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Shri Pankaj P. Saraiya 2 6525 & 6539/Mum/2016 ORDER
PER N.K. PRADHAN, AM
The captioned appeals are directed against the order of the Commissioner of Income Tax (Appeals)-52 [in short ‘CIT(A)’], Mumbai and arise out of the assessment completed u/s 143(3) r.w.s. 153A and penalty levied u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’). As common issues are involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience.
Though the cases were fixed for hearing on 21.03.2018, 24.04.2018, 16.07.2018, 19.07.2018, 12.09.2018, 06.02.2019 and 04.04.2019, neither the assessee nor his authorized representative appeared before the Tribunal on the above dates. Therefore, we are proceeding to dispose of these appeals after hearing the Ld. DR and examining the relevant documents available on record. Assessment Year: 2005-06 3. The grounds of appeal
filed by the assessee read as under:
1. The Ld. CIT(A) erred in not holding that the assessment in reference was bad-in-law and/or was otherwise time barred.
2. The Ld. CIT(A) erred in not holding that in the facts and circumstances of the case the reference made for special audit u/s 142(2A) was bad-in-law and that the assessment made based on such audit would also be rendered bad- in-law.
3. The Ld. CIT(A) erred in confirming the addition of Rs.2,19,000/- made by the AO u/s 68 in respect of the alleged unexplained cash deposits in the bank account of the appellant.
Shri Pankaj P. Saraiya 3 6525 & 6539/Mum/2016 4. The Ld. CIT(A) erred in confirming the addition of Rs.98,840/- by the AO u/s 68 in relation to the alleged unexplained cheque and other deposits (like RTGS etc.) in the bank account of the appellant.
The Ld. CIT(A) erred in not appreciating and holding that in the facts and circumstances of the case: (A) the impugned addition u/s 68 could not be assessed in the hands of the appellant, (B) in any case the source of impugned cash credits was explained and (C) such an addition could not be made in an assessment made u/s 153A.
6. Without prejudice to the above ground, it is submitted in the alternative that the Ld. CIT(A) erred in not appreciating and holding that only the peak of cash credits in reference could be added u/s 68.
The Ld. CIT(A) erred in not allowing the plea of the appellant that since 50% of salary income of Rs.7,80,000/- received by the appellant from M/s Avon Corporation Ltd. was disallowed in the hands of the said Avon Corporation Ltd., in the hands of the appellant to the salary income assessed/assessable had to abate/ be reduced by 50% i.e. by Rs.4,50,000/-.
The Ld. CIT(A) erred in not appreciating and holding that since a massive addition of Rs.1,21,79,642/- was made in the hands of Avon Corporation Ltd. for want of supporting, the additions made in the hands of the appellant were required to be reduced to the extent the additions in the hands of the said Avon Corporation Ltd. were sustained.
The Ld. CIT(A) erred in confirming the interest levied by the Ld. AO u/s 234A and u/s and u/s 234B.
Briefly stated, the facts are that a search and seizure action u/s 132(1) of the Act was carried out on M/s Avon Corporation Ltd. group of cases on 04.02.2011. The appellant happens to be the Managing Director of M/s Avon Corporation Ltd. as also the main person of the group and was covered u/s 132(1) of the Act. During the course of search, certain incriminating material was found and seized. Subsequently, a notice u/s Shri Pankaj P. Saraiya 4 6525 & 6539/Mum/2016 153A of the Act was issued to the assessee on 08.02.2012. In response to the said notice, the assessee filed a return of income on 06.08.2012, declaring total income of Rs.7,77,500/-, which was declared in the return of income originally filed u/s 139(1) of the Act on 31.08.2005. Subsequently, assessment proceedings were taken up and in due consideration to the facts of the case, the AO added a sum of Rs.2,19,000/- as unexplained cash deposits in the savings bank account of the assessee bearing No.000210100054583 maintained with Bank of India, Andheri (W) Branch. In fact, this issue was referred to the Special Auditors appointed u/s 142(2A) of the Act and they gave a categorical finding that in the absence of books of accounts, they were not in a position to verify whether any cash advance was received by the assessee. During the course of assessment proceedings, the assessee submitted a very brief clarification that cash was deposited in the bank account after cash withdrawals made in earlier years and short-term loans taken from various parties. However, no further details were submitted. The AO, accordingly, added this amount as unexplained income chargeable to tax in the hands of the assessee. Besides, it was noticed by the AO that the assessee had received loan, etc., amounting to Rs.11,76,318/- from various parties, sources of which he failed to explain to the satisfaction of the AO, resulting into an addition of these amounts also. Further, the AO also made an addition of Rs.10,000/- on account of unexplained investment in share application money with M/s Avon Corporation Ltd. Accordingly, the assessment was made on an income of Rs.21,82,820/-, vide order dated 30.10.2013 passed u/s 143(3) read with sec. 153A of the Act.
Shri Pankaj P. Saraiya 5 6525 & 6539/Mum/2016 5. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). Having examined the contentions of the assessee, the Ld. CIT(A) vide order dated 28.12.2015 held that (i) the objection of the assessee that the assessment order was passed by the AO without the approval of the Joint Commissioner is unsustainable and is, therefore, rejected, (ii) the assessment has been completed by the AO well within the limitation period laid down by the statute, (iii) the reference u/s 142(2A) has been validly made in this case and consequently, the assessment made on the basis of such audit report is also valid, (iv) in absence of any direct co-relation, no benefit of cash withdrawal of Rs.40,000/- can be given to the assessee as against the cash deposit of Rs.2,90,000/-, (v) the assessee has received Rs.55,229/- from Smt. Rupal Saraiya as on 07.02.2005 through Cheque No. 54584 and a further amount of Rs.55,000/- on 07.03.2005 by Cheque, by way of loan. Since the identity, capacity and genuineness of transaction is proved, no addition can be made by the AO in respect of these amounts received from Smt. Rupal Saraiya, (vi) as regards the loans of Rs.54,500/- from Shri B.L. Doshi, since, Shri Doshi is independently assessed to tax, this amount is also treated as explained, (vii) several credits have come from the company Avon Corporation Ltd., where the assessee happens to be the Chairman and Managing Director. The total of such transactions during the year is Rs.9,22,893/-. On facts of the case, the amount of Rs.9,22,893/- is treated as explained, (viii) in the case of Smt. Shantaben Saraiya, the source of credit of Rs.44,550/- is unexplained, (ix) in the case of Pratapsinh Saraiya, the amount of Rs.54,290/- is unexplained, (x) the addition of Rs.10,000/- made by the Shri Pankaj P. Saraiya 6 6525 & 6539/Mum/2016 AO as unexplained investment in share application money of Avon Corporation Ltd. is confirmed.
The Ld. DR submits that the Ld. CIT(A), after hearing the authorized representatives of the assessee and the written submission filed by them and going through the facts of the case and assessment records has passed the appellate order dated 28.12.2015 and partly allowed the appeal on merits. It is stated that the order passed by the Ld. CIT(A) being reasonable, be confirmed.
7. We have heard the Ld. DR and perused the relevant materials on record. In the instant case as mentioned earlier during the course of search, certain incriminating material was found and seized. In this case, the issue was referred to the Special Auditors appointed u/s 142(2A) of the Act and they stated categorically that in absence of books of accounts, they were not in a position to verify whether any cash advance was received by the assessee. Regarding the addition of Rs.2,19,000/- made by the AO as unexplained cash deposits in the bank account of the assessee, the Ld. CIT(A) has rightly held that in the absence of any direct co-relation, no benefit for the cash withdrawals of Rs.40,000/- can be given to the assessee against the cash deposits of Rs.2,19,000/-. Regarding the addition of Rs.11,76,318/- made by the AO as unexplained cheque deposits/receipts in the bank account of the assessee, the Ld. CIT(A) after an elaborate discussion confirmed the addition of Rs.98,840/- and deleted Rs.10,77,478/-.
Shri Pankaj P. Saraiya 7 6525 & 6539/Mum/2016 Regarding the addition of Rs.10,000/- made by the AO as unexplained investment in share application money of Avon Corporation Ltd., as the AR of the assessee could not furnish any explanation in this regard, the Ld. CIT(A) confirmed the above addition. As mentioned earlier the case of the assessee was referred to the Special Auditors appointed u/s 142(2A) of the Act and they gave a categorical finding that in the absence of books of accounts, they were not in a position to verify whether any cash advance was received by the assessee. We also find that during the course of assessment proceedings, the assessee submitted a very brief clarification that cash deposited in the bank account after cash withdrawals made in earlier years and short term loans taken from various parties. However, no further details were submitted before the AO. In view of the above facts, we uphold the order of the Ld. CIT(A) and dismiss the appeal. ITA No. 6525/MUM/2016 Assessment Year: 2007-08 8. The grounds of appeal filed by the assessee read as under:
1. The Ld. CIT(A) erred in confirming penalty of Rs.40,73,990/- levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961.
2. The Ld. CIT(A) erred in not holding that in the facts and circumstances of the case there was no case to levy the impugned penalty.
3. The Ld. CIT(A) erred in not holding that the levy of impugned penalty was bad in law and/or was otherwise time barred.
Shri Pankaj P. Saraiya 8 6525 & 6539/Mum/2016 4. The Ld. CIT(A) erred in not appreciating that the impugned penalty was excessive and on the higher side.
9. In a nutshell, the facts are that a search and seizure action u/s 132(1) of the Act was carried out on M/s Avon Corporation Ltd. group of cases on 04.02.2011. The brief facts leading to the assessment made by the AO u/s 143(3) r.w.s. 153A has been delineated at para 4 hereinbefore. For the AY 2007-08 the AO made an assessment on an income of Rs.21,82,820/- vide order dated 30.10.2013 passed u/s 143(3) r.w.s 153A of the Act. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the appeal of the assessee was disposed of by the Ld. CIT(A) vide order dated 22.02.2014, in which the addition of Rs.1,17,50,928/- was confirmed as unexplained credits and a relief of Rs.3,43,160/- was granted. Also the Ld. CIT(A) confirmed the unexplained cash deposits of Rs.14,33,500/-. Thereafter, the AO levied a penalty of Rs.40,73,990/- u/s 271(1)(c) in respect of the addition of Rs.1,17,50,928/- and unexplained cash deposits of Rs.14,33,500/-, totalling to Rs.1,31,84,428/-. Aggrieved by the penalty of Rs.40,73,990/- levied by the AO u/s 271(1)(c), the assessee filed an appeal before the Ld. CIT(A). After going through the written submission filed by the assessee, reproduced at page 4-6 of the order dated 17.08.2016 and the facts of the case, the Ld. CIT(A) referred to Explanation 5A to section 271(1)(c) and the decision in CIT v. Zoom Communications Pvt. Ltd. (2010) 327 ITR 510, MAK Data v. CIT 358 ITR 593 (SC) and CIT v. Lal Chand Tirath Ram (1997) 225 ITR 684 (P&H), the Ld. CIT(A) held that the assessee has concealed the particulars of his income within the meaning of Explanation 1 to section Shri Pankaj P. Saraiya 9 6525 & 6539/Mum/2016 271(1)(c) r.w. Explanation 5A and confirmed the penalty of Rs.40,73,990/- imposed by the AO.
Before us, the Ld. DR submits that the above penalty has been levied by the AO in respect of unexplained credits, cash deposits in the accounts of the assessee, which were detected because of a search and seizure action carried out on the premises of the assessee u/s 132(1) on 04.02.2011. The issue of taxability of these unexplained credits has been decided against the assessee by the Ld. CIT(A). Thus it is argued that the Ld. CIT(A) has rightly confirmed the penalty of Rs.40,73,990/- as the assessee has concealed the particulars of this income within the meaning of Explanation 1 to section 271(1)(c) r.w. Explanation 5A of the Act.
We have heard the Ld. DR and perused the relevant materials on record. The reasons for our decisions are given below. In the instant case, vide order dated 18.03.2013 passed u/s 142(2A), the accounts of the assessee were ordered to be audited by accountant defined in the Explanation below sub-section (2) of section 288 of the Act and M/s TR Chadha & Co., CA was authorized to conduct Special Audit in the assessee’s case. The Special Auditors remarked in the audit report that the extent of compliance made by the assessee before them was below par and the books of account of the assessee before them was below par and the books of account for the relevant period do not reflect true and fair results. In the instant case, the AO has levied the penalty on unexplained credits and cash deposits in the accounts of the assessee, which were Shri Pankaj P. Saraiya 10 ITA Nos. 1130, 6525 & 6539/Mum/2016 detected because of a search and seizure action carried out on the premises of the assessee u/s 132(1) on 04.02.2011. The issue of taxability of those unexplained credits has been decided by the Ld. CIT(A) against the assessee. As the credits remained unexplained, the Ld. CIT(A) has rightly relied on the decision in Zoom Communications Pvt. Ltd. (supra), MAK Data (supra) and Lal Chand Tirath Ram (supra) and held that the assessee has concealed the particulars of his income within the meaning of Explanation 1 to section 271(1)(c) r.w. Explanation 5A of the Act and confirmed the penalty of Rs.40,73,990/-. In view of the above facts, we uphold the order of the Ld. CIT(A) and dismiss the appeal. Facts being identical, our decision for AY 2007-08 in ITA No. 6525/M/2016 applies mutatis mutandis to AY 2011-12 (ITA No. 6539/M/2016).