A. Bhaskar Raju, Hyderabad V. Dy.CIT, Central Circle-8, Hyderabad

ITA 889/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82455 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 09-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Reopening of assessment; Revision of order; Assessment record
• Section: 143(3); 234B; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL.NO. ITA NO. AY APPELLANT RESPONDENT 01 888/H/14 2003-04 D. SATYANARAYANA RAJU, HYDERABAD PANAWBPR9756M DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 8, HYDERABAD 02 889/H/14 2003-04 A. BHASKAR RAJU, HYDERABAD PAN-ADWPA4450H -DO- 03 891/H/14 2003-04 I MALLAPPA RAJU, HYDERABAD PAN-AFPPR 5791B -DO- ASSESSEE BY SHRI K.C. DEVDAS REVENUE BY SHRI D. SUDHAKAR RAO DATE OF HEARING 15-09-2014 DATE OF PRONOUNCEMENT -10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THE AFORESAID APPEALS BY THREE DIFFERENT ASSESSEES ARE AGAINST SEPARATE ORDERS OF CIT(CENTRAL), HYDERABAD PASSED U /S 263 OF THE ACT REVISING THE ASSESSMENT COMPLETED U/S 143(3) READ W ITH SECTION 147 OF THE ACT FOR THE AY 2003-04. 2. BRIEFLY, THE FACTS ARE, ASSESSEE IS AN INDIVIDUA L. ORIGINALLY, ASSESSEE DID NOT FILE ANY RETURN OF INCOME FOR THE AY UNDER CONSIDERATION. SUBSEQUENTLY, ON THE BASIS OF THE ST ATEMENT OF SHRI B. RAMALINGA RAJU, EX-CHAIRMAN OF SATYAM COMPUTERS SER VICES LTD. (SCSL) MAKING DISCLOSURE ABOUT FUDGING OF ACCOUNTS OF THE COMPANY AND FRAUD COMMITTED, AO REOPENED ASSESSMENT U/S 147 OF THE ACT BY 2 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS ISSUING A NOTICE DATED 24/03/10 U/S 148 TO ASSESSEE AS HE HAPPENS TO BE A FAMILY MEMBER AND CLOSE RELATIVE OF SHRI B. RA MALINGA RAJU. IN RESPONSE TO THE NOTICE ISSUED U/S 148, ASSESSEE FIL ED HIS RETURN OF INCOME DECLARING NIL INCOME. AO LOOKING AT THE CO MPLEXITY OF THE ACCOUNTS OPINED THAT ASSESSEES CASE REQUIRED AUDIT U/S 142(2A) OF THE ACT. THOUGH ASSESSEE OBJECTED FOR SUCH SPECIAL AUDIT BUT ASSESSEES CASE WAS REFERRED FOR SPECIAL AUDIT AND THE SPECIAL AUDIT REPORT WAS ALSO OBTAINED. ULTIMATELY, AO COMPLETED THE ASSESSMENT VIDE ORDER DATED 04/08/2011 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT DETERMINING THE INCOME AT RS. 19,94,589 BY MAKING ADDITION TOWARDS ACCRUED INTEREST EARNED ON BANK DE POSITS. AS IT APPEARS FROM RECORD, AFORESAID ASSESSMENT ORDER PAS SED BY THE AO WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY . DURING THE PENDENCY OF THE APPEAL BEFORE THE FIRST APPELLATE A UTHORITY, CIT CALLED FOR THE ASSESSMENT RECORD OF THE ASSESSEE FOR THE I MPUGNED AY AND AFTER EXAMINING THE SAME NOTICED THAT THOUGH AS PER THE INFORMATION AVAILABLE ON RECORD, ASSESSEE IS IN POSSESSION OF 1 0 ACRES OF AGRICULTURAL LAND AND ALSO EARNING PENSION INCOME A S A RETIRED SCIENTIST OF CISR BUT THE AO WHILE COMPLETING ASSES SMENT HAS NOT CONSIDERED THE SAME FOR COMPUTATION OF TAX AND NOT CHARGED INTEREST THEREON. ACCORDINGLY, CIT BEING OF THE OPINION THAT ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, ISSUED A NOTICE TO ASSESSEE TO SHOW CAUSE AS TO WHY ASSESS MENT ORDER PASSED SHOULD NOT BE REVISED U/S 263 OF THE ACT. IN REPLY TO THE SAID SHOW CAUSE NOTICE, ASSESSEE NOT ONLY SUBMITTED A DE TAILED REPLY OBJECTING TO THE INITIATION OF PROCEEDING U/S 263 O F THE ACT, BUT, ALSO FILED WRITTEN SUBMISSIONS BEFORE THE CIT IN COURSE OF THE REVISION PROCEEDING STATING THEREIN THAT THE ASSESSMENT ORDE R IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVEN UE. CIT, HOWEVER, REJECTING THE SUBMISSIONS OF ASSESSEE SET ASIDE THE ASSESSMENT ORDER PASSED BY THE AO WITH A DIRECTION TO QUANTIFY THE A GRICULTURAL INCOME EARNED BY ASSESSEE AND ALSO BRING TO TAX THE PENSIO N EARNED BY 3 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS ASSESSEE. THE FINDINGS OF THE LEARNED CIT ARE EXTRA CTED HEREUNDER FOR CONVENIENCE. 3. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESS EE. THE AO WHILE COMPLETING THE ASSESSMENT U/S 143(3) R.W.S . 147 HAD MADE ADDITIONS OF RS. 19,94,589/- TOWARDS INTEREST ACCRUED ON FIXED DEPOSITS IN VARIOUS BANKS AS AGAINST INCOME R ETURNED NIL FILED BY ASSESSEE. FOR THE COMPUTATION OF TAX PURPO SE THE AO OUGHT TO HAVE QUANTIFIED THE AGRICULTURAL INCOME FR OM AGRICULTURAL LANDS OF 10 ACRES. FURTHER THE AO SHOU LD HAVE ASCERTAINED AND BROUGHT TO TAX THE PENSION INCOME. BUT THE AO FAILED TO DO SO AND HENCE THE ORDER PASSED U/S 143( 3) R.W.S. 147 WAS CERTAINLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4. UNDER THE CIRCUMSTANCES STATED ABOVE, I HEREBY S ET ASIDE THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) RW S 147 FOR THE AY 2003-04 DT. 04/08/2011 WITH A DIRECTION TO Q UANTIFY AGRICULTURAL INCOME EARNED ON POSSESSION OF AGRICUL TURAL LANDS BY THE ASSESSEE AND TO CONSIDER THE SAME FOR THE PU RPOSE OF COMPUTATION OF TAX. AO SHOULD ALSO BRING TO TAX THE PENSION EARNED BY THE ASSESSEE IN FY 2002-03 RELEVANT TO AY 2003-04, AFTER MAKING NECESSARY VERIFICATION ON THE ABOVE IS SUES. WHILE REDOING THE ASSESSMENT THE AO SHOULD ALSO RECOMPUTE D THE INTEREST U/S 234A AND/OR 234B AND/OR 234 C AS MAY B E NECESSARY. NEEDLESS TO SAY, AN OPPORTUNITY SHOULD B E GIVEN TO THE ASSESSEE BEFORE REDOING THE ASSESSMENTS AS PER THE DIRECTIONS ABOVE. 3. LEARNED AR MORE OR LESS REITERATING THE SUBMISSI ONS MADE BEFORE THE REVISIONAL AUTHORITY CONTENDED THAT WHEN ASSESSEE WAS HAVING NIL INCOME FROM OTHER SOURCES, THERE IS NO NECESSITY FOR SHOWING AGRICULTURAL INCOME AS AGRICULTURAL INCOME IS OTHERWISE EXEMPT. ONLY IN CASE WHERE THERE ARE OTHER TAXABLE INCOME, AGRICULTURAL INCOME COULD BE CONSIDERED FOR RATE PU RPOSE. IT WAS SUBMITTED, THE VERY FACT THAT ASSESSEE HAS SHOWN N IL AGRICULTURAL INCOME IS SUGGESTIVE OF THE FACT THAT ASSESSEE DID NOT EARN ANY AGRICULTURAL INCOME. LEARNED AR SUBMITTED THAT AO H AVING VERIFIED THIS FACT FROM THE RETURN FILED BY ASSESSEE IN COUR SE OF ASSESSMENT PROCEEDING, THE ASSESSMENT ORDER PASSD CANNOT BE C ONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. IT WAS FURTHER SUBMITTED THAT THE IMPUGNED ASSESSMENT ORDER HAS BE EN CHALLENGED 4 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS BY WAY OF AN APPEAL BEFORE THE CIT(A) IT WAS SUBMIT TED, ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REOPENING OF ASSESSM ENT IN THE APPEAL FILED. IN CASE, THE CIT(A) DECLARES INITIATION OF PROCEEDING U/S 147 TO BE INVALID, THE VERY BASIS ON WHICH THE PROCEEDING HAS BEEN INITIATED U/S 263 WILL NOT SURVIVE. IN THIS CONTEXT, LEARNED AR SUBMITTED THAT REOPENING OF ASSESSMENT MADE FOR THE EARLIER YEARS ON SIMILAR GROUNDS HAS ALREADY BEEN QUASHED BY THE FIRST APPEL LATE AUTHORITY. IT WAS SUBMITTED, IN THE AFORESAID CIRCUMSTANCES, EXE RCISE OF REVISIONARY POWER U/S 263 S NOT CORRECT. 4. LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT ON THE BASIS OF VARIOUS IRREGULARITIES, AO RECOMMENDED FOR SPECIAL AUDIT AND ONLY TAKING INTO CONSIDERATION THE SPECIAL AUDIT REPORT, AO COMPLETED THE ASSESSMENT BY DETERMINING THE INCOME AT RS. 19,94,5 89. HOWEVER, WHILE DOING SO, AO FAILED TO EXAMINE THE ISSUE OF A GRICULTURAL INCOME AND PENSION EARNED BY ASSESSEE, WHICH HAS NOT BEEN BROUGHT TO TAX. AS THERE WAS NO ENQUIRY BY THE AO IN THIS REGARD, A SSESSMENT ORDER PASSED IS NOT ONLY ERRONEOUS BUT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THESE CIRCUMSTANCES, CIT WAS JUSTIFIED IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES. THE UNDISPUTED FACTS ARE, ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR DID NOT FILE ANY RETURN OF INCOME V OLUNTARILY, BUT, ONLY AFTER NOTICE WAS ISSUED U/S 148, ASSESSEE CAME FORWARD TO FILE HIS RETURN OF INCOME DECLARING NIL INCOME. HOWEVE R, IN REPLY TO THE QUESTIONNAIRE ISSUED BY AO DURING THE ASSESSMENT PR OCEEDING, ASSESSEE IN REPLY DATED 04/08/2010 SUBMITTED BEFORE AO ON 23/08/2010 DISCLOSED HIS SOURCE OF INCOME AS PENSIO N FROM CSIR AND TEN ACRES OF AGRICULTURAL LAND. FOR THE SAKE OF CLA RITY, WE REPRODUCE HEREUNDER SOME OF THE ANSWERS BY ASSESSEE TO THE QU ERY RAISED BY AO IN THE AFORESAID REPLY, A COPY OF WHICH WAS PLAC ED BEFORE US: 5 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS 1. BRIEF NOTE ON THE BUSINESS ACTIVITIES. YOUR SOUR CE OF INCOME ANS: I AM A RETIRED SCIENTIST, HAVING PENSION FROM CSIR AND 10 ACRES OF AGRICULTURAL LANDS. 4. STATEMENT OF AFFAIRS AS ON 31/03/2003 ANS: HAVING 10 ACRES OF AGRICULTURAL LANDS 5. CAPITAL ACCOUNT FOR THE FINANCIAL YEAR 2002-03 ANS: HAVING 10 ACRES OF AGRICULTURAL LANDS 6. CASH FLOW STATEMENT FOR THE FINANCIAL YEAR 2002- 03 ANS: PENSION/AGRICULTURAL INCOME 11. HAVE YOU DERIVED ANY EXEMPTED INCOME DURING THE YEAR SUCH AS AGRICULTURAL INCOME, DIVIDEND INCOME ETC., DETAILS WITH PROOF. ANS: PENSION/AGRICULTURAL INCOME 12. PERSONAL DRAWINGS TOTAL FAMILY EXPENDITURE FOR THE YEAR IN CONSIDERATION. ANS: PERSONAL EXPENDITURE MEETS OUT OF PENSION/AGRI CULTURAL INCOME. FROM THE AFORESAID REPLY OF ASSESSEE, IT IS CLEAR T HAT ASSESSEE HIMSELF HAS ADMITTED THAT HE HAS EARNED INCOME FROM AGRICUL TURE AS WELL AS PENSION. HOWEVER, NEITHER IN THE COURSE OF ASSESSM ENT PROCEEDING OR WHILE COMPLETING THE ASSESSMENT AO HAS PAID ANY ATT ENTION TO NON- DISCLOSURE OF INCOME FROM AGRICULTURE AND PENSION. HE SIMPLY COMPLETED THE ASSESSMENT BY ONLY BRINGING TO TAX AC CRUED INTEREST ON BANK DEPOSIT THEREBY COMPLETELY OVERLOOKING THE ISS UE OF PENSION EARNED AND AGRICULTURAL INCOME. THIS REVEALS NOT ON LY NON-APPLICATION OF MIND ON THE PART OF AO, BUT, ALSO TOTAL LACK OF ENQUIRY. THE CONTENTION OF THE LEARNED AR THAT WHEN ASSESSEE IS DECLARING NIL INCOME THERE IS NO NECESSITY TO SHOW AGRICULTURAL I NCOME IS DEVOID OF MERIT. IT MAY BE TRUE THAT WHEN THE ASSESSEE EARNED INCOME ONLY FROM AGRICULTURE IT MAY NOT BE TAXABLE. HOWEVER, IN THE PRESENT CASE, AO HAS DETERMINED TAXABLE INCOME AT RS. 19,94,589. THE REFORE, IF THERE IS ANY AGRICULTURAL INCOME, THE SAME IS REQUIRED TO BE CONSIDERED FOR RATE PURPOSE. AO HAVING FAILED TO EXAMINE AND CONS IDER THE QUANTUM OF AGRICULTURAL INCOME EARNED BY ASSESSEE, ASSESSME NT ORDER IS 6 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS CERTAINLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. FURTHER, AS CAN BE SEEN FROM THE REPLY DATED 04/08/ 10, ASSESSEE HIMSELF ADMITTED OF HAVING EARNED PENSION INCOME. T HAT BEING SO, HOW AND UNDER WHAT CIRCUMSTANCES, ASSESSEE FILED HI S RETURN OF INCOME SHOWING NIL INCOME AND THE AO ALSO OVERLOO KED TO CONSIDER PENSION INCOME IS NOT UNDERSTOOD. THEREFORE, FAILUR E ON THE PART OF AO TO EXAMINE THE ISSUE RELATING TO EARNING OF AGRI CULTURAL INCOME AND PENSION INCOME HAS RENDERED THE ASSESSMENT ORDER ER RONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN THESE C IRCUMSTANCES, CIT, IN OUR VIEW, WAS JUSTIFIED IN SETTING ASIDE THE ASSESS MENT ORDER BY EXERCISING HIS REVISIONAL POWERS U/S 263 OF THE ACT . MERE PENDING OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WOULD N OT DEBAR OR RESTRICT THE CIT FROM EXERCISING POWERS U/S 263 OF THE ACT. IN THE AFORESAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER PA SSED BY THE CIT DESERVES TO BE UPHELD. HOWEVER, WE MAKE IT CLEAR TH AT AO WHILE REDOING THE ASSESSMENT SHALL EXAMINE THE ISSUE OF A GRICULTURAL INCOME AND PENSION INDEPENDENTLY AND WITH AN UNBIAS ED MIND. AO SHOULD AFFORD ADEQUATE OPPORTUNITY TO ASSESSEE TO E STABLISH HIS CLAIM AND ONLY AFTER CONSIDERING THE SUBMISSIONS OF ASSES SEE AND EXAMINING THE MATERIALS/EVIDENCES PRODUCED BY ASSES SEE SHALL COMPLETE THE ASSESSMENT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ITA NOS. 889 & 891/HYD/2014 7. FACTS IN THESE APPEALS ARE MATERIALLY IDENTICAL TO THE FACTS INVOLVED IN ITA NO. 888/H/14. THE ONLY DIFFERENCE B EING IN CASE OF THESE TWO ASSESSEES, THERE IS NO PENSION INCOME. IN CASE OF THESE TWO ASSESSEES ALSO THOUGH THEY ARE IN POSSESSION O F SUBSTANTIAL AMOUNT OF AGRICULTURAL LAND, BUT, THE AO WHILE COMP LETING ASSESSMENT HAS FAILED TO CONSIDER THE ISSUE OF AGRICULTURAL IN COME FOR RATE PURPOSE. THEREFORE, FOLLOWING OUR DECISION IN ITA N O. 888/HYD/2014, WE UPHOLD THE ORDERS OF CIT IN THESE TWO APPEALS. 7 ITA NOS. 888, 889 & 891/HYD/2014 D. SATYANARAYANA & OTHERS 8. IN THE RESULT, THESE TWO APPEALS ARE DISMISSED . 9. TO SUM UP, ALL THE THREE APPEALS UNDER CONSIDER ATION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10/10/2014. SD/- SD/- (P.M. JAGTAP) (SAKT IJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 10 TH OCTOBER, 2014 KV COPY TO:- (XEROX PURPOSE 9 COPIES) 1) D. SATYANARAYANA RAJU, 2) A. BHASKAR RAJU AND 3 ) I. MALLAPPA RAJU, PLOT NO. 80, ROAD NO. 9, JUBILEE HILLS, HYDERABAD 500 033 3) DCIT, CENTRAL CIRCLE - 8, HYDERABAD 4) CIT(CENTRAL), HYDERABAD. 5) ADDL. CIT CR-3, HYDERABAD 6)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.