PROCYON OFFSHORE SERVICES P. LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 4951/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2588 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-08-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SONIDR
• Assessee Lawyers: M SUBRAMANIANAR
• Keywords: Reopening of assessment; Depreciation; Additional evidence; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 148; 144

Judgement Text

1 , , , , INCOME-TAX APPELLATE TRIBUNAL CBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER ./I.T.A./4951 & 4952/MUM/2012 , /ASSESSMENT YEAR: 2004-05 & 2005-06 M/S. DOLPHIN OFFSHORE SHIPPING LTD. (FORMERLY KNOWN AS M/S. PROCYCON OFFSHORE SERVICES P.LTD. ),LIC BLDG. PLOT NO.54, SECTOR-II,CBD-BELAPUR-400 614. PAN:AAACP 2682 G VS. ACIT, -5(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI VIJAY KUMAR SONI-DR ASSESSEE BY: SHRI M. SUBRAMANIAN-AR / DATE OF HEARING: 30.06.2016 / DATE OF PRONOUNCEMENT: 13.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 20/04/2012, OF THE CIT (A)-9,MUMBAI, THE ASSESSEE HAS FILED THE APPEALS FOR THE ABOVE-MENTIONED TWO ASSESSMENT YEAR S(AY.S.)RAISING VARIOUS GROUNDS OF APPEALS.CONSIDERING THE FACT THAT THE ISSUES INVOLV ED IN BOTH THE CASES ARE ALMOST IDENTICAL, WE ARE ADJUDICATING BOTH APPEALS BY SINGLE ORDER.THE D ETAILS OF FILING OF RETURNS, RETURNED INCOMES AND ASSESSED INCOMES ETC., CAN BE SUMMARISE D AS UNDER: A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) CIT(A) ORDER DT. 2004-05 25.10.2004 NIL 24.12.2009 1,05,47,180/- 20. 04.2012 2005-06 28.10.2005 NIL 24.12.2009 95,910/- 20.04.20 12 ITA/4951/MUM/2012- AY.2004-05: BRIEF FACTS: 2. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF SHIP PING SERVICES. RETURN OF INCOME,FILED BY THE ASSESSEE, WAS PROCESSED U/S. 143 (1) OF THE ACT ON 08/07/2005. IT WAS RECTIFIED U/S.154 OF THE ACT,ON 07/06/2006 FOR GRANTING TDS CREDIT. S UBSEQUENTLY,THE ASSESSING OFFICER (AO) ISSUED A NOTICE U/S. 147 OF THE ACT ON 22/02/2008.I N RESPONSE,THE ASSESSEE FURNISHED A LETTER,DATED 12/02/2009,STATING THAT THE ORIGINAL R ETURN FURNISHED BY IT SHOULD BE TREATED AS THE RETURNFILED IN RESPONSE TO THE NOTICE ISSUED U/S. 1 48 OF THE ACT AND REQUESTED THE AO TO SUPPLY THE REASONS RECORDED FOR REOPENING OF THE ASSESSMEN T.AS PER THE AO,ASSESSEE WAS FURNISHED 4951-52/M/12-PROCYCON OFFSHORE 2 THE COPY OF THE RECORDED REASONS,VIDE LETTER 30/11/ 2009. THE AO ISSUED NOTICES U/S.143 (2) AND 142(1)OF THE ACT AND COMPLETED THE ASSESSMENT U /S.144 R.W.S. 147 OF THE ACT,DISALLOWING DEPRECIATION OF RS. 17.81 LAKHS. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,IT WAS ARGUED THAT DUE TO CHANGE OF ADDRESS, NOTICES ISSUED BY THE AO WERE SENT TO THE OLD ADDRESS AND N OT AT THE NEW ADDRESS OF THE ASSESSEE, THAT THE REOPENING OF ASSESSMENT WAS BAD IN LAW,THAT NO FRESH MATERIAL EVIDENCE WAS BROUGHT ON RECORD. THE ASSESSEE FILED THE PAPER BOOK BEFORE TH E FAA ON 07/06/2011.HE CALLED FOR A REMAND REPORT (RR) FROM THE AO AND DIRECTED HIM TO EXAMINE THE FRESH EVIDENCES AND TO EXAMINE THE ISSUES RAISED BY THE ASSESSEE.AFTER CON SIDERING THE RR AND THE SUBMISSION OF THE ASSESSEE, HE HELD THAT RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S. 143(1)OF THE ACT,THAT NO OPINION WAS FORMED BY THE AO, THAT IT COULD NOT BE SAID THAT THERE WAS A CHANGE OF OPINION IN ISSUING THE NOTICE U/S.148 OF THE ACT,THAT THE TIME OF ISSUE OF NOTICE U/S. 148 THE AO HAD MATERIAL ON HAND THAT INCOME HAD ESCAPED ASSESSMENT , THAT THE SUFFICIENCY OR THE CORRECTNESS OF THE MATERIAL WAS NOT TO BE CONSIDERED AT THE TIM E OF ISSUE OF REASSESSMENT NOTICE,THAT THE AO HAD CORRECTLY ISSUED THE NOTICE, THAT HE HAD GIV EN A COPY OF THE REASONS RECORDED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S.THUS, THE FAA UPHELD THE REOPENING.WITH REGARD TO THE CLAIM OF THE ASSESSEE OF DEPRECIATION OF A VESSEL HE HELD THAT IT WAS ACQUIRED IN THE SUBSEQUENT YEAR, THAT IT HAD PU T TO USE THE SHIP IN THE SUBSEQUENT YEAR, IT HAD NEVER USED THE SHIP FOR ITS BUSINESS PURPOSES, THAT THE AO HAD CORRECTLY DISALLOWED WITH DEPRECIATION ON THE SAID SHIPPING VESSEL.REGARDING THE EXPENSES,DISALLOWED U/S.37 (1) OF THE ACT,THE FAA HELD THAT THE ASSESSEE HAD FURNISHED TH E COPIES OF THE INVOICE FOR THE FIRST TIME BEFORE HIM,THAT IT HAD NOT CLAIMED THAT THE EVIDENC E WAS SUBMITTED AS AN ADDITIONAL EVIDENCE, THAT NO APPLICATION UNDER RULE 46A HAD BEEN MADE,TH AT THE ASSESSEE HAD FAILED TO EXPLANATION AS TO HOW THE EXPENDITURE INCURRED BY IT WAS FOR BU SINESS PURPOSES.HE UPHELD THE DISALLOWANCE MADE BY THE AO AMOUNTING RS. 5.54 LAKH S. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE(AR) STATED THAT THE REASONS WERE NOT FURNISHED BY THE AO TO THE =,THAT IT WAS GROSS VIOLATION OF THE MANDATE OF THE PROVISIONS OF THE ACT.HE REFERRED TO THE CASE O F VIDESH SANCHAR NIGAM LTD.(340ITR66). THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE O RDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. IN OUR OPINION, BEFORE DECIDING THE ISSUES ON MERITS THE JURISDICTI ONAL ISSUE HAS TO BE ADJUDICATED.THE 4951-52/M/12-PROCYCON OFFSHORE 3 ASSESSEE HAD,BEFORE THE FAA AS WELL AS BEFORE US, A RGUED THAT REASONS FOR REOPENING WERE NOT SUPPLIED TO IT. IT HAS REFERRED TO THE LETTER DATED 12/02/2009 (PAGE 45 OF THE PAPER BOOK) WHEREIN IT HAD REQUESTED THE AO TO FURNISH AT THE R EASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION.AS PER THE AO, HE HAD SUPPLIED THE REASONS ON 30/11/2009. WE FIND THAT THERE WAS A CHANGE IN ADDR ESS OF THE ASSESSEE, THAT THE OFFICE OF THE ASSESSEE WAS SHIFTED FROM BANDRA TO NARIMAN POINT, THAT THE ASSESSEE HAD INTIMATED THE CHANGE OF ADDRESS,THAT THE DEPARTMENTAL AUTHORITIES WERE AWARE OF THE NEW ADDRESS, THAT THE NOTICES ISSUED BY THE AO WERE RECEIVED BACK BY HIM, THAT THE AO HAD COMPLETED ASSESSMENT U/S. 144 OF THE ACT. CONSIDERING THE SEQUENCE OF TH E EVENTS IT WAS THE DUTY OF THE AO TO PROVE BEFORE THE FAA THAT THE REASSESSMENT NOTICE WAS ACT UALLY SERVED UPON THE ASSESSEE.THE AO HIMSELF AT MENTION THAT THE NOTICES ISSUED BY HIM A LONG WITH THE REASONS RECORDED COULD NOT BE SERVED ON THE ASSESSEE. IT IS ALSO A FACT THAT T HE ASSESSEE WAS NOT AWARE OF THE EX-PARTE ASSESSMENT PASSED BY THE AO. WE HAVE GONE THROUGH T HE REMAND REPORT FILED BY THE AO. WE FIND THAT HE HAS NOT PROVED THAT REASONS RECORDED B Y HIM WERE SERVED ON THE ASSESSEE. IN OUR OPINION,VALID SERVICE OF REASONS RECORDED FOR REOPE NING AS A PRE-REQUISITE FOR COMPLETING THE ASSESSMENT U/S. 147 OF THE ACT. THE ASSESSEE CANNOT BE KEPT DARK ABOUT THE REASONS RECORDED BY THE AO.IN THE CASE BEFORE US, THERE IS NO EVIDEN CE THAT THE REASONS WERE HANDED OVER TO THE ASSESSEE OR VALIDLY SERVED UPON IT. THEREFORE, ASSE SSMENT ORDER PASSED HAS TO BE HELD AS INVALID.HERE,WE WOULD LIKE TO REFER TO THE CASE OF TREND ELECTRONICS (379 ITR 456),WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: IT IS AXIOMATIC THAT THE POWER TO REOPEN A COMPLETE D ASSESSMENT UNDER THE ACT IS AN EXCEPTIONAL POWER AND WHENEVER THE REVENUE SEEKS TO EXERCISE SUCH POWER, IT MUST STRICTLY COMPLY WITH THE PRE-REQUISITE CONDITIONS, VIZ., REC ORDING OF REASONS TO INDICATE THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH WOULD WARRANT THE REOPENING OF AN ASSESSMENT. THESE RECORDED REASONS MUST BE FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR S O AS TO ENABLE THE ASSESSEE TO OBJECT TO THE REASONS BEFORE THE ASSESSING OFFICER. THUS, IN THE ABSENCE OF REASONS BEING FURNISHED WHEN SOUGHT FOR WOULD MAKE AN ORDER OF REASSESSMENT BAD IN LAW. THE RECORDING OF REASONS AND FURNISHING OF THE REASONS HAS TO BE STRICTLY COMPLI ED WITH AS IT IS A JURISDICTIONAL ISSUE. THIS REQUIREMENT IS SALUTARY AS IT NOT ONLY ENSURES REOP ENING NOTICES ARE NOT LIGHTLY ISSUED BUT ALSO WHERE NOTICES HAVE BEEN ISSUED ON SOME MISUNDERSTAN DING/MISCONCEPTION, THE ASSESSEE IS GIVEN AN OPPORTUNITY TO POINT OUT THAT THE REASONS TO BELIEVE AS RECORDED IN THE REASONS DO NOT WARRANT REOPENING BEFORE THE REASSESSMENT PROCEEDIN GS ARE COMMENCED. THE ASSESSING OFFICER DISPOSES OF THESE OBJECTIONS AND IF SATISFI ED WITH THE OBJECTIONS, THEN THE REOPENING NOTICE U/S. 148 IS DROPPED OR WITHDRAWN OTHERWISE I T IS PROCEEDED WITH FURTHER. IN ISSUES SUCH AS THIS, I.E., WHERE THE JURISDICTIONAL ISSUE IS IN VOLVED THIS MUST BE STRICTLY COMPLIED WITH BY THE AUTHORITY CONCERNED AND NO QUESTION OF KNOWLEDG E BEING ATTRIBUTED ON THE BASIS OF IMPLICATION CAN ARISE... CONSIDERING THE ABOVE,WE HOLD THAT THE ORDER OF THE AO WAS INVALID.SO,REVERSING THE ORDER OF THE FAA,WE DECIDE THE FIRST GROUND OF APPEAL IN FAV OUR OF THE ASSESSEE.AS WE HAVE DECIDED 4951-52/M/12-PROCYCON OFFSHORE 4 THE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE, SO,WE ARE NOT ADJUDICATING THE MATTER ON MERITS. ITA/4952/MUM/2012-AY.2005-06: 6. FACTS FOR THE YEAR ARE SIMILAR TO THE FACTS OF THE EARLIER YEAR-EXCEPT FOR THE AMOUNT INVOLVED FOR DEPRECIATION ON VESSEL.SO,FOLLOWING OUR ORDER F OR THE EARLIER YEAR,WE DECIDE THE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE AND REVERSE THE ORDER OF THE FAA.LIKE LAST AY.WE ARE NOT ADJUDICATING THE ISSUES OF MERITS. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR B OTH THE ASSESSMENT YEARS STANDS ALLOWED. . ORDER PRONOUNCED I N THE OPEN COURT ON 13 TH JULY, 2016. 13 , 2016 SD/- SD/- ( ( ( ( /PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.