALL THE THREE FLATS HAVING AGGREGATE AREA OF 2040 S Q.FT. BASED ON THE SEIZED MATERIALS, THE AO ADDED AMOUNTS NOTED IN VARIOUS LO OSE SHEETS, VIZ., RS.2,81,716/-, RS.5,21,000/-, RS.8,68,230/-, RS.4,9 8,680/- AND RS.5,00,000/-. IN THE QUANTUM APPELLATE PROCEEDINGS, THE TRIBUNAL ACC EPTED THE CONTENTION OF THE ASSESSEE THAT THERE WERE OVERLAPPING IN NOTING DOWN THE EXPENDITURE INCURRED IN RESPECT OF THE ABOVE SAID THREE FLATS. HENCE, CONS IDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ESTIMATED T HE COST INCURRED ON INTERIOR DECORATION OF ALL THE THREE FLATS AT RS.40.00 LAKHS . SINCE THE ASSESSEE HAD ALREADY DISCLOSED RS.34,84,082/-, THE TRIBUNAL CONF IRMED ADDITION TO THE EXTENT OF RS.5.00 LAKHS ONLY. AGAINST THIS ADDITION ALSO, THE AO HAS LEVIED PENALTY U/S 158BFA(2) OF THE ACT. 6. SINCE THE PENALTY HAS BEEN LEVIED U/S 158BF A(2) OF THE ACT, WE FEEL IT PERTINENT TO EXTRACT THE SAID PROVISION BELOW:- 2. THE ASSESSING OFFICER OR THE COMMISSIONER (AP PEALS) IN THE COURSE OF ANY PROCEEDING UNDER THIS CHAPTER, MAY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT B E LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TI MES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DE TERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC . PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE M ADE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYA BLE; I.T(SS)A NO.16/MUM/2012 I I T I T A 4 (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN. PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED B Y THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RET URN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UND ISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDI SCLOSED INCOME SHOWN IN THE RETURN. 7. THE QUESTION- WHETHER THE PENALTY PROVIDED U /S 158BFA(2) IS MANDATORY OR DISCRETIONARY WAS ALSO CONSIDERED BY THE VARIOUS BE NCHES OF TRIBUNAL. SINCE THE OPENING PORTION OF ABOVE SAID SECTION USES THE EXPR ESSION MAY DIRECT, THE TRIBUNAL HAS EXPRESSED THE VIEW THAT THERE IS A DIS CRETION TO THE ASSESSING OFFICER EITHER TO LEVY OR NOT TO LEVY PENALTY. IN THIS RE GARD, THE DECISION RENDERED BY THE CHENNAI BENCH OF TRIBUNAL IN THE CASE OF CH. SU RESH REDDY VS. ACIT (120 TTJ 523) MAY BE REFERRED TO. 8. WITH REGARD TO THE FIRST ISSUE, THE LD D.R SUBM ITTED THAT THE REMUNERATION FOR THE FILM WAS ORIGINALLY DETERMINED BY THE AO AT RS.48.00 LAKHS. HOWEVER, THE TRIBUNAL AFTER APPRECIATING THE SEIZED MATERIALS HA S HELD THAT THE ASSESSEE WAS TO RECEIVE A REMUNERATION OF RS.36.00 LAKHS. ACCOR DINGLY, THE TRIBUNAL HAS SUSTAINED THE ADDITION OF RS.9.00 LAKHS HOLDING THA T THE ASSESSEE HAS RECEIVED THE SAME BY WAY OF CASH. SINCE THE TRIBUNAL IS A F ACT FINDING AUTHORITY AND SINCE THE IMPUGNED ISSUE HAS BEEN DECIDED BY IT ON THE BA SIS OF SEIZED MATERIALS, THE LD D.R SUBMITTED THAT THE AO WAS JUSTIFIED IN LEVYI NG PENALTY ON THIS ADDITION. 9. ON THE CONTRARY, THE LD A.R SUBMITTED THAT TH E TRIBUNAL HAS WRONGLY CONFIRMED THE SAID ADDITION ON THE BASIS OF NOTING FOUND IN A DIARY. INVITING OUR ATTENTION TO THE COPIES OF CORRESPONDENCES EXCHANGE D BETWEEN THE ASSESSEE AND I.T(SS)A NO.16/MUM/2012 I I T I T A 5 THE PRODUCTION HOUSE SUBSEQUENT TO THE DATE OF SEAR CH, THE LD A.R SUBMITTED THAT THE ASSESSEE HEREIN, IN FACT, REDUCED THE REMU NERATION TO RS.27.00 LAKHS AS AGAINST THE AMOUNT OF RS.36.00 LAKHS ORIGINALLY PRO POSED. HE SUBMITTED THAT THE MANNER OF RECEIPT OF RS.27.00 LAKHS WAS ALSO DIFFER ENT FROM THE ONE NOTED IN THE DIARY. THE LD A.R FURTHER SUBMITTED THAT THE ASSES SEE WAS CONSTRAINED TO REDUCE THE REMUNERATION TO RS.27.00, SINCE THE CONCERNED F ILM DID NOT FAIR WELL. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE TRIBUNAL WAS WRONG IN SUSTAINING THE ADDITION OF RS.9.00 LAKHS WITHOUT APPRECIATING THE EVENTS THAT TOOK PLACE SUBSEQUENTLY. ACCORDINGLY, THE LD A.R SUBMITTED TH AT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY ON THE REASONING THAT THE A BOVE SAID ADDITION HAS BEEN SUSTAINED ON ESTIMATE BASIS. THE LD A.R FURTHER SU BMITTED THAT THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.9.00 LAKHS BY FILING APPEAL BEFORE THE HONBLE HIGH COURT OF BOMBAY AND THE SAME HAS BEEN ADMITTED. HE SUBMITTED THAT THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HIG H COURT WOULD MEAN THAT THE BONAFIDES OF THE ASSESSEES STAND ESTABLISHED AND I N THAT CASE, THE PENALTY IS NOT EXIGIBLE ON THOSE ISSUES. FOR THIS PROPOSITION, TH E LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BENCH OF TRIBUNAL I N THE CASE OF ACIT VS. EKTA EXPORTS IN IT(SS)A NO.27/MUM/2011 DATED 24.08.2012. 10. IN THE REJOINDER, THE LD D.R SUBMITTED THAT THE TRIBUNAL HAS, IN FACT, CONSIDERED THE SUBMISSIONS RELATING TO SUBSEQUENT R EDUCTION OF REMUNERATION IN PARAGRAPH 53 OF THE ORDER AND HAS REJECTED THE SAME BY HOLDING THE SAME TO BE AN AFTER THOUGHT. HE FURTHER SUBMITTED THAT THE HO NBLE DELHI HIGH COURT, IN THE CASE OF CIT VS. SPLENDER CONSTRUCTION (2013)(352 IT R 588), HAS HELD THAT, WHEN THE ORDER OF THE ASSESSING OFFICER IN THE QUANTUM P ROCEEDINGS WAS SUSTAINED BY I.T(SS)A NO.16/MUM/2012 I I T I T A 6 ALL THE AUTHORITIES AND THE COURT ALSO DISMISSED TH E APPEAL FILED BY THE ASSESSEE AT THE ADMISSION STAGE, IT COULD NOT BE SAID THAT T HE ISSUE WAS DEBATABLE. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ADMISSIO N OF APPEAL BY THE HIGH COURT CANNOT MAKE THE ISSUE DEBATABLE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND CAREFULLY PERUSED THE RECORD. BEFORE US, THE LD A.R PLACED STRONG R ELIANCE TO THE CORRESPONDENCES EXCHANGED BETWEEN THE ASSESSEE AND THE PRODUCTION H OUSE SUBSEQUENT TO THE DATE OF SEARCH AND CONTENDED THAT THE REMUNERATION WAS IN FACT REDUCED FROM RS.36.00 LAKHS TO RS.27.00 LAKHS AND HENCE THERE IS NO NECESSITY TO SUSTAIN THE ADDITION OF RS.9.00 LAKHS. ACCORDINGLY HE CONTENDE D THAT THE TRIBUNAL HAS SUSTAINED THE ADDITION ON THE BASIS OF INFERENCES. HOWEVER A CAREFUL PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL IN THE QUANTUM ASS ESSMENT PROCEEDING WOULD SHOW THAT THE TRIBUNAL HAS CONSIDERED THE CLAIM OF REDUCTION OF REMUNERATION SUBSEQUENT TO THE DATE OF SEARCH AND HAS EXPRESSED THE VIEW THAT THE SAME SEEMS TO BE AN AFTER THOUGHT. FURTHER THE TRIBUNAL HAS DULY CONSIDERED THE NOTING MADE IN THE SEIZED RECORD, THE CONDUCT OF TH E FATHER OF THE ASSESSEE WHO USED TO MAINTAIN RECORDS OF THE ASSESSEE AND ACCORD INGLY HELD THAT THE ASSESSEE WAS TO RECEIVE A REMUNERATION OF RS.36.00 LAKHS. S INCE THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED A SUM OF RS.27.00 LAKHS ON LY, THE TRIBUNAL HAS HELD THAT THE ASSESSEE MUST HAVE RECEIVED THE BALANCE AM OUNT OF RS.9.00 LAKHS IN CASH. THUS, WE NOTICE THAT THE TRIBUNAL HAS CONSID ERED ALL THE SUBMISSIONS MADE BY THE ASSESSEE, THE SEIZED MATERIAL, SURROUNDING C IRCUMSTANCES, CONDUCT OF THE ASSESSEES FATHER WHO MAINTAINED THE RECORD AND FIN ALLY HAS GIVEN A FINDING THAT THE REMUNERATION WAS RS.36.00 LAKHS. UNDER THESE S ET OF FACTS, WE ARE UNABLE TO I.T(SS)A NO.16/MUM/2012 I I T I T A 7 AGREE WITH THE CONTENTION OF THE LD A.R AS WELL AS WITH THE VIEW EXPRESSED BY LD CIT(A) THAT THE ADDITION OF RS.9.00 LAKHS HAS BEEN SUSTAINED ON ESTIMATE BASIS. IN OUR VIEW, THE ABOVE SAID ADDITION HAS BEEN SUSTA INED ON THE BASIS OF SEIZED MATERIAL ONLY. HENCE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTY ON THE ABOVE SAID ADDITION U/S 1 58BFA(2) OF THE ACT. 12. THE LD A.R ALSO CONTENDED THAT THE PENALTY IS NOT EXIGIBLE SINCE THE HONBLE HIGH COURT HAS ADMITTED THE APPEAL FILED BY THE ASSESSEE CHALLENGING THE DECISION RENDERED BY THE TRIBUNAL IN RESPECT OF THE ADDITION OF RS.9.00 LAKHS REFERRED ABOVE. IN THIS REGARD, THE LD A.R ALSO RE LIED UPON THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S EKTA EX PORTS (SUPRA). WE HAVE GONE THROUGH THE SAID DECISION AND WE NOTICE THAT T HE CO-ORDINATE BENCH HAS FOLLOWED DECISIONS RENDERED BY OTHER CO-ORDINATE BE NCHES IN RESPECT OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT. IN RESPECT OF PEN ALTY LEVIED U/S 271(1)(C) OF THE ACT, IT HAS BEEN HELD THAT THE ADMISSION OF SUBSTAN TIAL QUESTION OF LAW BY THE HONBLE HIGH COURT LENDS CREDENCE TO THE BONAFIDES OF THE ASSESSEE. THE SAID VIEW GETS SUPPORT FROM EXPLANATION 1 TO SEC. 271(1) (C) OF THE ACT. UNDER EXPLANATION 1 TO SEC. 271(1)(C), AN ASSESSEE CAN ES CAPE FROM PENALTY, IF HE PROVES HIS BONAFIDES. HENCE, THE TRIBUNALS HAVE EX PRESSED THE VIEW THAT THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HON BLE HIGH COURT MAKES THE ISSUE DEBATABLE AND THUS PROVES THE BONAFIDES OF TH E ASSESSEE. HOWEVER THE EXPLANATION 1 TO SEC. 271(1)(C) IS NOT APPLICABLE T O SEC. 158BFA(2) OF THE ACT. IN THE ABSENCE OF SUCH KIND OF RELATION, WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE ABOVE SAID PROPO SITION. I.T(SS)A NO.16/MUM/2012 I I T I T A 8 13. IN VIEW OF THE FOREGOING, WE SET ASIDE THE O RDER OF LD CIT(A) WITH REGARD TO THE PENALTY LEVIED ON THE ADDITION OF RS.9.00 LA KHS REFERRED ABOVE AND RESTORE THE ORDER OF THE AO IN RESPECT OF THE SAME. 14. THE NEXT ISSUE RELATES TO THE PENALTY LEVIED ON THE ADDITION OF RS.5.00 LAKHS RELATING TO THE INTERIOR DECORATION CARRIED OUT BY THE ASSESSEE IN THREE FLATS. WE HAVE ALREADY NOTICED THAT THE TRIBUNAL HAS GIVEN A FINDING THAT THERE WERE OVERLAPPING IN THE SEIZED MATERIALS WHEREIN THE ITE MS OF WORK WERE FOUND NOTED. UNDER THESE CIRCUMSTANCES, THE TRIBUNAL HAS ESTIMAT ED THE AMOUNT SPENT ON INTERIOR WORKS OF THREE FLATS AT RS.40.00 LAKHS AND THUS SUSTAINED THE ADDITION TO THE EXTENT OF RS.5.00 LAKHS. HENCE, WE AGREE WITH THE VIEW EXPRESSED BY LD CIT(A) ON THIS ADDITION THAT THE TRIBUNAL HAS SUSTA INED THE ADDITION ON ESTIMATE BASIS AND THE TRIBUNAL COULD NOT COME A CONCLUSION FROM THE SEIZED MATERIAL THAT THERE WAS UNDISCLOSED INCOME IN INCURRING INTERIOR DECORATION WORKS. HENCE, IN RESPECT OF THIS ISSUE, WE AGREE WITH THE LD CIT(A) AND ACCORDINGLY HOLD THAT THE FIRST APPELLATE AUTHORITY WAS JUSTIFIED IN DIRECTIN G THE ASSESSING OFFICER TO DELETE THE PENALTY. 15. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31ST JULY , 2014. -. ) / 0 1 31ST JULY, 2014 . ( 2* 3 SD SD ( / VIVEK VARMA) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ) * MUMBAI: 31ST JULY,2014. I.T(SS)A NO.16/MUM/2012 I I T I T A 9 . . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ) 5+ ( ) / THE CIT(A)- CONCERNED 4. ) 5+ / CIT CONCERNED 5. 62 #+ 7 , , 7 , ) * / DR, ITAT, MUMBAI CONCERNED 6. 2 8* / GUARD FILE. 9 ) / BY ORDER, TRUE COPY : % (ASSTT. REGISTRAR) , 7 , ) * /ITAT, MUMBAI