Smt. Kailash Sharma Prop:, Jalandhar V. The Income Tax Officer, Phagwara

ITA 411/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8723 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Amritsar
• Next Hearing Date: 20-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 08-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Keywords: Reopening of assessment; Principle of natural justice; Reassessment proceedings
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 292BB; 48; 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.411/ASR/2016 (ASSESSMENT YEAR-2004-05) SH. KAILASH SHARMA, PROP: M/S SURAJ INDUSTRIES JAGATPURA, PHILLAUR. PAN NO.ACPPS9780G (ASSESSEE) VS .. ITO-WARD-2, PHAGWARA (REVENUE) ASSESSEE BY SHRI .SANDEEP VIJH, CA. REVENUE BY SHRI. BHAWANI SHANKER, DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004- 05, TAKING THE FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN UPHOLDING AN ORDER WHICH IS BAD IN LAW INCLUDING FOR THE REASON THAT THE SANCTION F OR RE- ASSESSMENT AS WELL AS THE NOTICE U/S 148 ARE IN THE NAME OF THE FIRM 'M/S. SURAJ INDUSTRIES, PHILLAUR ' AND NOT THE ASSESSEE. DATE OF HEARING 20.01.2017 DATE OF PRONOUNCEMENT 15 .03.2017 I.T.A NO.411/ASR/2016 2 2. THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS), HAS ERRED IN UPHOLDING THE ASSUMPTION OF JURISDICTI ON FOR RE-ASSESSMENT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 108,616 /- IN RESPECT OF INVESTMENT MADE FOR THE SALES OF RS.264, 529 ALLEGEDLY MADE BY THE ASSESSEE. EVEN THE PRINCIPLES OF NATURAL JUSTICE WERE NOT FOLLOWED AND CONSEQUENTLY THE ADDITION OF RS. 203,661/- WAS BAD IN LAW. 4. THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 60,868/ - TOWARDS G.P. ON THE SALES OF RS. 264,529/- ALLEGEDL Y MADE BY THE ASSESSEE. EVEN THE PRINCIPLES OF NATURA L JUSTICE WERE NOT FOLLOWED AND CONSEQUENTLY THE ADDI TION OF RS. 60,868/-WAS BAD IN LAW. 2. REGARDING GROUND NO.1, THE ASSESSEE HAD RAISED THIS ISSUE BY WAY OF GROUND NO.2 BEFORE THE LD. CIT(A), AS FOLLOWS: 2(A) THAT THE EXEMPTION OF JURISDICTION FOR REASSE SSMENT IS BAD IN LAW. 2(B) THAT THE ISSUANCE OF NOTICE U/S 148 AS WELL AS THE CONSEQUENT ASSESSMENT ORDER IS BAD IN LAW. I.T.A NO.411/ASR/2016 3 3. AS PER IMPUGNED ORDER (PAGES 3 TO 6, PARA 6.1, R ELEVANT PORTIONS), BY WAY OF WRITTEN SUBMISSIONS DATED 02.02.2016, THE ASSESSEE STATED BEFORE THE LD. CIT(A) THAT: 1. THE FIRST GROUND OF APPEAL IS THAT THE ORDER IS BAD IN LAW. IN THIS REGARD IT IS SUBMITTED THAT THAT THE ASSESS MENT ORDER HAS BEEN PASSED IN THE CASE OF SMT. KAILASH SHARMA PROP : M/S SURAJ INDUSTRIES IN HER INDIVIDUAL CAPACITY. THIS I S VERY MUCH EVIDENT FROM THE IMPUGNED ORDER ITSELF. THE DOCUMEN TS ON RECORD SHOW THAT THE SANCTION WAS APPLIED FOR AND O BTAINED IN THE CASE OF 'M/S SURAJ INDUSTRIES, PHILLAUR' IN THE CAPACITY OF A FIRM. COPY OF THE RELEVANT DOCUMENTS IS ENCLOSED AT PAGE NO. 1 TO 3. A PERUSAL OF THE ABOVE DOCUMENTS CLEARLY SHOW S THAT THE NAME OF THE ASSESSEE DOES NOT APPEAR ANYWHERE AND A LSO THE STATUS IS THAT OF A FIRM. THE NOTICE U/S 148 DATED 29/3/2011 WAS ALSO ISSUED IN THE NAME OF THE FIRM 'M/S SURAJ INDU STRIES'. COPY OF THE NOTICE U/S 148 IS ENCLOSED AT PAGE NO. 4. DU RING THE ASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAD OBJ ECTED TO THE REASSESSMENT IN THE HANDS OF THE INDIVIDUAL AND COP Y OF THE RELEVANT REPLY IS BEING ENCLOSED AT PAGE NO. 5. IN VIEW OF THE I.T.A NO.411/ASR/2016 4 ABOVE SUBMISSIONS, THE ASSESSMENT ORDER DATED 22/12 /2011 IN THE STATUS OF INDIVIDUAL WHEN NOTICE U/S 148 AS WEL L AS THE REASONS RECORDED ARE IN THE STATUS OF A FIRM IS BAD IN LAW AND DESERVES TO BE CANCELLED. WE WOULD LIKE TO DRAW YOU R ATTENTION TO THE DECISION OF THE CALCUTTA HIGH COURT IN THE C ASE OF CIT VS. BIBHUTI BHUSHAN MALLICK REPORTED AT 165 ITR 107 WHE REIN IT WAS HELD THAT WHERE THE NAME OF THE ASSESSEE WAS IN CORRECTLY MENTIONED IN THE NOTICE U/S 148, THE RE-ASSESSMENT PROCEEDINGS WERE INVALID. COPY OF THE DECISION IS ENCLOSED AT P AGE NO. 6 TO 9. THE KERALA HIGH COURT HAS IN THE CASE OF P.N. SA SIKUMAR AND OTHERS VS. CIT REPORTED AT 170 ITR 80 ALSO EXPR ESSED SIMILAR VIEW AND HAS EVEN HELD THAT THE PROVISIONS OF SECTION 292B WOULD NOT SAVE SUCH A NOTICE. COPY OF THE DECI SION IS ENCLOSED AT PAGE NO. 10 TO 13. IT IS AN ACCEPTED LE GAL POSITION THAT ONE THE INITIATION OF RE-ASSESSMENT PROCEEDING S IS BAD IN LAW, WHATEVER FOLLOWS IS ALSO BAD IN LAW. RELIANCE IS PLACED ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF RAVATMAL HARAKCHAND VS. CIT REPORTED AT 129ITR346. ANOTHER ASPECT TO BE HIGHLIGHTED IT THAT THE ASSES SING OFFICER IN I.T.A NO.411/ASR/2016 5 THIS CASE HAD SOUGHT SANCTION FOR ISSUANCE OF NOTIC E U/S 148 FROM THE ADDITIONAL COMMISSIONER OF INCOME TAX. COP Y OF THE SANCTION LETTER OBTAINED CLEARLY SHOWS THAT THE SAN CTION WAS OBTAINED IN THE NAME OF M/S SURAJ INDUSTRIES, PHILL AUR. SINCE ASSESSMENT WAS ULTIMATELY FRAMED IN THE NAME OF SMT . KAILASH SHARMA, IT IS CLEAR THAT THERE WAS NO SANCTION FROM THE ADDITIONAL COMMISSIONER AND THE NOTICE ISSUED U/S 1 48 WITHOUT OBTAINING SANCTION IS BAD IN LAW AND CONSEQUENTLY T HE IMPUGNED ORDER IS ALSO BAD IN LAW. THE APPROVAL BY THE SUPERIOR AUTHORITIES BY JUST MENTIONING YES IS NOT IN ACCORDANCE WITH LAW. VARIOUS COLUMNS LEFT BLANK IN THE DOCUMEN T FILED AT PAGE NO. 2 ALSO SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE AUTHORITIES CONCERNED. 2(B) THE SECOND PART OF THE SECOND GROUND OF APPEA L IS THAT THE ISSUANCE OF NOTICE U/S 148 AS WELL AS THE CONSE QUENT ASSESSMENT ORDER IS BAD IN LAW. SANCTION IN THIS CA SE WAS OBTAINED IN THE CASE OF A FIRM AND ASSESSMENT FRAME D IN THE CASE OF AN INDIVIDUAL. THE SUBMISSIONS MADE AT GROU ND NO. I AND 2(A) ABOVE MAY PLEASE BE CONSIDERED WHILE DECID ING THIS GROUND '. I.T.A NO.411/ASR/2016 6 4. THE AO HAS FILED HIS COMMENTS/REPORT DATED 05.04 .2016. THIS IS REPRODUCED AT PAGES 6 TO 8, IN PARA 6.2 OF THE IMPUGNED ORDER. THE RELEVANT PORTION THEREOF IS AS FOLLOWS: THE NOTICE FOR RE-OPENING OF ASSESSMENT HAS BEEN I SSUED WITH THE PRIOR APPROVAL OF THE ADDL. COMMISSIONER OF INC OME-TAX, PHAGWARA RANGE, PHAGWARA AND BASED ON PROCEEDINGS I N THE CASE OF M/S AZAD ENGG. WORKS, BATHINDA BEFORE THE S ETTLEMENT COMMISSION IN WHICH THE ABOVE FIRM HAS ADMITTED UNR ECORDED TRANSACTIONS. AND IN VIEW OF THE ABOVE FACTS THE THEN ASSESSING OFFICER CORRECTLY ISSUED THE NOTICE FOR R E-OPENING OF ASSESSMENT HAS BEEN ISSUED WITH THE PRIOR APPROVAL OF THE ADDL. COMMISSIONER OF INCOME-TAX, PHAGWARA RANGE, PHAGWARA 5. THE ASSESSEE IN HIS COUNTER COMMENTS (IMPUGNED O RDER, PAGE 8 TO 10, PARA 6.3), INTER ALIA, STATED THAT: IT HAS BEEN STATED IN PARA NO.3 THAT NOTICE FOR RE -OPENING OF ASSESSMENT WAS ISSUED WITH THE PRIOR APPROVAL OF TH E ADDITIONAL COMMISSIONER OF INCOME TAX, PHAGWARA RANGE. THE ASS ESSING OFFICER HAS NOT REBUTTED THE FACT THAT THE APPROVAL WAS TAKEN IN THE NAME OF THE FIRM M/S SURAJ INDUSTRIES AND NOT T HE ASSESSEE. I.T.A NO.411/ASR/2016 7 6. THE LD. CIT(A) AT PAGE 10, PARA 6.4 (RELEVANT PO RTION) OF HIS ORDER, HAS HELD THAT: .I AM ALSO OF THE OPINION THAT THE MISTAK E COMMITTED BY THE ASSESSING OFFICER WHILE TAKING APP ROVAL FOR REOPENING THE ASSESSMENT IN THIS CASE IS COVERED UN DER THE PROVISIONS OF SECTION 292BB OF THE ACT AS THE ASSES SEE HAS DULY COMPLIED WITH THE NOTICES ISSUED TO THE ASSESSEE IN THE NAME OF HER PROPRIETARY CONCERN. I AM FURTHER OF THE OPINIO N THAT THE ASSESSEE CANNOT RAISE THE OBJECTION WITH REGARD TO FRAMING OF ASSESSMENT IN HER CASE NOW IN VIEW OF PROVISIONS OF SECTION 292BB OF THE ACT. UNDER SUCH CIRCUMSTANCES, THE ACT ION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT IN TH E CASE OF THE ASSESSEE CANNOT BE SAID TO BE UNJUSTIFIED. 7. THE QUESTION IS WHETHER IN THE ABOVE FACTS, THE LD. CIT(A) WAS CORRECT IN UPHOLDING THE AOS ORDER, WHEN SANCTION FOR INITIAT ION OF REASSESSMENT PROCEEDINGS WAS ACCORDED IN THE CASE OF THE FIRM, M /S SURAJ INDUSTRIES PHILLAUR, WHEREAS THE AOS ORDER HAS BEEN PASSED IN THE CASE OF THE ASSESSEE, INDIVIDUAL. 8. APB-7 IS A COPY OF FORM FOR RECORDING REASONS FO R INITIATING PROCEEDINGS U/S 148 OF THE I.T. ACT AND FOR OBTAINING THE APPROVAL OF THE ADDL. CIT. ITEM NO.1 THEREOF GIVES THE NAME AND ADDRESS OF THE ASSESSEE AS M/S SURAJ INDUSTRIES, PHILLAUR. ITEM NO.3 SHOWS THE STATUS AS FIRM. TH E SANCTION HAS BEEN ACCORDED BY THE ADDL.CIT AT THE BOTTOM OF THE PAGE, BY STATI NG YES. THE NAME OF THE I.T.A NO.411/ASR/2016 8 ASSESSEE INDIVIDUAL NOWHERE APPEARS ON THIS FORM. T HUS, IT IS EVIDENTLY CLEAR THAT PROCEEDINGS U/S 148 OF THE ACT WERE SOUGHT TO BE IN ITIATED IN THE CASE OF THE FIRM, WHICH IS THE PROPRIETORSHIP CONCERN OF THE ASSESSEE , AND NOT IN THE CASE OF THE ASSESSEE, IN HIS INDIVIDUAL CAPACITY. 9. APB-8 IS A COPY OF THE REASONS DATED 23.03.2011 RECORDED FOR INITIATING PROCEEDINGS U/S 148. THESE REASONS ARE SHOWN (AT TH E TOP OF THE PAGE) TO HAVE BEEN RECORDED IN THE CASE OF AS M/S SURAJ INDUSTRIES, P HILLAUR, AND AGAIN, NOT IN THE CASE OF THE ASSESSEE INDIVIDUAL. 10. APB-9 IS A COPY OF THE NOTICE ISSUED U/S 148 OF THE ACT. THIS NOTICE HAS BEEN ISSUED TO AS M/S SURAJ INDUSTRIES, PHILLAUR, (JAG ATPURA), AND NOT TO THE ASSESSEE. 11. THOUGH THE NAME OF THE ASSESSEE IN THE ASSESSME NT ORDER HAS BEEN STATED TO BE SMT. KAILASH SHARMA AND THE STATUS HAS BEEN ME NTIONED TO BE INDIVIDUAL, THE VERY OPENING SENTENCE OF THE ORDER STATES; THE ASSESSEE FIRM IS PROPRIETARY CONCERN. THEN, IN THE BODY OF THE ASSESSMENT ORDER , AS STATED IN THE REASONS RECORDED, WHICH, TO REITERATE, ARE IN THE NAME OF T HE FIRM, IT HAS BEEN OBSERVED THAT AS PER THE INFORMATION RECEIVED, M/S AZAD ENGINEE RING WORKS, ON WHOSE PREMISES A SURVEY HAD BEEN CONDUCTED, HAD MADE CASH PAYMENTS TO THE EXTENT OF RS.2,64,529/- TO THE FIRM, M/S SURAJ INDUSTRIES, P HILLAUR, DURING THE YEAR. THE INTENTION OF THE DEPARTMENT TO REASSESS THE INCOME OF THE FIRM AND NOT OF THE I.T.A NO.411/ASR/2016 9 ASSESSEE INDIVIDUAL GETS CLARIFIED EVEN FURTHER, WH EN IN HIS COMMUNICATION/REPORT DATED 05.04.2016 (IMPUGNED ORDER, PAGE 6, PARA 6.2, SUB PARA 2), THE AO HIMSELF STATED AS THE VERY OPENING SENTENCE OF HIS REPORT T HAT: THE ASSESSEE FIRM IS A PROPRIETARY CONCERN. 12. THE LD. CIT(A), IN HIS ORDER, HAS OBSERVED THAT THE MISTAKE COMMITTED BY THE AO WHILE TAKING APPROVAL FOR REOPENING THE ASSESSME NT IN THIS CASE IS COVERED WITH THE PROVISIONS OF SECTION 292BB OF THE ACT AS THE A SSESSEE HAS DULY COMPLIED WITH THE NOTICES ISSUED TO THE ASSESSEE IN THE NAME OF H ER PROPRIETARY CONCERN. THUS, THE LD. CIT(A) HAS HIMSELF ACKNOWLEDGED THAT THE APPROV AL WAS NOT TAKEN IN THE NAME OF THE ASSESSEE INDIVIDUAL. HE HOLDS THAT THIS MIS TAKE IS COVERED U/S 292BB OF THE ACT, WHEREBY, AS RELEVANT TO THE PRESENT CASE, WHER E AN ASSESSEE HAS APPEARED IN ANY PROCEEDINGS RELATING TO A REASSESSMENT, ANY NOT ICE UNDER THE ACT, WHICH IS REQUIRED TO BE SERVED ON HIM, SHALL BE DEEMED TO HA VE BEEN DULY SERVED ON HIM IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THE A SSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTION THAT THE NOTICE WAS NOT SERVED ON HIM. 13. IN THIS REGARD, SECTION 292BB, AS IS CLEAR FROM THE LANGUAGE EMPLOYED THEREIN, DEALS WITH A NOTICE THAT IS REQUIRED TO BE SERVED ON THE ASSESSEE WHO HAS APPEARED IN ANY PROCEEDINGS RELATING TO A REASSESSM ENT. IN THE PRESENT CASE, EVEN AS PER THE ASSESSMENT ORDER ITSELF, AS NOTICED HEREINA BOVE, WHEREAS THE ASSESSMENT I.T.A NO.411/ASR/2016 10 BEING FRAMED WAS THAT OF THE ASSESSEE INDIVIDUAL, T HE COMPLETED ASSESSMENT REOPENED WAS THAT OF THE FIRM. ALSO THE REASONS REC ORDED WERE IN THE CASE OF THE FIRM AND THE NOTICE U/S 148 TOO WAS ISSUED IN THE N AME OF THE FIRM. THUS, EVIDENTLY, THE NOTICE U/S 148 WAS REQUIRED TO BE SERVED ON THE FIRM, IN WHOSE NAME IT WAS ISSUED, AND NOT ON THE ASSESSEE INDIVIDUAL. SO, IF THE PROVISIONS OF SECTION 292BB ARE TO BE INVOKED, APPLICATION THEREOF WOULD MAR RA THER THAN FURTHER THE CAUSE OF THE DEPARTMENT. THE NOTICE U/S 148 WAS, AS SEEN ABO VE, REQUIRED TO BE SERVED ON THE FIRM, M/S SURAJ INDUSTRIES, PHILLAUR. THEREFORE, THE PROVISIONS OF SECTION 292BB WOULD HAVE BEEN APPLICABLE TO THE FIRM, IN CASE IT (THE FIRM) APPEARED IN ANY REASSESSMENT PROCEEDINGS. PER CONTRA, IT WAS THE AS SESSEE INDIVIDUAL WHO APPEARED AND SECTION 292BB IS, FOR THIS REASON ALONE, NOT AT TRACTED. 14. THEN, NOT ONLY AS IS CLEAR FROM THE LANGUAGE US ED IN SECTION 292BB, BUT AS HAS ALSO BEEN HELD IN CIT VS. PANORAMA BUILDERS PV T. LTD., 45 TAXMANN.COM 159 (GUJ), SECTION 292BB IS ONLY CONFINED TO SERVICE OF NOTICE AND IT DOES NOT APPLY TO ISSUANCE THEREOF. IN THE PRESENT CASE, THE OBJECTIO N OF THE ASSESSEE IS THAT THE ISSUANCE OF THE NOTICE IS BAD IN LAW. THAT BEING SO , THE PROVISIONS OF SECTION 292BB CANNOT COME INTO PLAY AND THEY CANNOT BE PRESSED IN TO SERVICE. I.T.A NO.411/ASR/2016 11 15. IN THE ABOVE FACTS AND CIRCUMSTANCES, THE ACTIO N OF THE ASSESSEE IN PUTTING IN APPEARANCE IN THE REASSESSMENT PROCEEDINGS OF THE F IRM, M/S SURAJ INDUSTRIES, PHILLAUR, CANNOT HAVE THE EFFECT OF VALIDATING THE REASSESSMENT ORDER. 16. FOR THE ABOVE DISCUSSION, THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND NO.1 IS JUSTIFIED. IT IS ACCEPTED. THE IMPUGNED ORD ER IS REVERSED. THE REASSESSMENT ORDER IS CANCELLED. AS A CONSEQUENCE, NOTHING FURTH ER SURVIVES FOR ADJUDICATION. 17. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUTANT MEMBER JUDICIAL MEMBER DATED 15/03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S.