ITO 14(1)(2), MUMBAI v. DIWA EXPORTS, MUMBAI

ITA 6141/MUM/2014 | 2011-2012
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 614119914 RSA 2014
Assessee PAN AAGFD0180N
Bench Mumbai
Appeal Number ITA 6141/MUM/2014
Duration Of Justice 1 year(s) 11 month(s) 29 day(s)
Appellant ITO 14(1)(2), MUMBAI
Respondent DIWA EXPORTS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-09-2016
Assessment Year 2011-2012
Appeal Filed On 01-10-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY(JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6140 & 6141/MUM/2014 ASSESSMENT YEAR: 2010 - 11 & 2011 - 12 ITO 14(1)(2) VS. DIWA EXPORTS 2 N D FLOOR R.NO. 204 205 B GLITZ MALL EARNEST HOUSE 99 VITHALWADI ZAVERI BAZAR NARIMAN POINT MUMBAI - 400002 MUMBAI - 400021 PAN NO. AAGFD0180N (APPELLANT) (RESPONDENT) APPELLANT BY : MS. AMRITA SINGH RESPONDENT BY : SHRI. KETAN L. VAJANI DATE OF HEARING : 16 /08/2016 DATE OF PRONOUNCEMENT : 30 /0 9 /2016 ORDER PER N.K. PRADHAN A.M . BOTH THE APPEAL S ARE FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR S ARE 20 10 - 11 & 2011 - 12 . THE APPEA L S ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) - 25 AT MUMBAI AND ARISE OUT OF THE ORDER PASSED UNDER SECTION 271(1|)(C) OF THE INCOME TAX ACT 1961 (HERE - IN - AFTER THE ACT) . IN THIS BATCH OF APPEALS THE CONTROVERSY RAISED BEING SIMILAR TH EY WERE HEARD ANALOGOUSLY AND ARE DISPOSED OF BY A COMMON ORDER. 2. THE ASSESSEE IS A MANUFACTURER IMPORTER AND EXPORTER OF G OLD AND G OLD J EWELLERY. THE ASSESSEE EXPORTS MANUFACTURED GOLD JEWELLERY ON BEHALF OF FOREIGN PARTIES AS PER THE I R INSTRUCTIONS. G OLD IS RECEIVED FROM THESE PARTIES FOR MANUFACTURING. THE MANUFACTURING UNIT IS LOCATED AT NOIDA SPECIAL ECONOMIC ZONE (NSEZ) NOIDA UTTAR ITA NO. 6140 & 6141/MUM/2014 2 PRADESH. DURING THE AY 2010 - 11 THE BUSINESS INCOME FROM NSEZ WAS DECLARED BY THE ASSESSEE AT RS. 8 52 74 580/ - . AF TER CLAIMING 100% DEDUCTION UNDER SECTION 10AA OF THE ACT OF RS. 8 52 74 580/ - THE TOTAL INCOME WAS SHOWN AS NIL. SIMILARLY FOR THE AY 2011 - 12 THE ASSESSEE DECLARED THE BUSINESS INCOME FROM NSEZ AT RS. 9 87 78 428/ - . AFTER CLAIMING 100% DEDUCTION UNDER S ECTION 10AA OF RS. 9 87 78 428/ - THE TOTAL INCOME WAS SHOWN A S NIL. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING FOR A.Y. 2010 - 11 SEN T A SHOW CAUSE NOT ICE TO THE ASSESSEE D ATED 08/03/2013 STATING THE FOLLOWING - 1. FROM THE PROFIT AND LOSS ACCOUNT SUBMITTED BY YOU IT IS OBSERVED THAT YOU HAVE PAID SALARIES & BONUS EXPENSES OF RS. 10 98 121/ - TO 24 EMPLOYEES DURING T H E YEAR FOR MANUFACTURING MORE THAN 500 KG OF JEWELLERY. FURTHER AS PER FIXED ASSETS STATEMENT ENCLOSED WITH YOUR BALANCE SHEET IT IS O BSERVED THAT PLANT & MACHINERY WORTH RS. 1 32 263/ - IS ONLY USED FOR THE PURPOSE OF MANUFACTURING. THIS SHOWS THAT NO SOPHISTICATED TOOLS HAVE BEEN USED BY YOU FOR THE PURPOSE OF MANUFACTURING THIS JEWELLERY. IT IS IMPRACTICAL TO MANUFACTURE SUCH A HUGE QU ANTITY OF JEWELLERY WITH SUCH A LOW COST OF LABOUR. THE ELECTRICITY CONSUMPTION IS ALSO LOW. 2. FURNISH JUSTIFICATION REGARDING CLAIM OF DEDUCTION U/S 10AA OF THE INCOME TAX ACT 1961... 2.1 IN RESPONSE TO THE ABOVE THE L D. AR OF THE ASSESSEE SUBMITTED THAT THE JEWELLERY MANUFACTURED WAS HAND MADE NOT REQUIRING SOPHISTICATED TOOLS AND THE ASSESSEE HA D NEITHER SUPPRESSED NOR GIVEN ANY INACCURATE PARTICULARS OF INCOME. THERE WA S NO EVIDENCE OF ANY EXPENSES INCURRED OR INCOME EARNED WHICH WER E NOT RECORDED IN THE BOOKS OF ACCOUNT. WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMITTED BEFORE THE AO THAT IT WAS IMPOSSIBLE TO QUANTIFY AS TO WHAT WOULD BE THE EXPENDITURE INCURRED TOWARDS SALARY ELECTRICITY AND OTHER EXPENSES AT THE FACTORY AT SEZ. THIS WOULD DIFFER FROM ASSESSEE TO ASSESSEE AND IT IS A DEBATABLE ISSUE. THE PROPOSED DISALLOWANCE OF DEDUCTION UNDER SECTION 10AA ON SUCH GROUNDS W OULD LEAD TO PROLONGED LITIGATION. IT WAS FINALLY SUBMITTED THAT THE ASSESSEE WITH A DESIRE TO AVOID LITIGATION AND TO BUY PE ACE SUO MOTU AND VOLUNTARILY WITH A CONDITION THAT THERE W OULD BE NO PENALTY LEVIED AND TO COOPERATE ITA NO. 6140 & 6141/MUM/2014 3 WITH THE D EPARTMENT FILED RE VISED OF RETURN INCOME OFFERING ADDITIONAL INCOME RS. 1 25 00 000/ - ON AD HOC BASIS FOR A.Y. 2010 - 11 AND RS. 1 40 00 000/ - F OR AY 2011 - 12 TO BE TAXED BY TREATING NOT HAVING BEEN EARNED IN SEZ AND HAVING BEEN SPENT TOWARDS BUSINESS EXPENSES IN SEZ. THE ASSESSEE FILED REVISED COMPUTATION OF TAXABLE INCOME FOR THE ABOVE ASSESSMENT YEARS AND COPY OF CHALLANS EVIDENCING TAX PAYMENT ON THE REVISED RETURN OF INCOME. THE AO BROUGHT TO TAX THE ABOVE AMOUNT UNDER SECTION 69C IN THE RELEVANT ASSESSMENT YEARS . TH E S E FACTS ARE PART OF THE RECORD. 2.2 THE AO DURING THE COURSE OF PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE ACT CAME TO A FINDING THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE ABOVE ASSESSMENT YEARS DECLARING NIL INCOME. SUBSEQUENTLY THE CASE S W ERE SELECTED FOR SCRUTI NY AND ENQUIRIES WERE CONDUCTED. THEN THE ASSESSEE FILED REVISED RETURN INCOME OFFERING ADDITIONAL INCOME RS. 1 25 00 000/ - ON ADHOC BASIS FOR A.Y. 2010 - 11 AND RS. 1 40 00 000/ - FOR AY 2011 - 12 TO BE TAXED BY TREATING NOT HAVING BEEN EARNED IN SEZ AND HAVING BEEN SPENT TOWARDS BUSINESS EXPENSES IN SEZ. AS PE R THE AO THE REVISED RETURN OF INCOME FILED PU RSUANT TO NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT AND AFTER THE ENQUIRY CONDUCTED INDICATE THAT THE ASSESSEE HAD NOT FURNISHED FULL PARTICULARS OF ITS TRUE INCOME. THEREFORE THE AO CONCLUDED THAT THE EXPLANATION OF THE ASSESSEE BEING NOT BONAFIDE A ND THE ASSESSEE HAVING FURNISHED INACCURATE PARTICULARS OF INCOME HAD CONCEALED THE INCOME. THER E FORE THE AO IMPOSED A MINIMUM PENALTY OF RS. 38 62 500/ - FOR THE AY 2010 - 1 1 AND RS. 43 26 000/ - FOR THE AY 2011 - 12. ASSESSEE CHALLENGED THE PENALTY ORDERS BEF ORE CIT(A). 