ACIT, CENTRAL CIRCLE-3(1), HYD, HYDERABAD vs. BYRRAJU RAMA RAJU (SR.), HYD, HYDERABAD

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ITA 1383/HYD/2016Status: DisposedITAT Hyderabad10 January 2018AY 2005-064 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was bad in law as there was no nexus between the reasons recorded and the assessment made. The Tribunal also noted that the tax effect was below the threshold for filing appeals as per CBDT circular.

What were the facts?

The Assessing Officer reopened the assessee's assessment based on a statement from Shri B. Ramalinga Raju. During reassessment, an addition was made for compensation received and interest income was added on a protective basis. The assessee contended the compensation was capital in nature and the interest was already offered.

What were the issues?

Whether the reopening of assessment under Section 147 was valid, and if the additions made were justified.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH

PER B. RAMAKOTAIAH, A.M. : This is an appeal by Revenue against the order of the Commissioner of Income Tax (Appeals)-12, Hyderabad dated 22-06-2016. Revenue has raised the following ground:

“1. Whether on the facts and circumstances of the case, the CIT(A) erred in quashing the reasons of re-opening u/s. 147 which was substituted with effect from April 1989 & sub-section 148 to 253, which are substantially different from the provisions as they stood prior to such substitution”.

Ground No. 2 is general in nature.

2.

Briefly stated, assessee has filed return of income declaring income of Rs. 89,30,450/- including interest accrued on deposits to an extent of Rs.2,58,822/-. After the statement of Shri B.

I.T.A. No. 1383/Hyd/2016 :- 2 -:

Ramalina Raju of M/s. Satyam Computer Services Ltd., Assessing Officer (AO) has reopened all the cases in the group and one such case is that of assessee. In the re-assessment proceedings, AO finalized the assessment by making an addition of Rs. 1,13,279/- being compensation received from Government, treated as ‘other income’. The amount of Rs. 2,58,822/- was also added again on a protective basis, as the income was substantially assessed in other cases.

3.

Before the Ld.CIT(A), assessee objected to the reopening of assessment as well as making additions. It was submitted that the amount of Rs. 1,13,279/- was received as a compensation from the court as a legal heir of his father, who made claim during his life time. It was capital in nature which is not liable to tax. As regards the interest income, it was submitted that it was already offered in the computation; hence again adding the amount does not arise and there is no need to tax the same on protective basis.

4.

Ld.CIT(A) after considering the factual aspect of the additions, set aside the assessment on the reason that reopening of assessment is bad in law as there is no nexus between the satisfaction recorded and the assessment made. Ld.CIT(A) followed the decision of ITAT ‘A’ Bench in the 16 Group companies of Satyam Group in ITA No. 1233/Hyd/2011 and others, relying on the principles laid down therein and has set aside the assessment by stating as under:

“5.4. Considering the facts of the case as enumerated in decision of ITAT, Hyderabad Bench which are relied upon by the assessee and the facts of the case under reference where it has been established that the AO failed to prove the nexus between the statement of Ramalinga Raju

I.T.A. No. 1383/Hyd/2016 :- 3 -:

and fudging of accounts of M/s.SCSL and their impact on the group concerns or persons including the assessee/appellant for the purpose of assessing to income tax and also for the fact that there is no nexus between the reasons recorded and additions made, I have no hesitation in holding that reopening assessments u/s. 147 Income Tax Act for A.Y. 2005-06 in this case is liable to be set aside and the grounds related to this issue are treated as allowed. Since the ground on reopening is allowed, I am of the further opinion that the other grounds relating to the additions made do not require separate consideration or adjudication as they have become academic in nature”.

5.

After considering the rival contentions, we are of the opinion that there is no merit in Revenue appeal. First of all as rightly pointed out by the Ld.CIT(A), the reasons recorded for reopening the assessment has no nexus with the ultimate assessment made. Therefore, we are of the opinion that the CIT(A) has rightly come to the conclusion that reopening of assessment is bad in law. Moreover, as seen from the order of the AO, the addition is only of Rs. 1,13,279/- in the re-assessment order and hence, the tax effect is below Rs. 10 Lakhs. Revenue has not given any reason why the appeal is preferred in violation of Board Circular No.21/2015 dated 10th December, 2015, bearing F.No.279/- Misc.142/2007-ITJ(Pt), which specifically shows that appeals with tax effect below Rs. 10 Lakhs should not be preferred. For these reasons also the appeal is not maintainable. Grounds are accordingly rejected.

6.

In the result, appeal of Revenue is dismissed.

Order pronounced in the open court on 10th January, 2018

Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 10th January, 2018 TNMM

I.T.A. No. 1383/Hyd/2016 :- 4 -:

Copy to :

1.

Asst. Commissioner of Income Tax, Central Circle-3(1), Hyderabad.

2.

Shri B. Rama Raju (Sr.), Plot No. 1326, Road No. 66, Jubilee Hills, Hyderabad.

3.

CIT (Appeals)-12, Hyderabad.

4.

Pr.CIT-(Central), Hyderabad.

5.

D.R. ITAT, Hyderabad.

6.

Guard File.

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