Dy.CIT, Circle-3(2), Hyderabad V. M/s Sreemitra Townships Private Limited, Hyderabad

ITA 1606/HYD/2013

• Counselvise Citation: 160622514 RSA 2013
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 18-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2013
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: M MADHUSUDAN
• Keywords: Unexplained expenditure
• Section: 69C; 133A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1606/HYD/2013 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD VS M/S. SREEMITRA TOWNSHIPS PVT. LTD., HYDERABAD [PAN: AAHCS9552R] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI B. KURMI NAIDU, DR FOR ASSESSEE : SHRI M. MADHUSUDAN, AR DATE OF HEARING : 1 8 - 1 1 - 201 5 DATE OF PRONOUNCEMENT : 02 - 1 2 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD DATED 06-09-2013 CANCELLING THE PENALTY OF RS. 35,34,960/ - LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] ON THE REASON OF CONCEALMENT OF INCOME BY ASSESSEE. 2. THE FACTS OF THE CASE INDICATE THAT THERE WAS SU RVEY OPERATION U/S. 133A OF THE ACT CONDUCTED ON 16-02-2009 DURING WHICH THERE WAS DEFICIT CASH BALANCE. ON 12-02-2009, THE DATE UPTO WHICH THE BOOKS OF ACCOUNT WERE UPDATED, THE CASH BALANCE AS PER THE BOOKS I.T.A. NO. 1606/HYD/2013 M/S. SREEMITRA TOWNSHIPS PVT LTD., :- 2 -: WAS AT RS. 62,98,269/-. SURVEY TEAM FOUND CASH OF ONLY RS. 71,270/-. WHEN CONFRONTED, THE MANAGING DIRECT OR OF ASSESSEE-COMPANY FILED A LETTER DT. 18-02-2009 BEFO RE THE ADIT (INVESTIGATION) STATING THAT THE VARIATION WAS ON A CCOUNT OF THE FOLLOWING EXPENSES WHICH WAS NOT ENTERED IN THE CAS H BOOK: A. SITE DEVELOPMENT EXPENSES - RS. 2,70,000/- B. REGISTRATION EXPENSES - RS. 7,80,000/- C. PETTY EXPENSES - RS. 41,009/- D. PAYMENT TO LANDLORDS - RS. 52,00,000/- 2.1. ASSESSEE COULD FURNISH EVIDENCES FOR THE EXPEN DITURES OTHER THAN PAYMENT TO LANDLORDS. SINCE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM, THE SHORTAGE OF CASH ON THE DATE OF SURV EY OF RS. 52 LAKHS WAS ADMITTED BY THE MANAGING DIRECTOR OF ASSE SSEE AS INCOME. HOWEVER, WHILE FILING THE RETURN OF INCO ME, THIS ABOVE AMOUNT WAS NOT ADMITTED. IN THE SCRUTINY ASSESSMEN TS ORIGINALLY COMPLETED BY THE AO U/S. 143 DT. 21-11-2011, THE AO ACCEPTED THE INCOME RETURNED AND MADE A DISALLOWANCE TO AN EXTEN T OF RS. 1,89,58,218/- INVOKING THE PROVISIONS OF SECTION 40 (A)(IA). AFTER COMPLETING THE ASSESSMENT AND PASSING THE ORDER ON 21-11-2011, SAME AO INITIATED PROCEEDINGS IMMEDIATELY U/S. 147 ON THE REASON THAT ADMITTED INCOME OF RS. 52 LAKHS WAS NOT BROUGH T TO TAX. IN THE RE-ASSESSMENT PROCEEDINGS, THE ABOVE AMOUNT WAS ALSO ADDED WHICH ASSESSEE HAS ACCEPTED. AO INITIATED PENALTY P ROCEEDINGS U/S. 271(1)(C) AND CONCLUDED THAT ASSESSEE HAS CONC EALED INCOMES AND LEVIED PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C). I.T.A. NO. 1606/HYD/2013 M/S. SREEMITRA TOWNSHIPS PVT LTD., :- 3 -: 3. ON APPEAL, LD. CIT(A) CONSIDERING THE SUBMISSION S MADE BY ASSESSEE AND VARIOUS CASE LAW, DELETED THE PENALTY STATING AS UNDER: 9. I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. THE ADDITION TO THE TO TAL INCOME HAS BEEN MADE U/S 69C AND HAVING BEEN AGREED TO BY TH E APPELLANT HAS REACHED FINALITY. IT IS NOT DISPUTED THAT THERE WAS ADEQUATE CASH' BALANCE AS PER THE BOOKS OF ACCOUNTS. THE DISCREPANCIES POINTED OUT BY THE ASSESSING OF FICER ARE CONFINED TO THE MANNER IN WHICH THE CASH BALANCE WAS P UT TO USE. IN ESSENCE, THE DISBELIEF OF THE ASSESSING OFF ICER PERTAINS TO THE CLAIM OF EXPENSES INCURRED AND DOES NOT RELATE TO THE SOURCES FOR THESE EXPENSES, WHETHER IN THE CAPITAL FIELD OR THE REVENUE FIELD. THE QUESTION ARISING OUT OF THE OBSERVATION S OF THE ASSESSING OFFICER IS WHETHER THE APPELLANT DID MAKE PAYMENTS TO THE LANDLORDS AS CLAIMED AND IF SO, WHETHER THERE WAS A NY JUSTIFICATION FOR SUCH PAYMENTS. IF, AS THE ASSESS ING OFFICER SUGGESTS, IT IS ACCEPTED THAT THE APPELLANT DID NOT MAKE THE PAYMENT TO THE ALLEGED LANDLORDS, IT RESULTS IN A SITUATION WHERE THERE IS NO DIFFERENCE BETWEEN THE CASH BALANCE A S PER BOOKS AND THE PHYSICAL CASH BALANCE AND THERE WOULD BE NO GROUND FOR ANY DISALLOWANCE OR ADDITION AND CONSEQUENTLY, NO GROUND FOR LEVY OF PENALTY. ON THE OTHER HAND, IF IT IS AC CEPTED, AGAIN AS THE ASSESSING OFFICER SUGGESTS, THAT THE PAYMENT TO THE LANDLORDS WERE NOT WARRANTED (WHETHER DUE TO THE FACT T HAT THE SALE AGREEMENT INDICATES PAYMENT ONLY BY CHEQUE AND NOT BY CASH OR DUE TO THE FACT THAT SOME OF THE ALLEGED RECIPIENTS WERE NOT LANDLORDS), IT WOULD MERELY LEAD TO A DISALLOWANCE OF EXPENSES (PRESUMING THE EXPENSES ARE HELD TO BE IN REVENUE I N NATURE). SUCH A DISALLOWANCE WOULD NOT WARRANT LEVY OF PENALTY EI THER, FOLLOWING THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD. 4. LD. DR RELIED ON THE ORDERS OF THE AO AND SUBMIT TED THAT ASSESSEE HAS CONCEALED THE INCOME ON THE FACT THAT IT HAD NOT APPEALED AGAINST THE ADDITION SHOULD HAVE BEEN CONS IDERED BY THE LD. CIT(A) AND WRONGLY DELETED THE PENALTY. 5. LD. COUNSEL HOWEVER, SUBMITTED THAT SHORTAGE OF CASH CANNOT BE CONSIDERED AS INCOME AND ASSESSEE EXPLAINED TH E NATURE OF EXPENDITURES AND ACCOUNTED THE SAME IN THE BOOKS OF ACCOUNT. THUS, ASSESSEE DID NOT ADMIT ANY INCOME EVEN THOUGH MANAGING I.T.A. NO. 1606/HYD/2013 M/S. SREEMITRA TOWNSHIPS PVT LTD., :- 4 -: DIRECTOR DURING THE SURVEY PROCEEDINGS ADMITTED THE SAME AS INCOME. IT IS FURTHER SUBMITTED THAT WHEN THE SA ME AO INITIATED THE PROCEEDINGS U/S. 147, ASSESSEE ADMITTED BEFORE THE OFFICER WITH A REQUEST THAT NO PENALTY SHOULD BE LEVIED. HE DEF ENDED THE ORDER OF CIT(A) THAT THE AMOUNT ITSELF CANNOT BE CONSIDER ED AS INCOME. THEREFORE, PENALTY ON THE SAME AMOUNT DOES NOT SURV IVE. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RI VAL CONTENTIONS. WE ARE UNABLE TO UNDERSTAND WHY THE S AME AO HAS ACCEPTED ASSESSEES CONTENTIONS IN THE ORIGINAL ASS ESSMENT AND WITHIN ONE MONTH PASSED A REVISED ORDER ON 22-12-20 11 MAKING THE SHORTAGE OF CASH AS UNEXPLAINED EXPENDITURE U /S. 69C OF THE ACT. WE ARE FURTHER UNABLE TO UNDERSTAND HOW THE P ROVISIONS OF SECTION 69C ARE APPLICABLE. THERE IS A CASH BALANC E IN THE BOOKS OF ACCOUNT AS ON 12-02-2009. ON THE DATE OF SURVEY ON 16-02-2009, THERE WAS LESS CASH AVAILABLE FOR WHICH ASSESSEE HAS EXPLAINED THAT AN AMOUNT OF RS. 52 LAKHS WAS PAID T O THE LANDLORDS. THIS AMOUNT WAS INCORPORATED IN THE BOO KS OF ACCOUNT AND NO CASH BALANCE WAS CARRIED OVER AND THERE IS N O DISPUTE ON THE ENTRIES IN THE BOOKS OF ACCOUNT. THE OTHER EXP ENDITURE CLAIMED WAS ACCEPTED AND ALLOWED. WHEN ASSESSEE HAS ALREADY ACCOUNTED THE AMOUNT THROUGH THE BOOKS OF ACCOUNT, HOW THE SAME CAN BE CONSIDERED AS UNEXPLAINED, SO AS TO B RING IT TO TAX IS NOT EXPLAINED BY THE OFFICER. FOR THE REASONS BEST KNOWN TO ASSESSEE, IT HAS NOT PREFERRED AN APPEAL, EVEN THOU GH THE AMOUNT WAS ADDED IN THE RE-ASSESSMENT PROCEEDINGS. CONSID ERING THE NATURE OF AMOUNT ADDED AND THE EXPLANATION GIVEN BY ASSESSEE, WE ARE OF THE OPINION THAT THE FACTS DOES NOR WARRANT LEVY OF PENALTY, MORE SO FOR CONCEALMENT OF INCOME. FURTHER, IT IS SEEN THAT AO LEVIED PENALTY FOR BOTH CONCEALMENT OF INCOME AND A LSO FURNISHING I.T.A. NO. 1606/HYD/2013 M/S. SREEMITRA TOWNSHIPS PVT LTD., :- 5 -: OF INACCURATE PARTICULARS, BUT LD. CIT(A), DELETED THE PROCEEDINGS HOLDING THAT THERE IS NO FURNISHING OF INACCURATE P ARTICULARS RELYING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., [322 I TR 158] (SC), WE ARE OF THE OPINION THAT THE FACTS OF THE CASE DOES NOT WARRANT ANY PENALTY, WHEN THE ADDITION ITSELF IS NOT PROPER UND ER THE PROVISIONS OF THE ACT. IN VIEW OF THIS, WE REJECT THE REVENUE S GROUNDS AND UPHOLD THE ORDER OF CIT(A). 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER, 2015 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 2 ND DECEMBER, 2015 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 3 (2), 7 TH FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS , HYDERABAD . 2. M/S. SREEMITRA TOWNSHIPS PVT. LTD., 302, KRISHNA PLAZA, KAIRTABAD, HYDERABAD. 3. CIT (APPEALS)-IV, HYDERABAD. 4. THE CIT - III , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6. GUARD FILE.