Sri M.Mohan, Kartha (HUF), Salem V. ACIT, CHENNAI

ITA 208/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6562 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-07-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: N DEVANATHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER] I.T.A.NO.208/MDS/2010 ASSESSMENT YEAR : 1996-97 SHRI M.MOHAN (KARTHA) 3/63/ METTU VELLAR STREET SALEM 636 010 VS THE ACIT CENTRAL CIRCLE II(4) CHENNAI [PAN AADHM1635A] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.DEVANATHAN RESPONDENT BY : SHRI P.B.SEKARAN O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS IS A RECALLED MATTER. THE APPEA L BY THE ASSESSEE, FOR ASSESSMENT YEAR 2006-07, FILED AGAINST THE ORDER OF THE LD. CIT(A)-II, CHENNAI, WAS FOUND TO BE BARRED BY LIMITATION, FOR WHICH A CONDONATION PETITION HAS BEEN FILED. 2. THE CASE OF THE ASSESSEE IS THAT THIS APPEAL OUG HT TO HAVE BEEN FILED ON OR BEFORE 7.2.2010 AS AGAINST WHICH T HE APPEAL HAS BEEN FILED ON 22.2.2010 AFTER ORDER OF THE LD. CIT(A) WA S RECEIVED ON 8.12.2009. THE REASON FOR THIS DELAY HAS BEEN STAT ED TO BE SICKNESS OF THE ASSESSEE FOR WHICH HE WAS AWAY FROM THE STATION . IN THESE ITA 208/10 :- 2 -: CIRCUMSTANCES, IT WAS PRAYED THAT A LENIENT VIEW MA Y BE TAKEN AND APPEAL MAY BE ADMITTED FOR THE CAUSE OF SUBSTANTIAL JUSTICE. RELIANCE WAS MADE ON VARIOUS DECISIONS IN THIS REGARD. THE CONTENTION OF THE LD.DR IS THAT THE ASSESSEE IS BOUND TO EXPLAIN EACH DAYS DELAY WITH COGENT PROOF. 3. WE HAVE COGITATED THE RIVAL CONTENTIONS. THE HON 'BLE SUPREME COURT HAS LONG BACK LAID DOWN A PERFECT GUI DELINE WHILE DECIDING THE CASE OF COLLECTOR, LAND ACQUISITION V S MST. KATIJI & OTHERS (167 ITR 471), IN THEIR PITH AND SUBSTANCE, THAT WH EN SUBSTANTIAL JUSTICE IS PITTED AGAINST PEDANTIC REASONS, THE CAU SE OF SUBSTANTIAL JUSTICE SHOULD PREVAIL. RECENTLY, THE HON'BLE SUPR EME COURT HAS REITERATED THE SAME PRINCIPLE WHILE DECIDING THE CA SE OF IMPROVEMENT TRUST VS UJAGAR SINGH (2010) 6SCC 786 (S.C) [SOURCE WWW.ITATONLINE.ORG ] BY OBSERVING THAT JUSTICE CAN BE DONE ONLY WHEN THE MATTER IS FOUGHT ON MERITS AND IN ACCORDANCE WI TH LAW RATHER THAN TO DISPOSE IT OF ON SUCH TECHNICALITIES AND THAT TO O AT THE VERY THRESHOLD. IT WAS STRONGLY LAID THAT UNLESS MALAF IDES ARE WRIT LARGE ON THE FACE OF IT DELAY SHOULD BE CONDONED. IN THIS CASE, NO SUCH MALAFIDE IS EXHIBITED. THE DELAY STANDS REASONABLY EXPLAINED. HENCE, BY FOLLOWING THE DICTUM OF THE ABOVE DECISIONS, WE CONDONE THIS DELAY AND ADMIT THE APPEAL. ITA 208/10 :- 3 -: 4. IN THIS APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED : THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-II IN ITA NO.51/2002-03, DATED 27.10.2009 , IS AGAINST THE FACTS OF THE CASE, LEGAL PRINCIPLES INV OLVED, WEIGHT OF EVIDENCE ON RECORD AND PRINCIPLES OF NATURAL JUS TICE. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - II, HAS ERRED IN CONFIRMING THE ARBITRARY ADDITION OF ` 10,00,000/= MADE BY THE LEARNED ASSESSING OFFICER U /S .143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASST. Y EAR: 1996- 97 WITHOUT ANY INVESTIGATION OR ANY MATERIALS ON HA ND. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-II) OUGHT TO HAVE DIRECTED THE LEARNED ASSESSING OFFICER TO F OLLOW THE DIRECTION OF HIS PREDECESSOR APPELLATE COMMISSIONER WHO WHILE SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER D IRECTED THE LEARNED ASSESSING OFFICER TO MAKE INVESTIGATION ON HIS OWN AND INCORPORATE THE SAME IN THE PROTECTIVE ASSE SSMENT ORDER. BUT THE LEARNED ASSESSING OFFICER HAD FAILED TO FOLLOW AND SIMPLY IGNORED ANY OF HIS DIRECTION. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAD ERRED IN OVERLOOKING THE ERROR IN THE CORRECT S TATUS OF THE APPELLANT WHICH IS VERY MUCH RELEVANT IN ESTABLISHM ENT OF SOURCES IN THE APPELLANT'S CASE. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT WHILE THE RETURN WAS FILED AND AFFIDAVIT WAS DEPOSED, NOTICES WERE ISSUED IN THE C APACITY OF HUF, PROTECTIVE ASSESSMENT ORDER WAS PASSED IN THE INDIVIDUAL CAPACITY DESPITE THE FACT A DETAILED LET TER DATED: 15.11.2000 WITH THE ASSESSING OFFICER, AS TO THE CO RRECT STATUS OF THE APPELLANT. THE ASSESSMENT WAS MADE IN THE WRONG CAPACITY, WHIC H CANNOT BE CURED EVEN UNDER THE PROVISIONS OF SEC.29 2B. KARUNA RANI JAIN VS CIT 178 ITR 321 P&H [1990]: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ARBITRARY ADDITION OF ` 10,00,000/= MADE BY THE LEARNED ASSESSING OFFICER AND ORDER TO ASSESS IN TH E CORRECT STATUS FOR THE ABOVE SAID ASST. YEAR. ITA 208/10 :- 4 -: FOR THESE AND OTHER GROUNDS WHICH MIGHT BE URGED TO BE ALLOWED AT THE TIME OF HEARING, THE APPELLANT HUMBL Y PRAYS THAT THE ORDER OF THE LEARNED ASSESSING OFFICER MAK ING AN ARBITRARY ADDITION MAY KINDLY BE ORDERED TO BE QUAS HED AND RENDER JUSTICE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HA S CHALLENGED THE VERY FRAMING OF ASSESSMENT ORDER AS INVALID ON THE REASONING THAT THE STATUS OF ASSESSEE HAS BEEN CHANGED FROM HUF TO INDIVIDUAL WITHOUT ANY VALID REASON. IN THIS BACKGROUND, IT HAS BEEN P RAYED THAT THE STATUS OF THE ASSESSEE BEING VERY MUCH RELEVANT FOR THE PURPOSE OF INCOME-TAX, ASSESSING IN A WRONG STATUS, GOES TO T HE VERY ROOT OF COMPUTATION OF INCOME AND CANNOT BE SUSTAINED IN TH E EYES OF THE LAW. THUS, PRAYER HAS BEEN MADE TO ANNUL THE ASSESSMENT ORDER ITSELF. ON THE CONTRARY, THE LD.DR, HAVING NOT CONFRONTED FACT UAL MATRIX, HAS SUPPORTED THE ACTION OF THE ASSESSING OFFICER BY SU BMITTING THAT IT IS ONLY AN IRREGULARITY WHICH IS CURABLE UNDER SECTION 292B OF THE ACT. 6. AFTER CIRCUMSPECTING THE RIVAL STANDS ON THIS ISS UE, WE HAVE CAPTURED THAT THE ASSESSEE HAS FILED RETURN OF INCO ME IN THE STATUS OF ASSESSEE-HUF AS USUAL. BUT THE ASSESSING OFFICER H AS ASSESSED IN THE STATUS OF INDIVIDUAL ONLY WITH A VIEW TO TREAT AN ADVANCE OF ` 10 LAKHS CLAIMED TO HAVE BEEN GIVEN FROM HUF FUNDS SO THAT T HE CLAIM OF THE ITA 208/10 :- 5 -: ASSESSEE IS DEFEATED. WE HAVE NOTICED THAT EVEN SU BSEQUENTLY, THIS ASSESSEE HAS BEEN ASSESSED AS HUF. WE MAY SAFELY SAY THAT THIS IS NOT AN IRREGULARITY/DEFECT WHICH CAN BE CURED U/S 292B OF THE ACT. IT IS FOUND TO BE A FACT THAT THE ASSESSEE HAD FILED T HE RETURN OF INCOME IN THE CAPACITY OF HUF BUT THE ASSESSMENT HAS BEEN MADE IN THE CAPACITY OF INDIVIDUAL. NOTICES WERE ISSUED TO THE ASSESSEE IN THE CAPACITY OF HUF, BUT THE PROTECTIVE ASSESSMENT W AS MADE IN THE CAPACITY OF INDIVIDUAL. IT WAS STATED THAT THE SUBSTANTIVE ASSESSMENT WAS MADE IN THE CASE OF ONE SHRI A.N.DYANESWARAN, I N WHOSE HANDS THE VERY SAME AMOUNT WAS ADDED AND THE SAME WAS FOU ND TO BE EXPLAINED, WHICH HAS SINCE BEEN FOUND TO BE UNSUSTA INABLE. TO FURTHER ELABORATE THE FACTS, IT IS FOUND THAT AGAINST THE A SSESSMENT ORDER, ORIGINALLY (IN THE FIRST ROUND), AN APPEAL WAS FILE D BEFORE THE LD. CIT(A), WHO HAD SET ASIDE THE ORIGINAL ASSESSMENT ORDER WIT H A DIRECTION TO THE ASSESSING OFFICER TO MAKE INVESTIGATIONS IN THI S CASE ON HIS OWN AND TO INCORPORATE THE SAME IN THE PROTECTIVE ASSES SMENT ORDER AND FURTHER DIRECTED TO MAKE NECESSARY INVESTIGATION BY TAKING INTO CONSIDERATION THE ASSESSEES EXPLANATION AND ALSO T O INCORPORATE THE SAME IN HIS ORDER. BUT IT WAS FOUND THAT THE ASSES SING OFFICER HAS FAILED TO CONSIDER BOTH DIRECTIONS OF THE LD. CIT( A) AND HAS REFRAMED THE ASSESSMENT ON SAME LINES. THE ASSESSEE AND HI S FAMILY IS ITA 208/10 :- 6 -: ENGAGED IN THE DAIRY FARMING BUSINESS AND ALSO CAR RIES ON AGRICULTURAL ACTIVITIES EXTENSIVELY. IN THIS REGARD, A DOCUMENT FROM KUMARASAMYPATTY MILK PRODUCERS CO-OPERATIVE SOCIETY LTD WAS PRODUCED. IN THE SECOND ROUND, THE OBJECTION RAISE D BY THE ASSESSEE BEFORE THE LD. CIT(A) AGAINST THE WRONG STATUS HAVI NG BEEN ADOPTED BY THE ASSESSING OFFICER WAS TURNED DOWN ON THE REAS ONING THAT MAKING OF ASSESSMENT IN THE INCORRECT STATUS WOULD NOT LE AD TO ANNULMENT OF THE ASSESSMENT ORDER. THE ONLY ADDITION IN THIS CA SE, MADE ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE AS I NDIVIDUAL IS OR ` 10 LAKHS, ALLEGEDLY ADVANCED TO SHRI DYANESWARAN WHICH WAS CLAIMED TO HAVE BEEN GIVEN OUT OF COMMON POOL OF THE FAMILY FU ND BELONGING TO HUF. THE LD.DR STATED IN THE COURT THAT THE SUBSTA NTIVE ASSESSMENT MADE IN THE HANDS OF SHRI DYANESWARAN HAS BEEN DELE TED BY FINDING THE EXPLANATION OF THE SOURCE TO BE CORRECT WHICH I S STATED TO BE FROM THE ASSESSEE-HUF ONLY. WHEN A SUBSTANTIVE ASSESSME NT HAS BEEN FOUND TO BE CORRECTLY EXPLAINED AND IS DELETED THEN PROTECTIVE ASSESSMENT CANNOT SURVIVE. MOREOVER, AN ASSESSMEN T MADE IN THE WRONG STATUS WHEN THE ASSESSEE HAD FILED RETURN OF INCOME IN DIFFERENT STATUS AND NOTICES WERE ISSUED IN THAT CAPACITY AS WELL I.E ASSESSEE- HUF; AND THAT PRIOR TO THIS YEAR AND ALSO IN SUBSE QUENT YEAR, THE ASSESSING OFFICER HAS ACCEPTED THE STATUS OF THIS A SSESSEE IN THE ITA 208/10 :- 7 -: CAPACITY OF HUF ONLY, THE ASSESSMENT MADE IN THE INDIVIDUAL STATUS CANNOT BE SUSTAINED IN THE EYES OF THE LAW. WHEN THE ASSESSEE FURNISHES A RETURN IN THE STATUS OF ASSOCIATION OF PERSONS (AOP), IT IS NOT POSSIBLE FOR THE ASSESSING OFFICER TO MAKE AN A SSESSMENT IN THE STATUS OF AN INDIVIDUAL ON THE BASIS THAT RETURN WITHOUT ISSUING A NOTICE U/S 139(2) OR 148. IT IS SO HELD IN THE CAS E OF CWT VS J.K.SRIVASTAVA & SONS (142 ITR 183 (ALLD.)]. IN TH IS CASE, THE ASSESSING OFFICER HAD ISSUED NOTICE TO THE ASSESSEE IN THE STATUS OF HUF ONLY. WHEN IN RESPONSE TO A NOTICE UNDER THE A CT, AN ASSESSEE FILES A RETURN OF INCOME IN THE STATUS OF HUF, THE OFFICER WAS NOT COMPETENT TO ASSESS IN THE STATUS OF INDIVIDUAL W ITHOUT SERVING A FRESH NOTICE TO FILE FRESH RETURN AS INDIVIDUAL. THIS IS THE VERDICT OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CWT V S RIDHKARAN & OTHERS (84 ITR 705). SIMILAR VIEW WAS TAKEN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS K.ADINARAYANA MURTY (6 5 ITR 607). LIKEWISE, WHEN A RETURN WAS SUBMITTED IN THE STATUS OF A FIRM, AND ASSESSMENT WAS MADE IN THE STATUS OF AOP, IT WAS STRUCK DOWN AS INVALID BY THE HON'BLE BOMBAY HIGH COURT WHILE REN DERING THE DECISION IN THE CASE OF CIT VS ASSOCIATED CEMENT AND STEEL A GENCIES, (147 ITR 776). SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE M .P HIGH COURT IN THE CASE OF CIT VS SOBHAGMAL MISHRILAL SEMLAVADA (2 23 ITR 554). THE ITA 208/10 :- 8 -: HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF K. ARUNACHALAM MUDALIAR VS CAGIT (111 ITR 780) HAS HELD THAT WHEN AN ASSESSEE FURNISHES RETURN IN THE STATUS OF AN INDIVIDUAL A ND THE DEPARTMENT IS INVOKING THE CLUBBING PROVISIONS OF THE MADRAS AGRI CULTURAL INCOME-TAX ACT, 1955 (WHICH CORRESPONDS TO SECTION 64(1) OF TH E INCOME-TAX ACT, 1961) INCLUDED INCOME ARISING FROM THE PROPERTY SET TLED ON THE WIFE, WAS HELD TO BE VALID BECAUSE THERE WAS NOTHING TO I NDICATE THAT ASSESSEE HAS FILED RETURN IN HIS CAPACITY AS KARTH A OF THE FAMILY. HOWEVER, IN THE SUBSEQUENT YEAR, THE ASSESSEE FILED RETURN IN HIS CAPACITY AS KARTHA OF HUF. IN THAT CASE, IT WAS HELD THAT SUCH INCLUSION WAS NOT JUSTIFIED BECAUSE THE ASSESSEE AN D HIS WIFE CONSTITUTED A HUF IN RELATION TO ANCESTRAL PROPER TY AND THE CLUBBING PROVISION COULD NOT BE INVOKED IN THE CASE OF HUF . WE ALSO DRAW SUPPORT FROM THE DECISION OF CIT VS SURESH CHANDRA GUPTA(173 ITR 407) (RAJ). BUT WHEN THE ASSESSING OFFICER MAKES H IS FINDING BY ISSUING NOTICE TO THE ASSESSEE PRIOR TO CHANGE OF T HE STATUS, HE IS LOGICALLY JUSTIFIED IN DOING SO. 7. IN VIEW OF THE ABOVE, WHEN STATUS HAS BEEN CHAN GED IN THIS GIVEN CASE WITHOUT GIVING NOTICE THEREOF, THE ASSES SMENT ORDER CANNOT BE SUSTAINED IN THE EYES OF THE LAW. THEREFORE, TH E ASSESSMENT ORDER ITA 208/10 :- 9 -: MADE IN THIS ASSESSEES CASE STANDS ANNULLED/QUASHE D. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 8.7.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 8 TH JULY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR