CRESCENT CONSTRUCTION CO., NAVI MUMBAI V. DCIT 22(3), MUMBAI

ITSSA 2/MUM/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8493 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-01-2011
• Assessment Year: misc
• Appeal Filed On: 04-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Gift; Document seized; Opportunity of being heard; Block assessment; Documents seized
• Section: 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) IT(SS)A 2/MUM/2010 (BLOCK PERIOD 1/4/1989 TO 10/2/2000) CRESCENT CONSTRUCTION CO., 527, ARENJA CORNER, SECTOR -17, VASHI, NAVI MUMBAI 400 703. PAN:AACFC 3931A (APPELLANT) VS. THE DCIT 22(3), PIRAMAL CHAMBERS, LALBAUG, MUMBAI. (RESPONDENT) APPELLANT BY : SHRI PRAKASH K. JOTWANI RESPONDENT BY : SHRI AJIT KUMAR SINHA ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 27/10/2009 OF CIT(A)-33 MUMBAI RELATING TO THE BLOCK PERIOD 1 /4/1989 TO 8/12/1999. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDE R OF THE AO IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 158BFA(2) OF THE INCOME TAX ACT, 1961(THE ACT). 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PENA LTY UNDER SECTION 158BFA(2) WAS IMPOSED ON THE ASSESSEE BY THE AO ARE AS FOLLOWS: 3. THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAG ED IN THE BUSINESS OF UNDERTAKING CONTRACTS FOR EXECUTION OF CIVIL CONSTR UCTION FROM VARIOUS GOVERNMENT DEPARTMENTS. THERE WAS A SEARCH AND SEI ZURE OPERATION UNDER SECTION 132 OF THE ACT CONDUCTED IN THE CASE OF THE ASSESSEE ON 10/2/2000. IT(SS)A 2/MUM/2010 2 THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 15 8 BC OF THE INCOME TAX ACT,1961 FIELD THE RETURN OF INCOME DISCLOSING UNDI SCLOSED INCOME TO THE EXTENT OF RS.68 LACS FOR THE BLOCK PERIOD. THE AS SESSMENT WAS COMPLETED BY THE AO BY DETERMINING THE UNDISCLOSED INCOME FOR TH E BLOCK PERIOD AT RS. 1,27,11,434/-. ON FURTHER APPEAL BY THE ASSESSEE B EFORE THE CIT(A) AND THE HONBLE ITAT ADDITION TO THE EXTENT OF RS.7,67,850 /- WAS ALONE SUSTAINED. THESE ADDITIONS ARE GROUPED UNDER THE FOLLOWING HEA DS: (I) ILLEGAL GRATIFICATION PAYMENT TO GOVT. OFFICER S RS. 1,50,000 PG.55 BUNDLE NO.1 (II) ILLEGAL GRATIFICATION PAYMENT RS. 68,000 PG.21 BUNDLE NO.2 (III)REPAYMENT OF LOAN RS. 1,03,000 PG.64 BUNDLE 24 (IV) UNACCOUNTED PAYMENT RS. 1,18,815 PG.1 BUNDLE NO.1 (V) UNACCOUNTED PAYMENT-DONATION RS. 1,68,000 PG. 39 TO 43 BUNDLE NO.6 (VI)UNACCOUNTED EXPENSES TOWARDS GIFT ARTICLES RS. 1,35,000 PG 24 BUNDLE NO.7 (VII)UNEXPLAINED PAYMENTS MADE TO MR.MUJEEB RS. 25,000 PG.23 BUNDLE NO.11 ------------------- TOTAL : RS. 7,67,8 15 ============ = IN RESPECT OF THE ADDITIONS SUSTAINED IN THE QUANTU M PROCEEDINGS, PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 158 BFA(2) WERE INITIATED. THE AO IMPOSED PENALTY HOLDING THAT THE ADDITIONS WERE NOT PURELY MADE ON THE BASIS OF ESTIMATE BUT THEY WERE SUBSTANTIVE ADDITIONS AND THAT BUT FOR THE SERACH THIS INCOME WOULD HAVE ESCAPED TAXATION. 4. BEFORE CIT(A) THE ASSESSEE GAVE EXPLANATION WITH REGARD TO EACH OF THE ADDITIONS SUSTAINED AND SUBMITTED THAT MOST OF THE ADDITIONS SUSTAINED WERE NOT CORRECT AND FURNISHED A CHART IN RESPECT OF THE EACH OF THE ADDITION IT(SS)A 2/MUM/2010 3 AND WHY THE SAID ADDITIONS COULD NOT BE SUSTAINED. THE SAME IS GIVEN AS ANNEXURE A TO THIS ORDER. 5. BESIDES THE ABOVE THE ASSESSEE ALSO FURNISHED DE TAILED SUBMISSIONS BEFORE THE CIT(A). THE CIT(A) ACKNOWLEDGED THESE F ACTS IN PARA 2.3 OF HIS ORDER BUT PROCEEDED TO IMPOSE PENALTY FOR THE REASO NS THAT THE ADDITIONS HAVE ALREADY BEEN CONFIRMED IN THE QUANTUM PROCEEDI NGS. THE LD. CIT(A) FURTHER PROCEEDED TO HOLD THAT PENALTY IS AUTOMATIC AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE PROCESSORS, 306 ITR 277(SC). ONE OF THE PLEA ADVANCED BY THE ASSES SEE BEFORE THE CIT(A) WAS THAT SINCE THERE WERE VOLUMINOUS RECORDS THE ASSE SSEE COULD NOT COMPUTE ITS UNDISCLOSED INCOME CORRECTLY AND THAT THE UNDIS CLOSED INCOME WHICH WERE ADDED IN THE COURSE OF ASSESSMENT PROCEEDINGS WERE BECAUSE OF THE VOLUMINOUS RECORDS AND SEIZED DOCUMENTS. THE ASSE SSEE IN THIS REGARD RELIED ON THE DECISION OF THE ITAT , MUMBAI BENCH I N THE CASE OF KOTEX INFRASTRUCTURE LTD. VS. DCIT, 100 ITD 510 (MUM), WH EREIN IT WAS HELD THAT WHERE VOLUMINOUS DOCUMENTS ARE SEIZED AND IT IS IMP OSSIBLE FOR AN ASSESSEE TO COMPUTE TRUE UNDISCLOSED INCOME AND WHERE THERE WAS NO MALA FIDE INTENTION AND THE ASSESSEE AGREES TO THE ADDITION M ADE IN BLOCK ASSESSMENT, NO PENALTY UNDER SECTION 158BFA(2) OF THE ACT COULD BE IMPOSED. THE CIT(A) HOWEVER HELD THAT THIS CASE WAS NOT APPLICABLE BECA USE SUCH A PLEA WAS NOT RAISED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT DESPITE THE ASSESSEE FILING EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT THE ADDITIONS SUSTAINED IN THE QUANTUM IT(SS)A 2/MUM/2010 4 PROCEEDINGS WERE ERRONEOUS, THE CIT(A) HAS NOT CONS IDERED THE SAME AND IN THOSE CIRCUMSTANCES THE ORDER OF THE CIT(A) SHOULD BE SET A SIDE AND THE CIT(A) SHOULD BE DIRECTED TO CONSIDER THE EXPLANATI ON OF THE ASSESSEE ON MERITS. 8. THE LD. D.R HOWEVER SUBMITTED THAT THE PROCEEDIN GS UNDER SECTION 158 BFA(2) ARE NOT SIMILAR TO PROCEEDINGS UNDER SECTIO N 271(1)(C) AND, THEREFORE, PENALTY UNDER SECTION 158 BFA IS AUTOMATIC. IN THI S REGARD RELIANCE WAS PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF SHRI SUDHAKAR T. PENDSE VS. ACIT, ITA NO.349/M/2005 DATED 29/5/2008. 9. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND DREW OUR ATTENTION TO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SATYENDRA KUMAR DOSI, 222 CTR 258 (RAJ) AND THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HARKARANDAS VEDPAL 222 CTR 4 38 (DEL), WHEREIN IT WAS HELD THAT PENALTY UNDER SECTION 158 BFA(2) IS NOT A UTOMATIC. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN O UR VIEW THE PENALTY UNDER SECTION 158BFA(2) IS NOT AUTOMATIC AS LAID DO WN BY THE HIGH COURTS IN THE DECISION REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE. THE CIT(A) IN OUR VIEW OUGHT TO HAVE CONSIDERED THE EXPLANATION O FFERED BY THE ASSESSEE WITH REGARD TO THE ADDITIONS SUSTAINED IN THE QUANT UM PROCEEDINGS. THE ADDITIONS SUSTAINED IN THE QUANTUM PROCEEDINGS ARE RELEVANT IN THE PENALTY PROCEEDINGS BUT THEY ARE NOT CONCLUSIVE. THE ASSES SEE IS AT LIBERTY TO SHOW THAT THE ADDITIONS OUGHT NOT TO HAVE BEEN MADE IN T HE QUANTUM PROCEEDINGS. SINCE THE CIT(A) HAS NOT CONSIDERED THE CLAIM OF TH E ASSESSEE IN THIS REGARD, WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER O F THE CIT(A) AND REMAND THE QUESTION OF IMPOSING PENALTY TO THE CIT(A) FOR FRESH CONSIDERATION. THE CIT(A) WILL CONSIDER THE EXPLANATION OFFERED BY THE ASSESSEE ON ITS MERIT AND IT(SS)A 2/MUM/2010 5 DECIDE THE QUESTION OF IMPOSING PENALTY IN ACCORDAN CE WITH LAW. THE CIT(A) WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. FOR STATISTICAL PURPOSES THE APPEAL OF THE ASSESSEE IS TREATED AS A LLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 11 TH DAY OF MARCH, 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 11 TH MARCH.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. IT(SS)A 2/MUM/2010 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 7/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 8/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER