Challamcherla Hanumantha Rao, Guntur V. The Income Tax Officer, Ward-2, , Narasaraopet

ITA 110/VIZ/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0187 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 10-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Transfer pricing; Assessment record
• Section: 263; 40A(3); 143(3); 153C; 92CA

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.135/Viz/2019 (ननधधारण वर्ा / Assessment Year : 2012-13) M/s Sai Bhagya Lakshmi Estates D.No.5-9-11, Rajakawada Narsaraopeta, Guntur [PAN : ACAFS9780P] Vs. Income Tax Officer Ward-2 Narasaraopet (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)\ आयकर अपील सं./I.T.A.No.110/Viz/2019 (ननधधारण वर्ा / Assessment Year : 2014-15) Sri Challamcherla Hanumantha Rao D.No.5-7-10/A, Rajakawada Narsaraopeta, Guntur [PAN : ALNPC4446L] Vs. Income Tax Officer Ward-2 Narasaraopet (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri I Kama Sastry, AR प्रत्यधथी की ओर से / Respondent by : Shri MN Murthy Naik, CIT(DR) सुनवधई की तधरीख / Date of Hearing : 27.07.2022 घोर्णध की तधरीख/Date of Pronouncement : 19.10.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : These appeals are filed by the assessees against the orders of the Principal Commissioner of Income Tax [in short, [Pr.CIT], Guntur dated 08.02.2019 for the Assessment Year (A.Y.) 2012-13 and 2014-15. Since the 2 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet grounds raised in these appeals are identical, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under. Grounds of the case are extracted from I.T.A.No.135/Viz/2019. 2. The assessee raised the following grounds of appeal : 1. In the facts of the case and as per law the order passed by the Ld.Pr.CIT Rajahmundry is not correct. 2. The order of the Ld.Pr.CIT is contradictory in the sense that at paragraph 8.3 of his order he is directing the Assessing Officer to disallow the amount of Rs.1,21,33,000/- on the other hand at paragraph 11 he is directing the Assessing Officer to redo the assessment in accordance with law and established procedure after affording the assessee an opportunity of hearing. 3. The Ld.Pr.CIT, Guntur is not correct in issuing directions to the AO to redo the assessment by making enquiries from the point of view of disallowance under section 40A(3) of the amount of Rs.1,21,33,000/- paid in cash by the assessee towards purchase of immovable property when relevant enquiries were made by the AO and after considering the submissions of the assessee only the ld.AO passed the order under section 143(3) r.w.s. 153C dated 30.12.2016. 4. All the above grounds are without prejudice to one another 5. The appellant craves, leave to amend, alter or delete any of the above grounds of appeal. Brief facts of the case are that the assessee is a firm. During the course of search & seizure operation in the case of Sri Gunda Sambasiva Rao on 15.10.2014, some incriminating material was found and seized in the case of the assessee. Assessment was completed u/s 143(3) r.w.s. 153C 3 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet of the Income Tax Act, 1961 (in short ‘Act’) dated 29.12.2016, determining total income at Rs.2,26,550/- by disallowing brokerage of Rs.1,34,500/- u/s 40(a)(ia) of the Act. Subsequently, the Ld.Pr.CIT has called for the case records of the assessee firm for the A.Y.2012-13 and examined by virtue of powers vested u/s 263 of the Act. On verification of the assessment record, it is observed that the assessee has made cash payments of Rs.1,21,33,000/- towards purchase of land in violation of the provisions of sec.40A(3) of the Act. The Ld.Pr.CIT observed that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and the entire amount of Rs.1,21,33,000/- has to be disallowed and brought to tax u/s 40A(3) of the Act for the A.Y.2012-13 as the said issue was not considered in the assessment order passed u/s 143(3) r.w.s. 153C of the Act dated 29.12.2016. Hence, issued a show cause notice dated 10.01.2019 to the assessee as to why the assessment order passed on 29.12.2016 should not be revised u/s 263 of the Act. The assessee filed written submissions before the Ld.Pr.CIT and submitted that the payments were made in cash due to business exigencies and circumstances beyond the control of the assessee and the AO has considered the explanation for cash expenditure. The assessee further submitted that all the major investments were flown from Sri Gunda Sambasiva Rao and taxed in his 4 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet hands which cannot be taxed again in the hands of the assessee on the reason that section 40A(3) was not complied with, which results in double taxation. Hence. requested to consider the plea and drop the proceedings. 3. However, the Ld.Pr.CIT observed that there is no mention / discussion by the AO regarding cash payment in violation of section 40A(3) of the Act towards purchase of land from farmers either in the assessment order or in the office note and considered by the AO during the course of scrutiny proceedings is not a valid argument and only an afterthought. The assessee could not produce any evidentiary material / documents towards his claim for non-disallowance u/s 40A(3) of the Act on payments made in cash in excess of Rs.20,000/- towards purchase of land from farmer and the assessee could not explain satisfactorily how the payments made to farmers were expediency of business. The Ld.Pr.CIT observed that the AO failed to make any analysis of the information available on record, having not examined the same properly and completing the assessment makes the assessment erroneous as well as prejudicial to the interest of the revenue. Hence, directed the AO to disallow the entire amount of Rs.1,21,33,000/- u/s 40A(3) of the Act and tax the same for the A.Y.2012-13. 5 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet 4. Aggrieved by the order of the Ld.Pr.CIT, the assessee preferred an appeal before the Tribunal and filed a letter to admit the additional grounds of appeal raised as under : “On the facts and in the circumstances of the case and in law the assumption of jurisdiction by the Ld.AO under section 153C is bad in law. Therefore, the order passed by him under section 153C r.w.s 143(3) is null and void being without jurisdiction, consequently the order under section 263 passed by the Pr.Commissioner of Income Tax directing the Assessing Officer to revise an invalid order is also ab initio void.” The Ld.AR submitted that the Ld.AO has sent a proposal to the Ld.Pr.CIT to revise the order u/s 263 of the Act passed by the AO u/s 143(3) r.w.s. 153C of the Act. The Ld.AR produced the copy of the proposal sent by the AO on 02.01.2019, which was acknowledged by the Ld.Pr.CIT on 03.01.2019. The Ld.AR, therefore, pleaded that the proposal sent by the AO is not legally valid and pleaded to quash the order of the Ld.Pr.CIT. 5. On the other hand, the Ld.DR relied on the order of the Ld.Pr.CIT and requested to uphold the order of the Ld.Pr.CIT and dismiss the appeal of the assessee. 6. We have heard both the parties and perused the material placed on record. We find merit in the argument of the Ld.AR that the Ld.Pr.CIT has directed the AO to revise the assessment order passed on the proposal sent 6 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet by the Ld.AO. In this connection, it is appropriate to quote section 263 of the Act which reads as follows : 263. (1) The 88 [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 89 [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90 [including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer 91 [or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 92 [or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; 92 [(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal 93 [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 92 [or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the* Principal Commissioner or Commissioner under this sub- 7 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94 [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95 [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 96 [Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.] On plain reading of the above section, it is clear that the Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous, in so far as it is prejudicial to the interest of the revenue. In the instant case, the Commissioner reopened the case u/s 263 of the Act based on the proposal sent by the AO and not on his own volition. We are therefore, of the considered view that reopening is bad in law and hence, we quash the order of the Ld.Pr.CIT. 7. Since the additional ground is adjudicated and allowed, other grounds raised by the assessee become infructuous, hence, not adjudicated. 8 ITA No.135/Viz/2019 & 110/Viz/2019, A.Y.2012-13 AND 2014-15 M/s Sai Bhagya Lakshmi Estates & Sri Challamcherla Hanumantha Rao, Narsaraopet 8. In the result, the appeals of the assessees are allowed. Order pronounced in the open court on 19 th October, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIAL MEMBER Dated : 19.10.2022 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– (i) M/s Sai Bhagya Lakshmi Estates, D.No.5-9- 11, Rajakawada, Narsaraopeta, Guntur (ii) Sri Challamcherla Hanumantha Rao, D.No.5-7-10/A, Rajakawada, Narsaraopeta, Guntur 2. रधजस्व/The Revenue – Income Tax Officer, Ward-2, Narasaraopet 3. प्रधान आयकर आयुक्त /The Principal Commissioner of Income, Guntur 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 5.गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam