Asst. Commissioner of Income Tax, Circle-8(1), Hyderabad V. M/s Hi-Power Electrical Industries, Hyderabad

ITA 27/HYD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2432 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: B SHANTHI KUMAR
• Section: 80IB

Judgement Text

ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.27/HYD/2014 (ASSESSMENT YEAR: 2009-10) ACIT, CIRCLE 8(1) HYDERABAD VS M/S. HI-POWER ELECTRICAL INDUSTRIES, PATANCHERU, HYDERABAD PAN: AACFH 8217 J (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. N.SWAPNA, DR FOR ASSESSEE : SHRI B. SHANTHI KUMAR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2009-10. IN TH IS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE LEARNED CIT (A)-III, HYDERABAD, DATED 8.10.2013 DELETING THE P ENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, ENGAGED IN MANUFACTURING OF TRANS FORMERS, AB SWITCHES, SPARES ETC., FILED ITS RETURN OF INCOME F OR THE A.Y 2009- 10 ON 30.09.2009 DECLARING A TOTAL INCOME OF RS.1,1 6,67,505. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND ACC ORDINGLY NOTICES FOR HEARING WERE ISSUED. DATE OF HEARING: 07.11 . 2017 DATE OF PRONOUNCEMENT: 15.11.2017 ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 2 OF 6 3. THE ASSESSEE FILED THE REQUIRED INFORMATION AND ON VERIFICATION OF THE INFORMATION SO FILED, THE AO OB SERVED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.38,89,169 AS D EDUCTION U/S 80IB OF THE ACT. HE OBSERVED THAT THE ASSESSEE IS A SMALL SCALE MANUFACTURING UNIT AND THEREFORE, INQUIRIES WERE CO NDUCTED WITH THE CENTRAL EXCISE DEPARTMENT AND THE ERI FORMS WER E OBTAINED TO IDENTIFY THE EXTENT OF MANUFACTURING ACTIVITY TH AT WAS UNDERTAKEN. ON VERIFICATION OF THE SAID DETAILS, IT WAS SEEN THAT THE ASSESSEE IS INVOLVED IN MANUFACTURING AND TRADI NG OF TRANSFORMERS AND OTHER RELATED PRODUCTS AND THAT TH E TOTAL VALUE OF THE PRODUCTS MANUFACTURED BY THE ASSESSEE WAS RS.17,05,25,736. THE AO OBSERVED THAT THE TOTAL SAL ES FOR THE RELEVANT A.Y AS REFLECTED IN RETURN OF INCOME IS RS .29,09,55,656 AND HENCE HE CAME TO THE CONCLUSION THAT RS.12,04,2 9,920 REPRESENTS TRADING SALES. THEREFORE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE CLAIM OF DEDUCTION UNDER S ECTION 80IB SHOULD NOT BE RESTRICTED TO THE MANUFACTURING ACTIV ITY ALONE. THE SUMMONS WERE ALSO ISSUED TO THE MANAGING PARTNER OF THE FIRM TO FILE THE DETAILS OF THE MANUFACTURING AND TRADING A CTIVITY; SALES AND PURCHASES INCURRED SPECIFICALLY TOWARDS MANUFAC TURING AND TRADING. AFTER VERIFICATION OF THE DETAILS FILED, T HE AO CONCLUDED THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S 80IB OF THE ACT ONLY ON THE MANUFACTURING ACTIVITIES AND MADE THE A DDITION OF RS.25,81,783 BEING THE EXCESS CLAIM OF DEDUCTION UN DER SECTION 80IB. FURTHER, THE AO ALSO OBSERVED THAT THERE IS A DIFFERENCE OF RS.10,31,360 IN SALES AS PER THE BOOKS OF ACCOUNT O F THE ASSESSEE AND VAT RETURNS. WHEN CONFRONTED, THE ASSESSEE ACCE PTED THE MISTAKE AND CERTIFIED THAT THE SALES HAVE BEEN UNDE R REPORTED TO THE EXTENT OF RS.10,31,360. THE SAME WAS BROUGHT TO TAX. ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 3 OF 6 4. CONSEQUENT TO THE ABOVE ASSESSMENT, THE AO ISSUE D A SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE, INSPITE OF RECEIPT OF THE SHOW CAUSE NOTI CE, DID NOT FILE ANY EXPLANATION BEFORE THE AO AND THE AO THEREFORE, LEVIED THE MINIMUM PENALTY U/S 271(1)(C) OF THE ACT BOTH FOR C ONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICUL ARS OF INCOME. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILE D AN APPEAL BEFORE THE CIT (A), WHO DELETED THE PENALTY AND THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DR SUBMITTED THAT THE AO IN THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER HAS C LEARLY BROUGHT OUT AS TO HOW THE ASSESSEE HAS CONCEALED ITS PARTIC ULARS OF INCOME BY SUPPRESSION OF SALES AND ALSO FURNISHED INACCURA TE PARTICULARS OF INCOME BY CLAIMING EXCESS DEDUCTION U/S 80IB OF THE ACT WITH REGARDS TO THE TRADING ACTIVITY AS WELL. THEREFORE, ACCORDING TO THE LEARNED DR, THE PENALTY OUGHT NOT TO HAVE BEEN DELE TED. IN SUPPORT OF HER CONTENTION, THE LEARNED DR PLACED RE LIANCE UPON THE FOLLOWING DECISIONS: I) CIT VS. HCIL KALINDEE ARSS PL REPORTED IN (2013) 261 CTR 462 (DEL.) II) CIT VS. ZOOM COMMUNICATION (P) LTD REPORTED IN (2010) 327 ITR 510 (DEL.) 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUBMITTED THAT THE AO, NOWHERE IN THE ASSESSM ENT ORDER HAS BROUGHT OUT THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND THER EFORE, THE PENALTY OUGHT NOT TO HAVE BEEN INITIATED. HE ALSO S UBMITTED THAT ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 4 OF 6 THE DIFFERENCE HAS ARISEN DUE TO MATHEMATICAL MISTA KES IN THE COMPUTATION OF DEDUCTION U/S 80IB OF THE ACT AND IN RETURN OF INCOME AND THEREFORE, THE CIT (A) HAS RIGHTLY DELET ED THE PENALTY. HE ALSO PLACED RELIANCE UPON THE FOLLOWING DECISION S IN SUPPORT OF HIS CONTENTION THAT THE PENALTY IS NOT TO BE LEVIED WHERE IN THE PENALTY NOTICE, THE AO HAS NOT STRUCK OFF THE IRREL EVANT PORTION: A) ITAT HYDERABAD IN THE CASE OF DCIT VS. M/S. SVC ESTATES PVT. LTD IN ITA NO.118/HYD/2013 B) HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF PR. CIT VS. SMT. BAISETTY REVATHI IN ITTA NO.684 OF 201 6 DATED 13.7.2017 (A.P. HIGH COURT) C) HON'BLE SUPREME COURT IN THE CASE OF CIT VS.SSA S EMERALD MEADOWS REPORTED IN (2016) 73 TAXMANN.COM 248 (S.C) 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD AND AS ADMITTED BY THE LEARNED COUNSEL FO R THE ASSESSEE DURING THE COURSE OF HEARING, WE FIND THAT THIS IS NOT THE FIRST YEAR OF CLAIM OF DEDUCTION U/S 80IB OF THE AC T AND THEREFORE, THE ASSESSEE WAS WELL AWARE OF ITS ELIGIBILITY TO I TS CLAIM OF DEDUCTION U/S 80IB OF THE ACT WITH REGARD TO ITS MA NUFACTURING ACTIVITY ONLY. IT IS SEEN THAT THE ASSESSEE HAS CLA IMED DEDUCTION WITH REGARD TO BOTH MANUFACTURING AS WELL AS TRADIN G ACTIVITY AND HENCE IT IS A CLEAR CASE OF FURNISHING OF INACCURAT E PARTICULARS OF INCOME AND NOT A CASE OF ANY TECHNICAL OR MATHEMATI CAL MISTAKE AS CONTENDED BY THE ASSESSEE AND ACCEPTED BY THE CI T (A). SIMILARLY, WITH REGARD TO THE DIFFERENCE IN THE SAL ES AS PER THE ASSESSEES BOOKS OF ACCOUNT AND THE VAT RETURNS, TH E ASSESSEE HAS UNDER REPORTED ITS SALES. THIS WOULD DEFINITELY AMOUNT TO SUPPRESSION OF THE INCOME AND IT IS ONLY AFTER THE ASSESSEE HAS BEEN CONFRONTED WITH THE DETAILS THAT THE MANAGING PARTNER OF THE FIRM ACCEPTED THE DIFFERENCE AND THIS HAS RESULTED IN THE ADDITION ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 5 OF 6 TO THE RETURNED INCOME OF THE ASSESSEE. THE CONTENT ION OF THE ASSESSEE THAT THE AO HAS NOT STRUCK OFF THE IRRELEV ANT PORTION IN THE NOTICE U/S 271(1)(C) ALSO DOES NOT HOLD WATER, BECAUSE THE AO HAS INITIATED THE PENALTY PROCEEDINGS FOR BOTH THE CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICUL ARS OF INCOME AND THEREFORE, THERE WAS NO IRRELEVANT PORTION TO B E STRUCK OFF. WE FIND THAT THE ASSESSEE HAS NOT FILED ANY EXPLANATIO N BEFORE THE AO IN REPLY TO THE SHOW CAUSE NOTICE ISSUED U/S 271(1) (C) OF THE ACT. THEREFORE, THE AO HAS RIGHTLY LEVIED THE MINIMUM PE NALTY U/S 271(1)(C) OF THE ACT. THE CIT (A)S FINDINGS THAT T HE AO HAS NOT GIVEN ANY REASON FOR LEVY OF PENALTY IS TOTALLY MIS PLACED AND INCORRECT. THE CIT (A)S FINDINGS THAT THE CONDUCT OF THE ASSESSEE DOES NOT INDICATE ANY MINDSET OR ANY PLANNING OF TA X EVASION IS ALSO NOT SUSTAINABLE BECAUSE THE ASSESSEE HAS BEEN CLAIMING DEDUCTION U/S 80IB IN THE EARLIER A.YS AS WELL AND IS WELL AWARE OF THE LEGAL POSITION. THEREFORE, WE ARE OF THE OPINIO N THAT THIS IS A CLEAR CASE FOR LEVY OF PENALTY AND THEREFORE, THE O RDER OF THE CIT (A) IS SET ASIDE AND THE ORDER OF THE AO IS RESTORED. 8. IN THE RESULT, REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH NOVEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH NOVEMBER, 2017. VINODAN/SPS ITA NO 27 OF 2014 HI POWER ELECTRICAL INDUSTRIES H YDERABAD. PAGE 6 OF 6 COPY TO: 1 ACIT, CIRCLE 8(1) 8 TH FLOOR, C BLOCK, IT TOWERS, HYDERABAD 2 M/S. HI-POWER ELECTRICAL INDUSTRIES, PHASE V, IDA PATANCHERU, MEDAK DISTT. HYDERABAD 3 CIT (A)-III HYDERABAD 4 PR. CIT II HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER