ACIT, Jaipur V. APEX METCHEM PVT. LTD., Jaipur

ITSSA 9/JPR/2008

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9204 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-05-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 03-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: S L PODDAR
• Keywords: Search and seizure; Accommodation entries; Block assessment
• Section: 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI B.R. JAIN AND SHRI VIJAY PAL RA O) ITSSA NO. 9/JP/20008 BLOCK PERIOD: 01-04-1988 TO 23-03-1999 PAN: AACCA 0143 M THE ACIT VS. M/S. APEX METCHEM (P) LTD. CIRCLE- 3 193-A, INDUSTRIAL AREA JAIPUR JHOTWARA, JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SUBHASH CHANDRA ASSESSEE BY : SHRI S.L. PODDAR DATE OF HEARING: 21-05-2013 DATE OF PRONOUNCEMENT: 24-05-2013 ORDER PER VIJAY PAL RAO, JM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST OR DER DATED 24-12-2007 OF LD. CIT(A)-I, JAIPUR ARISING FROM PENALTY ORDER PASSED U/S 158BFA(2) OF THE ACT FOR THE BLOCK PERIOD 01-04-1998 TO 23-03-1999 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUND. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-1 (CAMP),JAIPUR HAS ERRED IN:- (1) DELETING THE PENALTY OF RS., 3,03,893/- LEVIED U/S 158BFA(2) OF THE I.T. ACT, 1961. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH A ND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT IN THAKKAR GROUP OF CASES OF MU MBAI ON 21-01-1999. DURING THE COURSE OF SEARCH, A COPY OF BANK ACCOUNT STATEMENT OF ASSESSEE'S ACCOUNT NO. 11166 IN THE UNION BANK OF INDIA, COTTON GREEN BRANCH, MUMBAI AN D OTHER DOCUMENTS / PAPERS 2 BELONGING TO THE ASSESSEE WAS FOUND. A NOTICE U/S 1 58BC READ WITH SECTION 158BD OF THE ACT WAS ISSUED ON 26-07-2007. IN RESPONSE TO THE NO TICE, THE ASSESSEE FILED BLOCK RETURN ON 12-09-2002 IN WHICH THE ASSESSEE HAS RETURNED NI L UNDISCLOSED INCOME. THE AO COMPLETED THE BLOCK ASSESSMENT AND DETERMINED THE U NDISCLOSED INCOME OF RS. 2,87,00,500/-. THE SAID ADDITION ON UNDISCLOSED INCOME WAS MADE BY THE AO ON THE BASIS OF THE TRANSACTION IN THE BANK ACCOUNT OF THE ASSESSEE IN UNION BANK OF INDIA, AS FOUND DURING THE COURSE OF SEARCH. 2.2 ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITIO N TO THE EXTENT OF RS. 2,53,24,311/-. 2.3 THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL AND THIS TRIBUNAL VIDE ITS ORDER DATED 29-03-2006 HAS HELD THAT THE ASSESSEE HAS PRO VIDED ACCOMMODATION ENTRIES ON WHICH IT IS EARNING COMMISSION. ACCORDINGLY, THE TR IBUNAL HAS DETERMINED THE INCOME OF THE ASSESSEE ON ESTIMATE BASIS AT 2% OF THE TOTAL T URNOVER OF TRANSACTION OF RS. 2,53,24,314/-. THUS THE TRIBUNAL HAS SUSTAINED THE ADDITION ON ACCOUNT OF COMMISSION IN THE CASH TRANSACTION IN THE BANK ACCOUNT OF THE ASSESSEE. THE AO INITIATED THE PENALTY PROCEEDINGS U/S 158BFA(2) OF THE ACT AND IMPOSED PE NALTY @ 100% OF TAX LEVIABLE ON THE UNDISCLOSED INCOME OF RS. 5,06,496/- AS SUSTAIN ED BY THIS TRIBUNAL. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE THE LD. CIT(A ) AND CONTENDED THAT THE ADDITION HAS BEEN SUSTAINED BY THE TRIBUNAL ON ESTIMATE BASIS AND WITHOUT ANY EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEARCH. THE LD. CIT(A) D ELETED THE PENALTY BY OBSERVING THAT THE TRIBUNAL HAS ESTIMATED THE ASSESSEE'S COMMISSIO N INCOME @ 2% AND THIS ADDITION IS ON PRESUMPTION. 