Parivel Rathnaswamy, CHENNAI V. ITO, CHENNAI

ITA 3260/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7353 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 21-02-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2016
• Court: TRIBUNAL
• Department Lawyers: M GOPIKRISHNA JT CI T
• Assessee Lawyers: K S B ALAKRISHNAN
• Section: 143(3)

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B/SMC, CHENNAI , ! ' # BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.3260/MDS/2016 $ % &'% / ASSESSMENT YEAR : 2013-14 PARIVEL RATHNASWAMY, 3/505, RAJA STREET, KOTTIVAKKAM, CHENNAI 600 041. [PAN: AVMPR 5246A] ( () /APPELLANT) VS. INCOME TAX OFFICER, NON-CORPORATE WARD-17(3), 121, M.G.ROAD, CHENNAI 600 034. ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI K.S. BALAKRISHNAN, ADV OCATE *+() , - /RESPONDENT BY : SHRI M.GOPIKRISHNA, JT. CI T . & , / /DATE OF HEARING : 21.02.2017 0' , / /DATE OF PRONOUNCEMENT : 31.03.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINS T THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI (C IT(A) FOR SHORT) DATED 17.10.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 24.02.2015 FOR ASSESSMENT YEAR (AY) 2013-14. 2. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSE SSEES COUNSEL, THAT PER THE 2 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO INSTANT APPEAL THE CHALLENGE IS TO THE LEGAL COMPET ENCE OF THE ASSESSING OFFICER (AO) TO SCRUTINIZE THE ASSESSEES RETURN OF INCOME, FILED ON 29.07.2013. THE ASSESSEE, HE WOULD CONTINUE, IS A 24 YEAR SALARIED PERSON, SO THAT SALARY CONSTITUTES HIS PRINCIPAL SOURCE OF INCOME. HE WAS ACCORDINGLY SURPRISED TO RECEIVE A NOTICE U/S. 143(2) DATED 03.9.2014 (FOR T HE RELEVANT YEAR) FOR 25.9.2014. THE HEARING WAS HOWEVER ADJOURNED TO 16. 01.2015, WHEREAT THE ASSESSEE WAS REQUIRED TO ATTEND ON 06.02.2015, FURN ISHING ALONG WITH A LIST OF REQUISITIONS (VIDE LETTER DATED 16.1.2015). PARA 6 OF THE SAID LETTER REQUIRED THE ASSESSEE TO SHOW THE SOURCE OF THE PURCHASE OF A PR OPERTY REFLECTED IN THE AIR ALONG WITH THE EVIDENCE. COPY OF AN AIR TRANSACTION REPORT, BEARING THE ASSESSEES NAME (AS THE SECOND PARTY) IN RESPECT OF A PURCHASE TRANSACTION OF AN IMMOVABLE PROPERTY, WAS ALSO GIVEN THEREAT. THE ASS ESSEE VIDE LETTER DATED 06.02.2015 FURNISHED THE REQUIRED INFORMATION AND, FURTHER, VIDE LETTER DATED 17.02.2015 CLARIFIED THAT HIS NAME IS INCLUDED IN T HE SALE DEED ONLY AS A GENERAL POWER OF ATTORNEY OF HIS BROTHER MR. GOUTHAM RATHNA SWAMY, A NON RESIDENT, FURNISHING ALONG WITH THE COPY OF THE SALE DEED (PB PAGES 57-77). TOWARD THIS, HE WOULD TAKE ME TO PAGE 2 OF THE SALE DEED, CLEARL Y STATING THE ASSESSEE AS REPRESENTING HIS BROTHER AS HIS POWER OF ATTORNEY. THE AIR TRANSACTION DETAILS (COPY ON RECORD) SHOWING THE ASSESSEE AS A PARTY TO THE TRANSACTION (AS SECOND PARTY) IS THUS CLEARLY WRONG. THE PROCEEDINGS U/S. 143(2), INITIATED ON THIS BASIS, OUGHT TO HAVE BEEN DROPPED AT THIS STAGE IN-AS-MUCH AS THE ASSESSEES RETURN WAS SELECTED FOR BEING SUBJECT TO THE VERIFICATION PROC EDURE UNDER THE ACT ONLY ON THE BASIS OF THE AIR INFORMATION, DRAWING MY ATTENTION TO THE NOTICE U/S. 143(2), WHICH BEARS THE CAPTION SELECTED UNDER COMPUTER AS SISTED SCRUTINY SELECTION (CASS). THIS IS AS THE INSTRUCTION (F.NO.225/26/ 20 06-ITA.II(PT)) DATED 08.9.2010 ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES (CBDT) STATES THAT THE SCOPE OF INQUIRY IN SCRUTINY CASES SELECTED ON THE BASIS OF AIR RETURNS WOULD BE LIMITED ONLY TO THE ASPECTS OF THE INFORMATION RECE IVED THROUGH THE AIR. AND 3 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO FURTHER, THAT A WIDER SCRUTINY OF THE RETURNS COULD BE ONLY WITH THE APPROVAL OF THE ADMINISTRATIVE COMMISSIONER, I.E., WHERE IT IS FELT THAT APART FROM AIR INFORMATION THERE IS A POTENTIAL ESCAPEMENT OF INCO ME OF MORE THAN . 10 LACS (PB PG. 21). AS SUCH, NOT ONLY THE CONTINUATION OF PROCEEDINGS AFTER THE FURNISHING OF THE REPLY, EXPLAINING THE POSITION VI DE LETTER 17.02.2015 (COPY ON RECORD), IS BAD IN LAW, THE AO COULD NOT HAVE VENTU RED TO EXAMINE OTHER ASPECTS OF THE MATTER, MAKING ADDITIONS AT AN AGGREGATE OF . 2.03 LACS UNDER THE HEADS OF INCOME SALARY AND INCOME FROM HIS PROPERTY. ON BEING ASKED IF HE HAD ANYTHING TO SAY ON THE MERITS OF THE TWO ADJUSTMENT S (TO HIS RETURNED INCOME), HE WOULD SUBMIT THAT THE CHALLENGE IS ONLY TO THE JURI SDICTIONAL ISSUE, I.E., OF THE COMPETENCE OF THE AO TO HAVE, FIRSTLY, ISSUED THE N OTICE U/S. 143(2), AND THEREAFTER, OF CONTINUING WITH THE SAID PROCEEDINGS AFTER IT WAS SHOWN THAT THE ASSESSEE WAS NOT A PARTY TO THE IMPUGNED TRANSACTIO N, AND HIS NAME HAD BEEN ENTERED IN THE SALE AGREEMENT ONLY AS A REPRESENTAT IVE OF THE SELLER/VENDOR, A NON RESIDENT, AS HIS ATTORNEY, FURNISHING HIS PAN. INST RUCTIONS BY THE BOARD ARE, AS IS WELL SETTLED, BINDING ON THE ASSESSING OFFICERS, WI TH THE TRIBUNAL ALSO TAKING SUCH A VIEW IN RESPECT OF INSTRUCTIONS WITH REGARD TO THE SELECTION AND SCOPE OF INQUIRY OF RETURN FOR VERIFICATION PURPOSES UNDER T HE ACT. THE LD. DR WOULD SUBMIT THAT THE INFERENCE THAT T HE ASSESSEES CASE WAS REOPENED ON THE BASIS OF AIR INFORMATION IS ONLY A SURMISE, NOT SUPPORTED BY ANY MATERIAL ON RECORD. IN FACT, IF THAT WERE THE CASE, THE NOTICE U/S. 143(2) DATED 03.9.2014 WOULD BE STAMPED AS AIR CASE, AS STATED AT PARA 5 OF THE INSTRUCTION DATED 08.9.2010 (SUPRA), WHICH IS NOT SO. MERELY BE CAUSE THERE IS AN AIR INFORMATION IN THE ASSESSEES CASE DOES NOT MEAN TH AT IT BECOMES AN AIR CASE, I.E., IS ONLY ON THAT BASIS. THE SAID INSTRUCTION I S THUS NOT APPLICABLE IN THE INSTANT CASE. 4 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO THE LD. AR WOULD, IN REJOINDER, STATE THAT WHY SHO ULD IN THAT CASE THE ASSESSEE BE SUPPLIED THE AIR TRANSACTION SUMMARY ON 06.01.2015, I.E., ALONG WITH OTHER REQUISITIONS OF EVEN DATE. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE CBDT HAS U/S. 119(2)(A) THE POWER TO ISSUE DIR ECTIONS OR INSTRUCTIONS TO THE INCOME TAX AUTHORITIES (NOT PREJUDICIAL TO T HE ASSESSEE) FOR THE PURPOSE OF PROPER AND EFFICIENT MANAGEMENT OF THE WORK OF ASSE SSMENT AND COLLECTION OF THE REVENUE AS TO THE GUIDELINES, PRINCIPLES OR PRO CEDURES TO BE FOLLOWED BY THEM IN THE WORK RELATING TO ASSESSMENT OR COLLECTION OF REVENUE, AND WHICH MAY BE EITHER BY WAY OF RELAXATION OF ANY OF THE PROVISION S SPECIFIED THEREIN, WHICH INCLUDES S. 143, OR OTHERWISE. THE INSTRUCTION DATE D 08.09.2010 SUPRA WOULD THEREFORE BE BINDING ON THE AO, AN INCOME TAX AUTHO RITY UNDER 116 OF THE ACT. THE ASSESSEE CLAIMS VIOLATION THEREOF, ASSAILING TH E ENSUING ASSESSMENT PROCEEDINGS ON THAT SCORE. SURELY, THE ASSESSEE EXT ENDING COOPERATION IN THE SAID PROCEEDINGS AND FURNISHING INFORMATION ON OTHER ASP ECTS OF HIS RETURN, AS REQUIRED BY THE AO, WOULD NOT GO AGAINST HIM; RATHE R, SPEAKS WELL OF HIM, OR DETRACT FROM HIS CASE OF QUESTIONING THE LEGAL BASI S OF THE NOTICE U/S. 143(2) IN VIEW OF THE INSTRUCTION AFORE-REFERRED. THIS IS AS ONCE THE ASSESSEE HAS CLARIFIED THAT HE IS A POWER OF ATTORNEY HOLDER OF HIS BROTHE R, FURNISHING THE LATTERS PAN, HIS BROTHER COULD BE ASSESSED IN RESPECT OF THE TRA NSACTION REPORTED IN THE AIR TRANSACTION SUMMARY. THE MOOT QUESTION, THEREFORE, IS IF THE ASSESSEES CASE IS INDEED AN AIR CASE, I.E., SELECTED ON THE BASIS OF INFORMATION RECEIVED THROUGH THE AIR RETURN. I FIND CLEAR MATERIAL ON RECORD TO SUPPORT THIS CLA IM . SELECTION UNDER CASS IS ON THE BASIS OF VARIOUS CRITERIA LIST ED FOR SELECTION OF RETURNS OF INCOME FOR SCRUTINY UNDER THE ACT, INCLUDING THIRD PARTY INFORMATION (I.E., INFORMATION FROM A PARTY WHO IS NOT A PARTY TO THE TRANSACTION, AS, FOR EXAMPLE, A REGISTERING AUTHORITY). IT IS THIS INFORMATION, WHI CH A THIRD PARTY IS STATUTORILY OBLIGED TO GIVE TO THE REVENUE ON AN ANNUAL BASIS, THAT IS CALLED THE AIR 5 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO INFORMATION, AND THE PRESCRIBED FORM FOR THE SAME AS THE AIR RETURN. IN OTHER WORDS, AN AIR CASE, I.E., A RETURN OF INCOME SELECT ED FOR SCRUTINY ON THE BASIS OF AIR INFORMATION, IS ONLY A SUB SET OF THE CASES SEL ECTED ON CASS BASIS. THIS IS CONFIRMED BY INSTRUCTION NO.7/2014 (F.NO.225/229/20 14/ITA.II) DATED 26.9.2014 ISSUED BY THE CBDT. IT IS MADE ABUNDANTLY CLEAR THEREIN THAT THE SELECTION UNDER CASS IS ONLY ON THE BASIS OF EITHER AIR DATA OR CASS INFORMATION OR FOR NON RECONCILIATION OF 26AS DATA, AND THAT THE SCOPE OF INQUIRY IN SUCH A CASE SHOULD BE LIMITED TO VERIFICATION OF THOSE ASPECTS/ISSUES ONLY. FURTHER, THAT SUCH NOTICE WOULD BE ISSUED TO THE TA X PAYER WITH THE REMARK SELECTED UNDER COMPUTER ASSISTED SCRUTINY SELECTIO N (CASS) (PARAS 2, 3 OF THE INSTRUCTION), AS INDEED STANDS NOTIFIED PER THE NOT ICE U/S. 143(2) UNDER REFERENCE. FURTHER, A WIDER SCRUTINY OF THE RETURN, I.E., ON ASPECTS OTHER THAN FOR WHICH IT WAS SELECTED FOR EXAMINATION, SHALL BE SUBJECT TO T HE APPROVAL BY THE HIGHER AUTHORITIES, IN WRITING, WHERE THE INCOME ESCAPING ASSESSMENT INVOLVED IS IN EXCESS OF .10 LACS ( . 5 LACS FOR NON METRO CHARGES) (PARA 4). THOUGH THE INSTRUCTION DATED 26.9.2014 IS AFTER THE DATE OF TH E NOTICE U/S. 143(2) IN THE INSTANT CASE (03/9/2014), THE SAME IN FACT REITERAT ES WHAT INSTRUCTION DATED 08.9.2010 STATES, SO THAT THERE IS NO MATERIAL DIFF ERENCE BETWEEN THE TWO. IN FACT, THE VERIFICATION COMMENCED ONLY AFTER 26.9.2014, WI TH THE ASSESSEE BEING SUPPLIED WITH THE REQUISITIONS ONLY ON 16.01.2015. THE NON-STAMPING OF THE NOTICE AS AN AIR CASE, OR THE AO CALLING FOR INFORM ATION ON OTHER ASPECTS, WHICH IS THUS IN VIOLATION OF THE GUIDELINES, WOULD BE OF NO MOMENT INASMUCH AS THE REVENUE CANNOT TAKE ADVANTAGE OF ITS OWN WRONG. T HE SAME WOULD NOT IN ANY CASE IMPART LEGITIMACY TO THE PROCEEDINGS. THE NEXT QUESTION IS THE VALIDITY OR OTHERWISE OF THE IMPUGNED NOTICE U/S. 143(2). THE SAME IN MY VIEW WOULD CRITICALLY DEPEND UPON THE ESTABLISHMENT OR OTHERWISE OF THE FACT AS TO WHETHER IT IS AN AIR CA SE, I.E., THE NOTICE ISSUED ON THE BASIS OF AIR DATA. IN MY CONSIDERED VIEW, THE NOTIC E UNDER REFERENCE HAVING 6 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO BEEN ISSUED ONLY ON THE BASIS OF AIR INFORMATION, I T IS CLEARLY A AIR CASE. SURE, THE ASSESSEE IS NOT A PARTY TO THE TRANSACTION IN H IS PERSONAL CAPACITY, BUT IT NEEDS TO BE APPRECIATED THAT AT THE TIME OF ISSUE OF NOTI CE IT IS THE INFORMATION RECEIVED THROUGH THE AIR RETURN/S THAT IS RELEVANT, AND THER E IS NO SCOPE EITHER FOR ITS VERIFICATION OR VETTING OR EXPLANATION AT THAT STAG E. IN FACT, IT MAY WELL BE THAT THE ASSESSEE, WHO REPRESENTS THE FIRST PARTY, IS LIABLE TO BE ASSESSED IN HIS REPRESENTATIVE CAPACITY, TREATING HIM AS AN AGENT O F THE NON-RESIDENT PRINCIPAL U/S. 163 OF THE ACT. THE JURISDICTIONAL FACT OF T HE NOTICE BEING IN RESPECT OF AN AIR CASE STANDS ESTABLISHED, AND ITS LEGALITY THERE FORE CANNOT BE QUESTIONED. THE NEXT QUESTION IS IF THE ASSESSEE HAVING FURNIS HED THE PAN OF HIS BROTHER, CLARIFYING HIS ROLE TO BE NO MORE THAN HIS REPRESENTATIVE, THE PARTY OF THE FIRST PART IN THE SALE DEED, WHICH IS THE SUBJECT M ATTER OF AIR INFORMATION, OUGHT THE AO TO HAVE DROPPED THE PROCEEDINGS. THAT IS, IS THE AO OBLIGED TO DO SO. I FIND NO LEGAL MANDATE FOR THE SAME. RATHER, S. 119 (1)(A) CLEARLY PLACES A RESTRICTION ON THE POWER OF THE BOARD TO ISSUE ANY ORDERS, INSTRUCTIONS OR DIRECTIONS REQUIRING ANY INCOME TAX AUTHORITY TO MA KE A PARTICULAR ASSESSMENT OR TO DISPOSE OF A PARTICULAR CASE IN A PARTICULAR MAN NER. IN OTHER WORDS, PROSCRIBES PLACING A RESTRICTION ON THE POWER OF INQUIRY OF TH E AO. IT WAS THEREFORE WELL WITHIN THE PURVIEW OF THE AO TO CALL FOR AND VERIFY THE INFORMATION FURNISHED TO HIM. THAT BEING SO, HE COULD NOT HAVE PROCEEDED FUR THER IGNORING OR OVERLOOKING OR WITHOUT MEETING THE SAME. FINDING THE ASSESSEES RETURN AS INCONSISTENT WITH THE LAW, I.E., GIVEN THE UNDISPUTED, ADMITTED FACTS , HE MADE ADJUSTMENTS TO THE RETURNED INCOME, TO WHICH IN FACT THE LD. AR ALSO C ONCEDED AS VALID IN LAW AND, IN ANY CASE, ARE NOT DISPUTED. THE SAID ADJUSTMENTS THEREFORE CANNOT BE CHALLENGED ON GROUND OF COMPETENCE OR LEGALITY. TH E ASSESSEES CHALLENGE ACCORDINGLY FAILS. THE DECISIONS RELIED UPON BY THE ASSESSEE HAVE NOT HING TO DO WITH THE RESTRICTION ON THE POWER OF THE BOARD U/S. 119(1)(A ) OF THE ACT, WITH REFERENCE TO 7 ITA NO.3260/MDS/2016 (AY 2013-14) PARIVEL RATHNASWAMY V. ITO WHICH ONLY THE INSTANT CASE IS DECIDED OR RESTS ON. THERE IS NO ESTOPPLE AGAINST LAW. THE ISSUE OF NOTICE U/S. 143(2) HAS BEEN FOUN D IN ORDER AND LEGALLY VALID. THE AO WAS THEREFORE DUTY BOUND TO FRAME ASSESSMENT U/S. 143(3) IN ACCORDANCE WITH THE LAW, AND WHICH HE HAS DONE. IN FACT, THE DECISIONS RELIED UPON ARE AGAIN ON THE BASIS OF THE PROVISIONS OF LA W, VIZ. SS. 153C & 153D. THE AO IN THE INSTANT CASE HAS NOT MADE ANY ADJUSTMENT ON THE BASIS OF THE AIR INFORMATION, RELIANCE ON WHICH, WITHOUT VERIFICATIO N, WAS AGAIN HELD AS NOT JUSTIFIED BY THE TRIBUNAL. THE MATTER THUS TURNED ON THE FACTS, I.E., ON THE BASIS OF THE EVIDENCE FOR AND AGAINST. THE AO IN THE PRES ENT CASE, ON THE OTHER HAND, HAS ACCEPTED THE ASSESSEES CLAIM QUA AIR INFORMATION. THE CITED CASE LAW WOULD THUS BE OF NO ASSISTANCE TO THE ASSESSEE. I DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED ON MARCH 31, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) ! /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED, MARCH 31, 2017. EDN 2 , *$/34 54'/ /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT 5. 4&78 *$/$ /DR 6. 89% : /GF