Income Tax Appellate Tribunal - Ahmedabad
Dy.Cit.,Cent.Circle-1,, Surat vs Praful A.Shah, Surat on 22 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER,
AND SHRI S. S. GODARA, JUDICIAL MEMBER.
ITA Nos.974 & 975/Ahd/2012 with C.O. Nos. 113 & 114 /Ahd/2012
(Assessment Years:2008-09 & 2009-10)
The Deputy Commissioner of Income Tax,
Central Circle - 1, Surat Appellant
Vs.
Praful A Shah
Garden Mills Compound, Sahara
Darwaja, Ring Road, Surat - 395003 Respondent / Cross Objector
PAN: AHHPS2727C
राज व क ओर से/By Revenue : Shri Sita Ram Meena, Sr. D.R.
आवेदक क ओर से/By Assessee : Shri J. P. Sahah & M. J. Shah, A.R.
सन
ु वाई क तार ख/Date of Hearing : 17.11.2016
घोषणा क तार ख/Date of
Pronouncement : 22.11.2016
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
These two Revenue's appeals and assessee's Cross Objections therein for A.Ys. 2008-09 & 2009-10, arise against separate order of CIT(A)-II, Ahmedabad's common order dated 20.03.2012 in appeal nos. CIT(A)- II/CC.1/101 & 102/2011-12; respectively, in proceedings under section 271AAA of the Income Tax Act, 1961; in short "the Act".
ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -2-
2. We come to rival pleadings. The Revenue's identical ground in its both appeals seeks to revive the impugned Section 271AAA penalties as imposed by the Assessing Officer in his orders dated 21.06.2011 to the tune of Rs.15lacs and Rs.12,50,000/-; respectively. The assessee's Cross Objections aver that the CIT(A) has erred in confirming the impugned penalties in the two impugned assessment years to the tune of Rs.36,128/- and Rs.19,190/-; respectively.
3. We first come to Revenue's appeal. The department had carried out the impugned search in assessee's case on 12.06.2008. He appears to have disclosed income of Rs.1.5crores and 1.25 crores; respectively in course thereof. The assessee would include the same in his returns. The same stood accepted. The Assessing Officer framed assessments u/s.153A r.w.s. 143(3) of the Act assessing the above incomes in the two assessment years. He however initiated the impugned penalty proceedings u/s.271AAA of the Act in both assessment years.
4. We now advert to assessee's reply in the penalty proceedings in question. He strongly objected Assessing Officer's proposal for the reason that he had complied with all necessary conditions u/s.271AAA(III) of the Act i.e. manner of having derived the above income followed by substantiation thereof along with payment of all taxes and interest. The Assessing Officer observed in his penalty order that the assessee's act and conduct in declaring the above additional income neither described the manner of having derived the same nor any substantiation had come from his end in support of the statement. He accordingly levied the impugned penalties of Rs.15lacs and Rs.12,50,000/-; respectively.
5. The assessee preferred separate appeals. The CIT(A) partly accepts the same as follows:
"5. I have considered the facts of the case mentioned by the Assessing Officer, the basis of levy of penalty, the submissions made by the Ld. ARs on behalf of the ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -3- appellant and the case laws relied upon. The appellant has filed the return of income for assessment year 2008-09 on 15/04/2009 and for assessment year 2009-10 on 30/09/2009 showing additional income of Rs. 1,50,00,000/- and Rs.1,25,00,000/- respectively on which ld Assessing Officer has levied penalty u/s 271AAA of the Act for Rs l5,00,000/- in A.Y. 2008-2009 and Rs 12,50,000/- in A.Y. 2009-2010 mainly on the ground that the gold ornaments and silver utensils valued at Rs 5,53,176/- (Rs.3,61,276/- in A.Y: 2008-2009 and Rs 1,91,900/- in A.Y. 2009-2010), found during search were unaccounted and not disclosed in the books of accounts and the appellant's case does not fall in exception criteria provided u/s 271AAA(2) of the Act as well such amount disclosed in the return of income is undisclosed income of the appellant.
On careful consideration of the entire facts of the appellant's case, it is an undisputed fact that the search was conducted at the appellant's premises on 12/06/2008 and in the statement recorded u/s 132(4) of the Act, the appellant has not made any disclosure of unaccounted income but additional income has been offered to tax in the return of income filed for the present assessment years. The appellant has claimed that the additional income shown in the return of income filled for both the assessment years is not with reference to any unaccounted valuables/ assets/expenditure etc based on the seized, documents found during the course of search or represents undisclosed income but was shown in the return of income to cover up any irregularities or discrepancies that may be found for which the appellant may not be able to provide evidence to the fullest satisfaction of the Assessing Officer. Along with the Statement of computation of total income, the appellant has appended note containing aforesaid nature of additional income shown in the return of income. It is further submitted that in the case of the appellant, the assessment orders u/s 143(3) r.w.s 153A of the Act for both the assessment years involved had been passed on 31/12/2010 wherein total income shown in the return of income filed by the appellant had been accepted after making addition of Rs.29,500/- in A.Y. 2008-2009 and Rs 29,45,000/- for unexplained investment in the painting purchased for which separate penalty proceedings u/s 271(1)(c) are initiated and penalty u/s 271 AAA was initiated for additional income shown in the. return of income in both assessment years separately. The provisions of section 271 AAA reads as under:
"Penalty where search has been initiated.
271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007, the assesses shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate often per cent, of the undisclosed income of the specified previous year.
(2) Nothing contained in sub-section (1) shall apply if the assessee,--
(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived ;
ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -4-
(ii) substantiates the manner in which the undisclosed income was derived ; and
(iii) pays the tax, together with interest, if any, in respect of the undisclosed income., (3)..... , (4)....
Explanation.-- For the purposes of this section,--
(a) "undisclosed income" means--
(i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 32, which has--
(A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of the search ; or
(ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not. been conducted;..."
The appellant as stated herein above, has shown additional income of Rs 1,50,00,000/-in A.Y. 2008-2009 and Rs 1,25,00,000/- in A.Y. 2009-2010 in the return of income and the same was not offered to tax in the statement recorded u/s 132(4) of the Act hence, exception criteria provided in section 271AAA(2) is not at all applicable in present case. However, for levy of penalty u/s 271AAA, foremost condition is that penalty is leviable only on "undisclosed income" of the appellant for which specific definition has been provided under the Act as referred herein above. The appellant has shown additional income in the return of income filed for current assessment years but no capitalization of such amount has been claimed in the books of accounts. In the assessment order passed by Assessing Officer, there is even no whisper about any unaccounted income or unexplained expenditure found during the course of search or any income of the specified previous year represented, either wholly or partly, by any money; bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents .or transactions found in the course of a search under section 132, which has not been accounted in the books of accounts. Even during the course of search, no money, bullion, jewellery or other valuable articles or things were found which were not accounted or represents unexplained expenditure or no seized documents were found which represents unaccounted income pertaining to current assessment year. During the course of search, no statement of appellant was recorded which relates to unaccounted income/unaccounted expenditure or in search, no corresponding unaccounted assets were found.
ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -5- However, the Assessing Officer has, in penalty orders at para 3(B), 3(D), 3(E) stated that in the assessment proceedings, discrepancy in jewellery found during the course of search and jewellery shown in the books of accounts to the extent of Rs 5,53,176/- (Rs.3161,276/- in A.Y. 2008-2009 and Rs. 1,91,900/- in A.Y. 2009-2010) was found which was considered as covered by the disclosure.
5.1 The appellant's explanation regarding such discrepancies is factually incorrect and false because the gold jewellery and the silver utensils valued at Rs 5,53,7167- were found during the search and were not declared in the W.T. Return/books of accounts and this was quantified by the Assessing Officer on tallying one to one item during the assessment proceedings. These items were not declared in the books at all. These were not treated as undisclosed due to minor discrepancy but were treated undisclosed because these items were totally not declared and accounted for so the undisclosed income to the extent of Rs Rs 5,53,716/- declared in the return of income, is represented by unaccounted jewellery and valuable. Regarding claim of the appellant that as against total gold jewellery of 16526.69 gms declared under the W.T. Returns of different family members, the total jewellery of 15297.30 gms was found in the search hence, no unaccounted jewellery was found, I have perused the submission made by the appellant and on careful consideration of the entire details, it is emanating that gold jewellery and silver worth Rs 5,53,716/- as referred herein above found during the course of search were not found recorded in books of accounts or jewellery declared in wealth tax return and the appellant himself requested to set off the items against additional income declared in the return of income for both the assessment years. Such difference is found with reference to items which are not declared in W.T. record or books of accounts of any of the family member of the appellant. As such, such items are not reflected in W.T. records or books of accounts of any of the family members of the appellant. Thus, amount of Rs 5,53,716/- represents undisclosed income of the appellant as these items were claimed to-be belonging to the appellant: In such a situation, the additional income to the extent of Rs 3,61,276/- in A.Y.. 2008-2009 and Rs 1,91,900/- for A.Y. 2009-2010, cannot be considered voluntary surrender during the course of search and such amount falls under the definition of "Undisclosed Income" as per clause (a) of Explanation to Section 271 AAA and these amount offered in the return of income is in fact undisclosed income of appellant which has not been admitted in statement u/s 132(4) of the act and further for which the manner of earning such income and substantiating manner as provided in section 271 AAA are not described during the assessment proceedings or during search hence penalty u/s 27TAAA @ 10% of such income being Rs 36,128/- in A.Y. 2008-2009 and Rs 19,1907- in A.Y. 2009-2010 is confirmed.
The remaining additional income shown in the return of income which was not due before search date for both the assessment years, is voluntary offer of income and such amount in no circumstances, can fall under the definition of "undisclosed income" as referred herein above as such income does not represented either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132 and same has not been recorded in the books of accounts. Once the amount offered in the return of income is not undisclosed income of the appellant as per specific definition provided in the Act for the purpose of levying penalty, question of levy of penalty u/s 271AAA does not arise. In view of these facts and circumstances of the cases, it is held that the Assessing Officer was not ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -6- justified in levying penalty u/s 271AAA of the Act @ 10% on balance amount of Rs 1,46,38,724/- (1,50,00,000/- less Rs 3,61,276/-) and Rs 1,23,08,100/-. (Rs 1,25,00,000/- less Rs 1,91,900/-) in A.Y. 2008-2009 and hence, the penalty u/s 271 AAA of Rs 14,63,872/- in A.Y. 2008-2009 and Rs 12,30,810/- is deleted."
This leaves both the parties aggrieved to the extent indicated hereinabove.
6. Ld. Departmental Representative strongly reiterates Assessing Officer's findings that the assessee did not specify and substantiate the manner of deriving the impugned undisclosed income. Ld. counsel representing assessee files before us hon'ble jurisdictional high court's judgment (2008) 299 ITR 305 (Gujarat) as well as (2005) 278 ITR 454 (Allahabad) CIT vs. Radha Kishan Goyal to submit that the departmental authorities never put such specific queries qua both these two aspects whilst recording Section 132 (4) statement and in such cases, the impugned benefit of statutory immunity cannot be denied. We further find that the ld. CIT(A) further concludes that this is not even a case involving undisclosed income as defined in Section 271AAA (Explanation (a)
(i) in the nature of any money, bullion, jewellery or other valuable articles or things so as to invoke the impugned penal provision. The same goes unrebutted from Revenue's end. We are accordingly of the opinion that the assessee has complied with the above two immunity conditions and also the Revenue fails in making the instant case to be an instance involving any undisclosed income. We thus uphold the lower appellate findings on both counts. The Revenue's appeals ITA Nos. 974 & 975/Ahd/2012 are declined.
7. This leaves us with the assessee's Cross Objections challenging both the lower authorities' action in imposing the impugned penalties of Rs.36,128/- and Rs.19,190/- in the two assessment years in question. It has already come on record that the assessee's total gold jewellery as declared in wealth tax returns weighs 16,526.69grms. whereas the department could found only 15297.30grms. jewellery in the course of search. We fail to understand as to how the differential weight of jewellery could be held to be unaccounted once ITA Nos.974 & 975/Ahd/2012 & C.O. Nos. 113 & 114/Ahd/2012 (DCIT vs. Praful A Shah) A.Ys. 2008-09 & 2009-10 -7- the larger figure already stood declared for assessment under wealth tax provisions. Ld. CIT(A) is of the view that there are some items which are found in the course of search but not reflected in the wealth tax return. This fails to impress upon us as we are concern with the gross weight of the jewellery item which is already much more than that found in the course of search. Ld. counsel at this stage also quotes CBDT's circular no.1916 dated 11.05.1994 laying down guidelines as per the traditional Hindu society norms wherein jewellery items are gifted on auspicious occasions of birth, marriage and other ceremonies. We have duly considered the same and find no reason to concur with the lower appellate observations under challenge. Both these two penalties are deleted. Cross Objections no.113 & 114/Ahd/2012 are accepted.
8. These two Revenue's appeals ITA Nos.974 & 975/Ahd/2012 are dismissed. Assessee's Cross Objection Nos. 113 & 114/Ahd/2012 therein are allowed.
[Pronounced in the open Court on this the 22nd day of November, 2016.] Sd/- Sd/-
(N. K. BILLAIYA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 22/11/2016
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आय!
ु त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।