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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
All the captioned appeals are filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam in appeal No.744/10455/2019-20/CIT(A)- 3/VSP/2020-21; 746/10457/2019-20/CIT(A)-3/VSP/2020-21; 747/10458/2019-20/CIT(A)-3/VSP/2020-21; 751/2019- 20/10462/CIT(A)-3/VSP/2020-21; 753/2019-20/10464/CIT(A)- 3/VSP/2020-21; 741/10476/2019-20/CIT(A)-3/VSP/2020-21, dated 31/3/2021 arising out of the orders passed U/s. 143(3) r.w.s 153C of the Income Tax Act, 1961 [the Act] for the AYs 2013-14 to 2018-19. Since the all these appeals are pertaining to one assessee and the issues involved are identical, therefore, for the sake of convenience, all these appeals are clubbed, heard together and disposed off in this consolidated order.
2. At the outset, the Ld. Authorized Representative brought to our notice that in all these appeals there is a delay of 270 days in filing the appeal before the Tribunal. Further, the Ld. AR drew our attention to the petition dated 4/5/2022 filed by the assessee seeking condonation of delay and read out the contents of the petition which is extracted herein below for reference:
“1. With respect to the above the appellant submits that the order of the Hon’ble CIT(A)-3 dismissing appellant’s appeal was received on 31/3/2021 and the time limit for preferring an appeal in Hon’ble ITAT-Visakhapatnam expired on 30/05/2021. However, the appeal was filed on 24.2.2022. In this process there was a delay of 270 days.
In this regard, the appellant relies on the decision of the Hon’ble Supreme Court dated 10/01/2022. Para 5(I) of the order mentions that period from 15/3/2020 till 28/2/2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. Further, para 5(III) of the order reads as under:-
In cases where the limitation would have expire during the period between 15/3/2020 till 28/2/2022, notwithstanding the actual balance period of limitation remaining all persons shall have a limitation period of 90 days from 01/03/2022. In the event the actual balance period of limitation remaining, with effect from 1/3/2022 is greater than 90 days that longer period shall apply.
In the facts and circumstances of the appellant’s case, the time limit available for filing of appeal is 90 days from 28/2/2022 ie., till 29/5/2022. Hence considering the decision of the Apex Court, the Hon’ble ITAT is requested to kindly condone the delay, otherwise would cause unduly hardship to the appellant.”
3. The Ld. AR therefore pleaded that the delay in all the appeals may kindly be condoned considering the directions of the Hon’ble Apex Court.
On perusal of the contents of the condonation petition filed by the assessee as well as the pleadings of the Ld. AR, we are of the considered view that this is a fit case to condone the delay as accordingly we hereby condone the delay of 270 days in filing all the instant appeals before the Tribunal and proceed to adjudicate the appeals on merits.
Since the issues raised in all the appeals are identical, we shall take (AY: 2013-14) as a lead appeal and proceed to adjudicate the same.
Briefly stated the facts of the case are that the assessee is an individual deriving income from business / salary filed his return of income for the AY 2013-14 on 23/11/2013 admitting total income of Rs. 9,81,320/-. A search and seizure operation U/s. 132 was conducted in the case of M/s. Apex Frozen Foods Limited on 18/01/2018 in which the assessee was the Purchase Manager. Subsequently, search proceedings were also conducted at the residence of the assessee on 19/1/2018. During the course of search proceedings various investments were noticed.
Subsequently, notice U/s. 153C r.w.s 153A was issued and served on the assessee on 21/3/2019 for the AY 2013-14. In response to the notice U/s. 153C, assessee filed his return of income admitting the same total income at Rs. 9,81,320/- on 29/3/2019 and subsequently, notice U/s. 143(2) and 142(1) along with the annexures were issued from time to time. In response to the notices, the assessee filed various information called for by the Ld. AO. During the search operations, it was noticed that M/s. Apex Frozen Foods Ltd., has paid an insurance premium of Rs. 9,92,856/- on the life of the employee under the Employer Employee Scheme (EES). The Ld. AO considered the premium paid by the company on the life of the assessee as a taxable perquisite in the hands of the assessee and added it to the total income of the assessee. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A).
Considering the facts of the instant case and the submissions made by the Ld. AR and the provisions of section 17(2)(v) of the Act, the Ld. CIT(A) upheld the order of the Ld. AO. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
The assessee has raised originally 8 grounds of appeal and later revised to 4 grounds of appeal as extracted below:
“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case.
2. The notice issued U/s. 153C of the Act is invalid.
3. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 9,92,856/- made by the Assessing Officer U/s. 17(2)(v) of the Act towards insurance premium paid by the employer.
