ITO, Ward-15(4), Hyd, Hyderabad V. Bommaku Swamy (HUF), R.R.Dist, R.R.Dist

ITA 110/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2451 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 05-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Business income; Retrospective amendment; Initiation of penalty proceedings
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A , HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NO. 110/HYD/2016 ASSESSMENT YEAR: 2013-14 INCOME-TAX OFFICER, WARD 15(4), HYDERABAD. VS BOMMAKU SWAMY (HUF), R.R. DISTRICT. PAN AAHH B1725 N (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. SUMAN MALIK FOR ASSESSEE : SHRI M.V. ANIL KUMAR DATE OF HEARING : 25-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER D.S. SUNDER SINGH, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF CIT(A) 7, HYDERABAD, DATED 30/11/2015 FOR THE A Y 2013-14 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.3 3,41,977J- IMPOSED ON THE ASSESSEE UJS.271(1)(C) OF THE I.T. A CT, 1961 WITHOUT APPRECIATING THE FACTS THAT THE AO HAD BROU GHT ON RECORD THE MATERIAL TO PROVE HOW THE ASSESSEE CONCEALED TH E PARTICULARS OF INCOME. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.3 3,41,977/- IMPOSED ON THE ASSESSEE U/S.271(1)(C) OF THE I.T. A CT, 1961 MAINLY ON THE INCOME DETECTED DURING THE COURSE OF SURVEY WHICH WOULD HAVE BEEN CONCEALED BY THE ASSESSEE HAD THE S URVEY OPERATION U/S.133A HAD NOT BEEN CONDUCTED. I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 2 -: 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A HUF, AS KARTA FILED RETURN OF INCOME ORIGINALLY ON 31.07.20 13, ADMITTING AN INCOME OF RS.3,30,747/-. A SURVEY OPERATION U/S 133 A OF THE I.T.ACT,1961 WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 11.02.2014. DURING THE COURSE OF SURVEY PROCEEDI NGS IT WAS NOTICED THAT THE ASSESSEE ALONG WITH HIS MEMBERS HAS CONVER TED AGRICULTURAL LANDS, WHICH WERE INHERITED FROM FOREFATHERS INTO P LOTS AND SOLD THE SAME. IN THE SURVEY OPERATION INCRIMINATING MATERIA L IN THE FORM OF SALE OF PLOTS WERE FOUND AND THE SAME WERE IMPOUNDED. IT HAS BEEN STATED THAT DURING THE FINANCIAL YEAR 2012-13 RELEVANT TO THE ASST. YEAR 2013- 14, THE ASSESSEE DEVELOPED THE INHERITED AGRICULTUR AL LANDS INTO PLOTS AND SOLD THE PART OF THE SAME DURING THE YEAR AND U P TO THE DATE OF SURVEY. 2.1 THE AO OBSERVED THAT TO COVER UP THE OMISSIONS POINTED OUT DURING THE COURSE OF SURVEY, THE ASSESSEE HUF DECLA RED AN AMOUNT OF RS.85,07,000/ TOWARDS CAPITAL GAINS ON TRANSFER OF PROPERTY INTO STOCK- IN-TRADE AND RS. 40,13,000/- TOWARDS BUSINESS INCOM E ON SALE OF PLOTS FOR THE ASST. YEAR 2013-14. ACCORDINGLY, FILED REVI SED RETURN OF INCOME ON 29.03.2014 DECLARING TOTAL INCOME OF RS.1,27,51, 450/- AND AGRICULTURAL INCOME OF RS.3,00,000/-. SCRUTINY ASSE SSMENT U/S 143(3) OF THE I.T.ACT,1961 DATED 18.07.2014 WAS PASSED DET ERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,36,19,811/- AND AGRI CULTURAL INCOME OF RS.3,00,000/- AND PENALTY U/S 271(1)(C) HAS BEEN IN ITIATED BY THE ASSESSING OFFICER. THE ORDER U/S 143(3) HAS BEEN M ODIFIED VIDE ORDER U/S 154 OF THE I.T. ACT,1961 DATED 22.07.2014, DETE RMINING THE TOTAL INCOME AT RS.1,31,73,045/- [RS. 47,81,360 + RS.3,30 ,747 = RS.51,12,107 BEING INCOME FROM BUSINESS AND RS.80,6 0,938/- BEING INCOME FROM LONG TERM CAPITAL GAIN). 3. WHILE COMPLETING THE SCRUTINY ASSESSMENT, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND AC CORDINGLY A SHOW I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 3 -: CAUSE NOTICE WAS SERVED ON ASSESSEE ON 26/12/2014. IN RESPONSE, THE AR OF THE ASSESSEE FILED A LETTER DATED 08/01/2015 AND STATED THEREIN AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS BOOKS A ND VOUCHERS HAVE BEEN PRODUCED FOR VERIFICATION. IT WA S BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THERE WAS A CALCULATION MISTAKE IN VALUATION OF CLOSING STOCK AFTER TAKING INTO CONSIDERATION/ AFTER VERIFICATION OF SAME THE INCOM E FROM SALE OF PLOTS WAS ESTIMATED AT 8% OF THE GROSS RECEIPTS OF RS. 5,97,67,000/- WHICH WORKS OUT TO RS. 47,81,360/- . THE DIFFERENCE BETWEEN THIS ESTIMATED AMOUNT OF RS. 47,81,360/- AN D RS. 40,12,997 ON SALE OF PLOTS AMOUNTING TO RS. 7,68,36 3/- WAS ADDED TO THE RETURNED INCOME. IT IS PERTINENT TO MENTION THAT DURING THE SURVEY THE AMOUNT WAS DECLARED WITH AN UNDERSTANDIN G THAT NO PENALTY PROCEEDING WILL BE INITIATED. HOWEVER ON CO MPLETION OF THE ASSESSMENT PENALTY PROCEEDING HAVE BEEN INITIATED. THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS. I SUBMIT THAT AFTER THE SURVEY AND OBTAINING PROFESSI ONAL ADVICE/ I HAVE MADE DECLARATION OF INCOME AND FILED THE RETUR N OF INCOME ADMITTING THE SAME. THE INCOME WAS ESTIMATED AND TH E SAME WAS AGREED DURING THE ASSESSMENT PROCEEDINGS. IT IS THE REFORE SUBMITTED THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE ACCOUNTS HAVE BEEN PROPERLY MAINTAINED AND VOUC HERS HAVE BEEN PRODUCED FOR VERIFICATION. ALL THE PAYMENTS HA VE BEEN MADE IN THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BU SINESS. HOWEVER. THE THEN ASSESSING OFFICER IN ORDER TO EST IMATE THE INCOME/ PROPOSED TO REJECT THE BOOKS WHICH WAS NOT OBJECTED AND AGREED TO ESTIMATE OF INCOME AT 8% OF THE TOTAL SAL E VALUE OF THE PLOTS OF RS. 5,97,67,000/-. ACCORDINGLY THE INCOME HAS BEEN ESTIMATED.' 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AS WELL AS THE CASE LAW RELIED UPON BY THE ASSESSEE, THE AO HELD T HAT THERE IS DELIBERATE ACTION ON THE PART OF THE HUF FOR CONCEA LMENT OF INCOME FROM LONG TERM CAPITAL GAIN AMOUNTING TO RS. 80,60, 938/- AND BUSINESS INCOME ON SALE OF PLOTS AMOUNTING TO RS. 47,81,360/ -, EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND TH EREFORE, IT IS A FIT CASE FOR LEVY OF PENALTY U/S 274 R.W.S. 271(1)(C) O F THE ACT. ACCORDINGLY, HE LEVIED A PENALTY OF RS. 33,41,977/ - BEING 100% OF THE TAX SOUGHT TO BE EVADED U/S 271(1)(C) OF THE ACT. I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 4 -: 5. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT THE ASS ESSEE HAD ADMITTED THE ADDITIONAL INCOME AS AGREED UPON DURIN G THE COURSE OF SURVEY WITH HONEST BELIEF AND UNDERSTANDING THAT TH E NO PENALTY WOULD BE LEVIED ON THE ADDITIONAL INCOME. THE LD AR FURTH ER ARGUED THAT THE ASSESSEE WAS UNDER THE BELIEF THAT THE SALE OF AGRI CULTURAL LANDS WAS NOT TAXABLE INCOME. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE EXAMINED THE ISSUE WITH HOST OF CASE LAWS INCLUDIN G THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF V.V.VS. PROJECTS & INVESTMENTS(P)LTD. V.CIT 300 ITR 40 AND CANCELIED THE PENALTY LEVIED BY THE AO HOLDING THAT THERE WAS NO SATISFACTION RE CORDED BY THE AO WHICH AMOUNTS TO JURISDICTIONAL DEFECT AND CANNOT B E CURED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 8. LD. DR APPEARING FOR THE REVENUE ARGUED THAT THE CIT(A) DELETED THE ADDITION HOLDING THAT THERE WAS NO SATISFACTION RECORDED REGARDING CONCEALMENT OF INCOME IN THE ASSESSMENT ORDER WHICH IS INCORRECT. SHE SUBMITTED THAT FROM THE PLAIN READING OF THE A SSESSMENT ORDER, IT IS CLEARLY APPARENT THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME ORIGINALLY ON 31/07/2013 ADMITTING THE INCOME OF RS . 3,30,747/- FROM FUNCTION HALL. SHE SUBMITTED THAT THOUGH ASSESSEE I S HAVING INCOME FROM REAL ESTATE , ASSESSEE HAS NOT ADMITTED THE IN COME FROM REAL ESTATE IN THE RETURN OF INCOME FILED. SHE SUBMITTED THAT THE ASSESSEE HAS ADMITTED THE REAL ESTATE INCOME FROM SALE OF PL OTS AFTER CONVERTING THE AGRICULTURAL LAND INTO PLOTS, ONLY AFTER CONDUC TING SURVEY IN WHICH INCRIMINATING MATERIAL WAS FOUND EVIDENCING CONVERS ION OF AGRICULTURAL LAND INTO PLOTS AND SALE OF THE SAME. SHE SUBMITTED THAT HAD THE I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 5 -: DEPARTMENT NOT CONDUCTED THE SURVEY SAID INCOME WOU LD HAVE GONE UNDETECTED HENCE IT IS CLEAR CASE OF CONCEALMENT OF INCOME AND THE AO HAS RIGHTLY IMPOSED THE PENALTY U/S 271(1)(C) OF THE ACT. WITH REGARD TO RECORDING SATISFACTION OF THE AO SHE SUBM ITTED THAT AO RECORDED IN THE ASSESSMENT ORDER THAT PENALTY U/S 2 71(1)(C) WAS INITIATED, WHICH IS SUFFICIENT COMPLIANCE OF SATISF ACTION RECORDED BY THE AO FOR INITIATING THE PENALTY. 9. ON THE OTHER HAND, LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE CONVERTED THE AGRICULTURAL LAND INTO PLOTS AND SOLD THE SAME AND HE WAS NOT AWARE OF THE PROVISIONS OF INCOME-TA X ACT. SINCE THE DEPARTMENT HAS CONDUCTED THE SURVEY THE ASSESSEE CA ME TO KNOW THAT CONVERSION OF AGRICULTURAL LANDS , DEVELOPING AND S ALE OF THE SAME ATTRACTS INCOME TAX ACCORDINGLY ADMITTED THE INCOM E. HE, THEREFORE, ARGUED THAT THERE IS NO CASE FOR PENALTY AND THE AD DITIONAL INCOME WAS OFFERED TO BUY PEACE AND TO AVOID PROTRACTED LITIGA TION. FINALLY, THE LD. AR SUBMITTED THAT THERE IS NO CASE FOR PENALTY AND RELIED ON THE ORDER OF CIT(A). 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE LD CIT(A) CANCELLED THE PENALTY HOLDING THAT THE AO HAS NOT RECORDED THE SATISFACTION IN THE ASSESSMENT ORDER A ND RELIED ON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF V .V.VS. PROJECTS & INVESTMENTS(P)LTD. V.CIT 300 ITR 40. HONBLE JURISD ICTIONAL HIGH COURT DELIVERED THE JUDGMENT FOR THE A.Y.1995-96 AND SUBS EQUENTLY THE ACT HAS BEEN AMENDED BY INTRODUCING SUB SECTION(1B) IN SECTION 271 BY THE FINANCE ACT, 2008, WITH EFFECT FROM 01/04/1989 WHICH READS AS UNDER: (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COM PUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSES SMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIAT ION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 6 -: REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFAC TION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS U NDER THE SAID CLAUSE (C). FROM THE PLAIN READING OF SECTION 271(1B), IT CLEAR LY INDICATES THAT MERE DIRECTION OF THE AO FOR INITIATING PENALTY PR OCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE INCOME -TAX ACT, 1961, IS SUFFICIENT COMPLIANCE. THIS AMENDMENT HAS NOT BEEN CONSIDERED BY THE LD.CIT(A). HONBLE HIGH COURT DELIVERED THE JUDGMENT IN THE CA SE OF V.V.VS. PROJECTS & INVESTMENTS(P)LTD. V.CIT 300 ITR 40 ON DECEMBER 6, 2007 AND HAD NO OCCASION TO CONSIDER THE AMENDME NT MADE IN FINANCE ACT 2008. THEREFORE THE CASE LAW RELIEUP ON BY THE LD.CIT(A) IS NOT APPLICABLE IN THE ASSESSEES CASE. THE HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CHENNAKESAVA PHARMACEUTICALS VS. CIT, [2013] 30 TAXMANN.COM 385, OBSERVED AS UNDER: 29. IT IS TO BE NOTED THAT THE LEGISLATURE HAD AMENDED SECTION 271 OF THE ACT BY THE FINANCE ACT, 2008, AND INSERTED SUB-SECTION (1B) WI TH RETROSPECTIVE EFFECT FROM APRIL 1, 1989, WHICH PROVIDED AS FOLLOWS : '271. (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSES SMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF P ENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C).' THIS PROVISION CREATES A FICTION BY WHICH SATISFACT ION OF THE ASSESSING OFFICER IS DEEMED TO HAVE BEEN RECORDED IN CASES WHERE AN ADDI TION OR DISALLOWANCE IS MADE BY THE ASSESSING OFFICER AND A DIRECTION FOR INITIA TION OF PENALTY PROCEEDINGS IS ISSUED. THE SAID PROVISION IS MADE EFFECTIVE RETROS PECTIVELY WITH EFFECT FROM APRIL 1, 1989. 10.1 IT IS OBSERVED THAT THE ASSESSEES CASE PERTAI NS TO AY 2013-14, AND THE ASSESSING OFFICER HAS MADE THE DIRECTION IN THE ASSESSMENT ORDER FOR INITIATION OF PENALTY PROCEEDINGS U/S 271 (1)(C) AND IT SUFFICIENT COMPLIANCE FOR RECORDING THE SATISFACTION FOR INITI ATION OF PENALTY PROCEEDINGS. THIS VIEW IS SUPPORTED BY HONBLE APE X COURTS DECISION I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 7 -: IN MAK DATA (P.) LTD. V CIT [2013] 38 TAXMANN.COM 448 (SC) WHERE IN HONBLE APEX COURT HELD AS UNDER: 10. THE AO HAS TO SATISFY WHETHER THE PENALTY PROCEEDI NGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT INTO WRITING. THE SCOPE OF SECTION 271(L)(C) HAS ALSO BE EN ELABORATELY DISCUSSED BY THIS COURT IN UNION OF INDIA V. DHARMENDRA TEXTI LE PROCESSORS [2008] 13 SCC 369 AND CIT V. ATUL MOHAN BINDAL [2009] 9 SCC 5 89. THEREFORE WE HOLD THAT THE LD.C IT(A) IS NOT CORRECT IN CANCELLING THE PENALTY HOLDING THAT THERE WAS NO SA TISFACTION OF THE AO FOR INITIATING THE PENALTY AND ACCORDINGLY WE SET A SIDE THE ORDERS OF THE CIT(A). THE LD.CIT(A) HAS NOT DECIDED THE CASE ON M ERITS AND DURING THE APPEAL HEARING THE LD.DR DID NOT PLACE THE STAT EMENT RECORDED DURING THE COURSE OF SURVEY AND THE INCRIMINATING M ATERIAL FOUND AND SEIZED. THEREFORE WE REMIT THE MATTER BACK TO THE F ILE OF THE CIT(A) TO DECIDE APPEAL ON MERITS. 11.0 IN VIEW OF THE ABOVE DISCUSSION, THE GROUNDS R AISED BY THE REVENUE IN THIS APPEAL ARE ALLOWED FOR STATISTICA L PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. (V. DURGA RAO) (D.S. SUNDER SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED:26 TH MAY , 2017. KV I.T.A. NO. 110/HYD/2016 BOMMAKU SWAMY (HUF) :- 8 -: COPY TO 1 ITO, WARD 15(4), B-BLOCK, 1 ST FLOOR, IT TOWRS, AC GUARDS, HYDERABAD 500 004. 2 SRI BOMMAKU SWAMY (HUF), H.NO. 1-10, NEAR AMBEDKA R STATUTE, BODUPPAL (V), GHATKESAR (M), RR DISTRICT. 3 CIT (A)- 7 HYDERABAD. 4 PR. CIT - 7, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE