Mahavir Ispat Pvt.Ltd., Hyd, Hyderabad V. ITO, Ward-16(3), Hyderabad, Hyderabad

ITA 12/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6678 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2016
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: B SAI PRASAD
• Keywords: Search and seizure; Tax effect
• Section: 32; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1 2 /H YD /201 6 ASSESSMENT YEAR: 20 0 9 - 1 0 M AHAVIR ISPAT PRIVATE LTD., HYDERABAD [PAN : AA CCM5071E ] VS THE INCOME TAX OFFICER , WARD - 16(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B . SAI PRASAD, AR FOR REVENUE : SHRI M. SITARAM , DR DATE OF HEARING : 0 4 - 0 4 - 201 6 DATE OF PRONOUNCEMENT : 13 - 0 4 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : TH I S IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS ) - 4 , HYDERABAD DATED 09 - 1 0 - 201 5 CONFIRMING THE PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] OF RS. 1,2 3,600/ - . 2. BRIEFLY STATED FACTS ARE THAT, ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF MS STEEL INGOTS ON WHICH A SEARCH AND SEIZURE OPERATION U/S. 1 3 2 OF THE ACT WAS CONDUCTED ON 29 - 01 - 2009. ASSESSEE FILED RETURN DECLARING TOTAL IN COME OF RS. 25,06,470/ - . THIS CASE WAS TAKEN UP FOR SCRUTINY AND I.T.A. NO. 1 2 / HYD / 20 1 6 MAHAVIR ISPAT PRIVATE LTD., : - 2 - : ASSESSING OFFICER (AO) HAS MADE AN ADDITION OF RS. 34,25,000/ - OUT OF THE SHARE APPLICATION MONEY INTRODUCED IN THE COMPANY IN THE NAME OF THIRTEEN INDIVIDUALS. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) VIDE HIS ORDER DT. 22 - 06 - 2009 WHO OBSERVED THAT, OUT OF THE TOTAL INVESTMENT OF RS. 34,25,000/ - , NINE INVESTORS MADE AN INVESTMENT OF RS. 30,25,000/ - AND THESE PEOPLE BEING INCOME TAX ASSESSEE S THEMSELVES CAN BE ACCEPTED AS GENUINE . THE BALANCE OF RS. 4 LAKHS INTRODUCED IN THE NAME OF MINOR CHILDREN OF DIRECTORS WERE HOWEVER, CONFIRMED BY THE LD. CIT(A). CONSIDERING THE SMALLNESS OF THE AMOUNTS INVOLVED, ASSESSEE DID NOT PREFER ANY APPEAL BUT REVENUE PREFERRED AN APPEAL ON THE DEL ETION OF RS. 30,25,000/ - . THE ORDER OF THE CIT(A) WAS CONFIRMED BY THE ITAT. SINCE THE QUANTUM ADDITION AT RS. 4 LAKHS HAS REACHED FINALITY, AO COMPLETED THE PROCEEDINGS U/S. 271(1)(C) AND LEVIED PENALTY U/S. 271(1)(C) FOR FURNISHING INACCURATE PARTICULA RS OF INCOME. ASSESSEE CONTESTED BEFORE THE LD. CIT(A) THAT THERE WERE NO INACCURATE PARTICULARS OF INCOME AND MERE ADDITION IN THE ASSESSMENT DOES NOT WARRANT ANY PENALTY U/S. 271(1)(C) . 2.1. ON MERITS, IT WAS SUBMITTED THAT THE LD. CIT(A) IN HIS WIS DOM CONFIRMED THE SHARE APPLICATION MONEY IN THE HANDS OF THE MINOR CHILDREN OF THE DIRECTORS WHEN THE INVESTMENT MADE BY THE DIRECTORS ITSELF WAS ACCEPTED. IT WAS SUBMITTED THAT THOSE MINORS DO NOT HAVE ANY SEPARATE ASSESSMENT, A S THE INCOMES ARE BEING A SSESSED IN THE HANDS OF THE PARENTS AS PER THE PROVISIONS OF THE ACT AND THEREFORE , THEY ARE NOT ASSESSEES ON RECORD, BUT THEY HAVE SUFFICIENT SOURCES. LD. CIT(A) HOWEVER, CONFIRMED THE PENALTY BY STATING AS UNDER: I.T.A. NO. 1 2 / HYD / 20 1 6 MAHAVIR ISPAT PRIVATE LTD., : - 3 - : 5.3. DURING THE COURSE OF APPEAL PROC EEDINGS ALSO, THE APPELLANT FILED THE SAME WRITTEN SUBMISSIONS WHICH ARE PRODUCED BEFORE THE AO, AND SIMPLY STATED THAT SINCE THE TAX EFFECT WAS LOW, THE SAME WAS NOT APPEALED BEFORE THE HON'BLE ITAT, WHICH IS NOT ACCEPTABLE, BECAUSE THOUGH THE TAX EFFECT IS SMALL IT INVOLVES LEGAL ISSUE. THE CIT(A) HAS CONFIRMED RS. 4,00,000/ - , SINCE THE DIRECTORS COULD NOT SATISFACTORILY EXPLAIN THE SOURCES. HENCE, IT IS CLEAR THAT THE APPELLANT COULD NOT SATISFACTORILY EXPLAIN THE ABOVE SOURCES NEITHER BEFORE THE AO NOR BEFORE THE CIT(A), AND FURTHER THE APPELLANT HAS NOT DISPUTED THE SAME BEFORE THE HON'BLE ITAT ALSO. AS PER THE PENALTY ORDER DATED 30/10/2014, THE AO CLEARLY NARRATED THE REASONS FOR IMPOSING THE PENALTY AT PARA NOS. 5, 6 & 7 AND IS SATISFIED TO IMPOSE PENALTY. I HAVE CAREFULLY GONE THROUGH THE SAME AND I AM COMPLETELY IN AGREEMENT WITH THE FINDINGS OF THE AO. HENCE, THE PENALTY LEVIED IS CONFIRMED. 3. LD. COUNSEL SUBMITTED THAT THERE IS NO INCRIMINATING MATERIAL IN THE COURSE OF SEARCH AND AO ONLY ENQUIRED THE SHARE APPLICATION MONEY TRANSFERRED THROUGH BANKING CHANNELS AND MADE THE ADDITION. LD. CIT(A) CONFIRMED ONLY RS. 4 LAKHS ON THE REASON THAT THE MINOR CHILDREN ARE NOT ASSESSEES, WHEREAS THE DIRECTORS WERE ASSESSED TAX AND THE FUNDS HAVE BEEN TRANSFERRED THROUGH BANKING CHANNELS. IT WAS SUBMITTED THAT THOSE MINOR CHILDREN ARE NOT ASSESSEES AS THEIR INCOMES ARE BEING ASSESSED IN THE HANDS OF THEIR PARENTS AS PER THE PROVISIONS OF THE IT ACT AND THE FUNDS ARE THROUGH BANKING CHANNELS ONLY AND R EFERRED TO THE ORDER OF THE CIT(A) AND SUBMISSIONS MADE THEREIN. IT WAS SUBMITTED THAT MERE CONFIRMATION OF ADDITION WHICH WAS NOT CONTESTED DUE TO SMALLNESS OF THE TAX DOES NOT RESULT IN LEVY OF PENALTY U/S. 271(1)(C). 3.1. IT WAS FURTHER SUBMITTED T HAT THOSE MINOR SHARE APPLICANTS HAVE THEIR OWN SOURCES AND THEREFORE, IT CANNOT BE CONSIDERED THAT COMPANY HAS CONCEALED INCOMES. IT WAS FURTHER SUBMITTED THAT AO FINALIZED THE PENALTY UNDER THE HEAD FURNISHING OF INACCURATE PARTICULARS WHEN THERE WAS NO I.T.A. NO. 1 2 / HYD / 20 1 6 MAHAVIR ISPAT PRIVATE LTD., : - 4 - : FURNISHING OF INACCURATE PARTICULARS. SINCE ONLY DEEMING PROVISIONS U/S. 68 WERE INVOKED, THE FACTS DOES NOT CALL FOR PENALTY U/ S. 271(1)(C). THERE IS NO FURNISH ING OF INACCURATE PARTICULARS ON THE FACTS OF THE CASE. 4. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AO AND CIT( A) TO SUBMIT THAT THE ADDITION WA S CONFIRMED AND ASSESSEE DID NOT CONTEST THE SAME. 5. WE HAVE CONSIDERED THE ISSUE AND RIVAL CONTENTIONS. AS CAN BE SEEN FROM THE ORDER OF THE AO AS WELL AS CIT(A) IN THE ASSESSMENT PROCEEDINGS, THE ENTIRE SHARE APPLICATION MONEY I N THIS PRIVATE LIMITED COMPANY WA S FROM THE DIRECTORS OR FROM THEIR MINOR CHILDREN. THE PROCEEDINGS WERE ALSO CONSEQUENT TO SEARCH OPERATIONS CONDUCTED IN THAT GROUP. STILL AO RECORDS THAT ASSESSEE HAS NOT PROVED THE G ENUINENESS OF CREDITORS, IDENTITY AND CREDITWORTHINESS WHILE MAKING THE ADDITION. LD. CIT(A) GAVE RELIEF TO THE EXTENT OF THE INVESTMENTS MADE BY THE DIRECTOR AS THEY ARE INCOME TAX ASSESSEES, WHO ALSO CONFIRMED THE INVESTMENT MADE IN THE NAME OF MINOR C HILDREN. AS POINTED OUT BY THE LD. COUNSEL, ASSESSEE DID NOT PREFER AN APPEAL DUE TO SMALLNESS OF THE TAX INVOLVED. THAT DOES NOT MEAN THAT THERE IS CONCEALMENT OF INCOME , M ORE SO, BY WAY OF FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U /S. 271(1)(C) OF THE ACT. MERE DISALLOWANCE IN ASSESSMENT OR A DDITION BY INVOKING THE DEEMING PROVISIONS DOES NOT AUTOMATICALLY ATTRACT THE PROVISIONS OF SECTION 271(1)(C), UNLESS THE CONDITIONS THEREON ARE SATISFIED. THE FACTS OF THE CASE DOES NOT FALL EITHER UNDER THE HEAD CONCEALMENT OF INCOME OR UNDER THE HEAD FURNISHING OF INACCURATE PARTICULARS. ALL THE I.T.A. NO. 1 2 / HYD / 20 1 6 MAHAVIR ISPAT PRIVATE LTD., : - 5 - : NECESSARY DETAILS WERE FURNISHED BY ASSESSEE AND THERE IS NO FURNISHING OF INACCURATE PARTICULARS IN THIS CASE . 5.1. T HE FACTS ARE FULLY IN TUNE WITH THE FACTS AS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD., [322 ITR 158] (SC). F OLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE ABOVE SAID CASE, WE ARE OF THE OPINION THAT MERE ADDITION OF THE SHARE CAPITAL FROM THE MINOR CHILDREN OF THE DIRECTORS DOES NOT ATTRACT PENALTY U/S. 271(1)(C). IN VIEW OF THAT, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDERS OF THE AO AND CIT(A) LEVYING PENALTY. THE GROUNDS OF ASSESSEE ARE ALLO WED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH APRIL , 2016 TNMM I.T.A. NO. 1 2 / HYD / 20 1 6 MAHAVIR ISPAT PRIVATE LTD., : - 6 - : COPY TO : 1. M AHAVIR ISPAT PRIVATE LTD., NO. 21 - 2 - 636/1, URDU GALLI, PATHERGATTI, HYDERABAD. 2 . THE INCOME TAX OFFICER, WARD - 16(3), HYDERABAD. 3 . CIT(APPEALS) - 4 , HYDERABAD. 4. CIT - 4 , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.