The ITO, Ward-5(1), RAJKOT-GUJARAT V. M/s. Parekh Ishwarlal Chunilal, RAJKOT-GUJARAT

ITA 41/RJT/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67285 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 11-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: KALPESH DOSHI
• Section: 143(3)

Judgement Text

0 N : S : IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH: RAJKOT . . R 0 . . 0 0 BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO . . 4 1 /R J T /2011 3 3 / ASSESSMENT YEAR 200 4 - 05 ITO V. M/S. PAREKH ISHWARLAL CHUNILAL WARD - 5(1) NAVA NAKA CHOWK RAJKOT SONI BAZAR, RAJKOT PAN: A A C FP4500E DATE OF HEARING: 07 .0 6 .2013 DATE OF PRONOUNCEMENT: 21 .0 6 . 2013 FOR THE REVENUE: K. C. MATHEWS, DR FOR THE ASSESSEE: KALPESH DOSHI , FCA / ORDER . . 0 /D K SRIVASTAVA: A PPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 2 1 - 12 - 20 1 0 , ON THE FOLLOWING GROUNDS: - 1 . THE LD. CIT (A), HAS ERRED IN LAW AND ON FACTS IN QUASHING THE REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE AO HAS ISSUED NOTICE U/S.148 OF THE ACT, WITHOUT VERIFYING THE FACTS FROM THE RECORDS OF THE ASSESSEE. 2 . THE LD. CIT (A ), HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK OF RS.10,95,758/ - . 3 . ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 4 . ANY OTHER GROUN D THAT THE REVENUE MAY RAISE BEFORE OR DURING HEARING PROCEEDINGS BEFORE THE HONBLE ITAT. 5 . IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) - IV, RAJKOT MAY KINDLY BE SET - ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE IS A FIRM. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN SILVER AND GOLD ORNAMENTS. IT FILED ITS ORIGINAL RETURN OF INCOME ON 25 - 10 - 2004 RETURNING TOTAL INCOME AT RS.14,090/ - . SURVEY U/S.133A OF THE I - T ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE - F IRM AT SONI BAZAR, RAJKOT ON 05 - 01 - 2006 DURING WHICH THE BOOKS OF ACCOUNTS FOUND AT THE PREMISES OF THE ASSESSEE 2 ITA 4 1 /201 1 WERE SCRUTINIZED. NOTICE U/S. 147/148 WAS ISSUED ON 19 - 06 - 2006 PURSUANT TO WHICH RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 07 - 07 - 2006 RETUR NING ONCE AGAIN THE SAME INCOME AS WAS ORIGINALLY RETURNED. ASSESSMENT U/S. 143(3) / 147 OF THE I - T ACT WAS COMPLETED ON 26 - 12 - 2007 AFTER ADDING A SUM OF RS.10,95,758/ - ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 3. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESSEE CHALLENGED THE VALIDITY OF INITIATION OF PROCEEDINGS U/S.147/148 OF THE I - T ACT AS ALSO THE CORRECTNESS OF THE ADDITION MADE BY THE AO. IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE HAD OBJECTED TO THE INITIATION OF PROCEED ING S U/S 147/148 BY HIS LETTER DATED 25 - 0 - 2007 BEFORE THE ASSESSING OFFICER AND THEREFORE IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO DISPOSE OF THOSE OBJECTIONS BEFORE COMPLETING THE ASSESSMENT. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER DID NOT DISPOSE OF THE OBJECTIONS RAISED BY THE ASSESSEE VIDE ITS LETTER DATED 25 - 09 - 2007 AND THEREFORE THE ASSESSMENT WAS LIABLE TO BE QUASHED. THE LD. CIT (A) ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS BEHALF AND RESULTANTLY QUASHED THE ASSES SMENT, WITH THE FOLLOWING OBSERVATIONS: - 3.3 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE AO AND THE SUBMISSION OF THE AR OF THE APPELLANT. THE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS SUPRA HAS HELD THAT WHEN NOTICE U/S.148 OF THE INCOME TAX ACT IS ISSUED THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE THE RETURN AND IF HE SO DESIRES TO SEEK REASONS FOR ISSUING THE NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN THE REASONABLE TIME. ON RECEIPT OF THE REASONS THE NOTICE E IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICES AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OFF THE SAME BY SPEAKING ORDER. THE DELHI HIGH COURT IN THE CASE OF SMT. KAMLESH SHARMA 287 ITR 337 HAS HELD THAT THE ASSESSING OFFICER WAS BOUND TO DISP OSE OFF THE OBJECTIONS BY SPEAKING ORDER. SINCE THE AO HAS NOT FOLLOWED THE ABOVE GUIDELINES AND HAS NOT DISPOSED OFF THE REASONS, THE REOPENING OF THE ASSESSMENT IS ILLEGAL AND THE ASSESSMENT ORDER IS QUASHED AS THE AO HAS NOT DISPOSED OFF THE REASONS AS HELD BY THE DELHI HIGH COURT. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 3 ITA 4 1 /201 1 4. AS REGARDS THE CORRECTNESS OF THE ADDITION MADE, THE LD. CIT (A) FELT THAT THERE WAS NO JUSTIFICATION FOR MAKING THE IMPUGNED ADDITION. HE THEREFORE DELETED THE IMPUGNED ADDITI ON ALSO ON MERITS. 5 . AGGRIEVED BY THE ORDER PASSED BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 6 . AT THE TIME OF HEARING, OU R ATTENTION WAS DRAWN TO THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ARVIND MILLS LTD. V. ACWT , 2 70 ITR 469 (GUJ.) IN WHICH IT HAS BEEN HELD THAT THE AO CANNOT PROCEED TO PASS ORDER OF REASSESSMENT WITHOUT FIRST DECIDING THE PRELIMINARY OBJECTIONS LODGED BY THE ASSESSEE BEFORE THE AO AGAINST THE NOTICE FOR REASSESSMENT. 7 . IN SUPPORT OF APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE AFORESAID JUDGMENT AND SUBMITTED THAT THE MATTER SHOULD BE RESTORED , IN VIEW OF THE AFORESAID JUDGMENT, TO THE FILE OF THE AO FOR DISPOSING OFF THE OBJECTIONS LODGED BY THE ASSESSEE WITH THE AO AGAINST THE NO TICE FOR REASSESSMENT. 8 . IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE CIT (A). 9 . WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE ORDERS PASSED BY THE AO AND THE LD. CIT (A) AS ALSO THE MATERIALS PLA CED BEFORE US BY THE PARTIES. IN ARVIND MILLS LTD. V. ACWT, 270 ITR 469 (GUJ.) , THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: - 14 . IN THE RESULT, THE IMPUGNED REASSESSMENT ORDER DT. 9 TH FEB., 2004, MADE UNDER S.17 R/W S.16(3) OF THE ACT IS HER EBY QUASHED AND SET ASIDE. THE RESPONDENT IS DIRECTED TO ABIDE BY THE DIRECTIONS ISSUED BY THIS COURT IN ITS ORDER DT. 3 RD MARCH, 2004, IN SPECIAL CIVIL APPLICATION NO.2736 OF 2004 (SUPRA), MORE PARTICULARLY, PARA NOS. 4 AND 5 WHICH ARE REPRODUCED HEREUND ER FOR THE SAKE OF CONVENIENCE. 4. THE ABOVE PRINCIPLE LAID WON IN RESPECT OF THE NOTICE OF REASSESSMENT UNDER THE IT ACT WOULD APPLY WITH FULL FORCE TO THE NOTICE 4 ITA 4 1 /201 1 FOR REASSESSMENT UNDER S.17 OF THE WT ACT AS WELL. THE PETITIONER COMPANY HAD ALREADY FIL ED ITS RETURN IN RESPONSE TO THE IMPUGNED NOTICE AND REQUESTED FOR FURNISHING REASONS, WHICH REQUEST HAS BEEN ACCEDED TO ONLY VERY RECENTLY AND THE PETITIONER HAS THEREAFTER SUBMITTED ITS OBJECTIONS ON 19 TH FEB., 2004. THE AO IS, THEREFORE, NOW REQUIRED T O DISPOSE OF THE OBJECTIONS BY PASSING A SPEAKING ORDER AS PER THE AFORESAID DECISION OF THE HONBLE SUPREME COURT. 5. THE AO IS ACCORDINGLY REQUIRED TO DECIDE THE PRELIMINARY OBJECTIONS LODGED BY THE PETITIONER TO THE NOTICE FOR REASSESSMENT AND PASS A S PEAKING ORDER. UNTIL SUCH SPEAKING ORDER IS PASSED, OBVIOUSLY THE AO CANNOT UNDERTAKE REASSESSMENT. HENCE, IT IS ONLY AFTER THE AO PASSES A SPEAKING ORDER DECIDING THE NOTICE FOR REASSESSMENT THAT ANY CAUSE OF ACTION WOULD ARISE FOR THE PETITIONER. 1 0 . TWO PROPOSITIONS ARE CLEARLY DISCERNIBLE FROM THE AFORESAID JUDGMENT. ONE, THE ASSESSING OFFICER IS OBLIGED TO PASS A SPEAKING ORDER DISPOSING OF THE OBJECTIONS LODGED BY THE ASSESSEE BEFORE HIM AGAINST A NOTICE FOR REASSESSMENT. TWO, THE AO CANNOT UNDER TAKE REASSESSMENT UNTIL SUCH A SPEAKING ORDER IS PASSED, 1 1 . TURNING TO THE FACTS OF THE CASE, IT IS STATED BY THE LD. CIT (A) IN HIS APPELLATE ORDER THAT THE ASSESSEE OBJECTED TO THE ISSUE OF NOTICE 147/148 BY HIS LETTER DATED 25 - 09 - 2007 . THERE IS HOWEVE R NO REFERENCE TO ANY SUCH LETTER DATED 25 - 09 - 2007 FILED BY THE ASSESSEE BEFORE THE AO, IN THE ENTIRE ASSESSMENT ORDER. THE ASSESSEE HAS FILED A COPY OF LETTER DATED 25 - 09 - 2007 BEFORE US. WE HAVE PERUSED THE AFORESAID LETTER. THERE IS NO INDICATION IN THE AFORESAID LETTER THAT IT WAS ACTUALLY FILED BEFORE THE AO. IN THIS VIEW OF THE MATTER, IT IS NECESSARY TO VERIFY AS TO WHETHER THE AFORESAID LETTER DATED 25 - 09 - 2007 WAS AT ALL FILED BEFORE THE AO . IN CASE THE AFORESAID LETTER IS FOUND TO HAVE BEEN ACTUALL Y FILED BEFORE THE AO, THE AO, IN THAT SITUATION , IS OBLIGED TO DISPOSE OF THE OBJECTIONS OF THE ASSESSEE BY A SPEAKING ORDER BEFORE PROCEEDING TO PASS ORDER OF REASSESSMENT. IN THIS VIEW OF THE MATTER, IT IS CONSIDERED APPROPRIATE TO SET ASIDE THE ORDERS PASSED BY THE AO AND THE CIT (A) AND TO RESTORE THE MATTER TO THE FILE OF THE AO. THE ORDERS PASSED BY THE AO AND THE 5 ITA 4 1 /201 1 CIT (A) ARE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO WITH THE DIRECTION TO DISPOSE OF THE OBJECTIONS FILED BY THE ASSES SEE AGAINST THE NOTICE FOR REASSESSMENT BY PASSING A SPEAKING ORDER. IT IS ONLY AFTER A SPEAKING ORDER IS PASSED THAT THE AO SHALL COMPLETE THE ASSESSMENT AFRESH. GROUND NO.1 TAKEN BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 1 2 . SINCE WE HAVE ALREADY SET ASIDE THE ENTIRE REASSESSMENT, WE ARE NOT ADJUDICATING UPON OTHER GROUNDS. THE AO SHALL HOWEVER BE FREE TO PASS A FRESH ASSESSMENT ORDER DE - NOVO AFTER PASSING A SPEAKING ORDER DISPOSING OFF THE OBJECTIONS FILED BY THE ASSESSEE. 1 3 . IN VIEW OF THE FOREGOING, APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. I 21 .0 6 . 201 3 I ORDER PRONOUNCED ON 21 .0 6 . 2013 SD/ - SD/ - ( 0 . . 3 / T. K. SHARMA) ( . . / D. K. SRIVASTAVA) S / JUDICIAL MEMBER 2013 / ACCOUNTANT MEMBER /RAJKOT : 21 .0 6 . 2013 NVA/ - RJO O / COPY OF ORDER FORWARDED TO: - 1 . /APPELLANT - THE INCOME - TAX OFFICER, WARD - 5(1), RAJKOT 2 . R /RESPONDE NT - M/S. PAREKH ISHWARLAL CHUNILAL,NAVA NAKA CHOWK, SONI BAZAR, RAJKOT 3 . N M / CONCERNED CIT - I II , RAJKOT 4 . M - / CIT(A) - XX I , AHMEDABAD 5 . N , 0 N , / DR, ITAT, RAJKOT 6 . 3 / GUARD FILE / BY ORDER TRUE COPY SENIOR PRIVATE SECRETARY, ITAT, RAJKOT