Bommareddy Venkata Krishna Reddy, Eluru V. THE ITO, WARD - 2, Eluru

ITA 193/VIZ/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0204 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 27-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Bonafide belief; Initiation of penalty proceedings

Judgement Text

ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO.193/VIZAG/2013 ( / ASSESSMENT YEAR : 2003-04 ) BOMMAREDDY VENKATA KRISHNA REDDY ELURU VS. ITO WARD-2 ELURU [ PAN: ADYPB 1755E ] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) , / / APPELLANT BY : SHRI G.V.N. HARI, AR -., / / RESPONDENT BY : SMT. D. KOMALI KRISHNA, DR / 3 / DATE OF HEARING : 23.09.2015 / 3 / DATE OF PRONOUNCEMENT : 27.11.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-11, MUMBAI, CAMP AT VISAKHAPATNAM FOR TH E ASSESSMENT YEAR 2003-04. ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE FILED RETUR N OF INCOME OF ` 1,13,178/- AND AN AGRICULTURAL INCOME OF ` 3,75,000/-. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAS TAKEN UP THE PROJECT IN THE NAME OF SVKTS NARESH TOWERS AT ELUR U FOR CONSTRUCTION OF 40 FLATS IN THE JOINT VENTURE. THE PROJECT WAS COM PLETED IN THE ASSESSMENT YEAR 2003-04 AFTER IT WAS STARTED IN THE FINANCIAL YEAR 2001-02. HOWEVER, THE ASSESSEE HAS NEITHER SHOWN A NY INVESTMENT NOR ANY INCOME FROM THE SAID PROPERTY AND ACCORDINGLY, THE AO HAS DETERMINED THE INCOME FROM THE SAID PROJECT ASSESSA BLE AS A SHARE OF ASSESSEE FOR THE JOINT VENTURE FOR THE ASSESSMENT Y EAR 2003-04 AT RS.4,13,105/-. THEREAFTER, ASSESSING OFFICER HAS I SSUED A SHOW CAUSE NOTICE AND CALLED THE EXPLANATION FROM THE ASSESSEE THAT WHY PROCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER CALLED AS THE ACT) CANNOT BE INITIATED. THE ASSE SSEE HAS FILED A DETAILED REPLY BEFORE THE AO. HOWEVER, THE ASSESSING OFFICE R HAS NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE AND IMPOSED T HE PENALTY BY OBSERVING THAT THE ASSESSEE HAS DELIBERATELY CONCEA LED AN INCOME FROM TRANSFER OF JOINT VENTURE, THOUGH HE WAS FULLY AWAR E OF THE JOINT VENTURE RIGHT FROM 2001 WHEN HE ENTERED INTO A PARTNERSHIP FIRM WITH THE OTHER PARTNER. SUBSEQUENT VOLUNTARY DISCLOSURE WHEN CONF RONTED WITH THE EVIDENCES COLLECTED BY THE DEPARTMENT DOES NOT EXON ERATE THE ASSESSEE ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 3 FROM IMPOSITION OF PENALTY FOR CONCEALMENT OF INCOM E. ACCORDINGLY, PENALTY WAS IMPOSED. 3. ASSESSEE HAS CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HE HAS SUBMITTED A DETAILED EXPLANATION IN WHICH HE HA S EXPLAINED THAT SINCE THE CONSTRUCTION OF THE FLATS AND PENT HOUSE WERE NOT COMPLETE IN ALL RESPECTS, THE SAME WERE NOT HANDED OVER TO HIM BY THE END OF THE FINANCIAL YEAR 2002-03. THE ASSESSEE BEING BASICAL LY AN AGRICULTURIST WAS UNDER BONAFIDE BELIEF THAT THERE WOULD NOT ARIS E ANY PROFIT OR INCOME ON SURRENDER OF HIS SITE AND ACQUISITION OF 3 FLATS AND PENT HOUSE. THE LD. COMMISSIONER AFTER CONSIDERING HIS EXPLANATION, HE WAS OF THE OPINION THAT ADMITTEDLY THE ASSESSEE NOT DIS CLOSED INCOME FROM THE HOUSING PROJECT AND THAT HAS BEEN DETERMINED AT RS.4,13,105/- AND THE SAME HAS BEEN ASSESSED AND NO APPEAL HAS BEEN P REFERRED AGAINST THE ASSESSMENT ORDER AND THAT ORDER BECAME FINAL. WITH THE ABOVE OBSERVATION, HE HAS CONFIRMED THE PENALTY ORDER OF THE AO. 4. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE HAS RECEIVED 25% SHARE IN LIEU OF THE SITE OF 385.2 5 SQ.YDS. AND SUBMITTED THAT THE ASSESSEE WAS UNDER BONAFIDE BELI EF THAT SINCE THE CONSTRUCTION OF THE FLATS AND PENT HOUSE WERE NOT C OMPLETED AND NOT AT ALL HANDED OVER TO HIM DURING THE ASSESSMENT YEAR 2 003-04, IT WAS ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 4 NOT DISCLOSED BEFORE THE AO. BY THE TIME SCRUTINY PROCEEDINGS HAVE BEEN TAKEN PLACE, THE CONSTRUCTION OF THE FLATS AND PENT HOUSE WERE COMPLETED AND THE SAME WAS ACCEPTED BEFORE THE AO. THEREFORE ACCEPTANCE BEFORE THE ASSESSING OFFICER NEITHER AMO UNTS TO CONCEALMENT OF INCOME NOR FILING OF THE INACCURATE PARTICULARS OF THE INCOME AND SUBMITTED THAT PENALTY MAY BE DELETED. THE LD. COU NSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION IN THE CASE OF CIT VS. KUSUM PRODUCTS LTD. (1993) 203 ITR 672 AND IN THE CASE OF CIT VS. CH. ATCHAIAH (1996) 218 ITR 239 AND ALSO IN THE CASE OF POTLA NAGESWARA RAO VS. CIT (2014) 365 ITR 249 (AP). 6. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT WHEN THE ASSESSING OFFICER DETECTED THE NON-DISCLOSURE OF TH E INCOME OF THE ASSESSEE, THE SAME WAS OFFERED FOR TAXATION AND SUB MITTED THAT THIS IS AMOUNTING TO CONCEALMENT OF INCOME AND HE RELIED ON THE JUDGEMENT OF ACIT VS. GOUTHAM PUBLIC SCHOOL (2004) 88 ITD 31 OF VISAKHAPATNAM BENCH, VISAKHAPATNAM. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE IS A OWNER OF ADMEASURING 385.25 SQ.YDS. SITE AND HE HAD ENTERED INTO A JOINT AGREEMENT DATED 2.7.2001 WITH HIS NEIGHBOUR SH. KOT HAMASU VENKATA SESHAGIRI RAO FOR CONSTRUCTION OF SVKTS NARESH TOW ERS AT ELURU. AS PER ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 5 THE ABOVE DOCUMENT, THE OTHER PARTY I.E. SHRI K.V.S ESHAGIRI RAO, THE NEIGHBOUR OF THE ASSESSEE HAS TO CARRY THE ENTIRE V ENTURE BY INVESTING HIS MONEY AND AFTER COMPLETION OF THAT WORK, THE AS SESSEE WILL BE PROVIDING 3 FLATS, ONE PENT HOUSE, TWO CAR PARKINGS AND A VACANT SITE ADMEASURING 20 SQ.FT. IN THE SOUTH SIDE OF THE CORN ER. ACCORDING TO THAT AGREEMENT, THE ASSESSEE HAS RECEIVED THE CONSIDERAT ION BY PARTING A VACANT SITE TO THE EXTENT OF 273.14 SQ.YDS. AND ACC ORDINGLY AO HAS CALCULATED THE CONSIDERATION RECEIVED BY THE ASSESS EE BASED ON THE GENERAL VALUE OF THE PROPERTY IN THAT AREA THAT OF RS.4,13,105/-. THEREAFTER, PENALTY PROCEEDINGS WERE INITIATED. TH E CASE OF THE ASSESSEE IS THAT HE HAS NOT RECEIVED ANY AMOUNT BUT HE HAS RECEIVED THE 3 FLATS, ONE PENT HOUSE & TWO CAR PARKINGS IN LIEU OF THE LAND OWNED BY HIM. THE DETAILED EXPLANATION WAS GIVEN BEFORE THE LD. CIT(A) THAT THE CONSTRUCTION OF THE FLATS AND PENT HOUSE WERE NOT F ULLY COMPLETED IN THE A.Y. UNDER CONSIDERATION I.E. 2003-04. THEREFORE H E WAS UNDER BONAFIDE BELIEF THAT THERE WOULD NOT ARISE ANY PROFIT OR INC OME ON SURRENDER OF HIS SITE AND ACQUISITION OF 3 FLATS AND PENT HOUSE. HO WEVER, WHEN SCRUTINY ASSESSMENTS WERE TOOK PLACE ON 14.3.2006 I.E. AFTER TWO YEARS OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS OFFERED THE CAPITAL GAINS AS PER THE CALCULATION MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) SIMPLY REJECTED THE EXPLANATION AND CONFIRMED THE ORDER OF THE A.O. IN OUR ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 6 OPINION, ONCE ASSESSEE IS UNDER BONAFIDE BELIEF THA T THERE IS NO CAPITAL GAINS/INCOME AROUSED DURING THE YEAR UNDER CONSIDER ATION AND THE SAME WAS SUBMITTED BEFORE THE LD. COMMISSIONER, HE HAS T O EXAMINE THE SAME. IN THE PRESENT CASE THE LD. COMMISSIONER FAI LED TO EXAMINE THE EXPLANATION OF THE ASSESSEE AND ALSO FAILED TO GIVE ANY FINDING ON THE SAME. THEREFORE, WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE U/S 271(1)(C) OF THE ACT AND PENALTY DESERVES TO BE DEL ETED. SO FAR AS THE CASE LAWS RELIED BY THE LD. DR IS CONCERNED, NO REL EVANCE TO THE FACTS OF THE CASE. IN THE CASE OF ACT VS. GOUTHAM PUBLIC SC HOOL OF VISAKHAPATNAM BENCH, VISAKHAPATNAM (SUPRA) IN WHICH IT WAS HELD THAT THE FORMATION OF SATISFACTION OF THE ASSESSING OFFI CER IN THE COURSE OF ASSESSMENT PROCEEDINGS IS SUFFICIENT TO FORM THE BA SIS FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE INVOLVED IN THIS A PPEAL IS WHETHER THE ASSESSEE HAS EITHER CONCEALED THE INCOME OR FILED I NACCURATE PARTICULARS. WE FIND THAT THE ASSESSEE NEITHER CONCEALED THE INCO ME NOR FILED INACCURATE PARTICULARS. THE ASSESSEE IS UNDER THE BONAFIDE BELIEF THAT DURING THE YEAR UNDER CONSIDERATION I.E. 2003-04 HE HAS NOT RECEIVED ANY CAPITAL GAINS/INCOME. THEREFORE, IT IS NOT NEC ESSARY FOR HIM TO DISCLOSE THE SAME DURING THE YEAR UNDER CONSIDERATI ON. HOWEVER WHEN SCRUTINY ASSESSMENT PROCEEDINGS TOOK PLACE IN 2006, THE ASSESSEE OFFERED THE SAME FOR TAXATION. THE AMOUNT OFFERED BY THE ASSESSEE AS ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 7 PER THE CALCULATION MADE BY THE ASSESSING OFFICER, IT CANNOT BE SAID THAT IT IS NEITHER CONCEALMENT OF INCOME NOR FILING INAC CURATE PARTICULARS OF THE INCOME. IN THE SIMILAR CIRCUMSTANCES, HONBLE MADRAS HIGH COURT IN THE CASE OF NAVIN CHEMICALS MANUFACTURING AND TRADI NG CO. (P) LTD. VS. CIT 259 ITR 111 HAS OBSERVED THAT SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IN ITS EXPLANATION REFERS TO THE EXPLANA TION OFFERED BY THE PERSON BEING FOUND TO BE FALSE OR NOT BEING ONE WHI CH THE PERSON OFFERING THE EXPLANATION IS ABLE TO SUBSTANTIATE. THE CONSIDERATION OF THE EXPLANATION OFFERED IS, THEREFORE, A DUTY CAST UPON THE OFFICER IMPOSING PENALTY. IN THE ABSENCE OF SUCH CONSIDERATION AND THE FINDING THAT THE EXPLANATION IS FALSE OR THAT THE ASSESSEE HAD FAILE D TO SUBSTANTIATE THE EXPLANATION OFFERED, THE OFFICER CANNOT PROCEED TO HOLD THAT THERE HAS BEEN CONCEALMENT OF INCOME ATTRACTING LEVY OF PENAL TY. IN THE PRESENT CASE, THE ASSESSEE HAS GIVEN A DETAILED EXPLANATION BEFORE THE CIT(A) EXPLAINING THE REASONS AND BONAFIDE BELIEF OF THE A SSESSEE, THE LD. COMMISSIONER WITHOUT EXAMINING THE EXPLANATION, SIM PLY CONFIRMED THE ORDER PASSED BY AO. IN VIEW OF THE LAW LAID DOWN B Y THE HONBLE MADRAS HIGH COURT IN THE CASE OF NAVIN CHEMICALS (S UPRA), IN OUR OPINION, IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT AND HENCE PENALTY IS DELETED. ITA NO.193/VIZAG/2013 BOMMAREDDY VENKATA KRISHNA REDDY, ELURU 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH NOV15. SD/- SD/- ( (( ( . . . . ) ( ) ( ) ( ) ( . .. . ) )) ) ( (( ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 6 / DATED : 27.11.2015 VG/SPS / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT SHRI BOMMAREDDY VENKATA KRISHNA REDDY, D.NO.25-3- 12, SINGH STREET, N.R. PETA, ELURU, W.G. DIST., A.P . 2. -., / THE RESPONDENT ITO WARD-2, ELURU 3. THE ACIT, ELURU RANGE, ELURU 3. : / THE CIT, RAJAHMUNDRY 4. : () / THE CIT(A)-11, MUMBAI, CAMP VISAKHAPATNAM 5. -, , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM