Mr. Petla Jagannadh alias Puri Jagannadh, Hyderabad V. DCIT, Central Circle-5, Hyderabad

ITA 1665/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74679 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NOS. 1665/HYD/2012 ASSESSMENT YEAR: 2004-05 MR. PETLA JAGANNADH ALIAS PURI JAGANNADH, APPELLANT HYDERABAD. (PAN AEKPP2273K) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CENTRAL CIRCLE 5, HYDERABAD. ASSESSEE BY : SHRI A. SRINIVAS REVENUE BY : SMT. K. HARITHA DATE OF HEARING : 12/03/2014 DATE OF PRONOUNCEMENT : 14/03/2 014 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS AN APPEAL OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-VII, DATED 27/08/2012 CONFIRMING THE PENALT Y LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, WHO IS IN THE BUSINESS OF DIRECTION AND PRODUCTION OF CINEMAS. THERE WAS A SEARCH AND SEIZURE OPERATIO N IN THE PREMISES OF THE ASSESSEE AND HIS GROUP ON 02/01/200 4. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, IT CAME TO THE LIGHT OF THE INCOME-TAX DEPARTMENT THAT THE GRO UP IS BOOKING HUGE EXPENDITURE UNDER DIFFERENT HEADS LIKE COMPANY ARTISTS PAYMENTS AND MUSIC AND ORCHESTRA, COSTUMES, ETC. IT ITA NO. 1665/HYD/13 MR. PETLA JAGANNADH ALIAS PURI JAGANNADH 2 WAS ALSO FOUND THAT THE VOUCHERS FOR THESE EXPENDIT URE WERE NOT SUPPORTED BY PROPER BILLS. A NOTICE U/S 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 07/07/2004 REQUIRING THE ASSESSEE TO FILE HIS RETURN OF INCOME FOR THE BLOCK PERIOD 1998-99 TO 2004-05. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED HIS BLOCK RETURN ON 01/11/2004 DECLA RING AN INCOME OF RS. 2,01,74,489/-. DURING THE COURSE OF A SSESSMENT PROCEEDINGS U/S SECTION 143(3) OF THE ACT READ WITH SECTION 153A OF THE IT ACT, THE AO OBSERVED THAT ASSESSEE H AS ADMITTED PROFITS DERIVED FROM THREE FILMS, NAMELY, 1. AMMA NAANNA O TAMILA AMMAYEE, 2) SIVAMANI, AND 3) ANDHRAAVAALA. THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENDITURE UNDER VARIOUS HEADS AND THE AS SESSEE HAS PRODUCED VOUCHERS, WHICH ARE SELF-MADE. THE AO, THEREFORE, REQUIRED THE ASSESSEE TO PRODUCE EVIDENC E IN SUPPORT OF THE CLAIM OF EXPENDITURE MADE IN THE RET URN OF INCOME. SINCE THE ASSESSEE FAILED TO PRODUCE ANY EV IDENCE IN SUPPORT OF HIS CLAIMS, THE AO CAME TO THE CONCLUSI ON THAT THESE ARE ALL BOGUS EXPENDITURE. HE ACCORDINGLY DIS ALLOWED PART OF THE CLAIM OF EXPENDITURE AND BROUGHT IT TO TAX. AGGRIEVED THE ASSESSEE WENT IN APPEAL BEFORE THE CI T(A) AND IN FURTHER APPEAL BEFORE THE ITAT. THE ITAT HAD GRA NTED PARTIAL RELIEF TO THE ASSESSEE. 3. IN THE MEANWHILE, THE AO HAD INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED MIN IMUM PENALTY OF 100% OF TAX SOUGHT TO BE EVADED. ON APPE AL, THE CIT(A) CONFIRMED THE PENALTY AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NO. 1665/HYD/13 MR. PETLA JAGANNADH ALIAS PURI JAGANNADH 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI A. SR INIVAS WHILE REITERATING THE ASSESSEES SUBMISSIONS MADE B EFORE THE AUTHORITIES BELOW, HAS FILED A COPY OF THE ORDER OF THE ITAT DATED 03/02/2012 IN ASSESSEES OWN CASE FOR AY 2005 -06 WHEREIN THE EXPENDITURE RELATING TO VERY THREE MOVI ES HAS BEEN CONSIDERED BY THE ITAT AND IT HAS BEEN HELD TH AT IN THE PARTICULAR LINE OF BUSINESS OF ASSESSEE, IT IS DIFF ICULT TO OBTAIN PROOF OF EXPENDITURE TO THE SATISFACTION OF THE AO BUT AT THE SAME TIME AN ELEMENT OF BOOSTING OF EXPENDITURE ALS O CANNOT BE RULED OUT. THUS, THE TRIBUNAL HAS ESTIMATED THE PROFITS FROM THE THREE FILMS AND DIRECTED THE AO TO RECOMPU TE THE TOTAL EXPENDITURE ON THE BASIS OF SUCH DIRECTION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS CLEAR FROM THE ORDER OF THE TRIBUNAL THAT THE COMPUTATION OF INCOM E AND PROFITS ON THREE MOVIES WAS CLEARLY ON ESTIMATION O F INCOME AND AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AERO TRADERS (P) LTD., 322 ITR 316, PENALTY IS NOT LEVIABLE ON ESTIMATION OF INCOME. 5. THE LEARNED DR, SMT. K. HARITHA, ON THE OTHER HA ND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND H AS DRAWN OUR ATTENTION TO THE OBSERVATIONS OF THE TRIBUNAL T HAT BOOSTING OF EXPENDITURE BY THE ASSESSEE CANNOT BE RULED OUT. THUS, ACCORDING TO HER IT IS A CLEAR CASE OF CONCEALMENT OF INCOME AND LEVY OF PENALTY U/S 271(1)(C) IS JUSTIFIED. 6. HAVING HEARD BOTH THE PARTIES AND THEIR RIVAL SUBMISSIONS AND ALSO MATERIAL ON RECORD, WE FIND TH AT THE PENALTY U/S 271(1)(C) OF THE IT ACT HAS BEEN LEVIED ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE CLAIMED BY T HE ASSESSEE TREATING IT AS CONCEALMENT OF INCOME. DURI NG THE ITA NO. 1665/HYD/13 MR. PETLA JAGANNADH ALIAS PURI JAGANNADH 4 COURSE OF SEARCH, INFORMATION GATHERED BY THE REVEN UE AUTHORITIES WAS THAT THE ASSESSEE AND HIS GROUP COM PANIES WERE BOOKING HUGE EXPENDITURE UNDER DIFFERENT HEADS . THE AO DISALLOWED PART OF THE EXPENDITURE ON THE GROUND TH AT THE ASSESSEE IS NOT MAINTAINING PROPER VOUCHERS AND THE RE IS NO EVIDENCE IN SUPPORT OF THE CLAIM OF EXPENDITURE. IT AT HAS CONFIRMED PART OF THE DISALLOWANCE ON ESTIMATE BASI S. THUS, IT IS CLEAR THAT THERE IS NO INCRIMINATING MATERIAL FO UND DURING THE COURSE OF SEARCH, WHICH IS THE BASIS FOR CONCLU SION THAT THERE IS CONCEALMENT OF INCOME. THE HONBLE DELHI H IGH COURT IN THE CASE OF AERO TRADERS (P) LTD. (SUPRA) HAS CL EARLY HELD THAT PENALTY CANNOT BE LEVIED ON ESTIMATION OF INCO ME OR DISALLOWANCE OF EXPENDITURE ON ESTIMATE BASIS. RESP ECTFULLY FOLLOWING THE SAID JUDGMENT, WE DELETE THE PENALTY LEVIED BY THE AO AND CONFIRMED BY THE CIT(A). 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 14/03/2014. SD/- SD/- (CHANDRA POOJARI) (P. MADHAV I DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED:14/03/2014 KV COPY TO:- 1) MR. PETLA JAGANNADH ALIAS PURI JAGANNADH, H.NO. 8-2-293/82/A/623/1, ROAD NO. 34, JUBILEE HILLS, HYDERABAD 500 033 2) DCIT, CENTRAL CIRCLE 5, AYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 5) CIT(A)-VII, HYDERABAD 4) THE CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A. T., HYD.