Dy. Commissioner of Income Tax, Hyderabad V. M/s. Rolex Meters Pvt., Ltd., Hyderabad

ITA 1414/HYD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6195 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 03-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2013
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: P MURALIKRISHNA
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1414/HYD/2013 ASSESSMENT YEAR: 2009-10 & ITA NO. 107/HYD/2015 ASSESSMENT YEAR: 2010-11 THE DY INCOME TAX OFFICER CENTRAL CIRCLE- 3(1) HYDERABAD VS. M/S ROLEX METERS PVT. LTD. HYDERABAD PAN AACCR8147E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI A. SITARAMA RAO ASSESSEE BY : SHRI P. MURALI KRISHNA DATE OF HEARING : 04-01-2017 DATE OF PRONOUNCEMENT : 31-01-2017 ORDER PER P. MADHAVI DEVI, J.M.: IN BOTH THESE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 22-08-2013 AND 07-11-2014 FOR THE A.YS 2009-10 & 2010-11 RESPECTIV ELY. THESE APPEALS ARE AGAINST THE ORDER OF THE CIT(A) D ELETING THE PENALTY LEVIED BY THE A.O U/S 271(1)(C) OF THE ACT. IN THESE APPEALS, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEALS. 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS. 2. THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE PENA LTY LEVIED U/S 271(1)(C) AS THE ASSESSEE FAILED TO ESTABLISH T HAT THE PURCHASES ARE GENUINE. 3. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TI ME OF HEARING. 2 ITA NO. 1414/HYD/2013 & 107/HYD/2015 M/S ROLEX METRS PVT. LTD., HYD. 2. BRIEF FACTS OF THE CASE LEADING TO THE LEVY OF P ENALTY ARE, THAT THE ASSESSEE COMPANY, ENGAGED IN THE BUS INESS OF MANUFACTURING AND SALE OF ELECTRICAL METERS, FIL ED ITS RETURN OF INCOME FOR THE RELEVANT A.Y. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, IT WA S NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES FROM M/S. ASAT PLASTO MECH, HYDERABAD (AP M). THE ASSESSEE WAS DIRECTED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE SUBMITTED THAT THE ASSE SSEE HAS MADE PURCHASES FROM THE SAID COMPANY THROUGH AN AGENT BUT THE ASSESSEE IS NOT ABLE TO LOCATE THE SA ID AGENT. A LETTER WAS ALSO ISSUED TO M/S APM UNDER SECTION 1 33(6) OF THE ACT ON 23-11-2011 CALLING FOR INFORMATION WI TH REFERENCE TO THE SALES MADE TO THE ASSESSEE COMPANY . THE A.O CAUSED ENQUIRIES THROUGH THE INSPECTOR OF HIS O FFICE. THE INSPECTOR VISITED THE BUSINESS PREMISES OF THE M/S APM AND MADE ENQUIRIES WITH ITS PROPRIETOR, SHRI SA NJAY, REGARDING THE SALES MADE TO THE ASSESSEE. SHRI SAN JAY, THOUGH STATED THAT HE MADE SALES TO THE ASSESSEE CO MPANY, BUT COULD NOT FURNISH ANY DETAILS IN THIS REGARD BU T SIMPLY STATED THAT THE REQUIRED INFORMATION WILL BE FURNIS HED IN DUE COURSE. THE A.O, TAKING INTO CONSIDERATION THE REPORT OF THE INSPECTOR, DIRECTED THE ASSESSEE TO PROVE TH E GENUINENESS OF THE PURCHASES MADE FROM M/S APM. S INCE THE ASSESSEE WAS NOT IN A POSITION TO PROVE THE GEN UINENESS OF THE PURCHASES, THE ASSESSEE AGREED FOR THE DISA LLOWANCE OF THE PURCHASES MADE FROM THE SAID CONCERN AND ALS O FILED A LETTER TO THAT EFFECT. IN VIEW OF THE SAME, THE A.O. BROUGHT THE ENTIRE PURCHASES MADE BY THE ASSESSEE COMPANY FROM M/S APM TO TAX. SIMILAR DISALLOWANCE WAS 3 ITA NO. 1414/HYD/2013 & 107/HYD/2015 M/S ROLEX METRS PVT. LTD., HYD. ALSO MADE FOR THE A.Y 2010-11. THE ASSESSEE PREFER RED APPEALS FOR THE RESPECTIVE A.YS BUT SUBSEQUENTLY WI THDREW THE SAME. MEANWHILE THE A.O INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. OBSERVING TH AT THE ASSESSEE HAS FAILED TO FILE ANY EXPLANATION AS TO W HY THE PENALTY SHOULD NOT BE LEVIED, THE A.O LEVIED THE MI NIMUM PENALTY @ 100% OF THE TAX SOUGHT TO BE AVOIDED FOR BOTH THE A.YS. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BE FORE THE CIT(A), WHO ALLOWED THE SAME AND THE REVENUE IS AN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD AGREED FOR THE ADDITIONS ONLY IN VIEW OF THE FACT THAT THE MANAGING DIRECTOR OF THE COMPANY WAS AGED ABOUT 71 YEARS AND WAS NOT KEEPING GOOD HEALTH AND ALSO HE WAS NOT ABLE TO LOCATE THE BROKER / AGENT WHO IS STATED TO HAVE LEFT THE BUSINESS AND IS NOT TRACEABLE. HE SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE ADDITI ONS NOT BECAUSE THE TRANSACTIONS WERE NOT GENUINE BUT BECAU SE THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE RELEVANT PARTY. HE ALSO SUBMITTED THAT THE INSPECTOR OF INCOME TAX HAD HIMSELF VERIFIED THE BILLS WITH THE SAID COMPANY AN D THE PROPRIETOR OF THE SAID COMPANY HAD CONFIRMED THAT H E HAD MADE SOME SALES TO THE ASSESSEE COMPANY. THEREFORE , ACCORDING TO HIM, THE IDENTITY AND GENUINENESS OF T HE TRANSACTION WERE PROVED. 4 ITA NO. 1414/HYD/2013 & 107/HYD/2015 M/S ROLEX METRS PVT. LTD., HYD. 4. WITH REFERENCE TO THE PENALTY PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED BEFORE US A COPY OF THE ASSESSEES REPLY TO THE PENALTY PROCEEDINGS SEEKING FURTHER TIME FOR FILING ITS REPLY BUT THE A.O HAS NOT GRANT ED ANY TIME. THUS, ACCORDING TO HIM, IT IS NOT THE CASE O F CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT IT IS A SIMPLE CASE OF THE ASSESSEE NOT BEING ABLE TO SUBSTANTIATE ITS CLAIM WITH NECESSARY EVIDE NCE. THEREFORE HE PRAYED THAT THE ORDERS OF THE CIT(A) B E CONFIRMED. 5. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ERS OF THE A.O AND SUBMITTED THAT MERELY BECAUSE THE AS SESSEE HAS AGREED TO THE ADDITION AS INCOME, IT CANNOT BE SAID THAT THE ASSESSEE IS RELEASED FROM THE MISCHIEF OF PENA L PROCEEDINGS U/S 271(1)(C) OF THE ACT. IN SUPPORT O F HIS CONTENTIONS HE PLACED RELIANCE UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA (P.) LTD. VS CIT-II [2013] 38 TAXMANN.COM 448 (SC). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE A.O HAS INITIA TED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT BECAUS E THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE AND PROV E THE PURCHASES MADE FROM M/S APM. THE REASON FOR THE LE VY OF PENALTY IS THE ADDITIONS WHICH THE ASSESSEE ITSELF HAS VOLUNTARILY AGREED FOR AS IT HAS NOT BEEN ABLE TO P ROVE THE GENUINENESS OF THE TRANSACTIONS. WE FIND THAT THE CIT(A) 5 ITA NO. 1414/HYD/2013 & 107/HYD/2015 M/S ROLEX METRS PVT. LTD., HYD. HAS CONSIDERED THE FACTUAL MATRIX OF THE CASE BEFOR E DELETING THE PENALTY U/S 271(1)(C) OF THE ACT. TH E RELEVANT PARA IS AS UNDER: I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. LEVY OF PENALTY U/S 271(1)( C) IS NOT A ROUTINE EXERCISE, APPLICABLE FOR EACH AND EVERY DIS ALLOWANCE. IT IS TRITE LAW THAT THE REQUIREMENTS FOR LEVY OF PENA LTY ARE MUCH MORE STRINGENT THAN FOR ASSESSMENT. WHILE THE APPE LLANT HAD ITSELF AGREED FOR THE DISALLOWANCE OF THE PURCHASES IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THERE ARE TWO FACTOR S THAT GO IN FAVOUR OF THE APPELLANT IN THIS CASE. FIRSTLY, THE PROPRIETOR OF APM, SRI SANJAY HAD CONFIRMED THE TRANSACTION THOUG H HE COULD NOT FURNISH THE DETAILS IMMEDIATELY. SECONDLY, THE CIRCUMSTANCES IN WHICH THE APPELLANT HAD AGREED TO THE DISALLOWANCE NEEDS TO BE BORNE IN MIND. THE APPELLA NT HAD SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PUR CHASES FROM APM HAD BEEN MADE THROUGH AN AGENT, THAT HE HAD BEE N UNABLE TO LOCATE THE AGENT AS A RESULT OF WHICH HE WAS NOT IN A POSITION TO PROVE THE GENUINENESS OF THE PURCHASES AND THERE FORE, AGREED FOR A DISALLOWANCE OF THE PURCHASES OF RS. 1,16,12, 952. IN OTHER WORDS, IT ADMITTED THE INABILITY TO PROVE THE GENUI NENESS OF THE TRANSACTION MERELY DUE TO THE INABILITY TO LOCATE T HE AGENT AND NOT BECAUSE THE TRANSACTION HAD NOT TAKEN PLACE AT ALL. THE MANNER IN WHICH THE DISALLOWANCE WAS ACCEPTED BY TH E APPELLANT, COUPLED WITH THE CONFIRMATION BY APM THA T THE TRANSACTION HAD INDEED TAKEN PLACE, LEADS TO THE CO NCLUSION THAT CONCEALMENT OF INCOME ON THE PART OF THE APPELLANT HAS NOT BEEN ESTABLISHED IN THE CASE. THE LEVY OF PENALTY IS THE REFORE, SET ASIDE AND THE APPEAL IS ALLOWED. 7. WE FIND THAT THE FINDINGS OF THE CIT(A) ARE SUBSTANTIATED BY THE DOCUMENTS FILED BY THE ASSESSE E BEFORE US. WE AGREE THAT THE ADDITION IS NOT ON AC COUNT OF ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICU LARS BUT DUE TO INABILITY OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS. IT MAY BE A GOOD GROUND FOR CONFIRMATION OF ADDITION BUT AS RIGHTLY HELD BY THE CIT(A), IT IS NOT A CASE FOR LEVY OF PENALTY. IN V IEW OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE 6 ITA NO. 1414/HYD/2013 & 107/HYD/2015 M/S ROLEX METRS PVT. LTD., HYD. CIT(A) FOR BOTH THE ASSESSMENT YEARS, AND ACCORDING LY REVENUES APPEALS ARE DISMISSED. 8. IN THE RESULT, REVENUES APPEALS FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY , 2017. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 31 ST JANUARY, 2017 KRK 1) M/S ROLEX METERS PVT. LTD., PLOT NO. 20& 21 FIRST FLOOR PRASANTH NAGAR, KUKATPALLY, INDUSTRIAL AREA,HYD. 2) DCIT, CENTRAL -3(1), HYDERABAD 3) CIT -VI, HYDERABAD 4) ACIT- RANGE-3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE