M/s. Krishna Sai Constructions, Hyderabad V. ITO, Ward-7(2), Hyderabad

ITA 649/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53783 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N H NAYAK
• Assessee Lawyers: G KALYAN DAS
• Keywords: Unexplained investment
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER & SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.649/HYD/2011 ASSESSMENT YEAR 2003-04 M/S KRISHNA SAI CONSTRUCTIONS, HYDERABAD. ( PAN AAFFK8709H ) VS THE ITO, WARD 7(2), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI G. KALYANDAS RESPONDENT BY : SHRI N.H. NAYAK DATE OF HEARING : 28.11.2011 DATE OF PRONOUNCEMENT: 28.11.2011 ORDER PER BENCH: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-VIJAYAWADA D ATED 31.1.2011 AND IT PERTAINS TO THE ASSESSMENT YEAR 20 03-04. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN IT S APPEAL: 1. THE CIT(A) IS CONTRARY TO LAW AND THE FACTS. 2. THE CIT(A) ERRED IN SUSTAINING PENALTY RS.99,776 /- U/S 271(1)(C) OF THE IT ACT, ON THE GROUND THAT THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE THE ASSESSING OFFICER. 3. THE CIT(A) FAILED TO NOTE THAT THE ASSESSING OFF ICER DID NOT PROVIDE ANY OPPORTUNITY TO THE ASSESSEE IN THE PENALTY PROCEEDINGS. ITA NO.649/HYD/2011 M/S KRISHNA SAI CONSTRUCTIONS, HYD. 2 4. AUTHORITIES BELOW FAILED TO NOTE THAT THE LETTER DATED 26.12.2008 WAS NOT SERVED ON THE ASSESSEE REQUIRING COMPLIANCE, ALTHOUGH THE LETTER ALLEGED TO HAVE BEE N FIXED. 5. THE ASSESSEE CONTENDS PASSING PENALTY ORDER WITHOUT FRESH OPPORTUNITY BY NEW ENCUMBENT IS BAD I N LAW. 6. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE CONTENDS CIT(A) ERRED IN SUSTAINING PENALTY, WHILE EXPLANATION WAS FILED BEFORE HIM. SUSTAINING PENAL TY IGNORING EXPLANATION IS BAD IN LAW. 7. THE CIT(A) FAILED TO NOTE THAT MERE ADDITION IN THE ASSESSMENT ORDER DISBELIEVING EVIDENCE OF CAPITAL CONTRIBUTION OF RS.2,50,000/- BY SHRI KESAVA REDDY IS BAD IN LAW. 8. THE AUTHORITIES BELOW OUGHT TO HAVE DELETED PENA LTY AS THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS AN D EXPLANATIONS WERE BONA FIDE AND THAT THERE WAS NO MENSERA ON THE PART OF THE ASSESSEE. 9. THE ASSESSEE FURTHER CONTENDS ASSESSMENT OF CAPITAL CONTRIBUTION OF MR. KESAVA REDDY IN THE FIR ST YEAR OF ASSESSEES BUSINESS AS UNDISCLOSED INCOME, AND CONSEQUENT LEVY OF PENALTY IS BAD IN LAW. 10. THE ASSESSEE CONTENDS THAT THE CAPITAL CONTRIBU TION OF MR. KESAVA REDDY, IN ANY CASE UNDER LAW WAS REQUIRED TO BE ASSESSED IN HIS PERSONAL ASSESSMENT AND CONSEQUENT PENALTY IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. 11. THE ASSESSEE CONTENDS MR. KESAVA REDDY HAVING ADMITTED HIS CAPITAL CONTRIBUTION WITH EVIDENCE ADDITION IN THE HANDS OF THE ASSESSEE AND CONSEQUEN T PENALTY IS BAD IN LAW. ITA NO.649/HYD/2011 M/S KRISHNA SAI CONSTRUCTIONS, HYD. 3 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE FIRM FILED ITS RETURN OF INCOME ON 21.11.2003 FOR THE ASSESSME NT YEAR 2003-04 DECLARING INCOME OF RS.29,240/-. THE ASSES SING OFFICER COMPLETED THE ASSESSMENT U/S 144 OF THE INC OME TAX ACT, 1961 ON 31.3.2006 DETERMINING THE TOTAL IN COME AT RS.23,09,240/- WHICH INCLUDES ADDITION OF RS.22,80, 000/-. A NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT WAS IS SUED AND SERVED ON THE ASSESSEE ALONG WITH THE ASSESSMENT OR DER ON 12.4.2006. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICE R, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-VI, HYDERABAD. THE CIT (A) VIDE HIS ORDER NO.0155/06- 07/CIT(A) VI/07-08 DATED 31.3.2008 GRANTED RELIEF TO THE EXTENT OF RS.19,85,273/-. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) IN NOT GR ANTING THE FULL RELIEF, THE ASSESSEE PREFERRED AN APPEAL BEFORE US. THE TRIBUNAL VIDE THEIR ORDER DATED 18.6.2010 IN IT A NO.1244/HYD/2008 DISMISSED THE APPEAL OF THE ASSESS EE SINCE THE ASSESSEE DID NOT RESPOND TO THE NOTICES I SSUE TO HIM. THE PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE U/S 271(1)(C) OF THE IT ACT. 6. AT THE TIME OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT TH E ASSESSING OFFICER HAS WRONGLY CONFIRMED THE PENALTY IN DISPUTE WITHOUT APPRECIATING THE EXPLANATIONS GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER AND ALSO FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT GIVEN SUFFICIENT OPPORTUN ITY TO PUT FORTH HIS CASE. HE SUBMITTED THAT THE NOTICE S ERVED ON 26.12.2008 WAS NOT RECEIVED BY THE ASSESSEE, AND WI THOUT ITA NO.649/HYD/2011 M/S KRISHNA SAI CONSTRUCTIONS, HYD. 4 SERVING PROPER NOTICE ON THE ASSESSEE THE PENALTY PROCEEDINGS HAS BEEN INITIATED AGAINST THE ASSESSEE . HE REQUESTED THAT THE PENALTY IN DISPUTE MAY BE DISMIS SED. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE T HROUGH THE RECORDS. IN THIS CASE, AN ADDITION HAS BEEN MA DE ON ACCOUNT OF UNEXPLAINED INVESTMENT. ACCORDING TO TH E ASSESSEE, SHRI KESAVA REDDY T RAISED FUNDS FROM SAL E OF AGRICULTURAL LAND AT RS.2.50 LAKHS AND THE SAME WAS INVESTED BY HIM IN THE FIRM. ACCORDING TO THE LOWE R AUTHORITIES, THE ASSESSEE HAS NOT PRODUCED ANY EVID ENCE REGARDING THIS INVESTMENT. FURTHER, THE PENALTY HA S BEEN CONFIRMED ON THE ASSESSEE ON THE REASON THAT THE TR IBUNAL HAS CONFIRMED THE ADDITION ON THIS ACCOUNT. IN OUR OPINION, PENALTY PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME SHAL L BE PROVED EVEN AT THE STAGE OF PENALTY PROCEEDINGS. T HE LOWER AUTHORITIES HAVE NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS DELIBERATELY CONCEALED THE IN COME PARTICULARS. MORESO, THE ASSESSEE HAS FILED CONFIR MATION LETTER FROM THE PARTNER SHRI T. KESAVA REDDY THAT H E HAS INVESTED THE MONEY. IN TURN SHRI KESAVA REDDY ALSO CONFIRMED THE SAME. BEING SO, THE EXPLANATION OFFE RED BY THE ASSESSEE IS REASONABLE UNLESS AND UNTIL THE LOW ER AUTHORITY BROUGHT ON RECORD TO SHOW THAT THE EXPLAN ATION GIVEN BY THE ASSESSEE IS A BOGUS ONE OR UNTENABLE, THE ITA NO.649/HYD/2011 M/S KRISHNA SAI CONSTRUCTIONS, HYD. 5 PENALTY CANNOT BE LEVIED. IN OUR OPINION, THIS IS NOT A FIT CASE FOR LEVY OF PENALTY. ACCORDINGLY, THE PENALTY IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON: 28.11.2011 SD/- SD/- (CHANDRA POOJARI) ( H.S. SIDHU ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH NOVEMBER, 2011 COPY FORWARDED TO: 1. M/S DEVA & CO., CHARTERED ACCOUNTANTS, FLAT NO.303, 5-9-42/2, GANDHI MEDICAL COLLEGE, HYDERABAD-63. 2. THE ITO, WARD 7(2), HYDERABAD 3. THE CIT(A) VI, VIJAYAWADA & HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/