ACIT CIR. - 4, THANE v. M/s. KARTIKYA CONSTRUCTION, THANE

ITSSA 51/MUM/2006 | misc
Pronouncement Date: 11-02-2010 | Result: Dismissed

Appeal Details

RSA Number 5119916 RSA 2006
Assessee PAN AAFFK6324A
Bench Mumbai
Appeal Number ITSSA 51/MUM/2006
Duration Of Justice 4 year(s) 4 day(s)
Appellant ACIT CIR. - 4, THANE
Respondent M/s. KARTIKYA CONSTRUCTION, THANE
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 11-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 11-02-2010
Date Of Final Hearing 16-12-2009
Next Hearing Date 16-12-2009
Assessment Year misc
Appeal Filed On 07-02-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH MUMBAI BEFORE SHRI R.V. EASWAR SENIOR VICE-PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER IT(SS) NO. 51/MUM/2006 (BLOCK PERIOD : 01.04.19991 TO 10.05.2001) ACIT CIRCLE - 4 M/S. KARTIKYA CONSTRUCTION QUERESHI MANSION 2ND FLOOR G-2 SHEETAL CLASSIC BL DG. NAUPADA THANE (W) 4000602 VS. SHEETAL NAGAR MIRA ROAD (E) DIST. THANE PAN - AAFFK 6324 A APPELLANT RESPONDENT APPELLANT BY: SHRI PRAGATI KUMAR RESPONDENT BY: SHRI K. SHIVARAM O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) II THANE DATED 21.11.2005. 2. REVENUE HAS RAISED THE FOLLOWING FOUR GROUNDS WHICH ARE MATERIAL FOR THE ISSUE TO BE CONSIDERED: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW LEARNED CIT(A)-II THANE ERRED IN DELETING ADDITIO N OF RS.5 52 195/- ON ACCOUNT OF TOTAL UNDISCLOSED INTEREST INCOME. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW LEARNED CIT(A)-II THANE ERRED IN LAW IN ACCEPTING THE CLAIM OF THE ASSESSEE THAT THIS IS A CASE OF DOUBLE TAXATION. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW LEARNED CIT(A)-II THANE ERRED IN LAW IN NOT APPRE CIATING THE FACT THAT AS PER LAW INCOME SHOULD BE TAXED IN THE HAND S OF RIGHT CORRECT & PROPER PERSON. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW LEARNED CIT(A)-II THANE ERRED IN LAW IN NOT APPRE CIATING THE FACT THAT AS PER THE SEIZED DOCUMENTS THE INCOME SHOULD HAVE BEEN TAXED IN THE HANDS OF M/S. KARTIKYA CONSTRUCTION. 3. BRIEFLY STATED THERE WAS A SEARCH AND SEIZURE OPERA TION CARRIED OUT IN THE BUSINESS AND RESIDENTIAL PREMISES OF SHRI SUNIL GUPTA WHO IS A FINANCIER. SHRI SUNIL GUPTA USED TO GIVE MONEY TO O NE SHRI ASHOK JAIN WHO IT(SS) NO. 51/MUM/2006 M/S. KARTIKYA CONSTRUCTION 2 WAS WORKING AS A FINANCE BROKER. THERE WAS SEARCH I N THE PREMISES OF SHRI ASHOK JAIN ALSO AND CERTAIN SEIZED MATERIAL MARKED AS A1 A2 & A7 WERE FOUND IN THE CASE OF SHRI ASHOK JAIN PERTAINING TO VARIOUS FINANCIAL TRANSACTIONS ENTERED BY SHRI SUNIL GUPTA AND HIS WI FE AND ASSOCIATED CONCERNS. ON VERIFICATION OF THE MATERIAL IT WAS FO UND THAT SHRI SUNIL GUPTA EARNED UNDISCLOSED INTEREST INCOME BY ACCEPTING CER TAIN PORTION OF INTEREST IN CASH WHICH WAS TOTALLY OUT SIDE THE BOOKS OF ACC OUNT BY FOLLOWING METHOD OF ACCEPTING INTEREST AT HIGHER RATE AND REC ORDING INTEREST AT LOWER RATE IN THE BOOKS OF ACCOUNT. BASED ON THE SEIZED M ATERIAL SHRI SUNIL GUPTA OFFERED RS.15 LAKHS IN HIS CASE AND RS.5 LAKHS IN T HE CASE OF HIS WIFE SMT. NAMRATA S. GUPTA AND THESE ASSESSMENTS WERE COMPLET ED BY THE DCIT CENTRAL CIRCLE 30 MUMBAI. WHILE COMPLETING THE ASS ESSMENT SINCE THE ASSESSEE FIRM IN WHICH SHRI SUNIL GUPTA AND HIS WIF E ARE PARTNERS HAS CERTAIN TRANSACTIONS THE INTEREST INCOME DISCLOSED TO THE EXTENT OF RS.5 52 195 IN THE CASE OF SHRI SUNIL GUPTA AND HIS WIFE WERE ACCEPTED UNDER THE HEAD MISCELLANEOUS UNDISCLOSED INCOME. CONSEQUENT TO COMPLETION OF THE ASSESSMENT ORDER THE INFORMATION WAS SENT TO THE ACIT CIRCLE 4 THANE FOR INITIATING PROCEEDINGS UNDER SE CTION 158BD. THE FIRM HAS FILED NIL RETURN AND THE ASSESSMENT WAS COMPLETED O N A TOTAL INCOME OF RS.5 52 195/- CONSISTING OF RS.2 66 797/- RECEIVED BY SHRI SUNIL GUPTA AND RS.2 85 398/- RECEIVED BY SMT. NAMRATA GUPTA. IT WA S THE ASSESSEES CONTENTION THAT THE SAID AMOUNT WAS OFFERED IN THE BLOCK ASSESSMENT OF MR. SUNIL GUPTA AND HIS WIFE AS THE ENQUIRIES WERE CON DUCTED IN THEIR CASE AND THE TRANSACTION WITH THE FIRM WERE NOT SUPPORTED BY THE SEARCH MATERIAL AND THE FIRM WAS NOT CENTRALISED. IT WAS FURTHER SUBMIT TED THAT THE MATERIAL WERE ACTUALLY SEIZED FROM SHRI ASHOK JAIN AND CONSEQUENT LY THE ASSESSMENT IN THE CASE OF SHRI SUNIL GUPTA WERE FINALISED AND THI S INCOME STANDS INCLUDED IN THE BLOCK ASSESSMENT OF SHRI SUNIL GUPTA AND HIS WIFE. THE A.O. DID NOT AGREE. THE CIT(A) AGREED WITH THE CONTENTION AND EX CLUDED THE AMOUNT BY HOLDING AS UNDER: - 4. I HAVE CAREFULLY GONE THROUGH THE BLOCK ASSESSM ENT ORDER PASSED BY THE ASSESSING OFFICER IN THE CASE OF THE APPELLA NT FIRM AND THE SUBMISSIONS MADE BY THE AUTHORISED REPRESENTATIVE O F THE APPELLANT FIRM. I FIND THAT A SEARCH AND SEIZURE OPERATION WA S CARRIED OUT IN THE PREMISES OF SHRI SUNIL GUPTA MRS. NAMRATA GUPTA AN D THEIR ASSOCIATE IT(SS) NO. 51/MUM/2006 M/S. KARTIKYA CONSTRUCTION 3 CONCERNS ON 10 TH MAY 2001 WHEREIN CERTAIN INCRIMINATING MATERIAL W AS FOUND AND SEIZED FROM SHRI ASHOK JAIN A FINANCE BR OKER WHICH REFLECTED THAT MR. SUNIL GUPTA HAD EARNED UNDISCLOSED INTERES T INCOME DURING THE BLOCK PERIOD WHICH WAS NOT REFLECTED IN HIS REGULAR RETURN OF INCOME. UNDISCLOSED INTEREST INCOME WAS EARNED BY SHRI SUNI L GUPTA IN TWO WAYS. A) INTEREST EARNED IN CASH TOTALLY OUTSIDE THE BOOK S OF ACCOUNTS B) PART INTEREST EARNED OVER AND ABOVE THE INTEREST REFLECTED IN THE BOOKS OF ACCOUNTS I.E. SUPPRESSION OF INTEREST INCO ME. DURING THE COURSE OF SEARCH SHRI SUNIL GUPTA HAD A DMITTED THAT HE HAD EARNED UNDISCLOSED INCOME OF RS.20 LAKHS WHICH HE HAD SURRENDERED U/S. 132(4) OF THE INCOME-TAX ACT. DURING THE COURS E OF BLOCK ASSESSMENT PROCEEDINGS SHRI SUNIL GUPTA OFFERED A SUM OF RS.1 5 LAKHS FOR TAXATION IN HIS HAND AND HIS WIFE MRS. NAMRATA GUPTA OFFERE D UNDISCLOSED INCOME OF RS.5 LAKHS IN HERE HAND RESPECTIVELY. IT WAS ARGUED BEFORE THE UNDERSIGNED THAT THE UNDISCLOSED INTEREST INCOME OF FERED BY MR. & MRS. SUNIL GUPTA WAS INCLUSIVE OF UNDISCLOSED INCOME OF ASSOCIATED FIRMS FOR WHICH NO NOTICE U/S. 158BC/BD OF THE INCOME-TAX ACT WERE ISSUED BY THE ASSESSING OFFICER TILL THE FINALISATION OF BLOC K ASSESSMENT PROCEEDINGS IN THE CASE OF MR. & MRS. SUNIL GUPTA. THE BASIC QU ESTION IS AS TO WHO HAS EARNED THE UNDISCLOSED INTEREST INCOME AND WHET HER THE TOTAL AMOUNT HAS BEEN ASSESSED AND BROUGHT TO TAX OR NOT. IT WAS NOTED FROM THE ANNEXURE A TO THE BLOCK ASSESSMENT ORDER IN T HE CASE OF THE APPELLANT FIRM THAT THERE WERE 29 ENTRIES IN THE SE IZED DIARIES WHEREIN LOAN AMOUNT AND INTEREST HAD BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF M/S. KARTIKYA CONSTRUCTION I.E. THE APP ELLANT FIRM BUT PART UNDISCLOSED INTEREST INCOME EARNED ON THESE LOANS W AS NOT REFLECTED CORRECTLY IN THE BOOKS OF ACCOUNTS OF THE APPELLANT FIRM IN THE A.Y. 2000- 01 AND A.Y. 2001-02 AND WAS CONCERNED BY SHRI SUNIL GUPTA. THE TOTAL UNACCOUNTED INTEREST WORKS OUT TO RS.5 52 195/- AS PER THE FOLLOWING WORKING GIVEN IN ANNEXURE A TO THE BLOCK ASSESSME NT ORDER. A) INTEREST EARNED IN CASH RS.2 40 462/- B) PART INTEREST SUPPRESSED RS.3 11 733/- TOTAL UNDISCLOSED INTEREST/INCOME RS.5 52 195/- =========== I AM INCLINED TO AGREE WITH THE ARGUMENTS OF THE A UTHORISED REPRESENTATIVE OF THE APPELLANT FIRM THAT THE UNDIS CLOSED INTEREST INCOME EARNED IN CASH OR BY WAY OF SUPPRESSION OF INTEREST WAS DEFACTO EARNED BY MR. & MRS. SUNIL GUPTA AND IN ORDER TO BUY PEACE WITH THE DEPARTMENT AND AVOID ON PROTRACTED LITIGATION THEY HAD OFFERED THIS INCOME FOR TAXATION IN THEIR RESPECTIVE BLOCK ASSES SMENTS IN THEIR INDIVIDUAL CAPACITY. THE BREAK UP OF WHICH IS AS FOLLOWS: A) INTEREST DECLARED IN THE HANDS OF MR. SUNIL GUPT A (RS.92 337 + 1 74 460) RS.2 66 797/- B) INTEREST DECLARED IN THE HANDS OF MRS. NAMRATA G UPTA (RS.148 125 + RS.1 37 273) RS.2 85 398/- IT(SS) NO. 51/MUM/2006 M/S. KARTIKYA CONSTRUCTION 4 TOTAL UNDISCLOSED INTEREST INCOME (A + B) RS.5 52 105/- ============ THUS THERE IS NO DISCREPANCY IN THE QUANTUM OF UNA CCOUNTED INTEREST EARNED BY MR. & MRS. GUPTA AND REFLECTED I N THEIR BLOCK RETURNS VIS--VIS INCOME OF THE APPELLANT FIRM ASSESSED UND ER BLOCK ASSESSMENT PROCEEDINGS. RATE OF TAX IN THE CASE OF BLOCK ASSES SMENT IS ALSO THE SAME FOR INDIVIDUAL AND THE APPELLANT FIRM AND THEREFORE INTEREST OF THE REVENUE STANDS PROTECTED. FURTHER AS PER THE DIARY FOUND AND SEIZED DURING THE COURSE OF SEARCH THAT SHRI ASHOK JAIN HAD MAINTAINED AN ACCO UNT IN THE NAME OF SHRI SUNIL GUPTA WAS FOUND AND IT SHOWS THAT ALL UNRECORDED INTEREST PAYMENT HAD BEEN PAID TO SHRI SUNIL GUPTA BY SHRI A SHOK JAIN. THEREFORE UNDISCLOSED INTEREST INCOME EARNED BY MR . & MRS. GUPTA AND THEIR ASSOCIATE FIRMS WERE BROADLY GROUPED UNDER TH E HEAD AND IN THE NAME OF SUNIL GUPTA. THEREFORE UNDISCLOSED INTER EST IN CASH AND SUPPRESSED INTEREST IN CASH WAS CORNERED BY SHRI SU NIL GUPTA DIRECTLY FROM SHRI ASHOK JAIN. SINCE THE ENTIRE UNDISCLOSED INCOME AMOUNTING TO RS.20 LAKHS HAD ALREADY BEEN DECLARED IN THE HANDS OF MR. & MRS. GUPTA AND TAXES PAID THEREON IN BLOCK ASSESSMENT PR OCEEDINGS THEREFORE WHEN THE PROCEEDINGS IN THE CASE OF THE APPELLANT FIRM WERE TAKEN UP BY THE ASSESSING OFFICER THE APPELLANT FIR M HAD FILED A BLOCK RETURN DECLARING NIL INCOME WITH REMARKS UNDER PRO TEST AND WITHOUT PREJUDICE. THEREFORE IN SUM AND SUBSTANCE THE DE PARTMENT HAD ALREADY COLLECTED TAXES ON UNDISCLOSED INTEREST INC OME IN THE HANDS OF SHRI SUNIL GUPTA AND MRS. NAMRATA GUPTA IN THEIR RE SPECTIVE BLOCK ASSESSMENTS. THEREFORE SAME INCOME CAN NOT BE ASSE SSED AGAIN IN THE HANDS OF THE APPELLANT FIRM. THE SAME UNACCOUNTED I NTEREST INCOME CANNOT BE TAXED TWICE ONCE IN THE HANDS OF MR. & MR S. GUPTA AND THEREAFTER AGAIN IN THE HANDS OF THE APPE LLANT FIRM. THEREFORE I AM OF THE VIEW THAT SHRI SUNIL GUPTA AND SMT. NAM RATA GUPTA WERE DEFACTO BENEFICIARIES OF UNDISCLOSED INTEREST INCOM E AND HAVE PAID TAXES ON THE UNDISCLOSED INTEREST INCOME EARNED BY THEM I N THEIR RESPECTIVE BLOCK ASSESSMENTS. THEREFORE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.5 52 195/- MADE IN THE HANDS OF THE APPELLANT FIRM ON TECHNICAL HYPER GROUNDS AS IT AMOUNTS TO DOUBLE TAX ATION OF THE SAME UNDISCLOSED INTEREST INCOME WHICH HAS ALREADY BEEN SUBJECTED TO TAX IN BLOCK ASSESSMENT PROCEEDINGS OF MR. SUNIL GUPTA AND HIS WIFE MRS. NAMRATA GUPTA. 4. BEFORE US THE LEARNED D.R. SUBMITTED THAT THE CORRE CT INCOME SHOULD BE ASSESSED IN THE HANDS OF THE FIRM WHOSE FUNDS WE RE GIVEN FOR FINANCING AND ACCORDINGLY PROCEEDINGS UNDER SECTION 158BD WAS CORRECTLY INITIATED. IT WAS HIS SUBMISSION THAT THE CIT(A) WAS WRONG IN DEL ETING THE SAID AMOUNT. 5. THE LEARNED COUNSEL IN REPLY RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT INCOME CANNOT BE TAXED TWICE ONCE I N THE HANDS OF THE PERSONS WHO EARNED AND AGAIN IN THE HANDS OF THE FI RM. HE ALSO RAISED IT(SS) NO. 51/MUM/2006 M/S. KARTIKYA CONSTRUCTION 5 FURTHER QUESTION ON RULE 27 WITH REFERENCE TO RECOR DING OF SATISFACTION AND ISSUE OF NOTICE UNDER SECTION 158BD STATING THAT TH ERE IS NO SATISFACTION BY THE OTHER A.O. BEFORE PASSING ON THE INFORMATION TO THE CURRENT A.O. AND ACCORDINGLY THE ASSUMPTION OF JURISDICTION UNDER SE CTION 158BD WHICH IS TO BE PRECEDED BY RECORDING OF SATISFACTION UNDER SECT ION 158BC OF THE PERSON SEARCHED. HE RELIED ON VARIOUS CASE LAW IN SUPPORT OF THE CONTENTIONS. 6. WITHOUT GOING TO THE LEGAL PRINCIPLES RAISED AFRESH BEFORE US WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT ON THE FACTS OF THE CASE. THE ENTIRE QUANTIFICATION OF UNDISCLOSED INTEREST INCOM E IS ON THE BASIS OF THE SEARCH MATERIAL AVAILABLE IN THE PREMISES OF SHRI A SHOK JAIN AND NOT ON THE BASIS OF THE SEARCH MATERIAL SEIZED FROM MR. SUNIL GUPTA. THE INVESTIGATION OF THE SEIZED MATERIAL REVEALED THAT IT IS MR. SUNI L GUPTA AND HIS WIFE WHO WERE ADVANCING FUNDS TO MR. ASHOK JAIN AND WERE OBT AINING HIGHER INTEREST THAN WHAT WAS RECORDED IN THE RESPECTIVE BOOKS OF A CCOUNTS. THE MONEY INDEED WAS EARNED BY SHRI SUNIL GUPTA AND SMT. NAMR ATA GUPTA AND ACCORDINGLY AFTER THE COMPLETION OF INVESTIGATIONS ONLY THE CASES OF SHRI SUNIL GUPTA AND SMT. NAMRATA GUPTA WERE CENTRALISED WHEREAS THE RESPECTIVE ASSESSMENTS OF THE FIRM IN WHICH THEY WE RE PARTNERS WERE NOT CONSIDERED. IT IS ALSO A FACT THAT THE INCOMES WERE VERIFIED AND ACCEPTED IN THE HANDS OF THE RESPECTIVE ASSESSEES WITHOUT ANY R EFERENCE TO THE VARIOUS FIRMS WHOSE FUNDS THESE TWO PEOPLE WERE UTILISING F OR ADVANCING TO VARIOUS PEOPLE AT HIGHER INTEREST. ON THE FACTS OF THE CASE THE ORDER OF CIT(A) IS CORRECT. AS RIGHTLY HELD BY THE HONOURABLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATCHAIAH 218 ITR 239 THE A.O. HAS NO OPTIO N LIKE THE ONE HE HAD UNDER THE I.T. ACT 1922. IT WAS HELD THAT HE CAN AND HE MUST TAX THE RIGHT PERSON AND THE RIGHT PERSONS ALONE. BY RIGHT PERSO N IT IS MEANT THE PERSON WHO IS LIABLE TO BE TAXED ACCORDING TO LAW AND WIT H RESPECT TO A PARTICULAR INCOME. THE EXPRESSION WRONG PERSON IS DEFINITELY U SED AS OPPOSITE OF THE EXPRESSION RIGHT PERSON. MERELY BECAUSE WRONG PERSO N IS TAXED WITH RESPECT TO A PARTICULAR INCOME THE A.O. IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME . EVEN THOUGH IN PRINCIPLE THE A.O. MAY BE CORRECT IN INVOKING THE PROVISIONS OF SECTION 158BD BUT THE R IGHT PERSON IN THIS CASE IS SHRI SUNIL GUPTA AND SMT. NAMRATA GUPTA WHO EARNED THE PARTICULAR IT(SS) NO. 51/MUM/2006 M/S. KARTIKYA CONSTRUCTION 6 INCOME. HENCE SINCE THE ASSESSMENT WAS ALREADY COM PLETED AND CRYSTALLISED IN THEIR HANDS TAXING THE INCOME CORRE CTLY THERE IS NO QUESTION OF BRINING TO TAX THE SAME AMOUNT IN THE HANDS OF T HE FIRM WITHOUT ESTABLISHING THAT IT IS THE FIRM WHICH HAS INDULGED IN SUCH TRANSACTIONS. THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE FI RM HAS EARNED THE INCOMES. BOTH ON FACTS AS WELL AS ON LAW THE ORDER OF THE CIT(A) IS TO BE UPHELD. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY 2010. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) SENIOR VICE-PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 11 TH FEBRUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) II THANE 4. THE CIT III THANE 5. THE DR G BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.