DCIT CIR 6(1), MUMBAI V. INDUS THERMAL SYSTEM P.LTD, MUMBAI

ITA 4072/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88141 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: R K BOTHRA
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 4072/MUM/2013 (ASSESSMENT YEAR: 2009-10) DCIT, C-6(1), MUMBAI MUMBAI -400 049 VS INDUS THERMAL SYSTEM PVT LTD, 371, VEER SAVARKAR MARG, MUMBAI -400 020 .: PAN: AAACI 2043 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SACCHIDANAND DUBEY RESPONDENT BY : SHRI R K BOTHRA !' # $% /DATE OF HEARING : 03-12-2014 &'( # $% / DATE OF PRONOUNCEMENT : 21-01-2015 ORDER , , , , PER VIVEK VARMA, JM: THE INSTANT APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) -14, MUMBAI, DATED 28.02.2013. 2. AT THE TIME OF HEARING, THE AR INFORMED THAT THE ENTIRE ASSESSMENT HAS BEEN SET ASIDE BY THE COORDINATE BENCH AT MUMBAI, IN ITA NO. 2843/MUM/2013, IN THE APPEAL FILED BY TH E ASSESSEE, WHEREIN IT WAS HELD THAT THE AO HAD EXCEEDED HIS JURISDICTION BY NOT TAKING PRIOR APPROVAL OF THE HIGHER AUTHORITIES. THE RELEVANT FINDING OF THE ITAT ORDER, IS, THE ASSESSEE HAD SPECIFICALLY RAISED THE ISSUE AS GROUND NO.1 BEFORE THE FAA.IN OUR OPINION, HE SHOULD HAVE CALLE D FOR REMAND REPORT FROM THE AO BEFORE DECIDING THE APPEAL. AS T HERE IS NO EVIDENCE THAT THE AO HAD OBTAINED PRIOR APPROVAL OF THE HIGHER AUTHORITY IN THE CASE UNDER CONSIDERATION, SO IN OU R OPINION, HE HAD EXCEEDED HIS JURISDICTION. INSTRUCTIONS ISSUED BY THE BOARD MAY OR MAY NOT BE BINDING ON THE ASSESSEES, BUT THE Y ARE BINDING ON THE OFFICERS OF THE DEPARTMENT. THERE IS NO NEED TO CITE CASE FOR THIS WELL ESTABLISHED PRINCIPLE OF TA X-JURISPRUDENCE. INDUS THERMAL SYSTEM PVT LTD, ITA 4072/M/2013 2 WE FIND THAT IN THE CASE OF CRYSTAL PHOSPHATES LTD. (SUPRA)DELHI TRIBUNAL HAD ALSO DEALT A MATTER WHERE SIMILAR KIND ISSUE HAD ARISEN, IN THE SENSE THAT HOW THE CASES SHOULD BE S ELECTED FOR SCRUTINY OF CORPORATE ASSESSEES IN PURSUANCE OF CIR CULAR ISSUED BY THE BOARD. IN THAT MATTER THE ASSESSEE HAD FILED RETURN OF INCOME ON 28-11-2006 DECLARING INCOME OF RS. 3,97,1 7,920/-. THE CASE WAS SELECTED FOR SCRUTINY BY WAY OF NOTICE DATED 17- 10-2007 U/S.143(2) OF THE ACT, UNDER THE CBDT INSTR UCTIONS CONTAINED IN SCRUTINY GUIDELINES CLAUSE 2(V)(B), WH ICH PROVIDES AS UNDER: 2.THE FOLLOWING CATEGORIES OF CASES SHALL BE COMPUL SORILY SCRUTINIZED: (V)(B) ALL CASES IN WHICH AN APPEAL IS PENDING BEFORE THE CIT(APPEALS) AGAINST AN ADDITION/DISALLOWANCE O F RS. 5 LAKHS OR ABOVE, OR THE DEPARTMENT HAS FILED AN APPE AL BEFORE THE ITAT AGAINST THE ORDER OF THE CIT(APPEALS) DELETING SUCH AN ADDITION/DISALLOWANCE AND AN IDENTICAL ISSUE IS ARI SING IN THE CURRENT YEAR. HOWEVER, AS IN (I) ABOVE, THE QUANTUM CEILING MAY NOT BE TAKEN INTO ACCOUNT IF A SUBSTANTIAL QUESTION OF LAW IS INVOLVED. THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCE EDINGS VIDE LETTER DATED 7-12-2007 CHALLENGED THE ASSUMPTION OF JURISDICTION ON THE GROUND THAT NO ADDITION/DISALLOWANCE EXCEEDI NG RS. 5 LACS WAS MADE IN EARLIER YEAR, WHICH WAS PENDING IN APPEAL BEFORE THE CIT(A). FURTHER, THERE WAS NO IDENTICAL ISSUE ARISING IN THE CURRENT YEAR AS ARISING IN EARLIER YEAR. HOWEVE R, ADD. CIT VIDE ORDER DATED 25-11-2008 AND THE CIT VIDE ORDER DATED 15- 12-2008 REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT NOTICE ISSUED WAS IN ACCORDANCE WITH LAW ON THE GRO UND THAT IN ASSESSMENT YEAR 2004-05,ADDITION AGGREGATING TO RS. 5,60,207/-WERE MADE IN ORDER OF ASSESSMENT WHICH WA S PENDING IN APPEAL BEFORE CIT(A).IN THE APPELLATE PR OCEEDINGS FAA HELD THAT THE NOTICE ISSUED WAS VALID SINCE ASS ESSEE HAD ACQUIESCED TO THE NOTICE ISSUED BY AO AND SOUGHT AD JOURNMENT. HE HELD THAT THE ASSESSEE COULD HAVE APPROACHED THE HIGHER JUDICIARY FOR REDRESSAL OF ITS GRIEVANCE THAT JURIS DICTION ASSUMED BY THE AO WAS NOT VALID. ALLOWING THE APPEAL OF THE ASSESSEE TRIBUNAL HELD AS UNDER: 7.WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PART IES AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON REC ORD. THE UNDISPUTED FACTS ARE THAT PROCEEDINGS FOR ASSESSMEN T FOR THE YEAR UNDER CONSIDERATION WERE COMMENCED BY ISSUE OF A NOTICE DATED 17-10-2007. THE AUTHORITIES BELOW HAVE HELD T HAT SUCH A NOTICE WAS VALID NOTICE, SINCE THE SAME WAS IN ACCO RDANCE WITH CLAUSE (V) (B) OF PARA 2 OF THE INSTRUCTION ISSUED BY THE CBDT FOR SELECTION OF CASES FOR CORPORATE ASSESSEE FOR F.Y. 2007-08. THE RELEVANT PORTION OF THE INSTRUCTION HA S ALREADY BEEN REPRODUCED BY US HEREINABOVE. THE ORDER OF ASS ESSMENT FOR A.Y. 2004-05 WHICH HAS BEEN MADE THE BASIS FOR ASSUMPTION OF JURISDICTION, SHOWS THAT THE SAME WAS PASSED U/S .143(3) VIDE ORDER DATED 18-12- 2006. ACCORDING TO ORDER, NO DIS ALLOWANCE WAS MADE IN EXCESS OF RS. 5 LACE THOUGH AGGREGATE O F ALL THE DISALLOWANCES WAS RS.5,60,207/-THE ISSUE, THEREFORE , ARISES WHETHER THE AO WAS CORRECT IN HOLDING THAT SINCE DI SALLOWANCE IN AGGREGATE EXCEEDED RS.5 LACS, THEREFORE, NOTICE WAS VALID. IN OUR OPINION, SUCH A CONCLUSION IS CONTRARY TO THE E XPRESS INSTRUCTIONS OF THE CBDT. IN OUR OPINION, THERE HAS TO BE AN ADDITION OR DISALLOWANCE OF RS. 5 LACS OR MORE AGAI NST WHICH AN APPEAL IS PENDING AND SUCH AN ISSUE MUST ALSO ARISE IN THE YEAR INDUS THERMAL SYSTEM PVT LTD, ITA 4072/M/2013 3 UNDER CONSIDERATION. ALL THESE FACTS MUST BE AVAILA BLE TO THE AO ON THE DATE OF ASSUMPTION OF JURISDICTION. THE BURD EN IS ON ASSESSING AUTHORITY TO ESTABLISH THAT JURISDICTION WAS ASSUMED IN ACCORDANCE WITH THE INSTRUCTIONS OF THE BOARD. THUS, IN OUR CONSIDERED OPINION, NOTICE ISSUED U/S 143(2) WAS NOT IN TERMS OF THE INSTRUCTIONS ISSUED BY THE CBDT . NOW THE QUESTION THAT ARISES IS THAT SINCE NOTICE ISSUED WA S NOT IN TERMS OF THE INSTRUCTIONS ISSUED BY THE CBDT, CAN IT BE H ELD THAT ASSUMPTION OF JURISDICTION WAS ILLEGAL SO AS TO HOL D THE ENTIRE PROCEEDINGS AS INVALID. IT WAS FURTHER HELD THAT ONCE CBDT ISSUED INSTRUCT IONS FOR ASSUMING OF JURISDICTION FOR SELECTION OF CASES OF CORPORATE ASSESSEE FOR SCRUTINY AND ASSESSMENT THEREOF SAME H AD TO BE FOLLOWED IN LATER AND SPIRIT BY THE AO, THAT THE BU RDEN LIED ON THE AUTHORITY ASSUMING JURISDICTION AND ESTABLISH T HAT SUCH INSTRUCTION HAVE BEEN DULY COMPLIED AND SATISFIED. AO WAS AWARE THAT THE ASSESSEE HAD CHALLENGED HIS J URISDICTION BEFORE THE TRIBUNAL, EVEN THEN NO EVIDENCE WAS PROD UCED FROM HIS SIDE, BEFORE US, TO PROVE THAT HE HAD OBTAINED PRIOR APPROVAL OF THE HIGHER AUTHORITIES, AS DIRECTED BY THE ABOVE REFERRED INSTRUCTION OF THE CBDT. THERE IS NO MENTION OF THE POTENTIAL ESCAPEMENT OF INCOME OF RS.10 LAKHS OR MORE. THEREF ORE, FOLLOWING THE DECISION OF THE ABOVE REFERRED CASE O F DELHI TRIBUNAL AND CONSIDERING THE PECULIAR FACTS AND CIR CUMSTANCES OF THE CASE, WE ARE REVERSING THE ORDER OF THE FAA. WE DECIDE THE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. I N OUR OPINION, REMAINING GROUNDS OF APPEAL(GROUND NO. 2 TO 4) ARE NOT BEING ADJUDICATED AS WE HAVE ALREADY HELD THAT THE ORDER PASSED BY THE AO WAS WITHOUT JURISDICTION. 3. THE AR SUBMITTED THAT ONCE THE ASSESSMENT HAS BEE N HELD TO BE INVALID, ALL CONSEQUENTIAL PROCEEDINGS ARE ILLEGAL, INVALID AND INFRUCTUOUS. 4. THE DR ACCEPTS THE FACT THAT ITAT HAS HELD THE PROCEEDINGS TO BE WITHOUT JURISDICTION. 5. SINCE THE ASSESSMENT ITSELF IS HELD TO BE ILLEGAL, ALL CONSEQUENTIAL PROCEEDINGS ARE ILLEGAL AND, THEREFORE, THE AP PEAL AS FILED BY THE DEPARTMENT DOES NOT SURVIVE AT ALL. AS A R ESULT, THE APPEAL FILED BY THE DEPARTMENT IS REJECTED. INDUS THERMAL SYSTEM PVT LTD, ITA 4072/M/2013 4 6. IN THE RESULT, THE APPEAL AS FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2015. SD/- SD/- ( ) ( ) (SANJAY ARORA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 21 ST JANUARY, 2015 $/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -14, MUMBAI. 4) THE CIT-VI, MUMBAI/CIT -VI, MUMBAI. 5) ,'-. $! , , / THE D.R. I BENCH, MUMBAI. 6) ./0 1 COPY TO GUARD FILE. 23! / BY ORDER / / TRUE COPY / / 4 / 5 6 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS