VGB Investments Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2909/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6959 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 04-07-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANCHAL KHANDELWAL
• Assessee Lawyers: SUBODH GUPTA
• Keywords: Principle of natural justice
• Section: 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 2909/DEL/2014 ASSTT. YR: 1999-00 VGB INVESTMENTS PVT. LTD., VS. ITO WARD-17(1), 3, SAHAR APARTMENTS, NEW DELHI. N-118, PANCHSHEEL PARK, NEW DELHI. PAN: AAACB 4289 K ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI SUBODH GUPTA CA RESPONDENT BY : MS. ANCHAL KHANDELWAL SR. DR DATE OF HEARING : 04/07/2016. DATE OF ORDER : 08/07/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 20.02.2014, PASSED BY THE LD. CIT(A)-19, NEW DELHI, RELATING TO A.Y. 1999-2000. 2. GROUND OF APPEAL, RAISED BY THE ASSESSEE IN ITS APPEAL, ARE AS UNDER: JURISDICTION ON DEFUNCT COMPANY 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE IM PUGNED ASSESSMENT ORDER IS BAD IN LAW AS NO VALID NOTICE W AS ISSUED AND SERVED ON THE PERSON LIABLE TO ASSESSED UNDER T HE PROVISIONS OF THE ACT AS THE COMPANY WAS ALREADY DE FUNCT ON THE DATE THE JURISDICTION WAS ASSUMED BY ISSUE OF N OTICE U/S 148 DT 24.3.2006 AND LEARNED CIT(A) HAS FAILED TO ADJUD ICATE THE 2 MATTER ON THIS GROUND, SPECIFICALLY RAISED AND ARGU ED BEFORE HIM. JURISDICTION ON ENHANCEMENT 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LEARNED CIT(A) HAS ERRED AND WAS NOT JUSTIFIED IN E NHANCEMENT OF INCOME ON THE MATTERS WHICH WERE NOT PART OF THE APPEAL OF THE APPELLANT WITHOUT ANY COGENT REASONS, BASIS OR CONTRARY EVIDENCE AND THUS LEARNED CIT(A) HAS EXCEEDED HIS J URISDICTION U/S 250 OF THE ACT IN ENHANCING THE ASSESSMENT IN A GROSS ARBITRARY MANNER. 3. THE CIT(A) HAS ACTED ARBITRARILY IN HASTE AND HA S FAILED TO FULLY APPRECIATE THE FACTS, CIRCUMSTANCES AND WR ITTEN SUBMISSIONS OF THE APPELLANT, REMAND REPORT CALLED FROM THE AO AND HAS ERRED IN ENHANCING THE ASSESSMENT WITHOUT A NY BASIS, COGENT REASONS OR CONTRARY EVIDENCE. 4. LEARNED CIT(A) HAS ERRED AND WAS NOT JUSTIFIED I N REQUIRING THE DEFUNCT ASSESSEE COMPANY, TO PRODUCE THE MANAGING DIRECTOR OF THE BUYER COMPANY AFTER ELAPSE OF ALMOST 15 LONG YEARS AND THUS EXPECTING THE ASSESSEE TO DO IMPRACTICAL/ IMPOSSIBLE. INVALID RE-ASSESSMENT PROCEEDINGS 5. THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW AND SHOULD BE SET ASIDE ON THE GROUND THAT A THERE WAS NO SUFF ICIENT 'REASONS TO BELIEVE' ANY ESCAPEMENT OF INCOME AND T HE INITIATION BY ISSUE OF NOTICE U/S 148 WAS MERELY BASED ON A RE PORT FROM AO, WARD 6(1), RATHER THAN AO'S OWN SATISFACTION. I T IS SUBMITTED THAT LEARNED AO WAS NOT EVEN AWARE OF THE CONTENTS AND/ OR THE REASONS OF SUCH CONCLUSIONS BY SAID AO WARD 6(1). 6. THAT LEARNED ASSESSING OFFICER HAS FAILED AND WA S NOT JUSTIFIED IN NOT ACCEDING THE SPECIFIC REQUEST MADE BY ASSESSEE DURING THE COURSE OF ASSESSMENT TO PROVIDE THE REAS ONS 3 RECORDED AND THE COPY OF THE LETTER SO RECEIVED FRO M AO WARD 6(1), IN AS MUCH AS SUCH OPPORTUNITY WAS NEVER PROV IDED TO THE ASSESSEE AND THUS PRINCIPLES OF NATURAL JUSTICE ARE INFRINGED AND THUS IMPUGNED ASSESSMENT ORDER IS LIABLE TO BE QUAS HED. ON MERITS : 7. THE LOWER AUTHORITIES HAVE FAILED TO PROVE THAT IMPUGNED AMOUNT OF RS. 3 LACS RECEIVED FROM MS LEAS ING PVT LTD, AS PER ORDER OF ASSESSMENT, TOWARDS SALE CONSI DERATION OF SHARES HELD BY THE APPELLANT, REPRESENTED INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES U/S 68 OF THE AC T. 8. THE IMPUGNED ASSESSMENT IS BAD ON FACTS AND IN L AW ON THE GROUND OF EQUITY & ARBITRARINESS AS THE LOWER A UTHORITIES HAVE FAILED TO CAST ANY REASON, INSPITE OF SPECIFIC REQUEST MADE IN THIS REGARD, AS TO WHY SUCH TRANSACTION REFERRED BY AO WARD 6(1) WAS BEING TREATED AS BOGUS OR TO PROVIDE THE C OPIES OF THE EVIDENCES, IF ANY, TO RESULT IN FORMATION OF OPINIO N FOR REASONS TO BELIEVE, BEFORE ASSUMING JURISDICTION U/S 147. 9. THE LOWER AUTHORITIES HAVE ERRED AND WERE NOT JU STIFIED IN INCLUDING THE IMPUGNED AMOUNT OF SALE CONSIDERATION AS INCOME OF THE APPELLANT, WHEN THE SAID AMOUNT WAS ALREADY CREDITED TO THE PROFIT & LOSS ACCOUNT AND INCLUDED IN THE RETU RNED TOTAL INCOME UNDER THE HEAD CAPITAL GAINS. THUS THE ARBIT RARY ACTION OF THE LOWER AUTHORITIES HAS RESULTED IN DOUBLE TAX ATION OF THE SAME INCOME BY WRONGLY INVOKING SECTION 68 OF THE A CT. GENERAL 10. THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT WIT HOUT PREJUDICE TO EACH OTHER. 11. THE ASSESSEE CRAVES TO ADD, MODIFY ANY NEW GROU ND OF APPEAL OR ADDUCE ANY NEW EVIDENCE DURING THE COURSE OF APPEAL, AS MAY BE NECESSARY, FOR THE DISPOSAL OF AP PEAL AND DISCHARGE OF DUE JUSTICE TO THE APPELLANT. 4 3. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARIN G LOSS OF RS. 1,84,170/- . THE AO HAD RECEIVED INFORMATION FROM ITO WARD 6(1 ), NEW DELHI VIDE LETTER NO. ITO WARD 6(1)/2005-06/502 DATED 20.3.200 6 THAT THE ASSESSEE COMPANY HAD RECEIVED AN ACCOMMODATION ENTRY OF RS. 3,00,000/- ON 7.10.1998 FROM M/S M.S. LEASING DURING FY 1998-99 R ELEVANT TO AY 1999- 2000. THE AO HAS OBSERVED THAT NOTICE U/S 148 WAS D ULY SERVED ON THE ASSESSEE ON 25.3.2006. IN RESPONSE, ASSESSEE FILED LETTER ON 10.4.2006, REQUESTING FOR TREATING THE ORIGINAL RETURN FILED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148. AFTER CONSIDERING THE ASESSEES SUB MISSIONS AO MADE AN ADDITION OF RS. 3,60,000/-. 4. BEFORE LD. CIT(A) THE ASSESSEE, INTER ALIA, CHA LLENGED THE INITIATION OF PROCEEDINGS U/S 148. THE LD. CIT(A), HOWEVER, AFTER CONSIDERING THE ASSESSEES SUBMISSIONS UPHELD THE SAME. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL REFERRED TO PAGE 71 OF THE PB, WHERE IN THE REPLY FILED ON 5.4.2006 IN RESPONSE TO NOTICE U/S 148 IS CONTAINED WHEREIN THE ASSESSEE HAD, INTER ALIA, STATED AS UNDER: IN THIS REGARD, WE WOULD LIKE TO INFORM YOU THAT TH E CAPTIONED ASSESSEE COMPANY WAS INCORPORATED UNDER THE COMPANI ES ACT. 1956 ON 03.10.1994. IT IS ALSO MENTIONED THAT THE S AID COMPANY 5 HAS NOW BECOME DEFUNCT W.E.F. 30.11.2003 UNDER THE COMPANIES ACT. 1956 AND THUS A SERVICE OF THE SAID (F) NOTICE U/S 148 ON THE SAID DEFUNCT COMPANY. WHICH IS NON-E XISTENT IN THE EYES OF LAW. IS BAD IN LAW AT THE FIRST INSTANC E AND THUS ANY PROCEEDINGS EMANATING FROM A BAD NOTICE WOULD ALSO BE BAD AND COULD NOT BE SUSTAINED . 6. LD. COUNSEL FURTHER REFERRED TO PAGE 25 OF THE P B, WHEREIN LETTER FILED WITH THE REGISTRAR OF COMPANIES ON 29.12.2003 IS CO NTAINED, WHEREIN THE ASSESSEE HAD REQUESTED FOR STRIKING OFF OF THE NAME OF THE COMPANY UNDER THE SIMPLIFIED EXISTING SCHEME AS PER CIRCULAR NO. 8/20 03/F.NO. 17/18/2001- CLV DATED 25.03.2003. LD. COUNSEL POINTED OUT THAT THIS APPLICATION WAS IN ACCORDANCE WITH SECTION 560 OF THE COMPANIES ACT. HE FURTHER REFERRED TO PAGE 24 OF THE PB, WHEREIN THE ORDER OF ROC DATED 2 3.6.2006, STRIKING OFF THE NAME OF THE COMPANY IS CONTAINED. 7. WITH REFERENCE TO AFOREMENTIONED DOCUMENTS, LD. COUNSEL REFERRED TO THE ASSESSMENT ORDER, WHICH WAS PASSED ON 8.8.2006. LD. COUNSEL, THEREFORE, SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY AO IS BAD IN LAW. 8. LD. COUNSEL FURTHER POINTED OUT THAT LD. CIT(A) HAS NOT DISPUTED THAT THE ASSESSMENT ORDER COULD NOT BE PASSED BY AO ON A DEFUNCT COMPANY, BUT IN PARA 4.1 AND 4.2 OF HIS ORDER HAS OBSERVED AS U NDER: 4.1 GROUND NO.6 CHALLENGES THE VALIDITY OF THE ORDE R ON THE GROUND THAT 'THE COMPANY WAS ALREADY DEFUNCT ON THE DATE THE 6 JURISDICTION WAS ASSUMED BY THE ISSUE OF NOTICE U/S 148 DT 24.3.2006'. THE SUBMISSIONS OF THE APPELLANT AND TH E FACTS HAVE BEEN CAREFULLY CONSIDERED. IN THE ASSTT. ORDER, THE AO. HAS STATED THAT THE NOTICE U/S 148 DATED 24.3.06 HAS BE EN DULY SERVED ON THE ASSESSEE ON 25.3.06. THE APPELLANT HA S FILED A COPY OF A NOTICE DATED 23.6.06 FROM THE DY. REGISTR AR OF COMPANIES BY WHICH THE APPELLANT COMPANY IS SAID TO HAVE BEEN 'DISSOLVED FROM THE DATE OF THIS PUBLICATION I N GAZETTE NOTIFICATION'. ONLY AN UNAUTHENTICATED COPY OF THIS NOTICE WAS FILED AND THE ORIGINAL WAS NOT PRODUCED. THE COPY F ILED IS NOT AUTHENTICATED. IN VIEW OF THESE FACTS, THIS COPY CA NNOT BE ACCEPTED AS AUTHENTIC. 4.2 FURTHER, WITH REFERENCE TO THE COPY OF NOTICE R EFERRED TO ABOVE, THE APPELLANT HAS FAILED TO FILE A COPY OF T HE GAZETTE NOTIFICATION SHOWING THE DATE OF DISSOLUTION. HE HA S THEREFORE, FAILED TO SUBSTANTIATE HIS CLAIM. EVEN THE COPY OF NOTICE FROM THE REGISTRAR OF COMPANIES FILED BY THE APPELLANT S HOWS THAT THE DATE OF THIS NOTICE, IS AFTER THE DATE OF ISSUE AND SERVICE OF NOTICE U/S 148. THE APPELLANT HAS NOT FILED ANY AUT HENTICATED EVIDENCE TO SHOW THE DATE OF DISSOLUTION OF THE APP ELLANT COMPANY. IN VIEW OF THESE FACTS, THE APPELLANT HAS FAILED TO ESTABLISH THAT THE COMPANY WAS DISSOLVED AT THE TIM E OF ISSUE OF NOTICE U/S 148, OR EVEN AT THE TIME OF REASSESSMENT . THE APPELLANT'S CLAIM THAT THE COMPANY WAS 'DEFUNCT' IS WITHOUT ANY LEGAL SIGNIFICANCE. IN VIEW OF THESE FACTS, THE APP ELLANT'S CLAIM IS NOT ACCEPTABLE. THE GROUND IS DISMISSED. 9. LD. DR RELIED ON THE ORDER OF CIT(A). 10. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY ASSESSEE HAD NOT GIVEN INFORMATION TO AO IN TERMS OF SECTION 176 OF THE I. T. ACT WHEN IT HAD APPLIED TO ROC ON 29.12.2003. HOWEVER, WHEN THE NOT ICE U/S 148 WAS 7 ISSUED ON 24.3.2006, THEN VIDE ITS REPLY DATED 5.4. 2006 THIS FACT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF AO, AS IS EVI DENT FROM THE CONTENTS OF THE LETTER, REPRODUCED EARLIER. IT IS WELL SETTLED LAW THAT NO ASSESSMENT ORDER CAN BE PASSED ON A DEFUNCT COMPANY. THEREFORE, THE ASSESSMENT ORDER PASSED BY AO WAS NON EST IN THE EYES OF LAW. ALL THESE ASP ECTS HAVE NOT BEEN DISPUTED BY LD. CIT(A), AS IS EVIDENT FROM HIS OBSE RVATION NOTED EARLIER IN PARA 4.1 AND 4.2 OF HIS ORDER. UNDER SUCH CIRCUMSTA NCES, I RESTORE THIS MATTER TO THE FILE OF LD. CIT(A) FOR PROVIDING AN OPPORTUN ITY TO ASSESSEE TO PRODUCE AUTHENTIC EVIDENCE TO SHOW THE DATE OF DISSOLUTION OF THE ASSESSEE COMPANY. IN CASE LD. CIT(A), AFTER PERUSING THE DOCUMENTS FI LED BY ASSESSEE, GETS SATISFIED ABOUT THE AUTHENTICITY OF THE DOCUMENTS, THEN THE ASSESSMENT ORDER PASSED WILL STAND QUASHED. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 08/07/2016. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 08/07/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.