G Surendra Reddy, Hyderabad V. Dy.CIT., Cent.Cir-2, Hyderabad

ITA 1667/HYD/2013

• Counselvise Citation: 166722514 RSA 2013
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure; Salary income; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1666/HYD/13 : ASSESSMENT YEAR 2005 - 06 ITA NO.1667/HYD/13 : ASSESSMENT YEAR 2006 - 07 ITA NO.1668/HYD/13 : ASSESSMENT YEAR 2007 - 08 SHRI G.SURENDRA REDDY HYDERABAD ( PAN - AFTPG 4651 D) V/S. DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 2, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SMT. K.HARITHA DR DATE OF HEARING 3.04.2014 DATE OF PRONOUNCEMENT 07.05.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST SIMILAR BUT SEPARATE ORDERS OF THE COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD DATED 10.9.2013, CONFIRMING PENALTIES LEVIED UNDER S.271(1)(C) OF THE INCOME - TAX ACT, 1961 FOR THE ASSESSMENT YEAR S 2005 - 06 TO 2007 - 08. SI NCE ISSUES INVOLVED AND FACTUAL BACK GROUND OF THE CASES ARE COMMON, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CA S E ARE THAT THE ASSESSEE IS IN THE BUSINESS O F R EAL ESTATE. A SEARCH AND SEIZURE OPE R ATION WAS CONDUCTED ON THE ENTIRE GROUP ITA NO. 1666 TO 1668 /HYD/2013 SHRI G.SURENDRA REDDY HYDERABAD 2 OF M/S. GRANDVILLE REALTORS ON 26.7.2006. IT WAS FOUND THAT THE ASSESSEE H A D NEVER FILED HIS RETURNS OF INCOME IN SPI T E OF THE BUSINESS IN REAL ESTATE. THER E FORE, NO T ICES UNDER S .153A WERE ISSUED. IN RESPONSE, THOUGH RETURNS WERE FILED DISCLOSING CERTAIN FIGURES OF INCOME, TH E ASSESSING OFFICER FOUND THAT THE INCOMES DECLARED WERE MEAGER AND NOT ACCURATELY DECL A RED AND AS P E R THE DOCUMENTS FOUND AND SEIZED DURING THE SEARCH OP E RATI O N S , THE ASSESSEE HAD ACTUALLY EARNED MORE INCOME. ACCORDINGLY, HE COMPLETED THE ASSESSMENTS, FOLLOWING THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2001 - 02, IN WHICH PURCHASE AND SALE OF VARIOUS PROPERTIES WERE QUANTIFIED AND DISCUSSED THOROUGHLY, M AKING ADDITIONS TO THE INCOMES RETURNED BY THE ASSESSEE FOR THE YEARS UNDER APPEAL, VIDE ORDERS OF ASSESSMENT DATED 29.12.2008, PASSED UNDER S.143(3) READ WITH S.153A OF THE ACT. 3. WITH REFERENCE TO SUCH ADDITIONS MADE IN THE ASSESSMENT S , PROCEEDINGS W ERE INITIATED FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT. IN RESPONSE TO THE PENALTY NOTICES, IT WAS EXPLAINED BY THE ASSESSEE THAT THE INCOME S ASSESSED BY THE ASSESSING OFFICER WAS ALR E A D Y EMBEDDED IN TH E R EAL ESTATE INCOME OFFE RED BY HIM IN HIS RETURN S OF INCOME. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD ACCEPTED THE ADDITION S M A DE IN ORDER TO AVOID PROLONGED LITIGATION. NOT FINDING MERIT IN THE SE CONTENTIONS OF THE ASSESSEE, OBSERVING THAT THE ASSESSEE HAD NEVER FIL E D THE RETURNS OF INCOME, AND IT IS ONLY DUE TO SEARCH AND SEIZURE OPERATION S T H A T T H E ASSESSEE HAS FILED HIS RETURN S OFFERING MEAGER AMOUNTS OF INCOME FOR ASSESSMENT FOR THE YEARS UNDER APPEAL , AND THAT DURING THE ASSESSMENT PROCEEDINGS THE UNDISCLOSED INCOME OF THE ASSESSEE WAS QUANTIFIED AND ASSESSED TO TAX, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE IMPOSED THE IMPUGNED PENALTIES, WORKING OUT THE SAME AT 100% OF THE TAX SOUGHT TO BE EVADED. DETAILS OF ADDITIONS MADE IN THE ASSESSMENT S AND PENALT IES FOR CONCEALMENT IMPOSED WITH REFERENCE THERETO, FOR EACH OF THE YEARS UNDER APPEAL, ARE TABULATED BELOW - ITA NO. 1666 TO 1668 /HYD/2013 SHRI G.SURENDRA REDDY HYDERABAD 3 ASSESSMENT YEAR ADDITION MADE TO INCOME RETURNED RS. PENALTY IMPOSED UNDER S.271(1)(C) OF THE INCOME - TAX ACT, 1961 RS. 2005 - 06 1,82,034 54,610 2006 - 07 58,619 17,586 2007 - 08 14,332 4,300 4. ON APPEAL BEFORE THE CIT(A) , THE ASSESSEE, BESIDES REITERATING THE CONTENTIONS URGED BEFORE THE ASSESSING OFFICER, FURTHER CONTENDED INTER - ALIA THAT HE WAS UNDER A BONA FIDE BELIEF THAT H IS INCOME FROM REAL ESTATE WAS EXEMPT FROM INCOME - TAX. NOT FINDING MERIT IN THE CONTENTIONS OF THE ASSESSEE, THE CIT(A), BY THE IMPUGNED ORDERS, CONFIRMED THE ABOVE PENALTIES IMPOSED BY THE ASSESSING OFFICER FOR CONCEALMENT OF INCOMES BY THE ASSESSEE FOR THE YEARS UNDER APPEAL. 5. AGGRI E VED, ASSESSEE PREFERRED THESE SECOND APPEALS BEFORE US. 6. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE SOURCE OF INCOME OF THE ASSESSEE IS FROM BUSINESS OF REAL ESTATE UPTO THE ASSESSMENT YEAR 2005 - 06 AND FOR THE ASSESS MENT YEARS 2006 - 07 AND 2007 - 08, THE SOURCE OF INCOME IS SALARY INCOME. THE ASSESSEE HAS ALREADY OFFERED THE INCOME UNDER THE HEAD REAL ESTATE AND ADMITTED AN INCOME OF RS.86,000 FOR THE ASSESSMENT YEAR 2005 - 06. THE ASSESSING OFFICER HAS HOWEVER, DETERMI NED THE INCOME AT RS.2,66,030, BY ADDING A SUM OF RS.1,82,034 ON ACCOUNT OF PURCHASE AND SALE OF PROPERTIES. WHILE DOING SO, THE ASSESSING OFFICER HAS NOT CONSIDERED ANY EXPENDITURE AS ALLOWABLE DEDUCTION. THE ASSESSEE HAS OFFERED THE NET INCOME AT RS.86, 000 AND HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION SEPARATELY. FURTHER, IT IS THE PLEA OF THE ASSESSEE THAT THE LANDS PURCHASED ARE AGRICULTURAL LANDS SITUATED BEYOND 8 KMS AND HENCE, ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT HE WAS NOT LIABLE FOR TAXATION UNDER ITA NO. 1666 TO 1668 /HYD/2013 SHRI G.SURENDRA REDDY HYDERABAD 4 THE HEAD CAPITAL GAINS. WE FIND MERIT IN THIS CONTENTION OF THE ASSESSEE. IT IS NOT THAT THE BONA FIDE BELIEF CLAIMED BY THE ASSESSEE IS WITHOUT ANY BASIS, AS NOTED BY THE REVENUE AUTHORITIES IN THE IMPUGNED ORDERS. HE NCE, WE FIND THAT THERE IS A REASONABLE CAUSE FOR THE NON - DISCLOSURE OF THE RELEVANT INCOME BY THE ASSESSEE, AND AS SUCH IT IS NOT A FIT CASE FOR THE LEVY OF PENALTY ON ACCOUNT OF CONCEALMENT, UNDER S.271(1)(C) OF THE ACT. BUT FOR BRUSHING ASIDE THE BONA FIDE BELIEF PLEADED BY THE ASSESSEE ON VAGUE AND GENERAL GROUNDS, THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THE FALSITY OF THE EXPLANATION OFFERED BY THE ASSESSEE. MERE FACT THAT THE ASSESSEE HAS ACCEPTED THE ADDITIONS MADE IN THE ASS ESSMENT, AND NOT PREFERRED APPEAL, DOES NOT BY ITSELF JUSTIFY THE IMPOSITION OF PENALTY FOR CONCEALMENT. FOR THESE VERY REASONS, AND ALSO FOR THE REASON THAT THE AMOUNTS INVOLVED IN THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 ARE VERY MEAGER, WE DO NOT FIND ANY JUSTIFICATION FOR THE IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT. WE ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDERS OF THE CIT(A) AND CANCEL THE PENALTIES IMPOSED BY THE ASSESSING OFFICER FOR ALL THE THREE ASSESSMENT YEARS UNDER APPEAL, ACCEPT ING THE GROUNDS OF THE ASSESSEE. 7. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 7 TH MAY, 2014 SD/ - SD/ - ( B.RAMAKOTAIAH ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 7 TH MAY , 2014 COPY FORWARDED TO: 1. SHRI G.SURENDRA REDDY C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3 - 6 - 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 . DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 2, HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) I I I HYDERABAD 4. COMMISSIONER OF INCOME - TAX I I , HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S