Sri. DINESH SETH, MUMBAI V. ACIT CIR. - 12(2), MUMBAI

ITSSA 37/MUM/2007

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8190 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 25 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: 01-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA JHA TRIPATHI
• Keywords: Bogus purchase; Unexplained investment; 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. 37/MUM/2007 (BLOCK PERIOD: 01.04.1990 TO 06.081999) SHRI DINESH 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) XII, MUMBAI DATED 27.12.2006 WHEREBY HE UPHELD THE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 158BC AND ALSO CONFIRMED THE ADDITIONS MADE THEREIN TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL W HO IS VICE PRESIDENT OF M/S. RADAN MULTIMEDIA LTD. (FORMERLY KNOWN AS RADON TAPES AND TUBES LTD.), A CONCERN BELONGING TO SETH GROUP. THE SAID GROUP IS ENGAGED IN THE BUSINESS OF VIDEO/AUDIO RECORDING AND PROCESSING STUDIO, TRADIN G OF SYNTHETIC YARN, IRON, PHARMA AND LEASE AND FINANCE. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 WAS CONDUCTED IN THE CASES BELONGING TO THE SAID GROUP INCLUDING THE CASE OF ASSESSEE. M/S. RADON MULTIMEDIA LTD. HAD CLAIMED DEPRECIATION ON VARIOUS MACHINERIES AND EQUIPMENTS WORTH RS.6,80,13,445/- STATED TO BE PURC HASED FROM VARIOUS PARTIES IN DELHI EITHER DIRECTLY OF THROUGH ITS SISTER CONCERN S, NAMELY GEMINI OILS LTD. AND SUDHEEP MERCANTILE CO. LTD. ON THE BASIS OF THE MAT ERIAL FOUND DURING THE COURSE OF SEARCH AS WELL AS POST SEARCH ENQUIRIES MADE BY HIM AS DISCUSSED IN DETAIL IN THE BLOCK ASSESSMENT PASSED IN THE CASE OF M/S. RADAN M ULTIMEDIA LTD. AS WELL AS IN THE CASE OF ASSESSEE, THE CLAIM OF THE SAID COMPANY OF HAVING PURCHASED THE SAID MACHINERY/EQUIPMENTS WAS HELD TO BE BOGUS AND DEPRE CIATION CLAIMED THEREON BY 2 IT(SS)A.NO.37/MUM/2007 DINESH SETH VS. ACIT THE SAID COMPANY WAS DISALLOWED. SINCE THE ASSESSEE IN HIS CAPACITY AS VICE PRESENT OF THE SAID COMPANY AND HIS BROTHER SHRI AS HOK SETH AS A DIRECTOR OF THE SAID COMPANY WERE EXERCISING CONTROL OVER THE AFFAI RS OF THE SAID COMPANY INCLUDING PURCHASES AND OTHER FINANCIAL TRANSACTIONS, THE A.O . HELD THAT BOTH OF THEM IN COLLUSION SHOULD HAVE SIPHONED OF FUNDS OF THE SAID 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 UNDISCLO SED INCOME OF THE ASSESSEE AS WELL AS OF SHRI ASHOK SETH BY THE A.O. AND THE SAME WAS ADDED TO THE UNDISCLOSED INCOME OF ASSESSEE IN THE BLOCK ASSESSM ENT COMPLETED UNDER SECTION 158BC. DURING THE COURSE OF SEARCH, A SAVING BANK A /C NO. 7267 MAINTAINED IN THE NAME OF ABHUDYA COOPERATIVE BANK LTD WAS ALSO FOUND . SINCE THE ASSESSEE FAILED TO PROVE THAT THE SAID BANK ACCOUNT WAS ALREADY DIS CLOSED BY HIM AND ALSO FAILED TO EXPLAIN THE SOURCE OF DEPOSITS MADE THEREIN, THE PE AK CREDIT OF THE TRANSACTIONS REFLECTED THEREIN AMOUNTING TO 23,31,300/- WAS ADDED BY THE A.O. TO THE UNDISCLOSED INCOME OF ASSESSEE. AFTER THE SEARCH, A SSESSEE HAD FILED RETURNS OF ITS INCOME FOR A.Y. 1997-98 AND 1998-99 DECLARING TOTAL INCOME OF 43,702/- AND 39,512/- RESPECTIVELY. SINCE THE SAID RETURNS WERE FILED AFTER THE DUE DATE AS WELL AS AFTER THE DATE OF SEARCH, THE INCOME DECLARED TH EREIN 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 3,64,21,291/- IN THE ASSESSMENT COMPLETED UNDER SEC TION 158BC VIDE AN 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 THEREIN THE VALIDITY OF SUCH ASSESSMENT AS WELL AS DISPUTING TH E ADDITIONS MADE THEREIN TO HIS UNDISCLOSED INCOME. THE LEARNED CIT(A) UPHELD THE V ALIDITY OF THE SAID ASSESSMENT REJECTING THE CONTENTIONS RAISED BY THE ASSESSEE IN THIS REGARD AND ALSO CONFIRMED THE ADDITIONS MADE THEREIN ON MERIT. AGGRIEVED BY T HE ORDER OF THE LEARNED CIT(A), ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 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 ADDITIO NS MADE THEREIN ON MERIT. 3 IT(SS)A.NO.37/MUM/2007 DINESH SETH VS. ACIT 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 ALLEGED SIPHONING OF MONEY IN THE GUISE OF BOGUS PURCHASE OF MACHINERY BY RADAN M ULTIMEDIA 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 EXAMINATION VIDE ITS ORDER DATED 13 TH MARCH 2011 PASSED IN IT(SS)A NO. 467/PN/200D, THE CLAIM OF THE PURCHASE OF MACHINERY AND EQUIPMENT WAS NOT BOGUS A S EXISTENCE OF THE SAID MACHINERY/EQUIPMENT WAS FOUND TO BE DULY ESTABLISHE D ON EVIDENCE. MOREOVER, AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE A ND NOT CONTROVERTED BY THE LEARNED D.R., THERE WAS NO EVIDENCE FOUND WITHER DU RING THE COURSE OF SEARCH OR EVEN AS A RESULT OF POST SEARCH ENQUIRY MADE BY THE A.O. TO SHOW THAT ANY CASH WAS RECEIVED FROM THE PAYMENT MADE AGAINST THE PURCHASE OF MACHINERY/EQUIPMENT BY ASSESSEE ON BEHALF OF RADAN MULTIMEDIA LTD. AND THE SAME WAS SIPHONED OFF BY HIM. THERE WAS ALSO NOTHING FOUND DURING THE COURSE OF SEARCH TO SHOW THAT ANY UNEXPLAINED INVESTMENT OR EXPENDITURE WAS MADE BY T HE ASSESSEE OR ANY CASH OR OTHER VALUABLES WERE FOUND FROM THE POSSESSION OF T HE ASSESSEE. HAVING REGARD TO ALL THESE FACTS OF THE CASE AND KEEPING IN VIEW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RADAN MULTIMEDIA LT D. TREATING THE PURCHASE OF MACHINERY AND EQUIPMENT BY THE SAID COMPANY AS GENU INE, WE HOLD THAT THE ADDITION MADE BY THE A.O. ON ACCOUNT OF ALLEGED SIP HONING OF MONEY IN THE GUISE OF BOGUS PURCHASE OF MACHINERY BY RADAN MULTIMEDIA WAS NOT SUSTAINABLE AND THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAID ADDITION. THE SAME IS THEREFORE DELETED. 5. AS REGARDS THE ADDITION OF 23,31,300/- MADE ON ACCOUNT OF PEAK CREDIT IN THE BANK ACCOUNT OF THE ASSESSEE IN ABDHUYA COOP ERATIVE BANK LTD., THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE SAI D BANK ACCOUNT WAS DULY DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME F ILED REGULARLY PRIOR TO THE DATE OF SEARCH BUT THE SAME COULD NOT BE ESTABLISHED BY HIM IN THE ABSENCE OF PROPER AND SUFFICIENT OPPORTUNITY AFFORDED BY THE A.O. HE HAS URGED THAT THIS MATTER MAY THEREFORE BE SENT BACK TO THE A.O. FOR GIVING ASSES SEE AN OPPORTUNITY FOR GIVING SUCH PARTICULARS. SINCE THE LD. DR HAS ALSO NOT RAISED A NY OBJECTION IN THIS REGARD, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON T HIS ISSUE AND RESTORE THE MATTER 4 IT(SS)A.NO.37/MUM/2007 DINESH SETH VS. ACIT TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECID E THE SAME AFRESH AFTER GIVING THE ASSESSEE PROPER 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 IN COME FILED FOR ASSESSMENT YEARS 1997-98 AND 1998-99 AFTER THE DATE OF SEARCH BEING LESS THAN THE TAXABLE LIMIT, THE INCOME SO DECLARED CANNOT BE ADDED AS HIS UNDISCLOS ED INCOME, THE LEARNED D.R. HAS SUBMITTED THAT THIS MATTER MAY ALSO BE SENT BAC K TO THE A.O. FOR VERIFYING THE STAND OF THE ASSESSEE. ACCORDINGLY, THE IMPUGNED OR DER OF THE LEARNED CIT(A) ON THIS ISSUE IS ALSO SET ASIDE AND THE MATTER IS REST ORED TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE STAND OF THE ASSESSEE FROM RECORD AND ALLOW APPROPRIATE RELIEF 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 CASE OF RADAN MULTIMEDIA LTD. (SUPRA) AND THE ISSUES RELATING TO THE REMAINING TW O ADDITIONS MADE IN THE BLOCK ASSESSMENT ARE BEING RESTORED TO THE FILE OF THE A. O. FOR VERIFICATION, OTHER ISSUES RAISED BY THE ASSESSEE IN THIS APPEAL CHALLENGING T HE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 158BC HAVE BECOME VIRTUAL LY INFRUCTUOUS/ACADEMIC. 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.