3 2.4 THE LD. DR HAS SUBMITTED THAT THOUGH THE TRIBUN AL HAS CONFIRMED UNDISCLOSED INCOME AT 2% OF THE TOTAL TURNOVER AS RECORDED IN T HE BANK ACCOUNT OF THE ASSESSEE, HOWEVER, THE SAID COMMISSION INCOME EARNED BY THE A SSESSEE ON THE BASIS OF THE AGREEMENT BETWEEN THE PARTIES AND THEREFORE, THE AD DITION SUSTAINED BY THE TRIBUNAL IS ONLY IN THE NATURE OF UNDISCLOSED INCOME WHICH ATTR ACTS THE PENALTY PROVISION OF SECTION 158BFA(2) OF THE ACT. HE HAS STRONGLY RELIED UPON T HE ORDER PASSED U/S 158BFA(2) OF THE ACT. 2.5 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE H AS SUBMITTED THAT THE ADDITION SUSTAINED BY THE TRIBUNAL IS ONLY ON ESTIMATE BASIS AND WITHOUT MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS TO SHOW SU CH UNDISCLOSED INCOME. THUS THE LD. AR SUBMITTED THAT PENALTY U/S 158BFA(2) CANNOT BE L EVIED ON ADDITION BASED ON ESTIMATE. HE HAS FORCEFULLY CONTENDED THAT THE ADDITION CONFI RMED BY THE TRIBUNAL IS ON ESTIMATE BASIS AND ON ASSUMPTION AND PRESUMPTION THAT THE AS SESSEE MIGHT HAVE EARNED COMMISSION @ 2% WITHOUT ANY EVIDENCE OR MATERIAL IN DICATING ANY UNDISCLOSED INCOME. HE FURTHER SUBMITTED THAT ASSESSEE'S CONTENTION WAS ONLY THAT SHRI THAKKAR HAD PROMISED TO PAY 0.5% COMMISSION WHICH HAS NEVER BEEN PAID BY HIM TO THE ASSESSEE. THEREFORE, THERE WAS NO ACTUAL INCOME TO THE ASSESSEE WHICH CA N BE TREATED AS UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 158BFA(2) OF THE ACT. IN THE ABSENCE OF ADVERSE MATERIAL ON RECORD WHICH PROVES THAT THE ASSESSEE H AS CONCEALED HIS INCOME OR UNDERSTATED HIS RETURN OF INCOME, LEVY OF PENALTY U /S 158BFA(2) IS BAD IN LAW. IN SUPPORT OF HIS CONTENTIONS, THE LD. AR OF THE ASSESSEE HAS RELIED ON FOLLOWING DECISIONS. 1. SHIV LAL TAK VS. CIT, 251 ITR 353 (RAJ.) 2. HARIPAL SINGH VS. CIT, 258 ITR 85 (P&H) 4 3. CIT VS. SURESH KUMAR BANSAL, 254 ITR 130 (P&H) 4. CIT VS. RAVAIL SINGH & CO., 254 ITR 191 (P&H) 2.6 WE HAVE HEARD THE LD. DR AS WELL AS OF THE LD. AR OF THE ASSESSEE AND CAREFULLY GONE THROUGH THE MATERIALS ON RECORD AND ALSO THE O RDERS OF THE AUTHORITIES BELOW. WE NOTE THAT DURING THE COURSE OF SEARCH AND SEIZURE A CTION THE COPY OF THE BANK ACCOUNT STATEMENT OF THE ASSESSEE BEARING A/C NO.11166 IN T HE UNION BANK OF INDIA, COTTON GREEN BRANCH, MUMBAI WAS FOUND. IT IS UNDISPUTED FA CT THAT THE TRANSACTIONS IN THE BANK ACCOUNT FOR A SUM OF RS. 2,87,00,500/- HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. EVEN THE ASSESSEE HAS NOT DISCLOSED T HE FACT OF THESE TRANSACTIONS IN ITS ACCOUNT THOUGH THE ASSESSEE CONTENDED THAT THE ASSE SSEE ALLOWED SHRI THAKKAR TO USE ITS ACCOUNT AND IN TURN SHRI THAKKAR PROMISED TO PAY 0. 5% COMMISSION ON THE TURNOVER THROUGH ASSESSEE'S BANK ACCOUNT. THE ASSESSEE HAS A LSO STATED TO HAVE GIVEN BLANK SIGNED CHEQUE TO SHRI THAKKAR FOR FACILITATING THE TRANSAC TION THROUGH ITS BANK ACCOUNT. IN THE BLOCK RETURN, NEITHER ANY UNDISCLOSED INCOME WAS DI SCLOSED NOR THESE TRANSACTIONS WERE DISCLOSED BY THE ASSESSEE. EVEN OTHERWISE, THERE IS NO DISPUTE THAT THESE TRANSACTIONS ARE OUT OF THE ASSESSEES BOOKS OF ACCOUNT. THE AO MADE ADDITION OF THE ENTIRE SUM OF RS. 2,87,00,500/- AS UNDISCLOSED INCOME BEING UNEXPLAIN ED DEPOSITS IN THE BANK, THOUGH THE AO HAS ALSO MADE AN ADDITION ON ACCOUNT OF COMMISS ION BUT THE SAME IS ON PROTECTIVE BASIS. THE TRIBUNAL HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THESE TRANSACTIONS WERE NOT MADE BY THE ASSESSEE BUT THE ASSESSEE HAS GIVEN THE ACCOMMODATION ENTRIES TO SHRI THAKKAR ON WHICH THE ASSESSEE RECEIVED COMMISS ION INCOME. THE LD. CIT(A) HAS DELETED THE ADDITION MAINLY ON THE GROUND THAT THE ADDITION SUSTAINED BY THE TRIBUNAL IS 5 ON ESTIMATE BUSINESS AND THERE IS NO POSITIVE EVID ENCE ON RECORD TO SHOW THAT THE ASSESSEE HAS EARNED INCOME OUT OF THE TRANSACTIONS OR ACCOMMODATION ENTRIES GIVEN TO THAKKAR GROUP. IT IS PERTINENT TO NOTE THAT THE COM MISSION INCOME SUSTAINED BY THE TRIBUNAL IS BASED ON THE ENTRIES IN THE BANK ACCOUN T OF THE ASSESSEE WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. T HEREFORE, THE ADDITION SUSTAINED BY THE TRIBUNAL IS BASED ON MATERIAL AND EVIDENCE FOUND D URING THE COURSE OF SEARCH AND SEIZURE ACTION IN THE SHAPE OF COPY OF BANK ACCOUNT STATEME NT OF THE ASSESSEE'S ACCOUNT. ONLY BECAUSE OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THE ENTRIES IN THE ASSESSEE'S BANK ACCOUNT WERE COME TO LIGHT A ND THEREFORE, THE ADDITION SUSTAINED BY THE TRIBUNAL BEING THE COMMISSION INCOME EARNED BY THE ASSESSEE ON THESE TRANSACTIONS IS NOTHING BUT THE UNDISCLOSED INCOME BASED ON THE MA TERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION. IT IS NOT THE CASE WHERE THE INCOME IS ESTIMATED WITHOUT ANY EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEA RCH AND SEIZURE. THEREFORE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE CONTENTION OF TH E ASSESSEE THAT THE ADDITION SUSTAINED BY THE TRIBUNAL IS BASED ON ESTIMATION AND THEREFORE, THE PENALTY SHOULD NOT BE LEVIED. IN OUR VIEW, THE LD. CIT(A) HAS IGNORED THE VERY MARTIAL A SPECT OF THE MATTER THAT THE ADDITION SUSTAINED BY THIS TRIBUNAL IS BASED ON THE MATERIAL DETECTED AS A RESULT OF SEARCH OPERATION U/S 132 OF THE ACT AND THEREFORE, THIS ADDITION IS NOTHING BUT THE UNDISCLOSED INCOME OF THE ASSESSEE WHICH WAS NOT DISCLOSED OR RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS ACCEPTED THE ADDITION AS SUSTAINED BY THE TRIBUNAL. THEREFORE, THERE IS NO DISPUTE THAT THE ADDITION OF INCOME TO THE EXTEN T OF RS. 5,06,696/- IS NOTHING BUT UNDISCLOSED INCOME DETECTED DURING THE COURSE OF SE ARCH AND SEIZURE ACTION. THEREFORE, 6 THE PENALTY LEVIED U/S 158BFA(2) IS JUSTIFIED. ACCO RDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND RESTORE THE PENALTY ORD ER PASSED U/S 158BFA(2) OF THE ACT. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24-05-2013 SD/- SD/- (B.R. JAIN) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 24 TH MAY, 2013 *MISHRA COPY FORWARDED TO:- BY ORDER 1. THE ACIT, CIRCLE- 3, JAIPUR 2. M/S. APEX METCHEM (P) LTD. , JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (ITSSA NO.9//JP/08) A.R. ITAT: J AIPUR 7 8