Sri. S. Guruswamy, Mysore V. DCIT, Mysore

ITA 1405/BANG/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6929 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: CHANNAPPA R NULVI
• Keywords: Opportunity of being heard; Principle of natural justice; Reason to believe
• Section: 142(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1405/BANG/2010 ASSESSMENT YEAR : 2001-02 SHRI S. GURUSWAMY, PROP. SHARAT BAR & RESTAURANT, NO.14, CANTOOR ROAD, ALANAHALLY LAYOUT, MYSORE. PAN : ADHPG 4976A VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), MYSORE. APPELLANT RESPONDENT APPELLANT BY : SHRI CHANNAPPA R. NULVI, C.A. RESPONDENT BY : SHRI SUSAN THOMAS JOSE, JT.CIT(DR) DATE OF HEARING : 26.12.2011 DATE OF PRONOUNCEMENT : 26.12.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 24.10.2010 OF THE CIT(APPEALS), MYSORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: ITA NO.1405/BANG/10 PAGE 2 OF 6 1. THE ORDER OF THE A.O AS WE L L AS C . I . T ( A ) I S B AD IN L A W A ND AGAINST THE FACT OF THE CASE. 2. THE NOTICE U/S 147 ISSUED BY TH E A.O IS BAD I N LAW AS HE HAS NO REASON TO BELIEVE ANY ESCAPEMENT OF I N COM E O T HE R THAN TH E INCOM E DEC L ARED BY THE APPELLANT AND ALSO NO REASON T O B EL IEVE FOR PROVIDING INACCURATE PARTICULARS BY THE APPELLANT . HE HAS IS S UED NOTI C E U/S 1 47 TO RE-ACTIVATE LODGED RETURN . 3. THE AUTHORITIES BELOW ERRED IN ADDIN G/ SUSTAININ G EXCESS OPENING CAPITAL OF RS.3,88,3 . 13 INSPIT E O F T HE AP P EL LANT FILE D TH E BALANCE SHEET FOR THE YEAR ENDING 31-3-1997 , 31-3- 199 8, 31 -3- 199 9 , 3 1 -3- 2000 AND 31-3-2001 WHEREIN THE OPENING CA PI T AL AS ON 1 - 4 - 2 000 HAS BEEN CLEARLY EXPLAINED BY THE A PP E L L AN T . 4. WHETHER ON THE FACT AND P R OVISI ONS OF T HE L A W T HE D IFFE RENCE IN OPENING CAPITAL IS TO BE TA X ED IN TH E AS SE S SM EN T Y E AR UND E R CONSID E RATION OR PRECEDING ASSESSM E NT YEAR, A S T HE OP E N I NG C APITAL I S TH E INC O ME OF THE PREVIOUS YEAR TO THE PRECEDING Y EA R . 5. THE A.O AS WELL AS C . I . T ( A) E RR E D IN S U S T A INING A DDITION OF R S. 1,00,000 BY DENYING THE CL A IM O F AGR I CU L T U R A L INCOM E BY TH E APPELLANT TO THE EXTENT OF RS. 1,00 , 000. A ND AD D E D AS TAXABL E INCOM E. INSPIT E OF THE APPELLANT BEFORE TH E C . I . T ( A ) G I V E N T HE D E TAIL E D S UBMISSION REGARDING LAND HO L DING, CROPS GR OWN AN D TH E R E ASON S A ND B AS I S FOR THE ESTIMATION OF INCOME FROM AGRIC U L T U R E . 6. FOR THESE AND OTHER REAS O N S W H I CH M AY B E ADDU C E D A T TH E TIME OF HEARING, THE APPELLANT PR A YS B EFO R E TH IS H O N ' BLE B E N C H TO D E L E TE THE ADDITION/SUSTAIN MADE BY T H E AU T H OR I T IE S B E LOW . 7. APPELLANT CRAVES LEAVES TO ADD, T O AI TE R, T O A ME ND A ND T O D E L ETE ANY OF THE GROUNDS AT THE TIME OF HEARI NG . 3. GROUND NOS. 1, 6 & 7 ARE GENERAL IN NATURE, SO D O NOT REQUIRE ANY COMMENTS ON OUR PART, WHILE GROUND NO.2 WAS NOT PRE SSED AS SUCH THE SAME IS DISMISSED AS NOT PRESSED. THE REMAINING GR OUNDS NO. 3 & 4 ARE CORRELATED AND RELATES TO THE SUSTENANCE OF ADDITIO N ON ACCOUNT OF EXCESS ITA NO.1405/BANG/10 PAGE 3 OF 6 OPENING CAPITAL OF RS.3,88,313, WHILE GROUND NO.5 R ELATES TO SUSTENANCE OF ADDITION OF RS.1 LAKH BY DENYING THE CLAIM OF AGRIC ULTURAL INCOME. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS IDENTIFIED AS STOP FILER SINCE THE LAST RETURN OF INCOME FILED BY HIM WAS FOR A.Y. 2000-01 ON 08-12-2000. THE ASSESSEE FILED THE RETURN OF IN COME FOR THE A.Y. 2001- 02 DECLARING AN INCOME OF RS.1,32,100 ALONG WITH AG RICULTURAL INCOME OF RS.1,90,000 ON 22.2.200. THE SAID RETURN WAS BELAT ED AND ACCORDING TO THE ASSESSING OFFICER, THERE WAS ESCAPEMENT OF INCO ME, THEREFORE ACTION U/S. 147 WAS CONSIDERED NECESSARY. THE AO ISSUED N OTICE U/S. 148 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS T HE ACT IN SHORT] ON 26.3.2007. THERE WAS NO RESPONSE TO THE SAID NOTI CE, THEREAFTER THE AO ISSUED NOTICE U/S. 142(1) ON 07.12.07 AND THE CASE WAS FIXED FOR HEARING ON 14.12.2007. ACCORDING TO THE AO, THERE WAS NO RESP ONSE BY THE ASSESSEE, HE THEREFORE PROCEEDED EX PARTE AND FRAMED THE ASSESSMENT U/S. 144 OF THE ACT. THE AO ADDED A SUM OF RS.3,88,313 ON ACCO UNT OF HIGHER OPENING CAPITAL FIGURE. THE AO ALSO CONSIDERED A SUM OF RS .1 LAKH AS INCOME FROM OTHER SOURCES OUT OF THE AGRICULTURAL INCOME CLAI MED BY THE ASSESSEE AT RS.1,90,000. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS), WHO CONFIRMED THE ADDITION OF RS.3,88,313/- MADE BY THE AO BY OBSERVING THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO SUBS TANTIATE THAT AGRICULTURAL LAND WAS ACQUIRED OUT OF REALIZATION OF BUSINESS DEBTS, SALE OF BUSINESS ASSETS, PERSONAL JEWELLERY ETC. AND THAT T HE BELATED RETURNS FILED BY THE ASSESSEE WERE NOT ACCOMPANIED BY THE BALANCE SHEET OR EVEN PROFIT & LOSS ACCOUNT. AS REGARDS TO THE AGRICULTURAL INC OME DISCLOSED BY THE ITA NO.1405/BANG/10 PAGE 4 OF 6 ASSESSEE AT RS.1,90,000, THE LD. CIT(APPEALS) OBSER VED THAT THE QUANTIFICATION OF AGRICULTURAL INCOME WAS BASED ON ESTIMATE ONLY BECAUSE THE ASSESSEE DID NOT MAINTAIN ACTUAL DETAILS OF AGR ICULTURAL EXPENSES PRODUCED OR CROPS SOLD ETC. HE FURTHER OBSERVED TH AT THE ASSESSEE HAD DISCLOSED AN AGRICULTURAL INCOME OF RS.80,000/- ONL Y IN THE PRECEDING YEAR AND THERE IS NO REASON OR EVIDENCE THAT THE SAME LA NDS WOULD SUDDENLY START GIVING MORE THAN DOUBLE INCOME. LD. CIT(A) C ONFIRMED THE ADDITION BY OBSERVING THAT THE AO CORRECTLY BASED HIS ESTIMATE ON THE INCOME DISCLOSED BY THE ASSESSEE IN EARLIER YEARS. NOW THE ASSESSEE IS IN APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WHILE MAKING THE ADDITIONS HAD NOT PROVIDED DUE AND REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THAT THE LD. CIT(A) WITHO UT CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE IN THE RIGHT PE RSPECTIVE, SUSTAINED THE ADDITION MADE BY THE AO. 7. IN HER RIVAL SUBMISSIONS, THE LD. DR STRONGLY SU PPORTED THE ORDER PASSED BY THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT COOPERATIVE, THEREFORE THE AO HAD NO OTHER ALTERNAT IVE, EXCEPT TO FRAME THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE U/S. 144 OF THE ACT. SHE FURTHER SUBMITTED THAT THE LD. CIT(A) CONSIDERED TH E WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AS WELL AS BY THE AO AND ONLY THEREAFTER UPHELD THE ADDITION MADE BY THE AO. THEREFORE THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSMENT WAS FRAMED BY THE AO EX ITA NO.1405/BANG/10 PAGE 5 OF 6 PARTE U/S. 144 OF THE ACT. WHILE DOING SO, THE AO AT PA GE 2 OF THE ASSESSMENT ORDER HAD STATED THAT NOTICE U/S. 148 WA S ISSUED AND SERVED ON THE ASSESSEE ON 26.3.2007, THEREAFTER ANOTHER NO TICE U/S. 142(1) WAS ISSUED ON 7.12.2007 AND THE CASE WAS FIXED FOR HEAR ING ON 14.12.2007, BUT THERE WAS NO RESPONSE FROM THE ASSESSEE TILL 17.12. 2007 I.E., THE DATE ON WHICH THE ASSESSMENT ORDER U/S. 144 WAS PASSED. FR OM THE ABOVE FACTS, IT APPEARS THAT ONLY ONE OPPORTUNITY WAS GIVEN TO THE ASSESSEE I.E., ON 14.12.2007 AND THE ORDER WAS PASSED ON 17.12.2007. IT SHOWS THAT ALTHOUGH OPPORTUNITY OF BEING HEARD WAS GIVEN TO TH E ASSESSEE, BUT THAT WAS NOT A SUFFICIENT OPPORTUNITY. 9. IN THE PRESENT CASE, IT IS ALSO NOTICED THAT THE ASSESSEE FILED THE WRITTEN SUBMISSION TO THE LD. CIT(A) ON 05.11.2008 AND EXPLAINED HIS CASE OF PURCHASING AGRICULTURAL LAND. THE LD. CIT(A) HA D MENTIONED AT PAGE NO.2 OF THE IMPUGNED ORDER THAT A REMAND REPORT WAS ASKE D FROM THE AO, WHO FURNISHED THE REMAND REPORT DATED 2.7.2008, WHICH C LEARLY SHOWS THAT THE LD. CIT(A) DID NOT ASK THE COMMENTS OF THE AO ON TH E WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON 05.11.08. IT THEREFORE AP PEARS THAT THE LD. CIT(A) WHILE SUSTAINING THE ADDITIONS HAD CONSIDERED THE R EMAND REPORT DATED 2.7.2008 OF THE AO, WHICH WAS PRIOR TO THE EXPLANAT ION FURNISHED BY THE ASSESSEE ON 05.11.08. IN OUR OPINION, THIS CASE RE QUIRES A FRESH ADJUDICATION AT THE LEVEL OF THE AO SINCE DUE AND P ROPER OPPORTUNITY OF BEING HEARD WAS NOT PROVIDED TO THE ASSESSEE, WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE, WHICH PROVIDES THAT NOBODY SHOULD BE CONDEMNED UNHEARD AS PER THE MAXIM AUDI ALTERAM PARTEM . WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS, SET ASIDE TH E IMPUGNED ORDER PASSED ITA NO.1405/BANG/10 PAGE 6 OF 6 BY THE LD. CIT(A) ON THE ISSUES UNDER CONSIDERATION AND THE CASE ON THE ISSUES AGITATED BY THE ASSESSEE IS REMANDED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW, AFTE R PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF DECEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH DECEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.