Appeal details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 2281 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-02-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2015-2016
Appeal Filed On
05-12-2018
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO,JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NOS.3335/CHNY/2018 ( / ASSESSMENT YEAR: 2015-16) MR. KAMALESH SHANTILAL JAIN, 7/1 -20, 4 TH FLOOR, WADDELS ROAD, KILPAUK, CHENNAI-600 010. VS ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-10(1) CHENNAI-600 034. PAN:AAFPJ 2745J ( /APPELLANT) /RESPONDENT/ / APPELLANT BY : MR.S.SANKARALINGAM, IRS CIT (RETD) MR.T.C.NARAYANAN,IT PRACTITIONER MR.A.K.RAMU, ITO RETIRED /RESPONDENTBY : MR.G.JOHNSON, ADDL CIT /DATE OF HEARING : 10.02.2021 /DATE OF PRONOUNCEMENT : 23.02.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE LEARNED CIT(A)-12, CHENNAI DATED 19.11.2018 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THIS APPEAL IS AGAINST THE ORDERS OF CLT (APPEA LS)-12, CHENNAI (ORDER IN ITA I02/CIT (A) -12 /2017-18, PASSED ON 1 9-11-18. 2. THE ORDER OF THE LEARNED CIT (APPEALS) IS CONTRA RY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND OPPOSED TO PRINCI PLES OF NATURAL JUSTICE, FAIR PROCEDURE AND LEGITIMATE EXPE CTATION. 3. DENIAL OF FAIR OPPORTUNITIES AND NATURAL JUSTICE : THE FIRST APPELLATE AUTHORITY FAILED TO CONSIDER TH E WRITTEN SUBMISSIONS FILED DURING THE COURSE OF HEARING. HE DID NOT AFFORD REASONABLE OPPORTUNITIES TO THE APPELLANT BEFORE CO MING TO CONCLUSIONS. HE DID NOT PROVIDE ANY OPPORTUNITY BEF ORE APPLYING 2 ITA NO. 3335/CHNY/2018 THE CASE LAW QUOTED BY HIM IN THE ORDER. HE DID NOT DISCUSS ANY OF THE DECISIONS RELIED ON BY THE APPELLANT AND REF ERRED TO IN THE WRITTEN SUBMISSIONS. 4. ASSESSMENT ORDER: THE ASSESSMENT ORDER ULS 143 READ WITH SECTION 147 IS BASED ON CONJECTURES, PRE-CONCLUDED MINDSET ENQUIRES AND MAT ERIALS NOT DIRECTLY RELATED TO THE APPELLANTS ROLE. 5. ASSESSES CONDUCT: THE HONOURABLE CIT (APPEALS) HAS FAILED TO APPRECIA TE THE FACT THAT THE ASSESSEE HAD DISCHARGED HIS RESPONSIBILITY IN PROVING THE TRANSACTIONS AND IT IS FOR THE A.O. TO DISPROVE THE M BEFORE MAKING AN ADDITION OR DISALLOWING THE CLAIMS MADE BY THE A SSESSEE IN THE RETURN. HE HAD FAILED TO TAKE NOTE OF THE FACT THAT THE SHARE PRICES OF THE COMPANY UNDER REFERENCE HAS SEEN UPS AND DOWNS DURING A PERIOD OF 21 MONTHS AS NOTED BY THE A.O IN HER ASSESSMENT ORDER AND THE ASSESSEE HAD NO ROLE IN TH ESE FLUCTUATIONS. 6. MATERIALS USED AGAINST THE ASSESSEE : THE LEARNED CIT (APPEALS) HAS FAILED TO NOTE, AS PO INTED OUT BY THE APPELLANT IN THE GROUNDS OF APPEAL BEFORE HIM, THAT THE AO HAD NOT REFERRED TO ANY REPORT/STATEMENT FROM BROKE R INDICATING THE ASSESSEE PERSONALLY FOR HIS ROLE IN PRICE MANIP ULATION AND/OR OBTAINING BOGUS ENTRIES ETC., IF ANY. THE LEARNED C IT (APPEALS) HAS FAILED TO NOTE THAT THE ASSESSMENT MADE, WITHOU T AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO CROSS- EXAMINE ANY I NFORMATION /EVIDENCE USED IN THE ASSESSMENT IS AGAINST THE PRI NCIPLES OF NATURAL JUSTICE AND ESTABLISHED ASSESSMENT PROCEDUR ES. 7. WRITTEN SUBMISSIONS FILED BEFORE THE CIT (A): THE APPELLANT SUBMITS THE GROUNDS OFAPPEAL AND WRIT TEN SUBMISSIONS FILED BEFORE THE CIT (APPEALS) MAY BE T AKEN AS PART AND PARCEL OF THIS GROUNDS OF APPEAL. 8. DECISIONS RELIED ON BY THE CIT (A): A) THE CIT(APPEALS) HAS REFERRED TO THE HONOURABLE SUPREME COURTS ORDER ON 8-2-18 IN THE CASE OF SEBI VS RAKHI TRADING PRIVATE LIMITED. THAT WAS AN APPEAL B Y THE SEBI AGAINST THE ORDER OF SECURITIES APPELLATE TRIB UNAL. THE 3 ITA NO. 3335/CHNY/2018 FACTS OF THE CASE ARE DIFFERENT IN ENTIRETY WITH TH E FACTS OF THE PRESENT APPEAL. THAT CASE RELATED TO FUTURES AND OP TIONS TRADING THE SAME DAY WITHIN MINUTES AND SECONDS-BY CERTAIN BROKEN AND TRADERS. THE ALLEGATIONS IN THE SAID CAS E WAS THAT THAT THE PARTIES WERE BUYING AND SELLING SECUR ITIES IN THE DERIVATIVES SEGMENT AT A PRICE WHICH DID NOT REFLEC T THE VALUE OF THE UNDERLYING IN SYNCHRONIZED AND REVERSE TRANSACTIONS. THE SUPREME COURTS DECISION IS ABOUT SYNCHRONIZED TRADING AND HELD IT IS VIOLATIVE OF TR ANSPARENT NORMS OF LADING IN SECURITIES. THE DECISION DOES NO T HAVE RELEVANCE TO AN INVESTOR BUYING SHARES AT A LESSER PRICE AND SELLING THEM AT A LUCRATIVE PRICE AFTER SOME TIME S AY ONE YEAR, BOTH TRANSACTIONS THROUGH PROPER APPROVED CHA NNELS I.E STOCK EXCHANGE REGISTERED BROKERS. B) THE CIT (APPEALS) HAS REFERRED TO A DECISION OF CHENNAI ITAT IN THE CASE OF VIDYA REDDY VS ITO (TA 2016 OF 2017) THE FACTS IN THE SAID CASE ARE DIFFERENT FROM THE P RESENT APPEAL. IN THE PRESENT APPEAL THE ASSESSE HAD PRODU CED ALL AVAILABLE EVIDENCES IN HIS POSSESSION ON GENUINENES S OF INVESTMENT IN SHARES OF THE COMPANY AND PRODUCED DE TAILS OF BANK ENTRIES FOR BUYING AND RECEIVING SALE PROCE EDS, CONTRACT NOTES, THE NAMES AND ADDRESSES OF BROKERS FOR PURCHASE AND SALE. 9. NO EVIDENCE AGAINST THE APPELLANT: THE CIT (APPEALS) HAS FAILED TO NOTE THAT THERE IS NO DIRECT OR INDIRECT EVIDENCE THAT THE APPELLANT ENTERED INTO A NY COLLISION DIRECT, DELIBERATE, CONSCIOUS AND SYSTEMATIC ACTION S TOWARDS CONVERTING UNACCOUNTED MONEY INTO LONG TERM PROFIT ON SALE OF SHARES. NEITHER THE AO NOR THE CIT (APPEALS) COULD SHOW ANY DIRECT EVIDENCE FROM A N Y SOURCE ABOUT SUCH AN ACTIVITY ON THE PART OF THE APPELLANT. 10. APPELLANT HAD NO CONTROL OVER THE SHARE PRICE : THE AO AND THE CIT (APPEALS) HAVE FAILED TO NOTE T HAT IN THE CASE OF THE ASSESSEE THE GENUINENESS OF THE COMPANY MIS. PS IT INFRA SERVICES LTD WHICH IS A THIRD PART AND NOT UNDER THE CONTROL OF THE ASSESSEE AND WHOSE SHARES ASSESSEE H AD PURCHASED AND SOLD IS THE ISSUE. MOREOVER THE PURCH ASE AND SALES OF SHARES WERE MADE THROUGH RECOGNIZED STOCK EXCHANGE IN THE OPEN MARKET FROM UNKNOWN AND UNCONNECTED PET SONS. THEREFORE THE FINAL REASON GIVEN BY THE CIT(APPEAL) FOR UPHOLDING 4 ITA NO. 3335/CHNY/2018 THE ASSESSMENT ORDER IS WITHOUT ANY EVIDENCE BUT ME RELY AN UNPROVED ALLEGATION ON THE ASSESSEE 11. LONG TERM CAPITAL GAINS EXEMPTION: THE CIT (APPEALS) AND THE AO HAVE FAILED TO NOTE TH AT THE ASSESSEE DID NOT SELL THE SHARES WHEN THE PRICE OF SHARE WAS RULING AT ITS HIGHEST RS,552 PER SHARE DURING JULY 2014 BUT SOLD THEM AFTER ONE YEAR OF HOLDING TO MAKE BENEFIT OF L ONG TERN CAPITAL GAINS EXEMPTION. THE CIT (APPEALS) AND THE AO HAVE FAILED TO APPRECIATE THAT THE APPELLANT IS LAWFULLY ENTITLED TO ARRANGE HIS FINANCIAL AFFAIRS TO MAKE BENEFIT OUT O F TAX EXEMPTIONS AVAILABLE. 12. SIMILAR CASE DECIDED BY THE ITAT CHENNAI: THE FACTS OF THE CASE ARE SIMILAR TO THE CASE IN IT A II87/CHNY/2017 WHEREIN THE HONOURABLE ITAT CHERMAI C BENCH HELD THAT CONCLUSION CANNOT BE BLUNTLY MADE ON THE BASIS OF SURMISES AND CONJECTURES IN THE CASE OF ANY ASSE SSEE WHEN CERTAIN OTHER MATERIAL FACTORS ARE IN FAVOUR OF THE ASSESSEE L3.OTHER RELATED DECISIONS: THE APPELLANT RELIES ON THE FOLLOWING DECISIONS IN HIS SUPPORT: A) BOMBAY HIGH COURT IN THE CASE OF JAMNA DEVI AGGA RWAL 236 CTR 32(2010) B) BOMBAY HIGH COURT IN THE CASE OF MUKESH RATILAL MAROLIA (2012)80 CCH 0407 C) GUJARAT HIGH COURT IN THE CASE OF MAHESHCHANDRA G.VAKIL (2013)40 TAXMAN 326 D) AHINEDABAD ITAT IN THE CASE OF MAHESH G VAKIL IT A NO.3104 IAHD./2009 E) KOLKATA HIGH COURT IN THE CASE OF EMERALD COMMER CIAL LTD (2002)120 TAXMAN 282 F) KOLKATA ITAT IN THE CASE OF SUNITA KHEMKA ITA NO .714 TO 718/KOL/2011. 5 ITA NO. 3335/CHNY/2018 G) KOLKATA ITAT IN THE CASE OF ANIL KHEMKA ITA NO.9 01 TO 905/KOL/2009 DATED 28/01/2010 14. ADDITIONAL GROUNDS: THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUN DS. 3. THE ASSESSEE HAS ALSO FILED A PETITION FOR ADMI SSION OF ADDITIONAL GROUNDS AND ARGUED THAT BY AN INADVERTEN T ERROR, HE HAS OMITTED TO TAKE A SPECIFIC GROUND CHALLENGING V ALIDITY OF NOTICE ISSUED U/S.148 OF THE ACT, BEFORE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S.143(2) OF THE ACT, AND THUS, RE ASSESSMENT PROCEEDINGS ARE NULL AND VOID AND HENCE, A PETITION HAS BEEN FILED EXPLAINING FACTS AND REASONS FOR FILING ADDIT IONAL GROUNDS. THE AR FURTHER SUBMITTED THAT ADDITIONAL GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IS PURELY LEGAL GROUND AND F URTHER NO NEW FACTS ARE REQUIRED TO BE EXAMINED AND HENCE, I N VIEW OF DECISION OF HONBLE SUPREME COURT IN NATIONAL THE RMAL POWER CORPORATION LTD. VS. CIT 229 ITR 383 (SC) A DDITIONAL GROUNDS FILED BY ASSESSEE MAY BE ADMITTED. 4. THE LEARNED DR, ON THE OTHER HAND, STRONGLY OPPO SING ADDITIONAL GROUNDS FILED BY ASSESSEE SUBMITTED THAT ASSESSEE HAS FAILED TO MAKE OUT A CASE FOR ADMISSION OF ADD ITIONAL GROUNDS AND ALSO FACTS WITH REGARD TO SAID ADDITIO NAL GROUNDS 6 ITA NO. 3335/CHNY/2018 WAS ALREADY ON RECORD AND HENCE, ADDITIONAL GROUND S OF APPEAL FILED BY ASSESSEE SHOULD NOT BE ADMITTED. 5. WE HAVE HEARD BOTH PARTIES AND CONSIDERED PETITI ON FILED BY ASSESSEE FOR ADMISSION OF ADDITIONAL GROUNDS AND WE FIND THAT ADDITIONAL GROUNDS TAKEN BY ASSESSEE CHALLENGI NG REASSESSMENT PROCEEDINGS IN LIGHT OF NOTICE ISSUED U/S.148 BEFORE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S .143(2) IS PURELY A LEGAL GROUND FOR WHICH THERE IS NO REQUIREMENT OF EXAMINING ANY FACTS AND HENCE IN VIEW OF SPECIFIC RATIO LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF M/S. NATIONAL THERMAL POWER CORPORATION LTD. VS. CIT (SUPRA), ADDITIONAL GROUNDS OF APPEAL FILED BY ASSESSEE ARE ADMITTED. 6. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GRO UNDS OF APPEAL:- 1. THE LEARNED CIT (APPEALS) OUGHT TO HAVE NOTED T HAT THE NOTICE U/S 148 ISSUED EVEN BEFORE THE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S L43(2)AND THEREBY RE-ASSES SMENT PROCEEDINGS ARE NULL AND VOID. 2. THE LEARNED CIT (APPEALS) FAILED TO NOTE THAT TH E ASSESSING OFFICER NEVER ISSUED NOTICE U/S 143(2) AF TER THE 7 ITA NO. 3335/CHNY/2018 ASSESSEE FILED THE RETURN IN RESPONSE TO NOTICE U/S 148 AND THEREFORE THE IMPUGNED ORDER IS INVALID. 3. THE EARNED CIT (APPEALS) FAILED TO NOTE THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT BLINDLY BASED ON TH E GENERAL INVESTIGATION REPORT RECEIVED FROM DI (INVE STIGATION) KOLKATTA, WITHOUT INDEPENDENT APPLICATION OF MIND A ND INDEPENDENT VERIFICATION. 4. THE TEAMED CIT (APPEALS) FAILED TO NOTE THAT THE SATISFACTION OF ESCAPEMENT OF INCOME WAS BY THE DIT (INVESTIGATION) ONLY AND NOT BY THE ASSESSING OFFIC ER HIMSELF AND THEREFORE IT AMOUNTED TO BORROWED SATISFACTION. 5. THE LEARNED CIT (APPEALS) FAILED TO NOTE THAT TH E SANCTION GRANTED BY THE JOINT COMMISSIONER OF INCOME TAX WA S A MECHANICAL ONE WITHOUT REFERENCE TO THE RELEVANT DO CUMENTS AND WITHOUT HIS OWN APPLICATION OF MIND. 7. BRIEF FACTS ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN NON-FERROUS METALS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2015-16 ON 30. 09.2015 DECLARING TOTAL INCOME OF ` 2,55,23,010/- AND SAID RETURN WAS PROCESSED U/S.143(1) OF THE ACT ON 02.08.2016. THE ASSESSMENT HAS BEEN SUBSEQUENTLY REOPENED FOR THE R EASONS RECORDED, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN 8 ITA NO. 3335/CHNY/2018 ESCAPED ASSESSMENT AND ACCORDINGLY, NOTICE U/S.148 DATED 23.09.2016 WAS DULY SERVED ON THE ASSESSEE. IN RES PONSE TO SAID NOTICE, ASSESSEE HAS REQUESTED TO TREAT RETURN OF INCOME FILED ON 30.09.2015 AS RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S.148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASS ESSEE HAS DECLARED LONG TERM CAPITAL GAIN FROM SALE OF SHARES OF M/S. PS IT INFRA & SERVICES LTD. FOR ` 7,32,82,880/- AND FURTHER CLAIMED EXEMPTION U/S.10(38) OF THE ACT. THEREFORE, HE CAL LED UPON ASSESSEE TO FILE NECESSARY DETAILS INCLUDING COMPUT ATION OF LONG TERM CAPITAL GAIN FROM SALE OF SHARES. THE ASSESSIN G OFFICER FURTHER, ON THE BASIS OF INFORMATION FILED BY THE A SSESSEE NOTED THAT ASSESSEE HAD ORIGINALLY PURCHASED 10,00,000 EQ UITY SHARES OF M/S. PS IT INFRA & SERVICES LTD., ON 16.08.201 3 FROM M/S. PREM SAGAR VINIMAY PVT .LTD. THROUGH OPEN OFFER @ ` 35 PER EQUITY SHARE. THESE SHARES WERE SUBSEQUENTLY DEMATE D AND SOLD BETWEEN 30.10.2014 AND 03.12.2014 AT RATES RA NGING FROM ` 70 TO 90 PER EQUITY SHARE. THE ASSESSING OFFICER AFTER ANALYZING SHARE PRICE IN STOCK MARKET AND ON ANALYS IS OF FINANCIALS OF COMPANY HAS COME TO THE CONCLUSION TH AT SCRIP 9 ITA NO. 3335/CHNY/2018 SOLD BY ASSESSEE IS PENNY STOCK AND SHARE PRICE WA S RIGGED IN COLLUSION WITH CERTAIN PARTIES AND ACCORDINGLY, MAD E ADDITIONS TOWARDS ENTIRE SALE CONSIDERATION RECEIVED FROM SAL E OF M/S. PS IT INFRA & SERVICES LTD., AS UNEXPLAINED CASH CREDI TS AND BROUGHT TO TAX U/S. 68 OF THE ACT. 8. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LEARNED CIT(A) BUT COULD NOT SUCCEED. THE LEARNED CIT(A) FO R THE REASONS RECORDED IN APPELLATE ORDER DATED 19.11.201 8 HAS CONFIRMED ADDITIONS MADE BY ASSESSING OFFICER TOWAR DS SALE CONSIDERATION RECEIVED FROM TRANSFER OF EQUITY SHAR ES ON THE GROUND THAT ENTIRE TRANSACTION WAS FRAUDULENT TO CR EATE UNDUE AND ILLEGAL BENEFIT TO THE ASSESSEE . IT IS IMMATER IAL WHETHER ASSESSEE HAS USED BANKING CHANNELS OR NOT, BUT WHAT IS RELEVANT TO DECIDE WHETHER PARTICULAR TRANSACTION IS GENUINE OR NOT IS THE SUBSTANCE OF TRANSACTION BETWEEN THE PAR TIES. FROM THE FACTS GATHERED DURING ASSESSMENT PROCEEDINGS, I T IS VERY CLEAR THAT ASSESSEE HAS CREATED TRANSACTION KNOWING WELL THAT COMPANY, AGENTS AND OTHER PERSONS INVOLVED IN THE ORGANIZED RACKET ARE AIDING ASSESSEE TO CREATE BOGUS SHARE TR ANSACTIONS 10 ITA NO. 3335/CHNY/2018 RESULTING TO SHAM TRANSACTIONS, ACCORDINGLY, OPINED THAT THERE IS NO ERROR IN THE FINDINGS OF ASSESSING OFFICER TO M AKE ADDITION TOWARDS SALE CONSIDERATION RECEIVED FOR SALE OF EQU ITY SHARES U/S.68 OF THE ACT. AGGRIEVED BY LEARNED CIT(A) ORDE R, THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE FIRST ISSUE THAT CAME UP FOR CONSIDERATION I N THE ADDITIONAL GROUNDS FILED BY ASSESSEE IS VALIDITY OF NOTICE ISSUED U/S.148 OF THE ACT AND CONSEQUENT REASSESSMENT ORDE R PASSED U/S.147 READ WITH SECTION 143(3) OF THE ACT. THE L EARNED AR FOR THE ASSESSEE SUBMITTED THAT NOTICE ISSUED U/S.1 48 AND CONSEQUENT REASSESSMENT PROCEEDINGS IS INVALID BECA USE, ASSESSING OFFICER HAD ISSUED REASSESSMENT NOTICE U/ S.148 OF THE ACT ON 23.09.2016 AND SAID NOTICE WAS ISSUED B EFORE EXPIRY OF TIME LIMIT FOR ISSUE OF ASSESSMENT NOTICE U/S.143(2) OF THE ACT. THE AR REFERRING TO CHRONOLOGY OF EVENTS SUBMITTED THAT ASSESSEE HAS FILED RETURN OF INCOME FOR IMPUG NED ASSESSMENT YEAR ON 30.09.2015 AND SAID RETURN WAS PROCESSED U/S.143(1) OF THE ACT ON 10.08.2016. THE DUE DATE FOR ISSUE OF NOTICE U/S.143(2) IS UPTO 30.09.2016. THE ASSESSING OFFICER HAS ISSUED REASSESSMENT NOTICE U /S.148 OF 11 ITA NO. 3335/CHNY/2018 THE ACT ON 23.09.2016. FROM THE ABOVE, IT IS VERY C LEAR THAT NOTICE ISSUED U/S.148 OF THE ACT ON 23.09.2016 IS B EFORE THE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S.143(2) OF THE ACT I.E. UPTO 30.09.2016 AND CONSEQUENTLY, INITIATION OF PRO CEEDINGS U/S.148 IS NOT VALID AND HENCE, WHOLE PROCEEDINGS IS NULL AND VOID. IN THIS REGARD, HE RELIED UPON THE DECISION O F HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS M/S.QATALYS SOFTWARE TECHNOLOGIES LTD.(2009) 308 ITR 249 AND IN THE CAS E OF CIT VS. K.M PACHAYAPPAN 304 ITR 264. THE ASSESSEE HAS A LSO RELIED UPON THE DECISION OF ITAT, CHENNAI THIRD MEM BER DECISION IN THE CASE OF M/S. SUPER SPINNING MILLS L TD. VS. ADDL.CIT (2010) 129 TTJ 305. 10. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUP PORTING ORDER OF LEARNED CIT(A) SUBMITTED THAT THERE IS NO MERIT IN THE ARGUMENTS TAKEN BY ASSESSEE IN LIGHT OF DECISION O F HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. K .M PACHAYAPPAN (SUPRA), BECAUSE ITAT., AHMEDABAD D B ENCH IN THE CASE OF ITO VS RIPUL C.DALAL IN ITA NO.1022/AH D/2003 HAS CONSIDERED AN IDENTICAL ISSUE AND BY FOLLOWING THE DECISION OF ITAT., LUCKNOW BENCH IN THE CASE OF M/S. KAILASH AU TO FINANCE 12 ITA NO. 3335/CHNY/2018 LTD. VS DCIT (2009) 32 SOT 80 HAS HELD THAT IN VIE W OF AMENDMENTS BROUGHT IN TO EXPLANATION 2(B) TO SECTIO N 147 OF THE ACT, THE LAW LAID DOWN BY HON'BLE JURISDICTIONA L HIGH COURT OF MADRAS IN THE CASE OF CIT VS. K.M PACHAYAPPAN (S UPRA) IS NO MORE APPLICABLE, BECAUSE WHEN THERE IS NO ASSESS MENT FRAMED, THE ASSESSING OFFICER IS WELL WITHIN HIS PO WERS TO REOPEN THE ASSESSMENT, BUT SUCH REOPENING CAN BE M ADE EVEN BEFORE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S .143(2) OF THE ACT. 11. WE HAVE HEARD BOTH PARTIES, PERUSED MATERIALS A VAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE SOLITARY QUESTION THAT CAME UP FOR OUR CONSIDERATIO N IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE IS WHETHER NOTI CE ISSUED U/S.148 DATED 23.09.2016 IS VALID AND CONSEQUENT REASSESSMENT ORDER PASSED U/S.143(3) R.W.S 147 DATE D 30.12.2017 IS VALID OR NOT? THE ADMITTED FACTS BO RNE OUT FROM RECORDS CLEARLY INDICATE THAT ASSESSEE FILED RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR ON 30.09.2015 AND SAID RET URN WAS PROCESSED U/S.143(1) OF THE ACT ON 10.08.2016. FURT HER, TIME LIMIT FOR ISSUE OF SCRUTINY ASSESSMENT NOTICE U/S .143(2) WAS 13 ITA NO. 3335/CHNY/2018 AVAILABLE UPTO 30.09.2016. IT IS ALSO AN ADMITTED FACT THAT BEFORE EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE U/S .143(2) OF THE ACT, ON 30.09.2016, THE ASSESSING OFFICER HAS ISSUE D REASSESSMENT NOTICE U/S.148 ON 23.09.2016. IT IS WE LL SETTLED PRINCIPLE OF LAW BY THE DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF CIT VS. QATALYS SOFTWARE TECHNOLOGIES LTD.(SUPRA), THAT WHEN TIME FOR ISSUE OF NOTICE U/S.143(2) HAD NOT EXPIRED, THE ASSESSING OFFICER CANNOT ISSUE REASSESSMENT NOTICE U/S.148 OF THE ACT. THE HON'BL E JURISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF K.M PACHAYAPPAN (SUPRA) HAS CONSIDERED AN IDENTICAL ISS UE AND BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUST VS. CIT (2000) 242 ITR 381, HELD THAT CONCLUSION DRAWN BY THE TRIBUNAL THAT NO ACTION COULD BE INITIATED U/S.147 OF THE ACT, WHEN THERE IS PENDENCY OF RETURN BEFORE THE ASSESSI NG OFFICER BASED ON VALID MATERIALS AND FACTS DO NOT CALL FOR ANY INTERFERENCE. WE FURTHER NOTED THAT THE HONBLE M ADRAS HIGH COURT WHILE ANSWERING SUBSTANTIAL QUESTION IN FAVOU R OF THE ASSESSEE HELD THAT WHEN VALID RETURN IS FILED WITHI N DUE DATE 14 ITA NO. 3335/CHNY/2018 SPECIFIED UNDER THE ACT, THE ASSESSING OFFICER CAN ISSUE NOTICE U/S.143(2) OF THE ACT FOR FRAMING ASSESSMENT U/S.14 3(3) WHEN TIME LIMIT FOR ISSUE OF SUCH NOTICE IS AVAILABLE. IN A SITUATION WHERE ASSESSING OFFICER CAN ISSUE NOTICE U/S.143(2) , HE COULD NOT HAVE ISSUED NOTICE FOR THE PURPOSE OF REOPENING OF ASSESSMENT U/S.147 OF THE ACT. THE RELEVANT FINDIN GS OF THE HONBLE MADRAS HIGH COURT ARE AS UNDER:- 5. HEARD THE COUNSEL. IN THIS CASE, RETURN OF INCO ME WAS FILED UNDER SECTION 139(4) OF THE ACT ON 15.03.2000 AND N OTICE UNDER SECTION 143(2) FOR FRAMING ASSESSMENT UNDER S ECTION 143(3) COULD HAVE BEEN ISSUED UPTO 31.03.2000. THER EFORE, A VALID RETURN OF INCOME WAS PENDING AS ON 15.03.2000 . THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O N 15.03.2000 WHEN A VALID RETURN UNDER SECTION 139(4) WAS PENDING. IN THIS CASE THE RETURN WAS FILED AND THE SAME IS PENDING, WHICH MEANS THAT THE PROCEEDING IS STILL P ENDING. IN SUCH A SITUATION, THE REVENUE COULD NOT HAVE ISSUED NOTICE FOR THE PURPOSE OF REOPENING UNDER SECTION 147 OF THE A CT. IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUST VS. COMMISSIONER OF INCOME-TAX [2000] 242 ITR 381 (SC), THE SUPREME COURT CONSIDERED THE SCOPE OF REO PENING THE ASSESSMENT AND HELD AS FOLLOWS: 'IT IS SETTLED LAW THAT UNLESS THE RETURN OF INCOME ALREADY FILED IS DISPOSED OF, NOTICE FOR REASSESSMENT UNDER SECTION 148 CANNOT BE ISSUED, I.E., NO REASSESSMENT PROCEEDINGS CAN BE INITIATED SO LONG A S ASSESSMENT PROCEEDINGS PENDING ON THE BASIS OF THE RETURN ALREADY FILED ARE NOT TERMINATED. ACCORDING TO THE REVENUE IT IS IMMATERIAL WHETHER THE ORDER IS COMMUNICATED OR NOT AND THE ONLY BAR TO THE 15 ITA NO. 3335/CHNY/2018 REASSESSMENT PROCEEDINGS IS THAT PROCEEDINGS ON THE RETURN ALREADY FILED SHOULD HAVE BEEN TERMINATED.' '.... A MERE GLANCE AT THIS NOTE WOULD SHOW THAT IT COULD NOT BE SAID THAT THE INCOME-TAX OFFICER GAVE FINALI TY TO THE REFUND SINCE NO REFUND IS GRANTED EITHER IN THE HANDS OF THE TRUST OR IN THE HANDS OF THE BENEFICIARIES. IT IS AN INCONCLUSIVE NOTE WHERE THE INCOME-TAX OFFICER LEFT THE MATTER AT THE STAGE OF CONSIDERATION EVEN WITH REGA RD TO REFUND IN THE HANDS OF THE BENEFICIARIES. THIS NOTE WAS ALSO NOT COMMUNICATED TO THE TRUSTEES. WHEN WE EXAMINE THE NOTE DATED NOVEMBER 10, 1965, ON THE FI LE OF 1963-64 NOTHING FLOWS FROM THAT AS WELL. IN ANY CASE IF IT IS AN ORDER, IT WOULD BE APPEALABLE UNDER SEC TION 249 OF THE ACT. SINCE THE PERIOD OF LIMITATION STAR TS FROM THE DATE OF INTIMATION OF SUCH AN ORDER, IT IS IMPE RATIVE THAT SUCH AN ORDER BE COMMUNICATED TO THE ASSESSEE. HAD THE INCOME-TAX OFFICER PASSED ANY FINAL ORDER, IT WOULD HAVE BEEN COMMUNICATED TO THE ASSESSEE WITHIN A REASONABLE PERIOD. IN ANY CASE, WHAT WE FIND IS T HAT THE NOTE DATED NOVEMBER 10, 1965, IS MERELY AN INTERNAL ENDORSEMENT ON THE FILE WITHOUT THERE BEIN G AN INDICATION IF THE REFUND APPLICATION HAS BEEN FINAL LY REJECTED. BY MERELY RECORDING THAT IN HIS OPINION, NO CREDIT FOR TAX DEDUCTED AT SOURCE IS TO BE ALLOWED, THE INCOME-TAX OFFICER CANNOT BE SAID TO HAVE CLOSED TH E PROCEEDINGS FINALLY. THE DECISIONS REFERRED TO BY T HE REVENUE ARE OF NO HELP IN THE PRESENT CASE. WE ARE, THUS, OF THE OPINION THAT DURING THE PENDENCY OF TH E RETURN FILED UNDER SECTION 139 OF THE ACT ALONG WIT H THE REFUND APPLICATION UNDER SECTION 237 OF THE ACT, AC TION COULD NOT HAVE BEEN TAKEN UNDER SECTION 147/148 OF THE ACT. OUR ANSWER TO THE QUESTION, THEREFORE, IS IN T HE NEGATIVE, I.E., AGAINST THE REVENUE.' IN THE CASE OF KLM ROYAL DUTCH AIRLINES VS. ASSISTA NT DIRECTOR OF INCOME-TAX [2007] 292 ITR 49 (DELHI), THE DELHI HIGH COURT, FOLLOWING THE ABOVE SUPREME COURT JUDGMENT, CONSIDE RED THE SCOPE OF PROVISION OF SECTIONS 139 AND 147 OF THE A CT AND HELD AS FOLLOWS: 16 ITA NO. 3335/CHNY/2018 'APPLYING THIS LINE OF DECISIONS TO THE FACTS OF TH E PRESENT CASE, THE INESCAPABLE CONCLUSION THAT WOULD HAVE TO BE REACHED IS THAT WHILE ASSESSMENT PROCEEDINGS REMAIN INCHOATE, NO 'FRESH EVIDENCE OR MATERIAL' COULD POS SIBLY BE UNEARTHED. IF ANY SUCH MATERIAL OR EVIDENCE IS AVAI LABLE, THERE WOULD BE NO RESTRICTIONS OR CONSTRAINTS ON IT S BEING TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER F OR FRAMING THE THEN CURRENT ASSESSMENT. IF THE ASSESSM ENT IS NOT FRAMED BEFORE THE EXPIRY OF THE PERIOD OF LIMIT ATION FOR A PARTICULAR ASSESSMENT YEAR, IT WOULD HAVE TO BE ASS UMED THAT SINCE PROCEEDINGS HAD NOT BEEN OPENED UNDER SE CTION 143(2), THE RETURN HAD BEEN ACCEPTED AS CORRECT. IT MAY BE ARGUED THAT THEREAFTER RECOURSE COULD BE TAKEN TO S ECTION 147, PROVIDED FRESH MATERIAL HAD BEEN RECEIVED BY T HE ASSESSING OFFICER AFTER THE EXPIRY OF LIMITATION FI XED FOR FRAMING THE ORIGINAL ASSESSMENT. SO FAR AS THE PRES ENT CASE IS CONCERNED, WE ARE OF THE VIEW THAT IT IS EVIDENT THAT, FACED WITH SEVERE PAUCITY OF TIME, THE ASSESSING OFFICER HAD ATTEMPTED TO TRAVEL THE PATH OF SECTION 147 IN THE VAIN ATTEMPT TO ENLARGE THE TIME AVAILABLE FOR FRAMING T HE ASSESSMENT. THIS IS NOT PERMISSIBLE IN LAW.' APPLYING THE PRINCIPLES ENUNCIATED IN THE JUDGMENTS OF THE SUPREME COURT AS WELL AS THE DELHI HIGH COURT, CITE D SUPRA, THE TRIBUNAL IS RIGHT IN COMING TO A CONCLUSION THAT NO ACTION COULD BE INITIATED UNDER SECTION 147 OF THE ACT, WHEN THE RE IS A PENDENCY OF THE RETURN BEFORE THE ASSESSING OFFICER . THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALID MA TERIALS AND EVIDENCE AND WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. 12. WE FURTHER NOTED THAT THE HONBLE SUPREME COURT IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUST V. CIT (SUPRA) HAS CONSIDERED AN IDENTICAL I SSUE AND HELD THAT IT IS WELL SETTLED LAW THAT UNLESS RETURN OF I NCOME ALREADY FILED IS DISPOSED OF, NOTICE FOR REASSESSMENT U/S. 148 CANNOT BE 17 ITA NO. 3335/CHNY/2018 ISSUED I.E. NO REASSESSMENT PROCEEDINGS CAN BE INIT IATED SO LONG AS VALID RETURN FILED BY ASSESSEE IS ATTAINED FINALITY. THE HONBLE SUPREME COURT FURTHER HELD THAT IF ASSESSME NT IS NOT FRAMED BEFORE EXPIRY OF PERIOD OF LIMITATION FOR TH E PARTICULAR ASSESSMENT YEAR, IT WOULD HAVE TO BE ASSUMED THAT SINCE PROCEEDINGS HAD NOT BEEN OPENED UNDER SECTION 143(2 ), THE RETURN HAD BEEN ACCEPTED AS CORRECT. IT MAY BE ARGU ED THAT THEREAFTER RECOURSE COULD BE TAKEN TO SECTION 147, PROVIDED FRESH MATERIAL HAD BEEN RECEIVED BY THE ASSESSING O FFICER AFTER THE EXPIRY OF LIMITATION FIXED FOR FRAMING THE ORIG INAL ASSESSMENT. IN THIS CASE, ON PERUSAL OF FACTS AVAIL ABLE ON RECORD, WE FIND THAT ASSESSEE HAS FILED VALID RETUR N WITHIN DUE DATE PRESCRIBED UNDER THE ACT AND SUCH RETURN WAS PROCESSED U/S.143(1) OF THE ACT. FURTHER, TIME LIMIT FOR ISSU E OF 143(2) NOTICE WAS NOT EXPIRED, WHEN THE ASSESSING OFFICER HAS ISSUED REASSESSMENT NOTICE U/S.148 DATED 23.09.2016. THE REFORE, WE ARE OF THE CONSIDERED VIEW THAT CASE OF THE ASSESS EE IS SQUARELY COVERED BY THE DECISION OF HON'BLE HIGH CO URT OF MADRAS IN THE CASE OF CIT VS. K.M PACHAYAPPAN (SUPR A) AND THE VIEW TAKEN BY HON'BLE HIGH COURT OF MADRAS IS F ULLY 18 ITA NO. 3335/CHNY/2018 SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAM'S SUPPLEMENTAL FAMILY TRUST V. CIT (SUPRA) AND HENCE, NOTICE ISSUED U/S. 148 DATED 23.09.2016 IS INVALID AND CONSEQUENT REASSESSMENT O RDER FRAMED U/S.143(3) R.W.S. 147 DATED 30.12.2017 IS NU LL AND VOID. 13. COMING BACK TO THE CASE LAW RELIED UPON BY LEAR NED DR IN LIGHT OF AMENDMENTS BROUGHT IN AS EXPLANATION 2( B) TO SECTION 147 OF THE ACT, IN LIGHT OF THE DECISION OF ITAT., AHMEDABAD D BENCH IN ITO VS. RIPUL C.DALAL (SUPRA). WE FIND THA T ALTHOUGH THE TRIBUNAL HAS DECIDED THE ISSUE BY REFERRING TO THE DECISION OF ITAT., LUCKNOW BENCH IN THE CASE OF M/S. KAILASH AUTO FINANCE LTD. VS DCIT (SUPRA), BUT FACTS OF THOSE CA SES ARE ENTIRELY DIFFERENT AND FURTHER TRIBUNAL HAS NOT TAK EN INTO CONSIDERATION BINDING PRECEDENT OF HON'BLE HIGH COU RT OF MADRAS IN THE CASES OF CIT VS. QATALYS SOFTWARE T ECHNOLOGIES LTD. (SUPRA) AND CIT VS. K.M PACHAYAPPAN (SUPRA). FURTHER, AMENDMENTS BROUGHT IN AS EXPLANATION 2(B) TO SECTIO N 147 OF THE ACT, IS ON DIFFERENT CONTEXT AND HAS NO RELEVAN CE TO THE ISSUE OF WHETHER REASSESSMENT NOTICE CAN BE ISSUED BEFORE 19 ITA NO. 3335/CHNY/2018 EXPIRY OF TIME LIMIT OF ISSUE OF NOTICE U/S. 143(2) OR NOT. FURTHER, AS PER EXPLANATION 2(B) WHAT WE UNDERSTOOD IS DEEME D CASES AT ESCAPED ASSESSMENT ALSO INCLUDES A CASE WHERE R ETURN OF INCOME HAS BEEN FURNISHED BY ASSESSEE, BUT NO ASSES SMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. FROM PLAIN READING OF EXPLANATION 2(B) OF SECTION 147, IT IS V ERY CLEAR THAT EVEN IF NO ASSESSMENT WAS MADE U/S.143(1) OR 143(3) , STILL ASSESSMENT CAN BE REOPENED U/S.147 OF THE ACT, IF T HE ASSESSING OFFICER NOTICED ESCAPEMENT OR UNDERSTATE MENT OF INCOME. IN THIS CASE, ISSUE IS ENTIRELY DIFFERENT BECAUSE QUESTION BEFORE US IS WHETHER ASSESSING OFFICER W AS RIGHT IN ISSUING REASSESSMENT NOTICE U/S. 148 OF THE ACT, W HEN VALID RETURN FILED BY ASSESSEE IS NOT ATTAINED FINALITY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT EXPLANATION 2(B) HA S NO RELEVANCE TO DECIDE THE ISSUE WHETHER ASSESSING OF FICER WAS RIGHT IN REOPENING OF ASSESSMENT U/S. 147, WHEN H E COULD HAVE ISSUED ASSESSMENT NOTICE U/S. 143(2) ON VALID RETUR N FILED BY 20 ITA NO. 3335/CHNY/2018 ASSESSEE AND THE TIME LIMIT FOR ISSUE OF SUCH NOTIC E IS NOT EXPIRED WHEN REASSESSMENT NOTICE WAS ISSUED. 14. IN THIS VIEW OF THE MATTER, AND CONSIDERING FAC TS AND CIRCUMSTANCES OF THE CASE AND BY RESPECTFULLY FOLLO WING DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT OF M ADRAS IN THE CASES OF CIT VS M/S.QATALYS SOFTWARE TECHNOLOGIES LTD.(SUPRA) AND IN THE CASE OF CIT VS. K.M PACHAYA PPAN (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT NOTICE ISSUED U/S.148 DATED 23.09.2016, BEFORE THE EXPIRY OF TIME LIMIT FOR NOTICE U/S.143(2) FOR THE IMPUGNED ASSESSMENT YEAR IS INVALID AND THUS, CONSEQUENT REASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 IS NULL AND VOID. HENCE, WE QUASH REASSE SSMENT ORDER PASSED BY THE ASSESSING OFFICER. 15. THE ASSESSEE HAS RAISED VARIOUS GROUNDS CHALLE NGING VALIDITY OF ASSESSMENT ORDER PASSED BY ASSESSING O FFICER IN LIGHT OF NON-ISSUE OF NOTICE U/S.143(2) AFTER FILIN G RETURN OF INCOME IN RESPONSE TO NOTICE U/S.148 OF THE ACT AN D ARGUED THAT IN ABSENCE OF NOTICE ISSUED U/S.143(2) AGAINST RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.148 OF THE A CT, 21 ITA NO. 3335/CHNY/2018 ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER I S INVALID AND LIABLE TO BE QUASHED. THE ASSESSEE HAS ALSO CHA LLENGED ADDITIONS MADE BY ASSESSING OFFICER TOWARDS SALE CONSIDERATION RECEIVED FOR TRANSFER OF EQUITY SHA RES U/S.68 OF THE ACT ON MERITS. SINCE, WE HAVE QUASHED THE ASSES SMENT ORDER PASSED BY ASSESSING OFFICER ON LEGAL ISSUE, OTHER GROUNDS TAKEN BY ASSESSEE INCLUDING NON-ISSUE OF N OTICE U/S.143(2) AND ALSO ADDITIONS MADE BY ASSESSING OF FICER TOWARDS SALE CONSIDERATION U/S.68 OF THE ACT BECOME S ACADEMIC IN NATURE. HENCE, OTHER GROUNDS TAKEN BY ASSESSEE A RE DISMISSED AS INFRUCTUOUS. 16. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2021 SD/ SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) ' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ' /CHENNAI, ' / DATED 23 RD FEBRU ARY, 2021 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .
