PRITI DEVENDRA SHAH,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

आदेश आदेश / ORDER आदेश आदेश

PER BENCH :

There are 4 appeals of the assessee under consideration involving assessment years 2008-09 to 2011-12. All these 4 appeals revolve around the common issue of taxation of unaccounted jewellery and silver.

2 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

seized during the search action. However, the seized papers during

the search action named Bundle No.3 lists out the bills showing the

evidence of purchase of jewellery and such acquisition of jewellery

works out to Rs.71,40,553/- and the details of acquisition are listed in

a tabular form. Relevant assessment-year wise details are in the table

which is extracted here as under :

S. Seized Party name Particulars Date of bill Amount A.Y. Total No. page no 1 2 NA Gold 11/06/2007 416000 2008-09 2 8 NA jewellery 11/06/2007 937368 2008-09 3 11 Govardhan jewellery 19/08/07 55757 2008-09 4 13 NA jewellery 27/03/08 500000 2008-09 2505578 5 21 NA jewellery 27/04/07 596453 2008-09 6 1 NA Earring 23/10/08 62000 2009-10 7 9 NA jewellery 07/09/2008 83750 2009-10 8 10 NA jewellery 10/01/2008 1410000 2009-10 1828750 9 14 NA NA 9/7/08, 273000 2009-10 25/10/08 10 5 Arena Kundan Set 22K 26/06/09 127596 2010-11 11 6 Pannalal D P Set 15/06/09 18938 2010-11 Zaveri 12 16 NA jewellery 30/05/09 1160000 2010-11 13 17 Gokul Gems jewellery 06/01/2009 4500 2010-11 & Jewellery 14 18 NA jewellery 27/12/09 1130000 2010-11

2455634 15 19 Gokul Gems jewellery 06/01/2009 14600 2010-11 & Jewellery 16 15 Shah jewellery 18/01/11 38089 2011-12 Babulal Gokuldas 17 20 Gala jewellery 12/01/2010 212502 2011-12 Diamond 350591 18 4 Card I5-008 NA NA 100000 2011-12

7140553 Total

during the A.Y. 2008-09 works out to Rs.25,05,578/-. Similarly,

Rs.18,28,750/- is the jewellery relevant to the A.Y. 2009-10,

Rs.24,55,634/- for the A.Y. 2010-11 and Rs.3,50,591/- is for the A.Y.

2011-12.

3 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

availability of the dates of acquisition of the said jewellery, the whole of

this amount of Rs.71,40,553/- was taxed in the A.Y. 2011-12. Infact,

assessee offered the same during the said search proceedings. The

said unaccounted investment of Rs.71,40,553/- on account of

jewellery was offered to tax in the return of income filed by the

assessee for A.Y. 2011-12. However, during the assessment

proceedings, ignoring the above arrangement, the AO issued a notice

u/s.153C of the Act for the A.Yrs. 2008-09 to 2010-11 and proceeded

to tax the unaccounted jewellery of 25,05,578/- for the A.Y. 2008-09,

Rs.18,28,750/- for the A.Y. 2009-10 and Rs.24,55,634/- for the A.Y.

2010-11 respectively. In doing so, the dates appearing in the seized

documents were relied by the AO. However, when it comes to the

addition for the A.Y. 2011-12 is concerned, the AO proceeded to tax as

per the income returned by the assessee without granting any

telescoping benefit. To that extent, it is a case of double taxation on

the said unaccounted jewellery. The CIT(A) confirmed the aforesaid

additions for all the 4 years, i.e. A.Yrs. 2008-09 to 2011-120-11. In

effect, the amount of Rs.67,89,962/- is taxed twice both in the A.Y.

2011-12 cumulatively and in the individual assessment years.

the 4 years and confirmed by the CIT(A), the assessee is in appeal

before us.

no objection to not to press the appeals for A.Yrs. 2008-09 to 2010-11

if the suitable directions are given to the AO with regard to the A.Y.

2011-12 which is in effect of granting relief to the assessee to the

extent of Rs.67,89,962/-.

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additional grounds and the same are extracted as under :

“1. Assessee submits that if addition made on account of excess jewellery of Rs.25,05,587/- in the A.Y. 2008-09, Rs.18,28,750/- in the A.Y. 2009-10 and Rs.24,55,634/- in the A.Y. 2010-11 is confirmed as to be taxed in the respective years then telescopic benefit of these amounts be given in the A.Y. 2011-12. 2. Assessee submits that this will be double addition once on the basis of seized paper in the respective years and again in the A.Y. 2011-12 on the basis of declaration u/s.134(4) of the Act in the A.Y. 2011-12. 3. The assessee therefore submits that on these facts the matter may be set aside to the AO for the purpose of taxing the amounts in the correct year and income for the A.Y. 2011-12 be reduced to the extent of amount taxed in the year 2008-09 to 2020-11 on account of excess jewellery. 4. The assessee submits that the additional grounds raised are legal in nature and as all the facts are on record, the assessee request for admission of the above additional grounds of appeal.”

all the 4 years, Ld. AR for the assessee submitted that it is unfair that

the manner of making the assessment on the amount to the extent of

Rs.67,89,962/- is unsustainable in law. Further, the fact of making

addition of Rs.67,89,962/- in the A.Y. 2011-12 was demonstrated by

the Ld. AR for the assessee. Drawing our attention to the

computation of income placed at page 2 of the paper book and also

drawing our attention to item No.2 on the said page, he demonstrated

that an amount of Rs.68,53,001/- was already offered to tax under

the head “income from other sources” -(Bank Int./Int. on Bonds (Bank

Interest) other income (Income disclosed in search-jewellery).

Mentioning that assessee erroneously offered the said amount in the

A.Y. 2011-12, Ld. AR submitted that the assessee is under the

bonafide belief that such income will not be added by the AO once

again in the A.Yrs. 2008-09 to 2010-11. But this is a case where the

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AO unfairly taxed this amount in the respective assessment years also

without granting any telescopic benefit in the A.Y. 2011-12.

Ld. AR for the assessee submitted that it is the duty of the AO to make

proper assessment guiding the assessee in every reasonable way,

particularly in the matter of claiming and securing reliefs as per the

rules and procedures laid down in the Income tax Act and the Rules.

Further, he submitted that there is no bar for the AO for making an

assessment even if it has an effect of reduction of return of income and

if it is in the interest of administration of justice. He also brought our

attention to the Nagpur Bench decision in the case of DCIT Vs.

Sanmukhdas Wadhwani 85 ITD 734. Relying on the decision of Pune

Bench of the Tribunal in the case of Serum Institute of India Ltd. Vs.

DCIT and Vice versa in ITA Nos. 985 and 986/PUN/2015 and ITA Nos.

1535 and 1536/PUN/2015, dated 28-11-2017, Ld. AR for the assessee

also submitted in favour of taxing the amounts in the correct

assessment year even if means having a negative effect for the A.Y.

2011-12.

orders of the AO/CIT(A) and mentioned the fact of not raising the issue

of telescoping benefit before the lower authorities. In any case, he

fairly concurred with the fact that the issue raised by the assessee

through the additional grounds constitutes legal in nature.

case and orders of assessment and the combined order of CIT(A). We

find there is no dispute with regard to the unaccounted nature of the

jewellery worth Rs.71,40,553/-. Further, there is no dispute about the

years of acquisition and taxability of the same. It was offered in the

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respective assessment years. It is an undisputed fact that the

assessee offered an amount of Rs.68,53,001/- and filed the returns

and paid taxes under the head “income from other sources”, which is

evident from the computation of income placed at page 2 of the paper

book. In effect, the said amount of unaccounted jewellery is once

added by the AO for the A.Yrs. 2008-09 to 2010-11 u/s.153C of the

Act ignoring the fact that the said amounts were already offered in the

return of income for the A.Y. 2011-12. Bonafide belief in offering the

additional income was not respected by the AO for any reason. Now,

through the additional grounds (supra), assessee raised the legal issue

stating that the assessee desires telescoping benefit in the A.Y. 2011-2.

