SADHULLA AHMED MAHADI, MUMBAI V. ASST CIT 19(3), MUMBAI

ITSSA 65/MUM/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0496 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-12-2014
• Assessment Year: misc
• Appeal Filed On: 16-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBEY
• Keywords: Block assessment
• Section: 132

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER ( ! ' #$% ) . / IT(SS)(A)NO.65/MUM /2011 ! & ( BLOCK ASSESSMENT PERIOD ) : 01/04/1988 TO 04/02/1999 SHRI SADULLA AHMED MAHADI, 3/B , SANJANA APPT. 66, CARTER ROAD, BANDRA-WEST, MUMBAI-400050 VS. THE ACIT-19(3), MUMBAI ( &'! / ASSESSEE) ( ( / REVENUE) P.A. NUMBER : AALPM5686Q &'! ) * / ASSESSEE BY SHRI HARIDAS BHATT ( ) * / REVENUE BY: SHRI SACHIDANAND DUBEY & ) !+ / DATE OF HEARING : 16/12/2014 ,-. ) !+ / DATE OF PRONOUNCEMENT : 17/12/2014 O R D E R PER JOGINDER SINGH, JM: THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 10/10/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS; I. ONE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A)30, MUMBAI ERRED CONFIRMING THE LEVY OF PENAL TY 2 SHRI SADULLA AHMED MAHADI U/S 158 BFC (2) OF RS.4,90,099/- BEING TAX SOUGHT T O BE EVADED ON UNDISCLOSED INCOME OF THE BLOCK PERIOD. II. THE ASSESSING OFFICER FAILED TO APPRECIATE THE FO LLOWING: A) THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE CASH BALANCE WAS ALREADY COVERED IN THE OVERALL DECLARAT ION MADE BY THE COMPANY (GLOBAL AIRFREIGHT PVT. LTD.) B) THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE JEWELLERY BELONGED TO MS. ALIA RIAS WHICH WAS SUPPO RTED BY AN AFFIDAVIT. C) THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE ASSESSEE HAD KNOWN SOURCE OF INCOME TO JUSTIFY THE INVESTMENTS MADE IN LAND AND NSC. D) THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE EXPENDITURE IN FOREIGN CURRENCY IN SMALL AMOUNTS WE RE AFFORDABLE WITH THE KNOWN INCOME OF THE ASSESSEE 2. AT THE TIME OF HEARING, SHRI HARIDAS BHATT, LD. COUNSEL FOR THE ASSESSEE, SO FAR AS, FIRST GROUND IS CONCERNED, CONTENDED THAT THE TRIBUNAL DELETED THE PENALTY IN THE NAME C ASE VIDE ORDER DATED 11/04/2012 (ITA NO.44/MUM/2011), THEREF ORE, IT WAS CONTENDED THAT THE PENALTY, SO IMPOSED U/S 158B FA (2) OF THE ACT MAY ALSO BE DELETED. ON THE OTHER HAND, TH E LD. COUNSEL FOR THE REVENUE, SHRI SACHIDANAND DUBEY, DE FENDED THE IMPOSITION AS WELL AS CONFIRMATION OF PENALTY B Y CONTENDING THAT THE ASSESSEE EVADED ITS INCOME. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY 3 SHRI SADULLA AHMED MAHADI CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PORTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 11/0 4/2012 (ITA NO.44/MUM/2011) FOR READY REFERENCE; 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS INVOLVED IN BUSINESS OFCLEARING / FORWARDING OF AIR CARGO OPERATIONS OF THE MUMBAI AIRPORT. IN THE ASSESSEES PREMISES, SEARCH UNDER THE PROVISION OF THE ACT WAS CARRIED O UT ON 04.02.1999. IT LASTED UP TO 17.02.1999. 3. ON 03.11.1999, THE ASSESSEE FILED ITS BLOCK RETU RN FOR THE ABOVE SAID BLOCKPERIOD. DECLARED UNDISCLOSED INCOME OF RS. 1,50,90,498, REVISED TO RS.1,53,11,864 IN ASSESSMEN T PROCEEDINGS. VIDE ASSESSMENT ORDER DATED 15.02.2001 , THE ASSESSING OFFICER COMPUTED TOTAL INCOME AT RS. 2,78 ,48,093 (INCLUDING UNDISCLOSED INCOME OF RS. 2,12,95,553.) THE AO ALSO ISSUED NOTICE OF PENALTY U/S. 158 BFA (2). 4. THE ASSESSEE / APPELLANT PREFERRED APPEAL AGAINS T ASSESSMENT ORDER. VIDE ORDER DATED 30.04.2003, THE LD. CIT(A) ACCEPTED ASSESSEES APPEAL IN PART. HELD THAT DISAL LOWANCES OF THE EXPENDITURE SHOWN TO HAVE BEEN INCURRED BY THE ASSESSEE @ 50% AS HELD BY THE AO WAS ON THE HIGHER SIDE. SO TH E LD.CIT(A) DETERMINED THE SAID DISALLOWANCE @ 25% ONLY. 5. THEREAFTER, THE CO-ORDINATE BENCH OF MUMBAI ITAT ALSO UPHELD THE LD.CIT(A) ORDER BY OBSERVING AS UNDER : THE DISALLOWANCE WAS MAINLY ON THE GROUND THAT THE VOUCHER WAS SELF MADE AND, THERE WAS LACK OF ONE TO ONE CO- RELATION BETWEEN ADVANCE GIVEN AND CORRESPONDING EXPENDITURE AND ALSO KEEPING IN VIEW THE FACT THAT THERE WAS PARTIAL DIS ALLOWANCE OF EXPENDITURE UNDER THE DIFFERENT HEAD OF RELATED EXP ENDITURE LIKE HANDING, CLEARING ETC. FOR WANT OF PROPER VERIFIABI LITY. SINCE THE 4 SHRI SADULLA AHMED MAHADI EXPENSES WERE INCURRED FOR BUSINESS PURPOSE, IN OUR PINION, THE ESTIMATED DISALLOWANCE TO THE EXTENT OF 25% WAS QUI TE REASONABLE. WE ACCORDINGLY CONFIRM THE SAME. 6. ON THE OTHER HAND, THE PENALTY MATTER U/S 158 BF A (2) WAS TAKEN UP. IN THE SAID PROCEEDINGS, THE PENALTY AUTH ORITY HELD THAT THE ADDITIONS IN QUESTION HAD SEEN MADE IN THE ASSE SSMENT PROCEEDINGS FOR FAILURE OF THE ASSESSEE IN PROVING EXPENSES. SO TREATED THE CASE IN HAND AS THAT OF NON-SUBSTANTIAT ION OF THE EXPENDITURE AND IN THE ABSENCE OF AUTHENTICATION OF THE VOUCHERS IN QUESTION. ACCORDINGLY PENALTY @ 100% OF THE ALLE GED UNDISCLOSED INCOME SOUGHT TO BE EVADED I.E. RS. 3,5 4,240 HAD BEEN IMPOSED. 7. IN APPEAL, THE LD.CIT(A) HAS UPHELD THE SAID PEN ALTY. HENCE, THE ASSESSEE HAS FILED THE INSTANT APPEAL. 8. SO FAR AS GROUND RAISE IN THE INSTANT APPEAL ARE CONCERNED, IN TOTAL THERE ARE 3 GROUNDS. SO ALL ARE DECIDED TOGET HER BEING INTERCONNECTED. IN SUPPORT OF THE GROUNDS RAISED, THE LD.CIT(A) HAS REFERRED TO PARA 29 PAGE 12 OF THE LD.CIT(A) ORDER DATED 30. 04.2003. ARGUED THAT, LD.CIT(A) HAD DELETED THE ADDITION TO THE EXTENT OF 50% I.E. 25% FROM 50%. MEANING THEREBY THAT IN PRIN CIPLE, THE EXPENDITURE IN QUESTION HAD BEEN DULY UPHELD. ONCE THAT IS SO, IT IS NEITHER THE CASE OF CONCEALMENT NOR OF FURNISHIN G INACCURATE PARTICULARS BY THE ASSESSEE. SIMILARLY, THE LD.AR HAS ALSO RELIED ON CASE LAW 11 9 ITD 153 SUPER METAL INDUSTRIES VS. DCIT ARGUED THAT SIN CE THE PENALTY PROVISION SECTION 158 BFA (2) WAS INTRODUCE D BY FINANCE ACT. 2002, AND RETURNS IN QUESTION WERE FILED IN TH E YEAR 1999, THEREFORE, THE SAID PENALTY IS ALSO LIABLE TO BE DE LETED. THE LD.AR HAS ALSO SUPPLIED PHOTOCOPIES OF THE OTHE R CASE LAWS NAMELY 100 ITO 510, 160 AS WELL AS ALSO REFERR ED TO 322 5 SHRI SADULLA AHMED MAHADI ITR 158 AND SUBMITTED THAT FOR PENALTY PROCEEDINGS, IT HAS TO BE A CASE OF FURNISHING INACCURATE PARTICULARS ONLY TH AT PENALTY CAN BE IMPOSED. ACCORDINGLY, HE PRAYED FOR ACCEPTANCE O F THE INSTANT APPEAL. 9. LD. DR APPEARING FOR THE REVENUE ON THE OTHER HA ND, RELIED ON ORDER OF LD.CIT(A). PRAYED FOR REJECTION OF THE APP EAL. 10. WE HAVE HEARD BOTH THE LD. REPRESENTATIVES. ALS O GONE THROUGH THE RECORD AS WELL AS CASE LAW. WE FIND THA T THAT ADMITTEDLY, THERE IS NO DISPUTE ON PRINCIPAL THAT E XPENDITURE IN QUESTION HAD NOT BEEN INCURRED BY THE ASSESSEE / AP PELLANT. RELIANCE IN THIS REGARD IS MADE ON THE ORDER OF THE LD.CIT(A) ORDER DATED 03.04.2003 (SUPRA). SO FAR AS THE AUTHENTICITY OF THE CLAIM RAISE BY TH E ASSESSEE IS CONCERNED, THE RETURNS ARE REGARDING BL OCK PERIOD FROM 01.04.1988 TO 04.02.1999 I.E THE TIME PERIOD O F ABOUT 11 YEARS. IF THIS BLOCK PERIOD IS COUPLED WIT H THE EXPENDITURE ALLOWED, IT COMES OUT THE LD.CIT(A) HAD DULY HELD THAT OF COURSE THE ASSESSEE HAD INCURRED THE EXPEND ITURE. MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE ANY OTHER EV IDENCE EXCEPT SELF MADE VOUCHERS IN SUPPORT CANNOT BE SOLE CRITERIA TO IMPOSE THE PENALTY IN QUESTION. EVEN IN PENALTY ORD ER, NOTHING HAS BEEN SAID ABOUT THE VALIDITY OF THE CLAIM RAISE D. IT IS ONLY NON SUBSTANTIATION OF EXPENDITURE WHICH HAS BEEN MAIN R EASON TO PENALISE THE ASSESSEE. IT HAS BEEN SETTLED BY HONB LE SUPREME COURT IN RELIANCE PETROCHEMICAL CASE THAT FOR THE P URPOSE OF PENALTY INSTEAD OF GROUND OF UNSUBSTANTIATED CLAIM, IT IS THE GENUINENESS OF THE CLAIM WHICH IS THE PRIME FACTOR. (322 ITR 158). 6 SHRI SADULLA AHMED MAHADI FURTHER, IN VIEW OF THE CASE LAW SUPER METAL INDUST RIES (SUPRA) IT HAS BEEN HELD THAT U/S 158 BFA (2), PENALTY CANNOT BE IMPOSED ONLY ON THE UNSATISFACTORY EXPLANATION OFFERED BY A SSESSEE. 11. IN LIGHT OF OUR ABOVE DISCUSSION, WE ARE OF THE FIRM OPINION THAT THE PENALTY IN HAND CANNOT BE UPHELD. 12. CONSEQUENTLY WE SET ASIDE THE IMPUGNED ORDER. A LLOW THE INSTANT APPEAL. 2.2. IF THE, OBSERVATION MADE IN THE ASSESSMENT ORD ER, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL AND T HE AFORESAID ORDER OF THE TRIBUNAL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT THE ASSESSEE WAS WORKING AS A MANAGER WIT H M/S GLOBAL AIRFREIGHT PVT. LTD. AND HIS RESIDENTIAL PREMISES W AS COVERED U/S 132 OF THE ACT ON 04 TH FEBRUARY, 1999. PURSUANT TO THE SEARCH, CERTAIN ADDITIONS WERE MADE LIKE ON ACCOUNT OF UNEX PLAINED CASH, UNEXPLAINED JEWELLERY, UNEXPLAINED INTEREST IN SHAR ES, UNEXPLAINED INTEREST IN LAND, UNEXPLAINED SOURCE OF CASH DEPOSI TS AND PURCHASE OF NSC, ETC. PENALTY PROCEEDINGS U/S 158B FA (2) OF THE ACT WERE ALSO INITIATED/LEVIED. THE TRIBUNAL VIDE ORDER DATED 26/11/2008 IT(SS) NO.709/MUM/2003 ETC, (GROUP CASE INCLUDING THAT OF ASSESSEE) DECIDED THE QUANTUM ADDITION AND PARTLY ALLOWED THE APPEALS, HOWEVER, IN THE CASE OF ASSESSEE ALSO PARTLY ALLOWED. THE LD. ASSESSING OFFICER IMPOSED PENALTY U/S 158BF A (2) OF THE ACT, WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 2.3. SO FAR AS, THE PENALTY IMPOSED WITH RESPECT TO JEWELLERY OF RS.4,43,805/-, IT WAS EXPLAINED THAT THE SAID JEWEL LERY WAS OWNED 7 SHRI SADULLA AHMED MAHADI BY MS ALIYA RIAS, MARRIED DAUGHTER OF THE ASSESSEE. AN AFFIDAVIT FROM THE DAUGHTER WAS ALSO FILED BEFORE THE ASSESSI NG OFFICER. EVEN DURING TENDERING OF STATEMENT, THIS FACTUM WAS MENTIONED. THE EXPLANATIONS OF THE ASSESSEE, STATEMENT AS WELL AS THE AFFIDAVIT, FILED BY THE DAUGHTER, WERE DISCARDED BY THE ASSESSING OFFICER MERELY OBSERVING THAT IT IS AN AFTERTHOUGHT . EVEN FROM THE ASSESSMENT ORDER (PAGE-7, PARA IV), ALL THESE FACT S WERE EXPLAINED THROUGH THE AFFIDAVIT THAT THE JEWELLERY BELONGS TO THE DAUGHTER. THERE IS NO BARE IN THE ACT THAT THE DAUGHTER CANNO T KEEP THE JEWELLERY IN THE LOCKER OWNED AND OPERATED BY THE P ARENTS. KEEPING IN VIEW, THE TOTALITY OF FACTS AND CIRCUMST ANCES AND THE MATERIAL AVAILABLE ON RECORD, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE, MORE SPECIFICALLY, WHEN THE AFFIDAVIT FIL ED BY THE DAUGHTER WAS NOT PROVED TO BE FALSE, IT MAY BE A GO OD CASE FOR QUANTUM ADDITION BUT NOT FOR LEVYING THE PENALTY, T HEREFORE, IN OUR VIEW, PENALTY IS NOT LEVIABLE. THE PENALTY SO IMPO SED IS DIRECTED TO BE DELETED. WE ARE MAKING IT CLEAR THAT OUR DECISI ON IS CONSEQUENT TO THE PECULIAR FACTS OF THIS CASE AND MAY NOT BE Q UOTED FOR FUTURE REFERENCES. FINALLY, APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 16/12/2014. SD/- SD/- (R.C.SHARMA) (JO GINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED - 17/12/2014 8 SHRI SADULLA AHMED MAHADI F{X~{T? P.S/. & . . ) )) ) /!0 /!0 /!0 /!0 $0.! $0.! $0.! $0.! / COPY OF THE ORDER FORWARDED TO : 1. 12 / THE APPELLANT 2. /312 / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 0#5 /!& , , / DR, ITAT, MUMBAI 6. 56 7 / GUARD FILE. & & & & / BY ORDER, 30! /! //TRUE COPY// 8 88 8 / % % % % ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI