Sri. KAILASHNATH MALHOTRA, MUMBAI V. JT. CIT. SPLL RG. 56, MUMBAI

ITSSA 8/MUM/2007

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2276 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 04-06-2015
• Assessment Year: misc
• Appeal Filed On: 22-01-2007
• Court: TRIBUNAL
• Department Lawyers: PURUSETH
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Assessment record
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACOUNTANT MEMBER) IT(SS).A. NO. 8/MUM/2007 (BLOCK PERIOD 1988-89 TO 15-12-1997) SH. KAILASHNATH MALHOTRA 82-A, ANITA BUILDING MOUNT PLEASANT ROAD, MALABAR HILL, MUMBAI 06 VS JT. CIT, SPECIAL RANGE 56 MUMBAI PAN : AABPM3088R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M SUBRAMANIAN RESPONDENT BY SHRI PURUSETH, DATE OF HEARING : 15-07-2016 DATE OF PRONOUNCEMENT : 27 -07-2016 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER C ALLED CIT(A)] DT 30- 01-2006 PASSED AGAINST THE PENALTY ORDER OF THE AO U/S 158BFA DT 22-12- 1999 FOR BLOCK PERIOD 1988-89 TO 15-12-1997. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WITH RE GARD TO LEVY OF PENALTY OF RS.6,60,000 U/S 158BFA(2) OF THE ACT. T HE BRIEF BACKGROUND IS THAT IN THIS CASE, A SEARCH ACTION U/S 132 OF THE A CT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 15-12-1997. DURING THE COURSE OF SEARCH, CASH, JEWELLERY AND SOME DOCUMENTS WERE SEIZED ON T HE BASIS OF WHICH 2 I.T(SS).A. NO.8 /MUM/2007 VARIOUS ADDITIONS WERE MADE AND SUBSEQUENTLY, MOST OF THE ADDITIONS WERE DELETED EXCEPT AN ADDITION OF RS.11 LACS WHICH WAS MADE BY THE AO ON THE BASIS OF A LOOSE DOCUMENT FOUND DURING THE C OURSE OF SEARCH, MARKED AS PAGE 18 OF ANNEXURE A1. THE ADDITION WAS CONFIRMED BY THE TRIBUNAL ALSO. SUBSEQUENTLY, BASED UPON THE SAME, P ENALTY WAS LEVIED BY THE AO U/S 158BFA(2) OF THE ACT. 3. DURING THE COURSE OF HEARING BEFORE US, IT WAS STAT ED THAT THIS PAPER CONTAINS SOME KIND OF PLANNING OF EXPENSES AND SOUR CES OF FUNDS FOR THE FUTURE USE. IT WAS STATED THAT ALL THE FIGURES MENT IONED ON THE PAPER WERE IN ROUND FIGURES AND, THEREFORE, THESE CANNOT BE TR EATED AS ACTUAL EXPENSES. IT WAS FURTHER STATED THAT ASSESSING OFF ICER HIMSELF WAS NOT CLEAR ABOUT THE PURPOSE AND THE EXACT NATURE OF JOT TINGS NOTED THEREIN. IT WAS FURTHER STATED THAT CASH WAS FOUND FROM THE LOC KER OF THE WIFE FOR RS.2,32,700/- AND NOT RS.2,00,000/- AS STATED BY TH E LOWER AUTHORITIES. IT WAS ALSO SUBMITTED THAT SINCE CASH HAS BEEN FOUND F ROM THE LOCKER OF THE WIFE, NO ADVERSE VIEW OF THE SAME SHOULD BE TAKEN I N THE HANDS OF THE ASSESSEE WHILE MAKING ADDITION ON THE BASIS OF THIS LOOSE DOCUMENT. IT WAS FURTHER STATED THAT ADDITION MADE WAS BASED UPO N PURE GUESSWORK AND OWN UNDERSTANDING OF THE ASSESSING OFFICER ABOU T THE SCRIBBLING MADE ON THE LOOSE PAPER. IT WAS ALSO STATED THAT PENALTY PROCEEDINGS ARE INDEPENDENT OF THE ASSESSMENT PROCEEDINGS. THE LEAR NED ASSESSING OFFICER LEVIED THE PENALTY IN A HIGHLY MECHANIZED A ND AUTOMATIC MANNER WITHOUT MAKING ANY INDEPENDENT VERIFICATION OF THE SO-CALLED FIGURES ALLEGED TO BE WRITTEN ON THE IMPUGNED DOCUMENT. IN VIEW OF THE SAME, IT WAS SUBMITTED THAT PENALTY IS HIGHLY UNJUSTIFIED ON FACTS AND IS CONTRARY TO LAW AND THE SAME SHOULD BE DELETED. 3 I.T(SS).A. NO.8 /MUM/2007 3. PER CONTRA, IT WAS STATED BY THE LEARNED LD. DEPART MENTAL REPRESENTATIVE THAT THE ADDITION WAS MADE BASED UPO N A LOOSE DOCUMENT WHICH WAS CONFIRMED BY THE TRIBUNAL AND, THEREFORE, PENALTY HAS BEEN RIGHTLY LEVIED AND SHOULD BE CONFIRMED BY THE TRIBU NAL. IT WAS FAIRLY AGREED BY THE LEARNED LD. DEPARTMENTAL REPRESENTATI VE THAT HE WAS NOT IN A POSITION TO SHOW ANY INDEPENDENT VERIFICATION OF THE LOOSE DOCUMENT MADE BY THE LEARNED ASSESSING OFFICER OR INDEPENDEN T APPLICATION OF MIND BY THE AO BEFORE LEVYING THE PENALTY. 4. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES AS WELL AS ORDER OF THE TRIBUNAL PASSED IN THE QUANTUM APPEAL. IT IS WELL SETTLED LAW THAT PENALTY PROCEEDINGS ARE INDEPENDENT OF THE ASS ESSMENT PROCEEDINGS. THE FINDINGS AND THE OBSERVATIONS MADE IN THE ASSES SMENT ORDER MAY BE RELEVANT AND JUSTIFIED FOR MAKING ADDITION/DISALLOW ANCE AND CREATING TAX LIABILITY IN THE HANDS OF THE ASSESSEE IN ACCORDANC E WITH THE PROVISIONS OF LAW CONTAINED IN THE INCOME TAX ACT,1961, BUT FOR L EVY OF PENALTY THE PROVISIONS OF THE LAW STAND ON AN ALTOGETHER DIFFER ENT FOOTING. THE ASSESSING OFFICER IS EXPECTED TO MAKE OUT A CASE TH AT THERE WAS ACTUALLY CONCEALED OR UNDISCLOSED INCOME. NO GUESSWORK OR PR ESUMPTUOUS APPROACH IS PERMISSIBLE WHILE LEVYING THE PENALTY. THE ASSESSING OFFICER IS EXPECTED TO BE CLEAR IN HIS THOUGHTS, REASONING AND CONCLUSION WHILE LEVYING THE PENALTY. IN THIS CASE, IT IS NOTED THAT A LOOSE SHEET WAS FOUND ON WHICH VARIOUS FIGURES HAVE BEEN MENTIONED. THERE ARE VARIOUS OTHER JOTTINGS, OVER-WRITINGS AND CUTTINGS ALSO ON THIS P APER. IT IS NOTED THAT RIGHT FROM THE STAGE OF RECORDING OF HIS STATEMENT, THE A SSESSEE CLEARLY STATED THAT THIS PAPER DOES NOT CONTAIN ANY INFORMATION WI TH REGARD TO ACTUAL INFLOW OR OUTFLOW OF CASH BUT IT WAS KEPT FOR THE P URPOSE OF PLANNING. BUT, TAKING SHELTER OF THE PROVISIONS OF SECTION 292C OF THE ACT, THE ASSESSING 4 I.T(SS).A. NO.8 /MUM/2007 OFFICER MADE THE ADDITION AFTER TAKING INTO ACCOUNT THE FIGURES WRITTEN ON THE PAPER AS PER HIS UNDERSTANDING. THE ADDITION SO MADE WAS SUBSEQUENTLY CONFIRMED BY THE TRIBUNAL ALSO IN ABSE NCE OF ANY CONTRARY MATERIAL HAVING BEEN BROUGHT ON RECORD BY THE ASSES SEE. BUT, IT IS NOTED THAT DURING THE COURSE OF PENALTY PROCEEDINGS THE A SSESSING OFFICER HAS MERELY STATED THAT SINCE ADDITION HAS BEEN CONFIRME D BY THE TRIBUNAL, PENALTY HAS TO BE LEVIED. IT IS NOTED THAT THERE WE RE FEW NAMES AND PARTICULARS MENTIONED ON THIS PAPER E. G. .... ADIR AJ BOARDING AND ELECTRICITY BILLS ETC....... IT IS SEEN THAT AT THE STAGE OF LE VY OF PENALTY, THE AO NEITHER ASKED ANY QUERIES ABOUT THE TRUTH REGARDING ADIRAJ BOARDING AND ELECTRICITY BILLS NOR ANY VERIFICATION WAS MADE BY THE AO HIMSELF. IT IS FURTHER NOTED BY US THAT THERE WAS SOME VAGUENESS I N THIS PAPER AND WE WANTED TO EXAMINE THE ORIGINAL COPY OF THE SEIZED D OCUMENT FOR WHICH TIME WAS GIVEN TO LD CIT-DR. THOUGH, THE LEARNED CI T-DR PRODUCED THE ASSESSMENT RECORDS BUT HE WAS NOT ABLE TO PRODUCE T HE SEIZED DOCUMENT ON THE BASIS OF WHICH IMPUGNED ADDITION WAS MADE. T HUS, ALL THE QUESTIONS WHICH WERE IN OUR MIND TO EXPLAIN THE DOC UMENT COULD NOT BE ANSWERED BY THE LEARNED CIT-DR. IT IS FURTHER NOTED THAT ALL THE FIGURES JOTTED THEREIN APPEAR TO BE IN ROUND FIGURES. THE A SSESSEE HAS SUBMITTED RIGHT FROM THE BEGINNING THAT IT WAS SIMPLY A PLANN ER AND NOT ACTUAL FIGURE WORK. UNDER THESE CIRCUMSTANCES, IN ABSENCE OF COG ENT MATERIAL HAVING BEEN BROUGHT BY THE ASSESSEE THE ADDITION COULD HAV E BEEN JUSTIFIED IN VIEW OF SECTION 292C OF THE ACT, BUT OTHER POSSIBI LITY OF THERE ACTUALLY BEING NO UNDISCLOSED INCOME/EXPENSES CAN ALSO NOT B E RULED OUT, IN THE GIVEN FACTS AND CIRCUMSTANCES. IN THIS CASE, ONE OF THE REASONING AS ADOPTED BY THE LOWER AUTHORITIES FOR MAKING THE ADD ITION WAS THAT CASH OF RS.2,00,000/- WAS FOUND. IT HAS BEEN BROUGHT TO OU R NOTICE THAT CASH WAS 5 I.T(SS).A. NO.8 /MUM/2007 FOUND FROM THE LOCKER OF THE WIFE OF THE ASSESSEE A ND NOT FROM THE ASSESSEE AND, THEREFORE, THE ADVERSE VIEW TAKEN IN THE HANDS OF THE ASSESSEE FOR MAKING ADDITION IS ON INCORRECT AND IR RELEVANT FACTS WHICH CANNOT BE JUSTIFIED FOR LEVY OF PENALTY. UNDER THE SE CIRCUMSTANCES, IT CAN BE SAID THAT THE FACTS AND CIRCUMSTANCES ARE EQUALL Y CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT ADDED BY THE AO DOES NOT REPRESENT UNDISCLOSED OR CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. FURTHER, IN THIS CASE, THOUGH THE EXPLANATION GIVEN BY THE ASSESSEE REMAINED UNCORROBORATED, BUT, BEFORE LEVYING THE PE NALTY THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT DISPROVED BY THE AS SESSING OFFICER. IN OTHER WORDS, THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT ACCEPTABLE BUT, CIRCUMSTANCES DO NOT LEAD TO A REASONABLE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THUS, TAKING INTO ACCOUNT ALL THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT PENALTY OF RS.6,60,000/- IS NOT JUSTIFIED IN LAW AND ON FACTS AND THEREFORE IT IS DIRECTED TO BE DELETE D. 6. OTHER LEGAL AND JURISDICTIONAL GROUNDS ARE NOT B EING ADJUDICATED AS THESE HAVE BECOME ACADEMIC IN VIEW OF THE RELIEF GI VEN ON MERITS. THEREFORE, THESE ARE DISMISSED AS INFRUCTUOUS AT TH IS STAGE. 7. AS A RESULT, THE APPEAL IS ALLOWED IN TERMS OF O RDER AS GIVEN ABOVE. ORDER PRONOUNCED IN THE COURT ON THIS 27 TH _ DAY OF JULY, 2016. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT :27 TH JULY, 2016 PK/- COPY TO: 6 I.T(SS).A. NO.8 /MUM/2007 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, A- BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES