Sri M.V.Madhusudhan Sarma, Hyderabad V. Addl.CIT, Range-4, Hyderabad

ITA 1365/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66187 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPTA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Initiation of penalty proceedings
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 1365/HYD/2011 ASSESSMENT YEAR 2007-08 SRI M.V. MADHUSUDHAN SARMA, HYDERABAD PAN: ADYPM1458M VS. ADDL. CIT RANGE-4 HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 1456/HYD/2011 ASSESSMENT YEAR 2007-08 ASST. CIT CIRCLE-4(1) HYDERABAD VS. SRI M.V. MADHUSUDHAN SARMA, HYDERABAD PAN: ADYPM1458M APPELLANT RESPONDENT ASSESSEE BY: SRI P. MURALI MOHAN RAO REVENUE BY: SMT. AMISHA S. GUPTA DATE OF HEARING: 18.07.2012 DATE OF PRONOUNCEMENT: 31.08.2012 O R D E R PER CHANDRA POOJARI, AM: THESE ARE CROSS APPEALS BY THE ASSESSEE AND REVENU E DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 1.6. 2011. 2. THE ASSESSEE IS IN APPEAL BEFORE US WITH REGARD TO SUSTAINING OF FOLLOWING ADDITIONS BY THE CIT(A): A) RS. 8,43,000 TOWARDS COMMISSION OUT OF RS. 20,07,00 0 MADE BY THE ASSESSING OFFICER. B) SUSTAINING OF RS. 33,56,824 TOWARDS SUPPRESSION OF RECEIPTS IN RESPECT OF FLATS. C) RS. 2,41,500 TOWARDS INTEREST ON LOAN. I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 2 3. THE ASSESSEE ALSO RAISED A GROUND WITH REGARD TO MENTIONING OF INITIATION OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961. 4. BRIEF FACTS OF THE ISSUE ARE THAT THERE WAS A SURVE Y IN THE CASE OF THE ASSESSEE AND DURING THE COURSE OF SURVE Y A SMALL SLIP MARKED AS PAGE NO. 12 WAS IMPOUNDED CONTAINING TH E FOLLOWING INFORMATION: 103 43 204 42 401 32 404 40 5. WHEN CONFRONTED THESE PARTICULARS TO THE ASSESSEE I T WAS STATED AS FOLLOWS: 'IT IS TRUE THAT THE SL. NOS. MENTIONED 103, 204, 4 01 & 404 ON PAGE NO. 12 RELATE TO FLAT NUMBERS WHICH ARE SOLD IN DD COLONY. FURTHER, I ALSO SUBMIT THAT THE AMOUNTS WRITTEN OF 43, 42, 32 & 40 ARE SALE CONSIDERATION IN RS. LAKHS IN RESPECT OF THE ABOVE FLAT NUMBERS. HOWEVER, I HAVE TO INCUR CERTAIN EXPENDITURE IN THE FORM OF COMMISSION OR BROKERAGE TO THE PERSON WHO HAVE SOLD THESE FLATS. TO AVOID LITIGATION AND TO BUY PEACE WITH THE DEPARTMENT, I VOLUNTARILY AGREE TO DISCLOSE ADDITIONAL INCOME OF RS. 75 LAKHS ON ACCOUNT OF SALE OF THESE FLATS. THIS I S OVER AND ABOVE THE PROFIT BASED ON THE REGISTERED DOCUMENTS.' 6. THUS, THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS. 75 LAKHS IN ADDITION TO RS. 61.93 LAKHS TOWARDS INCOME ON SALE OF FOUR FLATS. ACCORDING TO THE ASSESSING OFFICER THE RE IS A DIFFERENCE BETWEEN ACTUAL CONSIDERATION I.E., RS. 1 .57 CRORES AND ADMITTED SALE CONSIDERATION OF RS. 1.37 CRORES WORK ED OUT AT RS. 20.07 LAKHS WHICH IS CLAIMED AS COMMISSION PAYMENT BY THE ASSESSEE. AS THERE IS NO EVIDENCE REGARDING PAYMEN T OF COMMISSION, THE ASSESSING OFFICER DISALLOWED THE SA ME. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE PLACED ADDIT IONAL EVIDENCE IN RESPECT OF PAYMENT OF COMMISSION TO ONE MR. SRI I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 3 RAMAKRISHNA. THE CIT(A) HAS GIVEN A FINDING THAT T HERE IS NO EVIDENCE REGARDING RENDERING OF ANY SERVICE BY SRI B. RAMA KRISHNA FOR WHICH THE PAYMENTS WERE MADE. FURTHER, THE CIT(A) OBSERVED THAT THE EVIDENCE PRODUCED BY THE ASSESSEE REGARDING PAYMENT OF RS. 10 LAKHS COMMISSION CANNOT BE ALLOW ED IN FULL AND CONSIDERING THE PREVAILING MARKET CONDITIONS, H E ALLOWED COMMISSION AT 1% OF THE SALE VALUE OF FLATS WORKED OUT AT RS. 1,57,000 AND DISALLOWED RS. 8,43,000 IN RESPECT OF PAYMENT TO SRI RAMAKRISHNA . REGARDING PAYMENT OF COMMISSION OF RS. 10 LAKHS, THE PAYMENTS MADE TO M/S. RAJESWARI BUILDERS WHICH WAS PAID BY CHEQUE AND DULY REFLECTED IN THE BOOKS OF A CCOUNT OF M/S. RAJESWARI BUILDERS, THE SAME WAS ALLOWED. AGA INST THE ABOVE DISALLOWANCE THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE REVENUE IS IN APPEAL BEFORE US REGARDING DELETI ON OF RS. 11,57,000 TOWARDS PAYMENT OF COMMISSION. 8. THE LEARNED AR SUBMITTED THAT DURING THE COURSE OF SURVEY THE ASSESSEE AGREED TO OFFER ADDITIONAL INCO ME OF RS. 75 LAKHS FOR THE DISCREPANCIES NOTICED IN THE COURSE O F SURVEY WITH REGARD TO SALE OF FOUR FLATS AND ONCE AGAIN SUSTAIN ING ADDITION ON THE SAME COUNT AMOUNTS TO PUNISHING DOUBLE TIME FOR SINGLE OFFENCE. HE PLEADED TO DELETE THE ADDITION. 9. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THER E IS NO DISPUTE THAT THE ASSESSEE OFFERED ADDITIONAL INCOME CONSEQUENT TO THE SURVEY U/S. 133A OF THE ACT FOR DISCREPANCY IN OFFERING THE CORRECT INCOME IN RESPECT OF FLAT NOS. 103, 204 , 401 AND 404 SITUATED IN DD COLONY, HYDERABAD. FURTHER MAKING A DDITION TOWARDS THE LAPSE OBSERVED IN THE SURVEY AS MENTION ED ABOVE CANNOT BE SUSTAINED. ACCORDINGLY, THE ENTIRE ADDIT ION OF RS. I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 4 20.07 LAKHS MADE TOWARDS PAYMENT OF COMMISSION HAS TO BE DELETED AND IS DELETED. THIS GROUND OF THE ASSESSE E IS ALLOWED. 11. THE SECOND GROUND IN ASSESSEES APPEAL IS WITH REGA RD TO SUSTENANCE OF ADDITION OF RS. 33,56,824 TOWARDS SUP PRESSION OF SALES RECEIPT OF FLATS. AFTER THE SURVEY, THE ASSE SSEE SOLD THE OTHER TWO FLATS IN DD COLONY BEARING NOS. 201 AND 5 02. THE AVERAGE RATE PER SQUARE FOOT (SFT FOR SHORT) IN RES PECT OF FLAT NOS. 103, 204, 401 AND 404 WAS WORKED OUT AT RS. 2417 PE R SFT WHEREAS THE AVERAGE RATE IN RESPECT OF THESE TWO FL ATS BEARING NOS. 201 AND 502 WAS WORKED OUT AT RS. 1058 PER SFT . BASED ON THE AVERAGE RATE PER SFT IN RESPECT OF FLAT NOS. 10 3, 204, 401 AND 404, THE ASSESSING OFFICER WORKED OUT THE DIFFERENC E AT RS. 33,56,824 (RS. 59,74,824 26,17,000) AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL THE CIT(A) CONFIRMED THIS ADDITION. 12. THE LEARNED AR PLACED ARGUMENTS BEFORE US THAT THE ASSESSEE HAS ALREADY OFFERED ADDITIONAL INCOME AND THERE IS NO EVIDENCE TO MAKE THE ADDITION OF RS. 33,56,824 AND IT IS TO BE DELETED. FURTHER THE CONTENTION OF THE ASSESSEE'S COUNSEL IS THAT FLAT NOS. 201 AND 502 CANNOT BE COMPARED TO FLAT NO S. 103, 204, 401 AND 404, AS THESE TWO FLATS ARE CONSTRUCTED BY DEVIATING FROM THE APPROVED PLAN AND ARE SOLD AT LOWER PRICE. THE DR RELIED ON THE ORDER OF THE CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS SEEN FROM THE FACTS OF THE CASE, SUR VEY MATERIAL REFLECTED THAT FLAT NOS. 103, 204, 401 AND 404 WERE SOLD AT AN AVERAGE RATE OF RS. 2417 PER SFT. HOWEVER, AFTER T HE SURVEY THE FLATS BEARING NOS. 201 AND 502 WERE SAID TO HAVE BE EN SOLD BY THE ASSESSEE AT A LOWER RATE OF RS. 1058 PER SFT WH ICH CLEARLY SHOWS THAT THE ASSESSEE SHOWN THE SALE OF FLATS AT A VERY LOWER I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 5 PRICE AS ALL THE FLATS ARE SITUATED IN THE SAME COL ONY. THE EXPLANATION OF THE ASSESSEE'S COUNSEL IS THAT SALE PRICE OF FLAT NOS. 201 AND 502 CANNOT BE COMPARED TO FLAT NOS. 10 3, 204, 401 AND 404, AS THESE TWO FLATS ARE CONSTRUCTED BY DEVI ATING FROM THE APPROVED PLAN AND ARE SOLD AT LOWER PRICE. IN THE INTEREST OF JUSTICE, THE ISSUE REMITTED BACK TO THE ASSESSING O FFICER FOR FRESH CONSIDERATION. THE ASSESSING OFFICER SHALL R E-EXAMINE THIS ISSUE. IF HE FINDS THE CLAIM OF THE ASSESSEE IS CO RRECT, IT IS TO BE ACCEPTED. OTHERWISE, THE JUDGEMENT OF JURISDICTION AL HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT (116 TAXMAN 67 5) (AP) WHEREIN IT WAS HELD THAT WHEN THERE IS MATERIAL FOU ND DURING THE COURSE OF SURVEY/SEARCH ACTION, IT CAN BE USED TO E STIMATE SALES OF THE PERIOD NOT COVERED BY THE SURVEY, IS TO BE A PPLIED. FURTHER, IF HE FINDS THAT OFFERING OF ADDITIONAL IN COME OF RS. 75 LAKHS BY THE ASSESSEE DURING THE COURSE OF SURVEY I S RELATING TO FLAT NOS. 201 AND 502 IN ADDITION TO FLAT NOS. 103 , 204, 401 AND 404 WHICH WERE SOLD BEFORE THE SURVEY DATED 11.9.20 06, THE ADDITION NEED NOT BE MADE. THIS GROUND OF THE ASSE SSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. THE NEXT GROUND IS WITH REGARD TO SUSTAINING ADDITI ON OF RS. 2,41,500 TOWARDS INTEREST ON LOAN. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SURVEY TWO PRO-NOTES ONE DATED 22.8.2006 FOR AN AMOUNT OF RS. 13 LAKHS AND THE OTH ER DATED 2.9.06 FOR AN AMOUNT OF RS. 10 LAKHS CARRYING INTER EST @ 18% GIVEN TO SRI B. RAMA KRISHNA WERE FOUND AND IMPOUND ED. WHEN QUESTIONED ABOUT THIS, THE ASSESSEE AT THE TIME OF SURVEY STATED THAT THE AMOUNTS WERE GIVEN OUT OF THE SALE CONSIDE RATION RECEIVED FROM THE SALE OF FLATS RECEIVED AT THE DD COLONY. IT IS NOTICED THAT THE ASSESSEE HAS NOT OFFERED ANY INTER EST ON THE ABOVE LOAN IN THE RETURN OF INCOME FILED. DURING T HE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED WHY THE INTERES T ON THE ABOVE LOAN WAS NOT OFFERED, WHETHER IT WAS RECEIVED OR NOT. THE I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 6 ASSESSEE VIDE HIS LETTER DATED 4.12.09 STATED THAT THE AMOUNT IS YET TO BE RECEIVED AND THE INTEREST WILL BE OFFERED TO TAX ON CASH BASIS UPON THE RECEIPT OF THE SAME. THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. THE ASSESSEE IS REGUL ARLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. HE CANNOT CHOOSE ANOTHER ACCOUNTING PRACTICE FOR THE PURPOSE OF OFFERING INT EREST ON THE LOAN GIVEN. THE INTEREST ON THE ABOVE LOAN @ 18% P ER ANNUM WORKS OUT TO RS. 2,41,500 AND THE SAME IS BROUGHT T O TAX. 15. ON APPEAL THE SAME WAS CONFIRMED BY THE CIT(A). AG AINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 16. THE CONTENTION OF THE AR IS THAT THE ASSESSEE IS FO LLOWING CASH SYSTEM OF ACCOUNTING FOR RECOGNITION OF THE IN COME FROM LOAN. AS SUCH ADDITION CANNOT BE MADE. WE FIND NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL. AS SEEN FROM T HE ASSESSMENT ORDER FIRST PAGE CLAUSE NO. 8, THE METHO D OF ACCOUNTING OF THE ASSESSEE WAS MERCANTILE SYSTEM AN D THIS FACT HAS NOT BEEN CHALLENGED BY THE ASSESSEE BEFORE ANY APPEAL PROCEEDINGS. BEING SO, THE ARGUMENT OF THE COUNSEL OF THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING IS DEVOID OF MERIT. IN OUR OPINION, INT EREST HAS ACCRUED TO THE ASSESSEE AND THE SAME HAS TO BE BROU GHT TO TAX. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER S OF LOWER AUTHORITIES AND THE SAME IS CONFIRMED. 17. THE OTHER GROUND BY THE ASSESSEE IS WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS BY THE LOWER AUTH ORITIES U/S. 271(1)(C) OF THE ACT. THE ASSESSEE CANNOT HAVE ANY GRIEVANCE FOR INITIATION OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME. FOR INITIATIO N OF PENALTY I.T.A. NOS. 1365 & 1456/HYD/2011 SRI M.V. MADHUSUDHAN SARMA =========================== 7 PROCEEDINGS THE ASSESSEE HAS NO RIGHT TO FILE AN AP PEAL. BEING SO, WE DISMISS THE GROUND RAISED BY THE ASSESSEE. 18. THE GROUND RAISED BY THE REVENUE IN ITS APPEAL REGA RDING DELETION OF RS. 11,57,000 TOWARDS PAYMENT OF COMMIS SION IS DISMISSED AS INFRUCTUOUS AS WHILE DISPOSING OF THE FIRST GROUND IN ASSESSEES APPEAL, WE HAVE CONFIRMED THE DELETIO N OF RS. 11,57,000. 19. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED PARTLY AND REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST AUGUST, 2012 TPRAO COPY FORWARDED TO: 1. SRI M.V. MADHUSUDHAN SARMA, C/O. M/S. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD-500 082. 2. THE ADDL. CIT, RANGE-4, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD. 4. THE DR B BENCH, ITAT, HYDERABAD