M/s. The Himalaya Drug Company, Bangalore V. Asst. Commissioner of Income Tax, Bangalore

ITA 2235/BANG/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1918 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 16-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Transfer pricing; International transaction; Period of limitation; Validity of assessment; Time period of passing order; Reassessment proceedings; TDS
• Section: 144C; 113; 147; 148

Judgement Text

IT(TP)A NO.2235(B)/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SMT.BEENA PILLAI, JUDICAL MEMBER IT(TP)A NO.2235(BANG)/2016 (ASSESSMENT YEAR : 2009 - 10) M/S THE HIMALAYA DRUG COMPANY, MAKALI, TUMKUR ROAD, BANGALORE - 562 162 PAN NO.AADFT3025B APPELLANT VS THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), BANGALORE RESPONDENT APPELLANT BY : SHRI P ADAMCHAND KHINCHA, CA REVENUE BY : MS NEERA MALHOTRA, CIT DATE OF HEARING : 26 - 09 - 2019 DATE OF PRONOUNCEMENT : 23 - 10 - 2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : P RESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 20/10/16 PASSED UNDER SECTION 143 (3) READ WITH SECTION 147 READ WITH SECTION 144(C ) OF THE ACT BY LD. ACIT CENTRAL CIRCLE - (1), BANGALORE. IT(TP)A NO.2235(B)/2016 2 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE IS A PARTNERSHIP FIRM ENG AGED IN BUSINESS OF MANUFACTURE AND SALE OF HERBAL PHARMACEUTICAL PRODUCTS (AYURVEDIC MEDICAMENTS AND PREPARATIONS), CONSUMER/PERSONAL CARE PRODUCTS AND ANIMAL HEALTH CARE PRODUCTS. FOR YEAR UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 30/09 /09 DECLARING TOTAL INCOME OF RS.49,63,55,214/ - . 2.1. THE AO OBSERVED THAT ASSESSEE HAD INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRISES IN RESPECT OF SALE OF FINISHED GOODS, AND ADVERTISE MENT, MAR KETING AND SALES PROMOTION. LD. AO THUS REFERRED THE IS SUE TO LD. TPO , FOR D ETERMINING ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION. L D. TPO CAL LED FOR ECONOMIC DETAILS OF INTERNATIONA L TRANSACTION AND COMPLETED ASSESSMENT BY PROPOSING ADJUSTMENT OF R S.80,04,49,338/ - . LD. AO DISALLOWED SUM OF RS.3,12,25, 891/ - I N RESPECT OF INTEREST. 3. AG GRIEVED BY THE ORDER PASSED BY LD. TPO, ASSES SEE FILED APPEAL BEFORE LD. CIT (A) V IDE ORDER DATED 31/07/13 AND ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) READ WITH 144C OF THE A CT. 3.1 SUBSEQUE NTLY , LD. AO ISSUED NOTICE U NDER SECTION 148 DATED 12/12/13, WHICH WAS RECEIVED BY ASSESSEE ON 16/12/13. IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE IT ACT, ASSESSEE FILED RETURN OF INCOME WHICH , IS PLACED AT PAGE 239 OF PAPER BOOK ON 20/12/13. ASSESSEE ALSO FILED LETTER TO LD. AO INTIMATING RETURN FILED UNDER SECTION 148 OF THE A CT , AND SOUGHT FOR REASONS RECORDED. IT(TP)A NO.2235(B)/2016 3 ON 04/03/14 ASSESSEE FILED LETTER SEEKING REASONS FOR REOPENING . R EMINDER OF THE SAME WAS FILED ON 29/05/14. ON 16/06/14 REASONS RECORDED WERE ISSUED BY LD.AO ON 20/06 /14. ON 06/08/14 ASSESSEE FIL ED ITS OBJECTION IN RESPECT OF REASSESSMENT. ON 21/10/14 A SSESSING O FFIC ER PASSED ORDER DISPOSING OF OBJECTION. THEREAFTER , ON 02/02/15 ASSESSING O FFICER ISSUED NOTICE UNDER SECTION 143 (2) OF THE A CT , WHICH IS PLACED AT PAGE 240 OF PAPER BOOK. LD.AR AT THIS STAGE SUBMITTED THAT NOTICE ISSUED UNDER SECTION 143 (2) OF THE ACT ON 02/02/2015 IS TIME - BARRED AS DUE DATE FOR ISSUE OF NOTICE LA P S ED ON 30/09/14. LD.AR RAISE D A PRELIMINARY ISSUE BY WAY OF ADDIT IONAL GROUND. IT HAS BEEN SUBMITTED THAT AS THE NOT ICE UNDER SECTION 143 (2) OF A CT HAS BEEN ISSUED BEYOND PERIOD OF LIMITATION, SUBSEQUENT PROCEEDINGS BY LD.AO I S VOID AB INITIO AND BAD IN LAW. 4. AT THE OUTSET LD.AR SUBMITTED THAT PRELIMINARY ISSUE IN R ESPECT OF THE VAL IDITY OF ORDER PASSED BY LD. AO MAY BE DECIDED BEFORE DEALING WITH GROUNDS RAISED ON MERITS. 5. LD. CIT DR , ON THE CONTRARY , OBJECTED FOR ADMISSION OF ADDITIONAL GROUND SO RAISED BY ASSESSEE. SHE SUBMITTED THAT TH IS ISSUE HAS BEEN RAISED F OR FIRST TIME AND THEREFORE , CANNOT BE ENTERTAINED. 6. WE HAVE PERUSED SUBMISSION S ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ON PERUSAL OF ASSESSMENT ORDER , IMPUGNED BEFORE US , IT IS OBSERVED THAT ISSUE REGARDING VALIDITY OF DRAFT ASSESSMENT ORDER ARISES OUT OF RECORDS. FURTHER IT IS OBSERVED THAT CONCISE GROUNDS FILED BY ASSESSEE I.E. GROUND 4.3 DEAL S WITH JURISDICTION OF LD.AO IN PASSING IT(TP)A NO.2235(B)/2016 4 DRAFT ASSESSMENT ORDER , AS ASSESSEE ALLEGES TH AT NOTICE UNDE R SECTION 143 (2) WAS ISSUED BEYOND PERIOD OF LIMITATION. HENCE , WE DO NOT FIND ANY FORCE IN OBJECTION RAISED BY LD.CIT DR AND WE ADMIT GROUND REGARDING PRELIMINARY ISSUE RAISED BY ASSESSEE. ACCORDINGLY , ADDITIONAL GROUND RAISED BY ASSESSEE STANDS ADMITTED. ASSESSEES QUESTION OF VALIDITY OF ASSESSMENT UNDER SECTION 143 (3) READ WITH 148 READ WITH 14 4C GOES TO ROOT OF THE MATTER , AND IT IS NECESSARY TO DECIDE FIRST PRELIMINARY ISSUE RAISED. 7. LD. AR SUBMIT S THAT PERIOD OF LIMITATION FOR ISSUA NCE OF NOTICE UNDER SECTION 143 (2) STARTS FROM DATE ON WHICH ASSESSEE FILED RETURN IN LIEU OF NOTIC E UNDER SECTION 148 OF THE A CT. HE SUBMITTED THAT ASSESSEE FILED ITS RETURN ON 20/12/13 PURSUANT TO NOTICE U/S 148. THEREFORE, REV ENUE SHOULD HAVE ISSUED NOTICE UNDER SEC TION 143 (2) ON OR BEFORE 30/09/2014. LD.AR PLACED RELIANCE ON FOLLOWING DECISION IN SUPPORT OF HIS PREPOSITIONS: ACIT VS HOTEL BLUE MOON, REPORTED IN (2010) 188 TAXMANN 113 (SC) CIT VS GITSONS ENGINEERING CO., REPORTED IN (2015) 53 TAXMANN.COM 108 (MAD); CIT VS LAKSHMANDAS KHANDELWAL REPORTED IN (2019) 108 TAXMANN.COM 183 (SC) LD.AR THUS SUBMITTED THAT ISSUANCE OF NOTICE UNDER SECTION 143 (2) IS MANDATORY. HE SUBMITTED THAT SECTI ON 292 BB WILL NOT SAFEGUARD INTEREST OF REVENUE IN A CASE WHERE MANDAT O RY NOT ICE UNDER SECTION 143 (2 ) HAS NOT BEEN ISSUED WITHIN PERIOD OF LIMITATION. HE IT(TP)A NO.2235(B)/2016 5 SUBMITTED THAT PROVISIONS OF SECTION 292 BB WOULD COME TO RESCUE ONLY IN A CASE OF IMPROPER SERVICE OR WRONG SERVICE OF SUCH NOTICE. 8. THE LD. AR, THUS ARGUED THAT ASSESSMENT OR R EASSESSMENT , LD. AO HAS TO ISSUE NOTICE UNDER SECTION 143 (2) WITHIN LIMITATION PERIOD FROM END OF THE ASSESSMENT YEAR IN WHICH RETURN IS FILED. IN THE PRESENT CASE , BEING RE - ASSESSMENT PROCEEDINGS UNDER SECTION 147, ON RECEIPT OF NOTICE UNDER SECTION 148, ASSESSEE FILED ITS RETURN OF INCOME ON 20/12/13 , AND AS PER RELEVAN T PROVISIONS APPLICABLE FOR YEAR UNDER CONSIDERATION , A SSESSING O FFICER SHOULD HAVE ISSUED NOTICE U/S 143(2 ) WITHIN 6 MONTHS FROM END OF F INANCIAL YEAR IN WHICH THE RETURN WAS FILED THAT IS O N OR BEFORE 30/09/14 , W HEREAS , LD. AO ISSUED NOTICE UNDER SECTION 143 (2) ON 02/02/2015 WHICH IS BEYOND PERIOD OF LIMITATION PRESCRIBED UNDER LAW. 9. ON THE CONTRARY , LD. CI T , DR SUBMITTED THAT ASSESSEE IS PRECLUDED FROM TAKING SUCH GROUND BEFORE THIS T RIBUNAL AT THIS STAGE , AS IT D ID NOT OBJECT SAME BEFORE AUTHORITIES BELOW. SHE SUBMITTED THAT THERE IS NO NE ED FOR NOTICE UNDER SECTION 143 (2) FOR REASSESSMENT PROCEEDINGS UNDER SECTION 148 OF THE A CT . SHE PLACED RELIANCE UPON FOLLOWING DECISIONS: CIT VS M ADHYA BHARAT E NGINEERING CORPORATION LTD REPORTED IN (2012) 20 TAXMAN.COM 557 (DELHI) SHRI.AS HO K CHADHA VS IT O REPORTED IN (2012) 20 TAXMANN.COM 387 (DELHI) CIT VS SRI DURGA E NTERPRISES REPORTED IN (2014) 44 TAXMANN.COM 4 FOR 2 IS (KARNATAKA) IT(TP)A NO.2235(B)/2016 6 VENKATESH AND RAGHU RAM VS IT O REPORTED IN (2018) 94 TAXMANN.COM 249 (MADRAS) CIT VS SUD EV I NDUSTRIES LTD REPORTED IN (2018 ) 94 TAXMANN.COM 373 (DELHI) 10. W E HAVE PERUSED SUBMISSIONS ADVANCED B Y BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE HAVE ALSO PERUSED DECISIONS RELIED UPON BY BOTH SIDES VERY CAREFULLY. 10.1 ON MERE LOOK AT PROVISIONS OF SECTION 148 , IT IS CRYSTAL CLEAR THAT EVEN IN CASE OF RE - ASSESSMENT UNDER SECTI ON 148 NOTICE UNDER SECTION 143 (2) IS TO BE MANDATORILY ISSUED WITHIN PERIOD OF LIMITATION PRESCRIBED UNDER SUB - CLAUSE (II) OF SUB - SECTION (2) OF SECTION 143. ISSUE OF VALID ITY OF NOTICE UN DER SECTION 143 (2) IN A RE - ASSESSMENT PROCEEDINGS WAS SUBJECT MATTER OF CONSIDERATION BEFORE VARIOUS HIGH C OURTS AND HONBLE SUPREME COURT ON SEVERAL OCCASIONS. LD.AR PLACED BEFORE US RECENT DECISION PASSED BY HONBLE SUPREME COURT IN CIT VS LAKSHMANDAS K HANDELWAL (SUPRA) , MANDATES SERV ICE OF NOTICE UNDER SECTION 143 (2) OF THE A CT WITHIN THE PERIOD OF LIMITATION AS PRESCRIBED UNDER LAW , PURSUANT TO NOTICE UNDER SECTION 148. HONBLE C OURT HAS HELD THAT PROVISIONS OF SECTION 142 (2) AND (3) OF SECTION 143 HAS MANDATORILY APPLICATION IN A CASE WHERE THE A SSESSING O FFICER IN REPUDIATION OF RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 WHICH PROCEEDS TO MAKE AN ENQUIRY. HONBLE C OURT ALSO ANALYSED APPLICATION OF SECTION 292 BB THAT CAME INTO EFFECT FROM 01/04/08. IT HAS BEEN HELD BY HONBLE COURT THAT SCOPE OF SEC.292BB IS TO MAKE SERVICE OF NOTICE HAVING CERTAIN INFIRMITY TO BE PROPER AND VALID IF THERE WAS REQUISITE PARTICIPATI ON ON PART OF IT(TP)A NO.2235(B)/2016 7 ASSESSEE , WH ERE NOTICE HAS EMANATED FROM DEPARTMENT WITHIN PERIOD OF LIMITATION. 11. IN PRESENT FACTS OF CAS E, ADMITTEDLY , NOTICE HAS BEEN DISPA TCHED BEYOND PERIOD OF LIMITATION AND THEREFORE , PROVISIONS OF SECTION 292 BB SHALL CLEARLY NOT APPLY. 11.1 LD. CIT DR RELIED UPON DECISI ON OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS DURGA E NTERPRISE (SUPRA) . ON PERUSAL OF THE SAME, IT IS OBSERVED THAT, THIS DECISION IS RENDERED IN CONTEXT TO ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, WHEREIN, REQUIREMENT TO FILE RETURN WITHIN SPECIFIED PERIOD WAS NOT SPECIFIED. IN OUR CONSIDERED OPINION , THIS DECISION IS OF NO ASSISTAN CE TO REVENUE AS FACTS HERE IN ARE DISTINGUISHABLE WITH ISSUE BEFORE US. FURTHER , OTHER DECISION RELIED UPON BY LD. CIT DR IN CASE OF VENKATESH AND RAGHU RAMPRAS AD VS IT (SUPRA) AND CIT VS SUDEV INDUSTRIES LTD (SUPRA) , ARE IN RESPECT OF IMPROPER SERVICE OF NOTICE. THESE DECISIONS ARE ALSO DISTINGUISHABLE FROM FACTS IN PRESENT CASE , AND THEREFORE CANNOT BE OF ANY ASSISTANCE TO REVENUE. RESPECTFULLY FOLLOWING THE DE CISION OF HONBLE SUPREME COURT IN CASE OF CIT VS LAXMAN DAS KHANDELWAL ( SUPRA ), WE HOLD THAT ASSESSMENT ORDER PASSED PURSUANT TO NOTICE UNDER SECTION 148 OF THE A CT , TO BE VOID AB INITIO AND BAD IN LAW. ACCORDINGLY THE SAME IS QUASH AND SET - ASIDE. WE THUS ALLOW PRELIMINARY LEGAL ISSUE RAISED BY ASSESSEE. IT(TP)A NO.2235(B)/2016 8 12. AS WE HAVE QUASH ED AND SET - ASID E RE - ASSESSMENT PROCEEDINGS , GROUNDS RAISED BY ASSESSEE ON MERITS BECOMES ACADEMIC IN NATURE. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED ON LEGAL ISSUE RAISED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 - 10 - 2019 SD/ - S D / - (B.R.BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 - 10 - 2019 *AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST.REGISTRAR