POPAT BROS. P.LTD, MUMBAI V. ASST CIT RG 7(1), MUMBAI

ITSSA 4/MUM/2012

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9480 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-07-2013
• Assessment Year: misc
• Appeal Filed On: 31-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Search and seizure; Block assessment
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI RAJENDRA SINGH , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER IT (SS) A NO. 04/M/12 BLOCK PERIOD FROM : 01.04.1987 TO 02.09.1997 M/S. POPAT BROS. PVT. LTD. 249 YUSUF MEHER ALI R OA D, POST BOX NO.13074, MUMBAI 400 003 PAN: AA AC P5738P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, RANGE - 7 (1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASS ESSEE BY : SHRI PANKAJ R. TOPRANI REVENUE BY : SHRI JITENDRA YADAV, D.R. DATE OF HEARING : 22.07.13 DATE OF PRONOUNCEMENT : 25.09.13 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A) DATED 18.11.1 1. 2. THE ASSESSEE HAS ASSAILED THE CONFIRMATION OF PENALTY IMPOSED UPON IT UNDER SECTION 158BFA(2) READ WITH SECTION 158BFA(3) OF THE INCOME TAX ACT AT THE RATE OF 200% OF THE TAX AMOUNT SOUGHT TO BE EVADED RELEVANT TO B LOCK PERIOD FROM 01.04.1987 TO 02.09.1997 . 3. VIDE GROUND NO.1,2,4 & 5 THE ASSESSEE HAS CHALLENGED THE JUSTIFICATION FOR THE LEVY OF PENALTY ITSELF. IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 2 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF COTTON QUOTED FABRICS, COTTON CLOTH AND SYNTHETIC FABRICS. A SE AR CH WAS CONDUCTED ON 02.01.97 IN THE PREMISES OF THE ASSESSEE . THE ASSESSEE FILED RETURN OF INCOME DECLARING AN INCOME OF RS.2 LAKHS ONLY. THE AO PASSED THE ORDER UNDER SECTION 158BB OF THE INCOME TAX AC T, 1961 MAKING THE FOLLOWING ADDITION S : - I . RS.11, 1 2,439/ - AS UNDISCLOSED STOCK BY ADOPTING GROSS PROFIT OF 8.5%. II . RS.30,90,108/ - BY ESTIMATING GROSS PROFIT AT 12% AS ADDITIONAL INCOME. 5. AT THE FIRST APPELLATE STAGE , THE LD. CIT(A) SETTLED THE GROSS P ROFIT RATE AT 10.5% AND WORKED OUT BOOK STOCK AT RS.1,06,84,633/ - AS ON 02.09.1997 (I.E. ON THE DATE OF SEARCH). THIS RESULTED IN DIFFERENCE OF STOCK OF RS.4,77,114/ - . AS THE APPELLANT HAD ALREADY DECLARED AN INCOME OF RS.2,00,000/ - , THE LD. CIT(A) CONF IRMED FURTHER ADDITION OF RS.2,77,197/ - . 6. IN THE SECOND APPEAL, T HE ITAT IN ITS ORDER DATED 24.02.06 HELD THAT LD. CIT(A) HAD BEEN REASONABLE IN TAKING GROSS PROFIT RATE AT 10.5% THOUGH HE COULD HAVE TAKEN IT AT 11% AND ACCORDINGLY THE ADDITION SO SUS TAINED BY LD. CIT(A) WAS CONFIRMED BY ITAT. 7 . PENALTY PROCEEDINGS WERE INITIATED ON THE GROUND THAT AT THE TIME OF SEARCH UNDER SECTION 132(4) ON 18.02.1997 , SHRI JAGDISH POPAT , DIRECTOR, HAD STATED THAT HE WANTED TO SURRENDER AN ADDITIONAL INCOME OF R S.12,50,000/ - FOR THE BLOCK PERIOD TO COVER THE EXCESS STOCK FOUND AND OTHER DISCREPANC IES WHICH MIGHT ARISE. HOWEVER, HE RETRACTED FROM HIS STATEMENT AND COMMITMENT WHILE FILING THE RETURN OF INCOME OF THE ASSES S EE AND DECLARED INCOME OF ONLY RS.2 LAKHS. THE AO WAS OF THE VIEW THAT THE APPELLANT HAD MADE A STATEMENT AND IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 3 THEREA FTER RETRACTED PARTIALLY AND HAD NOT COME FORWARD WITH EVIDENCE TO PROVE HOW ITS EARLIER STATEMENT WAS WRONG. THE APPELLANT ON THE OTHER HAND HAD STATED THAT THE ADDITION WAS ON A MERE ESTIMATION OF GROSS PROFIT AND NO MENSREA HAD BEEN ESTABLISHED BY THE DEPARTMENT. THE A.O. WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE HENCE IMPOSED PENALTY @300% OF THE TAX AMOUNT SOUGHT TO BE EVADED BY THE ASSESSEE. 8 . DURING THE FIRST A PPELLATE PROCEEDINGS , IT WAS AGAIN CONTENDED ON BEHALF OF THE APPELLANT THAT IT WAS NOT LIABLE FOR PAYING PENALTY AS PER THE FACTS OF THE CASE. IT WAS CONTENDED THAT A N ESTIMATION OF GROSS PROFIT CANNOT BE A GROUND FOR LEVY OF PENALTY. AS AN ALTERNAT IVE , IT WAS ARGUED THAT PENALTY ONLY SHOULD HAVE BEEN LEVIED ON RS.2,77,197/ - AS THE ASSESSEE HAD ALREADY OFFERED INCOME OF RS.2 LAKHS. THE APPELLANT ALSO CONTENDED THAT THE LEVY OF PENALTY @ 300% WAS UNDULY HARSH AND IT SHOULD BE REDUCED. IT AGAIN RELIED ON THE CONCEPT OF MENSREA CONTENDING THAT THE SAME HAD NOT BEEN ESTABLISHED BY THE DEPARTMENT. 9 . THE LD. CIT(A) OBSERVED THAT T HERE WAS A SEARCH AND SEIZURE ACTION IN THE CASE OF THE APPELLANT AND THE DIRECTOR MR. JAGDISH POPAT HAD OFFERED TO SURRENDE R AN ADDITIONAL INCOME OF RS.12,50,000/ - FOR BLOCK PERIOD TO COVER EXCESS STOCK , WHO LATER ON RETRACTED AND OFFERED ONLY RS.2 LAKHS IN THE RETURN OF INCOME. THE STATEMENT UNDER SECTION 132(4) WAS RECORDED ON THE SPOT AND THE SAME WAS HAVING A GREATER EVID ENTI ARY VALUE. EVEN T HE ITAT ALSO CONFIRMED THE ADDITION ON THIS POINT IN CONJUNCTION WITH THE STATEMENT UNDER SECTION 132(4) . HE HELD T HAT UNEXPLAINED STOCK WAS CLEARLY FOUND AS A RESULT OF SEARCH. THUS A CLEAR CUT CASE OF CONCEALMENT WAS MADE OUT AS A RESULT OF SEARCH ACTION. THUS IT WAS HELD THAT THE PENALTY WAS LEVIABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE IS THUS IN APPEAL BEFORE US. IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 4 1 0 . WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE PARTIES AND ALSO GONE THROUGH THE RECORD S . 1 1 . SO FAR THE CONTENTION OF THE LD. A.R. THAT NO PENALTY WAS LEVIABLE IN THIS CASE IS CONCERNED , WE DO NOT FIND ANY MERIT IN THE SAME. IN THE QUANTUM ASSESSMENT , THE ASSESSEE HAD CONTESTED THE SAME UP TO THE ITAT . THE ITAT , AS OBSERVED ABOVE, VIDE ORDER DATED 24.02 .06 HAS UPHELD THE ORDER OF THE LD. CIT(A) CONFIRMING ADDITION IN THE INCOME. IN THE SAID ORDER THE CO - ORDINATE BENCH OF TRIBUNAL HAS CATEGORICALLY OBSERVED THAT THE EXCESS PHYSICAL STOCK FOUND DURING THE COURSE OF SEARCH WAS ITSELF A MATERIAL TO WARRANT ADDITION IN THE BLOCK ASSESSMENT. THE EXCESS STOCK FOUND WAS SUFFICIENT INDICATION THAT THERE HAD BEEN INVESTMENT IN SUCH EXCESS STOCK OUTSIDE THE BOOKS OF ACCOUNTS. IN THE PENALTY APPEAL THE LD. CIT(A) HAS OBSERVED THAT THE DIRECTOR OF THE ASSESSEE COMP ANY NAMELY MR. JAGDISH POPAT HAD OFFERED TO SURRENDER AN ADDITIONAL INCOME OF RS.12,50,000/ - FOR THE BLOCK PERIOD TO COVER EXCESS STOCK. HOWEVER , HE LATER RETRACTED HIS STAT EMENT AND THE ASSESSEE OFFERED ONLY RS. 2 LAKHS IN THE RETURN OF INCOME. ALL THESE FACTS PROVE BEYOND DOUBT THAT THERE WAS A CONSCIOUS CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. HENCE IN OUR VIEW THE REVENUE WAS JUSTIFIED IN LEVYING THE PENALTY UNDER SECTION 158BFA(2) READ WITH SECTION 158BFA(3) OF THE INCOME TAX ACT. 1 2 . SO FAR THE CONTENTION OF THE ASSESSEE RAISED VIDE GROUND NO.2 OF THE APPEAL THAT THE AO HAD NOT MENTIONED THE FACT OF INITIATION OF PENALTY IN THE ASSESSMENT ORDER ITSELF IS CONCERNED , IT MAY BE OBSERVED THAT NO SUCH REQUIREMENT IS THERE IN THE LAW TO MENTIO N SUCH FACT IN THE ASSESSMENT ORDER ITSELF . HOWEVER IT MAY FURTHER BE OBSERVED THAT A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS CATEGORICALLY MENTIONED IN THE ASSESSMENT ORDER, PENALTY UNDER SECTION 271(1)(C) IS INITIATED SEPARATELY. AT THI S STAGE THE LD. IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 5 A.R. HAS STATED AT BAR THAT HE DOES NOT PRESS THIS ISSUE. HENCE THE ISSUE RAISED VIDE GROUND NO.2 IS DECIDED AGAINST THE ASSESSEE. 1 3 . THROUGH GROUND NO.4 THE ASSESSEE HAS RAISED THE CONTENTION THAT NO PENALTY CAN BE LEVIED IN THE ABSENCE OF ANY ADDITION MADE. HOWEVER , IT MAY BE OBSERVED THAT AN ADDITION OF RS. 2,77,197/ - WAS MADE IN THE CASE OF ASSESSEE WHICH WAS CONFIRMED BY THE ITAT. HENCE THERE IS NO FORCE IN THE CONTENTION RAISED BY THE ASSESSEE VIDE GROUND NO.4 ALSO. 14. VIDE GRO UND NO.5 THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY CONTENDING THAT THE POWER TO LEVY THE PENALTY UNDER SECTION 158BFA IS DISCRETIONARY AND NOT MANDATORY. THE LD. A.R. HAS RELIED IN THIS RESPECT ON AN AUTHORITY OF THE HONBLE RAJASTHAN HIGH COURT STY LED AS CIT VS. NAGENDRA KUMAR DOSI (2009) 315 ITR 172, WHEREIN THE HONBLE RAJASTHAN HIGH COURT HAS HELD SO. HOWEVER THE FACTS OF THE PRESENT CASE IN HAND ARE QUITE DIFFERENT FROM THAT OF THE CASE BEFORE THE HONBLE RAJASTHAN HIGH COURT. EVEN IF, THE P OWER TO LEVY THE PENALTY IS DISCRETIONARY, BUT THE LD. A.R. COULD NOT BRING BEFORE US ANY SUBSTANCE THROUGH WHICH HE MAY PROVE THAT THE DISCRETION TO LEVY THE PENALTY WAS WRONGLY EXERCISED BY THE AUTHORITIES BELOW AGAINST THE ASSESSEE. UNDER SUCH CIRCUMST ANCES, THIS AUTHORITY RELIED UPON BY THE LD. A.R. IS OF NO HELP TO THE ASSESSEE. THE ISSUE RAISED VIDE GROUND NO.5 IS THUS DECIDED AGAINST THE ASSESSEE. 1 5 . VIDE GROUND NO.3 , THE ASSESSEE HAS RAISED THE CONTENTION THAT THE PENALTY HAS BEEN LEVIED ON THE T OTAL TAXABLE INCOME OF RS.4,77,177/ - OUT OF WHICH THE ASSESSEE HAD ALREADY OFFERED RS.2 LAKHS AND THAT THE PENALTY WAS LEVIABLE ONLY ON THE REMAINING AMOUNT OF RS.2,77,197/ - . IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 6 1 6 . IT IS A FACT ON THE FILE THAT THE ASSESSEE HAD OFFERED RS.2 LAKHS AS AN I NCOME WHICH HAD BEEN GIVEN CREDIT BY LD. CIT(A) , WHILE WORKING OUT THE DIFFERENCE IN THE STOCK. A PERUSAL OF THE PROVISIONS OF SECTION 158BFA(2) REVEALS THAT AS PER THE 2 ND PROVISO TO SECTION 158BFA , THE PENALTY IS LEVIABLE ONLY ON THE AMOUNT OF UNDISCLO SED INCOME WHICH IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN. THE SECTION 158BFA(2) FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: SECTION158BFA (2 ) : THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS), IN THE COURSE OF ANY PROCEEDINGS UND ER THIS CHAPTER, MAY DIRECT THAT A PERSON SHALL PAY 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 UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED, A RETURN UNDER CLAUSE (A) OF SECTION 158BC ; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEEN PAID OR, IF THE ASSETS SEIZED CONSISTS OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE ; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN ; AND (IV) AN APPEAL IS NOT FILED AGA INST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN : PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN TH E RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 1 7 . IN VIEW OF THE EXPRESS PROVISIONS OF SECTION 158BFA(2) , THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE AND IT IS DIRECTED THAT THE PENALTY IS LEVIABLE ONLY ON THE AMOUNT WHICH IS HELD TO BE IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN BY THE ASSESSEE. 1 8 . IN THE GROUND NO.6 THE ASSESSEE HAS CHALLE NGED THE QUANTUM OF THE PENALTY AMOUNT. THE AO LEVIED THE PENALTY AT THE RATE OF 300% OF THE TAX SOUGHT TO BE E VADED. HOWEVER THE LD. CIT(A) REDUCED IT TO 200%. WHILE IT ( SS) A NO. 04/M/12 M/S. POPAT BROTHERS PVT. LTD. 7 DOING SO THE LD. CIT(A) OBSERVED THAT THE CASE OF THE ASSESSEE DID NOT FALL IN THE NAT URE OF CASES WHERE MINIMUM PENALTY SHOULD BE LEVIED. SO HE ADOPTED THE MIDDLE RATE OF OPTION . HE REDUCED THE PENALTY FROM THE MAXIMUM RATE OF 300% OF THE TAX SOUGHT TO BE EVADED TO 200%. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE WELL REASONED ORDE R OF THE LD. CIT(A) IN THIS RESPECT. HENCE GROUND NO.6 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 19 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.09. 2013. SD/ - SD/ - ( RAJENDRA SINGH ) ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 2013. * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.