Suman Kumar Narula, Kolkata V. ACIT, Circle - 54, Kolkata, Kolkata

ITSSA 4/KOL/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8783 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-10-2010
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-07-2010
• Assessment Year: misc
• Appeal Filed On: 29-03-2010
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: R SALARPURIA
• Keywords: Document seized; Documents seized

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA () . . , , !' .#$. , %& [BEFORE SRI B. R. MITTAL, JM & SRI C. D. RAO, AM] ( &' ( ') ) '* '* '* '* / IT(SS)A NO.4 /KOL/2010 )+ / // / BLOCK PERIOD : 01.04.1989 TO 17.12.1999 SUMAN KUMAR NARULA -VS- ASSISTANT COMMISSIONER OF INCOME-TAX, (PA NO.ABOPN 4051 B) CIRCLE-54, KOLKATA. (-. / APPELLANT ) (/0-./ RESPONDENT ) FOR THE APPELLANT: : SRI R. SALARPURIA FOR THE RESPONDENT 1 /SRI K. K. TRIPATHI %2 / ORDER PER B. R. MITTAL, ( . . . . . . . . ) )) ), , , , ) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), KOLKATA DATED 26TH FEBRUARY, 2010 FOR BLOCK PERIOD 01.04.1989 TO 17.12.1999 IN CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING OF FICER U/S. 158BFA(2) OF THE I. T. ACT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SEAR CH AND SEIZURE WAS CONDUCTED ON 17 TH DECEMBER, 1999 AT THE RESIDENTIAL AND BUSINESS PRE MISES OF NARULA GROUP, NOT IN THE CASE OF THE ASSESSEE, DURING WHICH SOME INCRIMI NATING DOCUMENTS WERE FOUND AS DETAILED IN THE ASSESSMENT ORDER OUT OF WHICH DOCUM ENTS MARKED AS VN-1, VN-3, VN-5 AND SOME OTHER DOCUMENTS WERE FOUND RELATING TO ASS ESSEE. THE SAID SEIZED DOCUMENTS VN-1 CONTAINED UNACCOUNTED PURCHASES OF RS.1,26,73, 837/- DURING THE PERIOD FROM 1.4.1998 TO 6.12.1999 AND SEIZED DOCUMENT MARKED VN /5 CONTAINED UNACCOUNTED PURCHASES OF RS.7,59,105/- DURING THE MONTHS OF OCT OBER, 1999 TO DECEMBER, 1999. THUS, TOTAL UNACCOUNTED PURCHASES OF RS.1,34,32,942 /- WERE FOUND. ON THE OTHER HAND, SEIZED DOCUMENT MARKED VN-3 CONTAINED DETAILS OF UN ACCOUNTED SALES OF RS.14,51,183/- DURING THE MONTHS OF OCTOBER, 1999 TO DECEMBER, 199 9. ON THE BASIS OF THAT ON 30.9.2000 THE ASSESSEE HAD VOLUNTARILY FILED A BLOC K RETURN FOR THE BLOCK PERIOD 1.4.89 TO 17.12.99 DISCLOSING AN UNDISCLOSED INCOME OF RS.17, 00,000/- WHICH INCLUDES RS.2,00,000/- AS INITIAL INVESTMENT TOWARDS HIS UND ISCLOSED BUSINESS ACTIVITIES AND 2 RS.15,00,000/- AS HIS PROFIT FROM UNDISCLOSED BUSIN ESS. SUBSEQUENTLY, PROCEEDINGS U/S. 158BD WAS INITIATED ON 14.12.2001 AND A NOTICE U/S. 158BD WAS ISSUED AND SERVED ON THE ASSESEE ON 18.12.2001 AND COMPLETED THE BLOCK A SSESSMENT. IN THE SAID ASSESSMENT, THE ASSESSING OFFICER APPLIED GROSS PROFIT RATE OF 23.5% AND ESTIMATED THE UNDISCLOSED PROFIT AT RS.31,56,740/- AND ALSO MADE AN ADDITION OF RS.32,36,670/- AS UNDISCLOSED INVESTMENT. THE ASSESSEE WENT IN APPEAL BEFORE THE 1 ST APPELLATE AUTHORITY. IN APPEAL, THE LD. CIT(A) HELD THAT GROSS PROFIT RATE OF 11.3 9% WAS JUSTIFIED AND THEN REDUCED THE UNDISCLOSED PROFIT TO RS.15,30,012/-. HE ALSO CONF IRMED ADDITION OF RS.8,27,849/- ON ACCOUNT OF UNDISCLOSED INVESTMENT, COMPRISING INITI AL INVESTMENT OF RS.2,00,000/- AS SHOWN BY THE ASSESEE AND UNDISCLOSED PURCHASE OF RS .1,93,282/- IN APRIL, 1998 AND THAT OF RS.4,34,567/- IN MAY, 1998. IN APPEAL BEFORE THE ITAT, THE ITAT CONFIRMED THE ORDER OF THE LD. CIT(A). WHEN THE ASSESSMENT ORDER REACHED FINALITY FROM THE ITAT, THE PENALTY PROCEEDINGS WERE INITIATED U/S. 158BFA(2) O F THE ACT AND THE PENALTY WAS LEVIED IN RESPECT OF THE ADDITION SO SUSTAINED BY THE LD. CIT(A) AND ITAT. THE ASSESSING OFFICER IMPOSED PENALTY @ 200% OF THE TAX SOUGHT TO BE EVADED UNDER THE PROVISIONS OF SECTION 158BFA(2) AMOUNTING TO RS.7,24,632/-. IN A PPEAL, THE LD. CIT(A) REDUCED THE PENALTY TO 100% INSTEAD OF 200% LEVIED BY THE ASSES SING OFFICER. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE IT AT. 3. AT THE TIME OF HEARING BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ABOVE PENALTY ON ACCOUNT OF INITIAL INVESTMENT, IN RESPECT OF UNDISCLOSED PURCHASES AS WELL AS THE PROFITS THEREON HAVE BEEN ADDED ON ESTI MATE BASIS AND HENCE, THE LEVY OF PENALTY IS NOT JUSTIFIED. THE LD. AR OF THE ASSESS EE FURTHER SUBMITTED THAT EVEN IF THE ADDITIONS HAVE BEEN SUSTAINED THE LEVY OF PENALTY C ANNOT BE IP SO FACTO AND RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KAMAL RICE MILLS VS. CIT (2004) 265 ITR 75. THE LD. AR OF THE ASSESSEE FURTH ER SUBMITTED THAT EVEN IF THE UNDISCLOSED INCOME OVER AND ABOVE THE INCOME DISCLO SED BY THE ASSESSEE IS ASSESSED BUT LEVY OF PENALTY U/S. 158BFA(2) IS NOT MANDATORY AND PLACED RELIANCE ON THE DECISION OF ITAT, CALCUTTA BENCH IN THE CASE OF DCIT VS. SURESH KUMAR (2005) 97 ITD 527. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT ON AN ESTIMATED ADDITION THE LEVY OF PENALTY IS NOT JUSTIFIED AND PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SUDARSHAN SILKS & SAREES VS. CIT (2008) 300 ITR 205. HE LASTLY PRAYED BEFORE THE BENCH THE PENALTY LEVIED BE CANCELLED. 3 4. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE INITIAL INVESTMENT CONSI DERED BY THE LD. CIT(A) AT RS.8,27,849/- CONSIDERING THE SEIZED DOCUMENTS VN-1 , VN-3 AND VN-5. HE FURTHER SUBMITTED THAT THE GROSS PROFIT RATE IN RESPECT OF THE UNDISCLOSED PURCHASE WAS CONSIDERED BY TAKING INTO ACCOUNT THE PROFIT DISCLO SED BY THE ASSESEE IN RESPECT OF THE FIRM M/S. GEETA STORES IN WHICH THE ASSESEE IS A PA RTNER FOR THE IDENTICAL PERIOD AND, THEREFORE, THE LD. CIT(A) HAS ESTIMATED THE PROFIT ON THE BASIS OF REASONABLE EVIDENCE. HE FURTHER SUBMITTED THAT THE SAID ADDITION OF RS.1 5,30,012/- AS AGAINST RS.15,00,000/- DISCLOSED BY THE ASSESSEE ON ACCOUNT OF UNACCOUNTED PROFIT SHOULD BE THE UNDISCLOSED INCOME FROM THE UNDISCLOSED BUSINESS ACTIVITY OF TH E ASSESEE AND HENCE, THE PENALTY U/S. 158BFA(2) ON THE ADDITIONAL AMOUNT OF RS.30,012/- I S JUSTIFIED. HE FURTHER SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE CONFIRMED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE REPRESENTATIVES. WE OBSERVE THAT THE UNACCOUNTED PROFIT OF RS.15,30,012/- HAS BEEN CONSI DERED BY TAKING INTO ACCOUNT THE GP RATE OF M/S. GEETA STORES, A FIRM IN WHICH THE ASSE SEE IS A PARTNER FOR THE IDENTICAL PERIOD. WE ALSO OBSERVE THAT THE ASSESSEE DISCLOSE D THE PROFIT ON THE UNDISCLOSED PURCHASES @ 10% BUT COULD NOT CONTROVERT AS TO WHY THE PROFIT @ 11.39% FOR THE IDENTICAL PERIOD IN THE CASE OF THE FIRM M/S. GEET A STORES SHOULD NOT BE TAKEN INTO ACCOUNT. WE OBSERVE THAT THE SAID PROFIT OF RS.15, 30,012/- ON THE UNDISCLOSED BUSINESS HAS BEEN COMPUTED CONSIDERING THE IDENTICAL CASE AN D ON A JUSTIFIABLE REASON. IT COULD NOT BE SAID THAT THE SAID PROFIT OF RS.15,30,012/- HAS BEEN CONSIDERED PURELY ON ESTIMATE BASIS OR ON A GUESS WORK. ON THE OTHER HAND, THE S AID PROFIT HAS BEEN CONSIDERED CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES AND T HE ASSESEE COULD NOT CONTROVERT THE SAID FACTUAL POSITION ON THE BASIS OF WHICH THE SAI D ADDITION OF RS.15,30,012/- TOWARDS UNACCOUNTED PROFIT FROM UNDISCLOSED BUSINESS HAS BE EN MADE AS AGAINST RS.15 LACS DECLARED BY THE ASSESSEE IN THE RETURN FILED FOR TH E BLOCK PERIOD UNDER CONSIDERATION. THE HONBLE ALLAHABAD HIGH COURT HAS ALSO HELD IN T HE CASE OF SUSHIL KR. SARAD KR. VS. CIT 232 ITR 588 THAT FINDINGS RECORDED IN THE ASSES SMENT ORDER CONSTITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDING BUT THOSE FINDIN G CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSE OF PENALTY PROCEEDINGS. HOWEVER, IT WAS HELD THAT WHERE ADDITION HAS BEEN MADE AFTER DETAILED INVESTIGATION AND A FTER CONFRONTING THE ASSESSEE WITH THE 4 EVIDENCE AND MATERIALS AND THE ASSESEE FAILED TO DI SCLOSE FACTUAL POSITION ON THE BASIS OF WHICH ADDITIONS WERE MADE, THE CASE STANDS ON DIFFE RENT FOOTING AND IN SUCH A CASE THE PENALTY COULD BE MADE EVEN WHERE THERE IS AN ESTIMA TED ADDITION. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE ASSE SEE THAT NO PENALTY CAN BE LEVIED WHEN AN ESTIMATED ADDITION IS MADE AND ACCORDINGLY, THE DECISION OF SUDARSHAN SILKS & SAREES VS. CIT 300 ITR 205 IS NOT APPLICABLE TO THE FACTS OF THE CASE IN SO FAR AS LEVY OF PENALTY FOR THE ADDITION OF RS.30,012/- IS CONCERNE D. IN SO FAR AS THE ADDITION OF RS.8,27,849/- IS CONC ERNED TOWARDS UNDISCLOSED INVESTMENT AS AGAINST RS.2 LACS DISCLOSED BY THE AS SESSEE, WE OBSERVE THAT THE SAID ADDITION HAS BEEN MADE ON ESTIMATE BASIS AS IS EVID ENT THAT THE LD. CIT(A) CONSIDERED PURCHASES OF TWO MONTHS I.E. PURCHASE OF APRIL, 19 98 OF RS.1,93,282/- AND PURCHASE OF MAY, 1998 OF RS.4,34,567/- AND AFTER TAKING INTO AC COUNT THE INITIAL ADMITTED INVESTMENT OF RS. 2 LACS AND THUS, AGGREGATED THE UNDISCLOSED INVESTMENT AT RS.8,27,849/-. WE OBSERVE THAT THE TRIBUNAL ALSO CONFIRMED THE SAID A DDITION MADE BY THE LD. CIT(A) ON THE GROUND THAT LD. CIT(A) HAS DRAWN A FAIR AND REA SONABLE PRESUMPTION AS AGAINST THE ASSESSING OFFICER CONSIDERED THE PURCHASES FOR FIRS T FIVE MONTHS. THEREFORE, WE AGREE WITH THE LD. AR OF THE ASSESSEE THAT THE SAID UNDIS CLOSED INVESTMENT AGGREGATING RS.8,27,849/- HAS BEEN MADE ON THE PRESUMPTION AND ON ESTIMATE BASIS UNLIKE IN THE CASE OF THE PROFIT RATE APPLIED BY CONSIDERING THE CASE OF THE FIRM M/S. GEETA STORES IN WHICH THE ASSESSEE IS A PARTNER. HENCE, WE HOLD TH AT THE CASES RELIED ON BY THE LD. AR OF THE ASSESSEE (SUPRA) SUPPORT THE CONTENTION OF T HE LD. AR OF THE ASSESSEE THAT THE LEVY OF PENALTY IN RESPECT OF THE ADDITION MADE IN THE U NDISCLOSED INVESTMENT IS NOT JUSTIFIED AND THUS THE SAME IS DELETED BY REVERSING THE ORDER S OF THE AUTHORITIES BELOW. 5 IN VIEW OF THE ABOVE, WE MODIFY THE ORDER OF THE L D. CIT(A) BY RESTRICTING THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED IN RE SPECT OF THE ADDITION OF RS.30,012/- AND DELETE THE PENALTY LEVIED FOR UNDISCLOSED INVE STMENT. HENCE, GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED IN PART. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. ORDER IS PRONOUNCED ON 18.10.2010 SD/- SD/- .#$., %& . . (C. D. RAO) (B. R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( ($& $& $& $&) )) ) DATED : 18 TH OCTOBER, 2010 34 56' 7 JD.(SR.P.S.) %2 8 / 9%:;- COPY OF THE ORDER FORWARDED TO: 1 . SRI SUMAN KUMAR NARULA, C/O, SALARPURIA JAJODIA & C O., 7, C.R. AVENUE, KOLKATA-72. 2 ( /0-. / RESPONDENT ) ACIT, CIRCLE-54, KOLKATA 3 . 25 / THE CIT, KOLKATA 4 . 25 ( )/ THE CIT(A), KOLKATA 5 . BC /5 / DR, KOLKATA BENCHES, KOLKATA 0 // TRUE COPY, %25D/ BY ORDER, E '' /DEPUTY REGISTRAR .