SUBBAYYA SHETTY, MUMBAI v. JTCIT RG 21(2), MUMBAI

ITA 845/MUM/2010 | 1999-2000
Pronouncement Date: 23-02-2010 | Result: Allowed

Appeal Details

RSA Number 84519914 RSA 2010
Bench Mumbai
Appeal Number ITA 845/MUM/2010
Duration Of Justice 20 day(s)
Appellant SUBBAYYA SHETTY, MUMBAI
Respondent JTCIT RG 21(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 23-02-2010
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 1999-2000
Appeal Filed On 03-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 845/MUM/2010 ASSESSMENT YEAR- 1999-2000 SHRI SUBBAYYA SHETTY PROP. OF HOTEL RAMAKRISHNA 15-A TEJPAL ROAD CORNER OF NEHRU ROAD VILE PARLE (E) MUMBAI-400 057 PAN-AAEPS 6820J VS. THE JT. CIT - 21(2) PRATYAKSHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P. TOPRANI RESPONDENT BY: SHRI D. SONGATE O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 9.10.2009 PASSED BY THE LD. CIT(A)-32 FOR THE ASSESSMENT YEAR 1999-2000. 2. THE FIRST GROUND OF APPEAL BY THE ASSESSEE IS AG AINST THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE PROCEEDING INITIATE D BY AO U/S 148. 3. THE FACTS OF THE CASE ARE THAT THERE WAS A SEARC H AND SEIZURE OPERATION U/S 132 IN THE ASSESSEES CASE ON 15.1.99 . ORDER DATED 25.1.2001 U/S 158BC COVERING THE BLOCK PERIOD 1.4.8 8 TO 15.1.99 WAS PASSED BY THE AO. THE CIT(A) XXI HAS ALLOWED PART R ELIEF VIDE HIS ORDER DATED 28.2.2001. FOR THE REASONS RECORDED IN THE OR DER U/S 158BC THE ASSESSING OFFICER HAD COME TO THE CONCLUSION THAT T HE ASSESSEE HAS SUPPRESSED SALES TO THE EXTENT OF 15% OF THE DISCLO SED RECEIPTS. THE LD. CIT(A) OBSERVED THAT PREDECESSOR CIT(A) HAD HELD TH AT ONLY THE GROSS PROFIT CAN BE TAKEN AS PART OF THE INCOME AND NOT T HE ENTIRE UNDISCLOSED ITA NO. 845/M/10 2 SALES AND HE DIRECTED TO CONSIDER 15% OF THE BOOK S ALES AS UNACCOUNTED TURNOVER AND 48% BEING THE G.P. PERCENTAGE OF THE U NDISCLOSED SALES AS UNDISCLOSED INCOME OF THE ASSESSEE. THE DEPARTMENT DID NOT GO FOR SECOND APPEAL AGAINST THIS ISSUE. 4. HOWEVER THE ASSESSEE AGITATED THE ISSUE BEFORE T HE ITAT. THE ITAT IN THEIR APPEAL NOS. IT(SS)A.NO.231/MUM/2002 AND IT (SS) A.NO.245(MUM) 2002 DATED 19.8.2005 HELD THAT SINCE NO SEARCH WAS CARRIED OUT AT THE PREMISES OF HOTEL RAMAKRISHNA IT SELF THE INCOME THEREOF WAS NOT ASSESSABLE UNDER CHAPTER XIVB OF TH E IT ACT. WHILE DOING SO THE HONBLE ITAT HAVE MADE AN OBSERVATION AT PAR A 8 OF THE THEIR ORDER THAT ESTIMATION OF SUPPRESSED SALES AND PROFI T THEREON ON THE BASIS OF STATEMENT OF MANAGER AND SHRI CHANDRASEKHAR SETT Y RECORDED DURING THE COURSE OF SURVEY WILL FALL SQUARELY WITHIN THE DOMAIN OF REGULAR ASSESSMENT ORDER. 5. SIMILAR SITUATION AROSE IN RESPECT OF SUPPRESSI ON OF SALE IN ROYAL COUNTRY BAR. APPLYING THE SAME FINDING AND REASONS THE AO TAXED UNDISCLOSED INCOME OF ROYAL COUNTRY BAR AT 15% OF G ROSS SALES. THIS ADDITION WAS DELETED BY LD. PREDECESSOR CIT(A) ON T HE GROUND THAT THERE WAS NO SURVEY U/S 133A OR SEARCH U/S 132 AT THE BUS INESS PREMISES OF SAID CONCERN WHICH IS LOCATED TOTALLY AT DIFFERENT PART OF THE CITY NO QUESTION WAS PUT TO THE APPELLANT OR HIS FAMILY ME MBERS ABOUT THE SALE OF ROYAL COUNTRY BAR AT THE TIME OF SEARCH SURVEY. NO INCRIMINATING DOCUMENT WAS FOUND IN RESPECT OF M/S ROYAL COUNTRY BAR DURING THE COURSE OF SEARCH SURVEY. THE DEPARTMENT AGITATED TH IS ISSUE AND THE HINBLE ITAT DISMISSED THE APPEAL OF THE DEPARTMENT ON THIS ISSUE. 6. YET ANOTHER ACTION U/S 132 WAS CONDUCTED AGAINST THE APPELLANT ON 6.7.2000 THAT IS AFTER 1 YEARS OF FIRST ACTION ON 15.1.99 ORDER U/S 158BC DATED 19.8.02 WAS PASSED IN RESPECT OF SECOND SEARCH AND ITA NO. 845/M/10 3 PREDECESSOR CIT(A) DELETED THE ADDITIONS VIDE HIS O RDER NUMBER SINCE THE SAME WERE BASED ON THE EARLIER BLOCK ASSESSMENT OR DER DATED 25.1.2000. THE HONBLE ITAT SUSTAINED THE SAID DELETION BY CI T(A). 7. ALL THESE EVENTS LED THE AO TO FORM A BELIEF THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND CONCLUDED THAT TH E ESTIMATION OF SALES HAS TO BE MADE UNDER THE REASSESSMENT PROCEED INGS U/S 148. 8. ON APPEAL ON THIS ISSUE THE ASSESSEE FILED THE W RITTEN SUBMISSIONS DATED 6.12.2007 AND HAS REPRESENTED THE CASE IN PER SON THEREAFTER. IN RESPECT OF GROUND NO 1 IT WAS STATED THAT THE NOTI CE U/S 147/148 WAS ISSUED BY THE AO ON 14.11.2005 AND THE REASONS WAS PROVIDED BY THE AO AT THE TIME OF REASSESSMENT PROCEEDINGS ON 9.10.200 6 I.E. AFTER APPROXIMATELY 11 MONTHS FOR THE REASONS BEST KNOWN TO HIM. THE LD AR HAD OBJECTED TO REOPENING THE ASSESSMENT AND STATED THAT IF THERE IS NO MATERIAL IN SURVEY REPORT THEN THE COPY OF THE SAM E MAY BE PROVIDED. HE FURTHER STATED THAT THE ASSESSMENT YEAR 1999-2000 I S ALREADY COVERED IN THE FIRST BLOCK ORDER FOR THE PERIOD ENDING ON 15.1 .99 AND IT IS ALSO ASSESSED U/S 143(3) FOR THE PERIOD 16.1.99 TO 31.3. 99 AND ALSO IN BLOCK ASSESSMENT ORDER DATED 20.7.2000. IT WAS CLAIMED TH AT THE BLOCK ASSESSMENT PERIOD DOES NOT FALL UNDER THE PURVIEW O F REOPENING. 9. THE ASSESSEE FURTHER CLAIMED BEFORE THE LD. CIT( A) THAT THE OBJECTION WAS RAISED AGAINST THE REASONS. THE AO WA S DUTY BOUND TO FIRST PASS THE SPEAKING ORDER REJECTING THE OBJECTION RAI SED BY THE ASSESSEE TO THE NOTICE. IN THIS REGARD THE RELIANCE WAS PLACED ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF GKN. DRIVESHAFTS (IND IA) LTD VS ITO (2003) 259 ITR 19. IN PARTICULAR THE FOLLOWING ASSERTIONS WERE FURTHER MADE IN THIS REGARD. ITA NO. 845/M/10 4 1. AO HAS WRONGLY ISSUED NOTICE U/S 147/148 BEYOND FOU R YEARS. 2. AO HAS NOT BROUGHT OUT ANY NEW MATERIAL ON RECORD T O RE OPEN THE CASE. 3. AO HAS ALSO NOT POINTED OUT THE MATERIAL FACT WHICH THE ASSESSEE HAS NOT DISCLOSED. 4. AO IS MISLEADING THE FACTS IN ORDER 5. AO HAS NOT PASSED ANY SPEAKING ORDER REJECTING THE OBJECTIONS RAIDED BY THE ASSESSEE. 6. AO HAS NOT PASSED THE ORDER AS PER HIS OWN WILL IGN ORING THE CIT(A) ORDERITAT MUMBAI. 10. THE LD. CIT(A) REJECTED THE ASSESSEES CLAIM OB SERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE FACT THAT THE ESTIMATION OF SUPPRESSED SALES WAS FIRST MADE IN TH E BLOCK ASSESSMENT. HONBLE ITAT CLEARLY HELD THAT THE SUP PRESSED SALE CANNOT BE ESTIMATED U/S 158BC AND AS SUCH THE ASSES SMENT FALLS WITHIN THE REALM OF REGULAR ASSESSMENT . THESE REAS ONS WERE ENOUGH FOR THE AO TO FORM A BELIEF THAT THE PROFIT ON ESTIMATED SALES HAD ESCAPED ASSESSMENT UNDER THE CIRCUMSTANCES THE AO WAS DUTY BOUND TO ISSUE THE NOTICE U/S 148 OF THE ACT. IT I S SEEN THAT THE AO HAS ISSUED NOTICE U/S 148 WITHIN THE PRESCRIBED TI ME LIMIT AND AFTER RECORDING THE REASONS IN WRITING. THE COPY OF THE REASONS HAS ALSO BEEN GIVEN TO THE APPELLANT ON HIS DEMAND. THEREFOR E THE ALLEGATION IS MADE ON THIS GROUND IS NOT SUPPORTED BY THE FAC TS OF THE CASE. THE AO HAD ADDRESSED THE OBJECTIONS MADE BY THE APP ELLANT AGAINST THE ISSUE OF NOTICE U/S 148 IN THE ASSESSMENT ORDER ITSELF. THEREFORE THE APPELLANTS CLAIM THAT ASSESSMENT ORDER IS BAD IN LAW DUE TO LACK OF NATURAL JUSTICE IS INCORRECT UNDER THE GIVE N FACTS. GROUND NO.1 OF APPEAL US ACCORDINGLY DISMISSED. 11. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US. 12. WE HEARD BOTH THE PARTIES. WE CONCUR WITH THE C LAIM OF THE ASSESSEE. THE AO ONCE HE HAS REOPENED THE ASSESSME NT SHOULD FURNISH THE REASONS FOR REOPENING TO THE ASSESSEE IF THE A SSESSEE HAS RAISED ITA NO. 845/M/10 5 OBJECTIONS ON THE REOPENING HE HAS TO ANSWER THE S AME. FURTHER IN THIS CASE THE REASONS FOR REOPENING HAS BEEN FURNISHED B EYOND SIX YEARS FROM THE END OF THE ASSESSMENT YEAR. THE AO HAS TO ESTAB LISH WHETHER SUCH BELATED FURNISHING OF REASONS WOULD RENDER THE REOP ENING TIME BARRED. WE THEREFORE DEEM IT FIT TO SET ASIDE THE ASSESSMEN T TO THE FILES OF THE AO FOR REDOING THE SAME DE NOVO IN ACCORDANCE WITH LAW AND AFTER FOLLOWING THE PROCEDURE LAID DOWN BY THE APEX COURT IN THE CA SE OF GKN. DRIVESHAFTS (INDIA) LTD VS ITO (2003) 259 ITR 19. 13. AS WE HAVE SET ASIDE THE ISSUE REGARDING THE VE RY VALIDITY OF THE REASSESSMENT FOR RECONSIDERATION WE ARE NOT DECIDIN G ANY OTHER ISSUE WHICH WILL ALSO BE CONSIDERED BY THE AO AFRESH IN A CCORDANCE WITH LAW IF HE HOLDS THAT THE ASSESSMENT HAS BEEN PROPERLY REOP ENED. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 23 RD DAY OF FEBRUARY 2011 SD/- SD/- ( S.V. MEHROTRA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 23 RD FEBRUARY 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 845/M/10 6 DATE INITIALS 1 DRAFT DICTATED ON: 11 . 02 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 17 .02.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED B Y SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______