Mr. N. Girish, Mysore V. Addl CIT, Mysore

ITA 715/BANG/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68306 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANESH RAO ADD
• Assessee Lawyers: V SRINIVASAN
• Keywords: Reopening of assessment; Opportunity of being heard; Principle of natural justice; Peak credit; Revised return
• Section: 142(1); 133A; 234B; 148; 144

Judgement Text

ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCHES, BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER & SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS.714 & 715/BANG/2009 & 983 & 984/BANG/2011 (ASSESSMENT YEARS: 2005-06, 2006-07 & 2003-04 & 20 04-05) N. GIRISH, SRIRANGA NO.834, 4 TH MAIN, RAMAKRISHNANAGAR, MYSORE-500023 PAN: AGRPG 5856 F VS. ADDITIONAL CIT, RANGE-3 MYSORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI V. SRINIVASAN, CA DEPARTMENT BY: SHRI GANESH RAO, ADD.CIT(DR) DATE OF HEARING: 02/08/2013 DATE OF PRONOUNCEMENT: 23/08/2013 O R D E R PER GEORGE GEORGE K. J.M. THESE FOUR APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE FOUR SEPARATE ORDERS OF THE CIT (A), MYSORE DATED 2 5.3.2009 AND 23.8.2011. THE RELEVANT ASSESSMENT YEARS ARE 2003- 04 TO 2006-07. I. ITA NOS: 983 & 984/B/11 AYS 2003-04 & 2004-05: 2. FOR BOTH THE ASSESSMENT YEARS, THE ASSESSEE HAS RAISED SEVEN IDENTICAL GROUNDS. GROUND NOS.1, 4 AND 7 ARE GENERAL IN NATURE AND, THEREFORE, THEY ARE DISMISSED. GROUND NO.6 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234A AND 234B OF THE ACT I S MANDATORY AND ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 2 OF 16 CONSEQUENTIAL IN NATURE. THE REMAINING GROUNDS REL ATE TO THE FOLLOWING IDENTICAL ISSUES, NAMELY: (1) THAT THE RE-ASSESSMENT WAS BAD IN LAW AND VOID-AB-I NITIO FOR WANT OF REQUISITE JURISDICTION AND THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH; (2) THAT THE AO WAS NOT JUSTIFIED IN CONCLUDING THE ASS ESSMENTS U/S 144 OF THE ACT; (3) THAT WITHOUT PREJUDICE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN ASSESSING THE PEAK CREDITS AT RS.5,29,607/- AND RS.7.68,518/-FOR THE AYS 2003-04 & 04-05 RESPECTIVE LY IN THE ASSESSEES HANDS AS THE SAME BELONGED TO HUF; II. ITA NO: 714 /B/09 AY 2005-06: 3. FOR THIS ASSESSMENT YEAR, THE ASS ESSEE HAS RAISED EIGHT GROUNDS. SINCE GROUND NOS.1, 4 AND 8 ARE GENERAL IN NATURE WITH NO ISSUES INVOLVED, THEY HAVE BECOME INCONSEQUENTIAL. GROUND NO.7 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234A AND 2 34B OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. THE REMAININ G GROUNDS RELATE TO THE FOLLOWING ISSUES, NAMELY: (1) THAT THE REASSESSMENT WAS BAD IN LAW AND VOID-AB-IN ITIO FOR WANT OF REQUISITE JURISDICTION AND THE MANDATORY REQUIRE MENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIS T AND HAVE NOT BEEN COMPLIED WITH; (2) THAT THE AO WAS NOT JUSTIFIED IN CONCLUDING THE ASS ESSMENT U/S 144 OF THE ACT; (3) THAT WITHOUT PREJUDICE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN ASSESSING THE PEAK CREDIT AT RS.37,04,387/- IN T HE ASSESSEES HANDS AS THE SAME BELONGED TO HUF; III. ITA NO: 715 /B/09 AY 2006-07: 4. FOR THIS ASSESSMENT YEAR TOO, THE ASSESSEE HAS RAISED EIGHT GROUNDS. SINCE GROUND NOS.1, 3 AND 8 ARE GENERAL IN NATURE WITH ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 3 OF 16 NO ISSUES INVOLVED, THEY ARE DISMISSED. IN GROUND NO.6 , THE ASSESSEE HAD RAISED AN ISSUE TO THE EFFECT THAT THE AUTHORI TIES BELOW WERE NOT JUSTIFIED IN ADDING RS.4.5 LAKHS AS INCOME FROM PRI ZE WINNING LOTTERY NOT OFFERED TO TAX. HOWEVER, DURING THE COURSE OF HEAR ING BEFORE THIS BENCH, THE LEARNED A R SUBMITTED THAT THIS GROUND I S NOT PRESSED BY THE ASSESSEE. ACCORDINGLY, GROUND NO.6 IS DISMISSED AS NOT PRESSED. GROUND NO.7 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234 A, 234B, 234C & 234D OF THE ACT IS MANDATORY AND CONSE QUENTIAL IN NATURE. THE REMAINING GROUNDS RELATE TO THE FOLLOWI NG ISSUES, NAMELY: (1) THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE RETU RN FILED ON 30.6.2007 ON THE GROUND THAT THE ASSESSEE WAS INCOM PETENT TO REVISE THE RETURN; (2) THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN AS SESSING THE ASSESSEE ON A TOTAL INCOME AT RS.32.41 LAKHS AS AGA INST THE RETURNED INCOME OF RS.6.69 LAKHS WHICH WAS CORRECTE D TO RS.11.64 LAKHS; & (3) THAT WITHOUT PREJUDICE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN ASSESSING THE PEAK CREDIT AT RS.19,96,664/- IN T HE ASSESSEES HANDS AS THE SAME BELONGED TO HUF. 5. AS THE ISSUES RAISED IN THESE A PPEALS WERE MORE OR LESS IDENTICAL AND PERTAINING TO THE SAME ASSESSEE, FOR THE SAKE OF CONVENIENCE, THEY WERE HEARD, CONSIDERED TOGETHER A ND DISPOSED OF IN THIS CONSOLIDATED ORDER. 6. THE ASSESSEE IS AN INDIVIDUAL AN D A DEALER IN LOTTERY TICKETS. DURING THE ASSESSMENT YEARS UNDER DISPUTE , THE ASSESSEE HAD FURNISHED HIS RETURNS OF INCOME, ADMITTING TOTAL IN COMES OF RS.85,000, RS.1,25,130/-, RS.6,81,890/- AND RS.6,69,480/- ON 2 4/2/2004, 12/1/2005, 13/3/2006 AND 30/3/2007 FOR THE ASSESSME NT YEARS 2003.04, 2004-05, 2005-06 AND 2006-07 RESPECTIVELY. THE RETURNS OF ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 4 OF 16 INCOME WERE, INITIALLY, PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THERE WAS AN ACTION U/S 133A OF THE ACT ON 17.6.200 7 IN THE CASES OF M/S. KMM MARKETING AND M/S. KARTHIK ASSOCIATES IN W HICH, THE ASSESSEE WAS A PARTNER. IT WAS UNEARTHED DURING TH E COURSE OF SURVEY PROCEEDINGS THAT THE ASSESSEE WAS MAINTAINING UNDIS CLOSED BANK ACCOUNTS WITH (I) PUNJAB NATIONAL BANK; AND (II) SY NDICATE BANK, MANDYA BRANCHES. ACCORDING TO THE AO, AFTER DULY RECORDIN G THE REASONS FOR RE-OPENING OF THE ASSESSMENTS FOR THE ASSESSMENT YE ARS UNDER CONSIDERATION, NOTICES U/S 148 OF THE ACT WERE SERV ED ON THE ASSESSEE, REQUIRING HIM TO FURNISH THE RETURNS FOR THE CONCER NED ASSESSMENT YEARS. HOWEVER, THERE WAS NO RESPONSE FROM THE ASS ESSEE. THERE WAS ALSO NO RESPONSE TO THE ISSUANCE OF NOTICES U/S 142 (1) OF THE ACT DATED 12.3.2008. AS THE ADDL. CIT (THE RANGE HEAD) TOOK UP THE ASSESSEES CASE FOR SCRUTINY, ONE MORE NOTICE U/S 142(1) OF T HE ACT WAS ISSUED ON 21.11.2008 CALLING FOR DETAILS WITH REGARD TO CREDI TS APPEARING IN THE SAID BANK ACCOUNTS, FOR WHICH, THE ASSESSEE, ACCORD ING TO THE AO (ADDL. CIT ), HAD FURNISHED CERTAIN DETAILS. ACCORDING TO THE AO, THOSE BANK DETAILS WERE NOT REFLECTED IN THE BALANCE SHEETS FI LED ALONG WITH THE RETURNS OF INCOME FOR THE AYS 2003-04 TO 2006-07 BE FORE SURVEY OPERATION. THERE WERE ALSO NO PROPER DETAILS/RESPO NSE TO THE QUERIES RAISED WITH REGARD TO THE NATURE AND SOURCES OF CRE DITS FOUND IN THE UNACCOUNTED BANK ACCOUNTS. HOWEVER, ACCORDING TO T HE AO, THE ASSESSEE, IN HIS SUBSEQUENT REBUTTAL, TOOK A STAND THAT THE CREDITS MADE IN THE BANK ACCOUNTS WERE RELATED TO THE BUSIN ESS TRANSACTION OF HUF. FURTHER, THE AO HAD NOTICED IN THE STATEMENT OF INCOME FILED ALONG WITH THE ORIGINAL RETURN FOR THE A.Y 2006-07 WHEREIN THE ASSESSEE HAD CLAIMED INCOME UNDER THE HEAD OTHER S OURCE OF RS.3 LAKHS BEING WINNING OF LOTTERY. ON A PERUSAL OF TH E TDS CERTIFICATES ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 5 OF 16 ISSUED BY THE KARNATAKA STATE LOTTERY THAT THE ASSE SSEE HAD, IN FACT, RECEIVED LOTTERY PRIZES, AGGREGATING TO RS.7.5 LAKH S DURING THE PERIOD RELEVANT TO THE AY 2006-07. AS THERE WAS NO COMPLIA NCE TO THE QUERY RAISED TO EXPLAIN THE DISCREPANCY OF RS.4.5 LAKHS [ RS.7.5 LAKHS 3 LAKHS], THE SAME WAS ADDED TO THE ASSESSEES INCOME . 6.1. AFTER TAKING INTO ACCOUNT ALL T HE RELEVANT FACTS AS DISCUSSED ABOVE, THE ASSESSEES CONTENTIONS AND FOR THE REASONS RECORDED THEREIN, THE AO HAD QUANTIFIED THE UNACCOU NTED INCOMES OF THE ASSESSEE FOR THE AYS 2003-04 TO 2006-07 AS UNDE R: ASST. YEAR PEAK CREDITS DIFF. IN LOTTERY RECEIPT 2003-04 RS. 5,29,60 7/- - 2004-05 RS. 7,68,518/- - 2005-06 RS. 37,04,387 /- - 2006-07 RS. 19,96,664 /- RS.4,50,000/- 6.2. AGGRIEVED, THE ASSESSEE TOOK U P THE ISSUES, AMONG OTHERS, BEFORE THE CIT (A). THE CIT (A) HAD, AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS, DISMISSED THE APPEAL S OF THE ASSESSEE PERTAINING TO THE ABOVE MENTIONED ISSUES, FOR THE R EASONS RECORDED IN HIS ORDERS DATED 25.3.2009 FOR THE AYS 2005-06 AND 2006-07. FOR APPRECIATION OF FACTS, THE RELEVANT PORTIONS OF THE REASONING OF THE CIT (A) UNDER VARIOUS HEADS ARE EXTRACTED AS UNDER: AY 2005-06 : (I) ASSUMING OF JURISDICTION U/S 148 OF THE ACT: (ON PAGE 3).IT IS NOT DISPUTED THAT UNACCOUNTED BANK ACCOUNTS IN THE NAME OF THE APPELLANT WERE DISCOVER ED DURING SURVEY AND THE APPELLANT COULD NOT EXPLAIN SUBSTANT IAL DEPOSITS OF RS.28,15, 817/- IN CASH AND RS.5,19,542/- BY CHEQUE IN THESE ACCOUNTS. IT WAS ONLY LATER DURING ASSESSMENT PROC EEDINGS THAT A STAND WAS TAKEN THAT THE BANK ACCOUNTS BELONG TO TH E HUF. THUS, ON THE FACTS FOUND BY THE AO DURING SURVEY AND THE ABSENCE OF ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 6 OF 16 EXPLANATION IN RESPECT OF DEPOSITS IN UNDISCLOSED B ANK ACCOUNTS, THE AO WAS CLEARLY JUSTIFIED IN ISSUING NOTICE U/S 148.. (II) ASSESSMENT MADE U/S 144 OF THE ACT: (ON PAGE 3).THIS GROUND HAS NOT BEEN ELABORATED BY THE AO. IT CAN BE SEEN FROM THE ASSESSMENT ORDER THAT EXCEPT FOR CLAIMING THAT THE BANK ACCOUNTS RELATE TO THE BUSIN ESS OF HUF, THE APPELLANT HAS GIVEN NO DETAILS. NO EVIDENCE HA S ALSO BEEN LED IN SUPPORT OF THE EXPLANATION REGARDING HUF BUSINES S. CONSIDERING THE ABOVE, THE AO WAS JUSTIFIED IN MAKI NG THE ASSESSMENT U/S 144 OF THE I.T. ACT. (III) UNDISCLOSED BANK ACCOUNTS BELONG TO HUF : (ON PAGE 5).. THOUGH A BALD GROUND HAS BEEN TAKEN THAT THE ASSESSMENT U/S 144 IS NOT JUSTIFIED, THE SAME IS NOT ELABORATED AND IS DISMISSED IN THE ORDER. APART FR OM THIS, THE EVIDENCE FILED IS NOT EVEN RELEVANT AS IT MERELY SH OWS THAT CERTAIN DRAFTS WERE PURCHASED BY THE APPELLANT AND DOES NOT SHOW IN ANY WAY THAT THESE DRAFTS HAVE BEEN PURCHASED OUT OF TH E FUNDS IN THE UNDISCLOSED BANK ACCOUNTS OR EVEN THAT THESE DRAFTS RELATE TO ANY DISCLOSED BUSINESS. THERE IS NO EVIDENCE REGARDING THE LOTTERY BUSINESS OF HUF EXCEPT THE TESTIMONY OF THE APPELLA NT WHICH IS VERY STRANGE AS ANY BUSINESS WILL HAVE ITS TELL-TAL E EVIDENCE IN SOME FORM OR THE OTHER. THE EXPLANATION REGARDING HUF BUSINESS WAS NOT EVEN TAKEN DURING THE TIME OF SURV EY. ABSENCE OF SALES TAX REGISTRATION OF THE INDIVIDUAL BUSINES S AS WELL AS THE ALLEGED HUF BUSINESS DOES NOT PROVE THE FACTS EITHE R WAY. THE EXPLANATION REGARDING HUF BUSINESS AND THE BANK ACC OUNTS BEING IN RESPECT OF SUCH A BUSINESS IS UNSUBSTANTIA TED. THE AO HAS ALSO FOUND THAT THERE IS NO MENTION OF THE HUF IN THE ACCOUNT OPENING FORM OR ANY OTHER WRITTEN DOCUMENT. THE EXPLANATION OF THE APPELLANT REGARDING UNDISCLOSED BANK ACCOUNT AS BELONGING TO HUF IS, THEREFORE, NOT ACCEPTED AND AOS FINDING IN THIS REGARD IS CONFIRMED. (IV) PEAK CASH CREDIT: (ON PAGE 6) THE APPELLANT HAS NOT GIVEN ANY WORKIN G OF PEAK CASH CREDIT AND HAS ONLY MADE A GENERAL SUBMISSION. AS REGARDS THE CLAIM THAT THERE ARE DEPOSITS AND WITHDRAWALS E ARLIER ALSO, IT IS NOTED THAT THE PEAK CASH CREDIT HAS TO BE WORKED OUT FOR EACH YEAR AND THE PEAK FOR ANY FINANCIAL YEAR HAS TO BE TAKEN TO THE RESPECTIVE ASSESSMENT YEAR AND, THEREFORE, PEAK FOU ND IN THE EARLIER YEAR WILL HAVE NO BEARING AND WILL NOT CONS TITUTE A DEDUCTION FOR PEAK DEPOSIT CALCULATED SEPARATELY FO R THE SUCCEEDING ASSESSMENT YEAR. THE WORKING OF PEAK CA SH CREDIT MADE BY THE AO IS, THEREFORE, CONFIRMED. ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 7 OF 16 AY 2006-07 : (I) REJECTION OF THE RETURN : (ON PAGE 2) IT CAN BE SEEN FROM PARA 3 OF THE ASS ESSMENT ORDER THAT SINCE THE ORIGINAL RETURN OF INCOME WAS NOT FI LED IN TIME, THE REVISED RETURN FILED IS INCOMPETENT. THE APPELLANT ALSO ADMITS AS MUCH WHEN HE SAYS THAT THE RETURN COULD NOT HAVE BE EN TAKEN COGNIZANCE OF AS REVISED RETURN. THEREFORE, THE QU ESTION OF TAKING COGNIZANCE OF THE SAME AS A CORRECTED RETURN DOES NOT ARISE. (II) UN-DISCLOSED BANK ACCOUNTS: (ON PAGE 3) THE FIRST POINT RAISED BY THE APPELLAN T IS THAT NEITHER HIS INDIVIDUAL BUSINESS NOR THE HUF BUSINES S WAS REGISTERED UNDER SALES-TAX ACT. THE SECOND POINT M ADE IS IN RESPECT OF EXISTENCE OF LOTTERY BUSINESS OF HUF EXC EPT THE TESTIMONY OF THE APPELLANT WHICH IS VERY STRANGE AS ANY BUSINESS WILL HAVE ITS TELL-TALE EVIDENCE IN SOME FORM OR TH E OTHER. THE EXPLANATION REGARDING HUF BUSINESS WAS NOT EVEN TAK EN DURING THE TIME OF SURVEY. ABSENCE OF SALES TAX REGISTRA TION OF THE INDIVIDUAL BUSINESS AS WELL AS THE ALLEGED HUF BUSI NESS DOES NOT PROVE THE FACTS EITHER WAY. THE EXPLANATION REGARD ING HUF BUSINESS AND THE BANK ACCOUNTS BEING IN RESPECT OF SUCH A BUSINESS IS UNSUBSTANTIATED. THE AO HAS ALSO FOUND THAT THERE IS NO MENTION OF THE HUF IN THE ACCOUNT OPENING FORM O R ANY OTHER WRITTEN DOCUMENT. THE EXPLANATION OF THE APP ELLANT REGARDING UNDISCLOSED BANK ACCOUNT ASS BELONGING TO HUF IS, THEREFORE, NOT ACCEPTED AND AOS FINDING IN THIS RE GARD IS CONFIRMED. (III) PEAK CASH CREDIT: (ON PAGE 4) THE APPELLANT HAS NOT GIVEN ANY WORKI NG OF PEAK CASH CREDIT AND HAS ONLY MADE A GENERAL SUBMISSION. AS REGARDS THE CLAIM THAT THERE ARE DEPOSITS AND WITHDRAWALS E ARLIER ALSO, IT IS NOTED THAT THE PEAK CASH CREDIT HAS TO BE WORKED OUT FOR EACH YEAR AND THE PEAK FOR ANY FINANCIAL YEAR HAS TO BE TAKEN TO THE RESPECTIVE ASSESSMENT YEAR AND, THEREFORE, PEAK FOU ND IN THE EARLIER YEAR WILL HAVE NO BEARING AND WILL NOT CONS TITUTE A DEDUCTION FOR PEAK DEPOSIT CALCULATED SEPARATELY FO R THE SUCCEEDING ASSESSMENT YEAR. THE WORKING OF PEAK CASH CREDIT MADE BY THE AO IS, THEREFORE, CONFIRMED. 6.2.1. LIKEWISE FOR THE AYS 2003-04 AND 2004- 05, THE CIT (A), MYSORE, HAD DISMISSED BOTH THE APPEALS OF THE ASSESSEE BY ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 8 OF 16 FOLLOWING THE ORDERS OF THE THEN CIT (A), MYSORE FO R THE AYS 2005-06 AND 2006-07 IN THE ASSESSEES OWN CASE. THE RELEVA NT PORTION OF THE REASONING OF THE CIT (A) [FOR THE AYS 2003-04 & 04- 05] IS EXTRACTED AS UNDER: (ON PAGE 4) THERE WERE SIMILAR ADDITIONS FOR THE A YS 2005-06 AND 2006-07. THE APPELLANT HAS RAISED SIMILAR GROU NDS BEFORE THE THEN CIT (A). THE CIT (A) VIDE ORDER IN ITA NO .199/CIT (A)/MYS/08-09 DATED 25.3.2009 FOR THE AY 2006-07 AN D ORDER DT. 25.3.2009 VIDE APPEAL IN ITA NO.198/CIT(A)/MYS/08-0 9 FOR THE AY 2005-06 HAS CONSIDERED THE GROUNDS OF APPEAL AND THE ARGUMENTS OF THE APPELLANT AND DISMISSED THE GROUND S FOR THE REASONS MENTIONED IN THE ABOVE ORDERS. I HAVE GONE THROUGH THE ORDERS OF THE CIT (A) FOR THE A.YS 2005-06 AND 2006 -07. I AM IN COMPLETE AGREEMENT WITH MY PREDECESSOR. SINCE THE ISSUES ARE SAME, AFTER CONSIDERING ALL THE FACTS AND MATERIALS AS ABOVE, ALL THE GROUNDS OF APPEALS OF THE APPELLANT ARE DISMISS ED FOR THE A.YS 2003-04 AND 2004-05 FOR THE REASONS MENTIONED IN THE ABOVE ORDERS FOR THE A.YS. 2005-06 AND 2006-07. 7. AGGRIEVED, THE ASSESSEE HA S COME UP BEFORE US WITH THE PRESENT APPEALS. DURING THE COURSE OF HEARING, THE ARGUMENTS PUT- FORTH BY THE LEARNED AR ARE SUMMARISED, UNDER VARIO US HEADS, AS UNDER: (I) RE-OPENING OF ASSESSMENTS FOR THE AYS 2003-04 TO 20 05-06: 7.1. IN COMPLIANCE TO THE NOTICES U/S 148 OF THE ACT FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06, THE ASSESSEE H AD FURNISHED HIS RETURNS OF INCOME. HOWEVER, THE AO HAD REFUSED TO ACT ON SUCH RETURNS ON THE PREMISE THAT THEY WERE FURNISHED BEY OND THE TIME ALLOWED UNDER THE SAID NOTICES. WITH REGARD TO THE REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENTS, IT WAS ADMITTED THAT THE AO WAS NOT ASKED TO FURNISH THE SAME. HOWEVER, RE-OPENING OF ASSESSMENTS BY ISSUANCE OF NOTICES U/S 148 OF THE ACT WAS CHALLENG ED BEFORE THE CIT (A). THOUGH, THE CIT (A) HAD PROVIDED THE REASONS RECORDED FOR RE- ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 9 OF 16 OPENING OF THE ASSESSMENTS, BUT, ULTIMATELY HELD TH AT THE AO WAS JUSTIFIED IN ISSUANCE OF NOTICES U/S 148 OF THE ACT . IN THIS CONNECTION, IT WAS ARGUED THAT THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO; INSTEAD, HE OUGHT TO HAVE DIRECTE D THE AO TO PROVIDE THE REASONS RECORDED, TO CONSIDER THE OBJECTIONS OF THE ASSESSEE AND THEN PASS A SPEAKING ORDER ETC. TO SUBSTANTIATE HIS ARGUMENT, THE A R HAD RELIED ON THE JUDGMENT OF THE HONBLE SUPREME C OURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LIMITED V ITO & ANR REPORTE D IN 259 ITR 19 (SC). (II) COMPLETION OF ASSESSMENTS U/S 144 OF THE ACT: IN THE COURSE OF ASSESSMENT PR OCEEDINGS, THE AO HAD CALLED FOR EXPLANATION WITH REGARD TO THE DEPOSITS IN THE BANK ACCOUNTS FOUND AT THE TIME OF SURVEY. IT WAS EXPLAINED THAT IT RE LATED TO HIS JOINT FAMILY. HOWEVER, THE AO HAD REJECTED THE SAME AND CONCLUDED THE ASSESSMENTS U/S 144 OF THE ACT. WHILE DOING SO, IT WAS EXPLAINED; THE AO COMPUTED THE PEAK CREDITS IN THE BANK ACCOUNT-WI SE. HE HAD ALSO BROUGHT TO TAX THE CREDITS BY WAY OF CHEQUES IN THE BANK ACCOUNTS, HOLDING THAT THE SAME WAS UNEXPLAINED. HOWEVER, TH E AO DID NOT CALL FOR ANY OBJECTIONS OF THE ASSESSEE WITH REGARD TO T HE COMPUTATION OF PEAK CREDIT OR THE ADDITION MADE IN RESPECT OF CRED ITS BY WAY OF CHEQUES IN THE BANK ACCOUNT. IT WAS, THEREFORE, PR AYED THAT ONE MORE OPPORTUNITY BE GIVEN TO THE ASSESSEE TO EXPLAIN THE SAME BEFORE THE AO SINCE THE ASSESSMENTS HAVE BEEN CONCLUDED U/S 14 4 OF THE ACT. (III) REJECTION OF HUF CLAIM: THE AO HAD REJECTED THE EXPL ANATION OF THE ASSESSEE WITH REGARD TO BANK ACCOUNTS FOUND AT THE TIME OF S URVEY BELONGING TO ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 10 OF 16 THE HUF OF THE ASSESSEE ON THE GROUND THAT THE HUF OF THE ASSESSEE HAD NOT PRODUCED ANY VAT REGISTRATION FOR THE BUSIN ESS CARRIED ON BY IT. IT WAS SUBMITTED THAT THE ASSESSEE HAD ALREADY PRAYED FOR RESTORATION OF THE ENTIRE ISSUES BEFORE THE AO FOR FURNISHING OF ALL RELEVANT DETAILS FOR HIS CONSIDERATION, THE ISSUE O F BUSINESS CARRIED ON BY THE HUF ALSO BE REFERRED BACK TO HIM FOR FRESH C ONSIDERATION. (IV) PEAK AND OTHER CREDITS: THE AO HAD COMPUTED THE PEAK CREDIT IN THE BANK ACCOUNTS FOUND AT THE TIME OF SURVEY BY CONSIDERING THE DEPOSITS AND WITHDRAWALS IN THE SAID BANK ACCOUNTS. AS THE PEAK CREDIT IS TO BE WORKED OUT BY CONSIDERING THE TRANSACTIONS OF ALL B ANK ACCOUNTS AS A DEPOSIT MADE IN ANY PARTICULAR BANK ACCOUNT COULD B E EXPLAINED FROM OUT OF WITHDRAWAL IN ANOTHER BANK ACCOUNT. IT WAS, FURTHER, POINTED OUT THAT THE AO DID NOT GIVE CREDIT FOR THE EXTENT OF P EAK CREDIT ASSESSED IN THE EARLIER YEAR WHICH FUNDS WILL BE AVAILABLE W HILE COMPUTING THE PEAK CREDIT ON SUCCEEDING YEARS. THIS CONTENTION O F THE ASSESSEE WAS REJECTED SOLELY BY THE CIT (A) ON THE GROUND THAT T HE ASSESSEE DID NOT FURNISH ANY WORKINGS. THERE WERE ALSO CERTAIN ERRO RS WHILE COMPUTING THE PEAK CREDITS BY THE AO. WITH REGARD TO THE CRE DITS BY WAY OF CHEQUES, THE SAME HAS BEEN ADDED ON THE GROUND THAT NO DETAILS OF THE NATURE OF CREDITS WERE FURNISHED BY THE ASSESSEE. AS THE ASSESSEE HAS ALL THE DETAILS AT HIS POSSESSION, IT WAS PRAYED TH AT THE ENTIRE ISSUE RELATING TO THE COMPUTATION OF PEAK CREDITS AS WELL AS THE ADDITIONS MADE IN RESPECT OF CREDITS BE REMANDED TO THE AO FO R FRESH CONSIDERATION. ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 11 OF 16 7.2. IN CONCLUSION, THE LEARNED AR P RAYED THAT SINCE ALL THE RELEVANT MATERIALS BACKED WITH DETAILS/EVIDENCES AR E IN THE POSSESSION OF THE ASSESSEE, THE ENTIRE ISSUES PERTAINING TO TH E A.YS 2003-04 TO 2006-07 BE RESTORED ON THE FILES OF THE AO FOR FRES H CONSIDERATION. 7.3. ON THE OTHER HAND, THE LEARNED D R SUPPORTED THE STAND OF THE AUTHORITIES BELOW AND PRAYED THAT THERE IS NO V ALID REASON FOR THE ASSESSEE TO REQUEST FOR REMITTING BACK THE ISSUES B EFORE THE AO FOR A FRESH LOOK. IT WAS, THEREFORE, PRAYED THAT THE FIN DINGS OF THE CIT (A) REQUIRE TO BE SUSTAINED. 8 WE HAVE CAREFULLY CONSIDERED THE RIVA L SUBMISSIONS, PERUSED THE RELEVANT CASE RECORDS AND ALSO THE PAPER BOOK F URNISHED BY THE LEARNED AR DURING THE COURSE OF HEARING. 8.1 WE SHALL NOW PROCEED TO DEAL WITH THE ISSUES RAISED BY THE ASSESSEE CHRONOLOGICALLY AS UNDER: (I) REOPENING OF ASSESSMENTS FOR THE AYS 2003-04 TO 200 5-06: (A) THERE WAS A SURVEY OPERAT ION U/S 133A OF THE ACT WHICH TOOK PLACE IN THE PREMISES OF KMM MARKETING AND KARTHIK ASSOCIATES ON 17.6.2007 IN WHICH THE ASSESSEE IS A PARTNER. IT WAS NOTICED DURING THE COURSE OF SURVEY PROCEEDINGS THA T THE ASSESSEE WAS MAINTAINING BANK ACCOUNTS WITH PUNJAB NATIONAL BANK AND SYNDICATE BANK, MANDYA BRANCHES. ACCORDING TO THE AO, THOSE BANK ACCOUNTS DETAILS WERE NOT REFLECTED IN THE BALANCE SHEETS FU RNISHED EARLIER ALONG WITH RESPECTIVE RETURNS OF INCOME FOR THE AYS 2003- 04 TO 2005-06. TO VERIFY THE DETAILS AND VERACITY OF SUCH TRANSACTION S, THE AO, AFTER ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 12 OF 16 RECORDING THE REASONS, INITIATED RE-OPENING OF THE ASSESSMENT PROCEEDINGS FOR THE AYS 2003-04 TO 2005-06 BY ISSUA NCE OF NOTICES U/S 148 OF THE ACT. AS ADMITTED BY THE LEARNED AR, THE ASSESSEE DID NOT ASK FOR THE REASONS RECORDED FOR ISSUANCE OF SU CH NOTICES BEFORE THE AO. HOWEVER, THE SAME WAS CHALLENGED ONLY BEFO RE THE CIT (A). AFTER TAKING INTO CONSIDERATION THE ASSESSEES OBJE CTION, THE CIT (A) REJECTED THE ASSESSEES OBJECTION. IT WAS HELD THAT ON THE FACTS AND EVIDENCES UNEARTHED BY THE SURVEY PARTIES AND ALSO IN THE ABSENCE OF PROPER EXPLANATION IN RESPECT OF UNACCOUNTED AND UN EXPLAINED DEPOSITS IN THE SAID BANKS THE AO WAS FULLY JUSTIFIED IN ISS UING OF NOTICES U/S 148 OF THE ACT. (B) BEFORE US, THE LEARNED AR PLA CED RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F GKN DRIVESHAFTS (SUPRA) AND ARGUED THAT THE CIT (A) HAD FAILED TO DIRECT THE AO TO PROVIDE THE REASONS RECORDED, CONSIDER TH E OBJECTIONS OF THE ASSESSEE, PASS A SPEAKING ORDER ON THE OBJECTIO N OF THE ASSESSEE AND THEN PROCEED TO CONCLUDE THE ASSESSMENTS. (C) WE HAVE, PERUSED THE JUDGMENT OF THE HONBLE SUPREME COURT (SUPRA) WHEREIN IT HAS BEEN HELD THAT WHEN A NOTICE UNDER S. 148 IS ISSUED, THE PROPER C OURSE OF ACTION FOR THE NOTICEE IS TO FILE RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE AO IS BOUND TO FUR NISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, TH E NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE A ND THE AO IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE PROCEEDINGS, THE AO HAS TO DISPOSE OF THE OBJECTION S, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH TH E ASSESSMENT. ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 13 OF 16 (D) WHAT HAS BEEN RULED BY THE HON BLE APEX COURT IS THAT IF THE ASSESSEE SO DESIRE TO SEEK REASONS FOR ISSUANCE OF NOTICE, THEN THE AO IS BOUND TO FURNISH REASONS DISPOSE OF THE OBJEC TIONS OF THE ASSESSEE, IF ANY, BY PASSING A SPEAKING ORDER. HOW EVER, IN THE INSTANT CASE, AS FAIRLY CONCEDED BY THE LEARNED A R, NO SUC H REQUEST WAS MADE BEFORE THE AO WHATSOEVER. WE ARE, THEREFORE, OF TH E CONSIDERED VIEW THAT THE PRESENT ISSUE DOESNT FALL WITHIN THE SCOP E OF THE JUDGMENT OF THE HONBLE COURT (SUPRA). ACCORDINGLY, WE AFFIRM THAT THERE WAS NO INFIRMITY IN THE FINDING OF THE CIT (A) WARRANTING OUR INTERFERENCE. IN SUBSTANCE, THIS GROUND RAISED FOR THE AYS 2003-04 T O 2005-06 IS DECIDED AGAINST THE ASSESSEE. IT IS ORDERED ACCORD INGLY. (II) COMPLETION OF ASSTS. U/S 144 OF THE ACT AYS 2003- 04 TO 05-06: (A) IT WAS THE ARGUMENT OF TH E LEARNED AR THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD CALLED FOR CERTAIN DETAILS WITH REGARD TO THE DEPOSITS IN THE BANK ACC OUNTS AND THE SAME WAS FURNISHED TO HIM. HOWEVER, ACCORDING TO THE LE ARNED AR, THE AO REJECTED THE SAME AND PROCEEDED TO COMPLETE THE ASS ESSMENTS U/S 144 OF THE ACT. (B) THE CIT (A) HAD JUSTIFIED THE AOS ACTION ON THE PREMISE THAT (GR.NO3) NO EVIDENCE HAS ALSO BEEN LED IN SUPPORT OF THE EXPLANATION REGARDING HUF BUSINESS. CONSIDERIN G THE ABOVE, THE AO WAS JUSTIFIED IN MAKING THE ASSESSMENT U/S 144 O F INCOME-TAX ACT. ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 14 OF 16 HOWEVER, THE PROVISIONS OF S.144 OF T HE ACT SUBSCRIBE THAT 144. BEST JUDGMENT ASSESSMENT.- (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR THE ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT AL L RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT.. (C) IN THE CASE ON HAND, AS ADM ITTED BY THE AO, THE ASSESSEE HAD FURNISHED CERTAIN INFORMATION VIDE HIS LETTER DATED 15.12.2008. FOR APPRECIATION OF FACTS, WE REPRODUC E THE RELEVANT PORTION OF THE AOS OBSERVATION, VERBATIM, AS UNDER : 2. FURTHER, LATER, ON 15.12.2008, THE ASSESSEE HAS FURNISHED CE RTAIN INFORMATION WHICH IS TAKEN INTO CONSIDERATION FOR C OMPLETING THE EX-PARTE ASSESSMENT AS UNDER. [COURTESY: ASST. ORDER 2005-06] (D) IN VIEW OF THE ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN CONCLUDING THE ASS ESSMENTS U/S 144 OF THE ACT WHICH GOES CONTRARY TO THE SPIRIT OF THE PR OVISIONS OF S. 144 OF THE ACT. TO ILLUSTRATE FURTHER, THE ASSESSEE HAD, I N FACT, COMPLIED WITH THE NOTICE U/S 142(1) OF THE ACT DATED 21.11.2008 A S CONCEDED BY AO HIMSELF. (E) CONSIDERING THE ABOVE FAC TS, WE ARE OF THE VIEW THAT THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE AO S STAND. MOREOVER, THE LEARNED AR SUBMITTED THAT THE AO DID NOT CALL F OR ANY OBJECTIONS OF THE ASSESSEE WITH REGARD TO COMPUTATION OF PEAK CREDIT OR THE ADDITIONS MADE IN RESPECT OF CREDITS BY WAY OF CHEQ UES IN BANK ACCOUNTS. KEEPING THE ABOVE MATTER IN VIEW, HE HAD PLEADED THAT THE ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 15 OF 16 ASSESSEE MAY BE GIVEN AN OPPORTUNITY TO ENABLE HIM TO EXPLAIN THE SAME BEFORE THE AO FOR CONSIDERATION. (F) TAKING INTO ACCOUNT ALL TH E FACTS INTO CONSIDERATION AND ALSO IN THE INTERESTS OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIRNESS, WE ARE OF THE VIEW THAT THE ENTIRE ISSUE REQUIRES F RESH CONSIDERATION AT THE AOS LEVEL. ACCORDINGLY, THE ENTIRE ISSUES FOR THE A.YS 2003-04 TO 2006-07 ARE RESTORED ON THE FILES OF THE AO WITH A SPECIFIC DIRECTION TO LOOK INTO THE SAME AFRESH AND TO TAKE APPROPRIAT E ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER AFF ORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE MEANWHILE, THE ASSESSEE THROUGH HIS LEARNED A.R IS ADVISED TO FURN ISH ALL THE RELEVANT MATERIALS IN HIS POSSESSION AND TO CO-OPERATE WITH THE AO TO CARRY OUT THE DIRECTIONS OF THIS BENCH (SUPRA). IT IS ORDERED ACCORDINGLY. 8.2. BEFORE PARTING WITH, WE WOULD LIKE TO P OINT OUT THAT IN THE ASSESSMENT ORDER FOR THE AY 2006-07, IT HAS BEEN ME NTIONED ON PAGE 1 OF THE ORDER THAT THE ASSESSMENT IS MADE U/S 143 (3) OF I.T. ACT, 1961 . HOWEVER, ON PARA 6 OF THE SAID ORDER, IT HAS BEEN STATED AS UNDER: 6. IN RESPONSE THERETO, THE ASSESSEE FILED A LETT ER DATED 1.5.2008 REQUESTING FOR ADJOURN THE CASE TO 05.12.2008. HOWE VER, EVEN AFTER AVAILING THE FINAL OPPORTUNITY, THE ASSESSEE DID NOT REPRESENT THE CASE ON 05.12.2008. IN VIEW OF THE ASSESSEES NON- COOPERATION AND FURNISHED THE REQUIRED DOCUMENTS, T HE ASSESSMENT IS BEING COMPLETED EX-PARTE U/S 144 OF THE I.T. ACT. 8.3. IT APPEARS THAT THE ASSESSMENT FOR THE AY 2006-07 HAS ALSO BEEN CONCLUDED U/S 144 OF THE ACT. ACCORDINGLY, TH E ISSUES RAISED BY ITA NOS.714 & 715 OF 09 AND 983 & 984 OF 2011 N GIR ISH MYSORE PAGE 16 OF 16 THE ASSESSEE FOR THIS AY ARE ALSO RESTORED ON THE F ILE OF THE AO FOR FRESH CONSIDERATION AS IN THE CASE OF THE AYS 2003- 04 TO 2005-06. 8.4. W E HAVE SINCE REMITTED BACK THE ENTIRE ISSUES ON TH E FILES OF THE AO FOR FRESH CONSIDERATION AS DIRECTED (SUPR A), THE OTHER ISSUES RAISED BY THE ASSESSEE HAVE NOT BEEN TAKEN UP FOR A DJUDICATION. 9. IN THE RESULT, THE APPEALS OF THE ASSESS EE FOR THE AYS 2003-04 TO 2006-07 ARE TREATED AS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 10. ORDER PRONOUNCED AT THE END OF HEARING ON 23 RD AUGUST, 2013. SD/- SD/- (JASON P. BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED 23 RD AUGUST, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE