Ala Veena, Hyd, Hyderabad V. ITO, Ward-1, Mahabubnagar, Mahabubnagar

ITA 124/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5913 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-11-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 08-02-2016
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Reopening of assessment; Gift; Source of fund; Condonation of delay
• Section: 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NOS. 124 & 125/HYD/2016 ASSESSMENT YEAR(S): 2003-04 MS. ALA VEENA, D/O. LATE A. CHINNA REDDY, HYDERABAD [PAN: ANQPA6117P] VS INCOME TAX OFFICER, WARD-1, MAHABOOBNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL, AR FOR REVENUE : SHRI A. SITARAMA RAO, DR DATE OF HEARING : 28-11-2016 DATE OF PRONOUNCEMENT : 16-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE TWO APPEALS ARE BY ASSESSEE AGAINST THE ORDER( S) OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, DATED 04-12-2015 ONE ON THE QUANTUM OF ASSESSMENT AND OTHER ON PENALTY U/S 271(1)(C) FOR THE AY 2003-04. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO. 124/HYD/16: 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER, WHER EIN THE NOTICE U/S. 148 OF THE IT ACT WAS NOT SERVED ON THE ASSESS EE. I.T.A. NOS. 124 & 125/HYD/2016 :- 2 -: 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ORDER, WHICH IS MADE BY ISSUING A NOTICE U/S. 148, WITHOUT APPLICATION OF MIND BY THE ASSESSING OFFICER, AS TH E INFORMATION ALLEGED TO HAVE BEEN COLLECTED FROM THE ASSESSING O FFICER OF A THIRD PARTY BY THE ADDL. CIT, TO PASS ON THE SAME TO THE ASSESSING OFFICER. 4. THE LEARNED COMMISSIONER ERRED IN ASSUMING THAT THE NOTICE IS PROPERLY SERVED ON THE ASSESSEE, WHEREAS IT WAS SER VED ON A. VIJAY KUMAR REDDY WHO IS NOT AUTHORIZED TO RECEIVE SUCH N OTICE. 5. THE LEARNED COMMISSIONER ERRED IN CONFIRMING THE ORDER IN WHICH ADDITION IS MADE, WITHOUT EXAMINING THE MATERIAL FO UND WITH THE THIRD PARTY. GROUND NOS. 1 & 6 ARE GENERAL IN NATURE. 3. BRIEFLY STATED FACTS ARE, ASSESSEE IS AN INDIVIDUAL . ON 29-07-2002, SHE HAS INVESTED IN A PLOT REGISTERED THRO UGH A DOCUMENT NO. 4038/2002 FOR A CONSIDERATION OF RS. 1 L AKH. THE DEPARTMENT, IT SEEMS HAS CONDUCTED SOME SURVEY OPERATION S IN THE CASE OF M/S. MANASA ESTATES, WHO SOLD THE SAID PROPE RTY AND CAME TO KNOW THAT ASSESSEE HAS PAID AN ADDITIONAL AMOUNT OF RS. 3,25,000/- OVER AND ABOVE RS. 1 LAKH IN THE REGISTE RED DOCUMENT. ON RECEIPT OF COMMUNICATION FROM THE OTHER OFFICER, AO INITIATED PROCEEDINGS U/S. 147 OF THE INCOME TAX ACT [ACT] AS A SSESSEE HAS NOT FILED ANY RETURN OF INCOME FOR THE YEAR UNDER CON SIDERATION. HOWEVER, A NOTICE U/S. 148 WAS ISSUED ON THE SAME AD DRESS AS MENTIONED IN THE SALE DEED BUT SERVED ON SHRI A. VIJAY KUMAR REDDY, WHO IS THE BROTHER OF ASSESSEE. THERE IS NO R ESPONSE FROM ASSESSEE AND SUBSEQUENT NOTICE SERVED WAS ALSO NOT RE SPONDED. AO SUMMONED SHRI A. VIJAY KUMAR REDDY ON 17-12-2009 ON WHOM THE NOTICES WERE SERVED. IN THE STATEMENT, SHRI A. VIJAY KUMAR REDDY EXPLAINED THAT ASSESSEE PURCHASED A PLOT F OR A CONSIDERATION OF RS. 2 LAKHS AND THAT TOO WITH THE HELP OF RELATIVES I.T.A. NOS. 124 & 125/HYD/2016 :- 3 -: SUCH AS A GIFT FROM HIS MATERNAL UNCLE, SRI VISWANATH REDDY AN ENGINEER IN USA. WHEN ASKED THE PROOF, HE EXPRESSED HIS INABILITY AS HE WAS NOT IN TOUCH WITH ASSESSEE. AO COMPLETED THE ASSESSMENT INVOKING THE PROVISIONS OF SECTION 144 AND BROUGHT TO TAX THE ENTIRE AMOUNT IE. THE REGISTERED SALE CONSIDERATI ON OF RS. 1 LAKH AND SO CALLED EXTRA CONSIDERATION CONSIDERED BY ACIT, CIRCLE- 4(1), HYDERABAD AT RS. 3,25,000/- AND ALSO STAMP DUTY AND REGISTERED CHARGES OF RS. 23,005/-. THUS, DETERMINED THE TOTAL INCOME OF RS. 4,48,005/- FOR THE YEAR UNDER CONSIDE RATION. THERE IS NOTHING ON RECORD TO SHOW WHETHER THIS ORDER WAS SE RVED ON ASSESSEE. SUBSEQUENTLY, AO FINALISED THE PROCEEDINGS U/S. 271(1)(C) AND LEVIED PENALTY ALSO OF RS.1,08,572/-. THIS ORDER SEEMS TO HAVE BEEN SERVED BY WAY OF AFFIXTURE AND IT TRANSPIRES THAT THE NEIGHBOUR IN FACT INTIMATED ASSESSEE ABOUT THIS OR DER. ASSESSEE FILED APPEALS BEFORE THE LD. CIT(A) WITH AN AFFIDAVIT FOR CONDONATION OF DELAY IN WHICH IT WAS STATED AS UNDER: I ALA VEENA, AGED 36 YEARS, D/O. ALA BHAGYA LAXMI, RESIDENT OF PLOT NO. 302, SRI HARSHA APARTMENTS, SA ROORNAGAR, HYDERABAD-500035, I, THE ABOVE NAMED DEPONENT TAKE OATH ON THIS DAY FEBRUARY 25, 2011, AND STATE AS UNDER: AFTER MY MARRIAGE IN THE YEAR 2000, WITH M. LAXMIKA NTH REDDY OF KURNOOL, I LEFT WANAPARTHY, TO STAY WITH M Y HUSBAND. I HAVE PURCHASED A PLOT IN JULY 2002 AT BUDVEL VILLAG E, RJENDRA NAGAR MUNICIPALITY. THE RESIDENTIAL ADDRESS WAS ME NTIONED AS 37- 1, VALLABHNAGAR, WANAPARTHY AS I WAS PLANNING TO GO ABROAD TO STAY WITH MY HUSBAND I HAD BEEN TO NEW ZEALAND ALON G WITH MY HUSBAND AND STAYED THERE FROM 2003 TO 2007 AND ALSO I HAD BEEN TO U.S.A. IN APRIL, 2008 AND RETURNED BACK IN SEPTE MBER, 2008, AND THEN ONWARDS STAYING AT HYDERBAD AT THE ABOVE MENTI ONED ADDRESS. IT APPEARS A NOTICE U/S. 148 OF THE I.T. ACT HAS BEEN ISSUED AND WAS SERVED ON SRI VIJAY KUMAR REDDY, AT WANAPARTHY, WHO IS MY BROTHER. AN EX-PARTE ASSESSMENT HAS ALSO BEEN MADE IN MY ASE AND THE ORDER ALSO SERVED ON MY BROTHER. FU RTHER, PENALTY U/S. 271(1)(C) OF THE I.T. ACT, IS LEVIED AND THE O RDER IS SERVED BY I.T.A. NOS. 124 & 125/HYD/2016 :- 4 -: WAY OF AFFIXTURE AT WANAPARTHY. IN THIS REGARD, IT IS SUBMITTED THAT MY RELATIONSHIP WITH MY BROTHER IS STRAINED ON ACCO UNT OF PRTITION OF ANCESTRAL PROPERTIES. IN FACT, THE DISPUTE IS PEND ING FOR THE ADJUDICATION BEFORE THE HON'BLE HIGH COURT, HYDERAB AD. THEREFORE, I HAVE NO KNOWLEDGE IN RESPECT OF ISSUE OF NOTICES AN D ALSO COMPLETION OF ASSESSMENT. THE AFFIXTURE OF PENALTY ORDER WAS BROUGHT TO MY NOTICE BY ONE OF OUR NEIGHBOR MR. SYE D AKTHAR AT WANAPARTHY ABOUT 15 DAYS BACK. THIS ORDER WAS HAND ED OVER TO A KNOWN ADVOCATE SRI KHADER MOHIYUDDIN, WHO IS PRACTI CING INCOME TAX AND HE HAS PROCURED THE ASSESSMENT ORDER ALSO F ROM MY BROTHER. APPEAL IS BEING FILED IN RESPECT OF ORDER U/S. 144 AND ORDER U/S. 271(1)(C) OF THE I.T. ACT, WITH DELAY OF 374 DAYS IN RESPECT OF ORDER U/S. 144 AND ABOUT 186 DAYS IN RESPECT OF ORDER U/S. 271(1)(C) OF THE I.T. ACT. THE DELAY IS MAINLY ON ACCOUNT OF MY CHANGE OF ADDR ESS AFTER MY MARRIAGE AND SERVICE OF ORDER WAS NOT INTIMATED TO ME BY MY BROTHER WHO IS HAVING STRAINED RELATIONSHIP WITH ME . CONSIDERING THE FACTS AND CIRCUMSTANCES, THE HON'BLE COMMISSION ER IS REQUESTED TO KINDLY ADMIT THE APPEAL TO DECIDE THE ISSUE ON M ERITS. 3.1. LD. CIT(A) CONDONED THE DELAY, HOWEVER, CONFIRM ED THE ASSESSMENT AND PENALTY. THEREFORE, ASSESSEE IS IN APPEAL BEFORE US. 4. LD. COUNSEL AFTER EXPLAINING THE FACTS OF THE CASE S SUBMITTED THAT NOTICES WERE NOT SERVED ON ASSESSEE AND THEREFORE, PROCEEDINGS INITIATED U/S. 147 ARE AB INITIO VOID. HE HAS RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. CHETAN GUPTA (ITA NO. 72 OF 2014), WHEREIN HONBLE HIGH COURT HAS HELD THAT ..THE ISSUE OF NOTICE TO ASSESSEE AND SERVICE OF SAID NOTICE UPON ASSESSEE ARE JURISDICTIONAL REQUIR EMENTS THAT MUST BE MANDATORILY COMPLIED WITH . THEY ARE NOT MERE PROCEDURAL REQUIREMENTS. HE HAS FURTHER RELIED ON THE FOLLOWING CASES: I. CIT VS. SHREE RAJASTHAN SYNTEX LTD., [313 ITR 231]; II. CIT VS. RAJESH KUMAR SHARMA [311 ITR 235]; I.T.A. NOS. 124 & 125/HYD/2016 :- 5 -: III. SHRI CHUNNILAL PRAJAPATI VS. ITO (ITA NOS. 290 TO 293/LUC/2010); IV. PRARTHANA CONSTRUCTION (P) LTD., VS. DCIT [118 TAXMAN 1 12]; V. CIT VS. SALEK CHAND AGARWAL [300 ITR 426]; VI. CIT VS. PRADEEP KUMAR GUPTA [303 ITR 95]; VII. SMT. S. NACHIAR VS. ITO & ORS. [326 ITR 77]; VIII. CIT VS. SFIL STOCK BROKING LTD., [325 ITR 285]; IX. CIT VS. SMT. PARAMJIT KAUR [311 ITR 38] (P&H); FOR THE PROPOSITION THAT PROCEEDINGS INITIATED AGAINST AS SESSEE ARE NOT VALID. IT WAS ALSO FURTHER SUBMITTED THAT ASSESSEE HA S PROPER EXPLANATION FOR THE AMOUNT INVESTED AND THEREFORE, NO A DDITION COULD BE SUSTAINED. 5. LD. DR, HOWEVER, IN REPLY SUBMITTED THAT EVEN THOUGH NOTICES WERE SERVED ON ASSESSEES BROTHER, THE BROTHER HAS U NDERTAKEN TO INFORM ASSESSEE. ACCORDINGLY, AO WAS OF THE IMPRESS ION THAT NOTICES WERE PROPER. IT WAS ALSO SUBMITTED THAT ASSESSE E HAS FILED A LETTER BEFORE THE AO DT. 10-12-2009. THEREFORE, IT C AN BE CONSIDERED THAT ASSESSEE HAS PARTICIPATED IN ASSESSMENT PROCEEDINGS AND PROVISIONS OF SECTION 292BB ARE COMP LIED WITH. IT IS ALSO SUBMITTED THAT ASSESSEE HAS NOT EXPLAINED SOURCE S. THEREFORE, AO WAS WELL WITHIN HIS RIGHTS TO CONSIDER THE ENTIRE AMOUNT INVESTED AS UNEXPLAINED. 6. WITH REFERENCE TO THE ENQUIRY WHETHER THERE IS ANY B ASIS FOR INITIATING THE PROCEEDINGS U/S. 147, LD. DR SUBMITTED TH AT THERE WAS A COMMUNICATION FROM THE OTHER ACIT, WHICH IS ENC LOSED IN THE PAPER BOOK AT PG. 13-14 BY ASSESSEE AND REFERRED TO THOSE I.T.A. NOS. 124 & 125/HYD/2016 :- 6 -: DOCUMENTS TO SUBMIT THAT THERE WAS AN EVIDENCE THAT ASSESSE E HAS INVESTED AN AMOUNT OF RS. 4,25,000/-. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND EXAM INED THE DOCUMENTS PLACED ON RECORD. AS SEEN FROM THE AFFIDAV IT FILED BY ASSESSEE AND THE CONDONATION GRANTED BY CIT(A), THERE IS NO DISPUTE THAT ASSESSEE AND HER BROTHER ARE NOT ON TALKING TERMS. THEREFORE, SERVICE OF NOTICE ON THE ASSESSEES BROTHE R CANNOT BE CONSIDERED AS A VALID ONE. AS CORRECTLY POINTED OUT B Y THE DELHI HIGH COURT IN THE CASE OF CIT VS. CHETAN GUPTA (SUPRA), ISSUE OF NOTICE TO THE ASSESSEE AND SERVICE OF SUCH NOTICE U PON THE ASSESSEE ARE JURISDICTIONAL REQUIREMENTS THAT MUST BE MANDAT ORILY COMPLIED WITH . THEY ARE NOT MERE PROCEDURAL REQUIREMENTS. EVEN TO INVOKE PROVISIONS OF SECTION 144, AO HAS TO SERVE NOTICES TO A SSESSEE OR AT LEAST A SHOW CAUSE NOTICE TO BE GIVEN BEFORE CONCLUDIN G THE ASSESSMENT. NO SUCH STATUTORY REQUIREMENT WAS FULFIL LED IN THIS CASE. HAD THE AO SERVED NOTICES BY AFFIXTURE ON THE L AST KNOWN ADDRESS, THEN, THE PROCEEDINGS COULD BE CONSIDERED AS VALID BUT IN THIS CASE, NOT ONLY THE INITIAL NOTICES U/S. 147 BUT ALSO SUBSEQUENT NOTICES WERE SERVED ON ASSESSEES BROTHER WITH WHOM A SSESSEE HAS NO CONTACTS AS CAN BE SEEN FROM THE RECORD. THEREFOR E, THE LEGAL REQUIREMENT OF SERVICE OF NOTICE UPON ASSESSEE IN TER MS OF SECTION 148 AND ALSO IN TERMS OF SECTION 143(3)/144 HAS NOT BEEN FULFILLED. THE NOTICES PER SE SERVED ON THIRD PERSON ARE BAD IN LAW. ACCORDINGLY, ENTIRE PROCEEDINGS ARE BAD IN LAW. 8. COMING TO THE ARGUMENT THAT ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PROCEEDINGS, THEREFORE, THE PROVISIONS OF SECTION 292BB ARE SATISFIED HAS NO BASIS. IN FACT THE ASSESSME NT ORDER WAS I.T.A. NOS. 124 & 125/HYD/2016 :- 7 -: PASSED ON 22-12-2009 AND THE SO CALLED LETTERS FROM A SSESSEE WERE NOT EVEN ON RECORD OF AO. NO MENTION OF THEM WERE MAD E NOR THE CONTENTIONS WERE EXAMINED. THEY ARE STATED TO HAVE BEE N FILED AFTER THE ASSESSMENT WAS OVER. NEITHER THE AO NOR THE C IT(A) ACKNOWLEDGED THE SAME. IN FACT ASSESSEE CAME TO KNOW ABOUT THE PASSING OF THE ORDER AS WELL AS LEVYING OF PENALTY O NLY AFTER A NEIGHBOUR INTIMATED THE SERVICE BY AFFIXTURE OF AN OR DER U/S. 271(1)(C) AND ASSESSEE WAS NOT EVEN AWARE OF THE PROC EEDINGS, QUESTION OF PARTICIPATION DURING THE ASSESSMENT PROCEED INGS DOES NOT ARISE. ACCORDINGLY, WE ARE OF THE OPINION THAT P ROVISIONS OF SECTION 294BB DOES NOT APPLY TO THE FACTS OF THE CASE. 9. WE ARE ALSO CONSCIOUS OF THE FACT THAT AO, EVEN THOU GH HAD MORE THAN ONE YEAR TIME TO INITIATE THE PROCEEDINGS, CH OSE TO SERVE THE NOTICE ON THE BROTHER OF ASSESSEE AND WENT ON TO RECORD A STATEMENT ALSO FROM HIM. HOWEVER, THE BROTHER OF ASSES SEE AS SEEN FROM THE STATEMENT HAS INFORMED THAT ASSESSEE HAD AN AC COUNT IN SBI, WANAPARTHI. HOWEVER, NO STEPS WERE TAKEN BY THE AO TO EXAMINE THE SOURCE OF FUNDS IN THAT ACCOUNT, EVEN THOUG H THE PURCHASE DEED INDICATE THAT AMOUNT OF RS. 50,000/- WAS PAID BY WAY OF CHEQUE. EVEN THE BASIS FOR THE SO CALLED COMM UNICATION FROM ACIT WAS NOT PLACED ON RECORD. AS SEEN FROM TH E TABULATED STATEMENT PLACED IN THE PAPER BOOK BY ASSESSEE, THE VERA CITY OF WHICH COULD NOT BE EXAMINED, THE RATE PER SQUARE YAR D VARIED FROM RS. 400/- TO RS. 850/-. IN ASSESSEES CASE IT WAS SHO WN AT RS. 850/- PER SQUARE YARD. THE BASIS FOR ARRIVING AT THA T PRICE IS ALSO NOT AVAILABLE. WHAT IS THE SOURCE OF SUCH INFORMATION BY THE ACIT TO THE ITO AND WHETHER CROSS-EXAMINATION WAS PROVIDED TO THE PARTIES TO CROSS EXAMINE THE ABOVE CONTENTS WAS NOT AVAIL ABLE ON I.T.A. NOS. 124 & 125/HYD/2016 :- 8 -: RECORD, THEREFORE, COMPLETING ASSESSMENT ON THE BASIS O F UN- VERIFIED INFORMATION ITSELF CANNOT BE JUSTIFIED. 9.1. BE THAT AS IT MAY, ASSESSEES BROTHERS CONDUCT ALS O CANNOT BE ACCEPTED. BEING AN ADVOCATE, IT IS HIS DUTY TO INF ORM EITHER TO ASSESSEE OR TO INFORM THE AO THAT HE IS NOT AUTHORISED TO REPRESENT HER. NEITHER WAS DONE BY THE BROTHER OF ASSESSEE. TH EREFORE, AO MIGHT HAVE BEEN LEAD TO BELIEVE THAT THE NOTICES WERE SE RVED PROPERLY, BUT THE STATUTORY REQUIREMENT OF SERVICE OF N OTICE ON ASSESSEE HAS NOT BEEN FULFILLED, WHEN THE PROCEEDING S ARE INITIATED FOR REOPENING OF ASSESSMENT U/S. 147. FOR THE REASON S STATED ABOVE WE ARE OF THE OPINION THAT NOT ONLY THE ASSESSMENT BUT AL SO CONSEQUENT LEVY OF PENALTY ARE AB INITO VOID. CONSEQUENTLY, GROUNDS OF ASSESSEE ARE ALLOWED IN BOTH THE APPEALS. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 16 TH DECEMBER, 2016 TNMM I.T.A. NOS. 124 & 125/HYD/2016 :- 9 -: COPY TO : 1. MS. ALA VEENA, D/O. LATE A. CHINNA REDDY, C/O. M OHD. AFZAL, ADVOCATE, 11-5-465, SHERSONS RESIDENCY, FLA T NO. 402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, MAHABOOBNAGAR. 3. CIT (APPEALS)-4, HYDERABAD. 4. PR.CIT-4, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.