Gowthami Infratech Pvt. Ltd., Hyd, Hyderabad V. ACIT, Circle-2(3), Hyd, Hyderabad

ITA 843/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2676 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 03-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Initiation of penalty proceedings
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 843/HYD/2016 2011-12 GOWTHAMI INFRATECH PRIVATE LIMITED, HYDERABAD [PAN: AACCK6892K] DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD 821/HYD/2017 2012-13 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD FOR ASSESSEE : SHRI V. RAGHAVENDRA RAO, AR FOR REVENUE : SHRI RAJEEV BENJWAL, DR DATE OF HEARING : 11-01-2018 DATE OF PRONOUNCEMENT : 19-01-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE TWO APPEALS ARE BY ASSESSEE AGAINST THE CONFIRM ATION OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] VIDE SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-2, H YDERABAD, DATED 29-02-2016 & 20-01-2017 FOR THE AYS. 2011-12 & 2012-13 RESPECTIVELY. SINCE COMMON ISSUES ARE INVOLVED IN BO TH THE APPEALS, THESE ARE HEARD TOGETHER AND DECIDED BY THIS C OMMON ORDER. ASSESSEE HAS RAISED GROUNDS ON THE ISSUE OF LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AND ALSO RAISED ADDITIONAL GROUNDS IN AY. I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 2 - : 2012-13 THAT THE NOTICE ISSUED IS NOT SPECIFIC WHETHER P ENALTY IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS IN THE BUSINES S OF CIVIL CONTRACT. THERE WERE SURVEY OPERATIONS ON 16-09 -2013 AND DURING THE SURVEY, IT WAS NOTICED THAT ASSESSEE HAD PAID A CERTAIN COORDINATION CHARGES IN CASH ON VARIOUS RA BILLS. WHEN THIS WAS CONFRONTED, THE EXECUTIVE DIRECTOR OF ASSESSEE-COMPANY IN THE SOLEMN STATEMENT STATED THAT THESE LOOSE SHEETS CONTAINED SEV ERAL TRANSACTIONS, PARTICULARLY CO-ORDINATION EXPENSES APPRO VED TO BE INCURRED BY THEM. THEREAFTER, SOLEMN STATEMENT OF SHRI K. VIJAY KUMAR, PROMOTER OF THE KVK GROUP OF COMPANIES WAS REC ORDED ON 18-09-2013, WHEREIN HE HAS ADMITTED THAT THEY WERE INCU RRING EXPENDITURES TO AN EXTENT OF 1.25% ON THE TURNOVER ON AC COUNT OF REC [RURAL ELECTRIFICATION CORPORATION] WORKS EXECUTED AT ORISSA, M.P. AND BELGAUM AND THESE EXPENDITURES WERE PAID IN CASH AND WERE ACCOUNTED FOR UNDER VARIOUS HEADS. AS IT WAS NOT POSSIBLE TO IDENTIFY AND SEGREGATE, ASSESSEES MANAGING DIRECTOR, ADMITTED TO OFFER THE ABOVE EXPENDITURE AS INCOME IN THE IMPUGNED ASSESSMENT YEARS. DURING THE ASSESSMENT PROCEEDINGS, FOR WHICH RETURNS WERE ALREADY FILED, ASSESSEE FURNISHED A NOTE ON COORDINA TION EXPENSES IN WHICH IT WAS STATED THAT THE ACTUAL PAYMENT RECEIVED AG AINST RA BILLS WAS RS. 38.64 CRORES AND EXPENDITURE INCURRED ON THAT WAS RS. 51,84,760/- IN AY. 2012-13 AND RS. 37.54 CRORES IN AY. 2011- 12 AND EXPENDITURE WAS RS. 32,60,810/-. AO, HOWEVER , CONSIDERED THE ENTIRE RECEIPTS OF P&L A/C [RATHER THAN THE RA BILLS PERTAINING TO REC) ON WHICH AMOUNTS HAVE BEEN RECEIVED AND DISAL LOWED AN I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 3 - : AMOUNT OF RS. 48,80,472/- IN AY. 2012-13 AS AGAINST R S. 41,58,760/- STATED TO HAVE BEEN INCURRED BY ASSESSEE. 2.1. LIKE-WISE, IN AY. 2011-12, AMOUNT DISALLOWED W AS RS. 92,20,557/- AS AGAINST RS. 46,92,461/- ADMITTED BY AS SESSEE HAVING BEEN SPENT FOR COORDINATION EXPENSES. AO HAS RECORDED THE FOLLOWING WHILE DISALLOWING THE AMOUNTS: 2011-12: 6. THE ABOVE CONTENTION OF THE ASSESSEE COMPANY IS NOT ACCEPTABLE. IN THE SWORN STATEMENT, THE DIRECTORS OF THE ASSESSEE COMP ANY, HAVE CATEGORICALLY ADMITTED THAT THE COORDINATION CHARGE S WAS PAID IN CASH AND 1.25% OF THE TURNOVER ON ACCOUNT OF REC (RURAL ELEC TRIFICATION CORPORATION) WILL BE ADMITTED AS INCOME UNDER THE HEAD COORDINAT ION CHARGES FOR AY 2011-12,2012-13 AND 2013-14 IN THE NAME OF THE GIPL OVER AND ABOVE THE BOOK RESULTS. IN THE SWORN STATEMENT, THEY HAV E NOT DEPOSED THAT THE COORDINATION CHARGES HAVE BEEN PAID ON ACTUAL PAYME NT RECEIVED AGAINST RA BILLS. THEREFORE, THE COORDINATION EXPENSES FOR THE YEAR UNDER CONSIDERATION IS WORKED AT RS.92,20,557/- (I.E. ON INCOME AS PER P&L ACCOUNT OF RS.73,76,44,591/-) IS ADDED TO THE TOTAL INCOME RETURNED. ADDITION; 92,20,557/- 2012-13: 6. THE ABOVE COMPUTATION OF THE ASSESSEE WAS CONSID ERED AND IT WAS OBSERVED THAT DURING SURVEY PROCEEDINGS, THE CO-ORD INATION EXPENSES FOR AY. 2012-13, WAS WORKED OUT AT RS. 48,40,472/-. HEN CE THE SAME IS ADDED BACK TO THE INCOME OF THE ASSESSEE. ADDITION RS. 48,80,472/- 3. AO, HOWEVER, MADE OTHER DISALLOWANCES LIKE PRI OR PERIOD EXPENSES, BANK INTEREST, DISALLOWANCE U/S. 43B ALSO IN AY. 2011-12. HE HAS INITIATION PROCEEDINGS U/S. 271(1)(C ) WITHOUT RECORDING ANY SATISFACTION SEPARATELY. I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 4 - : 4. ASSESSEE CONTENDED BEFORE THE LD.CIT(A) THAT THESE EXPENDITURES WERE ACTUALLY INCURRED AND ASSESSEE HAS AGREED FOR ADDITION IN THE COURSE OF SURVEY STATEMENT, AS IT WAS DIFFICULT TO IDENTIFY A PARTICULAR EXPENDITURE INCURRED BY ASSESSE E AS THE TOTAL EXPENDITURE WAS IN CRORES OF RUPEES. NO APPEAL WAS PREFERRED ONLY BECAUSE THE EXPENDITURE INVOLVED IS ONLY 1.25% ON THE ACTUAL PAYMENT RECEIVED, WHICH WAS BOOKED IN THE BOOKS OF A CCOUNT IN CASH. IT IS ALSO SUBMITTED THAT ASSESSEE NEITHER CONCEAL ED THE INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF IN COME AND MERE DISALLOWANCE OF EXPENDITURE CLAIM DOES NOT WARRA NT ANY PENALTY. LD.CIT(A), HOWEVER, DID NOT AGREE AND IN HI S DETAILED ORDER CONCURRED WITH AO AND CONFIRMED THE PENALTY. 5. LD. COUNSEL REITERATED THE SUBMISSIONS AND SUBMI TTED THAT THERE IS NO DISPUTE THAT THE AMOUNTS HAVE BEEN INCURRE D BY ASSESSEE AND REGISTERED IN THE BOOKS OF ACCOUNT AS AN EXPENDITURE UNDER VARIOUS HEADS. THERE IS ALSO NO DISPUTE THAT AO HAS CONSIDERED A HIGHER DISALLOWANCE ON THE ENTIRE TURNOVE R OF ASSESSEE, EVEN THOUGH ASSESSEE STATEMENT INDICATES THAT THE COORDINATION EXPENSES WERE ONLY ON REC PROJECT THAT TO O, ON THE ACTUAL AMOUNT RECEIVED. HE REFERRED TO THE STATEMENT MAD E TO AO AND THE DISALLOWANCE MADE, TO SUBMIT THAT AO HAS DISALL OWED MORE AMOUNT THAN WHAT WAS ACTUALLY SPENT BY ASSESSEE, BUT C ONSIDERING THAT A STATEMENT WAS GIVEN, ASSESSEE HAS NOT PREFERRED A NY APPEAL. IT WAS SUBMITTED THAT ASSESSEES ACCEPTANCE OF DISALLOWAN CE DOES NOT MEAN THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 5 - : 6. LD.DR, HOWEVER, SUBMITTED THAT ASSESSEE HAS CAMOUFLAGED THE COORDINATION EXPENSES WHICH ARE NOT LE GAL EXPENDITURE UNDER VARIOUS HEADS AND WHEN CONFRONTED I N A SURVEY, HAS AGREED FOR DISALLOWANCE OF THE ABOVE AMOUNTS WHIC H WOULD NOT HAVE COME TO THE NOTICE OF THE AO, BUT FOR THE SURVEY OF OPERATIONS. IT WAS SUBMITTED THAT THE PENALTY IS WARRANTED ON THE FAC TS OF THE CASE. HE RELIED ON THE JUDGMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF MAK DATA P. LTD., VS. CIT-II (CIVIL APPEAL NO. 9772 OF 2013) AND ALSO ON THE JUDGMENT OF CIT VS. ATUL BINDAL (SC) TO SUPPORT THE CONTENTIONS OF REVENUE. 7. LD. COUNSEL, HOWEVER, SUBMITTED THAT THE PENALTY NOTI CE HAS NOT SPECIFIED WHETHER THE PENALTY WAS FOR CONCEALM ENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS A ND ACCORDINGLY, THE PENALTY IS NOT WARRANTED AND RELIED ON THE JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE PRINCIPAL CIT, VISAKHAPATNAM VS. BAISETTY REVATHI (ITTA NO.684 OF 20 16, DATED 13.07.2017). 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDER OF AUTHORITIES. THERE IS NO DISPUTE THAT DURIN G THE SURVEY OPERATIONS, ASSESSEE WAS FOUND TO HAVE BEEN SPENT CER TAIN COORDINATION EXPENSES, WHICH ARE BOOKED AS OTHER EXPE NDITURE IN THE BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY QUANTIFIC ATION THEREON OR IDENTIFICATION THEREON, ASSESSEE ADMITTED THAT ABOUT 1. 25% OF THE REC BILLS ACTUALLY RECEIVED PAYMENT. HOWEVER, AO IN HIS ORDER, DID NOT GO BY THE STATEMENT OF THE PARTNER, BUT DISALLOWE D 1.25% ON THE ENTIRE TURNOVER REPORTED BY ASSESSEE IN THE BOOK S OF ACCOUNT. EVEN THOUGH THERE IS NO DISPUTE THAT ASSESSEE HA S SPENT I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 6 - : CERTAIN MONEYS FOR COORDINATION WHILE OBTAINING THE BILLS, THE DISALLOWANCE IS NOT EXACTLY OF THE ACTUAL AMOUNTS SUPP OSED TO HAVE BEEN PAID LIKE THAT. AO HAS DISALLOWED MORE AMOUNT THA N WHAT WAS ADMITTED DURING THE SURVEY IN THE IMPUGNED ASSESSME NT YEARS. EVEN THOUGH THE BASIS IS SURVEY STATEMENT, IT CAN NOT BE STATED THAT AO HAS STRICTLY GONE BY THE STATEMENT, AS HE H AS DISALLOWED MORE AMOUNT, EVEN THOUGH NO SUCH EXPENDIT URE WAS CLAIMED ON THE BILLS WHICH ARE NOT RECEIVED. THEREF ORE, IT HAS TO BE CONSIDERED AS MERE DISALLOWANCE OF EXPENDITURE RATHER THAN ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PAR TICULARS. SINCE THE DISALLOWANCE MADE BY AO IS MORE THAN WHAT WA S ADMITTED BY ASSESSEE IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE SAME HAS TO BE CONSIDERED, AS ADDITION BY AO IN THE CO URSE OF ASSESSMENT PROCEEDINGS. IT IS TRITE LAW THAT MERE DISALL OWANCE IN THE COURSE OF ASSESSMENT DOES NOT LEAD TO LEVY OF PEN ALTY U/S. 271(1)(C), UNLESS THERE IS A FINDING THAT ASSESSEE H AS A CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS. AS CAN BE SEEN FROM THE ORDERS OF AO EXTRACTED ABOVE, THERE IS NO INDICATI ON THAT THE DISALLOWANCE/ADDITION MADE BY THE AO FALLS IN ANY OF THESE CATEGORIES STATED ABOVE, AS THERE IS NO DISCUSSION EVEN ABOUT INITIATION OF PENALTY PROCEEDINGS. THE ORDER OF AO INDICATES THAT IT IS A MERE DISALLOWANCE, CONSEQUENT TO SURVEY OPERATION S CONDUCTED. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINI ON THAT THE CASE DOES NOT FALL EITHER UNDER THE HEAD CONCEALMENT O F INCOME OR UNDER FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY UNDER SEC.271(1)(C). 8.1. BOTH THE PARTIES HAVE RELIED ON VARIOUS CASE LA W, WHICH WE DO NOT INTEND TO REPEAT HERE, AS THE FACTS INDICATE TH AT THERE IS I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 7 - : NO NEED FOR LEVY OF PENALTY ON MERE DISALLOWANCE OF A CERTAIN CLAIM MADE IN THE P&L A/C. ASSESSEES GROUNDS ARE ALLOWE D. SINCE THE ISSUES ARE CONSIDERED ON MERITS, THE ADDITIONAL GROUND S RAISED ON TECHNICALITIES ARE NOT CONSIDERED AND ACCORDINGLY, T HE ADDITIONAL GROUNDS ARE REJECTED. 9. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 19 TH JANUARY, 2018 TNMM I.T.A. NOS. 843/HYD/16 & 821/HYD/17 :- 8 - : COPY TO : 1. GOWTHAMI INFRATECH P. LTD., 6-3-1109/A/1, 3 RD FLOOR, NAVABHARATH CHAMBERS, SOMAJIGUDA, RAJ BHAVAN ROAD, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD. 3. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD. 4. CIT (APPEALS)-2, HYDERABAD. 5. PR.CIT-2, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.