SRI EPURU KRISHNA CHAITANYA, NELLORE V. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, GUNTUR

CO 24/VIZ/2022

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against the order of the Commissioner of Income Tax (Appeals), which had allowed the appeal of the assessee, Sri Epuru Krishna Chaitanya, regarding the addition of Rs. 91,50,000 as undisclosed income under Section 69A of the Income Tax Act, 1961. The Tribunal's decision focused on the procedural validity of the notice issued under Section 143(2), which was found to be issued beyond the permissible time frame, thus affecting the validity of the subsequent assessment order. The Tribunal also addressed the procedural aspects of the Cross Objection filed by the assessee, which was admitted despite a delay, due to reasonable cause shown.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128517 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 19-04-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 29-11-2022
• Other Referred Cases: Harman Singh Dhingra vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 69; 132; 143(3); 142(1); 153A; 143(2); 69A; 73

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.147/Viz/2022 (Ǔनधा[रण वष[ / Assessment Year :2019-20) Deputy Commissioner of Income Tax, Central Circle-1, 3 rd Floor, Raj Kamal Complex, Lakshmipuram, Guntur, Andhra Pradesh. Vs. Sri Epuru Krishna Chaitanya, D.No. 26-2-3312, Vedyapalem, Chaitanyapuri Colony, Nellore, Andhra Pradesh – 524004. PAN: AROPK 9859 N (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) C.O. No. 24/Viz/2022 (In आयकर अपील सं./ I.T.A. No.147/Viz/2022) (Ǔनधा[रण वष[ / Assessment Year: 2019-20) Sri Epuru Krishna Chaitanya, D. No. 26-2-3312, Vedyapalem, Chaitanyapuri Colony, Nellore, Andhra Pradesh – 524004. PAN: AROPK 9859 N Vs. Deputy Commissioner of Income Tax, Central Circle-1, 3 rd Floor, Raj Kamal Complex, Lakshmipuram, Guntur, Andhra Pradesh. (Cross Objector) (Appellant in appeal) अपीलाथȸ कȧ ओर से/ Assessee by : Sri Sunil Vamsi Krishna Kota, AR Ĥ×याथȸ कȧ ओर से / Revenue by : Sri ON Hari Prasada Rao, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 20/04/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 01/06/2023 2 O R D E R PER S. BALAKRISHNAN, Accountant Member : The captioned appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), Visakhapatnam-3 [Ld. CIT(A)] in DIN & Order No. ITBA/APL/S/250/2022-23/1043053720(1), dated 18/05/2022 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] for the AY 2019-20. 2. The Revenue has raised the following grounds of appeal: “1. The Order of the Ld. CIT(A) is erroneous both on the f acts and in law. 2. The Ld. CIT(A) is not correct in deleting the addition of Rs. 91,50,000/- based on the submissions of the assessee. The Ld. CIT (A) ought to have appreciated that the AO had rightly added the income U/s. 69A of the Act as the assessee f ailed to substantiate his clai m and contradictory statements given. 3. The Ld. CIT(A) is not correct in deleting the addition of Rs. 91,50,000/- as the assessee failed to prove the sources f or the amount and should have appreciated the f acts brought out by the AO. 4. The Ld. CIT (A) is erred in deleting the addition even though the assessee f ailed to produce proper books of account and si mply basing on the conf irmations and affidavits, which is an af terthought and self-serving. 5. Any other ground that may be urged at the time of hearing.” 3 3. The assessee has filed the Cross Objection No. 24/Viz/2022 (AY 2019-20) and raised the following Grounds: “1. The order of the Deputy Commissioner of Income Tax, Central Circle-1, Guntur dated 06/07/2021 is opposed to law and the f acts of the case. 2. The execution of search warrant on the Inspector of Police, Dargamitta PS, Nellore drawing of Panchanama and completion of search on 16/03/2019 are in gross violation of the provisions of section 132 and 132A of the Act. 3. The seizure of money and invocation of the provisions of section 132A of the Act are illegal and bad in law. 4. The AO erred in assuming jurisdiction under the provisions of section 143(2) of the Act vide Notice dated 12/10/2020. 5. The assessment order passed by the AO dated 06/07/2021 is illegal, void ab initio and without jurisdiction. 6. The AO erred in ignoring the sworn statements, affidavits and other conf irmations f iled by several parties who have accepted ownership of the money seized f rom the appellant. 7. The AO f ailed to appreciate that the appellant was not the owner of the money seized and hence the provisions of section 69A of the Act are not attracted. 8. The addition of Rs. 91,50,000/- U/s. 69A of the Act is bad in law. 9. The Ld. AO erred in initiating penalty proceedings U/s. 271AAC and 271AAB(1A) of the Act.” 4. On perusal of the Grounds of appeal raised by the Revenue as well as the Cross Objections raised by the assessee, at the outset, we find that vide Cross Objection Ground No.4 & 5, the 4 assessee has raised a legal ground pertaining to assuming of jurisdiction by the Ld. AO under the provisions of section 143(2) of the Act vide notice dated 12/10/2020, thereby rendering the assessment void ab initio. In our considered opinion, the outcome of these Grounds will have bearing on the other grounds raised by the assessee in his Cross Objection as well as the Grounds raised by the Revenue. Therefore, we deem it fit to take up firstly the Cross Objection raised by the assessee. 5. At the outset, we noticed that the assessee has filed the Cross Objection before the Tribunal with a delay of 73 days beyond the prescribed time limit. With respect to the delay, the Ld. AR drawn our attention to the affidavit filed by the assessee seeking condonation of delay by explaining the reasons for filing the Cross Objection belatedly. For the sake of reference, the relevant portions from the affidavit filed by the assessee are extracted herein below: “1 .......... 2 ........... 3 ........... 4. The Cross Objections were drafte d and sent to me on 15/09/2022 for signatures. Ho wever, I was unabl e to pursue the documents and execute the s ame as I was ou t of the country due to a pre-pl anned commitment. Late r on, af ter re turning I coul d not h ave necessary discussions reg arding the cross objections being fil ed as my Ch artered Accountant was busy due to his tax au dit an d income tax return fil ings. Upon follo w up from the Charte red Account, I 5 re al ized the del ay and i mmedi atel y forwarded the signed Memo of Cross Objections on 28/11/2022 for the purpose of fil ing. I state th at I was in regul ar touch wi th my Charte red Accountant from the ti me of the receipt of the appe al memo from the Registrar. 5. I state th at the cross objections are filed on 28/11/2022 wi th a del ay of 73 days as computed from 17/09/2022 through registered speed post. The del ay was neither intentional nor del iberate and was caused on account of re asons beyond my control , for which I s incerel y regret.” 6. On perusal of the reasons advanced by the assessee for not filing the Cross Objection within the stipulated time which is due to the reason that the assessee was in abroad at the relevant period, we find that there is a reasonable and sufficient cause which prevented the assessee in filing cross objection before the Tribunal within the prescribed time limit. Therefore, in our considered view this is a fit case to condone the delay and accordingly we hereby condone the delay of 73 days in filing the Cross Objection and proceed to adjudicate the CO in the following paras. 7. Briefly stated facts of the case are that the assessee is an individual, Correspondent, Head Master and a Computer Teacher in Lily Little Flower School in Nellore. The assessee was carrying Rs. 91,50,000/- which was seized from the assessee on 21/2/2019 by the Police of Dargamitta Police Station, Nellore while he was Travelling in a car with the case. The Police took 6 possession of the cash and the assessee on 23/02/2019 and deposed before the ADIT (Inv.), Unit-IV(3), Guntur wherein he stated that Rs. 36,80,000/- belongs to Sri O. Krishna Reddy, a partner of Pennar Aqua Export; Rs. 35,20,000/- belongs to Lilly Little Flower English Medium High School and the balance amount of Rs. 19,50,000/- relates to his mother, wife and himself. The assessee also submitted that he was on his way to bank to deposit the total cash in the bank on behalf of the above persons. The seized cash was requisitioned U/s. 132A by executing a search warrant on the Inspector of Police, Dargamitta PS, Nellore on 16/3/2019 and as per the Panchanama dated 16/3/2019, the search was completed on the same day. The assessee filed his return of income for the AY 2019-20 on 18/8/2019 admitting a total income of Rs. 2,93,930/-. Notice U/s. 143(2) was issued on 12/10/2020 and notice U/s. 142(1) was issued on 26/01/2021. The case was notified to DCIT, Central-1, Guntur vide order U/s. 127 of the Pr. Commissioner of Income Tax (Central), Visakhapatnam in DIN & Order No. ITBA/COM/F/17/2020-21/1030463120(1) dated 09/02/2021. Subsequently, notice U/s. 142(1) was issued on 12/4/2021. In response to the notices, the assessee’s Authorized Representative filed the information and clarified the issues. The Ld. AO 7 considering the submissions and after visiting the business premises of M/s. Pennar Aqua Exports at Nellore District wherein Sri O. Krishna Reddy is a partner found that Sri O. Krishna Reddy failed to prove that Rs. 36,80,000/- belongs to him or to M/s. Pennar Aqua Exports and therefore, treated this amount as undisclosed income of the assessee U/s. 69A of the Act. Similarly, the Ld. AO also found that Little Flower English Medium High School failed to substantiate its claim that Rs.35,20,000/- belongs to it and therefore added the same U/s. 69A of the Act as undisclosed income of the assessee. Similarly, out of Rs. 91,50,000/-, the assessee stated that Rs. 7 lakhs belongs to his Mother Smt. Swayamprabha and Rs. 6 lakhs belongs to his wife Smt. Nischala. The balance amount of Rs. 6.5 lakhs belongs to him. The Ld. Assessing Officer found that the claim of the assessee that Rs. 7 lakhs received as an advance towards sale of Flat at Nellore is a concocted one and therefore disallowed the same. Further, the Ld. AO also rejected the claim of the assessee’s wife on the explanation with regard to source of cash of Rs. 6 lakhs and added the same U/s. 69 of the Act. The Ld.AO also did not accept the explanation for the source of cash of Rs. 6.50 lakhs in the assessee’s name and treated it as undisclosed income of the assessee U/s. 69A of the Act. The 8 Ld.AO, thus made additions aggregating to Rs. 91,50,000/- to the total income of the assessee for the AY 2019-20. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). During the first appellate proceedings, the assessee made various submissions and submitted that the sworn statements and affidavits of the various parties who owned the cash seized from the assessee. Considering the submissions of the assessee, the Ld. CIT(A) found that the assessee has clarified the sources with proof and material and therefore allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us and the in support of the Ld. CIT(A)’s order, the assessee has filed the Cross Objection No.24/Viz/2022 wherein in grounds No 4 & 5, the assessee has questioned the Ld. AO’s decision in assuming the jurisdiction under the provisions of section 143(2) of the Act vide notice dated 12/10/2020. 8. At the outset, the Ld. AR submitted that the seized cash was requisitioned U/s. 132A of the Act and the assessment should have been completed U/s. 153A of the Act. Further, the Ld. AR also submitted that the Ld. AO also did not reopen the assessment as mandated by section 153A of the Act for the 9 previous six assessment years. Further, the Ld. AR also stated that the notice U/s. 143(2) was issued beyond the period of six months from the end of the Financial Year in which the return was filed and therefore the assessment itself void ab initio. 9. On the other hand Ld. DR submitted that the cash was seized from the assessee wherein the assessee has stated at the time of seizure at Dargamitta Police Station that he was on his way to purchase agricultural land. The Ld. DR further submitted that later on the assessee stated that the seized cash was to be deposited into the bank account as per the instructions of various persons. Explaining these facts, the Ld. DR pleaded that the assessee is not in a position to properly explain the sources of cash and therefore the Ld. AO has rightly considered the amounts as unexplained cash U/s. 69A of the Act. The Ld. AR fully supported the order of the Ld. AO. 10. We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities. The core legal issue involved in the Cross Objection raised by the assessee is the validity of the notice issued U/s. 143(2) of the Act. At this juncture, it is pertinent to extract the provisions of section 143(2) of the Act as under: 10 “Sec. 143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.” 11. As per the proviso to section 143(2), no notice shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. In the present case, the assessee has filed his return of income for the AY 2019-20 (FY-2018-19) on 18/08/2019 and the notice U/s. 143(2) ought to have been served on or before 30/09/2020. Whereas the Ld. AO has issued notice U/s. 143(2) on 12/10/2020 after expiry of six months from the end of the financial year (FY 2019-20) in which the return is furnished. It therefore, in our considered view, attracts the proviso to section 143(2) in which case the assessment made based on such notice becomes void ab intio. Under similar circumstances, the Hon’ble ITAT, Delhi ‘C’ Bench in the case of Harman Singh Dhingra vs. ACIT (supra) has held as under: 11 “7. We have heard both the parties and perused the material available on record. Since the additional grounds are legal grounds we are firstly deciding the same by admitting the additional grounds. It is pertinent to note that the notice u/s 143(2) should have been issued till the date 30-9- 2014 but the same was issued after the statutory limit. This fact was not denied by the Ld. DR after going through the assessment records. Hence, the additional ground raised by the assessee are allowed. Thus, the assessment order itself becomes null and void ab initio as the notice issued was not issued within the specified time. Since, the assessment itself becomes nullity; there is no need to discuss the merits of the case. The appeal of the assessee is allowed.” 12. Considering the facts and circumstances of the case, provisions of section 143(2) of the Act, respectfully following the decision of the ITAT, Delhi ‘C’ Bench in the case of Harman Singh Dhingra (supra) and also following the principle of consistency, we are of the considered view that since the notice U/s. 143(2) was not issued within the statutory time limit, the assessment order passed by the Ld. AO itself becomes null and void ab initio. Thus, the legal grounds raised by the assessee in its Cross Objection vide Grounds No. 4 & 5 are allowed in assessee’s favour. 13. With respect to the other grounds raised by the assessee in its Cross Objection, since the legal issue involved in the Ground No.4 & 5 is allowed in favour of the assessee, the adjudication of other grounds on merits becomes infructuous. Hence, the 12 Grounds No. 1, 2, 3, 6, 7, 8 & 9 raised by the assessee are dismissed as infructuous. 14. In the result, Cross Objection of the assessee is partly allowed. 15. With respect to the Revenue’s appeal in ITA No.147/Viz/2022, while adjudicating the legal issue involved in the assessee’s Cross Objection, we found that the assessment order passed by the Ld. AO is null and void ab initio since the notice issued U/s. 143(2) is beyond the prescribed statutory limit of six months. Hence, the grounds raised by the Revenue in its appeal on merits have no locus standi. Accordingly, all the grounds raised by the Revenue are dismissed. 16. In the result, appeal of the Revenue is dismissed. 17. Ex-consequenti, appeal of the Revenue is dismissed and the Cross Objection filed by the assessee is partly allowed. Pronounced in the open Court on the 01 st June, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated : 01.06.2023 13 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Sri Epuru Krishna Chaitanya, Dr. No.26- 2-3312, Vedayapalem, Chaitanyapuri Colony, Nellore, Andhra Pradesh – 524004. 2. राजèव/The Revenue – Deputy Commissioner of Income Tax, Central Circle-1, 3 rd Floor, Raj Kamal Complex, Lakshmipuram Main Road, Guntur, 522007, Andhra Pradesh. 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam