Smt.B.Rajyasree, Hyderabad V. Dy.CIT,Central Circle-6, Hyderabad

ITA 1741/HYD/2013

• Counselvise Citation: 174122514 RSA 2013
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D V ANJANEYULU
• Keywords: Search and seizure; Reasonable cause
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B : HYDERABAD BEFORE S/SHRI B. RAMAKOTAIAH, A.M. & SAKTIJIT DEY, J.M. ITA.NO.1741/HYD/2013 ASSESSMENT YEAR 2008-09 SMT. B. RAJYASREE, -V- DY. CIT, CENTRAL CIR-6, BANJARA HILLS, HYDERABAD. HY DERABAD. PAN: AFKPB7548F (APPELLANT) (RESPONDENT) APPELLANT BY : SRI DV ANJANEYU LU RESPONDENT BY SRI SOLGY JO SE T. KOTTARAM DATE OF HEARING : 05-06-2014 DATE OF PRONOUNCEMENT : 01-08-2014 ORDER PER BENCH: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25-11-2013 PASSED BY THE CIT (A)-I, HYDERABAD CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2008-09. - 2. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDI VIDUAL AND PROPRIETRIX OF BOLLINENI HEART CENTRE ROAD NO.13A, HAPPY VALLEY, BANJARA HILLS, HYDERABAD. FOR THE IMPUGNED ASSESS MENT YEAR, ASSESSEE HAD ORIGINALLY FILED A RETURN OF INCOME ON 29-8-2008 DECLARING INCOME OF RS.69,48,870/-. SUBSEQUENTLY A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF ASSESSEES HUSBAND DR. B. BHASKARA RAO AND ALSO IN CASES OF OTHER GROUP CONCERNS ON 20-08-2009. AS ALLEGED BY THE AO, DURING THE SEARCH AND SEIZURE OPERATION, CERTAIN IN CRIMINATING MATERIAL WERE FOUND AND SEIZED FROM THE RESIDENCE O F DR. 2 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. BHASKARARA RAO, AMONGST WHICH WERE FIVE NUMBERS OF PROMISSORY NOTES OF RS.7 LAKHS EACH TOTALING TO RS .35 LAKHS. DURING THE POST SEARCH PROCEEDINGS, ASSESSEES HUS BAND SRI BHASKARA RAO WHEN WAS ASKED TO EXPLAIN THE CONTENT S OF THE PROMISSORY NOTES, HE STATED THAT THESE WERE ADVANC ES GIVEN TO VARIOUS PEOPLE DURING THE COURSE OF BUSINESS. HOWE VER, SINCE HE WAS NOT IN A POSITION TO FURNISH ANY FURTHER DET AILS, HE OFFERED TO DECLARE THE AMOUNT OF RS.35 LAKHS, AS MENTIONED IN THE FIVE PROMISSORY NOTES, AS ADDITIONAL INCOME IN HIS WIFE I,E., THE PRESENT ASSESSEES HANDS FOR THE FINANCIAL YEAR 200 7-08. IN TERMS WITH THE OFFER MADE BY HER HUSBAND, THE ASSES SEE IN RESPONSE TO THE NOTICE ISSUED U/S 153C OF THE ACT F ILED A RETURN OF INCOME ON 30-6-2010 DECLARING INCOME OF RS.1,04, 48,870/- WHICH INCLUDED ADDITIONAL INCOME OF RS.35 LAKH. AO CONCLUDED THE ASSESSMENT U/S 143(3) READ WITH SECTION 153C OF THE ACT VIDE ORDER DATED 26-12-2011 BY ACCEPTING THE INCOME DECLARED OF RS.1,04,48,870/-. WHILE COMPLETING THE ASSESS MENT, THE AO INITIATED PROCEEDING FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED B Y THE AO IT WAS STATED BY HER THAT SHE HAD ADMITTED ADDITIONAL INCOME OF RS.35 LAKH TO BUY PEACE WITH THE DEPARTMENT AND NOT TO PROLONG LITIGATION. FURTHER, SINCE SHE HAS CO-OPERATED WITH THE DEPARTMENT IN CONCLUDING THE ASSESSMENT AND HAS NOT APPEALED AGAINST THE ASSESSMENT ORDER, SHE REQUESTED FOR DRO PPING THE PENALTY PROCEEDINGS. THE AO HOWEVER REJECTING THE EXPLANATION OF THE ASSESSEE PASSED AN ORDER ON 27-6-2012 IMPOSI NG PENALTY OF RS.11,89,650/- U/S 271(1)(C) OF THE ACT. BEING AGGRIEVED OF THE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 3. DURING THE PROCEEDINGS BEFORE THE CIT (A), IT WA S CONTENDED BY THE ASSESSEE THAT THE SEIZED DOCUMENT VIZ., 3 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. PROMISSORY NOTES WERE NEITHER FOUND FROM THE ASSESS EE NOR ANY STATEMENT WAS RECORDED FROM HER. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT DECLARED ANY ADDITIONAL INCOME EIT HER AT THE TIME OF SEARCH OPERATION OR DURING THE POST SEARCH PROCEEDINGS. IT WAS ONLY HER HUSBAND WHO HAD DECLARED THE ADDITI ONAL INCOME IN THE HANDS OF THE ASSESSEE. THE CIT (A) AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE HOWEVER CONFIRMED THE P ENALTY IMPOSED U/S 271(1)(C) OF THE ACT BY HOLDING AS UNDE R:- 7.0 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CARE FULLY CONSIDERED. IT MAY BE NOTED THAT THE APPELLANT FILE D HER ORIGINAL RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 69,48,870/- AND SUBSEQUENT TO SEARCH FILED A RETURN U/S 153C DECLARING A TOTAL INCOME OF RS. 1,04,48,870/-. ON THE BASIS OF THE PROMISSORY NOTES FOUND AT THE TIME OF SEARCH, WHEN THE APPELLANTS HUSBAND WAS QUESTIONED, HE OFF ERED THE SAID AMOUNT OF RS. 35,00,000/- AS UNEXPLAINED ADVANCES. THERE HAS BEEN NO APPEAL AGAINST THE ASSESSMENT ORDER. THE CONTENTION THAT THERE WAS NO SEARCH IN HER PREMISES, SHE DID NOT DISCLOSE THE IN COME BUT HER HUSBAND DID AND HER STATEMENT WAS NOT RECOR DED ETC. DO NOT HAVE ANY MERIT AND IN FACT IT REFLECTS THAT IT IS ONLY HER HUSBANDS INCOME AND SHE DOES NOT KNOW ANYTHING ABOUT HER FINANCIAL AFFAIRS AND HER HUSBAN D ONLY CONTROLS THEM. THE QUESTION ARISES AS TO WHO HAS TO BE TAXED IN RESPECT OF THE AMOUNTS APPEARING IN THE DOCUMENTS FOUND AND SEIZED. SINCE SHE OWNED UP THE AMOUNTS AS HER INCOME, SHE IS LIABLE FOR THE CONSEQUENCES. AS PER THE CLAUSE (II) TO EXPLANATION 5A OF SECTION 271(1)(C), SHE IS LIABLE TO PENALTY AND THE AO HAS RIGHTLY LEVIED PENALTY ON HER. AS MAY BE NOTED, THE APPELLANT HAS BEEN DODGING PAYMENT OF TAXES BY NOT DISCLOSING FULL AND TRUE INCOME TILL SHE (HER HUSBA ND) IS CONFRONTED WITH THE EVIDENCES. 7.1 SINCE THERE IS NO REASONABLE CAUSE WHICH IS PREVENTED THE APPELLANT FROM DISCLOSING THESE TRANS ACTIONS TO THE DEPARTMENT VOLUNTARILY WHEN THE ORIGINAL RET URN WAS FILED, I AM CONVINCED THAT THERE IS A DELIBERATE AT TEMPT ON THE PART OF THE APPELLANT TO CONCEAL THE PARTICULAR S OF HER INCOME AT THE TIME OF FILING ORIGINAL RETURN. IN VI EW OF THE ABOVE, IT IS HELD THAT THERE HAS BEEN NO REASONABLE CAUSE WHICH PREVENTED HER FROM DISCLOSING THE TRUE AND CO RRECT 4 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. INCOME VOLUNTARILY AND ACCORDINGLY, THE PENALTY LEV IED U/S 271(1) OF RS. 11,89,650/- IS CONFIRMED. 4. REITERATING THE SUBMISSIONS MADE BEFORE THE CIT (A), THE LEARNED AR SUBMITTED THAT NEITHER THE PROMISSORY NO TES REVEAL THE ASSESSEES NAME NOR ASSESSEE DURING THE SEARCH OPERATION OR POST SEARCH PROCEEDINGS HAS OFFERED THE ADDITION AL INCOME AS MENTIONED IN THE PROMISSORY NOTES. IT WAS SUBMITTE D THAT IT WAS THE ASSESSEES HUSBAND WHO HAD MADE DECLARATION OF ADDITIONAL INCOME AT THE HANDS OF THE ASSESSEE. THE LEARNED AR SUBMITTED THAT EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT WILL NOT BE APPLICABLE AS NEITHER THERE IS ANY SEARCH OR SEIZURE OPERATION U/S 132 OF THE ACT IN CASE OF THE ASSESSE E NOR ANY INCRIMINATING MATERIAL RELATING TO THE ASSESSEE WAS FOUND DURING THE SEARCH. ONLY BECAUSE ASSESSEES HUSBAND DECLAR ED THE ADDITIONAL INCOME AT THE HANDS OF THE ASSESSEE, IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED HER INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, PENALTY U/S 271( 1)(C) OF THE ACT CANNOT BE IMPOSED. IT WAS FURTHER SUBMITTED THAT T HE AO MUST RECORD HIS SATISFACTION THAT THE ASSESSEE HAS EITHE R CONCEALED HER INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME WHILE INITIATING PROCEEDING U/S 271(1)(C) OF THE ACT IN T HE ASSESSMENT ORDER. UNLESS SUCH SATISFACTION IS RECORDED IN TH E ASSESSMENT ORDER BY THE AO, PENALTY IS NOT LEVIABLE. IN SUPPO RT OF SUCH CONTENTION, THE LEARNED AR RELIED ON THE FOLLOWING DECISIONS:- I) CHENNAKESAVA PHARMACEUTICALS VS. CIT (349 ITR 196 (AP) II) CIT VS. RAMPOOR ENGG. CO. LTD. (309 ITR 143) (D EL). (FB) III) N. NAGESWARA RAO VS. DCIT (ITA 367/HYD/2000 DATED 30-12-2005) 5 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. 5. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTING THE IMPOSITION OF PENALTY SUBMITTED THAT ONLY AS A RES ULT OF SEARCH IN COURSE OF WHICH SUCH INCRIMINATING MATERIAL WERE FO UND, THE ASSESSEE WAS FORCED TO DECLARE ADDITIONAL INCOME OF RS.35 LAKH. IT WAS SUBMITTED THAT THE ASSESSEE HAS ALSO NOT OFF ERED ANY PLAUSIBLE EXPLANATION WHY SUCH ADDITIONAL INCOME WA S NOT OFFERED BY HER VOLUNTARILY IN THE ORIGINAL RETURN F ILED. THEREFORE, IN ABSENCE OF ANY SATISFACTORY EXPLANATION FROM THE ASSESSEE, IMPOSITION OF PENALTY IS JUSTIFIED. IN SUPPORT OF SUCH CONTENTION, THE LEARNED DR RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CIVIL APPEAL NO. 9772 OF 2013 IN CASE OF MAK DATA P. LTD. VS. CIT. 6. IN HIS REJOINDER, THE LEARNED AR SUBMITTED THAT THE DECISION OF MAK DATA WAS RENDERED ON A COMPLETELY DIFFERENT SET OF FACTS, HENCE WILL NOT APPLY TO THE FACTS OF THE ASSESSEES CASE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS FACTS ON RECORD. IT IS CLEARLY EVIDENT THAT THE ENTIRE BASI S OF THE PENALTY U/S 271(1)(C) OF THE ACT IS THE ADDITIONAL INCOME O F RS.35 LAKH DECLARED BY THE ASSESSEE IN HER RETURN OF INCOME FI LED IN PURSUANCE TO THE NOTICE ISSUED U/S 153C OF THE ACT. IT IS FURTHER EVIDENT THAT THIS ADDITIONAL INCOME OFFERED WAS ON THE BASIS OF THE AMOUNT MENTIONED IN THE PROMISSORY NOTES SEIZED DURING THE SEARCH AND SEIZURE OPERATION IN THE CASE OF ASSESSE ES HUSBAND DR. BHASKARA RAO. ON A PERUSAL OF THE SEIZED PROMI SSORY NOTES, COPIES OF WHICH HAVE BEEN SUBMITTED BEFORE US, IT I S ABSOLUTELY CLEAR THAT THERE IS NO REFERENCE TO THE ASSESSEE IN THESE PROMISSORY NOTES. FURTHER, IN THE POST SEARCH PRO CEEDINGS, WHEN ASSESSEES HUSBAND WAS ASKED TO EXPLAIN ON TH E PROMISSORY NOTES ON 4-12-2009, HE STATED AS UNDER: - 6 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. Q.NO. 8: I AM SHOWING YOU PAGE NO. 63 TO 67 OF ANNE XURE A/BBR/RES/01, WHICH ARE LIVE PROMISSORY NOTES SIG NED BY VARIOUS PEOPLE (RS. 7 LAKHS EACH) TO THE TUNE OF RS. 35 LAKHS. PLEASE GO THROUGH THE SAME AND EXPLAIN THE CONTENTS AND ALSO EXPLAIN WHETHER THE TRANSACTIONS ARE REFLECTED IN THE RETURNS OF INCOME. ANS.: THESE REPRESENTS THE AMOUNTS GIVEN TO MY FRIE NDS AND IS STILL LYING WITH THEM. SINCE I CAN NOT DISCL OSE THEIR NAMES FOR SOCIAL REASONS, I INTEND TO DECLARE THIS AMOUNT OF RS. 35 LAKHS AS ADDITIONAL INCOME IN THE HANDS O F MY WIFE SMT. B. RAJASREE WHO IS RUNNING A HOSPITAL UND ER THE NAME AND STYLE OF M/S BOLLINENI HEART CENTRE FOR TH E LAST 5 YEARS. THIS AMOUNT SHALL BE DECLARED AS INCOME EARN ED BY MY WIFE FROM HER HOSPITAL DURING THE YEAR YEAR ENDI NG 31/03/2009. FROM THE STATEMENT OF DR. K. BHASKARA RAO, IT IS A BSOLUTELY CLEAR, THOUGH THE AMOUNT AS MENTIONED IN THE PROM ISSORY NOTES WERE STATED TO HAVE BEEN ADVANCED BY HIM TO HIS FR IENDS BUT SURPRISINGLY THE ADDITIONAL INCOME WAS OFFERED IN THE HANDS OF HIS WIFE, THE PRESENT ASSESSEE, AND WAS ALSO DECLAR ED AS INCOME BY HER IN THE RETURN OF INCOME FILED IN PURSUANCE T O NOTICE ISSUED U/S 153C OF THE ACT. WHEN THE AMOUNTS WERE ADVANCE D BY THE ASSESSEESHUSBAND DR. K. BHASKARA RAO TO HIS FRIEND S, IN ALL FAIRNESS, IT SHOULD HAVE BEEN TREATED AS THE INCOME OF SRI K. BHASKARA RAO AND NOT THE PRESENT ASSESSEE. HOWEVER , NOT ONLY THE ADDITIONAL INCOME WAS DECLARED BY THE ASSESSEE IN HER RETURN OF INCOME, BUT THE DEPARTMENT ALSO ACCEPTED IT IN H ER HANDS. IN FACT, READING OF THE OBSERVATION MADE BY CIT (A) IN PARA-7 OF HER ORDER, WOULD MAKE IT CLEAR THAT THE CIT (A), PRIME FACIE, WAS ALSO OF THE VIEW THAT THE ADDITIONAL INCOME BELONGED TO THE ASSESSEES HUSBAND. THEREFORE, WHEN THE SEIZED DOC UMENT DOES NOT HAVE ANY REFERENCE TO THE ASSESSEE AND FRO M THE STATEMENT RECORDED FROM SRI BHASKARA RAO, IT APPEAR S THAT THE AMOUNT WAS ADVANCED BY HIM, ONLY BECAUSE HE OFFERED IT AT THE HANDS OF HIS WIFE, THE PRESENT ASSESSEE, IT CANNOT BE CONCLUDED 7 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. THAT ASSESSEE HAS CONCEALED HER INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN THAT VIEW OF THE MATTER, PENALTY CANNOT BE IMPOSED U/S 271(1)(C) OF THE ACT AGAINST THE ASS ESSEE. SO FAR AS THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF MAK DATA P. LTD VS. CIT, ON CAREFUL EXAMINATION OF THE SAME, WE ARE OF THE VIEW THAT IT IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE FOR THE FOLLOWING REASONS. IN CASE OF MAK DATA (SUPRA), INCRIMINATING DOCUMENT INDICATING SUPPRESSION OF IN COME BY THE ASSESSEE WAS FOUND DURING SURVEY OPERATION U/S 133 A OF THE ACT. IN SPITE OF SUCH INCRIMINATING MATERIAL FOUND AS A RESULT OF SURVEY, THE ASSESSEE DID NOT COME FORWARD AND OFFER ADDITIONAL INCOME IN HIS RETURN OF INCOME. SUBSEQUENTLY IN CO URSE OF ASSESSMENT PROCEEDINGS, WHEN THE AO AGAIN CONFRONTE D THOSE INCRIMINATING MATERIAL TO THE ASSESSEE, BEING UNABL E TO EXPLAIN THE SAME, THE ASSESSEE WAS FORCED TO OFFER ADDITION AL INCOME AS FOUND IN THE INCRIMINATING MATERIAL. SINCE THERE W AS NO VOLUNTARY DISCLOSURE BY THE ASSESSEE AND THERE WAS A DIFFEREN CE BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME, THE HO NBLE SUPREME COURT UPHELD THE IMPOSITION OF PENALTY. HO WEVER, IN THE PRESENT CASE, THE SEIZED MATERIALS HAVE NO REFE RENCE TO THE ASSESSEE. FURTHER, IT IS THE ASSESSEES HUSBAND DR . K. BHASKARA RAO WHO HAS OWNED UP THE AMOUNT MENTIONED IN THE SE IZED MATERIALS, BUT FOR INEXPLICABLE REASONS OFFERED IT IN THE HANDS OF HIS WIFE. MOREOVER, THE INCOME DECLARED BY THE ASSE SSEE IN THE RETURN OF INCOME WAS ACCEPTED BY THE AO IN THE ASSE SSMENT ORDER PASSED. IN OTHER WORDS, THERE IS NO VARIATIO N BETWEEN THE INCOME RETURNED AND INCOME ASSESSED. IN THESE CIR CUMSTANCES, THE DECISION IN CASE OF MAK DATA P. LTD. VS. CIT (S UPRA) WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN VIEW O F THE AFORESAID, WE HOLD THAT IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT IN THE PRESENT CASE IS NOT JUSTIFIED. ACCORDINGLY, WE DEL ETE THE SAME. 8 ITA.NO. 1741 OF 2013 SMT. B. RAJYASREE, HYD. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 01/08/201 4. SD/- (B. RAMAKOTAIAH) SD/- (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 1 ST AUGUST, 2014. COPY FORWARDED TO: 1. SMT. B. RAJYASREE, C/O M/S ANJANEYULU & CO., CAS., 30, BHAGYALAKSHMI NAGAR, GANDHI NAGAR, HYDERABAD 500 080 2. DCIT., CENTRAL CIRCLE 6, HYDERABAD. 3. CIT(A)-1, HYDERABAD 4. CIT (CENTRAL), HYDERABAD. 5. THE DR, ITAT, HYDERABAD