Telangana High Court
The Pr. Commissioner Of Income Tax2 vs Sri Venkatesh Granites Pvt. Ltd. on 24 August, 2022
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
AND
THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
I.T.T.A.No.241 of 2022
JUDGMENT:(Per the Hon'ble the Chief Justice Ujjal Bhuyan) Heard Mr. A.Radha Krishna, learned Standing Counsel, Income Tax Department for the appellant.
2. This appeal has been preferred by the Revenue as the appellant under Section 260A of the Income Tax Act, 1961 (briefly referred to hereinafter as 'the Act') assailing the legality and validity of the order dated 25.08.2021 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad (Tribunal) in ITA No.1251/Hyd/2018 for the assessment year 2014-15.
3. The questions which have been proposed as substantial questions of law are as under:
"1. Whether on the facts and circumstances of the case and in law, the ITAT has erred in not appreciating the fact that the assessing officer fully 2 HCJ & CVBRJ I.T.T.A.No.241 of 2022 complied with provisions of Section 271AAB of the I.T. Act 1961 and passed penalty order?
2. Whether on the facts and circumstances of the case and in law, ITAT has misinterpreted the A.O's. order under Section 271AAB of the I.T. Act 1961?
3. Whether on the facts and the circumstances of the case, the ITAT was right in allowing the appeal of the assessee without appreciating the facts that seized cash and amount lying in the PD account has to be adjusted against the existing liability only. With the insertion of Explanation-2 in Section 132B of the I.T. Act 1961, which is declaratory in law, it has been clarified that the "existing liability" does not include advance tax payable in accordance with the provisions of Part- C of Chapter XVII?"
4. Thus from the above, we find that the core issue involved in the appeal is the order of penalty imposed by the assessing officer which was set aside by the Tribunal.
5. Respondent is an assessee under the Act having the status of a private company.
6. For the assessment year 2014-15 assessment order was passed by the assessing officer on 29.02.2016 3 HCJ & CVBRJ I.T.T.A.No.241 of 2022 under Section 143(3) of the Act. Certain additions were made to the returned income including undisclosed income discovered during search. Therefore, assessing officer while passing the order of assessment directed that separate penalty proceedings under Sections 271(1)(c) and 271AAB of the Act be initiated. Upon initiation of penalty proceedings, order of penalty came to be passed on 31.08.2016 by the assessing officer under Section 271AAB of the Act whereby penalty of Rs.2,20,00,000.00 was levied.
7. This was appealed against by the respondent before the Commissioner of Income Tax (Appeals)-II, Hyderabad (briefly referred to hereinafter as 'CIT(A)'). By the appellate order dated 19.03.2018, CIT(A) partly allowed the appeal by holding that respondent had satisfied the conditions laid down in Section 271AAB(1)(a) of the Act and therefore, the penalty leviable was 10% as against 30% levied by the assessing officer.
8. Against the aforesaid order of CIT(A), the related appeal was filed by the Revenue before the Tribunal.
4 HCJ & CVBRJ I.T.T.A.No.241 of 2022 Respondent also filed cross appeal being ITA No.1278/Hyd/18. While the appeal of the Revenue was dismissed, appeal of the assessee was allowed by the Tribunal vide the order dated 25.08.2021 in the following manner:
"5. Next comes the Revenue's and assessee's cross appeals ITA Nos.1251/Hyd/2018 and 1278/Hyd/2018 dealing with Section 271AAB penalty issue. Suffice to say, it transpires at the outset that the Assessing Officer's penalty order dt.31-08-2016 had nowhere specified as to whether the alleged undisclosed income satisfied that the corresponding statutory parameters prescribed in Section 271AAB, Explanation (C)(i)(A) & (B) and (ii) "not been recorded or before the date of search in the books of accounts or other documents maintained in the normal course relating to such previous year or otherwise not disclosed before the specified authority (ies) or it had surfaced either wholly or partly by ...... in respect of expense recorded....." We therefore find no reason to sustain the impugned Section 271AAB penalty as well for this sole reason alone. The Revenue's appeal ITA No.1251/Hyd/2018 fails and assessee's cross appeal ITA No.1278/Hyd/2018 succeeds therefore.
6. To sum-up, both the Revenue's appeals 1250 & 1251/Hyd/2018 are dismissed and assessee's appeal ITA No.1278/Hyd/2018 is allowed. A copy of this common order be placed in the respective case files."
5 HCJ & CVBRJ I.T.T.A.No.241 of 2022
9. We are in agreement with the view expressed by the Tribunal and concur with the finding rendered that penalty imposed on the respondent be it 30% or 10% could not be sustained. No question of law, not to speak of any substantial question of law, arises out of the aforesaid order.
10. Consequently, the appeal is dismissed. However, there shall be no order as to costs.
11. As a sequel, miscellaneous applications pending, if any, in the appeal, shall stand closed.
__________________________ UJJAL BHUYAN, CJ ___________________________ C.V.BHASKAR REDDY, J Date: 24.08.2022 KL