Kolla China Subba Rao, Guntur, Hyderabad V. DCIT, Central Circle-2(1), Hyderabad, Hyderabad

ITA 272/Hyd/2017

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5958 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2008-2009
• Appeal Filed On: 19-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Keywords: Income from undisclosed sources; Reassessment proceedings; Set aside
• Section: 54; 143(3); 158BD; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD (Through Virtual Hearing) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SRI S.S. GODARA, JUDICIAL MEMBER ITA No.271/Hyd/2017 A.Y. 2008-09 Smt. Kolla Parvathi, Guntur. PAN: ALJPK 0477 H VS. DCIT, Central Circle-2(1), Hyderabad. (Appellant) (Respondent) ITA No. 272/Hyd/2017 A.Y. 2008-09 China Subbarao Kolla, Guntur. PAN: ADSPK 7977 M Vs. DCIT, Central Circle-2(1), Hyderabad. (Appellant) (Respondent) Assessee by Sri K.A. Sai Prasad Revenue by Smt. Komali Krishna, DR Date of hearing: 27/10/2021 Date of pronouncement: 21/12/2021 ORDER PER A. MOHAN ALANKAMONY, A.M: The captioned two appeals are filed by two assessees against the orders of the Ld. CIT(A)-12, Hyderabad in appeal Nos.0125 & 2 0126/2015-16, dated 17/10/2016 passed U/s. 143(3) r.w.s 153C r.w.s 254 and U/s. 250(6) of the Act for the A.Y. 2008-09. 2. In the case of Kolla Chinna Subbarao the assessee has raised eight grounds. Smt. Kolla Parvathi also has raised eight revised grounds in her appeal. All these grounds are identical, and they are extracted herein below for reference: “1. The order of the First Appellate Authority is not correct either in facts or in law or in both. 2. The Ld. First Appellate Authority is not justified in rejecting the contentions that in the absence of proper satisfaction recorded, the initiation of proceedings U/s. 153C of the IT Act is not valid. 3. The Ld. First Appellate Authority failed to appreciate the fact that the Board Circular issued is applicable to pending litigation and hence the assessment proceedings are bad in law. 4. The Ld. First Appellate Authority is not justified in confirming the addition of Rs. 69,50,555/- made by the Assessing Officer without bringing anything to show that the appellant received the extra sale consideration. 5. The Ld. First Appellate Authority failed to appreciate the fact that the purchaser could not bring any evidence in support of his claim of payment of additional sale consideration. 6. The Ld. First Appellate Authority is not justified in confirming the action of the Assessing Officer in rejecting the claim of additional works amounting to Rs. 7,09,268/- incurred for claiming exemption U/s. 54 of the Act. 7. The Ld. First Appellate Authority failed to appreciate the fact that the claim of additional works is fully supported by proper evidences and hence the disallowance of Rs. 70,268/- is not justified. 8. The appellant craves, leave to add, amend or alter any of the ground or grounds at the time of hearing.” 3. Further, both the assessees had raised one identical additional ground which is extracted herein below: 3 “Since the seized material referred to by the Assessing Officer does not belong to the appellant, the initiation of proceedings U/s. 153C is bad in law.” 4. The brief facts of the case are that in the case of both the assessees original assessments were completed U/s. 143(3) r.w.s 153C of the Act on 27/12/2010 wherein additions were made by the ld. AO towards unaccounted income from sale of property. These additions were confirmed by the Ld. CIT (A) and when the matter came up before the Tribunal the Tribunal remitted back the matter in the case of both the assessees with directions to decide the issue afresh after examining all facts and materials on record after affording reasonable opportunity to the assessees of being heard. The issue in the appeal is that search and seizure operations were conducted in the business premises of M/s. A.M.R. Constructions Limited wherein an agreement of sale dated 21/6/2007 entered between Sri K. Chinna Subba Rao, Smt. K. Parvathi and Sri A. Mahesh Reddy was found and seized. From the agreement it was revealed that Sri K. Chinna Subba Rao, Smt. K. Parvathi had agreed to sell their property to Shri A. Mahesh Reddy for a sale consideration of Rs. 1,91,01,111/-. Further, in the search the copy of the sale deed with respect to the same property dated 12/07/2007 was also found and seized wherein the sale consideration of the property was mentioned as Rs. 52 lakhs. Therefore, the Ld. AO opined that the assessee had received on-money for the transaction and the same was not declared in the return of income. Accordingly, the Ld. AO added 50% 4 of the difference amount of Rs. 1,39,01,111/- {(1,91,01,111 – 52,00,000) which works out to Rs.69,50,555/-} in the hands of each of the assessee by treating it as unaccounted income. On appeal, the Ld. CIT (A) confirmed the order of the Ld. AO. The assessee had explained before the ld. Revenue Authorities as follows: (i) The sale agreement is not a valid document because it is signed only by the vendors and not the vendee. (ii) The sale agreement was signed by the vendor as the vendee has requested him to do so for the purpose of availing bank loan. (iii) There was no evidence either from the sale agreement or from any other materials to establish that both the assessees together have received an amount of Rs. 1,91,01,111/-. 5. While passing the respective order both the Ld. Revenue Authorities had rejected the submission of the assessee. 6. Before us the Ld. AR argued by stating that the initiation of the proceedings U/s. 153C of the Act is not valid because the Ld. AO had not recorded his satisfaction. The Ld. DR on the other hand argued by stating that the ld. CIT (A) has examined the issue and adjudicated the same in the second round of litigation. 7. On perusing the order of the Ld. CIT (A) we find that the Ld. CIT (A) had dismissed the ground by stating that the assessee had not raised 5 this ground on earlier occasions. The relevant portion of the order is extracted herein below for reference: “4.3. The appellant sought adjudication of additional ground of appeal on the ground that proceedings U/s. 153C were initiated without proper satisfaction and furnished the copy of the order sheet of assessment order, in this regard. In this context, it may be relevant to observe that the reassessment proceedings under reference was in pursuance of the order of ITAT, which had set aside the original assessment order to the file of the AO for verification of the claims on non-receipts of additional consideration for sale of house and the claims on exemption claims U/s. 54, with the option of raising additional grounds, if any. However, on perusal of record, the assessee has never raised the issue of validity of reopening at the stage of set aside assessment proceedings. As this is reassessment proceedings, in pursuance of ITAT order, where the appellant held to have failed to follow the order of Hon’ble ITAT and failed to raise the issue before the AO during the reassessment proceedings. On these lines, it is held that the additional grounds raised by appellant are not maintainable as such treated as dismissed and the main issues raised in appeal originally, are taken up and decided on merits/facts of the case, as discussed in the forthcoming paragraphs of this order.” 8. When the Bench requested the Ld. DR to submit the reasons recorded by the Ld. AO for reopening of the assessment U/s. 153C of the Act, he was unable to produce the same. It is pertinent to mention that the Hon’ble Apex Court in the case NTPC vs. CIT reported in 229 ITR 383 had held that the assessee is entitled to raise any legal ground before the Tribunal even if it is for the first time. Therefore, the assessee is entitled to raise this legal ground before us. Further, it is apparent that the Revenue is not able to establish that the Assessing Officer had recorded the reasons for reopening the assessment in the case of both the assessees. Several High Courts have held that the provisions of section 153C of the Act are pari materia to the provisions of section 158BD of the Act. Further, the Hon’ble Apex Court in the case Calcutta 6 Culcutta Knitwearsing reported in 362 ITR 603 vide order dated 12/3/2014 had held that recording of satisfaction is pre-requisite and the satisfaction note must be prepared by the Assessing Officer before he transmit the record to the AO who has jurisdiction over such other person U/s. 158BD of the Act. This view has been accepted by the CBDT also vide its circular No.24 of 2015, dated 31/12/2015 reported in 380 ITR (St) 32. 9. Following the ratio laid down by the Hon’ble Apex Court cited supra we are of the view that in the case of both the assessees the reopening of the assessment U/s. 153C of the Act is bad in law. Accordingly, we hereby quash the assessment order passed by the Ld. AO in the case of both the assessees. Further, on merits also the Revenue does not have a good case because they have made addition based on an incomplete sale agreement without any further corroborative evidence other than the admission of the vendee which cannot be relied upon. 10. In the result, both the appeals of the assessees are allowed. Pronounced in the open Court on the 21 st December, 2021. Sd/- Sd/- (S.S. GODARA) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 21 st December, 2021. OKK 7 Copy to:- 1) Smt. Kolla Parvathi C/o. Ch. Parthasarathy & Co., 1-1- 298/2/B/3, 1 st Floor, Sowbhagya Avenue, St. No.1, Ashoknagar, Hyderabad – 500 020. (ii) Sri Kolla China Subba Rao C/o. Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1 st Floor, Sowbhagya Avenue, St. No.1, Ashoknagar, Hyderabad – 500 020. 2) The Deputy Commissioner of Income Tax, Central Circle-2(1), Aayakar Bhavan, 6 th Floor, Hyderabad. 3) The CIT(A)-12, Hyderabad. 4) The Pr. CIT (Central), Hyderabad. 5) The DR, ITAT, Hyderabad 6) Guard File