The ACIT, Circle-3, Baroda V. Shri Mahendra S.Vyas, Anand

ITSSA 59/AHD/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0025 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-02-2014
• Assessment Year: misc
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Business income; Income from undisclosed sources; Reasonable cause; Block assessment
• Section: 273B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.(SS) A. NO. 59 /AHD/2010 (BLOCK PERIOD: 19 88-89 TO 31.03.1999) ACIT CIRCLE 3, BARODA V/S SH. MAHENDRA S. VYAS. VIII; UMETHA, TA: ANKLAV, DIST. ANAND (APPELLANT) (RESPONDENT) PAN: ABAPV2302H APPELLANT BY : SHRI J.P. JHANGID, SR. D.R . RESPONDENT BY : SHRI ASEEM THAKKAR ( )/ ORDER DATE OF HEARING : 03-02-2014 DATE OF PRONOUNCEMENT : 21-02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, BARODA DATED 14.10.2009 FOR BLOCK PERIOD 1988-89 TO 31.03. 2009. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINES S OF TOBACCO. A SEARCH ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT THE RESIDENCE/OFFICE PREMISES OF ASSESSEE ON 31.03.1999. IN RESPONSE TO THE NOTICE UNDER SECTION 158BC, ASSESSEE FILED RETURN OF INCOME SHOWING TOTA L UNDISCLOSED INCOME OF RS. 20,38,608/- FOR THE BLOCK PERIOD UNDER REFERENC E. THE ASSESSMENT WAS IT(SS)A NO 5 9/AHD/2010 . BLOCK PERIOD 1988- 89 TO 31.03.1999 2 THEREAFTER FRAMED UNDER SECTION 158BC(C) R.W.S. 158 BG (B) OF THE ACT VIDE ORDER DATED 07.07.2000 AND THE TOTAL UNDISCLOSED IN COME FOR THE BLOCK PERIOD WAS DETERMINED AT RS. 71,34,196/- BY MAKING VARIOUS ADDITIONS. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER B EFORE CIT(A) WHERE SOME OF THE ADDITIONS MADE BY A.O. WERE DELETED. THE DE TAILS OF THE ADDITIONS MADE AND CONFIRMED/DELETED BY CIT(A) ARE AS UNDER:- AMOUNT ADDITIONS CONFIRMED BY CIT(A) ADDITIONS DELETED BY CIT(A) 1. UNDISCLOSED AGRICULTURE INCOME RS. 35,72,313/- RS. 12,61,261/- RS.23,11,092 2 DISALLOWANCE OF PROFESSIONAL FEES RS. 11,00,000/- RS. 11,00,000/- --- 3 UNDISCLOSED INCOME RS. 1,72,854/- --- RS. 1 ,72,854/- 4 UNEXPLAINED CASH RS. 55,250/- RS. 55,250/- ---- 5 PERSONAL EXPENDITURE RS. 42,438/- --- 42 ,438/- 6. ADDL. INCOME SURRENDERED RS. 76,217/- RS. 76,2 17/- --- 7. DISALLOWED CLAIM U/S 80L RS. 76,476/- --- R S. 76,476 4. THE ORDER OF CIT(A) CONFIRMING THE ADDITIONS OF RS. 24,37,478/- WAS CONTESTED BY ASSESSEE IN APPEAL BEFORE ITAT. ITAT VIDE ORDER DATED 30.04.2008 IN IT(SS)A NO. 105/AHD/2003 DISMISSED THE APPEAL OF TH E ASSESSEE AND CONFIRMED THE ADDITIONS WHICH WERE UPHELD BY CIT(A) . ON THE AFORESAID ADDITION WHICH WAS CONFIRMED BY TRIBUNAL, A.O. VIDE ORDER DATED 26.02.2009 LEVIED PENALTY OF RS. 14,62,487/- UNDER SECTION 158 BFA(2) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 14.10.2009 ALLOWED THE APPE AL OF THE ASSESSEE BY HOLDING AS UNDER:- 5.1 UNDISCLOSED AGRICULTURAL INCOME: IT IS WELL SET TLED THAT PENALTY PROCEEDINGS AND QUANTUM PROCEEDINGS ARE DISTINCT AND SEPARATE. DIFFERENT S TANDARDS HAVE BEEN PRESCRIBED BOTH FOR THE A.O. AS WELL AS THE ASSESSEE. HERE THE ISSUE IS WITH REGARD TO THE AMOUNT OF AGRICULTURE INCOME EARNED BY THE ASSESSEE. THE ASSESSEE CLAIMED TO HAVE EARNED DURIN G THE BLOCK PERIOD AGRICULTURAL INCOME OF RS. 35,72,353/-. HOWEVER, THE APPELLATE AUTHORITIES ACC EPTED, ON THE BASIS OF EVIDENCES FILED, AGRICULTURA L INCOME OF RS. 23,11,092/- ONLY. SUBSEQUENTLY IN TH E PENALTY PROCEEDINGS, THE ASSESSEE HAS FURNISHED OTHER EVIDENCES IN THE FORM OF CONFIRMATIONS. THIS WAS NOT CONSIDERED BY THE A.O. AS PER THE DECISION OF JURISDICTIONAL BENCH OF THE ITAT IN GANDHI STATI ON VS. ACIT, 100 TTJ 1143, THE SAME OUGHT TO HAVE BEEN CONSIDERED. THE A.O. HAS DISALLOWED THE AGRICU LTURAL INCOME BY TREATING IT AS BUSINESS INCOME. IT(SS)A NO 5 9/AHD/2010 . BLOCK PERIOD 1988- 89 TO 31.03.1999 3 NO INSTANCE HAS BEEN PUT FORTH TO SHOW THAT THE INC OME IN QUESTION WAS BUSINESS INCOME AND NO AGRICULTURAL INCOME. NO EVIDENCE HAS ALSO BEEN UNC OVERED DURING THE SEARCH OR OTHERWISE TO SHOW THAT THE ASSESSEE HAD EARNED BUSINESS INCOME OUTSID E ITS BOOKS, WHICH HAD NOT BEEN DISCLOSED IN THE RETURN OF INCOME BUT WAS DISGUISED AS AGRICULTURAL INCOME. ACCORDINGLY, I AM OF THE OPINION THAT LEVY OF PENALTY U/S 158BFA WAS NOT JUSTIFIED TO THE EXTE NT OF RS. 12,61,261/- AND IS, ACCORDINGLY, CANCELLE D. 5.2 DISALLOWANCE OF PROFESSIONAL FEES: THE ONLY ISS UE HERE IS WHETHER THE FEE RELATES TO THE BLOCK PERIOD OR NOT. IN THE OPINION OF THE A.O., THE PAY MENT WAS MADE BEYOND THE BLOCK PERIOD AND HENCE IT COULD NOT BE CLAIMED AS AN EXPENSE WHILE COMPUTING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE FACT REMAINS THAT THE CHARTERED ACCOUNTANT WAS ENGA GED ON 31.03.1999 AND PAYMENTS AGGREGATING TO RS. 4.50 LACS HAVE BEEN SUBSEQUENTLY MADE, THE DETA ILS OF WHICH ARE GIVEN BELOW:- SR. NO. PAYMENT MADE (AMOUNT IN RS. ) CHEQUE DRAFT NO. AND DATE DRAWN ON 1. RS. 2,00,000/- DD NO. 112076, 22.11.1999 CHAROTAR NARARIK SAHAKARI BANK, AHMEDABAD 2. RS. 50,000/- CHEQUE NO. 233077, 14.08.2003 ICICI BANK 3. RS. 1,00,000/- CHEQUE NO. 193259, 18.12.2003 BANK OF BARODA, ANKLAV. 4. RS. 50,000/- CHEQUE NO. 193280, 20.04.2004 BANK OF BARODA ANKLAV. 5. RS. 50,000/- CHEQUE NO. 193281, 20.04.2004 BANK OF BARODA, ANKLAV. RS. 4,50,000/- (BALANCE OF RS. 6,50,000/- IS STILL TO BE PAID 5.2.1 HENCE, THE ONLY CONTROVERSY IS WHETHER THE LI ABILITY ACCRUED ON 31.03.1999 OR NOT. THIS IS A DEBATABLE ISSUE ON WHICH MORE THAN ONE VIEW IS POSS IBLE. IN ANY CASE, THE FACT OF INCURRING EXPENDITUR E OF RS. 11 LACS HAS NOT BEEN DOUBTED OR DISPUTED. T HE DIFFERENCE HAS ARISEN ONLY WITH RESPECT TO THE YEAR IN WHICH THE EXPENDITURE SHOULD BE CHARGED. I N MY OPINION PENALTY WOULD NOT BE SUSTAINABLE ON A DEBATABLE ISSUE AS MENTIONED ABOVE. ACCORDINGLY, P ENALTY IN RESPECT OF DISALLOWANCE OF RS. 11 LACS IS CANCELLED. 5.3 GROSS PROFIT: IN A VERY LARGE NUMBER OF CASES, THE COURTS HA VE CONSISTENTLY HELD THAT PENALTY MAY NOT BE LEVIED IN RESPECT OF GP ADDITION MADE PURELY ON THE BASIS OF ESTIMATE, AS IN THE INSTANT CASE. IN THIS REGARD, THE DECISIONS CITED BY THE ID. AR (SUP RA) ARE RELEVANT. FOLLOWING THE DECISION OF THE JURISDICTIONAL BENCH OF THE IT AT IN THE CASE OF AL LARAKHA I. VOHRA V ACIT, IN IT(SS)A NO. 63/AHD/2008, VIDE ORDER DT. 31.12.2008, THE PENALTY LEVIED IN RESPECT OF GP ADDITION AMOUNTING TO RS. 76,217/- IS CANCELLED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US, THE LD. D.R. SUBMITTED THAT THE PENALTY WAS LEVIED UNDER SECTION 158BFA ON THE ADDITION WHICH WERE CONFIRMED BY CIT( A) AND ITAT. HE TOOK US THROUGH THE FINDINGS OF A.O. AND SUPPORTED HIS O RDER. HE FURTHER SUBMITTED THAT PENALTY UNDER 158BFA IS MANDATORY AND THEREFOR E CIT(A) HAS ERRED IN DELETING THE PENALTY. HE ALSO PLACED RELIANCE ON T HE DECISION IN THE CASE OF KANDOI BHOGILAL MULCHAND VS. DCIT (2012) 341 ITR 27 1 (GUJ.) CIT VS. IT(SS)A NO 5 9/AHD/2010 . BLOCK PERIOD 1988- 89 TO 31.03.1999 4 BECHARBHAI PARMAR (2012) 341 ITR 499 (GUJ.) AND OTH ER DECISIONS. HE THUS SUPPORTED THE ORDER OF A.O. 6. ON THE OTHER HAND, THE LD. A.R. REITERATED THE S UBMISSIONS MADE BEFORE CIT(A). HE FURTHER SUBMITTED THAT DURING THE COURSE OF PROCEEDINGS UNDER SECTION 158BC, ASSESSEE HAD SUBMITTED VARIOUS EVIDE NCES LIKE EXTRACT OF REVENUE RECORD, STATEMENT SHOWING AGRICULTURE PRODU CE ETC. THE ASSESSEE HAD DISCLOSED THE NET AGRICULTURE INCOME OF RS. 35, 72,353/-. THE ADDITION OF RS. 12,61,261/- THAT WAS CONFIRMED BY CIT(A) AS WE LL AS TRIBUNAL WAS ONLY FOR THE REASON THAT THE EVIDENCE REGARDING THE SAME WAS NOT AVAILABLE IN THE SEIZED MATERIAL AND THEREFORE THE SAME WAS CONSIDER ED AS INCOME FROM UNDISCLOSED SOURCES. HE FURTHER SUBMITTED THAT CONF IRMATION FROM ALL THE PURCHASERS OF AGRICULTURE PRODUCE OF THE ASSESSEE W AS FILED AT PENALTY STAGE BUT THE A.O. DID NOT VERIFY THE SAME. HE FURTHER SU BMITTED THAT THERE IS NO MUCH VARIATION IN THE HOLDING OF LAND BY ASSESSEE W HEREIN THE ASSESSEE HAD BEEN ALLOWED THE AGRICULTURE INCOME FOR A.Y. 1999-2 000. WITH RESPECT TO DISALLOWANCE OF PROFESSIONAL FEES, IT WAS SUBMITTED THAT ASSESSEE HAD AGREED TO PAY RS. 11 LACS TOWARDS PROFESSIONAL FEES BUT IT WAS NOT ALLOWED BY THE A.O. UNDER SECTION 158BC FOR THE REASON THAT THE PR OFESSIONAL FEES WERE PAID AND ACCRUED AFTER 31.03.1999 THAT IS AFTER THE BLOC K PERIOD. HE THEREFORE SUBMITTED THAT THE ADDITION WAS ON ACCOUNT OF DIFFE RENCE OF OPINION. WITH RESPECT TO THE ADDITION OF GROSS PROFIT LD. A.R. SU BMITTED THAT ON THE TURNOVER OF RS. 3,81,089/-. A.O. CONSIDERED THE G.P. DISCLOSED BY THE ASSESSEE TO BE LOW AND THEREFORE ESTIMATED THE SAME AT 20% RESULTI NG INTO ADDITION OF RS. 76,217/-. HE THEREFORE SUBMITTED THAT IN VIEW OF T HE AFORESAID FACTS NO PENALTY WAS LEVIABLE AND THUS SUPPORTED THE ORDER OF CIT(A ). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT WITH RESPECT TO UNDISCLOSED AGRICULTURE I NCOME, CIT(A) WHILE DELETING THE ADDITION ON AGRICULTURE INCOME HAS NOTED THAT A SSESSEE HAD CLAIMED TO HAVE EARNED AGRICULTURAL INCOME OF RS. 35,72,353/- BUT IN APPELLATE IT(SS)A NO 5 9/AHD/2010 . BLOCK PERIOD 1988- 89 TO 31.03.1999 5 PROCEEDINGS THE INCOME OF RS. 23,11,092/- WAS ACCEP TED. HE HAS FURTHER NOTED THAT DURING THE COURSE OF PENALTY PROCEEDING S, ASSESSEE HAD FURNISHED EVIDENCES IN THE FORM OF CONFIRMATIONS BUT THE SAME WERE NOT CONSIDERED BY A.O. HE HAS FURTHER NOTED THAT A.O. HAD DISALLOWED THE AGRICULTURE INCOME BY TREATING IT AS BUSINESS INCOME BUT FOR WHICH NO EVI DENCE DURING THE SEARCH OR OTHERWISE WAS FOUND TO SHOW THAT ASSESSEE HAD EARNE D BUSINESS INCOME OUTSIDE IT BOOKS AND HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME BUT WAS DISGUISED AS AGRICULTURE INCOME. WITH RESPECT TO DI SALLOWANCE OF PROFESSIONAL FEES, CIT(A) HAS GIVEN A FINDING THAT ASSESSEE WAS ENGAGED ON 31.03.1999 AND RS. 4.50 LACS WAS ALSO PAID SUBSEQUENTLY TO HIM . THE ISSUE THAT WHETHER THE LIABILITY OF PROFESSIONAL FEES ACCRUED AS ON 31 .03.1999 WAS A DEBATABLE ISSUE AND THEREFORE PENALTY CANNOT BE SUSTAINED ON DEBATABLE ISSUE. WITH RESPECT TO GROSS PROFIT, HE HAS NOTED THAT G.P. ADD ITION WAS MADE ON THE BASIS OF ESTIMATE AND THEREFORE NO PENALTY WAS LEVIABLE. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) BY BRIN GING ANY CONTRARY MATERIAL ON RECORD. 8. WE ALSO DO NOT AGREE WITH THE SUBMISSION OF REV ENUE THAT PENALTY U/S. 158BFA IS MANDATORY IN VIEW OF THE DECISION OF RAJA STHAN HIGH COURT IN THE CASE OF CIT VS. SATYENDARA KUMAR DOSI (2009) 315 IT R 172 WHERE THE HONBLE HIGH COURT HAS HELD THAT LEVY OF PENALTY U/ S. 158BFA(2) IS DISCRETIONARY AND NOT MANDATORY. 9. IN THE CASE OF CIT VS. BECHARBHAI PARMAR (SUPRA) TH E HONBLE GUJ. HIGH COURT HAS HELD AS UNDER:- SUB-SECTION (2) OF SECTION 158BFA MAKES IT CLEAR T HAT IT IS WELL WITHIN THE DISCRETION OF THE A.O, WH ILE FRAMING THE ASSESSMENT FOR THE BLOCK PERIOD, WHETHE R OR NOT TO IMPOSE ANY PENALTY OR NOT. THE WORDS, MAY DIRECT HAVE TO BE GIVEN ITS NORMAL MEANING, L EAVING DISCRETION TO THE OFFICER. IN ABSENCE OF AN Y SPECIAL REASON THE WORD, MAY CANNOT BE READ AS S HALL. THE CONTENTION OF THE COUNSEL FOR THE REVENUE THAT ONLY UPON SATISFACTION OF THE CONDITIO NS CONTAINED IN PROVISO TO SUB-SECTION (2) THAT THE ASSESSEE, IN CASE OF THE BLOCK ASSESSMENT CAN BE SP ARED OF THE PENALTY CANNOT BE ACCEPTED. IT IS, OF COURSE, TRUE THAT UPON SATISFYING SUCH CONDITIONS, THAT IN ASSESSEE WOULD GET IMMUNITY FROM PENALTY. NEVERTHELESS, THIS IS NOT A THING AS TO SUGGEST THA T IN NO OTHER CASE, OR ON NO OTHER GROUND, THE A.O. IT(SS)A NO 5 9/AHD/2010 . BLOCK PERIOD 1988- 89 TO 31.03.1999 6 MAY AT HIS DISCRETION, NOT IMPOSE PENALTY THE MOMEN T ADDITIONS UNDER CLAUSE (C) OF SECTION 158BC ARE SUSTAINED. IN OTHER WORDS, THE PENALTY UNDER SECTI ON 158BFA(2) IS NOT MANDATORY IN NATURE. IT IS TRU E THAT SECTION 273B WHICH PROVIDES THAT PENALTY SHALL NOT BE IMPOSED IN CERTAIN CASES ON THE ASSESSEE PROVING THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO PAY TAX REFERS TO SEVERAL PROVISIONS SUCH AS SECTIONS 271, 271A ETC., MAKES NO MENTION OF SECTIO N 158BFA(2). THIS STILL DOES NOT MEAN THAT PENALTY UNDER SECTION 158BFA(2) IS MANDATORY. 10. IN VIEW OF THE AFORESAID FACTS AND RELYING ON THE DECISIONS OF HIGH COURTS STATED ABOVE WE ARE OF THE VIEW THAT NO PENALTY IS LEVIED IN THE PRESENT CASE AND THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS APPEAL OF REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD