DCIT, Salem V. Shri P.A.Habibulla, Salem

ITSSA 26/CHNY/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8434 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: misc
• Appeal Filed On: 11-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER AND SHRI N. S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING : DRAFTED ON: IT(SS) NO.26/MDS./09 BLOCK PERIOD: 01.08.09 TO 14.07.09 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE,SALEM. VS. SHRI P.A.HABIBULLA, C/O.FIVE STAR READYMADES, 162,FIRST AGRAHARAM, SALEM 636 001. PAN/GIR NO. : AALPH 1157 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY: SHRI S. SRIDHAR O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)- , DATED 30.03. 09. 2. IN THIS APPEAL, THE ASSESSE HAS TAKEN SIX GROUNDS O F APPEAL AND THE ONLY ISSUE INVOLVED IN ALL THE GROUNDS OF APPEAL IS THAT THE C IT(A) WAS NOT JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY OF RS.8,25,500/- U/S.158BFA(2) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH U/S.1 32 OF THE ACT WAS CONDUCTED AT THE RESIDENTIAL CUM BUSINESS PREMISES OF THE ASSESS E GROUP AT PALLAPATTI AND 14 OTHER BUSINESS PREMISES ON 14.07.99. A SURVEY WAS ALSO C ONDUCTED IN THE BUSINESS PREMISES AT THENI AND DINDUGUL. IN THE COURSE OF SEARCH AND SU RVEY, INCRIMINATING DOCUMENTS AND BOOKS OF ACCOUNT IN ADDITION TO CASH OF RS.10.2 LAK HS WERE SEIZED. IN PURSUANCE TO THE NOTICE U/S.158BC OF THE ACT, THE ASSESSE FILED A BL OCK RETURN FOR THE PERIOD ENDING 14.07.99 ON 07.03.00 DISCLOSING UNDISCLOSED INCOME OF RS.6,01,520/-. THE ASSESSMENT WAS COMPLETED ON 30.0701 DETERMINING UNDISCLOSED IN COME AT RS.22,85,161, WHICH WAS REDUCED IN APPEAL TO RS.19,77,362/-. THE ADDITIONA L INCOME ASSESSED WAS ON ACCOUNT OF ADDITION MADE FOR INVESTMENT IN KITCHEN OF RS.4 LAK HS, ON-MONEY TRANSACTION OF RS.1 LAKH AND CIRCULATING CAPITAL AND CASH SEIZED RS.9,77,362 /-. SINCE THE ASSESSE HAD DISCLOSED - 2 - UNDISCLOSED INCOME OF RS.6,01,520/-, THE AO LEVIED PENALTY U/S.158BFA(2) ON THE DIFFERENCE AMOUNT OF RS.13,75,842/-, WHICH WORKED O UT TO RS.8,25,500/- 4. IN APPEAL BEFORE THE CIT(A), THE ASSESSE SUBMITTED THAT LEVY OF PENALTY WAS NOT JUSTIFIED, SINCE THERE IS A DISCRETION THAT THE ASS ESSING OFFICER TO LEVY THE PENALTY OR NOT. IT WAS ALSO SUBMITTED THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. KOATEX INFRASTRUCTURE LTD. [2006] 100 ITD 510 HAS H ELD THAT LEVY OF PENALTY U/S.158BFA(2) WAS DISCRETIONARY AND THERE IS A NECESSITY FOR THE LEARNED ASSESSING OFFICER TO BRING INDEPENDENT MATERIAL FOR MAKING THE ADDITION. IT W AS FURTHER SUBMITTED THAT THE ASSESSE FILED THE RETURN ON NET-WORTH BASIS AND THOUGH THE NET-WORTH STATEMENT FILED WITH THE RETURN IN FORM NO.2B HAD UNDERGONE CHANGE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE UNDISCLOSED INCOME IN THE RETURNED INCOME REMAINS SAME. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER DID NOT DISCOV ER ANY INDEPENDENT MATERIAL FOR MAKING THE ADDITION AND THEREFORE NO PENALTY WAS LE VIABLE U/S.158BFA(2). THE ASSESSE FILED RETURN U/S.158BC AND PAID ALL THE TAXES DUE O N THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER. THE INTEREST U/S.158BFA( 1) WAS ALSO WAIVED BY THE CIT. THE ASSESSE FURTHER RELIED ON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. HRKARANDAS VEDPAL [2009] 222 CTR 438 WHERE IT WAS H ELD THAT IF THERE IS A BONAFIDE SURRENDER AND UNDISCLOSED INCOME WAS COMPUTED MEREL Y ON THE BASIS OF SUCH SURRENDER, NO PENALTY WOULD BE IMPOSABLE U/S.158BFA(2). 5. THE CIT(A) AFTER CONSIDERING THE ABOVE SUBMISSIONS HELD THAT UNDISCLOSED INCOME HAD NOT UNDERGONE ANY CHANGE AND THE FINDING OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER CONFIRMS THE FACT. THE ASSESSING OFFICER HA S BROUGHT NO INDEPENDENT MATERIAL FOR MAKING ADDITION AS WELL AS THE LEVY OF PENALTY . T HE ASSESSING OFFICER HAS NOT MADE OUT A CASE OF THE CONCEALMENT OF INCOME OR THE FURNISHI NG OF INACCURATE PARTICULARS WHILE ARRIVING AT THE ADDITIONAL INCOME. HE RELIED ON TH E DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. DODSAL [2008] IN 218 C TR 430 WHERE IT WAS HELD THAT THE LEVY OF PENALTY WAS DISCRETIONARY AND PENALTY WAS NOT IM POSABLE MERELY BECAUSE THE ASSESSED INCOME WAS MORE THAN THE INCOME DECLARED BY THE ASS ESSE. HE ALSO NOTED THAT IN THE ASSESSMENT ORDER THE AO HAS GIVEN A FINDING IN PAGE -2 THAT THOUGH THE NET WORTH STATEMENT FILED ALONG WITH THE RETURN IN FORM 2B HA D UNDERGONE CHANGE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE UNDISCLOSED I NCOME RETURNED REMAINED THE SAME. THEREFORE, THE CIT(A) HELD THAT THE DIFFERENCE AROS E MAINLY ON ACCOUNT OF THE DIFFERENCE IN NET-WORTH COMPUTED BY THE AO. ACCORDINGLY, THE CIT(A) DELETED THE PENALTY OBSERVING THAT THERE IS NO JUSTIFICATION FOR LEVY O F PENALTY U/S.158BFA(2). - 3 - 6. THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE OBSERVATION OF THE CIT(A) THAT THE UNDISCLOSED INCOME SHOWN IN THE BLOCK RETU RN HAD NOT UNDERGONE ANY CHANGE WAS NOT CORRECT AS THE ASSESSE SHOWED THE UNDISCLOS ED INCOME OF RS.6,01,520/- IN BLOCK RETURN AGAINST WHICH UNDISCLOSED INCOME ASSESSED WA S RS.19,77,362/- THUS, THERE WAS A DIFFERENCE OF RS.13,75,842/- BETWEEN THE RETURNED I NCOME AND THE ASSESSED INCOME AND THEREFORE, THE PENALTY WAS RIGHTLY LEVIED BY THE AO AND THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE SAME. THE DEPARTMENTAL REPRESENTATIVE ALSO RELIED ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF KAY CEE ELECTR ICALS VS. DCIT [2003] 87 ITD 35 (DEL.) WHERE IT WAS HELD THAT IN VIEW OF PROVISIONS OF SEC .158BFA RECOURSE TO THE PROVISIONS OF EXPLANTION-5 TO SEC.271(1)(C) CANNOT BE TAKEN TO DE TERMINE THE SCOPE OF UNDISCLOSED INCOME AND THEREFORE, THE DEFINITION OF UNDISCLOSED INCOME GIVEN IN SEC.158B(B) WOULD APPLY. HE ALSO RELIED ON THE DECISION OF THE MUMBA I BENCH OF THE TRIBUNAL IN THE CASE OF SPARK ELECTRIC COMMUNICATION SYSTEMS [2006] 98 ITD 237 (MUM.) WHERE IT WAS HELD THAT WHERE THE AO MADE CERTAIN ADDITIONS IN BLOCK ASSESS MENT ON ACCOUNT OF VARIOUS INCOMES WHICH WERE NOT OFFERED BY THE ASSESSEE IN BLOCK RET URN, BUT WERE SUBSEQUENTLY DECLARED DURING ASSESSMENT PROCEEDINGS, PENALTY/S.158BFA(2) WAS LEVIABLE. 7. THE AUTHROISED REPRESENTATIVE OF THE ASSESSE ON THE OTHER HAND SUBMITTED THAT THE ADDITION OF RS.4 LAKHS MADE ON ACCOUNT OF INVES TMENT IN KITCHEN WAS BASED ON THE VALUERS REPORT. HE SUBMITTED THAT THIS WAS ALREAD Y DISCLOSED IN THE REGULAR RETURN OF INCOME BY THE ASSESSE. NO MATERIAL WAS FOUND IN TH E SEARCH AND THEREFORE, ADDITION MADE ON THE BASIS OF VALUERS REPORT CANNOT BE A GR OUND FOR IMPOSING PENALTY U/S.158BFA. HE SUBMITTED THAT ADDITION OF RS.9,77 ,362/- ON ACCOUNT OF CIRCULATING CAPITAL AND CASH SEIZED WAS ARRIVED AT WITH REFEREN CE TO SEIZED BOOKS AND AS PER THE FIGURES GIVEN BY THE ASSESSE DURING THE COURSE OF A SSESSMENT PROCEEDINGS AND THEREFORE NO PENALTY U/S.158BFA COULD BE LEVIED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, PENALTY OF RS.8,25,500/- WAS IMPOSED BY THE LEARNED ASSESSING OFFICER U/S.158BFA(2) OF THE ACT ON DIFFERENCE BETWEEN RETURNED INCOME FOR THE BLOCK PE RIOD OF RS.6,01,520/- AND ASSESSED INCOME OF `19,77,362/- ON APPEAL THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) DELETED THE ABOVE PENALTY BY OBSERVING AS UNDER:- - 4 - 6. AFTER CONSIDERING THE SUBMISSIONS OF THE APPEL LANT AND THE CONTENTIONS OF THE LEARNED ASSESSING OFFICER, I AM OF THE VIEW THAT THIS IS A CASE WHERE THE UNDISCLOSED INCOME HAS NOT UNDERGONE ANY CHANGE AND THE FINDING OF THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT ORDER A LSO CONFIRM THE FACT. I ALSO FIND THAT THE LEARNED ASSESSING OFFICER HAS NO T BROUGHT OUT ANY INDEPENDENT MATERIAL FOR MAKING THE ADDITION AS WEL L AS LEVY OF PENALTY. THE LEARNED ASSESSING OFFICER ALSO HAS NOT MADE OUT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS W HILE ARRIVING AT THE ADDITIONAL INCOME. THE HONBLE MUMBAI HIGH COURT I N THE CASE OF CIT VS. DODSAL (218 CTR 430)(2008) HAS GIVEN A FIND ING THAT THE LEVY OF PENALTY IS DISCRETIONARY AND PENALTY IS NOT IMPOSAB LE MERELY BECAUSE THE ASSESSED INCOME IS MORE THAN THE INCOME DECLARED BY THE APPELLANT. I ALSO FIND THAT THE LEARNED ASSESSING OFFICER HAS GIVEN A FINDING IN PAGE NO.2 OF THE ASSESSMENT ORDER THAT THOUGH THE NET WORTH STAT EMENT FILED ALONG WITH THE RETURN IN FORM 2B HAS UNDERGONE CHANGE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE UNDISCLOSED INCOME RETURNED REMAIN S THE SAME. I FIND THAT THE DIFFERENCE AROSE MAINLY ON ACCOUNT OF THE DIFFE RENCE IN NET WORTH COMPUTED BY THE LEARNED ASSESSING OFFICER. THEREFO RE, I AM OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR LEVY OF PENALTY U/S.158BFA(2) AND PENALTY IS DIRECTED TO BE DELETED. 9. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIVE P OINTED OUT THAT ASSESSED INCOME WAS RS.19,77,362/- WHEREAS RETURNED INCOME W AS RS.6,01,520/- AND THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WA S NOT JUSTIFIED IN DELETING THE PENALTY BY OBSERVING THAT UNDISCLOSED INCOME HAS NO T UNDERGONE ANY CHANGE AND DIFFERENCE HAS AROSE ONLY BECAUSE OF NET WORTH COMP UTED BY THE LEARNED ASSESSING OFFICER. 10. WE FIND THAT COPY OF NET WORTH COMPUTATION AS FILED BY THE ASSESSEE ALONG WITH RETURN OF INCOME WAS NOT PRODUCED BEFORE US BY EITH ER OF THE PARTIES. FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AL SO IT COULD NOT BE DECIPHERED THAT HOW DIFFERENCE IN RETURNED INCOME AND ASSESSED INCO ME AROSE ONLY BECAUSE OF CHANGE IN COMPUTATION OF NET WORTH AND NOT BECAUSE OF NON-DIS CLOSURE OF ANY INCOME BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NON-SPEAKING ORDER AS IT HAS NOT MENTI ONED DETAILS OF DIFFERENCE BETWEEN - 5 - THE RETURNED INCOME AND ASSESSED INCOME AND HAS NOT DISCUSSED THE ISSUE IN COMPLETE DETAILS. IN THESE CIRCUMSTANCES, WE ARE NOT IN A P OSITION TO ADJUDICATE THE ISSUE FULLY. WE THEREFORE, IN THE INTEREST OF JUSTICE RESTORE TH E MATTER BACK TO THE FILE OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DI RECT HIM TO ADJUDICATE THE ISSUE AFRESH BY PASSING A SPEAKING ORDER AND BRINGING ALL THE RELEVANT MATERIAL ON RECORD AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. 11. THUS, THIS APPEAL OF THE REVENUE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 27 TH DAY OF MAY, 2011. SD/- SD/- (U.B.S.BEDI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: CHENNAI, 27 TH DAY OF MAY, 2011. COMPILED AND COMPARED BY: KSS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, CHENNAI BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, CHENNAI DATE INITIALS 1. DRAFT DICTATED ON 04.05.11 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 06.5.11 -------- ----------- 3. DRAFT PROPOSED & PLACED 10.05.11 ------------- ------ JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ----- -------------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- - 6 - 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------