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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
अपीलधर्थी की ओर से/ Appellant by : Dr. Satyasai Rath, CIT(DR) प्रत्यधर्थी की ओर से / Respondent by : Shri G.V.N.Hari, AR सुिवधई की तधरीख / Date of Hearing : 08.05.2024 घोर्णध की तधरीख/Date of Pronouncement : 20.06.2024 आदेश /O R D E R
Per Shri S. Balakrishnan Accountant Member :
This appeal is filed by the Revenue against the order of Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam in Appeal No.98/10114/2019-20/CIT(A)-3/VSP/2020-21 dated 11.08.2020, arising out of the penalty order passed u/s 271(1)(c) of the M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year (A.Y.) 2015-16.
Brief facts of the case are M/s Milk Producers & Employees Educational Health and Medical Welfare Trust, registered u/s 12A of the Act, filed it’s return of income for the A.Y.2015-16, declaring total income at Rs. Nil. Subsequently, search and seizure operation u/s 132 of the Act was conducted on 25.10.2016 in the case of Visakha Dairy Group. Consequent to the search, a notice u/s 153A was issued and served on the assessee on 23.06.2017. In response to the notice u/s 153A, the assessee filed it’s return of income for the A.Y.2015-16 on 15.07.2017, admitting total income of Rs.4,37,66,000/-. Thereafter, notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued and served on the assessee on 01.06.2018. Due to change in incumbency, another notice u/s 142(1) of the Act dated 13.11.2018 was issued and served on the assessee on the same day. In response to the above notice, assessee’s representative appeared and submitted the information called for from time to time. From the submissions made by the assessee, the Ld.AO noticed various discrepancies, miscomputation of income and interest etc. The Ld.AO found that the assessee has entered into a contract with M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam M/s Sri Vijaya Visakha Milk Producers Company Limited (VVMPCL) for collecting cash from the liquid milk booths on daily basis. The Ld.AO observed that the revenue from the collection of cash was declared by the assessee, whereas, it is in the nature of business receipts and not in accordance with the bye laws of the Trust. The assessee has offered income under presumptive taxation in respect of the receipts received under cash collection charges. The Ld.AO observed that in lieu of supply of labour, the assessee has received cash collection charges from VVMPCL, which is a clear business activity and is not covered u/s 2(15) of the Act and also not covered under the objective of the Trust. The Ld.AO found that Shri Adari Tulasi Rao Managing Trustee of the Trust in his sworn statement u/s 132(4) of the Act, recorded on 13.12.2016 admitted a sum of Rs.98 lakhs as business income for various assessment years from 2010-11 to 2016-17, as detailed in the assessment order. The Ld.AO considering the admission of the Managing Trustee concluded that the assessee has not disclosed the profit of Rs. 21,40,708/- as per the Profit & Loss Account, whereas the assessee has declared income on presumptive basis. The Ld. AO however has not disputed the gross income of the assessee. He therefore added an amount of Rs. 21,40,708/- to the returned income of the assessee. Further, the Ld.AO also observed
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam that the assessee has created provision for expenditure amounting to Rs.6,00,26,300/- to fulfil the criteria of 85% utilisation of receipts. The Ld. AO after examining the books of accounts found that the assessee has incurred expenditure to the extent of Rs. 1,89,26,698/- and therefore added an amount of Rs. 4,10,84,602/- to the returned income of the assessee. Considering the above disclosures by the assessee as concealment, the Ld.AO issued penalty notice u/s 271(1)(c) of the Act by levying penalty amounting to Rs.1,27,92,593/-.
Aggrieved by the order of the penalty u/s 271(1)(c) of the Act, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) considering the submissions made by the assessee concluded that the assessee has not deliberately concealed the income, but has only committed a mistake by claiming exemption, under the bonafide impression that it is exempt from tax and relying on the various judicial pronouncements allowed the appeal of the assessee.
Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before us by raising the following grounds :
“i. The Ld.CIT(A) erred in cancelling the penalty of Rs.1,27,92,593/- levied u/s 271(1)(c) of the I.T.Act, 1961 ignoring the fact that the income out of liquid booth does not M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam constitute a charitable purpose as defined in section 2(15) of the I.T.Act, 1961. ii. The Ld.CIT(A) erred in cancelling the penalty levied ignoring the fact that the assessee had made wrong provision in the ledger without incorporating any actual expenditure to fulfil the criteria of 85% of the funds utilization thus failing to comply with the provisions of section 11. iii. The Ld.CIT(A) ought to have followed the ratio of decision of the Hon’ble Supreme Court in the case of MAK Data Pvt. Ltd., Vs. Commissioner of Income Tax (Civil Appeal No.9772 of 2013), wherein, it was held that the statute does not recognize the defences such as surrendering of additional sums to avoid litigation. iv. Any other ground of appeal that may arise at the time of hearing.”
The Ld.DR argued that the assessee is engaged in the business activity by providing manpower supply to VVMPCL for collection of cash from the milk booths. The Ld.DR argued that admission by the Managing Trustee is consequent to the search and not voluntary and hence, levying of penalty is justifiable. He, therefore, pleaded that the order of the AO be sustained. The Ld.DR relied on the following case laws :
i. Hon’ble Supreme Court of India in the case of MAK Data (P.) Ltd. Vs. Commissioner of Income Tax-II, Civil Appeal No.9772 of 2013, 358 ITR 593(SC) II. Hon’ble Bombay High Court in the case of Dr.Nitin Laxmikant Lad Vs. Asst.Commissioner of Income Tax
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam
Per contra, the Ld.AR argued that prima facie, there is no concealment and referred to page No.24 of the paper book, wherein, the computation of total income is enclosed. The Ld.AR submitted that on perusal of the computation statement, the assessee has disclosed total receipts of Rs.40.41 crores and expenditure of Rs.40.59 crores which includes the provision of Rs. 6,00,26,300/-. He argued that even if the provision for Rs.4.10 crores (net of actual amount spent subsequently) is deducted from the actual expenditure incurred, net expenditure comes to Rs.36.49 crores, which is over and above 85% of the total receipts. He therefore pleaded that the addition made by the Ld.AO on account of non- consideration of the provision made in the books of accounts is not concealment of income or furnishing inaccurate particulars, but only the bonafide belief that the expenditure will be incurred in due course. The Ld.AR, further submitted that the assessee has also disclosed cash collection receipts for Rs.66,96,000/- and has admitted income u/s 44AD of the Act @8%, while filing the return of income of the assessee and hence there is no concealment or furnishing of inaccurate particulars of income. Further, the Ld.AR also submitted that there is no incriminating material based on which the admission was made. He, therefore, pleaded that the assessee has not concealed any particulars of income, but was M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam under bonafide belief of claiming exemption, which should not be the basis for levying penalty u/s 271(1)(c) of the Act. The assessee also referred to Explanation 5A to section 271 of the Act. The Ld.AR, further submitted that the case law relied upon by the Ld.DR and the ratio laid down by the Hon’ble Supreme Court in MAK Data (P.) Ltd. Vs. Commissioner of Income Tax-II is distinguishable on the fact that the penalty levied in the instant case was on account of incriminating material impounded during the search. However, in the instant case, there is no such incriminating material, which leads to concealment of income by the assessee. Further, the Ld.AR also submitted that in the case of Dr. Nitin Laxmikant Lad Vs. ACIT, the ratio laid down by the Hon’ble Bombay High Court is distinguishable on the fact that penalty was levied based on the incriminating documents impounded during the course of search and seizure, wherein, the assessee has unrecorded receipts and expenses and investments in various financial years. Therefore, this case relied on by the Ld.DR cannot be applied to the instant case, where the assessee has disclosed receipts and payments while filing the return of income.
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam
We have heard both the sides and perused the material available on record. It is an admitted fact that the additional income of Rs.4.32 crores was added by the Ld.AO based on the admission made by the Managing Trustee, while recording statement u/s 132(4) of the Act. From the submissions of the Ld.AR, we find that the assessee in it’s computation statement, the assessee has disclosed the receipts and expenditure, but, while claiming expenditure, the assessee has made a provision of Rs.6,00,26,300/- in order to fulfil the 85% criteria, specified in section 11(1) of the Act. Further the assessee has made payment of Rs.1,89,36,698/- out of the total Rs.6,00,26,300/-, but has reversed the provision of Rs.4,10,89,602/- in the subsequent year without incurring actual expenditure. There is merit in the argument of the Ld.AR that even if the amount of Rs. 4,10,89,602/- is considered as not spent the Trust has fulfilled the obligation of incurring 85% of total receipts towards charity, amounting to Rs. 36.49 Crs, which is not disputed by the revenue authorities. Further, it is also found that the assessee has disclosed the cash collection receipts as business income, but has offered into tax by invoking the provisions of section 44AD of the Act under presumptive taxation scheme. During the search and seizure, it was found that the actual profit for the impugned assessment year, from it’s business
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam operations amounted to Rs.26,76,396/-. However, there is no restriction to the assessee to offer the income U/s. 44AD of the Ac t on presumptive basis. We also find that the Ld. AO has not disputed the gross collections nor found any incriminating material for concealment of income. Accordingly, the assessee has offered an amount of Rs.5,35,688/- under the presumptive taxation. The Ld.AO proposed to tax the balance of Rs.21,40,708/-, which the Managing Trustee, accepted to offer the same to tax, while recording statement u/s 132(4) of the Act. From the above, discussions, we find that the assessee has disclosed the entire cash receipts and the business receipts, while filing the return of income, but has claimed exemption on the above income based on the provision for expenses. The Ld AR’s argument that even if the provision is excluded the trust has fulfilled 85% complying with section 11(1) of the Act was also not disputed by the Ld. AO. We have examined the above fact and are of the view that the trust has complied with section 11(1) of the Act. Further, in the case relied on by the Ld.AR, Hon’ble High Court of Andhra Pradesh in CIT Vs. M/s Shakthi Industries (supra) held as under :
The readiness on the part of the assessee to accept the facts and figures noticed in the survey, with the objective of avoiding further complication in the matter or to purchase peace, cannot be treated as unconditional
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam acceptance of the allegation or accusation against him much less does it basis for levy of penalty. If every variation that is noticed in the course of assessment is to be treated as concealment, the very computation of the income tax and the exercise to be undertaken there under, undergoes substantial change, which the Parliament may not have intended. At any rate, the Commissioner was convinced on the facts that there was no act on the part of the respondent. It is only when the conclusions at the level of the Commissioner who happens to be the last authority on the facts are shown to be perverse or without any basis, that an occasion would arise for the Tribunal or for that matter, this Court to interfere with the same.
Respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in CIT Vs. M/s Shakthi Industries (supra), we are of the view that mere admission of the additional income in the statement recorded U/s. 132(4) of the Act cannot be considered as concealment in the absence of any incriminating material disclosing such concealment of income. The case laws relied upon by the Ld.DR is of no help to the revenue and distinguishable on facts. We, therefore, find no infirmity in the order of the Ld.CIT(A) and thereby dismiss the grounds raised by the revenue.
In the result, appeal of the revenue is dismissed.
M/s Milk Producers & Employees Educational Health and Medical Welfare Trust., Visakhapatnam
Order pronounced in the open court on 20th June, 2024.
Sd/- Sd/- (दुव्वूरु आर.एल रेड्डी) (एस बालाकृष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 20.06.2024 L.Rama, SPS आदेश की प्रतिलिपि अग्रेपिि/Copy of the order forwarded to:- 1 निर्धाररती/ The Assessee – M/s Milk Producers & Employees Educational Health and Medical Welfare Trust, D.No.32-11-1, Krishi Building, Nathayyapalem, Visakhapatnam 2.रधजस्व/The Revenue – The Dy.Commissioner of Income Tax, Central Circle-2, Visakhapatnam 3. The Principal Commissioner of Income Tax, Visakhapatnam 4. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 5..गधर्ा फ़धईल / Guard file आदेशधिुसधर / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam