Sri P.Suresh, Trichy V. ITO, Trichy

ITA 1777/CHNY/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4459 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 17-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 1777/MDS/2009 ASSESSMENT YEAR : 2005-06 SHRI P. SURESH, 6, MAIN ROAD, SIRUDAIYUR, LALGUDI, TRICHY DT. VS. THE COMMMISSIONER OF INCOME-TAX, TRICHY. (PAN: AAGPS1727C ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A), T RICHY IN APPEAL NO. ITA. 58/08-09 DATED 17-08-2009 FOR ASSESSMENT YEAR 2005- 06. 2. SHRI S.SRIDHAR, ADVOCATE REPRESENTED ON BEHALF O F THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHAL F OF THE REVENUE. I.T.A. NO.1777/MDS/09 2 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THERE WAS A DELAY IN FILING THE APPEAL BY 23 DAYS. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS PRE-OCCUPIED WITH OBTAINING CERTAIN LICENCES AND APPROVALS AND ARRANGING FOR BANK LOANS IN RESPE CT OF AN INSTITUTION BEING A SELF-FINANCING COLLEGE WHICH WAS BEING PROMOTED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT DUE TO PRE-OCCUPATION HE OVER LOOKE D THE DUE DATE FOR FILING THE APPEAL. IT WAS THE SUBMISSION THAT THE DELAY MAY B E CONDONED. THE LEARNED D.R. HAS NO OBJECTION IN REGARD TO THE CONDONATION OF DELAY. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DELAY OF 23 DAYS IS EXPLAINED WITH REASONABLE CAUSE. THE DELAY IS CONDONED AND THE AP PEAL IS HEARD ON MERITS. 4. IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRE SENTATIVE THAT THE ASSESSEE IS A PROPRIETOR OF A TEXTILE RETAIL SHOP. THE ASSESSEE HAD FILED HIS RETURN FOR THE RELEVANT ASSESSMENT YEAR DISCLOSING AN INCO ME OF RS. 3,34,810/- AND AN AGRICULTURAL INCOME OF RS. 1,08,000/-. IN THE COUR SE OF ASSESSMENT IT WAS NOTICED THAT THE ASSESSEE HAD SHOWN THAT HE HAD RECEIVED RS . 5 LAKHS FROM M/S. RAGHAVENDRA BUILDERS AND ANOTHER AMOUNT OF RS. 2 LA KHS FROM M/S. SRINIVASA HOUSING PROMOTERS. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS PARTNER IN BOTH THE CONCERNS. IT WAS THE FURTHER SUBMISSION THAT I N RESPECT OF RAGHAVENDRA BUILDERS THE ASSESSEE WAS A PARTNER ALONG WITH 4 OT HERS AND THE BUSINESS WAS CONSTRUCTION AND SALE OF FLATS. THE SAID FIRM HAD DONE ONLY ONE PROJECT COMPRISING OF 66 HOUSES AND THE SAME WAS COMPLETED IN 2002-03 AND NO OTHER I.T.A. NO.1777/MDS/09 3 WORK WAS CARRIED ON BY THE SAID PARTNERSHIP FIRM AN D THE RETURNS WERE FILED UPTO THE ASSESSMENT YEAR 2005-06. IN RESPECT OF SRINIVA SA HOUSING PROMOTORS IT WAS THE SUBMISSION THAT IT WAS ALSO DOING THE BUSINESS OF CONSTRUCTION AND IT HAD DONE ONLY ONE PROJECT COMPRISING OF 12 HOUSES AND 5 SHOPS WHICH WAS COMPLETED IN 2003 AND AFTER WHICH NO WORK WAS DONE. IT WAS THE SUBMISSION THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS TAKEN UP AT THE END OF 2007. IT WAS MORE THAN 2 YEARS AFTER THE CLOSURE OF THE TWO BUSINESSES. THE ASSESSEE ON ACCOUNT OF THE CLOSURE OF THE BUSINESS OF BOTH RAGHAVENDRA BUILDERS AND SRINIVASA HOUSING PROMOTORS COULD NOT PRODUCE T HE BOOKS OF ACCOUNTS OF THE SAID TWO CONCERNS. IT WAS THE SUBMISSION THAT AS T HE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNTS OF THE TWO FIRMS, THE CLAIM THAT THE ASSESSEE HAD RECEIVED THE AMOUNT OF RS. 5 LAKHS FROM RAGHAVENDRA BUILDERS AND THE AMOUNT OF RS 2 LAKHS FROM SRINIVASA HOUSING PROMOTORS HAD BEEN DISBELIEVED AND THE ADDITION WAS MADE. IN APPEAL THE LEARNED CIT(A) HA D ALSO CONFIRMED THE ADDITIONS. IT WAS THE SUBMISSION THAT VARIOUS OTHE R ADDITIONS MADE IN THE COURSE OF THE REGULAR ASSESSMENT HAD BEEN DELETED BY THE L EARNED CIT(A). IT WAS THE FURTHER SUBMISSION THAT IN RESPECT OF THE ADDITION REPRESENTING THE WITHDRAWALS FROM RAGHAVENDRA BUILDERS AND SRINIVASA HOUSING PRO MOTORS THE AO HAD INITIATED PENALTY PROCEEDINGS. IT WAS THE SUBMISSION THAT IN THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE HAD PRODUCED CONFIRMATION LETTERS FROM 3 PERSONS BEING, (I) SHRI P. KRISHNAMOORTHY FOR AN AMOUNT OF RS. 3 LAKHS, (II) SHRI P. I.T.A. NO.1777/MDS/09 4 DURAIMANICKAM FOR AN AMOUNT OF RS. 2 LAKHS AND (III ) SHRI PRASANNA VENKATESAN FOR AN AMOUNT OF RS. 2 LAKHS. IT WAS THE SUBMISSIO N THAT THE CONFIRMATION LETTERS WERE TO THE EFFECT THAT THE ADVANCES HAD BEEN RECEI VED BY THE ASSESSEE IN REGARD TO THE BUSINESSES OF THE FIRMS. IT WAS THE SUBMISSION THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS REJECTED AS AN AFTER-THOU GHT AND AS BEING FICTITIOUS WITHOUT ANY VERIFICATION AND ONLY ON THE GROUND THA T THE BOOKS OF THE TWO FIRMS HAD NOT BEEN PRODUCED AND THE PENALTY HAD BEEN LEVI ED. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD ALSO UPHELD THE PENALTY ORDER STATING THAT THE ASSESSEE HAD NOT EXPLAINED PROPERLY BEFORE THE AO A S TO WHERE THE MONEY OF THE CLOSED FIRMS WERE KEPT OR THE WHEREABOUTS OF THE ER STWHILE PARTNERS OF THE TWO FIRMS. IT WAS THE SUBMISSION THAT THE LEARNED CIT( A) ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION O F INDIA V. DHARMENDRA TEXTILES PROCESSORS (2008) 174 TAXMAN 171 (S.C.) WH ICH HAD BEEN SUBSTANTIALLY DILUTED BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158)(S.C. ). IT WAS THE SUBMISSION THAT THE ASSESSEE HAD GIVEN AN EXPLANATION AND THE EXPLA NATION GIVEN HAD NOT BEEN FOUND TO BE FALSE AND CONSEQUENTLY NO PENALTY WAS E XIGIBLE. IT WAS THE FURTHER SUBMISSION THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS WERE SEPARATE INDEPENDENT PROCEEDINGS. HE ALSO RELIED UPON THE D ECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. CHANDRAKANT M. TOLIA RE PORTED IN 220 ITR 438 (MAD) TO SUPPORT HIS CONTENTION, WHEREIN IT WAS HELD THAT THE DEPARTMENT HAVING FAILED I.T.A. NO.1777/MDS/09 5 TO ESTABLISH THAT THE ASSESSEE HAD FURNISHED INACCU RATE PARTICULARS ON ACCOUNT OF ANY FRAUD OR ANY GROSS OR WILFUL NEGLECT ON HIS PAR T AND FAILED TO DISCHARGE THE ULTIMATE BURDEN PLACED ON IT AND THE TRIBUNAL WAS C ORRECT IN DELETING THE PENALTY. 5. IN REPLY, THE LEARNED D.R. SUBMITTED THAT THE AS SESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNT OF THE TWO FIRMS AND CONSEQUEN TLY IT COULD NOT BE VERIFIED AS TO WHETHER THE SAID 3 PERSONS HAD IN FACT PAID T HE AMOUNTS TO THE FIRMS AND WHETHER THERE WAS MONEY IN THE SAID TWO FIRMS FOR T HE ASSESSEE TO WITHDRAW. HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF H.V. VENUGOPAL CHETTIAR V. CIT (153 ITR 376) (MAD) TO SUPPORT HIS CONTENTION THAT IT WAS NOT NECESSARY FOR THE DEPARTMENT TO MAK E ANY INDEPENDENT ENQUIRY TO FIND OUT WHETHER THERE WAS SUPPRESSION OR WHETHE R SUCH SUPPRESSION WAS DUE TO ANY DISHONEST INTENTION ON THE PART OF THE ASSES SEE, ESPECIALLY WHEN THE ASSESSEE HIMSELF HAS CATEGORICALLY ADMITTED THAT HE IS UNABLE TO PRODUCE THE BOOKS OF ACCOUNTS OF THE SAID TWO FIRMS FROM WHOM T HE ASSESSEE HAS CLAIMED TO HAVE DRAWN THE MONEY. HE ALSO RELIED UPON THE DECI SION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF DY. DIRECTOR OF I NCOME-TAX V. CHIRAG METAL ROLLING MILLS LTD. (305ITR 29) (M.P.) TO SUPPORT HI S CONTENTION THAT AFTER THE INSERTION OF THE EXPLANATION 1 TO SECTION 271(1)(C) NO SEPARATE ENQUIRY WAS NECESSARY FOR IMPOSING THE PENALTY. HE VEHEMENTLY SUPPORTED THE ORDERS OF THE THE LEARNED CIT(A) AND THE AO. I.T.A. NO.1777/MDS/09 6 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER FOR THE RELEVANT ASSESSMENT YEAR CLEARLY SHOW S THAT THE ASSESSEE HAS CLAIMED THAT THE AMOUNT OF RS. 5 LAKHS HAS BEEN DRA WN FROM M/S. RAGHAVENDRA BUILDERS AND THE AMOUNT OF RS. 2 LAKHS HAS BEEN DRA WN FROM M/S. SRINIVASA HOUSING PROMOTERS. IT IS ALSO NOTICED THAT STATEME NTS HAD BEEN RECORDED FROM THE ASSESSEE AND THIS STATEMENT HAS ALSO BEEN CATEG ORICALLY RECHECKED WITH SOME OF THE OTHER PARTNERS OF THE FIRMS FROM WHICH THE A SSESSEE HAS DRAWN THE FUNDS. FOR EXAMPLE, IN PAGE 5 OF THE ASSESSMENT ORDER IN R ESPECT OF M/S. SRINIVASA HOUSING PROMOTERS THE ASSESSEE HAD GIVEN A SPECIFIC STATEMENT THAT THE BOOKS WERE NOT TRACEABLE AND THIS STATEMENT OF THE ASSESS EE HAD ALSO BEEN VERIFIED WITH ANOTHER MANAGING PARTNER, SHRI SUBRAMANIAN WHO HAD ALSO CONFIRMED THE STATEMENT OF THE ASSESSEE. THIS HAS ALSO BEEN RE-V ERIFIED WITH SHRI P. SUKUMAR, WHO WAS ANOTHER PARTNER IN M/S. SRINIVASA HOUSING P ROMOTERS AND SHRI P. SUKUMAR IS ALSO BROTHER OF THE ASSESSEE AND HE HAS ALSO CONFIRMED THE FACT OF THE NON-AVAILABILITY OF THE BOOKS. THUS THE AO HAS EXAMINED ONE INDEPENDENT PERSON AS ALSO ONE RELATED PERSON BOTH WHO WERE PAR TNERS ALONG WITH THE ASSESSEE AND THIS EXAMINATION WAS DONE BEHIND THE B ACK OF THE ASSESSEE AND STILL THE ASSESSEES STATEMENT HAS STOOD THE TEST O F EXAMINATION. NON-AVAILABILITY OF THE BOOKS OF ACCOUNTS OF THE TWO FIRMS ESPECIALL Y WHEN THE FIRMS HAD BEEN CLOSED MORE THAN TWO YEARS BACK ALONE WOULD NOT BE A GROUND ENOUGH TO DISCARD THE EXPLANATION OF THE ASSESSEE. ADMITTEDLY, THERE IS NO OTHER SOURCE OF INCOME I.T.A. NO.1777/MDS/09 7 IN THE HANDS OF THE ASSESSEE NOR ANY OTHER UNDISCLO SED SOURCE HAS BEEN DETECTED BY THE REVENUE. AN ADDITION MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS PER SE WILL NOT LEAD TO THE PRESUMPTION OF CONCEALMENT OF INCOME. IT IS ALSO NOTICED THAT IN THE COURSE OF PENALTY PROCEEDINGS THE ASSES SEE HAS PRODUCED THE CONFIRMATION LETTERS FROM PERSONS WHO HAD GIVEN THE ADVANCES. THIS EVIDENCE HAS ALSO NOT BEEN EXAMINED BY THE AO. IT COULD BE POSSIBLE THAT THE AO WAS OF THE PRESUMPTION THAT THE STATEMENT OF THE ASSESSEE HAVING BEEN FOUND TO BE TRUE TILL NOW, THE CONFIRMATION LETTERS AS PRODUCED MAY ALSO STAND THE TEST OF EXAMINATION. HERE ONE SHOULD APPRECIATE THAT AFTER THE INTRODUCTION OF THE EXPLANATION 1 TO SECTION 271(1)(C) IT IS INCUMBENT U PON THE AO TO SHOW THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE OR IS NO T PROBABLE OR THAT IT CANNOT STAND THE TEST OF EXAMINATION. IF THE ASSESSEE DO ES NOT GIVE AN EXPLANATION PENALTY BECOMES AUTOMATIC. BUT ONCE THE ASSESSEE H AS GIVEN AN EXPLANATION, THE PRIMARY ONUS ON THE ASSESSEE STANDS DISCHARGED. THE EXPLANATION GIVEN BY THE ASSESSEE CANNOT BE DISCARDED WITHOUT EXAMINATIO N AND IF IT IS SO DISCARDED WITHOUT EXAMINATION THE PENALTY LEVIED AS A CONSEQU ENCE OF SUCH DISCARDING OF THE EXPLANATION WITHOUT EXAMINATION WOULD FALL. HE RE IT IS NOTICED THAT THE EXPLANATION GIVEN BY THE ASSESSEE HAS NOT BEEN SHOW N TO BE FALSE OR IMPROBABLE OR UN-SUBSTANTIABLE ESPECIALLY WHEN ALL THE FACTS R ELATING TO THE CREDIT OF THE SAID AMOUNTS IN THE ASSESSEES BOOKS WERE PRODUCED. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LEVY OF PENALTY IS UNSUSTAINAB LE ON THE FACTS OF THE PRESENT I.T.A. NO.1777/MDS/09 8 CASE AND CONSEQUENTLY THE SAME IS QUASHED. IN THE CIRCUMSTANCES THE ORDER OF THE LEARNED CIT(A) STANDS REVERSED THE ORDER OF THE AO LEVYING PENALTY U/S. 271(1)(C) STANDS CANCELLED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 8. THE ORDER WAS PRONOUNCED IN THE COURT ON 23-07-2 010. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 23 RD JULY, 2010. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE