Sri Pramod Kumar Gupta(Huf), Hyderabad vs Assessee

2. The assessee in the present case is a HUF which derives income from business and other sources. A search and seizure action under section 132 of the Act was conducted in the cases belonging to MBS Jewellers. During the course of search, certain documents relating to the assessee were found and seized. Consequently, notices under section 153C were 2 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

issued by the A.O. on 11.11.2011, in response to which, the returns of income for the years under consideration were filed by the assessee declaring the income as under :

A.Y. Amount 2004-05 Rs.6,16,658 2006-07 Rs. 2,40,000 2007-08 Rs. 86,340 2010-11 Rs.3,01,250

3. In the assessments completed under section 143(3) read with section 153C by orders dated 30.12.2011, the total income as returned by the assessee for all the years under consideration was accepted by the A.O. Subsequently, the record of the said assessments was examined by the Ld. CIT and on such examination, he found that assessee had not offered any income/remuneration received from three companies namely M/s. Musaddilal Projects Ltd., M/s. Egwood Boards and Panels P. Ltd., and M/s. Egwood Industries P. Ltd., He also noted that cash deposits of Rs.12.75 lakhs were made by the assessee in the Bank of India, Secunderabad Branch which were not enquired into by the A.O. while completing the assessment for A.Y. 2006-07. He further noted that a sum of Rs. 12.50 lakhs was seized during the course of search which was also not duly examined by the A.O. He also noted that as per the statement of Bank of India, Secunderabad Branch, rental income aggregating to Rs.4,06,560 was deposited during the previous year relevant to A.Y. 2007-08 which again was not enquired into by the Assessing Officer. According to the Ld. CIT(A), the assessments in the case of the assessee for all the four years under consideration thus were completed by the A.O. without making proper and adequate enquiries rendering the same to be 3 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

erroneous as well as prejudicial to the interests of the Revenue. He, therefore, issued notices seeking explanation of the assessee as to why the assessment orders passed by the A.O. for all the four years under consideration under section 143(3) read with section 153C should not be revised under section 263.

4. In response to the notices issued by the Ld. CIT(A) under section 263, it was submitted by the assessee that the only income earned by it during all the four years under consideration was from commission and the same was duly offered to tax. It was submitted that there was no remuneration received by the assessee from any of the three concerns during all the four years under consideration and such remuneration actually received by Mr. Pramod Kumar Gupta in his individual capacity was duly declared by him in his individual returns of income. It was pointed out that Mr. Pramod Kumar Gupta was a Director in all the three companies in his individual capacity and the remuneration from the said companies was received by him in his individual capacity and not by the assessee as HUF. As regards the cash deposits of Rs.12.75 lakhs and rental deposits of Rs.4,06,560 made in the bank account with Bank of India, Secunderabad Branch, it was submitted that the said bank account did not belong to the assessee HUF but was jointly owned by Mr. Pramod Kumar Gupta in his individual capacity and three other persons. As regards cash of Rs.12.50 lakhs seized during the course of search, it was clarified by the assessee that the same had already been added to the income of the individuals. It was contended on behalf of the assessee that there were thus no errors in the assessment orders passed by the A.O. 4 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

under section 143(3) read with section 153C for all the four years under consideration as alleged by the learned CIT in the notices issued under section 263 and the revision of said assessment orders was not called for.

5. The learned CIT did not find merit in the submissions made by the assessee and proceeded to treat the assessment orders passed by the A.O. for all the four years under consideration as erroneous and prejudicial to the interests of Revenue for the following reasons given in his impugned order.

"9. I have gone through the submission of the assessee. It is evident from the assessment orders that the issues raised in the notice for the above referred assessment years were not examined by the A.O. and the assessment orders were passed accepting the returned income. It has been judicially held that an assessment made without necessary enquiry can be held to be erroneous and can be revised under section 263 of the I.T. Act, 1961. Reference in this regard can be made to the decision of Special Bench, ITAT, Chennai reported in 313 ITR (AT) 182, Chennai SB wherein it was observed that it is not necessary for the Commissioner of Income Tax in revision to make further enquiries before cancelling the assessment order of the A.O. The Commissioner of Income Tax can regard the order as erroneous on the ground that in the circumstances of the case, the A.O. should have made further enquires before accepting the statements made by the assessee in his return. It is incumbent on the A.O. to investigate the facts stated in the return when circumstances would make such an enquiry prudent. The word erroneous in section 263 of Income Tax Act, 1961 includes cases where there has been failure to make necessary enquiries. Considering the above, the order passed by A.O. without examining the issues narrated above are definitely erroneous and prejudicial to the interest of Revenue."

6. For the reasons given above, the assessment orders passed by the A.O. for all the years under consideration 5 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

were set aside by the Ld. CIT with a direction to him to make the assessments afresh after examining the issues in proper perspective and after considering the explanation offered by the assessee during the course of revised proceedings. Aggrieved by the orders of Ld. CIT passed under section 263, assessee has preferred these appeals before the Tribunal.

7. At the time of hearing before us, none has appeared on behalf of the assessee. These appeals of the assessee therefore are being disposed of exparte after considering the arguments of the learned D.R. and perusing the relevant material on record. It is observed that the solitary ground raised by the assessee, which is identical in all the four appeals, reads as under :

"For that in the facts and circumstances of the case, the Ld. CIT (Central) has erred in setting aside the order of the A.O. under section 263 of the I.T. Act, without taking into consideration the material and explanations given by the assessee and non application of mind in the matter. As such, the order passed under section 263 of the I.T. Act is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law."

8. As is clearly evident from the common ground raised by the assessee in all the four appeals, assessee is mainly challenging the impugned orders of the Ld. CIT on the ground that the same have been passed without considering the explanation offered during the course of revision proceedings and without applying his mind in the matter. In this regard, it is observed that certain issues were raised by the Ld. CIT in the notices issued under section 263 pointing out that the same were not properly enquired into or examined by the A.O. during the course of assessment proceedings. In reply to the said notices, a detailed submission was filed by the 6 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

assessee explaining as to how the issues raised by the Ld. CIT in the notices issued under section 263 were not relevant for the purpose of completing the assessments in the case of the assessee for all the four years under consideration. On the basis of this explanation offered in respect of each and every issue, it was contended on behalf of the assessee before the Ld. CIT that it was not the case of assessments having been completed by the A.O. without making proper and adequate enquiries as required in the facts and circumstances of the case. A perusal of the operative portion of the Ld. CIT impugned order however shows that he has neither considered this explanation of the assessee nor made any comment/ observation thereon pointing out specifically that it was still a case of failure on the part of the A.O. to make proper and adequate enquiries before completing the assessments as were required in the facts and circumstances of the case. He has not pointed out specifically even a single enquiry which A.O. ought to have done in the facts and circumstances of the case but has failed to do. We, therefore, fully agree with the stand of the assessee that the impugned orders have been passed by the Ld. CIT under section 263 without considering the explanation offered by the assessee and without applying his mind. In our opinion, this failure of the Ld. CIT, however, does not constitute any legal infirmity to make the orders passed by him under section 263 invalid or void abinitio as sought to be made out by the assessee in the ground raised in these appeals. We are of the view that it would be just and proper in the facts and circumstances of the case, to set aside the impugned orders of the Ld. CIT passed under section 263 and remit the matter back to him with a direction to pass fresh orders under section 263 after duly taking into consideration the explanation offered 7 ITA.No.1102 to 1107/Hyd/2014 Mr. Pramod Kumar Gupta (HUF), Hyderabad.

by the assessee and after applying his mind. Needless to observe that the Ld. CIT(A) shall pass well discussed and well reasoned orders after giving proper and sufficient opportunity of being heard to the assessee.

9. In the result, appeals of the assessee are treated as allowed for statistical purposes.

Order pronounced in the open Court on 20.02.2015.

Sd/- Sd/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 20th February, 2015

VBP/-

Copy to

1. Mr. Pramod Kumar Gupta (HUF), 3-5-784/B & C Nageena Building, King Koti Road, Hyderabad - 500 001.

2. Commissioner of Income Tax (Central), 7th Floor, Aayakar Bhavan, Hyderabad.

3. Addl. CIT, C.R. 3, Hyderabad

4. Asst. Commissioner of Income Tax, CC.8, Hyderabad.

5. D.R. I.T.A.T. "B" Bench, Hyderabad.