P.JANGA REDDY ,HYDERABAD vs. INCOME TAX OFFICER, WARD-9(4), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “SMC” BENCH: HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ITA. No.1337/Hyd/2018 Assessment Year: 2009-10 P. Janga Reddy, vs. ITO, Hyderabad. Ward-9(4), PAN: AHOPP 4343 E Hyderabad. (Appellant) (Respondent) For Assessee: Sri M. Chandramouleswara Rao For Revenue : Smt. Neeju Gupta, DR Date of Hearing : 15/05/2019 Date of Pronouncement : 24/05/2019 ORDER PER V. DURGA RAO, JM. This appeal is filed by the assessee against the order of the CIT(A)- 7, Hyderabad dated 24/4/2018 for the assessment year 2009-10. In this appeal, the assessee has raised the following grounds of appeal:-

“1. The appellate order of the Ld. CIT(A) is erroneous and bad both on facts and in law. 2. On the facts and in the circumstances in the case, the Ld Commissioner has erred in confirming the concealment penalty imposed ignoring the fact that the appellant has not concealed any income and agreed for estimation of income from his spare parts business by the CIT(A) whereas in fact, the appellant has not made any surplus in such business. 3. On the facts and in the circumstances in the case, the Ld. Commissioner has erred in confirming the levy of concealment penalty in a case where the Assessing Officer after due investigation has found the appellant’s claims of business in spare parts as true and correct and where the Assessing Officer further followed the agreed profit estimation rate decided by the first appellate commissioner of income tax. He ought to have considered the fact that the appellant’s claim was found to be true

and correct and no new facts were brought on record by the A.O. while will contradict the claim of the appellant. 4. such other ground and grounds that may be urged during the hearing of the appeal.”

of the Act dated 09/08/2016. In the assessment order, A.O. observed that after conducting the detailed enquiries it is established that the assessee has carried spare part business and by considering the nature of the business and also based on the findings of the CIT(A), A.O. assessed 25% of the gross receipts of Rs. 21,12,500/- is the income of the assessee and so far as the agricultural income is concerned, A.O. accepted the explanation of the assessee and considered the same as agricultural income. Subsequently, the A.O has initiated penalty proceedings u/s 271(1)(c) of the Act amounting to Rs. 1,79,510/-. In the penalty order, the A.O. has noted as under: “3. In pursuance to the IT AT order, notices u/s 1'43(2) dated 26/04/2016 and 06/06J2016 were issued and Assessee's AR Sri D.Ramakrishna Reddy appeared and filed information on 29/0712016. It was submitted that the assessee was in spare parts business and furnished confirmation letters from the parties from whom assessee purchased spare parts. At the same time he expressed his inability to get the details of buyers who have purchased spare parts from him. In order to verify the genuinity of the claim of spare parts business, enquiries were caused. Enquiries conducted have established that assessee has done rig spate parts business. Considering the nature of the business and findings of the CIT(A) profit on Rs.21 ,12,5001- amount @ 25% 'is treated as income from business. Out of the total cash deposits of RS.23,40,OOOI-, the amount of RS.21 , 12,5001- is treated as gross receipts from the business in rig spare parts and RS.2,27,5001- as net agricultural income. 4. Thus it is clear that the assesses has' not reflected has true business affairs in return of income filed for the A. Y 2009-10. After considering the material available on record, I am satisfied that the assessee has concealed the true income particulars. Notice u/s 271(1)(c) of the Income Tax Act dated 09/08/2016 was issued asking the assessee to appear on 24/0812016 and show cause why an order imposing penalty should not be made uls 271(1)(c) . In response to the notice, the AR of the assessee, Sri D. Ramakrishna Reddy appeared on 24/08/2016 and submitted that since the Income is estimated, penalty may be dropped. Though the bank deposits were treated as "business receipts" and income was estimated, the income was not shown in the return of income. Only during the appellate proceedings he made submission that he did spare part business and cash deposits in bank are sourced from the spare parts business. Hence it is treated that the assessee has suppressed the very source of his income and has also concealed the true particulars of his income.”

filed against the order passed by the A.O. It is a fact that the assessee has not initially offed business income before the CIT(A). He has made a detailed submissions before the CIT(A) and after considering the same, the deposits made by the assessee in the bank account considered as business receipts and the CIT(A) directed the A.O. to estimate 25% of the gross receipts as income of the assessee. Even after ITAT set-aside the order of the CIT(A), the A.O. made a detailed enquiry and find that the assessee is carrying on business of ring spare parts and estimated the income of the assessee. Under these circumstances of the case, I am of the opinion that it cannot be said that the assessee has concealed the income. Assessee has accepted the addition made by the A.O. and accordingly taxes are being paid. Therefore, the order passed by the CIT(A) cannot survive and therefore I cancel the order passed by the CIT(A) and allow the grounds raised by the assessee.

Sd/- (V. DURGA RAO) JUDICIAL MEMBER Hyderabad, Dated: 24th May, 2019. OKK, Sr.PS

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