DCIT, Circle-13(1), Hyderabad V. M/s. Narayanee Pictures, Hyderabad

ITSSA 24/HYD/2011

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7666 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 22-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Keywords: Reasonable cause; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER IT(SS)A NO.24/HYD/2011 (BLOCK PERIOD OF ASSESSMENT YEARS FROM 1996-97 TO 2001-02 AND FROM 1.4.2001 TO 29 .1.2002) DY. COMMISSIONER OF INCOME- TAX, CIRCLE 13(1), HYDERABAD V/S M/S. NARAYANEE PICTURES, HYDERABAD (PAN - AANPR 4600 E ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.VISWANATHAM RESPONDENT BY : NONE DATE OF HEARING 14 3.2012 DATE OF PRONOUNCEMENT 16.3.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED A GAINST THE ORDER OF THE CIT(A) II, HYDERABAD DATED 1.6.2012, CANCELLING PENALTY OF RS.7,41,834 LEVIED BY THE ASSESSING OFFICER UNDER S .271D OF THE ACT, FOR THE BLOCK PERIOD COMPRISING OF ASSESSMENT YEARS FR OM 1996-97 TO 2001-02 AND FROM 1.4.2001 TO 29.1.2002 . 2. AT THE OUTSET, WE MAY NOTE THAT NONE APPEARED O N BEHALF OF THE ASSESSEE-RESPONDENT, AT THE TIME OF HEARING ON THIS APPEAL, DESPITE SERVICE OF NOTICE. NOT EVEN A PETITION FOR ADJOURNM ENT HAS BEEN RECEIVED FROM THE ASSESSEE. HENCE, WE ARE INCLINED TO PROCE ED TO DISPOSE OF THIS APPEAL ON MERITS EX-PARTE QUA THE ASSESSEE- ON THE BASIS OF MATERIAL ON RECORD. 3. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- I IT(SS)A NO.35/HYD/11 M/S. NARAYANEE PICTURES, HYDERABAD 2 1. THE CIT(APPEALS) OUGHT TO HAVE UPHELD THE PENA LTY UNDER S.271D. 2. THE CIT(A) OUGHT TO HAVE RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN CASE KASI CONSULTANT CORPN. VS. DCIT AND P ATNA HIGH COURT NARSINGAM ASHOK KUM AR VS. UNION OF INDIA 234 ITR 414 AND ADIT VS. KUM A.B.SHANTI 255 ITR 258 TO UPHOLD THE O RDER OF PENALTY. 4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE MATERIAL ON RECORD. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF PRODUCTION OF FILMS. SEARCH AND SEIZUR E OPERATIONS WERE CARRIED OUT UNDER S.132 OF THE ACT ON 29.1.20902 AT THE RESIDENTIAL PREMISES OF SHRI SRIHARI, A FILM ACTOR. DURING THE COURSE OF SEARCH INCRIMINATING MATERIAL EVIDENCING UNDISCLOSED INCOM E RELATING TO ASSESSEE FIRM WAS FOUND AND SEIZED. SUBSEQUENTLY, BLOCK ASS ESSMENT PROCEEDINGS UNDER S.158BD READ WITH S.58BC(C) OF THE ACT WERE O RIGINALLY COMMITTED ON 30.1.2004 DETERMINING THE UNDISCLOSED INCOME OF THE ASSESSEE AT RS.4.,91.94. THOUGH ON APPEAL, CIT(A) ALLOWED A REL IEF OF RS.3,50,000 TO THE ASSESSEE, ON FURTHER APPEAL BY THE DEPARTMENT, THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION OF THE MATTER. THE ASSESSING OFFICER THEREAFTER, FRAMED THE ASSESSMENT AFRESH IN ACCORDA NCE WITH THE DIRECTIONS OF THE CIT(A) AND ULTIMATELY PASSED THE BLOCK ASSESSMENT ORDER ON 31.12.2008, DETERMINING THE UNDISCLOSED IN COME OF THE ASSESSEE FOR THE BLOCK PERIOD AT RS.2,01,840. WHILE DOING SO , HE ALSO INITIATED PENALTY PROCEEDINGS UNDER S.271D OF THE ACT, FOR CO NTRAVENTION OF PROVISIONS OF S.269SS OF THE ACT. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE AND C ONSIDERING THE SUBMISSIONS DURING THE COURSE OF PENALTY PROCEEDING S, THE ASSESSING OFFICER ULTIMATELY LEVIED THE IMPUGNED PENALTY OF R S.7,41,834, VIDE PENALTY ORDER DATED 23.6.2009 PASSED UNDER S.271D O F THE ACT. THE CIT(A) BY THE IMPUGNED ORDER DATED 1.6.2011, CANCEL LED THE SAID PENALTY, RELYING ON THE DECISION OF THE HYDERABAD BENCH OF T HE TRIBUNAL IN I IT(SS)A NO.35/HYD/11 M/S. NARAYANEE PICTURES, HYDERABAD 3 INDUSTRIAL ENTERPRISES V/S. DY.CIT (73 ITD 252), AN D OBSERVING VIDE PARA- 9 OF THE IMPUGNED ORDER AS FOLLOWS- 9. THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF INDUSTRIAL ENTERPRISES VS. DY. CIT SUPRA APPLIES TO THE PRESENT FATS WHICH STATED- ASSESSEE HAVING BORROWED MONIES IN CASH FROM WELL WISHERS AND FRIENDS UNDER COMPELLING CIRCUMSTANCES TO MEET ITS DAY TO DAY BUSINESS REQUIREMENTS, THERE WA S A REASONABLE CAUSE FOR VIOLATION U/S. 269SS AND ;PENA LTY U/S. 271D IS NOT JUSTIFIED PARTICULARLY WHEN ASSESSING AUTHORITIES HAVE NO DOUBTS WHATSOEVER ABOUT GENUINE NESS OF LOANS, THE IDENTITY OF LENDERS AND THEIR CREDITW ORTHINESS. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE LOAN, THE IDENTITY AND THE CREDITWORTHINESS OF THE LENDER AND IT ALSO NOT THE CASE OF UNAVAILABILITY OF BANKING FACILITIES, BUT IT IS COM PELLING CIRCUMSTANCES WHICH HAS LED THE APPELLANT TO THE V IOLATION OF THE PROVISIONS OF SECTION 269SS. CONSIDERING THE PROBLE MS PECULIAR TO FILM INDUSTRY WHERE CASH TRANSACTIONS ARE THE NORM OF THE DAY SINCE EVERYBODY INSISTS ON CASH PAYMENT ON THE SPOT DUE TO THE UNCERTAINTIES OF THE SUCCESS OF THE PROJECT, THERE IS SOME MERIT IN THE CONTENTION OF THE ASSESSEE. THE AO HAS STATED T HAT NO EVIDENCE WAS FOUND TO SHOW THAT THE BORROWINGS IN CASH WAS M EANT TO RUN THE DAY TO DAY ACTIVITIES OF THE FIRM. HE HAS NOT SPECIFIED AS TO THE TYPE OF EVIDENCE REQUIRED TO SUBSTANTIATE THE CLAIM . DURING THE ASSESSMENT PROCEEDINGS AND ALSO APPELLATE PROCEEDIN GS, THE ASSESSEE HAD FILED COPY OF CASH BOOK WITH THE DETA ILS OF EXP INCURRED FOR THE PERIOD REFLECTING EXPENSES WHICH HAVE BEEN INCURRED FROM THE AMOUNTS BORROWED FROM 1.4.2001 TO 5.1.2001. AFTER VERIFYING THE DETAILS OF EXPENSES, I AGREE WI TH THE CLAIM OF THE ASSESSEE THAT HERE WERE COMPELLING CIRCUMSTANCE S AS ENVISAGED BY THE HONBLE ITAT IN THE CASE CITED ABO VE FOR THE VIOLATION OF THE PROVISIONS OF SECTION 269SS. ACCOR DINGLY, THE PENALTY LEVIED U/S. 271D OF RS.7,41,834 IS HEREBY C ANCELLED. THUS, THE DECISION OF THE CIT(A) IN CANCELLING THE PENALTY IS BASED ON HIS FINDING THAT THE BORROWALS MADE IN THE PRESENT CASE WERE UNDER COMPELLING CIRCUMSTANCES TO MEET THE DAY TO DAY NEE DS OF BUSINESS OF THE ASSESSEE. HE HAS ALSO NOTED THAT THERE WAS NO DISPU TE EITHER WITH REGARD TO THE IDENTITY OF THE LENDER OR HIS CREDITWORTHINE SS OR THE GENUINENESS OF THE TRANSACTIONS. IN THIS VIEW OF THE MATTER, HE CO NCLUDED THAT THE COMPELLING CIRCUMSTANCES ENVISAGED BY THE COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF INDUSTRIAL ENTERPRISES (SUP RA) FOR VIOLATION OF THE PROVISIONS OF S.269SS OF THE ACT, ARE PRESENT IN TH E INSTANT CASE. WE FIND I IT(SS)A NO.35/HYD/11 M/S. NARAYANEE PICTURES, HYDERABAD 4 NO INFIRMITY IN THE IMPUGNED ORDER OF THE CIT(A) IN CANCELLING THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER S.271D OF THE ACT. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUN DS OF THE REVENUE IN THIS APPEAL. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 16.03.2012 SD/- SD/- ( ASHA VIJAYARAGHAVAN) (D.KARUNAKARA R AO ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 16TH MARCH, 2012 COPY FORWARDED TO: 1. M/S.NARAYANEE PICTURES, 620103/A/2R, AKSHAY ENCL AVE, SHOBANA COLONY, BALANAGAR, HYDERABAD 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 13(1), H YDERABAD 3. 4. COMMISSIONER OF INCOME-TAX(APPEALS) II HYDERABAD COMMISSIONER OF INCOME-TAX AP III, HYDERABAD 5 . THE DEPARTMENTAL REPRESENTATIVE, ITAT HYDERABAD B.V.S.