Konda Ramesh V. Asst. Commissioner of Income-Tax, Circle-, Karimnagar

ITTA/195/2007

AI Insights

The case revolves around an appeal by Konda Ramesh, the Managing Partner of M/s. Hanuman Parboiled Rice & Oil Mill, against the order of the Income-tax Appellate Tribunal which restored an addition of Rs.1,50,303 as interest income for the block period from 1989-90 to 1999-2000. The addition was initially contested and deleted by the Commissioner of Income-tax (Appeals), who found no interest was received by the assessee during the block period. However, the Appellate Tribunal reversed this decision without providing adequate reasoning. The High Court's judgment focused on the lack of reasoning in the Appellate Tribunal's decision and upheld the findings of the Commissioner of Income-tax (Appeals).

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 688348 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 06-12-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P KRISHNA
• Assessee Lawyers: A V A KARTIKEYA
• Keywords: Block period; Interest income; Mercantile method of accounting; Search and seizure
• Section: 143(2); 132; 133A; 158BC; 260A

Judgement Text

"[ 34181 IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY ,THE SIXTH DAY OF DECEMBER TWO THOUSAND AND TWENry FOUR PRESENT THE HONOURABLE THE CHIEF JUSTICE ALOK ARADHE AND THE HONOURAB.LE SRI JUSTICE J. SREENIVAS RAO INCOME TAX TRIBUNAL APPEAL NO: 195 OF 2007 . Appeal filed under Section 2604 of the lncome Tax Act, 1961 aqainst the Orlgr-!a!g{ 10.01.2007 passed in t.T. (SS).A No. B4tHydto3 (Btock period 1989-90 to 1999-2000) on the file of the lncome Tax Appellate'Triburial, Hyderabad Bench fl.[V{eg!aq-pr-\"j.g{r3q against the Order dated 31.03 2003 passed in Appeat No. ss3/TrlDclr, KRM/clr(A-lll/02-03) on the fite of the commissioner of ln66me Tax Spl.\":l: -.lll), Hy9erabad plgfeqed against the Order dated 30.05.2001 passed in PAN/GIR No. R-816 on the file of the Deputy Commissioner of lncome Tai, Circle - 1, Karimnagar. Between: Konda Ramesh, 4-1-817, Osmanpura, Karimnagar ...Appellant AND Asst. Commissioner of lncome-Tax, Circle-, Karimnagar. ...Respondent Counsel for the Appellant : Mr. A.V.A. Siva Kartikeya Counsel for the Respondent : Mr. P. Murali Krishna, Senior Standing Counsel for lncome Tax The Court delivered the following: JUDGMENT - THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE AND THE HON'BLE SRI JUSTICE J. SREENIVAS R{O ITTA No. 195 of 2007 JUDGMENTi (per the Hon'ble the Chief Justice Alok Aradhe) Mr. A.V.A. Siva Kartikeya, learned counsel appears for the appellanVassessee. Mr. P. Murali Krishna, leamed Senior Standing Counsel for Income-tax appears for the respondent/Revenue through video conferencing. 2. This appeal under Section 260A of the Income-tax Act, 1961 (herein:rfter referred to as 'the Act') is filed by the assessee and pertains to block period 1989-90 to 1999-2000. The appeal has been admitted on the following substantial question of law. \"Whether the Income-tax Appellate Tribunal committed an error of law in restoring the addition of Rs.1,50,303/- as interest received by the assessee without assigning any reasons and u'ithout any improving reasoning of the Commissioner of lncome-tax (Appeals) in para 2.2 and para 2.3 ol the order dated I1.03.2003?\" CJ & JSR, J ITTA.No 195 of2007 3. Facts giving rise to filing of this appeal briefly stated are that the assessee is the Managing Partner of M/s.Hanuman Parboiled Rice & Oil Mill, Karimnagar. A search and seizure operation under Section 132 of the Act was conducted on 09.03.1999 in the business and residential premises of the assessee. A survey operation under Sectiort 133,4 of the Act was also conducted in the premises of Hanuman Parboiled Rice & Oil Mill and Nandini Traders of Hanuman Group. A notice under Section 158BC of the Act was issued to the assessee on 13.08.1999. It was served on him on 18.08.1999. The assessee thereupon filed the return of income for the block period 1989-90 to 1999-2000 on 28.09.1999 and disclosed his total income of Rs.2,56,7 7 0/ -. 4. Thereafter, a notice under Section 143(2) of the Act was issued along with a detailed show cause notice dated 31.08.2000. The Assessing Officer by an order dated 30.05.2001 computed the income of the assessee under the Head of Interest and quantihedthe sum as fu.1,50,303/-. The assessee was directed to pay the balance tax amount of 2 Rs.2,34,5091- C.J &JSR. J ITTA No.195 oI2007 5. Being aggrieved, the assessee filed an appeal' The Commissioner of Income-tax (Appeals) by an order dated 31.03.2003 after taking into account the remand report received from the Assessing Officer' held that the assessee did not receive any interest during the block period' It was further held that the .Assessing Ofhcer ought not to have made the addition of a sum of Rs.1,50,303/- without making an enquiry whether the assessee had received the interest on the pro-notes found during the course of enquiry. It was further held that the assessee is no1 a company and therefore, the interest cannot be assessed on accrual basis. 6. Being aggrieved, the Revenue filed an appeal before the Income-tax Appellate Tribunal (hereinafter referred to as 'the Appellate Tribunal'). The Appellate Tribunal by an order dated 10.01.2007 inter aliaheld as follows: \"6. We have heard the leamed Departmental Representatlve and perused the records of the Tribunal. We are of the considered opinion that the leamed Commissioner of Income- tax (Appeals) was in error in deleting the above addition on the facts and circumstances narrated above- We, therefore, allou this ground ofthe Revenue and set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue.\" b= 3 c.' & JSR J I1TA.No.l95 of 2007 The Appeal preferred by the Revenue was partly allowed. Being Aggrieved, the assessee has filed this appeal 7. Leamed counsel for the assessee has invited the attention of this Court to the findings recorded in para 2.2 and para 2.3 of the order dated 31.03.2003 passed by the Commissioner of Income-tax (Appeals) and has submitted that the Commissioner of Income-tax (Appeals) by placing reliance on the remand report received from the Assessing Officer has rightly directed the deletion of a sum of Rs.1,50,303/-. It is contended that without assigning any reasons, the Appellate Tribunal has reversed the aforesaid finding. 8. On the other hand, leamed counsel for the Revenue has supported the order passed by the Appellate Tribunal and has contended that the assessee follows the mercantile method of accounting. Therefore, the order passed by the Appellate Tribunal does not call for any interference. 9. We have considered the submissions made on both sides 4 and have perused the record. (:J & JSR, J lTTA.No.95oi2007 10. At this stage, it is apposite to take note of para 2.2and para 2.3 of the order dated 31.03.2003 passed by the Commissioner of Income-tax (Appeals) which are extracted below for the faciliry ofreference. -2.2 V'ide by my lettet dt. 14-2-2003, I requested the AO to veri! from the debtors whether they had paid any interest to the appellant and his family members. The AO, vide by his letters dr. 13-3-2003 & 25-3-2003, has informed that the debtors had told his Inspector, who went for enquiries, that they had not paid any interest during the block period. 2.3 I have carefully considered the submission. The AO has made this addition without making even basic enquiries. If promotes were seized during the course of search and if the AO wanr.s [o assess the interest on those promotes, thc minimum enquiry that the AO has to make is to find out whether the debtors had paid the interest. The appellant is not a company where the interest can be assessed on accrual basis. The appellant is an individual and if an individual has not actually rcceived the interest, there is no question of assessing the same. [n these circumstances, I deletb this addition of Rs. 1.50,3034.\" Thus, it is evident that the Commissioner of Income-tax (Appeals) on the basis of the remand report of the Assessing Officer has recorded a finding that the debtors had stated that they had not paid any interest to the assessee during the block period. It has further been held that since the assessee is not a 5 I I Company, interest cannot be assessed on accrual basis. The l I I I CJ & JSR, J lTfA No l9s of 2007 aforesaid finding of fact is recorded on the basis of material available on record. However, the aforesaid finding has been reversed by the Appellate Tribunal without assigning any reasons and without any improving reasoning on which the order of the Commissioner of Income-tax (Appeals) 6 was based. 11. For the aforementioned reasons, substantial question of law framed by this Court is answered in favour of the assessee and against the Revenue. 12. In the result, the order dated 10.01.2007 passed by the Appellate Tribunal is set aside. 13. Accordingly, the appeal is allowed. Miscellaneous applications, if any pending, shall stand closed. There shall be no order as to costs. //TRUE COPY// A.V.S.S.C.S.M. SARMA JOINT REGISTRAR SECTION OFFICER To, 1. The lncorne Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad' 2. The Commissionei bf lncome Tax (Appeals - lll), Hyderabad. 3. The Deputy Commissioner of lncome Tax, Circle-1 , Karimnagar' +. On\" CC to'Mr. A.V.A. Siva Kartikeya, Advocate [OPUC] 5. One CC to Mr. P. Murali Krishna,'senior Standing Counsel for lncome- lax toPUcl 6. Two CD CoPies Njb/gh a I HIGH COURT DATED:0611212024 JUDGMENT lTTA.No.l95 of 2007 ALLOWING THE ITTA WITHOUT COSTS e rHE SIa 14: c 2 [ 0f[ 20a f)c.- .i.,. (i r a I * I)^- CHE-O ?)^ "