J. Chittibabu, (L/R by J.V.Ratnamani), Rajamundry, Hyderabad v. ITO, Ward-10(4), Hyd, Hyderabad

ITA 961/HYD/2016 | 2003-2004
Pronouncement Date: 08-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 96122514 RSA 2016
Assessee PAN AFTPJ9171M
Bench Hyderabad
Appeal Number ITA 961/HYD/2016
Duration Of Justice 1 year(s) 4 month(s) 11 day(s)
Appellant J. Chittibabu, (L/R by J.V.Ratnamani), Rajamundry, Hyderabad
Respondent ITO, Ward-10(4), Hyd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 08-11-2017
Date Of Final Hearing 26-07-2017
Next Hearing Date 26-07-2017
First Hearing Date 26-07-2017
Assessment Year 2003-2004
Appeal Filed On 27-06-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B SMC : HYDERABAD BEFORE SHRI D. MANMOHAN VICE PRESIDENT ITA.NO.960/HYD/2016 ASSESSMENT YEAR 2003 - 2004 SMT. J.V. RATNAMANI H.NO.74 - 11 - 4 PRAKASH NAGAR RAJAHMUNDRY. PAN: AFTPJ 9171 M VS. ITO WARD - 10(4) IT TOWERS A.C. GUARDS HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.961/HYD/2016 ASSESSMENT YEAR 2003 - 2004 J. CHITTIBABU (LATE) REPRESENTED BY LEGAL REPRESENTATIVE SMT. J.V. RATNAMA NI H.NO.74 - 11 - 4 PRAKASH NAGAR RAJAHMUNDRY. PAN: AFTPJ 9170 L VS . ITO WARD - 10(4) IT TOWERS A.C. GUARDS HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE S : SHRI S. RAMA RAO FOR REVENUE : SMT. N. SWAPNA DR DATE OF HEARING : 11.08.2017 DATE OF PRONOUNCEMENT : 0 8 . 11 .2017 ORDER PER D. MANMOHAN VP. THESE APPEALS ARE DIRECTED AGAINST ORDERS PASSED BY LD. CIT(A) - 9 HYDERABAD ARISING OUT OF PENALTY LEVIED U/S 221(1) OF THE INCOME TAX ACT 1961 WHICH WAS PARTLY CONFIRMED BY LD. CIT(A). WE ARE CONCERNED WITH TWO ASSESSEES HEREIN. SHRI J. CHITTIBABU HAVING EXPIRED IN 2014 SMT. J.V. RATNAMANI FILED AN APPEAL BEFORE THE TRIBUNAL IN HER CAPACITY AS A LEGAL REPRESENTATIVE. IN THE OTHER APPEAL SMT. J.V. RATNAMANI IS AN APPELLANT. 2. FACTS CONCERNING LEVY OF PENALTY IN THE CASE OF LATE J. CH ITTIBABU ARE STATED IN BRIEF. FOR THE PREVIOUS YEAR RELEVANT TO A.Y. 2003 - 2004 ASSESSEE DECLARED INCOME 2 FROM HOUSE PROPERTY ENGINEERING CONSULTANCY AND AGRICULTURAL INCOME. IN THE RETURN OF INCOME FILED ON 25.02.2005 HE ADMITTED LOSS FROM WAREHOUSING BUSINESS AT RS. 82 255/ - ; INCOME FROM ENGINEERING CONSULTANCY OF RS. 78 000/ - AND AGRICULTURAL INCOME OF RS. 68 000/ - . 3. DURING RE - ASSESSMENT PROCEEDINGS A.O. NOTICED THAT ASSESSEE CONSTRUCTED WAREHOUSE GODOWNS WHICH WERE GIVEN ON LEASE TO AP STATE WAREHO USING CORPORATION FROM FEBRUARY 2003 ONWARDS. ACCORDING TO ASSESSEE THE LOSS ADMITTED FROM WAREHOUSE BUSINESS REPRESENTS CAPITAL BORROWED FROM BANK FOR CONSTRUCTION OF GODOWNS. IT WAS SAID THAT IT WAS PARTLY FROM THE LOAN TAKEN FROM ICICI BANK AND OWN F UNDS WERE ALSO UTILISED FOR CONSTRUCTION OF GODOWNS. DEDUCTION WAS ALSO CLAIMED U/S 80 - IB OF THE ACT. 4. WHILE EXPLAINING THE INVESTMENT AND CONSTRUCTION OF WAREHOUSE GODOWNS ASSESSEE CLAIMED TO HAVE UTILISED OWN FUNDS OF RS. 10 47 000/ - CREDITORS OF RS . 18 28 337/ - ETC. A.O. DISBELIEVED THE SOURCE OF SUCH FUNDS AND ADDED THE SAME AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. FURTHER THE EXPENDITURE TOWARDS THE PAYMENT OF INTEREST TO ICICI BANK WAS ALSO TREATED AS INCOME U/S 69C OF THE ACT. ACCORDIN GLY ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS. 40 12 898/ - AS AGAINST THE NET LOSS OF RS. 82 255/ - DECLARED BY ASSESSEE. ON AN APPEAL LD. CIT(A) DELETED CERTAIN ADDITIONS AND ON A FURTHER APPEAL ITAT DELETED SUBSTANTIAL ADDITIONS VIDE ITS ORDER DATED 16.03.2016. EXCEPT FOR MINOR ADDITIONS U/S 69 / 69C OF THE ACT THERE IS NO ENHANCEMENT ON THE GROUND OF EARNING OF INCOME BY ASSESSEE. 5. SINCE THE ASSESSEE DID NOT PAY THE HUGE DEMAND RAISED BY A.O. PENALTY PROCEEDINGS WERE INITIATED U/S 221(1) OF THE ACT WHEREIN THE A.O. NOTICED THAT THOUGH THE ASSESSEE PROMISED TO PAY TAX DEMAND BY 31.08.2008 ON THE SAID DATE ASSESSEE HAVING NOT PAID TAXES IT IS A FIT CASE FOR LEVY OF PENALTY. IN THIS REGARD IT MAY BE NOTICED THAT ASSESSEE FURTHER REQUESTED FOR TIME ON THE GROUND THAT HE HAD NO LIQUID FUNDS AND TAX CAN BE PAID UPON SALE OF PROPERTY WHICH IS EXPECTED BY THE END OF DECEMBER 2008. A.O. OBSERVED THAT THE DEMAND HAVING FALLEN DUE IN NOVEMBER 2006 A SSESSEE IS EXPECTED TO PAY THE OUTSTANDING DEMAND IMMEDIATELY AND THOUGH HE HAS SOURCE OF INCOME SUCH AS ENGINEERING CONSULTANCY AND AGRICULTURAL INCOME HE HAD NOT PAID A SINGLE RUPEE TILL NOW WHICH SHOWS THE CASUAL NATURE ON THE PART OF ASSESSEE IN PAYMENT 3 OF TAXES PARTICULARLY AFTER AUGUST 2008. ACCORDINGLY A.O. LEVIED PENALTY OF RS. 2 52 800/ - WHICH IS EQUIVALENT TO 20% OF THE DEMAND DUE FROM THE ASSESSEE. 6. SIMILARLY IN THE CASE OF SMT. J.V. RATNAMANI A LOSS OF RS. 85 718/ - WAS ADMITTED FROM WAREHOUSING BUSINESS AND INCOME FROM OTHER SOURCES WAS DECLARED AT RS. 69 575/ - APART FROM AGRICULTURAL INCOME OF RS. 84 000/ - . SINCE THE SOURCE OF INVESTMENT IN CONSTRUCTION OF WAREHOUSE GODOWNS ETC. WAS NOT ADMITTED BY THE A.O. AS IN TH E CASE OF HUSBAND (J. CHITTIBABU) A.O. COMPLETED ASSESSMENT ON A TOTAL INCOME OF RS. 40 86 262/ - AND RAISED TAX DEMAND OF RS. 12 59 871/ - . HERE ALSO ASSESSEE GOT SOME RELIEF BEFORE LD. CIT(A) AND BEFORE THE ITAT A SUBSTANTIAL RELIEF WAS GRANTED AND THOU GH THE MAIN SOURCE OF INCOME WAS NOT DISPUTED ADDITIONS WERE CONFIRMED ON ACCOUNT OF THE DEEMING PROVISIONS I.E. SECTIONS 69 AND 69C OF THE ACT. 7. IN THIS CASE ALSO A.O. WAS OF THE OPINION T HE ASSESSEE OUGHT TO HAVE STUCK TO THE PROMISE OF PAYING TAXE S BY 31.08.2008 AND HAVING NOT PAID TAXES IT WAS A FIT CASE FOR LEVY OF PENALTY. ACCORDING TO A.O. SHE HAS SOURCE OF INCOME SUCH AS AGRICULTURAL INCOME AND INCOME FROM OTHER SOURCES WHICH COULD HAVE BEEN UTILISED FOR PAYMENT OF TAXES. 8. IN BOTH THE CASES IN QUANTUM PROCEEDINGS A.O. OBSERVED THAT THE ASSESSEES OBTAINED LOAN FROM ICICI BANK FOR CONSTRUCTION OF WAREHOUSE GODOWN S AND THERE WOULD NOT HAVE BEEN SURPLUS FROM THE ANNUAL INCOME DECLARED SINCE IT MAY HARDLY BE SUFFICIENT FOR DAY - TO - DAY EXPE NDITURE AND IN FACT THE AGRICULTURAL INCOME CLAIMED TO HAVE BEEN RECEIVED WAS ALSO NOT ACCEPTED BY THE A.O. THOUGH LD. CIT(A) ACCEPT ED J AGRICULTURAL INCOME AS ONE OF THE SOURCES. 9. HOWEVER WHILE LEVYING PENALTY BY TREATING THE ASSESSEES IN DEFAULT A. O. OBSERVED THAT BOTH THE ASSESSEES HAVE SUFFICIENT SOURCE OF INCOME BUT HAVE NOT PAID EVE N A SINGLE RUPEE TOWARDS TAX . 10. BEFORE LD. CIT(A) ASSESSEES SUBMITTED THAT SHRI J. CHITTIBABU WAS NOT KEEPING GOOD HEALTH AND SHIFTED HIS RESIDENCE TO RAJAHMUNDRY FOR MEDICAL TREATMENT. IT WAS ALSO SUBMITTED THAT SUBSTANTIAL RELIEF WAS GRANTED BY THE TRIBUNAL WHEREAS THE A.O. WAS OF THE OPINION THAT THE ASSESSEE OUGHT TO HAVE PAID THE DEMAND RAISED BY THE A.O. AS OTHERWISE ASSESSEE SHOULD BE TREATED AS IN DEFAULT. IT WAS ALSO SUBMITTED THAT APART FROM THE FACT THAT THE ASSESSEE WAS AGED (71 YEARS OLD) HE WAS NOT MAINTAINING 4 GOOD HEALTH AND ULTIMATELY PASSED AWAY ON 11.01.2014 AND THUS THE P AYMENT COULD NOT BE MADE. IT WAS ALSO STATED THAT THE ASSESSEE DID NOT HAVE SUFFICIENT FUNDS AT THAT POINT OF TIME AND REQUESTED FOR FURTHER TIME FOR MAKING PAYMENT UPON SALE OF PROPERTY BUT THE A.O. REJECTED THE SUBMISSION OF ASSESSEE BY ASSUMING THAT THE ASSESSEE HAD SUFFICIENT FUNDS FOR MAKING PAYMENT OF TAX DEMAND. 11. SIMILAR SUBMISSIONS WERE MADE WITH REGARD TO PENALTY LEVIED IN THE CASE OF SMT. J.V. RATNAMANI. 12. LD. CIT(A) OBSERVED THAT HAVING REGARD TO THE ORDER OF ITAT WHEREIN SUBSTANTIAL REL IEF WAS GRANTED THE TAX PAYABLE BY THE ASSESSEES REQUIRED TO BE RECOMPUTED AND PENALTY TO BE LEVIED ACCORDINGLY. IT MAY BE NOTICED THAT IN BOTH THE CASES THE MAIN PLEA AS TO WHETHER THERE IS SUFFICIENT REASON FOR NON - PAYMENT OF TAXES WAS NOT LOOKED INT O BY THE LD. CIT(A). 13. AGGRIEVED ASSESSEES ARE IN APPEAL BEFORE THE TRIBUNAL. 14. LD COUNSEL FOR THE ASSESSEES SUBMITTED THAT THE ADDITIONS WERE MADE BY A.O. BY APPLYING DEEMING PROVISIONS OF SECTIONS 68 / 69 / 69C OF THE ACT BY HOLDING THAT THE ASSESSE ES DO NOT HAVE SOURCES TO EITHER PAY INTEREST TO ICICI BANK OR FOR UTILISATION OF THE SO CALLED AVAILABLE FUNDS FOR CONSTRUCTION OF WAREHOUSE GODOWNS. HAVING ESTIMATED THAT THE ASSESSEES DO NOT HAVE SUFFICIENT SOURCE S OF INCOME HE CANNOT TAKE A DIFFERENT STAND TO HOLD THAT THE ASSESSEES HAD SUBSTANTIAL SOURCE OF INCOME TO PAY TAX DEMAND. LD COUNSEL FOR THE ASSESSEE ADVERTED OUT ATTENTION TO QUANTUM ASSESSMENT ORDER S TO SUBMIT THAT THE AGRICULTURAL INCOME WAS NOT ACCEPTED BY THE A.O. AT ANY POINT OF TIME AND HENCE IT CANNOT NOW BE SAID IN THE PROCEEDINGS U/S 221(1) OF THE ACT THAT THE A SSESSEES HAVE SUFFICIENT SOURCE FOR PAYMENT OF TAXES IN THE FORM OF AGRICULTURAL INCOME ALSO. IT WAS ALSO STATED THAT SHRI J. CHITTIBABU EXPIRED WHEN HE W AS 71 YEARS OLD AND SMT. J.V. RATNAMANI IS AGED ABOUT 65 YEARS AND ADVERTING OUR ATTENTION TO PROVISIONS OF SECTION 221(1) OF THE ACT IT WAS SUBMITTED THAT WHEN THERE IS A REASONABLE CAUSE FOR NON - PAYMENT OF TAXES PENALTY NEED NOT BE LEVIED IN A ROUTINE COURSE. IT WAS SUBMITTED THAT THE ASSESSES DO NOT HAVE SUFFICIENT SOURCE OF INCOME SO AS TO PAY TAX DEMAND AND THOUGH IT WAS EXPLAINED TO THE A.O. PENALTY WAS ARBITRARILY LEVIED. AT ANY RATE LEVY OF PENALTY AT 20% OF THE OUTSTANDING DEMAND IS ARBITRARY AND EXCESSIVE. HE POINTED OUT THAT SECTION 221(1) HAVING NOT SPECIFIED THE MINIMUM AND MAXIMUM PENALTY LEVIABLE HAVING REGARD TO THE CIRCUMSTANCES OF THIS 5 CASE A NOMINAL PENALTY AT BEST COULD HAVE BEEN LEVIED. IN THIS REGARD HE HIGHLIGHTED TH A T SUBSTANTIAL ADDITIO NS W E R E DELETED BY THE ITAT AND LD. CIT(A) AND BUT FOR THE INTEREST COMPONENT U/S 234A AND 234B THE TAX PAYABLE WAS VERY MARGINAL AND IN FACT THE ASSESSEE PAID REGULAR TAXES (A SUM OF RS. 1 53 923/ - EACH WAS PAID BY THE ASSESSEES HEREIN). HE HAS ALSO REFERRED TO S ECOND PROVISO TO SECTION 221 OF THE ACT WHICH READS AS UNDER: - PROVIDED FURTHER THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE [ASSESSING] OFFICER THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS NO PENALTY SHALL BE LEVIED UNDER THIS SECTION. HE THUS SUBMITTED THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY AND IN T H E ALTERNATIVE LEVY OF PENALTY AT 20% OF THE TAX PAYABLE IS EXCESSIVE. 15. ON THE OTHER HAND LD DR SUBMITTED THAT THE ASSESSEES HAVE ON THEIR OWN ADMISSION STATED TO HAVE EARN ED INCOME FROM VARIOUS SOURCES IN WHICH EVENT THE OUTSTANDING DEMAND OUGHT TO HAVE BEEN PAID AND SINCE THERE WAS A SUBSTANTIAL DELAY IN PAYMENT OF OUTSTANDING DEMAND EVEN AFTER ISSUING OF NOTICE FOR LEVY OF PENALTY U/S 221(1) OF THE ACT IT IS A FIT CASE F OR LEVY OF PENALTY. LD DR THUS SUPPORTED THE ORDERS PASSED BY LD. CIT(A). 16. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED RECORD. THOUGH THE A.O. SAID THAT THE ASSESSEES HAD SUBSTANTIAL SOURCE FOR PAYMENT OF OUTSTANDING DEMAND QUANTUM ORDERS PASSED BY A.O. DO NOT INDICATE THAT THE ASSESSEES HAVE SUFFICIENT LIQUID FUNDS. IN FACT THE CLAIM OF HAVING OWN FUNDS AND INCOME EARNED IN THIS YEAR TOWARDS PAYMENT OF INTEREST TO ICICI BANK ETC. WAS ALSO REJECTED BY A.O. SUCH BEING THE CASE IT CANNOT BE SAID THAT THE ASSESSEES HAD SUFFICIENT FUNDS TO PAY OUTSTANDING DEMAND AS IT WOULD AMOUNT TO TAKING A DOUBLE STAND UNLESS SOME MATERIAL IS BROUGHT ON RECORD TO INDICATE THAT IN THE YEAR OF PENALTY ASSESSEES HEREIN HAD SUFFICIENT LIQUID FUNDS. HOWEVER THE FACT REMAINS THAT THE ASSESSEES CLAIM THAT THE CASE OF THE ASSESSEES HEREIN CLAIMED THAT THEY HAD FUNDS IN THE FORM OF RENT RECEIVED FROM WAREHOUSING CORPORATION AND AGRICULTURAL INCOME WAS ACCEPTED BY LD. CIT(A) IN WHICH EVENT IT CANNOT BE SAID THAT THERE IS A SUFFICIENT REASON FOR NON - PAYMENT OF TAX . IN FACT EVEN AS PER THE CONSEQUENTIAL ORDERS PASSED BY A.O. TO GIVE EFFECT TO THE ORDERS PASSED BY THE ITAT THE ASSESSEES HEREIN APPEAR T O HAVE NOT PAID THE BALANCE OUTSTANDING DEMAND ; T HE FACT REMAINS THAT SUBSTANTIAL TAX D E M A N D AROSE OUT OF INTEREST CHARGED U/SS 234A 234B AND 220(2) OF THE ACT. HAVING REGARD TO THE OVER ALL 6 CIRCUMSTANCES OF THE CASE I AM OF THE VIEW THAT A NOMINAL LEVY OF PENALTY OF RS. 10 000/ - IN EACH CASE WOULD MEET THE ENDS OF JUSTICE. I DIRECT ACCORDINGLY. 17. IN THE RESULT APPEALS FILED BY THE ASSESSEES ARE PARTLY ALLOWED. 18 . ORDER PRONOUNCE D IN THE OPEN COURT ON 0 8 T H NOVEMBER 2017. S D / - (D. MANMOHAN) VICE PRESIDENT HYDERABAD DATED: 0 8 T H NOVEMBER 2017 OKK SR.PS COPY TO 1. SRI S. RAMA RAO ADVOCATE FLAT NO.102 SHRIYAS ELEGANCE 3 - 6 - 643 STREET NO.9 HIMAYAT NAGAR HYDERABAD 500 029. 2. ITO WARD - 10(4) I.T. TOWERS A.C. GUARDS HYDERABAD. 3. CIT(A) - 09 HYDERABAD. 4. PR. CIT - 6 HYDERABAD. 5. D.R. ITAT B BENCH HYDERABAD. 6. GUARD FILE