VENKATESHWARA RAO POONURU,HYDERABAD vs. ADIT, INTERNATIONAL TAXATION-(2), HYDERABAD

ITA 71 of 2022 Venkateswara Rao Ponnuru

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA-IT No.71/Hyd/2022 Assessment Year: 2017-18 Shri Venkateswara Rao Vs. Asstt. Director of Income Ponnuru, Hyderabad Tax (International PAN:AAWPP7203L Taxation)-2 Hyderabad (Appellant) (Respondent) Assessee by: Shri Y.V. Bhanu Narayan Rao, CA Revenue by: Shri Jeevan Lal Lavidiya, CIT (DR) Date of hearing: 16/03/2023 Date of pronouncement: 10/04/2023 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 15.2.2022 passed by the Assessing Officer u/s 147 r.w.s. 144C(13) of the I.T. Act, relating to A.Y.2017-18.

Page 1 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

ITA 71 of 2022 Venkateswara Rao Ponnuru

speaking order. The assessee also challenged the validity of the notice issued u/s 143(2) which was rejected by the Assessing Officer. The assessee further raised various objections, such as the notice u/s 143(2) was served without considering the contents of the assessee’s letter and reasons recorded were not given within the reasonable time, that the case was originally selected for compulsory scrutiny etc., which were rejected by the Assessing Officer.

“2.6.1 Having considered the submissions; the assessee has filed return of Income for AY 2017-18 on 03-03-2018. The case was selected for limited scrutiny under CASS for examination of cash deposit during the year. The AO ward-2, Karimnagar issued notice U/s 143(2) on 09-08-2018. The case was transferred to ACIT, circle 6(1), Hyderabad. The assessee filed reply on 14-11-2019 for the Sources of cash deposits. The ITO Karimnagar finally sends the file to jurisdictional Assessing Officer ADIT (International Taxation)-2, Hyderabad. 2.6.2 The ADIT (International Taxation)-2, Hyderabad did not post the case for further hearing by giving any opportunity to the assessee and the case got time barred and computer screenshot shows the status of proceeding as closed. The JAO (jurisdiction Assessing Officer) did not pass any Assessment Order U/s 143(3 144 of the IT Act,1961. The assessment proceedings were barred by limitation U/s 153 of the IT Act, 1961. 2.6.3 On 04-03-2020 the JAO issued notice U/s 148 of the IT Act,1961. The assessee filed Return of income in response U/s 148 of the IT Act,1961 on 14-03- 2020 .

Page 3 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

2.6.4 The reasons recorded for re-opening the assessment were communicated to the assessee as per notice ü/s i43(2) r.w.s 147 of the IT Act,1961 dated 4-1 2020. The AO is in compliance of the case law GKN Driveshafts (India) Ltd. vs. TO in civil appeal no. 7731 to 7737 of 2002(SC). 2.6.5 We note that the limited scrutiny Assessment proceedings U/s 143(3) initiated by ITO Karimnagar, ACIT, Circle-6(1), Hyderabad and finally by ADIT (International Taxation)-2, Hyderabad is barred by limitation. The JAO invoked the provision of section 147 of the IT Act, 1961 as the assessing officer had Reasons to believe that any income chargeable to tax has escaped assessment for the relevant Assessment Year. The JAC had reasons to believe that income has escaped assessment. The reasons were communicated to the assessee as follows: “AS per the information available with this office, the assessee has made a huge cash deposit of Rs. 60,00,000/ in his bank account maintained with Axis Bank (Current Account # 916020042516778) Himayat Nagar Branch during AY 2017- 18. In the ITR for AY 2017-18 the assessee has declared his total income 5s 0,4,/0. The cash deposits made by the assessee during The AY 201/-18 60,00,000. Therefore, the cash deposit is far in excess of the sources of income declared by the assessee. The return of income was only processed the 1.T Act 1961. As the case has never been taken up for scrutiny, there is an under-assessment of income to the extent of Rs. 60,00,000." 2.6.6. We note that as per IT Act, 1961 there is no bar on issuing a notice /s * for invoking proceeding ü/s 147 of the IT Act, 1961 in case where 143 proceedings were initiated by the AO but got time barred by limitation. 2.6.7 The AO action is as per the section 147 Explanation 2(b) of the IT Act 1961 which is reproduced as below is applicable in instant case of assessee. “(b)where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return." 2.6.8 As per the submission of the assessee's letter dated 23-02-2021. The assessee has replied to the notice U/s 142(1) dated 22-02-2021 and show cause notice dated 12-02-2021. That the money of Rs. 60 lacs belong to assessee's late father and late brother. "The money of Rs. 60 lacs belongs to my late father and late brother: my brother was unmarried and he had no dynasty. My late Brother, P. Siram sold the property adjacent to my property for Rs. 38.00 lacs during his lifetime. He kept that money with him. My late father's money is with my mother. After her death, the money was in possession of my late bother.

Page 4 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

My late brother, Mr. P. Sriram died in an accident in July,2014 I noticed this money in his Almirah in 2016, when I came to India on vacation, in July/August, 2016. As, I am the only male member of the family, the money was inherited by me. As I could not stay for more adays, I have deposited the money in August 2016 in my Axis Bank account and left to Kuwait for performing my duties, since, the money is inherited, the same is not taxable in my hands. " 2.6.9 During the proceedings U/s 147 the above reply dated 23-02-2021 is the new information to the AO that the money belongs to the late father and late brother. In the reply it is only a statement made by the assessee without any proof or evidence 2.6.10. On merits of the submission there is no evidence that the money of Rs. 60 lacs belong to his late father and brother. The assessee has failed to prove that the money belongs to his late father and late brother. The ownership of the money is not proved with any tangible evidence. Therefore, as per Indian evidence act when any money, bullion, Jewellery any valuable article or thing are or is found in the position or control of any person it is presumed that it belongs to such person. The claim of the assessee that Rs. 60 lacs is inherited from his late brother and late father is without any legal evidence. 2.6.11 The cash of Rs. 60Lacs /- is deposited in the assessee's own Axis bank current account and therefore, the assessee is liable to explain the source of the cash deposit. 2.6.12 Therefore, the claim that the money being inherited and is a hereditary income is hereby rejected on lack of any evidence and on merits. 2.6.13 The Assessee has relied on case laws. CIT VS. Tarajan Tea Company (P) Ltd Appeal (Civil) 1941 of 1993, reported in 236 ITR 447(5.C) date of Judgement 04/02/199. ITO ward 41(2), Kolkata Vs. M/s Epkon Associates, Kolkata, ITA No. 1425/Kol/2014/A. Y 2005-06, 30/5/2018. SH. Abrar Ahmad Qasimi, New Delhi Vs. ITO, New Delhi TA No.3177/DEL/2017, Asst. Year. 2007-08 In the Appellate Tribunal, Delhi Benches "SMC": Delhi. ACIT & Anr. Vs. Hotel Blue Moon [(2010)321 ITR 362(SC)]. and 5more case laws as per Annexure Vi of the paper book dated 14th June 2021 2.6.14 The case laws relied by the assessee are distinguishable in facts and in law and are not applicable in the present case where the issue involved is cash deposit of Rs. 60 lacs by the assessee in his own current account of AXiS bank. 2.6.15 We don't find any infirmity in the action of the AO in issuing notice U/s 148 of the IT Act 1961 and proceedings U/s 147 of the IT Act. These grounds of objections are here by rejected.

Page 5 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 6 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

of the money i.e., cash of Rs. 60 lacs in his own current account Axis bank and the assessee has not disclosed the cash deposit in his Return of income Filed. Further the explanation Offered by the assessee that Rs. 60 lacs belong to his late father and late brother is without any legal evidence. There is no tangible evidence to prove that this cash belongs to his late father and late brother. Therefore, this unexplained money U/s 69A of the IT Act,1961. For application of the sectic69A of the IT Act,1961 maintaining the books of accounts is not mandatory condition. We don't find any infirmity in the application of section 69A of the Act in the case of the assessee. We reject this ground of objection.”

Page 7 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 8 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

69A of the Income tax act, 1961, stating about the ownership and not recorded in the books of accounts if any, maintained by the Assessee for any source of income and offers no explanation going to Indian evidence act which says about the "Position or Control" is in correct. The Appellant explained that the money belongs to his late kith and kin and inherited by him and other survivors and deposited the same in bank account. The provisions of sec. 69A does not speak anything about the money deposited in Bank and there are about other items mentioned in the Section for which bank will not come into picture and hence, meaning of ownership is to be taken that it should be in physical position. Hence the contentions on imagination of the assessing officer are incorrect and erroneous. 8. The view of the Assessing officer in the Assessment order u/s. 147 read with sec. 144C(13) in page 16 that the filing of Return of income against the notice u/s. 148 leads to treat the appellant has took part the proceedings is incorrect. Filing of return of income in response to notice u/s. 148 is responsibility of the assessee. It cannot be treated that the proceedings are accepted and the assessee should not ask any thing regarding the reasons for reopening the assessment. 9. Cash Deposited in the bank account cannot be treated as income of the assessee or investment of the assessee. It is also not included u/s. 2(24) of the income definition of the income tax Act, 1961. When these deposits are subject matter of the limited scrutiny proceedings for verification u/s. 143(2), on the same ground and without having fresh tangible information. Provisions of sec. 147 cannot be invoked. 10. The Assessing Officer is stating that action u/s. 147 is as per explanation 2 (b) of the IT Act, 1961. This is incorrect as in assessee's case, assessment proceedings were "Closed" and no question of 'No assessment has been made' does not arise. The assessee has also not understated the income as money deposited in the bank account will not come under the preview of income. The question of deemed income cannot be assumed or imagined by the learned assessing officer before invoking the provisions of sec. 147. 11. The notice u/s. 143(2)) read with sec. 147 was served on the assessee on 4/11/2020. Actually, such notice should be served within 6 months from the end of the financial year in which the return of income is filed by the assessee. Such period will end by 30/09/2020, hence the notice served on 04/11/2020 is an invalid notice. At para 2.3 in page 11 of the assessment order the assessing officer stated that there was an embargo on issuing notice to the assessee till September 18th, 2020 in view of the CBDT's direction. Even then still there was 12days time to the Assessing Officer for serving notice u/s. 143(2). The TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISONS) ACT, 2020 dated 29/09/2020 will not speak anything about the service of a notice. As stated in chapter 2 Clause 3(1) and sub clause A of the said Act, the words are not applicable to assessee's case because no time limit has

Page 9 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

been prescribed for any notice in the income tax act except to notice u/s. 148. Bar on issuance of notice cannot be attributable to service of notice, which is mandatory and not procedural as stated by Hon'ble supreme Court in the case of Asst. Commissioner of IT & Anr Vs. M/s. Hotel Blue Moon in Civil Appeal NO. 1198 of 2010 and this point of law is settled by the Hon'ble Supreme Court is binding on the entire India as per Constitution and the above act will not applicable to our case. 12. The learned Assessing officer has not followed the Standard operating procedure (SOP) in finalizing the assessment proceedings such as providing reasons recorded before issuing notice u/s. 148 and invoking sec. 147. The learned assessing Officer also not followed the SOP in issuing and serving of notice u/s. 143(2) read with Sec. 147 as per the case law of the Hon'ble Supreme Court in ACIT and Anr. Vs. Hotel Blue Moon (2010), 321 ITR 362 (SC). It is also stated by the learned assessing Officer that the decision of Hon'ble Supreme Court in the case of CIT Vs. Tarazen Tea Co. Private Limited, Appeal (Civil) 1941 of 1993 reported in 2FORM ITR 447(SC) date of Judgement 04/02/1999 is not applicable to the assessee's case and it is incorrect. 13. The Learned Commissioners of Income tax (Members) of Dispute Resolution Panel have stated in Para 2.6.13 and 2.6.14 at page 5 of their proceedings u/s. 144C(5) have mentioned that the case laws relied by the assessee are distinguishable in facts and in law and are not applicable in the case of assessee is incorrect. In the case of CIT VS. Tarazen Tea Co. Private Limited, Appeal (Civil) 1941 of 1993 reported in 236 ITR 447(SC) date of Judgement 04/02/1999, wherein it was held that: "Information which was with the AO at the time of original assessment cannot be used for reopening the Assessment u/s.147". In the case of ACIT and Anr Vs. Vs. Hotel Blue Moon(2010), 321 ITR 362 (SC) it is held that "it is mandatory for the AO to issue notice u/s.143(2). The issuance and service of notice u/s. 143(2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid. Reassessment Notice. assessee intimating original return be treated as fresh return .Reassessment proceedings completed despite assessee filing affidavit denying service of notice u/s. 143(2). ***. Assessing Officer not representing before commissioner (Appeals) that notice had been issued.. Reassessment order invalid due want of notice u.sl143(2). ., Income tax, 1961, ss.143, 147,148, prov.... ITO Vs. R K Gupta (308) ITR 49 (Del) tribu. --- The above Judgements of Hon'ble Supreme court relates to law (Legal issue) and the findings cannot be stated as distinguishable facts and law, the decision by the Hon'ble Supreme court is binding on lower Authorities in India and also binding on the public as per article 141 of the constitution of India.

Page 10 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Hence, it is incorrect to say by the learned Commissioner's(Members) of Dispute Resolution Panel that the case laws are not applicable to the Appellant Assessee. 14. The learned assessing Officer is incorrectly applied the provisions of sec. 69A, though all the conditions of the section are not applicable in the assessee's case. The assessee is an NRI and not having any activity in INDIA. He has not filed any return of income in earlier years as there is no taxable income in India. He has not maintained any books of Accounts. Since, the word used between the conditions in the act is "and" and not "or", all the conditions should satisfy for applying the provisions of sec. 69A. Money deposited in the bank account is not an income. The assessee has not maintained any books of account hence, the provisions of section 69A shall not apply at all”.

ITA 71 of 2022 Venkateswara Rao Ponnuru

assessee on 4.3.2020 in response to which the assessee filed his return of income on 14.3.2020 declaring the income originally returned. Subsequently the assessee was provided with the reasons according to which the reopening was for the cash deposit of Rs.60.00 lakhs in the Bank A/c maintained with Axis Bank.

ITA 71 of 2022 Venkateswara Rao Ponnuru

reported in 236 ITR 447, dated 4.2.1999, he submitted that the Assessing Officer cannot reopen the assessment on the same reason which were made before at the time of the original proceedings. Referring to the said decision, he submitted that the notice u/s 148 cannot be issued purely on a change of opinion since during the original scrutiny assessment proceedings all material facts were fully and truly disclosed in the regular assessment proceedings and the failure of the Assessing Officer not to pass the order cannot be attributed to the assessee.

ITA 71 of 2022 Venkateswara Rao Ponnuru

assessee is an NRI working as a Doctor by profession and residing in Kuwait, the case was transferred to the Dy. CIT (International Taxation)-2 Hyderabad. Since the jurisdiction of the assessee falls under the Assessing Officer of the International Taxation Division, the original proceedings were dropped and notice u/s 148 was issued by reopening the case after due approval by the superior authorities.

ITA 71 of 2022 Venkateswara Rao Ponnuru

for verification of the cash deposits during the year. We find the Assessing Officer issued notice u/s 143(2) on 9.8.2018 copy of which is placed at 26 to 27 of the Paper Book which is as under:

Page 15 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 16 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 17 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 18 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

Page 19 of 20

ITA 71 of 2022 Venkateswara Rao Ponnuru

proceedings. We accordingly quash the re-assessment proceedings. Since the assessee succeeds on this legal ground, the various other legal grounds challenging the validity of the assessment and the addition on merit have become academic in nature and therefore, are not being adjudicated.

Page 20 of 20