Case Law Details

Case Name : Ami Estates Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Appeal Number : Income tax (Appeal) nos. 7321 & 7300 of 2013 & others
Date of Judgement/Order : 23/09/2015
Related Assessment Year :
Courts : All ITAT (4439) ITAT Mumbai (1463)

Brief of the Case

ITAT Mumbai held In the case of Ami Estates Pvt. Ltd. vs. DCIT that the assessee has explained one to one nexus namely cash funds received from sale of Bangalore property, and its utilization for Pune property. The revised declaration of income so filed by the assessee was bonafide 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 avoid litigation. The disclosure was with a specific plea that no penalty proceedings be initiated u/s.271AAA or 271(1) (c). Considering the totality of facts and circumstances as discussed above, we do not find any merit in the penalty imposed u/s.271(1)(c).

Facts of the Case

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 28.10.2007 showing total income of Rs. Nil. The search & Survey Operations u/s.132 (1) and 133A was conducted in the cases of M/s. Pooja Exports and its group concerns. Notice u/s 153C dated 29.9.2010 was issued. In response to this notice, the assessee filed the return of income on 28.10.2010 declaring total income of Rs. Nil, Subsequently the assessee also filed revised return of income on 21.12.2011 declaring the total income at 2,59,75,000/- to buy peace and on condition of no penalty. An assessment order U/s 143(3) r.w.s. 153C was passed on 28.12.2011 determining the total income at Rs. 2,59,75,000/-. There were no changes in the returned income as revised by assessee.

The AO accepted the assessee’s Revised Computation without disturbing the same or adjusted any other addition to the same. The A.O. observed that the assessee has declared its income for the A.Y.2007-08 vide its revised return, the assessee has not able to substantiate the manner in which the income was derived and also failed to explain the sources of cash investment and application thereof. Thereafter penalty proceedings, u/s. 271(1) (c) were initiated separately by issuance of notice u/s. 274 r.w.s. 271. The assessee submitted 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 point of application. However in order to have peace with the revenue authority the amount was offered by assessee and accepted by the AO.

Contention of the Assessee

The ld counsel of the assessee submitted that assessee company had no earning during the years under consideration and for this purpose our attention was invited to pages 5 of the Paper Book which contains profit and loss account and balance sheet of the assessee company. Our attention was also invited to the statement of Sunil Kotharis dated 29-7-2009, which has been corrected in subsequent statement under Section 132(4) dated 25-9-2009. Our attention was invited to question No.9 and its reply of the statement dated 29-7-2009. It was submitted that question and answer No.3 in the statement dated 25-9-2009 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 ld. AR, even though the MOU for sale of shares was recorded on 15-6-2009, the transaction was initiated in prior years and payments made on account in prior years.

Our attention was also invited to page 37 of the paper book which contains details of cheque payment received in prior years. Ld. AR further contended that assessee group has not dishonoured the offers made in the statement under Section 132(4), explained in letter dated 17-11-2011. It was submitted that department should not tax both the income and also its application as the same would amount to double taxation. Our attention was also invited to submission dated 21-12-2011 placed at page 52 to 58 of the paper book, which give date wise and month wise nexus between cash received from sale of shares vis-à-vis investment in Pune properties. As per ld. AR the AO has not given any cogent reason nor controverted the nexus for funding of Pune properties.

As per ld. AR assessee has disclosed Rs.2.59 crores in revised return, even though the same was not its income, just to buy peace with department. He further contended that the assessee company has not admitted or capitalized its offer in its books of account in subsequent years, therefore, assessee should not be penalized u/s.271 (1) (c). With regard to the reliance placed by the AO on the statement recorded u/s.132(4) dated 29-7-2009, ld. AR relied on the decision of Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co., 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. Reliance was also placed on the decision of Hon’ble Bombay High Court in the case of Nirmala L. Mehta, 269 ITR 1, 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 Hon’ble Supreme Court in the case of Cement Marketing Co. of India Pvt. Ltd., 124 ITR 15(SC), decision of Pune Bench of the Tribunal in the case of Jyotichand Bhalchand Saraf & Sons (P) Ltd., 139 ITD 10, Chennai Bench of the Tribunal in the case of RMP Infotech (P) Ltd. 25 taxmann.com 12 ITR (Trib) 581 and in the case of Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC).

In support of the proposition that since the assessee had made a complete disclosure in return of income and offered surrendered amount for purposes of tax, which was accepted and brought to tax, there could be no question of treating assessee as having concealed particulars of income or furnished inaccurate particulars of income, ld. AR relied on the various judicial pronouncements.

Contention of the Revenue

The ld counsel of the revenue submitted that revised return filed by the assessee was not voluntarily offered and that assessee has concealed income therefore, AO was justified in levying the penalty. Ld. DR further supported the orders of lower authorities.

Held by ITAT

We found that there was search at Pooja Export group on 28-7-2009, of which assessee is part, whose case is covered u/s.153C. While filing return of income in response to notice u/s.153A & after visualizing all the seized material seized from various premises in different entities. Assessee had worked out the amount of Rs.40.35 crores undisclosed income & filed return as under: – a) M/s Pooja Exports – 12.25 cr. b) Mr. Sunil Kothari – 14.80 cr. c) Mrs. Sneha Kothari-13.30 cr. The Return of income of Ami Estate & Cornetstene was filed NIL, because both entities were incorporated to acquire the property in the names of 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 & cheque component were arranged & funded by Promoter of the company, in this case Mr. Suni & Mrs. Sneha Kothari.

As per statement recorded u/s.132, Sunil Kothari have clearly admitted that he had paid cash of Rs.14.57 crores for acquisition of the properties in Pune (Wakad and Hinjewadi) and the money has been paid out of unaccounted income generated on account of sale of shares of M/s Ami Builders Pvt. Ltd. and M/s S.K.Projects Pvt. Ltd. which is already offered and taxed in hands of Mr. Sunil Kothari and Mrs. Sneha Kothari being the promoter of the above referred companies. In this transaction Sunil Kothari has received an amount of Rs.14.63 crores received in cash which was applied for making cash payments for acquisition of the properties in Pune.

It is clear that money applied in acquisition of Pune properties was mainly out of money received from sale of shares of M/s Ami builders Pvt. Limited & S.K.Projects Private limited. No fault has been found by the AO or CIT (A) in the cashflow statement indicating one to one nexus between the cash funds received on sale of Bangalore property and utilization 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. Limited & S.K.Projects Private limited therefore, again there cannot be tax on the same income at the time of acquisition of property at Pune. In view of the above facts we may appreciate that declaring additional income of Rs.40.35 Crore before lower authorities, covers each & every issue that has been pointed out during the search as well as post search proceedings. Assessee had paid taxes with a view to buy a peace & to avoid litigations. As a matter of record group companies and their promoters have been filing return of income since more than two decades & also paying taxes thereon.

It is also clear from statement so recorded by the department u/s. 132(4) that cash component was there for the purchase of property at Pune. The said cash and cheque component was arranged and funded by the promoters of the company, namely, Sunil and Sneha Kotharis. The source of cash was made available from the sale proceeds on shares of M/s Ami Builders Pvt. Ltd. and S.K. Projects Ltd. which was declared and offered for tax.

In view of the cash flow statement, the assessee has explained one to one nexus namely cash funds received from sale of Bangalore property, and its utilization for Pune property. The revised declaration of income so filed by the assessee was bonafide 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 avoid litigation. The disclosure was with a specific plea that no penalty proceedings be initiated u/s.271AAA or 271(1) (c). Considering the totality of facts and circumstances as discussed above, we do not find any merit in the penalty imposed u/s.271(1)(c) of the Act in respect of both the assessment years 2007-08 & 2008-09 under consideration.

Accordingly appeal of the assessee allowed.

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