M/s. Handum Industries Ltd, Hyderabad V. The ACIT, Central Circle - 5, Hyderabad

ITA 1486/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61886 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Search and seizure; Wrong claim
• Section: 143(3)

Judgement Text

1 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.CCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 1486 & 1487/HYD/2010 ASSESSMENT YEARS : 2003-04 & 2005-06 HANDUM INDUSTRIES LTD., ASSESSEE HYDERABAD (PAN AFYPM1120J) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDENT CENTRAL CIRCLE 5, HYDERABAD ASSESSEE BY : MR. S. RAMA RAO RESPONDENT BY : MR. V. SRINIVAS DATE OF HEARING : 05/03/2012 DATE OF PRONOUNCEMENT : 04/05/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE ORDERS OF THE CIT(A)-III, HYDERABAD DATED 26/10/2010 FOR T HE ASSESSMENT YEARS 2003-04 AND 2005-06. AS IDENTICAL ISSUES ARE INVOLV ED IN BOTH THESE APPEALS, THEY WERE HEARD TOGETHER AND, THEREFORE, WE FIND IT CONVENIENT TO DISPOSE OF THESE APPEALS BY WAY OF A COMMON ORDER. 2. SEARCH AND SEIZURE OPERATIONS CONDUCTED IN THE C ASE OF THE ASSESSEE AND OTHER CONCERNS OF SUJANA GROUP OF INDUSTRIES. A FTER THE SEARCH OPERATIONS, THE ASSESSING OFFICER HAD INITIATED ASS ESSMENT PROCEEDINGS FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 BY ISSUING NOTICES U/S 153C OF THE 2 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. ACT. THE ASSESSING OFFICER MADE CERTAIN ADDITIONS WHILE COMPLETING THE ASSESSMENT PASSED U/S 143(3) READ WITH 153C OF THE ACT. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S 271( 1)(C) OF THE ACT, AT THE TIME OF COMPLETION OF ASSESSMENT. 3. FOR THE A.Y. 2003-04, THE ASSESSING OFFICER ISSU ED A FRESH SHOW CAUSE NOTICE TO THE ASSESSEE REQUESTING TO EXPLAIN AS TO WHY PENALTY ON THE GROUND OF CONCEALMENT OF INCOME SHOULD NOT BE LEVIED. IN R ESPONSE TO SAME AS NOTED BY THE AO, THE ASSESSEE HAD SUBMITTED THAT THERE IS NO INTENTIONAL WITHHOLDING OF INFORMATION. THE ASSESSING OFFICER, HOWEVER, NOTED THAT NO SPECIFIC EXPLANATION HAS BEEN OFFERED BY THE ASSESS EE WITH REGARD TO THE ISSUES OF DISALLOWANCE OF DEPRECIATION INTEREST AND LOSS ON ASSET. REFERRING TO THE OPPORTUNITIES PROVIDED TO THE ASSESSEE DURING T HE ASSESSMENT PROCEEDINGS TO EXPLAIN ITS CASE, AND NON SUBMISSION OF SATISFAC TORY REPLY BY THE ASSESSEE HE OBSERVED THAT IT HAS BEEN PROVED BEYOND DOUBT TH AT THE ALLEGED SUPPLIERS OF MACHINERY WERE PROPRIETARY CONCERNS OF THE EMPLO YEES AND BOGUS BILLS & INVOICES WERE BEING MANUFACTURED TO SHOW PURCHASES. HE FURTHER NOTED THAT THE EMPLOYEES WHO WERE SHOWN AS PROPRIETORS OF VARI OUS CONCERNS HAVE ACCEPTED ON BOTH COUNTS THAT THEY HAVE NOT DONE AN Y BUSINESS AND NOT SUPPLIED ANY MACHINERY TO THE ASSESSEE. THE ASSESSI NG OFFICER, STATING THAT DURING THE COURSE OF THE PENALTY PROCEEDINGS NO EXP LANATION HAS BEEN FURNISHED BY THE ASSESSEE WITH REFERENCE TO THAT IS SUES HE FURTHER NOTED THAT WITH REGARD TO THE TWO OTHER DISALLOWANCE OF INTERE ST ON LOAN AND LOSS ON SALE OF ASSET THE ASSESSEE ALSO HAS FAILED TO OFFER ANY SPECIFIC EXPLANATION. WITH THESE OBSERVATION HE HELD THAT THE ASSESSEE HAS FUR NISHED INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED THE INC OME AMOUNTING TO RS 348,17,000/- ARISING FROM SUCH DISALLOWANCES OF CLA IM OF DEPRECIATION INTEREST AD LOSS ON SALE OF ASSTS. HENCE, THE ASSE SSING OFFICER HELD THAT THE ASSESSEE IS LIABLE FOR PENALTY ON THE GROUND OF CON CEALMENT OF INCOME FOR THE SAID AMOUNT HE LEVIED A PENALTY OF RS 127,95,247/- U/S 271(1)(C) OF THE ACT 3 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. VIDE ORDER DATED 25.3.2009. AGGRIEVED THE ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT(A). 4. DURING THE HEARING OF APPEAL IN THE WRITTEN SUB MISSIONS FILED BY THE LD. AR IT WAS SUBMITTED THAT IN THE MEANTIME THE OR IGINAL QUANTUM APPEAL IN THE ABOVE CASE FOR THE ASST. YEAR 2003-04 HAS BEEN DISPOSED OFF BY THE HONBLE ITAT, HYDERABAD BENCH, ON 28.8.2009 BY SETT ING ASIDE THE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER. HE FURNISHED BEFORE THE CIT(A) A COPY OF THE SAID ORDER (COMBINED ORDER) OF THE HONBLE TRIBUNAL IN ITA 747 TO 750 AND 1299/HYD/2008 FOR THE ASST. YEAR S 2000-01, 2001-02, 2003-04,2005-06 AND 2004-05 DATED 28.8.2009. REFER RING TO THE OBSERVATIONS MADE BY THE HONBLE TRIBUNAL IN THAT REGARD IN PARA 13 OF THE SAID ORDER THE LD. AR SUBMITTED THAT PENALTY U/S 271(1)(C) MAY NO T BE LEVIED AND NECESSARY ORDER FOR DELETING THE PENALTY MAY PLEASE BE DIRECT ED TO BE PASSED IN FAVOUR OF THE ASSESSEE. 4.1 THE CIT(A) WITH RESPECT TO THE PENALTY ON ACCOU NT OF DEPRECIATION CLAIMED ON NON-EXISTING ASSETS, HELD AS FOLLOWS: FROM THE ABOVE IT IS SEEN THAT THE DISALLOWANCE OF DEPRECIATION OF RS 237,07,000/- ON PLANT AND MACHINERY MADE IN THE ASS ESSMENT ORDER WHICH WAS CONFIRMED BY THE CIT(A) HAS BEEN DELETED BY THE HONBLE TRIBUNAL VIDE THEIR ABOVE ORDER. SINCE THE ABOVE ADDITION HAS BEEN DELETED BY THE HONBLE TRIBUNAL NO PENALTY U/S 271( 1)(C) COULD BE LEVIED AGAINST THE SAID ADDITION. 4.2 WITH RESPECT TO THE PENALTY ON ACCOUNT OF BANK INTEREST, THE CIT(A) HELD AS UNDER:- FURTHER IN THEIR SAID ORDER IN ITA 749/HYD/2008 TH E HONBLE TRIBUNAL HAVE SET ASIDE THE ISSUE OF DISALLOWANCE OF BANK I NTEREST AMOUNTING TO RS 106,02,000/- TO THE FILE OF THE ASSESSING OFFICE R DIRECTING HIM TO RECONSIDER THE SAME AFTER VERIFYING THE NECESSARY D ETAILS AND GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. 4.3 WHILE IMPOSING PENALTY ON THE GROUND OF CONCEA LMENT OF INCOME, THE ASSESSING OFFICER CONSIDERED THE DISALLOWANCE OF RS . 5,08,000/- TOWARDS CLAIM OF LOSS AND SALE OF ASSETS. THIS DISALLOWANCE WHICH WAS UPHELD BY THE CIT(A) HAD BEEN CONCEDED BY THE ASSESSEE BEFORE THE TRIBUNAL. AS PER PARA 11 OF THE SAID ORDER OF THE HONBLE TRIBUNAL THOUGH THE ASSESSEE HAS RAISED GROUND AGAINST THE SAID DISALLOWANCE MADE IN ASSESS MENT IF DID NOT PRESS THE SAID GROUND BEFORE THE HONBLE TRIBUNAL. ACCORDING LY THE SAID GROUND WAS REJECTED BY THE HONBLE TRIBUNAL. UNDER THE CIRCUMS TANCES IT CLEARLY SHOWS THAT THE ASSESSEE INDIRECTLY ADMITS THAT IT HAS WIL LFULLY MADE SUCH WRONG CLAIM FOR DEDUCTION, FROM THIS IT THUS MAKES CLEAR THAT THE ASSESSEE HAS CONCEALED ITS INCOME TO THE EXTENT OF SAID DISALLOW ANCE OF RS 508,000/- FOR THE ASST. YEAR 2003-04. THEREFORE THE ASSESSEE IS FULLY LIABLE FOR PENALTY U/S 271(1)(C) AGAINST THE SAID AMOUNT, THUS THE DECISIO N OF THE AO IN LEVYING PENALTY U/S 271(1)(C) ON THE SAID AMOUNT IS JUSTIFI ED AND HENCE THE SAME IS UPHELD. 4.4 THE FIRST TWO ISSUES RELATING TO PENALTY IMPOSE D WITH RESPECT TO DEPRECIATION CLAIMED ON NON-EXISTING ASSETS AND PEN ALTY TOWARDS DISALLOWANCE OF INTEREST AS THE REMITTANCE OF BANK INTEREST HAS NOT BEEN DONE BY THE ASSESSEE BEFORE DUE DATE OF FILING OF RETURN, IS CO MMON FOR BOTH THE ASSESSMENT YEARS 2003-04 AND 2005-06. 4.5 .0WITH RESPECT TO LEVY OF PENALTY CONSEQUENT T O FURNISHING OF INACCURATE PARTICULARS TOWARDS PRIOR PERIOD EXPENDI TURE FOR THE ASSESSMENT YEAR 2005-06, THE CIT(A) HAS OBSERVED AS FOLLOWS:- 6IN PARA 4 OF THE ABOVE PENALTY ORDER, HE H AS STATED THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICU LARS OF INCOME AND THEREBY CONCEALED THE INCOME OF RS. 3,57,64,926/-, WITH REGARD TO DEPRECIATION, INTEREST AND PRIOR PERIOD EXPENDITURE . THUS, THE SAID AMOUNT OF RS. 3,57,64,926/- INCLUDES THE ADDITION O F RS. 7,96,737/-, ARISING FROM DISALLOWANCE OF PRIOR PERIOD EXPENSES. THE SAID DISALLOWANCE, MADE IN THE ASSESSMENT ORDER, WHICH W AS CONFIRMED BY THE CIT(A), HAS BEEN CONCEDED TO BY THE APPELLANT B EFORE THE HONBLE 5 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. TRIBUNAL. AS PER PARA 17 OF THE SAID ORDER OF THE H ONBLE TRIBUNAL, THOUGH THE APPELLANT HAS RAISED GROUND AGAINST THE SAID DISALLOWANCE MADE IN ASSESSMENT, IT DID NOT PRESS THE SAID GROUN D BEFORE THE HONBLE TRIBUNAL. ACCORDINGLY, THE SAID GROUND WAS REJECTED BY THE HONBLE TRIBUNAL. UNDER THE CIRCUMSTANCE, IT CLEARL Y SHOWS THAT THE APPELLANT INDIRECTLY ADMITS THAT IT HAS WILLFULLY M ADE SUCH WRONG CLAIM OF DEDUCTION. FROM THIS, IT THUS MAKES CLEAR THAT T HE APPELLANT HAS CONCEALED ITS INCOME TO THE EXTENT OF ABOVE DISALLO WANCE OF RS. 7,96,737/- FOR THE ASSESSMENT YEAR 2005-06. THEREFO RE, THE APPELLANT IS FULLY LIABLE FOR PENALTY U/S 271(1)(C) ON THE SAID AMOUNT. THUS, THE DECISION OF THE AO IN LEVYING PENALTY U/S 271(1)(C) ON THE SAID AMOUNT, IS JUSTIFIED, AND HENCE, THE SAME IS UPHELD. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI MURALI MOHAN CONTENDED THAT THE CIT(A) ERRED IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER WHEREIN WITH RESPECT TO PENALTY ON THE DISALLOWANCE ON SALE OF ASSETS OF RS. 5,08,000/- FOR THE ASSESSMENT YEAR 2003-04 AND THE ORDER OF THE CIT(A) IN CONFIRMING THE PENALTY ON THE DISALLOWANCE OF RS. 7 ,96,737/- TOWARDS PRIOR PERIOD EXPENDITURE IN A.Y. 2005-06. 5.1 THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE COMPANY HAD NOT CONCEALED ANY PARTICULARS AND THE N ECESSARY EXPLANATIONS HAVE BEEN GIVEN TO THE ASSESSING OFFICER AND CIT(A) . THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE LEVY OF PENALTY IS NOT AUTOMATIC AND MERELY BECAUSE THE DISALLOWANCE WAS CONCEDED IN QUANTUM AP PEAL BEFORE THE TRIBUNAL, PENALTY CANNOT BE LEVIED. 5.2 THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE DECISION OF THE COORDINATE BENCH IN THE CASE OF SHRI S. PRASAD RAO IN ITA NO. 338/HYD/06 FOR A.Y. 1997-98 VIDE ORDER DATED 21/11/2008. HE AL SO RELIED UPON THE FOLLOWING CASE LAWS:- I) HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, [1972 ] 83 ITR 26 (SC) II) K.C. BUILDERS VS. ACIT [2004] 265 ITR 562 (SC) 6 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. III) MOHAMMAD IBRAHIM AZIMULLA VS. CIT [1981] 131 ITR 680 (ALL.) IV) CIT VS. K.R. CHINNI KRISHNA CHETTY [2000] 246 ITR 121 V) CIT VS. SANTOSH FINANCIERS [2001] 247 ITR 742. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 5 88 (SC) HELD AS UNDER:- MERELY BECAUSE THE ASSESSEE MISTAKES A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AMOUNT TO FURNISHING O F INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. 8. IN THE PRESENT CASE BEFORE US, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY GIVE RISE TO SUSPICION SUFFICIENT TO MA KE THE ADDITION FOR THE PURPOSE OF ASSESSMENT BUT NOT SUFFICIENT ENOUGH TO JUSTIFY LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSING OFFICER SHOULD SHOW THAT THE PLEA OF THE ASSESSEE IS FALSE OR THAT THE ASSESSEE HAS COMMITTE D SOME FRAUD OR GROSS WILLFUL NEGLIGENCE ON HIS PART TO BRING ABOUT CONCE ALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME. PENALTY CANNOT BE IMPOSED ON THE GROUND THAT THE ASSESSEE HAS ACCEPTED THE AD DITION IN QUANTUM APPEAL FOR THE REASONS BEST KNOWN TO HIM. THEREFORE, PENAL TY LEVIED IS HEREBY DELETED IN BOTH THE YEARS UNDER CONSIDERATION. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 04/05/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 4 TH MAY, 2012. KV 7 ITA NOS. 1486 & 1487/HYD/2010 HANDUM INDUSTRIES LTD. COPY TO:- 1) HANDUM INDUSTRIES LTD., C/O P. MURALI & CO., CAS, 6-3-655/2/3, I FLOOR, SOMAJIGUDA, HYDERABAD 82. 2) ACIT, CENTRAL CIRCLE 5, HYDERABAD 3) THE CIT (A)-III, HYDERABAD 4) THE CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.