S.R.Nandakishore, CHENNAI V. DCIT, Tambaram

ITA 984/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95911 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYALU
• Assessee Lawyers: N DEVANATHAN
• Keywords: Business income; Principle of natural justice
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ , % ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 984/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) MR.S.R.NANDAKISHORE NEW NO.32, OLD NO.28, RAMACHANDRA ROAD, NEHRU NAGAR, CHROMPET, CHENNAI-34. VS. DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS RANGE TAMBARAM. PAN:AAJPJ5610N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.DEVANATHAN, ADVOCATE /RESPONDENT BY : DR. U.ANJANEYALU, CIT /DATE OF HEARING : 25 TH JUNE, 2015 /DATE OF PRONOUNCEMENT : 19 TH AUGUST, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX-VII, CHENNAI DATED 21.03.2014 FOR THE ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 263 OF THE ACT. IN THE GROUNDS OF APPEAL, THE ASSESSEE CHALLENGES THE ORDER OF THE COMMISSIONER O F INCOME TAX IN INVOKING THE PROVISIONS OF SECTION 26 3 AND IN HOLDING THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE AND IN SETTING ASIDE T HE ORDER OF THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION AND PASSING FRESH ASSESSMENT IN ACCORDANCE WITH LAW. 2 ITA NO.984 /MDS/2014 2. BRIEF FACTS ARE THAT ASSESSEE, AN INDIVIDUAL, FI LED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 31.10. 2009 DECLARING TOTAL INCOME OF ` 1,07,35,030/-. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 26.12.2011 ACCEPT ING THE INCOME RETURNED. LATER, COMMISSIONER OF INCOME TAX PASSED ORDER UNDER SECTION 263 OF THE ACT SETTING ASIDE T HE ASSESSMENT FOR DE NOVO CONSIDERATION TO PASS FRESH ASSESSMENT IN ACCORDANCE WITH LAW FOR THE REASON TH AT THE ASSESSING OFFICER HAS OMITTED TO CAUSE ENQUIRIES I N RESPECT OF BUSINESS OF BUYING AND SELLING LANDS AND DEVELOP MENT OF LANDS BY PLOTTING THEM BY THE ASSESSEE AND WHETHER THESE ACTIVITIES ARE ASSESSABLE UNDER BUSINESS INCOME OR UNDER THE HEAD INCOME FROM CAPITAL GAINS. AS THE SCRUTINY AS SESSMENT WAS COMPLETED WITHOUT CAUSING NECESSARY ENQUIRIES COMMISSIONER OF INCOME TAX HELD THAT ASSESSMENT ORD ER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. BEFORE THE COMMISSIONER OF INCOME TAX, THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAD CONSIDERED THE DETAILS AND INCOME ARISING OUT OF SALE OF LANDS AS CAPITAL GAINS. HOWEVER, ON EXAMINING THE RECORDS AND PERUSING THE ASSESSMENT ORDER, COMMISSIONER OF INCOME TAX WAS OF THE 3 ITA NO.984 /MDS/2014 VIEW THAT NECESSARY ENQUIRIES WERE NOT MADE BY THE ASSESSING OFFICER ON THE ACTIVITIES OF THE ASSESSEE AND THEREFORE HELD THAT ASSESSMENT ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS H E SET ASIDE THE ASSESSMENT FOR DE NOVO CONSIDERATION AFTER GIVI NG ADEQUATE OPPORTUNITY TO THE ASSESSEE. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSING OFFICER HAS CONSIDERED ALL THE DETAILS FURNISHED BY THE ASSESSEE IN RESPECT OF CAPITAL GAINS RETURNED BY TH E ASSESSEE AND THE ASSESSING OFFICER HAS ACCEPTED THE CONTENTI ON OF THE ASSESSEE THAT INCOME FROM SALE OF PLOTS HAS TO BE C ONSIDERED AS INCOME UNDER THE HEAD CAPITAL GAINS AND NOT UNDE R THE HEAD BUSINESS. HE FURTHER CONTENDED THAT IN FACT TH E ASSESSING OFFICER ISSUED 147 NOTICE FOR REOPENING O F ASSESSMENT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2008-09 AND ON EXAMINATION OF ALL THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER ACCEPTED THAT THE ACTIVITIES OF THE ASSESSEE IN DEVELOPING THE LAND, MAKING PLOTS AND SELLING THEM IS NOT IN THE NATURE OF BUSINESS A ND THE GAINS ON SUCH ACTIVITY ARE TO BE ASSESSED ONLY UNDE R CAPITAL 4 ITA NO.984 /MDS/2014 GAINS. HE FURTHER SUBMITS THAT ON SATISFIED WITH T HE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER DROPPED 147 ASSESSMENT AND COMPLETED THE ASSESSMENT WITHOUT MAKING ANY COMPUTATION UNDER BUSINESS. REFERRING TO PAGES 77 AND 82 OF THE PAPER BOOK, COUNSEL FURTHER SUBMIT S THAT IN CO-OWNERS CASE, THE TRIBUNAL HAS ALREADY HELD THAT SALE PROCEEDS FROM THOSE PLOTS ARE ASSESSABLE ONLY UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD BUSINESS INCOME. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND SETTING AS IDE THE ASSESSMENT FOR DE NOVO CONSIDERATION. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSING OFFICER NEITHER CALLED FOR ANY DETAILS IN RESPECT OF ACTIVITIES OF THE ASSESSEE NOR EXAMINED THEM AND PASSED ORDER WITHOUT VERIFYIN G THE ACTIVITIES OF THE ASSESSEE AND THIS MADE THE ASSES SMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THUS THE COMMISSIONER OF INCOME TAX HAS PROPERL Y EXERCISED THE JURISDICTION UNDER SECTION 263 OF THE ACT. 5 ITA NO.984 /MDS/2014 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. IN THIS CASE, THE ASSESSMENT WAS COMPLETED UNDER SE CTION 143(3) OF THE ACT ON 26.12.2011 ACCEPTING THE INCOM E RETURNED BY THE ASSESSEE. IT IS THE SUBMISSION OF T HE ASSESSEE THAT ASSESSING OFFICER HAS EXAMINED THE DE TAILS FURNISHED BY THE ASSESSEE IN RESPECT OF ACTIVITIES OF THE ASSESSEE AND ACCEPTED THE COMPUTATION OF CAPITAL GA INS. BEFORE US, THE ASSESSEE COULD NOT PRODUCE ANY OF TH E DETAILS FURNISHED BEFORE THE ASSESSING OFFICER. ON A READIN G OF THE ASSESSMENT ORDER AND RECORDS BEFORE US, WE COULD SE E THAT NEITHER THE ASSESSING OFFICER CALLED FOR ANY DETAIL S REGARDING THE ACTIVITIES OF THE ASSESSEE NOR ASSESSEE FURNISH ED ANY MATERIALS BEFORE THE ASSESSING OFFICER SO AS TO SAY THAT ASSESSING OFFICER EXAMINED THE ACTIVITIES OF THE AS SESSEE AND HAS ACCEPTED THE CLAIMS OF THE ASSESSEE MADE UN DER CAPITAL GAINS. WHEN ASKED FOR REASONS FOR REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2008-09, COUNSEL FOR THE ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE THE REA SONS FOR REOPENING. IN THE ABSENCE OF REASONS FURNISHED BEFO RE US, THE SUBMISSIONS OF THE ASSESSEE THAT ASSESSING OFFICER REOPENED THE ASSESSMENT FOR THE IMMEDIATELY PRECEDING ASSESS MENT 6 ITA NO.984 /MDS/2014 YEAR AND DROPPED THE SAME ACCEPTING THE CONTENTION OF THE ASSESSEE THAT INCOME ARISING FROM SALE OF PLOTS HA S TO BE CONSIDERED ONLY AS CAPITAL GAINS HAS NO RELEVANCE. COMING TO THE SUBMISSION OF THE ASSESSEE THAT IN CO-OWNER S CASE THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE HOLD ING THAT GAINS ARISING OUT OF SALE OF PLOTS HAS TO BE CONSID ERED AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME, WE ARE UN ABLE TO ACCEPT THE SUBMISSIONS SINCE THE ASSESSING OFFICER HAS NOT EXAMINED THE ACTIVITIES OF THE ASSESSEE AT ALL. THE RE IS NO FINDING AS TO WHETHER THE ASSESSEE IS CO-OWNER OF T HE LAND, HOW HE IS CO-OWNER OF THE LANDS OF OTHER CO-OWNERS, WHETHER THE PROPERTY IS JOINTLY HELD BY THE OTHER CO-OWNERS ALONG WITH THE ASSESSEE AND IN WHAT WAY THE ASSESSEE IS CONCER NED WITH THOSE PERSONS IS NOT CLEAR FROM RECORD. FURTHE R ON A PERUSAL OF THE WEALTH-TAX ASSESSMENT OF THE ASSESSE E DATED 20.01.2014 WHICH WAS MADE MUCH LATER TO THE INCOME TAX ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-10 D ATED 26.12.2011, WE FIND THAT ASSESSEE IS HAVING AGRICUL TURAL LANDS AT VARIOUS PLACES I.E. RAJAKILPAKKAM, MADAMBA KKAM, GOWRIVAKKAM, OTTIAMBAKKAM AND NATHANALLUR AND IT IS ALSO NOT KNOWN AS TO THE ACTIVITIES IN THESE LANDS OF THE ASSESSEE 7 ITA NO.984 /MDS/2014 WHETHER THEY ARE ONLY FOR INVESTMENTS OR THEY ARE R EALLY DOING BUSINESS ACTIVITIES BY THE ASSESSEE. THE ASSESSING OFFICER NEVER EXAMINED ALL THOSE THINGS WHILE COMPLETING TH E ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THERE FORE, SINCE THE ASSESSING OFFICER HAS NOT CALLED FOR ANY SUCH DETAILS IN RESPECT OF VARIOUS ACTIVITIES OF THE ASS ESSEE LIKE DEVELOPING LANDS, SELLING PLOTS ETC. AND IN THE ABS ENCE OF ANY CLARIFICATION OR STATEMENT MADE IN THE COURSE OF A SSESSMENT PROCEEDINGS, IT CANNOT BE HELD THAT ASSESSING OFFIC ER HAD EXAMINED ALL THESE DETAILS AND FORMED AN OPINION A ND ALLOWED THE CLAIM OF THE ASSESSEE THAT GAINS ARISI NG ON SALE OF PLOTS IS ASSESSABLE UNDER CAPITAL GAINS. THE COM MISSIONER OF INCOME TAX CLEARLY STATED IN HIS ORDER THAT ASSE SSING OFFICER PASSED AN ERRONEOUS ORDER ALLOWING THE CLA IMS OF THE ASSESSEE WITHOUT PROPERLY INVESTIGATING OR EXAMININ G THE ISSUES WHICH MEANS, THE ASSESSING OFFICER HAS NOT A PPLIED HIS MIND AT ALL TO THE ISSUES WHILE COMPLETING THE ASSESSMENT. 6. IN THE CASE OF M/S. MALABAR INDUSTRIAL CO.LTD., (243 ITR 83), THE HONBLE SUPREME COURT HELD THAT AN INCORR ECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF L AW WILL 8 ITA NO.984 /MDS/2014 SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. SIMILARLY, ORDERS PASSED WITHOUT APPLYING THE PRINC IPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND ARE ALSO ERRONEOUS. IN THE INSTANT CASE, THE ASSESSING OFF ICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) NE VER APPLIED HIS MIND TO VARIOUS ISSUES AS POINTED OUT B Y THE COMMISSIONER OF INCOME TAX IN HIS ORDER. THE ASSESS ING OFFICER HAS PASSED THE ASSESSMENT ORDER ALLOWING TH E CLAIMS OF THE ASSESSEE WITHOUT CALLING FOR THE DETAILS AND EXAMINING THEM. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND IS CERTAINLY AN ERRONEO US ORDER AND IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF MANNUL AL MATADEEN VS. CIT (277 ITR 346) HELD THAT THE INCOME TAX OFFICER HAD NOT MADE NECESSARY ENQUIRIES BEFORE ALL OWING THE DEDUCTION OF INTEREST TO MANNULAL MATADEEN ON T HE CREDIT BALANCE AND THEREFORE, THE ORDER PASSED WAS ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 7. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS. SESHASAYEE PAPER AND BOARDS LTD. (242 ITR 490) WHILE 9 ITA NO.984 /MDS/2014 EXAMINING THE POWERS OF COMMISSIONER OF INCOME TAX UNDER SECTION 263 OBSERVED AS UNDER:- THAT THE COMMISSIONER FOUND THAT THE INCOME-TAX OFFICER WAS NOT CORRECT IN GRANTING RELIEF WITH RE SPECT TO SOME OF THE ITEMS CONSIDERED IN THE ORIGINAL ASSESS MENT PROCEEDINGS AND FROM THE INSTANCES OR SPECIMENS OF SOME OF THE CASES EXAMINED BY HIM, HE CAME TO THE CONCLUSION THAT THE INCOME-TAX OFFICER HAD NOT COM PLETED THE ASSESSMENT BY FOLLOWING THE PROCEDURE EXPECTED OF HIM. IT WAS NOT NECESSARY FOR THE COMMISSIONER TO EXAMINE EACH ITEM IN DETAIL AND RECORD A CLEAR FIN DING THAT THE ORDER PASSED BY THE INCOME-TAX OFFICER WAS ERRONEOUS. 8. IN THE INSTANT CASE, FROM THE DETAILS FURNISHED BEFORE US, WE COULD SEE THAT THE ASSESSING OFFICER NEITHER CAL LED FOR ANY DETAILS WITH REGARD TO THE ACTIVITIES OF THE ASSESS EE NOR MADE ANY ENQUIRIES BEFORE ALLOWING THE CLAIMS OF THE ASS ESSEE WHILE COMPLETING THE ASSESSMENT. 9. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER PASSED BY THE AS SESSING OFFICER UNDER SECTION 143(3) ALLOWING THE CLAIMS OF THE ASSESSEE WITHOUT APPLICATION OF MIND, WITHOUT EXAM INING THE CORRECT POSITION OF LAW IS CERTAINLY AN ORDER PASSE D ERRONEOUSLY AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. THE CASE LAWS RELIED ON BY THE COUNSEL FOR THE ASS ESSEE ARE DISTINGUISHABLE ON FACTS AND HAVE NO APPLICATION TO THIS CASE. 10 ITA NO.984 /MDS/2014 THEREFORE, WE HOLD THAT THE COMMISSIONER OF INCOME TAX RIGHTLY INVOKED THE PROVISIONS UNDER SECTION 263 O F THE ACT DIRECTING THE ASSESSING OFFICER TO DO THE ASSESSMEN T DE NOVO EXAMINING ALL THE ISSUES. ACCORDINGLY, WE UPHOLD TH E IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX AN D DISMISS THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 19 TH AUGUST, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .