K.Ch. Subba Rao v. The ACIT, Central Circle-3, Hyderabad
[Citation -2016-LL-0916-36]

Citation 2016-LL-0916-36
Appellant Name K.Ch. Subba Rao
Respondent Name The ACIT, Central Circle-3, Hyderabad
Court ITAT-Hyderabad
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags prejudicial to the interests of revenue • purchase and sale of land • unexplained investment • source of investment • additional ground • unexplained cash • seized material • revision order
Bot Summary: The assessee has objected to the proceedings stating that assessments have been completed under section 153A after due scrutiny of the entire seized material, not only of the assessee but also other group concerns in which assessee is interested and since the assessments have been completed with the approval of the Addl. Learned Counsel for the assessee referring to the orders and paper book placed on record submitted that Assessing Officer has completed the consequential assessments and the details are as under : A.Y. Seized material Addition Remarks reference in made in 263 order 143(3) r.w.s. 263 2004-05 Page 4 to 7 of No addition made as A/KCSR/RES/02 amount relates to year 1998-99. Herein, we would like to submit that the AO is not required to narrate the entire assessment proceedings in its assessment order and merely because the AO has not mentioned about the verification of the above material in the assessment order, the provisions of section 263 are not attracted. We would further like to submit that the CIT has erred in not pointing out any specific error in the order of assessing officer while passing the revision order u/s. In the case in hand, the CIT has erred in not pointing out any error in order of AO and has set aside the matter to the file of AO to point out the error in the assessment order. As far as the contention that Assessing Officer has examined all the seized material and accepted the investments in HUF, the same can be borne by the fact that Assessing Officer in A.Y. 2004-05 has examined the documents as noted in para.4.1 of the assessment order and assessed long term capital gains on disposal of assessee s flat at Rajeshwari Towers, Punjagutta, Hyderabad, which was not reflected in the regular return of income. We hereby set aside the orders of CIT in respect of impugned assessment years and restore the original assessment orders of the Assessing Officer.


IN INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.Nos.885, 886, 887 & 888/Hyd/2013 Assessment Years 2004-05, 2005-06, 2006-07 & 2008-09 Mr. K.Ch. Subba Rao, ACIT, Central Circle-3, Hyderabad. vs. Hyderabad. PAN AHLPK3647B (Appellant) (Respondent) For Assessee : Mr. P. Muralimohan Rao For Revenue : Smt. Pallavi Agarwal Date of Hearing : 16.08.2016 Date of Pronouncement : 16.09.2016 ORDER PER B. RAMAKOTAIAH, A.M. These four appeals are by assessee against separate but similar orders of CIT, Central, Hyderabad dated 25.03.2015 setting aside assessments completed in respective assessment years under section 153A read with section 143(3) of I.T. Act, 1961 which are all completed vide orders dated 28.12.2010. 2. Briefly stated, assessee herein is covered under section 132 of I.T. Act on 29.12.2008. Consequent to that, notices under section 153A of I.T. Act were issued on 03.08.2008 for impugned assessment years and after due scrutiny and with approval of Addl. CIT, Central Range-2, assessments have been completed in impugned assessment years. On noticing that certain seized material has 2 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. not been examined by Assessing Officer Ld. CIT initiated proceedings under section 263 of I.T. Act, 1961. said seized material are as under : FOR A.Y. 2004-05 : (i) Page No. 4 to 7 of Annexure A/KCSR/RES/02 is agreement of sale dated 13.11.2003 for purchase of property by you for consideration of Rs.25,00,000/-, out of which amount of Rs.12,50,000/- was already paid. (ii) Page No. 77 to 79 of Annexure A/KCSR/RES/03 is agreement of sale dated 13.11.2003 for purchase of property by you for consideration of Rs.25,00,000/-. FOR A.Y. 2005-06 : (i) Page No. 83 to 88 of Annexure A/KCSR/RES/03 is agreement of sale dated 08.07.2004 for purchase of property for consideration of Rs.7,50,000/-, out of which amount of Rs.3,75,000/- was paid in cash. FOR A.Y. 2006-07 : (i) Page No. 66 to 75 of Annexure A/KCSR/RES/02 is agreement of sale dated 16.03.2006 for purchase of property for consideration of Rs.5,50,000/-. entire amount was paid in cash. (ii) Page No.56 to 65 of Annexure A/KCSR/RES/02 is agreement of sale dated 16.03.2006 for purchase of property for consideration of Rs.5,50,000/-. entire amount was paid in cash. (iii) Page No.68 to 76 of Annexure A/KCSR/RES/03 is sale deed dated 20.06.2005 entered by assessee for purchase of property for consideration of Rs.45,000/-. 3 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. FOR A.Y. 2008-09 : (i) Page No.101 to 107 of Annexure A/KCSR/RES/02 is agreement of sale dated 18.06.2007 for purchase of property by you for consideration of Rs.4,50,000/-. entire amount was paid in cash. (ii) Page No.83 to 88 of Annexure A/KCSR/RES/02 is agreement of sale dated 18.06.2007 for purchase of property by you for consideration of Rs.6,00,000/-. entire amount was paid in cash. (iii) Page No.93 to 96 of Annexure A/KCSR/RES/03 is development agreement entered by M/s. Deepti Homes, wherein Sri K. Srikanth, your son, was partner for development of property at Madhapur. (iv) Page No.89 to 92 of Annexure A/KCSR/RES/03 is development agreement entered by M/s. Deepti Homes, wherein Sri K. Srikanth, your son, was partner for development of property at Madhapur. (v) Page No.19 to 35 of Annexure A/KCSR/RES/03 is development agreement entered by M/s. Deepti Homes, wherein Sri K. Srikanth, your son, was partner for development of property at Madhapur. 2.1. assessee has objected to proceedings stating that assessments have been completed under section 153A after due scrutiny of entire seized material, not only of assessee but also other group concerns in which assessee is interested and since assessments have been completed with approval of Addl. CIT, there is no error in order of Assessing Officer. Further, it was submitted that impugned material pertains to assessee HUF and these investments made by HUF does not pertain to assessee in individual capacity. Assessee also further objected to that in assessment year 2004-05, so-called seized material does not pertain to 4 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. year under consideration. Ld. CIT however, did not agree with assessee. His reasoning which is common in all assessment years are as under : 5. I have gone through submission. First of all submission has been received from assessee in capacity of HUF where as documents no where states that agreement was entered by HUF. Rather it clearly shows that assessee as individual had entered into agreements. Further case of HUF was not centralised with AO for any verification whatsoever. In any case fact remains that issue has not at all been dealt by Assessing Officer in assessment order though seized materials were available before AO at time of assessment. Further submission has been received from HUF whereas show-cause notice was issued to Sri K.Ch. Subba Rao in capacity of individual. Hence, reply given by assessee can not be accepted. 6. It has been judicially held that assessment made without necessary enquiry can be held to be erroneous and can be revised u/s.263 of LT. Act 1961. Reference in this regard can be made to decision of Special Bench, ITAT, Chennai reported in 313 ITR (AT) 182, Chennai SB wherein it was observed that it is not necessary for Commissioner of Income-tax in revision to make further enquiries before canceling Assessment Order of A.O. Commissioner of Income-tax can regard order as erroneous on ground that in circumstances of case, A.O. should have made further enquiries before accepting statements made by assessee in his return. It is incumbent on A.O. to investigate facts stated in return when circumstances would make such enquiry prudent. word erroneous in Sec.263 of Income-tax Act, 1961 includes cases where there has been failure to make necessary enquiries. Considering above, order passed by Assessing Officer u/s.143(3) r.w.s.153A for A.Y.2004-05 on 28.12.2010 is prejudicial to interest of Revenue. 2.2. By considering issue as above, Ld. CIT set aside impugned assessment orders with direction to re-do 5 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. assessment after conducting necessary verification/enquiries relating to transaction of assessee in purchase and sale of land as appearing in seized books of account and documents and after verifying source of investment in such landed properties. He, accordingly, set aside assessments. 3. Assessee has raised similar grounds in all appeals and since common issue is involved in all appeals, we have heard appeals together. Assessee has also raised additional ground stating that proceedings under section 143(3) read with section 153A itself are invalid. Therefore, consequently, proceedings would also become invalid. Learned Counsel for assessee referring to orders and paper book placed on record submitted that Assessing Officer has completed consequential assessments and details are as under : A.Y. Seized material Addition Remarks reference in made in 263 order 143(3) r.w.s. 263 2004-05 Page 4 to 7 of No addition made as A/KCSR/RES/02 amount relates to year 1998-99. Page 77 to 79 of No addition made as A/KCSR/RES/03 amount relates to year 1998-99 2005-06 Page 83 to 88 of Rs.3,75,000 = A/KCSR/RES/03 Total Rs.3,75,000 2006-07 Page 66 to 75 of Rs.1,10,000 1/5th share added in A/KCSR/RES/02 hands of assessee. Page 56 to 65 of No addition made in 143(3) A/KCSR/RES/02 rws 263 order. Page 68 to 76 of Rs.45,000 Unexplained investment A/KCSR/RES/03 Total Rs.1,55,000 6 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. 2008-09 Page 101-107 of Rs.1,12,500 1/4th share added in A/KCSR/RES/02 hands of assessee. Page 83-88 of Rs.1,50,000 1/4th share added in A/KCSR/RES/02 hands of assessee. Page 93-96 of = A/KCSR/RES/03 Page 89-92 of = A/KCSR/RES/03 Page 19-35 of = A/KCSR/RES/03 Total Rs.2,62,500 3.1. It was his objection that Assessing Officer himself has given finding that material referred to by CIT in A.Y. 2004-05 does not pertain to year under consideration and accordingly, no addition was made. Therefore, proceedings initiated per se are bad in law. Coming to A.Y. 2005-06 even though Assessing Officer has made amount of Rs.3,75,000 as addition there is no such seized material which can determine this amount. With reference to assessment years 2006-07 and 2008-09, it was submitted that only few additions have made in each year which in fact, pertain to HUF. It was submitted that HUF has equally good income in respect of assessment years and these amounts were pertaining to HUF which also has agricultural income. details of income in individual and HUF status are submitted as under : Income Statement for Individual and HUF S.No. A.Y. HUF Individual Total Income Income income 1 2004-05 11,75,848 6,67,177 18,43,025 2. 2005-06 12,06,394 11,92,060 23,98,454 3. 2006-07 19,94,904 22,75,905 42,70,809 4. 2007-08 3,41,368 29,57,420 32,98,788 5. 2008-09 29,60,395 44,55,013 74,15,408 Total 76,78,909 1,15,47,575 1,92,26,484 7 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. 3.2. It was submission that in all three assessment years total of additions made was only at Rs.7,92,500 that too pertaining to HUF status in individual assessments, when assessee has declared almost Rs.2 crores of income in intervening years. Apart from factual position, Learned Counsel for assessee also submitted objections as under : 3. We would further like to submit that entire assessments were completed after careful verification of all material found during course and fact remains that Assessing Officer had made certain addition to income of appellant based on material seized for A.Y. 2008-09. Assessing Officer had arrived at conclusion that no addition is warranted in respect of seized material referred by learned CIT(Central) and therefore no additions were made while completing assessment u/s.143(3) rws 153A of Act. 3.3. Herein, we would like to submit that AO is not required to narrate entire assessment proceedings in its assessment order and merely because AO has not mentioned about verification of above material in assessment order, provisions of section 263 are not attracted. In this regard, reliance is placed on decision of jurisdictional High Court in case of M/s Spectra Shares and Scrips P Ltd Vs CIT 36 taxmann.com 348 (Andhra Pradesh). 4. We would also like to submit that assessments completed u/s.143(3) rws 15A of Act are passed after getting statutory approval of Addl. CIT u/s 153D of Income Tax Act. Fact remains that CIT (Central) while passing order u/s 263 of Act have not revised approval as granted by Addl. CIT given u] s 153D of Act. It is established position of law that assessment made u] s 153A of Act cannot be revised without revising directions of Addl. CIT u/s 153D of Act. In this regard, reliance is placed on order of Hon'ble Hyderabad ITAT in case of M/s. Trinity Infra Ventures Limited vs DCIT in ITA No. 584-589/H/2015. 8 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. 5. We would further like to submit that CIT (Central) has erred in not pointing out any specific error in order of assessing officer while passing revision order u/s. 263 of Act. It is submitted that as per provisions of section 263 of Act, twin conditions has to be satisfied i.e., order has to be prejudicial to interest of revenue and order has to be erroneous. In case in hand, CIT (Central) has erred in not pointing out any error in order of AO and has set aside matter to file of AO to point out error in assessment order. It is also fact that no addition was made by AO for Y 2004-05 in order passed u/s 143(3) rws 263 of Act. 5.1. action of CIT(Central) is not justified as held by Delhi High Court in case of ITO Vs DG Housing Projects Limited 20 taxmann.com 587 wherein it held that in cases of wrong opinion or finding on merits, CIT has to come to conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required. CIT cannot set aside order to file of AO to point out mistake. 4. Ld. D.R. however submitted that Assessing Officer has not examined seized material. Therefore, Ld. CIT is correct in exercising jurisdiction under section 263 of I.T. Act. He supported orders of Ld. CIT. 5. We have examined rival contentions and perused orders on record. As far as contention that Assessing Officer has examined all seized material and accepted investments in HUF, same can be borne by fact that Assessing Officer in A.Y. 2004-05 has examined documents as noted in para.4.1 of assessment order and assessed long term capital gains on disposal of assessee s flat at Rajeshwari Towers, Punjagutta, Hyderabad, which was not reflected in regular return of income. 9 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. 5.1. In A.Y. 2005-06 and 2006-07, Assessing Officer did ask for information and entire information and other documents were examined, as noted in order and income returned was accepted. In A.Y. 2008-09 there is specific mention of examination of various seized material from para 4.1 onwards and income from coal business at Rs.40 lakhs and unexplained cash credits at Rs.104,73,034 were assessed in that year. orders do indicate that Assessing Officer has examined seized material and has completed assessment after due verification. Therefore, Ld. CIT s contention that Assessing Officer has not examined certain seized material is without any basis. 5.2. Coming to impugned seized material considered by Ld. CIT in proceedings under section 263 finding by Assessing Officer in consequential proceedings were also examined. As far as A.Y. 2004-05 is concerned, there is no addition to original assessed income, as said material considered by Ld.CIT does not pertain to impugned A.Y. and this fact was noted by Assessing Officer in consequential order. Therefore, initiation of proceedings for A.Y. 2004-05 itself is per se not correct, as there is no error in order of Assessing Officer. Further as seen from consequential orders placed on record along with explanation of assessee during proceedings before Ld. CIT, it was contention that all material do pertain to HUF status. Surprisingly, Ld. Assessing Officer without examining contentions, brought amounts to tax on reason that there is no mention of HUF status in agreement of sale. We are unable to understand how agreement of sale will contain 10 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. status of person. These are to be examined with reference to source of funds and returns of assessee, which were already filed and assessed. For example, addition made by Ld. Assessing Officer in A.Y. 2005-06 is as under : 3. Pages 83 to 88 of Annexure A/KCSR/RES/03 is agreement of sale deed executed on 08-07-2004 by Sri B. Rajasekhar Rao in favour of assessee Sri K. Ch. Subba Rao and Smt Kolla Mamata W/o. K. Vijay Kumar for Plot bearing No.492, in Sy. No.78 admeasuring 600 Sq Yards for consideration of Rs.7,50,000/- out of which 50% of share relates to assessee. In this regard, assessee has contended that he has purchased this property in his HUF capacity. Though assessee has contended that he has purchased said property in his HUF capacity, no such mention is made in agreement of sale. Considering fact that there is no mention of HUF in agreement of sale, contention of assessee that property was purchased in HUF capacity is not acceptable. Hence, investment made towards purchase of said property of Rs.3,75,000/- i.e., 50% of investment stands unexplained in hands of assessee. Accordingly, same is treated as unexplained. 5.3. This indicates that these contentions were not examined at all by Assessing Officer, even though assessments were specifically set aside by CIT to examine issues. Be that as it may, we are of opinion that proceedings initiated by CIT are not correct. First of all, as already stated above (1) Seized material were taken into consideration at time of original assessment. (2) CIT without examining assessee s contention that it belongs to HUF and without identifying whether transaction pertain to individual or HUF, could not have come to conclusion that order of Assessing Officer is erroneous on that fact. 11 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. (3) These orders were also approved by Addl. CIT. Therefore, it cannot be stated that Ld. Assessing Officer has not examined documents. (4) Moreover, assessee has declared substantial incomes in both individual and HUF status and there are long term capital gains/business income offered in HUF status as well. Without identifying exact nature of transaction, whether it is offered in HUF or individual status and without any finding on these transactions, amounts cannot be considered in hands of individual- simply because agreement of sale does not mention HUF status. 5.4. For these reasons also, we are unable to uphold proceedings initiated by Ld. CIT. Assessee has relied on various case law in his arguments. Considering principles therein, we have no hesitation in holding that proceedings initiated by CIT are bad in law. There is no error in impugned orders of Assessing Officer, which are neither erroneous nor prejudicial to interests of Revenue, twin conditions which should be satisfied before initiating proceedings u/s 263 of IT Act. We hereby set aside orders of CIT in respect of impugned assessment years and restore original assessment orders of Assessing Officer. 6. In result, all appeals of assessee are allowed. Order pronounced in open Court on 16.09.2016. Sd/- Sd/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 16 th September, 2016 VBP/- 12 ITA.No.885 to 888/Hyd/2013 Mr. K.Ch. Subba Rao, Hyderabad. Copy to 1. Mr. K.Ch. Subba Rao, Hyderabad. C/o. Mr. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad 82. 2. ACIT, Central Circle-3, Hyderabad. 3. Commissioner of Income Tax (Central), 7th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad. 4. Addl. CIT, C.R-2, Hyderabad. 5. D.R. ITAT Bench, Hyderabad. 6. Guard File K.Ch. Subba Rao v. ACIT, Central Circle-3, Hyderabad
Report Error