IVAN LESLIE PINTO, MUMBAI v. ITO 17(3(2), MUMBAI

ITA 1780/MUM/2009 | 2005-2006
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 178019914 RSA 2009
Assessee PAN AAAPP5726C
Bench Mumbai
Appeal Number ITA 1780/MUM/2009
Duration Of Justice 3 year(s) 11 day(s)
Appellant IVAN LESLIE PINTO, MUMBAI
Respondent ITO 17(3(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 30-03-2012
Date Of Final Hearing 31-01-2012
Next Hearing Date 31-01-2012
Assessment Year 2005-2006
Appeal Filed On 19-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER & SHRI N.V.VASUDEVAN JUDICIAL MEMBER. I.T.A. NO. 1780/MUM/2009. ASSESS MENT YEAR : 2005-06. IVAN LESLINE PINTO THE INCOME-TAX OFFICER N.K. ASSOCIATES VS. 17(3)(2) 7 EMBASSY APARTMENT MUMBAI. 291 BELLASIS ROAD MUMBAI 400008. PAN AAAPP5726C APPELLANT. RESPONDENT. APPELLANT BY : SHR I M.SUBRAMANIAN. RESPONDENT BY : SHRI PARTHASARTHI NAIK. DATE OF HEARING : 31-01-2012. DATE OF PRONOUNC EMENT : 30-03-2012 O R D E R PER P.M. JAGTAP A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-XXVII MUMBAI DATED 30-12-2008. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH E APPEAL ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO WAS SEARCHED BY THE CUSTOM AUTHOR ITIES IN THE MONTH OF MARCH 2005 AT MUMBAI AIRPORT. DURING THE SAID SEARCH A C ASH OF RS.50 LAKHS WAS FOUND AND SEIZED FROM HIS POSSESSION. ON RECEIPT OF THE I NFORMATION ABOUT THE SEIZURE OF THE SAID CASH BY CUSTOM AUTHORITIES FROM THE ASSESS EE AND AFTER HAVING FOUND THAT 2 ITA NO. 1780/MUM/2009 NO RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATIO N I.E. ASSESSMENT YEAR 20-05-06 WAS FILED BY THE ASSESSEE A NOTICE U/S 148 WAS ISS UED BY THE AO TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 29-11-2006 DECLARING T OTAL INCOME OF RS.1 50 890/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND ON ENQUIRIES MADE THAT THE COMMISSIONER OF CUSTOMS HAD ALREADY PASSED AN O RDER IN ASSESSEES CASE ON 27-10-2007. HE ALSO OBTAINED A COPY OF THE SAID ORD ER FROM THE CUSTOMS DEPARTMENT AND ON THE BASIS OF THE SAID ORDER AS WE LL AS OTHER EXAMINATION MADE BY HIM THE AO RECORDED HIS FINDINGS IN PARAGRAPH N O. 15 OF THE ASSESSMENT ORDER AS UNDER : (I) ASSESSEE HAS DONE THE SAME KIND OF ACTIVITIES OF CARRYING INDIAN CURRENCY/GOLD OUT OF INDIA BEING SMUGGLING ON MANY OCCASION DURING A.Y. 2005-06 FOR WHICH IS GETTING PERKS/REMUNERATIO N SHOULD HAVE BEEN TREATED AS UNDISCLOSED INCOME AND TAXED ACCORD INGLY. HENCE RS.5 00 000/- IS HEREBY ADDED BEING INCOME FROM PER KS/SALARY RECEIVED ON ACCOUNT OF DOING THE BUSINESS OF SMUGGL ING/CARRYING INDIAN CURRENCY/GOLD ON ESTIMATED BASIS. (II) THE ASSESSEE HAS RECEIVED LOAN OF RS.20 00 000 /- FROM HIS OWNER/MASTER/EMPLOYER AND THE PERKS/SALARY HAS BEEN ADJUSTED AGAINST THE LOAN. THE SAID LOAN OF RS.20 00 000/- HAS NOT B EEN DISCLOSED BY THE ASSESSEE IN HIS BALANCE SHEET. THE SAID LOAN WAS AD JUSTED BY ASSESSEE ON ACCOUNT OF PERKS/SALARY RECEIVED DURING THE RELE VANT PERIOD. ACCORDINGLY THE PERKS/SALARY RECEIVED BY ASSESSEE ON ACCOUNT OF SUCH SMUGGLING ACTIVITIES HAS BEEN TREATED AS INCOME FRO M UNDISCLOSED SOURCES AT RS.20 00 000/- AND ADDED TO THE TOTAL IN COME. (III) THE COMMISSIONER OF CUSTOMS HAS IMPOSED A PEN ALTY UNDER THE PROVISIONS OF SEC.114(I) OF THE CUSTOMS ACT 1962 TR EATING THE ASSESSEE BEING A CARRIER FOR HIS EMPLOYER/MASTER AS PER PARA NO. 3.29 OF HIS ORDER. (IV) SINCE THE ORDER OF COMMISSIONER OF CUSTOMS IT WAS STATED THAT PENAL PROCEEDINGS AGAINST SHRI RAMCHANDRAN ARE KEPT IN AB EYANCE TILL HE IS 3 ITA NO. 1780/MUM/2009 APPREHENDED AND INVESTIGATION REGARDING HIS ROLE AR E FURTHER CARRIED OUT. (V) SINCE THE AMOUNT HAS TO BE TAXED IN THE HANDS O F ASSESSEE BY CUSTOM AUTHORITIES THIS AMOUNT HAS TO BE TAXED IN THE HAN DS OF ASSESSEE ONLY AND ADDED TO THE TOTAL INCOME. ON THE BASIS OF ABOVE FINDINGS THE AO MADE AN ADDI TION OF RS.49 73 000/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF CASH FOU ND AND SEIZED FROM THE POSSESSION OF THE ASSESSEE BY CUSTOM AUTHORITIES TR EATING THE SAME AS UNEXPLAINED. HE ALSO MADE A FURTHER ADDITION OF RS.20 LAKHS ON A CCOUNT OF UNDISCLOSED INCOME EARNED BY THE ASSESSEE FROM SMUGGLING ACTIVITIES. A CCORDINGLY THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE AO AT RS.71 23 8 90/- IN THE ASSESSMENT COMPLETED U/S 144 READ WITH SECTION 147 VIDE AN ORD ER DATED 27-12-2007. 3. AGAINST THE ORDER PASSED BY THE AO U/S 144 READ WITH SECTION 147 AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CI T(APPEALS) CHALLENGING THEREIN THE VALIDITY OF THE ASSESSMENT MADE BY THE AO AS WE LL AS DISPUTING THE ADDITIONS MADE THEREIN ON MERITS. AFTER CONSIDERING THE SUBMI SSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D THE LEARNED CIT(APPEALS) DID NOT FIND ANY LEGAL INFIRMITY IN THE ASSESSMENT MADE BY THE AO U/S 144 READ WITH SECTION 147 AND UPHELD THE VALIDITY OF THE SAME. HE ALSO CONFIRMED THE ADDITION OF RS.49 73 000/- MADE BY THE AO ON ACCOUNT OF UNEXPLA INED CASH FOUND AND SEIZED BY THE CUSTOM AUTHORITIES FROM THE POSSESSION OF TH E ASSESSEE HOLDING THAT ALTHOUGH THE SAID CASH WAS CLAIMED TO BE BELONGING TO ONE SHRI RAMCHANDRAN BY THE ASSESSEE NOTHING WAS BROUGHT ON RECORD TO SATI SFACTORILY ESTABLISH THE IDENTITY OF THE SAID PERSON AS WELL AS HIS WHEREABOUTS. HE H ELD THAT THE CASH FOUND AND SEIZED FROM THE POSSESSION OF THE ASSESSEE THEREFO RE WAS RIGHTLY HELD BY THE AO TO BE BELONGING TO THE ASSESSEE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS 4 ITA NO. 1780/MUM/2009 UNEXPLAINED MONEY U/S 69A. HE FURTHER CONFIRMED THE ADDITION OF RS.20 LAKHS MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INCOME OF THE ASSESSEE FROM SMUGGLING ACTIVITIES OBSERVING THAT THE ASSESSEE WAS FOUND TO BE WORKING FOR SHRI RAMCHANDRAN IN CARRYING OUT THE SMUGGLING ACTIVITIE S AND HAD RECEIVED REMUNERATION FOR THE SERVICES RENDERED IN CONNECTIO N WITH THE SAID ACTIVITIES. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. IN GROUND NOS. 1 TO 5 THE ASSESSEE HAS RAISED A PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE AO U/S 144 R EAD WITH SECTION 147 ON THE GROUND THAT THE INITIATION OF REASSESSMENT PROCEEDI NGS U/S 147 ITSELF WAS BAD IN LAW. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS PRELIMINARY ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD INCLUD ING THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT IN THE CASE OF THE ASSESSEE. A PERUSAL OF THE SAID REASONS SHOWS THAT THE INFORMATION WAS RECEIVED BY THE AO FROM THE CUSTOM AUTHORITIES OF HAVING SEIZED CASH OF RS.50 LAKHS FR OM THE POSSESSION OF THE ASSESSEE IN THE MONTH OF MARCH 2005 AT MUMBAI AIRPORT. THE AO ALSO FOUND ON VERIFICATION OF THE RECORD THAT NO RETURN OF INCOME WAS FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2005- 06. AS PER THE INFORMATION RECEIVED FROM THE CUSTOM AUTHORITIES THE AO CAME T O KNOW THAT THE ASSESSEE WAS DETAINED UNDER COFEPOSA/ SAFEMA ON THE ALLEGATION T HAT HE WAS INVOLVED IN SMUGGLING AND FOREIGN EXCHANGE MANIPULATING ACTIVIT IES. SINCE NO RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE A SSESSEE SHOWING INCOME OF THE SAID ACTIVITY AND THERE WAS A SEIZURE OF CASH OF RS .50 LAKHS FROM THE POSSESSION OF THE ASSESSEE IN MARCH 2005 THE AO CAME TO THE PRI MA FACIE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME BY THE ASSESSEE FROM THE A SSESSMENT FOR THE YEAR UNDER 5 ITA NO. 1780/MUM/2009 CONSIDERATION. THE AO THUS HAD VALID REASON HELD IN GOOD FAITH THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT FOR THE YEAR UN DER CONSIDERATION AND IN OUR OPINION THE REOPENING OF THE ASSESSMENT OF THE ASS ESSEE FOR THAT YEAR BASED ON THE SAID REASON WAS IN ACCORDANCE WITH LAW. WE THEREFO RE FIND NO MERIT IN THIS PRELIMINARY ISSUE RAISED BY THE ASSESSEE CHALLENGIN G THE VALIDITY OF ASSESSMENT MADE BY THE AO AND DISMISS GROUND NOS. 1 TO 5 OF TH E ASSESSEES APPEAL. 6. THE ISSUE RAISED IN GROUND NO. 6 RELATES TO THE ADDITION OF RS.20 LAKHS MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF UNDISCLOSED INCOME ALLEGEDLY EARNED BY THE ASSESSEE FROM SMUGGL ING ACTIVITIES. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE ORDER OF COMMISSIONER OF CUSTOMS DATED 27-10-2007 PASSED IN THE CASE OF THE ASSESSEE . AS ALREADY NOTED THE REASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDE RATION WERE INITIATED IN THE CASE OF THE ASSESSEE ON THE BASIS OF SEARCH ACTION OF THE CUSTOM AUTHORITIES WHICH RESULTED IN SEIZURE OF CASH OF RS.50 LAKHS FROM THE POSSESSION OF THE ASSESSEE. THE ULTIMATE FINDINGS IN THE CASE MADE OUT BY THE CUSTO M AUTHORITIES AGAINST THE ASSESSEE THEREFORE ARE RELEVANT FOR THE PURPOSE O F ASSESSMENT OF INCOME OF THE ASSESSEE AND EVEN THE AO HAS MADE MAINLY THE ORDER OF COMMISSIONER OF CUSTOMS DATED 27-10-2006 AS THE BASIS FOR COMPUTING THE INC OME OF THE ASSESSEE. HE HAS SUMMARIZED THE FINDINGS BASED ON THE SAID ORDER IN PARA NO. 15 ON PAGE NO. 7 OF HIS ORDER WHICH ARE ALREADY REPRODUCED BY US IN THE FOREGOING PORTION OF THIS ORDER. AS NOTED BY THE AO THEREIN THE ASSESSEE WAS REGULA RLY DOING THE ACTIVITIES OF CARRYING INDIAN CURRENCY/GOLD OUT OF INDIA ILLEGALL Y AND WAS GETTING REMUNERATION/PERKS FOR SUCH ACTIVITIES CARRIED ON A S PER THE DIRECTION OF SHRI RAMCHANDRAN. AS FURTHER NOTED BY THE AO SUCH ACTIV ITIES WERE CARRIED ON BY THE ASSESSEE EVEN IN THE PREVIOUS YEAR RELEVANT TO ASSE SSMENT YEAR 2005-06 FOR WHICH A 6 ITA NO. 1780/MUM/2009 SUM OF RS.5 LAKHS SHOULD HAVE BEEN RECEIVED BY THE ASSESSEE AS REMUNERATION/PERKS AS ESTIMATED BY THE AO. HE HOWEVER ADDED A SUM OF RS.20 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNDISCLOSED IN COME EARNED BY THE ASSESSEE FROM SMUGGLING ACTIVITIES ON THE GROUND THAT THE AS SESSEE HAD RECEIVED A LOAN OF RS.20 LAKHS FROM SHRI RAMCHANDRAN WHICH ACCORDING T O THE AO MUST HAVE BEEN ADJUSTED AGAINST THE REMUNERATION/PERKS RECEIVABLE BY THE ASSESSEE ON ACCOUNT OF SMUGGLING ACTIVITIES. IN OUR OPINION THIS BASIS AD OPTED BY THE AO WAS NOT CORRECT INASMUCH AS THE INCOME OF THE ASSESSEE FROM SMUGGLI NG ACTIVITIES HAVING BEEN ESTIMATED BY THE AO HIMSELF AT RS.5 LAKHS THE TOTA L LOAN AMOUNT OF RS.20 LAKHS COULD NOT BE TREATED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. EVEN IF THE SAID LOAN AMOUNT WAS TO BE ADJUSTED AGA INST THE REMUNERATION RECEIVABLE TO THE ASSESSEE ON ACCOUNT OF SMUGGLING ACTIVITIES SUCH ADJUSTMENT ONLY TO THE EXTENT OF RS.5 LAKHS COULD HAVE BEEN MADE IN SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED AND THE INCOME ESTIMATED BY THE AO AT RS.5 LAKHS FOR THE YEAR UNDER CONSIDERATION COULD NOT BE ENHANCED ON THE BASIS OF ADJUSTABLE LOAN AMOUNT. WE THEREFORE SUSTAIN THE ADDITION MADE BY THE AO ON THIS ISSUE TO THE EXTENT OF RS.5 LAKHS AND ALLOW GROUND NO.6 OF THE A SSESSEES APPEAL PARTLY. 8. THE ISSUE RAISED IN GROUND NO. 7 RELATES TO THE ADDITION OF RS.49 73 000/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) ON ACCOUNT OF CASH SEIZED FROM THE POSSESSION OF THE ASSESSEE TREATING THE SAME AS HIS UNEXPLAINED MONEY U/S 69A. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE ALSO PERUS ED THE ORDER OF THE COMMISSIONER OF CUSTOMS DATED 27-10-2006 PASSED IN THE CASE OF THE ASSESSEE. THE DISCUSSIONS AND FINDINGS ON THE ISSUES INVOLVE D HAVE BEEN RECORDED BY THE COMMISSIONER OF CUSTOMS ON PAGE NO. 16 TO 23 OF THE SAID ORDER INCLUDING THOSE 7 ITA NO. 1780/MUM/2009 ON THE ISSUE OF INDIAN CURRENCY OF RS.49 73 000/- S EIZED FROM THE POSSESSION OF THE ASSESSEE. AS NOTED BY HIM IN THIS CONTEXT THE ASSE SSEE WAS A PERSON OF MEAGER RESOURCES AND WAS WORKING AS A CARRIER AS PER THE D IRECTION OF SHRI RAMCHANDRAN WHO WAS ACTUALLY THE MASTERMIND BEHIND THE ATTEMPT TO ILLEGALLY EXPORT INDIAN CURRENCY OUT OF INDIA. ALTHOUGH THE COMMISSIONER OF CUSTOMS IMPOSED A PERSONAL PENALTY OF RS.5 LAKHS ON THE ASSESSEE AND KEPT THE PROCEEDINGS AGAINST SHRI RAMCHANDRAN IN ABEYANCE TILL HE IS APPREHENDED HIS STATEMENTS ARE RECORDED AND INVESTIGATIONS ARE CARRIED OUT TO ESTABLISH HIS CO MPLICITY IN THE SMUGGLING ACTS THE FINDING CLEARLY GIVEN BY THE COMMISSIONER OF CUSTOM S IS THAT THE ROLE OF THE ASSESSEE IN THE SMUGGLING ACTIVITY WAS LIMITED AS C ARRIER OF INDIAN CURRENCY AND THE ACTUAL MASTERMIND BEHIND THE SMUGGLING ACTIVITY WAS SHRI RAMCHANDRAN. EVEN THE AO HAS ACCEPTED THIS LIMITED ROLE OF THE ASSESSEE W HILE MAKING ADDITION ON ACCOUNT OF UNDISCLOSED INCOME RECEIVED BY HIM IN THE FORM O F REMUNERATION/PERKS FOR HIS ACTIVITIES CARRIED ON FOR SHRI RAMCHANDRAN. IN THES E CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO BE THE OWN ER OF THE CASH FOUND FROM HIS POSSESSION SINCE HE WAS CARRYING THE SAID MONEY AS CARRIER ON BEHALF OF SHRI RAMCHANDRAN WHO WAS THE ACTUAL OWNER OF THE SAID MO NEY. THE CASH FOUND FROM THE POSSESSION OF THE ASSESSEE IN OUR OPINION THE REFORE CANNOT BE TREATED AS UNEXPLAINED MONEY OF THE ASSESSEE U/S 69A SINCE THE SAID MONEY WAS NOT BELONGING TO THE ASSESSEE BUT WAS BELONGING TO SHRI RAMCHANDRAN. IN THAT VIEW OF THE MATTER WE DELETE THE ADDITION MADE BY THE AO A ND CONFIRMED BY THE LEARNED CIT(APPEALS) ON THIS ISSUE AND ALLOW GROUND NO.7 OF THE ASSESSEES APPEAL. 10. THE ISSUE RAISED IN GROUND NO.8 RELATING TO CHA RGING OF INTEREST U/S 234A 234B AND 234C IS CONSEQUENTIAL IN NATURE. THE AO IS ACCORDINGLY DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE ON THIS ISSUE. 8 ITA NO. 1780/MUM/2009 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH 2012. SD/- SD/- (N.V.VASUDEVAN) (P.M. JAGT AP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI DATED: 30 TH MARCH 2012. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR I-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI.