N.R. Agarwal Industries Ltd., Surat V. The ACIT.,Vapi Circle, Vapi

ITA 2308/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8895 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 28-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Difference of opinion; Change of opinion; Set aside
• Section: 40A(3); 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.2307 AND 2308/AHD/2009 [ASSTT YEAR : 2002-2003 AND 2003-2004] N.R.AGRAWAL INDUSTRIES LTD. 169, GIDC, VAPI. VS. ACIT, VAPI. ASSESSEE BY : NONE REVENUE BY : SHRI RAJEEV AGARWAL O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THESE TWO APPEALS BY THE ASSESSEE RELATE TO THE ASSESSMENT YEARS 2002-2003 A ND 2003-2004. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURE OF PAPER, PAPER BOARDS AND NEWS PRINT. IN RESPECT OF THESE YEARS, THE RETURNS OF INCOME WERE ORIGINALLY FILED ON 28-10-2002 AND 27-11-2003 RESPECTIVELY DEC LARING A LOSS OF RS.71.41 LAKHS FOR THE ASSESSMENT YEAR 2002-2003 AND NIL I NCOME FOR THE ASSESSMENT YEAR 2003-2004. THESE RETURNS WERE PROCESSED UNDER SECTION 143(1). FOR THE ASSESSMENT YEAR 2003-2004, AN ASSESSMENT WAS LATER COMPLETED ALSO UNDER SECTION 143(3) ON 22-2-2006. SUBSEQUENTLY, NOTICES WERE ISSUED UNDER SECTION 148 OF THE ACT ON 26-2-2007 REOPENING THE ASSESSMEN TS. IT WOULD APPEAR FROM PARA-1 OF THE STATEMENT OF FACTS FILED BY THE ASSES SEE BEFORE THE CIT(A) FOR BOTH THE YEARS THAT THE REASONS FOR REOPENING THE ASSESS MENT WERE NOT SUPPLIED TO THE ASSESSEE DESPITE SPECIFIC REQUESTS. THEREAFTER, TH E REASSESSMENTS WERE COMPLETED BY DISALLOWING CASH PAYMENTS UNDER SECTIO N 40A(3) AND SUCH DISALLOWANCES AMOUNTED TO RS.20,90,698/- AND RS.25, 52,256/- FOR THE ASSESSMENT YEARS 2002-2003 AND 2003-2004 RESPECTIVE LY. 2. THE ASSESSEE APPEALED TO THE CIT(A) AND BEFORE H IM IT WAS INTER ALIA PLEADED THAT THE REASONS FOR REOPENING THE ASSESSME NTS NOT HAVING BEEN SUPPLIED TO THE ASSESSEE, THE REASSESSMENTS WERE BA D IN LAW. ARGUMENTS WERE PAGE - 2 ITA NO.2307 AND 2308/AHD/2009 -2- ALSO ADDRESSED ON THE MERITS OF THE DISALLOWANCE UN DER SECTION 40A(3). THE CIT(A) HELD THAT THE REASSESSMENTS WERE MADE BECAUS E THE MANDATORY PROVISIONS OF SECTION 40A(3) WERE OVERLOOKED AND IT WAS NOT THE CASE OF CHANGE OF OPINION. ACCORDINGLY, HE UPHELD THE VALIDITY OF THE REOPENING OF THE ASSESSMENTS. THE SPECIFIC QUESTION REGARDING THE E FFECT OF THE NON-SUPPLY OF THE REASONS FOR REOPENING THE ASSESSMENTS WAS NOT A DDRESSED BY HIM. ON MERITS, THE DISALLOWANCES WERE UPHELD AND THUS THE APPEALS WERE DISMISSED. 3. BEFORE US THE PRELIMINARY QUESTION WHICH ARISES IS WHETHER THE NON- SUPPLY OF THE REASONS RECORDED FOR REOPENING THE AS SESSMENTS INVALIDATE THE REASSESSMENTS OR WHETHER THE MATTER HAS TO BE SENT BACK TO THE AO WITH THE DIRECTION TO HIM TO FURNISH THE REASONS TO THE ASSE SSEE IN VIEW OF THE SPECIFIC REQUESTS AND TO DEAL WITH THE ASSESSEES OBJECTIONS FIRST AND PASS AN ORDER THEREON BEFORE PROCEEDING TO MAKE THE REASSESSMENTS . IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO, (2003) 259 ITR 19 , THE SUPREME COURT DEALT WITH THE SIMILAR SITUATION AND HELD THAT WHEN THE N OTICE UNDER SECTION 148 IS ISSUED THE PROPER COURSE FOR THE ASSESSEE IS TO FIL E THE RETURN AND THEREAFTER TO SEEK REASONS FOR ISSUING THE NOTICES AND IF A REQUE ST IS SO MADE, THE AO IS BOUND TO FURNISH THE REASONS WITHIN A REASONABLE TI ME. ON RECEIPT OF THE REASONS, THE ASSESSEE MAY FILE OBJECTION TO THE NOT ICE AND THE AO IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. R ESPECTFULLY FOLLOWING THE JUDGMENT, WE SET ASIDE THE REASSESSMENT AND DIRECT THE AO TO APPLY THE AFORESAID JUDGMENT AND FURNISH THE REASONS TO THE A SSESSEE PROVIDED THE ASSESSEE HAS FILED THE RETURNS OF THE INCOME IN RES PONSE TO THE NOTICES UNDER SECTION 148. THE ASSESSEE IS ENTITLED TO FILE OBJE CTIONS TO THE NOTICES, IF SO ADVISED, AND THE OBJECTIONS IF ANY FILED BY THE ASS ESSEE SHALL BE DEALT WITH BY THE AO BY PASSING A SPEAKING ORDER BEFORE PROCEEDIN G WITH THE REASSESSMENT. WE DIRECT ACCORDINGLY AND RESTORE THE MATTER FOR BO TH THE YEARS TO THE FILE OF THE AO FOR COMPLIANCE AND DECISION AS ABOVE AND IN ACCO RDANCE WITH LAW. THE PAGE - 3 ITA NO.2307 AND 2308/AHD/2009 -3- APPEALS OF THE ASSESSEE ARE DEEMED TO BE ALLOWED FO R STATISTICAL PURPOSES. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 30 TH SEPTEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD