IN INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER I.T.A. No.1359/Mds/2014 Assessment year : 2010-2011 Shri. V.C. Raam Sukesh, Vs. Income Tax Officer, G1, Ground floor, Ward I(2), Shree Apartment, Pondicherry. No.31, Romain Rolland Street, Puducherry 605 001. [PAN AHKPR 1504R] (Appellant) (Respondent) Appellant by : Shri. Philip George, Advocate Respondent by : Smt. Parminder, IRS, Date of Hearing : 22-06-2016 /Date of Pronouncement : 15-09-2016 ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: appeal filed by assessee is directed against order of Commissioner of Income-tax, Puducherry dated 12.03.2014 for assessment year 2010-2011 passed u/s.143(3) and 250 of Income Tax Act, 1961 (herein after referred to as Act ). :- 2 -: ITA No.1359/Mds/2014 2. Brief facts of case are that assessee is individual and filed Return of income on 28.02.2011 admitting total income of 4,74,175/- consisting house property income, income from capital gains and income from other sources and return of income was processed u/s.143(1) of Act. Subsequently, under scrutiny norms case was selected and notice u/s.143(2) of Act was issued. notice u/s.142(1) with questionnaire of Act was issued on 09.10.2012. In compliance to notices, ld. Authorised Representative of assessee appeared from time to time, produced Books of account and other details. ld. Assessing Officer having satisfied with submissions completed assessment accepting Returned income and passed assessment order u/s.143(3) of Act dated 14.12.2012. Subsequent to assessment proceedings, ld. Commissioner of Income Tax, Puducherry issued show cause notice under powers conferred u/s.263 of Act and issues were explained in notice whether assessee has made investments in financial year 2009-2010 in mutual funds aggregating to 36,29,435/- and were not reflected in Balance Sheet and short term capital gains are not offered for taxation 2.1 On second issue, assessee has discontinued offering rental income from property and was settled as per family settlement agreement. ld. CIT also called for explanation on non :- 3 -: ITA No.1359/Mds/2014 inclusion of Bank accounts and Bank transactions involving investments in mutual funds, and also Balance sheet does not reflect cash balance and drawings to meet routine day to day family expenses and disputed actual profit disclosed as per income and expenditure account and financial position as per Balance Sheet. In compliance to show cause notice issued by ld. Commissioner of Income Tax on 29.05.2013, ld. Authorised Representative filed written submissions explaining that ld. CIT has formed opinion were ld. Assessing Officer has concluded assessment without proper enquiry on various disputed points referred in notice. ld. Authorised Representative also submitted letters before ld. Assessing Officer on 29.10.2012, 05.11.2012 and 26.11.2012. In compliance questionnaire to notice u/s.142(1) of Act ld. Assessing Officer has considered submissions filed and supporting documentary evidence. ld. Authorised Representative further explained that ld. Assessing Officer has passed order u/s.143(3) of Act after having satisfied with submissions of details in response to notice u/s.142(1) of Act were details were explained. On points raised by Commissioner of Income Tax on investments in mutual funds it was explained that investments are made from HUF funds and admitted in HUF return and assessment of HUF was completed u/s.143(3) of Act and same was filed before Assessing Officer with details of investments and Bank :- 4 -: ITA No.1359/Mds/2014 account transaction of mutual funds; and dispute has arised due to furnishing of inaccurate PAN and therefore information was wrongly reflected in form 26AS. On disputed issue of property income assessee has discontinued offering rental income from property at Vivekandanagar, Puducherry were it was explained that property was settled in favour of Smt. P. Chandralekha and assessee has filed detailed note explaining that property was inherited by assessee and his brother from deceased mother Smt. C. Madhavi on succession. Subsequently, property was settled in favour of Smt. P. Chandralekha wife of brother through family settlement deed dated 30.06.2009. Hence, assessee considered rental income for three months. Whereas Smt. P. Chandralekha is separately assessed to tax and disclosed information and offering rental income in her Income Tax Return. On next disputed issue, assessee is not carrying on business in individual capacity and income is derived as partner in partnership firm Vinbros and Co were assessee has representing in HUF capacity. assessee s mother was assessed to Income Tax and Wealth Tax and died on 13.09.2008. and she died inestate leaving her two sons and therefore assessee has one half share of properties in HUF and other half in individual capacity. Further, these facts were brought to knowledge of ld. Assessing Officer and explained with supporting documentary evidence and filed details of inherited properties. On issue of sources of :- 5 -: ITA No.1359/Mds/2014 funds for meeting family obligations, it was explained that assessee is partner in Vinbros and Co which is assessed to tax separately alongwith his brother and assessee has withdrawals from partnership firm and were duly accounted and debited to capital account of assessee and withdrawals were utilized for family maintenance expenses along with other savings. ld. Authorised Representative argued and contested jurisdiction of Revision that ld. Assessing Officer has made proper enquires and applied his mind on relevant material papers before passing assessment order and relied on judicial decisions. ld. Assessing Officer was satisfied with submissions though not reflected in assessment order and issue of notice of revision u/sec. 263 of Act is not accordance with law. ld. Commissioner of Income Tax verified documents and considered submissions of assessee and assessment record and is of opinion that assessee has not supported case with documentary evidence of bank statement issued by bank instead supported on typed statements. Further, no explanations were provided in respect of assets owned by assessee s mother before demise and documentary evidence of property inherited was not sufficient and also investments in mutual funds in individual and HUF capacity is required to be verified as there is inadequacy of details furnished by assessee and further assessee failed to explain :- 6 -: ITA No.1359/Mds/2014 transactions of individual or HUF and transactions with family members. ld. CIT observed that on inheritance and partition of properties ld. Assessing Officer has failed to investigate properly and extensively in scrutiny assessment and that order passed u/s.143(3) dated 14.12.2012 is prejudicial to interest of Revenue and set aside with direction to do proper investigation and examination and passed order u/s.263 of Act dated 12.03.2014. Aggrieved by order, assessee filed appeal before Tribunal. 3. Before us, ld. Authorised Representative argued ground of challenging jurisdiction that ld. CIT does not have jurisdiction to invoke provisions u/s.263 of Act and action of ld. Assessing Officer is not against interest of Revenue. ld. Commissioner of Income Tax presumed that order passed u/s.143(3) of Act dated 14.12.2012 is erroneous and prejudicial to interest of Revenue. ld. Commissioner of Income Tax has not appreciated that assessee has produced entire material in assessment proceedings in compliance to notice u/s.142(1) of Act and various letters are filed. information submitted in assessment proceedings are vital and ld. Assessing Officer has applied his mind and took cognizance of issues and passed order. Further, ld. Commissioner of Income Tax action in directing ld. Assessing Officer to make enquiries is not in :- 7 -: ITA No.1359/Mds/2014 accordance with law has exceeded jurisdiction for further investigation irrespective of facts on record that all substantial materials are filed before ld. Assessing Officer and prayed for quashing impugned order and supported his arguments with judicial decisions. Further, it was submitted before ld. Assessing Officer that investments are disclosed in capacity of HUF and was duly explained and is assessed to tax. discontinuance of rental income at Vivekananda Nagar property, Puducherry was explained that property was acquired on inheritance on demise of mother and settled in favour of sister in law and rental income from said property was offered only for three months. Whereas Sister in law Smt. P. Chandralekha assessed to Income Tax and Wealth Tax is filing Return of income and wealth and disclosing rental income from said property and was duly explained in assessment proceedings. ld. Authorised Representative explained on dispute of cash in hand and drawings that assessee is partner with Vinbros & Co and said partnership is assessed to Income Tax with higher income. funds are withdrawn from assessee s capital account and was reflected in Books of account of firm. assessee is having sufficient drawings in partnership and utilized for household and meeting family obligations and supported with legal decisions and filed details of letters in paper book and prayed for quashing order of ld. Commissioner of Income Tax. :- 8 -: ITA No.1359/Mds/2014 4. Contra, ld. Departmental Representative relied on order of Commissioner of Income Tax and vehemently opposed to grounds and prayed for dismissing appeal. 5. We heard rival submissions, perused material on record and judicial decisions cited. ld. Authorised Representative emphasized on jurisdiction of provisions of Sec.263 of Act and directions of ld. Commissioner of Income Tax to do investigation and examination. ld. Commissioner of Income Tax shall set aside assessment order passed u/s.143(3) of Act only were ld.AO has not applied his mind nor conducted any enquiry before passing order which is prejudicial to interest of Revenue. We perused order of ld. Commissioner of Income Tax were explanations are incorporated on disputed issue and ld. Authorised Representative explained that information was already produced before Assessing Officer in assessment proceedings and ld. Assessing Officer having satisfied with details has passed assessment order with due application of mind. ld. Authorised Representative drew our attention to reply filed in appellate proceedings at page 2 of paper book with letters dated 29.10.2012, 05.11.2012 and 26.11.2012 and reflected at page nos.6 to 10 alongwith copy of Income Tax Returns of assessee s HUF at page 11 and form No. 26AS and reconciliation of TDS claim in :- 9 -: ITA No.1359/Mds/2014 capacity of individual and HUF. information submitted is exhaustive and assessee has filed said information before ld. Assessing Officer which consist of voluminous transaction of mutual funds, bank accounts, properties and bank deposits. Further at page 49 of paper book, notice u/s.142(1) of Act was issued alognwith questionnaire annexure by ld. Assessing Officer calling for certain details and documents. assessee has complied directions and submitted information, ld. Assessing Officer has summarily accepted details and passed assessment order. ld. Authorised Representative supported his arguments with judicial decisions and vehemently emphasized that ld. Commissioner of Income Tax does not have jurisdiction to set aside and direct enquiry. We also perused assessment order at page no.53 of paper book which is cryptic and ld. Assessing Officer has not made any reference of these voluminous submissions nor recorded any satisfaction note that disputed issues raised by ld. CIT were already dealt in assessment order proceedings with due application of mind. No doubt ld. Authorised Representative appeared on various dates of hearing but conclusion was made by ld. Assessing Officer in accepting Returned Income without reference to voluminous transactions of mutual fund, rental income, details of HUF and cash withdrawals. We are not in position to understand whether these facts are bonafidely accepted by ld. Assessing Officer. :- 10 -: ITA No.1359/Mds/2014 ld. Departmental Representative submitted that ld. Assessing Officer has passed sterotype order and assessee has filed details which shall be forming part of assessment record and has to be examined. ld. Departmental Representative could not produce any evidence to prove that information filed was brought on record. On other hand, ld. Authorised Representative supported that information was filed before ld. Assessing Officer and dates were recorded in assessment order in respect of letters filed. ld. Commissioner of Income Tax cannot give direction for conducting another investigation. We considering apparent facts, materials on record, judicial decisions and practical aspects, assessee is having various sources of income and has categorically maintained and submitted information before ld. Assessing Officer on mutual funds investments, properties and Bank accounts as seen from letters filed in paper book. dispute arises prima facie on assessment order which does not give complete picture being non speaking order. order passed by ld. Assessing Officer has to be consistent with rules of natural justice. ld. Commissioner of Income Tax has directed investigation and examination on investments in mutual funds and disclosure of rental income and cash on hand. We are of opinion that such direction shall not stop assessee from submitting clarifications and should not be put in worst position. ld. Commissioner of :- 11 -: ITA No.1359/Mds/2014 Income Tax issued specific directions to ld. Assessing Officer but set aside of order u/sec. 143(3) of act with specific directions to conduct further investigation and examination cannot be accepted and in interest of justice order has to be consistent with rules of nature justice. We set aside order of Commissioner of Income Tax and remit file to ld. Assessing Officer to decide afresh and pass speaking order on merits and assessee should be provided with adequate opportunity of hearing before passing order. 6. In result, appeal of assessee is allowed for statistical purpose. Order pronounced on Thursday, 15th day of September, 2016, at Chennai. Sd/- Sd/- (CHANDRA POOJARI) (G. PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai Dated:15.09.2016 KV Copy to: 1. Appellant 3. CIT(A) 5. DR 2. Respondent 4. CIT 6. GF V.C. Raam Sukesh v. Income-tax Officer, Ward I(2), Pondicherry