Nama Krishnaiah, Hyderabad, Hyderabad V. DCIT, Central Circle 2(1), Hyderabad, Hyderabad

ITA 1149/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5992 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2015
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Search and seizure; Salary income; Difference of opinion; Change of opinion
• Section: 143(3); 153A; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1149/HYD/2015 ASSESSMENT YEAR: 2008-09 SRI NAMA KRISHNAIAH, HYDERABAD [PAN: AAXPN3260A] VS DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR DATE OF HEARING : 16-11-2016 DATE OF PRONOUNCEMENT : 23-11-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS APPEAL BY ASSESSEE AGAINST THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX, CENTRAL, HYDERABAD, U/S. 263 OF THE INCOME TAX ACT [ACT] DATED 11-03-2015 FOR THE AY. 2008-09. 2. BRIEFLY STATED, THERE WERE SEARCH AND SEIZURE OPERA TIONS CONDUCTED U/S. 132 OF THE ACT IN THE GROUP CASES OF M/S . MADHUCON PROJECTS LTD., ON 04-02-2011. CONSEQUENT TO TH AT, PROCEEDINGS U/S. 153A IN THE CASE OF SHRI KRISHNAIAH WERE INITIATED IN THE GROUP CASES. ASSESSING OFFICER IN THE SCRUTI NY ASSESSMENT HAVE EXAMINED THE ISSUES AND COMPLETED THE ASSESSMENTS ON 28-03-2013. ON THE REASON THAT AO HAS NOT EXAMINED THE ISSUES I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 2 -: IN THE CORRECT PERSPECTIVE, LD. CIT INITIATED THE PROCE EDINGS U/S. 263 AND ISSUED SHOW CAUSE LETTER. ASSESSEE OBJ ECTED BUT CIT REJECTED THE CONTENTIONS AND SET ASIDE THE ASSESSMENTS FO R MAKING DETAILED ENQUIRIES AND INVESTIGATION ON THE ISSUES SPEC IFIED THEREIN. ASSESSEE IS AGGRIEVED AND PREFERRED THE PRESENT APPEA L. 3. ASSESSEE HAS RAISED VARIOUS GROUNDS IN APPEAL WH ICH INCLUDE THAT THE PROCEEDINGS COMPLETED BY THE AO U/S. 153A ARE NOT VALID. THAT ISSUE DOES NOT ARISE OUT OF THE PRESENT PROCEEDINGS , THEREFORE, GROUNDS QUESTIONING THE VERY ASSESSMENT ARE NOT CONSIDE RED AND ACCORDINGLY THEY ARE DISMISSED. THE MAIN ISSUE TO BE CONSIDERED IS WHETHER LD. CIT IS CORRECT IN INVOKING JURISDICTION U/ S. 263 TO SET ASIDE THE ASSESSMENTS COMPLETED BY THE AO? 4. THE CIT INVOKED THE JURISDICTION U/S. 263 FOR THE F OLLOWING REASON: (A) IT WAS FOUND FROM THE RECORDS THAT THE ASSESSE E DECLARED SALARY OF RS. 3,60,000/- AND INCOME FROM OTHER SOURCES OF RS. 4,8 8,207/-. THE FORM NO. 16 FILED ALONG WITH THE RETURN SHOWS THAT THE A SSESSEE HAS RECEIVED SALARY OF RS. 2,40,000/- FROM MADHUCON GRANITES LTD ., RS. 1,20,000/- FROM VARALAXMI GRANITES PVT. LTD., AT THE SAME TIME THE FORM NO. 26AS SHOWS THAT THE ASSESSEE WAS PAID RS. 3 LAKHS SALARY MADHUCON SUGARS LTD., ON WHICH TDS OF RS. 39,000/- U/S. 192 WAS MAD E. THE INCOME REFLECTED IN FORM NO. 26AS WAS NOT SHOWN IN THE RET URN OF INCOME UNDER THE HEAD SALARY. THE ASSESSING OFFICER WHILE COM PLETING THE ASSESSMENT HAS ACCEPTED THE RETURNED INCOME OF RS. 7,45,710/-. THUS, THE INCOME REFLECTED IN FORM NO. 26AS APPEARS TO HAVE ESCAPED TAXATION. SINCE THE ASSESSING OFFICER HAS FAILED TO EXAMINE THIS ISSUE WHILE COMPLETING THE ASSESSMENT THE ORDER PASSED BY THE ASSESSING OFFICE R U/S. 143(3) R.W.S. 153A OF THE IT ACT, 1961, DATED 27-03-2013 FOR THE ASSESSMENT YEAR 2008-09 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 4.1. ASSESSEE EXPLAINED THAT IT HAS CLAIMED CREDIT OF T DS TO THE EXTENT OF FORMS NO. 16 ISSUED TO HIM AND THERE WERE NO SERVICES RENDERED TO THAT COMPANY NOR ANY SALARY WAS RECEIVABL E FROM M/S. I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 3 -: MADHUCON SUGARS LTD., ON WHICH TDS OF RS. 39,000/- W AS MADE BY THAT COMPANY. IT WAS SUBMITTED THAT THEY HAVE WRONGLY M ADE THE PROVISION IN THE BOOKS AND DEDUCTED TAX BUT NO SUCH AMOUNT WAS RECEIVABLE BY ASSESSEE NOR ANY CREDIT WAS TAKEN F OR THE TDS MADE IN THE NAME OF ASSESSEE AND REFLECTED IN 26AS. IT WAS SUBMITTED THAT THERE IS NO ERROR IN THE ORDER PASSED BY TH E AO. IT WAS FURTHER SUBMITTED THAT THIS IS A SEARCH CASE AND NOT ICE U/S. 153A WAS ISSUED AND AO HAS ENQUIRED ALL THE FACTS BEF ORE COMPLETING THE ASSESSMENT U/S. 143(3) R.W.S. 153A ON 2 7-03-2013. LD. CIT, HOWEVER, DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE AND BY STATING AS UNDER, HE SET ASIDE THE ASSESSMENT: 5. I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSION OF THE ASSESSEE. IT IS A FACT ON RECORD THAT THERE WERE DISCREPANCIES REGARDING RECEIPT OF SALAL'! INCOME F ROM MADHUCON SUGARS LTD. THE FORM NO.16 FILED BY THE ASSESSEES C LEARLY SHOWS RECEIPT OF SALARY INCOME OF RS.3,60,000/- FROM MADH UCON GRANITES AND VARALAXMI GRANITES LTD. AND IT IS NOT DISPUTED THAT THE SAID INCOME HAS BEEN OFFERED TO TAX BY THE ASSESSEE. HOW EVER, FORM NO.26AS WHICH IS FILED BY THE ASSESSEE CLEARLY INDI CATES PAYMENT OF RS.3,00,000/- BY MADHUCON SUGARS LTD. ON WHICH TDS OF RS.39,000/- WAS MADE. THE ASSESSEE HAS NOT BEEN ABL E TO CLARIFY THE DISCREPANCIES IN THE FORM NO.26AS AND IN THE FO RM NO.16 AND AS TO WHY THE INCOME REFLECTED IN FORM NO.26AS HAS NOT BEEN OFFERED 10 TAX. THE ONLY CONTENTION OF THE ASSESSEE THAT THE INCOME RETURNED IS MORE THAN THE INCOME REFLECTED IN FORM NO.26AS CANNOT JUSTIFY THE REASON WHY THE INCOME FROM MADHUCON SUG ARS LTD WAS NOT OFFERED TO TAX. THE ASSESSING OFFICER HAS NOT E XAMINED THE ISSUE IN DETAIL WHILE FRAMING THE ASSESSMENT. TO THAT EXT ENT THE ORDER PASSED BY THE ASSESSING OFFICER IS CERTAINLY ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT H AS BEEN JUDICIALLY HELD THAT AN ASSESSMENT MADE WITHOUT NECESSARY ENQU IRY CAN BE HELD TO BE ERRONEOUS AND CAN BE REVISED U/S.263 OF THE I.T. ACT 1961. REFERENCE IN THIS REGARD CAN BE MADE TO THE D ECISION OF SPECIAL BENCH, ITAT, CHENNAI REPORTED IN 313 ITR (A T) 182. CHENNAI SB WHEREIN IT WAS OBSERVED THAT IT IS NOT NECESSARY FOR THE COMMISSIONER OF INCOME-TAX IN REVISION 10 MAKE FURT HER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE A.O. THE COMMISSIONER OF INCOME-TAX CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, T HE A.O. SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE ST ATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. IT IS INCUMBENT ON T HE A.O. TO I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 4 -: INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIR CUMSTANCES WOULD MAKE SUCH AN ENQUIRY PRUDENT. THE WORD ERRONEOUS IN SEC.263 OF INCOME TAX ACT, 1961 INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE NECESSARY ENQUIRIES. 5. IT WAS THE CONTENTION OF LD. COUNSEL THAT AO HAS EXAMI NED ALL THE ASPECTS AS IT IS A SEARCH CASE AND PROCEEDING S WERE INITIATED U/S. 153A. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS FU RNISHED ALL THE INFORMATION BEFORE THE AO AND AO EXAMINED THE ISSUES INCLUDING THE ISSUE OF RECEIPT OF SALARY. THEREFORE , THE ORDER CANNOT BE CONSIDERED AS ERRONEOUS. THE ACTION OF THE CIT TANTAMOUNT TO CHANGE OF OPINION. IT WAS FURTHER SUBMITTED THAT ASSE SSEE WAS NOT IN RECEIPT OF ANY AMOUNT OF RS. 3 LAKHS FROM MADHUCON SUGARS LTD. ASSESSEE NEITHER RECEIVED THIS AMOUNT DURING THE F Y. 2007-08 NOR RECEIVED IN THE LATER YEAR. SINCE ASSESSEE IS F OLLOWING CASH SYSTEM OF ACCOUNTING, HE IS NOT AWARE ABOUT SALARY BEI NG CREDITED TO HIS ACCOUNT BY THE SAID COMPANY. SINCE NO TDS CRED IT WAS CLAIMED IN ANY OF THE YEARS, IT CANNOT BE CONSIDERED THAT ASSESSEE HAS RECEIVED THE AMOUNT. IT WAS FURTHER SUBMITTED THAT M/S . MADHUCON SUGAR LTD., REVERSED THE ENTRIES LATER ON. S INCE TDS WAS ALREADY MADE, THEY ARE NOT ABLE TO RECOVER THE AMOU NT FROM THE DEPARTMENT BUT ASSESSEE NEITHER RENDERED ANY SERVICE S TO THEM NOR WAS DUE TO GET ANY AMOUNT FROM THAT COMPANY. IN VIE W OF THAT, IT WAS SUBMITTED THAT THERE IS NO ERROR ON THE PART OF THE AO IN ACCEPTING ASSESSEES SUBMISSIONS. LD. COUNSEL RE LIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO. LIMITED VS. CIT [243 ITR 83] (SC). HE ALSO RELIED ON THE FOLLOWING CASES: I. SPECTRA SHARES & SCRIPS (P) LIMITED [354 ITR 35] [36 TAXMANN.COM 348] (AP HIGH COURT); I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 5 -: II. SAAIWALA AGRO REFINNERIES LTD., ITA NOS. 224 & 225/H YD/15; III. CH. KRISHNA MURTHY, ITA NO. 766/HYD/12; IV. TRINITY INFRA VENTURES LTD., ITA NOS. 584-89/HYD/15; V. CONTINENTAL WAREHOUSING CORPORATION (NHAA SHEA) LTD., [58 TAXMANN.COM 78] (HIGH COURT OF BOMBAY); 6. LD. DR HOWEVER, SUBMITTED THAT FORM NO. 26AS GIVES CREDIT OF THE TDS OF RS. 39,000/- FROM MADHUCON SUGARS LTD AND SINCE AO HAS NOT EXAMINED THE ISSUE AT ALL, CIT IS CORRECT IN INVOKING THE JURISDICTION U/S. 263. 7. WE HAVE EXAMINED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. THERE IS NO DISPUTE THAT A SSESSEE HAS CLAIMED SALARY INCOME ONLY FROM TWO COMPANIES I .E, M/S. MADHUCON GRANITES LTD., TO AN EXTENT OF RS. 2,40,000/- AND M/S. VARALAXMI GRANITES PVT. LTD., TO AN EXTENT OF RS. 1,20,00 0/-, TOTAL BEING RS. 3,60,000/-. TDS WAS ALSO ACCORDINGLY CLA IMED AS PER THE FORM NO. 16 FURNISHED BY THE ABOVE TWO COMPANIES. F ORM 26AS MAY SHOW A CREDIT OF RS. 39,000/- TDS MADE BY M/S. M ADHUCON SUGARS LTD., BUT ASSESSEE CONTENTION THAT HE HAS NEITHER R ECEIVED THE AMOUNT NOR OBTAINED ANY FORM 16 HAS BEEN IGNORED. EVEN IN THE INTIMATION U/S. 143(1) PASSED AS EARLY AS 15-09-20 09, THE CREDIT FOR TDS WAS GIVEN ONLY TO AN EXTENT OF RS. 62, 830/- WHICH PERTAINS TO ABOVE TWO SALARY INCOMES AND NO CREDIT FO R RS. 39,000/- WAS TAKEN/GIVEN. EVEN SUBSEQUENTLY ALSO IN T HE SCRUTINY ASSESSMENT, NO FURTHER CREDIT FOR THE AMOUNT OF RS. 39, 000/- WAS GIVEN. ONCE THE CREDIT OF THE AMOUNT IS NOT GIVEN, THE ISSUE OF BRINGING TO TAX THE CORRESPONDING INCOME DOES NOT ARIS E. IN WHAT I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 6 -: CIRCUMSTANCES M/S. MADHUCON SUGARS LTD. CLAIMED SALAR Y INCOME TO ASSESSEE IS NOT ON RECORD. BUT THE FACT IS THAT PERIO DICALLY, THERE WERE SEARCH AND SEIZURE OPERATIONS IN THE GROUP OF MA DHUCON GROUP OF COMPANIES AND MADHUCON SUGARS LTD., IS ALSO PART OF THE GROUP COMPANIES. NOTHING WAS BROUGHT ON RECORD BY THE CIT WHETHER THE SAID RS. 3 LAKHS PAID/CLAIMED TO ASSESSEE WAS GIVEN AS A DEDUCTION IN THE HANDS OF MADHUCON SUGARS LTD., JUST BECAUSE FORM 26AS REFLECT A TDS AMOUNT, IT CANNOT BE C ONSIDERED THAT THE RELEVANT AMOUNT WAS RECEIVABLE BY ASSESSEE. BE ING THE SEARCH CASE, IT CAN BE PRESUMED THAT AO EXAMINED THE IS SUES. THE HON'BLE AP HIGH COURT IN THE CASE OF SPECTRA SHARES & SCRIPS (P) LIMITED [354 ITR 35] [36 TAXMANN.COM 348] HAS HELD THA T AO IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED RE ASONS AND ONCE IT IS CLEAR THAT THERE WAS APPLICATION OF MIND BY A N ENQUIRY, THE COMMISSIONER MERELY BECAUSE HE ENTERTAINS A DIFFE RENT OPINION IN THE MATTER, CANNOT INVOKE HIS POWERS U/S. 263. H E HAS ALSO NOT GIVEN ANY FINDING THAT SUCH INCOME IS RECEIVABLE BY ASSESSEE. SINCE ASSESSEE HAS NOT CLAIMED ANY CREDIT OF SUCH TDS, BRI NGING TO TAX THE AMOUNT INVOLVED DOES NOT ARISE WHEN ASSESSEE SUBMI TS THAT THE AMOUNT IS NOT RECEIVABLE BY HIM AS NO SERVICES WER E RENDERED. THERE IS ALSO NO PREJUDICE CAUSED AS THE AMOUNT OF T DS IS WAS ALREADY REMITTED TO GOVERNMENT. AT BEST WHAT REVENUE CAN DO IS TO GIVE CREDIT TO THAT AMOUNT, WHEN ASSESSEE OFFERS THE SAME AS INCOME IN CASE THE SAID AMOUNT IS SALARY RECEIVED OR RECEIVABLE. SINCE IT IS A SEARCH AND SEIZURE CASE, WE ARE OF THE OPINION THAT THE ISSUE RAISED BY CIT DOES NOT WARRANT INVOKING THE POW ERS U/S. 263. THE PROCEEDINGS COMPLETED BY CIT ARE NOT ACCORDING T O THE LAW OR FACTS. THEREFORE, WE HAVE NO HESITATION IN SETTING ASID E THE ORDER OF CIT AND RESTORE THE AOS ORDER. I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 7 -: 8. BEFORE PARTING WE WOULD LIKE TO NOTE THAT ASSESSEE HA S FURNISHED A STATEMENT THAT THE SAID MADHUCON SUGARS LTD., HAS NOT CLAIMED BUT REVERSED THE ENTRIES SUBSEQUENTLY. TH IS ASPECT CAN BE EXAMINED BY THE AO AND IN CASE THE SAID MADHUC ON SUGARS LTD., HAS INDEED CLAIMED THE AMOUNT AS PAYABLE TO ASSES SEE OR DEDUCTION IN THEIR ACCOUNTS, THEN NECESSARY PROCEEDIN GS FOR REOPENING THE ASSESSMENT FOR ESCAPEMENT OF INCOME CAN BE CONSIDERED BY THE AO IN THE YEAR OF RECEIPT AND CREDIT FOR TDS CAN BE GIVEN. WE WOULD ALSO PLACE ON RECORD THE FACT THA T AO HAS NOT EVEN GIVEN CREDIT FOR THE TAX WHICH WAS ALREADY GIVEN IN THE EARLIER PROCEEDINGS IN THE CONSEQUENTIAL PROCEEDINGS. BASICA LLY IF CIT/AO FEELS THAT AMOUNT OF RS. 3,00,000/- WAS TAXABLE AS INCO ME, AT BEST THE TDS ON THAT AMOUNT ALSO COULD HAVE BEEN GIVEN CRED IT. EVEN THE AMOUNT OF TDS, ON OFFERED INCOMES, GIVEN CREDIT IN THE ORDER U/S 153A WAS DENIED, LEAVE ALONE THE CREDIT OF RS. 39 ,000 IN FORM 26AS, ON THE BASIS OF WHICH PRESENT PROCEEDINGS WERE INITIATED. THIS SHOWS LACK OF APPLICATION ON THE PART OF AUTHORITIE S IN COMPLETING ASSESSMENTS. WITH THESE OBSERVATIONS, THE GRO UNDS RAISED BY ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 23 RD NOVEMBER, 2016 TNMM I.T.A. NO. 1149/HYD/2015 SRI NAMA KRISHNAIAH :- 8 -: COPY TO : 1. SRI NAMA KRISHNAIAH, HYDERABAD. C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRC LE-2(1), HYDERABAD. 3. THE PR. COMMISSIONER OF INCOME TAX, CENTRAL, HYD ERABAD. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.