Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 5331 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
31-01-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 592 & 593 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 & 2010 11 ) AARTI INDUSTRIES LTD. 71, 2 ND FLOOR, UDYOG KSHETRA MULUND GOREGAON LINK ROAD MULUND (W), MUMBAI 400 080 PAN AABCA2787L . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 15(1)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI RAM TIWARI DATE OF HEARING 15.04.2019 DATE OF ORDER 29.05.2019 O R D E R PER SAKTIJIT DEY. J.M. THE AFORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE CHALLENGING T WO SEPARATE ORDER S , BOTH DATED 8 TH OCTOBER 2017, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 24 , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 20 09 10 AND 2010 11. 2 . GROUNDS RAISED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT THE FIGURES. 2 AARTI INDUSTRIES LTD. 3 . GROUND NO.1 IN BOTH THE APPEALS ARE GENERAL IN NATURE, HENCE, DO NOT REQUIRE ADJUDICATION. 4 . IN GROUND NO.2 OF BOTH THE APPEALS, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). IN ADDITION TO THE AFORESAID GROUND S, THE ASSESSEE HAS RAISED COMMON ADDITIONAL GROUNDS IN BOTH THE APPEALS CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT ON ACCOUNT OF LACK OF PROPER APPROVAL UNDER SECTION 151 OF THE ACT AND DUE TO N ON DISPOSAL OF THE OBJECTIONS RAISED DURING THE ASSESSMENT PROCEEDINGS. IN OUR VIEW, THE ISSUES RAISED IN THE ADDITIONAL GROUND S ARE NOT ONLY ANCILLARY AND INCIDENTAL TO THE MAIN GROUND CHALLENGING THE VALIDITY OF RE ASSESSMENT ORDER . SINCE, THE ADDITIONAL GROUNDS ARE ON PURELY LEGAL AND JURISDICTIONAL ISSUE S GOING TO THE ROOT OF THE MATTER, THEY REQUIRE CONSIDERATION. MOREOVER, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE CAN BE DECIDED ON THE BASIS OF FACTS AND MATERIALS AVAILABLE ON RECORD. THAT BEING T HE CASE, WE ARE INCLINED TO ADMIT THE ADDITIONAL GROUND S FOR ADJUDICATION ON MERIT. 5 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF DYE S, INTERMEDIATES , ORGANIC AND INORGANIC CHEMICAL S, AND PHARMACEUTICALS. F OR THE ASSESSMENT YEAR 3 AARTI INDUSTRIES LTD. 2009 10 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2019, DECLARING TOTAL INCOME OF ` 79,54,12,240. SIMILARLY, FOR THE ASSESSMENT YEAR 2010 11 THE ASSESSEE FILED ITS RETURN OF INCOME ON 17 TH SEPTEMBER 2009 DECLARING TOT AL INCOME OF ` 96,06,67,950. ASSESSMENTS IN RESPECT OF THE AFORESAID ASSESSMENT YEARS WERE INITIALLY COMPLETED UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION GATHERED INDICATING THAT THE ASSESSEE HAS BOOKED BOGUS EXPENSES TOWARD S PAYMENT OF COMMISSION AND BROKERAGE AMOUNTING TO ` 30,71,856 IN ASSESSMENT YEAR 2009 10 AND ` 5,52 ,840 IN ASSESSMENT YEAR 2010 11, T HE ASSESSING OFFICER RE OPENED THE ASSESSMENT S UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE S UNDER SECTION 148 OF THE AC T. IN THE COURSE OF RE ASSESSMENT PROCEEDINGS , THE ASSESSEE RAISED OBJECTIONS CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. THE ASSESSING OFFICER WITHOUT DISPOSING OF THE OBJECTIONS RAISED BY THE ASSESSEE PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE BY DISALLOWING AND ADDING BACK THE COMM ISSION AND BROKERAGE PAYMENT OF ` 30,71,856 AND ` 5,52,840 UNDER SECTION 69C OF THE ACT IN THE ASSESSM ENT YEAR 2009 10 AND 2010 11 RESPECTIVELY. AGAINST THE ASSESSMENT ORDERS SO PASSED, ASSESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY CHALLENGING THE VALIDITY OF THE RE ASSESSMENT PROCEEDINGS AS WELL AS MERITS OF THE DISALLOWANCE MADE. 4 AARTI INDUSTRIES LTD. L EARNE D COMMISSIONER (APPEALS), HOWEVER, DECIDED BOTH THE ISSUES AGAINST THE ASSESSEE. 6 . SHRI VIJAY MEHTA, L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED , AFTER COMPLYING TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, THE ASSESSEE HAD SOUGHT REASONS FOR RE OPENING OF ASSESSMENT AND AFTER OBTAINING THE REASONS, THE ASSESSEE HAD RAISED OBJECTIONS BEFORE THE ASSESSING OFFICER VIDE LETTER S DATED 31 ST AUGUST 2016, CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT S UNDER SECTION 147 OF THE ACT. THE LEARNED COUNSEL SUBMITTED , THE ASSESSING OFFICER KEPT THE OBJECTIONS PENDING AND ULTIMATELY COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT WITHOUT DISPOSING OF THE OBJECTIONS. THUS, HE SUBMITTED , THE ASSESSING OFFICER HAS NOT FOLLOWED THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN GKN DRIVESH AFTS INDIA LTD. V/S ITO & ORS., [2003] 259 ITR 019 (SC) , WHICH MAK ES THE ASSESSMENT ORDER VOI D AB INITIO. HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) WITHOUT PROPERLY APPRECIATING THE AFORESAID LEGAL ASPECT HAS DISMISSE D THE APPEAL OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS : I ) GKN DRIVESHRAFTS INDIA LTD. V/S ITO & ORS., [2003] 259 ITR 019 (SC) ; II ) BAYER MATERIALS SCIENCE PVT. LTD. V/S DCIT, [2016] 382 ITR 333 (BOM.); 5 AARTI INDUSTRIES LTD. III ) KSS PETRON PVT. LTD. V/S ACIT, ITA NO.224/2014, DATED 03.10.2016; AND IV ) HINDUSTAN UNILIVER LTD. V/S DCIT, ITA NO.3701/MUM./2016, DATED 01.01.2018. 7 . SHRI RAM TIWARI, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , NON DISPOSAL OF THE OBJECTIONS BY THE ASSESSING OFFICER IS CURABLE PROCEDURAL LAPSE WHICH CAN BE RECTIFIED BY PASSING FRESH ASSESSMENT ORDER S AFTER DISPOSAL OF OBJECTIONS RAISED BY THE ASSESSEE. THUS, HE SUBMITTED , THE ORDERS PASSED MAY BE RESTORED BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO DISPOSE OF THE OBJECTIONS RAISED BY THE ASSESSEE AND THEREAFTER COMPLETE THE ASSESSMENT S . 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UP ON. THE UNDISPUTED FACTS EMERGING FROM RECORD INDICATE THAT IN THE COURSE OF RE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER S DATE D 31 ST AUGUST 2016, HAD RAISED OBJECTIONS BEFORE THE ASSESSING OFFICER SPECIFICALLY CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IN BOTH THE ASSESSMENT YEAR S UNDER DISPUTE. THE FACT THAT BEFORE COMPLETION OF THE ASSESSM ENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAS NOT DISPOSED OFF THE OBJECTIONS RAISED BY THE ASSESSEE THROUGH SEPARATE ORDERS , REMAINS UNCONTROVERTED BEFORE US. THE HON'BLE SUPREME COURT 6 AARTI INDUSTRIES LTD. IN GKN DRIVESH AFTS INDIA LTD. (SUPRA) HAS HELD THAT IF IN THE COURSE OF RE ASSESSMENT PROCEEDINGS, THE ASSESSEE RAISES OBJECTIONS CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, THE ASSESSING OFFI CER IS DUTY BOUND TO DISPOSE OF SUCH OBJECTIONS INDEPENDENTLY BEFORE COMPLETING THE ASSESSMENT. FOLLOWING THE AFORESAID DECISION OF THE HON'BLE SUPREME COURT, THE HON'BLE JURISDICTIONAL HIGH COURT IN BAYER MATERIALS SCIENCE PVT. LTD. (SUPRA), HAS ALSO QUASHED THE DRAFT ASSESSMENT ORDER SINCE IT WAS PASSED WITHOUT DIS POSING OFF THE OBJECTIONS FILED BY THE ASSESSEE. SIMILAR LY, THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF KSS PETRON PVT. LTD. (SUPRA) HAS HELD THAT IF THE ASSESSING OFFICER PASSES THE RE ASSESSMENT ORDER WITHOUT DISPOSING OF THE OBJECTIONS RAISED BY TH E ASSESSEE, SUCH ASSESSMENT ORDER WILL BE WITHOUT JURISDICTION AND ONLY CONSEQUENCE WHICH CAN FOLLOW IS TO DECLARE THE ASSESSMENT ORDER NULL AND VOID, HENCE, THERE IS NO REASON TO RESTORE THE ISSUE TO THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER. ADMITTEDLY, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEARS UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT HAS NOT FOLLOWED THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT AND THE HON'BLE JURISDICTIONAL HIGH COUR T , REFERRED TO ABOVE . THEREFORE, THE ISSUE WHICH REQUIRES CONSIDERATION IS , WHETHER NON DISPOSAL OF THE OBJECTIONS RAISED BY THE ASSESSEE IS A PROCEDURAL DEFECT , AS URGED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IN OUR VIEW, NON DISPOSAL OF 7 AARTI INDUSTRIES LTD. OBJECTIONS C HALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS NOT A MERE PROCEDURAL LAPSE BUT EFFECTS THE JURISDICTION OF THE ASSESSING OFFICER TO PASS THE ASSESSMENT ORDER UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT. THEREFORE, F OLLOWING THE RATIO LAID DOWN IN THE DECISION S REFERRED TO ABOVE, WE HAVE NO HESITATION IN HOLDING THE IMPUGNED ASSESSMENT ORDERS PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT AS VOID AB INITIO . ACCORDINGLY, WE QUASH THE ASSESSMENT ORDERS IMPUGNED IN THE PRESENT APPEAL. AS A NATURAL COROLLARY, IMPUGNED ORDERS PASSED BY LEARNED COMMISSIONER (APPEALS) ARE HEREBY SET ASIDE. AS WE HAVE QUASHED THE ASSESSMENT ORDERS ON THE REASONING OF NON DISPOSAL OF OBJECTIONS RAISED BY THE ASSESSEE , THE OTHER PROPOSIT ION S ADVANCED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE RE ASSESSMENT ORDERS ARE OF MERE ACADEMIC IMPORTANCE, HENCE, NOT REQUIRED TO BE ADJUDICATED UPON. THESE GROUNDS ARE ALLOWED TO THE EXTENT INDICATED ABOVE. 9 . IN VIEW OF OUR DECISION IN GROUND NO.2 OF BOTH THE APPEALS, GROUNDS NO.3 AND 4 IN BOTH THE APPEALS HAVE BECOME ACADEMIC, HENCE, DO NOT REQUIRE ADJUDICATION. HOWEVER, THE ISSUES RAISED THEREIN ARE LEFT OPEN FOR ADJUDICATION IF THEY ARISE IN ANY OTHER ASSESSMENT YEAR IN FUTURE. 8 AARTI INDUSTRIES LTD. 10 . IN THE RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 29.05.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 29.05.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI
