Sri. K.U. Povaiah, Pollobetta V. ITO, Madikeri

ITA 311/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0278 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: K RAMGOPAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.311/BANG/2014 ASSESSMENT YEAR : 2006-07 SHRI K.U. POOVAIAH, M/S. ESCONDIDO TRADING & IMPEX INC., LAKSHMI ESTATE, POLLOBETTA 571 215. PAN: ABAPP 1185E VS. THE INCOME TAX OFFICER, WARD 1, MADIKERI. APPELLANT RESPONDENT APPELLANT BY : SHRI K. RAMGOPAL, ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 13.06.2016 DATE OF PRONOUNCEMENT : 15.07.2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 17.09.2013 OF THE CIT(APPEALS), MYSORE FOR THE ASSE SSMENT YEAR 2006-07. 2. THE ASSESSEE IS CARRYING ON THE BUSINESS IN TRAD ING OF SPICES/FLOWERS ETC. AND FILED HIS RETURN OF INCOME FOR THE AY 2006 -07 DECLARING AN INCOME OF RS.1,72,450. THE ASSESSING OFFICER IN THE SCRUT INY ASSESSMENT ORDER U/S. 143(3) OF THE ACT ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT ITA NO.311/BANG/2014 PAGE 2 OF 7 RS.10,27,750. AGGRIEVED BY THE ORDER OF THE AO, TH E ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS) AND ALSO RAISED ADDI TIONAL GROUNDS OF APPEAL. 3. THE CIT(APPEALS) CALLED FOR A REMAND REPORT FROM THE AO ON THE ASSESSEES SUBMISSIONS MADE BEFORE HIM. THE CIT(A) CONSIDERED THE REMAND REPORT OF THE AO AND THE FINAL WRITTEN SUBMI SSIONS OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE CIT(APPEALS) WITH RESPECT TO THE ISSUE OF U/ S. 143(2) OF THE ACT HELD THAT THE ASSESSEE SUBSTANTIALLY COMPLIED WITH ALL THE PROCEEDINGS SUBSEQUENTLY AND NEVER OBJECTED TO THE NOTICE, HENC E THE SAME CANNOT BE OBJECTED. RELIANCE WAS PLACED ON THE DECISION OF T HE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. C. PALANIAPPAN, 241 CTR 207. 5. ON MERITS, THE CIT(APPEALS) NOTED THAT THE ASSES SEE PRODUCED CERTAIN BOOKS FROM WHICH THE AO NOTICED CERTAIN DEF ECTS, WHICH THE ASSESSEE TRIED TO CORRECT AND PRODUCED ANOTHER SET OF BOOKS ON THE PLEA THAT THE EARLIER SET OF BOOKS WERE ROUGH ONES AND T HE SECOND SET WERE THE FINAL ONES. THE ASSESSEE CONTENDED BEFORE CIT(A) THAT THE EARLIER SET WAS NOT HIS VERSION AND WAS SUBMITTED BY SOME UNAUTHORI ZED PERSON, THEREBY TAKING A TOTALLY DIFFERENT VERSION BEFORE THE CIT(A ). THE CIT(A) WAS OF THE VIEW THAT THE AO CLEARLY ANALYSED AND POINTED OUT T HE DEFICIT CASH, WHICH THE ASSESSEE TRIED TO MATCH IT WITH CERTAIN CASH RE CEIPTS PRIOR TO THE DATES OF CASH DEFICIT WHICH HE FAILED TO PROVE. THE CIT(A) NOTED THAT EVEN DURING ITA NO.311/BANG/2014 PAGE 3 OF 7 THE PROCEEDINGS BEFORE HIM, THE ASSESSEE COULD NOT ESTABLISH ANYTHING CREDIBLY REGARDING THE DISCREPANCIES NOTICED BY THE AO. THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCES IN ACCOUNTS AND ALSO THE DEFICIT CASH POINTED OUT BY THE AO. 6. THE CIT(A) FOUND NO MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND CONCLUDED THAT THE ACTION OF THE AO WAS WELL JUSTIF IED AND WAS ELABORATELY EXPLAINED IN THE REMAND REPORTS AS WELL. THUS, THE ORDER OF THE AO WAS CONFIRMED. 7. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE CONCISE GROUNDS OF APPEA L AS FOLLOWS:- 1. THE LEARNED COMMISSIONER (APPEALS) ON FACTS, AN D IN LAW ERRED IN RECTIFYING THE CONTENTION OF THE APPELLANT THAT THE ORDER OF THE ASSESSMENT WAS ILLEGAL, AND LIABLE TO BE QUASHE D FOR THE REASONS THAT THE NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, WAS NOT SERVED ON THE APPELLANT WITHIN THE TIM E PRESCRIBED. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLD ING THAT AFTER PASSING THE ORDER OF ASSESSMENT THE LEGAL ISS UE OF SERVICE OF NOTICE, RAISED BY THE APPELLANT DOES NOT HAVE MUCH STRENGTH RELAYING ON THE DECISION OF THE MADRAS HIGH COURT I N CIT V. C PALLANIYAPPAN 241 CTR 207, WHICH IS DISTINGUISHABLE ON FACTS AND WHO'S RATIO IS NOT APPLICABLE TO THE CASE OF TH E APPELLANT. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE CONTENTION MADE BY THE APPELLANT TO THE EFFECT THAT ORDER OF THE ASSESSMENT PASSED BY THE ASSESSIN G OFFICER, WAS ILLEGAL AND LIABLE TO BE QUASHED AS THE ASSESSING O FFICER SELECTED THE CASE OF THE APPELLANT FOR SCRUTINY DISREGARDING THE INSTRUCTIONS ISSUED BY THE CBDT FOR SELECTION OF THE CASE SCRUTI NY ASSESSMENTS. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE CONTENTION OF THE APPELLANT THAT TH E ALLEGED ROUGH ITA NO.311/BANG/2014 PAGE 4 OF 7 CASH BOOK PRODUCED BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT BEFORE THE ASSESSING OFFICER ON 7-10-2008 BASED ON WHICH THE ASSESSING OFFICER WORKED OUT THE ALLEGED PEAK DEFICIT OF CASH BALANCE OF RS. 7,94,804/- DID NOT CONTAIN ALL THE 132 ENTRIES LISTED BY THE ASSESSING OFFICER AT PAGE NO.2 OF THE ORDER OF ASSESSMENT. 5. THE LEARNED COMMISSIONER (APPEALS) ON FACTS AND IN LAW, ERRED IN UPHOLDING THE ADDITION OF RS. 7,94,804/- M ADE BY THE ASSESSING OFFICER UNDER SECTION 69C WITHOUT CONSIDE RING THE DETAILS RETURN SUBMISSIONS MADE BY THE APPELLANT BE FORE HIM. 6. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE CONSIDER THE AUDITED BOOKS OF ACCOUNTS WHICH IS OTH ERWISE, CERTIFIED BY THE CHARTERED ACCOUNTANT UNDER SECTION 44 AB OF THE INCOME TAX ACT, PRODUCED BEFORE HIM AND ALSO BEFORE THE ASSESSING OFFICER ON 11-11-2008 AND ACCORDINGLY, OU GHT TO HAVE GIVEN FINDINGS THAT THERE WAS NO DEFICIT CASH IN TH E SAID CASH BOOK AND AS A COROLLARY , DELETED THE ADDITION OF RS.7,9 4,804/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69C. 7. THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHO LDING THE ADDITION OF RS. 54,497/- MADE BY THE ASSESSING OFFICER TOWARDS BOGUS CREDITOR IN THE CASE OF SAGAR TRADERS . MERELY, FOR THE REASON THAT THE APPELLANT DID NOT FURNISHED CON FIRMATION LETTER FROM THE CREDITOR AND THE CREDITOR DID NOT RESPOND TO THE LETTER SENT BY THE ASSESSING OFFICER. 8. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE ACCEPTED THE CONTENTION OF THE APPELLANT THE ORDER THE OF ASSESSMENT PASSED BY THE ASSESSING OFFICER WITHOUT FOLLOWING PRINCIPALS OF THE NATURAL JUSTICE WAS BAD IN LAW AN D ACCORDINGLY, OUGHT TO HAVE QUASHED THE IMPUGNED ORDER OF THE ASS ESSMENT IN THE BEST INTEREST OF JUSTICE AND EQUITY. 9. THE LEARNED COMMISSIONER OF (APPEALS) ERRED FOR NOT CONSIDERING THE RECONCILIATION STATEMENTS OF DEBTOR S BY NAME TAJ CORMANDEL - CHENNAI, TAJ SATS AIR CATERING LTD.MUMB AI. 8. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AO CLAIMED THAT ON RECEIPT OF NOTICE U/S. 143(2) DATED 25.06.2007, THE ITA NO.311/BANG/2014 PAGE 5 OF 7 ASSESSEE HAD SOUGHT FOR AN ADJOURNMENT BY LETTER DA TED 5.7.2007. THE ASSESSEE ON VERIFICATION OF THE SAID LETTER SUBMITT ED THAT THE SIGNATURE FOUND IN THE SAID ADJOURNMENT LETTER IS NOT THAT OF HIS AUTHORIZED CA. IT WAS ALSO STATED THAT THE SAID LETTER IS NOT TYPED IN TH E LETTERHEAD OF THE ASSESSEE NOR FROM THE OFFICE OF HIS CA AND HENCE IT IS A FAB RICATED ONE. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSMENT IS BARRED BY TIME AS THE AO FAILED TO ISSUE NOTICE WELL WITHIN ONE YEAR FROM THE DATE OF FILING THE RETURN FOR THE AY 2006-07. HE SUBMITTED THAT THE AO ISSUED NOTICE U/S. 143(2) ONLY ON 29.7.2008 AFTER A LAPSE OF ONE YEAR AND THEREFORE THE ENTIRE ASSESSMENT IS BARRED BY LIMITATION AND THEREFORE IL LEGAL. IT WAS ALSO SUBMITTED THAT THE RELIANCE PLACED UPON BY THE CIT( A) ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF C. PALANIAPPAN (SUPRA) WAS DISTINGUISHABLE ON FACTS AND NOT APPLICABLE TO THE ASSESSEES CASE. 9. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE AO HAD PASSED THE IMPUGNED ORDER WITHOUT GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE CIT(APPEALS) MERELY F OLLOWED THE ORDER OF THE AO. IN THESE CIRCUMSTANCES, IT WAS PRAYED THA T AN OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE TO PRESENT ITS CASE BEFORE THE AO TO ESTABLISH THAT THE ISSUE OF NOTICE U/S. 143(2) WAS NOT SERVED ON T HE ASSESSEE WITHIN THE TIME PRESCRIBED AND ALSO THAT THE AO HAS NOT SELECT ED THE CASE FOR SCRUTINY FOR THE AY 2006-07 ACCORDING TO THE BOARD INSTRUCTI ONS AND NOT FOLLOWED THE DUE PROCEDURE OF THE BOARD GUIDELINES. THE AO BEFO RE TAKING UP THE CASE FOR SCRUTINY HAD NOT TAKEN PRIOR PERMISSION FROM TH E CCIT/DGIT, HENCE THE ITA NO.311/BANG/2014 PAGE 6 OF 7 AO HAD EXCEEDED HIS JURISDICTION TO PASS THE ASSESS MENT U/S. 143(3) OF THE ACT WHICH IS ILLEGAL AND IN VIOLATION OF THE PROVI SIONS OF THE I.T. ACT. 10. APART FROM THE JURISDICTIONAL ASPECT, THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(APPEALS) ON MERITS. 11. THE LD. DR RELIED ON THE ORDER OF THE LOWER AUT HORITIES. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE DEEM IT FIT TO SET ASIDE THE ORDER OF THE CIT(APPEALS) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE AO IS ACCORDINGLY DIRECTED TO VERIFY THE ISSUE OF SERVICE OF NOTICE U/S. 143(2) OF THE ACT ON THE ASS ESSEE AND ALSO WHETHER DUE PROCEDURE HAS BEEN FOLLOWED IN OBTAINING PRIOR PERMISSION FROM THE CCIT FOR TAKING UP THE SCRUTINY ASSESSMENT. THE AO SHALL DECIDE THE ISSUES AFRESH ON THE ABOVE ISSUES AND ON MERITS IN ACCORDANCE WITH LAW, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. 13. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JULY, 2016. SD/- (ASHA VIJAYARAGHAVAN ) JUDICIAL MEMBER BANGALORE, DATED, THE 15 TH JULY, 2016. /D S/ ITA NO.311/BANG/2014 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.