Shri Kirtilal Nagardas Shah, Palanpur V. The Dy.CIT.,Cent.Circe-1(1), Ahmedabad

ITSSA 177/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0676 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Search and seizure; Principle of natural justice; Non-deduction of tax
• Section: 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , BEFORE SHRI SHAILEND RA KUMAR YADAV, JUDI CIAL MEMBER, AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER . IT (SS) A. NO. 177 /AHD/20 11 (ASS ESSMENT YEAR: 200 7 - 0 8 ) KIRTILAL NAGARDAS SHAH 4, KALYAN SOCIETY, MANSROVAR ROAD, PALANPUR, DIST. BANASKANTHA APPELLANT VS. DY.C.I.T., CENTRAL CIRCLE - 1(1), AHMEDABAD RESPONDENT PAN: A IMPS2897P / BY APPELLANT : SHRI S. N. DIVETIA, A.R. / BY RESPONDENT : SMT. SONIA KUMAR, SR.D .R. / DATE OF HEARING : 2 2 . 0 4 .2015 / DATE OF PRONOUNCEMENT : 15 . 0 5 .201 5 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THI S APPEAL HAS BEEN FILED BY ASSESSE E AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - I , AHMEDABAD , DATED 2 5 . 11 .201 0 FOR A.Y. 200 7 - 0 8 ON THE FOLLOWING GROUNDS: I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 2 1.1 THE ORDER PASSED U/S.250 ON 25.11.2010 FOR A.Y.2007 - 08 BY CIT(A) - I, ABAD UPHOLDING THE PENAL TY OF RS.2,35,62,000 LEVIED U/S.271 (L) ( C) BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN PASSING THE IMPUGNED ORDER WITHOUT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT. 2.1 THE LD.C IT(A) HAS GRIEVOUSLY ERRED IN LA W AND ON FACTS IN UPHOLDING PENALTY LEVIED U/S.271 (1)(C) BY AO. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE PENALTY OF RS. 2,35,62,000 LEVIED U/S.271 (L)(C) BY AO. 3.1 THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS NO CONCEALMENT OF THE INCOME INCLUDED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTIC E U/S.1 53A, IRRESPECTIV E OF THE SAME BEING DETECTED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. 3.2 THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE CONDITIONS PROVIDED UNDER EXPLN. 5 TO SEC. 271(L)(C) FOR AVAILING IMMUNITY FROM PENALTY WERE FULFILLED IN SUBSTANCE AND SPIR IT INASMUCH THE TAXES WERE PAID / OFFERED FOR ADJUSTMENT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE ACTION U/S. 132 OF THE I.T. ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF ASSESSE ON 1/11/06. ASSESSEE IN ITS RETURN U/S.153A DE CLARED TOTAL TAXABLE INCOME OF RS.7,06,75,930/ - . THIS AMOUNT INCLUDED ADDITIONAL INCOME OF RS.7 CRORE, DISCLOSED IN STATEMENT RECORDED U/S.132(4) OF THE I.T. ACT. THE ASSESSMENT ORDER HAS BEEN PASSED ON 31.12.2008 WHEREIN RETURNED INCOME HAS BEEN ACCEPTE D. I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 3 2.1 IN IMPUGNED PENALTY ORDER, ASSESSING OFFICER HAS CONSIDERED THE DISCLOSED AMOUNT OF RS.7 CRORE AS CONCEALED INCOME AND LEVIED CONCEALMENT PENALTY OF RS.2,35,62,000/ - BEING 100% OF TAX SOUGHT TO BE EVADED. 3. MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY, WHEREIN CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF ASSESSEE INTER ALIA SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE PENALTY LEVIED BY ASSESSING OFFICER. CIT(A) FAILED TO APPR ECIATE THAT CONDITIONS PROVIDED UNDER EXPLANATION 5 TO SECTION 271(1)(C) FOR AVAILING IMMUNITY FROM PENALTY WERE FULFILLED IN SUBSTANCE AND SPIRIT INASMUCH THE TAXES WERE PAID / OFFERED FOR ADJUSTMENT. ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF ACIT VS. GEBILAL KANHAIALAL HUF REPORTED IN (2012) 348 ITR 561 (SC) AND REQUESTED THAT PENALTY IN QUESTION BE DELETED. ON OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. AFTER GOING THROUGH R IVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT WAS INSERTED W.E .F. 1/10/1984 AND WA S APPLICABLE TO A SITUATION WHERE IN THE COURSE OF SEARCH U/S.132, ASSESSEE IS FOUND TO BE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING, WHOLLY OR IN PART, HIS INCOME FOR ANY PREVIOUS YEAR WHICH HAS ALREADY ENDED ON OR AFTER DATE OF SEARCH . IN VIEW OF EXPLANATION, NOTWIT HSTANDING I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 4 THE FACT THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED OR AFTER THE DATE OF SEARCH, HE SHALL BE FOR THE PURPOSE OF SECTION 271(1 ) (C), BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTIC ULARS OF SUCH INCOME EXCEPT IN CASES WHERE SUCH INCOME IS, OR THE TRANSACTIONS RESULTING IN SUCH INCOME ARE RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS, IF ANY, MAINTAINED BY HIM FOR ANY S OURCE OF INCOME OR SUCH INCOME WA S OTHERWISE D ISCLOSED TO CIT BEFORE THE DATE OF THE SEARCH. THUS BY THE DEEMING PROVISIONS OF E XPLANATION 5 TO SEC 271(1)(C), ASSESSEE IS FASTENED WITH THE LIABILITY TO PENALTY U /S 271(1)(C) IN CASE HE EXPLAINED THE ACQUISITION OF ASSETS, RECOVERED IN COURSE OF SEARCH FROM OUT OF INCOME OF PREVIOUS YEAR WHICH HAS ALREADY ENDED BEFORE THE DATE OF SEARCH OR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH. THE EXCEPTION TO ABOVE RULE HAS BEEN PROVIDED IN SUB - SECTION 2 OF EXPLANATION 5 TO SECTION 27 1(1) (C) OF THE ACT. SAME READS AS UNDER: - '(2) HE, IN THE COURSE OF THE SEARCH, MAKES A STATEMENT UNDER SUB - SECTION (4 ) OF SECTION 132 THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL, HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB SECTION (1 ) OF SECTION 139, AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN - DERIVED AND PAYS THE TAX, TOGETHER WITH INTEREST , IF ANY, IN RESPECT OF SUCH INCOME.' I N PRESENT CASE, ASSESSE HAS NOT PAID TAXES ON SUCH RETURNED INCOME, EVEN AT THE TIME OF FILING OF RETURN OF INCOME, THOUGH I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 5 RETURNED INCOME INCLUDED THE DISCLOSED AMOUNT OF RS.7 CRORE. DURIN G COURSE OF APPELLATE PROCEEDING, POSITION WAS THAT ASSESSE OUT OF TOTAL TAXES PAYABLE OF RS.4,47,58,868/ - FOR A.Y. 2001 - 02 TO 2007 - 08, ASSESSE COULD PAY ONLY RS.1,85,58,868/ - BEFORE PASSING OF PENALTY ORDER AND BALANCES TAXES OF RS.2,62,00,000/ - HAVE BEEN PAID AFTER PASSING PENALTY ORDER BY ASSESSING OFFICER. THUS, ADMITTED FACT IS THAT TOTAL TAXES AS MENTIONED ABOVE HAVE BEEN PAID BY ASSESSE AFTER PASSING OF ASSESSMENT ORDER AND QUESTION BEFORE US IS THAT WHETHER ANY SUCH SITUATION, ASSESSE IS ENTITLED TO AVAIL BENEFIT OF EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT. IN THIS REGARD, WE FIND THAT HONBLE SUPREME COURT IN CASE OF GEBILAL KANHAIALAL HUF (SUPRA), WHEREIN PENALTY WAS LEVIED FOR FAILURE TO DEDUCT TAX AT SOURCE. REGARDING WAIVER OF PENALTY W HETHER ASSESSE WAS ENTITLED FOR IMMUNITY UNDER CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C). THE ISSUE OF WAIVER OF PENALTY REGARDING ENTITLEMENT OF IMMUNITY UNDER CLAUSE AROSE. IN CASE OF GEBILAL KANHAIALAL HUF (SUPRA) SEARCH AND SEIZURE OPERATION T OOK PLACE , ASSETS AND INCRIMINATING DOCUMENTS WERE SEIZED FROM ASSESSEES PREMISES. DESPITE, KARTAS STATEMENT U/S.132(4) SURRENDERING AN AMOUNT OF RS.42,32,000/ - , ASSESSE CHOSE NOT TO FILE ITS RETURN OF INCOME ON DUE DATE I.E. 31 ST JULY, 1987 . ASSESSEE WAS DENIED BENEFIT OF IMMUNITY UNDER CLAUSE (2) OF EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT FOR ITS FAILURE TO FILE RETURN OF INCOME PAY TAX THEREON. IN SUCH SITUATION, HONBLE SUPREME COURT HELD THAT FOR CLAIMING IMMUNITY FROM PAYMENT OF PENALTY UND ER CLAUSE (2) OF EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT, THREE CONDITIONS HAVE GOT TO BE SATISFIED BY ASSESSEE. I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 6 I. ASSESSEE MUST MAKE A STATEMENT U/S.132(4) IN COURSE OF SEARCH STATING THAT UNACCOUNTED ASSETS AND INCRIMINATING DOCUMENTS FOUND FROM H IS POSSESSION DURING SEARCH HAVE BEEN ACQUIRED OUT OF HIS INCOME, WHICH HAS NOT BEEN DISCLOSED IN RETURN OF INCOME TO BE FURNISHED BEFORE EXPIRY OF TIME SPECIFIED IN SECTION139(1). SUCH STATEMENT WAS MADE BY KARTA DURING SEARCH WHICH CONCLUDED ON AUGUST 1 , 1987. II. ASSESSEE SHOULD SPECIFY IN HIS STATEMENT U/S.132(4), MANNER IN WHICH SUCH INCOME STOOD DERIVED. SECOND CONDITION WAS ALSO SATISFIED BY THE KARTA. III. ASSESSEE HAS TO PAY TAX TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF SUCH UNDISCLOSED INCOM E. HOWEVER, AS NO TIME LIMIT FOR PAYMENT OF SUCH TAX STOOD PRESCRIBED UNDER CLAUSE (2), THIRD CONDITION ALSO STOOD FULFILLED. ASSESSEE HAD PAID TAX WITH INTEREST AFTER PASSING THE PENALTY ORDER BY ASSESSING OFFICER . IN CASE BEFORE US , OUT OF TOTAL TAXE S PAYABLE OF RS.4,47,58,868/ - FOR A.Y. 2001 - 02 TO 2007 - 08, ASSESSE COULD PAY ONLY RS.1,85,58,868/ - BEFORE PASSING OF PENALTY ORDER AND BALANCES TAXES OF RS.2,62,00,000/ - HAVE BEEN PAID AFTER PASSING PENALTY ORDER BY ASSESSING OFFICER AS OBSERVED BY CIT(A) IN ITS ORDER. IN THIS SITUATION, ASSESSE IS ENTITLED TO IMMUNITY UNDER CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) AS HELD IN GEBILAL KANHAIALAL HUF (SUPRA) . THOUGH THE PAYMENT OF REMAINING AMOUNT OF RS.2 CRORE HAS BEEN PAID AFTER PENALTY ORDER BUT I T IS NOT CLEAR WHETHER THIS AMOUNT INCLUDE INTEREST LIABLE TO BE PAID BY ASSESSEE AT RELEVANT POINT OF TIME AS PER LAW. EVEN BEFORE US, IT HAS NOT BEEN CLARIFIED WHETHER I T (SS) A NO. 177 /AHD/ 11 A.Y. 200 7 - 0 8 [ KIRTILAL NAGARDAS SHAH VS. DCIT ] PAGE 7 PAYMENT OF TAX INCLUDE THE ELEMENT OF INTEREST IN THE SECOND INSTALLMENT OF RS.2 CROR E OR NOT . SO, ASSESSING OFFICER WILL VERIFY THIS FACT . I N CASE IT INCLUDES INTEREST ELEMENT ASSESSEE WILL BE GRANTED RELIEF OTHERWISE, ASSESSE WILL HAVE TO PAY ADDITIONAL INTEREST LIABLE TO BE PAID AT RELEVANT POINT OF TIME AS PER LAW FOR AVAILING IMMUNI TY AS PER CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) OF ACT . ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5 . IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AS INDICATED ABOVE . PRONOUNCED IN THE OPEN COURT ON THIS THE 15 TH DAY OF MAY , 201 5 . SD/ - SD/ - (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 15 /0 5 /2015 S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER / , / ,