M. Krishna Murthy (HUF), Hyderabad V. ITO,Ward-1, Chttoor District

ITA 1159/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2371 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC B BENCH, HYDERABAD , BEFORE SHRI ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ./I.T.A. NO. 1159/HYD/2014 /ASSESSMENT YEAR : 2005-06 SRI M. KRISHNA MURTHY (HUF), D.NO. 8-340, NEHRU BAZAR, MADANAPALLE. [PAN:AKHM 6626E] VS. THE INCOME TAX OFFICER, WARD -1, MADANAPALLE. ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. S. RAMA RAO, AR /RESPONDENT BY : SHRI. K. J. RAO, DR /DATE OF HEARING : 11.05.2017 /DATE OF PRONOUNCEMENT : 30.06.2017 / O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THE FILING OF APPEAL BEFORE THE BENCH HAS BEEN DEL AYED BY 8 DAYS. THE ASSESSEE HAS FILED A PETITION FOR CONDONING THE DEL AY AS FOLLOWS: :-2-: ITA NO. 1159/HYD/2014 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AS SESSMENT IN THE CASE OF THE APPELLANT WAS COMPLETED BY THE ITO, WARD-1, MADANAPALLE U/S.143(3) R.W.S. 148 OF THE I.T. ACT V IDE ORDER DATED 20.10.2011. AGGRIEVED WITH THE ORDER OF ASSESSMENT , THE APPELLANT FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS), GUNTUR. THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) ALLOWED THE APPEAL PARTLY VIDE ORDER IN ITA NO.293/CIT(A)/GNT/1 1-12 DATED 28.2.2014. THERE WAS A DELAY OF 8 DAYS. IN THIS R EGARD IT IS HUMBLY SUBMITTED THAT THE ASSESSEE WAS CONTEMPLATING TO GE T THE APPEAL PREPARED AND FILED BY AN ADVOCATE AT HYDERABAD. TH E ASSESSEE PAID THE APPEAL FEE INTO THE BANK AT MADANAPALLE ON 28.5.201 4. AS THE ASSESSEE IS AGED ABOUT 87 YEARS, HE IS NOT IN A POSITION TO TRAVEL TO HYDERABAD. THEREFORE, HE REQUESTED HIS AUTHORISED REPRESENTATI VE TO GET THE APPEAL PREPARED. THE SAID AUTHORISED REPRESENTATIVE CONSU LTED THE ADVOCATE ON 2.6.2014 AND CARRIED THE APPEAL PAPERS ON 3.6.20 14 TO MADANAPALLE. THE APPEAL PAPERS WERE SENT BY MAIL TO THE ADVOCATE AT HYDERABAD. THE PAPERS WERE RECEIVED BY THE ADVOCATE ON 7.6.2014 (C OURIER ACKNOWLEDGEMENT SLIP IS ANNEXED) AND THE APPEAL WAS FILED ON 9.6.2014 AS 7.6.2014 AND 8.6.2014 ARE CLOSED HOLIDAYS FOR TH E HONBLE ITAT ON ACCOUNT OF SATURDAY AND SUNDAY. THE PETITIONER HUM BLY SUBMITS THAT THE DELAY IS FOR THE REASONS SUBMITTED ABOVE AND IS NOT INTENTIONAL. THE PETITIONER, THEREFORE, PRAYS THE HONBLE ITAT TO KI NDLY CONDONE THE DELAY AND PASS APPROPRIATE ORDERS IN THE MATTER. I FIND THAT THE ASSESSEE HAS REASONABLE CAUSE FOR T HE DELAY AND HENCE I CONDONE THE DELAY OF 8 DAYS. :-3-: ITA NO. 1159/HYD/2014 2. THE FACTS ARE AS FOLLOWS: 2.1 IN RESPONSE TO THE NOTICE U/S.142 DATED 12.03.2 009, THE APPELLANT THOUGH HAS NOT BEEN MAINTAINING ANY PROPER BOOKS OF ACCOUN TS, SINCE BEGINNING, FILED HIS RETURN OF INCOME FOR THE ASST. YEAR 2008-09 ON 16.11.2009 UNDER HUF STATUS, DECLARING A NET INCOME OF RS.1,81,000/- WHI CH AMOUNT INCLUDES A SUM OF RS.18,720/- UNDER THE HEAD HOUSE PROPERTY INCOME, AND RS.1,62,280/- UNDER THE HEAD OTHER SOURCE. 2.2 THE LEARNED I.T.O COMPLETED THE ASSESSMENT U/S. 143(3) DATED 20.12.2010 AND RAISED A DEMAND OF RS.9,94,744/-. AGGRIEVED BY THE SAID ASSESSMENT ORDER, THE APPELLANT PREFERRED AN APPEAL BEFORE THE HONBL E C.I.T (APPEALS) GUNTUR. THE SAID APPEAL IS PRESENTLY PENDING DISPOSAL. 2.3 THE LEARNED I.T.O RAISED A NOTICE U/S.148 DATED 15.02.2011 REQUIRING THE ASSESSEE TO FILE A RETURN OF INCOME FOR THE ASST YE AR 2005-06 WITHIN 10 DAYS TO RE-ASSESS THE SAME. BUT, THE FACT REMAINS THAT T HE APPELLANT HAD NOT FILED ANY RETURN OF INCOME EARLIER FOR THE ASST YEAR 2005 -06. IN ORDER TO CO-OPERATE WITH THE DEPARTMENT, THE APPELLANT, FAITHFULLY FILE D HIS RETURN OF INCOME DATED 30.06.2011 FOR THE ASST YEAR 2005-06 AS CALLED FOR BY THE LEARNED I.T.O. THE SAID RETURN OF INCOME FOR THE ASST YEAR 2005-06 DEC LARED A TOTAL INCOME OF RS.68,000/- WHICH AMOUNT INCLUDES A SUM OF RS.16,63 5/- UNDER THE HEAD HOUSE :-4-: ITA NO. 1159/HYD/2014 PROPERTY INCOME, AND RS.51,365/- UNDER THE HEAD O THER SOURCE RESPECTIVELY. 2.4 AFTER ISSUING A SHOW CAUSE NOTICE DATED 27.04.2 011, THE LEARNED I.T.O, COMPLETED THE ASSESSMENT OF ASST YEAR 2005-06 U/S.1 43(3) R.W.S 148 DATED 20.10.2011 AND RAISED A DEMAND OF RS.16,58,282/-. 2.5 ON APPEAL, CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. 3. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HA S FILED THE FOLLOWING GROUNDS OF APPEAL BEFORE ME: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE AP PELLANT HEREIN. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OU GHT TO HAVE SEEN THAT THE INITIATION OF PROCEEDINGS U/S.147 IS NOT V ALIDLY MADE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN CONFIRMING THE ADDITION OF RS.3,00,908/- OUT OF THE TOTAL ADDI TION OF RS.6,37,408/- MADE BY THE ASSESSING OFFICER. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.25,385/- OUT OF RS.53,775/-. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT THE ENTIRE INTEREST IS ALLOWABLE AS A DEDUCTION AS THE MONEY WAS BORROWED FOR THE PURPOSES OF BUSINESS OF THE APPELL ANT HEREIN. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN CONFIRMING THE ADDITION OF RS.1,55,000/- ON THE GROUND THAT TH E ADVANCE AGAINST SALE OF AGRICULTURAL LANDS IS NOT PROPERLY EXPLAINE D. :-5-: ITA NO. 1159/HYD/2014 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN CONFIRMING THE ADDITION OF RS.3,36,500/- OUT OF RS.6,74,807/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE CURRENT CA PITAL AMOUNT WAS NOT PROPERLY EXPLAINED. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN COMPUTING THE CAPITAL GAIN OF RS.6,70,697/-. THE LEARNED COM MISSIONER OF INCOME- TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE EXPLANAT ION SUBMITTED AND HELD THAT THE ASSET TRANSFERRED IS NOT A CAPITAL AS SET WITHIN THE MEANING OF THE PROVISIONS OF SEC.2(14) OF THE I.T. ACT AND THAT NO CAPITAL GAIN IS ASSESSABLE TO TAX. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OU GHT NOT TO HAVE CONFIRMED DISALLOWANCE OF RS.20,285/- MADE BY THE A SSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OU GHT TO HAVE SEEN THAT NO BROKERAGE WAS CLAIMED AS REVENUE EXPENDITUR E. 9. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SRI S RAMA RAO BROUGHT TO OUR NOTICE THAT THE ASSESSEE WAS GIVEN ONLY 10 DAYS TIME TO RE PLY FOR THE 147 NOTICE. FURTHER, NOTICE U/S.148 WAS ISSUED ON 15.2.2011 WHI CH IS BEYOND 4 YEARS FROM THE END OF THE ASSESSMENT YEAR AND ALSO THE ASSESSE E WAS NOT GIVEN ENOUGH TIME, HENCE THE ASSESSEE WISHES TO RAISE THE ISSUE OF VALIDITY OF THE NOTICE U/S.148 BEFORE ME. 5. THE ASSESSEE STATED THAT THEY HAVE INADVERTENTLY OMITTED TO RAISE THE GROUNDS OF APPEAL ON THE VALIDITY OF ISSUE OF NOTIC E U/S.148 BEFORE THE CIT(A). :-6-: ITA NO. 1159/HYD/2014 THE ASSESSEE SUBMITTED THAT AS IT IS A LEGAL GROUND AND ALSO THE FACTS CONCERNED THE ISSUE OF NOTICE U/S.148 ARE ALREADY ON RECORD T HE HONBLE ITAT SHOULD ADMIT THE ADDITIONAL GROUNDS. THE LEARNED CIT(A) OUGHT T O HAVE SEEN THAT INITIATING OF PROCEEDINGS U/S.147 IS NOT VALIDLY MADE. THE LEARN ED COUNSEL FOR THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE AS FOLLOWS: THERE ARE 9 GROUNDS OF APPEAL IN ALL. GROUND NOS. 1,2 AND 9 ARE GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. GROUND NO.3 IS AGAINST THE ADDITION OF RS.3,00,908/ - CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) DISCUSSED THIS ISSUE AT PARA 5.2 OF HIS ORDER. ACCORDING TO THE LEARNED COMMISS IONER OF INCOME-TAX (APPEALS), THERE WERE SALES OF LAND DURI NG THE FINANCIAL YEAR 2004-05 TO AN EXTENT OF RS.3,36,500/-. IT CAN BE SEEN FROM THE ASSESSMENT ORDER AT PAGE 2 WHERE THE DETAILS OF SALE OF PLOTS RELEVANT FOR THE ASSESSMENT YEAR 2005-06 ARE RECORD ED. THE TOTAL SALE CONSIDERATION AMOUNTED TO RS.6,66,000/-, THE D ETAILS OF WHICH ARE AT PAGE NOS. 46 AND 47 OF THE PAPER BOOK. THER EFORE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT CORRECT IN CONFIRMING THE ADDITION OF RS.3,00,908/-. THE REAL SALE VALUE OF THE LAND IS RS.6,66,000/- AND NOT RS.3,36,500/- AS MENT IONED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). THER EFORE, GROUND NO.3 MAY KINDLY BE ALLOWED. GROUND NO.4 IS WITH REGARD TO DISALLOWANCE OF INTER EST OF RS.25,385/- AGAINST RS.53,775/-. THERE IS NO REASO N FOR DISALLOWANCE OF ANY PART OF THE INTEREST AND, THEREFORE, THE ASSESS ING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE AMOUNT AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING SUCH ADDITION. :-7-: ITA NO. 1159/HYD/2014 GROUND NO.5 IS WITH REGARD TO THE ADDITION OF RS.1, 55,000/- BEING THE ADVANCES RECEIVED AGAINST AGRICULTURAL LANDS. THE APPELLANT HUMBLY SUBMITS THAT OUT OF RS.1,55,000/-, THE AMOUNT RECEI VED FROM SRI N.GURU MURTHY NAIDU WAS RS.55,000/-. IT IS SUBMITTED THAT IN FACT AN AMOUNT OF RS.69,000/- WAS RECEIVED FROM SRI N GURU MURTHY NAI DU AND THE PROPERTY WAS REGISTERED AS PER THE REVENUE RECORDS (PAGE NO. 45 OF THE PAPER BOOK). THE AMOUNT OF SALE CONSIDERATION WAS SHOWN AT RS.69,000/- AND THE SUB REGISTRAR, MADANAPALLE SIGNED HAVING WITNES SED THE TRANSFER. GROUND NO.6 IS AGAINST CONFIRMATION OF THE ADDITION OF RS.3,36,500/- OUT OF RS.6,74,807/-. THE LEARNED CO MMISSIONER OF INCOME-TAX (APPEALS) REJECTED THE GROUND AND HELD T HAT RS.3,36,500/- COULD BE THE OPENING BALANCE. HE CONFIRMED THE BAL ANCE OF RS.6,74,807/-. IT IS SUBMITTED THAT THE OPENING BALANCE CANNOT BE ADDED BY THE ASSESSING OFFICER. THIS DOES NOT REPRESENT THE REC EIPT DURING THE YEAR. IT CAN ALSO BE SEEN THAT THE AMOUNT WAS SHOWN AS TH E OPENING BALANCE IN THE CAPITAL ACCOUNT OF THE APPELLANT. N O PART OF THE AMOUNT WAS RECEIVED DURING THE YEAR. THE APPELLANT WAS IN RECEIPT OF AGRICULTURAL INCOME FOR A LONG TIME. THE ASSESSING OFFICER FAIL ED TO SEE THAT THE APPELLANT WAS BEING ASSESSED TO TAX EVEN PRIOR TO 1 971. SOME OF THE COPIES OF THE ORDERS ARE SUBMITTED. AS ON 31.03.19 78 HIS CAPITAL ACCOUNT AMOUNTED TO RS.85,270/- (PAGE NO.183 OF THE PAPER B OOK); AS ON 31.03.1978 HIS CAPITAL ACCOUNT IN THE PARTNERSHIP F IRM SHOWED RS.85,270/- . INDIVIDUALLY ALSO HE HAS TAXABLE INCOME AND WAS SUBJECTED TO INCOME TAX. FURTHER THE APPELLANT WAS IN POSSESSION OF AG RICULTURAL LANDS WHICH WERE SOLD DURING THE CURRENT YEAR. HE WAS IN POSSE SSION OF 28 ACRES OF AGRICULTURAL LAND AT BASINIKONDA VILLAGE, MADANAPAL LE VILLAGE, CHITTOOR DISTRICT AND WAS DERIVING AGRICULTURAL INCOME. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND THE ASSESSING OFFICER A RE NOT JUSTIFIED IN HOLDING THAT THE OPENING BALANCE IS NOT PROPERLY EX PLAINED. :-8-: ITA NO. 1159/HYD/2014 GROUND NO.7 IS AGAINST COMPUTATION OF CAPITAL GAIN OF RS.6,70,697/- . IT IS SUBMITTED THAT THE LAND IS SITUATED AT BAS INIKONDA VILLAGE, MADANAPALLEVILLAGE,CHITTOOR DISTRICT REPRESENTS THE AGRICULTURAL LANDS. IT IS NOT A CAPITAL ASSET WITHIN THE MEANING OF SEC.2(14) OF THE I.T.ACT. THE APPELLANT PROPOSE TO SELL THE LAND. AS THE ENTIRE LAND COULD NOT BE SOLD, HE SOLD THE LAND IN PLOTS. THE ASSESSING OFFICER IS O F THE VIEW THAT THE APPELLANT IS NOT ENTITLED FOR EXEMPTION AS THE LAND WAS SOLD IN PLOTS. IT IS SUBMITTED THAT ONLY TO FACILITATE SALE, THE LAND WA S DIVIDED INTO SMALL PORTIONS AND WERE SOLD. IN THIS REGARD THE APPELLA NT RELIES ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF ITO VS. OMKARMAL RAMBILAS GINNING AND PESSING FACTORY, ADILABAD IN ITA NO.776/HYD/2010. THE NATURE OF THE ASSET WOULD NOT BE CHANGED SIMPLY BECAUSE THE ASSET IS DIVIDED INTO SMALL PARTS FOR SALE. AS CAN BE SEEN FROM THE FACTS THAT THE PROPERTY REPRESENTS AGRICULTURAL LANDS AND WAS HELD BY THE APPELLANT AS AN ANCESTRAL AGRICULTURAL PROPERTY. T HE DIVISION OF THE PROPERTY INTO PLOTS CANNOT BE HELD AGAINST THE APPE LLANT IN CLAIMING THE NATURE OF THE LAND. WITHOUT PREJUDICE TO THE CONTENTION OF THE APPELLAN T, IF THE ASSESSING OFFICER IS OF THE VIEW THAT THERE IS ANY CONVERSION OF THE LAND ON ANY PARTICULAR DAY, THE MARKET VALUE AS ON THE DAY OF CONVERSION HAS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ARRIVIN G AT THE COST IN VIEW OF THE PROVISIONS OF SEC.45(2) OF THE I.T.ACT. THE AP P0ELLANT HUMBLY SUBMITS THAT THE LAND WAS AGRICULTURAL LAND; IT WAS HELD BY THE APPELLANT AND ANCESTORS FOR A VERY LONG TIME; AGRICULTURAL OPERAT IONS WERE CARRIED ON FOR SUBSTANTIAL PERIOD. IN SUCH CIRCUMSTANCES, THE ASS ESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE PROPERTY DOES NOT REP RESENT AGRICULTURAL LAND. WITH REGARD TO GROUND NO.8, THE ASSESSING OFFICER A ND THE LEARNED COMMISSION OF INCOME-TAX (APPEALS) HAVE NO REASON T O DISALLOW THE BROKERAGE CLAIM FOR SALE OF THE PLOTS OF RS.20,285/ -. :-9-: ITA NO. 1159/HYD/2014 6. I FIND THAT THE REOPENING UNDER SEC.147 HAS BEEN DONE IN HASTE AND NOT ENOUGH TIME WAS GIVEN FOR THE ASSESSEE TO REPRESENT HIS CASE AND THE ASSESSING OFFICER HAS NOT VERIFIED THE DETAILS FILED BY THE A SSESSEE. IN THESE CIRCUMSTANCES, I AM OF THE OPINION THAT THE MATTER SHOULD GO BACK TO THE ASSESSING OFFICER SO AS TO VERIFY THE DETAILS FILED BY THE ASSESSEE WITH RE SPECT TO EACH GROUND OF APPEAL AND THE ASSESSING OFFICER SHALL PASS A DE-NOVO ORDE R AFTER APPRECIATING THE ARGUMENTS RAISED BY THE ASSESSEE. 7. IN THE RESULT THE APPEAL IS SET ASIDE FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED ON 30 TH JUNE, 2017 AT HYDERABAD. SD/- ( ) (ASHA VIJAYARAGHAVAN) /JUDICIAL MEMBER HYDERABAD DATED: 30 TH JUNE, 2017 $ / COPY TO: 1 . / APPELLANT 2. / RESPONDENT 3. % ( ) / CIT(A) 4. % / CIT 5. / DR 6. * / GF