Shri Satyanarayan J.Kabra, Ahmedabad V. The ACIT, Circle-7, Ahmedabad

ITSSA 435/AHD/2013

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3164 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-04-2017
• Assessment Year: misc
• Appeal Filed On: 29-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VS AHD TO
• Keywords: Income from undisclosed sources; Peak credit; Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER SL. NOS. IT(SS)A NO(S)/ CO BLOCK PERIOD APPEAL(S) / CO BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 461/AHD/2013 1.4.1995 TO 31.3.2001 & FROM 1.4.2001 TO 12.7.2001 ACIT CIRCLE-7 AHMEDABAD SHRI SATYANARAYAN J.KABRA PROP. OF POONAM CORPROATION & DINDAYAL ASSOCIATES 3, RAJESH APARTMENT ASHRAM ROAD, AHMEDABAD PAN:ADGPK 2858 M 2. 435/AHD/2013 -DO- ASSESSEE REVENUE 3. CO 66/AHD/14 -DO- ASSESSEE REVENUE ASSESSEE BY : SHRI DHIRAN SHAH, AR REVENUE BY : SHRI JAMES KURIAN,SR.DR !' / DATE OF HEARING 11/04/2017 #$%& !' / DATE OF PRONOUNCEMENT 19/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEALS ONE BY THE REVENUE AND THE ANOTHER BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD [CIT(A) IN SHORT] DATED 18/09/2013 FOR IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 2 - THE BLOCK PERIOD 01/04/1995 TO 31/03/2001 & FROM 0 1/04/2001 TO 12/07/2001. THIS APART, THE ASSESSEE ALSO FILED CR OSS OBJECTION NO.66/AHD/20014 ARISING OUT OF REVENUES APPEAL IN IT(SS)A NO.461/AHD/2013. 2. AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LD.AR FOR THE ASSESSEE THAT APPEAL FILED BY THE REVENUE IS HIT BY CBDT CIRCULAR NO.21 OF 2015 DATED 10/12/2015. AS PER AFORESAID CIRCULA R, ALL PENDING APPEALS FILED BY REVENUE ARE LIABLE TO BE DISMISSED AS A ME ASURE FOR REDUCING LITIGATION WHERE THE TAX EFFECT DOES NOT EXCEED THE PRESCRIBED MONETARY LIMIT WHICH IS RS.10 LAKHS. IN THE INSTANT CASE, T HE TAX EFFECT ON THE DISPUTED ISSUE RAISED BY THE REVENUE IS STATED TO B E LESS RS.10 LAKHS AND THEREFORE APPEAL OF THE REVENUE IS REQUIRED TO BE D ISMISSED IN LIMINE . 3. THE LD.DR FOR THE REVENUE FAIRLY ADMITTED THE AP PLICABILITY OF THE CBDT CIRCULAR NO.21 OF 2015. ACCORDINGLY, APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. HOWEVER, IT WILL BE OPEN TO THE REVENUE TO SEEK RESTORATION OF ITS APPEAL ON SHOWING INAPPL ICABILITY OF THE AFORESAID CBDT CIRCULAR IN ANY MANNER. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ASSESSEES CROSS OBJECTION IT(SS)A NO.66/AHD/2014 IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 3 - 5. THE GROUND RAISED BY THE ASSESSEE IN ITS CROSS O BJECTION READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-XIV, AHMEDABAD AFTER GOING THROUGH THE DETAILS AND SUBMI SSIONS OF THE APPELLANT AND OBSERVATION OF THE HONBLE ITAT HAS R IGHTLY DELETED PENALTY OF RS.8,19,489/- ON THE ADDITION OF RS.13,3 9,000/-. IT WAS FURTHER HELD LD.CIT(A) THAT THEREFORE, THIS IS AN E STIMATE MADE BY HONBLE ITAT AND FOR THIS THE APPELLANT CANNOT BE H ELD IN DEFAULT AS CONTEMPLATED U/S.158BFA(2) OF THE ACT AND THE LD .CIT(A) HAS RIGHTLY DELETED THE PENALTY IMPOSED. 6. THE LD.AR FAIRLY CONCEDED THAT THE CO NO.66/AH D/2014 IN APPEAL ALSO REQUIRES TO BE CORRESPONDINGLY DISMISSE D IN VIEW OF THE REVENUES APPEAL IN IT(SS)A NO.461/AHD/2013 BEING D ISMISSED ON THE GROUND OF LOW TAX EFFECT. 7. A PERUSAL OF THE GROUND OF APPEAL RAISED IN TH E CROSS OBJECTIONS OF THE ASSESSEE SHOWS THAT THESE ARE MERELY SUPPORTING THE ACTION OF THE CIT(A) IN GRANTING RELIEF TO THE ASSESSEE. AS THE REVENUES APPEAL HAS BEEN DISMISSED ON ACCOUNT OF LOW TAX EFFECT, THE CO RAISED BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND DOES NOT SURVI VE. AS A RESULT, CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 4 - 8. IN THE RESULT, BOTH REVENUES APPEAL IN ITA NO. 461/AHD/2013 AND CROSS OBJECTION IN 66/AHD/2014FILED BY THE ASSESSEE THEREON ARE DISMISSED. 9. THIS LEAVES US WITH ASSESSEES APPEAL IN IT(S S)A NO.435/AHD/2013 WHICH IS DEALT WITH AS UNDER:- 10. IN THE CAPTIONED APPEAL THE ASSESSEE HAS CHALLE NGED THE ACTION OF THE CIT(A) IN SUSTAINING THE PENALTY TO THE EXTENT OF RS.11,18,911/- IMPOSED BY THE AO UNDER S.158BFA(2) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 11. BRIEFLY STATED, A SEARCH ACTION UNDER S.132 OF THE ACT WAS CONDUCTED ON THE ASSESSEE ALONG WITH KABRA GROUP ON 12/07/2001. PURSUANT TO SEARCH PROCEEDINGS, RETURN FOR THE BLOC K PERIOD BEING 01/04/1995 TO 12/07/2001 WAS FILED UNDER S.158BC OF THE ACT. IN THE ASSESSMENT OF THE BLOCK PERIOD, IT WAS NOTED BY THE AO THAT CERTAIN LOOSE- PAPERS WERE SEIZED IN THE COURSE OF SEARCH INDICATI NG HUGE CASH RECEIPTS AND PAYMENTS BY THE ASSESSEE. IN THE QUANTUM PROCE EDINGS, THE ASSESSEE ADMITTED THAT THE CASH FLOW ENTERED AS PER THE AFOR ESAID SEIZED PAPERS BELONGED TO THE ASSESSEE. THE ASSESSEE ACCEPTED TH E ROUGH JOTTINGS AND PAYMENTS AND RECEIPTS BUT PLEADED THAT THE PRINCIPL E OF PEAK THEORY CAN IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 5 - BE APPLIED FOR DETERMINATION OF INCOME BY ASSESSING AUTHORITY. AFTER CONSIDERING THE ENTIRE SEIZED MATERIAL OR THE RECOR D, THE ASSESSEE SUBMITTED THAT CASH BALANCE OF ABOUT RS.18 TO 19 L ACS AVAILABLE AT THE DISPOSAL IS SUFFICIENT TO EXPLAIN THE SOURCE AS PER THE PEAK WHICH WOULD ALSO BE APPROXIMATELY THE SAME AMOUNT OF RS.18 TO 1 9 LACS. IT WAS THUS CONTENDED THAT NO UNDISCLOSED INCOME NEED TO BE DET ERMINED AS PER PEAK THEORY. IN QUANTUM APPEAL, THE ASSESSEE PREPARED U NACCOUNTED CASH BALANCE OF RS.18.72 LACS. THE AO REWORKED THE AFOR ESAID AMOUNT AT RS.1,40,29,620/-. THE CIT(A) CONFIRMED THE ACTION OF THE AO IN THE QUANTUM PROCEEDINGS. AGAINST THE ORDER OF THE CIT( A), THE ASSESSEE PREFERRED AN APPEAL IN QUANTUM PROCEEDINGS BEFORE T HE ITAT. THE ASSESSEE REWORKED THE PEAK ADDITIONS AS PER THE LOO SE-PAPER AT RS.31,70,985/- AND IN SUPPORT THEREOF FURNISHED TH E CERTIFICATE OF A CHARTERED ACCOUNTANT. THE ITAT, IN PRINCIPLE, APPR OVED THE PEAK METHOD FOR DETERMINATION OF UNDISCLOSED INCOME AND REMITTED THE MATTER BACK TO THE FILE OF AO FOR REDETERMINATION OF THE Q UANTUM OF THE UNDISCLOSED INCOME AS PER THE PEAK CREDIT THEORY. PURSUANT THERETO, THE ASSESSMENT WAS ONCE AGAIN CARRIED OUT AND AN ADDITI ON TOWARDS UNDISCLOSED INCOME BY APPLYING PEAK CREDIT THEORY W AS FINALLY ASCERTAINED AT RS.31,70,985/-. IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 6 - 12. THE AO ALSO IMPOSED PENALTY ON THE IMPUGNED AD DITION OF RS.31,70,985/- TOWARDS UNDISCLOSED INCOME ON THE GR OUND THAT THE ASSESSEE HAS ADMITTED A DEFAULT AS ENVISAGED BY SEC TION 158BFA(2) OF THE ACT. THE CIT(A) ADMITTED THE SOURCE TO THE EXTENT OF RS.17,49,650/- AS EXPLAINED AND SUSTAINED PENALTY ON THE BALANCE AMOU NT OF RS.14,21,335/-. 13. AGAINST THE APPELLATE ORDER OF THE CIT(A) CONF IRMING PENALTY, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. THE LD.AR MR.DHIRAN SHAH SUBMITTED THAT THE AS SESSEE HAS FULLY CO-OPERATED IN THE PROCEEDINGS AND HAS SUBMITTED TH E WORKING OF UNACCOUNTED INCOME AS PER PEAK CREDIT THEORY AT RS. 31,70,985/- DULY CERTIFIED BY THE CHARTERED ACCOUNTANT. AGAINST THE AFORESAID AMOUNT, SOURCE OF CASH BALANCE OF RS.17,49,650/- STANDS EXP LAINED TO THE SATISFACTION OF THE REVENUE AND THE PENALTY UNDER S .158BFA(2) IS ON THE REMAINING AMOUNT OF RS.14,21,335/- WHICH IS IN APPE AL. THE LD.AR VEHEMENTLY SUBMITTED THAT THE CASH FLOW STATEMENT W AS ORIGINALLY PREPARED AT ABOUT RS.18 19 LACS WHICH WAS RE-WORK ED AND INFLATED BY THE AO AT A STAGGERING AMOUNT OF RS.1,40,29,620/-. THE ITAT FINALLY ACCEPTED PEAK THEORY IN VIEW OF THE ROTATIONAL TRAN SACTIONS AND AS PER THE PEAK THEORY, THE AMOUNT WAS FINALLY ASCERTAINED AT RS.31,70,985/-. THE LD.AR THUS, SUBMITTED THAT IN THE CIRCUMSTANCES, TH E ASSESSEE IS ENTITLED IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 7 - TO FAVOURABLE VIEW AS THE ENTIRE INCOME IS DETERMI NED IN THE REALM OF ESTIMATION. IT WAS SUBMITTED THAT THE PENALTY UND ER S.158BFA(2) IS SOUGHT TO BE LEVIED ON DIFFERENTIAL AMOUNT DETERMIN ED TOWARDS UNDISCLOSED INCOME BY APPLYING PEAK CREDIT THEORY Q UA THE CASH ADMITTEDLY AVAILABLE AT THE DISPOSAL OF THE ASSESS EE. THE LD.AR POINTED OUT THAT THE PROVISIONS OF SECTION 158BFA(2) ARE DI SCRETIONARY IN NATURE AND CONSEQUENTLY THE DISCRETION IS REQUIRED TO BE E XERCISED IN FAVOUR OF ASSESSEE IN THE GIVEN SET OF CIRCUMSTANCES. HE ACC ORDINGLY PLEADED THAT THE PENALTY IMPOSED ON THE AFORESAID ADDITION REQUI RES TO BE DROPPED. 15. THE LD.DR RELIED UPON THE ORDER OF THE ORDER OF THE CIT(A). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SHORT QUESTI ON THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE REVENUE WAS JUSTIFIED IN SUSTAINING THE PENALTY ON THE UNDISCLOSED INCOME DETERMINED AS PER PEAK CREDIT THEORY IN TERMS OF SECTION 158BFA(2) OF THE ACT. WE NOTE THAT THE ASSESSEE HIMSELF HAS ADMITTED THE EXISTENCE OF UNDISCLOSED I NCOME AS PER THE LOOSE-PAPERS FOUND DURING THE COURSE OF SEARCH. TH E QUANTUM THEREOF VARIED IN THE QUANTUM PROCEEDINGS AT DIFFERENT LEVE LS AND FINALLY COMPUTED BY ASSESSEE AND ENDORSED BY ITAT AT RS.31, 70,985/-. THEREFORE, THE MAXIMUM POSSIBLE BENEFIT AS PER PEAK CREDIT THEORY HAS IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 8 - BEEN MADE AVAILABLE TO THE ASSESSEE ON MOST LIBERAL CONSIDERATIONS OF CIRCUMSTANCES. THEREFORE, BALANCE AMOUNT REMAINED UNEXPLAINED IN SPITE OF UTMOST BENEFIT OF THE PEAK CREDIT THEORY BESTOWE D UPON THE ASSESSEE. IN THESE CIRCUMSTANCES, IT IS VERY DIFFICULT TO ADM IT THE PLEA OF THE ASSESSEE THAT PENALTY SHOULD NOT BE IMPOSED ON SUCH ADDITIONS TOWARDS UNDISCLOSED INCOME. IN SPITE OF THE MAXIMUM POSSIB LE BENEFITS AWARDED TO THE ASSESSEE, A PORTION OF UNDISCLOSED INCOME HA S SPRUNG OUT FOR WHICH THE ASSESSEE HAS NO SATISFACTORY EXPLANATION TO OFF ER. THE UNDISCLOSED INCOME HAS BEEN DETECTED DUE TO EXTREME ACTION BY W AY OF SEARCH. THE REFERENCE TO THE LOOSE-PAPER AND DETAILED WORKING A S FOUND IN THE ORDERS OF THE AUTHORITIES BELOW REVEAL THAT THE ASSESSEE H AS INDULGED IN MASS SCALE TRANSACTIONS OF CASH. THE ASSESSEE HAS INITI ALLY SOUGHT TO MATCH THE ENTRIES IN LOOSE-PAPER WITH PURPORTED CASH AVAILABL E. THIS STAND WAS MODIFIED ONLY AT A BELATED STAGE WHEN UNTRUTHFULNES S OF THE EARLIER STAND WAS EXPOSED. THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE IN THE STAND AT INITIAL STAGE AND LATER STAGE. THEREFORE, EVEN AFTER GIVING THE BENEFIT OF THE ROTATIONAL TRANSACTIONS, THE VOID OF REMAINING UNACCOUNTED TRANSACTIONS COULD NOT BE FILLED. THE ASSESSEE I S THUS LIABLE FOR PENALTY ON THE UNDISCLOSED INCOME SO DETERMINED INDEED. TH E ACTION OF CIT(A) IS THUS PLAUSIBLE AND WITHIN THE AUTHORITY OF LAW. HENCE, WE REFUSE TO INTERFERE WITH THE ORDER OF THE CIT(A). IT(SS)A NO.461/AHD/13 (BY REVENUE) CO NO.66/AHD/2014 (BY ASSESSEE) & IT(SS)A NO.435/AHD/2013 ACIT VS. SATYANARAYAN J. KABRA - 9 - 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER PRONOUNCED IN OPEN COURT ON 19 / 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 19/ 04 /2017 ,..,.../ T.C. NAIR, SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT. 3. 234' 5' / CONCERNED CIT 4. 5' ( . ) / THE CIT(A)-XIV, AHMEDABAD 5. 678'34 , ..34 & , . 2 / DR, ITAT, AHMEDABAD 6. 89 / GUARD FILE. / BY ORDER, 16'' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12.4.17 (DICTATION-PAD 17- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.4.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.19.4.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 19.4.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER