Income Tax Appellate Tribunal - Hyderabad
Handum Industries Ltd, Hyderabad vs Assessee on 5 March, 2012
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ITA Nos. 1486 & 1487/Hyd/2010
Handum Industries Ltd.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI CHANDRA POOJARI, A.CCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA Nos. 1486 & 1487/HYD/2010
Assessment Years : 2003-04 & 2005-06
Handum Industries Ltd., ... Assessee
Hyderabad
(PAN - AFYPM1120J)
Vs.
Asstt. Commissioner of Income-tax, ...Respondent
Central Circle 5, Hyderabad
Assessee by : Mr. S. Rama Rao
Respondent by : Mr. V. Srinivas
Date of Hearing : 05/03/2012
Date of Pronouncement : 04/05/2012
ORDER
PER ASHA VIJAYARAGHAVAN, J.M.:
Both these appeals filed by the assessee are directed against the orders of the CIT(A)-III, Hyderabad dated 26/10/2010 for the assessment years 2003-04 and 2005-06. As identical issues are involved in both these appeals, they were heard together and, therefore, we find it convenient to dispose of these appeals by way of a common order.
2. Search and seizure operations conducted in the case of the assessee and other concerns of Sujana Group of Industries. After the search operations, the Assessing Officer had initiated assessment proceedings for the assessment years 2003-04 and 2005-06 by issuing notices u/s 153C of the 2 ITA Nos. 1486 & 1487/Hyd/2010 Handum Industries Ltd.
Act. The Assessing Officer made certain additions while completing the assessment passed u/s 143(3) read with 153C of the Act. The Assessing Officer also initiated penalty proceedings u/s 271(1)(c) of the Act, at the time of completion of assessment.
3. For the A.Y. 2003-04, the Assessing Officer issued a fresh show cause notice to the assessee requesting to explain as to why penalty on the ground of concealment of income should not be levied. In response to same as noted by the AO, the Assessee had submitted that there is no intentional withholding of information. The Assessing Officer, however, noted that no specific explanation has been offered by the assessee with regard to the issues of disallowance of depreciation interest and loss on asset. Referring to the opportunities provided to the assessee during the assessment proceedings to explain its case, and non submission of satisfactory reply by the assessee he observed that it has been proved beyond doubt that the alleged suppliers of machinery were proprietary concerns of the employees and bogus bills & invoices were being manufactured to show purchases. He further noted that the employees who were shown as proprietors of various concerns have accepted on both counts that they have not done any business and not supplied any machinery to the assessee. The Assessing Officer, stating that during the course of the penalty proceedings no explanation has been furnished by the assessee with reference to that issues he further noted that with regard to the two other disallowance of interest on loan and loss on sale of asset the assessee also has failed to offer any specific explanation. With these observation he held that the assessee has furnished inaccurate particulars of income and thereby concealed the income amounting to Rs 348,17,000/- arising from such disallowances of claim of depreciation interest ad loss on sale of assts. Hence, the Assessing Officer held that the assessee is liable for penalty on the ground of concealment of income for the said amount he levied a penalty of Rs 127,95,247/- u/s 271(1)(c) of the Act 3 ITA Nos. 1486 & 1487/Hyd/2010 Handum Industries Ltd.
vide order dated 25.3.2009. Aggrieved the assessee preferred the appeal before the CIT(A).
4. During the hearing of appeal in the written submissions filed by the ld. AR it was submitted that in the meantime the original quantum appeal in the above case for the asst. year 2003-04 has been disposed off by the Hon'ble ITAT, Hyderabad Bench, on 28.8.2009 by setting aside the assessment to the file of the assessing officer. He furnished before the CIT(A) a copy of the said order (combined order) of the Hon'ble Tribunal in ITA 747 to 750 and 1299/Hyd/2008 for the asst. years 2000-01, 2001-02, 2003-04,2005-06 and 2004-05 dated 28.8.2009. Referring to the observations made by the Hon'ble Tribunal in that regard in para 13 of the said order the ld. AR submitted that penalty u/s 271(1)(c) may not be levied and necessary order for deleting the penalty may please be directed to be passed in favour of the assessee.
4.1 The CIT(A) with respect to the penalty on account of depreciation claimed on non-existing assets, held as follows:
"From the above it is seen that the disallowance of depreciation of Rs 237,07,000/- on plant and machinery made in the assessment order which was confirmed by the CIT(A) has been deleted by the Hon'ble Tribunal vide their above order. Since the above addition has been deleted by the Hon'ble tribunal no penalty u/s 271(1)(C) could be levied against the said addition."
4.2 With respect to the penalty on account of bank interest, the CIT(A) held as under:-
"Further in their said order in ITA 749/Hyd/2008 the Hon'ble Tribunal have set aside the issue of disallowance of bank interest amounting to Rs 106,02,000/- to the file of the assessing officer directing him to reconsider the same after verifying the necessary details and giving opportunity of hearing to the assessee."4
ITA Nos. 1486 & 1487/Hyd/2010 Handum Industries Ltd.
4.3 While imposing penalty on the ground of concealment of income, the Assessing Officer considered the disallowance of Rs. 5,08,000/- towards claim of loss and sale of assets. This disallowance which was upheld by the CIT(A) had been conceded by the assessee before the Tribunal. As per para 11 of the said order of the Hon'ble Tribunal though the assessee has raised ground against the said disallowance made in assessment if did not press the said ground before the Hon'ble Tribunal. Accordingly the said ground was rejected by the Hon'ble Tribunal. Under the circumstances it clearly shows that the assessee indirectly admits that it has willfully made such wrong claim for deduction, From this it thus makes clear that the assessee has concealed its income to the extent of said disallowance of Rs 508,000/- for the asst. year 2003-04. Therefore the assessee is fully liable for penalty u/s 271(1)(c) against the said amount, Thus the decision of the AO in levying penalty u/s 271(1)(c) on the said amount is justified and hence the same is upheld.
4.4 The first two issues relating to penalty imposed with respect to depreciation claimed on non-existing assets and penalty towards disallowance of interest as the remittance of bank interest has not been done by the assessee before due date of filing of return, is common for both the assessment years 2003-04 and 2005-06.
4.5 .0With respect to levy of penalty consequent to furnishing of inaccurate particulars towards prior period expenditure for the assessment year 2005-06, the CIT(A) has observed as follows:-
"6........................In para 4 of the above penalty order, he has stated that the appellant has furnished inaccurate particulars of income and thereby concealed the income of Rs. 3,57,64,926/-, with regard to depreciation, interest and prior period expenditure. Thus, the said amount of Rs. 3,57,64,926/- includes the addition of Rs. 7,96,737/-, arising from disallowance of prior period expenses. The said disallowance, made in the assessment order, which was confirmed by the CIT(A), has been conceded to by the appellant before the Hon'ble 5 ITA Nos. 1486 & 1487/Hyd/2010 Handum Industries Ltd.
Tribunal. As per para 17 of the said order of the Hon'ble Tribunal, though the appellant has raised ground against the said disallowance made in assessment, it did not press the said ground before the Hon'ble Tribunal. Accordingly, the said ground was rejected by the Hon'ble Tribunal. Under the circumstance, it clearly shows that the appellant indirectly admits that it has willfully made such wrong claim of deduction. From this, it thus makes clear that the appellant has concealed its income to the extent of above disallowance of Rs. 7,96,737/- for the assessment year 2005-06. Therefore, the appellant is fully liable for penalty u/s 271(1)(c) on the said amount. Thus, the decision of the AO in levying penalty u/s 271(1)(c) on the said amount, is justified, and hence, the same is upheld".
Aggrieved, the assessee is in appeal before us.
5. The learned counsel for the assessee Shri Murali Mohan contended that the CIT(A) erred in confirming the order passed by the Assessing Officer wherein with respect to penalty on the disallowance on sale of assets of Rs. 5,08,000/- for the assessment year 2003-04 and the order of the CIT(A) in confirming the penalty on the disallowance of Rs. 7,96,737/- towards prior period expenditure in A.Y. 2005-06.
5.1 The learned counsel for the assessee contended that the assessee company had not concealed any particulars and the necessary explanations have been given to the Assessing Officer and CIT(A). The learned counsel for the assessee argued that the levy of penalty is not automatic and merely because the disallowance was conceded in quantum appeal before the Tribunal, penalty cannot be levied.
5.2 The learned counsel for the assessee relied upon the decision of the coordinate bench in the case of Shri S. Prasad Rao in ITA No. 338/Hyd/06 for A.Y. 1997-98 vide order dated 21/11/2008. He also relied upon the following case laws:-
i) Hindustan Steel Ltd. Vs. State of Orissa, [1972] 83 ITR 26 (SC)
ii) K.C. Builders Vs. ACIT [2004] 265 ITR 562 (SC) 6 ITA Nos. 1486 & 1487/Hyd/2010 Handum Industries Ltd.
iii) Mohammad Ibrahim Azimulla Vs. CIT [1981] 131 ITR 680 (All.)
iv) CIT Vs. K.R. Chinni Krishna Chetty [2000] 246 ITR 121
v) CIT Vs. Santosh Financiers [2001] 247 ITR 742.
6. On the other hand, the learned DR relied upon the orders of the CIT(A).
7. We have heard both the parties, perused the record and gone through the orders of the authorities below. The Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 588 (SC) held as under:-
"Merely because the assessee mistakes a claim which is not sustainable in law, will not amount to furnishing of inaccurate particulars regarding the income of the assessee."
8. In the present case before us, the disallowance made by the Assessing Officer may give rise to suspicion sufficient to make the addition for the purpose of assessment but not sufficient enough to justify levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer should show that the plea of the assessee is false or that the assessee has committed some fraud or gross willful negligence on his part to bring about concealment of income or furnishing of inaccurate particulars of his income. Penalty cannot be imposed on the ground that the assessee has accepted the addition in quantum appeal for the reasons best known to him. Therefore, penalty levied is hereby deleted in both the years under consideration.
9. In the result, both the appeals filed by the assessee are allowed.
Pronounced in the open court on 04/05/2012.
Sd/- Sd/-
(CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
th
Hyderabad, Dated: 4 May, 2012.
kv
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ITA Nos. 1486 & 1487/Hyd/2010
Handum Industries Ltd.
Copy to:-
1) Handum Industries Ltd.,
C/o P. Murali & Co., CAs, 6-3-655/2/3, I Floor,
Somajiguda, Hyderabad - 82.
2) ACIT, Central Circle - 5, Hyderabad
3) The CIT (A)-III, Hyderabad
4) The CIT-II, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.