Commissioner of Income-tax, Central-II v. Shri Kiran Hirji Shah
[Citation -2014-LL-1120-4]

Citation 2014-LL-1120-4
Appellant Name Commissioner of Income-tax, Central-II
Respondent Name Shri Kiran Hirji Shah
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 20/11/2014
Judgment View Judgment
Keyword Tags additional income • cash flow • change of opinion • legal principle • original return • revisional power • search and seizure • unaccounted income
Bot Summary: The Assessee challenged the order passed by the ou Commissioner under section 263 of the Income Tax Act, 1961. The Commissioner has explained in detail as to how it was not enough merely to accept the statement of the H Assessee that there was an opening balance, but how that figure of Rs.2.33 crores has been derived as an opening balance on 31 y March 1999 should have been carefully and properly examined by ba the Assessing Officer. In rt relation to that explanation given by the Assessee in response to the ou notice of 12 April 2007 discloses that entities mentioned therein, one Gala Group and Mr.Narendra Khetshi Shah took advance of Rs.26 lakhs from the Assessee. Mr.Malhotra places strong reliance on the assessment order passed on 28 December 2010, pursuant to the om Commissioner's direction under section 263, in which the Assessee admitted that there is no explanation for the advance of Rs.26 lakhs. The elaboration in the Tribunal's order has been referred to and Mr.Mistri Uday Kambli 7/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 8/14 itxa-1342-12.doc was at pains to point out as to how the Tribunal has considered the rt notice of the Assessing Officer dated 12 April 2007 and response ou thereto by the Assessee on 21 April, 2007, as also a letter addressed to the Asst.Director of Income-TaxUnit VIII dated 5 December 2005 by the Assessee. Rt Thereafter from para 14 the Departmental representative's ou contentions have been rejected by observing that there was an explanation given by the Assessee on 24 April 2007 in writing and in response to the letter of the Assessing Officer dated 12 April 2007. Gabriel India Ltd. Inquiries have been made in ig regard to nature of the expenditure incurred by the Assessee, the explanation has been given and which the Assessee termed as a H detailed explanation and in writing.


1/14 itxa-1342-12.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rt INCOME TAX APPEAL NO.1342 OF 2012 ou WITH INCONE TAX APPEAL NO.1371 OF 2012 WITH INCOME TAX APPEAL NO.1372 OF 2012 WITH C INCOME TAX APPEAL NO.1469 OF 2012 WITH INCOME TAX APPEAL NO.1470 OF 2012 WITH h INCOME TAX APPEAL NO.1514 OF 2012 . Central-II v/s. ig Commissioner of Income-Tax, ...Appellant Shri Kiran Hirji Shah ...Respondent H Mr.A.R.Malhotra for Appellant. Mr.J.D.Mistri, Sr.Advocate i/b Atul K. Jasani for Respondent. ... y CORAM : S.C.DHARMADHIKARI & ba A.A. SAYED, JJ. DATED : 20 NOVEMBER 2014 om P.C. All these Appeals by Revenue question order of Income Tax Appellate Tribunal, Mumbai Bench in 10 Appeals B and which pertain to Assessment Years 2000-01 to 2006-07. We would for purpose of disposal of all these Appeals take facts in Income Tax Appeal No.1371 of 2012. Uday Kambli 1/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 2/14 itxa-1342-12.doc 2. Assessee-Applicant before Tribunal was one rt Mr.Kiran Shah. Assessee challenged order passed by ou Commissioner under section 263 of Income Tax Act, 1961 (for short IT Act). C 3. Commissioner of Income Tax (Central)-II, Mumbai referred to search and seizure account under section 132 (1) of IT Act on 22 September 2005, that was at residential premises h of Director/Partner of one M/s.Vijay Grihanirman Pvt.Ltd. and its ig sister concerns (Vijay Group). During search, various H documents and loose papers belonging to Assessee Mr.Kiran H.Shah were seized. They have been referred to as A-1 to A-27 in y panchanama dated 22 September 2005. Assessee was ba main Director, according to Revenue, of Private Limited Company called M/s.Motta Construction Pvt.Ltd., which is engaged in construction business. As warrant was in name of om Assessee, proceedings under section 153C were initiated. Return was filed on 29 September 2006 declaring total income B of Rs.19,94,038/-. Original Return under same provision was filed on 29 March 2001 declaring total income of Rs.4,97.038/-. Assessment Order under section 143(3) read with section 153C was passed by Asst.Commissioner of Income Tax Central Uday Kambli 2/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 3/14 itxa-1342-12.doc Circle-15 & 16, Mumbai on 4 May 2007 assessing total income of rt Rs.21,73,220/-. ou 4. Commissioner referred to several expenses and examined assessment records as also seized materials. We C are concerned