Maurya Vegetarian Restaurant (Discontinued), CHENNAI V. ACIT, CHENNAI

ITSSA 5/CHNY/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1877 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2016
• Assessment Year: misc
• Appeal Filed On: 15-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MOHAN
• Assessee Lawyers: R VENKATESH
• Keywords: Block assessment
• Section: 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.(SS) A. NO. 5/MDS/2013 BLOCK ASSESSMENT PERIOD : 01.04.1989 TO 31.03.199 8 & 01.04.1998 TO 09.03.1999 M/S MAURYA VEGETARIAN RESTAURANT (DISCONTINUED), L BLOCK 15/23, 26 TH CROSS STREET, ANNA NAGAR EAST, CHENNAI - 600 102. PAN : AAAFM 3927 C V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(5), CHENNAI - 600 034. ('(/ APPELLANT) (*+'(/ RESPONDENT) '( , - / APPELLANT BY : SHRI R. VENKATESH, CA *+'( , - / RESPONDENT BY : SHRI R. MOHAN, CIT . , /$ / DATE OF HEARING : 09.02.2016 0!1 , /$ / DATE OF PRONOUNCEMENT : 01.04.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, CHENN AI, DATED 31.08.2011 AND PERTAINS TO BLOCK PERIOD 1.4.1989 TO 31.03.1998 AND 01.04.1998 TO 09.03.1999. 2 I.T.(SS) A. NO.5/MDS/13 2. SHRI R. VENKATESH, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT CONSEQUENT TO THE SEARCH OPERATION U NDER SECTION 132 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT' ) IN THE BUSINESS AND RESIDENTIAL PREMISES OF ONE SHRI MUKUNDAN, ONE OF THE PARTNERS OF THE ASSESSEE-FIRM, ON 09.03.1999, A NOTICE WAS I SSUED TO THE ASSESSEE UNDER SECTION 158BD OF THE ACT CALLING THE ASSESSEE TO FILE THE RETURN OF INCOME. THE ASSESSEE HAD DECLAR ED NIL INCOME. HOWEVER, THE ASSESSING OFFICER COMPUTED THE UNDISCL OSED INCOME FOR THE BLOCK PERIOD TO ` 66,40,000/-. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONFIRMED THE ADDITION TO THE EXTE NT OF ` 23,45,873/- FOR THE BLOCK PERIOD. THIS TRIBUNAL HAS ALSO CONFIRMED THE ORDER OF THE CIT(APPEALS). THE ASSESSING OFFIC ER LEVIED PENALTY UNDER SECTION 158BFA(2) OF THE ACT BY AN ORDER DATE D 28.11.2008 AND THE CIT(APPEALS) HAS CONFIRMED THE PENALTY. AC CORDING TO THE LD. REPRESENTATIVE, THE ADDITION WAS MADE ONLY ON T HE BASIS OF STATEMENT SAID TO BE RECORDED FROM THE PARTNER OF T HE ASSESSEE-FIRM AND NOT ON THE BASIS OF SEIZED MATERIAL. THE ASSES SMENT BEING MADE UNDER SECTION 158BD OF THE ACT, THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION AS REQUIRED UNDER SEC TION 158BD OF THE ACT. IN THE ABSENCE OF ANY MATERIAL FOUND DURI NG THE COURSE OF SEARCH OPERATION, ACCORDING TO THE LD. REPRESENTATI VE, THE ADDITION 3 I.T.(SS) A. NO.5/MDS/13 MADE BY THE ASSESSING OFFICER ITSELF IS NOT JUSTIFI ED. THEREFORE, THERE IS NO QUESTION OF ANY LEVY OF PENALTY. PLACI NG RELIANCE ON THE DECISION OF THIS TRIBUNAL IN DR. HAKEEM S.A.SYED SA THAR V. ACIT (2009) 120 ITD 1, THE LD. REPRESENTATIVE SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE OF CONCEALMENT OF INCOME, A CCORDING TO THE LD. REPRESENTATIVE, PENALTY UNDER SECTION 158BF A(2) OF THE ACT IS NOT CALLED FOR. 3. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER MADE THE ADDITION IN THE QUANTUM PROCEEDING ONLY ON THE BASIS OF PRESUMPTION. REFER RING TO SECTION 158BC AND 158BD OF THE ACT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD HAS TO BE COMPUTED ONLY ON THE BASIS OF MATE RIAL FOUND DURING THE COURSE OF SEARCH OPERATION. IN THIS CAS E, THE ADDITION WAS MADE ONLY ON THE BASIS OF STATEMENT OF THE PART NER, THEREFORE, PENALTY UNDER SECTION 158BFA(2) IS NOT CALLED FOR. 4. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT TH E REVENUE AUTHORITIES COULD NOT FIND ANY CASH, BULLION OR ASS ET DURING THE COURSE OF SEARCH OPERATION AND NO INDEPENDENT ENQUI RY OR VERIFICATION WAS MADE WITH REGARD TO SO-CALLED SUMM ARY STATEMENT 4 I.T.(SS) A. NO.5/MDS/13 SEIZED DURING THE COURSE OF SEARCH OPERATION. THE AGGREGATE SALES AS PER THE SO-CALLED DAILY SUMMARY TRANSACTION REPO RT WAS LESS THAN THE GROSS SALES AS PER THE RETURN, THEREFORE, THERE IS NO SUPPRESSION OF SALES AT ALL. HENCE, ACCORDING TO T HE LD. REPRESENTATIVE, IT IS NOT A FIT CASE FOR LEVY OF PE NALTY UNDER SECTION 158BFA(2) OF THE ACT. 5. ON THE CONTRARY, SHRI R. MOHAN, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT DURING THE COURSE OF SEARCH OPERATION, SALES BILLS FOR THE FINANCIAL YEARS 1994 -95 TO 1997-98 WERE OBTAINED. THESE BILLS SHOW UNACCOUNTED SALES FOR THE BLOCK PERIOD. INSPITE OF SEVERAL OPPORTUNITIES GIVEN, TH E ASSESSEE COULD NOT RECONCILE THE AMOUNT SHOWN IN THE SALES BILLS. THE PARTNER OF THE FIRM SHRI MUKUNDAN WAS ALSO EXAMINED. AS PER T HE MODUS OPERANDI, ONCE A REPORT IS TAKEN OUT FROM THE BILLI NG MACHINE, ALL THE BILLED AMOUNTS PRIOR TO THAT POINT OF TIME ARE ERAS ED FROM THE MEMORY OF THE MACHINE. REFERRING TO THE CONTENTION OF THE ASSESSEE THAT NO UNACCOUNTED CASH, BULLION OR ASSET WAS FOUND DURING THE COURSE OF SEARCH OPERATION, THE LD. D.R. SUBMITTED THAT CREATION OF ASSET WOULD ONLY BE CONSEQUENT TO THE G ENERATION OF INCOME. ACCORDING TO THE LD. D.R., THE ASSESSEE MI GHT HAVE 5 I.T.(SS) A. NO.5/MDS/13 INVESTED THE UNDISCLOSED INCOME IN ANY OTHER GROUP CONCERNS OR MIGHT HAVE SPENT IT. REFERRING TO THE DAILY SUMMAR Y TRANSACTION REPORT, WHICH WAS SEIZED, THE LD. D.R. SUBMITTED TH AT THIS SUMMARY TRANSACTION REPORT WAS FOUND TO BE UNACCOUNTED SALE S NOT ENTERED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS ALSO CONTEN DED BEFORE THE ASSESSING OFFICER THAT THE SOFTWARE OF THE COMPUTER WAS NOT TESTED. ACCORDING TO THE LD. D.R., THE SOFTWARE WAS BEFORE THE ASSESSING OFFICER IN THE FORM OF SEIZED MATERIAL. ACCORDING TO THE LD. D.R., THE ASSESSEE CONCEALED PART OF THE INCOME BY NOT RECORD ING THE SALES IN THE BOOKS OF ACCOUNT. THE BILLS FOUND DURING THE C OURSE OF SEARCH OPERATION, INCLUDING THE DAILY SUMMARY TRANSACTION REPORT, SHOW THE CONCEALMENT OF INCOME. HENCE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE LEVY OF PENA LTY UNDER SECTION 158BFA(2) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE BLOCK ASSESSMENT WAS MADE UNDER SECTION 158BD OF TH E ACT SINCE THE ASSESSEE WAS THE PERSON OTHER THAN THE SEARCHED PERSON. FOR FRAMING ASSESSMENT UNDER SECTION 158BD OF THE ACT, THE ASSESSING 6 I.T.(SS) A. NO.5/MDS/13 OFFICER IS EXPECTED TO RECORD A SATISFACTION THAT T HE SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION RELATES TO ASSESSEE. 7. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF A PEX COURT IN MANISH MAHESHWARI V. ACIT (2007) 289 ITR 341. I N THE CASE BEFORE THE APEX COURT, THERE WAS SEARCH IN THE PREM ISES OF ONE SHRI RAMESHWAR H. MAHESWARI AND HIS WIFE SMT. LALITA DEV I ON 21.11.1995. SEVERAL INCRIMINATING MATERIALS WERE F OUND RELATING TO THE BUSINESS OF THE FIRM, NAMELY, M/S INDORE CONSTR UCTION COMPANY (PVT.) LTD. DURING THE COURSE OF ASSESSMENT PROCEE DING, IT WAS FOUND THAT THE SATISFACTION WAS NOT RECORDED BY THE ASSESSING OFFICER AS REQUIRED UNDER SECTION 158BD OF THE ACT. CONSIDERING THE NATURE OF PROCEEDING UNDER CHAPTER XIV-B OF THE ACT, THE APEX COURT FOUND THAT THE PROVISIONS CONTAINED IN CHAPTE R XIV-B IS DRASTIC IN NATURE AND THE CONSEQUENCES ARE DRACONIA N. THE APEX COURT FURTHER FOUND THAT THE PROCEEDING UNDER SECTI ON 158BD OF THE ACT CAN BE INITIATED ONLY IF A SEARCH WAS CARRIED O N. ULTIMATELY THE SUPREME COURT FOUND THAT RECORDING OF SATISFACTION FOR INITIATING PROCEEDING UNDER SECTION 158BD OF THE ACT IS MANDAT ORY. THIS VIEW OF THE APEX COURT IS ALSO ENDORSED BY THE CBDT IN ITS LATEST CIRCULAR. IN FACT, THE CBDT INSTRUCTED ITS OFFICER S TO WITHDRAW THE 7 I.T.(SS) A. NO.5/MDS/13 PENDING APPEALS BEFORE THE TRIBUNAL WHEREVER THE SA TISFACTION WAS NOT RECORDED. THE CBDT HAS ALSO CLARIFIED THAT EVE N IN CASE THE ASSESSING OFFICER OF THE SEARCHED PERSON AND OTHER THAN THE SEARCHED PERSON ARE ONE AND THE SAME, RECORDING OF SATISFACTION IS MANDATORY. IN THE CASE BEFORE US, THE PARTNER OF T HE ASSESSEE-FIRM WAS SUBJECTED TO SEARCH. UNDER THE COMMON LAW, THE PARTNER AND THE PARTNERSHIP-FIRM ENJOY THE SAME RELATIONSHIP. HOWEVER, UNDER THE INCOME-TAX ACT, THE PARTNER AND THE PARTNERSHIP -FIRM ARE TWO DIFFERENT AND INDEPENDENT ASSESSABLE UNITS. THEREF ORE, IN A PROCEEDING UNDER THE INCOME-TAX ACT, THE PARTNER AN D PARTNERSHIP- FIRM ARE TREATED AS TWO DIFFERENT, INDEPENDENT ASSE SSABLE UNITS. THEREFORE, EVEN THOUGH THERE WAS A SEARCH IN THE PR EMISES OF THE PARTNER SHRI M. MUKUNDAN, RECORDING OF SATISFACTION AS INSTRUCTED BY THE CBDT IS MANDATORY, WHEN THE CASE WAS INITIATED UNDER SECTION 158BD OF THE ACT AGAINST THE PARTNERSHIP FIRM. IN THE CASE BEFORE US, SUCH A SATISFACTION WAS NOT RECORDED. 8. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT PENALTY PROCEEDING IS DIFFERENT THAN THE ASSESSMENT PROCEED ING. THE AUTHORITIES UNDER INCOME-TAX ACT ARE EXPECTED TO RE -APPRECIATE THE MATERIAL AVAILABLE ON RECORD AND FIND OUT WHETHER P ENALTY CAN BE 8 I.T.(SS) A. NO.5/MDS/13 IMPOSED FOR CONCEALMENT OF INCOME. THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT WHEN THE SATISFACTION WAS N OT RECORDED BY THE ASSESSING OFFICER FOR INITIATING PROCEEDING UND ER SECTION 158BD OF THE ACT, IT CANNOT BE SAID THAT THERE IS ANY CON CEALMENT OF INCOME BY THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT INITIATING PROCEEDING UNDER SECTION 158BFA(2) MAY NOT BE JUSTIFIED. EVEN OTHERWISE, TH ERE ARE TWO VIEWS POSSIBLE IN THIS CASE. ONE VIEW IS THAT THE PARTNER AND PARTNERSHIP-FIRM ARE ONE AND THE SAME PERSON, THERE FORE, RECORDING OF SATISFACTION MAY NOT BE NECESSARY. THIS VIEW IS SOMEWHAT SIMILAR TO THAT OF SAME OFFICER ASSESSING THE INCOME OF SEA RCHED PERSON AND THE PERSON OTHER THAN THE SEARCHED PERSON. THE CBDT CLARIFIED THAT EVEN THOUGH THE ASSESSING OFFICER IS ONE AND T HE SAME FOR THE SEARCHED PERSON AND THE PERSON OTHER THAN SEARCHED PERSON, SATISFACTION NEED TO BE RECORDED. SIMILARLY, EVEN THOUGH THE PARTNER AND PARTNERSHIP-FIRM ARE ONE AND SAME UNDER COMMON LAW, THEY ARE BEING ASSESSED SEPARATELY UNDER INCOME-TAX ACT, THE REFORE, RECORDING OF SATISFACTION IS MANDATORY AS HELD BY T HE APEX COURT IN MANISH MAHESHWARI (SUPRA). THE CBDT, IN FACT, INST RUCTED TO WITHDRAW ALL THE APPEALS WHERE NO SATISFACTION WAS RECORDED. 9 I.T.(SS) A. NO.5/MDS/13 9. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT. ACCORDINGLY, THE PEN ALTY IS DELETED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON 1 ST APRIL, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 3 /DATED, THE 1 ST APRIL, 2016. KRI. , */45 651/ /COPY TO: 1. '( /APPELLANT 2. *+'( /RESPONDENT 3. . 7/ () /CIT(A)-1, CHENNAI 4. . 7/ /CIT, CENTRAL-1, CHENNAI 5. 58 */ /DR 6. 9: ; /GF.