Sanjay Gupta, New Delhi V. ITO, New Delhi

ITA 2960/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91220 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 17-05-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 13-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Keywords: Rectification of order; Principle of natural justice; Reassessment proceedings
• Section: 143(3); 147; 154; 2

Judgement Text

ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 SHRI SANJAY GUPTA, VS INCOME TAX OF FICER, M/S DUROWELL INDUSTRIES, WARD 24(2), NEW DELH I. 22, UDAI PARK, NEW DELHI. (APPELLANT) (RESPONDE NT) APPELLANT BY: SHRI SURESH KUMAR GUPTA, CA RESPONDENT BY: SHRI B.R.R. KUMAR, SR. DR DATE OF HEARING: 06.05.2015 DATE OF PRONOUNCEMENT: 17 TH JUNE, 2015 O R D E R PER C.M. GARG, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF THE CIT(A)-XXIII, NEW DELHI DATED 28.02.2013 IN APPEAL NO.50/10-11 FOR AY 2002-03. 2. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE APPELLANT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002 -03 ON 31.10.2002 DECLARING AN INCOME OF RS. 2,13,695/-. AN ASSESSMEN T WAS COMPLETED UNDER SECTION 143(3) ON 28.03.2005 AT AN INCOME OF RS. 10 ,94,330/-. THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 AND THE ASSESSMENT WAS COMPLETED UNDER ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 2 SECTION 143(3) READ WITH SECTION 147 ON 07.12.2009, ACCEPTING THE RETURNED INCOME. THE ASSESSING OFFICER INADVERTENTLY OMITTED TO INCLUDE THE ADDITIONS MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS OF RS. 8,29,600/- OUT OF COMMISSION PAYMENT, OF RS. 40,572/- OUT OF VEHICLE EXPENSES, AND OF RS. 10,463/- OUT OF TELEPHONE EXPENSES. THE ASSESSING O FFICER ISSUED NOTICE UNDER SECTION 154 ON 13.05.2010 PROPOSING TO AMEND THE AS SESSMENT ORDER DATED 07.12.2009. NO REPLY WAS FILED BY THE APPELLANT ON THE SPECIFIED DATE OF HEARING, WHICH WAS 20.05.2010. THE ASSESSING OFFICER ACCORDI NGLY, RECTIFIED THE. MISTAKE VIDE ORDER UNDER SECTION 154 DATED 24.05.20 10, AND ASSESSED THE TOTAL INCOME AT RS. 10,94,330/- AS WAS ASSESSED IN THE OR IGINAL ASSESSMENT ORDER UNDER SECTION 143(3) DATED 28.03.2005. 3. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) AGAINST THE ORDER OF THE AO U/S 154 OF THE ACT DATED 24.5.2010 BUT REMAINED EMPTY HANDED AS THE APPEAL WAS ALSO DISMISSED BY THE FIRST APPEL LATE AUTHORITY. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL IN TH IS SECOND APPEAL. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS UNDER:- THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.8,29,600/- BEING COMMISSION PAID TO M/S RAJEEV INDUSTRIES IGNORING T HE FACT THAT AO HAS FAILED TO COMPLY WITH THE DIRECTIONS OF THE LD. CIT(A) TO VERIFY THE JUSTIFICATION OF THE PAYMENT O F COMMISSION AFTER OPPORTUNITY TO THE APPELLANT. 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. LD. ASSESSEES REPRESENTATIVE SUBMITTED THAT ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE OF RS.8,29,600/- BEING COMMISSION PAID TO M/S RAJEEV I NDUSTRIES IGNORING THE FACT THAT AO HAS FAILED TO COMPLY WITH THE DIRECTIONS OF THE LD. CIT(A) TO VERIFY THE JUSTIFICATION OF THE PAYMENT OF COMMISSION AFTER OP PORTUNITY TO THE ASSESSEE. LD. AR HAS CHRONOLOGICALLY DRAWN OUR ATTENTION TOWA RDS ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATED 28.3.2005, APPEL LATE ORDER OF THE CIT(A) DATED 27.9.2012 AGAINST THE ASSESSMENT U/S 143(3) O F THE ACT, REASSESSMENT ORDER PASSED U/S 147/143(3) OF THE ACT DATED 7.12.2 009, ORDER OF RECTIFICATION PASSED U/S 154/147 DATED 24.5.2010 AND IMPUGNED ORD ER OF THE CIT(A) DATED 28.2.2013 AND SUBMITTED THAT THE AO MADE ADDITIONS DURING ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AMOUNTING TO RS.8 ,29,600 BEING COMMISSION PAID TO M/S RAJEEV INDUSTRIES. LD. AR FURTHER TOOK US THROUGH PAGE NO. 19 AND 20 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT THE ISSUE OF IMPUGNED ADDITION WAS AGITATED BY THE ASSESSEE BEFORE THE FI RST APPELLATE AUTHORITY DURING APPEAL AGAINST THE ORDER U/S 143(3) OF THE ACT BUT THE SAME WAS DISMISSED WITHOUT ANY ADJUDICATION ON MERITS SIMPLY HOLDING T HAT THE ORIGINAL ASSESSMENT WAS REOPENED AND REASSESSMENT HAS BEEN MADE, AS SUC H THE ORIGINAL ASSESSMENT AND APPEAL AGAINST THAT ORDER U/S 143(3) OF THE ACT DOES NOT SURVIVE AND HAS BECOME INFRUCTUOUS. 5. LD. AR VEHEMENTLY CONTENDED THAT DURING THE REAS SESSMENT PROCEEDINGS, THE AO DID NOT MAKE ANY DISALLOWANCE OR ADDITION IN THIS REGARD AND COMPLETED ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 4 THE REASSESSMENT U/S 147/143(3) OF THE ACT ON 7.12. 2009 AT THE RETURNED INCOME BUT SUBSEQUENTLY WITHOUT ANY VALID REASON, THE AO I SSUED A NOTICE U/S 154 OF THE ACT TO THE ASSESSEE, SHOWING HIS INTENTION TO RECTI FY THE REASSESSMENT ORDER DATED 7.12.2009. LD. AR FURTHER POINTED OUT THAT T HE SAID NOTICE WAS GIVEN TO THE ASSESSEE ON 13.5.2010 FIXING THE CASE FOR HEARI NG ON 20.5.2010 BUT ON THE SAID DATE OF HEARING, THE AO MARKED ABSENT OF THE A SSESSEE AND PASSED AN EX PARTE ORDER WITHOUT AFFORDING DUE OPPORTUNITY OF HE ARING FOR THE ASSESSEE IN A HASTY MANNER AND PASSED THE RECTIFICATION ORDER ON 24.5.2010 BY REVISING THE IMPUGNED ADDITION OF RS.8,29,600 WITHOUT ANY JUSTIF IED REASON AND VIOLATING PRINCIPLES OF NATURAL JUSTICE. LD. AR FURTHER POI NTED OUT THAT IN THE ORDER DATED 24.5.2010, THE AO HAD NOT MENTIONED THAT A NOTICE D ATED 13.5.2010 WAS DULY SERVED ON THE ASSESSEE AND DESPITE DUE SERVICE, NEI THER THE ASSESSEE NOR HIS REPRESENTATIVE ATTENDED THE PROCEEDINGS. 6. LD. AR FURTHER SUBMITTED THAT THE ASSESSEE CHALL ENGED THE ORDER OF RECTIFICATION BEFORE THE CIT(A) WITH A LEGAL OBJECT ION THAT THE AO PASSED RECTIFICATION ORDER WITHOUT PROVIDING REASONABLE OP PORTUNITY OF HEARING TO THE ASSESSEE BUT THE LD. CIT(A) DID NOT ADDRESS THIS I SSUE PROPERLY. LD. AR FURTHER POINTED OUT THAT THE CIT(A) WHILE PASSING THE IMPUG NED ORDER IGNORED THIS FACT THAT DURING THE EARLIER APPELLATE PROCEEDINGS, THE ASSESSEES GROUND ON MERIT WAS NOT ADJUDICATED AND THE SAME WAS SIMPLY DISMISSED B Y OBSERVING THAT THE ORIGINAL ASSESSMENT WAS REOPENED AND REASSESSMENT H AS BEEN MADE AND ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 5 THEREFORE, ORIGINAL ASSESSMENT AND APPEAL AGAINST T HAT ORDER DID NOT SURVIVE AND HAD BECOME INFRUCTUOUS. 7. LD. AR CONCLUDED THE ARGUMENT WITH A FINAL SUBMI SSION THAT THE GROUND OF ASSESSEE BEFORE THE CIT(A) AGAINST IMPUGNED ADDI TION WITH REGARD TO COMMISSION PAID TO M/S RAJEEV INDUSTRIES WAS NOT AD JUDICATED ON MERITS AND THE SAME WAS DISMISSED AS INFRUCTUOUS IN THE LIGHT OF T HIS FACT THAT THE ASSESSMENT WAS REOPENED AND REASSESSMENT ORDER WAS PASSED. LD . AR FURTHER POINTED OUT THAT DURING REASSESSMENT PROCEEDINGS U/S 147/143(3) OF THE ACT, THE AO DID NOT MAKE ANY ADDITION IN THIS REGARD AND ASSESSMENT WAS FINALISED AT THE RETURNED INCOME. LD. AR ALSO SUBMITTED THAT THE AO RECTIFIE D THE REASSESSMENT ORDER EX PARTE WITHOUT AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WHEN THE ASSESSEE AGITATED THIS ISSUE BEFORE THE CIT(A), THE FIRST APPELLATE AUTHORITY DID NOT ADJUDICATE THE ISSUE OF VIOLATION OF PRINCI PLES OF NATURAL JUSTICE AS WELL AS IMPUGNED ADDITION ON MERITS. LD. AR FINALLY SUBMIT TED THAT THE ASSESEE WAS NOT ALLOWED PROPER OPPORTUNITY OF HEARING BEFORE THE AU THORITIES BELOW AND THE ISSUE OF IMPUGNED ADDITION WAS DISMISSED ON TECHNICAL GRO UNDS WITHOUT ANY PROPER ADJUDICATION ON MERITS. 8. LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES B ELOW AND SUBMITTED THAT WHEN REASSESSMENT PROCEEDINGS WERE STARTED AND ENDE D BY PASSING A REASSESSMENT ORDER U/S 147/143(3) OF THE ACT, THEN ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT AND APPEAL AGAINST THA T ORDER DOES NOT SURVIVE FOR ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 6 ADJUDICATION AND THE SAME WAS CORRECTLY DISMISSED B Y THE CIT(A). LD. DR FURTHER POINTED OUT THAT THE REASSESSMENT PROCEEDIN GS WERE COMPLETED WITHOUT MAKING ANY ADDITION ON ACCOUNT OF IMPUGNED COMMISSI ON AMOUNT BUT THIS WAS A MISTAKE APPARENT FROM RECORD WHICH WAS RIGHTLY RECT IFIED BY THE AO BY PASSING ORDER DATED 24.5.2010 U/S 154/147 OF THE ACT SUPPOR TING THE IMPUGNED ORDER OF THE CIT(A). LD. DR ALSO CONTENDED THAT THE AO DID NOT REFER TO THE ORIGINAL RECORDS BEFORE COMPLETING THE REASSESSMENT U/S 147 OF THE ACT AND THE COUNSEL OF THE ASSESSEE NEVER BROUGHT THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 28.3.2005 TO THE ATTENTION OF THE AO, FURTHER, THE AO WAS QUITE JUSTIFIED AND CORRECT IN RECTIFYING THE REASSESSMENT ORDER AND AP PEAL WAS RIGHTLY DISMISSED BY THE CIT(A). HOWEVER, LD. DR FAIRLY ACCEPTED THAT I N THE RECTIFICATION ORDER DATED 24.5.2010, THE SERVICE OF NOTICE ON THE ASSES SEE HAS NOT BEEN MENTIONED. 9. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E ARE OF THE CONSIDERED VIEW THAT THE AO PASSED RECTIFICATION ORDER EX PART E WITHOUT AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AS FROM THE RECTIFICATION ORDER, WE CLEARLY NOTE THAT THE AO HAS MENTIONED THAT NOTICE DATED 13.5.2010 FOR THE HEARING ON 20.5.2010 WAS DULY SERVED ON THE ASSESSE E OR HIS REPRESENTATIVE. IN THIS SITUATION, THE RECTIFICATION ORDER PASSED IN A HASTY MANNER IS CLEARLY AGAINST THE PRINCIPLES OF NATURAL JUSTICE. FROM THE IMPUGN ED ORDER OF THE CIT(A), WE NOTE THAT THE ASSESSEE AGITATED THIS VIOLATION BY W AY OF GROUND NO. 2 BUT THE SAME WAS NOT PROPERLY ADJUDICATED AND ADDRESSED BY THE CIT(A). DURING THE ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 7 APPEAL PROCEEDINGS AGAINST THE ORIGINAL ORDER, THE GROUND OF ASSESSEE PERTAINING TO DISALLOWANCE OF COMMISSION WAS NOT ADJUDICATED O N MERITS BECAUSE THE APPEAL WAS DISMISSED ON ACCOUNT OF REOPENING OF ASS ESSMENT AND SUBSEQUENT REASSESSMENT ORDER AND DURING THE FIRST APPELLATE P ROCEEDINGS AGAINST THE RECTIFICATION ORDER, THE GROUND OF ASSESSEE PERTAIN ING TO COMMISSION WAS NOT ADJUDICATED ON MERITS AND THE CIT(A) ADJUDICATED TH E LIMITED ISSUE THAT THERE WAS AN APPARENT MISTAKE ON THE FACE OF REASSESSMENT ORDER DATED 7.12.2009 AND THE CIT(A) SIMPLY HOLDING THAT THE AO DID NOT REFER TO THE ORIGINAL RECORDS AND THE COUNSEL OF THE ASSESSEE NEVER BROUGHT THE ASSES SMENT ORDER U/S 143(3) OF THE ACT TO THE ATTENTION OF THE AO. IN THIS SITUATION, WE ARE INCLINED TO HOLD THAT THE ISSUE REQUIRES PROPER ADJUDICATION AT THE LEVEL OF THE AO AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE. HENCE, RE CTIFICATION ORDER AS WELL AS IMPUGNED ORDER OF CIT(A) DATED 28.2.2013 ARE HEREBY SET ASIDE AND THE ISSUE OF CLAIM OF THE ASSESSEE OF RS.8,29,600 BEING COMMISSI ON PAID TO M/S RAJEEV INDUSTRIES IS RESTORED TO THE FILE OF AO FOR A PROP ER AND FRESH ADJUDICATION. THE AO IS DIRECTED TO ADJUDICATE THE ISSUE WITHOUT BEIN G PREJUDICED FROM THE EARLIER ORDERS AND ORDERS OF THE CIT(A). THEREFORE, GROUND NO. 1 OF THE ASSESSEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 8 GROUND NO. 2 OF THE ASSESSEE 10. LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.40,752/- AND RS.1 0,463/- OUT OF VEHICLE AND TELEPHONE EXPENSE RESPECTIVELY FOR PERSONAL USE OF THESE ASSETS/FACILITIES. LD. AR FURTHER SUBMITTED THAT THE AO DID NOT BRING ANY FACT OR ALLEGATION AGAINST THE ASSESSEE THAT THERE WAS AN ELEMENT OF PERSONAL USE OF VEHICLE AND TELEPHONE FACILITY BY THE ASSESSEE. LD. DR SUBMITTED THAT THE AO INADVERTENTLY OMITTED TO INCLUDE THE ADDITIONS ON ACCOUNT OF COMMISSION A ND DISALLOWANCE OUT OF VEHICLE EXPENSES AND TELEPHONE EXPENSES WHICH WAS R ECTIFIED BY THE AO VIDE ORDER DATED 24.5.2010 PASSED U/S 154/147 OF THE ACT . 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT SINCE BY THE EARLIER PART OF THIS ORDER W E HAVE HELD THAT THE AO PASSED RECTIFICATION ORDER EX PARTE WITHOUT AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WE HAVE RESTORED THE ISSUE OF COMMISSI ON TO THE FILE OF THE AO FOR FRESH ADJUDICATION, THEREFORE, WE ALSO DEEM IT PROP ER AND JUSTIFIED TO RESTORE THE ISSUE OF DISALLOWANCE ON ACCOUNT OF VEHICLE AND TEL EPHONE EXPENSES MADE BY THE AO ON THE ALLEGATION OF PERSONAL USE BY THE ASSESSE E. THEREFORE, GROUND NO.2 OF THE ASSESSEE IS ALSO RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESS EE. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEE IS ALSO DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2960/DEL/2013 ASSTT.YEAR: 2002-03 9 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES ONLY ON AFOREMENTIONED ISSUES FOR THE LIMITED PURPO SE AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.6.2015. SD/- SD/- (S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 17TH JUNE 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. C.I.T. 5. DR BY ORDER ASSTT. REGISTRAR