DCIT, Mangalore V. M/s Hameed, Mangalore

ITA 552/BANG/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51272 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 02-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SINGH
• Assessee Lawyers: S VENKATESAN
• Keywords: Validity of assessment; Reason to believe
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.511 TO 516/BANG/2009 ASSESSMENT YEARS : 2001-02 TO 2006-07 HAJEE HAMEED, 16-1-56/6, MANGALORE DRIVING SCHOOL, SHAH COMPLEX, BENDOORWELL, MANGALORE. PAN : AANPN 2334K VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MANGALORE. APPELLANT RESPONDENT ITA NO.552 TO 557/BANG/2009 ASSESSMENT YEARS : 2001-02 TO 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MANGALORE. VS. HAJEE HAMEED, 16-1-56/6, MANGALORE DRIVING SCHOOL, SHAH COMPLEX, BENDOORWELL, MANGALORE. PAN : AANPN 2334K APPELLANT RESPONDENT ASSESSEE BY : SHRI S. VENKATESAN, C.A. REVENUE BY : SHRI PRADEEP SINGH, ADDL.CIT(DR) DATE OF HEARING : 22.09.2011 DATE OF PRONOUNCEMENT : 28.09.2011 ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 2 OF 8 O R D E R PER BENCH THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPART MENT ARE DIRECTED AGAINST THE SEPARATE ORDERS EACH DATED 31. 3.2009 OF THE CIT(APPEALS), MANGALORE FOR THE ASSESSMENT YEARS 20 01-02 TO 2006-07. 2. THE GROUNDS INVOLVED IN THESE APPEALS BY THE ASS ESSEE AND THE DEPARTMENT ARE COMMON AND THE APPEALS WERE HEARD TO GETHER, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 3. ONE COMMON ISSUE IN ALL THE ASSESSEES APPEALS V IDE GROUNDS NO.2[A] AND 2[B] WHICH WAS ARGUED AT THE FIRST INST ANCE READS AS UNDER: 2[A]. THE ORDER OF ASSESSMENT U/S. 147 IS BAD I N LAW AND VOID-AB-INITIO FOR WANT OF REQUISITE JURISDICTION E SPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S. 148 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH A ND CONSEQUENTLY, THE RE-ASSESSMENT REQUIRES TO BE CANC ELLED. 2[B]. THE REASSESSMENT IS BAD IN LAW AS THE LEARN ED A.O. HAS NOT PASSED AN ORDER REJECTING THE OBJECTIONS OF THE APPELLANT SUBMITTED AFTER FURNISHING THE REASONS RECODED AS R EQUIRED BY THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN GKN DRIVESHAFTS REPORTED IN 259 ITR 19 AND THEREFORE, T HE ASSESSMENT ORDER REQUIRES TO BE ANNULLED. 4. FROM THE ABOVE GROUNDS IT WOULD BE CLEAR THAT TH E ASSESSEE HAD CHALLENGED THE JURISDICTION OF THE AO WHILE FRAMING REASSESSMENT BY ISSUING NOTICE U/S. 148 R.W.S. 147 OF THE I.T. ACT, 1961 [H EREINAFTER REFERRED TO AS THE ACT IN SHORT]. ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 3 OF 8 5. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE IS A PROPRIETOR OF M/S. MANGALORE DRIVING SCHOOL AND M/S . MANGALORE CONSTRUCTIONS. THE ASSESSEE IS ALSO UNDERTAKING CO NTRACTS FOR CONSTRUCTION ACTIVITIES. FOR THE ASSESSMENT YEAR 2001-02, THE A SSESSEE FILED RETURN OF INCOME ON 2.5.2002 DECLARING TOTAL INCOME OF RS.76, 510 DERIVED FROM M/S. MANGALORE DRIVING SCHOOL. IN THIS CASE, A SURVEY U /S. 133A OF THE ACT WAS CONDUCTED BY THE ADIT(INV.), MANGALORE ON 24.7.2007 . ACCORDING TO THE AO, THERE WAS FAILURE FROM THE ASSESSEE TO FURNISH THE CORRECT PARTICULARS OF HIS INCOME IN RESPECT OF CONTRACT WORK AND ALSO TO FURNISH CORRECT PARTICULARS OF INCOME FROM M/S. KARAVALI SERVICE STATION AND VE HICLE BROKERAGE BUSINESS, THEREFORE, HE REOPENED THE ASSESSMENT BY ISSUING NOTICE DATED 15.2.2008 U/S. 148 OF THE ACT. 6. THE ASSESSEE IN RESPONSE TO THE ABOVE NOTICE FIL ED A LETTER DATED 20.3.2008 STATING THAT THERE WAS NO INCOME ESCAPING ASSESSMENT FOR THE A.Y. 2001-02 AND ALSO THERE WAS NO MATERIAL OR INFO RMATION WHICH INDUCES A BELIEF THAT THE INCOME FOR THE AFORESAID ASSESSME NT YEAR HAS ESCAPED ASSESSMENT. THE ASSESSEE REQUESTED TO TREAT THE RE TURN ALREADY FILED ON 2.5.2002 AS THE RETURN FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. 7. THE AO FRAMED THE REASSESSMENT FOR THE A.Y. 2001 -02 AT AN INCOME OF RS.13,51,260 BY MAKING CERTAIN ADDITIONS. THE A SSESSEE CARRIED THE MATTER TO THE LD. CIT(APPEALS) AND BESIDES CHALLENG ING THE ADDITIONS, HAD ALSO CHALLENGED THE VALIDITY OF NOTICE U/S. 148 BY STATING THAT THE AO HAD NO JURISDICTION U/S. 147 AND THE REASSESSMENT MADE BY HIM WAS BAD IN LAW AS HE HAD NOT PASSED AN ORDER REJECTING THE OBJECTIONS OF THE ASSESSEE IN VIEW OF THE GUIDELINES GIVEN BY THE HONBLE SUPREME COUR T IN THE CASE OF CIT V. ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 4 OF 8 GKN DRIVESHAFTS INDIA LTD. 259 ITR 19 . IT WAS ALSO CONTENDED THAT THE IMPUGNED ASSESSMENT ORDER IS INVALID IN LAW AS BEIN G CONTRARY TO LAW AS PER THE RATIO OF THE HONBLE SUPREME COURT AND HENC E REQUIRED TO BE ANNULLED. 8. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE UPHELD THE ACTION OF THE AO FOR ISSUING NO TICE U/S. 148 OF THE I.T. ACT BY OBSERVING IN PARA 4.5 OF THE IMPUGNED ORDER AS UNDER: 4.5 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE APPELLANT AND ALSO THE VARIOUS DETAILS FURNISHED BY THE APPELLANT. AS REGARDS LEGALITY OF ASSESSMENT UNDER SECTION 147 OF THE I.T. ACT, 1961, I AM NOT INCLINED TO AGREE WITH THE APPE LLANT THAT MERELY BECAUSE THE ASSESSING OFFICER HAS NOT CONSID ERED HIS OBJECTIONS TO THE NOTICE UNDER SECTION 148, THE ENT IRE ASSESSMENT BECOME BAD IN LAW. IN MY OPINION, THE VARIOUS DISC REPANCIES NOTICED DURING THE COURSE OF SURVEY ACTION BROUGHT CERTAIN FACTS TO THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE INC OME HAS ESCAPED ASSESSMENT FOR THE ASST YEAR UNDER CONSIDER ATION AND THEREFORE, IT WAS CERTAINLY INFORMATION UNDER SECTI ON 147. THERE WAS PRIMA FACIE REASON TO BELIEVE ON THE BASIS OF M EMORANDUM OF UNDERSTANDING THAT THERE WAS NO PARTNERSHIP FIRM IN EXISTENCE WITH EFFECT FROM 1.12.2000 AND HENCE, THE REMUNERAT ION PAID TO THE PARTNERS HAS ESCAPED ASSESSMENT BESIDES TAXING OF INCOME EARNED IN THE HANDS OF THE APPELLANT ON THIS COUNT. SIMILARLY, DURING THE COURSE OF SURVEY, THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT HAS MADE DEPOSITS ON VARIOUS DATES IN SAVINGS BANK ACCOUNT FOR WHICH THE APPELLANT WAS UNABLE TO EXPLA IN PROPERLY WITH DOCUMENTARY EVIDENCES. THE ASSESSING OFFICER HAS FOUND THAT THE APPELLANT HAS NOT DISCLOSED SAVINGS BANK A CCOUNT NO.16978 WITH CANARA BANK, VALENCIA BRANCH, MANGALO RE IN HIS RETURN OF INCOME FOR ASST YEAR 2001-02. HE HAS ALS O NOT MAINTAINED BOOKS OF ACCOUNT IN RESPECT OF MANGALORE DRIVING SCHOOL. THEREFORE, THE ASSESSING OFFICER IS RIGHT IN RE-OPENING THE ASSESSMENT FOR THE ASST YEAR UNDER CONSIDERATIO N IN VIEW OF THE PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961 . IN THE CASE OF CIT V. S.R. CONSTRUCTIONS 257 ITR 502 (MAD), IT WAS HELD THAT TWO CONDITIONS MUST EXIST BEFORE ISSUING NOTICE UND ER SECTION 148 (I) THAT THE ASSESSING OFFICER HAS REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX HAD BEEN UNDER ASSESSED; AND (II) THAT HE HAS ALSO REASON TO BELIEVE THAT SUCH UNDER ASSESSMENT H AD OCCURRED BY ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 5 OF 8 REASON OF EITHER (I) OMISSION OR FAILURE ON THE PAR T OF AN ASSESSEE TO MAKE A RETURN OF INCOME (II) OR OMISSION OR FAIL URE ON THE PART OF AN ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. IN THE PRESENT CASE, IT IS SEEN FROM THE REASONS RECORDED BY THE ASSESSING OFFICER THAT HE HAD APPLIED HIS MIND TO THE RELEVANT MATERIAL AND F ORMED A BELIEF THAT THE APPELLANT HAD NOT DISCLOSED COMPLETE FACTS AND THEREFORE, INCOME HAD NOT BEEN PROPERLY ASSESSED. IT WAS HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF RATNACHUDAMANI S. UTNAL V. ITO (2004) 269 ITR 792 THAT PRIMA FACIE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT IS SUFFICIENT FOR ISSUE OF N OTICE UNDER SECTION 148. THE DELHI ITAT IN THE CASE OF N.C. GUPTA V. ACIT (2004) 270 ITR 106, HAS HELD, .. THAT AFTER AMENDMENT, THERE IS NO CONDITION PRECEDENT THAT THE ESCAPEMENT OF IN COME MUST BE FOUND ON THE BASIS OF INFORMATION COMING TO THE P OSSESSION OF THE ASSESSING OFFICER. THE ASSESSMENT CAN BE REOPE NED IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. SUCH REASON TO BELIEVE CAN BE FOUNDED ON THE BASIS OF ANY MATERIAL AND CANNOT BE RESTRICTED TO INFORMATION COMING TO THE POSSESSION OF THE ASSES SING OFFICER. THE NOTICE OF RE-ASSESSMENT WAS VALID. THE FOLLOW ING DECISIONS ALSO SUPPORT THAT ASSUMPTION OF JURISDICTION UNDER SECTION 147 WAS IN CONFORMITY WITH THE LAW AND IN ORDER. (I) CIT V. VIPIN BATRA 293 ITR 389 (DELHI) (II) DHANYA KUMAR JAIN V. ASST CIT 298 ITR 396 (MP ):- TRUE DISCLOSURE OF INCOME NOT MADE BY ASSESSEE. NOTICE F OR RE- ASSESSMENT PROPER. (III) REACH CABLE NETWORKS LTD. V. DDIT 299 ITR 316 (DELHI):- MATERIAL FOR PRIMA FACIE BELIEF THAT INC OME HAD ESCAPED ASSESSMENT, NOTICE VALID. IN VIEW OF THE ABOVE DISCUSSION, IN MY CONSIDERED O PINION, ASSUMPTION OF JURISDICTION UNDER SECTION 147 BY THE ASSESSING OFFICER WAS IN CONFORMITY WITH THE LAW AND IN ORDER . 9. NOW THE ASSESSEE IS IN APPEAL. DURING THE COURS E OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(APPEALS) AND FURTHER SUBMITTED THAT THE ASSESSE E RAISED OBJECTION FOR REOPENING THE ASSESSMENT BEFORE THE AO, BUT HE HAD NOT DISPOSED OF THE ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 6 OF 8 SAME AND THIS FACT WAS ALTHOUGH ADMITTED BY THE LD. CIT(A), BUT WITHOUT CONSIDERING THE FACTS IN THE RIGHT PERSPECTIVE, THE LD. CIT(APPEALS) ARBITRARILY UPHELD THE ACTION OF THE AO FOR ISSUING NOTICE U/S. 148 OF THE I.T. ACT. IT WAS CONTENDED THAT THE OBJECTION FILED BY THE ASSESSEE SHOULD HAVE BEEN DISPOSED OF BY THE AO BEFORE PROCEEDING TO FRAME RE ASSESSMENT U/S. 147 OF THE ACT. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS INDIA LTD. V. ITO & ORS. (2003) 259 ITR 19 . 10. IN HIS RIVAL SUBMISSIONS, THE LD. DR DREW OUR A TTENTION TO THE OBSERVATIONS MADE BY THE LD. CIT(APPEALS) IN PARA 4 .5 OF THE IMPUGNED ORDER AND STRONGLY SUPPORTED THE ORDER PASSED BY TH E LD. CIT(APPEALS). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT APPEARS THAT WHEN THE AO ISSUED NO TICE U/S. 148 OF THE ACT FOR REOPENING THE ASSESSMENT, THE ASSESSEE FILED OB JECTIONS AND THOSE OBJECTIONS WERE NOT DISPOSED OF BY THE AO. THIS FA CT HAS ALSO BEEN ADMITTED BY THE LD. CIT(A), WHO OBSERVED THAT HE WA S NOT INCLINED TO AGREE WITH THE ASSESSEE THAT MERELY BECAUSE THE AO HAD NO T CONSIDERED HIS OBJECTION TO THE NOTICE U/S. 148, THE ENTIRE ASSESS MENT BECOMES BAD IN LAW. ON A SIMILAR ISSUE, THEIR LORDSHIPS OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS INDIA LTD. V. ITO & ORS. (2003) (SU PRA) AT PAGE 20 HELD AS UNDER: . THE ASSESSING OFFICER IS BOUND TO FURNISH REAS ONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICE E IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSES SING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 7 OF 8 INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE PROCEEDINGS, THE ASSESSING OFFICER HAS TO DISPOSE O F THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE AB OVESAID FIVE ASSESSMENT YEARS. 12. IN THE PRESENT CASE ALSO, ALTHOUGH THE AO RECOR DED THE REASONS AND SUPPLIED THE SAME TO THE ASSESSEE, BUT HE HAD NOT D ISPOSED OF THE OBJECTIONS RAISED BY THE ASSESSEE BY PASSING A SPEA KING ORDER. WE THEREFORE DEEM IT APPROPRIATE TO SET ASIDE THE IMPU GNED ORDER OF THE LD. CIT(APPEALS) AND REMAND THE CASE BACK TO THE FILE O F THE AO TO DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE IN RESPECT OF REOPENING BY ISSUING NOTICE U/S. 148 FIRST AND THEREAFTER TO DECIDE THE CASE AFRESH IN ACCORDANCE WITH THE LAW, AFTER PROVIDING DUE AND REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE WE HAVE REMANDED THE CASE T O THE FILE OF AO, WE DO NOT CONSIDER IT FIT AND APPROPRIATE TO GO INTO T HE OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS OF THE CASE. 13. IN ALL THE OTHER APPEALS OF THE ASSESSEE ALSO, THE AFORESAID LEGAL GROUND HAS BEEN RAISED, SO OUR FINDINGS GIVEN ABOVE SHALL APPLY MUTATIS MUTANDIS FOR OTHER ASSESSMENT YEARS INVOLVED UNDER CONSIDER ATION. 14. AS FAR AS THE APPEALS FILED BY THE DEPARTMENT A RE CONCERNED, SINCE WE HAVE REMANDED THE CASE TO THE FILE OF THE AO, TH EREFORE THE AO IS DIRECTED TO CONSIDER THE GROUNDS RAISED BY THE DEPA RTMENT IN ITS APPEAL WHILE DECIDING THE CASE OF THE ASSESSEE. ITA NO.511 TO 516 AND 552 TO 557/BANG/09 PAGE 8 OF 8 15. IN THE RESULT, THE APPEALS BY THE ASSESSEE AS W ELL AS BY THE DEPARTMENT ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF SEPTEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE, DATED, THE 28 TH SEPTEMBER, 2011. DS/- COPY TO: 1. ASSESSEE 2. REVENUE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.