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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
PER BENCH
Out of the aforesaid bunch of five appeals, four are preferred by the assessee and one by the Department and are directed against separate orders passed by the learned Commissioner (Appeals) for assessment years 2005–06, 2006–07, 2007–08 and 2008–09.
As the survey action under section 133A of the Income Tax Act, 1961 (for short "the Act") on the basis of which assessment was made in assessment year 2008–09 and on that basis assessments for earlier assessment years were re–opened, the appeal being ITA no.5783/Mum./2012, for assessment year 2008–09, is taken up as the lead case.
ITA no.5783/Mum./2012 Revenue’s Appeal – A.Y. 2008–09
In this appeal, the Revenue has challenged the order of the learned Commissioner (Appeals) raising following effective grounds:–
1 . On the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in holding that the assessee had honoured the declaration made during survey proceeding under section 133A of the I.T. Act and therefore, the protective addition made by the assessing officer in A.Y.2008-09 is upheld without considering the fact that the documents impounded during the survey proceedings clearly indicates that the unaccounted cash purchases and unaccounted cash expenses pertains to Assessment years 2005-06, 2006-07, 2007-08 and 2008-09 and subsequently the assessments for Assessment years 2005-06, 2006-07 and 2007-08 have been
4 Rajbali V. Mourya reopened and additions made in the respective years. 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made of Rs.28,87,373/- holding that it would amount to double taxation without considering the fact the assessing officer has not made any separates addition of Rs.28,87,373/- in the assessment order but only stated that this amount included in the survey declaration pertains to assessment year 2008-09, as can be seen from the computation of income. 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing depreciation of Rs.9,00,000/- on 'Centering Material' without considering the fact the assessee has failed to furnish details of the nature of asset and date on which it was put to use, for allowing the depreciation claim".
As could be seen from grounds no.1 and 2, the Revenue is aggrieved with the decision of the learned Commissioner (Appeals) in converting the addition made of ` 1,00,01,339 on the basis of declaration made by the assessee to substantive addition in the impugned assessment year in place of protective addition made by the Assessing Officer.
Brief facts are, assessee an individual is engaged in the business of civil contract. A survey action under section 133A was conducted in case of assessee on 24th January 2008. In the course of survey operation, certain notebooks containing cash payment made by the assessee towards labour and purchases were impounded and marked as Annexure A–1 and A–5. On going through this impounded documents, it was found by the survey party that the assessee had
5 Rajbali V. Mourya made cash purchase amounting to ` 50,01,339 and cash payment towards labour of ` 40 lakh. When the assessee was called upon to explain the discrepancy, in a statement recorded at the time of survey, assessee came forward to declare additional income of ` 90 lakh over and above the regular income to cover up the discrepancy found on the basis of impounded material. Further, to take care of any other discrepancies the assessee offered a further amount of ` 10 lakh as additional income. Thus, the total additional income offered by the assessee for the assessment year 2008–09 over and above the regular income was ` 1,00,01,339. On the basis of declaration made at the time of survey, assessee filed his return of income for the impugned assessment year on 29th September 2008, declaring total income of ` 1,54,66,377, which included the additional income declared of ` 1,00,01,339. During the assessment proceedings, the Assessing Officer on verifying the return of income found that the assessee had included the entire additional income of ` 1,00,01,339 in the impugned assessment year and has also paid taxes on such income. However, he observed, as per impounded books of account, the unaccounted cash purchases and unaccounted cash payment relate to different financial years beginning from financial year 2004–05 to 2007–08 the details of which are as under:–
6 Rajbali V. Mourya 2007–08 Books 2004–05 2005–06 2006–07 – – ` 6,04,898 ` 8,97,037 A–1 ` 4,43,325 – – – A–2 – ` 10,71,450 ` 11,20,150 ` 64,060 A–3 ` 90,525 ` 3,68,533 ` 2,97,600 ` 15,48,068 A–4 ` 23,53,523 – – – A–5 ` 14,39,983 ` 20,22,648 ` 25,09,165 ` 28,87,373 Total GRAND TOTAL – ` 88,59,169
The Assessing Officer was of the view, as the unaccounted cash expenditure relates to four financial years, income declared by the assessee at the time of survey is also required to be assessed in relation to those years and not in the year in which the survey was conducted. Accordingly, observing that for the purpose of making additions in the respective assessment years of the declared income as per the impounded material action under section 147 has to be taken, he concluded the assessment by assessing the entire additional income of ` 1,00,01,339, on protective basis. While doing so, the Assessing Officer also observed that the actual amount which could be added in the impugned assessment year towards unaccounted cash payment is ` 38,87,373. Being aggrieved of the aforesaid decision of the Assessing Officer, assessee preferred appeal before the learned Commissioner (Appeals).
It was submitted before the learned Commissioner (Appeals) by the assessee that as per the understanding between the assessee and
7 Rajbali V. Mourya the Department at the time of survey, to cover up the discrepancies found on the basis of impounded material assessee had come forward to declare the entire additional income of ` 1,00,01,339 in the impugned assessment year, therefore, the observation of the Assessing Officer to spread over additional income to the other assessment years is not correct. The learned Commissioner (Appeals), after considering the submissions of the assessee and perusing the material on record found that the assessee had declared additional income of ` 1,00,01,339 for assessment year 2008–09 in the statement recorded during the survey. He also noted that the assessee followed up the aforesaid declaration by filing the return of income for the assessment year 2008–09 on 29th August 2008 offering the total income of ` 1,56,61,377 which included the entire additional income. Further, on going through the statement recorded at the time of survey, learned Commissioner (Appeals) noted that the assessee had specifically stated that the entire additional income on account of unaccounted cash payments were to be declared in financial year 2007–08 corresponding to assessment year 2008–09. He also noted that in the survey report dated 28th January 2008 forwarded to the Commissioner of Income Tax, the Assessing Officer has also clearly mentioned that the total additional income offered at ` 1,00,01,339, was for financial year 2007–08. He also noted that the Commissioner of Income Tax while forwarding the survey report to the Chief
8 Rajbali V. Mourya Commissioner of Income Tax in his note dated 6th February 2008 has also mentioned that the assessee had made voluntary disclosure of ` 1,00,01,339 for assessment year 2008–09 and he had directed the Assessing Officer to monitor the payment of advance tax. Thus, on the basis of aforesaid facts, the learned Commissioner (Appeals) was of the opinion that the additional income offered of ` 1,00,01,339 during the survey and subsequently followed up in the return of income filed for the assessment year 2008–09 should be assessed in the impugned assessment year on substantive basis. He, therefore, held that no further addition on account of cash payment can be made in the impugned assessment year.
learned Departmental Representative relying upon the observations of the Assessing Officer submitted, as per the impounded note books, the cash payments pertained to different financial year i.e., 2004–05 to 2007–08. Therefore, the additional income declared by the assessee has to be spread over to the respective assessment years and the entire additional income cannot be assessed in the impugned assessment year. He, therefore submitted, learned Commissioner (Appeals) was not justified in upholding the addition of the entire additional income of ` 1,00,01,339, on substantive basis in the impugned assessment year.
9 Rajbali V. Mourya 9. Learned Authorised Representative on the other hand, strongly supporting the view of the learned Commissioner (Appeals) submitted, the assessee at the time of survey had specifically and categorically stated that the additional income offered by him to cover up the discrepancies noticed on the basis of impounded material is to be declared in the assessment year 2008–09. That being the case, the learned Commissioner (Appeals) was justified in accepting the additional income declared by the assessee in the impugned assessment year. Learned Authorised Representative referring to the statement recorded from the assessee during the survey submitted, the statement given by the assessee would clearly indicate that the entire additional income of ` 1,00,01,339 was declared in assessment year 2008–09. He submitted, even in the survey report forwarded by the Assessing Officer to Commissioner and the correspondence between Commissioner and Chief Commissioner of Income Tax as well as the Assessing Officer and the Commissioner would clearly demonstrate that even Departmental Authorities also intended to assess the entire declared income in assessment year 2008–09. Therefore, the Commissioner of Income Tax directed the Assessing Officer to monitor the advanced tax payment by the assessee. He, therefore, submitted, there is no reason to interfere with the order of the learned Commissioner (Appeals).
10 Rajbali V. Mourya 10. We have considered the submissions of the parties and perused the material available on record. As could be seen from the financial year wise unaccounted cash payment quantified by the Assessing Officer on the basis of impounded material marked as Annex. A–1 and A–5 as tabulated by the Assessing Officer at Para–4.1 of his order and reproduced in the earlier part of the order, the total unaccounted cash payment as per the impounded material in different financial years amounted to ` 88,59,169. As against the aforesaid unaccounted cash payment, the assessee at the time of survey had offered additional income of ` 1,00,01,339 which is more than sufficient to cover up the discrepancies. Further, it is observed, the assessee has followed up the offer made at the time of survey by declaring the entire additional income of ` 1,00,01,339 in the return of income filed for the impugned assessment year in addition to the regular income declared by him. It is also accepted by the Department that the assessee has paid the tax due on the entire additional income offered by him. Thus, the only dispute raised by the Department is, the additional income should be apportioned to the respective assessment years. In our view, such stand taken by the Assessing Officer is unacceptable. On a perusal of the statement recorded from the assessee at the time of survey on 25th January 2008, it is noted that in question no.7, the assessee was asked to explain the discrepancies on the basis of impounded material Annex. A–1 to A–5. In reply to the aforesaid question, the assessee
11 Rajbali V. Mourya had categorically stated that he would be offering the additional income in the financial year 2007–08 to cover up the discrepancies found in the books of account. This fact is further corroborated from the answer given by the assessee in response to question no.8 by the survey party, wherein, it is clearly demonstrated that the assessee not only declared additional income of ` 1,00,01,339 in financial year 2007–08 but it also handed over two post dated cheques of ` 8.25 lakh each towards advance tax payment on such additional income offered. Thus, as could be seen from the aforesaid facts, at the time of survey the Department never intended to assessee the additional income offered by the assessee in different assessment years. On the contrary, during survey as well as post survey the conduct of the Departmental Authorities demonstrate that they were also of the view that the entire additional income offered by the assessee is to be taxed in assessment year 2008–09. Aforesaid fact is further corroborated from the survey report submitted by the Assessing Officer to the Commissioner of Income Tax as well as other correspondence between the Departmental Authorities including Commissioner and Chief Commissioner. Moreover, it is not disputed by the Department that to cover up the total discrepancies found on the basis of impounded material quantified at ` 88,59,169, the assessee had not only declared additional income of ` 90 lakh, but to take care of any other discrepancies has supplemented it by a further amount of ` 10 lakh.
12 Rajbali V. Mourya Thus, the total declaration made by the assessee aggregating to ` 1,00,01,339, is sufficiently more than the unaccounted cash payment quantified at the time of survey. In the aforesaid view of the matter, we do not find any reason to interfere with the order of the learned Commissioner (Appeals) on the issue. We may further observe, when the assessee has come forward to declare additional income which was actually followed up by declaring the amount promised in the return of income and has also paid the tax due on such income, in all fairness, the Department should have accepted it and avoided unnecessary litigation with the assessee. With the aforesaid observations, we dismiss ground no.1, raised by the Department.
In ground no.2, the issue raised by the Department is in relation to allowance of claim of depreciation of ` 9 lakh on centering material.
Brief facts are, on a perusal of Profit & Loss account, the Assessing Officer noticed that the assessee had claimed depreciation of ` 10 lakh on centering material. Alleging that the assessee has not furnished necessary details of nature of asset, date of put to use, etc., and also the fact that assessee has capitalized the declaration the Assessing Officer disallowed the claim of depreciation.
Learned Commissioner (Appeals), after considering the submissions of the assessee and perusing the material on record found
13 Rajbali V. Mourya that the disclosure of ` 90 lakh made by the assessee was towards purchase of material and labour. He, therefore, held that the assessee is eligible to claim depreciation on the amount of ` 90 lakh. Accordingly, he quantified the allowable depreciation at ` 9 lakh.
We have considered the submissions of the parties and perused the material available on record. Undisputedly, the depreciation claimed are on centering material such as ply, steel plate, which are essentially required by a civil contractor. Therefore, assessee’s claim of depreciation cannot be disallowed. In that view of the matter, we do not find any reason to interfere with the order of the learned Commissioner (Appeals). Ground no.2, is dismissed.
In the result, Revenue’s appeal stands dismissed.
ITA no.5518/Mum./2012 Assessee’s appeal for assessment years ITA no.5519/Mum./2012 2005–06, 2006–07 and 2007–08 ITA no.5521/Mum./2012
In all these appeals, the assessee has raised a common legal issue relating to validity of re–opening of assessment under section 147 of the Act.
As already discussed in the earlier part of the order, in the course of a survey action, the assessee on the basis of certain discrepancies found, as a result of impounded material came forward to declare
14 Rajbali V. Mourya additional income of ` 1,00,01,339, which was also followed up by offering the same in the return of income filed for the assessment year 2008–09. However, while completing the assessment for assessment year 2008–09, the Assessing Officer, though, agreed that to cover up the discrepancies found on account of unaccounted cash payment aggregating to ` 88,59,169, the assessee had offered additional income of ` 1,00,01,339, however, he was of the view that the cash payment since pertained to different assessment years viz. A.Y. 2005– 06, 2006–07, 2007–08 and 2008–09, the additional income has to be spread over to those assessment year. Accordingly, on that basis, he re–opened the assessment under section 147 of the Act for the assessment years 2005–06, 2006–07 and 2007–08 and ultimately completed assessment by apportioning the additional income offered to these assessment years along with some other additions. Being aggrieved of such assessment orders, assessee preferred appeals before the learned Commissioner (Appeals).
Learned Commissioner (Appeals), however, upheld the assessment orders passed by the Assessing Officer.
We have considered the submissions of the parties and perused the material available on record. As could be seen from the material on record, the only reason for which the assessments for the impugned assessment years were re–opened is, the entire additional
15 Rajbali V. Mourya income offered by the assessee cannot be taxed in assessment year 2008–09 but has to be spread over to the respective assessment years. While deciding the appeal of the assessee being ITA no.5783/Mum./2012, for assessment year 2008–09, we have held that the facts and evidences brought on record clearly demonstrate that not only the assessee intended to offer the entire additional income of ` 1,00,01,339 in assessment year 2008–09, but the Department also during the survey and even in post survey proceedings had accepted assessee’s claim which is evident from not only the survey report b ut also the other official correspondences between various Departmental Authorities, copies of which were placed before us. Moreover, it is not disputed that the assessee has offered the entire additional income in assessment year 2008–09 and what the Department wants to achieve by re–opening the assessment is to spread the additional income offered to different assessment years. In our view, when the entire income has been offered by the assessee, albeit, in a single assessment year, it cannot be said that the income has escaped assessment, assessments cannot be reopened merely for raising some extra demand on the assessee by way of interest and penalty. Moreover, while deciding assessee’s appeal in ITA no.5783/Mum./2012, we have upheld the decision of the learned Commissioner (Appeals) in treating the addition of ` 1,00,01,339 on substantive basis. That being the case, in our view, the re–opening of assessment is not valid.
16 Rajbali V. Mourya Accordingly, we quash the assessment orders passed under section 143(3) r/w section 147 of the Act for the impugned assessment years. In view of the aforesaid, the other grounds raised by the assessee in all these appeals having become redundant do not require adjudication.
In the result, assessee’s appeals are partly allowed.
ITA no.5520/Mum./2012 Assessee’s Appeal – A.Y. 2007–08
In this appeal, assessee has challenged the penalty imposed under section 271(1)(c) of the Act.
Though, the Registry has pointed out delay of 1,460 days in filing the appeal on the basis of date of receipt of appellate order mentioned by the assessee in column no.9, of form no.36. However, it is clarified by the learned Authorised Representative before us that due to typographical error, the date of receipt of appellate order has been wrongly mentioned as 06.07.2008 instead of 18.07.2012 on which date the appellate order was actually received. On a perusal of the impugned order of the learned Commissioner (Appeals), we have noted that the said order was passed by the learned Commissioner (Appeals) on 09.07.2012. In fact, the appeal before the learned Commissioner (Appeals) was instituted on 13.08.2010. Thus, the date
17 Rajbali V. Mourya of receipt of first appellate order under no circumstances can be 6th July 2008. Therefore, it is apparent that the delay computed by the Registry is on the basis of inadvertent mistake committed by the assessee while mentioning the date of receipt of appellate order in Form no.36. Thus, actually there being no delay in filing the appeal, the delay in filing the appeal pointed out by the registry is ignored and appeal is heard on merit.
Assessee had originally filed his return of income for the impugned assessment year on 22nd October 2007, declaring total income of ` 31,36,537. Assessment in assessee’s case was also completed under section 143(3) of the Act on 31st December 2009. Subsequently, while completing the assessment for assessment year 2008–09, the Assessing Officer was of the view that the additional income offered by the assessee as a result of survey amounting to ` 1,00,01,339, should be spread over to different assessment years, on that basis the assessment for the impugned assessment year was re– opened and an amount of ` 25,09,165 out of the additional income offered by the assessee was apportioned to the impugned assessment year. On the basis of addition made the Assessing Officer initiated proceeding for imposition of penalty and ultimately passed an order imposing penalty of ` 7,45,506 under section 271(1)(c). Though, the assessee challenged the imposition of penalty before the learned
18 Rajbali V. Mourya Commissioner (Appeals), however, the learned Commissioner (Appeals) upheld the imposition of penalty.
We have considered the submissions of the parties and perused the material available on record. While deciding assessee’s appeal in ITA no.5521/Mum./2012, we have quashed the assessment order passed under section 143(3) r/w section 147 of the Act. That being the case, penalty imposed on the basis of addition made in the said assessment order cannot survive. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) by deleting the penalty imposed.
In the result, assessee’s appeal is allowed.
To sum up, ITA no.5783/Mum./2012, is dismissed, ITA 5518/ Mum./2012, ITA no.5519/Mum./2012 and ITA no. 5521/Mum./2012 are partly allowed and ITA no.5520/Mum./2012, is allowed. Order pronounced in the open Court on 19.08.2016
Sd/- Sd/- SAKTIJIT DEY NABIN KUMAR PRADHAN ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 19.08.2016
19 Rajbali V. Mourya
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt. Registrar) ITAT, Mumbai
.