P. Harsha Vardhan Reddy (HUF), Hyderabad V. DCIT, Hyderabad

ITA 194/HYD/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5891 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E S NAGENDRA PRASAD
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER (SMC) ITA NOS.191, 192, 193 & 194/ ASSESSMENT YE AR: 2000- 2001 TO HYD/2010 2003-2004 SHRI P. HARSHA VARDHAN REDDY, HYDERABAD (HUF) (AALPR 2677 M) VS DY. COMMISSIONER OF IT, CENTRAL CIRCLE (2), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MURALI MOHAN RAO RESPONDENT BY: SHRI E.S. NAGENDRA PRASAD O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE FOUR APPEALS PREFERRED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDER PASSED BY THE CIT(A) III, HYD ERABAD DATED 15.1.2010 AND PERTAINS TO THE ASSESSMENT YEARS 2000-01, 2001-02, 2002-03 AND 2003-04. SINCE COMMON ISSUES ARE INVOLVED I N ALL THESE FOUR APPEALS, THEY ARE CLUBBED TOGETHER, HEARD TOGETH ER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE RAISED THE COMMON GROUNDS IN ALL THESE FOUR APPEALS. THE DCIT, HYDERABAD ERRED WHILE PASSING THE ORDER W HEREIN THE TOTAL INCOME OF THE ASSESSEE HAS BEEN ARRIVED AT RS.2,77, 500/- FOR THE ASSESSMENT YEAR 2000-01 WHICH IS NOT CORRECT NOT JU STIFIED AND BAD IN LAW. THE CIT(A) HAS ERRED WHILE PASSING THE EXPARTE ORDE R IN RESPECT OF THE ASSESSEE U/S 144 WHICH IS NOT CORRECT, NOT JUSTIFIE D AND BAD IN LAW. THE 2 2 ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY OF BEING HE ARD, HENCE WE ARE REQUESTING YOU TO GIVE AS OPPORTUNITY OF BEING HEAR D. THE ASSESSEE HAS RELIED UPON CBDT CIRCULAR NO.286/2 /2003-IT (INV.). 3. ON APPEAL, CIT(A) CONFIRMED THE ORDER OF THE A SSESSING OFFICER HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE AR SUBMITTED THAT THE ONLY STATEMENT RECORDED U/S 132(4) IS THE REASON FOR MAKING ADDITION. HE SUBMITTE D THAT THE ADDITIONS ARE NOT SUPPORTED BY ANY EVIDENCE COLLECTED DU RING THE COURSE OF SEARCH. HENCE HE SUBMITTED THAT THE ADDITIONS TO BE D ELETED. FURTHER, HE SUBMITTED THAT THE ASSESSMENT WAS COMPLETED U/ S 144 OF THE IT ACT AND AS SUCH AN OPPORTUNITY OF HEARING MAY BE GIVEN TO THE ASSESSEE. HE RELIED ON THE CBDT CIRCULAR NO.286/2/03- IT(INVESTIGATION) DATED 10.3.2003 FOR THE PROPOSITION FUNCTIONAL STATEMENT DURING THE COURSE OF SEARCH AND SURVEY ACTION CANNOT BE RELIED UPON BY THE DEPARTMENT FOR MAKING ANY ADDITI ON. 4.1. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT AMPLE OPPORTUNITY OF HEARING HAS BEEN GIVEN TO THE ASSESSEE IN THE COURSE OF ASSESSMENT AS WELL AS DURING THE FIRST APPELLATE PROCEEDINGS HENCE THERE IS NO DENIAL OF THE O PPORTUNITY TO THE ASSESSEE AND HE OPPOSED FOR GIVING ANY FURTHER OPPORTUNI TY TO THE ASSESSEE. HE RELIED ON THE FOLLOWING JUDGMENTS: I). A.K. BABU KHAN VS. CIT (102 ITR 757) (AP HC) WHE REIN IT WAS HELD THAT THOUGH YEAR AFTER YEAR THE ASSESSEE WAS GIVEN OPP ORTUNITY TO PRODUCE MATERIAL IN SUPPORT OF HIS CLAIM, HE HAD NO T CHOSE TO DO SO. THE ASSESSEES WHO WERE GUILTY OF REMISSNESS AN D GROSS NEGLIGENCE, AS IN THE INSTANT CASE, ARE NOT ENTITLE D TO INDULGENCE BEING SHOWN TO ADDUCE ADDITIONAL EVIDENCE IN SECOND APPEAL. 3 3 THEE TRIBUNAL HAD EXERCISED ITS DISCRETION PROPERLY IN REFUSING TO RECEIVE THE ADDITIONAL EVIDENCE. II). CIT VS. SAS EDUCATIONAL SOCIETY (319 ITR 65) ( P&H HC) WHEREIN IT WAS HELD THAT : ALLOWING THE APPEAL, THAT DESPITE THERE BEING A F INDING THAT THE ASSESSEE HAD BEEN GIVEN A SUFFICIENT NUMBER OF OPPO RTUNITIES, THE TRIBUNAL HAD PASSED THE ORDER WITHOUT RECORDING ANY FINDING THAT SUFFICIENT OPPORTUNITIES HAD NOT BEEN GIVEN. THE T RIBUNAL COULD NOT DIRECT THE ASSESSING OFFICER TO PROVIDE FURTHER OPP ORTUNITY TO THE ASSESSEE WITHOUT RECORDING A FINDING WHETHER THE AS SESSEE WAS DENIED SUFFICIENT OPPORTUNITY. FOR JUSTIFYING ITS DIRECTI ON FOR GIVING FURTHER OPPORTUNITY, THE TRIBUNAL HAD TO RECORD A FINDING O F DENIAL OF OPPORTUNITY. THUS, THE ORDER OF THE TRIBUNAL WAS S ET ASIDE AND THE MATTER WAS REMANDED TO THE TRIBUNAL 4.2. FURTHER, HE DREW OUR ATTENTION TO THE CIT(A) ORDER AND SUBMITTED THAT THE ASSESSEE WAS NOT ABLE TO LEAD ANY EVID ENCE THAT HE HAS NOT RECEIVED ANY INTEREST FROM THE SAID ADVANCE. AS SUCH, THE STATEMENT GIVEN BY SHRI P. HARSHAVARDHAN BEFORE THE A DDL. DIRECTOR (INVS.) WAS RELIED FOR MAKING THE ADDITION, HE PRAYE D TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ASSESSMENT ORDER WAS PASSED U/S 144 READ WITH S.153C OF THE ACT. BEFORE PA SSING ASSESSMENT ORDER A NOTICE WAS ISSUED TO THE ASSESSEE U/S 153C OF THE A CT ON 22.11.07 ASKING THE ASSESSEE TO FILE RETURN OF INCOME IN THE STATUS OF HUF WITHIN 12 DAYS OF RECEIPT OF THE NOTICE. THIS WAS SE RVED ON THE ASSESSEE SON SHRI P. SHRAVAVAN KUMAR ON 27.11.07. THE A SSESSEE HAS NOT FILED ANY RETURN OF INCOME. LATER A NOTICED WAS SERVED U/S 142(1) OF THE ACT TO THE ASSESSEE REQUIRING THE ASSESSEE TO PRODUCE TH E BOOKS OF ACCOUNT, LEDGER AND BANK ACCOUNT. THE ASSESSEE NEITHER PRO DUCED THE SAME NOR ATTENDED OFFICE ON 17.12.2007. HOWEVER, THE ASSESSEE FILED A LETTER ON 18.12.2007 WHEREIN IT WAS STATED THAT HE H AS NOT HAVING ANY INCOME IN THE CAPACITY AS HUF DUE TO WHICH HE HAS NOT FILE D ANY RETURN 4 4 OF INCOME IN THE CAPACITY AS HUF. HOWEVER, THE ASSESSING OF FICER RELIED ON THE SWORN STATEMENT RECORDED BY THE ADDITIONAL DIRE CTOR (INVESTIGATION) FROM THE ASSESSEE ON 23.9.2005 WHICH READ S AS FOLLOWS: Q.10. HAVE YOU GIVEN ANY LOANS TO ANY INDIVIDUAL S OR INSTITUTIONS? ANS: I HAVE GIVEN RS.1850 LAKHS TO M/S ACCESS FINA NCE CORPORATION . SD- ROAD, SECUNDERABAD FOR A INTEREST RATE AT 12% T O 15% IN THE YEAR 1998. I WAS RECEIVING INTEREST INCOME UPTO FINANCI AL YEAR 2002-03 WHICH IS ALREADY OFFERED IN THE INCOME TAX RETURN I N THE STATUS OF P. HARSHAVARDHAN REDDY, HUF'. 6. IN OUR OPINION, THE ANSWER TO THE ABOVE QUESTION IS A SOLE BASIS FOR MAKING ADDITION. FURTHER, INSPITE OF ASSESSEE FILING A LETTER ON 18.12.2007 STATING THAT ASSESSEE IS HAVING NO INCOME IN TH E CAPACITY AS HUF, THE ASSESSMENT ORDER WAS PASSED ON 28.12.2007 U/S 144 OF THE ACT. IN OUR OPINION, PROPER OPPORTUNITY OF HEARING HAS NOT BEEN GIVEN TO THE ASSESSEE TO EXPLAIN THE CORRECT POSITION. THE ASSESSMENT ORDER PASSED ON 28.12.2007 I.E. WITHIN A SHORT TIME OF 10 D AYS AFTER RECEIVING THE REPLY FROM THE ASSESSEE. THE REQUIREMENT OF NATUR AL JUSTICE DEPEND ON THE CIRCUMSTANCES OF THE CASE, THE NATURE OF THE ENQUI RY, THE RULES UNDER WHICH THE ASSESSING OFFICER ACTED UPON, THE SUBJECT M ATTER THAT IS BEING DEALT WITH, AND SO FORTH. ONE ESSENTIAL IS THAT THE PERSON CONCERN SHOULD HAVE REASONABLE OPPORTUNITY OF PRESENTING HIS CASE . ONE OF THE RULES WHICH CONSTITUTES A PART OF PRINCIPLES OF NATURAL J USTICE IS THE RULE OF AUDI ALTEREM PARTEM WHICH REQUIRES THAT NO MAN SH OULD BE CONDEMNED UNHEARD. IT IS INDEED A REQUIREMENT OF T HE DUTY TO ACT FAIRLY WHICH LIES IN ALL QUASI JUDICIAL AUTHORITIES AN D THIS DUTY HAS BEEN EXTENDED ALSO TO THE AUTHORITIES HOLDING ADMINISTRATIV E ENQUIRIES INVOLVING CIVIL CONSEQUENCES OR AFFECTING RIGHTS OF PART IES BECAUSE THE AIM OF THE RULES OF NATURAL JUSTICE IS TO SECURE JUSTICE OR TO PUT IT NEGATIVELY TO PREVENT MISCARRIAGE OF JUSTICE, AND JUST IN A SOCIETY WHICH HAS ACCEPTED SOCIALISM AS ITS ARTICLE OF FAITH IN THE CONSTIT UTION, IS DISPENSED NOT ONLY BY JUDICIAL OR QUASI JUDICIAL AUTH ORITIES, BUT ALSO BY 5 5 AUTHORITIES DISCHARGING ADMINISTRATIVE FUNCTION. THIS R ULE REQUIRES AN OPPORTUNITY TO BE HEARD, TO BE GIVEN TO A PERSON LIK ELY TO BE AFFECTED BY A DECISION IS ALSO, LIKE THE GENUS OF WHICH IT IS SPECIES, NOT AN INFLEXIBLE RULE HAVING A FIXED CONNOTATION. IT HAS VARIABLE CO NTENT DEPENDING ON THE NATURE OF THE ENQUIRY, THE FRAME WORK OF THE LA W UNDER WHICH IT IS HELD THE AUTHORITY HOLDING THE ENQUIRY, THE NATURE AND CHARACTER OF THE RIGHTS AFFECTED AND THE CONSEQUENCES FLOWING FROM THE DECI SION. IT IS, THEREFORE, NOT POSSIBLE TO SAY THAT IN EVERY CASE THE RU LE OF AUDI ALTEREM PARTEM REQUIRES THAT A PARTICULAR SPECIFIED PROCEDUR E TO BE FOLLOWED. IT MAY BE THAT IN A GIVEN CASE, THE RULE OF AUDI ALTERE M PARTEM MAY IMPORT A REQUIREMENT THAT WITNESSES WHOSE STATEMENT ARE SOUGHT TO BE RELIED UPON BY THE AUTHORITY HOLDING AN ENQUIRY SHO ULD BE PERMITTED TO BE EXAMINED BY THE PARTY AFFECTED WHILE IN SOME OTHER CASE IT MAY NOT. THE PROCEDURE REQUIRED TO BE ADOPTED FOR GIVING AN O PPORTUNITY TO A PERSON TO BE HEARD OR CROSS EXAMINED MUST NECESSARILY DEPE ND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN OUR OPINION, THE A UTHORITIES CONCERNED REQUIRED TO GIVE AN OPPORTUNITY OF EFFECTIV E HEARING TO THE ASSESSEE AND ALSO GIVE AN OPPORTUNITY TO COMMENT ON THE STATEMENTS AND BOOKS OF ACCOUNTS TO BE RELIED UPON BY THE REVENUE AUTHORITIES. THIS WILL ENABLE ASSESSEE TO PROVE THE INCORRECTNESS OR INCO MPLETENESS OF THOSE BOOKS OF ACCOUNTS. THE OPPORTUNITY WOULD THE REFORE NECESSARILY CARRYING WITH IT RIGHT TO EXAMINE WITNESS AND THAT WOULD INCLUDE THE RIGHT TO CROSS EXAMINE THE WITNESS EXAMINED B Y THE REVENUE AUTHORITIES. THE REVENUE CANNOT RELY ON CERTAIN STAT EMENTS AND MATERIALS TO STRENGTHEN ITS CASE AGAINST THE ASSESSEE AND CAN NOT SAY THAT THE STATEMENTS OR MATERIALS DIRECTLY SUPPORT THE D EPARTMENTS CASE. NO PRINCIPLES OF LAW AND ANY JUDICIAL DECISION SUPPORTS THE APPROACH OF THE REVENUE. THE CORRECT AND SET RULE IS THAT IF A STAT EMENT OR MATERIAL IS AN INTEGRAL PART OF THE CASE OF THE DEPARTMENT, OR IS RELIED UPON TO DRAW AN ADVERSE INFERENCE, CROSS EXAMINATION OF THE PERSO N MAKING THE STATEMENT MUST BE GIVEN. THE DEPARTMENT CANNOT RELY ON A STATEMENT 6 6 OR MATERIAL AND AT THE SAME TIME, SEEK TO DENY THE OP PORTUNITY OF HEARING ON THE GROUND THAT THE STATEMENT OF THE ASSESS EE WAS RELIED. THE ASSESSEE SHOULD BE AFFORDED AN OPPORTUNITY TO DEAL W ITH AND REBUT SUCH MATERIAL. CROSS EXAMINATION TO BE ALLOWED TO THE ASSESSEE WHEN THIRD PARTY ACCOUNTS ARE RELIED UPON BY THE DEPARTMENT . IF THE DEPARTMENT TO RELY ON ANY EXCEPTIONS, THE BURDEN IS ON THE DEPARTMENT TO ESTABLISH THE EXISTENCE OF ANY EXCEPTIONS. THE NON PROVIDING OF EFFECTIVE OPPORTUNITY OF HEARING CLEARLY CONSTITUTES INF RACTION OF THE RIGHT CONFERRED ON THE ASSESSEE AND THAT VITIATED THE ORDER O F THE ASSESSMENT MADE AGAINST THE ASSESSEE. 7. IN VIEW OF THIS, WE ARE OF THE OPINION THAT IN THE PRESENT CASE, PROPER OPPORTUNITY TO THE ASSESSEE WAS NOT GIVEN AND HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRE SH CONSIDERATION. FURTHER, WE MAKE IT CLEAR THAT THE ASSESSEE IS AT LIBERT Y TO PROVE FROM THE EVIDENCE THE FALSITY OF STATEMENT RECORDED BY AUTHO RITY. TO THAT EXTENT PROVED TO BE FALSE FROM THE HELP OF MATERIALS , ONLY THEN SUITABLE DEDUCTION TO BE GIVEN. ACCORDINGLY, WE SET ASIDE THE ISSU E TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. 8. IN THE RESULT APPEALS OF THE ASSESSEE IN ITA NO.191, 192,193 & 194/HYD/2010 ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT : 19.3.2010 SD/- CHANDRA POOJARI ACCOUNTANT MEMBER(SMC) DATED THE 19 TH MARCH, 2010. 7 7 COPY FORWARDED TO: 1. SHRI P. MURALI & CO., CA, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. DCIT, CIRCLE II, HYDERABAD 3. CIT(A)- III, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP