Shri Hiteshkumat T. Kaneriya, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Circle-1, RAJKOT-GUJARAT

ITSSA 59/RJT/2012

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8592 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2012
• Assessment Year: misc
• Appeal Filed On: 14-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: R D LALCHANDANI A
• Keywords: Search and seizure; Opportunity of being heard; Corroborative evidences; Block assessment
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI B.R.JAIN , AM IT (SS) A NO . 59 /RJT / 201 2 / ASSESSMENT BLOCK PERIOD 1.4.1990 - 5.9.2000 SHRI HITESHKUMAR T KANERIYA, C/O M/S SAFAL OIL INDUSTRIES, 116 - GUNJ BAZAR, OLD MADHU PURA, AHMEDABAD - 380003 PAN: AAXPK416AL ( / APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - I, 508, AAYAKAR BHAVAN, RACE COURSE RING ROAD, RAJKOT - 360001 / R ESPONDENT A / ASSESSEE BY SHRI R.D.LALCHANDANI A / REVENUE BY SHRI A NKUR GARG / DATE OF HEARING 4 .12 .2012 / DATE OF PRONOUNCEMENT 14. 12.2012 / ORDER B.R.JAIN , A . M . THIS AP PEAL BY ASSESSEE AGAINST THE ORDER DATED 24.4.2012 OF LD. CIT(A) - I I , RAJKOT RAISES THE FOLLOWING GROUNDS : 1. THE LD . CIT(A) ERRED IN UPHOLDING THE LEVY OF PENALTY U/S 158BFA(2) OF THE ACT. THE LEVY OF PENALTY IS NEITHER JUSTIFIED ON FATS NOR JUSTIFI ED IN LAW . 2. BRIEFLY THE FACTS ARE THAT AN ACTION U/S 132 OF THE INCOME TAX ACT 1961 (THE ACT) WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 5.9.2000. PURSUANT TO THE NOTICE U/S 158BC OF THE ACT ISSUED ON 17.10.2000, THE ASSESSEE FILED RETURN FOR THE BLOCK PERIOD OF 1.4.1990 - 5.9.2000 SHOWING UNDISCLOSED INCOME OF RS. 5,97,335/ - . THE ASSESSMENT WAS COMPLETED AT AN UNDISCLOSED INCOME OF IT (S S) A NO. 59 /RJT/201 2 2 RS.13,32,944/ - BY AN ORDER DATED 20.9.2002 . HE ALSO INITIATED PENALTY PROCEEDINGS U/S 158BFA(2) OF THE A CT IN RESPECT OF DIFFERENCE BETWEEN UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CLAUSE 158BC OF THE ACT AND THE UNDISCLOSED INCOME DECLARED IN THE BLOCK RETURN FILED BY THE ASSESSEE. 3. AN OPPORTUNITY OF BEING HEARD IN TERMS OF SUB - SECTION (3) OF SECTION 158BFA WAS AFFORDED TO THE ASSESSEE REQUIRING HIM TO SHOW CAUSE AS TO WHY PENALTY IN TERMS OF SECTION 158BFA BE NOT IMPOSED ON HIM THE ASSESSEE FURNISHED HIS REPLY STATING THEREIN THAT THE SMALL ADDITIONS WERE NOT ALLOWED TO BE CONTESTED BY THE APPELLATE TRIBUNAL ON ACCOUNT OF SMALLNESS OF AMOUNT. 4. AS REGARD S ADDITION ON ACCOUNT OF ENTRIES OF 650,350 FOUND WRITTEN IN THE PROTECT ED AREA OF THE DIGITAL DIARY THAT CAME TO BE ASSESSED AS UNDISCLOSED INCOME , IT WAS STATED THAT THIS ENTRY FOR THE PRICE OF CALCULATORS AND NO EVIDENCE COULD BE FOUND DURING THE COURSE OF SEARCH TO SUBSTANTIATE THAT HE HAS MADE ANY INVESTMENT THEREIN IN FACT . THE SUBMISSIONS OF THE ASSESSEE AND CASE LAWS RELIED UPON BY HIM WERE DULY CONSIDERED BY THE ASSESSIN G AUTHORITY. HE FOUND THAT THE APPELLATE TRIBUNAL HAS CONFIRMED THE ADDITIONS AS UNDISCLOSED INCOME IN QUANTUM APPEAL FILED BY THE ASSESSEE. NO FRESH EVIDENCE OR ANY OTHER DOCUMENT HAS BEEN FILED BY THE ASSESSEE TO SUBSTANTIATE HIS CLAIM. HE, THEREFORE, BEING OF THE OPINION THAT THE ASSESSEE HAS CONCEALED HIS INCOME BY WAY OF FURNISHING INACCURATE PARTICULARS , IMPOSED PENALTY AMOUNTING TO RS.4,82,919/ - EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED ON THE CONCEALED INCOME OF RS.6,87,619/ - . IT (S S) A NO. 59 /RJT/201 2 3 5. THE LD. C IT(A) CONFIRMED THE PENALTY AS THE CASE LAW S RELIED UPON BY THE ASSESSEE DID NOT APPLY TO THE PECULIAR FACTS OF THIS CASE MORE PARTICULARLY WHEN ALL THE CASE LAWS THAT THE ASSESSEE SOUGHT TO BE RELIED WERE WITH RESPECT TO PENALTY IMPOSED UNDER SECTI ON 271(1( C) OF THE ACT. HE ALSO FOUND THAT THE EXPLANATION TENDERED BY THE ASSESSEE IS NOT FOUND BONAFIDE. 6. IN APPEAL, THE ASSESSEE S COUNSEL CONTENDS THAT SEARCH DID NOT REVEAL ANY INVESTMENT IN CALCULATORS BY THE ASSESSEE TO THE EXTENT OF RS .650,350. THE ASSESSEE HAD RECORDED THE FIGURES OF 650,350 AGAINST THE NARRATION OF CALCULATORS . HE IS NOT A DEALER IN CALCULATORS. THERE IS NO CALCULATOR IN THE MARKET WHICH CAN BE SAID TO HAVE PRICE OF 650,350. HE FURTHER STATED THAT IT IS THE P ROTECTED AREA ONLY IN THE DIGITAL DIARY WHERE THE ASSESSEE COULD STORE SUCH INFORMATION FOR HIS MEMORY ITS PURPOSE. HE CLAIMED TO HAVE MADE SUCH ENTRIES IN THE PROTECT ED AREA FOR TWO CALCULATORS WHICH HAD TWO DIFFERENT PRICE, SO THAT ON LATER DATE WHE N HE MAKES PURCHASES, HE MAY REFER TO SUCH INFORMATION. THE EXPLANATION BEING BONAFIDE WAS NOT ACCEPTED BY THE AUTHORITIES BELOW . AS REGARDS OTHER ADDITIONS AS UNDISCLOSED INCOME THEY WERE OF PETTY AMOUNT AND ASSESSEE WAS NOT ALLOWED TO AGREE THE A DDITIONS DUE TO THEIR SMALLNESS IN NATURE. THE PROVISIONS OF SECTION 158BFA(2) DID NOT EMPOWER THE ASSESSING AUTHORITY TO IMPOSE PENALTY AUTOMATICALLY. THE EXPLANATION OF THE ASSESSEE HAS TO BE CONSIDERED AND IF FOUND BONAFIDE THE PENALTY HAS T O BE CANCELLED . TH IS, HOWEVER, HAS NOT BEEN DONE BY THE AUTHORITIES BELOW . THE ORDER OF THE LD. CIT(A), THEREFORE, REQUIRES TO BE SET ASIDE. IT (S S) A NO. 59 /RJT/201 2 4 7. ON THE OTHER HAND, SHRI ANKUR GARG, THE LD. DR SUPPORTED THE DECISIONS OF THE AUTHORITIES BELOW AND CONT ENDS TH A T THE ASSESSING AUTHORITIES HAS DETERMINED UNDISCLOSED INCOME OF RS.7,35,609/ - OVER AND ABOVE THE UNDISCLOSED INCOME OF RS.5,97,335/ - DECLARED BY THE ASSESSEE PURSUANT TO RETURN FILED UNDER SECTION 158BC. THE TOTAL UNDISCLOSED INCOME DECLAR ED BY THE ASSESSEE U/S 158BC OF THE ACT HAS BEEN ASSESSED AT RS.13,32,944/ - . THE AO HAS INCLUDED THE UNDISCLOSED INCOME OF RS.5,97,335/ - FURNISHED BY THE ASSESSEE IN THE RETURN FILED UNDER CLAUSE (A) OF SUB - SECTION 158BC OF THE ACT. THE ASSESSING AUTHORITY THUS IMPOSED PENALTY ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH WAS IN EXCESS OF THE AMOUNT OF DISCLOSED INCOME SHOWN BY THE ASSESSEE. THE HON BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. BECHARBHAI P. PARMAR REPORTED IN (2012) 341 ITR 499 (GUJ.) HAS ANALYSED THE PROVISION CONTAINED IN SUB - SECTION (2) OF SECTION 158BFA OF THE ACT. IT HAS STATED THAT : THE FIRST PROVISO TO SUB - SECTION (2) OF SECTION 158BFA, HOWEVER, PROVIDES THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IF THE CONDITIONS (I) TO (IV) THEREIN ARE SATISFIED. IN ESSENCE, NO PENALTY WOULD BE IMPOSED IF THE ASSESSEE FURNISHES RETURN OF INCOME ; PAYS OR OFFERS TAX BY WAY OF ADJUSTMENT ON SUCH INCOME ; PRODUCES EVIDENCE OF TAX HAVING BEEN PAID ALONG WITH THE RETURN AND ALSO DOES NOT DISPUTE BY FILING APPEAL AGAINST THAT PORTION OF ASSESSMENT WHICH HE HAS SHOWN IN HIS RETURN. BY A FURTHER PROVISO, HOWEVER, IT IS CLARIFIED THAT SUCH EXCLUSION WILL NOT BE AVAILABLE WHERE THE UNDISCLOSED INCOME DETERMINE D BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH A CASE, PENALTY SHALL BE IMPOSED ON THAT PORTION OF THE UNDISCLOSED INCOME DETERMINED, WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. IT (S S) A NO. 59 /RJT/201 2 5 IT TH US FOUND THAT PENALTY UNDER SUB - SECTION (2) OF SECTION 158BFA OF THE ACT HAS BEEN PROVIDED WHERE THE ASSESSING AUTHORITY BROUGHT INCOME IN EXCESS OF INCOME WHAT IS DECLARED BY THE ASSESSEE FOR THE BLOCK PERIOD. THIS PROVISO THUS IS DIFFERENT THAN T HE PENALTY PROVISION S CONTAINED U/S 271(1)( C ) OF THE ACT, WHICH PROVIDES FOR PENALTY WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME, OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. SINCE THE ADDITION AS UNDISCLOSED WAS CONFIRMED BY THE TRIBUNAL MADE WHICH WAS OVER AND ABOVE THE INCOME DISCLOSED BY THE ASSESSEE IN THE RETURN OF BLOCK PERIOD, THE LD.CIT(A) CANNOT BE SAID TO HAVE COMMITTED AN ERROR IN CONFIRMING THE PENALTY. 8 . THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S BECHARB HAI P. PARMAR IN TAX APPEAL NO. 2538 OF 2009, ORDER DATED 1.10. 2012 HADL AN OCCASION TO CONSIDER THE SAID JUDGMENT IN THE CASE OF KANDOI BHOGILAL MULCHAND V. DEPUTY CIT [2012] 341 ITR 271 (GUJ.) AND ALSO THE JUDGMENT BY CERTAIN HIGH COURTS IN THE FOLLO WING CASES : ( A ) CIT V. SMT. ANJU R. INNANI [2010] 323 ITR 626 (BOM) ; ( B ) CIT V. SATYENDRA KUMAR DOSI [2009] 315 ITR 172 (RAJ) ; AND ( C ) CIT V. HARKARAN DAS VED PAL [2011] 336 ITR 8 (DELHI). AFTER CONSIDERING THE AFORESAID JUDGMENTS, THE HON BLE COU RTS HAS CONCLUDED THAT THE LEVY OF PENALTY U/S 158BFA IS NOT MANDATORY . THE HON BLE JURISDICTIONAL HIGH COURT VIDE PARAGRAPH 14 OF ITS ORDER OPIN ED THAT THE TRIBUNAL DELETED THE PENALTY BY HOLDING AS UNDER : IT (S S) A NO. 59 /RJT/201 2 6 14. WE ARE FURTHER OF THE OPINION THAT TH E TRIBUNAL DELETED THE PENALTY ON THE GROUNDS WHICH WERE SIMPLY NOT PERMISSIBLE. AS ALREADY NOTED, THE PENALTY ON THE GROUNDS OF THE ADDITION OF RS. 7.23 LAKHS AND RS. 2 LAKHS WAS DELETED OBSERVING THAT THE FINDINGS OF THE ASSESSING OFFICER IS MERE PRESUMP TION AND THAT NOTHING INCRIMINATING WAS FOUND WHICH WOULD REVEAL THAT THE ASSESSEE HAD INCURRED SUCH AN EXPENDITURE. WE ARE AFRAID, SUCH AN OBSERVATION WOULD AMOUNT TO REOPENING THE QUESTION OF QUANTUM ADDITION WHICH HAD ATTAINED FINALITY BY VIRTUE OF THE DECISION OF THE TRIBUNAL. PENALTY ON THE INCOME OF RS. 4.60 LAKHS WAS DELETED OBSERVING THAT THOUGH THE ASSESSEE HAD FAILED TO PRODUCE SUPPORTING EVIDENCE, FOR MERE ABSENCE OF SUPPORTING EVIDENCE, IT CANNOT BE HELD THAT SUCH AGRICULTURAL INCOME DID NOT EXI ST. SUCH OBSERVATION AGAIN, IN OUR OPINION, WOULD AMOUNT TO REOPENING THE CLOSED ISSUES OF ADDITION SUSTAINED UP TO THE LEVEL OF THE TRIBUNAL. SURELY, THE TRIBUNAL, WHILE CONSIDERING THE PENALTY PROCEEDINGS COULD NOT HAVE OVERRULED THE PREVIOUS FINDINGS WH ICH HAD ATTAINED FINALITY. PENALTY CORRESPONDING TO THE ADDITION OF RS. 17.22 LAKHS WAS DELETED ON THE GROUND THAT THE ASSESSEE HAD DEMONSTRATED THAT THERE WAS ESTIMATION OF ADDITIONS AND THAT, THEREFORE, NO PENALTY COULD BE LEVIED. HERE AGAIN, WE ARE OF T HE OPINION THAT THE TRIBUNAL INTERFERED WITH THE PENALTY ON THE GROUND WHICH WAS NOT PERMISSIBLE. ADDITIONS MADE ON THE BASIS OF ESTIMATION MAY BE ONE OF THE GROUNDS ON WHICH DISCRETION NOT TO IMPOSE PENALTY MAY BE EXERCISED. HOWEVER, IN THE ABSENCE OF ANY REQUIREMENT TO PROVE THE CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS FOUND IN SECTION 271(1)(C) OF THE ACT CANNOT FORM THE SOLE BASIS TO DELETE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER (APPEALS). IN THIS VIEW OF THE MATTER, THERE IS NO MATERIAL AVAILABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT PENALTY IN A CASE LIKE THIS IS NOT ACCEPTABLE. HE, THEREFORE, URGED TH A T THE GROUND RAISED IN THIS APPEAL NEEDS TO BE REJECTED AND APPEAL BE DISMISSED. 9 . WE HAVE H EARD PARTIES WITH REFERENCE TO THE MATERIAL ON RECORD AND THE PRECEDENTS CITED AT BAR. THE EXPLANATION OF THE APPELLANT FOR RECORDING THE FIGURES OF 650, 350 AGAINST THE NARRATION CALCULATOR IN THE PROTECTED AREA OF THE DIGITAL DIARY IS THAT THIS I S THE ONLY AREA WHERE SUCH INFORMATION CAN BE STORED. THE DIARY DOES NOT HAVE ANY IT (S S) A NO. 59 /RJT/201 2 7 OTHER AREA FOR STORING OR RECORDING INFORMATION AS SUCH. EVEN THOUGH DIARY IS NOT PRODUCED BY EITHER OF THE PARTIES BEFORE US , YET IT IS NOT DENIED THAT THE PROTECTI VE AREA IS THE ONLY AREA WHERE A PERSON HOLDING THE DIGITAL DIARY CAN STORE ANY SUCH INFORMATION. THAT BESIDES, THE FIGURES OF 650,350 WRITTEN AGAINST THE NARRATION OF CALCULATOR WERE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE BY 650,350 / - IN THE BLOCK ASSESSMENT. ADMITTEDLY, THEREFORE, THE NARRATION WRITTEN AS CALCULATOR IS APPARENT AS WELL AS REAL AND THIS FACT IS NOT DISPUTED BY EITHER PARTIES. THE APPELLANT HAS NOT SHOWN TO BE DEALER IN CALCULATOR S . BY RUMMAGE OF ALL CORNERS OF THE HOUSE, THE SEARCH PROCEEDINGS DID NOT REVEAL ANY PHYSICAL INVENTORY AS INVESTMENT IN CALCULATOR HELD BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WHEN THE TWO FIGURES OF 650 , 350 ARE APPEARING AGAINST THE NARRATION OF CALCULATOR AND THERE BE ING NO CALCULATOR AVAILABLE IN THE MARKE T OF THE PRICE OF RS. 6,50,350/ - , THE EXPLANATION OF THE ASSESSEE THAT HE HAS NOTED THE FIGURES FOR CALCULATOR S ONE AT 650 AND ANOTHER AT 350 IS PLAUSIBLE . THE LEVY OF PENALTY IS ALSO NOT MANDATORY. THE HON BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. BECHARBHAI P. PARMAR REPORTED IN (2012) 341 ITR 499 (GUJ.) VIDE PARAGRAPH 10 OF ITS ORDER HAS REJECTED BY HOLDING THAT THE REVENUE S CONTENTION THAT ONLY UPON SATISFACTION OF THE CONDITION S CONTAINED IN THE PROVISO TO SUB - SECTION (2) THAT THE ASSESSEE, IN THE CASE OF THE BLOCK ASSESSMENT CAN BE SPARED OF THE PENALTY , CANNOT BE ACCEPTED. IT IS, OF COURSE, TRUE THAT UPON SATISFYING SUCH CONDITIONS, THE ASSESSEE WOULD GET IMMUNITY FROM PENALTY . NEVERTHELESS, THIS IS NOT A THING AS TO IT (S S) A NO. 59 /RJT/201 2 8 SUGGEST THAT IN NO OTHER CASE, OR ON NO OTHER GROUND, THE ASSESSING OFFICER MAY AT HIS DISCRETION, NOT IMPOSE PENALTY THE MOMENT ADDITIONS UNDER CLAUSE (C) OF SECTION 158BC ARE SUSTAINED. 10 . IN THE BACKDROP OF T HE VIEW SO ENTERTAINED BY THE HON BLE GUJARAT HIGH COURT , WE FIND THAT THIS WAS A CASE WHERE THE AO OUGHT TO HAVE USED HIS DISCRETION IN NOT IMPOSING THE PENALTY AS THE LEVY THEREOF IS NOT MANDATORY IN NATURE. THE LD. CIT(A) IS THUS FOUND TO HAV E ERRED IN SUSTAINING THE ADDITION WITHOUT APPRECIATING THE MATERIAL AND THE PLEA RAISED BY THE ASSESSEE IN RIGHT PERSPECTIVE. THE EXPLANATION BEING BONAFIDE, WE CANCEL THE PENALTY IN RESPECT OF UNDISCLOSED INCOME O F RS.650,350/ - . 11 . IN SO FAR AS THE BALANCE AMOUNT OF RS. 36,969/ - BEING THE BALANCE OF UNDISCLOSED INCOME OF THE ASSESSEE IN EXCESS OF INCOME SHOWN IN THE RETURN FILED FOR BLOCK PERIOD, THE ASSESSEE HAS NOT TENDERED ANY EXPLANATION DESPITE REASONABLE OPPORTUNITY OF BEING HEARD HA V ING BEEN GIVEN TO HIM. THE LEVY OF PENALTY ON THE AMOUNT OF RS. 36,969/ - , THEREFORE, STANDS UPHELD. 12 . IN THE RESULT, THE ASSESSEE S APPEAL PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 14.12.2012 SD SD (T. K. SHARMA) ( B.R.JAIN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / ORDER DATE 14. 12. 2012. /RAJKOT SRL IT (S S) A NO. 59 /RJT/201 2 9 / COPY OF ORDER FORWARDED TO: - 1. / APPELLANT - , 2. / RESPONDENT - 3. / CONCERNED CIT . 4. - / CIT (A) . 5. , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.