T Madhava Rao Hyderabad v. Acit Warangal

In The Income Tax Appellate Tribunal Hyderabad Bench A Before Shri N R S Ganesan And Shri Akber Basha I T A Nos 1134 1135 Hyd 2007 17 Hyd 2008 Assessment Years 2003 04 2005 06 2004 05 Respect Ively T Madhava Rao Warangal Appellant Pan Aatpt 4233 D Versus Asst Cit Circle 1 Warangal Respondent Appellant By Shri S Rama Rao Respondent By Shri H Phani Raju O R D E R Per N R S Ganesan Judicial Member These Three Appeals Of The Assessee Are Directed A Gainst The Common Order Passed By The Cit Appeals Vi Hyderabad Da Ted 21 9 2007 Confirming Levy Of Penalty Under Sec 271 1 C Of The Income Tax Act 1961 For The Asst Years 2003 04 2004 05 And 2005 06 For The Sake Of Convenience We Heard The Appeals Together And We Dispose Of The Same By This Common Order 2 Shri S Rama Rao Learned Counsel For The Assesse E Submitted That The Assessee Is A Civil Contractor According To The Le Arned Counsel There Was A Survey Operation Under Sec 133 A Of The Income Tax Act In The Premises Of The Assessee On 14 2 2005 According To The Learned Cou Nsel No Incriminating Material Was Found During The Course Of Survey Oper Ation The Learned Counsel Submitted That The Assessee Had Produced The Entire Books Of Account Before The Assessing Officer During The Assessment Proceed Ings After The Survey The Assessee Voluntarily Filed Revised Returns Of Incom E Declaring Additional Income 2 Of Rs 60 24 000 For The Three Asst Years Under Con Sideration The Revised Returns Filed By The Assessee Were Accepted On The Understanding That No Penalty Proceedings Would Be Initiated Against The Assessee According To The Learned Counsel The Assessee Filed The Revised Ret Urns Only To Buy Peace With The Department And To Avoid Protracted Litigation The Learned Counsel Further Submitted That The Additional Income Offered By The Assessee Was Not Related To Any Specific Material Found During The Survey Opera Tion Therefore The Assessee Voluntarily Offered Additional Income For All The Three Asst Years Which Cannot Be A Basis For Levy Of Penalty According To The Learned Counsel For Levying Penalty There Must Be Conscious Concealmen T Of Income Or Furnishing Of Inaccurate Particulars In This Case According To The Learned Counsel There Was No Such Concealment The Learned Counsel Submit Ted That The Assessee Filed The Voluntary Returns Of Income Which Were Ad Mitted By The Ao Therefore There Cannot Be Any Levy Of Penalty The Learned Co Unsel Placed His Reliance On The Judgment Of The Madhya Pradesh High Court In Th E Case Of Cit V S V Electricals Pvt Ltd 2005 274 Itr 334 And Submi Tted That When The Assessee Surrenders The Income Voluntarily There Cannot Be Any Levy Of Penalty Under Sec 271 1 C Of The Act The Learned Counsel Also Placed Reliance On The Judgment Of The Madhya Pradesh High Court In The Ca Se Of Cit V Shyamlal M Soni 2005 276 Itr 156 And Submitted That When Th E Revised Return Filed By The Assessee Was Accepted By The Ao There Was No C Oncealment Of Income In This Case According To The Learned Counsel The Re Vised Returns Filed Voluntarily By The Assessee Were Accepted By The Revenue Withou T Any Further Addition Therefore There Cannot Be Any Concealment Of Incom E For Levy Of Penalty The 3 Learned Counsel Also Placed His Reliance On The Jud Gment Of The Apex Court In The Case Of Cit V Suresh Chandra Mittal 2001 251 Itr 9 And Submitted That When The Assessee Filed Revised Return Disclosing A Dditional Income In Order To Purchase Peace There Cannot Be Any Concealment Of Income 3 On The Contrary Shri H Phani Raju Learned Dep Artmental Representative Submitted That There Was Survey Operation In The Pr Emises Of The Assessee On 14 2 2005 It Is Not Correct To Say That No Incrimi Nating Material Was Found In The Survey According To The Learned Departmental R Epresentative Certain Diary Was Found In The Survey Which Was Impounded By The Revenue On An Analysis Of The Diaries It Was Found That Several Entries R Elating To Unsecured Loan Transactions In Cash With Various Persons Were Reco Rded However The Entries Found In The Diary Were Not Recorded In The Regular Books Of Account Maintained By The Assessee