P.Narsing Rao, Hyderabad V. Income Tax Officer, Hyderabad

ITA 1454/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74736 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B SHANTI KUMAR
• Keywords: Unexplained cash credit; Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1454/HYD/13 : ASSESSMENT YEAR 2007 - 08 SHRI P.NARSING RAO, HYDERABAD ( PAN - AJEPP 5012 C) V/S. INCOME TAX OFFICER WARD 8(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.SHANTI KUMAR RESPONDENT BY : SHRI JEEVAN LAL LAVIDIYA DR DATE OF HEARING 04.3.2014 DATE OF PRONOUNCEMENT 21.3.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD DATED 7.8.2013 , CONFIRMING THE PENALTY OF RS.10,09,800 LEVIED BY THE ASSESSING OFFICER IN RELATION TO THE ADDITION OF RS.30,00,000 MADE ON ACCOUNT OF UNEXPLAINED CREDITS, FOR THE ASSESSMENT YEAR 2007 - 08 2. BRIEF FACTS OF THE CASE LEADING TO THE FILING OF THE PRESENT APPEAL ARE THAT THE ASSESSEE, AN INDIVIDUAL AND PROPRIETOR OF M/S. PRIYANKA WINES, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 ON 23.10.2007 DECLARING TOTAL INCOME OF R S .3,46,500. TH E ASSESSING OFFICER COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF R S .56,28,905, AFTER MAKING ADDITIONS ON ACCOUNT O F DIFFERENCE IN SALES OF R S .22,68,402; UNEXPLAINED CASH CREDIT S O F R S .30,00,000 AND BY WAY OF DISALLOWANCE OF EXPENDITURE OF RS.14,003, VIDE ORDER OF ASSESSMENT DATED 16.12.2009 PASSED UNDER S.143(3) OF THE ACT. WHILE THUS C OMPLETING THE ASSESSMENT, THE ASSESSING OFFICER ALSO INITIATED THE PROCEEDINGS FOR LEVY OF PENALTY UNDER S.271(1)(C) OF THE ACT. ITA NO. 1 454 / HYD/20 1 3 SHRI P.NARSING RAO, H YDERABAD 2 3. AS FOR THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN SALES, THE ASSESSING OFFICER NOTICED THAT IN THE PROFIT & LOSS ACCOU NT THE ASSESSEE HAS SHOWN PURCHASE OF RS .4,10,10,200 AND SALES AT R S .4,59,03,906 DURING THE FINANCIAL YEAR 2006 - 07. ON VERIFICATION OF BOOKS PRODUCED, IT WAS SEEN THAT THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT ARE NOT FULLY VOUCHED AND IN RESPECT O F SALES, THE ASSESSEE COULD PRODUCE ONLY COMPUTERIZED ABSTRACTS O F DAILY SALES, WHICH WERE TERMED BY THE ASSESSING OFFICER AS D ETAILS O F WITHOUT BI L LING DAILY SALES . IT WAS OBSER V ED THAT THE EVIDENCE FURNISHED BY TH E ASSESSEE IN RESPECT OF SALES W E RE ALS O NOT VERIFIABLE , AND THEY ARE ALSO NOT RELIABLE. IT WAS OBSERVED THAT THE GROSS PROFIT MARGIN ADMITTED BY THE ASSESSEE IS 13.74% AND THE NET PROFIT IS 1.09% WHICH WAS TOO LOW TO BE ACCEPTED. THE ASSESSING OFFICER, TH E REAFT E R KEEPING IN VIEW THE G.O. M S. NO.184 DATED 17.2.2005 OF THE GOVERNMENT OF ANDHRA PRADESH, ACCORDING TO WHICH THE RETAILERS MARGIN, I.E. THE GROSS PROFIT IS 27% ON SALES OF ORDINARY LIQUOR PRODUCTS, 20% ON MEDIUM AND PREMIUM VARIETIES OF IMFL AND 25% ON BEER; AND TAKING INTO CON S I D ERATION VARIOUS SUBMI S SION S MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, THE SALES WERE ESTIMATED AT 20% OF TH E GOODS SOLD, AND ARRIVED AT THE DIFFERENCE BETWEEN THE SALES ADMITTED AND SALES ESTIMATED AT R S .22,68,402, WHICH WAS ADDED TO THE INCOME RETURNED. ON FURTHER APPEALS BY THE ASSESSEE, ULTIMATELY THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ESTIM A TE THE NET PROFIT AT 5% ON THE STOCKS PUT FOR SALE DURING THE Y E AR UNDER CONSIDERATION , W HICH R E SULTED IN THE ESTIMATION OF PROFIT AT RS.20 , 07,17 9 . RE DUCING THEREFROM THE PROFIT ADMITT E D BY THE ASSESSEE OF R S .5,02,970, DIFFERENTIAL INCOME ADDED WAS R S .15,14,210. THIS AMOUNT OF RS.15,14,210, WAS TREATED AS ONE COMPONENT OF THE CONCEALED INCOME, WITH REFERENCE TO WHICH PENALTY WAS TO BE IMPOSED. 4. THE ASSESSING OFFICER FURTHER NOTICED F R OM THE BALANCE SHEET FILED WITH THE RETURN THAT THE ASSESSEE HAS SHOWN UNSECURED LOAN OF R S .17,00,000 FROM SMT.B.KAMALAMMA AND RS.13,00,000 FROM B.SATTAIAH. WHEN ASKED FOR DETAILS OF UN S ECURED LOANS AND TO P R OVE THE CREDIT - WORTHINESS, THE ASSESSEE STATED THAT H E WAS ADOPTED BY SMT.KAMALAMMA AND SHRI B.SATTAIAH IN THE ITA NO. 1 454 / HYD/20 1 3 SHRI P.NARSING RAO, H YDERABAD 3 Y E AR 1985, AS THEY HAVE NO MALE CHILDREN AND THEY HAVE GIVEN HIM THE AMOUNT OF RS.30,00,000. SINCE IT WAS STATED THAT THOSE PERSONS WERE NO LONGER PRESENT, AND I N THE ABSENCE OF ANY EVIDENCE FURNISHED TO SUBSTANTIATE EITHER THE GENUINENESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO THE SAID SUM OF RS.30,00,000, OR THE CREDITWORTHINESS OF SMT. KAMALAMMA AND SHRI B.SATTAIAH, THE ASSESSING OFFICER MADE THE ADDITION OF RS.30,00,000 BY WAY OF UNEXPLAINED CREDIT, WHICH ADDITION WAS CONFIRMED BY THE CIT(A) AS WELL AS THE T RIBUNAL ON APPEAL. THIS WAS THE SECOND COMPONENT OF THE CONCEALED INCOME, WITH REFERE N CE TO WHICH PENALTY WAS PROPOSED TO BE LEVIED. 5. THE ASSESSING OFFICER, NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AGAINST THE PENALTY PROPOSED UNDER S.271(1 ) ( C) OF THE ACT, ULTIMATELY LEVIED A PENALTY OF R S .15,19,480, VIDE ORDER DATED 28.12.2012, PASSED UNDER S.271(1 )(C) OF THE ACT . 6. ON APPEAL, THE CIT(A) CANCELLED THE PENALTY LEVIED WITH REFERENCE TO THE ESTIM A TED ADDITION MADE TO THE NET PROFIT DISCLOSED, OBSERVING THAT ESTIMATION IS B A SED ON CIRCUMSTANTIAL EVIDENCE , AND THERE IS NO SPECIFIC EVIDENCE WH IC H REVEALS THAT THE ASSESSEE HAS CONCEALED ITS NET PROFIT, AND AS SUCH NO PENALTY ON E S TIMAT E D INCOME CAN BE LEVIED UNDER S.271(1)(C) OF THE AC T. HE HOWEVER, WITH REGARD TO THE PENALTY IMPOSED WITH REFERENCE TO THE UNEXPLAINED CREDITS, AFTER DETAILED CONSIDERATION OF THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE RATIO LAID DOWN BY VARIOUS COURTS ON THE POINT AT ISSUE, UPHELD THE VIEW TAKEN BY THE REVENUE AUTHORITIES IN TR E ATING SUCH UNEXPLAINED CREDITS AS REPRESENTING CONCEALED INCOME OF THE ASSESSEE, AND CONSEQUENTLY, SUSTAINE D THE PENALTY LEVIED FOR CONCEALMENT IN THAT BEHALF. 7. AGGRIEVED, ASSESSEE PREFERRED THIS SECOND APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE CONTENTIONS URGED BEFORE THE REVENUE AUTHORITIES SUBMITTED THAT IT IS NOT A FIT CASE FOR THE ITA NO. 1 454 / HYD/20 1 3 SHRI P.NARSING RAO, H YDERABAD 4 IMPOSITION OF PENALTY. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE MATERIAL PARTICULARS NECESSARY F OR COMPLETION OF THE ASSESSMENT. HE SUBMITTED THAT THERE CAN BE NO DISPUTE WITH REGARD TO THE IDENTITY OF THE PERSONS, WHO HAVE GIFTED THE AMOUNT OF RS.30,00,000, SINCE THEY WERE THE PERSONS WHO ADOPTED THE ASSESSEE. THE ASSESSING OFFICER HAS MADE AN ADDI TION IN THAT BEHALF IN THE ASSESSMENT MERELY ON ACCOUNT OF HIS SUSPICION AS TO THE CREDITWORTHINESS OF THOSE PERSONS AND GENUINENESS OF THE CLAIM OF THE ASSESSEE AS TO THE GIFTING OF THE AMOUNTS IN QUESTION BY THEM TO THE ASSESSEE. IF THE ASSESSEE COULD NOT ADDUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM, IT WAS BECAUSE THOSE PERSONS WERE NO LONGER THERE. HE FURTHER SUBMITTED THAT MERELY BECAUSE THE ADDITION HAS BECOME FINAL IN QUANTUM PROCEEDINGS, PENALTY CANNOT BE JUSTIFIED, SINCE THE ASSESSEE WAS NOT GUIL TY OF EITHER CONCEALING ANY PART OF ITS INCOME OR SUPPRESSING ANY MATERIAL FACTS, IMPUGNED PENALTY CANNOT BE JUSTIFIED. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON THE DECISION OF THIS T R IBUNAL IN THE CASE OF SHRI NITIN KUMAR SHAH, HYDERABAD V/S. ACIT, CIRCLE 1(2), HYDERABAD, IN ITA NO.870 & 872/HYD/2013, DULY FURNISHING A COPY THEREOF BEFORE US. HE ACCORDINGLY PRAYED THAT THE IMPUGNED PENALTY SHOULD BE CANCELLED IN ITS ENTIRETY. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND, STR ONGLY SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 10. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. THE ISSUE ARISING FOR CON S I D ERATION IN THIS APPEAL IS THE JUSTIFICATION FOR THE PEN ALTY IMPOSED WITH REFERENCE TO THE ADDITION OF RS. 30,00,000, WHICH ATTAINED FINALITY IN THE QUANTUM PROCEEDINGS, MADE ON ACCOUNT OF UNEXPLAINED CREDITS BY DISBELIEVING THE VERSION OF THE ASSESSEE THAT HE RECEIVED THE SAID AMOUNT FROM ONE SHRI SATTAIAH AN D SMT. KAMALAMMA, WHO HAVE ADOPTED HIM SINCE THEY D ID NOT HAVE MALE CHILDREN. IT IS DUE TO PAUCITY OF EVIDENCE WHICH THE ASSESSEE COULD ADDUCE TO SUBSTANTIATE ITS CLAIM WITH REGARD TO GIFTING OF THE AMOUNTS BY THOSE ITA NO. 1 454 / HYD/20 1 3 SHRI P.NARSING RAO, H YDERABAD 5 TWO INDIVIDUALS, THAT THE IMPUGNED ADD ITION HA VE BEEN MADE BY THE ASSESSING OFFICER, AND IT STOOD SUSTAINED BY THE APPELLATE AUTHORITIES. PAUCITY OF EVIDENCE MAY JUSTIFY AN ADDITION IN QUANTUM PROCEEDINGS, BUT SUCH AN ADDITION IN QUANTUM PROCEEDINGS CANNOT AUTOMATICALLY LEAD TO A CONCLUSION W ITH REGARD TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. PENALTY PROCEEDINGS ARE INDEPENDENT OF THE QUANTUM PROCEEDINGS. IN THE PENALTY PROCEEDINGS, ONUS IS ON THE DEPARTMENT , TO ESTABLISH THAT THE ASSESSEE IS GUILTY O F EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, SO AS TO JUSTIFY THE PENALTY PROPOSED. IN THE PRESENT CASE, EXCEPT FOR RELYING ON THE FINDINGS ARRIVED AT AND INFERENCES DRAWN IN THE QUANTUM PROCEEDINGS WITH REGARD TO THE UNEXPLAINED CREDITS IN QUESTION , NOTHING HAS BEEN BROUGHT ON RECORD TO INDICATE THAT THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME . O N THE CONTRARY, IT APPEARS FROM THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS IN RELATION TO GIFTS IN QUESTION, AND IT WAS ONLY NOT SATISFIED WITH THE COMPLETENESS OF THE EVIDENCE ADDUCED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM, MORE PARTICULARLY WITH REGARD TO CREDIT - WORTHINESS OF THE PERSONS, FROM WHOM, ASSESSEE HAS CLAIMED TO HAVE RECEIVED GIFTS, THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN THE QUANTUM PROCEEDINGS, DISBELIEVING THE GIFTS CLAIMED. AS ALREADY NOTED ABOVE, WHILE PAUCITY OF EVIDENCE ADDUCED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM MAY JUSTIFY AN ADDITION, MERELY ON THAT COUNT NO INFERENCE OF EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME COULD BE DRAWN. WE ARE SUPPORTED IN THIS BEHALF BY THE ORDER OF THIS TRIBUNAL I N THE CASE OF NITIN KUMAR SHAH (SUPRA), RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE ACCORDINGLY, SET ASIDE THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND CANCEL THE PENALTY SUSTAINED BY THE CIT(A) WITH A REGARD TO UNEXPLAINED CREDITS, AS WE LL. CONSEQUENTLY, ASSESSEES GROUNDS IN THIS APPEAL ARE ALLOWED. ITA NO. 1 454 / HYD/20 1 3 SHRI P.NARSING RAO, H YDERABAD 6 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 21.3.2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 21 ST MARCH , 2014 COPY FORWARDED TO: 1. SHRI P.NARSING RAO, C/O. SHRI B.SHANTI KUMAR, ADVOCATE 411,TARAMANDAL COMPLEX, 5 - 9 - 13, SAIFABAD, HYDERABAD 500 004. 2 . INCOME TAX OFFICER WARD 8 ( 1 ), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD 4. COMMISSIONER OF INCOME - TAX II , HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S