Liquidz India Pvt.Ltd Hyd, Mumbai V. DCIT, Cir-16(1), Hyderabad

ITA 558/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66421 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Depreciation; Search and seizure; Validity of assessment; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL M EMBER ITA NO.558/HYD/2011 : ASSES SMENT YEAR 2006-07 M/S. LIQUIDZ INDIA (P)LTD., HYDERABAD ( PAN - AABCL 0387 K ) V/S. DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.V.RAGHURAM RESPONDENT BY : SHRI M.H.NAIK DATE OF HEARING 7.8.2012 DATE OF PRONOUNCEMENT 31.10.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A) V, HYDERABAD DATED 4.2.2011, CONFIRMING THE PENALTY OF RS.51,11,373 LEVIED BY THE ASSESSING OFFICER UNDER S.271(1)(C) O F THE INCOME-TAX ACT, 961 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL I S THE LEGALITY AND VALIDITY OF THE PENALTY IMPOSED UNDER S.271(1)(C) O F THE ACT. 3. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE, A PRIVATE LIMITED COMPANY, IS ENGAGED IN THE BUSINESS OF RUNN ING A RESTAURANT. IN FACT, ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 2 IT STARTED ITS BUSINESS ONLY DURING THE PREVIOUS YE AR UNDER APPEAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED I TS RETURN OF INCOME ON 27.11.2006, DECLARING LOSS OF RS.37,96,372. IN THE COURSE OF SEARCH AND SEIZURE OPERATION CARRIED OUT IN CASE OF SHRI HAREN CHOKSEY AND GROUP MUMBAI ON 5.10.2007, A BALANCE SHEET OF THE ASSESSE E AS ON 31.3.2006 WAS FOUND IN THE RESIDENTIAL PREMISES OF SHRI HAREN CHO KSEY, WHICH REVEALED CASH EXPENSE OFRS.1,43,24,100. AS A SEQUENCE TO THE SEA RCH, THE DDIT INV. UNIT II, MUMBAI ALSO CARRIED OUT ENQUIRY WITH THE ASSESS EE. THE ASSESSEE, IN THE COURSE OF THE ENQUIRY, ACCEDED INCOME OF RS.1,43,24 ,100 AND ALSO PAID THE TAX DUE ON THE ADMITTED INCOME AMOUNTING TO RS.35,4 3,633 ON 9.6.2008. A NOTICE UNDER S.153C WAS ISSUED ON 31.3.2009, CALLIN G FOR RETURN FROM THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.8.2009, SHOWING THE ADMITTED ADDITIONAL INCOM E. THE ASSESSMENT WAS COMPLETED UNDER ASSESSEE'S.153C ON 29.12.2009, BY A CCEPTING THE ADMITTED INCOME OF RS.98,56,525. THE ASSESSING OFFICER MADE FURTHER ADDITION OF RS.1,90,000 UNDER S.58 OF THE ACT, AND AN AMOUNT OF RS.6,71,203 BY DISALLOWING THE CLAIM OF DEPRECIATION. THE ASSESSEE ACCEPTED THE INCOME DETERMINED AND DID NOT FILE ANY APPEAL AGAINST THE ASSESSMENT ORDER. 4. AFTER COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED A NOTICE INITIATING THE PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT. THE ASSESSEE IN ITS EXPLANATION FURNIS HED TO THE ASSESSING OFFICER STATED THAT IT HAS STARTED ITS BUSINESS OF RUNNING THE RESTAURANT FOR THE FIRST TIME DURING THE RELEVANT PREVIOUS YEAR, BY INVESTIN G THE SUM OF RS.1,34,24,100. THE ASSESSEE STATED THAT IT HAS V OLUNTARILY CAME FORWARD ADMITTING THE ADDITIONAL INCOME TO BUY PEACE WITH T HE DEPARTMENT. IT WAS STATED BY THE ASSESSEE THAT THE ADMISSION OF ADDITI ONAL INCOME BY ITSELF WILL NOT LEAD TO THE INFERENCE THAT THE ASSESSEE HAS CON CEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF I NCOME. SO FAR AS THE ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 3 OTHER ADDITIONS ARE CONCERNED, THE ASSESSEE HAS STA TED THAT IT HAS ACCEPTED UNSECURED LOANS FROM FRIENDS AND RELATIVES ON VARIO US DATES AND RETURNED THE SAME DURING THE PREVIOUS YEAR AND ALL THE TRANSACTI ONS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT IN THE NORMAL COURSE OF BUSINE SS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE EVIDENCE TO PROVE THE GE NUINENESS OF THE CREDITORS, SINCE IT HAS CLOSED DOWN ITS BUSINESS IN 2008 AND ALSO LOST RECORDS IN FIRE. SIMILARLY, ALSO IN THE CASE OF CLAIM OF D EPRECIATION, SINCE THE ASSESSEE COULD NOT PRODUCE THE RELEVANT BILLS AND VOUCHERS, WHICH WERE LOST IN FIRE, THE DISALLOWANCE WAS MADE. THE ASSESSING OFFICER HOWEVE R, DID NOT ACCEPT THE EXPLANATION FURNISHED BY THE ASSESSEE. HE INFERRED THAT ONLY BECAUSE OF THE SEARCH, THE ASSESSEE CAME FORWARD WITH THE OFFER OF ADDITIONAL INCOME. HAD THE SEARCH NOT TAKEN PLACE, THE ASSESSEE WOULD HAVE CONCEALED THAT AMOUNT OF INCOME. THE ASSESSING OFFICER ULTIMATELY PASSED AN ORDER UNDER S.271(1)(C) IMPOSING PENALTY OF AN AMOUNT OF RS.51, 11,373. 5. THE ASSESSEE CHALLENGED THE ORDER PASSED UNDER S.271(1) (C) BY FILING AN APPEAL BEFORE THE CIT(A). IN THE APPELLA TE PROCEEDINGS BEFORE THE CIT(A), SINCE NONE APPEARED FOR THE ASSESSEE IN SPI TE OF OPPORTUNITY BEING GRANTED, THE CIT(A) PROCEEDED TO DISPOSE OFF THE AP PEAL EX PARTE. THE CIT(A) AFTER GOING THROUGH THE MATERIALS BEFORE HIM, CONCU RRED WITH THE FINDINGS OF THE ASSESSING OFFICER THAT HAD THE SEARCH AND SEIZU RE OPERATION NOT TAKEN PACE, THE ASSESSEE WOULD NEVER HAVE DISCLOSED THE A MOUNT, WHICH HE OFFERED FOR TAXATION. THE CIT(A) HELD THAT THE NON-DISCLOS URE OF INCOME IN THE ORIGINAL RETURN, COUPLED WITH THE FACT THAT THE ASS ESSEE DECLARED THE ADDITIONAL INCOME ONLY IN THE RETURN FILED IN RESPO NSE TO NOTICE UNDER S.153C, PROVED THE FACT OF CONCEALMENT. THE CIT(A) THEREFO RE, SUSTAINED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 4 6. BEING AGGRIEVED BY THE ORDERS OF THE LOWER AUTH ORITIES, ASSESSEE IS IN SECOND APPEAL BEFORE US, WITH THE FOLLOWING G ROUNDS. 1.00 THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY LEVIED U/S. 271(1)(C) ON THE FOLLOWING ADDITIONS: 1.01 INCOM E OF RS.1,43,24,100 VOLUNTARILY ACCEPTED TO BUY PEACE ON WHICH FULL TAX LIABILITY WAS DISCHARGED IM MEDIATELY AT THE TIM E OF ACCEPTANCE AND WHICH INCOM E WAS ALSO DECLARED IN THE RETURN LATER FILED IN RESP ONSE TO NOTICE U/S. 153C. 1.02 ADDITION OF RS.1,90,000 U/S. 689 BEING SQUARED OFF UNSECURED LOANS FROM FRIENDS AND RELATIVES SOLELY F OR NON- FURNISHING OF CONFIRMATIONS FROM PARTIES. 1.03 DISALLOWANCE OF DEPRECIATION ON FURNITURE & FIXTUR ES AGGREGATING TO RS.6,71,203. 2.00 . 7. AT THE TIME OF HEARING OF THE APPEAL, THE ASSES SEE FILED A PETITION PRAYING FOR ADMISSION OF THE FOLLOWING ADDITIONAL G ROUND OF APPEAL- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER DT.29.12.2009 PASSED BY THE AO BEING ILLEGAL AND NON EST IN LAW AS HAVING BEEN PASSED WITHOUT THE APPROVAL O F THE JOINT COMMISSIONER OF INCOME TAX AS REQUIRED UNDER SECTIO N 153D OF THE ACT, THE ORDER OF PENALTY WHICH IS BASED ON SUC H ASSESSMENT ORDER IS ILLEGAL AND UNSUSTAINABLE IN LAW. 8. LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSE SSEE URGED BEFORE US FOR ADMITTING THE AFORESAID ADDITIONAL GROUND SI NCE IT GOES TO THE ROOT OF THE MATTER. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER DATED 29.12.2009 UNDER S.143(3) READ WITH S.153C, H AS NOT TAKEN APPROVAL UNDER S.153B OF THE ACT, WHICH IS A MANDATORY REQUI REMENT UNDER LAW. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT SINCE IT IS A JURISDICTIONAL ISSUE AND GOES TO THE ROOT OF THE MATTER, AND SINCE THE ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 5 IMPOSITION OF PENALTY IS ALSO DEPENDENT ON A VALID ASSESSMENT PROCEEDING, THE ADDITIONAL GROUND RAISED NEEDS ADJUDICATION. 9. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND, STRONGLY OPPOSED THE ADMISSION OF THE ADDITIONAL GROUND, BY CONTENDING THAT IT INVOLVES GOING INTO THE LEGALITY OF THE ASSESSMENT, WHICH ATTAINED FINALITY, AND THUS, FRESH FACTS. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISS UE AND PERUSED THE MATERIAL ON RECORD. IT IS A FACT ON RECORD THA T THE ASSESSEE HAS NOT CHALLENGED THE VALIDITY OF THE ASSESSMENT PROCEEDIN GS, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND HAS PARTICIPATED AN D FULLY COOPERATED IN THE COMPLETION OF THE ASSESSMENT . IN FACT, THE ASSESS EE HAS ACCEPTED THE ASSESSMENT ORDER PASSED, NOT ONLY WITH REGARD TO LE GALITY BUT ALSO WITH REGARD TO THE MERITS OF THE ADDITIONS, ETC., BY NO T FILING ANY APPEAL. EVEN DURING THE INITIATION OF THE PENALTY PROCEEDINGS BE FORE THE ASSESSING OFFICER AS WELL AS BEFORE THE FIRST APPELLATE AUTHORITY, TH E ISSUE OF VALIDITY OF ASSESSMENT PROCEEDINGS WAS NEVER RAISED BY THE ASSE SSEE. THEREFORE, AT THIS STAGE, THAT TOO, WHILE HEARING AN APPEAL WITH REGAR D TO IMPOSITION OF PENALTY UNDER S.271(1)(C), THE ADDITIONAL GROUND RAISED WIT H REGARD TO VALIDITY OF ASSESSMENT PROCEEDINGS CANNOT BE ENTERTAINED. WE A CCORDINGLY DECLINE TO ADMIT THE ADDITIONAL GROUND. 11. WITH REGARD TO THE MERITS OF THE PENALTY IMPOS ED UNDER S.271(1)(C), THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS VOLUNTARILY COME FO RWARD AND HAS NOT ONLY DECLARED THE ADDITIONAL INCOME, BUT HAS ALSO IMMED IATELY DISCHARGED THE TAX LIABILITY ON THE ADDITIONAL INCOME SO DECLARED. IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER S.153C, THE ASSESSEE HAS ALSO DECLA RED THE ADDITIONAL INCOME,. IT WAS FURTHER SUBMITTED BY THE LEARNED A UTHORISED REPRESENTATIVE ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 6 FOR THE ASSESSEE THAT THE ASSESSING OFFICER, IN FAC T, HAS ACCEPTED THE ADDITIONAL INCOME DECLARED WITHOUT MAKING ANY VARIA TION. SO FAR AS OTHER ADDITIONS WITH REGARD TO CASH CREDITS AND DEPRECIAT ION ARE CONCERNED, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THEY WERE ON AGREED TERMS. THE LEARNED AUTHORISED REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT SINCE THE ADDITIONS WERE MADE ON AGR EED BASIS, THE ASSESSEE EVEN DID NOT CHALLENGE THEM BY FILING APPEAL BEFORE THE CIT(A) FOR BUYING PEACE WITH THE DEPARTMENT. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN THESE FACTS AND CIRCUMST ANCES, THE ASSESSEE CANNOT BE VISITED WITH PENALTY UNDER S.271(1)(C), S INCE THERE IS NEITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IN SUPPORT OF HIS CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF SURESHCHAND MITTAL V/S. CIT(251 ITR 9). THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE ALSO RELIED UPON TH E FOLLOWING JUDGMENTS/DECISIONS, COPIES OF WHICH WERE SUBMITTED IN THE PAPER-BOOK FILED BEFORE US. (A) DECISION OF INCOME-TAX APPELLATE TRIBUNAL, HYDE RABAD IN THE CASE OF P.V. RAMANA REDDY, HYDERABAD V/.S. ITO (ITA NOS .1852 TO 1857/HYD/2011) DATED 6.1.2012 (B) JUDGMENT OF HONBLE A.P. HIGH COURT DATED 7.12. 2011 IN CIT V/S. SHRI B. VENKATESAM AND OTHERS (ITTA NOS. 41,13,14 A N 83 OF 2000) (C) JUDGMENT OF HONBLE DELHI HIGH COURT DATED 8.4. 2011 IN CIT V/S. M/S. SAS PHARMACEUTICALS (ITA NO.1058 OF 2009. (D) ACIT V/S. JUPITER DISTILLERY (143 TTJ 745)-AHD. ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 7 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTING THE IMPOSITION OF PENALTY UNDER S.271(1) (C) OF THE ACT, SUBMITTED THAT IT IS ONLY BECAUSE OF THE SEARCH AND SEIZURE O PERATIONS, THE ASSESSEE CAME FORWARD WITH THE OFFER OF ADDITIONAL INCOME. HAD THE SEARCH NOT TAKEN PLACE, THE ASSESSEES INCOME WOULD HAVE ESCAPED ASS ESSMENT. IN THE CIRCUMSTANCES OF THE CASE, OFFER OF ADDITIONAL INCO ME FOR ASSESSMENT BY THE ASSESSEE, CANNOT BE SAID TO BE VOLUNTARY. 13. WE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. ON GOING THROUGH THE ORDERS OF THE LOWER AUTHORITIES, IT IS EVIDENT THAT THE MAIN GROUND ON WHICH THE PENALTY WAS IMPOS ED WAS ON THE REASONING THAT ONLY BECAUSE OF THE SEARCH AND SEIZU RE OPERATION, AS A RESULT OF WHICH DOCUMENTS, REFLECTING CONCEALED INCOME OF THE ASSESSEE, WERE UNEARTHED, THE ASSESSEE CAME FORWARD WITH THE OFFER OF ADDITIONAL INCOME. THE FURTHER REASONING FOR IMPOSITION OF PENALTY IS TO THE EFFECT THAT THE ASSESSEE DID NOT IMMEDIATELY FILE A REVISED RETURN OF INCOME EVEN AFTER THE DISCLOSURE OF ADDITIONAL INCOME, AND REVISED THE EA RLIER RETURN ONLY AFTER RECEIPT OF NOTICE UNDER S.153C OF THE ACT. HOWEVER , FACT REMAINS THAT THE ASSESSEE, WHEN WAS CONFRONTED WITH THE INFORMATION GATHERED IN THE COURSE OF SEARCH, IT IMMEDIATELY CAME FORWARD WITH A DECLA RATION OF ADDITIONAL INCOME AND ALSO PAID THE TAXES DUE ON THE ADDITIONA L INCOME, PURPORTEDLY TO BUY PEACE WITH THE DEPARTMENT. THE ASSESSEE ALSO RE FLECTED THE ADDITIONAL INCOME IN THE RETURN FIELD IN RESPONSE TO THE NOTIC E UNDER S.153C OF THE ACT. AS IT APPEARS FROM THE ASSESSMENT ORDER PASSED UNDE R S.153C, THE ASSESSING OFFICER HAS ALSO ACCEPTED THE ADDITIONAL INCOME DEC LARED BY THE ASSESSEE, WITHOUT ANY VARIATION. THE HONBLE SUPREME COURT I N THE CASE OF HINDUSTAN STEEL LTD. V/S. STATE OF ORISSA (83 ITR 26) LAID DO WN THE LAW THAT PENALTY SHOULD NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL T O DO SO. UNLESS THE ASSESSEE IS GUILTY OF CONTUMACIOUS CONDUCT AND THER E IS A DELIBERATE AND ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 8 CONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO CO NCEAL THE INCOME OR FURNISHING INACCURATE PARTICULARS OF HIS INCOME, PE NALTY CANNOT BE IMPOSED. IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN HIS BONA F IDE BY NOT ONLY ADMITTING THE ADDITIONAL INCOME BUT ALSO PAID THE ENTRE TAX L IABILITY IMMEDIATELY THEREAFTER. IN THESE CIRCUMSTANCES, A LIBERAL APPR OACH NEEDS TO BE TAKEN SO FAR AS IMPOSITION OF PENALTY UNDER S.271(1)(C) IS C ONCERNED. THE DECISIONS RELIED UPON BY THE ASSESSEE ALSO SUPPORT THIS VIEW. 14. SO FAR AS THE OTHER ADDITIONS IN THE COURSE O F ASSESSMENT ARE CONCERNED, VIZ. UNEXPLAINED CASH CREDIT OF RS.1,90, 000 AND DISALLOWANCE OF DEPRECIATION OF RS.6,71,203, IT IS APPARENT FROM RE CORD THAT THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN ASKED T O EXPLAIN ABOUT THE UNSECURED LOANS, HAD SUBMITTED THAT THE LOANS WERE TAKEN FROM FRIENDS AND RELATIVES FOR THE PURPOSES OF CREATING THE REQUIRED INFRASTRUCTURE AND THE SAME WERE REPAID DURING THAT YEAR ONLY. HOWEVER, S INCE THE ASSESSEE HAS CLOSED DOWN ITS BUSINESS, AND THE RELEVANT RECORDS WERE ALSO LOST IN FIRE IN 2008, IT COULD NOT FURNISH THE NECESSARY EVIDENCE A ND DETAILS. IN FACT, THE ASSESSEE HAD ALSO FILED THE COPY OF THE FIR LODGED INDICATING THE FIRE ACCIDENT DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OF FICER HOWEVER, MADE THE ADDITION, SINCE THE ASSESSEE WAS NOT ABLE TO FURNIS H THE NECESSARY EVIDENCE. FROM THE AFORESAID NARRATION OF FACTS, IT IS QUITE CLEAR THAT THE ASSESSEE HAS SUBMITTED A VALID EXPLANATION FOR ITS INABILITY IN PRODUCING NECESSARY EVIDENCE WITH REGARD TO THE UNSECURED LOANS, THOUGH THE SAME WAS NOT TO THE SATISFACTION OF THE ASSESSING OFFICER. ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DISTINCT AND SEPARATE PROCEEDIN GS. REJECTION OF ASSESSEES EXPLANATION MAY JUSTIFY THE ADDITION IN THE COURSE OF ASSESSMENT PROCEEDINGS, BUT THAT BY ITSELF CANNOT JUSTIFY IMPO SITION OF PENALTY. EVERY ADDITION MADE IN AN ASSESSMENT PROCEEDING CANNOT BY ITSELF LEAD TO AN INFERENCE THAT THE ASSESSEE HAS CONCEALED THE PARTI CULARS OF HIS INCOME OR HAS ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 9 FURNISHED INACCURATE PARTICULARS OF INCOME, SO AS T O ATTRACT IMPOSITION OF PENALTY UNDER S.271(1)(C). THE EXPLANATION SUBMITT ED BY THE ASSESSEE IN THE COURSE OF THE PENALTY PROCEEDINGS NEEDS TO BE CONSI DERED INDEPENDENT OF THE REASONING ON WHICH THE ADDITIONS WERE MADE IN THE A SSESSMENT PROCEEDINGS. FROM THE EXPLANATION SUBMITTED BEFORE THE ASSESSING OFFICER, WE FIND THAT THERE IS A VALID REASON FOR THE ASSESSEE FOR NOT BE ING ABLE TO SUBMIT THE REQUISITE DETAILS AND EVIDENCE SO AS TO SUBSTANTIAT E ITS CLAIM WITH REGARD TO UNSECURED LOANS. 15. SIMILARLY, THE CLAIM OF DEPRECIATION ON ADDIT IONS MADE TO FIXED ASSETS DURING THE RELEVANT ASSESSMENT YEAR WAS DISA LLOWED, SINCE THE ASSESSEE COULD NOT COMPLY WITH THE ASSESSING OFFICE RS QUERIES TO PRODUCE BILLS AND VOUCHERS WITH REGARD TO ADDITIONS MADE TO FIXED ASSETS. THOUGH THE ASSESSEE OFFERED A SIMILAR EXPLANATION, AS WAS OFFE RED IN THE CASE OF UNSECURED LOANS, THE SAME WAS REJECTED BY THE ASSES SING OFFICER, WHICH LED TO THE DISALLOWANCE OF DEPRECIATION TO THE EXTENT O F RS.6,71,203. AS WE HAVE ALREADY OBSERVED HEREIN BEFORE, EVERY ADDITION MADE IN ASSESSMENT CANNOT LEAD TO THE INFERENCE OF CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME. THAT APART, AS HAS BEEN OBS ERVED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S. RELIANCE PETR O-PRODUCTS (322 ITR 158), A CLAIM MADE BY THE ASSESSEE WITH REGARD TO DEDUCTI ON IN THE RETURN OF INCOME IF FOUND INADMISSIBLE, WILL NOT AUTOMATICALL Y LEAD TO THE INFERENCE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F INCOME OR HAS CONCEALED INCOME. AS IS APPARENT FROM THE ASSESSMENT ORDER, THE DISALLOWANCE OF DEPRECIATION WAS MADE ONLY BECAUSE OF THE FACT THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT THE BILLS AND VOUCHERS WITH REGARD T O ADDITIONS MADE TO THE FIXED ASSETS DURING THE YEAR. DURING THE PENALTY PROCEEDINGS, THE ASSESSEE HAS OFFERED AN EXPLANATION, EXPLAINING THE REASONS WHICH PREVENTED IT FROM THE SUBMISSION OF THE BILLS AND VOUCHERS WHICH LED TO THE DISALLOWANCE OF ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 10 DEPRECIATION. THE EXPLANATION OFFERED BY THE ASSESS EE, VIZ. FIRE IN 2008, MERITS CONSIDERATION AND CANNOT BE REJECTED ON THE FACE OF IT. IT IS WELL SETTLED PRINCIPLE OF LAW THAT IMPOSITION OF PENALTY UNDER S .271(1)(C) IS NEITHER MANDATORY NOR AUTOMATIC. THE ASSESSING OFFICER IS V ESTED WITH A DISCRETION EITHER TO LEVY OR NOT TO LEVY PENALTY AFTER CONSIDE RING THE EXPLANATION OF THE ASSESSEE. THE DISCRETION HAS TO BE EXERCISED JUDIC IOUSLY AND IN AN OBJECTIVE MANNER. BEFORE IMPOSING THE PENALTY UNDER S.271(1)( C), IT HAS TO BE PROVED CONCLUSIVELY BY THE DEPARTMENT THAT THERE IS A DELI BERATE AND CONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. 16. IN VIEW OF THE FOREGOING DISCUSSION AND CONSID ERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE ACCUSED OF HAVING CONCEALED THE INCOME OR HAVING FURNISHED INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT. THE FURTHER FACT THA T THE ASSESSEE HAS ACCEPTED THE ADDITIONS MADE IN THE ASSESSMENT BY NO T FILING AN APPEAL BEFORE THE CIT(A) PROVES THE CONTENTION OF THE ASSESSEE TH AT THE ADDITIONAL INCOME WAS OFFERED TO BUY PEACE WITH THE DEPARTMENT AND TH E ADDITIONS WERE MADE ON AGREED BASIS AND IT IS FOR THAT REASON THAT THE ASSESSEE HAS ACCEPTED THE ADDITIONS, WITHOUT FILING ANY APPEAL AGAINST THE AS SESSMENT. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION, THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER S.271(1)(C). WE ACCORDINGLY CANCEL THE PENALT Y OF RS.51,11,373 IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY T HE CIT(A), ALLOWING THE GROUNDS OF THE ASSESSEE IN THIS APPEAL. 17. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO.558/HYD/2011 M/S. LIQUIDZ INDIA (P)LTD., HYDERAB AD 11 ORDER PRONOUNCED IN THE COURT ON 31.10.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 31ST OCTOBER, 2012 COPY FORWARDED TO: 1. M/S. LIQUIDZ IND IA PVT. LTD., C/O. SHRI VIVEK CHWLA, 10-8-318, CENCED APARTMENTS, PALI HILL ROAD, UNION PARK, KHAR(W) MUMBAI 400 052 2. 3. 4 DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(1), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS)-V, HYDERABAD COMMISSIONER OF INCOME-TAX V, HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.