THE ITO WARD - 2, Eluru V. Bolla Veera Raghavaiah Chowdary, Eluru

ITA 15/VIZ/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8904 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHAN
• Assessee Lawyers: P BALA SRINIVAS
• Keywords: Unexplained cash credit; Unexplained investment; Peak credit
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 15/VIZ/2014 (ASST. YEAR : 2003-04) ITO, WARD-2, ELURU. VS. SRI BOLLA VEERA RAGHAVAIAH CHOWDARY, 25-11-20/4, OPP. SAI BABA TEMPLE STREET, N.R. PET, ELURU, W.G. DISTRICT. PAN NO. AEXPB 0370 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. BALA SRINIVAS CA. DEPARTMENT BY : SHRI R.S. ARAVINDAKSHAN - DR DATE OF HEARING : 08/05/2017. DATE OF PRONOUNCEMENT : 09/05/2017. O R D E R THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), GUNTUR, DATED 30/10/2013 FOR THE ASSESSMENT YEAR 2003-04. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PARTNER IN THE FIRM M/S.B.R.C. CONSTRUCTIONS, ELURU ALONGWITH TWO OTHERS, NAMELY B.RAMAKRISHNA AND M. SATYANARAYANA. THE ASSESSEE FILED A RETURN OF INCOME ON BEHALF OF B. RAMAKRISHNA, AS A GENERAL POWER OF ATTORNEY HOLDER. THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT OF THE ASSESSEE AND AFTER VERIFICATION, HE CAME TO A CONCLUSION THAT THE INVESTMENT SHOWN IN THE HANDS OF SHRI B. RAMAKRISHNA IS FALSE, HENCE, 2 ` THE ENTIRE AMOUNT IS TREATED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. 3. SO FAR AS SHRI M. SATYANARAYANA IS CONCERNED, HE MADE AN INVESTMENT IN THE FIRM M/S. B.R.C. CONSTRUCTIONS TO THE TUNE OF 13,62,640/-. ON VERIFICATION, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT HE HAS NOT HAVING SUFFICIENT MEANS TO MAKE INVESTMENT IN THE FIRM AND THE SAME HAS BEEN TREATED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT AND PROTECTIVE ASSESSMENT MADE IN THE HANDS OF SHRI M.SATYANARAYANA, SUBSTANTIVE ASSESSMENT WAS MADE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, ASSESSMENT WAS COMPLETED. ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. WHEN APPEAL IS CARRIED OUT BEFORE THE ITAT, SO FAR AS SHRI M.SATYANARAYANA IS CONCERNED, THE TRIBUNAL DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. INSOFAR AS SHRI B. RAMAKRISHNA IS CONCERNED, THE ORDER PASSED BY THE ASSESSING OFFICER WAS SET ASIDE AND REMITTED THE MATTER BACK TO THE ASSESSING OFFICER TO CONSIDER AFRESH AND IT IS ALSO OBSERVED THAT NO ADDITION MADE IN THE HANDS OF THE ASSESSEE. 5. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND NOTICE WAS ISSUED TO THE ASSESSEE. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE, PENALTY WAS IMPOSED BY ORDER DATED 31/03/2010. 6 . BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 3 ` 8. IT IS A SETTLED LAW THAT PENALTY PROCEEDINGS ARE THE OUTCOME OF AN ASSESSMENT WHERE SUCH ASSESSMENT ITSELF IS SET ASIDE, PENALTY PROCEEDINGS CANNOT SURVIVE. THE ASSESSING OFFICER HAS NO OPTION EXCEPT TO AWAIT FURTHER ASSESSMENT BEFORE HE CAN CONSIDER POSSIBLE REVIVAL OF THE PROCEEDINGS DEPENDING UPON THE DEVELOPMENT DURING THE FRESH ASSESSMENT. THIS VIEW HAS ALSO BEEN HELD BY THE GUJARAT HIGH COURT IN THE CASE OF RAMCHHODBHAI HARBHAI JADAV V. ACIT [1999] 238 ITR 949. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. BHAGWAN LTD. [1987] 168 ITR 846, HAS HELD THAT WHERE THE ORDERS OF REASSESSMENT, ON THE BASIS OF WHICH PENALTIES WERE LEVIED HAS BEEN SET ASIDE BY THE TRIBUNAL, THE ORDER OF PENALTY CANNOT STAND BY ITSELF. THUS, IT IS DEAR THAT THE ORIGINAL ASSESSMENT ORDER HAVING BEEN SET ASIDE BY THE ITAT, VISAKHAPATNAM, THE PENALTY ORDER, WHICH WAS BASED ON SUCH ASSESSMENT ORDER IS LIABLE TO BE CANCELLED. IN VIEW OF THE SAME, THE ORDER LEVYING PENALTY U/S.271(1)(C) DATED 31.03.2010 IS CANCELLED AND THE APPEAL IS ALLOWED. 9. FURTHER, AS REGARDS MERITS OF THE CASE, THE APPELLANT HAS RAISED TWO ISSUES. HE HAS REFERRED TO VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT MERELY BECAUSE AN ADDITION HAS BEEN MADE, IT CANNOT LEAD TO AUTOMATIC LEVY OF PENALTY. HE HAS STATED THAT THERE IS NO POSITIVE MATERIAL TO HOLD THAT THE AMOUNT ADDED AS UNEXPLAINED CASH CREDIT ACTUALLY REPRESENTED HIS INCOME OR THAT HE CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME. SECONDLY, HE HAS STATED THAT THERE WERE WITHDRAWALS TO THE TUNE OF RS.13.19 LAKHS FROM THE CAPITAL ACCOUNT OF SRI B. RAMAKRISHNA IN THE FIRM M/S.BRC CONSTRUCTIONS AND THE A.O. SHOULD HAVE ADOPTED THE PEAK CREDIT/INVESTMENT TO DECIDE THE QUANTUM TO BE ADDED U/S 68 OF THE IT ACT. 10. I HAVE PERUSED THE SUBMISSIONS MADE BY THE APPELLANT AS WELL AS THE FACT THAT IN PURSUANCE OF THE ORDER OF ITAT, VISAKHAPATNAM, THE APPELLANT HAD SUBMITTED THE MOBILE PHONE NUMBER OF SRI B.RAMAKRISHNA AND THE ASSESSING OFFICER HAS ALSO SPOKEN TO A PERSON PRESENTING HIMSELF AS B.RAMAKRISHNA. SUBSEQUENTLY, A LETTER WAS ALSO RECEIVED BY THE ASSESSING OFFICER FROM B.RAMAKRISHNA STATING THAT THE INVESTMENTS HAD BEEN MADE BY HIM AND NOT BY THE APPELLANT IN THE FIRM MFS.BRC CONSTRUCTIONS. IN VIEW OF THE ABOVE FACTS, IT CANNOT BE DENIED THAT THE APPELLANT HAS FURNISHED WHATEVER EVIDENCE HE COULD IN HIS SUPPORT. WHILE THE ASSESSING OFFICER MAY HAVE PERSISTED WITH HIS DOUBTS REGARDING THE GENUINENESS OF THE CREDITOR/INVESTOR OR HIS CAPACITY TO MAKE THE INVESTMENT, IT DOES NOT NECESSARILY FOLLOW THAT PENALTY FOR CONCEALMENT IS LEVIABLE IN THIS CASE. WHERE LEVY OF PENALTY IS CONCERNED, ANY BENEFIT OF DOUBT HAS TO GO TO THE APPELLANT. IN VIEW OF THE SAME, THE PENALTY U/S.271(1)(C) LEVIED VIDE ORDER DATED 31.03.2010 IS FOUND TO BE UNSUSTAINABLE ON MERITS ALSO. 7 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 8 . WHEN THIS APPEAL IS TAKEN UP FOR HEARING, LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT PENALTY IS LEVIED IN THE 4 ` HANDS OF THE ASSESSEE ON THE GROUND THAT INVESTMENT MADE BY SHRI B.RAMAKRISHNA IS FALSE AND ADDITION WAS MADE UNDER SECTION 69 OF THE ACT IN THE HANDS OF THE ASSESSEE. SO FAR AS SHRI M. SATYANARAYANA IS CONCERNED, THE ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. IN THE HANDS OF SHRI M. SATYANARAYANA PROTECTIVE ASSESSMENT IS MADE. ON THE ABOVE TWO COUNTS, THE HON'BLE ITAT IN ITA NO. 570/VIZAG/2008 FOR THE ASSESSMENT YEAR 2003-04 IN THE CASE OF B.VEERA RAHAVAIAH CHOWDARY VS. ACIT DATED 17/08/2010, DELETED THE ADDITION MADE IN THE HANDS OF THE ASSESSEE AND SUBMITTED THAT PENALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) HAS NO LEGS TO STAND, THEREFORE, SAME MAY BE DELETED. 9 . ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 10 . I HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 11 . THE ASSESSING OFFICER HAS LEVIED PENALTY IN THIS CASE ON THE GROUND THAT THE INVESTMENT MADE BY MR. B. RAMAKRISHNA AND MR. M.SATYANARAYANA ARE FALSE AND THE ADDITION IS MADE UNDER SECTION 69 OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ITAT BY ORDER DATED 17/08/2010, IN QUANTUM PROCEEDINGS, IN ASSESSEES OWN CASE, DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. I FIND THAT NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 5 ` 12 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 09 TH DAY OF MAY, 2017. SD/- (V. DURGA RAO) JUDICIAL MEMBER DATED : 09 TH APRIL, 2017. VR/- COPY TO: 1. THE ASSESSEE - SRI BOLLA VEERA RAGHAVAIAH CHOWDARY, 25- 11-20/4, OPP. SAI BABA TEMPLE STREET, N.R. PET, ELURU, W.G. DISTRICT. 2. THE REVENUE - ITO, WARD-2, ELURU. 3. THE CIT, RAJAHMUNDRY. 4. THE CIT(A), GUNTUR. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER