K. Raviraja Pandian, J.:— The appeals are filed against the order of the Income-tax Appellate Tribunal Madras “D” Bench made in I.T.A Nos. 123 and 124.Mds/2004 dated July 28, 2006. The relevant assessment year is 2000-01.
2. The assessees were the directors of M/s. Hotel AMS Pvt. Ltd., Kondalampatti, Salem. During the course of survey conducted on November 16, 1999, under section 133A of the Income-tax Act, 1961, it was noticed that the company had constructed the hotel with the share capital funds said to have been floated by the directors.
3. On enquiry with the assessees, the assessees offered a sum of Rs. 12,00,000 as income, out of which Rs. 2,00,000 each in the name of the assessees and remaining in the name of other members in the Hindu undivided family. The assessees also admitted that there was no source for share capital and their share in the construction amounting to Rs. 2,00,000 each can be taken as unexplained investment. The assessees filed the return of income on September 21, 2001, admitting the income of Rs. 2,80,000 each. However, when notice under section 148 was issued on October 16, 2001, return was filed admitting additional income of Rs. 2,00,000 each as their unexplained income. In section 143(3) proceedings made on March 26, 2003, the unexplained investment of Rs. 2,00,000 was treated as additional income and penalty proceedings were initiated for concealment of income and furnishing of inaccurate particulars. Thus orders were passed on September 26, 2003, one against M. Pachamuthu and other against Balavenkatesan, the brother of the former imposing penalty of Rs. 37,400 each under section 271(1)(c) of the Act. The assessees being aggrieved by the same preferred appeals before the Commissioner of Income-tax (Appeals), who allowed the same and the Department preferred appeals before the Income-tax Appellate Tribunal have also been dismissed not on the merits but with reference to the tax effect involved in the case. The correctness of the same is now canvassed before this court.
4. Learned counsel appearing for the Revenue contended that the Tribunal has not considered the issue involved in these cases on the merits, however, non-suited the Revenue on the ground that the tax effect involved in the appeals before the Tribunal was only Rs. 37,400 which is not more than Rs. 1 lakh as provided in the circular issued by the Central Board of Direct Taxes in F. No. 279/126/98-ITJ dated March 27, 2000. Hence the appeals were not maintainable.
5. Heard learned counsel for the Revenue and perused the materials on record.
6. It is not argued by counsel for the Revenue that the circular issued is not binding on the Revenue. However, he relied on the decision reported in Commissioner Of Income-Tax v. Abhishek Industries Ltd., [2006] 286 ITR 1 (P & H). The issue involved in these appeals has been considered by us in the order made in T.C (A) No. 222 of 2004 (Commissioner Of Income-Tax v. Associated Electrical Agencies, [2007] 295 ITR 496 (Mad)) dated August 16, 2007, and held against the Revenue in the sense that if the tax effect is less than as provided in the Central Board of Direct Taxes circular in F. No. 279/126/98-ITJ and if the case has not come within the exceptions made in the circular, the appeals filed by the Revenue in the light of the circular cannot be legally maintainable. The relevant portion of the order reads as follows (page 500):
“We are of the considered view that none of the exceptions stated in the circular are applicable to the facts of the present case. The circular was stated to be issued by invoking the statutory power under section 119 of the Income-tax Act. The appeal is filed under section 260A of the Income-tax Act. It is well-settled principle of law that each and every provision of a statute has to be given the same importance. One provision cannot be elevated to a higher pedestal than the other provision, of course, unless or otherwise specifically stated either in the scheme, the Act or in the provision itself that a particular provision is subjected to or qualified by any other provision or the provision can be given effect to notwithstanding anything contained in any other provisions by assigning overriding effect. Hence, the contention that notwithstanding the circular, which was issued under section 119 of the Income-tax Act, the appeal could be filed by the Revenue under section 260A has to be rejected for the reason that if the contention is accepted, one of the sections would become virtually otiose and that cannot be the intention of the law makers. Hence, the above judgments cannot be taken in aid for non-suiting the respondent/assessee from taking shelter under the Government Order.”
7. On merit also the Commissioner of Income-tax (Appeals) after considering the statement submitted before him has found that the statement showed the business of the assessee, capital contribution shown in the returns of income before the survey, amount of authorised capital, paid up capital, loan from SUCB, Kondalampatty branch, amount received from shareholders, estimated expenditure for furniture and fittings, status of maintenance of books of account, date of purchase of land, rate thereof etc., It was not on record that concealment was discovered as a result of enquiry or investigation of the material found during the course of survey conducted by the Department nor was it a case of compatibility of the disclosure made with items of expenditure, sales, purchases, investments or any other thing disclosed by the assessees on discovery of any evidence. Mere addition agreed to by the assessees during the course of survey would not empower the Assessing Officer to levy the penalty. On the face of the above factual finding recorded by the Commissioner of Income-tax (Appeals) and having regard to the tax effect involved in these cases for the reasons stated above, the appeals are liable to be dismissed. Accordingly, the tax case appeals are dismissed. Consequently, M.P No. 2 is closed.