M/s. Pooja Jewellers, Hyderabad V. ITO, Ward-11(3), Hyderabad

ITA 1992/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66172 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: A V RAGHURAM
• Keywords: Peak credit
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1991 AND 1992/HYD/2011 ASSESSMENT YEARS : 2002-03 & 2004-05. POOJA JEWELLERS, HYDERABAD. .... APPELLANT PAN: AAFFP 6343 N VS. ITO, WARD-11(3), HYDERABAD. RESPONDENT APPELLANT BY : SHRI A.V. RAGHU RAM RESPONDENT BY : SHRI K.J. RAO DATE OF HEARING : 26-06-2012 DATE OF PRONOUNCEMENT : 24-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST COMMON ORDER DATED 26-9-2011 OF CIT (A)-VI, HYDERA BAD AND THEY PERTAIN TO THE ASSESSMENT YEARS 2002-03 AND 2004-0 5. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE ARE CLU BBED TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE DISPUTE IN THESE SET OF APPEALS IS CONFINED TO IMPOSITION OF PENALTY U/S 271(1)(C ) OF THE ACT. 3. BRIEFLY THE FACTS ARE THE ASSESSEE A PARTNERSHIP FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN GOLD AND SILVER JEWELLER Y. FOR THE 2 ITA NOS.1991 & 1992 OF 2011 POOJA JEWELLERS, HYD. ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED IT S RETURN OF INCOME DECLARING LOSS OF RS.1,25,708. A SURVEY U/S 133A WAS CONDUCTED ON THE ASSESSEE ON 23-11-2005. CONSEQUENT TO THE SURV EY OPERATION, A NOTICE WAS ISSUED U/S 148 REOPENING THE ASSESSMENT. IN RESPONSE TO THE NOTICE U/S 148 THE ASSESSEE FILED A RETURN OF I NCOME DECLARING ADDITIONAL INCOME OF RS.1,83,710 AND AFTER ADJUSTIN G THE LOSS TOTAL INCOME OF RS.58,000 WAS SHOWN. THE AO COMPLETED TH E ASSESSMENT U/S 143(3) READ WITH SECTION 147 ACCEPTING THE INCO ME RETURNED. THE AO HOWEVER INITIATED PROCEEDING FOR IMPOSITION OF P ENALTY U/S 271(1)(C) FOR DEFICIT CASH BALANCE OF RS.1,83,710 D ISCOVERED AT THE TIME OF SURVEY. IN ITS EXPLANATION SUBMITTED BEFOR E THE AO THE ASSESSEE SUBMITTED THAT THE ADDITIONAL INCOME OF RS .1,83,710 WAS ACCEPTED TO BUY PEACE WITH THE DEPARTMENT AND NOT B ECAUSE ACTUALLY THERE WAS ANY UNDISCLOSED INCOME. IT WAS ALSO STAT ED BY THE ASSESSEE THAT AFTER PROPER RECONCILIATION IN THE BOOKS OF AC COUNTS BY POSTING THE VOUCHERS. THERE WAS NO NEGATIVE BALANCE ON ANY DATE . THE PEAK CREDIT BALANCE IN THE COMPUTERISED CASH BOOK AROSE BECAUSE OF AN INCOMPLETE SET OF BOOKS PREPARED BY THE EMPLOYEE WHO WAS NOT W ELL VERSED WITH EITHER MAINTENANCE OF ACCOUNTS OR HANDLING ACCOUNTA NCY PACKAGE AND POSTING OF ENTRIES. NO EVIDENCE WAS FOUND TO SUGGE ST THAT THERE WAS ANY EXPENDITURE OUTSIDE THE BOOKS. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BY OBSERVING THAT IT WA S NOT A CASE OF SOLITARY INSTANCE OF DEFICIT BUT CREDIT BALANCE WAS NOTICED ON VARIOUS DATES IN COURSE OF SURVEY. THE AO OBSERVED THAT BU T FOR THE DETECTION OF THE DEFICIENCY IN THE ACCOUNTS AS A RESULT OF SU RVEY THE ASSESSEE WOULD NOT HAVE DECLARED THE ADDITIONAL INCOME OF RS.1,83,710. THE AO FURTHER NOTED THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THERE WAS NO DEFICIT. ON THE AFORESAID FINDING THE AO PASSED AN ORDER U/S 271(1)(C) IMPOSING PENAL TY OF RS.1,01,499.00. 4. THE ASSESSEE CHALLENGED THE ORDER OF PENALTY BEF ORE THE CIT (A). IN COURSE OF HEARING OF APPEAL BEFORE THE CIT (A) R EITERATING THE STAND TAKEN EARLIER BEFORE THE AO IT WAS CONTENDED BY THE ASSESSEE THAT THE 3 ITA NOS.1991 & 1992 OF 2011 POOJA JEWELLERS, HYD. DEFICIT IN THE CASH BOOK AROSE DUE TO MISTAKE COMM ITTED IN CORRECTING THE POSTING THE ENTRIES. IF POSTING OF ALL ENTRIES IS CONSIDERED THERE WOULD BE NO CASH DEFICIT. IT WAS FURTHER CONTENDED THAT NO ADVERSE VIEW SHOULD BE TAKEN OF THE FACT OF NON PRODUCTION OF VOUCHERS AS IT WAS BEYOND THE CONTROL OF THE ASSESSEE. IT WAS FUR THER CONTENDED THAT THE FAILURE TO PRODUCE THE VOUCHERS WAS DUE TO UNUS UAL SITUATION ARISING AS A RESULT OF THE MANAGING PARTNER LEAVING THE FIRM DUE TO PERSONAL REASONS. THE CIT (A) HOWEVER FOUND THE CO NTENTIONS RAISED BY THE ASSESSEE TO BE UNACCEPTABLE AND SUSTAINED TH E IMPOSITION OF PENALTY. 5. THE LEARNED AR SUBMITTED BEFORE US THAT THE NEGA TIVE CASH BALANCE FOUND AT THE TIME OF SURVEY WAS DUE TO INCO MPLETE BOOKS OF ACCOUNTS PREPARED BY AN EMPLOYEE WHO WAS NOT WELL V ERSED IN HANDLING THE ACCOUNTANCY PACKAGE IN THE COMPUTER AND POSTING THE ENTRIES. AFTER RECONCILIATION OF THE CASH BOOK BY PROPERLY P OSTING THE VOUCHERS LEFT OUT ACTUALLY THERE WAS NO DEFICIT. HOWEVER, T O BUY PEACE WITH THE DEPARTMENT THE PEAK CREDIT BALANCE AS WORKED OUT AT THE TIME OF SURVEY WAS OFFERED AS ADDITIONAL INCOME AND WHICH W AS ALSO ACCEPTED BY THE DEPARTMENT. THE LD. AR SUBMITTED THAT IT CO ULD NOT PRODUCE THE RELEVANT VOUCHERS DUE TO CIRCUMSTANCES BEYOND ITS C ONTROL. IT WAS SUBMITTED THAT THE MANAGING PARTNER OF THE FIRM WHO WAS ENTIRELY IN CHARGE OF THE AFFAIRS SUDDENLY LEFT THE FIRM DUE TO PERSONAL REASONS FOR WHICH REASON THE VOUCHERS COULD NOT BE PRODUCED. IN THIS REGARD, THE LD. AR INVITED OUR ATTENTION TO PAGE 28 OF THE PAPE R BOOK. THE LEARNED AR FURTHER CONTENDED THAT THE INCOME DECLARED BY TH E ASSESSEE HAVING BEEN ACCEPTED IN THE ORDER PASSED U/S 143(3) READ W ITH SECTION 147 NO PENALTY COULD BE IMPOSED U/S 271(1)(C ). FOR THIS PROPOSITION, THE LD. AR RELIED UPON A DECISION OF THE HONBLE SUPREME CO URT IN CASE OF CIT VS. SURESH CHAND MITTAL REPORTED IN 251 ITR 9. THE LEARNED AR RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN C ASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 SUBMI TTED THAT FOR IMPOSING PENALTY U/S 271(1)(C) THE DEPARTMENT MUST CONCLUSIVELY 4 ITA NOS.1991 & 1992 OF 2011 POOJA JEWELLERS, HYD. PROVE THAT THE ASSESSEE HAS CONCEALED HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. 6. THE LEARNED DR STRONGLY SUPPORTED THE ORDERS PAS SED BY THE REVENUE AUTHORITIES. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS APPARENT FROM THE ORDERS PASSED BY T HE CIT (A) AND THE AO THAT PENALTY WAS IMPOSED AS A RESULT OF DEFICIT CASH BALANCE FOUND AT THE TIME OF SURVEY OPERATION. THE ASSESSEE HAD EXPLAINED BEFORE THE AO AS WELL AS BEFORE THE CIT (A) THAT THE DEFIC IT CASH BALANCE FOUND AT THE TIME OF SURVEY WAS DUE TO IMPROPER POSTING O F ENTRIES BY AN EMPLOYEE WHO WAS NOT WELL VERSED EITHER WITH ACCOU NTS OR WITH HANDLING THE ACCOUNTANCY PACKAGE IN THE COMPUTER. THOUGH SUBSEQUENTLY THE DEFICIT CASH BALANCE WAS RECONCILE D BY MAKING PROPER ENTRIES OF VOUCHERS AND THOUGH THERE WAS NO DEFICIT CASH BALANCE AFTER RECONCILIATION OF THE CASH BOOK, THE ASSESSEE NEVER THELESS OFFERED THE DEFICIT CASH BALANCE IN ITS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 FOR BUYING PEACE WITH THE DEPARTMENT. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DISBELIEVED ON THE GROUND THAT TH E ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT VOUCHERS. WE FIND SUCH AN APPROACH OF THE REVENUE AUTHORITIES IS NOT JUSTIFIED. THE EXPL ANATION OFFERED BY THE ASSESSEE MERITS CONSIDERATION. IT IS A FACT ON REC ORD THAT THE MANAGING PARTNER WHO WAS PRESENT AT THE TIME OF SURVEY AND F ROM WHOM STATEMENT WAS RECORDED LEFT THE FIRM DUE TO PERSONA L REASONS. THIS CERTAINLY PUT THE ASSESSEE IN A DISADVANTAGEOUS POS ITION TO COMPLY TO THE QUERIES, MADE BY THE REVENUE AUTHORITIES. THE CIT (A) HAS PUT MUCH RELIANCE ON THE STATEMENT OF THE MANAGING PART NER RECEIVED AT THE TIME OF SURVEY. IT IS WELL SETTLED PRINCIPLE O F LAW THAT STATEMENT RECORDED DURING SURVEY OPERATION DOES NOT HAVE MUCH EVIDENTIARY VALUE. IT IS ALSO A FACT THAT EXCEPTING THE DEFICI T CASH BALANCE FOUND IN THE CASH BOOK NO OTHER INCRIMINATING MATERIAL WAS F OUND DURING THE SURVEY OPERATION. IMPOSITION OF PENALTY U/S 271(1) (C) IS NEITHER MANDATORY NOR AUTOMATIC. THE AO IS VESTED WITH A D ISCRETION TO EITHER LEVY OR NOT LEVY PENALTY AFTER CONSIDERING THE EXPL ANATION OF THE 5 ITA NOS.1991 & 1992 OF 2011 POOJA JEWELLERS, HYD. ASSESSEE. THE DISCRETION HAS TO BE EXERCISED IN AN OBJECTIVE MANNER. FOR IMPOSING PENALTY U/S 271(1)(C) THE DEPARTMENT H AS TO PROVE CONCLUSIVELY THAT THERE IS AN DELIBERATE AND CONSCI OUS ATTEMPT BY THE ASSESSEE TO CONCEAL HIS INCOME OR FURNISHING INACCU RATE PARTICULARS OF INCOME. IN THE FACTS OF THE PRESENT APPEAL THE DEP ARTMENT HAS CONCLUSIVELY FAILED TO PROVE THAT THERE IS A DELIBE RATE OR CONSCIOUS ATTEMPT BY THE ASSESSEE TO CONCEAL ITS INCOME. THA T APART FACT REMAINS THAT THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED IN COMPLIANCE TO SECTION 148 WAS ACCEPTED BY THE AO, T HEREFORE NO PENALTY COULD BE IMPOSED U/S 271(1)(C) IN VIEW OF T HE PRINCIPLE OF LAW DECIDED BY THE HONBLE SUPREME COURT IN CASE OF CIT VS. SURESH CHAND MITTAL 251 ITR 9. CONSIDERING THE TOTALITY OF FACT S AND PRINCIPLE OF LAW LAID DOWN BY THE HONBLE SUPREME COURT AND DIFFEREN T HIGH COURTS WHICH WERE CITED BY THE ASSESSEE BEFORE CIT (A) AN D ALSO BEFORE US, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY U/S 2 71(1)(C) IS NOT JUSTIFIED. WE THEREFORE DELETE PENALTIES FOR THE T WO YEARS UNDER CONSIDERATION. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24- 8-2012. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 24 TH AUGUST, 2012. COPY TO:- 1) C/O VASANT KUMAR & A.V. RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABHUKHAN ESTATES, HYDERABAD. 2) ITO, WARD-11(3), HYDERABAD. 3) CIT (A)-VI, HYDERABAD. 4) THE CIT CONCERNED, HYDERABAD 5).THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD. JMR* 6 ITA NOS.1991 & 1992 OF 2011 POOJA JEWELLERS, HYD.