KUNTLURU ANIL KUMAR,HYDERABAD vs. INCOME TAX OFFICER, WARD-4(5), HYDERABAD

The assessee has raised several identical grounds in both these appeals however, the cruxes of the issues are as follows:-

The brief facts of the case are that the assessee is an individual engaged in the business of operating Saw Mill. A Search & Seizure Operation U/s. 132 of the Act was conducted in the case of Shri B. Ram Das Goud and Desagoni Raghupathi Goud Group on 15/9/2008 wherein certain incriminating materials pertaining to the assessee were found and seized. Thereafter, notice U/s. 153C of the Act was issued to the assessee on 27/8/2010 and in response to the notice the assessee filed his return of income on 4/11/2010 and 8/11/2010 declaring total income of Rs. 1,21,757/-and Rs. 1,25,957/- for the AY 2007-08 and 2008-09 respectively.

During the course of post search proceedings the assessee in his sworn statement on 20/10/2008 had stated that during the previous year relevant to the AY 2007-08 the assessee had purchased one plot at Annojiguda admeasuring 400 sq yds for an amount of Rs. 4,80,000/-. Towards the same the assessee furnished two sale deeds dated 14/6/2006 wherein the sale consideration was mentioned as Rs. 1 lakh in each of the sale deeds aggregating to Rs. 2 lakhs excluding stamp duty. However in the original return of income filed by the assessee on 31/3/2008 along with the Balance Sheet it was revealed that the value of the property purchased by the assessee was mentioned as Rs. 2 lakhs. Based on the admission of the assessee that the actual sale consideration paid by the assessee was Rs. 4,80,000/- for the plots of land, the Ld. AO opined that the difference of the amount admitted by the assessee of Rs. 4,80,000/- and Rs. 2 lakhs declared in the return of income should be treated as the undisclosed income. Accordingly, he made the addition which was further confirmed by the Ld. CIT (A). During the course of penalty proceedings the assessee neither appeared before the assessee not submitted any written submissions. Therefore, the Ld. AO levied minimum penalty of Rs. 70,403/-. Before the Ld. CIT (A) the assessee raised several pleas, however, the Ld. CIT (A) confirmed the order of the Ld. AO by finding the case of the assessee to be a fit case for levy of penalty, aggrieved by which the assessee is in appeal before the Tribunal.

During the course of search proceedings it was revealed from the cash receipt dated 25/10/2007 that the assessee had paid Rs. 5 lakhs to Shri Bakaram Eashwar for purchase of a plot of land. Since the assessee could not explain the source for the amount paid to Mr. Bakaram, the Ld. AO treated the same as the unexplained investment invoking the provisions of section 69 of the Act. It was also revealed from the sworn statement of the assessee that he had purchased another property for Rs. 5,05,620/- however it was declared in the return of income as Rs. 3,47,170/-. Therefore the Ld. AO treated the entire amount of Rs. 5,05,620/- also as the undisclosed investment of the assessee U/s. 69 of the Act. Thus, an aggregate addition of Rs. 10,05,620/- was made in the hands of the assessee. On appeal, the Ld. CIT (A) granted partial relief of Rs. 3,47,170/- being the amount disclosed in the return of the assessee for the purchase of the immovable property and confirmed the addition of Rs.6,58,150/- [ 5,00,000/- + (5,05,620 - 3,47,170/-)]. During the course of penalty proceedings the assessee neither appeared before the Ld. AO nor submitted any written submissions. Therefore, the Ld. AO levied minimum penalty of Rs. 1,11,021/- in the hands of the assessee. Before the Ld. CIT (A) the assessee raised several pleas, however, the Ld. CIT (A) confirmed the order of the Ld. AO by finding the case to be a fit case for levy of penalty, aggrieved by which the assessee is in appeal before the Tribunal.

At the outset, we do not find the case of the assessee to be a fit case for levy of penalty U/s. 271(1)(c) of the Act because the entire addition is made only on the basis of mere admission made by the assessee during the course of post search proceedings in the case of Shri B. Ram Das Goud and Desagoni Raghupathi Goud Group and the cash receipt of Rs. 5 lakhs found during the course of the search. It is quite obvious that the cash receipt is the acknowledgement of Shri Bakaram Eashwar for having received the amount of Rs. 5 lakhs from the assessee towards the proposed sale of the property. Since the cash receipt is not generated or signed by the assessee it cannot be treated as conclusive evidence to establish that the assessee had paid the amount to Shri Bakaram Eashwar. Further, it is quite possible that the source for the amount of Rs. 5 lakhs might have been from the accumulated savings of the assessee because he has been consistently declaring income over a Lakh of Rupees per annum. Further even with respect to the admissions made by the assessee for payment of on-money for the purchase of the land, there is no corroborative and conclusive evidence. Considering these facts and circumstances of the case we are of the view that there is every possibility that the admissions made by the assessee might have been out of duress because there is no other prudent reason for the assessee to make such statements when there is no cogent evidence against him. The Hon’ble Apex Court in the case of Satinder Kumar HUF vs. CIT reported in 106 ITR 64 has categorically held that though admission made by the assessee constitutes a relevant piece of evidence but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts such an admission cannot be relied upon without first considering the aforesaid contention. Further, the Hon’ble Apex Court in the case CIT vs. Anwar Ali reported in 76 ITR 696 has held that it cannot be said that the findings given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars. From facts of the case it is apparent that the assessee had failed to appear before the Ld. AO in the penalty proceedings however, he has raised several objections before the Ld. CIT (A) against invoking the penal provisions of section 271(1)(c) of the Act by retracting the statements given at the time of post search proceedings. Therefore, though the case may be a fit case for sustaining the addition, we are of the considered view that the case of the assessee is not a fit case for invoking the penal provisions of section 271(1)(c) of the Act. Hence, we hereby set-aside the orders of the Ld. CIT (A) and direct the Ld. AO to delete the penalty levied in the hands of the assessee U/s. 271(1)(c) of the Act for the AY 2007-08 and 2008-09.

Since we have decided both the appeals on merits, We do not find it necessary to address the second ground raised by the assessee as it would be only academic.

In the result, both the appeals of the assessee are allowed.