MOHD. ZAMMER CUTTERWALA, MUMBAI V. ASST CIT 17(3), MUMBAI

ITA 3314/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9514 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIADR
• Assessee Lawyers: RAKESH JOSHIAR
• Keywords: Opportunity of being heard; Audit objection; Question of law; Difference of opinion; Assessment record; Right to appeal; Revised return; Change of opinion; Reassessment proceedings
• Section: 143(3); 194C; 147; 148

Judgement Text

3314/M/15-ZAMMER CUTTERWALA 1 INCOME-TAX APPELLATE TRIBUNAL JBENCH MUMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER ./ I.T.A./3314/MUM/2015 , / ASSESSMENT YEAR: 2011-12 MOHD. ZAMMER CUTTERWALA 93, MORLAND ROAD, ARABS STABLE MUMBAI-400 008. PAN:AAAPC 7090 E VS. ACIT, -17 (3) R.NO.614, 6HT FLOOR PIRAMAL CHAMBERS, LALBAUG, PAREL MUMBAI-400 012. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: MS. ARJU GARODIA-DR ASSESSEE BY: SHRI RAKESH JOSHI-AR / DATE OF HEARING: 18/08/2017 / DATE OF PRONOUNCEMENT: 15/09/2017 , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM: CHALLENGING THE ORDER DATED 04/03/2015, OF THE CIT( A)-32, MUMBAI THE ASSESSEE HAS FILED A PRESENT APPEAL. ASSESSEE- AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF MANUFACTURING OF FOR PIPE LINES, HAND TOOLS,WIRE CUTTER ETC.,FILED ITS RETURN OF INCOME ON 17/10/2011,DECLARING THE TOTAL INCOME OF RS.20.14 LAKHS.SUBSEQUENTLY, A REVISED RE TURN WAS FILED ON 08/05/2012,DECLARING INCOME AT RS.87.24 LAKHS.THE A.O, COMPLETED THE ASS ESSMENT U/S. 143(3) OF THE ACT, ON 21/ 01/ 2013,DETERMINING HIS INCOME AT RS.1.88 CRORES. 2. VIDE HIS APPLICATION DTD.20.06.2017,THE ASSESSEE HA S FILED ADDITIONAL GROUND OF APPEAL STATING THAT SAME WERE OF LEGAL NATURE,THAT AS PER RULE 11 OF THE ITAT RULES, 1963 SAME SHOULD BE ADMITTED.BEFORE US,THE AUTHORISED REPRESENTATIVE(AR ) REITERATED THE SUBMISSION THAT ARE PART OF THE APPLICATION MADE BY THE ASSESSEE.THE DEPARTMENT AL REPRESENTATIVE (DR)LEFT THE ISSUE OF ADMITTING ADDITIONAL GROUNDS OF APPEAL TO THE DISCR ETION OF THE BENCH.WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE,GOES TO THE ROOT OF T HE MATTER AND DOES NOT REQUIRE VERIFICATION OF THE FACTS.THEREFORE,WE TAKE ON RECORD THE ADDITIONA L GROUND,RAISED BY ASSESSEE. BRIEF FACTS: 3. THE ASSESSEE HAS FILED THE ORIGINAL RETURN IN THE M ONTH OF OCTOBER,2011.LATER ON,A REVISED RETURN WAS FILED ON 08/05/2012,WHEREIN HE CLAIMED A DEDUCTION OF RS.1.01 CRORES U/S. 54G OF THE 3314/M/15-ZAMMER CUTTERWALA 2 ACT.INITIALLY THE RETURN WAS PROCESSED U/S.143(1) O F THE ACT. AS THE AO WAS OF THE OPINION THAT THE TAXABLE INCOME OF THE ASSESSEE HAD ESCAPED TAXA TION;SO,HE ISSUED A NOTICE U/S.148 OF THE ACT TO THE ASSESSEE.VIDE HIS LETTER,DATED 27/11/2012,TH E ASSESSEE STATED THAT THE RETURN FILED ON 08/05/2012 SHOULD BE TAKEN AS HAVING BEING FILED I N RESPONSE TO NOTICE ISSUED TO HIM. 4. THE FIRST GROUND OF THE APPEAL AND THE ADDITIONAL G ROUND DEAL WITH VALIDITY OF THE REASSESSMENT PROCEEDINGS.DURING THE COURSE OF HEARING BEFORE US, THE AR STATED THAT THE AO HAD NOT PROVIDED HIM THE COPY OF THE REASONS RECORDED FOR ISSUING NO TICE U/S. 148 OF THE ACT, THAT THE REOPENING THE ASSESSMENT WAS BAD IN LAW,THAT THE AO HAD NOT ISSUE D THE NOTICE U/S. 143(2) OF THE ACT, THAT THE ASSESSMENT PASSED BY THE AO WAS VOID AB-INITIO IN A BSENCE OF THE 143(2) NOTICE. HE STATED THAT THE ASSESSEE HAD REQUESTED FOR THE COPY OF THE REAS ON RECORDED, THAT THE AO DID NOT SUPPLY HIM THE COPY TILL THE ASSESSMENT WAS OVER,THAT BEFORE T HE EXPIRY DATE OF NOTICE TO BE ISSUED U/S. 143(2)OF THE ACT,THE AO HAD ISSUED THE NOTICE U/S. 148 OF THE ACT. HE REFERRED TO THE CASES OF GENO PHARMACEUTICALS LTD. (84 CCH 117) OF THE HONB LE BOMBAY HIGH COURT, SUPER SPINNING MILLS LTD.(129 TTJ 305)VARDHMAN HOLDINGS LTD. (69 T AXMAN.COM 376),JAI SHIV SHANKAR TRADER PVT.LTD.(94 CCH 55)VIDESH SANCHAR LTD. (340 ITR 66) AND G. ENTERTAINMENT ENTERPRISES LTD. (ITA/7005/MUM/2012,AY.2006-07,DATED18/10/2016).THE DR SUPPORTED ORDER OF FIRST APPELLATE AUTHORITY(FAA) AND RELIED UPON CASE OF MADHYA BHARA T ENERGY CORPORATION LTD. (ITA NO. 950 OF 2008). 5. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE MATE RIAL BEFORE US. IN OUR OPINION,IT WOULD BE USEFUL TO DECIDE ISSUE OF VALIDITY OF REASSESSMENT PROCEEDING BEFORE ADJUDICATING THE MERIT OF THE CASE.DURING THE COURSE OF HEARING,THE BENCH HAD ASK ED THE DR TO PRODUCE THE ASSESSMENT RECORDS ALONG WITH THE EVIDENCE OF SERVICE OF NOTICE ISSUED U/S.143(2) OF THE ACT. THE DR HAD INTIMATED THE AO CONCERNED TO SEND THE ASSESSMENT RECORDS FOR VERIFICATION PURPOSES.BUT,TILL THE LAST DATE OF HEARING,ASSESSMENT RECORDS WERE NOT PRODUCED BY THE AO PROVING THE SERVICE OF NOTICE U/S. 143(2) OF THE ACT OR SUPPLYING OF REASONS RECORDED FOR INITIATING THE PROCEEDINGS U/S. 147 OF THE ACT. WE FIND THAT THE ASSESSEE HAD RAISED SPECIFIC GROUN D ABOUT NON SUPPLY OF REASONS WHILE FILLING THE APPEAL BEFORE THE FAA.GROUND NO. 1 FILED BY THE ASS ESSEE TALKS OF NON-FURNISHING THE REASONS RECORDED INSPITE OF WRITTEN REQUEST MADE.IN THE STA TEMENT OF FACTS THE ASSESSEE HAD MENTIONED THAT THE AO DID NOT COMMUNICATE THE REASONS RECORDED FOR REOPENING. PAGE NO. 16 OF PAPER BOOK IS 3314/M/15-ZAMMER CUTTERWALA 3 THE LETTER OF THE ASSESSEE, DATED 20/07/2012. IN TH AT LETTER, HE HAD REQUESTED THE AO TO PROVIDE IN THE REASONS FOR ISSUING REASSESSMENT NOTICE. THE FA A HAD TAKEN NOTE OF THE OBJECTION RAISED BY THE ASSESSEE ABOUT OF THE VALIDITY OF THE REASSESSM ENT PROCEEDINGS, BUT HAD NOT DEALT WITH IT. AS PER SETTLE PRINCIPLES OF TAXATION JURISPRUDENCE THE AO IS REQUIRED SUPPLY OF THE REASONS RECORDED TO THE ASSESSEE AFTER IT FILES A RETURN OF INCOME. IN CASE THE ASSESSEES OBJECT TO THE REASSESSMENT PROCEEDING THE AO.S HAVE TO DISPOSED OFF THE OBJECT IONS RAISED BY THEM IN A SEPARATE ORDER. THE FAILURE OF THE AO SUPPLY OF THE COPY OF THE REASONS IS FATAL TO THE ENTIRE REASSESSMENT PROCEEDING. IN THE CASE OF VIDESH SANCHAR LTD.(SUPRA),THE HONB LE JURISDICTIONAL HIGH COURT HAS HELD THAT IF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMEN T WERE NOT FURNISHED TO THE ASSESSEE TILL THE COMPLETION OF THE RE-ASSESSMENT,THE REASSESSMENT OR DER WOULD BE INVALID.THE BOMBAY HIGH COURT,IN THE CASE OF JAY SHIV SHANKAR TRADER PVT. L TD.(SUPRA) HAS HELD THAT NON ISSUANCE OF NOTICE U./S. 143(2)OF THE ACT,WOULD INVALIDATE THE NOTICE ISSUED TO THE ASSESSEE AND THE ASSESSMENT COMPLETED IN PURSUANCE OF THE NOTICE.WE WOULD LIKE TO REFER TO THE CASE OF G. ENTERTAINMENT ENTERPRISES LTD., (SUPRA)AND REPRODUCE THAT RELEVAN T PORTION OF THE ORDER.IT READS AS FOLLOW: 3. THE ASSESSEE HAD FILED AN APPLICATION,VIDE ITS LETT ER DATED,11/08/2016,FOR ADMISSION OF ADDITIONAL GRO UNDS.IT WAS ARGUED THAT THE ADDITIONAL GROUNDS WERE LEGAL IN NA TURE AND DID NOT REQUIRE NEW DOCUMENTS OR EVIDENCES .IN THE ADDITIONAL GROUNDS THE ASSESSEE HAD RAISED TWO ISSU ES NAMELY NON-ISSUANCE OF NOTICE U/S.143(2) OF THE ACT AND INITIATION OF REASSESSMENT PROCEEDING ON THE BASIS OF AUDIT OBJECTIONS THAT WERE NOT ACCEPTED THE AO H IMSELF. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR) ARGUED THAT ADDITIONAL GROUND S RAISED BY THE ASSESSEE WERE PURELY LEGAL GROUND AND NO NEW FACTS,OTHER THAN THOSE ALREADY ON RECORD,WERE REQU IRED TO BE CONSIDERED.HE RELIED UPON THE CASE OF NTPC (229 ITR 383).HE FURTHER CONTEND ED THAT THE AO HAD NOT ISS UED NOTICE U/S.143 (2) OF THE ACT, THAT NON-ISSUE OF NOTICE DU RING THE RE-ASSESSMENT PROCEEDINGS MADE THE ASSESSM ENT ORDER AB INITIO AVOID.HE REFERRED TO THE CASE OF KANCHANJUN GA IMPEX PVT.LTD. (ITA/6057/MUM/2013-AY.2002-03,DAT ED 23/09/2015). 5. THE DEPARTMENTAL REPRESENTATIVE(DR)OBJECTED TO ADMI SSION OF ADDITIONAL GROUNDS AND CONTENDED THAT THE ASSESSEE HAD NEVER RAISED THOSE GROUNDS DURING THE ASSESSMENT PROCEED -INGS OR THE APPELLATE PROCEEDIN GS,THAT IT ATTENDED THE HEARING AND SUBMITTED INFORMATION ON V ARIOUS OCCASIONS, THAT EVEN BY FILING THE APPEAL BE FORE THE TRIBUNAL IT HAD NOT RAISED THE ISSUE WITH REGARD TO NOTICE, THAT NO NEW GROUND COULD BE TAKEN BEFORE T HE TRIBUNAL FOR THE FIRST TIME.SHE REFERRED TO THE CASES OF NTPC (S UPRA), ARAVALI ENGINEERS PRIVATE LTD. (237 CTR 312) , VISION INC. (208 TAXMAN 153), MADHYA BHARAT ENERGY CORPORATION (337 ITR 389) JAYPRAKASH SINGH (219 ITR 737).SHE ST ATED THAT THE AO HAD INFORMED THAT ON PERUSAL OF THE REC ORDS IT WAS FOUND THAT CERTAIN DOCUMENTS WERE NOT A VAILABLE ON THE FILE,NAMELY-LETTER OF OBJECTION TO THE REOPENIN G FILED BY THE ASSESSEE, DISPOSAL OF OBJECTION BY T HE AO, NOTICE U/S. 143 (2) AND ORIGINAL THE ASSESSMENT ORDER U/S.143 ( 3)R.W.S.147,ORDER SHEET OF THE HEARING/THE ASSESSME NT PROCEEDINGS,THAT THE RECORDS WERE OLD, THAT NO COGN IZANCE OF NONAVAILABILITY OF NOTICE U/S.143 (2) COU LD BE TAKEN THAT NON-AVAILABILITY OF NOTICE COULD NOT BE CONSTRUCTED TO CONCLUDE THAT NO NOTICE U/S.143 (2)WAS ISSUED I N 2011 BY THE AO, THAT THE ASSESSEE HAD NOT RAISED THE GROUND ABO UT THE AUDIT OBJECTIONS BEFORE THE AO OR THE FAA, T HAT ANY FACT BROUGHT OUT BY THE AUDIT PARTY WAS A VALID GROUND F OR REOPENING THE ASSESSMENT. SHE RELIED UPON THE CA SE OF SOMDUTT BUILDERS PRIVATE LTD.(98 ITD 78), PVS BEEDIES PRIVA TE LTD.(237 ITR 13) AND RAJESH JHAVERI STOCKBROKERS PRIVATE LTD.(161 TAXMAN 316), THAT AO HAD DELIBERATED OVER THE ISSUE ONCE IT WAS POINTED OUT BY THE REVENUE AU DIT, THAT THE FACT THAT TAX WAS NOT DEDUCTED U/S. 194C OF THE ACT FROM THE FILE OF SOME OTHER ASSESSEE, THAT THE INF ORMATION WAS NOT AVAILABLE BEFORE THE AO AT THE TIME OF ORIGINAL ASS ESSMENT,THAT IT WAS A NEW TANGIBLE INFORMATION WHIC H CAME TO THE 3314/M/15-ZAMMER CUTTERWALA 4 NOTICE OF THE AO SUBSEQUENTLY, THAT THE PROVISIONS OF SECTION 194C WERE APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. 6. IN HIS REJOINDER,THE AR STATED THAT PROVISIONS OF S ECTION 292BB WERE APPLICABLE FROM 01/ 04/2008,THAT THE CASES RELIED UPON BY THE DEPARTMENT WERE DISTINGUISHABLE ON FACTS,THAT NO NOTICE U/S.143 (2) WAS ISSUED BY T HE AO, THAT THE ASSESSEE HAD RAISED A PURELY LEGAL ISSUE EMANAT ING FROM FACTS ON RECORD, THAT THE AO VIDE HIS LETT ER,DATED 07/05/201,HAD OPPOSED THE AUDIT OBJECTIONS AND HAD REQUESTED THE AUDIT PARTY TO DROP THE SAME,THAT EVE N AFTER OPPOSING THE SAID AUDIT OBJECTIONS,HE PROCEEDED TO REOPEN THE CASE OF THE ASSESSEE. THE AR RELIED UPON THE CASE OF PURITY TECHTEXTILES P.LTD. (325 ITR 459)AND ARGUED THAT THE ASSESSMENT WAS PASSED UNDER THE DICTATES O F THE AUDIT PARTY, THAT AO HAD NOT FORMED ANY INDEPENDENT OPINI ON, THAT IT WAS A CASE OF CHANGE OF OPINION. 7 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD RAISED MORE ADDITIONAL GROUNDS BEFORE THE TRIBUNAL AND SAM E WERE NOT AGITATED BEFORE THE AO/FAA. BOTH THE ADD ITIONAL GROUNDS, IN OUR OPINION,ARE PURELY LEGAL GROUNDS. I N THE CASE OF NTPC (SUPRA),THE HONBLE SUPREME COUR T HAD HELD AS UNDER: UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961, THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PART IES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SU CH ORDERS THEREON AS IT THINKS FIT. THE POWER OF TH E TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED I N THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASS ESSEE IN ACCORDANCE WITH LAW. .THERE IS NO REASON TO RE STRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS-OBJECTIONS BEFORE THE TRIBU NAL. THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDERI NG QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. THE VIEW TH AT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING O UT OF THE APPEAL BEFORE THE COMMISSIONER (APPEALS) IS TOO NARROW A VIEW TO TAKE OF THE POWERS OF THE TRIBUNAL. UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO ALL OW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON REC ORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON W HY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAIS ED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN O RDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN AS SESSEE. 8. CLEARLY,THE TRIBUNAL CAN ADMIT A PARTICULAR ISSUE A RISING FROM THE FACTS ON RECORD EVEN THOUGH SAME WA S NOT RAISED BEFORE THE LOWER AUTHORITIES.IN THE CASE OF ARAVALI ENGINEERS PRIVATE LTD. (SUPRA) THE HONBLE PUNJAB AND HARYANA HIGH COURT HAD HELD THAT A QUESTION OF FACT COULD NOT BE ALLOWED TO BE RAISED FOR THE FIRST TI ME BEFORE THE TRIBUNAL.IN OUR OPINION, BOTH THE ISSUES RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL ARE PURELY LEGAL I SSUES. 9. IN OUR OPINION,NON-ISSUANCE OF NOTICE U/S.143(2) OF THE ACT IS NOT IN IRREGULARITY OR A PROCEDURAL LAP SE BUT IT IS A JURISDICTIONAL DEFECT WHICH IS NON-CURABLE. AS THE ISSUE EMANATES FROM THE FACTS AVAILABLE ON THE RECO RD,SO,IN OUR OPINION THE ASSESSEE CANNOT BE PREVENTED FROM RAISI NG THE ADDITIONAL GROUND ABOUT NON-ISSUE OF NOTICE. REST OF THE CASES RELIED UPON BY THE DR DO NOT DIRECTLY DEAL WI TH THE ISSUE OF NOTICE U/S.143 (2) OF THE ACT. 9.1. WE FIND THAT SUFFICIENT TIME WAS ALLOWED BY THE TRI BUNAL TO THE DEPARTMENTAL AUTHORITIES TO PRODUCE TH E EVIDENCE OF ISSUE OF NOTICE AND SERVICE OF THE SAME ON THE A SSESSEE.THE AO HIMSELF HAS INTIMATED THAT NOTICE U/ S.143(2) ALONG WITH THE ORDER SHEET WERE NOT AVAILABLE. IN ABSENCE OF THE EVIDENCE OF ISSUE OF NOTICE WE ARE OF THE O PINION THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS NOT A VALID O RDER.WE WOULD LIKE TO REFER TO THE MATTER OF GENO PHARMACEUTICALS LTD.(214TAXMAN83)OF THE BOMBAY HIGH COURT.IN THAT CASE THE HONBLE COURT HAS HELD THAT NOTICE U/S.143(2)IS MANDATORY AND IN ABSENCE OF SUCH SERVI CE THE AO CANNOT PROCEED TO MAKE AN INQUIRY ON THE RETURN FILED IN COMPLIANCE WITH NOTICE ISSUED U/S. 148. 3314/M/15-ZAMMER CUTTERWALA 5 IN OUR OPINION BY NOT ISSUING THE 143 NOTICE AND NO T SUPPLYING THE RECORDED REASONS TO THE ASSESSEE,THE AO HAS COMMITTED FATAL ERRORS AS FAR A S VALIDITY OF THE ASSESSMENT IS CONCERNED . ACCORDINGLY,WE HOLD THAT ORDER PASSED BY THE AO WAS NOT A VALID ORDER. 5. AS WE HAVE DECLARED THE ORDER OF THE AO WAS INVA LID, SO, WE ARE NOT ADJUDICATING THE OTHER GROUND OF APPEAL RAISED BY HIM. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2017. 15 , 2017 SD/- SD/- /PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 15.09.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.