ACIT, Cir-6(1), Hyderabad V. D.B. Ramachander, Hyderabad

ITA 521/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61936 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 28-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Unexplained investment
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, A.CCOUNTANT MEMBER ITA NO. 521/HYD/2011 ASSESSMENT YEAR: 2000-01 ASST. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 6(1), HYDERABAD VS. D.B. RAMACHANDER, RESPONDENT HYDERABAD. (PAN. ABPPD8035J) AND C.O. NO. 39/HYD/11 (IN ITA NO. 521/HYD/2011 ASSESSMENT YEAR: 2000-01) D.B. RAMACHANDER, CROSS OBJECTOR HYDERABAD. (PAN. ABPPD8035J) VS. ASST. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 6(1), HYDERABAD REVENUE BY : SHRI B.V. PRASAD REDDY ASSESSEE BY : SHRI A.V. RAGHURAM DATE OF HEARING : 08/05/2012 DATE OF PRONOUNCEMENT : 09/07 /2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE REVENUE AND C.O. BY THE ASSESS EE ARE DIRECTED AGAINST THE ORDER OF CIT(A), GUNTUR, D ATED 29/11/2010 FOR THE ASSESSMENT YEAR 2000-01. ITA NO. 521/HYD/2011 & C.O. 39/H/11 D.B. RAMACHANDER 2 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS DERI VING INCOME FROM MONEY LENDING AND FOR THE AY 2000-01 FI LED THE RETURN OF INCOME ADMITTING TOTAL INCOME AT RS. 39,1 1,721/-. SUBSEQUENTLY, ON RECEIPT OF INFORMATION AND COPIES OF THE PAPERS FILED BEFORE THE ARBITRATOR, THE CASE WAS RE OPENED BY THE AO BY ISSUE OF NOTICE U/S 148 OF THE ACT. THE AO HELD THAT THE ASSESSEE HAD MADE UNEXPLAINED INVESTMENT T O THE TUNE OF RS. 60,70,000/- IN M/S POLISETTY TOWERS AND ADDED THE SAME TO THE TOTAL INCOME AND ACCORDINGLY HE CO MPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS. 99,81,720/-, WHICH RESULTED IN A TAX DEMAND OF RS. 43,99,542/-. 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E CIT(A) QUESTIONING THE REOPENING AS WELL AS THE ADD ITION. WITH REGARD TO THIRD GROUND ON ADDITION OF RS 60,7 0,000/- THE APPELLANT SUBMITTED HIS ARGUMENTS AS UNDER: THE APPELLANT SUBMITTED THAT THE ACTION OF THE AO IN MAKING ADDITION OF RS 60,70,000/- IS UNJUST AND IS WITHOUT APPLICATION OF MIND. THE AO IS OF THE VIEW THAT (A) THE ASSESSEE HAD MADE THE CLAIM OF RS 95,30,000 I.E. THE ASSESSEE HIMSELF ADMITTED THAT HE SPENT TH E STATED AMOUNT (B) THE ARBITRATION AWARD IS NOT FINA L AS THE APPEAL IS PENDING WITH THE A.P. HIGH COURT . TH E AWARD MIGHT BE CHANGED AND ONLY ON A FULL AND FINAL FINDING CAN SUCH AMOUNT OVERRIDE THE INITIAL ADMISS ION MADE BY THE ASSESSEE (C) EVEN IN THE ARBITRATION AWARD, THE AMOUNT SPENT IN POLISETTY TOWERS HAS BEE N FINALIZED BETWEEN ONLY TWO PARTIES SRI JAGADEESWA R AND THE ASSESSEE SRI D.B. RAMACHANDER. SINCE THE AMOUNTS IN QUESTION ARE SPENT BY THESE TWO SPECIFIC PEOPLE ONLY, WHAT IS SPENT BY THE ASSESSEES WIFE H AS NO RELEVANCE TO WHAT IS BEING CLAIMED AS SPENT BY T HE ASSESSEE. THE ABOVE CONCLUSIONS ARRIVED AT BY THE AO SHOW THA T SHE IS TOTALLY PREJUDICED AND HAS NOT APPLIED HER M IND ITA NO. 521/HYD/2011 & C.O. 39/H/11 D.B. RAMACHANDER 3 TO THE FACTS BEFORE HER TO ARRIVE AT A REASONABLE CONCLUSION. THIS IS SO BECAUSE WHAT IS REQUIRED TO BE VERIFIED IS THE SOURCES FOR INVESTMENT ASSUMING FOR A WHILE THAT THE ASSESSEE HAS INVESTED. IT IS NOT UNDERSTANDABLE AS TO WHY INVESTMENT CLAIMED BY THE WIFE OF APPELLANT CANNOT BE CONSIDERED AND HOW IT H AS NO RELEVANCE. DOES THE AO HAS BEFORE HER ANY INFORMATION THAT THE INVESTMENT BY WIFE OF THE APPELLANT CLAIMED TO BE ON POLISETTY TOWERS IS NOT ACTUALLY MADE OR THAT IT IS INVESTED OVER AND ABOVE THE INVESTMENT OF THE APPELLANT. THIS CONCLUSION BY TH E AO IS TOTALLY UNJUST AND RIDICULOUS. THE APPELLANT SUBMITS THAT THE CLAIM BEFORE ARBITR ATION AUTHORITY WAS MADE ON THE BASIS OF VALUATION OF THE WORK GOT DONE AND NOT ON THE BASIS OF THE INVESTMEN T REFLECTED IN THE BOOKS OF ACCOUNT. WHEN THE WORK GO T DONE IS EVALUATED THE MARKET VALUE OF THE MATERIAL USED AND ALSO THE VALUE OF SERVICES USED WILL BE CONSIDERED AND AS SUCH THE SAME MAY BE MORE THAN WHAT IS RECORDED IN THE BOOKS OF ACCOUNT. THIS IS COMMON PRACTICE BY ANY BUILDER OR CONTRACTOR IF A C LAIM WERE TO BE MADE BEFORE ANY ARBITRATION AUTHORITY. IF THE VIEW OF THE AO THAT THE ACTUAL INVESTMENT WOULD BE EQUAL TO THE CLAIM BEFORE THE ARBITRATION AUTHORITI ES WERE TO BE TAKEN AS CORRECT THEN IN CASE OF THOSE CONTRACTORS WHOSE ARBITRATION CLAIMS, RUNNING INTO CRORES OF RUPEES. PENDING BEFORE THE GOVT. OF ANDHR A PRADESH THERE SHOULD BE HUGE ADDITION OF UNEXPLAINE D INVESTMENT. WHERE AS IT IS NOT SO. IN FACT IN ALL CASES OF CONTRACTORS WHOEVER HAPPEN TO RECEIVE THE ARBITRATION AWARD WHAT IS BEING CONSIDERED BY THE DEPARTMENT IS AS TO WHETHER TO ASSESS WHOLE OF SUCH RECEIPT OR A PART OF IT. THE APPELLANT HAS NOT COME ACROSS A SINGLE CASE WHEREIN THE AO HAS LOOKED INTO THE DETAILS OF THE CLAIM MADE AND THE RECORDING IN THE BOOKS OF ACCOUNT OF SUCH AMOUNT AS INVESTMENT. FOR REASONS BEST KNOWN TO THE AO A NEW STAND IS TAKEN I N HIS CASE TO CONSIDER THE ENTIRE AMOUNT OF CLAIM AS INVESTED AND THE DIFFERENCE IS ADDED AS UNEXPLAINED INVESTMENT. THE APPELLANT ONCE AGAIN SUBMITS THAT THERE IS NO SUCH INVESTMENT AS CLAIMED AND THE VALU E OF CLAIM IS ARRIVED AT BY CONSIDERING THE MARKET VA LUE OF THE MATERIAL AND THE VALUE OF SERVICES THROUGH PERSONAL SUPERVISION. THE AO AT BEST COULD ADD ONL Y THE AMOUNT OF DIFFERENCE BETWEEN THE VALUE THAT IS DETERMINED BY THE ARBITRATOR AS INVESTED AND THE ITA NO. 521/HYD/2011 & C.O. 39/H/11 D.B. RAMACHANDER 4 AMOUNT AS CLAIMED BY THE APPELLANT AND NOT MORE THA N THAT.. EVEN WHILE DOING SO THE AO SHOULD ALLOW DEDUCTION OF AN AMOUNT OF RS 11,35,000/- WHICH IS REFLECTED IN HER WEALTH TAX RETURN FILED ON 31.8..2 000. A COPY OF THE SAME IS SUBMITTED FOR PERUSAL. THE AO WHILE ON ONE HAND GIVES CREDENCE TO THE WEALTH TAX RETURN OF THE APPELLANT TO ARRIVE AT THE DIFFERENC E IN INVESTMENT DOES NOT GIVE THE SAME VALUE TO THE WEAL TH TAX RETURN BY THE WIFE OF APPELLANT AND THE AMOUNT REFLECTED THEREIN. THERE IS NO REASON TO HOLD THAT SUCH AN INVESTMENT IS NOT MADE IN POLISETTY TOWERS. THI S SUBMISSION IS WITHOUT PREJUDICE TO THE SUBMISSION T HAT THE VERY ASSESSMENT IS VITIATED BY BIAS AND IS NOT VALIDLY MADE SINCE THERE IS NO EVIDENCE OF THE NOTI CE U/S 148 BEING ISSUED IN TIME. THE APPELLANT THEREFO RE PRAY THAT THE APPEAL BE ALLOWED. 4. THE CIT(A) ALLOWED THE ASSESSEES APPEAL HOLDING THAT THE QUANTUM OF UNEXPLAINED INVESTMENT MADE BY THE A O IS NOT CORRECT AND IF AT ALL ANY ADDITION IS MADE, IT WILL BE RS. 18,17,000/- BEING THE DIFFERENCE BETWEEN THE AWARD AMOUNT OF RS. 64,12,000/- AND INVESTMENT BY THE ASSESSEE OF RS. 34.6 LAKHS AND BY HIS WIFE OF RS. 11.35 LAKHS. THE CIT(A) FURTHER HELD THAT THE ADDITION CANNOT BE MADE IN TH IS YEAR AS IT IS ADMITTED IN THE YEAR 2009-10. 5. THE ASSESSEE BEFORE THE CIT(A) WITH RESPECT TO T HE VALIDITY OF ISSUE OF NOTICE U/S 148, THAT THE NOTI CE U/S 148 WAS SERVED ON THE ASSESSEE ON 20/04/2007 AND UNDER THE PROVISIONS OF SECTION 149 IT HAS TO BE SERVED ON TH E ASSESSEE BEFORE THE END OF SIX YEARS, WHICH ENDED BY 31/03/2 007. THE CIT(A) HELD THAT IT IS ENOUGH IF THE NOTICE IS ISSUED BY 31/03/2007 AND THERE IS NO NEED TO SERVE IT WITHIN THAT DATE. AGGRIEVED, THE ASSESSEE FILED C.O. AGAINST T HE ORDER OF CIT(A). 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS O F APPEAL ITA NO. 521/HYD/2011 & C.O. 39/H/11 D.B. RAMACHANDER 5 AND THE ASSESSEE HAS RAISED C.O. AGAINST THE ORDER OF CIT(A) WITH RESPECT TO REOPENING OF ASSESSMENT U/S 148 OF THE ACT. 1. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS 60,70,000/- BEING THE UNEXPLAINED INVESTMENT MADE I N POLISETTY TOWERS. 2. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HIMSELF HAD ADMITTED BEFORE THE ARBITRATOR THAT THE AMOUNT INVESTED IN POLISETTY TOWERS WAS RS . 95,30,000/- WHEREAS THE SAME WAS ADMITTED AT RS 34,50,000/- IN THE WEALTH TAX RETURNS FILED. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. IT IS OBSERVED THAT THE ADDITION CANNOT BE MADE ON THE CLAIM OF THE ASSESSEE BEFORE THE ARBITR ATION. THE FINAL AWARD OF THE ARBITRATION TO BE LOOKED INT O AND THE SAME WAS NOT PRODUCED BEFORE US. BEING SO, IN OUR O PINION, IT IS FAIR AND JUST TO RESTORE THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER TO DECIDE THE SAME ON THE BASIS O F FINAL AWARD OF THE ARBITRATION. WE ORDER ACCORDINGLY. THU S, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. 8. WITH REGARD TO THE C.O. FILED BY THE ASSESSEE, THE AO HAS CLARIFIED THAT THE PROCEEDINGS U/S 148 THE ISSU E OF NOTICE IS RELEVANT AND NOT THE DATE OF SERVICE. IN THIS C ASE, MENTIONING OF THE DATE IN THE ORDER SHEET ON WHICH NOTICE WAS GIVEN FOR SERVICE TO THE NOTICE SERVER MIGHT NO T HAVE BEEN PRESENT. HOWEVER, NOTICE WAS ISSUED ON 20/03 /2007 I.E. BEFORE 31/03/2007. HENCE, THE PRESUMPTION THA T NOTICE U/S 148 ISSUED BEYOND 31/03/2007 IS INCORRECT AND I S TO BE DISMISSED. THEREFORE, THE C.O. FILED BY THE ASSESS EE IS DISMISSED. ITA NO. 521/HYD/2011 & C.O. 39/H/11 D.B. RAMACHANDER 6 9. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. OF TH E ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH JULY, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 9 TH JULY, 2012. KV COPY TO:- 1) ACIT, CIRCLE 6(1), HYDERABAD 2) D.B. RAMCHANDER, DR.NO. 8-2-680/9, ROAD NO.12, BANJARA HILLS, HYDERABAD. 3) THE CIT (A), GUNTUR. 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.