Abhayam Trading Limited, CHENNAI V. DCIT, CHENNAI

ITA 410/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8837 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 115JB; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.410 & 411/MDS/2016 ( )( / ASSESSMENT YEARS : 2007-08 & 2008-09 M/S ABHAYAM TRADING LIMITED (FORMERLY KNOWN AS APPLE CREDIT CORPORATION LIMITED), NO.2, GOKUL ARCADE, 1 ST FLOOR, SARDAR PATEL ROAD, ADYAR, CHENNAI - 600 020. PAN : AACCA 2996 C V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. T. BANUSEKAR, CA -.+, / 0 / RESPONDENT BY : SH. B. KOTESWARA RAO, CIT 1 / 2% / DATE OF HEARING : 03.05.2016 3') / 2% / DATE OF PRONOUNCEMENT : 15.07.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AG AINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, DATED 23.12.2015 AND PERTAIN TO ASSESSMENT YEARS 2007- 08 AND 2008-09. SINCE COMMON ISSUE ARISES FOR CONS IDERATION IN 2 I.T.A. NOS.410 & 411/MDS/16 BOTH THE APPEALS, WE HEARD BOTH THE APPEALS TOGETHE R AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IN BOTH THE APPEALS IS WITH REGARD TO REOPENING OF ASSESSMENT U NDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT' ). ACCORDING TO THE LD. D.R., FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSMENT WAS REOPENED AFTER EXPIRY OF FOUR YEARS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSEE IN FURNISHING INACCURATE PARTICULARS BEFOR E COMPLETING THE ORIGINAL ASSESSMENT. IN FACT, THE ORIGINAL ASSESSM ENT WAS COMPLETED. FOR THE ASSESSMENT YEAR 2008-09, THE AS SESSMENT WAS REOPENED WITHIN FOUR YEARS. ACCORDING TO THE LD. R EPRESENTATIVE, THE ASSESSEE, A NON-BANKING FINANCIAL COMPANY, BORROWED LOAN FROM SEVERAL BANKS. THE LOAN WAS SETTLED BY MAKING ONE- TIME PAYMENT. THE ONE-TIME SETTLEMENT MADE BY THE ASSESSEE WAS TH E SUBJECT MATTER OF EARLIER ASSESSMENT AND, IN FACT, THE CIT( APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER WITH REG ARD TO ONE-TIME SETTLEMENT. ON FURTHER APPEAL BY THE REVENUE, THE SAME WAS CONFIRMED BY THIS TRIBUNAL ALSO. BY PLACING RELIAN CE ON THE 3 I.T.A. NOS.410 & 411/MDS/16 JUDGMENT OF DELHI HIGH COURT IN CIT V. GOYAL M.G. G ASES LTD. (2010) 321 ITR 437, THE ASSESSING OFFICER REOPENED THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS. ACCORDI NG TO THE LD. REPRESENTATIVE, AN ADDITION WAS MADE WITH REGARD TO ONE-TIME SETTLEMENT, WHICH WAS IN FACT, DELETED BY THE CIT(A PPEALS). ON FURTHER APPEAL BY THE REVENUE, THE SAME WAS CONFIRM ED BY THIS TRIBUNAL. NOW, THE ASSESSING OFFICER CLAIMS THAT E VEN THOUGH IT IS NOT TAXABLE IN NORMAL COMPUTATION, THE SAME HAS TO BE INCLUDED FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT UNDER SECT ION 115JB OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, WHEN THE ONE-TIME SETTLEMENT WAS NOT TAXABLE IN THE NORMAL COMPUTATIO N, THE SAME CANNOT FORM PART OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE LD. REPRESENTATIVE CLARIFIED THAT SINCE IT IS ONE-T IME SETTLEMENT OF LOAN, THE SAME WAS BROUGHT TO THE BALANCE SHEET AS CAPITAL RESERVE. THE LD. REPRESENTATIVE FURTHER CLARIFIED THAT THE O NE-TIME SETTLEMENT WAS NOT ROUTED THROUGH PROFIT & LOSS ACCOUNT. 3. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT IN RESPONSE TO THE REASONS R ECORDED FOR THE REOPENING OF ASSESSMENTS, THE ASSESSEE HAS FILED A DETAILED OBJECTION ON 04.07.2014 FOR THE ASSESSMENT YEAR 200 7-08 AND ON 4 I.T.A. NOS.410 & 411/MDS/16 19.03.2015 FOR THE ASSESSMENT YEAR 2008-09, THE COP IES OF OBJECTIONS ARE AVAILABLE AT PAGES 25 AND 36 OF THE PAPER-BOOK. ACCORDING TO THE LD. REPRESENTATIVE, THESE OBJECTIO NS WERE NOT DISPOSED OF BY THE ASSESSING OFFICER BEFORE COMPLET ING THE ASSESSMENTS. PLACING RELIANCE ON THE JUDGMENT OF A PEX COURT IN GKN DRIVESHAFTS (INDIA) LTD. V. ITO 259 ITR 19, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE OBJECTION OF THE ASSESSEE BY A SEPAR ATE ORDER. BY PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COU RT IN CIT V. BAER SHOES (INDIA) (P) LTD. (2011) 331 ITR 435, THE LD. REPRESENTATIVE SUBMITTED THAT THE POWER OF REOPENIN G OF ASSESSMENT UNDER SECTION 147 OF THE ACT HAS TO BE INVOKED IN A CCORDANCE WITH THE CONDITIONS LAID DOWN THEREIN. MERELY BECAUSE A JUDGMENT WAS RENDERED SUBSEQUENTLY THAT CANNOT BE A REASON TO RE OPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE MADRA S HIGH COURT FOUND THAT REOPENING OF ASSESSMENT ON THE BASIS OF SUBSEQUENT JUDGMENT OF APEX COURT WOULD AMOUNT TO CHANGE OF OP INION. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, REO PENING OF ASSESSMENT ON THE BASIS OF THE HIGH COURT JUDGMENT IS NOTHING BUT CHANGE OF OPINION, THEREFORE, REOPENING OF ASSESSME NT IS INVALID. 5 I.T.A. NOS.410 & 411/MDS/16 4. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF DEL HI HIGH COURT IN CIT V. ORIENT CRAFT LTD. (2013) 354 ITR 536 AND SUB MITTED THAT ON IDENTICAL SET OF FACTS, THE DELHI HIGH COURT FOUND THAT EVEN THOUGH NO ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE ACT, REOPENING OF ASSESSMENT WOULD AMOUNT TO CHANGE OF O PINION. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF APEX COURT IN CIT V. KELVINATOR OF INDIA LTD. (2010 ) 320 ITR 561 AND THE JUDGMENT OF FULL BENCH OF DELHI HIGH COURT IN C IT V. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1. 5. PLACING RELIANCE ON THE JUDGMENT OF GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. V. DCIT (2013) 354 I TR 244, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHEN THE ASSESSING OFFICER FAILS TO DISPOSE OF THE OBJECTION RAISED BY THE ASSESSEE FOR REOPENING OF ASSESSMENT, THE ASSESSING OFFICER CANN OT PASS AN ASSESSMENT ORDER. ACCORDING TO THE LD. REPRESENTAT IVE, AFTER SERVING NOTICE UNDER SECTION 148 OF THE ACT, THE AS SESSING OFFICER WAS EXPECTED TO GIVE A COPY OF THE REASON RECORDED FOR REOPENING AND THE ASSESSING OFFICER THEREAFTER HAS TO CONSIDE R THE OBJECTION OF THE ASSESSEE AND PASS A SPEAKING ORDER. A COPY OF THE ORDER SHALL 6 I.T.A. NOS.410 & 411/MDS/16 BE SERVED ON THE ASSESSEE AND AN OPPORTUNITY SHALL BE GIVEN TO THE ASSESSEE TO CHALLENGE THE ORDER BEFORE APPROPRIATE FORUM. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HAS TO FIRST DISPOSE OF THE OBJECTION OF TH E ASSESSEE. IN THIS CASE, THE OBJECTION FILED BY THE ASSESSEE WAS NOT D ISPOSED OFF. IN SIMILAR CIRCUMSTANCES, THE GUJARAT HIGH COURT HAS Q UASHED THE ORDER OF THE ASSESSING OFFICER. IN VIEW OF THIS JU DGMENT OF GUJARAT HIGH COURT, ACCORDING TO THE LD. REPRESENTATIVE, TH E ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WITHOUT DISPO SING OF THE OBJECTION CANNOT STAND IN THE EYE OF LAW. 6. REFERRING TO THE JUDGMENT OF APEX COURT IN APOLL O TYRES LTD. V. CIT (20020 255 ITR 273, THE LD. REPRESENTATIVE F OR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE WAS EXPECTED TO COMPUTE THE BOOK PROFIT UNDER SECTION 115JB(2) OF THE ACT UNDER PART S II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. ONCE THE B OOK PROFIT IS COMPUTED AS PER THE PROVISIONS OF COMPANIES ACT AND CERTIFIED BY THE AUDITOR, THE ASSESSING OFFICER CANNOT GO BEYOND THE BOOK PROFIT COMPUTED AND CERTIFIED BY THE AUDITOR. THE POWER O F THE ASSESSING OFFICER IS ONLY TO VERIFY WHETHER IT IS CERTIFIED B Y THE AUDITOR OR NOT. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER 7 I.T.A. NOS.410 & 411/MDS/16 RECOMPUTED THE BOOK PROFIT BY INCLUDING THE ONE-TIM E SETTLEMENT MADE BY THE ASSESSEE, WHICH IS NOT PERMISSIBLE AS H ELD BY THE APEX COURT IN APOLLO TYRES LTD. (SUPRA). REFERRING TO T HE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN SURESH CHANDRA V. ITO IN I.T.A. NO.3061/DEL/2012, A COPY OF WHICH IS AVAILABLE AT P AGE 78 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT T HE ASSESSING OFFICER IS MANDATED TO DECIDE THE OBJECTION OF THE ASSESSEE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT BEFORE P ASSING THE ORDER. 7. THE LD. REPRESENTATIVE FURTHER PLACED HIS RELIAN CE ON THE JUDGMENT OF BOMBAY HIGH COURT IN CIT V. ADBHUT TRAD ING CO. (2011) 338 ITR 94 AND SUBMITTED THAT ONCE THE PROFI T & LOSS ACCOUNT PREPARED BY THE ASSESSEE WAS CERTIFIED BY T HE AUTHORITIES UNDER THE COMPANIES ACT, IT IS NOT OPEN TO THE ASSE SSING OFFICER TO CONTEND THAT THE PROFIT & LOSS ACCOUNT HAS NOT BEEN PREPARED IN ACCORDANCE WITH LAW UNDER THE PROVISIONS OF COMPANI ES ACT. IN THIS CASE, THE PROFIT & LOSS ACCOUNT WAS CERTIFIED BY TH E AUTHORITIES PRESCRIBED UNDER THE COMPANIES ACT. THEREFORE, THE ASSESSING OFFICER NOW CANNOT CONTEND THAT THE PROFIT & LOSS A CCOUNT WAS NOT PREPARED IN ACCORDANCE WITH LAW UNDER THE COMPANIES ACT. PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CI T V. 8 I.T.A. NOS.410 & 411/MDS/16 VIJAYASHREE FINANCE & INVESTMENT CO (P) LTD. (2008) 216 CTR 191, THE LD. REPRESENTATIVE SUBMITTED THAT WHILE COMPUTI NG INCOME UNDER SECTION 115J OF THE ACT, THE POWER OF THE ASSESSING OFFICER IS TO EXAMINE WHETHER THE BOOK PROFIT AS COMPUTED WAS CER TIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. T HE A.O. THEREAFTER HAS LIMITED POWER TO INCREASE OR REDUCE AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIF FERENTLY, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER DO ES NOT HAVE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN T HE PROFIT & LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED FOR IN THE EX PLANATION TO SECTION 115J OF THE ACT. 8. ON THE CONTRARY, SHRI B. KOTESWARA RAO, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE BORROWED LOAN FROM SEVERAL BANKING INSTITUTIONS AND THE SAME WAS SETTLED BY ONE-TIME PAYMENT. THEREFORE, THE BANKIN G INSTITUTIONS WAIVED THEIR CLAIM FOR PROVIDING ONE-TIME SETTLEMEN T. THE PAYMENT OF ONE-TIME SETTLEMENT WAS THE SUBJECT MATTER OF LI TIGATION BEFORE THIS TRIBUNAL. THIS TRIBUNAL FOUND THAT ONE-TIME SETTLE MENT CANNOT BE THE SUBJECT MATTER OF TAXATION UNDER THE NORMAL COM PUTATION. THE 9 I.T.A. NOS.410 & 411/MDS/16 ASSESSING OFFICER FURTHER FOUND THAT IN VIEW OF JUD GMENT OF DELHI HIGH COURT IN GOYAL M.G. GASES LTD. (SUPRA), EVEN T HOUGH THE WRITE BACK OF LOANS WAS NOT TAXABLE UNDER NORMAL PROVISIO NS OF THE ACT, THEY ARE TO BE INCLUDED FOR THE PURPOSE OF COMPUTAT ION OF BOOK PROFIT. SINCE THE ASSESSEE HAS NOT INCLUDED FOR COM PUTING THE BOOK PROFIT, ACCORDING TO THE LD. D.R., THE BOOK PROFIT WAS NOT COMPUTED AS PER THE PROVISIONS OF COMPANIES ACT, THE ASSESSI NG OFFICER HAS RIGHTLY RECOMPUTED THE BOOK PROFIT IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT. 9. PLACING RELIANCE ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN DCIT V. BOMBAY DIAMOND CO. LTD. (2010) 33 DTR 59, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT WHEN THE ACCOUNTS WERE NOT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, MERELY BECAUSE TH E AUDITOR HAS CERTIFIED THE ACCOUNT, IT CANNOT BE SAID THAT THE A SSESSING OFFICER CANNOT RECOMPUTE THE BOOK PROFIT. IN VIEW OF THIS DECISION OF MUMBAI BENCH OF THIS TRIBUNAL, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS EVERY RIGHT TO RECOMPUTE THE BOOK PROFIT WHEN THE ACCOUNTS WERE NOT PREPARED AS PER THE PROVISION S OF COMPANIES ACT. ACCORDING TO THE LD. D.R., THE ONE-TIME SETTL EMENT AND WAIVER 10 I.T.A. NOS.410 & 411/MDS/16 OF LOAN BY THE BANKING INSTITUTIONS WAS ADMITTEDLY NOT ROUTED THROUGH PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS TAKEN THE SAME TO THE BALANCE SHEET DIRECTLY. THEREFORE, THE ACCOUNTS WER E NOT MAINTAINED AS PER THE PROVISIONS OF COMPANIES ACT. WHEN THE A CCOUNTS WERE NOT MAINTAINED AS PER THE PROVISIONS OF COMPANIES A CT AND WAIVER OF LOAN AND ONE-TIME SETTLEMENT WERE NOT ROUTED THR OUGH PROFIT & LOSS ACCOUNT, ACCORDING TO THE LD. D.R., THE BOOK P ROFIT WAS NOT COMPUTED AS PER THE PROVISIONS OF COMPANIES ACT. T HEREFORE, THE JUDGMENT OF APEX COURT IN APOLLO TYRES LTD. (SUPRA) MAY NOT BE APPLICABLE AT ALL. WHEN IT WAS FOUND THAT THE ACCO UNTS WERE NOT PREPARED IN THE MANNER PROVIDED IN PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956, THE ASSESSING OFFICER CAN GO BEYOND THE BOOK PROFIT AS PER THE AUDITED ACCOUNTS. THEREFORE , ACCORDING TO THE LD. D.R., IT IS NOT CORRECT TO SAY THAT THE ASSESSI NG OFFICER CANNOT RECOMPUTE THE BOOK PROFIT. ACCORDING TO THE LD. D. R., SINCE THE ACCOUNTS WERE NOT MAINTAINED AS PER THE PROVISIONS OF COMPANIES ACT AND ONE-TIME SETTLEMENT AND WAIVER OF LOAN BY T HE BANKING INSTITUTIONS WERE NOT ROUTED THROUGH PROFIT & LOSS ACCOUNT, THE ASSESSING OFFICER HAS RIGHTLY RECOMPUTED THE BOOK P ROFIT. 11 I.T.A. NOS.410 & 411/MDS/16 10. REFERRING TO REOPENING OF THE ASSESSMENTS, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO ASSES SMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT. IN FAC T, THE RETURNS OF INCOME WERE PROCESSED UNDER SECTION 143(1) OF THE A CT. PLACING RELIANCE ON THE JUDGMENT OF APEX COURT IN ACIT V. R AJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500, THE LD. D .R. SUBMITTED THAT ONCE THE CONDITIONS PROVIDED UNDER SECTION 148 OF THE ACT WERE SATISFIED, THE ASSESSING OFFICER HAS EVERY RIGHT TO REOPEN THE ASSESSMENT, THEREFORE, THE CONTENTION OF THE LD. RE PRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSMENT WAS REOPENED BEYON D FOUR YEARS IS NOT CORRECT. EVEN THOUGH THE ASSESSMENT WAS REO PENED BEYOND FOUR YEARS FOR THE ASSESSMENT YEAR 2007-08, SINCE N O ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE ACT, PROVISION S OF SECTION 147 OF THE ACT MAY NOT BE APPLICABLE AT ALL. REFER RING TO THE ASSESSMENT ORDER FOR BOTH THE ASSESSMENT YEARS, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER IN CATEGORICAL TERMS RECORDED THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS THAT WERE NECESSAR Y TO COMPLETE THE ASSESSMENT. IN VIEW OF THIS, ACCORDING TO THE LD. D.R., IT CANNOT BE SAID THAT THE REOPENING OF ASSESSMENT IS INVALID. 12 I.T.A. NOS.410 & 411/MDS/16 11. REFERRING TO THE CONTENTION OF THE ASSESSEE THA T THERE WAS CHANGE OF OPINION BY THE ASSESSING OFFICER, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EXPRESSED ANY OP INION WITH REGARD TO BOOK PROFIT UNDER SECTION 115JB OF THE AC T. IN FACT, NO ASSESSMENT WAS MADE, THEREFORE, THE ASSESSING OFFIC ER HAD NO OCCASION TO EXPRESS ANY OPINION. UNLESS AND UNTIL THE ASSESSING OFFICER EXPRESSES HIS OPINION BY PASSING AN ASSESSM ENT ORDER UNDER SECTION 143(3) OF THE ACT, IT CANNOT BE SAID THAT THE ASSESSING OFFICER CHANGED HIS OPINION. IN THE ABSENCE OF ANY OPINION BY THE ASSESSING OFFICER, IT CANNOT BE SAID THAT THE ASSES SING OFFICER CHANGED HIS OPINION, THEREFORE, THE JUDGMENT OF APE X COURT AND THE JUDGMENT OF FULL BENCH OF DELHI HIGH COURT IN KELVI NATOR OF INDIA LTD. (SUPRA) MAY NOT BE APPLICABLE AT ALL. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE IS A NON-BANKING FINANCIAL COMPANY. THE A SSESSEE BORROWED LOAN FROM SEVERAL BANKS AND FINANCIAL INST ITUTIONS AND SETTLED THE SAME BY ONE-TIME SETTLEMENT. THE BANKS AND FINANCIAL INSTITUTIONS WAIVED LOAN AND PRINCIPAL AMOUNT AND I NTEREST SO AS TO 13 I.T.A. NOS.410 & 411/MDS/16 ENABLE THE ASSESSEE TO SETTLE THE OUTSTANDING DUE B Y ONE-TIME SETTLEMENT. THE TAXABILITY OF ONE-TIME SETTLEMENT WAS THE SUBJECT MATTER OF APPEAL BEFORE THIS TRIBUNAL. THIS TRIBUN AL FOUND BY AN ORDER DATED 20.09.2011, THAT THE ONE-TIME SETTLEMEN T CANNOT BE SUBJECTED TO TAXATION. THE ISSUE NOW BEFORE THIS T RIBUNAL IS WITH REGARD TO COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE ASSESSING OFFICER CLAIMS THAT EVEN THOUGH ONE-T IME SETTLEMENT WAS NOT TAXABLE IN VIEW OF THE DECISION OF THIS BEN CH DATED 20.09.2011, THE SAME HAS TO BE INCLUDED FOR THE PUR POSE OF COMPUTING BOOK PROFIT. THEREFORE, SHE REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 13. THE ASSESSEE NOW CLAIMS BEFORE THIS TRIBUNAL TH AT THE REOPENING OF ASSESSMENT IS NOT VALID. ACCORDING TO THE LD. REPRESENTATIVE, FOR THE ASSESSMENT YEAR 2007-08, TH E ASSESSMENT WAS REOPENED AFTER EXPIRY OF FOUR YEARS, THEREFORE, THE REOPENING IS BAD IN LAW. FOR THE ASSESSMENT YEAR 2008-09, THE L D. REPRESENTATIVE FOR THE ASSESSEE CONTENDS THAT THE R EOPENING OF ASSESSMENT WAS DUE TO CHANGE OF OPINION. THE ASSES SEE ALSO CLAIMS THAT IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT, AN OBJECTION WAS FILED FOR REOPENING OF ASSESSMENT. F OR THE 14 I.T.A. NOS.410 & 411/MDS/16 ASSESSMENT YEAR 2007-08, THE OBJECTION WAS FILED BE FORE THE ASSESSING OFFICER ON 04.07.2014 AND FOR THE ASSESSM ENT YEAR 2008- 09, THE OBJECTION WAS FILED ON 19.03.2015. THE ASS ESSEE CLAIMS THAT THESE OBJECTIONS WERE NOT DISPOSED OFF BY THE ASSESSING OFFICER BEFORE PASSING THE ASSESSMENT ORDERS. THE QUESTION NOW ARISES FOR CONSIDERATION IS - CAN THE ASSESSING OFFICER PROCEE D FURTHER IN THE ASSESSMENT PROCEEDING WITHOUT DISPOSING OF THE OBJE CTIONS FILED BY THE ASSESSEE FOR REOPENING THE ASSESSMENT? THIS IS SUE WAS SUBJECT MATTER OF DISCUSSION BEFORE THE GUJARAT HIG H COURT IN GENERAL MOTORS INDIA PVT. LTD. (SUPRA). THE GUJARA T HIGH COURT, AFTER CONSIDERING THE CASE LAWS ON THE SUBJECT, HAS OBSERVED AS FOLLOWS:- 23. A DIVISION BENCH OF THIS COURT IN ARVIND MILLS LT D. V. ASST. CWT (NO. 2) [2004] 270 ITR 469 (GUJ), AFTER CONSIDERING THE DECISION OF THIS COURT IN GARDEN FI NANCE LTD. V. ASST. CIT [2004] 268 ITR 48 (GUJ), HELD IN THE MAJORITY OPINION AS UNDER (PAGE 474 OF 270 ITR) : ' 'WHAT THE SUPREME COURT HAS NOW DONE IN THE GKN C ASE [2003] 259 ITR 19 IS NOT TO WHITTLE DOWN THE PRINCIPLE LAID DOWN BY THE CONSTITUTION BENCH OF THE APEX COURT IN CALCUTTA DISCOUNT CO. LTD. CASE [1961] 41 ITR 191 (SC) BUT TO REQUIRE THE ASSESSEE FIRST TO LODGE PRELIMINARY OBJECTION BEFORE THE ASSESSING OFFICER WHO IS BOUND TO DECIDE THE PRELIMINARY OBJECTIONS TO ISSUANCE OF THE REASSESSM ENT NOTICE BY PASSING A SPEAKING ORDER AND, THEREFORE, IF SUCH ORDER ON THE PRELIMINARY OBJECTIONS IS STILL AGAINS T THE ASSESSEE, THE ASSESSEE WILL GET AN OPPORTUNITY TO C HALLENGE THE SAME BY FILING A WRIT PETITION SO THAT HE DOES NOT HAVE TO 15 I.T.A. NOS.410 & 411/MDS/16 WAIT TILL COMPLETION OF THE REASSESSMENT PROCEEDING S WHICH WOULD HAVE ENTAILED THE LIABILITY TO PAY TAX AND INT EREST ON REASSESSMENT AND ALSO TO GO THROUGH THE GAMUT OF AP PEAL, THE SECOND APPEAL BEFORE INCOME-TAX APPELLATE TRIBUN AL AND THEN REFERENCE/TAX APPEAL TO THE HIGH COURT. VIEWED IN THIS LIGHT, IT APPEARS TO ME THAT THE R IGOUR OF AVAILING OF THE ALTERNATIVE REMEDY BEFORE THE AS SESSING OFFICER FOR OBJECTING TO THE REASSESSMENT NOTICE UN DER SECTION 148 HAS BEEN CONSIDERABLY SOFTENED BY THE APE X COURT IN GKN CASE [2003] 259 ITR 19 IN THE YEAR 2003. IN MY VIEW, THEREFORE, THE GKN CASE [2003] 259 ITR 19 DOES NOT RUN COUNTER TO THE CALCUTTA DISCOUNT CO. LTD. C ASE [1961] 41 ITR 191 (SC) BUT IT MERELY PROVIDES FOR CHALLENGE TO THE REASSESSMENT NOTICE IN TWO STAGES, THAT IS, (I) RAISING PRELIMINARY OBJECTIONS BEFORE THE ASSES SING OFFICER AND IN CASE OF FAILURE BEFORE THE ASSESSING OFFICER (II) CHALLENGING THE SPEAKING ORDER OF THE ASSESSIN G OFFICER UNDER SECTION 148 OF THE ACT. THE POSITION IN LAW IS THUS WELL SETTLED. AFTER A NOTICE FOR RE-ASSESSMENT HAS BEEN ISSUED AN ASSESSEE IS RE QUIRED TO FILE THE RETURN AND SEEK REASONS FOR ISSUANCE OF SUCH NOTICE. THE ASSESSING OFFICER IS THEN BOUND TO SUPP LY THE REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REA SONS, THE ASSESSEE IS ENTITLED TO FILE PRELIMINARY OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS UND ER A MANDATE TO DIS POSE OF SUCH PRELIMINARY OBJECTIONS BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH TH E ASSESSMENT IN RESPECT OF THE ASSESSMENT YEAR FOR WH ICH SUCH NOTICE HAS BEEN ISSUED.' 24. FROM THE AFORESAID DISCUSSION, WE ARE OF THE CONS IDERED OPINION THAT THE WRIT PETITION UNDER ARTICLE 226 OF TH E CONSTITUTION OF INDIA IS MAINTAINABLE WHERE NO ORDE R HAS BEEN PASSED BY THE ASSESSING OFFICER DECIDING THE OBJECTION FILED BY THE ASSESSEE UNDER SECTION 148 OF THE ACT AND ASSESSMENT ORDER HAS BEEN PASSED OR THE ORD ER 16 I.T.A. NOS.410 & 411/MDS/16 DECIDING AN OBJECTION UNDER SECTION 148 OF THE ACT H AS NOT BEEN COMMUNICATED TO THE ASSESSEE AND ASSESSMENT OR DER HAS BEEN PASSED OR THE OBJECTION FILED UNDER SECTIO N 148 HAS BEEN DECIDED ALONG WITH THE ASSESSMENT ORDER. I F THE OBJECTION UNDER SECTION 148 HAS BEEN REJECTED WITHOUT THERE BEING ANY TANGIBLE MATERIAL AVAILABLE WITH TH E ASSESSING OFFICER TO FORM AN OPINION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT AND IN THE ABS ENCE OF REASONS HAVING DIRECT LINK WITH THE FORMATION OF THE BELIEF, THE WRIT COURT UNDER ARTICLE 226 CAN QUASH THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THE WRIT PETITIO N FILED BY THE PETITIONER IS MAINTAINABLE. THE ASSESSING OF FICER IS MANDATED TO DECIDE THE OBJECTION TO THE NOTICE UNDE R SECTION 148 AND SUPPLY OR COMMUNICATE IT TO THE ASSES SEE. THE ASSESSEE GETS AN OPPORTUNITY TO CHALLENGE THE O RDER IN A WRIT PETITION. THEREAFTER, THE ASSESSING OFFICER MA Y PASS THE REASSESSMENT ORDER. WE HOLD THAT IT WAS NOT OPE N TO THE ASSESSING OFFICER TO DECIDE THE OBJECTION TO NO TICE UNDER SECTION 148 BY A COMPOSITE ASSESSMENT ORDER. TH E ASSESSING OFFICER WAS REQUIRED TO, FIRST DECIDE THE OBJECTION OF THE ASSESSEE FILED UNDER SECTION 148 AND SERVE A COPY OF THE ORDER ON THE ASSESSEE. AND AFTER GIVI NG SOME REASONABLE TIME TO THE ASSESSEE FOR CHALLENGING HIS ORDER, IT WAS OPEN TO HIM TO PASS AN ASSESSMENT ORDER. THIS W AS NOT DONE BY THE ASSESSING OFFICER, THEREFORE, THE ORDER ON THE OBJECTION TO THE NOTICE UNDER SECTION 148 AND THE ASSESSMENT ORDER PASSED UNDER THE ACT DESERVES TO B E QUASHED. IN VIEW OF THE ABOVE OBSERVATION OF GUJARAT HIGH CO URT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER WAS EXPECTED TO DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE BEFORE PROCEEDING FURTHER IN THE ASSESSMENT. 17 I.T.A. NOS.410 & 411/MDS/16 14. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE OBJ ECTIONS FILED BY THE ASSESSEE WERE NOT DISPOSED OFF BY THE ASSESSING OFF ICER. THEREFORE, CONSEQUENTIAL ASSESSMENT FRAMED BY THE A SSESSING OFFICER CANNOT STAND IN THE EYE OF LAW. THIS JUDGME NT OF GUJARAT HIGH COURT WAS CONSIDERED IN AN UNREPORTED DECISION OF DELHI BENCH OF THIS TRIBUNAL IN SURESH CHANDRA (SUPRA). THE ASSESSEE HAS FILED A COPY OF THIS DECISION OF DELHI BENCH OF THIS TRIBUNAL WHICH IS AVAILABLE AT PAGE 78 OF THE PAPER-BOOK. T HE DELHI BENCH, AFTER CONSIDERING THE JUDGMENT OF GUJARAT HIGH COUR T IN GENERAL MOTORS INDIA PVT. LTD. (SUPRA) AND THE JUDGMENT OF APEX COURT IN GKN DRIVESHAFTS (INDIA) LTD. (SUPRA), HAS FOUND THA T THE ASSESSING OFFICER WAS FIRST REQUIRED TO DISPOSE OFF THE OBJEC TION OF THE ASSESSEE. SINCE THE OBJECTIONS WERE NOT DISPOSED O F, THE IMPUGNED ASSESSMENT DATED 31.12.2010 WAS VOID AB INITIO. IN FACT, THE DELHI BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS AT P ARA 8 OF ITS ORDER:- 8. IN VIEW OF THE ABOVE DECISIONS, WE FIND THAT THE ASSESSING OFFICER IS MANDATED TO DECIDE THE OBJECTI ON TO THE NOTICE UNDER SEC. 148 OF THE ACT AND SUPPLY OR COMMUNICATE IT TO THE ASSESSEE. THEREAFTER, THE ASSESSEE GETS AN OPPORTUNITY TO CHALLENGE THE ORDER IN A WRIT PETITION. THEREAFTER, THE ASSESSING OFFICER M AY PASS THE REASSESSMENT ORDER. IT IS NOT OPEN TO THE ASSESSING OFFICER TO DECIDE THE OBJECTION RAISED AG AINST 18 I.T.A. NOS.410 & 411/MDS/16 NOTICE UNDER SEC. 148 BY A COMPOSITE ASSESSMENT ORDE R. THUS, THE ASSESSING OFFICER WAS REQUIRED TO FIRST DECIDE THE OBJECTION OF THE ASSESSEE FILED UNDER SE C. 148 AND SERVE A COPY OF THE ORDER ON ASSESSEE. AND AFTER GIVING SOME REASONABLE TIME TO THE ASSESSEE F OR CHALLENGING HIS ORDER, IT IS OPEN TO HIM TO PASS AN ASSESSMENT ORDER. SINCE SUCH COMPLIANCE HAS NOT BE EN MADE BY THE ASSESSING OFFICER IN THE PRESENT CASE, WE HOLD THAT THE IMPUGNED ASSESSMENT ORDER DATED 03.10.2008 AS NOT VALID AND THE SAME IS HELD AS VOID AB INITIO. 15. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE T O UPHOLD THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION MA DE BY THE ASSESSING OFFICER IS DELETED. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED ON 15 TH JULY, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 15 TH JULY, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-1, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.