M/s. Sai Krishna Constructions,, Hyderabad v. ITO , Ward 8(1), Hyderabad

ITA 96/HYD/2014 | 2008-2009
Pronouncement Date: 28-10-2016 | Result: Allowed

Appeal Details

RSA Number 9622514 RSA 2014
Assessee PAN CEACT2008W
Bench Hyderabad
Appeal Number ITA 96/HYD/2014
Duration Of Justice 2 year(s) 9 month(s) 4 day(s)
Appellant M/s. Sai Krishna Constructions,, Hyderabad
Respondent ITO , Ward 8(1), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-10-2016
Date Of Final Hearing 01-08-2016
Next Hearing Date 01-08-2016
Assessment Year 2008-2009
Appeal Filed On 24-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SMT P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NOS. 96 AND 1625/HYD/2014 ASSESSMENT YEARS: 2008-09 & 2007-08 M/S SAIKRISHNA CONSTRUCTIONS HYDERABAD. PAN AAOFSO684A VS. INCOME-TAX OFFICER WARD 8(1) HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. RAGHAVENDRA RAO REVENUE BY : SHRI A. SITARAMA RAO DA TE OF HEARING 02-08-2016 DATE OF PRONOUNCEMENT 28-09-2016 O R D E R PER S. RIFAUR RAHMAN A.M.: BOTH THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCO ME-TAX(A) - III BOTH DATED 12/11/2013 HYDERABAD FOR AY 2007-08 AN D 2008-09. AS IDENTICAL ISSUE IS INVOLVED IN BOTH THE APPEALS TH EY WERE CLUBBED AND HEARD TOGETHER THEREFORE A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY THE FACTS AS TAKEN FROM AY 2008-09 ARE THAT THE ASSESSEE FIRM FILED THE RETURN OF INCOME FOR THE AS ST. YEAR 2008-09 ON 31-03-2009 ELECTRONICALLY DECLARING TOTAL INCOME OF RS. 11 90 200/-. THE RECEIPTS SHOWN AS PER THE PROFIT AND LOSS ACCOU NT IS RS.2 27 79 621/- AND THE NET PROFIT WAS SHOWN AT RS . 11 90 200/-. A SURVEY U/S. 133A OF THE I.T. ACT WAS CONDUCTED ON 1 1-08-2009 IN THIS CASE. DURING THE COURSE OF SURVEY IT WAS FOUND THA T THE ASSESSEE WAS MAINTAINING SMALL REGISTERS IN WHICH THE ACTUAL REC EIPTS FROM SALE OF 2 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. FLATS WERE BEING RECORDED AND THE SAME WERE IMPOUND ED. THE RECEIPTS RECORDED IN THE SMALL REGISTERS WERE COMPA RED WITH THE ACTUAL RECEIPTS ACCOUNTED FOR IN THE BOOKS AND SHOW N IN THE PROFIT AND LOSS ACCOUNT. IT IS SEEN FROM THE SAME THAT THE ASS ESSEE HAS NOT DISCLOSED THE ACTUAL RECEIPTS FOR A.Y. 2008-09. AS PER THESE TWO REGISTERS THE TOTAL RECEIPTS FOR THE F.Y. 2007-08 WORKED OUT TO RS. 4 45 77 577/-. WHEN CONFRONTED THE MANAGING PARTNE R SRI P. BABU RAO IN HIS STATEMENT GIVEN U/S. 131 OF THE I.T. ACT ON 21-08-2009 HAS AGREED FOR THE ABOVE DISCREPANCIES NOTICED BUT SUBM ITTED THAT THE DIFFERENCE IN RECEIPTS SHOULD NOT BE ENTIRELY TREAT ED AS INCOME AS THERE ARE SOME PAYMENTS INCURRED FOR THE BUSINESS W HICH WAS NOT PROPERLY ACCOUNTED FOR. IN HIS STATEMENT GIVEN U/S. 131 OF THE I.T. ACT CONSEQUENT TO SURVEY HE ADMITTED ADDITIONAL INCOME FOR THIS ASSESSMENT YEAR BASED ON ESTIMATION OF THE INCOME @ 10% OF THE TOTAL RECEIPTS. ON THIS BASIS THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS. 32.70 LAKHS FOR THIS ASSESSMENT YEAR. IN CON FORMITY WITH THE SAME THE ASSESSEE FILED REVISED RETURN OF INCOME F OR A.Y. 2008-09 ON 08-09-2009 ADMITTING A TOTAL INCOME OF RS. 44 57 76 0/- AS AGAINST RS. 11 90 200/- ADMITTED IN THE ORIGINAL RETURN OF INCO ME FILED ON 31-03- 2009. IN THE REVISED RETURN THE ASSESSEE OFFERED AD DITIONAL INCOME OF RS 32 67 560/.THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE I.T. ACT AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE I.T. ACT ON 31-03-2010. THUS THE ADDITION IS MADE TO TH IS EXTENT IN THE ASSESSMENT. 2.1 THEREAFTER AO HAS INITIATED PENALTY PROCEEDING S ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS AND THEREBY CONCEALED THE INCOME. 2.2 IN THE REPLY FILED VIDE LETTER DATED 24-09-201 0 THE ASSESSEE STATED THAT THE ASSESSEE HAS VOLUNTARILY COME FORWA RD TO FILE THE REVISED COMPUTATION OF INCOME OFFERING HIGHER INCOM E AND CO- OPERATED WITH THE DEPARTMENT IN THE ASSESSMENT PROC EEDINGS. IT IS ALSO STATED THAT THE ASSESSMENT WAS COMPLETED BY AD OPTING PROFIT RATE 3 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. OF 10% ON GROSS RECEIPTS. THE ASSESSEE IN ITS REPL Y HAS ALSO CITED SOME DECISIONS AS UNDER: I. WHERE INCOME WAS VOLUNTARILY OFFERED FOR ASSESS MENT YEAR AFTER SEARCH PROCEEDINGS THE GUJARAT HIGH COURT H ELD IN THE CASE OF CIT VS SHANKERLAL NEBHUMAL (311 ITR 327) PENALTY CANNOT BE LEVIED. II. THE PUBJAB & HARYANA HIGH COURT HELD IN THE CA SE OF CIT VS. RAJIV GARG & OTHERS (313 ITR 256) THAT WHERE HIGHE R INCOME WAS VOLUNTARILY OFFERED EVEN AFTER ISSUE OF NOTICE U/S 148 PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. THE SUPRE ME COURT REJECTED THE SLP FILED AGAINST THE JUDGMENT. III. THE FULL BENCH OF THE DELHI HIGH COURT HELD I N THE CASE OF CIT VS. RAMPUR ENGG. COMPANY LTD AND OTHERS THAT P ENALTY V/S 271(1)(C) CANNOT BE LEVIED UNLESS SATISFACTION CAN BE SPELT OUT IN THE ASSESSMENT ORDER. IV. THERE IS ALSO CASE LAW WHERE IT WAS HELD THAT WHERE INCOME IS ASSESSED ON ESTIMATE BASIS PENALTY CANNOT BE L EVIED U/S 271(1)(C). 2.3 THE AO REJECTED THE EXPLANATION OF THE ASSESSEE FOR THE FOLLOWING REASONS: I. IT IS A FACT THAT THE ASSESSEE HAS NOT DECLARED THE ENTIRE RECEIPTS IN THE PROFIT AND LOSS ACCOUNT FILED ALON G WITH THE RETURN OF INCOME WHICH THE ASSESSEE HAS ALSO ACCEPT ED IN HIS STATEMENT. THE ASSESSEE FILED THE REVISED RETURN OF INCOME ONLY AFTER THE DATE OF SURVEY AND DUE TO CERTAIN DISCREP ANCIES NOTICED DURING THE COURSE OF SURVEY. AS THE ASSESSEE WAS NO T ABLE TO QUANTIFY THE EXPENDITURE THE PROFIT WAS ADOPTED @ 10% OF GROSS RECEIPTS. II. THE DECISIONS CITED ARE NOT APPLICABLE AND REL EVANT TO THE FACTS OF THE CASE. THE DECISION OF THE GUJARAT HIG H COURT IS RELATED TO THE SEARCH PROCEEDINGS AND THAT TOO WI TH REGARDS TO THE EXPLANATION 5 TO SEC. 271(1)(C). WHEREAS THE ASSESSMENT PROCEEDINGS COMPLETED IN THE ASSESSEE'S CASE IS BA SED ON SURVEY FINDINGS. 4 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. III.. SIMILARLY THE DECISION OF THE PUNJAB AND H ARYANA COURT IS RELATING TO OFFERING OF HIGHER INCOME AFTER ISSUE O F NOTICE U/S. 148 OF THE I.T. ACT. WHEREAS IN THE ASSESSEE'S CASE NO TICE U/S 148 IS ISSUED ONLY TO REGULARIZE THE REVISED RETURN OF INC OME. THE HIGHER INCOME OFFERED IN THE REVISED RETURN OF INCOME IS D UE TO DISCREPANCIES NOTICED DURING THE COURSE OF SURVEY U /S 133A. FURTHER THE DECISION OF THE DELHI HIGH COURT IS OV ERCOME BY INSERTION OF SEC. 271(1)(C) BY THE FINANCE ACT 2008 W.R.E.F. 01- 04-1989 WHICH READS AS UNDER:. 'WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIREC TION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1) SUCH AN ORDER OF ASSESSMENT OR RE-ASSESSMENT S HALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAI D CLAUSE (C)' 2.4 THE AO OBSERVED THAT THE INCOME ADMITTED BY THE ASSESSEE IN THE REVISED COMPUTATION OF INCOME IS NOT ACTUALLY V OLUNTARY BUT THE SAME WAS ADMITTED ONLY AFTER A SURVEY U/S 133A COND UCTED BY THE DEPARTMENT AND SUPPRESSION OF RECEIPTS WERE POINTED OUT BASED ON THE IMPOUNDED MATERIAL. HE THEREFORE CONCLUDED TH AT THE IT IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THUS THE INCOME SOUGHT TO BE EVADED IS WORKED OUT AS UNDER: DIFFERENCE IN RECEIPTS DETERMINED CONSEQUENT TO THE SURVEY RS. 2 17 97 956 INCOME DETERMINED ON SUCH RECEIPTS @ 10% RS. 21 79 795 THE INCOME SOUGHT TO BE EVADED WAS WORKED OUT AT RS . 21 79 795/- ON WHICH A MINIMUM PENALTY WORKED OUT TO RS. 7 49 9 10/- U/S 271(1)(C) OF THE ACT. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A) THE CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT IT IS CLEAR THAT RIGHT 5 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. FROM THE BEGINNING THE ASSESSEE HAS METICULOUSLY PL ANNED AND EXECUTED THE STRATEGY OF TAX EVASION. SALES WERE RE PORTED SELECTIVELY AND DUPLICATE BOOKS WERE MAINTAINED WHEREIN ACTUAL SALES WERE WRITTEN. HAD THE INCOME TAX DEPARTMENT NOT CONDUCTE D A SURVEY THE DUPLICATE BOOKS WOULD NEVER HAVE BEEN DISCLOSED TO THE DEPARTMENT AND TAXES WOULD HAVE BEEN EVADED BY HUGE AMOUNTS. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - III HYDERABAD (CIT(A))ERRED ON FACTS AND IN LAW IN DISM ISSING THE APPEAL OF THE ASSESSEE. 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAININ G THE PENALTY LEVIED OF RS. 7 40 910/- U/S 271(1)(C) OF THE I T A CT 1961. 3. THE LEARNED CIT (A) IS NOT JUSTIFIED IN HOLDING THAT THE ADDITIONAL INCOME OFFERED BY WAY OF REVISED COMPUTA TION WAS NOT VOLUNTARY. 4. THE LEARNED CIT (A) AND THE AO WHO LEVIED THE PE NALTY OMITTED TO NOTICE IN THEIR RESPECTIVE ORDERS THE FI NDING OF THE AO VIDE THE ASSESSMENT ORDER THAT THE ASSESSEE 'VOLUNT ARILY CAME FORWARD' IN HIS STATEMENT GIVEN U/S 131 OF THE IT ACT TO ADMIT 'ADDITIONAL INCOME'. 5. THE LEARNED CIT(A) HAVING ACCEPTED THAT THE ESTI MATE IS MADE IN CASES WHERE ACCOUNTS DO NOT REFLECT THE CORRECT STATE OF FINANCIAL YEARS FAILED TO NOTICE THAT THE AO REJEC TED THE ACCOUNTS OF THE ASSESSEE VIDE THE ASSESSMENT ORDER PRECISELY FOR THAT REASON. THE LEARNED CIT (A) HAS ERRED IN SUSTAINING PENALTY U/S 271(1)(C) WHERE ASSESSMENT IS MADE ON .THE BASIS OF ESTIMATE. 6. THE LEARNED CIT(A) HAS ERRED IN NOT NOTICING THE ORDER OF THE JURISDICTIONAL BENCH IN THE CASE OF ACIT VS M/S SI DDI JEWELLERS HYDERABAD IN ITA NO. 381/HYD/2012 DT 17-06-2013 AND THE RATIO LAID DOWN THEREIN WHICH IS APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 7. THE LEARNED AO ERRED IN HOLDING THAT THE JUDGMEN T OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS RAJIV GARG & OTHERS (313 ITR 256) DOES NOT APPLY TO THE FACTS OF THE CA SE WHICH IS ACTUALLY ON A BETTER FOOTING BECAUSE UNLIKE IN THAT CASE HERE ASSESSEE OFFERED INCOME BEFORE AND NOT AFTER ISSUE OF NOTICE U/S 148. 6 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. 8. THE LEARNED AO ERRED IN HOLDING THAT THE JUDGMEN T OF GUJARAT HIGH COURT IN THE CASE OF CIT VS SHANERLAL NEBHUMAL (311 ITR 327) DOES NOT APPLY BECAUSE THAT WAS A CASE OF SEAR CH. THE RATIO IS APPLICABLE TO SURVEY CASES ALSO WHICH ARE LESS R IGOROUS PROCEEDINGS THAN SEARCH. THE PRINCIPLE FOR LEVY OF PENALTY IS MORE RIGOROUS IN THE CASE OF SEARCH. 9. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE DISCUSSION IN THE ASSESSMENT ORDER POINTS TO SATISFACTION FOR INI TIATION OF PROCEEDINGS U/S 271(1)(C) WHILE IT IS ACTUALLY THE OTHER WAY. 10. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE CASE LAW CITED BEFORE THE AO AND ALSO IN THE STATEMENT OF FA CTS. 11. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE URG ED AT J BEFORE THE DATE OF HEARING IT IS PRAYED THAT THE PE NALTY LEVIED BE CANCELLED. 5. LD. AR SUBMITTED THAT THE AO RELIED SOLELY ON TH E ASSESSMENT ORDER FOR LEVYING PENALTY WITHOUT ANY FURTHER EVIDE NCE AS TO THE MENS REA OR MALAFIDE CONDUCT OF THE ASSESSEE. HE SUBMITT ED THAT THE ASSESSMENT WAS COMPLETED ON AN AGREED BASIS. IN THE INTEREST OF AGREED ASSESSMENT A MUCH HIGHER RATE OF 10% ON REC EIPTS WAS ADOPTED. LD. AR SUBMITTED THAT THE CONDUCT OF THE A SSESSEE THROUGHOUT SHOWS THAT THE ASSESSEE WAS HIGHLY COOPE RATIVE AND THE ADMISSION OF THE AMOUNTS NOTICED IN THE REGISTERS B EING ACCEPTED AS SALES RECEIPTS AND NOT MERELY ADVANCES WAS TO AVOID ANY LITIGATION WITH THE DEPARTMENT AND NOT BECAUSE ALL THE AMOUNTS NOTED THERE WERE RECEIPTS IN WHICH INCOME AND TAX ARE EMBEDDED. LD. AR SUBMITTED THAT THERE WAS NO OBSERVATION IN THE AO T HAT THE CONTUMACIOUS CONDUCT OR DELIBERATE DEFIANCE OF LAW BY THE ASSESSEE TO AVOID TAXES. LD. AR RELIED ON THE FOLLOWING CASE S: 1. GODAVARI TOWNSHIPS (P) LTD. VS. DCIT ITA NO. 5 4/VIZAG/12 DATED 29/01/14. 2. RAJESH C. GANDHI VS. ITO ITA NO. 3158/MUM/09 DATED 09/03/2010. 3. ACIT VS. MALU ELECTRODES (P) LTD. ITA NO. 271/ NAG/08 DT. 12/08/09. 4. DCIT VS. MS. AISHWARYA RAI ITA NO. 2637/MUM/02 DTD. 25/08/06. 7 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. 6. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 7. CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES A ND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF R EVENUE AUTHORITIES. WE HAVE ALSO GONE THROUGH THE CASE LAW CITED BY THE LD. AR. IT IS OBSERVED THAT THE ASSESSEE FILED RETURN OF INCOME O RIGINALLY ON 31/03/2009 ADMITTING A TOTAL INCOME OF RS. 11 90 20 0/-. THEREAFTER A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 11/08/2 009. CONSEQUENT TO SURVEY THE ASSESSEE VOLUNTARILY CAME FORWARD TO ADMIT ADDITIONAL RECEIPTS FOR THIS AY AND REQUESTED FOR ESTIMATION OF THE INCOME @ 10% OF THE TOTAL RECEIPTS. ACCORDINGLY THE ASSESSEE FILED REVISED RETURN OF INCOME AT RS. 44 57 760/- O N 08/09/2009 AS AGAINST RS. 11 90 200/- ADMITTED IN THE RETURN FILE D ON 31/03/2009. THUS THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS. 32 67 560/-. ASSESSMENT WAS COMPLETED U/S 143(3) RWS 147 OF THE ACT ASSESSING THE INCOME OF THE ASSESSEE AT RS. 32 67 560/-. THE CONTENTION OF THE ASSESSEE IS THAT SINCE RETURN OF INCOME FILED BY TH E ASSESSEE HAS BEEN ACCEPTED BY THE AO AND SINCE THE INCOME DECLAR ED IN THE RETURN OF INCOME WAS DUE TO FINDINGS IN SURVEY U/S 133A OF THE ACT THERE CAN BE NO IMPOSITION OF PENALTY FOR CONCEALMENT OF INCO ME. 7.1 THE LEGAL POSITION WOULD BE UNDERSTOOD IF WE GO THROUGH THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT TOGETHER WITH EXPLN. 3 5 & 5A THEREUNDER WHICH IS AS UNDER: 'SEC.271- FAILURE TO FURNISH RETURNS COMPLY WITH N OTICES CONCEALMENT OF INCOME ETC.-(1) IF THE ASSESSING OF FICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER IN THE C OURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT A NY PERSON- (A) TO (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY - (D) TO (II)** ** ** 8 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D) IN ADDITION TO TAX IF ANY PAYABLE BY HIM A SUM WHICH SHALL N OT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT O F TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTIC ULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS)OR THE COMMISSIONER TO BE FAL SE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPR ESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. EXPLANATION 3 - WHERE ANY PERSON FAILS WITHOUT RE ASONABLE CAUSE TO FURNISH WITHIN THE PERIOD SPECIFIED IN SU B-SECTION (1) OF SECTION 153 A RETURN OF HIS INCOME WHICH HE IS REQU IRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL 1989 AND UNTIL THE EXPIRY OF THE PERIOD AFORESAID NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 142 OR SECTION 148 AND THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR S UCH PERSON HAS TAXABLE INCOME THEN SUCH PERSON SHALL FOR TH E PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO HAVE C ONCEALED THE PARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESS MENT YEAR NOTWITHSTANDING THAT SUCH PERSON FURNISHES A RETURN OF HIS INCOME AT ANY TIME AFTER THE EXPIRY OF THE PERIOD AFORESAI D IN PURSUANCE OF A NOTICE UNDER SECTION 148. EXPLANATION 5 - WHERE IN THE COURSE OF A SEARCH INI TIATED UNDER SECTION 132 BEFORE THE 1 ST DAY OF JUNE 2007 THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELL ERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLA NATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HI S INCOME - (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE T HE DATE OF THE SEARCH BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE OR WHERE SUCH RETU RN HAS BEEN 9 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. FURNISHED BEFORE THE SAID DATE SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFT ER THE DATE OF THE SEARCH; THEN NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH HE SHALL FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUBSECTION (L) OF THIS SECTION BE DEEMED TO HAV E CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME UNLESS - (1) SUCH INCOME IS OR THE TRANSACTIONS RESULTING I N SUCH INCOME ARE RECORDED (I) IN A CASE FALLING UNDER CLAUSE (A ) BEFORE THE DATE OF THE SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B) ON OR BEFO RE SUCH DATE IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE SAID DATE; OR (2) HE IN THE COURSE OF THE SEARCH MAKES A STATEM ENT UNDER SUB- SECTION (4) OF SECTION 132 THAT ANY MONEY BUL LION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POS SESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WH ICH HAS NOT BEEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (L) OF SECTION 139 AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGET HER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME. EXPLANATION 5A - WHERE IN THE COURSE OF A SEARCH I NITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE 2007 THE ASSESSEE IS FOUND TO BE THE OWNER OF- (I) ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACT IONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY P REVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND - (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR 10 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. B) THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN THEN NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH HE SHALL FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION BE DEEMED TO HA VE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME.' 7.2. EXPLANATION-3 IS AN EXCEPTION TO THE RULE THA T WHEN AN INCOME WHICH IS ULTIMATELY BROUGHT TO TAX IS DECLARED IN A RETURN OF INCOME THERE CAN BE NO QUESTION OF TREATING THE ASSESSEE A S HAVING 'CONCEALED PARTICULARS OF INCOME OR FURNISHED INACC URATE PARTICULARS OF INCOME'. EXPLAN.-4(B) TO SEC.271(1) OF THE ACT MAKE S THIS CLEAR. EXPLN.-4 TO SEC.271 (L) OF THE ACT LAYS DOWN WHAT I S 'THE AMOUNT OF TAX SOUGHT TO BE EVADED' ON WHICH PENALTY CAN BE IMPOSE D AND CLAUSE (B) LAYS DOWN IN ANY CASE TO WHICH EXPLANATION 3 APPLIE S MEANS THE TAX ON THE TOTAL INCOME ASSESSED AS REDUCED BY THE AMOU NT OF ADVANCE TAX TAX DEDUCTED AT SOURCE TAX COLLECTED AT SOURC E AND SELF ASSESSMENT TAX PAID BEFORE THE ISSUE OF NOTICE UNDE R SECTION 148. THIS MEANS THAT THE INCOME DECLARED IN THE RETURN O F INCOME CAN BE IGNORED AND PENALTY CAN BE IMPOSED EVEN IN RESPECT OF SUCH INCOME. EXPLANATION 3 OF SECTION 271(1)(C)(III) APPLIES ALS O IN THE CASE OF ASSESSEES WHO HAVE NOT BEEN ASSESSED AS YET. ACCOR DING TO THIS SECTION IF A PERSON FAILS WITHOUT REASONABLE CAUS E TO FURNISH A RETURN OF HIS INCOME VOLUNTARILY UNDER SECTION 139 WITHIN THE PERIOD SPECIFIED UNDER SECTION 153(1) I.E. WITHIN TWO YEARS FROM T HE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSES SABLE HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR IF HE HAS TAXABLE INCOME FO R THAT YEAR. BUT THIS IS SUBJECT TO TWO LIMITATIONS - FIRSTLY IT AP PLIES TO ASSESSMENT YEAR 1989-90 AND SUBSEQUENT YEARS AND SECONDLY NO NOTIC E UNDER SECTION 142(1) OR 148 WAS ISSUED WITHIN THE SAID PERIOD OF TWO YEARS. IN OTHER WORDS EXPLANATION 3 SHALL HAVE NO APPLICATION IF A NOTICE UNDER SECTION 142(1) OR 148 WAS ISSUED WITHIN TWO YEARS. BUT IF AN ASSESSEE FILES A RETURN OF HIS INCOME AFTER THE PERIOD OF TW O YEARS IN RESPONSE 11 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. TO A NOTICE UNDER SECTION 148 HE WOULD BE CAUGHT W ITHIN THE MISCHIEF OF THIS EXPLANATION. 7.3 IN THE PRESENT CASE EXPLN.-3 TO SEC.271(1) OF THE ACT WILL NOT APPLY BECAUSE AS WE HAVE SEEN THE ASSESSEE FILED T HE ORIGINAL RETURN OF INCOME ON 09.06.2010 AND IN RESPONSE TO NOTICE U /S. 148 OF THE ACT BY LETTER DATED 16.9.2010 REQUESTED THE AO TO TREA T THE RETURN FILED EARLIER AS A RETURN FILED IN RESPONSE TO NOTICE U/S .148 OF THE ACT. THUS THE RETURN OF INCOME WAS FILED WITHIN A PERIOD OF 2 YEARS FROM THE END OF AY 08-09. MOREOVER THE NOTICE U/S.148 HAD BEEN I SSUED IN THE PRESENT CASE PRIOR TO 16.9.2010 WHICH IS WITHIN TWO YEARS FROM THE END OF AY 07-08. THEREFORE EXPLANATION 3 WILL NOT APPLY TO THE PRESENT CASE. 7.4 THERE CAN BE NO CONCEALMENT OR NON-DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE IT R ETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX AND THEREFORE NO PENALTY UNDER S. 271 (1)( C) COULD BE LEVIED. THE W ORDS 'IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT' IN SEC. 271(1)(C ) OF THE ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT(A ). WHEN A SURVEY IS CONDUCTED BY A SURVEY TEAM THE QUESTION OF SATISFA CTION OF AO OR THE CIT(A) OR THE CIT DOES NOT ARISE. ONE HAS TO KEEP I N MIND THAT IT IS THE AO WHO INITIATES PENALTY PROCEEDINGS AND DIRECT S THE PAYMENT OF PENALTY. HE CANNOT RECORD ANY SATISFACTION DURING T HE COURSE OF SURVEY. DECISION TO INITIATE PENALTY PROCEEDINGS IS TAKEN WHILE MAKING ASSESSMENT ORDER. IT IS THUS OBVIOUS THAT THE EXP RESSION 'IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT' CANNOT HA VE THE REFERENCE TO SURVEY PROCEEDINGS. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULAR OF INCOME BY THE ASSESSEE HAS TO BE IN THE IT RETURN FILED BY IT. THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE IT RETURN FILED BY THE ASSESS EE. THIS VIEW GETS SUPPORTED BY EXPLANATIONS 4 AS WELL AS 5 AND 5A OF S. 271. OBVIOUSLY NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STI PULATED IN THE SAID 12 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SI NCE THE ASSESSEE WAS EXPOSED DURING SURVEY MAY BE IT WOULD HAVE NO T DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER THERE CANN OT BE ANY PENALTY ONLY ON SURMISES CONJECTURES AND POSSIBILITIES. SE C. 271 (1)( C) HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT T HERE IS ACTUALLY A CONCEALMENT OR NON-DISCLOSURE OF THE PARTICULARS OF INCOME PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONCEALMENT OR NON-DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN T HE IT RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 7.5 EXPLN.5 AND 5A ARE ALSO AN EXCEPTION TO THE RU LE THAT WHEN AN INCOME WHICH IS ULTIMATELY BROUGHT TO TAX IS DECLAR ED IN A RETURN OF INCOME THERE CAN BE NO QUESTION OF TREATING THE AS SESSEE AS HAVING 'CONCEALED PARTICULARS OF INCOME OR FURNISHED INACC URATE PARTICULARS OF INCOME'. THOSE EXPLANATIONS WILL ALSO NOT APPLY IN THE PRESENT CASE BECAUSE THOSE EXPLANATIONS ARE APPLICABLE ONLY WHEN THERE IS A SEARCH U/S.132 OF THE ACT AND NOT TO A CASE OF SURV EY U/S.133A OF THE ACT. 7.6. FOR THE REASONS GIVEN ABOVE WE HOLD THAT THERE CAN BE NO JUSTIFICATION FOR IMPOSITION OF PENALTY ON THE INCO ME OFFERED IN THE RETURN OF INCOME BY THE ASSESSEE BECAUSE THERE CAN NOT BE ANY PENALTY ON INCOME WHICH IS DECLARED IN A RETURN OF INCOME ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7.7 ACCORDINGLY WE SET ASIDE THE ORDERS OF CIT(A) AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED IN THE BOTH AYS UND ER CONSIDERATION. 8. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD DATED: 28 TH SEPTEMBER 2016 13 ITA NOS. 96 & 1625/HYD/14 M/S SAI KRISHNA CONSTRUCTIONS HYD. KV COPY TO:- 1) M/S SAI KRISHNA CONSTRUCTIONS 8-3-988/4 & 18 SRIPADA TOWERS SBH COLONY SRINAGAR COLONY HYDERABAD. 2) ITO WARD 8(1) HYDERABAD. 3) CIT(A) - II HYDERABAD 4 CIT - II HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDE RABAD. 6) GUARD FILE