D.A.M.M.Srinivasa (Seenu) Sah, Kancheepuram V. ACIT, CHENNAI

ITSSA 6/CHNY/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1694 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-01-2016
• Assessment Year: misc
• Appeal Filed On: 30-03-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T VASUDEVAN
• Keywords: Initiation of penalty proceedings; Block assessment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.(SS)A.NO.6/MDS/2015 BLOCK ASSESSMENT A.Y 1991 - 92 TO 2000 - 01 AND UPTO 14.9.2000 D.A.M.M. SRINIVASA (SEENU) SAH PROP. SRI LAKSHMI SILKS NO.17-B, NADU STREET KANCHEEPURAM 631501 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE III(1) CHENNAI [PAN AAWPS 3726 K] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE /RESPONDENT BY : SHRI A.V SREEKANTH, JCIT / DATE OF HEARING : 11 - 01 - 2016 / DATE OF PRONOUNCEMENT : 19 - 0 2 - 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)-19, CHENN AI, DATED 29.1.2015 AND PERTAINS TO BLOCK PERIOD FROM A.Y 19 91-92 TO 2000-01 AND UPTO 14.9.2000. 2. SHRI T. VASUDEVAN, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT A SEARCH WAS CONDUCTED AT THE RESIDENCE AND BU SINESS PREMISES OF THE ASSESSEE ON 14.9.2000. THE BLOCK ASSESSMENT W AS COMPLETED ON IT(SS)A NO.6/15 :- 2 -: 30.12.2002. THE CIT(A) GRANTED A RELIEF OF ` 21,119/-. ON FURTHER APPEAL BEFORE THIS TRIBUNAL, THIS TRIBUNAL ESTIMATE D THE PROFIT @ 2% OF THE TOTAL UNDISCLOSED TURNOVER. ULTIMATELY, THE RE LIEF GRANTED BY THIS TRIBUNAL COMES TO ` 98,163/-. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 158BFA(2) OF THE ACT. ACCORDING T O THE LD. COUNSEL, THE INCOME RETURNED BY THE ASSESSEE IS ` 40,98,608/-. THE INCOME DETERMINED CONSEQUENT TO THE ORDER OF THIS TRIBUNAL IS ` 46,52,608/-. THE ASSESSING OFFICER COMPUTED THE DIFFERENCE OF ` 5,54,000/- BETWEEN THE RETURNED INCOME AND ASSESSED INCOME AND LEVIED PENALTY. ACCORDING TO THE LD. COUNSEL, THE ADDITION WAS BECA USE OF ESTIMATION MADE BY THE AUTHORITIES BELOW, THEREFORE, NO PENALT Y COULD BE LEVIED. 3. THE LD. COUNSEL FURTHER SUBMITTED THAT FOR THE BLOC K PERIOD, THE INCOME HAS TO BE DETERMINED ONLY ON THE BASIS O F MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION. ACCORDING T O THE LD. COUNSEL, A MERE ESTIMATION OF PROFIT FOR THE BLOCK PERIOD WOUL D NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY U/S 158BFA(2) OF THE ACT AND THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY L EVIED BY THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI A.V SREEKANTH, THE LD. DEPART MENTAL REPRESENTATIVE SUBMITTED THAT THERE IS A DIFFERENCE OF ` 5,54,000/- BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME . THE TAX IT(SS)A NO.6/15 :- 3 -: LEVIED ON ` 5,54,000/- @ 60% COMES TO ` 3,88,908/-. THEREFORE, THE ASSESSING OFFICER LEVIED PENALTY OF ` 3,88,908/- @ 100%. ACCORDING TO THE LD. DR, THE ASSESSEE WAS CARRYING ON THE BUSIN ESS OF PURCHASE AND SALE OF SILK SAREES AND OTHER HANDLOOM PRODUCTS IN THE NAME AND STYLE OF M/S SRI LAKSHMI SILKS AND M/S SRI LAKSHMI ZARI T RADERS AT KANCHEEPURAM. DURING THE BLOCK PERIOD, THE ASSESS EE CLAIMS TO HAVE PURCHASED SAREES AND PAID THE PURCHASE PRICE THROUG H CHEQUES. ON EXAMINATION, THE ASSESSING OFFICER FOUND THAT THE B USINESS OF SAREES WAS OUTSIDE THE REGULAR BOOKS OF ACCOUNT. ON VERIF ICATION, THE ASSESSING OFFICER FOUND THAT THERE WAS NO PURCHASE AND SALE OF SAREES BY THE ASSESSEE. SOME OF THE CHEQUES ISSUED BY TH E ASSESSEE WERE NOT EVEN PRESENTED BEFORE THE BANK. BY TAKING INTO CONSIDERATION THE TRANSACTION CARRIED ON OUTSIDE THE BOOKS OF ACCOUNT AND THE NON- PRESENTATION OF THE CHEQUES FOR ENCASHMENT, THIS TR IBUNAL ESTIMATED THE INCOME AT 8% INSTEAD OF 10% MADE BY THE AUTHORI TIES BELOW. AFTER ESTIMATING THE PROFIT AT 8%, THERE WAS A DIFF ERENCE OF ` 5,54,000/- BETWEEN THE RETURNED INCOME AND THE INCO ME ASSESSED. SINCE THE ASSESSEE COULD NOT OFFER ANY EXPLANATION , ACCORDING TO THE LD. DR, THE CIT(A) HAS RIGHTLY CONFIRMED THE PENALT Y LEVIED BY THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE IT(SS)A NO.6/15 :- 4 -: THROUGH THE PROVISIONS OF SEC. 158BFA(2) OF THE ACT . SEC. 158BFA(2) GIVES A DISCRETION TO THE ASSESSING OFFICER TO LEVY PENALTY WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE. THE F IRST PROVISO TO SEC. 158BFA(2) PROVIDES EXEMPTION FROM LEVY OF TAX IF A PERSON FURNISHED THE RETURN OF INCOME U/S 158BC(A) AND PAID THE TAX ES. SECOND PROVISO TO SEC. 158BFA(2) CLEARLY SAYS THAT THE UND ISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN, PENALTY SHALL BE IMPOSED ON THE PORT ION OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. IN THE CASE BEFORE US, THE DIFFERENCE BETWEEN THE INCOME ASSESSED AND THE INCOME DISCLOSED BY THE ASSESSEE IS BECAUSE OF THE ESTIMA TION MADE BY THE AUTHORITIES BELOW AND THIS TRIBUNAL. IN FACT, THE AUTHORITIES BELOW ESTIMATED THE PROFIT @ 10%. HOWEVER, THIS TRIBUNA L REDUCED THE SAME TO 8%. SEC. 158BB(1) OF THE ACT CLEARLY SAYS THAT THE INCOME FOR THE BLOCK PERIOD HAS TO BE COMPUTED ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION AND THE EVIDE NCE WHICH IS RELATABLE TO THE MATERIAL FOUND DURING THE COURSE O F SEARCH OPERATION. IN THE CASE BEFORE US, THE INCOME WAS NOT ASSESSED ON THE BASIS OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPER ATION. THIS TRIBUNAL FOUND THAT THE ENTIRE TRANSACTION WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND PURCHASE AND SALE OF SAREES WE RE DONE OUTSIDE IT(SS)A NO.6/15 :- 5 -: THE BOOKS OF ACCOUNT. THEREFORE, THE PROFIT WAS UL TIMATELY ESTIMATED @ 8% WITHOUT PLACING ANY RELIANCE ON THE SEIZED MAT ERIAL. WHEN THE PROFIT WAS ESTIMATED, THE QUESTION ARISES FOR CONSI DERATION IS WHETHER PENALTY CAN BE LEVIED U/S 158BFA(2) OF THE ACT OR NOT? EVEN THOUGH SECOND PROVISO TO SEC. 158BFA(2) MAKES IT MANDATORY TO LEVY PENALTY IN CASE THE ASSESSED INCOME EXCEEDS THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE, 158BFA(2) GIVES A DISCRETION TO T HE ASSESSING OFFICER FOR INITIATING PENALTY PROCEEDINGS. THEREFORE, THE POWER TO INITIATE PENALTY PROCEEDINGS HAS TO BE EXERCISED JUDICIALLY ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. IN OTHER WORDS, WHEN THE ASSESSING OFFICER HIMSELF ESTIMATED THE PROFIT @ 10% RATHER H E DETERMINED THE UNDISCLOSED INCOME NOT BASED ON ANY CONCRETE MATERI AL FOUND DURING THE COURSE OF SEARCH OPERATION, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT INITIATION OF PENALTY PROCEEDINGS ITSE LF IS NOT VALID. THEREFORE, LEVY OF PENALTY U/S 158BFA(2) IS NOT JU STIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE PENALTY LEVIED BY THE ASSESSING OFFICER OF ` 3,88,908/- IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. IT(SS)A NO.6/15 :- 6 -: ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ! / CHENNAI '# / DATED: 19 TH FEBRUARY, 2016 RD #$%&'(' / COPY TO: 1 . / APPELLANT 4. ) / CIT 2. / RESPONDENT 5. '* +%%,- / DR 3. ). / CIT(A) 6. + /01 / GF