He relied on various decisions including the CBDT Circular No.14(XL-

35), dated 19-04-1955 in respect of the legal proposition that the

returned income can be assessed at the lower side on the peculiar

facts of the present case. In this regard, we perused the CBDT

Circular and the relevant portion is extracted as under :

“3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :— (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.”

of Serum Institute of India Ltd. (relied upon by the assessee) where the

decision of Nagpur Bench in the case of DCIT Vs. Sanmukhdas

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Wadhwani was relied upon by the Tribunal and held that making of an

assessment on the assessed income lesser than the returned income is

within the scope/jurisdiction of the AO. Adopting the said decisions,

we have granted similar directions in the case of Serum Institute of

India Ltd. vide our order dated 28-11-2017. Relevant portion is

extracted as under :

“33. To start with, we will take up the Apex Court’s judgment in the case of Commissioner of Income-tax v. Shelly Products [2003] 261 ITR 367 (SC), the Apex Court held in favour of refunding of the excess taxes paid (of advance tax as well as self-assessment tax) out of abundant caution or owing to error or non taxability. Held portion of this judgment is extracted as under :

“However, failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more dis- advantageous position than he would have been in if a fresh assessment were made. In a case where the assessee chooses to deposit, by way of abundant caution, advance tax or tax on self assessment which is in excess of his liability on the basis of the return furnished or, if there is an arithmetical error or inaccuracy, it is open to the assessee to claim refund of the excess tax paid in the course of the assessment proceedings. He can certainly make such a claim before the concerned authority calculating the refund. Similarly, if the assessee has, by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which, if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in a case where a refund is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief.”

“Held, that the circular in question refers to assessments which are to be made u/s.143(3) of the Act. The circular directs that in a particular type of cases, i.e. in scrutiny cases u/s.143(3) of the Act, the income can neither be assessed at a figure lower than the returned income nor the loss assessed at a figure higher than the loss nor further refund given except what was due on the basis of the returned income. Thus, by issuance of the circular, the quasi-judicial officer is directed to assess cases of particular nature in a particular manner. The Assessing Officer being bound by it had abdicated his function and did not act independently and, therefore, there was no question of alternative remedy which was a futile remedy. In fact, the

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jurisdiction had been exercised by the Central Board of Direct Taxes by issuing the circular and, therefore, the order of the Assessing Officer was without jurisdiction. The court had to exercise its jurisdiction under article 226. The order of the Assessing Officer to the extent it stated that the total income would be the returned income, was to be set aside, with a direction to the Assessing Officer to make assessment without keeping in mind the Central Board of Direct Taxes Circular dated 31-10-1989.”

“7. In view of the above, we do not find any reason to interfere with the Tribunal’s ultimate conclusion in allowing the assessee’s appeal. Though some of the observations may not appeal to us, nevertheless, for the reasons somewhat different from those recorded by the Tribunal we come to the same conclusion. Decision of the Apex Court in case of Shelly Products & Others (supra), was rendered in very different background. It was a case where the assessee had filed return. Assessee had paid self assessment tax on the income disclosed in the return. Tribunal on appeal by the assessee held that the order of the assessment passed by the Assessing Officer was ab- initio void since he had no jurisdiction to deal with such proceedings. Revenue sought reference before the High Court. When such reference was pending, the assessee applied to the department for refund of the tax paid. It was in this background the Apex Court expressed the opinion that liability to pay income tax does not depend on assessment being made and failure or inability to frame fresh assessment after earlier assessment is set aside or nullified in appropriate proceedings, does not disentitle the assessee to claim refund of the advance tax and tax paid on self assessment because to that extent the assessee had admitted his liability to pay tax in accordance with law. Facts of the present case are therefore, different. In case of hand, the assessment was not rendered null. In fact such assessment, which according to the order of CIT(Appeals) had become final tax liability of the assessee, came lower than that declared by him in the return filed.”

(1) To sum up, from the above, it is obvious that the fetters imposed by the CBDT, on the AOs, when it comes to assessing the income of assessee lower than the returned income, are held ultra vires. Further, the Hon’ble Apex Court also held that the taxes paid by the assessee as a matter of abundant caution, i.e. by way of Advance or Self Assessment Taxes, needs to be refunded after due verification of the claims.

