ALLIANCE HOTELS, V. ASST CIT 12(1),

MA 62/MUM/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0986 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Keywords: Search and seizure; Principle of natural justice; Source of fund
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM MA NO.62/MUM/2013 (ARISING OUT OF ITA NO.4076/MUM/2011) ASSESSMENT YEAR 2006-07 ALLIANCE HOTELS 121 CITY TERRACE, W.H. MARG, FORT, MUMBAI 400 001 PAN: AAFFA7075E / VS. ACIT 12(1) AAYAKAR BHAVAN, M. K. ROAD, MUMBAI- 400 020 ( !' APPELLANT) ( #!' / RESPONDENT) !' / APPELLANT BY : SHRI VIJAY MEHTA #!' / RESPONDENT BY : SHRI SURINDERJIT SINGH $ %&' ( ) DATE OF HEARING : 05.07.2013 *+, ( ) / DATE OF PRONOUNCEMENT : 04.09.2013 ! O R D E R PER SANJAY ARORA (AM): THIS IS A MISCELLANEOUS PETITION BY THE ASSESSEE A RISING OUT OF THE ORDER U/S. 254(1) OF THE INCOME TAX ACT 1961(THE ACT HEREINA FTER) DATED 26.12.2012 BY THE TRIBUNAL DISPOSING ITS APPEAL FOR ASSESSMENT YEAR 2 006-07. 2.1 IT WOULD BE RELEVANT TO BRIEFLY RECOUNT THE FAC TS OF THE CASE. A COMPUTER PRINT- OUTS SHEET WAS FOUND DURING THE COURSE OF SURVEY PR OCEEDINGS AT THE ASSESSEES BUSINESS PREMISES ON MAY 11 & 12, 2007, WHICH REFLE CTED SUMS (AGGREGATING TO RS.18.44 LACS) RECEIVED FROM ONE, MR. PERVEZ, A PAR TNER IN THE ASSESSEE-FIRM, FOR BEING USED AS FOR A NUMBER OF PERSONS, INCLUDING TH E ASSESSEE. THE ASSESSEE BEING UNABLE TO EXPLAIN NATURE AND SOURCE OF THESE FUNDS; THE SAME WAS ADDED TO ITS TOTAL INCOME, WHICH STOOD CONFIRMED BY THE FIRST APPELLAT E AUTHORITY. BEFORE THE TRIBUNAL, THE ASSESSEES CASE WAS THAT EVEN ADMITTING THE TRU TH OF THE DOCUMENT FOUND, NO MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 2 ADDITION COULD AT ALL BE MADE ON THE BASIS OF SAID DOCUMENT. THIS IS AS DOCUMENT ITSELF EXHIBITS THE SOURCE OF THE FUNDS AS FROM MR. PERVEZ. NOW, THE REVENUE CANNOT, PLACING RELIANCE ON A DOCUMENT RECOVERED REQUIRE TH E ASSESSEE TO EXPLAIN THE IMPUGNED SUMS, I.E., AS TO ITS NATURE AND SOURCE, A ND YET NOT ADMIT THE SOURCE AS STATED IN THE DOCUMENT ITSELF. THAT IS, REPUDIATE THE SAME AT THE SAME TIME, WHICH WOULD BE A CLASSICAL CASE OF APPROBATE AND REPROBATE. FURTHER, WHETHER MR. PERVEZ. HAS REFLECTED THE SAID SUMS IN HIS ACCOUNTS OR EXPLAINS THE SAME (AS TO SOURCE, ETC.) IS NOT GERMANE AS FAR AS THE ASSESSEE IS CONCERNED. IF HE HAS NOT, IT IS FOR THE REVENUE TO PROCEED AGAINST HIM, BUT THAT WOULD NOT AUTHORIZE IT IN ANY MANNER TO BRING THE SAID SUMS TO TAX IN ITS HANDS. INCOME COULD BE ASSESSED ONLY IN THE HANDS OF THE RIGHT PERSON (PARA 2.2 OF THE IMPUGNED ORDER/IO). 2.2 THE REVENUES CASE, ON THE OTHER HAND, WAS THAT THE ASSESSEE CANNOT ESCAPE TAXATION IN RESPECT OF THE SAID SUMS MERELY BY ASCR IBING THE SOURCE TO MR. PERVEZ, UNLESS OF COURSE, MR. PERVEZ EXPLAINS THE NATURE AN D SOURCE OF THE SAME WITH HIM, OR DISCLOSES THE SAME AS HIS UNEXPLAINED INCOME. THE A MOUNT, THEREFORE, STOOD RIGHTLY BROUGHT TO TAX IN THE ASSESSEES HANDS AND WAS TO B E CONFIRMED (PARA 3.2 OF THE IO). 2.3 THE TRIBUNAL DEALT WITH THE MATTER COMPREHENSIV ELY. WITH REFERENCE TO SECTION 292C OF THE ACT, IT WAS OF THE VIEW THAT THERE IS S TATUTORY PRESUMPTION AS TO THE TRUTH OF THE DOCUMENT FOUND. THIS PRESUMPTION IS REBUTTAB LE, THOUGH, OF COURSE, WITH EVIDENCE. THE ASSESSEE HAD NOT LED ANY EVIDENCE AT ANY STAGE. THEREFORE, IT WAS UNDER A LEGAL OBLIGATION TO EXPLAIN THE NATURE AND SOURCE AS FOUND REFLECTED IN THE SAID DOCUMENT, PLACING RELIANCE ON THE DECISION IN CASE OF CHUHARMAL VS. CIT [1998] 172 ITR 250 (SC). THE ASSESSEES EXPLANATION OF MR. PER VEZ AS THE SOURCE OF THE FUNDS HAD TO BE GIVEN DUE CREDENCE; THE REVENUE HAVING NO T PROVED THE DOCUMENT TO BE UNTRUE; RATHER, PROCEEDING ONLY ON THE BASIS OF THE SAID DOCUMENT. THAT MR. PERVEZ HAD NOT DISCLOSED OR EXPLAINED THE SAID SUMS WAS FO UND TO BE IRRELEVANT. HOWEVER, OBLIGATION ON THE ASSESSEE IS TO EXPLAIN BOTH THE N ATURE AND THE SOURCE OF THE FUNDS. IT, HOWEVER, HAD NOT UTTERED A WORD ON THE NATURE OF TH E FUNDS. THE NON-SATISFACTION OF THE ASSESSING OFFICER (A.O.) WITH THE ASSESSEES EX PLANATION WAS THUS HELD AS LEGALLY VALID, AND THE ADDITION CONFIRMED IN PRINCIPLE. FUR THER, AS SPECIFIED AMOUNTS AS PAID MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 3 BY MR. PERVEZ PER THE DOCUMENT WAS TO PERSONS OTHER THAN THE ASSESSEE AS WELL, ONLY THE AMOUNT STATED THEREIN AS HAVING BEEN PAID TO TH E ASSESSEE, I.E., RS.5.61 LACS, AS AGAINST THE ENTIRE AMOUNT OF RS.18.44 LACS, WOULD B E LIABLE TO BE DEEMED AS THE ASSESSEES INCOME U/S. 69A (REFER PARAS 4.1 TO 4.4 OF THE IO). 3.1 THE ASSESSEE HAS NOW MOVED THE INSTANT PETITION , CLAIMING THAT ITS STANDS PREJUDICED BY THE CONFIRMATION OF THE ADDITION BY T HE TRIBUNAL U/S. 69A AS NO OPPORTUNITY TO CONTEST THE APPLICATION OF THE SAID SECTION HAD BEEN GRANTED TO THE ASSESSEE. NON GRANT OF OPPORTUNITY ITSELF AMOUNTS T O A PREJUDICE BEING CAUSED. HOWEVER, ON BEING QUERIED AS TO HOW IT WAS PREJUDIC ED THUS, I.E., BY THE TRIBUNAL STATING OF SECTION 69A BEING APPLICABLE IN THE INST ANT CASE AS AGAINST S. 69 BY THE LD. CIT(A), AND SECTION 68 BY THE AO, THE LD. AR WOULD STATE THAT NON-GRANT OF OPPORTUNITY ITSELF IMPLIES A PREJUDICE. EXPLAINING HOW IT IS PREJUDICED WOULD LEAD A DISCUSSION ON THE MERITS OF THE CASE VIS--VIS THE SAID SECTIONS, AND WHICH THE ASSESSEE IS PRECLUDED FROM IN THE RECTIFICATION PROCEEDINGS. SO, HOWEVER, AS IT HAS BEEN SPECIFICALLY QUESTIONED IN THE MATTER, THE PREJUDIC E COULD BE IN TERMS OF THE POWER OF THE TRIBUNAL IN CHANGING THE SECTION; THE YEAR FOR WHICH THE ADDITION COULD BE MADE; AND SO ON. WHAT THE ASSESSEES ARGUMENT/S WOULD BE IS PREMATURE TO CONSIDER AND SPELL OUT AT THIS STAGE. THE IMPUGNED ORDER WAS, TH EREFORE, PRAYED FOR BEING RECALLED, TO ALLOW AN OPPORTUNITY FOR BEING HEARD TO THE ASSE SSEE. 3.2 THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THA T THE WHOLE ISSUE WAS ARGUED BEFORE THE TRIBUNAL, AS APPARENT FROM A READING OF THE IMPUGNED ORDER, AS TO WHETHER THE ASSESSEE HAS, IN THE GIVEN FACTS AND CIRCUMSTAN CES, BEEN ABLE TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF THE FUNDS AS REFLE CTED IN THE DOCUMENT/S FOUND FROM ITS PREMISES, FAILING WHICH THE SAME WOULD STAND TO BE DEEMED AS THE ASSESSEES UNEXPLAINED INCOME FOR THE RELEVANT YEAR. WHETHER T HE SAID EXPLANATION STOOD ATTRACTED UNDER SECTION 68 OR S. 69 OR S. 69A, ALL OF WHICH ARE IN FACT PARA MATERIA , WAS NEVER THE SUBJECT MATTER OF DISPUTE AND, THUS, NOT SUBJECT TO ANY ARGUMENT BY THE PARTIES BEFORE THE TRIBUNAL NOR IN FACT BEFORE THE AUTHORITIES BELOW. MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 4 3.3 IN REJOINDER, THE LD. AR WOULD SUBMIT THAT THE VERY FACT THAT THERE WAS NO ADMITTEDLY NO DISCUSSION OR ARGUMENT IN THE MATTER ITSELF VALIDATES THE ASSESSEES CASE OF NON-GRANT OF OPPORTUNITY TO EXPLAIN ITS CASE IN THE MATTER. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. DESPITE GIVING OUR CAREFUL AND ANXIOUS CONSIDERATI ON TO THE MATTER, WE ARE WHOLLY UNABLE TO APPRECIATE THE ASSESSEES CASE, AN D FIND ITS GRIEVANCE MISPLACED AND MISCONCEIVED. THIS IS AS WE ARE, WE ARE AFRAID TO S AY, AT LOSS TO UNDERSTAND THE SAME. THE A.O. MADE THE ADDITION U/S. 68. THE ASSESSEE RAISED NO GROUND IN ITS RESPECT BEFORE THE FIRST APPELLATE AUTHORITY, BEFORE WHOM T HE ASSESSEES OBLIGATION TO EXPLAIN THE DOCUMENT REFLECTING THE RECEIPT OF MONIES BY IT FROM MR. PERVEZ DURING THE RELEVANT PREVIOUS YEAR, OR THE TRUTH OF THE MATTER, WAS AN ACCEPTED POSITION . THE LD. CIT(A) ALSO FOUND THE SAME TO HAVE BEEN NOT SATISFA CTORILY EXPLAINED, AND CONFIRMED THE ADDITION. HOWEVER, AS THE SUMS WERE NOT ADMITTE DLY REFLECTED IN THE BOOKS, IN VIEW OF THE LD. CIT(A), SECTION 69 OR S. 69A WOULD APPLY, AND NOT SEC.68, AS INVOKED BY THE A.O., FURTHER STATING THAT SECTION 69 WAS MO RE APPROPRIATE AS NO MONEY WAS ACTUALLY FOUND. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNA L. IT DID NOT SPECIFICALLY RAISE THE ISSUE OF APPLICABILITY OF SECTION 69 , MUCH LESS MOVE A RECTIFICATION APPLICATION BEFORE THE FIRST APPELLATE AUTHORITY, R AISING AN ISSUE OF BEING PREJUDICED ON ACCOUNT OF CHANGE OF SECTION BY HIM, OR HIS POWER T O DO SO, AS IT DOES BEFORE US. QUITE SIMPLY FOR THE REASON, AS AFORE-STATED, THAT THE RE CEIPT OF MONEY FROM MR. PERVEZ AS REFLECTED WAS REQUIRED TO BE SATISFACTORILY EXPLAIN ED; THE ASSESSEES BOOKS NOT DISCLOSING THE SAME, WAS THE GIVEN POSITION BEFORE THE FIRST APPELLATE AUTHORITY IN VIEW OF SECTION 292C OF THE ACT . DURING THE HEARING BEFORE THE TRIBUNAL, AGAIN, NO S PECIFIC ISSUE IN THIS RESPECT WAS RAISED (REFER PARA 3.3 OF THIS ORDER). THE QUESTION BEFORE IT, AS ALSO PLEADED BY THE LD. DR BEFORE US, WAS AS TO WHETHER THE RECEIPT OF MONEY AS REFLECTED IN THE DOCUMENT STANDS SATISFACTORILY EXPLAINED BY THE ASSESSEE OR NOT, AS IN ITS ABSENCE THE SAME WOULD BE DEEMED AS THE ASSESSEES INCOME . THE ASSESSEE CLAIMED IT TO BE EXPLAINED INASMUCH AS THE DOCUMENT ITSELF REFLECTED PERVEZ TO BE THE SOURCE OF FUNDS, AND QUA MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 5 WHICH THE ASSESSEE WAS UNDER THE CIRCUMSTANCES OBLI GED TO EXPLAIN. THE TRIBUNAL, ON AN EXAMINATION OF THE FACTS OF THE CASE AS WELL AS THE RULES OF EVIDENCE AS ENSHRINED IN SS. 68, 69 AND 69A R.W.S. 292C OF THE ACT, FOUND TH E ASSESSEES PLEA ACCEPTABLE NOTWITHSTANDING THAT MR. PERVEZ MAY NOT HAVE DISCLO SED THE SAME IN HIS BOOKS OR MAY HAVE NO EXPLANATION WITH REGARD THERETO, ON WHI CH THE ASSESSEES EXPLANATION WAS SILENT. THIS WAS FOR THE REASON THAT S. 292C ITSELF PROVIDE S FOR THE TRUTH OF THE DOCUMENT, AND ON WHICH THE ASSESSEES CASE BEFORE U S WAS BASED . HOWEVER, AS VITAL FACTS PERTAINING TO THE TRANSACTION/S HAD BEEN WITH HELD AND NOT DISCLOSED, IT WAS ON FACTS FOUND THAT THE ASSESSEES EXPLANATION IS NOT SATISFACTORY AS IT DID NOT ADDRESS THE ASPECT OF THE NATURE OF THE TRANSACTION/S OR THE RECEIPT AT ALL, WHICH UNDER LAW IT WAS REQUIRED TO EXPLAIN, BUT ONLY AS TO ITS SOURCE. FUR THER, THE ASSESSEE ALSO DISPUTING THE APPLICABILITY OF S. 69 DURING ARGUMENTS ON THE BASI S THAT NO INVESTMENT HAD BEEN MADE, IN ITS VIEW THE SAME WAS OF NO MOMENT IN VIEW OF THE ASSESSEE HAVING NOT LED ANY EVIDENCE TO REBUT THE STATUTORY PRESUMPTION; RA THER, EXPLAINING MR. PERVEZ TO BE THE SOURCE OF CASH RECEIVED. HOWEVER, IN VIEW OF TH IS ADMITTED POSITION, SECTION 69A WOULD APPLY; SEC. 69 BEING IN RESPECT OF AN UNEXPLA INED INVESTMENT (REFER PARAS 4.1 TO 4.3 OF THE ORDER). THIS THUS IS THE TRIBUNALS ANSWER TO THE ASSESSEE S SAID PLEA . THE ASSESSEE IS AGGRIEVED, EVEN AS GOING BY ASSESSE ES OWN EXPLANATION THE MONEY HAS BEEN RECEIVED IN CASH (WHICH FACT THE TRI BUNAL FOUND THE ASSESSEE TO HAVE FAILED TO REBUT), AND THAT SECTION 69A SPEAKS OF MO NEY, AS AGAINST SECTION 69, WHICH IS QUA INVESTMENT AND, FURTHER, DESPITE THE TRIBUNAL MAKI NG IT ABUNDANTLY CLEAR, THAT THE PROVISIONS ARE PARA MATERIA , DRAWING SUPPORT FROM THE DECISION IN THE CASE OF CIT VS. JAUHARIMAL GOEL [2005] 147 TAXMAN 148 (ALL). A DECISION IS RENDERED ON THE BASIS OF THE RESPECTIVE CASES AS ADVANCED BY THE PARTIES, GI VEN THE MATERIAL ON RECORD. THE QUESTION OF THE APPLICABILITY OF ANY PARTICULAR SEC TION WAS NEVER AN ISSUE, BEING INCONSEQUENTIAL IN VIEW OF THE ASSESSEES OBLIGATIO N TO EXPLAIN THE TRANSACTION BEING NOT IN DISPUTE, FAILING WHICH THE AMOUNT REFLECTED AS RECEIVED WOULD BE DEEMED AS ITS INCOME. IN ANY CASE, EVEN OTHERWISE THE APPROPRIATE NESS OR THE APPLICABILITY OF A PARTICULAR SECTION IN THE FACTS AND CIRCUMSTANCES O F THE CASE, ON WHICH THERE IS NO DISPUTE, IS A LEGAL ISSUE. IN FACT THE TRIBUNAL HAS GIVEN A SPECIFIC FINDING AS TO THERE BEING NO LEGAL BAR ON THE APPLICATION OF SAID SECTI ONS OR SECTION 69A (PARA 4.2 OF IO). MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 6 THE GRIEVANCE NOW BEING PROJECTED EXTENDS TO THE TR IBUNAL HAVING COMMITTED A MISTAKE FOR NON-GRANT OF OPPORTUNITY. THIS IS WHA T LED US TO REMARK DURING HEARING AS TO HOW THE ASSESSEE IS PREJUDICED, GIVEN THE FAC TUAL POSITION OF THE CASH BEING RECEIVED AND, FURTHER, IN LIGHTER VEIN THOUGH, THAT IF IN ITS VIEW SECTION 69 IS APPLICABLE, SO BE IT. IT IS TRITE THAT AS LONG AS A N ACTION IS AUTHORIZED OR GOVERNED BY A PROVISION, MERE WRONG MENTION OF PROVISION WOULD BE TO NO CONSEQUENCE. FURTHER, IT IS THE CORRECT LEGAL POSITION THAT IS RELEVANT, AND IS TO BE APPLIED, AND NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN THE MATTER [ CIT V. C. PARAKH & CO. (INDIA) LTD. [1956] 29 ITR 661 (SC); KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)]. THE ASSESSEE COULD, IN OUR VIEW, CHALLENGE T HE SAID FINDING OF APPLICABILITY OF SECTION 69A (OR, FOR THAT MATTER, S.69) ONLY UNDER REVIEW PROCEEDINGS, AS IT COULD THE FINDING OF THE EXPLANATION BEING NOT SATISFACTORY, BUT NOT IN RECTIFICATION PROCEEDINGS. THE ASSESSEE HAS RELIED ON THE DECISION IN THE CAS E OF CIT VS. S. S. GUPTA [2002] 257 ITR 440 (RAJ) [119 TAXMAN 626] FOR THE P ROPOSITION THAT NON-GRANT OF OPPORTUNITY WOULD TANTAMOUNT TO A MISTAKE INASMUCH AS THERE IS A VIOLATION OF NATURAL JUSTICE. AS SOUGHT TO BE CLARIFIED EARLIER, NO NEW FACTS OR MATERIAL STANDS CONSIDERED. THE SAID DECISION, THEREFORE, WOULD NOT APPLY IN TH E FACTS AND CIRCUMSTANCES OF THE CASE, AND NEITHER WOULD FOR THE SAME REASON THE DEC ISION IN THE CASE OF STAR ESTATES MANAGEMENT PVT. LTD. VS. DY. CIT [2003] 130 TAXMAN (MAGAZINE) 214 (DEL), ALSO RELIED UPON BY THE ASSESSEE. 5. IN THE RESULT, THE ASSESSEES MISCELLANEOUS APPL ICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 04, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER $ ' MUMBAI; -% DATED : 04.09.2013 A. K. PATEL, PS & ROSHANI, SR. PS MA.NO.62/M/13 (A.Y. 2006-07) ALLIANCE HOTELS VS. ASST. CIT 7 !'#$%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ . ( ) / THE CIT(A) 4. $ . / CIT CONCERNED 5. 1&23 # %45 , ) 45, , $ ' / DR, ITAT, MUMBAI 6. 367 8' / GUARD FILE ! / BY ORDER, )*+ (DY./ASSTT. REGISTRAR) , $ ' / ITAT, MUMBAI