D.Suresh Kumar, Hyd, Hyderabad V. ITO, Ward-16(2), Hyderabad, Hyderabad

ITA 982/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6127 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Reasonable cause; Deemed dividend
• Section: 27

Judgement Text

ITA NO 982 OF 2016 D SURESH KUMAR HYDERABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.982/HYD/2016 (ASSESSMENT YEAR: 2010-11) SHRI D. SURESH KUMAR HYDERABAD PAN: AEOPD 9880 R VS INCOME TAX OFFICER WARD 16(2) HYDERABAD FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. U. MINI CHANDRAN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11 AGAINS T THE ORDER OF THE CIT (A)-4, HYDERABAD, DATED 24.03. 2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2. THE INITIATION OF PROCEEDINGS U/S 271(1)(C) OF T HE INCOME-TAX ACT IS NOT VALID AS THE ASSESSING OFFICER DID NOT STRIKE OFF THE INAPPROPRIATE PORTION OF THE NOTICE. THE ASSESSING OFFICER OUGHT TO HAVE STRUCK OFF THE INAPPROPRIATE PORTION AND INDICATED TO THE APPELLANT THE APPLICABLE PORTION IN THE NOTICE.' 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING LEVY OF PENALTY U/S 271(1)(C) WITH REFERENCE TO THE ADDITIONS MADE OF RS.10 LAKHS U/S 2(22)(E) OF THE I.T. ACT AND DATE OF HEARING : 23.02.2017 DATE OF PRONOUNCEMENT : 28.02.2017 ITA NO 982 OF 2016 D SURESH KUMAR HYDERABAD PAGE 2 OF 4 RS.2,40,OOOJ-BEING THE EXPENDITURE NOT TAKEN INTO ACCOUNT WHILE DRAWING CASH FLOW STATEMENT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT THE SAID AMOUNTS DO NOT REPRESENT THE CONCEALED INCOME AND PENALTY U/S 271(1)(C) IS NOT LEVIABLE. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. AT THE OUTSET, WE FIND THAT THE APPEAL IS TIME B ARRED BY 3 DAYS AND THE ASSESSEE HAS FILED AN APPLICATION FO R CONDONATION OF DELAY. BEING SATISFIED THAT THE ASSESSEE WAS PRE VENTED BY REASONABLE CAUSE AND THE DELAY IS NOT INTENTIONAL, WE CONDONE THE DELAY AND PROCEED TO ADJUDICATE THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE. 3. GROUNDS OF APPEAL NO.1 & 5 ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 4. AT THE TIME OF HEARING, IT IS SUBMITTED BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE GROUND OF APPEAL NO.2 IS A LEGAL GROUND WHICH WAS NOT RAISED EITHER BEFORE THE AO OR BEFORE THE CIT (A). HE SUBMITTED THAT THE ASSESSEE HAS FILED A N APPLICATION FOR TREATING THE GROUND AS AN ADDITIONAL GROUND OF APPEAL AND HAS ALSO FILED A LETTER DATED 20.02.2016 ALONG WITH THE COPY OF THE NOTICE U/S 271(1)(C) OF THE ACT REQUESTING FOR ADMI SSION OF ADDITIONAL GROUND OF APPEAL. 5. THE LEARNED DR HOWEVER, OPPOSED THE ADMISSION OF THE ADDITIONAL GROUND. ITA NO 982 OF 2016 D SURESH KUMAR HYDERABAD PAGE 3 OF 4 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THIS GROUND IS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE KARNATAKA H IGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACT ORY REPORTED IN (2013) 35 TAXMANN.COM 250 (KAR.) WHEREI N IT WAS HELD THAT THE LEVY OF PENALTY IS NOT SUSTAINABLE IF THE AO FAILS TO STRIKE OFF THE INAPPROPRIATE WORDS IN THE NOTICE SO THAT T HE ASSESSEE COMES TO KNOW THE GROUND ON WHICH THE PENALTY PROCE EDINGS ARE INITIATED. THE REVENUE FILED AN SLP AGAINST A SIMIL AR ORDER BEFORE THE HON'BLE SUPREME COURT AND THE HON'BLE SUPREME C OURT HAS REFUSED TO GRANT SLP AS REPORTED IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS, REPORTED IN (2016) 73 TAXMANN.COM 248. WE HAVE VERIFIED THE NOTICE U/S 271(1)(C) IN THE CASE BEFORE US. WE ARE SATISFIED THAT THE REQUIRED CONDITION OF STRIKING O FF THE INAPPROPRIATE PORTION IS NOT SATISFIED. THEREFORE, THIS GROUND OF APPEAL IS ADMITTED AND ALSO ALLOWED. 7. FURTHER, EVEN OTHERWISE ON THE MERITS OF THE PENA LTY, WE FIND THAT THE AO HAS INITIATED PENALTY PROCEEDIN GS ON ACCOUNT OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER TOWAR DS DEEMED DIVIDEND INCOME U/S 2(22)(E) OF THE ACT, THE LONG T ERM CAPITAL GAIN NOT DISCLOSED BY THE ASSESSEE AND ALSO EXPENDI TURE NOT TAKEN INTO ACCOUNT WHILE DRAWING THE CASH FLOW STAT EMENT. SINCE THE ASSESSEE DID NOT FILE ANY REPLY TO THE SHOW CAU SE NOTICE ISSUED BY THE AO, THE AO LEVIED THE MINIMUM PENALTY U/S 27 1(1)(C) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT (A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. THE CIT (A) DELETED THE PENALTY AS REGARDS THE NON OFFERING OF THE LTCG TO TAX. HOWEVER, AS REGARDS THE DEEMED DIVIDEND AND ALSO THE EXPENDI TURE NOT TAKEN INTO ACCOUNT, THE CIT (A) CONFIRMED THE PENAL TY. THE LEARNED ITA NO 982 OF 2016 D SURESH KUMAR HYDERABAD PAGE 4 OF 4 COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIO NS ARE MADE BY THE AO ONLY BECAUSE THE ASSESSEE COULD NOT SUBST ANTIATE ITS CLAIMS BUT NOT BECAUSE THE ASSESSEES CONTENTIONS A RE PROVED TO BE WRONG. 8. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ADDITIONS MAY BE WARRAN TED BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM, BUT EVERY ADDITION DOES NOT AUTOMATICALLY ATTRACT PENALTY U/S 271(1)(C). IT HAS NOT BEEN BROUGHT ON RECORD THAT THE CONTENTIONS OF THE ASSESSEE ARE INCORRECT. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE PENALTY, EVEN ON MERITS, IS NOT SUSTAINABL E. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 28 TH FEBRUARY,2017. VINODAN/SPS COPY TO: 1 SHRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYA'S E LEGANCE, 3-6- 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 INCOME TAX OFFICER, WARD 16(2), HYDERABAD 3 CIT (A)-4 HYDERABAD 4 CIT - HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER