NILESH KANTILAL SOLANKI, MUMBAI V. DCIT 22(1), NAVI MUMBAI

ITA 4261/MUM/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3454 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Period of limitation; Assessment record; Time period of passing order
• Section: 40A(3); 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4261/M/2011 ASSESSMENT YEAR: 2007-08 MR. NILESH KANTILAL SOLANKI, BLDG. NO.8, SHOP NOS.9, 10 & 11, ABHAY CHS, TILAK NAGAR, CHEMBUR, MUMBAI 400 089 PAN: AMKPS7314M VS. DCIT 22(1), TOWER NO.6, FOURTH FLOOR, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 400703 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARAN GANDHI, A.R. REVENUE BY : SHRI RAVINDRA, D.R. DATE OF HEARING : 04.02.2019 DATE OF PRONOUNCEMENT : 30.04.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 15.03.2011 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS FILED THE FOLLOWING GROUNDS OF APPEAL: 1. THE C.I.T(A) WAS NOT JUSTIFIED IN HOLDING THAT THE A.O WAS CORRECT IN COMPLETING THE ASSESSMENT U/S 144 OF THE IT ACT, TH OUGH SEVERAL OF THE NOTICES MENTIONED BY THE A.O WERE NOT SERVED ON THE APPELLA NT. 2. THE FIRST APPELLATE AUTHORITY WAS NOT CORREC T IN CONFIRMING THE DISALLOWANCE OF RS 36,456 (OUT OF PURCHASES) MADE BY THE A.O RELYIN G ON SECTION 40A(3) OF THE IT ACT. 3. THE C.I.T(A) OUGHT NOT TO HAVE UPHELD THE DI SALLOWANCE OF RS 28,574,(PUT OF WAGES PAID BY THE APPELLANT) DISALLOWED BY THE A.O INVOKING SEC 40A(3) OF THE IT ACT. ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 2 4. THE FIRST APPELLATE AUTHORITY WAS NOT JUSTIF IED IN UPHOLDING DISALLOWANCE OF RS 24,66,958, (REPRESENTING 10% OF THE PURCHASES MADE BY THE APPELLANT) MADE BY THE A.O ON AN ESTIMATE BASIS. 5. THE C.IT(A) WAS NOT JUSTIFIED IN SUSTAINING DISALLOWANCE OF RS 2,37,416, (REPRESENTING 15% OF THE WAGES PAID).MADE BY THE A.O ON AN ESTIMATE BASIS. 6. THE FIRST APPELLATE AUTHORITY WAS NOT JUSTIF IED IN CONFIRMING DISALLOWANCE OF RS 51,690 (REPRESENTING 15% OF THE LABOUR CHARGES PAID BY THE APPELLANT) MADE BY THE A.O ON AN ESTIMATE BASIS. 7. THE C.IT(A) WAS NOT JUSTIFIED IN SUSTAINING T HE FOLLOWING AMOUNTS DISALLOWED BY THE A.O ON AN ESTIMATE BASIS. (A) TELEPHONE EXPENSES RS 17,790( REPRESENTING 20% OF RS 80,948 CLAIMED BY THE APPELLANT) (B) CONVEYANCE, STAFF WELFARE RS 54,383 (REPRESENT ING 25% OF THE AND SUNDRY EXPENSES EXPENSES CLAIMED BY THE APPE LLANT) (C) CREDIT CARD EXPENSES RS 86,991 (REPRESENTING 50 % OF THE CREDIT CARD EXPENSES CLAIMED BY THE APPELLANT) THE APPELLANT CRAVES LEAVE TO ADD TO, VARY, MODIFY OR DELETE ANY OF THE GROUNDS, BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. BESIDES FILING GROUNDS OF APPEAL IN THE MEMORAND UM OF APPEAL, THE ASSESSEE HAS FILED ADDITIONAL GROUNDS O F APPEAL WHICH ARE AS UNDER: 8. WITHOUT PREJUDICE TO THE GROUNDS, NO NOTICE U/S 143(2) WAS SERVED ON THE ASSESSEE AND THEREFORE, THE ENTIRE ASSESSMENT IS BAD IN LAW. 9. WITHOUT PREJUDICE TO THE OTHER GROUNDS, THERE WA S NO PROPER SERVICE OF NOTICE U/S 143(2) ON THE ASSESSEE AND THEREFORE, TH E ENTIRE ASSESSMENT IS BAD IN LAW. 4. THE LD. A.R. PRAYED BEFORE THE BENCH THAT THE A DDITIONAL GROUNDS PERTAINING TO JURISDICTIONAL ISSUE MAY KIN DLY BE ADMITTED. THE LD. A.R. SUBMITTED THAT THE ISSUE RA ISED IN THE ADDITIONAL GROUNDS IS PURELY LEGAL IN NATURE AND AL L THE FACTS PERTAINING TO THE SAID ISSUE ARE ALSO ON RECORD AND THUS DO NOT REQUIRE ANY INDEPENDENT VERIFICATION OF FACTS. THE LD. A.R., THEREFORE, PRAYED THAT THE SAME MAY KINDLY BE ADMIT TED AND ADJUDICATED IN THE INTEREST OF JUSTICE. THE LD. A. R. IN DEFENCE OF HIS ARGUMENTS PLACED RELIANCE IN THE CASE OF NATION AL THERMAL POWER CORPORATION LTD. VS. CIT 229 ITR 383 (SC). ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 3 5. THE LD. D.R., ON THE OTHER HAND, STRONGLY OPPOSE D THE ADMISSION OF ADDITIONAL GROUNDS AS FILED BY THE ASS ESSEE BY SUBMITTING THAT THE SAME HAVE NOT BEEN FILED IN TH E MEMORANDUM OF APPEAL AND SUBMITTED BEFORE THE TRIBU NAL THAT SAME MAY KINDLY BE DISMISSED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT LEGAL ISSUE RAISED BY THE A SSESSEE IS PURELY OF LEGAL NATURE CHALLENGING THE JURISDICTION OF THE AO TO PASS THE ASSESSMENT ORDER FOR THE REASONS THAT NOTI CE UNDER SECTION 143(2) OF THE ACT WAS NOT SERVED UPON THE A SSESSEE AND THEREFORE ASSESSMENT SO FRAMED WAS VOID AND BAD IN LAW. WE FIND FROM THE FACTS BEFORE US THAT NO INDEPENDENT V ERIFICATION OF FACTS IS REQUIRED ON THE ISSUE RAISED IN THE ADDIT IONAL GROUNDS FILED BY THE ASSESSEE WHICH IN OUR OPINION IS PUREL Y OF LEGAL NATURE AND EMANATING FROM THE ASSESSMENT RECORDS. W E ARE THEREFORE INCLINED TO ADMIT THE SAME AFTER FOLLOWIN G THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NA TIONAL THERMAL POWER CORPORATION LTD. VS. CIT ( SUPRA). 7. THE FACTS IN BRIEF ARE THAT THE ASSESSEE CHANGED HIS OFFICE ADDRESS FROM A-6/58, NILESH ELECTRICALS, SHASTRI NA GAR, R.N. GANDHI ROAD, VIDYAVIHAR EAST, MUMBAI 400 077 OPPOS ITE M.G. ROAD, GHATKOPAR. THE ASSESSEE HAS BEEN FILING THE RETURNS OF INCOME BY MENTIONING THE NEW ADDRESS IN THE RETURN OF INCOMES RIGHT FROM ASSESSMENT YEAR 2005-06 , 2006-07 ONWARD S. IT IS MENTIONED IN THE ASSESSMENT ORDER BY THE AO THAT NO TICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 08.09.2008 AND THE CASE WAS FIXED FOR HEARING ON 06.10.2008. IT IS ALSO ME NTIONED AT ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 4 PAGE NO.2 THAT ON 29.09.2008 ANOTHER NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSE SSEE FIXING THE DATE ON 13.10.2008. THEREAFTER, ON 13.10.2008 NONE ATTENDED BEFORE THE AO. AGAIN ON 14.10.2009 A NOTI CE UNDER SECTION 142(1) OF THE ACT ALONG WITH THE QUESTIONNA IRE WAS ISSUED AND SERVED ON THE ASSESSEE FIXING THE DATE O F HEARING ON 30.10.2009. EVEN ON 30.09.2009 NONE APPEARED. THE CONTENTIONS OF THE ASSESSEE IS THAT BOTH THE ADDRES SES OLD AND NEW WERE IN THE KNOWLEDGE OF AO AS BOTH THESE WERE MENTIONED ON THE 1 ST PAGE OF THE ASSESSMENT ORDER WHEREAS THE AO HAS FAILED TO ISSUE AND SERVE THE NOTICE ON THE NEW ADD RESS WHICH WAS AVAILABLE BEFORE THE AO. THE ASSESSEE ARGUED T HAT THE AO SENT THE NOTICE ON THE OLD ADDRESS WHICH WAS SHIFT ED BY THE ASSESSEE LONG AGO. CONSEQUENTLY, IT WAS NOT RECEIVE D BY THE ASSESSEE BUT SERVED ON SOME OTHER PERSON. THE LD. A.R. SUBMITTED THAT ASSESSEE HAD LEFT LONG BACK FROM THE OLD ADDRESS AND THEREAFTER STARTED FILING THE RETURN FROM THE N EW ADDRESS AS EVIDENT FROM THE ACKNOWLEDGEMENTS OF RETURN OF INCO ME FOR THE ASSESSMENT YEARS 2005-06 ONWARDS. THE LD. A.R. SU BMITTED THAT SINCE THE AO HAS FAILED TO SERVE THE NOTICE ON THE ASSESSEE WITHIN THE STIPULATED TIME AND AS A RESULT, THE ASS ESSMENT AS FRAMED BY THE AO IS NULL AND VOID AND HAS TO BE QUA SHED. THE ASSESSEE RAISED SPECIFIC GROUND NO.3 BEFORE LD. CIT (A) CHALLENGING THAT OUT OF TWO NOTICES ISSUED UNDER SE CTION 143(2) DATED 08.09.2008 AND DATED 29.09.2008 NONE OF THE N OTICES WERE RECEIVED BY THE ASSESSEE AND SERVED AS THESE N OTICES WERE SENT ON THE OLD ADDRESS AND ONLY NOTICE RECEIVED B Y THE ASSESSEE WAS DATED 14.10.2009 WHICH WAS ISSUED UNDER SECTIO N 142(1) OF THE ACT. THE LD. CIT(A) HAS STATED THAT THIS GROU ND AS GENERAL ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 5 IN NATURE AND DECIDED ONLY THE SPECIFIC GROUNDS RAI SED BY THE ASSESSEE. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THIS IS A CASE OF NON SERVICE OF NOTICE ISSUED UNDER SEC TION 143(2) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE NOTICE ISS UED ON 08.09.2008 AND 29.09.2008 UNDER SECTION 143(2) WERE NOT SERVED ON THE ASSESSEE AT ALL AS ASSESSEE WAS NOT H AVING ANY CONNECTION OR STAFF AT THE OLD ADDRESS WHICH WAS CO MPLETELY CLOSED DOWN AND SHIFTED TO A NEW PLACE WHICH STOOD INFORMED TO THE AO AND THE AO EVEN STATED BOTH THE ADDRESSES NE W AND OLD IN THE ASSESSMENT ORDER ON THE PAGE NO.1. THE LD. A .R. AT THE TIME OF HEARING PRODUCED BEFORE THE BENCH THE ENVEL OPES CONTAINING THE OLD ADDRESSES DUE TO WHICH THE NOTIC ES UNDER SECTION 143(2) REMAINED UNSERVED. THE LD. A.R. SUB MITTED THAT THE FOR THE FIRST TIME THE NOTICE WHICH WAS SERVED ON THE CORRECT ADDRESS WAS DATED 10.10.2009 REQUIRING THE ASSESSEE TO ATTEND ON 30.10.2009. THUS THE LD. A.R. SUBMITTED THAT IT IS A CLEAR CUT CASE OF NON SERVICE OF NOTICE UNDER SECTION 143 (2) AND THEREFORE THE ASSESSMENT FRAMED UNDER SECTION 143(3 ) IS BAD IN LAW AND HAS TO BE QUASHED. THE LD. A.R. ALSO REFER RED TO THE ASSESSMENT RECORD PRODUCED BY THE LD. D.R. ON THE D IRECTION OF THE BENCH AND POINTED OUT THAT NOTICES WERE SENT ON THE OLD ADDRESS. THE LD. A.R. IN DEFENCE OF HIS ARGUMENT R ELIED ON A SERIES OF DECISIONS NAMELY SURESH KUMAR SHEETLANI V S. INCOME TAX OFFICER (2018) 257 TAXMAN 338 (ALLAHABAD), CIT VS. MASCOMPTEL INDIA LTD. (2012) 345 ITR 58 (DELHI) AND ASHOK B. BAFNA VS. DY. CIT (2012) 18 ITR (TRIB.) 43 (MUMBAI) . THE LD. A.R. PRAYED BEFORE THE BENCH THAT IN ALL THESE DECI SIONS THE ASSESSMENTS WERE HELD TO BE NOT VALID ON ACCOUNT OF NON SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT. ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 6 8. THE LD. D.R., ON THE OTHER HAND, PRAYED BEFORE T HE BENCH THAT THE NOTICE WAS DULY ISSUED BY THE AO THOUGH SE NT ON THE OLD ADDRESS AND THERE IS NO REQUIREMENT OF SERVICE OF NOTICE, IT IS ONLY THE ISSUANCE OF NOTICE WHICH IS MANDATORY U/S 143(2) OF THE A CT WHICH HAS BEEN DULY COMPLIED WITH BY THE AO. THE LD. D.R. SUBMITTED THAT EVEN IF THE NOTICES WERE NOT SE RVED WITHIN THE TIME LIMIT AS ARGUED BY THE LD. A.R. BUT THE NO TICE IS AVAILABLE ON THE FILE AS BEING ISSUED WITHIN THE TI ME LIMIT AS ENVISAGED BY SECTION 143(2) OF THE ACT. THE LD. D. R. ALSO ARGUED THAT ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PR OCEEDINGS AND THEREFORE AT THIS STAGE IT SHOULD NOT BE ALLOWE D TO TAKE THE BENEFIT OF NON SERVICE OF NOTICE AS NO OBJECTION WA S RAISED IN THE ASSESSMENT STAGE AND THE ASSESSEE CASE FALLS WITH IN THE AMBIT OF SECTION 292BB OF THE ACT. THUS THE LD. D.R. PRA YED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE MAY KINDLY BE DISMISSED. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT INDISPUTABLY, THE NOTICES ISSUED UNDER SECTION 143(2) DATED 08.09.2008 AND 29.09.2008 WERE SENT ON THE OLD ADDRESS WHICH WAS SHIFTED BY THE ASSESSEE A LONG AGO TO PLACE WHICH WAS INFORMED TO THE AO. THE SAID FACT IS CLEAR FROM PAGE NO.1 OF THE ASSESSMENT ORDER IN WHICH THE AO S TATED BOTH THE ADDRESSES OLD AS WELL AS NEW. WE HAVE ALSO EXA MINED THE RECORDS PRODUCED BY THE LD. D.R. AT THE DIRECTION O F THE BENCH TO VERIFY THE FACTS ON RECORD AND FIND THAT BOTH THES E NOTICES WERE ISSUED ON THE OLD ADDRESSES WHICH DID NOT BELONG TO THE ASSESSEE. IN OUR OPINION, THE NON SERVICE OF NOTIC E UNDER SECTION 143(2) OF THE ACT ON THE ASSESSEE IS FATAL AND GOE S TO THE ROOT OF ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 7 THE ASSESSMENT ITSELF. IN THE CASE OF SURESH KUMAR SHEETLANI VS. INCOME TAX OFFICER (SUPRA), THE HONBLE HIGH COURT HAS HELD THAT WHERE THE DEPARTMENT HAS CORRECT ADDRESS, SENDING T HE NOTICE AT INCORRECT ADDRESS THEN THE PRESUMPTION OF SERVICE O F NOTICE IS WHOLLY ERRONEOUS. THE HONBLE HIGH COURT HAS REVERS ED THE ORDER OF TRIBUNAL WHERE A PRESUMPTION T WAS DRAWN B Y THE TRIBUNAL THAT SINCE THE NOTICE WAS NOT RECEIVED BAC K UNSERVED, IT WOULD BE DEEMED TO BE SERVICE OF NOTICE. IN THE CA SE OF CIT VS. MASCOMPTEL INDIA LTD. (SUPRA), THE HONBLE HIGH COU RT HAS HELD THAT NO ATTEMPT WAS MADE BY THE REVENUE TO SERVE TH E NOTICE ON THE ASSESSEE AT THE CORRECT ADDRESS WHICH WAS AVAI LABLE WITH THE DEPARTMENT AND IN FACT ALSO STATED IN THE RETURN OF INCOME AND SUBSEQUENT ATTEMPT TO SERVE ANOTHER NOTICE LONG AFT ER EXPIRY OF LIMITATION PERIOD BY PROVISO COULD NOT HELP REVENUE AND ACCORDINGLY ASSESSMENT WAS HELD TO BE INVALID. IN THE CASE OF ASHOK B. BAFNA VS. DY. CIT (SUPRA) THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS HELD AS UNDER: 14. WE, THEREFORE, RESPECTFULLY FOLLOWING THE PRIN CIPLES LAID DOWN BY THE HON'BLE SPECIAL BENCH IN THE CASE OF KUBER TOBACCO PRODUCTS (P) LTD. (SUPRA), HOLD THAT EVEN IF IN THE PRESENT ASSESSMENT YEAR IN I.E. A.Y. 2007 -08, THE ASSESSEE HAS FULLY PARTICIPATED IN THE ASSESSMENT PROCEEDING AND EVEN DID NOT RAISE ANY OBJECTION TILL THE COMPLETION OF THE SAID PROCEEDINGS, YET THE ASS ESSEE CAN VALIDLY RAISED AN OBJECTION FOR NO SERVICE OF THE NOTICE U/S.143(2) O F THE ACT WITHIN THE TIME LIMIT PRESCRIBE VIDE PROVISO TO SAID SUB-SECTION, AS SEC. 292BB OF THE ACT IS APPLICABLE FROM THE A.Y. 2008-09. IN THIS CASE, ADMITTEDLY, TH E A.O. HAS NOT SENT THE NOTICE ON THE ADDRESS GIVEN BY THE ASSESSEE IN HIS RETURN OF INCOME. WE FIND NO MERIT IN THE PLEA OF THE LD. D.R. THAT THE NOTICE WAS ISSUED ON THE ADDRESS GIVEN IN THE APPLICATION FOR THE PAN NUMBER. IN FACT, WHEN THE A .O. SELECTED THE RETURN OF INCOME FOR SCRUTINY THEN HE HAS TO ADOPT THE ADDRES S GIVEN ON THE SAID RETURN. WE, THEREFORE, HOLD THAT ASSESSMENT ORDER PASSED BY THE A.O. U/S.143(2)(II) IS BAD IN LAW AND WE ACCORDINGLY CANCEL THE SAME. GROUND NOS.2, 3 & 4 TAKEN BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 10. IN VIEW OF THE RATIO LAID DOWN BY THE HIGH COUR TS AND THE CO-ORDINATE BENCHES OF THE TRIBUNAL, WE ARE INCLINE D TO HOLD THAT THERE IS NO SERVICE OF NOTICE ISSUED UNDER SECTION 143(2) OF THE ITA NO.4261/M/2011 MR. NILESH KANTILAL SOLANKI 8 ACT ON THE ASSESSEE WITHIN THE TIME LIMIT AS STIPUL ATED BY THE PROVISO TO THAT SECTION AND THEREFORE THE ASSESSMEN T ORDER SO FRAMED AS NULL AND VOID. APPEAL OF THE ASSESSEE IS ALLOWED ON ADDITIONAL GRO UNDS. 11. SINCE WE HAVE DECIDED THE APPEAL IN FAVOUR OF T HE ASSESSEE ON THE TECHNICAL ISSUE, THE GROUND RAISED ON MERITS NEED NOT TO BE ADJUDICATED. 12. IN RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.04.2019. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30.04.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.