Addl. DIT (Intl. Taxn), Hyderabad V. Sri Venkata Mohan Rao, Hyderabad

ITA 277/HYD/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69917 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S J T KOTTARAM
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Unexplained expenditure; Retrospective amendment; Validity of assessment
• Section: 69C; 142(1); 147; 6; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.277/HYD/2009 ASSESSMENT YEAR 2005-06. ADDL. DIRECTOR OF IT, -V- SRI A.VENKATA MOHAN RAO, (INTL. TAXN.)HYDERABAD. PLOT NO.28 1/A,ROAD NO.10C, HYDERABAD. PAN: (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.J.T.KOTTARAM RESPONDENT BY SHRI M.V. ANIL KUMAR DATE OF HEARING 3 1 - 10 - 2013 DATE OF PRONOUNCEMENT 22 - 11 - 2013 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 15-12-2008 OF CIT (A)-IV, HYDERABAD PAS SED IN APPEAL NO. ITA NO.469/ITO6(3)/CIT(A)-IV/2007-08 PER TAINING TO THE ASSESSMENT YEAR 2005-06. 2 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. 2. THE ONLY GRIEVANCE OF THE DEPARTMENT WHICH ARIS ES OUT OF THE GROUNDS RAISED IS WITH REGARD TO THE CIT (A) AN NULLING THE ASSESSMENT BY HOLDING THAT THE NOTICE ISSUED U/S 14 2(1) IS BEYOND THE PERIOD OF ONE YEAR FROM THE END OF THE R ELEVANT ASSESSMENT YEAR IS INVALID IN LAW. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVI DUAL AND IS A NON RESIDENT INDIAN. THE ASSESSING OFFICER ON THE B ASIS OF THE INFORMATION AVAILABLE WITH HIM FOUND THAT THE ASSE SSEE HAD INCURRED AN EXPENDITURE OF RS.10,17,447/- THROUGH C REDIT CARD ISSUED BY CITI BANK DURING FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. HE FURTHER NOTE D THAT THE ASSESSEE IS NOT ASSESSED TO INCOME-TAX. HENCE HE I SSUED A NOTICE U/S 142(1) ON 30-8-2007 CALLING UPON THE ASS ESSEE TO SUBMIT ITS RETURN OF INCOME FOR THE IMPUGNED ASSESS MENT YEAR. SINCE THERE WAS NO RESPONSE TO THE NOTICE ISSUED U/ S 142(1), THE ASSESSING OFFICER ISSUED A SHOW CAUSE LETTER TO THE ASSESSEE ON 20-11-2007. IN THE SAID SHOW CAUSE LET TER, THE ASSESSING OFFICER MADE IT CLEAR THAT UNLESS THE ASS ESSEE COMPLIES TO THE NOTICE ISSUED U/S 142(1) OF THE ACT BY FILING A RETURN OF INCOME, THE ASSESSMENT WILL BE COMPLETED U/S 144 OF THE ACT BY TREATING THE EXPENDITURE INCURRED AS AN UNEXPLAINED EXPENDITURE U/S 69C OF THE I T ACT. THE ASSESSEE W AS DIRECTED TO FURNISH REPLY TO THE SHOW CAUSE ON 4-12-2007. S INCE THERE WAS NO RESPONSE FROM THE ASSESSEE EVEN TO THE SHOW CAUSE LETTER ISSUED BY THE ASSESSING OFFICER, FINDING NO OTHER ALTERNATIVE, THE ASSESSING OFFICER PROCEEDED TO COM PLETE THE 3 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. ASSESSMENT U/S 144 OF THE ACT BY TREATING THE EXPEN DITURE INCURRED THROUGH CREDIT CARD AMOUNTING TO RS.10,17, 447/- AS UNEXPLAINED INCOME AND THEREFORE TREATED IT AS INCO ME OF THE ASSESSEE U/S 69C OF THE ACT. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE CIT (A). 4. IT APPEARS FROM THE MATERIALS ON RECORD AS WELL AS THE ORDERS PASSED BY THE CIT (A) THOUGH NO SPECIFIC GRO UND WAS RAISED BY THE ASSESSEE BEFORE THE CIT (A) CHALLENGI NG THE VALIDITY OF ASSESSMENT DUE TO NOTICE U/S 142(1) OF THE ACT HAVING BEEN ISSUED BEYOND A PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND FURTHER IT APPEARS FROM THE ORDER OF THE CIT (A) THAT THERE IS NO ARGUMENT MAD E BY THE LEARNED AR OF THE ASSESSEE IN THIS REGARD, BUT THE CIT (A) ON HIS OWN TOOK UP THE ISSUE OF VALIDITY OF ASSESSMENT PROCEEDINGS ON ACCOUNT OF ISSUANCE OF NOTICE U/S `142(1) OF THE ACT BEYOND THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND ULTIMATELY ANNULLED THE ASSESSMENT BY HOLD ING THAT THE NOTICE ISSUED U/S 142(1) BEYOND A PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR BEING AB IN ITIO VOID,, THE ASSESSMENT ORDER PASSED CONSEQUENT THEREUPON HA S TO BE ANNULLED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED BEFORE US THAT THE CIT (A) IS TOTALLY INCORRECT IN HOLDING HTHAT THE NOTICE ISSUED U/S 142(1) OF THE ACT BEYOND A PE RIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR T OBE INVALID 4 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. AS THE PROVISO INSERTED TO SECTION 142(1) OF THE AC T BY FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990 HA S CLEARLY DONE AWAY WITH ANY LIMITATION WITH REGARD TO THE I SSUANCE OF NOTICE U/S 142(1) OF THE ACT. IN THIS CONTEXT, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON A DECISION OF HONBLE DELHI HIGH COURT IN CASE OF DIT VS. KLM ROYAL DUTC H AIRLINES (2007) 165 TAXMAN 34 (DEL). 6. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE AS SESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT (A). 7. WE HAVE CONSIDERED SUBMISSIONS OF THE PARTIES AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FA CT THAT THE NOTICE U/S 142(1) OF THE ACT IN THE CASE OF THE ASS ESSEE WAS ISSUED ON 30-8-2007 WHICH IS BEYOND THE PERIOD OF O NE YEAR FROM THE DATE OF THE RELEVANT ASSESSMENT YEAR I.E., ASSESSMENT YEAR 2005-06. HOWEVER, THE ISSUE BEFORE US IS WHETH ER THE NOTICE ISSUED U/S 142(1) BEYOND THE PERIOD OF ONE Y EAR FROM THE END OF THE ASSESSMENT YEAR CAN BE HELD TO BE IN VALID IN VIEW OF THE PROVISO TO CLAUSE (I) OF SECTION 142(1) INSERTED BY FINANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1- 4-1990. THE SAID PROVISO READS AS UNDER:- PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UNDE R THIS SUB-SECTION FOR THE PURPOSES OF THIS CLAUSE AF TER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON O R AFTER THE 1 ST DAY OF APRIL, 1990 TO A PERSON WHO HAS NOT 5 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. MADE A RETURN WITHIN THE TIME ALLOWED UNDER SUB-SEC TION (1) OF SECTION 139 OR BEFORE THE END OF THE RELEVAN T ASSESSMENT YEAR, ANY SUCH NOTICE ISSUED TO HIM SHAL L BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE PROVISIONS OF THIS SUB-SECTION. ON A PLAIN READING OF THE PROVISION CONTAINED U/S 1 42(1) OF THE ACT ALONG WITH THE PROVISO INTRODUCED BY FINANCE AC T, 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990, IT WOULD BE CLE AR THAT THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO ISS UE NOTICE U/S 142(1) OF THE ACT AFTER THE END OF THE RELEVANT ASSESSMENT YEAR TO A PERSON WITHIN THE TIME ALLOWED UNDER SUB- SECTION (1) OF SECTION 139 OR BEFORE THE END OF THE RELEVANT AS SESSMENT YEAR AND ANY SUCH NOTICE ISSUED TO THE ASSESSEE SHA LL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 142(1) OF THE ACT. THUS, IT IS VERY MUC H CLEAR THAT THE ASSESSING OFFICER CAN ISSUE A NOTICE U/S 142(1) OF THE ACT AT ANY TIME AFTER THE END OF THE RELEVANT ASSESSMENT Y EAR. THERE IS ABSOLUTELY NO RESTRICTION ON THE ASSESSING OFFI CER TO ISSUE NOTICE U/S 142(1) BEFORE EXPIRY OF ONE YEAR FROM TH E END OF THE RELEVANT ASSESSMENT YEAR AS HAS BEEN HELD BY THE CI T (A). THE PROVISIONS OF SECTION 142(1) OF THE ACT, IN OUR VIE W, DO NOT PROVIDE ANY SUCH RESTRICTION, AFTER THE INSERTION O F THE PROVISO TO SECTION 142(1) OF THE ACT W.E.F. 1-4-1990. THE REASONING OF THE CIT (A) THAT NO MAXIMUM TIME LIMIT HAVING BEEN PRESCRIBED U/S 142(1) AFTER THE AMENDMENT EFFECTED BY THE FINANCE ACT, 2006, IT CANNOT BE CONSTRUED THAT NOTI CE U/S 6 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. 142(1) CAN BE ISSUED AT ANY TIME AFTER THE END OF THE RELEVANT ASSESSMENT YEAR, IN OUR VIEW, IS NOT THE CORRECT IN TERPRETATION OF THE PROVISIONS BECAUSE OF THE LIMITATION PRESCRI BED FOR COMPLETING THE ASSESSMENT UNDER SUB-SECTION (1) OF SECTION 153 OF THE ACT. THEREFORE, THE PROVISION OF SECTIO N 142(1) CANNOT BE CONSTRUED TO MEAN THAT THE ASSESSING OFFI CER CAN ISSUE A NOTICE U/S 142(1) AT ANY TIME AFTER THE E ND OF THE ASSESSMENT YEAR IRRESPECTIVE OF THE LIMITATION PRES CRIBED U/S 153(1) OF THE ACT. SO FAR AS THE OBSERVATION MADE BY THE CIT (A) THAT THE PROVISION CONTAINED U/S 147 OF THE ACT WOULD BECOME REDUNDANT IF SECTION 142(1) IS INTERPRETED T O MEAN THAT THE ASSESSING OFFICER CAN ISSUE A NOTICE AT ANY TIM E AFTER EXPIRY OF THE RELEVANT ASSESSMENT YEAR, IN OUR VIEW IS MIS PLACED. THIS IS BECAUSE OF THE FACT THAT THE PROVISION CONTAINED U/S 147 OF THE ACT CAN ONLY BE INVOKED FOR ASSESSMENT OF ESCAP ED INCOME AND HENCE TO BE APPLICABLE IN A PARTICULAR SITUATIO N. THEREFORE, THE PROVISION CONTAINED U/S 142(1) AND SECTION 147 ARE INDEPENDENT PROVISIONS AND DO NOT OVER-LAP. THE O RDER OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH A, WHERE BOTH THE PRESENT MEMBERS ARE PARTIES, WHILE CONSIDE RING IDENTICAL ISSUE IN CASE OF DIT VS. SMT. KAUSARI BE GUM IN ITANO.532/HYD/2010 DATED 18-5-2012 HELD AS UNDER:- 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WHETHER NOTICE U/S 142(1) ISSUED AFTE R END OF ONE YEAR FROM THE RELEVANT ASSESSMENT YEAR IS BARRE D BY LIMITATION OR NOT. AT THIS STAGE, IT IS NECESSARY T O LOOK INTO THE PROVISIONS CONTAINED U/S 142(1) OF THE ACT. 7 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. 142 (1) FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDE R THIS ACT, THE AO MAY SERVE ON ANY PERSON WHO HAS MADE A R ETURN (UNDER SECTION 115WD OR SECTION 139 (OR IN WHOSE CAS WE THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139] FO R FURNISHING THE RETURN HAS EXPIRED] A NOTICE REQUIRING , ON A DATE TO BE THEREIN SPECIFIED- (I) WHERE SUCH PERSON HAS NOT MADE A RETURN (WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 (OR BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR] TO F URNISH A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PE RSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED, OR [PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UNDER THIS SUB-SECTION FOR THE PURPOSES OF THIS CLAUSE AFT ER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1990 TO A PERSON WHO HAS NOT MADE A RETURN WITHIN THE TIME ALLOWED UNDER SUB-SECTIO N (1) OF SECTION 139 OR BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR, ANY SUCH NOTICE ISSUED TO HIM SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE PROVISIONS OF THIS SUB-SECTION THE PROVISO TO SECTION 142(1) WAS INTRODUCED BY FINAN CE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990. THE A FORESAID AMENDMENT AS EXPLAINED IN THE NOTES ON CLAUSES TO THE FINANCE BILL, 2006 IS REPRODUCED BELOW:- CLAUSE 35 OF THE BILL SEEKS TO AMEND SECTION 142 OF THE INCOME-TAX ACT RELATING TO INQUIRY BEFORE ASSESSMEN T. THE EXISTING PROVISIONS CONTAINED IN CLAUSE (I) OF S UB-SECTION (1) OF SAID SECTION PROVIDE THAT WHERE A PERSON HAS NOT MADE A RETURN OF INCOME WITHIN THE TIME ALLOWED UNDER SUB-SE CTION (1) OF SECTION 139, THE AO MAY SERVE A NOTICE ON HIM RE QUIRING HIM TO FURNISH THE RETURN OF INCOME. 8 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. IT IS PROPOSED TO AMEND THE SAID CLAUSE (I) SO AS TO PRO VIDE THAT WHERE A PERSON HAS NOT MADE A RETURN OF INCOME BEFORE HT END OF THE RELEVANT ASSESSMENT YEAR, THE AO MAY SERVE A NOTICE UNDER THIS SUB-SECTION ON HIM AFTER THE END OF THE RE LEVANT ASSESSMENT YEAR, REQUIRING HIM TO FURNISH RETURN OF INCOME. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2006. IT IS FURTHER PROPOSED TO PROVIDE THAT THE NOTICE REFER RED TO IN SAID SUB-SECTION FOR THE PURPOSES OF SAID CLAUSE SERVE D AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER 1 ST APRIL, 1990 SHALL BE DEEMED TO BE A NOTICE SERVED IN ACCORDANCE WITH THE PROVISIONS OF THE AFORESAID SUB-SE CTION. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1 ST APRIL, 1990. A PLAIN READING OF SECTION 142(1) ALONG WITH ITS PROV ISO AND EXPLANATIONS TO NOTES MAKES IT CLEAR THAT IN A CASE WHERE NO RETURN OF INCOME HAS BEEN FILED WITHIN THE TIME ALLO WED U/S 139(1) OF THE ACT, THE AO IS VESTED WITH POWER TO IS SUE NOTICE U/S 142(1) EVEN AFTER THE END OF THE RELEVANT ASSESS MENT YEAR. WHEN THERE IS NO EXPRESS PROVISION LIMITING ISSUANCE OF NOTICE U/S 142(1) WITHIN THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH LIMITATION CAN BE READ INTO THE PROVISION. IN VIEW OF THE ABOVE, WE DO NOT FIND A NY SUBSTANTIAL FORCE IN THE ARGUMENT OF THE LEARNED AR OF THE ASSESSEE THAT NOTICES U/S 142(1) CANNOT BE ISSUED WH EN NO RETURN OF INCOME WAS FILED. THE PROVISION U/S 142(1) IS VERY MUCH CLEAR IN THIS RESPECT. THE DECISION OF ITAT, CA LCUTTA BENCH IN THE CASE OF SHAW WALLACE & CO. LTD. VS. DCI T (2006) 101 TTJ 258 RELIED UPON BY THE LEARNED AR IS OF NO HELP TO THE ASSESSEE AS IT WAS RENDERED PRIOR TO THE INSERTION OF PROVISO TO SECTION 142(1) OF THE ACT. WE ARE THEREFORE OF THE VIEW THAT THE CIT (A) WAS NOT CORRECT IN HOLDING THE ISSUANCE OF N OTICE U/S 142(1) TO BE AB INITIO VOID. SINCE THE CIT (A) HAS DECIDED THE APPEAL ON TECHNICAL ISSUE WITHOUT GOING INTO MERITS O F THE CASE, WE THINK IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE CIT (A) AND DIRECT HIM TO DISPOSE OF THE APPEAL ON MERITS IN ACCORDANCE WITH LAW AFTER AFFORDING A REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. 9 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. 8. THE HONBLE DELHI HIGH COURT IN CASE OF DIT VS. KLM ROYAL DUTCH AIRLINES (SUPRA) ALSO EXPRESSED THE SAME VIEW WHILE CONSIDERING IDENTICAL ISSUE OF ISSUANCE OF NOTICE U/S 142(1). THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH AS WELL AS THE HONBLE DELHI HIGH COURT AS REFERRED TO HEREIN ABOVE, WE HO LD THAT THE NOTICE ISSUED U/S 142(1) OF THE ACT IN THE INSTANT CASE IS VALID AND CONSEQUENTLY THE ASSESSMENT ORDER PASSED CANNOT BE HELD TO BE INVALID IN LAW. ACCORDINGLY, WE SET ASIDE TH E ORDER OF THE CIT (A). HOWEVER, SINCE THE CIT (A) HAS NOT DECIDED THE MATTER ON THE MERIT OF THE ISSUE, WE REMIT THE MATTER BACK TO THE FILE OF THE CIT (A) FOR DECIDING THE SAME ON MERIT. 9. IN THE RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22 -11-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 22 ND NOVEMBER, 2013 JMR* 10 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD. COPY TO:- 1) ADDL. DIRECTOR OF INCOME-TAX (INTL,) TAXN.) 6 TH FLOOR, C- BLOCK IT TOWERS, HYDERABAD. 2) SRI VENKATA MOHAN RAO AKULA, PLOT NO. 281/A, ROAD NO.10C, HYDERABAD. 3) CIT (A)-IV, HYDERABAD. 4) CIT-III, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. JMR* 11 ITA NO.277 OF 2009 VENKATA MOHANA RAO, HYD.