The ITO, Ward-1(4)., Visakhapatnam V. M/s City Wines, Visakhapatnam

ITA 282/VIZ/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2588 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 01-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Bonafide belief; Block assessment; Set aside
• Section: 143(1); 143(2); 147; 148; 132

Judgement Text

ITA 282/VIZ/2007 CITY WINES, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 282 /VIZAG/ 20 07 ASSESSMENT YEAR : 2000 - 01 ITO WARD - 1(4) VISA KHAPATNAM CITY WINES VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO. AAAAC2321F APPELLANT BY: SHRI D.S. SUNDER SINGH, DR RESPONDENT BY: SHRI C. SUBRAHMANYAM, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS APPEAL IS PREFERRED BY THE REV ENUE AGAINST THE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2000 - 01. THE GROUNDS OF APPEAL FILED ALONG WITH THE MEMORANDUM OF APPEAL WERE REVISED BY THE LD. D.R. BY FILING THE REVISED GROUNDS OF APPEAL. ACCORDINGLY, THE REVISED GROUNDS ARE TAK EN ON RECORD IN PLACE OF ORIGINAL GROUNDS. THE REVISED GROUNDS ARE EXTRACTED HEREUNDER: 1. THE ORDER OF THE LD. CIT(A) IS NOT CORRECT BOTH IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRE D IN LAW IN HOLDING THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE REOPENING OF THE ASSESSMENT IS WELL FOUNDED IN AS MUCH AS THE EXCESS STOCK FOUND IN THE SURVEY AND EXCESS CASH FOUND IN SEARCH OPERATI ONS WOULD CONSTITUTE `INFORMATION WITHIN THE MEANING OF SEC. 147 OF THE ACT FOR REOPENING OF THE ASSESSMENT. 4. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARING. 2. THROUGH THESE REVISED GROUNDS, THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) THAT HE HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF LIQUOR. ITS RETURN OF INCOME FOR THE ASSESSMEN T ITA 282/VIZ/2007 CITY WINES, VSKP 2 YEAR 2000 - 01 SHOWING THE TOTAL INCOME AT RS.2,160/ - WAS P R O CESSED U/S 143(1) OF THE I.T. ACT ON 17.1.2001. A SEARCH OPERATION U/S 132 OF THE I.T. ACT WAS CONDUCTED IN THE CASE OF SHRI D. KRISHNA KISHORE ONE OF THE PARTNER OF THE ASSESSEE FIRM ON 28.3.20 00 WHERE EXCESS STOCK OF RS.1,42,767/ - AND EXCESS CASH OF RS.1,12,210/ - WERE FOUND. ACCORDINGLY, IT WAS ASSESSED IN THE HANDS OF THE PARTNER IN BLOCK ASSESSMENT. THE BLOCK ASSESSMENT WAS CHALLENGED BEFORE THE CIT(A) AND CIT(A) HAS QUASHED THE BLOCK ASSES SMENT FOR THE REASON THAT NOTICE U/S 143(2) OF THE I.T. ACT WAS NOT ISSUED BEFORE COMPLETING THE ASSESSMENT U/S 158 BD OF THE ACT. THIS ORDER OF THE CIT(A) WAS CONFIRMED BY THE TRIBUNAL. THE REGULAR ASSESSMENT FOR THE ASSESSMENT YEAR 1999 - 2000 AND 2000 - 0 1 WAS ALSO FRAMED IN THE HANDS OF THE PARTNER AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE PARTNER SHRI D. KRISHNA KISHORE HAS FILED A LETTER BEFORE THE ASSESSING OFFICER THAT THE UNEXPLAINED STOCK OF RS.1,42,767/ - AND CASH SEIZED OF RS.1,12,210/ - B ELONGS TO THE PARTNERSHIP FIRM I.E. M/S. CITY WINES, THE PRESENT ASSESSEE. ON THE BASIS OF THIS INFORMATION, THE ASSESSING OFFICER HAS ISSUED A NOTICE U/S 148 OF THE ACT FOR REOPENING OF THE ASSESSMENT. THE REOPENING OF THE ASSESSMENT IS CHALLENGED BY TH E ASSESSEE WITH THE CONTENTION THAT WHEN THE ADDITIONS WERE MADE ON BOTH THE ISSUES IN THE HANDS OF THE ONE OF THE PARTNERS OF THE ASSESSEE FIRM SHRI D. KRISHNA KISHORE WHILE COMPLETING HIS BLOCK ASSESSMENT THE ASSESSMENT CANNOT BE REOPENED IN THE HANDS OF THE PARTNERSHIP FIRM ON THE SAME ISSUES . I F IT IS ALLOWED TO BE DONE, IT WOULD AMOUNT TO A DOUBLE TAXATION. REJECTING THE CONTENTION OF THE ASSESSEE, THE ASSESSING OFFICER HAS HELD THAT THE FACTS OF THE UNEXPLAINED STOCK AND EXCESS CASH PERTAINS TO THE ASSESSEE FIRM CAME TO THE NOTICE OF THE ASSESSING OFFICER ONLY WHEN THE LETTER DATED 3.3.2005 WAS FILED DURING THE COURSE OF REGULAR ASSESSMENT IN THE CASE OF PARTNERS OF THE ASSESSEE FIRM SHRI D. KRISHNA KISHORE. THE A.O. HAS ALSO OBSERVED THAT AS REGARD TO THE EXCESS CASH OF RS.1,12,210/ - , THE ASSESSEE FIRM HAS FILED A LETTER DATED 17.3.2005 BEFORE THE DCIT, CENTRAL - 2, VISAKHAPATNAM IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI D. KRISHNA KISHORE, PARTNER OF THE ASSESSEE FIRM FROM WHI CH IT IS SEEN THAT THE ASSESSEE FIRM HAS ACCEPTED THAT ABOVE CASH OF RS.1,12,210/ - FOUND IN THE RESIDENTIAL PREMISES OF SHRI KRISHNA KISHORE PERTAINS TO IT REPRESENTING ITA 282/VIZ/2007 CITY WINES, VSKP 3 SALE OF LIQUOR MADE ON 26 TH AND 27 TH MARCH, 2000 WHICH WAS STATED TO BE KEPT WITH THE P ARTNER SHRI KRISHNA KISHORE AS PRECAUTIONARY MEASURE. THEREFORE, ON THE BASIS OF THESE LETTERS, THE ASSESSING OFFICER HAS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THE NOTICE U/S 148 WERE VALIDLY ISSUED. THE A.O. HAS ALSO M ADE THE ADDITIONS UNDER BOTH THE HEADS IN THE HANDS OF THE ASSESSEE FIRM WHICH WAS CHALLENGED BEFORE THE CIT(A) AND CIT(A) HAS ANNULLED THE ASSESSMENT ON A LEGAL ISSUE THAT REOPENING OF THE ASSESSMENT WAS NOT VALID. WHILE HOLDING SO, THE CIT(A) HAS OBSERV ED THAT IT IS A SETTLED LAW WHERE THERE IS A DOUBT AND AMBIGUITY ABOUT THE REAL ENTITY IN WHOSE HANDS A PARTICULAR INCOME IS TO BE ASSESSED, THE ASSESSING AUTHORITY IS ENTITLED TO HAVE RECOURSE TO MAKE PROTECTIVE ASSESSMENT IN THE CASE OF ONE AND REGULAR A SSESSMENT IN THE CASE OF THE OTHER. BUT THE REOPENING TO MAKE SUBSTANTIVE ASSESSMENT FOR THE SAME AMOUNT IN THE HANDS OF THE ASSESSEE FIRM WHICH HAS ALREADY SUFFERED TAX IN THE HANDS OF THE PARTNER OF THE SAID FIRM IS NOT POSSIBLE. TWO SUBSTANTIVE ASSESS MENTS FOR THE SAME AMOUNT IS NOT CONTEMPLATED UNDER THE ACT. CIT(A) HAS NOT GIVEN ANY FINDING ON MERIT. 4. AGGRIEVED, THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) WITH THE SUBMISSION THAT CIT(A) IS NOT CORRECT IN HOLDING THAT THE ADDITION OF THE IM PUGNED ISSUES WERE SIMULTANEOUSLY MADE IN TWO HANDS ; ONE IS THE PARTNER AND THE OTHER THE FIRM. THE LD. D.R. FURTHER INVITED OUR ATTENTION THAT NO DOUBT INITIALLY THE IMPUGNED ADDITIONS ON ACCOUNT OF UNEXPLAINED STOCK AND EXCESS CASH WERE MADE IN THE HAN DS OF THE PARTNERS OF THE FIRM IN BLOCK ASSESSMENT BUT LATER ON THE BLOCK ASSESSMENT WAS QUASHED BY THE CIT(A) ON TECHNICAL GROUNDS. THE FINDING OF THE CIT(A) WAS ALSO APPROVED BY THE TRIBUNAL. THEREFORE, THERE WAS NO ADDITION ON THE IMPUGNED ISSUES IN T HE HANDS OF THE PARTNERS. THE PARTNER OF THE FIRM HIMSELF HAS FILED A LETTER BEFORE THE ASSESSING OFFICER IN THE REGULAR ASSESSMENT THAT THE UNEXPLAINED STOCK OF RS.1,42,767/ - AND THE CASH OF RS.1,12,210/ - BELONGS TO THE ASSESSEE FIRM. NOT ONLY THIS LETT ER, ASSESSEE FIRM HAS ALSO OWNED BY FILING A LETTER DATED 17.3.2005 THAT THE EXCESS CASH OF RS.1,12,210/ - PERTAINS TO THE ASSESSEE FIRM WHICH WAS KEPT AT THE RESIDENTIAL PREMISES OF SHRI KRISHNA ITA 282/VIZ/2007 CITY WINES, VSKP 4 KISHORE, PARTNER OF THE FIRM AS THE PRECAUTIONARY MEASURE. T HESE EVIDENCES ARE ENOUGH FOR THE ASSESSING OFFICER TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE FIRM HAS ESCAPED ASSESSMENT. THEREFORE, THE A.O. HAS RIGHTLY ISSUED THE NOTICE U/S 148 FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. WITH REGARD TO THE JUDGEMENT RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE, THE LD. D.R. HAS SUBMITTED THAT THE JUDGEMENT IN THE CASE OF METRO AUTO CORPORATION VS. ITO AND OTHERS 286 ITR 618 IS DISTINGUISHABLE ON FACTS AS IN THAT CASE NOTICE U/S 148 WAS ISSUED DURING THE PENDENCY OF THE APPEAL FILED BY THE DEPARTMENT BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) ALLOWING RELIEF TO THE ASSESSEES, FOR REOPENING THE ASSESSMENT OF T HE SAME ASSESSEE. IN THAT CASE, ASSESSEE IS ONLY ONE AND THE HO NBLE HIGH COURT OF BOMBAY HAVE HELD THAT TWO PROCEEDINGS CANNOT BE INITIATED SIMULTANEOUSLY IN THE HANDS OF THE ASSESSEES. BUT IN THE INSTANT CASE THE ASSESSEES ARE DIFFERENT AND MORE SO THE ASSESSMENT IN THE HANDS OF ONE ASSESSEE IN WHICH THE ADDITIONS WERE MADE HAS ALREADY BEEN ANNULLED BY THE FIRST APPELLATE A UTHORITY. THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE EVIDENCE FILED BY THE ASSESSEE AND ITS PARTNERS. THEREFORE, THE REOPENING OF THE ASSESSMENT IS AS PER LAW AND DESERVES TO BE CONFIRMED. 5 . THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS SUBMITTED THAT ADDITIONS ON THE SAME ISSUES WERE INITIALLY MADE IN THE HANDS OF THE PARTNERS OF THE ASSESSEE FIRM SHRI D. KRISHNA KISHORE IN THE BLOCK ASSESSMENT. DESPITE ADDITIONS IN THE BLOCK ASSESSMENT IN THE HANDS OF THE PARTNER, ASSESSING OFFICER HAS ISSUED A NOTICE U/S 148 FOR REOPENING THE ASSESSMENTE IN THE HANDS OF THE PARTNERSHIP FIRM FOR MAKING THE SAME ADDITIONS. THEREFORE, THE ADDITIONS ON A PARTICULAR ISSUE CANNOT BE MADE IN THE HA NDS OF THE TWO ASSESSEES. THE CIT(A) HAS APPRECIATED THE FACTS PROPERLY BEFORE HOLDING THE REOPENING OF THE ASSESSMENT TO BE INVALID. 6 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT DURING THE COURSE OF A SEARCH , UNEXPLAINED STOCK AND EXCESS CASH WAS FOUND AT THE RESIDENTIAL PREMISES OF MR. D. KRISHNA KISHORE, PARTNER OF THE ASSESSEE FIRM. DURING THE COURSE OF SEARCH PROCEEDINGS OR ITA 282/VIZ/2007 CITY WINES, VSKP 5 THEREAFTER THE PARTNER DID NOT TAKE A STAND THAT THIS UNEXPLAINED STOCK OR EXCESS CASH BELONGS TO THE ASSESSEES. THEREFORE, THE A.O. HAS MADE THE ADDITION OF THE SAME IN BLOCK ASSESSMENT. BUT THE BLOCK ASSESSMENT WAS QUASHED BY THE CIT(A) ON A LEGAL GROUND THAT NOTICE U/S 143(2) WAS NOT ISSUED BEFORE COMPLETING THE ASSESSMENT U/S 158 BD OF THE ACT. THIS ORDER OF THE CIT (A) WAS APPROVED BY THE TRIBUNAL. DURING THE PENDENCY OF REGULAR ASSESSMENT, THE PARTNER SHRI D. KRISHNA KISHORE HIMSELF HAS FILED A LETTER BEFORE THE ASSESSING OFFICER THAT THE UNEXPLAINED STOCK AND THE CASH SEIZED I N FACT PERTAINS TO THE ASSESSEE FIRM. NOT ONLY THAT THE ASSESSEE FIRM HAS ALSO ADMITTED BEFORE THE DCIT (CENTRAL), CIRCLE - 2, VISAKHPATNAM IN THE COURSE OF ASSESSMENT PROCEEDINGS OF SHRI D. KRISHNA KISHORE THAT THE EXCESS CASH OF RS.1,12,210/ - PERTAINS TO IT AND IT WAS KEPT WITH THE PARTNER SHRI KRISHNA KISHORE AS A PRECAUTIONARY MEASURE. THE ASSESSING OFFICER GOT THE INFORMATION IN THIS REGARD ONLY ON 3 RD OF MARCH, 2005 AND 17 TH OF MARCH, 2005 THROUGH THEIR LETTERS AND ON THE BASIS OF THESE LETTERS, THE A SSESSING OFFICER HAS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE HANDS OF THE PARTNERSHIP FIRM. WE THEREFORE DO NOT FIND ANY INFIRMITY IN A BONAFIDE BELIEF FORMED BY THE ASSESSING OFFICER. SO FAR AS THE OBJECTION OF THE LD . COUNSEL FOR THE ASSESSEE THAT THE SAME INCOME CANNOT BE ASSESSED IN TWO HANDS AND THE ASSESSMENT CANNOT BE REOPENED WHERE THE APPEAL PROCEEDINGS ARE PENDING ARE CONCERNED, WE ARE OF THE VIEW THAT THIS LEGAL POSITION IS WITH REGARD TO THE CASE WHERE THERE IS ONLY ONE ASSESSEE. WE ARE OF THE VIEW WHERE THE APPEAL PROCEEDINGS ARE PENDING BEFORE THE APPELLATE AUTHORITIES ON CERTAIN ISSUES , AN ASSESSMENT CANNOT BE REOPENED ON THOSE ISSUES IN THE HANDS OF THE SAME ASSESSEES. BUT HERE IS A CASE WHERE THE ASSES SEES ARE DIFFERENT AND IN THE HANDS OF THE ONE ASSESSEES THE ADDITIONS WERE DELETED BY THE APPELLATE AUTHORITIES AND THERE AFTER SOME NEW EVIDENCE WAS SURFACED ON THE BASIS OF WHICH IT WAS MADE KNOWN TO THE ASSESSING OFFICER THAT PARTICULAR INCOME BELONGS TO SOME OTHER PERSON. ON THE BASIS OF THAT INFORMATION, THE ASSESSMENT WAS REOPENED IN THE HANDS OF THE ASSESSEE FIRM IN WHOSE CASE THE ISSUE WAS NEVER EXAMINED BY THE A.O. THE JUDGEMENT REFERRED TO BY THE ASSESSEE IN THE CASE OF METRO AUTO CORPORATION V S. ITO (SUPRA) IS NOT RELEVANT TO THE PRESENT CONTROVERSY AS IT RELATE TO A ONE PARTICULAR ASSESSEE IN ITA 282/VIZ/2007 CITY WINES, VSKP 6 WHICH THE ASSESSMENT WAS TRIED TO BE REOPENED BY THE A.O. WHILE APPELLATE PROCEEDINGS WE RE PENDING. THEREFORE, NO ASSISTANCE CAN BE DRAWN FROM TH IS JUDG EMENT IN FAVOUR OF THE ASSESSEES. UNDER THE GIVEN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT A.O. HAS RIGHTLY REOPENED THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT. THE CIT(A) WHILE ADJUDICATING THE ISSUES HAS GONE ON WRONG F OOTING AND WE DO NOT SUBSCRIBE THE SAME. THE CIT(A) HAS NOT DECIDED THE APPEAL ON MERIT. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH THE DIRECTION TO ADJUDICATE THE ISSUE ON MERIT AFTER OFFERING A OPPORTUNITY O F BEING HEARD TO THE PARTIES. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29.11. 20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 29 TH NOVEMBER , 20 10 COPY TO 1 ITO WARD - 1(4), VISAKHAPATNAM 2 M/S. CITY WINES, D.NO.48 - 14 - 12/2, ASILMETTA JN., VISAKHAPATNAM 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 TH E DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM