COMMISSIONER OF INCOME TAX HYD V. SRI RAM NIVAS GUPTA

ITTA/74/2003

AI Insights

The case involves the Income Tax Officer as the appellant and Sri Ram Nivas Gupta as the respondent, who is both an individual assessee and the Kartha of a Hindu Undivided Family (H.U.F.). The dispute arose from the reopening of the assessment for the H.U.F. for the assessment year 1989-90, where the notice was mistakenly issued to the respondent in his individual capacity. The Assessing Officer's action was challenged on the grounds of procedural error and lack of substantive basis for reopening the assessment, which was initially contested and led to various appeals. The Tribunal and the High Court both found procedural lapses and a lack of new evidence to justify the reopening of the assessment, leading to the dismissal of the appeal by the Income Tax Officer.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 744606 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 03-09-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A V KOUNDINYA
• Assessee Lawyers: S R ASHOK
• Keywords: Assessment Reopening; Change of opinion; Hindu Undivided Family; Income Tax; Individual Assessee
• Section: 147; 148; 143(3); 234B; 234C

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY and THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No. 74 of 2003 % 03.09.2014 Between: # The Income Tax Officer. ... APPELLANT Versus $ Sri Ram Nivas Gupta. ...RESPONDENT < Gist: > Head Note: ! COUNSEL FOR THE APPELLANT :- Sri S.R.Ashok ^COUNSEL FOR RESPONDENT :- Sri A.V.Krishna Koundinya ? Cases Referred: HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.74 of 2003 JUDGMENT:- (Per Hon’ble Sri Justice L.Narasimha Reddy) The sole respondent herein is an assessee in his individual capacity, and Kartha of the Hindu Undivided Family (H.U.F.), which is also assessed to income tax. For the assessment year 1989-90, the individual as well as the H.U.F., assessments were processed and orders under Section 143 (3) of the Income Tax Act (for short ‘the Act’) were passed on 20.03.1992 and 26.03.1992 respectively. It is necessary to note that reference number of H.U.F. is R-201 and that of the respondent in his individual capacity, is R-760. The Assessing Officer issued a notice, dated 16.09.1994, in exercise of power under Section 148 of the Act with the approval of the Deputy Commissioner proposing to reopen the assessment of the H.U.F. However, the notice was issued to the respondent. In compliance with the notice, the respondent appeared before the Assessing Officer. He raised an objection to the very reopening of the assessment stating that there was no valid basis therefor. He has also stated that the proposal to reopen the assessment was in relation to a building, which, in turn, was assessed to the H.U.F. The Assessing Officer passed an order, dated 26.03.1997, levying tax of Rs.2,28,960/- and interest of Rs.3,83,015/- under Sections 234B and 234C of the Act. Aggrieved by that order, the respondent carried the matter in appeal before the Commissioner (Appeals). The Commissioner allowed the appeal through order, dated 03.09.1997. Feeling aggrieved by that order, the Revenue filed I.T.T.A.No.53/Hyd/1998 before the Hyderabad Bench ‘B’ of the Income Tax Appellate Tribunal. The appeal was dismissed through order, dated 04.09.2002. Hence, this further appeal under Section 260A of the Act. Heard Sri S.R.Ashok, learned Senior Standing Counsel for the appellant and Sri A.V.Krishna Koundinya, learned counsel for the respondent. It has already been mentioned that apart from being an individual assessee, the respondent is the Kartha of the H.U.F., which is also assessed to tax. Though in the ordinary context, much difference cannot be discerned, the distinction assumes significance from the point of view of assessment and levy of income tax. The parameters for assessment of H.U.F. on the one hand and the individual on the other, are substantially different. The assessments of both the individual and the H.U.F. were dealt with under Section 143 (3) of the Act, which discloses that meticulous verification was undertaken. In case any item has been omitted or has missed the attention of the Assessing Officer, the order of rectification could have been passed under Section 154 of the Act, duly issuing notice. However, the power under Section 147 of the Act was invoked and notice under Section 148 of the Act was issued. Here itself, a note requires to be added that mere change of opinion by an Assessing Officer on the set of facts, which constitute the basis for an earlier order of assessment, cannot constitute the basis to invoke power under Section 147 of the Act. Secondly, since the reopening of the assessment under Section 147 of the Act would expose the assessee to not only additional liability, but also punitive measures, such as interest and penalty, the prescribed procedure is required to be followed meticulously. It has already been mentioned that the assessments of the respondent on the one hand and the H.U.F. headed by him on the other are identified through separate numbers. If the appellant wanted to reopen the assessment of the H.U.F., he ought to have ensured that proper reference is made through the identification number, and notice is served accordingly. The notice in the instant case was issued to the respondent, in his individual capacity. Even when the discrepancy was pointed out, the appellant proceeded on the assumption that once the respondent is before him, it does not matter whether the notice was issued to the H.U.F. or the individual. He proceeded to confirm the facts and figures mentioned in the notice and levied tax and interest. The Appellate Authority has gone through the entire record and found that serious error has crept into the proceedings. He pointed out the number with which H.U.F. on the one hand, and the individual on the other, are identified and held that the notice was issued to the individual, even while proposing to reopen the assessment of the H.U.F. For an Assessing Officer, such a discrepancy may appear to be trivial. However, when the exercise is going to result in fastening of huge financial liability, apart from exposing the assessee to punitive measure, any lapse must certainly lead to annulment of the proceedings. The Commissioner (Appeals) has done exactly that, and has set aside the order of re-assessment. The Tribunal has also dealt with the matter in detail. It observed that there was hardly any explanation or justification for reopening the assessment of the H.U.F. by issuing a notice to the individual. It is fairly well settled that where law requires a thing to be done in a particular manner, it shall be done in that manner, or not at all. The requirement in this behalf is more rigorous in relation to the steps taken by the State and its authorities which have the effect of imposing additional financial liability on the citizens or exposing them to penal consequences. The Tribunal has also found that reopening of the assessment was only on the basis of change of opinion and that the same does not accord with the powers conferred under Section 147 of the Act. We are in agreement with the findings of the Tribunal, in all respects. Hence, the appeal is dismissed. There shall be no order as to costs. Miscellaneous petitions, if any, filed in this appeal shall also stand disposed of. _______________________ L. NARASIMHA REDDY, J ________________________ CHALLA KODANDA RAM, J Date:03.09.2014 Note: L.R. copy to be marked. kdl "