TaxTMI 
TaxTMI 
2017 (2) TMI 690
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.... on behalf of the assessee on the date of hearing i.e. 11-01-2017. Thus, it appears that assessee is not interested in representing these appeals. Under these circumstances, we have no other option but to proceed ex-parte qua the assessee. 4. We shall first take up appeal for A.Y. 2005-06 in ITA No.750/Mum/2014 filed by the assessee on the following grounds:- "Ground No 1:- On the facts and in the circumstances of the case and in law, the learned Deputy Commissioner of Income-tax, Central Circle, Mumbai erred in initiating penalty proceedings and erred in levying penalty uls 271(1)(c) amount ing to Rs. 45,37,808/-. The appellant prays that the penalty levied may kindly be cancelled. Ground No 2:- The learned Deputy Commissioner of Income-tax has failed to establish that the amounts offered constituted the concealed income of the Assessee and therefore, the levy of penalty is entirely unjustified as he has merely relied on the offer made by the Assessee to buy peace. Ground No 3:- Without prejudice to the above it is submitted that the penalty imposed is void abinitio because the DCIT could not have been satisfied about the Assessee having concealed any income a....
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....5662 67,90,000 4 Rajesh Sharma Corporation Bank Phulchand Sons Investment Ca053 99,28,000 The amounts were deposited in the accounts over different periods as discussed in the penalty order. The entries at sr no.1 to 3 were discovered during the assessment whereas the entry no.4 was disclosed by the assessee at the time of search action. Although the assessee disclosed the amount of undisclosed income in search (issue no-(i) for Rs. 99,28,000l-), the penalty proceedings were initiated by the AO on the ground that the assessee would not have disclosed the income in absence of search. The other amount (issue no-(ii)) of Rs. 36,42,000/- was detected during the assessment proceedings and therefore, the penalty proceedings were initiated by the AO on the ground that the assessee failed to disclose the said amount in the return of income. Subsequently, penalty order u/s 271(1)c) of the Act was passed in the appellant's case for AY 2005-06 on 30.6.2011 levying penalty of Rs. 90,75,616/-. In the penalty order, the AO discussed the basis of the disclosure and the basis of addition on the above issues in the search assessment completed. In respect of the dis....
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.... bank accounts were not explained by the assessee during search proceedings. The AO issued notices to the banks for providing the copies of bank statements and bank account opening forms etc. The verification of these accounts suggested that the cash was deposited into the accounts. The three persons namely Mr. Gee Vergesh, M. Vinod Kode & Mr. Rajesh Sharma were required to present themselves before the AO, but no person attended. The AR of the assessee informed that the persons had left the company. During the assessment proceedings, a show cause was issued to appellant requiring to explain the cash deposits which are as follows: Sr No. Name of the Person Bank Entity Name Bank A/c Cash Deposit 1 Rajesh Sharma Dena Bank Akash Securities 12561 44,99,500 2 Vinod Kode Corporation Bank Vinod Enterprises 073 2,25,71,542 3 Gee Vergesh Dena Bank 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 Raj....
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....r under consideration, the addition on this count was Rs. 36,42,000/-. During the penalty proceedings, the assessee was asked to explain as to why penalty u/s 271(1)(c) of the Act should not be levied. In reply, the assessee submitted in respect of undisclosed income of Rs. 99,28,000/- that the same was offered by the assessee in the return of income filed u/s 153A of the Act under the head income from business over and above the normal profit derived from profit & loss account, on which due taxes were paid. It was, therefore, contended 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 Rs. 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 su....
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....g account, The statement dated 16.4.2005 of Mr Bharat Ruia states at answer No.9 that 'this loss had been booked by non genuine oft market transactions between R.R International & M/s Rajesh Investments as per pre-defined arrangement, This proves that the assessee deliberately and willfully resorted to tax evasion, (ix) The bank accounts opened in the name of the employee were Introduced by another employee for e.g. the account of Vinod Enterprises at Corporation Bank was introduced by M/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 Rs. 90,75,316/- @ 200% of the tax sought to be evaded." 5. In the appeal order, Ld. C....
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.... as penalty order and thereafter it was concluded by him that levy of penalty by the AO was justified. But he reduced the penalty from 200% to 100%. Relevant part of order of Ld. CIT(A) is reproduced hereunder:- "9.0 I have carefully examined the facts of the case, the stand taken by the Assessing Officer in the penalty order, the grounds of appeal and the written submissions filed by the appellant during the appeal proceedings. 9.1 During the A.Y.2005-06, the appellant has admitted undisclosed income of Rs. 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 th....
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....ri Bharat Ruia. Further, whatever amounts deposited in bank accounts are not belonging to me out belonging to Shri Bharat Ruia. The above mentioned concerns are being operated by Shri Bharat Ruia using my name. I am only employee of M/s. B.R. International and working as Accountant in this office. Q.8 Please provide details of all your demat accounts and explain the sources of acquisition of the shares in such accounts. Ans. The 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....
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.... Hero, I would like to state that the modus operandi stated in earlier questions is entirely applicable in the case of above persons since the above said bank accounts are opened by the said persons but managed and arranged by Shri B, R. Ruia." 9.2 Shri Rajesh Sharma also stated in his statement that two other bank accounts, one current bank account no.073 with Corporation Bank, Lower Parel 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 Rs. 785.03 Lacs. The relevant statement of Mr. Bharat R Ruia in response to Q. No. 9 of t....
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....eposited in cash in the bank accot.nl M/s.Phulchand Sons Investment by M/s B.R. International, This cash deposited represent the unaccounted income in the hands of MIs B.R. International as sources, of such cash deposit cannot be explained. Therefore, l, in the capacity of Karta of BR. Ruia (HUF), proprietor of BR. International hereby declare the said cash deposits of Rs. 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 Rs. 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 Rs. 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....
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....he statement recorded 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 following income:- Assessment Year/Party's name 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 2007-08 - - - 2008-09 - - 51,63,987 Total 67,90,000 44,99,500 2,25,71,542 9.7 As against the above admission, the assessing o....
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.... concerns in the name of other persons including assessee's employees and close associates and was maintaining various bogus bank accounts, through which unaccounted income was generated regularly. We find that findings have been recorded by the Ld. CIT(A) on the basis of facts and material held on record. Nothing has been brought before us to controvert or negate these factual findings. Under these circumstances, we find it appropriate to uphold the order of the Ld. CIT(A). Grounds 1 to 3 & 5 are dismissed. 9. Ground 4: In this ground, the assessee has contended that no penalty was exigible u/s 271(1)(c) since provisions of sections 271AA(2) & (3) would apply as the search was carried out after 1st day of June, 2007 and statement was made u/s 132(4). 10. In this ground, it is claimed that the assessee was exempt from levy of penalty under provisions of sections 271AAA (2) & (3) of the Act. It is noted that this issue has also been decided by Ld. CIT(A) by observing as under:- "In this connection it is made clear that the provisions of subsection 2 and 3 of section 27IAAA will not be applicable to the appellant as the assessment year 2005.06 is not the specified previous y....