ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1), HYDERABAD V. B.RAMALINGA RAJU , HYDERABAD

ITA 55/HYD/2020

AI Insights

The case involves two appeals by the Revenue against the orders of the Commissioner of Income Tax (Appeals) - 11, which granted partial relief to the assessee, B. Ramalinga Raju, for the assessment year 2002-03. The appeals were consolidated due to identical facts and common issues, except for the figures involved. The primary issues revolved around the additions made by the Assessing Officer under sections 143(3) read with section 147 of the Income Tax Act, concerning unexplained investments and income from other sources, which were later contested and partially overturned by the CIT(A). The Tribunal's decision focused on the adequacy of the CIT(A)'s examination of the issues and the legal basis for the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29114 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2002-2003
• Other Referred Cases: Sri Govindraju vs. ITO, CIT Vs. Jet Airways Ltd., CIT Vs. M/s.Swarna Andhra IJMII Integrated Township Development Private Limited, Hyderabad
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B.BALAKRISHNA
• Assessee Lawyers: K.C.DEVDAS; MANY HIGH COURTS JUDGMENTS; THEREFORE
• Keywords: Set aside; Opportunity of being heard; Revised return; Revenue expenditure; Retrospective amendment; Reassessment proceedings; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Gift; Capital Gains; Source of fund; Assessment record; Reason to believe; Revision of order; Bogus
• Section: 147; 148; 143(3); 142(1); 143(2); 263; 271(1)(c); 158BC; 80HH; 20

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER ITA Nos.55 and 57/Hyd/2020 Assessment Year: 2002-03 The Assistant Commissioner of Income Tax, Central Circle – 3(1), Hyderabad. Vs. B. Ramalinga Raju, Plot No.1242, Road No.62, Jubilee Hills, Hyderabad. PAN : ACVPB8311J. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas, C.A. Revenue by: Shri B. Bala Krishna, CIT-DR Date of hearing: 19.12.2024 Date of pronouncement: 11.02.2025 O R D E R PER LALIET KUMAR, J.M: These two appeals filed by the Revenue are directed against separate, but identical orders of Commissioner of Income Tax (Appeals) – 11, even dated 19.08.2019 relevant to the assessee for A.Y. 2002-03. Since, the facts are identical and issue is common but for the figures, for the sake of convenience, these two appeals 2 B. Ramalinga Raju were heard together and are being disposed of, by this consolidated order. 2. The grounds raised by the Revenue in ITA No.55/Hyd/2020 read as under : “1. The Ld.CIT (A) erred both in law and on facts of the case in allowing relief to the assessee. 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in giving relief in respect of the proceeds of the accounts of Rs.1122 crores without appreciating the fact that the assessee being Managing Director of M/s.Satyam Computers Services Ltd., (SCSL) having blanket authority to run the affairs of the company and is in knowledge of such amounts failed to submit evidences to the satisfaction of the Assessing Officer. 3. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in giving relief to the assessee ignoring the fact that the opening balance seen from the forensic report of Rs.1122 crores which was put into the suspense account in the re-stated financial statement was not explained by the assesee who is the only Director having knowledge of such transactions.” 3. The grounds raised by the Revenue in ITA No.57/Hyd/2020 read as under : “1. The Ld.CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2. The Ld.CIT(A) ought to have taken into consideration the decision in the case of Sri Govindraju vs. ITO of Karnataka High Court (377 ITR 243) wherein it was held that the notice u/s.148(2) is found to be valid then addition can be made on all amounts and issues which may come to the notice of the Assessing Office subsequently during the course of proceedings U/s.147 of the Act even though, reasons for notice for 'such income' which may have escaped assessment may not survive. 3 B. Ramalinga Raju 3. The Ld.CIT(A) failed to appreciate the fact that explanation 3 to section 147 was inserted by which it has been clarified that the Assessing Officer can assess the income in respect of any issue which has escaped assessment and also 'any other income (of the second part of section 147) which comes to his notice subsequently during the course of the proceedings under the section. 4. The Ld.CIT(A) failed to appreciate the fact that the provision of section 147 as well as its explanation 3 is for the benefit of the Revenue and not the assessee and is aimed at garnering the escaped income of the assessee. 5. The Id. CIT(A) failed to appreciate the fact that the Assessing Officer made addition on the issue for which the assessment is re-opened and hence the ratio of Hon'ble High Court, Bombay in the case of M/s. Jet Airways.” ITA No.57/Hyd/2020 3.1 The brief facts of the case are that assessee filed his return of income for the assessment year 2002-03 on 09-08-2002 declaring an income of Rs.2,51,11,160/- from salary and other sources. Assessment u/s 143(3) was completed originally on 04-03-2005. Consequent to the confessional statement by the assessee as Chairman of M/s Satyam Computer Services Limited on 07.01.2009 assessment was re-opened by issuing a notice u/s 148 dated 24-3- 2009. The assessee in response filed return of income for assessment year 2002-03 on 11-5-2009 declaring the same income, as was originally declared. Subsequently, the case was taken up for scrutiny and notices u/s 143(2) dt.28.07.2009 and notice u/s 142(1) of the Act dt.28.07.2009 were issued to the assessee. During the reassessment proceedings, the assessee objected to the reopening of the assessment which the AO rejected by way of passing a reasoned order. After providing due opportunity to the assessee and 4 B. Ramalinga Raju considering the partial information furnished by the assessee on 20.07.2010, along with the facts available on record, the Assessing Officer completed the assessment under Section 143(3) read with Section 147 of the Act, inter alia, making additions of Rs. 4,80,04,380/- towards FDRs, Rs. 2,36,84,000/- towards the amount claimed to be irretrievably lost, and Rs. 45,87,20,000/- towards the amount received in the form of ADRs. Accordingly, passed assessment order on 21.07.2010. 4. Aggrieved with such assessment order, assessee filed an appeal before the LD.CIT(A), who granted partial relief to the assessee. 5. Aggrieved with the order of LD.CIT(A), the Revenue is now in appeal before us. 6. At the outset, the CIT-DR has drawn our attention to para 6.1 and 6.2 of the order of Ld.CIT(A) which is to the following effect : “6.1 During the course of appellate proceedings, it was contended that similar addition made in the hands of Mr. Suryanarayana Raju was deleted by CIT(A) in ITA No.773/2010-11/DCIT-CCB/CIT-VII/H/2014-15, dt.29.09.2014 relying on the Remand Report of the AO, wherein in it was reported that the sources of funds duly verified and the addition is the hands of the appellant is also liable to be deleted. 6.1.1 The operative portion of the order for ready reference is reproduced below: 5 B. Ramalinga Raju \"8.1 FINDINGS on the addition made towards unexplained investment in fixed deposits to the tune of 2.50 crores. 8.1.1 In course of the appeal proceedings in the case of Sri A.Bhaskar Raju and others (the namesake deposit owners) the appellant had filed detailed charts indicating the flow of funds culminating in the deposits. The same was forwarded to the A.O. for his detailed examination and submission of his report. The letter dated 07/05/2014 reads as under:- F.No. Appeal No.770/2010-11 and others/2014-15. Dt.07.05.2014 To, The DCIT Central Circle-8 Hyderabad Sir, Sub-.-Pending appeals in the case of individuals/family members of Sri B. Ramalinga Raju Satyam Group for AY2002- 03-Reg.. Ref:-Appeal orders passed for in the case of A. Bhaskara Raju in Appeal No ITANo. CIT(A)- VI 1/776/Hyd/CC/8/10-11 and doted 28.03.1014. Sl.No. Name Appeal No. Remarks 1 Shri B. Ramalinga Raju 761/10-11 Protective assessments were mode in the hands of these individuals on the issue of investment in FDs of Rs 19.50 crores and Rs 50 Lakhs in a firm totaling Rs 20 crores in all 2 Smt B. Nandini Raju 770/10-11 3 Shri B. Rama Raju 764/10-11 4 Shri Raju B. Suryanarayana 773/10-11 5 Smt. B. Rad ha 758/10-11 6 Smt. B. Jhansi Rani 760/10-11 7 Shri Rama Raju (jr) 774/10-11 8 Shri Teja Raju 777/10-11 2. Please Also refer to the appellate order passed in the case of Sri A. Bhaskara Raju referred supra. Similar orders were passed in case of six others for A. Y 2002-03 as detailed overleaf. 6 B. Ramalinga Raju Sl.No. Name Appeal No. Dated 1 A. Bhaskara Raju IT A No. CIT(A)-VI-8/10-11 28.03.2014 2 A.V.L. Kumari IT A No.CIT(A) 0772/2010- ll/CC-8/10-11 3 D. Satyanarayana Raju ITANo.CIT(A)-VII/771/ Hyd/8/10-11 4 D. Sathyavathi ITA No.CIT(A)-VII/0759/201 ll/C-8/CIT(A)-VII/H 5 I. Mat la pa Raju ITANo.CIT(A)- VII/765/Hyd/CC-8/10-11 6 I. Janakirama Raju ITA No.CIT(A)-VI 8/10-11 7 D. Rajeswari Devi ITANo.CIT(A)-VII/0767/ 2010-ll/ CC-8 3.0 The operative part of the above orders at para 8(H) reads as The protective assessments made in the hands of Sri B Ramalinga Raju and seven others now become substantive. A remand report is being separately called for from the AO in the appeals filed by Sri B Ramalinga Raju, Smt B Radha and others, giving the AO on opportunity to examine the trail of money in light of the new findings and disclosure made by Sri B.Ramalinga Raju in his confessionary statement to his satisfaction and come to a conclusion regarding whether it come from tax suffered money or not, 4.0 I am enclosing the original statement indicating the flow of funds into the FDs and also the spiral books that were filed. All these are part of their original filings in 2002-03 before the ADIT and the AO and may be available with you in the earlier black assessment records. At any rate, I am enclosing the spiral books and the detailed statement which were filed in original and you may return them back after verification along with the remand report. You may also seek another set or any other record/format for your record and necessary verification. 1. A remand report after due verification of issues outlined at para 3.0 may be sent by 30/06/2014. Thanking you, Yours faithfully M. Ravindra Sai, CIT(Appeals), Hyderabad, 7 B. Ramalinga Raju Encl:- (a) Detailed 4 fold statement showing flow of funds. b) Spiral book filed in March 2002 before the DDIT on the subject: ( Investigation-deposits in the banks-regarding. (c) Bank accts of family members-Annexure B (d) Ledger accts of family members-Annexure C (e) Spiral book with yellow transparent cover sheet with first page Bank accts for I explaining the flaw\" M. Ravindra Sai CIT (Appeals)-VII, Hyderabad. 8.1.2 The A.O, submitted a remand report dated 06/08/2014. The operative part of the remand report reads as under:- \"In this connection, as directed the verification regarding the trail of money based an assessee's submissions before the CIT(A) whether such investment were made from tax suffered money or not was carried out in the following cases. 1) Sri. B. Rama Linga Raju 2) Smt. B Nandini Raju 3) Sri. B. Rama Raju 4) Sri B Suryanarayana Raju. 5) Smt. B Radha 6) Smt B.Jhansi Rani 7) Sri Rama Raju (Ir.) 8) Sri B Pritam Teja alias Teja Raju It is submitted that the fund flow showing the trail of monies invested by the above eight individuals into the FDs was verified as shown in the chart submitted by the assessee. As seen from the chart, the above eight individuals have monies to the seven individuals namely Sri A Bhaskara, Smt. AVL Kumari, Sri D Satvanarayana, Smt. D.Satyavati, Sri I Mallapa, Sri 8 B. Ramalinga Raju I Janaki Rama Raju and Smt. D Rajeshwari Devi after routing them through 4 layers. As verified from the assessee's submissions, it is observed that the mantes came out of sale consideration received on sale of shares by four ndividuals namely - B Pritam Teja alias Teja, B Rama Raju, B Surya Narayana B Jhansi Rani. Out of the monies received by these individuals, part of it has been given directly to the parties mentioned in the trail. These four individuals have also gifted monies to the four individuals mentioned hereunder 1. Sri B Ramalinga Raju 2. Smt B Nandini Raju 3. Sri B Rama Raju 4. Smt B Radha Raju Apart from this, consideration was also received on sale of shares made by Sri BN Satyanaravana Raju and Smt. Appalanarasamma and the some was gifted by them to the above four individuals. In this connection, it is submitted that the FDs made in the name of seven individuals, Sri A Bhaskara Raju, Smt.AVL Kumari, Sri D Satvanarayana Ralu, Smt. O Satyavati, Sri I Mallapa Raju, Sri. J. Janaki Rama Raju and Smt. D. Rajeshwari Devi were out of gifts and out of tax suffered monies as declared in the respective returns of income of the eight individuals namely, Sri. B Ramalinga Raju, Smt. B. Nandini Raju, Sri B Rama Raju, Sri B Suryanarayana Smt. B Radha, Smt B Jhansi Rani, Sri. Rama Raju (Ir.) Sri B Pritam Teja alias Teja Raju whose monies were invested. As directed, the spiral books and the detailed statement filed in original are returned herwith. 8.1.3 The remand repot was given to the appellant and his comments were called for. The appellant, on this addition, at para 3 on page 3 stated as under: \"All the subsequent paragraphs of the remand report elaborately point out the verification by the assessing officer as to the factum of the details of investments and the sources of funds as having flown from the tax suffered monies in his endeavour to carry the directions of the Hon'ble CIT(A) calling for the remand report. It has been brought out by the Assessing Officer in the remand report that his verification revealed that the submissions as to the details of the investments and the sources of such investments were correct. No adverse findings or observations have been brought out. In the last paragraph 9 B. Ramalinga Raju the Assessing officer mentioned that the investments have come out of tax suffered monies duly stand declared in the return of income of the respective individuals. 8.1.4 In light of the clear finding that the source of the fixed deposits was the tax suffered funds of the appellant and his other family members (the real owners), no addition is called for towards unexplained investment in fixed deposits. The addition made to the tune 2.50 crores on this account, is accordingly deleted.\" 6.2 On consideration of the above, it is seen that the facts of the appellant's case are also identical to the case referred above which is of one of the family members where similar addition is made. As the source of this funds stand verified and accepted by the AO in the remand proceedings based on which the CIT(A) has deleted the addition in the case of Mr. Suryanarayana Raju, the addition made is not warranted and the same is deleted.” 7. It was submitted by the ld.DR that the Ld.CIT(A) had deleted the addition made in the hands of the assessee on account of unexplained cash credit of Rs.4,80,04,380/-. The ld.CIT-DR has also drawn our attention to the grounds raised by the Revenue reproduced hereinabove. It was submitted by the Revenue that the Ld.CIT(A) had deleted the other grounds by relying upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways Ltd. reported in 331 ITR 236 (Bom) and the decision of jurisdictional High Court in the case of CIT Vs. M/s.Swarna Andhra IJMII Integrated Township Development Private Limited, Hyderabad and our attention was drawn to page 29 to 32 of the order. “7. The remaining grounds raised by the appellant are against the other additions made by the AO, namely Rs.2,36,84,000/- as amount claimed as irretrievably lost and Rs.45,87,20,000/- on account of diverted ADR proceeds. Before considering the above grounds/additions on merits, the relevant issue arising for consideration is whether the addition other than those mentioned in the reasons recorded for reopening would survive where 10 B. Ramalinga Raju the addition related to reasons recorded is deleted. In this contest, the reasons recorded for issue of notice u/s.148 are reproduced below. It is observed from the records that the amounts mentioned below are found in the form of fixed deposits in the names of the following persons as on 28.02.2002. Sl.No. Name of the person in whose name FD Amount (Rs.) Bank Deposit receipt No. 1 A. Bhaskar Raju 63,75,111 SBH, Begumpet 645520-31 2 AVL Kumari 63,73,111 SBH Begumpet 645486-94 and 645508 3 1. Mallapa Raju 71,90,111 SBH Begumpet 645495-507 4 1. Janakirama Raju 66,58,111 SBH Begumpet 645475-85 5 D.Rajeswari Devi 65,82,111 SBH Begumpet 645509-519 6 D. Satyanarayana Raju 1,00,00,000 SBH Begumpet 0214816-827 and 0214834 7 D. Satyavathi 1,00,00,000 SBH Begumpet 0214828-843 and 0214846 a When questioned about the sources of the funds for making the above mentioned deposits, it is submitted that the monies are not really owned by them and in-fact received from the family members of Sri B. Ramalinga Raju, Ex-Chairman of M/s Satyam Computer Services Ltd., The list of the persons claimed to have passed on the monies to the above mentioned persons is as under. 1.B.Rama Linga Raju 2.8. Nandini Raju 3.B. Rama Raju(Senior) 4.B.Radha Raju 5.B. Pritam Teja 6.8. Ramaraju(Junior) 11 B. Ramalinga Raju It was further submitted that the family members of Sri. Raju held the shares of M/s. SCSL. The shares held by these persons were first claimed to be transferred to the following Investments companies in order to facilitate the sale of said shares. 1. Higrace Investments Ltd. 2. Elem Investments Ltd. 3. Fincity Investments Ltd. and 4. Veeyes Investments Ltd. It is further observed that when the shares are transferred to the above mentioned investments companies by the family members of Sri B.Ramalinga Raju, the transfer is not affected through contract notes. Besides, the transaction of transferring shares held by the family members of Sri Raju to the Investment Companies is not considered as a real transfer and therefore the consequential taxes arising under the head capital gains are not paid by any of the family members. The second mentioned persons have transferred funds to the end beneficiaries through the following persons. 1 Sri. K. Lakshmi 2. Sri 1.V. Krishnam Raju 3. Sri M. Hari Prasad Raju 4. Smt N.Lakshmi 5. Sri K.Krishnam Raju 6. Sri A.S.V. Krishnam Ra 7. Sri M. Suryanarayana Raju 8. Sri N. Rama Raju Since the first mentioned persons have never filed return of income it can be concluded that these persons do not have any source to deposit huge amounts as FD's. The second mentioned persons claimed that the monies in the form of fixed deposits really belong to them and the said monies are emanated from the sale proceeds of share held by them. They, however, 12 B. Ramalinga Raju could not furnish a cogent reply to the question as to why the monies are routed through various layers before ultimately the same are parked as deposits in the names of first mentioned persons. As it is claimed that the shares held by the family members of Sri B. Suryanarayana Raju are sold through the investment Companies and not directly by them in the market, it is imperative to examine the capital gains, if any, arisen in the hands of investment companies or not. Since these transactions are routed through many layers and it is not transparent, it is felt that the issue requires deep investigation and through examination. In view of the foregoing the assessments, for the assessment year 2002-03 of the second mentioned persons (6 in number) and the fourth mentioned persons (8 in number) are required to be reopened. As the assessments proposed to reopened in the case of Sri B.Rama Raju are for the assessment year 2002-03 has lapsed four years, since then, the approval of commissioner of income tax (central) may kindly be accorded so as enable the undersigned to reopen the assessments u/s. 148 of the IT Act, 1961 in respect of Sri B.Rama Raju.\" From the above, it is seen that the assessment was reopened on account of unexplained investment in FDs. The addition made on the above account is considered and deleted vide decision in Para- 6(supra). As the above addition is deleted, the other additions made do not survive in view of the ratio laid down in case of CIT Vs Jet Airways Ltd 331 ITR 236 (Bom) and that of jurisdictional High Court in case of M/s. CIT-III Vs Swarna Andhra IJMII Integrated Township Pvt Limited in ITTA No.165 of 2014, dt. 12.03.2014. Accordingly, the other additions made are deleted. The appellant succeeds on the grounds raised against above addition.” 8. The contention of the ld.CIT-DR is that the Ld.CIT(A) may be right on the facts that the addition made by the Assessing Officer in respect to irrevocable loss to the tune of Rs.2,36,84,000/- and the contention on account of unexplained income from other sources were examined by the Assessing Officer after recording the satisfaction during the course of assessment, however, these two were having live link with the first addition i.e., addition on account 13 B. Ramalinga Raju of FDRs made in the name of other person. The ld.CIT-DR has relied upon the decision of Hon'ble Karnataka High Court in the case of Govind Vs. Income Tax Officer reported in 377 ITR 243 and it was submitted that even the unrelated issues can be examined by the Assessing Officer after issuing notice for reopening. Furthermore, it was submitted that the decision of jurisdictional High Court in the case of Swarna Andhra JMII Integrated Township Development Private Limited, Hyderabad (supra) is against the assessee and for that purposes, he has drawn our attention to the following observations of the Hon'ble High Court : “We have heard Mr. B.Narasimha Sarma, learned Counsel for the appellant, and have gone through the judgment and order of the learned Tribunal. It appears that the learned Tribunal has found that the reasons recorded for reopening the assessment has no nexus with the income ultimately assessed under Section 147 of the Income Tax Act, 1961. The finding of the learned Tribunal is reproduced hereunder: \"Thus, it is very much clear that the reassessment has been made for assessment of income other than the income escaping assessment as per the reasons recorded for formation of belief while initiating proceeding under Section 147 of the Income Tax Act, 1961. says that upon reading of Explanation-3 to Section 147 of the Income Tax Act, the learned Tribunal should not have concluded as aforesaid, as the Explanation-3 has got retrospective effect. We are of the view that the Explanation-3 to Section 147 of the Income Tax Act on the given facts and circumstances of the case does not apply. Moreover, in which case and when Explanation-3 would be applicable has been decided by various High Courts, namely, Bombay High Court in case of CIT Vs. Jet Airways (1) Ltd., (331 ITR 236); Delhi High Court in case of Ranbaxy Laboratories Ltd. Vs. CIT (336 ITR 136); Chhattisgarh High Court in case of ACIT Vs. Major Deepak Mehta (344 ITR 641) and Gujarat High Court in case of CIT Vs. Mohmed Juned Dadani. In view of the consistent decision of these High Courts, we are not in a position to take a different view and the learned Tribunal has followed the consistent view of those High Courts. Even, we find that independent of the decision of those High 14 B. Ramalinga Raju Courts that the Explanation-3 will be applicable in case where live issue, which was subsisting at the time of original assessment and if such issue has escaped the determination of the Assessing Officer, can be a ground for reopening. Any new issue that has cropped up subsequently on new set of facts, the aforesaid Explanation has no application. We think that the Explanation-3 has not really diluted cardinal object of Section 147 of the Income Tax Act for reopening. The Explanation-3 has been given a retrospective effect with an idea there are so many assessment orders, which were passed earlier without deciding the issue subsisting at the time of original assessment. This Explanation has held to be reopened in those cases. Accordingly, the appeal is dismissed. No order as to closed.” 9. Per contra, ld.AR has drawn our attention to the reasons recorded by the Assessing Officer for reopening the assessment which is also available at para 7 of the order of Ld.CIT(A), reproduced hereinabove. 10. On the basis of the above said issue, it was submitted that the reasons for reopening were restricted to the fixed deposits made in other names for an amount of Rs.4,80,04,380/- and was not relating to either the amount claimed to be irrevocable loss or to the amount received in the form of ADRs. The ld.AR had relied upon the judgment referred to hereinabove by the Ld.CIT(A) and besides that ld.AR has also drawn our attention to the decision of Bombay High Court in case of CIT Vs. Jet Airways (1) Ltd., (331 ITR 236); Delhi High Court in case of Ranbaxy Laboratories Ltd. Vs. CIT (336 ITR 136); Chhattisgarh High Court in case of ACIT Vs. Major Deepak Mehta (344 ITR 641) and Gujarat High Court in case of CIT Vs. 15 B. Ramalinga Raju Mohmed Juned Dadani. In the case of Jet Airways (1) Ltd (supra) it was held as under : “15. Parliament, when it enacted the Explanation (3) to section 147 by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by \"Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd.'s case (supra) and of the Punjab & Haryana High Court in Vipan Khanna's case (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh's case (supra), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab & Haryana High Court in CIT v. Atlas Cycle Industries [1989] 180 ITR 3191. The decision in Atlas Cycle Industries' case (supra) held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under section 148 were incorrect or non-existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries' case (supra) and of the Rajasthan High Court in Shri Ram Singh's case (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to section 147.- 16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the 16 B. Ramalinga Raju conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income (\"such income\") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a.matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income \"and also\" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words \"and also\" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words \"and also\" by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 11. The ld.AR had further submitted that since the issue is covered in favour of the assessee by many High Court’s judgments, therefore, the decision in the case of Govinda Raju (supra) will not have any application and therefore, the order passed by the Ld.CIT(A) is correct. Furthermore, the ld.AR has also drawn our attention to the decision of the co-ordinate Bench of the Tribunal in the case of ACIT Vs. B. Ram in W.T.A No.1/2020 and 01/2012 wherein the 17 B. Ramalinga Raju Tribunal has the occasion to examine the identical issue and the Tribunal after going into issues, has decided the same against the Revenue. 12. It was further contended by the ld.AR that these two issues of irrevocable loss and ADRs were not available at the time of reopening of assessment and it was submitted that the reopening was made by the Assessing Officer vide reasons to be reopened dated 24.03.2009 and however, the issue of irrevocable loss and ADR were only cropped up on the basis of statement given during the course of assessment. For the above said purposes, the ld.AR has drawn our attention to paras 7.1 to 8.3 of the assessment order, which is to the following effect : “7.1 During the course of reassessment proceedings it was noticed that in the Capital Accounts furnished by Sri B. Ramalinga Raju & his seven family members, certain amounts were claimed to be irretrievably lost. The same are as follows: Sl.No. Name Amount Rs. 1 Sri B. Ramalinga Raju 2,36,84,000 2 Smt. B. Nandini Raju 78,95,000 3 Sri B. Rama Raju 2,28,07,000 4 Smt. B. Jhansi Rani 64,40,000 5 Smt. B. Suryanarayana 1,22,81,000 6 Smt. B. Radha 1,14,04,000 7 Sri B. Teja Raju 78,94,500 8 Sri B. Rama Raju (Jr.) 78,94,500 Total 10,03,00,000 18 B. Ramalinga Raju 7.2 During the course of reassessment proceedings, the assessee was directed to furnish the details of the claim of irretrievably lost amounts and to justify the claim that the money was actually lost and there was no accrued income on this amount. In response, the assessee filed a vague reply in tappal, stating as follows: \"In respect of debits obtaining by way of advances, we submit for your consideration that we shall be adjusting the same by way of drawings t to the debit of B of 8 individuals as the amounts are irretrievable. The amounts were rather capitalized nor considered for any revenue expenditure. otherwise. enclosed.\" Therefore, there is no impact as to the income or A separate statement indicating the position of such advances is 7.3 From the above, it is clear that the assessee is not coming forward with the facts and simply furnished an evasive reply. 7.4 As mentioned above, Sri B. Ramalinga Raju made a confessional statement on 07.01.2009. Subsequent to this statement, investigations were carried out by various agencies and found that huge properties were acquired by Sri B. Ramalinga Raju & his family members on their names and in the names of various persons and concerns. It was also noticed that these properties were either not disclosed to the Department or partly disclosed to the Department. From this, it is clear that huge unaccounted properties were acquired by Sri B. Ramalinga Raju & his family members during the period under consideration. For acquiring these properties both the money routed through various channels and also unexplained sources of income were clubbed and utilized. During the year, instead of debiting the personal expenditures spent for expenditure purposes they showed that amounts as irretrievably lost. This is nothing but a camouflaged attempt of the assessee, to link up his undisclosed assets acquired from undisclosed sources of income, with the money that was actually spent for some other purposes but cleverly shown as irretrievably lost. This is done with a motive that, even if Department finds the undisclosed assets in future, the same can be linked up with declared irretrievably lost amounts. In fact, because of this reason only, the assessee, Shri B.Ramalinga Raju when called for, did not furnish details such as how the money was claimed to be lost, who gained out of this transaction, was there any accrued income on this amount etc. Hence, an amount of Rs. 2,36,84,000/- is added to the income of the assessee Shri B.Ramalinga Raju treating the same as unexplained investment made from undisclosed sources of income but tried to link the amount that was spent for personal purposes and utilized otherwise. 7.5 Without prejudice to the above conclusion, the assessee acquired undisclosed asset from undisclosed sources of income to the extent of claim of irretrievably lost, the following discussion is also made. 19 B. Ramalinga Raju 7.6 If the argument that there is no undisclosed asset, to that extent the money shown as irretrievably lost, it should be treated as cash loan advanced by the assessee to others and a reasonable income should be estimated on accrual basis on this advance. Otherwise, if the claim of irretrievably lost is to be accepted, the assessee should clearly identify who gained out of this transaction and the treatment of this in recipient's hands should be examined, if time limits for assessment permits. This discussion is made without prejudice to the conclusion that the assessee acquired undisclosed assets from undisclosed sources of income and tried to link up the same to his personal drawings and money spent otherwise. 7.7 From the above discussion, it is clear that the assessee Sri B. Ramalinga Raju failed to disclose true and correct income to the Department, for the year under consideration. The assessee Sri B. Ramalinga Raju deliberately concealed income particulars to that extent from the Department and evaded taxes thereon. For this act of concealment of income particulars, penalty Proceedings under sec. 271(1)(c.) of the I.T. Act are initiated along with this Assessment Order. 8. Amount received in the form of ADRS: 8.1 During the course of Wealth Tax assessment proceedings for the Financial Year 2001- 02, relevant for the A.Y. 2002-03, it was noticed that Sri B. Ramalinga Raju as Ex-Chairman of M/s Satyam Computer Services Ltd, raised ADRs of about Rs.721 Crores from the Market. Subsequently, it was noticed that an amount of $ 8.8 Millions from the Citi Bank and $0.96 Millions out of HSBC Bank, New York, were transferred to from unknown entities in Virgin Islands, United Kingdom. Subsequently, no trace of these amounts were found. It was learnt that these transfers took place on the instructions of Sri B. Ramalinga Raju. In fact, he had the blanket approval of Board of Directors of M/s SCSL, who open and operate any account in the name of M/s SCSL anywhere in the World. The above transaction was carried out at his instructions and it is in the full knowledge of him. Further, it was noticed that this money transfer was not routed through the books of accounts of M/s SCSL and it never appeared in the Financial Statements of the Company. Sri B. Ramalinga Raju was confronted with the above issue and was asked to explain clearly the above transactions and final destination of the ADR amounts. However, Sri B. Ramalinga Raju has furnished reply by tappal, for the specific query as follows: \"a) To the best of my remembrance there was no ADR issue by M/s Satyam Computer Services Ltd in the financial year 2006-07. As to the amount of ADR raised during the financial year 2001-02, 1 request you to obtain the details from M/s Satyam Computer Services Ltd., as individually I shall not be having any information with me, as the then Chairman of the company. 20 B. Ramalinga Raju b) As regards clarification on utilization of ADR funds, it is submitted that in all fairness the assessing officer should appreciate that M/s Satyam Computer Services Ltd., will be in a position to explain as the ADR issue is by the corporate entity and equally the details of utilization will thus be available with the corporate entity and in no event will be available with the Chairman of Company. It is therefore not fair on the part of the assessing officer to ask me about the utilization of the ADR funds. c) In respect of the proposition to assess the ADR amount of Rs.45,87,20,000/- as my unexplained income for the assessment year 2002- 03, it is submitted that i) The assessing officer may please clarify as to how it constitutes income at all much less in my individual hands? Further, the evidence in your possession to treat the same as my income may also be furnished to enable me to explain as to how it does not constitute income and much less my income. (ii) The basis for assessing an amount as undisclosed income cannot be on presumption much less the wealth tax assessment as mentioned in the letter of the assessing officer. In this connection it is further submitted that an appeal was preferred against the mentioned wealth tax assessment before the Commissioner of Appeals(I). For completeness of records, the copy of the statement of facts and grounds of appeal submitted is enclosed to be read as and final destination of the ADR amounts. However, Sri B. Ramalinga Raju has furnished reply by tappal, for the specific query as follows: \"a) To the best of my remembrance there was no ADR issue by M/s Satyam Computer Services Ltd in the financial year 2006-07. As to the amount of ADR raised during the financial year 2001-02, 1 request you to obtain the details from M/s Satyam Computer Services Ltd., as individually I shall not be having any information with me, as the then Chairman of the company. b) As regards clarification on utilization of ADR funds, it is submitted that in all fairness the assessing officer should appreciate that M/s Satyam Computer Services Ltd., will be in a position to explain as the ADR issue is by the corporate entity and equally the details of utilization will thus be available with the corporate entity and in no event will be available with the Chairman. of Company. It is therefore not fair on the part of the assessing officer to ask me about the utilization of the ADR funds. c) In respect of the proposition to assess the ADR amount of Rs.45,87,20,000/- as my unexplained income for the assessment year 2002- 03, it is submitted that 21 B. Ramalinga Raju 1) The assessing officer may please clarify as to how it constitutes income at all much less in my individual hands? Further, the evidence in your possession to treat the same as my Income may also be furnished to enable me to explain as to how it does not constitute income and much less my income. (ii) The basis for assessing an amount as undisclosed Income cannot be on presumption much less the wealth tax assessment as mentioned in the letter of the assessing officer. In this connection it is further submitted that an appeal was preferred against the mentioned wealth tax assessment before the Commissioner of Appeals(I). For completeness of records, the copy of the statement of facts and grounds of appeal submitted is enclosed to be read as part of reply to the query. On the basis of the said submissions since Income can never be assessed on presumption and equally much less without any evidence being brought on record and put to me for my explanation your proposal to assess the said amount as my income is against all cannons of law. Accordingly, I object to the proposition to treat it as my undisclosed income for the assessment year 2002-03.\" 8.2 From the above facts, it is clear that a total amount of $9.76 Million (with an average exchange then prevailing rate of Rs.47/-) equaling to Rs.45,87,20,000/- was unaccountedreceipt in the hands of Sri B. Ramalinga Raju during the Financial Year 2001-02 relevant for the A.Y. 2002-03. He failed to substantiate the money transfer. Despite knowing all the facts of the transaction he did not offer any explanation for this transaction. If the facts are in the possession of a person and he is not coming forward to explain the same, it has to be concluded that if the same were explained they would be against the person only. As the above mentioned ADR amounts never reached M/s SCSL and never become part of its financial statements. Mr. B. Ramalinga Raju, as the sole decision making authority with regard to the ADR amounts, controlled the money flow from the origin to the destination and enjoyed the de facto possession of the same. The money raised leaked in the transmission and its actual flow and finality was in the sole knowledge of Sri B. Ramalinga Raju. Hence, the amount is to be treated as receipt of Sri B. Ramalinga Raju, in lieu of his position as charge de affairs of M/s SCSL and the same needs to be brought to taxation in his individual hands. Hence, an amount of Rs.45,87,20,000/- is treated as. unexplained income of Sri B. Ramalinga Raju under the head Income from Other Sources and the same is brought to tax accordingly. 8.3 From the above discussion, it is clear that the assessee Sri B. Ramalinga Raju failed to disclose true and correct income to the Department, for the year under consideration. The assessee Sri B. Ramalinga Raju deliberately concealed income particulars to that extent from the Department and evaded taxes thereon. For this act of concealment of income particulars, Penalty 22 B. Ramalinga Raju Proceedings under sec. 271(1)(c.) of the I.T. Act are initiated along with this Assessment Order.” 12.1. On the basis of the above, it was submitted that the order passed by the Ld.CIT(A) is in accordance with the law. 13. We have heard the rival submissions and perused the material on record. In the present case, as evident from the assessment order, the assessee originally filed a return of income on 09.08.2002, and the assessment was completed under section 143(3) on 04.03.2005. Thereafter, the case was reopened after obtaining approval from the CIT (Central). In response, the assessee filed a reply/objection and a revised return on 24.03.2009. However, it was submitted that the assessee made an additional statement on 07.01.2009, as noted in paragraph 3.2 of the assessment order, which is to the following effect : “3.2 The assessee's main objection against re-opening the assessments completed earlier u/s.143(3), 143(3) r.w.sec.158BC and 143(3) r.w.s. 158BD r.w.sec. 158BC of I.T.Act was that, all the issues were examined during the completed proceedings, assessee disclosed all facts before the department at that time and there are no fresh facts in the possession of the Revenue to reopen these assessments now. However, this objection is untenable, in light of the fact that the assessee, Shri B.Ramalinga Raju, Ex- Chairman of M/s.Satyam Computer Services Ltd., himself made a confessional statement on 7-1-2009 stating that the accounts of the company were fudged and false results were shown over a period of time\". Even he admitted that \"fictitious bank deposits were shown for this purposes and bogus bank statements were generated\". Further, it is also clear that the fudging of the company's accounts resulted into transfer of huge amounts in the form of dividend distribution, issue of bonus shares, issue of rights and off-loading of shares held by the management related persons at a premium and other money transfers. On verification of these 23 B. Ramalinga Raju facts, it is clear that one of the prime beneficiaries from fudging of the company accounts were Shri B.Ramalinga Raju, his family members and his close relatives and associated concerns. In the confessional statement, Shri Ramalinga Raju also stated that the companies floated by his family members/close relatives advanced huge amounts to M/s.Satyam Computer Services Ltd and the same were not duly reflected in the books of accounts of the company. Hence the sources for the money advanced by the companies and its promoter's warrants thorough examination and their taxability needs close verification. Definitely these are the fresh facts now in the possession of the department and assessee, though aware of these facts, failed to submit the same before the department during the earlier scrutiny assessments. Hence, the reassessment proceedings initiated against the assessee u/s.147 of the I.T.Act are justified.” 14. Furthermore, if we look into the allegation mentioned in paragraph 7 of the order of the ld. CIT(A), wherein he has recorded the reasons given by the Assessing Officer, it is clear from the reasons recorded that the issue of irrevocable loss and ADR was not the subject matter of reopening. Instead, it subsequently came to the notice of the Assessing Officer during the course of assessment, based on the additional statements given by the assessee on 09.01.2009. It is also evident that the addition made in the hands of the assessee with respect to this issue had already been deleted by the ld. CIT(A)-VII, as recorded in paragraph 6.2 of his order. The above finding of fact was duly recorded by the ld. CIT(A) in his order. Admittedly, the Revenue has not filed an appeal against the deletion of the addition made in the hands of the assessee concerning the first issue—FDRs made in the name of seven persons. 24 B. Ramalinga Raju 15. Once the basis of reopening, i.e., the addition made on account of FDRs in the name of seven people, has been deleted and no appeal has been filed by the Revenue, the question now arises as to whether the Assessing Officer could make an addition in the hands of the assessee for new issues that came to his notice during the course of assessment proceedings, particularly when these fresh issues were neither related to nor linked with the issue of FDRs in the name of seven people. 16. The parties before us have admitted that the issue of reopening is not related to the remaining issues of irrevocable loss and the amount received on account of ADR. In fact, these two issues are entirely independent and are not linked with the first issue, i.e., the addition on account of FDRs in the name of seven family members. 17. Once the very basis for initiating proceedings, i.e., the reasons recorded for income escaping assessment concerning the issue of 'addition on the basis of FDRs,' has been accepted by the Revenue and no additions have been made on that issue, but instead, additions were made with respect to the other two issues, namely, irrevocable loss and the amount received on account of ADR, then, admittedly, these subsequent issues are not related to the first issue. In our considered opinion, no addition under section 148 can be made against the assessee for these issues. In this regard, we may fruitfully rely upon the decisions of the Hon’ble Bombay High Court 25 B. Ramalinga Raju and Delhi High Court, as referred to by the ld. CIT(A). In the case of Ranbaxy (supra), the facts of that case are similar to the present case, and the Hon’ble Delhi High Court in the said case, has held as under:\" “18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of V. Jaganmohan Rao (supra). We may also note that the heading of section 147 is \"income escaping assessment\" and that of section 148 \"issue of notice where income escaped assessment\". Section 148 is supplementary and complimentary to section 147. Sub- section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148. 19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts. 20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club 26 B. Ramalinga Raju fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well.” 18. With regard to the Revenue's reliance on the judgment in the case of Govindaraju (supra), since it is a decision of a non- jurisdictional High Court, it is not binding on this Tribunal, especially when various other High Court decisions relied upon by the ld. CIT(A) are in favor of the assessee. Needless to say, the Hon’ble Supreme Court, in the case of Vegetable Products Ltd. [1973] 88 ITR 192 (SC), had the occasion to consider the conflict arising from decisions of non-jurisdictional High Courts and held that the judgment which is favorable to the assessee should be applied. The relevant portion of Vegetable Products (supra) reads as under: “There is no doubt that the acceptance of one or the other interpretation sought to be placed on section 271(1)(a)( i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well- accepted rule of construction recognised by this court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in section 271(1)(a)( i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty. 27 B. Ramalinga Raju But the difficulty in this case is, as mentioned earlier, the expression used is not \"tax\" but \"the tax\". That expression can be reasonably understood as referring to the expression earlier used in the provision, namely, \"the amount of the tax, if any, payable\" by the assessee. At any rate, the provision in question is capable of more than one reasonable interpretation. Two High Courts, namely, Calcutta and Mysore, have taken the view that the expression \"the tax\" in section 271(1)(a)( i) refers to \"the tax, if any, payable\" (by the assessee) mentioned in the earlier part of the section. It is true that the Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further, as seen earlier, the consequences of accepting the interpretation placed by the revenue may lead to harsh results.” 19. Now, coming to the decision of the jurisdictional High Court in the case of CIT vs. M/s. Swarna Andhra IJMII Integrated Township Development Private Limited (supra), in fact, this judgment was sought to be distinguished by the ld. DR. However, we do not agree with the reasoning given by the ld. DR, as the jurisdictional High Court has approved the ratio laid down by the Hon’ble Bombay High Court in the case of Jet Airways (supra) and the Hon’ble Delhi High Court in the case of Ranbaxy (supra). 20. In light of the above, and respectfully following the decision in the case of M/s. Swarna Andhra IJMII Integrated Township Development Private Limited (supra), the Hon’ble Bombay High Court in the case of Jet Airways (supra), and the Hon’ble Delhi High Court in the case of Ranbaxy (supra), and also considering the fact that the new issues were not linked with the addition on account of 28 B. Ramalinga Raju FDRs in the name of seven persons, we dismiss the appeal of the Revenue. 20.1 In the result, the appeal of Revenue in ITA No.57/Hyd/2020 is dismissed. ITA No.55/Hyd/2020 21. The brief facts of the case are that assessee filed his return of income for A.Y. 2002-03 on 09.08.2002, declaring an income of Rs. 2,51,11,160/- from Salary & Other Sources. The original assessment u/s 143(3) was completed on 04.03.2005. Later, the case was reopened under section 147 of the Act and a reassessment order u/s 143(3) r.w.s. 147 was passed on 21.07.2010. On review, the CIT(C) found that key issues, including diversion of funds and the opening balance of the suspense account as on 01.04.2002, were not considered. Investigations into M/s Satyam Computer Services Ltd. in 2010 revealed possible fund diversion from ADS proceeds amounting to Rs.193.00 crores as per the KPMG forensic audit and Rs.397.00 crores as per the SFIO report. Additionally, a Rs.1122.00 crore opening balance was recorded under the 'Suspense Account' in the company's restated financials for A.Y. 2008-09, attributed to potential fund diversion and fictitious transactions. Given the assessee’s financial control as Chairman, the omission of these issues in the reassessment order dated 21.07.2010 was deemed erroneous and prejudicial to revenue. After considering 29 B. Ramalinga Raju the assessee’s submissions, the CIT(C) passed an order u/s 263 on 08.03.2012, setting aside the reassessment order and directing an examination of the Rs. 397 crore ADS proceeds and the Rs. 1122.00 crore opening balance. A notice u/s 143(2) was issued on 30.03.2012 and served on 31.03.2012, requiring the assessee’s appearance on 09.04.2012. 21.1. In response, the assessee submitted his reply on 02.04.2012, stating that he had filed an appeal before the ITAT against the order passed under section 263 of the Act and requested that the proceedings be kept in abeyance until the ITAT adjudicates the appeal. Subsequently, in reply to the summons issued under section 131 of the Act dated 05.07.2012, the assessee submitted a letter dated 12.07.2012, stating that he would not be able to attend personally and that he would appear in person only after the conclusion of his trial before the Special Judge. Thus, the assessee failed to avail himself of the opportunities provided and merely expressed his inability to state or produce any proof as to why the opening balance of Rs. 1122 crores and the ADS proceeds of Rs. 397 crores should not be added as his unaccounted income. 21.2. During the course of the assessment proceedings, upon verification of the submissions made by the assessee in response to the notices issued by the department, his confessional statements, and the material on record, the Assessing Officer observed that the assessee, along with Shri Vadlamani Srinivas, was responsible for overseeing the collection, utilization, and accounting of funds raised 30 B. Ramalinga Raju through the ADR issue and that they failed to provide details regarding the utilization of these funds. The company's bank records falsely reflect a transfer of Rs. 397.03 crores to its Indian accounts from Citibank, New York. The Assessing Officer further noted that, on 07.01.2009, the assessee admitted in a letter to the Board of Directors (and SEBI) that Satyam Computer Services Ltd. (SCSL) had falsified accounts over several years. He confessed that revenues and profits had been manipulated by altering financial records. He also claimed that neither the Board members nor senior executives were aware of these manipulations. 21.3 On 21.02.2009, the Assessing Officer recorded the assessee's sworn statement in Chanchalguda Central Prison, where he confirmed the details mentioned in his letter. Investigations conducted by the SFIO and CBI revealed that the assessee had the authority to open and operate SCSL’s bank accounts, indicating his direct involvement in falsifying the company’s accounts. During the assessment for A.Y. 2003-04, board meeting minutes confirmed that the assessee had the power to authorize bank account operations and appoint signatories. The assessee contended that the ADR issue had already been considered and that Rs. 45.87 crores had been added to his income. However, the assessment did not take into account the SFIO and Forensic Audit reports, which indicated a much larger amount. The SFIO report estimated the unaccounted ADS proceeds at Rs. 397.03 crores, which was now treated as unexplained income. The forensic audit also found that Rs. 1122 crores were recorded as an \"unknown\" opening balance in the 31 B. Ramalinga Raju company’s books as of 01.04.2002. Since the assessee was in charge of the company's financial affairs during that period, he was required to explain this amount. The forensic auditors opined that the inflated opening balance indicated financial fraud that had commenced before 2002. As neither the assessee nor the company could provide any satisfactory explanation regarding the nature of these funds, the Assessing Officer concluded that the amount had been siphoned off. In the absence of any substantial explanation from the assessee regarding these transactions, an adverse inference was drawn. Accordingly, the Assessing Officer treated the amount of Rs. 1122 crores as unaccounted income under \"Income from Other Sources\" and thereafter initiated penalty proceedings under section 271(1)(c) of the Act. 22. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), who granted part relief by deleting the addition of Rs.1122 crores by observing as under : “7.2. I have considered the assessment order, order u/s.263 passed by the TT, the submissions of the appellant and the material placed before me. The CIT(Central), Hyderabad in the order u/s.263 has given direction to the AO to examine the issues mentioned therein as no proper enquiry was conducted with reference to the issue of diversion of ADS proceeds and opening balance of Rs. 1122Crores as on 01.04.2002 shown in re-cast balance sheet/accounts of M/s.SCSL. As there is no specific direction given by CIT(Central) in order u/s.263 it is proceeded to decide/adjudicate the issues raised on merits. 7.2.1 The addition made by the AO is consequent to the confessional statement given by Mr.Ramalinga Raju regarding the affairs of M/s.SCSL as to manipulation/misreporting of the income/liabilities etc. Consequent to his statement, forensic Audit was got conducted by M/s KPMG, enquiries 32 B. Ramalinga Raju were conducted by SFIO and charge sheet has been filed and the CBI has also conducted enquiries and filed charge sheet in criminal cases. The basis for the addition made is that the appellant was at the helm of the affairs at the relevant period, the report of the forensic Auditors bringing out the discrepancies in the accounts, the appellant alone was in knowledge of the manipulation/discrepancies in the accounts and owned up the responsibility for the same and he is under obligation to disclose full and correct affairs of the company, which he has not disclosed. The appellant being the sole person in knowledge of the correct state of affairs of the company is under obligation to offer explanation with production of evidences, in absence of the above, would against the appellant. 7.2.2 The AO made the addition basically on the basis of forensic audit report. Basically, the re-statement of accounts consequent to the confessional statement made by Sri Ramalinga Raju in his capacity as Chairman of M/s. SCSL has effect on the corporate entity. Any un-reconciled amount will have a bearing in the assessment of M/s SCSL. Without establishing that the amount was diverted by the assessee for his personal benefit, the discrepancies in the accounts of the company cannot be brought to tax in the hands of the assessee, being the Chairman of the said company. There are no allegations either in the charge-sheet filed or in the order of the Hon'ble Addl. Chief Metropolitan Sessions Judge-XXI, Hyderabad that the assessee has made diversion of funds or diverted the funds for his personal benefit. The allegations are that the assessee has fraudulently declared more revenue and offered more income for tax, thereby declaring more profits, declaration of higher dividend, earning of commission on higher profit and consequently maintaining of higher share value in the share market, which are to be considered in the hands of M/s SCSL, but has no bearing in his individual assessment. Since there is no allegation of diversion of funds or misappropriation of funds by the assessee, the discrepancy in the books of account of M/s SCSL cannot be treated as unaccounted income of the assessee by any means. It is also seen from the Judgment of XXI AddI. Chief Metropolitan Magistrate Cum Special Sessions Judge that the assessee was convicted under the provisions of IPC and CrPC and there is no finding of misappropriation/diversion of funds of the company. In fact, the allegations are more or less declaring higher income than what was actually earned, thereby showing fictitious incomes and fictitious cash balances and consequent payment of higher taxes. These may have relevance in the assessments of the company but the discrepancies so identified in the interim cannot be the basis for treating the amount as unaccounted amount of the assessee. For these reasons, I am of the opinion that there is no basis for making addition of Rs.1122 crores in 'suspense account' identified without establishing any diversion of funds in the years in which these transaction have happened. The entire amount cannot be brought to tax as unreported prior to 2002 in this year. For these reasons, I allow the assessee's ground on this issue and delete the above addition so made.” 33 B. Ramalinga Raju 23. Aggrieved with the order of LD.CIT(A), the Revenue is now in appeal before us. 24. Before us, the Ld.DR submitted that LD.CIT(A) had deleted the addition on the basis of a non-existing order passed by the Addl.Chief Metropolitan Session Judge – XXI, Hyderabad. Furthermore, the LD.CIT(A) had failed to consider the forensic report conducted by the auditor. Since the order passed by the authorities was without any basis, the order of LD.CIT(A) should be set aside. 25. Per contra, ld.AR submitted that this issue was already examined by the Coordinate Bench of the Tribunal in WTA No.1/Hyd/2020 vide its order dated 11-10-2021, wherein similar additions were considered and subsequently, deleted by the Tribunal. Our attention was specifically drawn to Paras 5 to 10 of the order passed by the Tribunal, which is to the following effect : “5. However, on perusing the facts and circumstances of the case and the submissions of the assessee before the Ld. Revenue Authorities, the Ld. CIT passed order U/s. 263 of the Act on 08.03.2012 wherein he observed as under: (i) As per the reports submitted by the Ld. Revenue Authorities (Ld. AO and the Addl. CIT) and on verification of the report submitted by the SIFO, it is evident that there is an alleged diversion of funds to the tune of Rs. 397 Crs from ADS proceeds of M/s. Satyam Computer Services Ltd. 34 B. Ramalinga Raju (ii) Though the ADS proceeds were stated to have been transferred to various bank accounts of M/s. Satyam Computers maintained in India, on verification of the related bank accounts it is revealed that the amounts were not actually credited to the said accounts. (iii) The Chairman of the company (M/s. Satyam Computers) in his confessional statement made in January, 2009 admitted to have fudged the accounts of the company. (iv) As per the SFIO report, there is falsification of books of account and the bank accounts by the concerned persons. (v) As per the Forensic Investigation Report of KPMG an amount of Rs. 1122 crores was shown as opening balance as on 01/04/2002, which was disclosed as suspense account in the restated financial statements for the year 2008-09. Hence there is a possibility of diversion of cash. 6. From the above observations, the Ld. CIT opined that the Assessing Officer has not thoroughly examined or enquired into the above issues. Therefore, the Ld. CIT came to the conclusion that the order passed by the Ld. AO is erroneous in so far as it is prejudicial to the interests of the Revenue. Accordingly, the Ld. CIT set-aside the assessment order passed U/s. 143(3) r.w.s 147 of the Act and directed the Ld. AO to thoroughly examine the issue of ADS proceeds of Rs. 397 crores referred to in the SFIO and also the opening balance of Rs. 1122 crores as on 01/04/2009 referred to in the restated financial statements and thereafter complete the assessment. Aggrieved by the order of the Ld. CIT, the assessee is in appeal before us. 7. The Ld. AR argued by stating that the Ld. AO had examined all the issues raised by the Ld. CIT in his 263 order and thereafter passed the Assessment Order U/s. 143(3) of the Act dated 21/07/2010. Hence, it was pleaded that there was no merit in the order of the Ld. CIT and therefore, it deserves to be quashed. The Ld. DR on the other hand argued in support of the Ld. CIT. 8. We have heard the rival submission and carefully perused the materials on record. On perusing the order of the Ld. AO we do not find any mention regarding the issues discussed by the Ld. CIT in his order U/s. 263. Further, since the issues raised by the Ld. CIT is of grave consequence, it is necessary to examine those issues in detail. Accordingly, the ld. CIT has only directed the Ld. AO to examine those issues in detail and to pass 35 B. Ramalinga Raju appropriate order in accordance with law and merit which is appropriate. In this situation, we do not find much strength in the arguments advanced by the Ld. AR and we further find merit in the order of the Ld. CIT for invoking his powers U/s. 263 of the Act and directing the Ld. AO to examine the issues pointed out by him in detail and thereafter to pass appropriate order in accordance with law and merit. For the afore said reasons, we do not find it necessary to interfere with the order of the Ld. CIT. Hence, the appeal of the assessee is devoid of merits. 9. As regards, as the order passed by the Ld. CWT U/s. 25 of the Wealth Tax Act for setting aside the order of the Ld. WTO and directing him to frame fresh assessment order after verifying the issues pointed out in the order passed U/s. 25 of the Act, the Ld. AR submitted that the Hyderabad Bench of the Tribunal had quashed the revised wealth tax assessment order passed U/s. 16(3)d r.w.s 17 of the Act dated 23/12/2019 and therefore, the order passed by the Ld. CWT U/s. 25 dated 26/03/2012 does not survive. It was therefore pleaded that the order of the Ld. CWT U/s. 25 may be quashed. The Ld. DR could not controvert to the submission of the Ld. AR. 10. After hearing both the parties and perusing the materials on record, as pointed out by the Ld.AR, we find that the order of the Ld. CWT passed U/s. 25 of the Act dated 26/3/2012 does not survive because the revised wealth tax assessment order passed by the ld. WTO U/s. 16(3) r.w.s 17 of the Act, dated 23/12/2009 was quashed by the Tribunal in WTA No. 02/H/2012 for the AY 2002-03 in the assessee’s case vide order dated 08/1/2014. Therefore, we hereby quash the order passed by the Ld. CWT U/s. 25 of the Act dated 26/3/2012 for the relevant AY 2002-03.” 26. Ld.AR further contended that once the Tribunal had adjudicated the issue in WTA 1/Hyd/2020, then it was not open for the Tribunal to re-examine the same issue in the present appeal. Further, it was also submitted that the order passed by the LD.CIT(A) was based on merits of the case. 36 B. Ramalinga Raju 27. However, during the course of arguments, we directed both the parties to provide a copy of the forensic report, as well as the order of Addl. Chief Metropolitan Sessions Judge – XXI, Hyderabad on which the LD.CIT(A) had relied to grant relief to the assessee. Despite our direction, neither the assessee nor the Revenue was able to produce the copy of said order. In fact, the Revenue categorically stated that no such order is in existence and therefore, it could not be provided. This contention of the Revenue remains unrebutted by the ld.AR till date. From our examination of Paras 7.2 to 7.2.2 of the CIT(A)’s order, it is evident that the sole basis for granting relief to the assessee was the alleged order of the Addl. Chief Metropolitan Sessions Judge – XXI, Hyderabad, which has not been produced before us, wherein the Sessions Judge allegedly acquitted the assessee and further had not made any order about diversion of funds. We further find that neither the alleged order nor the forensic report has been borne out from the records placed before us, and even the lower authorities nor the assessee could provide it. 28. In light of the above, we are left with no other option but to remand the matter back to the file of the Ld. CIT(A) for fresh adjudication. The Ld.CIT(A) is directed to reconsider the issue of addition of Rs.1122 crores, and other grounds raised by the assessee. Additionally, the Ld.CIT(A) shall consider any other documents or submissions filed by the assessee during the appellate proceedings. A remand report shall be obtained from the AO based on these documents. Thereafter, the Ld. CIT(A) shall grant both 37 B. Ramalinga Raju parties an opportunity of being heard and decide the issue afresh. Accordingly, the appeal filed by the Revenue is allowed for statistical purposes. 29. In the result, the appeal of Revenue in ITA No.55/Hyd/2020 is allowed for statistical purpose. 30. To sum up, the appeal of Revenue in ITA No.55/Hyd/2020 is allowed for statistical purposes and the other appeal of Revenue i.e, ITA No.57/Hyd/2020 is dismissed. Order pronounced in the Open Court on 11th February, 2025. Sd/- Sd/- Sd/- (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 11.02.2025. TYNM/sps 38 B. Ramalinga Raju Copy to: S.No Addresses 1 B. Ramalinga Raju, Plot No.1242, Road No.62, Jubilee Hills, Hyderabad – 500033, Telangana. 2 The Assistant Commissioner of Income Tax, Central Circle 3(1), Hyderabad. 3 Pr.CIT (Central), Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "