Income Tax Appellate Tribunal - Bangalore
Shri K Mehfuz Ali Khan , Bellary vs Deputy Commissioner Of Income Tax ... on 24 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORESHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER
Appeal No. Appellant AssessmentYears Respondent
Shri Madhu Kumar Varma,
S/o. Subba Raju, Near
Peddaraju Camp,
YanignurHobli
ITA No.
Ramachandrapuram, 2010-11
478/Bang/2017
Camp Kempli, Hospet
Taluk,
Bellary Dist.
PAN: AGEPV3217E
Shri K. Mehfuz Ali Khan,
2nd Floor, Door No. 231,
Ward No. 22,6th Cross,
ITA No.
M.V. Nagar, Kappagal 2010-11
494/Bang/2017 The Deputy
Road,
Commissioner of
Bellary - 583 104.
Income Tax,
PAN: ANNPM3470G
Central Circle - 1
Shri K. Mehfuz Ali Khan,
(3),
2nd Floor, Door No. 231,
ITA Nos. 919, Bangalore.
Ward No. 22,6th Cross,
920, 921, 922 2009-10, 2010-11
M.V. Nagar, Kappagal
& & 2011-12
Road,
923/Bang/2017
Bellary - 583 104.
PAN: ANNPM3470G
Shri K. Mehfuz Ali Khan,
Partner - M/s. Devi
Enterprises,
ITA No. No. 1050/H, Railway
2010-11
954/Bang/2017 Grand Twinlane
Timmancherla Guntakal,
A.P. - 515 801.
PAN: AAQFM5466J
Assessee by : Shri Mayank Jain, Advocate
Revenue by : Shri K.V. Arvind, Sd. Counsel
Date of hearing : 11.09.2018
Date of Pronouncement : 24.09.2018
Interim Order
Per Shri A.K. Garodia, Accountant Member
Out of this bunch of eight appeals, one appeal was filed in February 2017, one in March, 2017 and remaining six appeals were filed in April, 2017. On the request letter dated 08.12.2017 filed by the learned AR of the assessee, all ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 2 of 8 these appeals were clubbed in 'A' Bench and were fixed for hearing on 27.12.2017. On this date, 'A' bench did not function and hence, the hearing was adjourned to 22.03.2018. On this date i.e. on 22.03.2018 also, 'A' bench did not function and hence, the hearing was again adjourned to 26.06.2018. On 26.06.2018, these appeals were partly heard. Mr. C. H. Sundar Rao, CIT DR was present on behalf of the revenue and Mr. Madhu Jain, Advocate and AR of the assessee appeared on behalf of the assessee. Hearing was adjourned to 16.07.2018. On 16.07.2018, Mr. Dilip, Junior to Shri K. V. Arvind, Standing Counsel for Revenue appeared and sought adjournment. For the assessee, Ms Hema S., Advocate appeared. On the request of Mr. Dilip, Junior to Shri K. V. Arvind, Standing Counsel for Revenue, hearing was adjourned to 26.07.2018. On 26.07.2018 also, on the request of Mr. Dilip, Junior to Shri K. V. Arvind, Standing Counsel for Revenue, hearing was adjourned to 27.08.2018. On 27.08.2018 also, on the request of Shri K. V. Arvind, Standing Counsel for Revenue that he was not well, hearing was adjourned to 11.09.2018.
2. In the mean time, on 23.07.2018, Senior Standing Counsel for Revenue, filed three applications with the Registry of ITAT seeking deferment of hearing of appeal in the case of Madhu Kumar Varma vs. DCIT in ITA No. 478/Bang/2017, in the case of Shri K Mehfuz Ali Khan in ITA No. 494/Bang/2017 and in the case of Shri K Mehfuz Ali Khan, Partner M/s Devi Enterprises in ITA No. 954/Bang/2017 but on 26.07.2018 and on 27.08.2018 when Mr. Dilip and Shri K. V. Arvind, Standing Counsel for Revenue appeared for seeking adjournment, no mention was made about these applications dated 23.07.2018 seeking deferment of hearing. On 11.09.2018, Shri K. V. Arvind, Standing Counsel for Revenue appeared and submitted a copy of three judgments of Hon'ble Karnataka High Court all dated 08.08.2018 in Writ Petition Nos. 31928 - 31929 of 2018, 31931 - 31932 of 2018 and 31935 - 31936 of 2018 and pointed out that in these judgments, Hon'ble Karnataka High Court has directed the tribunal to first decide these three applications of revenue regarding deferment of hearing in ITA No. 478/Bang/2017,494/Bang/2017 & 954/Bang/2017and till such applications are decided on merit, the tribunal shall not proceed with the hearing of ITA No. 478/Bang/2017, 494/Bang/2017 and 954/Bang/2017.
ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 3 of 8
3. At this juncture, the bench pointed out as to why no mention was made about these applications dated 23.07.2018 seeking deferment of hearing of three appeals by Mr. Dilip and Shri K. V. Arvind, Standing Counsel for Revenue appeared on two occasions i.e. on 26.07.2018 and 27.08.2018. The bench also observed that when some application is filed in the registry, the same can be acted upon only when it reaches to the file and the attention of the bench is drawn to such application but in the present case, although Mr. Dilip, Junior to Shri K. V. Arvind and Mr. K.V. Arvind, Standing Counsel for Revenue himself appeared on two dates i.e. on 26.07.2018 and 27.08.2018 but no mention was made about these applications. The bench observed that had mention been made of these applications on earlier occasions, the same would have been decided much earlier and the precious time of Hon'ble High Court could have been saved. The action of the revenue or the standing counsel was uncalled for as it an abuse of theprocess of law. We are unable to understand as to how the revenue has approached the Hon'ble High Court for deferment of hearing of the appeals without raising the issue before the Tribunal during the course of hearing. We strongly deprecate the action of the revenue and the standing counsel and we hope that in future, the revenue will not adopt such malpractice in order to obtain some favourable order from the Hon'ble High Court. However the bench asked both sides to argue these three applications of the revenue regarding deferment of hearing in ITA Nos. 478/Bang/2017, 494/Bang/2017 and 954/Bang/2017.
4. Learned Senior Counsel Shri K. V. Arvind, Standing Counsel for Revenue made detailed arguments in this regard. Finally, he submitted that all the impugned orders of CIT (A) in ITA No. 478/Bang/2017, 494/Bang/2017 and 954/Bang/2017 are ex parte qua the assessee as well as revenue and in these impugned orders of CIT(A), there is no decision on merit and the appeals of the assessee were dismissed by him on this basis alone that there is unreasonable delay in filing of these appeals before CIT (A) and the delay has not been properly explained. He submitted that under these facts, only this aspect can be decided by the tribunal as to whether the delay in filing these appeals before Learned CIT (A) can be condoned or not and if it is held that the delay should ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 4 of 8 be condoned then the matter has to go back to CIT (A) for a decision on merit and the tribunal cannot decide the issue on merit in the absence of any decision on merit by CIT (A). He filed written submissions dated 18.09.2018 on 19.09.2018 along with copy of seven judicial pronouncements. The written submissions filed by him are reproduced herein below:-
"1. Search under section 132 of the Act was conducted in the residential premises of the assessee and incriminating material were found and seized. The assessee is close associate of Sri Gali Janardhan Reddy. Assessment was completed under section 153C of the Act dated 31/3/2013. Assessment was made protectively in the hands of the assessee and substantial in the hands of Shri Gali Janardhan Reddy.
2. The assessee being aggrieved against the order of protective assessment preferred appeal before the Commissioner of Income Tax - Appeals. The Appellate Commissioner vide order dated 12/1/2017 rejected the appeal as satisfactory explanation was not offered for condonation of delay. The Appellate Commissioner without going into the merits, has only dismissed the appeal on the ground of delay.
3. The assessee being aggrieved against the order of the Appellate Commissioner has preferred the above appeal before this Hon'ble Court with further delay.
4. It is submitted that the substantive assessment made in the hands of Shri Gali Janardhan Reddy was subject matter of appeal before this Hon'ble Tribunal in ITA 1459/Bang/2014. This Hon'ble Tribunal by order dated 17/10/2016 setaside the assessment made under section 153C of the Act by holding that the same is not in compliance of the provisions of section 153C of the Act.
5. It is submitted that the assessment of Sri Gali Janardhan Reddy for the Assessment Year 2010-11 was reopened by issue of notice under section 147 of the Act and assessment was concluded by order dated 29/12/2017. The protective addition is in the case of the assessee and substantial additions in the case of Sri Gali Janardhan Reddy. Shri. Gali Janardhan Reddy being aggrieved against the order of assessment dated 29/12/2017 has preferred appeal before the Commissioner of Income Tax - Appeals and the same is pending consideration.
6. It is submitted that the protective assessment is made as per the law laid down by the Supreme Court in the case of Lalji Haridas 43 ITR 387, wherein it is held that when there was a doubt as to which ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 5 of 8 person among two was liable to be assessed, parallel proceedings might be started against both. The issue was again considered by Kerala High Court in the case of K P Varkey 304 ITR 127, wherein it is held that the protective assessment cannot be setaside merely on the ground that substantive assessment made has been setaside. In the facts before the Kerala High Court, the substantive assessment was set aside and remanded to the Assessing Officer and in the circumstances it was held that the tribunal has to wait till the Assessing Officer completes the substantive assessment as directed by the division bench or in alternatively to dispose of the appeals filed by the Department against the orders passed by the first appellate authority on merits. However, the second option provided by the Kerala High Court to dispose of the appeal by the tribunal on merits would not arise in the present case as the appeal before this Hon'ble tribunal is only against the rejection of condonation of delay. Hence, as held by the Kerala High Court, the appeal in the protective assessment has to await the outcome of the substantive assessment pending before the Appellate Commissioner.
7. It is submitted that ITAT Indore bench in the case of Bhatiya Motors Stores 288 ITR 31, has held that substantive assessment and the protective assessment need not be simultaneous and it can be done separately. In view of the above, the contention of the assessee that in view of the substantive assessment being made under section 148 of the act, the protective assessment also has to be made under section 148 of the act is incorrect.
8. It is submitted that the Delhi High Court in the case of Mahindra Finlease Ltd 343 ITR 464, has reiterated the concept and requirement of protective assessment and the same has been held to protect the limitation, protective assessment is permitted. Kind attention of this Honorable Tribunal is invited to para-11, 12, 13, 14 and 15 of the judgment.
9. It is submitted that High Court of Allahabad in the case of BhagmalSaudagarmal 267 ITR 637 has reiterated the concept of protective assessment in order to avoid time barring. Reliance is placed on para-6 and 7 of the judgment.
10. It is submitted that Gujarat High Court in the case of Sri SurendraGulabchand Modi 140 ITR 517 has held that deferment of protective assessment during pendency of the appeal on the substantive assessment to await the outcome of the substantive appeal was to be granted and the contrary view of the Tribunal was set aside.
11. It is submitted that the jurisdictional High Court in the case of CIT Vs Smt.Meenakshi Devi Avaru and others in WTA 1/2015 and connected matters dated 30/8/2018 has recognised the protective ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 6 of 8 assessment in the absence of substantive assessment and upheld the protective assessment and the Assessing Officer was granted liberty to make substantive assessments in the case of the assessee (earlier protective assessment made).
12. It is submitted that in view of the above legal position and also the object behind the contemplation of protective assessment being the to avoid the assessments being time barred, if the contention of the assessee is to be accepted that substantive assessment was made under section 148 of the Act and hence protective assessment also has to be made under section 148 of the Act, the entire purpose and object of contemplating protective assessment by Supreme Court and other high courts would be defeated.
13. The appeal has to be deferred by this Hon'ble Tribunal awaiting the outcome of the appeal pending before the Appellate Commissioner on the substantive assessment in the case of Sri Gali Janardhan Reddy for the reason that in the event of a finding is recorded in the case of Sri Gali Janardhan Reddy that in view of the addition being on the basis of the seized material found in the case of the assessee, the same as to be assessed in the case of the assessee and not in the case of Sri Gali Janardhan Reddy, if this Hon'ble Tribunal disposes off the appeal on the protective assessment, the revenue would be left with no remedy and the entire purpose and object of the Apex Court contemplating protective assessment would be defeated and the same would be contrary to the law laid down by the Apex Court and the Kerala High Court referred to above.
14. It is submitted that if the request of the assessee to dispose of the appeal on the protective assessment without awaiting the outcome of the substantive appeal is accepted, it would amount to putting the cart before the Horse which is not permissible and contrary to the law laid down by the Supreme Court and other High Court in the judgments referred to above.
15. It is further submitted that in view of the addition being made on protective basis, there is no recovery in respect of the protective assessment being initiated by the revenue and the assessee has no harm or prejudice in deferring the matter awaiting the outcome of the appeal in the case of Sri Gali Janardhan Reddy, which is substantive.
16. Wherefore, it is respectfully prayed that this Hon'ble Tribunal may be pleased to defer the hearing of the above appeal awaiting adjudication of the substantive appeal by the Commissioner of Income Tax-Appeals in conformity with the law laid down by the Supreme Court and other High Court in the above referredjudgments and also in the interest of justice and equity."
ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 7 of 8
5. The ld. counsel for the assessee has strongly objected to the deferment of hearing with the submission that substantial and protective assessment can be made at the time of completing the original assessment and they will move together before the appellate authorities but in the present case, the substantial assessment was knocked down by the Tribunal on legal ground and the revenue has initiated fresh action of reopening assessment u/s. 148 of the Act and therefore, there is no nexus between the present protective assessment and the substantive addition in the assessment framed consequent to the reopening of the assessment u/s. 143(3) r.w.s. 147 of the Act. The ld. counsel of the assessee further contended that the parameters for reopening of the assessment are entirely different than the original assessment completed u/s. 143(3) of the Act. He further argued that original assessment was completed u/s. 153C and the assessment was knocked down by the Tribunal on legal ground and the order of the Tribunal has not been challenged by the revenue. It is further contended that while reopening the assessment, the Assessing Officer has to form the reason to believe that income chargeable to tax has escaped assessment. While completing the assessment u/s. 147 of the Act, the protective assessment cannot be made as assessment was reopened on the ground of certainty and not on presumptions. Therefore, the hearing should not be deferred on the ground that appeal against the order passed u/s. 147 is pending before CIT (A).
6. We have considered the entire facts and rival submissions in respect of the request of the revenue regarding deferment of hearing of these appeals. Undisputedly, the substantial assessment framed u/s. 153C has been knocked down by the Tribunal on legal grounds and revenue has not challenged that tribunal order before Hon'ble High Court and hence, that order has attained finality. So far as relevance of protective assessment with the assessment framed consequent to the reopening of the earlier assessment u/s. 147 is concerned, prima facie we are not convinced with the arguments of ld. DR but at this stage, we do not want to express our opinion on this. It is also important to note that in the instant case, the CIT (A) has dismissed all the appeals being barred by limitation. The CIT (A) did not adjudicate the issues on merit and therefore, we are of the view that first of all, it should be decided as to whether ITA Nos. 478, 494, 919 to 923 & 954/Bang/2017 Page 8 of 8 the CIT (A) was justified in dismissing these appeals by not condoning the delay in filing of the appeals. Once it is decided that there was justifiable reasons for the delay in filing of the appeals and the CIT (A) ought to have condoned the delay, the matter would be required to be sent back to CIT (A) for adjudication of the appeal on merit. In any case, the appeals on merit cannot be adjudicated in the absence of the proper findings of the first appellate authority. We are unable to understand as to why the revenue has approached Hon'ble High Court for deferment of the hearing of the appeals and wasted its precious time where the present appeals are to be disposed of only on the point as to whether the CIT(A) is right in dismissing the appeal by not condoning the delay. In the light of these facts, we do not find any merit in the application for deferment of the hearing of the appeals moved by the revenue. Accordingly, we dismiss the same and direct the parties to advance their arguments on this point as to whether CIT (A) was justified in dismissing the appeals by not condoning the delay on the next date of hearing already fixed on 03.10.2018.
7. In the result, the three applications of the revenue for deferment of hearing are dismissed Interim Order is pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/-
(SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA)
Judicial Member Accountant Member
Bangalore,
Dated, the 24th September, 2018.
/MS/
Copy to:
1. Appellant 4. CIT(A)
2. Respondent 5. DR, ITAT, Bangalore
3. CIT 6. Guard file
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.