ADIT (Intl. Taxn)-I, Hyderabad V. Sri Art Khachaturian, Hyderabad

ITA 822/HYD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69968 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Opportunity of being heard; Retrospective amendment; Validity of assessment
• Section: 142(1); 147; 69; 6; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 822/HYD/2011 ASSESSMENT YEAR 2005-06 THE ASST. DIRECTOR OF INCOME-TAX (INTL. TAXN)-I, HYDERABAD VS. SRI ART KHACHATURIAN HYDERABAD PAN: NOT AVAILABLE APPELLANT RESPONDENT APPELLANT BY: SRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: SRI A.V. RAGHURAM DATE OF HEARING: 05.11.2013 DATE OF PRONOUNCEMENT: 05.11.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 15.2.2011 FOR A.Y. 2005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: I) THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS OF THE CASE AND IN LAW. II) THE CIT(A) OUGHT TO HAVE SUSTAINED THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE. III) THE CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUNDS THAT THE NOTICE U/S. 142(1) WAS ISSUED BEYOND THE PRESCRIBED TIME AND IN HOLDING THAT ASSESSMENT AS NOT LEGALLY TENABLE AND NULL AND VOID. IV) THE CIT(A) ERRED BY NOT CONSIDERING THE AMENDMENT BROUGHT IN SECTION 142(1) W.E.F. 01.04.2006. ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 2 V) FURTHER, THE CIT(A) ERRED BY NOT TAKING INTO COGNIZANCE THE PROVISO INSERTED AFTER CLAUSE (I) OF SECTION 142(1) W.E.F. 01.04.1990. 3. BRIEF FACTS OF THE CASE ARE THAT ON THE BASIS OF I NFORMATION RECEIVED STATING THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS. 22,82,245 IN SHARES OF MOSCHIP SEMI CONDUCTOR T ECHNOLOGY LTD., DURING THE FINANCIAL YEAR 2004-05, THE AO ISS UED NOTICE U/S. 142(1) OF THE ACT ON 31.08.2007 CALLING FOR RE TURN OF INCOME FOR THE A.Y. 2005-06. AS THERE WAS NO RESPONSE TO THE ABOVE NOTICE, THE AO ISSUED A SHOW CAUSE LETTER PROPOSING TO COMPLETE THE ASSESSMENT U/S. 144 TREATING THE ENTIRE AMOUNT OF INVESTMENT AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT. HOWEVER, THE ASSESSEE DID NOT FURNISH ANY REPLY TO THE SHOW CAUSE LETTER ALSO. THEREFORE, THE AO COMPLETED THE ASSESSMENT U/S. 144 OF THE ACT TREATING THE ENTIRE INVESTMENT OF RS. 22,82,245 IN SHARES OF MOSCHIP SEMI CONDUCTOR TECHN OLOGY LTD., AS INCOME OF THE ASSESSEE U/S. 69 OF THE ACT. 4. ON APPEAL, THE CIT(A) QUASHED THE ASSESSMENT ORDER ON THE REASON THAT THE TIME LIMIT FOR FILING THE RETUR N OF INCOME FOR A.Y. 2005-06 IS ON 31.7.2005. THE TIME LIMIT FOR I SSUE OF NOTICE U/S. 142(1) IS UP TO 31.3.2007. IN THE PRESENT CAS E AS THE NOTICE WAS ISSUED U/S. 142(1) ON 31.8.2007, WHICH IS BEYOND THE PRESCRIBED TIME THE ASSESSMENT WAS NOT LEGALLY TENABLE AND IS NULL AND VOID. SINCE THE ASSESSMENT ITSELF WAS QUASHED, THE CIT(A) DID NOT ADJUDICATE THE OTHER GROUNDS. AGAIN ST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFORE US THAT THE CIT (A) IS TOTALLY IN CORRECT IN HOLDING THAT THE NOTICE ISSUED U/S 142(1) OF THE ACT BEYOND A PERIOD OF ONE YEAR FROM THE END OF THE REL EVANT ASSESSMENT YEAR TO BE INVALID AS THE PROVISO INSERT ED TO ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 3 SECTION 142(1) OF THE ACT BY FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990 HAS CLEARLY DONE AWAY WITH ANY LIMITATION WITH REGARD TO THE ISSUANCE OF NOTICE U/S 142(1) OF THE ACT. IN THIS CONTEXT, THE LEARNE D DEPARTMENTAL REPRESENTATIVE RELIED UPON A DECISION OF HONBLE DELHI HIGH COURT IN CASE OF DIT VS. KLM RO YAL DUTCH AIRLINES (2007) 165 TAXMAN 34 (DEL). 6. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT (A). 7. WE HAVE CONSIDERED SUBMISSIONS OF THE PARTIES AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. 8. IT APPEARS FROM THE MATERIALS ON RECORD AS WELL AS THE ORDERS PASSED BY THE CIT (A) THOUGH NO SPECIFIC GROUND WAS RAISED BY THE ASSESSEE BEFORE THE CIT (A ) CHALLENGING THE VALIDITY OF ASSESSMENT DUE TO NOTIC E U/S 142(1) OF THE ACT HAVING BEEN ISSUED BEYOND A PERIO D OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YE AR AND THE CIT (A) ON HEARING THE ARGUMENT OF AR OF ASSESSEE ON THE ISSUE OF VALIDITY OF ASSESSMENT PROCEEDINGS ON ACCOUNT OF ISSUANCE OF NOTICE U/S 14 2(1) OF THE ACT BEYOND THE PERIOD OF ONE YEAR FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR AND ULTIMATELY ANNULLE D THE ASSESSMENT BY HOLDING THAT THE NOTICE ISSUED U/ S 142(1) BEYOND A PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR BEING AB INITIO VOID,, THE ASSESSMENT ORDER PASSED CONSEQUENT THEREUPON HAS TO BE ANNULLED. ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 4 9. THERE IS NO DISPUTE TO THE FACT THAT THE NOTICE U/S 142(1) OF THE ACT IN THE CASE OF THE ASSESSEE WAS I SSUED ON 31-08-2007 WHICH IS BEYOND THE PERIOD OF ONE YEA R FROM THE DATE OF THE RELEVANT ASSESSMENT YEAR I.E., ASSESSMENT YEAR 2005-06. HOWEVER, THE ISSUE BEFORE US IS WHETHER THE NOTICE ISSUED U/S 142(1) BEYOND THE PERIOD OF ONE YEAR FROM THE END OF THE ASSESSMENT Y EAR CAN BE HELD TO BE INVALID IN VIEW OF THE PROVISO TO CLAUSE (I) OF SECTION 142(1) INSERTED BY FINANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990. THE SAID PROVI SO READS AS UNDER:- PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UNDER THIS SUB-SECTION FOR THE PURPOSES OF THIS CLAUSE AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1990 TO A PERSON WHO HAS NOT MADE A RETURN WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 OR BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR, ANY SUCH NOTICE ISSUED TO HIM SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE PROVISIONS OF THIS SUB- SECTION. ON A PLAIN READING OF THE PROVISION CONTAINED U/S 1 42(1) OF THE ACT ALONG WITH THE PROVISO INTRODUCED BY FIN ANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-1990, IT WOULD BE CLEAR THAT THE ASSESSING OFFICER IS EMPOWE RED UNDER THE ACT TO ISSUE NOTICE U/S 142(1) OF THE ACT AFTER THE END OF THE RELEVANT ASSESSMENT YEAR TO A PERSON WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SE CTION 139 OR BEFORE THE END OF THE RELEVANT ASSESSMENT YE AR AND ANY SUCH NOTICE ISSUED TO THE ASSESSEE SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 5 PROVISIONS OF SECTION 142(1) OF THE ACT. THUS, IT IS VERY MUCH CLEAR THAT THE ASSESSING OFFICER CAN ISSUE A N OTICE U/S 142(1) OF THE ACT AT ANY TIME AFTER THE END OF THE RELEVANT ASSESSMENT YEAR. THERE IS ABSOLUTELY NO RESTRICTION ON THE ASSESSING OFFICER TO ISSUE NOTI CE U/S 142(1) BEFORE EXPIRY OF ONE YEAR FROM THE END OF TH E RELEVANT ASSESSMENT YEAR AS HAS BEEN HELD BY THE CI T (A). THE PROVISIONS OF SECTION 142(1) OF THE ACT, IN OUR VIEW, DO NOT PROVIDE ANY SUCH RESTRICTION, AFTER TH E INSERTION OF THE PROVISO TO SECTION 142(1) OF THE A CT W.E.F. 1-4-1990. THE REASONING OF THE CIT (A) THAT NO MAXIMUM TIME LIMIT HAVING BEEN PRESCRIBED U/S 142( 1) AFTER THE AMENDMENT EFFECTED BY THE FINANCE ACT, 20 06, IT CANNOT BE CONSTRUED THAT NOTICE U/S 142(1) CAN B E ISSUED AT TIME AFTER THE END OF THE RELEVANT ASSES SMENT YEAR, IN OUR VIEW, IS NOT THE CORRECT INTERPRETATIO N OF THE PROVISIONS BECAUSE OF THE LIMITATION PRESCRIBED FOR COMPLETING THE ASSESSMENT UNDER SUB-SECTION (1) OF SECTION 153 OF THE ACT. THEREFORE, THE PROVISION O F SECTION 142(1) CANNOT BE CONSTRUED TO MEAN THAT THE ASSESSING OFFICER CAN ISSUE A NOTICE U/S 142(1) A T ANY TIME AFTER THE END OF THE ASSESSMENT YEAR IRRESPECT IVE OF THE LIMITATION PRESCRIBED U/S 153(1) OF THE ACT. S O FAR AS THE OBSERVATION MADE BY THE CIT (A) THAT THE PROVIS ION CONTAINED U/S 147 OF THE ACT WOULD BECOME REDUNDANT IF SECTION 142(1) IS INTERPRETED TO MEAN THAT THE ASSE SSING OFFICER CAN ISSUE A NOTICE AT ANY TIME AFTER EXPIRY OF THE RELEVANT ASSESSMENT YEAR, IN OUR VIEW IS MISPLACED. THIS IS BECAUSE OF THE FACT THAT THE PROVISION CONTAINED U/S 147 OF THE ACT CAN ONLY BE INVOKED FOR ASSESSMENT O F ESCAPED INCOME AND HENCE TO BE APPLICABLE IN A PARTICULAR SITUATION. THEREFORE, THE PROVISION CON TAINED ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 6 U/S 142(1) AND SECTION 147 ARE INDEPENDENT PROVISIO NS AND DO NOT OVER-LAP. THE ORDER OF INCOME-TAX APPE LLATE TRIBUNAL, HYDERABAD BENCH A, WHERE BOTH THE PRESE NT MEMBERS ARE PARTIES, WHILE CONSIDERING IDENTICAL IS SUE IN CASE OF DIT VS. SMT. KAUSARI BEGUM IN ITA NO.532/HYD/2010 DATED 18-5-2012 HELD AS UNDER:- 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WHETHER NOTIC E U/S 142(1) ISSUED AFTER END OF ONE YEAR FROM THE RELEVANT ASSESSMENT YEAR IS BARRED BY LIMITATION OR NOT. AT THIS STAGE, IT IS NECESSARY TO LOOK INTO TH E PROVISIONS CONTAINED U/S 142(1) OF THE ACT. 142 (1) FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER THIS ACT, THE AO MAY SERVE ON ANY PERSON WHO HAS MADE A RETURN (UNDER SECTION 115WD OR SECTION 139 (OR IN WHOSE CASWE THE TIME ALLOWED UNDER SUB- SECTION (1) OF SECTION 139] FOR FURNISHING THE RETU RN HAS EXPIRED] A NOTICE REQUIRING, ON A DATE TO BE THEREIN SPECIFIED- (I) WHERE SUCH PERSON HAS NOT MADE A RETURN (WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 (OR BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR] TO FURNISH A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED, OR [PROVIDED THAT WHERE ANY NOTICE HAS BEEN SERVED UNDER THIS SUB-SECTION FOR THE PURPOSES OF THIS CLAUSE AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1990 TO A PERSON WHO HAS NOT MADE A RETURN WITHIN THE TIME ALLOWED UNDER SUB- SECTION (1) OF SECTION 139 OR BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR, ANY SUCH NOTICE ISSUED TO HIM SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH THE PROVISIONS OF THIS SUB-SECTION THE PROVISO TO SECTION 142(1) WAS INTRODUCED BY FINANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM 1- 4- ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 7 1990. THE AFORESAID AMENDMENT AS EXPLAINED IN THE NOTES ON CLAUSES TO THE FINANCE BILL, 2006 IS REPRODUCED BELOW:- CLAUSE 35 OF THE BILL SEEKS TO AMEND SECTION 142 OF THE INCOME-TAX ACT RELATING TO INQUIRY BEFORE ASSESSMENT. THE EXISTING PROVISIONS CONTAINED IN CLAUSE (I) OF SUB- SECTION (1) OF SAID SECTION PROVIDE THAT WHERE A PERSON HAS NOT MADE A RETURN OF INCOME WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139, THE AO MAY SERVE A NOTICE ON HIM REQUIRING HIM TO FURNISH THE RETURN OF INCOME. IT IS PROPOSED TO AMEND THE SAID CLAUSE (I) SO AS T O PROVIDE THAT WHERE A PERSON HAS NOT MADE A RETURN O F INCOME BEFORE HT END OF THE RELEVANT ASSESSMENT YEA R, THE AO MAY SERVE A NOTICE UNDER THIS SUB-SECTION ON HIM AFTER THE END OF THE RELEVANT ASSESSMENT YEAR, REQUIRING HIM TO FURNISH RETURN OF INCOME. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2006. IT IS FURTHER PROPOSED TO PROVIDE THAT THE NOTICE REFERRED TO IN SAID SUB-SECTION FOR THE PURPOSES OF SAID CLAUSE SERVED AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER 1 ST APRIL, 1990 SHALL BE DEEMED TO BE A NOTICE SERVED IN ACCORDANCE WITH THE PROVISIONS OF THE AFORESAID SUB - SECTION.THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1 ST APRIL, 1990. A PLAIN READING OF SECTION 142(1) ALONG WITH ITS PROVISO AND EXPLANATIONS TO NOTES MAKES IT CLEAR THAT IN A CASE WHERE NO RETURN OF INCOME HAS BEEN FILED WITHIN THE TIME ALLOWED U/S 139(1) OF THE ACT, THE AO IS VESTED WITH POWER TO ISSUE NOTICE U/S 142(1) EVEN AFTER THE END OF THE RELEVANT ASSESSMENT YEAR. WHEN THERE IS NO EXPRESS PROVISION LIMITING ISSUANCE OF NOTICE U/S 142(1) WITHIN THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH LIMITATION CAN BE READ INTO THE PROVISION. IN VIEW OF THE ABOVE , WE DO NOT FIND ANY SUBSTANTIAL FORCE IN THE ARGUMENT OF THE LEARNED AR OF THE ASSESSEE THAT NOTICES U/S 142(1) CANNOT BE ISSUED WHEN NO RETURN OF ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 8 INCOME WAS FILED. THE PROVISION U/S 142(1) IS VERY MUCH CLEAR IN THIS RESPECT. THE DECISION OF ITAT, CALCUTTA BENCH IN THE CASE OF SHAW WALLACE & CO. LTD. VS. DCIT (2006) 101 TTJ 258 RELIED UPON BY T HE LEARNED AR IS OF NO HELP TO THE ASSESSEE AS IT WAS RENDERED PRIOR TO THE INSERTION OF PROVISO TO SECT ION 142(1) OF THE ACT. WE ARE THEREFORE OF THE VIEW TH AT THE CIT (A) WAS NOT CORRECT IN HOLDING THE ISSUANC E OF NOTICE U/S 142(1) TO BE AB INITIO VOID. SINCE THE CIT (A) HAS DECIDED THE APPEAL ON TECHNICAL ISSUE WITH OUT GOING INTO MERITS OF THE CASE, WE THINK IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE CIT (A) A ND DIRECT HIM TO DISPOSE OF THE APPEAL ON MERITS IN ACCORDANCE WITH LAW AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. THE HONBLE DELHI HIGH COURT IN CASE OF DIT VS. KLM ROYAL DUTCH AIRLINES (SUPRA) ALSO EXPRESSED THE SAME VIEW WHILE CONSIDERING IDENTICAL ISSUE OF IS SUANCE OF NOTICE U/S 142(1). THEREFORE, RESPECTFULLY FOLL OWING THE DECISIONS OF INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH AS WELL AS THE HONBLE DELHI HIGH COURT AS REFERRED TO HEREIN ABOVE, WE HOLD THAT THE NOTICE ISSUED U/S 142(1) OF THE ACT IN THE INSTANT CASE IS VALID AND CONSEQUENTLY THE ASSESSMENT ORDER PASSED CANNOT BE HELD TO BE INVALID IN LAW. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT (A). HOWEVER, SINCE THE CIT (A) HAS NOT DECIDED THE MATTER ON THE MERIT OF THE ISSU E, WE REMIT THE MATTER BACK TO THE FILE OF THE CIT (A) FO R DECIDING THE SAME ON MERIT. ITA NO. 822/HYD/2011 SRI ART KHACHUTURIAN ================== 9 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH NOVEMBER, 2013 S D/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 5 TH NOVEMBER, 2013 TPRAO COPY FORWARDED TO: 1. THE ASST. DIRECTOR OF INCOME - TAX (INTL. TAXN) - I, 6 TH FLOOR, 'C' BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. SRI ART KHACHATURIAN, 8 - 2 - 684, MOSCHIP SEMI CONDUCTOR, RD. NO. 12, BANJARA HILLS, HYDERABAD. 3. THE CIT(A) - V, HYDERABAD. 4. THE DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION), BANGALORE. 5. THE DR 'B' BENCH, ITAT, HYDERABAD