MR. RAMBRADAN GOPAL CREATION, Mumbai V. THE ITO 2(3)(3), Mumbai

ITA 1375/MUM/2004

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48878 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 14-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 05-03-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: DINESH VYAS
• Keywords: Reason to believe; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

1 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J BEFORE SHRI D. MANMOHAN, V.P. AND SHRI R.K. PANDA, A.M. ITA NO. 1375/MUM/2004 ASSESSMENT YEAR 1999-2000 RAMABADRAN GOPALAKRISHNAN, FLAT NO. 101-A, IST FLOOR, BAUG E-ABBAS, 21-A, CAPT. PRAKASH PETHE MARG, OLD CUFFE PARADE ROAD, COLABA, MUMBAI 400 005. PAN AADPG7657C VS. INCOME TAX OFFICER - 2(3)(3), MUMBAI. APP E L LANT RESPONDENT APP ELLANT BY SHRI DINESH VYAS RESPONDENT BY SHRI SUMEET KUMAR ORDER PER R.K. PANDA A.M. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESSE E AND IT PERTAINS TO A.Y. 1999-2000. 2. THE ASSESSEE DECLARED A TOTAL INCOME OF ` 6687290/- UNDER THE HEAD SALARIES AND INCOME FROM OTHER SOURCES. THE MAIN S OURCE OF INCOME BY THE ASSESSEE IS REMUNERATION FROM HIS TWO EMPLOYERS I.E . M/S HINDUSTAN LEVER LTD. AND M/S TATA SONS LTD. THE RETURN OF INCOME WAS AC CEPTED BY THE A.O. U/S 143(1) OF THE ACT ON 22 ND AUGUST, 2000 AND SUBSEQUENTLY IT HAS COME TO THE NOTICE OF THE A.O. THAT THE ASSESSEE HAS RECEIVED A SUM OF ` 26,50,000/- FROM HINDUSTAN LEVER LTD. IN THE FORM OF NON-COMPETE FEE AND THE SAME WAS NOT OFFERED TO TAX CLAIMING IT TO BE CAPITAL IN NATURE. SINCE THE THEN A.O. WAS OF THE OPINION THAT TAXABILITY OF THE NON-COMPETE FEE AMO UNTS TO ESCAPEMENT OF 2 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. INCOME, HE SOUGHT TO RE-OPEN THE ASSESSMENT AND ACC ORDINGLY HE ISSUED NOTICE U/S 148 OF THE ACT AND RECORDED DETAILED REASONS JU STIFYING THE VALIDITY OF REOPENING OF THE ASSESSMENT. IT MAY BE NOTED THAT T HE RETURN OF INCOME FILED BY THE ASSESSEE ON 9.8.99 WAS DULY PROCESSED U/S 143(1 ) BUT THE AMOUNT REQUIRED TO BE REFUNDED WAS NOT REFUNDED. ON 22.3.2001, THE DCIT SPL. RANGE 11 HAS RECORDED THE REASONS FOR REOPENING OF THE ASSESSMEN T. DUE TO RESTRUCTURING OF I.T. DEPTT. IN 2001, THE CASE WAS TRANSFERRED TO AC IT 28(2) MUMBAI AND THUS THE DCIT SPL. RANGE 11 HAD NO OCCASION TO ISSUE A NOTICE U/S 148 DESPITE THE FACT THAT THE REASONS WERE DULY RECORDED. CONSEQUE NT UPON THE ABOVE TRANSFER OF THE RECORDS FROM DCIT SPL. RG. 11 TO ACIT 28(2), A NOTICE WAS ISSUED U/S 148 OF THE ACT ON 13.11.2001 UNDER THE SIGNATURE OF SHR I TT JACOB, ACIT 28(2). IN THE SAID NOTICE HE HAS NOT RECORDED INDEPENDENT REA SONS BEFORE ISSUING NOTICE U/S 148 OF THE ACT. IN OTHER WORDS, NO REASON WHAT SOEVER MENTIONED TO PROJECT THAT HE WAS SATISFIED THAT IT WAS A FIT CASE FOR RE OPENING OF ASSESSMENT. THEREAFTER, THE ASSESSMENT MADE U/S 143(3) R.W.S. 1 47 OF THE ACT WAS CHALLENGED BEFORE THE LD. CIT(A) AND FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL. 3. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS C ONCERNING THE VALIDITY OF REASSESSMENT AS WELL AS ON MERITS, HAVING REGARD TO FACTS OF THE CASE BROUGHT TO THE NOTICE OF THE BENCH BY THE LD. COUNS EL AS WELL AS LD. D.R. AS PER THE WRITTEN SUBMISSION ON THE ISSUE CONCERNING REOP ENING OF THE ASSESSMENT, WE DEEM IT FIT AND PROPER TO TAKE UP THE PRELIMINAR Y ISSUE FIRST BEFORE GOING INTO THE MERITS OF THE CASE. 4. WE HAVE HEARD THE ARGUMENTS OF LD. COUNSEL FOR T HE ASSESSEE AS WELL AS LD. D.R. AND PERUSED THE MATERIAL AVAILABLE ON REC ORDS. THE MAIN POINT OF THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE IS THAT SE CTION 148 OF THE INCOME TAX ACT POSTULATES THAT THE A.O., WHO HAS ISSUED THE NO TICE U/S 148, SHOULD HAVE REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSE SSMENT. TO PUT IT STRAIGHT 3 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. MERELY BECAUSE SOMEBODY HAS ALREADY RECORDED THE RE ASONS, THE CONCERNED A.O. CANNOT ISSUE A NOTICE U/S 148 WITHOUT HIMSELF BEING SATISFIED ABOUT THE REASONS FOR REOPENING OF THE ASSESSMENT AND IT HAS TO BE SHOWN EITHER IN THE NOTICE OR IN THE ORDER SHEET. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF HYNOUP FOOD AND OIL INDUSTRIES LTD. VS. ACIT 307 ITR 115 WHEREIN THE HO NBLE COURT ALSO WHILE DEALING WITH SECTION 148 HAS USED THE EXPRESSION H AS REASON TO BELIEVE AND HELD THAT GOING BY THE LANGUAGE EMPLOYED IN SECTION 148, IT IS MANDATORY ON THE PART OF THE A.O. TO RECORD REASONS AND HE CANNO T PROCEED ON THE SAME REASONS RECORDED BY HIS PREDECESSOR. THE RELEVANT PORTION OF THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF HYNOUP FO OD AND OIL INDUSTRIES LTD. (SUPRA) AT PAGE 128 & 129 ARE EXTRACTED BELOW:- HAVING HEARD THE LEARNED ADVOCATES APPEARING FOR T HE ASSESSEE AND THE LEARNED SENIOR STANDING COUNSEL A PPEARING FOR THE REVENUE AND HAVING PERUSED THE REASONS RECORDED FO R EACH OF THE ASSESSMENT YEARS AND THE ASSESSMENT ORDERS PASSED UNDER SECTION 143(3) OF THE ACT AND HAVING CONSIDERED THE RELEVAN T STATUTORY PROVISIONS AS WELL AS THE AUTHORITIES CITED BEFORE THE COURT, WE ARE OF THE VIEW THAT THE CORE ISSUE THAT IS TO BE DECIDED BY US IS AS TO WHETHER THERE IS ANY OMISSION OR FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY FOR THE RELEVANT ASSESSMENT YEARS. WE ARE ALSO CALLED UPON TO DECIDE AS TO WHET HER THE REASONS RECORDED BY THE ASSESSING OFFICERS EMPOWER THEM TO ASSUME THE JURISDICTION FOR ISSUANCE OF THE NOTICES TO FRAME T HE REASSESSMENT ORDERS FOR THE RELEVANT YEARS UNDER SECTION 143(3) , READ WITH SECTION 147 OF THE ACT. BEFORE WE DECIDE THESE ISSUES, IT IS RELEVANT TO NOTE HERE THAT THIS COURT HAS PASSED AN ORDER ON JULY 3 , 2008, IN SPECIAL CIVIL APPLICATION NO. 7335 OF 1998. AFTER PERUSING THE REASONS RECORDED BY THE ASSESSING OFFICER ON JANUARY 21, 1 998, WHICH ARE PRODUCED BEFORE THE COURT ALONG WITH THE AFFIDAVIT DATED JULY 3, 2008, THE COURT OBSERVED THAT ON GOING THROUGH THE REASON S RECORDED IT IS NOTICED THAT THE REASONS HAVE BEEN RECORDED AND SIG NATURE APPENDED BY ONE MR. R. P. MEENA, ASSISTANT COMMISSIONER OF I NCOME-TAX, CENTRAL CIRCLE-1(2), AHMEDABAD, WHILE THE IMPUGNED NOTICE (EXHIBIT-I) DATED JULY 29, 1998, HAS BEEN ISSUED BY ONE MR. RAM ESH CHANDER. THE COURT, THEREFORE, ASKED THE LEARNED STANDING C OUNSEL TO VERIFY THE RECORDS OF THE RESPONDENT-DEPARTMENT AND STATE WHE THER THE OFFICER, WHO HAS ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT, HAS RECORDED HIS SATISFACTION AS TO ESCAPEMENT OF INCOME, OR WH ETHER THERE IS ANY NOTING TO SUGGEST THAT THE SUCCESSOR OFFICER HAS A GREED WITH THE REASONS RECORDED BY THE PREDECESSOR OFFICER. WHILE ISSUING SUCH 4 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. DIRECTIONS, THE COURT OBSERVED THAT THE AFORESAID EXERCISE IS NECESSITATED IN THE LIGHT OF THE OPENING PORTION OF SECTION 147 OF THE ACT WHICH STIPULATES THAT ACTION MAY BE INITIATED IF TH E ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. WHEN TH IS PROVISION IS READ IN CONJUNCTION WITH SECTION 148(2) OF THE ACT WHICH MANDATES THAT THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NO TICE UNDER SECTION 148 OF THE ACT, RECORD HIS REASONS FOR ISSUING THE NOTICE. IT IS, THEREFORE, CLEAR THAT THE OFFICER RECORDING THE RE ASONS UNDER SECTION 148(2) AND THE OFFICER ISSUING NOTICE UNDER SECTIO N 148(1) HAS TO BE THE SAME PERSON. THE FORM OF THE NOTICE ITSELF INDICAT ES THAT THE AUTHORITY HAS TO RECORD WHEREAS I HAVE REASON TO BELIEVE TH AT . . . INCOME LIABLE TO TAX FOR THE ASSESSMENT YEAR . . . HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOMETAX ACT, 19 61. THE COURT WAS, THEREFORE, OF THE PRIMA FACIE VIEW THAT A SUC CESSOR OFFICER CANNOT ISSUE NOTICE UNDER SECTION 148 OF THE ACT ON THE B ASIS OF THE SATISFACTION RECORDED BY THE PREDECESSOR OFFICER BE CAUSE THE REASON TO BELIEVE HAS TO BE OF THE OFFICER CONCERNED, VIZ., T HE OFFICER ISSUING THE NOTICE UNDER SECTION 148 OF THE ACT. NOTHING HAS CO ME ON THE RECORD TO INDICATE THAT THE OFFICER, WHO HAS ISSUED THE NOTIC E UNDER SECTION 148 OF THE ACT, HAS RECORDED HIS SATISFACTION AS TO ES CAPEMENT OF INCOME. WE ARE, THEREFORE, OF THE VIEW THAT SO FAR AS ASSE SSMENT YEARS 1990- 91 AND 1991-92 ARE CONCERNED, THE OFFICER, WHO HAS ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT, IS DIFFERENT THAN TH E OFFICER, WHO HAS RECORDED THE REASONS, AND HENCE, THE NOTICES FOR B OTH THESE YEARS ARE HELD TO BE INVALID AND DESERVE TO BE QUASHED ON TH IS SOLITARY GROUND. 5. IT WAS ALSO CONTENDED THAT THE FACTUM OF NON-ADJ USTMENT OF REFUND TILL DATE AND ALSO NON-SERVICE OF THE INTIMATION U/S 143 (1)(A) OF THE ACT GOES TO SHOW THAT INTIMATION ON PROCEEDINGS U/S 148 OF THE ACT IS BAD IN LAW AND RELIANCE WAS PLACED ON THE DECISION OF COCHIN BENCH OF ITAT IN THE CASE OF CHANDRASEKHER BALAGOPAL VS. ACIT REPORTED IN [2007] 11 SOT 615 (COCHIN). 6. THE LD. D.R. COULD NOT PLACE BEFORE US ANY CASE LAW WHEREIN A CONTRARY VIEW WAS TAKEN BY ANY COURT OR TRIBUNAL IN THE LIGH T OF THE ABOVE FACTS, RESPECTFULLY FOLLOWING THE ABOVE CITED DECISIONS, W E HOLD THAT THE REASSESSMENT PROCEEDINGS ARE BAD IN LAW AND ACCORDINGLY QUASHED. 5 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. 7. SINCE THE REASSESSMENT PROCEEDINGS ARE HELD TO B E INVALID, IT IS NOT NECESSARY FOR US TO ADJUDICATE THE OTHER GROUNDS ON MERITS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 25.5.2011. SD/- SD/- (D. MANMOHAN) (R.K. PANDA) VICE PRESIDENT ACCO UNTANT MEMBER MUMBAI, DATED 25THE MAY, 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A) XXXIII, MUMBAI 4. THE CIT- CITY II, MUMBAI 5. THE DR BENCH, J 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 6 ITA 1375/M/04 MR. RAMABHA DRAN GOPALAKRISHNAN. DATE INITIALS 1 DRAFT DICTATED ON 19.5.11, 23.5.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 20.5.2011, 23.5.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER