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IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM)
.. , ,
./I.T.(SS)A. No.16/Mum/2012
( / Assessment Block P eriod : 1990-91 to 2001-02)
Asstt. Commissioner of Income / Ms. Rani Mukerji
Tax, CC- 22, Vs. 701, Vidya Apartment,
Room No.403, 4th Floor, 7th Floor, Janki Kutir,
Aayakar Bhavan, Church Road,
M K Road, Juhu,
Mumbai-400020 Mumbai-400049.
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :AALPM8973B
/ Appellant by : Shri Santosh Kumar
/Respondent by : Shri B V Jhaveri
/ Date of Hearing
: 10.7.2014
/Date of Pronouncement : 31.7.2014
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
The appeal filed by the revenue is directed against the order dated
16.01.2012 passed by Ld CIT(A)-39, Mumbai and it relates to the block period
from 1990-91 to 2001-02.
2. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the
penalty levied u/s 158BFA(2) of the Act in respect of the following two items of
income:-
(a) Difference in remuneration received Rs.9.00 lakhs
I.T(SS)A No.16/Mum/2012
2 I I T I T A
(b) Unaccounted expenditure on renovation of flat Rs.5.00 lakhs.
3. A search and seizure action u/s 132 of the Act was conducted in the hands
of the assessee on 26-09-2000. The assessee filed her block return declaring
undisclosed income at Rs.26,17,283/-. The AO, however, determined the
amount of undisclosed income at Rs.1,58,41,635/-. The assessment order was
challenged by the assessee before Ld CIT(A) and also before the ITAT. The
Tribunal passed the order on 07.01.2010 confirming certain additions made by
the AO. Subsequently, the assessing officer levied penalty u/s 158BFA(2) of the
Act on the additions confirmed by the Tribunal, which inter alia, included
following items:-
(a) Addition relating to difference in the remuneration in respect of the
film named "Bus Itna Sa Khwab Hai" Rs.9.00 lakhs.
(b) Addition on account of undisclosed investment made in interior
decoration of flat Rs.5.00 lakhs.
The Ld CIT(A), however, deleted the penalty by holding that both the above said
additions have been made / confirmed on estimated basis. Aggrieved by the
order of Ld CIT(A), the revenue has filed this appeal before us.
4. The facts relating to the first item of addition of Rs.9.00 lakhs are that the
assessee had shown the remuneration received for the film cited above at
Rs.27.00 lakhs. Based on the seized material, the AO held that the assessee has
received Rs.48.00 lakhs as remuneration for the above said film and accordingly
added the difference to the undisclosed income of the assessee. The same was
confirmed by Ld CIT(A). The Tribunal, however, gave a finding that the
remuneration for the film was Rs.36.00 lakhs and accordingly restricted the
I.T(SS)A No.16/Mum/2012
3 I I T I T A
addition to Rs.9.00 lakhs. Against this addition, the AO has levied penalty u/s
158BFA(2) of the Act.
5. The facts relating to the second item of addition of Rs.5.00 lakhs are that
the assessee had incurred expenses on renovation of flat nos. 404, 405 and 305,
all the three flats having aggregate area of 2040 Sq.ft. Based on the seized
materials, the AO added amounts noted in various loose sheets, viz.,
Rs.2,81,716/-, Rs.5,21,000/-, Rs.8,68,230/-, Rs.4,98,680/- and Rs.5,00,000/-. In
the quantum appellate proceedings, the Tribunal accepted the contention of the
assessee that there were overlapping in noting down the expenditure incurred in
respect of the above said three flats. Hence, considering the facts and
circumstances of the case, the Tribunal estimated the cost incurred on interior
decoration of all the three flats at Rs.40.00 lakhs. Since the assessee had
already disclosed Rs.34,84,082/-, the Tribunal confirmed addition to the extent
of Rs.5.00 lakhs only. Against this addition also, the AO has levied penalty u/s
158BFA(2) of the Act.
6. Since the penalty has been levied u/s 158BFA(2) of the Act, we feel it
pertinent to extract the said provision below:-
"2. The Assessing Officer or the Commissioner (Appeals) in the
course of any proceeding under this Chapter, may direct that a person
shall pay by way of penalty a sum which shall not be less than the amount
of tax leviable but which shall not exceed three times the amount of tax
so leviable in respect of the undisclosed income determined by the
Assessing Officer under clause (c) of section 158BC.
Provided that no order imposing penalty shall be made in respect of
a person if--
(i) such person has furnished a return under clause (a) of
section 158BC;
(ii) the tax payable on the basis of such return has been paid or,
if the assets seized consist of money, the assessee offers the
money so seized to be adjusted against the tax payable;
I.T(SS)A No.16/Mum/2012
4 I I T I T A
(iii) evidence of tax paid is furnished along with the return; and
(iv) an appeal is not filed against the assessment of that part of
income which is shown in the return.
Provided further that the provisions of the preceding proviso shall
not apply where the undisclosed income determined by the Assessing
Officer is in excess of the income shown in the return and in such cases
the penalty shall be imposed on that portion of undisclosed income
determined which is in excess of the amount of undisclosed income shown
in the return."
7. The question- Whether the penalty provided u/s 158BFA(2) is mandatory or
discretionary was also considered by the various benches of Tribunal. Since the
opening portion of above said section uses the expression "May direct", the
Tribunal has expressed the view that there is a discretion to the Assessing officer
either to levy or not to levy penalty. In this regard, the decision rendered by
the Chennai bench of Tribunal in the case of Ch. Suresh Reddy Vs. ACIT (120
TTJ 523) may be referred to.
8. With regard to the first issue, the Ld D.R submitted that the remuneration
for the film was originally determined by the AO at Rs.48.00 lakhs. However, the
Tribunal after appreciating the seized materials has held that the assessee was
to receive a remuneration of Rs.36.00 lakhs. Accordingly, the Tribunal has
sustained the addition of Rs.9.00 lakhs holding that the assessee has received
the same by way of cash. Since the tribunal is a fact finding authority and since
the impugned issue has been decided by it on the basis of seized materials, the
ld D.R submitted that the AO was justified in levying penalty on this addition.
9. On the contrary, the Ld A.R submitted that the Tribunal has wrongly
confirmed the said addition on the basis of noting found in a diary. Inviting our
attention to the copies of correspondences exchanged between the assessee and
I.T(SS)A No.16/Mum/2012
5 I I T I T A
the Production house subsequent to the date of search, the Ld A.R submitted
that the assessee herein, in fact, reduced the remuneration to Rs.27.00 lakhs as
against the amount of Rs.36.00 lakhs originally proposed. He submitted that the
manner of receipt of Rs.27.00 lakhs was also different from the one noted in the
diary. The ld A.R further submitted that the assessee was constrained to reduce
the remuneration to Rs.27.00, since the concerned film did not fair well.
Accordingly, the ld A.R submitted that the Tribunal was wrong in sustaining the
addition of Rs.9.00 lakhs without appreciating the events that took place
subsequently. Accordingly, the Ld A.R submitted that the Ld CIT(A) was justified
in deleting the penalty on the reasoning that the above said addition has been
sustained on estimate basis. The Ld A.R further submitted that the assessee has
challenged the addition of Rs.9.00 lakhs by filing appeal before the Hon'ble High
Court of Bombay and the same has been admitted. He submitted that the
admission of substantial question of law by the High Court would mean that the
bonafides of the Assessee's stand established and in that case, the penalty is not
exigible on those issues. For this proposition, the Ld A.R placed reliance on the
decision rendered by the Mumbai bench of Tribunal in the case of ACIT Vs. Ekta
Exports in IT(SS)A No.27/Mum/2011 dated 24.08.2012.
10. In the rejoinder, the Ld D.R submitted that the Tribunal has, in fact,
considered the submissions relating to subsequent reduction of remuneration in
paragraph 53 of the order and has rejected the same by holding the same to be
an after thought. He further submitted that the Hon'ble Delhi High Court, in the
case of CIT Vs. Splender Construction (2013)(352 ITR 588), has held that, when
the order of the assessing officer in the quantum proceedings was sustained by
I.T(SS)A No.16/Mum/2012
6 I I T I T A
all the authorities and the court also dismissed the appeal filed by the assessee
at the admission stage, it could not be said that the issue was debatable.
Accordingly, the Ld D.R submitted that the admission of appeal by the High
Court cannot make the issue debatable.
11. We have heard the rival contentions on this issue and carefully perused
the record. Before us, the Ld A.R placed strong reliance to the correspondences
exchanged between the assessee and the production house subsequent to the
date of search and contended that the remuneration was in fact reduced from
Rs.36.00 lakhs to Rs.27.00 lakhs and hence there is no necessity to sustain the
addition of Rs.9.00 lakhs. Accordingly he contended that the Tribunal has
sustained the addition on the basis of inferences. However a careful perusal of
the order passed by the Tribunal in the quantum assessment proceeding would
show that the Tribunal has considered the claim of reduction of remuneration
subsequent to the date of search and has expressed the view that the same
seems to be an after thought. Further the Tribunal has duly considered the
noting made in the seized record, the conduct of the father of the assessee who
used to maintain records of the assessee and accordingly held that the assessee
was to receive a remuneration of Rs.36.00 lakhs. Since the assessee has
claimed to have received a sum of Rs.27.00 lakhs only, the Tribunal has held
that the assessee must have received the balance amount of Rs.9.00 lakhs in
cash. Thus, we notice that the Tribunal has considered all the submissions made
by the assessee, the seized material, surrounding circumstances, conduct of the
assessee's father who maintained the record and finally has given a finding that
the remuneration was Rs.36.00 lakhs. Under these set of facts, we are unable to
I.T(SS)A No.16/Mum/2012
7 I I T I T A
agree with the contention of the Ld A.R as well as with the view expressed by Ld
CIT(A) that the addition of Rs.9.00 lakhs has been sustained on estimate basis.
In our view, the above said addition has been sustained on the basis of seized
material only. Hence, we are of the view that the assessing officer was justified
in levying penalty on the above said addition u/s 158BFA(2) of the Act.
12. The Ld A.R also contended that the penalty is not exigible since the
Hon'ble High Court has admitted the appeal filed by the assessee challenging the
decision rendered by the Tribunal in respect of the addition of Rs.9.00 lakhs
referred above. In this regard, the Ld A.R also relied upon the decision rendered
by the Co-ordinate bench in the case of M/s Ekta Exports (supra). We have
gone through the said decision and we notice that the co-ordinate bench has
followed decisions rendered by other co-ordinate benches in respect of penalty
levied u/s 271(1)(c) of the Act. In respect of penalty levied u/s 271(1)(c) of the
Act, it has been held that the admission of substantial question of law by the
Hon'ble High Court lends credence to the bonafides of the assessee. The said
view gets support from Explanation 1 to sec. 271(1)(c) of the Act. Under
Explanation 1 to sec. 271(1)(c), an assessee can escape from penalty, if he
proves his bonafides. Hence, the Tribunals have expressed the view that the
admission of substantial question of law by the Hon'ble High Court makes the
issue debatable and thus proves the bonafides of the assessee. However the
Explanation 1 to sec. 271(1)(c) is not applicable to sec. 158BFA(2) of the Act. In
the absence of such kind of relation, we are unable to agree with the contentions
of the assessee with regard to the above said proposition.
I.T(SS)A No.16/Mum/2012
8 I I T I T A
13. In view of the foregoing, we set aside the order of Ld CIT(A) with regard
to the penalty levied on the addition of Rs.9.00 lakhs referred above and restore
the order of the AO in respect of the same.
14. The next issue relates to the penalty levied on the addition of Rs.5.00 lakhs
relating to the interior decoration carried out by the assessee in three flats. We
have already noticed that the Tribunal has given a finding that there were
overlapping in the seized materials wherein the items of work were found noted.
Under these circumstances, the Tribunal has estimated the amount spent on
interior works of three flats at Rs.40.00 lakhs and thus sustained the addition to
the extent of Rs.5.00 lakhs. Hence, we agree with the view expressed by Ld
CIT(A) on this addition that the Tribunal has sustained the addition on estimate
basis and the Tribunal could not come a conclusion from the seized material that
there was undisclosed income in incurring interior decoration works. Hence, in
respect of this issue, we agree with the Ld CIT(A) and accordingly hold that the
first appellate authority was justified in directing the assessing officer to delete
the penalty.
15. In the result, the appeal filed by the revenue is partly allowed.
The above order was pronounced in the open court on 31st July, 2014.
31st July, 2014
Sd sd
( / VIVEK VARMA) (.. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai: 31st July,2014.
I.T(SS)A No.16/Mum/2012
9 I I T I T A
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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