Sri P Srinivasa Reddy, Rajahmundry V. The ACIT, Circle-1, Rajahmundry

ITA 505/VIZ/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0116 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1998-1999
• Appeal Filed On: 08-12-2003
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Keywords: Search and seizure; Block assessment

Judgement Text

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.505/VIZAG/2003 ASSESSMENT YEAR: 1998-99 PADALA SRINIVASA REDDY, RAJAHMUNDRY VS. DCIT, CIRCLE-1, RAJAHMUNDRY (APPELLANT) (RESPONDENT) . GIR NO: S01031 APPELLANT BY: SHRI Y. RATNAKAR, CA RESPONDENT BY: SHRI B. JAYAKUMAR, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.9.2003 PASSED BY THE LD CIT (A) RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 1998-99. 2. THE ASSESSEE HAD RAISED ORIGINALLY FOLLOWING GRO UNDS: I) THE FIRST APPELLATE AUTHORITY VIZ., COMMISSIONER OF INCOME-TAX (APPEALS), RAJAHMUNDRY SHOULD HAVE ALLOWE D THE APPEAL IN FULL; II) THE ASSESSING AUTHORITY VIZ., DEPUTY COMMISSIONER O F INCOME-TAX, CIRCLE-1 RAJAHMUNDRY HAS NOT GIVEN PROPE R OPPORTUNITY BEFORE COMPLETING THE ASSESSMENT TO THE APPELLANT; III) THE BOOK RESULTS SHOULD HAVE BEEN ACCEPTED BY THE ASSESSING AUTHORITY; IV) THE APPELLANT CONTENDED BEFORE THE ASSESSING AUTHOR ITY THAT HE COULD NOT PRODUCE BOOKS OF ACCOUNT BEFORE T HE ADI AS HE NEVER CALL FOR THE SAID BOOKS; V) THE APPELLANT MAINTAINING BOOKS OF ACCOUNT AND THE SAID BOOK RESULTS SHOULD HAVE BEEN ACCEPTED AS STATED AB OVE PAGE 2 OF 6 VI) ANY OTHER GROUNDS OF APPEAL THAT MAY BE URGED AT TH E TIME OF HEARING 3. WHEN IT WAS POINTED OUT THAT THE GROUNDS RAISED ARE GENERAL IN NATURE AND FURTHER THEY ARE NOT IN ACCORDANCE WITH THE RULE 8 OF APPELLATE TRIBUNAL RULES, THE ASSESSEE HAS FILED THE FOLLOWIN G GROUNDS UNDER THE HEADING ADDITIONAL GROUNDS OF APPEAL. A) THE ORDER OF THE LEARNED CIT(A) RAJAHMUNDRY DATED 16-9-2003 IS CONTRARY TO LAW AND FACTS. B) THE LEARNED CIT A) SHOULD HAVE SEEN THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT IS NOT LIABLE TO TAX ON THE INTEREST AMOUNT AS ASSESSED. C) THE APPELLANT CONTENTS THAT HE IS NOT ENTITLED TO THE INTEREST ASSESSEE NOR DID HE RECEIVE ANY INTEREST ON THE PROMOTES ALLEGED TO BE IN THE NAME OF THE APPELLANT. D) THE APPELLANT CONTENDS THAT THE LEARNED CIT (A) SHOULD HAVE SEEN THAT THE PROMOTES DO NOT BELONG TO THE APPELLANT AND IN THE BLOCK ASSESSMENT THOSE PROMOTES WERE INCLUDED ONLY AS A PROTECTIVE MEASURES. HENCE THE LEARNED CIT (A) SHOULD NOT HAVE UPHELD THE ASSESSMENT OF INTEREST IN THE APPELLANTS HANDS. E) IN ANY EVENT THE APPELLANT CONTENDS THAT EVEN IF ANY INTEREST IS ASSESSABLE, IT IS LIABLE TO TAX ONLY IN THE HANDS OF SHRI P.S.SATYANARAYANA REDDY AND NOT IN THE HANDS OF THE APPELLANT. F) IT IS CONTENDED THAT ASSESSMENT IS MADE WITHOUT GIVING ADEQUATE TIME TO THE APPELLANT TO PLACE FULL MATERIAL ON RECORD. G) THE APPELLANTS CREATES LEAVE TO ADD TO, AMEND OR ALTER ANY OF THE ABOVE SAID GROUNDS ON THE OCCASION MAY REQUIRE. 4. WE NOTICE THAT EVEN THE ADDITIONAL GROUNDS OF AP PEAL ARE ALSO ARGUMENTATIVE AND NARRATIVE AND NOT IN ACCORDANCE W ITH THE RULE 8 OF THE APPELLATE TRIBUNAL RULES. THERE IS NO GROUND STATI NG THE SPECIFIC RELIEF SOUGHT FOR BY THE ASSESSEE. HOWEVER, ON A PERUSAL OF THE ORDER OF LD CIT (A), WE UNDERSTAND THAT THE ASSESSEE IS ASSAILING T HE DECISION OF LD CIT (A) PAGE 3 OF 6 IN CONFIRMING THE ADDITION OF RS.154,491/- IN HIS H ANDS. ACCORDINGLY WE PROCEED TO DISPOSE OF THIS APPEAL. 5. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE A SSESSEE HEREIN FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1998-99 AD MITTING AN INCOME OF RS.46,410/-. THE ASSESSEE IS ONE OF THE PERSONS REL ATED TO SHRI PADALA SATYANARAYANA REDDY. THERE WAS A SEARCH AND SEIZURE OPERATION ON 23.12.1997 IN THE GROUP OF PADALA SATYANARAYANA RED DY. DURING THE COURSE OF SEARCH CERTAIN PRONOTES STANDING IN THE NAME OF THE ASSESSEE WERE FOUND OUT. ON THE BASIS OF FURTHER ENQUIRY, THE AO, DURI NG THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, CAME TO THE CONCLUSION THAT SHRI PADALA SATYANARAYANA REDDY IS THE REAL OWNER OF THE PRONOT ES, THOUGH THEY STAND IN THE NAME OF THE ASSESSEE. ACCORDINGLY THE INVES TMENT IN PRONOTES WERE ASSESSED PROTECTIVELY IN THE HANDS OF THE ASSESSEE IN THE BLOCK ASSESSMENT PROCEEDING. DURING THE COURSE OF REGULAR ASSESSMEN T PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION, THE INTEREST PERTAINING T O THE PERIOD FROM 24.12.1997 TO 31.3.1998, I.E. SUBSEQUENT TO THE DAT E OF SEARCH WAS DETERMINED AT RS.1,86,844/-. ACCORDINGLY THE AO DE TERMINED THE TOTAL INCOME AT RS.186844/- AS AGAINST RS.46,410/- RETURN ED BY THE ASSESSEE. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LD CIT (A) GAVE A RELIEF OF RS.32,353/-. STILL AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE US. 6. LD AR SUBMITTED THAT THE PRONOTES, ON THE BASIS OF WHICH THE INTEREST INCOME WAS ASSESSED BY THE AO, DO NOT BELONG TO TH E ASSESSEE. IT IS VERY CLEAR FROM THE ORDER PASSED BY THE AO IN THE BLOCK ASSESSMENT PROCEEDING, WHEREIN THE AO HAS GIVEN A CLEAR FINDING TO THE EFF ECT THAT SHRI PADALA SATYANARAYANA REDDY IS THE REAL OWNER OF THE PRONOT ES. ACCORDINGLY THE LD AR CONTENDED THAT THE INTEREST ON PRONOTES, WHICH A RE NOT RELATED TO THE ASSESSEE CANNOT BE ASSESSED IN THE HANDS OF THE ASS ESSEE. ON THE OTHER HAND THE LD DR SUPPORTED THE ORDER OF LD CIT (A). PAGE 4 OF 6 7. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THERE CANNOT BE ANY DISPUTE WITH THE FACT THAT THE BLOCK ASSESSMENT PROCEEDING AND THE REGULAR ASSESSMENT PROCEEDING ARE TWO INDEP ENDENT PROCEEDINGS, WHICH ARE PARALLEL TO EACH OTHER. AS SUBMITTED BY T HE ASSESSEE, WE NOTICE THAT THE INVESTMENT MADE IN THE PRONOTES, WHICH WER E UNEARTHED DURING THE COURSE OF SEARCH WAS ASSESSED IN THE HANDS OF THE A SSESSEE ON PROTECTIVE BASIS. THE ISSUE WAS CARRIED IN APPEAL TO THE TRIB UNAL AND THIS TRIBUNAL, VIDE ITS ORDER DATED 10.1.08 PASSED IN THE HANDS OF THE ASSESSEE IN ITSSA NO. 44/VIZAG/2002, CANCELLED THE ADDITION MADE BY THE A O ON PROTECTIVE BASIS ON THE GROUND THAT THERE CANNOT BE ANY PROTECTIVE A DDITION IN A BLOCK ASSESSMENT CASE. THUS THE BLOCK ASSESSMENT HAS BEE N CANCELLED ON A LEGAL GROUND ONLY. THE ISSUE WAS NOT DECIDED ON MERITS. IN CASE OF DOUBTS ABOUT THE PERSON TO BE ASSESSED, THE REVENUE NORMALLY ASS ESSES THE INCOME ON SUBSTANTIVE BASIS IN THE HAND OF A PERSON AND PROTE CTIVELY IN THE HANDS OF ANOTHER PERSON. IN THE APPELLATE PROCEEDINGS, THE R EAL PERSON IN WHOSE HANDS THE INCOME SHALL BE ASSESSABLE IS DECIDED AND THERE IS A POSSIBILITY THAT IN APPELLATE PROCEEDING, THE DECISION OF THE A O MAY BE REVERSED. THE LD AR COULD NOT SUBMIT HOW THE ISSUE REGARDING THE ASSESSMENT OF PRONOTES WERE DECIDED IN THE HANDS OF SHRI P.S.SATYANARAYANA REDDY, I.E. WHETHER THE SUBSTANTIVE ASSESSMENT IN HIS HANDS WAS CONFIRM ED OR NOT. HENCE, IN OUR OPINION, THE ORDER PASSED BY THE TRIBUNAL IN TH E HANDS OF THE ASSESSEE IN THE BLOCK ASSESSMENT PROCEEDINGS CAN NOT COME TO THE HELP OF THE ASSESSEE TO DECIDE THE ISSUE BEFORE US. 8. THE ISSUE BEFORE US IS WITH REFERENCE TO THE REG ULAR ASSESSMENT PROCEEDINGS. FROM THE ORDER OF THE LD CIT (A) WE NO TICE THAT THE ENTIRE INTEREST ON PRONOTES FOUND OUT DURING THE COURSE OF SEARCH WAS ALSO ASSESSED IN THE HANDS OF SHRI PADALA SATYANARAYANA REDDY. IN THE APPEAL PREFERRED BY SHRI SATYANARAYANA REDDY, THE CONCERNE D LD CIT (A) DIRECTED THAT THE INTEREST INCOME HAS TO BE ASSESSED IN THE HANDS OF RESPECTIVE ASSESSEES WHO WERE FOUND TO BE THE OWNER ON RECORD. THE DECISION OF THE LD CIT (A) ARE EXTRACTED BELOW FOR THE SAKE OF REFE RENCE: PAGE 5 OF 6 THE ORDER OF THE ASSESSING OFFICER, THE STATEMENT OF FACTS, THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSIONS F URNISHED BY THE AUTHORISED REPRESENTATIVE AT THE TIME OF APP EAL HEARING HAVE BEEN CONSIDERED. AT THE TIME OF APPEAL HEARING, THE AUTHORISED REPRESENTATIVE HAD SUBMITTED THAT TH E CIT (APPEALS) HAD DISPOSED OFF THE APPEAL FILED BY SHRI PADALA SATYANARAYANA REDDY AGAINST THE ORDER OF THE DCIT, CIRCLE-1, RAJAHMUNDRY, PASSED U/SEC 143 (3) OF THE ACT FOR TH E ASSESSMENT YEAR 1998-99. IT IS SEEN FROM THE SAID OR DER OF CIT (APPEALS) IN ITA NO.90/ITR/C-1.RJY/CIT(A), RJY/ 2001-02, DATED 01-02-2002 THAT AT PARA 6, THE ISSUE HAS BEEN DISCUSSED. THE ASSESSING OFFICER MADE AN ADDITION O F RS.3,61,058/- AS INTEREST ON PRONOTES. THE CIT (APP EALS) HELD THAT THE APPEALS AGAINST THE BLOCK ASSESSMENTS IN T HE CASE OF THE APPELLANT I.E.SRI SATYANARAYANA REDDY AS WELL A S OTHER MEMBERS, HAVE BEEN DISPOSED OFF AND THE INVESTMENTS IN THE PRONOTES HAVE BEEN CONFIRMED IN THE HANDS OF THE AP PELLANT AS WELL AS THE OTHER FAMILY MEMBERS AND DIRECTED TH AT THE INTEREST PERTAINING TO RELEVANT ASSESSMENT YEAR HAS TO BE SPREAD OVER TO ALL MEMBERS, INCLUDING THE APPELLANT , IN THE RATIO OF THEIR INVESTMENTS, AND DIRECTED THE ASSESS ING OFFICER TO COMPUTE THE INTEREST INCOME ON THE PRONOTES IN T HE RESPECTIVE ASSESSEES HANDS AND GIVE RELIEF IN THE CASE OF THE APPELLANT I.E. SRI PADALA SATYANARAYANA REDDY. AT T HE TIME OF ASSESSMENT PROCEEDINGS, THE AUTHORISED REPRESENTATI VE WORKED OUT THE INTEREST RELATABLE TO THE PRONOTES I N THE NAME OF SRI P. SRINIVASA REDDY, WHICH WERE ADDED IN THE HANDS OF SRI PADALA SATYANARAYANA REDDY AT RS.1,86,844/-. IT IS FURTHER SEEN THAT THE CIT (APPEALS), IN THE APPELLATE ORDER IN THE CASE OF THE APPELLANT FOR THE BLOCK ASSESSMENT, VIDE ORD ER IN ITA NO.28/TR/C-1.RJY/CIT (A),RJY/2000-01 DATED 30-01-20 02, HELD THAT THE PRONOTE IN THE NAME OF SRI BALAKRISHN A VARMA DATED 15-4-1995 OF RS.1 LAKH AND THE PRONOTE IN THE NAME OF SRI KUNAPURAJU VIJAYARAMA RAJU, DATED 10-10-1996 OF RS.4 LAKHS, ARE EXECUTED WITHOUT ANY MONEY BEING PASSED ON, AND THE ADDITION WAS DELETED BY THE CIT (APPEALS). THER EFORE, THE INTEREST RELATABLE TO THESE PRONOTES AMOUNTING TO R S.6,467/- AND RS.25,886/- HAVE TO BE DELETED FROM THE ADDITIO N MADE BY THE ASSESSING OFFICER OF RS.1,86,844/-. THEREFOR E, THE APPELLANT GETS A RELIEF OF RS.32,353/-. 9. BEFORE US, IT WAS NOT SHOWN THAT THE ORDER PASSE D BY THE CONCERNED LD CIT(A) IN THE HANDS OF SHRI P.SATYANARAYANA REDD Y HAS BEEN REVERSED OR MODIFIED. IN THESE CIRCUMSTANCES, ON A CAREFUL PER USAL OF THE ORDER OF LD PAGE 6 OF 6 CIT(A), WE NOTICE THAT THE LD CIT(A) HAS RENDERED H IS DECISION ON PROPER REASONING AND HENCE WE DO NOT FIND ANY INFIRMITY IN HIS DECISION. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 16.9.2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 16 TH SEPTEMBER, 2009. COPY TO 1 SHRI PADALA SRINIVASA REDDY, D.NO.74-13-5/9, S-1, SRI APARTMENTS, PRAKASH NAGAR, RAJAHMUNDRY 533 105 2 THE DCIT, CIRCLE-1, RAJAHMUNDRY 3 THE CIT, RAJAHMUNDRY 4 THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM