Shri Addala Chanti, Hyd, Hyderabad V. The CIT-I, Hyderabad

ITA 492/HYD/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6104 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Audit objection
• Section: 143(3); 147; 148; 263

Judgement Text

ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.492/HYD/2011 (ASSESSMENT YEAR: 2003-04) SHRI ADDALA CHANTI HYDERABAD PAN: ACXPA 5104 G VS DEPUTY COMMISSIONER OF INCOME TAX, 13(1) HYDERABAD FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. G. APARNA RAO, CIT(DR) O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2003-04. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT U/S 263 OF THE ACT AND RAISED THE FOLLOWING GROUNDS OF APPE AL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT THE ASSESSING OFFICER IS JUSTIFIED IN INITIATING PROCEEDINGS U/S 147 AND IN ISSUING NOTICE U/S 148 OF THE I. T. ACT. 3. THE OBSERVATIONS MADE BY THE LEARNED COMMISSIONER OF INCOME-TAX WITH REGARD TO THE DATE OF HEARING : 19.10.2016 DATE OF PRONOUNCEMENT : 26.10.2016 ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 2 OF 6 APPLICATION OF PROVISIONS OF SEC.147 ARE NOT RELEVANT TO THE PROCEEDINGS U/S 263 OF THE I.T. ACT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE APPRECIATED THE FACT THAT HE CANNOT ADJUDICATE UPON THE ISSUE RELATING TO ISSUANCE OF NOTICE U/S 148 AND APPLICATION OF THE PROVISIONS OF SEC.147 OF THE I.T. ACT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT THERE IS ANY ERROR IN THE ORDER U/S 143(3) R.W.S. 147PASSED BY THE ASSESSING OFFICER AND FURTHER ERRED IN HOLDING THAT THE SAID ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN SETTING ASIDE THE ORDER OF ASSESSMENT FOR BEING RE-DONE. THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSING OFFICER WHILE PASSING THE ORDER Y/S 143(3) R.W.S. 147 HAS CORRECTLY MADE THE ASSESSMENT AFTER VERIFYING THE MATERIAL ON RECORD AND, THEREFORE, THERE IS NO ERROR IN THE ASSESSMENT MADE BY THE ASSESSING OFFICER. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, ENGAGED IN FILM PRODUCTION UNDER THE NA ME AND STYLE OF M/S FRIENDLY MOVIES, FILED HIS RETURN OF INCOME F OR THE A.Y 2003-04 ON 28.11.2003 DECLARING THE TOTAL INCOME AT RS.14,05,680. THE RETURN WAS PROCESSED U/S 143(1) O F THE ACT ON 18.3.2004 AND THE ASSESSEES CLAIM OF DEPRECIATION ON VEHICLES ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 3 OF 6 AND INTEREST ON VEHICLE LOANS AS EXPENDITURE WAS AL LOWED. SUBSEQUENTLY, THE AO NOTICED THAT THESE AMOUNTS HAV E NOT BEEN REFLECTED IN THE BALANCE SHEET AND THE P&L A/C AND SINCE THERE IS NO CLAIM IN THE P&L A/C, HE WAS OF THE OPINION THAT THE EXPENDITURE IS NOT ALLOWABLE THROUGH COMPUTATION OF INCOME ALONE. THEREFORE, HE REOPENED THE ASSESSMENT U/S 14 7 OF THE ACT ON 29.06.2009. THEREAFTER, AFTER CONSIDERING THE AS SESSEES CONTENTION ABOUT THE ALLOWABILITY OF THE CLAIM, HE DISALLOWED THE DEDUCTION CLAIMED IN THE COMPUTATION OF INCOME OF B OTH THE INTEREST ON VEHICLE LOANS AND DEPRECIATION ON VEHIC LES AND BROUGHT IT TO TAX. SUBSEQUENTLY, THE CIT PERUSED THE ASSESS MENT RECORDS BY VIRTUE OF POWERS VESTED IN HIM U/S 263 OF THE AC T AND WAS OF THE OPINION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE WAS OF THE OPINION THAT THE AO HAS NOT VERIFIED VARIOUS ISSUES BUT HAS BLINDLY COMPLETED THE ASSESSMENT TACKLING THE SINGLE POINT RAISED BY THE AUDIT PARTY. THEREFORE, HE ISSUED A SHOW CAUSE NOTI CE AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE REVISED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE APPEARED AN D SUBMITTED THAT THE BOOKS OF ACCOUNT WERE EXAMINED B Y THE AO AND THAT THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS AND HENCE THE JURISDICTION U/S 263 OF THE ACT CANNOT BE INVOK ED. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE PROCEEDINGS U/S 147 ITSELF ARE NOT VALID AND THAT T HE ASSESSEE IS IN APPEAL BEFORE THE CIT (A) AGAINST THE VALIDITY O F THE PROCEEDINGS. THEREAFTER, THE ASSESSEE ALSO SUBMITTED ITS EXPLANA TION ON ALL THE ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 4 OF 6 ISSUES RAISED BY THE CIT IN THE SHOW CAUSE NOTICE U /S 263 OF THE ACT. THE CIT WAS HOWEVER, NOT CONVINCED WITH THE AS SESSEES CONTENTIONS AND PROCEEDED TO CONSIDER THE VALIDITY OF THE PROCEEDINGS U/S 147 OF THE ACT AND UPHELD THE SAME. THEREAFTER, HE PROCEEDED TO CONSIDER THE ASSESSEES SUBMISSIONS ON THE ISSUES RAISED BY HIM IN THE SHOW CAUSE NOTICE AND H OLDING THAT THE AO HAS FAILED TO MAKE ANY VERIFICATION OF THE A SSESSEES CLAIM, HE CONCLUDED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE, TH EREFORE, DIRECTED THE AO TO VERIFY ALL THE ISSUES POINTED OUT BY THE CIT INCLUDING THE AUDIT OBJECTION AND THEREAFTER COMPLETE THE ASSESSM ENT AFRESH. AGAINST THIS ORDER OF THE CIT, THE ASSESSEE IS IN A PPEAL BEFORE US. 4. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE, WHILE GROUND NOS. 2 TO 4 ARE AGAINST THE POWERS OF THE CI T IN DEALING WITH THE VALIDITY OF THE PROCEEDINGS U/S 147 OF THE ACT U/S 263 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT ARE IN VALID AND THEREFORE, THE ASSESSMENT COULD NOT HAVE BEEN REVIS ED U/S 263 OF THE ACT. FURTHER, ACCORDING TO HIM, THE CIT U/S 263 HAS NO JURISDICTION TO CONSIDER THE VALIDITY OR THE PROCEE DINGS U/S 147 OF THE ACT. THE LEARNED DR, ON THE OTHER HAND, SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS ALREADY CH ALLENGED THE VALIDITY OF THE PROCEEDINGS U/S 147 BEFORE THE CIT (A) AND THE ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 5 OF 6 SAME IS PENDING ADJUDICATION EVEN AS ON TODAY. THE CIT U/S 263 OF THE ACT CAN ONLY REVISE THE ASSESSMENT ORDER PRO VIDED THE TWIN CONDITIONS OF THE ORDER BEING ERRONEOUS AND ALSO PR EJUDICIAL TO THE INTERESTS OF THE REVENUE ARE FULFILLED. THE CIT HAS NO JURISDICTION TO CONSIDER THE VALIDITY OF THE ASSESSMENT PROCEEDI NGS U/S 147 OF THE ACT AS HE HAS NOT SITTING IN ANY APPEAL AGAINST THE ASSESSMENT ORDER, BUT IS ONLY VESTED WITH THE POWERS OF REVISI ON. THEREFORE, WE HOLD THAT THE CIT HAS NO POWER TO GIVE A FINDING ON THE VALIDITY OF THE PROCEEDINGS U/S 147 OF THE ACT IN HIS ORDER U/S 263 OF THE ACT. THUS, GROUND NOS. 2 TO 4 ARE ALLOWED. 6. AS FAR AS THE MERITS OF THE ORDER U/S 263 IS CON CERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE FACT THAT THE CIT HAS NOT GIVEN ANY FINDING ABO UT THE FULFILLMENT OF THE CONDITION U/S 263 OF THE ACT FOR REVISION OF THE ASSESSMENT ORDER. HE HAS DRAWN OUR ATTENTION TO THE LAST PARA OF THE CITS ORDER WHEREIN HE HAS ONLY SET ASIDE THE A SSESSMENT ORDER FOR PROPER VERIFICATION BY THE AO. THOUGH IT IS TRUE THAT THE AO HAS NOT VERIFIED ANY OF THE CLAIMS OF THE ASSESS EE DURING THE PROCEEDINGS U/S 143(1) OR 143(3) R.W.S. 147 OF THE ACT, IT WOULD ONLY MAKE THE ASSESSMENT ORDER ERRONEOUS BUT NOT PR EJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS MATERIAL HAS BE EN BROUGHT ON RECORD TO HOLD THAT THE ASSESSEES CONTENTIONS ARE NOT ACCEPTABLE AND THEREFORE, IT HAS CAUSED PREJUDICE TO THE INTER ESTS OF THE REVENUE. THERE IS NO FINDING GIVEN BY THE CIT THAT THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF THE NON ACCEPTABILITY OF THE CONTENTIONS OF THE ASS ESSEE IN ITA 492 OF 2011 SHRI ADDALA CHANTI HYDERABAD PAGE 6 OF 6 RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE CIT U/S 263 OF THE ACT. THEREFORE, IN OUR OPINION, THE REVISION OR DER IS ALSO NOT SUSTAINABLE. THUS, GROUND NOS. 5 & 6 ARE ALSO ALLOW ED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 26 TH OCTOBER, 2016. VINODAN/SPS COPY TO: 1 SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS E LEGANCE, 3-6- 643, STREET NO.9 HIMAYATNAGAR, HYDERABAD 500029 2 DY. COMMISSIONER OF INCOME TAX, CIRCLE 13(1) HYDE RABAD 3 CIT-I HYDERABAD 4 CIT (A)-II HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER