Srinivasa Brick Industries, Hyd, Hyderabad V. ITO, Ward-9(1), Hyd, Hyderabad

ITA 1007/HYD/2015

• Counselvise Citation: 100722514 RSA 2015
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 04-08-2015
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1007/HYD/2015 ASSESSMENT YEAR: 2003-04 S RINIVASA BRICK INDUSTRIES , HYDERABAD [PAN: AFPPA6778K] VS INCOME TAX OFFICER , WARD-9(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO , AR FOR REVENUE : SHRI B. KURMI NAIDU , DR DATE OF HEARING : 0 1 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 13 - 1 1 - 2015 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, HYDERABAD DATED 26-05-2015, CONFIRMING THE PENALTY OF RS. 3,46,317/ - LEVIED BY THE ASSESSING OFFICER (AO) U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT]. ASSESSEE HAS RAISED THE FOLLOWING GROUND: 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN LEVYING PENALTY U/S. 271(1)(C) PARTICULARLY WHEN TH E INCOME ARRIVED AT BY THE ASSESSING OFFICER IS ON ESTIMATE BASIS AND THE ADDITION MADE DOES NOT REPRESENT CONCEALED INCO ME. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE AND GROUND NO. 2 REGARDING ORDER NOT PASSED IN TIME U/S. 275 WAS NOT PRESSED. 2. BRIEFLY STATED, ASSESSEE IS A FIRM ENGAGED IN TH E BUSINESS OF MANUFACTURE OF BRICKS. IT FILED ITS RETURN OF INCO ME ON 28-11-2003 DECLARING TOTAL INCOME OF RS. 1,04,530/-. A SURVEY OPERATION U/S. I.T.A. NO. 1007/HYD/2015 SRINIVASA BRICK INDUSTRIES :- 2 -: 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF ASSE SSEE ON 17-03-2005. CONSEQUENT TO THE SURVEY, ASSESSEE FIL ED REVISED RETURN DECLARING TOTAL INCOME AT RS. 2,31,898/-. H OWEVER, ASSESSMENT WAS COMPLETED ON 31-03-2006 ON A TOTAL I NCOME OF RS.11,01,126/-. SINCE THE ADDITION WAS CONFIRMED B Y THE CIT(A), AO LEVIED PENALTY U/S. 271(1)(C) OF AN AMOUNT OF RS . 3,46,317/-. 3. IN THE COURSE OF PENALTY PROCEEDINGS, IT WAS SUB MITTED BY ASSESSEE THAT MANAGING PARTNER IS ILLITERATE AND HI S BROTHER SHRI P. VENGALARAO WAS MANAGING THE AFFAIRS AND UNFORTUNATE LY, HE PASSED AWAY. AS ASSESSEE, MANAGING PARTNER DOES NOT HAVE THE KNOWLEDGE ABOUT MAINTENANCE OF BOOKS OF ACCOUNT, THE BOOKS OF ACCOUNT WERE MAINTAINED BY AN EMPLOYEE WHO DID NOT RECORD T HE SALES AND EXPENDITURE PROPERLY. IN THE COURSE OF SURVEY, SAL ES PERTAINING FROM 15-12-2002 TO 31-03-2003 WERE FOUND AND ON THE BASIS OF PART INFORMATION, AO EXTRAPOLATED THE SALE FIGURES, THEREBY ARRIVING AT THE SALE THAT COULD HAVE BEEN MADE FOR THE WHOLE YEAR AT RS. 2,48,33,580/- AND GROSS PROFIT WAS ESTIMATED AT 10% . IT WAS FURTHER SUBMITTED THAT THE INCOME WAS ESTIMATED, TH EREFORE, PENALTY COULD NOT BE LEVIED. IT WAS FURTHER SUBMIT TED THAT ASSESSEES CONTENTION THAT THERE ARE SOME BORROWED BRICKS FROM ANOTHER MANUFACTURER, WHICH WAS ALSO CONSIDERED AS ASSESSEES TURNOVER, WAS NOT ACCEPTED. IT WAS ALSO FURTHER CO NTENDED THAT ASSESSEE WAS HAVING OTHER SISTER CONCERN, WHOSE TUR NOVER WAS ALSO INCLUDED IN ASSESSEES TURNOVER. AO, HOWEVER, DID NOT AGREE. BEFORE THE CIT(A), IT WAS CONTENDED THAT AO INCREAS ED THE TURNOVER AND ESTIMATED THE GROSS PROFIT AND REDUCED THE ACTU AL EXPENSES AS RECORDED IN THE BOOKS. IT WAS FURTHER SUBMITTED TH AT ITAT HAS REDUCED THE PROFIT TO 10% AND AT 5% ON THE TURNOVER RELATING TO BRICKS SOLD ON BEHALF OF OTHERS. IT RELIED ON THE DECISION OF CIT VS. I.T.A. NO. 1007/HYD/2015 SRINIVASA BRICK INDUSTRIES :- 3 -: K. MEENAKSHI KUTTY [258 ITR 494] (MAD) AND DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILL S VS. CIT [252 ITR 416] (GUJ). LD. CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEES CONTENTIONS AND CONFIRMED THE PENALTY AS LEVIED BY THE AO. 4. BEFORE US, LD. COUNSEL REITERATED THE SUBMISSION S, WHEREAS LD. DR RELIED ON THE ORDER OF AO. 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE FACTS PLACED ON RECORD. FIRST OF ALL, I AM UNABLE TO UND ERSTAND FOR WHAT PERIOD ACTUAL PRODUCTION OF BRICKS WERE AVAILABLE I N THE SURVEY PROCEEDINGS. AO IN ASSESSMENT ORDER AT PAGE 2 RECO RDS THAT DURING THE SURVEY PROCEEDINGS REGISTERS CONTAINING THE ACTUAL PRODUCTION OF BRICKS FROM 15-12-2002 TO 31-03-2005 WERE FOUND . IT IS TO BE NOTED THAT SURVEY PROCEEDINGS WERE CONDUCT ED ON 17-03- 2005, HOW AO COULD FIND PRODUCTION REPORTS UPTO 31- 03-2005 WAS NOT EXPLAINED. IN THE VERY SAME PAGE, AO WHILE ARR IVING AT THE PRODUCTION OF BRICKS SOLD MENTIONS THAT ACTUAL PROD UCTION OF BRICKS SOLD FROM 15-12-2002 TO 31-12-2003 WERE RS. 1,08,87 ,700/-. THIS INDICATES THAT WHAT AO FOUND OUT IN THE COURSE OF S URVEY WAS NOT PRODUCTION OF BRICKS BUT SALE OF BRICKS. THUS, THE RE IS CONTRADICTION IN THE ASSESSMENT ORDER ITSELF ABOUT THE NATURE OF INFORMATION OBTAINED DURING THE COURSE OF SURVEY. BE THAT AS IT MAY, AO RESORTED TO ESTIMATION OF MANUFACTURING OF BRICKS RELYING ON THE PRINCIPLE ACCEPTED IN THE JURISDICTIONAL HIG H COURT JUDGMENT IN THE CASE OF RAJNIK & CO [251 ITR 561]. ACCORDIN GLY, EXTRAPOLATING THE SALES OF 5 MONTHS PERIOD TO THE B ALANCE OF THE PERIOD, ARRIVED AT THE BRICKS PER MONTH AT 17,80,59 0/- AND THESE FIGURES WERE ADOPTED FOR THE WHOLE OF THE YEAR AND ADDED THE BRICKS ON BARUWAI (BORROWED BRICKS). THEREAFTER, THE SAL E PRICE OF THE I.T.A. NO. 1007/HYD/2015 SRINIVASA BRICK INDUSTRIES :- 4 -: BRICK WAS TAKEN AT 1.20 PS. WITHOUT GIVING ANY TRAN SPORTATION CHARGES CLAIMED BY ASSESSEE IN THE COMPUTATION. TH US, THE TOTAL SALES WERE ESTIMATED AT RS. 2.65 CRORES AND GROSS P ROFIT AT 10% WAS ESTIMATED AT RS. 26,58,358/-. FROM THERE, AS A GAINST ASSESSEES EXPENDITURE CLAIM OF RS. 20,63,894/-, AO RESTRICTED THE EXPENDITURE TO 15,57,232/-, THEREBY DETERMINING THE TOTAL INCOME AT RS. 11,01,126/-. OUT OF THIS ESTIMATION ALSO, I TAT DID NOT CONFIRM ESTIMATION OF INCOME AT 10% ON THE BARUWAI AND RESTRICTED TO 5% ONLY. ALL THIS INDICATES THAT THERE IS NO CR YSTALLIZATION OF CONCEALED INCOME. AO RESORTED TO ESTIMATION ON THE BASIS OF THE DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY. C OMING THE BONAFIDES OF ASSESSEE, AS SEEN FROM THE ORDER ITSEL F, AO ADMITS THAT ASSESSEE GROUP HAD FOUR CONCERNS NAMELY M/S. SRI SR INIVASA BRICK INDUSTRIES, M/S. SRI SRINIVASA TRADERS, M/S. LAKSHM I TRADERS AND M/S. BALAJI TRANSPORT. EVEN THOUGH RETURNS OF INCO ME IN RESPECT OF ASSESSEES WERE NOT FILED AND THERE WERE CLAIMS O F INTEREST AND TURNOVERS THEREIN, AS RECORDED BY THE AO IN THE ASS ESSMENT ORDER ITSELF, ASSESSEE COULD NOT FURNISH THE TURNOVERS OF ALL THE CONCERNS. IT CAME FORWARD TO OFFER THE INCOME OF ALL THE THRE E CONCERNS IN THE HANDS OF SRI SRINIVASA BRICK INDUSTRIES. THEREFORE , THE INCOME ESTIMATED IN THE HANDS OF ASSESSEE, IS NOT EXACTLY THE CONCEALED INCOME OF ASSESSEE ALONE, IF AT ALL IT IS TO BE TRE ATED AS CONCEALED INCOME, BUT INCOME EARNED BY OTHER TWO CONCERNS, W HICH ARE IN THE SAME BUSINESS AND ESTIMATED IN THE HANDS OF ASS ESSEE BY THE AO. SINCE OTHER ASSESSEES INCOME WAS ALSO ASSESSE D IN THE HANDS OF ASSESSEE AND ENTIRE QUANTIFICATION WAS DONE ON T HE BASIS OF THE ESTIMATION OF INCOME, WE ARE OF THE OPINION THAT IT CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME. IN FACT, AO LEVIED THE PENALTY HOLDING IT AS FURNISHING OF INACCURATE PAR TICULARS. WHAT INACCURATE PARTICULARS WERE FURNISHED BY ASSESSEE WERE NOT STATED I.T.A. NO. 1007/HYD/2015 SRINIVASA BRICK INDUSTRIES :- 5 -: BY THE AO AT ALL IN THE PENALTY ORDER. AS CAN BE S EEN FROM THE ASSESSMENT ORDER ITSELF, AS FAR AS EXPENDITURE IS C ONCERNED, THE CLAIMS OF EXPENDITURE WAS RESTRICTED. AS FAR AS ES TIMATION OF INCOME IS CONCERNED, AS AGAINST ASSESSEES GROSS PR OFIT OF RS. 22,90,032/- ADMITTED BY ASSESSEE IN THE BOOKS OF AC COUNT, THE AOS ESTIMATION OF GROSS PROFIT WAS ONLY RS. 26,58, 358/-. THE ABOVE AMOUNT INCLUDES THE ESTIMATION OF INCOME ON B ARUWAI BRICKS, WHICH WAS REDUCED BY ITAT. DIFFERENCE IN I NCOME ASSESSED IS MAINLY BECAUSE OF RESTRICTION OF EXPENDITURE RAT HER THAN DIFFERENCE IN GROSS PROFIT ESTIMATED. IN VIEW OF T HIS, I AM OF THE OPINION THAT THE FACTS OF THE CASE DOES NOT FALL EI THER UNDER THE HEAD CONCEALMENT OF INCOME OR UNDER THE HEAD FUR NISHING OF INACCURATE PARTICULARS. SINCE ASSESSMENT WAS COMP LETED ON MANY PRESUMPTIONS AND ASSUMPTIONS, I AM OF THE OPINION T HAT THE FACTS OF THE CASE DOES NOT WARRANT ANY PENALTY U/S. 271(1 )(C). ACCORDINGLY, THE ORDER OF CIT(A) IS SET ASIDE AND T HE ORDER OF PENALTY OF AO IS CANCELLED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH NOVEMBER, 2015 TNMM I.T.A. NO. 1007/HYD/2015 SRINIVASA BRICK INDUSTRIES :- 6 -: COPY TO : 1. SRINIVASA BRICK INDUSTRIES, 16-2-836/3, SAIDABAD , HYDERABAD. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYATNA GAR, HYDERABAD. 2. INCOME TAX OFFICER, WARD-9(1), INCOME TAX TOWERS , A.C. GUARDS, HYDERABAD. 3. CIT(APPEALS) - VII , HYDERABAD. 4. THE CIT - VII , HYDERABAD . 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.