Sri Manilok Constructions (Firm), Hyderabad V. ITO, Hyderabad

ITA 1301/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66172 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: K V CHALAMAIAH
• Keywords: Invalid notice; Recovery proceedings; Opportunity of being heard; Audit objection; Difference of opinion; Change of opinion
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.1301/HYD/2010 : ASSESSMENT YEAR 2005 -06 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD (PAN - AAZFS 6749 M) (APPELLANT) V/S INCOME - TAX OFFICER.WARD - 4(2). HYDERABAD. (RESPONDENT) APPELLANT BY : SHRI K.V.CHALAMAIAH RESPONDENT BY : SMT. AMISHA S.GUPT DATE OF HEARING 08.08.2012 DATE OF PRONOUNCEMENT 24.8.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, HYDERABA D DATED 27.8.2010 FOR THE ASSESSMENT YEAR 2005-06. 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEA L READ AS FOLLOWS- 1. .. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS WH ILE SUSTAINING THE ACTION OF THE ASSESSING OFFICER U/S. 147 READ WITH SECTION 119(1) OF THE ACT WITHOUT ANY SPEAKING ORDER ON THIS ISSUE . 3. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE A SSESSING OFFICER ERRED IN ASSUMING JURISDICTION FOR MAKING A REGULAR ASSESSMENT FOR ASSESSMENT YEAR 2005-06 BY VIRTUE OF A NOTICE PURPORTEDLY ISSUED AND SERVED U/S. 148 READ WITH SECTION 119(1) OF THE ACT. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEAR NED. CIT(A) ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER I N PASSING THE IMPUGNED ASSESSMENT ORDER U/S. 144 WITHOUT GIVING REASONABLE OPPORTUNITY OF BEING HEARD UNDER AN ERRONEOUS NOTIO N THAT THE APPELLANT ARE REFUSED TO PRODUCE BOOKS OF ACCOUNT O R ANY OTHER ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 2 EVIDENCE ON ANY ISSUE EVEN BEFORE HIM (CIT(A))), WH ICH IS CONTRARY TO THE FACTS OF THE CASE. 4. ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APPEA L WHICH READ AS FOLLOWS- 1. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSIN G OFFICER ERRED IN ASSUMING JURISDICTION FOR MAKING A RE-ASSESSMENT FOR ASSESSMENT YEAR 2005-06 BY VIRTUE OF AN INVALID NO TICE UNDER SECTION 148 PURPORTEDLY ISSUED AND SERVED ON THE S ATISFACTION OF THE CIT, WHICH IS NOT PERMITTED UNDER LAW, ON THE F ACTS AND IN THE CIRCUM STANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE S USTAINING THE ACTION OF THE ASSESSING OFFICER U/S. 147 WITHOUT TAKING CO GNIZANCE OF AN INVALID NOTICE UNDER SECTION 148 ISSUED AND SERVED ON THE DIRECTION OF THE CIT PURPORTEDLY BY VIRTUE OF A R EVENUE AUDIT OBJECTION, WHICH IS NOT PERMITTED UNDER LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3..: .. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN THE BUSINESS OF EXECUTING WORK CONTRACTS . IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 18.10.,20 05, ADMITTING AN INCOME OF RS.1,30,040. THOUGH THE RETURN WAS INITI ALLY PROCESSED UNDER S.143(1) OF THE ACT ON 10.4.2006 RESULTING IN GRANT OF REFUND OF RS.1,24,822 TO THE ASSESSEE, IT WAS LATER OBSERVED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, AND ACCOR DINGLY A NOTICE UNDER S.148 OF THE ACT WAS ISSUED ON 3.2.2009. I N RESPONSE TO THE SAID NOTICE, ASSESSEE FILED A LETTER DATED 2.3.2009, WHI CH READS AS FOLLOWS- KIND REFERENCE IS INVITED TO THE NOTICE U/S. 148 CITED ABOVE WHEREIN, APART FROM CALLING FOR OUR RETURN OF INCOM E FOR ASSESSMENT YEAR 2005-06, IT WAS M ENTIONED THAT THE SAID NOTICE WAS ISSUED AFTER OBTAINING THE NECESSARY SATISFACTI ON OF THE CIT- IV, HYDERABAD. IN THIS CONNECTION, IT IS REQUESTED THAT THE SATIS FACTION OF THE CIT-IV, HYDERABAD MAY PLEASE BE COM MUNICATED TO US, APART FORM THE REASONS FOR SUCH A SATISFACTION, SO AS T O ENABLE US TO COMPLY WITH THE SAID NOTICE WITHOUT FURTHER LOSS OF TIME, SINCE WE ARE AT A LOSS TO UNDERSTAND AS TO HOW THE RETURN OF INCOM E ALREADY ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 3 FILED BY US FOR ASSESSMENT YEAR 2005-06 ON 18.10.20 05 VIDE INWARD NO.0402001048 WAS DEFICIENT. IMMEDIATELY ON RECEIPT OF THE ABOVE MENTIONED LETTE R, REASONS RECORDED FOR ISSUING THE NOTICE UNDER S.148 WERE INTIMATED V IDE LETTER DATED 3.3.2009 AND THE SATISFACTION OF THE CIT-IV, HYDERA BAD WAS ALSO INTIMATED, AS REQUESTED BY THE ASSESSEE. 4. LATER, AS THERE WAS A CHANGE IN INCUMBENCY, A N OTICE UNDER S.143(2) WAS ISSUED ON 17.7.2009, AND THE CASE WAS POSTED FOR HEARING ON 29.7.2009. HOWEVER, ON THAT DATE NONE APPEARED. BUT ON 10.8.2009, CHARTERED ACCOUNTANT OF THE ASSESSEE, SHRI K.V.CHAL AMAIAH, APPEARED AND FILED A POWER OF ATTORNEY IN HIS FAVOUR AND A L ETTER DATED 29.7.2009, WHEREBY BESIDES CONTESTING THE LEGALITY OF THE INIT IATION OF PROCEEDINGS UNDER S.147, ALSO CONTESTED THE REASONS FOR THE ISS UANCE OF NOTICE UNDER S.148 ON MERITS. AS THE EARLIER NOTICE UNDER S.14 3(2) DATED 7.7.2009 WAS ISSUED ON THE MISTAKEN PRESUMPTION THAT THE ASS ESSEE HAS FILED A REQUEST TO TREAT THE ORIGINAL RETURN FILED ON 18.10 .2005 AS A RETURN FILED IN RESPONSE TO THE NOTICE ISSUED UNDER S.148, THE SAID NOTICE UNDER S.143(2) DATED 7.7.2009 WAS WITHDRAWN AND A FRESH NOTICE UND ER S.143(2) DATED 8.10.2009 WAS ISSUED. THEREAFTER, REJECTING THE VAR IOUS OBJECTIONS OF THE ASSESSEE AGAINST THE REOPENING OF THE ASSESSMENT, T HE ASSESSING OFFICER COMPLETED THE RE-ASSESSMENT, MAKING VARIOUS ADDITIO NS/DISALLOWANCES AND DETERMINING THE TOTAL INCOME OF THE ASSESSEE A T RS.19,18,536, VIDE ORDER OF ASSESSMENT DATED 18.12.2009, PASSED UNDER S.144 READ WITH S.147 OF THE ACT. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER NOT ONLY WITH REGARD TO THE REOPENING OF TH E ASSESSMENT, BUT ALSO THE ADDITIONS/DISALLOWANCES MAD THEREIN, AND THUS D ISMISSED THE APPEAL OF THE ASSESSEE. ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 4 6. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE PREFERRED THIS SECOND APPEAL BEFORE US. 7. THE FIRST GRIEVANCE OF THE ASSESSEE IS AGAINST THE LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT. RELEV ANT ARGUMENTS OF THE APR5TREIS ON THIS ISSUE ARE AS FOLLOWS- 8. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE O UTSET MENTIONED THAT IT IS A CASE OF SUMMARY ASSESSMENT UNDER S.143 (1) OF THE ACT PASSED BY THE ASSESSING OFFICER ORIGINALLY, BASED O N THE RETURN FILED ON 18.10.2009 FOR THE ASSESSMENT YEAR 2005-06, AND THE NOTICE UNDER S.148 WAS ISSUED WITHIN FOUR YEARS, BUT SUBSEQUENTLY APPR OVED BY THE COMMISSIONER OF INCOME-TAX ADMINISTRATIVELY. THE L EARNED COUNSEL FOR THE ASSESSEE PLEADED THAT THE REOPENING OF ASSESSME NT SHOULD BE HELD INVALID, CONSIDERING THE FACT THAT HE BORROWED THE SATISFACTION OF THE COMMISSIONER OF INCOME-TAX. ASSESSEE RELIED ON JUDI CIAL PRONOUNCEMENTS TOO. 9. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT APPROVAL OF THE COMMISSIONER OF INCO ME-TAX WAS MERE ADMINISTRATIVE REQUIREMENT IN ALL MATTERS, WHERE TH ERE ARE AUDIT OBJECTIONS, AND SO, THAT SHOULD NOT BE CONFUSED WIT H THE ORIGINAL SATISFACTION RECORDED BY THE ASSESSING OFFICER, WHI CH IS NOT DISPUTED. THUS, IT IS THE CASE OF REOPENING THE SUMMARY ASSES SMENT BASED ON THE SATISFACTION OF THE ASSESSING OFFICER, WHICH IS DUL Y APPROVED BY THE COMMISSIONER ADMINISTRATIVELY. 10. WE HEARD BOTH THE SIDES AND PERUSED THE IMPUG NED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. THERE IS NO DISPUTE ABOUT THE RECORDING OF SATISFACTION BY THE ASSESSIN G OFFICER, A COPY OF WHICH WAS ALREADY GIVEN TO ASSESSEE, AND THE ASSESS EE HAS NO GRIEVANCE ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 5 ABOUT THE ADEQUACY OF THE SATISFACTION RECORDED BY THE ASSESSING OFFICER. IN THE CIRCUMSTANCES OF THE CASE, THIS ISSUE RELATI NG TO LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER S.147 OF T HE ACT HAS TO BE DECIDED AGAINST THE ASSESSEE. IT IS A FACT THAT TH E ASSESSING OFFICERS SATISFACTION IS ADMINISTRATIVELY APPROVED BY THE CO MMISSIONER AND THE SAME SHOULD NOT BE CONFUSED WITH THE BORROWAL OF SATISFACTION OF THE COMMISSIONER. FURTHER, IT IS A FACT THAT THERE IS OCCASION FOR FORMATION OF OPINION IN THE SUMMARY ASSESSMENT PROCEEDINGS, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (291 ITR 500), WHEREIN IT HAS BEEN HELD BY THE APEX COURT AS FOLLOWS- WITH EFFECT FROM APRIL 1, 1998, THE SECOND PROVISO TO SECTION 143(1)(A) WAS SUBSTITUTED. DURING THE PERIOD BETWEE N APRIL 1, 1998 AND MAY 31, 1999, SENDING OF AN INTIMATION WAS MANDATORY. THE LEGISLATIVE INTENT IS VERY CLEAR FROM THE USE O F THE WORD INTIMATION AS SUBSTITUTED FOR ASSESSMENT THAT TWO DIFFERENT CONCEPTS EMERGE. WHILE MAKING AN ASSESSMENT, THE AS SESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING THE ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A) NO ADDITION WHICH IS IMPERMISS IBLE BY THE INFORM ATION GIVEN IN THE RETURN COULD BE MADE BY THE ASSE SSING OFFICER. THE INTIMATION UNDER SECTION 143(1)(A) CA NNOT BE TREATED TO BE AN ORDER OF ASSESSMENT . UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SE CTION 143(1), WITH EFFECT FROM JUNE 1, 1999, EXCEPT AS PROVIDED I N THE PROVISION ITSELF, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. IT CANNOT THEREFORE BE SAID THAT AN ASSESSMENT IS DONE BY T HEM. THE INTIMATION UNDER SECTION 143(1)(A) WAS DEEMED TO B E A NOTICE OF DEMAND UNDER S.156 FOR THE APPARENT PURPOSE OF MAKI NG MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX AP PLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYA BLE IN THE INTIMATION BECAME PERMISSIBLE. NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISIONS. THEREFORE, THERE BEING NO ASSESSMENT UNDER SECTIONS 143(1)(A), THE QUESTION O F CHANGE OF OPINION DOES NOT ARISE. FURTHER, WE PERUSED THE DELHI HIGH COURTS JUDGMENT IN THE CASE OF SIDDHARTHA LTD DATED 14.9.2011 AND FIND IT IS A CAS E OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER AND APPLICATION OF MI ND BY THE ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 6 COMMISSIONER. IT IS NOT THE CASE HERE IN THE PRESE NT APPEAL. THERE, THE FACTS ARE ALSO DIFFERENT. IN THE INSTANT CASE, THE RE EXISTS REASONS RECORDED BY THE ASSESSING OFFICER, WHO MERELY OBTAINED THE A DMINISTRATIVE APPROVAL OF COMMISSIONER, WHICH IS PART OF THE ADMINISTRATIV E PROCEDURE. THEREFORE, WE FIND NO INFIRMITY IN THE ACTION OF TH E ASSESSING OFFICER IN REOPENING THE ASSESSMENT UNDER S.147 OF THE ACT. WE ACCORDINGLY UPHOLD THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND REJECT THE GROUNDS OF THE ASSESSEE ON THIS ASPECT OF VALIDITY OF REOPE NING OF THE ASSESSMENT. 11. AS FOR THE MERITS OF THE ADDITIONS/DISALLOWANC ES MADE IN THE RE-ASSESSMENT, CONSIDERING GROUND NO.4 OF THE ASSES SEE NOTED ABOVE PLEADING FOR ONE MORE REASONABLE OPPORTUNITY TO PUT FORTH ITS CASE AND SUBSTANTIATE THE CLAIMS MADE, IN THE INTERESTS OF J USTICE, WE SET ASIDE THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES, AND RESTO RE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO R E-DETERMINE THE ISSUES INVOLVED IN THE ASSESSMENT ON MERITS, BY PASSING A SPEAKING ORDER IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPPORT UNITY TO THE ASSESSEE TO ADDUCE NECESSARY EVIDENCE TO SUBSTANTIATE ITS CL AIMS AND ALSO TO PUT FORTH ITS ARGUMENTS IN RELATION TO VARIOUS ISSUES R AISED IN THE RE- ASSESSMENT. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 24.08.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 24 TH AUGUST, 2012 ITA NO.1301/HYD/2010 SHRI MANILOK CONSTRUCTIONS (FIRM), HYDERABAD 7 COPY FORWARDED TO: 1. SHRI MANILOK CONSTRUCTIONS (FIRM), H. NO.1-90-485/1 5/11, LALITHANAGAR, RAMNAGAR GUNDU, HYDERABAD 2. 3. INCOME T AX OFFICER, W AR D - 4(2), HYDERABAD COMMISSIONER OF INCOME - TAX(APPEALS) - V, HYDERABAD 4. COMMISSIONER OF INCOME-TAX IV, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.