IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. No. 551/HYD/2016 Assessment Year: 2005-06 K. Hemalatha, Asst. Commissioner of HYDERABAD Vs Income Tax, [PAN: AQLPK6573D] Central Circle-2, HYDERABAD (Appellant) (Respondent) For Assessee : Shri P.V.S.S. Prasad, AR For Revenue : Shri K.J. Rao, DR Date of Hearing : 01-09-2016 Date of Pronouncement : 05-10-2016 ORDER PER B. RAMAKOTAIAH, A.M. : This is appeal by assessee against order of Ld.Commissioner of Income Tax (Appeals)-9, Hyderabad dated 29-02-2016, confirming penalty of Rs. 1,77,473/- u/s. 271(1)(c) of Income Tax Act [Act]. 2. Briefly stated facts as mentioned in order of CIT(A) are as under: "1.0 appellant Smt K. Hemalatha is individual. search operation was conducted on appellant's son-in-law Shri K. Srinivasa Rao at his residence situated at Plot No.1219 Road No 36, jubilee Hills, Hyderabad on 09-10-2007. Consequent to search operation notice under sec.153C dated 26-06-2008 was issued for AY 2005-06 to appellant. Appellant filed her return of income on 01-08-2008 by admitting total income of Rs 89,310/- and agricultural income of Rs 1,26,500/-. Learned DCIT, central circle -2, Hyderabad (AO) issued notice under Sec I.T.A. No. 551/Hyd/2016 :- 2 -: K. Hemalatha 143(2) and Sec 142(1) dated 06-04-2009 and conducted scrutiny proceeding calling for information and details from time to time. Appellant submitted details called from time to time before learned AO. 1.1 learned AO questioned appellant as to source of opening balance of her capital account amounting to Rs 22,94,430/-. Appellant explained that out of said amount of Rs. 11,00,000/- pertain to sale proceeds of house sold at Kovvuru, Andhra Pradesh which as declared in accounting year relevant to A.Y. 2004-05. In respect of balance amount of Rs 11,94,000/-, it was explained that it was accumulation of agricultural income, terminal benefits received on demise of appellant's husband Shri Kesava Rao and other miscellaneous income. Such valid explanation has been rejected by learned AO and added said amount of Rs 11,94,000/- as unexplained cash credit under sec.68 of Act. 1.2 Aggrieved by addition of Rs 11,94,000/- made by learned AO, assessee went on appeal against order of Ld AO before CIT(A). 1.3 Learned CIT(A) in his order gave relief for amount of Rs 3,53,000/- out of addition of Rs 11,94,000/- and confirmed addition for balance of amount of Rs 8,40,500/-. 2. Aggrieved by confirmation of addition of Rs 8,40,500/- assessee has come on appeal before Hon'ble Tribunal. 3. Hon'ble Tribunal vide its order dt 16-11-2011 gave further relief of Rs 2,10,000/- and confirmed balance addition of Rs 6,30,500/-. 4. As part of addition of Rs 6,30,500/- as mentioned above was confirmed by appellate authority assessee received notice u/s 274 read with section 271 (1)(c) dated 09-02-2012. 5. assessee vide her letter dated 22-02-2012 stated that even though Hon'ble Tribunal sustained addition of Rs 6,30,500/- fact is that there is no concealment of income. agricultural income earned year after year had been accumulated in her capital account over period of 12 years and sale proceeds of house at Kovvuru were also credited to capital account. She was unable to produce proof of agricultural income though it was really earned. Hence there is no concealment of income. 6. Ld AO ought to have appreciated that even in absence of returns of income prior to assessment years 2002-03 appellant would have made savings over her life time from agricultural income etc. which would have contributed to her capital balance as on 1-4-2004. I.T.A. No. 551/Hyd/2016 :- 3 -: K. Hemalatha 7. Appellant did not have any income other than agricultural income prior to AY 2002-03. Hence there was no requirement to file return of income for years prior to AY 2002-03. 8. In response to notice assessee filed reply dated 22-02-2012 wherein above facts were stated that levy of penalty is not automatic when addition is made and cited various case laws wherein penalty was not levied. 3. Ld. CIT(A) confirmed penalty stating as under: 4.1 I have carefully considered penalty order, submissions of assessee and facts of case. only issue involved is this case is levy of penalty u/s. 271(1)(c) of IT. Act of Rs. 1,77,473/- for A.Y. 2005-06. brief facts of case are while completing assessment for A.Y. 2005-06 u/s 143(3) r.w.s. 153C of I.T. Act on 24.12.2009, Assessing Officer made addition of Rs. 11,94,000/- as unexplained credit, as assessee failed to adduce any evidence in support of her contentions that this amount of Rs. 11,94,000/- represents her accumulated savings. On appeal, CIT (Appeals) has given relief to extent of Rs. 3,53,500/- and confirmed remaining addition of Rs. 8,40,500/-. On further appeal, Hon'ble ITAT gave further relief of Rs 2,10,000 and confirmed balance of Rs 6,30,500/-. Therefore, penalty u/s 271(1)(c) was levied by Assessing Officer in respect of income of Rs. 6,30,500/- by relying on explanation 1(A) to sec. 271(1)(c). 4.2 During course of appellate proceedings assessee contended even though Hon'ble ITAT sustained addition of Rs. 6,30,500/-, there is no concealment of Income as assessee had accumulated agricultural income over period of 12 years along with sale proceeds of house at Kovuru, and further submitted that she is unable to produce proof of same. assessee relied on following case laws in support of in her contention. 1. Jasbir Singh Saini Vs. Income Tax Officer [2015] 61 Taxmann. Com 230 (Chandigarh- Tribe.). 2. Kanbay Software India (p) Ltd Vs. DCIT Pune [2009] 131 SOT 153 (Pune). 3. DCIT Vs. Koatex Infrastructure Ltd [2006] 100 ITD 510(Mum.). 4. DCIT Vs Saraya Industries [2007]14 SOT 55 (Delhi) (URO). I.T.A. No. 551/Hyd/2016 :- 4 -: K. Hemalatha 4.3 However, assessee's contentions are not acceptable as assessee has not explained properly sources for said accumulated savings. After verifying facts and contentions of assessee, Hon'ble ITAT Hyderabad confirmed addition of Rs. 6,30,500/-. Even during appellate proceedings, assessee submitted that she is unable to produce any proof of same. Therefore, in absence of any documentary evidence, assessee's claim cannot be accepted. As rightly stated by Assessing Officer, assessee is very much hit by explanation 1(A) to sec. 271 (1)(C) of IT Act which clearly stipulates that when person fails to offer explanation or offers explanation which is found to be false, then such income shall be deemed to be concealed income. Therefore, as assessee has failed to substantiate her claim with respect to amount of Rs.6,30,500/-, same being confirmed by Hon'ble ITAT, assessee can be said to have concealed particulars of income to that extent. Moreover, facts of case laws as relied upon by assessee are different from facts of instant case and hence cannot come to her rescue. Further, I place reliance on following case laws: (i) Loknath Chowdhary Vs. CIT (Cal) 155 ITR 29. (ii) Rahmat Devft & Engineering Corporation Vs. CIT (Cal) 130 ITR 602. (iii) CIT Vs. Rattam Singh Grewal (P&H) 304 ITR 75. (iv) Charndatt H. Danget Vs. Income Tax Officer (ITAT, Mumbai) 126 ITO 483. In above cases, it was held that unexplained investment is deemed to be income for purpose of levying penalty if no satisfactory explanation is offered and penalty is leviable. These decisions are applicable in assessee's case as he has not furnished satisfactory explanation either during assessment proceedings or appellate proceedings. 4.4 In view of above mentioned facts and circumstances, I am of considered opinion that Assessing Officer has rightly levied penalty u/s 271(1)(C) of IT Act and therefore, penalty levied of Rs. 1,77,473 is hereby upheld . 4. Ld. Counsel submitted that addition was opening balance of capital of assessee and filed details of assets held by assessee at beginning of Block period as under: I.T.A. No. 551/Hyd/2016 :- 5 -: K. Hemalatha S.No Date of Name of Survey No. Area in Purchase Acquisition Asset Ac. Value Guntas 1 Before 99 Pooppalaguda 294(294/2) 5Ac 56,000.00 2 19-Jan-99 Vattingulpally 213 15 25,251.00 Guntas 3 03-Mar-99 Nanakram 95/AA/P 3 Ac 24 2,12,621.00 guda Guntas 4 16-Jun-99 Vattingulpally 225/P 10Ac 3,56,771.00 5 26-Jun-99 Nanakram 95/ 1 Ac 2,23,271.00 guda A/P 6 12-Nov-99 Yellareddygud 44 & 45 Flat 4,26,721.00 da 7 21-Jun-00 Vattingulpally 173 8 Ac 6 4,54,636.00 Guntas 8 25-Sep-00 Manikonda 124 14 39,471.00 Guntas 9 15-Mar-04 Vattingulpally 203 & 204 21 1,11,600.00 Guntas 10 29-Mar-04 Vattingulpally 213(part) 19 46,485.00 Guntas TOTAL 19,52,827.00 List of Current Assets S.No Date Name of Amount (Rs) Remarks Asset 1 Cash in Hand 1,06,839.00 2 Bank Account 72,568.86 3 FD with P.O. 2,50,000.00 Date of (13447) deposit: As at 31-03- 12.08.2003 4 2004 FD with P.O. 40,000.00 Date of (13459) deposit: 12.08.2003 4.1. It was contended that assets are acquired much earlier including current assets and it was unfortunate that same amount got confirmed in appeal. He referred to relief given by Ld. CIT(A) and ITAT and submitted that addition in assessment does not lead to penalty as concealment of income . 5. Ld. DR however, relied on orders of AO and Ld. CIT(A) to contend that penalty u/s. 271(1)(c) is attracted on facts of case. I.T.A. No. 551/Hyd/2016 :- 6 -: K. Hemalatha 6. We have considered rival contentions and perused orders including appeals in quantum proceedings. There is no dispute that assessee has shown opening balance of Rs. 22,94,430/-, which is value of various assets acquired much earlier. These include Fixed Assets of Rs. 19,52,827/- and balance Current Assets. Even though, AO made addition of entire amount, assessee got substantial relief and only Rs. 6,30,000/- confirmed by ITAT in appeal. However, fact that these assets were acquired in earlier years were not noticed. Whatever may be reason for confirming part of amount in assessment, same does not automatically lead of levy of penalty u/s. 271(1)(c). Assessee can question addition itself in penalty proceedings so as to justify non-levy of penalty. Considering fact that these assets are acquired much earlier and assessee has shown them as opening balance only, in our opinion mere addition of part of amount does not attract penalty for concealment. Considering these facts of case penalty u/s. 271(1)(c) is not warranted. Accordingly, same is set aside. 7. In result, appeal of assessee is allowed. Order pronounced in open Court on 05th October, 2016 Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 05th October, 2016 TNMM I.T.A. No. 551/Hyd/2016 :- 7 -: K. Hemalatha Copy to : 1. K. Hemalatha, Hyderabad. C/o. Prasad & Prasad Chartered Accountants, Flat No. 301, MJ Towers, 8-2-698, Road No. 12, Banjara Hills, Hyderabad. 2. Asst. Commissioner of Income Tax, Central Circle-2, Hyderabad. 3. CIT (Appeals)-9, Hyderabad. 4. Pr.CIT-6, Hyderabad. 5. D.R. ITAT, Hyderabad. 6. Guard File. K. Hemalatha v. Asst. Commissioner of Income Tax, Central Circle-2, HYDERABAD