Sri Vemula Lakshmi Narayana, Hyderabad V. ACIT-1, Hyderabad

ITA 614/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4837 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAKIR HUSSAIN SHAIK
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Opportunity of being heard
• Section: 143(3); 133A; 147; 148; 144

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. 614/HYD/2013 ASSESSMENT YEAR:2008-09 SRI VEMULA LAKSHMI NARAYANA, APPELLANT WARANGAL. (PAN ADIPV7622C) VS. ASST. COMMISSIONER OF INCOME-TAX, RESPONDENT HYDERABAD. APPELLANT BY : SHRI P. MURALI MOHAN RAO RESPONDENT BY : SHRI SHAKIR HUSSAIN SHAIK DATE OF HEARING : 05/08/2013 DATE OF PRONOUNCEMENT : 2 1/08/2013 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-18, MUMBAI, DATED 07/03/2013 FOR TH E ASSESSMENT YEAR 2008-09. 2. AT THE OUTSET THE LEARNED AR FILED A PETITION SE EKING ADMISSION OF THE FOLLOWING ADDITIONAL GROUNDS: 11. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT THE AO HAS ERRED IN ISSUING THE NOTICE U/ S 148 OF THE ACT WHEN PROCEEDINGS U/S 143(3) ASSESSMENT WERE PENDING FOR CONCLUSION. 12. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E JUDGMENT OF HONBLE HYDERABAD ITAT IN THE CASE OF S AHITYA ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 2 HOUSING PVT. LTD. VS. DCIT VIDE ITA NO. 569/HYD/201 0 IN ORDER DATED 31/08/2010. 3. SINCE THE GROUNDS RAISED ARE PURELY LEGAL GROUND S AND GOES TO THE ROOT OF THE MATTER, WE ADMIT THE SAME A ND PROCEED TO DECIDE THE SAME AT THE FIRST INSTANCE. 4. BRIEFLY THE FACTS ARE, THE ASSESSEE AN INDIVIDUA L FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR D ECLARING TOTAL INCOME OF RS. 1,39,032/-. THE RETURN WAS INIT IALLY PROCESSED U/S 143(1) OF THE ACT ON 16/07/2009 RESULTING IN A REFUND OF RS. 8,460/- TO THE ASSESSEE. SUBSEQUENTLY, A SURVEY U/S 133A IN THE PREMISES OF THE ASSESSEE ALONG WITH HIS OTHER THREE BROTHERS WAS CARRIED OUT. IN CONSEQUENCE TO THE SURVEY ACTION, N OTICE U/S 148 WAS ISSUED TO THE ASSESSEE PURSUANT TO REOPENING O F ASSESSMENT U/S 147 OF THE ACT ON THE REASON THAT MATERIAL IMP OUNDED IN COURSE OF SURVEY OPERATION REVEALED UNDISCLOSED INC OME OF RS. 38,03,844/- TO HAVE ESCAPED ASSESSMENT. SINCE THE ASSESSEE FAILED TO APPEAR BEFORE THE AO, THE ASSESSMENT ORDE R WAS PASSED U/S 144 OF THE ACT VIDE ORDER DATED 30/12/2010 DETE RMINING THE TAXABLE INCOME AT RS. 32,02,759/- AFTER MAKING ADDI TION OF AN AMOUNT OF RS. 30,63,777/- AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE CHAL LENGED THE ASSESSMENT ORDER PASSED BY PREFERRING APPEAL BEFORE THE CIT(A). THE CIT(A) ALSO SUSTAINED ADDITION BY DISMISSING TH E APPEAL OF THE ASSESSEE. 5. THE LEARNED AR WHILE PRESSING THE ADDITIONAL GRO UNDS SUBMITTED THAT AT THE TIME OF INITIATION OF PROCEED ING U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148, THE TIME LIMIT F OR COMPLETION OF PROCEEDING U/S 143(3) OF THE ACT WAS STILL NOT OVER AND THE RETURN OF THE ASSESSEE FILED FOR THE IMPUGNED ASSESSMENT YEAR WAS STILL PENDING FINALISATION. HENCE, IN THESE CIRCUMSTANCES , ACTION U/S ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 3 147 OF THE ACT CANNOT BE INITIATED ALLEGING ESCAPEM ENT OF INCOME. FOR SUCH CONTENTION, THE LEARNED AR RELIED UPON THE DECISION OF ITAT, HYDERABAD BENCH IN CASE OF SAHITYA HOUSE PVT. LTD. VS. DCIT IN ITA NO. 569/H/10 DATED 31/08/2010. 6. THE LEARNED DR, AT THE TIME OF HEARING SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. SUBSEQUENTLY, TH E LEARNED DR ON 07/08/2013 HAD FILED A WRITTEN SUBMISSION SPECIF ICALLY TAKING A STAND THAT THE IMPUGNED ASSESSMENT ORDER WAS PASSED U/S 144 OF THE ACT AND WHICH IS WITHIN THE PRESCRIBED TIME. HE HAD FURTHER SUBMITTED THAT THOUGH PROCEEDING WAS INITIATED U/S 148 OF THE ACT NO ASSESSMENT ORDER WAS PASSED U/S 143(3) R.W.S. 14 7 OF THE ACT. 7. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. SO FAR AS THE CONT ENTION OF THE ASSESSEE THAT ACTION U/S 147 CANNOT BE INITIATED DU RING PENDENCY OF THE RETURN AND WHEN THERE IS STILL TIME LEFT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT IS CONCERNED, LET US E XAMINE THE LAW IN THIS REGARD. THE HONBLE MADRAS HIGH COURT IN CA SE OF CIT VS. K.M. PACHAYAPPAN, 304 ITR 264 FOLLOWING A DECISION OF THE HONBLE SUPREME COURT AS WELL AS THE HONBLE DELHI HIGH COURT, HELD THAT WHEN THE TIME FOR ISSUING NOTICE U/S 143( 2) HAS NOT EXPIRED NO ACTION U/S 148 CAN BE TAKEN. THIS VIEW W AS REITERATED BY THE HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. QATALYS SOFTWARE TECHNOLOGIES LTD., 308 ITR 249 (MAD.). WHE N SIMILAR ISSUE CAME UP BEFORE THE ITAT, CHENNAI BENCH IN CAS E OF SUPER SPINNING MILLS LTD VS. ACIT, 3 ITR (TRIB) 258 DIVER GENT VIEWS WERE EXPRESSED BY THE HONBLE AM AND HONBLE JM ON THE I SSUE. WHILE THE HONBLE AM HELD THAT NOTICE FOR REASSESSMENT U/ S 148 OF THE ACT CAN ONLY BE ISSUED AFTER TIME LIMIT FOR INITIAT ING PROCEEDING U/S 143(2) HAS EXPIRED, WHEREAS THE HONBLE JM HELD A CONTRARY VIEW UPHOLDING THE ACTION OF THE AO IN ISSUING NOTI CE U/S 148 OF ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 4 THE ACT. THEN THE MATTER WAS REFERRED TO THIRD MEMB ER. THE HONBLE THIRD MEMBER AGREED WITH THE VIEW OF THE HO NBLE AM BY HOLDING THAT THE PROCEEDING U/S 147 SHOULD BE INITI ATED ONLY AFTER THE EARLIER PROCEEDING IS TERMINATED BY VIRTUE OF T HE RETURN HAVING EITHER PROCESSED U/S 143(1) AND THE TIME TO ISSUE N OTICE U/S 143(2) IS OVER, ASSESSMENT IS MADE U/S 143(3) OR TH E ASSESSMENT IS NO LONGER POSSIBLE U/S 143(3). WE MAY REITERATE HERE THAT AN ORDER OF THE THIRD MEMBER HAS EQUAL BINDING FORCE A S THAT OF SPECIAL BENCH DECISION OF THE TRIBUNAL. THEREFORE, THIS ORDER OF THE THIRD MEMBER IS BINDING UPON US. THE COORDINATE BEN CH OF THIS TRIBUNAL IN CASE OF SAHITYA HOUSING PVT. LTD. VS. D CIT IN ITA NO. 569/H/10 DTD. 31/08/2010 AFTER FOLLOWING THE DECISI ONS OF THE HONBLE SUPREME COURT IN CASE OF RAJESH JHA STOCKBR OKERS, 291 ITR 500 AND THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN CASE OF MOTOROLA INC. AND ALSO OTHER DECISIONS OF THE HONBLE SUPREME COURT HELD IN THE FOLLOWING MANNER: THEREFORE, FROM THE JUDGMENT OF THE APEX COURT IN T HE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA) AND THE DECISION OF SPECIAL BENCH IN THE CASE OF MOTOROLA INC. (SUPRA), IT IS OBVIOUS THAT EXPLANATI ON-2 (B) TO SECTION 147 REFERS TO A SITUATION WHERE NO ASSESSMENT ORDER HAS BEEN P ASSED AND THE TIME LIMIT FOR PASSING SUCH ORDER HAS BEEN EXPIRED OR TIME LIMIT F OR ISSUING A NOTICE UNDER SECTION 143(2) WAS EXPIRED. THIS IS OBVIOUS FROM TH E DECISION OF THE SPECIAL BENCH IN THE CASE OF MOTOROLA INC. (SUPRA) AND THE JUDGMENT OF APEX COURT IN THE CASE OF NARSEE NAGSEE & COMPANY (SUPRA). THE QUESTION OF ESCAPEMENT OF INCOME FROM ASSESSMENT WOULD COME WHEN THE ASSESSME NT PROCEEDINGS HAVE BEEN TERMINATED/ CONCLUDED EITHER BY AN ORDER UNDER SECTION 143(3) OR BY OPERATION OF LAW ON THE EXPIRY OF TIME LIMIT FOR IS SUING A NOTICE UNDER SECTION 143(2) OF THE ACT. IT IS OBSERVED BY THE APEX COURT THAT SECTION 147 REFERS TO A SITUATION WHERE THE INCOME HAD ESCAPED ASSESSMENT. SECTION 143(2) REFERS TO A SITUATION WHERE THE ASSESSING OFFICER WAS OF THE OP INION THAT THE ASSESSEE HAS UNDERSTATED THE INCOME. WHEN THE ASSESSING OFFICER HAS TIME LIMIT FOR MAKING AN ENQUIRY UNDER SECTION 143(2) OF THE ACT AS HELD BY THE APEX COURT, WE MAY NOT BE ABLE TO SAY THAT ANY INCOME HAS ESCAPED ASSE SSMENT. THE LUCKNOW BENCH OF HIS TRIBUNAL HAS NOT TAKEN NOTE OF THIS FA CTUAL SITUATION IN WHICH THE APEX COURT DECIDED THE CASE IN RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA). IN OTHER WORDS, THE LUCKNOW BENCH OF THE TRIBUNAL I N KAILASH AUTO FINANCE LIMITED (SUPRA) HAS NOT TAKEN NOTE OF THE FACT THAT THE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P VT. LTD., (SUPRA) DECIDED THE ISSUE ON THE FACTS ON WHICH THE TIME LIMIT FOR ISSU ING A NOTICE UNDER SECTION ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 5 143(2) HAS ALREADY EXPIRED. EVEN THOUGH INTIMATION UNDER SECTION 143(1) WAS ISSUED, THE FAILURE OF THE ASSESSING OFFICER TO TAK E STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN VIEW OF THIS FACTUAL SIT UATION, IN OUR OPINION, THE DECISION OF THE LUCKNOW BENCH OF THE TRIBUNAL IN TH E CASE OF KAILASH AUTO FINANCE LIMITED (SUPRA) MAY NOT BE ANY ASSISTANCE T O THE REVENUE. A SIMILAR VIEW WAS TAKEN BY THE AGRA BENCH OF THE TRIBUNAL IN SUBHASH CHANDRA GOYAL (2005) 4 SOT 405 (AGRA) AND MUMBAI BENCH OF THE TRI BUNAL IN FATEH INTERNATIONAL (2007) 104 ITD 305 (MUM.). IN VIEW OF THE ABOVE DISCUSSION, BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD., AND IN THE CASE OF TRUSTEES OF HEH THE NIZARN'S SUPPLEMENTAL FAMILY TRUST (SUPRA), AND THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MOTOROLA INC. (SUPRA ), WE HOLD THAT ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT DURING THE PEND ENCY OF PROCEEDINGS UNDER SECTION 143(2) OF THE ACT IS INVALID AND CONSEQUENT LY ALL THE ORDERS PASSED BY THE ASSESSING OFFICER IN PURSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT CANNOT STAND AND ACCORDINGLY THE SAME ARE QUASHED. IN VIEW OF THE ABOVE DECISION IT MAY NOT BE NECESSARY FOR THIS TRIBUNAL TO GO INTO T HE MERITS OF THE CASE. 8. THEREFORE, AS CAN BE SEEN FROM THE RATIO LAID DO WN IN THE JUDICIAL PRECEDENTS REFERRED TO HEREINABOVE, THE PR INCIPLE OF LAW AS EMERGES IS, UNTIL THE PROCEEDING U/S 143(2) HAS BEEN TERMINATED BY VIRTUE OF AN ASSESSMENT ORDER PASSED U/S 143(3) OR THE TIME LIMIT FOR ISSUING OF NOTICE U/S 143(2) HAS NOT EXPIRED NO ACTION CAN BE TAKEN BY ISSUING NOTICE U/S 148 OF TH E ACT. THEREFORE IN THE LIGHT OF JUDICIAL PRECEDENTS, IT H AS TO BE CONSIDERED WHETHER THE ASSESSEES CONTENTION IS ACC EPTABLE OR NOT. 9. NOW REVERTING BACK TO THE FACTS OF PRESENT APPE AL, AS CAN BE SEEN FROM THE ASSESSMENT ORDER DATED 30/12/2 010 PASSED U/S 144 OF THE ACT, THE AO IN PARA 3 OF THE ORDER H AS CLEARLY MENTIONED NOTICES U/S 148 WERE ISSUED TO THE ASSESS EE ALONG WITH HIS OTHER 2 BROTHERS MENTIONED IN SL. NO. 2 & 4 OF PARA 2. HOWEVER, IN PARAGRAPH 12 OF THE ASSESSMENT ORDER, T HE AO HAS REPRODUCED REASONS RECORDED WHICH RELATES TO AY 200 9-10. IN COLUMN 12 AT PAGE 1 OF THE ASSESSMENT ORDER, IT IS ALSO ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 6 MENTIONED THAT THE ASSESSMENT ORDER HAS BEEN PASSED U/S 144 OF THE ACT. THERE IS NO MENTION OF SECTION 147 IN THE SAID COLUMN. THE CIT()A) THOUGH HAS MENTIONED THAT THE AO HAS IS SUED NOTICE U/S 148 OF THE ACT BUT AS CAN BE SEEN FROM THE PARA 12 OF THE ASSESSMENT ORDER, THE AO HAS REPRODUCED THE REASONS FOR ASSESSMENT FOR AY 2009-10 AND NOTHING HAS BEEN MENT IONED SO FAR AS THE AY 2008-09 IS CONCERNED, I.E. IMPUGNED A SSESSMENT YEAR. IN THIS CONTEXT, THE CONTENTION OF THE LEARNE D DR THAT THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED U/S 144 O F THE ACT AND NOT AN ASSESSMENT ORDER U/S 143(3) R.W.S. 147 O F THE ACT ASSUMES IMPORTANCE AND REQUIRES TO BE EXAMINED. ON PERUSAL OF THE ASSESSMENT ORDER, WE FIND IT TO BE TOTALLY CONF USING. WE ARE OF THE VIEW THAT FACTS RELEVANT FOR TAKING A DECISION ON THIS ISSUE HAVE NOT AT ALL BEEN BROUGHT ON RECORD. THESE FACTS COULD NOT ALSO BE PROPERLY EXAMINED AND THRASHED OUT BEFORE THE CI T(A) AS THE ASSESSEE HAS NOT RAISED ANY GROUND CHALLENGING PROC EEDING U/S 147 OF THE ACT OR ISSUANCE OF NOTICE U/S 148 OF THE ACT. THESE ADDITIONAL GROUNDS ON THE LEGAL ISSUE OF VALIDITY O F PROCEEDING U/S 147 OF THE ACT HAS BEEN RAISED FOR THE FIRST TIME B EFORE US. THOUGH IN THE GROUNDS RAISED, THE ASSESSEE HAS ALL EGED THAT THE CIT(A) HAS NOT APPRECIATED THE ISSUES WITH REGARD T O THE ISSUANCE OF NOTICE U/S 148 OF THE ACT AND THE RATIO LAID DOW N BY THE ITAT, HYDERABAD IN CASE OF SAHITYA HOUSING LTD. VS. DCIT, BUT, IN OUR VIEW IN ABSENCE OF ANY GROUND RAISED OR ARGUMENT CA NVASSED BEFORE THE CIT(A), IN THIS RESPECT, THE CIT(A) COU LD NOT HAVE GONE INTO THESE ISSUES WHILE DECIDING THE APPEAL. I N THE AFORESAID VIEW OF THE MATTER SINCE ADDITIONAL GROUNDS HAVE BE EN RAISED FOR THE FIRST TIME BEFORE US AND THE CIT(A) NEVER HAD O CCASION TO DEAL WITH THE SAME AND FURTHER, THE FACT THAT THERE IS L ACK OF CLARITY ON MANY VITAL ISSUES WITH REGARD TO ISSUANCE OF NOTICE U/S 143(2) AND 148 OF THE ACT, WHICH REQUIRES TO BE PROPERLY ADDRE SSED TO AS IT IS NOT CLEAR EITHER FROM THE ASSESSMENT ORDER OR FROM THE ORDER ITA NO. 614/HYD/2013 SRI VEMULA LAKSHMI NARAYANA 7 PASSED BY THE CIT(A) AS TO WHETHER THE IMPUGNED ASS ESSMENT ORDER IS A REGULAR ASSESSMENT ORDER OR A REASSESSME NT ORDER U/S 147 OF THE ACT AND AS NOTHING HAS BEEN BROUGHT BEFO RE US TO CLARIFY THIS PERTINENT ISSUE, WE CONSIDER IT PROPE R TO SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO HI S FILE FOR FRESH ADJUDICATION. THE CIT(A) SHALL VERIFY THE RECORDS T O FIND OUT WHETHER IT IS A REGULAR ASSESSMENT OR REASSESSMENT MADE U/S 147 OF THE ACT AND DECIDE THE LEGAL ISSUE RAISED BY THE ASSESSEE IN THE ADDITIONAL GROUNDS KEEPING IN VIEW OUR OBSERVATIONS MADE HEREINBEFORE. IF WARRANTED, THE CIT(A) SHALL THEREA FTER DECIDE THE MERITS OF THE CASE. THE CIT(A), OF COURSE, SHALL AF FORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21/08/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 21 ST AUGUST, 2013. KV COPY TO:- 1) SRI VEMULA LAKSHMI NARAYANA, C/O P. MURALI & CO. , CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. 2) ACIT-1, HYDERABAD. 3) CIT(A)-18, MUMBAI. 4) CIT 5/6, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD.