ADIT, Hyderabad V. Sri V. Chaitanya, Hyderabad

ITA 334/HYD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61952 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Opportunity of being heard; Retrospective amendment
• Section: 142(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.334/HYD/2009 : ASSESSMENT YEAR 2005-06 ASSTT. COMMISSIONER OF INCOME - TAX(INT. TAXN.)-I, HYDERABAD V/S SHRI V.CHAITANYA, HYDERABAD ( PAN/GIR - NOT AVAILABLE ON RECORD) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 27.6.2012 DATE OF PRONOUNCEMENT 28.6.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERAB AD DATED 20.12.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL ARE AS FOLLOWS- I. THE ORDER OF THE CIT(APPEALS) IS ERRONEOUS BOTH ON FACTS OF THE CASE AND IN LAW. II. THE HONOURBLE CIT(A) OUGHT TO HAVE SUSTAINED TH E ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED INVESTME NT MADE BY THE ASSESSEE. III. THE CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUNDS THAT HE NOTICE U/S.1 42(1) WAS ISSUED B EYOND THE PRESCRIBED TIME AND IN HOLDING THE ASSESSMENT AS NOT LEGALLY TENABLE AND NULL AND VOID. IV. THE CIT(A) ERRED BY NOT CONSIDERING THE AMENDME NT BROUGHT IN SECTION 142(1) W.E.F. 01.04.2006. V. FURTHER, THE CIT(A) ERRED IN NOT TAKING INTO COG NIZANCE THE PROVISO INSERTED AFTER CLAUSE (I) OF SECTION 142(1) W.E.F. 01.04.2006 . V. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT FO R ISSUE OF NOTICE U/S. 148, THE ASSESSING OFFICER SHOULD HAVE REASON TO ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 2 BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . 3. BRIEF FACTS OF THE CASE ARE THAT BASED ON THE I NFORMATION RECEIVED FROM THE SUB-REGISTRARS OFFICE, ERRAGADD A TO THE EFFECT THAT THE ASSESSEE HAD SOLD PROPERTY FOR AN AMOUNT OF RS.69,0 8,000/- AS PER THE DOCUMENT REGISTERED ON 20.3.2005, SINCE THE ASSESSE E WAS NOT ASSESSED TO INCOME-TAX, THE ASSESSING OFFICER ISSUED A NOTIC E UNDER S.142(1) OF THE ACT DATED 29.8.2007, REQUESTING THE ASSESSEE TO FIL E THE RETURN OF INCOME. AS THERE WAS NO RESPONSE TO THE SAID NOTICE, A FURT HER SHOW CAUSE LETTER WAS ADDRESSED TO THE ASSESSEE ON 21.11.2007. OBSER VING THAT THE ASSESSEE HAS NOT FILED ANY REPLY EVEN TO THIS SHOW- CAUSE LETTER, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSM ENT UNDER S.144 OF THE ACT, BRINGING TO TAX THE UNEXPLAINED INVESTMENT MADE IN IMMOVABLE PROPERTY AS INCOME OF THE ASSESSEE UNDER S.69 OF T HE ACT. ASSESSMENT WAS ACCORDINGLY COMPLETED ON THE SAID AMOUNT OF RS. 24,15,330, VIDE ORDER OF ASSESSMENT DATED 19.2.2007 PASSED UNDER S.144 OF THE ACT. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTESTED THE LEGALITY AND VALIDITY OF THE NOTICE ISSUED UNDER S.142(1) OF THE ACT, AND ALSO THE MERITS OF THE ASSESSMENT MADE. THE CIT(A) ACCEPTI NG THE CONTENTION OF THE ASSESSEE THAT THE NOTICE UNDER S.142(1) WAS ISS UED BEYOND THE TIME STIPULATED UNDER THE STATUE, AND CONSEQUENTLY THE A SSESSMENT MADE IN PURSUANCE THEREOF IS DECLARED NULL AND VOID, ALLOWE D THE APPEAL OF THE ASSESSEE ON THIS LEGAL GROUND. HENCE, REVENUE IS I N APPEAL BEFORE US. 4. DURING THE PROCEEDINGS BEFORE US, THE LEARNE D COUNSEL FOR THE ASSESSEE, AT THE OUTSET, MENTIONED THAT THIS IS A C ASE WHERE NOTICE UNDER S.142(1) WAS ISSUED ON 29.8.2007 WHEREAS THE RELEVA NT ASSESSMENT YEAR, VIZ. 2005-06 ENDED ON 31.3.2006. THUS, THE AS SESSING OFFICER FAILED TO ISSUE THE NOTICE UNDER S.142(1) OF THE ACT, WITH IN THE TIME STIPULATED BY THE STATUTE, VIZ. BY THE END OF THE OF THE RELEV ANT ASSESSMENT YEAR. BY ISSUING THE NOTICE SUBSEQUENT TO THE TIME PRESCRIBE D BY THE STATUTE FOR ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 3 MAKING REGULAR ASSESSMENT UNDER S.143/144 OF THE AC T, THE ASSESSING OFFICER TRAVELLED INTO THE TIME GENERALLY APPLICABL E UNDER THE PROVISIONS OF S.148 OF THE ACT. IN SUPPORT OF THE ARGUMENT OF I NVALIDITY OF THE IMPUGNED NOTICE, THE LEARNED AUTHORISED REPRESENTAT IVE RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MOTOROLA INC (95 ITD 269)-DEL., WHICH IS DATED PRIOR TO THE INS ERTION OF THE PROVISO TO S.142(1)(I) OF THE ACT. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR TH E REVENUE, SUBMITTED THAT THE LEGAL ISSUE RAISED BY THE ASSESS EE IS COVERED BY THE RECENT DECISION OF THE TRIBUNAL DATED 18.5.2012, IN ITA NO.532/HYD/2010 IN THE CASE OF DY. DIRECTOR OF IT(INTL. TAXN.), HY DERABAD V/S. SMT. KAUSARI BEGUM, HYDERABAD. CORE ARGUMENT OF THE LEAR NED COUNSEL REVOLVES AROUND THE INTERPRETATION OF THE PROVISION S OF THE PROVISO TO S.142(1)(I) OF THE ACT, AND THE REQUIREMENT OF INV OKING THE PROVISIONS OF S.148 OF THE ACT INSTEAD. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTING THE ORDER OF THE ASSESSING OFFI CER, SUBMITTED THAT WHILE GRANTING RELIEF, THE CIT(A) HAS NOT CONSIDERE D THE AMENDMENT BROUGHT TO THE PROVISION OF S.142(1)(I) OF THE ACT AND THE PROVISIONS INSERTED VIDE THE FINANCE ACT, 2006 WITH EFFECT FR OM 1.4.1990. SHE INSISTED FOR APPLYING THE DIVISION BENCH DECISION I N THE CASE OF KAUSARI BEGUM (SUPRA). 6. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF T HE LOWER AUTHORITIES. THERE IS NO DISPUTE ON FACTS. WE F IND THAT THE NOTICE UNDER S.142(1) OF THE ACT ISSUED ALLEGEDLY BEYOND THE TIM E LIMIT PRESCRIBED UNDER S.142(1) OF THE ACT, IS ALSO VALID IN VIEW OF THE DEEMING PROVISIONS, VIZ. PROVISO TO S.142(1) OF THE ACT, WHICH HAVE NOT BEEN CONSIDERED BY THE CIT(A) IN THE IMPUGNED ORDER. THE SAID PROVISO READS AS FOLLOWS: ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 4 142(1) PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UNDE R THIS SUBSECTION FOR THE PURPOSE OF THIS CLAUSE AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMM ENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1990 TO A PERSON WHO HAS NOT MADE A RETURN W ITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 OR BEF ORE THE END OF THE RELEVANT ASSESSMENT YEAR, ANY SUCH NOTICE ISSUE D TO HIM SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH TH E PROVISIONS OF THIS SUB-SECTION. FROM THE ABOVE EXTRACTION OF THE PROVISO TO S.142(1 )(I) OF THE ACT, IT IS CLEAR THAT ANY NOTICE SERVED ON THE ASSESSEE AFTER THE END OF THE RELEVANT ASSESSMENT YEAR SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE PROVISIONS OF S.142(1) OF THE ACT,. LEARNED CO UNSEL MENTIONED THAT IN THE INSTANT CASE NOTICE WAS SERVED ON 29.8.2007. T HE DELAY IS OF MORE THAN 15 MONTHS, SINCE THE RELEVANT ASSESSMENT YEAR ENDED ON 31.3.2006. THUS, THE IMPUGNED NOTICE UNDER S.142(1) OF THE ACT WAS ISSUED AFTER EXPIRY OF 15 MONTHS FROM THE END OF THE DUE DATE 31 .3.2006 PROVIDED IN S.142(1) OF THE ACT. SUCH A DELAY OF 15 MONTHS CAN NOT BE CALLED REASONABLE DELAY, COVERED UNDER THE DEEMED PROVISI ONS OF THE PROVISO TO S.142(1)(I) OF THE ACT. PER CONTRA, THE REVENUE AR GUES THAT THE SAID PROVISO DOES NOT SPECIFY ANY OTHER TIME LIMITS AND THEREFORE, THE NOTICE ISSUED AFTER 15 MONTHS DELAY SHOULD ALSO BE DEEMED VALID. WE AGREE WITH THE ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTA TIVE FOR THE REVENUE. PROVISIONS CONTAIN THE OPERATIVE EXPRESSI ON, I.E. ANY NOTICE HAS BEEN SERVED, SUCH NOTICE ISSUED TO HIM . THIS EXPRESSION ONLY QUALIFY THE CONDITIONS ISSUE AND SERVICE OF ANY NOTICE. THE EXPRESSION ANY IN OUR OPINION SHOULD COVER THE IMPUGNED NOTICE ISS UED WITH THE DELAY OF 15 MONTHS OF THE END OF THE RELEVANT ASSESSMENT YEA R 2005-06. IT IS OBVIOUS FROM THE DATES MENTIONED IN THE IMPUGNED O RDERS AND THE DATES OF THE AMENDMENT TO S.142(I) PROVISO, VIDE FINANCE ACT, 2006, THE ASSESSING OFFICER AND THE CIT(A) DID NOT HAVE THE B ENEFIT OF THE SUBSEQUENT LEGISLATIVE DEVELOPMENTS. ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 5 7. REGARDING THE OTHER ARGUMENTS OF LEARNED COUNS EL ABOUT APPLICABILITY OF THE PROVISIONS OF S.148 OF THE ACT , IN OUR OPINION, THESE ARE SEPARATE PROCEEDINGS AND IT IS NOT THE CASE HER E THAT PROCEEDINGS UNDER S.144 READ WITH S.142(1)(I) OF THE ACT ARE SI MULTANEOUSLY INITIATED, WHILE THE OTHER PROCEEDINGS UNDER S.148 ARE IN FOR CE OR VICE VERSA. THEREFORE, THE CITATION RELIED ON BY THE LEARNED CO UNSEL FOR THE ASSESSEE, SHRI S.RAMA RAO, IS INAPPLICABLE. 8. IN SPIRIT, THE ISSUE RAISED IS SQUARELY COVERE D BY THE COORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE C ASE OF KAUSARI BEGUM (SUPRA). PARA 3 OF THE SAID DECISION, RELIED UPON BY LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US, READS AS FOL LOWS- 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 AFTER E ND OF ONE YEAR FROM THE RELEVANT ASSESSMENT YEAR IS BARRED BY LIMIT ATION OR NOT. AT THIS STAGE, IT IS NECESSARY TO LOOK INTO THE PRO VISIONS CONTAINED U/S 142(1) OF THE ACT. 142 (1) FOR THE PURPOSE OF MAKING AN ASSESSMENT UN DER THIS ACT, THE AO MAY SERVE ON ANY PERSON WHO HAS MADE A RETURN (UNDER SECTION 115WD OR SECTION 139 (OR IN WHOSE CA SWE THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139] FOR FURNISHING THE RETURN HAS EXPIRED] A NOTICE REQUIRING, ON A DA TE 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 BE FORE THE END OF THE RELEVANT ASSESSMENT YEAR] TO FURNISH A R ETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RES PECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT, IN THE PR ESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETT ING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED, OR [PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UND ER THIS SUB-SECTION FOR THE PURPOSES OF THIS CLAUSE A FTER 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 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 THE PROVISO TO SECTION 142(1) WAS INTRODUCED BY FIN ANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990. THE AFO RESAID ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 6 AMENDMENT AS EXPLAINED IN THE NOTES ON CLAUSES TO T HE 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 ASSESSMENT. THE EXISTING PROVISIONS CONTAINED IN CLAUSE (I) OF SUB-SECTION (1) OF SAID SECTION PROVIDE THAT WHERE A PERSON HAS NOT MADE A RETURN OF INCOME WITHIN THE TIME ALLOWED UNDER SUB- SECTION (1) OF SECTION 139, THE AO MAY SERVE A NOTICE ON HIM REQUI RING HIM TO FURNISH THE RETURN OF INCOME. IT IS PROPOSED TO AMEND THE SAID CLAUSE (I) SO AS T O PROVIDE THAT WHERE A PERSON HAS NOT MADE A RETURN OF INCOME BEFO RE HT END OF THE RELEVANT ASSESSMENT YEAR, THE AO MAY SERVE A NO TICE UNDER THIS SUB-SECTION ON HIM AFTER THE END OF THE RELEVA NT 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 R EFERRED TO IN SAID SUB-SECTION FOR THE PURPOSES OF SAID CLAUSE SE RVED AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON O R AFTER 1 ST APRIL, 1990 SHALL BE DEEMED TO BE A NOTICE SERVED I N ACCORDANCE WITH THE PROVISIONS OF THE AFORESAID SUB-SECTION. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M 1 ST APRIL, 1990. A PLAIN READING OF SECTION 142(1) ALONG WITH ITS PR OVISO AND EXPLANATIONS TO NOTES MAKES IT CLEAR THAT IN A CASE WHERE NO RETURN OF INCOME HAS BEEN FILED WITHIN THE TIME ALLOW ED 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 ASSESSMENT YEAR. WHEN THERE IS NO EXPRESS PROVISION LIMITING ISSUANCE OF N OTICE U/S 142(1) WITHIN THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH LIMITATION CAN BE READ INT O THE PROVISION. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY SUBSTANTIAL FORCE IN THE ARGUMENT OF THE LEARNED AR OF THE ASSESSE E THAT NOTICES U/S 142(1) CANNOT BE ISSUED WHEN NO RETURN OF INCOME WAS FILED. THE PROVISION U/S 142(1) IS VERY MUCH CLE AR IN THIS RESPECT. THE DECISION OF ITAT, CALCUTTA BENCH IN TH E CASE OF SHAW WALLACE & CO. LTD. VS. DCIT (2006) 101 TTJ 25 8 RELIED UPON BY THE LEARNED AR IS OF NO HELP TO THE ASSESSEE AS IT WAS RENDERED PRIOR TO THE INSERTION OF PROVISO TO SECTIO N 142(1) OF THE ACT. WE ARE THEREFORE OF THE VIEW THAT THE CIT (A) W AS NOT CORRECT IN HOLDING THE ISSUANCE OF NOTICE U/S 142(1) TO BE A B INITIO VOID. SINCE THE CIT (A) HAS DECIDED THE APPEAL ON TECHNIC AL ISSUE WITHOUT GOING INTO MERITS OF THE CASE, WE THINK IT P ROPER TO SET ASIDE THE MATTER TO THE FILE OF THE CIT (A) AND DIREC T HIM TO DISPOSE OF THE APPEAL ON MERITS IN ACCORDANCE WITH LAW AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 7 THE ABOVE SAID DECISION OF THE TRIBUNAL IN THE CASE OF SMT.KAUSARI BEGUM (SUPRA), WHICH CLINCHES THE ISSUE IN FAVOUR OF THE REVENUE AND THE SAME WAS NOT AVAILABLE TO THE CIT(A), AS IT WAS PRONOUNC ED SUBSEQUENTLY ON 18.5.2012. IN VIEW OF THE NON-CONSIDERATION OF THE ASPECTS RELATING TO INTERPRETATION OF THE STATUTORY PROVISIONS RELATING TO S.142(1) WITH REGARD TO VALIDITY OF THE NOTICE ISSUED BEYOND THE TIME SP ECIFIED BY THE STATUTE, AND ALSO NON-CONSIDERATION OF THE DECISION OF THE T RIBUNAL WHICH COVERS THE ISSUE ON MERITS, WE DEEM IT FIT AND PROPER TO S ET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND AS INDICATED IN THE BENCH, RESTORE THE MATTER TO HIS FILE FOR FRESH CONSIDERATION AND DISPOSAL OF TH E APPEAL BEFORE HIM IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE, BY PASSING A SPEAKING ORDER ON ALL AS PECTS OF THE MATTER. 5. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 28.6.2012 SD/- SD/- (SAKTIJIT DEY) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 28 TH JUNE 2012 COPY FORWARDED TO: 1. 2. 3 4. 5. SHRI V.CHAITANYA, 53 C MLAS COLONY, BANJARA HILLS , HYDERABAD ASSTT. COMMISSIONER OF INCOME-TAX, (INT. TAXN),-I, HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) IV HYDERABAD COMMISSIONER OF INCOME-TAX III, HYDERABAD DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S. ITA NO.334/HYD/2009 SHRI V.CHAITANYA, HYDERABAD 8