Dy. Commissioner of Income Tax, Hyderabad V. Sri B.Ravi Kumar Reddy, Bangalore

ITA 1147/Hyd/2013

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5304 (ITAT-BANGALORE)
• Duration Of Justice: 8 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: V. CHANDRASHEKAR
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 148; 69C; 153A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER Appeal No. Appellant Respondent Assessment Year ITA No. 720/Hyd/2013 Shri B. Ravi Kumar Reddy, No. 48/1, C.M. Mohan Building, Tumkur Road, Yeshwanthpur, Bangalore. PAN: ADLPR6631A The Assistant Commissioner of Income Tax, Central Circle 3, Hyderabad. 2008-09 ITA No. 1147/Hyd/2013 The Deputy Commissioner of Income Tax, Central Circle – 3, Hyderabad. Shri B. Ravi Kumar Reddy, No. 48/1, C.M. Mohan Building, Tumkur Road, Yeshwanthpur, Bangalore. PAN: ADLPR6631A C.O. No. 26/Hyd/2014 (in ITA No. 1147/Hyd/2013) Shri B. Ravi Kumar Reddy, No. 48/1, C.M. Mohan Building, Tumkur Road, Yeshwanthpur, Bangalore. PAN: ADLPR6631A The Deputy Commissioner of Income Tax, Central Circle – 3, Hyderabad. Assessee by : Shri V. Chandrashekar, Advocate Revenue by : Dr. Manjunath Karkihalli, CIT- DR Date of Hearing : 23-02-2022 Date of Pronouncement : 04-04-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present cross appeals filed by assessee as well as revenue arises out of order dated 25/03/2013 passed by the Ld.CIT(A)-V, Hyderabad for assessment year 2008-09. Page 2 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 2. Brief facts of the case are as under: 2.1 The assessee is an individual carrying on with business as a proprietary concern under the style of M/s. Macro Precision Components. The assessee filed the original return of income on 29/09/2008 with DCIT/ACIT Central Circle 9(1), Bangalore. 2.2 Subsequently, a search and seizure operation under section 132 of the Act was conducted on 16/12/2008, in case of M/s.ARM Construction Ltd., and its group companies. This was followed by search and seizure operation in case of Shri L.Tulsi Prasad and others, wherein the assessee’s case was also covered. The entire group was centralised with DCIT Central Circle-7 Hyderabad. 2.3 Notice under section 153A of the Act was issued to assessee on 19/06/2009, calling for returns for assessment years 2003-04 to 2008-09. In response to said notice, the assessee filed return on 10/06/2010 and declared the total income of ₹1,36,95,180/-. 3. The Ld.AO passed order under section 143 (3) read with 153A of the Act on 31/12/2010 and determined the income of assessee as under: Page 3 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 4. Aggrieved by the additions made, the assessee filed appeal before the Ld. CIT(A), Hyderabad, who allowed the appeal on merits of the case. However, the legal issues raised by the assessee challenging issuance of common notice under section 143 (2) for assessment years 2003-04 to 2009-10 and the issue regarding validity of the search was dismissed. Aggrieved by the order of Ld.CIT(A), the assessee, as well as revenue, are in appeal before this Tribunal. The assessee also filed across objection in the appeal filed by the revenue. 5. The Ld.AR at this juncture informed that the cross objection is filed with the delay of 139 days. Revenue Appeal: 6. The issue alleged by the revenue in their appeal is against the unexplained cash credits under section 68, being deleted, and allowing relief of Rs.414.79 crores to assessee being unexplained expenditure towards SEZ. 7. The Ld.AR as well as the revenue submitted that additional evidence was filed before the Ld. CIT(A) and a remand report was obtained. The Ld.AO, however did not carry out necessary verification in respect of the same. It is thus submitted that, these issues may be remanded to the Ld.AO for consideration and verification of the evidence filed by the assessee. 8. Based on the above submission by both sides, we remand the issue alleged by revenue in their appeal to Ld.AO. The assessee shall file all relevant details before the Ld.AO, based on which, necessary de novo verification will be carried out. The claim of assessee will be considered in accordance with law having regard Page 4 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 to the evidence filed by assessee. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly the appeal filed by revenue stands allowed for statistical purposes. 9. As we have remanded the appeal filed by revenue, the cross objection filed by assessee becomes infructuous. However the Ld.AR, at the time of argument withdrew the cross objection. Accordingly the cross objection filed by assessee stands dismissed as withdrawn. Assessee’s Appeal: 10. The Ld.AR submitted that, Ground No.1 is general in nature and do not require adjudication. 11. The Ld.AR submitted that, the assessee do not wish to argue Ground No.2, as the said issue is now settled against assessee by virtue of amendment to Sec. 132. 12. The Ld.AR submitted that issues raised in Ground Nos.4, 5 and 7 would get remanded to the Ld.AO, pursuance to the appeal filed by revenue being remanded for de novo verification. We therefore, remanded Ground Nos.4, 5 and 7 to the Ld.AO with similar direction to carry out necessary verification based on the evidences/documents filed by assessee and to consider the claim in accordance with law. Accordingly, Ground Nos.4, 5 and 7 stands allowed for statistical purposes. The only issue that remains to be adjudicated in assessee’s appeal are raised in Ground Nos. 3, 6 and 8. Ground No.3: Page 5 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 13. The assessee alleges that, mandatory notice under section 143 (2) of the Act was not issued in accordance with law, for year under consideration. It is submitted that a common notice was issued for all the years from assessment year 2003-04 to 2009- 10, and that, a single notice covering a period of more assessment year was bad in law. 14. On the contrary, the Ld. CIT.DR submitted that, the Act emphasises issuance of notice under section 143(2), consequent to search, which is not disputed by the assessee. He thus supported the order passed by the Ld.CIT(A). We have perused the submissions advanced by both sides in the light of records placed before us. 15. Admittedly, the notice under section 143(2) was issued to assessee. This is a case where the notice under section 153A of the Act has been issued for the relevant assessment year under consideration. The assessee is therefore already intimated of the proceedings that has been initiated against him, notice u/s.143(2) though issued for all the years under consideration, will not invalidate the proceedings, as the entire assessment is open to the assessment, at the time, when the notice under section 153A was issued. We note that the assessee did not raise objection before the Ld.AO regarding the same. Be that as it may, as the entire assessment for year under consideration abated, and notice under section 153A was issued to assessee, the subsequent issuance of notice under section 143(2) becomes mere procedure to be followed mandatorily. Page 6 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 16. We note that the decision relied by the Ld.AR is in respect of notice under section 148 which cannot be jointly issued for various assessment years and Hon’ble Allahabad High Court decided the issuance of notice under section 148 vis-à-vis relevant assessment year, qua the reason to believe on some tangible material/information. In our view this decision do not support the argument of the assessee in the present facts of the case. No other decision with identical fact was filed by the assessee or has come to our notice. We therefore do not find any merit in the legal issue raised by assessee. Accordingly this ground race of assessee stands dismissed. 17. Ground number 6 and 8: These grounds are raised by assessee against the addition of unexplained expenditure under section 69C of the Act. 18. The Ld.AR submitted that, during the course of search, certain loose papers marked as A/AMR/RES/01 dated 16/12/2008, numbered serially as 2 to 6, were found and seized, in case of Shri A Mahesh Reddy and others, the Ld.AO reproduce the content of this material in the assessment order, and observed that, various expenses were shown to be incurred by Shri.Mahesh Reddy and assessee. 19. Before us, the Ld.AR submitted that, an identical expenditure based on same loose sheet marked as A/AMR/RES/01 dt. 16.12.2008 pages 2 to 6 disallowed in case of Shri Mahesh Reddy was considered by Hon’ble Hyderabad Tribunal by order dated 19/04/2013 as under: Page 7 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 “74. We have heard both the parties and perused the material on record. In this case the addition is made on the basis of entries in the loose sheets. In the loose sheets it does not contain date. The said seized material marked as A/AMR/Res/ 01 page Nos. 2 to 6 is placed on record in Paper Book-II page Nos. 184-186. In our opinion, these loose sheets cannot be considered as a basis for addition unless supported by corroborative evidence. The addition is based only on surmises and conjectures. It is a dumb document that cannot be acted upon as it is not supported by corroborative material to substantiate Department's version. The Tribunal and various High Courts again and again reiterated that unsubstantiated loose sheets cannot be a basis for addition. In similar circumstances, the Tribunal in the case of Gyan Kumar Agarwal vs. ACIT (60 DTR 241) (Hyd) (146 TTJ 334). held as follows: "The note book/loose slips marked A/GAR/05 found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. If there is circumstantial evidence in the form of promissory notes, loan agreement and address of the parties or bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips carrying on money lending business of the assessee. The assessing officer has failed to prove the money lending business carried on by the assessee on the basis of seized material A/GAR/05. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business." 75. In view of the above discussion, we are inclined to reverse the order of the CIT(A) on this issue. In the result, ITA No. 1241/Hyd/2012 is partly allowed.” The Ld.AR submitted that, it is the same seized material, based on which, the addition was deleted by holding that, there was no corroborative material or any circumstantial evidence to support the addition. 20. On the contrary the Ld.CIT.DR relied on the decision of Hon’ble Chandigarh bench in case of ITA no.449/CHD/2019 by Page 8 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 order dated 17/09/2019, decision of Hon’ble Jaipur Bench in ITA No.998/JP/2013 by order dated 22/01/2016 and decision of Hon’ble Delhi High Court in case of Mahavir Woollen Mills vs. CIT reported in 245 ITR 297. We have perused submissions advanced by both sides in light of records placed before us. 21. We note that identical addition made in the hands of Shri Mahesh Reddy based on the same document that were seized. Hon’ble Hyderabad Tribunal deleted the addition by observing that, there was no corroborative evidence / circumstantial materials available in order to uphold the addition. Before us, the revenue in the present case was not able to bring out any circumstantial evidence in support of the loose sheets to strengthen the addition made by the Ld.AO. The decision relied by the revenue in case of Mahavir Woollen Mills vs. CIT (supra) supports the observation of Hon’ble Hyderabad Tribunal (supra). In the facts before the Hon’ble Delhi High Court, there were corroborative materials in order to support the basis of the addition. No statements are recorded to substantiate the addition made. Respectfully following the decision of Hon’ble Hyderabad Tribunal reproduced hereinabove, we direct the Ld.AO to delete the addition made in the hands of assessee in respect of the alleged unexplained expenditure under section 69C of the Act. Accordingly these grounds 6 and 8 stands allowed. 22. Ground No.9 is consequential nature and therefore do not require any adjudication. Page 9 of 9 ITA Nos. 720 & 1147/Hyd/2013 & C.O. No. 26/Hyd/2014 23. Ground No.10-11 are general in nature therefore do not require any adjudication. In the result appeal filed by assessee stands partly allowed as indicated hereinabove and cross objection filed by assessee stands dismissed as withdrawn. The appeal filed by revenue stands allowed for statistical purposes. Order pronounced in open court on 04 th April, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 04 th April, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore