Dy.CIT, Central Circle-9, Hyderabad V. M/s Satabhish Biotech Pvt Ltd., Hyderabad

ITA 525/HYD/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7763 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Unexplained investment; Opportunity of being heard; Source of fund; Cost of acquisition; Reasonable cause; Corroborative evidences; Assessment record
• Section: 143(3); 234B; 115JB; 37(1); 131; 69; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL. NO. ITA NO. AY APPELLANT RESPONDENT 01 485/H/14 2007-08 M/S SATABISHA BIOTECH PVT. LTD., HYDERABAD PAN-AAHCS 1690L INCOME-TAX OFFICER, (OSD)-3, CENTRAL RANGE 1, HYD. 02 564/H/14 2007-08 M/S JESHTA FARMS PVT. LTD., HYD. PAN-AABCK 2425J -DO- 03 486/H/14 2007-08 M/S SKY BLUE BIO- TECH PVT. LTD., HYD. PAN-AAECS1898K -DO- 04 715/H/14 2007-08 ADD. COMMISSIONER OF INCOME-TAX, RANGE 3, HYD. M/S JESHTA FARMS PVT. LTD., HYD. PAN-AABCK 2425J 05 525/H/14 2007-08 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 9, HYD. M/S SATABISHA BIOTECH PVT. LTD., HYDERABAD PAN-AAHCS 1690L 06 582/H/14 2007-08 -DO- M/S SKY BLUE BIO- TECH PVT. LTD., HYD. PAN- AAECS1898K 07 487/H/14 2008-09 M/S NALLAMALA AGRO FARMS PVT. LTD., HYD. PANAABCN2520Q ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 8, HYD. 08. 488/H/14 2008-09 M/S CHITRAVATI AGRO FARMS PVT. LTD., HYD. PAN-AACCC1396C -DO- 09 490/H/14 2008-09 M/S PARBATI AGRO FARMS PVT. LTD., HYD. -DO- 10 491/H/14 2008-09 M/S GOMATI AGRO FARMS PVT. LTD., HYD. PAN-AABCG3988K -DO- 11 494/H/14 2008-09 M/S KANCEHNJUNG GREENLANDS PVT. LTD. -DO- 2 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS ASSESSEE BY SHRI K.C. DEVDAS REVENUE BY SHRI RAJAT MITRA DATE OF HEARING 27-11-2014 DATE OF PRONOUNCEMENT -12-2014 O R D E R PER BENCH: THESE ARE BUNCH OF 11 APPEALS. THERE ARE CROSS APP EALS IN CASE OF THREE DIFFERENT ASSESSEES AGAINST SEPARATE ORDERS OF LD. CIT(A)-VII, HYDERABAD PERTAINING TO AY 2007-08. RES T 5 APPEALS ARE BY DIFFERENT ASSESSEES AGAINST SEPARATE ORDERS OF L D. CIT(A)-VII, HYDERABAD CONFIRMING THE PENALTY IMPOSED U/S 221(1) READ WITH SECTION 140A(3) PERTAINING TO AY 2008-09. 2. AT FIRST WE SHALL DEAL WITH THE CROSS APPEALS P ERTAINING TO AY 2007-08. ITA NOS. 485, 486 & 564/HYD/2014. 3. ONE GROUND WHICH IS COMMON IN THE AFORESAID APPE ALS OF ASSESSEES, EXCEPT THE FIGURES AND DATE IS AS UNDER : 1. THE LD. CIT(A) HAVING FOUND AS A MATTER OF FACT THAT THE SUM OF RS. 2,40,000 COULD NOT BE ADDED U/S 69 OF THE IT ACT, 1961 ERRED IN GIVING THE FOLLOWING FINDING/DIRECTION WHI CH IS NOT NECESSARY FOR THE DISPOSAL OF THE APPEAL AND IS THE REFORE BE DELETED: I. THE ORDER OF CIT(A) IN GIVING A FINDING/DIRECTIO N THAT THE ALLOWANCE OF EXPENDITURE AS COST OF ACQUISITION DEVELOPMENT CAN BE TAKEN UP AS AND WHEN THE LANDS A RE SOLD IN A FINDING DIRECTION NOT NECESSARY FOR THE D ISPOSAL OF THE APPEAL AND THEREFORE IS TO BE DELETED. II. THE DIRECTION OF CIT(A) AT PARAGRAPH 6.5 HIS OR DER DIRECTING THE APPELLANT TO FILE COMPLETE DETAILS OF THE EXPENSES AND SUPPORTING EVIDENCES TO THE NOTICE OF THE APPELLATE AUTHORITY BY 15 TH FEBRUARY, 2014 IN A FINDING WHICH IS NOT NECESSARY FOR THE DISPOSAL OF THE APPE AL AND THEREFORE TO BE EXPUNGED. 3 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS 4. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISSU E, AS TAKEN FROM THE FOLDER ITA NO. 485/HYD/2014 ARE, ASSESSEE A CO MPANY IS ENGAGED IN CARRYING ON AGRICULTURAL AND ALLIED ACTI VITIES. IT IS ONE AMONGST NUMBER OF COMPANIES ESTABLISHED BY SHRI B. RAMALINGA RAJU, ERSTWHILE CHAIRMAN OF SATYAM COMPUTERS AND SE RVICES LTD. AND HIS FAMILY MEMBERS. FOR THE IMPUGNED AY, ASSESSEE F ILED ITS RETURN OF INCOME DECLARING NIL INCOME. DURING THE SCRUTINY ASSESSMENT PROCEEDING, IT WAS NOTICED BY AO THAT ASSESSEE HAS MADE ADDITION TO THE FIXED ASSETS BY MAKING INVESTMENTS IN LAND AMOU NTING TO RS. 2,40,000. AS ALLEGED BY AO, THE SAID ADDITION CLAIM ED TO BE ON ACCOUNT OF DEVELOPMENT EXPENSES INCURRED IN RESPECT OF LAND COULD NOT BE SUBSTANTIATED BY ASSESSEE BY FILING ANY SUPP ORTING EVIDENCE. AO, THEREFORE, TREATED THE SAID ADDITION TO THE FIX ED ASSETS AS UNEXPLAINED INVESTMENT OF ASSESSEE IN TERMS WITH SE CTION 69 OF THE ACT AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME O F ASSESSEE FOR THE IMPUGNED AY WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 24/12/2009. BEING AGGRIEVED OF THE ASSE SSMENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 5. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE MADE THE FOLLOWING SUBMISSIONS: (A) THE AO , FOR THE PURPOSES OF MAKING THE ADDITI ON OF RS 2,40,000/-, INVOKED THE PROVISIONS OF SEC 69 OF THE LT ACT BY C ONSIDERING THE ASSET SIDE OF THE BALANCE SHEET IN ISOLATION. (B) THE AO SHOULD HAVE APPRECIATED THAT THE EXPEN DITURE RECORDED IN THE BOOKS DOES NOT REPRESENT 'UNEXPLAINED INVESTMEN T.' (C) THE AO, HAVING NOTICED THE INCREASE IN THE AD DITION TO THE ASSETS AS OBTAINING FROM THE AUDITED FINANCIAL STATEMENTS, SH OULD HAVE ALSO REALISED THAT THIS IS IN FACT A CONFIRMATION OF REC ORDING OF ASSETS IN BOOKS AND HENCE IS NOT AN UNEXPLAINED INVESTMENT. 4 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS (D) THE AO SHOULD HAVE REALISED THAT IT IS NOT AN EXPENDITURE DEBITED TO THE P&L ACCT AND CLAIMED AS AN EXPENDITU RE, FOR IT TO BE DISALLOWED. (E) A DEBIT IN THE ASSET ACCOUNT OF THE BOOKS DOE S NOT CONSTITUTE INCOME. (F) CONFIRMATION LETTER WAS FILED FROM THE CREDIT OR(S) BUT THE AO DID NOT CONSIDER THE SAME WHILE MAKING THE ADDITION OF RS 33,93,000/- U/S 68 OF THE IT ACT. (G) THE INCREASE IN UNSECURED LOANS WAS RS 33,93, 000 WHICH ACTUALLY COMPRISED OF AN INCREASE OF AN AMOUNT OF R S 41265 FROM B.JHANSI RANI AND AN INCREASE OF AN AMOUNT OF RS 33 ,52,635 FROM SRI B.SURYANARAYANA RAJU-BOTH WERE EXISTING ,OLD CREDIT ORS AND THERE WAS A FURTHER INCREASE IN THE AMOUNTS RECEIVED FROM THEM. LEDGER EXTRACTS OF THESE CREDITORS IN THE BOOKS OF THE APP ELLANT WERE SUBMITTED. (H) THE AO PUT THE ONUS OF PRODUCTION OF RECORDS AS EVIDENCE EVEN THOUGH IT WAS SPECIFICALLY POINTED OUT TO HIM IN NO UNCERTAIN TERMS THAT THE APPELLANT WAS NOT IN POSSESSION OF R ECORDS AS THEY WERE SEIZED BY INVESTIGATING AGENCIES. THIS WAS ALS O A FACT THAT WAS IN THE KNOWLEDGE OF THE ASSESSING OFFICER. THE AO C OULD HAVE EASILY CROSS CHECKED WITH THE RECORDS OF THE CREDITORS AVA ILABLE WITH ANOTHER ASSESSING OFFICER WITH ANOTHER CENTRAL CIRC LE OFFICER (DCIT, CENTRAL CIRCLE 1 HYDERABAD.) 6. LD. CIT(A) BEING CONVINCED WITH THE SUBMISSIONS MADE BY ASSESSEE, HELD THAT ADDITION TO THE FIXED ASSETS RE PRESENTING DEVELOPMENT EXPENSES COULD NOT BE TREATED AS UNEXPL AINED AS THE SAME HAS FLOWN FROM APPLICATION OF FUNDS AS APPEARI NG ON THE ASSETS SIDE OF ASSESSEES BALANCE SHEET. LD. CIT(A) HELD T HAT SOURCE OF FUNDS FOR MAKING INVESTMENTS IN ADDITION TO THE FIX ED ASSETS THUS WAS DULY EXPLAINED AND THE SAME COULD NOT BE TREATED AS UNEXPLAINED INVESTMENT OF ASSESSEE U/S 69 OF THE ACT. HAVING H ELD SO, LD. CIT(A) PROCEEDED FURTHER TO HOLD THAT IF THE EXPENSES WERE CAPITALIZED THE ALLOWABILITY OF THE SAME HAS TO BE CONSIDERED IN TH E SUBSEQUENT YEARS WHEN THE LAND IS SOLD. HE, THEREFORE, DIRECTED ASSE SSEE TO FILE THE COMPLETE DETAILS OF THE RELEVANT EXPENSES WITH SUPP ORTING EVIDENCE SO THAT THE CLAIM OF ASSESSEE ON ACCOUNT OF ADDITIO N TO FIXED ASSETS 5 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS REPRESENTING COST OF ACQUISITION CAN BE CONSIDERED IN THE RELEVANT AY. BEING AGGRIEVED OF THIS DIRECTION OF LD. CIT(A), AS SESSEE HAS PREFERRED APPEAL BEFORE US. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. A T THE OUTSET, LD. AR SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVE RED BY THE DECISION OF SMC BENCH OF THIS TRIBUNAL IN CASE OF SOME OTHER GROUP COMPANIES, WHICH WAS SUBSEQUENTLY FOLLOWED BY DIVIS ION BENCH. COPIES OF ORDERS PASSED BY COORDINATE BENCHES WERE PLACED ON RECORD PERTAINING TO SAME AY. ON PERUSAL OF THE ORD ER PASSED BY SMC BENCH OF THIS TRIBUNAL IN ITA NOS. 895, 896 & 198/H YD/2014 DATED 14/08/2014, WE FIND THAT THE TRIBUNAL WHILE DEALING WITH THE RELEVANT DIRECTION OF LD. CIT(A) HELD AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PURSED THE RECORD. ADMITTEDLY, ASSESSEES HAVE MADE INVESTMENTS IN FIXED ASSETS AND THE SOURCE OF SUCH INVESTMENTS WAS THE INFLOW AVAILABLE ON THE LIABILITY SIDE OF T HE BALANCE SHEET. SINCE THE ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS, BEFORE THE LEARNED CIT(A), THE SOURCE WA S EXPLAINED, AND THE SAME WAS ACCEPTED BY THE LEARNED CIT(A). HA VING ACCEPTED THE SOURCE OF FUNDS, THERE CANNOT BE ANY A DDITION MADE IN THIS YEAR AND EVEN IN THE SUBSEQUENT YEAR, I.E. IN THE YEAR OF SALE, THE SOURCE OF INVESTMENT CANNOT BE DI SPUTED. THEREFORE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN G IVING DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE SOURCE OF INVESTMENT IN THE YEAR OF SALE. IN THESE CIRCUMSTANCES, WE SET AS IDE THE DIRECTIONS OF THE LEARNED CIT(A) AND HOLD THAT IT I S NOT A FIT CASE FOR MAKING THE ADDITION UNDER S.69 OF THE ACT. THIS DECISION WAS ALSO FOLLOWED BY A DIVISION BENCH OF THIS TRIBUNAL IN ITA NO. 498/HYD/14 DATED 24/09/14 IN CASE OF M/S PUNARVASU GREENFILEDS PVT. LTD. WHILE SETTING ASIDE SIMILAR D IRECTION OF LD. CIT(A). THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES AS AFORESAID, WE SET ASIDE THE DIRECTIONS G IVEN BY LD. CIT(A) FOR CONSIDERING THE SOURCES OF INVESTMENT IN THE YE AR OF SALE AND ALLOW THE GROUND RAISED BY ASSESSEE IN ALL THESE AP PEALS. 6 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS 8. APART FROM THE AFORESAID COMMON ISSUE IN APPEALS REFERRED TO HEREINABOVE, TWO MORE ISSUES ARISE ONLY IN ITA NO. 486/HYD/2014. 9. THE FIRST ONE BEING TREATING AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWING AN AMOUNT OF RS. 1,6 6,221 OUT OF TOTAL EXPENDITURE OF RS. 1,76,221 FROM THE EXPENDITURE CL AIMED. 10. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISS UE ARE, DURING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS. 6,63,125 AND HAS CLAIMED EXPENDITURE OF RS. 1,76,221. AS ALLEGED BY AO IN THE ASSESSMENT OR DER, ASSESSEE DID NOT FILE ANY EVIDENCE IN SUPPORT OF INCOME EARN ED FROM AGRICULTURAL ACTIVITY, HENCE, ENTIRE INCOME WAS TREATED AS INCO ME FROM OTHER SOURCES. SINCE AO DISALLOWED ASSESSEES CLAIM OF AGRICULTURAL INCOME, HE ALSO WAS OF THE VIEW THAT EXPENDITURE CL AIMED OF RS. 1,76,221 CANNOT BE ALLOWED TO BE SET OFF IN VIEW OF THE PROVISIONS OF SECTION 56. ACCORDINGLY, WHILE TREATING THE AMOUNT OF RS. 6,63,125 AS INCOME FROM OTHER SOURCES, AO ALSO MADE SEPARATE ADDITION OF RS. 1,76,221 OF THE EXPENDITURE CLAIMED BY HOLDING THAT IT IS NOT ALLOWABLE U/S 37(1) OF THE ACT. BEING AGGRIEVED OF THE ADDITI ONS MADE BY AO, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 11. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, DID NOT FIND MERIT IN THEM AND CONFIRMED THE VIEW OF AO THAT ASSESSEE HAS NOT CARRIED ON ANY AGRICULTURAL ACTIVITY, HENCE , INCOME SHOWN UNDER THE HEAD AGRICULTURAL INCOME HAS TO BE TREATE D AS INCOME FROM OTHER SOURCES. SO FAR AS DISALLOWANCE OF EXPENDIT URE IS CONCERNED, LD. CIT(A) OUT OF THE TOTAL DISALLOWANCE OF RS. 1,7 6,221, ALLOWED AN AMOUNT OF RS. 10,000 WHILE SUSTAINING THE ADDITION OF THE BALANCE AMOUNT OF RS. 1,66,221. 12. THE LD. AR SUBMITTED BEFORE US THAT ASSESSEE HA D GIVEN ON LEASE THE AGRICULTURAL LANDS AND THE LESSEE HAS BEE N CARRYING ON 7 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS AGRICULTURAL ACTIVITIES ON THE SAID LAND, THEREFORE , LEASE RENTALS RECEIVED BY ASSESSEE HAS TO BE TREATED AS AGRICULTU RAL INCOME. IT WAS FURTHER SUBMITTED THAT LEASE RENTALS RECEIVED IN AY 2006-07, WAS ALSO SHOWN AS AGRICULTURAL INCOME AND IN ASSESSMENT ORDE R PASSED U/S 143(3) AO ALSO ACCEPTED THE SAME. IT WAS, THEREFORE , SUBMITTED THAT WHEN THE AGRICULTURAL INCOME HAS BEEN ACCEPTED IN THE PRECEDING YEAR AS WELL AS IN THE SUBSEQUENT YEAR, THERE IS NO REASON TO DISALLOW THE SAME AND TREAT IT AS INCOME FROM OTHER SOURCES . IN SO FAR AS DISALLOWANCE OF EXPENDITURE IS CONCERNED, LD. AR SU BMITTED THAT AO AS WELL AS LD. CIT(A) WERE NOT JUSTIFIED IN DISALLO WING THE EXPENDITURE CLAIMED BY ASSESSEE. 13. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT A S ASSESSEE HAS NOT SUBMITTED ADEQUATE EVIDENCE TO SUPPORT EARNING OF AGRICULTURAL INCOME., AO AND LD. CIT(A) WERE JUSTIFIED IN TREATI NG IT AS INCOME FROM OTHER SOURCES AND ALSO DISALLOWING THE EXPEND ITURE CLAIMED. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER AS WELL AS THE ORDER OF LD. CIT(A), ASSESSEES CLAIM OF AGRICULTURAL INCOME HAS BEEN REJECTED ONLY ON THE GROUND OF LACK OF SUPPORTING EVIDENCE. HOWEVER, IT IS THE CLAIM OF ASSESSEE THAT ASSESSEE IS HAVING SUBSTANTI AL AGRICULTURAL LAND HOLDING WHICH IT HAS LEASED OUT AND AGRICULTUR AL OPERATIONS IS BEING CARRIED ON SUCH LAND. IT IS ALSO TO BE NOTED THAT ASSESSEE HAS CLAIMED THAT SIMILAR INCOME SHOWN IN THE PRECEDING AY HAS BEEN ACCEPTED BY AO IN SCRUTINY ASSESSMENT PROCEEDING. C ONSIDERING THE SUBMISSIONS OF THE PARTIES, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RE-EXAMINATION. IF THE ASSESSEE HAS BEEN SHOWING AG RICULTURAL INCOME FROM LEASE RENTALS FROM THE SAME LAND IN THE PRECED ING AY, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT, THEN, THERE IS NO REASON WHY IT SHOULD BE DISALLOWED IN THE IMPUGNED AY. AO IS DIR ECTED TO VERIFY THIS ASPECT AND DECIDED THE ISSUE ACCORDINGLY. WHIL E DOING SO, AO IS 8 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS ALSO DIRECTED TO EXAMINE ASSESSEES CLAIM OF EXPEND ITURE AND IF ASSESSEE IS ABLE TO ESTABLISH THE SAME, THEN, ALLOW IT. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, ITA NOS. 485 & 564/HYD/14 ARE AL LOWED AND ITA NO. 486/HYD/14 IS PARTLY ALLOWED. ITA NOS. 715, 525 AND 582/HYD/2014 BY REVENUE 16. THE ONLY ISSUE WHICH IS COMMON IN ALL THE AFOR ESAID APPEALS BY THE DEPARTMENT IS AS UNDER: 2. THE LEARNED CIT(A) ERRED IN DECIDING THE APPEAL OF THE ASSESSEE WITHOUT ACCORDING AN OPPORTUNITY TO THE AO FOR THE VERIFICATION OF THE FRESH EVIDENCE PRODUCED BEFORE HIM DURING THE APPELLATE PROCEEDINGS. 17. AS DISCUSSED IN HEREINBEFORE WHILE DEALING WITH ASSESSEES CLAIM OF INVESTMENTS MADE IN LAND IN COURSE OF ASSE SSMENT PROCEEDING, AO TREATED THE LAND DEVELOPMENT EXPENSE S AS UNEXPLAINED INVESTMENT OF ASSESSEE U/S 69 OF THE AC T. THAT APART, DURING THE ASSESSMENT PROCEEDING, AO ALSO WHILE EXA MINING THE BALANCE SHEET OF ASSESSEE, FOUND INCREASE IN UNSECU RED LOANS. ALLEGING THAT ASSESSEE HAS NOT FURNISHED ANY EVIDEN CE TO SUBSTANTIATE THE SOURCE OF SUCH CREDIT, AO TREATED THEM AS UNEXP LAINED CASH CREDIT U/S 68 OF THE ACT AND ACCORDINGLY MADE ADDITION TO THE INCOME OF THE CONCERNED AY. BEING AGGRIEVED OF SUCH ADDITION, ASS ESSEE PREFERRED APPEAL BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDE RING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, DID NOT FIND MERIT IN BOTH THE ADDITIONS AN D ACCORDINGLY DELETED THEM. 18. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. A S CAN BE SEEN FROM THE GROUNDS, THE SOLE GRIEVANCE OF THE DEPARTMENT I S LD. CIT(A) HAS 9 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS DELETED THE ADDITIONS ON THE BASIS OF FRESH EVIDENC E FILED BY ASSESSEE. HOWEVER, ON A SPECIFIC QUERY FROM THE BEN CH, LD. DR FAILED TO BRING TO OUR NOTICE WHAT ARE THE FRESH EVIDENCES SUBMITTED BY ASSESSEE AND ON THE BASIS OF WHICH LD. CIT(A) DELET ED THE ADDITION. ON THE CONTRARY, ON A CAREFUL PERUSAL OF ORDER OF L D. CIT(A), IT IS VERY MUCH CLEAR THAT ONLY ON THE BASIS OF MATERIALS AVAI LABLE ON RECORD, WHICH ALSO FORMED PART OF ASSESSMENT RECORD, VIZ., RETURN OF INCOME, BALANCE SHEET, P&L A/C, CONFIRMATION LETTERS ETC., LD. CIT(A) HAS CONCLUDED THAT NEITHER THE DEVELOPMENT EXPENSES CAN BE TREATED AS UNEXPLAINED INVESTMENT NOR THE INCREASE IN UNSECURE D LOANS CAN BE TREATED AS UNEXPLAINED CREDIT. AS THERE IS NOTHING ON RECORD TO SUGGEST THAT LD. CIT(A) HAS ENTERTAINED ADDITIONAL/ FRESH EVIDENCE WHILE DELETING THE ADDITION, WE ARE UNABLE TO ACCEP T THE CLAIM OF THE DEPARTMENT. ACCORDINGLY, GROUND RAISED IS DISMISSED . 19. IN THE RESULT, FACTS BEING IDENTICAL ALL THE AP PEALS OF THE DEPARTMENT IN ITA NOS. 715, 525 & 582/HYD/14 ARE DI SMISSED. ITA NOS. 487, 488, 490, 491 & 494/HYD/2014 BY DIFFE RENT ASSESSEES. 20. THE ONLY ISSUE IN THE AFORESAID APPEALS OF ASSE SSEES IS RELATING TO IMPOSITION OF PENALTY U/S 221(1) R.W.S. 140A(3) OF THE ACT. 21. BRIEFLY THE FACTS ARE, ASSESSEES HEREINABOVE BE LONG TO GROUPOF COMPANIES ESTABLISHED BY SHRI B. RAMALINGA RAJU AND HIS FAMILY MEMBERS. DURING THE FY 2007-08 RELEVANT TO AY UNDER DISPUTE, THE AFORESAID ASSESSEES SOLD CERTAIN EXTENT OF LAND AND THE PROFIT ON SALE OF LAND WAS SHOWN IN THE P&L A/C FOR THE YEAR ENDED 31/03/2008. IN THE RETURN OF INCOME FILED FOR THE IMPUGNED AY, ASS ESSEES DECLARED INCOME UNDER THE NORMAL PROVISIONS AT RS. NIL WHI LE PROFIT ON SALE OF LAND WAS DECLARED AS BOOK PROFIT U/S 115JB OF THE A CT. AS BOOK PROFIT U/S 115JB WAS MORE THAN REGULAR INCOME, THE SAME WA S ADOPTED FOR 10 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS TAX PURPOSES AND TAX PAYABLE WAS COMPUTED BY DIFFER ENT ASSESSEES ARE AS UNDER: BOOK PROFIT SELF ASSESSMENT TAX NALLAMALLA AGRO FARMS (P) LTD. 20,46,76,320 2,31,89,827 CHITRAVATI AGRO FARMS (P) LTD. 15,30,71,372 1,73,42,987 PARBATI AGRO FARMS PVT. LTD. 20,43,20,574 2,82,53,990 GOMATI AGRO FARMS PVT. LTD. 24,41,41,876 2,76,61,267 KANCHANJUNGA GREEN LANDS 6,74,10,871 76,37,652 HOWEVER, IT WAS NOTICED THAT NEITHER ASSESSEES PAID ANY ADVANCE TAX DURING THE YEAR NOR EVEN WHILE FILING THE RETURNS O F INCOME ANY SELF ASSESSMENT TAX WAS PAID. RETURNS FILED BY ASSESSEES WERE PROCESSED U/S 143(1) BY ACCEPTING THE BOOK PROFIT U/S 115JB A ND TAX PAYABLE AS COMPUTED BY ASSESSEES. BECAUSE OF FAILURE ON THE PA RT OF ASSESSEES IN PAYING ADVANCE TAX, INTEREST U/S 234B AND 234C W AS ALSO LEVIED. EVEN AFTER SERVICE OF ASSESSMENT ORDERS ALONGWITH DEMAND NOTICES, SINCE ASSESSEE FAILED TO PAY THE ADMITTED TAX ALONG WITH INTEREST, AO ISSUED A NOTICE U/S 221(1)OF THE ACT FOR IMPOSITION OF PENALTY. AO NOTED THAT, EVEN DURING THE SCRUTINY ASSESSMENT PRO CEEDING WHEN THE DIRECTOR OF THE COMPANY WAS SUMMONED U/S 131 AND WA S SPECIFICALLY ASKED ABOUT DEFAULT IN MAKING TAX PAYMENTS FOR THE IMPUGNED AY, HE REPLIED EVASIVELY AND DID NOT SATISFACTORILY EXPLAI N WHY ASSESSEE FAILED TO MAKE PAYMENT OF ADVANCE TAX OR SELF-ASSES SMENT TAX. IN REPLY TO SHOW CAUSE NOTICE, IT WAS SUBMITTED BY ASS ESSEES THAT THERE WAS NO WILLFUL ATTEMPT ON THE PART OF ASSESSEES TO EVADE PAYMENT OF TAXES. IT WAS SUBMITTED THAT AS ASSESSEES WERE NOT HAVING MEANS TO PAY TAX ON THE DATE OF FILING OF RETURN, ADMITTED T AX WAS NOT PAID. IT WAS SUBMITTED, SUBSEQUENT EVENTS ARISING OUT OF FRA UD COMMITTED IN SATYAM COMPUTERS ALSO PREVENTED ASSESSEES FROM PAYI NG THE TAXES. THUS, IT WAS SUBMITTED IN ABSENCE OF LIQUIDITY, ASS ESSEE COULD NOT DISCHARGE ITS TAX LIABILITIES. AO HOWEVER WAS NOT C ONVINCED WITH THE EXPLANATION OF ASSESSEE. AO ON EXAMINING THE BANK A CCOUNTS OF 11 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS ASSESSEES MAINTAINED WITH AXIS BANK NOTED THAT SUBS TANTIAL AMOUNTS WERE CREDITED DURING FINANCIAL YEAR 2007-08. 22. AO WAS OF THE VIEW THAT THOUGH THE COMPANY HAD ENOUGH LIQUIDITY DURING THE ACCOUNTING YEAR, IT HAS APPLIE D ITS REVENUES IN BUSINESS WHILE DEFAULTING IN PAYMENT OF TAXES TO TH E GOVT. REFERRING TO THE BALANCE SHEETS OF RESPECTIVE ASSESSEES AS ON 31 /03/08, AO OBSERVED THAT THEY ARE HAVING SUBSTANTIAL AMOUNTS A S RESERVES AND SURPLUS AND CURRENT ASSETS BY WAY OF LOANS AND ADVA NCES. AO OBSERVED THAT AT THE TIME OF MAKING TRANSACTION OF SALE OF LAND, ASSESSEE KNEW ABOUT ITS TAX LIABILITIES ON THE INCO ME, BUT, ASSESSEES CHOSE NOT TO PAY THE TAXES. HE FURTHER OBSERVED THA T THE ACCOUNTS OF ASSESSEES WERE AUDITED BY AUDITORS, HENCE, ASSESSEE MUST BE AWARE OF THE TAX LIABILITY IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT ON THEIR INCOME AND ALSO SPECIFIED TIME WITHIN WHICH THE TAX HAS TO BE PAID. ON THE BASIS OF THE AFORESAID ANALYSIS OF FACTS, AO ULTIMATELY CONCLUDED THAT AS ASSESSEES HAVE DEFAULTED IN PAYME NT OF ADMITTED TAX, THEY HAVE TO BE TREATED AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 140A(3) THEREBY LIABLE TO BE VISITED WITH PENALTY U /S 221(1) OF THE ACT. ACCORDINGLY, CONSIDERING THE ADMITTED TAX LIABILITY OF EACH ASSESSEE, AO PASSED ORDERS IMPOSING PENALTY U/S 221(1) AS UND ER: PENALTY IMPOSED NALLAMALLA AGRO FARMS (P) LTD. 45,00,000 CHITRAVATI AGRO FARMS (P) LTD. 35,00,000 PARBATI AGRO FARMS PVT. LTD. 56,00,000 GOMATI AGRO FARMS PVT. LTD. 50,00,000 KANCHANJUNGA GREEN LANDS 15,00,000 23. IN COURSE OF HEARING OF APPEAL, BEFORE LD. CIT( A), ASSESSEE MADE THE FOLLOWING SUBMISSIONS: A) THE TRANSACTION COVERED IN THIS CASE IS NOT A SA LE. THE APPELLANT HAD TRANSFERRED LAND (28.10 ACRES OF LAND) TO SISTER CO NCERNS (SUBSIDIARY COMPANIES, WHICH ARE THE GROUP COMPANIES) AND AS TH ESE WERE AGRICULTURAL LANDS AND THE TRANSFER WAS TO A SUBSID IARY COMPANY, THE VERY TAXABILITY OF THE TRANSACTION IN TERMS OF SECTION 4 7(IV) WAS DOUBTFUL. 12 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS B) THE DEMAND AROSE ONLY BECAUSE OF THE CREDITING O F THE SALE PROCEEDS TO P&L A/C AND BECAUSE OF THE APPLICABILITY OF PROVISIONS OF S ECTION 115JB TO A CORPORATE ENTITY. (C) THE AO LISTED OUT VARIOUS DEPOSITS AND BANK BAL ANCES BUT FAILED TO MENTION THAT THERE WAS NO BALANCE IN THE BANK SUBSE QUENT TO 08.03.2008. FUNDS WERE NOT AVAILABLE AT THE TIME OF FILING OF RETURN. (D) NEITHER THE SUBSIDIARY COMPANY NOR THE HOLDING COMPANY HAD ANY FUNDS ON THE DATE ON WHICH ADVANCE TAX WAS TO BE PA ID AND I ON THE DATES OF FILING OF ROI. AS PER THE STATUTORY OBLIGA TION ROI WAS FILED ON 30.09.08 WITH ITS LIABILITY TO FILE U/S 115JB OF TH E LT.ACT. OR UNDER INTIMATION U/S 143(1). (E) THE RETURN WAS PROCESSED U/S 143(1) ON 27.0S.2009 AND THE PROBLEMS FOR THE FLAG SHIP COMPANY OF THE GROUP M/S SAT YAM COMPUTER SERVICES LTD STATED IN DECEMBER, 200S CULMINATING I N THE STATEMENT OF SRI RAMALINGA RAJU IN JANUARY, 2009. THIS SITUATION HAD ITS EFFECT ON ALL THE GROUP COMPANIES. (F) ALL THESE SUBSEQUENT EVENTS AND THE LACK OF LIQ UIDITY AND FUNDS POST JANUARY, 2009 AND ESPECIALLY AT THE TIME OF POINT O F IMPOSITION OF PENALTY ON 22.10.2003 ARE WELL WITHIN THE KNOWLEDGE OF THE AO. HE NEITHER CONSIDERED NOR APPRECIATED THEM. (G) IMPOSITION OF PENALTY U/S 221 IS ONLY DISCRETIONARY AND NOT MANDATORY. 24. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEES AND GOING THROUGH THE DECISIONS RELIED UPON CONFIRMED T HE PENALTY. LD. CIT(A) NOTED THAT ALL ASSESSEES HAVE SOLD LAND AND RECEIVED SUBSTANTIAL AMOUNT TOWARDS SALE PROCEEDS AMOUNTING TO RS. 16.67 CRORES BY 08/06/2007. INSPITE OF AVAILABILITY OF FU ND NEITHER ASSESSEES PAID ANY OF THE INSTALMENTS OF ADVANCE TAX NOR SEL F ASSESSMENT TAX, WAS PAID, EVEN THOUGH, RETURN OF INCOME WAS FILED O N 30/09/2008. LD. CIT(A) OBSERVED THAT DEFENSE BUILT UP BY ASSESSEE RELATING TO FINANCIAL STRINGENCY AND LACK OF FUNDS ARISING OUT OF THE PROBLEMS FACED BY ASSESSEE AS A RESULT OF FRAUD COMMITTED IN M/S SATYAM COMPUTERS SERVICES LTD. CANNOT HOLD GOOD AS ALL TH ESE EVENTS HAPPENED IN JUNE, 2009 MUCH AFTER THE FILING OF RET URN OF INCOME FOR THE IMPUGNED AY. HE NOTED THAT ASSESSEE AS PER THE RECORDS CLEARLY RECEIVED LOT OF FUNDS AND DEPLOYED THEM ELSEWHERE W ITHOUT BOTHERING 13 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS ABOUT THE TAX LIABILITY. LD. CIT(A) OBSERVED THAT A SSESSEES HAVE FAILED TO EXPLAIN WHAT PREVENTED THEM FROM PAYING THE TAX DUES FROM THE PERIOD BEGINNING ON 08/06/07, WHEN LANDS WERE SOLD AND SALE PROCEEDS WERE RECEIVED IN THE BANK ACCOUNT, TILL 30 /09/08 ON WHICH DATE RETURN OF INCOME WAS FILED WITHOUT PAYMENT OF SELF ASSESSMENT TAX. LD. CIT(A) OBSERVED THAT AS THE TAXES ARE THE REVENUE OF THE GOVT. ENABLING IT TO CARRY OUT ITS FUNCTIONS AND WH EN THE LIABILITY IS SELF DETERMINED, THE RESPONSIBILITY ON THE TAX PAYER IS MORE, THEREFORE, CONSEQUENCE FOR DEFAULT HAS TO FOLLOW AS A NATURAL COROLLARY. ACCORDINGLY, HE CONFIRMED THE PENALTY IMPOSED. 25. THE LEARNED AR MOSTLY REITERATING THE SUBMISSIO NS MADE BEFORE THE DEPARTMENTAL AUTHORITIES, SUBMITTED THAT ASSESS EES COULD NOT DISCHARGE THEIR ADMITTED TAX LIABILITY DUE TO LACK OF LIQUIDITY. REFERRING TO THE BANK ACCOUNT COPIES LD. AR SUBMITTED THAT I N THE BEGINNING OF YEAR AS WELL AS IN THE END OF YEAR, ASSESSEES WERE HAVING NIL BALANCE. IT WAS SUBMITTED, THEREFORE, ON THE DATE O F FILING OF RETURN ON 30/09/08, ASSESSEE COULD NOT DISCHARGE THE TAX LIAB ILITY. LD. AR SUBMITTED THAT HOWEVER SUBSEQUENTLY ASSESSEES HAVE DISCHARGED THE ADMITTED TAX LIABILITY ALONG WITH INTEREST CHARGED U/S 234B AND 234C. 26. LD. AR SUBMITTED THAT DUE TO THE SUBSEQUENT EVE NTS LIKE FRAUD COMMITTED AND WITH THE AFFAIRS OF M/S SATYAM COMPUT ERS SERVICES LTD. AND CONSEQUENTIAL ACTIONS WHICH FOLLOWED WITH ATTACHMENT OF BANK ACCOUNTS, FREEZING OF PROPERTIES, ASSESSEE CO ULD NOT DISCHARGE THE TAX LIABILITY. THUS, IT WAS SUBMITTED AS THERE WAS A REASONABLE CAUSE FOR NOT PAYING SELF ASSESSMENT TAX PENALTY SH OULD NOT HAVE BEEN LEVIED. LD. AR SUBMITTED THAT PENALTY U/S 221( 1) IS NOT AUTOMATIC. AO HAS BEEN GIVEN DISCRETION IN IMPOSING PENALTY. THEREFORE, IN AN APPROPRIATE CASE WHERE THERE IS RE ASONABLE CAUSE FOR THE ASSESSEE IN NOT PAYING SELF ASSESSMENT TAX, PEN ALTY CANNOT BE IMPOSED. IN SUPPORT OF SUCH CONTENTION, LD. AR RELI ED ON THE FOLLOWING DECISIONS. 14 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS 1. CIT VS. SRAVANA TEXTILES, 137 ITR 369 (AP) 2. CIT VS. FREE WHEELS, 137 ITR 378 (DEL.) 3. CIT VS. WESMAN, 104 ITR 605 (CAL.) 4. BHAURAM VS. CIT, 108 ITR 305 (GAU.) 5. CIT VS. BANARSI DASS, 108 ITR 554 ( P&H) 6. CIT VS. MYSORE FERTILIZER, 145 ITR 91 ( MAD.) 7. MEWAR TEXTILES VS. CIT, 151 ITR 127 (RAJ.) 8. CIT VS. LALWANI, 258 ITR 276 (RAJ.) 9. RAMCHANDRA PESTICIDES LTD. VS. CIT, 285 ITR 45 (KAR.) 10. CIT VS. WESTERN INDIA SALES & SERVICE, 220 ITR 292 (PATNA) 11. CIT VS. HTHA BIT PVT. LTD., 217 ITR 173 (MAD.) 27. LD. AR SUBMITTED, IN FACT, ASSESSEE HAS DISCHAR GED THE TAX LIABILITY ALONG WITH INTEREST, THEREFORE, NO PREJUD ICE IS CAUSED TO REVENUE. IN THAT VIEW OF THE MATTER, IMPOSITION OF PENALTY U/S 221(1) IN CASE OF ASSESSEE IS NOT JUSTIFIED. 28. THE LD. DR, ON THE OTHER HAND, STRONGLY RELYING UPON THE FINDING OF AO AS WELL AS LD. CIT(A) SUBMITTED THAT THE FACT S BROUGHT OUT ON RECORD CLEARLY SHOW THAT ASSESSEE HAD SUFFICIENT LI QUIDITY ON THE DATES WHEN THE ADVANCE TAX INSTALMENT AND SELF ASSESSMENT TAX WAS DUE TO BE PAID. THEREFORE, PLEA OF ASSESSEE THAT IT DID NO T HAVE LIQUIDITY IS NOT ACCEPTABLE. LD. DR SUBMITTED AS ASSESSEE HAS DE FAULTED IN PAYING ADMITTED TAX LIABILITY, PENALTY HAS BEEN COR RECTLY IMPOSED. 29. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECI SIONS RELIED UPON BY LD. AR. AT THE OUTSET, IT NEEDS TO BE MENTIONED THAT THERE IS NO DISPUTE TO THE FACT THAT ASSESSEES HAVE FAILED TO P AY SELF-ASSESSMENT TAX U/S 140A OF THE ACT WHILE SUBMITTING ITS RETURN OF INCOME FOR THE IMPUGNED AY. THEREFORE, ASSESSEES ARE TO BE TREATED AS ASSESSEES IN DEFAULT U/S 140A(3) OF THE ACT THEREBY MAKING TH EM AMENABLE TO IMPOSITION OF PENALTY U/S 221(1) OF THE ACT. SECTIO N 221(1) MAKES IT 15 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS CLEAR THAT AO CAN IMPOSE PENALTY IN A CASE WHERE AS SESSEE HAS DEFAULTED IN MAKING PAYMENT OF THE TAX LIABILITY AS A RESULT OF WHICH HE IS TO BE TREATED AS AN ASSESSEE DEEMED TO BE IN DEF AULT. HOWEVER, IT IS ALSO NECESSARY TO NOTE THAT QUANTUM OF PENALTY H AS NOT BEEN FIXED IN THE SAID PROVISION AND IT HAS BEEN LEFT TO THE D ISCRETION OF AO. HOWEVER, THE FIRST PROVISO TO SECTION 221(1) PROVID ES THAT BEFORE IMPOSITION OF PENALTY, ASSESSEE SHALL BE GIVEN A RE ASONABLE OPPORTUNITY OF BEING HEARD. WHEREAS, SECOND PROVISO PROVIDES THAT WHERE ASSESSEE PROVES TO THE SATISFACTION OF AO THA T THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PENALTY SHALL B E LEVIED. FROM THE PLAIN READING OF THE AFORESAID PROVISION, IT BECOME S CLEAR THAT IMPOSITION OF PENALTY U/S 221(1) IS NOT AUTOMATIC O R MANDATORY. AO HAS BEEN GIVEN DISCRETION TO IMPOSE PENALTY IN AN A PPROPRIATE CASE WHEREAS ASSESSEE HAS ALSO BEEN GIVEN AN OPPORTUNITY TO SATISFY AO THAT THERE IS GOOD AND SUFFICIENT REASONS FOR DEFAU LT IN MAKING PAYMENT. 30. KEEPING IN VIEW THE AFORESAID STATUTORY PROVISI ON, LET US EXAMINE THE FACTS OF THE PRESENT CASE. AT THE COST OF REPETITION, WE WOULD LIKE TO OBSERVE THAT THERE IS NO DISPUTE THAT ASSESSEE HAS DEFAULTED IN DISCHARGING ITS TAX LIABILITY U/S 140A AT THE TIME OF FILING OF RETURN OF INCOME. IT IS THE CLAIM OF ASSESSEE THAT DUE TO LIQUIDITY PROBLEM, IT COULD NOT PAY THE TAX LIABILITY ON THE DATE OF FILING OF RETURN AS ASSESSEE DID NOT HAVE SUFFICIENT FUNDS WITH HIM. HOWEVER, IT IS A FACT ON RECORD THAT ASSESSEE HAS RECEIVED ABOUT RS. 16.67 CRORES ON SALE OF LAND IN JUNE, 2007. ON PERUSAL OF BANK ACCO UNT COPIES SUBMITTED IN THE PAPER BOOK, THOUGH IT APPEARS THAT THE BALANCE AT THE BEGINNING OF THE YEAR AND AT THE END OF THE YEAR IS NIL, BUT AT THE SAME TIME THERE ARE SUBSTANTIAL TRANSACTIONS IN BETWEEN. IN FACT IN CASE OF ONE OF THE ASSESSEE ON 24/10/07, AN AMOUNT OF RS. 5 CRORES WAS RECEIVED AND THE SAME WAS TRANSFERRED TO M/S MAYTAS ON THE VERY NEXT DAY I.E. ON 25/10/2007. THE SAME IS ALSO THE C ASE WITH OTHER ASSESSEES. THEREFORE, THE CLAIM OF ASSESSEE THAT FU NDS WERE NOT 16 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS AVAILABLE CANNOT BE ACCEPTED. MORE SO, WHEN ADMITTE DLY AS PER ASSESSEES OWN ADMISSION THE TAX BURDEN FOR ALL THE GROUP COMPANIES WERE DISCHARGED BY M/S MAYTAS. IN THAT VIEW OF THE MATTER, THE CLAIM OF ASSESSEE THAT ADMITTED TAX LIABILITY COULD NOT B E DISCHARGED DUE TO LIQUIDITY PROBLEM OR UNAVAILABILITY OF FUNDS IS NOT ACCEPTABLE. CONSIDERED IN THE AFORESAID PERSPECTIVE, AS ASSESSE E HAS FAILED TO MAKE OUT A CASE OF REASONABLE CAUSE FOR DEFAULT, AS SESSEE HAS TO BE TREATED AS ASSESSEE IN DEFAULT IN TERMS WITH SECTIO N 140A(3) OF THE ACT AND THEREBY LIABLE TO BE VISITED WITH PENALTY U /S 221(1). THOUGH, WE FULLY AGREE WITH THE PRINCIPLES LAID DOWN IN THE DECISIONS CITED BY LD. AR, RATIO LAID DOWN THEREIN CANNOT BE APPLIED U NIFORMLY DE HORS THE FACTS INVOLVED IN A PARTICULAR CASE. HAVING HELD SO , WE WILL NOW EXAMINE WHETHER THE QUANTUM OF PENALTY IMPOSED BY A O IS REASONABLE. AS STATED EARLIER SECTION 221(1) OF THE ACT HAS NOT FIXED THE QUANTUM OF PENALTY THAT IS REQUIRED TO BE IMPOS ED AND HAS LEFT IT TO THE DISCRETION OF AO. THEREFORE, THE DISCRETION VESTED HAS TO BE USED OBJECTIVELY AND JUDICIOUSLY. A PERUSAL OF THE PENALTY ORDER DOES NOT REVEAL THE BASIS ON WHICH AO HAS QUANTIFIED TH E PENALTY. HOWEVER, CONSIDERING THE FACT THAT ASSESSEE HAS DIS CHARGED THE TAX LIABILITY ALONG WITH INTEREST, IN OUR VIEW, LIBERAL APPROACH NEEDS TO BE TAKEN. MORE SO, WHEN SECTION 221(1) ITSELF EMPOWERS AO TO INCREASE PENALTY IN CASE OF CONTINUING DEFAULT. THEREFORE, I MPOSITION OF PENALTY AT SUCH A HIGH FIGURE AT THE FIRST INSTANCE, IN OUR VIEW, IS NOT JUSTIFIED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF CASE, WE ARE OF THE VIEW THAT PENALTY @ 5% OF THE ADMITTED TAX LIABILITY WOU LD BE REASONABLE AND MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE DIREC T AO TO CONFINE THE PENALTY U/S 221(1) OF THE ACT TO 5% OF THE ADMITTED TAX LIABILITY IN EACH CASE. 31. IN THE RESULT, ASSESSEES APPEALS IN ITA NOS. 48 7, 488, 490, 491 & 494/HYD/2014 ARE PARTLY ALLOWED. 17 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS 32. TO SUM, APPEALS OF ASSESSEES IN ITA NOS. 485 & 564/HYD/2014 ARE ALLOWED, APPEALS IN ITA NOS. 486, 487, 488, 4 90, 491 & 494/HYD/2014 ARE PARTLY ALLOWED AND APPEALS OF DEPA RTMENT IN ITA NOS. 715, 525 & 582/HYD/14 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10/12/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 10 TH DECEMBER, 2014 KV COPY TO:- 1. M/S SATABISHA BIOTECH PVT. LTD., HYDERABAD PLOT NO. 80, ROAD NO. 9, JUBILEE HILLS, HYDERABAD 500 033 2. M/S JESHTA FARMS PVT. LTD., HYD. 3. M/S SKY BLUE BIO-TECH PVT. LTD., HYD. 4. M/S NALLAMALA AGRO FARMS PVT. LTD., HY 5. M/S CHITRAVATI AGRO FARMS PVT. LTD., HYD 6. M/S PARBATI AGRO FARMS PVT. LTD., HYD. 7. M/S GOMATI AGRO FARMS PVT. LTD., HYD. 8. M/S KANCEHNJUNG GREENLANDS PVT. LTD. 9. INCOME-TAX OFFICER, (OSD)-3, CENTRAL RANGE 1, HYD. 10.ADD. COMMISSIONER OF INCOME-TAX, RANGE 3, HYD. 11. DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 9, HYD. 12. CIT(A)-VII, HYDERABAD 13. CIT (CENTRAL), HYDERABAD 14. THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD. 18 ITA NOS. 485 AND OTHERS M/S SATABISHA BIOTECH PVT. LTD. AND OTHERS DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER