M/s Mfar Holdings Pvt Ltd, Bangalore V. Assistant Commissioner of Income Tax, Circle-4(1)(2), Bangalore

ITA 1931/BANG/2017

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6253 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-07-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 27-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEERA RAGHAVAN
• Keywords: Business expenditure; Period of limitation; Additional evidence; Revised return; Set aside
• Section: 148; 143(3); 142(1); 133A; 153A; 143(1); 143(2); 158BC; 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No. 1931/Bang/2017 Assessment Year : 2009-10 M/s. Mfar Holdings Pvt. Ltd., #3, Lavelle Road, Bengaluru – 560 001. PAN: AABCM3804C Vs. The Assistant Commissioner of Income Tax, Circle 4(1)(2), Bengaluru. APPELLANT RESPONDENT Assessee by : Shri Tata Krishna, Advocate Revenue by : Shri Veera Raghavan, JCIT DR Date of Hearing : 27-07-2023 Date of Pronouncement : 25-10-2023 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 14.07.2017 passed by the Ld.CIT(A)-2, Bangalore for A.Y. 2009-10 on following grounds of appeal: Page 2 of 14 ITA No. 1931/Bang/2017 Page 3 of 14 ITA No. 1931/Bang/2017 Page 4 of 14 ITA No. 1931/Bang/2017 2. At the outset, the Ld.AR submitted that assessee has raised a legal issue in Ground no. 2 challenging the validity of issuance of 143(2) notice dated 01.10.2010 to be bad in law. He submitted two proposition in respect of this issue as under:- a) The notice u/s. 143(2) has been belatedly issued to assessee; and/or b) The notice u/s. 143(2) has been issued in a consolidated manner including assessment years 2003-04 to 2009-10. The Ld.AR submitted that these issues go to the root cause of the assessment which are raised in grounds 2 to 4 of this appeal. Page 5 of 14 ITA No. 1931/Bang/2017 3. Brief facts leading to the above issue are as under: 3.1 Assessee had filed the original return of income on 30.09.2009 declaring total income of Rs.38,31,71,027/- that was processed u/s. 143(1) of the act. Subsequently a search action u/s. 132 was conducted in case of Sri Laxman & Others on 20.02.2009, during the course of which certain incriminating documents were found and seized relating to the assessee. The case was thus centralized and a notice u/s. 142(1) dated 13.07.2010 was issued to the assessee requiring it to file return of income within 15 days from the date of receipt of such notices. 3.2 It is noted from the original assessment order that the assessee had filed e-return on 25.06.2010 declaring total income of Rs.38,31,71,027/- which was a revised return wherein income consisted of income from house property amounting to Rs.22,33,005/-, loss from business amounting to Rs.15,86,54,468/-, short term capital gains amounting to Rs.6,03,65,912/-, long term capital gains amounting to Rs.47,56,39,745/- and income from other sources amounting to Rs.35,86,833/-. The second revised return was filed by assessee on 26.10.2010. 3.3 Against the notice issued u/s. 142(1) dated 13.07.2010, the assessee had filed letter on 27.07.2010 stating that the e-return filed may be treated as return in response to notice u/s. 142(1) of the act. 3.4 It is also noted from the original assessment order that the survey u/s. 133A was carried out on 11.06.2009 at the premises of assessee. At the time of survey it came to light that assessee company had sold shares of Mfar Infrastructure Development (P) Page 6 of 14 ITA No. 1931/Bang/2017 Ltd. At the time of survey, the assessee company has provisionally admitted long term capital gain from the sale of shares at Rs.45,44,70,362/-. It was noted by the Ld.AO during the assessment year under consideration that, the assessee sold 21,12,568 shares of Mfar Infrastructure Development (P) Ltd. at Rs.274.40 per share to M/s. Ozone group. The Ld.AO noted that the total consideration received from this transaction is Rs.57,96,88,659/-, and that against the sale consideration, assessee has claimed cost of acquisition of Rs.9,71,78,128/- (indexed cost of acquisition Rs.10,89,74,309/-), professional charges of Rs.64,56,565/- and brokerage and commission amounting to Rs.2,42,99,497/-. 3.5 The Ld.AO based on the survey material, concluded the original assessment by observing as under: “Till the date of this order, assessee has not submitted any proof regarding the brokerage and commission even though the assessee company was specifically asked to submit the details as per the questionnaire dated 2.8.2010 and show cause notice dated 28.12.2010. By taking all these factors into consideration, the assessee’s claim of brokerage and commission is disallowed. An amount of Rs.2,42,99,497/- claimed under the head brokerage and commission is added back to the long term capital gain and taxed accordingly.” 3.6. Against the said impugned order, the assessee preferred appal before the Ld.CIT(A) who confirmed the order of the Ld.AO. Against the order of the Ld.CIT(A), assessee had preferred appeal before this Tribunal in ITA No. 536/Bang/2013. 3.7. This Tribunal after considering the arguments on merits, remanded the issue back to the Ld.AO for denovo consideration by observing as under: “6. Having heard both the parties and having considered the rival contentions, we find that the additional ground of Page 7 of 14 ITA No. 1931/Bang/2017 appeal raised by the assessee is with regard to the nature of expenditure, whether it is brokerage and commission or business expenditure. The assessee, in the original return xof income had claimed it to be brokerage and commission while in the revised return filed on 25-6-2010 it has been claimed as business expenditure. Thus, we find that facts relating to the expenditure are very much on record and what is required to be considered is only the nature of payment and the allowability thereof. The Hon'ble Supreme Court, in the case of Tek Ram (Dead) Through LRS (supra) has held that where the assessee files additional evidence before the Supreme Court, it can be remanded to the High Court to be looked into by the High Court before adjudicating the allowability or otherwise of the claim of the assessee. In the case before us also, the additional evidence, purportedly filed by the assessee is in support of the assessee's claim of business expenditure. Further, we find that the AO has issued a letter dated 29- 12:2010 requiring the assessee to file details relating to the assessee's claim of brokerage and commission and also with regard to conversion of investment into stock-in- trade but without waiting for the reply of the assessee and without giving the assessee sufficient time to furnish the details, the AO has proceeded to complete the assessment. The assessee has filed its reply on 31-10-2010 and has also furnished the revised return of income after the conclusion of the assessment proceedings and therefore it could not have been considered by the AO while passing of the assessment order. The principles of natural justice requires that the assessee should be given sufficient time to meet the requirements of law. If the AO felt the need to issue a letter to the assessee and call for details, unless the assessment is time-barring, we do not find any reason as to why he should conclude the assessment proceedings even before the assessee receives the notice or on the date on which the assessee receives notice. The AO should have given the assessee sufficient time to produce the details and should have concluded the assessment after expiry of the period given in the notice. Therefore, in the interest of equity and justice, we deem it fit and proper to admit the additional ground of appeal as well as the additional evidence and remand the issue to the file of the AO for de novo consideration of all the issues raised before him. The AO shall give the assessee a fair opportunity of hearing and shall also consider the judicial precedents on the issue before concluding the assessment.” 3.6 In the remand proceedings, before the Ld.AO, assessee was called upon to furnish various details in support of its claims Page 8 of 14 ITA No. 1931/Bang/2017 made. The Ld.AO has however observed that assessee has merely chosen to state that the claims made in the revised return of income needs to be allowed as such and only a repeated assertion was made in respect of the same. The Ld.AO thus disallowed the claim of assessee in respect of the business loss claimed in the return of income. Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A) who once again confirmed the additions made by the Ld.AO. 3.7 Aggrieved by the order of the Ld.AO, assessee preferred appeal before this Tribunal. 4. At the outset, it is submitted that the legal issue raised in Ground nos. 2-4 have been raised for the first time before this Tribunal in the second round of proceedings and that these issues arises out of the records. 4.1 The Ld.AR submitted that the notice issued u/s. 143(2) are for consolidated assessment years on 01.10.2010 and is bad in law as the same has been issued beyond the period of limitation, that is, six months from the end of the financial year in which the return is furnished. 4.1.1 It is submitted that in the present facts of the case, the original return of income was filed by the assessee on 30.09.2009 and hence the notice u/s. 143(2) ought to have been issued to assessee on or before 30.09.2010. 4.2 Without prejudice to the above proposition the Ld.AR submitted that no notice was issued u/s. 143(2) to the assessee considering the last revised return filed by the assessee on 31.12.2010 and therefore the assessment order originally passed is void-ab-initio. Page 9 of 14 ITA No. 1931/Bang/2017 4.3 Another argument raised by the Ld.AR is that the notice u/s. 143(2) dated 01.10.2010 is bad in law as it has been issued in a consolidated manner for assessment years 2003-04 to 2009-10. He submitted that the present assessment year does not fall under the block period subsequent to search and has to be treated as independent assessment year. 4.3.1 Under such circumstances, the Ld.AR submitted that independent and separate notice u/s. 143(2) should have been issued to the assessee as against the consolidated notice dated 01.10.2010. He placed reliance on the decision of Hotel Blue Moon decided by Hon’ble Supreme Court reported in 321 ITR 362 in support of this contention, wherein it is held that, the provisions of 143(2) are mandatory and any omission on part of the assessing authority cannot be treated as a procedural irregularity and the same is not curable. The Ld.AR submitted that Hon’ble Supreme Court has held that the requirement of notice u/s. 143(2) cannot be dispensed with. 4.3.2 The Ld.AR thus submitted that, as the notice dated 01.10.2010 is a consolidated notice, has to be held to be invalid since the same has to be issued separately for each assessment year. In support, he placed reliance on the decision of Hon’ble Delhi Tribunal in case of Barnala Steel Industries Ltd. vs. ACIT in ITA Nos. 3201/Del/2012 and 6783/Del/2013 by order dated 05.09.2019. He also placed reliance on the decision of Hon’ble Allahabad High Court in case of Mohd. Ayub vs. ITO reported in (2012) 346 ITR 30 wherein the combined notice issued u/s. 148 of the act for four assessment years was struck down and there was no notice issued u/s. 143(2) of the act. Page 10 of 14 ITA No. 1931/Bang/2017 4.4 The Ld.DR on the contrary, submitted that the decision by Hon’ble Supreme Court in case of Hotel Blue Moon (supra) has been passed in the context of section 158BC which is not similar with the legislative indent u/s. 153A / 153C of the act. Primarily, the Ld.DR argued that provisions of section 143(2) are not applicable in the cases of assessments u/s. 153A/153C which is clear from the language referred to herein above in section 153C(2) of the act. 4.4.1. He submitted that the decisions relied by the Ld.AR in case of Hon’ble Delhi Tribunal is therefore distinguishable on facts. Referring to the decision of Hon’ble Allahabad High Court, rellied by the Ld.AR, the Ld.DR submitted that, it was a case of non- issuance of notice u/s. 143(2) wherein the Hon’ble High Court held the entire reassessment proceedings to be without jurisdiction. He thus submitted that this decision relied by the Ld.AR is distinguishable on facts. 4.4.2. The Ld.DR submitted that the Ld.AO completed the assessment under the provisions of section 143(3) of the act. He thus submitted that the notice has been issued as per the mandate required u/s. 143(2) for completion of the assessment and therefore the arguments of the assessee cannot be appreciated. 4.4.3. He relied on the orders passed by the authorities to be valid in respect of the contention raised by the Ld.AR regarding the notice u/s.143(2) issued beyond the period of limitation. The Ld.DR submitted that, notice u/s. 142(1) was issued post survey on 13.07.2010 and the assessee had responded to the notice by intimating vide letter dated 22.07.2010 to consider the e-return Page 11 of 14 ITA No. 1931/Bang/2017 filed as in response to the notice u/s. 142(1) of the act. The Ld.DR thus submitted that considering the fact that the assessee has e filed the revised return on 25/06/2010, the notice u/s. 143(2) dated 01.10.2010 is issued within the period of limitation. We have perused the submissions advanced by both sides in the light of records placed before us. 5. Assessee vide letter dated 22.07.2010 had informed the department in lieu of notice u/s. 143(1) dated 13.07.2010, to consider the e-return of income that was filed by the assessee. The Ld.AO thus assumed jurisdiction as per the intimation by the assessee vide letter dated 22.07.2010. In the present facts of the case, prior to the notice issued u/s. 143(1) dated 13.07.2010, the assessee has filed two revised returns subsequent to the original return of income one on 24.05.2010 which is placed at page 96 of the paper book. The second one on 25.06.2010 which is placed at page 97 of the paper book. Even if latest of these two revised returns are taken into consideration, the notice u/s. 143(2) dated 01.10.2010 cannot be held to be barred by limitation. Under such circumstances, the notice u/s. 143(2) has been issued within the period of six months and therefore is not barred by limitation. Accordingly, we do not find any merit in ground no. 2 raised by the assessee and the same is dismissed. 6. Ground no. 3 is a without prejudice ground to ground no. 2, wherein the Ld.AR submitted that no notice u/s. 143(2) has been issued based on the revised return filed on 31.12.2010. Page 12 of 14 ITA No. 1931/Bang/2017 6.1. In our opinion, this argument cannot be appreciated and deserves to be thrashed at the outset. Once the assessee intimated vide letter dated 22.07.2010 to consider the e-return filed to be treated in response to notice u/s. 143(1), any subsequent return filed by the assessee cannot be a reason to issue notice u/s. 143(2) once again. In this regard, we refer to the decision of Coordinate Bench of this Tribunal in case of DCIT vs. IDEB Buildcon Pvt. Ltd. in ITA No. 317/Bang/2013 for A.Y. 2009-10 vide order dated 18.07.2014. In this decision, it was noted that the Ld.AO did not take cognizance of the return of income and proceeded to frame assessment on the basis of original return. The Tribunal held that since the revised return was filed within the time, the Ld.AO ought not to have framed the assessment with reference to original return of income. This order of the Tribunal was taken into appeal by the revenue before the Hon’ble Karnataka High Court in ITA No. 507/2014. Hon’ble Karnataka High Court vide order dated 02.02.2016 dismissed the revenue’s appeal at the admission stage itself. 6.2. In the present facts of the case, in the remand assessment order passed by the Ld.AO, it has been noted that all the three revised returns filed by the assessee has been considered for the purposes of completion of assessment proceedings. This is more specifically coming out of para 4 of the assessment order dated 27.03.2015. However, for the purposes of issuance of notice u/s. 143(2), the third revised return dated 31.12.2010 filed by the assessee cannot be taken into consideration at all as assessee has responded to the intimation u/s. 143(1) much prior to the filing of the third revised return. We therefore do not find any Page 13 of 14 ITA No. 1931/Bang/2017 merit to the without prejudice prayer raised by assessee in ground no. 3. Accordingly, ground no. 3 is dismissed. 7. Ground no. 4 – Assessee is challenging the manner in which the notice u/s. 143(2) has been issued in a consolidated way. Admittedly, the notice u/s. 143(2) dated 01.10.2010 is a combined notice for A.Ys. 2003-04 to 2009-10. 7.1. It is the grievance of the assessee that even the searched years are also included in the said notice which is not in accordance with the provisions of the act. In the present facts, the case of assessee is of a regular assessment for A.Y. 2009-10 being the year of search, and therefore, the Ld.AO carried out assessment u/s.143(3) of the act. Keeping this in mind, the mandatory notice u/s. 143(2) has to be issued to the assessee qua the assessment year, as has been held in plethora of decisions. We note that though the notice u/s. 143(2) has been issued to the assessee, it is a common notice which includes the assessment years falling under the category of 153A assessment. 7.2 In our considered opinion, the argument of the Ld.AR on this issue is liable to succeed as separate notice is a must to be issued for every assessment year as per the scheme of the act. Each assessment year is to be considered as an independent unit of assessment, and the provisions of the act applies separately and the assessing officer is obliged to issue separate notice for such each assessment year. We therefore are of the opinion that the assessment order passed is without assuming proper Page 14 of 14 ITA No. 1931/Bang/2017 jurisdiction for the year under consideration and is liable to be quashed and set aside. Accordingly the assessee thus succeeds on ground no. 4. 7. As we have already quashed and set aside the assessment order on on of the legal issue raised by assessee in ground no. 4, the issue raised by assessee on merits in Ground nos. 5-6 becomes academic at this stage and the same is not adjudicated. In the result, the appeal filed by the assessee stands allowed on legal issue raised in ground no. 4. Order pronounced in the open court on 25 th October, 2023. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 25 th October, 2023. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file By order Assistant Registrar, ITAT, Bangalore