V. Srinivasa Rao, Hyderabad V. ACIT, Circle-11(1), Hyd, Hyderabad

ITA 1004/HYD/2015

• Counselvise Citation: 100422514 RSA 2015
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Keywords: Business income; Search and seizure; Wrong claim; Corroborative evidences
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A (SMC), HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.1003/HYD/2015 : ASSESSMENT YEARS 20 01-02 ITA NOS.1004/HYD/2015 : ASSESSMENT YEARS 20 02-03 ITA NOS.1005/HYD/2015 : ASSESSMENT YEARS 20 03-04 SHRI V.SRINIVASA RAO, HYDERABAD (PAN - BAAGTS 6114 D ) V/S ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 11(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.DEVDAS RESPONDENT BY : SHRI M.SITARAM DR DATE OF HEARING 9.10.2015 DATE OF PRONOUNCEMENT 30.10.2105 O R D E R THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) VII, HYDD DATED 15 TH MAY, 2015, CONFIRMING THE PENALTIES OF RS.3,21,994 ; RS.2,80,758 AND RS.2,14,996 FOR THE ASSESSMENT YEAR S 2001-02 TO 2003-04 RESPECTIVELY IMPOSED BY THE ASSESSING OFFIC ER UNDER S.271(1)(C) OF THE INCOME TAX ACT,1961 2. FACTS OF THE CASE IN BRIEF, AS TAKEN FROM THE A PPEAL FOR THE ASSESSMENT YEAR 2001-02, ARE THAT THE ASSESSEE IS P ROPRIETOR OF M/S. KRISHNA ENGINEERING WORKS. SEARCH AND SEIZURE OPERA TIONS WERE CONDUCTED ON BUSINESS AND RESIDENTIAL PREMISES OF T HE ASSESSEE ON 16.7.2003. IT WAS FOUND DURING THE COURSE OF SEARC H THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE AND SALE OF ELECTRONIC S TREET LIGHT TIMERS TO VARIOUS MUNICIPALITIES AND THIS BUSINESS INCOME WAS NOT DISCLOSED IN THE RETURN OF INCOME. THE ASSESSEE ESTIMATED THE NE T PROFIT OUT OF THE ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 2 UNDISCLOSED SALES OF RS.2,59,03,360 FOR THE ASSESSM ENT YEARS 2001-02 TO 2004-05 AT RS.92,59,294. 3. CONSEQUENT UPON SEARCH OPERATIONS IN THE RETU RNS FILED IN RESPONSE TO NOTICE UNDER S.153A, ASSESSEE DECLARED HIGHER INCOMES, TAKING INTO ACCOUNT THE INCOMES DERIVED FROM MANUFA CTURE AND SALE OF ELECTRONIC STREET LIGHT TIMERS ALSO. WHILE DOING SO, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER S.80IB ON THE GROUND THAT H E IS ENGAGED IN MANUFACTURING OF ELECTRONIC STREET LIGHT TIMERS AND THAT THE PROFITS FROM SUCH MANUFACTURING ACTIVITY ARE ELIGIBLE FOR DEDUCT ION UNDER S.80IB. 4. THE ASSESSING OFFICER, HOWEVER, OBSERVING THAT THE ASSESSEE HAS FAILED TO FURNISH ANY BOOKS OF ACCOUNT AND RELEVANT CERTIFICATE FROM THE STATUTORY AUDITOR FOR CLAIMING THE DEDUCTION UNDER S.80IB, DISALLOWED THE CLAIMS OF THE ASSESSEE IN TH AT BEHALF, AND ACCORDINGLY COMPLETED THE ASSESSMENTS. 5. AGAINST THE DENIAL OF RELIEF UNDER S.80IB, ASSE SSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO CONFIRMED T HE ACTION OF THE ASSESSING OFFICER. ON FURTHER APPEAL AGAINST THE O RDERS OF THE CIT(A), THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE MATTERS TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONS IDERATION. IN THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE ASSESSEE C ONSIDERING HIS INABILITY TO FILE NECESSARY CERTIFICATES AS PER THE PROVISIONS IN SUPPORT AND SUBSTANTIATE THE CLAIMS FOR RELIEF UNDER S.80IB , WITHDREW THE CLAIMS MADE IN THAT BEHALF. ACCORDINGLY, THE ASSE SSING OFFICER COMPLETED THE ASSESSMENTS DENYING THE CLAIMS FOR RE LIEF UNDER S.80IB, VIDE ORDERS DATED 29.12.2010 PASSED UNDER S.153A RE AD WITH S.254 OF THE ACT. ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 3 6. WHILE COMPLETING THE ASSESSMENT AS ABOVE, THE A SSESSING OFFICER ALSO INITIATED PROCEEDINGS FOR IMPOSITION O F PENALTY UNDER S.271(1)(C) OF THE ACT, IN RELATION TO THE CLAIM OF THE ASSESSEE FOR RELIEF UNDER S.80IB OF THE ACT. IN RESPONSE TO THE PENA LTY NOTICE, ASSESSEE CONTENDED THAT THERE WAS NO CONCEALMENT OF ANY PART ICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME A ND HE IS UNDER BONA FIDE IMPRESSION THAT HE IS ELIGIBLE FOR DEDUCTION U NDER S.80IB. 7. THE ASSESSING OFFICER WAS NOT CONVINCED WITH T HE EXPLANATION OF THE ASSESSEE. HE NOTED THAT THE ASS ESSEE HAS TO MAINTAIN PROPER BOOKS OF ACCOUNT AND ENCLOSE PROFIT & LOSS ACCOUNT, BALANCE SHEET, AUDIT CERTIFICATE IN FORM NO.10CCB I N ORDER TO CLAIM DEDUCTION UNDER S.80IB. AS AGAINST THIS, HE NOTED T HE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND HENCE THE QUEST ION OF ENCLOSING PROFIT & LOSS ACCOUNT AND OTHER RELEVANT CERTIFICAT ES DID NOT ARISE, AND THE ASSESSEE HIMSELF ACCEPTED TO DISALLOW THE CLAIM FOR DEDUCTION UNDER S.80IB. THE ASSESSING OFFICER ACCORDINGLY CO NCLUDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS TO CL AIM DEDUCTION UNDER S.80IB, IMPOSED PENALTY UNDER S.271(1)(C) WORKING O UT THE SAME AT THE MINIMUM LEVIABLE UNDER THE ACT. 8. DETAILS OF INCOME DECLARED BY THE ASSESSEE IN THE ORIGINAL RETURNS AND IN THE RETURNS FILED IN RESPONSE TO NOT ICE UNDER S.153A, TOGETHER WITH THE AMOUNTS CLAIMED BY WAY OF DEDUCTI ON UNDER S.80IB, AND THE INCOMES ASSESSED BY THE ASSESSING OFFICER I N THE ORDERS PASSED UNDER S.143(3) READ WITH S.153A, FOR ALL THE THREE YEARS ARE TABULATED BELOW- ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 4 ASSESS - MENT YEAR INCOME ORIGINALLY RETURNED INCOME ADMITTED IN RETURNS FILED IN RES- PONSE TO NOTICE UNDER S.153A DEDUC TION CLAIMED UNDER S.80IB INCOME ULTIMATELY ASSESSED PENALTY IMPOSED UNDER S.271(1)- (C) 2001-02 97,370 29,24,750 9,17,220 38,41,970 3,21,994 2002-03 1,35,940 28,99,830 9,17L,509 38,17,339 2,80,758 2003-04 -- 11,91,480 4,80,095 19,37,340 2,14,996 9. AGGRIEVED BY THE PENALTY IMPOSED UNDER S.271(1) (C), ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A), WHO, ON CAREFUL EXAMINATION OF THE MATTER IN THE LIGHT OF THE FACTU AL BACKGROUND AND THE CONTENTIONS URGED BEFORE HIM, IN THE LIGHT OF T HE PROVISIONS OF S.80IB, HAS CONFIRMED THE ABOVE PENALTIES OBSERVING IN PARAS 7.4 TO 7.6 OF HIS IMPUGNED ORDER AS FOLLOWS- 7.4 ALL THE FOREGOING FACTS A N D DISCUSSION MADE PROVE THAT THE APPELLANT INITIALLY HAS NOT DISCLOSED HIS BUSINESS ACTIVITY AND WHEN CONFRONTED WITH THE BANK ACCOUNTS AND OTHER CORROBORATIVE EVIDENCES IN SUPPORT OF HIS BUSINESS, HE ADMITTED THE INCOMES FR OM SUCH BUSINESS AND KNOWING FULLY WELL THAT HE HAD NOT FULFILLED ANY OF THE CONDITIONS FOR CLAIMING DEDUCTION U/S 80IB MADE THE CLAIM ONLY TO REDUCE THE TAX BURDEN ON THE UNDISCLOSED INCOME. THE APPELLANT HAS NIT ADMITTED THIS OBVIOUS POSITION AND WENT ON MAKING THE CLAIM OF DE DUCTION U/S 80IB BEFORE DIFFERENT FORA. IT IS AFTER PROTRACTED LITIG ATION AND ONLY DURING THE COURSE OF SET ASIDE ASSESSMENT PROCEEDINGS, THE APP ELLANT CONCEDED THE DISALLOWANCE OF DEDUCTION U/S 80IB. THIS AD 1 IISSION, HOWEVER, DOES NOT ABSOLVE HIM OF THE CONSEQUENCES OF MAKING WRONG CLAIM, A CLAIM WHICH WAS MADE INTENTIONALLY TO REDUCE TAX BURDEN. 7.5 NOW COMING TO THE CASE LAWS RELIED UPON BY THE APPELLANT, IT IS COMMON KNOWLEDGE THAT BEFORE RELYING ON ANY CASE LA W, ONE HAS TO CO- RELATE THE FACTS OF HIS CASE WIT THE FACTS OF THE C ASE RELIED UPON. IN THE CASE ON HAND, THE MANUFACTURING ACTIVITY IS NOT ADM ITTED BY THE APPELLANT ON HIS OWN BUT THE UNDISCLOSED SALES WERE DETECTED BY THE DEPARTMENT BY CARRYING A SEARCH OPERATION. IN ALL T HE CASE LAWS RELIED UPON BY THE APPELLANT, THE FACTS ARE THAT THERE IS SOME GROUND TO MAKE ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 5 THE CLAIMS THOUGH THEY ARE NOT ALLOWABLE IN NATURE. IT IS NOT A CASE OF NOT SATISFY ING WITH THE EVIDENCES PRODUCED IN SUPPORT OF CLAIM OF DEDUCTION BUT A CASE OF TOTAL ABSENCE OF ANY IOTA O F EVIDENCE IN SUPPORT OF THE CLAIM OF DEDUCTION U/S 801B. THEREFORE, THE CASE LAWS RELIED UPON BY THE APPELLANT ARE TOTALLY DIFFERENT AND ARE NOT EMULATED HERE. I 7.6 IN VIEW OF THE ABOVE DISCUSSION , I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY MAKING A CONSCIOUS WRONG CLAIM AND THE R EFORE, THE PENALTY LEVIED U/S 271 (1)( C) BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2001-02, 2002-03 & 2003-04 STANDS SUSTAINED. I 10. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), CO NFIRMING THE PENALTIES IMPOSED BY THE ASSESSING OFFICER, ASSESSE E IS IN SECOND APPEAL BEFORE THIS TRIBUNAL. 11. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES AND OTHER MATERIAL ON REC ORD. ADMITTEDLY, IMPUGNED PENALTIES UNDER S.271(1)(C) HAVE BEEN IMPO SED ONLY WITH REFERENCE TO THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N UNDER S.80IB OF THE ACT, IN RESPECT OF THE PROFITS AND GAINS CLAIME D TO HAVE BEEN DERIVED FROM THE MANUFACTURE OF ELECTRONIC STREET L IGHT TIMERS. IT IS DURING THE COURSE OF SEARCH AND SEIZURE ACTION PROC EEDINGS UNDER S.132 OF THE ACT, THE SAID LINE OF BUSINESS BEING C ARRIED ON BY THE ASSESSEE HAS COME TO LIGHT. WHILE FILING THE RETUR NS FOR THE YEARS UNDER APPEAL IN RESPONSE TO NOTICES UNDER S.153A OF THE ACT, ASSESSEE DECLARED HIGHER INCOMES THAN THOSE ADMITTED IN THE RETURNS FILED EARLIER, OFFERING TO TAX THE PROFIT DERIVED FROM TH E MANUFACTURE OF ELECTRONIC STREET LIGHT TIMERS. WHILE DOING SO, HE HAS ALSO CLAIMED DEDUCTION UNDER S.80IB, ON THE GROUND THAT THE ACTI VITY INVOLVED IN THE SAID BUSINESS IS ELIGIBLE FOR SUCH DEDUCTION. WHEN THE ASSESSING OFFICER DISALLOWED THE SAID CLAIMS OF THE ASSESSEE FOR DEDUCTION UNDER S.80IB, ASSESSEE HAS CONTESTED THE ACTION OF THE AS SESSING OFFICER IN DENYING THE CLAIMS FOR DEDUCTION UNDER S.80IB IN TH E APPEALS FILED UPTO THE LEVEL OF TRIBUNAL. THE TRIBUNAL, FINDING MERIT IN THE CONTENTIONS OF ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 6 THE ASSESSEE, SET ASIDE THE MATTERS TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. IT IS IN THE RE-ASSESSME NT PROCEEDINGS TAKEN UP IN PURSUANCE OF THE DIRECTIONS OF THE TRIBUNAL, THAT THE ASSESSEE, CONSIDERING HIS INABILITY TO ADDUCE NECESSARY CERTI FICATES / EVIDENCE TO SUPPORT AND SUBSTANTIATE THE CLAIMS FOR DEDUCTION U NDER S.80IB OF THE ACT, WITHDREW THE SAME. CONSEQUENT TO THIS WITHDRA WAL, DEDUCTION CLAIMED UNDER S.80IB HAS BEEN DENIED, AND ASSESSMEN TS WERE COMPLETED UNDER S.153A READ WITH S.254 OF THE ACT. ASSESSEE IS AT LIBERTY TO WITHDRAW ANY CLAIM MADE AT ANY STAGE DUR ING THE PROCEEDINGS BEFORE THE ASSESSING OFFICER, IF HE IS UNABLE TO FURNISH THE RELEVANT PARTICULARS CALLED FOR. MERELY BECAUSE T HE ASSESSEE HAS WITHDRAWN THE CLAIM FOR DEDUCTION UNDER S.80IB, IT CANNOT BE SAID THAT THE ASSESSEE HAS EITHER CONCEALED THE INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME. IT IS MORE SO, WHEN IN THE FIRST ROUND OF PROCEEDINGS, THE ASSESSEE HAS CONTESTED THE DENIAL OF CLAIM BY THE ASSESSING OFFICER, RIGHT UPTO THE STAGE OF TRIBUNAL . 12. FURTHER, MERE DISALLOWANCE OF A CLAIM MADE BY THE ASSESSEE CANNOT AUTOMATICALLY LEAD TO THE INFERENCE OF EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS THEREOF, AS HELD BY THE APEX COURT IN THE CASE OF RELIANCE P ETRO PRODUCTS LTD. (322 ITR 158), WHEREIN IT HAS BEEN HELD THAT MERE M AKING OF A CLAIM WHICH IS NOT FOUND TO BE SUSTAINABLE BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE AND JUST BECAUSE THE ASSESSEES CLAIM HAS NOT BEEN ACCEPTED, PENALTY U/S 271(1)(C) CANNOT BE ATTRACTED ESPECIALL Y WHEN THERE IS NO ALLEGATION THAT ANY PARTICULARS FILED BY THE ASSESS EE IN RELATION TO SUCH CLAIM WERE FOUND TO BE INCORRECT OR INACCURATE. I N THE FACTS OF THE PRESENT CASE, ASSESSEE HAS NOT ONLY MADE A CLAIM BU T CONTESTED AGAINST THE DENIAL OF THE SAME RIGHT UPTO THE STAGE OF TRIBUNAL. IT IS ONLY WHEN THE ASSESSEE NOTICED THE INABILITY TO FUR NISH EVIDENCE TO THE ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 7 SATISFACTION OF THE ASSESSING OFFICER IN SUPPORT OF THE CLAIM MADE, THAT HE WITHDREW THE SAME. IT IS NOT THAT ASSESSEE THAT THE ASSESSEE HAS FURNISHED SOME EVIDENCE OR PARTICULARS, WHICH WERE FOUND TO BE FALSE OR INCORRECT, BUT IT IS A CASE, WHERE THE ASSESSEE COULD NOT FURNISH NECESSARY EVIDENCE AND ACCORDINGLY WITHDRAW THE CLA IM MADE. WHEN THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE IN SUPP ORT OF A CLAIM MADE, IT CANNOT BE SAID THAT HE HAS FURNISHED INACC URATE PARTICULARS, MERELY BECAUSE SUCH CLAIM WAS DENIED. 13. FURTHER, AS EVIDENT FROM THE FACTS OF THE CASE NARRATED ABOVE, A NEW LINE OF BUSINESS ENGAGED IN BY THE ASS ESSEE, VIZ. MANUFACTURE AND SALE OF ELECTRONIC STREET LIGHT TIM ERS, HAS COME TO LIGHT, AND IT LED TO DISCLOSURE IN THE RETURNS FILE D IN RESPONSE TO NOTICES UNDER S.153A, HIGHER INCOME THAN WHAT WAS DECLARED EARLIER BY THE ASSESSEE. ASSESSING OFFICER IN THE PRESENT CASE IS NOT ATTRIBUTING ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS IN RESPECT OF THE ENTIRE INCOME RELATING TO THIS NEW LINE OF BUSINESS , BUT CONFINING HIMSELF ONLY TO THE CLAIMS MADE FOR DEDUCTION UNDER S.80IB, WHILE PROPOSING PENALTY UNDER S.271(1)(C). THIS APPROACH OF THE ASSESSING OFFICER, IN MY CONSIDERED OPINION IS NOT JUSTIFIED. HAVING NOT PROPOSED ANY PENALTY IN RELATION TO THE LARGER PORTION OF PR OFIT OF THE NEW LINE OF BUSINESS, THERE IS NO JUSTIFICATION FOR PENALTY IN RELATION ONLY TO THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION UNDER S.80 IB OF THE ACT. HAD THE ASSESSEE NOT MADE THE CLAIM FOR DEDUCTION U NDER S.80IB, IF THE APPROACH OF THE ASSESSING OFFICER IS APPROVED, THERE IS NO CASE FOR PENALTY FOR CONCEALMENT, BECAUSE EVERYTHING WOULD H AVE REMAINED PROFIT OF THE NEW LINE OF BUSINESS DISCOVERED, IN R ELATION TO WHICH NO PENALTY PROCEEDINGS WERE INITIATED. CONSIDERING IN THE LIGHT OF THE FACT THAT DISCLOSURE OF PROFITS FROM SUCH BUSINESS DID N OT ATTRACT ANY PENALTY U/S 271(1)(C), MAKING A CLAIM U/S 80IB OUT OF THOSE PROFITS CAN ONLY BE CONSIDERED AS GENUINE CLAIM. ITA NO.1003-1005/HYD/2015 SHRI V.SRINIVASA RAO , HYDERABAD 8 14. IN THE LIGHT OF THE FOREGOING DISCUSSION, I AM OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UND ER S.271(1)(C). I ACCORDINGLY CANCEL THE PENALTIES, IMPOSED BY THE AS SESSING OFFICER IMPUGNED IN THESE APPEALS AND ALLOW THE GROUNDS OF THE ASSESSEE IN THESE APPEALS. 15. IN THE RESULT, ALL THE THREE APPEALS OF THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 30 TH OCTOBER, 2015 SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEM BER. DT/- 30 TH OCTOBER, 2015 COPY FORWARDED TO: 1. SHRI V.SRINIVASA RAO, C/O. M/S. B.NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO.554, ROAD NO.92, JUBILEE HILLS, HYDERABAD 96. 2. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(1), HYDER ABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS) VII, HYDERAB AD 4. COMMISSIONER OF INCOME - TAX VII, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.