Deen Dayal Kothari, CHENNAI V. ITO, CHENNAI

ITA 1667/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7585 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: D ANAND
• Keywords: Cost of acquisition; Validity of assessment; Onus to prove; Reason to believe
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , ! [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1667/MDS/2016 / ASSESSMENT YEAR : 2008-2009 SHRI. DEEN DAYAL KOTHARI, 79, GODOWN STREET, CHENNAI 600 001. [ PAN AANPK 2282K] VS. THE INCOME TAX OFFICER, BUSINESS WARD VIII(3) CHENNAI 600 034 ( '# / APPELLANT) ( $%'# /RESPONDENT) / APPELLANT BY : SHRI.D. ANAND, ADVOCATE /RESPONDENT BY : SHRI. R. CLEMENT RAMESH KUMAR, JCIT. /DATE OF HEARING : 28-02-2017 ! /DATE OF PRONOUNCEMENT : 03-03-2017 & / O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 29.02.2016 OF LD. COMMISSIONER OF INCOM E TAX (APPEALS)- 13, CHENNAI, FOR THE IMPUGNED ASSESSMENT YEAR. 2. ASSESSEE HAS TAKEN ALTOGETHER SEVEN GROUNDS OF WHIC H GROUNDS NO.1 & 7 ARE GENERAL IN NATURE NEEDING NO S PECIFIC ADJUDICATION. VIDE GROUND NO.2, ASSESSEE ASSAILS TH E LEGALITY OF ASSESSMENT DONE ON HIM. ITA NO. 1667//MDS/2016 :- 2 -: 3. FACTS APROPOS ARE THAT ASSESSEE HAD FILED A RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR IN A STATUS OF HUF DISCLOSING INCOME OF C1,82,089/-. LD. ASSESSING OFFICER WAS H AVING INFORMATION REGARDING PURCHASE OF 2.89 ACRES OF LAND BY THE ASS ESSEE ALONGWITH FOUR OTHER PERSONS, FROM ONE SMT. K. SATHYA ON 21.0 5.2007. IN THE RETURN OF INCOME FILED BY THE ASSESSEE IN THE HUF S TATUS THE INVESTMENT IN THE ABOVE PROPERTY WAS NOT DISCLOSED. HENCE NOTICE U/S.148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUED TO THE ASSESSEE. THEREUPON ASSESSEE REQUESTED THE L D. ASSESSING OFFICER TO TREAT THE RETURN ORIGINALLY FILED AS ONE FILED IN PURSUANCE TO SUCH NOTICE. THEREAFTER NOTICE U/S.143(2) OF THE A CT WAS ALSO ISSUED TO THE ASSESSEE. HOWEVER, ASSESSEE DID NOT ENTER AP PEARANCE. LD. ASSESSING OFFICER EXAMINED SMT. K. SATHYA SELLER OF THE PROPERTY UNDER SUMMONS. IT SEEMS SMT. K.SATHYA STATED THAT SHE H AD SOLD TWO PIECES OF LAND TO FIVE PERSONS INCLUDING THE ASSESS EE SHRI. DEEN DAYAL KOTHARI. AS PER SMT. K. SATHYA THE DETAILS OF THE PROPERTY SOLD WERE AS UNDER:- SL.NO LAND AREA SALES PRICE AMOUNT 1 S.NO.146/4A, NEMILI VILL AGE, SRIPERUMPUDUR 2.89 ACRES C60,04,000/ - (CHEQUE NO.5,04,000/- + CASH C55,00,000/-) 2 S.NO.146/4B, NEMILI VILLAGE, SRIPERUMPUDUR 4.03 ACRES C83,72,325/ - (CHEQUE NO.7,02,800/- + CASH C76,69,525/-) ITA NO. 1667//MDS/2016 :- 3 -: 4. THEREAFTER ON 04.02.2013, ASSESSEE APPEARED BEFORE LD. ASSESSING OFFICER AND A SWORN STATEMENT WAS RECORDE D. IN SUCH SWORN STATEMENT HE ADMITTED THAT THE PURCHASE WAS MADE IN HIS INDIVIDUAL STATUS THOUGH PA NO. OF HUF WAS GIVEN FOR REGISTRAT ION OF THE DOCUMENT. IT IS TO BE NOTED THAT ASSESSEE HAD ALSO FILED A RETURN IN HIS INDIVIDUAL STATUS FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING TOTAL INCOME OF C1,65,784/-. IN THE SAID RETURN ASSESSEE HAD DISCLOSED PURCHASE OF THE ABOVE MENTIONED PROPERTY AND THE COST OF ACQUISITION WAS MENTIONED AS C6,03,400/-, CLAIMED TO BE 1/5 TH SHARE OF THE CONSIDERATION PAID. LD. ASSESSING OFFICER PROCEEDE D TO COMPLETE THE ASSESSMENT IN THE INDIVIDUAL STATUS OF THE ASSESSEE BASED ON THE STATEMENTS GIVEN BY THE ASSESSEE AND SMT. K. SATHY A BEFORE HIM. LD. ASSESSING OFFICER ALSO REFERRED TO AN ASSESSMENT DO NE ON ONE SHRI. DILLI RAJA, WHO WAS THE MEDIATOR FOR THE PURCHASE OF THE ABOVE PROPERTY. SHRI. DILLI RAJA IT SEEMS HAD ADMITTED THAT CASH O F C55,00,000/- PERTAINING TO THE FIRST OF THE TWO PROPERTIES WAS H ELD BY HIM IN THE SAFE CUSTODY AND LATER TRANSFERRED TO THE SELLER AND HER DAUGHTERS. THOUGH THE ASSESSEE ARGUED BEFORE LD. ASSESSING OFFICER THAT RECEIPT OF C55,00,000/- ALONE WAS ACKNOWLEDGED BY SMT. K. SA THYA TO HAVE BEEN RECEIVED IN CASH FROM THE ASSESSEE, THIS WAS NOT ACCEPTED BY THE LD. ASSESSING OFFICER. ACCORDING TO HIM, SMT. K. S ATHYA HAD PRODUCED COPIES OF RECEIPTS WITH REGARD TO BOTH PROPERTIES A ND SHRI. DILLI RAJA THE ITA NO. 1667//MDS/2016 :- 4 -: MEDIATOR HAD ACCEPTED PAYMENT OF ON-MONEY. HE HELD THAT ASSESSEE HAD NOT DISCLOSED INVESTMENT FOR 1/5TH SHARE IN BO TH THESE PROPERTIES. TOTAL AMOUNT NOT DISCLOSED BY THE ASSESSEE WAS COMP UTED BY THE ASSESSING OFFICER AS UNDER:- ACTUAL PURCHASE PRICE (1/5 TH SHARE OF ASSESSEE) BUT OFFERED BY ASSESSEE IN HIS RETURN (C12,60,040 X 1/5) BALANCE ADD STAMP DUTY (100808 X 1/5) TOTAL AMOUNT NOT DISCLOSED BY ASSESSEE C12,00,800 C2,52,000 9,48,800 20,162 9,68,962/- 60,04,000 ACTUAL PURCHASE PRICE (1/5 TH SHARE OF ASSESSEE) BUT OFFERED BY ASSESSEE IN HIS RETURN (C17,57,080 X 1/5) BALANCE ADD STAMP DUTY (140568 X 1/5) TOTAL AMOUNT NOT DISCLOSED BY ASSESSEE C16,74,465 C3,51,416 13,23,049 28,114 13,51,163 83,72,325 TOTAL AMOUNT NOT DISCLOSED BY THE ASSESSEE C9,68,962/- + 13,51,163/ = C23,20,117/- ITA NO. 1667//MDS/2016 :- 5 -: AN ADDITION OF C23,20,117/- WAS MADE AND ASSESSMEN T WAS COMPLETED ON THE ASSESSEE ON THE INDIVIDUAL STATUS 5. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOM E TAX (APPEALS) DID NOT MEET WITH ANY SUCCESS. ACCORDING TO LD. COMMISSIONER OF INCOME TAX (APPEALS) SMT. K.SATYA H AD SOLD FIRST PROPERTY FOR C60,04,000/- THOUGH VALUE AS PER SALE DEED WAS ONLY C12,60,040/-. FURTHER AS PER LD. COMMISSIONER OF I NCOME TAX (APPEALS) THE SECOND PROPERTY WHICH WAS ADJACENT TO THE FIRST ONE WAS ALSO SOLD BY SMT. K. SATYA FOR A SUM OF C83,72,325 /- THOUGH ACTUAL AMOUNT SHOWN IN THE REGISTERED DEED WAS ONLY C17,57 ,080/-. LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT SHR I. K.DILLI RAJA WHO WAS THE MEDIATOR HAD ADMITTED PAYMENT OF ON-MO NEY. AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS), LD. ASSES SING OFFICER HAD SUCCESSFULLY DISCHARGED HIS BURDEN OF PROOF BY ISSU ING SUMMONS TO SMT. K. SATHYA WHO HAD ACCEPTED RECEIPT OF ON-MONEY . HE CONFIRMED THE ADDITIONS MADE BY THE LD ASSESSING OFFICER. 6. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE SUBMIT TED THAT THE ASSESSMENT WAS BAD IN LAW SINCE IT WAS INITIATE D ON A RETURN FILED BY THE ASSESSEE IN HUF STATUS. AS PER LD. AUTHORISE D REPRESENTATIVE ASSESSING OFFICER IF HE FOUND THAT THE PROPERTY WAS PURCHASED IN THE ITA NO. 1667//MDS/2016 :- 6 -: INDIVIDUAL STATUS OF THE ASSESSEE, OUGHT HAVE ISSU ED NOTICE U/S.148 OF THE ACT TO THE ASSESSEE IN HIS INDIVIDUAL STATUS. THIS WAS NEVER DONE. NOTICE WAS ADMITTEDLY ISSUED IN THE STATUS OF HUF. ASSESSMENT HAVING BEING DONE U/S.143(3) R.W.S. 147 OF THE ACT, AS PE R LD. AUTHORISED REPRESENTATIVE NOTICE ISSUE OF NOTICE U/S.148 OF T HE ACT WAS MANDATORY. AS PER THE LD. AUTHORISED REPRESENTATIVE EVEN THE NOTICE U/S.143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON LY IN HUF STATUS. THUS, ACCORDING TO HIM ASSESSMENT IN THE HUF STATUS OF THE ASSESSEE WAS BAD IN LAW. LD. AUTHORISED REPRESENTATIVE PLACE D RELIANCE ON THE THIRD MEMBER DECISION OF THE DELHI BENCH OF THE TRI BUNAL IN THE CASE OF SURAJ MAL, HUF VS. ITO (2007) 109 ITD 327 . 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE TAX PAYER HIMSELF HAD STARTED THE CONFUSION. ER ROR WAS COMMITTED BY THE ASSESSEE AND THIS WAS RECTIFIED BY THE LD. ASSESSING OFFICER BY MAKING THE ASSESSMENT IN THE CORRECT STATUS. ACCOR DING TO HIM, THE LACUNA IF ANY COULD BE CURED U/S.292BB OF THE ACT . 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FIRST TWO PARAGRAP HS IN THE IMPUGNED ASSESSMENT ORDER WHICH WAS PASSED U/S.143(3) R.W.S. 147 OF THE ACT IS VERY RELEVANT AND THESE ARE REPRODUCED HEREUNDER:- ITA NO. 1667//MDS/2016 :- 7 -: THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE A. Y.200S- 09 IN HUF STATUS ON 21.08.2008 DECLARING A TOTAL IN COME OF RS..1,82,089/- THE SAME WAS PROCESSED U/S 143(1). INFORMATION WAS RECEIVED FROM THE INCOMETAX OFFICER , WARD I(1), KANCHIPURAM VIDE LETTER DT 04.02.2011 AB OUT THE PURCHASE OF A LAND LOCATED AT SURVEY NO.146/4A, NEMILI A VILLAGE, SRIPERUMPUDUR MEASURING TO 2.89 A CRES BY THE ASSESSEE ALONGWITH 4 CO-OWNERS FROM ONE SMT. K.SATHYA ON 21.05.2007 CONNECTED IN THE CASE OF SHR I. DILLI RAJA WHO IS ASSESSED IN HIS WARD. ON EXAMINATION OF THE RETURN OF INCOME FILED BY THE ASSESSEE SHRI. DEEN DAYAL KOTHARI FOR THE AY 2008-0 9 IN HUF STATUS, IT IS SEEN THAT THE INVESTMENT IN THE A BOVE PROPERTY HAS NOT BEEN DISCLOSED. SO, THE UNDERSIGNE D HAS REASON TO BELIEVE THAT THERE IS AN ESCAPEMENT OF IN COME AND THE ASSESSMENT WAS REOPENED. NOTICE U/S. 148 WAS ISSUED ON 07.07.2011. THE ASSESSEE HAD WRITTEN A LE TTER STATING THAT THE RETURN ALREADY FILED MAY BE TREATE D AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S.148 . THE PROPERTIES PURCHASED BY THE ASSESSEE AS PER LD. ASSESSING OFFICER, WAS NOT DISCLOSED IN THE RETURN FILED BY THE ASSESS EE IN HUF STATUS. IT WAS ONLY WHEN ASSESSEE WAS EXAMINED BY THE LD. ASSE SSING OFFICER ON 04.02.2013, THE LD. ASSESSING OFFICER RECOGNIZED TH AT PROPERTIES WERE ACQUIRED BY THE ASSESSEE IN HIS INDIVIDUAL STATUS A ND NOT IN THE HUF STATUS. RELEVANT PARA OF THE ASSESSMENT ORDER WHI CH CLEARLY BRING OUT THIS IS REPRODUCED HEREUNDER:- WHEN SHRI. DEEN DAYAL KOTHARI APPEARED ON 04.02.2 013 A SWORN STATEMENT WAS RECORDED FROM HIM. IN HIS STATEMENT HE STATED THAT THE ABOVE PROPERTY WAS PURCHASED IN HIS INDIVIDUAL STATUS BUT PAN NO. OF H UF STATUS WAS QUOTED WRONGLY DURING THE REGISTRATION. WHEN THE ASSESSEES RETURN OF INCOME FILED IN HIS INDIVI DUAL STATUS FOR THE CONCERNED ASST YEAR DECLARING A TOTA L INCOME ITA NO. 1667//MDS/2016 :- 8 -: OF C1,65,784/- WAS VERIFIED, IT IS FOUND THAT THE A SSESSEE HAS DISCLOSED THE ABOVE PURCHASE OF PROPERTY FOR AN AMOUNT OF C6,03,400/- (C2,52,000/- AND C3,51,416/-) BEING 1/5 TH SHARE. HENCE, THE ASSESSMENT IS BEING COMPLETED IN ASSESSEES INDIVIDUAL STATUS. WHAT TRANSPIRES FROM THE ABOVE IS THAT RETURN THOU GH ORIGINALLY FILED IN THE STATUS OF HUF, THE ASSESSMENT WAS FINALLY COMP LETED IN THE STATUS OF INDIVIDUAL. BOTH THE NOTICE U/S.148 OF THE ACT WHICH WAS ISSUED ON 07.07.2011 AND NOTICE U/S.143(2) OF THE ACT WHICH WAS ISSUED ON 10.10.2012 WERE MUCH PRIOR TO RECORDING OF SWORN ST ATEMENT FROM THE ASSESSEE WHICH HAPPENED ON 04.02.2013. THUS, IT CA N SAFELY BE CONCLUDED THAT THERE WAS NO ISSUE OF NOTICE ON THE ASSESSEE IN HIS STATUS AS INDIVIDUAL EITHER U/S.148 NOR 143(2) OF THE ACT. FOR ITS CONTENTION THAT ONCE ASSESSMENT PROCEEDINGS HAS BEE N STARTED IN THE STATUS OF HUF, IT OUGHT TO HAVE BEEN CONCLUDED ONL Y IN THE STATUS OF HUF AND NOT AS AN INDIVIDUAL, LD. AUTHORISED REP RESENTATIVE HAS RELIED ON THE THIRD MEMBER DECISION IN THE CASE OF SURAJ MAL, HUF(SUPRA). IN THE SAID CASE, THE ORIGINAL RETURN WAS FILED I N THE STATUS OF INDIVIDUAL BUT FINAL ASSESSMENT WAS COMPL ETED IN THE STATUS OF HUF. WHAT WAS HELD BY THE BENCH AT PARA 16 OF THE O RDER IS VERY RELEVANT, AND THIS IS REPRODUCED HEREUNDER:- 16. IN THE CASE OF AAC VS. LATE B. APPAIAH NAIDU 1974 CTR (SC) 147 : (1972) 84 ITR 259 (SC), THEIR LORDSHIPS HELD AS UNDER : ITA NO. 1667//MDS/2016 :- 9 -: 'NOW COMING TO THE SECOND QUESTION AS NOTICED EARLIER, THE ASSESSMENT WAS MADE IN RESPECT OF THE INCOME OF APPAIAH NAIDU ON HIS LEGAL REPRESENTATIVE , HIS SON SRIRAMAMURTHY, IN THE STATUS OF AN INDIVIDU AL AND NOT AS THE KARTA OF HIS HUF. THE DEPARTMENT CANNOT NOW BE PERMIT-TED TO CHANGE ITS CASE AND CONTEND THAT IN REALITY THE ASSESSEE IS THE HUF.' THUS ONCE LD. ASSESSING OFFICER REACHED A OPINION T HAT ASSESSMENT WAS TO BE DONE ONLY IN THE STATUS OF INDIVIDUAL AND NOT IN THE STATUS OF HUF, HE WAS BOUND TO ISSUE A NOTICE TO THE ASSESS EE IN HIS INDIVIDUAL STATUS. AN INDIVIDUAL AND AN HUF ARE DIFFERENT PERSONS UNDER THE INCOME TAX ACT, AND NOTICE TO ONE CANNOT BE DEEMED AS NOTICE TO THE OTHER. SECTION 2(31) CLEARLY BRINGS OUT THIS DIFFER ENTIATION. IN THE CASE BEFORE US, THERE WAS A CLEAR FAILURE TO ISSUE NOTI CE TO THE ASSESSEE IN HIS INDIVIDUAL STATUS. SEC. 292BB OF THE ACT CAN CURE ONLY WERE A NOTICE IS CLAIMED BY A ASS ESSEE NOT TO HAVE BEEN SERVED ON HIM OR SERVED ON HIM OUT OF TIME O R SERVED IN AN IMPROPER MANNER. IT CANNOT CURE A SITUATION WERE TH ERE WAS NO ISSUE OF NOTICES U/S.148 OR U/S.143(2) OF THE ACT. AS FO R THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT SUCH A GR OUND WAS NOT RAISED BY THE ASSESSEE BEFORE LD. ASSESSING OFFICER , IT BEING A PURE QUESTION OF LOW WITH ALL RELEVANT FACTS ON RECORD, I AM OF THE OPINION THAT TRIBUNAL CAN CONSIDER IT, THOUGH RAISED FIRST TIME BEFORE IT. I, THEREFORE HAVE NO HESITATION TO SET ASIDE THE ASSES SMENT DONE ON ITA NO. 1667//MDS/2016 :- 10 -: ASSESSEE ON IMPUGNED ASSESSMENT YEAR. CONSEQUENTLY , APPEAL OF THE ASSESSEE IS ALLOWED ON LEGAL GROUND. QUESTION ON MERITS ON ADDITION OF THE ADDITION IS THEREFORE NOT ADJUDICATED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 3 RD DAY OF MARCH , 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 3RD MARCH, 2017 KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF