S.P. Office Needs Pvt.Ltd, Hyderabad V. ACIT, Circle-5, Hyderabad

ITA 1557/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61825 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2000-2001
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.1556/HYD/2011 : ASSESSMENT YEAR 1999-20 00 ITA NO.1557/HYD/2011 : ASSESSMENT YEAR 2000-01 ITA NO.1558/HYD/2011 : ASSESSMENT YEAR 2002-03 ITA NO.1559/HYD/2011 : ASSESSMENT YEAR 2003-04 M/S. S.P. OFFICE NEEDS P. LTD., HYDERABAD (PAN - AADCS 4041 H ) V/S ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-5, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.MURALIMOHANA RAO RESPONDENT BY : SHRI K.VISWANATHAM DATE OF HEARING 26.3.2012 DATE OF PRONOUNCEMENT 11.4.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST A COMMON ORDER OF THE CIT(A) IV, HYDERABAD DATED 29.7 .2011, CONFIRMING THE PENALTIES OF RS.41,30,095; RS.56,01, 481; RS.78,96,9065 AND RS.1,00,21,897 FOR THE ASSESSMENT YEARS 1999- 2000, 2000-01, 2002-03 AND 2004-05 RESPECTIVELY, LE VIED UNDER S.271(1)(C) OF THE INCOME-TAX ACT, 1961. SINCE COMM ON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS A COMPANY, BELONGING TO THE SUJANA GROUP. SEARCH AND SEIZRURE OPERATIONS HAD BEEN CONDUCTED IN THE SUJANA GROUP O F CASES DURING THE FINANCIAL YEAR 2004-05. SUBSEQUENTLY, ORDERS UN DER S.143(3) READ WITH S.153C OF THE ACT WERE PASSED IN THE CASE OF T HE ASSESSEE FOR ALL ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 2 THE ASSESSMENT YEARS UNDER CONSIDERATION ON 11.12. 2006. DURING THE ASSESSMENT PROCEEDINGS FOR THESE YEARS, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE CLAIMED INTEREST ON CASH CREDITS OF RS.1,18,00,271 FOR THE ASSESSMENT YEAR 1999-2000; RS.1,45,49,303 F OR THE ASSESSMENT YEAR 2000-01, RS.2,21,18,830 FOR THE ASS ESSMENT YEAR 2002-03 AND RS.2,72,70,473 FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD TAKEN LOANS FROM THE BANKS, WHICH HAD BEEN UTILISED FOR MAKING INVESTMEN TS AND ADVANCING LOANS. THE ASSESSING OFFICER THEREFORE, HELD THAT THE BANK LOANS HAD NOT BEEN USED FOR THE REGULAR BUSINESS OF THE ASSES SEE. BESIDES, IT WAS ALSO OBSERVED THAT NO INCOME FROM SUCH INVESTME NTS OR LOANS/ADVANCES HAD BEEN OFFERED, WHEREBY IT WAS EVI DENT THAT THE FUNDS HAD BEEN DIVERTED BY THE ASSESSEE. THE ASSES SING OFFICER THEREFORE, CONCLUDED THAT THE INTEREST CLAIMED DURI NG THE YEARS UNDER APPEAL COULD NOT BE TREATED AS INCIDENTAL TO THE BU SINESS OF THE ASSESSEE. IN THE ABSENCE OF ANY INFORMATION FURNIS HED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION OF SUCH INT EREST, THE ASSESSING OFFICER DISALLOWED THE SAME, AND COMPLETED THE ASSE SSMENTS ACCORDINGLY. ON APPEAL IN QUANTUM PROCEEDINGS, TH E CIT(A) UPHELD THE ABOVE DISALLOWANCES MADE BY THE ASSESSING OFFIC ER. 3. WHILE THUS COMPLETING THE ASSESSMENTS, THE ASS ESSING OFFICER ALSO INITIATED THE PENALTY PROCEEDINGS. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE OPPOSED THE PROPOSED PENALTI ES, BY EXPLAINING BY THE ASSESSEE THAT THERE WAS NO INTENTIONAL WITHH OLDING OF INFORMATION ON THE PART OF THE ASSESSEE. THE ASSES SING OFFICER NOTED FROM THE RECORDS THAT THE ASSESSEE HAD DONE MEAGER SALES AND PURCHASES DURING THE YEARS UNDER CONSIDERATION. HE THEREFORE FELT THAT THERE WAS NO NEED FOR TAKING SUCH HUGE BANK LOANS F OR EFFECTING SUCH MEAGER SALES AND PURCHASES. HE FURTHER FOUND THAT IT HAD BEEN ESTABLISHED BEYOND DOUBT THAT OUT OF THE BORROWINGS , INVESTMENTS ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 3 WERE MADE, AS WELL AS LOANS AND ADVANCES HAD BEEN G IVEN TO M/S. GANGA INDUSTRIAL CORPN. LTD. HE THEREFORE, FOUND T HAT IT WAS CLEAR THAT THE ASSESSEE HAD DIVERTED FUNDS FOR NON-BUSINESS PU RPOSES. IT WAS FURTHER NOTICED THAT EVEN DURING THE APPELLATE PROC EEDINGS, NO INFORMATION/MATERIAL COULD BE FURNISHED TO JUSTIFY THE CLAIM OF INTEREST AND EVEN IN THE REPLY TO THE SHOW CAUSE NOTICE IN THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE COULD NOT OFFER A NY SPECIFIC EXPLANATION IN THE MATTER. IN THE CIRCUMSTANCES, T HE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THERE WAS NO INTENTIONAL WITHHOLDING OF INFORMATION. HE THEREFOR E, DID NOT CONSIDER THE EXPLANATION OFFERED BY THE ASSESSEE AS TRUE AND BONA FIDE. CONSEQUENTLY, DEEMING THE AMOUNTS OF INTEREST DISAL LOWED FOR THE YEARS UNDER CONSIDERATION, AS THE CONCEALED INCOME OF THE ASSESSEE, THE ASSESSING OFFICER LEVIED THE IMPUGNED PENALTIES . ON APPEAL, THE CIT(A) CONFIRMED THOSE PENALTIES. HENCE, ASSESSEE IS IN SECOND APPEAL BEFORE US FOR THESE FOUR YEARS. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATI NG THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, SUB MITTED THAT IT IS NOT A FIT CASE FOR THE LEVY OF PENALTY FOR CONCEALMENT FOR THE YEARS UNDER CONSIDERATION. HE SUBMITTED THAT IT IS THE DISALLO WANCE OF INTEREST EXPENDITURE CLAIMED THAT LED TO THE IMPUGNED PENALT IES. HE SUBMITTED THAT THE DISALLOWANCE OF INTEREST MADE BY THE ASSES SING OFFICER IS ON ACCOUNT OF DIFFERENCE OF OPINION AS TO THE JUSTIFIC ATION FOR THE LOANS TAKEN, OBSERVING THAT THE ASSESSEE HAS INDULGED IN DIVERSION OF BORROWED FUNDS BY GIVING ADVANCES, ETC. EVEN THOUG H THE CIT(A) CONFIRMED THE DISALLOWANCES MADE BY THE ASSESSING O FFICER IN THAT BEHALF, THE TRIBUNAL ON FURTHER APPEAL, VIDE ITS OR DER DATED 20 TH AUGUST, 2009, ALLOWED 25% OF THE INTEREST CLAIMED ON ESTIMA TE BASIS. THUS, THE ADDITIONS SURVIVING IN RELATION TO WHICH PENALT Y, IF AT ALL, COULD BE LEVIED ARE ESTIMATED ADDITIONS OUT OF ITNE5REST PAY MENTS MADE FOR THE ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 4 YEARS UNDER APPEAL. BEING ESTIMATED ADDITIONS, IT IS ONLY A CASE OF DIFFERENCE OF OPINION, AND BASED ON SUCH ESTIMATED ADDITIONS, ASSESSEE CANNOT BE SAID TO HAVE EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, AND PENALTY UNDER S .271(1)(C) COULD BE JUSTIFIED. HE CLAIMED THAT THE ASSESSEE HAS BORR OWED MONEY FOR THE PURCHASE OF MATERIAL, WHICH IS LYING AS STOCK IN TR ADE. THOUGH THERE ARE NO PURCHASES OR SALES COMMENSURATE WITH THE BOR ROWALS, THE FACTUM OF BORROWAL OF FUNDS FOR INVESTING IN STOCK IS NOT DISPUTED. EVEN THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE INVESTMENT OF MONEY IN STOCK IN TRADE AND THAT THERE IS NO PURCHASE AND SALE. THE CONTENTION OF TH E ASSESSEE IS THAT THE MONEY WAS BORROWED FOR THE PURPOSE OF BUSINESS AND IT IS INVESTED IN BUSINESS. THE STAND OF THE REVENUE THAT THERE A RE NO PURCHASES OR SALES OF THE EXPECTED DEGREE, MAY JUSTIFY THE DISAL LOWANCE OF INTEREST AS HAS BEEN DONE IN THE QUANTUM PROCEEDINGS, BUT IT IS NOT ENOUGH TO CONCLUDE THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. IN SUPPORT OF THES E CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E ON THE DECISION OF THE APEX COURT IN THE CASE OF CIT V/S. RELIANCE PET RO-PRODUCTS (P) LTD. (322 ITR 158). HE ALSO PLACED RELIANCE ON THE DECI SION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHR I S.PRASADA RAO V/S. DCIT (ITA 338/HYD/2006) DATED 21.11.2008, DULY FURN ISHING A COPY THEREOF BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE LOWER AU THORITIES AND SUBMITTED THAT THIS IS A FIT CASE FOR LEVY OF PENAL TY FOR CONCEALMENT, AND THE IMPUGNED PENALTIES LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) MAY BE CONFIRMED. ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS THE AMOUNTS O F INTEREST DISALLOWED WHICH LED TO THE LEVY OF THE IMPUGNED PENALTIES FOR CONCEALMENT FOR THE YEARS UNDER APPEAL. WHILE THE REVENUE AUTHORIT IES HAVE MADE THE IMPUGNED DISALLOWANCES ON THE GROUND THAT THE PURCH ASE AND SALES MADE BY THE ASSESSEE ARE NOT COMMENSURATE WITH THE BORROWINGS MADE AND THE ASSESSEE HAS IN FACT DIVERTED FUNDS BY GIVING LOANS AND MAKING ADVANCES TO OTHERS, THE TRIBUNAL ON APPEAL I N QUANTUM PROCEEDINGS, HAS GIVEN PARTIAL RELIEF BY SUSTAINING ONLY 75% OF SUCH DISALLOWANCES MADE BY THE ASSESSING OFFICER ON ESTI MATE BASIS. IN THESE CIRCUMSTANCES, WE HAVE TO EXAMINE WHETHER THE IMPUGNED PENALTIES FOR CONCEALMENT ARE JUSTIFIED, AND WHETHE R IT IS A FIT CASE FOR LEVY OF PENALTY. FIRSTLY, WHAT REMAINS FOR ATTRACT ING PENALTY IS ONLY ESTIMATED DISALLOWANCE OUT OF INTEREST PAYMENTS SUS TAINED BY THE TRIBUNAL. SECONDLY, THERE IS NO DISPUTE WITH REGAR D TO THE BORROWALS MADE BY THE ASSESSEE, BUT THE CASE OF THE REVENUE I S ONLY WITH REGARD TO UTILIZATION OF SUCH BORROWED FUNDS FOR BUSINESS PURPOSES OF THE ASSESSEE. WHILE THERE MAY BE EVERY JUSTIFICATION F OR THE ADDITIONS BY WAY OF DISALLOWANCE OUT OF INTEREST PAYMENTS CLAIME D ON GROUNDS OF REASONABLENESS OR DIVERSION FOR NON-BUSINESS PURPOS ES, THERE CANNOT BE ANY ALLEGATION OF CONCEALMENT OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS THEREOF BY THE ASSESSEE, INASMUCH AS TH E DISALLOWANCES IN THE QUANTUM PROCEEDINGS HAVE BEEN MADE ON APPRECIAT ION OF EVIDENCE ON RECORD, ON THE BASIS OF THE MATERIAL FURNISHED B Y THE ASSESSEE ITSELF IN THE RETURN OR DURING THE ASSESSMENT PROCEEDINGS. IN THE CIRCUMSTANCES, IT IS NOT A CASE FOR IMPOSITION OF P ENALTY UNDER S.271(1)(C) OF THE ACT. 7. WE ARE SUPPORTED IN THIS BEHALF BY THE DECIS ION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S. P RASADA RAO (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US. IN PARA ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 6 8.2 OF ITS ORDER DATED 21.11.2008 IN THAT CASE, THE TRIBUNAL DREW A DISTINCTION BETWEEN CONCEALMENT OF INCOME AND FU RNISHING INACCURATE PARTICULARS AND HELD AS FOLLOWS- 8.2 CONCEALMENT OF INCOM E AND FURNISHING INACCURATE PARTICULARS ARE DIFFERENT. BOTH CONCEALMENT AND F URNISHING OF INACCURATE PARTICULARS REFER TO DELIBERATE ACTS ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPRESSIO VERY OR SUGESTIO FALSI . IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EX IST. THERE MUST BE SOME MATERIAL OR CIRCUM STANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESEN T THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOS E OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME AND THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS IE. C ONSCIOUS CONCEALM ENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE H YPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOM E AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED THE RE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY, THE REVENUE SHOULD HAVE PROVED THAT THE ASSESSEE PROVED THAT THE ASSESSEE HAS MENS REA OR GUILTY MIND ON HIS PART TO SHOW THAT IT IS CONC EALMENT OF INCOME. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTME NT CANNOT BE EQUATED WITH FRAUD OR WILLFUL DEFAULT.. 8. IT IS ALSO WORTHWHILE TO REFER TO THE RATIO DEC ISION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO-PRODUCTS ( SUPRA), WHEREIN IT HAS BEEN HELD THAT S. 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME AND THE CASE BEFORE IT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHIN G OF INACCURATE PARTICULARS, IT WAS HELD THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INA CCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NO T ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEO US . IN THE ABSENCE OF A FINDING BY THE ASSESSING OFFICER THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1)(C). HONBLE ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 7 SUPREME COURT FURTHER HELD THAT THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME IS NOT CORRECT. IT OBSERVED THAT BY NO STRETCH OF IMAGINATION CAN THE MAKING OF AN I NCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS . A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE . IF THE CONTENTION OF THE REVENUE IS ACCEPTED, IT WA S HELD THAT IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED B Y THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE P ENALTY U/S 271(1)(C), WHICH IS CLEARLY NOT THE INTENDMENT OF THE LEGISLAT URE. 9. IN THE LIGHT OF THE FOREGOING DISCUSSION, WE HO LD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY. WE ACCORDINGLY CANCEL THE IMPUGNED PENALTIES LEVIED BY THE ASSESSING OFFICER AND CONFI RMED BY THE CIT(A). 10. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11.4.2012 SD/- SD/- (ASHA VIJAYARAG HAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- MARCH, 2012 COPY FORWARDED TO: 1. M/S. S.P. OFFICE NEEDS P. LTD., C/O, M/S. P.MURALI& CO., CHARTERED ACCOUNTANTS, 6-3-655/ 2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. 2. ASST COMMISSIONER OF INCOME - TAX CIRCLE - 5 , HYDERABAD ITA NO.1556-1559/HYD/2011. M/S. S.P . OFFICE NEEDS P. LTD., HYDERABAD 8 3 . COMMISSIONER OF INCOME - TAX(APPEALS) IV HYDERABAD 5. COMMISSIONER OF INCOME-TAX III, HYDERABAD 6. DEPARTMENTAL REPRESENTATIVE , ITAT, HYDERABAD B.V.S.