Income Tax Appellate Tribunal - Mumbai
The Supreme Indus. Ltd., Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
"J" Bench, Mumbai
Before Shri R.V. Easwar, President
and Shri B. Ramakotaiah, Accountant Member
IT(SS) A No. 125/Mum/2007
(Block Period: 01.04.1991 to 29.05.2001)
The Supreme Industries Ltd. ACIT, Central Circle 29
612, Raheja Chambers Vs. Room No. 411, 4th Floor
213, Nariman Point Aayakar Bhavan, M.K. Road
Mumbai 400021 Mumbai 400020
PAN - AAACT 1344 F
Appellant Respondent
Appellant by: Shri Nitesh Joshi
Respondent by: Smt. Kusum Ingle
ORDER
Per B. Ramakotaiah, A.M.
This appeal by the assessee is against the order of the CIT(A) Central-V, Mumbai dated 23.03.2007 confirming the penalty of `32,00,000/- levied by the A.O. under section 158BFA(2).
2. Assessee has raised following 8 grounds on levy of penalty. Ground Nos. 1,2,3,5(b), 6,7 & 8 are general in nature and includes submissions as well which does not require adjudication. Ground Nos. 4 and 5(a) are as under: -
"4. The appellant submits the learned Commissioner of Income-tax (Appeals) erred in upholding the finding of the CIT(A) in quantum appeal and the action of the Assessing Officer that the appellant had paid unaccounted cash of Rs.33 lakhs for the purchase of land and thereby upholding the levy of penalty under section 158BFA(2).
5(a) The learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in levying penalty, in respect of the addition made under section 68 of the Act amounting to Rs.14,79,976/- as unexplained cash credit."
Briefly stated, there was a search and seizure operation under section 132 of the Act against the assessee company and its Director on 29.05.2001.
2 IT(SS)A No. 125/Mum/2007The Supreme Industries Ltd.
During the course of search various documents were seized from the business premises of the company and the residential premises of the Director. On the basis of the seized documents the A.O. made two additions in the block assessment under section 158BC: (a) unexplained investment in cash for purchasing a plot of land at Vasai on the basis of document seized vide Annexure 'A-II' page. 65 - `33,00,000/-; and (b) unexplained cash credit on the basis of page 52 of document 'A-I' seized from the residence of the Director Shri M.P. Taparia - `14,74,976/-. In the appeal filed against the order under section 158BC assessee withdrew the issue regarding the second addition of `14,74,976/- whereas the addition of `33,00,000/-, though contested, was confirmed by the CIT(A). Consequent to that assessee was issued show cause letter and the reply from the assessee dated 27.01.2006 was extracted by the A.O. in para 4 of the penalty order. The A.O. did not agree with the explanation of the assessee and levied penalty. The A.O. imposed a penalty of `32,00,000/- under section 158BFA(2) in respect of the above two additions.
3. At the outset it was submitted that the addition of `33,00,000/- on which penalty was levied contested in ground No. 4 has been deleted by the ITAT vide order in IT(SS) No.69/Mum/2009 dated 24.09.2010. Accordingly there is no need for confirming the penalty on the above since the addition itself was deleted in the quantum appeal. Therefore, the A.O. is directed to delete the penalty levied on the above amount. Ground Nos. 4 on the above issue stand allowed.
4. Ground No. 5(a) is with reference to levy of penalty in respect of addition made under section 68 of the Act. amounting to `14,74,976/- as unexplained cash credit. As stated earlier, on the basis of the seized document A-I/52 from the residence of the Director Shri MP. Taparia the A.O. enquired about the entries thereon. It was stated by Shri Taparia that this paper pertains to the assessee company. This loose paper contain notings of receipt of `14,74,976/- and expenditure of `9,61,658/- and the balance available as on 09.05.2001 of `5,13,318/-.
3 IT(SS)A No. 125/Mum/2007The Supreme Industries Ltd.
5. It was assessee's submission that the notings on the loose paper represent items of estimated receipts/expenses in the nature of brief notings and they indicate the expected receipts/expenses of various group companies. Assessee submitted that the notings has been made by the Cashier for his information and for assessing the cash flow requirements which could arise in the near future. It was further submitted that the actual receipts/expenses, if any, incurred would obviously be reflected in the books of account of respective concerns as and when the same could have actually occurred. It was further submitted that these expenses did not fall part of its regular books of account. The A.O. treated the said amount of receipt at `14,74,976/- as unexplained cash credit based on his interpretation of the notings in the loose paper. The assessee submits that the addition has been made by taking a different interpretation of the matter and this cannot be taken for levy of penalty. Since the ground contested before the CIT(A) on this issue was withdrawn the A.O. did not accept assessee's explanation and levied penalty. The CIT(A), on the explanation given by the assessee, was of the opinion that on the addition of `14,74,976/- was not discussed by the CIT(A) in the quantum appeal as the assessee did not press this ground and the submissions made by the learned A.R. were not born out of the record. He rejected the contentions stating that a tentative estimate of receipts and expenses made by the Cashier for his information would normally be found with the Cashier in the office whereas the impugned page was found in the residence of the Director. Further on perusal of the entries on the impugned document he was of the opinion that it gave exact amount of receipts from each person and also the cash balance as on 09.05.2001. The entries on the receipt side are the exact amounts of `2,12,981/-, `10,794/-, etc. which cannot be held to be an estimate of receipt which would normally be in round figures. Similarly the expenditure side also shows exact figure of expenditure which was against the submission of the assessee that the notings are estimated expenses. He also observed that if the notings are estimated receipts and expenditure, there would be no necessity of providing the cash balance and that too of an exact figure of `5,13,318/- as on 09.05.2001. Therefore the 4 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
CIT(A) concluded that it is evident that the notings on this page represent unaccounted receipts and expenditures. Since no submissions regarding the source of these entries were furnished he upheld the levy of penalty holding that the A.O. was fully justified in treating the receipt as unexplained cash credit.
6. Contesting the above findings of the CIT(A), the learned counsel made certain propositions stating that the addition could not have been made under section 158BC and the said document was seized from the residence of the Director and the proceedings could have been done only under section 158BD. Further it was his argument that the loose paper cannot be considered as books of account and so the question of making addition under section 68 does not arise as it is not a credit in the books of account. It was his submission that there can be no addition on the loose document as there is no corroborative evidence to justify the addition. He relied on the judgment of the Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341 for the proposition that the A.O. has not recorded any satisfaction while assessing the amount in the hands of the assessee. He further submitted that with reference to the jurisdiction of addition made in the quantum appeal, the same can be raised in the penalty proceedings as penalty proceedings are seperate proceedings. He relied on the decision in the case of CIT vs. Dharamchand L. Shah 204 ITR 462 and submitted that the addition in the assessment would not automatically entitle the Revenue to impose penalty. He further relied on the decision of the ITAT Bench "D" in the case of S.P. Goyal vs. DCIT 82 ITD 85 (Mum) (TM) for the proposition that the entries found on loose sheets or diaries seized during the course of search cannot be considered as books of account for the purpose of section
68. It was his submission that there is no evidentiary value of the document to support unaccounted income so as to attract penalty under section 271(1)(c). He also relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Bhaichand H. Gandhi 141 ITR 67 that loose sheet cannot be considered as books of account maintained as there are no supporting evidences in support of such entries. It was further submitted that mere entries in documents are not sufficient to attract penalty and referred to the 5 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
decision of the Hon'ble Gujarat High Court in the case of CIT vs. Maulikkumar K. Shah 307 ITR 137. He further relied on the principles established by the Hon'ble P&H High Court in the case of ITO vs. Mohanlal Vig and Anr 139 ITR 681 that there should be some other evidence to give credence to the entries made in the books of account. It was his submission that the entries in the loose document does not give rise to presumption that there is concealed income and penalty can be levied on such entries in the loose documents.
7. The learned D.R. in reply submitted that the loose document was a seized document on which entries were confronted to the director who admitted that this document refers to the entries of company. It was also submitted that the assessee admitted that the entries in the document are not accounted for in the books of account. When the addition is made on the basis of this document the assessee choose to withdraw the ground before the CIT(A). Thus the addition stands confirmed as the assessee has not contested the same. It was his submission that many of the case laws relied upon by the learned counsel with reference to jurisdiction of assessing the amount and genuineness of the addition cannot be agitated/challenged in these proceedings as the assessee accepted the genuineness of the document and entries therein. Therefore, relying of the decision of the Hon'ble Allahabad High Court in the case of Bharat Rice Mill vs. CIT 278 ITR 599, the learned D.R. submitted that the assessment order having not been challenged to the extent of addition made on the basis of the said document it cannot be said to be a void order in a collateral proceeding under section 158BFA(2). He further relied on the decision of the Hon'ble Madhya Pradesh High Court in the case of S.S. Rattanchand Bholanath vs. CIT 210 ITR 682 to submit that the assessment based on the acceptance of the assessee that a particular amount was includable in its total income and having become final, the assessment cannot be objected to in penalty proceedings. He further relied on the principles established by the Hon'ble Allahabad High Court in the case of CIT vs. Ram Niwas Agrawal 124 ITR 432 that imposition of penalty is valid when on the basis of the admission the proceedings were taken up and concluded. He further referred to the provisions of section 6 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
132(4A) to submit that the burden is on the assessee to explain the transaction and once the transactions are not explained provisions of section 158B(b) would apply. He further relied on the Co-ordinate Bench decisions in the case of Haji Nazir Hussian & Co. vs. ITO 91 ITD 42 (Asr) (TM) with reference to the entries in the cash book, about the genuineness of the transaction in Napar Drugs Pvt. vs. DCIT 98 ITD 285 (Del) (TM) and regarding entries in the diaries in Rati Ram Gotewala vs. DCIT 89 ITD 14 (Del).
8. The learned counsel in reply submitted that there is difference in entries in the diary/notings and entries in the documents which stand at a different footing. It was his submission that the entries in the document cannot be equated with the books of account so as to attract provisions of section 68.
9. We have considered the issue. Many of the case laws relied upon by the learned counsel with reference to the addition were made on the basis of the documents are not directly applicable to the facts of the given case as the said document was seized from the residence of the Director who stated that the transactions pertain to the assessee company. It is also on record that these transactions were admitted to be unaccounted for and assessee choose to withdraw the ground when the addition was made on the said document instead of contesting. It was already stated earlier that assessee choose to contest only the addition of `33,00,000/- made on the basis of similar document and the ITAT, after examination of entries and interpretation therein and also the legal propositions deleted the addition so made. The reasons for not contesting the entries in this document are better known to the assessee but the fact is that the assessee choose to withdraw the ground before the CIT(A) who had no occasion to examine the merits of the addition as pointed out by the CIT(A) in his order while confirming the penalty. Now the provisions of section 158B(b) defines the undisclosed income as under: -
"158B. In this Chapter, unless the context otherwise requires,--
(a) .....7 IT(SS)A No. 125/Mum/2007
The Supreme Industries Ltd.
(b) "undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false."
10. According to the above, the undisclosed income included any income based on any entry in the documents which has not been or would not have been disclosed for the purpose of this Act. The entries found in the document includes certain credits which have not been explained with reference to the books of account maintained. That may be the reason why the assessee admitted the entries in the said document as income and did not pursue contesting the same in appeal. Therefore, as far as addition of the entries in the said document as undisclosed income was concerned that has become final. Therefore, the various propositions raised by the learned counsel under section 68 and it applicability does not arise in this case as the amount is defined as 'undisclosed income' under the provisions of section 158B(b) and this document was seized in the course of Search proceedings. Having accepted the entries in the books of account as belonging to the company and having been accepted the same in the quantum appeal, we are of the opinion that the assessee cannot challenge in the penalty proceedings the genuineness of the document or the genuineness of the entries therein. Had assessee challenged, it is on the Revenue to prove the genuineness of the transaction while levying penalty. However, in this case the assessee having not contested the same earlier, can not challenge now stating that the Revenue has not discharged the burden. In view of this, many of the propositions relied upon by the learned counsel do not apply.
11. Assessee has also contested that the assessment could have been made under section 158BD and not under section 158BC. On this, when it was enquired, the assessee's counsel admitted that there was jurisdiction 8 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
under section 158BC in the case of the company as well as there was search in the assessee premises aswell. Since the same A.O. is considering the assessment of the company as well as the Director, we are of the opinion that initiation of separate 158BD proceedings are not required when 158BC proceedings were open before the same officer. Even the proceedings U/s 158 BD also require that the A.O. shall proceed only under section 158BC and provisions of Chapter shall apply accordingly. Since both 158BC proceedings and 158BD proceedings are similar in procedure and assessee having been covered by search and is being assessed under provisions of section 158BC, we are of the opinion that this legal challenge now does not survive. Even otherwise the assessee has not challenged the same in the quantum appeal and having become final, the same cannot be challenged in collateral proceedings as held by the Hon'ble Allahabad High Court in the case of Bharat Rice Mill vs. CIT 278 ITR 599 relied upon by the learned D.R.
12. The penalty was levied u/s 158BFA(2). Provisions of section 158BFA(2) are as under: -
"158BFA (1) .....
(2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC:
Provided that no order imposing penalty shall be made in respect of a person if--
(i) such person has furnished a return under clause (a) of section 158BC;
(ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable;
(iii) evidence of tax paid is furnished along with the return; and
(iv) an appeal is not filed against the assessment of that part of income which is shown in the return :
Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such 9 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return."
13. Provisions of sub-section (3) provides exceptions to the levy of penalty and the assessee's case does not fall in any of the exceptions. It is admitted that the assessee has not included the said sum at the time of filing the return and the addition was made in the return and has become final. Therefore, there is a difference between the undisclosed income determined and undisclosed income shown in the return, on which second proviso of the section would apply. Penalty shall be imposed on that portion of undisclosed income determined.
14. The only way to get over the penalty is to give a bonafide explanation for the sum included. The explanation with reference to the above addition given before the A.O. as extracted by the A.O. in the penalty order at para 4 which is relevant is as under: -
"4. .....
"In the matter, we submit that we are in the process of preferring an appeal before the Income-tax Appellate Tribunal against the order of the Commissioner (Appeals) upholding the assessment order under section 158BC of the Act giving rise to the penalty proceedings. We, therefore, request you to kindly keep the penalty proceedings in abeyance as per the provisions of section 275 of the Act, till the final disposal of appeal by the Income-tax Appellate Tribunal. Without prejudice to the aforesaid, and on perusal of our records we submit as under: -
1. A search and seizure action under section 132(1) of the Act was conducted in the case of Supreme Industries Group on 29th May, 2001. As a part of the group, we were also covered under section 132 of the Act. During the course of the search action, certain documents were seized from our various premises.
2. The major areas of dispute/additions/disallowances to income under section 158BC of the Act are on account of following:
(a) .....
(b) Treating a sum of Rs.14,74,976/- as unexplained cash credit, based on interpretation of certain notings on a seized paper, and thereby taxing the same as undisclosed income for the block period.
3(a)......
10 IT(SS)A No. 125/Mum/2007The Supreme Industries Ltd.
4(a) During the course of the search at the residence of the Tapaira family at 71, Girikunj, 6th floor, Netaji Subhash Road, Mumbai, a loose paper was seized on 29th May, 2001, which was marked as Page 52 of Annexure A/1. This loose paper was explained by Mr. M.P. Taparia as belonging to the company, which has been confirmed by our company management. The said paper contained notings of Rs.14,74,976/- and Rs.5,13,318/-.
(b) We gave necessary explanation for the said loose paper.
However, the sum of Rs.14,74,976/- was added as our unexplained cash credit treating the same as undisclosed income for the block period.
(c) We submit that the notings on the loose paper represent items of estimated receipts/expenses in the nature of rough notings and they indicated expected receipts/expenses of various group companies. We submit that the notings were made by the Cashier for his information and for assessing the cash flow requirements, which could arise in the near future. We further submit that the actual receipts/expenses, if any, incurred would obviously be reflected in the books of account of the respective concerns as and when the same would have actually occurred. We submit that accordingly these notings did not form part of our regular books of account.
We submit that a sum of Rs.14,74,976/- has been treated as our unexplained cash credit, based on interpretation of notings on the said loose paper and thereby taxing the same as our undisclosed income for the block period. We submit that in the absence of any other corroborating evidence, merely on the basis of certain notings on the loose paper and its interpretation, it cannot be concluded that there was any undisclosed income. Though we have withdrawn the ground of appeal pertaining to this addition, before the Commissioner (Appeals) that is only on account of lack of available details and not as a matter of acceptance of the cash credit. As there could not be any corroborative evidence for projected expenses as per the notings of the cashier, we did not pursue the mater in Appeal.
5. From the aforesaid, you will appreciate that the additions made are on account of a noting on loose papers and its interpretation. The additions have been made by taking a different interpretation and this cannot be a ground for initiation of the penalty proceedings.
6. We submit that full, correct and complete particulars of our income were furnished in the return of income filed under 11 IT(SS)A No. 125/Mum/2007 The Supreme Industries Ltd.
section 158BC of the Act and also during the course of assessment proceedings. We therefore, request you to kindly drop the penalty proceedings initiated by you. We reiterate that we have neither concealed particulars of our income nor filed inaccurate particulars thereof. Hence, the question of levying any penalty does not arise."
15. This explanation was examined by the CIT(A) to find that the transactions are not estimation of the receipts and expenditure but they are genuine receipts and payment with a cash balance on 09-05-2001. We also pursued the said document which was placed on record. As seen from the document the credit entries titled as "cash credit" indicate that there was receipt of `14,74,976/-. The entries are as under: -
"47325 - Durg...i
150000 - Sharma, JA
422750 - Jonk
46150 - Vktji
10794 - .... Khajd
45750 - .... 24/4
264.226 - Silfn? - Prston
986995
212981 - Sharma,
1199976
150000 - .... Do.
125000 - (scribbling)
1474976
======
This indicate that there was periodical totalling also. As against cash credit, the expenditure side indicate periodic payments which included extra March Salary for Driver, Watchman, March overtime, sales tax (`54,000/-), Kore Adv. Lic. SUFL (`4,000), Sales tax Siltap-Orissa-SWHC (`15,250), Prepipe- Jalgaon- January - 9th April (`1,87,630). Entries of these total to the amount of `6,67,664/-. Further to that, again BSES payment and other payments were made which again gave a total of `6,98,170/-. After that further entries indicate Watchman O-T April (`3989) and Sjtji (pcs) (`1,50,000). Further expenditure including Radhika's B'day Gym Bill sub total `29,804 as SJT's personal A/c were accounted for totalling the expenditure at `9,51,158/-. Further to that another entry of `10,000/- SJT's official' was accounted for making the total expenditure to `9,61,658/-
12 IT(SS)A No. 125/Mum/2007The Supreme Industries Ltd.
leaving a cash with Gala on 09.05.2001 at `5.13,318/-.These entries do indicate that these are actual receipts and payments and not estimates of the expenditures and receipts as explained by the assessee during the assessment proceedings as well as during the penalty proceedings. Since the explanation is not bonafide and as admitted that the transactions are not accounted in the books of account Vide para 4 (c) in the explanation, we are of the opinion that the penalty under section 158BFA(2) on the above amount is warranted as the said entries comes within the definition of 'unexplained income' and having been found in the course of search proceedings and having been accepted by the assessee without any contest in the quantum appeal. Therefore, keeping the second proviso of the section 158BFA(2) in consideration, the penalty levied to that extent covered by ground No. 5 is confirmed.
16. A.O. is directed to modify the quantum of penalty accordingly.
17. In the result, appeal is considered partly allowed.
Order pronounced in the open court on 16th March 2011.
Sd/- Sd/-
(R.V. Easwar) (B. Ramakotaiah)
President Accountant Member
Mumbai, Dated: 16th March 2011
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) - Central-V, Mumbai
4. The CIT- Central -II, Mumbai City
5. The DR, "J" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.