VIJAY KUMAR SARDA, MUMBAI V. DCIT CIR 20(3), MUMBAI

ITA 3435/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71218 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S GHOSH
• Assessee Lawyers: VIJAY KUMAR SARDA
• Keywords: Income from undisclosed sources; Salary income; Opportunity of being heard; Principle of natural justice; Source of fund; Surrender of tenancy right
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 3435/MUM/2012 (ASSESSMENT YEAR: 2003-04) SHRI VIJAY KUMAR SARDA DCIT, CIRCLE 20(3) 49/1, LAXMI NIWAS, LAXMI NARAYAN PIRAMAL CHAMBERS, LALBAUG MANDIR MARG, J B NAGAR VS. MUMBAI ANDHERI (E), MUMBAI 400059 PAN - AAOPS7052A APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY KUMAR SARDA RESPONDENT BY: SHRI S. GHOSH DATE OF HEARING: 11.09.2013 DATE OF PRONOUNCEMENT: 04.10.2013 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-31, MUMBAI AND IT PERTAINS TO A.Y. 2003-04. 2. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEES WIFE, SMT. KALPANA VIJAY SARDA PURCHASED A PROPERTY ADMEASURING 1050 SQ.FT. IN THE BUILDING KNOWN AS L AXMI NIWAS SITUATED ON PLOT NO. 49, OF RAJASTHAN CO-OPERATIVE HOUSING SOCI ETY LTD., J.B. NAGAR, ANDHERY (E). ACCORDING TO SMT. KALPANA A SUM OF ` 8,25,000/- WAS PAID TO SHRI NANDKISHORE BABULAL, THE LANDLORD OF THE BUILD ING FOR TRANSFERRING THE FLAT IN HER NAME. 3. IT MAY BE NOTICED THAT IN THE SAME BUILDING SEVERAL OTHER PERSONS GOT THE FLATS TRANSFERRED IN THEIR NAMES WHEREIN THEY H AVE PAID SOME AMOUNT TO THE PERSON WHO IS HOLDING TENANCY RIGHTS APART FROM PAYING A STIPULATED SUM TO THE LANDLORD. BASED ON A TAX EVASION PETITION TH E AO OBSERVED THAT A SUM OF ` 16,51,000/- MUST HAVE BEEN PAID TO THE LEGAL HEIRS OF LATE SHRI JEEVANDAS BHAIYA FOR SURRENDERING OF TENANCY RIGHTS AND FOR HANDING OVER ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 2 THE POSSESSION OF THE FLAT APART FROM PAYMENT OF ` 8,25,000/- TO SHRI NANDKISHORE BABULAL, THE LANDLORD OF THE BUILDING. IT IS NOT IN DISPUTE THAT PAYMENT OF ` 8,25,000/- IS DECLARED BUT SMT. KAPLANA DENIED HAV ING PAID A SUM OF ` 16,51,000/- FOR SURRENDERING OF TENANCY RIGHTS BUT THE AO, BASED ON THE CIRCUMSTANTIAL EVIDENCE, ASSUMED THAT SHE MI GHT HAVE ALSO PAID A SIMILAR AMOUNT FOR SURRENDER OF TENANCY RIGHTS OUT OF UNACCOUNTED SOURCE OF INCOME AND FURTHER ASSUMED THAT THIS PAYMENT WOULD HAVE BEEN MADE FROM THE UNACCOUNTED MONEY OF HER HUSBAND, SINCE SHE WAS ONLY A HOUSEWIFE. ACCORDINGLY A SUM OF ` 16,51,000/- WAS ADDED IN THE HANDS OF SMT. KALPANAS HUSBAND, THE ASSESSEE HEREIN. AGGRIEVED B Y THE ORDER OF THE AO THE ASSESSEE CHALLENGED THE ADDITION OF ` 16,51,000/- UNDER SECTION 69A OF THE ACT BY CONTENDING THAT THE SAID FLAT WAS NOT PU RCHASED BY HIM AND THERE IS NO EVIDENCE ON RECORD TO SHOW THAT HE HAS PAID T HE IMPUGNED SUM TO THE LEGAL HEIRS OF LATE SHRI. JEEVANDAS BHAIYA FOR SURR ENDER OF TENANCY RIGHTS. 4. THE LEARNED CIT(A) OBSERVED THAT SINCE SMT. KALPANA VIJAY SARDA HAS ACQUIRED TENANCY RIGHTS OR PURCHASED THE FLAT IN LA XMI NIWAS AS PER AGREEMENT DATED 21.06.2002, IF AT ALL ANY ADDITION IS TO BE MADE TOWARDS PAYMENT FROM UNDISCLOSED SOURCES, THE SAME SHOULD H AVE BEEN CONSIDERED IN THE HANDS OF SMT. KALPANA VIJAY SARDA. IT MAY BE NOTED THAT THE ASSESSEE HEREIN HIGHLIGHTED THAT SMT. KALPANA VIJAY SARDA HA S FILED HER RETURNS OF INCOME AND SHE WAS DRAWING SALARY INCOME OF ` 3,00,000/- PER ANNUM DURING A.Y. 2003-04. IT IS ALSO SHOWN THAT SHE WAS INCOME TAX ASSESSEE EVEN IN EARLIER YEARS. UNDER THESE CIRCUMSTANCES THE LEA RNED CIT(A) OBSERVED, IN PARA 3.2 OF HIS ORDER, THAT THE RELEVANT ADDITION, IF AT ALL REQUIRED, SHOULD HAVE BEEN MADE IN THE HANDS OF SMT. KALPANA VIJAY S ARDA AND NOT IN THE HANDS OF THE ASSESSEE. IN OTHER WORDS, THE ADDITION MADE IN THE HANDS OF THE ASSESSEE WAS DELETED ON THE GROUND THAT NEITHER THE SAID FLAT WAS ACQUIRED OR PURCHASED BY THE ASSESSEE NOR WAS THERE ANY EVID ENCE TO PROVE THAT THE PAYMENT MADE TO THE OUTGOING TENANT WAS SOURCED OUT OF THE UNACCOUNTED INCOME OF THE ASSESSEE. 5. THOUGH HE SET ASIDE THE ISSUE, WHICH WAS IN DISPUTE BEFORE HIM, THE LEARNED CIT(A) HAS GONE A STEP FURTHER TO OBSERVE T HAT THERE IS SUFFICIENT ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 3 CORROBORATIVE CIRCUMSTANTIAL EVIDENCE TO PROVE THE SMT. KALPANA VIJAY SARDA HAS ACQUIRED THE FLAT ON PAYMENT OF PREMIUM OF ` 16,51,000/- AND HENCE THE AO WAS DIRECTED TO ASSESS THE ENTIRE UNACCOUNTE D PAYMENTS IN THE HANDS OF SMT. KALPANA, BY INVOKING THE PROVISIONS O F SECTION 150(1) OF THE INCOME TAX ACT FOR THE RELEVANT ASSESSMENT YEAR. AG GRIEVED BY THIS DIRECTION THE ASSESSEE IS IN APPEAL BEFORE US. 6. SHRI VIJAY KUMAR SARDA APPEARED AS PARTY IN PERSON AND SUBMITTED THAT SECTION 150(1) SHOULD NOT BE INVOKED TO REVIVE AN ASSESSMENT WHICH WAS ALREADY BARRED BY LIMITATION, MORE PARTICULARLY WHE N THE PARTY HAS NOT BEEN GIVEN AN OPPORTUNITY OF BEING HEARD, APART FROM THE FACT THAT THE LEARNED CIT(A) HAS NO POWER TO TRAVEL BEYOND THE ISSUE WHIC H IS CHALLENGED BEFORE HIM. NO DOUBT THE POWERS OF THE COMMISSIONER (APPEA LS) IS WIDER IN ITS AMPLITUDE WHEREBY HE CAN EVEN ENHANCE AN ASSESSMENT BUT SUCH POWERS ARE CIRCUMSCRIBED IN A WAY I.E. THE ENHANCEMENT CAN BE LIMITED TO THE ASSESSEE WHO IS IN APPEAL AND WHEN IT AFFECTS A THI RD PARTY THE COMMISSIONER (APPEALS) CANNOT ARBITRARILY DIRECT THE AUTHORITIES TO REOPEN THE ASSESSMENT AT LEAST WITHOUT GIVING AN OPPORTUNITY TO THE EFFECTED PERSON. HE, THEREFORE, SUBMITTED THAT UNDER SECTION 150(1) R.W.S. 251 OF T HE INCOME TAX ACT THE CIT(A) IS NOT COMPETENT TO ISSUE DIRECTIONS IN THE CASE OF A THIRD PARTY. 7. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) AND SUBMITTED THAT THE LEARNED CIT(A) WAS SEIZED OF THE ISSUE AS TO WHETHER PREMIUM WAS PAID FOR ACQUIRING TENANCY RIGHTS AND HAVING ACCEPTED IN PRINCIPLE THAT PREMIUM WAS PAID, BASED ON SUFFICIENT CORROBORATIVE CIRCUMSTANTIAL EVIDENCE, THE CIT(A) W AS JUSTIFIED IN DIRECTING THE AO TO CONSIDER THE ISSUE IN THE HANDS OF THE PA RTY WHO WAS THE LEGAL OWNER OF THE PROPERTY. HE THUS JUSTIFIED THE ACTION OF THE LEARNED CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. UNDER SECTION 251 OF THE INCOME TAX ACT THE FIRST APPELLATE AUTHORITY HAS THE POWERS TO CONFIRM, REDUCE, ENHANCE OR ANNUA L THE ASSESSMENT. HE CAN ALSO INITIATE PENALTY PROCEEDINGS AND IN ANY OT HER CASE HE MAY PASS SUCH ORDERS IN THE APPEAL AS HE THINKS FIT. THE EXPRESSI ON MAY PASS SUCH ORDERS IN THE APPEAL WAS SUBJECT MATTER OF CONSIDERATION BY VARIOUS COURTS. WHILE ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 4 DECIDING THE APPEAL THE APPELLATE AUTHORITY MAY GIV E APPROPRIATE DIRECTIONS TO THE AO EITHER IN REGARD TO THE ASSESSEE IN APPEAL B EFORE HIM OR OTHERWISE. HOWEVER, THESE DIRECTIONS CANNOT TRAVEL OUTSIDE THE ASSESSMENT YEAR TO WHICH THE APPEAL RELATES. IN THE SAME WAY THE DIRECTIONS CANNOT RELATE TO A THIRD PERSON, WHOSE APPEAL IS NOT PENDING BEFORE HIM. THE POLICY OF LAW IS THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROC EEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE , AS OBSERVED BY THE HON'BLE APEX COURT IN THE CASE OF PARASHURAM POTTER Y WORKERS CO. LTD. 106 ITR 1 AT PAGE 10. IN THE INSTANT CASE NO ADDITION W AS MADE IN THE HANDS OF SMT. KALPANA VIJAY SARDA THOUGH SHE HAS FILED THE R ETURN BY SPECIFYING THAT SHE HAS PURCHASED THE PROPERTY. AT THE SAME TIME IT IS NOT IN DISPUTE THAT THE AO HAS TAKEN A CONSISTENT STAND THAT A SUM OF ` 16,51,000/- WAS PAID FOR PURCHASE OF THE SAID PROPERTY BUT CONSCIOUSLY TOOK A VIEW THAT SHE HAS NO WHEREWITHAL TO MAKE SUCH PAYMENT AND HENCE NO ADDIT ION CAN BE MADE UNDER SECTION 69A OF THE ACT. THIS FINDING HAS BECO ME FINAL AND THIS WAS NOT IN DISPUTE BEFORE THE APPELLATE AUTHORITY. IN THE A PPEAL FILED BY THE ASSESSEES HUSBAND THE ONLY ISSUE WAS AS TO WHETHER HE PAID A SUM OF ` 16,51,000/- TO THE TENANT ON BEHALF OF HIS WIFE AND IT IS NOT THE CASE OF EITHER THE AO OR THE ASSESSEE THAT THE PAYMENT WAS MADE BY ASSESSEES WI FE. SUCH BEING THE CASE, AN ISSUE WHICH IS NOT BEFORE THE FIRST APPELLATE AU THORITY CANNOT BE SUBJECT MATTER OF CONSIDERATION WHILE DISPOSING OF AN APPEA L, IN EXERCISE OF THE POWERS VESTED IN THE FIRST APPELLATE AUTHORITY UNDER SECTI ON 251 OF THE INCOME TAX ACT. IN THE CASE OF A.B. PARIKH VS. INCOME TAX OFFI CER 203 ITR 186 THE HON'BLE GUJARAT HIGH COURT HAD CONSIDERED IDENTICAL ISSUE W ITH REGARD TO EXTENSION OF TIME LIMIT BY VIRTUE OF PROVISIONS OF SECTION 150(1 ) OF THE INCOME TAX ACT AND IN THAT REGARD THE COURT OBSERVED THAT IN ORDER TO ISSUE SUCH DIRECTIONS, WHICH WOULD AMOUNT TO ENHANCING THE ASSESSMENT OF A THIRD PARTY, SUCH PERSON MUST HAVE BEEN PUT ON NOTICE, AS OTHERWISE, IT IS NOT PERMISSIBLE TO GIVE SUCH DIRECTION. THE FIRST INGREDIENT IS THAT T HERE MUST BE A FINDING THAT THE INCOME EXCLUDED FROM THE TOTAL INCOME OF ONE PE RSON IS THE INCOME OF ANOTHER PERSON. THE SECOND INGREDIENT IS THAT THE O RDER MUST BE ONE WHICH HAS COME TO BE PASSED AFTER THE OTHER PERSON WAS GI VEN AN OPPORTUNITY OF BEING HEARD. THE PERSON CONCERNED MUST BE PUT ON NO TICE THAT THE ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 5 CONSEQUENCE OF THE INCOME BEING HELD AS HER INCOME IS LIKELY TO ADVERSELY AFFECT HER TAX LIABILITY. 9. IN THE INSTANT CASE THE LEARNED CIT(A) HAS NOT CALL ED FOR ANY RECORD EITHER FROM THE AO OR FROM THE AFFECTED PARTIES BEF ORE COMING TO THE CONCLUSION AS TO WHY THE ALLEGED PAYMENT WAS MADE F ROM THE UNDISCLOSED SOURCES OF INCOME, MORE PARTICULARLY WHEN THE AO WA S FIRMLY OF THE OPINION THAT SHE WOULD NOT HAVE BEEN IN A POSITION TO PAY S UCH HUGE AMOUNT SINCE SHE HAD NO OTHER INCOME TO MAKE SUCH PAYMENT. THE E XPRESSION MAY BE DEEMED TO BE THE INCOME UNDER SECTION 69A OF THE A CT IMPLIES THAT EVEN AFTER COMING TO THE CONCLUSION THAT A SUM OF ` 16,51,000/- WOULD HAVE BEEN PAID FOR SURRENDER OF TENANCY RIGHTS IT IS NOT AUTO MATIC THAT SUCH ADDITION SHOULD BE MADE UNDER SECTION 69A OF THE ACT UNLESS IT IS SHOWN THAT SHE WAS CAPABLE OF HAVING SO MUCH OF INCOME IN THE YEAR UNDER CONSIDERATION. THE FIRST APPELLATE AUTHORITY HAS NOT MADE ANY COMM ENT IN THAT REGARD AND, IN FACT, HAS NOT GIVEN ANY OPPORTUNITY TO SMT. KALP ANA VIJAY SARDA, WHICH SHOWS THE FALLACY IN THE DIRECTION GIVEN BY HIM. 10. IN THE CASE OF MRS. BANOO E. COWASJI 138 ITR 686 THE HON'BLE INDORE BENCH OF THE MADHYA PRADESH HIGH COURT OBSERVED THA T THERE WAS NO PROVISION OF LAW UNDER WHICH THE CIT(A), WHILE DECI DING AN APPEAL PREFERRED BY THE ASSESSEE, CAN PASS ORDERS WITH REGARD TO ASS ESSMENTS MADE BY THE AO IN THE CASE OF A THIRD PARTY. 11. IN THE CASE OF PEICO ELECTRONICS AND ELECTRICALS LT D. 210 ITR 991 THE HON'BLE CALCUTTA HIGH COURT OBSERVED THAT THOUGH TH E POWERS OF THE FIRST APPELLATE AUTHORITY ARE CO-TERMINUS WITH THAT OF TH E AO AND HAS POWERS TO ENHANCE THE ASSESSMENT BUT THAT IS CONFINED TO THE ASSESSEE AND A FINDING OR DIRECTION, WHILE DISPOSING OF THE APPEAL, MUST B E A FINDING NECESSARY FOR GIVING RELIEF IN RESPECT OF THE ASSESSMENT YEAR IN QUESTION . IN OTHER WORDS, THE CONCLUSION REACHED BY THE AO IN THE CASE OF A THIRD PARTY SHOULD NOT BE DISTURBED WITHOUT GIVING SUCH ASSESSEE AN OP PORTUNITY OF BEING HEARD AND WHEN IT IS NOT A NECESSARY FINDING OR DIRECTION IN THE CASE OF THE ASSESSEE WHOSE APPEAL IS PENDING AND THE ISSUE THER EIN IS SUBJECT MATTER OF DISPUTE BEFORE THE CIT(A). ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 6 12. IN THE CASE OF CIT VS. BANWARI LAL & SONS P. LTD. 2 57 ITR 518 AT PAGE 522 THE HON'BLE DELHI HIGH COURT APPROVED THE FINDI NGS OF THE APPELLATE TRIBUNAL BY OBSERVING AS UNDER: - BEFORE CLOSING, WE WOULD LIKE TO SAY A WORD ABOUT THE DIRECTION OF THE LEARNED APPELLATE ASSISTANT COMMISSIONER TO THE INC OME-TAX OFFICER TO BRING THE AMOUNT IN QUESTION TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RESPECTIVE ASSESSMENT YEARS TO WHI CH THE INCOME RELATES. THIS DIRECTION OF THE LEARNED APPELLATE AS SISTANT COMMISSIONER HAS TO BE CONSTRUED IN THE LIGHT OF THE DECISION OF THE SUPREME COURT IN THE CASE OF RAJINDER NATH V. CIT [1979] 120 ITR 14. IT WAS NOT AT ALL NECESSARY FOR THE DISPOSAL OF THE ASSESSEES APPEAL FOR THIS YEAR TO GIVE SUCH A DIRECTION AND, THEREFORE, THE SAME COULD NOT BE TREATED AS A DIRECTION GIVEN BY THE LEARNED APPELLATE ASSISTANT COMMISSIONER AS CONTEMPLATED IN SECTION 153(3)(II). IT DESERVES TO BE NOTICED THAT THE EXPRESSION IN C ONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER UNDER SECTION 250 .. IS AKIN TO THE EXPRESSION USED IN SECTION 150( 1) I.E. ANY FINDING OR DIRECTION CONTAINED IN AN ORDER PASSED BY ANY AUTHO RITY IN ANY PROCEEDING UNDER THIS ACT BY WAY OF AN APPEAL. IN OTHER WORDS , IN ORDER TO EXTEND THE TIME LIMIT UNDER SECTION 148 OF THE ACT, BY TAKING AID OF SECTION 150 OR 153 OF THE ACT, THE FIRST APPELLATE AUTHORITY HAS TO TA KE INTO CONSIDERATION THE FACT THAT THE FINDING OR DIRECTION SHOULD BE RELEVA NT FOR THE SUBJECT MATTER OF DISPUTE AND, WHEN IT AFFECTS A THIRD PARTY, PRINCIP LES OF NATURAL JUSTICE DEMANDS THAT SUCH THIRD PARTY SHOULD HAVE BEEN GIVE N AN OPPORTUNITY AS OTHERWISE SUCH DIRECTION DESERVES TO BE SET ASIDE A S INVALID. 13. SIMILAR VIEW WAS TAKEN BY THE ITAT HYDERABAD BENCH IN THE CASE OF PENNAR ELECTRONICS P. LTD. 308 ITR (AT) 192. AT PAG E 203 THE ITAT HYDERABAD BENCHES HAD TAKEN SUPPORT OF THE VIEW TAK EN BY THE HON'BLE PATNA HIGH COURT IN THE CASE OF GAURI SHANKAR CHOUD HARY 234 ITR 865 TO OBSERVE THAT RESORT TO SUB-SECTION (1) OF SECTION 1 50 OF THE ACT CAN BE TAKEN ONLY IN CASES WHERE IT BECOMES NECESSARY TO MAKE AS SESSMENT OR REASSESSMENT OR RECOMPUTATION AND SUCH DIRECTION MU ST RELATE TO THE ASSESSEE IN QUESTION AND NOT ANY DIRECTION OR ASSES SMENT MADE IN APPEAL, REFERENCE OR REVISION OR ANY OTHER ASSESSEE OR ANY PROCEEDINGS IN WHICH THE ASSESSEE IN QUESTION IS NOT A PARTY. THUS, ON A CON SPECTUS OF THE MATTER, WE ITA NO. 3435/MUM/2012 SHRI VIJAY KUMAR SARDA 7 ARE OF THE FIRM VIEW THAT THE DIRECTION GIVEN BY TH E FIRST APPELLATE AUTHORITY UNDER SECTION 150(1) IS NOT IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2013. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH OCTOBER, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 31, MUMBAI 4. THE CIT 20, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.