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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SHRI LALIET KUMAR
These are the appeals arising out of the order dated 05.08.2014 with the following grounds:
&1668, 1674&1675, 1676-85, /Bang/2014 Page 4 of 20
Grounds of Appeal:
3. On 14.4.2016, the revenue has filed another additional 3 grounds which are as under: &1668, 1674&1675, 1676-85, /Bang/2014 Page 5 of 20
4. At the outset, the learned AR for the respondent has made the objection about the maintainability of the appeal and submitted that as per Rule 14 of the Income Tax Income Appellate Tribunal rules, the appellant herein (revenue) has not made the appellant before the CIT(A) as respondent in the present appeal and submitted that present appeals are required to be dismissed. The learned AR has drawn our attention to rule 14 which provides as under: “In an appeal by the Income-tax Officer 1[/Assessing Officer] under sub-section (2) of section 253, the appellant before the Appellate Assistant Commissioner 1[/Commissioner of Income-tax (Appeals)] shall be made a respondent to the appeal.”
The learned AR has also drawn our attention to section 2(7) which reads as under:
“26(7) "assessee"27 means a person by whom 28[any tax] or any other sum of money is payable under this Act, and includes— (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income 29[or assessment of fringe benefits] or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ; (b) every person who is deemed to be an assessee under any provision &1668, 1674&1675, 1676-85, /Bang/2014 Page 6 of 20 of this Act ; (c) every person who is deemed to be an assessee in default under any provision of this Act ;”
The learned AR has also referred to section 156 which reads as under:
“156. Notice of demand.- When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable : Provided that where any sum is determined to be payable by the assessee under sub-section (1) of section 143, the intimation under that sub-section shall be deemed to be a notice of demand for the purposes of this section.”
On the basis of the above, it was contended by the AR that the appellant before the CIT(A) was an individual, as he has filed the appeal against the order passed by the AO, as the status of the assessee has been changed from individual to AOP. Therefore, it was submitted that the appellant should have made the individual as the respondent/s, in the present appeal, instead of filing the appeal against AOP arraying as respondent.
Per contra, the learned counsel for the appellant has drawn our attention to the assessment order wherein in column 1 of the assessment order, it is mentioned in the name of the assessee as AOP of Shri. Bommegowda and Shri.Rangegowda. He has also drawn our attention to the order of CIT(A) wherein the name of appellant has been mentioned as Shri. Rangegowda, AOP of Shri. Bommegowda and Shri.Rangegowda. It was submitted by the learned counsel on behalf &1668, 1674&1675, 1676-85, /Bang/2014 Page 7 of 20 of the appellant that no prejudice was caused to the present respondent by filling the appeal in the name of AOP of Shri. Bommegowda and Shri. Rangegowda.
We have heard the parties and perused the record. The revenue can prefer an appeal against the order passed by the CIT(A) u/s 253(2) of the Act before the Appellate Tribunal. The procedure of the Appellate Tribunal is provided u/s 255 of the IT Act. The Tribunal while exercising its power u/s 255(5) of the Act had framed the rules to regulate the procedure of Appellate Tribunal. As is clear from Section 253(2), the department, if objects to an order passed by CIT, may direct AO to file an appeal before the Appellate Tribunal. In the present case, the CIT(A) has passed an order on the appeal of Shri. Bommegowda and Shri. Rangegowda without ensuring that AOP of Shri. Bommegowda and Shri. Rangegowda is to be made as a party against which the assessment order was passed.
In our view, the impugned order can be challenged by the revenue before the Tribunal only by making the AOP of Shri. Bommegowda and Shri. Rangegowda as respondent in the present case. Admittedly, Shri. Bommegowda and Shri. Rangegowda were part of the AOP and therefore there is a compliance of the rule 14 of ITAT rules of 1963. Moreover, “Appellant before the CIT” used in Rule 14 of ITAT Rules, 1963, is required to be interpreted liberally, so as to include any other person, against whom the initial order was passed by the assessing officer, should also be permitted to be respondent in the appeal filled by the Revenue. Merely because one of the Assessee has preferred an appeal before the CIT(A) will not &1668, 1674&1675, 1676-85, /Bang/2014 Page 8 of 20 withhold the revenue from filling the appeal against the actual person against whom the assessment order was passed by the AO. In our view, under the scheme of the Act an appeal may be preferred by the assessee or by any collector or by any person denying liability to deduct tax in certain cases before the CIT(A). Therefore, to say that the person who had preferred an appeal before the commissioner should be made a party as a respondent in the appeal of the revenue as against the actual person against whom the assessment order was passed by AO, is not correct interpretation of rule 14 of ITAT Rules, 1963. The rules were framed to advance the cause of justice and are supplementary to the Act, if strict interpretation is done then it will lead to anomaly, as the revenue will not be able to file appeal against the person originally assessed by the AO.
The order of the CIT(A) challenged before us, it is clearly mentioned that appellant is Shri. Rangegowda AOP of Shri. Bommegowda and Shri.Rangegowda. Before the Commissioner as well before Tribunal, Shri.Nagin Kincha, CA was representing the assessee (however till date he had not filled POA on behalf of respondents) i.e., AOP of Shri.Bommegowda and Shri.Rangegowda and individuals. Therefore no prejudice would cause to the assessee before us for not impleading the individuals before CIT(A). It is only a technical objection which was raised by the learned AR. Further under the rules, the consequence of filing the appeal without impeding the appellant before the CIT(A) has not been provided in the Act or in Rules as it is provided under order 7 rule 11 of Civil Procedure Code. Our view is also supported by judgment of Hon’ble Delhi high court in &1668, 1674&1675, 1676-85, /Bang/2014 Page 9 of 20 similar facts in the matter of [1975] 99 ITR 552 (DELHI) Commissioner of Income-tax v. Income-Tax Appellate Tribunal wherein it was held as under: “The Tribunal held that Reference Application No. 1722 of 1964-65 was a nullity and thus dismissed the same rejecting the contention of the revenue that the defect in not properly describing the respondents be allowed to be removed as allowing such a request, according to the Tribunal, would amount to substituting altogether a new application in the name of removing the defect. The Tribunal rejected the reference application also on the ground that the assessee in the said application was stated to be " SahuJagdish Prasad and others". The Tribunal put a question to itself as to who those "others" were because it was not indicated in the appeal wherefrom to get them.
It was required of the department to mention the names of all the respondents clearly but at any rate the fact remains that the department had indicated the name of the assessee-family as SahuJagdish Prasad, Pilibhit. Much capital cannot be made out of the fact that instead of giving the names of other respondents clearly the department chose to describe them as "and others".
The Tribunal's powers in dealing with the appeals are of widest amplitude and identical with the powers of an appellate court under the Code of Civil Procedure as observed by their Lordships of the Supreme Court in the case, Income-tax Officer, Cannanore v. M.K. Mohammed Kunhi [1969] 71 ITR 815. The Tribunal is not a court but it exercises judicial powers. As observed in the above-cited case because of its appellate jurisdiction the Tribunal has the power of doing all such acts or employing such means as are essentially necessary for making orders for staying proceedings to prevent an appeal, if successful, from being rendered nugatory. Because of the powers of the Tribunal which are of "widest amplitude and identical with the powers of an appellate court under the Code of Civil Procedure" in the circumstances of the case the Tribunal should have permitted the department to rectify the mistake in mentioning the names of the other respondents clearly instead of their being described as "and others".
Reference here may be made to the case, Jhuta Ram v. Ram Sarup AIR 1937 Lah. 60. In that case a suit was instituted against several defendants of whom three were minors. The minor defendants were first represented by their relations as their &1668, 1674&1675, 1676-85, /Bang/2014 Page 10 of 20 respective guardians but subsequently as those relations refused to act as guardian a court official was appointed as the guardian of the minor defendants. The suit was dismissed. The plaintiff filed an appeal. The minor defendants-respondents were shown as being represented by the original guardian, their relations, and not by the court official. The appeal was dismissed by the first appellate court on the ground that the appeal was not properly represented as against the minors and could not, therefore, proceed as it could not proceed against those minors, having thus abated in its entirety. The view that it had abated was negatived holding that there was no question of abatement in the case. It was observed that the fact that there was a mistake in the description of the respondents should not entail the dismissal of the appeal. The defect in not properly impleading the respondents as parties to the appeal was held to be a formal one which should be allowed to be corrected when brought to the notice of the court. The case was accordingly remanded to the first appellate court with a direction to proceed with the appeal on merits after the description of the minor defendants had been corrected and the service effected on their guardian.
Reference may also be made to a Division Bench decision of the Oudh High Court in Ch. KanhayaBux Singh v. Mst. Ram Devi Kuer AIR 1944 Oudh 62. In that case in the grounds of appeal the appellants named themselves but did not mention the names of the idols, who were defendants in the suit, either in the category of the persons appealing or in that of the respondents. Objection to the competency of the appeal was repelled holding that omission of names of the idols in the grounds of appeal amounted merely to a mis-description. The appellants were permitted to amend the memorandum of appeal so as to show distinctly the names of the idols. The omission was held not to have the effect of rendering the judgment of the trial court final in regard to the question affecting the idols who were not impleaded as parties to the appeal.
Omission to implead the names of the other respondents in the appeal merely amounted to a mis-description and being a formal one should have been allowed to be corrected when brought to the notice of the Tribunal rather than entail the dismissal of the reference application.”
&1668, 1674&1675, 1676-85, /Bang/2014 Page 11 of 20
In the light of the above, the objection of the learned AR for the assessee is without any substance and is therefore rejected.
In the assessment order, we noticed that initially the notices u/s 142(1) were issued against Shri. Bommegowda and Shri. Rangegowda only. However, when they left the office of the AO in the middle of giving the statements on 23.02.2012, then the AO had sent the notices under section 142(1) to AOP of Shri. Bommegowda and Shri. Rangegowda. The relevant paragraphs mentioning the above said facts in the Assessment Order are as under: &1668, 1674&1675, 1676-85, /Bang/2014 Page 12 of 20 &1668, 1674&1675, 1676-85, /Bang/2014 Page 13 of 20
We have noticed that the appeal was filed before the CIT(A) in the individual capacity by Shri. Rangegowda and others and is clear from Form 35. The details of the 19 appeals preferred against the assessment orders are as under: &1668, 1674&1675, 1676-85, /Bang/2014 Page 14 of 20
Before the AO, Shri. A. Shridhar, Advocate appeared on 08.02.2013 under the signature of Shri. Bommegowda and Shri. Rangegowda. The contents of the letter were reproduced in the Assessment Order to the following fact: &1668, 1674&1675, 1676-85, /Bang/2014 Page 15 of 20
“Gist of the letter: We are the residents of Paduvalahippe Village. Due to the transportation of sand in about 25 to 30 lorries through private transporters, villagers were suffering due to many fallouts of the same. In a meeting dated 02.04.2009, the villagers took certain decisions copy of which is enclosed.
Running of lorries on the lands owned by the villagers has caused a lot of damage and brought health problems to the people. In order to make up for the loss and since the village panchayath or the Government did not take any action, it is decided to collect Rs.1,000/- per lorry as penalty. Further, to collect this penalty, Shri. Venkatesh, S/o. HanumatheGowda, shri. Basavegowda, S/o. GowdeGowda, Shri.BommeGowda, s/o EreGowda and Shri. Range Gowda, S/o LakkeGowda have been authorized who are well known persons of the village. Further, it is decided to open a bank account at Cauvery Kalpatharu Grameena Bank, Paduvalahippe in the joint names of Shri. Venkatesh, S/oHanumatheGowda, Shri. BasaveGowda, S/o GowdeGowda, Shri. Bomme Gowda, S/o Ere Gowda and Shri. Range Gowda, S/o LakkeGowda. It is also decided to disburse the money among the 140 agricultural oriented families equally.
Signed BommeGowda and Range Gowda
Translation of minutes of meeting dt. 02.04.2009
Subject: Transportation of sand from Hemavathi River by 10 to 15 lorry loads of sand by private transporters and loss to the members of village and farmers – action to be taken – reg.
Decision: The respected citizens of Paduvalahippe Shri. Venkatsh and Shri.BasaveGowda and others have informed that daily some private lorry owners are transporting about 25 to 30 loads of sand from Paduvalahippe village and since there is no road contact to the Hemavathi River bank, they are running the lorries &1668, 1674&1675, 1676-85, /Bang/2014 Page 16 of 20 through the agricultural lands of Paduvalahippe village. This has created huge loss to the crops and the farms.
Due to too much of lorry transport, the villagers are also suffering from health hazards like fever, cough etc. Even the water of Hemavathiriver has become dirty and the cattle are not able to use the Hemavathi water due to pollution. Even the GramaPanchayath has not taken any action to prevent this. In order to make up for the losses the respected villagers discussed the issues and decided to collect Rs.1,000/- per lorry from the lorry transporters. The powers to collect this money is delegated to Shri. Venkatsh, S/o GowdeGowda, Shri. BommeGowda, S/o EreGowda and Shri. Range Gowda, S/o LakkeGowda. It is further decided to open two bank accounts in joint names at CauveryKalpatharuGrameena Bank, Paduvalahippe. It was decided to disburse the amount so collected among the 140 agricultural oriented families equally.
Signed by: Venkatesh, BasaveGowda, BommeGowda and Range Gowda.”
The learned CIT while passing the order in the appeal of Shri. Rangegowda in paragraphs 24 to 25 has held as under:
Now the question would arise as to whether the two persons &1668, 1674&1675, 1676-85, /Bang/2014 Page 17 of 20 who were allowed to open the bank accounts and operate the same,
If we examine the conclusion arrived at by the learned CIT(A), then it is clear that he held that the accounts were being operated by two or more persons viz., Shri. Bommegowda and Shri.Rangegowda and also by Shri.Venkatesh and Shri.Basavegowda in terms of the minutes of the meeting of the members of the village and were collecting and depositing amount in their respective accounts. However, the learned CIT has held that two persons operating the accounts cannot constitute as AOP and therefore the order of the AO has no legs to stand. In our view, the order passed by the learned CIT(A) is brefit of any reasoning as was passed without appreciating the facts on record. It is a consistent case of the persons before the AO viz., Shri. Bommegowda and Shri.Rangegowda, Shri. Basavegowda and Shri.Venkatesh were authorized by the villagers consisting of 140 persons to collect the amount from the lorry ferrying sand from the river bed and this has been done with a view to develop the infrastructure in the village in the form of road, etc. However, despite the notices and opportunity given by the learned AO, &1668, 1674&1675, 1676-85, /Bang/2014 Page 18 of 20 the said two persons have failed to bring on record of the members who have authorized them to collect and have further failed to give any record of expenditure made by them for the construction, repair and maintenance of the road, etc.
In the light of the above, the AO has concluded that the amount deposited in the form of cash in the bank account remained unexplained. The learned CIT(A) has decided the appeal on the basis of the appellant before him without ensuring that all the persons forming AOP whether registered or unregistered were impleaded in appeal before him if the status of the AOP have been disputed that the accounts and amount belonged to them.
The Appellant before CIT(A) have not disputed that the accounts do not belong to them, further they have not disputed that the cash was not deposited by them, they have not disputed that the cash was collected by them legally or illegally from the lorry drivers/vehicle owners to remove sands from the river bank. They have also not disputed that they are authorized by the residents of the village by a resolution to collect the amount. They have also not disputed that the said amount was required to be spent for the purposes of welfare of the club. We are in agreement with the contention of the learned AR that as per section 4 of the Income Tax Act, the tax is chargeable in respect of the total income of the previous year of every person and a person is defined in section 2(31) of the IT Act. The AOP (Association of Persons) or body of individuals whether incorporated or not falls within the definition of person. The appellant before the CIT (the &1668, 1674&1675, 1676-85, /Bang/2014 Page 19 of 20 persons before the AO) were required to explain the amount deposited in the account and they have explained the said amount by way of their response in their letter dated 08.02.2013 as mentioned herein above. Thus, in our view, either the money belongs to the persons in whose names the accounts were maintained in the bank to whom notices under section 142(1) of the Act were given or the money belongs to the association of the persons who have authorized them to collect the amount. As the appellants before the CIT(A) were not cooperating during the assessment proceedings, therefore the AO left the office before they could be examined under section 131. The AO was having no other option but to adjudicate the issue on the basis of the material available with him.
In the light of the above, we deem it appropriate to remand the matter to the file of the CIT with the following direction: i. That the CIT(A) shall issue the appropriate notice/notices to the account holders of the two savings bank accounts bearing Nos.013102023278 and 013102014627 with Cauvery Kalpatharu Grameen Bank, Padavalahippe Village. ii. The CIT(A) shall in addition to the above said may also issue the notice to any other person, as may be informed to him by the account holders (assessee) stating that the money belongs to the other persons. In case the person in whose names the accounts were maintained namely Shri. Bommegowda and Shri. Rangegowda fail to give details or particulars of the names and addresses of the persons who in their estimation the amount lying in the bank account belongs to them or they &1668, 1674&1675, 1676-85, /Bang/2014 Page 20 of 20
had been authorized by them to collect the amount then, in our view, the assessment proceedings shall be completed against the Shri. Bommegowda and Shri. Rangegowda in accordance with the law after following the due process treating the amount to be of the persons/account holders.
We have decided the appeal bearing No.1667/Bang/2014. Having only stated the facts of the said case, we notice that the facts of other appeals are similar to the facts of appeal No. 1667/Bang/2014. Therefore, we have not decided each appeal separately. However, we direct the CIT(A) to deal with each appeal by following the directions given in para 23 to each of the assessees / AOP in every appeal.
In the result, the appeals of the revenue are allowed for the statistical purposes.
Pronounced in the open court on this 23rd day of February, 2017.