Shri Ashok Seth, V. The ACIT, Range 12(2),

ITSSA 265/MUM/2004

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8187 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-06-2011
• Assessment Year: misc
• Appeal Filed On: 06-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA JHA TRIPATHI
• Keywords: Bogus purchase; Depreciation; Search and seizure; Opportunity of being heard; Peak credit; Validity of assessment; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER IT(SS)A NO. 265/MUM/2004 (BLOCK PERIOD: 01.04.1990 TO 06.081999) SHRI ASHOK SETH VS. ACIT, RANGE 12(2) 231-B, JOLLY MAKER APT. NO.1 AAYAKAR BHAVAN, M.K. ROAD CUFFE PARADE, MUMBAI 400005 MUMBAI 400020 PAN - AAGPS 6487 D APPELLANT RESPONDENT APPELLANT BY : SHRI SALIL KAPOOR RESPONDENT BY : MS. REENA JHA TRIPATHI O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)- V, MUMBAI DATED 23.02.2004 WHEREBY HE UPHELD THE VALID ITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 158BC AND ALSO CONFIRMED THE ADD ITIONS MADE THEREIN TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL W HO IS A DIRECTOR OF M/S. RADAN MULTIMEDIA LTD. (FORMERLY KNOWN AS RADON TAPE S AND TUBES LTD.), A CONCERN BELONGING TO SETH GROUP. THE SAID GROUP IS ENGAGED IN THE BUSINESS OF VIDEO/AUDIO RECORDING AND PROCESSING STUDIO, TRADING OF SYNTHET IC YARN, IRON, PHARMA AND LEASE AND FINANCE. A SEARCH AND SEIZURE ACTION UNDER SECT ION 132 WAS CONDUCTED IN THE CASES BELONGING TO THE SAID GROUP INCLUDING THE CAS E OF ASSESSEE. M/S. RADON MULTIMEDIA LTD. HAD CLAIMED DEPRECIATION ON VARIOUS MACHINERIES AND EQUIPMENTS 2 IT(SS)A.NO.265/MUM/2004 SHRIASHOK SETH VS. ACIT WORTH RS.6,80,13,445/- STATED TO BE PURCHASED FROM VARIOUS PARTIES IN DELHI EITHER DIRECTLY OF THROUGH ITS SISTER CONCERNS, NAMELY GEM INI OILS LTD. AND SUDHEEP MERCANTILE CO. LTD. ON THE BASIS OF THE MATERIAL FO UND DURING THE COURSE OF SEARCH AS WELL AS POST SEARCH ENQUIRIES MADE BY HIM AS DISCUS SED IN DETAIL IN THE BLOCK ASSESSMENT PASSED IN THE CASE OF M/S. RADAN MULTIME DIA LTD. AS WELL AS IN THE CASE OF ASSESSEE, THE CLAIM OF THE SAID COMPANY OF HAVING P URCHASED THE SAID MACHINERY/EQUIPMENTS WAS HELD TO BE BOGUS AND DEPRE CIATION CLAIMED THEREON BY THE SAID COMPANY WAS DISALLOWED. SINCE THE ASSESSEE IN HIS CAPACITY AS DIRECTOR OF THE SAID COMPANY AND HIS BROTHER SHRI DINESH SETH AS A VICE PRESIDENT OF THE SAID COMPANY WERE EXERCISING CONTROL OVER THE AFFAIRS OF THE SAID COMPANY INCLUDING PURCHASES AND OTHER FINANCIAL TRANSACTIONS, THE A.O . HELD THAT BOTH OF THEM IN COLLUSION SHOULD HAVE SIPHONED OFF FUNDS OF THE SAI D COMPANY IN THE GARB OF BOGUS PURCHASES OF MACHINERY AND EQUIPMENT. ACCORDINGLY A N AMOUNT OF 3,40,06,777/- BEING 50% OF THE VALUE OF MACHINERY AND EQUIPMENTS AMOUNTING TO 6,80,13,554/- HELD AS BOGUS WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE AS WELL AS OF SHRI DINESH SETH BY THE A.O. AND THE SAME WAS ADDED TO T HE UNDISCLOSED INCOME OF ASSESSEE IN THE BLOCK ASSESSMENT COMPLETED UNDER SE CTION 158BC. DURING THE COURSE OF SEARCH, A SAVING BANK A/C NO. 7266 MAINTAINED IN THE NAME OF ABHUDYA COOPERATIVE BANK LTD WAS ALSO FOUND. SINCE THE ASSE SSEE FAILED TO PROVE THAT THE SAID BANK ACCOUNT WAS ALREADY DISCLOSED BY HIM AND ALSO FAILED TO EXPLAIN THE SOURCE OF DEPOSITS MADE THEREIN, THE PEAK CREDIT OF THE TRANS ACTIONS REFLECTED THEREIN AMOUNTING TO 25,01,652/- WAS ADDED BY THE A.O. TO THE UNDISCLOSE D INCOME OF ASSESSEE. AFTER THE SEARCH, ASSESSEE HAD FILED RETURN OF HIS INCOME FOR A.Y. 1998-99 DECLARING TOTAL INCOME OF RS.55,074/-. SINCE THE SAID RETURN WAS FI LED AFTER THE DUE DATE AS WELL AS AFTER THE DATE OF SEARCH, THE INCOME DECLARED THERE IN WAS ALSO TREATED BY THE A.O. AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED IN THE BLOCK ASSESSMENT. ACCORDINGLY, THE UNDISCLOSED INCOME OF THE ASSESSEE WAS COMPUTED BY THE A.O. AT /- IN THE ASSESSMENT COMPLETED UNDER SECTION 158BC VIDE A N ORDER DATED 28.09.2001. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 158BC, APPEAL WAS PREFERRED BY ASSESSEE BEFORE THE LEARNED CIT(A) CHALLENGING THER EIN THE VALIDITY OF THE ASSESSMENT 3 IT(SS)A.NO.265/MUM/2004 SHRIASHOK SETH VS. ACIT MADE U/S 158BC AS WELL AS DISPUTING THE ADDITIONS M ADE THEREIN TO HIS UNDISCLOSED INCOME. THE LEARNED CIT(A) UPHELD THE VALIDITY OF T HE SAID ASSESSMENT REJECTING THE CONTENTIONS RAISED BY THE ASSESSEE IN THIS REGARD A ND ALSO CONFIRMED THE ADDITIONS MADE THEREIN ON MERIT EXCEPT THE ADDITION OF RS.25, 01,652/- MADE ON ACCOUNT OF PEAK CREDIT IN BANK ACCOUNT WHICH HE RESTRICTED TO RS.92 ,688/-. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), ASSESSEE HAS PREFERRED THIS APP EAL BEFORE THE TRIBUNAL. 3. IN THE VARIOUS GROUNDS RAISED IN THIS APPEAL, ASSES SEE HAS CHALLENGED THE VALIDITY OF THE ASSESSMENT MADE BY THE A.O. UNDER S ECTION 158BC ON VARIOUS GROUNDS AND HAS ALSO DISPUTED ALL THE THREE ADDITIONS MADE THEREIN ON MERIT. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE MAIN AD DITION OF 3,40,06,777/- MADE TO THE UNDISCLOSED INCOME OF ASSESSEE ON ACCOUNT OF AL LEGED SIPHONING OF MONEY IN THE GUISE OF BOGUS PURCHASE OF MACHINERY BY RADAN MULTI MEDIA LTD., THE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE HAS ALREADY BEEN EXAMINED BY THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF RADAN MULTIMEDIA LTD. AND AS HELD BY THE TRIBUNAL ON SUCH EXAMINATIO N VIDE ITS ORDER DATED 13 TH MARCH 2011 PASSED IN IT(SS)A NO. 467/PN/200D, THE CLAIM O F THE PURCHASE OF MACHINERY AND EQUIPMENT WAS NOT BOGUS AS EXISTENCE OF THE SAID MA CHINERY/EQUIPMENT WAS FOUND TO BE DULY ESTABLISHED ON EVIDENCE. MOREOVER, AS SUBMI TTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND NOT CONTROVERTED BY THE LEARNED D. R., THERE WAS NO EVIDENCE FOUND WITHER DURING THE COURSE OF SEARCH OR EVEN AS A RES ULT OF POST SEARCH ENQUIRY MADE BY THE A.O. TO SHOW THAT ANY CASH WAS RECEIVED FROM TH E PAYMENT MADE AGAINST THE PURCHASE OF MACHINERY/EQUIPMENT BY ASSESSEE ON BEHA LF OF RADAN MULTIMEDIA LTD. AND THE SAME WAS SIPHONED OFF BY HIM. THERE WAS ALS O NOTHING FOUND DURING THE COURSE OF SEARCH TO SHOW THAT ANY UNEXPLAINED INVES TMENT OR EXPENDITURE WAS MADE BY THE ASSESSEE OR ANY CASH OR OTHER VALUABLES WERE FOUND FROM THE POSSESSION OF THE ASSESSEE. HAVING REGARD TO ALL THESE FACTS OF THE C ASE AND KEEPING IN VIEW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CAS E OF RADAN MULTIMEDIA LTD. TREATING THE PURCHASE OF MACHINERY AND EQUIPMENT BY THE SAID COMPANY AS GENUINE, WE HOLD THAT THE ADDITION MADE BY THE A.O. ON ACCOUNT OF AL LEGED SIPHONING OF MONEY IN THE GUISE OF BOGUS PURCHASE OF MACHINERY BY RADAN MULTI MEDIA WAS NOT SUSTAINABLE AND 4 IT(SS)A.NO.265/MUM/2004 SHRIASHOK SETH VS. ACIT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAID ADDITION. THE SAME IS THEREFORE DELETED. 5. AS REGARDS THE ADDITION OF /- MADE ON ACCOUNT OF PEAK CREDIT IN THE BANK ACCOUNT OF THE ASSESSEE IN ABDHUYA COOPERA TIVE BANK LTD. WHICH HAS BEEN RESTRICTED BY THE LD.CIT(A) TO RS.92,688/-, THE LEA RNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE SAID BANK ACCOUNT WAS DULY DISCL OSED BY THE ASSESSEE IN HIS RETURN OF INCOME FILED REGULARLY PRIOR TO THE DATE OF SEAR CH BUT THE SAME COULD NOT BE ESTABLISHED BY HIM IN THE ABSENCE OF PROPER AND SUF FICIENT OPPORTUNITY AFFORDED BY THE A.O. HE HAS URGED THAT THIS MATTER MAY THEREFORE BE SENT BACK TO THE A.O. FOR GIVING ASSESSEE AN OPPORTUNITY FOR GIVING SUCH PARTICULARS . SINCE THE LD. DR HAS ALSO NOT RAISED ANY OBJECTION IN THIS REGARD, WE SET ASIDE T HE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE SAME AFRESH AFTER GIVING THE ASSESSEE PR OPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. 6. AS REGARDS THE STAND OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FI LED FOR ASSESSMENT YEAR 1998-99 AFTER THE DATE OF SEARCH BEING LESS THAN THE TAXABL E LIMIT, THE INCOME SO DECLARED CANNOT BE ADDED AS HIS UNDISCLOSED INCOME, THE LEAR NED D.R. HAS SUBMITTED THAT THIS MATTER MAY ALSO BE SENT BACK TO THE A.O. FOR VERIFY ING THE STAND OF THE ASSESSEE. ACCORDINGLY, THE IMPUGNED ORDER OF THE LEARNED CIT( A) ON THIS ISSUE IS ALSO SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE STAND OF THE ASSESSEE FROM RECORD AND ALLOW APPROPRIATE RELI EF IN ACCORDANCE WITH LAW. 7. KEEPING IN VIEW THAT THE ISSUE RELATED TO THE MAIN ADDITION MADE IN THIS CASE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE C ASE OF RADAN MULTIMEDIA LTD. (SUPRA) AND THE ISSUES RELATING TO THE REMAINING TWO ADDITI ONS MADE IN THE BLOCK ASSESSMENT ARE BEING RESTORED TO THE FILE OF THE A.O. FOR VERI FICATION, OTHER ISSUES RAISED BY THE ASSESSEE IN THIS APPEAL CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER 5 IT(SS)A.NO.265/MUM/2004 SHRIASHOK SETH VS. ACIT SECTION 158BC HAVE BECOME VIRTUALLY INFRUCTUOUS/ACA DEMIC. WE THEREFORE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO DECIDE THE SAME. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE 2011. SD/ - SD/ - ( V. DURGA RAO ) ( P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH JUNE 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.