VIPLAV TRADING LTD, MUMBAI V. ACIT., RANGE-8(3), MUMBAI

ITA 3461/MUM/2011

• Counselvise Citation: 346119914 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 28-08-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Assessee Lawyers: G P MEHTA
• Keywords: Opportunity of being heard; Principle of natural justice; Period of limitation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.540/MUM/2008 AND ITA NO.3461/MUM/2011 ( / ASSESSMENT YEAR :2003-04) VIPLAV TRADING LIMITED, C/O G P MEHTA AND CO., CAS, 807, TULSIANI CHAMBERS, 212, NARIMAN POINT, MUMBAI-400021 / VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE- 8(3), 2ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, CHURCHGATE, MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./ $% ./ PAN/GIRNO.: AAACV1487B & / APPELLANT BY : SHRI G P MEHTA AND !' ' & /RESPONDENT BY : SHRI RAJESH RANJAN PRASAD ( ) ' * + / DATE OF HEARING : 28.8.2014 ,- ' * + / DATE OF PRONOUNCEMENT : 10.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS PASSED BY LD CIT(A)-XXIX, AND CIT( A)-18, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2003-04. THE APPEAL NUMBERED AS ITA 540/MUMBAI/2008 RELATES TO QUANTUM PROCEEDINGS AND THE OTHER APPEAL IS RELATED TO THE PENALTY PROCEEDINGS. THE ASSESSEE I S AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN BOTH THE PROCEEDINGS. 2. WE SHALL FIRST TAKE UP THE APPEAL RELATING TO TH E QUANTUM PROCEEDINGS. WE NOTICE THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT AFTER OBTAINING AUDIT REPORT U/S 142(2A) OF THE ACT. ACCORDING TO THE ASSESSEE, THE ASSESSING I.T.A. NO.540/MUM/2008 AND ITA NO.3461/MUM/2011 2 OFFICER HAS ORDERED FOR CONDUCTING OF SPECIAL AUDIT AS PER THE PROVISIONS OF SEC. 142(2A) OF THE ACT WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE AND ALSO WITHOUT ESTABLISHING THAT THE ACCOUNTS MAINTAINED BY THE AS SESSEE WAS SO COMPLEX WHICH WARRANTED A SPECIAL AUDIT. ACCORDINGLY, THE ASSESSEE IS, INTER ALIA, CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER PA SSED BY CONSIDERING THE SPECIAL AUDIT REPORT. THOUGH THE ASSESSEE URGED TH E ABOVE SAID ISSUES BEFORE LD CIT(A), YET THEY DID NOT FIND FAVOUR WITH THE FI RST APPELLATE AUTHORITY. 3. WE HEARD THE PARTIES ON THIS PRELIMINARY ISSUE . THE LD A.R PLACED HEAVY RELIANCE ON THE DECISION RENDERED BY THE HONBLE KA RNATAKA HIGH COURT IN THE CASE OF CIT VS. SUBBOJI RAO C.H (2013) (355 ITR 320 ) TO CONTEND THAT THE IMPUGNED ASSESSMENT ORDER IS VOID AND LIABLE TO BE QUASHED. WE NOTICE THAT THE ISSUE BEFORE THE HONBLE KARNATAKA HIGH COURT WAS W HETHER THE ASSESSMENT ORDER WAS BARRED BY LIMITATION, I.E., THE CASE OF T HE ASSESSEE THEREIN WAS THAT THE ASSESSING OFFICER HAD BORROWED TIME TO COMPLETE THE ASSESSMENT BEYOND THE PRESCRIBED TIME LIMIT BY ORDERING FOR SPECIAL AUDIT U/S 142(2A) OF THE ACT. THE HONBLE KARNATAKA HIGH COURT CONSIDERED THE DECISIO N RENDERED BY HONBLE SUPREME COURT IN THE CASE OF RAJESH KUMAR & OTHERS VS. DCIT (2006)(157 TAXMAN 168; 287 ITR 91), WHEREIN THE HONBLE APEX C OURT HAS HELD THAT THE ASSESSEE SUFFERS FROM CIVIL CONSEQUENCES AS A RESUL T OF ORDER U/S 142(2A) AND SAME IS PREJUDICIAL TO HIM AND THEREFORE THE PRINCI PLES OF NATURAL JUSTICE MUST BE HELD TO BE IMPLICIT IN PROVISION OF SEC. 142(2A) O F THE ACT. THE HIGH COURT FURTHER HELD THAT THE ASSESSING OFFICER HAD RESORTED TO SUC H A PROCEDURE ONLY TO EXTEND THE PERIOD OF LIMITATION. UNDER THESE SET OF FACTS , THE HONBLE HIGH COURT HAS HELD THAT THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE TH E ORDER OF THE APPELLATE AUTHORITY AND ACCORDINGLY HELD THAT THE ASSESSMENT ORDER IS B ARRED BY LIMITATION. 4. IN THE INSTANT CASE, THERE IS NO ALLEGATION THAT THE ASSESSING OFFICER HAS RESORTED TO THE PROCEDURE OF SPECIAL AUDIT ONLY TO BORROW TIME, I.E., TO EXTEND THE PERIOD OF LIMITATION. HENCE, IN OUR VIEW, THE ASSE SSEE CANNOT DRAW SUPPORT FROM THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COU RT (REFERRED SUPRA). 5. DURING THE COURSE OF HEARING, OUR ATTENTION WAS INVITED TO THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF SA HARA INDIA (FIRM) VS. CIT (2008)(300 ITR 403), WHEREIN THE HONBLE APEX COURT , WHILE AFFIRMING ITS VIEW I.T.A. NO.540/MUM/2008 AND ITA NO.3461/MUM/2011 3 GIVEN IN THE CASE OF RAJESH KUMAR (SUPRA), HAS HELD THAT THE LAW DECLARED ON THE RULE OF AUDI ALTERAM PARTEM IS APPLICABLE PROSPECTIVELY. WE FURTHER NOTICE THAT THE DELHI SPECIAL BENCH OF TRIBUNAL HAS CONSIDERED BOTH THE DECISIONS OF HONBLE SUPREME COURT, REFERRED ABOVE, IN THE CASE OF ACIT VS. SUSHILA MILK SPECIALITIES (P) LTD (2010)(122 ITD 48) AND HAS HELD AS UNDER:- APPLYING THE PRINCIPLE IN THE PRESENT CASE, WE HOL D THAT EVEN IF DIRECTION OF SPECIAL AUDIT UNDER SECTION 142(2A) WITHOUT AFFORDI NG AN OPPORTUNITY OF BEING HEARD WAS NOT CORRECCT, THE ASSESSING OFFICER WAS NOT LACKING THE JURISDICTION FOR FRAMING ASSESSMENT THEREAFTER. TH E ONLY REQUIREMENT WAS TO AFFORD REASONABLE OPPORTUNITY WHILE FRAMING ASSE SSMENT ALSO. APPLYING THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF GUDUTHUR BROS (1960)(40 ITR 298) AS ALSO IN THE CASE OF DEEP AL AGRO FOODS (C.A. NOS. 4327 & 4328 OF 2008 DATED 11.7.2008) AND IN VI EW OF THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RAJESH KUMAR ORDER DATED 9-4-2009, WE ANSWER THE QUESTION REFERR ED FOR THE OPINION OF SPECIAL BENCH AS UNDER:- IN VIEW OF THE TWO DECISIONS OF THE HONBLE SUPREME COURT NAMELY RAJESH KUMARS CASE (SUPRA) AND SAHARA INDIA (FIRM) S CASE (SUPRA) THE ASSESSMENT IS REQUIRED TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT AS HEL D IN THE CASE OF RAJESH KUMAR (SUPRA) ITAT IN ITS ORDER DATED 3-6-20 08 AND DO NOT HOLD THE ASSESSMENT AS TIME BARRED AS HELD IN THE CASE OF RAKESH KUMAR. WE, THEREFORE, APPROVE THE VIEW TAKE N BY THE TRIBUNAL IN THE CASE OF RAJESH KUMAR (SUPRA) AND DO NOT APPROVE THE DECISION OF TRIBUNAL IN THE CASE OF RAKESH KUMA R (SUPRA). BEFORE US, THE LD A.R ALSO SUBMITTED THAT HE DOES N OT HAVE ANY OBJECTION IN SETTING ASIDE ALL THE MATTERS TO THE FILE OF ASSESS ING OFFICER FOR THEIR FRESH CONSIDERATION. 6. IN VIEW OF THE FOREGOING DISCUSSIONS AND BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF SUSHILA MILK SP ECIALITIES (P) LTD (SUPRA), WE SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE ALL T HE MATTERS TO THE FILE OF THE ASSESSING OFFICER FOR THEIR FRESH CONSIDERATION, AF TER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. WE, HOWEVER, MAKE IT CLEAR THAT THE SPECIAL AUDIT REPORT OBTAINED IN THE ORIGINAL PROCEEDING WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE SHOULD BE IGNORED BY THE ASSESSING OFFICER . IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER SHOULD EXAMINE T HE MATTER AFRESH AND IF HE CONSIDERS IT NECESSARY TO REFER THE ACCOUNTS OF THE ASSESSEE FOR A SPECIAL AUDIT, HE MAY DO SO AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. I.T.A. NO.540/MUM/2008 AND ITA NO.3461/MUM/2011 4 7. SINCE THE ENTIRE ISSUES ARISING OUT OF THE ASSESSMENT ORDER ARE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, THE PENALTY ORDE R WOULD NOT SURVIVE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LD CIT(A) ON T HE PENALTY ORDER AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. HOWEVER, THE ASSESSING OFFICER MAY INITIATE PENALTY PROCEEDINGS IN THE SET ASIDE PROCEEDINGS, IF HE CONSIDERS IT NECESSARY TO DO SO. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IN ITA NO.540/MUM/2008 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE O THER APPEAL NUMBERED AS ITA NO.3461/MUM/2011 IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10TH SEPT, 2014 . ,- ( . /0 1 2 10 TH SEPT , 2014 - ' 3) 4 SD SD ( . . / H.L. KARWA ) ( . . , / B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI : 10TH SEPT, 2014 . . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ( 9* ( ) / THE CIT(A)- CONCERNED 4. ( 9* / CIT CONCERNED 5. 6. :; 3 !*< , + < , / ( ) / DR, ITAT, MUMBAI CONCERNED 3 = ) / GUARD FILE. > ( / BY ORDER, TRUE COPY ? $ (ASSTT. REGISTRAR) + < , / ( ) /ITAT, MUMBAI