Dr.G.Samba Siva Reddy , Rajahmundry V. ACIT, CIRCLE - 1, Rajahmundry

ITA 314/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2018 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Reasonable cause
• Section: 143(3); 142(1); 133A; 139

Judgement Text

ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 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.314/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) DR. G. SAMBASIVA REDDY RAJAHMUNDRY VS. ACIT , CIRCLE - 1 , RAJAHMUNDRY [PAN: AHLPG1113E ] ( / APPELLANT) ( / RESPONDENT) ./I.T.A.NO.318/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO , WARD - 4 , RAJAHMUNDRY VS. DR. G. SAMBASIVA REDDY RAJAHMUNDRY ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 24.02.2016 / DATE OF PRONOUNCEMENT : 18.03.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-11, MUMBAI, CA MP: VISAKHAPATNAM DATED 22.2.2013 AND IT PERTAINS TO THE ASSESSMENT Y EAR 2008-09. ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, DOCTOR BY PROFESSION FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 17.10.2008 DECLARING TOTAL INCOME OF RS. 20,64,450/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME T AX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') ON 31.12.2010 DET ERMINING TOTAL INCOME OF RS.22,78,580/-. A NOTICE U/S 271(1)(C) R.W.S. 27 4 OF THE ACT WAS ISSUED TO THE ASSESSEE, FOR CONCEALMENT OF PARTICUL ARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. A SUR VEY WAS CONDUCTED U/S 133A OF THE ACT ON THE PROFESSIONAL PREMISES OF THE ASSESSEE ON 23.9.2008. DURING THE COURSE OF SURVEY, IT WAS NOTI CED THAT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME FOR THE ASSESSME NT YEAR IN QUESTION AND ALSO FOR THE ASSESSMENT YEAR 2007-08. IT WAS F URTHER NOTICED THAT A FEW LOOSE SLIPS FOUND DURING THE COURSE OF SURVEY, REVEALS THE PROFESSIONAL RECEIPTS COLLECTED BY THE ASSESSEE. TH E A.O. HAS CONFRONTED THE LOOSE SLIPS AND ASKED TO EXPLAIN, WHETHER THESE RECEIPTS ARE ACCOUNTED IN THE BOOKS OF ACCOUNTS? IN REPLY, THE A SSESSEE STATED THAT HE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS, THER EFORE, HE IS UNABLE TO EXPLAIN WHETHER THESE RECEIPTS WERE ACCOUNTED IN TH E BOOKS OF ACCOUNTS OR NOT. ON A FURTHER QUERY FROM THE ASSESSING OFFIC ER, THE ASSESSEE STATED THAT HIS AVERAGE DAILY COLLECTIONS FROM THE PROFESSION FROM IN- PATIENT AND OUT-PATIENT IS ABOUT RS.6,000/-. BY TAK ING INTO ACCOUNT ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 3 AVERAGE DAILY COLLECTIONS OF RS.6,000/- PER DAY, HI S ANNUAL COLLECTIONS WOULD BE AROUND RS.20 TO 25 LAKHS AND AFTER ALL EXP ENDITURE TOWARDS MAINTENANCE OF HOSPITAL, THE NET ANNUAL INCOME WOUL D BE AROUND RS.15 LAKHS. HOWEVER, I AM NOT IN A POSITION TO SUBSTANT IATE MY PROFESSIONAL RECEIPTS AND EXPENSES WITH NECESSARY DOCUMENTARY EV IDENCE, THEREFORE AGREED TO ADMIT A SUM OF RS.20 LAKHS EACH FOR THE A SSESSMENT YEAR 2007-08 AND 2008-09 AND FURTHER A SUM OF RS.10 LAKH S FOR THE FIRST HALF OF THE CURRENT FINANCIAL YEAR. THE ASSESSEE FURTHER STATED THAT HE IS NOT HAVING REGULAR ACCOUNTANT, THEREFORE COULD NOT MAIN TAIN REGULAR BOOKS OF ACCOUNTS, HENCE, THE ESTIMATION MADE FOR THE FINANC IAL YEAR IS PROBABLE AND ESTIMATED. THE ASSESSEE FILED RETURN OF INCOME FOR THE ABOVE ASSESSMENT YEARS AND ADMITTED INCOME DISCLOSED DURI NG THE COURSE OF SURVEY AND ALSO PAID TAXES BEFORE FILING THE RETURN OF INCOME. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND DETERMINED TOTAL INCOME OF RS.22,78,580/-. WHIL E DOING SO, THE ASSESSING OFFICER HAS ACCEPTED THE RETURN OF INCOME FILED BY THE ASSESSEE, IN ADDITION MADE SEPARATE ADDITIONS TOWAR DS REFERRAL INCOME RECEIVED FROM TWO DIAGNOSTIC CENTERS, WHICH WAS NOT CONSIDERED BY THE ASSESSEE IN THE RETURN OF INCOME. ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 4 3. THEREAFTER, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE U/S 271(1)(C) R.W.S. 274 OF THE ACT AND ASKED TO EXPLAI N WHY PENALTY SHALL NOT BE LEVIED FOR CONCEALMENT OF INCOME AND ALSO FU RNISHING INACCURATE PARTICULARS OF INCOME. IN REPLY TO SHOW CAUSE NOTIC E, THE ASSESSEE SUBMITTED THAT HE HAS ADMITTED THE ADDITIONAL INCOM E DURING THE COURSE OF SURVEY ON ESTIMATION BASIS. THE SURVEY PARTY COU LD NOT GATHER ANY INFORMATION SO AS TO QUANTIFY THE ADDITIONAL INCOME . HE HAD VOLUNTARILY ADMITTED THE ADDITIONAL INCOME TO BUY PEACE AND ALS O TO COOPERATE WITH THE DEPARTMENT FOR SMOOTH COMPLETION OF THE ASSESSM ENT PROCEEDINGS WITH A REQUEST TO THE ASSESSING OFFICER FOR IMMUNIT Y FROM PENAL PROCEEDINGS. THEREFORE, REQUESTED TO DROP PENALTY P ROCEEDINGS. THE ASSESSING OFFICER HOWEVER AFTER CONSIDERING THE EXP LANATIONS FURNISHED BY THE ASSESSEE, LEVIED THE PENALTY U/S 271(1)(C) O F THE ACT. WHILE DOING SO, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS WILLFULLY CONCEALED THE PARTICULARS OF INCOME AND A LSO FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSING OFF ICER FURTHER HELD THAT AS ON THE DATE OF SURVEY I.E. ON 23.9.2008, THE ASS ESSEE DID NOT FILED ANY RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUE STION AND ALSO FOR THE ASSESSMENT YEAR 2007-08. FROM THESE FACTS, IT IS VERY CLEAR THAT IF SURVEY COULD NOT HAVE TAKEN PLACE, THE ASSESSEE WOU LD NOT HAVE FILED HIS ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 5 RETURN OF INCOME AND DISCLOSED TRUE AND CORRECT INC OME AND PAY TAXES. SINCE, THE SURVEY PARTY GATHERED SOME INFORMATION, THE ASSESSEE WAS COMPELLED TO ADMIT ADDITIONAL INCOME, THEREFORE, IT CANNOT BE CONSIDERED AS VOLUNTARY DISCLOSURE OF INCOME. WITH THESE OBSERV ATIONS, THE ASSESSING OFFICER LEVIED PENALTY OF RS.10 LAKHS U/S 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSES SEE, UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME. THE CIT(A) FURTHER HELD THAT DESPITE SURVEY, THE ASSESSEE HAS NOT DISCLOSED REFERRAL INC OME RECEIVED FROM TWO DIAGNOSTIC CENTERS, WHICH CLEARLY SHOWS HIS INT ENTION NOT TO DISCLOSE TRUE AND CORRECT INCOME TO THE DEPARTMENT. HOWEVER, MODIFIED THE PENALTY ORDER AND DIRECTED THE ASSESSING OFFICER TO LEVY MINIMUM PENALTY OF 100% OF TAX SOUGHT TO BE EVADED. AGGRIE VED BY THE CIT(A) ORDER, THE REVENUE AS WELL AS ASSESSEE ARE IN APPEA L BEFORE US. 5. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACT S AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE. THE AUTHORISED REPRESENTATIVE ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 6 FURTHER SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING MINIMUM PENALTY OF 100% LEVIED U/S 271(1)(C) OF THE ACT. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT TH E ASSESSEE HAS DISCLOSED ADDITIONAL INCOME DURING THE COURSE OF SU RVEY UNDER ESTIMATION BASIS. IT WAS NOT A CASE OF ASSESSING OFFICER THAT THERE WAS INCRIMINATING MATERIAL FOUND DURING SURVEY, WHICH SUGGEST CONCEAL MENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AU THORISED REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED RETURN OF INCOME ADMITTING INCOME DISCLOSED DURING THE COURSE OF SURVEY AND PAID TAXES BEFORE FILING THE RETURN OF INCOME, WHICH SHO WS HIS INTENTION NOT TO HIDE ANY INCOME FOR THE TAXATION. DESPITE FILING T HE RETURN AND PAID TAXES AS ADMITTED DURING SURVEY, THE ASSESSING OFFI CER LEVIED PENALTY BY HOLDING THAT THE ASSESSEE DID NOT FILED THE RETURN OF INCOME AS ON THE DATE OF SURVEY. THE AUTHORISED REPRESENTATIVE FURT HER SUBMITTED THAT AS ON THE DATE OF SURVEY, I.E. ON 23.9.2008, THE DUE D ATE FOR FURNISHING RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUESTIO N WAS NOT OVER. THEREFORE, THE ASSESSING OFFICER WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE WOULD NOT HAVE FILED RETURN OF INCOME AND DISCLOSED TRUE AND CORRECT INCOME FOR TAXATION, IF SURVEY COULD NOT HA VE TAKEN PLACE. THE A.R. RELIED UPON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. SAS PHARMACEUTICALS REPORTED IN (2011) 3 35 ITR 239 AND ALSO ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 7 CO-ORDINATE BENCH DECISION OF ITAT, VISAKHAPATNAM I N THE CASE OF GODAVARI TOWNSHIPS (P) LTD. VS. DCIT (2014) 148 ITD 463 AND ARGUED THAT NO PENALTY CAN BE LEVIED FOR THE INCOME SURREN DERED IN THE SURVEY. 6. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT T HE CIT(A) OUGHT TO HAVE SUSTAINED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IN TOTAL, AS HE HIMSELF STATED THAT IT IS A FIT CASE FOR LEVY OF PENALTY. THE LD. D.R. FURTHER SUBMITTED THAT THE CIT(A) ERRED IN NOT GIVI NG COGENT REASONS FOR RESTRICTING THE PENALTY TO 100% OF THE TAXES SOUGHT TO BE EVADED, WHEN HE IS CONVINCED THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATIONS, THEREFORE REQUESTED TO UPHOLD THE PENALTY ORDER PAS SED BY THE ASSESSING OFFICER. THE D.R. FURTHER SUBMITTED THAT THE ASSESS EE HAS WILLFULLY CONCEALED THE PARTICULARS OF INCOME AND ALSO FURNIS HED INACCURATE PARTICULARS OF INCOME. AS ON THE DATE OF SURVEY I.E . ON 23.9.2008, THE ASSESSEE DID NOT FILED ANY RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUESTION AND ALSO FOR THE ASSESSMENT YEAR 2007-08. FROM THESE FACTS, IT IS VERY CLEAR THAT IF SURVEY COULD NOT HAVE TAKEN P LACE, THE ASSESSEE WOULD NOT HAVE FILED HIS RETURN OF INCOME AND DISCL OSED TRUE AND CORRECT INCOME AND PAY TAXES. THE SURVEY PARTY GATHERED SOM E INFORMATION, THEREFORE, THE ASSESSEE WAS COMPELLED TO ADMIT ADDI TIONAL INCOME, ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 8 WHICH CANNOT BE CONSIDERED AS VOLUNTARY DISCLOSURE OF INCOME. THEREFORE, REQUESTED TO UPHOLD THE PENALTY ORDER PA SSED BY THE A.O. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THERE WAS A SURVEY U/S 133A OF THE ACT IN THIS CASE ON 23.9.200 8. AS ON THE DATE OF SURVEY, THE ASSESSEE DID NOT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUESTION AND ALSO FOR THE ASSESSMENT YEAR 2 007-08. DURING THE COURSE OF SURVEY, 12 LOOSE SLIPS STATED TO BE COLLE CTION RECEIPTS FROM OUTPATIENTS WAS FOUND WHICH WAS CONFRONTED TO THE A SSESSEE AND ASKED HIM TO EXPLAIN WHETHER THE SAME ARE ACCOUNTED IN TH E BOOKS OF ACCOUNTS OR NOT. IN REPLY TO A SPECIFIC QUERY FROM THE A.O. , THE ASSESSEE ADMITTED THAT THESE ARE OUT PATIENT COLLECTION RECEIPTS, HOW EVER, STATED THAT HE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS TO SAY W HETHER THESE ARE ACCOUNTED OR NOT IN THE ABSENCE OF REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE, IN REPLY TO A FURTHER QUERY FROM THE A.O. ADMITTED THAT HIS AVERAGE DAILY COLLECTION FROM INPATIENT AND OUTPATI ENT IS AROUND RS.6,000/-, BY TAKING INTO ACCOUNT THE AVERAGE DAIL Y COLLECTION HIS PROFESSIONAL COLLECTIONS WOULD BE AROUND RS.20 TO 2 5 LAKHS PER ANNUM. FROM THIS, AFTER MEETING THE EXPENDITURE FOR MAINTE NANCE OF HOSPITAL, THE NET INCOME WOULD BE AROUND RS.15 LAKHS PER ANNU M, WHICH IS ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 9 PROBABLE AND ESTIMATED. SINCE, I AM NOT IN A POSIT ION TO SUBSTANTIATE MY RECEIPTS AND EXPENDITURE WITH NECESSARY EVIDENCE AGREED TO ADMIT RS.20 LAKHS EACH FOR THE ASSESSMENT YEAR 2007-08 AN D 2008-09 AND RS.10 LAKHS FOR THE FIRST HALF OF THE CURRENT FINAN CIAL YEAR. ACCORDINGLY, FILED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 20 08-09 ON 17.10.2008 AND ADMITTED INCOME DECLARED DURING THE COURSE OF S URVEY AND PAID TAXES BEFORE FILING RETURN OF INCOME. 8. THE A.O. LEVIED PENALTY U/S 271(1)(C) OF THE ACT , ON THE GROUND THAT THE ASSESSEE WITH A MALAFIDE INTENTION WILLFUL LY CONCEALED THE PARTICULARS OF INCOME, WHICH IS EVIDENT FROM THE FA CTS THAT HE DID NOT FILED RETURN AND ALSO NOT PAID ANY ADVANCE TAX. THE A.O. WAS OF THE OPINION THAT IF THE SURVEY COULD NOT TAKEN PLACE, T HE ASSESSEE WOULD NOT HAVE DISCLOSED HIS TRUE AND CORRECT INCOME. BECAUSE , THE SURVEY PARTY FOUND LOOSE SHEETS WHICH INDICATES THE SUPPRESSED I NCOME, THE ASSESSEE HAS ACCEPTED ADDITIONAL INCOME WHICH IS NOT VOLUNTA RY. THE DEPARTMENT HAS GATHERED SOME MATERIAL INFORMATION, WHICH WAS T HE REASON FOR DISCLOSURE OF ADDITIONAL INCOME BY THE ASSESSEE, TH EREFORE, IT IS A CLEAR CASE OF WILLFUL CONCEALMENT OF INCOME WHICH ATTRACT S PENALTY U/S 271(1)(C) OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT HE HAS OFFERED THE INCOME DURING THE COURSE OF SURVEY PURE LY ON ESTIMATION ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 10 BASIS AND WHICH WAS NOT SUPPORTED BY ANY INCRIMINAT ING MATERIALS, THEREFORE IT CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME. THE ASSESSEE FURTHER STATED THAT HE HAS FILED THE RETUR N OF INCOME, DISCLOSED THE INCOME ADMITTED DURING THE COURSE OF SURVEY AND ALSO PAID TAXES BEFORE FILING THE RETURN OF INCOME. HE FURTHER SUBM ITTED THAT HE HAD MADE A FAIR ESTIMATION OF INCOME AND DISCLOSED OVER AND ABOVE HIS PROBABLE INCOME TO BUY PEACE AND TO COOPERATE WITH THE DEPARTMENT FOR SMOOTH COMPLETION OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER STATED THAT THE DECLARATION OF INCOME WAS MADE WITH A REQU EST TO IMMUNITY FROM PENALTY PROVISIONS AND HIS REQUEST AT THE TIME OF SURVEY HAVE TO BE TAKEN AS IMPLIEDLY ACCEPTED. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSE E AND ALSO ORDERS OF THE AUTHORITIES BELOW. BEFORE WE GO INTO THE MERITS OF THIS CASE, LET US UNDERSTAND THE POSITION OF LAW AS ENUM ERATED U/S 271(1)(C) OF THE ACT. SECTION 271(1)(C) OF THE ACT, PROVIDES FOR LEVY OF PENALTY, IN A CASE WHERE THE A.O. OR CIT(A) IS SATISFIED THAT T HE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRE CTED TO PAY PENALTY A SUM NOT LESS THAN 100% AND NOT MORE THAN 300% OF TAX SOUGHT TO BE EVADED. EXPLANATION (1) APPENDED TO SECTION 271(1)( C) OF THE ACT, ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 11 PROVIDES FOR LEVY OF PENALTY, IF THAT PERSON FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY SUCH PERSON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTANTIATED AND HE FAILS TO PROVE SUCH EXPLANATIONS IS BONAFIDE AND THAT ALL FACTS RE LATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM REPRESENTS THE CONCEALED INCOME. SIMILARLY, EXP LANATION (3) APPENDED TO SECTION 271(1)(C) OF THE ACT, PROVIDES FOR LEVY OF PENALTY IN A CASE, WHERE ANY PERSON FAILS, WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED IN SUB-SECTION 1 OF SEC TION 153, A RETURN OF HIS INCOME, WHICH HE IS REQUIRED TO FURNISH U/S 139 OF THE ACT, IN RESPECT OF ANY ASSESSMENT YEAR COMMENCING ON OR AFTER 1 ST DAY OF 1989 AND ON THE EXPIRY OF THE PERIOD AFORESAID NO NOTICE HAS BE EN ISSUED TO HIM U/S 142(1) OF THE ACT OR U/S 148 OF THE ACT AND THE A.O . OR CIT(A) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR, SUCH PERSON HAS TAXABLE INCOME, THEN SUCH PERSON SHALL FOR THE PURP OSE OF CLAUSE (C) OF THIS SUB SECTION, BE DEEMED TO HAVE CONCEALED THE P ARTICULARS OF HIS INCOME, NOTWITHSTANDING THE FACT THAT SUCH PERSON F URNISHES A RETURN OF HIS INCOME AT ANY TIME AFTER THE EXPIRY OF THE PERI OD AFORESAID. THE CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME SHOULD BE REFERRED TO RETURN OF INCOME FILED BY THE ASSESSEE, BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AVA ILABLE WITH THE ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 12 AUTHORITIES AT THE TIME OF ANY PROCEEDINGS UNDER TH IS ACT. IN THE PRESENT CASE ON HAND, ADMITTEDLY AS ON THE DATE OF SURVEY, THE ASSESSEE HAS NOT FILED RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE RIGHT FROM THE BEGINNING CLAIMED THAT HE DID NOT MA INTAIN REGULAR BOOKS OF ACCOUNTS OF HIS PROFESSION, EXCEPT FEW REGISTERS SHOWING DETAILS OF INPATIENT AND OUTPATIENT. HOWEVER, THE ASSESSEE HA S FAIRLY ESTIMATED HIS GROSS COLLECTIONS BETWEEN RS. 20 TO 25 LAKHS AND AF TER ALL EXPENDITURE A NET INCOME OF RS.15 LAKHS HAS BEEN ESTIMATED. FURTH ER, THE ASSESSEE HAS DISCLOSED RS.20 LAKHS FOR THE ASSESSMENT YEAR U NDER CONSIDERATION AND ALSO FOR THE ASSESSMENT YEAR 2007-08. FURTHER, THE ASSESSEE HAS FILED RETURN OF INCOME ADMITTING INCOME DISCLOSED I N THE SURVEY AND ALSO PAID TAXES BEFORE FILING THE RETURN OF INCOME. IT I S NOT A CASE OF A.O. THAT HE HAD GATHERED CONCEALMENT OF INCOME BASED ON CERT AIN INCRIMINATING DOCUMENTS, WHICH IS THE BASIS OF ESTIMATION OF INCO ME DISCLOSED DURING SURVEY. WHAT WAS FOUND AND SEIZED DURING SURVEY WA S 12 LOOSE SLIPS, WHICH PERTAINS TO ASSESSMENT YEAR 2009-10 AND WHICH WAS THE BASIS FOR SURRENDER OF INCOME. THEREFORE, WE ARE OF THE OPINI ON THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS BONAFIDE AND WHICH IS NOT A CASE OF WILLFUL CONCEALMENT OF INCOME, SO AS TO LEVY PEN ALTY UNDER EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 13 10. EXPLANATION 3 APPENDED TO SECTION 271(1)(C) OF THE ACT PROVIDES FOR LEVY OF PENALTY, IN A CASE WHERE ANY ASSESSEE, FAILS WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPEC IFIED IN SUB SECTION 1 OF SECTION 153 OF THE ACT, A RETURN OF HIS INCOME W HICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 OF THE ACT, IN RESPECT OF ANY ASSESSMENT YEAR AND THE A.O. AND CIT(A) IS SATISFIED THAT IN RESPEC T OF SUCH ASSESSMENT YEAR, SUCH PERSON HAS TAXABLE INCOME, THAN SUCH PER SON SHALL FOR THE PURPOSE OF CLAUSE (C) OF THIS SUB SECTION, MAY DEEM ED TO BE CONCEALED THE PARTICULARS OF HIS INCOME. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT FILED RETURN OF INCOME AND ALSO NO T PAID ANY ADVANCE TAX FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 AS ON THE DATE OF SURVEY I.E. ON 23.9.2008. IF SURVEY COULD NOT TAKEN PLACE, THE ASSESSEE WOULD NOT HAVE DISCLOSED TRUE AND CORRECT INCOME, T HEREFORE, IT IS A CASE OF WILLFUL CONCEALMENT OF INCOME AND HENCE, ATTRACT S PENALTY U/S 271(1)(C) OF THE ACT. WE DO NOT SEE ANY MERITS IN T HE CONTENTION OF THE A.O. THAT ASSESSEE WOULD NOT HAVE FILED RETURN AND NOT DISCLOSED TRUE AND CORRECT INCOME. IN THE PRESENT CASE ON HAND, AS ON THE DATE OF SURVEY I.E. ON 23.9.2008, THE DUE DATE OF FURNISHIN G RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 WAS NOT OVER. THEREFORE , THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE ASSESS EE WOULD NOT HAVE FILED RETURN OF INCOME IF SURVEY WAS NOT CONDUCTED. SIMILARLY, THE A.O. ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 14 STATED THAT ASSESSEE HAS NOT FILED ANY RETURN OF IN COME FOR THE ASSESSMENT YEAR 2007-08. THOUGH, THE DUE DATE OF FU RNISHING RETURN UNDER SUB SECTION (1) OF SECTION 139 OF THE ACT WAS OVER AS ON THE DATE OF SURVEY, THE ASSESSEE SHALL ALWAYS FILE HIS RETUR N UNDER SUB SECTION (4) OF SECTION 139 OF THE ACT, WHICH WAS NOT OVER AS ON THE DATE OF SURVEY. THEREFORE, WE ARE OF THE OPINION THAT EVEN UNDER EX PLANATION 3 OF SECTION 271(1)(C) OF THE ACT, THE PENALTY IS NOT LE VIABLE. 11. THE QUESTION WHETHER THERE WAS A REASONABLE CAU SE FOR WHICH THE REQUIREMENT OF CONCERNED PROVISIONS OF SECTION COUL D NOT BE COMPLIED WITH IS PRIMARILY AN ESSENTIAL QUESTION OF FACT AND IT HAS TO BE DECIDED IN EACH CASE ON CONSIDERATION OF MATERIALS PLACED BEFO RE THE CONCERNED AUTHORITY. THE LEVY OF PENALTY U/S 271(1)(C) OF TH E ACT IS NOT AUTOMATIC. BEFORE LEVYING THE PENALTY, THE CONCERNED OFFICER I S REQUIRED TO FIND OUT THAT EVEN THERE WAS ANY VIOLATION REFERRED TO IN TH E SAID PROVISIONS AND THE SAME WAS WITHOUT A REASONABLE CAUSE. THE INITIA L BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTS A REASONABLE CAU SE, WHICH WAS THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISIONS. THEREFORE, THE ASSESSING OFFICER DEALING WITH THE M ATTER IS TO CONSIDER WHETHER THE EXPLANATIONS OFFERED BY THE ASSESSEE OR THE PERSON, AS THE CASE MAY BE AND AS REGARDS THE REASON WAS ON ACCOUN T OF REASONABLE ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 15 CAUSE. IN THE PRESENT CASE ON HAND, THE ASSESSEE RI GHT FROM THE BEGINNING CONTENDS THAT HE HAS NOT MAINTAINED REGUL AR BOOKS OF ACCOUNTS, SO AS TO SAY WHETHER THOSE 12 RECEIPTS WH ICH ARE THE BASIS FOR ESTIMATION OF INCOME WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS OR NOT. THE ASSESSEE EXPLAINED THAT HE HAS FAIRLY ESTIMATED HIS INCOME BASED ON THE AVAILABLE INFORMATION AND ARRIVED AT ANNUAL GRO SS RECEIPTS OF RS.20 TO 25 LAKHS AND AFTER ALL EXPENSES FOR MAINTENANCE OF HOSPITAL, NET INCOME WOULD BE AROUND RS.15 LAKHS WHICH IS PROBABLE AND E STIMATED. HOWEVER, HE DISCLOSED RS.20 LAKHS WHICH IS OVER AND ABOVE HIS ESTIMATED INCOME WITH A REQUEST TO IMMUNITY FROM TH E PENALTY PROCEEDINGS. THE ASSESSEE SURRENDERED THE INCOME DU RING THE COURSE OF SURVEY AND ALSO PAID TAXES BEFORE FILING THE RETURN OF INCOME. THOUGH, A.O. ASSESSED SLIGHTLY HIGHER INCOME OVER AND ABOVE INCOME DECLARED BY THE ASSESSEE, WHICH WAS ON ACCOUNT OF REFERRAL INCO ME FROM TWO HOSPITALS AMOUNTING TO RS.2,14,177/- WHICH IS SUBSU MED IN THE EXTRA INCOME DECLARED DURING THE COURSE OF SURVEY. THE A. O. HAD HIS OWN APPREHENSION THAT ASSESSEE WOULD NOT HAVE DECLARED HIS TRUE AND CORRECT INCOME, IF SURVEY COULD NOT TAKEN PLACE. WHE THER SURVEY IS TAKEN PLACE OR NOT, THE FACT REMAINS THAT THE DUE DATE FO R FURNISHING RETURN FOR BOTH THE ASSESSMENT YEARS WAS NOT OVER AS ON THE DA TE OF SURVEY. ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 16 THEREFORE, THERE IS NO SCOPE FOR SUCH SUSPICION AND SURMISES IN THE PENALTY PROCEEDINGS. 12. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE HIGH C OURT OF DELHI, IN THE CASE OF CIT VS. SAS PHARMACEUTICALS, REPORTED IN (2 011) 335 ITR 239, WHEREIN THE HONBLE HIGH COURT HELD THAT NO PENALTY CAN BE LEVIED FOR INCOME SURRENDERED DURING THE COURSE OF SURVEY. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: IT IS TO BE KEPT IN MIND THAT S. 271(1)(C) IS A PE NAL PROVISION AND SUCH A PROVISION HAS TO BE STRICTLY CONSTRUED. UNLESS THE CASE FALLS WITHIN THE FOUR CORNERS OF THE SAID PROVISION, PENALTY CANNOT BE IM POSED. SUB-S. (1) OF S. 271 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENI NG WHEREOF THE AO OR THE CIT(A) MAY DIRECT PAYMENT OF PENALTY BY THE ASS ESSEE. SEC. 271(1)(C) AUTHORIZES IMPOSITION OF PENALTY WHEN THE AO IS SAT ISFIED THAT THE ASSESSEE HAS EITHER : (A) CONCEALED THE PARTICULARS OF HIS I NCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS NOT TH E CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME, AS IN THE IT RETU RN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE IT RETURN. THE QUEST/ON IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSEE OR NOT. IT WOU LD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONCEALMENT HAS REFERENCE TO THE IT RETURN FILED BY THE ASSESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE IT RETURN. THE WORDS 'IN THE COURSE OF ANY PROCEEDINGS UNDER T HIS ACT' ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT('A). WHEN THE SURVEY IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATISFACTION OF A O OR THE CIT(A) OR THE CIT DOES NOT ARISE. ONE HAS TO KEEP IN MIND THAT IT IS THE AO WHO INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COURSE OF SURV EY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAKEN WHILE MAKING ASSESSME NT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION 'IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT' CANNOT HAVE THE REFERENCE TO SURVEY PROCE EDINGS IN THIS CASE. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY TH E ASSESSEE HAS TO BE IN THE IT RETURN FILED BY IT. THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UP ON THE IT RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLNS. 4 AS WELL AS S AND 5A OF S. 271. OBVIOUSLY, NO PENALTY CAN BE IMPOS ED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DU LY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING SU RVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAI D SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY ONLY ON SURMISES, CONJE CTURES AND ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 17 POSSIBILITIES. SEC. 271 (1) (C) HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON-D ISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. T HERE IS NO SUCH CONCEALMENT OR NON-DISCLOSURE AS THE ASSESSEE HAD M ADE A COMPLETE DISCLOSURE IN THE IT RETURN AND OFFERED THE SURREND ERED AMOUNT FOR THE PURPOSES OF TAX.CIT VS. MOHAN DAS HASSA NAND (1983 ) 34 CTR (DEL) 361 (1983) 141 ITR 203 (DEL) AND CIT VS. RELIANCE P ETRO PRODUCTS (P) LTD. (2010) 230 CTR (SC) 320: (2010) 36 DIR (SC) 44 9: (2010) 3 SCR 510 RELIED ON. 13. THE ASSESSEE RELIED UPON ITAT, VISAKHAPATNAM BE NCH DECISION IN THE CASE OF GODAVARI TOWNSHIPS (P) LTD. VS. DCIT (2 014) 148 ITD 463. THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILA R CIRCUMSTANCES HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: ON SIMILAR ISSUE, HIGH COURT OF A.P. IN CASE OF V. V. PROJECTS AND INVESTMENTS PVT. LTD. VS. DCIT 300 ITR 40 (A.P.) CON SIDERED SIMILAR SITUATION AND HELD THAT PENALTY IS NOT IMPOSABLE. FURTHER, HELD THAT IN ABSENCE OF ANYTHING TO SHOW THAT ANY OTHER MATERIAL WAS AVAILABLE WITH ASSESSING OFFICER TO EFFECT THAT ASSESSEE CONCEALED INCOME, IT IS NOT OPEN TO ASSESSING OFFICER TO INVOKE POWER U/S 271(1)(C) LEVYING PENALTY. FOLLOWING SAID DECISION PENALTY U/S 271(1)(C) WAS N OT IMPOSABLE. EVEN OTHERWISE, ASSESSEE HAVING GIVEN BONAFIDE EXPLANATI ON THAT HE HAD OFFERED HIGHER INCOME EVEN THOUGH THAT MUCH INCOME WAS NOT TAXABLE, WAS NOT REBUTTED. ASSESSING OFFICER HAD NEITHER BR OUGHT ANY CALCULATIONS ON RECORD NOR MENTIONED HOW AMOUNT WAS QUANTIFIED. THUS, ASSESSEE HAD UNEXPLAINED EXPENDITURE IN EARNING THAT GROSS R ECEIPTS. THEREFORE, EVEN PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)( C) CAME INTO OPERATION AS ASSESSEES EXPLANATION HAD NOT BEEN DISPROVED. THEREFORE, CONDITIONS FOR IMPOSING PENALTY DID NOT SATISFY. HENCE, PENAL TY CANCELLED. UNLIKE IN A SEARCH CASE THERE IS NO PRESUMPTION THA T THE AMOUNT UNEARTHED DURING THE COURSE OF SURVEY WILL AUTOMATI CALLY BE CONSIDERED AS 'CONCEALED INCOME'. NO PM VISION/EXPLANATION SIMILA R TO EXPLANATION-5 WAS PROVIDED IN THE SECTION TO COVER SURVEY CASES. SINC E, THE INCOME DETECTED/OFFERED IN SURVEY CANNOT BE DEEMED TO BE C ONCEALED INCOME', TREATING THE SAME AS 'CONCEALED INCOME' AS WAS DONE BY AG DOES NOT ARISE. AG HAS TO ESTABLISH THE NATURE OF INCOME AS 'CONCEALED INCOME' BEFORE LEVY OF PENALTY. NOTHING WAS DONE BY AD EXCE PT ACCEPTING THE REVISED INCOME RETURNED IN THE ASSESSMENT PROCEEDIN GS U/S. 143(3) OF THE ACTS ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 18 CIT(A) IN HIS DETAILED ORDER HAD ELABORATELY DISCUS SED PRINCIPLES OF LAWS HOWEVER, CIT(A) HAD MISSED APPLICATION OF VARIOUS P RINCIPLES ON THE GIVEN SET OF FACTS. IN ASSESSEE'S CASE, PENALTY WAS NOT I MPOSABLE. THEREFORE, WHILE APPRECIATING EFFORTS OF CIT(A) IN IMPROVING O RDER OF AO, ORDER OF CIT(A) SET ASIDE AND PENALTY DELETED. ASSESSEE'S AP PEAL ALLOWED. V.V. PROJECTS AND INVESTMENTS PVT. LTD. VS. DCIT 300 PR 40 (A.P.), FOLLOWING 14. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE RATIOS OF THE JUDGEMENTS CITED ABOVE, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UND ER EXPLANATION 1 AND 3 OF SECTION 271(1)(C) OF THE ACT, AS THE CONDITIONS STI PULATED FOR LEVY OF PENALTY IS NOT FULFILLED. THE EXPLANATIONS OFFERED BY THE ASSESSEE UNDER EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT APPEA RED TO BE BONAFIDE. THE CONDITIONS STIPULATED UNDER EXPLANATION 3 OF 27 1(1)(C) OF THE ACT ARE NOT FULFILLED TO HOLD THAT THE ASSESSEE SHALL DEEME D TO BE CONCEALED THE INCOME SO AS TO LEVY PENALTY. THEREFORE, WE DIRECT THE A.O. TO DELETE THE PENALTY OF RS.10 LAKHS LEVIED U/S 271(1)(C) OF THE ACT. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 18 TH MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 18.03.2016 VG/SPS ITA NO.314&318/VIZAG/2013 DR. G. SAMBASIVA REDDY, RAJAHMUNDRY 19 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT DR. G. SAMA SIVA REDDY, D.NO.26- 2-9, JAYAKRISHNAPURAM, BESIDE SHADE JUNIOR COLLEGE, KAMBALACHERUVU, RAJAHMUNDRY 2. / THE RESPONDENT THE ACIT CIRCLE-1, RAJAHMUNDRY 3. / THE RESPONDENT THE ITO WARD-4, RAJAHMUNDRY 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM