The ACIT, Circle-6, Ahmedabad V. M/s. Narayan Enterprises, Ahmedabad

ITA 2539/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0492 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-11-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 03-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M C
• Keywords: Reopening of assessment; Assessment record; Set aside
• Section: 143(3); 143(2); 147; 148; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 2539/AHD./2009 ASSESSMENT YEAR : 1995-1996 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- M/S. NARAYAN ENTERPRISES, AHMEDABAD CIRCLE-6, AHMEDABAD (P.A. NO. AAACU 5405 H) (APPELLANT) (R ESPONDENT) & C.O. NO. 221/AHD./2009 (ARISING OUT OF I.T.A. NO. 2539/AHD./2009) ASSESSMENT YEAR : 1995-1996 M/S. NARAYAN ENTERPRISES, AHMEDABAD VS.- ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, AHMEDABAD (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI UMAID SINGH BHAT I RESPONDENT BY : SHRI M.C. PANDIT O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER DAT ED 29.06.2009 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XI, AHMEDABAD FOR THE ASSESSM ENT YEAR 1995-96. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS CASE ARE THAT IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE FILED ITS RETURN OF INCO ME ON 31.08.1995 DECLARING A TOTAL INCOME OF RS.16,36,667/-. THE A.O. FRAMED THE ASSESSMENT UNDE R SECTION 143(3) ON 04.02.1998 DECLARING TOTAL INCOME OF RS.18,71,222/-. SUBSEQUENTLY THE AS SESSEE FILED A RECTIFICATION APPLICATION AND ACCORDINGLY ASSESSMENT ORDER WAS RECTIFIED UNDER SE CTION 154 OF THE INCOME TAX ACT ON 15.12.1998 DECLARING THE TOTAL INCOME OF RS.17,72,2 21/-. SUBSEQUENTLY THE DEPARTMENT CAME TO KNOW THAT THE ASSESSEE WAS ALLOWED DEDUCTION FOR DE PRECIATION ON TRUCK TWICE. THIS WAS NOT RECTIFIED UNDER SECTION 154 ON 28.12.1998 DETERMINI NG THE TOTAL INCOME OF RS.18,25,853/-. THEREAFTER THE A.O. RE-OPENED THE ASSESSMENT UNDER SECTION 147 BY ISSUING NOTICE UNDER SECTION 148 ON 08.03.1999. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED THE RETURN OF INCOME ON 21.04.1999 DECLARING TOTAL INCOME OF RS.17,72,220/- . THEREAFTER THE A.O. COMPLETED THE 2 ASSESSMENT UNDER SECTION 147 ON 17.11.2000. THEREAF TER HE BROUGHT TO TAX THE VALUE OF GOODWILL OF RS.18,00,000/-. IN THE ASSESSMENT ORDER IN PARA 3, THE A.O. STATED THAT THE LD. COUNSEL OF THE ASSESSEE OBJECTED TO THE ISSUANCE OF NOTICE ON THE GROUND THAT NOTICE FOR COMPLETION OF ASSESSMENT HAD BEEN ISSUED AFTER EXPIRY OF 12 MONTH S FROM THE END OF THE MONTH IN WHICH RETURN WAS FILED IN COMPLIANCE TO NOTICE UNDER SECTION 148 . THE A.O. STATED THAT TIME-BARRING LIMIT FOR COMPLETING THE ASSESSMENT IS TWO YEARS UNDER SECTIO N 153(2) OF THE ACT FOR ASSESSMENT TO BE COMPLETED UNDER SECTION 147. ACCORDINGLY THE A.O. C ONCLUDED THAT THE OBJECTION OF THE ASSESSEE IN RESPECT OF ISSUING NOTICE UNDER SECTION 143(2) F OR COMPLETING THE ASSESSMENT UNDER SECTION 147 AFTER 12 MONTHS OF FILING RETURN IN COMPLIANCE TO N OTICE UNDER SECTION 148 WAS NOT TENABLE. AGAINST THE AFORESAID ORDER, AN APPEAL WAS FILED BE FORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XII, AHMEDABAD, WHEREIN THE ASSESSEE H AS RAISED SIX GROUNDS OF APPEAL. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XII , AHMEDABAD VIDE HIS ORDER DATED 02.05.2002 HAS CANCELLED THE ASSESSMENT PROCEEDINGS ON THE BASIS OF LEGAL GROUNDS TAKEN BY THE ASSESSEE. THEREAFTER AN APPEAL WAS FILED AND ITAT, AHMEDABAD VIDE ITS ORDER IN ITA NO. 2390/AHD./2006 DATED 20.10.2006 HAS ALLOWED THE LEG AL GROUND AND WITH REGARD TO THE OTHER GROUNDS, THE ITAT RESTORED BACK THE MATTER TO THE F ILE OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO BE DECIDED ON MERITS. THE ITAT, AHM EDABAD WHILE DECIDING THE APPEAL IN ITS ORDER OBSERVED AS UNDER :- WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERI AL AVAILABLE ON RECORD. SINCE ASSESSEE HAS NOT PRESSED CO, THE SAME IS DISMISSED. SINCE IT IS RIGHT OF ASSESSEE TO GET COPY OF REASONS RECO RDED IN RE-OPENING. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHALL E NSURE THAT ASSESSEE GETS COPY OF REASONS WHILE DECIDING THE AP PEAL ON MERITS. THEREAFTER THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS)-XI, AHMEDABAD VIDE ORDER DATED 29.06.2009 CANCELLED THE ASSESSMENT MADE UNDER SECT ION 147 ON THE GROUND THAT THE A.O. HAS NOT RECORDED THE REASONS TO HAVE BELIEVED THAT THERE WA S AN ESCAPEMENT OF INCOME. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ACCORDINGLY HEL D THAT IN ABSENCE OF SUCH RECORDINGS, IT CANNOT BE SAID THAT RE-OPENING OF ASSESSMENT IS VAL ID. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHR I M.C. PANDIT APPEARED AND STATED THAT ON THE LAST DATE OF HEARING, BENCH DIRECTED HIM TO PRODUCE THE REASONS RECORDED BEFORE ISSUING 3 NOTICE UNDER SECTION 147 OF THE I.T. ACT. THE LD. D .R. SUBMITTED THAT IN THIS CASE REASONS WERE RECORDED BUT THE COPY OF THE SAME IS NOT AVAILABLE. HOWEVER, THE LD. D.R. SUBMITTED THAT THE A.O. GIVEN THE REASONS FOR RE-OPENING OF ASSESSMENT VIDE LETTER NO. JCIT/SR-3/ASSTT./2000-01 DATED 28.07.2000. THE RELEVANT PART OF THE LETTER IS RE-P RODUCED AS UNDER :- 2. AS PER RECORDS THE GOODWILL OF RS.18 LAKHS CRED ITED TO PARTNERS ACCOUNT ON 01/04/94 REMAINS TO BE TAXED. YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE AS TO WHY THE AS SESSMENT PROCEEDINGS SHOULD NOT BE COMPLETED AFTER INCLUDING THE AMOUNT OF GOODWILL AS INCOME OF THE FIRM FOR A.Y. 95-96. 4. CONTINUING HIS ARGUMENT, THE LD. D.R. SUBMITTED THAT THE ABOVE LETTER WAS RECEIVED BY THE ASSESSEE WHICH CAN BE CONFIRMED VIDE ASSESSEES LET TER DATED 08.08.2000. IN THE SAID REPLY, THE ASSESSEE RAISED THE OBJECTIONS IN REGARD OF THE TIM E LIMIT FOR THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. FROM THE APPELLATE ORDER DATED 2 9.06.2009, IT CAN BE SEEN THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT DISCUSS ED THIS ISSUE AND CANCELLED THE ASSESSMENT ORDER ON THE GROUND THAT THE A.O. HAD NOT RECORDED THE REASONS BEFORE RE-OPENING OF THE ASSESSMENT. THE LD. D.R. SUBMITTED THAT THIS OBSERV ATION OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT ACCEPTABLE AT ALL IN VIEW OF TH E FACT THAT THE LD. JT. C.I.T.(ASSTT.), SPECIAL RANGE-3, AHMEDABAD VIDE HIS LETTER DATED 28.07.2000 HAD INFORMED THE REASONS FOR RE-OPENING THE ASSESSMENT. IN THE RE-OPENED ASSESSMENT ONLY TH E VALUE OF GOODWILL CREDITED IN THE CAPITAL ACCOUNT OF THE PARTNERS HAD BEEN ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. HE ACCORDINGLY CONTENDED THAT IT MAY BE HELD THAT RE-OPENING WAS M ADE AFTER RECORDING THE REASONS AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE DIRE CTED TO DECIDE THE APPEAL ON MERIT ON THE GROUND THAT NO REASONS WERE RECORDED AS ASKED FOR. 5. ON THE OTHER HAND, SHRI UMAID SINGH BHATI APPEAR ED FOR THE ASSESSEE AND DREW OUR ATTENTION TO THE DECISION OF ITAT DATED 20.10.2006 IN ITA NO. 2390/AHD./2006 WHEREBY THE MATTER WAS RESTORED BACK TO THE FILE OF LEARNED COM MISSIONER OF INCOME TAX(APPEALS) TO BE DECIDED ON MERITS WITH THE FOLLOWING OBSERVATIONS : - WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. SINCE ASSESSEE HAS NOT PRESSED CO, THE S AME IS DISMISSED. SINCE, IT IS RIGHT OF ASSESSEE TO GET COPY OF REASO NS RECORDED IN RE- OPENING, THE C.I.T.(A) SHALL ENSURE THAT ASSESSEE G ETS COPY OF REASONS WHILE DECIDING THE APPEAL ON MERITS. 4 5.1. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMIT TED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), ASKED THE CONCERNED A.O. TO SU BMIT A REPORT/ REASONS RECORDED BEFORE RE- OPENING OF ASSESSMENT UNDER SECTION 148. THE A.O. B EFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS SUBMITTED THE FOLLOWING REPLY :- 2. IT IS NOTICED FROM THE ABOVE LETTER THAT IN THE CASE OF AFOREMENTIONED ASSESSEE, THE HON'BLE ITAT, AHMEDABA D VIDE ITS ORDER IN ITA NO. 2390/AHD./2006 WITH CO NO. 119/AHD ./2002 DATED 20.10.2006, HAS SET ASIDE THE ORDER OF THE C.I.T.(A ) WITH A DIRECTION TO GET THE REASONS FROM THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT U/S. 148 OF THE I.T. ACT, 1961. IN THIS CONNECTION, IT MAY BE SUBMITTED THAT ON RECEIPT OF APPLICATION FROM TH E ASSESSEE UNDER RIGHT TO INFORMATION ACT, 2005, THE ASSESSEES AUTH ORIZED REPRESENTATIVE WAS ALLOWED TO INSPECT THE CONCERNED RECORDS AVAILABLE WITH THIS CIRCLE. DURING THE COURSE OF IN SPECTION BY THE REPRESENTATIVE, IT WAS FOUND THAT IN NONE OF THE FO LDERS THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT UNDER SECT ION 148 OF THE I.T. ACT, 1961 IS FOUND AVAILABLE. SUBSEQUENTLY, TH IS OFFICE HAS ALSO VERIFIED THE RECORDS BUT COULD NOT TRACE OUT THE RE ASONS RECORDED FOR REOPENING OF THE ASSESSMENT. 6. FROM THE ABOVE REPLY, IT IS CLEAR THAT NEITHER D URING THE COURSE OF INSPECTION OF THE ASSESSMENT RECORD NOR AS REQUIRED BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS), THE A.O. COULD PRODUCE THE REASONS RECORDED PRIOR TO BE FORE ISSUING NOTICE UNDER SECTION 148. EVEN ON THE LAST DATE OF HEARING, THE LD. D.R. ASKED TO PRODUCE THE REASONS BUT HE WAS UNABLE TO PRODUCE THE SAME. IN VIEW OF THIS, THE VIEW TAKEN B Y THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FOUND CONSIDERABLE FORCE IN THE SUBMISSIO N MADE BY THE LD. COUNSEL OF THE ASSESSEE. THE A.O. IS REQUIRED TO RECORD REASONS TO HAVE BELI EVED THAT THERE WAS AN ESCAPEMENT OF INCOME BEFORE RE-OPENING OF ASSESSMENT UNDER SECTION 147/ 148 OF THE ACT. RE-OPENING OF ASSESSMENT WITHOUT RECORDING THE REASONS IS INVALID AS HELD BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER. DESPITE THE OPP ORTUNITY GIVEN, THE LD. D.R. COULD NOT PRODUCE THE REASONS RECORDED BEFORE US. IN VIEW OF THIS, WE DECLINE TO INTERFERE. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 5 8. THE ONLY GROUND OF CROSS OBJECTION FILED BY THE ASSESSEE IS AS UNDER :- THAT ACCORDING TO THE A.O. THE REASONS WERE RECORD ED FOR RE- OPENING THE ASSESSMENT ON 28.07.2000 BUT THE NOTICE U/S. 148 WAS ISSUED ON 22.03.1999 THEREFORE, IN VIEW OF THE PROV ISIONS OF SUB- SECTION (2) OF SECTION 148 OF THE ACT THE PRESENT A PPEAL OF THE DEPARTMENT BE QUASHED. 9. WE HAVE HEARD BOTH THE SIDES. THE LETTER DATED 2 8.07.2000 ISSUED BY LD. JCIT (ASSTT.), SPL. RANGE-3, AHMEDABAD ADDRESSED TO THE ASSESSEE I S NOT THE REASON RECORDED BY THE A.O. BUT IT SIMPLY STATES THAT AS PER RECORDS, THE GOODWILL OF RS.18,00,000/- CREDITED TO THE PARTNERS ACCOUNT ON 01.04.1994 REMAINS TO BE TAXED. IT IS PERTINENT TO NOTE THAT NOTICE UNDER SECTION 148 WAS ISSUED ON 22.03.1999. THEREFORE, THE REASONS CANNOT BE REC ORDED AFTER ISSUING OF NOTICE UNDER SECTION 148. BE THAT AS IT MAY, SINCE IN REVENUES APPEAL A BOVE, WE HAVE UPHELD THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) QUASHIN G THE ASSESSMENT, THIS GROUND OF CROSS OBJECTION BECOMES INFRUCTUOUS AND HENCE, DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. THE ORDER PRONOUNCED IN THE COURT ON 13.11.2009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 / 11 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED; (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.