THE ITO 19(3)-4, v. MRS. SWARNAKANTA N. MALHOTRA, MUMBAI

ITA 4421/MUM/2007 | 1998-1999
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 442119914 RSA 2007
Assessee PAN AABPM4864H
Bench Mumbai
Appeal Number ITA 4421/MUM/2007
Duration Of Justice 2 year(s) 10 month(s) 22 day(s)
Appellant THE ITO 19(3)-4,
Respondent MRS. SWARNAKANTA N. MALHOTRA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 30-04-2010
Date Of Final Hearing 09-04-2010
Next Hearing Date 09-04-2010
Assessment Year 1998-1999
Appeal Filed On 08-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BEFORE SHRI D.K. AGRAWAL (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) I.T.A NO.4421/MUM./2007 ASSESSMENT YEAR : 1998-99 DATE OF HEARING 9.4.2010 INCOME TAX OFFICER 19(3) 4 R.NO.304 PIRAMAL CHAMBERS LALBAUG PAREL MUMBAI 400 012 .. APPELLANT VS MRS. SWARNAKANTA N. MALHOTRA A-2/12-A SHAH NAHAR INDUSTRIAL ESTATE LOWER PAREL MUMBAI 400 013 AABPM4864H RESPONDENT APPELLANT BY : MS. MONICA KHARE RESPONDENT BY : SHRI M.S. MATHUSIA O R D E R PER PRAMOD KUMAR A.M. THIS IS REVENUES APPEAL AGAINST LEARNED CIT(A)S ORDER DATED 29 TH MARCH 2007 FOR THE ASSESSMENT YEAR 1998-99 FOLLOWING GRIEVANCE IS RAISED:- ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [2] 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIONS OF RS.19 61 804/- AND RS.1 56 944/- RESPECTIVELY MADE U/S 68 AND 69C OF T HE ACT BY HOLDING THAT THE DIAMONDS GENUINELY EXISTED PARTICULARLY WH EN THE INVESTIGATION WING HAD ALREADY PROVED THAT THE HAWALA OPERATORS H AD GIVEN ENTRY TO THE ASSESSEE FOR DECLARING NON-EXISTENT DIAMONDS. 2. THE BRIEF MATERIAL FACTS ARE AS FOLLOWS. THE ASSESS EE HAD MADE DECLARATION UNDER VOLUNTARY DISCLOSURE OF INCOME SCHEME 1997 DECLARING UNDISCLOSED INCOME FOR SEVERAL YEARS UPTO 1984-85 WHICH WAS REPRESENT ED BY WAY OF INVESTMENT IN ASSETS IN THE FORM OF GOLD / DIAMOND ORNAMENTS JEW ELLERY AND LOOSE DIAMONDS. THIS DECLARATION WHICH WAS SUPPORTED BY VOLUATION REPOR T OF THE APPROVED GOVERNMENT VALUER AFFIDAVIT OF THE APPELLANT EXTRACTS OF ACC OUNTING ENTRIES AND PAYMENT OF TAX OF RS.9 51 889/- WAS DULY ACCEPTED BY THE LD. CIT ( MUMBAI CITY XIII) WHO ISSUED A CERTIFICATE TO THAT EFFECT. IN THE RELEVANT PREVIOU S YEAR THE ASSESSEE CLAIMED TO HAVE SOLD THOSE DIAMONDS ETC. FOR RS.8 59 027/- AND RS .11 02 777/- BUT THE ASSESSING OFFICER DECLINED TO ACCEPT THESE SALES AS GENUINE A ND EVEN PROCEEDED ON THE BASIS THAT ASSESSEE SPENT 8% OF VALUE OF THESE SALES TO A RRANGE BOGUS BILLS WHILE DOING SO HE OBSERVED AS FOLLOWS:- 7. ON THE BASIS OF INTIMATION RECEIVED THAT SEARCH AND SEIZURE ACTION ON MARCH 2000 AND CONSEQUENT BLOCK ASSESSMENT IN TH E CASE OF SHARMA & JOHARI GROUP LED TO THE FINDING OF FACT THAT TWO CH ARTERED ACCOUNTANTS VIZ. SHRI KAMAL KUMAR JOHARI AND SHRI HARI OM SHARM A FLOATED A NUMBER OF CONCERNS WHEREIN THEIR CLOSE RELATIVES OR ACQUAI NTANCES OR CONFIDANTS WERE MADE EITHER PARTNERS OR PROPRIETORS OR SHAREHO LDERS. LATER ON NON EXISTENT DIAMONDS WERE DECLARED UNDER THE VDIS 1997 . IT WAS LATER FOUND OUT THAT THE HAWALA RACKET OPERATED BY THE TWO CAS BY BOGUS PURCHASE OF NON EXISTENT DIAMONDS AND LIQUIDATING THE SAME AS R ETAIL SALES IN CASH AND THEREBY LAUNDERING MASSIVE AMOUNT OF UNACCOUNTE D MONEY THROUGH A MAZE OF VARIOUS FIRMS SERIES OF BANK ACCOUNTS AN D PLETHORA TRANSACTIONS. THE BENEFICIARIES HAVE MISUSED A GOVE RNMENT SCHEME BY FRAUDULENTLY DECLARING NON-EXISTANT DIAMONDS FOR VD IS PURPOSES AND LIQUIDATING THE SAME ON PAPER BY OBTAINING BOGUS SA LES BILLS TO REMOVE EVIDENCE AND DEFRAUD THE REVENUE BY PAYING SOME NEG LIGIBLE TAX ON A HUGE CAPITAL BUILD UP. OUT OF THE BENEFICIARY HAVIN G OBTAINED HAWALA ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [3] ENTRIES FOR THE PURPOSE OF DECLARATION OF VDIS 1997 IS THE ASSESSEE. THE AMOUNT AND DATE OF SALE IS AS UNDER:- DATE OF SALE AMOUNT 6.11.1997 RS.8 59 027/- 13.12.1997 RS.11 02 777/- 8. IN THE LIGHT OF THE ABOVE FINDINGS IT IS APPARE NT THAT THE ASSESSEE HAS INTRODUCED HER OWN UNDISCLOSED INCOME OF RS.19 61 804/- UNDER THE GUISE OF SALE PROCEEDS OF NON-EXISTANT DIAMOND. THE SAME IS THEREFORE TREATED AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT AND TAXED ACCORDINGLY. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INTIATED SEPARATELY. 9. THE ACCOMMODATION ENTRY IS OBTAINED BY THE ASSES SEE FROM SHARMA & JOHARI GROUP. SHE HAS NOT DISCLOSED ANY EX PENDITURE INCURRED FOR OBTAINING SUCH ACCOMMODATION ENTRY. UNDER THE C IRCUMSTANCES I ESTIMATE THE EXPENDITURE AT EIGHT PERCENT FOR OBTAI NING SUCH HAWALA ENTRY AND THE SAME IS CONSIDERED AS UNEXPLAINED EXP ENDITURE U/S 69C OF THE ACT AND THE SAME IS ADDED TO THE TOTAL INCOME O F THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) REVERSED THE ACTION OF T HE ASSESSING OFFICER BY OBSERVING AS FOLLOWS:- 3.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER APPE LLANTS SUBMISSIONS REPORT OF THE ASSESSING OFFICER AND AP PELLANTS COMMENTS ON THIS REPORT. AS I FIND THERE ARE TWO ENDS TO TH E SPECTRUM OF THIS ISSUE. AT ONE END OF THE SPECTRUM IS THE EXISTENCE OF THE DIAMONDS AND AT THE OTHER END IS THE QUESTION OF THE GENUINENESS OF THE IR SALE. THE ASSESSING OFFICER HAS HELD THAT THE APPELLANT HAS INTRODUCED HER OWN UNDISCLOSED INCOME UNDER THE GUISE OF SALE PROCEEDS OF NON-EXIS TENCE DIAMOND. TO DECONSTRUCT HE HAS HELD THAT THE DIAMONDS WERE NON -EXISTENT AND AS A RESULT THEIR SALE IS BOGUS AND CONSTITUTE ONLY OBT AINING OF HAWALA ENTRIES. LOOKING INTO THE APPELLANTS SUBMISSIONS THE DOCUMENTS RELIED UPON BY THE APPELLANT AND VARIOUS JUDICIAL DECISION S I DO NOT FIND ANY MERIT IN THIS THEORY. SO FAR AS EXISTENCE OF THE DI AMONDS IS CONCERNED THEY STOOD DECLARED BY THE APPELLANT AND ACCEPTED B Y CIT MC. XIII ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [4] MUMBAI UNDER VDIS-1997. IN THIS BACKDROP IN TERMS OF THE PROVISIONS OF VDIS-1997 NO QUESTION CAN BE RAISED ON THEIR GENUI NENESS. REGARDING THE SALE I FIND THAT IT STANDS SUBSTANTIATED BY TH E CONFIRMATION OF M/S. GALAXY EXPORTS VIDE THEIR AFFIDAVIT DATED 8.2.2006 AND THE PURCHASE INVOICES DATED 6.11.1997 AND 13.12.1997 ISSUED BY T HEM. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING SPECIFIC ON RECORD TO POINT OUT ANY FAULT WITH THESE DOCUMENTS. HE HAS BASED HIS DECISI ON MERELY ON INFERENTIAL PRESUMPTIONS. FURTHER MOST IMPORTANTLY I FIND THAT HONBLE ITAT BENCH J IN ITS ORDER DATED 31.1.2005 IN ITA NO.IT(SS)/70/M/2003 HAS DELETED THE ADDITION OF UNDISCLOSED INCOME MADE IN THE HANDS OF M/S. GALAXY EXPORTS ON ACCOUNT OF THE ALLEGED BOGUS SALE/ PURCHASE OF THE DIAMONDS. THE OBSERVATIONS MADE BY THE HONBLE TRIBUNAL IN THIS ORDER SUBSTANTIATE THE GENUINENESS OF THE SALE MADE BY THE APPELLANT TO M/S. GALAXY EXPORTS. IN THIS ORDER WHILE HOLDING T HAT THERE IS NO JUSTIFICATION FOR THE ADDITIONS IN THE CASE THE HO NBLE ITAT OBSERVED THAT THE SELLER PARTIES WHOSOEVER WERE SUMMOND BY THE ASSESSING OFFICER U/S 131 THEY ALL CONFIRMED THE SALE OF DIAM ONDS BY THEM WHICH BEING A GLARING DIRECT EVIDENCE FURTHER LENDS CRED ENCE TO THE ENTRIES OF THESE TRANSACTIONS RECORDED IN THE REGULAR BOOKS OF ACCOUNTS WHICH HAVE BEEN DULY AUDITED. THE HONBLE ITAT FURTHER O BSERVED THAT ADDITIONS OF UNDISCLOSED INCOME CANNOT BE MADE ON T HE BASIS OF SURMISES / CONJECTURES AS ALSO ON THE BASIS OF PRESUMPTION / ASSUMPTIONS MUCH LESS ON THE BASIS OF ESTIMATE MADE DISBELIEVING THE ENTRIES AS THEY STAND ALREADY RECORDED IN THE REGULAR BOOKS. AS MAY BE SE EN IN THIS ORDER THE HONBLE ITAT HAS RECOGNIZED THE PURCHASE BY M/S. GA LAXY EXPORTS AS GENUINE. IT HAS ALSO ACKNOWLEDGED THE CONFIRMATION BY THE SELLER PARTIES AS CREDIBLE. IN LIGHT OF THIS I FIND THAT THE SAME TRANSACTION AT THE OBSERVATIONS AND DECISION OF THE HONBLE ITAT. FURT HER I ALSO FIND THAT THERE IS A SERIES OF DECISION IN THE MATTER BY DIFF ERENT BENCHES OF HONBLE ITAT IN WHICH SIMILAR ADDITION U/S 68 AND U/S 69C HAVE BEEN DELETED. IN LIGHT OF THE ABOVE FACTS AND JUDICIAL DECISIONS I FIND THAT THERE IS NO CASE FOR HOLDING THE SALE OF DIAMONDS AS A HAWALA ENTRY. WEIGHING THE TWO POSITIONS I FIND THAT WHEREAS THE APPELLANT HAS RE LIED ON CONCRETE EVIDENCES TO SUBSTANTIATE ITS STAND THE ASSESSING OFFICER HAS ONLY RESTORED TO INFERENTIAL PRESUMPTIONS. IN THESE CIRC UMSTANCES THE ADDITIONS U/S 68 AND U/S 69C OF THE ACT CANNOT BE J USTIFIED. ACCORDINGLY THEY ARE DELETED AND THESE GROUNDS OF APPEAL ARE AL LOWED. 4. THE ASSESSING OFFICER IS NOT SATISFIED BY THE STAND SO TAKEN BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [5] 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS ED THE MATERIAL ON RECORD WE FIND NO REASONS TO INTERFERE IN THE WELL REASONED FINDINGS OF THE LEARNED CIT(A) WHICH IS ON THE LINES OF STAND NOW TAKEN BY THE HON'BLE BOMBAY HIGH COURT IN A NUMBER OF CASES. IN THE CASE OF CIT VS UTTAMCH AND JAIN (JUDGMENT DATED 2.7.2009) THEIR LORDSHIPS HAVE INTER-ALIA OBSERV ED AS FOLLOWS:- 16 AS THE VDIS 1997 CERTIFICATE ISSUED BY THE DEPA RTMENT IS VALID AND SUBSISTING IT IS NOT OPEN TO THE REVENUE TO CONTEN D THAT THERE WAS NO JEWELLERY WHICH COULD BE SOLD BY THE ASSESSEE ON 20 .1.1999. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE CONTINUES TO BE IN POSSESSION OF THE SAID DIAMOND JEWELLERY EVEN AFTER THE ALLEGED SALE EFFECTED ON 20.1.1999 OR THAT THE SAID JEWELLERY HAS BEEN SOLD TO THIRD P ARTIES. IN THESE CIRCUMSTANCES THE DECISION OF THE TRIBUNAL IN ACCE PTING THE CLAIM OF THE ASSESSEE THAT THE AMOUNT OF RS.10 35 562/- REPRESEN TED THE SALE PROCEEDS OF THE DIAMOND JEWELLERY DECLARED UNDER VD IS 1997 CANNOT BE FAULTED. 17. THE FACT THAT THE DIAMOND JEWELLERY CLAIMED TO HAVE BEEN SOLD BY THE ASSESSEE WAS NOT FOUND WITH THE PURCHASER (DHAN ANJAY DIAMONDS) OR HIS ASSOCIATES CANNOT BE HELD AGAINST THE ASSESS EE BECAUSE ADMITTEDLY THE SAID DIAMOND JEWELLERY DECLARED UND ER VDIS 1997 IS ALSO NOT FOUND WITH THE ASSESSEE AFTER THE SALE IS EFFEC TED. IF EXISTENCE OF THE DIAMOND JEWELLERY WITH THE ASSESSEE PRIOR TO THE SA LE IS EVIDENCED BY THE VDIS 1997 CERTIFICATE AND ON SALE OF THE SAID JEW ELLERY THE ASSESSEE HAS RECEIVED THE CONSIDERATION WHICH IS DULY ACCOUNTED FOR THEN THE MERE FACT THAT THE JEWELLERY SOLD BY THE ASSESSEE IS NOT FOUND WITH THE PURCHASER CANNOT BE A GROUND TO HOLD THAT THE TRANS ACTION WAS BOGUS AND THE CONSIDERATION RECEIVED BY THE ASSESSEE WAS THE UNDISCLOSED INCOME OF THE ASSESSEE. 6. IN THE CASE OF CIT VS INDER V. NANKANI (JUDGMENT D ATED 24 TH FEBRUARY 2009) THEIR LORDSHIPS HAVE OBSERVED AS FOLLOWS:- 5. ADMITTEDLY THE ASSESSEE HAD MADE A VDIS DECLAR ATION IN WHICH DIAMONDS WERE DISCLOSED. THERE IS NO DISPUTE THAT T HE ASSESSEE HAD RECEIVED THE CONSIDERATION FROM THE PURCHASE BY CHE QUE. THE ENTIRE SUBMISSION ON BEHALF OF THE REVENUE IS THAT THE FIR ST PURCHASER HAS IN FACT SOLD THE DIAMONDS TO THE SECOND PURCHASER WHOS E WHAREABOUTS COULD NOT BE TRACED AND AS SUCH THE SALE WAS FICTI TIOUS. THE QUESTION IS WHETHER THE ORDER COULD NOT BE TRACED AND AS SUCH THE SALE WAS ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [6] FICTITIOUS. THE QUESTION IS WHETHER THE ORDER OF LE ARNED CIT(A) AND ITAT SUFFERS FROM ANY ERROR OF LAW. IN THE INSTANT CASE ADMITTEDLY THE DIAMONDS WERE DECLARED. THE DECLARATION WAS ACCEPTE D BY THE REVENUE AND THEREAFTER ASSESSEE HAD PAID THE TAX. THE ASSE SSEE THEREAFTER HAD SOLD THE SAID DIAMONDS AND RECEIVED CONSIDERATION W HICH IS ALSO DISCLOSED IN THE BOOKS OF ACCOUNT. IN THESE CIRCUMS TANCES THE FINDING RECORDED BY THE TRIBUNAL CANNOT BE FAULTED NAMELY T HAT THE ASSESSEE HAD PROVED THE POSSESSION OF THE JEWELLERY OR DIAMONDS AT THE TIME OF DECLARATION. IN THE INSTANT CASE THE ASSESSING OFF ICER WAS GIVEN AN OPPORTUNITY TO PRODUCE ANY MATERIAL IN HIS POSSESSI ON TO HOLD TO THE CONTRARY. THE ASSESSING OFFICER FAILED TO COMPLY WI TH THE SAID DIRECTION. IN THESE CIRCUMSTANCES LEARNED CIT(A) PROCEEDED TO PASS THE ORDER WHICH ORDER CAME TO BE SUBSEQUENTLY AFFIRMED BY THE ITAT. THE TRIBUNAL IN THE INSTANT CASE HAS HELD THAT THE ASSESSEE HAD DISCLOSED THE DIAMONDS IN HIS POSSESSION AT THE TIME OF VDIS DECL ARATION WHICH WAS ACCEPTED. ONCE THAT BE THE CASE AND THE CONSIDERATI ON RECEIVED FROM THE PURCHASER WHICH HAS NOT BEEN DOUBTED. THE FACT THAT THERE IS DOUBT ABOUT THE SECOND SALE CANNOT RESULT IN MAKING ADDI TION IN THE HANDS OF THE ASSESSEE. 7. IN THE PRESENT CASE NO MATERIAL HAS BEEN BROUGHT O N RECORD TO SUGGEST THAT VDIS CERTIFICATE IS WITHDRAWN OR THAT THE ASSESSEE CONTINUED TO BE IN POSSESSION OF DIAMONDS AFTER THESE ARE CLAIMED TO HAVE BEEN SOLD OFF. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING BINDING JUDICIAL PRECEDE NTS WE APPROVE THE ORDER OF THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATT ER. 8. IN THE RESULT THE APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF APRIL 2010. SD/- (D.K. AGRAWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL 2010 ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [7] COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT MUMBAI (4) CIT(A) MUMBAI (5) DR J BENCH (6) GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PRADEEP J. CHOWDHURY MUMBAI BENCHES SR. PRIVATE SECRETARY ITA NO.442/MUM./2007 SWARNAKANTA N. MELHOTRA [8] DATE INITIAL 1. DRAFT DICTATED ON 22.4.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 23.4.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 23.4.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 23.4.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.4.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 23.4.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 23.4.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER