ACIT, Cir-9(1), Hyderabad V. Smt. C. Prabhavathi, Hyderabad

ITA 404/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66503 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: S K PISSAY
• Keywords: Unexplained cash credit; Unexplained investment; Rectification of order; Search and seizure; Opportunity of being heard; Principle of natural justice; Peak credit; Assessment record
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 404/HYD/2011 ASSESSMENT YEAR : 2003-04 THE ASST. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 9(1), HYDERABAD. VS. SMT. C. PRABHAVATHI, RESPONDENT HYDERABAD. (PAN/GIR NO. ABFPC5583Q/P-706) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SHRI S.K. PISSAY DATE OF HEARING : 18/10/2012 DATE OF PRONOUNCEMENT : 23/11/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT-VI, HYDERABAD DATED 15/11/2010 FOR THE ASSES SMENT YEAR 2003-04. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THERE WA S A SEARCH AND SEIZURE OPERATION CONDUCTED ON 21/01/2004. DURING T HE COURSE OF SEARCH CERTAIN INCRIMINATING MATERIAL HAS BEEN FOUN D. ON THE BASIS OF INFORMATION GATHERED DURING THE COURSE OF SEARCH AND ON THE BASIS OF FURTHER INVESTIGATIONS, THE NET PEAK OF CASH CRE DITS WAS WORKED OUT IN RESPECT OF UNEXPLAINED INVESTMENTS FROM THE ASSESSMENT YEAR 2 ITA NO. 404/HYD/2011 C. PRABHAVATHI 1998-99 TO 2003-04. AFTER CONSIDERING THE NET PEAK CREDIT AVAILABLE, NO ADDITION WAS MADE IN RESPECT OF UNEXPLAINED INVE STMENT/ CREDIT IN THE ORIGINAL ASSESSMENT ORDER DATED 29.3.2006. O N APPEAL BY THE ASSESSEE THE CIT(A) VIDE HIS ORDER DATED 14.3.2007 HAD ENHANCED THE ASSESSMENT BY ADDING A SUM OF RS. 30,45,000/- B EING THE AMOUNT SHOWN AS ADVANCES TO FARMERS MADE ON 31.3.20 03. IT WOULD APPEAR THAT THIS SUM WAS FIRST ADDED IN THE ASSESSM ENT FOR AY 2004- 05 BUT WAS DELETED BY CIT(A) WITH A DIRECTION TO CO NSIDER IT FOR AY 2003-04. ACCORDINGLY THE CIT(A) IN THE COURSE OF AP PELLATE PROCEEDING FOR AY 2003-04 ENHANCED THE ASSESSMENT B Y THIS AMOUNT ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE SOURCE FOR THESE ADVANCES. IN THE COURSE OF THE APPELLATE PROCEEDING S THE ASSESSEE RAISED AN ADDITIONAL ALTERNATE GROUND THAT IF THE A DDITION OF RS 30,45,000/- WERE TO BE SUSTAINED, THEN THE ADDITION FOR THE EARLIER YEARS FROM 1998-99 TO 2003-04 SHOULD BE GIVEN CREDI T TO AS A SOURCE OF THESE ADVANCES AND SHOULD BE REDUCED FROM THE ADDITION OF RS. 30,45,000/-. THE CIT(A) AGREED WITH THIS CON TENTION AND DIRECTED THE AO REDUCE THE ADDITIONS MADE OBSERVING AS UNDER: 12. AS PER ADDITIONAL GROUNDS OF APPEAL, THE APPELL ANT HAS TAKEN THE GROUND THAT IN THE EVENT OF ADDITION OF R S. 30,45,000/- BEING MADE, THE SAME SHOULD BE SET OFF AGAINST PEAK CASH CREDIT AVAILABLE WITH THE APPELLANT WHICH WAS OFFERED AS INCOME. THERE IS MERIT IN THE ALTERNATIVE SUBMIS SION OF THE APPELLANT. THE AMOUNT OF RS. 30,45,000/- IS NOTHING BUT CASH AVAILABLE OUTSIDE THE BOOKS OF ACCOUNT. PEAK CASH C REDIT ASSESSED AS PER DETAILS FURNISHED BY THE APPELLANT AS UNDER. A.Y. F.Y. MAXIMUM CUMULATIVE PEAK NET PEAK CREDIT (INCOME) 1998 - 99 1997 - 98 4,00,000 4,00,000 1999 - 00 1998 - 99 6,50,000 2,50,000 2000 - 01 1999 - 00 21,25,000 14,75,000 2001 - 02 2000 - 01 23,44,000 NIL 3 ITA NO. 404/HYD/2011 C. PRABHAVATHI 2002 - 03 2001 - 02 15,00,000 NIL 2003 - 04 2002 - 03 9,00,000 NIL TOTAL 23,44,000 13. JUSTICE AND FAIR PLAY DEMANDS THAT THE CASH OF RS. 30,45,000/- TREATED AS OUTSIDE THE BOOKS OF ACCOUNT IS SET OFF AGAINST PEAK CASH CREDIT WHICH WAS ALSO AVAILABLE O UTSIDE THE BOOKS OF ACCOUNT AND ASSESSED TO TAX ONCE IT WAS RE CORDED IN THE BOOKS OF ACCOUNT. IN VIEW OF THE SAME, THE ASSE SSING OFFICER IS DIRECTED TO VERIFY THE PEAK CREDITS ASSE SSED FOR THE ASSESSMENT YEARS 1999-2000 TO 2003-04 AND SET OFF T HE SAME AGAINST THE AMOUNT OF RS. 30,45,000/- AND ADD THE B ALANCE AMOUNT TO THE TOTAL INCOME ASSESSED FOR THE AY 2003 -04. 3. THE AO GAVE EFFECT TO THE ORDER OF THE CIT(A) ON 15.11.2007 ADDING RS. 11,01,000/- FROM THE ADDITION OF RS. 30, 45,000/- THE AO REDUCED RS. 19,44,000/- BEING THE PEAK CASH CREDIT FOR AY 1998-99. TO 2003-04. 4. THEREAFTER THE AO ISSUED AN ORDER OF RECTIFICATI ON U/S 154 PURPORTEDLY MADE ON THE SAME DATE AS THAT OF THE OR DER GIVING EFFECT TO THE ORDER OF THE CIT(A). THE ORDER OF REC TIFICATION WAS DELIVERED TO THE ASSESSEE ONLY ON 14.3.2008. IN THE ORDER OF RECTIFICATION THE AO WITHDREW THE SET OFF OF RS. 19 ,44,000/- AGAINST THE ADDITION OF RS. 30,45,000/- TOWARDS UNEXPLAINED INVESTMENT, STATING THAT THE PEAK UNEXPLAINED CASH CREDITS HAVE NOT BEEN ADDED AS CREDITS OUTSIDE THE BOOKS OF ACCOUNT. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO T HE CIT(A). IN VIEW OF THE CONTRADICTORY STANDS TAKEN BY THE AO, T HE CIT(A) CALLED FOR REMAND REPORT OF THE AO. THE AO VIDE HIS REPORT ED DATED 03/12/2009 SUBMITTED THAT THE ORDER RECTIFYING THE CONSEQUENTIAL ORDER WAS PASSED ON 15/11/2007 AND AS SUCH THERE IS WRONG ON THE 4 ITA NO. 404/HYD/2011 C. PRABHAVATHI PART OF THE AO. HOWEVER, IT WAS SUBMITTED THAT WHIL E PASSING THE RECTIFICATION ORDER U/S 154 NO OPPORTUNITY WAS GIVE N TO THE ASSESSEE OF BEING HEARD. IT WAS ALSO SUBMITTED THAT AS PER T HE ORDER SHEET OF THE ASSESSMENT RECORD, THE DATE OF PASSING OF RECTI FICATION ORDER IS NOT AVAILABLE. IT WAS SUBMITTED THAT THE D&CR ENTRI ES WERE MADE IN DIFFERENT PARTS. 6. THE CIT(A) HAD BEEN PROVIDED THE REMAND REPORT T O THE ASSESSEE CALLING FOR ITS OBJECTIONS, IF ANY. THE AS SESSEE VIDE ITS LETTER DATED 25/10/2010 SUBMITTED ITS OBJECTIONS, W HICH WERE EXTRACTED BY THE CIT(A) AT PAGES 5 & 6 OF HIS IMPUG NED ORDER. 7. THE CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE AND THE RECORDS, SUBMISSIONS OF THE ASSESSEE, REMAND REPORT OF THE AO, HELD THAT THE AO FAILED TO UNDERSTAND THE TRUE SPIRIT OF THE CONCLUSIVE DIRECTIONS OF THE CIT(A)-I IN THE FIRST ROUND AND S IMPLY CARRIED AWAY BY THE FACTS AND FINDINGS GIVEN THEREIN FOR REACHIN G SUCH CONCLUSIVE DIRECTIONS. THE CIT(A) HAD IN THE FIRST ROUND DIREC TED THE AO TO ALLOW PEAK OF CASH CREDITS OF RS. 19,44,000/- (FROM ASSES SMENT YEAR 1999-2000 TO 2003-04 OUT OF THE TOTAL PEAK OF RS. 2 3,44,000) FROM UNACCOUNTED CASH CREDIT OF RS. 30,45,000/- (ADVANCE S TO FARMERS) AND BRING TO TAX THE UNACCOUNTED CASH CREDIT BEING ADVANCES GIVEN TO FARMERS AT RS. 11,01,000/- DURING THE PRESENT AS SESSMENT YEAR 2003-04. 8. IN THE PRESENT APPEAL THE CIT(A) ACCEPTED THE PL EA OF THE ASSESSEE ON JURISDICTION OBSERVING AS UNDER: 18. HOWEVER, THE CLAIM OF THE ASSESSEE THAT THE ORD ER U/S 154 CANNOT BE ON THE BASIS OF CHANGE/DIFFERENCE OF OPIN ION HAS 5 ITA NO. 404/HYD/2011 C. PRABHAVATHI DEFINITELY SOME FORCE IN IT. IN VIEW OF THE ABOVE F ACTS, I AM OF THE OPINION THAT THE VARIOUS JUDICIAL PRONOUNCEMENT S RELIED UPON BY THE APPELLANT IN SUPPORT OF ITS CLAIM DIFFE RENTIATING THE NATURE BETWEEN ORDER U/S 153 AND 154 ARE NOT SIMILA R TO THE FACTS OF THE CASE AND ARE ONLY TAILOR MADE TO SUIT THE PARTICULAR NEED OF THE ASSESSEE AT A PARTICULAR POINT OF TIME ONLY. 19. ACCORDINGLY, AFTER GOING THROUGH THE FACTS OF T HE CASE AND THE RECORDS, SUBMISSIONS OF THE APPELLANT, REMAND R EPORT OF THE ASSESSING OFFICER, I AM OF THE OPINION THAT THE ASS ESSING OFFICER FAILED TO UNDERSTAND THE TRUE SPIRIT OF THE CONCLUSIVE DIRECTIONS OF THE CIT(A) AND SIMPLY CARRIED AWAY BY THE FACTS AND FINDINGS GIVEN THEREIN FOR REACHING SUCH CONCLU SIVE DIRECTIONS. IN VIEW OF THE ABOVE, THE ASSESSING OFF ICER IS DIRECTED TO ALLOW PEAK OF CASH CREDITS OF RS. 19,44 ,000/- (FROM ASSESSMENT YEAR 1999-2000 TO 2003-04 OUT OF THE TOT AL PEAK OF RS. 23,44,000) FROM UNACCOUNTED CASH CREDIT OF R S. 30,45,000 (ADVANCES TO FARMERS) AND BRING TO TAX TH E UNACCOUNTED CASH CREDIT BEING ADVANCES GIVEN TO FAR MERS AT RS. 11,01,000 DURING THE PRESENT ASSESSMENT YEAR 20 03-04. 9. AGGRIEVED THE REVENUE IS ON APPEAL. BEFORE US, T HE LEARNED DR SMT. VIDISHA KALRA HAS RELIED UPON THE ORDER OF THE AO. 10. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S.K. PISSAY SUBMITTED THAT TO GIVE EFFECT TO THE DI RECTIONS GIVEN IN APPEAL NO. 0346/06/-07 FOR AY 2003-05 BY THE CIT(A) -I, IN HIS ORDER DATED 14/09/2007, A CONSEQUENTIAL ORDER DATED 15/11 /2007 WAS PASSED AND SERVED ON THE ASSESSEE ON 23/11/2007. IT IS SUBMITTED THAT ON 14/03/2008 THE ASSESSEE RECEIVED BY SPEED P OST AN ORDER U/S 154 BY WHICH IT WAS SOUGHT TO AMEND THE CONSEQU ENTIAL ORDER PASSED EARLIER AND THIS REVISED ORDER U/S 154 WAS A LSO DATED 15/11/2007. IT IS SUBMITTED THAT THIS ORDER WAS DIS PATCHED ON 12/03/2008 AS PER THE POSTAL STAMP ON THE DEPARTMEN TAL ENVELOPE, THEREFORE, THIS ORDER WAS RECEIVED FOUR MONTHS AFTE R THE DATE OF 6 ITA NO. 404/HYD/2011 C. PRABHAVATHI PASSING. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT AN APPEAL WAS FILED BEFORE THE CIT(A) FOR THE 2 ND ORDER U/S 154 WHEREIN IT WAS PLEADED AS FOLLOWS:- A) THE ORDER PASSED U/S 154 WAS NOT PASSED ON THE D ATE MENTIONED IN THE ORDER, THEREFORE, THE ORDER PASSED IS LIABLE TO BE QUASHED. B) I) THE FIRST ORDER DT. 15/11/2007 IS TITLED AS C ONSEQUENTIAL ORDER WHICH HAVE BEEN PASSED UNDER THE PROVISIONS O F SECTION 153(3)(II). II) THE SECOND ORDER WHICH IS ALSO DATED 15/11/2007 IS TITLED AS ORDER U/S 154 OF IT ACT, AND ATTEMPTED TO RECTIFY T HE CONSEQUENTIAL ORDER. III) WHEN THE ORDER IS PASSED U/S 154 THE PROVISION S THEREIN HAVE TO BE FOLLOWED. U/S 153(3) ANY AMENDMENT WHICH HAS THE EFFECT OF ENHANCING AN ASSESSMENT OR OTHERWISE INCR EASING THE LIABILITY OF THE ASSESSEE SHALL NOT BE MADE UNLESS THE AUTHORITY CONCERNED HAS GIVEN NOTICE TO THE ASSESSEE AND HAS ALLOWED THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEAR D. IV) A PLAIN READING OF THE 2 ND ORDER U/S 154 SHOWS THAT THE REASONS GIVEN ARE LONG DRAWN OBSERVATIONS TO SUBSTA NTIATE THE RECTIFICATION MADE. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WHILE ENHANCING THE ORDER U/S 154, THE AO HAS NOT PROVIDE D ANY OPPORTUNITY OF BEING HEARD, THEREFORE, THE PRINCIPL ES OF NATURAL JUSTICE HAVE BEEN VIOLATED. FOR THIS PROPOSITION, T HE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HO NBLE SUPREME COURT IN THE CASE OF K.C. JOSHI VS. UNION OF INDIA, 163 ITR 597 (SC). 12. THE LEARNED COUNSEL SUBMITTED THAT THE MISTAKE APPARENT FROM RECORDS MUST BE OBVIOUS AND A PATENT MISTAKE AND NO T SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS O F REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY TWO OPINION. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FR OM RECORDS. FOR 7 ITA NO. 404/HYD/2011 C. PRABHAVATHI THIS PROPOSITION, HE RELIED UPON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF T.S. BALARAM VS ITO, 82 ITR 50 (SC). 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE AO STATING THAT IT WAS AN UNINTENDED ERROR S OUGHT TO BE CORRECTED BY THE AO AND HENCE REQUIRES TO BE UPHELD . 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. FROM THE RECORDS IT IS CLEAR THAT THE CIT(A) IN HIS ORDE R DATED 14.9.2007, IN THE FIRST ROUND OF APPEAL, HAD CLEARLY GIVEN A D IRECTION TO ADJUST AGAINST THE ADDITION OF RS.30,45,000/-, PEAK CASH C REDIT WHICH WAS ALSO AVAILABLE OUTSIDE THE BOOKS OF ACCOUNT AND ASS ESSED TO TAX ONCE IT WAS RECORDED IN THE BOOKS OF ACCOUNT. THE DIRECT IONS OF THE CIT(A) ARE CLEAR. HE HAS DIRECTED THAT THE PEAK CREDIT TAX ED IN THE EARLIER YEARS SHOULD BE REDUCED FROM THE ADDITION OF UNEXPL AINED ADVANCES OF RS. 30,45,000/-. THERE IS NO AMBIGUITY IN IT. WH ILE GIVING EFFECT TO THE ORDER OF THE CIT(A), THE AO HAS TO MERELY FO LLOW THE DIRECTIONS. IT IS NOT FOR THE AO TO SIT ON JUDGMENT OVER THE CORRECTNESS OF THE DIRECTIONS EITHER IN ADDING THE ADVANCES OR IN DIRECTING THE DEDUCTION OF THE PEAK CREDIT ADDED IN THE EARLIER YEARS. MUCH LESS IN AN ORDER OF RECTIFICATION OF THE ORDER GIVING EFFECT TO THE ORDER OF THE CIT(A). WE AGREE WITH THE CONCLUSION O F THE CIT(A) AND DISMISS THE REVENUES APPEAL. 8 ITA NO. 404/HYD/2011 C. PRABHAVATHI 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 23 RD NOVEMBER, 2012 KV COPY TO:- 1) ACIT, CIR-9(1)1 ST FLOOR, B-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) SMT. C. PRABHAVATHI, PROP: M/S OMSAI RAM FRUIT CO., A-7, NEW FRUIT MARKET COMPLEX, GADDIANNARAM, HYD. 3) THE CIT(A)-VI, HYDERABAD 4) CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD.