ITO, Ward-2, Nandyal, Nandyal V. G. Mahesh Rao, Kurnool, Kurnool

ITA 1096/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2467 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: G KALYAN DAS
• Keywords: Opportunity of being heard; Audit objection; Assessment record
• Section: 40A(3); 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A , HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NOS. 1234/HYD/2015 & 1066/HYD/2016 ASSESSMENT YEAR: 2009-10 G. MAHESH RAO, KURNOOL. PAN AKDPG 8775 H VS INCOME-TAX OFFICER, WARD 2, NANDYAL. (APPELLANT) (RESPONDENT) I.T.A. NO. 1096/HYD/2016 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WARD 2, NANDYAL VS G. MAHESH RAO, KURNOOL. PAN AKDPG 8775 H (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI G. KALYANDAS & HARISH FOR REVENUE : SHRI P. CHANDRA SEKHAR DATE OF HEARING : 18-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER V. DURGA RAO, J.M.: THESE APPEALS FILED BY THE ASSESSEE AS WELL AS REVE NUE ARE DIRECTED AGAINST THE ORDERS OF CIT-III FOR AY 2009- 10. ITA NO. 1234/HYD/2015. 2. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), HYDERABAD DATED 28/03/2014, PASSED U/S 263 OF THE ACT. I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 2 -: 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS IN THE BUSINESS FILED RETURN OF INCOME FOR THE AY 2009-10 DECLARING TOTAL INCOME OF RS. 1,72,996/- ON 07/08/2009, WHICH WAS P ROCESSED U/S 143(1) OF THE ACT. THEREAFTER ASSESSMENT WAS COMPLE TED U/S 143(3) ACCEPTING THE RETURN FILED BY THE ASSESSEE. 4. THEREAFTER, THE CIT BY EXERCISING HIS POWER U/S 263 OF THE ACT CALLED FOR THE ASSESSMENT RECORDS OF THE ASSESSEE A ND AFTER EXAMINING THE SAME, CAME TO A CONCLUSION THAT THE AO HAS NOT EXAMINED THE BANK ACCOUNTS AND ALSO CERTAIN PAYMENT MADE BY THE ASSESSEE WHICH WERE EXCEEDED MORE THAN RS. 20,000/-. THE CIT RECOR DED A FINDING THAT THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) HAS NOT EXAMINED THE DETAILS PROPERLY, THEREFORE, THE A SSESSMENT MADE U/S 143(3) HAS BEEN RENDERED ERRONEOUSLY AND HENCE, THE SAME IS PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGL Y, A NOTICE U/S 263 WAS ISSUED TO THE ASSESSEE. THOUGH THE OPPORTUNITIE S GIVEN TO THE ASSESSEE, THE ASSESSEE NEITHER APPEARED NOR FILED ANY DETAILS BEFORE THE CIT. THE CIT, THEREFORE, CONSIDERING THE RECORD S AVAILABLE WITH HIM, OBSERVED THAT THE AO FAILED TO MAKE NECESSARY ENQUIRIES AND EXAMINED THE RECORD AND COMPLETED THE ASSESSMENT U/ S 143(3), WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF RE VENUE. ACCORDINGLY, HE DIRECTED THE AO TO RE-DO THE ASSESSMENT BY SETTI NG ASIDE THE ORDER PASSED BY THE AO U/S 143(3) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AO COMPLETED THE ASSESSMENT U/S 143(3) AFTER MAKING NECESSARY ENQUIRES AND, THEREFORE, THE ORDER PASSED BY THE AO DOES NOT COME UNDER THE PURVIEW OF SECTION 263 AND THE SAME MAY B E QUASHED. I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 3 -: 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE AO ACCEPTED THE RETURN FILED BY THE ASSESSEE WITHOUT MAKING ANY ENQUIRY AND WITHOUT CALLING FOR ANY DETAILS AND, THEREFORE, THE ORDER PASSED BY THE CIT U/S 263 IS WITHIN SCOPE OF SECTION 263 AND SUPP ORTED THE ORDER OF THE CIT. 8. CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL FACTS ON RECORD. IT IS OBSERVED THAT THE CIT EXERCISING H IS POWERS VESTED U/S 263 SET ASIDE THE ORDER OF THE AO PASSED U/S 143(3) ON THE GROUND THAT THE AO HAS NOT MADE ANY ENQUIRY NOR CALLED FOR ANY DETAILS IN RESPECT OF BANK DEPOSITS AND ALSO IN RESPECT OF PAYMENTS WH ICH EXCEEDED RS. 20,000/- AND SIMPLY ACCEPTED THE RETURN FILED BY T HE ASSESSEE. WE ALSO FIND THAT THE CIT HAS CORRECTLY SET ASIDE THE ORDER OF THE AO AND DIRECTED TO REDO THE ASSESSMENT AS THE AO HAS NOT MADE ANY ENQUIRY AND NO DETAILS WERE CALLED FOR, BUT, SIMPLY ACCEPTE D THE RETURN FILED BY THE ASSESSEE. WHEN THE BENCH HAS SPECIALLY POINTED OUT TO THE LD. AR OF THE ASSESSEE THAT ANY QUESTIONNAIRE ISSUED OR AN Y DETAILS WERE CALLED FOR BY THE AO DURING THE COURSE OF ASSESSMEN T, THE LD. AR SUBMITTED THAT NO SUCH QUESTIONNAIRE AND DETAILS WE RE CALLED FOR BY THE AO. THEREFORE, IN THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE, WE ARE INCLINED TO ACCEPT THE ACTION OF THE C IT IN EXERCISING HIS POWER U/S 263 IN SETTING ASIDE THE ORDER OF THE AO PASSED U/S 143(3) AND DIRECTED TO REDO THE ASSESSMENT. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D. ITA NOS. 1066/HYD16 AND ITA NO. 1096/HYD/16 10. BOTH THESE ARE CROSS APPEALS DIRECTED AGAINST T HE ORDER OF CIT(A), KURNOOL DATED 30/05/2016. I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 4 -: 11. SUBSEQUENT TO THE REVISION ORDER PASSED U/S 2 63 OF THE ACT, DATED 28/03/2014, THE AO ISSUED A SHOW CAUSE NOTICE TO APPEAR THE ASSESSEE BEFORE HIM. HOWEVER, ASSESSEE DID NOT APPE AR BEFORE THE AO. THE AO OBSERVED THAT DURING THE FY 2008-09 REL EVANT TO AY 2009-10, THERE WERE CASH DEPOSITS OF RS. 30,34,850/ - IN SB ACCOUNT NO. 0063-G40941-001 IN INDUS IND BANK. AS THE ASSES SEE DID NOT APPEAR INSPITE OF SUFFICIENT OPPORTUNITIES PROVIDED TO ASSESSEE TO EXPLAIN THE SOURCE FOR THESE CASH DEPOSITS, THE AO TREATED THE SAID CASH DEPOSITS OF RS. 30,34,850/- AS UNACOUNTED CASH DEPOSITS AND ADDED THE SAME TO THE INCOME RETURNED BY THE ASSESS EE. 11.1 IN RESPECT OF DISALLOWANCE OF RS. 3,17,825/- U /S 40A(3), THE AO OBSERVED THAT AS PER THE LEDGER ACCOUNT ASSESSEE HA D INCURRED DIESEL EXPENSES OF RS. 3,17,825/- OTHERWISE THAN BY ACCOUN T PAYEE CHEQUES FOR AMOUNTS EXCEEDING OR EQUAL TO RS. 20,000/-. THE REFORE, THE AO DISALLOWED THE SAID AMOUNT AND ADDED TO THE INCOME RETURNED. 12. ON AN APPEAL BEFORE THE CIT(A), IT WAS SUBMITTE D BEFORE THE CIT(A) THAT THE AMOUNT OF RS. 30,34,850/- IN THE BA NK ACCOUNT RELATED TO M/S MADHURI AGENCIES IN WHICH THE ASSESSEE IS A PARTNER AND, THEREFORE, THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. THE CIT(A) SIMPLY REJECTED THE SUBMISSIONS OF THE A SSESSEE ON THE GROUND THAT THE ACCOUNT MAINTAINED BY THE ASSESSEE AND, THEREFORE, IT CANNOT BE SAID THAT THE AMOUNT BELONGING TO THE FIR M I.E. M/S MADHURI AGENCIES. ACCORDINGLY, HE CONFIRMED THE ACTION OF T HE AO. 12.1 AS REGARDS THE DISALLOWANCE OF DIESEL EXPENSES TO THE TUNE OF RS. 3,17,825/- U/S 40A(3), THE ASSESSEE IN HIS WRIT TEN SUBMISSIONS STATED THAT HE HAD INCURRED DIESEL EXPENSES OF RS. 12,71,116/- DURING THE AY RS. 12,71,116/- AND NOT RS. 3,17,825/- AS ST ATED BY AO. HE FURTHER STATED THAT THE ASSESSEE HAD NOT VIOLATED T HE PROVISIONS OF I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 5 -: SECTION 40A(3) AS THE EXPENDITURE INCURRED ON DIESE L WAS NEVER EXCEEDED THE LIMIT OF RS. 20,000/- OF EACH PAYMENT. 12.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE CIT(A) OBSERVED THAT THE AO HAD FAILED TO APPRECIATE THE I SSUE PROPERLY AND MADE AN ERRONEOUS ADDITION TREATING THE TOTAL SUM O F DIESEL EXPENDITURE AS PAYMENTS ATTRACTING 40A(3), HE, THER EFORE, DIRECTED THE AO TO DELETE THE ADDITION. 13. AGGRIEVED BY THE ORDER OF THE CIT(A) BOTH THE A SSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. ASSESSEE IS IN APPEAL AGAINST THE ADDITION MADE ON ACCOUNTS OF CASH DEPOSITS WHILE RE VENUE IS IN APPEAL AGAINST DELETION OF ADDITION U/S 40A(3). 14. AS REGARDS THE ADDITION OF RS. 30,34,850/-, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE MAY BE REMITTED B ACK TO THE FILE OF THE AO TO SUBSTANTIATE THE ASSESSEE CLAIM AS THE AO PASSED EX-PARTE ORDER. 15. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E ASSESSEE NEITHER APPEARED BEFORE THE AO NOR FILED RELEVANT D ETAILS BEFORE THE AO, THEREFORE, THE ORDER OF THE AO MAY BE UPHELD. 16. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE LEVANT MATERIAL ON RECORD, WHEN THE AO FOUND CERTAIN DEPOSITS OF RS . 30,34,850/- IN THE BANK, HE ASKED THE ASSESSEE TO EXPLAIN THE SOUR CE OF SUCH DEPOSITS, BUT, THE ASSESSEE DID NOT APPEAR BEFORE T HE AO. HOWEVER, BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE DEPOSITS IN THE BANK WERE BELONGING TO THE FIRM M/S MADHURI AGENCIE S. THE CIT(A) REFUSED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE A ND CONFIRMED THE ADDITION MADE BY THE AO. THE ONLY ISSUE TO BE DECID ED BY US IS WHETHER THE DEPOSITS BELONGING TO THE ASSESSEE OR T O THE FIRM M/S I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 6 -: MAHDURI AGENCIES ?. THE ISSUE NEEDS A DETAILED EXAM INATION, AND THEREFORE, TO MEET THE ENDS OF JUSTICE, WE REMIT TH E ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE ALL THE DETAILS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECT ED TO SUBSTANTIATE HIS CLAIM BEFORE THE AO BY WAY OF DOCUMENTARY PROOF . 17. AS REGARDS THE DISALLOWANCE OF DIESEL EXPENSES TO THE TUNE OF RS. 3,17,825/- U/S 40A(3) IS CONCERNED, THE LD. DR INVITED THE BENCH ATTENTION TO THE PAPER BOOK AT PAGES 43, 49,50, 51, 52 & 53 TO SUBMIT THAT CERTAIN AMOUNTS PAID BY THE ASSESSEE IN CASH E XCEEDED RS. 20,000/-, THEREFORE, THE ASSESSEE VIOLATED THE PROV ISIONS OF SECTION 40A(3). HE ARGUED THAT THE CIT(A) WITHOUT EXAMINING THE DETAILS, SIMPLY DELETED THE ADDITION MADE BY THE AO, THEREFO RE, THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO IS RESTO RED ON THIS ISSUE. 18. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPEAL FILED BY THE REVENUE COMES UNDER BELOW RS. 10 LAKHS, HENCE, THE APPEAL IS NOT MAINTAINABLE. 19. THE LD. DR SUBMITTED THAT THIS CASE IS TAKEN UP FOR SCRUTINY AS OBJECTED BY THE AUDIT PARTY AND, THEREFORE, THE APP EAL COMES UNDER EXCEPTION PROVIDED IN THE CIRCULAR ISSUED THE CBDT VICE ITS NO.21/2015 DATED 10 TH DECEMBER, 2015. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. IT IS OBSERVED THAT THE AO HAS MAD E AN ADDITION OF RS. 3,17,825/- ON THE GROUND THAT THE ASSESSEE HAS MADE THE PAYMENTS BY WAY OF CASH EXCEEDING RS. 20,000/- IN CONTRAVENTION OF PROVISION OF SECTION 40A(3). BEFORE THE CIT(A), THE ASSESSEE IN HIS WRITTEN SUBMISSIONS STATED THAT HE HAS INCURRED DIESEL EXPE NSES OF RS. 12,71,116/- DURING THE YEAR UNDER CONSIDERATION AND NOT RS. I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 7 -: 3,17,.825/- AS STATED BY THE AO. THE CIT(A) WITHOUT EXAMINING THE RECORD, DELETED THE ADDITION. WE FIND THAT IN THE P APER BOOK AT PAGES 49 TO 53, AS POINTED OUT BY THE LD. DR, THERE ARE C ERTAIN PAYMENTS, WHICH EXCEEDED RS. 20,000/-. HOWEVER, THE AMOUNT ME NTIONED BY THE AO AND THE AMOUNT MENTIONED BY THE LD. DR ARE NOT M ATCHING AND THERE IS A DIFFERENCE IN THE TOTAL AMOUNT. THUS, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND REMIT THE MATTER BACK TO T HE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE LEDGER ACCOUNT OF T HE ASSESSEE AND, IF, HE FOUND ANY VIOLATION BY THE ASSESSEE IN MAKING TH E CASH PAYMENTS EXCEEDING RS. 20,000/-, INVOKE THE PROVISIONS OF SE CTION 40A(3) AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 20.1 SO FAR AS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE REVENUES APPEAL IS NOT MAINTAINABLE AS THE APP EAL IS BELOW RS. 10/- LAKHS, LD. DR SUBMITTED THAT THIS CASE IS TAKE N UP FOR SCRUTINY AS OBJECTED BY THE AUDIT PARTY AND, THEREFORE, THE APP EAL COMES UNDER EXCEPTION PROVIDED IN THE CIRCULAR ISSUED BY THE CB DT VIDE ITS NO.21/2015 DATED 10 TH DECEMBER, 2015. IT IS A FACT THAT SCRUTINY HAS TAKEN PLACE BECAUSE OF AUDIT OBJECTION AND THIS FAC T HAS NOT BEEN DISPUTED BY THE LD. COUNSEL. IN VIEW OF THE ABOVE C IRCULAR, THE OBJECTION RAISED BY THE AR IS REJECTED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL A S APPEAL OF THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURP OSES. I.T.A. NOS. 1234, 1066 & 1096/HYD/2016 G. MAHESH RAO, KURNOOL :- 8 -: 22. TO SUM UP, APPEAL IN ITA NO. 1234/H/2015 IS DIS MISSED AND THE APPEALS IN ITA NOS. 1066 & 1096/HYD/2015 ARE ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 26 TH MAY , 2017. KV 1 G. MAHESH RAO, C/O M/S KALYANDAS & CO., CAS, 15, VENKATESWARA COLONY, NARAYANAGUDA, HYDERABAD 500 029. 2 ITO, WARD 2, NANDYAL 3 CIT (A), KURNOOL 4 PR. CIT, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE 1. DRAFT DICTATED ON 2. DRAFT PLACED BEFORE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER