M/s. Anant Incense Ltd., Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 138/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94850 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L SHARMA
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Principle of natural justice; Deemed to accrue or arise in india; Reason to believe; Reassessment proceedings
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.138/AHD/2011 ( / ASSESSMENT YEAR : 2002-03) M/S.ANANT INCENSE LTD. 3, PRASAD PARK SOCIETY OPP.JAIN TEMPLE SATELLITE ROAD AHMEDABAD / VS. THE ITO WARD-1(2) AHMEDABAD ' ./ ./ PAN/GIR NO. : AADCA 0012 A ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '% ( / APPELLANT BY : SHRI S.N. DIVATIA, AR &''% ) ( / RESPONDENT BY : SHRI B.L. SHARMA, SR.DR * ) / DATE OF HEARING 03/12/2015 +,-. ) / DATE OF PRONOUNCEMENT 07/12/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABA D [CIT(A) IN SHORT] DATED 01/11/2010 PERTAINING TO ASSESSMENT Y EAR (AY) 2002-03. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1.1. THE ORDER PASSED U/S.250 ON 1.11.2010 FOR A.Y. 2002 -03 BY CIT(A)-VI, ABAD UPHOLDING THE REOPENING OF ASSTT.AS WELL AS ADDITION OF RS.10,0,766 TOWARDS THE EXCESS STOCK MA DE BY AO IS ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 2 - WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDING THE REOPENING OF ASSTT.AS WELL AS ADDITION OF RS.10,03,766 MADE B Y AO WITHOUT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BEFORE HIM. 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN UPHOLDING THE VALIDITY OF NOTICE ISSUED U/S.148 ON 26.3.2007. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE NOT ICE OF REOPENING ASSTT. U/S.147 WAS VALID AND WITHIN THE J URISDICTION. 3.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN CONFIRMING THE ADDITION OF RS.10,03,766 TOWARDS ALL EGED EXCESS STOCK. 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE CONFIRMED THE ADDIT ION OF RS.10,03,766 TOWARDS ALLEGED EXCESS STOCK. 4.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN HOLDING T HAT THE AO HAD FOUND LOT OF DISCREPANCIES IN APPELLANTS CLAIM OF SALE OF STOCK AT LOSS AND IT WAS AN ATTEMPT TO INDIRECTLY RETRACT TH E DECLARATION OF ADDITIONAL INCOME. 4.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN HOLDING T HAT THE BUSINESS LOSS COULD NOT BE ADJUSTED AGAINST DEEMED INCOME ON ACCOUNT OF UNEXPLAINED STOCK TAXABLE UNDER SECTION 69/69A IN V IEW OF THE DECISION OF HON.GUJARAT HIGH COURT IN THE CASE OF F AKIR MOHD.HAJI HASSAN (247 ITR 290). 4.3 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AF ORESAID DECISION WAS NOT APPLICABLE TO THE FACTS OF THE APP ELLANTS CASE AND AS SUCH THE INCOME DECLARED TOWARDS EXCESS STOC K WAS BUSINESS INCOME AND COULD BE SET OFF AGAINST OTHER INCOME. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS REOPENED FOR ASSESSMENT AND THE ASSESSMENT U/S.147 R.W.S. SECTIO N 143(3) OF THE ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 3 - INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 31/12/2007, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION ON ACCOUNT OF EXCESS STOCK FOUND DURI NG SURVEY OF RS.10,03,766/-. THE ASSESSEE BEING AGGRIEVED BY TH E ASSESSMENT ORDER, PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE ASSESSEE IS FURTHER IN APPEAL BEFORE US. 3. GROUND NOS.1.1 & 1.2 OF THE ASSESSEES APPEAL AR E GENERAL IN NATURE WHICH REQUIRE NO INDEPENDENT ADJUDICATION. 4. GROUND NOS.2.1 & 2.2 IN THIS APPEAL ARE RELATED TO VALIDITY OF THE NOTICE ISSUED U/S.148 OF THE ACT. THE LD.COUNSEL FO R THE ASSESSEE SUBMITTED THAT REOPENING OF THE ASSESSMENT IS NOT V ALID AND IS CONTRARY TO LAW. HE SUBMITTED THAT WHEN THE ASSESSEE REQUE STED FOR THE REFUND OF RS.81,081/-, THE A.O. ASKED FOR THE SET OF RETURN O F INCOME-TAX FILED FOR AYS 2001-02 & 2002-03 ALONG WITH RELEVANT ENCLOSUR ES VIDE LETTER DATED 17/11/2005. HE SUBMITTED THAT THE ACTION OF THE R E-OPENING WAS TAKEN BY THE REVENUE ONLY ON THE BASIS OF THE COPY OF THE RE TURN SUPPLIED BY THE ASSESSEE IN PURSUANCE TO THE GRIEVANCE APPLICATION FOR REFUND FOR AY 2002-03. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO OUGHT NOT TO HAVE REOPENED THE ASSESSMENT UNDER THE FACTS OF THE PRESENT CASE. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE JUD GMENT OF THE HONBLE ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 4 - SUPREME COURT RENDERED IN THE CASE OF TRUSTEES OF H .E.H. THE NIZAMS SUPPLEMENTAL FAMILY TRUST VS. CIT REPORTED AT (200 0) 109 TAXMAN 193 (SC). HE SUBMITTED THAT IN THE LIGHT OF THE AFORES AID JUDGEMENT, WHEN THE RETURN FILED ALONG WITH THE REFUND APPLICATION BEING A VALID RETURN AND NO ASSESSMENT ORDER WAS COMMUNICATED TO THE ASSESSE E, NO ACTION U/S.147/148 COULD HAVE BEEN TAKEN. HE SUBMITTED T HAT SINCE NO ASSESSMENT U/S.143(3) OF THE ACT WAS MADE AND THE O RDER WAS NOT COMMUNICATED TO THE ASSESSEE, THEREFORE THE AO WAS NOT JUSTIFIED AND EMPOWERED TO INITIATE THE PROCEEDING U/S.147 OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONCE THE ASSESSMENT WAS NOT MADE, THEN HOW CAN THE AO HAS REASON TO BELIEVE THAT ANY INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH IS THE PRECONDITION FO R ISSUING THE NOTICE U/S.148 OF THE ACT. 4.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER OF THE AO FOR REOPENING THE ASSESSMENT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACT THAT THE REASSESSMENT PROCEEDINGS WERE INI TIATED SUBSEQUENT TO FILING OF THE APPLICATION FOR REFUND, THE REVENUE H AS NOT PLACED ANY MATERIAL ON RECORD THAT THE EARLIER RETURN FILED BY THE ASSESSEE WAS ACTED ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 5 - UPON BY THE AO. IT WAS ONLY WHEN THE ASSESSEE FILE D AN APPLICATION FOR REFUND ALONG WITH COPY OF RETURN, THEN THE PROCEEDI NGS U/S.147 OF THE ACT WAS INITIATED. THE REVENUE HAS NOT PLACED ANY MATE RIAL ON RECORD SUGGESTING THAT THE RETURN OF INCOME, FILED ON 30/1 0/2002 WHICH WAS PROCESSED BY THE REVENUE. FURTHER, IT IS NOT DISPU TED THAT THE COPY OF RETURN WAS FILED IN RESPONSE TO LETTER DATED 17.11. 2005. THE AO HAS NOT MADE THE ASSESSMENT ON THIS RETURN, HOWEVER PROCEED ED TO REOPEN THE ASSESSMENT. THE HONBLE APEX COURT IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAMS SUPPLEMENTAL FAMILY TRUST VS. CIT(SUPRA ) HAS HELD THAT DURING THE PENDENCY OF THE RETURN FILED U/S.139 OF THE ACT ALONG WITH REFUND APPLICATION U/S.237 OF THE ACT, ACTION COULD NOT HAVE BEEN TAKEN U/S.147/148 OF THE ACT. IN THE PRESENT CASE ALSO, THERE IS NO EVIDENCE THAT THE AO HAS CONCLUDED THE ASSESSMENT PROCEEDINGS ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THEREFORE, IN THE LI GHT OF THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF TRUSTEES OF H .E.H. THE NIZAMS SUPPLEMENTAL FAMILY TRUST VS. CIT(SUPRA), THE AO OU GHT NOT TO HAVE BEEN REOPENED THE ASSESSMENT. THEREFORE WE HOLD TH AT THE REOPENING OF THE ASSESSMENT IS NOT IN ACCORDANCE WITH LAW. WE F IND NO MERIT ON THE REASON FOR REOPENING AS STATED BY THE AO IS THAT TH E AUDITOR HAD MADE A NOTE IN SCHEDULE-T TO BALANCE-SHEET THAT THERE WAS A SURVEY PROCEEDINGS BY INCOME-TAX DEPARTMENT AT THE FACTORY /OFFICE PREMISES OF THE COMPANY ON 30.01.2002. AS PER THE PHYSICAL VER IFICATION STOCK FOUND TO BE RS.32,10,489/- AND AS PER BOOKS IT WAS RS.22, 06,723/-. THE ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 6 - DISCREPANCIES IN STOCK OF RS.10,03,766/-. THE SAME IS INCLUDED IN THE AMOUNT OF STOCK IN THE BOOKS. THE VALUATION OF CLO SING STOCK AS AT 31.03.2002 IS BASED ON THE PHYSICAL STOCK TAKEN WHI CH INCLUDES THE EXCESS STOCK OF RS.10,03,766/- . THE AO HAD NO NEW MATERIAL SUGGESTING THAT THE INCOME HAS ESCAPED INCOME. ACCORDINGLY, WE HER EBY QUASH THE IMPUGNED ASSESSMENT BEING ILLEGAL AND CONTRARY TO S ETTLED PRINCIPLES OF LAW. THUS, GROUND NOS.2.1 & 2.2 OF THE ASSESSEES A PPEAL ARE ALLOWED. 6. SINCE WE HAVE HELD THAT THE REOPENING OF THE ASS ESSMENT ITSELF IS INVALID AND QUASHED THE ASSESSMENT ORDER, THEREFORE REMAINING GROUNDS DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND, THERE FORE, THE SAME ARE DISMISSED AS SUCH. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON MONDAY, THE 7 TH DAY OF DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 07/ 12 /2015 2.., .../ T.C. NAIR, SR. PS ITA NO.138 /AHD /2011 M/S. ANANT INCENSE LTD. VS. ITO ASST.YEAR 2002-03 - 7 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-VI, AHMEDABAD 5. 7 8 &45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:; <* / GUARD FILE. ! / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.12.15 (DICTATION-PAD 11- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3.12.15 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7.12.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.12.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER