Income Tax Appellate Tribunal - Delhi
Sunil Rastogi, Moradabad vs Acit, Bareilly on 7 February, 2018
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A": NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
ITA Nos.:-1921, 1922/Del/2016
Assessment Years: 2006-07, 2012-13
Sunil Rastogi, ACIT
B-92, Gandhi Nagar, Central Circle
Moradabad Vs. Bareilly
PAN ABIPR8101N
(Appellant) (Respondent)
Assessee by: None
Department by : Shri Ravi Kant Gupta, Sr.DR
Date of Hearing 01/02/2018
Date of 07/02/2018
pronouncement
ORDER
PER AMIT SHUKLA, J.M.
The aforesaid appeals have been filed by the assessee against separate impugned order of even date 25.2.2016, passed by Ld. CIT(Appeals), Moradabad in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2006-07 and 2012-13. None appeared on behalf of the assessee despite service of notice, accordingly we are proceeding to decide the appeal of the assessee on merits. Since issues involved in both the appeals are common arising ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT out of almost identical set of facts, therefore, same were heard together and are being disposed of by way of this consolidative order. In the assessment year 2006-07 the assessee is aggrieved by levy of penalty of Rs. 33,000/- and Rs. 2,29,000/- for the assessment year 2012-13, both on account of alleged unexplained expenditure.
2. So far as the brief facts qua the penalty for assessment year 2006-07 is concerned, a search and seizure action u/s 132(1) was carried out on 22.9.2011 at various premises of Shakumbhri group of cases on 22.9.2011. In the course of search, certain loose papers and documents were found and in one of such seized documents 'Annexure LP-2' consisted of loose papers containing 38 pages in which some hand written details of liquor expenditure aggregating to Rs. 2,93,850/- pertaining to financial year 2005-06 was found. The said seized documents contained the name of Shri Kapil Rastogi, Shri Sunil Rastogi and Shri Ravi Prakash Rastogi. The investigation wing inferred that these expenditure are of personal nature. The scan copy of relevant seized documents have been reproduced in the assessment order also. Since the documents were found from the possession of these three persons, therefore, AO in terms of section 292C (1) held that it is presumed that said expenditure pertains to the three persons in whose possession the said documents have been found. Accordingly, he quantified the expenditure in the hands of the three 2 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT persons equally and one third of the amount, i.e., Rs. 97,950/- was added in the hands of the assessee. It appears that the said addition in the quantum proceedings had attained finality as nothing is borne out from the record that assessee has filed any appeal against the said assessment order. In the penalty proceedings, the assessee submitted that he is not fond of drinking and in any case the said amount is covered by his personal withdrawal for house hold expenses and cash balance available with him. Another limb of explanation was that the said documents and alleged expenditure belongs the company, M/s. Shakumbhri Straw Products Ltd. In whose hands this expenditure has been offered to tax. Therefore, the provision of section 292C (1) will not apply. It was further submitted that, at the time of assessment no satisfaction was recorded in terms of section 271(1)(c) by the AO, therefore initiation of penalty proceeding is illegal. However, the Ld.AO held that, since specific documents have been seized from the premises of the assessee, therefore, such an addition on account of unexplained expenditure has rightly been added. Under these facts, it is a fit case for imposing penalty u/s 271(1)(c) and accordingly he levied penalty of Rs. 33,000/-.
3. Before the Ld. CIT(A) the assessee submitted that the entire amount of Rs. 2,93,850/- on account of loose papers have been surrendered in the hands of the company, M/s. Shakumbhri Straw 3 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT Products Ltd. in the assessment year 2006-07 in the return of income filed u/s 153A. The surrender was made by the director of the company on the ground that these loose papers does not relate to any of the directors as none of them were fond of liquor. Even though the paper was found from the premises of three directors but the premises was used as guest house of the company and their names are not appearing in the seized documents. Therefore, not only the additions should be made again in the hands of the assessee but also no penalty should be levied. It was pointed out that, the AO has made protective assessment in the hands of the company and substantive in the hands of the assessee. The relevant finding in the assessment order of company M/s. Shakumbhri Straw Products was as under:-
"Party A-I, Annexure LP-2 is a bunch of loose papers containing 38 pages. Page no. 29 to 38 of this loose bunch are hand written which pertain to the financial year 2005-06 relevant to A. Y. 2006- 07 and contain the details of liquor expenditure of Rs. 2,93,850/-. On the above mentioned seized documents the names of Shri Kapil Rastogi, Shri Sunil Rastogi and Shri Ravi Prakash Rastogi appear. It is also evident from the seized documents that the expenditure is of personal nature. The assessee's were asked to explain the said transactions of Rs. 2,93,850/- vide questionnaires dated 02/12/2013 and 22/01/2014. It is also relevant to mention here that provisions of section 292 (C) (1) of the I. T. Act, 1961 are also applicable in this case. Since the documents were found in the premises of the assessee during search operations, heavy burden lies upon the assessee to explain 4 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT the nature of records/transactions and where they are reflected in the regular books of accounts. Since the assessee's were unable to explain the said transactions with relevant documentary evidences /verifications, therefore, the amount of Rs. 2,93,850/- is considered to be unaccounted expenditure u/s 69C of the I. T. Act during the F. Y. 2005-06 relevant to A. Y. 2006-07. Though the addition of 1/3 amount of Rs. 2,93,850/- (i.e. Rs. 97,950/-) is made in the cases of Shri Sunil Kumar Rastogi, Shri Kapil Rastogi and Shri Ravi Prakash Rastogi each for the A. Y. 2006-07, as on perusal of the relevant seized material, it appears that this expenditure is of personal nature but the addition of Rs. 2,93,850/- is also made in the case of assessee company for A. Y. 2006-07 on protective basis in order to safeguard the interest of the revenue as the assessee may claim that the expenses were part of the expenses of the company, without prejudice to the findings given in the cases of Shri Sunil Kumar Rastogi, Shri Kapil Rastogi and Shri Ravi Prakash Rastogi.
Therefore, the amount of Rs. 2,93,850/- is added to the income of the assessee on protective basis."
2. The Ld. CIT(A) confirmed the penalty on the ground that even though the amount has been surrendered in the hands of the company, however the incriminating material was found from the possession of one of the director's residence and also contained the name of other two persons, therefore, there is an acceptance that these papers indicate unexplained expenditure of the directors in individual capacity and penalty levied is justifiable.
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ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT
3. Before us the Ld. DR strongly relying upon the impugned appellate order as well as the finding given by the AO and submitted that, once the document has been found from the possession of the directors and no explanation has been given that such an expenditure is out of known sources, then not only the addition has been correctly made but penalty has also been rightly imposed. Mere surrender in the hands of the company without any basis is of no consequence, because in the hands of the company only protective assessment has been made and substantive has been made in the case of these three persons. Thus, the levy of penalty is justified.
4. After considering the relevant facts and material culled out from the impugned orders, we find that certain loose papers were found from the residence of the three directors of the company, M/s. Shakumbhri Straw Products Ltd. The said loose documents contain certain expenditure of various brands of whisky and the amount paid for such liquors. The total amount of expenditure reflected was at Rs. 2,93,850/-. The said expenditure as reflected in the loose papers have been surrendered/offered to tax in the hands of the company. M/s Shakumbhri Straw Products Ltd. in the return of income filed u/s 153A for the same assessment year. It was submitted during the impugned appellate proceedings that the house of all the directors were separate and the AO was not justified in treating the entire 6 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT expenditure in the hands of the three directors proportionally. However, in the hands of the company, addition has been made on protective basis and substantive addition has been made in the hands of the three directors on the ground that documents were found from the possession of one of the directors, therefore, onus lied upon the assessee to explain the nature of document and transactions in terms of section 292C (1)). Accordingly the addition has been made in the case of all three directors including that of the present assessee of Rs. 97,950/-. From the perusal of the seized papers as incorporated in the assessment order, it is very difficult to decipher as to whether it is a case of purchase of liquor or for distribution of liquor. One of reasoning given by the assessee which is appearing from the submission made before the Ld. CIT (A) is that, these expenses on liquor was for the visitors who has visited the guest house of the company and it was not for the personal consumption or purpose of the director and therefore, such surrender was made in the hands of the company and if any action was called for, then same should have been made in the hands of the company. As an alternative submission, another explanation was given that the amount of Rs. 97,950/- on account of alleged expenses should be treated to be covered by withdrawals made for the personal house hold expenses and from the cash withdrawals from the books of the assessee. Such explanation has not been commented upon or rebutted by the AO and 7 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT the penalty has been imposed merely on the ground that addition has been made in the quantum proceedings as the documents were found from the possession of the assessee at the time of search. Nowhere in the impugned penalty order or CIT(A) order, there is any reasoning or rebuttal that the explanation given by the assessee is either incorrect or the amount which has been surrendered in the hands of the company was not proper. Nowhere is it borne out as to what has been the fate of the additions sustained in the hands of the company. Even otherwise also, if the addition has been confirmed in the assessment order of the assessee on substantive basis, that itself cannot be the conclusive factor for imposing or levying the penalty u/s 271(1)(c). The amount which has been offered to tax in the hands of the company was based on the explanation given that the documents pertain to the company and not of the directors; and simply because the documents have been found from the possession of the one of the directors and thereby implicating all the three directors that these expenditure relates to them in their personal capacity without any other material to corroborate that it belongs to them and not to the company, cannot be the ground for levying penalty for concealment of income in the hands of the assessee. The assessee's explanation given before the AO as well as the Ld. CIT (A) has not been rebutted on the basis of material on record except for relying upon the provision of section 292C (1). The presumption u/s 292 C (1) is a rebuttal presumption 8 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT and assessee can show from the documents found from his possession that it does not belong to it albeit to a different person. Here in this case the assessee has not only rebutted that these documents pertained to company but this income has been offered to tax in hands of the company. Therefore, to that extent the presumption stands rebutted by the assessee and without there being any such material to controvert such assessee's version, we do not find a fit case for levy of penalty u/s 271(1)(c) and the same is directed to be deleted.
5. So far as the levy of penalty in the assessment year 2012-13 for sums amounting to Rs. 2,29,000/-, the brief facts are that in the course of search, certain documents were found which reflected that certain expenditure were incurred on the repair of the house at Shakumbhri Niwas and for furnishing of the house which aggregated to Rs. 22,21,926/-. This amount too was offered for taxation in the hands of the company, M/s. Shakumbhri Products Limited. The assessee's case before the AO was that the construction of the residential houses was made between the year 2001-02 and the loose papers were found from the residential-cum-guest house of the company used as the premises of Shri Kapil Ratogi and these directors were not having any source of income except for salary from the said company, therefore,; neither the addition could be made in the hands of the assessee for the assessment year 2012-13; nor it can 9 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT be said to be incurred by the assessee. The loose paper does not bear any date and therefore, it cannot be presumed that it belonged to the same year. However, the AO noted that the documents were found from the premises which is jointly occupied by the three directors and hence the said amount is to be taxed in hands of the directors in view of the provision of section 292C (1). Accordingly, proportionate amount of Rs. 7,40,658/- was added on the same amount penalty has also been levied. Ld. CIT(A) too has confirmed the action of the AO by and large on the same reasoning that the material was found from one of the directors residence and therefore, unexplained expenditure belonging to the assessee only.
6. After considering the relevant finding given in the impugned order, we find that facts are by and large the same as in the aforesaid appeal. Here also the explanation given by the assessee was that the loose papers were found from the premises which was the guest house of the company and therefore, it was surrendered in the hands of the company. Apart from that it was also submitted that the loose papers does not contain any date and repair work in the house was carried out beyond the period of six years as given the section 153A. Here again the penalty levied has been confirmed merely on the ground that the loose documents were found from the possession of one of the directors and based on such premise the expenditures appearing in 10 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT the loose papers have been apportioned equally amongst the three directors. There is no finding as to why the assessee's explanation is not acceptable when it has been stated that these expenditure belong to the company in whose hand this amount of alleged unexplained expenditure has been offered to tax in the return of income and alternatively the expenditures did not pertain to this year, absent any mention of date in the seized documents. Here also the onus to controvert the presumption u/s 292C has been prima facie discharged and in absence of any material to rebut such explanation the penalty for concealment cannot be levied. Our finding given for the assessment year 2006-07 as above will apply for this year also and accordingly, in view of the reason given above we hold that it is not a fit case for levy of penalty and the same is directed to be deleted.
7. In the result both the appeals of the assessee is allowed.
Order pronounced in the open court on 7th February, 2018.
sd/- sd/- (O.P. KANT) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07/02/2018 Veena Copy forwarded to 1. Applicant 2. Respondent 11 ITA Nos. 1921, 1922/DEL/2016 Shri Sunil Rastogi vs. ACIT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi 12