RAJESH C. GUPTA, MUMBAI V. ASST. CIT CEN CIR 35, MUMBAI

ITSSA 45/MUM/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0351 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-08-2014
• Assessment Year: misc
• Appeal Filed On: 13-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N M PORWAL; H S SANGHAVI
• Keywords: Business income; Business expenditure
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER IT(SS) A- 45/MUM/2010 BLOCK PERIOD: 01.04.1996 TO 11.04.2002 RAJESH C. GUPTA 4-B/1 SONAWALA BUILDING, TARDEO ROAD,TARDEO MUMBAI 400 007 VS. ACIT CEN CIR-35 MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AABPG 8723 D ASSESSEE BY : SHRI N.M. PORWAL & H.S. SANGHAVI REVENUE BY : SHRI SANTOSH KUMAR DATE OF HEARING : 06.08.2014 DATE OF PRONOUNCEMENT : 10.09.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-41, MUMBAI DATED 06.07.2010 FOR THE BLOCK PERIOD FROM 01.04.1996 TO 11.04.2002. 2. IN THIS APPEAL, THE ASSESSEE HAS AGITATED THE DE CISION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCES ON ACCOUNT OF THE EXPE NSES OF RS.3,13,236/- FOR PURCHASES OF LIQUOR, RS.6,199/ OF TELEPHONE EXPENSE S AND RS.68,212/- OF PAYMENT MADE TO THE BMC. 3. ALSO, THE ASSESSEE VIDE, AN APPLICATION, DATED 3 0.04.2013 HAS FILED THE ADDITIONAL GROUNDS OF APPEAL WHICH RELATES TO THE V ALIDITY OF THE NOTICE ISSUED U/S 148BD OF THE INCOME TAX ACT. AFTER GOING THROUGH TH E ADDITIONAL GROUNDS FILED BY THE ASSESSEE, IT IS NOTED THAT THE ADDITIONAL GROUN DS ARE LEGAL GROUNDS WHICH DO NOT REQUIRE ANY NEW FACTS TO BE BROUGHT ON RECORD. IN V IEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANIES LTD. VS. CIT (1998 ) 229 ITR 383, THE LEGAL GROUNDS ARE ADMITTED. IT(SS) A- 45/MUM/2010 RAJESH C. GUPTA BLOCK PERIOD: 01.04.1996 TO 11.04.2002 2 4. THE RELEVANT FACTS ARE THAT THERE HAS BEEN A SEA RCH ACTION U/S 132 OF THE ACT, CARRIED OUT AT THE PRESIDENTIAL PREMISES OF SHRI DE VAKINANDAN GUPTA AND HIS FAMILY MEMBERS AT 4/A/B/C/ SONAWALA BUILDING TARDEO ROAD M UMBAI-7, ON 11.04.2002. DURING THE COURSE OF THE INVESTIGATION, IT WAS FOUN D THAT INCOME/DEPOSIT IN THE BANK ACCOUNT NO. 9500 HAS BEEN HELD IN THE NAME OF SHRI RAJESH GUPTA, THE ASSESSEE AND THE SAME WAS NOT DISCLOSED TO THE DEPARTMENT. ACCOR DINGLY, THE AO ISSUED A NOTICE U/S 158BD ON 24.01.2005 WHICH WAS SERVED UPON THE A SSESSEE ON 27.01.2005 ASKING THE ASSESSEE TO FILE HIS RETURN FOR THE BLOC K PERIOD FROM 01.04.1996 TO 11.04.2002 IN FORM NO. 2B. IN RESPONSE TO THE REQUE ST, AFTER AVAILING THE EXTENDED GRANT OF TIME, THE ASSESSEE ASSESSEE FILED HIS RETU RN OF INCOME ON 24.02.2005 DECLARING UNDISCLOSED INCOME OF RS.1,75,000/- AS AG AINST THE UNDISCLOSED BANK CREDITS OF RS.10,15,757/-. ACCORDING TO THE ASSESSE E, THE SAID UNDISCLOSED BANK CREDITS OF RS.10,15,757/- CONSISTED OF THE UNEXPLAI NED CREDITS INCLUDING DEPOSITS PERTAINING TO BUSINESS ACTIVITY CARRIED OUTSIDE THE BOOKS. OUT OF THE TOTAL DEPOSITS, THE ASSESSEE DEDUCTED/CLAIMED BUSINESS EXPENDITURE OF RS.7,03,252/- RELATED TO UNDISCLOSED BUSINESS ACTIVITY CARRIED ON BY HIM. TH E SAID RETURN SUBMITTED BY THE ASSESSEE WAS CONSIDERED BY THE AO AND IN THE ASSESS MENT CONCLUDED U/S 158BC READ WITH SECTION 143(3) OF THE ACT, THE AO ASSESSE D THE UNDISCLOSED INCOME AT RS.10,15,757/-. WHILE COMPLETING THE ASSESSMENT, TH E AO HAD DISALLOWED THE CLAIM OF BUSINESS EXPENDITURE OUT OF RECEIPT OF THE UNDIS CLOSED BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. THE AO WAS OF THE VIEW THAT THE AS SESSEE HAD NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE RECEIPTS WERE B USINESS RECEIPTS AND THE EXPENSES WERE MADE OUT OF THESE BUSINESS RECEIPTS. ACCORDINGLY, THE AO MADE THE IMPUGNED ADDITION OF RS.10,15,757/-. ON APPEAL, THE LD.CIT(A), WHILE PARTLY ALLOWING THE CLAIM OF THE ASSESSEE IN RESPECT OF CERTAIN EXP ENDITURE, CONFIRMED THE DISALLOWANCES MADE BY THE AO ON ACCOUNT OF THE EXPE NSES OF RS.3,13,236/- FOR PURCHASES OF LIQUOR, RS.6,199/ OF TELEPHONE EXPENSE S AND RS.68,212/- OF PAYMENT MADE TO THE BMC. AGGRIEVED BY THE IMPUGNED ORDER, T HE ASSESSEE IS IN APPEAL BEFORE US. 5. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS RELEVANT TO STATE THAT THE ASSESSEE, VIDE ADDITIONAL GROUNDS , HAS CHALLENGED THE VALIDITY OF THE IT(SS) A- 45/MUM/2010 RAJESH C. GUPTA BLOCK PERIOD: 01.04.1996 TO 11.04.2002 3 NOTICE ISSUED BY THE AO U/S 148BD OF THE ACT. ACCOR DING TO THE ASSESSEE, THE NOTICE ISSUED U/S 158BD DOES NOT SATISFY THE REQUIREMENT O F SECTION 158BD FOR THE REASON THAT THE SAID NOTICE DOES NOT RECORD ANY SATISFACTI ON THAT ANY UNDISCLOSED INCOME BELONGS TO THE ASSESSEE. THEREFORE, ACCORDING TO TH E ASSESSEE, THE ASSESSMENT MADE BY THE AO U/S 158BC R.W.S. 143(3) OF THE ACT O UGHT TO HAVE BEEN HELD AS INVALID BY THE LD.CIT(A). IN SUPPORT OF THE SAID CO NTENTION, THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CA SE OF MANISH MAGESHWARI VS. ACIT 289 ITR 341 (SC) AND THE DECISIONS OF THE TRIBUNAL, IN THE CASES OF MR. ABDUL REHMAN DAMDA VS. ACIT IN [IT(SS) NO. 1/M/2007], MR. ZIA UR REHMAN VS. ACIT [IT(SS) NO. 3/M/2007] AND SHRI MOHAMMAD ZUBAIR ALIAKBAR VS. ACIT [IT (SS) NO. 2/M/2007]. IN THIS REGARD, A QUERY WAS RAISED BY THE BENCH AS TO WHETHER ANY FINDING IS GIVEN BY THE LD.CIT(A) ON THIS ASPECT RE GARDING SATISFACTION RECORDED BY THE AO, AND IN REPLY, IT WAS SUBMITTED BY THE LEARN ED AR OF THE ASSESSEE THAT NO SUCH FINDING WAS GIVEN BY THE LD.CIT(A). WE ALSO FI ND THAT NO SUCH SPECIFIC GROUND WAS RAISED BEFORE THE LD.CIT(A), ALTHOUGH THIS GROU ND WAS RAISED BEFORE HIM THAT ORDER PASSED BY THE AO IS BAD IN LAW AND SHOULD BE QUASHED. ON THE OTHER HAND, IT IS THE CONTENTION OF THE LD.AR THAT SINCE THE MAIN CASES IN THIS GROUP HAVE BEEN ALREADY CENTRALIZED IN THE JURISDICTION OF THE AO U PON A REQUEST TO THE CIT CENTRAL-3, MUMBAI VIDE HIS LETTER NO. DCIT, CC-35/GF/2003-04 D ATED 09.05.2003, THE SAME AO NEED NOT RECORD ANY SATISFACTION U/S 158BD OF THE A CT TO THE EFFECT THAT THERE IS ANY UNDISCLOSED INCOME BELONGS TO THE ASSESSEE. AFTER C ONSIDERING THE RIVAL SUBMISSIONS, IT IS RELEVANT TO STATE THAT THERE ARE PLETHORA OF DECISIONS TO THE EFFECT THAT THE PRECONDITION TO INVOKE SECTION 158BD IS THAT THE AO MUST RECORD SATISFACTION THAT THERE IS INCOME BELONGS TO THE OTHER PERSON AND IN THE ABSENCE OF SUCH FINDING, SECTION 158BD CANNOT BE INVOKED. ALSO, IT IS A WELL SETTLED POSITION OF LAW THAT THE SATISFACTION MUST BE OBJECTIVE AND NOT SUBJECTIVE. THIS OBJECTIVE SATISFACTION CANNOT BE WAIVED MERELY BECAUSE THE SAME AO PROCEEDS WITH THE ASSESSMENT. AFTER CONSIDERING THE FACTUAL AND LEGAL POSITION ON THIS ISSUE, WE ARE OF THE VIEW THAT IT IS JUST AND PROPER TO SET ASIDE THE ENTIRE MATTER TO T HE FILE OF THE LD.CIT(A) FOR DECIDING THIS ISSUE AS TO WHETHER REQUISITE SATISFACTION WAS RECORDED BY THE AO IN ORDER TO ASSUME JURISDICTION BY THE AO OVER THE ASSESSEE UND ER SECTION 158BD. ACCORDINGLY, IT(SS) A- 45/MUM/2010 RAJESH C. GUPTA BLOCK PERIOD: 01.04.1996 TO 11.04.2002 4 WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE ENTIRE MATTER BACK TO HIS FILE FOR FRESH DECISION. HE SHOULD FIRST DECIDE THE TECH NICAL ASPECT AS TO WHETHER REQUISITE SATISFACTION WAS RECORDED BY THE AO OR NOT IN ORDER TO DECIDE AS TO WHETHER THE AO HAS PROPERLY ASSUMED JURISDICTIONAL UNDER SECTION 1 58BD OF THE ACT OR NOT. IF IT IS FOUND THAT THE AO HAS NOT ASSUMED PROPER JURISDICTI ON UNDER SECTION 158BD OF THE ACT, THEN THE ASSESSMENT ORDER DESERVES TO BE QUASH ED. IN CASE, IT IS FOUND THAT PROPER SATISFACTION WAS RECORDED AND ASSUMPTION OF JURISDICTIONAL UNDER SECTION 158BD OF THE ACT BY THE AO IS PROPER, THEN VARIOUS OTHER ISSUES INCLUDING TECHNICAL AND ISSUES ON MERITS SHOULD BE DECIDED BY THE LD.CI T(A) AFRESH. NEEDLESS TO SAY, THE LD.CIT(A) SHOULD PASS A SPEAKING ORDER AFTER PR OVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES. THIS ADDITIONAL GROUND O F THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. IN VIEW OF OUR DECISION IN RES PECT OF ADDITIONAL GROUNDS, OTHER ISSUES RAISED BY THE ASSESSEE BY WAY OF ORIGINAL GR OUNDS AS PER THE MEMO OF APPEAL DO NOT CALL FOR ANY ADJUDICATION AT THIS STAGE, BEC AUSE AFTER DECIDING THE TECHNICAL ASPECT, THE LD.CIT(A) HAS TO DECIDE THE ENTIRE ISSU ES AGAIN. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (RAJENDRA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.09.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.