MR. KARUPPASAMY PILLAI VADIVEL MURUGAN, CHENNAI V. ITO, NON CORPORATE WARD 10(5), CHENNAI

ITA 771/CHNY/2022

AI Insights

The case involves Shri Karuppasamy Pillai Vadivel Murugan, the appellant, contesting an assessment order for the year 2011-12 by the Income Tax Officer (ITO), which was upheld by the CIT(A). The appellant challenged the reopening of the assessment and the subsequent additions made to his income, including unreported rental income and a gift received from his wife. The Tribunal addressed procedural issues regarding the issuance of notices and substantive issues concerning the assessment of rental income and the treatment of the gift under the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133804 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 20-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 11-09-2022
• Other Referred Cases: ACIT V. Apollo Hospital Enterprises Ltd., Sadhna Tolasariya vs. ITO
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G. VARDHINI KARTHICK LD
• Keywords: Gift; Period of limitation; Corroborative evidences; Time period of passing order; TDS; FORM 26AS
• Section: 148; 142(1)

Judgement Text

आयकर अपीलीय अिधकरण ‘ए/एस एम सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A/SMC’ BENCH, CHENNAI माननीय .ी मनोज कु मार अ2वाल ,लेखा सद6 के सम7। BEFORE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.771/Chny/2022 (िनधा=रण वष= / Assessment Year: 2011-12) Shri Karuppasamy Pillai Vadivel Murugan No.10, Maraimalai Adigalar Street, Razack Garden, Aminjikarai, Chennai – 600 029. बनाम/ V s. ITO Non Corporate Ward-10(5), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AC RP V -8 2 9 6 -Q (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Smt. G. Vardhini Karthick (Advocate)-Ld. AR थ की ओरसे/Respondent by : Shri Sanat Kumar Raha (Addl. CIT)-Ld. DR सुनवाई की तारीख/Date of Hearing : 21-02-2023 घोषणा की तारीख /Date of Pronouncement : 21-02-2023 आदेश / O R D E R 1. Aforesaid appeal by assessee for Assessment Year (AY) 2011-12 arises out of the order of learned Commissioner of Income Tax (Appeals)-12, Chennai [CIT(A)] dated 22-05-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 11-12-2018. The grounds raised by the assessee read as under: 1) The CIT(A)'s order is erroneous and unsustainable in law and opposed to the facts and circumstances of the case. Reopening U/S 147 is barred by Limitation 2) The proceedings of issuance of notice u/s 148 dated 24.3.2018 is non est in law, as the same has been served on the Assessee on 02.04.2018 and the same is confirmed by the Assessing Officer in his notice u/s 142(1) dated 10.07.2018. 3) The time frame stipulated for reopening an assessment is four years and, in a situation, where there is failure to disclose the material facts, then the period for ITA No.771/Chny/2022 - 2 - reopening is more than four years but less than six years. The Reopening of assessment in the present case is 2011-12 and the time lapses on 31.03.2018. The date of initiation of the proceeding is dated 24.3.2018 and service was completed on assessee on 02.04.2018,hence, the present case is hit by limitation. 4) The Assessing Officer is put to strict proof of issuing the notice u/s 148 within the time frame prescribed under the Income Tax Act, 1961. 5) The Appellant places reliance on the Judgement of the Jurisdictional High Court in the case of ACIT V. Apollo Hospital Enterprises Ltd., (2016) 97 CCH 0177 ChenHC, wherein it was held that the wordings used in the section concerned is issue of notice, that does not man affixing the signature itself will amount to issue of notice, but, the said notice has to be set in motion to get the meaning of the term ‘issue of notice'. On Merits 6) The Assessing Officer erred in not considering the fact that the issue pertaining to payment of arrears of rent of Rs.10,16,118/- is still pending before the Hon'ble High Court of Madras in OS No. 2686/2020 as on 18.06.2021. 7) The Assessing Officer failed to see that the Appellant has not received the arrears of rent till date and the deduction of TDS by Central Warehousing Corporation cannot be the basis for making addition of a notional income and the respondent is put to strict proof for the addition made towards rental arrears. 8) The Appellant places reliance on the Rule 4(d) of the Income Tax Rules, 1962, read with Explanation to Section 23(1) of the Income Tax Act, 1961. The Appellant submits that the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent and hence, the rent is unrealized as on date and the addition is non tenable. 9) The Appellant submits that the Rs.1,40,000/- was given as gift by wife, and the same was deposited in the bank account. 10) The Assessing Officer failed to see that the gift from his wife was allowed u/s 56(2) (vi) and cannot be treated as unexplained money u/s 69A. 2. The Registry has noted delay of 1150 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of condonation petition which is supported by the affidavit of the assessee. It has been submitted that the assessee was facing adverse medical conditions which is evidenced by medical records as placed on record. The Ld. AR further submitted that another factor which led to delay in the appeal was that Ld. CIT(A) confirmed the quantum order which led to initiation of penalty proceedings. Considering the same, the assessee was advised to file the appeal. The revenue has opposed condonation of delay and filed written submissions, in this regard. It ITA No.771/Chny/2022 - 3 - has been submitted that the assessee underwent Coronary Angiogram during April, 2021 whereas impugned order was passed on 22-05- 2019. Therefore, there is no valid reason with the assessee for inordinate delay. 3. I find that the period commencing from 15-03-2020 to 28-02-2022 is attributable to Covid-19 Pandemic and this period has to be excluded for limitation considering the decision of Hon’ble Supreme Court in its suo-moto miscellaneous application No. 29 of 2022 in Re. Cognizance for extension of limitation wherein Hon’ble Court has directed for exclusion of this period for the purpose of computation of limitation. It is also a fact that the assessee was facing adverse medical conditions and underwent Coronary Angiogram during April, 2021 and it was facing adverse medical conditions. Considering all these facts, I am inclined to condone the delay and accordingly, proceed with adjudication of the appeal on merits. 4. The Ld. AR has stated that the issue of rental payment is pending before appropriate authority and adjudication therein shall have direct bearing on the merits of the case. The Ld. AR also submitted that notice u/s 148 was barred by limitation since the same was served after 6 years. The Ld. Sr. DR opposed any interference in the impugned order. 5. From case records, it emerges that the assessment for this year was reopened and notice u/s 148 was issued on 24-03-2018 which was duly served on the assessee. The proceedings stem from the fact that the assessee did not reflect correct rental income as earned from Central Warehousing Corporation Ltd. since higher figure of Rs.10.36 Lacs was reported in Form 26AS whereas the assessee admitted ITA No.771/Chny/2022 - 4 - income of Rs.1.29 Lacs only. The Ld. AO, rejecting assessee’s submissions, assessed rental income at Rs.10.36 Lacs and made net addition of Rs.6.34 Lacs. Another addition was for Rs.1.40 Lacs being gift received from assessee and deposited in bank account since the assessee did not file any confirmation or corroborative evidences. 6. Before Ld. CIT(A), the assessee raised a legal ground that the notice was served on 02-04-2018 i.e., beyond 6 years and therefore, it was hit by limitation period of 6 years. However, this plea was rejected. On merits, the assessee submitted that the amount of Rs.10.36 Lacs was rent payable and not rent received. There was legal dispute in this regard which was pending before Hon’ble High Court of Madras. The TDS was deducted by tenant only as abundant precaution. However, this plea was also rejected by Ld. CIT(A). The addition of Rs.1.40 Lacs was also confirmed for want of supporting evidences. Aggrieved, the assessee is in further appeal before me. 7. So far as the legal ground is concerned, I find that notice u/s 148 was issued on 24-03-2018 and put to service on assessee. In such a case, the ratio of decision of Hon’ble High Court of Madras in Sadhna Tolasariya vs. ITO (127 Taxmann.com 127) would apply wherein it has been held that 'Issue of Notice' and 'Service of Notice' to the assessee cannot be compared at all. What is contemplated under Sec. 149 of the Income-tax Act is 'issue of notice' and not 'service of notice' to the assessee. The service part is to be complied with subsequently enabling the assessee to defend his case. Undoubtedly, the assessee can defend his case only after service. However, for reckoning the period of limitation 'issue of notice' is sufficient. Respectfully following the same, I am not inclined to accept the legal grounds raised by Ld. ITA No.771/Chny/2022 - 5 - AR. The case law of ACIT vs. Apollo Hospital Enterprises Ltd. (97 CCH 0177), as referred to by Ld. AR, would not apply since in that case, the revenue could not prove the service of the notice which is not the case here. 8. So far as the determination of rental income is concerned, I find that impugned rental income as reported in Form 26AS is rent payable which is under dispute and the same is pending for adjudication before appropriate court. The status of the same has been placed by Ld. AR on page no.18 of the paper-book. I find that adjudication therein would have direct bearing on quantum of rental income that would accrue to the assessee. In such a scenario, I deem it fit to remit the matter back to the file of Ld. CIT(A) for fresh adjudication after considering the outcome of legal dispute qua rental income between the assessee and Central Warehousing Corporation Ltd. The addition of Rs.1.40 Lacs also stand restored back to the file of Ld. CIT(A) for re-adjudication with a direction to the assessee to substantiate the same. The grounds, on merits, stands allowed for statistical purposes. 9. The appeal stand partly allowed for statistical purposes Order pronounced on 21 st February, 2023. Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद6 / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 21-02-2023 EDN/- आदेश की Qितिलिप अ 2ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF