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IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 1345/Hyd/2015 Assessment Year: 2009-10 Income-tax Officer, Ward – 15(4), Hyderabad.

Pericherla Shiva Kumar Raju, Hyderabad. PAN – AEWPP 0982J (Respondent)

vs.

(Appellant )

Revenue by : Revenue by : Date of hearing Date of pronouncement

:

Shri K.J. Rao Shri P. Rama Krishna 21-12-2016 30-12-2016

O RDE R PER S. RIFAUR RAHMAN, A.M.: This appeal filed by the Revenue is directed against the order of CIT(A) - 7, Hyderabad dated 11/09/2015 for AY 2009-10. 2.

Briefly the facts of the case are that the assessee is an

individual deriving income from consultancy on sale and purchase of lands. The assessee filed his return of income for the assessment year 2009-10 on 12.01.2010 by admitting total income of Rs.29,705/and the agricultural income of Rs.10,86,000/- which

the assessee

claimed as exempt income. This case has been selected for scrutiny under 'CASS', to examine the claim of large exempted income i.e. agricultural income in the returns of income filed by the assessee.

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2 ITA No. 1345/H/15 Pericherla Shiva Kumar Raju

2.1

During the course of scrutiny proceedings, it was found that the

assessee has shown unsecured loans to the tune of Rs.40,60,000/for the financial year relevant to the A. Y2009-10. During the Course of assessment proceedings the assessee was asked to submit the details of the said unsecured loans and was asked to prove the genuineness of the transactions in terms of identity, creditworthiness and genuineness of the loan creditors.

As the assessee could not

prove the credit worthiness of the creditors and also could not discharge the onus cast on him, the assessment was completed u/s.143(3) by making additions to the returned income under the head unexplained cash of Rs.40,60,000/-. On appeal, both the CIT(A) and ITAT have confirmed the addition made by the AO. 3.

Thereafter,

the

AO

initiated

271(1)(c) on the ground that

the

penalty

proceedings

u/s

the assessee has concealed true and

correct particulars of income. Accordingly, the AO issued notice u/s 271(1)(c) to show cause as to why penalty u/s 271(1)(c) should not be levied for concealment of income in the return. In reply, the assessee stated that he has proved with evidence the genuineness of the creditors and also the fact that they had lent moneys. The assessee relying on the decisions of Hon’ble Supreme Court in the case of Sudarshan silks & Sarees Vs. CIT, Karnataka [2008] 300 ITR 205 (SC) and CIT Vs. Reliance Petrochemicals [2010] 322 ITR 158 (SC), submitted that mere assessment of an income does not mean that penalty can be imposed. 3.1

The AO rejected the submissions of the assessee,

levied the

minimum penalty of Rs. 13,20,851/- relying on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Atul Mohan Bindal [2009] 317 ITR 001 (SC). 4.

Aggrieved by the penalty order, the assessee preferred an

appeal before the CIT(A) and contended that the penalty is not

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3 ITA No. 1345/H/15 Pericherla Shiva Kumar Raju

leviable as the assessee had furnished confirmation, produced creditors before the AO and further submitted that the levy of penalty needs affirmative findings as to ‘concealment’ not just being satisfied with creditworthiness/genuineness of the transactions.

The elaborate

submissions of the assessee were extracted by the CIT(A) at pages 4 to 8 of his order. 5.

After considering the submissions of the assessee, the CIT(A)

deleted the penalty levied by the AO by observing as under: “6. The factual Position emanating the assessment order, the penalty order under appeal and the submissions of the appellant are considered. It is seen from the assessment order and the material placed before me that the appellant has given names and addresses of all the alleged creditors, filed confirmation letters duly signed by them, produced the creditors before Assessing Officer for examination and all of them accepted that they have advanced loans to the appellant. The Assessing Officer confronted the appellant with the inadequacies in their statement and after considering the reply of appellant held that the creditors are not proved in as much as the credit worthiness and the genuineness of the transactions are remain unproved. 6.1 The penalty proceedings are separate and distinct from the assessment proceedings, while addition u/s 68 is justified, the same does not lead to levy of penalty automatically. To levy penalty the Assessing Officer has to go beyond non-acceptance of appellant's explanation to levy penalty. In the present case, the appellant could not substantiate the credit worthiness and genuineness of transactions through any further evidence, after the Assessing Officer expressed serious doubts about the creditors after recording their statements. The Assessing Officer gave instances of inconsistencies in the statement of creditors. But the question is Whether the facts on record are sufficient for levy of penalty. The appellant has given Complete details and produced creditors before the Assessing Officer Who accepted that they gave loans to the appellant and the Assessing Officer has examined the creditors. It can be said that the Assessing Officer has not disproved the version of the appellant but unproved leading to the addition. Relying on the ratio laid down by Gujarat High Court in case reported at 245 ITR 125 and in case of Dhirubhai Gajera vs ITO in ITA No.1147/Ahd/2009, it is held that this is not a fit case for levy of penalty. Accordingly, the penalty levied is set aside.”

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4 ITA No. 1345/H/15 Pericherla Shiva Kumar Raju

6.

Aggrieved by the order of the CIT(A), the revenue is in appeal

before us raising the following grounds of appeal: 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty of Rs.13,20,851/- imposed on the assessee u/s 271(1)(c) of the I.T.Act,1961 on the addition made under the head "unexplained cash" without appreciating the fact that the AO had brought on record material evidence to prove that the unsecured loans shown by the assessee in the Balance Sheet for the year ended 31.03.2009 are not genuine. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty of Rs.13,20,851/- imposed on the assessee u/s 271(1)(c) of the I.T.Act,1961 on the addition made under the head "unexplained cash" without appreciating the fact that the assessee miserably failed in proving the genuineness of the transactions and creditworthiness of the loan creditors during the assessment proceedings as well as during the penalty proceedings by producing any clinching evidence.” 7.

Ld. DR submitted that the assessee has not proved the

creditworthiness of the creditors and AO has rightly imposed penalty. He relied on the decision of Hon’ble Supreme Court in the case of Mak Data P. Ltd., 358 ITR 593. 8.

Ld. AR submitted that

the AO has brought on record all the

details relating to loan creditors and assessee has brought all those creditors before the AO. The creditors were also confirmed before the AO that they have lent money to the assessee. He, therefore, submitted that there is no concealment of income and relied on the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., [2010] 233 ITR 158. 9.

Considered the rival submissions and perused the material facts

on record. The assessee has brought on record the details of loan creditors and during the assessment proceedings produced before the AO all the creditors, even the creditors have confirmed the amount lent to the assessee. Subsequently, AO has brought on record that the

creditworthiness

of

the

creditors

are

not

genuine,

it

is

questionable. The AO levied the penalty and justified his action by

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5 ITA No. 1345/H/15 Pericherla Shiva Kumar Raju

giving findings in the assessment order. In our view, the assessee all along declared the details of the loan and creditors in the return and produced the creditors before the AO. The Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) laid down a ratio that there has to be concealment of particulars of the income of the assessee

and

the

assessee

must

have

furnished

inaccurate

particulars of his income. The meaning of the word ‘particulars’ used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate,

the

assessee

cannot

be

held

guilty

of

furnishing

inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot b e invoked. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question inviting penalty u/s 271(1)(c). In the given case, the assessee has furnished all the details and found to be correct. Only the creditworthiness of the creditors was not proved. As far as the particulars are concerned, all the details are fully

furnished

and

also

the

creditors

have

submitted

their

confirmation. Hence, in our view, there is no concealment of any particulars

of

income

in

the

return.

AO

had

found

that

the

creditworthiness of the creditors are not genuine, it may be a good case to make addition u/s 68, but, cannot be a case for levying penalty as all the particulars of income and details of loan are fully disclosed in the return of income. Therefore, this is not a fit case to levy penalty u/s 271(1)(c) of the Act and the CIT(A) is justified in deleting the penalty levied by the AO u/s 271(1)(c). Accordingly, we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue.

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6 ITA No. 1345/H/15 Pericherla Shiva Kumar Raju

10.

In the result, appeal of the revenue is dismissed. Pronounced in the open court on 30 th December, 2016.

Sd/(P. MADHAVI DEVI) JUDICIAL MEMBER

Sd/(S. RIFAUR RAHMAN) ACCOUNTANT MEMBER

Hyderabad, Dated: 30 th December, 2016 kv Copy to:1) ITO, Ward – 15(4), B-Block, 1 st floor, IT Towers, AC Guards, Hyderabad. 2) Shri Pericherla Shiva Kumar Raju, H. No. 4-37/1, Near Uppal Bus Depot, Hyderabad, RR Dist. 3) CIT(A) – 7, Hyderabad 4 Pr. CIT – 7, Hyderabad 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File