Precision Camshafts Ltd., Solapur V. Assistant Commissioner of Income-tax,

ITA 557/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0779 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Period of limitation; Tangible material; Assessment record; Time period of passing order; Reassessment proceedings
• Section: 143(3); 10B; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 557 /PN/20 1 4 / ASSESSMENT YEAR: 200 6 - 07 PRECISION CAMSHAFTS LTD. (FORMERLY KNOWN AS CLANCY PRECISION COMPONENTS PVT. LTD.) D - 5, MIDC, CHINCHOLI, SOLAPUR - 413255 . / APPELLANT PAN: A ABCC1368H VS. THE A SST . COMMISSIONER OF INCOME TAX, THE A SST . COMMISSIONER OF INCOME TAX, CIRCLE - 1 , SOLAPUR . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPOND ENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 2 9 .0 9 .201 6 / DATE OF PRONOUNCEMENT: 30 . 0 9 .201 6 / ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF CIT (A) - I II , PUNE , DATED 29 . 0 1 .201 4 RELATING TO ASSESSMENT YEAR 200 6 - 07 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REASST. U/S 147 WAS VALID IN LAW WITHOUT APPRECIATING THAT NO NOTICE U/S. 1 43(2) WAS ISSUED TO THE ASSESSEE AND ACCORDINGLY, THE REASST. ORDER SHOULD HAVE BEEN HELD TO BE NULL AND VOID. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT SINCE THE ASSESSEE HAD ATTENDED DURING THE ASST. PROCEEDINGS AND HAD NOT RAISED THE OBJECTION OF NON ISSUE OF NOTICE U/S. 143(2), THE ASSESSEE WAS PRECLUDED FROM THE SAID OBJECTION IN THE APPELLATE PROCEEDINGS IN VIEW OF THE PROVISIONS OF SECTION 292BB. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 292BB WERE NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE AND THEREFORE, THE ASSESSEE HAD A RIGHT TO AGITATE THE VALIDITY OF THE REASST. ORDER EVEN THOUGH THE ASSESSEE HAD NOT RAISED THE OBJECTION DURING THE REASST. PROCEEDINGS. 4] THE LEARNED CIT(A) OUGHT TO HAVE APPR ECIATED THAT SINCE NO NOTICE U/S. 143(2) WAS ISSUED BY THE LEARNED A.O., THE REASST. ORDER WAS NOT VALID AND ACCORDINGLY, THE SAME SHOULD HAVE BEEN DECLARED NULL AND VOID. 5] THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT SINCE THE ASSESSEE HAD NOT FILED A RETURN OF INCOME IN RESPONSE TO THE NOTICE U / S 148 BUT HAD REQUESTED THE A.O. TO TREAT THE ORIGINAL RETURN FILED AS RETURN FILED IN RESPONSE TO THE. NOTICE ISSUED U / S 148, IN SUCH A SCENARIO, THE A.O. WAS NOT REQUIRED TO ISSUE NOTICE U / S 143(2) AND CONSEQUENTLY, THE REASST. IS JUSTIFIED IN LAW. 6] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REOPENING U / S 148 WAS VALID WITHOU T APPRECIATING THAT THERE WAS NO TANGIBLE MATERIAL WITH THE A.O. TO BELIEVE THAT TH E INCOME HAD ESCAPED ASST. AND THEREFO RE, THE REOPENING WAS NOT VALID IN LAW AN D ACCORDINGLY, THE REASST. ORDER BE DECLARED NULL AND VOID. 7] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U / S 10 B IS TO BE ALLOWED ONLY AFTER SET OFF OF THE BROUGHT FORWARD LOSSES AND THE UNABSORBED D EPRECIATION RELATING TO THE EARLIER YEARS. 8] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE DEDUCTION U / S 10 B WAS TO BE ALLOWED WHILE COMPUTING THE PROFITS AND GAINS OF THE UNDERTAKING AND THE UNABSORBED LOSSES AND DEPRECIATION WERE TO BE SET O FF ONLY AGAINST THE RESULTANT PROFITS AND GAINS OF THE BUSINESS, IF ANY, AFTER ALLOWING DEDUCTION U/S. 10 B. 3. THE ISSUE VIDE GROUNDS OF APPEAL NO.1 TO 5 RAISED BY THE ASSESSEE IS AGAINST RE - ASSESSMENT PROCEEDINGS COMPLETED AGAINST THE ASSESSEE UNDER SECTI ON 147/148 OF THE ACT BEING NULL AND VOID IN THE ABSENCE OF ANY NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT. ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 3 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME ON 08.11.2006 DECLARING THE TOTAL INCOME AT NIL. T HE SAID RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER SECTION 10B OF THE ACT AT RS. 1,87,74,968/ - . BUT THE ASSESSEE HAD NOT ADJUSTED BROUGHT FORWARD DEPRECIATI ON LOSS AND BUSINESS LOSS BEFORE CLAIMING THE DEDUCTION UNDER SECTION 10B OF THE ACT . H ENCE REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. FURTHER, NOTICE UNDER SECTION 148 OF THE ACT WAS SERVED UPON THE ASSESSEE ON 03.1 1.2010 . I N RESPONSE THERETO, THE ASSESSEE VIDE LETTER DATED 30.12.2010 SUBMITTED THAT THE ORIGINAL RETURN OF INCOME FILED ON 08.11.2006 TO BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THEREAFTER, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 5. BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE RE - ASSESSMENT 5. BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE RE - ASSESSMENT PROCEEDINGS ON THE GROUND THAT NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE BEFORE COMPLETING THE ASSESSMEN T UNDER SECTION 143(3) OF THE ACT. THE CIT(A) VIDE PARAS 5 TO 5.2.8 CONSIDERED THE ISSUE AND OBSERVED THAT WHERE THE ASSESSEE HAD NOT FURNISHED FRESH RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT AND HAD MERELY FILED A LETTER AND WHERE THE ASS ESSEE HAD APPEARED BEFORE THE ASSESSING OFFICER AND NEVER CHALLENGED THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT, THERE IS NO MERIT IN THE ARGUMENTS OF ASSESSEE THAT THE RE - ASSESSMENT HAD BECOME INVALID FOR NON - ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. THE SECOND ASPECT ADDRESSED BY THE CIT(A) WAS THAT IN VIEW OF THE PROVISIONS OF SECTION 292BB OF THE ACT AND WHERE THE ASSESSEE HAD PARTICIPATED IN THE ASSESSMENT PROCEEDINGS, THEN SUCH A PLEA CANNOT BE RAISED AGAINST RE - ASSESSMENT PROCEEDINGS . ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 4 6. THE ASSESSEE IS IN APPEAL AGAINST THE PRELIMINARY ISSUE OF COMPLETION OF RE - ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WITHOUT THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE P OINTED OUT THAT NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE WAS ASKED TO PRODUCE THE ASSESSMENT RECORD TO VERIFY WHETHER ANY NOTICE UNDER SECTION 143(2) OF THE ACT WAS IS SUED TO THE ASSESSEE. ON THE NEXT DATE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FAIRLY ADMITTED THAT THERE IS NO EVIDENCE AVAILABLE ON RECORD WITH REGARD TO ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT AND EVEN THE ORDER SHEE T ENTRIES ARE SILENT ON THIS. THE COPIES OF ORDER SHEET ENTRIES HAVE BEEN FILED ON RECORD. SHEET ENTRIES HAVE BEEN FILED ON RECORD. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN ACIT VS. GENO PHARMACEUTICALS LTD. (2013) 32 TAXMANN.COM 162 (BOM) , THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS MANDATORY IN RE - ASSESSMENT PROCEEDINGS UNDER SECTION 148 OF THE ACT. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. TH E FIRST JURISDICTIONAL ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST RE - ASSESSMENT ORDER PASSED IN THE CASE OF ASSESSEE AFTER RECORDING REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. ADMITTEDLY, THE ASSESSING OFFICER HAD ISSUED NOTICE UNDER SECTION 148 OF THE ACT, WHICH WAS SERVED UPON THE ASSESSEE ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 5 ON 03.11.2010 . I N RESPONSE THERETO, THE ASSESSEE HAD FILED LETTER DATED 30.12.2010 THAT THE ORIGINAL RETURN OF INCOME FILED ON 08.11.2006 MAY BE TREATED AS RETURN OF INCOME FILED IN RESPONS E TO NOTICE UNDER SECTION 148 OF THE ACT. AFTER THIS COMMUNICATION OF THE ASSESSEE, THE ASSESSING OFFICER IN ORDER TO COMPLETE THE RE - ASSESSMENT PROCEEDINGS HAD TO FOLLOW THE PROCEDURE LAID DOWN IN THE ACT I.E. ISSUE NOTICE OF HEARING UNDER SECTION 143(2) OF THE ACT. THE ASSESSING OFFICER IN THE PRESENT CASE HAS ADMITTEDLY NOT ISSUED ANY NOTICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSMENT RECORDS HAVE BEEN PRODUCED BEFORE US AND THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ADMITS THAT NO NO TICE ISSUED UNDER SECTION 143(2) OF THE ACT IS AVAILABLE ON RECORD. FURTHER, EVEN THE ORDER SHEET ENTRIES ARE SILENT ON SUCH ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT . THE SAID NOTICE IS TO BE ISSUED WITHIN LIMITATION PERIOD, WHICH ADMITTEDLY, HAS NOT BEEN FOLLOWED BY THE ASSESSING OFFICER. IN SUCH CIRCUMSTANCES, THE ASSESSEES CLAIM IS THAT RE - ASSESSMENT ORDER PASSED AGAINST THE ASSESSEE IS VITIATED IN LAW . W HERE THAT RE - ASSESSMENT ORDER PASSED AGAINST THE ASSESSEE IS VITIATED IN LAW . W HERE THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS MANDATORY IN ORDER TO COMPLET E THE RE - ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE AND WHICH HAS NOT BEEN FOLLOWED BY THE ASSESSING OFFICER, THEN THE CONSEQUENT RE - ASSESSMENT ORDER PASSED AGAINST THE ASSESSEE DOES NOT STAND AND THE SAME IS TO BE DECLARED AS NULL AND VOID. 11. THE HON BLE BOMBAY HIGH COURT IN ACIT VS. GENO PHARMACEUTICALS LTD. (SUPRA) HAS UPHELD THE ORDER OF TRIBUNAL IN H OLDING THAT THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT IS MANDATORY AND IN THE ABSENCE OF SUCH SERVICE, THE ASSESSING OFFICER CANNOT PROCEED TO MAKE AN ENQUIRY ON RETURN FILED IN COMPLIANCE WITH NOTICE ISSUED UNDER SECTION 148 OF THE ACT. IN THE FACTS OF THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT , ADMITTEDLY, NO NOTICE UNDER SECTION 143(2) OF THE ACT ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 6 HAD BEEN ISSUED WHILE MAKING THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. THE TRIBUNAL IN THE SAID CASE HAD RELIED ON THE JUDGMENT OF APEX COURT IN R. DALMIA VS. CIT (1999) 236 ITR 480 (SC) TO CONCLUDE THAT THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT WAS MANDATORY. THE TRIBU NAL FOLLOWING THE SAID JUDGMENT OF THE APEX COURT HAD HELD THAT THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS MANDATORY AND IN THE ABSENCE OF SAID SERVICE, THE ASSESSING OFFICER COULD NOT PROCEED TO MAKE AN ENQUIRY ON THE RETURN FILED IN COMPLIANCE WITH T HE NOTICE ISSUED UNDER SECTION 148 OF THE ACT . THE ORDER OF TRIBUNAL WAS CONFIRMED BY THE HONBLE HIGH COURT. 12. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE AND FOLLOWING THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HONBLE HIGH COURT IN ACIT VS. GENO PHARMACEUTICALS LTD. (S UPRA), WE HOLD THAT IN THE ABSENCE OF ANY NOTICE BEING ISSUED UNDER SECTION 143(2) OF THE ACT AFTER THE REASSESSMENT PROCEEDINGS ARE ISSUED UNDER SECTION 143(2) OF THE ACT AFTER THE REASSESSMENT PROCEEDINGS ARE INITIATED AGAINST THE ASSESSEE UNDER SECTION 148 OF THE ACT AND THE ASSESSEE HAS FI LED THE RETURN OF INCOME OR FILED A LETTER STATING THAT THE RETURN OF INCOME FILED BY IT SHOULD BE TREATED AS FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT , THEN REASSESSMENT ORDER IS VITIATED. O NCE NO NOTICE UNDER SECTION 143(2) OF THE ACT IS ISSUED TO THE ASSESSEE, THEN THE REASSESSMENT ORDER PASSED IS NULL AND VOID, SINCE THE ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT IN REASSESSMENT PROCEEDINGS UNDER SECTION 147 / 148 OF THE ACT IS MANDATORY. WE HOLD THAT REASSESSMENT ORDER PASSED IN T HE PRESENT CASE UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS NULL AND VOID. WE FIND NO MERIT IN THE OPINION OF CIT(A) THAT WHERE THE ASSESSEE HAS ONLY FILED LETTER STATING THAT ORIGINAL RETURN OF INCOME FILED BY IT SHOULD BE TREATED AS FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT IMPLIES THAT NO RETURN OF INCOME HAS BEEN FILED IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 7 OF THE ACT, IS MISPLACED. REVERSING THE ORDER OF CIT(A), WE HOLD THAT THE REASSESSMENT PROCEEDINGS COMPLETED AGAINST THE ASSESSEE ARE WITHOUT ANY JURISDICTION. 1 3 . ALTHOUGH, WE HAVE DECIDED THE PRELIMINARY ISSUE IN FAVOUR OF THE ASSESSEE BUT THE ISSUE RAISED ON MERITS I.E. WORKING OF DEDUCTION UNDER SECTION 10B OF THE ACT, WHETHER THE SAME IS TO BE ALLOWED BEFORE SETTING OF F OF BROUGHT FORWARD DEPRECIATION LOSS AND BUSINESS LOSS OR AFTER THE SAME IS SET OFF, IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.70/PN/2012 AND 72/PN/2012, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 10.11.2015 . T HE RELEVANT FINDINGS OF TRIBUNAL ARE IN PARA S 15 TO 17 OF THE SAID ORDER, UNDER WHICH RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL. CIT & ANR. IN ITA NOS.551/PN/2014 AND 736/PN/2014 , RELATING TO ASSESSMENT YEAR 2005 - 06, VIDE NOS.551/PN/2014 AND 736/PN/2014 , RELATING TO ASSESSMENT YEAR 2005 - 06, VIDE ORDER DATED 08.10.2015 AND THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (2012) 348 ITR 72 (BOM) TO HOLD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT WAS T O BE COMPUTED BEFORE ADJUSTING BROUGHT FORWARD UNABSORBED LOSSES AND / OR DEPRECIATION LOSSES. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 AND FOLLOWING THE SAME P ARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 10B OF THE ACT AGAINST THE ELIGIBLE PROFITS OF BUSINESS AND IN CASE THERE ARE ANY LEFTOVER PROFITS, THEN TH E SAME ARE TO BE ADJUSTED AGAINST BROUGHT FORWARD UNAB SORBED DEPRECIATION / LOSS AS CLAIMED BY THE ASSESSEE . HENCE, THE ISSUE RAISED IN GROUNDS OF APPEAL NO.7 AND 8 IS DECIDED IN FAVOUR OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT PRESSED THE GROUND OF ITA NO . 557 /PN/201 4 PRECISION CAMSHAFTS LTD. 8 APPEAL NO.6 AND HENC E, THE SAME IS DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 1 4 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPTEMBER , 201 6 . SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 30 TH SEPTEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 2. / THE RESPONDENT ; 3. ( ) / THE CIT(A) - I II, PUNE ; 4. / THE CIT - IV, PUNE ; 5. , , / DR B, ITAT, PUNE ; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE