ACIT., Circle-3(2), Hyderabad V. M/s Sri Lakshmi Gayatri Hotels Private Limited, Hyderabad

ITA 261/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2919 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV BENJWAL
• Assessee Lawyers: K A SAI PRASADY R RAO
• Keywords: Depreciation; Reasonable cause; Revised return
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.261/HYD/2013 ASSESSMENT YEAR:2008-09 ACIT, CIR-3(2), HYDERABAD VS M/S. SRI LAKSHMI GAYATRI HOTELS PVT. LTD., HYDERABAD. PAN:AAFCS 4671P {APPELLANT) (RESPONDENT) APPELLANT BY : SRI RAJIV BENJW AL RESPONDENT BY S/SRI K.A. SAI PRASAD/Y.R.RAO DATE OF HEARING : 29-5-2013 DATE OF PRONOUNCEMENT : 31- 5-2013 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER. THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER OF CIT (A)-VI, HYDERABAD PASSED IN APPEAL N O.7/DC 3(2)/CIT(A)-IV/2011-12 PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. THE SOLE ISSUE IN THIS APPEAL IS WITH REGARD TO THE DELETION OF PENALTY IMPOSED U/S 271(1) ( C) OF THE ACT. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE, A PRIVATE L IMITED COMPANY IS IN THE BUSINESS OF RUNNING A HOTEL. A S URVEY OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY ON 9-3-2009. IN COURSE OF SURVEY OPERATION, AN UNSIGNED PROFIT AND LOSS ACCOUNT AND BALANCE-SHE ET FOR THE ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 2 ASSESSMENT YEAR 20080-09 WAS FOUND AS PER WHICH THE PROFIT AFTER DEPRECIATION AND BEFORE TAX WAS SHOWN AT RS.4,54,63,8888/-. THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR FILED ITS RETURN OF INCOME ON 31-3-2009 DECLAR ING A TOTAL INCOME OF RS.4,52,77,223/-. THE RETURN OF INCOME W AS INITIALLY PROCESSED U/S 143(1) OF THE ACT. HOWEVER, SUBSEQUE NTLY THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMENT. TH E SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 16-6-2010. THE ASSESSING OFFICER AFTER MAKIN G SOME DISALLOWANCES DETERMINED THE INCOME AT RS.4,87,45,9 40/- AND ALSO INITIATED PROCEEDINGS U/S 271(1)(C ) OF THE AC T. IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE SUBMITT ED ITS EXPLANATION. THE ASSESSING OFFICER HOWEVER WAS NOT CONVINCED WITH THE EXPLANATION SUBMITTED BY THE ASSESSEE AND REJECTED THE SAME BY OBSERVING THAT THE ASSESSEE ON THE DATE OF SURVEY ON 9-3-2009 HAD NEITHER FILED THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR NOR HAS PAID THE TAXES. THE ASSESSING OFFICER FURTHER OBSERVED THAT EVEN THOUGH THE FINAL ACCOUNTS WERE READY, THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME WHICH CLEARLY SHOWS THAT BUT FOR THE SURVEY, THE ASSESSEE WOULD NOT HAVE FILED THE RETURN OF INCOME NOR WOULD HAVE PAID THE TAX DUE ON THE SAME. THE ASSESSING O FFICER THEREFORE CAME TO A CONCLUSION THAT THE ASSESSEE HA D CONCEALED THE PARTICULARS OF INCOME BY NOT FILING THE RETURN OF INCOME IN TIME AND THEREFORE PROCEEDED TO IMPOSE PENALTY OF A N AMOUNT OF RS.2,09,85,991/- BEING 150% OF THE TAX SOUGHT TO BE EVADED U/S 271(1)(C ) OF THE ACT. THE ASSESSEE BEING AGG RIEVED OF THE PENALTY IMPOSED U/S 271(1)( C) PREFERRED AN APPEAL BEFORE THE CIT (A). ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 3 4. THE CIT (A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENT S HELD THAT THE ASSESSEE HAS NOT CONCEALED ITS INCOME AND ACCORDING LY DELETED THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT BY OBS ERVING IN THE FOLLOWING MANNER:- 6. I HAVE EXAMINED THE FACTS ON RECORD AND 6. I HAV E EXAMINED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. THER E IS NO DISPUTE THAT THE APPELLANT DID NOT FILE THE RETURN WITHIN T HE PERIOD SPECIFIED U/S. 139(1). HOWEVER, THE APPELLANT DID FILE ITS RE TURN OF INCOME WITHIN THE PERIOD SPECIFIED U/S. 139(4), ALBEIT AFT ER THE SURVEY U/S. 133A. IT IS ALSO APPARENT FROM THE ASSESSMENT ORDER THAT THE ADDITIONS MADE TO THE RETURNED INCOME WERE IN THE N ATURE OF TECHNICAL STATUTORY DISALLOWANCES WHICH CANNOT BE S AID TO AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS. 7. THE LEVY OF PENALTY IN THIS CASE HINGES ON THE Q UESTION WHETHER THE FAILURE OF THE APPELLANT TO FILE THE RETURN OF INCO ME WITHIN THE DUE DATE UNDER SEC. 139(1) CAN BE SAID TO QUALIFY FOR C ONCEALMENT OF INCOME LIABLE TO PENALTY U/S. 271(1)(C). 8. IN THE CASE OF CHAGANLAL SUTERIYA VS. ITO [2011] 337 ITR 350 (GUJ), THE COURT RECOGNIZED THAT A MERE FAILURE TO FURNISH A RETURN OF INCOME DOES NOT AMOUNT TO CONCEALMENT UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, AND THAT THE INTRODUCTION OF EXPLANATION 3 TO SECTION 271(1) WITH EFFECT FROM APRIL 1, 1976, H AD CHANGED THE LAW ON THE POINT. FOR THE PURPOSE OF FALLING WITHIN THE PURVIEW OF EXPLANATION 3, (I) A PERSON SHOULD HAVE FAILED WITH OUT REASONABLE CAUSE TO FURNISH A RETURN OF INCOME WITHIN TWENTY-O NE MONTHS FROM THE END OF THE ASSESSMENT YEAR CONCERNED; (II) NO N OTICE SHOULD HAVE BEEN ISSUED TO HIM UNDER SECTION 142(1) OR SECTION 148 OF THE ACT TILL THE EXPIRY OF THE TWO-YEAR PERIOD; AND (III) THE CO NCERNED OFFICER SHOULD BE SATISFIED THAT IN RESPECT OF SUCH ASSESSM ENT YEAR, SUCH PERSON HAD TAXABLE INCOME. IN SUCH CASES, EXPLANATI ON 3 PROVIDES THAT SUCH PERSON SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 4 HIS INCOME WITHIN THE MEANING OF CLAUSE (C) OF SECT ION 271(1) OF THE ACT FOR SUCH ASSESSMENT YEAR. IN SUCH AN EVENTUALIT Y, EVEN IF THE PERSON CONCERNED FILES A RETURN AFTER THE EXPIRY OF THE PERIOD OF TWO YEARS IN PURSUANCE OF A NOTICE UNDER SECTION 148 OF THE ACT, THE DEEMING PROVISION OF EXPLANATION 3 SHALL STILL HAVE APPLICATION. THE COURT ALSO HELD IN THIS CASE THAT THE REQUIREMENTS OF THE EXPL.3 WERE CUMULATIVE AND IT WAS NECESSARY THAT ALL THE CONDIT IONS SPECIFIED THEREIN SHOULD BE SATISFIED FOR LEVY OF PENALTY. 9. IN THE APPELLANT'S CASE, THE APPELLANT HAD FILED ITS RETURN OF INCOME WELL BEFORE 31.12.2010 (I.E. WITHIN THE PERIOD SPEC IFIED U/S 153(1) OF THE ACT). SINCE ONE OF THE CONDITIONS SPECIFIED UND ER EXPL.3 TO SEC.271(1)(C) IS NOT CANNOT BE SAID TO APPLY TO THE APPELLANT. FURTHER, RELYING ON THE DECISION IN THE CASE OF CHAGANLAL SU TERIYA, IT IS HELD THAT MERE FAILURE TO FILE A RETURN OF INCOME CANNOT BE HELD TO BE A CASE OF CONCEALMENT OF INCOME. 10. THE DECISION IN THE CASE OF GVK PETROCHEMICALS HAD BEEN RENDERED IN THE CONTEXT OF A REVISED RETURN BEING FILED BY THE ASSESSEE CONSEQUENT TO THE SEARCH. IN THE CASE OF THE APPELL ANT, THERE IS NO REVISION OF ITS RETURN. THEREFORE, IT CANNOT BE SAID THAT TH ERE HAD BEEN AN INITIAL CONCEALMENT OF ITS INCOME. 11. SIMILARLY, IN THE CASE OF M.N. RAJARAMAN, IT WA S FOUND DURING A SEARCH THAT THE ASSESSEE HAD MADE CERTAIN INVESTMEN TS THAT HAD NOT BEEN DISCLOSED IN THE RETURN OF INCOME FILED BY HIM. IT WAS UNDER THESE CIRCUMSTANCES THAT THE ITAT HELD THAT IT WAS ONLY A FTER THE REVENUE WAS IN THE POSSESSION OF INCRIMINATING MATERIALS PERTAI NING TO UNDISCLOSED INCOME, DID THE ASSESSEE COME OUT WITH PAYMENT OF A DVANCE TAX AND DISCLOSURE OF ADDITIONAL INCOME BY A REVISED RETURN , AND UPHELD THE LEVY OF PENALTY. THE FACTS IN THE APPELLANT'S CASE ARE D IFFERENT. THOUGH THE APPELLANT HAD NOT FILED THE RETURN TILL THE DATE OF SURVEY AND THOUGH THE TIME SPECIFIED U/S 139(1) HAD LAPSED, THE APPELLANT WAS PERMITTED UNDER SEC.139(4) OF THE ACT TO FILE THE RETURN TILL 31.3. 2009. FURTHER, THE ASSESSING OFFICER DID NOT FIND ANYTHING DURING THE SURVEY THAT WAS AT VARIANCE FROM THE ENTRIES IN THE FINALIZED, THOUGH UNSIGNED, ACCOUNTS AND WHICH CAN BE CLASSIFIED AS CONCEALMENT. ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 5 12. UNDER THE CIRCUMSTANCES, THE APPELLANT CANNOT B E SAID TO HAVE CONCEALED ITS INCOME AND THE PENALTY OF RS. 2,09,85 ,991/- IS DIRECTED TO BE DELETED. THE APPEAL IS ALLOWED. 5. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS A FACT THAT A SURVEY WAS CONDUCTED IN CASE OF THE ASSESSEE ON 9-3-2009 AND DURING THE SURVEY UNSI GNED PROFIT & LOSS A/C AND BALANCE-SHEET WERE FOUND. APART FROM THESE NO OTHER INCRIMINATING MATERIAL WAS FOUND AT THE TIME OF SUR VEY. THE ASSESSEE VOLUNTARILY FILED A RETURN OF INCOME FOR THE IMPUGN ED ASSESSMENT YEAR ON 31-3-2009 DECLARING A TOTAL INCOME OF RS.4,52,77 ,220/- BEFORE ISSUANCE OF ANY NOTICE BY THE DEPARTMENT. AN ASSES SMENT WAS ALSO COMPLETED U/S 143(3) OF THE ACT BY THE ASSESSING OF FICER ON THE BASIS OF SUCH RETURN AND THE TOTAL INCOME WAS DETERMINED AT RS.4,87,45,940/- AFTER MAKING CERTAIN DISALLOWANCES . THEREFORE, IN THE AFORESAID FACTS AND CIRCUMSTANCES, IT CANNOT BE SAI D THAT THE ASSESSEE HAS CONCEALED ITS INCOME. AS APPEARS FROM THE OR DER PASSED U/S 271 (1) (C ) OF THE ACT, THE PENALTY HAS BEEN IMPOS ED BY THE ASSESSING OFFICER ONLY ON A PRESUMPTION THAT BECAUSE OF THE SURVEY OPERATION, THE ASSESSEE FILED ITS RETURN OF INCOME OR PAID TAX DUE OR OTHERWISE THE ASSESSEE WOULD NOT HAVE FILED ITS RETURN OF INCOME . HOWEVER, SUCH FINDING ONLY ON PRESUMPTION HAS NO BASIS AND IS NO T LEGALLY SUSTAINABLE. THOUGH THE ASSESSEE MAY NOT HAVE FILE D THE RETURN OF INCOME WITHIN THE DUE DATE U/S 139(1) OF THE ACT BU T CERTAINLY IT HAS FILED THE RETURN WITHIN THE TIME PERMITTED U/S 139( 4) OF THE ACT AND THE RETURN IS A VALID RETURN. THE ASSESSING OFFICER MU ST ESTABLISH THE FACT ON RECORD THAT THERE IS A CONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL HIS INCOME OR FURNISH INACCURATE PARTICU LARS OF INCOME BEFORE IMPOSING PENALTY U/S 271(1)(C ) OF THE ACT. AS CAN BE SEEN THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT O RDER HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE EXCEPT ING FOR CERTAIN DISALLOWANCES. IT IS ALSO NOT THE CASE OF THE DEPA RTMENT THAT THE ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 6 ASSESSEE HAD FILED THE RETURN ONLY AFTER CERTAIN IN CRIMINATING MATERIALS WERE RECOVERED FROM HIM OR AFTER ISSUANCE OF NOTICE U/S 142(1) OR 148 OF THE ACT. IN FACT IN THE ORDER PASSED U/S 271(1) ( C) OF THE ACT THE ASSESSING OFFICER HAS NOT EVEN MENTIONED WHAT IS TH E INCOME CONCEALED BY THE ASSESSEE. NEITHER THE INCOME DECLA RED BY THE ASSESSEE NOR THE DISALLOWANCES MADE CAN BE CONSIDER ED AS CONCEALED INCOME OF THE ASSESSEE. THEREFORE, CONS IDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE, THE ASS ESSEE CANNOT BE ACCUSED OF CONCEALING HIS INCOME TO BE VISITED WITH PENALTY U/S 271(1)(C ) OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) WHICH IS SUSTAINED. HENCE, TH E GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 -05-20 13. SD/- (B. RAMAKOTAIAH ) SD/- (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST MAY, 2013. COPY FORWARDED TO: 1. ACIT, CIR-3(2), HYDERABAD. 2. M/S SRI LAKSHMI GAYATRI HOTELS PVT. LTD., NO.8, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 3. CIT (A)-IV, HYDERABAD. 4. CIT CONCERNED, HYDERABAD. 5. THE DR, ITAT, HYDERABAD JMR* ITA NO. 261 OF 2013 SRI LAKSHMI GAYATRI HOTELS, HYD.. ================== 7