4. Any other ground that may be urged at the time of appeal hearing.”
Further, the assessee also raised the additional legal ground as below:
“On the facts and in the circumstances of the case, whether the notice dated 21/3/2019 issued U/s. 153C of the Act is liable to be quashed as invalid and consequently whether the assessment proceedings are liable to be quashed as void-ab- initio.”
At the outset, the Ld. AR argued that the Ld. AO has issued a notice U/s. 153C of the Act instead of issuing notice U/s. 153A of the Act. The Ld. AR further submitted that since the assessee’s premises was also subjected to search, the Ld. AO ought to have issued notice U/s. 153A of the Act. The Ld. AR further invited our attention to the notice issued U/s. 153C of the Act placed in paper book page 13. The Ld. AR therefore submitted that the assessment made u/s. 143(3) r.w.s 153C is void ab initio and liable to be quashed. The Ld. AR relied on the jurisdictional Tribunal’s decision in the case of Sri Kagitha Mathaiah in (AY: 2017-18), dated 26/5/2022.
Per contra, the Ld. DR submitted that mere mentioning of the wrong section in the notice issued cannot vitiate the assessment proceedings. The Ld. DR relied on the decision of the Hon’ble Karnataka High Court in K.M. Nagaraj vs. DCIT reported in 120 Taxmann.com 425 (Karnataka). The Ld. DR therefore pleaded that the order of the Ld. Revenue Authorities be upheld.
We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue
7 Authorities. Admittedly, this legal issue was not raised before the Lower Authorities by the assessee. The core issue involved in this appeal relates to the validity of the notice issued U/s. 153C of the Act and completion of assessment u/s 143(3) r.w.s 153C.
In the instant case, search operation U/s. 132 was conducted in the premises of M/s. Apex Frozen Foods Limited and subsequently in the premises of the assessee. The Ld. AO has issued a notice U/s. 153C of the Act wherein it was stated that the Ld. AO has required the assessee to prepare the true and correct return of the total income in pursuance of the provisions of section 153C r.w.s 153A of the Act for the impugned assessment year. As per the provisions of the Act, consequent to the search, as per the requirement of law, in case the premises of the persons have been searched, then the proceedings to be initiated are by way of issue of notice U/s. 153A of the Act. In the instant case, the documents were seized from the residential premises of the assessee and therefore the Ld. AO ought to have issued notice U/s. 153A of the Act instead of notice U/s. 153C of the Act. Further, we find from the written submissions made by the Ld. AR regarding the satisfaction note recorded by the Ld. AO wherein the Ld. AO proposed to issue notice U/s. 153C of the Act. Therefore, the initiation of proceedings U/s.153C of the Act
8 in the case of the assessee who is the person searched is not valid. It is not out of place to mention that any defects in notices U/s. 153A / 153C of the Act, whereby the Assessing Officer assumes jurisdiction, are not curable U/s. 292BB of the Act even though the assessee participated in the assessment proceedings without objection. Therefore, it can be safely concluded that in the instant case, since the issue of notice U/s. 153C is invalid and consequently, the assessment order passed U/s. 143(3) r.w.s 153C is bad in law and void ab initio. The decision quoted by the Ld. DR is distinguishable on the facts, although in that case the heading of the said notice proposed to assess the assessee’s income U/s. 153A of the Act but the contents of the notice contains the proposal to assess the assessee’s income U/s. 153C of the Act. However, in the instant case, not only the heading of the notice but also the contents of the notice proposed to assess the assessee’s income U/s. 153C of the Act. We therefore are of the considered view that this decision cannot be applied to the instant case. We are therefore inclined to quash the assessment order passed U/s. 143(3) r.w.s 153C of the Act considering it void ab initio.
9 11. The other grounds raised by the assessee are academic in nature since the legal ground raised by the assessee is adjudicated in favour of the assessee.
In the result, appeal of the assessee is allowed.
With respect to to 37/Viz/2022 (AY: 2014-15 to 2017-18), since the assessee has raised similar grounds of appeal to that of the grounds raised in his appeal ITA No. 33/Viz/2022 (AY: 2013-14), our decision given therein applies mutatis mutandis to these appeals also. Thus, all these appeals filed by the assessee are allowed.
ITA No.38/Viz/2022 (AY: 2018-19)
Brief facts of the case are that a search & seizure operation U/s. 132 was conducted in the case of M/s. Apex Frozen Foods Limited on 18/01/2018, in which the assessee is Purchase Manager of the company. Subsequently, search proceedings in the residence of the assessee were carried out on 19/01/2018.
During the course of search proceedings, based on the incriminating material found, on being asked the assessee admitted Rs. 8,65,521/- towards profit on sale of shares, Rs. 16,00,000/- towards unexplained loan advance and Rs.
10 35,93,861/- towards deemed income U/s. 50C of the Act as additional income for the AY 2018-19. Thereafter, the case of the assessee was notified to Central Circle-1, Rajahmundry along with the company. The assessee e-filed his return of income on 19/09/2018 declaring total income of Rs. 66,46,930/-.
Subsequently, notice U/s. 153C r.w.s 153A was issued and served on the assessee on 21/03/2019. Later the case was transferred to ACIT, Central Circle-2. Subsequently, notice U/s. 143(2) and 142(1) along with the annexures were issued from time to time. In response to the notices, the assessee filed various information called for by the Ld. AO. Based on the information submitted by the assessee, the Ld. AO observed that the assessee has advanced a sum of Rs. 16,00,000/- @ 12% per annum and the borrower has repaid the same along with interest which worked out to Rs. 16,80,000/- and the same was not admitted by the assessee in the return of income. In the absence of any proper explanation by the assessee, the Ld. AO made addition of Rs. 16 lakhs under unexplained loan advance.
Further, the Ld. AO observed that the assessee admitted capital gain of Rs. 26,80,572/- in the return of income in response to the notice U/s. 153A against the admitted short term capital gain of Rs. 8,65,521/-. Therefore, the Ld. AO made addition of Rs. 26,80,572/- under the head undisclosed profit on sale of shares.
During the search operations, it was noticed that M/s. Apex Frozen Foods Ltd., has paid an insurance premium of Rs. 8,43,632/- on the life of the employee under the Employer Employee Scheme (EES). The Ld. AO considered the premium paid by the company on the life of the assessee as a taxable perquisite in the hands of the assessee and added it to the total income of the assessee. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A) contesting the additions of Rs 16,00,000/- and Rs 8,43,632/-. Considering the facts of the instant case and the submissions made by the Ld. AR and the provisions of section 17(2)(v) of the Act, the Ld. CIT(A) dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us and raised the following grounds:
“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 8,43,632/- made by the Assessing Officer U/s. 17(2)(v) of the Act towards insurance premium paid by the employer. 3. (a) The Ld. CIT(A) is not justified in sustaining the addition of Rs. 16,00,000 made by the assessing Officer towards unexplained amount of loans advanced.
12 (b)The Ld. CIT (A) ought to have appreciated that the appellant has already included the aforesaid amount in the total income admitted in the return of income. 4. Any other ground that may be urged at the time of appeal hearing.”
Grounds No. 1 & 4 are general in nature and need not be adjudicated.
Grounds No.3(a) and (b) are not pressed by the Ld. AR and therefore they are not adjudicated.
With respect to Ground No 2, at the outset, the Ld. AR submitted that the assessee has no right on the policy either to claim or surrender or till the policy is assigned in his favour.
The Ld. AR further submitted that the benefit of the policy will not accrue to the assessee and therefore the premium paid by the employer cannot be considered as a perquisite U/s. 17(2)(v) of the Act.
Per contra, the Ld. DR relied on the orders of the Ld.
Revenue Authorities.
We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities. Admittedly, the policy is taken by the employer in 13 the name of the employee and cannot be assigned in the name of the employer in a future date. The insurance policy is taken by the employer to protect the interests of the employees even though no immediate benefit is accrued to the employees. The main issue is whether premium paid by the employer on the policy taken on the life of the employee / assessee is a taxable perquisite as defined U/s. 17(2)(v) of the Act or not? We extract below section 17(2)(v) of the Act for reference:
“Sec. 17(2)(v): any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect an assurance on the life of the assessee or to effect a contract for an annuity;”
From the plain reading of the section 17(2)(v) of the Act, we find that any policy to effect an assurance on the life of the assessee shall be treated as a ‘perquisite’ as defined in the Act.
Therefore, the argument of the Ld. AR has no merits. We are therefore inclined to uphold the order of the Ld. CIT(A) and dismiss this appeal of the assessee.
In the result, assessee’s appeals in to 37/Viz/2022 are allowed and ITA No.38/Viz/2022 is dismissed.
Pronounced in the open Court on the 26th April, 2023. Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER Dated : 26.04.2023 OKK - SPS आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Sri Gottumukkala Vijaya Raghava Raju, 1. D.No.4-384, Bank of Baroda Colony, Aigolupadu Centre, Kakinada, Andhra Pradesh – 533005. राज�व/The Revenue – Asst. Commissioner of Income Tax, Central 2. Circle-2, Guntur, Andhra Pradesh – 522002.
3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam