Shastha pharma Laboratories Pvt Ltd , Bangalore V. Income TAx Officer Ward-12(2), Bangalore

ITA 1862/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4571 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1999-2000
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: H ANIL KUMAR
• Keywords: Rectification of order
• Section: 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1862 / BANG/201 7 ASSESSMENT YEAR : 1999 - 2000 M/S. SHASTHA PHARMA LABORATORIES PVT. LTD., NO. 16/2, O.V.R. ROAD, BASAVANGUDI, BANGALORE 560 004. PAN: AAFCS6484C VS. THE INCOME TAX OFFICER, WARD 12 (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H. ANIL KUMAR, CA RESPONDENT BY : SMT. PADMA MEENAKSHI, JCIT (DR) DATE OF HEARING : 1 1 .0 6 .2018 DATE OF PRONOUNCEMENT : 22 .0 6 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-6, BANGALORE DATED 07.07.2017 FOR ASS ESSMENT YEAR 1999-2000. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED CIT (A) IN HOLDING THAT NO INFIRMITY HAS OCCURRED IN THE AO'S RECTIFICATION ORDER U/S 154 IS AGAINST LAW, FACTS OF THE CASE AND WEIGHT OF EVIDENCE. 2. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE RECTIFICATION ORDER U/S 154 WHEN THE ADJUSTMENTS MADE TO THE RETURNED I NCOME COULD NEVER HAVE BEEN MADE UNDER SECTION 143(1). 3. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER OF RECTIFICATION PASSED BY THE I.T.O. WARD 12 (2) RECT IFYING AN INTIMATION PASSED BY THE DCIT CIRCLE 4 (6), AN OFFICER SUPERIO R IN RANK,. 4. THE LEARNED CIT (A) HAS ERRED IN NOT GIVING A FI NDING ON GROUND NO 2 THAT THE A.O. HAS IGNORED THE FACT THAT APPELL ANT HAS REPLIED TO THE NOTICE/S 154 DATED 17-7-2002 ON 30-7-2002 (A CO PY OF WHICH IS ENCLOSED HEREWITH) AND FURTHER ERRED IN PARA 8 OF T HE ORDER THAT ITA NO. 1862/BANG/2017 PAGE 2 OF 7 'SEVERAL NOTICES WERE SENT TO APPELLANT POSTING THE CASE FOR HEARING. HOWEVER APPELLANT CHOSE TO IGNORE ALL NOTICES'. 5. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER U/S 154 WHEN TWO OPINIONS WERE POSSIBLE ON THE ISSUES INVOLVED I N THE RECTIFICATION MADE BY A.O. 6. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER U/S 154 PASSED BY THE INCOME TAX OFFICER WARD 12 (2) WITHOU T ASCERTAINING HOW HE GOT POWER OVER THE APPELLANT. 7. THE LEARNED CIT (A) HAS ERRED IN RELYING UPON DE CISIONS U/S 124 WHICH RELATE THE JURISDICTION BY AREA, WHERE AS IN THE INSTANT CASE, THE ISSUE IS RELATED TO PECUNIARY JURISDICTION. 8. THE LEARNED C.I.T. (A) HAS OVERLOOKED THAT THE N OTICE U/S 154 DATED 17-7-2002 PROPOSING TO RECTIFY THE INTIMATION U/S 1 43(1) DATED 20-3- 2001, TO ADD BACK RS. 1,85,210 AND RS. 6,71,275 WHI LE DETERMINING THE CAPITAL GAINS AS WRONGLY CLAIMED, IS INFRUCTUOU S AS THE SAID INTIMATION HAS BEEN RECTIFIED VIDE AO'S ORDER U/S 1 54 DATED 26-6-2002 TO DELETE THE CAPITAL GAINS. 9. (A) THE APPELLATE OFFICER HAS ERRED IN CONCLUDIN G THAT INTEREST OF RS. 6,71,275/- PAID TO BANK ON BORROWALS MADE TO REFUND THE ADVANCES / DEPOSITS OF THE TENANT, SO THAT THE TENANT WILL VAC ATE THE PREMISES OCCUPIED, AND THE APPELLANT CAN HAND OVER VACANT PO SSESSION TO THE BUYER IS NOT AN EXPENDITURE INCURRED U/S. 48(1). (B) THE LEARNED APPELLATE OFFICER HAS FAILED TO APP RECIATE THE FACT THAT CONSEQUENT TO THE PASSING OF THE ORDER DATED 26-06- 2002 THE DEFECTS POINTED OUT VIDE NOTICE DATED 17-07-2002 DOES NOT E XIST AS ON 17-07-2002 AND AS SUCH THE ENTIRE PROCEEDING IS BAD IN LAW. (C) THE APPELLATE OFFICER HAS FAILED TO APPRECIATE THE EXPENDITURE OF RS. 6,71,275/- HAS BEEN CLAIMED SEPARATELY OUT OF T HE SALE PROCEEDS AND THE SAME HAS BEEN ALLOWED BY THE PREVIOUS OFFIC ER. 10. THE C.I.T. (A) HAS ERRED IN CONCLUDING THE INTE REST INCOME OF RS. 1,85,210/- HAS BEEN PROPERLY ADDED BY THE ASSESSING OFFICER WHEN THE PREVIOUS ASSESSING OFFICER HAS ACCEPTED THE CONTENT ION OF THE APPELLANT THAT THE SAME NEVER REACHED APPELLANT AND AS SUCH T HE SAID RECTIFICATION CANNOT BE MADE IN AN ORDER U/S. 154. 11. THE STATEMENT OF FACTS, GROUNDS OF APPEAL AND A DDITIONAL GROUNDS OF APPEAL FILED BEFORE THE CIT (A) BE READ AS PART OF THESE PRESENTS. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE PRESENT APPEAL OF THE ASSESSEE IS IN SECOND ROUND AND THE COPY OF THE TRIBUNAL ORD ER IN THE FIRST ROUND IN ITA ITA NO. 1862/BANG/2017 PAGE 3 OF 7 NOS. 106 & 1480/BANG/2003 & 604/BANG/2005 DATED 11. 08.2006 IS AVAILABLE ON PAGES 31 TO 37 OF PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA 7 OF THIS TRIBUNAL ORDER AND IT WAS POINTED OU T THAT THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF CIT(A) FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW. HE FURTHER POINTED OUT THAT T HIS WAS THE CONTENTION RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL THAT THE ITO, W ARD 12 (2), BANGALORE HAS NO JURISDICTION TO PASS ORDER U/S 154 IN RESPECT O F THE RETURN PROCESSED U/S. 143(1)(A) BY DCIT, COMPANY CIRCLE 4 (6), BANGALOR E AND THIS WAS THE CLAIM OF THE LD. AR OF ASSESSEE THAT THIS ISSUE WAS NOT BROU GHT TO THE NOTICE OF CIT(A) AND HENCE, THE SAME WAS NOT DISCUSSED BY CIT(A) IN THE FIRST ROUND AND FOR DECIDING THIS ASPECT, THE MATTER WAS RESTORED BACK TO THE FILE OF CIT(A) GIVING LIBERTY TO THE ASSESSEE THAT THE ASSESSEE MAY RAISE THE GROUND ON MERIT ALSO AND THE SAME MAY BE DECIDED BY CIT(A) IN ACCORDANCE WITH LAW. THEREAFTER, HE DREW OUR ATTENTION TO PAGES 4 & 5 OF THE ORDER O F CIT(A) IN SECOND ROUND. HE FURTHER SUBMITTED THAT THERE IS AMENDMENT IN THE PROVISIONS OF SECTION 143(1) OF IT ACT W.E.F. 01.06.1999 AND AS PER THE S AME, IN THE INTIMATION ISSUED BY THE AO U/S. 143(1), THE AO HAS TO JUST INTIMATE THE AMOUNT OF DEMAND RAISED OR REFUND TO BE ISSUED AND NO FURTHER ADJUSTMENT CA N BE MADE BY AO IN SUCH INTIMATION U/S. 143(1) AFTER 01.06.1999 AND SINCE I N THE PRESENT CASE, THE INTIMATION WAS ISSUED ON 20.03.2001, THE AMENDED PR OVISIONS ARE APPLICABLE AND THEREFORE, THE AO CANNOT MAKE AN ADJUSTMENT IN THE SAID INTIMATION AND WHAT CANNOT BE DONE U/S. 143(1), THE SAME CANNOT BE DONE INDIRECTLY U/S. 154. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON TRIBUNAL ORDER RENDERED IN THE CASE OF RACHHPAL SINGH VS. ITO AS REPORTED IN ( 2005) 93 TTJ 283 (AMRITSAR). OUR ATTENTION WAS DRAWN TO PARA NO. 8 OF THIS TRIBUNAL ORDER. 4. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A) AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO PARA 11 OF TH IS ORDER OF CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE INTIMATION ISSUED BY THE AO U/S. 143(1) IS DATED 20.03.2001 AND THIS INTIMATION WAS RECTIFIED BY THE AO U/S. 154 AS PER ORDER PASSED BY HIM ON 26.06 .2002. IN THE LIGHT OF THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF TR IBUNAL ORDER RENDERED IN THE CASE OF RACHHPAL SINGH VS. ITO (SUPRA) AND ALTHOUGH THIS IS AN ORDER OF SMC ITA NO. 1862/BANG/2017 PAGE 4 OF 7 BENCH OF TRIBUNAL AND THEREFORE NOT BINDING ON THE DIVISIONAL BENCH, THIS ORDER HAS GOT PERSUASIVE VALUE AT LEAST. THE RELEVANT PA RA OF THIS TRIBUNAL ORDER I.E. PARA 8 IS REPRODUCED HEREINBELOW FOR THE SAKE OF RE ADY REFERENCE. 8. NOW, COMING TO THE MERITS OF ORDERS PASSED UNDER SECTION 154, IT IS NO DOUBT TRUE THAT POWERS HAVE BEEN CONFERRED ON TH E AO TO RECTIFY INTIMATION OR DEEMED INTIMATION UNDER SECTION 143(1 ). BUT, SUCH POWER HAS TO BE SEEN IN THE LIGHT OF POWERS CONFERR ED UNDER SECTION 143(1). THE RETURNS WERE PROCESSED UNDER SECTION 14 3(1) ON 28TH MARCH, 2000. PROVISIONS OF SECTION 143 HAVE BEEN DR ASTICALLY AMENDED BY THE FINANCE ACT, 1999, W.E.F. 1ST JUNE, 1999. HIGHLIGHTS OF THESE AMENDMENTS ARE THAT POWERS OF THE AO TO MAKE ADJUSTMENTS UNDER SECTION 143(1)(A) AND CONSEQUENT LEVY OF ADDI TIONAL TAX UNDER SECTION 143(1 A) HAVE BEEN TAKEN AWAY. THE AM ENDED PROVISIONS OF SECTION 143(1) OF THE ACT READ AS UND ER: '143(1) WHERE A RETURN HAS BEEN MADE UNDER SECTION 139, OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTI ON 142,- (I) IF ANY TAX OR INTEREST IS FOUND DUE ON THE BASI S OF SUCH RETURN, AFTER ADJUSTMENT OF ANY TAX DEDUCTED AT SOURCE, ANY ADVAN CE TAX PAID, ANY TAX PAID ON SELF-ASSESSMENT AND ANY AMOUNT PAID OTH ERWISE BY WAY OF TAX OR INTEREST, THEN, WITHOUT PREJUDICE TO THE PRO VISIONS OF SUB-SECTION (2), AN INTIMATION SHALL BE SENT TO THE ASSESSEE SP ECIFYING THE SUM SO PAYABLE, AND SUCH INTIMATION SHALL BE DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTION 156 AND ALL THE PROVISI ONS OF THIS ACT SHALL APPLY ACCORDINGLY; AND (II) IF ANY REFUND IS DUE ON THE BASIS OF SUCH RETU RN, IT SHALL BE GRANTED TO THE ASSESSEE AND AN INTIMATION TO THIS EFFECT SH ALL BE SENT TO THE ASSESSEE : PROVIDED THAT, EXCEPT AS OTHERWISE PROVIDED IN THIS SUB-SECTION, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER THIS SUB-SECTION WHERE EITHER NO SUM IS PAYAB LE BY THE ASSESSEE OR NO REFUNDS IS DUE TO HIM: PROVIDED FURTHER THAT NO INTIMATION UNDER SUB-SECTI ON SHALL BE SENT AFTER THE EXPIRY OF ONE YEAR FROM THE END OF THE FI NANCIAL YEAR IN WHICH THE RETURN IS MADE:' A BARE READING OF THE AFORESAID PROVISIONS SHOWS TH AT, NOW, THE AO, ON THE BASIS OF RETURN FILED, CAN DETERMINE THE TAX AND INTEREST, IF ANY, PAYABLE BY THE ASSESSEE AFTER ALLOWING CREDIT FOR T DS AND PRE PAID TAXES AND SEND THE INTIMATION SPECIFYING THEREIN TH E SUM SO PAYABLE. IN CASE ANY REFUND IS DUE ON THE BASIS OF SUCH RETURN, AO SHALL GRANT THE REFUND AND SEND THE INTIMATION TO THE ASSESSEE. IT IS ONLY IF ANY TAX IS PAYABLE OR REFUND IS DUE TO THE ASSESSEE, INTIMATIO N UNDER SECTION 143(1) WOULD NEED BE SENT TO THE ASSESSEE. THE AO H AS NOT BEEN CONFERRED ANY OTHER POWERS TO MAKE ANY ADJUSTMENTS FOR DISALLOWING ITA NO. 1862/BANG/2017 PAGE 5 OF 7 OR ALLOWING ANY CLAIM TO THE ASSESSEE. THUS, POWERS CONFERRED UNDER SECTION 154(1)(B) FOR RECTIFICATION OF INTIMA TION OR DEEMED INTIMATION HAVE TO BE CONSIDERED IN THE LIGHT OF PO WERS CONFERRED UNDER SECTION 143(1).. IF THE AO IS NOT VESTED (WIT H) ANY AUTHORITY TO MAKE ADJUSTMENTS OR DISALLOWING THE CLAIM OF THE AS SESSEE UNDER SECTION 143(1), HE CANNOT DO SO UNDER SECTION 154(1)(B) OF THE IT ACT. THEREFORE, THE ISSUE WHETHER THERE IS A MIS TAKE IN THE INTIMATION OR DEEMED INTIMATION IS TO BE SEEN IN TH E LIGHT OF POWERS CONFERRED UNDER SECTION 143(1). IF SUCH POWERS DO N OT EXIST UNDER SECTION 143(1), I.E., THE MAIN SECTION, SUCH POWERS CANNOT BE CONFERRED UNDER SECTION 154(1)(B). SECTION 154(1)(B )CANNOT BE PRESSED INTO SERVICE FOR MAKING ADJUSTMENT OF THE N ATURE MENTIONED UNDER SECTION 143(1)(A)OF THE PRE-AMENDED SECTION, AS SUCH POWER HAS BEEN INTENTIONALLY TAKEN AWAY BY THE LEGISLATURE. S INCE THE ACTION OF THE AO FOR WITHDRAWING EXEMPTION OF INTEREST UNDER SECTION 10(4) OF THE ACT FALLS OUTSIDE THE SCOPE OF POWERS CONFERRED UNDER SECTION 143(1), THE AO HAD NO JURISDICTION TO PASS ORDERS U NDER SECTION 154(1)(B). EVEN IF THE ASSESSEE HAD AGREE BEFORE TH E AO DUE TO WRONG APPRECIATION OF LAW, SUCH AGREEMENT WOULD NOT HAVE MADE THE ILLEGAL ORDERS AS LEGAL BECAUSE THE AO HAD NO AUTHORITY OR JURISDICTION TO DO SO. THEREFORE, SUCH ORDERS ARE BAD IN LAW AND VOID AB INITIO AND DESERVE TO BE QUASHED ON THIS GROUND ITSELF. 6. FROM THE ABOVE PARA REPRODUCED FROM THE TRIBUNAL ORDER, IT IS SEEN THAT IN THAT CASE ALSO, THE INTIMATION U/S. 143(1) WAS DATED 28. 03.2000 AND IT IS NOTED BY TRIBUNAL THAT PROVISIONS OF SECTION 143 (1) HAVE BE EN DRASTICALLY AMENDED BY THE FINANCE ACT, 1999 W.E.F. 01.06.1999. THE TRIBU NAL ALSO NOTED THAT AS PER THESE AMENDMENTS, THE POWERS OF THE AO TO MAKE ADJU STMENTS U/S. 143(1)(A) AND CONSEQUENT LEVY OF ADDITIONAL TAX U/S. 143(1A) HAVE BEEN TAKEN AWAY. THE TRIBUNAL HAS REPRODUCED THE AMENDED PROVISIONS OF S ECTION 143(1) AND NOTED THAT AFTER THIS AMENDMENT, THE AO ON THE BASIS OF R ETURN FILED, CAN DETERMINE THE TAX AND INTEREST, IF ANY, PAYABLE BY THE ASSESS EE AFTER ALLOWING CREDIT FOR TDS AND PRE PAID TAXES AND SEND THE INTIMATION SPEC IFYING THEREIN THE SUM SO PAYABLE AND IN CASE ANY REFUND IS DUE ON THE BASIS OF SUCH RETURN, AO SHALL GRANT THE REFUND AND SEND THE INTIMATION TO THE ASS ESSEE. THE TRIBUNAL ALSO NOTED THAT IT IS ONLY IF ANY TAX IS PAYABLE OR REFU ND IS DUE TO THE ASSESSEE, INTIMATION UNDER SECTION 143(1) WOULD NEED BE SENT TO THE ASSESSEE AND THE AO HAS NOT BEEN CONFERRED ANY OTHER POWERS TO MAKE ANY ADJUSTMENTS FOR DISALLOWING OR ALLOWING ANY CLAIM TO THE ASSESSEE. THEREAFTER, THE TRIBUNAL NOTED THAT THE POWERS CONFERRED UNDER SECTION 154(1 )(B) FOR RECTIFICATION OF INTIMATION OR DEEMED INTIMATION HAVE TO BE CONSIDER ED IN THE LIGHT OF POWERS ITA NO. 1862/BANG/2017 PAGE 6 OF 7 CONFERRED UNDER SECTION 143(1) AND IF THE AO IS NOT VESTED (WITH) ANY AUTHORITY TO MAKE ADJUSTMENTS OR DISALLOWING THE CLAIM OF THE ASSESSEE UNDER SECTION 143(1), HE CANNOT DO SO UNDER SECTION 154(1)(B) OF THE IT ACT. IN THAT CASE ALSO, THE ASSESSMENT YEARS INVOLVED WERE IN THE YEA RS 1997-98 TO 2000-01 AND IN THE PRESENT CASE, THE ASSESSMENT YEAR INVOLVED I S 1999-2000. 7. RELIANCE WAS ALSO PLACED ON A DECISION OF AHMEDA BAD BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF PACKERS (INDIA) VS. ITO AS REPORTED IN (2006) 99 ITD 383. WE FIND THAT THIS TRIBUNAL ORDER IS OF A DIVI SION BENCH OF AHMEDABAD BENCH AND IN THIS CASE ALSO, THE TRIBUNAL HAS CONSI DERED THE AMENDED PROVISIONS OF SECTION 143(1) AND HELD THAT W.E.F. 0 1.06.1999, THE AMENDED PROVISIONS OF SECTION 143(1) HAS TO BE APPLIED IRRE SPECTIVE OF ASSESSMENT YEAR INVOLVED. THE TRIBUNAL HAS REFERRED TO SEVERAL JUD GEMENTS OF VARIOUS HIGH COURTS AND THEREAFTER, IT WAS HELD THAT THE AO CANN OT EXERCISE POWERS UNDER SECTION 154 OF IT ACT TO AMEND AN INTIMATION UNDER SECTION 143(1) WITH REGARD TO A MATTER WHICH HE CANNOT DO WHILE PROCESS ING UNDER SECTION 143(1) OF THE ACT ITSELF. HENCE RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER RENDERED IN THE CASE OF PACKERS (INDIA) VS. ITO (SUPRA), WE HOLD TH AT THE ORDER PASSED BY THE AO U/S. 154 IS NOT VALID BECAUSE THE AO HAS NO POWE RS TO DO SO U/S. 143(1) AND THEREFORE, THE SAME CANNOT BE DONE U/S. 154 OF IT ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 22 ND JUNE, 2018. /MS/ ITA NO. 1862/BANG/2017 PAGE 7 OF 7 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.