Shri Purushottam S.Multani, Ahmedabad V. The Dy.CIT., Cent.Circle-1(3), Ahmedabad

ITSSA 170/AHD/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2329 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-06-2016
• Assessment Year: misc
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA ARS; S N SOPARKAR
• Keywords: Search and seizure; Principle of natural justice; Reasonable cause; Non compliance; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. IT(SS)A NO.170/AHD/2011 BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 SHRI PURUSHOTTAM S. MULTANI, 33, AMALTAS BUNGLOWS, NR. SUMERU BUNGLOWS, NR. HOTEL SARTHI VASTRAPUR, BODAKDEV, AHMEDABAD. VS. DCIT, CIRCLE-3, AHMEDABAD. APPELLANT RESPONDENT PAN AAYPM 2624G AND IT(SS)A NO.95/AHD/2011 BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 ACIT, CIRCLE-3, AHMEDABAD. VS. SHRI PURUSHOTTAM S. MULTANI, 33, AMALTAS BUNGLOWS, NR. SUMERU BUNGLOWS, NR. HOTEL SARTHI VASTRAPUR, BODAKDEV, AHMEDABAD. APPELLANT RESPONDENT APPELLANT BY SHRI S. N. SOPARKAR & P.M. MEHTA, ARS RESPONDENT BY SHRI SANJAY KUMAR, SR. DR DATE OF HEARING: 15/6/2016 DATE OF PRONOUNCEMENT: 03/8/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 2 THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 30/11/2010 IN APPEAL NO.CIT(A)/GNR/107/2009-10 PASSED AGAINST ORDER U/S 158BFA(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR BLO CK YEAR FY 1996- 97 TO 2001-02 & 1/4/2002 TO 25/7/2002 FRAMED ON 30/ 10/2009 BY DCIT, CIRCLE-3, AHMEDABAD. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF BUILDER, RUNS PETROL PUMPS AND ALSO MONEY LENDING. SEARCH AND SEIZURE OPERATION U/ S 132(1) OF THE ACT WAS CONDUCTED ON 25.07.2002 AND NOTICE U/S 158B C OF THE ACT WAS ISSUED ON 10/02/2003 TO FILE RETURN OF INCOME F OR THE RELEVANT BLOCK PERIOD. ASSESSEE FILED THE RETURN OF INCOME O N 23.04.2004 DISCLOSING AN INCOME OF RS.20,00,000/- FOR THE BLOC K PERIOD. BLOCK ASSESSMENT U/S 158BC OF THE ACT WAS FINALIZED ON 30 /7/2004 AND INCOME WAS ASSESSED AT RS.6,56,39,749/-. MATTER WAS CARRIED BEFORE LD. CIT(A) AND SUBSEQUENTLY TO THE TRIBUNAL AND MAJ OR RELIEF WAS GRANTED TO ASSESSEE AND AFTER SUSTAINING TOTAL ADDI TION OF RS.8,03,600/-, TOTAL INCOME REMAINED AT RS.28,03,60 0/- ON WHICH LD. ASSESSING OFFICER LEVIED PENALTY U/S 158BFA(2) OF T HE ACT AT RS.17,15,803/- BY APPLYING THE PROVISO (1) OF SEC.1 58BFA (2) OF THE ACT. THE BASIC REASON OBSERVED BY LD. ASSESSING OF FICER WHILE FRAMING PENALTY ORDER U/S 158BFA(2) OF THE ACT ON 3 0.10.2009 WAS THAT ASSESSEE HAS OFFERED INCOME OF RS.20,00,000/- IN HIS RETURN AND OUT OF TOTAL TAX LIABILITY OF RS.12 LACS, PAID ONLY RS.5 LACS AND WAS, IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 3 THEREFORE, OUT OF THE IMMUNITY GRANTED IN THE PROVI SO (1) OF SUB-SEC.(2) OF SEC.158BFA OF THE ACT AND ACCORDINGLY CALCULATED PENALTY ON THE TOTAL INCOME ASSESSED AFTER THE APPEAL EFFECT ORDER OF THE TRIBUNAL WHEREIN INCOME WAS DETERMINED AT RS.28,03,600/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND GOT PART RELIEF AS LD. CIT(A) WAS OF THE VIEW THAT PROV ISO (1) OF SUB-SEC. (2) OF SECTION 158BFA WAS NOT APPLICABLE TO ASSESSEE AS HIS INTENTION WAS TO PAY OFF TOTAL TAX LIABILITY BUT WAS PREVENTE D FROM PAYING SO DUE TO RESTRAINT ORDERS PASSED BY THE DEPARTMENT ON THE RECOVERABLE LOANS & ADVANCES RATHER PENALTY IS LEVIABLE AS PER THE PROVISO (2) OF SUB-SEC.(2) OF SECTION 158BFA OF THE ACT AND WHILE DECIDING SO OBSERVED AS UNDER :- 6. I HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSION MADE BY THE ASSESSEE. THE PENALTY HAS BEEN LEVIED ON THE BASIS OF UNDISCLOSED INCOME OF RS.28,03,600/-. THE ASSESSEE HAD FILED RETURN FOR THE BLOCK PER IOD ON 23/4/2004 DECLARING UNDISCLOSED INCOME OF RS.20,00,000/-. THE LEVY OF PENALTY IS BEING DISCUSSED AND DECIDED IN TWO PARTS ; ' I) ON THE UNDISCLOSED INCOME REPRESENTED BY THE RETURN AND II) THE PORTION OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER WHICH IS IN EXCESS OF THE RETURNED INCOME I. ON THE UNDISCLOSED INCOME REPRESENTED BY T HE RETURN THE ASSESSING OFFICER HAS NOT GIVEN THE BENEFIT OF PROVISO ONE STATING THAT THE ASSESSEE HAD NOT PAID THE TAXES AS REQUIRED BEFORE FILING THE RETURN AND NO CASH OR MONEY WAS LYING SEIZED WITH THE DEPARTMENT. THE ASSESSEE'S PLEA MAINLY ARE - IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 4 A) THE ASSESSEE'S CASE LIES IN SECOND PROVISO AND T HEREFORE THE PROVISIONS OF THE FIRST PROVISO ARE NOT APPLICABLE ON HIM. HE HAS ALSO RELIED ON SOME JUDGMENTS OF NON-JURISDICTIONAL APPE LLATE TRIBUNALS. B) THE ASSESSEE'S AMOUNTS WITH THE DEBTORS WERE LYING ATTACHED, AND IN THIS SENSE THEIR MONEY WAS LYING SEIZED. C) WITHOUT PREJUDICE TO ABOVE, THEY WERE PREVENTED BY SUFFICIENT CAUSE AS ABOVE AND THEREFORE IN THE FACTS AND CIRCUMSTANCES NO PENALTY IS LEVIABLE. AS FAR AS THE CONTENTION A) ABOVE IS CONCERNED, I R ESPECTFULLY BEG TO DIFFER. THE PROVISIONS OF THE ACT HAVE TO BE UNDERS TOOD IN A WAY THAT THERE IS A HARMONIOUS CONSTRUCTION. CONSIDER TWO CASES. TWO HY POTHETICAL ASSESSEES FILE BLOCK RETURNS OF RUPEES ONE CRORE EACH. BOTH T HE ASSESSEES FAIL TO PAY FULL TAXES .NO ADDITION IS MADE IN THE FIRST CASE AS HE HAD COMPUTED HIS UNDISCLOSED INCOME CORRECTLY. HOWEVER IN THE SECOND CASE AND ADDITION OF RS. ONE LAKH IS MADE AS THE ASSESSING OFFICER FINDS ADDITIONAL UNDISCLOSED INCOME. GOING BY THE CONSTRUCTION PROPOSED WHILE FI RST ASSESSEE WOULD HAVE TO PAY A MINIMUM OF PENALTY OF RS.60 LAKHS THE SECO ND ESCAPES WITH ONLY RS.60,000. IT IS TO BE NOTED THAT THE COMPLIANCE OF THE FIRST ASSESSEE IS A LITTLE BETTER. THE SITUATION CANNOT BE ENVISAGED AND THERE FORE ANY SUCH MEANING HAS TO BE REJECTED. IT IS HELD THAT TO GET THE BENE FIT OF NON-LEVY OF PENALTY ON THE UNDISCLOSED INCOME REPRESENTED BY THE BLOCK ASS ESSMENT RETURN, THE CONDITIONS OF FIRST PROVISO ARE TO BE MET. THE EXEM PTION FROM PENALTY PROVIDED BY THE FIRST PROVISO IS NOT TO BE TAKEN LIGHTLY AND CONDITIONS ARE TO BE STRICTLY FOLLOWED. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. ANJU R. INANI 323 ITR 626. IN THIS CASE THE ASSESSEE HAD DISCLOSE D THE INCOME BUT HAD DISPUTED TAX RATES IN APPEAL. THIS WAS TAKEN AS NON -FULFILLMENT OF CONDITIONS OF FIRST PROVISO AND THE BENEFIT WAS THEREFORE DENIED. THE ASSESSEE IS CLAIMING ASSESSEE'S AMOUNTS WITH THE DEBTORS WERE LYING ATTA CHED, AND IN THIS SENSE THEIR MONEY WAS LYING SEIZED. DEBT IS NOT MONEY NOR CAN IT BE SEIZED. IN FACT IT WAS LYING ATTACHED AND NOT SEIZED. THEREFORE THE CO NDITIONS OF FIRST PROVISO ARE NOT MET. NOW, IT HAS TO BE SEEN THAT WHETHER THERE WERE REAS ONABLE CAUSE WITH THE ASSESSEE. IT IS SEEN THAT NOTICE U/S 158BC WAS ISSU ED ON 10/02/2003. AT THAT TIME THE LOANS WERE LYING ATTACHED BY THE DEPARTMEN T. IT IS NOT THE CASE THAT THE ASSESSEE DID NOT WANT TO PAY TAX. HE HAD ALREAD Y PAID RS. FIVE LAKH BEFORE FILING THE RETURN. IN THE CIRCUMSTANCES WHER E MAJOR LOANS ADVANCED WERE LYING ATTACHED BY THE DEPARTMENT, THE ASSESSEE DIFFICULTY IN ARRANGING THE TAX CAN BE UNDERSTOOD. THE ASSESSEE HAD PAID TA XES IN VARIOUS INSTALLMENTS AFTER FILING THE RETURN. THIS SHOWS TH E INTENTION OF THE ASSESSEE OF IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 5 PAYING TAXES ON RETURNED INCOME. THE ASSESSEE HAS N OT DISPUTED THE RETURNED INCOME IN APPEAL. THE ASSESSEE'S INTENTION OF PAYING TAXES AND CIRCUMSTANCES OF HIS FAILURE TO DO SO BEFORE FILING RETURN ARE ALSO CLEAR FROM THE NOTE ON THE RETURN FILED. IN THE CIRCUMSTANCES; I H OLD THAT THE ASSESSEE HAD FULFILLED ALL CONDITIONS OF FIRST PROVISO OF SECTIO N 158 BFA (2) EXCEPT PAYING THE FULL TAXES ON RETURNED INCOME BEFORE FILING RETURN, AND FOR THIS FAILURE ALSO HE HAD A REASONABLE CAUSE. THEREFORE, IT.IS HELD THAT NO PENALTY IS LEVIABLE ON THE BASIS OF UNDISCLOSED INCOME TO THE EXTENT OF THAT D ECLARED IN THE BLOCK ASSESSMENT RETURN, I.E., RS. 20 LAKHS. II THE PORTION OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER WHICH IS IN EXCESS OF THE RETURNED INCOME THE MAIN PLEA OF THE ASSESSEE REGARDING THIS PART O F UNDISCLOSED INCOME SUSTAINED IN QUANTUM BY THE HONBLE ITAT IS THAT 'ON THE FACTS AND CIRCUMSTANCES THAT ASSESSEE WAS JUSTIFIED TO BELIEVE THAT THIS WA S NOT HIS UNDISCLOSED INCOME AND THE ADDITION SUSTAINED IS BE ST AN OPINION BASED ON PROBABILITY'. THE UNDISCLOSED INCOME HAS BEEN WORKED OUT BOTH CON SIDERING INVESTMENTS AND INCOME ASSESSMENT YEAR WISE AND ADD ITION ON RETURN INCOME IS MAINLY BECAUSE OF RS.6.5 LAKH ADDITION ON THE BASIS OF PROMISSORY NOTE AND RS.2.5 LAKHS ADDITION ON UNDISC LOSED INCOME REPRESENTED BY ASSESSEE SHARE IN HIRA PANNA PROJECT . AS FAR AS THE PROMISSORY NOTE OF RS.6.5 LAKH $ CONC ERNED, THIS ISSUE AND ASSESSEE'S EXPLANATION WAS CONSIDERED THREAD BARE B Y THE COMMISSIONER APPEALS WHILE DECIDING THE QUANTUM. THE RELEVANT OB SERVATIONS ARE BEING REPRODUCED BELOW; 'I FIND THAT THE APPELLANT HAS ATTEMPTED TO MIX THE ISSUE AS FAR AS PROMISSORY NOTES OF RS.6.5 LAKHS PERTAINING TO SHRI NARENDRA KHESKANI DATED 1.2.2002 WAS CONCERNED. THE AGREEMEN T FOR THE FINANCIAL JOINT VENTURE PARTNERSHIP WITH KHESKANI G ROUP IS DATED 9.4.99 AND OTHER PROMISSORY NOTES IN THE NAME OF PR UTHVI BUILDCON P LTD AS WELL AS CHASE BUILDCON PROJECT LTD ARE PERTA INING TO THE YEAR 1999 ONLY. THEY ARE IN FACT-DATED 9.4,99 WHEN THE A GREEMENT WAS ENTERED INTO RS.5 LAKHS ON 24.9.99. THE WHOLE AMOUN T OF RS. 15 LAKHS WAS GIVEN BY THE APPELLANT APPARENTLY ON 11.1 .99 WHICH INCLUDED RS. 6 LAKHS BY CHEQUES DISCLOSED IN THE BO OKS OF ACCOUNT AN RS.9 LAKHS BY CASH WHICH IS OFFERED AS UNDISCLOS ED INCOME BY THE IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 6 APPELLANT IN THE BLOCK RETURN. THE PROMISSORY NOTE OF RS.6.5 LAKHS DATED 1.2.2000 IN THE NAME OF SHRI NARENDRA .KESHKA NI, THEREFORE / PRIMA FACIE DOES NOT LINK WITH THE FINANCING TRANSA CTIONS OF THE APPELLANT WITH KESHKANI GROUP. THERE IS ALSO NO MEN TION OF REQUIREMENT OF SHRI NARENDRA KESHKANI GIVING PERSON AL GUARANTEE IN THE JOINT VENTURE MOU. FURTHER, TO ABOVE, IT ALSO D OES NOT MATCH WITH THE TOTAL FIGURE OF RS.15 LAKHS AS AT ONE POINT OF TIME, THE APPELLANT IS CLAIMING ADVANCE OF RS.6.00 LAKHS RECORDED IN THE B OOKS AND BALANCE OF RS.9 LAKHS AS PART OF DISCLOSURE IN THE BLOCK RETURN. I, THEREFORE, FIND THAT THIS WAS TOTALLY A SEPARATE TR ANSACTION BETWEEN THE APPELLANT AND SHRI KHESHKANI AND ON THE BASIS O F MATERIAL AVAILABLE ON RECORD, THE AO WAS JUSTIFIED IN TREATI NG THE SAME AS SEPARATE INVESTMENT OF THE APPELLANT WHICH HAD NOTH ING TO DO WITH THE JOINT VENTURE PROJECT WITH KESHKANI GROUP AS NEITHER FIGURES WERE MATCHING NOR THE DATES WERE SUITABLY FITTING IN THE JOINT VENTURE TRANSACTIONS. THE PROMISSORY NOTE ALSO HAS PECULIARITY IN THE SE NSE THAT IT WAS SIGNED BY SHRI KESHKANI IN HIS INDIVIDUAL CA PACITY. THE CHASE BUILDCON PROJECT LTD WAS A SEPARATE CORPORATE ENTIT Y AND THERE WAS ALREADY SUFFICIENT GUARANTEE WITH THE APPELLANT IN THE FORM OF PROMISSORY NOTES OF THE COMPANY AS WELL AS THE ALLOTMENT LETTE RS OF THE SHOPS AND THEREFORE THERE WAS HARDLY ANY MERIT IN THE EXPLANA TION FURNISHED BY THE APPELLANT THAT HE FURTHER REQUIRED PERSONAL GUARANT EE OF SHRI KESHKANI IN THE MATTER THAT TOO OF, MUCH LATER DATED I.E. IN FEBRUARY, 2000 WHEREAS THE FINANCIAL TRANSACTIONS TOOK PLACE IN JA NUARY, 1999. ON THESE FACTS, THEREFORE, I FIND THAT THE AO WAS FULL Y JUSTIFIED IN REJECTING THE EXPLANATION OF THE APPELLANT AND TREAT THIS AMO UNT OF RS.6.5 LAKHS AS REPRESENTING THE UNDISCLOSED INCOME OF THE APPEL LANT INVESTED AS UNACCOUNTED LOAN GIVEN TO MR. KHESKANI. THE CORRESP ONDING ADDITION OF RS.6.5 LAKHS MADE BY THE AO IS THEREFORE CONFIRMED. THE EXPLANATION OF THE ASSESSEE IN PENALTY APPEALS REMAINS ESSENTIALLY THE SAME. IT IS CLEAR THAT THE EXPLANATION IS A SEL F-SERVING CONCOCTED STORY WHICH CANNOT BE BELIEVED WHERE CIRCUMSTANCES PROVE THAT THE PROMISSORY NOTE WAS OBTAINED FOR A SEPARATE LOAN TRANSACTION. THE AMOUNT REPRESENTS THE UNDISCLOSED INCOME OF THE ASSESSEE WHICH WAS NEITHE R DISCLOSED IN THE RETURNS NOR IN THE BLOCK ASSESSMENT RETURN AND THER EFORE PENALTY IS HELD LEVIABLE ON THIS. CONSIDERING THE PROFIT REPRESENTED BY ASSESSEE SHAR E IN HIRA PANNA PROJECT. THE ASSESSEE HAS UNDOUBTEDLY PARTICIPATED IN THIS JOINT VENTURE WHICH WAS TO BE DONE OUT OF THE BOOKS AND WAS DONE IN THA T MANNER ONLY. NO RETURN OF THE JOINT VENTURE WAS FILED IN ANY CAPACITY. THE PROFITS WERE SHARED WITHOUT IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 7 DISCLOSING TO THE DEPARTMENT. THIS IS A CASE OF CLE AR MENSREA. THE ASSESSEE EVEN HAS FAILED TO DISCLOSE IT IN THE BLOCK ASSESSM ENT RETURN. IN THE CIRCUMSTANCES, THE APPELLANT CANNOT SUCCEED AND PEN ALTY IS HELD LEVIABLE ON UNDISCLOSED INCOME REPRESENTED BY THIS ADDITION ALS O. IN TOTALITY, PENALTY IS HELD LEVIABLE ON TOTAL UNDI SCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IN EXCESS OF TH AT DECLARED BY THE ASSESSEE IN ITS BLOCK ASSESSMENT RETURN, AND IS CON FIRMED AT THE MINIMUM LEVEL (HUNDRED PERCENT) OF TAX LEVIABLE ON SUCH PAR T OF UNDISCLOSED INCOME FINALLY DETERMINED. 4. AGGRIEVED, REVENUE AND THE ASSESSEE BOTH ARE IN APPEAL BEFORE THE TRIBUNAL. 5. WE TAKE BOTH THE APPEAL OF REVENUE IN IT(SS)A NO.95/AHD/2011 AND ASSESSEES APPEAL IN IT(SS)A NO. 170/AHD/2011 TOGETHER. 5.1 REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL IN IT(SS)A NO.95/AHD/2011:- 1. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE PENALTY U/S 158BFA(2) IS LEVIABLE ON TOTAL UNDISCLOSED INCOME DETERMINED BY THE A.O.IN EXCESS OF THAT DECLARED BY THE A.O.IN ITS BLOCK ASSESSMENT RETURN THOUGH HE DID NOT FULFILL THE CONDITIONS AS PER PROVISIONS OF SECTION 158BFA(2). 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON TH E ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . THE APP ELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. A COPY OF CIT(A)'S ORDER WAS RECEIVED BY ME ON 21/12/2010. IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 8 5.2 IN ASSESSEES APPEAL IN IT(SS)A NO.170/AHD/201 1 FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN CONSIDERING IT A FIT CASE FOR LEVY OF PENALTY U/S.158BFA(2) OF THE L.T. ACT. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT PENALTY U/S.15 8BFA(2) IS LEVIABLE WITH REFERENCE TO THE EXCESS OF UNDISCLOSE D INCOME ASSESSED OVER THE UNDISCLOSED INCOME RETURNED AND H AS FURTHER ERRED IN DIRECTING THE QUANTUM TO BE EQUAL TO 100% OF TAX LEVIABLE ON THE AFORESAID EXCESS OF UNDISCLOSED INCOME ASSESSED OVER UNDISCLOSED INCOME RETURNED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 6. LD. DR SUPPORTING THE ORDER OF LD. ASSESSING OFF ICER SUBMITTED THAT ONE OF THE BASIC CONDITIONS PROVIDED IN PROVIS O (1) OF SECTION 158BFA(2) OF THE ACT IS THAT TAX PAYABLE ON THE BAS IS OF PROVISIONS OF SEC. 158BC OF THE ACT HAS TO BE PAID ALONG WITH THE RETURN WHEREAS ASSESSEE HAS PARTLY COMPLIED WITH THE CONDITIONS BY PAYING RS.5 LACS AS AGAINST RS.12 LACS PAYABLE AS TAX AND, THEREFORE , ASSESSING OFFICER HAS RIGHTLY CALCULATED THE PENALTY BY APPLY ING PROVISIONS OF SECTION 158BF(2) OF THE ACT. 7. ON THE OTHER HAND, LD. AR SUBMITTED THAT ONE OF THE PRIMARY CONTENTIONS OF ID. ASSESSING OFFICER FOR IMPOSING T HE IMPUGNED PENALTY, WHICH HAS BEEN VERBALIZED AT THE CONCLUDIN G PART OF PARA 3 OF THE IMPUGNED ORDER, WAS THAT AT TIME OF FILING OF B LOCK RETURN, EVEN IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 9 THOUGH THE APPELLANT HAD DISCLOSED OF RS.20 LACS AS HIS UNDISCLOSED INCOME, HE HAS PAID TAX OF RS.5 LACS ONLY AS AGAINS T RS.12 LACS PAYABLE. IT WAS FURTHER STATED BY ID. ASSESSING OFF ICER THAT, AS PER PROVISO TO SECTION 158BFA(2) THE ASSESSEE GETS IMMU NITY FOR PENALTY U/S 158BFA(2) ONLY IN RESPECT OF THAT PART OF UNDIS CLOSED INCOME ONLY IF (I) HE FURNISHES HIS RETURN OF INCOME U/S 158BC (II) THE TAX PAYABLE ON THE BASIS OF RETURN IS PAID/OR OFFERS TO ADJUST THE SEIZED MONEY AGAINST TAX PAYABLE (III) EVIDENCE OF TAX PAID IS F URNISHED ALONGWITH THE RETURN (IV) NO APPEAL IS FILED AGAINST ASSESSME NT OF THAT PART OF INCOME. IN VIEW OF THIS, IT WAS CONTENDED THAT SINC E THE APPELLANT HAS NOT PAID THE ENTIRE AMOUNT OF TAX AT THE TIME OF FI LING RETURN, HE WAS BARRED FROM THE IMMUNITY PROVIDED BY THE FIRST PROV ISO TO SECTION 158BFA(2) OF THE ACT. ON THIS VERY ISSUE, THE APPELLANT AT FIRST BEGS TO INVITE YOUR HONOUR'S SYMPATHETIC CONSIDERATION TO THE NOTES FOR MING PART OF THE RETURN WHICH READ AS UNDER: 1. PURSUANT TO THE ABOVE DISCLOSURE, THE ASSESSEE HAS ALREADY MADE PAYMENT OF RS.5 LACS AS TAX. CHALLANS EVIDENCI NG PAYMENT OF THE SAID TAX IS BEING ENCLOSED WITH THIS RETURN. THE ASSESSEE, AFTER THE PAYMENT OF RS.5 LACS, HAD BEEN IN THE PROCESS OF TRYING TO COLLECT MONIES TO PAY OFF THE NECESSARY TAX ON THE ABOVE INCOME OFFERED TO TAX IN THE BLOCK RET URN. HOWEVER, IT HAS BEEN MADE KNOWN TO HIM THAT CERTAIN MONIES WHICH ARE RECOVERABLE BY HIM FROM CERTAIN PARTIES, BEING IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 10 BHAGWATI GROUP AND CHASE BUILD CONE CANNOT BE RECOV ERED BY HIM AS RESTRAINT ORDERS HAVE BEEN PASSED BY THE INC OME-TAX DEPARTMENT AND SERVED ON SUCH PARTIES RESTRAINING T HEM FROM MAKING ANY PAYMENT TO THE ASSESSEE AND HIS MEMBERS. ONLY ON ACCOUNT OF THIS, THERE HAS BEEN FURTHER DELAY IN FILING OF THE RETURN AFTER THE PAYMENT OF RS.5 LACS OF TAX WHICH THE ASSESSEE HAS BEEN ABLE TO MAKE FROM THE FUNDS AVAILABLE OR G ATHERED BY HIM. UNDER THE CIRCUMSTANCES, AS THE ASSESSEE IS NO W UNABLE TO GATHER ANY FURTHER MONIES, THE ASSESSEE IS FILIN G THIS RETURN WITH SPECIFIC REQUEST TO THE INCOME-TAX DEPARTMENT TO COLLECT THE MONIES FROM THE ABOVE TWO PARTIES TO WHOM THE D EPARTMENT HAS SERVED RESTRAINING ORDERS, AND ADJUST THE SAID MONIES AGAINST HIS TAX LIABILITY AGGREGATING TO RS.12 LACS AGAINST THE INCOME OFFERED OF RS.20 LACS AT THE RATE OF 60%. IT WILL BE APPRECIATED THAT RS.5 LACS HAS ALREADY BEEN PAID; A ND ACCORDINGLY, THE REST OF THE SUM OF RS.7 LACS MAY K INDLY BE RECOVERED FROM THE ABOVE REFERRED TWO PARTIES AND A DJUSTED AGAINST THE ASSESSEE'S TAX LIABILITY. THE ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT ON ACCOUNT OF NON PAYMENT OF THE ABOVE TAX LIABILITY AS, HE HAS BEEN UNABLE TO M AKE PAYMENT ONLY ON ACCOUNT OF THE RESTRAINT ORDERS PASSED BY T HE DEPARTMENT AS REFERRED TO HEREINABOVE. 2. THE ASSESSEE FURTHER STATES THAT HE HAS ALSO INF ORMED THE ABOVE REFERRED PARTIES REQUESTING THEM TO MAKE PAYM ENT TO THE DEPARTMENT PURSUANT TO THE RESTRAINT ORDER, FOR THE ABOVE TAX IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 11 LIABILITY. ANY ACTION WHATSOEVER REQUIRED FROM THE ASSESSEE WITH REFERENCE TO THIS ADJUSTMENT MAY KINDLY BE INTIMATE D TO THE ASSESSEE.' FROM THE ABOVE, YOUR HONOUR MAY APPRECIATE THAT NON PAYMENT OF TAX AT THE TIME OF FILING THE BLOCK ASSESSMENT RETURN W AS PRECISELY ON ACCOUNT OF INABILITY OF APPELLANT TO RECOVER DUES F ROM CERTAIN PARTIES, BEING BHAGWATI GROUP AND CHASE BUILD CONE ON WHOM P ROHIBITORY ORDERS WERE SERVED BY THE DEPARTMENT, RESTRAINING T HEM FROM MAKING PAYMENT TO APPELLANT. HOWEVER, TO OVERCOME SUCH GEN UINELY UNCONTROLLABLE CIRCUMSTANCES AND FURTHER OWING TO I TS COMPLIANT INTENT, THE APPELLANT HAD MADE SPECIFIC REQUEST TO ID. ASSE SSING OFFICER TO COLLECT THE MONIES FROM THE ABOVE TWO PARTIES TO WH OM THE DEPARTMENT HAS SERVED RESTRAINING ORDERS, AND ADJUS T THE SAID MONIES AGAINST HIS TAX LIABILITY AGGREGATING TO RS. 12 LACS. NEVERTHELESS WHEN NO SUCH ADJUSTMENT WAS MADE BY TH E ID. ASSESSING OFFICER, THE APPELLANT PAID THE BALANCE T AX LIABILITY AS STATED BELOW, AT THE EARLIEST AVAILABILITY OF FUNDS . 11-8-2004 60,000 31-12-2004 50,000 25-8-2004 2,65,000 12-8-2004 3,00,000 03-8-2004 35.000 8.10.000 IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 12 IT MAY ALSO BE KINDLY NOTED THAT MOST OF THE ABOVE PAYMENTS WERE MADE BY THOSE DEBTORS DIRECTLY TO THE CREDIT OF DEP ARTMENT THROUGH CHALLAN. UNDER THESE CIRCUMSTANCES, IT IS STATED TH AT NON ADJUSTMENT OF TAX LIABILITY OF APPELLANT OUT OF HIS DUES RECEI VABLE FROM SUCH PARTIES BY ID. ASSESSING OFFICER, CANNOT BE MADE A JUSTIFIA BLE GROUND TO HOLD THAT SINCE THE APPELLANT HAD NOT PAID ENTIRE AMOUNT OF TAX ALONG WITH RETURN OF INCOME RESULTING INTO NON COMPLIANCE OF F IRST PROVISO TO SECTION 158BFA(2) OF THE ACT. WITH UTMOST RESPECT, IT IS SUBMITTED THAT THE ID. ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THE GENUINE INABILITY TO MAKE PAYMENT OF TAXES BEFORE FILING RE TURN OF INCOME AND OUGHT NOT TO HAVE SADDLED THE APPELLANT WITH PENAL CONSEQUENCES FOR THE CIRCUMSTANCES BEYOND HIS CONTROL AND IN COMPLET E DISREGARD OF ELEMENTARY PRINCIPLES OF NATURAL JUSTICE. 8. LD. AR FURTHER SUBMITTED THAT AS THE ASSESSEE IN TENDED TO PAY TOTAL TAX LIABILITY PAYABLE ON THE DISCLOSED INCOME IN THE RETURN FOR THE BLOCK PERIOD BUT WAS UNABLE TO DO SO DUE TO RESTRAI NING ORDER BY THE DEPARTMENT ON THE DEBTORS OF THE ASSESSEE AND EVEN SUBSEQUENT THERETO THE ASSESSEE HAS PAID THE BALANCE TAX LIABI LITY. THEREAFTER LD. CIT(A) HAS HELD THAT PROVISO (1) OF SEC.158BFA(2) O F THE ACT IS NOT APPLICABLE TO THE ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE F ACT THAT IN RESPONSE TO THE NOTICE U/S 158BC OF THE ACT ASSESSEE HAS DIS CLOSED AN INCOME OF RS.20,00,000/- IN THE BLOCK RETURN. LD. ASSESSIN G OFFICER HAS IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 13 FINALIZED THE ASSESSMENT ON 30 TH JULY, 2004 AND DETERMINED THE TAXABLE INCOME AT RS.6,56,39,749/-. THE DISPUTE REG ARDING DETERMINATION OF INCOME TRAVELLED UPTO THE TRIIBUNA L AND ULTIMATELY THE INCOME OF RS.28,03,600/- STANDS DETERMINED. THU S AN ADDITION OF RS.8,03,600/- CONFIRMED IN THE INCOME OF ASSESSEE F OR THE BLOCK ASSESSMENT. THE CONTROVERSY IN BOTH THESE APPEALS R ELATES TO LEVY OF PENALTY U/S 158BFA(2) PROVISO (1) & (2). IN ORDER T O APPRECIATE THE CONTROVERSY IN RIGHT PERSPECTIVE IT IS IMPERATIVE O N US TO TAKE NOTE OF SECTION 158BFA(2) OF THE ACT, RELEVANT PART OF THE SECTION READ AS UNDER :- 158BFA. (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A P ERSON 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 RESPEC T OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE ( C ) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT 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 B EEN PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; ( III ) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND ( IV ) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN 38 : PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY S HALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 10. A BARE PERUSAL OF THE SECTION INDICATES THAT IT CONTEMPLATES TWO SITUATIONS WHERE PENALTY UPON THE ASSESSEE WOULD BE IMPOSED. FIRST PROVISO PROVIDES THAT IF AN ASSESSEE FAILS TO PAY T HE TAXES ON THE IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 14 RETURNED INCOME FOR THE BLOCK PERIODS WHILE FILING THE RETURN THE ASSESSEE WOULD BE LIABLE TO PAY PENALTY EQUIVALENT TO THE TAX LEVIABLE ON THE RETURNED INCOME. THE SECOND PROVISO CONTEMPL ATES A DIFFERENT SITUATION. IT PROVIDES THAT IN CASE AN ASSESSEE FIL ES A BLOCK RETURN AND PAID TAXES AS PER LAW ON THAT RETURN INCOME BUT THE ASSESSING OFFICER HAS MADE CERTAIN ADDITION IN THE ASSESSMENT ORDER A ND ULTIMATELY THE ASSESSED INCOME IS A DIFFERENT INCOME THAN THE ONE DISCLOSED BY THE ASSESSEE ON THIS DIFFERENCE A PENALTY EQUIVALENT TO THE TAX SOUGHT TO BE EVADED WOULD BE PAID BY THE ASSESSEE ON THIS DIF FERENCE. 11. AS FAR AS THE FACTS FOR THE FIRST SITUATION ARE CONCERNED, THE ASSESSEE WAS CAUSED TO PAY TAX OF RS.12 LACS ON THE DISCLOSED INCOME OF RS.20,00,000/- THE ASSESSEE COULD PAY RS. 5 LACS AND THERE WAS A SHORTAGE OF RS.7 LACS. THE ASSESSEE CONTENDED THAT IT HAS UNREALIZED LOANS AND ADVANCES WHOSE RECOVERY HAS BE EN RESTRAINED BY THE DEPARTMENT. IN OTHER WORDS THEY WERE ATTACHE D. THEREFORE, ASSESSEE COULD NOT RECOVER THESE AMOUNTS. ALONG WIT H THE RETURN FILED IN A LETTER PRAYED FOR RECOVERY OF THESE AMOUNTS AN D ADJUSTMENTS AGAINST THE TAX LIABILITY BUT NO SUCH ACTION WAS CA RRIED OUT AT THE END OF THE DEPARTMENT. THUS THE ASSESSEE CONTENDED THAT IT HAS A REASONABLE CAUSE FOR NOT MAKING PAYMENT OF TAXES IN THE RETURNED INCOME. LD. FIRST APPELLATE AUTHORITY HAS ACCEPTED THE REASONABLE CAUSE AND DELETED THE PENALTY. REVENUE IS AGGRIEVED ON THIS PART OF LD. CIT(A)S ORDER. ON DUE CONSIDERATION OF THE REC ORD, WE ARE OF THE VIEW THAT ONCE THE ASSESSEE HAS LOANS AND ADVANCES WHOSE RECOVERY WAS NOT IN DOUBT AND ASSESSEE APPLIES TO T HE DEPARTMENT IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 15 EITHER FOR RECOVERY OR UPLIFTING OF RESTRAINED ORDE RS AND THE DEPARTMENT DID NOT TAKE ANY ACTION THEN IT WOULD BE CONSIDERED THAT ASSESSEE WAS PROHIBITED BY REASONABLE CAUSE FOR MAK ING THE PAYMENT OF TAXES ON THE RETURNED INCOME. THEREFORE, ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PENALTY UNDER THE SI TUATION AS CONTEMPLATED UNDER FIRST PROVISO TO SECTION 158BFA( 2) OF THE ACT. 12. AS FAR AS THE PENALTY CONTEMPLATED UNDER THE SE COND PROVISO IS CONCERNED, THE SCHEME OF CHAPTER-14B PROVIDES THAT INCOME OF AN ASSESSEE FOR THE PURPOSE OF BLOCK ASSESSMENT IS TO BE DETERMINED ON THE BASIS OF SEIZED MATERIAL FOUND DURING THE COURS E OF SEARCH. ASSESSING OFFICER WOULD SUPPLY THAT MATERIAL TO THE ASSESSEE AND IN RESPONSE TO NOTICE U/S 158BC ASSESSEE HAS TO COMPUT E TRUE AND DISCLOSE INCOME OUT OF THE SEIZED MATERIAL FOR THE PURPOSE OF BLOCK ASSESSMENT. NOW THE QUESTION IS, ASSESSEE HAS TO CO MPUTE RS.20,00,000/- AS TRUE UNDISCLOSED INCOME OUT OF TH E SEIZED MATERIAL. LD. ASSESSING OFFICER HAS DETERMINED AN INCOME OF R S. 6,56,39,749/- WHICH HAS BEEN SCALED DOWN TO RS.28,03,600/- BY THE HIGHER APPELLATE AUTHORITY. A PERUSAL OF THESE DETAILS WOU LD INDICATE THAT ALLEGATION AGAINST THE ASSESSEE FOR THE PURPOSE OF VISITING IT WITH PENALTY WOULD BE, WHY ASSESSEE FAILED TO COMPUTE TR UE UNDISCLOSED INCOME FROM THE SEIZED MATERIAL. IN THE UNDERSTANDI NG OF ASSESSEE THE TRUE UNDISCLOSED INCOME OUT OF THE SEIZED MATER IAL COMES TO RS.20,00,000/-. THE LD. ASSESSING OFFICER HAS NOT B ROUGHT ANY MATERIAL ON THE RECORD INDICATING THE DELIBERATE FL AW IN THE COMPUTATION MADE BY THE ASSESSEE RATHER IF WE TAKE THE ULTIMATE IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 16 DETERMINATION OF INCOME AT RS.28,03,600/- VIS--VIS THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER AT RS. 6 ,56,39,749/- THEN IT WOULD INDICATE THAT CONSTRUCTION OF SEIZED MATER IAL AT THE END OF ASSESSEE IS MORE CLOSURE TO THE TRUE OF COMPUTATION OF UNDISCLOSED INCOME RATHER WILD GUESS WORK MADE BY ASSESSING OF FICER ASSESSING THE SAME AT RS.6.56 CRORES. IN THIS SITUATION WE AR E SATISFIED THAT ASSESSEE IS ABLE TO DEMONSTRATE AS TO WHY HE HAS CO MPUTED HIS TRUE UNDISCLOSED INCOME AT RS.20,00,000/-. CONSIDERING A LL THESE FACTS WE DISMISS THE APPEAL OF REVENUE WHEREAS IN THE APPEAL OF ASSESSEE, WE DELETE THE PENALTY OF RS.4,82,160/- CONFIRMED BY LD. CIT(A). 13. GROUND NO.3 IS OF GENERAL NATURE, WHICH NEEDS N O ADJUDICATION. 14. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 AUGUST, 20 16 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 3/8/2016 MAHATA/- IT(SS)A NO. 170 & 95/AHD/2011 ASST. YEAR BLOCK PERIOD F.Y.1996-97 TO 2001-2002 & 01.04.2002 TO 25.07.2002 17 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 01/08/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 02/08/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 3/8/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: