K. Ranga Rao, Secunderabad, Hyderabad V. DCIT, Circle-2(1), Hyderabad, Hyderabad

ITA 299/HYD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6731 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 10-09-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J PRABHAKAR ANAND
• Assessee Lawyers: SHRIA V RAGHURAM
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Set aside
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NO. 299/HYD/2017 ASSESSMENT YEAR: 2008-09 SHRI K.RANGA RAO, SECUNDERABAD [PAN: AGGPK4226L] VS DCIT, CIRCLE-2(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRIA.V.RAGHURAM, AR FOR REVENUE : SHRI D.J.PRABHAKAR ANAND, DR DATE OF HEARING : 10-09-2020 DATE OF PRONOUNCEMENT : 11-09-2020 O R D E R PER D.S. SUNDER SINGH, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-10, HYDERABAD, DATED 30-09-2016. 2. GROUND NOS.1 AND 6 ARE GENERAL IN NATURE, HENCE D OES NOT REQUIRE SPECIFIC ADJUDICATION. 3. DURING THE APPEAL HEARING, LD.AR DID NOT PRESS GRO UND NO.5. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO.2 IS RELATED TO CHALLENGING THE VALIDITY OF INITIATION OF PROCEEDINGS U/S.147 OF THE INCOME TAX A CT [ACT]. ITA NO. 299/HYD/2017 :- 2 -: 5. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE FILED THE RETURN OF INCOME, DECLARING TOTAL INCOME OF RS.1,95,16 ,925/- ON 12-09-2008. THE ASSESSMENT WAS COMPLETED U/S.143( 3) OF THE ACT ON THE TOTAL INCOME OF RS.2,05,29,512/-. SUBSEQU ENTLY, THE AO RE-OPENED THE ASSESSMENT FOR THE REASON OF ESCA PEMENT OF INCOME WITH REGARD TO THE INTEREST RECEIPT OF RS.34,5 5,684/-. THE AO OBSERVED THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S 143(3) DATED 31-12-2010 THE AO MADE THE ADDITION OF RS.7,99,567/-, AS AGAINST THE SUM OF RS. 34,55,684/- AND THE DIFFERENCE BETWEEN THE AMOUNT OF RS.34,55,684/- AND 7,99,567/- AMOUNTING TO RS.26,56,117/-, HAD ESCAPED TH E ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, AS PER REASONING, GIVEN BY THE AO IN PARA 2 OF THE ASSES SMENT ORDER, FRAMED U/S.143(3) R.W.S.147 OF THE ACT, DT.21-0 3-2014. 6. ASSAILING THE VALIDITY OF THE ISSUE OF RE-OPENING THE ASSESSMENT, THE LD.AR SUBMITTED THAT THE ISSUE WITH REGARD TO INTEREST RECEIPTS OF RS.34,55,684/- WAS CONSIDERED BY THE AO IN THE ORIGINAL ASSESSMENT MADE U/S.143(3) OF THE AC T, DT.31- 12-2010 AND CONCLUDED THE ASSESSMENT, AFTER HAVING SA TISFIED THAT THE ONLY NET RECEIPTS ARE REQUIRED TO BE BROUGHT TO TAX . 6.1. AT THE TIME OF HEARING, LD.AR TAKING OUR ATTENTION TO PG.2 OF THE ASSESSMENT ORDER, STATED THAT THE AO CONSIDERE D THE ISSUE IN DETAIL AND MADE THE ADDITION OF RS.7,99,56 7/-, AFTER NETTING-OF THE INTEREST RECEIVED AND INTEREST PAID BY THE ASSESSEE, SINCE, BOTH THE RECEIPTS REPRESENTS THE BUSIN ESS TRANSACTIONS. THEREFORE ARGUED THAT THE RE-OPENING OF ASSESSMENT ON THE SAME ISSUE WHICH WAS ALREADY EXAMIN ED BY THE AO CONSTITUTES DIFFERENCE OF OPINION AND THE AO IS NOT ITA NO. 299/HYD/2017 :- 3 -: PERMITTED TO INITIATE PROCEEDINGS U/S.147 OF THE ACT ON DIFFERENCE OF OPINION. HENCE, THE LD.A.R REQUESTED TO SET ASIDE THE ORDERS OF THE LD.CIT(A) AND QUASH THE NOTICE ISS UED. 7. ON THE OTHER HAND, LD.DR VEHEMENTLY OPPOSED THE ARGUMENTS OF THE AR AND ARGUED THAT THE AO HAS RIGHTLY REOPENED THE ASSESSMENT HAVING REASON TO BELIEVE THAT IN COME HAD ESCAPED ASSESSMENT AND HENCE, SUBMITTED THAT NO INTERFERENCE IS CALLED FOR WITH REGARD TO ISSUE OF NO TICE. 8. WE HAVE HEARD BOTH THE PARTIES THROUGH VIDEO CONFERE NCE AND GONE THROUGH THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S.143(3) OF THE ACT ON 31-12-2010 AND THE AO HAD EXAMINED THE ISSUE IN D ETAIL AND CONSIDERED THE SUM OF RS.7,99,567/- FOR TAX. AT PG.2 OF THE ASSESSMENT ORDER, THE AO VERIFIED THE PROFIT & LOSS A/C AND SUMMARIZED THE BANK INTEREST AT RS.12,04,820/-, W HICH WAS DEBITED TO THE PROFIT & LOSS A/C. FOR THE SAKE OF CL ARITY AND CONVENIENCE, WE EXTRACT PAGE NO.2 OF THE AO DATED 3 1-12- 2010, WHICH READS AS UNDER: ON VERIFICATION OF PROFIT AND LOSS ACCOUNT FILED AL ONG WITH RETURN OF INCOME IT IS OBSERVED THAT NET BANK INTEREST PAID A MOUNTING TO RS.12,04,820/- WAS DEBITED TO PROFIT AND LOSS ACCOU NT BREAK UP OF WHICH IS AS FOLLOWS. RS. INTEREST EARNED ON DEPOSIT OTHER BANKS 33,24,031 INTEREST EARNED ON MCF 1,31,653 TOTAL INTEREST EARNED 34,55,684 INTEREST PAID ON LOANS 31,40,195 INTEREST ON ICICI BANK LOAN 15,20,309 TOTAL INTEREST PAID 46,60,504 NET BANK INTEREST PAID: RS.12,04,820/- ITA NO. 299/HYD/2017 :- 4 -: 8.1. IN PG.4 OF THE ASSESSMENT ORDER, THE AO, AFTER VER IFYING THE DETAILS, BROUGHT TO TAX THE SUM OF RS.7,99,567/-. FO R THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARAS 2 & 3 AT PG.4 OF THE ASSESSMENT ORDER, WHICH READS AS UNDER: ON VERIFICATION OF THE INFORMATION SUBMITTED BY TH E ASSESSEE IT IS OBSERVED THAT OUT OF THE INTEREST AMOUNT OF RS.33,2 4,031/- EARNED AN AMOUNT OF RS.26,56,117/- IS EARNED FROM THE FIXED D EPOSITS SOURCED FROM OCC LIMITS. THE REMAINING BALANCE INTEREST OF RS.6,67,914/- AND INTEREST EARNED ON MCF HAS NO NEXUS WITH THE FU NDS BORROWED. IN VIEW OF THE ABOVE, INTEREST INCOME OF RS.6,67,91 4/- AND RS.1,31,653/- TOTALLING TO RS.7,99,567/- IS TREATED AS INCOME FROM OTHER SOURCES. REMAINING INTEREST INCOME IS ALLOWE D TO NET OFF INTEREST PAID. THUS, IT IS CLEAR THAT THE AO MADE THE ADDITION OF RS.7,99,567/- AFTER BEING SATISFIED THAT INCOME REQUIRE D TO BE BROUGHT TO TAX ONLY THE SUM OF RS. 7,99,567/- BUT NOT THE ENTIRE AMOUNT OF RS. 34,55,684/- 8.2. THE AO RE-OPENED THE ASSESSMENT, BY ISSUING A NO TICE U/S.148 OF THE ACT ON THE SAME ISSUE OF INTEREST RECEIP TS OF RS.34,55,684/-. THE SAME IS EVIDENT FROM PG.2 OF THE ORDER U/S.143(3) R.W.S 147, WHICH READS AS UNDER: 2. LATER IT IS BROUGHT TO THE NOTICE THAT THE ASSE SSEE DERIVED INTEREST INCOME TO THE TUNE OF RS.33,24,031 AND REDUCED AN A MOUNT OF RS.46,60,504 AS INTEREST PAID ON THE LOANS TAKEN AN D THE NET INTEREST PAID OF RS.12,04,820 WAS CLAIMED AS EXPENDITURE ON THE DEBIT SIDE OF THE P&L A/ C. SINCE THE INCOME FROM BUSINESS HAS BE EN COMPUTED ON ESTIMATION BASIS, THE INTEREST RECEIPTS OF RS.34,55 ,684 NEEDS TO BE BROUGHT TO TAX. HOWEVER IN THE ASSESSMENT ORDER U/S 143(3), THE AO HAD ALREADY CONSIDERED AN AMOUNT OF RS.7,99,567/-, THE DIFFERENCE AMOUNT OF RS.26,56,117 (RS.34,55,684 - RS.7,99,567) ESCAPED ASSESSMENT WITHIN MEANING OF PROVISIONS OF SEC.147 OF I.T.ACT AND THE SAME NEEDS BROUGHT TO TAX. ACCORDINGLY A NOTICE U/S.148 DT.11.01.2013 WAS ISSUED AND SERVED ON THE ASSESSEE . ITA NO. 299/HYD/2017 :- 5 -: 8.3. FROM THE ORIGINAL ASSESSMENT ORDER DT.31-12-2010, WE FIND THAT THE ISSUE HAD BEEN EXAMINED BY THE AO IN DETA IL AND HAS TAKEN A CONSCIOUS DECISION TO TAX THE SUM OF RS.7,99,567/- AGAINST DEBIT OF RS.12,04,820/-, AFTER N ETTING-OF THE INTEREST EARNED AND INTEREST PAID BY THE ASSESSEE. TH E AO ALSO HAS GIVEN A FINDING IN THE ORIGINAL ASSESSMENT THAT THE INTEREST REQUIRED TO BE BROUGHT TO TAX UNDER OTHER SOUR CES WAS ONLY RS.7,99,567/- BUT NOT RS. 34,55,684/-. THE PRESE NT AO RE-OPENED THE ASSESSMENT FOR THE SAME ISSUE, WHICH WAS ALREADY CONSIDERED BY THE ERSTWHILE AO. SINCE THE AO HAS TAKEN A CONSCIOUS DECISION, AFTER EXAMINING THE COMPL ETE DETAILS, RE-OPENING OF ASSESSMENT ON THE SAME ISSUE AM OUNTS TO DIFFERENCE OF OPINION AND THE AO IS NOT PERMITTED TO INITIATE THE RE-ASSESSMENT PROCEEDINGS U/S.147 OF THE ACT ON DI FFERENCE OF OPINION. THEREFORE, THE NOTICE ISSUED U/S.148 OF TH E ACT IS BAD IN LAW AND THE SAME IS QUASHED. SINCE THE ISSUE OF NOTICE U/S.148 IS QUASHED, WE CONSIDER IT IS NOT NECESSARY TO ADJUDICATE THE OTHER GROUNDS, RAISED BY THE ASSESSEE I N THIS APPEAL. ACCORDINGLY, THE APPEAL OF ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER,2020 SD/- SD/- (P.MADHAVI DEVI) (D.S.SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED: 11-09-2020 TNMM ITA NO. 299/HYD/2017 :- 6 -: COPY TO : 1.SRI K.RANGA RAO, C/O.K.VASANT KUMAR, A.V.RAGHU RA M, P.VINOD&M.NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2.THE DCIT, CIRCLE-2(1), HYDERABAD. 3. CIT(APPEALS)-10, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.