Mr. Santosh Kumar Jain, Hyderabad V. ACIT, Cental Circle-4, Hyderabad

ITA 571/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66434 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 18-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K GNAN PRAKASH
• Assessee Lawyers: RAJEN DRA K ANKARIA
• Keywords: Search and seizure; Opportunity of being heard; Assessment record
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.571/HYD/2012 : ASSES SMENT YEAR 2004-05 SHRI SAN TOSH KUMAR JAIN, HYDERABAD ( PAN - AAFCS 0765 A) V/S. ASSTT. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 4, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEN DRA K ANKARIA, AR RESPONDENT BY : SHRI K.GNAN PRAKASH, DR DAT E OF HEARING 13.9.2012 DATE OF PRONOUNCEMENT 7.11.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX CENTRAL, HYDERABAD DATED 28.3.2012, PASSED UNDER S.263 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2004-05. 2. THOUGH THE ASSESSEE HAS RAISED SEVEN GROUNDS, T HE CORE ISSUE ARISING IN THE PRESENT APPEAL IS THE VALIDITY OF TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDER S.263 OF THE ACT. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDI VIDUAL. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED HIS RETURN OF INCOME ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 2 ON 10.5.2004 DECLARING A TOTAL INCOME OF RS.5,47,98 0 BESIDES AGRICULTURAL INCOME OF RS.30,000. A SEARCH AND SEIZURE OPERATIO N UNDER S.132 WAS CONDUCTED IN THE CASE OF ASSESSEE ON 24.8.2007. DUR ING SEARCH OPERATION VARIOUS BANK ACCOUNTS OPENED IN THE NAME OF DIFFERE NT PERSONS WERE NOTICED. THE BANK ACCOUNTS REVEALED REGULAR TRANSACTIONS DUR ING THE FINANCIAL YEARS 2003-04, 2004-05 AND 2005-06. WHEN THE ASSESSEE WA S CONFRONTED ABOUT THE DEPOSITS IN THE BANK ACCOUNTS, IN THE COURSE O F RECORDING OF STATEMENT UNDER S.132(4) THE ASSESSEE AND SHRI KISHORE KUMAR JAIN ADMITTED THAT THE DEPOSITED AMOUNTS ACTUALLY BELONGED TO THEM. THEY F URTHER SUBMITTED THAT FROM THE DEPOSITS MADE IN THE BANK ACCOUNTS, SHARES WERE PURCHASED IN THE NAME OF THOSE PERSONS IN THE INITIAL PUBLIC OFFER O F VARIOUS LISTED COMPANIES AND THE SHARES WERE SOLD AND PROFIT WAS DERIVED. OW NING UP THE DEPOSITS MADE IN THE SEIZED BANK ACCOUNTS, THE ASSESSEE OFF ERED TO DISCLOSE ADDITIONAL INCOME OF RS. 50 LAKHS. IN CONSEQUENCE OF THE SEAR CH OPERATION, A NOTICE UNDER S.153A WAS ISSUED TO THE ASSESSEE. THE ASSES SEE HAS FILED RETURN IN RESPONSE THERETO DECLARING INCOME OF RS.13,30,190 W HICH INCLUDED ADDITIONAL INCOME OF RS.7,82,215. THE ASSESSING OFFICER COMPLE TED THE ASSESSMENT UNDER S.143(3) READ WITH S.153A ON 8.12.2009 BY ACC EPTING THE INCOME DECLARED BY THE ASSESSEE. 4. THE COMMISSIONER EXERCISING HIS JURISDICTION U NDER S.263 OF THE ACT, CALLED FOR THE ASSESSMENT RECORD OF THE ASSESS EE PERTAINING TO THE YEAR UNDER DISPUTE. AFTER EXAMINING THE ASSESSMENT RECOR DS AND THE SEIZED MATERIAL, THE COMMISSIONER NOTICED THAT THOUGH IN T HE STATEMENT RECORDED, THE ASSESSEE ADMITTED THE AMOUNT OF RS.50,00,00 DEP OSITED IN VARIOUS BANK ACCOUNTS, HOWEVER, IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153A, THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME O F RS.7,82,215 ONLY. THE ASSESSING OFFICER HAVING COMPLETED THE ASSESSMENT A CCEPTING THE RETURN OF INCOME, WITHOUT BRINGING ON RECORD COGENT REASON AS TO HOW THE ADDITIONAL ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 3 INCOME OF RS.50 LAKHS WAS REDUCED TO RS.7.82 LAKHS IN THE RETURN OF INCOME. IN VIEW OF THIS, THE COMMISSIONER CONSIDERED THE AS SESSMENT ORDER PASSED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE AND ISSUED A NOTICE UNDER S.263 OF THE ACT. 5. THE ASSESSEE IN ITS REPLY TO THE NOTICE UNDER S.263 OF THE ACT SUBMITTED HAT HE ALONGWITH SHRI KISHORE KUMAR JAIN ARE PARTNERS IN M/S. KHIWASARA FINANCE AND LEASING LTD. A SURVEY WAS CONDUCTED IN THE CASE OF THE SAID COMPANY ON 17.9.1999 AND DURING THE SURVEY , IT WAS FOUND THAT THE COMPANY WAS PAYING INTEREST TO THE ASSESSEE ALONGWI TH OTHER DIRECTORS OUTSIDE BOOKS OF ACCOUNT. ACCORDINGLY, THE UNACCOUN TED INTEREST PAYMENTS RECEIVED BY THE ASSESSEE WERE OFFERED TO TAX IN THE ASSESSMENT YEARS 1998- 99 AND 1999-2000. IT WAS SUB MITTED THAT THE UNACCO UNTED INTEREST INCOME RECEIVED BY THE ASSESSEE AND OFFERED FOR TAXATION WAS AVAILABLE WITH HIM FOR MAKING DEPOSITS IN THE BANK ACCOUNTS, WHICH WERE FO UND IN THE COURSE OF THE SEARCH OPERATIONS. IT WAS SUBMITTED THAT ALL THESE FACTS WERE EXPLAINED BEFORE THE ASSESSING OFFICER IN PURSUANCE TO ENQUIR Y MADE BY HIM DURING THE ASSESSMENT PROCEEDINGS. IT WAS FURTHER SUBMITTED T HAT SINCE THE AMOUNTS WERE ALREADY OFFERED TO TAX, THE BENEFIT OF TELESCO PING SHOULD BE GIVEN TO HIM AND THE AMOUNT SHOULD NOT BE ADDED ONCE AGAIN. 6. THE COMMISSIONER THOUGH ACCEPTED THE ASSESSEE S CONTENTION THAT AN AMOUNT OF RS.42,17,785 WAS OFFERED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000, BUT HE DID NOT ACCEPT THE CONTENTION THAT THE SAID AMOUNT WAS DEPOSITED BY HI M IN THE BANK ACCOUNTS FOUND DURING SEARCH OPERATIONS, SINCE ACCORDING TO THE COMMISSIONER, THE ASSESSEE AT LEAST MUST HAVE PAID 30% OF THE AMOUNT OFFERED TOWARDS TAX. THE COMMISSIONER ON EXAMINING THE RECORDS FOUND THA T THE ASSESSING OFFICER HAS ACCEPTED THE RETURN OF THE ASSESSEE WITHOUT LOO KING INTO THIS ASPECT. THE ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 4 COMMISSIONER FURTHER NOTED THAT THE ASSESSING OFFIC ER HAS NOT EXAMINED WHETHER ANY UNACCOUNTED INTEREST INCOME WAS RECEIVE D BY THE ASSESSEE SUBSEQUENT TO ASSESSMENT YEAR 1998-99 AND 1999-2000 . THE COMMISSIONER HELD THAT THE ASSESSMENT ORDER PASSED ACCEPTING THE RETURN OF INCOME WITHOUT MAKING PROPER ENQUIRY WITH REGARD TO THE SO URCES OF THE AMOUNTS DEPOSITED INTO THE BANK ACCOUNTS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, AND ACCORDINGLY SET ASIDE THE ASSESSMENT WITH THE FOLLOWING DIRECTIONS- 2.4 IN VIEW THEREOF, THE ORDER PASSED BY THE ASSES SING OFFICER U/S. 143(3) R.W.S 153A FOR THE ASSESSMENT YEAR 2004-05 I S SET ASIDE WITH A DIRECTION TO REEXAMINE THE ABOVE MENTIONED ISSUES I N DETAIL AND TO RECOMPUTE THE INCOME THEREAFTER. BEFORE THE PASSIN G THE REVISED ORDER, THE ASSESSING OFFICER IS DIRECTED TO AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED BEFORE US THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT AFTER MAKING ENQUIRY WITH REGARD TO THE PARTICULAR ASPECT OF DEPOSITS INTO THE BANK ACCOUNTS FOUND AT THE TIME OF SEARCH AND WHICH WERE UTILISED FOR INVESTMENT IN SHARES. IN THIS REGARD, THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE ASSESS ING OFFICER AND THE REPLIES GIVEN BY THE ASSESSEE. THE LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED THAT THE ASSESSING OFFICER AFTER TAKING ALL FACTS A VAILABLE BEFORE HIM ACCEPTED THE ASSESSEES CONTENTION THAT THE AMOUNT OF RS.42, 17,785 OFFERED AS INCOME FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 HAS TO BE SET OFF AGAINST THE INCOME OF RS.50 LAKHS QUANTIFIED DURING THE SE ARCH AND THE BALANCE AMOUNT OF RS.7,82,215 IS TO BE TAKEN AS THE ADDITI ONAL INCOME FOR THE ASSESSMENT YEAR 2004-05. THE AUTHORISED REPRESENTA TIVE SUBMITTED THAT SINCE THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER AFTER CONDUCTING ENQUIRY AND APPLYING HIS MIND, THE SAME CANNOT BE S AID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 5 (A) CIT V/S. GURUSWAMY NADAR & SONS (1249 ITR 127)-MAD (B) CIT V/S. GANPAT RAM BISHNOI (296 ITR 292)-RAJ. (C) CIT V/S. D.P. KERAI(266 ITR 113)-GUJ. (D) CIT V/S. HERO AUTO LTD. (343 ITR 342)-DEL. (E) ITO V/S. DG HOUSING PROJECTS LTD.(343 ITR 329)-DEL. (F) CIT V/S. MEHROTRA BROTHERS (270 IT$R 157)-MP (G) CIT V/S. ARVIND JEWELLERS (124 TAXMANN 615)-GUJ. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTED THE ORDER OF THE COMMISSIONER AND SUBMITTED THAT THE AS SESSING OFFICER COMPLETED THE ASSESSMENT BY ACCEPTING THE RETURN FI LED BY THE ASSESSEE WITHOUT CONDUCTING PROPER ENQUIRY WITH REGARD TO TH E SOURCE OF DEPOSITS IN THE BANK ACCOUNTS AND THE INVESTMENTS MADE IN SHARE S. THE ASSESSING OFFICER HAS ALSO NOT AT ALL LOOKED INTO THE ASPECTS POINTED OUT BY THE COMMISSIONER IN THE IMPUGNED ORDER PASSED UNDER S.236 OF THE ACT. T HE LEARNED DR SUBMITTED THAT THERE BEING TOTAL NON-APPLICATION OF MIND BY T HE ASSESSING OFFICER, THE COMMISSIONER WAS JUSTIFIED IN SETTING ASIDE THE ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER, IN EXERCISE OF HIS POWERS UN DER S.263 OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE F OLLOWING DECISIONS- (A) RAMPYARI DEVI SARAOGI V/S. CIT(67 ITR 84)-SC (B) MALABAR INDUSTRIAL CO. LTD. V/S. CIT(243 ITR 83)-SC (C) SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. (NO. 1) V/S. CIT(187 ITR 412)-ALL. (D) GEE VEE ENTERPRISES V/S ADDL. CIT(99 ITR 375)-DEL. (E) RAJALAKSHMI MILLS LTD. V/S. ITO(121 ITD 343)-CHENN AI ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 6 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISI ONS CITED BEFORE US BY BOTH THE PARTIES. THE MAIN THRUST OF ARGUMENT OF TH E LEARNED AUTHORISED REPRESENTATIVE IS THAT THE AMOUNT OF RS.42,17,785 OFFERED AS INCOME FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 WERE AVAILAB LE TO THE ASSESSEE FOR DEPOSITING IN THE BANK ACCOUNTS FOUND AT THE T IME OF SEARCH AND WHICH WERE SUBSEQUENTLY WITHDRAWN FROM THE BANK ACCOUNTS FOR INVESTING IN SHARES. THEREFORE, IT SHOULD BE SET OFF AGAINST THE INCOME DECLARED OF RS.50 LAKHS FOR THE ASSESSMENT YEAR 2004-05 AT THE TIME O F SEARCH. IN OTHER WORDS , ACCORDING TO THE ASSESSEE, THE ADMITTED UNDISCLO SED INCOME OF RS.50 LAKHS QUANTIFIED DURING THE SEARCH OPERATION ALSO INCLUDE S THE AMOUNT OF RS.42,17,785 OFFERED AS INCOME IN THE ASSESSMENT YE ARS 1998-99 AND 1999- 2000. THEREFORE, IT CANNOT BE TAXED TWICE. THE LEA RNED COMMISSIONER THOUGH HAS ACCEPTED THE FACT THAT RS.42,17,785 WAS OFFERED AS INCOME BY THE ASSESSEE FOR THE ASSESSMENT YEARS 1998-99 AND 1999- 2000, AT THE SAME TIME, HE HAS OBSERVED THAT THE AFORESAID AMOUNT IN ITS ENTIRETY COULD NOT BE AVAILABLE TO THE ASSESSEE, CONSIDERING THE FACT THA T HE MUST HAVE DISCHARGED THE TAX LIABILITY OUT OF THE AFORESAID OFFERED INCO ME. IT IS A FACT THAT THE ASSESSING OFFICER IN THE QUESTIONNAIRE DATED 28.7.2 9009 HAS ASKED THE ASSESSEE TO EXPLAIN WHY HE HAS NOT OFFERED THE AMOU NT OF RS.50 LAKHS QUANTIFIED AS INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE, AND THE ASSESSEE HAS ALSO REPLIED TO THE QUERY MADE, BUT AS IT APPEARS THE ASSESSING OFFICER HAS NOT AT ALL CROSS VERIFIED IT PROPERLY B EFORE ACCEPTING THE CLAIM OF THE ASSESSEE, THAT THE SOURCE OF INVESTMENT IN SHAR ES OF RS.50 LAKHS WAS OUT OF THE INCOME OFFERED BY THE ASSESSEE FOR THE ASSES SMENT YEARS 1998-99 AND 1999-2000. THE ASSESSING OFFICER HAS NOT AT ALL PR OPERLY EXAMINED THE FACT THAT THE UNDISCLOSED INTEREST PAYMENT MADE TO THE DIRECTORS WERE ACTUALLY DEPOSITED IN BANK ACCOUNTS OPENED IN THE NAMES OF VARIOUS PERSONS AND THE INVESTMENTS IN SHARES WERE ACTUALLY OUT OF THE DEPO SITS MADE IN THOSE ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 7 ACCOUNTS. THERE IS NOTING IN THE ASSESSMENT ORDER T HAT THE ASSESSING OFFICER HAS MADE ADEQUATE ENQUIRY IN THIS REGARD. THE ASSE SSMENT ORDER REVEALS NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. UNDISPUTEDLY, AT THE TIME OF SEARCH ON THE BASIS OF VARIOUS BANK ACCOUNTS AND IN VESTMENTS IN SHARES, INCOME FOR THE ASSESSMENT YEAR 2004-05 WAS QUANTIFI ED AT RS.50 LAKHS WHICH WAS ALSO ADMITTED BY THE ASSESSEE, THEREFORE, THE ONUS IS ON THE ASSESSEE TO PROVE BY SUBMITTING NECESSARY EVIDENCE THAT TH E INCOME OFFERED EARLIER FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 FORM ED PART OF THE INVESTMENTS UNEARTHED AT THE TIME OF SEARCH. IT A PPEARS FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT MADE PROPER ENQUIRY IN THIS REGARD. IN THE CIRCUMSTANCES, THE ASSESSMENT ORDER HAS TO BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. THE DECISIONS CITED BY THE LEARNED AUTHORISED REPRESENTATIVE ARE NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE. PARTICULARLY, THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. HERO AUTO LTD (SUPRA) AND ITO V/S. DG HOUSING PROJECTS LTD. (SUPRA) ON WHICH THE LEARNED AUTHORISED REPRE SENTATIVE FOR THE ASSESSEE 7PLACED STRONG RELIANCE, THE ACTION U/S. 263 WAS H ELD TO BE INVALID AS THE COMMISSIONER HAS NOT RECORDED ANY FINDING THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. HOWEVER, IN THE CASE BEFORE US, THE LEARNED COMMISSIONER HAS RECORDED A POSITIVE FINDING BEING SUPPORTED BY REASONS THAT THE ASSESSMENT ORDER IS E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THAT BESIDES THE LEAR NED COMMISSIONER HAS NOT DIRECTED FOR ADDITION OF THE AMOUNT, BUT HAS DIRECT ED THE ASSESSING OFFICER TO RECOMPUTE THE INCOME AFTER EXAMINING IN DETAIL THE ISSUES POINTED OUT BY HIM. IN THE AFORESAID VIEW OF THE MATER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED COMM ISSIONER U/S. 263 OF THE ACT. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APP EAL ARE ACCORDINGLY REJECTED. ITA NO.571/HYD/2012 SHRI SANTOSH KUMAR JAIN, HYDERABAD 8 10. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 7.11.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 7 TH NOVEMBER, 2012 COPY FORWARDED TO: 1. SHRI SANTOSH KUMAR JAIN, C/O. M/S. R.KANKARIA & UTTAM SANGHI, CHARTERED ACCO UNTANTS, 6-3-10900/C-4, ABOVE ANDHRA BANK, RAJ BHAVAN ROAD, HYDERABAD 500 082 2. 3. ASST. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 4 , HYDERABAD COMMISSIONER OF INCOME - TAX (CENTRAL) , HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.