Dr. N. Madhava Reddy, Tirupathi v. ACIT, Central Circle, Tirupathi

ITA 1897/HYD/2011 | 2008-2009
Pronouncement Date: 10-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 189722514 RSA 2011
Assessee PAN ADQPM0925M
Bench Hyderabad
Appeal Number ITA 1897/HYD/2011
Duration Of Justice 6 year(s)
Appellant Dr. N. Madhava Reddy, Tirupathi
Respondent ACIT, Central Circle, Tirupathi
Appeal Type Income Tax Appeal
Pronouncement Date 10-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 10-11-2017
Date Of Final Hearing 02-08-2017
Next Hearing Date 02-08-2017
First Hearing Date 02-08-2017
Assessment Year 2008-2009
Appeal Filed On 09-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SMT P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NO. 1897/HYD/2011 ASSESSMENT YEAR: 2008-09 DR. N. MADHAVA REDDY TIRUPATI. PAN ADQPM0925M VS. ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE TIRUPATI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. RAGHAVENDRA RAO REVENUE BY : SHRI K.V.N. CHARYA DATE OF HEARING 15-09-2017 DATE OF PRONOUNCEMENT 10-11-2017 O R D E R PER S. RIFAUR RAHMAN A.M.: 1. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) VII HYDERABAD DATED 16/08/2011 RELATING TO AY 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) - VII HYDERABAD (CIT(A)) HAS ERRED ON FACTS AND IN LAW. (B) THE ASSESSMENT ORDER IS INVALID IN LAW AS NOTIC E U/S 153A IS INVALID. THE INITIATION OF ASSESSMENT PROCEEDINGS B EING NOT LEGAL CONSEQUENT ASSESSMENT IS INVALID. (C) THE NOTICE AND ASSESSMENT U/S 153A IS NOT VALID ALSO FOR THE REASON THAT NO INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH. 2 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY 2. THE LEARNED CIT{A) HAS FAILED TO NOTICE THAT THE AMOUNT INVESTED IN THE PURCHASE OF THE SITE IN TIRUPATI WA S ONLY RS. 1 05 84 000/- AND NOT RS. 1 22 09 495/-. (B) THE LEARNED CIT(A) FAILED TO NOTICE THAT THE AS SESSING OFFICER (AO) IS INCONSISTENT IN HOLDING ONE PART OF THE SWORN STATEMENT AS CORRECT AND THE OTHER PARTS AS NOT COR RECT. THE AO CANNOT APPROBATE AND REPROBATE. 3. THE LEARNED CIT(A) HAS ERRED IN SUSTAINING AN AD DITION OF RS. 5 LAKHS ON THE GROUND THAT THE AMOUNT RECEIVED FROM SRI K SHIVA KUMAR REDDY HAS NOT BEEN EXPLAINED. HE IGNORE D THE RELEVANT FACTS THAT THE AMOUNT OF RS. 10 00 000/- W AS RECEIVED FROM B SHYAM SUNDER REDDY WHO HAS ACCEPTED AND EXPL AINED THE PAYMENT OF RS. 10 00 000/- TO THE ASSESSEE. 4.(A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN UPHOL DING THE ADDITION OF RS. 9 LAKHS RECEIVED BY WAY OF GIFT FRO M SRI RADHA KRISHNA REDDY. (B) THE AO HAS ACCEPTED THE CREDITWORTHINESS OF SRI RADHA KRISHNA REDDY THE GRAND FATHER OF THE SPOUSE OF TH E ASSESSEE. THE LOWER AUTHORITIES OUGHT TO \ HAVE ACCEPTED THE GIFT AS IT WAS GIVEN TO FACILITATE THE ACQUISITION OF SITE BY THE \ ASSESSEE OUT OF LOVE AND AFFECTION. (C) THE SOURCES WERE ALL STATED IN THE COURSE OF SW ORN STATEMENT RECORDED ON THE DAY OF SEARCH. 5. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING ADDITI ON OF RS. 15 70 000/- RECEIVED BACK FROM SRI B RAVI SHANKARA REDDY. HAVING NOT .DOUBTED THE PAYMENT OF RS. 15 70 000/- TO SRI RAVI SHANKARA REDDY FOR THE PURPOSE OF PAYMENT TO THE VE NDORS THE SOURCE OF RS. 15 70 000/- OUGHT TO HAVE BEEN ACCEPT ED. THE FACT OF RETURN OF THE RECEIPT ISSUED BY SRI RAVI SH ANKAR REDDY AT THE TIME OF PAYMENT TO HIM ON THE OCCASION OF THE C ONCLUSION OF THE DEAL OUGHT TO HAVE BEEN ACCEPTED. THIS IS ESPEC IALLY SO AS THE RETURN OF THE RECEIPT WAS AVERRED IN THE COURSE OF SWORN STATEMENT. 6. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE RAIS ED AT / BEFORE THE TIME OF HEARING IT IS PRAYED THAT THE AD DITIONS SUSTAINED BY THE CIT(A) BE COMPLETELY DELETED. 2.1 THE ASSESSEE HAS ALSO FILED THE FOLLOWING REVIS ED ADDITIONAL GROUNDS OF APPEAL: 1. (A) THE NOTICE U/ S 143(2) ISSUED ON 20-10-2009 IS BARRED BY LIMITATION UNDER PROVISO TO SEC 143(2)(II) OF THE I T ACT ACCORDING TO WHICH NO NOTICE SHALL BE SERVED U/ S 143(2) SIX MONTHS AFTER THE END OF THE PREVIOUS YEAR IN WHICH RETURNS IS FI LED. THE RETURN 3 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY WAS FILED ON 18-03-2009. THE ISSUE OF NOTICE IS BEY OND THE STATUTORY PERIOD MAKING IT IMPOSSIBLE TO BE SERVED WITHIN THE SAID PERIOD OF SIX MONTHS WHICH EXPIRED ON 30-09-20 09. (B) THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT (ASST.) VS HOTEL BLUE MOON VS CITT (321 ITR 362) APPLIES TO THE FACTS OF THE CASE. (C) AS THERE WAS NO NOTICE U/S 143(2) EXISTING BY 3 0-09-2009 THE ASSESSMENT PROCEEDINGS AND THE RESULTANT ASSESS MENT ORDER ARE LEGALLY INVALID AND NON EST. 2. (A) LEARNED ASSESSING OFFICER (AO) ERRED IN PRES UMING THAT THE INVESTMENT IN PURCHASE OF THE VACANT LAND IS RS . 1 12 25 000/- AND MAKING ADDITION IN THE ASSESSMENT ON THAT BASIS. ASSESSEE INVESTED ONLY RS. 1 05 84 000/- (RO UNDLY) AS EVIDENCED BY THE REGISTERED SALE DEED. EXCESS ADDIT ION OF RS. 6 41 000/- ON THIS ACCOUNT IS INCORRECT. (B) LEARNED AO ERRED IN NOT CONSIDERING THE AMOUNT OF RS. 3 00 000/- OFFERED AS INCOME TO COVER DEFICIENCIES DURING THE SEARCH. THE ONLY DEFICIENCY NOTICED IS THE INVESTME NT IN PURCHASE OF VACANT SITE. 3. (A) THE ASSESSMENT ORDER IS INVALID IN LAW AS NO TICE UNDER U/S 153A IS INVALID. THE INITIATION OF ASSESSMENT PROCE EDINGS BEING NOT LEGAL CONSEQUENT ASSESSMENT IS INVALID. (B) THE NOTICE AND ASSESSMENT U/S 153A IN NOT VALID ALSO FOR THE REASON THAT NO INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH. 3. AS THE ADDITIONAL GROUNDS ARE PURELY LEGAL IN NA TURE AND GOES TO THE ROOT OF THE MATTER AND THERE IS NO NEED FOR FRE SH INQUIRY INTO FACTS WE HEREBY ADMIT THE SAME FOR ADJUDICATION. 4. FIRST WE DEAL WITH THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT SEARCH AN D SEIZURE OPERATIONS WERE CONDUCTED IN THE PREMISES OF THE AS SESSEE ASSESSMENTS FOR PREVIOUS AYS 2002-03 AND 2007-08 WE RE COMPLETED U/S 143(3) R.W.S. 153A OF THE INCOME-TAX ACT 1961 ( IN SHORT THE ACT) ACCEPTING THE RETURNED INCOME OF THE ASSESSEE. 6. THE PRESENT AY IS THE YEAR SUBSEQUENT TO BLOCK P ERIOD I.E. AY 2002-03 TO 2007-08. HOWEVER THE AO HAD ISSUED COMB INED NOTICES 4 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY U/S 142(1) & 143(2) FOR THE AYS 2002-03 TO 2008-09. BY FOLLOWING SUCH NOTICE U/S 153A THE ASSESSEE FILED RETURN OF INCOME ON 18/03/2009 DECLARING THE TOTAL INCOME OF RS. 5 06 6 00/- AND THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 89 81 600/- BY MAKING VARIOUS ADDITIONS. WHEN THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE CIT(A) THE CIT(A) CONFIRMED ALL THE ADD ITIONS EXCEPT THE ADDITION IN RESPECT OF LOAN FROM NRI SISTER WHICH WAS DELETED. 7. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 8. BEFORE US THE ASSESSEE HAS RAISED A LEGAL GROUN D BY WAY OF ADDITIONAL GROUND THAT THE NOTICE U/ S 143(2) ISSUE D ON 20-10-2009 IS BARRED BY LIMITATION UNDER PROVISO TO SEC 143(2)(II ) OF THE IT ACT ACCORDING TO WHICH NO NOTICE SHALL BE SERVED U/ S 1 43(2) SIX MONTHS AFTER THE END OF THE PREVIOUS YEAR IN WHICH RETURNS IS FILED. THE RETURN WAS FILED ON 18-03-2009. THE ISSUE OF NOTICE IS BEY OND THE STATUTORY PERIOD MAKING IT IMPOSSIBLE TO BE SERVED WITHIN THE SAID PERIOD OF SIX MONTHS WHICH EXPIRED ON 30-09-2009. 9. LD. AR SUBMITTED THAT THE ASSESSMENT ORDER PASSE D BY THE AO IS INVALID AS NOTICE U/S 153A IS INVALID ON THE GRO UND THAT NO INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF S EARCH. HE FURTHER SUBMITTED THAT THE NOTICE U/S 143(2) ISSUED BY THE AO IS BARRED BY LIMITATION UNDER PROVISO TO SECTION 143(2) AS THE A O ISSUED THE SAID NOTICE ON 20/10/2009 WHICH WAS SUPPOSED TO BE ISSU ED ON OR BEFORE 30/09/2009 FROM THE DATE OF FILING OF RETURN I.E. O N 18/03/2009. HE THEREFORE CONTENDED THAT AS THERE WAS NO NOTICE U/ S 143(2) EXISTING BY 30/09/2009 THE ASSESSMENT PROCEEDINGS AND THE R ESULTANT ASSESSMENT ORDER ARE LEGALLY INVALID AND NON EST. HE RELIED ON THE FOLLOWING CASES: 1. PR. CIT VS. SILVER LINE [2016] 383 ITR 455 (DE L.) 2. CIT VS. MUKESH KUMAR AGARWAL [2012] 345 ITR 29 (ALL.) 3. CIT VS. SALARPUR GOLD STORAGE (P) LTD. 50 TAXMA NN.COM 105 (ALL.) 4. UKT SOFTWARE TECHNOLOGIES (P) LTD. VS. ITO ITA NO. 5293 & 5294/DEL/200 DTD. 11/02/2011. 5 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY 10. THE LD. DR ON THE OTHER HAND SUBMITTED THAT T HE ISSUE OF NOTICE WAS NOT RAISED BEFORE THE AO NOR BEFORE THE CIT(A) AND THE ASSESSEE CANNOT RAISE THE SAME FOR THE FIRST TIME B EFORE THE TRIBUNAL. FURTHER HE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 292BB THE NOTICES ARE DEEMED TO BE VALID IF THERE IS ANY SHOR TCOMINGS IN SERVING THE SAME. HE RELIED ON THE FOLLOWING CASES: 1. CIT VS. PREMIUM CAPITAL MARKET AND OTHERS [200 5] 275 ITR 260 2. AARAVALI ENGINEERS (P) LTD. VS. CIT & ANR 335 I TR 508 (P&H) 3. CIT VS. SHRI KAMALJEET SINGH AHLUWALIA ITA NO. 175/2009 DATED 24/05/2017 (JAIPUR HIGH COURT) 11. IN THE REJOINDER THE LD. AR RELIED ON THE JUDG MENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE OF A NDHRA PRADESH VS. COMMERCIAL TAX OFFICER KURNOOL 169 ITR 564 TO SUB MIT THAT WHEN THERE ARE TWO VIEWS POSSIBLE WHILE REFERRING TO TH E DECISIONS OF DIFFERENT HIGH COURTS THE DECISION WHICH IS BENEFI CIAL TO THE ASSESSEE MUST BE PREFERRED. 12. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD AS WELL AS THE CASE LAW CITED BY BOTH THE COUNSELS. THE FACT IS THE AO HAS ISSUED 153A NOTICES FOR THE AYS 2002 -03 TO 2008-09. HE ALSO ISSUED 143(2) NOTICES FOR THE AYS 2002-03 T O 2008-09 ON 20/10/2009. THE AYS 2002-03 TO 2007-08 COVERS THE B LOCK PERIOD AND AY 2008-09 IS THE YEAR IN WHICH THE SEARCH TOOK PLA CE. IN THIS AY AO HAS TO DO THE REGULAR ASSESSMENT U/S 143(3). THE RE GULAR ASSESSMENT PROCEDURE HAS TO BE FOLLOWED. TO COMPLETE THE ASSES SMENT U/S 143(3) THE AO HAS TO ISSUE NOTICE U/S 143(2) TO GE T THE JURISDICTION TO COMPLETE THE ASSESSMENT U/S 143(3). AS PER THE PROV ISIONS OF SECTION 143(2) AO HAS TO ISSUE THE NOTICE U/S 143(2) WITHI N 6 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN I S FURNISHED. IN THE GIVEN CASE AO MUST ISSUE NOTICE ON OR BEFORE 30/0 9/2009. BUT THE NOTICE WAS ISSUED ON 20/10/2009. IS THE ACTION OF T HE AO PROPER AND THE PROVISIONS OF SECTION 292BB WILL COME TO RESCUE IN THE GIVEN FACTS 6 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY OF THE CASE ? AS PER THE RATIO LAID DOWN IN THE CAS E OF PCIT VS. SILVER LINE (SUPRA) THE HONBLE DELHI HIGH COURT HAS CLEA RLY HELD A REASSESSMENT ORDER CANNOT BE PASSED WITHOUT COMPLIA NCE WITH THE MANDATORY REQUIREMENT OF NOTICE U/S 143(2) BEING IS SUED AS THE REQUIREMENT OF ISSUANCE OF SUCH NOTICE IS A JURISD ICTIONAL ONE AND SECTION 292BB CANNOT CURE JURISDICTIONAL ERROR. 12.1 THE LD. DR HAS RELIED ON THE CASES (SUPRA) INC LUDING THE CASE OF AARAVALI ENGINEERS (P) LTD. (SUPRA) WHEREIN THE HO NBLE P&H HIGH COURT HAS LAID DOWN THE RULE THAT APPELLATE AUTHORI TY CAN ALLOW A QUESTION TO BE RAISED FOR THE FIRST TIME EVEN IF SU CH A QUESTION WAS NOT RAISED AT A LOWER FORUM BUT THE DISCRETION TO DO SO HAS TO BE EXERCISED IN THE INTEREST OF JUSTICE. NORMALLY A QU ESTION OF FACT MAY NOT BE ALLOWED TO BE RAISED FOR THE FIRST TIME AS I T MAY PREJUDICE THE OTHER SIDE. BUT AS PER THE RATIO LAID DOWN IN NTPC CASE THE QUESTION OF LAW CAN BE RAISED AT ANY STAGE. IN THE GIVEN CAS E IT IS NOT THE ISSUE OF SERVING OF NOTICE BUT ISSUE OF NOTICE TO ACQUIRE JURISDICTION TO COMPLETE THE ASSESSMENT U/S 143(3). HENCE IT IS TH E QUESTION OF LAW AND NOT FACT. HENCE THE CASES RELIED UPON BY THE L D. DR (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSI DERATION. MOREOVER SECTION 292BB CANNOT BE APPLIED IN THE GIVEN CASE B ECAUSE THE ISSUE IS NOT SERVING OF NOTICE BUT ISSUE OF NOTICE TO ACQ UIRE THE JURISDICTION TO COMPLETE THE ASSESSMENT U/S 143(3). THEREFORE I N THE GIVEN CASE ISSUE IS NOT SERVING OF NOTICE BUT ISSUE OF NOTICE WITHIN THE PERIOD OF LIMITATION PRESCRIBED IN PROVISO TO SECTION 143(2) TO COMPLETE THE ASSESSMENT U/S 143(3). IT IS CLEAR FROM THE RECORD THAT AO HAS ISSUED THE NOTICE U/S 143(2) ONLY ON 20/10/2009 INSTEAD OF ISSUING THE NOTICE ON OR BEFORE 30/09/2009. IT CLEARLY SHOWS THAT THE AO HAS NO JURISDICTION TO COMPLETE THE ASSESSMENT U/S 143(3). HENCE THE ASSESSMENT COMPLETED U/S 143(3) CANNOT BE PASSED WI THOUT COMPLIANCE WITH THE MANDATORY REQUIREMENT OF NOTICE BEING ISSUED U/S 143(2) THEREFORE THE ASSESSMENT ORDER IN QUESTION IS LEGALLY UNSUSTAINABLE AND THE SAME IS HEREBY QUASHED. 7 ITA NO. 1897 /HYD/2011 DR. N. MADHAV REDDY 13. IN THE RESULT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THE OTHER MAIN GROUNDS ARE DISMISSED AS NOT PRESSED. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD DATED: 10 TH NOVEMBER 2017 KV COPY TO:- 1) DR. N. MADHAVA REDDY DOOR NO. 10-15-189/3 KK LAYOUT TIRUPATI - 517501 2) ACIT CENTRAL CIRCLE TIRUPATI 3) CIT(A) VII HYD. 4) CIT (CENTRAL) HYD. 5) THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDE RABAD. 6) GUARD FILE