THE Dy. CIT, CENTRAL CIRCLE -2, Visakhapatnam V. M/s Meridian Promoters Pvt. Ltd., Visakhapatnam

ITA 75/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9940 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C.V.S. MURTHY
• Keywords: Search and seizure; Wrong claim
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 153A

Judgement Text

ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 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.NOS.74&75/VIZAG/2013 ( / ASSESSMENT YEARS: 2005-06 & 2006-07) DCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM VS. MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM [PAN: AACCM7712D ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SHRI C.V.S. MURTHY, AR / DATE OF HEARING : 27.07.2016 / DATE OF PRONOUNCEMENT : 12.08.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE ORDER OF CIT(A)-I, HYDERABAD DATED 29.11.2012 FOR T HE ASSESSMENT YEARS 2005-06 & 2006-07. SINCE THE FACTS ARE IDENT ICAL AND ISSUES ARE ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 2 COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PRIVAT E LIMITED COMPANY INCORPORATED IN THE MONTH OF FEBRUARY, 2002 IN THE NAME & STYLE OF M/S. MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM ENGAGED IN THE BUSINESS OF CONSTRUCTION OF APARTMENT COMPLEXES. THE ASSESSEE HAD FILED A RETURN OF INCOME ADMITTING TOTAL INCOME OF ` 31,29,500/-. SUBSEQUENTLY, THERE WAS A SEARCH AND SEIZURE OPERATION IN THE ASSESSEE S CASE. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO THE NOTICE ISSUED U/S 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLE D AS 'THE ACT') ADMITTING TOTAL INCOME AS ADMITTED IN THE ORIGINAL RETURN OF INCOME. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT DU RING THE COURSE OF SEARCH & SEIZURE OPERATIONS SOME INCRIMINATING MATE RIALS WERE FOUND AND SEIZED. THE COMPANY HAD EXECUTED THE FOLLOWING PROJECTS DURING THE FINANCIAL YEAR 2003-04 RELEVANT TO FINANCIAL YE AR 2002-03 TO 2005-06: (I) MERIDIAN TOWERS (II) MERIDIAN SEASHELLS (III) MERIDIAN SHIRE (IV) MERIDIAN ENCLAVE (V) MAHARSHI TOWERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A. O. FURTHER OBSERVED THAT THE ASSESSEE WAS GIVEN A DETAILED SHO W CAUSE LETTER ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 3 POINTING OUT THE DISCREPANCIES NOTICED AS PER THE S EIZED/IMPOUNDED MATERIAL AND AFTER CONSIDERING THE EXPLANATION OF T HE ASSESSEE, ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT. ACCORDING TO THE A.O., THE ASSESSEE HAS INCURRED LABOUR EXPEN SES - FICTITIOUS BOOK ENTRY FOR THE ASSESSMENT YEAR 2005-06 OF ` 36,26,032/-, FOR THE ASSESSMENT YEAR 2006-07 OF ` 1,17,50,529/-, LABOUR EXPENSES - CASH PAYMENTS FOR THE ASSESSMENT YEAR 2005-06 OF ` 17,20,000/-, FOR THE ASSESSMENT YEAR 2006-07 OF ` 38,97,000/-, SUPPRESSED TURNOVER IN MERIDIAN TOWERS OF ` 2,91,964/- AND ACCORDINGLY ASSESSMENT WAS COMPLETED. 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE CIT(A). 4. THE LD. CIT(A) SO FAR AS LABOUR EXPENSES FICTI TIOUS BOOK ENTRY IS CONCERNED DIRECTED THE A.O. TO RESTRICT THE DISALLO WANCE IN A.Y. 2005-06 TO 25% OF ` 36,26,032/- AND SO FAR AS LABOUR EXPENSES - CASH P AYMENTS ARE CONCERNED DIRECTED THE A.O. TO RESTRICT THE DIS ALLOWANCE OF EXPENDITURE TO 25% OF ` 17,20,000/- I.E. 25% OF ` 53,46,032/-. SO FAR AS SUPPRESSED TURNOVER IS CONCERNED, THE ASSESSEE I S NOT ABLE TO RECONCILE THE DIFFERENCE OF ` 2,91,964/- BEING THE DIFFERENCE BETWEEN THE NET PROJECT TURNOVER, ACCORDINGLY, CONFIRMED THE AD DITION. ASSESSEE ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 4 ACCEPTED AND PAID THE TAXES ACCORDINGLY. THEREAFTE R, THE A.O. HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND CALLED FOR THE EXPLANATION FROM THE ASSESSEE. THE ASSESSEE HA S SUBMITTED DETAILED EXPLANATION BEFORE THE A.O. THE RELEVANT PORTION O F THE EXPLANATION IS EXTRACTED AS UNDER: 4. IN VIEW OF THE ABOVE IN ORDER TO FINALIZE THE PE NALTY PROCEEDINGS U/S 271 (1)(C) THE ASSSESSEE WAS ASKED TO SHOW CAUS E AS TO WHY PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOSED FOR CONCEALMENT / FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME VIDE THIS OFFI CE LETTER DATED 03- 04-2010. IN REPLY THE ASSSESSEE FLIED HIS EXPLANATI ON ON 25-03-2010 WHEREIN HE SUBMITTED THAT AS UNDER: WITH REFERENCE TO YOUR ABOVE LETTER IT IS HEREBY MO ST RESPECTFULLY SUBMITTED THAT THE DEMANDS MENTIONED BY YOUR HONOUR IN THE ABOVE CITED LETTER AS PAYABLE BY OUR COMPANY REPRESENT DISPUTED TAXES AS THE RELEVANT APPEALS ARE PENDING IN HON'BLE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM. IN THIS CONNECTION, WE ALSO BRING TO YOUR KIND NOTICE THAT THE DEMAND OF RS 6,52,214/- RELATING TO THE ASST YE AR 2004-05 HAS BEEN NULLIFIED AS THE FIRST APPEAL WAS ALLOWED BY THE HO NBLE COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM BY GRANTING RELI EF TO OUR COMPANY. HOWEVER, THE OTHER DEMANDS ARE OUTSTANDING AS WE AR E NOT ABLE TO PAY THE SAME DUE TO OUR PRECARIOUS FINANCIAL POSITION, AS THE REAL ESTATE AND CONSTRUCTION SECTORS HAVE BEEN VERY MUCH SLOWED DOW N AND ARE FACING SEVERE RECESSION. SO WE ARE FACING SEVERE LIQUIDIT Y CRUNCH AND INFACT WE HAVE BEEN FACING LOT OF FINANCIAL PROBLEMS IN OUR D AY TO DAY BUSINESS. SO IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE FOR U S TO PAY EVEN A MINUTE PART OF THE SAID DEMANDS AT THIS CRITICAL POINT OF TIME. MOREOVER, WE ALSO HEREBY BRING TO YOUR KIND NOTICE THAT WE HAVE GOT S TRONG CASE IN APPEALS WHICH WARE PENDING BEFORE THE HONBLE INCOMETAX APPE LLATE TRIBUNAL, VISAKHAPATNAM. WE HAVE GOT ALL EVIDENCES AND SUPPOR TING DOCUMENTS IN SUPPORT OF OUR CONTENTIONS AND THE IMPUGNED SHARE I NVESTORS AND PERSONS WHO GAVE ADVANCES FOR PURCHASE OF FLATS ARE ALL CLE ARLY IDENTIFIABLE AND WELL ESTABLISHED PERSONALITIES IN THE SOCIETY AND C ONFIRMATIONS FROM THEM HAVE ALREADY BEEN FILED. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) VISAKHAPATNAM IN THE FIRST APPEAL DISMISS ED THESE APPEALS RELATING TO THE ASST YEAR 2003-04 ARBITRARILY AND I N A CRYPTIC MANNER AND HENCE OUR COMPANY HAS PREFERRED APPEALS SECOND APPE AL TO THE HONBLE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM AND WE ARE SURE TO GET RELIEF IN SECOND APPEAL. ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 5 REGARDING THE OTHER TWO APPEALS ALSO THOUGH WE GOT SUBSTANTIAL RELIEF IN THE ASST YEARS 2005-06 AND 2006-07, THE E STIMATION RATE ADOPTED BY THE HONBLE COMMISSIONER OF INCOMETAX (APPEALS), VISAKHAPATNAM WAS VERY HIGH AND UNREALISTIC IN ANY VIEW OF THE MATTER AND HENCE OUR COMPANY HAS PREFERRED SECOND APPEAL TO THE HONBLE INCOMETAX APPELLATE TRIBUNAL, VISAKHAPATNAM AND WE ARE VERY MUCH CONFID ENT TO GET SUBSTANTIAL RELIEF IN THESE APPEALS ALSO. WE THEREFORE PRAY YOUR HONOUR TO KINDLY KEEP THE I MPUGNED DEMANDS IN ABEYANCE TILL THE DISPOSAL OF THE RELEVA NT APPEALS BY THE HONBLE INCOMETAX APPELLATE TRIBUNAL, VISAKHAPATNAM IN THE INTERESTS OF JUSTICE. 5. THE A.O. AFTER CONSIDERING THE EXPLANATION OF TH E ASSESSEE LEVIED PENALTY U/S 271(1)(C) OF THE ACT BY OBSERVING AS UN DER: 6. THE ASESSEE'S EXPLANATION HAS BEEN CAREFULLY CON SIDERED. HOWEVER THE SAME IS FOUND TO BE NOT ACCEPTABLE AS THE EXPLA NATION IS VAGUE IN NATURE. AS SEEN FROM THE ASSESSEE'S EXPLANATION WIT H REGARD TO LEVY OF PENALTY THE ASSESSEE HAS NEITHER MADE ANY CONTENTIO N NOR SHOWN ANY SUBSTANTIAL GROUND AS TO WHY THE PENALTY U/S 271(1) (C) SHOULD NOT BE LEVIED IN HIS CASE. HE HAS SIMPLY SOUGHT TIME TO DE FER THE PENALTY PROCEEDINGS TILL THE DISPOSAL OF THE ASSSESSEE'S AP PEAL PENDING BEFORE THE ITAT FILED AGAINST THE ORDERS OF THE CIT(A), VISAKH APATNAM. AS SEEN FROM THE ABOVE, THE ASSESSEE HAS NOT OFFERE D ANY EXPLANATION ON THE ISSUES OR ON MERIT AS TO WHY PENALTY SHOULD NOT BE IMPOSED. FURTHER, THE ASSESSEE'S REQUEST TO KEEP THE PENALTY PROCEEDI NGS IN ABEYANCE TILL THE DISPOSAL OF ASSESSEE'S APPEAL FILED BEFORE THE ITAT, VISAKHAPATNAM CANNOT BE CONSIDERED AS PENALTY IS BEING LEVIED ON THE PORTION WHICH HAS BEEN CONFIRMED BY THE COMMISSIONER OF INCOME TAX (A PPEALS), VISAKHAPATNAM. 7. IN LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE ASSESSEE HAD RESORTED TO CONCEALMENT OF IN COME OF LABOUR EXPENSES, THROUGH FICTITIOUS BOOKS ENTRY, LABOUR EX PENSES BY CASH PAYMENTS AND SUPPRESSED GROSS RECEIPTS IN MERIDIAN TOWER PROJECT COMES TO RS. 16,28,472/- [ TOTALLING TO RS 13,36,508/- + PS 2,91,964/- WHICH WERE ULTIMATELY ASSESSED TO TAX AND ALSO ATTRACTS P ENAL PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. THUS THE TOTAL CONCEALMENT OF INCOME COMES TO RS.16,28,472/, AND I T IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX. AC T. THE MINIMUM AND MAXIMUM PENALTY LEVIABLE IS ITS 5,95,898/- AND ITS 1 7,87,698/- RESPECTIVELY. CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE, I LEVY THE MINIMUM PENALTY OF RS 5 ,95,898/- U/S 271(1)(C) OF THE IT. ACT. THIS SHOULD BE PAID AS PER THE DEMAND NOTICE AND CH ALLAN ENCLOSED. ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 6 6. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE E XPLANATION OF THE ASSESSEE HE HAS CANCELLED THE PENALTY IMPOSED BY TH E A.O. THE RELEVANT PORTION OF THE ORDER OF LD. CIT(A) IS AS U NDER: 7 .0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. FROM THE DISCUSSION MADE ABOVE, IT I S CLEAR THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN BOTH THE YEARS WERE SUBSTANTIALLY REDUCED BY THE FI RST APPELLATE AUTHORITY AND, SUBSEQUENTLY, EVEN THE HONBLE INCOME-TAX APPEL LATE TRIBUNAL AGREED WITH THE VIEW OF THE COMMISSIONER OF INCOME- TAX (APPEALS) WITH REGARD TO RESTRICTION OF SUCH DISALLOWANCES. IT IS CLEAR THAT EVEN THOUGH THE EXPENDITURE ON ACCOUNT OF LABOUR EXPENSES AND S UBCONTRACT PAYMENTS TO MASONS WERE PARTLY DISALLOWED, SUCH DISALLOWANCE WAS MADE NOT ON THE BASS OF ANY SPECIFIC FINDING WITH REGARD TO ANY SPE CIFIC EXPENDITURE, BUT ON ANY ESTIMATE BASIS ONLY. IT IS SEEN THAT EVEN IN THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSING OFFICER DID NOT BRING AN Y FURTHER EVIDENCE ON RECORD TO ESTABLISH THAT THE AMOUNTS SO DISALLOWED ON ESTIMATE BASIS ACTUALLY REPRESENTED ANY FALSE CLAIMS. HE RATHER PR OCEEDED TO LEVY THE PENALTY ONLY ON THE GROUND THAT DISALLOWANCES TO TH E EXTENT MENTIONED IN THE FOREGOING DISCUSSION WERE CONFIRMED BY THE COMM ISSIONER OF INCOME- TAX (APPEALS). 8.0 ON THE OTHER HAND, IT IS A SETTLED LAW THAT THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE, EVEN THOUGH THOSE ARE ENTITLED TO GREAT WEIGHT. THE LEGAL POSITION IS VER Y CLEAR THAT PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT FROM ASSES SMENT PROCEEDINGS AND EVEN CONFIRMATION OF ASSESSMENT ORDER ITSELF CA NNOT BE CONSIDERED AS THE SOLE GOVERNING FACTOR FOR LEVY OF PENALTY. RE FERENCE IN THIS REGARD CAN BE MADE TO THE DECISION IN THE CASE OF COMMISSI ONER OF INCOME-TAX VS. KHODAY ESWARA & SONS (83 ITR 369) AND THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGHA IAH & CO., VS. COMMISSIONER OF INCOME-TAX (123 ITR 457). THE HON'BL E JURISDICTIONAL INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF HOE LEA THER GARMENTS LTD VS DCIT (2010) (5 TAXMANN.COM 6) HAVE OPINED THAT T HE PENALTY ORDER SHOULD HE A SELF CONTAINED ONE AND THE FINDINGS REG ARDING CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN T HE ASSESSMENT ORDER CANNOT AUTOMATICALLY GET TRANSFERRED TO THE PENALTY ORDER. IT IS CLEAR THAT IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT R ECORDED ANY FINDING OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT HAS PROCEEDED TO LEVY THE PENALTY ON THE ONLY GROUND TH AT THE DISALLOWANCES IN THE ASSESSMENT ORDER WERE PARTLY UPHELD BY THE C OMMISSIONER OF INCOME-TAX (APPEALS). ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 7 08.1 ON THE OTHER HAND, THE HON'BLE INCOME-TAX APPE LLATE TRIBUNAL, AHMADABAD BENCH IN THE CASE OF GANDHI SERVICE STATI ON VS ACIT (100 TTJ 1143) HAVE OPINED THAT THE QUANTUM AND PENALTY PROC EEDINGS ARE DISTINCT AND SEPARATE AND THAT WHILE DECIDING, THE ISSUE OF PENALTY, FACTS HAVE TO BE RE-CONSIDERED. THEY HAVE OBSERVED THAT THE FACTU M OF CONCEALMENT NEEDS TO BE PROVED. IT WAS NOTED THAT THE EXPLANATI ON OF THE SAID ASSESSEE WAS REJECTED ON ASSUMPTIONS, DRAWING ADVER SE INFERENCE BASED ON PROBABILITIES. IT IS CLEAR THAT EVEN IN THE PRES ENT CASE, ADVERSE INFERENCE BASED ON PROBABILITIES, HAS BEEN DRAWN, L EADING TO DISALLOWANCES ON ESTIMATED BASIS MERELY ON ACCOUNT OF THE FACT TH AT THE APPELLANT COULD NOT FURNISH EVIDENCE IN SUPPORT OF EXPENDITURE CLAI MED TO THE SATISFACTION OF THE ASSESSING OFFICER. 8.2 IT IS ALSO SEEN THAT THE HON1BE INCOME-TAX APPELL ATE TRIBUNAL, AHMADABAD BENCH IN THE CASE OF JAYENDRA G SONI VS. ITO (2011) (16 TAXMANN.COM 87) HAVE OPINED THAT WHERE PURSUANT TO THE SEARCH PROCEEDINGS, CERTAIN ADDITIONS WERE MADE ON ESTIMAT E OR PREPONDERANCE OF PROBABILITIES, IT WOULD NOT BE A FIT CASE FOR LE VY OF PENALTY U/S 271(1)(C) OF THE ACT. 8.3 IT IS SEEN THAT IN THE CASE OF COMMISSIONER OF I NCOME-TAX VS DABWALI TRANSPORT CO. (ITA NO 872 OF 2010) (O&M) AL SO, THE HONBLE HIGH COURT OF PUNJAB AND HARYANA HAVE HELD, 'NO DOUBT TH E ASSESSEE CLAIMED EXPENSES WHICH COULD NOT BE SUBSTANTIATED AND ON TH AT GROUND, THE SAME WERE DISALLOWED AND DISALLOWANCE WAS PARTLY UPHELD UPTO THIS COURT, BUT MERE FACT THAT THE ASSESSEE COULD NOT FURNISH EVIDE NCE IN SUPPORT OF THE EXPENSES CLAIMED, WAS NOT BY ITSELF ENOUGH TO HOLD THAT THE ASSESSEE HAD FURNISHED INCORRECT PARTICULARS OF INCOME CONSCIOUS LY. THE HON'BLE HIGH COURT NOTED THAT SUBSTANTIAL PART OF EXPENDITURE CL AIMED WAS DULY EXPLAINED BY THE ASSESSEE IN THE SAID CASE. IT IS C LEAR THAT EVEN IN THE PRESENT CASE, SUBSTANTIAL PART OF THE EXPENDITURE C LAIMED HAS BEEN ACCEPTED AS EXPLAINED AND ONLY A PERCENTAGE THEREOF WAS FINALLY DISALLOWED. 8.4 IN VIEW OF THE ABOVE LEGAL PRONOUNCEMENTS, I AM OF THE CONSIDERED VIEW THAT PENALTIES IN THE INSTANT APPEALS LEVIED O N THE ONLY GROUND OF PART-UPHOLDING OF DISALLOWANCES MADE IN THE ASSESSM ENT ORDERS, CANNOT BE SUSTAINED. DELETING THE PENALTIES OF RS 5,95,8 98/- AND RS 15,02,391/- IN THE ASSESSMENT YEARS 2005-06 AND 2006-07, RESPEC TIVELY, THE GROUNDS RAISED IN THESE APPEALS ARE DECIDED IN FAVOUR OF TH E APPELLANT. 7. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. THE LD. D.R. RELIED ON THE ORDERS OF THE A.O. ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 8 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 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 ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF APARTMENT COMPLEXES. HE HAS CONSTRUCTED NEAR ABOUT 5 APARTME NTS AND HE HAS INCURRED VARIOUS EXPENDITURES. THERE IS A SEARCH A ND SEIZURE ACTION CARRIED OUT IN THE CASE OF THE ASSESSEE AND THEY FO UND SOME INCRIMINATING MATERIAL. BASED ON THE SAME, THE A.O . IS OF THE OPINION THAT THE ASSESSEE HAS BOOKED FICTITIOUS LABOUR EXPE NSES FOR A.Y. 2005-06 OF ` 36,26,032/-, FOR A.Y. 2006-07 OF ` 1,17,50,529/-, LABOUR EXPENSES - CASH PAYMENTS MADE FOR A.Y. 2005-06 OF ` 17,20,000/- FOR A.Y. 2006-07 OF ` 38,97,000/- AND THERE IS A SUPPRESSED TURNOVER OF ` 2,91,964/- FOR A.Y. 2005-06. BY OBSERVING THE ABOVE, THE A.O. COM PLETED THE ASSESSMENT BY MAKING THE ABOVE ADDITIONS. ON APPEA L, LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE OF EXPENDITURE IN RESPE CT OF BOOKED FICTITIOUS LABOUR EXPENSES TO 25% AND FOR CASH PAYMENTS ALSO T O 25%. SO FAR AS THE SUPPRESSION OF TURNOVER IS CONCERNED, THE ASSES SEE IS NOT ABLE TO SUBSTANTIATE THE DIFFERENCE AND HE ACCEPTED THE SAM E AND PAID THE TAXES. ACCORDING TO THE A.O., THE ASSESSEE HAS CON CEALED THE PARTICULARS ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 9 OF INCOME AND LEVIED PENALTY U/S 271(1)(C) OF THE A CT. BEFORE THE A.O. DURING THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE HAS FILED A DETAILED EXPLANATION. THE A.O. HAS NOT ACCEPTED THE EXPLANA TION GIVEN BY THE ASSESSEE, HOWEVER, HE HAS NOT POINTED THAT THE EXPL ANATION GIVEN BY THE ASSESSEE IS NEITHER FALSE OR NOT BONAFIDE. THE ENT IRE CASE OF THE ASSESSEE BEFORE US IS THAT THE ADDITION SUSTAINED O NLY ON THE BASIS OF ASSUMPTION AND MERE SUSPICION AND SUBMITTED THAT PE NALTY PROCEEDINGS CANNOT BE INITIATED ON MERE SUSPICION OR ON ACCOUNT OF ASSUMPTION. WE FIND THAT THE ADDITIONS I.E. FICTITIOUS BOOK ENTRY & CASH PAYMENTS OF LABOUR EXPENSES RESPECTIVELY AS DISALLOWED BY A.O. ON ASSUMPTION BASIS AND THE SAME WAS RESTRICTED BY CIT(A) TO THE EXTENT OF 25%. AGAINST THE ORDER OF THE CIT(A), WHEN REVENUE CARRIED THE M ATTER IN APPEAL BEFORE THE ITAT IN ITA NOS.75 & 76/VIZAG/2010 DATED 3.6.2011 IN THE ASSESSEES OWN CASE, ITAT HAS OBSERVED THAT THE CIT (A) HAS EXAMINED EACH AND EVERY ASPECT OF THE CLAIM OF THE EXPENSES RAISED BY THE ASSESSEE. NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE ORDER OF THE CIT(A) AND HENCE FOUND NO INFIRMITY THEREIN AND ACC ORDINGLY CONFIRMED THE ORDER OF THE CIT(A). IN VIEW OF THE ABOVE, WE FIND THAT THE DISALLOWANCE SUSTAINED FOR THE ASSESSMENT YEARS 200 5-06 AS WELL AS 2006-07 IS ONLY ON ASSUMPTION BASIS, THEREFORE, NO PENALTY CAN BE LEVIED. THEREFORE, WE FIND NO INFIRMITY IN THE ORD ER PASSED BY THE LD. ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 10 CIT(A). IN SO FAR AS DIFFERENCE OF TURNOVER IS CON CERNED, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. HAS ASKED THE ASSESSEE TO RECONCILE THE DIFFERENCE OF ` 2,91,964/- BEING THE DIFFERENCE BETWEEN THE NET PROJECT TURNOVER WHICH IS OF ` 4,00,00,304/- AND THE TURNOVER REFLECTED IN THE BOOKS OF ACCOUNTS OF ` 3,97,08,340/-. THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE DIFFERENCE AND PAID TA XES ACCORDINGLY. IN OUR OPINION, THE DIFFERENCE IN TURNOVER IS NEITHER AMOUNTING TO CONCEALMENT NOR FILING OF INACCURATE PARTICULARS. ON THIS COUNT, NO PENALTY CAN BE LEVIED. THIS GROUND OF APPEAL RAISE D BY THE REVENUE IS DISMISSED. 10. SO FAR AS ASSESSMENT YEAR 2006-07 IS CONCERNED, FACTS ARE REMAIN SAME AND IN VIEW OF OUR ORDER IN THE ASSESSMENT YEA R 2005-06, THE GROUND RAISED FOR THE ASSESSMENT YEAR 2006-07 IS AL SO DISMISSED. 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12 TH AUG16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 12.08.2016 VG/SPS ITA NOS.74&75/VIZAG/2013 MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM 11 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CENTRAL CIRCLE-2, VISA KHAPATNAM 2. / THE RESPONDENT M/S. MERIDIAN PROMOTERS PVT. LT D., D.NO.47-3-29/2, 5 TH LANE, DWARAKANAGAR, VISAKHAPATNAM 3. ) / THE CIT(CENTRAL), HYDERABAD 4. ) ( ) / THE CIT(A)-I, HYDERABAD 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM