M/s Prithvi Developers, V. Income Tax Officer, Ward-10(4), Hyderabad

ITA 1720/HYD/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1892 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-10-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 13-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Bonafide belief; Deemed to accrue or arise in india; Wrong claim; Onus to prove; Revised return
• Section: 44AD; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA.NO.1720/HYD/2013 ASSESSMENT YEAR 2000-2001 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. PAN AAEFT5399P VS. THE INCOME TAX OFFICER, WARD 10(4) HYDERABAD. (APP ELLANT ) (RESPONDENT) FOR ASSESSEE : MR. A.V. RAGHURAM FOR REVENUE : MR. M. SITARAM DATE OF HEARING : 12 . 1 0.2015 DATE OF PRONOUNCEMENT : 14 . 1 0.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-18, MUMBAI HOLD ING CONCURRENT JURISDICTION OF CIT(A)-VI, HYDERABAD DAT ED 19.08.2013 WHEREBY HE CONFIRMED THE PENALTY OF RS.5,76,064 IMPOSED BY THE A.O. UNDER SECTION 271(1 )(C). 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE CONSTRUCTI ON BUSINESS. A SURVEY UNDER SECTION 133A WAS CARRIED O UT IN ITS BUSINESS PREMISES ON 23.12.1999. DURING THE COU RSE OF SURVEY, IT WAS FOUND THAT THE INVESTMENT MADE BY THE ASSESSEE IN THE CONSTRUCTION OF TWO PROJECTS NAMELY 2 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. PRITHIVI EMERALD AND PRITHIVI REBA WAS NOT FULLY DI SCLOSED BY THE ASSESSEE. IN HIS STATEMENT RECORDED DURING T HE COURSE OF SURVEY, MR. KETAN SANGHAVI, PARTNER OF TH E ASSESSEE FIRM SURRENDERED INTER ALIA, ADDITIONAL INCOME OF RS.27 LAKHS FOR THE YEAR UNDER CONSIDERATION AS THE UNDISCLOSED INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE IN THE SAID TWO PROJECT S. THEREAFTER, THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 31.01.20 01 DECLARING TOTAL INCOME OF RS.10,44,430. IN THE SAID RETURN, THE ADDITIONAL INCOME OF RS.27 LAKHS SURRENDERED DU RING THE COURSE OF SURVEY WAS DECLARED BY THE ASSESSEE A FTER CLAIMING DEDUCTION OF RS.8,63,900 BEING THE OPENING BALANCE IN THE PARTNERS CAPITAL ACCOUNT AND RS.8,19 ,974 BEING INTEREST AND REMUNERATION PAID TO THE PARTNER S. AS REGARDS THE CLAIM OF ASSESSEE FOR DEDUCTION/SET OFF ON ACCOUNT OF OPENING BALANCE IN THE CAPITAL ACCOUNTS OF THE PARTNERS, THE A.O. HELD THAT NO SUCH CLAIM WAS MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY AND IT WAS ONLY AN AFTER-THOUGHT. HE, THEREFORE, DISALLOWED THE SAM E. THE A.O. ALSO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PARTNERS INTEREST AND REMUNERATION FROM THE INCOME SURRENDERED DURING THE COURSE OF SURVEY ON THE GROUND THAT INCOME SO SURRENDERED WAS ON ACCOUNT OF UNEXPLAINED INVESTMEN T WHICH WAS CHARGEABLE TO TAX AS THE DEEMED INCOME OF THE ASSESSEE UNDER SECTION 69B. HE HELD THAT THE DEDUCT ION ON ACCOUNT OF PARTNERS INTEREST AND REMUNERATION WA S NOT ALLOWABLE AGAINST SUCH DEEMED INCOME AND SINCE THIS 3 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. AMOUNT WAS NOT FORMING PART OF THE BOOK PROFIT OF T HE ASSESSEE AS SHOWN IN THE P & L ACCOUNT, THE CLAIM O F THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PARTNERS INTER EST AND REMUNERATION WAS NOT ALLOWABLE AS PER THE CLEAR PROVISIONS OF SECTION 40(B). ACCORDINGLY, THE ASSES SMENT UNDER SECTION 143(3) WAS COMPLETED BY THE A.O. COMPUTING TOTAL INCOME OF THE ASSESSEE AT RS.27,25, 304 AFTER MAKING DISALLOWANCE OF RS.8,63,900 ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION/SET OFF OF OPENING B ALANCE IN THE CAPITAL ACCOUNTS OF THE FIRM AND RS.8,19,974 ON ACCOUNT OF INTEREST AND REMUNERATION PAID TO THE PARTNERS. 2.1. IN THE QUANTUM PROCEEDINGS, BOTH THE ABOVE ADDITIONS MADE BY THE A.O. TO THE TOTAL INCOME OF T HE ASSESSEE FIRM WERE CONFIRMED BY THE LD. CIT(A) AS W ELL AS BY THE TRIBUNAL AND AFTER PASSING OF THE TRIBUNAL O RDER DATED 31.10.2006, NOTICE WAS ISSUED BY THE A.O. REQ UIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE IMPOSED IN RESPECT OF BOTH THESE ADDITIONS. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT APPROXIMATE FIGURE OF INCOME WAS SURRENDERED D URING THE COURSE OF SURVEY AFTER TAKING INTO CONSIDERATIO N THE COST OF CONSTRUCTION BUT THE CLAIM FOR SET OFF/DEDU CTION ON ACCOUNT OF CAPITAL INVESTED BY THE PARTNERS IN THE BUSINESS WAS NOT MADE DUE TO TENSION AND PRESSURE T HAT PREVAILED DURING THE COURSE OF SURVEY. IT WAS CONTE NDED THAT THE CAPITAL INTRODUCED BY THE PARTNERS WAS DUL Y INVESTED IN THE BUSINESS ACTIVITIES OF THE FIRM AND 4 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. THEREFORE, THE INVESTMENT MADE IN THE CONSTRUCTION OF TWO PROJECTS WAS EXPLAINED TO THAT EXTENT. AS REGARDS T HE DEDUCTION CLAIMED ON ACCOUNT OF INTEREST AND REMUNERATION PAID TO THE PARTNERS, IT WAS CONTENDED BY THE ASSESSEE THAT THE INCOME SURRENDERED DURING THE COURSE OF SURVEY WAS OFFERED TO TAX AS BUSINESS INC OME AND THEREFORE, THE SAID CLAIM MADE BY THE ASSESSEE WAS IN ACCORDANCE WITH LAW. 2.2. THE A.O. DID NOT FIND MERIT IN THE CONTENTION S OF THE ASSESSEE. ACCORDING TO HIM, THE AMOUNT OF RS .27 LAKHS SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY AS ADDITIONAL INCOME WAS ON ACCOUNT OF INVES TMENT FOUND TO BE MADE IN THE CONSTRUCTION OF THE TWO PRO JECTS AND THE SAID AMOUNT HAVING BEEN ASSESSED TO TAX IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT AS DEEMED INCOME, THE DEDUCTION ON ACCOU NT OF INTEREST AND REMUNERATION PAID TO THE PARTNERS W AS NOT ALLOWABLE AGAINST THE SAID INCOME. HE ALSO HELD THA T THERE BEING NO CLAIM MADE BY THE ASSESSEE FOR SET OFF OR DEDUCTION ON ACCOUNT OF PARTNERS CAPITAL ACCOUNT DU RING THE COURSE OF SURVEY, SUCH CLAIM MADE IN THE RETURN WAS ONLY AN AFTER-THOUGHT WITHOUT THERE BEING ANYTHING TO SUPPORT AND SUBSTANTIATE THE SAME. ACCORDINGLY, THE EXPLANATION OFFERED BY THE ASSESSEE DURING THE COUR SE OF PENALTY PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY THE A.O. AND HE PROCEEDED TO IMPOSE PENALTY OF RS.5,76,064 U NDER SECTION 271(1)(C) BEING 100% OF THE TAX SOUGHT TO B E 5 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. EVADED BY THE ASSESSEE IN RESPECT OF TWO ADDITIONS MADE TO ITS TOTAL INCOME. 2.3. THE PENALTY IMPOSED BY THE A.O. WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LD. CIT(A). DURING THE COURSE OF APPEAL PROCEEDINGS BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS STAND THAT THE PENALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) WAS NOT SUSTAINABLE. FIRSTLY INCOME ADMITTED DURING SURVEY IS ONLY ON ESTIMATE BASIS AND NOT BASED ON ANY MATERIAL FOUND DURING SURVEY AND SECONDLY THE CLAIM OF CAPITALS INTRODUCED BY THE PARTNERS IS BRUSHED ASIDE WITHOUT APPRECIATION OF FACTS. DURING THE PENALTY PROCEEDIN GS THE A. O. HAS NOT MADE ANY ATTEMPT TO VERIFY WHETHE R THERE COULD BE CAPITAL OF THE PARTNERS OR NOT. HE SIMPLY RELIED ON THE ORDER OF THE APPELLATE AUTHORI TY. THE APPELLANT IS REPRODUCING THE FINDINGS OF THE CI T(A) ON THE CLAIM OF CAPITALS IN THE ORDER FOR A. Y. 200 0-01 :- '6(III) TOTAL VOLUME OF ASSETS AND LIABILITIES OF THE APPELLANT FIRM ARE NOT KNOWN SINCE NO BOOKS WERE MAINTAINED AND AT NO TIME WAS A BALANCE SHEET SUBMITTED ALONG WITH THE RETURN. SINCE THE APPELLANT TIES CHOSEN NOT TO DISCLOSE ITS LIABILITIES OTHER THAN CAPITAL ACCOUNTS AND ITS ASSETS OTHER THAN THE BUILDING UNDER CONSTRUCTION, IT HAS THEREFORE TO BE HELD THAT WHATEVER WERE THE LIABILITIES OF THE FIRM AS ON 31.03.1999, INCLUDING THE PARTNERS' CAPITAL ACCOUNTS, THEY WERE ALREADY DEPLOYED AS ASSETS. IN SUM THE PARTNERS' CAPITAL AS ON 31.03.1999 WAS ALREADY USED UP IN EXPLAINING INVESTMENTS AND OTHER CURRENT ASSETS AS. ON 31.03.1999. THEREFORE NEITHER ON FACTS NOR IN 6 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. LAW, IS THERE ANY JUSTIFICATION IN THE CLAIM THAT THE CAPITAL BALANCES AS ON 31.03.1999 OR 1.4.1999 WERE TO BE SET OFF AGAINST THE UNEXPLAINED INVESTMENT OF RS. 271AKHS DISCLOSED FOR THE PERIOD 1.4.1999 TO 31.3.2000. WHATEVER WERE THE FUNDS OF THE FIRM, THEY WERE ALREADY USED UP IN THE CONSTRUCTION FOUND ON THE DAY OF THE SURVEY. THE APPEAL FALLS ON THIS GROUND.' MERE NON-MAINTENANCE OF BOOKS OF ACCOUNT CANNOT STAND AGAINST THE APPELLANT FOR ALL PURPOSES . IF THAT IS THE CASE WHEN INCOME IS ESTIMATED AND ADMITTED U/S 44AD NO FURTHER ADDITION SHOULD HAVE BEEN MADE. HOWEVER, THE AUTHORITIES EXTRACTED INCOME IN THE FORM OF UNEXPLAINED INVESTMENT THEREB Y GIVING A DIFFERENTIAL TREATMENT FOR THE APPELLANT COMPARED TO AN ASSESSEE ADMITTING INCOME U/S 44AD IN THE NORMAL COURSE MERELY BECAUSE OF SURVEY, THEREFORE, APPELLANT SUBMITS THAT ON SUCH AN ADDITI ON PENALTY CANNOT BE LEVIED HOLDING THE SAME TO BE CONCEALED INCOME. THE APPELLANT UNDER BONAFIDE BELIEF THAT IT IS ENTITLED FOR REMUNERATION AND INTEREST ON THE ADDITIONAL INCOMES ADMITTED HAS PREFERRED SUCH CLAIM. THE APPELLATE AUTHORITY HAS TAKEN DIFFERENT OPINION. MERE DISALLOWANCE OF A CLAIM MADE CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME AND PENALTY CANNOT BE LEVIED. IN THIS REGARD THE APPELLANT INVITES KIND ATTENTION TO THE FOLLOWING DECISIONS: (A) BALANCE VEGETABLE PRODUCTS (P) LTD. 290 ITR 172 (KARNATAKA). (B) CIT VS. BACARDI MARTINI INDIA LTD., 288 ITR 585 (DEL.) (C) CIT VS. MANIBHAI & BROTHERS 294 ITR 501 (GUJARAT). 7 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. 2.4. THE LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE AND REJECTING THE SAME, HE CONFIRMED THE PENALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) FOR THE FOLLOWING REASONS G IVEN IN HIS IMPUGNED ORDER. FROM THE PERUSAL AND SUBMISSIONS OF APPELLANT, IT IS OBSERVED THAT A SURVEY WAS CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT COMPANY. DURING THE SURVEY, DISCREPANCIES RELATING TO THE CAPITAL BALANCE OF THE PARTNERS AND REMUNERATION AND INTEREST TO PARTNERS WERE NOTICED AND CONFRONTED TO THE ASSESSEE TO COVER UP THESE DISCREPANCIES THE AR HAS DECLARED UNDISCLOSED INCOME OF RS. 18,42,000 FO R A.Y. 1999-2000 AND A Y. 2000-01. IN THE RETURN FILE D THE APPELLANT HAS NOT DISCLOSED THE AMOUNT DECLARED DURING THE COURSE OF SURVEY, THUS, THE A.O. HAS ASSESSED THE TOTAL INCOME AT RS.27,25,310/- AS AGAINST RS. 10,41,430/-. THE CIT(A) HAS GIVEN A PARTIAL RELIEF AND THE INCOME WAS COMPUTED AT RS. 25,37,698/-. THE HON'BLE TRIBUNAL HAS DISMISSED THE APPEAL OF THE ASSESSEE. FROM THE FACTS, IT IS CLEAR THAT DURING THE COURSE OF SURVEY OPERATION DISCREPANCIES WERE POINTED OUT FOR WHICH THE APPELLANT HAS DECLARED UNDISCLOSED INCOME WHICH WAS NOT ACTUALLY DECLARED IN THE REVISED RETURN FILED AFTER SURVEY. THESE FACTS PROVE THAT ITS A CLEAR CASE OF CONCEAL MENT OF INCOME BASED ON THE FACTS. THE ARGUMENT OF THE APPELLANT THAT IT MERELY A DISALLOWANCE OF CLAIM MA DE BY THE APPELLANT AND NOT ANY CONCEALMENT OF INCOME IS NOT ACCEPTABLE AND THE DECISIONS RELIED ON ARE A LSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE IT IS NOT A CASE OF MERE DISALLOWANCE OF EXPENSES BUT A SPECIFIC DISCREPANCIES WERE POINTED OUT WHICH WERE ALSO ADMITTED BY THE MANAGING PARTNER OF THE APPELLANT FIRM AND DECLARED AS UNDISCLOSED INCOME. ON FACTS, THE HON'BLE ITAT HAS CONFIRMED THE ORDER OF THE AO. SINCE THE TRIBUNAL I S A FINAL FACT FINDING AUTHORITY, THEREFORE, IT IS HELD THAT THE ASSESSEE HAS SUBMITTED INACCURATE PARTICULARS O F 8 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. INCOME WHICH HAS RESULTED INTO CONCEALMENT OF INCOME. THUS, THE DECISIONS RELIED ON BY THE APPELL ANT ARE NOT HELPFUL. TO STRENGTHEN THE VIEW OF THE AO. RELIANCE IS PLACED ON THE DECISION IN CASE OF CIT V S. ANANTHAN CHETTIAR 273 ITR 401, IN CASE OF CIT VS. K.A. SAMPATH REDDY 197 ITR 232, IN CASE OF ACIT VS. SRINIVASA ENTERPRISES 63 ITO 85, IN CASE OF CIT VS. POPULAR LUNGI COMPANY 238 ITR 229, IN CASE OF P.C. JOSEPH & BROS. CO. 240 ITR 818, IN CASE OF CIT VS. DR. A.MOHMED ABDUL KHADIR 260 ITR 650 AND IN CASE OF CIT VS. MAHADIK PRASAD BAJAJ 298 ITR 109, I T WAS HELD THAT SURVEY OF BUSINESS - IMPOUNDING OF BOOKS OF ACCOUNT - ASSESSEE AGREED TO ASSESSMENT - IMPOSITION OF PENALTY WAS VALID. IN CASE OF G.C. AGARWAL VS. CIT 186 ITR 571, THE HON'BLE SUPREME COURT HAS HELD THAT BURDEN OF PROOF - ASSESS - FILI NG REVISED RETURNS SHOWING MUCH LARGER INCOME - NOT ABLE TO ESTABLISH INADVERTENT MISTAKE OR OMISSION I N ORIGINAL RETURNS PENALTY WAS JUSTIFIED. KEEPING IN VIEW THE FACTS & CIRCUMSTANCES, IT IS HELD THAT THE APPELLANT HAS WILLFULLY CONCEALED ITS INCOME TO EVA DE THE PAYMENT OF TAXES THEREFORE, IT IS A FIT CASE FO R LEVYING PENALTY U/S 271(1)(C), THUS, THE PENALTY LE VIED BY THE A.O. OF RS. 5,76,064/- IS UPHELD AND THE GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW IN SUPPORT OF ASSESSEE S CLAIM THAT THE PENALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) AND CONFIRMED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN THE FACTS OF ASSESSEES CASE. THE LE ARNED D.R. ON THE OTHER HAND STRONGLY RELIED ON THE ORDER S OF THE AUTHORITIES BELOW IN SUPPORT OF REVENUES STAND THA T THE 9 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. CASE OF THE ASSESSEE IS A FIT CASE TO IMPOSE PENALT Y UNDER SECTION 271(1)(C). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT INVESTMENT MADE BY THE ASSESSEE IN THE CONSTRUCTION OF TWO PROJECTS WAS FOUND TO BE HIGHER THAN WHAT WAS DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SURV EY AND IN HIS STATEMENT RECORDED DURING THE COURSE OF SURV EY, THE PARTNER OF THE ASSESSEE NOT ONLY ADMITTED SUCH UNEXPLAINED INVESTMENT BUT ALSO SURRENDERED ADDITIO NAL INCOME OF RS.27 LAKHS ON ACCOUNT OF SUCH UNEXPLAINE D INVESTMENT FOR THE YEAR UNDER CONSIDERATION I.E., A .Y. 2000-2001. IN THE RETURN OF INCOME FILED FOR THE Y EAR UNDER CONSIDERATION, THE ASSESSEE NO DOUBT OFFERED THE INCOME SO SURRENDERED TO TAX BUT ONLY AFTER CLAIMIN G TWO DEDUCTIONS OF RS.8,63,900 AND RS.8,19,974 ON ACCOUN T OF BALANCE IN THE PARTNERS CAPITAL ACCOUNT AND INTERE ST AND REMUNERATION TO PARTNERS RESPECTIVELY. AS REGARDS T HE DEDUCTION/SET OFF CLAIMED BY THE ASSESSEE ON ACCOUN T OF BALANCE IN THE PARTNERS CAPITAL ACCOUNT, IT IS OBSE RVED THAT ALTHOUGH THIS CLAIM OF THE ASSESSEE IS NOT ALL OWED IN THE QUANTUM PROCEEDINGS BY THE TRIBUNAL IN THE ABSE NCE OF REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSES SEE, THE CLAIM OF THE ASSESSEE OF HAVING SUCH AMOUNT AVA ILABLE IN THE FORM OF PARTNERS CAPITAL IS NOT FOUND WRONG AT ANY STAGE. SINCE THE ASSESSEE FIRM WAS ALREADY IN THE B USINESS OF CONSTRUCTION AND HAD OFFERED INCOME AS WELL AS ADDITIONAL INCOME TO TAX IN THE EARLIER YEARS, IT C ANNOT BE 10 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. SAID THAT THE CLAIM OF THE ASSESSEE FOR HAVING THE AMOUNT OF RS.8,63,900 AVAILABLE IN THE PARTNERS CAPITAL A CCOUNT WAS UNREASONABLE. THIS CLAIM NO DOUBT WAS REJECTED IN THE QUANTUM PROCEEDINGS BY TAKING A VIEW THAT IN TH E ABSENCE OF BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE, THE SAME WAS NOT ACCEPTABLE. BUT THE FACT REMAINS THAT THERE WAS SOME AMOUNT AVAILABLE IN THE PARTNERS CAPITAL ACCOUNT AND THE INABILITY TO QUAN TIFY THE SAME FOR WANT OF BOOKS OF ACCOUNT COULD BE THE REAS ON TO DISALLOW THE CLAIM OF THE ASSESSEE FOR CREDIT OR SE T OFF ON THIS ACCOUNT BUT THE SAME CANNOT BE EQUATED TO CONCEALMENT OF PARTICULARS OF ITS INCOME BY THE ASS ESSEE OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INC OME FOR THE PURPOSE OF IMPOSING PENALTY UNDER SECTION 271(1 )(C). 4.1. AS REGARDS THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST AND REMUNERATION T O PARTNERS, WE HOWEVER FIND OURSELVES IN AGREEMENT WI TH THE AUTHORITIES BELOW THAT THE AMOUNT SURRENDERED BY TH E ASSESSEE COMPANY DURING THE COURSE OF SURVEY ON ACC OUNT OF UNEXPLAINED INVESTMENT FOUND TO BE MADE IN THE CONSTRUCTION OF TWO PROJECTS WAS ASSESSABLE IN ITS HANDS AS DEEMED INCOME AS PER THE SPECIFIC PROVISIONS CON TAINED IN SECTION 69B AND NO DEDUCTION ON ACCOUNT OF INTER EST AND REMUNERATION TO PARTNERS WAS ALLOWABLE AGAINST SUCH DEEMED INCOME. MOREOVER, THE PROVISIONS OF SECTION 40(B) DEALING WITH THE ALLOWABILITY OF DEDUCTION ON ACCOU NT OF PARTNERS INTEREST AND REMUNERATION ARE VERY SPECIF IC WHICH ALLOW SUCH DEDUCTIONS FROM THE BOOK PROFIT AN D NOT 11 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. FROM THE UNDISCLOSED INCOME WHICH IS NOT FORMING PA RT OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FIRM AN D WHICH IS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FIRM AS ITS DEEMED INCOME UNDER THE SPECIAL PROVISIONS OF SECTI ON 69B. THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACC OUNT OF INTEREST AND REMUNERATION TO PARTNERS, IN OUR OP INION, THUS WAS A PATENTLY WRONG CLAIM NOT TENABLE IN LAW AND BY MAKING SUCH PATENTLY WRONG CLAIM, THE ASSESSEE W AS GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF I TS INCOME ATTRACTING PENAL PROVISIONS OF SECTION 271(1)(C). 5. FOR THE REASONS GIVEN ABOVE, WE SUSTAIN THE PENALTY IMPOSED ON THE ASSESSEE UNDER SECTION 271(1 )(C) TO THE EXTENT IT IS IN RESPECT OF DISALLOWANCE OF R S.8,19,974 ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION TOWARD S INTEREST AND REMUNERATION TO PARTNERS AND DELETE TH E SAME TO THE EXTENT IT IS IN RESPECT OF ADDITION OF RS.8,63,900 MADE ON ACCOUNT OF DISALLOWANCE MADE ON ACCOUNT OF ASSESSEES CLAIM FOR SET OFF OR CREDIT F OR THE BALANCE IN THE PARTNERS CAPITAL ACCOUNT. THE IMPUG NED ORDER OF THE LD. CIT(A) IS ACCORDINGLY MODIFIED AND THE A.O. IS DIRECTED TO RE-COMPUTE THE PENALTY PAYABLE BY THE ASSESSEE UNDER SECTION 271(1)(C). 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 12 ITA.NO.1720/HYD/2013 M/S. PRITHVI DEVELOPERS, SECUNDERABAD. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2015. SD/- SD/- (SMT. P. MADHAVI DEVI) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 14 TH OCTOBER, 2015 VBP/- COPY TO : 1. M/S. PRITHVI DEVELOPERS, SECUNDERABAD. C/O. MR. K. VASANTKUMAR, MR. A.V. RAGHURAM, & MR. P. VINOD, ADVOCATES, FLAT NO.610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2. THE INCOME TA X OFFICER, WARD 10(4), HYDERABAD. 3. CIT(A) - 18, ROOM NO.20, 3 RD FLOOR, B - WING, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. (HAVING CONCURRENT JURISDICTION CIT(A)-VI, HYDERABAD). 4. CIT(A) - VI, HYDERABAD. 5. CIT - 5/6, HYDERABAD 6 . D.R. ITAT A BENC H, HYDERABAD. 7 . GUARD FILE