M/s. Ranka N Ranka Infrastructure Private Limited, Bengaluru V. Assistant Commissioner of Income Tax, Circle 5(1)(1), Bengaluru

ITA 2234/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6017 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Principle of natural justice; Opportunity of cross examination; Accommodation entries; Procedural lapse; Assessment record; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, BENGALURU BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.2222/BANG/2018 (ASSESSMENT YEAR:2013-14) AND ITA NO.2234/BANG/2018 (ASSESSMENT YEAR: 2009-10) M/S. RANKA N RANKA INFRASTRUCTURE PVT. LTD. 3 RD FLOOR, RANKA CHAMBERS, NO.31, CUNNINGHAM ROAD, BENGALURU-560052. PAN: AADCR 9181 M APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 5(1)(1), BENGALURU. RESPONDENT APPELLANT BY : SMT.SUMAN LUNKAR, CA. RESPONDENT BY : SHRI R.N.SIDDAPPAJI, ADDL.CIT(DR) DATE OF HEARING: 07/03/2019 DATE OF PRONOUNCEMENT: 15/03/2019 O R D E R PER PAVAN KUMAR GADALE, JM : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2009-10 AND 2013-14. SINCE THE GROUNDS OF APPEALS ARE SIMILAR IN BOTH THE ASSESSMENT YEARS, THEY ARE CLUBBED AND HEARD TOGETHER AND CONSOLIDATED ORDER IS PASSED. ITA NOS.222 & 2234/BANG/2018 PAGE 2 OF 8 2. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP ITA NO.2234/BANG/2019 AND THE FACTS NARRATED THEREIN. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASSING THE IMPUGNED ORDER IN THE MANNER PASSED BY HIM AND LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE ORDER, THE IMPUGNED ORDER BEING MADE IN LAW WITHOUT JURISDICTION AND VOID AB-INITIO SHOULD HAVE BEEN QUASHED BY CIT(APPEALS). 2. IN ANY CASE, THE LEARNED ASSESSING OFFICER HAD ERRED IN ASSUMING THE JURISDICTION U/S 147 OF THE ACT INSTEAD OF SECTION 153C OF THE ACT. THE ACTION OF ASSESSING OFFICER WAS BAD IN LAW, RING THE CONSEQUENTIAL ORDER BAD IN LAW AND THE LEARNED CIT(A) SHOULD HAVE QUASHED THE --MOD ORDER INSTEAD OF UPHOLDING. 3. IN ANY CASE AND WITHOUT PREJUDICE, THE CONDITIONS PRECEDENT FOR THE ISSUE OF NOTICE U/S. 148 OF THE ACT BEING ABSENT, THE RE-OPENING WAS BAD IN LAW AND CONSEQUENTLY THE ORDER PASSED BEING ALSO BAD IN LAW SHOULD HAVE BEEN QUASHED BY CIT(A). 4. IN ANY CASE, THE LEARNED ASSESSING OFFICER HAVING NOT COMPLIED WITH MANDATORY/ LEGAL REQUIREMENTS OF LAW BEFORE THE PASSING OF IMPUGNED ORDER, MAKE THE ENTIRE ASSESSMENT BAD IN LAW AND SUCH ORDER SHOULD HAVE BEEN QUASHED BY CIT(A). 5. IN ANY CASE, THE NOTICE ISSUED U/S. 148 OF THE ACT WAS BARRED BY LIMITATION MAKING THE CONSEQUENT ASSESSMENT NULL AND VOID IN LAW AND SUCH ORDER SHOULD HAVE BEEN QUASHED BY THE CIT(A). 6 IN ANY CASE, NON-SERVICE OF NOTICE U/S. 143(2) OF THE ACT, VITIATES THE ENTIRE ASSESSMENT AND THE LEARNED CIT(A) INSTEAD OF QUASHING THE ORDER HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER. THE ACTION OF AUTHORITIES BELOW BEING WHOLLY ERRONEOUS IS TO BE NEGATED AND THE IMPUGNED ORDER IS LIABLE TO BE QUASHED. 7. IN ANY CASE AND WITHOUT PREJUDICE THE IMPUGNED ORDER HAVING BEEN PASSED WITHOUT GIVING THE OPPORTUNITY OF CROSS EXAMINATION AND IN TOTAL DISREGARD OF AND IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE WAS A BAD ORDER WHICH SHOULD HAVE BEEN QUASHED BY CIT(A). ITA NOS.222 & 2234/BANG/2018 PAGE 3 OF 8 8. IN ANY CASE AND WITHOUT FURTHER PREJUDICE, THE ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS. 25,00,000/- BEING AMOUNT RECEIVED FROM SHIPRA FABRICS PVT. LTD, AS BOGUS ACCOMMODATION AND CIT(A) HAD ERRED IN CONFIRMING THE SAME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW APPLICABLE, THE ADDITION AS MADE AND CONFIRMED BEING CONTRARY TO AVAILABLE FACTS AND THE LAW APPLICABLE IS TO BE DELETED. 9. THE LEARNED ASSESSING OFFICER HAD ERRED IN NOT APPRECIATING THE FACTS OF THE CASE THAT: I. THE APPELLANT HAD RECEIVED AMOUNT FROM SHIPRA FABRICS PVT. LTD,; II. SUCH AMOUNT WAS RECEIVED THROUGH BANKING CHANNEL; AND ALSO ERRED IN CONCLUDING THAT THE AMOUNTS RECEIVED WAS A BOGUS ACCOMMODATION ENTRY. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE SAME. THE CONCLUSION DRAWN BEING TOTALLY ERRONEOUS AND MERELY ON SURMISES AND CONJECTURES AND WITHOUT BASIS ARE TO BE DISREGARDED AND ADDITION AS MADE CONFIRMED IS TO BE DELETED. 10. IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE IMPUGNED ORDER BE QUASHED OR ATLEAST THE ADDITION MADE AND CONFIRMED BE DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF BUILDERS, CONTRACTORS AND MANUFACTURING POWER AND ENERGY AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 28/09/2009 DECLARING TOTAL LOSS RS.12,94,11,524/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] DATED 28/03/2011 DETERMINING THE TOTAL LOSS OF RS.12,85,67,848/-. SUBSEQUENTLY, THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, ISSUED NOTICE U/S 148 OF THE ACT DATED ITA NOS.222 & 2234/BANG/2018 PAGE 4 OF 8 31/03/2016 AND IN RESPONSE TO THE NOTICE, THE LEARNED AR FILED LETTER TO TREAT THE RETURN OF INCOME FILED EARLIER AS COMPLIANCE. THE AO ALSO PROVIDED AN OPPORTUNITY TO THE ASSESSEE TO FILE OBJECTIONS ON REOPENING OF ASSESSMENT. ON PERUSAL OF INFORMATION FILED, THE AO FOUND THAT SEARCH OPERATIONS ARE CARRIED OUT IN THE CASE OF M/S. SHIPRA FABRICS PVT. LTD., WHERE MR. VIPUR VIDUR BHATT HAS GIVEN A STATEMENT U/S 132(4) OF THE ACT BEFORE THE DIRECTOR OF INVESTIGATION THAT HE IS WORKING AS ENTRY OPERATOR AND M/S. SHIPRA FABRICS PVT. LTD., IS A BOGUS COMPANY AND USED BY HIM FOR PROVIDING BOGUS ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES ON CERTAIN TERMS AND CONDITIONS OF COMMISSION. FURTHER HE IS ALSO A DIRECTOR OF THE COMPANY ALONG WITH OTHER DIRECTORS. THE AO OBSERVED THAT THE ASSESSEE HAS BOGUS ACCOMMODATION ENTRIES TRANSACTIONS FROM M/S. SHIPRA FABRICS PVT. LTD., THEREFORE, IN THE ABSENCE OF ANY EVIDENCE/SUPPORTING DOCUMENTS FROM THE ASSESSEE CONTRADICTING THE FACTS, AO MADE ADDITION OF AMOUNT AND ASSESSED THE TOTAL LOSS AT RS.12,60,67,848/- AND PASSED THE ORDER U/S 143(3) R.W.S. 147 DATED 23/12/2016. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE VALIDITY OF ISSUE OF NOTICE U/S 148 OF THE ACT AND ADDITIONS MADE BY THE AO. THE CIT(A) CONFIRMED THE ACTION OF THE AO AND DISMISSED THE APPEAL. ITA NOS.222 & 2234/BANG/2018 PAGE 5 OF 8 5. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED AR, AT THE TIME OF HEARING, ARGUED ON THE VALIDITY OF ISSUE OF NOTICE U/S 148 OF THE ACT WHICH IS BARRED BY LIMITATION AND NON-SERVICE OF NOTICE U/S 143(2) OF THE ACT IN THE RE-ASSESSMENT PROCEEDINGS AND NO ARGUMENT ENVISAGED ON OTHER GROUNDS OF APPEAL. THE LEARNED AR ALSO SUBMITTED THAT THE ASSESSEES OBJECTIONS FILED ON THE REASONS FOR ISSUE OF RE- ASSESSMENT NOTICE WERE NOT DISPOSED OF AND HENCE PRAYED THAT THE ORDER OF RE-ASSESSMENT BE ANNULLED. THE LEARNED AR VEHEMENTLY ARGUED AND FILED JUDICIAL DECISIONS IN SUPPORT OF HER SUBMISSIONS. CONTRA, THE LEARNED DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND ON THE ISSUE OF NOTICE U/S 143(2) OF THE ACT, EMPHASIZED THAT THE ASSESSEE HAS PARTICIPATED IN THE RE- ASSESSMENT PROCEEDINGS AND NON-DISPOSAL OF OBJECTIONS BY THE AO IS CURABLE AND SUPPORTED HIS ARGUMENTS RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HOME FINDERS HOUSING LTD. VS. ITO (2018)(94 TAXMANN.COM 84)(SC) AND PRAYED THAT THE MATTER MAY BE REMITTED TO THE FILE OF THE AO TO DISPOSE OF THE OBJECTIONS. 7. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AT THE TIME OF HEARING, THE LEARNED AR HAS RESTRICTED HER ARGUMENTS RELATING TO NON-ISSUE OF NOTICE U/S 143(2) OF THE ACT ITA NOS.222 & 2234/BANG/2018 PAGE 6 OF 8 IN THE RE-ASSESSMENT PROCEEDINGS AND THE OBJECTIONS FILED BY THE ASSESSEE AGAINST REASONS FOR ISSUE OF NOTICE U/S 148 OF THE ACT WERE NOT DISPOSED OF BY A SEPARATE ORDER. THE LEARNED AR HAS NOT ARGUED ON THE MERITS OF THE CASE AND OTHER GROUNDS OF APPEAL. WE CONSIDER THE FACTS ON THE ISSUE OF NOTICE U/S 143(2) AND THE LEARNED AR CONTENTION THAT IT IS MANDATORY REQUIREMENT THAT NOTICE U/S 143(2) HAS TO BE ISSUED TO SUBMIT DETAILS AND RELIED ON THE JUDICIAL DECISIONS. BUT THE LEARNED DR VEHEMENTLY SUPPORTED HIS ARGUMENTS AND REFERRED TO JUDICIAL DECISIONS THAT NOTICE U/S 143(2) IS NOT MANDATORY IN THE CASE OF RE-ASSESSMENT PROCEEDINGS AND FILED THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF AREVA T & D INDIA LTD. VS. ACIT (2007) 165 TAXMAN 123(MADRAS). WHEN QUERY WAS RAISED TO LD. AR WHETHER CLAIM WAS MADE BEFORE THE CIT(A), THE LD.AR SUBMITTED THAT SAME WAS RAISED IN PARA 2.3 AS GENERAL GROUND OF APPEAL. WE FOUND THAT THE ASSESSEE HAS PARTICIPATED IN THE RE-ASSESSMENT PROCEEDINGS AND THE CLAIM OF NON-ISSUE OF NOTICE U/S 143(2) IS NOT EMANATING OUT OF THE ASSESSMENT ORDER. THE LEARNED AR CONCEDED THAT SUCH CLAIM WAS NOT MADE BEFORE THE ASSESSING AUTHORITY. WE FOUND, THOUGH THE LD. AR HAS MADE SUBMISSIONS ON NON-ISSUE OF NOTICE U/S 143(2), WE ARE OF THE OPINION THAT BOTH THE PARTIES ARE NOT ABLE TO ESTABLISH THROUGH EVIDENCES THAT NO NOTICE WAS ISSUED U/S 143(2) OF THE ACT AND ALSO REVENUE COULD NOT PRODUCE ASSESSMENT RECORDS. THEREFORE, WE ARE OF THE ITA NOS.222 & 2234/BANG/2018 PAGE 7 OF 8 SUBSTANTIVE OPINION THAT THIS DISPUTED ISSUE HAS TO BE VERIFIED AND ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO VERIFY THE RECORDS AND GIVE AN APPROPRIATE FINDING WITH EVIDENCE. 8. ON THE SECOND ISSUE OF NON-DISPOSAL OF OBJECTIONS FILED BY THE AO, WE FOUND THE HONBLE SUPREME COURT IN HOME FINDERS HOUSING LTD., VS. ITO (2018) 94 TAXMANN.COM 84(SC) WHERE SLP IS DISMISSED HAS OBSERVED AS UNDER: SECTION 148, READ WITH SECTION 147, OF THE INCOME-TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - ISSUE OF NOTICE FOR (GENERAL) - ASSESSING OFFICER NOTICED THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND HE INITIATED REASSESSMENT UNDER SECTION 147 - ASSESSEE RAISED OBJECTIONS - HOWEVER, ASSESSING OFFICER WITHOUT GIVING DISPOSAL TO OBJECTIONS OF ASSESSEE, PASSED REASSESSMENT ORDER - ASSESSEE CHALLENGED REASSESSMENT ORDER BEFORE HIGH COURT ON GROUND THAT BY NOT PASSING A SPECIFIC ORDER AFTER RECEIVING OBJECTIONS, ASSESSING OFFICER VIOLATED LAW DECLARED BY SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD. V. ITO (2002) 125 TAXMAN 963 THAT ASSESSING OFFICER SHOULD PASS A SPEAKING ORDER TAKING INTO ACCOUNT OBJECTIONS FOR RE-OPENING ASSESSMENT UNDER SECTION 147, AND RESULTANTLY, ORDER WAS BAD IN LAW - HIGH COURT HELD THAT NON-COMPLIANCE OF PROCEDURE INDICATED BY SUPREME COURT WOULD NOT MAKE ORDER VOID OR NON EST AND SUCH A VIOLATION WAS A PROCEDURAL IRREGULARITY WHICH COULD BE CURED BY REMITTING MATTER TO AUTHORITY - WHETHER SLP AGAINST IMPUGNED ORDER WAS TO BE DISMISSED - HELD, YES [PARA 2] [IN FAVOUR OF REVENUE] WE, CONSIDERING THE PRINCIPLES OF NATURAL JUSTICE AND THE OBSERVATIONS OF THE HONBLE SUPREME COURT AND ALSO THE REVENUE SHALL NOT BE AT A LOSS BY PROVIDING AN OPPORTUNITY TO THE ASSESSEE, ACCORDINGLY, REMIT THIS DISPUTED ISSUE TO THE FILE OF THE AO TO PASS APPROPRIATE ORDERS AGAINST THE OBJECTIONS FILED BY THE ITA NOS.222 & 2234/BANG/2018 PAGE 8 OF 8 ASSESSEE AND PASS A SPEAKING ORDER. SINCE THE ASSESSEE HAS NOT ARGUED OTHER GROUNDS OF APPEAL THEY ARE DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. SIMILARLY, FOR THE ASSESSMENT YEAR 2013-14, THE FACTS ARE SIMILAR AND THE DECISION TAKEN BY US FOR THE ASSESSMENT YEAR 2009-10 WILL APPLY MUTATIS MUTANDIS . ACCORDINGLY, WE RESTORE THE DISPUTED ISSUE IN PARTICULAR TO NON-ISSUE OF NOTICE U/S 143(2) AND NON-DISPOSAL OF THE OBJECTIONS FILED BY THE ASSESSEE TO THE FILE OF THE AO AND THE OTHER GROUNDS ARE DISMISSED. 11. IN THE RESULT, THE ASSESSEES APPEALS FOR ASSESSMENT YEARS 2009-10 AND 2013-14 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2019. SD/- SD/- (A.K.GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU DATED : 15/03/2019 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE