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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 353 & 354/VIZ/2018 (Asst. Year : 2016-17) 1. Koka Srinivasa Rao, vs. ITO, Ward-1, D.No. 2.35, Main Road, Gudivada. Kodangi (Post), Kalidindi (Mandal), Krishna District. PAN No. BJIPK 1716 P 2. Taragala Lakshmana, D.No. 1-20-1, Kodangi (Post), Kalidindi (Mandal), Krishna District. PAN No. ASEPT 7112 Q (Appellants) (Respondent)
Assessee by : Shri G.V.N. Hari – Advocate. Department By : Shri D.K. Sonawal – CIT DR
Date of hearing : 16/07/2019. Date of pronouncement : 07/08/2019. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER
These appeals by the different assessees are directed against the separate orders of Principal Commissioner of Income Tax, Vijayawada, both dated 09/05/2018 for the Assessment Year
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2016-17. Since facts and issues are common, clubbed and heard together and disposed of by way of this consolidated order. 2. Facts in ITA No.353/VIZ/2018, in brief, are that the assessee is an individual engaged in the business of transport, filed his return of income admitting total income of Rs. 2,70,000/-. The case of the assessee was selected for scrutiny manually with the approval of the Pr.CIT, Vijayawada. In the assessment order, the Assessing Officer has noted that during the course of vehicle surveillance by the flying squad set up for election purpose in Madurai on 19/03/2016, a sum of Rs. 18.01 lakhs were found in the possession of assessee and Sri Taragala Laxman. When asked about the details of cash found, the assessee and Sri Taragala Laxman have admitted that the cash of Rs. 10.10 lakhs is belonging to the assessee and Rs. 8.00 lakhs belonging to Sri Taragala Laxman. Since these two persons could not furnish any documentary evidence regarding the source of cash, the said cash was seized and handed over to the District Treasury, Madhurai. The ADIT (Inv.), Unit-I & II, Madurai has obtained written submissions regarding the cash seized, as per which, the said amount was carried by the above named two persons to purchase proclainer from Madurai to undertake certain civil works going on at their villages. In the said written submissions, the assessee
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admitted that out of the cash seized, a sum of Rs. 10.10 lakhs belonging to him and explained the sources for the same as under:- (i) Mortgage Loan taken from Finance Rs. 3,00,000 Company (ii) Gold Loan Rs. 1,00,000 (iii) Loans raised from friends Rs. 6,00,000 (iv) Personal savings Rs. 10,000 Total Rs. 10,10,000
Subsequently, the ADIT (Inv.), Unit-II, Madurai transferred the case to the DGIT (Inv.), AP & Telangana. The DDIT (Inv.), Unit-IV(2), Vijayawada has made enquiries in this case and reported that sources have been verified and found to be in order and seizure of cash is not warranted. Subsequently, the case has been transferred to the Assessing Officer for taking necessary action. With the above background, the Assessing Officer has scrutinized the case manually and after following due procedure, assessment was completed u/sec. 143(3) on 30/10/2017. During the course of assessment proceedings, the Assessing Officer has asked the assessee to substantiate the source of cash of Rs. 10.10 lakhs. The assessee only filed confirmations before the Assessing Officer, therefore, the Assessing Officer was of the opinion that the assessee has failed to bring the loan creditors in respect of loan taken by the assessee of Rs. 7.00 lakhs, hence the same is
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added to the total income of the assessee. Subsequently, the Pr.CIT by exercising powers conferred in section 263, issued a notice to the assessee and opined that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue for the following reasons:- a) As the cash was seized u/sec. 132A, the assessment was to be made u/sec. 153A, which was not done. Thereby, the order dated 30/10/2017 itself is void ab initio and not maintainable. The approval of the Range Head was also not taken before completion of assessment proceedings. (erroneous in nature) b) The Assessing Officer treated the amount seized as unexplained money, but has not invoked the provisions of section 69A while making the additions. Thereby even the provisions of section 115BBE referring to special tax rates were not applied. (prejudicial to the interest of revenue) c) While filing the return of income, the assessee offered income u/sec. 44AE for full 12 months. But the sources for acquisition of vehicles were not verified by the Assessing Officer, though as per provisions of section 142(1)(iii) proviso (b), the Assessing Officer had the powers to verify the books of account of earlier three Assessment Years (both erroneous and prejudicial to the interest of revenue) Accordingly, directed the Assessing Officer to redo the assessment .
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On appeal before us, ld. counsel for the assessee has submitted that the case of the assessee was selected manually for scrutiny after approval of the Pr.CIT. The Assessing Officer has considered and examined all the issues and addition was made, therefore, the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. 4. On the other hand, ld.DR supported the order of the Pr.CIT. 5. We have heard both the sides, perused the material available on record and orders of the authorities below. 6. In this case, during the course of vehicle surveillance by the flying squad set up for election purpose in Madurai Central Assembly Constituency, a sum of Rs. 18.10 lakhs was found on 19/08/2016 in the possession of the assessee and Sri Tharagala Lakshmana Rao. When they have been asked for the source, it was submitted by the assessee that Rs. 10.10 lakhs belonging to him and the remaining balance of Rs. 8.00 belongs to Sri Tharagala Lakshmana Rao. The Surveillance team not satisfied with the explanation given by the assessee and the amounts seized from both the parties and handed over to the District Treasury, Madhurai. Subsequently, the ADIT (Inv.), Unit I & II has transferred the case to the DGIT (Inv.), AP & Telangana, who made enquiries in this case and reported that sources have been
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verified and found to be correct and seizure of cash is not warranted. Subsequently, case was transferred to the Assessing Officer for taking necessary action. The Assessing Officer selected this case manually for scrutiny after obtaining permission from the Pr.CIT. The Assessing Officer made detailed enquiries and called the assessee to explain the source and after considering the explanation, he made the addition of Rs. 7.00 lakhs and the same is brought to tax in the hands of the assessee. Therefore, in our opinion, the order passed by the Assessing Officer neither erroneous nor prejudicial to the interest of the Revenue. It is further noted that as per the order passed by the Pr.CIT, the order of the Assessing Officer is void ab initio and not maintainable. If the order of the Assessing Officer is prima facie invalid, the Pr.CIT cannot exercise the powers conferred in u/sec. 263, therefore on this count also, the order passed by the Pr.CIT is not valid. In view of the above, the order passed by the Pr.CIT is hereby cancelled and allow the appeal of the assessee. 7. Insofar as ITA No. 354/VIZ/2018 is concerned, the facts and circumstances are similar to the facts involved in ITA No. 353/VIZ/2018, therefore our decision in ITA No. 353/VIZ/2018 shall apply mutatis mutandis to this appeal also.
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In the result, both the appeals filed by the assessees are allowed. Order Pronounced in open Court on this 07th day of August, 2019.
Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 07th August, 2019. vr/- Copy to: 1. The Assessee – a) Koka Srinivasa Rao, D.No. 2.35, Main Road, Kodangi (Post), Kalidindi (Mandal), Krishna District. b) Taragala Lakshmana, D.No. 1-20-1, Kodangi (Post), Kalidindi (Mandal), Krishna District. 2. The Revenue – ITO, Ward-1, Gudivada. 3. The Pr.CIT, Vijayawada. 4. The D.R., Visakhapatnam. 5. Guard file. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.