Sh. J.K. Malhar, New Delhi V. DCIT, New Delhi

ITSSA 5/DEL/2008

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8544 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-02-2011
• Assessment Year: misc
• Appeal Filed On: 16-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Documents seized
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI RAMESH P. TOLANI AND SHRI K.G. BANSAL IT(SS)A NO. 5 (DEL)/2008 BLOCK PERIOD: 1.4.1989 TO 27.7.1999 SHRI J.K. MALHAN, DEPUTY COMMISSIONER OF INCOME 59, POCKET-II, VS. TAX, CENTRAL CIRCLE-4, JASOLA, NEW DELHI. NEW DEL HI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMITOSH MOITRA, C .A. & MISS ROLI CHAUBEY, C.A RESPONDENT BY : SMT. MONA MOHANTY, SR. DR ORDER PER K.G. BANSAL : AM IN THIS CASE, THE TRIBUNAL HAD PASSED THE ORDER O N 17.12.2008, IN WHICH THE APPEAL WAS DISMISSED FOR NON-PROSECUTION . THIS ORDER WAS RECALLED ON 21.8.2009 AND THE APPEAL WAS RESTOR ED AT ITS ORIGINAL NUMBER FOR FRESH DISPOSAL AS PER LAW. THE APPEAL WAS A GAIN DISMISSED ON 5.10.2009 ON GROUND OF NON-PROSECUTION. THIS ORD ER WAS RECALLED ON 29.01.2010 FOR DECIDING THE APPEAL ON MERITS. TH E APPEAL WAS DISMISSED FOR THE THIRD TIME ON 6.5.2010 FOR NON-PROSECUTI ON. HOWEVER, THIS ORDER WAS ALSO RECALLED ON 19.11.2010 FOR DECIDIN G THE APPEAL ON MERITS. THAT IS HOW, THE CASE HAS COME UP BEFORE US FOR HEA RING. IT(SS)A NO. 5(DEL)/2008 2 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IS THA T ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEA LS) ERRED IN DISMISSING THE APPEAL OF THE ASSESSEE AND UPHOLDING THE LEV Y OF PENALTY BY THE AO. 2.1 THE FACTS AS PER RECORD ARE THAT THE AS SESSEE FILED ITS RETURN FOR THE BLOCK PERIOD ON 22.06.2001 DECLARING UNDISCLO SED INCOME OF RS. 3.70 LAKH. THE ASSESSMENT WAS COMPLETED U/S 158BC ON 31.08.2001 AT UNDISCLOSED INCOME OF RS. 2,50,93,032/-. PENALTY P ROCEEDINGS WERE ALSO INITIATED U/S 158BFA. THESE PROCEEDINGS WERE DI SPOSED OFF ON 30.4.2007, LEVYING THE PENALTY OF RS. 10,51,875/-. THE PENA LTY WAS LEVIED IN RESPECT OF THREE AMOUNTS, WHICH WERE UPHELD FOR ADDITION BY THE TRIBUNAL. THE DETAILS OF THE AMOUNT ARE AS UNDER:- (A) UNDISCLOSED PROFIT ON SALE OF E-38, POORVI MARG, VASANT VIHAR, NEW DELHI. RS. 3,00,000/- (B) UNDISCLOSED PROFIT ON SALE OF 59, MANDAKINI, NEW DELHI & 14 MANDAKINI, NEW DELHI. RS. 5,53,750/- (C) UNDISCLOSED INVESTMENT U/S 69 BEING CASH LOANS GIVEN TO MR. MALHOTRA & MR. GUPTA RS. 7,40,000/- - - - - - - - - - - - - RS. 15,93,75 0/- - - - - - - - - - - - - 2.2 THE ASSESSEE FILED APPEAL BEFORE THE CIT(APP EALS)-III, DELHI, WHO DISMISSED IT ON 20.11.2007 IN APPEAL NO. 26/07-08. IT(SS)A NO. 5(DEL)/2008 3 3. BEFORE US, THE LD. COUNSEL DREW OUR ATTENTIO N TO PARAGRAPH NO. 4 OF THE IMPUGNED ORDER, IN WHICH IT IS MENTIONED THAT THE ASSESSEE HAD FILED RETURN DECLARING UNDISCLOSED INCOME OF RS. 3.70 LAKH. THE THREE ADDITIONS IN RESPECT OF WHICH PENALTY HAS BEEN LEV IED WERE NOT SHOWN IN THE RETURN. IN RESPECT OF THESE ADDITIONS, THE AO ISSUED QUESTIONNAIRE ON 23.4.2001 FOR OBTAINING THE DETAILS, INFORMATIO N AND THE EXPLANATION ABOUT THE DOCUMENTS SEIZED IN THE COURSE OF SEA RCH. IN PARTICULAR, THE ASSESSEE WAS ASKED TO FILE DETAILS OF THE PROPERT IES PURCHASED AND SOLD DURING THE BLOCK PERIOD. SUCH DETAILS WERE FIL ED ON 17.08.2001. ON PERUSAL OF THE DETAILS, IT WAS FOUND THAT PROPER TY SITUATED AT E-38, POORVI MARG, VASANT VIHAR, THE BASEMENT AND GROUND FLOO R WERE PURCHASED FOR A CONSIDERATION OF RS. 62.00 LAKH AND SOLD FOR A CO NSIDERATION OF RS.65.00 LAKH. THE PROPERTY SITUATED AT 59, MANDAKINI, WAS PURCHASED FOR A SUM OF RS. 28,59,000/- AND SOLD FOR RS. 29,93,750 /-. THE PROPERTY SITUATED AT 14, MANDAKINI, WAS SHOWN TO HAVE BEEN ACQUIR ED FOR A SUM OF RS. 30,95,000/- AND SOLD FOR RS. 32,50,000/-. IN A LL THESE TRANSACTIONS OF PURCHASE AND SALE, THE ASSESSEE EARNED PROFIT, W HICH WAS NOT SHOWN IN THE RETURN FILED ON 22.6.2001. IN THE COURSE OF ASS ESSMENT OF UNDISCLOSED INCOME, IT WAS CONCEDED THAT PROFIT ON SALE OF THESE PROPERTIES WAS NOT DISCLOSED IN THE RETURN. THE RESPECTIVE AMOUNTS W ERE OFFERED FOR TAXATION IT(SS)A NO. 5(DEL)/2008 4 AS EVIDENCED BY ORDER-SHEET ENTRY DATED 17.08. 2001. ON THE FACTS OF THE CASE, IT WAS HELD THAT IF THE ASSESSEE HAD NOT BE EN SEARCHED AND PROCEEDINGS U/S 158BC HAD NOT BEEN INITIATED, THE PROFITS EAR NED ON SALE OF THESE THREE PROPERTIES WOULD HAVE ESCAPED ASSESSMENT. THE A CTION REGARDING SURRENDER OF INCOME WAS TAKEN ONLY AFTER ISSUAN CE OF THE QUESTIONNAIRE BY THE AO. THEREFORE, THE LEVY OF PENALTY WAS UPHEL D. 3.1 IT WAS SUBMITTED THAT THE ADDITIONS WERE N OT BASED ON ANY SEIZED MATERIAL. THEREFORE, PENALTY U/S 158BFA (2) IS NOT LEVIABLE IN LAW. IN THIS CONNECTION, OUR ATTENTION HAS BEEN DRAWN TO PAGE NOS. 13 AND 14 OF THE PAPER BOOK, BEING RELEVANT PORTIONS OF THE ASSES SMENT ORDER PASSED ON 31.8.2001. PAGE NO. 14 CONTAINS DETAILS OF VARIO US PROPERTIES INCLUDING THE PROPERTY SITUATED AT E-38, POORVI MARG, NEW DELHI . THESE DETAILS HAVE BEEN EXTRACTED FROM PAPERS SEIZED FROM J.M. C ONSTRUCTION PVT. LTD. AND THESE WERE IN THE HANDWRITING OF J.K. MALHAN, TH E ASSESSEE. HOWEVER, THE DETAILS DO NOT INCLUDE TWO PROPERTIES LOCATED IN MANDAKINI, NEW DELHI. FURTHER, IT IS SEEN THAT THE ADDITION OF RS. 5,53,750/- IN RESPECT OF PROFIT ON SALE OF TWO PROPERTIES IN MANDAKINI HAS BEEN REDUCED BY THE TRIBUNAL TO RS. 2,89,750/- IN IT(SS) A. NO. 60(DEL)/2009 DATED 13.10.2009, A COPY OF WHICH HAS BEEN PLACED ON RECORD. IT(SS)A NO. 5(DEL)/2008 5 3.2 IN REPLY, THE LD. DR SUBMITTED THAT IT IS A CLEAR CASE OF CONSCIOUS CONCEALMENT OF INCOME BY THE ASSESSEE AND IT HAS B EEN ADMITTED THAT PROFITS FROM SALE OF AFORESAID THREE PROPERTIES HAD NOT SHOWN IN THE RETURNED UNDISCLOSED INCOME OF RS. 3.70 LAKH. ACCORDINGLY, IT IS ARGUED THAT THE LEVY OF PENALTY MAY BE CONFIRMED. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. FROM THE ASSESSMENT ORDER AS WELL AS PAPERS PLACED IN THE PAPER BOOK, DISCUSSED ABOVE, IT IS CLEAR THAT THE ORIGIN OF COMPUTING UNDISCLOSED INCOME OF RS. 3.00 LAKH WAS IN THE S EIZED MATERIAL, WHICH HAS BEEN EXTRACTED BY THE AO ON PAGE 2 OF THE ASSESS MENT ORDER. THE PAPERS REGARDING THIS PROPERTY WERE FOUND FROM J.M. CON STRUCTION PVT. LTD. AT BEST WHAT CAN BE SAID IS THAT THE ADDITION IS MADE BY INVOKING THE PROVISIONS CONTAINED IN SECTION 158BD AND THE ORD ERS U/S 158BC AND SECTION 158BD HAVE BEEN COMBINED. IT IS AN ADMITT ED FACT THAT THE ASSESSEE EARNED PROFIT ON SALE OF THIS PROPERTY, WHICH HAS NOT BEEN INCLUDED IN THE UNDISCLOSED INCOME. THE WORKING OF THE PROF IT HAS BEEN FURNISHED BY THE ASSESSEE IN RESPONSE TO QUESTIONNAIRE ISSUED BY THE AO. ACCORDINGLY, IT IS HELD THAT THE PROFIT OF RS. 3.00 LAKH WAS NOT OFFERED FOR TAXATION BY IT(SS)A NO. 5(DEL)/2008 6 WAY OF CONSCIOUS ACT OF THE ASSESSEE. THEREFORE, PENALTY IN RESPECT OF PROFIT OF RS. 3.00 LAKH IS LEVIABLE. 4.1 ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SE EN THAT THERE IS NO NARRATION OF THE TWO PROPERTIES AT MANDAKINI IN AN Y OF THE SEIZED MATERIAL DESCRIBED THEREIN. IN THE CASE OF CIT VS. RAVI KA NT JAIN, (2001) 250 ITR 141, THE HONBLE DELHI HIGH COURT HELD THAT TH E ASSESSMENT OF THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD CAN ONLY BE MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF SEARCH. IN THE C ASE OF CIT VS. HARKARAN DAS VED PAL, (2009) 222 CTR (DEL) 438, IT HAS BEE N HELD THAT IF UNDISCLOSED INCOME HAS BEEN CORRECTLY DISCLOSED B Y THE ASSESSEE IN THE RETURN, THE SECOND PROVISO TO SECTION 158BFA(2) BARS THE FIRST PROVISO IN RESPECT OF LEVY OF PENALTY. WE HAVE SEEN THAT I N SO FAR AS PROPERTY AT E- 38, POORVI MARG, NEW DELHI IS CONCERNED, THE PRO VISO DOES NOT COME TO THE RESCUE OF THE ASSESSEE BECAUSE IN SPITE OF SEIZED MATERIAL IN RESPECT OF THIS PROPERTY, PROFIT THEREON WAS NOT INCLUDED I N THE UNDISCLOSED INCOME. HOWEVER, THERE IS NO EVIDENCE ON RECORD THAT AN Y MATERIAL WAS FOUND IN THE COURSE OF SEARCH IN RESPECT OF TWO PROPERTI ES SITUATED IN MANDAKINI, NEW DELHI. NO DOUBT, THE ASSESSMENT OF UNDISCLOS ED INCOME IN RESPECT OF THESE PROPERTIES HAS BEEN CONFIRMED BY THE TRI BUNAL AT RS. 2,89,750/-, BUT IT(SS)A NO. 5(DEL)/2008 7 SUCH CONFIRMATION IS BASED ONLY ON THE DETAILS F ILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ADDITION DOES NOT HAVE ITS ORIGIN IN THE MATERIAL FOUND AT THE TIME OF SEARCH. THE REFORE, RELYING ON THE DECISION IN THE CASE OF RAVI KANT JAIN (SUPRA), IT IS HELD THAT THE PENALTY COULD NOT HAVE BEEN LEVIED. 4.2 THE THIRD ADDITION IN RESPECT OF WHICH PENAL TY IS LEVIED, RELATES TO CASH LOANS GIVEN TO MR. MALHOTRA AND MR. GUPTA. THIS ADDITION HAS ITS ORIGIN IN THE SEIZED MATERIAL, AS CAN BE SEE N FROM PARAGRAPH NO. 4 OF THE ASSESSMENT ORDER. HOWEVER, THIS ADDITION HAS BEEN DELETED BY THE TRIBUNAL IN M.A. NO. 594(DEL)/2008 DATED 31.3.2009, BY H OLDING THE DOCUMENT TO BE A DUMB DOCUMENT. AS THE ADDITION ITSELF HA S BEEN DELETED, NO CASE SURVIVES FOR LEVY OF PENALTY. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 MARCH, 2011. SD/- SD/- (RAMESH P. TOLANI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 11TH MARCH, 2011. SP SATIA IT(SS)A NO. 5(DEL)/2008 8 COPY OF THE ORDER FORWARDED TO: J.K.MALHAN, NEW DELHI. DCIT, CENTRAL CIRCLE 4, NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REG ISTRAR.