P.Haresh Kumar, Salem V. DCIT, Salem

ITSSA 3/CHNY/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1879 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-02-2016
• Assessment Year: misc
• Appeal Filed On: 13-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHALJCIT
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Reasonable cause; Block assessment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T(SS)A.NO.3/MDS/2015 ( BLOCK ASSESSMENT FROM 01.04.1986 TO 17.03.1997 ) MR. P.HARESH KUMAR, 12, KANAKKAR STREET, SALEM-636 001. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I SALEM-636 007. PAN:AALPH1173J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.G.BASKAR, ADVOCATE /RESPONDENT BY : DR.B.NISCHAL,JCIT /DATE OF HEARING : 2 ND FEBRUARY, 2016 /DATE OF PRONOUNCEMENT : 6 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS), SALEM DATED 30.12.2014 IN ITA NO.31/2007-08 PASSED UNDER SECTION 158FA(2) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE MINIMUM PENALTY OF RS.2,43,625/- MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 158BFA(2) IN RELATION TO THE UNDISCL OSED INCOME OF RS.4,06,040/-. 2 IT(SS)A NO.3/MDS/2015 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL DERIVING INCOME FROM RENT, MONEY LENDING , DIVIDEND AND SALE OF CASSETTES. A SEARCH WAS CONDUCTED ON TH E ASSESSEE ON 17.3.1997 IN THE ASSESSEES BUSINESS PR EMISES AND HIS RESIDENCE AT SALEM. DURING THE COURSE OF TH E SEARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SECU RED; HOWEVER, NO VALUABLES WERE SEIZED. THEREAFTER, ASSE SSMENT WAS MADE UNDER SECTION 158BC OF THE ACT AND ADDITIO NS WERE MADE ON ACCOUNT OF UNDISCLOSED INCOME OF RS.23,49,247/-. ON APPEAL, THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) DELETED ADDITION TO THE EXTENT OF RS.19,08,230/- AND THEREBY SUSTAINED THE ADDITION TO RS.4,41,040/-. ON FURTHER APPEAL BEFORE THE TRIBUNA L, THE TRIBUNAL SUSTAINED THE ADDITION AT RS.4,06,040/-. THE ASSESSEE HAD NOT FILED ANY REGULAR RETURN OF INCOME FOR THE ASSESSMENT YEARS 1994-95 TO 1997-98. SINCE THE TRIB UNAL HAD CONFIRMED THE ADDITION FOR RS.4,06,040/-, THE L EARNED ASSESSING OFFICER LEVIED MINIMUM PENALTY @ 100% ON THE CONCEALED INCOME CONFIRMED BY THE TRIBUNAL. THE LE ARNED ASSESSING OFFICER WAS OF THE VIEW THAT IN THE CASE OF THE 3 IT(SS)A NO.3/MDS/2015 ASSESSEE, LEVY OF PENALTY IS INEVITABLE BECAUSE OF THE FOLLOWING REASONS. (A) THE ASSESSEE HAD FAILED TO F URNISH THE REGULAR RETURN OF INCOME UNDER SECTION 139(1) OF TH E ACT WITHOUT REASONABLE CAUSE FOR ALL THE RELEVANT ASSES SMENT YEARS AND HAD FILED RETURN OF INCOME ONLY AFTER THE DATE OF SEARCH EXPOSING HIS INCOME BEFORE THE REVENUE. (B) THE ASSESSEE HAS ALSO NOT PRODUCED BILLS FOR THE PURCHA SE OF CASSETTES IN ORDER TO ASCERTAIN THE CLOSING STOCK O F THE CASSETTES AND IT WAS FOUND THAT THE ASSESSEE HAD EX CESS STOCK OF CASSETTES WORTH RS.57,100/-. (C) THE ASSES SEE HAD ALSO NOT OFFERED ANY EXPLANATION REGARDING UNEXPLAI NED INVESTMENT OF RS.44,000/- AND FURTHER DID NOT FURNI SH ANY EVIDENCE FOR PAYMENT OF BROKERAGE OF RS.8500/- IN O RDER TO ESTABLISH THE GENUINENESS OF THE PAYMENT. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESS ING OFFICER BY OBSERVING AS UNDER:- 5. I HAVE PERUSED THE PENALTY ORDER AND THE SUBMISSIONS OF THE APPELLANT. ALL THE GROUNDS OF THE APPELLANT PERTAIN TO THE LEVY OF PENALTY ONLY. THE APPELLANT'S MAIN CONTENTION IS THAT THE REGULAR 4 IT(SS)A NO.3/MDS/2015 RETURNS WERE FILED, THOUGH BELATEDLY, ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNTS AND WHICH WERE RECORDED BEFORE THE DATE OF SEARCH, BUT RETURNS WER E NOT FILED. THE APPELLANT'S RELIANCE OF THE DECISION OF THE HON'BLE ITAT CHENNAI IN G.KANAKARAJ VS. DCIT (73 TTJ 731) IS ALSO PERUSED . 5.1. THE APPELLANT ALSO LIST OUT THE CONDITIONS THA T ARE TO BE SATISFIED, FOR LEVY OF PENALTY U/S 158 BFA(2). FOR CLARIFICATION, SECTION 158 BFA(2) IS AS UNDER. THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS ) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER , MAY DIRECT THAT A PERSON SHALL PM) 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 RESPECT OF THE UNDISCL OSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE(C) OF SECTION 158BC' 5.2. THE APPELLANT ALSO STATES THAT THE LEVY OF PENALTY U/S 158 BFA(2) IS DISCLOSURE AND NOT MANDATORY. 5.3 AS PER RECORDS, THE APPELLANT HAS FILED A NIL R ETURN AS UNDISCLOSED INCOME IN HIS BLOCK RETURN. THE SAME WAS ASSESSED AT RS.23,49,274/- IN THE ASSESSMENT. THE SAME WAS REDUCED SUBSTANTIALLY BY THE CIT(A) AN D THE SAME WAS CONFIRMED BY THE ITAT IN ITS ORDER IN IT(SS)A. 81/MDS/01 DATED 18/3/2006. THE ASSESSING OFFICER HAS LEVIED THE PENALTY @ 60% ON THE UNDISCLOSED INCOME OF RS.4,06,040/- AS PER THE ORDER OF THE HON'BLE ITAT SUPRA. 5 .4. THE APPELLANT'S CONTENTION THAT REGULAR RETURNS WERE FILED, HAS BEEN REJECTED BY THE ASSESSING OFFICER AS THE SAME HAS BEEN FILED BELATEDLY AND MUCH AFTER THE SEARCH. THE APPELLANT'S RELIANCE ON CASE LAWS RELATING TO ESTIMATION ALSO ARE NOT ACCEPTABLE AS THE INCOME HAS BEEN CONFIRMED BY THE HON'BLE ITAT. 5.5. BE THAT AS MAY BE, THE HON'BLE ITAT IN THE APPELLANT'S CASE HAS CONSIDERED FILING OF REGULAR RETURN BY THE APPELLANT AND HAS HELD AS UNDER. 5 IT(SS)A NO.3/MDS/2015 '8.2. CONSIDERING THE ISSUE, WE FIND THAT HAVING NO T FILED RETURN OF INCOME BEFORE THE DATE OF SEARCH, T HESE INCOMES CANNOT BE TREATED AS DISCLOSED INCOME OF TH E ASSESSEE' 5.6 IN VIEW OF THIS, IT BECOMES VERY CLEAR THAT THE APPELLANTS GROUNDS CANNOT BE ACCEPTED. 5. THE LEARNED AUTHORIZED REPRESENTATIVE REITERATED HIS SUBMISSIONS MADE BEFORE THE REVENUE ON EARLIER OCCA SIONS BY STATING THAT LEVY OF PENALTY UNDER SECTION 158BF A(2) OF THE ACT IS NOT MANDATORY. IT WAS FURTHER POINTED OUT TH AT THE ADDITIONS WERE MADE SINCE THE ASSESSEE COULD NOT FU RNISH ALL THE VOUCHERS FOR PURCHASE OF CASSETTES; HOWEVER THE CLOSING STOCK HAS TO BE VALUED ON THE NET REALIZABLE MARKET VALUE OR COST WHICHEVER IS LESS, WHICH THE ASSESSEE HAD COMP LIED WITH. BUT THE REVENUE HAS WRONGLY ESTIMATED THE EXC ESS CLOSING STOCK AT RS.57,100/- . IT WAS FURTHER EXPLA INED THAT THE INVESTMENT MADE FOR RS.44,000/- WAS FROM THE ASSESS EES OWN SAVINGS BUT IT WAS WRONGLY TREATED BY THE REVEN UE AS INVESTMENT MADE OUT OF UNEXPLAINED SOURCE. THE LEAR NED AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT TH E BROKERAGE EXPENSE WAS A ROUTINE EXPENSE IN THE BUSI NESS OF MONEY LENDING AND THE AMOUNT OF RS.8500/- CLAIMED B Y THE ASSESSEE AS BROKERAGE PAID WAS QUITE NOMINAL. CONSI DERING 6 IT(SS)A NO.3/MDS/2015 THESE FACTS, IT WAS PLEADED THAT THE PENALTY LEVIED BY THE LEARNED ASSESSING OFFICER WHICH WAS FURTHER CONFIRM ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE DELETED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, VEHEMENTLY OPPOSED TO THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE AND ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. THE ADDITION MA DE BY THE LEARNED ASSESSING OFFICER OF RS.23,49,274/- WAS SUS TAINED BY THE TRIBUNAL ONLY TO THE EXTENT OF RS.4,06,040/-. F URTHER THE ADDITION SUSTAINED TOWARDS EXCESS STOCK OF RS.57,10 0/-, UNEXPLAINED INVESTMENT OF RS.44,000/- AND BROKERAGE PAID RS.8500/- ARE ALL DUE TO THE FACT THAT THE ASSESSEE COULD NOT ACCURATELY FURNISH THE DETAILS. BUT IT IS AN ACCEP TED PRACTICE THAT THE CLOSING STOCK HAS TO BE VALUED AS PER THE COST OR MARKET VALUE REASONABLY DETERMINED BY THE ASSESSEE WHICHEVER IS LESS. THESE ASPECTS WERE NOT CONSIDERE D WHILE MAKING THE ADDITION. FURTHER, THE AMOUNT OF RS.44,0 00/- IS 7 IT(SS)A NO.3/MDS/2015 PETTY AND THE SOURCE COULD BE REASONABLY ESTIMATED FROM THE BONAFIDE SAVINGS OF THE ASSESSEE CONSIDERING HIS FI NANCIAL STATUS. SIMILARLY, THE AMOUNT OF BROKERAGE CHARGES OF RS.8500/- DISALLOWED WAS DUE TO NON-FURNISHING OF V OUCHERS AND DETAILS. HOWEVER, THAT DOES NOT MEAN THAT THE A SSESSEE WOULD NOT HAVE INCURRED ANY EXPENDITURE TOWARDS BRO KERAGE CHARGES CONSIDERING THE NATURE OF HIS BUSINESS. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT P ENALTY UNDER SECTION 158BFA(2) OF THE ACT NEED NOT BE INVO KED BECAUSE LEVY OF PENALTY UNDER THESE PROVISIONS ARE NOT MANDATORY. ACCORDINGLY, WE HEREBY DELETE THE MINIMU M PENALTY OF RS.2,26,625/- LEVIED BY THE LEARNED ASSE SSING OFFICER WHICH WAS FURTHER CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER /CHENNAI, & /DATED 6 TH APRIL, 2016 8 IT(SS)A NO.3/MDS/2015 SOMU !() *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) !!/ /DR 6. 2 /