TECHNIMONT ICB P.LTD, MUMBAI V. DCIT RG 9(3), MUMBAI

ITA 1596/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0915 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Depreciation; Rectification of order; Principle of natural justice; Unabsorbed depreciation
• Section: 154

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./1596/MUM/2013, /AY.: 2005-06 TECHNIMONT ICB PVT.LTD. 504 LINK ROAD, CHINCHOLI BUNDER MALAD (W),MUMBAI-400 064. PAN:AAACI 2628 B VS. ACIT-9 MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI MANJUNATHA SWAMY-CIT-DR ASSESSEE BY: SHRI NITESH JOSHI / DATE OF HEARING: 16.03.2017 / DATE OF PRONOUNCEMENT:19.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DTD.10.12.2012OF THE CIT(A)-2 0,MUMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF ENGINEERING DESIGN AND CONSTRUCTION ACTIVITIES,FILED ITS RETURN OF INCOME ON 27/10/2005, DECLARING INCOME OF RS.4.39 CRORES.THE ASSESSING OFFICER (AO) COMPLETED THE ASS ESSMENT U/S.143(3) OF THE ACT, ON 26/12/ 2008,DETERMINING ITS INCOME AT RS. 12.82 CRORES. 2. FIRST GROUND OF APPEAL IS ABOUT RECTIFICATION PROCE EDINGS CARRIED OUT U/S.154 OF THE ACT.AGAINST THE ORDER OF THE AO PASSED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTH ORITY (FAA).GIVING EFFECT TO HIS ORDER, DATED 26/03/2010,THE AO PASSED AN ORDER ON 20/05/20 10. THE AO OBSERVED THAT THERE WAS MISTAKE IN HIS ORDER OF MAY 20 TH , 2010. ACCORDINGLY, A NOTICE U/S.154 WAS ISSUED ON 07/09/2011 PROPOSING TO RECTIFY THE MISTAKE. AS PER THE AO WHILE GIVING EFFECT TO THE ORDER OF THE FAA,THE RETURNED INCOME OF RS.4.39 CRORE WAS TA KEN,THAT THE SAID INCOME INCLUDED SET OFF OF LOSSES OF RS.1.67 CRORES OF THE AY. 2003-04, THA T THERE WERE NO LOSSES OF THAT AY. PENDING FOR SET OFF IN THE YEAR UNDER APPEAL I.E. AY. 2005- 06. AS PER THE AO, THE ASSESSEE DID NOT MAKE ANY SUBMISSION WITH REGARD TO NOTICE ISSUED FO R RECTIFICATION. HE HELD THAT THE ASSESSEE HAD NO OBJECTION TO THE PROPOSED RECTIFICATION OF M ISTAKES. ACCORDINGLY, HE REVISED THE TOTAL INCOME THE ASSESSEE AS UNDER: I. TOTAL INCOME AS PER ORDER DATED 20/05/2010 GIVING EFFECT TO THE ORDER OF THE FAA- RS. 4.39 CRORES 1596/M/13(05-06) TECNIMONT ICB PVT.LTD. 2 II. ADD: WITHDRAWAL OF LOSS OF AY. 2003-04 RS. 1.67 CRORES III. REVISED TOTAL INCOME RS. 6.07 CRORES. 2.1. AGGRIEVED BY THE RECTIFICATION ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA. BEFORE HIM IT WAS ARGUED THAT ORDER PASSED BY THE AO WAS ILLEGAL, BAD IN LAW AND CONTRARY TO THE PROVISIONS OF THE ACT,THAT THE ASSE SSEE HAD NOT RECEIVED ANY NOTICE U/S.154, THAT HE WRONGLY MENTIONED THE FACT THAT NOTICE WAS DULY SERVED UPON THE ASSESSEE, THAT NO OPPORTUNITY WAS GRANTED TO THE ASSESSEE, THAT THE S ET OF LOSSES WAS GRANTED BY THE AO WHILE PASSING THE ORDER U/S.143 (3) ON 26/12/200 IT, THAT THE AO HAD ERRED IN NOT PROVIDING ANY REASON AS TO WHY LOSS SHOULD NOT BE TREATED AS CLAIMED BY THE ASSESEE IN THE YEAR UNDER APPEAL, THAT BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 1.67 CRORES, REFERRED AS LOSS BY THE AO, WAS SET OFF BY THE ASSESSEE, THAT SAME WAS BROUGHT FORWARD FROM THE AY. S.2001-02 AND 2002-03 AND NOT FROM THE AY. 2003-04. 3. AFTER HEARING THE SUBMISSION OF THE ASSESSEE AND CO NSIDERING THE AVAILABLE MATERIAL, THE FAA REFERRED THE MATTER TO THE AO ALONG WITH THE PA PER BOOK FILED BY THE ASSESSEE CONTAINING 107 PAGES. THE EXPLANATION OF THE ASSESSING OFFICER WAS FORWARDED TO THE ASSESSEE AND FINAL HEARING OF THE CASE WAS FIXED ON 08/11/2012.AS PER THE FAA, NO COUNTER REPLY OF FACTS OF THE CASE, AS MENTIONED BY THE AO, WAS FILED BEFORE HIM. HE HELD THAT THERE WAS NO BALANCE LOSS WAS LEFT TO BE CARRIED FORWARD AND TO BE SET OFF IN THE YEAR UNDER CONSIDERATION, THAT THE AO HAD ANALYSED THE FACTUAL MATTERS OF THE CASE, THAT THE ASSESSEE WAS NOT ABLE TO REFUTE THE FINDING GIVEN BY THE AO, THAT RECTIFICATION ORDER W AS AS PER LAW, THAT THERE WAS NO MERIT IN THE ARGUMENT THAT NOTICE U/S.154 WAS NOT SERVED, THAT I T WAS EVIDENT FROM THE RECTIFICATION ORDER THAT NOTICE WAS SEEN POSTED THROUGH RPAD SERVED BY THE POSTAL AUTHORITIES AT GIVEN ADDRESS. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE STATED THAT ASSESSEE DID NOT RECEIVE ANY NOTICE ALLEGED TO HAVE BEEN ISS UED ON 07/09/2011 AND IT WAS NOT DULY SERVED ON THE ASSESSEE BY POSTAL AUTHORITIES, THAT ASSESSEE HAD SUBMITTED A LETTER, DATED 10/02/2012, TO THE AO AND HAD REQUESTED HIM TO SUPP LY IT A COPY OF THE NOTICE AS WELL AS THE POSTAL ACKNOWLEDGEMENT, THAT IT DID NOT RECEIVE ANY RESPONSE FROM THE AO, THAT THE OFFICE OF THE AO PROVIDED A PRINTOUT OF THE NOTICE TO ITS REP RESENTATIVE,THAT NO EVIDENCE OF POSTAL ACKNOWLEDGEMENT WAS MADE AVAILABLE, THAT THE PRESUM PTION OF THE AO THAT THE ASSESSEE HAD NO OBJECTION TO THE PROPOSED RECTIFICATION WAS NOT TRUE, THAT SUB-SECTION 3 OF SECTION 154 OF THE ACT STIPULATED THAT REASONABLE OPPORTUNITY OF B EING HEARD HAS TO BE GIVEN TO THE ASSESSEE 1596/M/13(05-06) TECNIMONT ICB PVT.LTD. 3 BEFORE PASSING RECTIFICATION ORDER AND THAT HEARING NOTICES TO BE ISSUED, THAT BOTH THE STATUTORY REQUIREMENTS HAD NOT BEEN COMPLIED WITH, THAT THE A O HAD WITHDRAWN THE SET OFF OF LOSSES/DEPRECIATION ON THE GROUND THAT SAID LOSSES/ DEPRECIATION WERE BROUGHT FORWARD FROM THE AY. 2003-04, THAT THE AO HAD PROPOSED THE RECTIFICA TION OF AN ERROR APPARENT FROM RECORD FOR THE ORDER GIVING EFFECT TO THE ORDER OF THE FAA FOR THE AY. 2005-06, THAT THE ASSESSEE HAD CLAIMED THE SET OFF IN THE ORIGINAL RETURN OF INCOM E WHICH WAS DULY CONSIDERED AND ALLOWED BY THE AO IN THE ORDER DATED 26/12/2008,THAT THEREA FTER THERE WERE NO PROCEEDINGS IN CONNECTION WITH THE MATTER IN THE APPEAL BEFORE THE F AA, THAT QUESTION OF WITHDRAWAL OF LOSS/ DEPRECIATION BY THE RECTIFICATION OF THE ORDER GIVI NG EFFECT TO THE FAA WOULD NOT ARISE, THAT THE DISPUTED BROUGHT FORWARD LOSSES DEPRECIATION RE LATED TO AY. 200102 AND 200203, THAT ASSESSMENT ORDER U/S.143 (3) FOR THE AY. 2003-04 WA S PASSED ON 14/02/2006, THAT THE CIT SET ASIDE THE ORDER ON 31/03/2008, THAT THE ASSESSEE FI LED AN APPEAL AGAINST THE REVISIONARY ORDER OF THE CIT,THAT THE TRIBUNAL,VIDE ITS ORDER DATED 2 9/10/2008, SET ASIDE THE ORDER OF THE CIT DATED 31/03/2008 PASSED U/S.263, THAT THE APPEAL FI LED BY THE DEPARTMENT AGAINST THE ORDER OF THE TRIBUNAL WAS DISMISSED BY THE HONBLE BOMBAY HI GH COURT ON 01/02/2010, THAT THE ORIGINAL ORDER U/S.143 DATED 14/02/2006 REMAINED RE STORED, THAT THE DEPARTMENTAL AUTHORITIES HAVE PASSED THE RECTIFICATION ORDER/CONFIRMED THE O RDER ON THE BASIS OF ERRONEOUS FACTS. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THE AO HAD PASSED RECTIFICATION ORDER IN PURSUANCE OF THE ORDER OF THE FAA. WE FIND THAT SPECIFIC GROUND WAS RAISED BY THE ASSESSEE BEFORE THE FAA AB OUT NON-SERVICE OF RECTIFICATION NOTICE. NEITHER THE AO IN HIS REMAND REPORT NOR THE FAA HAS GIVEN ANY CATEGORICAL FINDING OF FACT ABOUT THE SERVICE OF NOTICE ISSUED U/S.154 OF THE A CT. SERVICE OF NOTICE IS THE FIRST PRE- REQUISITES FOR PASSING A RECTIFICATION ORDER. IN OU R OPINION, ISSUANCE OF NOTICE OR HANDING OVER THE NOTICE TO THE DISPATCH SECTION IS NOT SUFFICIEN T. UNLESS AND UNTIL A NOTICE IS SERVED UPON THE ASSESSEE OR IS RETURNED BACK BY THE POSTAL AUTHORIT IES WITH COMMENTS OF REFUSE TO RECEIVE, IT CANNOT BE PRESUMED THAT NOTICE WAS SERVED UPON THE ASSESSEE. IN THE ABSENCE OF A VALID SERVICE OF NOTICE, ALL OTHER PROCEEDINGS WOULD BE V ITIATED FOR NOT FOLLOWING THE BASIC PRINCIPLE OF NATURAL JUSTICE.ONLY ON THIS COUNT THE ORDER OF THE FAA DESERVES TO BE REVERSED. HOWEVER, WE FIND THAT THE ORDER PASSED BY THE AO U/S.143(3) OF THE ACT BECAME FINAL AFTER THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY WHEREIN IT HAD UPHELD THE ORDER OF THE TRIBUNAL WHEREIN THE REVISIONARY PROCEEDINGS, INITIATED BY THE CIT, U/S.263 OF THE ACT,WERE SET ASIDE. AS A RESULT,THE CLAIM MADE BY THE ASSESSEE FOR CARR Y FORWARD AND SET OFF OF UNOBSERVED LOSS/ 1596/M/13(05-06) TECNIMONT ICB PVT.LTD. 4 DEPRECIATION HAD TO BE ALLOWED. THUS, THE AO HAD WR ONGLY HELD THAT NO DEPRECIATION WAS AVAILABLE IN THE AY.2003-04, THAT THE UNABSORBED LO SS/DEPRECIATION WAS BEING CARRIED FORWARD FROM THE EARLIER YEARS. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT OR DER PASSED BY THE FAA HAS TO BE REVERSED. JURISDICTIONAL ISSUE,RAISED BY THE ASSESSEE,STANDS DECIDED IN ITS FAVOUR.WE HAVE ALSO DISCUSSED THE MERITS OF THE CASE. A RESULT APPEAL FILED BY THE ASSESSEE STANDS ALLOWE D. . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL, 2017. 19 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 19.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.