Shri Popatbhai M.Patel, Ahmedabad V. The Dy.CIT.,Cent.Circle-1(1), Ahmedabad

ITSSA 578/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1685 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 03-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Income from undisclosed sources
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI SHAILENDRA YADAV, JM, & MANISH BOR AD, AM. IT(SS)A NO.578 /AHD/2012 ASST. YEAR: 2004-05 SHRI POPATBHAI M. PATEL, 1, DEEP BUNGLOWS, OPP. KARNAVATI CLUB, SARKHEJ GANDHINAGAR HIGH WAY, AHMEDABAD. VS. DCIT, CEN. CIR-1(1), AHMEDABAD. APPELLANT RESPONDENT PAN AAYPP 4354J APPELLANT BY MRS. URVASHI SHODHAN, AR RESPONDENT BY SMT. SONIA KUMAR, SR.DR DATE OF HEARING: 25/2/2016 DATE OF PRONOUNCEMENT: 26/02/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-1, AHMEDABAD, DATED 23.10.2012 IN APPEAL NO. CIT(A)- I/CC.I(1)128/2011-12 CONFIRMING PENALTY U/S 271(1)( C) OF THE IT ACT, 1961, (IN SHORT THE ACT) AT RS.1,03,050/-. PENALTY ORDER U/S 271(1)(C) OF THE ACT WAS FRAMED ON 31.03.2011 FOR ASST. YEAR 2004-05 BY ACIT, CC-1(1), AHMEDABAD. ASSESSEE HAS RAISED FOLLOWING G ROUNDS OF APPEAL :- IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 2 1. IN LAWS AND ON FACTS AS WELL AS IN THE CIRCUMSTANCE S OF THE APPLICANT'S CASE, THE LEARNED CIT (APPEALS) HAS GROSSLY ERRED I N DISMISSING GROUND NO. 1 OF THE APPELLANT'S APPEAL CHALLENGING THE VAL IDITY OF THE PENALTY ORDER IMPUGNED BEFORE HIM ON THE GROUND THAT IT HAD BEEN PASSED IN TOTAL DISREGARD TO THE FACT THAT THE APPELLANT'S APPLICAT ION FOR GRANTING IMMUNITY FROM PENALTY U/S 273AA WAS STILL PENDING BEFORE THE HON'BLE COMMISSIONER OF INCOME TAX. 2. WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND ON F ACTS AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF THE APPLICANT, THE LEA RNED CIT (APPEALS) HAS GROSSLY ERRED IN SUSTAINING PENALTY OF RS.1,03,050/ - LEVIED UNDER SECTION 271(1)(C) VIDE ORDER IMPUGNED BEFORE HIM WHEN HE OU GHT TO HAVE DELETED THE SAME. 3. WITHOUT PREJUDICE TO FOREGOING, THE ORDER UNDER SEC TION 271(1)(C) IS VOID, IN VIEW OF THE FACT THAT ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SEC.153C IS VOID AND ILLEGAL. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. OUT OF THE ABOVE FOUR GROUNDS GROUND NO.1,3 & 4 ARE OF GENERAL NATURE WHICH NEED NO ADJUDICATION. 3. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS AGAINS T THE ACTION OF LD. CIT(A) SUSTAINING PENALTY OF RS.1,03,050/- LEVI ED U/S 271(1)(C) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. A SEARCH OPERATION U/S 132(1) OF THE ACT WAS CONDUCTE D IN THE CASES OF SANJAY R. SHAH & MEGHMANI GROUP BY ISSUING A WARRA NT OF AUTHORISATIONU/S 132(1) OF THE ACT ON 22.09.2005 AN D VARIOUS DOCUMENTS/BOOKS OF ACCOUNT/OTHER VALUABLE ARTICLES/ OTHER THINGS WERE FOUND AND SEIZED FROM THE VARIOUS PREMISES COVERED U/S 132(1) AND IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 3 132(1A) OF THE ACT. ON VERIFICATION OF DOCUMENTS SE IZED DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT DIFFERENT DOC UMENTS RELATING TO SALARY, BONUS, ETC. OF THE ASSESSEE WERE SEIZED DUR ING THE COURSE OF SEARCH. THEREFORE, IN VIEW OF THE PROVISIONS OF SEC TION 153C (1) OF THE ACT PROCEEDINGS U/S 153C R.W.S. 153A OF THE ACT WAS INITIATED BY ISSUING NOTICE U/S 153C R.W.S. 153A OF THE ACT ON 8 .5.2006 DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S 153A, ASSESSEE FILED HIS RETURN OF INCOME ON 28.05.2007 D ECLARING TOTAL INCOME AT RS.2,93,870/-. ASSESSMENT WAS COMPLETED U /S 153C R.W.S. 143(3) OF THE ACT ON 30.09.2008 AFTER MAKING ADDITI ON OF RS.4,95,000/-. IN APPEAL BEFORE CIT(A) THE ADDITION OF RS.4,95,000/- WAS SUSTAINED TO RS.3,43,500/-. PENALTY PROCEEDINGS U/S 271(1) OF THE ACT WERE INITIATED AND PENALTY OF RS.1,03,050/- WAS IMPOSED ON THE CONCEALED INCOME OF RS.3,43,500/- VIDE ORDER DA TED 31.03.2011. 5. APPEAL BY THE ASSESSEE AGAINST THE ORDER OF ASSE SSING OFFICER U/S 271(1)(C) OF THE ACT COULD NOT BRING ANY RELIEF AND PENALTY LEVIED WAS CONFIRMED BY LD. CIT(A). 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 7. AT THE OUTSET LD. AR OF THE ASSESSEE SUBMITTED T HAT SIMILAR ISSUE HAS BEEN ADJUDICATED BY THE CO-ORDINATE BENCH IN IT (SS)A NOS.579 & 580/AHD/2012 FOR ASST. YEAR 2002-03 & 2003-04 IN TH E CASE OF ALKESH M. PATEL VS. DCIT, IN WHICH ALKESH M. PATEL WAS ALSO AN EMPLOYEE WITH MEGHMANI GROUP AND PURSUANT TO SEARCH U/S 132(1) OF THE ACT IN THE CASE OF SANJAY R. SHAH & MEGHMANI GR OUP, SOME IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 4 DOCUMENTS RELATING TO EXPENDITURE ON ACCOUNT OF SAL ARY, BONUS IN THE NAME OF ALKESH M. PATEL WERE FOUND AND PROCEEDINGS WERE CARRIED OUT U/S 153C R.W.S 153A OF THE ACT WERE CARRIED OUT AND AS A RESULT PENALTY U/S 172(1) (C) OF THE ACT WAS ALSO IMPOSED IN THE CASE OF ALKESH M. PATEL. LD. AR FURTHER SUBMITTED THAT HON. CO-ORDINATE BENCH ALLOWED THE APPEAL OF ASSESSEE BY DELETING TH E PENALTY U/S 271(1)(C) OF THE ACT. 8. LD. DR COULD NOT CONTROVERT THE SUBMISSIONS MADE BY LD. AR. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THIS APPEAL IS REGARDI NG IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. THE CASE OF THE A SSESSEE IS THAT HE WAS AN EMPLOYEE OF MEGHMANI GROUP AND PURSUANT TO S EARCH U/S 132(1) OF THE ACT SOME DOCUMENTS RELATING TO ASSESS EE WERE FOUND AND SEIZED AND PROCEEDINGS U/S 153C R.W.S 153A OF T HE ACT WERE INITIATED AND ASSESSMENT WAS COMPLETED. ON APPEAL C IT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.3,43,500 /- AND THEREAFTER PENALTY U/S 271(1)(C) WAS IMPOSED BY THE ASSESSING OFFICER AT RS.1,03,050/- AND THE SAME WAS CONFIRMED BY CIT(A). 10. WE FURTHER FIND THAT THE DECISION OF THE CO-ORD INATE BENCH REFERRED BY THE LD. AR IS ON SIMILAR ISSUE RELATING TO AN EMPLOYEE OF MEGHMANI GROUP IN THE CASE OF ALKESH M. PATEL VS. D CIT IN IT(SS) A NO.579 & 580/AHD/2012, WHEREIN THE CO-ORDINATE BENC H WHILE DECIDING THE ISSUE, HAS OBSERVED AS UNDER :- IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 5 2. THIS ASSESSEE-INDIVIDUAL WORKED WITH M/S MEGHMAN I GROUP AS ITS MANAGER (IMPORT/EXPORT) ON SALARY BASIS. THE DEPART MENT CARRIED OUT A SEARCH IN THIS GROUP'S CASE ON 22-09-2005. IT WOULD RECOVER ALLEGED INCRIMINATING MATERIAL IN THE SHAPE OF A DIARY/PEN DRIVE REVEALS ASSESEE'S NAME AND PERSONAL MEMORANDUM. THE DEPARTMENT WOULD ALSO RECORD STATEMENT OF MR. LALIT K. PATEL FROM WHOSE RESIDENT SOME NOTINGS REGARDING HAS BEEN RECOVERED. THIS CULMINATED INTO ISSUANCE O F SECTION 153C R.W.S. 153A NOTICE DATED 05-04-2006. THE ASSESSEE FILED HI S RETURN ON 30-04- 2007 STATING INCOME OF RS. 1,10,881/-. THE ASSESSIN G OFFICER TOOK UP SCRUTINY. THE ASSESSEE STATED THEREIN THAT HE HAD A LREADY APPROACHED SETTLEMENT COMMISSION FOR OFFERING ADDITIONAL INCOM E OF RS. 36,7007- ALONG WITH SIMILAR OTHER SUMS IN PRECEDING AND SUCC EEDING ASSESSMENT YEAR. THE ASSESSING OFFICER OBSERVED THAT SETTLEMEN T COMMISSION STOOD ABATED FOR WANT OF ORDER WITHIN THE TIME PERIOD PRE SCRIBED. HE REFERRED TO INCRIMINATING EVIDENCE OF MR. PATEL'S STATEMENT ALL EGED DISCLOSING NOTINGS THEREIN REPRESENTING OVERALL LIMITS OF EXPENDITURE TO BE INCURRED BY VARIOUS EMPLOYEES. THE ASSESSEE'S NAME ADMITTEDLY APPEARS I N THESE DOCUMENTS. THE ASSESSING OFFICER WAS OF THE PRIMA FACIE OPINIO N THAT ASSESSEE'S ACT AND CONDUCT BEFORE SETTLEMENT COMMISSION IN ADMITTI NG UNDISCLOSED INCOME INDICATED NON-UTILIZATION OF SOME OF THE EXP ENDITURE REMAINING UN- SPENT FOR THE PURPOSE OF SEARCHED ENTITY'S BUSINESS EXPENSE. 3. THE ASSESSEE FILED HIS REPLY INTER ALIA PLEADING THAT THE IMPUGNED INCRIMINATING EVIDENCE WAS NOWHERE SUBJECTED TO CRO SS VERIFICATION, SECTION 153C DID NOT SPECIFY ANY REASONS, DREW ATTENTION TO WARDS HIS SEARCH STATEMENT DATED 28-12-2005 STATING THAT THE IMPUGNE D SUMS WERE IN FACT EXPENDITURE LIMIT ALLOCATED IN CORRESPONDING ASSESS MENT YEAR AND NOT HIS INCOME, AND THAT THE IMPUGNED UNDISCLOSED INCOME OF RS. 36,7007- HAD BEEN ADMITTED IN SETTLEMENT COMMISSION TO AVOID LIT IGATION. ALL THIS FAILED TO CONVINCE THE ASSESSING AUTHORITY. IT REJECTED TH E SAME AFTER HOLDING THAT SECTION 153C REASONS STOOD SUPPLIED, M/S. MEGHMANI GROUP HAVE HABITUALLY OF EARNING UNACCOUNTED INCOME BY WAY OF OVERPRICING ITS PURCHASES AND UNDERSTATEMENT OF SALES. AN INFERENCE WAS DRAWN THAT ITS EMPLOYEES' INTEGRAL PART OF ALL THIS PLOT. THE ASSE SSING OFFICER WAS OF THE VIEW THAT THERE WAS NO EVIDENCE OF INCURRING OF THE EXPENDITURE QUA THE CORRESPONDING LIMITS AS STATED HEREINABOVE. AND THA T ASSESSEE WAS A SALARIED EMPLOYEE NOT ENTITLED TO CLAIM ANY CORRESP ONDING INCOME THERETO. THE ASSESSMENT ORDER DATED 30-09-2009 ACCORDINGLY T REATED THE ALLEGED EXPENDITURE SUM LIMIT SALARY AND BONUS THEREBY ADDI NG THE IMPUGNED SUM OF RS. 36,7007- AS UNDISCLOSED INCOME OF THE RELEVA NT PREVIOUS YEAR. THE ASSESSING OFFICER FURTHER INITIATED THE INSTANT PEN ALTY PROCEEDINGS ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULAR S OF INCOME. CASE IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 6 RECORDS REVEAL THAT THE CIT(A) AFFIRMED ASSESSING O FFICER'S ACTION. QUANTUM PROCEEDINGS SEEM TO HAVE ATTAINED FINALITY AT THIS STAGE. 4. THE ASSESSING OFFICER RESUMED WITH THE INSTANT P ENALTY PROCEEDINGS. THE ASSESSEE'S REPLY APPEARS TO HAVE AVERRED THAT N EITHER THE FACTS OF THE CASE COMPRISE OF ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN VIEW OF THE ABOVE STATED FACTUAL POSIT ION. THE ASSESSING OFFICER QUOTED THE FACTUAL CHRONOLOGY HEREINABOVE F OR HOLDING THAT ASSESSEE'S ACT AND CONDUCT IN ADMITTING UNDISCLOSED INCOME OF RS. 36,7007- AMOUNTED TO CONCEALMENT OF INCOME BY FURNI SHING INACCURATE PARTICULARS THEREOF. THIS RESULTED IN LEVY OF THE I MPUGNED PENALTY OF RS. 11,0107- BEING IMPOSED. THE CIT(A) UPHOLDS THE SAME . THIS LEAVES THE ASSESSEE AGGRIEVED. 5. HEARD BOTH SIDES. CASE FILE PERUSED. THE ASSESSE E REITERATES HIS EXPLANATION THROUGHOUT AND PRAYS FOR DELETING THE I MPUGNED PENALTY INTER ALIA ON THE GROUND THAT THIS IS NEITHER A CASE OF C ONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE PEN DRIVE IN QUESTION HAD BEEN RECOVERED FROM HIS EMPLOYER ONLY, THE UNDISCLOSED I NCOME HAD ALREADY BEEN DECLARED BEFORE THE SETTLEMENT COMMISSION AND THAT THERE IS NO SPECIFIC FINDING BY THE LOWER AUTHORITIES AS TO WHE THER THE FACTS OF THE INSTANT CASE AMOUNT TO CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS. HE ACCORDINGLY PRAYS FOR ACCEPTANCE OF THE INSTANT APPEAL. THE REVENUE STRONGLY SUPPORTS THE LOWER AUTHORITIES' AC TION IN IMPOSING THE IMPUGNED PENALTY. 6. WE HAVE HEARD RIVAL CONTENTIONS. RELEVANT FACTS SET OUT HEREINABOVE ARE NOT REPEATED FOR THE SAKE OF BREVITY. THERE IS NO D ISPUTE THAT ASSESSEE AS WELL AS HIS EMPLOYER HAVE BEEN STATING THAT THIS UN DISCLOSED INCOME IS IN FACT AN EXPENDITURE LIMIT ALLOWED TO BE INCURRED TO THE RESPECTIVE EMPLOYEES. THERE IS NO EVIDENCE QUOTED IN THE SHAPE OF INCRIMINATING MATERIAL OR OTHERWISE WHICH COULD PROVE THAT ASSESS EE'S EMPLOYER HAS NOT BOOKED THE CORRESPONDING SUM AS EXPENDITURE IN ITS ACCOUNTS MAINTAINED. THE ASSESSEE'S CASE IS THAT HE HAS SPENT THE IMPUGN ED SUMS FOR THE PURPOSE OF THE BUSINESS OF HIS EMPLOYER. HE FAILS T O SUBSTANTIATE THE SAME. THIS HAS LED TO ASSESSMENT OF THE IMPUGNED SUM IN H IS HANDS AS UNDISCLOSED INCOME. WE REITERATE THAT HE ALREADY AD MITTED THE SAME AS INCOME BEFORE THE SETTLEMENT COMMISSION. THE REVENU E STRONGLY DRAWS SUPPORT FROM THIS ACTION. THERE CAN HARDLY BE ANY D ISPUTE ABOUT THE SETTLED LEGAL POSITION THAT QUANTUM AND PENALTY PROCEEDINGS STAND ON DIFFERENT FOOTING AND EACH AND EVERY ADDITION OF UNDISCLOSED INCOME DOES NOT LEAD TO IMPOSITION OF PENALTY. WE OBSERVE IN THESE FACTS AND CIRCUMSTANCE THAT IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 7 WE ARE DEALING WITH A TAX STATUTE WHEREIN LEVY OF P ENALTY BY INVOKING A PENAL PROVISION AFTER FINALIZATION OF QUANTUM IS NO T AUTOMATIC. WE VIEW THE CASE FROM THIS ANGLE AND HOLD THAT THE PRESENT ONE IS AN INSTANCE WHERE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS EXPL ANATION OF HAVING SPENT THE IMPUGNED EXPENDITURE LIMIT FOR HIS EMPLOY ER COMPANY FOR THE PURPOSE OF THE BUSINESS AND ALSO THE REVENUE HAS FA ILED TO REFER TO THE EMPLOYER'S BOOKS SO AS TO NEGATE THE SAME BY HOLDIN G THAT THE VERY SUMS HAVE NOT BEEN CLAIMED AS EXPENDITURE. WE REITERATE THAT THIS IS A PENALTY CASE LIABLE TO BE STRICTLY INTERPRETED. THIS FACTUA L POSITION LEADS US TO A CONCLUSION THAT THE AUTHORITIES BELOW HAVE WRONGLY IMPOSED THE IMPUGNED PENALTY OF RS. 11,0107-U/S. 271(1 )(C) OF THE ACT. THE SAME STANDS DELETED. IT(SS)A 579/AHD/2012 IS ACCEPTED. 7. SAME ORDER TO FOLLOW IN IT(SS)A 580/AHD/2012. 8. BOTH THESE ASSESSEE'S APPEALS ARE ALLOWED. 11. FROM GOING THROUGH THE ABOVE DECISION, WE FIND THAT THE APPEAL OF ASSESSEE IS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH IN THE ABOVE CASE AND, THEREFORE, RESPECTFULLY FOLL OWING THE SAME, WE ARE OF THE VIEW THAT PENALTY U/S 271(1)(C) OF THE A CT HAS WRONGLY BEEN IMPOSED IN THE CASE OF ASSESSEE. ACCORDINGLY, WE SE T ASIDE THE ORDER OF LD. CIT(A) BY DELETING PENALTY OF RS.1,03,050/- IMPOSED U/S 271(1)(C) OF THE ACT AND ALLOW THE APPEAL OF ASSESS EE. 12. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 26/02/2016 MAHATA/- IT(SS)A NO. 578/AHD/2012 ASST. YEAR 2004-05 8 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 26/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 26/02/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: