THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, , VISKAHAPATNAM vs. SRI VIJAYA VISAKHA MILK PRODUCERS COMPANY LIMITED,, VISAKHAPATNAM

आदेश /O R D E R Per Shri S.Balakrishnan Accountant Member : Condonation of Delay : These appeals are filed by the revenue against the orders of Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam vide Appeal No.116/2019-20/CIT(A)-3/VSP/2020-21 dated 07.10.2020 and 117/2019-20/CIT(A)-3/VSP/2020-21 dated 14.08.2020 arising out of orders passed u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Years (A.Y.) 2012-13 and 2013-14 respectively, with the delay of 9 days. The revenue filed petition for condonation of delay and submitted that the appeals against the orders of the Ld.CIT(A) dated 14.08.2020 received by the revenue authorities on 24.09.2020, which ought to have been filed before the Tribunal on or before 23.11.2020, but the revenue could file the appeals with the delay of 9 days due to the fact that the regular assessing officer was on long leave on health grounds and the work was handled by an incharge officer, in addition to his own. The revenue submitted that the delay occurred was due to unforeseen circumstances beyond the control of the revenue, which was neither intentional nor deliberate and therefore pleaded to condone the delay and admit the appeals for hearing in the interest of justice.

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We have gone through the condonation petition filed and find that there is a valid and sufficient cause for the revenue to file the appeals belatedly. We therefore, condone the delay and admit the appeals for hearing in the interest of justice. Since the grounds raised in all the appeals are identical in nature, these appeals are clubbed, heard together and a common order is being disposed of for the sake of convenience as under. Facts are extracted from I.T.A.No.237/Viz/2020, A.Y.2013-14. 2. Brief facts of the case are that the assessee is a milk producer, having income from production of dairy and related products, filed it’s return of income for the A.Y.2013-14 on 29.09.2013, admitting total income of Rs.2,00,41,050/-. Subsequently, the case was taken up for scrutiny and assessment u/s 143(3) of the Act was completed on 05.03.2015, assessing the income of the assessee at Rs.4,38,01,590/-. Subsequently, search & seizure operation u/s 132 of the Act was conducted in the assessee’s case on 25.10.2016 and also at the residence of it’s Director. During the course of search, it has been found that the assessee concern was selling its processed milk to a firm M/s Visakha Milk Products and a company, M/s Visakha Milk Products (I) Private Limited. It was found that both the concerns are related to the Chairman, Shri Adari Tulasi Rao. It was further found that the assessee company

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was selling the milk and milk products to these two concerns at lower rates when compared to others. It was also found that from F.Y.2013-14, the assessee started supplying milk through a firm M/s Siridi Sai Agencies, in which the Managing Parter, Shri Lalam Arjuna Rao is a close aide to Shri AdariTulasi Rao, the Chairman of the assessee company. A sworn statement u/s 131(1A) of the Act was recorded from Shri Lalam Arjuna Rao, Managing Partner of Shri Siridi Sai Agencies on 31.10.2016, who stated that Shri Siridi Sai Agencies is an intermediary agency, supplying milk in bulk milk tankers to M/s Visakha Milk Products Private Ltd. He further stated that he was not aware of the fixation of the prices by M/s Sri Vijaya Visakha Milk Producers Company Ltd. It was also found that during the scrutiny proceedings u/s 143(2) in the case of Siridi Sai Agency, it could not produce evidence with regard to claim of expenditure. Thereafter, the Ld.AO concluded that M/s Siridi Sai Agency is a dummy agency. Further, from the seized material, Annexure A/VD/VSP/01, seized in the business premises of M/s Sri Vijaya Visakha Milk Producers Ltd, it was observed that the assessee company supplied milk to M/s Glaxo SmithKline Consumer Healthcare Ltd., Rajahmundryfrom 01.07.2015 onwards with higher rates as follows :

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(a) Milk fat Rs.280/- per kg.

(b) Milk SNF Rs.205/- per kg.

Similarly, it was found that the milk supplied to M/s Siridi Sai Agencies, Visakhapatnam as follows :

HTM with 3.3% fat and 9.18% SNF per litre Rsd.22.50 ps and HDTM milk with 1.7% fat and 9.09% SNF per litre Rs.21.50 ps ex-factory, Visakhapatnam.

Based on the above evidence, Shri Saragadam Venkata Ramana, Managing Director of the assessee company, during the statement recorded u/s 132(4) of the Act on 09.12.2016, admitted the fact of selling milk at lower rate to M/s Visakha Milk Products (I) Private Ltd. In the statement recorded u/s 132(4) of the Act, the Managing Director admitted that he is voluntarily offering income to the tune of Rs.19 crores for the A.Y.2017-18. Subsequently, the case was centralized vide proceedings of Pr.CIT-2, Visakhapatnam in F.No.CIT-2/VSP/127/2016-17 dt.20.03.2017. Subsequently, notice u/s 153A of the Act was issued to the assessee company on 22.06.2017 and served on the assessee on 30.06.2017. In response thereto, the assessee filed its return of income for the A.Y.2013-14 on 12.07.2017, admitting total income at

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Rs.4,34,72,171/-, which included the additional income of Rs.2,34,31,124/- admitted by the Managing Director of the company during the search proceedings. After considering the information and submissions made by the assessee, the Ld.AO completed the assessment on28.12.2018 u/s 143(3) r.w.s. 153A of the Act by accepting the income returned. Subsequently, the Ld.AO initiated penalty proceedings u/s 271(1)(c) of the Act. The Ld.AO issued notice to the assessee on 11.06.2019, asking the assessee to submit it’s explanation. In response, the assessee has made elaborated submissions before the Ld.AO. On verification of the submissions, the Ld.AO observed that the assessee has failed to explain satisfactorily, the reasons for offering lower sale prices to some of the chosen entities, which are closely associated with the assessee company. He, therefore, concluded that disclosure of additional income on this count cannot be said to be voluntary, as it is based on the seized material. Therefore, the AO proceeded to levy the penalty of Rs.76,02,230/- u/s 271(1)(c) of the Act.

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precedents, as detailed in his order, allowed the appeal of the assessee, thereby deleting the penalty u/s 271(1)(c) of the Act.

(i) The Ld.CIT(A) erred in deleting the penalty of Rs.76,02,230/- levied u/s 271(1)(c) of the I.T.Act, 1961 by ignoring the fact that the assessee has sold the milk at lesser price to the associate concerns as compared to un-related parties. (ii) The Ld.CIT(A) erred in deleting the penalty levied by the A.O.ignoring the statement recorded u/s 132(4) from Sri S.V.Ramana, Managing Director of assessee company on 09.12.2016 and letter dated 01.02.2017 wherein he has admitted differential price of Rs.4 per litre as additional income against the supply of milk to related parties. (iii) The Ld.CIT(A) erred in deleting the penalty by stating that concealment of particulars of income is not established in the case. (iv) Any other ground of appeal that may arise at the time of hearing. 5. The Ld.DR argued that the assessee is unable to properly explain the discrepancies and voluntarily offered the undisclosed income to the tune of Rs.19 crores for the A.Y. 2010-11 to 2017-18. The Ld.DR through written submissions, reiterated that based on the statement recorded by Sri Saragadam Venkata Ramana, Managing Director of the assessee company u/s 132(4) of the Act and also based on the seized material,

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since there is concealment of income, levy of penalty by the Ld.AO is justified. 6. Per contra, the Ld.AR argued that the assessee accepted voluntarily, the amount of Rs.19 crores for the A.Y.2011-12 to 2017-18 only to buy peace with the department. Further, he also reiterated that there is differential price in supply of milk to various customers depends on the customers buying small and large quantities. He also submitted that the rates are fixed by the Board of the Company based on the demand and supply. Further, he also submitted that there was no contract between the assessee company and Glaxo SmithKline Health Care Limited during the impugned assessment years and reiterated that the material seized for the A.Y.2015-16 and 2016-17 cannot be used for the A.Y.2012-13 and 2013-14. The Ld.AR further submitted that the admission was uniform for all the years @Rs.4 per litre, which is in the nature of an estimate by the assessee. He further reiterated through his written submission that the AO accepted the admissions and concluded the assessment u/s 143(3) r.w.s. 153A of the Act, by accepting the income returned by the assessee filed u/s 153A of the Act. The Ld.AR further reiterated that the additional income surrendered by the assessee was treated as concealed income only on the basis of statement recorded during the search and

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seizure operations and the seized material was not sufficient to establish the concealment of income. The Ld.AR relied on the following cases : (i) Principal Commissioner of Income Tax Vs. Neeraj Jindal (2017) 393 ITR 0001 (Delhi) (ii) Commissioner of Income Tax Vs. Rajiv Garg & Ors (2009) 313 ITR 0256 (iii) Commissioner of Income Tax Vs. Aero Traders (P) Ltd. (2010) 322 ITR 0316 (iv) Hari Gopal Singh Vs. Commissioner of Income Tax (2002) 258 ITR 0085 (v) Principal Commissioner of Income Tax (Central) Vs. Shree Sai Developers (2019) 418 ITR 0306 (Guj) (vi) Deputy Commissioner of Income Tax Vs. Rajendra Agarwal (2019) 71 ITR (Trib) 0518 (Jaipur) (vii) Kirit Dahyabhai Patel Vs. Assistant Commissioner of Income Tax (2015) 121 DTR (Guj) 0337 (viii) Ramsons Castings Pvt.Ltd. Vs. Income Tax Officer (2017) 159 DTR 0306 (Bom) (ix) Order of Hon’ble High Court of Telangana in the case of M/s Shakthi Industries – ITTA No.66 of 2002. (x) Order of ITAT Visakhapatnam in the case of T.Satyanarayana in ITA No.679/Viz/2013 (xi) Order of ITAT Visakhapatnam in the case of M/s Baggu Sarojini Devi Hospitals in I.T.A.No.44 & 45/Viz/2016 (xii) Order of ITAT, New Delhi in the case of M/s OSE Infrastructure Ltd in ITA Nos. 5891 to 5895/Del/2016 (xiii) S.M.J.Housing Vs.Commissioner of Income Tax (2013) 357 ITR 0698 (Mad) The Ld.AR, therefore, pleaded that penalty u/s 271(1)(c) be deleted as there is no concealment, but it is only due to voluntary disclosure by the assessee. 7. We have heard both the parties and perused the material available on record including the written submissions filed by the Ld.AR and

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Ld.DR. It is the case of the Ld.AO that the assessee supplied milk to various parties at differential prices through partnership concern M/s Siridi Sai Agency, wherein, Managing Partner of the firm is close associate of the Managing Director of the assessee company. The Ld.AO made additions to the returned income based on the voluntary disclosure made by the assessee company, while recording it’s statement u/s 132(4) of the Act. Since the contract with Glaxo SmithKline Consumer Health Care Ltd. commenced from 01.07.2015, it cannot be used as an evidence for differential pricing for the earlier A.Ys 2012-13 and 2013-14, as the material seized has no bearing for those assessment years. Further, we also find that the milk purchased by M/s Visakha Milk Products and M/s Visakha Milk Products (I) Private Ltd is substantively high and consistent, when compared to the milk purchased by Glaxo SmithKline Consumer Healthcare Ltd. Further, pricing of milk also depends on the fat content and SNF content. It is also not disputed by the revenue that the assessee has suppressed the sales during the impugned assessment years. We find merit in the argument of the Ld.AR and the price charged for different concerns is a business decision of the assessee and it cannot be questioned by the revenue authorities. Further, we also find that the

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assessee admitted income while filing the return of income u/s 153A of the Act. Section 153A of the Act is reproduced below for reference :

153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 61[but on or before the 31st day of March, 2021], the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules62 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless— (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and

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(c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.—For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.

From the plain reading of the same, any return filed u/s 153A shall be deemed to have been filed as u/s 139 of the Act. Various judicial pronouncements have held that penalty can be levied only when there is difference between the admitted income and assessed income. In the instant case, the AO has accepted the income returned by the assessee filed u/s 153A of the Act and hence, there is no variation between the returned income and assessed income. Further, in the case relied on by

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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 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. Further, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Rajiv Garg & Ors (supra) held as follows :

Pursuant to the notice under s.148, the assessee filed the revised return of income showing higher income. The said return of income was accompanied by a note in which the assessee submitted that he surrendered the entire amount of sale proceeds of shares to buy peace of mind and to avoid hazards of litigation and also to save himself from any penal action. Later on, on the basis of revised return, the assessment was framed and the return submitted by the assessee was regularized as it is. During the course of assessment, the aforesaid explanation given by the assessee was neither rejected nor it was held to be malafide. The Tribunal has recorded a pure finding of fact to the effect that the Revenue has not placed on record any material or evidence to discharge its burden of proving concealment. In the assessment order, no

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such finding was recorded. The Department has simply rested its conclusion on the act of assessee of having offered additional income in the return filed in response to the notice issued under s.148. The Tribunal has further held that the additional income so offered by the assessee was done in good faith and to buy peace. Therefore, in view of the aforesaid finding, the Tribunal was justified in upholding the order of the CIT(A), whereby the penalty imposed under s.271(1)(c) by the AO was ordered to be deleted. In view of the aforesaid discussion, no substantial question of law is arising in this appeal. Further, the Hon’ble High Court of Delhi in the case of PCIT Vs. Neeraj Jindal (supra) held as follows :

This shows that Explanatnion-5 was specifically inserted to deal with the situation where higher income was disclosed in the return filed consequent to a search operation, and the assessee claimed that such addition of income did not imply that there was concealment. In other words, but for the insertion of Explanation-5, it would be open to the assessee to contend that additions made to his income in the return filed after the search operation were only to buy peace and did not tantamount to concealment. This also flows from the language of Explanation-5 itself, wherein, the words used by the Legislature are “be deemed to have concealed the particulars of his income”, which shows that there is a deeming fiction by virtue of which such additional income is considered as concealment. If such additions in the income in the return filed consequent to a search, were to automatically evidence concealment under Section 271(1)(c), there would be no need for Parliament to enact a deeming fiction in the form of Explanation-5, such a reading would render Explanation-5 otiose and without any purpose. This is also consonant with the view arrived at in the earlier part of this decision, i.e. mere increase of income in the return filed pursuant to Section 153A would not be sufficient to show concealment under Section 271(1)(c).

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Further, the coordinate Bench of Delhi in M/s OSE Infrastructure Ltd. vs. ACIT (supra) held as follows :

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Order pronounced in the open court on 28th May, 2024.

Sd/- Sd/- (एस बालाकृष्णन) (दुव्वूरुआर.एल रेड्डी) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 28.05.2024 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue–The Assistant Commissioner of Income Tax, Central Circle-2, Prathyakshakar Bhavan, Sector-8, MVP Double Road, Visakhapatnam 2. ननधधाऩरती/ The Assessee –M/s Sri Vijaya Visakha Milk Producers Company Limited, Visakha Diary, BHPV Post, NH-5, Nathayyapalem, Visakhapatnam 3. The Principal Commissioner of Income Tax, Visakhapatnam 4.नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 5..गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam