KANJI & KALYANJI & CO, MUMBAI V. ACIT 25(3), MUMBAI

ITSSA 62/MUM/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9103 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM GAUR
• Assessee Lawyers: MAYUR R MAKADIA
• Keywords: Unexplained investment; Peak credit; Difference of opinion; Block assessment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKOT AIAH,(AM) IT(SS)A NO.62/MUM/2009 ASSESSMENT YEAR : BLOCK PERIOD : 1.4.1989 TO 19.11.1999 M/S. KANJI & KALYANJI & CO. KESAR KUNJ, GROUND FLOOR DR. DALVI ROAD, KANDIVALI(W) MUMBAI-400 067. ..( APPELLANT ) P.A. NO. (AAEFK 3379 F) VS. ASSTT. COMMISSIONER OF INCOME TAX -25(3) BANDRA-KURLA COMPLEX MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI MAYUR R. MAKADIA RESPONDENT BY : SHRI VIK RAM GAUR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 27.2.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR PERTAINING TO BLOCK PERIOD 1.4.1989 TO 19.11.19 99. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT IN THIS CASE T HERE WAS A SEARCH U/S.132 OF THE INCOME TAX ACT, 1961 (THE ACT) ON 19.11.1999 AT THE RESIDENTIAL PREMISES OF THE ASSESSEE AS WELL AS THE BUSIN ESS PREMISES OF M/S. KANJI KALYANJI & CO. A FIRM WHEREIN T HE ASSESSEE IS A PARTNER. NOTICE U/S. 158 BC WAS ISSUED AND IN RESPONSE T HE ASSESSEE IT(SS)A NO.62/M/09 A.Y:BP 2 FILED BLOCK RETURN IN FORM 2B DECLARING UNDISCLOSED INCO ME OF RS.50.00 LACS. HOWEVER, THE BLOCK ASSESSMENT WAS COMPLETED DETERMININ G THE TOTAL UNDISCLOSED INCOME FOR THE BLOCK PERIOD AT RS.2,52 ,32,481/- VIDE ORDER DATED 31.1.2002 PASSED U/S.158 BC R.W.S. 143(3) O F THE ACT. ON APPEAL, THE LD. CIT(A) REDUCED THE TOTAL UNDISCLOSED IN COME FROM RS.2,52,32,480/- TO RS.84,43,750/-. THE DEPARTMENT A S WELL AS THE ASSESSEE FILED APPEALS BEFORE THE TRIBUNAL (ITAT) AGAINST THE ORDER OF THE CIT(A). THE ITAT VIDE ITS ORDER IN IT(SS)A NO.5 20/MUM/02 AND IT(SS)A NO.567/MUM/02 DATED 3.5.2006 DISMISSED THE AP PEAL FILED BY THE DEPARTMENT ON MOST OF THE ISSUES AND CONFIRMED THE O RDER OF THE LD. CIT(A) ON ALL GROUNDS EXCEPT ISSUE OF LEVY OF SURCHAR GE. THE ITAT ALSO DIRECTED TO GIVE TELESCOPIC SET OFF FOR SEED CAPITAL . AFTER RECEIPT OF THE ORDER OF THE ITAT, THE ASSESSING OFFICER AFTER HE ARING THE ASSESSEE RE-COMPUTED THE UNDISCLOSED INCOME AT RS.56,26,903/- . THEREAFTER, A LETTER WAS ISSUED TO THE ASSESSEE IN CONNECTIO N WITH THE PENALTY PROCEEDINGS U/S. 158 BFA(2). IN RESPONSE TO THI S LETTER THE ASSESSEE SUBMITTED THAT THE TOTAL UNDISCLOSED INCOME AFTER G IVING TELESCOPIC CREDIT OF THE TOTAL UNDISCLOSED INCOME RETURNED WORKS OUT TO RS.56,26,904/-. IT WAS ALSO SUBMITTED THAT THE ADDITIO NS HAVE BEEN MADE ON THE ESTIMATED BASIS HENCE, THERE IS NO PRECISE FIN DING THAT THE PARTICULAR PRECISE AMOUNTS HAVE BEEN CONCEALED. THE UNDISCLOSED INCOME IS BASED PURELY ON ESTIMATED BASIS HENCE PENALTY CANNOT BE IT(SS)A NO.62/M/09 A.Y:BP 3 LEVIED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE A SSESSEE'S EXPLANATION. HE WAS OF THE VIEW THAT THE FINALITY OF THE ASSESSMENT IN THE PRESENT CASE HAS BEEN GIVEN BY THE ITAT WHICH IS THE HIGHEST FACT FINDING AUTHORITY, THE AMOUNT OF RS.6,26,904/- ASSESSED AS THE ASSESSEE'S UNDISCLOSED INCOME OVER AND ABOVE THAT DECLARED IN THE BLOCK RETURN FILED HAS, THEREFORE, TO BE TERMED AS A C ONFESSION OF CONCEALMENT AND ACCORDINGLY HE IMPOSED PENALTY OF RS.3,76 ,142/- BEING 100% OF TAX SOUGHT TO BE EVADED ON THE CONCEALED AMOUNT OF RS.6,26,904/-, VIDE ORDER DATED 4.3.2008 PASSED U/S.153 BFA(2) OF THE ACT. ON APPEAL, THE LD. CIT(A) OBSERVED THAT THE ADDITION OF RS.6,26,904/- REPRESENTS PROFIT ON UNACCOUNTED SALES, UNACCO UNTED KVPS AND IVPS AND SEED CAPITAL. THE LD. CIT(A) WH ILE CONFIRMING THE LEVY OF PENALTY ON UNACCOUNTED SALES AND UNACCOUNTED KVPS AND IVPS HELD THAT THE ADDITION OF SEED CAPITAL IS BASED ON E STIMATION, HENCE, NO PENALTY IS ATTRACTED ON THIS ITEM AND ACCORDINGLY PA RTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN THE ALL THE GROUNDS TH E SUSTENANCE OF PENALTY SUSTAINED BY THE LD. CIT(A) . IT(SS)A NO.62/M/09 A.Y:BP 4 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE GIVING FACTUAL MATRIX OF THE CASE FURTHER SUBMITS THAT A FTER GIVING EFFECT TO THE ITAT ORDER, THE FOLLOWING ADDITIONS ARE SUSTAIN ED :- GP ADDITION FOR AY 98-99 RS.13,55,780/- UNACCOUNTED INVESTMENT IN PURCHASES FOR AY 98-99 RS.16,8 6,000/- ON ACCOUNT OF NEGATIVE PEAK BALANCE OF FY 97-98 RS.23,6 0,000/- AND OTHER ITEMS TO COVER ANY DISCREPANCY INTEREST INCOME RS. 2,25,125/- RS.56,26,905/- HE FURTHER SUBMITS THAT THE LD. CIT(A) HAS UPHELD THE P ENALTY ON THE GP ADDITIONS AND HAS DELETED THE PENALTY ON ADDITIONS MADE ON ACCOUNT OF SEED CAPITAL I.E., UNACCOUNTED INVESTMENT IN PURCHASES FOR A.Y. 1998-99, RS.16,86,000/- . HE FURTHER SUBMITS THA T AFTER REDUCING THE SAME AMOUNT FROM THE TOTAL FINALLY ASSESSED INCOME, T HE NET INCOME FOR THE PURPOSE OF PENALTY COMES TO RS.39,40,905/ - WHICH IS LESS THAN THE UNDISCLOSED INCOME SHOWN BY THE ASSESSEE AMOUN TING TO RS.50.00 LACS AND, HENCE, THE PENALTY ON THE ESTIMATED ADDITION IS NOT LEVIABLE AND THEREFORE, THE SAME BE DELETED. 5. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE ADDITIO NS ON WHICH THE IT(SS)A NO.62/M/09 A.Y:BP 5 PENALTY WAS IMPOSED BY THE ASSESSING OFFICER ARE ESTIMATED ADDITIONS BASED ON DIFFERENCE OF OPINION. IN CIT VS. DODSAL LTD. (2009) 312 ITR 112 (BOM.), THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE PENALTY U/S.158 BFA(2) OF THE ACT IS DIRECTORY AND NOT MANDATORY. THIS BEING SO, AND KEEPING IN VIEW, THAT THE LD. DR H AS NOT CONTROVERTED THE ASSESSEE'S PLEA THAT AFTER EXCLUDING THE PENALTY ON THE AMOUNT OF SEED CAPITAL I.E. UNACCOUNTED INVESTMEN T IN PURCHASES FOR ASSESSMENT YEAR 1998-99 RS.16,86,000/-, THE BALANCE A MOUNT FOR THE PURPOSE OF PENALTY COMES TO LESS THAN THE UNDISCLOSED I NCOME RETURNED BY THE ASSESSEE RS.50.00 LACS, WE ARE OF THE VIE W THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER AN ESTIMATED ADDI TION AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY THE SAME IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 7. IN THE RESULT, ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.6.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 11.6.2010. JV. IT(SS)A NO.62/M/09 A.Y:BP 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.