(2) Ld. Counsel for the assessee filed various decisions of the Tribunal demonstrating that the ‘contingency’ disclosure are entitled to refund after due verification. In this regard, Ld. Counsel for the assessee filed written note on ‘Contingency issue’ stating that the return of income filed by the assessee constitutes a notional undisclosed

9 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

income as part of the total income. The same should not become an impediment for assessing the income of the assessee based on the principles relating to the Real Income theory. According to him, the income offered by the assessee in the return of income is not sacrosanct and what matters is the AO’s finding on the assessed income of the assessee. The assessed income can be lower than the returned income. Relying on the decision of Nagpur Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani 85 ITD 734, Shri R.S. Abhyankar, Ld. Counsel for the assessee submitted that where the assessee himself returned his undisclosed income on adhoc basis without giving any break-up for the same and when the subsequent working submitted by him reveals that the undisclosed income actually assessable in the hands of the assessee is lower than the returned income, the same has to be assessed at such lower income based on the concept of Real Income. Only condition specified in the said decision relates to the verification and correctness of the statements so submitted giving the detailed working before the AO. Relevant portion is extracted as under :

"12. It is observed that a similar issue in the context of regular assessment arose for consideration before the Hon'ble Delhi High Court in the case of CIT v. Bharat General Insurance Co. Ltd. [1971] 81 ITR 303 wherein it was held by their Lordships that even if an assessee declares an income in the return, the Assessing Officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. In the case of Narayanan v. Gopal AIR 1960 SC 235, the Hon'ble Supreme Court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It is well- established that the object of an assessment is to determine the correct income and consequently the correct tax liability. In our opinion, this settled position equally holds good in the matter of block assessment also since the scope of undisclosed income assessable in the block assessment is specifically provided and the procedure for determination of such income is also clearly laid down. In these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be assessed as such merely for the reason that the same was declared by the Assessee in the return for block period and there cannot be such estoppel against the statute. It, therefore, follows that if the assessee commits a patent mistake of fact or law while filing his return of undisclosed income under section 158BC, he cannot be assessed on such incorrect income merely on the basis of admission made in the return.

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the other judgment in the case of Ester Industries Ltd. Vs. CIT 316 ITR 260 (Delhi). According to this judgment, suo moto disallowance leading to increased returned income can always be verified by the AO in the assessment and decrease the returned income, even if it falls below the amount of total income returned by the assessee in the return of income. In this case, the Hon’ble High Court restored the matter for such verification. Relevant portion of the judgment are extracted as under :

"11. According to us, the Tribunal ought to have examined the issue as to whether the fact that assessee had made an admission with respect to an addition / disallowance in its original return or in the revised return would ipso facto bar the assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. This is so especially in view of the circumstances, that the Assessing Officer while making the additions /disallowances did not call upon the assessee to furnish any explanation. The upshot of the submission made by the learned counsel for the assessee, is that, had the assessee been given an opportunity by the Assessing Officer it could have demonstrated that no additions or disallowances were called for, in view of the binding precedents of Courts and/or Tribunal in respect of each of the addition/disallowance. The observations made in the Tax Audit Report could not have formed the basis of additions/ allowances by the Assessing Officer. On this aspect of the matter the observations in the judgment of the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 being apposite are extracted hereinbelow :

It is no doubt true that e

ntries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. (p. 20).

11.1 We find that the Tribunal instead of examining the matter from this angle has repeated the order passed in the first round without due application of mind to the issues which called for adjudication.

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“13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . To sum up, the fresh claim made by the appellant during the present proceedings that such income of Rs.1,00,00,000/- may be excluded from the total income assessed by the Assessing Officer as no discrepancies were found during the assessment proceedings cannot be accepted as the additional income was offered voluntarily in the return of income. The alternate claim of the appellant for set off of such contingencies against other statutory disallowance made by the AO also cannot be accepted as discussed above. Ground of appeal No.8 stands rejected.”

The CIT(A) denied the claim of the assessee ignoring the settled legal propositions on the topic. The reasons given above by the CIT(A) are artificial and not supported by the legal precedents.

12 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

Ignoring the same, we now have to decide that the said amount of Rs. 1 crore is assessable to tax in the light of the above legal scope relating to this addition.

by the AO assumes significance under the statute notwithstanding the

offer of income by the assessee in the return of income on peculiar

facts of each case. Therefore, we are of the view that considering the

principles of natural justice, the additional grounds raised by the

assessee should be admitted and remanded to the file of AO for fresh

adjudication in the matter considering the above referred decisions

and the CBDT circular referred above. Accordingly, the additional

grounds relating to granting of telescoping benefit with regard to the

disclosure of unaccounted jewellery is remanded to the file of AO for

fresh adjudication and decision. It is obviously unfair to tax

Rs.67,89,962/- and others if any, in three assessment years as

discussed above. Therefore, AO shall not only allow the claim of the

assessee after hearing him and examining the issue and applicability

of the cited judgments but also grant reasonable opportunity of being

13 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

heard to the assessee in accordance with the set principles of natural

justice. Thus, all the additional grounds raised by the assessee are

allowed for statistical purposes.

in the appeal, Ld. AR for the assessee submitted that all the grounds

revolve around the issue of addition of Rs.2.2 lakhs on account of

unexplained investment in silver articles.

Netra Pritam Shah Vs. DCIT vide ITA No.1504/PUN/2015 for the A.Y.

2011-12, order dated 29-11-2017, Ld. AR for the assessee submitted

that this issue now stands covered by the order of the Tribunal. As

discussed in the above said case, the assessee happened to be one of

the family members of this group. Relevant discussion is given in Para

Nos. 4 to 10 of the said order of the Tribunal and they are identical.

For the sake of completeness, relevant portions are extracted here as

under :

“4. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was conducted in the Parag Group of cases on 04.02.2011. Search was conducted at the residence of Shri Devendra Shah, Shri Pritam Shah, their business associates and the corresponding business premises on 04.02.2011. The said group was engaged in trading and manufacturing of milk products, wherein M/s. Parag Milk Foods Pvt. Ltd. was flagship concern of the group and M/s. Bhagyalaxmi Dairy Farms Pvt. Ltd. was sister concern of Parag group. Some of group concerns of Parag group as well as business associates were also covered under Survey under section 133A of the Act. Various loose papers, hand written chits and computer print outs, etc. supporting the practice adopted by the concern was seized from the business premises as well as residential premises. All these papers / loose documents were confronted to Shri Devendra Shah, Smt. Priti Shah, Smt. Netra Pritam Shah (assessee) and the employees and concerned officials during the search as well as during post search enquiries.. . . .

14 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

unexplained silver to the extent of worth Rs.2.2 lakhs is held to be

allowable without any tax. Therefore, relying on the order of Tribunal

(supra), taxing the unaccounted silver worth of Rs.2.2 lakhs in the

hands of the assessee is uncalled for. Accordingly, the original

grounds raised by the assessee on this issue are allowed in toto.

A.Yrs. 2008-09 to 2010-11, Ld. AR drew our attention to the grounds

raised by the assessee in all the 3 appeals and mentioned that the

same are raised in connection with the aforesaid unexplained

investment in jewellery of 25,05,578/- for the A.Y. 2008-09,

Rs.18,28,750/- for the A.Y. 2009-10 and Rs.24,55,634/- for the A.Y.

2010-11 respectively. Total of these additions works out to

Rs.67,89,962/-. Referring to the facts and additional grounds raised

in A.Y. 2011-12, subjected to the grant of relief on account of

telescopic benefit, Ld. AR for the assessee further submitted that he

will not press these appeals. The additions in these assessment years

were made as per the dates available on the receipts/invoices showing

the evidence of acquisition of jewellery in particular assessment year.

15 ITA Nos.1508 to 1511/PUN/2015 Priti Devendra Shah

the assessee should be allowed in view of our finding in Para 13 above.

Therefore, all the 3 appeals stands dismissed as ‘not pressed’ in view

of our finding in principle and in favour of granting telescoping benefit

to the extent of the above said amounts from the income returned by

the assessee for A.Y. 2011-12. The figures and facts are subject to

verification of the AO during the remand proceedings for the A.Y.

2011-12. With these directions, the grounds raised by the assessee in

all these 3 appeals are dismissed as not pressed’.

allowed for statistical purposes and the appeals of the assessee for

A.Yrs. 2008-09 to 2010-11 are dismissed.

Order pronounced in the open court on this 17th day of January, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 17th January, 2018. सतीश आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. CIT(A)-13, Pune 4. CIT-13, Pune िवभागीय %ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” 5. Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// Senior Private Secretary //True Copy// आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune