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TMI Blog2014 (12) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... eals of assessees, except the figures and date is as under: "1. The ld. CIT(A) having found as a matter of fact that the sum of Rs. 2,40,000 could not be added u/s 69 of the IT Act, 1961 erred in giving the following finding/direction which is not necessary for the disposal of the appeal and is therefore be deleted: i. The order of CIT(A) in giving a finding/direction that the allowance of expenditure as cost of acquisition development can be taken up as and when the lands are sold in a finding direction not necessary for the disposal of the appeal and therefore is to be deleted. ii. The direction of CIT(A) at paragraph 6.5 his order directing the appellant to file complete details of the expenses and supporting evidences to the notice of the appellate authority by 15th February, 2014 in a finding which is not necessary for the disposal of the appeal and therefore to be expunged." 4. Briefly the facts relating to the aforesaid issue, as taken from the folder ITA No. 485/Hyd/2014 are, assessee a company is engaged in carrying on agricultural and allied activities. It is one amongst number of companies established by Shri B. Ramalinga Raju, erstwhile chairman of Satyam Computers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally pointed out to him in no uncertain terms that the appellant was not in possession of records as they were seized by investigating agencies. This was also a fact that was in the knowledge of the assessing officer. The AO could have easily cross checked with the records of the creditors available with another assessing officer with another Central circle officer (DCIT, Central circle 1 Hyderabad.)" 6. Ld. CIT(A) being convinced with the submissions made by assessee, held that addition to the fixed assets representing development expenses could not be treated as unexplained as the same has flown from application of funds as appearing on the assets side of assessee's balance sheet. Ld. CIT(A) held that source of funds for making investments in addition to the fixed assets thus was duly explained and the same could not be treated as unexplained investment of assessee u/s 69 of the Act. Having held so, ld. CIT(A) proceeded further to hold that if the expenses were capitalized the allowability of the same has to be considered in the subsequent years when the land is sold. He, therefore, directed assessee to file the complete details of the relevant expenses with supporting evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural income as 'income from other sources' and disallowing an amount of Rs. 1,66,221 out of total expenditure of Rs. 1,76,221 from the expenditure claimed. 10. Briefly the facts relating to the aforesaid issue are, during the assessment proceeding, AO noticed that assessee has shown agricultural income of Rs. 6,63,125 and has claimed expenditure of Rs. 1,76,221. As alleged by AO in the assessment order, assessee did not file any evidence in support of income earned from agricultural activity, hence, entire income was treated as 'income from other sources'. Since AO disallowed assessee's claim of agricultural income, he also was of the view that expenditure claimed of Rs. 1,76,221 cannot be allowed to be set off in view of the provisions of section 56. Accordingly, while treating the amount of Rs. 6,63,125 as 'income from other sources', AO also made separate addition of Rs. 1,76,221 of the expenditure claimed by holding that it is not allowable u/s 37(1) of the Act. Being aggrieved of the additions made by AO, assessee preferred appeal before CIT(A). 11. Ld. CIT(A) after considering the submissions of assessee, did not find merit in them and confirmed the view of AO that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reason why it should be disallowed in the impugned AY. AO is directed to verify this aspect and decided the issue accordingly. While doing so, AO is also directed to examine assessee's claim of expenditure and if assessee is able to establish the same, then, allow it. This ground is allowed for statistical purposes. 15. In the result, ITA Nos. 485 & 564/Hyd/14 are allowed and ITA No. 486/Hyd/14 is partly allowed. ITA Nos. 715, 525 and 582/Hyd/2014 by Revenue 16. The only issue which is common in all the aforesaid appeals by the department is as under: "2. The learned CIT(A) erred in deciding the appeal of the assessee without according an opportunity to the AO for the verification of the fresh evidence produced before him during the appellate proceedings." 17. As discussed in hereinbefore while dealing with assessees claim of investments made in land in course of assessment proceeding, AO treated the land development expenses as unexplained investment of assessee u/s 69 of the Act. That apart, during the assessment proceeding, AO also while examining the balance sheet of assessee, found increase in unsecured loans. Alleging that assessee has not furnished any evidence to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As book profit u/s 115JB was more than regular income, the same was adopted for tax purposes and tax payable was computed by different assessees are as under: Book profit Self assessment tax Nallamalla Agro Farms (P) Ltd. 20,46,76,320 2,31,89,827 Chitravati Agro Farms (P) Ltd. 15,30,71,372 1,73,42,987 Parbati Agro Farms Pvt. Ltd. 20,43,20,574 2,82,53,990 Gomati Agro Farms Pvt. Ltd. 24,41,41,876 2,76,61,267 Kanchanjunga Green Lands 6,74,10,871 76,37,652 However, it was noticed that neither assessees paid any advance tax during the year nor even while filing the returns of income any self assessment tax was paid. Returns filed by assessees were processed u/s 143(1) by accepting the book profit u/s 115JB and tax payable as computed by assessees. Because of failure on the part of assessees in paying advance tax, interest u/s 234B and 234C was also levied. Even after service of assessment orders along with demand notices, since assessee failed to pay the admitted tax along with interest, AO issued a notice u/s 221(1) of the Act for imposition of penalty. AO noted that, even during the scrutiny assessment proceeding when the director of the company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of hearing of appeal, before ld. CIT(A), assessee made the following submissions: a) The transaction covered in this case is not a sale. The appellant had transferred land (28.10 acres of land) to sister concerns (subsidiary companies, which are the group companies) and as these were agricultural lands and the transfer was to a subsidiary company, the very taxability of the transaction in terms of section 47(iv) was doubtful. b) The demand arose only because of the crediting of the sale proceeds to P&L A/c and because of the applicability of provisions of section 115JB to a corporate entity. (c) The AO listed out various deposits and bank balances but failed to mention that there was no balance in the bank subsequent to 08.03.2008. Funds were not available at the time of filing of return. (d) Neither the subsidiary company nor the holding company had any funds on the date on which advance tax was to be paid and I on the dates of filing of ROI. As per the statutory obligation ROI was filed on 30.09.08 with its liability to file u/s 115JB of the LT.Act. or under intimation u/s 143(1). (e) The return was processed u/s 143(1) on 27.0S.2009 and the problems for the flag ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of year, assessees were having 'nil' balance. It was submitted, therefore, on the date of filing of return on 30/09/08, assessee could not discharge the tax liability. Ld. AR submitted that however subsequently assessees have discharged the admitted tax liability along with interest charged u/s 234B and 234C. 26. Ld. AR submitted that due to the subsequent events like fraud committed and with the affairs of M/s Satyam Computers Services Ltd. and consequential actions which followed with attachment of bank accounts, freezing of properties, assessee could not discharge the tax liability. Thus, it was submitted as there was a reasonable cause for not paying self assessment tax penalty should not have been levied. Ld. AR submitted that penalty u/s 221(1) is not automatic. AO has been given discretion in imposing penalty. Therefore, in an appropriate case where there is reasonable cause for the assessee in not paying self assessment tax, penalty cannot be imposed. In support of such contention, ld. AR relied on the following decisions. 1. CIT Vs. Sravana Textiles, 137 ITR 369 (AP) 2. CIT Vs. Free Wheels, 137 ITR 378 (Del.) 3. CIT Vs. Wesman, 104 ITR 605 (Cal.) 4. Bhauram V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid provision, it becomes clear that imposition of penalty u/s 221(1) is not automatic or mandatory. AO has been given discretion to impose penalty in an appropriate case whereas assessee has also been given an opportunity to satisfy AO that there is good and sufficient reasons for default in making payment. 30. Keeping in view the aforesaid statutory provision, let us examine the facts of the present case. At the cost of repetition, we would like to observe that there is no dispute that assessee has defaulted in discharging its tax liability u/s 140A at the time of filing of return of income. It is the claim of assessee that due to liquidity problem, it could not pay the tax liability on the date of filing of return as assessee did not have sufficient funds with him. However, it is a fact on record that assessee has received about Rs. 16.67 crores on sale of land in June, 2007. On perusal of bank account copies submitted in the paper book, though it appears that the balance at the beginning of the year and at the end of the year is nil, but at the same time there are substantial transactions in between. In fact in case of one of the assessee on 24/10/07, an amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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