M/s Sri Taraka Jewellers, Hyderabad V. ITO, Ward-1, Nalgonda

ITA 998/HYD/2013

• Counselvise Citation: 99822514 RSA 2013
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R LAXMAN
• Assessee Lawyers: A V RAGHURAM
• Section: 143(3); 133A

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.998/HYD/2013 ASSESSMENT YEAR 2007-2008 M/S. SRI TARAKA JEWELLERS NALGONDA. PAN ABGFS4722E VS. INCOME TAX OFFICER, WARD - 1 NALGONDA (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.V.RAGHURAM FOR RESPONDENT : SHRI R. LAXMAN DATE OF HEARING : 01.10.2013 DATE OF PRONOUNCEMENT : 04.10.2013 ORDER SMT. P. MADHAVI DEVI, J.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A)-VI, HYDERABAD DATED 20-05-2013 FOR THE ASSESS MENT YEAR 2007-2008. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST THE CONFIRMATION OF PENALTY ON THE ADDITION OF RS.10 LAKHS LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961. BRIEF FACTS OF THE CASE LEADING TO THE LEVY OF PENALTY ARE AS UNDER : 3. THE ASSESSEE IS A FIRM WHICH IS TRADING IN GOLD AND SILVER ORNAMENTS AND IS ALSO IN RECEIPT OF MAKING CHARGES OF JEWELLERY/ORNAMENTS. IT FILED ITS RETURN OF INCOME FO R THE RELEVANT ASSESSMENT YEAR 2007-2008 ON 31.10.2007 ADMITTING TO TAL INCOME OF RS.5,47,210/-. DURING THE ASSESSMENT PROC EEDINGS UNDER SECTION 143(3) OF THE ACT, VARIOUS DETAILS WE RE CALLED FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO H AD TAKEN INTO 2 CONSIDERATION THE MATERIAL FOUND DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 IN T HE BUSINESS PREMISES OF THE ASSESSEE (ON 13.09.2007). ON PERUSA L OF THE SAID MATERIAL AND THE CASH FLOW STATEMENT FILED BY THE AS SESSEE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER O BSERVED THAT THE CASH BALANCE AVAILABLE WITH THE ASSESSEE AS ON 31.03.2007 IS RS.11,24,707/-. HE OBSERVED THAT AS PER THE WORKING OF THE DEPARTMENT, THE CASH BALANCE SHOULD BE OF RS.44,04, 444/-. THEREFORE, THE ASSESSEES EXPLANATION WITH REGARD TO DISCREPANCY IN THE CASH BALANCE WAS CALLED FOR. THE ASSESSEE FU RNISHED A LETTER DATED 31.07.2009 EXPLAINING THAT THE ASSESSIN G OFFICER HAS NOT CONSIDERED CASH INFLOW BY WAY OF BANK LOAN OF RS. 1,09,614/- AND ACCORDING TO THE ASSESSEES STATEMENT, PURCHASES IS OF RS.54,39,747/- AND UNACCOUNTED PURCHASES OF RS.10 L AKHS IS ALSO THERE AND THEREFORE, THE ASSESSING OFFICERS CO NCLUSION THAT THERE IS A DISCREPANCY IN THE CASH BALANCE AS ON 31. 03.2007 IS NOT CORRECT. THE ASSESSEE FURNISHED A CASH FLOW STA TEMENT AS ON 31.03.2007 ACCORDING TO WHICH, THERE WAS UNACCOUNTE D TURNOVER OF RS. 10 LAKHS AS WELL AS UNACCOUNTED PURCHASES OF RS. 10 LAKHS. AFTER CONSIDERING THE DETAILS FURNISHED BY TH E ASSESSEE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT F ROM THE AVAILABLE FUNDS OF RS.79,51,266/-, THE ASSESSEE CLA IMED PURCHASES OF RS.54,39,747/- AND UNACCOUNTED PURCHAS ES OF RS.10 LAKHS, WHEREAS, AS VERIFIED FROM THE DETAILS FURNISHED DURING THE COURSE OF HEARING, THE ASSESSEE RECORDED PURCHASES TO AN EXTENT OF RS.33,77,214/- AND UNACCOUNTED PURCHASE S WERE RS. 20,62,533/- AND THEREFORE, THE SUM OF RS.54,39, 747/- INCLUDES THE UNACCOUNTED PURCHASES OF RS. 10 LAKHS ALSO. THUS, ACCORDING TO HIM, THE ADDITIONAL SUM OF RS. 10 LAKH S IS THE ASSESSEES PROFIT/UNDISCLOSED INCOME AND THEREFORE, HE TREATED IT AS INCOME OF THE ASSESSEE AND ADDED TO THE TOTAL IN COME AND BROUGHT IT TO TAX. SUBSEQUENTLY, THE ASSESSING OFFICE R INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE I .T. ACT, 1961. 3 IN THE MEANTIME, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE CIT(A) AGAINST THE ADDITION WHICH WAS CONFIRMED BY T HE CIT(A) AND ON FURTHER APPEAL TO ITAT, THE ADDITION WAS CON FIRMED. TAKING NOTE OF THE ABOVE CONFIRMATION OF ADDITION B Y ITAT, ASSESSING OFFICER LEVIED THE PENALTY ON THE ADDITION OF RS. 10 LAKHS WHICH WAS ALSO CONFIRMED BY THE CIT(A). 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI A.V. RAGHURAM, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW S UBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE ASSES SEE HAD MADE ADMISSION OF BOTH UNACCOUNTED PURCHASES AS WELL AS UNACCOUNTED TURNOVER OF RS. 10 LAKHS AND WHILE THE ASSESSING OFFICER HAS ACCEPTED THE UNACCOUNTED TURNOVER, DID NOT ACCEPT THE CONTENTION OF UNACCOUNTED PURCHASES, RESULTING IN THE IMPUGNED ADDITION. HE SUBMITTED THAT IT MAY BE A CAS E FOR ADDITION, BUT ALL ADDITIONS DO NOT AUTOMATICALLY ATT RACT PENALTY. HE FURTHER SUBMITTED THAT THE CIT(A) HAS FAILED TO APPRECIATE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER AND THE INCOME OF THE ASSESSEE WA S ESTIMATED AND IN SUCH CIRCUMSTANCES THE QUESTION OF WORKING O UT DEFICIT CASH BY CONSTRUCTING BALANCE SHEET DOES NOT ARISE AN D THEREFORE, THE LEVY OF PENALTY IS INCORRECT. HE FURTHER SUBMITT ED THAT THE ISSUE IS HIGHLY DEBATABLE AND IN SUCH CIRCUMSTANCES, THE PENALTY IS NOT LEVIABLE. IN SUPPORT OF HIS CONTENTION, HE P LACED RELIANCE UPON THE FOLLOWING DECISIONS : (I) CIT VS. BHARAT MINERALS SALES CORPORATION (2002) 253 ITR 419 (CAL.) (II) CIT VS. LATE G.D. NAIDU BY LRS. (1987) 165 ITR 63 (MAD.) 5. THE LEARNED D.R. ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASS ESSEE HIMSELF 4 HAS ADMITTED TO UNACCOUNTED PURCHASES OF RS. 10 LA KHS AND THE SAID ADDITION HAS BEEN CONFIRMED BY THE ITAT WHICH P ROVES THAT THE ASSESSEES CLAIM IS INCORRECT AND FILING OF INCO RRECT CLAIM ITSELF WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULAR S OF INCOME/CONCEALMENT OF INCOME AND THEREFORE, THE PEN ALTY WAS RIGHTLY LEVIED UNDER SECTION 271(1)(C) OF THE I.T. A CT, 1961. HE HAS ALSO FILED COPIES OF CASH FLOW STATEMENT FILED BY TH E ASSESSEE BEFORE THE ASSESSING AUTHORITY AS ON 31.03.2007 TO D EMONSTRATE THAT THE CLAIM OF THE ASSESSEE WAS INCORRECT. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CAREFUL LY CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE ISSUE BEFORE US IS, WHETHER THE ADDITION OF RS. 10 LAKHS WOULD ATTR ACT THE LEVY OF PENALTY UNDER SECTION 271 (1) (C) OF THE I.T. ACT, 1 961 ? ADMITTEDLY, THE ASSESSEE HAD CLAIMED BOTH UNACCOUNTE D PURCHASES OF RS. 10 LAKHS AND UNACCOUNTED TURNOVER OF RS. 10 LAKHS AS ON 31.03.2007. FROM THE CASH FLOW STATEMEN T SUBMITTED BY THE ASSESSEE AS ON 31.03.2007 FILED BY THE LEARNED D.R. BEFORE US WHICH IS ALSO REPRODUCED IN THE ASSESSMENT ORDER , WE FIND THAT THESE TWO CLAIMS WERE MADE BY THE ASSESSEE BEF ORE THE ASSESSING AUTHORITY. THE AUTHORITIES BELOW HAVE ACCE PTED THE ASSESSEES CONTENTION OF UNACCOUNTED TURNOVER OF RS. 10 LAKHS BUT DID NOT ACCEPT THE CLAIM OF UNACCOUNTED PURCHAS ES OF RS. 10 LAKHS RESULTING IN THE ADDITION. THE ITAT HAS ALSO CONFIRMED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS ADMITT ED THE UNACCOUNTED PURCHASES. THE QUESTION BEFORE US IS, W HETHER THE ADDITION OF RS. 10 LAKHS WOULD ATTRACT THE PENALTY P ROCEEDINGS. IT IS SETTLED LAW THAT EVERY ADDITION WILL NOT AUTOMATI CALLY ATTRACT PENALTY. UNDER EXPLANATION-1 TO SECTION 271(1)(C) O F THE I.T. ACT, 1961, THE TWIN CONDITIONS FOR LEVY OF PENALTY ARE THA T (1) THE ASSESSEE SHOULD NOT HAVE OFFERED THE EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FA LSE AND (2) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO 5 SUBSTANTIATE (AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM). SHOULD NOT HAVE BEEN BONAFIDE. 7. IN THE CASE BEFORE US, THE ASSESSEE HAS OFFERED THE EXPLANATION WHICH IS NOT FOUND TO BE FALSE. FURTHER WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL THE DETAILS BEFORE T HE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE ASSE SSING OFFICER AND THE CIT(A) HAVE NOT ACCEPTED THE CONTENTION OF THE ASSESSEE RESULTING IN ADDITION BUT IT WOULD NOT MAKE A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE WHOLE BASIS FOR THE LEVY OF PENALTY, IS THE CONFIRMATION OF THE ADDITION OF RS. 10 LAKHS BY THE ITAT AND NOT DUE TO THE FULFILMENT OF THE CONDITIONS PRESCRI BED UNDER EXPLANATION-1 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961 IS NOT JUSTIFIABLE A ND ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 04.10.2013 SD/- SD/- S D (B.RAMAKOTAIAH) ACCOUNTANT MEMBER - (P.MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 04 TH OCTOBER, 2013 VBP/- 6 COPY TO 1. M/S. SRI TARAKA JEWELLERS, NEW PRAKASAM BAZAR, NALG ONDA. C/O. K. VASANTKUMAR, ADVOCATE, 610, BABUKHAN ESTATE, BAHSEERBAGH, HYDERABAD-1. 2. I.T.O. WARD - 1, NALGONDA. 3. CIT(A) - VI , 6A, I.T. TOWERS, A.C. GUARDS, HYDERABAD-500 004. 4. CIT - VI , HYDERABAD 5. DR A BENCH, ITAT, HYDERABAD