Sri Kosana Venkata Krishna Rao, Vijayawada V. THE CIT, VIJAYAWADA, Vijayawada

ITA 430/VIZ/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5312 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 27-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: A C GANGAIAH
• Keywords: Reopening of assessment; Income from undisclosed sources; Tangible material
• Section: 147; 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.430/VIZ/2012 ASSESSMENT YEAR: 2005 - 06 KOSANAM VENKATA KRISHNA RAO, 32 4 - 11A, PRAJASAKTHI NAGAR, VIJAY A WADA. VS. ITO, WARD 2(3), VIJAY A WADA. PAN/GIR NO. : ACWPK 3780 H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI A.C.GANGAIAH RESPONDENT BY : SMT. KOMALI KRISHNA DATE OF HEARING : 0 2/12/2013 DATE OF PRONOUNCEMENT : 0 6/12/2013 O R D E R PER SAKTIJIT DEY, JM THE ASSESEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2005 - 06 AGAINST ORDER DATED 21.11.2012 OF LD CIT(A) VIJAYAWADA ON THE FOLLOWING GROUND: THE ITO SPECIFIED THAT A NOTICE WAS ISSUED DULY RECORDING THE REASONS. BUT THE ASSESSMENT ORDER DOES NOT SPECIFY THE REASONS. IF THE REASON IS CIVIL SUIT, ENTIRE PROCEEDINGS ARE TO BE TAKEN FOR ASSESSMENT. THE ASSESSMENT MADE IS AGAINST THE SPIRIT OF PROCEEDINGS IN CIVIL SUIT. HENCE, THE ADDITIONS MADE AGAINST TH E STATEMENT MADE IN PROCEEDINGS OF CIVIL SUIT WITHOUT ANY EVIDENCE OR INFORMATION ARE TO BE ANNULLED. 2 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE ORIGINALLY FILED HIS RETURN O F INCOME DECLARING TOTAL INCOME OF RS.99,000/ - . SUBSEQUENTLY, THE AO, ON THE BASIS OF INFORMATION AVAILABLE WITH HIM HAVING FORMED A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, ISSUED NOTICE UNDER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT OF THE IMPUGNED ASSESSMENT YEAR. IN COMPLIANCE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT, THE ASSESSEE STATED IN WRITING BEFORE THE ASSES SING OFFICER ON 27.3.2006 THAT THE RETURN FILED BY HIM EARLIER SHOULD BE TREAT ED AS RETURN FILED IN PURSUANCE TO NOTICE UNDER SECTION 148 OF THE ACT. DURING THE A SSESSMENT PROCEEDINGS THAT ENSU ED, AO NOTICED THAT ASSESSEE WAS INVOLVED IN A CIVIL SUIT AND IN COURSE OF DEPOSITION BEFORE THE CIVIL COURT I.E. ADDITIONAL SENIOR CIVIL JUDGE, VIJAYWADA, HE HAD STATED THAT HE WAS DOING SOFTWARE BUSINESS IN THE NAME OF M/S. LOGISTIC SOFT AND HIS MONTHLY INCOME WAS RANGING FROM RS.4 0,000/ - TO RS.50,000/ - . WHEREAS IN THE SWORN STATEMENT BEFORE THE AO, ASSESSEE ADMITTED THAT HE WAS RUNNING A SOFTWARE TRAINING INSTITUTE BUT SINCE HE HAD INCURRED LOSS, HE CLOSED DOWN THE SAID BUSINESS. AO FURTHER OBSERVED THAT ASSESSEE COULD NOT FILE ANY EVIDENCE TO SUBSTANT IATE HIS CLAIM THAT THE BUSINESS WAS CLOSED IN THE YEAR 2001. AO FURTHER NOTED THAT IF THE VERSION OF THE ASSESSEE WOULD BE PRESUMED TO BE CORRECT THEN HE WOULD NOT HAVE DEPOSED BEFORE THE CIVIL JUDGE ON 8.11.2004 THAT HE WAS EARNING INCOME FROM SUCH SOFT WARE BUSINESS. AO THEREFORE, DISBELIEVING THE CONTENTION OF THE ASSESSEE, ADDED AN AMOUNT OF RS.4,80,000/ - BY ESTIMATING SUCH INCOME OF THE ASSESSEE FROM SOFTWARE BUSINESS. HE FURTHER NOTED THAT IN THE STATEMENT RECORDED BEFORE THE CIVIL JUDGE, ASSESSEE HAD STATED THAT SINCE FIVE YEARS , HE WAS DOING REAL ESTATE BUSINESS. THEREFORE, AO WAS OF THE VIEW THAT IF THE ASSESSEE WAS DOING REAL ESTATE BUSINESS FOR THE PAST FIVE YEARS, AS ADMITTED BY HIM IN THE STATEMENT RECORDED ON 15.7.2008, THEN ASSESSEE MUST H AVE EARNED INCOME FROM REAL ESTATE BUSINESS DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. ON THIS ACCOUNT, AO ESTIMATE INCOME AT RS.1 LAKH FOR THE IMPUGNED ASSESSMENT YEAR AND ADDED IT TO THE INCOME OF THE ASSESSEE. 3 3. AO ON THE BASIS OF INFORMATION AVAILABLE WITH HIM NOTED THAT ASSESSEE DURING THE FINANCIAL YEAR 2004 - 05 HAD ENTERED INTO AGREEMENT WITH HIS CO - SON - IN - LAW SHRI PAPA RAO TO PURCHASE A SITE AT RAMAVARAPPADU FOR RS.13 LAKHS AND PAID AN ADVANCE OF RS.3,68,000/ - . IN THE COURSE OF RECORDING OF STATEMENT OF THE ASSESSEE TO A SPECIFIC QUESTION PUT TO HIM REGARDING THIS TRANSACTION, ASSESSEE STATED THAT ACTUALLY ONE MR SATYA NAGENDRA KUMAR, WHO IS A BUILDER APPROACHED THE ASSESSEE AND HIS CO - SON - I N - LAW SRI KANDULA PAPA RA O FOR DEVELOPMENT OF SITE ADMEASURING 400 SQ.YARDS EACH GIVEN TO ASSESSEES WIFE AND SISTER SMT KANDULA DURGA MAHALAKSHMI. ASSESSEE FURTHER STATED THAT THE AGREEMENT WAS CANCELLED AS THEY COULD NOT THE APPROVAL OF THE PLAN AND THE SITE REMAINED WITH THE SISTER ONLY. ASSESSEE DENIED OF HAVING PAID ANY AMOUNT IN SUCH T RANSACTION. AO OBSERVING THAT ASSESSEE COULD NOT PRODUCE EITHER SHRI KANDULA PAPA RAO OR FURNISHED A NY PROOF THAT HE HAS NOT PAID ANY AMOUNT AS ADVANCE IN THIS TRANSACTION, ADDED AN AMOUNT OF RS.3,68,000/ - AS INCOME FROM UNDISCLOSED SOURCES. 4. AO ON EXAMINING THE BANK ACCOUNT OF THE ASSESSEE IN SBI, PRAJASAKTHI NAGAR, VIJAYAWADA NOTICED CASH DEPOSIT OF RS.95,000/ - DURING FINANCIAL YEAR 2004 - 05 RELEVANT TO ASSESSMENT YEAR 2005 - 06. AS NOTED BY THE AO IN THE ASSESSMENT ORDER, IN ABSENCE OF ANY VALID EXPLANATION FROM THE ASSESSEE, SAID AMOUNT OF RS.95,000/ - WAS ADDED AS UNEXPLAINED CASH DEPOSIT UNDER SECTION 68 OF THE ACT. 5. AO FURTHER NOTED THAT ASSESSEE ON 18.12.2004 HAS DISPOSED OF A PROPE RTY AT JAGGALA HPET TOWN ADMEASURING 0.49 ACRE TO ONE SRI DODDAPANENI VEERA GANGADHAR FOR A CONSIDERATION OF RS.5,88,000/ - . AS ASSESSEE DID NOT DISCLOSE THE INCOME ARISING OUT OF SUCH SALE, AO ASKED THE ASSESSEE TO EXPLAIN. ASSESSEE ADMITTED SUCH TRANSACT ION AND WORKED OUT TAXABLE CAPITAL GAIN OF RS.45,288/ - . HOWEVER ON EXAMINING THE COMPUTATION MADE BY THE ASSESSEE, AO NOTICED THAT ASSESSEE CLAIMED SITE DEVELOPMENT AND CIVIL CONSTRUCTION DONE ON THE SITE DURING THE YEAR 1994 - 95 FOR AN AMOUNT OF RS.2,75,0 00/ - . HOWEVER, ON EXAMINATION OF THE SALE DEED, AO NOTICED THAT AS PER RECITAL OF THE SA LE DEED, ASSESSEE SOLD A VACAN T SITE WITHOUT ANY CONSTRUCTION , ETC. HE, THEREFORE, CONCLUDED THAT ASSESSEES CLAIM OF DEVELOPMENT EXPENDITURE ON ACCOUNT OF CONSTRUC TION BEING MADE IS NOT ACCEPTABLE. HE, THEREFORE, COMPUTED THE LONG TERM CAPITAL GAIN OF RS.5,36,890/ - AND ADDED IT TO THE INCOME OF THE ASSESSEE . 4 BEING AGGRIEVED OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER , ASSESSEE PREFERRED APPEAL BEFORE LD CIT(A), VIJAYAWADA. 6. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSE E CHALLENGED THE ASSESSMENT ORDER BOTH ON LEGAL ISSUE AS WELL AS ON MERITS. LD CIT(A) IN A COMMON ORDER FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09, AFTER CONSIDERING ASSESSEE S SUBMISSIONS, DELETED ALL THE ADDITIONS MADE BY THE AO EXCEPT THE ADDITION MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN. SO FAR AS LONG TERM CAPITAL GAIN IS CONCERNED, LD CIT(A) HAVING NOTED THE FACTS ON RECORD, UPHELD THE ORDER OF THE AO IN THIS REGARD BUT NEVERTHELESS LD CIT(A) PARTLY ACCEPTED ASSESSEES CONTENTION WITH REGARD TO DEVELOPMENT EXPENDITURE INCURRED BY HIM BY RESTRICTING IT TO RS.1,25,000/ - . LD CIT(A) ALSO ACCEPTED ASSESSEES CLAIM THAT ASSESSEE I S ONLY 50% SHAREHOLDER IN THE SAID PROPERTY AND, THEREFORE, HELD THAT 50% O F THE LONG TERM CAPITAL GAIN TO BE COMPUTED IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. STILL AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. AT THE TIME OF HEARING, LD A.R . CANVASSED HIS ARGUMENTS ONLY ON THE LEGAL ISSUE OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT AND SUBMITTED THAT AO WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT ONLY ON THE BASIS OF DEPOSITION MADE BEFORE THE CIVIL COURT. HE SUBMITTED THAT EV EN AS PER THE STATEMENT RECORDED BEFORE THE CIVIL COURT, ASSESSEE HAD ADMITTED HIS INCOME FROM OTHER SOURCES IN THE YEAR UNDER DISPUTE AT RS.1 LAKH WHEREAS IN THE RETURN FILED FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSEE HAS DISCLOSED INCOME OF RS.99,000/ - . HENCE, THERE IS NO CASE FOR REOPENING THE ASSESSMENT. LD A.R. SUBMITTED THAT THERE BEING NO TANGIBLE MATERIAL BEFORE THE AO, REOPENING OF ASSESSMENT IS BAD IN LAW. LD A.R. FURTHER CONTENDED THAT ASSESSEE HAD SPECIFICALLY REQUESTED F OR COMMUNICATION OF R EASONS RECORDED FOR REOPENING THE ASSESSMENT, HOWEVER, AO COMPLETED THE ASSESSMENT WITHOUT COMMUNICATION OF REASONS. HENCE, HE URGED THAT REASSESSMENT MADE UNDER SECTION 147 OF THE ACT IS 5 INVALID. IN THIS CONTEXT, LD A.R. RELIED UPON THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD VS. ITO, 259 ITR 19(SC). 8. ON THE OTHER HAND, LD D.R. SUBMITTED THAT ASSESSEE HAD NOT RAISED THE ISSUE OF NON - COMMUNICATION OF REASONS RECORDED BEFORE LD CIT(A), THEREFORE, HE CANNOT RAISE IT AT THIS STAGE. LD D.R. FURTHER SUBMITTED THAT ASSESSEE HAD, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NEVER ASKED FOR CO MMUNICATION OF REASONS RECORDED , HENCE, THERE IS NO OCCASION ON THE PART OF THE AO TO COMMUNICATE SUCH REASONS TO THE ASSESSEE. SHE F URTHER SUBMITTED THAT ASSESSEE HIMSELF HAVING ADMITTED CAPITAL GAIN DURING THE ASSESSMENT PROCEEDINGS , ESCAPEMENT OF INCOME IS ESTABLISHED . HENCE, THE EXERCISE OF THE JURISDICTION BY THE AO IN REOPENING THE ASSESSMENT UNDER SECTION 147 CANNOT BE CHALLENGE D. 9. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. ON PERUSAL OF ASSESSMENT ORDER, IT IS APPARENT THAT AO ON THE BASIS OF INFORMATION A VAILABLE WITH HIM INDICATING ESCAPEMENT OF INCOME HAD EXERCISED HIS POWERS UNDER SECTION 147 OF THE ACT FOR REOPENING THE ASSESSMENT. IT IS FURTHER EVIDENT FROM THE ASSESSMENT ORDER IN SO FAR AS NON - DISCLOSURE OF LONG TERM CAPITAL GAIN IS CONCERNED, THE ESCAPEMENT OF INCOME IS PROVED ON RECORD AS ASSES SEE HIMSELF DURING THE ASSESSMENT PROCEEDINGS HAS ADMITTED NON - DISCLOSURE OF SUCH INCOME AND WORKED OUT THE TAXABLE CAPITAL GAIN AT RS.45,288/ - . THEREFORE, REOPENING OF ASSESSMENT ON ACCOUNT OF ESCAPEMENT OF INCOME IS PROVED BEYOND DOUBT AND THERE IS NO G ROUND ON THE PART OF THE ASSESSEE TO CHALLENGE THE SAME BY CONTENDING THAT THERE IS NO TANGIBLE MATERIAL BEFORE THE AO. IN SO FAR AS ASSESSEES CONTENTION WITH REGARD TO NON - COMMUNICATION OF REASONS IS CONCERNED, IT IS NOT CLEAR FROM THE FACTS ON RECORD A S TO WHETHER AS SESSEE AFTER COMPLYING TO THE NOTICE UNDER SECTION 148 OF THE ACT , HAD ASKED FOR COMMUNICATION OF REASONS . TO A SPECIFIC QUERY MADE BY THE BENCH, LD AR ALSO COULD NOT SUBSTANTIATE HIS CLAIM BY PRODUCING ANY MATERIAL EVIDENCE TO SHOW THAT AS SESSEE BEFORE COMPLETION OF ASSESSMENT HAD ASKED FOR COMMUNICATION OF REASONS. 6 IN THIS FACTUAL POSITION, RELIANCE PLACED BY LD A.R. IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD (SUPRA) WILL NOT BE OF ANY SUPPORT TO THE ASSESSEE SINCE ASSESSEE HAD NEVER ASKE D FOR COMMUNICATION OF REASONS BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS. IT IS ALSO A FACT THAT ASSESSEE NOT ONLY HAS PARTICIPATED IN THE ASSESSMENT PROCEEDINGS BUT HAS ALSO ADMITTED CAPITAL GAIN. THEREFORE, IT HAS TO BE PRESUMED THAT ASSESSEE WAS AWAR E OF THE REASONS ON WHICH ASSESSMENT WAS REOPENED . FURTHER MORE, AS CAN BE SEEN FROM RECORD, ASSESSEE HAS NOT RAISED ANY ISSUE WITH REGARD TO MERITS OF THE ADDITION. IN FACT, LD A.R. IN THE COURSE OF HEARING, FAIRLY CONCEDED THAT ASSESSEE HAS NO CASE IN SO FAR AS THE MERITS OF THE ADDITION IS CONCERNED. IN THE AFORESAID CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD A.R. REGARDING VALIDITY OF THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT. WE, THEREFORE, UPHOLD THE ORDER OF LD C IT(A) BY DISMISSING THE GROUND RAISED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6/12/2013 . SD/ - S D/ - (B. RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAP ATNAM DATED 0 6 /12 /2013 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : KOSANAM VENKATA KRISHNA RAO, 32 4 - 11A, PRAJASAKTHI NAGAR, VIJAYAWADA. 2. THE RESPONDENT. : ITO, WARD 2(3),VIJAYAWADA 3. THE CIT(A) - VIJAYAWADA 4. CIT , VIJAYAWADA 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//