MADAN MOHAN RAO PUVVADA,HYDERABAD vs. ITO., WARD-5(1), HYDERABAD

4 ITA.No.1152/Hyd./2024 4.1. In the affidavit also the assessee has reiterated the same facts as under:

4.2. Thus, the only reason explained by the assessee is that he did not receive the physical certified copy of the impugned order and therefore, he could not file the appeal within the period of limitation. It is pertinent to note that the impugned order was passed by the Pr. CIT with digital

5 ITA.No.1152/Hyd./2024 signature and therefore, there was no requirement of attestation or physical copy of the impugned order when it was served to the assessee by email. However, taking a lenient view and to decide the appeal of the assessee on merits instead of dismissing on technicalities, we condone the delay of 158 days in filing the present appeal, subject to cost of Rs.5,000/- [Rs. Five Thousand Only] to be paid to Prime Minister’s National Relief Fund within a period of one month from the date of this order.

6 ITA.No.1152/Hyd./2024 5. The Ld. Pr. CIT erred in passing the revisionary order by forming different opinion from that of the Assessing Officer taken during the course of assessment proceedings.

7 ITA.No.1152/Hyd./2024 6. The assessee is an individual and has not filed any return of income u/sec.139 of the Income Tax Act [in short "the Act"], 1961 for the year under consideration. The Assessing Officer issued notice u/sec.148 of the Act on 27.03.2021 on the basis of NMS information that the assessee received interest income of Rs.4,27,121/-, professional and technical fees of Rs.2,38,050/-, sale of immovable property of Rs.75,00,000/-and cash deposit of Rs.57,61,230/- in his bank account during the year under consideration. In response to the notice u/sec.148 of the Act, the assessee filed his return of income on 08.05.2021 declaring total income of Rs.11,84,080 /-. The Assessing Officer passed the assessment order u/sec.147 r.w.s.144B of the Act on 31.03.2022 accepting the returned income.

9 ITA.No.1152/Hyd./2024 8. Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that in response to the notice u/sec.148 of the Act, the assessee filed return of income declaring total income of Rs.11,89,080/-. Thereafter, the Assessing Officer issued notice u/sec.143(2) and 142(1) of the Act which were duly responded by the assessee by furnishing the relevant details and documentary evidence. The Assessing Officer was satisfied with the documentary evidence and accordingly completed the assessment u/sec.147 r.w.s.144B of the Act accepting the returned income of the assessee. The learned Authorised Representative of the Assessee thus submitted that the Assessing Officer has examined the issue as stated in the reasons recorded for issuing the notice u/sec.148 of the Act and therefore, the order of the Assessing Officer passed u/sec.147 r.w.s.144B of the Act cannot be held as erroneous when this issue of purchase of property was not subject matter of the re-assessment proceedings. The Assessing Officer has taken a conscious decision with regard to the issues taken up for scrutiny and after considering all the 10 ITA.No.1152/Hyd./2024 relevant evidence filed by the assessee during the assessment proceedings, the Assessing Officer applied his mind and accepted the return of income. Thus, the Assessing Officer has taken one of the plausible view on the basis of the material after necessary application of mind while passing the assessment order. The learned Authorised Representative of the Assessee thus contended that the learned Pr. CIT cannot proceed with revision u/sec.263 of the Act when the assessment order was passed by the Assessing Officer is sustainable in law. Therefore, the revision order passed u/sec.263 deserves to be quashed. In support of his contention, he has relied upon the following decisions:

11 ITA.No.1152/Hyd./2024 6. Satyanarayana Reddy Manne, Hydereabad vs. ACIT Central Circle -2(4), Hyderabad A Bench, Hyderabad in dated 09-04-2024.

8.1. He has further contended that the Assessing Officer has conducted a detailed enquiry before accepting the return of income and therefore, the learned Pr. CIT has no power to invoke the provisions of sec.263 of the Act on the issue other than the reasons for which the case of the assessee was reopened. Thus, the Pr. CIT cannot exercise his power u/sec.263 to revise the re-assessment order which did not form part of the reasons for reopening of the assessment. In support of his contention, he has relied upon the 12 ITA.No.1152/Hyd./2024 Judgment of Hon’ble Delhi High Court in the case of Sipura Developers (P.) Ltd., vs. Pr. CIT (supra).

14 ITA.No.1152/Hyd./2024 15 ITA.No.1152/Hyd./2024 10.1. Thus, the Assessing Officer asked the assessee to furnish the record and details regarding the interest income, professional and technical fees and payments received in respect of transfer of immovable property as well as cash deposits and cash withdrawals in the bank account of the assessee. In reply, the assessee has furnished these details which were called for by the Assessing Officer and thereafter, 16 ITA.No.1152/Hyd./2024 the Assessing Officer has passed the assessment order on 31.03.2022 as under:

17 ITA.No.1152/Hyd./2024 10.2. Thus, it is clear from record that neither in the notice issued u/sec.142(1) nor in the assessment order the Assessing Officer has taken up this issue of purchase of 18 ITA.No.1152/Hyd./2024 property and deduction of TDS under the PAN of the assessee which was found by the Pr. CIT from verification of record. The learned Pr. CIT has given the reasons for initiating the proceedings u/sec.263 of the Act in Para nos.2 and 3 of the impugned order as under:

“2. By virtue of the powers, vested with undersigned u/s.263 of the I.T. Act, 1961, on examination of the records relating to the assessee for the A.Y.2017-18 it is noticed that: 1. On verification of the ITS details available through ITBA, it is observed that the assessee during the financial year 2016-17, purchased an immovable property from one Shri Damodar Reddy Vangala (PAN: AZDPV6585F) on 25.05.2016 for an amount of Rs.2,70,98,000/- and duly deducted tax of Rs.42,97,761/- u/s. 1941A of I.T. Act, 1961. However, the said asset/amount is not seen in the Balance Sheet filed as at 31.03.2017. As seen from the ITR and the financials filed, the total value of the Balance Sheet(i.e. Liabilities/Assets) itself is Rs.1,79,94,081/-. From the ITR filed for the Asst Year 2018-19 it is seen that the Balance Sheet shows only an amount of Rs.6,64,860/-(Net of current assets/ liabilities).

However, the same was neither disclosed by the assessee nor has been examined by the assessing officer during the course of assessment proceedings resulting in under assessment of income to the tune of Rs.2,70,98,000/- Thus, the assessment completed u/s 147 r.w.s 144B of the 19 ITA.No.1152/Hyd./2024 IT Act on 31.03.2022 is erroneous in so far as it is prejudicial to the interest of revenue.

“4. In response to the same the assessee has filed his written submission on 12.02.2024, the relevant portion is reproduced as under:

20 ITA.No.1152/Hyd./2024 2. Issue in show cause notice without considering the fact that same has been disclosed by joint purchaser: - 2.1. In this regard it may be submitted that the assessment u/s 147 r.w.s. 144B of the Act has been completed after thorough examination of all the issues by applying the provisions of law judiciously by taking one course of decision as per law. There is no mistake in application of law or short coming in the enquiry or examination of the issues.

2.2. However, your good selves issued show cause notice for revision proceedings on the basis that the assessee has purchased immovable property at Rs.2,70,98,000/- from Shri Damodar Reddy Vangala on 25.05.2016 and said the assessment order passed u/s 147rws144B is erroneous and prejudicial to the interest of the revenue.

2.3. However, your good selves erred in appreciating the fact that the property purchased are in joint name i.e., Mr. P. Madan Mohan Rao and Smt. P.L Ratnam (wife of P. Madan Mohan Rao). The above fact can be verified from the purchase agreement which has been enclosed as Annexure- 1 for your good selves' reference. Extract of page of agreement is reproduced below for easy reference.:

IN FAVOUR OF 1. Dr. P. MADAN MOHAN RAO S/o. Late Dhananjaya Rao, Aged 61 years, Occupation: Doctor,

2.4. Further the said property was purchased in the joint names of assessee and his wife, but the assessee's PAN was quoted during the purchase. However, the purchase was accounted in assessee's wife financials as evident in subsequent paras. There is no intention of income escapement by the assessee.

2.5. However, in the subsequent year the property was sold at Rs.2,71,00,000/- and same has been considered/offered by wife proprietorship. Thus there is no escapement of any amount of tax in the assessee's hand as it is not shown in balance sheet, as the same was found place in wife's accounts and offered. Hence, it is not appropriate to propose the addition in the assessee account on the simple reason that the asset is not found in assessee's balance sheet, as the same was being offered by the assessee's wife and offered to tax in subsequent year.

2.6. Further Smt. P.L. Ratnam for the AY 2017-18 has shown the fact of the being property purchased in its asset side the same is given below of the balance sheet. Subsequently, in the AY 2018-19 the Smt. P. L Ratnam has sold the said property and same was deleted from its books of accounts.

22 ITA.No.1152/Hyd./2024 Hence, the immovable property that your good office is questioning is purchased by the joint holders (Assessee and his wife) and same property reported in the books of the wife account and in subsequently sale to reported in the wife's account. Thus, the reason assigned for revision of the assessment order under misconception and mis- honour. Therefore, it is unsustainable and requested to be dropped.

a) CIT vs. Mehrotra Brothers [2004] 270 ITR 157 (MP); b) CIT vs. Parameshwar Bohra [2004] 267 ITR 698 (Raj); c) Paul Mathews and Sons vs. CIT [2003] 263 ITR 101 (Ker) Since the property under consideration has been reported in the books and ITR by joint holder and Asst order passed by the Assessing officer in case of the assessee was not erroneous and prejudicial to the interest of the revenue, the proposed revision u/s 263 is requested to be dropped.”

10.4. In para 2.2 and 2.3 of the reply of the assessee, it is contended that the property in question was purchased in the joint name of the assessee and his wife. The assessee 23 ITA.No.1152/Hyd./2024 further submitted that assessee’s PAN was quoted during the purchase however, the transaction was accounted in the financials of his wife. The assessee also explained that in the subsequent year the property was sold and the same has been considered and offered by the wife to tax. The Pr. CIT has considered the reply of the assessee and observed in Para nos.5 and 5.1 as under:

“5. After careful verification of the submissions made by the assessee and the material available on record it is observed from the sale deed that Shri Dr. P. Madan Mohan Rao and Smt. Dr. P.L. Ratnam w/o of Dr. P. Madan Mohan Rao are the co-owners of the property purchased. Further, from the deed it is seen that the part payment of sale consideration is paid by way of taking loan from the Bajaj Finance Limited. The assessee in his submissions has stated that the property purchased has been reflected in his wife i.e. Dr. P.L. Ratnam's return in the balance sheet on asset side as it is a joint property. Therefore, the assessee. was requested vide hearing notice dated 18.03.2024 tosubmit a copy of the loan sanctioned from Bajaj Finance, the sources for repayment of loan with supporting documents and also sources for payment of Rs.45,68,741/- with supporting documents in his claim on or before 20.03.2024. 5.1. In response to the same, the assessee neither appeared nor submitted any written submission/explanations with regard to the claim made by the assessee. Hence, it is 24 ITA.No.1152/Hyd./2024 presumed that the assessee has nothing to say to substantiate his claim.” 10.5. Therefore, there is no denial that at the time of purchase, the said property was in the joint name and PAN of the assessee was given and even the TDS was also deducted under the PAN of the assessee which is reflected in the PAN account of the assessee and therefore, the said transaction was duly available in the PAN account of the assessee. Further, the assessee did not submit any supporting evidence or explanation as how the sale consideration was paid and the status of the loan taken from Bajaj Finance Ltd., as well as source of repayment of loan. Once the transaction was found to be under the PAN of the assessee then, the Assessing Officer was supposed to consider the said information available in the PAN account of the assessee and particularly, with the ITS details available in the ITBA Portal under the PAN of the assessee. Failure on the part of the Assessing Officer to consider the said information amounts to complete lack of enquiry on the part of the Assessing Officer which renders the assessment order 25 ITA.No.1152/Hyd./2024 passed by the Assessing Officer as erroneous so far as prejudicial to the interests of Revenue.

10.6. It is pertinent to note that it is not a case of re- assessment but it is a case of assessment as no return was filed by the assessee prior to the notice issued u/sec.148 of the Act and therefore, the assessment order in question is the first order in the case of the assessee for the year under consideration. The decisions relied upon by the learned Authorised Representative of the Assessee are on the point of jurisdiction of the Pr. CIT u/sec.263 of the Act after the re- assessment order is confined only on the issue which is subject matter of re-assessment and not on the issue which is subject matter of the original assessment and attained finality being not disturbed by the re-assessment order cannot be revised by the Commissioner u/sec.263 of the Act after the limitation of 2 years from the date of original assessment. Thus, so long as the limitation is available to the CIT to initiate proceedings u/sec.263, it makes no difference whether it is original assessment or re-assessment, but in the garb of re-assessment order the Commissioner cannot invoke 26 ITA.No.1152/Hyd./2024 the provisions of sec.263 of the Act to revise the original assessment order as it would be beyond the limitation period. Accordingly, in the facts and circumstances of the case as discussed above, we do not find any error or illegality in the impugned order of the learned Pr. CIT passed u/sec.263 of the Act and therefore, the order of the learned Pr. CIT is upheld.