Pasupati Fabrics Ltd., New Delhi V. ACIT, New Delhi

ITA 1884/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4328 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Period of limitation; Additional evidence; Initiation of penalty proceedings; Time period of passing order; Reason to believe
• Section: 143(3); 244A; 142(1); 234B; 292BB; 143(2); 13; 27; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F, NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1884/DEL./2017 ASSESSMENT YEAR: 2009-10 M/S. PASUPATI FABRICS LTD., 112, COMPETENT HOUSE, F- 14, CONNAUGHT PLACE, NEW DELHI VS. ACIT, CENTRAL CIRCLE-9, NEW DELHI PAN :AAACP1338B (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 30/01/2017 PASSED BY THE LEARNED CIT(APPEALS)-27, N EW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 200 9-10 RAISING FOLLOWING GROUNDS: 1. THAT THE IMPUGNED ORDER IS ERRONEOUS IN LAW, FA CTS & PROCEDURE. 2. THAT THE LEARNED CIT (A) ERRED IN ARBITRARILY R EJECTING THE APPLICATION FILED UNDER RULE 46 (A) FOR ADMISSION O F ADDITIONAL EVIDENCE. APPELLANT BY SHRI RAJAN BHATIA, ADV. RESPONDENT BY SHRI SATISH KR. GUPTA, SR.DR DATE OF HEARING 19.02.2020 DATE OF PRONOUNCEMENT 24.02.2020 2 ITA NO. 1884/DEL./2017 3. THAT THE ASSESSMENT WAS MADE IN A RUSHED MANNER WITHOUT GRANT OF A FULL & PROPER OPPORTUNITY OF BEING HEARD OF MAKING FULL & PROPER REPRESENTATION. THE CIT (A) ALSO PASS ED A MECHANICAL ORDER. 4. FOR THAT THE LEARNED CIT (A) HAS ERRED IN UPHOL DING THE DISALLOWANCE OF DEPRECIATION ON 'PLANT AND MACHINER Y OF RS. 5,27,38,080/- AND ON FACTORY BUILDING OF RS. 73,59, 996/- & THAT DEPRECIATION AS CLAIMED MAY KINDLY BE ALLOWED. 5. THAT THE AO HAS ERRED IN OBSERVING THAT ASSETS WERE NOT USED FOR THE PURPOSE OF BUSINESS &THE CIT (A) ERRED IN U PHOLDING SUCH OBSERVATIONS. 6. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING RS. 10,750/- FROM EXPENDITURE UNDER THE HEAD 'PROFESSIONAL CHARGES' & THAT THE DISALLOW ANCE SO MADE MAY KINDLY BE DELETED. 7. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING EXPENSES AMOUNTING TO RS. 10, 22,033/- CLAIMED UNDER THE HEAD 'CONSUMABLE STORES & MACHINE RY SPARES CONSUMED' & THAT THE DISALLOWANCE SO MADE MA Y KINDLY BE DELETED. IN ANY CASE SUCH DISALLOWANCE IS EXCESSIVE. 8. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING 'MANUFACTURING EXPENSES' CLAI MED AT RS. 3,29,305/- & THAT THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED. IN ANY CASE SUCH DISALLOWANCE IS EXCESS IVE. 9. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING UNDER THE HEAD 'POWER & FUEL' AMOUNT OF RS. 13,03,373/- & THAT THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED. IN ANY CASE SUCH DISALLOWANCE IS EXCESSIVE. 10. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDIN G THE ACTION OF THE AO IN DISALLOWING RS. 94,79,443/- FROM EXPENDIT URE UNDER THE HEAD 'EMPLOYEE EXPENSES ' & THAT THE DISALLOWAN CE SO MADE MAY KINDLY BE DELETED. IN ANY CASE SUCH DISALL OWANCE IS EXCESSIVE. 11. THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO & IN DISALLOWING A SUM OF RS. 2,38,623/- U/S 40 A (3) OF THE INCOME TAX ACT, 1961 & THAT THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED. 12. THAT THE REASONS ASSIGNED FOR DISALLOWANCE OF VARIOUS EXPENSES BY THE AO & CONFIRMED BY THE CIT (A) THAT DISALLOWANCE IS WARRANTED ON ACCOUNT OF ' NO PRODUC TION ACTIVITY' ARE PERVERSE & UNCALLED FOR & ARBITRARY. 13. THAT THE ASSESSING OFFICER WRONGLY ASSUMED JUR ISDICTION. THAT NO NOTICE WAS ISSUED U/S 143 (2) IN RELATION TO ASS ESSMENT PROCEEDINGS FOR RETURN FILED & ALSO NOTICE U/S 143 (2) WAS ISSUED & SERVED BEYOND THE PERIOD OF LIMITATION REN DERING THE ASSESSMENT AS MADE AB- INITIO VOID & THE CIT (A) ER RED IS NOT OUTRIGHTLY QUASHING THE SAID ASSESSMENT. IN ANY CAS E ISSUE OF NOTICE U/S 142(1) DATED 19.07.2011 ASKING THE ASSES SE TO FILE 3 ITA NO. 1884/DEL./2017 A RETURN VITIATED THE ASSESSMENT AS MADE BASED ON R ETURN FILED U/S 139(1). 14. THAT THE ORDER OF BOTH THE LEARNED AO & LEANED CIT (A) IS MECHANICAL, NON - REASONED, ARBITRARY & BASED ON IR RELEVANT CONSIDERATIONS & EVIDENCES WHILE IGNORING RELEVANT CONSIDERATIONS & EVIDENCE & THE PROCEEDINGS ARE VIT IATED FOR THESE REASONS. 15. THAT CHARGES OF INTEREST U/S 234A, 234B & 244A (WITHDRAWAL) IS WRONG & INITIATION OF PENALTY PROCEEDINGS U/S 27 1 (1) (C) IS ALSO WRONG. 16. THAT NO DEFECT WHATSOEVER WAS FOUND BY THE LEA RNED AO IN THE AUDITED BOOKS OF ACCOUNTS OF THE APPELLANT COMP ANY OR IN THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY IT & ADDITIONS THUS MADE WERE UNCALLED FOR. 17. THAT THE APPELLANT COMPANY CRAVES LEAVES OF YO UR HONOUR TO TAKE ADDITIONAL GROUND OR GROUND OF APPEAL AT OR BE FORE THE TIME OF HEARING OR TO MODIFY ANY GROUND. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 30/09/2009 (WRONGLY MENTIONED B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AS 30/09/ 2010). THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTIC E UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT), WAS ISSUED ON 08/08/2011. THE SCRUTINY ASSESSMENT UNDER SECTION 143 (3) OF THE ACT WAS COMPLETED ON 30/11/2011 AFTE R MAKING CERTAIN ADDITIONS/DISALLOWANCES. AGGRIEVED, THE ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO DISMISSED THE APPE AL OF THE ASSESSEE AND UPHELD THE DISALLOWANCE/ADDITIONS MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE HAS FILE D APPEAL BEFORE THE TRIBUNAL, RAISING THE GROUNDS AS REPRODUCED ABO VE. 3. BEFORE US, FIRST OF ALL, THE ASSESSEE CHALLENGED T HE GROUND NO. 13 OF THE APPEAL, WHEREIN JURISDICTION ASSUMED BY ASSESSING OFFICER UNDER SECTION 143(2) OF THE ACT HAS BEEN CH ALLENGED. IT IS THE CONTENTION OF THE ASSESSEE THAT NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED WITHIN THE LIMITATION PERIOD. THE LEARNED 4 ITA NO. 1884/DEL./2017 COUNSEL FILED A PAPER-BOOK CONTAINING PAGES 1 TO 11 9 AND REFERRED TO PAGE NO. 1 OF THE PAPER-BOOK, WHICH IS A COPY OF THE ACKNOWLEDGEMENT OF RETURN OF INCOME FILED IN FORM N O. ITR-V. THE LEARNED COUNSEL ALSO REFERRED TO THE COPY OF THE NO TICE DATED 08/08/2011 ISSUED UNDER SECTION 143(2) OF THE ACT, AVAILABLE ON PAGE 2 OF THE PAPER-BOOK. ACCORDING TO HIM, IN THE INSTANT CASE, NO NOTICE UNDER SECTION 143(2) OF THE ACT COULD HAV E BEEN ISSUED AFTER 30/09/2010, WHEREAS THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT FOR THE FIRS T TIME ON 08/08/2011, WHICH IS BEYOND THE PERIOD OF THE LIMIT ATION AND, THEREFORE, THE ASSESSMENT IS VOID AB INITIO AND NEED TO BE QUASHED. THE LD. COUNSEL RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON IN CIV IL APPEAL NO. 1198 OF 2010 4. THE LEARNED DR SUBMITTED THAT THIS ISSUE HAS BEEN R AISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND, THEREFO RE, SAME SHOULD HAVE BEEN RAISED BY WAY OF ADDITIONAL GROUND ONLY. ON HIS OBJECTION, THE LEARNED COUNSEL OF THE ASSESSEE REQU ESTED TO TREAT THE SAME GROUND AS ADDITIONAL GROUND AND REQUESTED TO ADMIT THE ADDITIONAL GROUND IN VIEW OF THE SETTLED PRINCIPAL IN THE CASE OF NTPC VS. CIT, 1998 229 ITR 383 SC. 5. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. WE ADMIT THE GROUND RAISED BY THE ASSES SEE IN VIEW OF THE SETTLED PRINCIPAL IN THE CASE OF NTPC (SUPRA) AS ALL THE FACTS ARE AVAILABLE ON RECORD AND NO INVESTIGATION IS REQ UIRED AS FAR AS FACTS ARE CONCERNED. 6. ON PERUSAL OF COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FILED BY THE ASSESSEE, IT IS UNDISPUTED THAT THE RE TURN OF INCOME 5 ITA NO. 1884/DEL./2017 FOR THE YEAR UNDER CONSIDERATION HAVING ACKNOWLEDGE MENT NO. 97888000300909 HAS BEEN FILED ON 30/09/2009. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS THOUGH MENTIONED THE ACKNOWLEDGEMENT NUMBER CORRECTLY; HOWEVER, THE DATE OF THE FILING HAS BEEN WRONGLY MENTIONED AS 30/09/2010. AS FAR AS ISSUE OF THE DATE OF 08/08/2011 OF THE NOTICE UNDER SECTION 143(2) OF THE ACT IS CONCERNED, AFTER VERIFICATION OF THE RECORDS, THE LEARNED DR DID NOT DISPUTE, THAT IT IS THE NOTICE I SSUED FOR THE FIRST TIME IN THE CASE OF THE ASSESSEE. THE PROVISI ONS OF SECTION 143(2), DURING RELEVANT PERIOD, SPECIFY THE LIMITAT ION PERIOD FOR ISSUE OF NOTICE AS UNDER: 143(1). [(2) WHERE A RETURN HAS BEEN FURNISHED UNDER SECTIO N 139 , OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTI ON 142 , THE ASSESSING OFFICER SHALL, (I ) WHERE HE HAS REASON TO BELIEVE THAT ANY CLAIM OF LOSS, EXEMPTION, DEDUCTION, ALLOWANCE OR RELIEF MADE IN T HE RETURN IS INADMISSIBLE, SERVE ON THE ASSESSEE A NOTICE SPE CIFYING PARTICULARS OF SUCH CLAIM OF LOSS, EXEMPTION, DEDUC TION, ALLOWANCE OR RELIEF AND REQUIRE HIM, ON A DATE TO B E SPECIFIED THEREIN TO PRODUCE, OR CAUSE TO BE PRODUCED, ANY EV IDENCE OR PARTICULARS SPECIFIED THEREIN OR ON WHICH THE ASSES SEE MAY RELY, IN SUPPORT OF SUCH CLAIM: [ PROVIDED THAT NO NOTICE UNDER THIS CLAUSE SHALL BE SERVED ON THE ASSESSEE ON OR AFTER THE 1ST DAY OF JUNE, 2003; ] (II) NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (I), IF HE CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER-PAID THE T AX IN ANY MANNER, SERVE ON THE ASSESSEE A NOTICE REQUIRING HI M, ON A DATE TO BE SPECIFIED THEREIN, EITHER TO ATTEND HIS OFFICE OR TO PRODUCE, OR CAUSE TO BE PRODUCED, ANY EVIDENCE ON W HICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RETURN: 6 ITA NO. 1884/DEL./2017 [PROVIDED THAT NO NOTICE UNDER CLAUSE (II) SHALL BE SERVED O N THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED .] 7. THE PROVISO HAS PUT A BAR OR RESTRICTION ON THE AS SESSING OFFICER FOR ISSUING NOTICE AFTER THE EXPIRY OF LIMI TATION PERIOD. THE SECTION 292BB OF THE ACT IS ALSO CANNOT CURE THIS ILLEGALITY, IN VIEW OF THE EMBARGO PUT ON THE ASSESSING OFFICER BY WAY OF PROVISO OF SECTION 143(2) OF THE ACT. HAD THE NOTIC E BEEN ISSUED WITHIN THE LIMITATION PERIOD AND SERVICE WAS DISPUT ED, THEN THE REVENUE COULD HAVE INVOKED THE SECTION 292BB OF THE ACT, BUT IN PRESENT CASE UNDISPUTEDLY, NOTICE FOR ACQUIRING JUR ISDICTION U/S 143(2) HAS NOT BEEN ISSUED WITHIN THE LIMITATION PE RIOD. IN OUR OPINION, THE ASSESSING OFFICER WAS REQUIRED TO ISSU E NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN SIX-MONTH FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN OF INCOME WAS F URNISHED. SINCE THE RETURN OF INCOME HAS BEEN FURNISHED ON 30/09/20 09, THE LIMITATION FOR ISSUE OF THE NOTICE EXPIRED ON 30/09 /2010. THUS, THERE IS NO DOUBT THAT NOTICE UNDER SECTION 143(2) OF THE ACT FOR SELECTING THE CASE UNDER SCRUTINY HAS BEEN ISSUED B EYOND THE LIMITATION PERIOD. AS REQUIREMENT OF ISSUE OF NOTIC E UNDER SECTION 143(2) OF THE ACT WITHIN LIMITATION PERIOD, BEING T HE JURISDICTIONAL REQUIREMENT AND NOT FULFILLING OF THE SAME HAS REND ERED THE ASSESSMENT ORDER ILLEGAL AND VOID AB INITIO. ACCORDINGLY, THE ASSESSMENT FRAMED UNDER SECTION 143(3) IN THE CASE IS QUASHED. THE ADDITIONAL GROUND (I.E. GROUND NO. 13) OF THE A SSESSEE IS ACCORDINGLY ALLOWED. AS WE HAVE ALREADY QUASHED THE ASSESSMENT, THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE RENDER ED MERELY 7 ITA NO. 1884/DEL./2017 ACADEMIC AND HENCE, WE ARE NOT ADJUDICATING UPON TH OSE GROUNDS. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2020. SD/- SD/- (KULDIP SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH FEBRUARY, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI