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2015 (11) TMI 633 - ITAT MUMBAI

2015 (11) TMI 633 - ITAT MUMBAI - [2015] 43 ITR (Trib) 396 (ITAT [Mum]) - Penalty under section 271(1)(c) - unexplained cash funds received from sale of the Bangalore property, and its utilisation for Pune property - Held that:- Money applied in acquisition of Pune properties was mainly out of money received from sale of shares of M/s. Ami Builders Pvt. Ltd. and S. K. Projects P. Ltd. No fault has been found by the Assessing Officer or the Commissioner of Income-tax (Appeals) in the above cash f .....

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time of acquisition of property at Pune.

In view of the above facts we may appreciate that declaring additional income of ₹ 40.35 crores as narrated in the letter dated December 8, 2011 filed before the lower authorities, covers each and every issue that has been pointed out during the search as well as post search proceedings. The assessee had paid taxes with a view to buy peace and to avoid litigations. As a matter of record group companies and their promoters have been filing .....

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which was declared and offered for tax.

In view of the cash flow statement as discussed above, the assessee has explained one to one nexus namely cash funds received from sale of the Bangalore property, and its utilisation for Pune property. The revised declaration of income so filed by the assessee was bona fide and voluntary and without detection of any irregularities found by the Department. The return was revised with a view to co-operate the Department and to buy peace and to av .....

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r).-These are the appeals filed by the assessee against the order by the learned Commissioner of Income-tax (Appeals)-36, Mumbai for the assessment years (A.Y.) 2007-08 and 2008- 09, in the matter of imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 ("the Act" hereinafter). 2. Common grounds have been taken by both the assessee with respect to levy of penalty under section 271(1)(c) of the Act in all the appeals under consideration. Therefore, all the appeals we .....

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cash and application of cash was not established. (b) The learned Commissioner of Income-tax (Appeals) ignored the fact that the company had never carried out any business activity to generate undisclosed income. Page No : 0399 (c) Voluntary declaration of ₹ 2,59,75,000 for the assessment year 2007-08 under section 132(4) of the Act was made by the appellant to buy peace and avoid any further litigation. 2. The learned Commissioner of Income-tax (Appeals) erred in confirming the penalty or .....

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the provisions of the Companies Act, 1956. The assessee-company is engaged in the business of construction, development and leasing of properties residential as well as commercial. The assessee had filed original return of income on October 28, 2007 showing total income of Rs. nil. The search and survey operations under sections 132(1) and 133A of Income-tax Act, 1961 was conducted in the cases of M/ s. Pooja Exports and its group concerns. Notice under section 153C of the Income-tax Act, 1961 d .....

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75,000. There were no changes in the returned income as revised by the assessee. The learned Assessing Officer accepted the assessee's revised computation without disturbing the same or adjusted any other addition to the same. The Assessing Officer observed that the assessee has declared its income for the assessment year 2007-08 vide its revised return, the assessee has not been able to substantiate the manner in which the income was derived and also failed to explain the sources of cash in .....

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estment in properties in Pune was made between the periods from July 2006 to September 2007. Money applied in acquisition of Pune properties was mainly out of money received from sale of shares of a group concern. Details of source and application of investment in Pune properties was filed on record during the course of the assessment proceedings. It was further submitted by the assessee that there was no need to offer the additional income of ₹ 2.59 crores since the money applied in acqui .....

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d representative that penalty has been levied by the Assessing Officer on the plea that investment in Pune property could not be explained by the assessee. As per the learned authorised representative cash investment for the purchase of Pune property as per the Assessing Officer took place from July 2006 to September, 2007 whereas the agreement for sale of shares of companies holding properties at Bangalore took place on June 15, 2009. The main grievance of the Assessing Officer was that the ass .....

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which has been corrected in subsequent statement under section 132(4) dated September 25, 2009. Our attention was invited to question No. 9 and its reply of the statement dated July 29, 2009. It was submitted that question and answer No. 3 in the statement dated September 25, 2009 clearly explained that major portion of cash relating to sale of shares was received from the financial years 2006-07 and 2007-08. As per the learned authorised representative, even though the memorandum of understandi .....

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tment should not tax both the income and also its application as the same would amount to double taxation. Our attention was also invited to the submission dated December 21, 2011 placed at pages 52 to 58 of the paper book, which give datewise and monthwise nexus between cash received from sale of shares vis-a-vis investment in Pune properties. As per the learned authorised representative the Assessing Officer has not given any cogent reason nor controverted the nexus for funding of Pune propert .....

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d at nil income. As per the learned authorised representative the assessee has disclosed ₹ 2.59 crores in revised return, even though the same was not its income, just to buy peace with the Department. He further contended that the assessee-company has not admitted or capitalised its offer in its books of account in subsequent years, therefore, the assessee should not be penalised under section 271(1)(c) of the Act. With regard to the reliance placed by the Assessing Officer on the stateme .....

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s also placed on the decision of the hon'ble Bombay High Court in the case of Nirmala L. Mehta v. A. Balasubramaniam, CIT [2004] 269 ITR 1 (Bom), wherein it was held that no taxation can be made on basis of a wrong admission. Any item which is not taxable under the law cannot be taxed because the same has been wrongly offered to tax by the assessee. Reliance was also placed on the decision of the hon'ble Supreme Court in the case of Cement Marketing Co. of India Ltd. v. Asst. CST [1980] .....

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purposes of tax, which was accepted and brought to tax, there could be no question of treating the assessee as having concealed the particulars of income or furnished inaccurate particulars of income, the learned authorised representative relied on the following judicial pronouncements : (i) Muninaga Reddy v. Asst. CIT [2013] 37 taxmann.com 440 (Bang- Trib) ; (ii) Vasavi Shelters v. ITO [2013] 32 taxmann.com 26 (Bang-Trib) ; (iii) Ajay Sangari and Co. v. Addl. CIT [2011] 16 taxmann.com 115 (Chd) .....

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d 223/Ind/2012 ; (xi) Bhagat and Co. v. Asst. CIT [2006] 10 SOT 37 (Mum) (URO) ; (xii) Giri Raj Gupta v. ITO [2007] 162 Taxman 81 (Delhi) (Mag) ; (xiii) New Sorathia Engineering Co. v. CIT [2006] 282 ITR 642 (Guj) ; (xiv) CIT v. Lakhdhir Lalji [1972] 85 ITR 77 (Guj) ; (xv) CIT v. C. K. Naha and Bros. [1979] 117 ITR 19 (Cal) ; (xvi) Padma Ram Bharali v. CIT [1977] 110 ITR 54 (Gauhati) ; and (xvii) Addl. CIT v. Sadiq Ali and Bros. [1973] 92 ITR 276 (J&K). 8. On the other hand, the learned Depa .....

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also perused the various statements recorded under section 132(4) dated July 29, 2009, September 25, 2009. We had also considered the various explanation filed by the assessee before the lower authorities vide their letter dated November 17, 2011. Various judicial pronouncements cited at the bar as well as referred to by the lower authorities in their orders have also been considered with reference to the factual matrix of the instant case. From the record we found that there was search at Pooj .....

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. The return of income of Ami Estate and Cornetstene was filed nil as against ₹ 5.19 crores in cash, because both entities were incorporated to acquire the property in the names of the company at Pune. Other than that no activity has been carried out in the said companies. Hence, question of earning any accounted or unaccounted income does not arise. But it does not concern that the cash component was not there in acquisition of property at Pune. The said cash and cheque component were arr .....

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ter analysing the seized material the assessee had filed a return of income of ₹ 40.35 crores. Mr. Sunil Kothari while recording statement under section 132(4) dated July 24, 2009 vide replies of question No. 9 admitted payment of cash for acquisition of properties at Pune amounting to ₹ 14,57,95,996. From the said statement recorded under section 132 of the Income-tax Act, Sunil Kothari have clearly admitted that he had paid cash of ₹ 14.57 crores for acquisition of the proper .....

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erties in Pune. During the course of search first statement under section 132(4) of Sunil Kothari on July 29, 2009 was recorded, wherein question No. 9 and its reply was as under : "Q.9 I am showing you the annexures found in the said premise in which several cash transactions were recorded in the name of your group concerns. I am also showing you statement recorded under oath of Shri Rashmikant Shah and Shri Pramod Amberkar in which they have categorically stated that all the transactions .....

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o you in due course. However, in the same property transaction, I have also earned ₹ 11.5 crores on account of sale of the said property which I have not so far disclosed to the Department. This amount of ₹ 11.5 crores is also hereby declared as my additional income for which I shall pay the taxes duly. Similarly, pages 56 to 60 of annexure-A-2 recovered from the office premises of M/s. Pooja Group Rawal Building, Laminton Road and page 19 of annexure A-3 recovered in the said premis .....

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M/s. Cornerstene Pvt. Ltd. as additional income and offer the same for taxation." 11. As per this question and answer, the Bangalore property was sold in the financial year 2005-06, cash portion of ₹ 14.63 crores and ₹ 11.50 crores, documents were considered and the same was offered to tax by Sunil Kothari in personal returns. The question and answer also indicate that Ami Estates and Cornetstene Pvt. Ltd. (the assessee before us) purchased the Pune property in 2006 and paid ca .....

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he hands of various persons of this group and in different relevant years, as applicable. This declaration statement is voluntarily offered by me with a request that no penalty or prosecution be launched against me or my family members, partners/directors/concerns of our group." 13. It is clear from the above question and answer that there was total offer by the Pooja Exports groups at ₹ 50.62 crores. There were details of offer-bifurcation of the assessee as well as yearwise bifurcat .....

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e of the Bangalore properties, we found that Sunil and Sneha Kothari own shares in Ami Builders Pvt. Ltd. and S. K. Projects Pvt. Ltd. These two companies jointly hold property in Bangalore, which is mortgaged to Diwan Housing Finance Corporation Ltd. (two companies have given property for rent). It is also clear that this memorandum of understanding is in furtherance of past agreement dated January 10, 2006. Thus, we can safely infer that agreement initiated in the financial year 2005-06, part .....

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received as advance payment through cheque No. 920776 dated December 10, 2005 and vide Pay Order No. 4364401 dated January 12, 2006 of ₹ 4,47,27,310, balance on account of ₹ 6,02,73,690 was payable by February 28, 2010. All these payments are further corroborated by the statement recorded under section 132(4) dated September 25, 2009 as placed at page 29 of the paper book. 14. The second statement under section 132(4) was recorded on September 25, 2009 of Sunil Kothari. In the state .....

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ber 12, 2006 and cash was received from time to time as stated by you. A.3 Total transaction was for ₹ 26.60 crores out of which the purchase party has to give ₹ 11.5 crores in cheque and ₹ 14.63 crores in cash. Major portion of the cash was received in financial year 2006-07 and 2007-08 and other than the cheque amount received as mentioned above, the balance amount is to be received in the current financial year as per the memorandum of understanding submitted. In the said tr .....

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ortion of cash component was received in the financial years 2006-07 and 2007-08. Thus, the availability of sufficient cash for purchase of Pune property was clearly established. 17. We had also gone through the letter dated November 17, 2011 filed before the Assessing Officer wherein it was clearly explained that in respect of Pune properties, cash component was funded from cash component received from sale of shares by Kothari in Ami Builders Pvt. Ltd. and S. K. Projects Pvt. Ltd. The assessee .....

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h flow furnished before the Assessing Officer was as under : Received Amount (in 000 ) Date Paid Amount (in 000 ) 7-Jul-06 5,000.000 17-Jul-06 10.000 18-Sep-06 28.000 28-Jul-06 51.000 26-Sep-06 23,180 7-Aug-06 2,000.000 7-Oct-06 1,700.000 5-Aug-06 20.000 7-Oct-06 62.321 14-Sep-06 500.000 9-Oct-06 800.000 23-Sep-06 2,500.000 11-Oct-06 106.764 14-Oct-06 2,500.000 20-Oct-06 61.400 16-Oct-06 100.000 3-Nov-06 1,000.000 6-Oct-06 200.000 8-Nov-06 1,100.000 6-Oct-06 3,100.000 8-Nov-06 800.000 5-Oct-06 2 .....

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0.180 29-Jan-07 1,000.000 6-Dec-06 0.070 5-Jan-07 2,500.000 20-Dec-06 499.250 5-Jan-07 1,000.000 23-Dec-06 4,500.000 4-Jan-07 10.000 23-Dec-06 3,000.000 3-Feb-07 500.000 5-Jan-07 698.950 2-Feb-07 5.000 5-Jan-07 748.875 9-Feb-07 500.000 10-Jan-07 2,400.000 21-Feb-07 7,500.000 10-Jan-07 3,200.000 23-Mar-07 5,000.000 11-Jan-07 4,000.000 29-Mar-07 3,400.000 11-Jan-07 2,500.000 3-Mar-07 10.000 12-Jan-07 2,300.000 13-Mar-07 500.000 12-Jan-07 99.850 23-Mar-07 1,000.000 13-Jan-07 1,742.700 2-Apr-07 600 .....

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p-07 20,000.000 21-Feb-07 599.100 10-Sep-07 6,000.000 22-Mar-07 580.000 08-Sep-07 10.000 19-Apr-07 700.000 17-Sep-07 10,000.000 19-Apr-07 400.000 18-Sep-07 2,000.000 24-Apr-07 100.000 18-Sep-07 1,000.000 1-May-07 300.000 27-Sep-07 4,500.000 3-May-07 50.000 28-Sep-07 35.170 19-Jun-07 5,000.000 28-Sep-07 11.830 19-Jun-07 2,500.000 28-Sep-07 75,000 19-Jun-07 2,500.000 28-Sep-07 25.000 21-Jun-07 2,500.000 21-Jun-07 2,500.000 23-Jun-07 1,994.000 03-Jul-07 4,000.000 04-Jul-07 6.000 05-Jul-07 1,500.000 .....

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0 7-Oct-06 62.321 16-Oct-06 100.000 9-Oct-06 800.000 6-Oct-06 200.000 11-Oct-06 106.764 20-Oct-06 61.400 2,730.485 2,800.000 3-Nov-06 1,000.000 6-Nov-06 3,100.000 8-Nov-06 1,100.000 5-Nov-06 2,000.000 8-Nov-06 800.000 19-Nov-06 1,000.000 8-Nov-06 499.250 12-Nov-06 950.000 9-Nov-06 1,500.000 11-Nov-06 1,950.000 9-Nov-06 500.000 21-Nov-06 1,000.000 15-Nov-06 299.550 27-Nov-06 1,000.000 16-Nov-06 900.000 27-Nov-06 300.000 16-Nov-06 800.000 17-Nov-06 10.000 21-Nov-06 1,750.000 21-Nov-06 1,950.000 22 .....

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1-Jan-07 2,500.000 12-Jan-07 2,300.000 12-Jan-07 99.850 13-Jan-07 1,742.700 15-Jan-07 4,999.000 15-Jan-07 649.025 17-Jan-07 199.700 20-Jan-07 711.930 22-Jan-07 798.800 22-Jan-07 199.900 24-Jan-07 3,500.000 24-Jan-07 299.550 25-Jan-07 100.000 25-Jan-07 449.325 25-Jan-07 10.200 30-Jan-07 199.700 29,807.505 4,516.000 9-Feb-07 149.775 3-Feb-07 500.000 21-Feb-07 7,500.000 2-Feb-07 5.000 21-Feb-07 599.100 9-Feb-07 500.000 21-Feb-07 7,500.000 8,248.875 8,505.000 22-Mar-07 580.000 23-Mar-07 5,000.000 29 .....

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-07 4,000.000 27-Jul-07 7,000.000 04-Jul-07 6.000 07-Jul-07 1,000.000 05-Jul-07 1,500.000 10-Jul-07 10.000 05-Jul-07 1,500.000 07-Jul-07 1,000.000 14-Jul-07 189.000 8,195.000 8,010.000 25-Aug-07 17.000 09-Aug-07 10.000 23-Aug-07 2,000.000 28-Aug-07 70.000 17.000 2,080.000 01-Sep-07 20.000 28-Sep-07 20,000.000 03-Sep-07 4,000.000 10-Sep-07 6,000.000 06-Sep-07 2,000.000 08-Sep-07 10.000 08-Sep-07 4,000.000 17-Sep-07 10,000.000 12-Sep-07 2,500.000 18-Sep-07 2,000.000 13-Sep-07 2,500.000 18-Sep-07 1 .....

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flow statement indicating one to one nexus between the cash funds received on sale of Bangalore property and utilisation for purchase of Pune property. Since all these income had been offered for tax, there cannot be double taxation on the same income one at a point of source and another at a point of application. Taxes have been paid on additional income out of sale of shares of M/s. Ami Builders Pvt. Ltd. and S. K. Projects P. Ltd. therefore, again there cannot be tax on the same income at th .....

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