M/s Bhavani Jewellers, Hyderabad V. ITO, Ward 8(2), Hyderabad

ITA 1004/HYD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6118 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Assessment record
• Section: 143(3); 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1004/HYD/2013 (ASSESSMENT YEAR: 2008-09) M/S. BHAVANI JEWELLERS, HYDERABAD [PAN: AADFB7724K] VS INCOME TAX OFFICER, WARD-8(2), HYDERABAD FOR : ASSESSEE SHRI P. MURALI MOHAN RAO, AR FOR : REVENUE SMT. G.V. HEMALATHA, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-II, HYDERABAD, DATED 25- 03-2013 PASSED U/S. 263 OF THE INCOME TAX ACT [ACT]. 2. BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SUR VEY OPERATION U/S. 133A OF THE ACT ON 06-02-2008. THERE AFTER, THE ASSESSEE-FIRM FILED ITS RETURN OF INCOME FOR THE A. Y 2008-09 ON 30- 09-2008 ADMITTING A TOTAL INCOME OF RS. 49,98,490/- . THE SAME WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT ON 24-03 -2010 AND SUBSEQUENTLY THE ASSESSMENT WAS TAKEN UP FOR SCRUTI NY U/S. 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT, ASSES SING OFFICER (AO) OBSERVED THAT THOUGH THE ASSESSEE DURING THE COURSE OF SURVEY HAS OFFERED TO PAY TAX ON THE EXCESS INCOME DISCOVERED DURING THE COURSE OF SURVEY ESTIMATED AT RS. 62,13,730/-, THE ASSESSE E HAS ONLY SHOWN DATE OF HEARING : 17.08.2016 DATE OF PRONOUNCEMENT : 19.10.2016 ITA NO. 1004/HYD/13 M/S. BHAVANI JEWELLERS PAGE 2 OF 6 AN AMOUNT OF RS. 44,90,295/- IN THE RETURN OF INCOM E AS THE INCOME OFFERED U/S. 133A. AO THEREFORE, ASKED THE ASSESSE E TO EXPLAIN AS TO WHY THE DIFFERENCE OF RS. 17,23,435/- SHOULD NOT BE TREATED AS ESCAPED INCOME AND ADDED TO THE ASSESSEES RETURN ED INCOME. THE ASSESSEE SUBMITTED HIS EXPLANATION, BUT AO WAS NOT CONVINCED WITH THE SAME AND BROUGHT THE DIFFERENCE OF THE AMOUNT T O TAX AND ALSO MADE VARIOUS OTHER ADDITIONS. AGGRIEVED, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO GRANTED PARTIAL RELIE F TO THE ASSESSEE AND ON FURTHER APPEAL BEFORE THE ITAT, THE ASSESSEE GOT RELIEF. 2.1. MEANWHILE, THE CIT, BY ASSUMING THE POWERS U/S . 263 OF THE ACT, PERUSED THE ASSESSMENT RECORDS AND OBSERVE D THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS ON LY CONSIDERED THE DIFFERENCE IN STOCKS BOTH AT THE HEAD OFFICE AN D BRANCH OFFICE AT THE TIME OF SURVEY, BUT DID NOT CONSIDER AND VERIFY THE ADDITIONAL CAPITAL INTRODUCED BY THE PARTNERS TO THE TUNE OF R S. 15,51,650/-. HE OBSERVED THAT THE AO DID NOT CALL FOR THE DETAIL S OF THE SOURCES AND THE SAME REMAINED UNEXPLAINED. THEREFORE, HE W AS OF THE OPINION THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THEREFORE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE U/S 263 OF THE ACT. THE ASSESSEE V IDE LETTER DT. 13- 03-2013, EXPLAINED THAT THE ADDITIONAL INCOME OF RS .44,90,295 OFFERED BY THE ASSESSEE U/S. 133A IN HIS RETURN OF INCOME INCLUDED A SUM OF RS. 10 LAKHS AS A SOURCE FOR CAPITAL INTRODU CED. IT WAS ALSO EXPLAINED THAT AN ADDITIONAL SUM OF RS. 4 LAKHS WAS INTRODUCED BY MR. SIVA KUMAR MASHETTY THROUGH A CHEQUE AND THE BA LANCE OF RS. 1,51,650/- HAS BEEN INTRODUCED OUT OF THE INDIVIDUA L INCOME OF THE RESPECTIVE PARTNERS. THE CIT HOWEVER, WAS NOT CONV INCED WITH THE ASSESSEES CONTENTIONS AND HELD THE ASSESSMENT ORDE R TO BE ERRONEOUS AND DIRECTED THE AO TO MAKE ENQUIRIES AND COMPLETE THE ITA NO. 1004/HYD/13 M/S. BHAVANI JEWELLERS PAGE 3 OF 6 ASSESSMENT IN ACCORDANCE WITH THE DIRECTIONS OF THE CIT. AGAINST THIS ORDER OF CIT, ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE, IN HIS RETURN OF INCOME, HAS OFFERED A SU M OF RS. 44,90,295/- AS ADDITIONAL INCOME U/S. 133A OF THE ACT. HE SUBMITTED THAT IN THE COMPUTATION OF INCOME ITSELF, THE ASSESSEE HAS GIVEN A NOTE STATING THAT THIS ADDITIONAL INCOME CO NSISTS OF THE VALUE OF DIFFERENCE IN STOCK FOUND AT THE HEAD OFFICE AND BRANCH OFFICE AT PANJAGUTTA AND ALSO ADDITIONAL CAPITAL INTRODUCED B Y THE PARTNERS OF THE FIRM IN THE FY. 2007-08. HE SUBMITTED THAT THE AO HAS CONSIDERED THE ASSESSEES COMPUTATION OF TOTAL INCO ME FILED ALONG WITH THE RETURN OF INCOME AND HAS ACCEPTED THE ASSE SSEES CONTENTIONS. THUS, ACCORDING TO HIM, WHEN THE AO H AS ACCEPTED ASSESSEES CONTENTION, THE CIT CANNOT SUBSTITUTE HI S OWN OPINION AND HOLD THE ASSESSMENT ORDER TO BE ERRONEOUS. FURT HER, HE SUBMITTED THAT CIT HAS ALSO NOT CONSIDERED THE FACT THAT THE ASSESSEE HAS EXPLAINED THE SOURCES OF THE ADDITIONA L CAPITAL BUT WITHOUT VERIFYING THE SAME HAS HELD THAT THE ASSESS MENT ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORD ING TO HIM THE CIT CANNOT REVISE THE ORDER ONLY ON THE GROUND THAT IT IS ERRONEOUS, WITHOUT GIVING A FINDING AS TO HOW THE ASSESSMENT O RDER IS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITTE D THAT THE CIT CANNOT DIRECT THE AO TO MAKE FRESH ENQUIRIES TO ARR IVE AT THE CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN SUPPORT OF THESE CONTENTIONS, HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS: I. SPECTRA SHARES & SCRIPTS (P) LTD. VS. CIT [36 TAXMA NN.COM 348] (AP); ITA NO. 1004/HYD/13 M/S. BHAVANI JEWELLERS PAGE 4 OF 6 II. ITO VS. D.G. HOUSING PROJECTS LTD., (2012) [20 TAXMANN.COM 587] (DELHI); III. NEW CYBERABAD CITY PROJECTS (P) LTD., VS. ITO (2013) [33 TAXMANN.COM 280] (HYD TRIB.) AND ALSO CBDT CIRCULAR IN F.NO.286/2/2003 IT(INV) D T.10-03-2003. 3.1. HE FURTHER SUBMITTED THAT DURING THE COURSE OF SURVEY, THE ASSESSEE HAS NEVER ADMITTED ANY INCOME TOWARDS INTRODUCTION OF ADDITIONAL INCOME BY THE PARTNERS AND THEREFORE, TH E SAME CANNOT BE THE BASIS FOR MAKING ANY ADDITION DURING THE COURSE OF ASSESSMENT WITHOUT ANY FURTHER CORROBORATIVE EVIDENCE. FURTHER , HE HAS ALSO DRAWN OUR ATTENTION TO THE STATEMENT OF SHRI NAGANA TH MASHETTY U/S. 133A OF THE ACT TO JUSTIFY THE ABOVE CONTENTIO N. THUS, ACCORDING TO HIM, THE ORDER OF CIT U/S. 263 IS NOT SUSTAINABL E. 4. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ER OF THE CIT AND SUBMITTED THAT THOUGH ASSESSEE HAS MADE A NOTE IN THE COMPUTATION OF INCOME THAT THE ADDITIONAL INCOME OF FERED U/S. 133A INCLUDES THE INTRODUCTION OF AN ADDITIONAL CAPITAL BY THE PARTNERS, THE ASSESSEE HAS NOT GIVEN ANY SPLIT-UP OR BREAK-UP OF THE SAME AND NONE OF THE OFFICERS BELOW I.E., AO OR THE CIT(A) H AVE CONSIDERED AND VERIFIED THE ISSUE. THEREFORE, ACCORDING TO HIM, T HE ASSESSMENT ORDER IS CLEARLY ERRONEOUS AND HAS RIGHTLY BEEN REVISED B Y THE CIT U/S 263 OF THE ACT. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THERE WAS A SURVEY U/S. 133 A AND DURING THE COURSE OF SURVEY, THE ASSESSEE HAD ADMITTED ABOUT T HE DIFFERENCE IN STOCK FOUND AT THE TIME OF SURVEY AND THE STOCK IN THE BOOKS OF ITA NO. 1004/HYD/13 M/S. BHAVANI JEWELLERS PAGE 5 OF 6 ACCOUNT. THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE SOURCE OF THE STOCK TO AN EXTENT AND ON THE VALUE OF THE BALANCE, HE OFFERED TO PAY TAX. THE VALUE OF THE EXCESS OF STOCK OFFERED DURI NG THE COURSE OF SURVEY WAS RS. 26,59,315/-. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS OFFERED RS. 44,90,295/- U/S. 133A OF T HE ACT AND DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS NOT A CCEPTED THE ASSESSEES CONTENTIONS OF THE CUSTOMERS GOLD ITEMS OF THE VALUE OF RS.9,20,000 BEING WITH THE ASSESSEE AND HAS MADE TH E ADDITION OF THE ENTIRE DIFFERENCE OF RS. 26,59,315/-. WE FIND THAT BEFORE THE CIT(A), THE BREAKUP OF THE AMOUNT DECLARED BY THE A SSESSEE HAS BEEN GIVEN AND THE SUM OF RS. 34,90,295/- HAS BEEN OFFERED FOR THE DIFFERENCE IN STOCK AT CHARMINAR AND PANJAGUTTA AND A SUM OF RS. 10 LAKHS HAS BEEN OFFERED FOR VARIOUS DISCREPANCIES . THE ASSESSEE HAS NOT EXPLAINED AS TO WHAT ARE THE DISCREPANCIES, HOWEVER, IN THE COMPUTATION OF INCOME, THE NOTE CLEARLY STATES THAT IT IS ON ACCOUNT OF ADDITIONAL CAPITAL INTRODUCED BY THE PARTNERS OF THE FIRM. CLEARLY, THE AO HAS NOT VERIFIED THIS CLAIM OF THE ASSESSEE. THUS, THAT WOULD MAKE THE ASSESSMENT ORDER ERRONEOUS. BUT TO REVISE AN ASSESSMENT ORDER U/S 263 OF THE ACT, THE TWIN CONDITIONS ARE T HAT THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIA L TO THE INTEREST OF THE REVENUE ARE TO BE SATISFIED. THOUGH THE ASS ESSEE HAS EXPLAINED THE SOURCES FOR INTRODUCTION OF ADDITIONA L CAPITAL BY THE PARTNERS, THE CIT HAS NEITHER VERIFIED ANY OF THESE CONTENTIONS BEFORE HIM NOR HAS HE GIVEN ANY REASON AS TO WHY SUCH CONT ENTIONS ARE NOT ACCEPTABLE HOLDING THAT THE ASSESSMENT ORDER IS PRE JUDICIAL TO THE INTEREST OF THE REVENUE. 5.1. AS HELD BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD., (2012) [20 TAXM ANN.COM 587] (SUPRA), THE CIT HAS TO MAKE ENQUIRIES HIMSELF TO A RRIVE AT THE ITA NO. 1004/HYD/13 M/S. BHAVANI JEWELLERS PAGE 6 OF 6 CONCLUSION THAT THE ASSESSMENT ORDER IS BOTH ERRONE OUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. CIT CA NNOT DIRECT THE AO TO MAKE ENQUIRIES AS TO WHETHER THE ASSESSMENT ORDE R IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. AS THE CIT IN THE PRESENT CASE HAS FAILED TO SATISFY THE ABOVE CO NDITIONS, WE ARE OF THE OPINION THAT THE REVISION ORDER IS NOT SUSTAINA BLE. FURTHER, THE SOURCE OF THE CAPITAL INTRODUCED BY THE PARTNERS HA S TO BE EXAMINED IN THE HANDS OF THE INDIVIDUAL PARTNERS. THE ASSESS EE HAS ALREADY EXPLAINED THE SOURCE AND THE CIT HAS NOT FOUND THE SAID SOURCES AS NOT ACCEPTABLE. THEREFORE, WE SET ASIDE THE REVISIO N ORDER U/S 263 OF THE ACT. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER, 2016 SD/- SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 19 TH OCTOBER, 2016. TNMM & VINODAN/SPS COPY TO: 1 M/S. BHAVANI JEWELLERS, HYDERABAD. C/O. P. MURALI & CO., CHARTERED ACCOUNTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2 THE INCOME TAX OFFICER, WARD-8(2), HYDERABAD. 3 CIT-II, HYDERABAD. 4 THE DR, ITAT HYDERABAD 5 GUARD FILE BY ORDER