Ravindra Shetty, Mumbai vs Department Of Income Tax

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

आयकर अपील सं./I.T.A. No.223 /Mum/2012 ( नधारण वष / Assessment Year : 2003-2004 आयकर अपील सं./I.T.A. No.222 /Mum/2012 ( नधारण वष / Assessment Year : 2004-2005 आयकर अपील सं./I.T.A. No.221 /Mum/2012 ( नधारण वष / Assessment Year : 2008-2009 Gunapal Shetty, बनाम/ 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. थायी ले खा सं . /PAN : AAIPS 5701N (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.219 /Mum/2012 ( नधारण वष / Assessment Year : 2007-2008 Sai Leela Hotel Pvt. Ltd., बनाम/ 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. थायी ले खा सं . /PAN : AADCS6375E (अपीलाथ /Appellant) .. ( यथ / Respondent) 2 11 APPEALS - SHETTY GROUP

आयकर अपील सं./I.T.A. No.217 /Mum/2012 ( नधारण वष / Assessment Year : 2008-2009 Ravindra Shetty, बनाम/ 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. थायी ले खा सं . /PAN : AAGPS 4176 D (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.218 /Mum/2012 ( नधारण वष / Assessment Year : 2008-2009 S.R. Enterprises, बनाम/ 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. थायी ले खा सं . /PAN : AAJFS 7474F (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.220 /Mum/2012 ( नधारण वष / Assessment Year : 2008-2009 Uday Shetty, बनाम/ 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. थायी ले खा सं . /PAN : AAEPS5362D (अपीलाथ /Appellant) .. ( यथ / Respondent) 3 11 APPEALS - SHETTY GROUP

आयकर अपील सं./I.T.A. No. 1358 /Mum/2012 ( नधारण वष / Assessment Year : 2003-2004 आयकर अपील सं./I.T.A. No. 1359 /Mum/2012 ( नधारण वष / Assessment Year : 2004-2005 Asstt. Commissioner of बनाम/ 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. थायी ले खा सं . /PAN : AAGPS4176D (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No. 1360 /Mum/2012 ( नधारण वष / Assessment Year : 2003-2004 आयकर अपील सं./I.T.A. No. 1361 /Mum/2012 ( नधारण वष / Assessment Year : 2004-2005 Asstt. Commissioner of बनाम/ 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 थायी ले खा सं . /PAN : AAEPS5362D (अपीलाथ /Appellant) .. ( यथ / Respondent)

Assessee by Shri Hari S. Raheja Revenue by Shri Pawan Kumar Beerla सन ु वाई क तार ख / Date of Hearing :23-4-2015

घोषणा क तार ख /Date of Pronouncement :06.05.2015 [

आदे श / 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.

आदे श क घोषणा खुले यायालय म दनांकः 6th May, 2015 को क गई ।

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

मुंबई Mumbai; दनांक Dated 6th May, 2015 [

व. न.स./ R.K., Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A) - Concerned,, Mumbai

4. आयकर आयु त / CIT- Concerned, Mumbai

5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai G Bench

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai