Sri Sarvaraya Sugars Limited, Chagallu V. THE DCIT, CIRCLE - 1, Kakinada

ITA 294/VIZ/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6469 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Principle of natural justice; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER ./ I.T.A.NO .294 / VIZ /201 4 ( / ASSESSMENT YEAR:20 06 - 07 ) ./ I.T.A.NO .295 / VIZ /201 4 ( / ASSESSMENT YEAR:20 08 - 09 ) ./ I.T.A.NO .576 / VIZ /201 4 ( / ASSESSMENT YEAR:20 07 - 08 ) M/S SRI SARVARAYA SUGARS LTD. CHELLURU RAYAVARAMMANDALAM EAST GODAVARI DISTRICT [ PAN : AA E CS6 55 4N] VS. JT .COMMISSIONER OF INCOME TAX, KAKINADA RANGE KAKINADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI , A R / RESPONDENT BY : S MT.R. M.M ADHAVI , DR / DATE OF HEARING : 2 8 . 11 .2017 / DATE OF PRONOUNCEMENT : 20 . 1 2 .2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : 1 . TH E S E APPEAL S ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)], VI S A KHAPATNAM VIDE 2 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU ORDER DATED 27.03.2014, 14.08.2014 AND 15.09.2014 FOR THE A.YS. 2006 - 07 TO 2008 - 09 . SINCE THE ISSUES INVOLVED IN THESE APPEALS AR E COMMON, THE APPEALS ARE CLUBB ED, HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE. 2 . THE COMMON GROUND IN ALL THE APPEALS IS COMPLETION OF ASSESSMENT WITHOUT COMMUNICATING THE REASONS TO THE ASSESSEE STATED TO BE BAD IN LAW AND THE CONSEQUENT ASSESS MENT S MADE U/S 143(3) R.W.S. 147 ARE TO BE QUASHED. IN THIS CASE, THE ASSESSMENTS WERE COMPLETED U/S 14 3(3) R.W.S. 14 7 AND THE DETAILS OF DATE OF NOTICE AND DATE OF FILING THE ORIGINAL RETURN OF INCOME ARE FURNISHED HEREUNDER. A.Y. RETURN OF INCOME RS. DATE OF FILING OF RETURN DATE OF ISSUE OF NOTICE U/S 148 ASSESSED INCOME RS. 2006 - 07 28,50,10,100 28.11.2006 28.03.2012 28,70,99,500 2007 - 08 10,50,92,140 25.10.2007 26.03.2012 10,80,63,313 2008 - 09 4,66,81,634 25.09.2008 26.03.2012 4,95,85,330 3. THE ASSESSEE HAS FILED REPLY TO THE NOTICE U/S 148 REQUESTING THE AO TO TREAT THE RETURN S FILED EARLIER AS PER THE DATES MENTIONED ABOVE AS RETURN S IN RESPONSE TO THE NOTICE S U/S 148 AND REQUESTED THE AO TO COMMUNICATE THE REASONS FOR INITIATING THE PROCEEDINGS U/S 148 OF THE ACT. 3 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU HOWEVER, T HE AO DID NOT COMMUNICATE THE REASONS , THUS , THE ASSESSEE CONTENDED THAT THE ASSESSMENT MADE U/S 143(3) R.W.S. 147 WITHOUT COMMUNICATING THE REASONS IS BAD IN LAW AND REQUIRED TO BE QUASHED. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND RAI SED THE ISSUE WITH REGARD TO THE ASSESSMENT MADE U/S 143(3) R.W.S. 148 AND ARGUED B EFORE THE LD. CIT (A) THAT THE ASSESSMENT MADE WITHOUT COMMUNICATING THE REASONS IS BAD IN LAW. HOWEVER, THE CIT(A) HAS CONSIDERED THE ARGUMENT OF THE ASSESSEE AND DISMISSED THE OBJECTION RAISED BY THE ASSES SEE STATING THAT THE ASSESSEE WAS AWARE OF THE REA SONS FOR REOPENING THE ASSESSMENT AND, T HE ASSESSEE HAS APPEARED BEFORE THE AO AND PARTICIPATED IN IMPUGNED ASSESSMENT PROCEEDINGS. THE LD.CIT(A) FURTHER HELD THAT T HE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY AND COMPLIED WITH THE PRINCIPLES OF NATURAL JUSTICE. THE LD.CIT (A) VIEWED THAT T HE PURPOSE OF COMMUNICATING THE REASONS IS TO GIVE COMPLETE OPPORTUNITY TO THE ASSESSEE WHICH HA S BEEN ACHIEVED AND THERE WAS NO VIOLATION O F PR INCIPLES OF NATURAL JUSTICE AND ACCORDINGLY DISMISSED OBJECTION OF THE ASSESSEE. 4 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL AND RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND ON FACTS. 2. THE LEARNED C I T (A) IS NOT JUSTIFIED IN NOT ACCEPTING THE PLEA THAT THE REOPENING THE ASSESSMENT U/S 147 BY ISSUING A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT IS NOT LEGAL. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING INTEREST PAYABLE ON PURCHASE TAX AMOUNTING TO RS. 9,51,160/ - . 4. THE LEARNED CIT(A) IS NOT CORRECT IN CONFIRMING THE ADDITION OF RS. 3,90,106/ - , CLAIMED AS REPAIRS BY THE COMPANY IN RESPECT OF REPLACEMENT OF BOILER CHIMNEY, BY WRONGLY RELYING ON A DECISION, WHICH WAS ABOUT REPLACEMENT OF WHOLE MACHINERY. FURTHER, NO OPPORTUNITY WAS GIVEN BY CIT(A), TO DISTINGUISH THE SAID CASE. 5. THE LEA RN ED CIT(A) IS NOT CORRECT IN CONFIRMING THE ADDITION OF RS.11,67,727/ - , CLAIMED AS REPAIRS BY THE COMPANY IN RESPECT OF REPLACEMENT OF BURNER, BY WRONGLY RELYING ON A DECISION, WHICH WAS ABOUT REPLACEMENT OF WHOLE MACHINERY. FURTHER, NO OPPORTUNITY WAS GIVEN BY CIT(A), TO DISTINGUISH THE SAID CASE. 6. THE APPELLANT SUBMITS THAT TH E ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY DELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEATING OF THE APPEAL.' 5 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU 6. THE ABOVE GROUNDS OF APPEAL ARE COMMON F OR ALL THE THREE APPEALS. IN ALL THE THREE APPEALS, THE COMMON GROUND NO.2 IS VALIDITY OF REASSESSMENT MADE U/S 147 OF I.T.ACT. DURING THE APPEAL HEARING, THE LD.AR SUBMITTED THAT THE AO HAD ISSUED THE NOTICE U/S 148 INITIATING THE PROCEEDINGS U/S 147 FOR WHICH THE ASSESSEE HAD COMPLIED WITH BY FILING LETTER TO TREAT THE RETURNS ALREADY FILED EARLIER AS RETURN S IN RESPONSE TO THE NOTICE S U/S 148 OF THE ACT AND REQUESTED THE REASONS FOR INITIATING THE PROCEEDINGS U/S 14 7 VIDE LETTER DATED 16.04.2012 SUBMITTED IN THE INCOME TAX OFFICE ON 23 . 04 . 2012 . THE AO DID NOT FUR NISH THE REASONS TILL COMPLETION OF ASSESSME NT AND ONLY DURING THE APPEAL PROCEEDINGS, THE AO HAS COMMUNICATED THE REASONS RECORDED FOR INITIATING ACTION U/S 148 ON 28.02.2014. THE LD.AR ARGUED THAT A S PER THE HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF M/S GKN DRIVE SHAFTS (INDIA) LTD. VS. ITO [259 ITR 19], ONCE THE ASSESSEE HAS FILED THE RETURN OF INCOME, IT IS THE OBL IGATION OF THE AO TO COMMUNICATE THE REASONS ON DEMAND MADE BY THE ASSESSEE. IN THIS CASE, THE AO HAS COMPLETED THE ASSESSMENT WITHOUT COMMUNICATING THE REASONS, HENCE , THE ASSESSMENT ORDER FRAMED BY THE AO IS BAD IN LAW AND REQUIRED TO BE QUASHED. LD.AR RELIED ON THE ORDERS OF THE CIT VS. TREND ELECTRONICS, HONBLE HIGH COURT OF BOMBAY [379 ITR 0456] AND BERGER PAINTS (INDIA) LTD. [139 TAXMANN 200] (CAL). 6 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU 7 . ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS OF THE LD. CIT (A) . 8 . WE HAVE HEARD BOTH THE PARTI ES AND PERUSE D THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS FILED REPLY TO THE NOTICE U/S 148 AND REQUESTED THE AO TO TREAT THE RETURN FILED ON VARIOUS DATE S AS MENTIONED IN THE TABLE IN PARA 2 AS RETURN S IN RESPONSE TO THE NOTICE U/S 148 OF THE I.T.ACT AND ALSO REQUESTED TO FURNISH THE REASONS RECORDED FOR ISSUE OF NOTICE U/S 148. THE AO COMPLETED THE ASSESSMENT WITHOUT COMMUNICATING THE REASONS RECORDED. ON APPEAL THE LD.CIT(A) DISMISSED THE ASSESSEES APPEAL ON THE VALIDI TY OF THE ASSESSMENT FOR NON COMMUNICATION OF THE REASONS STATING THAT THE ASSESSEE HAD RESPONDED TO THE NOTICE AND PARTICIPATED IN THE ASSESSMENT PROCEEDINGS. 9 . T HE AO HAS COMPLETED THE ASSESSMENT WITHOUT COMMUNICATING THE REASONS RECORDED FOR ISSUE OF NOTICE U/S 148, IN SPITE OF THE SPECIFIC REQUEST MADE BY THE ASSESSEE FOR FURNISHING THE REASONS. A S PER THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S GKN DRIVE SHAFTS (INDIA) LTD. VS. ITO, IT IS OBLIGATORY ON THE PART OF AO TO COMMUNICATE TH E REASONS ON FURNISHING THE RETURN OF INCOME. THE ASSESSEE IN RESPONSE TO THE NOTICE 7 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU ISSUED U/S 148 SUBMITTED A LETTER TO THE AO TO TREAT THE RETURNS FILED EARLIER AS RETURN S IN RESPONSE TO THE NOTICE ISSUED U/S 148. THUS THE ASSESSEE HAS COMPLIED WITH T HE MANDATE OF HONBLE SUPREME COURT JUDGEMENT CITED SUPRA BUT THE AO FAILED TO COMMUNICATE THE REASONS . THE ASSESSEE RELIED ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF BERGER PAINTS INDIA LTD. VS. ACIT (SUPRA) , WHEREIN HONBLE HIGH COU RT HELD THAT THE ASSUMPTION OF JURISDICTION OF ASSESSING OFFICER U/S 147 DEPENDS UPON EXISTENCE OF REASONS FOLLOWED BY COMMUNICATION THEREOF TO THE ASSESSEE . I F THE NOTICE SERVED UNDER SECTION 148 IS CHALLENGED , T HE AO CANNOT PROCEED WITH THE ASSESSMENT UNDER SECTION 147 UNLESS REASONS ARE COMMUNICATED. IN THE INSTANT CASE, THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS COMPLIED WITH THE NOTICE U/S 148 AND THE AO HAS NOT FURNISHED THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 DESPITE THE RE QUEST MADE BY THE ASSESSEE. THE REVENUE COULD NOT PLACE ANY EVIDENCE TO CONTROVERT THE ARGUMENT OF THE LD.AR THAT THE REASONS WERE NO T COMMUNICATED. THUS T HE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISIONS IN THE CASE OF BERGER PAINTS INDIA LTD. VS. ACIT (SUPRA) AND CIT VS. TREND ELECTRONICS (SUPRA). 9.1. T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TREND ELECTRONICS (S UPRA) FOLLOWING THE DECISION OF CIT VS. VIDESH SANCHAR NIGAM 8 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU LTD A ND APPLYING THE DECISION OF APEX COURT IN THE CASE OF GKN D RIVE S HAFTS (INDIA) LTD. VS. ITO HELD AS UNDER : 8. WE FIND THAT THE IMPUGNED ORDER MERELY APPLIES THE DECISION OF THE APEX COURT IN GKN DRIVESHAFTS (INDIA) LTD. (SUPRA). FURT HER IT ALSO FOLLOWS THE DECISION OF THIS COURT IN VIDESH SANCHAR NIGAM LTD. (SUPRA) IN HOLDING THAT AN ORDER PASSED IN REASSESSMENT PROCEEDINGS ARE BAD IN LAW IN THE ABSENCE OF REASONS RECORDED FOR ISSUING A REOPENING NOTICE UNDER SECTION 148 OF THE ACT BE ING FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR. IT IS AXIOMATIC THAT POWER TO REOPEN A COMPLETED ASSESSMENT UNDER THE ACT IS AN EXCEPTIONAL POWER AND WHENEVER REVENUE SEEKS TO EXERCISE SUCH POWER, THEY MUST STRICTLY COMPLY WITH THE PREREQUISITE CONDITIONS VIZ. REOPENING OF REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH WOULD WARRANT THE REOPENING OF AN ASSESSMENT. 9.2. IN THE INSTANT CASE, THE AO HAD ISSUED NOTICE U/S 148 AND T HE ASSESSEE HAS COMPLIED WITH THE NOTICE AND REQUESTED FOR REASONS. THE AO COMPLETED THE ASSESSMENT WITHOUT COMMUNICATING THE REASONS. THEREFORE, THE FACTS OF THE CASE ARE SIMILAR TO THAT OF THE DECISION OF HONBLE BOMBAY HIGH COURT RELIED UPON BY THE LD.AR CITED SUPRA. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT, WE HOLD THAT THE ASSESSMENT MADE U/S 147 R.W.S. 143(3) WITHOUT COMMUNICATING THE REASONS IS BAD IN LAW. ACCORDINGLY, THE ORDERS FRAMED U/S 147 R.W.S. 143(3) ARE QUASHED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. SINC E, WE HAVE QUASHED THE ASSESSMENT MADE U/S 143(3), WE CONSIDER IT IS NOT NECESSARY TO ADJUDICATE THE GROUNDS ON MERITS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 9 ITA NO . 294, 295, 57 6 /VIZ/201 4 M/S SRI SARVARYA SUGARS LTD., CHELLURU THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 TH DEC 17. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 20 . 1 2 .2017 L. RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - M/S SRI SARVARAYA SUGARS LTD., CHELLURU, RAYAVARAM MANDALAM, EAST GODAVARI DISTRICT 2 . / THE RESPONDENT JT.COMMISSIONER OF INCOME TAX, KAKINADA RANGE KAKINADA 3. THE PR. COMMISSIONER OF INCOME TAX , VIJAYAWADA 4 . THE COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM