DCIT, UDAIPUR v. Shri Rakesh Vajawat, UDAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI V.D. RAO JUDICIAL MEMBER ITA NO: 48 / JU / 2010 ASSTT. YEAR: 2007 2008 DY. COMMISSIONER OF INCOME-TAX V/S SHRI RAKESH VAJAWAT CENTRAL CIRCLE-1 UDAIPUR. S/O SHRI RANJEET VA JAWAT GOKUL NAGAR UDAIPUR. PAN: AAPPV 3419 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVDESH KUMAR D.R. RESPONDENT BY : NONE ORDER PER V.D. RAO: JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) CENTRAL JAIPUR DATED 16-11-2009 RELATING TO THE ASSESSMENT YEAR 2007-2008. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 2 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) CENTRAL JAIPUR WAS JUSTIFIED IN DELETING T HE PENALTY OF RS. 12 93 442/- LEVIED U/S. 271 (1) (C) OF THE I .T. ACT 1961. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) CENTRAL JAIPUR WAS JUSTIFIED IN HOLDING THA T THE CONDITIONS LAID DOWN IN EXPLANATION 5(2) TO SECTION 271 (1) (C) WERE FULFILLED IN RESPECT OF RS. 38 LAKHS SURRE NDERED AT THE TIME OF SEARCH EVEN THOUGH THE SAID SUM HAD NOT BEEN DISCLOSED IN THE ORIGINAL RETURN OF INCOME. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) CENTRAL JAIPUR WAS JUSTIFIED IN DELETING THE P ENALTY LEVIED U/S. 271 (1) (C) BY THE A.O. IN RESPECT OF A DDITION OF RS. 30 732/- OUT OF VEHICLE EXPENSES AND DEPRECIATI ON AND RS. 10 296/- AS UNEXPLAINED INVESTMENT IN FDR AND I NTEREST THEREON. 4. THE APPELLANT CRAVES LEAVE TO AMEND ALTER ADD TO THE ABOVE GROUNDS OF THE APPEAL. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE TRADING OF MARBLE SLABS TILES ARTICLES ETC. A SEARCH OPERAT ION WAS CARRIED OUT IN HIS PROPRIETORSHIP CONCERN M/S VAJAWAT INDUSTRIES U/S 132 OF THE INCOME- TAX 3 ACT 1961 ON 14.12.2006. THE ASSESSEE FILED THE RET URN OF INCOME ON 31 ST MARCH 2008 DECLARING AN INCOME OF RS. 48 66 540/-. THE ASSESSMENT WAS COMPLETED U/S 143 (3) ON 31.3.2008 ON TOTAL INCOME OF RS. 49 71 840/- WHICH WAS REVISED TO RS. 49 24 920/- VIDE ORDER U/S 154 DATED 19.2.2009 PASSED BY THE ASSESSING OFFICER. SUBSEQUENTLY THE ASSESSING OFFICER HAS PASSED THE PENALTY ORDER THE INCOME ASSESSED INCLU DES UNDISCLOSED INCOME OF RS.39 65 665/- DECLARED BY THE ASSESSEE IN THE R ETURN OF INCOME AS WELL AS SOME OTHER ADDITIONS WERE MADE BY THE ASSESSING OFF ICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE UNDISCLOSED INC OME OF RS. 39 65 665/- INCLUDES UNEXPLAINED CASH OF RS. 75 000/- UNEXPLAI NED INVESTMENT IN GOLD AND SILVER RS. 22 25 000/- AND UNEXPLAINED INVESTME NT IN CONSTRUCTION OF HOUSE AT RS. 15 00 000/- UNEXPLAINED INVESTMENT IN THE PURCHASE OF PLOT AT UDAIPUR AT RS.1 65 995/-. IN ADDITION TO THIS THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OUT OF VEHICLE DEPRECIATION THERE ON RS.30 732/- INSURANCE PREMIUM RELATED TO HOUSE RS. 15 618/- UN EXPLAINED INVESTMENT IN THE FDR AND INTEREST THERE IN THE NAME OF HIS SON RS.11 296/-. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S 271 (1) (C). 4. THE ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE ADDITIONAL INCOME WHICH WAS OFFERED FOR TAXATIO N IN RESPONSE TO HIS STATEMENT RECORDED U/S 132 (4) OF THE INCOME-TAX AC T 1961 DATED 4 14.12.2006 THEREFORE HE WAS COVERED BY THE IMMUNI TY PROVIDED UNDER EXPLANATION 5 TO SEC. 271 (1) (C) OF THE ACT AND HE ALSO EXPLAINED EACH AND EVERY ITEM ON WHICH PENALTY WAS LEVIED BY THE ASSES SING OFFICER. HOWEVER THE ASSESSING OFFICER HAS REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD TO THAT THE DISCLOSURE MADE BY THE ASSESSEE WAS NOT VOLUNTARY AND IT WAS DECLARED IN THE RESULT OF SEARCH OPERATION AND ONE MORE REASON GIVEN BY THE ASSESSING OFFICER WAS THAT NO APPEAL HAS BEEN P REFERRED AGAINST THE ORDER OF THE ASSESSING OFFICER AND REJECTED THE EXPLANATI ON AND IMPOSED THE PENALTY. 5. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATT ER BEFORE THE CIT (A) AND IT WAS SUBMITTED BEFORE THE LD. CIT (A) THAT IN PURSUANCE TO THE STATEMENT RECORDED U/S 132 (4) THE ASSESSEE HAS OF FERED ADDITIONAL INCOME FOR TAXATION ALONG WITH THE INTEREST AND HIS CASE I S COVERED BY EXPLANATION 5 TO SEC. 271 (1) (C) OF THE ACT. THE LD. CIT (A) AC CEPTED THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE PENALTY EXCEPT OF RS. 1 65 995/- ON WHICH NO CROSS OBJECTION HAS BEEN FILED BEFORE US BY THE ASS ESSEE. THE RELEVANT PORTION OF THE LD. CIT (A) IS EXTRACTED AS UNDER. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEAR NED LD. A.R AND HAVE PERUSED THE MATERIAL ON RECORD. EXPLA NATION 5 TO SEC. 271 (1) (C) IS REPRODUCED AS UNDER. 5 EXPLANATION 5:- WHERE IN THE COURSE OF A SEARCH UNDER SECTION 132 THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLAN ATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOL LY OR IN PART) HIS INCOME - (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF THE SEARCH BUT THE RETURN OF INCOME FOR SUCH YEAR NOT BEEN FURNISHED BEFORE THE SAID DATE OR WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFTER THE DATE OF THE SEARCH THEN NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH HE SHALL FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME UNLESS - 1) SUCH INCOME IS OR THE TRANSACTIONS RESULTING IN SUCH INCOME ARE RECORDED - (I) IN A CASE FALLING UNDER CLAUSE (A) BEFORE THE DATE OF SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B) ON OR BEFORE SUCH DATE IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE 6 DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE SAID DATE; OR 2) HE IN THE COURSE OF THE SEARCH MAKES A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 THAT ANY MONEY BULLION JUWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECTION 139 AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME. EXPLANATION5 TO SEC. 271 (1) (C) WAS INSERTED W.E.F . 1-10- 1984. FROM A PERUSAL OF EXPL.5 IT IS CLEAR THAT T HE CIRCUMSTANCES WHICH OTHERWISE DID NOT ATTRACT PENAL TY UNDER SEC. 271 (1) (C) NOW BY A DEEMING PROVISION ATTRAC T PENALTY PROVISIONS. BUT AN EXCEPTION HAS BEEN PROVIDED IN CLAUSE (2) OF THE EXPLANATION WHERE THE DEEMING PROVISION WILL NOT APPLY IF THE ASSESSEE DURING THE COURSE OF SEARCH O PERATIONS MAKES STATEMENT UNDER SEC. 132 (4) THAT THE MONEY BULLION JUWELLERY ETC. FOUND IN HIS POSSESSION HAS BEEN ACQ UIRED OUT 7 OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR I N THE RETURN OF INCOME AND ALSO SPECIFIES THE MANNER IN W HICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER W ITH INTEREST IF ANY IN RESPECT OF SUCH INCOME. THE I NTENTION OF THE EXCEPTION APPEARS TO BE TO AFFORD AN OPPORTUNIT Y TO THE ASSESSEE TO MAKE A CLEAN CONFESSION DURING THE COUR SE OF SEARCH SURRENDER HIS INCOME AND ALSO MAKE PAYMENT OF TAX AND INTEREST THEREON. THUS THE CONDITIONS WHICH SH OULD BE SATISFIED TO TAKE AN ASSESSEE OUT OF THE AMBIT OF E XPLANATION 5 ARE AS UNDER. (I) HE MAKES STATEMENT UNDER SEC. 132 (4) THAT THE MONEY BULLION JEWELLERY ETC. FOUND DURING SEARCH HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139 (1). (II) HE SPECIFIES THAT MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN EARNED. 8 (III) HE PAYS THE TAX AND INTEREST ON THE AMOUNT ADMITTED TO BE UNDISCLOSEDBY HIM IN HIS STATEMENT UNDER SEC.132 (4). FROM THE FACTS OF THE PRESENT CASE AS SEEN FROM TH E RECORD IT IS NOTICED THAT IN HIS STATEMENT RECORDED UNDER SEC . 132(4) ON 14.12.2006 BY THE AUTHORIZED OFFICER IN ANSWER TO QUESTION NO.16 THE APPELLANT ADMITTED THAT THE FOLLOWING AS SETS INTER- ALIA WERE OUT OF HIS INCOME NOT DISCLOSED IN THE R ETURN OF INCOME AND HE AGREED TO PAY THE THERE ON. CASH RS. 75 000 GOLD AND JEWELLERY & SILVER UTENSILS RS.22 25 000 UNDISCLOSED RENOVATION FINISHING AND FURNISHING IN THE RESIDENTIAL HOUSE RS.15 00 000 ___________ TOTAL: RS.38 00 000 IT IS ALSO NOTICED THAT IN THE RETURN OF INCOME FOR THE ASSTT. YEAR UNDER CONSIDERATION FILED BY THE APPELLANT ON 31.3.2008 HE INCLUDED UNDISCLOSED INCOME OF RS. 39 65 995/-. THIS INCLUDES RS.38 00 000/- ADMITTED IN THIS STATEMENT UNDER 9 SEC.132(4) THE DETAILS OF WHICH ARE GIVEN ABOVE A ND RS. 1 65 995/- IN RESPECT OF UNDISCLOSED INVESTMENT IN PLOT AT UDAIPUR. THE AMOUNT OF RS. 1 65 995/- DISCLOSED IN THE RETURN IN RESPECT OF PLOT AT UDAIPUR WAS NOT ADMITTED IN H IS STATEMENT UNDER SEC. 132 (4). IT IS ALSO NOTICED T HAT IN THE STATEMENT UNDER SEC. 132 (4) THE APPELLANT HAD IN ANSWER TO QUESTION NO.16 STATED THAT HE WAS EARNING UNDISCLO SED INCOME FROM PURCHASE AND SALE OF SOME MARBLE ITEMS WHICH HE HAS NOT DISCLOSING IN THE BOOKS OF ACCOUNT. THU S IT IS NOTICED IN RESPECT OF RS.38 00 000/- MENTIONED ABOV E THE APPELLANT MADE STATEMENT UNDER SEC. 132(4) AND ALSO SPECIFIED THE MANNER IN WHICH THE INCOME WAS EARNED . IT IS ALSO NOTICED THAT THE TAX ALONG WITH INTEREST ON TH E RETURNED INCOME WHICH INCLUDED RS.38 00 000/- WAS PAID BY TH E APPELLANT. THIS INCOME WAS ALSO NOT DISCLOSED SO F AR HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SE. 139(1) BECAUSE THE RETURN FOR THE ASSTT. YEAR RELEVANT TO THE PERIOD IN WHICH THE SEARCH TOOK PLA CE I.E FOR 10 THE ASSTT. YEAR 2007-08 WAS NOT DUE BEFORE 31.7.200 7. THEREFORE ALL THE CONDITIONS PRESCRIBED IN EXPLANA TION 5(2) ARE SATISFIED SO FAR AS THE CASE THE CONDITIONS LA ID DOWN IN EXPLANATION 5(2) TO SEC. 271 (1) (C)ARE FULFILLED A ND NO PENALTY UNDER SE. 271 (1) (C) WAS LEVIABLE IN RESPE CT OF THE SURRENDERED AMOUNT OF RS. 38 00 000/-. THE SAME VI EW HAS BEEN TAKEN BY HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS MAHENDR C.SHAH (2008) 299 ITR 305 (GUJ.) RAJAST HAN HIGH COURT IN THE CASE OF CIT VS. (I) KANHAIYA LAL (II) KANHAIYALAL SARUPARIA (2008) 299 ITR 19 AND ALLAHAB AD HIGH COURT IN THE CASE OF CIT VS. RADHA KISHANGOYAL (2005) 278 ITR 454. IN VIEW OF THESE FACTS AND CIRCUMSTAN CES I AM OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED IN IMPOSING PENALTY UNDER SEC. 271 (1) (C ) IN RESPECT OF INCOME OF RS.38 00 000/- MENTIONED ABOVE. THERE FORE PENALTY RELATING TO THE INCOME OF RS. 38 00 000/- I S CANCELLED. 11 ON BEING AGGRIEVED THE REVENUE CARRIED THE MATTER I N APPEAL BEFORE THE TRIBUNAL. 6. THE LD. D.R. STRONGLY RELIED ON THE ORDER OF TH E ASSESSING OFFICER ON THE OTHER HAND THE LD. COUNSEL FOR THE A SSESSEE SUPPORTED THE ORDER PASSED BY THE LD. CIT (A). THE LD. CIT (A) I N HIS ORDER HAS GIVEN A FINDING THAT THE ASSESSEE IN PURSUANCE TO THE 132 ( 4) STATEMENT RECORDED HE DISCLOSED THE INCOME OF RS. 39 65 995/- IT INCLUDE S RS.38 00 000/- AND ACCORDING TO CIT (A) THE AMOUNT OF RS. 38 00 000/- ON WHICH PENALTY WAS IMPOSED COVERED BY EXPLANATION 5 TO SEC. 271 (1) ( C) OF THE INCOME-TAX ACT AND NO PENALTY CAN BE LEVIABLE. HE HAS ALSO RELIED ON VARIOUS CASE LAWS INCLUDING JURISDICTIONAL HIGH COURT. WE FIND NO IN FIRMITY ON THE ORDER PASSED BY THE CIT (A) AND GROUND NO.2 RAISED BY TH E REVENUE IS DISMISSED. 7. GROUND NO.3 RELATING TO ADDITION OF RS. 30 732/ - AND RS. 10 296/-. IN RESPECT OF RS. 30 732/- THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSING OFFICER HAS DISALLOWED T HE ABOVE AMOUNT ON ESTIMATE BASIS ON THE GROUND THAT BEING 1/5 TH OF TOTAL EXPENSES UNDER THESE HEADS BEING PERSONNEL IN NATURE. IN THIS REGARD WE ARE OF THE CONSIDERED OPINION THAT WHEN THE ASSESSING OFFICER DISALLOWED CERTAIN AMOUNTS ON ESTIMATE BASIS NO PENALTY CAN BE IMPOSED ON THOSE AMOUNTS. 12 8. IN SO FAR AS UNEXPLAINED INVESTMENT OF RS. 10 29 6/- IN FDR IN THE NAME OF HIS MINOR SON MASTER CHIRAG AND INTERES T OF RS.1 690/- IS CONCERNED THE LD. CIT (A) DELETED THE PENALTY BY O BSERVING THAT THE PREVAILING SOCIAL CUSTOM IN JAIN FAMILY AND THE STA TUS OF THE ASSESSEE IT IS NORMAL TO RECEIVE GIFTS ON THE OCCASION OF BIRTHDAY S AND VARIOUS FESTIVALS BY MINOR CHILD. THEREFORE THE AMOUNT OF INVESTMENT I N FDR CANNOT BE SAID TO BE UNREASONABLE. HE FURTHER OBSERVED THAT IT CAN B E A BONA-FIDE OMISSION AND DELETED THE PENALTY. WE FIND NO INFIRMITY FROM THE ORDER PASSED BY THE CIT (A) AND THIS GROUND OF APPEAL RAISED BY THE REV ENUE IS DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 10. THE ORDER WAS PASSED IN THE OPEN COURT DATED ON 9TH FEBRUARY 2011. SD/- SD/- (S.V. MEHROTRA) (V.D. RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9TH FEBRUARY 2011 KAMAL KUMAR COPY FORWARDED TO:-APPELLANT/RESPONDENT/ITO/CIT/LD. D.R /GUARD FILE