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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, VP & SHRI S. RIFAUR RAHMAN, AM
आदेश / O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of the assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-48, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-48/I.T-195/DCCC-2(4)/2016-17 vide
At the outset, it is noticed, that the assessee in original grounds have filed argumentative grounds for single issue. Hence, he was asked to file a concise grounds and he filed the following concise grounds:-
“1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the action of the assessing officer in issuing notice and passing the penalty order under section 271AAA of the Act dated 26.12.2016 which is bad and invalid in the eyes of law.
The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming the action of the assessing officer in levying penalty of ₹ 22,50,000/- under section 271AAA of the Act.”
The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty under section 271AAA of the Act.
Assessment Description of declaration Amount ₹ Year 2009-10 Excess Cash found at 12,80,000/- business premises 2009-10 Jewellery found in the 3,20,000/- locker 2009-10 Renovation and repair 34,00,000/- expenses made out of books for Lonavala Project. 2009-10 Unaccounted investment 1,75,00,000/- in gold bars and gold biscuits Total 2,25,00,000/- 5. The assessee declared an additional income of ₹ 2.25 crores as business income and the Assessing Officer assessed under section 143(3) of the Act vide order dated 31.12.2010, the declaration made by assessee of ₹ 2.25 crore, as income from business and the relevant computation is given in Para 3 of the assessment order at page 11 which reads as under: -
I Income from Business or Profession Net profit as per Profit and Loss Account (-) 6,17,43,478 Less: Considered Separately: a. Income Declared (-) 2,25,00,000 b. Property Dealing Income (-) 1,18,34,820 (-)9,60,78,298 Add: Considered Separately: A. Depreciation 9,36,801 Add: As discussed in Para 2.1.1 a. Property Dealing Income (substantive) 55,96,487 b. Property Dealing Income (protective) 62,38,333 Add: Disallowance of expenses a. As per Para 2.3.2 1,41,14,224 b. Fringe Benefit Tax 86,800 c. Donation 17,200 2,69,89,845 (-)7,53,26,786 Less: Allowable Expenses a. Allowable Depreciation under section 32(1) (-) 5,24,801 b. Deferred Tax Asset (-)1,46,012 6,70,813 (-)6,90,88,453 II Income From Various Sources Income offered to taxation in response to Action Under section 132(1) to cover up any and every discrepancy in Business and Acc. Records 2,25,00,000 Gross Total Income (-)4,65,88,453 Total Taxable Income (-)4,65,88,453 Total Taxable Income Rounded Off (-)4,65,88,450 7. There is no change in the income declared by the assessee accepted in the above computation of income by the AO at item II as income from various sources as income offered to taxation in response to action under section 132(1) of the Act to cover up any and every discrepancy accounts and records. The disclosure accepted was at ₹22,50,000/- as declared by assessee. The Assessing Officer
The CIT(A) noted that the assessee has not disclosed modes of application of unaccounted amount of ₹22.50 lakhs and in the manner in which it was earned and further assessee did not pay any taxes on the undisclosed income, actually disclosed. The CIT(A)’s finding is also that even assessee has neither substantiate the manner in which he has earned this income nor pay taxes on it. Hence, the CIT(A) confirmed the action of the Assessing Officer in levying the penalty under section 271AAA of the Act. Aggrieved, now assessee is in appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that search was conducted on the business premises of the assessee under section 132 of the Act on 14.08.2008. The assessee during the course of search explained and the relevant extract of the statement recorded on 27.10.2008 is reproduced below:
Ans. My name is Jyendra P. Jhaveri, I am son of Shri Pravinchandra R. Jhaveri, I am aged 54 years, residing at 29 Nidhi Buldg, 1st Floor, Khotachi Wadi, V.P. Road Mumbai-400 004, I am Director of Ronak Gems Pvt. Ltd. and I do hereby confirmed that the oath is administered to me and I am made aware of the consequences of making false statement.
Q2. Kindly explain the discrepancies in stock in trade, cash in hand and please explain the issue of renovation expenses of your Lonavala Project of 12 bunglows.
Ans. You are well a aware that my books of accounts for the current year are incomplete as my accountant has not entered all the transactions which have taken place during the current financial year and hence I am not in position to reconcile my financial position and explain the discrepancies.
Q3. How do you intend to cover up the above mentioned discrepancy?
Ans. To cover up any and every discrepancy in my books of account, in my business and in my accounting record and to set things right and to avoid unnecessary
Q4. Do you have anything else to say?
Ans. That my above referred additional income of rs.2.25 crores over and above my current years regular income for AY 2009-10 includes my excess above my current years regular income for AY 2009-10 includes my excess cash balance of ₹ 12.8 lacs, gold ornaments lying in locker No.14 at M/s Siddhi Safe Fault Pvt. Ltd. of ₹3.2 lacs, the amounts of ₹34 lacs spent on renovation of 12 bungalow at lonavala which
Further we noticed that Shri Yogin P. Jhaveri, Director of the assessee company wrote a letter to the investigation wing, giving bifurcation of this declaration to cover up the discrepancies noticed during the search. Contents of the letter are reproduced below:
“i. “That our company have disclosed a sum of ₹2.25 crores, as additional income for AY 2009-10 being undisclosed for various business sources which will be credited to reserve and surplus of our company in our books of accounts for Financial Year 2008-09 pertaining to AY 2009-10 and it covered all our discrepancies in our business and in our accounts.
ii. The out of the said undisclosed income of ₹2.25 crores, a sum of ₹12.80 lacs is in form of unexplained cash in hand seized by the Income tax department and we have requested to Income Tax Department to adjust the same towards our first installment of Advance tax for AY 2009-10.
iv. That our of said undisclosed income of ₹2.25 crores, our company has carried out necessary repairs and renovations worth ₹34 lacs in 12 bunglows, Lonavala project as on completion of total renovation our company want to sell the said bunglows at higher price and said amount is debited to our Lonavala Porject.
That out of said undisclosed income of ₹2.25 Corres our company has acquired 15 Kilo Gold Bars and Gold Biscuits (15 Kg @ ₹ 11,66,666/- per Kg = ₹1.75 Cr) for giving the same on junghad basis for earning some rent on such janghad and said amount is debited to our Janghad stock for specific purposes of giving the same on hire basis and I have to mention that these
Vi. That I promise to pay the Income tax voluntarily on the above referred declaration of ₹ 2.25 Crores in due course of time for which I have already handed over to you the post dated cheques for such advance tax payment and I hereby requetst you to adjust the seized cash of ₹12.80 lacs towards Advance Tax payment”
We also noted that the assessee is engaged in the business of trading in rough cut and polished diamonds, gold bars jewellery and property. The assessee purchases property, carries out renovation thereon, makes the title of the property marketable and sale the same in the market for consideration. The assessee also gives its property on rent till the sale is affected. The assessee has huge stock of gold hence, they also gives its gold stock on rent popularly known as on Janghad Basis for earning Jhangad Rent/ Jhangad Commission in Metal Terms. The assessee maintains Composite Books of Accounts of the company on computer at its Accounting office away from its Head office, Branch office, property units at Ravindra Niwas. The assessee maintains books of accounts at Ravindra Niwas for the period under consideration. The directors, executives, outdoor salesman, supervisors are reporting the business Tranactions carried out by them from time to time to the Accounting office at Ravindra Niwas and hence, the books of accounts of the
The assessee has made the voluntarily declaration on the officers giving assurance that the assessee will be protected fully from penalty proceeding and prosecution under the Act. The assessee was under bonafide belief that subject to their declaring the 2.25 Crore as an additional income and making payment of appropriate tax, no penalty proceeding will be initiated and/or no penalty will be levied as assured.
The assessee has also explained to the Survey party its nature of business and the manner in which the said income is received by them for the period under consideration. The assessee has explained that they are giving their Gold Stock on Rent / Commission popularly known as Janghad basis for earning Rent/ Commission in Metal Terms which results in accumulation of Gold under Janghad system which is to be accounted for at the end of the year as a Janghad Stock representing the Rent / Commission Income in Metal Terms receivables. The assessee also explained that the renovation is under process at Lonavala Twelve Bunglow Project by contactor/Supervisor for which the payment is pending and the said renovation is accounted for at the end of the year as a renovation expense which increase the value of the property which is to be sold at higher price after renovation is completed in due course of time. The assessee also explained that there is some cash sales by our Outdoor salesman who sends cash to the office through Angadia and then reports the details of cash sales transactions to the accounts department. The cash balance of Rs. 12.80 lakhs is on account of cash sales etc. The
The assessee has carried out Renovation of Rs. 34 Lakhs through their contractors/ supervisors. The said Amount is also taken in Computation of disclosure of income. The delay in accounting the said renovation expense was due to delay in raising bills by the Contractor/ Supervisors. The delay in Accounting for certain regular expenses and certain regular income was on account of several branch offices, reporting the same, several property under renovation reporting the renovation expense in respect of various property at various places. We have noticed from the facts of the case that the assessee has accounted for all the Properties for Trading purpose under the Stock in Trade since, the same is the nature of business. The assessee has accounted for the said normal business transactions taking place from time to time and there is no concealment of income. The delay in recording the said business transactions was due to delay in reporting by the Director, Executives, Outdoor Sales Man and also on account of delay in recording the transactions in the books of accounts by the accounting
In view of the above facts and circumstances, now question arises whether the assessee has complied with all the three conditions as prescribed under the provision of section 271AAA of the Act. We noted that the three conditions mentioned in the provision of section 271AAA are (i) that the assessee should admit the undisclosed income in a statement made under section 132(4) of the Act. (ii) The assessee specify the manner in which such income has been derived and substantiate the manner in which the undisclosed income was derived. (iii) The assessee should pay the taxes together with interest in respect of undisclosed income. In term of the above provision, in the present case the assessee has disclosed the entire source of income and manner of undisclosed income earned, which is noted in Para 14 and 15 of this order. The assessee has also paid the taxes and the details are noted in Para 13 of this order. The assessee has admitted the undisclosed income of ₹ 2.25 crores and voluntarily
This position has been deliberated in detail by the co-ordinate Bench of this Tribunal in the case of DCIT vs. Salasar Stock Broking Ltd. (2016) 47 ITR (Trib.) 616 (Kolkata), wherein the Tribunal has discussed the issue in Paras 8.1, 8.2, 8.3, 9 and finally held as under:-
“8.1. From the above disclosure statement , we find that the assessee had substantiated the fact that the income in the form of advances, margin money and deposits etc which might not be proved to the satisfaction of the department with proper documentation and paper work. We also find that even the Learned AO had accepted the said offer for the said reason in his assessment order. We find that the assessee had not retracted from the disclosure petition . We find that the assessee had duly offered the additional income of Rs. 2,00,00,000/- in the case of M/s SalasarStockBrokingLtd for the Asst Year 2009-10 in the return filed u/s 153A of the Act and paid taxes thereon. In the disclosure petition itself, we find that
8.2. We also find that the decision of the Hon'ble Supreme Court in the case of Sudarshan Silks & Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 supports the case of the assessee. The brief facts of this are as below:—
"3. A search was conducted on the premises of the assessee on 14 and 15-10- 1987 and incriminating documents evidencing concealment of income by the assessee were unearthed apart from cash and jewellery found at the time of search. It was found that the appellant was maintaining double set of books and was accounting for only 50 per cent of sales in the regular set of books. This fact was admitted by Shri 1.S. Ramesh, a partner of the firm in the statement recorded under section 132(4) of the Act. Shri 1.S. Ramesh is the person-in- charge
During the course of recording the statement under section 132(4) of the Act, Shri Ramesh agreed to declare such additional income as had been estimated by the search party in the office of the appellant and its sister concerns. On the basis of these calculations, revised returns were filed by the appellant for all the years under appeal. The income as per revised returns were also accepted in toto. In
The Learned CIT(A) deleted the levy of penalty u/s 271(1)(c ) of the Act. On second appeal by the revenue, the tribunal held as follows:—
"Although there is nothing on record to show that he was given an assurance that no penalty would be levied, the fact however clearly suggest that such an inducement must have been given by the searching party. When only partial evidence in support of concealment for a very limited period was detected during the search, why would a man go to offer much higher amounts for a large number of years unless he was promised some reciprocal benefit like
Again, although incriminating materials were found out during the search, such materials were however ultimately not used by the departmental authorities in making the assessments. The assessments were made totally on the basis of estimation income for the earlier years as disclosed in the revised returns. The revised returns should therefore be considered as having been filed in good faith. So far as assessment of the undisclosed income is concerned, such revised returns would be sufficient evidence for that purpose. However, for levying penalty, some further and stronger evidences were surely required. In the cases relied upon by the learned DR, the search itself discovered the undisclosed income. In the instant cases, the search merely led to certain clues to the undisclosed income and but for the statement made by Sri Ramesh, it would perhaps have not been possible for the Department to assess
These findings have been finally approved by the Hon'ble Supreme Court by observing as under:-
Accordingly, the orders under appeal are set aside and that of the CIT(Appeals) and Tribunal restored. It is held that in the facts and circumstances of the case, penalty under section
8.3. We find that the following decisions support the case of the assessee :—
(a)Decision of co-ordinate bench of Cuttack Tribunal in the case of Pramod Kumar Jain v. Dy. CIT [2013] 33 taxmann.com 651 (Cuttack - Trib)
'6. We have heard the rival contentions and perused the material available on record. On consideration of the facts and circumstances of the case, we are inclined to hold that no definition could be given to the "specified manner" insofar as the very statement on oath u/s. 132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance to notice u/s. 153A accounting the assets. Therefore, the case laws cited at the Bar clearly indicate that the penalty is not automatic if one of the purported condition is not fulfilled although all the conditions have been agreed to of having fulfilled by the Assessing Officer insofar as the tax and interest has been recovered. Penalty has been levied after the tax has been recovered therefore answers the queries raised by the learned
In the result, all the appeals filed by the assesses are allowed.'
(b)Decision of co-ordinate bench ofNagpur Tribunal in the case of Concrete Developers v. Asstt. CIT [2013] 34 taxmann.com 62 (Nagpur - Trib)
In view of the aforesaid facts and circumstances and specific findings given by us and in view of the judicial precedents relied upon hereinabove, we hold that the assessee is entitled for immunity from levy of penalty u/s 271AAA(2) of the Act and accordingly the penalty levied by the Learned AO is cancelled. The grounds raised by the revenue are dismissed.”
In view of the above factual discussion and the position of law and the fact that the assessee has complied with the conditions of section 271AAA(2) of the Act, the assessee is not liable for penalty
Sd/- Sd/- (ए रयपऔय यहभान/ S. RIFAUR RAHMAN) (भहावीय स िंह /MAHAVIR SINGH) (रेखा दस्म / ACCOUNTANT MEMBER) (उऩाध्मक्ष / VICE PRESIDENT) भुिंफई, ददनािंक/ Mumbai, Dated: 30. 09.2021 ुदीऩ यकाय ,व .ननजी चिव/ Sudip Sarkar, Sr.PS आदेश की प्रतिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अऩीराथी / The Appellant 2. प्रत्मथी / The Respondent. 3. आमकय आमुक्त ) अऩीर ( / The CIT(A) 4. आमकय आमुक्त / CIT 5. ववबागीम प्रनतननचध आमकय , अऩीरीम अचधकयण भुिंफई , / DR, ITAT, Mumbai 6. गार्ा पाईर /Guard file. आदेशान सार/ BY ORDER,
त्मावऩत प्रनत //True Copy व .तनजी सधिव Sr. Private Secretary / आयकर अपीऱीय अधिकरण ,भुिंफई / ITAT, Mumbai