V Radhakrishna, Hyderabad V. DCIT, Central Circle-7, Hyderabad

ITA 748/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66238 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: I RAMA RAO
• Keywords: Reopening of assessment; Gift; Income from undisclosed sources; Deemed dividend; Assessment record
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 748/HYD/2012 ASSESSMENT YEAR: 2004-05 V. RADHAKRISHNA, ... APPELLANT HYDERABAD. (PAN ABQPV7046J) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 7, HYDERABAD. APPELLANT BY : SHRI I. RAMA RAO RESPONDENT BY : SHRI M.H. NAIK DATE OF HEARING : 05/09/2012 DATE OF PRONOUNCEMENT : 14/09/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VII, HYDERABAD DATE D 14/02/2012 FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL, DERIVING INCOME FROM SALARIES AND OTHER SOURCES. FOR THE ASSESSMENT YEAR 2004-05, THE ORIGINAL RETUR N OF INCOME WAS FILED ON 31/10/2004 ADMITTING A TOTAL IN COME OF RS. 27,46,999/-. AS AGAINST THE RETURN OF INCOME, T HE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 30/08/2006 AT A TOTAL INCOME OF RS. 33,23,547/-. SUBSEQUENTLY, A NOTICE DATED 27/04/2010 U/S 148 OF THE ACT WAS ISSUED PROPOSING TO REOPEN THE ASSESSMENT ON TH E GROUND OF INCOME HAS GOT ESCAPED FROM THE ASSESSMEN T. ITA NO. 748/HYD/12 V. RADHAKRISHNA. 2 3. ON RECEIPT OF THE ORDER U/S 148 OF THE ACT, THE ASSESSEE OBJECTED TO THE PROPOSED ASSESSMENT AND AS KED FOR REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 VID E LETTER DATED 28/04/2010. THE ASSESSEE HAD NOT RECEIVED THE REASONS RECORDED FROM THE ASSESSING OFFICER. IN THE MEANWHILE, THE ASSESSING OFFICER COMPLETED THE ASSE SSMENT U/S 143(3) READ WITH SECTION 147 ON 12/05/2010 AND MADE AN ADDITION OF RS. 44,04,467/- BY INVOKING THE PROV ISIONS OF SECTION 2(22)(A) OF THE ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE HAD RAISED THE OBJECTION TO THE ADDITION BY RAISING A SOLITARY GRO UND OF APPEAL FILED ORIGINALLY ON 23/06/2007 OPPOSING THE ADDITION OF DEEMED DIVIDEND ON ACCOUNT OF GIFT RECEIVED FROM THE COMPANY IN THE FORM OF IMMOVABLE PROPERTY. 6. HOWEVER, WHILE FURNISHING THE WRITTEN SUBMISSION S ON 03/11/2011, THE ASSESSEE HAD TAKEN ADDITIONAL GROUN D SUBMITTING A PETITION UNDER SUB-CLAUSE (V) OF SECTI ON 250 OF THE ACT, STATING THAT THE REOPENING OF ASSESSMENT I S BAD IN LAW AND RAISED THE ADDITIONAL GROUND OF APPEAL, AS UNDER: THE APPELLANT OBJECT TO THE REOPENING OF THE ASSESSMENT, SINCE IT IS BAD IN LAW. 7. THE CIT(A) AT PARA 3.2 OF HIS ORDER, OBSERVED AS UNDER:- AT THE TIME OF WRITTEN SUBMISSIONS, THE APPELLANT W AS REQUESTED TO FILE THE REASONS FOR RAISING THE ADDIT IONAL GROUND AT THE STAGE OF APPEAL AND IT WAS ADJOURNED ACCORDINGLY. HOWEVER, THE APPELLANT HAS CHOSEN NOT TO FILE THE CLARIFICATION ON THE SUBJECT AND AS COULD BE SEEN FROM THE ADDITIONAL GROUND RAISED BY THE ITA NO. 748/HYD/12 V. RADHAKRISHNA. 3 APPELLANT, IT IS BASED ON THE LEGAL ISSUE AND AS S UCH DISPOSED ON MERITS. 8. AGAIN AT PARA 5.2, THE CIT(A) OBSERVED AS UNDER: WHILE RAISING THE ADDITIONAL GROUND, THE APPELLANT HAS OBSERVED THE FOLLOWING ON THE ACTION INITIATED BY T HE AO U/S 147 OF THE ACT. I) THERE IS NO NEXUS BETWEEN THE REASONS RECORDED A ND ASSESSMENT FRAMED. II) THE AO HAS TRAVELLED BEYOND THE SCOPE OF SECTIO N 147 OF THE ACT, 1961 BY MAKING AN ADDITION, WHICH I S NOT THE BASIS OF INITIATION OF REOPENING. III) THE REASONS RECORDED ARE FOUND TO BE INCORRECT . 9. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AS IN PARA 5.4, HELD THAT AS COULD BE SEE N FROM THE ASSESSMENT RECORD, THE ISSUE UNDER REFERENCE I.E. D EEMED DIVIDEND WAS NOT A SUBJECT MATTER OF DISCUSSION IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3). THE CIT(A) F URTHER OBSERVED THAT REGARDING THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT, IT REVEALED THAT THE AO HAS CONSIDE RED TWO ISSUES FOR REOPENING THE ASSESSMENT AND THE ISSUE U NDER REFERENCE BEING ONE OF THEM. THE CIT(A) REPRODUCED THE REASONS RECORDED BY THE ASSESSING OFFICER IN HIS OR DER AND HELD AS FOLLOWS: AS COULD BE SEEN FROM THE ABOVE, IN THE PROCEEDINGS INITIATED U/S 148, THE ISSUE OF INVESTMENTS BY THE APPELLANT IN M/S AAMODA PUBLICATIONS PVT. LTD., WAS ONE OF THE ISSUE, THE AO HAS TAKEN UP ALONG WITH TH E ISSUE OF GIFT OF THE LAND WORTH RS. 44.04 LAKHS REC EIVED BY THE APPELLANT FOR THE PURPOSE OF MAKING ADDITION U/S 2(22)(A) OF THE ACT. THE CORRESPONDENCE MADE BY TH E AO INCLUDING THE SHOW CAUSE NOTICE DT. 29/04/2010, INDICATE THE PARTICULARS ON THE ABOVE ISSUE, WHICH WAS ALSO RESPONDED BY THE APPELLANT VIDE LETTER DT. 04/05/2010 WHEREIN THE DETAILS RELATED TO THE SAID GIFT WERE ELABORATED. UNDER THE CIRCUMSTANCES, THE FACTS OF THE CASE MAKE IT VERY CLEAR THAT THE AO HAS NOT TRAVELLED BEYOND THE SCOPE OF SECTION 147 OF THE AC T AS ALLEGED BY THE APPELLANT IN BRINGING THE DEEMED DIVIDEND TO TAX. ITA NO. 748/HYD/12 V. RADHAKRISHNA. 4 THE REASONS RECORDED IN THIS CASE BY THE AO HAS INCORPORATED THE ISSUE OF DEEMED DIVIDEND RECEIVED BY THE APPELLANT AS GIFT FROM THE COMPANY M/S APCPL. UNDER THE CIRCUMSTANCES, THE ADDITIONAL GROUND RAIS ED BY THE APPELLANT IS TREATED AS DISMISSED. 10. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI I. RA MA RAO CONTENDED THAT THE IMPUGNED REASSESSMENT PROCEEDING S ARE LIABLE TO BE QUASHED ON THE GROUND THAT THERE WAS N O ALLEGATION BY THE AO THAT THE ASSESSEE HAD FAILED T O DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. HE FURTHER CONTENDED THAT THE AO HAD CONCEDED THAT THE ASSESSE E HAD MADE A FULL DISCLOSURE OF ALL MATERIAL FACTS NECESS ARY FOR THE ASSESSMENT. TO THIS EFFECT THE LEARNED COUNSEL REFE RRED THE FINDINGS OF THE AO VIDE PAGE NO. 2 OF HIS ORDER, WH ICH ARE AS UNDER:- ON VERIFICATION OF THE INFORMATION AVAILABLE ON REC ORD, IT IS OBSERVED THAT M/S ACTIVE POWER CORPORATION LT D., HAS GIFTED LAND VALUED IN THE BOOKS AT RS. 44.04 LA KHS TO SHRI V. RADHA KRISHNA ON 15/12/2003. SRI V. RADH A KRISHNA IS A SUBSTANTIAL SHAREHOLDER IN M/S ACTIVE POWER CORPORATION LTD., A COMPANY IN WHICH PUBLIC A RE NOT SUBSTANTIALLY INVOLVED. BY VIRTUE OF PROVISIONS OF SECTION 2(22)(E), THE AMOUNT OF RS. 44,04,467/- ARE TO BE TREATED AS TAXABLE DIVIDEND INCOME IN THE HANDS OF SRI V. RADHA KRISHNA AND CONSTITUTE UNACCOUNTED INCOME IN HIS HANDS. 12. THE LEARNED COUNSEL SUBMITTED THAT WHEN THERE W AS NO SUCH ALLEGATION OR NO SUCH FAILURE, THE REASSESSMEN T IS REQUIRED TO BE QUASHED. FOR THIS PROPOSITION OF LAW , THE LEARNED COUNSEL RELIED UPON THE FOLLOWING CASE LAWS : A) SOUND CASTING (P) LTD., VS. DCIT [2012] 250 CTR 119 (BOM.) ITA NO. 748/HYD/12 V. RADHAKRISHNA. 5 B) JASHAN TEXTILES MILLS P. LTD. VS. DCIT [2006] 28 4 ITR 542 (BOM.) C) GERMAN REMEDIES LTD. VS. DCIT [2006] 287 ITR 494 D) CIT VS. FORMER FINANCE [2003] 264 ITR 566 (SC) E) INDUCTO ISPAT ALLOYS LTD. VS. ACIT (OSD) (GUJ.) 320 ITR 458 F) HONDA SIEL POWER PRODUCTS LTD. VS. DCIT (SC) 340 ITR 64. 14. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIE D UPON THE FOLLOWING CASE LAWS: 1. BERGER PAINTS INDIA LTD. VS. ACIT, 266 ITR 462 A T 468 2. S. NAGARAJ VS. STATE OF KARNATAKA, 4 STC 59 5. 3. JASTI RAMA RAO VS. ITO, 130 TTJ 66(HYD) (ITA NO. 630/HYD/2007, AY 2000-01, DT. 29/01/2010.) 4. QUALCOMM INCORPORATED VS. ADIT, W.P.(C)7959/2010, JUDGMENT DT. 29/08/2012. 15. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HEMAL KNITTING INDUSTRIES (SUPRA) FOR T HE PROPOSITION THAT THE ASSESSEE COULD CHALLENGE THE V ALIDITY OF PROCEEDINGS INITIATED U/S 147 IN THE SECOND ROUND O F LITIGATION BEFORE THE TRIBUNAL. 16. ON THE OTHER HAND, THE LEARNED DR SHRI M.H. NAI K RELIED ON THE DECISION OF L. ALGASUNDARAM CHETTIAR VS. ITR, 252 ITR 893. 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES AS WELL AS THE DECISIONS CITED. WE FIND THAT THE ASSESSEE HAD ADDRESSED THE LETTER DATED 28/04/2010 TO THE DCIT, CENTRAL CIRCLE-7, HYDERABAD ASKING FOR THE RE ASONS ITA NO. 748/HYD/12 V. RADHAKRISHNA. 6 RECORDED FOR THE ISSUE OF NOTICE U/S 148, AND HAD F AILED TO RECEIVE THE SAME. IT WAS ONLY AFTER THE RECEIPT OF THE ORDER OF THE CIT(A) THAT THE ASSESSEE HAD COME TO KNOW TH E REASONS RECORDED WHEREIN VIDE PARA 5.5 OF THE ORDER , THE REASONS RECORDED WEE REPRODUCED BY THE CIT(A). WE F IND THAT THE HONBLE BOMBAY BENCH OF ITAT IN THE CASE O F TATA INTERNATIONAL LTD. VS. DCIT, MUMBAI IN ITA NOS. 335 9 TO 3361/MUM/2009 VIDE ORDER DATED 29/06/2012 FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. VIDESH SANCHAR NIGAM LTD. 340 ITR 66 AND CIT VS . FOMENTO RESORTS AND HOTELS LTD., INCOME-TAX APPEAL NO. 71 OF 2006 DECIDED ON NOVEMBER 27, 2006 HELD VIDE PARA 8.1 AS UNDER:- THE REASONS REQUIRED TO BE FURNISHED WITHIN A REASONABLE PERIOD OF TIME SO THAT THE ASSESSEE CAN RAISE OBJECTIONS AT THE PRELIMINARY STAGE OF ASSESS MENT PROCEEDINGS. IF THE REASONS ARE NOT SUPPLIED DURING THE ASSESSMENT PROCEEDINGS, THEN FURNISHING THE REASONS SUBSEQUENT TO ASSESSMENT PROCEEDINGS WOULD ACHIEVE NO PURPOSE AND TANTAMOUNT TO DEPRIVING AND DENYING THE ASSESSEE OF ITS RIGHTS TO RAISE OBJECTIONS AGAI NST THE VALIDITY OF NOTICE ISSUED U/S 148 OF THE ACT. IT WAS FURTHER HELD THAT THUS REASSESSMENT COMPLETE D WITHOUT FURNISHING THE REASONS ACTUALLY RECORDED BY THE AO FOR REOPENING OF ASSESSMENT IS NOT SUSTAINABLE I N LAW BECAUSE THE AO IS DUTY BOUND TO SUPPLY THE SAME WITHIN REASONABLE TIME AS HELD BY THE HONBLE SUPRE ME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. T HE SUBSEQUENT SUPPLY OF REASONS WOULD NOT MAKE GOOD OF THE ILLEGALITY SUFFERED BY THE REOPENING ASSESSMENT . 18. WITH RESPECT TO SECTION 292BB, THE SAME WAS INS ERTED BY THE FINANCE ACT, 2008 WITH EFFECT FROM 01/04/200 8 AND HENCE IS NOT APPLICABLE TO THE PRESENT CASE BEFORE US. 19. HENCE, WE ARE OF THE OPINION THAT THE REASONS R ECORDED BY THE ASSESSING OFFICER ARE REQUIRED TO BE FURNISH ED TO THE ITA NO. 748/HYD/12 V. RADHAKRISHNA. 7 ASSESSEE AND THE REASONS RECORDED CANNOT BE IMPROVE D UPON OR AMENDED BY ANY CORRESPONDENCE, LETTERS, ETC. THO UGH THE REASONS RECORDED WERE CALLED FOR BY THE CIT(A) AT T HE TIME OF HEARING BEFORE HIM AND THE SAME WERE EXTRACTED I N THE ORDER OF THE CIT(A) THE FACT REMAINS THAT BEFORE TH E COMPLETION OF THE ASSESSMENT, THE REASONS RECORDED WERE NOT ACTUALLY FURNISHED TO THE ASSESSEE DESPITE HIS LETTER DATED 28/04/2010, THEREFORE, FOLLOWING THE RATIO LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GKN DRI VE SHAFTS LTD.(SUPRA), WE ARE OF THE OPINION THAT THE REASSESSMENT ORDER PASSED WITHOUT SUPPLY OF REASONS AS RECORDED FOR REOPENING OF THE ASSESSMENT IS INVALID AND CANNOT BE SUSTAINED. ACCORDINGLY, WE SET ASIDE THE ASSESSMENT UNDER CONSIDERATION AS BEING INVALID. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 14/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 14 TH SEPTEMBER, 2012. KV COPY TO:- 1) V. RADHAKRISHNA, C/O P.R. DATLA & CO. CAS., 6-3-788/A/9, FIRST FLOOR, DURGA NAGAR, AMEERPET, HYDERABAD 500 016. 2) DCIT, CENTRAL CIRCLE-7, HYDERABAD. 3) THE CIT (A)-VII, HYDERABAD 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.