Addala Chanti, Hyderabad V. DCIT, Circle-13(1), Hyderabad

ITA 871/HYD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87421 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-01-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Depreciation; Audit objection; Condonation of delay
• Section: 148; 263; 143(3)

Judgement Text

ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 871/HYD/2012 (ASSESSMENT YEAR: 2003-04) SHRI ADDALA CHANTI HYDERABAD PAN-ACXPA 5104G VS. DY.CIT, CENTRAL CIRCLE 13(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI D. SUDHAKAR RAO, CIT(DR) DATE OF HEARING : 05/03/2015 DATE OF PRONOUNCEMENT : 18 /03/2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE CIT (A)-II HYDERABAD DATED 29.02.2012 PASSED FOR A.Y 2003-04 U/S 143(3) R.W.S. 147 OF THE I.T. ACT, 1961. 2. THE APPEAL IS TIME BARRED BY 25 DAYS. THE PETITI ON FOR CONDONATION OF DELAY STATES THAT THE ACCOUNTANT HAD LEFT THE EMPLOYMENT ABRUPTLY AND LATER ANOTHER PERSON WAS AP POINTED IN HIS PLACE. THE NEW ACCOUNTANT NOTICED THE ORDER OF CIT (A) AND FILED APPEAL BEFORE ITAT AFTER DELAY OF 25 DAYS. W E ACCEPT THE EXPLANATION OF THE LD COUNSEL FOR THE ASSESSEE AND CONDONE THE DELAY OF 25 DAYS AND ADMIT THE APPEAL. ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 2 OF 6 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE PRODUCTION OF FILMS UNDER THE NAME AND STYLE OF M/S FRIENDLY MOVIES AND FILED ITS RETURN OF INCOME FOR A.Y 2003- 04 ON 28.11.2013 DECLARING TOTAL INCOME OF RS.14,05,680. THE RETURN WAS PROCESSED U/S 143(1) ON 18.3.2004. SUBSEQUENTLY IT WAS NOTICED BY THE AO THAT ASSESSEE CLAIMED DEPRECIATIO N ON VEHICLES AND INTEREST ON VEHICLE LOANS AS EXPENDITURE IN THE COMPUTATION SHEET AS UNDER: DEPRECIATION ON VEHICLES RS.2,35,645 INTEREST ON VEHICLE LOANS (QUAILS) RS. 68,566 INTEREST ON VEHICLE LOANS (LANCER) RS. 48,219 TOTAL RS.3,52,430 4. AO HELD THAT THESE AMOUNTS HAVE NOT BEEN REFLECT ED IN THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. IN THE A BSENCE OF ANY CLAIM IN THE P&L A/C, EXPENDITURE IS NOT ALLOWABLE THROUGH COMPUTATION. HENCE THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT AND NOTICE U/S 147 WAS ISSUED ON 29.06.2009 . IN RESPONSE TO THE ABOVE, ASSESSEE FILED A LETTER DATE D 20.08.2009 STATING THAT THE RETURN FILED ON 28.11.2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE I .T. ACT. THE ASSESSMENT WAS COMPLETED DETERMINING THE TOTAL INCO ME AT RS.17,58,110. ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 3 OF 6 5. IN THE MEANWHILE, THE LD CIT PASSED ORDER U/S 26 3 OF THE I.T. ACT ON 18.01.2011. THE LD CIT HELD AS FOLLOWS: 4.9 NOW LET ME CONSIDER THE ISSUE OF SCOPE OF ASSESSMENT U/S 143(3) R.W.S. 147. THE AR MAY CONTEND THAT THE ASSESSMENT WAS REOPENED ONLY FOR THE PURPOSE OF BRINGING TO TAX THE INADMISSIBLES ON ACCOUNT OF INTEREST AND DEPRECIATION ON VEHICLES AN D HENCE THE AO LIMITED HIMSELF TO THE SAME ISSUE. I H AVE CONSIDERED THIS ARGUMENT ALSO. ONCE THE ASSESSMENT IS VALIDLY REOPENED, THE ENTIRE ASSESSMENT IS OPEN BEFORE THE AO FOR EXAMINATION AND VERIFICATION. TO THE EXTENT THERE ARE SEVERAL OTHER ISSUES ON WHICH THER E IS ESCAPEMENT OF TAX, THE AO IS FULLY EMPOWERED TO EXAMINE THE SAME AND TO BRING TO TAX SUCH SUMS, NO DOUBT HE CANNOT MAKE ANY ROVING ENQUIRIES, BUT HE CANNOT ABSOLVE HIMSELF OF THE DUTY TO ATLEAST EXAMI NE THE BOOKS OF ACCOUNTS, EXAMINE THE ISSUE WHICH ARE PATENT AND OBVIOUS, SUCH AS DIVERSION OF FUNDS FOR PERSONAL USAGE, NON FILING OF FORM 52A, CONFIRMATIO N OF NEW LOANS, NON DISCLOSURE OF INCOME FROM LEASE RECEIPTS, MEAGER HOUSE HOLD EXPENDITURE ETC. NO DOU BT HE CANNOT CHANGE HIS OPINION OR DISTURB THE ISSUES ALREADY SETTLED IN THE ORIGINAL ASSESSMENT. HOWEVER , UPON EXAMINATION, IT IS SEEN THAT THERE IS NO ORIGI NAL ASSESSMENT IN THIS CASE. THE RETURN WAS MERELY PROCESSED ACCEPTING THE RETURNOF INCOME. THUS, IT W AS INCUMBENT ON AO TO EXAMINE THE ISSUES WHICH WERE NEVER BEEN SUBJECTED TO EXAMINATION, ONCE THE ASSESSMENT WAS OPEN. THIS IS EXACTLY THE REASON WHY IN SECTION 147, WE FIND THE WORDS AND ALSO ANY OTH ER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY, IN THE COURSE OF THE PROCEEDINGS UNDE R THIS SECTION. THE AO IS TO EXAMINE CAREFULLY ANY B RING TO TAX THE WHOLE INCOME WHICH ESCAPED ASSESSMENT. 4.10 THERE WAS NO ORIGINAL ASSESSMENT IN THIS CASE. HENCE, REOPENING IS FULLY VALID. THE REASONS RECORD ED FOR REOPENING OF ASSESSMENT ARE GIVEN AS ENCLOSURES IN PAGE NO.4 (ORDER SHEET-2). THE NOTE CLEARLY STAT ES THAT THE EXPENDITURE NOT DEBITED IN THE P&L A/C, AN D DEPRECIATION ON ASSETS NOT SHOWN IN THE BALANCE SHEET OF THE CONCERN, WERE WRONGLY CLAIMED. ONCE TH E CASE IS REOPENED VALIDLY THE ENTIRE ASSESSMENT IS ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 4 OF 6 BEFORE THE AO FOR PROPER VERIFICATION AND ACTION TO BE TAKEN AS PER LAW. THE COURTS CANNOT GO INTO THE SUFFICIENCY OF THE REASONS BUT CAN LOOK INTO THE LI NK BETWEEN THE MATERIAL ON RECORD AND FORMATION OF BELIEF FOR REOPENING OF THE ASSESSMENT. CIT VS. JANARDAH DWARAKADAS 290 ITR 1 (MUMBAI), SINCE NO ORIGINAL ASSESSMENT WAS COMPLETED THERE IS AMPLE SCOPE TO REOPEN THE CASE. THIS IS BECAUSE OF THE VI DE POWERS GIVEN AFTER 01.04.1989. RELIANCE IS PLACED O N: (A) RAKESH AGARWAL VS. ACIT (87 TAXMANN 306) (DEL.) (B) SRIKRISHNA PVT. LTD VS. ITO (221 ITR 538)(S.C) (C) RAM PRASAD VS. ITO (82 TAXMANN 199) (ALL.) (D) ACIT VS. VXL INDIA LTD (247 ITR 820) (S.C) (E) PRAFUL CHUNNILAL PATIL VS. CIT (236 ITR 832) (GUJ.) (F) DCIT VS. MURRAH LIVE STOCK AGENCY (2004) (91 ITD 98) (PATNA TM). 4.11 IN SO FAR AS NO ORIGINAL ASSESSMENT WAS DONE BUT THE RETURN WAS MERELY PROCESSED, IN MY OPINION, THE AO HAS VALIDLY REOPENED THE ASSESSMENT AND TO THE EXTENT IT WAS VALIDLY REOPENED, THE ENTIRE ASSESSMENT WAS OPEN BEFORE HIM. SO, HE OUGHT TO HAVE EXAMINE ALL THE ISSUES. ONCE THE AO FAILED TO EXAMINE EVEN THE PRIMARY ISSUES (NO ROVING), THERE IS PREJUDICE AND ERROR CAUSED TO THE REVENUE AND ACCORDINGLY THERE IS NECESSITY FOR THE CIT AS SUPERVISORY AUTHORITY IS BOUND TO TAKE NECESSARY ACTION. THE REVIEW ASSESSMENT IS DONE UNDER THE BOARDS GUIDELINES AND THE CIT IS TO FOLLOW SUCH GUIDELINES. 4.12 ON ACCOUNT OF THE ABOVE FACTS AND ALSO IN VIEW OF THE ABOVE CASE LAWS IT IS MY CONSIDERED OPINION THAT THE ASSESSMENT DESERVES TO BE SET ASIDE SUCH THAT AFTER PROPER VERIFICATION, THE AO COMPLETES TH E ASSESSMENT ON ALL THE ISSUES POINTED OUT IN MY NOTI CE INCLUDING THE AUDIT OBJECTION. THE ASSESSMENT IS COMPLETED BY THE AO VIDE ORDER DATED 19.03.2010 IS HEREBY SET ASIDE AND THE AO IS DIRECTED TO VERIFY A LL THE ISSUES AND TO REFRAME THE ASSESSMENT. ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 5 OF 6 6. THE ASSESSEE FILED APPEAL AGAINST THE ORDER DATE D 19.03.2009 PASSED BY THE DCIT, CIRCLE 13(1) HYDERAB AD U/S 143 R.W.S 147 OF THE ACT FOR THE A.Y 2003-04 DETERMININ G THE TOTAL INCOME AT RS.17,58,110. THE CIT (A) WHILE ADJUDICAT ING THE APPEAL HELD AS FOLLOWS: HOWEVER, IT IS GATHERED THAT THE COMMISSIONER OF INCOME TAX-I HYDERABAD, VIDE HIS ORDER U/S 263 OF I.T. ACT, 1961 DATED 18.1.2011, HAS SET ASIDE THE ASSESSMENT WITH A DIRECTION TO COMPLETE THE ASSESSMENT AFTER VERIFICATION OF ALL THE ISSUES RAI SED BY HIM IN THE ORDER. SINCE THE ASSESSMENT ORDER UNDER APPEAL HAS BEEN SET ASIDE, THERE IS NO CASE F OR ADJUDICATION AND THE APPELLANTS AR HAS CONCURRED WITH THIS VIEW. ACCORDINGLY, THE APPEAL IS DISMISSE D. 7. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT OUGHT TO HA VE DECIDED THE APPEAL ON MERITS WITHOUT CONSIDERING THE ORDER U/S 263 OF THE I.T. ACT. THE LD COUNSEL ALSO POINTED OUT THAT THE CIT (A) WHILE PASSING AN ORDER U/S 263 HAS NO JURISDICTION TO DISCUSS ABOUT THE ISSUE OF NOTICE U/S 147 AND THAT THE CIT (A) SHOULD HAVE POINTED OUT THIS ERROR IN THE ORDER OF THE CIT U/S 263 AND FURTHER SHOULD HAVE DECIDED THE ISSUE OF REOPENING IN HIS ORDER DATED 29.02.2012 INSTEAD OF REFERRING TO THE CIT U/ S 263 AND FOLLOWING THE SAME. 8. WE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT: THE CIT SHOULD HAVE POINTED OUT THAT THE COMMISSIONER HAVE NO JURISDICTION OR WAS NOT ITA NO.871 OF 2012 ADDALA CHANTI HYDERABAD PAGE 6 OF 6 REQUIRED UNDER LAW TO DISCUSS ABOUT THE REOPENING PROCEEDINGS. THE CIT (A) SHOULD HAVE DECIDED THE ISSUE OF REOPENING AND THE ISSUES ON MERITS. THE CIT (A) ERRED IN HOLDING THAT THE ASSESSMENT ORDER UNDER APPEAL HAVING BEEN SET ASIDE BY THE CIT AND THEREFORE, THE APPEAL NEED NOT BE ADJUDICATED A ND IS TO BE ACCORDINGLY DISMISSED. 9. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE CIT (A) WITH A DIRECTION TO ADJUDICATE ON THE ISSUE OF REOPENING A ND ALSO ON THE MERITS OF THE CASE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015. S D/ - S D/ - (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 18 TH MARCH, 2015. VNODAN/SPS COPY TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS E LEGANCE, H.NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2. THE DY. CIT, CENTRAL CIRCLE 13(1) HYDERABAD 3. THE CIT(A) II HYDERABAD 4. THE CIT I HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER