SWARANJEET SINGH BAJAJ, MUMBAI V. ACIT CIR 19(4), MUMBAI

ITSSA 7/MUM/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8778 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARJIT SINGH GUJRAL
• Assessee Lawyers: K K LALKAKA
• Keywords: Business income; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI R.K. PAND A,(AM) IT(SS)A NO.7/MUM/2010 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1994 TO 10.12.1 998 SWARANJEET SINGH BAJAJ 622, DURGA NIWAS KHAR PALI ROAD, KHAR (WEST) MUMBAI-400 052. ..( APPELLANT ) P.A. NO. (AAHPB 9552 H) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 19(1) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI K.K. LALKAKA RESPONDENT BY : SHRI AM ARJIT SINGH GUJRAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 30.11.2009 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR PERTAINING TO BLOCK PERIOD 1.4.1994 TO 10.12.19 98, SUSTAINING THE LEVY OF PENALTY IMPOSED BY THE AO U/S.158 BFA(2) OF THE IT ACT, 1961, (THE ACT) AMOUNTING TO RS.4,11,236/-. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ON THE DE ATH OF SHRI JAGJIT SINGH BAJAJ ON 7.11.1997 THE ASSESSEE BECAME THE PROPRIETOR OF M/S. PUNJAB PANEER CENTRE WHICH IS ENGAGED IN THE BUSI NESS OF MANUFACTURE AND SALE OF PANEER. ON 10.12.1998 A SEAR CH AND SEIZURE OPERATION WAS CONDUCTED AT THE BUSINESS PREMISES OF M/S. PUN JAB IT(SS)A NO.7/M/10 A.Y:BP 2 PANEER CENTRE AND PUNJAB SINDH PANEER CENTRE, A PRO PRIETARY CONCERN OF SHRI JASWINDER SINGH, BROTHER OF THE ASSESSEE AND THE IR RESIDENTIAL PREMISES. DURING THE COURSE OF SEARCH, SOME LOOSE PAPAER S WERE FOUND. THE STATEMENT OF SHRI JASWINDER SINGH BAJAJ WA S RECORDED AND ON THE BASIS OF THE STATEMENT OF SHRI JASWINDER SINGH BAJAJ, AN UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE WAS ESTIMATED AT RS .75 LACS. BESIDES, THE ASSESSING OFFICER HAS ALSO ESTIMATED T HE UNDISCLOSED INCOME AT RS.15,51,610/- AGAINST THE DISCLOSED INCOME OF RS .3,36,200/- ON THE BASIS OF THE SEIZED MATERIAL, RESUL TING INTO AN ADDITION OF RS.12,15,410/-. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT( A) AND THE LD. CIT(A) RELYING UPON HIS OBSERVATIONS IN THE CASE OF SHRI JASWINDER SINGH BAJAJ, HAS DELETED THE ADDITION OF RS.75 LACS. HE , ALSO REDUCED THE OTHER ADDITION FROM RS.12,15,410/- TO RS.6,85,394 /-. THE LD. CIT(A) ALSO DELETED THE ADDITIONS OF RS.5,30,016/- MA DE IN ASSESSMENT YEAR 1998-99 ON ESTIMATION OF UNDISCLOSED INCOME AT RS.7,30,016/- AGAINST THE DISCLOSED INCOME AT RS.2 LACS. THE LD. CIT(A), HOWEVER, CONFIRMED THE ADDITION OF RS .7,71,594/- RELATING TO ASSESSMENT YEAR1999-00 ON ACCOUNT OF SUPPRESSED SALES ON THE B ASIS OF THE SAID MATERIAL FOR 6 DAYS. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSE E AS WELL AS THE REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL. IN THE APPEAL THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS. 75 LACS AND RS.5,30,016/- WHEREAS THE ASSESSEE HAS CHALLENGED THE SUSTEN ANCE OF ADDITION OF RS.7,71,594/-. THE TRIBUNAL WHILE UPHOL DING THE ORDER OF THE LD. CIT(A) DISMISSED THE REVENUES AND ASSESSEE'S APPEAL IN IT(SS) IT(SS)A NO.7/M/10 A.Y:BP 3 NO.271 & 255/M/2001 FOR THE SAME BLOCK PERIOD VIDE O RDER DATED 21.5.2007 5. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDING U/S.158BFA(2) OF THE ACT . IN RESPONSE TO NOTICE TO SHOW CAUSE AS TO WHY PENALTY U/S.158BFA(2) SHOU LD NOT BE IMPOSED IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE NOTICE ISSUED U/S.158BC IS BAD IN LAW AS IT HAS NEITHER MENTIONE D THE BLOCK PERIOD NOR THE STATUS OF THE ASSESSEE. FURTHER THE ASSESSME NT IS BASED ON ESTIMATE INASMUCH AS OF SUPPRESSION OF SALES FROM 26.10.1998 TO 10.12.1998, PROFIT RELATING THERETO OF RS.86,200/- HAS ALREADY BEEN DISCLOSED. HOWEVER, THE MULTIPLICATION FOR MULA HAS BEEN ADOPTED FOR 1999-00 AND AN ADDITION OF RS.7,71,594/- HAS BEEN MADE BY APPLYING THE SAID FORMULA WHICH IS PURELY ON ESTIMA TE BASIS, CONJECTURE AND GUESS WORK. IN THE COURSE OF SEARCH NO MATE RIAL SHOWING SUPPRESSION OF SALES FOR THE ENTIRE BLOCK PERIOD W AS FOUND, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAK ING ADDITION ON MULTIPLICATION FORMULA. THE ASSESSEE WHILE RELYING ON CE RTAIN DECISIONS REQUESTED TO DROP THE PENALTY PROCEEDING. HOWEVER, TH E ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION. HE WAS O F THE VIEW THAT THE ASSESSEE HAS SUPPRESSED THE SALES AND THE UNDISCLOSED INCOME HAS BEEN DETERMINED CORRECTLY AT RS.6,85,394/- F OR THE RELEVANT PERIOD AND HENCE HE IMPOSED A PENALTY OF RS.4 ,11,236/- VIDE ORDER DATED 31.12.2007 PASSED U/S.158 BFA(2) OF THE IN COME TAX ACT, (1961) THE ACT). ON APPEAL THE LD. CIT(A) WHILE AGR EEING WITH THE VIEW OF THE ASSESSING OFFICER CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER . IT(SS)A NO.7/M/10 A.Y:BP 4 6. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN BOTH THE GROUNDS THE SUSTENANCE OF PENALTY OF RS.411236/- IMPOSED BY THE ASSESSING OFFICER U/ S. 158BFA(2) OF THE ACT. 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT THE TRIBUNAL IN ASSESSEE'S BROTHERS CASE IN JASWINDER SINGH BAJAJ IN IT(SS)A NO.71/MUM/2008 FOR ASSESSMENT YEAR PERTAINI NG TO BLOCK PERIOD 1.4.1989 TO 10.12.1998 ORDER DATED 30.4.2010 ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE HAS DELETED THE SIMILAR PE NALTY IMPOSED BY THE ASSESSING OFFICER. HE THEREFORE SUBMITS THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY T HE LD. CIT(A) BE DELETED. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. 8. ON THE OTHER HAND THE LD. DR WHILE RELYING ON TH E ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) SUBMITS THAT IN VIEW OF THE DECISION CITED THEREIN, THE LD. CIT(A) WAS FULLY JUSTIF IED IN CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING OFFICER . SHE FURTHE R SUBMITS THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF JASWIN DER SINGH BAJAJ SUPRA, RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS NO T APPLICABLE AS THE PENALTY US/ 158BFA(2) IS MANDATORY AND SINCE THER E WAS A DIFFERENCE IN THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE AND FINALLY ASSESSED BY THE ASSESSING OFFICER , THEREFORE, THE A SSESSEE IS LIABLE TO PENALTY. SHE THEREFORE, SUBMITS THAT THE P ENALTY SUSTAINED BY THE LD. CIT(A) BE UPHELD. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN CIT VS. DODSAL LTD. IT(SS)A NO.7/M/10 A.Y:BP 5 (2009) 312 ITR 112(BOM.) THEIR LORDSHIPS UPHELD THE D ECISION OF THE TRIBUNAL THAT SEC.158BFA(2) WAS DIRECTORY AND NOT MANDA TORY. RESPECTFULLY FOLLOWING THE SAME WE DO NOT FIND ANY MER IT IN THE PLEA OF THE LD. DR THAT THE PROVISIONS OF SEC.158BFA(2) ARE MAN DATORY. WITH REGARD TO THE PLEA OF THE LD. DR THAT THE ASSESSING OFF ICER HAS CORRECTLY APPLIED MULTIPLICATION FORMULA TO DETERMINE THE UNDI SCLOSED INCOME, WE ARE OF THE VIEW THAT IT IS SETTLED LAW THAT UNDER TH E BLOCK ASSESSMENT THE INCOME SHALL BE COMPUTED ON THE BASIS OF MATERIAL FO UND DURING THE COURSE OF SEARCH. THE TRIBUNAL IN THE CASE OF JASWIN DER SINGH BAJAJ (SUPRA), AFTER CONSIDERING THE DECISION IN CST VS. H.M. ESUFALI H.M. ABDULALI (1973) 90 ITR 271(SC) AND DR. SURENDER NATH REDDY VS. ACIT (2000) 68 TTJ (HYD.) 384 AND THE OTHER DECISIONS R ELIED ON BY THE LD. DR, APPLIED THE RATIO OF DECISION IN CIT VS. R ELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) AND H AS HELD VIDE PARA 7 , 9 AND 10 AS UNDER :- 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE I NASMUCH AS THE PENALTY U/S.158BFA(2) WAS IMPOSED BY THE AO ON THE AMOUNT OF ADDITION OF UNDISCLOSED INCOME OF RS.5,16,827/- (INCOME FINALLY ASSESSED RS.8,56,518 RS.3,39,693 UNDISCLOSED INCOME SHOWN). WE FURTHER FIND THAT THE ABOVE ADDITION WAS MADE ON ACCOUNT OF UNACCOUNTED SALES OF RS.8,98,466/- FOR THE PERIOD 1.11.1998 TO 10.12.1998 , FOUND DURING THE COURSE O F SEARCH. ON THE BASIS OF SAID SALES, ADMITTED BY TH E ASSESSEE, THE AO WORKED OUT THE SUPPRESSED SALES FO R THE ASSESSMENT YEAR 1999-00 AT RS.39,26,978/- BY MULTIPLYING THE RECORDED SALES BY THE FACTOR OF 2.4 4 TO ARRIVE AT THE ALLEGED ACTUAL SALES AND THEREAFTER H E APPLIED NET PROFIT RATIO OF 20% AND DETERMINED THE UNDISCLOSED INCOME OF RS.8,56,518/-. ON APPEAL THE SAME HAS BEEN CONFIRMED BY THE LD. CIT(A) BY RELYIN G ON THE DECISIONS IN CST VS. H.M. ESUFALI H.M. ABDULALI ( 1973) 90 ITR 271(SC) AND DR. SURENDERNATH REDDY VS. ACIT (2000) 68 TTJ (HYD.) 384 AND ALSO UPHELD BY THE TRIBUNAL. AT THIS STAGE THE LD. COUNSEL FOR THE AS SESSEE IT(SS)A NO.7/M/10 A.Y:BP 6 SUBMITS THAT THE ABOVE DECISIONS ARE DISTINGUISHABL E AND NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. HOWEVER WE FIND THAT THE TRIBUNAL, IN THE QUANTUM APPEAL, AFTER CONSIDERING THE ABOVE DECISIONS HAS U PHELD THE ORDER OF THE LD. CIT(A) AND THE QUANTUM DETERMI NED BY THE TRIBUNAL HAS BECOME FINAL. WITH REGARD TO L EVY OF PENALTY ON THE ABOVE UNDISCLOSED INCOME WE FIND THA T THERE IS NO DISPUTE THAT THE ASSESSEE HAS DISCLOSED HIS UNACCOUNTED SALES AND INCOME THEREON IN THE BLOCK RETURN. THE AO HAS FURTHER ESTIMATED THE ASSESSEE' S SALES AND APPLIED MULTIPLICATION FORMULA TO DETERMI NE THE UNDISCLOSED INCOME. HENCE, IT IS A CASE OF ESTIMATI ON OF INCOME. IT IS SETTLED LAW THAT UNDER THE BLOCK ASSE SSMENT THE UNDISCLOSED INCOME SHALL BE COMPUTED ON THE BAS IS OF MATERIAL FOUND DURING THE COURSE OF SEARCH. THIS V IEW ALSO FINDS SUPPORT FROM THE RECENT DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN CIT VS. R.M.L. MEHROTRA (20 10) 320 ITR 403(ALLD.) WHEREIN THEIR LORDSHIPS WHILE HO LDING THAT THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COU RT IN THE CASE OF H.M. ESUFALI H.M. ABDULALI (1973) 90 ITR 271 IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, HELD THAT THE BEST JUDGMENT ASSESSMENT WHICH HAD BEEN MADE ON THE BASIS OF SEARCH ALONE COULD NOT HAVE BEEN MADE AS THE BLOCK ASSESSMENT IN THE CASE OF SEARCH HAS TO B E CONFINED TO INCOME ATTRIBUTABLE TO THE MATERIAL AND EVIDENCE FOUND THEREIN OR OTHER INFORMATION AVAILAB LE WITH THE AO RELATING TO SUCH MATERIALS. FURTHER IT IS AL SO SETTLED LAW THAT PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY AND THE REVENUE IS NOT REQUIRED TO PROVE WILLFUL CONCEALMENT AS HELD BY THE HONBLE SUPREME COURT IN CASE THE OF UNION OF INDIA VS. DHARMENDRA TEXTILES AND PROCESSORS (2008) 306 ITR 277(SC). HOWEVER, EACH AN D EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY FOR CONCEALME NT OF INCOME. A CASE FOR IMPOSITION OF PENALTY HAS TO BE EXAMINED IN TERMS OF THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C). SECONDLY, IT IS ALSO A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FRO M ASSESSMENT PROCEEDINGS. THE FINDING GIVEN IN THE ASSESSMENT THOUGH IS GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS. 9. IN A RECENT DECISION OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. DHARAMENDRA TEXTILE IT(SS)A NO.7/M/10 A.Y:BP 7 PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDE R TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF TH E PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF T HE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETUR N IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE C ANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS . IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY P ROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CA N MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE TH AT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPL IED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRE CT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTIO N OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A ME RE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. 10. APPLYING THE RATIO OF THE ABOVE DECISIONS TO TH E FACTS OF THE PRESENT CASE WE FIND THAT IT IS NOT TH E CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED HIS INCOME ON THE UNDISCLOSED SALES OR THE ASSESSEE HAS NOT DISCLOSED THE TOTAL SALES AND MERELY BECAUSE THE SA LES DISCLOSED BY THE ASSESSEE HAVE BEEN ENHANCED BY THE AO BY APPLYING MULTIPLICATION FORMULA WHICH HAS NO BAS IS IN THE EYE OF LAW WE ARE OF THE VIEW THAT THE PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LD. CIT(A) I S NOT SUSTAINABLE IN LAW AND ACCORDINGLY THE SAME IS DELE TED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED. IT(SS)A NO.7/M/10 A.Y:BP 8 10. IN THE ABSENCE OF ANY OTHER DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LD. DR WE RESPECTFULLY FOLLOWING THE ORD ER OF THE TRIBUNAL IN ASSESSEE'S BROTHERS CASE SHRI JASWINDER SINGH BAJAJ SUPR A, HOLD THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE PENAL TY U/S.158BFA(2) IMPOSED BY THE ASSESSING OFFICER AND SUSTAINE D BY THE LD. CIT(A) IS NOT LEVIABLE AND ACCORDINGLY WE DELETE T HE PENALTY OF RS.4,11,236/- IMPOSED BY THE ASSESSING OFFICER .THE GROUND S TAKEN BY THE ASSESSEE ARE, THEREFORE ALLOWED. 11. IN THE RESULT ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.11.2010. SD/- SD/- (R.K. PANDA) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.11.2010. JV. 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.