PRATHAMESH GENERAL HOSPITAL, MUMBAI V. ACIT CIR 3, KALYAN

ITSSA 48/MUM/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0254 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-12-2013
• Assessment Year: misc
• Appeal Filed On: 21-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Search and seizure; Opportunity of being heard; Opportunity of cross examination; Block assessment
• Section: 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER IT(SS)A NO.48/MUM/2010 (BLOCK PERIOD: 01.04.1990 TO 14.12.2000) M/S. PRATHAMESH GENERAL HOSPITAL 1 ST FLOOR, GHANSHAYAM BLDG. MAHATMA GANDHI ROAD, DOMBIVLI MUMBAI-421 202. VS. ACIT , CIRCLE - 3 KALYAN RANI MANSION 2 ND FLOOR MURBAD ROAD, KALYAN. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : AABFP 8986 D ASSESSEE BY : SHRI JAYANT BHATT REVENUE BY : SHRI A.C. TEJPAL DATE OF HEARING : 16/07/2014 DATE OF PRONOUNCEMENT : 30/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30/07/2010 OF CIT(A) ARISING FROM PENALTY ORDER PAS SED UNDER SECTION 158 BFA(2) OF THE INCOME TAX ACT. 2. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT IN CASE OF DR. VIJAY GANGADHAR NEGALUR, PARTNER OF THE ASSESSEE FIRM ON 14/12/2000. DURING THE COURSE OF SEARCH INCRIMINATING BOOKS AND DOCUMENTS WERE SEIZED. IT W AS NOTICED THAT RENUKA HOSPITAL WAS A PROPRIETARY CONCERN OF M/S. PRATHAMESH GENERAL IT(SS)A NO.48/M/10 PRATHMESH GENERAL HOSPITAL 2 HOSPITAL, (THE ASSESSEE). THE PARTNER OF THE ASSESS EE FIRM ADMITTED ON MONEY PAYMENT OF RS.10.00 LACS ON PURCHASE OF THE P REMISES. IN ANOTHER SEARCH CARRIED OUT AT THE RESIDENTIAL AND BUSINESS PREMISES OF SHRI VISHWAS R. BHOIR AT DOMBIVALI IN WHOSE PREMISES REN UKA HOSPITAL WAS BEING RUN BY THE ASSESSEE ON RENTAL BASIS. DURING T HE COURSE OF SEARCH IN CASE OF SHRI VISHWAS R. BHOIR CERTAIN PAPERS WERE SEIZED CONTAINING ENTRIES RELATING TO ACQUISITION OF HOSPITAL PREMISE S OF ASSESSEE. AS PER THE SEIZED PAPER A SUM OF RS. 30 LACS WAS RECEIVABLE FR OM THE DOCTORS OF THE ASSESSEE HOSPITAL IN MARCH 93 AND WAS TO BE PAID TO SHRI VISHWAS SETH THUS THIS AMOUNT OF RS. 30 LACS WAS ADDED TO THE IN COME OF THE ASSESSEE BY THE AO ON ACCOUNT OF ON MONEY PAID IN RESPECT OF PURCHASES OF PREMISES. THE PENALTY UNDER SECTION 158BFA(2) HAS B EEN LEVIED VIDE ORDER DATED 22/09/2009. THE ADDITION WAS BASED ON S TATEMENT OF SHRI VISHWAS R. BHOIR RECORDED UNDER SECTION 132(4). THE AO MADE THE ADDITION OF UNDISCLOSED INCOME OF RS.50,00 LACS IN THE BLOCK ASSESSMENT BY CONSIDERING THE ON MONEY PAYMENT OF RS.30.00 LAC S AND INTEREST OF RS.20 LACS. THIS ADDITION WAS REDUCED BY CIT(A) AND THEN BY THIS TRIBUNAL TO RS.30.00 LACS ON ACCOUNT OF ON MONEY PA YMENT AND ACCORDINGLY THE PENALTY UNDER SECTION 158 BFA(2) WA S LEVIED IN RESPECT OF THE ADDITION OF RS.30.00 LACS AS UNDISCLOSED INCOME ON ACCOUNT OF ON MONEY CONFIRMED BY THIS TRIBUNAL. THE ASSESSEE CHAL LENGED THE LEVY OF PENALTY BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US THE LD. AR HAS SUBMITTED THAT THE SAID ADDITION WAS MADE BY THE AO ON THE BASIS OF STATEMENT OF SHRI VI SHWAS R. BHOIR AND NO OPPORTUNITY OF CROSS EXAMINATION OF THE ASSESSEE WAS GIVEN TO THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THOUGH THE ADDITION TO THE EXTENT OF RS.30.00 LACS HAS BEEN CONFIRMED BY THIS TRIBUNAL HOWEVER, THE OPPORTUNITY OF CROSS EXAMINATION OUGHT TO HAVE BEEN GIVEN TO THE ASSESSEE DURING PENALTY PROCEEDINGS. THE ASSESSEE D EMANDED THE CROSS EXAMINATION DURING THE PENALTY PROCEEDINGS BUT AO D ENIED THE SAME. IT(SS)A NO.48/M/10 PRATHMESH GENERAL HOSPITAL 3 THUS THE LD. AR HAS SUBMITTED THAT THE PENALTY PROC EEDINGS ARE SEPARATE AND INDEPENDENT FROM THE ASSESSMENT ORDER AND AO SH OULD HAVE DECIDED THE SAME INDEPENDENTLY. HE HAS POINTED OUT THAT THE ASSESSEE HAS ALREADY FILED AN APPEAL AGAINST THE ORDER OF THIS T RIBUNAL BEFORE THE HON'BLE HIGH COURT WHICH HAS BEEN ADMITTED VIDE ORD ER DATED 05/12/2009. HE HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DODSAL LTD. (312 ITR 112) AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS HELD THAT PENALTY U/S. 158 BFA(2) IS DISCRETIONARY AND NOT MANDATORY. 4. ON THE OTHER HAND THE LD. DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ADDIT ION HAS BEEN CONFIRMED BY THIS TRIBUNAL THEN AO IS BOUND TO LEVY PENALTY U/S. 158 BFA(2) IN RESPECT OF UNDISCLOSED INCOME ASSESSED I N BLOCK ASSESSMENT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ADDITION IN QUESTION IS BAS ED ON A SEARCH CONDUCTED IN THE CASE OF THIRD PARTY NAMELY SHRI VI SHWAS R. BHOIR AND STATEMENT OF SHRI VISHWAS BHOIR RECORDED DURING THE SEARCH. THOUGH THE ADDITION HAS BEEN CONFIRMED BY THIS TRIBUNAL IN QUA NTUM APPEAL HOWEVER, THE PENALTY U/S. 158 BFA(2) IS NOT AUTOMAT IC BUT AO HAS TO EXECISE ITS DISCRETION ON THE ISSUE OF LEVY OF PENA LTY U/S. 158 BFA(2). THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS . DODSAL LTD. (SUPRA) IN PARA-6 IS AS UNDER :- THE TERMINOLOGY OF THE SAID SECTION MAKES IT CLEA R THAT THERE IS A DISCRETION IN THE ASSESSING OFFICER TO DIRECT PAYME NT OF PENALTY. THE PROVISO SUPPORTS THIS INTERPRETATION. ONLY IF THE AUTHORITY DECIDES TO IMPOSE PENALTY THEN, IT WILL NOT BE LES S THAN THE TAX LEVIABLE BUT SHALL NOT EXCEED THREE TIMES THE TAX SO LEVIABLE. IT IS, THEREFORE, NOT POSSIBLE TO ACCEPT THE SUBMISSION O N BEHALF OF THE REVENUE THAT ONCE THE ASSESSING OFFICER COMES TO T HE CONCLUSION THAT THERE IS A BREACH OF THE MANDATE OF SECTION 1 58BFA(1), THEN THE PENALTY SHOULD BE IMPOSED. MERELY BECAUSE THE EXPRESSION IT(SS)A NO.48/M/10 PRATHMESH GENERAL HOSPITAL 4 USED IS SHALL NOT BE LESS THAN THE AMOUNT OF TAX LE VIABLE OR NOT EXCEEDING THREE TIMES THE TAX, DOES NOT RESULT IN R EADING THE FIRST PART OF THE SECTION AS MANDATORY. THE PROVISO TO T HE SUB SECTION MAKES IT CLEAR THAT THERE IS DISCRETION CONFERRED ON THE COMMISSIONER (APPEALS) FOR THE REASONS WHICH ARE SE T OUT THEREIN. WHILST CONSIDERING THE TAXING STATUTE, THE SUPREME COURT HAS HELD THAT IT IS SETTLED LAW THAT THE EXPRESSIONS US ED IN A TAXING STATUTE WOULD ORDINARILY BE UNDERSTOOD IN THE SENSE IN WHICH IT IS HARMONIOUS WITH THE OBJECT OF THE STATUTE TO EFFECT UATE THE LEGISLATIVE INTENTION. IT IS EQUALLY SETTLED LAW TH AT, IF THE LANGUAGE IS PLAIN AND UNAMBIGUOUS, ONE CAN LOOK FAIRLY AT THE L ANGUAGE USED AND INTERPRET IT TO GIVE EFFECT TO THE LEGISLATIVE INTENTION. TAX LAWS, NEVERTHELESS, HAVE TO BE INTERPRETED REASONABLY AND IN CONSONANCE WITH JUSTICE ADOPTING A PURPOSIVE APPROACH. SEE CI T V. GWALIOR RAYON SILK MANUFACTURING CO. LTD. [1992] 196 ITR 149 (SC). IN THE INSTANT CASE, BOTH THE COMMISSIONER OF INCOMETA X (APPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL HAVE RECORDED REASONS FOR EXERCISE OF THEIR DISCRETION. BEFORE US, THE REVENU E HAS NOT CHALLENGED THE SAID FINDING OF FACT AS TO THE EXERC ISE OF DISCRETIONARY POWER. WE, THEREFORE, UPHOLD THE VIE W TAKEN BY INCOME-TAX APPELLATE TRIBUNAL THAT THE SECTION IS DIRECTORY AND NOT MANDATORY. 5.1 THUS IT IS CLEAR THAT BEFORE PASSING AN ORDER O F LEVYING PENALTY U/S. 158 BFA(2) AO HAS TO GIVE AN OPPORTUNITY OF HEARING TO THE ASSESSEE WHICH ITSELF MANIFEST THE REQUIREMENT OF THE INDEPE NDENT EXAMINATION OF THE CASE FOR THE PURPOSE OF LEVY OF PENALTY U/S. 15 8 BFA. GIVING A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE IMPOSI NG PENALTY ITSELF EMBEDDED THE PRINCIPLE OF CONSIDERING THE EXPLANATI ON AND OBJECTIONS RAISED BY ASSESSEE. THOUGH THE ASSESSMENT FRAMED U/ S. 158 BC/BD IS A MATERIAL EVIDENCE FOR INITIATING THE PENALTY PROCEE DINGS TO LEVY THE PENALTY HOWEVER, THE ADDITION MADE IN THE BLOCK ASS ESSMENT ITSELF IS NOT A CONCLUSIVE EVIDENCE TO JUSTIFY THE LEVY OF PENALT Y IF THE ASSESSEE BRINGS ON RECORD CERTAIN FACTS AND EXPLANATION AS WELL AS OBJECTIONS AGAINST THE LEVY OF PENALTY. IN SUCH A CASE AO HAS TO CONSIDER THE OBJECTIONS, EXPLANATIONS, MATERIAL OR DETAILS SO RAISED OR PROD UCED BY THE ASSESSEE BEFORE ARRIVING TO THE CONCLUSION OF IMPOSING A PEN ALTY U/S. 158 BFA(2). IN THE CASE IN HAND WE NOTE THAT THE ASSESSEE DEMAN DED CROSS EXAMINATION OF SHRI VISHWAS BHOIR AND SHRI MUKESH U PADHYAYA WHICH IT(SS)A NO.48/M/10 PRATHMESH GENERAL HOSPITAL 5 WAS REJECTED BY THE AO IN THE PENALTY PROCEEDINGS A S WELL AS BY THE CIT(A). ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE WE SET ASIDE THE MATTER TO THE RECORD OF AO TO GIVE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI M UKESH UPADHYAYA AND SHRI VISHWAS BHOIR AND THEN DECIDE THE LEVY OF PENALTY AS PER LAW. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 30/07/2014. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.