2.3 THE L D. CIT(A) RELIED ON THE JUDGMENT IN THE CASE OF SURESH CHANDRA MITTAL (2000) 241 ITR 124 (MP) WHEREIN IT HAS BEEN HELD TH A T IN THE CASE OF ADDITIONAL ITA NO. 6140 & 6141/MUM/2014 4 I N COME OFFERED TO B U Y PEACE AND AVOID LITIGATION NO PENALTY COULD BE LEVIED FOR CO NCEALMENT. THE SAID JUDGMENT WAS LATER UPHELD BY THE HONBLE SUPREME COURT IN 251 ITR 9(SC) . HE ALSO RELIED UPON THE DECISION IN THE CASE OF CIT V S. CAREERS EDUCATION AND INFOTECH (PVT .LTD.) (2012) 336 ITR 257 (P&H) WHEREIN IT HAS BEEN HELD THAT IN EVERY CASE WHERE SURRENDER IS MADE INFERENCE OF CONCEALMENT OF INCOME CANNOT BE DRAWN UNDER SECTION 58 OF THE EVIDENCE A CT . AS THE AO FAILED TO ESTABLISH THROUGH EVIDENCE THAT THE ASSESSEE HAD CONCEALED ITS INCOME THE L D. CIT(A) DELETED THE PENALTY OF RS. 38 62 500/ - IMPOSED FOR THE AY 2010 - 11 AND RS. 43 26 000/ - FOR THE AY 2011 - 12 . 3. THE LD. DR RELIED ON THE ASSESSMENT ORDER PASSED BY THE AO. SHE ALSO RELIED ON THE DECISION IN THE CASE OF PREM PAL GANDHI V S. CIT ( 2011 ) 335 ITR 23 (P&H) . 4. THE L D. COUNSEL OF THE ASSESSEE REFER RED TO THE DECISION IN THE CASE OF SUDHARSHAN SILK & SAREES V S. CIT (2008) 300 ITR 205 (SC) ; CAREERS EDUCATION AND INFOTECH (P) LTD. ( SUPRA) AND SURESH CHANDRA MITTAL (SUPRA) . HE FURTHER STATED THAT THE ASSESSEE WITH A DESIRE TO AV OID LITIGATION AND TO BUY PEACE VOLUNTARILY FILED A REVISED RETURN OFFERING ADDITIONAL INCOME OF RS. 1 25 00 000/ - FOR THE AY 2010 - 11 AND RS. 1 40 00 000/ - FOR THE AY 2011 - 12 ON AD HOC BASIS TO BE TAXED BY TREATING NOT HAVING BEEN EARNED IN SEZ AND HAVING BEEN SPEN T TOWARDS BUSINESS EXPENSES IN SEZ. IN VIEW OF THE ABOVE THE L D. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE L D. CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE MATTER. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED BY THE AO OFFERED ADDITIONAL INCOME OF RS 1 25 00 000/ - FOR THE AY 2010 - 11 AND RS. 1 40 00 000/ - FOR THE AY 2011 - 12 ON AD HOC BASIS TO BE TAXED BY ITA NO. 6140 & 6141/MUM/2014 5 TREATING NOT HAVING BEEN EARN ED IN SEZ AND HAVING BEEN SPENT TOWARDS BUSINESS EXPENSES IN SEZ . 5.1 NOW LET US GO THROUGH THE DECISION IN THE CASE OF PREM PAL GANDHI (SUPRA) RELIED ON BY THE LD. DR. IN THIS CASE AFTER ASSESSMENT WAS COMPLETED IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD SUBSTANTIAL TRANSACTIONS IN BANK WHICH WERE NOT DISCLOSED. PROCEEDINGS WERE INITIATED FOR RE - ASSESSMENT. THE ASSESSEE FILED REVISED INCOME AND OFFERED THE PEAK CREDITS IN THE BANK ACCOUNT AND INTEREST THEREON WITH THE CONDITION THAT NO PENALT Y BE IMPOSED. AFTER FOLLOWING DUE PROCEDURE PENALTY WAS IMPOSED BY THE AO. THE HONBLE HIGH COURT DISMISSED THE APPEAL FILED BY THE ASSESSEE. HOWEVER WE FIND THAT THE CASE OF THE ASSESSEE IN THE PRESENT APPEAL IS DISTINGUISHABLE FROM THE DECISION IN TH E CASE OF PREM PAL GANDHI(SUPRA) RELIED ON BY THE LD. DR AS IN THE INSTANT CASE THE ASSESSMENT WAS NOT COMPLETED AND THE ASSESSEE OFFERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ADDITIONAL INCOME ON AD HOC BASIS TO BE TAXED. 5.2 WE NOW TURN TO TH E DECISIONS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN THE CASE OF SUDHARSHAN SILK AND SAREES (SUPRA) THERE WAS A DISCLOSURE OF ADDITIONAL INCOME IN REVISED RETURN AFTER SEARCH AND SEIZURE. REVISED RETURN FILED BY THE ASSESSEE DECLARING ADDITIONAL I NCOME FOR SEVERAL YEARS WERE ACCEPTED IN TOTO. THE TRIBUNAL UPHELD THE FINDINGS OF THE CIT(A) CANCELLING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) HOLDING THAT THE ASSESSMENTS WERE MADE TOTALLY ON THE BASIS OF ESTIMATED INCOME DISCLOSED IN THE REVISED RE TURN RATHER THAN ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE SEARCH. THE HONBLE SUPREME COURT HELD THAT PENALTY UNDER SECTION 271(1)(C) WAS NOT EXIGIBLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 6140 & 6141/MUM/2014 6 IN THE CASE OF CAREERS EDUCATION & INFOTECH (SUPRA) WE FIND THAT THE HONBLE HIGH COURT OBSERVED N OT ONLY THE SURVEY TEAM BUT DURING THE COURSE OF ASSESSMENT THE AO HAS ALL THE MATERIALS BEFORE HIM TO FIND OUT IF THERE ARE ANY DISCREPANCIES WHICH CAN BE CORRELATED TO THE AMOUNT OF SURRENDER MADE BY THE ASSESSEE. HOWEVER THE AO HAS NOT UTTERED A SINGLE WORD IN THE ASSESSMENT ORDER TO SAY THAT THERE WAS ANY CONCEALMENT OF INCOME OF ASSESSEE HAVING NOTICED BY THE S URVEY TEAM OR BY THE AO HIMSELF. I T WAS HELD THAT THERE WAS NO MATERIAL TO INFER CON CEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS BY THE ASSESSEE THEREFORE NO PENALTY FOR CONCEALMENT BE LEVIED UNDER SECTION 271(1)(C) MERELY BECAUSE THE ASSESSEE SURRENDERED ADDITIONAL SUM FOR TAXATION SUBSEQUENT TO SURVEY OPERATION. IN THE CAS E OF SURESH CHANDRA MITTAL (SUPRA) REVISED RETURN WAS FILED BY THE ASSESSEE SHOWING HIGHER INCOME. ASSESSEE HAD SURRENDERED THE INCOME AFTER PERSISTENT QUERIES BY AO. HOWEVER THE REVISED RETURN S HAVE BEEN REGULARISED BY THE REVENUE. EXPLANATION BY THE A SSESSEE THAT HE HAS DECLARED ADDITIONAL INCOME TO BUY PEACE AND TO COME OUT OF VEXED LITIGATION COULD BE TREATED AS BONAFIDE. IT WAS HELD BY THE HONBLE HIGH COURT THAT THE TRIBUNAL WAS JUSTIFIED IN CANCELLING THE PENALTY LEVIED UNDER SECTION 271(1)(C). TH IS DECISION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN CIT V S . SURESH CHANDRA MITTAL(SUPRA) . 5.3 IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN JAIN BROS. VS. UNION OF INDIA . (1970) 77 ITR 107 116 (SC) THAT THOUGH PENALTY HAS BEEN REGARDED AS AN AD DITIONAL TAX IN A CERTAIN SENSE AND FOR CERTAIN PURPOSES IT IS NOT POSSIBLE TO HOLD THAT PENALTY PROCEEDINGS ARE ESSENTIALLY A CONTINUATION OF THE PROCEEDINGS RELATING TO ASSESSMENT ITA NO. 6140 & 6141/MUM/2014 7 5.4 LET US GO BACK TO THE BEGINNING. IN THE INSTANT CASE THE ASSESSMENT S WERE MADE BY THE AO ON THE BASIS OF ESTIMATED INCOME DISCLOSED IN THE REVISED RETURN RATHER THAN ON THE BASIS OF INCRIMINATING MATERIALS. THE AO HAD NO MATERIAL BEFORE HIM TO FIND OUT THAT THE AD HOC ESTIMATED INCOME OFFERED BY THE ASSESSEE COULD BE CORR ELATED WITH ANY DISCREPANCY. 6. THE PRESENT FACTUAL MATRIX IS TO BE TESTED ON THE ANVIL OF THE ABOVE ENUNCIATION OF LAW. IN THE LIGHT OF THE DECISION IN THE CASE OF SUDHARSHAN SILK AND SAREES; CAREERS EDUCATION & INFOTECH ; AND SURESH CHANDRA MITTAL REFER RED HERE - IN - ABOVE AND THE FACTS BEING SIMILAR WE UPHOLD THE ORDER PASSED BY THE LD. CIT(A) FOR THE A.Y. 2010 - 11 AND A.Y. 2011 - 12. 7 . IN THE RESULT BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/ 0 9 /2016. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 30 /0 9 /2016 A KV (ON TOUR) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE . BY ORDER //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT MUMBAI