Pillala Ramakrishna Rao, Visakhapatnam V. The ACIT, Visakhapatnam

ITA 64/VIZ/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8880 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 14-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Section: 143(3); 153A; 27; 132

Judgement Text

ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 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.64/VIZAG/2017 ( / ASSESSMENT YEAR:2013-14) PILLALA RAMAKRISHNA RAO, VISAKHAPATNAM ACIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM [PAN NO. AAQ PP9688M ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 05.06.2017 / DATE OF PRONOUNCEMENT : 07.06.2017 / O R D E R PER SHRI G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A)-3, VISAKHAPATNAM DATED 6.1.2007 AND IT PERTA INS TO THE ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS A CHARTERED ACCOUNTANT BY PROFES SION AND DERIVED INCOME FROM PROFESSION, HOUSE PROPERTY AND OTHER SO URCES. THE ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 2 ASSESSEE WAS SUBJECTED TO SEARCH & SEIZURE OPERATIO N U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') ON 20.12.2012. DURING THE COURSE OF SEARCH & SEIZURE OPERATIONS, C ASH WAS FOUND IN THE BANK LOCKER OF THE ASSESSEE. DURING THE COURSE OF SEARCH & SEIZURE OPERATION, A STATEMENT WAS RECORDED ON 8.1.2013 AND WHILE ANSWERING TO THE STATEMENT, THE ASSESSEE ADMITTED THAT CASH F OUND DURING THE COURSE OF SEARCH REPRESENTS PROFESSIONAL INCOME EAR NED FOR THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2013-14. THE ASSE SSEE HAS FILED RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S 1 53A OF THE ACT, AND ADMITTED ADDITIONAL INCOME DISCLOSED DURING THE COU RSE OF SEARCH OF ` 30 LAKHS AS HIS PROFESSIONAL RECEIPTS AND OFFERED NIL TOTAL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT, ON 11.3.2015 ACCEPTI NG THE NIL INCOME RETURNED BY THE ASSESSEE. 3. SUBSEQUENTLY, PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WAS INITIATED BY ISSUE OF NOTICE DATED 11.3.2015, TO SH OW CAUSE AS TO WHY AN ORDER IMPOSING A PENALTY SHOULD NOT BE MADE U/S 271 AAB OF THE ACT. IN RESPONSE TO PENALTY NOTICE, THE ASSESSEE FILED HIS REPLY VIDE LETTER DATED 19.6.2015 AND SUBMITTED THAT THE CASH FOUND DURING THE COURSE OF SEARCH REPRESENTS PROFESSIONAL INCOME OF THE FINANC IAL YEAR RELEVANT TO ASSESSMENT YEAR 2013-14, THE DUE DATE OF FILING RET URN FOR THE ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 3 ASSESSMENT YEAR 2013-14 HAS NOT BEEN ENDED AS ON TH E DATE OF SEARCH, THEREFORE, THE SAME CANNOT BE CONSIDERED AS UNDISCL OSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS ADMITTED CASH FOUND DURING TH E COURSE OF SEARCH AS HIS PROFESSIONAL INCOME, SUBSTANTIATES THE MANNE R IN WHICH THE SAID UNDISCLOSED INCOME WAS DERIVED AND ALSO FURNISHES T HE RETURN OF INCOME FOR THE SPECIFIED PREVIOUS YEAR DECLARING SUCH UNDI SCLOSED INCOME THEREON, THEREFORE, NO PENALTY CAN BE LEVIED U/S 27 1AAB OF THE ACT. ALTERNATIVELY, THE ASSESSEE SUBMITTED THAT IN CASE, YOU ARE NOT SATISFIED WITH THE EXPLANATION, THEN THE LEVY OF PENALTY CANN OT EXCEED 10% OF THE ALLEGED UNDISCLOSED INCOME, IN AS MUCH AS I HAVE CO MPLIED WITH ALL THE 3 CONDITIONS STIPULATED IN SECTION 271AAB(A) OF THE A CT. 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE AND ALSO ANALYSIS OF THE PROVISIONS OF SECTION 271AAB O F THE ACT, OBSERVED THAT THE ASSESSEE HAS DISCLOSED UNDISCLOSED INCOME OF ` 30 LAKHS TOWARDS CASH FOUND DURING THE COURSE OF SEARCH AND ALSO ADMITTED SUCH UNDISCLOSED INCOME IN HIS RETURN OF INCOME FILED FO R THE SPECIFIED PREVIOUS YEAR. THE A.O. FURTHER OBSERVED THAT AS A DMITTED BY THE ASSESSEE HIMSELF, HE HAD NOT MAINTAINED REGULAR BOO KS OF ACCOUNTS TILL THE DATE OF SEARCH, ALTHOUGH THE ASSESSEE BEING A P ROFESSIONAL IS OBLIGED U/S 44AA OF THE ACT READ WITH RULE 6F OF THE INCOME TAX RULES, 1962 TO ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 4 MAINTAIN REGULAR BOOKS OF ACCOUNTS ON DAY TO DAY BA SIS. THE EXPLANATIONS GIVEN BY THE ASSESSEE THAT HE WOULD HA VE DISCLOSED THE AMOUNT AS HIS INCOME OF THE CURRENT YEAR, EVEN IF N O SEARCH HAD TAKEN PLACE AND HE HAS BEEN DISCLOSING PROFESSIONAL INCOM E YEAR AFTER YEAR IS NOT TENABLE AS THE ASSESSEE HAS BEEN DISCLOSING VER Y LOW AMOUNT OF PROFESSIONAL INCOME IN THE PRECEDING FINANCIAL YEAR S. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME IN HIS STATEMENT U/S 132(4) OF THE ACT, BUT HAS NEITHER BE EN ABLE TO SPECIFY THE MANNER IN WHICH SUCH INCOME WAS DERIVED NOR HAS BEE N ABLE TO SUBSTANTIATE THE MANNER IN WHICH THE UNDISCLOSED IN COME WAS DERIVED. THE CONDITIONS PRESCRIBED IN CLAUSE (A) & CLAUSE (B ) OF SUB SECTION 1 TO SECTION 271AAB OF THE ACT ARE NOT FULFILLED, THEREF ORE, THE CASE OF THE ASSESSEE FALLS UNDER CLAUSE (C) OF THE SAID SUB SEC TION, WHICH PRESCRIBES A MINIMUM PENALTY OF 30% OF THE UNDISCLOSED INCOME, ACCORDINGLY, LEVIED PENALTY OF 30% ON THE UNDISCLOSED INCOME OF ` 30 LAKHS, WHICH WORKED OUT TO ` 9 LAKHS U/S 271AAB OF THE ACT. 5. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE A.O. IS NOT JUSTIFIED IN IMPOSING PENALTY OF 30% ON UNDISCLOSED INCOME U/S 271AAB OF THE ACT, EVEN THOUGH THE ASSESSEE HAS ADMITTED THE UNDISCLOSED INCOME AND EXPLAINED THE MANNER IN WHIC H THE UNDISCLOSED ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 5 INCOME WAS DERIVED. THE ASSESSEE FURTHER SUBMITTED THAT THE CASH FOUND DURING THE COURSE OF SEARCH REPRESENTS HIS CU RRENT YEARS PROFESSIONAL INCOME DERIVED FROM VARIOUS SERVICES R ENDERED TO CLIENTS BUT NOT UNDISCLOSED INCOME. THE ASSESSEE FURTHER S UBMITTED THAT HE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS FOR THE FINA NCIAL YEAR AND ALSO FOR THE PRECEDING FINANCIAL YEARS AND HE HAS COMPILED H IS PROFESSIONAL RECEIPTS BASED ON THE CREDITS FOUND IN THE BANK STA TEMENTS. THEREFORE, TREATING CASH FOUND DURING THE COURSE OF SEARCH AS HIS UNDISCLOSED INCOME OUTSIDE THE BOOKS OF ACCOUNTS IS INCORRECT. HE FURTHER SUBMITTED THAT HE HAS EXPLAINED THE MANNER IN WHICH SUCH INCO ME HAS BEEN DERIVED AND ALSO INCLUDED SUCH INCOME IN THE INCOME TAX RETURN FILED FOR THE SPECIFIED PREVIOUS YEARS AND ALSO FILED RETURN OF INCOME ON OR BEFORE THE SPECIFIED DATE. THEREFORE, THE A.O. WAS ERRED IN IMPOSING PENALTY U/S 271AAB OF THE ACT. 6. THE CIT(A) AFTER CONSIDERING EXPLANATIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER IS JUSTIFIED IN CONSIDERING THE ADDITIONAL INCOME OF ` 30 LAKHS AS UNDISCLOSED INCOME AND INVOKING THE PROVISIONS OF SECTION 271AAB OF THE ACT. THE CIT(A ) FURTHER OBSERVED THAT SINCE THE ASSESSEE HAS ADMITTED ADDITIONAL INC OME OF ` 30 LAKHS AS HIS PROFESSIONAL INCOME FOR THE RELEVANT ASSESSMENT YEARS AND THE FACT THAT THE ASSESSING OFFICER HAS ACCEPTED INCOME DECL ARED BY THE ASSESSEE ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 6 IN THE ASSESSMENT PROCEEDINGS, AND ALSO EXPLAINED T HE MANNER IN WHICH THE OTHER PROFESSIONAL INCOME WAS DERIVED, THE A.O. IS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE DID NOT SPECIFY THE MANNE R IN WHICH UNDISCLOSED INCOME WAS DERIVED. THE CIT(A) FURTHER OBSERVED THAT THE A.O. WAS ERRED IN OBSERVING THAT THE ASSESSEE HAS N OT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 271AAB(A)&(B) OF TH E ACT. THE A.O. HIMSELF HAS ADMITTED THE INCOME DECLARED BY THE ASS ESSEE AND MADE NO FURTHER ADDITIONS TO THE INCOME OF THE ASSESSEE AND HENCE, THE QUESTION OF PAYMENT OF THE TAX TOGETHER WITH INTEREST, IF AN Y IN RESPECT OF UNDISCLOSED INCOME DOES NOT ARISE. THEREFORE, OPIN ED THAT THERE IS NO VIOLATION OF CLAUSE (C) OF SUB SECTION (1) OF SECTI ON 271AAB OF THE ACT. HOWEVER, THE CIT(A) FURTHER OBSERVED THAT THE ASSES SEE HAS ADMITTED UNDISCLOSED INCOME OF ` 30 LAKHS IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT, AND ALSO ADMITTED SUCH INCOME IN HIS RE TURN OF INCOME FILED FOR THE SPECIFIED PREVIOUS YEARS AND HENCE, THE ASS ESSEE HAS COMPLIED TO THE CONDITIONS STIPULATED U/S 271AAB OF THE ACT, AC CORDINGLY, DIRECTED THE A.O. TO LEVY PENALTY OF 20% INSTEAD OF 30% TO M EET BOTH THE ENDS OF JUSTICE. AGGRIEVED BY THE CIT(A) ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. 7. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) IS ERRED IN CONFIRMING PENALTY LEVIED BY THE A.O. U/S 271AAB OF THE ACT, ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 7 DESPITE THE ASSESSEE HAS EXPLAINED THE CASH FOUND D URING THE COURSE OF SEARCH AND ALSO SPECIFIED THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. THE A.R. FURTHER SUBMITTED THAT ASSESSEE BEING A PROFESSIONAL DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS FOR THE RELEVANT ASSESSMENT YEAR. THE A.R. FURTHER SUBMITTED THAT HAD HE BEEN MAINTAINED BOOKS OF ACCOUNTS AND DID NOT INCLUDE THE PROFESSIONAL RECEI PTS FOUND IN THE FORM OF CASH IN HIS BOOKS OF ACCOUNTS, THEN DEFINITELY S UCH INCOME WOULD FALL WITHIN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED U /S 271AAB OF THE ACT FOR THE PURPOSE OF LEVY OF PENALTY. SINCE, THE ASS ESSEE DID NOT MAINTAIN BOOKS OF ACCOUNTS AND ALSO EXPLAINS THE CASH FOUND DURING THE COURSE OF SEARCH AS HIS CURRENT YEARS PROFESSIONAL RECEIPTS, THE A.O. WAS ERRED IN IMPOSING PENALTY U/S 271AAB OF THE ACT. 8. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED ORDER OF THE CIT(A). THE D.R. FURTHER SUBMITTED THAT IT IS A FA CT THAT A SUM OF ` 30 LAKHS CASH WAS FOUND DURING THE COURSE OF SEARCH IN THE BANK LOCKER OF THE ASSESSEE AND ASSESSEE HIMSELF HAS ADMITTED CASH FOUND DURING THE COURSE OF SEARCH AS HIS UNDISCLOSED INCOME IN THE S TATEMENT RECORDED U/S 132(4) OF THE ACT, AND ALSO INCLUDED SUCH UNDIS CLOSED INCOME IN HIS RETURN OF INCOME FILED FOR THE SPECIFIED PREVIOUS Y EAR, THEREFORE, THE PROVISIONS OF SECTION 271AAB OF THE ACT CLEARLY ATT RACTS AND THE A.O. HAS ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 8 RIGHTLY LEVIED PENALTY U/S 271AAB OF THE ACT AND HI S ORDER SHOULD BE UPHELD. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE WHICH LEADS TO IMPOSITIO N OF PENALTY U/S 271AAB OF THE ACT ARE THAT DURING THE COURSE OF SEA RCH & SEIZURE OPERATION U/S 132 OF THE ACT, CASH OF ` 30 LAKHS WAS FOUND IN THE BANK LOCKER OF THE ASSESSEE. DURING THE COURSE OF SEARC H, WHILE RECORDING STATEMENT U/S 132(4) OF THE ACT, THE ASSESSEE ADMIT TED CASH FOUND DURING THE COURSE OF SEARCH REPRESENTS HIS PROFESSI ONAL RECEIPTS OF THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2013-14. THE A.O. IMPOSED PENALTY ON THE GROUND THAT IF SEARCH IS NOT TAKEN P LACE, THE ASSESSEE WOULD NOT HAVE DISCLOSED CASH FOUND DURING THE COUR SE OF SEARCH. THE A.O. FURTHER WAS OF THE OPINION THAT THE EXPLANATIO NS OFFERED BY THE ASSESSEE THAT HE WOULD HAVE DISCLOSED THE CASH AS H IS PROFESSIONAL INCOME EVEN NO SEARCH HAS BEEN TAKEN PLACE IS NOT A CCEPTABLE FOR THE REASON THAT THE ASSESSEE HAS DISCLOSED MEAGER INCOM E IN THE PREVIOUS FINANCIAL YEARS. ACCORDING TO THE A.O., PENALTY U/ S 271AAB OF THE ACT IS APPLICABLE, EVEN IF THE ASSESSEE HAS ADMITTED UNDIS CLOSED INCOME IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT. IT IS TH E CONTENTION OF THE ASSESSEE THAT CASH FOUND DURING THE COURSE OF SEARC H REPRESENTS ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 9 PROFESSIONAL INCOME OF THE CURRENT FINANCIAL YEAR, BUT NOT UNDISCLOSED INCOME AS DEFINED U/S 271AAB OF THE ACT. THE ASSES SEE FURTHER CONTENDED THAT HE HAD EXPLAINED CASH FOUND DURING T HE COURSE OF SEARCH AND ALSO SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, THEREFORE, PENALTY U/S 271AAB OF THE ACT CANNOT BE IMPOSED. 10. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIALS ON RECORD, WE FIND THAT THE ASSESSEE HAS EXPLAINED CASH FOUND DURING THE COURSE OF SEARCH AS HIS PROFESSIONAL INCOME OF THE CURRENT YE AR RELEVANT TO ASSESSMENT YEAR 2013-14. THE ASSESSEE ALSO SPECIFI ES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. WE FURTHER OBSE RVED THAT THE ASSESSEE IS NOT MAINTAINING REGULAR BOOKS OF ACCOUN TS FOR THE CURRENT FINANCIAL YEAR AND ALSO FOR THE PREVIOUS FINANCIAL YEARS. HAD HE BEEN MAINTAINED BOOKS OF ACCOUNTS FOR THE CURRENT FINANC IAL YEAR AND NOT INCLUDED CASH FOUND DURING THE COURSE OF SEARCH IN HIS BOOKS OF ACCOUNTS, THEN DEFINITELY THE SAID CASH COMES WITHI N THE PURVIEW OF UNDISCLOSED INCOME OF SPECIFIED PREVIOUS YEAR AS DE FINED U/S 271AAB OF THE ACT. SINCE, THE ASSESSEE DID NOT MAINTAIN REGU LAR BOOKS OF ACCOUNTS AND ALSO THE TIME LIMIT FOR FILING OF RETURN OF INC OME FOR THE SPECIFIED YEAR IS NOT EXPIRED AS ON THE DATE OF SEARCH, THE C ASH FOUND DURING THE COURSE OF SEARCH CANNOT BE CONSIDERED AS UNDISCLOSE D INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271 AAB OF THE ACT. THEREFORE, WE ARE OF ITA NO.64/VIZAG/2017 PILLALA RAMAKRISHNA RAO, VSKP 10 THE CONSIDERED VIEW THAT THE EXPLANATIONS OFFERED B Y THE ASSESSEE THAT HE WOULD HAVE DISCLOSED CASH FOUND DURING THE COURS E OF SEARCH AS HIS PROFESSIONAL RECEIPTS FOR THE YEAR 2013-14, EVEN NO SEARCH WOULD HAVE BEEN TAKEN PLACE, APPEARS TO BE REASONABLE AND BONA FIDE. HENCE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN IMPOSING PENALTY U/S 271AAB OF THE ACT. ACCORDINGLY, WE DIRECT THE A.O. TO DEL ETE PENALTY LEVIED U/S 271AAB OF THE ACT. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7 TH JUN17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 7.6.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT PILLALA RAMAKRISHNA RAO, FLAT NO .101, FAIR FIELDS APARTMENTS, KIRLAMPUDI LAYOUT, VISAKHAPATNAM 2. / THE RESPONDENT THE ACIT, CENTRAL CIRCLE-2, VIS AKHAPATNAM 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM