TMI Blog2017 (2) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... ified previous year. The said provisions are applicable only for the specified previous year. The search in this case was conducted on 20.2.2008. Since the XY.2005-(163 is not the specified previous year, the provisions of sect' (2) & 3) of the Act will not be applicable in the case of the Appellant. Reducing the quantum of penalty from 200% to 100% by CIT(A) - Held that:- No justification was given before us as to why the penalty should be levied at 200%. Nothing could be shown from the order of the AO wherein any justification was given by AO for levy of penalty at 200%. Under these circumstances, we find that no interference is called for in the order of Ld. CIT(A). - I.T.A. No. 949 to 952 /Mum/2014, I.T.A. No. 750 to 753/Mum/2014 - - - Dated:- 8-2-2017 - SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) For The Assessee : None For The Revenue : Shri Suman Kumar ORDER Per Bench These appeals pertain to same assessee involving identical issues, therefore, these were heard together and are disposed of by this common order. 2. It is noted that these appeals were earlier fixed for hearing on 18-02- 2016 and the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement that he has agreeable to being taxed on the disclosed amount. 4. The brief background and facts of the case narrated in the order of Ld. CIT(A) is reproduced here under: A search seizure action u/s 132 of the Act was carried out at the residence and business premises of Phoenix Group on 20/02/2008 by DDIT(Inv) Unit-IV(2), Mumbai. The Phoenix Mills Ltd. (PML), the flagship company of the group was engaged in the business of manufacturing and distribution of cotton textiles and also in the business of real estate development. Phoenix Mills Ltd. group was controlled and managed by Ruia family. Hence, the business concerns and the residences of the Ruia was also covered u/s 132/133A of the Act. An order u/s 153A rws 143(3) of the Act dated 29.12.2010 was passed in the case of the assessee. During the course of assessment proceedings, additions were made on the following issues and penalty proceedings u/s 271 (1) (c) of the Act were initiated; (i) unexplained cash deposits in account of M/s Phulchand Sons Investment amounting to ₹ 99,28,000/- [disclosed during search in statement u/s132(4)], (ii) Unaccounted cash deposits in the accounts of the employees by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operandi used by Mr Bharat R. Ruia. While Mr. Bharat R. Ruia was confronted with the statement of Mr. Rajesh Sharma, the assessee made a disclosure of ₹ 9928000/- and adhered to the same in the return filed u/s 153A of the Act. In respect of addition of ₹ 36,42,000/-, the AO stated that Shri Bharat R Ruia was engaged in dealing in shares in the name of his employees. To investigate the issue a statement on oath of Mr. Rajesh Sharma, an employee of Mr Bharat Ruia, was recorded on 19.3.2008 at the time of operation of prohibitory order at corporate office of M/s. Phoenix Mills Ltd. at 162, Senapati Bapat Marg, Lower Parel, Mumbai. Mr. Rajesh Sharma also stated in his statement that two bank accounts, one current bank account No 073 in Corporation Bank, Lower Parel Branch, Mumbai and second current bank account No 125662, Dena Rank, Lower Parel Branch, Mumbai are benami bank accounts of Shri Bharat Ruia. These accounts were opened by Shri Bharat R. Ruia in the name of M/s. Vinod Enterprises and M/s Mayank Goel. Thus, it is evident that Shri B.R. Ruia was having number of bank accounts. These accounts were effectively controlled and managed by Shri Bharat R. Ruia only. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mayank Goel 125662 67,90,000 In reply, the assessee submitted that Mr Rajesh Sharma was an employee of the assessee company and the other two persons were not related to the assessee. It was further submitted that the bank accounts standing in the name of Shri Rajesh Sharma were not related to the assessee and the assessee already offered the transactions in case of M/s. Rajesh Investments and M/s. Phulchand Sons Investment at the time of search as these were accepted to be operated by the assessee. However, the assessee offered the following amounts in respect of the above transactions without prejudice to the contention that they did not relate to the assessee and in order to avoid prolonged litigation and to buy mental peace with an understanding that no penalty will be initiated / levied: Assessment Year Mayank Goel Akash Securities Vinod Enterprises 2005-06 5,000 5,000 36,32,000 2006-07 67,85,000 44,94,500 1,37,75,555 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee should not be penalized under the provisions of section 271(l)(c) of the Act. With respect to the other issue of addition of ₹ 36,42,000/-, the assessee submitted that the accounts in which cash deposits were found did not belong to the assessee and the assessee was not controlling these accounts. However, the assessee accepted these deposits under protest and to buy peace of mind and avoid further litigation under an understanding that penalty provisions would not be invoked as the income was being accepted under protest and without prejudice to the fact that the cash deposits did not belong to the assessee. The assessee also submitted that the provisions of section 271(1)(c) of the Act will have to be read with section 271AAA of the Act and intention of section 271AAA of the Act should be considered. The A.O did not accept the submissions of the assessee for the following reasons: (i) The search was conducted on 20.2.2008. The financial year with respect to the amount of ₹ 99,28,000/- is 2004-05 Thus, the assessee had no intention to disclose the amount. The detection 01 cash deposits in the account of the employee came to light only after se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Phulchand Sons Investment The assessee could not prove how the cash did not belong to him which was deposited in these accounts. (x) The cash was deposited into these accounts over a period of AYrs.2005-03 to 200-09, Thus there was continuous and repeated attempt on the part of the assessee to defraud the Revenue. (xi) The assessee's explanation during the course of penalty proceedings had no strength because the explanation relates to section 271AAA whereas the penalty leviable relates to section 271(1)(c) of the Act. Therefore, the AO levied penalty u/s. 271(1)(c) of the Act amounting to ₹ 90,75,316/- @ 200% of the tax sought to be evaded. 5. In the appeal order, Ld. CIT(A) has noted that detailed submissions were made to challenge the levy of penalty amounting to ₹ 90,75,616 levied @200% of the tax sought to be evaded by the assessee. It was submitted that levy of penalty @200% is not justified at all as no concealment was done by the assessee. Therefore, without prejudice to other submissions, it should be reduced to 100%. Thereafter it was also submitted at length that levy of penalty is not justified at all and it should be deleted. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has admitted undisclosed income of ₹ 9928,000/- in the statement recorded uis.132(4) of the Act and followed it by disclosing the same in the return of income filed in response to notice uls.153A of the Act. The admission of undisclosed income by the appellant is the Outcome of action u/s. 132 of the Act. The statement recorded from Mr,Rajesh Sharma, the employee of Mr.Bhrat Ruia evidences that the appellant (Karia of HUF) was dealing in shares in the names of his employees. During the course of search many bank accounts and huge deposits in these bank accounts were discovered. It was also detected that Mr. Bharat R. Ruia has been operating certain demat accounts only with a view to create bogus losses in the books of account of M/s. BR. International, a proprietary concern of Mr.Bharat R Ruia. The relevant statement recorded from Mr. Rajesh Sharma is reproduced as under for convenience: Q4: Since, when you are working in M/s. B.R. International? Ms. I am working in the firm M/s. B.R.international, for the last six years. Q.5: During the course of search action, it has been found that there are two bank accounts, in the name of M/s.Rajesh Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demat accounts operated by me at the instruction of Shri Bharat Ruia are as under:- (i) M/s Rajesh Investment, Kotak Securities Ltd, Nariman Point Branch, a/c No.12900315. (ii) M/s Rajesh Investment, Oracle Securities Pvt. Ltd, a/c No. Gurunanak Road, Banda, Mumbai, a/c No.1203050000000722. in respect of the source of the acquisition of the shares reflected in those accounts, 1 would like to state that all transactions in these accounts are off market transactions, Almost all transactions of shares through these demat accounts have been done with M/s B.R. international only. There is no receipt or payment of any sum in respect of such share transactions with M/s. B.R. International. The amounts are shown, as outstanding. These share transactions with M/s. B.R. international through my demat accounts have been carried out as per direction and instruction of Shri B.R. Ruia Q.9.- Please explain the modus operandi of operating the current bank count and demat account opened in name of your proprietary concern? Ans All above the current bank accounts and demat accounts have been opened in my name but I have never done any transaction of depositing or withdrawi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Branch, Mumbal and second current bank account no.125662, Dena Bank, Lower Parel Branch, Mumbai are also benami bank accounts of Shri B.R. Ruia. These bank accounts have been opened by Shri Bharat R. Rua in the name of M/s.Vinod Enterprises and Mr.Mayank Goel, Thus, it is evident that Shri B.R. Ruia is having number of bank accounts which are effectively controlled and managed by Shri Bharat R Ruia only. Therefore, the transactions reflected in such bank accounts and demat accounts pertain to him. 9.3 Mr. Bharat R. Ruia was confronted with the above statement recorded from Mr Rajesh Sharma. In the statement recorded on 16.4.2008 u/s.132(4) of the Act, Mr Bharat R Ruia admitted undisclosed income of ₹ 785.03 Lacs. The relevant statement of Mr. Bharat R Ruia in response to Q. No. 9 of the statement recorded u/s.132(4) of the Act on 16.4.2008 is given as under: Q During the course of operation of prohibitory order at corporate office of MJs.PML at 462, Senapati Bapat Marg, Lower Parel, Mumbai on 19.03.2008, a statement on oath of Shri Rajesh Sharma, your employee, was recorded. The statement shows that you have been operating several business concerns In the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 99.28 lacs as undislosed income of MIs. B.R. International for the A. Y2005-06 over and above the regular income. I would pay the taxes due on such additional income disclosed by me. During the A.Y 2OO7-08, M/s Phulchand Sons Investment has transacted in shares and earned an income of ₹ 30.96 lacs. The said income has not been offered for lax by MIs Phulchand Sons Investment. In light of the statement of Shri Rajesh Sharma and the facts discussed above, the said income is hereby being offered as undisclosed income in the hands of M/s.B.R. International. Therefore, I, in the capacity of Karta of B.R. Ruia HUF, Proprietor of B.R. International, hereby declare the amount of ₹ 30.28 lacs as undisclosed income of M/s BR. International for the A. V 2007-08 over and above the regular income. I would pay the taxes due on such additional income disclosed by me...... Thus, disclosure made by Ws. Bharat Ruia u/s. 132(4) in hands of M/s.B.R. international under venous heads is as under: S. N. Issue involved A.Y. 2005-06 Rs. In lacs A.Y. 2007-08 Rs.in lacs 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded u/s.132 (4) of the Act on 19.3.2008 as referred above (refer Q. No, 7 10 of the statement), the assessing officer obtained certain bank account details u/s.133(6) of the Act and had noticed huge cash deposits in such accounts The details are as under:- Sr. No. Name of the Person Bank Entity Name Bank A/c Cash Deposit 1 Rajesh Sharma Dena Bank Akash Securities 125661 44,99,500 2 Vinod Kode Coprporation Bank Vinod Enterprises 073 2,25,71,542 3 Gee Vergesh Dena Bank Mayank Goel 125662 67,90,000 Total 3,38,61,042 9.3 The appellant was requested to explain the sources of the credits. Though the appellant feigned ignorance about these accounts, however he admitted the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the enquiry was conducted at the time of assessment proceedings but the entire enquiry was the fallout of the statement recorded from Mr. Rajesh Sharma who has given the details of the bank accounts in Dena Bank and the corporation Bank (refer to Q Nos, 7 10) at the time of statement recorded from him u/s 132(4) of the Act on 19.3.2008. The appellant cannot feign ignorance about these accounts more so during the course of assessment proceedings the appellant also admitted the deposits as undisclosed income. The appellant also did not contest the said additions in appeal and the assessments have become final. These facts reveal the culpability of the appellant in concealing the income. Therefore the levy of penalty the Act is justifiable. 8. We have gone through the orders passed by the AO as well as the aforesaid detailed findings of Ld. CIT(A). It is noted that it has been examined in detail by the Ld. CIT(A) that from the statements recorded of Shri Rajesh Sharma as well as the assessee it was clear that assessee was operating several business concerns in the name of other persons including assessee s employees and close associates and was maintaining various bogus ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s involved in these appeals are identical to appeal for A.Y. 2005-06. Therefore, our order for A.Y. 2005- 06 shall apply mutatis mutandis on the appeals of these years. As a result, these appeals are also dismissed. 13. Now we shall take up Revenue s appeals for A.Y. 2005-06 (ITA No.949/Mum/2014); A.Y. 2006-07 (ITA No.950/Mum/2014); A.Y. 2007-08 (ITA No.951/Mum/2014); and A.Y.2008-09 (ITA No.952/Mum/2014). It is noted that the solitary ground raised by the Revenue in all these appeals is for challenging the action of Ld. CIT(A) in reducing the quantum of penalty from 200% to 100%. It is noted that penalty has been levied by the AO @200% of tax sought to be evaded. However, while levying the penalty at 200%, no justification has been given by AO in the penalty order as to why it was a fit case for levy of penalty at 200% and not at minimum rate of 100%. Under these circumstances, Ld. CIT(A) reduced the same to 100% by observing as under:- 9.11 The appellant also argued that the penalty proceedings u/s 271(1)(c) of the Act are quasi criminal in nature and distinct from the assessment proceedings and therefore no penalty could be levied in its case is not acceptable in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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