Kalwa Bhasker, Mahabubnagar, Hyderabad V. ACIT, Circle-5(1), Hyderabad, Hyderabad

ITA 1366/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2452 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Peak credit; Revised return

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. 1365, 1366 & 1367/HYD/2015 ASSESSMENT YEARS: 2008-09, 2010-11 & 2011-12 KALWA BHASKER, MAHABUBNAGAR PAN ACAPK 3582 H VS ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 5(1), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL FOR REVENUE : SMT. SUMAN MALIK DATE OF HEARING : 17-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER V. DURGA RAO, J.M.: THESE THREE APPEALS BY ASSESSEE ARE DIRECTED AGAINS T THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 4, HY DERABAD, ALL DATED, 13/10/2015 FOR THE AYS. 2008-09, 2010-11 & 2 011-12 LEVYING PENALTY U/S 271(1)(C). AS IDENTICAL ISSUE IS INVOL VED IN THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND THEREFORE A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. THE FACTS AS EMANATED FROM AY 2011-12 ARE THAT T HE ASSESSEE IS A PROPRIETOR OF M/S L.N. MOTORS, MAHABUBNAGAR AND I S DEALING IN TRADING OF AUTORIKSHAWS AND SPARE PARTS. ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2011-12 ON 30/09/2011 DECLARING TOTAL INCOME OF RS. 49,79,920/-, WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UND ER CASS. I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 2 -: 2.1 DURING THE SCRUTINY PROCEEDINGS, THE AO ASKED T HE ASSESSEE TO FURNISH BILLS AND VOUCHERS FOR THE EXPENDITURE DEBI TED TO P&L A/C IN RESPECT OF HIS BUSINESS PLACES AT MAHABUBNAGAR AND AT BELLARI AND THE DETAILS OF ACCOUNTS MAINTAINED IN ING VYSYA BANK, A XIS BANK AND HDFC BANK. IN RESPONSE, THE ASSESSEE HAS DECLARED T HE PEAK OF NET CASH DEPOSITS FOR AY 2011-12 RS. 36,90,956/-, FOR A Y 2010-11 RS. 30,88,645/- AND FOR AY 2008-9 RS. 28,10,263/-. 2.2 THE AO AFTER CONSIDERING THE ABOVE DISCLOSURES MADE BY THE ASSESSEE DURING THE SCRUTINY PROCEEDINGS, ACCEPTED THE PEAK CREDITS DISCLOSED AND ASSESSMENT WAS COMPLETED BRINGING THE PEAK CREDITS TO TAX. 2.3 WHILE COMPLETING THE ASSESSMENT, THE AO INITIAT ED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCURATE PA RTICULARS OF HIS INCOME AND CALLED FOR EXPLANATION FROM THE ASSESSEE . IN RESPONSE, THE ASSESSEE SUBMITTED A DETAILED SUBMISSION AS UNDER: DURING THE COURSE OF ASSESSMENTS PROCEEDING, I VOLU NTARILY OFFERED FOR TAXATION THE PEAK CREDIT OF RS. 36,90,9 56/- IN THE BANK ACCOUNTS, WHICH WAS OMITTED TO BE SHOWN! DECLARED I N THE ORIGINAL RETURN OF INCOME FILED BY ME. I ALSO OFFERED FOR TA XATION BANK INTEREST AND OTHER INCOME CREDITED IN BANK ACCOUNTS AMOUNTING. TO RS.82,235/- AND RS.2,16,730/- RESPECTIVELY FOR THE ASSESSMENT YEAR 2011-2012. I ALSO SUBMITTED ALL BANK ACCOUNT C OPIES WHICH DID NOT FIND PLACE IN THE ORIGINAL RETURN OF INCOM E FILED. THE BANK ACCOUNTS MISSED MY ATTENTION WHILE FILING THE ORIGI NAL RETURN DUE TO MENTAL TENSION AND WORRY CAUSED DUE TO FINANCIAL AN D MANAGERIAL PROBLEMS IN THE BUSINESS. I HAVE TWO BUSINESS PLACE S ONE AT MAHABUBNAGAR (ANDHRA PRADESH) AND THE OTHER AT BELL ARY (KARNATAKA STATE). THE DISTANCE BETWEEN THESE TWO P LACES IS ABOUT 350 KMS. I DEPENDED UPON AGENTS, SALESMAN, AC COUNTANTS AND OTHER STAFF MEMBERS TO RUN MY BUSINESS . I HAVE TO FREQUENTLY MOVE FROM ONE BUSINESS PLACE TO THE OTHER TO RUN TH E BUSINESS WHICH EFFECTED MY HEALTH AND CAUSED MENTAL WORRY AN D TENSION. AS SOON AS. I FOUND OMISSIONS IN THE ORIGINAL RETUR N, I.E DURING ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2011 -2012, I FILED TRUE AND CORRECT PARTICULARS OF BANK TRANSACT IONS AND OTHER INCOMES LIKE. BANK INTEREST ETC., VOLUNTARILY IN MY LETTER DATED 27- I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 3 -: 12-2013 FOR THE ASSESSMENT YEAR 2011-2012 AS WELL AS FOR THE PREVIOUS ASSESSMENT YEARS 2008-2009, 2009-2010, 201 0-2011 AND ALSO FOR THE SUBSEQUENT ASSESSMENT YEARS 2012-2 013. 2.4 AFTER CONSIDERING THE SAID EXPLANATION, THE AO OBSERVED THAT THE EXPLANATION GIVEN BY THE ASSESSEE CANNOT BE ACCEPTE D FOR THE REASON THAT, BUT, FOR THE SELECTION OF THE CASE FOR SCRUTI NY, THE ASSESSEE WOULD NOT HAVE FILED THE DETAILS AND DISCLOSED THE CORREC T INCOME. ACCORDINGLY, AO LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE AO BY OBSERVING THAT ASSESSEE HAS NOT DISCLOSED THE CORRECT INCOME IN TH E ORIGINAL RETURN OF INCOME AND ALSO NOT FILED REVISED RETURN OF INCOME. 4. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THOUGH THE ASSESSEE HAS NOT DISCLOSED THE DETAILS OF BANK ACCOUNTS IN THE RETURN OF INCOME, HE HAS EXPLAINED THE REASONS BEFO RE THE AO, BUT, THE AO SIMPLY REJECTED THE EXPLANATION OFFERED BY THE A SSESSEE WITHOUT EXAMINING THE GENUINENESS OF THE EXPLANATION. HE A LSO SUBMITTED THAT IT IS NOT A CASE OF THE AO THAT THE EXPLANATION GIV EN BY THE ASSESSEE IS NEITHER FALSE NOR BONAFIDE AND, THEREFORE, SUBMITTE D THAT THE PENALTY U/S 271(1)(C) IS NOT WARRANTED IN THE CASE OF THE A SSESSEE. HE RELIED ON THE FOLLOWING CASES: 1. CIT & ANR. VS. MANJUNATHA COTTON & GINNING FACTO RY, [2013] 359 ITR 565. 2. PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT, CIV IL APPEAL NO. 6924 OF 2012., 348 ITR 306. 3. CIT VS. M/S GEM GRANITES (KARNATAKA), [2014] 55 (I) ITCL 406. I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 4 -: 5. LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE AS SESSEE HAS NOT DISCLOSED DETAILS OF BANK ACCOUNTS AND INTEREST INC OME AS WELL AS CERTAIN MISCELLANEOUS INCOME IN THE RETURN OF INCOM E FILED AND, THEREFORE, IT IS A CLEAR CUT CASE OF CONCEALMENT OF INCOME. THEREFORE, PENALTY LEVIED BY THE AO IS PROPER AND THE SAME MAY BE UPHELD. SHE RELIED ON THE DECISION THE CASE OF MAK DATA (P.) LT D. VS. CIT, 358 ITR 593. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE DECISIONS CITED. IT IS OBS ERVED THAT THE AO HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND BUT FOR THE SELECTION OF THE CASE FOR SCRUTINY THE UNDISCLO SED INCOME OF THE ASSESSEE WOULD NOT HAVE SEEN THE LIGHT OF THE DAY. ACCORDINGLY, THE NET CASH DEPOSITS DISCLOSED BY THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION WAS BROUGHT TO TAX BY THE AO AND ACC ORDINGLY PENALTY U/S 271(1)(C) WAS LEVIED ON THE GROUND OF NOT FURNI SHING THE FULL PARTICULARS IN THE ORIGINAL RETURN OF INCOME. HOWEV ER, THE ASSESSEE OFFERED AN EXPLANATION VIDE LETTER DATED 27/12/13, BUT, THE SAME WAS REJECTED BY THE AO ON THE GROUND THAT IF THE SCRUTI NY ASSESSMENT IS NOT TAKEN PLACE, THE ASSESSEE WOULD NOT HAVE DISCLOSED THE DETAILS OF BANK ACCOUNTS. ACCORDING TO THE ASSESSEE, IT IS NOT A CA SE OF THE AO THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS NEITHER FA LSE NOR BONAFIDE AND ONCE THE DETAILS HAVE BEEN DISCLOSED AND PAID T AXES, THOUGH NO REVISED RETURN IS FILED, ON TECHNICAL GROUNDS PENAL TY CANNOT BE LEVIED U/S 271(1)(C) OF THE ACT. IN THIS CONTEXT, WHETHER THE CASE OF THE ASSESSEE IS ATTRACTED PENALTY U/S 271(1)(C) OR NOT, WE REFER TO THE FOLLOWING CASES, ON WHICH RELIANCE PLACED BY THE AS SESSEE: 6.1 IN THE CASE OF MANJUNATHA COTTON & GINNING FACT ORY (SUPRA), THE HONBLE KARNATAKA HIGH COURT HAS OBSERVED THAT THE CONDITION PRECEDENT FOR LEVYING THE PENALTY IS THE SATISFACTI ON OF THE AUTHORITY I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 5 -: THAT THERE IS A CONCEALMENT OF THE PARTICULARS OF T HE INCOME OR INACCURATE PARTICULARS ARE FURNISHED TO AVOID PAYME NT OF TAX. ONCE THE AUTHORITY COMES TO SUCH CONCLUSION, THE LAW MANDATE S THAT BEFORE IMPOSING PENALTY, THE ASSESSEE MUST BE HEARD. THE A SSESSEE IS GIVEN THE OPPORTUNITY TO OFFER HIS EXPLANATION. ONCE SUCH AN OPPORTUNITY IS GIVEN AND THE ASSESSEE FAILS TO OFFER THE EXPLANATI ON OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE, THEN THE PE NALTY WILL FOLLOW AS PRESCRIBED UNDER SUB-CLAUSE (III) OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271. WHERE THE ASSESSEE OFFERS AN EXPLANAT ION AND SUBSTANTIATE THE EXPLANATION, THE QUESTION OF IMPO SING PENALTY WOULD NOT ARISE. EVEN IN CASES WHERE HE FAILS TO SUBSTAN TIATE THE EXPLANATION BUT IF HE PROVES THAT THE EXPLANATION OFFERED IS A BONA FIDE ONE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME AS BEEN DISCLOSED BY HIM, THEN, IN LAW , A DISCRETION IS VESTED WITH THE AUTHORITY NOT TO IMPOSE PENALTY. I N OTHER WORDS, IF THE ASSESSEE OFFERS EXPLANATION BUT FAILS TO SUBSTANTIA TE THE SAME, BUT IF HE PROVES THAT EXPLANATION OFFERED IS BONAFIDE BUT IS NOT SUFFICIENT TO SUBSTANTIATE THE EXPLANATION AND DISCLOSES ALL MATE RIAL FOR THE COMPUTATION OF HIS TOTAL INCOME, THE QUESTION OF IM POSING PENALTY WOULD NOT ARISE. 6.1.1 IN THE PRESENT CASE, THE ASSESSEE THOUGH DECL ARED ALL THE DETAILS OF INCOME DURING THE COURSE OF SCRUTINY PROCEEDINGS , BUT, EXPLAINED THE REASONS FOR NON-DISCLOSURE AT THE TIME OF FILING OF ORIGINAL RETURN OF INCOME. IN THIS CASE, THE AO SIMPLY REJECTED THE E XPLANATION OFFERED BY THE ASSESSEE. HOWEVER, IT IS NOT THE CASE OF THE AO THAT EXPLANATION OFFERED BY THE ASSESSEE IS NEITHER FALSE NOR BONAFI DE. THE ONLY GROUND FOR REJECTION OF EXPLANATION BY THE AO IS THAT DISC LOSURE WAS MADE BY THE ASSESSEE IN THE SCRUTINY ASSESSMENT PROCEEDINGS . THEREFORE, IT CANNOT BE PRESUMED THAT THE EXPLANATION GIVEN BY TH E ASSESSEE NEITHER FALSE NOR BONAFIDE. UNLESS THE AO SPECIFICA LLY MENTIONS THAT EXPLANATION OFFERED BY THE ASSESSEE IS FALSE AND NO T BONAFIDE. I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 6 -: THEREFORE, THE EXPLANATION OFFERED BY THE ASSESSEE IS PRESUMED TO BE A GENUINE ONE. IN THE PRESENT CASE, SUCH OBSERVATIO N WAS NOT MADE BY THE AO. 6.2 IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LT D. (SUPRA), THE HONBLE SUPREME COURT OBSERVED THAT THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASS ESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE F URNISHING ANY INACCURATE PARTICULARS. IT APPEARS TO US THAT ALL T HAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND IN ADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESC RIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE A ND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADV ERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED , BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING IN ACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 6.2.1 IN THE PRESENT CASE, THE ASSESSEE HAS DISCLOS ED ALL THE PARTICULARS BEFORE COMPLETION OF THE ASSESSMENT U/S 143(3), THOUGH THE DETAILS WERE FILED IN THE SCRUTINY PROCEEDING. FURT HER, SCRUTINY ASSESSMENT PROCEEDINGS HAVE TAKEN FOR AY 2011-12, B UT, THE ASSESSEE HAS DISCLOSED ALL THE DETAILS IN RESPECT OF 2008-09 , 2009-10 AND 2010- 11 ALSO. THEREFORE, THE ATTEMPT MADE BY THE ASSESSE E TO DISCLOSE THE PARTICULARS OF INCOME SHOWS THE BONAFIDES OF ASSESS EE. 6.4 SO FAR AS THE CASE LAW RELIED ON BY THE ASSESSE E IN THE CASE OF MAK DATA (P.) LTD. (SUPRA) IS CONCERNED, THE VERY S AME JUDGMENT HAS BEEN CONSIDERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M/S GEM GRANITES (SUPRA), OBSERVED THAT THE HON BLE SUPREME COURT WHILE CONSIDERING THE EXPLANATION TO SECTION 271(1), HELD THAT I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 7 -: THE QUESTION WOULD BE WHETHER THE ASSESSEE HAD OFFE RED AN EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOM E OR FURNISHING INACCURATE PARTICULARS OF INCOME AND THE EXPLANATIO N TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERE NCE IS NOTICED BY THE ASSESSING OFFICER BETWEEN THE REPORTED AND ASSE SSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, B Y COGENT AND RELIABLE EVIDENCE AND WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY THE ASSESSEE, THE ONUS SHIFT S ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE IR INCOME AND NOT OTHERWISE. FACTUALLY, WE FIND THAT THE ONUS CAST UP ON THE ASSESSEE HAS BEEN DISCHARGED BY GIVING A COGENT AND RELIABLE EXP LANATION. THEREFORE, IF THE DEPARTMENT DID NOT AGREE WITH THE EXPLANATION, THEN THE ONUS WAS ON THE DEPARTMENT TO PROVE THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE P ARTICULARS OF INCOME. 6.4.1 IN THE PRESENT CASE, THE ASSESSEE HAS DISCHAR GED THE BURDEN BY GIVING DETAILED EXPLANATION BEFORE THE AO. THE AO S IMPLY REJECTED THE EXPLANATION WITHOUT DISCHARGING THE BURDEN CAST UPO N HIM, AS THE ASSESSEE HAS DISCLOSED THE PARTICULARS OF INCOME IN THE SCRUTINY ASSESSMENT. 6.5 WE FIND THAT NEITHER THE AO NOR THE CIT(A) HAS DEALT WITH THE ISSUE IN CORRECT PERSPECTIVE. 6.6 IN VIEW OF THE ABOVE DISCUSSION AS WELL AS THE RATIOS LAID DOWN BY THE HONBLE COURTS AS ABOVE, WE ARE OF THE VIEW THAT THE CASE OF THE ASSESSEE IS NOT A FIT CASE TO ATTRACT THE PROVISION S OF SECTION 271(1)(C) AND ACCORDINGLY, WE DIRECT THE AO TO DELETE THE PEN ALTY IMPOSED U/S 271(1)(C) OF THE ACT. 7. AS THE ISSUE IN AYS 2008-09 AND 2010-11 ARE MATE RIALLY IDENTICAL TO THAT OF AY 2011-12, FOLLOWING THE CONCLUSIONS DR AWN THEREIN, WE DIRECT THE AO TO DELETE THE PENALTY LEVIED IN THESE YEARS ALSO. I.T.A. NOS. 1365, 1366 & 1367HYD/15 KALWA BHASKER :- 8 -: 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE U NDER CONSIDERATION, ARE 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 KALWA BHASKER, C/O MOHD. AFZAL, ADVOCATE, 11-5-46 5, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COURT ROAD, RED H ILLS, HYDERABAD 500 004. 2 ACIT, CIRCLE 5(1), AAYKAR BHAVAN, HYDERABAD. 3 CIT(A) - 4, HYDERABAD. 4 PR. CIT 4, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE