Sanivarapu Mysura Reddy, Kadapa, Hyderabad V. ITO, Ward-1, Kadapa, Kadapa

ITA 1024/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2466 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Agreed addition
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A , HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NOS. 1025 & 1024/HYD/2016 ASSESSMENT YEAR: 2010-11 SANIVARAPU MYSURA REDDY, KADAPA. PAN AQZPS 2955B VS INCOME-TAX OFFICER, WARD 1, KADAPA (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. KOMALI KRISHNA DATE OF HEARING : 15-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER V. DURGA RAO, J.M.: ITA NO. 1025/HYD/2016. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), KURNOOL, DATED 29/04/2016 FOR THE AY 2010- 11 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A CIVIL CONTRACTOR ENGAGED IN WORKS CONTRACT. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2010-11 ON 07/06/2010 ADMITTING A TOTAL INCOME OF RS. 4,25,930/- AND THE RETURN WAS PROCESSED U/S 143 (1). THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND THE AO CALLE D FOR THE DETAILS BY ISSUING STATUTORY NOTICES. THE ASSESSEE FURNISHED T HE INFORMATION CALLED FOR ALONG WITH BOOKS OF ACCOUNT. 2.1 ON VERIFICATION OF BALANCE SHEET, THE AO NOTIC ED THAT THE ASSESSEE HAS SHOWN 'CASH AT BANK' TO THE EXTENT OF 70,340. THE AO I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 2 -: OBSERVED THAT DURING THE COURSE OF SCRUTINY THE AS SESSEE HAD FURNISHED TWO BANK ACCOUNTS I.E. ONE FROM CENTRAL B ANK OF INDIA, KADAPA AND THE OTHER FROM IDBI BANK, KADAPA. THE TW O BANK ACCOUNTS WERE THOROUGHLY VERIFIED AND THE OUTSTANDING BALANC E OF CENTRAL BANK OF INDIA IN A/C SB NO.6345 AS ON 02-01-2010 WAS RS. 143 AND IDBI BANK A/C N0.207104000000435 OUTSTANDING BALANCE AS ON 31-03-2010 WAS RS. 32,62,548. THUS THE TOTAL OUTSTANDING BANK BALANCES AS ON 31-03-2010 WERE OF RS. 32,52,691. BUT THE ASSESSEE HAD SHOWN 'CASH IN BANK' IN HIS BALANCE SHEET OF RS. 70,840 ONLY. T HEREFORE, THE AO OPINED THAT THE DIFFERENCE AMOUNT OF 31,91,851 WA S NOT DISCLOSED IN HIS RETURN OF INCOME FOR THE AY 2010-11 AND HENCE, A LETTER DATED 14- 12-2012 WAS SERVED ON THE ASSESSEE ON 19-12-2012 TO SHOW CAUSE WHY THE DIFFERENCE AMOUNT OF RS. 31,91,851 SHOULD N OT BE TREATED AS UNEXPLAINED INCOME/CREDITS UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. 2.2 IN REPLY, THE ASSESSEE HAS SUBMITTED A LETTER O N 20-12-2012 EXPLAINING THE REASONS FOR THE DISCREPANCY THAT HE HAD ISSUED FOUR CHEQUES AMOUNTING TO RS. 32 LAKHS IN FAVOUR OF TRAD E CREDITORS DURING 2009-10 IN IDBI BANK ACCOUNT AND ACCORDINGLY PASSED JOURNAL ENTRIES IN IDB BANK A/C AND TRADE CREDITORS A/C AND THE RES ULTANT BANK BALANCE & TRADE CREDITORS BALANCE HAD BEEN REFLECTED IN THE BALANCE SHEET AS ON 31/03/2010. THEREFORE, IT WAS STATED THAT THERE IS NEITHER SUPPRESSION OF INCOME NOR SUPPRESSION OF BALANCE OF THE BANK BALANCE, HENCE, SECTION 68 DOES NOT ARISE. AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE, AGAIN A LETTER DATED 2 1/12/2012 SERVED BY THE AO ON THE ASSESSEE TO FURNISH THE FULL DETAI LS OF CREDITORS TO WHOM THE CHEQUES ALLEGED TO HAVE ISSUED. IN REPLY, THE ASSESSEE SUBMITTED A WRITTEN LETTER DATED 26/12/2012 STATING HIS INABILITY TO FURNISH THE DETAILS OF THE CREDITORS AND AGREED FOR THE ADDITION OF RS. 31,91,851/-. ACCORDINGLY, THE AO MADE THE ADDITION AS AGREED BY THE ASSESSEE. I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 3 -: 3. ON APPEAL BEFORE THE CIT(A), THE CIT(A) CONFIRME D THE ADDITION MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT SUBSEQUENT TO THE ISSUE OF CHEQUES TO THE FOUR PERS ONS, ASSESSEE HAS PAID CASH PAYMENTS ON VARIOUS DATES TO THE ALLEGED FOUR TRADE CREDITORS AND, THEREFORE, ADDITION MAY BE DELETED. 6. LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER S OF REVENUE AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL FACTS ON RECORD. IT IS OBSERVED THAT WHEN THE AO NOTICED THAT FROM THE BALANCE SHEET FILED BY THE ASSESSEE THAT T HERE WAS A DIFFERENCE IN THE CASH IN BANK AND BANK BALANCES. W HEN AO ASKED THE ASSESSEE TO SUBSTANTIATE HIS CLAIM BY WAY OF DOCUME NTARY EVIDENCE, THE ASSESSEE FAILED TO DO SO AND REQUESTED THE AO T O TREAT THE DIFFERENCE AMOUNT AS ADDITION. HENCE, THE AO MADE T HE ADDITION AND THE CIT(A) CONFIRMED THE SAME. BEFORE THE CONFIRMIN G THE ADDITION, THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE, CALLED FOR A REMAND REPORT FROM THE AO. IN THE REMA ND REPORT ALSO, THE AO CATEGORICALLY STATED THAT THE ASSESSEE AGREED FO R THE ADDITION AS HE WAS UNABLE TO SUBMIT CONFIRMATION LETTERS FROM T HE CREDITORS. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT AS WELL AS CONSIDERING THE FACTS OF THE CASE, CONFIRMED THE ADDITION MADE BY T HE AO. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN TH E ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO AS THE ASSES SEE HIMSELF AGREED FOR THE SAID ADDITION AND, THEREFORE, WE HER EBY UPHOLD THE ORDER I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 4 -: OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ITA NO. 1024/HYD/2016. 9. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A), KURNOOL, DATED 29/04/2016 WHEREBY HE CONFIRMED THE PENALTY L EVIED BY THE AO U/S 271(1)(C) OF THE ACT. 10. THE AO MADE THE ADDITION OF RS. 32,00,000/- AS AGREED BY THE ASSESSEE WHEN THE ASSESSEE FAILED TO SUBSTANTIATE H IS CLAIM BY WAY OF DOCUMENTARY EVIDENCE AFTER NOTICING BY THE AO THE D IFFERENCE IN THE BALANCE SHEET BETWEEN CASH IN HAND AND THE BANK BAL ANCE. 11. THEREAFTER, THE AO INITIATED PENALTY PROCEEDING S U/S 271(1)(C) AND LEVIED PENALTY OF RS. 9,78,650/-. ON APPEAL BEF ORE THE CIT(A), THE ASSESSEE SUBMITTED AS UNDER: A. THE ADDITION WAS AN AGREED ADDITION, B. APPELLANT VOLUNTARILY SURRENDERED INCOME OF RS. 32 LACKS ON FOUR TRADE CREDITORS ACCOUNT TO PURCHASE PEACE OF M IND WITH THE DEPARTMENT AND C. THE APPELLANT'S REQUEST/CONDITION NOT TO LEVY PE NALTY U/S 271(1)(C) IS CONTAINED IN THE SAME LETTER OF SURREN DER DT. 26.12.2012. THE A.O. HAS NEITHER BROUGHT ANY OTHER COGENT EVIDE NCE ON RECORD (EXCEPT THE VOLUNTARY CONSENT LETTER GIVEN FOR AGRE ED ADDITION) TO ESTABLISH THAT THE APPELLANT HAS IN FACT CONCEALED PARTICULARS OF HIS INCOME NOR DISPROVED THE GENUINENESS OF THE FOUR TR ADE CREDITORS REFERRED ABOVE. HENCE, APPELLANT SUBMITS THAT THE P ENALTY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE IN LAW. AS REGARDS THE A.O.'S FINDINGS IN THE PENALTY ORDER DT. 28.06.2013 REGARDING NONATTENDANCE TO HEARINGS POSTED ON 18.02 .2013 AND ON 10.06.2013 AND NON FILING OF ANY REPLY TO THE NO TICES POSTING I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 5 -: ABOVE HEARINGS, THE APPELLANT SUBMITS THAT HE IN FA CT ATTENDED BEFORE THE A.O. FROM TIME TO TIME BETWEEN FEBRUARY 2013 TO JUNE 2013 AND REQUESTED HIM TO DROP PENALTY PROCEEDINGS INITIATED AGAINST HIM, THOUGH HE DOESN'T REMEMBER THE DATES O F MEETING THE A.O. SOME OF THE RELEVANT FACTS ARE AS UNDER: A. THE APPELLANT APPEARED BEFORE THE A.O. ON 04.03. 2013 ALONG WITH A CHALLAN SUPPORTING PART PAYMENT OF REGULAR T AX FOR RS. 41,500/- AND REQUESTED THE A.O. TO GRANT INSTALLMEN TS TO PAY TAX. THE APPELLANT FURTHER REQUESTED THE A.O. NOT TO LE VY ANY PENALTY (MEANING PENALTY U/S. 271(1)(C OVER AND ABOVE THE TAX ALREADY LEVIED UPON HIM AS AGREED DURING THE ASSESSMENT PRO CEEDINGS. IN SUPPORT OF THE ABOVE HE ALSO FILED A LETTER DT. 04. 03.2013 IN THE AO.'S OFFICE, WHICH IS DULY ACKNOWLEDGED BY THE A.O .'S OFFICE INWARD SECTION. APPELLANT REQUESTS YOUR HONOUR TO A PPRECIATE THE LAW ABIDING NATURE OF THE APPELLANT IN APPEARING BE FORE THE A.O. AND REQUESTING FOR MONTHLY INSTALMENTS TO PAY TAXES DUE AND VOLUNTARY PART PAYMENT OF REGULAR TAX WITHIN HIS LI MITED FINANCIAL RESOURCES. B. THE APPELLANT FURTHER SUBMITS THAT HE APPEARED B EFORE THE A.O. ON 29.05.2013 AND ON 21.06.2013 AND REQUESTED HIM N OT TO LEVY PENALTY U/S 271(1)(C) AS AGREED DURING THE ASSESSME NT PROCEEDINGS. ON 29.05.2013 THE APPELLANT APPROACHED THE A.O.'S OFFICE WITH A LETTER REQUESTING TO DROP (NOT TO LEV Y) PENALTY PROCEEDINGS AND ON 21.06.2013, THE APPELLANT ALSO H ANDED OVER A CHALLAN SUPPORTING PART PAYMENT OF RS. 50,000/- REG ULAR TAX IN THE AO.S OFFICE. C. AS THE AUDITOR IS UNWILLING TO APPEAR TO HEARING S, THE APPELLANT HAD TO ATTEND BEFORE THE AO. BY HIMSELF AND REQUEST ED THE AO. TO DROP THE PENALTY PROCEEDINGS U/S 271 (1 )(C). HE FI LED LETTERS IN THE LOCAL LANGUAGE. THERE MAY BE SOME TECHNICAL ERRORS/ DEFICIENCIES IN SUCH LETTERS BUT INTENTION IS TO REQUEST THE A.O . TO DROP THE PENALTY PROCEEDINGS U/S271 (I)(C). IN VIEW OF THE ABOVE FACTS, THE ASSESSEE SUBMITS TH AT HE HAS BEEN CONSISTENTLY PURSUING THE AUTHORITIES TO DROP THE PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT. 12. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO BY OBSERVING AS UNDER: 6.1 THE ISSUE INVOLVED HERE IS THE DETECTION OF UNA CCOUNTED COMPENSATING PAYMENTS MADE BY THE APPELLANT TO ITS TRADE CREDITORS AND CONFRONTED WITH THIS SITUATION, THE A PPELLANT SURRENDERED VOLUNTARILY THE INCOME OF RS. 31,91,851 /- VIDE HIS I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 6 -: LETTER DATED 26.12.2012, WHICH IS REPRODUCED (TRANS LATED) AS BELOW: 'THE SAID TRADE CREDITORS ARE NOT AVAILABLE AT THEI R ADDRESS AT PRESENT AND HENCE I AM NOT IN A POSITION TO PRESENT THEM BEFORE YOUR HONOUR. UNDER THESE CIRCUMSTANCES, J HEREBY AG REE FOR THE ADDITION OF THE DIFFERENCE OF THE BANK BALANCE AMOU NT OF RS. 32,00,000/- TO PURCHASE PEACE OF MIND WITH DEPARTME NT AND ALSO I REQUEST YOU NOT TO LEVY PENALTY PROCEEDINGS AGAINST ME. ' 7. IN VIEW OF THE DETAILED FINDINGS ARRIVED AT BY T HE AO IN HIS ORDER, I AM IN AGREEMENT WITH THE AO THAT THE APPEL LANT HAS WILLFULLY TRIED TO CONCEAL THE UNACCOUNTED NATURE O F THE CREDIT BALANCE AS NOTICED IN THE ACCOUNT. ACCORDINGLY, I U PHOLD THE LEVY OF PENALTY RESORTED TO BY THE AO U/S.271 (1)(C). 13. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 14. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. IT IS OBSERVED THAT WHEN THE ASSESSEE IS NOT ABLE TO FURNISH THE DETAILS ABOUT THE DIFFERENCE IN CASH IN HAND AN D BANK BALANCE, TO BUY PEACE OF MIND, HE AGREED FOR THE ADDITION OF RS . 32,00,000/-. THEREFORE, WE ARE OF THE VIEW THAT IN VIEW OF THE A CCEPTED ADDITION VOLUNTARILY, IT NEITHER AMOUNTS TO CONCEALING THE I NCOME NOR FURNISHING INACCURATE PARTICULARS OF INCOME. WHEN THE AO ASKED THE ASSESSEE TO SHOW THE SOURCE OF BANK DEPOSITS, THE ASSESSEE FAIL ED TO SUBSTANTIATE THE SAME AND AGREED FOR THE ADDITION. THEREFORE, TH E CASE OF THE ASSESSEE IS NOT A FIT A CASE TO ATTRACT THE PROVISI ONS OF SECTION 271(1)(C) AND LEVY PENALTY, HENCE, WE DELETE THE PE NALTY LEVIED BY THE AO. ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. I.T.A. NO. 1025 & 1024/HYD/2016 SANIVARAPU MYSURA REDDY :- 7 -: 16. TO SUM UP, APPEAL IN ITA NO. 1024/HYD/1 6 IS DI SMISSED AND THE APPEAL IN ITA NO. 1025/HYD/2016 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 26 TH MAY , 2017. KV 1 SANIVARAPU MYSURA REDDY, C/O SHRI S. RAMA RAO, AD VOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029. 2 ITO, WARD 1, BESIDES MURALI THEATRE, KADAPA 516 001 3 CIT (A), KURNOOL 4 PR. CIT, KURNOOL 5 THE DR, ITAT HYDERABAD 6 GUARD FILE