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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.599/Hyd/2016 Assessment Year: 2012-13 Dy. Commissioner of Vs. Sabbineni Surendra, Income Tax, No. 512/R, Road No.29, Central Circle-2(2), Jubilee Hills, Hyderabad. Hyderabad. PAN: ADQPS 3461 E (Appellant) (Respondent)
C.O. No.34/Hyd/2016 (In ITA No.599/Hyd/2016) Assessment Year: 2012-13 Sabbineni Surendra, Vs. Dy. Commissioner of No. 512/R, Road No.29, Income Tax, Jubilee Hills, Hyderabad. Central Circle-2(2), PAN: ADQPS 3461 E Hyderabad. (Appellant) (Respondent) Assessee by: Sri V. Raghavendra Rao Revenue by: Sri Y.V.S.T. Sai, CIT-DR Date of hearing: 07/01/2019 Date of pronouncement: 13/03/2019 ORDER PER Smt. P. Madhavi Devi, J.M.:
The captioned appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order of the CIT(A)-12, Hyderabad, dated 18/12/2015.
2 2. Brief facts of the case are that the assessee, an individual, was the Managing Director of M/s. Coastal Projects Limited and was in receipt of managerial remuneration from the company and also of technical consultancy income for the technical and consultancy services rendered in the field of civil engineering during the relevant financial year. There was search and seizure operation u/s 132 of the Act on 25/11/2011 at the residential premises of the assessee and also of the business premises of the Group companies of M/s. Coastal Projects Limited. During the course of search, Gold to the extent of 17 Kgs; Silver to the extent of 12342.8 Gms; Diamonds / Stones worth 406 Cts were found. The total value of the jewellery found was Rs. 6,26,91,050/- out of which jewellery worth of Rs. 5,51,13,550/- was estimated as unexplained. Cash of Rs. 16 lakhs, and certain documents were also found and seized. During the course of search, the Gold and jewellery found with the assessee’s father Sri S. Papayya and his sister Smt. N. Swarupa Rani were also owned by the assessee to be taxed in his hands. As regards the balance of Gold and Jewellery, he submitted that some jewellery was received by his wife Smt. Santhi Sree as ‘Stridhana’ on the occasion of their marriage and various other family functions viz., naming ceremony, birthdays of their two children etc., and some jewellery was purchased over a period of 20 years. The assessee also explained the sources for purchase of the jewellery as his salary, transport business income, capital gains income and unsecured loans
3 which were duly reflected in the statement of affairs of the relevant assessment years. He also claimed exemption towards possession of gold for the family members as per the guidelines of CBDT. The Assessing Officer, however, observed that the assessee has not adduced any evidence like bills / vouchers, bank payments etc., with regard to the purchase of the gold and jewellery in a particular year or purchase of certain quantity or item of jewellery. He observed that the assessee has not even filed wealth tax returns during those years and therefore, he did not accept the contentions of the assessee of purchasing gold in the earlier years and after allowing the basic exemption to the extent of Rs. 25,27,000/- he made addition of the balance of Rs. 5,25,86,550/- as unexplained investment in jewellery and brought it to tax.
Aggrieved, assessee preferred an appeal before the CIT(A). However, the assessee did not pay the admitted tax at the time of filing of the appeal. The CIT(A) observed that that the assessee has finally paid the admitted tax only on 28/02/2015. The CIT(A) therefore observed that though the appeal was filed on 06/05/2014, since the assessee has paid the admitted tax on 28/02/2015, it is deemed to have been filed on 28/02/2015 with a delay of 299 days. The assessee had filed an application for condonation of 299 days delay and the reasons for filing the appeal belatedly were stated to be financial difficulties. CIT(A) accepted the financial difficulties as a reasonable cause and condoned the delay by following the decision of the ITAT in the case of
4 M/s. AKR Constructions Ltd vs. DCIT (ITA No.572/Hyd/2015) dated 30/07/2015. Thereafter, CIT(A) proceeded to consider the assessee’s grounds on the merits of the addition made u/s 69 of the Act and granted partial relief to the assessee. Against the relief granted by the CIT(A), the Revenue is in appeal before us and against the partial confirmation of the addition, the assessee is in cross objection before us. Along with Form No.36, the Revenue has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, and in law, the CIT(A) erred in deleting the addition made on account of “undisclosed investment in Gold & Jewellery” ignoring the deeming provisions of section 69A. 2. On the facts and in the circumstances of the case, and in law, the CIT(A) erred in the concluding that in the earlier years the claim of the assessee regarding “undisclosed investment in Gold & Jewellery” was accepted contrary to the fact that such claims were assessed on protective basis only. 3. The appellant prays that the order of the CIT(A) on the above grounds be set-aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground, which may be necessary.” 3.1 Thereafter, vide letter dated 01/06/2018, the Revenue has filed the additional grounds of appeal along with the prayer for admission of the additional grounds of appeal. Vide letter dated 21/06/2018, the Revenue has explained the reasons for filing of the additional grounds as under:-
“In the case of Sri Sabbineni Surendra, appeal was filed before the Hon’ble ITAT for the asst year 2012-13 on 27/04/2016. Subsequently, after a perusal of the original grounds, it was noticed that certain vital issues were not considered while filing the appeal namely: The CIT(A) erred in admitting the appeal when the taxes on undisputed liability were not paid by the assessee. After the enactment of Tax Laws (Amendment)
5 Act, 1989 w.e.f 1/4/1989, the CIT(A) didn’t have the discretion to admit an appeal without the assessee having paid the taxes on admitted income. For the same reason, the CIT(A) didn’t have the power to condone the delay of 299 days in payment of taxes due to admitted income. Further, the principles of natural justice were violated when the A.O. was denied the right of being heard even when it was specifically stated by the A.O. in the ITNS 51 Form that he would to be heard. Hence it is prayed to the Hon’ble ITAT that the additional grounds may be permitted to be admitted.” 4. Learned Departmental Representative supported the additional grounds of appeal and prayed for admission of the same, while the Learned Counsel for the Assessee objected to the admission of the additional grounds of appeal stating that the Revenue cannot raise such additional grounds of appeal.
Having regard to the rival contentions, we find that this is the appeal filed by the Revenue and the grounds raised by the Revenue are against the entertaining of the appeal by the CIT(A) even though the assessee has not paid the admitted tax at the time of filing of the appeal before the CIT(A). Since these facts emerge for the first time from the order of the CIT(A), we are inclined to admit the additional grounds as they go to the root of the matter i.e., about the maintainability of the appeal or power of the CIT(A) to entertain the appeal.
Learned Departmental Representative in addition to his arguments, has submitted written submissions as under:-
“At the outset it is submitted that the order of CIT(A) suffers from serious infirmity. In this case, the assessment order was passed on 31/03/2014 and it has been served on 07/04/2014. The appeal was filed on 06/05/2014. It is humbly submitted that in the Form No: 35 filed before the CIT(AL the column related to payment of taxes on admitted income was kept blank. This was because, the admitted tax of Rs 1,95,38,850 was not paid till 28/02/2015. Even
6 in the statement of facts filed along with the appeal, no mention was made about non-payment of admitted taxes. The appeal could not have been entertained by the CIT(A) because there was clear misrepresentation in the appeal form by way of keeping a critical column as blank and only when it was pointed out by CIT(A), the CIT(A) was informed that the admitted tax was paid on 28/02/2015. The conduct of the assessee indicates that he suppressed material facts while filing the appeal. It is submitted that after 01/04/1989, the C1T(A) does not have discretionary powers to admit appeals in cases where admitted taxes on returned income are not filed. Nor it was proper for the CIT(A) to deem that the appeal was filed on 28/02/2015, even when the original appeal form was filed in time and there is no provision under the Act to deem that an appeal filed on a particular date is filed at a later date.
Without prejudice to the above, it is submitted that the order of the CIT(A) does not contain specific reasons for admitting the appeal and as the issue being that of verification of facts of the case, the CIT(A) could not have cited decision of Hon'ble ITAT in another case to condone the delay of 299 days without discussing the facts at length. Perusal of the documents filed by the assessee in the supplementary paper book dated 24/05/2018 indicates that the assessee claimed great financial crisis on account of payment of taxes by M/s Coastal Projects Ltd group, its directors and other persons covered in search operation. The assessee stated that there were no liquid funds as the incomes disclosed were locked up in immovable properties and the assessee cooperated in the auction proceedings by the Department. He also stated that penalty was not levied u/s 221 by the Department for non-payment of self- assessment tax when the above reasons were explained.
The CIT(A) apparently accepted the submissions at face value as the reasons for accepting the submissions is not evident from his order. Before admission of the appeal, the CIT(A) was bound to verify the claims and record a finding on facts, which is not done in his case. To substantiate his claims, the assessee was bound to provide proof for the liquidity problem and also the immediate source for the payment of tax at a later date. The assessee made only general claims which were accepted by the CIT(A). The claim before the CIT(A) that a letter was written by the assessee to the AO on 09/01/2013 that the amount kept in PD account may be adjusted towards self-assessment tax is also untenable because the amount was specifically against jewellery which otherwise could have been seized. During the search proceedings as well as assessment proceedings, the assessee could not justify that the jewellery was accounted to make a claim for release of the amount for adjustment against self assessment tax. Therefore, the CIT(A) was not correct in accepting the claim in this regard. With regard to levy of penalty u/s 221 also, no communication was issued by the AO at any point of time, that the explanation of the assessee is accepted. Mere non levy of penalty u/s 221 does not mean acceptance of the version of the assessee. Besides, the appellate proceedings are before a higher authority and non levy of penalty
7 cannot be taken as conclusive proof of the claims by the higher authority without conducting verification. Therefore, it is humbly submitted that the additional grounds filed by the Department may kindly be admitted. Regarding the additional cross objections filed by the assessee on 17/04/2018, it is humbly submitted that they same are without basis and may kindly be rejected.”
Thus, the Learned Departmental Representative submitted that before filing of an appeal before the CIT(A), the assessee is required to make the payment of admitted tax but the assessee has filed the appeal without making any payment and it is only after filing of the appeal, that the assessee had made the payments and as observed by the CIT(A), the payment was done on 28/02/2015. Therefore, according to the Learned Departmental Representative, the CIT(A) ought not to have entertained the appeal till such date as there was no valid appeal filed by the assessee. He submitted that the CIT(A) ought to have dismissed the appeal and ought not to have condoned the delay in filing of the appeal by deeming the appeal to have been filed on 28/02/2015. Therefore, according to him, the appeal itself was not maintainable and CIT(A) erred in not only entertaining the appeal but also condoning the delay of 299 days without even verifying the financial difficulties as a reasonable cause for delay in payment of admitted tax before the date of filing of the appeal. Further, he submitted that the A.O. was not given an opportunity to be present at the time of hearing even though it was specifically requested in Form No. ITNS-51, which is against the principles of natural justice.
8 8. Learned Counsel for the Assessee, on the other hand, submitted that the assessee was in severe financial difficulties as the assessee had to pay the taxes for six preceding years all at one time and since the income disclosed was locked up in immovable property, there was no liquid cash after payment of tax relating to six preceding years. He submitted that all the relevant facts were submitted by the assessee in the application for condonation of delay and the same was considered by the CIT(A) before condoning the delay and entertaining the appeal. Therefore, according to him, the order of the CIT(A) is sustainable and needs no interference.
As regards the request of the A.O. to be present at the time of hearing, he submitted that there was no such Form No. ITNS 51 and therefore, there was no occasion for the CIT(A) to grant an opportunity to the A.O. as raised in the additional grounds of appeal no.5.
Having regard to the rival contentions and the material on record, we find that the appeal was filed before the CIT(A) on 06/05/2014 and admittedly the assessee has not paid the admitted tax before that date. The total tax on the admitted income was Rs. 2,76,23,346/- out of which a sum of Rs. 80,84,496/- was adjusted as TDS and the balance of Rs. 1,95,38,850/- was paid on 28/02/2015. We find that the CIT(A) has taken the date of filing of the appeal as 28/02/2015 only, i.e., after payment of the admitted tax, and thereafter, has arrived at the delay of
9 299 days in filing of the appeal. The assessee had filed an application for condonation of delay along with an affidavit and after considering the same, the CIT(A) has condoned the delay and entertained the appeal. The relevant paras of the affidavit are reproduced hereunder for ready reference:-
Thus, it can be seen that the assessee has explained the financial difficulties faced by it and also the source for making the payment
11 ultimately on 28/02/2015. Since, all the material facts were before the CIT(A), he has accepted the contention of the assessee. In the case of M/s. AKR Constructions Ltd vs. DCIT (supra), the Tribunal has accepted the financial difficulties faced by the said assessee as a reasonable cause for condoning the delay [which was refused by the relevant CIT(A)] and the Tribunal had remanded the matter to the file of the CIT(A) for re- adjudication of the issues on merits. In the case before us, the CIT(A) himself has condoned the delay and admitted the appeal. The Tribunal had considered the decision of the Hon’ble Karnataka High Court in the case of CIT vs. K. Satish Kumar Singh [19 taxmann.com 154 (Kar)] wherein it was held that even if the appeal has been dismissed for non- payment of admitted tax, if the admitted tax is paid after such dismissal, appellate authority is required to recall the order dismissing the appeal in limine, and that there is no prohibition or legal impediment for the appellate authority in recalling its earlier order and deciding the same on merits. We find that the said decision would apply to the case on hand. Admittedly, the assessee had made the payment of admitted tax after filing of the appeal, but before the dismissal of the appeal by the CIT(A) and therefore, we do not find any error in the order of the CIT(A) in condoning the delay and entertaining the appeal. Therefore, the additional grounds of appeal raised by the Revenue are dismissed.
Coming to the original grounds of appeal raised by the Revenue against the order of the CIT(A) deleting the addition of unexplained
12 investment in jewellery, the Learned Departmental Representative submitted that during the course of search on 25.11.2011, certain incriminating documents and unaccounted jewellery were found and during the course of statement recorded u/s 132(4) of the Act on 14.12.2011, the assessee explained that the jewellery belongs to him, his wife, his unmarried daughter, his son, his sister, his parents and his grandparents, but he could not prove the sources and since none of the other owners apart from him, filed wealth tax returns, he agreed that the unaccounted jewellery is to be brought to tax in his hands. The total value of the jewellery found at the residence of the assessee, his father and his sister turned out to be of Rs. 6,26,91,050/- and after allowing the basic exemption of Rs. 25,27,000/-, the A.O brought the value of jewellery of Rs. 5,25,86,550/- to tax. The Learned Departmental Representative submitted that the CIT(A) has accepted the contentions of the assessee at its face value without considering the fact that the assessee has failed to produce any evidence in support of his contentions and therefore, the order of the A.O. ought to have been confirmed. The Learned Departmental Representative also relied upon its written submissions filed by him.
Learned Counsel for the Assessee, on the other hand, supported the order of the CIT(A) and reiterated the submissions made by the assessee before the CIT(A).
13 14. Having regard to the rival contentions and the material on record, we find that the total value of jewellery found at the time of search was Rs. 6,26,91,050/-. After allowing the exemption for the minimum jewellery that can be held by an individual i.e., the assessee, his sister and his father, the A.O brought to tax the sum of Rs. 5,51,13,550/-. The assessee had submitted that he had offered unexplained investment in jewellery during the assessment proceedings 2010-11 and 2011-12 to the extent of Rs. 32,64,000/- and Rs. 51,50,000/- respectively and that the A.O. had brought it to tax on protective basis. We find that the said protective assessments have not been disturbed and the assessee had paid the admitted tax thereon and therefore, bringing the same to tax again in AY 2011-12 would amount to double taxation. Therefore, we do not find any infirmity in the finding of the CIT(A) on this issue.
As regards the balance of the addition is concerned, we find that the CIT(A) has taken into consideration, the returns of income along with the balance sheet of the respective parties filed in the earlier assessments wherein the investment in gold jewellery was reflected. We also find that the respective Assessing Officers, have accepted the said returns and therefore, bringing the same to the tax again in the A.Y 2011-12 would amount to double taxation. The A.O. had brought the entire jewellery to tax only in the year of search i.e., 2012-13 but we find that it has been rightly accepted by the CIT(A) that the entire jewellery could not have been purchased during the relevant assessment year but
14 must have been acquired over a period of may be 20 years as claimed by the assessee. Therefore, we do not see any reason to interfere with the order of the CIT(A) on this issue.
The investment to the extent of Rs. 22,10,000/- remained to be unexplained during the assessment year 2012-13. The CIT(A) had examined the cash flow statement filed by the assessee which included his salary, business income and unsecured loans, to consider the source for investment in the jewellery as explained. Therefore, we see no reason to interfere with this finding of the CIT(A) on this addition as well. Accordingly, the Revenue’s grounds of appeal No. 1 and 2 are rejected and the Revenue’s appeal is dismissed.
Coming to the Cross Objection of the assessee, we find that the assessee has raised the following grounds of cross objections:-
“1. Learned CIT(A) has erred in holding that Rs. 48,83,364/-in respect of cost of construction of incomplete building should be assessed for A.Y. 2012-13 while that amount is arrived at on estimate basis as on 31/3/2014. 2. Ld. CIT(A) has not made any allowance for error of 5% in the estimate by Departmental Valuation Officer which is usual and normal. 3. Alternatively, Ld. CIT(A) has failed to notice that the difference in cost of construction has to be spread over the period of construction upto 31/3/2014.” 18. In addition to the above, the assessee has also raised additional cross-objections in support of the order of the CIT(A) in respect of the unexplained investment in jewellery. However, since the Revenue’s appeal has been dismissed, the additional grounds of cross-objections
15 raised by the assessee need no adjudication and accordingly they are rejected.
Brief facts relating to the assessee’s cross-objections are that during the search proceedings, it was observed that the assessee had constructed a residential building at Shaikpet Village, Jubilee Hills Cooperative House Building Society, Road No.29, Jubilee Hills, Hyderabad. The District Valuation Officer of the Valuation Cell of Income Tax Department, Hyderabad, was required to make an estimate of the fair market value of the property and furnish the valuation report of the cost of construction u/s 142A of the Income Tax Act, 1961. As per the DVO report, the cost of construction of the above mentioned property was at Rs. 9,93,24,000/-. The value disclosed by the assessee through balance sheet was Rs. 5,44,70,056/- only. The assessee was, therefore asked to show cause as to why the difference of Rs. 4,48,53,944/- in the value of the property should not be assessed in his hands for the assessment year 2012-13. The assessee, vide his reply dated 30.03.2014, submitted that the assessee had incurred expenses to the extent of Rs. 5,44,70,056/- upto 31.03.2012 for which the balance sheet was submitted and that during the financial year 2012- 13, the assessee had incurred a further sum of Rs. 75,48,000/- towards construction of building and the source for the same explained as the sale proceeds of commercial vehicles and out of the remuneration received from M/s. Coastal Projects Limited. It was also submitted that
16 the assessee and his wife had incurred an amount of Rs. 3.60 Crs towards the cost of marbles, sanitary fittings, false-ceiling, wood, wood- work and labour charges etc., during the financial year 2013-14 for the construction of building and that these expenses are still payable. The assessee promised to provide all the bills etc., at the earliest. The A.O. observed that the assessee had made investment in the construction of a residential property at Road No.29, Jubilee Hills, Hyderabad and that he has not disclosed the full value of investment in his books of account maintained and he has disclosed the investment only to the extent of Rs. 5,44,70,056/- in his books of account including undisclosed investment admitted during the course of search. As regards the assessee’s contention that he had incurred Rs. 3.60 Crs towards the cost of marbles, sanitary fittings etc., he observed that the assessee has not furnished any evidence for the investment made in the house after 31/03/2012 by furnishing cogent evidence and thus came to the conclusion that the assessee has not disclosed the full amount of investment in his books of account. Therefore, he observed that the provisions of section 69B of the Act are attracted and brought the difference of Rs. 4,48,53,944/- to tax. Aggrieved, the assessee has preferred an appeal before the CIT(A) stating that the valuation as arrived at by the Valuation Cell was as on 31/3/2014 and not as on 31/3/2012 and hence, it cannot be accepted as investment up to the end of the relevant financial year. It was submitted that if the
17 investment during the F.Y. 2012-13 and also in the subsequent years of A.Y. 2013-14 and 2014-15 are considered, the total investments would go up to Rs. 9,47,60,636/- and there remained a small difference of Rs. 45,83,364/- only and this was not considered by the A.O. The assessee furnished the balance sheets filed for the relevant years and it was submitted that the difference, if applied to the year ending on 31/03/2012, there would not be any difference. The CIT(A) accepted this contention of the assessee and restricted the addition to Rs. 45,83,364/- only. Against this decision of the CIT(A), the assessee is in cross- objection before us.
Learned Counsel for the Assessee reiterated the submissions made before the Authorities below and submitted that the CIT(A) ought to have considered that in the subsequent years, the cost had increased and also that the DVO had adopted the higher rates prevailing at Delhi as compared to the lower rates at Hyderabad, and hence the difference.
The Learned Departmental Representative, on the other hand, supported the orders of the Authorities below.
Having regard to the rival contentions and the material on record, we find that the CIT(A) has accepted the assessee’s contentions that the investments reflected in his balance sheet were only till 31/3/2012 and the investments made by the assessee and his wife subsequent thereto have tallied with the valuation arrived at by the DVO. The assessee had
18 not been able to explain the difference to the extent of Rs. 45,83,364/- only, except stating that the difference may have arisen on account of difference in rates between the cities of Delhi and Hyderabad. We find that the CIT(A) has considered the issue in a reasonable manner and the assessee has not been able to furnish any evidence in support of his contentions. Therefore, we see no reason to interfere with the order of the CIT(A) on this issue. Accordingly, the assessee’s cross objections are dismissed.
In the result, both the Revenue’s appeal and the assessee’s cross objections are dismissed.
Pronounced in the open Court on 13th March, 2019.
Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 13th March, 2019
OKK Copy to:-
1) Sri Sabbineni Surendra, No.512/R, Road No.29, Jubilee Hills, Hyderabad. 2) Dy. CIT, Central Circle-2(2), Hyderabad. 3) The CIT(A)-12, Hyderabad 4) The Pr. CIT-12, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File