Income Tax Appellate Tribunal - Hyderabad
Sri A.V.Guruva Reddy,, Hyderabad vs Department Of Income Tax on 6 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER AND
SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA No.1119/Hyd/14 : Assessment year 2007-08
ITA No.1120/Hyd/14 : Assessment year 2008-09
Dy. Commissioner of Income- V/s. Shri A.V.Guruva Reddy, Hyderabad
tax Central Circle 6, Hyderabad
( PAN - ADDPA 6981 E )
(Appellant) (Respondent)
Appellant by : Shri Kurmi Naidu DR
Respondent by : Shri S.Rama Rao
Date of Hearing 10.12.2015
Date of Pronouncement 06.01.2016
ORDER
Per B.Ramakotaiah, Accountant Member:
These two appeals are filed by the Revenue and they are directed against separate orders of the Commissioner of Income- tax(Appeals) I, Hyderabad, both dated 26.3.2014 for the assessment years 2007-08 and 2008-09.
2. The common issue involved in these appeals relates to penalties levied by the Assessing Officer under S.271(1)(c) of the Act for the assessment years 2007-08 and 2008-09, which have been deleted by the CIT(A). It is the contention of the Revenue that the penalties imposed by the Assessing Officer are based on the loose papers seized and the CIT(A) was not justified in deleting the penalty, particularly when the assessee himself offered income in the course of survey.
3. Briefly stated, assessee is a renowned orthopedic surgeon and he is also the Managing Director of M/s. Sarvejana Health Care Pvt. Ltd. He filed the returns of income for the assessment year 2007-08 admitting 2 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad income of Rs.1,56,15,550 and for the assessment year 2008-09 and of Rs.3,08,55,184 for the assessment year 2009-10. Consequent to search and seizure operations conducted on 20.08.2009 and survey operations conducted on the premises above company, proceedings under S.153A were initiated. Assessee filed revised returns declaring income of Rs.2,31,62,130, thereby admitting additional income of Rs.75 lakhs for the assessment year 2007-08 and of Rs.3,33,45,263 for the assessment year 2008-09, thereby admitting additional income of Rs.25,00,000 for that year. Assessments were completed on total income of Rs.2,12,57,442 for the assessment year 2007-08 and of Rs.3,38,84,018 for assessment year 2008-09, viz. on incomes which are less than the incomes returned by the assessee. Even though the assessee admitted income as declared under S.132(4), the Assessing Officer however in the assessment orders brought these amounts to tax separately and initiated proceedings under S.271(1)(c). For the assessment year 2007-8, an amount of Rs.45 lakhs was quantified by the Assessing Officer on the basis of certain sale deeds impounded towards unexplained investments in property purchased at Hyderabad for assessment year 2008-09 and for assessment year 2008- 09, based on some scribbling which are not dated or clear, Assessing Officer quantified the amounts advanced by the assessee at Rs.25 lakhs, and on those additions penalty under S.271(1)(c) was levied.
4. Before the learned CIT(A), assessee explained that when the assessee has admitted an amount of Rs.75 lakhs for assessment year 2007-08, only an amount of Rs.45 lakhs was considered for penalty. It was also explained that assessee has invested various amounts in the earlier years from assessment year 2002-03 to 2005-06, but the Assessing Officer chose to bring to tax the entire amount in assessment year 2007- 08 based on certain registered documents and there was no investment made in this year. It was contended that in order to settle the matter, the assessee offered the amount to tax under S.132(4) and the provisions of Explanation 5A to S.271(1)(c) are to applicable to the assessee. Assessee 3 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad also submitted that income admitted in the course of proceedings under S.153A cannot be the only basis for considering the concealment penalty, as these proceedings are entirely independent of general assessment proceedings and relied on various case-law as discussed by the CIT(A) in paras 5.6 and 5.7 of the impugned order for assessment year 2007-08. For assessment year 2008-09, it was also submitted that loose papers do not contain any date or any details and the transactions therein do not reflect any money given or received back. It was further submitted that there is no link with any of the investments in properties or earning of income by the assessee. However, in order to settle the matter, assessee offered the amount to tax. Just because an amount was offered to tax by the assessee, the same is not sufficient for levy of penalty for concealment. The learned CIT(A) considered the submissions, examined the facts and deleted the impugned penalties for both the years, stating as under-
Assessment year 2007-08 "06.0 The assessment order, penalty order and the submissions of the appellant have been carefully considered. It is noted that in the assessment order, the AO has made additions on account of difference in the cost of construction of Rs.6,45,312/-, unexplained investment in property of Rs.45,00,000/- and unexplained advances received of Rs.4,50,000/- and issued the penalty notice u/s.271(1)(c) of I.T. Act. However, while passing the penalty order u/s. 271(1)(c}, he considered the addition of Rs.45,00,000/- only and did not give any reasons for excluding the other two items of addition and concluded that the appellant would not have offered the income of Rs.45,00,000/- but for the search conducted by the department. It is a fact that the appellant offered additional income after the search was carried out in his premises and it is also noticed from the declaration of income made by him before the ADIT(Inv), Unit-II(3), Hyderabad that he declared Rs.1,OO,OO,OOO/- for Asst. years 2007-08 and 2008-09 as below:
4ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad Particulars Additional Assessment declarations Year Investments in construction 25,50,000 2007-08 Payment towards property 45,00,000 2007-08 purchased at Hyderguda Village Misc. advances given 4,50,000 2007-08 Advances towards purchase of 25,00,000 2008-09 property TOTAL 1,00,00,000 06.1 Regarding the investment in property at Hyderguda, it is noticed from seized material nos.22,24 & 25 of annexure A/AVGR/Res/02 that he made the investment for himself and also on behalf of others in 2 phases and in the first phase, the investment was Rs.17,80,OOO/- in Asst. year 2002-
03; Rs.88,OOO/- in Asst. year 2003-04; Rs.14,60,OOO/- in Asst. year 2004-05 and Rs.50,OOO/- in Asst. year 2005-06 and in the second phase, the investment was Rs.15,45,OOO/- in Asst. year 2004-05. From this, it is clear that the appellant made all investment during the period of Asst. year 2002-03 to 2005-06 and not during the relevant financial year 2006-07. It is only during the financial year 2006-07 that the registration of the property took place and no part of investment was made during this year. However, it is noted that the AO has relied on the seized material pages 60 to 85 of annexure-A/AVGR/Res/02 which are only sale deed dt.18-5-2006. Even if we consider penalty to be imposed, it has to be done only in the year in which the appellant has concealed the particulars of his income or furnished inaccurate particulars of such income and as noted above, there was no undisclosed income invested in the property at Hyderguda during the year under consideration.
06.2 It has been held by various judicial authorities that since assessment proceedings and penalty proceedings are separate and distinct, the finding in the assessment proceedings cannot be regarded as conclusive for the 'purposes of penalty proceedings and cannot be taken as- conclusive for the purpose of holding assessee liable for concealment and imposing penalty u/s. 271(1)(c) of IT, Act, In the present case, the appellant disclosed additional income of Rs.l-crore for Asst. years 2007-08 and 2008-09 and paid taxes thereon. In this context, I would like to refer to the observations made by the Horr'ble jurisdictional Tribunal in the case of Sri P.V.Ramana Reddy Vs ITO in ITA Nos.1852-1857/Hyd/2011 which is reproduced as under:
"The Assessing Officer is required to satisfy himself about the concealment of income or furnishing inaccurate particulars of such income. It gives discretion to the AO to exonerate the assessee from levy of penalty even in case where the assessee has concealed the income or furnish incorrect particulars of income. The expression in 5 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad section 271(1)(c) reads as follows: 'If the Assessing Officer .....is satisfied that in person.....(c) has concealed the particulars of his income or furnished inaccurate particulars of income; He may direct ...." That above provision shows that the Assessing Officer is vested with a discretionary power to levy or not to levy any penalty in a deserving case. In the case of Hindustan Steel Ltd. vs State of Orissa (83 ITR 26) (Se), held that penalty should not be imposed merely because it is lawful to do so. The Assessing Officer has to exercise his discretion judiciously. If an assessee files the revised return though at a later stage or disclosed true income, penalty need not believed. No doubt, merely offering additional income will not automatically protect the assessee from levy of penalty but in a given case where the assessee's case, came forward with additional income though after deduction on account of that the assessee was not in a position to explain-
properly, the seized material and express remorse, in his conduct un-hesitantly, the
Assessing Officer might have to exercise the discretion in favour of such assessee as otherwise the expression 'may' in section 271(1)(c) of the Act remains redundant. If it is to be understood that in a case of admitted concealment, penalty is not automatic. The discretion vested in the officer should be used not to levy the penalty. In our opinion, the case before us is most befitting case to exercise such discretion, particularly there is divergent of opinion among the lower authorities as well as the Tribunal while deleting or sustaining the addition. It shows that there is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. Further as seen from the facts of the case, to avoid litigation the assessee accepted the additions or made fresh offer in the course of the proceedings before the lower authorities. After the AO had the clinching evidence of concealment then the offer may not have been accepted and the same should have been proceeded on the basis of material available on record. The lower authorities relied oh proceedings before assessing.
officer for levying the penalty. The same do not constitute admission for the purpose of levying penalty. The addition made on the basis of more; or less on the offer made by the assessee and the AO not brought enough incriminating material for concealment and there is no material for establishing the concealment independently in the given facts and circumstances of the penalty is 6 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad not leviable and the same is deleted."
Therefore, if there is a case where the Assessing Officer has clinching evidence for concealment or any incriminating material to establish concealment independently, then there is no question of exercising discretion as to the levy of penalty. The Assessing Officer has the discretion to levy penalty and levy of penalty is not automatic and it should not be imposed merely because it is lawful to do so. But in the present case, the appellant came forward to offer additional income on account of investment made in the earlier years in the year under consideration because he could not reconcile the purchase deed with the payments made in the past and also to buy peace only on the basis of registration of the said property in this year. If at all penalty has to be levied in respect of the concealment of income or furnishing of inaccurate particulars, it has to be done in the year of making the investment and not in the year of registration of the property and offer of admission of income by the appellant. It is not in spirit of the Explanation-5A of section 271(l)(c) of IT. Act. Mere admission of income does not justify penalty, more so when the alleged investment in the property was made out of the disclosed/undisclosed income in the earlier years and not 'in the year under consideration. Therefore, the penalty levied of Rs.14,13,720/- u/s.271(1)(c) is not justified and hence, cancelled.
Assessment year 2008-09 "06.0 The assessment order, penalty order and the submissions of the appellant have been carefully considered.
It is rioted that the appellant filed return of income in response to notice u/s.153A declaring an income of Rs.3,33,45,263/- which included the additional income offered of Rs.25 lakhs and the AO completed the assessment accepting the same and made a further addition of Rs.5,38,758/- on account of difference in the cost of construction. The contention of the AO that but for the search, the appellant would not have offered the amount of Rs.25 lakhs may sound good but penalty cannot be levied on surmises, on conjectures and possibilities and unless it is established that there is actually concealment or non-disclosure of the particulars of income. Page nO.19 & 20 of seized Annexure-A/AVGR/Res/04 have been perused and they are only some scribbling i.e., Gurivi owes Bujji on page19 and some amounts were scribbled on page-20. There is no indication as to the dates of payments or receipts and what the payments were about. Since the appellant could not explain them, in order to buy peace, had admitted as unexplained advances and offered Rs.25 lakhs as additional income in the return filed in response to notice 7 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad issued u/s.153A. The scribbling might be good for making addition but not sufficient for levying penalty for concealment since the assessment and penalty proceedings are distinct and separate proceedings. For levying penalty, it is essential to establish that the appellant concealed the particulars of income or filed inaccurate particulars. Addition made or income offered to buy peace on account of scribbling which cannot be attributable to any assessment year or to any person cannot be a basis for levy of penalty. In view of the above, the penalty levied by the assessing officer is not justified and accordingly, the same is ordered to be deleted.
5. Aggrieved by the action of the learned CIT(A) in cancelling the impugned penalties for both the years, Revenue is in appeal before us.
6. Considering the rival contentions and perusing the details placed on record, we are of the opinion that the Revenue has not made out any strong case for levy of concealment. In fact, as stated by the learned CIT(A), there was no evidence of investment in respect of assessment years, which could have been brought to tax as income of the year. The assessee has admitted income on his own and filed the returns in the course of proceedings under S.153A. That alone cannot be a basis for levy of penalty, unless there is evidence or nexus with the concealed income as stated by the CIT(A). The amount of Rs.45 lakhs considered for penalty in assessment year 2007-08 was not invested in that year, but represents the investments made in assessment years 2002-03 to 2005-
06. Likewise, the evidence in the form of scribblings on rough sheets cannot be considered as pertaining to assessment year 2008-09. In fact, any such undated evidence, at the most, can be considered as pertaining to the year of search, which could have been brought to tax in assessment year 2010-11, as the search took place on 20th August, 2009, but the Assessing Officer chose to bring to tax in the assessment year 2008-09, which is on the basis of the admission by the assessee under S.1342(4). In view of these facts of the case, we do not see any reason to disturb the findings of the learned CIT(A) for both the years. Accordingly, we uphold 8 ITA No.1119-1120/Hyd/2014 Dr. A.V.Guruva Reddy Hyderabad the impugned orders of the learned CIT(A) and reject the grounds of the Revenue.
8. In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the court on 06/01/2016
Sd/- Sd/-
(P.Madhavi Devi) (B.Ramakotaiah)
Judicial Member Accountant Member
Dt/- 6th January, 2016
Copy forwarded to:
1. Shri A.V.Guruva Reddy, No.4C, Phase II, Road No.12, Film Nagar, Jubilee Hills, Hyderabad
2. Dy. Commissioner of Income-tax, Central Circle 6, Hyderabad 3 Commissioner of Income-tax(Appeals) I, Hyderabad
4. Commissioner of Income-tax Central, Hyderabad
5. Departmental Representative, ITAT, Hyderabad.
B.V.S