Itta/21/2002 Of Smt. Kamalabai Loya v. Commissioner Of Income-Tax Hyd And Anr

* THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.No.21 of 2002 % Date: 22.07.2014 Smt.Kamalabai Loya. and …Appellant. $Commissioner of Income-Tax and another. …Respondents ! Counsel for appellant: Mrs.C.Jayashree Sarathy ^ Counsel for Respondents : Sri S.R. Ashok < GIST: > HEAD NOTE: ? Cases referred THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.21 of 2002 JUDGMENT:(Per the Hon’ble Sri Justice L.Narasimha Reddy) The appellant is an assessee under the Income Tax Act, 1961(for short ‘the Act’). The returns, filed by her for the assessment year1993-94, were processed by the Assistant Commissioner of IncomeTax, Circle-II, Hyderabad, and an order was passed on 30.12.1994. However, he proposed to rectify the said order, by incorporatingsome more items. Therefore, he issued a show cause notice, dated26.02.1996, to the appellant to explain as to why ‘Income fromHouse Property’, being Rs.17,600/-, be not added. Stating that inspite of receiving show cause notice, dated 26.02.1996, theappellant did not submit any explanation, the Income Tax Officerpassed an order, dated 03.09.1996 under Section 154 of the Act. Anadditional amount of Rs.25,415/- was also levied. Aggrieved by that,the appellant approached the Commissioner of Income Tax(Appeals). The appeal was dismissed, through order, dated19.02.1997. Thereupon, the appellant filed I.T.A.No.1393/Hyd/1997before the Hyderabad Bench ‘A’ of the Income Tax AppellateTribunal. One of the contentions urged by the appellant was that thoughthe explanation to the show cause notice was submitted, on 02.04.1996, the Income Tax Officer did not take the same intoaccount. The Tribunal, however, refused to accept the contentionthat it was raised for the first time before it. On merits also, it opinedthat the explanation cannot be accepted. Hence, this appeal underSection 260-A of the Act. Heard learned counsel for the appellant and learned SeniorStanding Counsel for the Department. The entire proceedings are referable to an exercise initiatedby the Income Tax Officer under Section 154 of the Act. The ITOprocessed the returns submitted by the appellant and passed anorder of assessment, on 30.12.1994. Thereafter, he issued a showcause notice under Section 154 of the Act, on 26.02.1996, statingthat an arithmetical error had crept into the order of assessment, andin that, ‘Income from House Property’, being Rs.17,600/-, was notadded inadvertently. By observing that the appellant did not file anyexplanation at all, he passed an order, on 03.09.1996, under Section154 of the Act. Additional liability of Rs.25,415/- was fastened. Thecase of the appellant is that the explanation was submitted, on02.04.1996. We do not have the benefit of perusing thememorandum of grounds filed before the Appellate Commissioner. However, the order, dated 19.02.1997, passed by him discloses thatthe discussion was undertaken on merits. Nowhere in the order, thequestion pertaining to the submission of explanation by theappellant, was dealt with. Equally, the order does not indicate thatthe appellant failed to submit the explanation. In an appeal preferred before the Tribunal, a specificcontention was urged by the appellant to the effect that theexplanation submitted by her was not taken into account. In additionto that, a miscellaneous petition under Section 254(2) of the Act, was filed in relation to the said reply. The Tribunal was not sure as towhether the reply was submitted by the appellant, as a matter of fact. In our view, it has virtually glossed over the issue by making certainsuperficial observations. They read: In an appeal preferred before the Tribunal, a specificcontention was urged by the appellant to the effect that theexplanation submitted by her was not taken into account. In additionto that, a miscellaneous petition under Section 254(2) of the Act, was filed in relation to the said reply. The Tribunal was not sure as towhether the reply was submitted by the appellant, as a matter of fact. In our view, it has virtually glossed over the issue by making certainsuperficial observations. They read: “In the course of hearing, it is contended that theassessee can take up this ground at any stage inclusive of theproceedings before the Tribunal. A legal ground can be takenbefore the Tribunal, even if not taken earlier, only if it does notentail enquiry into fresh facts. The question whether the so-called reply dated 02.04.1996 was actually filed before theassessing officer is a matter, which according to us, entails afresh enquiry. It requires verification of the registers of theDepartment and verification of signature of the concerned clerkwho acknowledged it. So, we are of the view that theassessee is not entitled to take this ground for the first timebefore the Tribunal. Even otherwise, we find that theexplanation requires consideration of the case on merits, whichcannot be urged in a proceeding under S.154. As rightlyobserved by the CIT(A), the assessee should have agitatedsuch matter in an appeal against the original assessmentorder, dated 30.12.1994, which laws not done. Having missedthe bus then, assessee cannot agitate it now. What theassessing officer has done in the impugned order under S.154is correction of a simple totalling mistake. It is a mistakeapparent from record, and so, to our mind, it falls within thescope of S.154. We see no reason to interfere with the order ofthe CIT(A) on this aspect.” From this, it is clear that the Tribunal refused to address thequestion pertaining to the submission of reply on 02.04.1996, on theground that it was raised for the first time before it. The saidobservation cannot be sustained in law, since the Tribunal happensto be the final forum on facts, in the system of adjudication under theAct. The Tribunal ought to have addressed two aspects in thisregard. The first is to verify as to whether the explanation, dated02.04.1996, was filed at all by the appellant before the ITO. Thiscould have been done simply by requiring the departmentalrepresentative to verify or to produce the record. The second is that if there is no serious doubt expressed by the Department as to thesubmission of the explanation, it could have addressed by itself, particularly when a separateapplication was filed, in this behalf. There was no basis for it torefuse to deal with the question at all on the specious plea that thequestion was not raised before the Appellate Commissioner. Wehave already observed that the Appellate Commissioner did notrecord any finding to the effect that the appellant did not file anyexplanation. The very fact that the Commissioner has dealt with thematter on merits, discloses that the contention advanced by theappellant was taken into account. The second major fallacy committed by the Tribunal was that,even while refusing to look into the explanation submitted by theappellant, it has pronounced on merits and observed that the pleataken in the explanation cannot be urged in the proceedings underSection 154 of the Act. When a specific show cause notice wasissued under Section 154 of the Act, it is just un-understandable asto how a plea raised in the explanation cannot be accepted. We would not have made so much of endeavour, but for thefact that in the order passed under Section 154 of the Act, the ITOhas not only added the income from house being Rs.17,600/- andlevied tax upon it, but also proceeded to levy the interest underSection 234-A, B & C of the Act, which is indeed phenomenalcompared to the entire assessment. The second major fallacy committed by the Tribunal was that,even while refusing to look into the explanation submitted by theappellant, it has pronounced on merits and observed that the pleataken in the explanation cannot be urged in the proceedings underSection 154 of the Act. When a specific show cause notice wasissued under Section 154 of the Act, it is just un-understandable asto how a plea raised in the explanation cannot be accepted. We would not have made so much of endeavour, but for thefact that in the order passed under Section 154 of the Act, the ITOhas not only added the income from house being Rs.17,600/- andlevied tax upon it, but also proceeded to levy the interest underSection 234-A, B & C of the Act, which is indeed phenomenalcompared to the entire assessment. We, therefore, allow the appeal and remand the matter to theIncome Tax Officer for fresh consideration and disposal. He shallverify as to whether the explanation, dated 02.04.1996, wassubmitted. If the record discloses that it was submitted, he shall passfresh orders after giving opportunity to both the parties. We make it clear that he shall not be entitled to levy interest under Section 234-A, B and C of the Act, since there was no delay on the part of theappellant in filing the returns or paying the advance tax. There shallbe no order as to costs. The miscellaneous petition filed in this writ appeal shall alsostand disposed of. ____________________ L.NARASIMHA REDDY, J. _____________________ CHALLA KODANDA RAM, J. Date:22.07.2014 GJ