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IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, MUMBAI
.. , , ^ È,
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BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
. / ITA no. 4136/Mum./2013
([ [ / Assessment Year : 200203)
. / ITA no. 4137/Mum./2013
([ [ / Assessment Year : 200405)
. / ITA no. 4138/Mum./2013
([ [ / Assessment Year : 200809)
M/s. Mahavir Builders
No.67, Goyal Shopping Centre
....................... /
S.V. Road, Borivali (West)
Mumbai 400 092 Appellant
v/s
Income Tax Officer (Technical)
................... × /
CentralIII, Aayakar Bhavan
101, M.K. Road, Mumbai 400 020 Respondent
./ Permanent Account Number AAKFM5577C
/ Revenue by : Shri Manjunatha Swamy
[ / Assessee by : Shri V. Chandra Shekhar a/w
Shri Narendra Sharma
/ /
Date of Hearing 21.11.2014 Date of Order 26.11.2014
/ ORDER
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È, /
PER AMIT SHUKLA, J.M.
The present appeals preferred by the assessee, are directed
against the separate impugned order dated 26th March 2013, passed
M/s. Mahavir Builders
2
for the assessment year 200203 and 200809 and order dated 28th
March 2013, for the assessment year 200405 passed by the learned
Commissioner, CentralIII, Mumbai. Since all these appeals pertain to
the same assessee involving common issues arising out of identical set
of facts and circumstances, therefore, as a matter of convenience,
these appeals were heard together and are being disposed off by way
of this consolidated order.
2. The assessee, in all the years under consideration, is mainly
aggrieved by the order passed under section 263, thereby setting aside
the order passed by the Assessing Officer dropping the penalty
proceedings under section 271(1)(c).
3. Facts in brief: A search and seizure action under section 132(1)
was conducted in case of Prakash H. Salva, on 17th January 2008.
Simultaneously, a survey under section 133A, was conducted on the
business premises of the assessee along with others. During the course
of search as well as under survey operations, statement on oath of
concerned persons were recorded and certain documents were seized.
The assessee is a partnership firm which is engaged mainly in the
business of property development. In the statement on oath, the
associates of the assessee S/Shri Prakash S. Savla and Pankaj Gangar,
had offered / declared additional income of Rs. 6,85,04,767, vide letter
dated 25th February 2008, in pursuance of their declaration made
under section 132(4). The contents of the said letter was as under:
M/s. Mahavir Builders
3
The disclosure, of undisclosed income now being made under, the
provisions of Section 132(4) mainly consist of the fol/owing:
a. Unsecured Loans
b. Traveling Expenses
c. Purchase of Electronic Gadgets
d. Repairs & Maintenance Expenses
e. Business Expenses including Security Charges and Gifts.
f. Purchase of Cars
g. Income tax paid in Cash
h. Cash on hand
i. Purchase of Gold and Diamond Jewel/ery
j. Difference between Purchase Price and Book Value of
Shares.
k. Commission and Brokerage
I. Marriage Expenses
m. Improvement of House, Furniture, Equipments, etc.
We are declaring herewith undisclosed income of Rs.
6,85,04,767/- under the provision of Section 132(4) over several
assessment years in the hands of various assesses in our group.
The total amount of Income tax and interest applicable thereon
comes to Rs.2,78,55,278/-. Please find enclosed challans
evidencing payments of the entire amount of Rs.2,78, 55,278/-.
Details of the said disclosure, assessee wise and assessment year
wise is enclosed herewith.
Sir, we would also like to bring to your notice the fact that the
above disclosure of Rs.6,85,04,767/- made u/s 132(4) is apart
from the regular income of the respective assesses for the current
assessment year 2008-09.
Annexure to declaration uls. 132(4) vide letter dated 2512/2008
Name of the Particulars A.Y. Amount (Rs)
assessee
Mahavir Builders Foreign Travel 2002-03 21,370
Mahavir Builders Unsecured loan 2002-03 3,000,000
Mahavir Builders Foreign Travel 2004-05 261,446
Mahavir Builders Foreign Travel 2005-06 418,362
Mahavir Builders Foreign Travel 2006-07 674,514
Mahavir Builders Foreign Travel 2007-08 449,134
Mahavir Builders Foreign Travel 2008-09 248,880
Cash seized from
Mahavir Builders 2008-09 800,000
Prakash Savla
Sei Developers
Proprietor PHS Unsecured loan 2003-04 255,825
Hirjibhai Savla Unsecured loan 2003-04 185,820
Sunderben Savla Unsecured loan 2003-04 500,000
Seial Savla Unsecured loan 2003-04 1,470,000
Sejal Savla Unsecured loan 2004-05 1,50,000
Prakash Savla Unsecured loan 2002-03 224,000
M/s. Mahavir Builders
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Prakash Savla Unsecured loan 2003-04 245,000
Prakash Savla Unsecured loan 2004-05 200,000
Mahavir Builders Vehicle - Qualis 2005-06 925,482
Mahavir Builders Vehicle - Civic 2008-09 1,273,265
Mahavir Builders Jewellery - cash 2008-09 3,150,000
Mahavir Builders Tax paid in cash 2008-09 1,149,269
Misc. expenses /
Mahavir Builders payments (Repairs, 2008-09 2,342,000
security, gadget, etc.)
Brokerage/commission
Mahalaxmi
Pankaj Gangar Chq 2008-09 1,000,000
Lay/Dev P
Recd
Mahalaxmi - Share
Sejal Savla 2008-09 8,740,000
Purchase
Pankaj Gangar Oorja Share Purchase 2007 2,430,000
08
Chhaya Gangar Oorja - Share Purchase 2007-08 2,430,000
Sejal Savla Toshniwal - Share 2006-07 2,184,897
Purchase
Toshniwal- Share
Prakash Savla 2006-07 30,425,503
Purchase
Prakash Savla Daughter Marriage 2008-09 350,000
DoM - April 2007
Chq -PHS-167850
30.5.2007
Cost of Improvement of
Pankaj Gangar House and House 2007-08 3,000,000
equipments
Total 68,504,767
4. In pursuance of such declaration, the assessee had filed its return
of income for various assessment years declaring following additional
income in response to notice under section 153C:
A.Y. Head under which income was Amount
disclosed u/s 132(4)
200203 Foreign Travel Rs. 21,370
Unsecured Loan Rs.
30,00,000
200405 Foreign Travel Rs. 2,61,446
M/s. Mahavir Builders
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200809 * Travelling Expenses Rs. 75,000
Travelling Expenses Rs. 44,700
Salary added under section 92C Rs. 5,83,000
* In addition to this, return of income of Rs. 2,10,11,499
was also filed.
5. The Assessing Officer accepted the said additional income offered
by the assessee as per the declaration made vide aforesaid letter and
completed the assessment on the return income under section 143(3),
r/w section 153C, vide order dated 30th December 2009, for all the
three assessment years. Thereafter, the Assessing Officer initiated the
penalty proceedings under section 271(1)(c) on the same income
which was offered in the declaration made under section 132(4). In
response to the said show cause notice, the assessee filed detail
explanation vide letter dated 21st June 2010, filed on 24th June 2010,
for the aforementioned assessment years 200203, 200405 and
200809. In the said explanation, the assessee had given elaborate
explanation for each and every income offered. For e.g., on account of
foreign travel expenses for the assessment year 200203 and 2004
05, the assessee submitted that these expenditures were incurred by
the partners out of their personal drawings for their personal travel.
The drawings of the partners were quite substantial to meet such
expenditures and, therefore, no declaration on additional income was
called for in the hands of the firm. However, only to buy peace, the
assessee had declared the said amount in the hands of the firm even
though no material was found in the search / survey qua foreign travel
M/s. Mahavir Builders
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Thus, there could not be a case of any concealment of income or
furnishing of inaccurate particulars of income.
Regarding unsecured loans, the assessee had submitted that the
assessee had received loans from several loan creditors, which were
received through banking channels, i.e., through account payee
cheques, credited in the books of account. However, due to lapse of
time, at the time of the search, the assessee was not able to get
proper cooperation from the loan creditors, therefore, it decided to
offer the said income for taxation. This was done purely to buy peace.
In suport of these contentions, reliance was placed on the decision of
the Hon'ble Jurisdictional High Court in CIT v/s Haji Gaffar Haji Dada
Chini, 169 ITR 33 (Bom.). For the assessment year 200809, the
assessee had made one very important submission that the return of
income was not due at the time of search and, therefore, there could
not have been any concealment of income. Apart from that for each
and every item disclosed in the return of income the assessee has
given elaborate explanation about the source of expenditure and the
investment.
6. After considering the assessee's explanation, the Assessing
Officer has dropped the penalty proceedings vide order dated 30th June
2010, for the assessment years under consideration.
7. Thereafter, the Commissioner of Income Tax, Central3, issued
show cause notice dated 18th February 2013, under section 263, as to
M/s. Mahavir Builders
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why the order passed by the Assessing Officer dropping the penalty
proceedings under section 271(1)(c) should not be set aside. In
response, the assessee filed detail submissions before the learned
Commissioner, the contents of which has been incorporated by the
Commissioner in the impugned order. However, the learned
Commissioner rejected the assessee's contention and set aside the
order of the Assessing Officer dropping the penalty proceedings under
section 271(1)(c) and directed the Assessing Officer to consider the
issue relating to the penalty proceedings afresh. The sum and
substance of the Commissioner's observation and conclusion for setting
aside the order of the Assessing Officer is that the Assessing Officer
while dropping the penalty proceedings had not carried out any proper
enquiry on the additions which were subject matter of penalty and
also distinguished the decision of the Hon'ble Jurisdictional High Court
in Haji Gaffar Haji Dada Chini (supra). He has also referred and relied
upon the decision of the Hon'ble Supreme Court in Malabar Industrial
Co. Ltd. v/s CIT, [2000] 243 ITR 83 (SC) to come to his conclusion.
8. Before us, the learned counsel, Shri V. Chandra Shekher, on
behalf of the assessee, after explaining the entire facts submitted that
the levy of penalty is discretionary which depends upon the facts and
the explanation given by the assessee. The words used in section
271(1) are "may" and not "shall" and therefore, a discretion is given to
the Assessing Officer for levying penalty or dropping the same after
considering the attendant facts and circumstances of the case and the
M/s. Mahavir Builders
8
explanation given by the assessee. He further submitted that the
learned Commissioner, in the impugned orders has not given any
specific finding that the surrender made by the assessee was based on
some material found in the course of search which was against the
assessee. There is no such finding in the assessment order passed
under section 143(3) / 154C also. Once no specific material has been
found on the various items of expenses, loan etc., for which the
assessee had offered the additional income, then no adverse inference
for the purpose of levy of penalty under section 271(1)(c) can be
drawn. The order of the Assessing Officer should be found to be
unsustainable on facts and in law, then only such an order can be held
to be erroneous error and prejudicial to the interests of Revenue u/s
263. In support of his contention, he strongly relied upon the decision
of the Hon'ble Delhi High Court in CIT v/s DLF Ltd., [2013] 350 ITR
355 (Del.). and on the 3rd Member decision of the Tribunal, Pune
Bench, in Jamnadas T. Mehta v/s ITO, wherein it was held that if two
views are possible, then such an order cannot be revised under section
263. If the Assessing Officer had initiated penalty proceedings and
after accepting the assessee's explanation has dropped the penalty
proceedings, then a conscious view has been taken by the Assessing
Officer which cannot be set aside. Lastly, he relied upon the decision of
the Hon'ble Delhi High Court in CIT v/s Sunbeam Auto Ltd., [2011] 332
ITR 167 (Del.), wherein the High Court has made a distinction between
on lack of enquiry and inadequate enquiry and it is on lack of inquiry,
M/s. Mahavir Builders
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CIT can set aside the assessment order u/s 263. Thus, he submitted
that on the facts of the present case, the impugned order passed by
the learned Commissioner under section 263, is badinlaw and
unsustainable.
9. The learned Departmental Representative, on the other hand,
submitted that the order passed by the Assessing Officer for dropping
the penalty proceedings will reveal that there is no proper application
of mind and it cannot be inferred that, whether he had examined the
issues properly or not. Here in this case, the assessee had made
surrender after the search and that to be after a long gap. If the
search would not have taken place, the assessee would not have come
forward with the declaration offering huge additional income. The
learned Commissioner has rightly pointed out that the Assessing
Officer before dropping the penalty proceedings should have carried
out some enquiry on the matters of the additions which was made by
the Assessing Officer in the assessment order. Such an order of the
learned Commissioner is fully justified. In support of his contention
that in the matter of penalty proceedings where the Assessing Officer
has dropped the proceedings, the Commissioner is within his
jurisdiction to set aside such order under section 263, he relied upon
the following case laws viz. (i) 275 ITR 360; (ii) 340 ITR 253 (Pat.);
224 ITR 169 (Mad.); 4 (Trib.) 297 (Hyd.). Besides this, he has also
quoted catena of case laws with which we are not dealing with as he
has not given the proper context in which such decisions were
M/s. Mahavir Builders
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rendered and how the ratio of such decisions are applicable in the
present case. Even the copy of such orders was not filed before us.
10. After hearing the case, the appeal was re fixed for certain
clarification and to whether the explanation/submissions filed before us
after the date of hearing was part of the assessment records or not. It
has now been clarified by both the parties that, the explanation filed
before the AO was part of assessment record. Ld. Counsel also pointed
out before us, that the Assessing Officer in the set aside proceedings
has passed fresh order, wherein he has, after detail examination has
deleted the penalty on most of the issues. Now in the fresh order,
penalty levied are on some minor issues and the quantum of penalty
has also been substantially reduced. The copy of the fresh penalty
order were also filed.
11. We have heard the rival contentions, perused the impugned
order and the material available on record. In the course of search and
seizure action in the case of Prakash H. Savla and survey action under
section 133A, on the business premises of the assessee, a statement
on oath under section 132(4) was recorded of Shri Prakash H. Savla
and Shri Pankaj Gangar. In pursuance thereof, these persons vide
letter dated 25th February 2008, have declared additional income of Rs.
6,85,04,767, which consisted of various items as has been listed above
in para 3. Insofar as the assessee is concerned, the disclosure was
mainly on account of foreign travel, unsecured loan, cash seized from
Prakash Savla, purchase of vehicle, jewellery, etc. On the basis of such
M/s. Mahavir Builders
11
declaration, the income has been assessed accordingly, under section
143(3) r/w section 153C for the assessment year 200203, 200405
and 200809. It is important to mention here that the assessment
order for the assessment year 200809, has been framed under
section 143(3), as it is the year of search and at the time of search
even the return of income under section 139(1) was not due. The
assessment orders so passed in all the years have attained finality, as
no appeal has been filed by the assessee nor it has been the subject
matter of revision under section 263. The assessment orders for the
impugned assessment years, simply incorporates the breakup of
declaration for a particular assessment year and on that basis income
has been computed in the assessment order. After having completed
the assessment in the said manner, the penalty proceedings under
section 271(1) (c) was initiated by the Assessing Officer vide notice
dated 30th December 2009. In response, the assessee, vide letter
dated 21st June 2010, filed on 24th June 2010, has given a detail
explanation with regard to each and every addition which was mainly
on the basis of declaration made by the assessee. For the assessment
year 200304 and 200405, with regard to the expenditure incurred
for foreign travel, the assessee had submitted that the amount
spended on foreign travel has been incurred by the partners out of
their personal drawings for their personal travel. The drawings of the
partners were quite substantial to meet such expenditure. The amount
was offered as income even though no corroborating or adverse
M/s. Mahavir Builders
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material was found during the search. It was offered only to buy
peace. No material has been referred in the assessment order to
controvert the said explanation of the assessee. Similarly, on account
of unsecured loans of Rs. 30 lakhs, offered for the assessment year
200203, the assessee had submitted that loan has been received
from various creditors through account payee cheques and through
proper banking channels. However, after a lapse of time, the loan
creditors were not in a position to give full cooperation, therefore, the
assessee decided to offer the same to be taxed as its own income,
even though, nothing incriminating has been found during the course
of search qua the loan. As regards various additions made in the
assessment year 200809, the assessee's explanations were two fold,
firstly, the return of income for the assessment year 200809 was not
due and secondly, most of the items were already appearing in the
books of account. The Assessing Officer, after considering such
explanation has dropped the penalty proceedings vide order dated 30th
June 2010. This order of the Assessing Officer dropping the penalty
proceedings is subject matter of revision under section 263. The main
plank of the impugned order for setting aside the order of the
Assessing Officer by the Commissioner is that, the Assessing Officer
has not carried out any proper enquiry before dropping the penalty
proceedings and consequently, the additional income offered by the
assessee cannot be said to be voluntarily. The learned Departmental
Representative is supporting the order of the learned Commissioner on
M/s. Mahavir Builders
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the ground that, had there been no search or survey, the assessee
would not have come forward with such a declaration.
12. It is a trite law that to assume jurisdiction under section 263, the
Commissioner has to satisfy twin conditions namely, (i) the order of
the Assessing Officer which has been sought to be revised is erroneous
and, (ii) it is prejudicial to the interest of revenue. Both the conditions
should exist simultaneously. The order can be termed erroneous only
when there is an incorrect assumption of facts or an incorrect
application of law, whereas prejudicial to the interest of revenue has to
be understood as erroneous order passed by the Assessing Officer
which has caused loss of revenue. This trite law has been opined by
the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. (supra),
which has also been referred and relied upon by the Commissioner.
Now, whether on the facts of the present case, can it be held that the
order of the Assessing Officer dropping the penalty proceedings can be
said to be erroneous or prejudicial to the interests of Revenue. The
main charge of the Commissioner is that the Assessing Officer has not
carried out proper enquiry. Here in this case, as stated above, the
assessments have been completed on the basis of income offered by
the assessee. While completing the assessment, there is no reference
to any incriminating material found at the time of search. There is not
a whisper about any adverse material in the assessment order
indicating any concealment of income or furnishing of inaccurate
particulars of income qua the income offered. The offer made by the
M/s. Mahavir Builders
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assessee has been accepted as such. If at all any enquiry was called
for, the same should have been made at this stage i.e., assessment
stage. The penalty proceedings under section 271(1)(c) is leviable only
in respect of those additions for which there is a material available on
record which indicates concealment of income or furnishing of
inaccurate particulars of income. For levying the penalty under section
271(1)(c), the basic element which has to be seen is, whether in
respect of any facts which is material to the computation of income by
the Assessing Officer, the assessee has failed to offer an explanation or
offers an explanation which has been found to be false or is unable to
substantiate its bonafide. The Commissioner in his entire order has not
pointed out as to how the assessee's explanation which was rendered
before the Assessing Officer as well as before him is false or not
bonafide or has not been substantiated. While cancelling such an
order, the Commissioner in his revisionary jurisdiction has to
demonstrate, as to, on what ground the order of the Assessing Officer
is unsustainable either on facts or in law. Once in the assessment
order itself, there is no reference of any incriminating material qua the
additions made except for accepting the offer of the assessee of
undisclosed income, then at the penalty stage what kind of enquiry
was required to be done by the Assessing Officer has not be elaborated
by the Commissioner. At the penalty proceedings, the only
requirement was to see whether the assessee has been able to adduce
proper explanation or not or he has been able to substantiate its bona
M/s. Mahavir Builders
15
fide at the time of filing of return of income. This has not been culled
out by the learned Commissioner. Thus, on these facts, it cannot be
held that the Commissioner was justified in cancelling the order of the
Assessing Officer for dropping the penalty proceedings under section
271(1)(c). Further, from the explanation which were furnished before
the Assessing Officer, it is seen that such an explanation are quite
bonafide and they have not been found to be false. Once such an
explanation has been accepted, then the Assessing Officer has formed
a considered opinion which cannot be held to be erroneous, unless an
opinion is based on incorrect assumption of facts or incorrect
application of law. Merely because some different opinion could have
been drawn by the Assessing Officer, this itself cannot justify the
revision of the order under section 263 by the Commissioner. This
preposition is still settled by the Hon'ble Supreme Court in Malabar
Industrial Co. (supra) and in CIT v/s Max India Ltd, [2007] 295 ITR
282 (SC). For the assessment year 200809, there is also one
additional factor that the income which was offered by the assessee
was 139(1) and that too such an income has been offered with proper
explanation which has not been found to be false and unsubstantiated.
Here are aspect which is very important to note is that, for this year
penalty u/s 271AAA is not an issue for consideration before us, but
penalty u/s 271(1)(c), same application of Explanation 5A.
M/s. Mahavir Builders
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13. At this stage, it has been brought on record that in set aside
proceedings, the Assessing Officer in a very detail order has
deleted/dropped the penalty on most of issues. This itself goes to show
that the impugned order of CIT was not justified on merits also.
However, our finding as given above is sans the subsequent events.
Thus, on the present facts of the case, we are of the opinion that the
order of the Assessing Officer for dropping the penalty proceedings
under section 271(1)(c) for the assessment year 200203 and 2004
05 and 200809, is neither erroneous nor prejudicial to the interests of
Revenue within the meaning of section 263 and, accordingly, such an
order cannot be set aside by the Commissioner under the revisionary
power of 263. Accordingly, all the three appeal of the assessee are
treated as allowed.
14. Various other arguments advanced by both the parties are not
addressed in view of our finding given above.
15. In the result, assessee's appeals for the assessment year 2004
05, 200203 and 200809 are allowed.
Order pronounced in the open Court on 26th November, 2014.
Sd/- Sd/-
Sd/- Sd/-
..
.. [ È
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R.C. SHARMA AMIT SHUKLA
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 26.11.2014
M/s. Mahavir Builders
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/ Copy of the order forwarded to:
(1) [ / The Assessee;
(2) / The Revenue;
(3) () / The CIT(A);
(4) / The CIT, Mumbai City concerned;
(5) , , / The DR, ITAT, Mumbai;
(6) [ / Guard file.
× / True Copy
/ By Order
*Srivastava
/ / (Dy./Asstt. Registrar)
, / ITAT, Mumbai
[ / É
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