ACIT, Hyderabad V. M/s. Bhooratnam Constructions Co.Pvt.LtdDCIT, Hyderabad

ITA 74/HYD/2011

• Counselvise Citation: 7422514 RSA 2011
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C P RAMASWAMY
• Assessee Lawyers: V SRINIVAS; R LAXMAN
• Keywords: Unexplained investment; Peak credit
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER 73 & 74/HYD/2011 ASSESSMENT YEAR 2003-04 & 2004-05 THE ACIT, CENTRAL CIRCLE 5, HYDERABAD VS SHRI BHOORATNAM CONSTRUCTIONS COMPANY, RP ROAD, HYDERABAD (PAN AAACJ 5066 A) APPELLANT RESPONDENT 72/HYD/2011 ASSESSMENT YEAR 2007-08 SHRI BHOORATNAM CONSTRUCTIONS COMPANY, RP ROAD, HYDERABAD (PAN AAACJ 5066 A)THE VS DCIT, CENTRAL CIRCLE 5, HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI. C.P. RAMASWAMY RESPONDENT BY : SHRI V. SRINIVAS & SH. R. LAXMAN DATE OF HEARING : 22.9.2011 DATE OF PRONOUNCEMENT : 12.10.2011 ORDER PER CHANDRA POOJARI, A.M. THESE THREE APPEALS PREFERRED BY THE ASSESSEE AS WE LL AS THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS PASSE D BY THE CIT(A) VII, HYDERABAD AND PERTAINS TO THE ASSESSMENT YEARS 2003-04, 2004- 05 AND 2007-08. 2. THE COMMON GROUNDS IN ITA NOS.73 & 74/HYD/2011 ARE WITH REGARD TO ALLOWING THE CREDIT ON TDS. ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 2 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD RECEIVED A LOAN FROM THE CONTRACTEE BY WAY OF MOBILISATION OF ADVANCES IN ACCORDANCE WITH THE CONTRACT AGREEMENT FOR DEDUCTIO N OF TDS. THE ABOVE LOAN RECEIVED WAS ONLY IN THE NATURE OF ADVAN CE AND THE CONTRACTEE, HOWEVER, HAD MADE A TDS CERTIFICATE AND THE SAID TDS CERTIFICATES ARE NOT GIVEN CREDIT BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD NOT OFFERED CORRESPONDING TUR NOVER FOR TAX PURPOSE. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE TDS MADE WAS UNDER MISTAKEN IMPRESSION BY THE CONTRACTEE. THEREFORE, ONLY BECAUSE THE ASSESSEE DID NOT OFFER THE CORRESPONDING INCOME, THE ASSESSING OFFICER HAS NOT GIVEN THE CR EDIT TO TDS CERTIFICATE FILED BY THE ASSESSEE. THE CIT(A) ON A PPEAL ALLOWED THE APPEAL OF THE ASSESSEE ON THE REASON THAT THE ASSES SEES FUNDS HAVE BEEN RETAINED BY THE CONTRACTEE IN THE FORM OF TAX LIABILITY AND CLAIMED TO HAVE BEEN PAID TO GOVERNMENT ACCOUNT EVEN THOUGH THERE IS NO TAX LIABILITY. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05. 4. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE TRIBUNAL DATED 28.7.2011 IN ASSESSEES OWN CASE IN ITA NOS.183, 218, 219/HYD/2011 FOR THE ASSESSMENT YEARS 2004-05, 2004 -05 AND 2008- 09 WHEREIN THE TRIBUNAL ALLOWED THE APPEAL OF THE A SSESSEE AND DISMISSED THE APPEAL OF THE REVENUE BY HOLDING AS F OLLOWS: 2. AT THE OUTSET, WE FIND THAT THE COMMON ISSUE INVOLVED THESE APPEALS IS COVERED BY THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE, ACIT VS. M/S BHOORATHNAM & COMPANY, SECUNDERABAD IN ITA NO.1671/H/2010 FOR THE ASSESSMENT YEAR 2004-05 DATED 3.6.2011, TO WHICH ON E OF US WAS A PARTY TO THAT ORDER, IS COVERED IN FAVO UR OF THE ASSESSEE, WHEREIN THE TRIBUNAL HELD IN THE PENULTIM ATE PARA OF THEIR ORDER AS UNDER: WE FIND FORCE IN THE ARGUMENTS OF THE LEARNED COUNS EL FOR THE ASSESSEE. THERE IS NO DISPUTE THAT THERE HAS B EEN A TDS EITHER IN THE NAME OF THE COMPANY OR IN THE NAM E OF ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 3 THE DIRECTOR AND IT COVERS ALL THE TAX PAYABLE BY T HE ASSESSEE. AS PER RULE 37BA OF THE IT RULES, 1962 T HE ASSESSING OFFICER IS REQUIRED TO GIVE CREDIT FOR T HE TDS CERTIFICATE FILED BY THE ASSESSEE COMPANY EITHER IN THE NAME OF THE ASSESSEE OR IN THE NAME OF THE DIRECTOR . BEING SO WHEN DUE CREDIT HAS BEEN GIVEN TO THE TDS CERTIFICATE THERE WOULD BE NO BALANCE OF TAX PAYABL E BY THE ASSESSEE. ACCORDINGLY, THE ASSESSEE IS NOT LIA BLE FOR INTEREST U/S 234B AND 234C OF THE ACT. THE GROUNDS RAISED BY THE REVENUE ARE DEVOID OF MERIT AND THE S AME ARE DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE AND THE FACTS AND THE CIRCUMSTANCES OF BOTH THESE CASES ARE QUITE SIMILAR AND IDENTICAL, WE UPHOLD THE FINDINGS OF THE CIT(A) FOR THE YEARS UNDER CONSIDERATION AND REJECT THE GROUNDS RA ISED BY THE REVENUE IN THESE APPEALS. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE STRONGLY OPPOSED THE ARGUMENTS OF THE ASSESSEES CO UNSEL AND RELIED ON THE ORDER OF THE TRIBUNAL CHANDIGARH IN THE CASE OF PRADEEP KUMAR DHIR VS. ACIT(2008) (303 ITR 45 ) (AT) (CHANDIGARH BENCH). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF M/S LIMAK SOMA JV, HYDERABAD IN ITA NO S.99, 206 & 207/HYD/2010 VIDE ORDER DATED 24.9.2010 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD . ADMITTEDLY TAX WAS DEDUCTED FROM THE MOBILISATION ADVANCE. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE TDS SHALL BE GIVEN CREDIT WHEN THE CORRESPONDING INCOME WAS NOT OFFERED FOR TAXATION. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTI ON 199 OF THE ACT WHICH READ AS FOLLOWS: '199. (1) ANY DEDUCTION MADE IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER AND PAID TO TH E CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUC TION WAS MADE, OR OF THE OWNER OF THE SECURITY, OR OF TH E ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 4 DEPOSITOR OR OF THE OWNER OF PROPERTY OR OF THE UNI T-HOLDER, OR OF THE SHAREHOLDER, AS THE CASE MAY BE. (2) ANY SUM REFERRED TO IN SUB-SECTION (IA) OF SECT ION 192 AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TRE ATED AS THE TAX PAID ON BEHALF OF THE PERSON IN RESPECT OF WHOSE INCOME SUCH PAYMENT OF TAX HAS BEEN MADE. (3) THE BOARD MAY, FOR THE PUR0POSES OF GIVING CRE DIT IN RESPECT OF TAX DEDUCTED OR TAX PAID IN TERMS OF THE PROVISIONS OF THIS CHAPTER, MAKE SUCH RULES AS MAY BE NECESSARY, INCLUDING THE RULES FOR THE PURPOSES OF GIVING CREDIT TO A PERSON OTHER THAN THOSE REFERRED TO IN SUB- SECTION (1) AND SUB-SECTION (2) AND ALSO THE ASSESS MENT YEAR FOR WHICH SUCH CREDIT MAY BE GIVEN.' FROM THE THIRD MEMBER DECISION OF THE CHANDIGARH BENCH OF THIS TRIBUNAL IT APPEARS THAT SECTION 199 WAS AMENDED BY FINANCE ACT, 1987. TILL JUNE 1, 1987 TH E LANGUAGE EMPLOYED BY THE PARLIAMENT IN SECTION 199 WAS DIFFERENT INSOFAR AS IT PROVIDED GIVING CREDIT TO T HE ASSESSEE IN RESPECT OF TDS FOR THE ASSESSMENTS IMMEDIATELY FOLLOWING THE ASSESSMENT YEAR. HOWEVER , BY FINANCE ACT, 1987 THE LANGUAGE OF SECTION 199 WAS SUBSTANTIALLY MODIFIED TO GIVE CREDIT TO THE TDS IN RESPECT OF THE INCOME WHICH IS ASSESSABLE. WHILE TAKING NO TE OF THE AMENDMENT MADE BY FINANCE ACT, 1987, THE LEARNE D JUDICIAL MEMBER HAS OBSERVED AS FOLLOWS: 'IT MAY BE PERTINENT TO MENTION THAT SECTION 199 QU OTED ABOVE IS THE SECTION AS AMENDED FROM TIME TO TIME A ND AS APPLICABLE FOR THE ASSESSMENT YEAR 2002-03. TIL L JUNE 1, 1987, THE LANGUAGE OF SECTION 199 WAS DIFFERENT IN SO FAR AS IT PROVIDED FOR GIVING CREDIT TO THE ASSESSE E IN RESPECT OF TDS IN THE ASSESSMENT FOR THE IMMEDIATEL Y FOLLOWING ASSESSMENT YEAR. BY THE FINANCE ACT, 198 7, THE LANGUAGE OF SECTION 199 WAS MODIFIED TO THE EXT ENT THAT THE CREDIT FOR THE TAX DEDUCTED AT SOURCE WAS PROVIDED TO BE GIVEN IN THE ASSESSMENT YEAR IN WHIC H TDS IS ASSESSABLE. AS AGAINST THE WORDS 'CREDITS S HALL BE GIVEN FOR SUCH ASSESSMENT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE', THE SECTION PROVIDED 'THE CR EDIT SHALL BE GIVEN FOR THE IMMEDIATELY FOLLOWING YEAR UNDER THIS ACT'. THUS, THE LEGISLATURE HAVING MODIFIED T HE ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 5 LANGUAGE OF SECTION 199 WITH EFFECT FROM JUNE 1, 19 87, IN MY CONSIDERED VIEW, THERE IS NO ESCAPE FROM THE VIE W THAT THE CREDIT FOR TDS IS TO BE GIVEN IN THE YEAR IN WHICH THE INCOME IN RESPECT OF WHICH TAX HAS BEEN DEDUCTE D AT SOURCE IS ASSESSABLE TO TAX. IT IS NOT DISPUTED THAT THE ASSESSEE HAS NOT OFFER ED THE INCOME CREDITED BY THE THREE PARTIES IN RESPECT OF WHICH TAX HAS BEEN DEDUCTED AT SOURCE ON THE GROUND THAT INCOME IS OFFERED TO TAX ON RECEIPT BASIS AND THE AMOUNTS HAVE NOT IN FACT BEEN RECEIVED. THE ASSESS ING OFFICER HAS, IN MY VIEW, BEEN REASONABLE TO GIVE CR EDIT FOR THE TAX DEDUCTED AT SOURCE TO THE EXTENT THE INCOME HAS BEEN OFFERED FOR TAXATION BY THE ASSESSEE IN THE YE AR UNDER APPEAL. AS POINTED OUT EARLIER, THE ASSESSEE HAS DISCLOSED THE AMOUNT OF TDS AS INCOME IN THE YEAR U NDER APPEAL AS PROVIDED UNDER THE STATUTE AND CREDIT TO THE EXTENT TDS RELATES TO SUCH INCOME HAS BEEN ALLOWED BY THE ASSESSING OFFICER.' THE THIRD MEMBER WHILE RESOLVING THE DISPUTED QUEST ION FOUND THAT GIVING CREDIT TO TDS HAS NOTHING TO WITH THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. IT IS OBSERVED THAT SECTION 199 OF THE ACT PROVIDES FOR G IVING CREDIT TO THE TDS IN RESPECT OF THE INCOME WHICH IS OFFERED FOR TAXATION. THE THIRD MEMBER HAS OBSERVE D AS FOLLOWS: ' . I HAVE NO QUARREL WITH THE ABOVE PROPOSITIO N BUT I AM UNABLE TO AGREE THAT THE CREDIT FOR THE TAX DEDU CTED AT SOURCE IS TO BE ALLOWED AS PER ANY SYSTEM OF ACCOUN TING FOLLOWED BY THE ASSESSEE. IN THE PRESENT CASE, THE RE IS NO DISPUTE REGARDING CASH SYSTEM OF ACCOUNTING FOLL OWED BY THE ASSESSEE AND HIS INCOME HAS BEEN COMPUTED AS PER THE ABOVE SYSTEM. NO ADDITION HAS BEEN MADE FO R INCOME WHICH THE ASSESSEE WAS 'ENTITLED' TO RECEIVE BUT DID NOT ACTUALLY RECEIVE. NO CREDIT FOR TDS ON SUC H NON- ASSESSABLE INCOME COULD BE CLAIMED. BENEFIT FOR TH E TAX DEDUCTED AT SOURCE IS TO BE ALLOWED AS PER STATUTOR Y PROVISIONS CONTAINED IN SECTION 199 OF THE ACT. IT HAS NOTHING TO DO WITH THE SYSTEM OF ACCOUNTING FOLLOWE D BY THE ASSESSEE. FURTHER THERE IS NO DISPUTE THAT THE REVENUE SHOULD HAVE A CONSISTENT APPROACH BUT THE ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 6 ABOVE PRINCIPLE OF LAW HAS NO APPLICATION WHERE INTERPRETATION OF THE STATUTORY PROVISIONS IS INVOL VED. IF IN A PARTICULAR YEAR A STATUTORY PROVISION WAS WRONGLY INTERPRETED AND APPLIED, THE REVENUE CAN CORRECT TH E ERROR AS INCOME IS REQUIRED TO BE COMPUTED BY CORRE CTLY APPLYING AND ENFORCING LAW. ERROR CANNOT BE PERPET UATED. THEREFORE, ON CORRECT INTERPRETATION OF SECTION 199 AND FOR THE REASONS GIVEN ABOVE, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS RIGHT IN ALLOWING CREDIT FOR TAX DEDUCTED AT SOURCE ON PRO-RATA BASIS. THE CREDIT F OR THE BALANCE AMOUNT MENTIONED IN THE CERTIFICATE IS TO B E ALLOWED IN THE YEAR IN WHICH SUCH INCOME IS DISCLOS ED OR IS OTHERWISE FOUND TO BE ASSESSABLE BY THE REVENUE. ' IN VIEW OF THE MAJORITY OPINION OF THIS TRIBUNAL IT IS VERY CLEAR THAT UNLESS THE ASSESSEE OFFERS THE INCOME FO R TAXATION, THE TDS CANNOT BE GIVEN CREDIT. A SIMILA R VIEW WAS TAKEN BY MAJORITY OPINION BY THE MUMBAI BENCH O F THIS TRIBUNAL IN SMT. VARSHA G. SALUNKE VS. DCIT (2 006) 98 ITD 141 (TM). WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THIS TRIBUNAL IN PROGRESSIVE CONSTRUCTION LTD. THIS TRI BUNAL AFTER CONSIDERING THE LANGUAGE OF SECTION 199 FOUND THAT NEXUS BETWEEN TDS AND THE CORRESPONDING INCOME ELEMENT WOULD REMAIN NOTIONAL. HOWEVER, THE AMENDMENT MADE BY THE PARLIAMENT BY FINANCE ACT, 1987 WAS NOT TAKEN INTO CONSIDERATION BY THE BENCH WHILE DECIDING THE CASE IN PROGRESSIVE CONSTRUCTION LTD. (SUPRA). THIS BENCH OF THE TRIBUNAL IN PROGRESSIVE CONSTRUCTION LTD. APPARENTLY FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN TOYO ENGINEERING ( I) LTD.. HOWEVER, THE CHANDIGARH BENCH OF THIS TRIBUN AL AFTER CONSIDERING THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN TOYO ENGINEERING (I) LTD. FOUND TH AT UNLESS INCOME IS OFFERED FOR TAXATION CREDIT CANNOT BE GIVEN FOR THE TDS. AS RIGHTLY SUBMITTED BY THE LEA RNED DR, THE DECISION OF THE THIRD MEMBER OF THIS TRIBUN AL WOULD HAVE MORE WEIGHTAGE THAN THE DIVISION BENCH O F THIS TRIBUNAL. IN OTHER WORDS, THE MAJORITY OPINIO N EXPRESSED BY THE CHANDIGARH BENCH OF THE TRIBUNAL I N PRADEEP KUMAR DHIR (SUPRA) WOULD HAVE A BINDING ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 7 NATURE RATHER THAN THIS TRIBUNAL'S DECISION IN PROG RESSIVE CONSTRUCTION LTD. (SUPRA). EVEN OTHERWISE, AS FOUN D BY THE TRIBUNAL IN PROGRESSIVE CONSTRUCTION LTD. (SUPR A) THE MAJORITY OPINION EXPRESSED BY THE CHANDIGARH BENCH WOULD PREVAIL. THE LEARNED COUNSEL FOR THE ASSESSEE MADE AN ATTEMP T TO DISTINGUISH THE DECISION OF THE CHANDIGARH BENCH OF THIS TRIBUNAL ON THE GROUND THAT THE ASSESSEE BEFORE THE CHANDIGARH BENCH WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. HOWEVER, IN THE CASE BEFORE US THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING. THIS ISSUE WAS ALSO CONSIDERED BY THE THIRD MEMBER IN CHANDIGARH BENCH OF THIS TRIBUNAL AND FOUND THAT ME THOD OF ACCOUNTING HAS NOTHING TO DO IN GIVING CREDIT TO THE TDS. IN VIEW OF THE ABOVE OBSERVATION OF THE THIRD MEMBER AND THE MAJORITY DECISION OF THE CHANDIGARH BENCH OF THIS TRIBUNAL, WE FIND NO SUBSTANCE IN THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE. MOREOVER, ADMITTEDLY, THE ASSESSEE HAS NOT OFFERED THE CORRESPONDING INCOME FOR TAXATION AND THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION ALSO. IN VIEW OF THE ABOVE DECISION, WE ARE UNABLE TO UPHOLD THE ORDER O F THE CIT(A) AND THE SAME IS SET ASIDE AND THE ORDER OF T HE ASSESSING OFFICER IS RESTORED. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE ALLOWED. 7. THE ABOVE ORDER OF THE TRIBUNAL WAS BASED ON TH E 3 RD MEMBER DECISION CITED SUPRA WHICH WAS NOT CONSIDERED BY TH IS TRIBUNAL IN THE ASSESSEES OWN CASE WHILE DECIDING APPEALS IN ITA N OS.183, 218 & 219/HYD/2011, AS SUCH, THE ABOVE ORDER IN ASSESSEE S OWN CASE CITED BY THE AR IS PER INCURIAM AND WE ARE INCLINED TO FOLLOW THE CORRECT ORDER OF THIS TRIBUNAL IN THE CASE OF M/S LIMAK SOM A JV CITED SUPRA WHEREIN THIS ISSUE WAS DECIDED AGAINST THE ASSESSE E AND IN FAVOUR OF THE REVENUE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS ALLOWED. 8. THE NEXT GROUND IN I TA NO.73/H/2011 IS THAT TH E CIT(A) ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE AND ALLOWE D DELETION OF ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 8 ADDITION MADE TOWARDS PIPE DAMAGES AT RS.78,808/-, SCRAP SALES AT RS.48,890/-, SUNDRY BALANCE AT RS.140,582/- 9. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER ADDED PIPE DAMAGES AT RS.78,808/- AS OTHER INCOME. SIMILARLY, HE HAS ADDED SALES OF SCRAP AT RS.48,083/- AND SUNDRY BALANCE WR ITE OFF AT RS.1,40,582/-. THE CIT(A) WAS OF THE OPINION THAT PIPE DAMAGES AND SALE OF SCRAP ARE PERTAINED TO GOODS. THE COLLECTI ON RECEIVED ON ACCOUNT OF PIPE DAMAGES AND MONEY RECEIVED ON ACCOU NT OF SALE OF SCRAP IS RELATED TO TURNOVER. HE ESTIMATED THE PRO FIT ON THIS AT 9%. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE RELATING TO PIPE DA MAGES AND SALE OF SCRAP TO BE CONSIDERED AS INCOME OF THE ASSESSEE IN ITS ENTIRETY AND NOT ON PERCENTAGE BASIS. THE WHOLE TURNOVER HAS TO BE CONSIDERED AS INCOME OF THE ASSESSEE AS THE EXPENDITURE IF ANY, I NCURRED TO EARN THIS INCOME DEEMED TO BE ALLOWED AS THE ASSESSEE HAVE CL AIMED ALL EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT AND ONCE AGAIN GIVING DEDUCTION WOULD AMOUNTS TO DOUBLE DEDUCTION. ACCOR DINGLY, WE REVERSE THE ORDER OF THE CIT(A) AND THIS ISSUE IS D ECIDED IN FAVOUR OF THE REVENUE. 11. NOW COMING TO THE TREATMENT OF SUNDRY BALANCE WRITE OFF AT RS.1,40,582/- AS INCOME OF THE ASSESSEE, THE LEARNE D COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGEMENT OF THE SUPREME COU RT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS (P) LTD. (SC) (236 IT R 518) WHEREIN HELD THAT: THE PRINCIPLE THAT EXPIRY OF THE PERIOD OF LIMITAT ION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTIN GUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FRO M ENFORCING THE DEBT, HAS BEEN WELL SETTLED. IF THAT PRINCIPLE IS APPLIED, IT IS CLEAR THAT MERE ENTRY IN THE BOOK S OF ACCOUNT OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 9 WILL NOT BY ITSELF CONFER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. 12. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE RELIED ON THE JUDGEMENT IN THE CASE OF T.V. SUNDARA M IYENGAR AND SONS LTD. (222 ITR 344) (SC) WHEREIN HELD THAT: THAT IF A COMMONSENSE VIEW OF THE MATTER WERE TAKE N, THE ASSESSEE, BECAUSE OF THE TRADING OPERATION, HAD BECOME RICHER BY THE AMOUNT WHICH IT TRANSFERRED TO ITS PROFIT AND LOSS ACCOUNT. THE MONEYS HAD ARISEN OUT OF ORDINARY TRADING TRANSACTIONS. ALTHOUGH THE AMOUNT S RECEIVED ORIGINALLY WERE NOT OF INCOME NATURE, THE AMOUNTS REMAINED WITH THE ASSESSEE FOR A LONG PERIO D UNCLAIMED BY THE TRADE PARTIES. BY LAPSE OF TIME, THE CLAIM OF THE DEPOSIT BECAME TIME BARRED AND THE AMO UNT ATTAINED TOTALLY DIFFERENT QUALITY. IT BECAME A DE FINITE TRADE SURPLUS. THE ASSESSEE ITSELF HAD TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AMOUNT TO ITS PROFIT AND LOSS ACCOUNT. THE AMOUNTS WERE ASSESSABLE IN THE HANDS OF THE ASSESSEE. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR OPINION, U/S 41(1) ANY DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF L OSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBS EQUENTLY DURING THIS ASSESSMENT YEAR IF THERE IS CESSATION OF LIABILITY EVEN BY UNILATERAL ACT BY ASSESSEE IT SHOULD BE TREATED AS INCOME OF THE A SSESSEE. 14. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGEMENT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS (P) LTD. ( SC) (236 ITR 518) FOR THE PROPOSITION THAT UNILATERAL WRITE OFF CANNO T BE TREATED AS INCOME OF THE ASSESSEE. WE HAVE GONE THROUGH THIS JUDGEMEN T. THIS JUDGEMENT WAS DELIVERED IN RESPECT OF ASSESSMENT YEAR 1965-66. HOWEVER, THERE WAS AN AMENDMENT TO THIS SECTION BY FINANCE ACT, 1996 WITH EFFECT FROM 1.4.1997 THROUGH WHICH EXPL ANATION 1 TO SECTION 41(1) WAS INSERTED AS PER WHICH REMISSION OR CESSAT ION OF ANY LIABILITY BY WAY OF WRITING OFF BY A UNILATERAL ACT TO BE CON SIDERED AS INCOME OF THE ASSESSEE. THIS AMENDMENT IS VERY MUCH APPLICABL E TO THE PRESENT ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 10 ASSESSMENT YEAR BEFORE US. IN VIEW OF THIS AMENDME NT, THE RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS M ISPLACED. ACCORDINGLY, THE ISSUE DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT. 15. IN THE RESULT, THE APPEALS IN ITA 73 & 74/H/20 11 ARE ALLOWED. 16. NOW COMING TO ITA NO.72/H/2011 THE ISSUE IS RE LATING TO CONFIRMING LEVY OF PENALTY U/S 271(1)(C ) OF THE AC T. 17. BRIEF FACTS OF THE ISSUE ARE THAT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, AN ANALYSIS OF SEIZED MATERIAL REVEALE D THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OUTSIDE THE REGULAR BOO KS OF ACCOUNT IN CASH AT RS. 2,77,55,211. FURTHER THE ASSESSEE MADE AN INVESTMENT IN IMMOVABLE PROPERTY AT RS. 70 LAKHS. THE TOTAL EXPE NDITURE COMES TO AROUND RS. 3,47,55,211. THE ASSESSEE HAD CASH INCO ME OF RS. 21,39,615. THUS THERE WAS AN EXCESS EXPENDITURE OF RS. 3,26,15,596 THAN CASH INCOME OF THE ASSESSEE. AS AGAINST THE E XPENDITURE OF RS. 3,26,15,596 THE ASSESSEE AFTER SEARCH DISCLOSED AN INCOME OF RS. 2,76,60,632 AS PEAK CREDIT. THE ASSESSING OFFICER AFTER CONSIDERING THIS MADE FURTHER ADDITION OF RS. 49,54,964. THIS ADDITION WAS NOT CONTESTED BY THE ASSESSEE IN ANY APPEAL BEFORE HIGH ER FORUM. AFTER CONCLUDING THE ASSESSMENT, THE ASSESSING OFFICER IN VOKED THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX A CT, 1961 AND LEVIED PENALTY OF RS. 16,65,384 ON THIS ACCOUNT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE ASSESSING OFFICER RECORDED THE FINDING IN THE ASSESSMENT ORDE R THAT THE ASSESSEE MADE AN INVESTMENT IN THE IMMOVABLE PROPERTY AT RS. 70 LAKHS WHICH IS OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAI NED THAT THE SAID FUNDS WERE GENERATED FROM THE REGULAR BUSINESS OF C IVIL CONSTRUCTION AND NOT RECORDED IN THE BOOKS OF ACCOUNT AND REQUES TED FOR TELESCOPING FOR THE CREDIT DETERMINED. THE ASSESSING OFFICER R ECORDED THE FINDING ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 11 THAT THE ASSESSEES EXPLANATION IS VERIFIED AND FOU ND TO BE SATISFIED AND HE ALSO STATED THEREIN THAT IN VIEW OF THE ASSESSE ES EXPLANATION, NO ADDITION IS CONSIDERED TO BE ADDED ON THIS ACCOUNT. HOWEVER, WHILE MAKING THE ADDITION, THE TOTAL UNACCOUNTED EXPENDIT URE IS WORKED OUT AS FOLLOWS: I) ILLEGAL EXPENSES - RS. 2,77,55,211 II) PURCHASE OF IMMOVABLE PROPERTY UNACCOUNTED - RS. 70,00,000 -------------------- TOTAL RS. 3,47,55,211 ============= 19. SINCE THE ASSESSEE HAD ALREADY ADMITTED RS. 2,7 6,60,632 AS ADDITIONAL INCOME FOR THIS LAPSE NOTICED BY SEARCH ACTION, HE FURTHER ADDED RS. 49,54,964 TOWARDS UNACCOUNTED INVESTMENT IN IMMOVABLE PROPERTY. THE ASSESSING OFFICER HAD TAKEN A CONTRA DICTORY STAND IN THE SAME ASSESSMENT ORDER WHILE MAKING THE ADDITION. O NCE HE RECORDED THE FACT THAT NO ADDITION IS CALLED FOR, HOWEVER, H E MADE ADDITION. AFTER MAKING THE ADDITION, THE ASSESSING OFFICER ALSO INI TIATED PENALTY PROCEEDINGS AND LEVIED PENALTY U/S. 271(1)(C) OF TH E ACT FOR THE LAPSE. HOWEVER, THERE IS NO CONCLUSIVE EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER REGARDING CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THESE CIRCUMS TANCES, WE ARE NOT INCLINED TO CONFIRM THE PENALTY. ACCORDINGLY, WE D ELETE THE PENALTY. 20. IN THE RESULT, THE BOTH THE APPEALS OF THE REVE NUE AND THE APPEAL OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCTOBER, 2011 SD/- G.C. GUPTA SD/- CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED THE 12 TH OCTOBER, 2011 ITA NO.72 TO 74 OF 2011 M/S BOORATHNAM CONSTRUCTIONS COMPANY, HYD. 12 COPY FORWARDED TO: 1. SHRI C.P. RAMASWAMI, ADVOCATE, FLAT NO.102 & 10 3, GITANJALI APARTMENTS, PLOT NO.108, SRINAGAR COLONY, HYDERABAD . 2. M/S BHOORATHNAM & COMPANY, 7-3-720, RP ROAD, SECUNDERABAD. 3. THE ACIT, CIRCLE 5, HYDERABAD 4. THE DCIT, CIRCLE 5, HYDERABAD 5. THE CIT(A) VII, HYDERABAD 6. THE CIT, HYDERABAD 7. THE DR, ITAT, HYDERABAD TPRAO