Income Tax Officer, Ward-11(4), Hyderabad V. Sri M.Balanarasimha Reddy, Hyderabad

ITA 1770/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82275 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Gift; Period of limitation; Additional evidence; Time period of passing order
• Section: 246; 10

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. 1770/HYD/2013 ASSESSMENT YEAR 2007-08 THE INCOME - TAX OFFICER WARD-11(4) HYDERABAD VS. SRI M. BALANARASIMHA REDDY, HYDERABAD PAN: ADWPM7881L APPELLANT RESPONDENT ITA NO. 1519/HYD/2013 ASSESSMENT YEAR 2007-08 SRI M. BALANARASIMHA REDDY, HYDERABAD PAN: ADWPM7881L VS. THE INCOME - TAX OFFICER WARD-11(4) HYDERABAD APPELLANT RESPONDENT REVENUE BY: SRI R. MOHAN REDDY ASSESSEE BY: SRI A.V. RAGHU RAM DATE OF HEARING: 17.07.2014 DATE OF PRONOUNCEMENT: 28 .08.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 30.9.2013 FOR ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM CONSULTANCY AND REMUNERATION FROM THE PARTNERSHIP F IRM M/S. VISHNUPRIYA FINANCE. DURING THE SURVEY OPERAT IONS CONDUCTED IN THE CASE OF SRI G. SANJEEVA REDDY, PAR TNER OF M/S./ S.V. CONSTRUCTIONS, IT WAS FOUND THAT THE ASS ESSEE ENTERED INTO SALE AGREEMENT ALONG WITH THREE OTHER 2 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== MEMBERS, FOR PURCHASE OF LAND ADMEASURING 56 ACRES 24.5 GUNTAS AT THE RATE OF RS. 32.00 LAKHS PER ACRE AGAINST WHICH PART PAYMENT OF RS. 4.90 CRORES WAS ADMITTED TO HAVE BEEN MADE BY THE DATE OF SURVEY. OUT OF THE ASSESSEE'S ADMITTED SHARE OF RS. 1,22,50,000, A N AMOUNT OF RS. 1,17,50,000 WAS TREATED AS UNEXPLAINE D INVESTMENT AND ADDED TO THE RETURNED INCOME. FURTH ER, AN AMOUNT OF RS. 25 LAKHS WAS ALSO BROUGHT TO TAX TREATING IT AS UNDISCLOSED ADDITIONAL INVESTMENT IN THE LAND BY THE ASSESSEE SINCE THE RECEIPT OF RS. 1.00 CRORE FOUND DURING THE SURVEY WAS NOT ADMITTED BY THE ASS ESSEE AND OTHERS. ON FURTHER APPEAL BEFORE THE ITAT, THE TRIBUNAL VIDE ITS ORDER DATED 25.01.2012 CONFIRMED BOTH THE ADDITIONS MADE IN THE ASSESSMENT ORDER. PENALT Y PROCEEDINGS WERE INITIATED HOLDING THAT THE ASSESSE E FAILED TO PROVE THE CREDITWORTHINESS OF THE CREDITORS AND SOURCES FOR FURTHER INVESTMENT OF RS. 25 LAKHS. THE PENALT Y OF RS. 47,96,550 WAS LEVIED U/S. 271(1)(C) OF THE ACT. 3. THE ASSESSEE QUESTIONED THE VALIDITY OF THE ORDER U/S. 271(1)(C) ON THE ISSUE OF LIMITATION AS THE OR DER U/S. 271(1)(C) WAS PASSED BEYOND THE TIME PRESCRIBED UND ER THE PROVISO TO SECTION 275 OF THE ACT. ACCORDING T O HIM, THE PENALTY ORDER SHOULD HAVE BEEN PASSED WITHIN ON E YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH OR DER OF THE CIT(A) IS RECEIVED. IN THIS CASE, THE ORDER WA S PASSED AFTER 1.6.2003 WHEREAS THE ORDER OF THE CIT(A) WAS RECEIVED ON 15.2.2011. THE CIT(A) HELD AS FOLLOWS: 'AS COULD BE SEEN FROM THE PROVISIONS OF THE ACT, THE TIME LIMIT STIPULATED FOR PASSING THE PENALTY ORDER IS SIX MONTHS FROM THE FINANCIAL YEAR IN WHICH THE ORDER OF CIT(A) OR ITAT IS RECEIVED ON THE APPEAL, AGAINST THE 3 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== ASSESSMENT PROCEEDINGS AND IN THIS CASE ORDER OF ITAT WAS PASSED/RECEIVED ON 25.01.2012 AND AS SUCH TIME WAS AVAILABLE TO THE AO FOR PASSING THE PENALTY ORDER UP TO 30.09.2012. THERE IS NO DISPUTE REGARDING THE PASSING OF ORDER OF PENALTY U/S. 271(1)(C) ON 27.09.2012. AS COULD BE SEEN FROM THE ABOVE INFORMATION READ WITH PROVISION CONCERNED, THERE IS NO INFIRMITY IN THE ORDER OF THE AO. FURTHER, THIS ISSUE WAS NEVER RAISED BY THE APPELLANT DURING THE COURSE OF THE PENALTY PROCEEDINGS, INCLUDING THE SHOW-CAUSE NOTICE DATED 11.07.2012. THUS, BASED ON THE ABOVE FACTS OF CASE, THE GROUND RAISED BY APPELLANT IN THIS REGARD IS NOT MAINTAINABLE AND THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 4. ON THE ISSUE OF ADDITION OF RS. 1,17,50,000 REPRESENTING THE AMOUNT OF INVESTMENT IN THE PROPER TY, IT WAS EXPLAINED BY THE AR OF THE ASSESSEE THAT CONTRIBUTIONS WERE RECEIVED FROM 7 MEMBERS WHO HAD COME TOGETHER WITH THE ASSESSEE AND HAD INVESTED THROUGH THE ASSESSEE. THE AO EXAMINED THE SOURCES OF THE 7 MEMBERS AND HELD THAT THERE WAS STRONG REASON TO DISBELIEVE SUCH CONTRIBUTIONS SINCE THE ENTIRE TRANSACTIONS WERE IN CASH AND THE CONTRIBUTING PART IES COULD NOT EXPLAIN THE CONTRIBUTIONS WITH THE HELP O F VERIFIABLE SOURCES. FURTHER, THE MAIN SOURCES QUOT ED WERE AGRICULTURAL INCOME AND SALE OF AGRICULTURAL LAND W HICH WERE AGAIN IN CASH. THE AO RECORDED THE STATEMENTS FROM MAJORITY OF SUCH PARTIES (5 OUT OF 7) BUT SUCH STAT EMENTS WERE NOT TAKEN INTO CONSIDERATION BY THE AO FOR WAN T OF VERIFIABLE EVIDENCE. A SUM OF RS. 1,17,50,000 WAS UPHELD BY THE CIT(A) AS WELL AS THE ITAT. THE ASSESSEE OB JECTED TO THE LEVY OF PENALTY RELATABLE TO THE ADDITION OF RS. 1,17,50,000 ON THE GROUND THAT THE ASSESSMENT PROCEEDINGS ARE DIFFERENT FROM PENALTY PROCEEDINGS AND 4 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== THE REASONS FOR MAKING THE ADDITION IN QUANTUM PROCEEDINGS ARE NOT ENOUGH TO LEVY PENALTY. IT WAS CONTENDED THAT THE ASSESSEE ON HIS PART HAD EXPLAIN ED THE INVESTMENTS BY PRODUCING THE CREDITORS AND THE CRED ITORS SUBSTANTIATED WITH RESPECT TO ADVANCING THE SUMS AN D IT IS ONLY THE AO WHO DISBELIEVED THAT THEY HAVE NO CREDITWORTHINESS AND THIS CANNOT BE TREATED AS CONCEALMENT. 5. THE CIT(A) OBSERVED THAT THE AO HAD RELIED ON THE DECISION IN THE CASE OF LOKNATH CHOWDHARY VS. CIT, 155 ITR 291 (CAL) AND HAD LEVIED PENALTY IN THIS CASE. THE CIT(A) FURTHER HELD THAT THE ASSESSEE FURNISHED THE INFORMATION WITH REFERENCE TO THE CREDITORS AND FIV E OUT OF SEVEN OF SUCH CREDITORS WERE EXAMINED BY THE AO DUR ING THE ASSESSMENT PROCEEDINGS AND THE SAID PARTIES WER E SHOWN TO HAVE CONFIRMED THE TRANSACTIONS. THE CIT( A) OBSERVED THAT IT WAS ONLY THE INFERENCE OR INTERPRE TATION OF THE AO THAT THE GENUINENESS OF TRANSACTION WAS NOT ESTABLISHED, THE CIT(A) POINTED OUT THAT THE SAID TRANSACTIONS WERE IN CASH AND THE SAID TRANSACTIONS WERE NOT GOVERNED BY ANY WRITTEN AGREEMENTS/DEEDS AND TH E ADDITIONS WERE MADE ON THE BASIS CONCLUSIONS DRAWN BY THE AO ON THE CREDITWORTHINESS OF THE CREDITOR BASE D ON THE STATEMENTS RECORDED FROM 5 CREDITORS AND THE CONFIRMATIONS FURNISHED BY THE ASSESSEE IN CASE OF TWO CREDITORS. IT WAS OBSERVED BY THE CIT(A) THAT AS PE R THE AO, THE CREDITORS HAVE NOT FURNISHED THE RELATED INFORMATION TO PROVE THAT THEY HAVE KNOWN SOURCES O F INCOME TO EXPLAIN THE CREDITS AND AS PER THE INFORM ATION BROUGHT ON RECORD, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FIVE OF THE CREDITORS WERE EXAMINED BY THE AO 5 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== AND THE SAID CREDITORS WERE SHOWN TO HAVE SOURCES F ROM AGRICULTURAL INCOMES, AND SOME OF THEM ALSO SHOWN T O HAVE INCOME FROM DAIRY AND SOME OF THE SHOWN TO HAV E SOLD AGRICULTURAL LANDS. THE CIT(A) NOTED THAT IN C ASE OF MR. RAGHUNATHA REDDY, WHO WAS NOT EXAMINED BY THE AO, IT WAS SHOWN THAT HE IS A SOFTWARE ENGINEER AND THE CREDITS ARE SHOWN TO BE OUT OF SALARY SAVINGS FOR 3 TO 4 YEARS. IT WAS OBSERVED BY THE CIT(A) THAT IN QUANT UM APPEAL, THE CIT(A) HAS UPHELD THE ADDITION ON THE G ROUND THAT NO MATERIAL WAS FILED TO PROVE THE CREDITS, WI THOUT NOTICING THE FACT THAT THE CREDITORS WERE EXAMINED AND STATEMENTS WERE RECORDED AND THE ASSESSEE'S APPEAL WAS UNSUCCESSFUL. THE CIT(A) FURTHER NOTED THAT FOR TH E SAME REASONS THE ITAT CONFIRMED THE ADDITION WITH REFERE NCE TO RS. 1,17,50,000. 6. IT WAS POINTED OUT BY THE CIT(A) THAT THE CIT(A)'S ORDER WAS CONFIRMED BY THE ITAT ON THE ISSUE OF ADD ITION OF RS. 1,17,50,000 IN SPITE OF BRINGING OF SUCH MAT ERIAL ON RECORD AND THE SAME HAS RESULTED IN FILING OF MA BE FORE THE ITAT. THE CIT(A) NOTED THAT WHILE DISPOSING TH E MA THE ITAT HAS NOT DISCUSSED THE ISSUE OF AVAILABILIT Y OF SUCH MATERIAL AND DISMISSED THE MA. THE CIT(A) WAS OF THE OPINION THAT ALL THESE FACTS ONLY INDICATE THAT THE ADDITION WAS BASED ON THE INTERPRETATION OF THE INFORMATION AVAILABLE, BUT NOT ON ACCOUNT OF COMPLE TE LACK OF INFORMATION OR MATERIAL EVIDENCE AND SUCH INFERE NCE HELPED IN ARRIVING AT THE CONCLUSIONS ON THE INADMISSIBILITY OF EXPLANATIONS OFFERED, THAT RESUL TED IN TREATING THE CREDITS AS UNEXPLAINED. THE CIT(A) HEL D THAT SUCH CONCLUSION ALONE MAY NOT PROVE THE ANGLE OF CONCEALMENT FOR THE PURPOSE OF LEVYING PENALTY AND 6 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== CONCLUDED THAT THE CASE LAWS RELIED ON BY THE ASSES SEE IN THE CASES OF (I) M/S. ACTION FOR WELFARE AND AWAKEN ING THE RURAL ENVIRONMENT (AWARE), HYD VS. ADIT (ITA NO. 894/HYD/03 DATED 26.06.2009) AND (II) M/S. NATCO PHARMA LTD. VS. DCIT (IT(SS)A NO. 19/HYD/2011 DATED 22.02.2013) SUPPORT THE CAUSE OF THE ASSESSEE, IN T HIS REGARD. 7. THE CIT(A) STATED THAT TWO CREDITORS NAMELY, MR. RAGHUNATHA REDDY WHO WAS SHOWN TO BE A SOFTWARE ENGINEER AND ASSESSED TO TAX, WITH RETURNS OF INCOM E FILED FOR AY 2006-07 AND 2007-08, WHO CONTRIBUTED RS. 10,00,000/- AND MR. P. BUCHI REDDY, WHO WAS SHOWN T O HAVE AGRICULTURAL INCOME AND CONTRIBUTION OF RS. 15,00,000/- SHOWN TO BE OUT OF AGRICULTURAL INCOMES , PAST SAVINGS, GIFTS RECEIVED AND LOANS RAISED ETC., WERE NEITHER CALLED FOR NOR EXAMINED BY THE AO, TO JUDGE UPON TH EIR CREDITWORTHINESS. THE CIT(A) OPINED THAT THE CONCL USIONS WERE DRAWN BY THE AO BASED ON THE LETTERS/CONFIRMAT IONS FILED BY THE ASSESSEE AND, THEREFORE, THE ADDITION RESULTING OUT OF TREATMENT OF SUCH CREDITS AS UNEXPLAINED, MA Y NOT END UP IN PROVING THE CONCEALMENT FOR THE PURPOSE O F LEVY OF PENALTY. THE CIT(A) POINTED OUT THAT THE CASE-LA W RELIED UPON BY THE AO WHILE FINALISING THE PENALTY ORDER A PPEARS TO BE DISTINGUISHABLE ON FACTS, AS THE SAID DECISIO N DEALS WITH THE UNEXPLAINED INVESTMENTS ON ACCOUNT OF VALU ATION OF PROPERTY, WHEREAS IN THE PRESENT CASE, THE ISSUE IS RELATED TO THE TREATMENT OF CREDITS AS UNEXPLAINED, BASED ON EITHER THE CONFIRMATIONS FURNISHED BY THE ASSESS EE OR THE EXAMINATION OF THE PARTIES/ CREDITORS, WHO EXPL AINED THEIR SOURCES FOR CREDITS, BUT WERE NOT ACCEPTABLE TO THE A.O. THE CIT(A) HELD THAT BASED ON THE FACTS OF TH E CASE 7 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== AND THE RATIO OF THE JUDICIAL DECISIONS REFERRED TO , NAMELY (I) M/S. ACTION FOR WELFARE AND AWAKENING THE RURAL ENVIRONMENT (AWARE) (SUPRA) AND (II) M/S. NATCO PHA RMA LTD. (SUPRA), THE ADDITIONS MADE IN QUANTUM PROCEED INGS ARE DIFFERENT FROM PENAL PROCEEDINGS AND THE ANGLE OF CONCEALMENT IS NOT FULLY ESTABLISHED, ON THE ISSUE OF INVESTMENTS WHICH WERE TREATED AS UNEXPLAINED TO AT TRACT THE PENALTY U/S. 271(1)(C), AS PER THE EXPLANATION L(B). HENCE, THE CIT(A) HELD THAT NO PENALTY IS LEVIABLE ON THE AMOUNT OF RS. 1,17,50,000/- REPRESENTING THE CONTRIBUTIONS FOR THE INVESTMENTS BY ASSESSEE, WHIC H WERE TREATED AS UNEXPLAINED INVESTMENTS, WITHOUT PROVING THE ANGLE OF CONCEALMENT. THE CIT(A) RELIED ON THE DECI SION OF HIGH COURT OF A.P. IN THE CASE OF CIT VS. H. ABDUL BAKSHI & OTHERS (160 ITR 94), WHEREIN THE HON'BLE HIGH COU RT WHILE RELYING ON THE DECISIONS OF SUPREME COURT IN THE CASES OF CIT VS. ANWAR ALI (76 ITR 696) AND CIT VS. KHODAY ESWARAIAH & SONS (83 ITR 369), HELD THAT BY MERELY DISBELIEVING THE EXPLANATION OF THE ASSESSEE , THE REVENUE CANNOT COME TO THE CONCLUSION THAT THE ASSE SSEE CONCEALED INCOME OR FURNISHED INACCURATE PARTICULAR S OF INCOME. TO THIS EXTENT, THE CIT(A) GAVE RELIEF TO THE ASSESSEE. 8. WITH RESPECT TO THE ADDITION OF RS. 25 LAKHS TREATING 25% OF RS. 1 CRORE WHICH WAS SHOWN TO HAVE BEEN PAID BY THE ASSESSEE ALONG WITH OTHERS AS UNDISCLOS ED AS PER THE INFORMATION AVAILABLE IN THE IMPOUNDED MATE RIAL DURING THE SURVEY PROCEEDINGS THE AR EXPLAINED THAT AS PER THE ASSESSMENT ORDER, THE RECEIPTS DATED 21.12. 2006 FOR RS. 1.00 CRORE (PAGE 44) AND RECEIPT WITHOUT DA TE FOR RS. 1.00 CRORE (PAGE 45), FORMED PART OF PAYMENT OF RS. 8 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== 2.00 CRORES, IN ADDITION TO RS. 3.90 CRORES, ACCEPT ED TO HAVE BEEN PAID VIDE AGREEMENT FOR SALE AND RECEIPT DATED 18.11.2006. ACCORDINGLY, THE CONTRIBUTION BY ASSES SEE TOWARDS PAYMENT AS CONSIDERATION WAS DETERMINED AT RS. 1,47,50,000 (BEING OF RS. 5,90,00,000) BY THE AO AND WAS TREATED AS UNEXPLAINED INVESTMENT MADE BY ASSES SEE. HOWEVER, AS PER THE ASSESSEE THE ACTUAL PAYMENT OF THE ADVANCES/ PART CONSIDERATION WAS ONLY RS. 4.90 CROR ES TAKING INTO ACCOUNT THE RECEIPT WITHOUT DATE FOR RS . 1.00 CRORE. 9. THE AR FURTHER EXPLAINED THAT AS PER THE AGREEMENT FOR SALE DATED 18.11.2006, AND THEREAFTER ON 18.11. 2006, AN AMOUNT OF RS. 2.90 CRORES WAS PAID AND FOR TOTAL AMOUNT OF RS. 3.90 CRORES RECEIPT ON PAGE 94, WAS ACKNOWLEDGED BY THE VENDORS. THE PAYMENT OF RS. 1. 00 CRORE ON 21.12.2006 (PAGE 44), THE TOTAL PAYMENTS REACHED FIGURE OF RS. 4.90 CRORES, AS AGAINST RS. 5 .90 CRORES, AS ARRIVED BY AO BY INCLUDING/TREATING THE PAYMENT OF RS. 1.00 CRORES AS SEPARATE PAYMENT, WHI CH WAS INDICATED IN THE UNDATED RECEIPT (PAGE 95). THE AR FURTHER ARGUED THAT THE AO FAILED TO EXAMINE THE VE NDORS AND ON PAYMENT OF RS. 1.00 CRORE ON 21.12.2006, A S ALE DEED WAS ENTERED INTO BY THE ASSESSEE & OTHERS AND VENDORS IN RESPECT OF LAND, ADMEASURING AC. 10.15 G UNTAS AND THE SAME WILL PROVE THAT RS. 1.00 CRORE VIDE TH E UNDATED RECEIPT, WAS NOT A SEPARATE PAYMENT. 10. THE AR FURTHER ARGUED THAT THE RELIEF WAS GRANTED BY CIT(A) ON ADDITION OF RS. 25,00,000/-, IN THE QU ANTUM PROCEEDINGS, WHICH WAS REVERSED BY ITAT AND HENCE WHERE TWO VIEWS ARE POSSIBLE, PENALTY IS NOT LEVIAB LE. THE 9 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== OTHER ARGUMENT OF THE AR WAS THAT THE ADDITION IN QUANTUM PROCEEDINGS WERE BASED ON INFERENCES AND IS DIFFERENT FROM PENALTY PROCEEDINGS AND AO CANNOT LE VY PENALTY WITHOUT DISLODGING STAND OF ASSESSEE. THE AR ALSO RELIED ON CERTAIN JUDICIAL DECISIONS AS LISTED BELO W, ON THE ISSUE OF PENALTY NOT LEVIABLE, WHERE TWO VIEWS ARE POSSIBLE: A) CIT V. LATE G.D.NAIDU AND OTHERS (165 ITR 63) (MAD) ; B) CIT V. CALCUTTA CREDIT CORPORATION, (166 ITR 29) (C AL); C) CIT V. AMARNATH, (143 CTR 148 ) (ALL); D) ALPHA ASSOCIATES V. DCIT (66 TTJ 758) (BOM); AND E) DCIT V. RAHOUL SIEMENS ENGG. (P) LTD. (140 TAXMAN 100) (DEL) 11. WE FIND THAT THE CIT(A) HELD THAT PENALTY IS LEVIAB LE ON THE ADDITION OF RS. 25 LAKHS REPRESENTING THE UNEXPLAINED INVESTMENT WHERE CONCEALMENT WAS ESTABLISHED BY THE FACTS AND THE CIT(A) HELD THAT P ENALTY IS NOT LEVIABLE ON THE ADDITION OF RS. 1,17,50,000 WHICH ALSO REPRESENTED UNEXPLAINED INVESTMENT IN THE HAND S OF THE ASSESSEE SINCE NO CONCEALMENT OF INCOME WAS ESTABLISHED BY THE AO AS HE HAS MERELY DISBELIEVED SUBMISSION OF THE ASSESSEE I.E., HENCE THE APPEAL W AS PARTLY ALLOWED BY THE CIT(A). SINCE THE CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE PARTLY, BOTH THE DEPARTMENT AND THE ASSESSEE HAVE COME IN APPEAL BEFORE THE TRIBUNA L. 12. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL IN HIS APPEAL IN ITA NO. 1519/HYD/2013 AS FOLLOWS: 1) THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ORDER PASSED U/S. 271(1)(C) IS WITHIN TIME U/S. 275 WITHOUT APPRECIATING THE LEGAL POSITION THAT AS PER THE PROVISIONS OF PROVISO TO SEC. 275(1) IN 10 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== CASE OF ORDERS OF CIT(A) RECEIVED AFTER 1 ST JUNE 2003 THE ORDER SHOULD BE PASSED WITHIN ONE FINANCIAL YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER IS RECEIVED AND THEREBY THE ORDER PASSED BEYOND THAT PERIOD IS VOID AB INITIO. 3) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE PENALTY ON ADDITION OF RS. 25 LAKHS ON THE GROUND THAT THE SAME IS MADE BASED ON MATERIAL IMPOUNDED DURING SURVEY WITHOUT APPRECIATING THAT IT IS NOT ESTABLISHED TO BE CORRECT SINCE THE RECIPIENT CONFIRMED TO HAVING RECEIVED ONLY RS. 3.90 CRORES AND THAT THE RECEIPT GIVEN FOR SUCH AMOUNT INCLUDES THE AMOUNT RECEIVED EARLIER, AND FURTHER THAT THE CIT(A) IN APPEAL AGAINST ADDITION HAS DELETED SUCH ADDITION ON SUCH A FACT. 4) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT PENALTY U/S. 271(1)(C) COULD NOT BE LEVIED WHERE TWO OPINIONS ARE POSSIBLE AND THEREBY ERRED IN CONFIRMING PENALTY U/S. 271(1)(C) TO THAT EXTENT. 13. GROUND NO. 1 IS GENERAL AND NEEDS NO ADJUDICATION. ACCORDINGLY, THIS GROUND IS DISMISSE D. 14. GROUND NO. 2 IS WITH RESPECT TO THE ISSUE OF LIMITATION FOR THE ORDER PASSED U/S. 271(1)(C) OF T HE ACT. IT WAS ARGUED THAT IN THE CASE OF THE ORDER OF THE CIT (A) RECEIVED AFTER 1 ST JUNE, 2003, THE ORDER SHOULD BE PASSED WITHIN ONE FINANCIAL YEAR FROM THE END OF THE FINAN CIAL YEAR IN WHICH THE ORDER IS RECEIVED AND THEREBY THE ORDER PASSED BEYOND THE PERIOD ID VOID AB INITIO . IN THE ASSESSEE'S CASE THE ORDER OF THE CIT(A) IS DATED 31.12.2010. THEREFORE, THE ORDER LEVYING PENALTY C OULD BE PASSED ONLY BEFORE 31.3.2012 AND NOT BEYOND THIS DA TE. IT WAS ALSO BROUGHT TO OUR NOTICE THAT THE LETTER CALL ING FOR EXPLANATION ITSELF WAS ISSUED ONLY ON 11.7.2012 WHI CH IS BEYOND THE DATE OF LIMITATION AND THE ASSESSEE HAD REQUESTED FOR KEEPING THE PROCEEDINGS IN ABEYANCE S INCE IT 11 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== WAS ALREADY BARRED BY LIMITATION. SECTION 275 READ S AS FOLLOWS: BAR OF LIMITATION FOR IMPOSING PENALTIES. 275. [(1)] NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED [( A ) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE [***] COMMISSIONER (APPEALS) UNDER SECTION 246 [OR SECTION 246A] OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253, AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE [***] COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER : 15. TIME LIMIT STIPULATED FOR PASSING THE PENALTY ORDER IS 6 MONTHS FROM THE FINANCIAL YEAR IN WHICH THE OR DER OF THE CIT(A) OR ITAT IS RECEIVED ON THE APPEAL AGAINS T THE ASSESSMENT PROCEEDINGS. IN THIS CASE THE ORDER OF THE ITAT WAS PASSED ON 25.1.2012 AND AS SUCH TIME WAS AVAILABLE TO THE AO FOR PASSING THE PENALTY ORDER U P TO 30.9.2012. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THE DELHI HIGH COURT REPORTED IN 345 ITR 41 IN THE CASE OF CIT VS. MOHAIR INVESTMENTS AN D TRADING CO. P. LTD. HELD AS FOLLOWS: 'A PROVISO IS MERELY A SUBSIDIARY TO THE MAIN SECTION AND MUST BE CONSTRUED IN THE LIGHT OF THE SECTION ITSELF. IT HAS TO BE CONSTRUED HARMONIOUSLY WITH THE MAIN PROVISION. THE PERIOD OF SIX MONTHS PROVIDED FOR IMPOSITION OF PENALTY UNDER SECTION 275(1)(A) OF 12 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== THE INCOME-TAX ACT, 1961, STARTS RUNNING AFTER THE SUCCESSIVE APPEALS FROM AN ASSESSMENT ORDER HAS BEEN FINALLY DECIDED BY THE COMMISSIONER (APPEALS) OR THE TRIBUNAL, AS THE CASE MAY BE, WHICHEVER PERIOD EXPIRES LATER. THE PROVISO TO SECTION 275(1)(A) HAS ONLY THE EFFECT OF EXTENDING THE PERIOD OF IMPOSING PENALTY FROM SIX MONTHS TO ONE YEAR WITHIN THE RECEIPT OF THE ORDER OF THE COMMISSIONER AFTER JUNE 1, 2003. THE PROVISO THUS CARVES OUT AN EXCEPTION FROM THE MAIN SECTION INASMUCH AS IN CASES WHERE NO APPEAL IS FILED BEFORE THE TRIBUNAL THE ASSESSING OFFICER MUST IMPOSE PENALTY WITHIN A PERIOD OF ONE YEAR TO BE RECKONED FROM THE DATE OF RECEIPT OF THE ORDER BY THE COMMISSIONER. SECTION 275(1A) WHICH WAS INTRODUCED LATER ON DOES NOT DILUTE OR IN ANY MANNER RENDER NUGATORY THE MAIN PROVISION, WHICH CAN ONLY BE READ TO MEAN THAT THE LIMITATION PERIOD FOR LEVY OF PENALTY, ONLY IN THE CASE OF ORDER OF THE TRIBUNAL, TO BE AS PROVIDED UNDER THE MAIN SECTION AND NOT OTHERWISE. THE PROT.ISO TO SECTION 275(1)(A) OF THE ACT DOES NOT NULLIFY THE AVAILABILITY TO THE ASSESSING OFFICER OF THE PERIOD OF LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH WHEN THE ORDER OF THE TRIBUNAL IS RECEIVED BY THE ASSESSING OFFICER. HELD , ALLOWING THE APPEAL, THAT THE ORDER OF THE TRIBUNAL WAS RENDERED ON AUGUST 11, 2008, AND THE ORDER PASSED BY THE ASSESSING OFFICER LEVYING PENALTY WAS PASSED ON FEBRUARY 26, 2009, I.E., WITHIN A PERIOD OF SIX MONTHS FROM THE ORDER OF THE TRIBUNAL. IT WAS NOT BARRED BY LIMITATION.' 16. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION GROUND NO. 2 IS TREATED AS DISMISSED. 17. WITH RESPECT TO GROUND NO. 3, IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE SRI A.V. RAGHU RAM THAT THE DEPARTMENTAL AUTHORITIES HAD WRONGLY TAKEN THE THREE RECEIPTS FOUND IN PAGES 94, 95 AND 96 OF THE PAPER BOOK. ACCORDING TO THE COUNSEL, THE ASSESSEE HAD RECEIVED A 13 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== SUM OF RS. 3.9 CRORES SIGNED BY ALL PARTIES AT PAGE 94 AND WITH RESPECT TO UNDATED RECEIPT AT PAGE 95 IT WAS CONTESTED THAT THE SAME WAS ONLY A TEMPORARY RECEIP T SIGNED BY TWO VENDORS ONLY AND ON 21.12.2006 WHEN T HE SALE DEED OF THE LAND WAS EXECUTED ADMEASURING 11.1 5 GUNTAS AN AMOUNT OF RS. 1 CRORE WHICH HAD BEEN MENTIONED EARLIER AT PAGE 95 ARE CONFIRMED BY THE R ECEIPT AT PAGE 96. IN SHORT, THE TOTAL AMOUNT RECEIVED WA S ONLY RS. 3.9 + 1 CRORE I.E., RS. 4.9 CRORES AND NOT 5.9 CRORES AS ARRIVED AT BY THE AO SINCE HE HAD TAKEN THE AMOUNT AT RS. 1 CRORE TWICE. IT WAS ALSO BROUGHT TO OUR NOTI CE THAT AT PAGE 91 THE VENDORS HAD COMMITTED TO REGISTER 18 AC RES WHEREAS ONLY 11.15 ACRES WERE ULTIMATELY REGISTERED . THE AGREEMENT ENTERED ON 18.11.2006 WAS CANCELLED AND T HE VENDORS HAD RETURNED RS. 2.3 CRORES, ALL THESE WERE GIVEN AS ADDITIONAL EVIDENCE BY WAY OF AFFIDAVIT TO THE A O ON 14.2.2008. IT WAS ARGUED THAT THE ADVANCE PAID WAS ONLY RS. 4.9 CRORES AND RS. 25 LAKHS AT OF RS. 1 CRORE HAD BEEN WRONGLY ADDED BY THE LOWER AUTHORITIES. 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT RELIEF WAS GRANTED BY THE CIT(A) ON THE ADDITI ON OF RS. 25 LAKHS IN QUANTUM PROCEEDINGS WHICH WAS REVERSED BY THE ITAT AND HENCE WHEN TWO VIEWS ARE POSSIBLE PENA LTY IS NOT LEVIABLE. 19. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT THE ASSESSEE HAS OFFERED EXPLANATION STATING THAT THE T OTAL AMOUNT RECEIVED WAS ONLY RS. 4.9 CRORES AND NOT RS. 5.9 CRORES AND HAD EXPLAINED THAT THE AMOUNT OF RS. 1 C RORE HAD BEEN TAKEN TWICE BY THE ASSESSING OFFICER WHILE 14 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== COMPUTING THE ADVANCES GIVEN. IT IS ALSO A FACT THA T THE LD. CIT(A) HAS DELETED THE ADDITION WHEREAS ITAT RESTOR ED IT. 20. THE SUPREME COURT IN PRICE WATERHOUSE COOPERS (P.) LTD. V. CIT [2012] 348 ITR 306/25 TAXMANN.COM 400/211 TAXMAN 40, HELD THAT ALL THAT HAPPENED IN T HE PRESENT CASE WAS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR THE ASSESSEE FAILED TO ADD THE PR OVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS COULD ONLY B E DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE T O MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAD LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT T HE ASSESSEE SHOULD HAVE BEEN CAREFUL COULD NOT BE DOUB TED, BUT THE ABSENCE OF DUE CARE, WOULD NOT MEAN THAT TH E ASSESSEE WAS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR WAS ATTEMPTING TO CONCEAL ITS INCOME . CONSEQUENTLY, GIVEN THE PECULIAR FACTS OF THIS CASE , THE IMPOSITION OF PENALTY ON THE ASSESSEE WAS NOT JUSTI FIED. 21. IN THE CASE OF CIT V. HARSHVARDHAN CHEMICALS & MINERALS LTD. [2003] 259 ITR 212/133 TAXMAN 320, T HE RAJASTHAN HIGH COURT HELD THAT WHEN THE ASSESSEE CLAIMED SOME AMOUNT THAT WAS DEBATABLE, IN SUCH CAS ES, IT COULD NOT BE SAID THAT THE ASSESSEE HAD CONCEALE D ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E FOR THE EVASION OF TAX. 22. IN THE CASE OF CIT V. YAHOO INDIA (P.) LTD. (33 TAXMANN.COM 332) THE BOMBAY HIGH COURT HELD THAT WHERE THE VERY ISSUE WAS DEBATABLE, PENALTY WAS HEL D TO BE NOT JUSTIFIED. 15 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== 23. FOLLOWING THE RATIO OF THE ABOVE SAID DECISIONS AND ON THE FACTS OF THE CASE, WE DELETE THE PENALTY CON FIRMED BY THE CIT(A). IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED. 24. THE DEPARTMENT IN ITS APPEAL ITA NO. 1770/HYD/ 2013 RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF LD. CIT(A) IS ERRONEOUS BOTH ON LAW AND FACTS. 2. THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF INSTEAD OF APPRECIATING THE FACT THAT THE PENALTY WAS LEVIED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO ON THE GROUND THAT, THE ASSESSEE HAS NEVER REFLECTED THE SAID TRANSACTIONS IN THE RETURNS OF INCOME FILED. 3. THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF THE TOTAL INCOME. 4. THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON THE GROUND THAT THE ASSESSEE HAS MADE INACCURATE PARTICULARS IN THE RETURN OF INCOME FILED. 25. WE ARE OF THE OPINION THAT THE ADDITIONS MADE IN QUANTUM PROCEEDINGS ARE DIFFERENT FROM PENALTY PROCEEDINGS. RELYING ON THE DECISION OF KHODAY ESWARAIAH & SONS (SUPRA) WE HOLD THAT MERELY DISBELIEVING THE EXPLANATION OF THE ASSESSEE THE RE VENUE CANNOT COME TO THE CONCLUSION THAT THE ASSESSEE CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. THE ASSESSEE HAS FILED CONFIRMATORY LET TERS AND THE AO EXAMINED THE PERSONS AND ALL OF THEM HAVE CONFIRMED ADVANCING THE AMOUNTS. THE HONBLE JURISDICTIONAL HIGH COURT OF ANDHRA PRADESH IN THE CASE. H. ABDUL BASKHEE & OTHERS (SUPRA) HELD ON SIMILAR F ACTS 16 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== THAT NO PENALTY CAN BE LEVIED. IN THE CASE OF MAHA VIR IRRIGATION PVT. LTD. VS. CIT (314 ITR 160) (AT) IT WAS HELD THAT SINCE THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS WERE SEPARATE AND DISTINCT FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT BE RELIED AS CONCLUSI VE FOR THE PURPOSE OF PENALTY PROCEEDINGS. 26. IN THE CASE OF ROSHANLAL MADAN VS. ACIT 67 ITD 33 IT HAS BEEN HELD THAT IF THE ASSESSEE IS ABLE TO FU RNISH A BONA-FIDE AND PLAUSIBLE EXPLANATION IN RESPECT OF T HE MATERIAL FACTS THE BURDEN CAST BY EXPLANATION 1 OF SECTION 271(1)(C) WOULD BE DISCHARGED AND THE CASE WOULD NO T BE HIT BY THE MISCHIEF OF THAT SECTION. FURTHER IT WA S HELD THAT MERELY BECAUSE THE EXPLANATION FURNISHED BY TH E ASSESSEE WAS CONSIDERED AS UN-SATISFACTORY OR UNREASONABLE IT WOULD NOT IPSO FACTO JUSTIFY THE INVOCATION OF CLAUSE (A) TO LEVY PENALTY U/S. 271(1)(C). HENC E WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDING THAT PENALTY IS NOT LEVIABLE ON THE ADDITION OF RS. 1,17 ,50,000 REPRESENTING UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE SINCE NO CONCEALMENT IS SHOWN TO HAVE BEEN ESTABLISHED AND ADDITIONS HAVE BEEN MADE BY MERELY DISBELIEVING THE SUBMISSIONS OF THE ASSESSEE. WE C ONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF T HE REVENUE. 27. IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED AND REVENUE'S APPEALS IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 28 TH AUGUST, 2014 17 ITA NO. 1770/HYD/2013 & ANR. SRI M. BALANARASIMHA REDDY ======================== TPRAO COPY TO: 1. THE INCOME - TAX OFFICER, WARD - 11(4), D BLOCK, 5 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 2. SRI M. BALANARASIMHA REDDY, H. NO. 12 - 12 - 484/9/A, NAGARJUNA NAGAR COLONY, TARNAKA, HYDERABAD. 3. THE CIT(A) - VI, HYDERABAD. 4. THE CIT - V, HYDERABAD. 5. THE DR, A - BENCH, ITAT, HYDERABAD.