For The Years Under Consideration The Assessee Explained Before The Lower Authorities That The Entries Relat Ed To Unsecured Loans Arranged By The Assessee For His Sub Contractors Fr Om Third Parties And Also To Repayment Of Such Unsecured Loans To Third Parties Along With Interest Obtained From The Sub Contractors And Handed Over To The Thi Rd Parties However The Assessee Has Not Maintained Any Record To Show That The Unsecured Loans Were Received From Third Parties And Paid To Sub Contrac Tors In Cash After This Incident The Assessee Filed Revised Returns Offeri Ng Additional Income Therefore It Is Not Correct To Say That The Assess Ee Filed The Revised Returns Voluntarily According To The Learned Departmental Representative After The Survey Operation The Material Found By The Revenue Authorities Clearly Establishes That The Entries Found In The Diary Wer E Not Reflected In The Books Of 4 Account Consequentially The Income Was Not Disclo Sed To The Department In The Original Returns Filed By The Assessee Therefo Re There Was Concealment Of Income To That Extent In Order To Get Over This T He Assessee Offered Additional Income In The Revised Returns Therefore According To The Learned Departmental Representative There Was Concealment Of Particular S Of Income By The Assessee Which Necessarily Fulfils The Conditions For Levy O F Penalty Under Sec 271 1 C Of The Act The Learned Departmental Representative Further Submitted That For The Asst Year 2005 06 The Time Limit For Filing T He Return Of Income Was Not Over However According To The Learned Departmenta L Representative The Transactions Noted In The Impounded Diary Were Not Recorded In The Regular Books Of Account For The Asst Year 2005 06 Also T He Assessee Was Not In A Position To Substantiate His Claim That Unrecorded Financial Transactions Could No Be Treated As Income From Business Therefore The Ao Levied Penalty For The Asst Year 2005 06 Also The Learned Departmental R Epresentative Further Submitted That The Assessee Has Not Maintained Prop Er Vouchers For The Expenses And For The Asst Year 2005 06 The Assesse E Claimed Expenses Of Rs 6 18 65 821 Under Various Head The Assessee Als O Offered Additional Income Of Rs 39 00 000 In The Absence Of Any Accep Table Explanation For The Additional Income Offered By The Assessee To The Ex Tent Of Rs 39 00 000 The Ao Levied Penalty The Learned Departmental Representa Tive Placed His Reliance On The Judgment Of The Apex Court In The Case Of Union Of India And Others V Dharmendra Textiles Processors And Others 2008 30 6 Itr 277 4 We Have Considered Rival Submissions On Either S Ide And Also Perused The Material Available On Record For The Asst Years 2 003 04 And 2004 05 The 5 Assessee Filed Returns Of Income After The Survey Operation The Assessee Offered An Additional Income Of Rs 10 50 000 For Th E Asst Year 2003 04 And Rs 10 75 000 For The Asst Year 2004 05 The Conten Tion Of The Assessee Is That The Additional Income Was Offered In The Revised Re Turns Voluntarily And Therefore There Was No Concealment For Levy Of Pen Alty Under Sec 271 1 C The Fact Remains That The Revised Returns Were File D After The Survey In The Course Of Survey Operation The Revenue Authorities Impounded A Diary Wherein Unexplained Cash Credits Were Found The Unexplaine D Cash Credits Found In The Diary Were Not Reflected In The Books Of Account Ma Intained In The Regular Course Of Business The Explanation Of The Assessee Was That The Money Was Borrowed From Third Parties And Given To Sub Contra Ctors The Question Arises For Consideration Whether There Was Concealment Of Income In Such Circumstances The Contention Of The Assessee Is Th At Since The Assessee Filed The Revised Returns Voluntarily For Purchasing Peac E With The Department And To Avoid Protracted Litigation There Cannot Be Any Le Vy Of Penalty In View Of The Judgment Of The Apex Court In The Case Of Suresh Ch Andra Mittal Supra The Fact Remains That Some Of The Contracts Were Execut Ed Through Sub Contractors Therefore The Possibility Of Borrowing Money And P Ayment To Sub Contractors Cannot Be Ruled Out Every Addition Cannot Automati Cally Result In Levy Of Penalty Wherever The Assessee Furnishes Inaccurate Particulars Of Income It Would Attract Levy Of Penalty In The Case On Our H And The Claim Of The Assessee Is That He Borrowed Money From Third Parti Es And Paid The Same To The Sub Contractors And Therefore It Was Not Show N As Income In The Original Return In Our Opinion This Explanation Of The Ass Essee Cannot Be Brushed Aside 6 Merely Because The Assessee Admitted The Said Amoun T As Income In The Revised Return 5 We Have Also Carefully Gone Through The Judgmen T Of The Madhya Pradesh High Court In The Case Of S V Electricals Pvt Ltd Supra In The Case Before The Madhya Pradesh High Court The Assessee Surrend Ered The Full Income For Taxation The Madhya Pradesh High Court Found That When The Assessee Surrenders The Full Income There Is No Question Of Concealment On Their Part In The Case Of Shyamlal M Soni Supra The Madhya Pr Adesh High Court Found That One Of The Appeals Arising Out Of The Same Bun Ch Of Cases Was Dismissed Earlier Therefore It Was Held That The High Court Cannot Take A Different View In Other Appeals In The Very Same Bunch In The Cas E Of Dharmendra Textiles Processors And Others Supra The Issue Was Entire Ly Different Sec 271 1 C Would Be Attracted Where The Assessee Could Not Exp Lain The Reason For Not Declaring The Income In The Original Return In The Case Before Us The Assessee Explained That The Money Borrowed Was Paid To Sub C Ontractors When The Sub Contractors Return The Money It Would Be Paid To T He Lenders In This Factual Situation Though The Assessee Declared The Money B Orrowed As Income In The Revised Return In Our Opinion That Would Not Auto Matically Result In Levy Of Penalty The Lower Authorities Are Bound To Examine The Issue Independent Of The Assessment Order In View Of The Explanation Of The Assessee That The Borrowed Money Was Paid To The Sub Contractors In Our Opinion The Levy Of Penalty Is Not Justified Accordingly The Orders O F The Lower Authorities Are Set Aside And The Entire Penalty For The Asst Years 20 03 04 And 2004 05 Is Deleted 7 6 Now Coming To Asst Year 2005 06 Admittedly Th E Time Limit For Filing The Return Of Income Was Not Over On 14 2 2005 When The Survey Was Carried Out The Assessee Filed The Regular Return On 1 11 2005 Admitting An Income Of Rs 78 94 910 This Income Was Accepted By The Ao O Nly A Sum Of Rs 1 50 000 Was Added Towards Inadmissible Items Of Expenditure Therefore The Addition Made By The Ao Is Only To The Extent Of Rs 1 50 000 The Ao Found That The Assessee Offered A Sum Of Rs 39 00 000 As Additiona L Income For The Asst Year 2005 06 It Is Not A Case Of Filing Revised Return After The Survey Operation The Assessee Filed The Original Return On 1 11 2005 Adm Itting A Sum Of Rs 78 94 910 Which Includes The Additional Income O F Rs 39 00 000 In Those Circumstances We Cannot Say That The Assessee Conc Ealed Any Particulars Of Income Since The Assessee Could Not Produce Proper Vouchers For The Expenditure Claimed And Certain Items Of Expenditur E Were Not Verifiable An Addition Of Rs 1 50 000 Was Made In Those Circumst Ances We Cannot Say That The Assessee Furnished Inaccurate Particulars Of In Come For The Asst Year 2005 06 Therefore Levy Of Penalty For The Asst Year 2 005 06 Is Not Justified Merely Because The Assessee Agreed For Addition Of Rs 1 50 000 Due To Unverifiable Items Of Expenditure For Which No Proper Vouchers W Ere Filed In Our Opinion That Cannot Be A Reason To Conclude That The Assess Ee Filed Inaccurate Particulars Of Income In View Of The Above There Is No Justification For Levy Of Penalty For The Asst Year 2005 06 8 In View Of The Above Discussion The Penalty Lev Ied For The Asst Year 2005 06 Also Is Deleted 8 9 In The Result All The Three Appeals Of The Asse Ssee Are Allowed Order Pronounced In The Court On 29 1 10 Sd Sd Akber Basha N R S Ganesan Accountant Member Judicial Member Hyderabad 29th January 2010 Rrrao Copy Of The Order Forwarded To 1 Sri S Rama Rao Advocate Flat No 103 H No 3 6 542 4 Indiradevi Nilayam St No 7 Himyatnagar Hyderabad 500 029 2 Acit Circle 1 Warangal 3 Cit Vi Hyderabad 4 Cit A Vi Hyderabad 5 Dr Itat Hyderabad