ITO, Hyderabad V. M/s Jaya Lakshmi Enterprises, Hyderabad

ITA 771/HYD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9827 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Assessment record; Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO. 771/H/2007 ASSESSMENT YEAR 2004-05 THE ITO, WARD 11(4), HYDERABAD VS M/S JAYALAKSHMI ENTERPRISES, HYDERABAD. (PAN AACFJ 5418 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.V. PRASAD REDDY RESPONDENT BY : SHRI S. RAMA RAO, ADVOCATE O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 19. 4.2007 AND PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1. THE CIT(A) ERRED IN CANCELLING THE PENALTY FOR THE ASSESSM ENT YEAR 2003-05 ON THE GROUND THAT THE PENALTY PROCEEDINGS WERE DROPPED FOR THE EARLIER ASSESSMENT YEAR 2003-04 BY ACCEPTING A SIMILAR EXPLANATION OFFERED A THE TIME AS BONA FIDE AND REA SONABLE. 2. THE CIT(A) ERRED IN HOLDING THAT THE RATIO OF T HE DECISION IN THE CASE OF CIT VS. GURBACHAN LAL 250 ITR 157, DELHI IS NOT APPLICABLE TO THE FACTS OF THE CASE ON THE GROUND THAT THERE WAS NO FRESH MATERIAL TO REJECT THE EXPLANATION OF THE ASSESSEE WHEN SIMILA R EXPLANATION WAS ACCEPTED FOR THE EARLIER YEAR AND PENALTY WAS NOT L EVIED. 3. THE CIT(A) ERRED IN CANCELLATION OF PENALTY BY FOLLOWING THE RULING GIVEN BY THE HONBLE S.C. IN SURESH MITTALS CASE O F K. DEEDAR AHMED VS. ITO (97 ITD 240) WHEN THE FACTS AND CIRCUMSTANC ES OF THESE TWO CASES ARE ENTIRELY DIFFERENT FORM THOSE OF THE INST ANT CASE. ITA NO.771/H/2007 M/S JAYALAKSHMI ENTERPRISES, HYD. 2 2 4 THE CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE FIRM FILED REVISED RETURN FOR THE ASSESSMENT YEAR 2003-04 TAKING THE S ALE PRICE AS RS.650/- PER SQ.FT. ON 27.11.2003, WHILE FOR THE AS SESSMENT YEAR 2004-05 IT FILED THE RETURN OF INCOME ON 29.10.2004 BY TAKING THE SALE PRICE AT RS.530/- PER.SQ.FT. ONLY. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BUILDER AND FILED ITS RETURN OF INCOME ON 29.10.2004 FOR THE AS SESSMENT YEAR 2004-05. A SURVEY WAS CARRIED OUT IN THE BUSINESS PREMISES O F THE ASSESSEE ON 7.11.2003 U/S 133A OF THE IT ACT. AS A RESULT OF S URVEY, THERE WAS DISCOVERY OF VARIOUS EVIDENCES RELATING TO SUPPRESS ION OF RECEIPTS OF FLATS FOR THE ASSESSMENT YEARS 2003-04 AND 2003-05. DURI NG THE COURSE OF SURVEY IT WAS STATED BY SHRI V. SUBBA RAO, MANAGING PARTNER OF THE FIRM THAT THE FIRM HAS CHARGED @ RS.740/750 PER SQUARE F EET INCLUDING THE VALUE OF LAND. THE IMPOUNDED DOCUMENTS REFLECTE D TWO FLATS WHICH ARE SOLD BY THE ASSESSEE AT RS.840/- PER. SQ.FT. AS AGA INST RECORDED SALE PRICE IN THE REGISTERED SALE DEED AND SHOWN IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 AT RS.540/ - PER.SQ.FT. IT WAS EXPLAINED BY THE ASSESSEE THAT CERTAIN EXPENSES HAS TO BE INCURRED IN THIS LINE OF BUSINESS OF CONSTRUCTION AND SALE OF FLATS, IT MAY NOT BE PROPER TO RECORD TRUE AMOUNT IN THE BOOKS OF ACCOUNT. FINALL Y, IN THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS CONSIDERED THE RATE AT RS.650 PER SQ.FT. AS AGAINST RS.530/- PER SQ.FT. AS DECLARED BY THE ASSESSEE. ACCORDINGLY, A MUTUALLY AGREED ASSESSMENT FOR THE E ARLIER ASSESSMENT YEAR 2003-04 WAS COMPLETED BY SUBSTITUTING THE ESTIMATED VALUE OF FLAT AT RS.650/- PER.SQ.FT. IN THE PLACE OF RS.530/- SQ.FT . OF BUILT UP AREA SOLD BY THE ASSESSEE. 4. IN THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT Y EAR 2004-05 THE ASSESSING OFFICER DURING THE COURSE OF SCRUTINY OBSERVED THAT IN THE RETURN OF INCOME FILED ON 29.10.2004 THE AVERAGE SE LLING RATE FOR FLAT HAS NOT BEEN REFLECTED AT THE ESTIMATED RATE OF RS.650/ - PER.SQ. FT. OF BUILT UP ITA NO.771/H/2007 M/S JAYALAKSHMI ENTERPRISES, HYD. 3 3 AREA WHICH WAS APPARENTLY ADMITTED BY THE ASSESSEE AS WELL AS ACCEPTED BY THE ASSESSING OFFICER FOR THE EARLIER ASSESSMENT YE AR. IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED AS TO WHY THE ES TIMATED SALE RATE OF RS.650/- IN RESPECT OF THE FLATS SOLD SHOULD NOT BE SUBSTITUTED IN PLACE OF RS.530/- PER SQ.FT. DISCLOSED IN THE RETURN OF INCO ME FILED FOR THE ASSESSMENT YEAR 2004-05. TO SUCH QUERIES THE ASSES SEE HAD EXPLAINED BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 17.1 .2005 AS UNDER: AS REGARDS THE AGREED RATE OFFERED FOR RS.650/- P ER SQ.FT. THE RECEIPT THAT HAVE BEEN ACCOUNTED AND ADMITTED WORKS UPTO RS .530/- ONLY. THE DIFFERENCE BETWEEN THE OFFERED INCOME AND ADMITTED/ ACCOUNTED RECEIPTS WHICH WORKS OUT TO RS.120/- PER SQ.FT. IS OFFERED O N THE FLOOR SPACE SOLD/REGISTERED/TRANSFERRED DURING THE YEAR COVERIN G 7855 SQ.FT. THE ADDITIONAL INCOME ON ACCOUNT OF THE DIFFERENCE SHAL L WORK OUT TO RS.21,42,600/- WHILE REGRETTING THE OVER LAP HE W AS AGREEABLE FOR THIS ADDITION TO THE INCOME RETURNED WITH REQUEST TO ACC EPT AND COMPLETE THE ASSESSMENT. 5. ON THE BASIS OF SUCH MUTUALLY AGR EED SELLING RATE ADDITIONS WERE MADE BOTH FOR ASSESSMENT YEAR 2003-04 AND ASSE SSMENT YEAR 2004- 05 THAT COMPRISED OF RS.120/- PER SQ.FT. OF BUILT UP AREA. FOR ASSESSMENT YEAR 2003-04 THIS ESTIMATED ADDITION TO SALE CONSID ERATION WAS RS.28,74,000/- AND FOR ASSESSMENT YEAR 2003-05 IT A MOUNTED TO RS.21,42,600/-. 6. ON THE BASIS OF SUCH MUTUALLY AGRE ED ESTIMATED ENHANCEMENT OF SALE CONSIDERATION THE ASSESSEE HAD ALSO PAID RE LEVANT TAX FOR BOTH THE ASSESSMENT YEARS. ITA NO.771/H/2007 M/S JAYALAKSHMI ENTERPRISES, HYD. 4 4 7. SUBSEQUENTLY, PENALTY PROCEEDINGS F OR BOTH THE ASSESSMENT YEARS 2003-04 AND 2004-05 WERE INITIATED. WHILE FO R THE ASSESSMENT YEAR 2003-04, THE ASSESSING OFFICER AFTER TAKING INTO TH E CONSIDERATION OF THE FACTS THAT THE ASSESSEE HAD COMPLIED WITH THE TERMS OF ITS DECLARATION GIVEN U/S 133A AND ALSO FOR THE REASON THAT THE ADDITIONA L INCOME OFFERED FOR ASSESSMENT YEAR 2003-04 WAS CLEARLY ON AN ESTIMATED BASIS WITH A DESIRE TO STRENGTHEN ITS RECORD, PENALTY PROCEEDINGS U/S 2 71(1) (C ) WERE DROPPED. 8. HOWEVER, ON THE SAME SET OF FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY PROCEEDINGS INITIATED FOR THE AS SESSMENT YEAR 2004-05 WAS NOT DROPPED. THE EXPLANATION OFFERED BY THE AS SESSEE DURING PENALTY PROCEEDINGS WERE REJECTED AND THE ASSESSING OFFICER IMPOSED PENALTY OF RS.7,70,000/-. 9. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(A). THE CIT(A) DELETED THE PENALTY. AGAINST THIS THE R EVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. THE MAIN GRIEVANCE OF THE REV ENUE IS WITH REGARD TO DELETION OF THE PENALTY ON THE REASON THAT IN EARLI ER ASSESSMENT YEAR ON SAME SET OF FACTS THE ASSESSING OFFICER HAS ACCEPTE D THE EXPLANATION OFFERED BY THE ASSESSEE REGARDING VARIATION IN THE SALE PRI CE OF THE FLATS AND NO PENALTY WAS LEVIED. THE DEPARTMENT IS ALSO HAVING GRIEVANCE WITH REGARD TO THE CIT(A) PLACING RELIANCE ON THE JUDGEMENT OF DEL HI HIGH COURT IN THE CASE OF CIT VS. GURBACHAN LAL (250 ITR 157) (DEL.) (HC) AND ALSO IN FOLLOWING THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL (251 ITR 9) (SC) AND ACCORDI NG TO THE DEPARTMENT, THE ORDER OF THIS TRIBUNAL IN THE CASE OF K. DEEDA R AHMED VS. ITO (97 ITD 240) IS NOT APPLICABLE TO THE FACTS OF THE CASE. T HE DEPARTMENT ALSO RELIED ITA NO.771/H/2007 M/S JAYALAKSHMI ENTERPRISES, HYD. 5 5 ON THE JUDGEMENT IN THE CASE OF SHRI K.P. MADHUSUD HANAN VS. CIT (SC) (251 ITR 99) AND IN THE CASE OF DURGA TIMBER WORK S VS. CIT (DEL. HC) (79 ITR 63). IN OUR OPINION, THE CIT(A) HAS DELETED T HE PENALTY NOT ONLY ON THE REASONS THAT THE PENALTY IS NOT LEVIED FOR THE ASSE SSMENT YEAR 2003-04 WHEREIN THE FACTS AND CIRCUMSTANCES OF THE CASE IS SIMILAR TO THIS ASSESSMENT YEAR BUT ALSO ON THE REASON THAT THE PE NALTY IS LEVIED ON DETERMINATION OF INCOME ON ESTIMATED BASIS. THE CI T(A) CONSIDERED THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND SINC E IN THIS ASSESSMENT YEAR THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED ON THE BASIS OF ESTIMATION AND THERE IS NO CONCLUSIVE PROOF FOR MAK ING ADDITION TOWARDS SALE PRICE OF THE FLATS AND HE IS OF THE OPINION TH AT THE PENALTY CANNOT BE LEVIED U/S 271(1) (C ) OF THE IT ACT WHEN THE INCOM E IS DETERMINED ON ESTIMATION. THE EXPLANATION GIVEN BY THE ASSESSEE IS ALSO BONA FIDE REGARDING VARIATION IN SALE PRICE. THE CIT(A) AFT ER CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE HAS DELETE D THE PENALTY. NOW THE DEPARTMENT IS CHALLENGING ONLY A PORTION OF THE ORD ER OF THE CIT(A) IN DELETING THE PENALTY. THE CIT(A) HAS GIVEN CLEAR FINDINGS IN HIS ORDER THAT THERE IS NO CORROBORATING EVIDENCE TO SAY THAT EAC H AND EVERY FLAT SOLD FOR PRICE AS MENTIONED IN SOME IMPOUNDED DOCUMENTS AT RS.850/- OR RS.840/- SQ.FT. OF BUILT UP AREA NOR ANY EVIDENCE W AS THERE TO PROVE THAT THE ASSESSEES DECLARATION OF ACTUAL RECEIPT OF ABO UT RS.740/- TO RS.750/- PER .SQ.FT OF BUILT UP AREA, SOLD WAS CORRECT NOR THERE WAS ANY MATERIAL EVIDENCE TO COMPUTE ANY KIND OF UNRECORDED EXPENDI TURE STATED TO HAVE BEEN INCURRED BY THE ASSESSEE RELATING TO HIS BUILD ING CONSTRUCTION BUSINESS. HENCE, IT IS CLEAR THAT AT THE SURVEY S TAGE AND POST SURVEY SCRUTINY OF ASSESSMENT RECORDS, A SOME KIND OF AGR EEMENT WAS DRAWN UP BY THE IT AUTHORITIES AND THE ASSESSEE FOR ESTIMATI NG SALE CONSIDERATION AT RS.650/- PER SQ.FT. INSTEAD OF RS.530/- PER SQ. FT DISCLOSED BY THE ASSESSEE. THUS, THE FACT OF ESTIMATION OF INCOME BY THE ASSES SING OFFICER AND LEVYING THE PENALTY WITHOUT BRINGING ANY CONCLUSIVE EVIDENC E PROVING THAT THE ITA NO.771/H/2007 M/S JAYALAKSHMI ENTERPRISES, HYD. 6 6 ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WAS NOT CHALLENGED BY THE DEP ARTMENT. THE DEPARTMENTS CHALLENGED BEFORE US ONLY A PART OF TH E CIT(A) ORDER. IF THE DEPARTMENT WANTS TO CHALLENGE THE DELETION OF PENAL TY, IT IS TO BE CHALLENGED IN ITS ENTIRETY AND NOT BY PIECEMEAL MAN NER. THE DEPARTMENT HAS NOT CHALLENGED THE FACT OF DELETING THE PENALTY WHICH IS LEVIED ON THE BASIS OF ESTIMATED INCOME. HENCE, WE ARE OF THE OP INION THAT THESE GROUNDS RAISED BY THE DEPARTMENT CANNOT BE SURVIVED . ACCORDINGLY, AFTER CONSIDERING THE CUMULATIVE EFFECT OF THE ORDER OF T HE CIT(A) AND ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR OPINION DELET ION OF PENALTY BY CIT(A) IS JUSTIFIED AND WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 11. IN THE RESULT THE APPEAL OF THE REVENUE IN IT A NO.771/H/2007 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 11 .2.2011 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 11 TH FEBRUARY, 2011 COPY FORWARDED TO: 1. M/S JAYALAKSHMI ENTERPRISES, 22-71, RK NAGAR, MA LKAJGIRI, HYDERABAD-47 2. THE ITO, WARD 11(4), BUDDA BHAVAN, SECUNDERABAD 3. CIT(A)-VI, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP