Sri. C. RamaiahReddy, Bangalore V. DCIT, Bangalore

ITA 121/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57462 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARCHANA CHOWDHRY CITII
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Retrospective amendment; Procedural lapse
• Section: 45(2); 143(3); 234B; 147; 148

Judgement Text

PAGE 1 OF 8 ITA NO.12 1/BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N K SAINI, ACCOUNANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.121/BANG/2011 (ASST. YEAR 2005-06) SRI C RAMAIAH REDDY, RAMAIAH REDDY COLONY, SECTOR-D, BASAVANAGAR, MARATHAHALLI, BANGALORE-37. PA NO.AAVPR7873D VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING 24.01.2012 DATE OF PRONOUNCEMENT 27.01.2012 APPELLANT BY : SHRI V SRINIVASAN, C.A. RESPONDENT BY : SMT. ARCHANA CHOWDHRY, CIT-II O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III, BANGALORE DATED 26.11. 2010. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- I) THE ORDER OF ASSESSMENT UNDER SECTION 147 IS BAD IN LAW AND VOID-AB-INITIO FOR WANT OF REQUISITE JURISDICTI ON ESPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION UNDER SECTION 148 OF THE ACT DID NOT E XIST PAGE 2 OF 8 ITA NO.12 1/BANG/2011 2 AND HAVE NOT BEEN COMPLIED WITH AND CONSEQUENTLY, TH E RE-ASSESSMENT REQUIRES TO BE CANCELLED. II) WITHOUT PREJUDICE TO THE ABOVE, THE AUTHORITIES BEL OW ARE NOT JUSTIFIED IN COMPLETING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT WITHOUT ISSUING THE MANDATORY NOTICE UNDER SECTION 143(2) OF THE ACT AND CONSEQUENTLY, THE IMPUGNED ORDER PASSED IS A NULLITY AND LIABLE TO BE CANCELLED. III) WITHOUT PREJUDICE TO THE ABOVE, THE AUTHORITIES BEL OW ARE NOT JUSTIFIED IN ASSESSING A SUM OF RS.12,13,68 ,180/- AS LONG TERM CAPITAL GAINS AND A SUM OF RS.61,32,80 0/- AS SHORT TERM CAPITAL GAINS UNDER SECTION 45(2) OF THE ACT BY ERRONEOUSLY HOLDING THAT THE STOCK-IN-TRADE RECEIV ED BY APPELLANT ON PARTITION OF THE ERSTWHILE JOINT FAM ILY WERE CAPITAL ASSETS AND THAT THEY WERE CONVERTED INT O STOCK IN TRADE AFTER THE PARTITION AND THEREFORE TH E APPELLANT WAS LIABLE TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS UNDER SECTION 45(2) OF THE ACT UNDER THE FACT S AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. IV) WITHOUT PREJUDICE TO THE ABOVE, THE LONG TERM CAPIT AL GAINS AND SHORT TERM CAPITAL GAINS COMPUTED IS HIGH LY EXCESSIVE AND LIABLE TO BE REDUCED SUBSTANTIALLY. V) WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HONBLE CCIT/DG, THE APPELLANT DENIES HIMSELF LIABL E TO BE CHARGED TO INTEREST UNDER SECTION 234B OF THE AC T WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF T HE APPELLANTS CASE AND THE LEVY DESERVES TO BE CANCELL ED. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE/APPELLANT IS AN INDIVIDUAL, A DEALER IN REAL ESTATE. FOR THE CONCERNED ASSESSMENT YEAR, RETURN OF INCOME WAS FILED ON 19/9/2006 DECLARING A LOSS OF RS.65,49,770/-. THE ASSESSING OFFICER COMPLETED THE RE-ASSESSMENT UNDER SECTION 143(3) RW S 147 OF THE ACT VIDE ORDER DATED 31.12.2008 DETERMINING THE TAXABLE INCO ME AT RS.12,10,51,209/- AFTER MAKING AN ADDITION OF RS.12,14,68,180/- AS LO NG TERM CAPITAL GAINS AND A PAGE 3 OF 8 ITA NO.12 1/BANG/2011 3 SUM OF RS.61,32,800/- AS SHORT TERM CAPITAL GAINS B Y INVOKING THE PROVISIONS OF SECTION 45(2) OF THE ACT. 4. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE HAS CHALLENGED JURISDICTIONAL ASPECT, NAMELY, THE REOPENING OF THE ASSESSMENT IS INVALID SINCE NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED. THE ISSUE ON MERITS WAS ALSO CHALLENGED. BOTH THE ISSUES WERE D ECIDED AGAINST THE ASSESSEE BY THE FIRST APPELLATE AUTHORITY. 4.1 THE JURISDICTIONAL ASPECT, NAMELY, NO NOTICE UN DER SECTION 143(2) OF THE ACT WAS ISSUED BEFORE COMPLETION OF A SSESSMENT UNDER SECTION 147, WAS DECIDED BY THE FIRST APPELLATE AUTHORITY AGA INST THE APPELLANT BY OBSERVING THUS:- I HAVE CONSIDERED THE ARGUMENTS AND THE WRITTEN SUBMISSION AND THE MATERIALS ON RECORD. I FIND THA T THE APPELLANT HAS PARTICIPATED IN THE ASSESSMENT PROCEE DINGS AND HAS NOT RAISED THIS OBJECTION ABOUT NON-SERVICE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT BEFORE T HE A.O. IN THE ASSESSMENT PROCEEDINGS. THEREFORE, IN LIGHT OF THE PROVISIONS OF SEC.292B OF THE ACT, THIS OBJE CTION IS NOT MAINTAINABLE BEFORE ME. THE RELEVANT GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED BY THE REJECTION OF APPEAL BY THE FIRS T APPELLATE AUTHORITY, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR SUBMITTED THAT THE REASSESSMENT HAS BEEN COMPLETED WITHOUT ISSUING MANDATORY NOTICE UNDER SEC TION 143(2) OF THE ACT PAGE 4 OF 8 ITA NO.12 1/BANG/2011 4 AND THEREFORE, THE RE-ASSESSMENT ORDER PASSED UNDER SECTION 143(3) RWS 147 OF THE ACT IS TO BE CANCELLED. THE LEARNED AR RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT V HOTEL BLUE MOON 321 ITR 362 AND CONTENDED THAT OMISSION ON THE PART OF THE ASSESSING OFFICER TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PR OCEDURAL IRREGULARITY AND IS NOT CURABLE. IT WAS FURTHER CONTENDED THAT REFE RENCE BY THE FIRST APPELLATE AUTHORITY TO THE PROVISIONS OF SECTION 292 BB OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, SINCE SECTION 292BB WAS INSERTED W.E.F. 1/4/2008 AND IT IS APPLICABLE FROM THE ASSESSMENT YEAR 2008-09. IN THIS CONNECTION, THE ASSESSEE RELIED O N THE SPECIAL BENCH ORDER OF THE TRIBUNAL IN THE CASE OF KUBER TOBACCO PRODUC TS P. LTD. V DCIT 310 ITR (AT) 300 (DEL.) (SB) AND ALSO THE ORDER OF THE TRIBUNAL IN THE CASE OF ARUN LAL V ACIT 1 ITR (TRIB.) 1 (AGRA). IT WAS FUR THER CONTENDED BY THE LEARNED AR THAT THE PROVISO TO SECTION 148(1) WILL NOT COME TO THE RESCUE OF THE REVENUE, SINCE IN THIS CASE; NO NOTICE UNDER SE CTION 143(2) HAS BEEN ISSUED. THE LEARNED AR RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO V R K GUPTA 308 ITR (AT) 49 (DEL.). 7. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPOR TED THE ORDER OF THE FIRST APPELLATE AUTHORITY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, RETURN OF INCOME WAS FILE D ON 19/9/2006 DECLARING A LOSS OF RS.65,49,770/-. SUBSEQUENTLY, NOTICE UNDER SECTION 148 WAS ISSUED (DATED 13/11/2007). IN REPLY TO THE NOTICE, THE ASS ESSEE HAD FILED A LETTER DATED 12/12/2007 WHEREIN THE ASSESSEE HAD STATED TH AT THERE IS NO PAGE 5 OF 8 ITA NO.12 1/BANG/2011 5 ESCAPEMENT OF INCOME AND REQUESTED FOR FURNISHING T HE REASONS RECORDED FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT . THE ASSESSEE HAD RAISED OBJECTIONS TO THE REASONS RECORDED. HOWEVER , THE OBJECTIONS RAISED BY THE ASSESSEE WAS REJECTED AND RE-ASSESSMENT WAS C OMPLETED VIDE ORDER DATED 31.12.2008. 8.1 IT WAS SPECIFICALLY CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT NECESSARY NOTICE UNDER SECTION 143(2) HAS NOT BEEN ISSUED. THE SAME CONTENTION IS REITERATED BEFORE US. THE B URDEN WITH REGARD TO SERVICE OF NOTICE UNDER SECTION 143(2) IS ON THE RE VENUE. THE ASSERTION OF THE ASSESSEE THAT THERE IS NO SERVICE OF NOTICE HAS NOT BEEN DISPELLED BY THE REVENUE BY PLACING ANY MATERIAL/EVIDENCE. THE HONBL E SUPREME COURT IN THE CASE OF ACIT V HOTEL BLUE MOON 321 ITR 362 HAD CATE GORICALLY HELD THAT OMISSION ON THE PART OF THE ASSESSING OFFICER TO IS SUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND IS NO T CURABLE. IT WAS FURTHER HELD BY THE HONBLE SUPREME COURT THAT FOR COMPLETIO N OF ASSESSMENT UNDER SECTION 158BC OF THE ACT, THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. IN THE INSTANT CASE, THE CIT(A) HAD DISMISSED THE APPEAL OF THE ASSESSEE BY PLACING RELIANCE ON SECTIO N 292BB OF THE ACT. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF KUBER TOBACCO PRODUCTS P. LTD. 310 ITR (AT) 300 (DEL.) (SB) DEALT WITH THE APPLICABILITY OF THE PROVISIONS OF SECTION 292BB OF THE ACT. IT WAS CATEGORICALLY HELD THAT THE PROVISIONS ARE NOT RETROSPECTIVE BUT PROSPECTIV E AND IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. IT WAS FURTHER HELD T HAT THE OBJECTION WITH REGARD TO NON-ISSUANCE OF NOTICE UNDER SECTION 143( 2) CAN BE RAISED BEFORE PAGE 6 OF 8 ITA NO.12 1/BANG/2011 6 THE APPELLATE AUTHORITIES PRIOR TO ASSESSMENT YEAR 2 008-09. THE RELEVANT FINDING OF THE SPECIAL BENCH IS SUMMARIZED AS FOLLO WS (PARA 46) :- SUMMARISING OUR FINDINGS WE HOLD AS FOLLOWS:- (I) SECTION 292BB EVEN IF IT IS PROCEDURAL IT IS CREATING A NEW DISABILITY AS IT PRECLUDES THE ASSESSEE FROM TAKING A PLEA WHICH COULD BE TAKEN AS A RIGHT, CANNOT BE CONSTRUED RETROSPECTIVELY AS THE SAME IS MADE APPLICABLE BY THE STATUTE WITH EFFECT FROM APRIL 1, 2008. (II) SECTION 292BB IS APPLICABLE TO THE ASSESSMENT YEAR 2008-09 AND SUBSEQUENT ASSESSMENT YEARS. 8.2 THE HONBLE MADRAS HIGH COURT IN THE CASE OF C IT V M CHELLAPPAN AND ANOTHER 281 ITR 444 HAS HELD THAT FO R RE-ASSESSMENT TO BE COMPLETED UNDER SECTION 143(3) RWS 147, NOTICE UNDE R SECTION 143(2) IS TO BE ISSUED WITHIN THE PRESCRIBED TIME LIMIT. THE RELE VANT FINDING OF THE HONBLE MADRAS HIGH COURT READS AS FOLLOWS:- (HEAD NOTE) THAT NO NOTICES UNDER SECTION 143(2) W ERE SERVED ON THE ASSESSEES WITHIN THE STIPULATED PERIO D OF TWELVE MONTHS AND THEREFORE THE PROCEEDINGS UNDER SECTION 143 CAME TO AN END AND THE MATTER ATTAINED FINALITY. THEREFORE, THE TRIBUNAL WAS RIGHT IN HOLD ING THAT THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 AND COMPLETION OF ASSESSMENT WITHOUT ISSUE OF NOTIC E UNDER SECTION 143(2) WITHIN THE TWELVE MONTHS WAS N OT VALID. 8.3 THE FIRST PROVISO TO SECTION 148(1) OF THE INC OME- TAX ACT, 1961 INSERTED BY THE FINANCE ACT, 2006 WITH RETROSPECTIVE EFFECT FROM OCTOBER 1, 1991 SAVES THE VALIDITY OF A PAGE 7 OF 8 ITA NO.12 1/BANG/2011 7 REASSESSMENT ORDER WHERE A NOTICE UNDER SECTION 143 (2) OF THE ACT WAS NOT SERVED WITHIN 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED. BUT THE SAVING IS S UBJECT TO THE ASSESSEE HAVING FILED THE RETURN BETWEEN OCTOBER 1, 1991 AND SEPTEMBER 30, 2005 IN RESPONSE TO A NOTICE ISSUED U NDER SECTION 148 OF THE ACT. THE OTHER CONDITION IS THAT THE NO TICE UNDER SECTION 143(2) HAS TO BE SERVED WITHIN THE TIME FRA ME PRESCRIBED UNDER CLAUSE (B) OF THE PROVISO. IN THE INSTANT C ASE, THE RETURN OF INCOME PURSUANT TO 148 NOTICE IS NOT FILED WITHI N 1 ST OCTOBER, 1991 AND SEPTEMBER 30, 2005. MOREOVER, IT IS THE C ASE OF THE ASSESSEE THAT NO NOTICE UNDER SECTION 143(2) HAS BE EN ISSUED. THE REVENUE HAS NOT BROUGHT ANY EVIDENCE ON RECORD T O SUGGEST THAT NOTICE UNDER SECTION 143(2) HAS BEEN ISSUED WI THIN THE TIME STIPULATED. THEREFORE, IN VIEW OF THE AFORESAID RE ASONS AND IN THE LIGHT OF THE JUDGEMENTS OF THE HONBLE SUPREME COURT AND THE HONBLE MADRAS HIGH COURT AND VARIOUS ORDERS OF THE TRIBUNAL (MENTIONED BELOW), WE ARE OF THE VIEW THAT RE-ASSES SMENT COMPLETED WITHOUT ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS TO BE SET ASIDE. ACIT V HOTEL BLUE MOON 321 ITR 362 (SC); CIT V M CHELLAPPAN AND ANOTHER 281 ITR 444; KUBER TOBACCO PRODUCTS P. LTD. V DCIT 310 ITR (AT) 300 (DEL.)(SB); ARUN LAL V ACIT 1 ITR (TRIB.) 1 (AGRA) & ITO V R K GUPTA 308 ITR (AT) 49 (DEL.) 8.4 BEFORE PARTING, IT IS TO BE MENTIONED THAT IF THE REVENUE IS TO BRING ON RECORD ANY MATERIAL TO SUGGEST THAT THERE H AS BEEN SERVICE OF NOTICE UNDER SECTION 143(2) ON THE ASSESSEE AS CONT EMPLATED UNDER LAW; NEEDLESS TO SAY, APPROPRIATE CURATIVE STEPS COULD BE TAKEN BY THE REVENUE. PAGE 8 OF 8 ITA NO.12 1/BANG/2011 8 8.5 SINCE WE HAVE DECIDED THE JURISDICTIONAL ISSU E IN FAVOUR OF THE ASSESSEE AND HAVE CANCELLED THE ASSESSMENT, THE OTH ER GROUNDS RAISED ON MERITS ARE NOT ADJUDICATED UPON. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF JANUARY, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.