I.T.O., Ward-2(1), Gwalior V. M/s Bhatnagar Opticals, Gwalior

ITA 170/AGR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 56923 (ITAT-AGRA)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOHAIL AKHTAR
• Assessee Lawyers: MAHESH AGARWAL
• Keywords: Reopening of assessment; Unexplained investment; Unexplained expenditure; Opportunity of being heard; Procedural lapse; Competent authority; Assessment record; Reason to believe; Reassessment proceedings
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER & SHRI A. L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 169 TO 172/AGRA/2011 ASST. YEAR : 2002-03 TO 2005-06 INCOME-TAX OFFICER, VS. M/S. BHATNAGAR OPTICALS , WARD 2(1), GWALIOR. SANJAY COMPLENX, JAYENDRA GANJ, GWALIOR. (PAN : AAGFB 0508 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SOHAIL AKHTAR, JR. D.R. RESPONDENT BY : SHRI MAHESH AGARWAL, C.A. DATE OF HEARING : 22.03.2012 DATE OF PRONOUNCEMENT OF ORDER : 23.03.2012 ORDER PER BENCH : ALL THE DEPARTMENTAL APPEALS ARE DIRECTED AGAINST THE COMMON ORDER OF LD. CIT(A), GWALIOR DATED 04.02.2011 FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06 ON THE FOLLOWING COMMON GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(APPEALS) HAS ERRED IN HOLDING THE ASSESSMEN T ORDER PASSED U/S. 147/148 INVALID WITH NON CURABLE DEFECTS ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT (APPEALS) HAS ERRED IN DELETING THE ADDITIO NS WITHOUT ADJUDICATING THE MERITS OF THE CASE ? ITA NO. 169 TO 172/AGRA/2011 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SURVEY O PERATION U/S. 133A WAS CONDUCTED ON 18.12.2007 AT THE BUSINESS PREMISES OF THE ASSESSEE. ON THE BASIS OF STATEMENT OF SHRI ANURAG BHATNAGAR, PARTNER OF THE ASSESSEE FIRM, THE AO HAS INITIATED THE PROCEEDINGS U/S. 147 OF THE IT ACT BY ISSUANCE OF NOTICE U/S. 148 ON 27.03.2009 AFTER RECORDING REASONS AND OBTAINING AP PROVAL OF THE COMPETENT AUTHORITY. SUBSEQUENTLY, THE ASSESSMENTS WERE COMPL ETED EX PARTE U/S. 144/148 OF THE IT ACT. VARIOUS ADDITIONS WERE MADE ON THE BASI S OF STATEMENT OF THE PARTNER. THE RE-ASSESSMENT ORDERS WERE CHALLENGED BEFORE THE LD. CIT(A) AND THE ASSESSEE OBJECTED TO THE INITIATION AND SUBSEQUENT COMPLETIO N OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE REASONS RECORDED FOR ISSUE O F NOTICE U/S. 148 HAVE NOT BEEN PROVIDED DESPITE BEING REQUESTED; THAT THE AO HAS N O MATERIAL BEFORE HIM AND THAT THE REASSESSMENTS ARE MADE ONLY ON CHANGE OF OPINIO N, MERELY ON THE BASIS OF STATEMENT OF PARTNER, WHICH HAS ALSO SINCE BEEN RET RACTED, THEREFORE, THE ORDER IS PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JU STICE WITHOUT PROVIDING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE LD. CIT(A), CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE MATERIAL ON RECORD, FOUND THAT THE ASSESSEE HAS REQUESTED THE AO TO TREAT THE RETURN A LREADY FILED U/S. 139 IN RESPONSE TO NOTICE U/S. 148 OF THE IT ACT AND THAT DESPITE R EQUEST MADE FOR SUPPLY OF REASONS FOR REASSESSMENT, THE AO HAS NOT SUPPLIED THE SAME TO THE ASSESSEE. THEREFORE, REASSESSMENT ORDERS WERE HELD TO BE INVALID WITH NO N-CURABLE DEFECTS. THE FINDING ITA NO. 169 TO 172/AGRA/2011 3 OF FACT RECORDED BY THE LD. CIT(A) IN PARAS 4 TO 5 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4. APPELLANTS SUBMISSIONS ALONG WITH ASSESSMENT ORDERS HAVE BEEN CONSIDERED CAREFULLY. ASSESSMENT RECORDS OF EA CH YEAR ALONG WITH SURVEY FOLDER HAVE ALSO BEEN PERUSED. FACT OF CARRYING OUT OF SURVEY ON 18.12.2007, RECORDING OF REASONS BY THE A O ON 30.01.2009 WHEN PROPOSAL FOR INITIATING PROCEEDINGS U/S. 147 F OR A.Y. 2002-03 & 2003-04 HAS BEEN SENT TO ADDL. CIT, R-II, GWALIOR & AGAIN ON 13.03.2009 AND ACCORDING TO APPROVAL BY THE CONCERN ED ADDL. CIT VIDE LETTER DATED 26/03/2009 ARE FOUND IRREFUTABLE FROM RECORDS. ACCORDINGLY, NOTICES U/S. 148 HAVE BEEN ISSUED ON 2 7/03/2009. FOR AY.S 2004-05 & 2005-06, SIMILAR NOTICES U/S. 148 HA VE BEEN ISSUED ON 25/03/2009 AFTER DUE RECORDING OF REASONS BY THE AO . 4.1 ON RECEIPT OF NOTICES U/S. 148, THE APPELLANT HAS INFORMED THE AO VIDE SEPARATE LETTERS DATED 22/04/2009 THAT RETURNS FILED EARLIER U/S. 139 FOR THE RELEVANT ASSESSMENT YEAR M AY BE TREATED AS FILED IN RESPONSE TO THE SAID NOTICE U/S. 148. THE APPELLANT HAS ALSO REQUESTED TO SUPPLY/PROVIDE THE REASONS RECORDED BY THE AO FOR ISSUE OF NOTICE U/S. 148 BY THE SAME LETTER. ALL THESE LE TTERS DATED 22/04/2009, HAVE BEEN DULY RECEIVED BY THE AO ON 27 /04/2009 AS PER DAK RECEIPTS. THE APPELLANT HAS SUBMITTED PHOTOCOPI ES OF THE ORIGINAL RETURNS FILED IN THE DUE COURSE ON 31.03.2003, 31.0 3.2004, 31.03.2005 & 31.03.2006 FOR ASSESSMENT YEARS 2002-03 TO 2005-0 6 RESPECTIVELY. AS PER RECORDS THE APPELLANT HAS NOT BEEN GIVEN BY THE AO THE REASONS SO RECORDED BEFORE ISSUANCE OF NOTICE U/S. 148. NEI THER THE APPELLANTS REQUEST HAS BEEN REFUSED BY THE AO. IT IS WELL SETT LED POSITION IN LAW THAT WHERE AN ASSESSEE STATES THAT THE ORIGINAL RET URN BE TREATED AS THE RETURN FILED IN COMPLIANCE WITH SECTION 148, THE AO MUST DISCLOSE THE REASONS FOR ISSUANCE OF THE NOTICE U/S. 148. THIS H AS BEEN SO HELD IN THE CASE OF ANAND KUMAR SHARMA VS. ACIT (1992) 198 ITR 121 (ALL.), HERBS (INDIA) PVT. LTD. VS. DCIT (1992) 198 ITR 554 (ALL.). FURTHER, JURISDICTIONAL MP HIGH CURT HAS HELD IN THE CASE OF HOTEL ASHOKA AND ANOTHER VS. UNION OF INDIA AND ANOTHER (1957) 226 I TR 388 (MP) THAT IT IS OBLIGATORY ON THE PART OF THE AUTHORITY CONCE RNED TO DISCLOSE AND COMMUNICATE THE REASONS FOR APPRECIATION AND PROPER DEFENSE AT LEAST ITA NO. 169 TO 172/AGRA/2011 4 ON DEMAND AFTER SUBMISSION OF THE RETURN IN COMPLIA NCE WITH THE NOTICE. LAW PERMITS NO PRIVILEGE IN THIS BEHALF. TH E ASSESSEE IS ENTITLED TO CONTEST THE ISSUE EFFECTIVELY. THIS IS POSSIBLE ON OBTAINING THE REASONS. WHERE AN ASSESSEE DEMANDS REASONS FOR THE ISSUE OF REASSESSMENT NOTICE AFTER COMPLYING WITH THE SAID N OTICE U/S. 148, IT HAS BEEN HELD THAT THE REASONS MUST BE COMMUNICATED TO THE ASSESSEE. THOUGH THERE IS NO NEED TO COMMUNICATE THE REASONS ALONG WITH THE NOTICE BUT THAT DOES NOT MEAN THAT IT NEED NOT BE C OMMUNICATED AT ANY STAGE. IT IS NECESSARY TO DISCLOSE THEM BEFORE AN A SSESSMENT IS MADE ESPECIALLY WHERE DEMANDED/REQUESTED BY THE ASSESSEE . THE LAW ON THE SUBJECT HAS NOW BEEN SETTLED BY HONBLE SUPREME COU RT IN GKN DRIVESHATS (INDIA) LTD. VS. ITO (2003) 259 ITR 19 ( SC) REQUIRING THE AO TO DISCLOSE THE REASONS AND FOR THE ASSESSEE TO RAISE OBJECTIONS, IF ANY, TO THE SAID NOTICE. WHERE OBJECTIONS ARE RAISE D, IT IS THE DUTY OF THE AO TO MEET THE SAME IN A SPEAKING ORDER BEFORE PROCEEDING FURTHER WITH REASSESSMENT PROCEEDINGS. IN CASE OF C OMUNIDADO OF CHICALIM VS. ITO )2001) 247 ITR 271 (SC) THE APEX C OURT HAD OVERRULED THE DECISION OF THE HIGH COURT WHICH HAD HELD THAT THERE WAS NO NECESSITY/STATUTORY DUTY TO COMMUNICATE THE REASONS RECORDED BY AO AS LONG AS SUCH REASONS HAD BEEN RECORDED. IN THE CASE OF THE APPEALS UNDER CONSIDERATION, THE APPELLANT HAS NOT BEEN PROVIDED WITH THE REASONS RECORDED BY THE AO THOUGH SPECIALLY REQ UESTED BY THE APPELLANT. THUS THE APPELLANT COULD NOT AVAIL THE O PPORTUNITY TO RAISE OBJECTIONS BEFORE THE AO. THIS MADE THE APPELLANT C OMPLETELY UNAWARE ABOUT THE FACTS AND REASONS OF ISSUANCE OF NOTICE U/S. 148 WHEN ORIGINAL RETURNS HAVE BEEN FILED ON TIME AND A CCEPTED BY THE AO AS SUCH. THUS THE AO HAS NOT FOLLOWED THE LAID DOWN LEGAL PROCEDURE BEFORE COMPLETING THE ASSESSMENT PROCEEDINGS U/S. 1 44 AND MAKING VARIOUS ADDITIONS ONLY ON THE BASIS OF STATEMENT OF ONE OF THE PARTNERS RECORDED AT THE TIME OF SURVEY WHICH HAS BEEN RETRA CTED SUBSEQUENTLY. THE AO HAS ALSO NOT BROUGHT ON RECORD ANY FACTUAL M ATERIAL OR DOCUMENTARY EVIDENCE BEFORE MAKING VARIOUS ADDITION S IN RESPECT OF UNEXPLAINED EXPENDITURE, UNEXPLAINED INVESTMENTS AN D HOUSEHOLD EXPENDITURE SOLELY ON THE BASIS OF STATEMENT GIVEN BY ONE OF THE PARTNER DURING THE COURSE OF SURVEY. 4.2 ON THE BASIS OF THE FACTS ABOVE AND THE PERUS AL OF RECORDS, ASSESSMENT ORDERS PASSED U/S.147/148 ARE HELD TO BE INVALID WITH NON- CURABLE DEFECTS. ACCORDINGLY, OTHER GROUNDS TAKEN B Y THE APPELLANT ITA NO. 169 TO 172/AGRA/2011 5 ARE NOT ADJUDICATED UPON AS THE ASSESSMENT ORDERS H AVE BEEN HELD TO BE INVALID. 5. IN THE RESULT, ALL FOUR APPEALS FILED BY THE A PPELLANT ARE ALLOWED. 3. THE LD. DR SUBMITTED THAT IT IS BEST KNOWN TO TH E AO WHY HE HAS NOT SUPPLIED REASONS FOR REOPENING OF ASSESSMENT TO THE ASSESSEE. HE HAS, HOWEVER, SUBMITTED THAT NON-SUPPLY OF REASONS WOULD BE A CUR ABLE DEFECT AND THE LD. CIT(A) SHOULD NOT HAVE ANNULLED THE REASSESSMENT ORDERS. T HE LD. DR RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F AREVA T AND D INDIA LTD. VS. ACIT, 294 ITR 233 (MAD.), IN WHICH THE AO DIRECTED THE ASSESSEE TO FILE THE RETURN AND PRODUCE THE RECORD. THE ASSESSEE OBJECTED TO TH E NOTICE OF REASSESSMENT AND REQUESTED THE AO TO TREAT THE ORIGINAL RETURN FILED AS THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S. 148 OF THE IT ACT. LATER ON, THE AO SUPPLIED THE COPY OF REASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT A ND THE ASSESSEE SENT HIS OBJECTIONS. THE AO COMPLETED THE REASSESSMENTS WITH OUT CONSIDERING THE OBJECTIONS OF THE ASSESSEE. THE TRIBUNAL UPHELD THE REOPENING OF ASSESSMENT AND IN RESPECT OF THE ADDITIONS AND DISALLOWANCES, THE MAT TER WAS REMANDED TO THE AO TO REDO THE ASSESSMENT ACCORDINGLY. HONBLE HIGH COURT HELD THAT THE OBJECTIONS OF THE ASSESSEE WERE NOT CONSIDERED BY THE AO. THERE W AS A VALID REOPENING OF ASSESSMENT, BUT THERE WAS PROCEDURAL IRREGULARITY C OMMITTED BY THE AO IN COMPLETING THE REASSESSMENTS. THE MATTER WAS, THERE FORE, REMANDED TO THE AO TO ITA NO. 169 TO 172/AGRA/2011 6 CONSIDER THE MATTER AFRESH AND OBJECTIONS OF THE AS SESSEE FOR REOPENING ALONG WITH ISSUE OF NOTICE U/S. 143(2). THE LD. DR, THEREFORE, SUBMITTED THAT FOR NON-SUPPLY OF REASONS FOR REOPENING OF ASSESSMENTS, THERE IS ONLY PROCEDURAL IRREGULARITY AND THE LD. CIT(A) SHOULD NOT HAVE QUASHED THE REASSESSMENT PROCEEDINGS. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND RELIED UPON THE ORDER OF ITAT, JAIPUR BE NCH IN THE CASE OF MANAK CHAND AGARWAL VS. ACIT, 4 DTR (JP)(TRIB) 584 IN WHI CH IT WAS HELD THERE BEING NO MATERIAL WITH THE AO FROM WHICH HE COULD FORM A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT AND NO REASONS HAVING BEEN SUPPLIED TO T HE ASSESSEE BY AO DESPITE REQUEST, ASSESSMENT UNDER S. 147 WAS NUL L AND VOID. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE SUBMITTED BEFORE THE AO T HAT THE RETURN ALREADY FILED U/S. 139 FOR RELEVANT ASSESSMENT YEARS, MAY BE TREATED A S THE RETURNS FILED IN RESPONSE TO THE NOTICES U/S. 148 OF THE IT ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE REQUESTED THE AO TO SUPPLY THE COPY OF THE REASONS FOR REOPENING OF ASSESSMENTS AND THAT THE AO DID NOT SUPPLY THE REASONS TO THE A SSESSEE FOR REOPENING OF THE ASSESSMENT. DURING THE COURSE OF ARGUMENTS ALSO, TH E SUBMISSIONS OF THE LD. DR CLEARLY SUPPORT THE FINDING OF THE LD. CIT(A) THAT THERE IS NO REASONS FOR REOPENING OF ASSESSMENT, HAVING BEEN SUPPLIED TO THE ASSESSEE . HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIDESH SANCHAR NIGAM LTD., 3 40 ITR 66 (BOM.) HELD THAT ITA NO. 169 TO 172/AGRA/2011 7 REASONS FOR RE-ASSESSMENT NOT FURNISHED TO THE ASSE SSEE BEFORE COMPLETION OF ASSESSMENT, REASSESSMENT NOT VALID. THE JUDGMENT OF THE BOMBAY HIGH COURT IS REPRODUCED AS UNDER : 1. WHETHER THE TRIBUNAL WAS JUSTIFIED IN CANCELING THE REOPENING OF THE ASSESSMENT IS THE QUESTION RAISED IN THIS APPEAL. 2. THE FINDING OF FACT RECORDED BY THE INCOME-TAX APPELLATE TRIBUNAL IS THAT IN THE PRESENT CASE, THE REASONS R ECORDED FOR REOPENING OF THE ASSESSMENT THOUGH REPEATEDLY ASKED BY THE ASSESSEE WERE FURNISHED ONLY AFTER COMPLETION OF THE ASSESSM ENT. THE TRIBUNAL FOLLOWING THE JUDGMENT OF THIS COURT IN THE CASE OF CIT VS. FOMENTO RESORTS AND HOTELS LTD., INCOME-TAX APPEAL NO. 71 O F 2006 DECIDED ON NOVEMBER 27, 2006, HAS HELD THAT THOUGH THE REOP ENING OF THE ASSESSMENT IS WITHIN THREE YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR, SINCE THE REASONS RECORDED FOR REO PENING OF THE ASSESSMENT WERE NOT FURNISHED TO THE ASSESSEE TILL THE COMPLETION OF ASSESSMENT, THE REASSESSMENT ORDER CANNOT BE UPHELD . MOREOVER, SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE DECISION OF THIS COURT IN THE CASE OF CIT VS. FOMENTO RESORTS AND HO TELS LTD., HAS BEEN DISMISSED BY THE APEX COURT, VIDE ORDER DATED JULY 16, 2007. IN THIS VIEW OF THE MATTER, THE PRESENT APPEAL IS ALSO DISMISSED WITH NO ORDER AS TO COSTS. 5. THE ABOVE JUDGMENT CLEARLY MENTIONS THAT HONBLE HIGH COURT FOLLOWED THEIR EARLIER DECISION TO ARRIVE AT THE DECISION IN THE MATTER, WHICH HAS ALSO BEEN CONFIRMED BY THE HONBLE SUPREME COURT BY DISMISSIN G THE SPECIAL LEAVE PETITION FILED BY THE REVENUE. THE ISSUE IS, THEREFORE, SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIDESH SANCHAR NIGAM LTD. (S UPRA). NO CONTRARY DECISION IS ITA NO. 169 TO 172/AGRA/2011 8 BROUGHT TO OUR NOTICE. THE DECISION OF MADRAS HIGH COURT RELIED UPON BY THE LD. DR IS CLEARLY DISTINGUISHABLE, IN WHICH THE REASONS FOR REOPENING OF ASSESSMENT HAVE BEEN SUPPLIED BY THE AO TO THE ASSESSEE. IN VI EW OF THIS MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) I N DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY