DCIT 9(3), MUMBAI V. REACH NETWORK INIDA P.LTD, MUMBAI

ITA 5753/MUM/2011

• Counselvise Citation: 575319914 RSA 2011
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-05-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 11-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA KUMAR
• Assessee Lawyers: GIRISH DAVE
• Keywords: Retrospective amendment; Reassessment proceedings
• Section: 147; 148; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI . . , ! , ' # BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER : 5753 / / 2011, 2005-06 ITA NO. 5753/MUM/2011 (ASSESSMENT YEAR: 2005-06) DY. COMMISSIONER OF INCOME TAX, CIRCLE -9(3), 2 ND FLOOR, ROOM NO. 229, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI -400 020 VS M/S. REACH NETWORK INDIA PVT. LTD., TIMES SQUARE, UNIT -4, B-WING, 3 RD FLOOR, ANDHERI KURLA ROAD, ANDHERI (EAST), MUMBAI -400 059 .: PAN: AABCT 3343 D (APPELLANT) (RESPONDENT) C.O. 129/MUM/2012 ARISING OUT OF ITA NO. 5753/MUM/2011, AY 2005-06 M/S. REACH NETWORK INDIA PVT. LTD., ANDHERI (EAST), MUMBAI -400 059 VS DY. DIRECTOR OF INCOME TAX, CIRCLE -9(3), MUMBAI -400 020 (APPELLANT) CROSS OBJECTOR (RESPONDENT) APPELLANT- CROSS OBJECTOR BY : SHRI GIRISH DAVE RESPONDENT REVENUE BY : SHRI SURENDRA KUMAR ! ' /DATE OF HEARING : 28-08-2013 #$ ! ' / DATE OF PRONOUNCEMENT : 30-08-2013 & O R D E R ! , : PER VIVEK VARMA, JM: THE APPEAL FILED BY THE DEPARTMENT IS AGAINST THE ORDER O F CIT(A) 20, MUMBAI, DATED 23.06.2011, WHEREIN, THE FOLLOWING GROUN DS HAVE BEEN TAKEN: M/S REACH NETWORK INDIA PVT. LTD. ITA NO. 5753/MUM/2011 CO 129/MUM/2012 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF LOSS ON IM PAIRMENT OF ASSETS OF RS. 5,38,25,866 ADDED TO THE BOOK PROFIT U/S 115JB DESPITE THE FACT THAT SAME CONSTITUTES AMOUNT PROVIDED FOR DIMINUTIO N IN VALUE OF ASSETS AS PER RETROSPECTIVE AMENDMENT OF PROVISIONS OF SEC TION 115JB INSERTED BY THE FINANCE ACT, 2006. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. THE ASSESSEE ALSO HAS FILED CROSS OBJECTIONS (CO) AGAINS T THE ORDER OF THE CIT(A), WHEREIN, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE RESPONDENT SUBMITS THAT ON THE FACTS AND CI RCUMSTANCES OF THE CASE, THE PROVISIONS OF SECTION 147 OF THE INCO ME-TAX ACT, 1961 ARE NOT APPLICABLE TO IT AND THEREFORE THE LEA RNED ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 9(3), MUMBAI (ACI T) ERRED IN RE-OPENING THE ASSESSMENT. THE RESPONDENT PRAYS THAT THE ACIT BE DIRECTED ACC ORDINGLY. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)] ERRED IN NOT ACCEPTING THE CONTENTION OF THE RESPONDENT T HAT THE EVERY BASIS FOR REASSESSMENT PROCEEDINGS IS INVALID ON TH E GROUND THAT NO SEPARATE GROUND WAS RAISED BY IT. 3. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE CONTENTION OF THE RESPONDENT THAT AS PER PROVISIONS OF SECTION 147 OF THE ACT, THE LEARNED ACIT HAS THE POWER TO ASSESS OR REASSESS OT HER INCOME ONLY IF HE MAKES AN ADDITION FOR THE ITEMS IN RESPE CT OF WHICH THE REASONS HAD BEEN RECORDED. 3. SINCE BOTH THE APPEALS BEFORE US EMANATE FROM THE SA ME ORDER, WE ARE PASSING A CONSOLIDATED ORDER, FOR THE SAKE OF CONV ENIENCE AND BREVITY. 4. SINCE THE CO, AS FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE REASSESSMENT PROCEEDINGS, INITIATED BY THE AO, WHOSE CONS EQUENTIAL ORDER ARE IN APPEAL BY THE DEPARTMENT, WE FIND IT NECESSA RY TO DISPOSE OFF THE CO, FIRST, CONCERNING THE REOPENING OF THE PROCEEDINGS. 5. THE FACTS ARE, THAT INITIALLY RETURN FILED BY THE ASSESSE E WAS ACCEPTED BY THE DEPARTMENT. SUBSEQUENTLY, NOTICE U/S 1 48 WAS ISSUED ON 26.03.2010. IN RESPONSE TO THIS, THE ASSESSEE FILED A LET TER DATED 05.04.2010 SUBMITTING THAT THE RETURN FILED ORIGINALLY MAY BE TAKEN TO BE THE RETURN IN RESPONSE TO NOTICE U/S 148. IN THIS LET TER ITSELF, THE M/S REACH NETWORK INDIA PVT. LTD. ITA NO. 5753/MUM/2011 CO 129/MUM/2012 3 ASSESSEE SOUGHT COPIES OF REASONS. THE REASONS AS RECO RDED BY THE AO WAS SUPPLIED ON 28.10.2010, ALONG WITH THE NOTICE U/S 143( 2) (AS PER THE AR, AFTER A GAP OF OVER SIX MONTHS). ON 26.11.2010, T HE ASSESSEE FILED OBJECTIONS, WHICH WERE RESPONDED TO BY THE AO IN THE ASSESSMENT ORDER. 6. AS PER THE AR, THE AO COMMITTED A BREACH OF PROCEDU RES, LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF A SIAN PAINTS LTD V. DCIT, REPORTED IN 296 ITR 90 (BOM), WHEREIN, THE HON BLE JURISDICTIONAL HIGH COURT HAS OBSERVED, 1. HEARD LEARNED COUNSEL FOR THE PETITIONER AND TH E RESPONDENT. RULE, RETURNABLE FORTHWITH. BY CONSENT ALL THE PETITIONS ARE TAKEN UP FOR FINAL HEARING. 2. IN ALL THE ABOVE PETITIONS, IT IS A CASE REGA RDING REOPENING OF THE ASSESSMENT ORDER UNDER SECTION 148 OF THE INCOME-TA X ACT. IN ALL THE ABOVE CASES, THE PETITIONERS HAVE FILED THEIR RESPE CTIVE OBJECTIONS ON JANUARY 15, 2007, WITH REGARD TO REOPENING OF THE A SSESSMENT. 3. THE LEARNED SENIOR COUNSEL FOR THE PETITIONER P OINTED OUT THAT IN SOME OF THE CASES AS SOON AS THE OBJECTIONS WERE REJECTED B Y THE CONCERNED INCOME-TAX OFFICER, EVEN THE ASSESSMENT ORDER HAS B EEN PASSED WITHIN A VERY SHORT TIME WHEREBY THE ASSESSEE IS LEFT WITH OUT ANY REMEDY TO CHALLENGE SUCH AN ORDER OF REJECTION. 4. HENCE WE MAKE IT CLEAR THAT IF THE ASSESSING OF FICER DOES NOT ACCEPT THE OBJECTIONS SO FILED, HE SHALL NOT PROCEED FURTHER I N THE MATTER WITHIN A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF SE RVICE OF THE SAID ORDER ON OBJECTIONS, ON THE ASSESSEE. 5. ACCORDINGLY, RULE IS MADE ABSOLUTE. 6. WE ALSO DIRECT THAT THE INCOME-TAX OFFICER CONC ERNED SHALL FOLLOW THE ABOVE PROCEDURE STRICTLY IN ALL SUCH CASES OF REOPE NING OF ASSESSMENT. 7. ALL THE PETITIONS STAND DISPOSED OF ACCORDINGLY . THE AR ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS ITO, REPORTED IN 259 ITR 19, WHEREIN, THE HONBLE SUPREME COU RT HELD THAT NON DISPOSAL OF THE OBJECTIONS IS A PROCEDURAL DEFECT AND THE AO WAS BARRED TO DISPOSE OFF THE OBJECTIONS OF THE ASSESSEE PE RTAINING TO THE REOPENING OF THE ASSESSMENT. THE AR, THEREFORE, PLEADED TH AT THE ENTIRE PROCEEDINGS, IS, THEREFORE, ILLEGAL AND THE PROCEEDINGS SHOULD BE CANCELLED. M/S REACH NETWORK INDIA PVT. LTD. ITA NO. 5753/MUM/2011 CO 129/MUM/2012 4 7. THE DR ON THE OTHER HAND SUPPORTED THE ORDER OF T HE CIT(A), WHEREIN, THE CIT(A) HELD THAT SINCE NO SPECIFIC GROUND WAS T AKEN BY THE ASSESSEE IN ITS GROUND, ON THE ISSUE OF PROCEEDINGS, U /S 148, THE GENERAL GROUND TAKEN CANNOT BE ENTERTAINED. THE DR, TH EREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) IS CORRECT. 8. WE HAVE HEARD THE ARGUMENTS OF THE PARTIES. THE FACT THAT THE OBJECTIONS WERE DISPOSED OFF IN THE ASSESSMENT ORDER, IS A N IRREGULARITY, WHICH WAS SETTLED BY THE HONBLE SUPREME COURT IN GKN D RIVESHAFTS ( SUPRA ). WE, FULLY AGREE WITH THE ARGUMENTS OF THE AR THAT THE P URPOSE OF DISPOSING OFF THE OBJECTIONS IS TO ALLOW THE ASSESSEE TO APPROACH AN APPROPRIATE FORUM TO CLAIM ITS BONA FIDES WITH REGARD TO FACTS AND MATERIAL SUBMITTED BEFORE THE DEPARTMENT IN ITS RETURN OF INCOME. THIS FACT, IS MISSING IN THE CURRENT CIRCUMSTANCE, BECAUSE THE A O ISSUED NOTICE U/S 143(2) WITHOUT DISPOSING OFF THE OBJECTIONS. THIS I S CERTAINLY AN IRREGULARITY. 9. AS PER THE DECISION OF THE CASES CITED BEFORE US, THE HONBLE BOMBAY HIGH COURT IN ASIAN PAINTS ( SUPRA ) AND HONBLE SUPREME COURT OF INDIA IN GKN DRIVESHAFTS ( SUPRA ) HAVE HELD TO BE PROCEDURAL IRREGULARITIES, WHICH DOES NOT OUST THE JURISDICTION OF THE A O TO PROCEED IN THE REASSESSMENT PROCEEDINGS. THE HONBLE SUPREME COURT HELD , WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER, WE CLARIFY THAT WHEN A NOTICE U NDER SECTION 148 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK R EASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE PROCEED INGS, THE ASSESSING OFFICER HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSMENT IN RES PECT OF THE ABOVESAID FIVE ASSESSMENT YEARS. M/S REACH NETWORK INDIA PVT. LTD. ITA NO. 5753/MUM/2011 CO 129/MUM/2012 5 10. WE, THEREFORE, SET ASIDE THE ORDERS OF BOTH THE REVE NUE AUTHORITIES AND DIRECT THE AO TO PROCEED ON THE IMPUG NED REASSESSMENT PROCEEDINGS, AFRESH, BY FIRST DISPOSING OFF THE OBJECTIONS, WHICH MAY HAVE ITS OWN LEGAL RAMIFICATIONS. 11. THE CO, THUS, FILED BY THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 12. SINCE WE HAVE SET ASIDE THE REASSESSMENT PROCEEDIN GS AND RESTORED THE PROCEEDINGS TO THE FILE OF THE AO, THE APPEA L FILED BY THE DEPARTMENT BECOMES INFRUCTUOUS. WE HOLD ACCORDINGLY. CO IS ALLOWED FOR STATISTICAL PURPOSES. ITA 5273 IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- ( . . ) ( ! ) (R.S. SYAL) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH AUGUST, 2013 !/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) (! ( ) 20, MUMBAI / THE CIT (A)-20, MUMBAI. 4) (! 9 , MUMBAI / THE CIT9, MUMBAI, 5) )* + ! , , ' , , - / THE D.R. B BENCH, MUMBAI. M/S REACH NETWORK INDIA PVT. LTD. ITA NO. 5753/MUM/2011 CO 129/MUM/2012 6 6) + . / COPY TO GUARD FILE. 01 / BY ORDER / / TRUE COPY / / [ 2 / 3 4 ' , , - DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *673 . . * CHAVAN, SR. PS