in this case with unaccounted expenses incurred by M/s.Motta Construction Pvt.Ltd. for Assessment Years 2000- 01, 2001-02 and 2004-05 in hands of Assessee. This Private h Limited company was also issued notices under section 153C and ig in their Returns of Income filed in response to these notices, they H have not declarded any unaccounted income in view of these expenses. expenses made by M/s.Motta Construction and assessments made on this account are referred to in para 4 of y ba order of Commissioner and in para 5 he concludes that verification of assessment records reveals that assessee made cash flow statement and tried to explain source and om application of income of Shri Kiran H. Shah for period from 1 April 1999 to 31 March 2006. In this statement he had shown B amount of Rs.2,33,00,000/- as opening balance. Vide point No.21, Assessing Officer raised specific query in his letter of 12 April 2007 and which query has been referred by Commissioner. Response to this query by Assessee is then referred to in para Uday Kambli 3/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 4/14 itxa-1342-12.doc 5.1 and entire explanation is analyzed. Commissioner rt concludes that from verification of relevant seized materials ou it is seen that there is no evidence to conclusively prove that transactions written on these pages are pertaining to period prior to 31 March 1999. In such circumstances, he disbelieved C Assessee and concluded that Assessing Officer has not examined source for Rs.2.33 crores. Even though he asked h Assessee to explain same, during assessment proceedings, ig Assessee has not bothered to give any explanation for same or produced any evidence to support his contention that this amount H is opening balance available as on 31 March 1999. For all these reasons, Commissioner concluded that order passed by y Assessing Officer is erroneous in so far as it is prejudicial to ba interest of Revenue and deserves to be set aside. matter deserves to be restored to file of Assessing Officer for om passing denovo assessment. B 5. It is this order of Commissioner dated 30 March 2010 which was challenged in Appeal before Income Tax Appellate Tribunal and each of Appeals of Assessee have been allowed by impugned order. Uday Kambli 4/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 5/14 itxa-1342-12.doc 6. Mr.Malhotra, appearing in support of these Appeals rt submits that four questions of law raised by Revenue at pages 6 ou and 7 of Paper Book are all substantial question of law. He submits that Tribunal has erred in interfering with order of Commissioner. jurisdiction under section 263 of Act C was properly exercised by Commissioner, inasmuch as, Commissioner concluded that Assessing Officer's order of h assessment is erroneous and in so far as it is prejudicial to ig interest of Revenue. Commissioner has explained in detail as to how it was not enough merely to accept statement of H Assessee that there was opening balance, but how that figure of Rs.2.33 crores has been derived as opening balance on 31 y March 1999 should have been carefully and properly examined by ba Assessing Officer. om 7. Mr.Malhotra submits that there was definite design in picking and choosing date of 31 March 1999/ 1 April 1999. That B could have relation with date of assessment namely 4 May 2007. That Assessing Officer had restraints and limitations on exercise of powers and he could not have gone beyond period stated in law that Assessee deliberately chose this date Uday Kambli 5/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 6/14 itxa-1342-12.doc and thereafter explained as to how figure was arrived at. In rt relation to that explanation given by Assessee in response to ou notice of 12 April 2007 discloses that entities mentioned therein, one Gala Group and Mr.Narendra Khetshi Shah took advance of Rs.26 lakhs from Assessee. These are picked up for instance by C Commissioner. Commissioner, therefore, was justified in holding that this explanation required deeper probe and scrutiny h by Assessing Officer. That having not been done, ig assessment order cannot be said to be taking any possible or plausible view. This is not mere change of opinion, but patently H erroneous order and which is prejudicial to interest of Revenue. y ba 8. Mr.Malhotra places strong reliance on assessment order passed on 28 December 2010, pursuant to om Commissioner's direction under section 263, in which Assessee admitted that there is no explanation for advance of Rs.26 lakhs. B If that is so, then amount of Rs.2.33 crores as derived and thereafter expended has not been explained at all. In such circumstances, he relied upon two decisions, one of Madras High Court in case of CIT vs. Seshasayee Paper & Boards Ltd. Uday Kambli 6/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 7/14 itxa-1342-12.doc reported in (2000) 242 ITR 490 (Mad) and other judgment of rt same High Court in case of Indian Textiles vs. CIT, reported in ou (1986) 157 ITR 112 (Mad). 9. On other hand, Mr.Mistri, learned Senior Counsel C appearing on behalf of Assessee would submit that Appeals do not raise any substantial question of law. He submitted that h Tribunal has correctly appreciated controversy. It has not merely ig held that view taken by Assessing Officer is possible view but has gone ahead and explained as to how that view is possible H and plausible. Tribunal has rested his conclusion only on fact that Assessee has explained that there was opening y balance. If there was indeed opening balance, then, how it was ba dealt and manner in which it has been dealt with by Assessing Officer was scrutinized by Tribunal. All this was to om appreciate argument of Assessee that Commissioner overstepped his limits and rather exceeded his jurisdiction in passing order under section 263 of IT Act. This was not B case where order of Assessing Officer was erroneous, insofar as it was prejudicial to interest of Revenue. elaboration in Tribunal's order has been referred to and Mr.Mistri Uday Kambli 7/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 8/14 itxa-1342-12.doc was at pains to point out as to how Tribunal has considered rt notice of Assessing Officer dated 12 April 2007 and response ou thereto by Assessee on 21 April, 2007, as also letter addressed to Asst.Director of Income-Tax (Inv.)Unit VIII (2) dated 5 December 2005 by Assessee. It is, therefore, apparent C that responses by Assessee were extensive, they were considered and this was not case where Assessing Officer h had committed error and to such extent as would enable ig Commissioner to exercise his revisional power under section 263. Mr.Mistri submits that even if assessment order later on passed H and on 28 December 2010, was available on record that did not make any difference. In such circumstances and relying upon y judgment of this Court in case of Commissioner of Income- ba Tax vs. Gabriel India Ltd. 1993 (203) ITR 108, Mr.Mistri submits that Appeals deserve to be dismissed. om 10. We have, with assistance of learned Counsel B appearing for parties, perused order passed by Commissioner and that of Tribunal. We have also perused decisions which have been brought to our notice under statutory provisions. We must at once refer to fact that out of 10 Income Uday Kambli 8/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 9/14 itxa-1342-12.doc Tax Appeals, which were before Tribunal, Income Tax Appeal rt No.3168-M-09 to Income Tax Appeal No.3170-M-09 came to be ou withdrawn by Assessee. 11. Tribunal dealt with remaining Appeals and C which were seven in number. They all pertain to challenge to order passed by Commissioner under section 263 with h above conclusion. ig 12. effective ground was that Commissioner's order H was erroneous. Tribunal referred to facts in brief from paras 5 to 9 of order. To our mind, though Tribunal observed that y this brief reference to facts, it is quite elaborate to our mind ba and would denote that Tribunal applied its independent mind to controversy. om 13. rival contentions have been noted. B Commissioner essentially concludes that source of Rs.2.33 crores was never explained and has been then scrutinized and with assistance of advocate, who made submission. Before Tribunal, Assessee's advocate arguments have been Uday Kambli 9/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 10/14 itxa-1342-12.doc referred and that of representative of Department. rt Thereafter from para 14 Departmental representative's ou contentions have been rejected by observing that there was explanation given by Assessee on 24 April 2007 in writing and in response to letter of Assessing Officer dated 12 April 2007. C This itself means that Assessing Officer raised query and sought reply. There was application of mind by Assessing h Officer and which would be further apparent from fact that ig record reveals letter dated 5 December 2005 addressed by Assessee to Asst.Director of Income Tax (Inv.) Unit-VIII (2). H There explanation was given regarding source of Rs.2.33 crores. Tribunal, therefore, concluded that there could be y explanation and which was later on furnished so as to explain ba source of funds. Tribunal also held that Assessee offered sum of Rs.2.47 crores as additional income in returns filed after om search. Tribunal held that if after examining details Assessing Officer accepts one of possible views, then his order B cannot be called erroneous and prejudicial to interest of Revenue. Uday Kambli 10/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 11/14 itxa-1342-12.doc 14. This conclusion is based on understanding of rt legal provisions by Tribunal and in that regard it makes ou reference to judgment of Delhi High Court in case of CIT v/s.Honda Siel Power Products Ltd. (2010) 235 CTR 336. C 15. Apart from that what we find is that throughout legal position has been what is essentially pointed out by this Court in h CIT v/s. Gabriel India Ltd. (supra). Inquiries have been made in ig regard to nature of expenditure incurred by Assessee, explanation has been given and which Assessee termed as H detailed explanation and in writing. This was part of record of case. claim was allowed by Assessing Officer on being y satisfied with this explanation of Assessee. Such order or ba assessment made by Assessing Officer could not have been held to be erroneous simply because elaborate or better reasons om could have been assigned. If Commissioner initiates proceedings under section 263 and hears Assessee, but on B examination of entire material what he upsets or rather interferes with is possible view, then course adopted by him was held to be impermissible in law. Uday Kambli 11/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 12/14 itxa-1342-12.doc 16. Tribunal did not deviate from these principles of rt law, but applied them to facts of present case and in doing ou that from para 16 it analyzes as to how view taken by Assessing Officer can be said to be possible and plausible one. Heads or Items in explanation of 24 April 2007 have been C scrutinized by Tribunal. Tribunal held that Assessing Officer has made inquiry and which also appears to have been h reflected in figures. While it is true that against figures, year has ig not been mentioned, but that itself does not indicate that explanation given by Assessee is incapable of being accepted. H Tribunal has referred to Heads and in relation to petroleum business. Tribunal has examined documents and which run y into Hundreds of pages. Assessee was carrying on petroleum ba and other business for more than 15 years and earned additional income. It is in these circumstances, that diary entries have been om referred to and Assessing Officer's conclusions have been eventually upheld. Once inquiry was made and how view taken B by Assessing Officer is demonstrated to be possible and plausible one, then we do not think that Tribunal's order can be termed as perverse or vitiated by any error of law apparent on face of record. Uday Kambli 12/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 13/14 itxa-1342-12.doc 17. True it is that Madras High Court has held that rt Assessing Officer ought to make inquiry and if he is found to have ou made no inquiry, then Commissioner is not prevented from taking recourse to section 263. Commissioner's powers are very wide and he is only to indicate his prima facie opinion to C support conclusion that order passed by Assessing Officer was erroneous, insofar as it is prejudicial to interest of h Revenue. powers of Commissioner are very wide. One ig cannot dispute this legal principle as is culled out in para 6 of first decision of Madras High Court relied upon by Mr.Malhotra. H 18. In second Madras case it is held that even on one y item if Commissioner is satisfied that order passed by ba Assessing Officer is erroneous and prejudicial to interest of Revenue, initiation of proceedings could not be questioned. om Such was not position here. There may have been cover up or after thought or indeed admission, but Tribunal was to find B out whether Commissioner's exercise under section 263 was justified. It is in that regard and on this essential conclusion that Tribunal faulted him. When inquiries were made by Assessing Officer and responses were sought, which responses have also Uday Kambli 13/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: 14/14 itxa-1342-12.doc been considered, then, Tribunal found that Commissioner rt did not make reference to total and complete material before ou Assessing Officer. He did not make any reference to exercise undertaken by Assessing Officer of referring matter to Investigation Branch and Investigation Branch seeking further C clarification. It is, therefore, essentially on facts that Tribunal interfered with order of Commissioner. h 19. ig We do not find that such course adopted by Tribunal and confined and peculiar to facts of Assessee H raises any substantial question of law. Appeals, thus, fail and are dismissed. No costs. y ba (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.) om B Uday Kambli 14/14 ::: Downloaded on - 11/08/2015 16:06:23 ::: Commissioner of Income-tax, Central-II v. Shri Kiran Hirji Shah
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