Pasham Madhusudhan Reddy, Hyderabad V. ACIT., CC-3, Hyderabad

ITA 1452/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6141 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P. MURALI MOHAN
• Keywords: Unexplained investment; Recovery proceedings; Opportunity of being heard; Reasonable cause
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 153A; 250; 143(2); 113; 13

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA NO. 923/HYD/2015 ASSESSMENT YEAR: 2006-07 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD PAN AEWPP0306 E VS. THE DCIT, CENTRAL CIRCLE-2 HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS. 1451&1452/HYD/2014 ASSESSMENT YEAR: 2007-08 & 2008-09 SHRI PASHAM MADHUSUDHAN VS. THE ACIT, CENTRAL C IRCLE-3 REDDY, HYDERABAD HYDERABAD. PAN AEWPP0306 E ASSESSEE BY : SHRI P. MURALI MOHAN REVENUE BY : SHRI A. SITARAMA RAO DATE OF HEARING : 08-02-2017 DATE OF PRONOUNCEMENT : 17 -02-2017 ORDER PER G. PAVAN KUMAR, J.M.: THESE ARE THE THREE APPEALS FILED BY THE ASSESSEE AGAINST THE DIFFERENT ORDERS OF THE CIT(A) PASSED U/S 221(1 ) AND 250 OF THE IT ACT. SINCE THE ISSUE ARE COMMON IN ALL THE THREE APPEALS, FOR THE SAKE OF CONVENIENCE THEY WERE CLUB BED AND HEARD TOGETHER AND DISPOSE OFF THESE APPEALS BY THE COMMON ORDER. 2 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. 2. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE OR DER OF CIT(A) 1, HYDERABAD VIDE ITA NO. 0601/CIT(A)-1, H YD/2014- 15, DATED 14/05/2015 FOR AY 2006-07, WHEREIN THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) -1, ERRED BOTH ON FACTS AND IN LAW IN SUSTAINING THE ORDER PASSED BY THE AO U T S 221(1) OF 1.T . ACT 1961, CONFIRMING THE PENALTY OF RS. 8,98,145/-. 2. THE LEARNED CIT(A) -1, OUGHT TO HAVE CONSIDERED THAT, THE ASSESSEE HAS FILED THE REVISED COMPUTATION OF INCOM E, AND AS PER THAT TAX PAYABLE IS NIL/- AND HENCE NO PENALTY CAN BE LEVIED. 3. THE LEARNED CIT(A) -1, ERRED WHILE CONFIRMING O RDER OF PENALTY U/S 221(1) PASSED BY THE DCIT, CENTRAL CIRCLE-2, HY DERABAD, ON THE BASIS OF THE ORIGINAL ROI AND IGNORING THE REVI SED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. 4. THE LEARNED CIT(A) -1, ERRED WHILE NOT CONSIDER ING THAT, THE ASSESSEE HAS ALREADY PREFERRED AN APPEAL AGAINST TH E ASST. ORDER PASSED U/S 143(3) OF I.T. ACT, 1961 IN WHICH ONE OF THE GROUNDS TAKEN IS NOT CONSIDERING THE REVISED COMPUT ATION AND AS ON DATE PENDING WITH ITAT. AS PENALTY HAS BEEN LEVI ED U/S 221(1) ON THE BASIS OF INVALID RETURN OF INCOME WHI CH IS NOT JUSTIFIED AND BAD IN LAW. 5. THE LEARNED CIT(A) -1, ERRED WHILE PASSING THE ORDER WHEREIN EXPRESSION USED IS 'MAY DIRECT' IN SECTION 221 OF I T ACT, WHICH INDICATE THAT, IMPOSITION OF PENALTY IS DISCRETIONA RY AND NOT MANDATORY. 6. THE APPELLANT HAS PLACED RELIANCE ON THE FOLLOW ING CASE LAW ITO V. DEVSONS (P) LTD (2008) 113 TTJ (DELHI) 615, WHER EIN IT WAS HELD THAT THE ASSESSING OFFICER MUST USE DISCRETION AFTER TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND SHOULD NOT IMPOSE THE PENALTY IN AN ARBITRARY M ANNER. 7. THE APPELLANT MAY ADD, ALTER, SUBSTITUTE ANY OT HER POINTS, TO THE GROUNDS OF APPEAL BEFORE OR AT ANY TIME BEFORE OR A T THE TIME OF HEARING OF CASE/ APPEAL. 3 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF REAL ESTATE AND THERE WAS SEARCH AND S EIZURE OPERATION U/S 132 OF THE IT ACT IN THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 09-10-2007. IN SEARCH OPERATIONS, C ERTAIN MATERIAL WAS SEIZED PERTAINING TO THE DIFFERENT YEA RS. SUBSEQUENTLY NOTICE U/S 153A OF THE IT ACT DATED 26 -06-2008 WAS ISSUED FOR THE A.YS 2002-03 TO 2007-08. IN RESP ECT OF CURRENT ASSESSMENT YEAR, SUMMONS ARE ISSUED U/S 13 2 OF THE IT ACT AND STATEMENTS WERE RECORDED. WHEREAS THE A SSESSEE AFTER THE ISSUE OF NOTICE 153A OF THE IT ACT HAS FI LED THE RETURN OF INCOME ON 18-08-2009 WITH TOTAL INCOME OF RS. 50,59,365/-. SUBSEQUENTLY, NOTICE U/S 143(2) OF THE IT ACT WAS ISSUED AND IN COMPLIANCE THE LD. AR APPEARED FR OM TIME TO TIME AND FILED THE INFORMATION. THE LD. A.O ON PERUSAL OF THE FINANCIAL STATEMENTS IN THE ASSESSMENT PROCEEDI NGS FOUND DEFICIT CASH BALANCES AND MADE ADDITION BASED ON TH E DOCUMENTARY EVIDENCE RS. 89,35,110/- AS UNEXPLAINED INVESTMENTS AND RS. 3,00,000/- WAS ADDED AS PROFIT EARNED ON THE REAL ESTATE TRANSACTIONS AND LAST ADDITION BY T HE A. O U/S 68 OF THE IT ACT ON CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE RS. 1,00,94,500/- AND LD. A.O PASSED ORDER U/S 143( 3) R.W.S 153A OF THE IT ACT ON 31-12-2009. 4. MEANWHILE, THE A.O ISSUED NOTICE U/S 221 OF THE IT ACT OF PAYMENT OF TAXES. THE A.O RAISED DEMAND U/S 143 (3) OF THE IT ACT ORDER DATED 31-12-2009 OF RS. 1,28,78,2 92/-. THE A.O FIND THAT THE ASSESSEE HAS NOT PAID TAXES ON TH E ADMITTED INCOME BEING SELF-ASSESSMENT TAX RS. 29,93,819/-. THE LD. 4 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. A.O OBSERVED THAT THE ASSESSEE IN SPITE OF PROVIDIN G AN OPPORTUNITY FOR PAYMENT OF TAXES INCLUDING THE TAX ON ADMITTED INCOME, THE ASSESSEE HAS DEFAULTED IN PAYM ENT OF TAXES. THE A.O. ISSUED NOTICE U/S 226(3) OF THE I T ACT AND ATTACHED THE BANK ACCOUNTS, SINCE THERE WAS NO BALA NCE IN THE BANK ACCOUNT NO RECOVERY COULD BE MADE AND THE LD. A.O ALSO MADE ATTACHMENT U/S 281B OF THE IT ACT IN RESPECT O F LAND PROPERTY. THE LD. A.O IN THE PENALTY PROCEEDINGS O BSERVED THAT THE ASSESSEE IS HAVING A HUGE BUSINESS VOLUME IN REAL ESTATE AND HAS NOT PAID THE TAXES EVEN DURING THE A SSESSMENT PROCEEDINGS AND THE RETURN OF INCOME WAS FILED AFT ER SEARCH OPERATIONS AND SWORN STATEMENT U/S 132(4) OF THE IT ACT WAS RECORDED. FINALLY IN RESPONSE TO NOTICE U/S 153A O F THE IT ACT RETURN OF INCOME WAS FILED. FURTHER, THE A.O. IS OF THE OPINION THAT THE ASSESSEE HAS EVADED TO PAY SELF- A SSESSMENT TAX LIABILITY IRRESPECTIVE OF CREDITS IN BANK ACCOU NT DURING THE PERIOD OF 2008-09. THE ASSESSEE HAS NOT TAKEN ANY REASONABLE STEPS TO MAKE THE PAYMENT AND REPLIED TO THE SHOW CASE NOTICE DATED 08-09-2010 AND 14-09-2010 AND REL IED ON THE JUDICIAL DECISIONS. THE A.O CONSIDERED THE FACT S AND SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE A SSESSEE HAS NOT PAID THE TAXES IN SPITE OF VARIOUS REMINDER S ISSUED AND ALSO THE ASSESSEE HAS NOT EXPLAINED THE VALID REASONS AND GENUINE HARDSHIP FOR NON-PAYMENT OF TAXES. AND FUR THER HAS WILLFULLY AVOIDED TO PAY TAXES ON THE ADMITTED INCO ME AND FINALLY LD. A.O PASSED ORDER U/S 221 OF THE IT ACT, DATED 21- 09-2010. 5 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL WITH THE CIT(A). IN APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS M ADE IN THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS AND ALSO MENTIONED THAT THE ASSESSEE HAS NOT ACCEPTED THE OR DER PASSED U/S 143 (3) OF THE IT ACT, 31/12/2009, AND I S CONTESTED. THE LD. CIT(A) CONSIDERED THE FACTS AND THE FINDINGS OF THE A.O, WHERE THE A.O HAS REFERRED TO THE DETAILS OF BANK ACCOUNT WITH CREDIT OF AMOUNTS. THE LD. CI T(A) CONSIDERED THE OVERALL ASPECTS THAT THE ASSESSEE HA S NOT PAID THE TAXES ON ADMITTED INCOME AND THE QUANTUM MATTER IS CONTESTED WITH THE CIT(A) AND OBSERVED THAT THE ASS ESSEE IS HAVING ADEQUATE FUNDS AND THE REVENUE PROVIDED SUFF ICIENT TIME BUT THE ASSESSEE HAS NOT PAID THE TAXES. WITH THESE OBSERVATIONS THE LD. CIT(A) CONCURRED WITH THE FIND INGS OF THE A.O AND CONFIRMED THE ACTION OF AO IN LEVY OF PENAL TY. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. 6. BEFORE US, THE LD. AR ARGUED THAT THE LD. CIT(A ) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 221 OF THE IT ACT IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS FILE D REVISED COMPUTATION OF INCOME IN THE ASSESSMENT PROCEEDINGS AND THE LD. A.O HAS OVERLOOKED THE SUBSEQUENT REVISED COMPU TATION AND PASSED THE ORDER U/S 143(3) R.W.S 153(A) OF THE IT ACT. THE A.O HAS NOT USED HIS DISCRETIONARY POWERS WHEN THESE FACTS WERE BOUGHT ON RECORD AND THE LD. CIT(A) IN THE QUANTUM APPEAL HAS DELETED THE ADDITION AND LD. AR PRAYED 6 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. FOR ALLOWING THE APPEAL. PER CONTRA, THE LD. DR RE LIED ON THE ORDERS OF THE LOWER AUTHORITIES AND OPPOSED TO GROU NDS RAISED BY THE ASSESSEE. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AR CONTENDE D THE PENALTY LEVIED U/S 221(1) OF THE IT ACT CANNOT BE S USTAINED AS THE ASSESSEE WAS NOT TREATED AS DEFAULTER. FURTH ER, THE ASSESSEES STATEMENT U/S 132(4) OF THE IT ACT WAS R ECORDED ON ADDITIONAL INCOME IN THE SEARCH OPERATIONS. BUT AFT ER RECONCILING FINANCIAL TRANSACTIONS WITH CASH FLOW S TATEMENT THE ASSESSEE HAS FILED RETURN OF INCOME SUBSEQUENTLY TH E ASSESSEE FILED A REVISED COMPUTATION OF INCOME WITH LD. A.O BEFORE PASSING OF ORDER. BUT THESE WERE NOT CONSID ERED BY THE LD. AO AND ORDER U/S 143(3) R.W.S 153A OF THE IT AC T WAS PASSED ON 31/12/2009. THE FACT REMAINS THAT IF THE A.O HAS CONSIDERED THE REVISED COMPUTATION OF INCOME THERE IS NO TAX LIABILITY PAYABLE BY THE ASSESSEE. THE LD. AR EXPL AINED THAT THE QUANTUM APPEAL WAS ALLOWED IN FAVOUR OF THE ASS ESSEE BY THE FIRST APPELLATE AUTHORITY AND THE REVENUE HAS F ILED APPEAL WITH THE TRIBUNAL. WITHOUT PREJUDICE TO THE FACTS, THAT THE REVENUE HAS FILED AN APPEAL BEFORE US AGAINST CIT(A ) ORDER. WE MAKE IT CLEAR THAT OUR OBSERVATIONS SHALL BE SOL ELY RESTRICTED ONLY TO THE APPLICABLE PROVISIONS OF SEC TION 221(1). WE HAVE PERUSED THE SECTION 221(1) OF THE IT ACT WH ICH READ AS UNDER: 221. (1) WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHALL, IN ADDITION 7 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTE REST PAYABLE UNDER SUB-SECTION (2) OF SECTION 220 , BE LIABLE, BY WAY OF PENALTY, TO PAY SUCH AMOUNT AS THE ASSESSING OFFICER MAY DIRECT, AND IN THE CASE OF A CONTINUING DEFAULT , SUCH FURTHER AMOUNT OR AMOUNTS AS THE ASSESSING OFFICER MAY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT THE TOTAL A MOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREAR S : PROVIDED THAT BEFORE LEVYING ANY SUCH PENALTY, THE ASSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD : PROVIDED FURTHER THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE DEFA ULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PENALTY SHALL BE LE VIED UNDER THIS SECTION. EXPLANATION.FOR THE REMOVAL OF DOUBT, IT IS HEREBY DECLARED THAT AN ASSESSEE SHALL NOT CEASE TO BE LIA BLE TO ANY PENALTY UNDER THIS SUB-SECTION MERELY BY REASON OF THE FACT THAT BEFORE THE LEVY OF SUCH PENALTY HE HAS PAID TH E TAX. (2) WHERE AS A RESULT OF ANY FINAL ORDER THE AMOUNT OF TAX, WITH RESPECT TO THE DEFAULT IN THE PAYMENT OF WHICH THE PENALTY WAS LEVIED, HAS BEEN WHOLLY REDUCED, THE PENALTY LEVIED SHALL BE CANCELLED AND THE AMOUNT OF PENALTY PAID SHALL BE R EFUNDED. 8. ON PERUSAL OF THE ASSESSMENT ORDER, WE FIND THE LD. A.O EXPRESSED VIEWS ON ADDITIONS AND RAISED THE DEMAND BUT THE FACTS REMAINS THAT THE LD. A.O IN THE PENALTY PROC EEDINGS HAS MENTIONED THE BANK ACCOUNTS WERE ATTACHED U/S 226( 3) OF THE ACT AND NO RECOVERY WAS MADE DUE MEAGER CASH BALA NCES IN THE BANK ACCOUNTS. AND ALSO ATTACHMENT OF VACANT PL OT AND AGRICULTURAL LAND WAS MADE U/S 281B) OF THE IT ACT. THE A.O HAS DISCRETIONARY POWERS IN LEVYING THE PENALTY CON SIDERING THE FINANCIAL CONSTRAINTS AND REASONABLE CAUSE. T HE A.O TOOK A VIEW THAT THE ASSESSEE IS NOT ABLE TO SUBSTA NTIATE THE HARDSHIP IN PAYING THE TAXES. WHEREAS THE A.O WHIL E REFERRING 8 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. TO THE BANK ACCOUNT CREDITS AT PAGE 2 & 3 OF HIS OR DER MENTIONED THAT THERE IS NO RECOVERY OF TAXES DUE T O NIL BALANCES IN THE BANK ACCOUNTS AND THE ASSESSEE HAS CLOSED THE BANK ACCOUNTS. ONCE BANK ACCOUNT IS ATTACHED, SUCH ATTACHMENT SHALL BE LIFTED ONLY WITH THE PRIOR APPR OVAL OF INCOME TAX AUTHORITIES. IN THE HEARING PROCEEDINGS , WHEN THIS ISSUE WAS PUT BEFORE THE REVENUE, THE ANSWERS ARE N OT CONVINCING. WE ARE OF THE OPINION THE ASSESSEE HAS NOT PAID THE TAXES FOR THE VARIOUS REASONS. BUT THE LD. A.O HAS NOT PROVIDED ANY FINDINGS IN RESPECT OF CLOSURE OF THE BANK ACCOUNT WHICH ARE IN THE ATTACHMENT. THOUGH THE AS SESSEE HAS CONTESTED THE APPEAL BEFORE APPELLATE AUTHORITY AND WAS GRANTED THE RELIEF AND SAME CANNOT BE A REASON FOR THE ASSESSEE FOR NOT PAYING THE TAXES. WE FIND THE ASS ESSEE IS CONTESTING QUANTUM ISSUE IN REVENUE APPEAL BEFORE T HE TRIBUNAL. WE ARE OF THE OPINION THAT THE ASSESSEE W AS NOT TREATED AS ASSESSEE IN DEFAULT AND HIS PROPERTIE S ARE UNDER ATTACHMENT BY THE REVENUE AND THE INTEREST OF THE R EVENUE IS PROTECTED. THEREFORE, WE DO NOT FIND ANY REASON TO LEVY PENALTY BY THE ASSESSING OFFICER. ACCORDINGLY WE CONSIDERI NG THE APPARENT FACTS AND MATERIAL ON RECORD DIRECT THE A SSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S 221(1) OF THE IT ACT AND ALLOW THE GROUNDS OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 9 ITA NO. 1451 & 1452/HYD/2014 & ITA NO. 923/HYD/2015 SHRI PASHAM MADHUSUDHAN REDDY, HYDERABAD. 10. AS THE FACTS OF THE CASE AND GROUNDS ARE SIMILA R IN ITA NOS. 1451 & 1452/HYD/2014 FOR AYS 2007-08 & 2008-09 . ACCORDINGLY WE DELETE THE PENALITY LEVIED BY THE AO U/S 221(1) IN THESE APPEALS AND ALLOW THE GROUNDS OF THE ASSES SEE. 11. IN THE RESULT, ALL THE APPEALS UNDER CONSIDERAT ION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (G. PAVAN KUMA R) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 17 TH FEBRUARY, 2017 KRK 1) PASHAM MADHUSUDHAN REDDY, C/O P. MURALI & CO CA, 6-3-655/2/3, IST FLOOR SOMAJIGUDA, HYDERABAD-82 . 2) DCIT, CENTRAL CIRCLE 2, HYDERABAD 3) ACIT, CENTRAL CIRCLE-1, HYDERABAD 4) CIT(A)-1, HYDERABD 5) CIT(A) -5, HYDERABAD 6) ADDL.CIT-4, HYDERABAD 7) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 8) GUARD FILE