VISA CHEMICAL INDUSTRIES, THANE V. ACIT CIRCLE -3, THANE

ITA 3902/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8402 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2018
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.3902/MUM/2018 ASSESSMENT YEAR: 2009-10 M/S. VISA CHEMICAL INDUSTRIES S-6 RATNA MANJUSH, RAVI INDUSTRIES COMPOUND, PANCHPAKHADI, THANE-400 602. PAN:AACFV2308L VS. ACIT, CIRCLE - 3, ASHAR IT PARK, B WING, ROAD NO. 16Z, WAGLE INDUSTRIAL ESTATE, THANE-400604. (APPELLANT/ASSESSEE) (RESPONDENT/REVENUE) APPELLANT BY: SHRI M. SUBRAMANIAN, LD.AR RESPONDENT BY : SHRI CHAITNYA ANJANIA, LD.DR DATE OF HEARING : 16.07.2019 DATE OF PRONOUNCEMENT : 16 - 07 - 2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 08-01- 2018 PASSED BY LD CIT(A)-2, PUNE AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY SUSTAINING DISALLOWANCE OF EXPENDITURE. THE ASSESS EE HAS ALSO CHALLENGED THE VALIDITY OF RE-OPENING OF ASSESSMENT. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS. THE AO RECEIVED INFORMATION FROM INVESTIGATION WING THAT SOME OF ITS DEALERS HA VE PROVIDED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING MATE RIALS. IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED MATERIALS TO THE TU NE OF RS.8256/- FROM ONE OF SUCH DEALERS. HENCE THE AO REOPENED THE ASS ESSMENT OF THE YEAR UNDER CONSIDERATION BY ISSUING NOTICE U/S 148 OF TH E ACT. THE ASSESSEE [2] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES FILED RETURN OF INCOME IN RESPONSE THERETO, WHEREIN IT OFFERED THE ABOVE SAID AMOUNT OF RS.8,256/-. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO DISALLOWED 20% OF VARIOUS EXPENSES CLAIMED BY TH E ASSESSEE. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) REDUCED THE DI SALLOWANCE TO 15%. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 3. AT THE TIME OF HEARING, THE LD A.R RAISED A L EGAL ISSUE. HE SUBMITTED THAT THE ASSESSEE HAS FILED RETURN OF INCOME ONLY O N 09-12-2013. HOWEVER, THE AO HAS ISSUED NOTICE U/S 143(2) OF THE ACT PRIO R TO THE FILING OF RETURN OF INCOME, I.E., ON 27.11.2013. ACCORDINGLY HE SUBMIT TED THAT THE ASSESSMENT ORDER IS LIABLE TO BE QUASHED AS PER THE FOLLOWING DECISIONS:- (A) DIT VS. SOCIETY FOR WORLDWIDE INTER BANK FINAN CIAL TELECOMMUNICATIONS (2010)(323 ITR 249)(DELHI) (B) SHRI SUDHIR MENON VS. ACIT (ITA NO.1744/MUM/20 16 DATED 03- 10-2018) THE LD A.R FURTHER SUBMITTED THAT THE AO HAS DISALL OWED 20% OF EXPENSES ON ADHOC BASIS AND SUCH KIND OF ESTIMATED DISALLOWA NCES CANNOT BE CONSIDERED TO BE INCOME ESCAPING ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE ACT. 4. I HEARD LD D.R AND PERUSED THE RECORD. I NOTI CE THAT THE ASSESSING OFFICER HAS ISSUED NOTICE U/S 143(2) OF THE ACT PRI OR TO THE FILING OF RETURN OF INCOME BY THE ASSESSEE. THE HONBLE DELHI HIGH COU RT HAS CONSIDERED THIS ISSUE IN THE CASE OF SOCIETY FOR WORLDWIDE INTER BA NK FINANCIAL TELECOMMUNICATIONS (SUPRA) AND HAS HELD THAT THE NO TICE SERVED ON THE ASSESSEE U/S 143(2) OF THE ACT PRIOR TO THE FILING OF RETURN OF INCOME IS NOT VALID AND ACCORDINGLY THE ASSESSMENT COMPLETED ON T HE BASIS OF SUCH NOTICE IS INVALID. THE MUMBAI BENCH OF TRIBUNAL HAS FOLLO WED THE ABOVE SAID DECISION IN THE CASE OF SHRI SUDHIR MENON (SUPRA). FOR THE SAKE OF [3] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES CONVENIENCE, WE EXTRACT BELOW THE RELEVANT PORTION OF ORDER PASSED BY THE CO-ORDINATE BENCH IN THE ABOVE SAID CASE:- CAN ASSESSMENT BE FRAMED WITHOUT ISSUING A NOTICE UNDER SECTION 143(2) OF THE ACT WHEN THE RETURN WAS FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT? THIS ISSUE HAS BEEN EXAMINED BY HONBLE BOMBAY HIGH COURT GENO PHARMACEUTICALS LTD. (SUPRA), WHEREIN IT IS HE LD AS UNDER: 5. APART FROM THAT, IT IS AN ADMITTED POSITION THA T NO NOTICE UNDER SECTION 143(2) HAD BEEN ISSUED WHILE MAKING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47. THE APEX COURT IN THE CASE OF NATIONAL THERMAL POWE R CO. LTD. V. CIT [1998] 229 ITR 383 HAS HELD THAT THE TR IBUNAL HAS DISCRETION TO ALLOW OR NOT TO ALLOW A NEW GROUN D TO BE RAISED. BUT IN A CASE WHERE THE TRIBUNAL IS ONLY RE QUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHI CH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS N O REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTI ON IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN A SSESSEE. THE ITAT, AFTER RELYING ON THE JUDGMENT OF THE APEX COURT IN R. DALMIA V. CIT [1999] 236 ITR 480/102 TAXMAN 7 02, CAME TO THE CONCLUSION THAT ISSUANCE OF NOTICE UNDE R SECTION 143(2) WAS MANDATORY. THE ITAT HAS TAKEN IN TO CONSIDERATION THE RELEVANT PROVISIONS AND HAS ALSO TAKEN INTO CONSIDERATION THE JUDGMENT OF THE APEX COURT A ND RELYING ON THE SAID JUDGMENTS, THE ITAT HAS HELD TH AT NOTICE UNDER SECTION 143(2) IS MANDATORY AND IN THE ABSENCE OF SUCH SERVICE, THE ASSESSING OFFICER CANN OT PROCEED TO MAKE AN INQUIRY ON THE RETURN FILED IN COMPLIANCE WITH THE NOTICE ISSUED UNDER SECTION 148 .. [4] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES 7. SIMILAR IS THE POSITION IN THE CASE OF MS. MALVI KA ARUN SOMAIYA (SUPRA), WHEREIN HONBLE BOMBAY HIGH COURT HAS CONSIDERED THE SIMILAR ISSUE. 8. FURTHER, HONBLE DELHI HIGH COURT IN THE CASE OF SOCIETY FOR WORLDWIDE INTER BANK FINANCIAL, TELECOMMUNICATIONS (SUPRA), WHEREIN HONBLE HIGH COURT CONSIDERED IDENTICAL SIT UATION ON FACTS AND HELD AS UNDER: 5. WE ARE OF THE VIEW THAT THE IMPUGNED ORDER DOES NOT CALL FOR ANY INTERFERENCE. BOTH THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE INCOME TAX APPELLATE TRIBUNAL HAVE RETURNED A CONCURRENT AND CLEAR FINDING OF FACT THA T THE NOTICE UNDER SECTION 143 (2) WAS ISSUED ON 23.03.20 00 AND SINCE THE RETURN WAS FILED ON 27.03.2000, THE N OTICE WAS NOT A VALID ONE AND, THEREFORE, THE ASSESSMENT COMPLETED ON THE BASIS OF THE NOTICE WAS ALSO INVAL ID AND WAS CONSEQUENTLY SET ASIDE. IT IS FOR THE FIRST TIM E BEFORE US THAT THE LEARNED COUNSEL FOR THE APPELLANT CONTENDS THAT THE NOTICE, IN FACT, WAS ISSUED ON 27.03.2000 AND NOT O N 23.03.2000, THE DATE WHICH IS RECORDED ON THE NOTIC E ITSELF. NO SUCH CONTENTION WAS RAISED BEFORE THE LOWER APPE LLATE AUTHORITIES. CONSEQUENTLY, THE SAID CONTENTION CANN OT BE RAISED BEFORE US FOR THE FIRST TIME. 6. HOWEVER, EVEN IF WE ACCEPT WHAT THE LEARNED COUN SEL FOR THE APPELLANT / REVENUE SUBMITS, IT DOES NOT MA KE THE CASE ANY BETTER FOR HIM. IN PARA 3.4 OF THE MEMORAN DUM OF APPEAL, THE APPELLANT HAS STATED THAT THE RETURN WA S FILED BY THE ASSESSEE ON 27.03.2000 AND THE NOTICE UNDER SECTION 143(2) WAS SERVED UPON THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE BY HAND WHEN THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CAME AND FILED [5] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES RETURN. HOWEVER, THE DATE OF THE NOTICE WAS MISTAKE NLY MENTIONED AS 23.03.2000. 7. ASSUMING THE AFORESAID TO BE TRUE, THE NOTICE WA S SERVED ON THE AUTHORIZED REPRESENTATIVE SIMULTANEOU SLY ON HIS FILING THE RETURN WHICH CLEARLY INDICATES TH AT THE NOTICE WAS READY EVEN PRIOR TO THE FILING OF THE RE TURN. SECTION 143(2) OF THE SAID ACT CLEARLY INDICATES TH AT WHERE A RETURN HAS BEEN FURNISHED UNDER SECTION 139, OR I N RESPONSE TO A NOTICE UNDER SECTION 142(1), THE ASSE SSING OFFICER SHALL- (I) WHERE HE HAS REASON TO BELIEVE THAT ANY CLAIM O F LOSS, EXEMPTION, DEDUCTION, ALLOWANCE OR RELIEF MADE IN T HE RETURN IS INADMISSIBLE, SERVE ON THE ASSESSEE A NOT ICE SPECIFYING PARTICULARS OF SUCH CLAIM OF LOSS, EXEMP TION, DEDUCTION, ALLOWANCE OR RELIEF AND REQUIRE HIM, ON A DATE TO BE SPECIFIED THEREIN TO PRODUCE, OR CAUSE TO BE PRO DUCED, ANY EVIDENCE OR PARTICULARS SPECIFIED THEREIN OR ON WHICH THE ASSESSEE MAY RELY, IN SUPPORT OF SUCH CLAIM. (II) NOTWITHSTANDING THE AFORESAID, IF THE ASSESSIN G OFFICER CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDER-STATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER-PAID THE T AX IN ANY MANNER, HE MAY SERVE THE ASSESSEE A NOTICE REQU IRING HIM, ON A DATE TO BE SPECIFIED THEREIN, EITHER TO A TTEND HIS OFFICE OR TO PRODUCE, OR CAUSE TO BE PRODUCED, ANY EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT RETURN. 8. THE PROVISIONS OF SECTION 143(2) MAKE IT CLEAR T HAT THE NOTICE CAN ONLY BE SERVED AFTER THE ASSESSING OFFIC ER HAS EXAMINED THE RETURN FILED BY THE ASSESSEE. WHEREAS WHAT [6] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES PARA 3.4 INDICATES IS THAT WHEN THE ASSESSEE CAME T O FILE THE RETURN, THE NOTICE UNDER SECTION 143(2) WAS SER VED UPON THE AUTHORIZED REPRESENTATIVE BY HAND. THUS, E VEN IF WE TAKE THE STATEMENT OF THE ASSESSING OFFICER AT F ACE VALUE, IT WOULD AMOUNT TO GROSS VIOLATION OF THE SC HEME OF SECTION 143 (2) OF THE SAID ACT. 9. IN ANY EVENT, WE DO NOT AGREE WITH THE CONTENTIO NS RAISED BY THE LEARNED COUNSEL FOR THE APPELLANT THA T THE NOTICE WAS ISSUED ON 27.03.2000 IN AS MUCH AS THE TRIBUNAL HAS ALREADY RETURNED A FINDING THAT THE NO TICE WAS ISSUED ON 23.03.2000. THAT BEING THE CASE, NO INTER FERENCE WITH THE IMPUGNED ORDER IS CALLED FOR. 9. IN VIEW OF THE FACT THAT NOTICE UNDER SECTION 14 8 OF THE ACT DATED 1.04.2013 WAS ISSUED AND AO BEFORE FILING OF RETURN BY ASSESSEE IN RESPONSE TO THIS NOTICE, A NOTICE UNDER SECTION 143(2) OF THE ACT DATED 03.05.2013 REQUIRING THE AS SESSEE TO ATTEND THE OFFICE ON 13.05.2013 WAS ALSO ISSUED. UP TO THIS DATE I.E. 13.05.2013 NO RETURN OF INCOME WAS FILED BY TH E ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. AC CORDING TO US, IN VIEW OF CONSISTENT VIEW OF JURISDICTIONAL HIGH C OURT AND DELHI HIGH COURT, IN THE ABSENCE OF PENDING RETURN OF INC OME, THE PROVISIONS OF SECTION 143(2) OF THE ACT IS CLEAR TH AT NOTICE CAN BE ISSUED ONLY WHEN A VALID RETURN IS PENDING FOR ASSE SSMENT. ACCORDINGLY, THIS NOTICE HAS NO MEANING. THE ASSESS EE FILED RETURN OF INCOME UNDER SECTION 148 OF THE ACT VIDE LETTER DATED 23.05.2013 STATING THAT THE ORIGINAL RETURN OF INCO ME CAN BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. IT MEANS THAT THE ASSESSEE HAS FILED RETUR N OF INCOME ONLY ON 23.05.2013. NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED BY THE DEPARTMENT ON OR AFTER 23.05.2013 . ACCORDING TO US THE ASSESSMENT FRAMED WITHOUT ISSUING A NOTIC E UNDER SECTION 143(2) OF THE ACT WHEN THE RETURN WAS FILED BY THE [7] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESSMENT FRAMED IS BAD IN LAW. ACCORDINGLY, ASSES SMENT IS QUASHED. THIS ISSUE OF ASSESSEE RAISED BY WAY OF AD DITIONAL GROUND IS ALLOWED. 5. ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISION S, I ALSO HOLD THAT THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW, AS IT HAS BEEN FRAMED WITHOUT ISSUING MANDATORY NOTICE U/S 143(2) OF THE ACT BEFO RE FILING RETURN OF INCOME. ACCORDINGLY ASSESSMENT IS QUASHED. 6. SINCE I HAVE QUASHED ASSESSMENT , I DO NOT FIN D IT NECESSARY TO ADJUDICATE OTHER LEGAL GROUNDS AND THE MERITS OF AD DITIONS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. SD/- ( B.R. BASKARAN) ACCOUNTANT MEMBER MUMBAI, DATED : 16 TH JULY,2019 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5 . THE DR, B BENCH, ITAT, MUMBAI BY ORDER (ASSISTANTREGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI DATE INITIAL WHETHER DICTATION PAD ENCLOSED WITH THE FILE : YES/ NO. 1. DRAFT DICTATED ON 05.12.2018 SR.PS 2. DRAFT PLACED BEFORE AUTHOR SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY JM/AM [8] ITA NO.3902/MUM/2018 M/S. VISA CHEMICAL INDUSTRIES SECOND MEMBER 5. APPROVED DRAFT COMES TO THE SR.PS/PS 16/7 PP SR.PS 6. DATE OF PRONOUNCEMENT 16/7 SR.PS 7. FILE SENT TO THE BENCH CLERK 17/7 PP SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER