The DCIT, Circle-2(1), Guntur V. M/s Triplaar School of Learning, Guntur

ITA 484/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50171 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 12-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SASMAL
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Depreciation; Document seized; Documents seized

Judgement Text

ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.481 TO 484/VIZAG/2009 ASSESSMENT YEAR S : 2000 - 01 TO 2003 - 04 DY.COMMISSIONER OF INCOME TAX CIRCLE-2 (1) GUNTUR VS. TRIPLAAR SCHOOL OF LEARNING, GUNTUR (APPELLANT) (RESPONDENT) PAN NO:AAEFT 3828 K DEPARTMENT BY: SHRI B. SASMAL, DR ASSESSEE BY: SHRI C. SUBRAMANYAM, CA ORDER PER BENCH: THE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 28.07.2009 PASSED BY LEARNED CIT(A), GUNTUR A ND THEY RELATE TO THE ASSESSMENT YEARS 2000-01 TO 2003-04. SINCE THE ISSU E URGED IN THESE APPEALS IS BASED UPON IDENTICAL FACTS, THEY WERE HE ARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. IN ALL THESE YEARS, THE REVENUE IS ASSAILING THE DECISION OF THE LEARNED CIT (A) IN DELETING THE PENALTY LEVIED BY THE ASSES SING OFFICER UNDER SECTION 271(1)(C) OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A PARTNERSHIP FIRM RUNNING AN EDUCATIONAL INSTITUTION . THE FIRM WAS INITIALLY CONSTITUTED BY 2 PARTNERS VIZ., SHRI M.S. RAMESH BA BU AND SHRI R.V. RAMANA DURING THE FINANCIAL YEAR 1998-99. LATER ON 07.12.2003, THERE WAS A CHANGE IN THE CONSTITUTION OF FIRM BY THE INDUCTI ON OF 3 NEW PARTNERS VIZ., SHRI V. GANDHI, SHRI P.V. SAMBASIVA RAO, AND SHRI M . CHANDRASEKHARA RAO. ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 2 OF 6 THE CONSTITUTION OF THE PARTNERSHIP FIRM AGAIN UNDE RWENT A CHANGE ON 9.12.2003, AS THE ORIGINAL PARTNERS VIZ., SHRI M.S. RAMESH BABU AND SHRI R.V. RAMANA RETIRED FROM THE FIRM. THUS, EFFECTIVEL Y THE NEW MANAGEMENT TOOK OVER THE BUSINESS OF THE PARTNERSHIP CONCERN. THE REVENUE CARRIED OUT SURVEY OPERATIONS ON THE BUSINESS PREMISES OF THE A SSESSEE ON 31.1.2004. DURING THE COURSE OF SURVEY OPERATIONS, CERTAIN MAT ERIALS EVIDENCING LOAN TRANSACTIONS WERE FOUND. IT WAS NOTICED THAT THE S AID LOAN TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE NEW MANAGEMENT EXPRESSE D THEIR INABILITY TO FURNISH VARIOUS DETAILS REGARDING THE SAID LOANS WI TH THE PLEA THAT THE SAID LOAN TRANSACTIONS WERE ENTERED INTO BY THE RETIRED PARTNERS. HENCE THE ASSESSING OFFICER FORMED THE VIEW THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE. ACCORDINGLY HE REJECTED THE BOOK S OF ACCOUNT AND ESTIMATED THE INCOME AT 14% OF GROSS RECEIPTS NET O F DEPRECIATION FOR ALL THE YEARS UNDER CONSIDERATION. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) WHO REVISED THE ESTIMATE BY DETERMINING THE TOTAL INCOME AT 25% OF THE GROSS RECEIPTS SUBJECT T O DEPRECIATION. THEREAFTER THE ASSESSING OFFICER INITIATED THE PENA LTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND LEVIED PENALTY ON THE INCOME SO DETERMINED BY THE LEARNED CIT(A) @ 100% OF THE TAX SOUGHT BE EVADED FOR ALL THE YEARS UNDER CONSIDERATION. THE ASSESSEE CHA LLENGED THE PENALTY ORDER BY FILING APPEALS BEFORE THE LEARNED CIT (A) AND THE FIRST APPELLATE AUTHORITY DELETED THE PENALTY SO LEVIED IN ALL THE YEARS UNDER CONSIDERATION. HENCE THE REVENUE IS IN APPEAL BEFORE US CHALLENGIN G THE ORDERS OF THE LEARNED CIT (A). 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE ASSESSEE HAS TO DISCHARGE THE ONUS PLACED UPON HIM UNDER EXPLANATION TO SEC.271 BY OFFERING PROPER EXPLANATIONS AND FURNISH ING NECESSARY DETAILS. IN THE INSTANT CASE THE ASSESSEE HAS FAILED TO DISCHAR GE THE ONUS SO PLACED ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 3 OF 6 UPON HIM. ON THE OTHER HAND, THE LEARNED CIT (A) HAS HELD THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY INDEPENDE NT EVIDENT TO SHOW THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND BY MAKING SAID OBSERVATION THE LEARNED CIT(A) HAS SHIFTED THE BURDEN UPON THE ASSE SSING OFFICER, WHICH IS NOT IN ACCORDANCE WITH THE LAW. ACCORDINGLY, HE PL EADED THE PENALTY LEVIED BY THE ASSESSING OFFICER SHOULD BE SUSTAINED. 5. ON THE OTHER HAND THE LEARNED AUTHORISED REPRESE NTATIVE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF A CCOUNTS AND THE ASSESSING OFFICER DID NOT FIND FAULT WITH THE SAID BOOKS. INSTEAD, THE ASSESSING OFFICER HAS PLACED HEAVY RELIANCE ON CERT AIN DOCUMENTS EVIDENCING LOAN TRANSACTIONS ENTERED INTO BY THE OL D PARTNERS, WITH WHICH THE ASSESSEE IS NOT CONNECTED WITH. HENCE THE NEW PARTNERS HAVE CLEARLY SUBMITTED THAT THEY COULD NOT EXPLAIN THE SAID LOAN TRANSACTIONS, AS THEY ARE NOT CONNECTED WITH THE SAID LOAN TRANSACTIONS. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT ONLY FOR THE REASON T HAT THE SAID LOAN TRANSACTIONS DID NOT FIND PLACE IN THE BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE, BUT WHILE MAKING ESTIMATE, THE EFFECT OF IMPUGNED LOAN TRANSACTIONS WAS NOT TAKEN INTO ACCOUNT. ACCORDING LY HE SUBMITTED THAT THE INCOME IN ALL THE YEARS UNDER CONSIDERATION HAS ONL Y BEEN ESTIMATED ON THE BASIS OF GROSS RECEIPTS DECLARED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT AND SUCH KIND OF ESTIMATION OF INCOME WILL NOT GIVE RIS E TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS OFFERED ITS EXPLANATION ON THESE LINES DURING THE COURSE OF PENALTY PROCEEDINGS. AC CORDINGLY, HE PLEADED THAT THE ORDERS OF LEARNED CIT(A) SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE LEARNED CIT (A) HAS DELETED THE PENALTY WITH THE FOLLOWING OBSERVATIONS: ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 4 OF 6 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANTS AUTHORISED REPRESENTATIVE AND THE FACTS BROUGHT OUT BY THE ASSESSING OFFICER. IT IS A FACT THAT ALTHOUGH THE A SSESSING OFFICER HAS BROUGHT ON RECORD THAT LOANS WERE SEEN TO BE TAKEN AS PER THE IMPOUNDED MATERIAL, BUT WERE NOT R EFLECTED IN THE BOOKS OF ACCOUNT, NO ADDITION WAS MADE ON TH AT ACCOUNT IN THE YEARS UNDER APPEAL. THE ITAT, IN THE ORDER SETTING ASIDE THE ASSESSMENT TO BE DECIDED AFRESH B Y THE ASSESSING OFFICER, HAS ALSO OBSERVED THE ASSESSING OFFICER HAS RECORDED THAT FROM PAPERS FOUND AT THE TIME OF THE SURVEY, THERE ARE NOTINGS WITH REGARD TO THE HUGE B ORROWINGS AS WELL AS REPAYMENTS. HE HAS ALSO NOTED ABOUT CERT AIN ADDITION IN FIXED ASSETS. HOWEVER, WE FIND THAT NO ADDITION IN RESPECT OF ANY OF THE ABOVE ITEM IS MADE. ON THE OT HER HAND, THE ASSESSING OFFICER MADE THE ADDITION TO THE TRAD ING RESULTS BUT, HE HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT WITH REFERENCE TO THE TRADING RESULTS, I.E. RECORDING THE RECEIPT OF THE FEES OR THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT. 6. THE SUBSEQUENT ASSESSMENT DID NOT BRING OUT ANY FRESH FACTS AND IN THIS ASSESSMENT TOO THERE WAS NO ADDIT ION MADE ON THE BASIS OF THE REPAYMENTS OF LOANS FOUND IN TH E IMPOUNDED MATERIAL. THE INCOME WAS ESTIMATED AS A PERCENTAGE OF THE GROSS RECEIPTS. THE AUTHORISED REPRESENTATIVE OF THE APPELLANT RELIED ON THE DECIS ION OF THE PUNJAB & HARYANA HIGH COURT IN 303 ITR 53 IN THE CA SE OF CIT VS. SANGRUR VANASPATI MILLS LTD. IN THAT CASE, THE ASSESSING OFFICER AFTER SCRUTINIZING DOCUMENTS SEIZ ED BY THE EXCISE AUTHORITIES, CAME TO THE CONCLUSION THAT THE APPELLANT IN THAT CASE HAD MADE UNACCOUNTED SALES. THE ASSESS ING OFFICER REJECTED THE BOOKS AND EXTRAPOLATED THE UNA CCOUNTED SALES ON THE BASIS OF THE 4 INVOICES IN THE SEIZED DOCUMENTS. THEREAFTER, PENALTY WAS ALSO LEVIED. THIS WAS DELET ED BY THE ITAT, WHICH HELD THAT THERE WAS NO CONCLUSIVE EVIDE NCE FOUND TO SHOW THAT THERE WERE UNACCOUNTED SALES MADE BY T HE APPELLANT. UPHOLDING THE ITATS ACTION OF CANCELING THE PENALTY, THE PUNJAB & HARYANA HIGH COURT HELD THAT IN ORDER TO ATTRACT CLAUSE ( C) OF SECTION 271(1)(C) OF TH E ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASS ESSEE OF THE PARTICULARS OF HIS INCOME OR FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME. THE PROVISIONS OF SECTI ON 271 (1)(C) OF THE ACT ARE NOT ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND AD DITIONS ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 5 OF 6 ARE MADE THEREIN. IT WAS HELD THAT WHEN THE ADDITION HAD BEEN MADE O THE BASIS OF ESTIMATE AND NOT ON ACCOUN T OF ANY CONCRETE EVIDENCE OF CONCEALMENT, THEN THE PENALTY WAS NOT LEVIABLE. 7. IN THE CASE OF THE APPELLANT, ALTHOUGH THE ASSES SING OFFICER MAKES A REFERENCE TO NOTINGS IN THE IMPOUNDED MATER IAL TO SHOW REPAYMENTS OF LOANS, THE ADDITION HAS NOT BEEN MADE ON THE ACCOUNT. NOR HAS IT BEEN ESTABLISHED BY THE ASSESSING OFFICER THAT THE NOTINGS ARE INDICATION OF CONCEALM ENT OF INCOME. THE APPELLANT HAS TIME AND AGAIN SUBMITTED THAT DUE TO CHANGE IN THE CONSTITUTION OF THE FIRM, SUBSTANT IATION OF NOTINGS MADE IN THE IMPOUNDED MATERIAL WAS RENDERED DIFFICULT. IT HAS BEEN SUBMITTED THAT THE NEW PARTNE RS DID NOT HAVE THE NECESSARY INFORMATION ON THE TRANSACTIONS RELATING TO EARLIER YEARS AND HENCE THESE COULD NOT BE SATISFAC TORILY SUBSTANTIATED. THE ASSESSING OFFICER HAS NOT BROUGH T OUT ANY INDEPENDENT EVIDENCE TO SHOW THAT IN FACT THERE WAS CONCEALMENT OF INCOME ON THE PART OF THE APPELLANT. THE ESTIMATE HAS ALSO BEEN MADE BASED ON COMPARABLE C ASES AND HAS BEEN SUBSEQUENTLY REDUCED BY THE CIT (A) GU NTUR. 8. PLACING RELIANCE ON THE DECISIONS WHICH HAVE HEL D THAT PENALTY UNDER SECTION 271(1)(C) IS ATTRACTED ONLY I N CASES WHERE CONCEALMENT HAS BEEN ESTABLISHED, I HOLD THAT SINCE NO CONCEALMENT HAS BEEN ESTABLISHED IN THE CASE OF THE APPELLANT, PENALTY UNDER SECTION 271(1)(C) OF THE A CT IS NOT LEVIABLE. THE ORDERS LEVYING THE PENALTY ARE ACCORD INGLY CANCELLED AND THE APPEALS ARE ALLOWED. 7. WE HAVE CAREFULLY CONSIDERED THE ORDER OF THE LE ARNED CIT (A). AS POINTED OUT BY THE LEARNED CIT (A), THOUGH THE DEPA RTMENT HAS FOUND OUT CERTAIN MATERIALS EVIDENCING CERTAIN LOAN TRANSACTI ONS, THE SAME WERE NOT USED FOR DETERMINING THE TOTAL INCOME OF THE ASSESS EE FOR THE YEARS UNDER CONSIDERATIONS. THE INCOME WAS ULTIMATELY ESTIMATED ON THE BASIS OF GROSS RECEIPTS THAT WERE DECLARED BY THE ASSESSEE. THUS THE NEXUS BETWEEN THE IMPUGNED LOAN TRANSACTIONS AND THE INCOME OF THE AS SESSEE FOR ALL THESE YEARS WERE NOT BROUGHT OUT BY THE ASSESSING OFFICER . THERE WAS ALSO NO FINDING BY THE ASSESSING OFFICER THAT THE IMPUGNED LOAN TRANSACTIONS HAVE LEAD TO ANY CONCEALMENT OF INCOME. THE STAND OF THE PRESENT PARTNERS THAT ITA NOS 481 TO 484 OF 2009 TRIPLAAR SCHOOL OF LEARN ING GUNTUR PAGE 6 OF 6 THE IMPUGNED LOAN TRANSACTIONS WERE ENTERED INTO BY THE EARLIER PARTNERS WAS NOT PROVED TO BE WRONG. WE NOTICE THAT DURING THE PENALTY PROCEEDINGS, THE ASSESSEE HAS OFFERED EXPLANATIONS ON THESE LINES. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED IN THE HANDS OF THE ASSESSEE ON TH E INCOME ESTIMATED IN ITS HANDS. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A) IN DELETING THE PENALTY IN ALL THE YEARS UN DER CONSIDERATION AND ACCORDINGLY WE UPHOLD HIS ORDERS. 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 11 TH MAY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 11-05-2011 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX CIRCLE-2(1) GUNT UR 2 M/S TRIPLAAR SCHOOL OF LEARNING, NH-5 EDULAPALEM, GUNTUR 3 4. THE CIT GUNTUR THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM