Income Tax Appellate Tribunal - Hyderabad
Kamma Srinivasa Rao, Khammam, ... vs Assessee on 6 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA.Nos.1227, 1228 & 1229/Hyd/2015
Assessment Years 2008-09, 2009-10 & 2011-12
Mr. Kamma Srinivasa Rao Dy. CIT,
Khammam. vs. Central Circle-2(1),
PAN AMLPK3874F Hyderabad.
(Appellant) (Respondent)
For Assessee : Mr. P. Muralimohan Rao
For Revenue : Smt. K. Mythil Rani
Date of Hearing : 21.01.2016
Date of Pronouncement : 06.04.2016
ORDER
PER SMT. P. MADHAVI DEVI, J.M.
These are assessee's appeals for the A.Ys. 2008-09, 2009-10 and 2010-11. In all the three appeals, the issues are common and therefore, these three appeals were heard together and are disposed of by this common and consolidated order.
2. Brief facts of the case are that there was a search and seizure operation under section 132 of the I.T. Act in the case of M/s. Madhucon Projects Ltd., and also the assessee herein on 04.02.2011. Accordingly, notice under section 153A of the Act was issued to the assessee on 13.01.2012. In response to the said notice, the 2 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam assessee filed his return of income on 09.02.2013 for the A.Y. 2008-09 declaring total income of Rs.12 lakhs, for the A.Y. 2009-10 declaring total income of Rs.17,46,424 and for the A.Y. 2011-12 declaring total income of Rs.9,00,000. The A.O. completed the assessments under section 143(3) read with section 153A of the Act for all the assessment years by accepting the income returned by the assessee. Thereafter, the Pr.CIT perused the assessment records by assuming jurisdiction under section 263 of the I.T. Act and found that assessee, for the relevant assessment years, had declared in his return of income certain sums as income from salary and fees for professional services, whereas the Form No.26AS shows receipt of higher amounts, such as for A.Y. 2008-09 assessee has declared Rs.12 lakhs whereas Form No.26AS shows total receipt of Rs.18 lakhs, for A.Y. 2009-10 assessee has declared a sum of Rs.18 lakhs as receipt from salaries and professional services, whereas Form No.26AS shows a total amount of Rs.35,99,756 and for A.Y. 2011-12, the assessee has declared total income of Rs.9 lakhs whereas Form No.26AS shows a further receipt of Rs.3,29,020. He, therefore, observed that the A.O. has failed to examine the difference of figures shown in the return and Form No.26AS so as to bring the differential amount to tax and to this extent the assessment orders passed by the A.O. for all the three assessment years under section 143(3) read with section 153A of the I.T. Act dated 27.03.2013 are erroneous in so far as they are prejudicial to the interests of the Revenue. He, therefore, 3 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam issued show cause notices to the assessee as to why the assessment orders should not be revised. The assessee filed his detailed written submission for each of the assessment years as under :
2.1. With regard to A.Y. 2008-09 it was submitted that the amount reflected in Form No.26AS is actually Rs.12,87,000 and not Rs.18 lakhs as stated by the A.O. 2.2. For the A.Y. 2009-10, it is stated that the actual amount reflected in Form No.26AS is Rs.26,99,756 and not Rs.35,99,756. It was further submitted that the amount of Rs.26,99,756 is also wrongly reflected in Form No.26AS instead of Rs.18 lakhs i.e., Rs.12 lakhs towards salary and Rs.6 lakhs towards professional services and while filing the return of income the assessee has taken the correct figure.
2.3. For A.Y. 2011-12 also, assessee submitted that the correct figure reflected in Form No.26AS is Rs.9 lakhs and not Rs.12,29,020.
3. The Ld. Pr. CIT, however, was not satisfied with assessee's contention and held that the A.O. while completing the assessment for the said assessment years has not examined these issues in detail so as to arrive at the conclusion that the assessed income is correct and true. He further observed that for the A.Ys. 2008-09 and 2009-10, though the assessee had stated in his reply that Form No.26AS is being enclosed, no such Form has been 4 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam enclosed or submitted. As regards the A.Y. 2011-12 he observed that as per the statement of income, assessee has shown salary from Madhurai Tuticorin Express Ways Ltd., whereas the Form No.26AS shows the deductor to be Madhucon Agra Jaipur Express Ways Ltd. and also O/o.
Asst. Director, Mines and Geology. Thus, he held that it is apparent that the A.O. has not examined the receipts of the assessee for all the three assessment years while completing the assessments and hence, the assessment orders are erroneous in so far as they are prejudicial to the interests of the Revenue. He, therefore, set aside the assessment orders and directed the A.O. to examine all the issues specified above in detail especially after proper examination of Form No.26AS for the relevant assessment years and to re-do the assessments afresh, after giving the assessee a fair opportunity of hearing. Against these orders of the Pr. CIT under section 263 of the Act, the assessee is in appeal before us.
4. The Ld. Counsel for the assessee submitted that during the assessment proceedings under section 143(3) read with section 153A of the Act, the A.O, vide questionnaire dated 31.01.2013, has required the assessee to file TDS certificates in respect of assessee's claim for the A.Ys. 2008-09, 2009-10 and 2010-11, in response to which, assessee has filed all the details vide his letter dated 15th February, 2013. Therefore, according to him, A.O. has considered all the details filed by the assessee before him and only thereafter, the assessment 5 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam order is passed after due application of mind and therefore, the assessment orders cannot be termed as erroneous and prejudicial to the interest of Revenue and hence, the revision orders under section 263 are not maintainable. Further, he submitted that the discrepancies pointed out by the Ld. Pr.CIT are on account of TCS amounts and not the amounts subjected to TDS and therefore, they were rightly not considered as assessee's income for the relevant assessment years. The Ld. Counsel for the assessee has filed before us a chart showing the quantum of TCS which has not been considered by the assessee as part of assessee's income. He has submitted that if this amount is not considered as the assessee's income, there is no discrepancy in assessee's return of income and Form No.26AS. He has submitted that assessee had made all these submissions before the Pr. CIT but the Pr. CIT has erroneously held the assessment orders to be erroneous and prejudicial to the interests of Revenue without any basis. He therefore prayed that the orders of the Pr. CIT under section 263 may be set aside.
4.1. Further he has also raised a ground of appeal that the assessment order under section 143(3) read with section 153A of the Act is not sustainable as there was no incriminating material found during the course of search and revision of such unsustainable order is also not sustainable. Another ground raised by the assessee is that the assessment order under section 143(3) was 6 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam passed with the approval of JCIT under section 153D of the Act and therefore, unless and until such an order has been set aside, it cannot be subjected to revisionary proceedings under section 263 of the Act. In support of the above contentions, the Ld. Counsel for the assessee has placed reliance upon the following decisions :-
(i) CIT vs. Dr. Ashok Kumar, Prop. S.S. Nursing Home - ITA.No.192 of 2000 dated
(ii) Mehtab Alam, Kanpur vs. ACIT, C.C.2, Kanpur in ITA.Nos.288 to 294/LKW/2014 and ITA.Nos.295 to 301/LKW/2014 dated 18.11.2014 of ITAT Lucknow Bench.
(iii) Mr. Ch. Krishna Murthy, Hyderabad vs. ACIT, C.C.3, Hyderabad ITA.No.766/Hyd/2012 dated 13.02.2015.
(iv) ITO vs. DG Housing Projects Ltd., (2012) 20 taxmann.com 587 (Del.) (HC)
(v) CIT (Central)-II, Mumbai vs. Development Credit Bank Ltd., (2011) 196 Taxman 329 (Bom.) (HC).
(vi) Mr.VR. Venkatachalam, Chennai vs. ACIT,
C.C.1(1), Chennai ITA.Nos.2634 to
2639/Mds/2014 dated 17.07.2015.
(vii) DCIT, Circle-3, Hyderabad vs. AMR India Ltd., ITA.Nos.1829 to 1831/Hyd/2012 dated 23.10.2013.
(viii) DCIT, C.C.7, Hyderabad vs. M/s. Midwest Gold Ltd., Hyderabad ITA.Nos.1062 to 1064/H/14 and 1288 to 1293/Hyd/2014 dated 10.12.2014 7 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam
(ix) Spectra Shares & Scrips (P) Ltd., vs. CIT-III, Hyderabad (2013) 36 taxmann.com 348 (A.P.)
(x) CIT vs. Sunbeam Auto Ltd., (2010) 189 Taxman 436 (Del.)
(xi) M/s. Shanti Transport, Kothagudem vs. ITO, Ward-1, Kothagudem ITA.No.995/Hyd/2014 dated 10.10.2014.
(xii) M/s. Trinity Infra Ventures Ltd., New Delhi vs. DCIT, C.C.2(1), Hyderabad ITA.Nos.584 to 589/H/2015 dated 04.12.2015
5. The Ld. D.R., on the other hand, supported the orders of the Ld. CIT under section 263 of the Act.
6. Having regard to the rival contentions and the material on record, we find that admittedly, there was no material relating to the assessee, found and seized during the course of search in the case of the assessee. It is due to this reason that the assessments under section 143(3) read with section 153A, were completed by accepting the returned income of the assessee and no additions were made during the assessment proceedings under section 153A of the I.T. Act. However, the assessee did not challenge the validity of assessment orders passed under section 143(3) read with section 153A and it cannot now challenge the same in this appeal against the order under section 263 of the Act. Therefore, assessee's grounds against the validity of the assessment proceedings under section 143(3) read with section 153A of the Act are dismissed as not maintainable.
8ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam 6.1. Coming to the question as to whether A.O. has applied his mind before completing the assessment under section 143(3) read with section 153A of the Act to the issue, it is noticed from page-1 of the paper book filed by the assessee which is a copy of the questionnaire issued by the A.O. during assessment proceedings under section 143(3) read with section 153A of the Act, that the A.O. had required the assessee to file the TDS certificates for the A.Ys. 2008-09, 2009-10 and 2010-11 and that the assessee has furnished the required details vide its submissions dated 15.02.2013. Thus, it is evident that the A.O. had called for the details and applied his mind to such details before computing the taxable income of the assessee. However, there is no mention of the consideration of the issue in the assessment order due to which CIT has come to the conclusion that the A.O. has not considered the same. Further, according to the CIT, the Form 26AS also was not filed along with the return of income which fact also is not disputed by the assessee. The reliance of the Ld. Counsel for the assessee is on the judgment of the Hon'ble jurisdictional High Court in the case of Spectra Shares & Scrips P. Ltd., 36 taxmann.com 348 (cited supra), that as long as the A.O. has considered the material, it cannot be said that there is lack of enquiry only because the A.O. has not given detailed reasons for accepting the same and merely because the CIT entertained a different opinion in the matter, he cannot invoke his powers under section 263 of the Act. We find that there is no quarrel with this proposition. But when 9 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam Form No.26AS for the relevant assessment years were never called for and not filed along with the return of income, it cannot be presumed that the A.O. has applied his mind to the material not available before him. The Hon'ble Delhi High Court in the case of Sunbeam Auto Ltd., (cited supra), had held that where proper enquiry has been made by the A.O, such an order cannot be revised under section 263. But due to the reasons mentioned above that where the relevant material was not before the A.O, the above decision cannot be applied to the case before us. Therefore, we are satisfied that the assessment order is erroneous.
6.2. Further, the Ld. Counsel for the assessee, has argued that the assessment order under section 143(3) read with section 153A is passed only after taking the approval of the Addl. CIT under section 153D of the Act and therefore, without setting aside the directions of the Addl. CIT under section 153D of the Act, the order under section 143 read with section 153C of the Act, cannot be revised under section 263 of the Act as held by the Hon'ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in ITA.No.192 of 2000. He also relied upon the decision of the Coordinate Bench of this Tribunal in the case of Mr. Ch. Krishna Murthy vs. Asst. CIT in ITA.No.766/H/2012 dated 13.02.2015 which has extensively considered this issue at length and has held as under :
10ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam "23. At this stage, one has to remember, the settled position of law is, for invoking jurisdiction u/s 263 of the Act, two conditions have to be satisfied cumulatively. Firstly, order must be erroneous and secondly it must be prejudicial to the interests of revenue. In absence of any one of the two conditions, the power conferred u/s 263 cannot be exercised. On a perusal of the assessment order as a whole, specifically, para 17, it is very much evident that Assessing Officer was conscious about the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Furthermore, from para 2.3 of impugned order of learned CIT, it becomes clear that Assessing Officer while forwarding the draft assessment order for approval, after considering appraisal report has proposed to treat the conversion of outstanding liability of Barium Division as advance to assessee in the books of VCPL as deemed dividend u/s 2(22)(e). However, while according his approval in terms with section 153D, Addl. CIT, who is range head directed Assessing Officer not to make addition u/s 2(22)(e). The reasoning of the Addl.
CIT is, advance created in the name of assessee was only through book entry and no payment was made and secondly, there was no accumulated profits of the company, which is a prerequisite for invoking provisions of section 2(22)(e). Therefore, from the aforesaid discussion, it becomes clear that not only Assessing Officer has examined the issue, but, he has also passed the order in consequence to the directions of his higher authority in terms with section 153D of the Act. ITAT, Pune Bench in case of Akil Gulamali Somji Vs. ITO in ITA Nos. 455 11 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam to 458/PN/2010 dt. 30/03/2012 while holding the conditions imposed u/s 153D to be of mandatory nature, referred to clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income-tax on behalf of CBDT, which reads as under:
"9. Approval for assessment : An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-1 2-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself."
Thus, from the aforesaid facts it becomes clear, the Assessing Officer while exercising power u/s 153A has to pass the assessment order as per the approval granted by addl. CIT u/s 153D. In these circumstances, Assessing Officer having examined the issue and applied his mind to the facts and having passed the order in terms with the directions of the Range Head as per the statutory provisions contained u/s 153D, the assessment order cannot be held to be erroneous. In fact ld. CIT has blamed the range head for the directions given by him while approving the draf t assessment order. Therefore, if at all, there is any error, it is in the 12 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised.
24. Furthermore, it is clear from the discussions made by ld. CIT, the reasons on which range head i.e. Addl. CIT disapproved treating the advance as deemed dividend u/s 2(22)(e) is because it is converted as advance in the name of assessee merely through book entries and actually no money was advanced to assessee and secondly the company i.e. VCPL was not having accumulated profits at the time of such payment. Though, learned CIT has accepted the fact that in reality no money was advanced by the company to assessee, but, according to him, by virtue of such a transaction assessee and his family members have become owner of shares worth Rs. 4 crores in the newly formed company. According to him, in these circumstances, journal entries passed in the books of account by converting the outstanding liability of the newly formed company as advance given to assessee will attract provisions of section 2(22)(e). In this context, he has relied upon a decision of the ITAT Chennai Bench and another decision of Hon'ble Madras High Court in case of T. Sundaram Chettiar and Another Vs. CIT, 49 ITR 287. From the aforesaid discussions of learned CIT, it is apparent and obvious that the issue whether the advance can be treated as deemed dividend u/s 2(22)(e) at the hands of assessee is a debatable issue on which more than one view are possible. Therefore, when the view taken by Addl. CIT and Assessing Officer can be considered as one of the possible views, assessment order cannot be treated as erroneous, even though there may be some prejudice caused to revenue. One more aspect, which needs to be taken note of is learned CIT while revising assessment order and directing Assessing Officer to treat the amount of Rs. 4,27,36,648 as deemed dividend at the hands of assessee has totally failed to examine whether M/s VCPL at the time of alleged payment was having accumulated profits or not. When learned CIT is aware of the fact that Addl. CIT while disapproving the addition proposed to be made u/s 2(22)(e) has 13 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam observed that M/s VCPL did not have accumulated profits, which is one of the conditions for invoking section 2(22)(e), it was incumbent upon him to examine that aspect before directing for addition of Rs. 4,27,36,648 u/s 2(22)(e). ITAT Lucknow Bench in case of Mehtab Alam Vs. ACIT, ITA No. 288 to 294/LKW/14 dated 18/11/2014 while setting aside the order passed u/s 263 of the Act, amongst other decisions also took note of a decision of the Hon'ble Allabahad High Court in case of CIT Vs. Dr. Ashok Kumar wherein it was held that when Assessing Officer was fully alive about the facts of the case and the order passed by him was approved by Addl. CIT, then, ld. CIT cannot be justified in interfering in the approval given by Addl. CIT for framing assessment order and there will be no case for setting aside the assessment order. Therefore, considered in the aforesaid perspective when it is a fact on record that both the addl. CIT while granting approval u/s 153D as well as Assessing Officer in course of assessment proceeding have examined the issue of deemed dividend u/s 2(22)(e) of the Act at the hands of assessee in relation to the advance shown in his name in the books of M/s VCPL and the view taken by Assessing Officer as well as addl. CIT can be considered as one of the possible views, assessment order cannot be treated as erroneous. More so, when assessment order has been passed in terms with section 153D of the Act and ld. CIT has not revised the directions of addl. CIT. In these circumstances, as one of the conditions of section 263 is not satisfied, the impugned order passed u/s 263 is not valid. Accordingly, we set aside the impugned order of learned CIT and restored the assessment order passed."
6.3. The above decision was followed by the Coordinate Bench of this Tribunal in the case of Trinity Infra Ventures Ltd., (cited supra) on which the assessee is placing reliance upon. However, we find that there is a distinction between the facts of the case in Mr. Ch. Krishna Murthy's case and the case before us. In the case 14 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam of Mr. Ch. Krishna Murthy, we notice that the A.O, therein, had proposed the addition under section 2(22)(e), but when the A.O. sought the approval under section 153D of the Act, the Addl. CIT directed the A.O. not to make the addition. The CIT under section 263 had sought to revise the assessment order for not making the addition under section 2(22)(e). It was in these circumstances that the Tribunal held that the assessment order passed consequent to approval under section 153D cannot be revised. Therefore, the decision is not applicable to the facts of the case before us. In the case of Trinity Ventures (cited supra), the Tribunal has set aside the revision order on the ground that the A.O. had applied his mind to the issue during the assessment proceedings and also by following the decision in the case of Mr. Ch. Krishna Murthy. Both of us, i.e., the A.M. as well as the J.M. are the signatories to the said order. However, we find that we have not brought out the similar or distinguishing facts of that case with the case of Mr. Ch. Krishna Murthy before applying the same to the said case. Whereas, the facts of the case before us are clearly distinguishable and therefore, is not applicable to the facts of the case before us.
6.4. Further, we also find from the details filed by the assessee before us that the discrepancies in the TDS returns of the assessee and Form No.26AS is on account of TCS amounts and not the amounts subjected to TDS made from the receipts of the assessee. Tax collected at 15 ITA.Nos.1227, 1228 & 1229/Hyd/2015 Mr. Kamma Srinivasa Rao, Khammam source cannot be the income of the assessee. However, nothing is on record to show that these facts were filed by the assessee before the CIT and were considered by him before revising the assessment order. The CIT has only considered that the A.O. has not made necessary enquiry to hold the assessment order to be erroneous but has not given any reason to hold that the assessment order is also prejudicial to the interests of the Revenue. To revise an assessment order, both the conditions are to be satisfied. Since, the CIT has not brought out that the assessment order is also prejudicial to the interest of Revenue. Since, we have already observed that the assessment order is erroneous, we deem it fit and proper to set aside the order of the CIT and remit it to his file to consider and examine the contentions of the assessee as to whether the assessment order is also prejudicial to the interests of Revenue.
7. In the result, all the appeals of the assessee are treated as partly allowed for statistical purposes.
Order pronounced in the open Court on 06.04.2016.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI)
ACOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated 06th April, 2016
VBP/-
16
ITA.Nos.1227, 1228 & 1229/Hyd/2015
Mr. Kamma Srinivasa Rao, Khammam
Copy to :
1. Mr. Kamma Srinivasa Rao, Khammam
C/o. Mr. P. Murali & Co., Chartered Accountants, 6- 3-655/2/3, 1st Floor, Somajiguda, Hyderabad - 82.
2. The DCIT, Central Circle-2(1), Hyderabad.
3. Pr. CIT (Central), 3rd Floor, Psnett Bhavan, Tilak Road, Ramkote, Hyderabad.
4. The Addl. CIT, Central Range-2, Hyderabad.
5. D.R. ITAT 'B' Bench, Hyderabad.
6. Guard File