Assistant Commissioner of Income-tax, V. M/s. Kirti Agrovet Ltd.,

ITA 1029/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9466 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Period of limitation; Tangible material; Time period of passing order; Revised return; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE , , , BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1029 /PUN/201 5 / ASSESSMENT YEAR : 20 09 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, NASHIK ....... / APPELLANT / V S. M/S. KIRTI AGROVET LTD., 79 - C, MARKET YEARD, LATUR 413512 PAN : AACCK6480D / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : S HRI AVADHESH KUMAR / DATE OF HEARING : 2 3 - 05 - 2017 / DATE OF PRONOUNCEMENT : 26 - 0 5 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL HAS BEEN FILED BY THE DEPARTMENT ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 12, PUNE DATED 07 - 04 - 2015 FOR THE ASSESSMENT YEAR 2009 - 10. 2. IN APPEAL, THE DEPARTMENT HAS IMPUGNED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS) IN HOLDING REASSESSMENT 2 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 PROCEEDINGS INVALID , AS WELL AS DELETING THE ADDITION OF RS.25,38,60,375/ - MADE ON THE BASIS OF DVOS REPORT. 3. THE FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : SEARCH AND SEIZURE ACTION U/S. 132 O F THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS CARRIED OUT IN THE CASE OF BHUTADA GROUP OF LATUR ON 28 - 08 - 2008. THE ASSESSEE COMPANY IS PART OF BHUTADA GROUP ENGAGED IN MANUFACTURING OF EDIBLE OIL AND SOLVENT EXTRACTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS IN POSSESSION OF VARIOUS ASSETS. THE ASSESSEE HA D DECLARED THE VALUE OF ASSETS AT RS.2,26,62,625/ - . IN ORDER TO DETERMINE THE CORRECT VALUE OF ASSETS THE ASSESSING OFFICER REFERRED THE VALUATION TO DVO U/S. 142A OF THE ACT. THE REP ORT OF THE DVO WAS NOT RECEIVED BY THE ASSESSING OFFICER TILL 31 - 12 - 2010. TO AVOID TIME BARRING OF ASSESSMENT , THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER ON 31 - 12 - 2010. THE ASSESSING OFFICER RECEIVED DVOS REPORT AFTER PASSING OF THE ASSESSMENT OR DER. THE DVO IN ITS REPORT DETERMINED THE VALUE OF ASSETS AS ON 31 - 03 - 2009 AT RS.27,65,23,000/ - , AS AGAINST RS.2,26,62,625/ - DECLARED BY THE ASSESSEE. ON THE BASIS OF DVOS REPORT, THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS AND ISSUED NOTIC E U/S. 148 OF THE ACT TO THE ASSESSEE ON 28 - 03 - 2013. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 31 - 03 - 2014 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT MADE ADDITION OF RS.25,38,60,375/ - ON ACCOUNT OF UNDER VALUATION OF ASSETS. APART FROM ABOVE THE AS SESSING OFFICER MADE ADDITION OF RS.7,637/ - ON ACCOUNT OF HAWALA TRANSACTIONS. AGGRIEVED BY THE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE CHALLENGED THE VALIDITY OF REASSESSMENT PROCEEDINGS AND ADDITIONS MADE ON MERITS BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE 3 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 IMPUGNED ORDER HELD REASSESSMENT PROCEEDINGS TO BE INVALID ON FOLLOWING COUNTS : I . THE ASSESSING OFFICER DID NOT PROVIDE COPY OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT. THUS, THE ASSESSEE WAS DEPRIVED FROM FILING OBJECTIONS AGAINST REOPENING. II . REASSESSMENT PROCEEDINGS WERE CARRIED OUT WITHOUT ISSUING NOTICE U/S. 143(2). III . DVOS REPORT CANNOT CONSTITUTE TANGIBLE MATERIAL TO REOPEN ASSESSMENT . IT WAS THE DVOS OPINION AND NOT TANGIBLE MATERIAL AS ENVISAGED U/S. 147 OF THE ACT FOR REOPENING THE ASSESSMENT. AGAINST THESE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI AVADHESH KUMAR REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER AND REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD SUBSTANTIALLY UNDERVALUED ITS ASSETS. THE ASSESSING OFFICER HAD REFERRED VALUATION OF ASSETS TO THE DVO. SINCE, LIMITATION PERIOD FOR FRAMING ASSESSMENT WAS COMING TO AN END AND THE REPORT OF DVO WAS NOT RECEIVED , THE ASSESSING OFFICER HAD NO OTHER OPTION BUT TO FRAME FINAL ASSESSMENT ON 31 - 12 - 2010. THE ASSESSING OFFICER INITIATED REASSESSMENT P ROCEEDINGS AFTER THE RECEIPT OF DVOS REPORT. IN SO FAR AS ISSUANCE OF NOTICE U/S. 143(2) IS CONCERNED, IN RESPONSE TO NOTICE ISSUED U/S. 148 , THE ASSESSEE HAD NOT FILED REVISED RETURN. NOTICE U/S. 142(1) WAS ISSUED TO THE ASSESSEE ON 30 - 12 - 2013 WHICH WA S DULY SERVED ON THE ASSESSEE. SINCE, NO RETURN WAS FILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S. 148 THE ASSESSING OFFICER DID NOT ISSUE NOTICE U/S. 143(2) OF THE ACT. 4 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 5. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE VEHE MENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN SETTING ASIDE THE REASSESSMENT PROCEEDINGS. THE LD. AR POINTED THAT REASONS FOR REOPENING WERE GIVEN TO THE ASSESSEE AFTER PASSING OF THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 147 OF T HE ACT. THIS FACT HAS BEEN RECORDED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 2.1.11 AT PAGE 14 OF THE IMPUGNED ORDER. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GKN DRIVESHAFT LTD. VS. ITO REPORTED AS 259 ITR 19 HA S HELD THAT THE ASSESS ING OFFICER IS DUTY BOUND TO FURNISH REASONS FOR REOPENING WITH IN A REASONABLE TIME. THE LD. AR FURTHER SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. TREND ELECTRONICS REPORTED AS 379 ITR 456 HAS HELD THAT WHER E REASONS ARE NOT FURNISH FOR REOPENING OF AN ASSESSMENT EVEN WHEN THE ASSESSEE SOUGHT FOR THE SAME , REASSESSMENT ORDER WOULD BE BAD IN LAW. 5.1 THE LD. AR SUBMITTED THAT REASSESSMENT PROCEEDINGS ARE FURTHER LIABLE TO BE SET ASIDE ON THE GROUND THAT THE REASSESSMENT ORDER WAS FRAMED WITHOUT ISSUING NOTICE U/S. 143(2) OF THE ACT. FOR CARRYING OUT SCRUTINY ASSESSMENT PROCEEDINGS , ISSUANCE OF NOTICE U/S. 143(2) IS MANDATORY. ANY SCRUTINY ASSESSMENT ORDER FRAMED IN THE ABSENCE OF NOTICE U/S. 143(2) SHALL B E INVALID. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PRECISION CAMSHAFTS LTD. VS. THE ASSTT. COMMISSIONER OF INCOME TAX IN ITA NO. 557/PN/2014 FOR ASSESSMENT YEAR 2006 - 07 D ECIDED ON 30 - 09 - 2016. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF THE ASSESSEE 5 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 HAS PLACED RELIANCE TO SUPPORT HIS SUBMISSIONS. REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AGAINST THE ASSESSEE ON THE BASIS OF DVOS REPORT. ADMITTEDLY, THE ASSESSING OFFICER HAS NOT PROVIDED REASONS FOR REOPENING THE ASSESSMENT BEFORE INITIATING ASSESSMENT PROCEEDINGS. TH E ASSESSEE VIDE LETTER DATED 23 - 04 - 2013 REQUESTED ASSESSING OFFICER TO PROVIDE A COPY OF REASONS RECORDED FOR ISSUANCE OF NOTICE U/S. 148 OF THE ACT. OSTENSIBLY, THE REASONS WERE PROVIDED TO THE ASSESSEE ON 09 - 09 - 2014 AFTER THE PASSING OF REASSESSMENT ORD ER ON 31 - 03 - 2014. IT IS A WELL SETTLED LAW THAT THE ASSESSING OFFICER IS DUTY BOUND TO PROVIDE A COPY OF THE REASONS FOR REOPENING TO THE ASSESSEE WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE ASSESSEE HAS RIGHT TO FILE OBJECTIONS AGAINST ISSUANC E OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER [ GKN DRIVESHAFT LTD. VS. ITO (SUPRA)]. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX & ANR. REPORTED A S 296 ITR 90 HAS FURTHER DIRECTED THAT MINIMUM FOUR WEEKS TIME SHOULD BE GRANTED TO THE ASSESSEE AFTER SERVICE OF ORDER DECIDING OBJECTIONS BEFORE THE ASSESSING OFFICER PROCEEDS WITH THE ASSESSMENT. 7. THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION RENDERED IN THE CASE OF KSS PETRON PRIVATE LTD. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX IN INCOME TAX APPEAL NO. 224 OF 2014 DECIDED ON 03 - 10 - 2016 HAS SET ASIDE REASSESSMENT PROCEEDINGS WERE THE ASSESSING OFFICER HAS NOT FOLLOWED THE PROPER PROCEDURE AS MANDATED FOR DISPOSING OF THE OBJECTIONS OF THE ASSESSEE. THE HONBLE COURT HELD : 8 WE NOTE THAT ONCE THE IMPUGNED ORDER FINDS THE ASSESSMENT ORDER IS WITHOUT JURISDICTION AS THE LAW LAID DOWN BY THE APEX COURT IN GKN DRIVESHAFTS (S UPRA) HAS NOT BEEN FOLLOWED, THEN THERE IS NO REASON TO RESTORE THE ISSUE TO THE ASSESSING OFFICE TO PASS A FURTHER/FRESH ORDER. IF THIS IS PERMITTED, IT WOULD GIVE A LICENCE TO THE ASSESSING OFFICER TO PASS 6 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 ORDERS ON RE - OPENING NOTICE, WITHOUT JURISDICTIO N (WITHOUT COMPLIANCE OF THE LAW IN ACCORDANCE WITH THE PROCEDURE, YET THE ONLY CONSEQUENCE, WOULD BE THAT IN APPEAL, IT WOULD BE RESTORED TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER FOLLOWING THE DUE PROCEDURE. THIS WOULD LEAD TO UNNECESSARY HAR ASSMENT OF THE ASSESSEE BY REVIVING STALE/ OLD MATTERS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. TREND ELECTRONICS (SUPRA). THE HONBLE COURT HELD : 8. ..........IT IS AXIOMATIC THAT POWER TO REOPEN A COMPLETED ASSESSMENT UNDER THE ACT IS AN EXCEPT I ONAL POWER AN D WHENEVER REVENUE SEEKS TO EXERCISE SUCH POWER, THEY MUST STRICTLY COMPLY WITH THE PREREQUISITE CONDITIONS VIZ. REOPENING OF REASONS TO INDICATE THAT THE ASSESSING OFFIC ER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH WOULD WARRANT THE REOPENING OF AN ASSESSMENT. THESE RECORDED REASONS AS LAID DOWN BY THE APEX COURT MUST BE FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR SO AS TO ENABLE THE AS SESSEE TO OBJECT TO THE SAME BEFORE THE ASSESSING OFFICER. THUS IN THE ABSENCE OF REASONS BEING FURNISHED, WHEN SOUGHT FOR WOULD MAKE AN ORDER PASSED ON REASSESSMENT BAD IN LAW. THE RECORDING OF REASONS (WHICH HAS BEEN DONE IN THIS CASE) AND FURNISHING OF THE SAME HAS TO BE STRICTLY COMPLIED WITH AS IT IS A JURISDICTIONAL ISSUE. THIS REQUIREMENT IS VERY SALUTARY AS IT NOT ONLY ENSURES REOPENING NOTICES ARE NOT LIGHTLY ISSUED . THUS, IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS FAILED TO PROVIDE REASONS FOR REOPENING AND USURPED THE OPPORTUNITY OF ASSESSEE TO FILE OBJECTIONS , THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY HELD REOPENING AS INVALID. 8. THE SECOND REASON GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR HOLDING REASSESS MENT PROCEEDINGS AS INVALID IS FRAMING OF ASSESSMENT ORDER WITHOUT ISSUING NOTICE U/S. 143(2) OF THE ACT. NOTICE U/S. 143(2) IS PREREQUISITE FOR CARRYING OUT SCRUTINY ASSESSMENT PROCEEDINGS. THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PRECISION CAMSHAFTS LTD. VS. THE ASSTT. COMMISSIONER OF INCOME TAX 7 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 (SUPRA) UNDER SIMILAR CIRCUMSTANCES , WHEREIN UNDER REASSESSMENT PROCEEDINGS NOTICE U/S. 143(2) WAS NOT ISSUED TO THE ASSESSEE , T HE TRIBUNAL HELD REASSESSMENT PROCEEDINGS TO BE WITHOUT JURISDICTION. THE CO - ORDINATE BENCH WHILE HOLDING SO PLACED RELIANCE ON THE DECISION RENDERED IN THE CASE OF ACIT VS. GENO PHARMACEUTICALS LTD. (2013) 32 TAXMANN.COM 162 (BOM ) . THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ARE AS UNDER : 11. THE HONBLE BOMBAY HIGH COURT IN ACIT VS. GENO PHARMACEUTICALS LTD. (SUPRA) HAS UPHELD THE ORDER OF TRIBUNAL IN HOLDING THAT THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT IS MANDATORY AND IN THE ABSENCE OF SUCH SERVICE, THE ASSESSING OFFICER CANNOT PROCEED TO MAKE AN ENQ UIRY ON RETURN FILED IN COMPLIANCE WITH NOTICE ISSUED UNDER SECTION 148 OF THE ACT. IN THE FACTS OF THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT, ADMITTEDLY, NO NOTICE UNDER SECTION 143(2) OF THE ACT HAD BEEN ISSUED WHILE MAKING THE ASSESSMENT UNDER SECTI ON 143(3) R.W.S. 147 OF THE ACT. THE TRIBUNAL IN THE SAID CASE HAD RELIED ON THE JUDGMENT OF APEX COURT IN R. DALMIA VS. CIT (1999) 236 ITR 480 (SC) TO CONCLUDE THAT THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT WAS MANDATORY. THE TRIBUNAL FOLLOWING THE SAID JUDGMENT OF THE APEX COURT HAD HELD THAT THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS MANDATORY AND IN THE ABSENCE OF SAID SERVICE, THE ASSESSING OFFICER COULD NOT PROCEED TO MAKE AN ENQUIRY ON THE RETURN FILED IN COMPLIANCE WITH THE NOTICE ISSU ED UNDER SECTION 148 OF THE ACT. THE ORDER OF TRIBUNAL WAS CONFIRMED BY THE HONBLE HIGH COURT. 12. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE AND FOLLOWING THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HONBLE HIGH COURT IN ACIT VS. GENO PHARMACEUTICALS LTD. (SUPRA), WE HOLD THAT IN THE ABSENCE OF ANY NOTICE BEING ISSUED UNDER SECTION 143(2) OF THE ACT AFTER THE REASSESSMENT PROCEEDINGS ARE INITIATED AGAINST THE ASSESSEE UNDER SECTION 148 OF THE ACT AND THE ASSESSEE HAS FILED THE RETURN O F INCOME OR FILED A LETTER STATING THAT THE RETURN OF INCOME FILED BY IT SHOULD BE TREATED AS FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT, THEN REASSESSMENT ORDER IS VITIATED. ONCE NO NOTICE UNDER SECTION 143(2) OF THE ACT IS ISSUED TO THE ASS ESSEE, THEN THE REASSESSMENT ORDER PASSED IS NULL AND VOID, SINCE THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT IN REASSESSMENT PROCEEDINGS UNDER SECTION 147 / 148 OF THE ACT IS MANDATORY. WE HOLD THAT REASSESSMENT ORDER PASSED IN THE PRESENT CASE UN DER SECTION 143(3) R.W.S. 147 OF THE ACT IS NULL AND VOID. WE FIND NO MERIT IN THE OPINION OF CIT(A) THAT WHERE THE ASSESSEE HAS ONLY FILED LETTER 8 ITA NO . 1029/PUN/2015, A.Y. 2009 - 10 STATING THAT ORIGINAL RETURN OF INCOME FILED BY IT SHOULD BE TREATED AS FILED IN RESPONSE TO NOTICE UNDER SEC TION 148 OF THE ACT IMPLIES THAT NO RETURN OF INCOME HAS BEEN FILED IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT, IS MISPLACED. REVERSING THE ORDER OF CIT(A), WE HOLD THAT THE REASSESSMENT PROCEEDINGS COMPLETED AGAINST THE ASSESSEE ARE WITHOUT ANY JURISDICTION. 9. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISIONS DISCUSSED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING REASSESSMENT PROCEEDINGS AS INVALID AND VOID. THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF THE DEPARTMENT IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 26 TH DAY OF MAY, 201 7 . SD/ - SD/ - ( / ANIL CHATURVEDI ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 26 TH MAY, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 12 , PUNE 4. / THE CIT (CENTRAL), NAGPUR 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / ASSISTANT REGISTRAR , , / ITAT, PUNE