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Gunapal Shetty, C-907, Upvan Tower, Govind Nagar, Malad (E), Mumbai 400 097. Vs. Asstt. Commissioner of Income Tax, Central Circle -34, Ist Floor, Aayakar Bhavan, Mumbai- 20.
May, 08th 2015
                    "F"                

IN THE INCOME TAX APPELLATE TRIBUNAL "F"    BENCH,   MUMBAI
         BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
                AND SHRI N.K. BILLAIYA, AM

                 ./I.T.A. No.223 /Mum/2012
           (     /
                 Assessment Year : 2003-2004
               ./I.T.A. No.222 /Mum/2012
           (   / Assessment Year : 2004-2005
               ./I.T.A. No.221 /Mum/2012
           (   / Assessment Year : 2008-2009
Gunapal Shetty,             /       Asstt. Commissioner of
C-907, Upvan Tower,                 Income Tax, Central
                            Vs.
Govind Nagar, Malad (E),            Circle -34,
Mumbai ­ 400 097.                   Ist Floor,
                                    Aayakar Bhavan,
                                    Mumbai- 20.
     . / PAN : AAIPS 5701N
 ( /Appellant)         ..             (    / Respondent)

                 ./I.T.A. No.219 /Mum/2012
           (     /   Assessment Year : 2007-2008
Sai Leela Hotel Pvt. Ltd.,  /       Asstt. Commissioner of
Nilgiri Apartment,                  Income Tax, Central
                              Vs.
Samant Wadi,                        Circle -34,
Jay Prakash Road,                   Ist Floor,
Goregaon (E),                       Aayakar Bhavan,
Mumbai ­ 400 063.                   Mumbai- 20.
      . / PAN : AADCS6375E
      ( /Appellant)        ..         (    / Respondent)
                                2    11 APPEALS ­ SHETTY GROUP




                 ./I.T.A. No.217 /Mum/2012
           (     /      Assessment Year : 2008-2009
Ravindra Shetty,        /              Asstt. Commissioner of
House No. 1,                           Income Tax, Central
                          Vs.
Radha Chhaya,                          Circle -34,
J.P. Nagar,                            Ist Floor,
Goregaon (East),                       Aayakar Bhavan,
Mumbai ­ 400 063.                      Mumbai- 20.
      . / PAN : AAGPS 4176 D
     ( /Appellant)     ..                 (    / Respondent)


                 ./I.T.A. No.218 /Mum/2012
           (     /      Assessment Year : 2008-2009
S.R. Enterprises,              /       Asstt. Commissioner of
Jagdamba Commercial                    Income Tax, Central
                               Vs.
Complex,                               Circle -34,
Link Road, Malad (W),                  Ist Floor,
Mumbai ­ 400 064.                      Aayakar Bhavan,
                                       Mumbai- 20.
     . / PAN : AAJFS 7474F
 ( /Appellant)         ..                 (    / Respondent)


                 ./I.T.A. No.220 /Mum/2012
           (     /      Assessment Year : 2008-2009
Uday Shetty,             /             Asstt. Commissioner of
Utsav Restaurant & Bar,                Income Tax, Central
                           Vs.
Opp. Filmistan Studio,                 Circle -34,
S.V. Road,                             Ist Floor,
Goregaon (West),                       Aayakar Bhavan,
Mumbai ­ 400 062                       Mumbai- 20.
      . / PAN : AAEPS5362D
     ( /Appellant)      ..                (    / Respondent)
                                  3     11 APPEALS ­ SHETTY GROUP




               ./I.T.A. No. 1358 /Mum/2012
            (     /      Assessment Year : 2003-2004
                         ./I.T.A. No. 1359 /Mum/2012
            (     /      Assessment Year : 2004-2005
Asstt. Commissioner of            / Ravindra Shetty,
Income Tax, Central Circle          House No. 1,
                                  Vs.
-34,                                Radha Chhaya,
Ist Floor,                          J.P. Nagar,
Aayakar Bhavan,                     Goregaon (East),
Mumbai- 20.                         Mumbai ­ 400 063.
                                    . / PAN : AAGPS4176D
     ( /Appellant)              ..       (  / Respondent)

               ./I.T.A. No. 1360 /Mum/2012
            (     /      Assessment Year : 2003-2004
                         ./I.T.A. No. 1361 /Mum/2012
            (     /      Assessment Year : 2004-2005
Asstt. Commissioner of            / Uday Shetty,
Income Tax, Central Circle          Utsav Restaurant & Bar,
                                  Vs.
-34,                                Opp. Filmistan Studio,
Ist Floor,                          S.V. Road,
Aayakar Bhavan,                     Goregaon (West),
Mumbai- 20.                         Mumbai ­ 400 062
                                    . / PAN : AAEPS5362D
     ( /Appellant)              ..       (  / Respondent)

     Assessee by                  Shri Hari S. Raheja
     Revenue by                   Shri Pawan Kumar Beerla
        / Date of Hearing
                                              :23-4-2015
       /Date of Pronouncement :06.05.2015
                                   [

                            / O R D E R
PER BENCH.                  :

      These are bunch of 11 appeals, seven appeals filed by the assessee and
four appeals filed by the Revenue, were heard together as these belong to one
                                   4     11 APPEALS ­ SHETTY GROUP




Shetty group and the issues being identical, we dispose of by this common
consolidated order for the sake of convenience.

First, we shall take up ITA No. 1358/Mum/2012 for A.Y. 2003-04
(Revenue's appeal).

2.    This is an appeal by the Revenue against the deletion of the penalty
levied u/s 271(1)(c) of the Income Tax Act, 1961.

3.    Facts as stated before us are that a search and seizure operation was
carried out on 26-7-2007 in the Ravi Shetty group of concern. This group is
running various hotels, liquor bar and restaurants etc. They also own air-
conditioned hall which are let out for functions like marriage reception,
birthday party etc. The assessee group in their letter dtd. 24-9-2009 made
u/s 134(4) of the Act admitted undisclosed income of Rs. 2 crores in the
various hands and head.

4.    For the year under consideration, return was filed on 17-11-2003
declaring total income at Rs. 13,54,908/-. After the search and pursuant to
the notice, return was filed on 1-12-2008 which included additional income
as per the statement made u/s 132(4) of the Act at Rs. 1,50,000/-. The total
returned income was Rs. 15,04,910/- which was assessed at Rs. 15,39,837/-

5.    Penalty proceedings were initiated u/s 271(1)(c) of the Act. The reason
for initiating penalty is that in the original return filed, the assessee has
offered long term capital gain, however, when consequent to the search, the
return was filed, the said long term capital gain was offered as short term
capital gain and in the assessment the entire sale consideration have been
assessed as income from other sources. The A.O. was convinced that the
assessee has filed in-accurate particulars and concealed the particulars of
income and levied penalty u/s 271(1)(c) of the Act. The assessee carried the
                                   5      11 APPEALS ­ SHETTY GROUP









matter before the ld. CIT(A). It was explained that the additional income of
Rs. 1,50,000/- was offered voluntarily as no material evidence for the same
were found or seized during the course of search proceedings. Insofar as the
sale consideration of shares are concerned, it was explained that the shares
were purchased for Rs. 28,911/- and sold at Rs. 12,21,065/-. It was further
explained that the shares were purchased by account payee cheque and
properly reflected in the books of account. The long term capital gain declared
in the original return was rectified in the post search return and the gains
were offered as short term capital and taxes were paid as per the provisions of
the law. Although in the assessment the entire sale consideration was taxed
under the head "income from other sources", which was accepted by the
assessee but that cannot be the sole reason for the levy of penalty. After
considering the facts and the submissions, the ld. CIT(A) observed that
concealment of income has to be found from the return of income after
comparing the same with the seized documents. In this case, the A.O. has
not made any addition over and above the return of income of the assessee.
The ld. CIT(A) further observed that in the case of sale of shares, the only
dispute is whether the income is taxable as "capital gain" or "income from
other sources". Drawing support from the decision of Hon'ble Supreme Court
in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158, the ld.
CIT(A) deleted the penalty. Aggrieved by this, the Revenue is in appeal before
us.

6.    The ld. D.R. strongly supported the order of levying the penalty. The ld.
D.R. also relied upon the decision of Hon'ble Supreme Court in the case of
Mak Data P. Ltd. vs. CIT, 358 ITR 593(SC).

7.    Per contra, the ld. Counsel for the assessee reiterated what has been
submitted before the lower authorities.
                                    6     11 APPEALS ­ SHETTY GROUP




8.    Having heard the rival submission, we have carefully perused the
orders of the authorities below. We have also gone through the assessment
order. There is no dispute that after the search, additional income was offered
at Rs. 1,50,000/- and long term capital gain has been shown as short term
capital gain. It is also not in dispute that the entire sale consideration has
been treated as income from other sources. The offer of additional income was
made u/s 132(4) of the Act. The share transactions, purchase and sale of
shares were duly reflected in the books of account of the assessee. The
assessee has suo moto offered capital gain in its return of income. The
assessment has been completed merely by changing the head of income i.e
capital gain was treated as income from other sources. The facts relating to
the share transactions were very much there in the return of income,
therefore, it cannot be said that the assessee has filed any in-accurate
particulars or has concealed the particulars of income. The decision of the
Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra)
squarely apply in this case. We, therefore, do not find any reason to interfere
with the findings of the ld. CIT(A). Appeal filed by the Revenue is accordingly
dismissed.

Now, we shall take up ITA No. 1359/Mum/2012 (Revenue's appeal) A.Y.
2004-05.

9.    This is an appeal by the Revenue against the deletion of penalty levied
u/s 271(1)(c) of the Act at Rs. 1,96,393/-.

10.   This appeal by the Revenue is late by 10 days. The delay is condoned.

11.   We find that the appeal of the Revenue cannot be entertained as it is
covered by the Circular of the CBDT vide Instruction No. 3 of 2011 dated 9-2-
2011 reported in (2011) 332 ITR 1 (Statutes). The Revenue's appeal is
accordingly dismissed.
                                     7     11 APPEALS ­ SHETTY GROUP




Now, we shall take up assessee's appeal in ITA No. 217/Mum/2012 for
A.Y. 2008-09 (Shri Ravindra Shetty)

12.   In this year, the penalty has been levied u/s 271(1)(c) of the Act in
respect of addition made on account of jewellery found at the time of search.
During the course of search, gold and diamond jewelleries were found. The
explanation regarding possession of gold jewellery was accepted and no
addition was made. However, in respect of diamond jewellery, addition of Rs.
7,41,320/- was made and penalty proceedings have been initiated. In the
penalty proceeding, after considering the facts and submissions, the A.O.
proceeded by levying penalty u/s 271(1)(c) of the Act holding that the
assessee has furnished in-accurate particulars of income. Aggrieved by this
the assessee carried the matter before the ld. CIT(A) but without any success.

13.   Before us, the ld. Counsel for the assessee stated that acquisition of the
diamond jewellery has come out of the additional income offered for taxation,
therefore, it cannot be said that the assessee has concealed his particulars of
income or has filed in-accurate particulars of income.

14.   Per contra, the ld. D.R. strongly supported the order of the authorities
below.

15.   We have carefully perused the orders of authorities below. There is no
dispute that in this group case, substantial additional income has been
offered for taxation, therefore, possession of diamond jewellery at Rs.
7,41,320/- cannot be ruled out. However, we are not in appeal against the
quantum addition but against the levy of penalty. Since the assessee group
has already offered substantial amount, the benefit of telescoping cannot be
denied. The diamond jewellery can be considered as having purchased out of
the additional income, therefore, it cannot be said that it is a fit case for levy
                                     8     11 APPEALS ­ SHETTY GROUP




of penalty for concealment of particulars of income. We accordingly set aside
the finding of the ld. CIT(A) and direct the A.O. to delete the penalty so levied.
The appeal filed by the assessee is allowed.

Now, we shall take up Revenue's appeal in ITA No. 1360/Mum/2012 for
A.Y. 2003-04.

16.   This is an appeal by the Revenue against the deletion of levy of penalty
u/s 271(1)(c) of the Act at Rs. 3,09,618/-.

17.   This appeal is late by 10 days. The delay is condoned.

18.   This appeal by the Revenue cannot be entertained as it is covered by
the CBDT Instruction No. 5/2014 (F.No. 279/MISC.142/2007-ITJ (PT) dt.
10.7.2014. We accordingly dismiss this appeal as not maintainable.

Now, we shall take up Revenue's appeal in ITA No. 1361/Mum/2012 for
A.Y. 2004-05.

19.   This appeal by the Revenue is preferred against the deletion of penalty
levied u/s 271(1)(c) of the Act amounting to Rs. 1,95,554/-. This appeal
cannot be entertained as the amount involved is less than Rs. 3 lakhs covered
by CBDT vide Instruction No. 3 of 2011 dated 9-2-2011 reported in (2011)
332 ITR 1 (Statutes). Accordingly this appeal is not maintainable, hence,
dismissed.

Now, we shall take up assessee's appeal in ITA No. 220/Mum/2012 for
A.Y. 2008-09 (Shri Uday Shetty)

20.   This is an appeal by the assessee against the levy of penalty u/s
271(1)(c) of the Act.
                                       9   11 APPEALS ­ SHETTY GROUP




21.   During the course of search and seizure operation, cash amounting to
Rs. 5,09,937/- was found out of which cash of Rs. 5 lacs was seized. The
assessee was asked to explain the source of the cash found and seized. It was
explained that the said cash is part of cash in hand of M/s Sai Palace
Restaurant & Bar and Courtyard Bar & Restaurant. Out of the total cash
found, Rs. 50,000/- belongs to Sai Palace Restaurant & Bar, Rs. 4,50,000/-
belongs to Courtyard Bar & Restaurant. Copy of the cash book for the
relevant period was submitted. However, when the A.O. proposed to make
addition of Rs. 5 lacs, the assessee accepted it. Penalty u/s 271(1)(c) of the
Act has been levied by treating Rs. 5 lacs as amount of income sought to be
evaded. The assessee agitated before the ld. CIT(A)but without any success.

22.   Before us, the ld. Counsel for the assessee reiterated what has been
stated before the lower authorities.

23.   The ld. D.R. supported the findings of the A.O.

24.   We have carefully gone through the orders of the authorities below. It
is not a case where the assessee has not offered any explanation during the
course of assessment proceedings. Not only the assessee offered the
explanation but had also substantiated by cogent material evidence. Merely
because of the addition of Rs. 5 lacs was accepted in the assessment
proceedings would not ipso facto lead to levy of penalty u/s 271(1)(c) of the
Act. Considering the facts that the cash in hand was duly reflected in the
books of M/s Courtyard Bar & Restaurant and we do not find any reason for
levy of penalty u/s 271(1)(c) of the Act. We accordingly set aside the findings
of ld. CIT(A) and direct the A.O. to delete the penalty. The appeal filed by the
assessee is accordingly allowed.

Now, we shall take assessee's appeals in ITA 222/Mum/12 and ITA
223/Mum/2012 for AYs 2003-04 & 2004-05 (Shri Gunapal Shetty)
                                      10   11 APPEALS ­ SHETTY GROUP




25.   These are the two appeals filed by the assessee against the levy of
penalties u/s 271(1)(c) of the Act.






26.   The facts for the levy of penalties are that the long term capital gain
returned in the original return of income were shown as short term capital
gain in the return filed after the dated of search and in the assessment
proceedings, the entire sale consideration has been treated as "income from
other sources". On identical set of facts in ITA No. 1358/Mum/2012 (supra)
wherein the ld. CIT(A) has deleted the penalty levied u/s 271(1)(c) of the Act
and we have confirmed the order of the ld. CIT(A) after giving detailed
discussion and other reasons given in ITA No. 1358/Mum/2012 (supra). We
direct the A.O. to delete the penalties levied u/s 271(1)(c) of the Act.

27.   In the result, both these appeals are allowed.

Now, we shall take up assessee's appeal in ITA No. 221/Mum/2012 for
A.Y. 2008-09 (Shri Gunapal Shetty)

28.   This is an appeal by the assessee against the levy of penalty u/s
271AAA of the Act.

29.   The A.O. has levied the penalty on the undisclosed income of Rs. 3 laks
which was offered during the course of search u/s 132(4) of the Act on the
ground that the assessee has not specified the manner in which such income
has been derived nor substantiated the manner in which the undisclosed
income was derived.

30.   Facts of the case are that during the course of search proceeding, the
assessee has disclosed income of Rs. 3 lakhs in the statement recorded u/s
132(4) of the Act. U/s 271AAA, penalty cannot be levied if the following
conditions are fulfilled:-
                                    11    11 APPEALS ­ SHETTY GROUP




      (i)   In the course of search a statement made u/s 132(4) of the Act,
      the assessee admits undisclosed income and certified the manner in
      such income has been derived;

      (ii)  Substantiated the manner in which the undisclosed income was
      derived and;

      (iii) Paid the tax, with interest if any, in respect of the undisclosed
      income.

According to the A.O. the assessee has not explained the manner in which
such income was derived. The assessee carried the matter before the ld.
CIT(A) but could not succeed. Aggrieved by this, the assessee is in appeal
before us.

31.   The ld. Counsel for the assessee vehemently submitted that the
assessee has fulfilled all the conditions certified u/s 271AAA of the Act for not
levying the penalty under the said section. The ld. Counsel relied upon the
decision of the Cuttack Bench of this Tribunal in the case of Pramod Kumar
Jain vs. DCIT [2013] 33 taxmann.com 651(Cuttach ­ Trib).

32.   Per contra, the ld. D.R. strongly supported the orders of authorities
below.

33.   We have carefully perused the impugned orders of authorities below.
There is no dispute that the assessee has offered the income under statement
made u/s 132(4) of the Act. It is also not in dispute that the assessee has
paid the taxes along with interest. The only reason for the levy of penalty is
that the assessee has not explained the manner in which such income has
been derived. The Cuttack Bench of the Tribunal in the case of Pramod
Kumar Jain (supra) held that no definition could be given to the "specified
manner" insofar as the very statement on oath u/s 132(4) certifies the
manner on which the assessee is preferred to pay tax thereon. The inscribing
                                          12    11 APPEALS ­ SHETTY GROUP




in the books of account was taken care of by the assessee when he filed the
returns in pursuance of notice u/s 153A accounting the assets. Therefore the
penalty is not automatic if one of the purported conditions is not fulfilled
although all the conditions have been agreed to of having fulfilled by the A.O.
insofar as the tax and interest have been recovered. Respectfully following the
decision of the Cuttack Bench of the Tribunal, we set aside the findings of the
ld. CIT(A) and direct the A.O. to delete the penalty so levied. Appeal of the
assessee is accordingly allowed.

Now, we shall take up assessee's appeal in ITA No. 218/Mum/2012 for
A.Y. 2008-09 (S.R. Enterprises).

34.   This is an appeal by the assessee against the levy of penalty u/s
271AAA of the Act.

35.   Facts of the case are that during the course of search, the assessee
offered income of Rs. 4 lacs. The A.O. has levied penalty holding that the
assessee has not fulfilled all the conditions given u/s 271AAA of the Act. The
assessee also failed before the ld. CIT(A) and therefore further appeal on
before us.

36.   On identical set of facts in the case of Shri Gunapal Shetty in ITA No.
221/Mum/2012 for A.Y. 2008-09, we have deleted the penalty so levied u/s
271AAA       of   the   Act.   In   our   detailed   discussion   given   in   ITA   No.
221/Mum/2012 (supra), the penalty levied in this case also deleted. Appeal
filed by the assessee is allowed.

Now, we shall take up assessee's appeal in ITA No. 219/Mum/2012 for
A.Y. 2007-08 (Sai Leela Hotel Pvt. Ltd.)
                                    13     11 APPEALS ­ SHETTY GROUP




37.   This is an appeal by the assessee against the levy of penalty u/s
271(1)(c) of the Act amounting to Rs. 2,69,280/-

38.   Facts of the case are that a survey u/s 133A of the Act was conducted
at the business premises on the assessee on 26-7-2007. During the course of
survey operations, the assessee had declared an amount of Rs. 8 lacs and
offered the same in its return of income. The return was accepted and
assessed as such. The penalty has been levied on the amount of Rs. 8 lacs as
the same was treated as the amount of income sought to be evaded. The
assessee carried the matter before the ld. CIT(A) but without any success.

39.   Before us, the ld. Counsel for the assessee reiterated what has been
submitted before the lower authorities.

40.   Per contra, the ld. D.R. strongly supported the impugned orders of the
lower authorities,

41.   We have carefully perused the orders of the authorities below. The
survey operation was conducted at the premises of the assessee on 26th
July,2007. The return for the assessment year 2007-08 was not due on this
date. The assessee offered the income for A.Y. 2007-08 and included the same
in its return. The returned income was Rs. 52,60,033/-. The assessed income
was Rs. 52,60,033/-. Thus the assessed income and the returned income are
the same. No addition has been made in the assessment proceedings. We
therefore do not find any reason for the levy of penalty u/s 271(1)(c) of the Act
when no concealment of income has been detected as per the return of
income of the assessee. Order of the ld. CIT(A) is set aside with the direction
to the A.O. to delete the penalty so levied. Appeal of the assessee is allowed.
                                             14   11 APPEALS ­ SHETTY GROUP




      42.    In the result, appeals of the assessee are allowed whereas appeals of
      the Revenue are dismissed.

             Order pronounced in the open court on 6th May, 2015.


                                          6th May, 2015    



                   Sd/-                                          Sd/-
            (I.P. BANSAL)                                 (N.K. BILLAIYA)
        JUDICIAL MEMBER                                 ACCOUNTANT MEMBER

       Mumbai;               Dated 6th May, 2015
                                             [



       . ../ R.K., Sr. PS
              /Copy of the Order forwarded to :
1.    / The Appellant
2.     / The Respondent.
3.     () / The CIT(A) ­ Concerned,, Mumbai
4.      / CIT- Concerned, Mumbai
5.            ,     ,  / DR, ITAT, Mumbai G Bench

6.     / Guard file.
                                                                         / BY ORDER,

                             //True Copy//
                                                        /  (Dy./Asstt.       Registrar)
                                                            ,  / ITAT, Mumbai

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