TaxTMI 
TaxTMI 
2015 (11) TMI 633
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..... A. No. 7321/Mum/2013 reads as under : "1. (a) The learned Commissioner of Income-tax (Appeals) has grossly erred in confirming the penalty levied by the Deputy Com missioner of Income-tax under section 271(1)(c) of the Income-tax Act, 1961 of Rs. 87,43,185 on the alleged ground that the appellant has not substantiated the manner in which the undisclosed income was derived and one to one source of 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 Rs. 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 order under section 271(1)(c) without granting the appellant an adequate opportunity of being heard. The penalty order is in contravention of the principles of natural justice and hence bad in law. 3. The appellant craves leave to add, alter amend or delete any grounds of appeal on or ....
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....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 Rs. 2.59 crores since the money applied in acquisition of Pune properties was mainly out of the money received from the sale of shares of the group concern and that there cannot be double taxation on the same income once at a point of source and another at the point of application. However in order to have peace with the Revenue authority the amount was offered by the assessee and accepted by the Assessing Officer. Hence, the assessees are before us against the levy of penalty under section 271(1)(c). 5. It was argued by the learned authorised 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 properti....
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....nd Sneha Kotharis on which they had already paid taxes. The funding was not by the assessee-company, in so far as the assessee-company was having no activity, therefore, the original return was correctly filed at nil income. As per the learned authorised representative the assessee has disclosed Rs. 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 statement recorded under section 132(4) dated July 29, 2009, the learned authorised representative relied on the decision of the hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC), wherein it was held that admission is an extremely important piece of evidence, it cannot be taken as conclusive. It is open to the assessee who made the admission to show that it was incorrect and the assessee should be given a proper opportunity. Relianc....
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....harali 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 Departmental representative contended that revised return filed by the assessee was not voluntarily offered and that the assessee has concealed income therefore, the Assessing Officer was justified in levying the penalty. The learned Departmental representative further supported the orders of the lower authorities. 9. We have considered the rival contentions, carefully gone through the orders of the authorities below and various pages of the paper book towards which our attention was invited. We had 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 Pooja Export group on July 28, 2009, of whic....
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....ng cash payments for acquisition of the properties 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 are only known to Shri Sunil Kothari. In this context, please go through the contents and explain the same. Ans. Pages 34 to 41 of annexure A-3 recovered from this premise relates to purchase and sale of one property at Bangalore where cash of Rs. 14.63 crores was transacted in the financial year 2005-06. I voluntarily offer this said amount of Rs. 14.63 crores as my additional income and shall pay taxes on its accordingly. The specific transaction and its taxability shall be explained to you in due course. However, in the same property transaction, I have also earned Rs. 11.5 crores on account of sale of the said property which I have not so far ....
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....4.80 crores, Ami Estate Pvt. at Rs. 5.18 crores M/s. Cornetstene Pvt. Ltd. at Rs. 5.18 crores, and Sunil Kothari and Sneha Kothari for sale transaction of Bangalore properties at Rs. 13.30 crores each in the year 2010-11, i.e., the year in which sale concluded. With respect to the memorandum of understanding dated June 15, 2009 as pointed out by the Assessing Officer for sale 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 considerations paid in the financial years 2006- 07 and 2007-08. The transfer of shares to be completed in February, 2010. Hence, the capital gains was liable to tax in the assessment year 2010-11, therefore, correctly offered in the statement under section 132(4) in the assessment year 2010-11. As per agreement for sale ....
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.... 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 has also filed monthwise cash statement in respect of the Bangalore transactions and payment for Pune property purchased which was compiled from loose papers. Further letter dated December 20, 2011 filed before the Assessing Officer, on December 20, 2011 which is placed at pages 52 to 53 of the paper book, reiterated one to one nexus between cash funds received from Bangalore property's sale and utilisation for purchase of Pune property. The receipt of cash and its utilisation, datewise cash 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 2....
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....0.000 07-Jul-07 1,000.000 25-Jan-07 449.325 10-Jul-07 10.000 25-Jan-07 10.200 23-Aug-07 2,000.000 30-Jan-07 199.700 28-Aug-07 70.000 9-Feb-07 149.775 09-Aug-07 10.000 21-Feb-07 7,500.000 28-Sep-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 ....
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....205.000 23-Dec-06 4,500.000 6-Dec-06 500.000 23-Dec-06 3,000.000 20-Dec-06 10.000 7,999.500 5,815.000 5-Jan-07 698.950 29-Jan-07 6.000 5-Jan-07 748.875 29-Jan-07 1,000.000 10-Jan-07 2,400.000 5-Jan-07 2,500.000 10-Jan-07 3,200.000 5-Jan-07 1,000.000 11-Jan-07 4,000.000 4-Jan-07 10.000 11-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....
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.... statement 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 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 the time of acquisition of property at Pune. 19. In view of the above facts we may appreciate that declaring additional income of Rs. 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 litigati....