M/s Girnar Hosiery Works, Ludhiana V. Addl. CIT, Ludhiana

ITA 1019/CHANDI/2010

• Counselvise Citation: 101921514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Principle of natural justice; Assessment record; Commercial expediency
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1034/CHD/2010 ASSESSMENT YEAR: 2004-05 ACIT,C-III, V M/S GIRNAR HOSIERY WORKS, LUDHIANA. WAIT GANJ, LUDHIANA. PAN: AABFG-1961H & ITA NO. 1019/CHD/2010 ASSESSMENT YEAR : 2004-05 M/S GIRNAR HOSIERY WORKS, V ADDL.CIT, ST. NO. VI, GURU NANAK DEV NAGAR, RANGE III, BASTI JODHEWAL, LUDHIANA. LUDHIANA. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT.JAISHREE SHARMA ASSESSEE BY : NONE DATE OF HEARING : 07.05.2012 DATE OF PRONOUNCEMENT : 24.05.2012 ORDER PER MEHAR SINGH, AM THE PRESENT CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY, ARE DIRECTED AGAINST THE ORD ER DATED 31.03.2010, PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). NONE APP EARED ON BEHALF OF THE ASSESSEE, HENCE, THE APPEALS ARE BEIN G DECIDED ON MERIT, IN THE LIGHT OF THE AVAILABLE RECORD. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD.CIT(A) ERRED IN LAW AND FACTS IN DELETI NG ADDITION OF RS.5,97,861/- MADE BY THE ASSESSING OFF ICER 2 ON ACCOUNT OF DISALLOWANCE OF JOB WORK EXPENSES IGNORING THE FACT THAT THE LIABILITY TO PAY HAS BEE N DISPUTED BY THE ASSESSEE ITSELF AND THUS AN UNASCERTAINED LIABILITY. THE EXPENSE HAS NEITHER BE EN ACTUALLY INCURRED NOR IS ASCERTAINED HENCE CANNOT B E ALLOWED IN THE YEAR UNDER CONSIDERATION. 2. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE A ND THAT OF THE A.O. BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN ASSESSEE'S APPEAL, FOLLOWING GROUNDS OF APPEA L HAVE BEEN RAISED : 1.THAT THE ID CIT(A) HAS NOT CONSIDERED THE CORREC T FACTS OF THE CASE AND DISALLOWANCE OF INTEREST @ 13.50% ON ACCOUNT OF BUSINESS ADVANCES SHOULD BE DELETED. 2. THAT THERE IS NO DIRECT NEXUS OF THE BUSINESS AD VANCES AND DISALLOWANCE OF INTEREST, HENCE THE DISALLOWANC E OF INTEREST SHOULD BE DELETED. 3. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE OF IN TEREST @ 13.50% P.A INSTEAD OF 21% P.A. HENCE THE DISALLOWAN CE BE DELETED. 4. THAT CIT(A) HAS NOT CONSIDERED THE ISSUE OF NOTICE U/S 142(1) & 143(2) IN THE APPEAL ORDER,HENCE THE PROCE EDINGS OF THE A.O SHOULD BE QUASHED ON DISALLOWANCE. 5. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD, AM END OR ALTER ANY GROUND OF APPEAL AT THE TIME OF HEARING. 4. IN GROUND NO.1, THE REVENUE CONTENDED THAT CIT(A ) ERRED IN LAW AND FACTS IN DELETING ADDITION OF RS.5,97,86 1/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF JOB WORK EXPENSES IGNORING THE FACT THAT THE LIABILITY TO PA Y HAS BEEN 3 DISPUTED BY THE ASSESSEE ITSELF. THE EXPENSES HAVE NEITHER BEEN ACTUALLY INCURRED NOR ASCERTAINED. 5. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO. THE AO, IN HIS ORDER DATED 18.12.2006 U/S 143(3) OF THE ACT DISALLOWED THE IMPUGNED AMOUNT, ON THE GROUND OF STOPPING PAYM ENT OF SUCH CHEQUES BY THE ASSESSEE. THE AO, WAS NOT CONVI NCED WITH THE REASONS FOR NON-ENCASHMENT OF CHEQUES. TH E ASSESSEE INFORMED THE AO THAT CHEQUES WERE GIVEN TO A PARTY, AS PAYMENT FOR JOB WORK. HOWEVER, QUALITY OF THE J OB WORK WAS FOUND INFERIOR. IN VIEW OF THIS, BANKERS WERE G IVEN INSTRUCTIONS TO STOP PAYMENT OF SUCH CHEQUES. THE AO, MADE THE IMPUGNED ADDITION ON THE GROUND THAT THE LIABIL ITY TO PAY SUCH EXPENSES WAS IN DISPUTE. 6. LD. CIT(A) ALLOWED THE IMPUGNED EXPENSES, AS IS EVIDENT FROM THE FINDINGS RECORDED HEREUNDER: 8. GROUND NO.8 OF APPEAL MEMO AND GROUND NO. 4 OF A DDITIONAL GROUND OF APPEAL DATED 10-8-2007 PERTAIN TO THE ADD ITION OF RS. 5,97,861/- MADE BY THE AO ON THE GROUND THAT TH ESE WERE THE CHEQUES WHICH HAD ISSUED BY THE ASSESSEE AND WHICH HAD NOT BEEN ENCASHED. THE AO HELD THAT SINCE THE ASSESSEE HAD D ISPUTED THE LIABILITY FOR PAYMENT OF THIS AMOUNT, IT COULD NOT BE TAKEN THAT THE LIABILITY TO PAY HAD ARISEN DURING THE YEAR UNDER CONSIDERATI ON. THE APPELLANT HAD CONTENDED THAT THE PAYMENT HAD BEEN STOPPED BEC AUSE OF INFERIOR QUALITY OF WORK. THE AO, IN TURN CONTENDED THAT IF THIS WERE SO, IT COULD HAVE TAKEN THE BENEFIT OF VALUATION OF STOCK AT MAR KET PRICE DUE TO INFERIOR QUALITY OF WORK. 8.1 DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS SUBMITTED THAT IT HAD RECEIVED BILLS TOTALING RS. 11,51,3977- FROM M/S SHREE DURGA DYEING AND FINISHING MILL FOR WORK DONE DURING THE ASSTT YEAR 2004-05 AND THE EXPENDITURE HAD BEEN CLAIMED IN THAT ASSESS MENT YEAR ON THE 4 MERCANTILE SYSTEM OF ACCOUNTING. THE VALUATION HAS BEEN DONE BY THE ASSESSEE ON 31-3-2004 WHICH HAD NOT BEEN DISPUTED B Y THE AO. I FIND FORCE IN THE APPELLANT'S SUBMISSION. IT IS NOT A CA SE WHERE THE ASSESSEE HAS DENIED THAT THE LIABILITY OF RS. 11,51,397- WAS NOT INCURRED BY IT. IT HAS ENTERED INTO TRADE DISPUTE WITH THE SUPPLIER M/S SH REE DURGA DYEING & FINISHING MILLS FOLLOWING WHICH CERTAIN PAYMENTS HA D BEEN STOPPED. IT IS NOT THE CASE THAT THE SUPPLIER HAS GIVEN ANY BENEFI T TO THE ASSESSEE BY WAIVING OFF THE LIABILITY TO THE EXTENT OF RS. 5,97 ,861-. THE VERY FACT THAT THE ASSESSEE ISSUED CHEQUES OF RS. 5,7,861/- SHOWS THAT IT INTEND TO MAKE PAYMENT AGAINST THE LIABILITY BUT THE PAYMENT WAS STOPPED DUE TO QUALITY PROBLEM WHICH EMERGED. EVEN THOUGH THE LIAB ILITY MAY BE DISPUTED, IT IS AN EXISTING LIABILITY BASED ON ACTU AL WORK DONE BY THE. SUPPLIER. UNDER THESE CIRCUMSTANCES, IN MY OPINION, THERE IS NO SCOPE FOR DISALLOWING THE PART PAYMENT ONLY BECAUSE THERE IS A DISPUTE ABOUT THE QUALITY OF THE WORK. IF ANY REMISSION AGAINST THE L IABILITY RECEIVED BY THE ASSESSEE, THE SAME WOULD BE REQUIRED TO BE OFFERED FOR TAX UNDER THE PROVISIONS OF SECTION 40A(1) OF THE ACT. THE ADDITI ON OF RS.5,97,861/- IS, THEREFORE, DELETED. GROUND NO. 8 OF APPEAL IS A LLOWED. 7. A BARE PERUSAL OF THE FINDINGS OF THE CIT(A) REVEALS THAT THERE IS EXISTENCE OF LIABILITY, WHICH IS QUANTIFIE D AND NOT IN THE NATURE OF CONTINGENT LIABILITY. THE MERE DISPU TE AS TO THE QUALITY OF THE JOB WORK WOULD NOT RENDER THE LIABIL ITY AS NON- EXISTENT. THEREFORE, THE FINDINGS OF THE AO ARE LE GALLY NOT TENABLE. IN VIEW OF THIS, FINDINGS OF THE LD. CIT(A ) ARE UPHELD AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NOS. 2 & 3 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ITA NO.1010/CHD/2010 (ASSESSEE'S APPEAL) 10. FIRST THREE GROUNDS OF APPEAL OF THE ASSESSEE P ERTAIN TO DISALLOWANCE OF INTEREST UPHELD BY THE CIT(A). 5 11. THE AO, WAS OF THE VIEW THAT THE MONEY WAS ADVA NCED BY THE ASSESSEE TO M/S GIRNAR FABRICS LTD., KNOWING FU LLY WELL THAT THE FINANCIAL POSITION OF M/S GIRNAR FIBRES WA S NOT GOOD AND THE PARTNERS OF THE ASSESSEE FIRM, BEING DIRECT OR IN THE COMPANY, WERE AWARE OF THE FINANCIAL POSITION OF TH E COMPANY. THE ASSESSEE CONTENDED THAT THE AMOUNT WAS GIVEN AS SECURITY DEPOSIT, SO AS TO GET THE PRODUCT AT LOWER COST THA N THE MARKET RATES AND NOT TO PAY INTEREST ON THE CREDIT PURCHAS ES MADE BY IT, AS WAS BEING CHARGED TILL THEN. IT WAS ALSO CO NTENDED THAT THE COMPANY HAD BECOME SICK. AO, RELIED ON THE DEC ISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F ABHISHEK INDUSTRIES 286 ITR 1 (P&H) WHEREAS THE APPELLANT PL ACED RELIANCE ON CERTAIN OTHER DECISIONS FOR THE PROPOSI TION THAT IT WAS NECESSARY FOR THE AO TO ESTABLISH DIRECT NEXUS BETWEEN THE BORROWED FUNDS AND THE INTEREST FREE LOAN GIVEN BEFORE DISALLOWING INTEREST EXPENDITURE. THE APPELLANT CO NTENDED THAT A SUM OF RS.1.25 CRORES WAS GIVEN TO M/S GIRNA R FIBRES LTD., AS SECURITY DEPOSIT, HOWEVER, NO AGREEMENT TO THIS EFFECT HAS BEEN SUBMITTED. THE OUTSTANDING OF RS.1,08,26, 000/- AGAINST M/S GIRNAR FIBRES LTD. APPEARS UNDER THE HE AD LOANS AND ADVANCES. 12. THE CIT(A), AFTER REFERRING TO PAGE 38 OF THE P APER BOOK, SUBMITTED BY THE APPELLANT WHICH SHOWED LOAN ACCOUN T OF M/S GIRNAR FIBRE LTD. IN THE BOOKS OF ACCOUNT OF THE AS SESSEE FIRM IN THE FINANCIAL YEAR 1997-98 AND ACCORDINGLY, THE APPELLANTS CONTENTION THAT AMOUNT WAS ADVANCED AS SECURITY DEP OSIT, IS NOT BORNE OUT FROM ANY EVIDENCE ON RECORD. THE LD. CIT(A), FURTHER OBSERVED THAT CONTENTION OF THE ASSESSEE TH AT THE 6 PARTNERS OF ASSESSEE FIRM WERE NOT DIRECTORS IN M/S GIRNAR FIBRES LTD. BUT HAD NOT SHOWN THAT THEY DIRECTLY AR E THEIR IMMEDIATE FAMILY MEMBERS, WERE NOT MAJOR SHAREHOLDE RS IN THE COMPANY AND WERE NOT IN MANAGEMENT AND CONTROL OF THE COMPANY. IT WAS POINTED OUT BY THE APPELLANT THAT IT HAD BEEN PAYING INTEREST ON CREDIT PURCHASES TO M/S GIRNAR F IBRES LTD. EARLIER, BEFORE INTEREST FREE LOAN WAS ADVANCED TO THE COMPANY. AFTER THE INTEREST FREE LOAN WAS ADVANCED , EVEN THOUGH ASSESSEE MADE CREDIT PURCHASES, IT WAS NOT R EQUIRED TO PAY ANY INTEREST ON THE CREDIT BALANCES. THIS FACT HAD NOT BEEN REFUTED BY THE AO. THE ASSESSEE FURTHER CONTE NDED WITH REFERENCE TO COPY OF ACCOUNT OF M/S GIRNAR FIBRES L TD. IN ITS BOOKS OF ACCOUNT, THAT IT CONTINUED TO AVAIL SUCH C REDIT FACILITY OF SUBSTANTIAL AMOUNT, DURING THE FINANCIAL YEAR 19 99-2000, 2000-01 AND 2001-02 (PART OF THE YEAR). THEREFORE, APPELLANTS CONTENTION THAT SECURITY DEPOSIT RESULTED IN BENEFI T TO ITSELF, ALSO APPEARS TO BE BORNE OUT OF THE FACT ON RECORD, ATLEAST IN A FINANCIAL YEAR, AFTER WHEN THE INTEREST-FREE LOANS WERE GIVEN. THE SUBSTANTIAL FINDING OF THE CIT(A) IN THE MATTER , ARE INCORPORATED IN PARA 6.6 AND THE SAME IS REPRODUCED HEREUNDER : 6.6 HOWEVER, IT IS SEEN THAT FROM THE FINANCIAL YEAR 2 001-02 ONWARDS THE PURCHASES AS WELL AS OUTSTANDING BALANCE S FROM GIRNAR FIBERS LTD REDUCED CONSIDERABLY AND THOUGH THE ASSES SEE HAD INTEREST FREE LOAN OUTSTANDING AGAINST M/S GIRNAR FIBERS LTD, IT DID NOT ADJUST THE PURCHASES AGAINST THE SECURITY DEPOSITS. NO R EASON FOR NO ADJUSTING THE PURCHASES AGAINST THE OUTSTANDING HAS BEEN SUBMITTED BY THE APPELLANT. THE APPELLANT'S CONTENTION IS THAT A SUIT HAS BEEN FILED FOR RECOVERY OF THE AMOUNT FROM M/S GIRNAR FI BERS LTD. THIS SUIT HAS APPARENTLY BEEN FILED ONLY IN THE YEAR 2007. THE AS SESSEE 7 CONTINUED TO MAKE PAYMENTS TO M/S GIRNAR FIBRES LTD . EVEN DURING THE FY 2003-04 AGAINST PURCHASES MADE FROM THAT COMPANY WITHOUT ATTEMPTING TO RECOVER THE INTEREST FREE LOAN THROUGH ADJUSTMENT OF THE PURCHASES. THE APPELLANT HAD ALSO NOT LED ANY EVIDE NCE TO SHOW HOW THE FUNDS ADVANCED BY IT TO GIMAR FIBERS LTD HAD BEEN USED BY THAT COMPANY. THE BALANCE SHEET OF M/S GIRNAR FIBRES LTD. F OR FINANCIAL YEAR 2003-04 SHOWS LOANS AND ADVANCES AMOUNTING TO R S. 2.56 CRORES WHICH INDICATES THAT THE COMPANY HAD ADVANCED FUNDS TO OTHERS ALSO. THE BUSINESS EXPEDIENCY OF SUCH ADVANCE S HAS NOT BEEN EXPLAINED. THE ASSESSEE HAS SUBMITTED THAT MS G IRNAR FIBERS LTD HAD BECOME SICK AND HAD BEEN REFERRED TO B1FR. I N THIS CONNECTION THE AO'S CONTENTION THAT THE COMPANY GAVE INTEREST FREE LOAN TO MS GIRNAR FIBERS LTD KNOWING THAT THE COMPANY'S FINANC IAL SITUATION WAS NOT GOOD AND WITHOUT ADJUSTING THE PURCHASES AG AINST THE INTEREST FREE LOAN/DEPOSIT DOES CARRY WEIGHT. THE COM MERCIAL EXPEDIENCY OF INTEREST FREE ADVANCE VIS-A-VIS THE AS SESSEE FIRM APPEARS TO BE RELEVANT UPTO THE FINANCIAL YEAR 2000- 01, BUT FROM THE SUBSEQUENT FINANCIAL YEARS THE ASSESSEE COMPANY APP EARS TO HAVE LEFT THE MONEY WITH THE COMPANY WITHOUT ANY GOOD REASON AND WITHOUT UTILIZING THAT MONEY TO PAY FOR THE PURCHASES MADE FO R THAT ''COMPANY. I AM. THEREFORE, OF THE OPINION THAT THE ASSESSEE HAS NOT ESTABLISHED THE COMMERCIAL EXPEDIENCY IN LETTING M/S GIRNAR FIBERS LTD ENJOY THE INTEREST FREE LOAN TO THE EXTEN T OF RS. 1.08 CRORES FROM THE ASSESSEE FIRM. EVEN IF DIRECT NEXUS OF THE INTEREST FREE LOAN GIVEN IS NOT ESTABLISHED WITH THE INTEREST FREE FUND S, THE APPELLANT IS REQUIRED TO SHOW THAT THE MONEY WAS GIVEN FOR, AND CONTINUED TO BE GIVEN, AS A MEASURE OF COMMERCIAL EXPEDIENCY. UNDE R THE CIRCUMSTANCES, I UPHOLD THE DISALLOWANCE OF INTEREST MA DE AGAINST THE OUTSTANDING INTEREST FREE LOAN IN THE NAME OF M/S GIRNA R FIBERS LTD. HOWEVER, AS POINTED OUT BY THE APPELLANT, THE DISAL LOWANCE ON THIS ACCOUNT IN THE ASSTT YEARS 2005-06 AND 2007-08 HAS B EEN MADE @ 13.5% BY THE AO. THE DISALLOWANCE @ 21% DOES APPEAR TO BE VERY STEEP AND IS NOT SUPPORTED BY SHOWING THAT THIS WAS THE COST OF THE FUNDS BORROWED BY THE ASSESSEE. I THEREFORE, DIRECT T HE AO TO RECOMPUTED AND TO LIMIT THE DISALLOWANCE ON ACCOUNT OF INTEREST FOR INTEREST FREE LOAN GIVEN TO M/S GIRNAR FIBRES LTD. @ OF 13.5%. GROUND NO. 5 OF APPEAL MEMO AND GROUND NOS. 1 AND,. 2 OF ADDITIONAL 8 GROUNDS OF APPEAL VIDE LETTER DATED 1-0-8-2007 ARE, THUS, PARTLY ALLOWED. 13. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE FINDINGS OF THE AO AS WELL AS T HAT OF THE CIT(A) AND FOUND THAT THE APPELLATE ORDER, PASSED B Y THE CIT(A), IS WELL REASONED AND DETAILED ONE, THEREFOR E, WE DO NOT FIND ANY INFIRMITY THEREIN AND, HENCE, THE SAME ARE UPHELD. HOWEVER, TO MEET THE ENDS OF JUSTICE, THE RATE OF INTEREST IS REQUIRED TO BE REDUCED TO 10%. CONSEQUE NTLY, FIRST THREE GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED. 14. IN GROUND NO.4 THE ASSESSEE CONTENDED THAT CIT( A) HAS NOT CONSIDERED THE ISSUE OF NOTICE U/S 142(1) & 143 (2) IN THE APPEAL ORDER, HENCE THE PROCEEDINGS OF THE A.O SHOU LD BE QUASHED ON DISALLOWANCE. THE DETAILED FINDINGS OF T HE CIT(A), ON THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO.4, AFTER APPRECIATION OF THE SUBMISSIONS, HAVE BEEN RECORDED IN PARA 6 OF THE APPELLATE ORDER, PASSED BY HIM. THE CIT(A) , HAS ADMITTED THE ADDITIONAL GROUNDS, BEING LEGAL IN NAT URE. THE ISSUE RELATED TO THE DENIAL OF NATURAL JUSTICE AND LIMITATION, IN RESPECT OF ASSESSMENT ORDER IN QUESTION. THE AP PELLANT, CONTENDED THAT THE ASSESSMENT ORDER WAS PASSED ON 01.01.2007. IT WAS CONTENDED BY THE APPELLANT THAT SINCE THE ASSESSMENT ORDER WAS RECEIVED BY IT ON 01.01.2007, IT WAS ALSO PASSED ON THE SAME DATE. HOWEVER, THE AO, HAS CONTENDED THAT SINCE THE ORDER HAS BEEN SERVED ON 01.01.2007, IT HAD BEEN PASSED BEFORE THE DATE, I.E . ON OR BEFORE 31.12.2006. THE CIT(A), PERUSED THE RELEVAN T ASSESSMENT RECORD AND FOUND THAT THERE IS A SIGNATU RE OF 9 SOME PERSON, ON THE COPY OF THE NOTICE OF DEMAND AN D THE PENALTY NOTICE, DATED 01.01.2007, APPARENTLY, IN RE CEIPT OF THESE DOCUMENTS. LD. CIT(A), FURTHER OBSERVED THAT THERE IS A REPORT OF NOTICE SERVER DATED 30.12.2006, INFORMING THAT HE HAD GONE TO SERVE THE DOCUMENTS ON 30.12.2006 TO TH E ASSESSEE, BUT THE OWNER WAS OUT AND THAT, SOME EMPL OYEE HAD PUT UP THE DATE OF SERVICE, OF 01.01.2007. HE, THEREFORE, INFORMED THE OFFICE CLERK ABOUT THE SAME AND THE OR DER WAS DISPATCHED THROUGH POST, ON THE SAME DATE. ACKNOWLEDGEMENT OF THE POSTAL DEPARTMENT, FOR SENDI NG THE DOCUMENTS BY SPEED POST, TO THE ASSESSEE ON 30.12.2 006 AT 8.33 PM IS POSTED ON THE REVERSE OF THE FIRST PAGE OF THE ASSESSMENT ORDER. NOTICE OF DEMAND, PENALTY NOTICE AND THE ASSESSMENT ORDER, ARE OF DATED 18.12.2006. THE AO, ALSO INDICATED DATE OF DISPATCH OF THE ORDER ON 30.12.20 06, BY SPEED POST. IN VIEW OF THIS, CIT(A), REJECTED THE LEGAL GROUND, RAISED BY THE ASSESSEE. RELEVANT PART OF THE FINDIN GS OF THE CIT(A) ARE REPRODUCED HEREUNDER : 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY . THE ADDITIONAL GROUNDS TAKEN BY THE APPELLANT ARE EITHER LEGAL ISSUES; ISSUES RELATING TO NATURAL JUSTICE; TO CONTENDING THAT THE ASSESSMENT ORDER WAS BARRED BY LIMITATION; OR RELATED TO THE ISSUES ALREADY TAKEN IN THE APPEAL MEMO. THESE ARE, THEREFORE, ADMITTED FOR ADJUDICATION SINC E LEGAL ISSUES CAN BE TAKEN AT THE APPELLATE STAGE BEFORE CIT(A), ISSU ES RELATING TO DENIAL OF NATURAL JUSTICE AND LIMITATION ARE GERMANE TO THE APPEAL, AND ISSUES RELATED TO THE GROUNDS ALREADY TAKEN IN APPEAL ARE N OT NEW GROUNDS AS SUCH. THE FIRST ISSUE TAKEN FOR ADJUDICATION IS FOR CONTENTION THAT THE ASSESSMENT IS BARRED BY LIMITATION SINCE THE AS SESSMENT ORDER HAD BEEN PASSED ON 1-1-2007. THE APPELLANT HAD CONTENDED THAT SINCE THE ASSESSMENT ORDER WAS RECEIVED BY IT ON 1-1-2007, IT WAS ALSO PASSED ON THE SAME DATE, WHEREAS THE AO HAS CONTENDED THAT SINCE THE ORDER HAS BEEN SERVED ON 1-1-2007, IT HAD BEEN PASSED BEFORE THAT DATE I.E. ON OR BEFORE 31-12-2006. PERUSAL OF THE ASSESSMENT RECO RD SHOWS THAT THERE IS SIGNATURE OF SOME PERSON ON THE COPY OF TH E NOTICE OF DEMAND AND ON THE PENALTY NOTICE DATED 1-1-2007, APPARENTLY IN RECEIPT OF THESE DOCUMENTS. THERE IS A REPORT OF A NOTICE SERVE R DATED 30-12-2006 INFORMING THAT HE HAD GONE TO SERVE THE DOCUMENTS ON 30-12-2006 TO THE ASSESSEE BUT THE OWNER WAS OUT TH AT DAY AND THAT 10 SOME EMPLOYEE HAD PUT A DATE OF SERVICE OF 1-1-2007. HE, THEREFORE, HAD INFORMED THE OFFICE CLERK ABOUT THE SAME AND TH E ORDER WAS DISPATCHED THROUGH SPEED POST ON THE SAME DATE. THE ACKNOWLEDGEMENT OF THE POSTAL DEPTT FOR SENDING THE D OCUMENTS BY SPEED POST TO THE ASSESSEE ON 30-12-2006 AT 8.33 PM IS PASTED ON THE REVERSE OF FIRST PAGE OF ASSESSMENT ORDER. THE NOTI CE OF DEMAND, THE PENALTY NOTICE AND THE ASSESSMENT ORDER ARE ALL DATE D 18-12-2006. THE AO IN HIS REPORT IN RESPECT OF FILING OF APPEAL HAS ALSO REPORTED THAT NOTICE OF DEMAND AND THE ASSESSMENT ORDER WERE DISP ATCHED ON 30- 12-2006 BY SPEED POST. I THINK THAT THERE IS SUFFICIE NT EVIDENCE ON RECORD TO SHOW THAT THE ASSESSMENT ORDER WAS SIGNED ON 18-12-2006 AND THE MERE FACT THAT A COPY WAS RECEIVED PERSONALLY BY SOME PERSON ON 1-1-2007 DOES NOT DETRACT FROM THIS FACT. IN THE REMA ND REPORT THE AO HAS NO WHERE STATED THAT THE ORDER WAS PASSED ON 3 1-12-2006. WHAT SHE HAD STATED IS THAT THE ORDER WAS PASSED ' BY 31-1 2-2006' SINCE THE SAME HAD BEEN SERVED ON 1-1-2007. THE ACT REQUIRES THE ASSESSMENT ORDER TO BE PASSED BY THE DATE OF LIMITATION. IN THE PRESENT CASE, THE DOCUMENTS IN RECORD SHOW THAT THE ORDER WAS PASSED O N 18-12- 2006 AND WAS DISPATCHED ON 30-12-2006 BY SPEED POST , IN ADDITION TO BEING SERVED BY HAND ON 1-12007. HENCE, THE APP ELLANTS CONTENTION THAT THE ASSESSMENT IS BARRED BY LIMITATI ON IS REJECTED. THE ADDITIONAL GROUND NO.1 FILED BY THE APPELLANT VIDE LETTER DATED 2.12.2008 IS, THEREFORE, REJECTED. 15. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS, GROUND NO.4 RAISED BY THE ASSESSEE IS DISMISSED. 16. GROUND NO. 5 IS GENERAL IN NATURE, HENCE, NEEDS NO SEPARATE ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 18. APPEAL OF THE REVENUE IS DISMISSED, AND THAT OF THE ASSESSEE IS PARTLY ALLOWED.. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH MAY,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH