P.Janga Reddy , Hyderabad V. Income Tax Officer, Ward-9(4), Hyderabad

ITA 1337/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0072 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 15-05-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 22-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEEJU GUPTA
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Unexplained investment; Business income
• Section: 271(1)(c); 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC BENCH: HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ITA. NO.1337/HYD/2018 ASSESSMENT YEAR: 2009 - 10 P. JANGA REDDY, HYDERABAD. PAN: AHOPP 4343 E VS. ITO, WARD - 9(4), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SRI M. CHANDRAMOULESWARA RAO FOR REVENUE : SMT. NEEJU GUPTA, DR DATE OF HEARING : 15/05/2019 DATE OF PRONOUNCEMENT : 24 /05/2019 ORDER PER V. DURGA RAO, JM . THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 7, HYDERABAD DATED 24/4/2018 FOR THE ASSESSMENT YEAR 2009 - 10. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE APPELLATE ORDER OF THE LD. CIT(A) IS ERRO NEOUS AND BAD BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES IN THE CASE, THE LD COMMISSIONER HAS ERRED IN CONFIRMING THE CONCEALMENT PENALTY IMPOSED IGNORING THE FACT THAT THE APPELLANT HAS NOT CONCEALED ANY INCOME AND AGREED FOR ESTIM ATION OF INCOME FROM HIS SPARE PARTS BUSINESS BY THE CIT(A) WHEREAS IN FACT, THE APPELLANT HAS NOT MADE ANY SURPLUS IN SUCH BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES IN THE CASE, THE LD. COMMISSIONER HAS ERRED IN CONFIRMING THE LEVY OF CONCEALMENT PENALTY IN A CASE WHERE THE ASSESSING OFFICER AFTER DUE INVESTIGATION HAS FOUND THE APPELLANTS CLAIMS OF BUSINESS IN SPARE PARTS AS TRUE AND CORRECT AND WHERE THE ASSESSING OFFICER FURTHER FOLLOWED THE AGREED PROFIT ESTIMATION RATE DECIDED BY THE FIRST A PPELLATE COMMISSIONER OF INCOME TAX. HE OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANTS CLAIM WAS FOUND TO BE TRUE 2 AND CORRECT AND NO NEW FACTS WERE BROUGHT ON RECORD BY THE A.O. WHILE WILL CONTRADICT THE CLAIM OF THE APPELLANT. 4. SUCH OTHER GROUN D AND GROUNDS THAT MAY BE URGED DURING THE HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 10,96,760/ - . THE CASE WAS SELECTED FOR SCRUTINY AND AFTER DUE PROCESS, ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT ON 24/12/2010 BY MAKING AN ADDITION OF RS. 23,40,000/ - AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT WITH REGARD TO CASH DEPOSITS IN SAVINGS BANK ACCOUNT. ON APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE WAS CARRYING ON SPARE PARTS BUSINESS AND AN AMOUNT OF RS. 21,12,500/ - IS THE B USINESS INCOME AND RS. 2,27,500/ - IS INCOME FROM AGRICULTURE. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HE DIRECTED THE A.O. TO DELETE THE ADDITION IN RESPECT OF AGRICULTURAL INCOME OF RS. 2,27,500/ - AND HE FURTHER DIRECTED THE A.O. TO ES TIMATE THE PROFIT @ 25% ON THE BUSINESS INCOME OF RS. 21,12,500/ - . THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE ITAT AND SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE IN RESPECT OF BUSINESS CARRIED ON BY THE ASSESSEE AND THEREFORE, THE ORDER PASSED BY THE CIT(A) IS NOT CORRECT. THE TRIBUNAL BY CONSIDERING THE SUBMISSIONS MADE BY THE DEPARTMENT, SET - ASIDE THE ORDER PASSED BY CIT(A) AND DIRECTED THE A.O. TO DECIDE THE APPEAL DENOVO IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER CONSEQUENT TO THE DIRECTIONS GIVEN BY THE ITAT PASSED ASSESSMENT ORDER U/S 144 R.W.S 254 3 OF THE ACT DATED 09/08/2016. IN THE ASSESSMENT ORDER, A.O. OBSERVED THAT AFTER CONDUCTING THE DETAILED ENQUIRIES IT IS ESTABLISHED THAT THE ASSESSEE HAS CARRIED SPARE PART BUSI NESS AND BY CONSIDERING THE NATURE OF THE BUSINESS AND ALSO BASED ON THE FINDINGS OF THE CIT(A), A.O. ASSESSED 25% OF THE GROSS RECEIPTS OF RS. 21,12,500/ - IS THE INCO ME OF THE ASSESSEE AND SO FAR AS THE AGRICULTURAL INCOME IS CONCERNED, A.O. ACCEPTED THE EXPLANATION OF THE ASSESSEE AND CONSIDERED THE SAME AS AGRICULTURAL INCOME. SUBSEQUENTLY, THE A.O HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 1,79,510/ - . IN THE PENALTY ORDER, THE A.O. HAS NOTED AS UNDER: 3. IN PURSUANC E TO THE IT AT ORDER, NOTICES U/S 1'43(2) DATED 26/04/2016 AND 06/06J2016 WERE ISSUED AND ASSESSEE'S AR SRI D.RAMAKRISHNA REDDY APPEARED AND FILED INFORMATION ON 29/0712016. IT WAS SUBMITTED THAT THE ASSESSEE WAS IN SPARE PARTS BUSINESS AND FURNISHED CONFI RMATION LETTERS FROM THE PARTIES FROM WHOM ASSESSEE PURCHASED SPARE PARTS. AT THE SAME TIME HE EXPRESSED HIS INABILITY TO GET THE DETAILS OF BUYERS WHO HAVE PURCHASED SPARE PARTS FROM HIM. IN ORDER TO VERIFY THE GENUINITY OF THE CLAIM OF SPARE PARTS BUSINE SS, ENQUIRIES WERE CAUSED. ENQUIRIES CONDUCTED HAVE ESTABLISHED THAT ASSESSEE HAS DONE RIG SPATE PARTS BUSINESS. CONSIDERING THE NATURE OF THE BUSINESS AND FINDINGS OF THE CIT(A) PROFIT ON RS.21 ,12,5001 - AMOUNT @ 25% 'IS TREATED AS INCOME FROM BUSINESS. O UT OF THE TOTAL CASH DEPOSITS OF RS.23,40,OOOI - , THE AMOUNT OF RS.21 , 12,5001 - IS TREATED AS GROSS RECEIPTS FROM THE BUSINESS IN RIG SPARE PARTS AND RS.2,27,5001 - AS NET AGRICULTURAL INCOME. 4. THUS IT IS CLEAR THAT THE ASSESSES HAS' NOT REFLECTED HAS T RUE BUSINESS AFFAIRS IN RETURN OF INCOME FILED FOR THE A. Y 2009 - 10. AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED THE TRUE INCOME PARTICULARS. NOTICE U/S 271(1)(C) OF THE INCOME TAX ACT DATED 09/08/2016 WAS ISSUED ASKING THE ASSESSEE TO APPEAR ON 24/0812016 AND SHOW CAUSE WHY AN ORDER IMPOSING PENALTY SHOULD NOT BE MADE ULS 271(1)(C) . IN RESPONSE TO THE NOTICE, THE AR OF THE ASSESSEE, SRI D. RAMAKRISHNA REDDY APPEARED ON 24/08/2016 AND SUBMITTED THAT SI NCE THE INCOME IS ESTIMATED, PENALTY MAY BE DROPPED. THOUGH THE BANK DEPOSITS WERE TREATED AS 'BUSINESS RECEIPTS' AND INCOME WAS ESTIMATED, THE INCOME WAS NOT SHOWN IN THE RETURN OF INCOME. ONLY DURING THE APPELLATE PROCEEDINGS HE MADE SUBMISSION THAT HE D ID SPARE PART BUSINESS AND CASH DEPOSITS IN BANK ARE SOURCED FROM THE SPARE PARTS BUSINESS. HENCE IT IS TREATED THAT THE ASSESSEE HAS SUPPRESSED THE VERY SOURCE OF HIS INCOME AND HAS ALSO CONCEALED THE TRUE PARTICULARS OF HIS INCOME. 4 3. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE A.O BY OBSERVING AS UNDER: 6. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER IN ASSESSMENT ORDER. AND THE SUBMISSIONS OF THE ASSESSEE CAREFULLY. THE ASSESSING OFFICER LEVIED PENALTY HOLDING THAT THE APPELLANT HAS CONCEALED INCOME OF RS.5,28,125/ - BEING THE BUSINESS 'INCOME FROM SPARE PARTS BUSINESS WHICH WAS NOT SHOWN IN THE RETURN OF INCOME FILED. THE ASSESSING OFFICER FOUND THAT CASH DEPOSITS IN THE SAVINGS BANK ACCOUNT REPRESENT THE TURNOVER CARRI ED OUT IN THE SPARE PARTS. BUSINESS. THE ADDITION MADE BY THE ASSESSING OFFICER @ 25% WAS ACCEPTED BY THE APPELLANT AGREEING WITH AN AMOUNT OF RS.21,12,500/ - AS GROSS RECEIPTS FROM SPARE PARTS BUSINESS. NO APPEAL WAS FILED AGAINST ORDER UJS.143(3) RWS 254, DATED 9 - 8 - 2016. SINCE THE CASH DEPOSITS IN THE SAVINGS BANK ACCOUNT REPRESENTING THE SALES J TURNOVER OF THE SPARE PARTS BUSINESS TO THE APPELLANT WAS NOT DECLARED IN THE RETURN OF INCOME FILED ORIGINALLY, THE FINDING OF THE ASSESSING OFFICER THAT THE AP PELLANT HAS CONCEALED THE INCOME IS CORRECT. THE RATIO OF THE DECISIONS CITED BY THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THE CASE. THE FACT OF THE PRESENT CASE IS ENTIRELY ON THE PREMISE THAT THE APPELLANT HAS NOT DECLARED ANY INCOME FROM THE SPAR E PARTS BUSINESS IN THE RETURN OF INCOME FILED ORIGINALLY. THE CASES CITED BY THE AR OF THE APPELLANT WAS ON PREMISE THAT HIGHER INCOME WAS ESTIMATED THAN THE INCOME SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. IN THAT CASE, THERE WAS ONLY A CASE OF HIGH ER ESTIMATION OF INCOME THAN THE RETURNED INCOME FROM THE BUSINESS INCOME WHICH WAS ALREADY DECLARED. IN THE PRESENT CASE, NO SUCH BUSINESS INCOME WAS DECLARED BY THE APPELLANT IN THE RETURN OF INCOME FILED. THEREFORE, I CONFIRM THE PENALTY LEVIED BY THE A SSESSING OFFICER. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ONLY ADDITION MADE BY THE A.O. IN THIS CASE IS ESTIMATION OF 25% OF THE GROSS RECEIPTS AND THE REFORE, PENALTY CANNOT BE LEVIED. 6. ON THE OTHER HAND, LD DR STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT IT IS NOT A CASE OF ESTIMATION AND THE PENALTY MAY BE CONFIRMED. 5 7. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORD ERS OF THE LOWER AUTHORITIES AS WELL AS THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE HAS FILED THE RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 10,96,760/ - AND THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 144 OF THE AC T ON 24/12/2010 BY MAKING AN ADDITION OF RS.23,40,000/ - S UNEXPLAINED INVESTMENT U/S 69 OF THE ACT WITH REGARD TO CASH DEPOSITS IN SAVINGS BANK ACCOUNT. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE HAS SUBMITTED THAT HE IS CARRYING SPARE PART BUSINESS AND HI S GROSS RECEIPTS ARE RS. 21,12,500/ - . THE CIT(A) BY CONSIDERING THE EXPLANATION OF THE ASSESSEE, ACCEPTED THE AGRICULTURAL INCOME AND DIRECTED THE A.O. TO DELETE THE SAME AND ALSO ACCEPTED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF SPARE PARTS AND D IRECTED THE A.O. TO ESTIMATE 25% ON THE GROSS RECEIPTS. REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE ITAT AGAINST THE SAID DECISION OF THE CIT(A) AND THE TRIBUNAL DIRECTED THE A.O. TO PASS ASSESSMENT ORDER DENOVO. CONSEQUENT TO THE TRIBUNALS ORDER, A. O. AFTER A DETAILED ENQUIRY CAME TO A CONCLUSION THAT THE ASSESSEE IS CARRYING ON SPARE PARTS BUSINESS AND BY CONSIDER THE ENTIRE FACTS OF THE CASE HE HAS ESTIMATED THE INCOME OF THE ASSESSEE @ 25% OF GROSS RECEIPTS OF RS. 21,12,500/ - . ASSESSEE ACCEPTED T HE SAME AND NO APPEAL IS FILED. SUBSEQUENTLY, A.O. HAS INITIATED PENALTY PROCEEDINGS ON THE GROUND THAT THAT THE ASSESSEE HAS NOT DECLARED THE INCOME FROM BUSINESS WHICH THE ASSESSEE HAS NOT SUBMITTED BEFORE THE CIT(A) AND EVEN SUBSEQUENTLY ALSO NO APPEAL IS 6 FILED AGAINST THE ORDER PASSED BY THE A.O. IT IS A FACT THAT THE ASSESSEE HAS NOT INITIALLY OFFED BUSINESS INCOME BEFORE THE CIT(A). HE HAS MADE A DETAILED SUBMISSIONS BEFORE THE CIT(A) AND AFTER CONSIDERING THE SAME, THE DEPOSITS MADE BY THE ASSESS EE IN THE BANK ACCOUNT CONSIDERED AS BUSINESS RECEIPTS AND THE CIT(A) DIRECTED THE A.O. TO ESTIMATE 25% OF THE GROSS RECEIPTS AS INCOME OF THE ASSESSEE. EVEN AFTER ITAT SET - ASIDE THE ORDER OF THE CIT(A), THE A.O. MADE A DETAILED ENQUIRY AND FIND THAT THE ASSESSEE IS CARRYING ON BUSINESS OF RING SPARE PARTS AND ESTIMATED THE INCOME OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME. ASSESSEE HAS ACCEPTED THE ADDITIO N MADE BY THE A.O. AND ACCORDINGLY TAXES ARE BEING PAID. THEREFORE, THE ORDER PASSED BY THE CIT(A) CANNOT SURVIVE AND THEREFORE I CANCEL THE ORDER PASSED BY THE CIT(A) AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE AS SESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2019. SD/ - (V. DURGA RAO) JUDICIAL MEMBER HYDERABAD, DATED: 24 TH MAY, 2019. OKK, SR.PS 7 COPY TO 1. M. CHANDRA MOULESWARA RAO, C - 3, SKYLARK APARTMENTS, OPP: SKYLINE THEATRE, BASHEERBAGH, HYDERABAD - 029. 2. INCOME TAX OFFICER, WARD - 9(4), HYDERABAD. 3. CIT (A) - 7, HYDERABAD. 4. PR. CIT - 7, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE