Abhijit Deshpande , Pandit Automotive Private Limited, Pune V. Deputy Commissioner of Income-tax, Circle - 4, Pune

ITA 492/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6321 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 19-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Reopening of assessment; Deemed dividend; Commercial expediency; Condonation of delay; Reason to believe; Bonafide mistake; Reassessment proceedings; Set aside
• Section: 143(3); 2(22)(e); 147; 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.492/PUN/2018 / ASSESSMENT YEAR : 2010-11 ABHIJIT DESPANDE, PANDIT AUTOMOTIVE PVT. LTD., CITY S. NO.1073, PLOT NO.425, SUB PLOT 9, BHOSALE MYSTIQA APARTMENTS, SHIVAJINAGAR, BHAMBURBA, PUNE 411 016. PAN : ABAPD7711J. . / APPELLANT V/S THE DY.COMMISSIONER OF INOCME - TAX, CIRCLE 4, PUNE. . / RESPONDENT ASSESSEE BY : SHRI KISHORE PHADKE. REVENUE BY : SHRI PANKAJ GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, PUNE DT.22.02.2017 FOR T HE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL WHO ELECTRONICALLY FILED ITS RETURN O F INCOME FOR A.Y. 2010-11 ON 28.09.2010 DECLARING TOTAL INCOME AT RS.30,20,136/-. THE CASE WAS RE-OPENED BY ISSUING NOTICE U /S 148 OF / DATE OF HEARING : 06.02.2019 / DATE OF PRONOUNCEMENT: 03.05.2019 2 ITA NO.492/PUN/2018 THE ACT WHICH WAS ISSUED ON 09.07.2013 AND DULY SERVED ON THE ASSESSEE ON 26.07.2013. THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 148 OF THE ACT AND THE TOTAL INCOME WAS DETERMINED AT RS.1,32,58,278/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE O RDER DT.22.02.2017 (IN APPEAL NO.PN/CIT(A)-2/DCIT CIR-4/PN/22/ 2015-16) DISMISSED THE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE PLEA OF THE ASSESSEE THAT RE-OPENING OF THE ASSESSMENT INVOKING S. 147 WAS ILLEGAL AND WITHOUT JURISDICTION SINCE THE ACTI ON WAS TAKEN BY THE A.O. KEEPING THE VALID RETURN OF INCOME FILE D PENDING FOR ASSESSMENT. THE RELIANCE WAS PLACED ON THE HON'BLE SUPREME COURT JUDGMENT. THE REOPENING ACTION U/S 147 BEING ILLEGAL AND WITHOUT JURISDICTION THE CONSEQUENTIAL ASSESSMENT I S ALSO BAD IN LAW. IT BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE PLEA OF THE ASS ESSEE FAVOURABLY THAT REASONS RECORDED (UNDATED) WERE WIT HOUT APPROVAL OF THE ADDL. CIT AS REQUIRED BY S. 151 OF THE ACT. THE MENTIONING IN THE ASSESSMENT ORDER ONLY THAT PRIOR APPROVAL OF THE ADDL. CIT WAS OBTAINED WILL NOT COMPLY THE MAND ATORY PROVISIONS OF LAW. THE ASSESSMENT, THEREFORE, IS IL LEGAL AND WITHOUT JURISDICTION. IT BE QUASHED SETTING ASIDE T HE ORDER OF THE LD. CIT(A). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE DECISION RELIED UPON BY THE LD. CIT(A) FOR HIS CONC LUSION ARE DISTINGUISHABLE ON FACTS AND LAW. THE RELIANCE PLAC ED ON THOSE PRECEDENTS ARE UNDER MISCONCEPTION OF LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ADDITION MADE INVOKING THE PROVISIONS OF SEC.2(22)( E) TO TAX THE DEEMED DIVIDEND FOR NON-AVAILABILITY OF ACCUMULATED PROFIT S WAS ILLEGAL. IN THE ABSENCE OF SUFFICIENT ACCUMULATED P ROFITS ANY PAYMENT MADE BY CLOSELY HELD COMPANY BY WAY OF ADVA NCE OR LOAN TO A SHAREHOLDER CANNOT BE TREATED AS DEEMED D IVIDEND U/S 2(22)(E) OF THE ACT. THE ADDITION MADE BY THE A. O. ON THIS COUNT AND CONFIRMED BY LD. CIT(A) IS NOT SUSTAINABL E IN LAW. IT BE DELETED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) FAILED TO APPRECIATE PROPERLY THE FACTS OF THE CASE FOR COMING TO THE CONCLUSION THAT THE DEEMED DIVIDEND O F RS. 1,02,38,142/- U/S 2(22)( E) IS TAXABLE IN THE HANDS OF THE ASSESSEE. THE LAW HAS NO SANCTION TO IT. THE ADDITI ON BE DELETED. 3 ITA NO.492/PUN/2018 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE APPEAL IS DELAYED BY FEW DAYS. THE ASSESSEE WAS PRE VENTED BY SUFFICIENT CAUSE. THE BALANCE OF CONVENIENCE IS IN FAVOUR OF THE ASSESSEE. THE DELAY IS NOT INTENTIONAL. THE APPELLA NT WILL FILE HIS APPLICATION FOR CONDONATION OF DELAY SUPPORTED BY A FFIDAVIT AT THE TIME OF HEARING. THE DELAY BE CONDONED AND THE APPE AL BE ADMITTED FOR HEARING IN ACCORDANCE WITH THE PROVISI ONS OF LAW. 3. SUBSEQUENTLY, ASSESSEE HAS RAISED ADDITIONS GROUNDS W HICH READS AS UNDER : 1. APPELLANT CONTENDS THAT THE REASSESSMENT PROCEEDING S INITIATED IN APPELLANT'S CASE WERE BASED ON MERE SUSPICION AND N OT BASED ON A VALID REASON TO BELIEVE ESCAPEMENT OF INCOME. FROM THE 'R EASONS' RECORDED, IT REVEALS, NO ANY CONSPICUOUS APPLICATION OF MIND IS REACHED TO FORM BELIEF OF ESCAPEMENT OF INCOME. 2. APPELLANT CONTENDS THAT THE REASSESSMENT ORDER PAS SED U/S 147 OF THE ITA, 1961 ON 27/3/2015 IS BAD IN LAW SINCE, OBJECTI ONS RAISED TO THE REASSESSMENT PROCEEDINGS WERE NOT DISPOSED-OFF BY P ASSING A SPEAKING ORDER BY THE LEARNED DCIT, CIRCLE-4, PUNE. THE I-T AUTHORITIES OUGHT TO HAVE APPRECIATED THAT OBJECTIONS TO 'REASONS' FOR B ELIEF OF ESCAPEMENT OF INCOME, OUGHT TO BE DISPOSED OFF BY A SPEAKING ORDE R AND THAT TOO, AT LEAST 4-5 WEEKS PRIOR TO THE LAST DATE OF FRAMING A REASSESSMENT ORDER, WHICH WAS NOT SO ENSURED IN THE MATTER. 3. APPELLANT CONTENDS THAT THERE IS NO REASON FOR TAX ING THE ADVANCES MADE BY M/S PANDIT AUTOMOTIVE PRIVATE LIMITED TO TH E OTHER THREE GROUP COMPANIES AS DEEMED DIVIDEND. LEARNED I-T AUTHORITI ES OUGHT TO HAVE APPRECIATED THE FOLLOWING ISSUES BEFORE CONCLUDING THE ADVANCES AS DEEMED DIVIDEND U/S 2(22)(E) A. COMMERCIAL EXPEDIENCY IN MAKING THE ADVANCES. B. ACTUAL TRANSACTIONS DURING THE A.Y. 2010-11. C. INSUFFICIENCY OF PROFIT. 4. WITH RESPECT TO ADDITIONAL GROUNDS, IT IS ASSESSEES SU BMISSION THAT THE ADDITIONAL GROUNDS BEING LEGAL GROUNDS AND SINCE IT GOES TO THE ROOT OF THE ISSUE INVOLVED IN THE APPEAL, THE SAME BE ADMIT TED. WITH REGARD TO RAISING AN ADDITIONAL GROUND AND THE ADMISSIBILITY, HE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF N ATIONAL THERMAL POWER CO., LTD., VS. CIT REPORTED IN 229 ITR 383 (SC) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS AND 4 ITA NO.492/PUN/2018 SHAREHOLDERS REPORTED AS 349 ITR 336. LD.D.R. DID NOT SER IOUSLY OBJECT TO THE ADDITIONAL GROUNDS RAISED NOW BY THE ASSESSEE. 5. ON THE ISSUE OF ADMISSION OF ADDITIONAL GROUNDS RAISED BY THE ASSESSEE, CONSIDERING THE AFORESAID FACTS AND IN VIEW OF TH E RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL (SUPRA), WE ADMIT THE ADDITIONAL GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR ADJUDICATION. 6. THE CASE FILE REVEALS THAT THERE IS DELAY OF 253 DAYS IN FILING THE PRESENT APPEAL. ASSESSEE FILED AN AFFIDAVIT WHEREIN HE INTER- ALIA SUBMITTED THAT THE DELAY OF 253 DAYS IN FILING THE PRESENT APPEAL OCCURRED DUE TO BONAFIDE MISTAKE AND IT IS PURELY UNINTEN TIONAL AND THEREFORE PRAYED THAT THE DELAY OF 253 DAYS BE CONDON ED. LD.D.R. DID NOT SERIOUSLY OBJECT TO THE PRAYER OF CONDONATION. 7. ON THE ISSUE OF CONDONATION OF DELAY OF APPEAL, WE HAVE GONE THROUGH THE PETITION FILED BY THE ASSESSEE AND HEARD TH E LD.D.R. AFTER CONSIDERING THE REASONS STATED IN THE AFFIDAVIT, WE ARE O F THE VIEW THAT THE DELAY IN FILING THE APPEAL HAS BEEN SATISFACTORILY EXPLAINE D. IN VIEW OF THESE FACTS, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING . 8. BEFORE US, LD.A.R. ON THE ADDITIONAL GROUNDS SUBMITTED TH AT AO HAS RE-OPENED THE ASSESSMENT AND THE REASONS FOR RE- OPENING WERE SUPPLIED TO THE ASSESSEE ALONG WITH NOTICE U/S 148 OF THE ACT DT.09.07.2013. HE SUBMITTED THAT THE ASSESSEE VIDE LETTER DT.05.03.2 014 OBJECTED TO THE RE-OPENING; THE COPY OF THE AFORESAID LETTER IS PLACED AT PAGE 7 OF THE PAPER BOOK. HE SUBMITTED THAT AO DID NOT DISPOSE OF THE OBJECTIONS OF THE ASSESSEE ON THE RE-OPENING. HE SUBMIT TED THAT HONBLE 5 ITA NO.492/PUN/2018 APEX COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO [2003] 259 ITR 19 (SC) HAS HELD THAT AO IS BOUND TO FURNISH REA SONS WITHIN A REASONABLE TIME AND ON RECEIPT OF REASONS THE ASSESSEE IS ENTITLED TO FILE THE OBJECTIONS TO THE ISSUANCE OF NOTICE AND THE AO IS B OUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. HE THEREFORE SUBMITTED THAT IN THE PRESENT CASE, AO HAS NOT DISPOSED OF THE OBJECTIO NS RAISED BY THE ASSESSEE. HE THEREFORE RELYING ON THE DECISION OF HONB LE BOMBAY HIGH COURT IN THE CASES OF KSS PETRON PRIVATE LIMITED VS. ACI T IN ITA NO.224 OF 2014 AND M/S. BAYER MATERIAL SCIENCE PVT. LTD. IN WP NO .2502 OF 2015 ORDER DATED 27.01.2016 SUBMITTED THAT WHEN AO HAS NOT FOLLOWED THE LAW LAID DOWN BY THE HONBLE APEX COURT, THE ORDER PASSED BY THE AO LACKS JURISDICTION AND THEREFORE BE SET ASIDE. 9. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). HE ALSO PLACED RELIANCE ON THE DECISION OF HOME F INDERS HOUSING LIMITED VS. ITO REPORTED IN (2018) 94 TAXMANN.COM 84 (SC). 10. LD.A.R. IN THE RE-JOINDER SUBMITTED THAT THE HONBLE APEX COURT IN THE CASE OF HOME FINDERS HOUSING LIMITED HAS MERELY DISM ISSED THE SLP WITHOUT ASSIGNING ANY REASONS FOR DISMISSAL. HE RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF KUNHAYAMMED AND OTHERS VS. STATE OF KERALA AND OTHERS REPORTED IN (2000) 245 IT R 360 SUBMITTED THAT WHEN THE SLP IS DISMISSED WITHOUT ASSIGNING ANY REASONS, THE N THE ORDER IS NOT A DECLARATION OF LAW BY SUPREME COURT UNDER ARTICLE 141 OF THE CONSTITUTION. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ON RECEIPT OF THE REASONS FOR RE-OPENING OF THE ASSESSMENT U/S 148 OF THE ACT THE ASSESSEE VIDE LETTER 6 ITA NO.492/PUN/2018 DT.05.03.2014 HAD RAISED OBJECTION TO THE RE-OPENING OF TH E ASSESSMENT PROCEEDINGS INITIATED BY THE AO. THE AO DID NOT DISPOSE OF THE OBJECTIONS SEPARATELY AND PROCEEDED AND PASSED THE R E-ASSESSMENT ORDER. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL O N RECORD TO DEMONSTRATE THAT THE REASONS RECORDED FOR REOPENING T HE ASSESSMENT WAS FURNISHED TO THE ASSESSEE. IN THE PRESENT CASE IT IS THUS CLEAR THAT DESPITE THE REQUEST BY THE ASSESSEE, THE ASSESSING OFFICE R HAS COMPLETED THE ASSESSMENT WITHOUT FURNISHING THE REASONS RECORDED FOR REOPENING OF ASSESSMENT. FURNISHING THE REASONS RECORDED FOR REOPENIN G OF THE ASSESSMENT IS MANDATORY CONDITION AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO (SUPRA) WHEREIN THE HON'BLE SUPREME COURT HAS LAID DOWN THE PRIN CIPLE THAT RECORDED REASONS MUST BE FURNISHED TO THE ASSESSEE WH EN THE ASSESSEE SOUGHT FOR THE REASONS. 12. WE ALSO FIND THAT HONBLE BOMBAY HIGH COURT IN THE CA SE OF M/S. BAYER MATERIAL SCIENCE PVT. LTD. (SUPRA) AFTER CONSIDERING THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS (SUPR A) HAD HELD THAT THE REASSESSMENT ORDER TO BE NON SUSTAINABLE WHEN TH E OBJECTIONS TO THE RE-ASSESSMENT WERE NOT DISPOSED OFF BY THE AO. SIMILAR VIE W WAS TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KSS PET RON PVT. LTD. (SUPRA). 13. WE FURTHER FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TREND ELECTRONICS (2015) 379 ITR 456 (BOM) AFTER CO NSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIDES H SANCHAR NIGAM LTD (2012) 340 ITR 66 (BOM) HAS HELD THAT R ECORDED REASONS AS LAID DOWN BY THE APEX COURT MUST BE FURNISH ED TO THE ASSESSEE WHEN SOUGHT FOR SO AS TO ENABLE THE ASSESSEE TO OBJECT TO THE 7 ITA NO.492/PUN/2018 SAME BEFORE THE AO. IT HAS FURTHER HELD THAT THE RECOR DING OF REASONS AND FURNISHING OF THE SAME HAS TO BE STRICTLY COMPLIED WIT H AS IT IS A JURISDICTIONAL ISSUE AND IN THE ABSENCE OF REASONS BEING FUR NISHED WHEN SOUGHT FOR WOULD MAKE AN ORDER PASSED ON REASSESSMENT BAD IN LAW. 14. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDIN G DECISION IN ITS SUPPORT. CONSIDERING THE TOTALITY OF THE AFORESAID FA CTS AND RELYING ON THE DECISIONS CITED HEREIN ABOVE, WE HOLD THE REASSESS MENT ORDER PASSED BY THE AO TO BE BAD IN LAW AND THUS SET IT ASID E. SINCE WE HAVE SET ASIDE THE RE-ASSESSMENT ORDER, THE GROUNDS RAISED ON MERITS REQUIRES NO ADJUDICATION AS THEY HAVE BEEN RENDERED ACADEMIC. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 3 RD DAY OF MAY, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 3 RD MAY, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, PUNE. PR. CIT-2, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.