Rao Subba Rao, Hyd, Hyderabad V. Addl. CIT, Range-6, Hyd, Hyderabad

ITA 171/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6133 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Initiation of penalty proceedings; Reasonable cause; Competent authority
• Section: 273B; 143(3); 142(1); 153A; 2

Judgement Text

1 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA.NO.170 & 171/HYD/2016 ASSESSMENT YEAR 2004-2005 SHRI RAO SUBBA RAO HYDERABAD. PAN ABSPR4642J VS. THE ADDL. CIT, RANGE-6 HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SHRI A. SITARAMA RAO DATE OF HEARING : 06.02.2017 DATE OF PRONOUNCEMENT : 17.02.2017 ORDER PER G. PAVAN KUMAR, J.M. THE ASSESSEE FILED APPEALS AGAINST DIFFERENT ORDERS PASSED BY CIT(A) UNDER SECTION 271E AND 271D OF THE I.T. AC T, 1961. FOR THE SAKE OF CONVENIENCE AND THE ISSUES ARE INTER-RELATED, WE TAKE-UP THE FACTS NARRATED IN ITA.NO.170/HYD/2016 PASSED BY CIT( A)-9 IN ITA.NO.0165/ADDL.CIT.R-6/2015-16 DATED 14 TH NOVEMBER, 2015. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED HON'BLE CIT(A) OUGHT TO HAVE APPRECIAT ED THAT THE INITIATION OF PENALTY PROCEEDING IS BAD IN LAW IN A S MUCH AS THE SAME WAS NOT INITIATED BY THE COMPETENT AUTHORITY W ITHIN REASONABLE TIME AS IN THIS CASE THE REMAND REPORT W AS DT.25/02/2010 WHEN THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE SOURCE OF LOAN IS ACCEPTED AND THE CASE CALLS FOR INITIATION OF PENALTY UNDER SECTION 271E. 2 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. 2. THE LEARNED HON'BLE CIT(A) SHOULD HAVE APPRECIATED THAT THERE WAS A REASONABLE CAUSE FOR NON-COMPLIANCE TO THE PR OVISIONS OF SECTION 269T BECAUSE OF A HOST OF FACTORS LIKE GENU INENESS OF THE TRANSACTION, EMERGENT FINANCIAL REQUIREMENT AND IGNORANCE OF PROVISIONS AND SHOULD HAVE APPRECIATED THE SETTL ED JUDICIAL PRECEDENTS AND NOT SUSTAINED PENALTY BECAUSE THERE WAS A TECHNICAL VIOLATION. THE PENALTY IMPOSE UNDER SECTI ON 271E IS THEREFORE LIABLE TO BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MODIFY ANY GROUND WHICH MAY BE REQUIRED FOR PROPER ADJUDICATION OF TH E CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION AND REAL ESTATE WORK. IN THE SEA RCH AND SURVEY OPERATIONS UNDER SECTION 132(1) OF THE ACT AT THE RESIDEN TIAL -CUM- BUSINESS. THE REVENUE FOUND THAT ASSESSEE ALONG WITH F AMILY MEMBERS HAS ENTERED INTO LAND DEVELOPMENT AGREEMENT A ND REAL ESTATE TRANSACTION AND RECORDED OF STATEMENTS, AND NOTIC E U/SEC. 153A OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOTICE, THE ASS ESSEE FILED RETURN OF INCOME ON 29.12.2006 WITH TOTAL INCOME OF RS .5,71,110 AND AGRICULTURAL INCOME OF RS.60,000. SUBSEQUENTLY, NOTIC E U/SEC. 143(2) AND 142(1) WAS ISSUED. IN COMPLIANCE, THE LD. A.R. O F THE ASSESSEE APPEARED AND FILED DETAILS. THE A.O. MADE ADDITIONS R EFERRED AT PAGE 2 TO 5 OF HIS ORDER AND ONE OF THE ADDITION BEING REPAYM ENT OF CASH TO SHRI M.F. PETRE, FROM WHOM THE AMOUNT WAS ACCEPTED IN CASH AND WITH OTHER ADDITIONS, THE LD. A.O. ASSESSED INCOME OF RS.1,13,91,970 AND PASSED ORDER U/SEC. 143 R.W.S. 153A OF THE ACT ON 28.12.2007. 3. AGGRIEVED BY THE ORDER, ASSESSEE FILED AN APPEA L WITH THE CIT(A) AND THE LD. CIT(A) PARTLY ALLOWED THE APPEAL V IDE ORDER DATED 22.02.2011. SUBSEQUENTLY, THE LD. A.O. ISSUED SHOW C AUSE NOTICE FOR LEVYING PENALTY UNDER SECTION 271E OF THE ACT AS THE AS SESSEE HAS REPAID LOAN OF RS.4 LAKHS TO MR. M.F. PETRE. IN THE PENALTY PROCEEDINGS 3 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. THE LEARNED A.O. RELY ON THE FINDINGS OF THE LD. CIT( A), WHO HAS REFERRED TO THE REPAYMENT OF LOAN OBTAINED FROM SHRI M. F. PETRE AT PARA 14.1 TO 14.3. OF THE ORDER. THE LD. CIT(A) HAVIN G SATISFIED WITH THE APPELLANTS SUBMISSIONS, CASH FLOW STATEMENT ON ACCE PTANCE OF LOAN OF RS.4 LAKHS AND REPAYMENT BY CASH FOUND THAT THE TRANSA CTION AS GENUINE AND DELETED THE ADDITION OF RS.4 LAKHS. ON IS SUE OF DIRECTIONS SOUGHT BY THE A.O. INVOKING THE PROVISIONS OF SECTION 2 69SS AND 269T OF THE ACT, THE CIT(A) OBSERVED THAT THE A.O. SHALL EXA MINE THE ASPECT AND SHALL TAKE NECESSARY FOLLOW-UP ACTION. WHEREAS, TH E A.O. IN PENALTY PROCEEDINGS MADE A REFERENCE THROUGH LETTER D T. 12-10-2012 TO THE ADDL. COMMISSIONER FOR INITIATION OF PENALTY U/SEC . 271E OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE, LD. AR APPEARED AND SUBMITTED INFORMATION RELATING TO CASH TRANSACTIONS AND EXPLAINED THAT ASSESSEE HAS OBTAINED THE LOAN FOR THE PURCHASE OF PROPERTY AND WAS REPAID IN CASH DURING THE SAME FINANCIAL YEAR AS THE TRANSACTION COULD NOT BE MATERIALISED. WHEREAS THE LD. A.O. COULD NOT IDENTIFY THE REASONABLE CAUSE UNDER SECTION 273B OF THE ACT AS EXPLAINED BY THE ASSESSEE AND ALSO DISTINGUISHED THE CASE LAW AND RELIED ON THE PROV ISIONS OF SECTION 275 OF THE ACT ON IMPOSING OF PENALTY AND FURTHER OBS ERVED THAT LEVY OF PENALTY WAS INITIATED ON 18.10.2012 AS THERE IS NO PRESCRIBED TIME LIMIT FOR INITIATING PENALTY PROCEEDINGS AND ALSO DEA LT ON THE PROVISIONS OF 269T OF THE ACT IN RESPECT OF MODE OF ACCEPTANCE OR REPAYMENT OF LOAN BY CASH. THE LD. A.O. OBSERVED THAT THERE IS NO R EASONABLE CAUSE FOR NOT REPAYING THE LOAN BY WAY OF CHEQUE OR DEMAND DRAFT AND THE ASSESSEE HAS NOT SATISFIED REASONABLE CAUSE ON FINAN CIAL TRANSACTIONS AND LD. A.O. LEVIED PENALTY U/SEC. 271E OF THE ACT FO R VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT, RS.4 LAKHS AND PASSED ORDER ON 30.04.2013. 4 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. 4. AGGRIEVED BY THE ORDER OF THE A.O, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) OBSERVED THAT THE ASS ESSEE COULD NOT ADDUCE ANY EVIDENCE FOR URGENCY IN REPAYMENT OF LOA N IN CASH IRRESPECTIVE OF THE FACT THAT THE PROPERTY TRANSACTION HAS BEEN CANCELLED. THE LD. CIT(A) GAVE FINDINGS AT PARA-4. 2 ON INITIATION OF PENALTY PROCEEDINGS PERTAINS TO A.Y. 2004-05 AND WHER EAS PENALTY INITIATED AFTER 8 YEARS AND EXPRESSED THAT THERE IS NO TIME LIMIT PRESCRIBED FOR INITIATION OF PENALTY PROCEEDINGS AND OVERRULED THE SUBMISSIONS OF THE ASSESSEE ON PENALTY PROCEEDINGS TH AT IT SHOULD BE INITIATED WITHIN THE REASONABLE TIME. BUT LD. CIT(A) CON FIRMED THE ACTION OF THE A.O. AND PASSED ORDER UNDER SECTION 271E ON 14 TH NOVEMBER, 2015. AGGRIEVED BY THE ORDER OF THE LD. CI T(A), THE ASSESSEE HAS ASSAILED AN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE REITERATE D THE SUBMISSIONS OF ASSESSMENT, QUANTUM APPEAL AND PENALT Y PROCEEDINGS AND FURTHER EXPLAINED THAT THE LD. CIT(A) HAS DELETED TH E ADDITION AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W. S. 153A ON 28.12.2007 AND PENALTY ORDER WAS PASSED ON 30.04.20 13. LD. AR EMPHASIZED THAT REVENUE HAS NOT CONSIDERED THE REASONAB LE TIME LIMIT WHEREAS THE LD. CIT(A) HAS OBSERVED THAT THE ASSE SSEE COULD NOT MAKE OUT A CASE ON REASONABLE CAUSE AND THE LEVY OF PENALTY HAS BEEN EXERCISED WITHIN A REASONABLE TIME. THE A.R. SUB STANTIATED THE CASE WITH PAPER BOOK AND EXPLAINED THE REASONS OF RE PAYMENT OF LOAN ON VARIOUS DATES AND THE LEVY OF PENALTY IS BEYOND TH E REASONABLE TIME AND PRAYED FOR CANCELLATION OF PENALTY. 6. PER CONTRA, THE LD. D.R. RELIED ON THE ORDERS OF TH E LOWER AUTHORITIES AND EXPLAINED THAT THE ASSESSEE COULD NOT ES TABLISH BUSINESS EXIGENCY FOR ACCEPTING AND REPAYMENT OF LOA N BY CASH AND 5 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. THE ASSESSEE HAS NOT PROVED THE REASONABLE CAUSE. THER EFORE, LEVY OF PENALTY IS JUSTIFIED. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. A.R. CONTE NTIONS WERE ON REASONABLE CAUSE AND REASONABLE TIME FOR LEVY OF PEN ALTY. THE LD. A.R. DREW OUR ATTENTION AT PAGE-7 OF THE PAPER BOOK CONTAINI NG CASH BOOK FOR THE PERIOD JULY 2003 AND AUGUST 2003 WHERE THE AS SESSEE HAS OBTAINED LOAN BY CASH RS.4 LAKHS ON 15.06.2003 FROM SHRI M.F PETRE AND THE SAME WAS REPAID IN THREE INSTALMENTS FIRST BEING 05.07.2003 RS. 1 LAKHS AND SECOND INSTALMENT ON 15.07.2003 RS.2 LAKHS AND FINAL INSTALMENT ON 05.08.2003 RS.1 LAKHS. THE ASSESSEE AND REVENUE HAS ACCEPTED THE FACT OF REPAYMENT IN CASH. THE LD. CIT(A ) FOUND THE TRANSACTION BEING REALISTIC AND DEALT IN QUANTUM APPEAL WERE THERE IS NO DISPUTE OF GENUINENESS OF THE TRANSACTION, BUT A.O. HAS MADE AN ADDITION ON CONTRAVENTION OF PROVISIONS OF SECTION 269S S OF THE ACT. THE LD. CIT(A) HAS DELETED THE ADDITION IN QUANTUM APP EAL WITHOUT ANY SPECIFIC DIRECTIONS FOR LEVY OF PENALTY AS ENVIS AGED BY THE A.O. IN THE PENALTY ORDER. ON PERUSAL OF THE ASSESSMENT ORDER AND INITIATION OF PENALTY BY THE LD. AO WE FOUND THE ASSESSMENT ORDER W AS PASSED ON 28.12.2007 AND THE PENALTY WAS INITIATED ON 18.12.2 012 AND FURTHER THE ORDER OF CIT(A) PASSED ON 22.02.2011. ON COMPAR ING THE DATE OF ASSESSMENT ORDER, CIT(A) ORDER AND INITIATION OF PENA LTY, THE REVENUE HAS ISSUED NOTICE AFTER DISPOSAL OF APPEAL ON 22.02 .2011: THE LD. A.R. DREW OUR ATTENTION TO PAGE NO. 3 OF PAPER BOOK ON THE SUBMISSIONS OF REASONABLE CAUSE OR SUFFICIENT CAUSE AND SUPPLIED WI TH WRITTEN SUBMISSIONS RELYING ON THE FOLLOWING JUDICIAL DECIS IONS. 6 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. 1. CIT VS. EMESKAY FINANCIAL SERVICES LTD., 128 TTJ 474 (VIZAG) (TRIBU.) 2. ROYAL METAL PRINTERS (P) LTD., VS. ADDL. CIT (TDS), RANGE-3, MUMBAI 37 SOT 139 (MUM.) 3. CIT VS. SUNIL KUMAR GOEL 315 ITR 163 ( P & H) (H IGH COURT) 4. CITIZEN CO-OP SOCIETY LTD., HYDERABAD VS. ADDL. CI T, RANGE-9, HYDERABAD (HYD.) (TRIBU.) ITA.NO.1156 TO 1159/HYD/20 09 DATED 26 TH FEBRUARY, 2010. 5. CH. SRINIVASULU REDDY, HYDERABAD VS. ITO (HYD.) (TRIBU.) ITA.NOS.758 & 759/H/2012 ETC., DATED 04.12.2015. 6. LODHA BUILDERS P. LTD., & OTHERS VS., ACIT 34 ITR (TRIBU.) 157 (MUM.) 7. ITO VS. DINESH JAIN 34 ITR 709 (DEL.) (TRIBU.) 8. ITO VS. JKD CAPITAL & FINLEASE LTD., 43 ITR 683 (D EL.) (TRIBU.) 9. CIT VS. M. RAMAKRISHNA 378 ITR 437 (MAD.) 10. PR. CIT VS. JKD CAPITAL & FINLEASE LTD., 378 ITR 614 (DEL.) 11. ADDL. CIT VS. M/S. BBL FOODS P. LTD., ITA.NO.236 /HYD/2006 DATED 23.05.2008. 12. PR. CIT VS. JKD CAPITAL FINLEASE LTD., ITA.NO.780 OF 2015 DATED 13.10.2015 (DELHI) (HIGH COURT) 13. CIT VS. AKHILESH YADAV & DIMPLE YADAV ITA.NO.71 OF 2013 AND ITA.NO.174 OF 2015 DATED 21 ST AUGUST, 2015. 14. CIT VS. SAINI MEDICAL STORE (2005) 277 ITR 420 ( P & H) (HC) 15. CIT VS. SAINI MEDICAL STORE (2005) 276 ITR 79 (P&H) (HC) 16. M.S. LOKAIAH, HYDERABAD VS. ADDL. CIT, RANGE-11 , HYDERABAD. ITA.NO.1272/HYD/2015 DATGED 03.08.2016 (HYD.) (TRIBU .) 8. THE LD. A.R. REFERRED TO THE A.OS LETTER DT. 12.12 .2012 FOR INITIATING PENALTY IRRESPECTIVE OF THE FACT THAT THE LD. C IT(A) IN QUANTUM APPEAL PASSED ORDER ON 22.02.2011. ON THE QUESTION FROM THE BENCH, THE LD. D.R. COULD NOT EXPLAIN THE REASONS W HY THERE IS A DELAY IN INITIATION OF PENALTY AFTER PASSING OF CIT(A ) ORDER ON 22.02.2011. WE ARE OF THE OPINION THAT THE ASSESSEE IN THE ORIGINAL PROCEEDINGS HAS NOT DISPUTED ACCEPTANCE AND REPAYMEN T OF CASH LOAN AND GENUINE REASONS BEING TO PURCHASE PROPERTY AND S INCE IT COULD NOT MATERIALISE, MONEY WAS RETURNED AS OBSERVED BY THE LD . CIT(A) AND DELETED THE ADDITION. PRIMA FACIE, THE ASSESSEE HAS RE ASONABLE CAUSE FOR ACCEPTING AND REPAYMENT OF LOAN. NOW THE QUESTION A RISE BEING THE 7 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. REASONABLE TIME FOR INITIATION OF PENALTY PROCEEDINGS . THE REVENUE CANNOT WAIT FOR A LONGER PERIOD OR INITIATE PENALTY PRO CEEDINGS AT THEIR INSTANCE ON THE REASON THAT THERE IS NO TIME LIMIT PRESCRI BED FOR INITIATION OF PENALTY UNDER THE PROVISIONS OF THE AC T. ON PERUSAL OF JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. U.B. ELECTRONIC INSTRUMENTS LTD., (2015) 371 ITR 314 (T & AP ) THE REASONABLE PERIOD TO TAKE ACTION BY THE REVENUE SHALL BE 4 YEARS: AND EVERY ADDITION CANNOT BE A GATE WAY FOR THE LEVY OF PE NALTY. IN THE CASE OF CIT VS. MANJUNATHA GINNING FACTORY LTD., 359 ITR 5 65 (KARN.), IT WAS HELD THAT THE PENALTY IS NOT AUTOMATIC AND PRINCIP LES HAVE TO BE CONSIDERED BEFORE LEVY OF PENALTY. THE JURISDICTION AL HIGH COURT IN THE CASE OF U.B. ELECTRONIC INSTRUMENTS LTD., (SUPRA) HELD AS UNDER : BY AND LARGE, FOUR YEARS IS TREATED AS THE PERIOD WITHIN WHICH ANY PENAL ACTION CAN BE INITIATED AGAINST AN ASSESSEE. FAILURE TO INITIATE STEPS WITHIN THAT PERIOD WOULD DISABLE THE DEPARTME NT TO PROCEED AGAINST THE ASSESSEE. IN THE INSTANT CASE ASSESSMENT YEARS ARE 1989-90, 1 990-91 AND 1991- 92. IT WAS NEARLY SEVEN YEARS THEREAFTER THAT A NOT ICE WAS ISSUED. FOR AN ASSESSEE TO BE REQUIRED TO PAY THE AMOUNT, EVEN IF DUE FIVE OR SIX YEARS PRECEDING THE DEMAND, WOULD BE A SERIOUS PROB LEM. 9. WE FOUND THE A.O. EVEN AFTER LD. CIT(A) PASSING THE ORDER ON 22.02.2011 HAS WAITED FOR MORE THAN 20 MONTHS AND I SSUED PENALTY NOTICE AND FURTHER COMPARING WITH THE ASSESSME NT PROCEEDINGS THE LD. A.O. COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT ON 28.12.2007 WHEREAS PENALTY WAS INI TIATED ON 18.10.2012 WHICH IS AFTER FOUR YEARS. WE RELY ON JU RISDICTIONAL HIGH COURT DECISION AND ARE OF THE OPINION THAT INITIATING OF PENALTY U/SEC. 271E OF THE ACT AFTER REASONABLE TIME IS NOT IN ACCORDA NCE WITH LAW. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE QUASH THE PENALTY ORDER AND ALLOW THE GROUNDS OF THE ASSESSEE. 8 ITA.NOS.170 & 171/HYD/2016 SHRI RAO SUBBA RAO, HYDERABAD. 10. SIMILARLY ITA.NO.171/HYD/2016 FILED AGAINST THE PENALTY ORDER U/SEC. 271D OF THE ACT. IN THIS APPEAL, THE ABOV E SAID PRINCIPLES SHALL APPLY AND ACCORDINGLY, THE APPEAL OF THE ASSESS EE IS ALLOWED. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (G.PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 17 TH FEBRUARY, 2017 VBP/- COPY TO 1. SHRI RAO SUBBA RAO, HYDERABAD. C/O. SHRI B. NARSING RAO & CO., CHARTERED ACCOUNTANTS , PLOT NO.554, ROAD NO.92, JUBILEE HILLS, HYDERABAD 96. 2. THE ADDL. CIT, RANGE-6, HYDERABAD. 3. CIT(A)-9, 2 ND FLOOR ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 4. PR. CIT-6, HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE