ACIT, Meerut V. M/s. Pep Infotech Ltd., Meerut

ITA 4873/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65205 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 23-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 04-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: KAVIND ER SINGH
• Keywords: Opportunity of being heard; Principle of natural justice; Assessment record; Reason to believe
• Section: 143(3); 142(1); 147; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 4873/DEL/2011 ASSESSMENT YEAR: 2005- 2006 ACIT VS. M/S. PEP INFOTECH LTD., CIRCLE-2, NEAR OLD OCTORAI POST, MEERUT DELHI ROAD, MEERUT AAAC P8374K (APPELLANT) (RESPONDENT) APPELLANT BY : DR. B.R.R. KUMAR, SR. DR. RESPONDENT BY : SHRI KAVINDER S INGH, ADVOCATE ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELL ATE ORDER ON THE FOLLOWING GROUNDS :- (I) WHETHER IN THE FACTS & CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW AND FACTS OF THE CASE IN ANNULLING THE ORDER OF THE A.O. MERELY ON T HE GROUND THAT THE OBJECTION WERE NOT REMOVED BEFORE THE ORDER IGNORIN G THE FACTS THAT THE OBJECTIONS WERE NOT RELEVANT WITH THE FACTS OF THE CASE. LD. CIT(APPEALS) FAILED TO APPRECIATE THAT NON-REMOVAL OF OBJECTION WAS A MARE IRREGULARITY WHICH CAN NOT TANTAMOUNT FOR NULL ITY. ITA NO. 4873/DEL/2011 2 (II) WHETHER IN THE FACTS & CIRCUMSTANCES OF THE CA SE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS & CIRCUMSTANCES IN CASE IGNORING THE FACTS THAT THEIR WAS SUFFICIENT M ATERIAL ON RECORD TO FORM REASON TO BELIEVE FOR RE-OPENING THE CASE WHEN PROVISIONS OF SECTION 40A(IA) OF THE IT ACT 1961 WERE CLEARLY APP LICABLE. (III) WHETHER IN THE FACTS & CIRCUMSTANCES OF THE C ASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY ANNULLING THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 148 OF THE ACT ON THE ISSUE OF SERVICE OF NOTICE IGNORING THE SECTION 27 OF GENERAL CLAUSE AC T AS THE NOTICE WAS ISSUED THROUGH SPEED POST WHICH WAS ALSO DULY COMPL IED BY THE ASSESSEE. 2. THE RELEVANT FACTS ARE THAT THE ASSESSE E ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALES / EXPORTS OF ELECTRONIC AND TELECOM PRODUCTS HAD FILED ITS RETURN OF INCOME DECLARING INCOME OF ` 1,48,47,006/- ON 29.10.2005. THE AO FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT ACCEPTI NG THE DECLARED INCOME. SUBSEQUENTLY THE AO WAS OF THE BELIEF THAT INCOME O F ` 18,47,873/- ON ACCOUNT OF DISALLOWABLE EXPENSES AND ` 61,72,492/-_ ON ACCOUNT OF EXCESS REMUNERATION BY WAY OF PAYMENT OF COMMISSION ON SALES HAVE ESCAP ED ASSESSMENT. THE AO ACCORDINGLY INITIATED THE PROCEEDINGS U/S 147 OF TH E ACT AND HE ISSUED NOTICE U/S 148 ON 12.3.2010. IN RESPONSE, THE ASSESSEE FILED I TS RETURN ON 31 ST MARCH, 2010 UNDER PROTEST DECLARING THEREIN THE INCOME OF ` 1,48,47,006/-. THE ASSESSEE VIDE COVERING LETTER DATED 29 TH MARCH, 2010 ASKED FOR BEING SUPPLIED A COPY OF THE REASONS RECORDED FOR INITIATING THE PROCEEDINGS U/S 147 WELL BEFORE TAKING UP THE ASSESSMENT PROCEEDINGS SO AS TO ENABLE IT TO AVAIL ITS LEGAL RIGHT OF FILING ITS OBJECTION AFTER RECEIPT OF THE COPY OF THE REASONS RECORDED. INSTEAD THE AO ISSUED NOTICE U/S 142(1) ON 5.8.2010 FOR 17.8.2010 REQUIRING THE ASSESSEE TO FILE ITS RETURN OF INCOME. VIDE REPLY DATED 16 TH AUGUST, 2010, ENCLOSING A COPY OF THE ITA NO. 4873/DEL/2011 3 ACKNOWLEDGEMENT FOR FILING THE RETURN ON 31 ST MARCH, 2010, THE ASSESSEE INFORMED THE AO THAT RETURN HAD ALREADY BEEN FILED. THE ASSESSEE ALSO REFERRED THE COVERING LETTER DATED 29.3.2010 AND REQUESTED A GAIN FOR PROVIDING A COPY OF THE REASON RECORDED TO ENABLE THE ASSESSEE TO FILE ITS OBJECTIONS THERETO. THE AO SUPPLIED A COPY OF REASONS RECORDED ON 18.8.2010. T HE ASSESSEE FILED AN APPLICATION DATED 27.8.2010 TO THE AO REQUESTING HI M TO PROVIDE THE ASSESSEE WITH DETAILS OF THE MATERIAL ON RECORD WHICH WAS N OTICED BY HIM ON GOING THROUGH THE ASSESSEES ASSESSMENT RECORD WHICH CON STITUTED THE BASIS OF HIS CONCLUSION THAT THE INCOME ALLEGED IN THE REASONS R ECORDED HAD ESCAPED ASSESSMENT AND THE ASSESSMENT YEARS THE RECORD OF W HICH WAS SO GONE THROUGH BY HIM FOR COMING TO SUCH CONCLUSION. IT WAS REQUES TED BY THE ASSESSEE TO PROVIDE THE REQUESTED INFORMATION AT THE EARLIEST S O AS TO ENABLE THE ASSESSEE TO FILE ITS OBJECTION. THE ASSESSEE ALSO REFERRED THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF G.L.M. DRIVESHAFTS (INDIA) LTD . VS ITO (2003) 259 ITR 19 (SC). A REMINDER DATED 12 TH OCTOBER, 2010 FILED ON 13.10.2010 WAS MADE BY THE ASSESSEE TO THE AO REGARDING THE REQUEST MADE BY TH E ASSESSEE IN IS APPLICATION DATED 27.8.2010 FOR SUPPLY OF THE MATERIAL ON THE B ASIS OF WHICH REASONS TO BELIEF OR ESCARPMENT OF INCOME WERE ARRIVED AT. A NOTICE U /S 143 (3) DATED 15.10.2010 FIXING THE DATE FOR 29 TH OCTOBER, 2010 WAS RECEIVED BY THE ASSESSEE ON WHIC H THE COUNSEL OF THE ASSESSEE ATTENDED AND APPRISED THE A O OF THE ABOVE CORRESPONDENCE. THE MATTER WAS THEREAFTER FIXED ON 16.11.2010 FOR HEARING. HOWEVER THE ASSESSEE RECEIVED ON 9.11.2010 A LETTER DATED 2.11.2010 OF THE AO ITA NO. 4873/DEL/2011 4 REFERRING TO THE ASSESSEE S APPLICATION DATED 2.11 .2010 AND AGAIN ENCLOSING A COPY OF THE REASONS RECORDED WHICH HAD ALREADY BEEN SUPPLIED BY HAND TO THE ASSESSEE ON 18.8.2010. ON 16.11.2010 THE ASSESEE RE ITERATED ITS REQUEST MADE VIDE ITS APPLICATIONS DATED 27.8.2010 AND 12.10.201 0. ON 19.11.2010 THE ASSESSEE RECEIVED A LETTER FROM THE AO FIXING THE HEARING ON 23 RD NOVEMBER 2010 AS LAST OPPORTUNITY. IN COMPLIANCE THE ASSESSE E FILED A WRITTEN SUBMISSIONS DATED 26.11.2010 MAKING THEREIN CLEAR THAT DUE TO NON-PROVIDING OF THE INFORMATION ASKED FOR IN ITS LETTERS, SUBMISSION OF SPECIFIC AND ELABORATE OBJECTIONS TO THE VALIDITY OF INITIATION OF PROCEED INGS U/S 147, THE REASONS RECORDED AND ISSUANCE AND SERVICE OF NOTICE U/S 1 48 WAS NOT POSSIBLE. THE ASSESSEE AFTER ADDRESSING THE PRELIMINARY OBJECTIO NS ALSO QUESTIONED THE ALLEGED ESCAPEMENT OF INCOME. THE ASSESSEE ALLEGED THAT IN GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE AND WITHOUT MAKING ANY MENTION OF THE OBJECTION OF THE ASSESSEE CONTAINED IN WRITTEN SUBMISSIONS DATE D 28.11.2010, THE AO WITHOUT APPLYING HIS MIND AND WITHOUT APPRECIATING THE VARI OUS CONTENTIONS OF THE ASSESSEE AND THE MATERIAL ON RECORD FILED BEFORE HI M, HE HAS PASSED A NON- SPEAKING ORDER DATED 7.12.20 10 MAKING THE IMPUGNED ADDITIONS AGGREGATING TO ` 80,20,365/- AS ESCAPED INCOME OF THE ASSESSEE. CON SIDERING THE CONTENTION OF THE ASSESSEE AND DISCUSSING THE DECISIONS RELIED UP ON BY IT BEFORE THE FIRST APPELLATE AUTHORITY, LD. CIT(A) HAS HELD THAT THE P ROCEEDINGS INITIATED U/S 147 WERE NOT VALID AND HAS ANNULLED REASSESSMENT ORDER. ITA NO. 4873/DEL/2011 5 3. GRIEVANCE OF THE LD. DR BEFORE THE TRIBU NAL IS THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT NON REMOVAL OF OBJECTIONS BY THE AO WAS A MERE IRREGULARITIES WHICH CANNOT TANTAMOUNT FOR NULLITY. 4. LD. AR ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE . THE LD. AR REFERRED PAGE NOS. 29 TO 90 OF T HE PAPER BOOK I.E. COPY OF REPLY DATED 26.11.2010 TO THE AO FILED BY THE ASSES SEE IN COMPLIANCE TO THE LETTER DATED 16.11.2010 ISSUED BY THE AO REGARDING PROCEEDINGS U/S 148 OF THE ACT. LD. AR SUBMITTED THAT THERE WAS NO ESCAPEMENT OF INCOME AS ALLEGED AND IN THE ORIGINAL ASSESSMENT ORDER WHICH ARE U/S 143(3 ) OF THE ACT, THE AO HAD RIGHTLY ACCEPTED THE INCOME DECLARED BY THE ASSESSE E AFTER DUE VERIFICATION. THE LD. AR REITERATED THE DECISIONS CITED BEFORE THE LD . CIT(A) AND ALSO PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH C OURT IN THE CASE OF CIT S. TINPLATE CO. OF INDIA LTD. (1994) 207 ITR 729 (CALC UTTA). 5. CONSIDERING THE ABOVE SUBMISSIONS WE AGRE E WITH THE CONTENTION OF THE ASSESSEE THAT THE AO WHILE FRAMING ASSESSMENT U/S 1 43(3) READ WITH 147 OF THE ACT HAS NOT AT ALL DISCUSSED THE SUBMISSION / OBJE CTION OF THE ASSESSEE RAISED BEFORE HIM AGAINST THE PROPOSED ADDITIONS. ON PERUS AL OF PAGE NO. 2 OF THE ASSESSMENT ORDER WE FIND THAT THE AO HAS MENTIONED THAT THE CASE WAS SUBSEQUENTLY ADJOURNED TO 26.11.2010 ON WHICH DATE THE ASSESSEE HAD FILED A DETAILED REPLY. THE AO HOWEVER HAS DISPOSED OFF THI S DETAILED REPLY OF THE ASSESSEE AS UNDER :- ITA NO. 4873/DEL/2011 6 I HAVE CAREFULLY GONE THROUGH THE REPLY, FILED BY THE ASSESSEE COMPANY OBSERVING THAT THE REPLY OF THE ASSESSEE IS NOT AT ALL CONVINCING. I AGREE WITH THE ACTION TAKEN BY MY PRE DECESSOR AND PROCEED TO REASSESS THE INCOME WHICH HAS ESCAPED AS SESSMENT. THE REASSESSMENT IS MADE AS UNDER :- INCOME LAST ASSESSED VIDE ORDER DATED 29.10.2005 ` 1,48,47,006/- ADD (1) COMMISSION ON SALES ` 16,29,029/- (2) ADVERTISEMENT EXPENSES ` 34,844/- (3) PROFESSIONAL EXPENSES ` 1,84,000/- (4) COMMISSION ON SALES ` 61,72,492/- ` 80,20,365/- _____________ ____________ ` 80,20,365/- ` 2,28,67,371/- 6. WE THUS FULLY CONCUR WITH THE CONTENTION S OF THE ASSESSEE THAT THE AO HAS PASSED A NON-SPEAKING ORDER IN THE ASSESSMENT I N QUESTION, BUT WE DO NOT AGREE WITH THE FINDING OF THE LD. CIT(A) THAT IT WA S A FIT CASE TO ANNUL THE ASSESSMENT ORDER MERELY ON THE BASIS THAT THE OBJEC TIONS RAISED BY THE ASSESSEE WERE NOT REMOVED BY THE AO BY A SPEAKING ORDER IN T HE ASSESSMENT ORDER. THUS WE FIND SUBSTANCE IN THE SUBMISSION OF THE LD. DR T HAT NON REMOVAL OF OBJECTION BY THE AO WAS MARE IRREGULARITY WHICH CANNOT TANTAM OUNT FOR NULLITY OF THE ASSESSMENT ORDER. THE IRREGULARITY IN THE ASSESSME NT ORDER IS REMEDIAL IN NATURE. WE THUS IN THE INTEREST OF JUSTICE WHILE SETTING AS IDE FIRST APPELLATE ORDER HOLDING THAT THE PROCEEDING INITIATED U/S 147 WAS NOT VALID AND ACTION OF THE FIRST APPELLATE AUTHORITY IN ANNULMENT OF ASSESSMENT ORDE R , REMAND THE MATTER TO THE FILE OF THE AO TO MAKE FRESH ASSESSMENT ON THE ISSU E AFTER AFFORDING ADEQUATE ITA NO. 4873/DEL/2011 7 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND PASS A SPEAKING ORDER AFTER DISCUSSING THE OBJECTION / SUBMISSION OF THE ASSES SEE AND MEETING OUT ISSUE THOSE SUBMISSIONS / OBJECTIONS. GROUND NO. 1,2,3 AR E THUS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT THE APPEAL IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 3.8.2012. SD/- SD/- ( SHAMIM YAHYA) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3.8.2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR