V.Suseela, Proddatur V. Dy. Commissioner of Income Tax, Circle-2(1), Tirupathi

ITA 1442/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5942 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 11-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure; Principle of natural justice
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES CIRCUIT BENCH A, AT TIRUPATI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. AY. APPELLANT RESPONDENT 1437/HYD/17 2000 - 01 SATYANARAYANA VALLAMKOND U, PRADDATUR [PAN: AAQPV2902C] DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), TIRUPATI 1438/HYD/17 2001 - 02 1439/HYD/17 2002 - 03 1440/HYD/17 2004 - 05 1441/HYD/17 2004 - 05 SUSEELA VALLAMKONDU, PRODDATUR, [PAN: AAQPV2899 C ] DY. COMMISSIONER OF INC OME TAX, CIRCLE - 2(1), TIRUPATI 1442/HYD/17 2005 - 06 1448/HYD/17 2002 - 03 SREEKRISHNA SATYANARAYANA VALLAMKONDU, PRODDATUR [PAN: AAQPV2898D] DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), TIRUPATI 1449/HYD/17 2003 - 04 1450/HYD/17 2005 - 06 1451 /HYD/17 2000 - 01 VALLAMKONDU SATYANARAYANA(HUF) PRODDATUR [PAN: AABHV0682A] DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), TIRUPATI 1452/HYD/17 2004 - 05 FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT. KOMALI KRISHNA, DR DATE OF HEARIN G : 1 7 - 0 5 - 201 8 DATE OF PRONOUNCEMENT : 17 - 0 5 - 201 8 O R D E R PER BENCH : ALL T H E S E A PPEAL S ARE BY RESPECTIVE ASSESSEES DIRECTED AGAINST THE SIMILAR BUT DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 2 - : (APPEALS) - KURNOOL , FOR THE ABOVE ASSESS MENT YEARS. SINCE COMMON ISSUES ARISE FROM THE ABOVE, WE HAVE CLUBBED THE APPEALS TOGETHER AND HEAR D TOGETHER AND ARE DISPOSED - OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THERE WERE SEARCH AND SEIZURE OPERATIONS IN THESE CASES ON 14 - 07 - 2004 U /S. 132 OF THE ACT. THEREAFTER, NOTICES U/S. 153A/153C WERE ISSUED AND ASSESSMENTS WERE COMPLETED U/S. 143(3) R.W.S. 153A/153C OF THE ACT. THERE WERE CERTAIN ADDITIONS MADE IN THE ABOVE CASES. ASSESSEES PREFERRED APPEALS BEFORE THE LD.CIT(A), WHO CONFIR MED THE ADDITIONS MADE BY THE AO. AGGRIEVED BY THE ORDERS, ASSESSEES HEREIN PREFERRED APPEALS BEFORE THE ITAT. IN THE COURSE OF PROCEEDINGS BEFORE THE ITAT, ASSESSEE HA D RAISED A LEGAL GROUND THAT ASSESSMENT FRAMED IN THESE CASES IS BAD IN LAW. FOR CLAR ITY, THE COMMON LEGAL GROUND RAISED IS RE - PRODUCED HERE UNDER: THE CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE BY THE AO INSPITE OF THE FACT THAT THEY WERE NOT MADE WITH REFERENCE TO ANY SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPE RATIONS . SINCE THIS LEGAL GROUND GOES TO THE ROOT OF THE MATTER AND AS LOWER AUTHORITIES HAVE NO OCCASION TO EXAMINE THIS, THE ITAT SET ASIDE THE ISSUE TO THE FILE OF AO FOR CONSIDERATION AND DECIDE THE SAME IN ACCORDANCE WITH LAW. 3. IN THE CONSEQUEN TIAL PROCEEDINGS, THE AO DECIDED THE ISSUE AS UNDER: I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 3 - : THE TRIBUNAL DIRECTED TO EXAMINE THE NEW LEGAL GROUND ONLY AND ITS APPLICABILITY TO THE FACTS OF THE CASE. IN THIS CASE SEARCH WAS CONDUCTED ON 14 - 7 - 2004 . HENCE, THE PROVISIONS OF SEC. 153A AS AME NDED W.E.F. 1 - 6 - 2003 ARE APPLICABLE IN THIS CASE. A PLAIN READING OF SECTION 153A INDICATES THAT WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31 DAY OF MAY 2003, THE AO SHALL ISSUE NOTICE CALLING FOR RETURNS OF INCOME FOR SIX ASSESSMENT YEARS. HENCE, INITIATION OF ACTION 132 ITSELF IS ENOUGH FOR ISSUE OF NOTICE U/S. 153A AND THE ASSESSMENT UNDER THESE PROVISIONS IS MANDATORY IN ALL CASES EVEN IF NO INCRIMINA TING MATERIAL IF FOUND IN THE COURSE OF SEARCH U/S. 132 OR REQUISITION MADE U/S. 132A AS HELD BY THE TRIBUNAL IN THE CASE OF RAJAT TRADECOM INDIA 120 ITD 48 (INDORE) . THIS VIEW APPEARS TO BE BASED ON THE PRINCIPLE THAT IF THE LANGUAGE OF A STATUTE IS PLAI N AND CLEAR AND THERE IS NO AMBIGUITY THEN THE NATURAL AND ORDINARY MEANING OF THE WORKS SHOULD BE ADOPTED AS HELD BY VARIOUS COURTS. (TARU LATA SYAM V., CIT 108 ITR 345, AIR 2001 SC 1980 IN THE CASE OF GURU DEVDUTTA VKSS MARYADIT VS. STATE OF MAHARASTRA) . THE INITIATION OF VALID SEARCH U/S. 132 OR REQUISITION U/S. 132A IS THE ONLY CONDITION FOR INVOKING THE PROVISIONS OF SEC. 153A. THE SEIZURE OF INCRIMINATING MATERIAL IS NOT THE CONDITION FOR INVOKING SUCH PROVISIONS. FURTHER, UNLIKE PROVISIONS OF CHAPTER XIV - B, WHEREIN THE ASSESSMENT WAS TO BE MADE IN RESPECT OF THE UNDISCLOSED INCOME ON THE BASIS OF MATERIAL FOUND IN THE COURSE OF SEARCH (SEC. 158BA R.W.S. 158BB) , SECTION 153A IN CLEAR TERMS PROVIDES THAT IN CASE WHERE SEARCH IS INITIATED AFTER 31 ST DAY OF MAY 2003, THE AO SHALL ISSUE THE NOTICE IN RESPECT OF SPECIFIED SIX YEARS AND ASSESS/REASSESS THE TOTAL INCOME OF THE ASSESSEE AND NOT THE UNDISCLOSED INCOME. SECTION 153A EMPOWERS THE AO TO ASSESS THE TOTAL INCOME WHICH, UNDOUBTEDLY, WOULD INCL UDE DISCLOSED AS WELL AS UNDISCLOSED INCOME. AS PER SETTLED LEGAL POSITION, THE COURT CANNOT ADD TO OR SUBTRACT FROM THE LANGUAGE USED BY THE LEGISLATURE IF SUCH LANGUAGE IS PLAIN AND SIMPLE. THE TIME WHEN SECTION 153A WAS INTRODUCED, THREE EXPRESSION WE RE ALREADY THERE IN THE ACT. I.E., TOTAL INCOME INCOME ESCAPING ASSESSMENT AND UNDISCLOSED INCOME. IT MEANS THAT THE LEGISLATURES HAD DELIBERATELY DEPARTED FROM THE CONCEPT OF UNDISCLOSED INCOME AND CONSCIOUSLY USED THE WORD TOTAL INCOME. FURTHER , THERE IS NOTHING IN THE LANGUAGE TO INFER THAT ASSESSMENT IS TO BE MADE ONLY ON THE BASIS OF SEARCH MATERIAL. IF THE ASSESSMENT WAS INTENDED TO BE MADE OF UNDISCLOSED INCOME ONLY ON THE BASIS OF SEARCH MATERIAL THEN THERE WAS NO NEED TO SWITCH OVER TO T HE NEW SCHEME. THE DELHI BENCH OF TRIBUNAL HAS TAKEN THE VIEW IN THE CASES: SHIVNATHRAI HARNARAIN (INDIA) LTD. VS. DCIT 117 TTJ 480 AND SHYAM LATA KAUSHIK VS. ACIT 114 ITD 305 WHEREIN IT HAS BEEN HELD THAT THERE IS NO REQUIREMENT IN SEC. 153A FOR MAKING ASSESSMENT ON THE BASIS OF SEARCH I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 4 - : MATERIAL. THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF RAJAT TRADECOM INDIA 20 ITD 48 (IND) HAS ALSO HELD THAT ONCE SEARCH IS MADE, ASSESSMENTS GET REOPENED FOR SIX YEARS EVEN IF NO INCRIMINATING MATERIAL IS FOUND. A O REPEATED THE TOTAL INCOME AS ASSESSED VIDE EARLIER ORDERS DT. 29 - 12 - 2006. 4. AGGRIEVED BY THE ABOVE ORDERS, ASSESSEES PREFERRED APPEALS AND RELIED ON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. KABUL CHA WLA [380 ITR 573] (DELHI) AND PR.CIT VS. LATA JAIN [81 TAXMANN.COM 83] AND OTHER CO - ORDINATE BENCH DECISIONS [ AS EXTRACTED BY THE LD.CIT(A) IN PARA 5 OF THE ORDER ] . HOWEVER, LD.CIT(A) DISMISSED THE CONTENTIONS STATING AS UNDER: 6.3. IN THIS CONTEXT, THE ASSESSING OFFICER STATED THAT IN VI EW OF THE ABOVE DISCUSSION, THE NEW LEGAL GROUND RAISED BEFORE THE TRIBUNAL THAT THE ASSESSMENT WAS NOT MADE WITH REFERENCE TO SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CANNOT BE ACCEPTED AND THE ASSESSMENT ALREADY MADE HOLDS GOOD SINCE THE ITAT, HYDERABAD HAS SET ASIDE THE LEGAL GROUND ONLY AND THE ITAT HAS NOT DECIDED THE OTHER GROUNDS WHICH HAS BEARING ON INCOME DETERMINATION. CONSIDERING THE FACTS, ISSUES AND CIRCUMSTANCES IN THE INSTANT CASE AS BROUGHT OUT IN THE PRECED ING PARAS, THE ASSESSMENT ORDER HOLDS WATER. HENCE, GROUND NO. 2 IS DISMISSED. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE ORDERS OF THE LOWER AUTHORITIES , WE ARE OF THE OPINION THAT BOTH AO AND LD.CIT(A) DID NOT EXAMINE THE ISSUE WHICH WAS SET ASIDE TO THE FILE OF THE AO. THERE IS NO DISPUTE WITH REFERENCE TO INITIATION OF PROCEEDINGS U/S. 153A/153C . THE GROUND RAISED BEFORE THE ITAT IS VERY CLEAR THAT NO ADDITION CAN BE MADE IN THE ABSENCE OF ANY SEIZED MATERIAL. ASSESSEE HAS VERY CLE ARLY SUBMITTED BEFORE THE I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 5 - : LD.CIT(A) THAT THE PRINCIPLES LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (SUPRA), WILL APPLY. THE HON'BLE DELHI HIGH COURT IN THE ABOVE SAID CASE HAS CLEARLY HELD THAT - (I) O NCE A SEARCH TAKES PLACE U/S. 132 OF THE ACT, NOTICE U/S. 153A WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRE HIM TO FILE RETURNS FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN THE YEAR IN WHICH THE SEA RCH TAKES PLACE. (II) ALTHOUGH SECTION 153A DOES NOT SAY THAT ADDITIONS SHOULD BE DIRECTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF SEARCH OR OTHER POST SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENC E FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARILY MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. (III) IN THE ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETE D ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR RE - ASSESSMENT CAN BE MADE. THE WORD ASSESS IN SECTION 153A IS RELATABLE TO ABATED PROCEEDINGS [I.E., THOSE PENDING ON THE DATE OF SEARCH ] AND THE WORD RE - ASSESS TO COMPLETE D THE PROCEEDINGS . (IV) INSOFAR AS THE PENDING ASSESSMENTS ARE CONCERNED, THE JU RISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND ASSESSMENT U/S. 153A MERGES IN TO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH ASSESSMENT YEAR ON THE BASIS OF FINDINGS OF THE I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 6 - : SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON RECORD OF THE AO . (V) COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING ASSESSMENT U/S. 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UN - EARTHED DURING THE COURSE OF SEARCH OR REQUISITION OR DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVER ED IN THE COURSE OF SEARCH, WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT . THESE PRINCIPLES LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE ABOVE SAID CASE I.E., CIT VS. KABUL CHAWLA (SUPRA), HAS BEE N FOLLOWED IN NUMBER OF CASES AS UNDER: I. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF PR.CIT VS. SAUMYA CONSTRUCTION (P) LTD., [387 ITR 529]; II. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF PR.CIT VS. DIPAK JASHVANTLAL PANCHAL [397 ITR 153]; III. HON'BLE HIGH COUR T OF DELHI IN THE CASE OF PR.CIT VS. MEETA GUTGUTIA [395 ITR 526]; IV. ITAT, MUMBAI IN THE CASE OF WIND WORLD INDIA INFRASTRUCTURE (P) LTD., VS. PR.CIT [167 ITD 438]; V. HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. DEEPAK KUMAR AGARWAL [398 ITR 586]; VI. HON'B LE HIGH COURT OF DELHI IN THE CASE OF PR.CIT VS. VIKAS GUTGUTIA [396 ITR 691]; THE CO - ORDINATE BENCHES IN THE CASE OF Y.V. ANJANEYULU VS. DCIT, VIJAYAWADA [88 TAXMANN.COM 568] (VISAKHAPATNAM - TRIB.) AND I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 7 - : DCIT, CENTRAL CIRCLE - 3 VS. LINGAM TULSI PRASAD [82 TAXMANN.COM 335] (HYDERABAD TRIB) HAVE FOLLOWED THE ABOVE PRINCIPLES AND HELD THAT ASSESSMENTS U/S. 153A COULD NOT BE MADE ON THE BASIS OF INCOME RETURNED BY ASSESSEE OR ON THE BASIS OF BOOKS OF ACCOUNT OF ASSESSEE WHERE NO INCRIMINATING MATERIAL HAD BEE N FOUND FROM POSSESSION OF ASSESSEE. 6. LD.CIT(A) INSPITE OF WRITTEN SUBMISSIONS MADE BEFORE HIM AND CONTENTIONS RAISED, DID NOT CONSIDER THE ABOVE PRINCIPLES LAID DOWN BY THE JUDICIAL AUTHORITIES. INSTEAD THE ISSUE DISCUSSED BY THE AO WHETHER THE PROC EEDINGS U/S. 153A ARE MANDATORY OR NOT HAVE BEEN UPHELD , WHEN THERE IS NO DISPUTE WITH REFERENCE TO INITIATION OF PROCEEDINGS . T HE DISPUTE IS ONLY WITH REFERENCE TO ADDITIONS MADE WHICH ASSESSEE CONTENDS THAT THEY ARE NOT BASED ON ANY INCRIMINATING MATERI AL FOUND IN THE COURSE OF SEARCH. THIS ASPECT HAS NOT BEEN EXAMINED BY THE LD.CIT(A) AT ALL. MOREOVER, ONCE THE LEGAL ISSUE IS EXAMINED, IT IS INCUMBENT ON THE CIT(A) TO DECIDE THE MERITS OF THE ADDITION ALSO. IF HE FINDS THAT THIS ISSUE WAS ALREADY DEC IDED IN EARLIER ROUND OF APPEALS, THEN, HE SHOULD FOLLOW THE SAME RATHER THAN DISMISSING THE GROUNDS RAISED. FOR THESE REASONS, WE ARE NOT IN A POSITION TO UPHELD THE ORDERS OF THE CIT(A). 7. SINCE THE AO H AS ALREADY CONSIDERED ( WRONGLY ) THE DIRECTIONS OF ITAT, WE DO NOT FIND IT NECESSARY TO SET ASIDE AGAIN TO THE FILE OF AO. THE REFORE THE ISSUE IS SET ASIDE TO THE FILE OF CIT(A) TO EXAMINE THE ADDITIONS IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HIGHER JUDICIAL AUTHORITIES AND GIVE CLEAR FINDINGS WHETHER ANY PROCEEDINGS ARE PENDING ON THE DATE OF SEARCH OR WHETHER ANY PROCEEDINGS HAVE I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 8 - : BEEN ABATED , WHETHER ANY INCRIMINATING MATERIAL WAS FOUND FOR MAKING ADDITIONS IN EACH OF THE ASSESSMENT YEARS AND ON EACH OF THE ADDITIONS MADE . I F REQUIRED, THE LD. CIT(A) MAY GIVE AN OPPORTUNITY TO AO. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BEFORE DECIDING THE ISSUE. PRINCIPLES OF NATURAL JUSTICE SHOULD BE FOLLOWED STRICTLY. WITH THESE DIRECTIONS, THE ORDERS OF CIT(A) IN ALL THESE APPEALS ARE SET ASIDE AND THE A PPEA L S BEFORE HIM ARE RESTORED FOR GIVING CLEAR DIRECTION S/FINDINGS AS STATED ABOVE WHILE CONSIDERING THE APPEALS BOTH ON LEGAL ISSUES AND MERITS OF THE ADDITION MADE, AS THEY HAVE A BEARING ON THE ISSUE . 8 . IN THE RESULT, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2018 SD/ - SD/ - (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER TIRUPATI, DATED 17 TH MAY, 2018 TNMM I.T.A. NO S . 1437, 1438, 1439, 1440, 1441, 1442, 1448, 1449, 1450, 1451 & 1452 /HYD/ 201 7 : - 9 - : COPY TO : 1. SATYANARAYANA VALLAMKONDU, 3/940, CO - OPERATIVE COLONY, PRODDATUR. 2. SUSEELA VALLAM K ONDU, 3/966, CO - OPERATIVE COLONY, PRODDATUR. 3. SREEKRISHNA SATYANARAYANA VALLAMKONDU, 3/940, CO - OPERATIVE COLONY, PRODDATUR. 4. VALLAMK ONDU SATYANARAYANA (HUF), 3/940, CO - OPERATIVE COLONY, PRODDATUR. 5 . DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), TIRUPATI. 6 . CIT (APPEALS) - KURNOOL . 7 . PR.CIT - KURNOOL. 8 . D.R. ITAT, HYDERABAD. 9 . GUARD FILE.