Sri Mahesh Anumalisetty, Visakhapatnam V. The Pr. CIT, Visakhapatnam

ITA 273/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8729 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Keywords: Business income; Salary income; Deemed dividend; Assessment record
• Section: 143(3); 153A; 263; 132

Judgement Text

ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.273/VIZAG/2017 ( / ASSESSMENT YEAR: 2007-08) SRI MAHESH ANUMALISETTY VISAKHAPATNAM DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM [PAN NO. ADJPA3853B ] ( ' / APPELLANT) ( ()' / RESPONDENT) ./I.T.A.NO.274/VIZAG/2017 ( / ASSESSMENT YEAR: 2007-08) SRI NAGESH ANUMALISETTY VISAKHAPATNAM DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM [PAN NO.ACFPA3146A] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI DEBA KUMAR SONOWAL, DR / DATE OF HEARING : 06.03.201 8 / DATE OF PRONOUNCEMENT : 0 9.03.2018 ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 2 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS FILED BY DIFFERENT ASSESSEES ARE DIRE CTED AGAINST THE ORDER OF THE PRINCIPAL CIT(CENTRAL), VISAKHAPATNAM VIDE ORDER NO.PR.CIT(C)/VSP/263/CC-2/VSP/2016-17 DATED 8.3.201 7 FOR THE ASSESSMENT YEAR 2007-08 ON IDENTICAL FACTS. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE GROUNDS OF APPEAL IN BOTH THE APPEALS ARE RE LATED TO THE ORDERS OF REVISION U/S 263 OF THE INCOME TAX ACT, 1 961 (HEREINAFTER CALLED AS 'THE ACT'). IN THIS CASE, THE FACTS ARE TAKEN FROM ITA NO.273/VIZAG/2017 IN THE CASE OF A. MAHESH. THE AS SESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF ` 49,64,520/- FOR THE ASSESSMENT YEAR 2007-08 ON 16.5.2008. THE ASSESSEE IS DIRECTO R IN A.S. STEEL TRADERS AND DERIVING SALARY INCOME, HOUSE PROPERTY, BUSINESS INCOME, CAPITAL GAINS AND OTHER SOURCES. A SEARCH U/S 132 OF THE ACT WAS CARRIED OUT IN THE ASSESSEES CASE ON 11.12.2012 IN A.S. ST EEL GROUP. CONSEQUENTLY, THE ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT WAS COMPLETED BY THE DCIT CENTRAL CIRCLE-2, VISAKHAPATN AM ON 31.3.2015 ACCEPTING THE INCOME RETURNED. ON VERIFICATION OF THE ASSESSMENT RECORDS, THE PRINCIPAL COMMISSIONER OF INCOME TAX ( CENTRAL), ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 3 VISAKHAPATNAM NOTICED THAT THE ASSESSEE IS 66% SHAR EHOLDER IN A.S. STEEL TRADERS PVT. LTD. AND DURING THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR 2007-08, THE COMPANY HAS ADVANCED A MOUNTS OF ` 5,31,700/- AND THE ACCUMULATED PROFITS OF THE COMPA NY WAS ` 2,94,081/- AS ON 31.3.2006. THE PRINCIPAL COMMISSI ONER OF INCOME TAX WAS OF THE VIEW THAT THE ADVANCE RECEIVED BY THE AS SESSEE COMPANY COMES UNDER THE PURVIEW OF DEEMED DIVIDEND AS DEFIN ED U/S 2(22)(E) OF THE ACT AS THE ASSESSEE IS HOLDING MORE THAN 10% OF VOTING POWER. IT WAS ALSO OBSERVED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX THAT THE DIRECTOR MR. A. NAGESH HOLDS 34% OF SHARES AND HAD RECEIVED ADVANCE OF ` 1,76,344/-, WHICH ALSO COMES WITHIN THE PURVIEW OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. BOTH THE DIRECTO RS HAVE NOT SHOWN THE ADVANCES RECEIVED FROM THE COMPANY AS A DEEMED DIVI DEND IN THE RETURN OF INCOME. HENCE, THE PRINCIPAL COMMISSIONE R OF INCOME TAX HAS TAKEN UP THE CASE FOR REVISION AND HELD THAT THE AS SESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN AS MUCH AS NOT E XAMINING THE ISSUE WITH REGARD TO THE DEEMED DIVIDEND AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, SINCE THE DEEMED DIVIDEND WAS NOT BROUGHT TO TAX. THEREFORE, THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX SET AS IDE THE ORDER PASSED BY THE A.O. WITH A DIRECTION TO RE-DO THE ASSESSMEN T AFRESH AFTER EXAMINING THE ISSUE. ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 4 3. AGGRIEVED BY THE ORDER OF THE PRINCIPAL COMMISSI ONER OF INCOME TAX, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL . DURING THE APPEAL HEARING, THE LD. A.R. ARGUED THAT IN THIS CASE THE ASSESSMENT WERE COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT ON THE ISSUES ON WHICH THE INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. THE ISSUE RAISED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX WITH REGARD TO THE DEEMED DIVIDEND IS DULY ACCOUNTED IN THE BOOKS OF A CCOUNTS AND THE SAME CANNOT BE THE MATERIAL FOR REVISION U/S 263 OF THE ACT IN RESPECT OF THE SEARCH ASSESSMENTS. THE ISSUE WITH REGARD TO T HE DEEMED DIVIDEND IF AT ALL REQUIRED TO BE EXAMINED, THE SAME SHOULD BE EXAMINED IN THE REGULAR ASSESSMENT BUT NOT IN THE SEARCH ASSESSMENT S. THE LD. A.R. RELIED ON THE DECISION OF A. SWARNA LAKSHMI VS. DCI T (CENTRAL), VIJAYAWADA IN ITA NO.207/VIZAG/2011 DATED 9.8.2017 OF THIS TRIBUNAL. 4. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DERS OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE SEARCH ASSESSMENTS WERE COMPLETED U/S 143 (3) R.W.S. 153A OF THE ACT BY AN ORDER DATED 31.3.2005 ACCEPTING THE I NCOME RETURNED. THE COMMISSIONER OF INCOME TAX HAS TAKEN UP THE CAS E FOR REVISION U/S 263 OF THE ACT WITH REGARD TO THE ADVANCES GIVEN BY THE COMPANY TO THE ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 5 DIRECTORS WHO ARE HOLDING SUBSTANTIAL SHARE IN THE COMPANIES. THE COMPANY WAS HAVING SUFFICIENT RESOURCES AND THE ISS UE HAS TO BE CONSIDERED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT. HOWEVER, AS PER THE DECIDED CASE LAWS, THE ENTRIES MADE IN THE REGULAR BOOKS OF ACCOUNTS SHOULD NOT BE CONSIDERED IN SEARCH ASSESSM ENTS UNLESS THE ASSESSMENT IS INCOMPLETE. ON THE SIMILAR FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IN THE CASE OF A. SWARNA LAKSHMI RELIED UP ON BY THE LD. A.R. ALLOWED THE APPEAL OF THE ASSESSEE. FOR READY REFE RENCE, WE EXTRACT RELEVANT PARA OF THIS TRIBUNAL ORDER WHICH READS AS UNDER: 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. PRIMA FACIE, THE EXPENDITURE WAS ACCOUN TED IN THE REGULAR BOOKS OF ACCOUNTS AND THE ASSESSMENTS FOR THE ASSESSMENT YEA RS 2006-07 AND 2007-08 ARE UNABATED AND COMPLETED. THE COMPLETED ASSESSMENTS CANNOT BE INFERRED WITH THE REGULAR BOOKS OF ACCOUNTS WHILE MAKING THE ASSESSME NTS U/S 153A. REASSESSMENT U/S 153A IS POSSIBLE IN UNABATED ASSESSMENTS ONLY W ITH THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IF NO NEW MATERIA L IS UNEARTHED DURING THE COURSE OF SEARCH REVISION U/S 263 IS NOT PERMISSIBL E IN THE CASE OF COMPLETED ASSESSMENTS ON THE BASIS OF ENTRIES MADE IN THE REG ULAR BOOS OF ACCOUNTS. FOR ANY OMISSION OR COMMISSION RESULTING UNDER ASSESSMENT S HOULD BE CONSIDERED IN REGULAR ASSESSMENTS BUT NOT IN SEARCH ASSESSMENTS. THIS VIEW IS SUPPORTED BY THE DECISION OF HON'BLE ITAT,DELHI TRIBUNAL IN MAHESH K UMAR GUPTA VS. COMMISSIONER OF OF INCOME TAX, REPORTED IN 47 CCH 0190. THE COOR DINATE BENCH IN THE DECISION CITED SUPRA IN CONNECTION WITH THE TAXABILITY OF DE EMED DIVIDEND HELD AS UNDER: THE CLAUSE (IV) ABOVE, THE HON Z/E HIGH COURT HELD THAT 'OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL'. IN CLAUSE (V), THE SAME IS REITERATED B Y HO/DING 'IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMEN T CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MA DE IN CLAUSE (VII), IT IS STATED 'COMPLETED ASSESSMENTS CAN BE INTERFER ED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASK OF SOME INCRIMINATING MATERIAL, THE COMPLETED ASSESSME NT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE RE ITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE ' IN CLAUSE (VII), IT IS STATED 'COMPLETED ASSESSMENTS CAN BE INTERFERED WIT H BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON TH E BASIS OF SOME ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 6 INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. THUS, IN PRESENT CASE THE ISSUE OF DEEMED DIVIDEND DOES NOT ARIE FROM THE PROVISIONS OF SECT/ON 153A OF THE ACT AND THERE IS NO SEIZED MATERIAL UNEARTHED AT THE RELEVANT TIME. THUS IT IS BEYOND A SSESSING OFFICER'S POWER TO ADDRESS THE SAID ISSUE IN PROCEEDINGS INITIATED UNDER SECTION 143(3) READ WITH SECTION 153A OF THE ACT. THE CIT WAS WRON G IN DIRECTING THE EXAMINATION OF TAXABILITY OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, IN THE PROCEEDINGS U/S 153A OF THE ACT WHILE P ASSING ORDER UNDER SECTION 263 OF THE ACT WHEN THE PROCEEDINGS UNDER S ECTION 153A ITSELF HAS NOT UNEARTHED THE SAID ISSUE. THUS, THE CIT DO NOT HAVE POWER UNDER SECTION 263 OF THE ACT TO GIVE ITS OWN OPINION WHEN THERE IS NO NEW MATERIAL UNEARTHED. THE ISSUE TAKEN UP BY THE CFT W AS NOT WITHIN THE PURVIEW OF THE ASSESSING OFFICER AT THE INCEPTION O F ASSESSMENT PROCEEDINGS. 11.1 THEREFORE WE HOLD THAT IT IS NOT PERMISSIBLE TO REVISE THE ASSESSMENT ORDER IN THE CASE OF SEARCH ASSESSMENTS WITHOUT REFERRING TO THE INCRIMINATING MATERIAL IN THE CASE OF COMPLETED ASS ESSMENTS IN THE INSTANT CASE THE ASSESSMENTS WERE UNABATED AND THERE IS NO INCRIMAINATING MATERIAL. HENCE WE SET ASIDE THE ORDERS OF THE LD.C IT AND ALLOW THE APPEAL OF THE ASSESSEE FOR THE A.Y.2006-07 AND 2007-08. 6. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLL OWING THE VIEW TAKEN BY THIS TRIBUNAL, WE HOLD THAT IT IS NOT PERMISSIBL E TO REVISE THE ASSESSMENT ORDER IN THE CASE OF SEARCH ASSESSMENTS WITHOUT REFERRING TO INCRIMINATING MATERIAL IN THE CASE OF COMPLETED ASS ESSMENTS. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. PRIN CIPAL COMMISSIONER OF INCOME TAX AND ALLOW THE APPEALS OF THE ASSESSEE. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE S ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH MAR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ITA NOS.273 & 274/VIZAG/2017 MAHESH ANUMALISETTY & NAGESH ANUMALISETTY, VSKP 7 # /VISAKHAPATNAM: ' /DATED : 09.03.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI ANUMALISETTY MAHESH, D.NO.7- 5-104/9, SRI LAKSHMI NIVAS, MAITRI NAGAR, VISAKHAPATNAM 2. 1. / THE APPELLANT SRI ANUMALISETTY NAGESH, PLOT NO .201, SECTOR-IV, MVP COLONY, VISAKHAPATNAM 3. / THE RESPONDENT THE DCIT, CENTRAL CIRCLE-2, VIS AKHAPATNAM 3. + / THE THE PRINCIPAL CIT (CENTRAL), VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM