Income Tax Appellate Tribunal - Hyderabad
Asst. Commissioner Of Wealth Tax, ... vs B.Ramalinga Raju, Hyderabad on 7 October, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
(THROUGH VIDEO CONFERENCE)
BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
WTA No. A.Y. Appellant Respondent
1/Hyd/2020 2003-04
Asst.Commissioner B.Ramalinga Raju,
2/Hyd/2020 2004-05 of Wealth Tax, Hyderabad
Central Circle-3(1), [PAN: ACVPB8311J]
3/Hyd/2020 2005-06 Hyderabad
4/Hyd/2020 2006-07
Deputy
Commissioner of
20/Hyd/2014 2003-04 Wealth Tax,
Central Circle-8,
Hyderabad
Commissioner of
2003-04 Wealth Tax-
31/Hyd/2013
B.Ramalinga Raju, (Central),
Hyderabad Hyderabad
[PAN: ACVPB8311J] Asst.Commissioner
2007-08 of Wealth Tax,
8/Hyd/2011
Central Circle-1,
Hyderabad
Deputy
Commissioner of
21/Hyd/2014 2008-09
Wealth Tax,
Central Circle-8,
Hyderabad
For Revenue : Shri Bala Krishna, CIT-DR
For Assessee : Shri K.C.Devdas, AR
Date of Hearing : 09-09-2021
Date of Pronouncement : 07-10-2021
ORDER
PER S.S.GODARA, J.M. :
The instant batch of eight appeals pertains to a single assessee Shri B.Ramalinga Raju. His four appeals WTA Nos.31/Hyd/2013 & 20/Hyd/2014 (AY.2003-04) with WTA :- 2 -:
Shri B.Ramalinga Raju (Group cases) Nos.08/Hyd/2011 & 21/Hyd/2014 (AYs.2007-08 and 2008-
09) arise against the CWT(A)-VII & CWT(A)-Central, Hyderabad's orders dt.28-08-2014, 27-03-2013 & 15-02-2011;
passed in case Nos.0843 & 0835 / DCIT, CC-8 / CIT(A)-VII / Hyd / 2014-15, CIT(C) / 25 / 46 / 12-13, 552 / Tr / DCIT CC- 8 / CIT(A)-VII / 10-11, involving proceedings u/s.16(3) r.w.s.17, Section 25 and u/s.16(3) (in latter twin cases) of the Wealth Tax Act, 1957 [in short, 'the Act']; respectively.
2. The Revenue's appeals WTA Nos.1 to 4/Hyd/2020 for AYs.2003-04 to 2006-07 are directed against the CWT(A)-11's order dt.19-08-2019 in first and CWT(A)-12's common order dt.23-09-2019, passed in case Nos.310/2017-18, 10058, 10118 & 10040/2017-18, involving proceedings u/s.16(3) r.w.s.25 of the Act; respectively.
Heard both the parties. Case files perused.
3. We notice at the outset that the Revenue's appeals for the AYs.2004-05, 2005-06 & 2006-07 suffer from identical delay of 04 days as attributable to the reasons mentioned in the petition/affidavit which have not been objected from assessee side. This delay stands condoned therefore.
4. We notice at the outset with the able assistance of both the parties that the sole identical clinching issue before us is that of correctness of the learned lower authorities' action assessing the taxpayer herein on account of his alleged American deposit receipts "ADRs" in the name of a company M/s.Satyam Computers Services Ltd (SCSL). Revenue's endeavour all along has been to assessee him under the provisions of the Act after alleging that he had made a :- 3 -:
Shri B.Ramalinga Raju (Group cases) confession in the year 2009 of having swindled the foregoing company's deposit funds to this effect. The Assessing Officer in WTA No.20/Hyd/2014 (AY.2003-04) as well as the WTA No.08/Hyd/2011 and 21/Hyd/2014 assessed him qua the said ADRs to the tune of Rs.45,87,20,000/- each; respectively.
The CWT(Central) on the other hand has invoked Section 25 revision order in WTA No.31/Hyd/2013 (AY.2003-04) forming subject matter of assessee's appeal therein. We therefore deem it appropriate at this stage to refer to the CWT(A)'s findings in lead AY.2003-04's appeal WTA No.20/Hyd/2014 reading as under:
"2.0 Facts of the case:
2.1 In this case, it is seen that the original assessment was actually completed on 08.02.2006 uls 16(3) of the Act making an addition of Rs.8,91,802/-. This addition was not appealed against earlier. 2.2 Subsequently, the assessment was reopened on 26.03.2010 and the assessment uls 16(3) rws 17 was completed on 02.11.2010 assessing the net wealth at Rs.46,27,00,500/- by making an addition of Rs 45.87 crores as excess cash in hand. It is seen that the issue has its origin in AY 2002-03 and is linked to the transfer of an amount of Rs.45.87 crores from certain bank accounts in M/s CITI BANK (8.8million $) and M/s HSBC Bank (0.96$ million) belonging, presumably to M/s Satyam Computers Services Ltd (M/S SCSL). Subsequently, no traces of this transferred amount was found and it was "learnt" that the transfers took place on the instructions of the appellant, who was the chairperson of the group and a very key person and had a blanket approval of Board of Directors of M/s SCSL to operate any account anywhere in the world. It was therefore held that the amount was siphoned out and became his personal asset and was accordingly taxed as cash in hand.
3.0 Against this assessment, the present appeal was filed on 12/02/2010 by the appellant with the following grounds of appeal.
1. The order of the Wealth Tax Officer for the assessment year 2003- 04 is wrong in law and on facts and therefore objected to
2. In the facts and circumstances of the case, the appellant :- 4 -:
Shri B.Ramalinga Raju (Group cases)
a) Objects to the addition of wealth in an amount of Rs.45,87,20,000/as the appellant's wealth as the appellant's wealth.
b) Objects to the addition of wealth on presumption which is not justifiable.
3. The wealth tax officer having never put the matter at issue to the appellant in the assessment proceedings and for that matter at any given point of time for being explained is not justified abruptly to come to the conclusion and thereby presuming that the appellant had such wealth and thus adding such amount as wealth of the appellant.
4. The wealth tax officer ought to have appreciated that the ADR issue of the corporate entity can in no event par take the nature of personal wealth and assets of the chairman i. e. the appellant as opined and much less held by the appellant as cash so as to invoke the provisions of section 2(ea)(vi) of the wealth tax act.
5. The appellant craves leave to add / amend and / or alter the grounds as the occasion may require.
6. For these and other grounds of appeal that shall be urged at the time of hearing of appeal, the appellant prays that the addition to the wealth returned may duly be deleted.
4.0 APPEAL PROCEEDINGS Sri M V Purushottama Rao, CA and the AR of the appellant appeared and the case was discussed with reference to the written submissions, statement of facts. -
5.0 While this appeal was pending, the assessment order passed by the AO on 02.11.2010 was set aside by the Commissioner of Wealth (Central) and a fresh assessment u/s 16(3) rws 25 of the Act was passed by him on 30.03.2014.
In this assessment made on 30/03/2014, the net wealth was reworked to Rs.1565.40 crores with a substantive addition of Rs.1122.10 crores and protective assessment of Rs.397.03 crores. The assessee has also filed an appeal against this assessment order dated 30.03.2014, vide appeal no.0048/2014-15, dated 21/04/2014.
5.1 It is however seen that in this order, the AO had started with net wealth of Rs 46,42,00,455/- as per order dated 2/11/2010 and added an amount of Rs. 1519,13,83,750/- and raised a demand of Rs.15,96,39,976/- on the assessed wealth of Rs.1565,40,84,205/-. He however reduced the demand of Rs.46,87,862/- already raised on assessed wealth of Rs.46,42,00,455/- vide order dated 2/11/2010 and which is the cause of present appeal under :- 5 -:
Shri B.Ramalinga Raju (Group cases) discussion. In other words, the AO has two live demands - (1) An amount of Rs 46,87,862/- on account of the assessment of wealth at Rs.46.42 crores assessed vide order dated 2/11/2010 and (2) A demand of Rs.15,49,52,114/- vide order u/s 16(3) r.w.s 25 of the W.T Act dated 30/03/2014.
5.2 Thus, the first assessment order and the appeal against it in the present proceedings need adjudication as this addition was taken as the starting point in the second order passed u/s 16(3) r.w.s. 25 of the W.T Act and the demand was kept alive.
5.3 This issue of "cash in hand" at Rs.45.87 crores actually originated in AY 2002-03 and the same was carried on in subsequent years and the issue already stands adjudicated by the erstwhile CIT(A)-VII, Hyderabad for the AY 2002-03, as well as AY 2007-08. Respectfully following the earlier orders, the addition made on account of amount of Rs.45.87 cores, is confirmed."
The taxpayer's position is no different in Revenue's four appeals WTA Nos.1 to 4/Hyd/2020, wherein the CWT(A) has granted relief to the assessee as under:
"7. During the present appellate proceedings, the assessee has submitted that the addition on account of ADS proceeds at Rs.371, 03,83,750/- was made on the basis that there was an allegation of diversion of funds in this regard. It was submitted that the same addition was made in assessment year 2002-03 and the ITAT has deleted the same as there is no accretion to the wealth and the addition was made on only presumptions. The addition in this year was made on protective basis as the revenue has not accepted the order of the ITAT. It was submitted that the allegations in theinvestigntiol1 report in the case of M/s SCSL is about non accounting of salary expenditure which could not be reconciled but not that the amount has been diverted or fraudulently utilised by the assessee. There was no allegation by the CBI of about diversion of funds or misappropriation of funds. Accordingly, it was contended that the addition made by the AO is not correct. 7.1 Similarly, with reference to funds in 'suspense account' of Rs.1122.10 crores, it was submitted that the suspense account relate to the Corporate entity of M/s SCSL. Since the restatement of accounts were undertaken in the hands of corporate entity, the entries pertain to the corporate body are no way connected to the assessee. The "Suspense Account" still appearing in in the books of Corporate entity of SCSL, since there is no accretion to the wealth of , the appellant, the addition per se is not in accordance with the provisions of section 2(ea) (VI) of Wealth Tax Act.
:- 6 -:
Shri B.Ramalinga Raju (Group cases) 7.2 The learned counsel submitted that the observations of the ITAT for assessment year 2002-03 are that the assets of the assessee not increased and in no way, the amount can be added as an asset as per the definition of "asset" appeared in section 2 (ea)(vi) of Wealth-
tax Act. In the alternative, it was contended that the amount was considered as diversion of funds and it becom.es liability towards corporate entity since both are notional amounts and the same cannot be considered as an 'asset' in the hands-of the assessee.
8. I have considered the rival contentions and perused the order of the AO. For assessment year 2002-03, the AO has originally made addition of Rs.47 crores which was part of ADS proceeds. The same was subject matter of appeal before the ITAT and the Hon'ble ITAT had set aside the order on the issue of reopening the assessment. The Hon'ble ITAT also held that this addition of Rs.47 crores was made on presumption and there was no accretion to wealth and liable to be deleted. Similar facts exist in this case also. Both the additions, one made on substantive basis and another on protective basis are based on the investigation/enquiry reports in the case of Corporate entity of M/s SCSL. The AO initially made addition of Rs.47Cr for AY-2002-03 and on the same grounds addition of Rs.397 Cr is made in the order subsequent to the revisionary proceedings. The addition of Rs.47Cr made by the AO for A.Y-2002-03 has been deleted by Hon'ble ITAT as pointed out above. The only ground on which the protective basis is that the decision of Hon'ble ITAT is not accepted by the department. As the facts are similar/same and no other material is brought on record by the AO, Moreover, as rightly pointed out by the learned counsel even though the addition was considered for diversion of funds from the Corporate entity, the same also becomes a liability in the hands of the assessee as the said amount can be recovered by the Corporate entity. Therefore, the said amount would be liable to be allowed as liability, where the addition so made on presumption without any accretion to wealth, following the decision/order of Hon'ble ITAT, is deleted. With reference to addition of Rs,1122Cr it is seen that whatever inflation of revenue and consequent availability of funds shown, which were transferred to the suspense account pertain to the Corporate entity and they were no way connected to individual assessment. There is no accretion to wealth of the assessee which the AO could have considered for bringing the same to wealth-tax, I am of the view that the addition cannot be made in the hands of the assessee at all. In view of the above, I have no hesitation in deleting the addition of Rs.1122Cr made by the AO. Accordingly, the grounds are considered as allowed".
:- 7 -:
Shri B.Ramalinga Raju (Group cases)
5. Both the learned lower representatives reiterated their respective stands against and in support of the correctness of the impugned wealth tax assessment in the assessee's hands.
It emerges in this factual backdrop that the instant issue of correctness of the impugned assessment/re-assessment of these ADRs had arisen before this tribunal's co-ordinate bench in assessee's appeal WTA No.09/Hyd/2011 for AY.2002-03 as well wherein the said bench decided the same in taxpayer's favour on 08-01-2014 as follows:
"9.We find that recording of reasons before the issue of notice under section 17 has absolutely no nexus with the assessment made. The Assessing Officer had no tangible material to come to. the conclusion that there was escapement of income from the original assessment. The assessment made under sec. 16(3) has been wrongly reopened under sec. 17 beyond period of 4 years, as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself. The reopening was on wrong foundation of reasoning of the financial implication between the assessee-company and M/s.Satyam computer Services Limited, which was not established in the reassessment to justify the reopening.
10. Thus, there being no nexus or live-link with the reasons recorded and the 'formation of belief' to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment, the CWT(A) erred in confirming the order of the Assessing Officer. We, therefore, hold that the reopening of the jurisdiction under section 17 is bad in law and is to be Quashed.
11. Therefore, we set aside the order of the CWT(A) and allow assessee's grounds on the issue of reopening raised before us in Ground Nos.1 & 2. Since, we have quashed the reopening of assessment itself, the other grounds on merits of the additions do not require any consideration as they become academic in nature. Accordingly, we allow the appeal WTA. No. 02/Hyd/2012 of the assessee.
:- 8 -:
Shri B.Ramalinga Raju (Group cases)
12. In other cases of the group, the facts are similar and AO simply denied the exemption claimed and in two cases made small addition on revaluation. In the case of Sri B. Ramalinga Raju, the AO made an addition of Rs. 47.57 crores on the reason that siphoned off amount from the company is to be considered as accretion to the wealth within the meaning of section 2(ea)(vi) of the Wealth Tax Act. This is only a presumption and no evidence in this regard. Therefore, the addition per se cannot be sustained in the absence of any accretion to wealth. As the facts and grounds in WTA Nos. 03, 04, 05, 06/Hyd/2012 and WTA No. 09/Hyd/2011 are materially identical to that of the case decided by us in case of B. Rama Raju in ITA. No. 02/Hyd/12 (supra), following the discussion and conclusions drawn therein, we set aside the orders of the CWT(A) in the said appeals and quash the ground raised on the issue of reopening of assessment in these appeals. Since the issue of reopening of assessment itself is quashed, additions made on such assessment become academic in nature in the said appeals. Therefore, all these appeals of Assessee are allowed.
In the result, all appeals under consideration are allowed".
6. Learned CIT-DR vehemently emphasized at this stage that the said co-ordinate bench had not commented on merits of the issue(s). He fails to rebut the clinching fact that the learned co-ordinate bench had made it clear that the Revenue's allegation against this assessee having siphoned off the amount of the company does not attract the alleged fiction of accretion of wealth within the meaning of Section 2(ea)(vi) of the Act. And that there is no material before us which could indicate that the said earlier bench findings have been reversed by the appropriate judicial forum. We thus keep in mind this clinching fact that the Revenue's uniform stand has remained in all these assessment years whilst assessing the assessee for alleged syphoning ADRs amount from the books of the company; already stands reversed and therefore, we adopt judicial consistency to delete all the impugned demands :- 9 -:
Shri B.Ramalinga Raju (Group cases) in his appeals WTA Nos.20/Hyd/2014, 31/Hyd/2013, 08/Hyd/2011 and 21/Hyd/2014.
The Revenue pleadings challenging correctness of the CWT(A)'s identical action deleting the corresponding demands in its appeals WTA Nos.1 to 4/Hyd/2020 stand rejected as a necessary corollary in absence of any distinction on facts or law.
All other corresponding grounds in the instant eight appeals are rendered infructuous therefore.
7. To sum-up, assessee's appeals WTA Nos.20/Hyd/2014, 31/Hyd/2013, 08/Hyd/2011 and 21/Hyd/2014 are allowed and Revenue's appeals WTA Nos.1 to 4/Hyd/2020 are dismissed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 7 th October, 2021 Sd/- Sd/-
(LAXMI PRASAD SAHU) (S.S.GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad,
Dated: 07-10-2021
TNMM
:- 10 -:
Shri B.Ramalinga Raju
(Group cases)
Copy to :
1.Shri B.Ramalinga Raju, Plot No.80, Road No.9, Jubilee Hills, Hyderabad.
2.Shri B.Ramalinga Raju, Plot No.1242, Road No.62, Jubilee Hills, Hyderabad.
3.The Addl.CWT, Circle-3, Hyderabad.
4.The Dy.Commissioner of Wealth Tax, Central Circle-8, Hyderabad.
5.The Asst.Commissioner of Wealth Tax, Central Circle-1, Hyderabad.
6.The Asst.Commissioner of Wealth Tax, Central Circle-3(1), Hyderabad.
7.The CWT(Appeals)-VII, Hyderabad.
8.The CWT(Appeals)-12, Hyderabad.
9.The Pr.CWT-Central, Hyderabad.
10.D.R. ITAT, Hyderabad.
11.Guard File.