COMMISSIONER OF INCOME TAX VIJAYAWADA V. L. NARSA REDY

ITTA/4/2003

AI Insights

The case involves a proprietary concern assessed to tax, which declared a loss for the assessment year 1981-82. Subsequent years' assessments led to disputes over credit claims, resulting in the respondent approaching the Settlement Commission and admitting some credits as income. The Revenue issued a show cause notice under Section 148 of the Income Tax Act, leading to a re-assessment for 1981-82. The respondent's appeal against this re-assessment was initially rejected by the Commissioner due to non-pursuit of proceedings, but was later allowed by the Income Tax Appellate Tribunal (ITAT) on the grounds of the proprietor's illness. The Revenue's appeal against the ITAT's decision was dismissed by the High Court, which found no error in the Tribunal's decision to allow the additional ground and agreed with the Tribunal's approach to the re-assessment issues.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 677840 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 21-08-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Additional ground; Income Tax; Re-assessment; Settlement commission; Credit verification
• Section: 148; 143(1)(a); 260-A

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.4 of 2003 JUDGMENT: (Per LNR,J) The respondent is a proprietary concern and is assessed to tax. For the assessment year 1981-82, it has declared the loss at Rs.71,760/-. The same was dealt with under Section 143-(1)(a) of the Income Tax Act, 1961 (for short ‘the Act’) and no liability as such was fastened upon the respondent. The returns for the assessment years 1984-85 and 1985-86 were processed and some statements with regard to claims as to credits were disbelieved. That in turn resulted in the respondent approaching the Settlement Commission, not only in respect of those two years, but also in relation to assessment years 1986-87 and 1987-88. The respondent is said to have admitted that some of the credits shown in the assessment are not true and they can be treated as his income. Treating the said fact as the basis, the appellant issued a show cause notice under Section 148 of the Act, proposing to re- assess the respondent for the assessment year 1981- 82. It was stated that some of the credits mentioned therein are not true. Thereafter, an order of re-assessment was passed. Aggrieved by the order of re-assessment, the respondent filed an appeal before the Commissioner. The appeal was rejected by the Commissioner, on the ground that the respondent did not pursue the proceedings. Thereupon, the respondent filed I.T.A.No.1030/Hyd/95 and batch before the Hyderbaad Bench of the Income Tax Appellate Tribunal. I.T.A.No.1031/Hyd/95 was in relation to assessment year 1981-82. The Tribunal allowed the batch of appeals through common order, dated 22.02.1999. It has permitted the respondent to raise an additional ground by accepting the plea that the proprietor was seriously ill, when the appeal was being heard by the Commissioner and that the ground could not be raised. This appeal is preferred by the Revenue, under Section 260-A of the Act against the said common order, insofar as it relates to the assessment year 1981-82. Heard learned counsel for the appellant and learned counsel for the respondent. So far as the first ground is concerned, we are at a loss to understand as to how the Tribunal can be said to have committed any error, in permitting an additional ground to be raised. The relevant provision, that confers power upon the Tribunal, permits such a course. Further, a sufficient factual foundation was laid for raising the additional ground. It is not disputed that the respondent was suffering from kidney problem, when the appeal was pending before the Commissioner and on account of the same, he could not concentrate on the matter. The Commissioner proceeded as though a human being, who is assessed to tax, has to dedicate his entire life and energy for the assessment and other proceedings before the Income Tax Officer and he has no other aspect in the life. The Tribunal has exhibited some human approach and understood the problem of the assessee. We are totally in agreement with the view taken by the Tribunal. Coming to the other two questions, we find that the respondent himself was so truthful that in the subsequent years, when the creditors backed out, it has approached the Settlement Commissioner and offered that the corresponding amount can be treated as its income. Here again, the Tribunal has gone to the root of the matter and took the view that whenever the creditor of an assessee backs out during the course of verification, the only alternative for the assessee is to treat the corresponding amount as its income and that no exception can be taken to it. Further, the mere fact that the creditor of an assessee, for a particular year has backed out, it does not by itself constitute the basis to suspect every credit, which was shown in the returns of the earlier assessment years. The Tribunal was objective in its approach and we do not find any basis to interfere with its well-considered order. Therefore, the I.T.T.A. is dismissed. The miscellaneous petition filed in this appeal shall also stand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ________________________ CHALLA KODANDA RAM, J Date: 21.08.2014 JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.4 of 2003 Date: 21.08.2014 JSU "