ITO, Ward-14(1), Hyd, Hyderabad V. Rao Subba Rao (HUF), Hyd., Hyderabad

ITA 759/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6214 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 08-09-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 04-06-2015
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: K C DEVADAS
• Keywords: Search and seizure
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 759/HYD/2015 ASSESSMENT YEAR: 2003-04 INCOME TAX OFFICER, WARD-14(1), HYDERABAD VS RAO SUBBA RAO (HUF) HYDERABAD [PAN: AAKHR7236R] (APPELLANT) (RESPONDENT) C.O. NO. 26/HYD/2016 (IN ITA NO. 759/HYD/2015) ASSESSMENT YEAR: 2003-04 RAO SUBBA RAO (HUF) HYDERABAD [PAN: AAKHR7236R] VS INCOME TAX OFFICER, WARD-14(1), HYDERABAD (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : SHRI K.J. RAO, DR FOR ASSESSEE : SHRI K.C. DEVADAS, AR DATE OF HEARING : 09-09-2016 DATE OF PRONOUNCEMENT : 23-09-2016 O R D E R THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD D ATED 27-02-2015 AND THE CROSS-OBJECTION BY ASSESSEE AGAIN ST THE SAID ORDER. THE CROSS-OBJECTION WAS FILED WITH A DELAY OF 131 (ONE HUNDRED AND THIRTY ONE) DAYS. WHILE FILING CROSS-O BJECTION, ASSESSEE HAD FILED AN AFFIDAVIT INDICATING THE REASON S FOR DELAY THAT HE LEFT FOR USA AND WHILE HE WAS AWAY FROM INDIA, AU THORISED HIS I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 2 -: SON TO BE A GENERAL POWER OF ATTORNEY [GPA] HOLDER INC LUDING THE TAX MATTERS AND HE COULD NOT ATTEND DUE TO BUSINESS COMMITM ENTS AND WHEN HE RETURNED, SON CEASED TO BE THE GPA AND ON ARRIVING INDIA, HE WAS BED-RIDDEN. WHEN HE CAME TO KNOW THAT THE CROSS- OBJECTION IS TO BE FILED AGAINST THE APPEAL FILED BY THE REVENUE, HE HAS PREFERRED THE SAME WITH A DELAYAND REQUESTED FOR CONDONATION. AFTER CONSIDERING THE SUBMISSIONS IN THIS REGARD, I HE REBY CONDONE THE DELAY AND ALLOW THE CROSS-OBJECTION. 2. THE FACTS LEADING TO THE PRESENT APPEALS ARE THAT ASS ESSEE HAS FILED HIS RETURN OF INCOME VOLUNTARILY ON 29-12-2006 FOR VARIOUS YEARS INCLUDING THE IMPUGNED AY. 2003-04. THERE WE RE SEARCH AND SEIZURE OPERATIONS IN THE RESIDENTIAL PREMISES OF SHRI RAO SUBBA RAO ON 24-08-2005. THEREAFTER, NOTICES WERE ISSUED I N THE INDIVIDUAL CAPACITY, WHEREAS ASSESSEE-HUF VOLUNTARIL Y FILED RETURNS IN THAT CAPACITY. FOR THE IMPUGNED ASSESSMENT YEAR, AS SESSEE RETURNED INCOME OF RS. 42,75,000/- AND AGRICULTURAL INCOME OF RS. 11,50,000/-. WHILE FILING THE RETURN, ASSESSEE, HOW EVER, CALCULATED THE TAX WRONGLY, AS THE HIGHEST MARGINAL RATE WAS CALCU LATED AT 20% AS AGAINST 30%. ASSESSEE ALSO CALCULATED INTEREST U/S.234A AT RS. 58,960/- ON THE TAX SO DETERMINED AT RS. 7,37,00 0/- AND 234B AT RS. 4,05,350/-. THUS, ASSESSEE CALCULATED TOTAL INTEREST PAYABLE UNDER THE TWO SECTIONS AT RS. 4,64,310/- AND T OTAL TAX PAID WAS RS. 12,01,310/- ON THE ADMITTED INCOME INCLUDING TH E AGRICULTURAL INCOME FOR RATE PURPOSES. 2.1. AO HOWEVER, IN THE ASSESSMENT, MADE ADDITIONS BY TREATING THE AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCE S AND CASH CREDITS TO AN EXTENT OF RS. 51,96,722/- AS UNEXPLAINE D. THUS, THE I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 3 -: TOTAL INCOME WAS DETERMINED AT RS. 1,06,21,720/-. ON A PPEAL, LD.CIT(A) CONFIRMED THE ADDITIONS MADE IN THE ASSESSME NT ORDER. THE SAME WAS CHALLENGED BEFORE THE ITAT ON TWO GROUN DS VIZ., ON THE GROUND OF JURISDICTION AND ON MERITS. THE ITAT VI DE ITS ORDER DT. 31-01-2013 HELD THAT THE AO HAS NOT RECORDED THE SA TISFACTION AND THEREFORE, THERE IS A JURISDICTIONAL DEFECT. ACC ORDINGLY, THE ASSESSMENT IN THE IMPUGNED YEAR FRAMED IN RESPECT OF H UF WAS QUASHED. HOWEVER, ITAT DIRECTED THAT WHATEVER ADMITTED TAX BY ASSESSEE IN ALL THESE ASSESSMENT YEARS IS TO BE FORF EITED IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS . SHELLY PRODUCTS AND ANOTHER [261 ITR 367] (SC). IN THE CONSEQUENTIAL ORDER GIVING EFFECT TO THE ORDER OF ITAT, AO RAISED D EMAND OF RS. 16,19,773/- ACCEPTING THE TOTAL INCOME AT RS. 42,75,000 /-. IN THAT ORDER, AO CHARGED THE TAX CORRECTLY AT 30% BEING THE HI GHEST MARGINAL RATE ON THE INCOME AS PER THE PROVISIONS OF T HE ACT AND WHILE DETERMINING THE INTEREST, HE ACCEPTED THE INTER EST U/S. 234A AT RS. 58,960/- AS ADMITTED BY ASSESSEE. HOWEVER, INTE REST U/S. 234B WAS ENHANCED TO RS. 7,22,777/- BEING CONSEQUENTI AL EFFECT IN VIEW OF THE INCREASED TAX AND FURTHER LEVIED INTEREST U/ S. 234C AT RS. 58,622/-. ASSESSEE HAS CHALLENGED THE DEMAND RA ISED IN THE CONSEQUENTIAL ORDER. LD.CIT(A) HAS ALLOWED THE APPEA L BY STATING AS UNDER: 7. AS THE HON'BLE ITAT HAS QUASHED THE ASSESSMENT MADE BY THE AO AND DIRECTED THAT TAX ADMITTED BE FORFEIT ED RELYING ON THE DECISION OF HON'BLE SUPREME COURT AS ABOVE, IT IS C LEAR THAT NO FURTHER DEMAND CAN BE RAISED AGAINST THE ASSESSEE. ACCORDINGLY, THE DEMAND RAISED IS NOT AS PER THE LAW LAID DOWN B Y THE HON'BLE SUPREME COURT FOLLOWED BY HON'BLE ITAT AND IS DELET ED. ASSESSEES GROUND NO. 1 & 2 ARE TREATED AS ALLOWED. I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 4 -: 3. REVENUE IS AGGRIEVED ON THE ABOVE AND RAISED THE F OLLOWING GROUNDS: 2. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE CIT(A) IS CORRECT IN DELETING THE DEMAND RAISED BY THE AO AS PER THE CONSEQUENTIAL ORDER WHEN THE SAME IS PASSED AFTER D ULY GIVING EFFECT TO THE ITAT ORDER. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) IS CORRECT IN IGNORING THE FACT THAT THE DEM AND RAISED IN THE CONSEQUENTIAL ORDER IS ON ACCOUNT OF CALCULATION OF TAX AND INTEREST ON THE INCOMES ADMITTED BY THE ASSESSEE IN ITS RETU RN OF INCOME ONLY AND NOT ON ACCOUNT OF ANY ADDITIONS MADE BY THE AO . GROUND NOS. 1 & 4 ARE GENERAL IN NATURE. 4. LD. DR SUBMITTED THAT ASSESSEE HAS FILED THE RETURN VOLUNTARILY MUCH BEFORE THE NOTICE U/S. 153C WAS ISSUE D AND HE HAS PAID SELF-ASSESSMENT LESS THAN REQUIRED UNDER THE LAW TO BE PAID. SINCE THERE IS A SHORT COMPUTATION OF SELF-ASSES SMENT TAX, AO HAS RAISED THE DEMAND IN THE CONSEQUENTIAL ORDER A ND NO FURTHER DEMAND WAS RAISED ON ASSESSEE VIOLATING THE O RDERS OF THE HON'BLE SUPREME COURT. IT WAS FURTHER SUBMITTED THAT THE CALCULATION IS AS PER THE RATES OF THE FINANCE ACT. T HEREFORE, THERE IS A LIABILITY TO PAY THE INCOME TAX CHARGEABLE U/S. 4(1) OF THE ACT AS PRESCRIBED UNDER THE LAW. 5. LD. COUNSEL WHILE AGREEING THAT THERE IS A MISTAKE I N CALCULATION OF SELF-ASSESSMENT TAX, HOWEVER, OBJECTED THAT FURTHER DEMAND U/S. 234C CANNOT BE RAISED AS THERE IS NO COMPUTATION OF INTEREST U/S. 234C IN THE ASSESSMENT ORDER ITSELF. THE REFORE, INTEREST U/S. 234C CANNOT BE LEVIED IN THE CONSEQUENTIAL ORDER. IT WAS ALSO FURTHER SUBMITTED THAT THE INTEREST U/S. 234A IS NOT LEVIED IN THE ASSESSMENT ORDER. THEREFORE, AO CANNOT LEVY IN TEREST U/S. I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 5 -: 234A IN THE CONSEQUENTIAL ORDER. COMING TO INTEREST U/S . 234B, IT WAS THE SUBMISSION THAT NO FURTHER DEMAND CAN BE MAD E IN THE CONSEQUENTIAL ORDER, OTHER THAN WHAT WAS VOLUNTARILY ADM ITTED BY ASSESSEE. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE RECORD. AS SEEN FROM THE RECORD, IT IS ASSESSEE WHO FILED RETURNS VOLUNTARILY IN THE HUF STATUS, ADMITTING THE TOTAL INCOME AT RS. 42,75,000/- AND AGRICULTURAL INCOME OF RS. 11,50,00 0/- WAS ADMITTED FOR RATE PURPOSES. HOWEVER, WHILE CALCULATIN G THE TAXES, ASSESSEE HAS TAKEN EXEMPTION OF FIRST RS. 50,000/- AND FOR NEXT RS. 50,000/-, HE CALCULATED THE TAX AT 10% AND NEXT RS. 90,0 00/- WAS CALCULATED AT 20% AND ON THE BALANCE, WRONGLY TAKEN AT RS. 52,75,000/- CALCULATED 20% AGAIN ARRIVING AT THAT TAX AT RS. 10,55,000/-. HOWEVER, THE CORRECT TAX LIABILITY ON THE ABOVE AMOUNT IS AT RS. 16,01,500/- AND AFTER AGRICULTURAL R EBATE, THE SAME WOULD RESULT AT RS. 13,30,875/-. AS AGAINST THI S, ASSESSEE ARRIVED TAX LIABILITY AT RS. 7,37,000/-. THUS, THERE IS A SHORTFALL IN THE SELF-ASSESSMENT TAX ITSELF WHICH IS COLLECTABLE AS TH E SAME IS THE LIABILITY ADMITTED BY ASSESSEE. THE LIABILITY IS TO PAY INCOME TAX CHARGEABLE U/S. 4(1) OF THE ACT THUS, DOES NOT REST ON THE ASSESSMENT BEING MADE. AS SOON AS THE FINANCE ACT PRE SCRIBES THE RATE ON INCOME FOR ANY ASSESSMENT YEAR, THE LIABILITY TO PAY THE TAX ARISES. ASSESSEE IS REQUIRED TO COMPUTE HIS TOTAL INC OME AND PAY THE INCOME TAX THEREON, WHICH INVOLVES PROCESS OF SELF -ASSESSMENT. SINCE ALL THIS IS DONE UNDER AN AUTHORITY OF LAW, THE SHORTFALL THEREON IS CERTAINLY LIABLE TO BE COLLECTED. SINCE IN THE ASSESSMENT COMPLETED IS HELD TO BE BAD IN LAW, THE ORIGINAL RETU RNED INCOME IS BEING ACCEPTED. HOWEVER, THE SHORTFALL IN TAX CALCULA TIONS MADE BY I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 6 -: ASSESSEE IS CERTAINLY A TAX DUE TO THE GOVERNMENT UNDER THE AUTHORITY OF LAW. THEREFORE, AO TO THAT EXTENT IS CORREC T IN RAISING THE DEMAND. HOWEVER, I AM NOT IN A POSITION TO APPRECI ATE THE LEVY OF INTEREST U/S. 234A AND 234C WHICH WERE NOT ORIGINALLY LEVIED IN AN ORDER U/S. 143(3). CONSEQUENTLY, LEVY OF INTEREST IN THE CONSEQUENTIAL ORDER IS NOT PROPER. HOWEVER, SINCE AS SESSEE HAS ADMITTED INTEREST UNDER SECTION 234A ORIGINALLY IN THE COMPUTATION, THE SAME IS DIRECTED TO BE ACCEPTED. 6.1. AS FAR AS INTEREST U/S. 234B IS CONCERNED, THE C ORRCT TAX LIABILITY ENHANCES THE LIABILITY AND THE SAME IS ALSO LEVIABLE AS PER THE PROVISIONS OF THE ACT. THEREFORE, PARTIALLY ALLOW ING THE CROSS- OBJECTIONS RAISED BY ASSESSEE, I DIRECT THE AO TO MODI FY TAX CALCULATIONS ACCORDINGLY, ACCEPTING THE 234A AS OFFE RED BY ASSESSEE IN THE RETURN AND MODIFY THE INTEREST U/S. 234B TO THE E XTENT OF DIFFERENCE IN TAX CALCULATED. INTEREST U/S. 234C, HOW EVER SHOULD NOT BE LEVIED. WITH THESE DIRECTIONS, THE ORDER OF CIT( A) IS MODIFIED AND AO IS DIRECTED TO COLLECT THE DIFFERENCE IN TAX ON THE ADMITTED INCOME AND INTEREST AS DIRECTED ABOVE. 7. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED AND CROSS-OBJECTION RAISED BY ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2016 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 23 RD SEPTEMBER, 2016 TNMM I.T.A. NO. 759/HYD/2015 C.O. NO. 26/HYD/2016 :- 7 -: COPY TO : 1. THE INCOME TAX OFFICER, WARD-14(1), HYDERABAD. 2. SRI RAO SUBBA RAO (HUF), PLOT NO. 44, ROAD NO. 7 OF 72, JUBILEE HILLS, HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-4, HYDERABAD 4. COMMISSIONER OF INCOME TAX-VI, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.