DCIT, Central Circle, Tirupathi, Tirupathi V. C.Gopi Krishna, Tirupathi, Tirupathi

ITA 747/HYD/2015

• Counselvise Citation: 74722514 RSA 2015
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-06-2015
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Search and seizure; Document seized; Documents seized
• Section: 142(1); 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 747/HYD/2015 2004-05 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, TIRUPATI SRI C. GOPI KRISHNA, TIRUPATI [PAN: AAXPC8372N] 748/HYD/2015 2005-06 749/HYD/2015 2008-09 750/HYD/2015 2009-10 C.O. NO. ASST. YEAR CROSS - OBJECTOR RESPONDENT 44/HYD/2015 (IN ITA NO. 747/HYD/15) 2004-05 SRI C. GOPI KRISHNA, TIRUPATI [PAN: AAXPC8372N] DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, TIRUPATI 45/HYD/2015 (IN ITA NO. 748/HYD/15) 2005-06 46/HYD/2015 (IN ITA NO. 749/HYD/15) 2008-09 47/HYD/2015 (IN ITA NO. 750/HYD/15) 2009-10 FOR REVENUE : SMT NIVEDITA BISWAS, CIT-DR FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR DATE OF HEARING : 03-09-2015 DATE OF PRONOUNCEMENT : 09-09-2015 O R D E R PER BENCH : THESE APPEALS AND CROSS OBJECTIONS ARE BY REVENUE AND ASSESSEE FOR AYS. 2004-05, 2005-06, 2008-09 AND 2009-10. IN ALL THESE APPEALS, I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 2 -: REVENUE IS AGGRIEVED ON THE ISSUES THAT LD. CIT(A) ERRED IN DELETING UN- EXPLAINED CASH CREDITS AND THE DISALLOWANCE OF PERS ONAL EXPENDITURE MADE BY THE ASSESSING OFFICER (AO). ASSESSEE IS AG GRIEVED THAT LD. CIT(A) UPHELD THE PROCEEDINGS U/S. 153C OF THE INCO ME TAX ACT [ACT]. 2. BRIEFLY STATED, THERE WERE SEARCH AND SEIZURE OP ERATIONS U/S. 132 OF THE ACT CONDUCTED IN THE CASE OF ASSESSEE SHRI C H. RAJA GOPAL AND OTHERS ON 12-02-2009. ASSESSEE HAPPENED TO BE SON OF SHRI RAJA GOPAL. NOTICES U/S. 153C DT. 24-09-2009 WERE ISSUED BY THE AO IN RESPECT OF THESE ASSESSMENT YEARS. ASSESSEE FILED THE RETURN OF INCOME ORIGINALLY FILED FOR THE ASSESSMENT YEARS UPTO AY. 2008-09 AND IN AY. 2009-10, BEING POST SEARCH PERIOD FILED THE REGULAR RETURN O F INCOME, CONSEQUENT TO THE NOTICE U/S. 142(1) ISSUED ON 31-05-2010. AO ISSUED VARIOUS NOTICES FOR COMPLETION OF ASSESSMENTS AND AS PER AO , THERE IS NO RESPONSE EXCEPT TO ONE NOTICE IN WHICH ONE SHRI S. RAM MOHAN RAO, CA APPEARED AND FILED POWER OF ATTORNEY (POA) ON 05-11 -2010. AO RECORDS THAT NEITHER ASSESSEE NOR HIS AR APPEARED AND FURNI SHED ANY INFORMATION CALLED IN THE NOTICE ISSUED U/S. 142(1) DT. 22-10-2010. IN THE ABSENCE OF ANY RESPONSE FROM ASSESSEE, AO INVOK ED THE PROVISIONS OF SECTION 144 AND MADE VARIOUS ADDITIONS, ACCORDINGLY , IN THE FORM OF UNEXPLAINED CASH CREDITS OF ALL THE AMOUNTS SHOWN I N THE CAPITAL ACCOUNTS AND ALSO DISALLOWANCE OF PERSONAL EXPENDIT URE OUT OF THE PROPRIETARY BUSINESS OF M/S. G.K. ENTERPRISES IN TH E IMPUGNED ASSESSMENT YEARS. 3. BEFORE THE LD. CIT(A), ASSESSEE CONTESTED TH E LEGALITY OF PROCEEDINGS U/S. 153C, ADDITIONS MADE WITHOUT ANY INCRIMINATING MATERIAL AND EX- PARTE ASSESSMENT. IT WAS SUBMITTED THAT AS ASSESSE E WAS NOT SEARCHED AND AS THERE IS NO INCRIMINATING MATERIAL PERTAININ G TO ASSESSEE, I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 3 -: INITIATION OF PROCEEDINGS U/S. 153C ARE NOT LEGALL Y VALID. WITH REFERENCE TO ADDITIONS MADE WITHOUT ANY INCRIMINATING MATERIA L, IT WAS SUBMITTED THAT ORIGINAL RETURNS HAVE BEEN FILED EARLIER. THO UGH AO IS EXPECTED TO MAKE ASSESSMENTS BASED ON SEIZED MATERIAL, WHILE MA KING ASSESSMENTS ON THE BASIS OF SEIZED MATERIAL, HE CAN ALSO RELY O N OTHER MATERIAL THOUGH NOT FOUND DURING THE COURSE OF SEARCH. IT WAS CONT ENDED THAT THERE IS NO REFERENCE TO DO ANY SEIZED MATERIAL AND THEREFORE, THE ADDITIONS MADE ARE NOT VALID. WITH REFERENCE EX-PARTE ASSESSMENT, IT WAS SUBMITTED THAT SHRI S. RAM MOHAN RAO WHO IS ENGAGED AS ASSESSEES COUNSEL DID NOT APPEAR BEFORE THE AO AND ASSESSEE DOES NOT KNOW HOW HE HAS NOT REPRESENTED. IT IS FURTHER SUBMITTED THAT ASSESSEE WAS NOT AWARE TILL THE ORDER WAS RECEIVED THAT THE ASSESSMENT WAS MADE EX- PARTE. THEREFORE, HE WAS DEPRIVED OF EXPLAINING THE ISSUES ON WHICH A DDITIONS WERE MADE. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT ASSESSE E HAS MAINTAINED LEDGER, BOOKS OF ACCOUNTS AND THEY CAN BE PRODUCED FOR VERIFICATION. SINCE AO HAS NOT SEEN THE BOOKS OF ACCOUNT AND RESO RTED THE VARIOUS ADDITIONS, ASSESSEE REQUESTED THE LD. CIT(A) TO CON SIDER THE ISSUE ON FACTS. ASSESSEE ALSO EXPLAINED INDIVIDUAL ADDITION S MADE BEFORE THE CIT(A). 4. LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CA SE, ASSESSMENT ORDER AND VARIOUS WRITTEN SUBMISSIONS, UPHELD THE PROCEED INGS U/S. 153C. LD. CIT(A) NOTICED THAT SEARCH AND SEIZURE OPERATIO NS WERE CONDUCTED ON SHRI CH. RAJA GOPAL, WHO IS THE FATHER OF ASSESSEE AND THEREBY NOTICES ISSUED U/S. 153C ARE TO BE TREATED AS VALID DUE T O RELATIONSHIP AND TO VERIFY INTER-RELATED TRANSACTIONS. WITH REFERENCE TO ADDITIONS MADE INCLUDING THE DISALLOWANCE OF PERSONAL EXPENDITURE, LD. CIT(A) WAS OF THE OPINION THAT THERE IS NO MENTION OF ANY UNACCOUNTED TRANSACTIONS OR INCOME OF ASSESSEE FROM THE STATEMENT OF MR. CH. RA JA GOPAL. SINCE IT IS AN ASSESSMENT COMPLETED BY APPLYING THE PROVISIONS OF SECTION 153C, I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 4 -: AO IS NOT SUPPOSED TO MAKE THESE ADDITIONS IN THE A BSENCE OF ANY SEIZED MATERIAL/DOCUMENTS. THEREFORE, ADDITIONS MADE BY T HE AO ARE DELETED IN ALL THE IMPUGNED ASSESSMENT YEARS EXCEPT IN AY. 2009-10. AS FAR AS AY. 2009-10 IS CONCERNED, LD. CIT(A) NOTICED THAT T HE PROCEEDINGS ARE NOT INITIATED U/S. 153C BUT ARE REGULAR PROCEEDINGS UNDER NORMAL ASSESSMENT PROCEDURE. HOWEVER, WHILE UPHOLDING ASS ESSEES CONTENTIONS TO THE EXTENT OF DISALLOWANCE OF PERSONAL EXPENDITU RE, LD. CIT(A) UPHELD THE ADDITION OF RS. 12,39,000/- AS UNEXPLAINED CASH CREDIT U/S. 68. 5. REVENUE IS AGGRIEVED ON DELETION OF CASH CREDITS AND PERSONAL EXPENDITURE IN ALL THE IMPUGNED ASSESSMENT YEARS AN D ASSESSEE IS AGGRIEVED ON REJECTING ARGUMENTS FOR ASSESSING U/S. 153C AND CONFIRMATION OF UNEXPLAINED CASH CREDIT IN AY. 2009 -10. 6. WE HAVE HEARD THE LD. DR AND LD. COUNSEL AND PER USED THEIR RIVAL CONTENTIONS. AS FAR AS REVENUES GROUNDS ARE CONCE RNED, WE DO NOT SEE ANY MERIT IN REVENUES GROUNDS IN AYS. 2004-05, 200 5-06 AND 2008-09. THERE IS NO INCRIMINATING MATERIAL AS FAR AS ASSESS EE IS CONCERNED. NOTHING WAS BROUGHT ON RECORD EITHER IN THE ASSESSM ENT ORDER OR BEFORE THE CIT(A) OR DURING THE PROCEEDINGS BEFORE US THAT THERE IS ANY INCRIMINATING MATERIAL IDENTIFIED AS BELONGING TO A SSESSEE. THEREFORE, THE PROCEEDINGS PER SE U/S. 153C SHOULD NOT ARISE. EVEN IF FOR THE SAKE O F ARGUMENT CONSIDER THAT PROCEEDINGS U/S. 153C ARE AP PROPRIATE, THE AO CANNOT MAKE ANY ROUTINE DISALLOWANCE IN THE SEARCH ASSESSMENTS IN THE ABSENCE OF ANY INCRIMINATING MATERIAL. AO WOULD BE ENTITLED TO MAKE ADDITIONS U/S. 153A. AS THE JURISDICTION FOR COMPL ETION OF ASSESSMENT U/S. 153C IS LIMITED, AO CANNOT MAKE ROVING ENQUIRI ES OR ROUTINE DISALLOWANCES WHICH ARE NOT WARRANTED OTHERWISE. M OREOVER, AS RIGHTLY CONSIDERED BY THE CIT(A) IN THE EX-PARTE ASSESSMENT S, AO HAS SIMPLY I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 5 -: DISALLOWED ALL THE AMOUNTS SHOWN IN THE CAPITAL ACC OUNTS WITHOUT ANY SCRUTINY. WE ALSO FOUND THAT BEFORE INVOKING PROVI SIONS OF SECTION 144, AO HAS NOT ISSUED ANY SHOW CAUSE NOTICE TO ASSESSEE NOR THERE IS ANY EVIDENCE THAT PROPER PROCEDURE HAS BEEN FOLLOWED. BE THAT AS IT MAY, IN THE THREE IMPUGNED ASSESSMENT YEARS, AS THERE IS NO INCRIMINATING MATERIAL AND PROCEEDINGS BEING U/S. 153C , THE ORDE R OF THE CIT(A) IS TO BE UPHELD. THERE IS NO MERIT IN REVENUES GROUNDS AND ACCORDINGLY, THEY ARE REJECTED. 7. COMING TO AY. 2009-10, AS ALREADY STATED ABOVE, THE PROCEEDINGS ARE NOT U/S. 153C. IT WAS THE CONTENTION OF ASSESS EE BEFORE THE LD. CIT(A) THAT HE HAS MAINTAINED BOOKS OF ACCOUNTS AN D AO SHOULD HAVE EXAMINED THE TRANSACTIONS ON THE BASIS OF BOOKS OF ACCOUNTS. SINCE AO HAS NEITHER FOLLOWED THE PROCEDURE U/S. 144 NOR CIT (A) HAS CONSIDERED ASSESSEES REQUEST FOR EXAMINING THE BOOKS OF ACCOU NTS, WE ARE OF THE OPINION THAT THE DELETION BY CIT(A) OF THE DISALLOW ANCE OF THE PERSONAL EXPENDITURE AND ALSO CONFIRMATION OF THE AMOUNT AS UNEXPLAINED CASH CREDIT IS WITHOUT ANY BASIS. EVEN THOUGH LD. CIT(A ) NOTED THAT ASSESSEE FAILED TO PRODUCE THE GENUINENESS OF THESE TRANSACT IONS BEFORE THE AO AND BEFORE CIT(A), THERE SEEMS TO BE NO ENQUIRY MAD E BY ANY OF THE AUTHORITIES TO COME TO THE SAID CONCLUSION. IN VIE W OF THIS, WE ARE NOT IN A POSITION TO UPHOLD THE ORDER OF CIT(A) IN AY. 200 9-10 AND THEREFORE THE REVENUES GROUNDS ON DISALLOWANCE OF PERSONAL EXPEN DITURE ARE TO BE CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. SI MILAR ISSUE ALSO CAME UP IN CROSS-OBJECTION IN THIS YEAR, THEREFORE FOR T HE LIMITED PURPOSE OF REVENUE APPEAL IN AY. 2009-10, WE UPHOLD THE GROUND S AS THE ISSUE REQUIRE FRESH EXAMINATION. THEREFORE, THE APPEAL I N AY 2009-10 IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 6 -: 8. COMING TO THE CROSS OBJECTIONS IN AY. 2004-05, 2 005-06 AND 2008-09, THE ONLY ISSUE IS WITH REFERENCE TO SUSTAI NING PROCEEDINGS U/S 153C. AS CAN BE SEEN FROM THE ORDER OF CIT(A), THE RE ARE CONTRADICTORY FINDINGS WHILE CONSIDERING THIS GROUND AND GROUNDS ON MERITS. LD. CIT(A) RECORDS, WHILE DISAGREEING WITH THE CONTENTI ONS U/S. 153C, THAT THE NOTICES U/S. 153C ARE TO BE TREATED AS VALID DU E TO THE RELATIONSHIP AND TO VERIFY THE INTER-RELATED TRANSACTIONS AND TH AT THE AO VERIFIES THE SAME AFTER GIVING THE NOTICE US 153C SINCE THE CERT AIN DOCUMENTS WERE SEIZED AT THE TIME OF SEARCH AND SEIZURE OF SHRI CH . RAJA GOPAL. HOWEVER, THIS FINDING OF CIT(A) IS CONTRADICTORY TO THE FINDING GIVEN IN PARA 6.1 WHILE DELETING THE ADDITIONS MADE ON MERIT S. THE CIT(A) HAS THE FOLLOWING TO RECORD: AS STATED BY THE APPELLANT, THERE IS NO SEIZED DOC UMENTS/ANNEXURES ARE ( SIC) ANY OF SURRENDERED INCOME PERTAINS TO APPELLANT, T HE AO ALSO FAILED TO NOTICE ANY SEIZED DOCUMENTS OR UNACCOUNTED TRANS ACTIONS OF THE APPELLANT AND ADDED ABOVE ADDITIONS ROUTINELY. THE RE IS NO MENTION OF ANY UNACCOUNTED TRANSACTIONS OR INCOME OF THE APPEL LANT FROM THE STATEMENT OF MR. CH. RAJA GOPAL. SINCE IT IS THE A SSESSMENT COMPLETED BY APPLYING THE PROVISIONS OF SECTION 153C, THE AO IS NOT SUPPOSED TO MAKE THESE ADDITIONS IN THE ABSENCE OF SEIZED MATERIAL/D OCUMENTS. 8.1 AS CAN BE SEEN FROM THE ABOVE, LD. CIT(A) GAVE CONTRADICTORY STATEMENTS/FINDINGS IN THE ORDER. AT THE TIME OF U PHOLDING THE PROCEEDING U/S. 153C, LD. CIT(A) ADMITTED THAT THER E IS SEIZED MATERIAL LINKED TO ASSESSEE, THAT IS THE REASON WHY SHE UPHE LD THE PROCEEDINGS U/S. 153C. HOWEVER, AT THE SAME TIME ADDITIONS WER E DELETED STATING THAT THERE IS NO INCRIMINATING MATERIAL. THE FACT IS THAT THERE IS NO INCRIMINATING MATERIAL AT ALL BELONGING TO ASSESSEE . THEREFORE, THE PROCEEDINGS U/S. 153C ITSELF ARE NOT WARRANTED. J UST BECAUSE ASSESSEE I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 7 -: HAPPENED TO BE SON OF SHRI RAJA GOPAL, WITHOUT THER E BEING ANY SATISFACTION OF AO AND INCRIMINATING MATERIAL BELON GING TO ASSESSEE, PROCEEDINGS U/S. 153C CANNOT BE INITIATED IN ASSESS EES CASE. THEREFORE, THERE IS MERIT IN ASSESSEES CONTENTIONS THAT THE P ROCEEDINGS ARE NOT VALIDLY INITIATED. FOR THESE REASONS, WE UPHOLD TH E CROSS OBJECTIONS OF ASSESSEE IN THE IMPUGNED THREE ASSESSMENT YEARS. 9. AS FAR AS AY. 2009-10 IS CONCERNED, ASSESSEES C ROSS OBJECTION IS WITH REFERENCE TO ADDITION OF RS. 12,39,000/- UPHEL D BY THE CIT(A) WITHOUT APPRECIATING THE FACT THAT THE LOANS ARE VE RIFIABLE AND WERE TAKEN IN THE PREVIOUS YEAR FOR THE BUSINESS. AS ALREADY STATED IN THE REVENUES APPEAL, THE ORDER OF CIT(A) CANNOT BE UPHELD AS NO OPPORTUNITY WAS GIVEN TO ASSESSEE TO SUBSTANTIATE THE TRANSACTIONS. AS A LREADY NOTED, PROCEEDINGS IN THIS ASSESSMENT YEAR ARE NOT CONSEQU ENTIAL PROCEEDINGS TO SEARCH BUT ARE REGULAR PROCEEDINGS. SINCE REGULA R SCRUTINY ASSESSMENT HAS TO BE DONE IN ASSESSEES CASE, WE ARE OF THE OP INION THAT ENTIRE ASSESSMENT HAS TO BE SET ASIDE AND BE RESTORED TO T HE FILE OF AO FOR EXAMINATION OF ASSESSEES TRANSACTIONS AFRESH. FOR THESE REASONS, THE ORDERS IN AY. 2009-10 OF THE AO AND CIT(A) ARE SET ASIDE AND THE ENTIRE ASSESSMENT IS RESTORED TO THE FILE OF AO TO BE DONE AS PER FACTS AND LAW. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY AND ASSESS EE ALSO SHOULD CO- OPERATE IN FURNISHING NECESSARY INFORMATION AND PRO DUCTION OF BOOKS OF ACCOUNTS TO THE AO. WITH THESE DIRECTIONS/OBSERVATI ONS CROSS OBJECTION NO. 47 FOR AY. 2009-10 IS THEREFORE TREATED AS ALLO WED. 10. IN THE RESULT, APPEALS OF REVENUE IN ITA NOS. 7 47/HYD/2015, 748/HYD/2015 AND 749/HYD/2015 ARE DISMISSED AND APP EAL OF REVENUE IN ITA NO. 750/HYD/2015 AND C.O. NO. 47/HYD /2015 OF I.T.A. NOS. 747 TO 750/HYD/2015 C.O. NOS. 44 TO 47/HYD/2015 SRI C. GOPI KRISHNA :- 8 -: ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. C.O . NOS. 44/HYD/2015, 45/HYD/2015 AND 46/HYD/2015 ARE ALSO CONSIDERED ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH SEPTEMBER, 2015 TNMM COPY TO 1. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. 2. SRI C. GOPI KRISHNA, D.NO. 18/410, BHAVANI NAGAR , TIRUPATI. C/O. SRI K. VASANT KUMAR & A.V. RAGHU RAM, ADVOCATE S, 610, BABUKHAN ESTATES, BASHEERBAGH, HYDERABAD. 3. CIT (APPEALS)-I, (I/C) GUNTUR. 4. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRA L, TIRUPATI 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.