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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SMT P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
This appeal is preferred by the assessee against the order of CIT(A) – 9, Hyderabad, dated 13/11/2015 for the AY 2004-05, whereby he confirmed the penalty levied u/s 271(1)(c) of the Act.
Briefly the facts of the case are, the assessee filed original return of income on 16/02/2005 declaring an income of Rs. 95,108/-. The assessee filed another return of income on 29/03/2007 admitting an income of Rs. 3,38,340/-. Subsequently, the case was selected for scrutiny and the assessment was completed on a total income of Rs. 11,61,400/- by adding undisclosed investment in house property for an amount of Rs. 8,23,000/- u/s 69 of the Act.
2.1 A survey u/s 133A of the Act was conducted in the assessee’s case on 23/10/2007, in which, it was found that the assessee had
2 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju invested Rs. 8,23,000/- in the purchase of property which was not reflected in his return of income. The assessment was completed on 26/12/2008 bringing to tax the said amount of Rs. 8.23 lakhs as unexplained investment u/s 69 of the Act.
2.2 Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) and since there was no response from the assessee to the penalty notice, the AO levied a penalty of Rs. 2,80,260/- on the assessee.
2.3 Aggrieved with the penalty order, assessee preferred an appeal before the CIT(A).
Before the CIT(A), the assessee submitted that the assessee had come forward to pay the taxes on the investment found during the course of survey proceedings in order to settle the matter with the department. It was further contended that the AO had not given any finding in the penalty order as to how the assessee had concealed income. The Assessee has relied on various cases which were extracted by the CIT(A) at page 2 of his order.
After considering the submissions of the assessee, the CIT(A) confirmed the penalty levied by the AO by observing as under:
However, the assessee's contentions are not acceptable. The assessee's contention that they wanted to settle the matter and hence paid the taxes cannot be accepted as the assessee had no explanation to this undisclosed investment and therefore, paid the taxes on it. It is also seen that the assessee has not filed any appeal against the assessment order, which clearly shows that the assessee has accepted this as his unexplained investment. Further, the assessee's contention that the Assessing Officer has not given any finding in the penalty order is also not correct as it is seen from the penalty order that the Assessing Officer while stating the facts of the case, stated clearly that non-disclosure of investment amounted to concealment. When penalty was initiated and notice was issued, there was no response from assessee. Therefore, the Assessing Officer has correctly levied the penalty u/s 271(1)(c).
3 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju Moreover, the facts of the cases cited by the assessee are different & distinguishable from the instant case. In these cases the issue is whether there in any deliberate suppression of income so as to levy penalty u/s 271(1)(c). However, this is a case where the assessee has not shown his investment in the return of income and it is only during the course of survey that this investment in property came to light. I place reliance on the cases of CIT Vis KA Sampath Reddy (KAR) 197 ITR 232 and Biland Ram Hargen Das Vs. CIT (All) 171 ITR 390 where in it was held that where a survey was conducted and certain erroneous entries are noticed and assessee agreed to the assessment, imposition of penalty is held to be valid. These cases are very much applicable to the present case and penalty is exigible.
4.3 Further, in the following cases, penalty was held to be leviable where there is unexplained investment and this is deemed to be income for purpose of levying penalty:
Loknath Chowdhry Vs. CIT (Cal) 1551TR 291. 2. Rahmat Development & Engineering Corporation Vs CIT (Cal) 130 ITR 602. 3. CIT Vs. Ra/tam Singh Grewal (P&H) 304 ITR 75. 4. Charudatt H Danget Vs. Income Tax Officer (ITA T, Mumbai) 126 lTD 483.
These above mentioned cases are clearly applicable to the instant case, wherein unexplained investment was detected and added to the total income, and hence can be construed as concealment for the levy of penalty u/s 271(1)(c).
4.4 Further, it is seen from the penalty order that the assessee has not offered any explanation during the course of penalty proceedings. In this connection, I place reliance on the case of CIT Vs. Chanchal Katyal (All) 173 Taxman 71, wherein the assessee did not furnish any explanation and so levy of penalty u/s 271(1)(c) was upheld.
4.5 In view of all the facts and circumstances of the case, it is very clear that the assessee has concealed income within the meaning of the provisions of section 271(1)(c) and hence the penalty order is upheld.”
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
“1. The order of the learned Commissioner of Income Tax (Appeals)-9 Hyderabad dated 13.11.2015 confirming the order
4 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju of penalty u/s 271(1)(c) of Income Tax Act,1961 is against law and facts of the case.
The learned Commissioner of Income Tax (Appeals) ought to have appreciated that mere upholding of the addition does not automatically result in levy of penalty.
The learned CIT (Appeals) ought to have appreciated that the explanation furnished by the appellant in response to the show cause notice for levy of penalty was not found to be false and mere rejection of explanation does not entail levy of penalty.
Without prejudice to the above grounds, The learned CIT (Appeals) ought to have appreciated that the penalty levied of Rs.2,80,260/- is excessive, unreasonable and arbitrary.
The appellant craves "leave to add/ alter/ modify grounds which would be necessary for adjudication of the case.
The assessee filed a petition to admit the following additional grounds of appeal:
A.O and Learned CIT(A) levied penalty not on any finding on merits but merely on the basis of lack of a reply to the notice u/s. 271(1)(c) of the LT. Act.
Inference of concealment is flawed because the amount added in the assessment had been already shown in the Balance Sheet filed along with the return in 2007. A.O and Learned CIT(A) failed to notice disclosure in the Balance Sheet.
Learned CIT (A) has erred in upholding penalty levied on the basis of addition which is of deemed income and not income as defined u/s. 2(24) of the I.T. Act. Deemed income is not included in the definition of income.
Without prejudice to the above grounds,
Notice u/s. 271(1)(c) issued is legally invalid because neither the assessment order nor the notice u/s. 271(1)(c) specifies whether the proceedings was for concealment of income or it was for furnishing inaccurate particulars of income.
Penalty order on the basis of such vague notice is also invalid.”
5 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju 6. As the said additional grounds are legal grounds, wherein, the facts are on record and facts do not require fresh investigation, following the decision of Hon’ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT 229 ITR 383 (SC), we admit the said additional ground of assessee.
Before us, ld. AR of the assessee insisted on the additional ground No. 4 that the notice issued u/s 274 is not proper. He relied on the following cases: 1. Godavari Townships (P) Ltd. Vs. DCIT [2014] 148 ITD 463 (ITAT – Vizag.) 2. Suvaprasanna Bhattacharya Vs. ACIT, ITA No. 1303/Kol/2010, dt. 06/11/2015 3. Shri Hafeex S Contractor Vs. ACIT, ITA No. 6222 and 6223/Mum/2013, dt. 02/09/2015 4. ITO Vs. Chhail Behari [2011] 8 ITR (Trib) 383 (ITAT – Agra) 5. CIT Vs. SSA’s Emerald Meadows, dated 23/11/2015 6. CIT Vs. SSA’s Emerald Meadows, ITA No. 380 of 2015, dt. 23/11/2015, Karnataka HC.
6.1 Further, the ld. AR of the assessee submitted that the Assessing Officer initiated the penalty proceedings by issue of a notice u/s 274 r.w.s. 271(1)(c) & 271(1)(b) on 26.12.2008. He submitted that while issuing the said notice, the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, the notice is not validly issued. Consequently, the order passed u/s 271(1)(c) also is not valid. For this proposition, he relied on the decision of the Hon’ble Supreme Court in the case of CIT Vs. SSA’s Emerald Meadows, [2016] 73 taxmann.com 248 (SC).
Ld. DR besides relying on the orders of revenue authorities, relied on the case of CIT Vs. Smt. Chanchal Katyal, IT Reference No. 11 of 1994 [2006] RD-AH 16290 (19th September 2006) – All.
6 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju 9. Considered the rival submissions and perused the material facts on record. The issue in dispute is squarely covered by the decision of the Hon’ble Supreme Court in the case of CIT Vs. SSA’s Emerald Meadows, [2016] 73 Taxmann.com 248 (SC) wherein the Apex Court upheld the decision of the Hon’ble High Court, in which, the Hon’ble High Court confirmed the order of the Tribunal and dismissed the appeal of the revenue, who came in appeal against the order of the Tribunal. The Tribunal relying on a decision of Karnataka High Court in case of CIT Vs. Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565/210 allowed the appeal of the assessee holding that notice issued by Assessing Officer u/s 274 read with section 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income.
9.1 In the case under consideration, on perusal of the show cause notices issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) & 271(1)(b) of the IT Act, 1961, dated 26/12/2008, it is seen that the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down by the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, the notice issued by the Assessing Officer is not valid and consequently, the order passed u/s 271(1)(c) is also not valid. Hence, we set aside the order of the CIT(A) and quash the order passed by the Assessing Officer u/s 271(1)(c) of the Act. Accordingly, the appeal of the assessee is allowed.
7 ITA No. 146 /Hyd/2016 AVK Viswanadha Raju
In the result, assessee’s appeal is allowed.
Pronounced in the open court on 24th January, 2018.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 24th January, 2018 kv Copy to:-
1) AVK Viswanadha Raju, C/o P.R.Datla & Co., CAs, 6-3-788/A/9, First Floor, Durga Nagar, Ameerpet, Hyd – 500 016. 2) ITO, Ward –6(2), IT Towers, Masab Tank, Hyd – 500 001 3) CIT(A) – 9, Hyderabad. 4) Pr. CIT – 6 , Hyderabad. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File