INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD

ITA No. 998/Hyd/2014
Assessment Year: 2009-10
Smt. Mantena Lalitha Rani (Appellant) vs Income-tax Officer (Respondent)
Date of Order: 30-11-2015

ORDER

PER S. RIFAUR RAHMAN, A.M.:
This appeal by assessee is directed against the order of ld. CIT u/s 263 of the Income-tax Act, 1961 (Act) dated 20/03/2014. for the AY 2009-10.

2. Assessee is an individual, earning income from house property, plying two lorries and trading of sand. The assessee filed her return of income for the AY 2009-10 declaring total income of Rs. 3,35,490. The assessee declared income of plying lorries of Rs. 1 lakh and in and business of Rs. 1 lakh on presumptive basis u/s 44AE and 44AF of the Act. The case was selected for scrutiny and notices u/s 143(2) were issued. The assessment was completed u/s 143(3) of the Act, determining the total taxable income at Rs. 7,56,150/-. The addition was made mainly on calculation of short term capital gains. Ld. CIT using his revisional powers u/s 263 of the Act, issued show cause notice under this Act. He found that the AO had not examined certain issues properly.

3. In brief, the CIT had raised the following issues in the order passed u/s 263 after considering the objections from the assessee:

a) As per the statement of total income, an amount of Rs. 1,00,000/- was admitted as income from plying of lorries and whereas, the same was admitted at Rs. 1,60,000/- in the previous assessment year. The AO has not examined for the short fall of income and also whether the assessee sold the lorries during the year or not. Further, the said lorries were not reflected on the asset side of the balance sheet and this aspect was also not examined by the AO.
b) As per the sworn statement dated 05/04/2011, the assessee sold 50% of her share held in Hotel Srilatha, Paloncha in December, 2007 for a consideration of Rs. 14 lakhs and claimed a short term capital loss of Rs. 2 lakhs. The AO has not verified whether the assessee derived any income from the above partnership firm as no income was admitted for the AY 2008-09 and the details for arriving such capital loss towards sale of shares, which was not debited to the capital account of the assessee.
c) As per the statement of total income, an amount of Rs. 1.00 lakh was admitted as net income from sand business for which no details were called for by the AO during the course of assessment proceedings.
d) The assessee purchased a land for a consideration of Rs. 7.35 lakhs on 16/09/08. The AO has not called for the details of payment whether the assessee was having sufficient cash balance for the said purchase or not. As per the balance sheet 31/03/08, the assessee is having Rs. 24,41,906 under the head “Investment, Cash in hand & bank” and the AO has not verified with reference to applicability of provisions of Wealth Tax for the AY 2008-09”

4. Ld. AR submitted that AO had already considered all the issues relating to the capital gains, lorry and sand business completely and submitted that the issues raised were irrelevant and uncalled for. He submitted as below:

4.1 First issue, the assessee carrying on business of plying lorry owning only two lorries. The assessee was eligible to declare presumptive income u/s 44AE of the Act at Rs. 84,000/- which is the limit prescribed in the Act whereas the assessee had declared actual income of Rs. 1,00,000 for the AY under consideration. The ld. CIT had compared this voluntary disclosure of Rs. 1 lakh with earlier year income, which was declared by assessee at Rs. 1.60 lakhs in AY 2008-09. The action of the assessee was considered to be genuine as the actual income out of this business declared by the assessee instead of resorting to declare only the presumptive income as per section 44AE. This aspect was already verified by the AO.

4.2 Ld. AR also submitted that the sale of hotel business was not relating to the AY under consideration.

4.3 Ld. AR further explained that the observation of the CIT relating to purchase of land for Rs. 7.35 lakhs was wrong. The actual investment made were Rs. 24,41,106/- for which assessee had already declared the same in the statement of affairs before the AO.

4.4 Ld. AR submitted that the order of CIT was not correct by relying on the judgment of jurisdictional High Court in the case of M/s Spectra Shares and coordinate bench of this Tribunal in the case of Chava Srinivasa Rao in ITA No. 997/Hyd/2014.

5. Ld. DR, on the other hand, submitted that AO has dealt only with two issues and failed to make proper verification. She justified the order of CIT u/s 263. She relied on the judgment of the Hon’ble Supreme Court in the case of Rampayari Devi Saragoi Vs. CIT, [1968] 67 ITR 84.

6. Having considered the submissions of both sides and perused the material on record, we are of the opinion that the CIT had initiated his power u/s 263 by observing as “AO has not examined certain issues properly”. The ld. AR also raised the ground before us challenging the jurisdiction of the ld. CIT in exercising power u/s 263 As per the contention of ld. AR, the AO had already made necessary enquiry before completing the assessment, in particular, when the assessee had declared the income more than the income based on the presumptive basis u/s 44AF and 44AE of the Act in the business of plying lorry and sand business. Moreover, the CIT had raised the issues relating to the business incomes in relation to corresponding previous AY when the assessee had declared more than the prescribed profit in the sections 44AF and 44AE of the Act. Moreover, when the assessee had complied with the section 44AF and 44AE, there is no jurisdiction on the part of the AO to make further assessment, particularly, when the assessee is allowed not to maintain any books u/s 44AA of the Act. Similarly, in other issue, sale of share in the Hotel Srilatha in December, 2007, which are not relevant for the AY under consideration.

6.1 In the 4th issue, assessee purchased a land for a consideration of Rs. 7.35 lakhs on 16/09/2008. Again this transaction relating to purchase of land involving Rs. 24,41, 906, which was declared in the balance sheet. But, CIT had directed AO to verify the matter relating to Wealth tax Act for the AY 2008-09. It has no relevance for reopening the assessment under consideration.

6.2 The other issues were come across by ld. CIT subsequent to proceedings carried on u/s 263 of the Act. .

6.3 On perusal of the reasons put forth by the CIT, it appears that no cogent evidence was found by him. CIT had used his revision powers merely on suspicion and without any basis. The AO had already applied his mind to complete the assessment. CIT had expressed that AO had not completed the assessment properly, conveys that AO had applied his mind and CIT is just extending and reviewing the process of completed assessment. CIT had not established the assessment order as erroneous or it is prejudicial to the interests of revenue.

6.4 In view of the above discussion, it clearly establishes that the assessment order was not erroneous and also not prejudicial to the interests of revenue. Hence, the order u/s 263 is not maintainable and accordingly, we quash the same.

7. In the result, appeal of the assessee is allowed.

Pronounced in the open court on 30th November, 2015

(P. MADHAVI DEVI)     (S. RIFAUR RAHMAN)
JUDICIAL MEMBER    ACCOUNTANT MEMBER