MAHAVIR BUILDERS, MUMBAI v. CIT CEN -III, MUMBAI

ITA 4138/MUM/2013 | 2008-2009
Pronouncement Date: 26-11-2014 | Result: Allowed

Appeal Details

RSA Number 413819914 RSA 2013
Assessee PAN AAKFM5577C
Bench Mumbai
Appeal Number ITA 4138/MUM/2013
Duration Of Justice 1 year(s) 6 month(s) 4 day(s)
Appellant MAHAVIR BUILDERS, MUMBAI
Respondent CIT CEN -III, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 26-11-2014
Assessment Year 2008-2009
Appeal Filed On 22-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI . .. . . . . . ! ! ! ! BEFORE SHRI R.C. SHARMA ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER . / ITA NO. 4136/MUM./2013 ( # $ %$ / ASSESSMENT YEAR : 200203 ) . / ITA NO. 4137/MUM./2013 ( # $ %$ / ASSESSMENT YEAR : 200405 ) . / ITA NO. 4138/MUM./2013 ( # $ %$ / ASSESSMENT YEAR : 200809 ) M/S . MAHAVIR BUILDERS NO.67 GOYAL SHOPPING CENTRE S.V. ROAD BORIVALI (WEST) MUMBAI 400 092 .. &' / APPELLANT # V/S INCOME TAX OFFICER (TECHNICAL) CENTRALIII AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... ()&' / RESPONDENT & . / PERMANENT ACCOUNT NUMBER AAKFM5577C + - / REVENUE BY : SHRI MANJUNATHA SWAMY # $. - / ASSESSEE BY : SHRI V. CHANDRA SHEKHAR A/W SHRI NARENDRA SHARMA # / / DATE OF HEARING 21.11.2014 01% / / DATE OF ORDER 26.11.2014 / ORDER 2 2 2 2 / PER AMIT SHUKLA J.M. THE PRESENT APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE IMPUGNED ORDER DATED 26 TH MARCH 2013 PASSED M/S. MAHAVIR BUILDERS 2 FOR THE ASSESSMENT YEAR 200203 AND 200809 AND ORDER DATED 28 TH MARCH 2013 FOR THE ASSESSMENT YEAR 200405 PASSED B Y THE LEARNED COMMISSIONER CENTRALIII MUMBAI. SINCE ALL THESE A PPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUES ARISING OU T OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES THEREFORE AS A MATTER O F CONVENIENCE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOS ED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION I S MAINLY AGGRIEVED BY THE ORDER PASSED UNDER SECTION 263 THER EBY SETTING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER DROPPING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). 3. FACTS IN BRIEF : A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) WAS CONDUCTED IN CASE OF PRAKASH H. SALVA ON 17 TH JANUARY 2008. SIMULTANEOUSLY A SURVEY UNDER SECTION 133A WAS CON DUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ALONG WITH OTHERS. DURING THE COURSE OF SEARCH AS WELL AS UNDER SURVEY OPERATIONS STATEME NT ON OATH OF CONCERNED PERSONS WERE RECORDED AND CERTAIN DOCUMENT S WERE SEIZED. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED MAINLY IN THE BUSINESS OF PROPERTY DEVELOPMENT. IN THE STATEMENT ON OATH THE ASSOCIATES OF THE ASSESSEE S/SHRI PRAKASH S. SAVLA A ND PANKAJ GANGAR HAD OFFERED / DECLARED ADDITIONAL INCOME OF RS. 6 85 04 767 VIDE LETTER DATED 25 TH FEBRUARY 2008 IN PURSUANCE OF THEIR DECLARATION MAD E UNDER SECTION 132(4). THE CONTENTS OF THE SAID LETTER W AS AS UNDER: M/S. MAHAVIR BUILDERS 3 THE DISCLOSURE OF UNDISCLOSED INCOME NOW BEING MADE UNDER THE PROVISIONS OF SECTION 132(4) MAINLY CONSIST OF THE FOL/OWING: A. UNSECURED LOANS B. TRAVELING EXPENSES C. PURCHASE OF ELECTRONIC GADGETS D. REPAIRS & MAINTENANCE EXPENSES E. BUSINESS EXPENSES INCLUDING SECURITY CHARGES AND GI FTS. F. PURCHASE OF CARS G. INCOME TAX PAID IN CASH H. CASH ON HAND I. PURCHASE OF GOLD AND DIAMOND JEWEL/ERY J. DIFFERENCE BETWEEN PURCHASE PRICE AND BOOK VALUE OF SHARES. K. COMMISSION AND BROKERAGE I. MARRIAGE EXPENSES M. IMPROVEMENT OF HOUSE FURNITURE EQUIPMENTS ETC. WE ARE DECLARING HEREWITH UNDISCLOSED INCOME OF RS. 6 85 04 767/- UNDER THE PROVISION OF SECTION 132(4) OVER SEVERAL ASSESSMENT YEARS IN THE HANDS OF VARIOUS ASSESSES IN OUR GROUP. THE TOTAL AMOUNT OF INCOME TAX AND INTEREST APPLICABLE THEREON COMES TO RS.2 78 55 278/-. PLEASE FIND ENCLOSED CHALLANS EVIDENCING PAYMENTS OF THE ENTIRE AMOUNT OF RS.2 78 55 278/-. DETAILS OF THE SAID DISCLOSURE ASSESSEE WISE AND ASSESSMENT Y EAR WISE IS ENCLOSED HEREWITH. SIR WE WOULD ALSO LIKE TO BRING TO YOUR NOTICE THE FACT TH AT THE ABOVE DISCLOSURE OF RS.6 85 04 767/- MADE U/S 132(4) IS APART FROM THE REGULAR INCOME OF THE RESPECTIVE ASSESSES FOR THE CURRENT ASSESSMENT YEAR 2008-09. ANNEXURE TO DECLARATION ULS. 132(4) VIDE LETTER DATED 2512/2008 NAME OF THE ASSESSEE PARTICULARS A.Y. AMOUNT (RS ) MAHAVIR BUILDERS FOREIGN TRAVEL 2002-03 21 370 MAHAVIR BUILDERS UNSECURED LOAN 2002-03 3 000 000 MAHAVIR BUILDERS FOREIGN TRAVEL 2004-05 261 446 MAHAVIR BUILDERS FOREIGN TRAVEL 2005-06 418 362 MAHAVIR BUILDERS FOREIGN TRAVEL 2006-07 674 514 MAHAVIR BUILDERS FOREIGN TRAVEL 2007-08 449 134 MAHAVIR BUILDERS FOREIGN TRAVEL 2008-09 248 880 MAHAVIR BUILDERS CASH SEIZED FROM PRAKASH SAVLA 2008-09 800 000 SEI DEVELOPERS PROPRIETOR PHS UNSECURED LOAN 2003-04 255 825 HIRJIBHAI SAVLA UNSECURED LOAN 2003-04 185 820 SUNDERBEN SAVLA UNSECURED LOAN 2003-04 500 000 SEIAL SAVLA UNSECURED LOAN 2003-04 1 470 000 SEJAL SAVLA UNSECURED LOAN 2004-05 1 50 000 PRAKASH SAVLA UNSECURED LOAN 2002-03 224 000 M/S. MAHAVIR BUILDERS 4 PRAKASH SAVLA UNSECURED LOAN 2003-04 245 000 PRAKASH SAVLA UNSECURED LOAN 2004-05 200 000 MAHAVIR BUILDERS VEHICLE - QUALIS 2005-06 925 482 MAHAVIR BUILDERS VEHICLE - CIVIC 2008-09 1 27 3 265 MAHAVIR BUILDERS JEWELLERY - CASH 2008-09 3 150 000 MAHAVIR BUILDERS TAX PAID IN CASH 2008-09 1 149 269 MAHAVIR BUILDERS MISC. EXPENSES / PAYMENTS (REPAIRS SECURITY GADGET ETC.) 2008-09 2 342 000 MAHALAXMI LAY/DEV P BROKERAGE/COMMISSION PANKAJ GANGAR CHQ RECD 2008-09 1 000 000 SEJAL SAVLA MAHALAXMI - SHARE PURCHASE 2008-09 8 740 000 PANKAJ GANGAR OORJA SHARE PURCHASE 2007 08 2 430 000 CHHAYA GANGAR OORJA - SHARE PURCHASE 2007-08 2 430 000 SEJAL SAVLA TOSHNIWAL - SHARE PURCHASE 2006-07 2 184 897 PRAKASH SAVLA TOSHNIWAL - SHARE PURCHASE 2006-07 30 425 503 PRAKASH SAVLA DAUGHTER MARRIAGE 2008-09 350 000 DOM - APRIL 2007 CHQ - PHS - 167850 30.5.2007 PANKAJ GANGAR COST OF IMPROVEMENT OF HOUSE AND HOUSE EQUIPMENTS 2007-08 3 000 000 TOTAL 68 504 767 4. IN PURSUANCE OF SUCH DECLARATION THE ASSESSEE HAD F ILED ITS RETURN OF INCOME FOR VARIOUS ASSESSMENT YEARS DECLARING FOL LOWING ADDITIONAL INCOME IN RESPONSE TO NOTICE UNDER SECTION 153C: A.Y. HEAD UNDER WHICH INCOME WAS DISCLOSED U/S 132(4) AMOUNT 200203 FOREIGN TRAVEL RS. 21 370 UNSECURED LOAN RS. 30 00 000 200405 FOREIGN TRAVEL RS. 2 61 446 M/S. MAHAVIR BUILDERS 5 200809 * TRAVELLING EXPENSES RS. 75 000 TRAVELLING EXPENSES RS. 44 700 SALARY ADDED UNDER SECTION 92C RS. 5 83 000 * IN ADDITION TO THIS RETURN OF INCOME OF RS. 2 10 11 499 WAS ALSO FILED. 5. THE ASSESSING OFFICER ACCEPTED THE SAID ADDITIONAL IN COME OFFERED BY THE ASSESSEE AS PER THE DECLARATION MADE VIDE AF ORESAID LETTER AND COMPLETED THE ASSESSMENT ON THE RETURN INCOME UNDER S ECTION 143(3) R/W SECTION 153C VIDE ORDER DATED 30 TH DECEMBER 2009 FOR ALL THE THREE ASSESSMENT YEARS. THEREAFTER THE ASSESSING OFF ICER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON THE SAM E INCOME WHICH WAS OFFERED IN THE DECLARATION MADE UNDER SEC TION 132(4). IN RESPONSE TO THE SAID SHOW CAUSE NOTICE THE ASSESSEE FI LED DETAIL EXPLANATION VIDE LETTER DATED 21 ST JUNE 2010 FILED ON 24 TH JUNE 2010 FOR THE AFOREMENTIONED ASSESSMENT YEARS 200203 200 405 AND 200809. IN THE SAID EXPLANATION THE ASSESSEE HAD GIV EN ELABORATE EXPLANATION FOR EACH AND EVERY INCOME OFFERED. FOR E .G. ON ACCOUNT OF FOREIGN TRAVEL EXPENSES FOR THE ASSESSMENT YEAR 2002 03 AND 2004 05 THE ASSESSEE SUBMITTED THAT THESE EXPENDITURES W ERE INCURRED BY THE PARTNERS OUT OF THEIR PERSONAL DRAWINGS FOR THEIR P ERSONAL TRAVEL. THE DRAWINGS OF THE PARTNERS WERE QUITE SUBSTANTIAL TO MEET SUCH EXPENDITURES AND THEREFORE NO DECLARATION ON ADDIT IONAL INCOME WAS CALLED FOR IN THE HANDS OF THE FIRM. HOWEVER ONLY TO BUY PEACE THE ASSESSEE HAD DECLARED THE SAID AMOUNT IN THE HANDS OF THE FIRM EVEN THOUGH NO MATERIAL WAS FOUND IN THE SEARCH / SURVEY Q UA FOREIGN TRAVEL M/S. MAHAVIR BUILDERS 6 THUS THERE COULD NOT BE A CASE OF ANY CONCEALMENT O F INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. REGARDING UNSECURED LOANS THE ASSESSEE HAD SUBMITTE D THAT THE ASSESSEE HAD RECEIVED LOANS FROM SEVERAL LOAN CREDI TORS WHICH WERE RECEIVED THROUGH BANKING CHANNELS I.E. THROUGH ACC OUNT PAYEE CHEQUES CREDITED IN THE BOOKS OF ACCOUNT. HOWEVER DUE TO LAPSE OF TIME AT THE TIME OF THE SEARCH THE ASSESSEE WAS NOT A BLE TO GET PROPER COOPERATION FROM THE LOAN CREDITORS THEREFORE IT DECIDED TO OFFER THE SAID INCOME FOR TAXATION. THIS WAS DONE P URELY TO BUY PEACE. IN SUPORT OF THESE CONTENTIONS RELIANCE WAS PLACED O N THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S HAJI GAFFAR HAJI DADA CHINI 169 ITR 33 (BOM.). FOR THE ASSESSMENT YEAR 20 0809 THE ASSESSEE HAD MADE ONE VERY IMPORTANT SUBMISSION THAT TH E RETURN OF INCOME WAS NOT DUE AT THE TIME OF SEARCH AND THERE FORE THERE COULD NOT HAVE BEEN ANY CONCEALMENT OF INCOME. APART FROM TH AT FOR EACH AND EVERY ITEM DISCLOSED IN THE RETURN OF INCOME THE A SSESSEE HAS GIVEN ELABORATE EXPLANATION ABOUT THE SOURCE OF EXPENDI TURE AND THE INVESTMENT. 6. AFTER CONSIDERING THE ASSESSEES EXPLANATION THE ASSES SING OFFICER HAS DROPPED THE PENALTY PROCEEDINGS VIDE ORDE R DATED 30 TH JUNE 2010 FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 7. THEREAFTER THE COMMISSIONER OF INCOME TAX CENTRAL3 ISSUED SHOW CAUSE NOTICE DATED 18 TH FEBRUARY 2013 UNDER SECTION 263 AS TO M/S. MAHAVIR BUILDERS 7 WHY THE ORDER PASSED BY THE ASSESSING OFFICER DROPPI NG THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) SHOULD NOT BE SET ASIDE. IN RESPONSE THE ASSESSEE FILED DETAIL SUBMISSIONS BEF ORE THE LEARNED COMMISSIONER THE CONTENTS OF WHICH HAS BEEN INCORPO RATED BY THE COMMISSIONER IN THE IMPUGNED ORDER. HOWEVER THE LEA RNED COMMISSIONER REJECTED THE ASSESSEES CONTENTION AND S ET ASIDE THE ORDER OF THE ASSESSING OFFICER DROPPING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AND DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ISSUE RELATING TO THE PENALTY PROCEEDINGS AFRESH. TH E SUM AND SUBSTANCE OF THE COMMISSIONERS OBSERVATION AND CONC LUSION FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER IS THAT THE ASSESSING OFFICER WHILE DROPPING THE PENALTY PROCEEDINGS HAD NOT CARRI ED OUT ANY PROPER ENQUIRY ON THE ADDITIONS WHICH WERE SUBJECT MATTER OF PENALTY AND ALSO DISTINGUISHED THE DECISION OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN HAJI GAFFAR HAJI DADA CHINI (SUPRA). HE HAS ALSO REFERRED AND RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN MA LABAR INDUSTRIAL CO. LTD. V/S CIT [2000] 243 ITR 83 (SC) TO COME TO HI S CONCLUSION. 8. BEFORE US THE LEARNED COUNSEL SHRI V. CHANDRA SHEK HER ON BEHALF OF THE ASSESSEE AFTER EXPLAINING THE ENTIRE F ACTS SUBMITTED THAT THE LEVY OF PENALTY IS DISCRETIONARY WHICH DEPENDS U PON THE FACTS AND THE EXPLANATION GIVEN BY THE ASSESSEE. THE WORDS USED IN SECTION 271(1) ARE MAY AND NOT SHALL AND THEREFORE A DISCRETION IS GIVEN TO THE ASSESSING OFFICER FOR LEVYING PENALTY OR DROPPING THE SAME AFTER CONSIDERING THE ATTENDANT FACTS AND CIRCUMSTANCES OF TH E CASE AND THE M/S. MAHAVIR BUILDERS 8 EXPLANATION GIVEN BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LEARNED COMMISSIONER IN THE IMPUGNED ORDERS HAS NOT GIVEN ANY SPECIFIC FINDING THAT THE SURRENDER MADE BY THE ASSE SSEE WAS BASED ON SOME MATERIAL FOUND IN THE COURSE OF SEARCH WHICH WAS AGAINST THE ASSESSEE. THERE IS NO SUCH FINDING IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) / 154C ALSO. ONCE NO SPECIFIC MATERIAL HAS BEEN FOUND ON THE VARIOUS ITEMS OF EXPENSES LOAN ETC. F OR WHICH THE ASSESSEE HAD OFFERED THE ADDITIONAL INCOME THEN NO A DVERSE INFERENCE FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271 (1)(C) CAN BE DRAWN. THE ORDER OF THE ASSESSING OFFICER SHOULD BE FOUND TO BE UNSUSTAINABLE ON FACTS AND IN LAW THEN ONLY SUCH AN ORDER CAN BE HELD TO BE ERRONEOUS ERROR AND PREJUDICIAL TO THE INTERESTS OF REVENUE U/S 263. IN SUPPORT OF HIS CONTENTION HE STRONGLY RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CIT V/S DLF LTD. [2013] 350 ITR 355 (DEL.). AND ON THE 3 RD MEMBER DECISION OF THE TRIBUNAL PUNE BENCH IN JAMNADAS T. MEHTA V/S ITO WHEREIN IT WAS HELD THAT IF TWO VIEWS ARE POSSIBLE THEN SUCH AN ORDER CANNOT BE REVI SED UNDER SECTION 263. IF THE ASSESSING OFFICER HAD INITIATED PENALTY PR OCEEDINGS AND AFTER ACCEPTING THE ASSESSEES EXPLANATION HAS DROPPED THE PENALTY PROCEEDINGS THEN A CONSCIOUS VIEW HAS BEEN TAKEN BY THE ASSESSING OFFICER WHICH CANNOT BE SET ASIDE. LASTLY HE RELIE D UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CIT V/S SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DEL.) WHEREIN THE HIGH COURT HAS MADE A DIS TINCTION BETWEEN ON LACK OF ENQUIRY AND INADEQUATE ENQUIRY AND IT IS ON LACK OF INQUIRY M/S. MAHAVIR BUILDERS 9 CIT CAN SET ASIDE THE ASSESSMENT ORDER U/S 263. THU S HE SUBMITTED THAT ON THE FACTS OF THE PRESENT CASE THE IMPUGNED O RDER PASSED BY THE LEARNED COMMISSIONER UNDER SECTION 263 IS BADI NLAW AND UNSUSTAINABLE. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFIC ER FOR DROPPING THE PENALTY PROCEEDINGS WILL REVEAL THAT THERE IS NO P ROPER APPLICATION OF MIND AND IT CANNOT BE INFERRED THAT WHETHER HE HAD EXAMINED THE ISSUES PROPERLY OR NOT. HERE IN THIS CASE THE ASSESS EE HAD MADE SURRENDER AFTER THE SEARCH AND THAT TO BE AFTER A LONG GAP. IF THE SEARCH WOULD NOT HAVE TAKEN PLACE THE ASSESSEE WOULD NOT HAVE COME FORWARD WITH THE DECLARATION OFFERING HUGE ADDITIONAL INCOME. THE LEARNED COMMISSIONER HAS RIGHTLY POINTED OUT THAT THE ASSESSING OFFICER BEFORE DROPPING THE PENALTY PROCEEDINGS SHOUL D HAVE CARRIED OUT SOME ENQUIRY ON THE MATTERS OF THE ADDITIONS WHICH WAS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. SUCH AN ORDER OF THE LEARNED COMMISSIONER IS FULLY JUSTIFIED. IN SUPPORT OF HIS CONTENTION THAT IN THE MATTER OF PENALTY PROCEEDINGS WHERE THE ASS ESSING OFFICER HAS DROPPED THE PROCEEDINGS THE COMMISSIONER IS WITH IN HIS JURISDICTION TO SET ASIDE SUCH ORDER UNDER SECTION 263 HE RELIED UPON THE FOLLOWING CASE LAWS VIZ. (I) 275 ITR 360; (II) 3 40 ITR 253 (PAT.); 224 ITR 169 (MAD.); 4 (TRIB.) 297 (HYD.). BESIDES TH IS HE HAS ALSO QUOTED CATENA OF CASE LAWS WITH WHICH WE ARE NOT DEALI NG WITH AS HE HAS NOT GIVEN THE PROPER CONTEXT IN WHICH SUCH DECISIO NS WERE M/S. MAHAVIR BUILDERS 10 RENDERED AND HOW THE RATIO OF SUCH DECISIONS ARE APP LICABLE IN THE PRESENT CASE. EVEN THE COPY OF SUCH ORDERS WAS NOT F ILED BEFORE US. 10. AFTER HEARING THE CASE THE APPEAL WAS RE FIXED FOR C ERTAIN CLARIFICATION AND TO WHETHER THE EXPLANATION/SUBMISSIO NS FILED BEFORE US AFTER THE DATE OF HEARING WAS PART OF THE ASSESSMENT RE CORDS OR NOT. IT HAS NOW BEEN CLARIFIED BY BOTH THE PARTIES THAT THE EX PLANATION FILED BEFORE THE AO WAS PART OF ASSESSMENT RECORD. LD. COUN SEL ALSO POINTED OUT BEFORE US THAT THE ASSESSING OFFICER IN THE SET AS IDE PROCEEDINGS HAS PASSED FRESH ORDER WHEREIN HE HAS AFTER DETAIL EXAMINATION HAS DELETED THE PENALTY ON MOST OF THE ISSUES. NOW IN THE F RESH ORDER PENALTY LEVIED ARE ON SOME MINOR ISSUES AND THE QUANTU M OF PENALTY HAS ALSO BEEN SUBSTANTIALLY REDUCED. THE COPY OF THE FRESH PENALTY ORDER WERE ALSO FILED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE IMPUGNED ORDER AND THE MATERIAL AVAILABLE ON RECORD. IN THE C OURSE OF SEARCH AND SEIZURE ACTION IN THE CASE OF PRAKASH H. SAVLA AND S URVEY ACTION UNDER SECTION 133A ON THE BUSINESS PREMISES OF THE ASSESSE E A STATEMENT ON OATH UNDER SECTION 132(4) WAS RECORDED OF SHRI P RAKASH H. SAVLA AND SHRI PANKAJ GANGAR. IN PURSUANCE THEREOF THES E PERSONS VIDE LETTER DATED 25 TH FEBRUARY 2008 HAVE DECLARED ADDITIONAL INCOME OF R S. 6 85 04 767 WHICH CONSISTED OF VARIOUS ITEMS AS HA S BEEN LISTED ABOVE IN PARA 3. INSOFAR AS THE ASSESSEE IS CONCERNED THE DISCLOSURE WAS MAINLY ON ACCOUNT OF FOREIGN TRAVEL UNSECURED LOAN CASH SEIZED FROM PRAKASH SAVLA PURCHASE OF VEHICLE JEWELLERY ETC. ON THE BASIS OF SUCH M/S. MAHAVIR BUILDERS 11 DECLARATION THE INCOME HAS BEEN ASSESSED ACCORDINGLY UNDER SECTION 143(3) R/W SECTION 153C FOR THE ASSESSMENT YEAR 2002 03 200405 AND 200809. IT IS IMPORTANT TO MENTION HERE THAT THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200809 HAS BEEN FRAM ED UNDER SECTION 143(3) AS IT IS THE YEAR OF SEARCH AND AT THE TIME OF SEARCH EVEN THE RETURN OF INCOME UNDER SECTION 139(1) WAS NOT DUE. THE ASSESSMENT ORDERS SO PASSED IN ALL THE YEARS HAVE ATTA INED FINALITY AS NO APPEAL HAS BEEN FILED BY THE ASSESSEE NOR IT HAS B EEN THE SUBJECT MATTER OF REVISION UNDER SECTION 263. THE ASSESSMENT ORDERS FOR THE IMPUGNED ASSESSMENT YEARS SIMPLY INCORPORATES THE BR EAKUP OF DECLARATION FOR A PARTICULAR ASSESSMENT YEAR AND ON THAT BASIS INCOME HAS BEEN COMPUTED IN THE ASSESSMENT ORDER. AFTER HAVIN G COMPLETED THE ASSESSMENT IN THE SAID MANNER THE PENALTY PROCEED INGS UNDER SECTION 271(1) (C) WAS INITIATED BY THE ASSESSING OFFI CER VIDE NOTICE DATED 30 TH DECEMBER 2009. IN RESPONSE THE ASSESSEE VIDE LETTE R DATED 21 ST JUNE 2010 FILED ON 24 TH JUNE 2010 HAS GIVEN A DETAIL EXPLANATION WITH REGARD TO EACH AND EVERY ADDITION WH ICH WAS MAINLY ON THE BASIS OF DECLARATION MADE BY THE ASSESSEE. FO R THE ASSESSMENT YEAR 200304 AND 200405 WITH REGARD TO THE EXPENDITU RE INCURRED FOR FOREIGN TRAVEL THE ASSESSEE HAD SUBMITTED THAT TH E AMOUNT SPENDED ON FOREIGN TRAVEL HAS BEEN INCURRED BY THE P ARTNERS OUT OF THEIR PERSONAL DRAWINGS FOR THEIR PERSONAL TRAVEL. THE DRAWINGS OF THE PARTNERS WERE QUITE SUBSTANTIAL TO MEET SUCH EXPENDITU RE. THE AMOUNT WAS OFFERED AS INCOME EVEN THOUGH NO CORROBORATING O R ADVERSE M/S. MAHAVIR BUILDERS 12 MATERIAL WAS FOUND DURING THE SEARCH. IT WAS OFFERED ONLY TO BUY PEACE. NO MATERIAL HAS BEEN REFERRED IN THE ASSESSME NT ORDER TO CONTROVERT THE SAID EXPLANATION OF THE ASSESSEE. SIM ILARLY ON ACCOUNT OF UNSECURED LOANS OF RS. 30 LAKHS OFFERED FOR THE ASSESSMENT YEAR 200203 THE ASSESSEE HAD SUBMITTED THAT LOAN HAS BEE N RECEIVED FROM VARIOUS CREDITORS THROUGH ACCOUNT PAYEE CHEQUES AND THROUGH PROPER BANKING CHANNELS. HOWEVER AFTER A LAPSE OF TIME THE LOAN CREDITORS WERE NOT IN A POSITION TO GIVE FULL COOPERA TION THEREFORE THE ASSESSEE DECIDED TO OFFER THE SAME TO BE TAXED AS ITS OWN INCOME EVEN THOUGH NOTHING INCRIMINATING HAS BEEN FOUND DU RING THE COURSE OF SEARCH QUA THE LOAN. AS REGARDS VARIOUS ADDITIONS MADE IN THE ASSESSMENT YEAR 200809 THE ASSESSEES EXPLANATIONS WERE TWO FOLD FIRSTLY THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 200809 WAS NOT DUE AND SECONDLY MOST OF THE ITEMS WERE ALREADY APPE ARING IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER AFTER CONSID ERING SUCH EXPLANATION HAS DROPPED THE PENALTY PROCEEDINGS VIDE ORDER DATED 30 TH JUNE 2010. THIS ORDER OF THE ASSESSING OFFICER DROP PING THE PENALTY PROCEEDINGS IS SUBJECT MATTER OF REVISION UNDER SECTION 263. THE MAIN PLANK OF THE IMPUGNED ORDER FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER BY THE COMMISSIONER IS THAT THE AS SESSING OFFICER HAS NOT CARRIED OUT ANY PROPER ENQUIRY BEFORE DROPPI NG THE PENALTY PROCEEDINGS AND CONSEQUENTLY THE ADDITIONAL INCOME O FFERED BY THE ASSESSEE CANNOT BE SAID TO BE VOLUNTARILY. THE LEARNE D DEPARTMENTAL REPRESENTATIVE IS SUPPORTING THE ORDER OF THE LEARNED COMMISSIONER ON M/S. MAHAVIR BUILDERS 13 THE GROUND THAT HAD THERE BEEN NO SEARCH OR SURVEY THE ASSESSEE WOULD NOT HAVE COME FORWARD WITH SUCH A DECLARATION. 12. IT IS A TRITE LAW THAT TO ASSUME JURISDICTION UN DER SECTION 263 THE COMMISSIONER HAS TO SATISFY TWIN CONDITIONS NAMELY (I ) THE ORDER OF THE ASSESSING OFFICER WHICH HAS BEEN SOUGHT TO BE REVI SED IS ERRONEOUS AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENU E. BOTH THE CONDITIONS SHOULD EXIST SIMULTANEOUSLY. THE ORDER CAN BE TERMED ERRONEOUS ONLY WHEN THERE IS AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WHEREAS PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE UNDERSTOOD AS ERRONEOUS ORDER PASSED BY THE ASSES SING OFFICER WHICH HAS CAUSED LOSS OF REVENUE. THIS TRITE LAW HAS BEEN OPINED BY THE HON'BLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA) WHICH HAS ALSO BEEN REFERRED AND RELIED UPON BY THE COMMISSIONER. NOW WHETHER ON THE FACTS OF THE PRESENT CASE CAN I T BE HELD THAT THE ORDER OF THE ASSESSING OFFICER DROPPING THE PENALTY P ROCEEDINGS CAN BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS O F REVENUE. THE MAIN CHARGE OF THE COMMISSIONER IS THAT THE ASSESSING OFFICER HAS NOT CARRIED OUT PROPER ENQUIRY. HERE IN THIS CASE AS ST ATED ABOVE THE ASSESSMENTS HAVE BEEN COMPLETED ON THE BASIS OF INCO ME OFFERED BY THE ASSESSEE. WHILE COMPLETING THE ASSESSMENT THERE I S NO REFERENCE TO ANY INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARC H. THERE IS NOT A WHISPER ABOUT ANY ADVERSE MATERIAL IN THE ASSESSMENT ORDER INDICATING ANY CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS OF INCOME QUA THE INCOME OFFERED. THE O FFER MADE BY THE M/S. MAHAVIR BUILDERS 14 ASSESSEE HAS BEEN ACCEPTED AS SUCH. IF AT ALL ANY ENQ UIRY WAS CALLED FOR THE SAME SHOULD HAVE BEEN MADE AT THIS STAGE I.E. ASSESSMENT STAGE. THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) IS LEVIABLE ONLY IN RESPECT OF THOSE ADDITIONS FOR WHICH THERE IS A MATE RIAL AVAILABLE ON RECORD WHICH INDICATES CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME. FOR LEVYING THE PEN ALTY UNDER SECTION 271(1)(C) THE BASIC ELEMENT WHICH HAS TO BE SEEN IS WHETHER IN RESPECT OF ANY FACTS WHICH IS MATERIAL TO THE COMPUTA TION OF INCOME BY THE ASSESSING OFFICER THE ASSESSEE HAS FAILED TO OFFE R AN EXPLANATION OR OFFERS AN EXPLANATION WHICH HAS BEEN FOUND TO BE FALS E OR IS UNABLE TO SUBSTANTIATE ITS BONAFIDE. THE COMMISSIONER IN HIS EN TIRE ORDER HAS NOT POINTED OUT AS TO HOW THE ASSESSEES EXPLANATION WH ICH WAS RENDERED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE HIM IS FALSE OR NOT BONAFIDE OR HAS NOT BEEN SUBSTANTIATED. WHILE CANCEL LING SUCH AN ORDER THE COMMISSIONER IN HIS REVISIONARY JURISDIC TION HAS TO DEMONSTRATE AS TO ON WHAT GROUND THE ORDER OF THE AS SESSING OFFICER IS UNSUSTAINABLE EITHER ON FACTS OR IN LAW. ONCE IN TH E ASSESSMENT ORDER ITSELF THERE IS NO REFERENCE OF ANY INCRIMINA TING MATERIAL QUA THE ADDITIONS MADE EXCEPT FOR ACCEPTING THE OFFER OF THE ASSESSEE OF UNDISCLOSED INCOME THEN AT THE PENALTY STAGE WHAT KIND OF ENQUIRY WAS REQUIRED TO BE DONE BY THE ASSESSING OFFICER HA S NOT BE ELABORATED BY THE COMMISSIONER. AT THE PENALTY PROCEEDINGS THE O NLY REQUIREMENT WAS TO SEE WHETHER THE ASSESSEE HAS BEEN ABLE TO ADDUCE PROPER EXPLANATION OR NOT OR HE HAS BEEN ABLE TO SUBST ANTIATE ITS BONA M/S. MAHAVIR BUILDERS 15 FIDE AT THE TIME OF FILING OF RETURN OF INCOME. THIS HAS NOT BEEN CULLED OUT BY THE LEARNED COMMISSIONER. THUS ON THESE FACTS IT CANNOT BE HELD THAT THE COMMISSIONER WAS JUSTIFIED IN CANCELLIN G THE ORDER OF THE ASSESSING OFFICER FOR DROPPING THE PENALTY PROCEEDING S UNDER SECTION 271(1)(C). FURTHER FROM THE EXPLANATION WHICH WERE FURNISHED BEFORE THE ASSESSING OFFICER IT IS SEEN THAT SUCH AN EXPLAN ATION ARE QUITE BONAFIDE AND THEY HAVE NOT BEEN FOUND TO BE FALSE. O NCE SUCH AN EXPLANATION HAS BEEN ACCEPTED THEN THE ASSESSING OF FICER HAS FORMED A CONSIDERED OPINION WHICH CANNOT BE HELD TO BE ERRON EOUS UNLESS AN OPINION IS BASED ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW. MERELY BECAUSE SOME DIFFERENT OP INION COULD HAVE BEEN DRAWN BY THE ASSESSING OFFICER THIS ITSELF CAN NOT JUSTIFY THE REVISION OF THE ORDER UNDER SECTION 263 BY THE COMMI SSIONER. THIS PREPOSITION IS STILL SETTLED BY THE HON'BLE SUPREME COU RT IN MALABAR INDUSTRIAL CO. (SUPRA) AND IN CIT V/S MAX INDIA LTD [2007] 295 ITR 282 (SC). FOR THE ASSESSMENT YEAR 200809 THERE IS A LSO ONE ADDITIONAL FACTOR THAT THE INCOME WHICH WAS OFFERED BY THE ASSESSEE WAS 139(1) AND THAT TOO SUCH AN INCOME HAS BEEN OFFERE D WITH PROPER EXPLANATION WHICH HAS NOT BEEN FOUND TO BE FALSE AND UNSUBSTANTIATED. HERE ARE ASPECT WHICH IS VERY IMPORTANT TO NOTE IS TH AT FOR THIS YEAR PENALTY U/S 271AAA IS NOT AN ISSUE FOR CONSIDERATION BEFORE US BUT PENALTY U/S 271(1)(C) SAME APPLICATION OF EXPLANATION 5A. M/S. MAHAVIR BUILDERS 16 13. AT THIS STAGE IT HAS BEEN BROUGHT ON RECORD T HAT IN SET ASIDE PROCEEDINGS THE ASSESSING OFFICER IN A VERY DETAIL ORDER HAS DELETED/DROPPED THE PENALTY ON MOST OF ISSUES. THIS I TSELF GOES TO SHOW THAT THE IMPUGNED ORDER OF CIT WAS NOT JUSTIFIED ON MERI TS ALSO. HOWEVER OUR FINDING AS GIVEN ABOVE IS SANS THE SUB SEQUENT EVENTS. THUS ON THE PRESENT FACTS OF THE CASE WE ARE OF TH E OPINION THAT THE ORDER OF THE ASSESSING OFFICER FOR DROPPING THE PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEAR 20020 3 AND 2004 05 AND 200809 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE WITHIN THE MEANING OF SECTION 263 AND ACCORD INGLY SUCH AN ORDER CANNOT BE SET ASIDE BY THE COMMISSIONER UNDER TH E REVISIONARY POWER OF 263. ACCORDINGLY ALL THE THREE APPEAL OF T HE ASSESSEE ARE TREATED AS ALLOWED. 14. VARIOUS OTHER ARGUMENTS ADVANCED BY BOTH THE PART IES ARE NOT ADDRESSED IN VIEW OF OUR FINDING GIVEN ABOVE. 15. IN THE RESULT ASSESSEES APPEALS FOR THE ASSESSM ENT YEAR 2004 05 200203 AND 200809 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER 2014. SD/- SD/- SD/ - . .. . . . . . $ $ $ $ R.C. SHARMA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI 3# 3# 3# 3# DATED: 26.11.2014 M/S. MAHAVIR BUILDERS 17 (4 54% / COPY OF THE ORDER FORWARDED TO : (1) # $. / THE ASSESSEE; (2) + / THE REVENUE; (3) 6() / THE CIT(A); (4) 6 / THE CIT MUMBAI CITY CONCERNED; (5) 49: (# / THE DR ITAT MUMBAI; (6) :;$ < / GUARD FILE. )4 ( / TRUE COPY # / BY ORDER *SRIVASTAVA = / > + / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI # $. ?@ A / B =?@ A + >C D