ITO - 1(3)(1), MUMBAI V. RAJ FILES & STATIONERS PVT. LTD., MUMBAI

ITA 5993/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 6911 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase; Principle of natural justice; Question of law
• Section: 143(3); 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5993 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 INCOME TAX OFFICER - 1(3)(1), ROOM NO. 541 AAYAKAR BHAVAN, MUMBAI - 400020 VS. M/S RAJ FILES & STATIONERS PVT. LTD. 150, MODI STREET, GR. FLOOR, SHAHEEN APT. FORT, MUMBAI - 400001. PAN NO. AADCR0650B APPELLANT RESPONDENT ITA NO. 7554 /MUM/201 6 ASSESSMENT YEAR: 2011 - 1 2 M/S RAJ FILES & STATIONERS PVT. LTD. 150, MODI STREET, GR. FLOOR, SHAHEEN APT. FORT, MUMBAI - 400001. VS. INCOME TAX OFFICER - 1(3)(1), ROOM NO. 541 AAYAKARBHAVAN, MUMBAI - 400020 PAN NO. AADCR0650B APPELLANT RESPONDENT REVENUE BY : MR. CHAITANYA ANJARIA, DR ASSESSEE BY : MR. DEVENDRA JAIN , AR DATE OF HEARING : 24/12/2018 DATE OF PRONOUNCEMENT: 31/12/2018 ORDER PER N.K. PRADHAN, AM THE CAPTIONED CROSS APPEALS - ONE BY THE REVENUE AND ONE BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME M/S RAJ FILES ITA NO. 5993 & 7554/MUM/2016 2 TAX (APPEALS) - 3 , MUMBAI , [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE A RE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THERE HAS BEEN A DELAY OF 42 DAYS ON THE PART OF THE ASSESSEE TO FILE APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AN AFFIDAVIT STATING THAT THE COMPANY WAS NO T ACTIVE AND THEREFORE THE ORDER OF THE CIT(A) COULD NOT BE SERVED AND WAS FINALLY COLLECTED BY THE CHARTERED ACCOUNTANT, WHO ATTENDED THE APPEAL BEFORE THE COMMISSIONER. HAVING GONE THROUGH THE CONTENTS OF THE AFFIDAVIT, WE ARE CONVINCED WITH THE ASSESSEE S EXPLANATION AND CONDONE THE DELAY OF 42 DAYS IN FILING THE APPEAL. THE ASSESSEE, IN CROSS - APPEAL HAS RAISED OBJECTION ON JURISDICTION THAT THE ASSESSING OFFICER (AO) HAS NOT ISSUED NOTICE U/S 143(2) WHILE MAKING ASSESSMENT U/S 147 OF THE ACT. TO THIS, W E WOULD ADVERT FIRST . ITA NO. 7554/MUM/2016 ASSESSMENT YEAR: 2011 - 12 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN REOPENING THE CASE U/S 147 WITHOUT FURNISHING TO THE APPELLANT THE REASONS RECORDED FOR REOPENING. 2. THE LD. CIT(A) HAS ERRED IN NOT ISSUING NOTICE U/S 143(2). 3. THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 4. THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE ONLY TO THE EXTENT OF 12.5% INSTEAD OF DELETING M/S RAJ FILES ITA NO. 5993 & 7554/MUM/2016 3 THE SAME ENTIRELY. THUS, OUT OF DISALLOWANCE OF RS.1,16,51,667/ - , THE DISALLOWANCE TO THE EXTENT OF RS.14,56,458/ - HAS BEEN RETAINED. THE SAME ONLY MAY KINDLY BE DELETED. 5. THE LD. CIT(A) HAS ERRED IN DISALLOWING CONVEYANCE EXPENSES OF RS.2,546/ - , TELEPHONE EXPENSES OF RS.2,631/ - AND OTHER EXPENSES OF RS.50,289/ - IN ASSESSMENT 143(3) R.W.S. 147 THOUGH THE ASSESSMENT W AS REOPENED ONLY ON THE GROUND OF ALLEGED BOGUS PURCHASES. 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 01.10.2011 DECLARING TOTAL INCOME OF RS.3,32,340/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) ON 23.01.2 012. THEREAFTER, THE AO ISSUED NOTICE U/S 148 TO THE ASSESSEE ON 18.03.2013. THE AO, THEN MADE AN ASSESSMENT U/S 143(3) R.W.S. 147 DATED 12.03.2014 ON A TOTAL INCOME OF RS.1,20,42,170/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BE FORE THE LD. CIT(A). IN THE 1 ST GROUND OF APPEAL, THE ASSESSEE HA D RAISED THE ISSUE THAT THERE WAS NO FURTHER NOTICE U/S 143(2) AFTER THE ISSUE OF NOTICE U/S 148 BY THE AO. BEFORE US, THE LD. COUNSEL SUBMITS THAT THE LD. CIT(A) HAS NOT ADJUDICATED THE ABOV E GROUND OF APPEAL. IN SUPPORT OF HIS CONTENTIONS THAT NOTICE U/S 143(2) SHOULD HAVE BEEN ISSUED WHILE MAKING ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT, THE LD. COUNSEL RELIES ON THE ORDER OF THE ITAT SMC BENCH, MUMBAI IN ASSESSEES OWN CASE FOR THE AY 2009 - 10 (ITA NO. 7553/MUM/2016). ALSO REFERENCE IS MADE BY HIM TO THE REMAND REPORT DATED 22.12.2015 SUBMITTED BY THE AO TO THE LD. CIT(A), WHEREIN IT IS STATED THAT THE ASSESSEE HAD NOT RAISED ANY OBJECTION FOR NON - ISSUANCE OF NOTICE U/S 143(2) DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. M/S RAJ FILES ITA NO. 5993 & 7554/MUM/2016 4 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, NO NOTICE U/S 143(2) SUBSEQUENT TO THE ISSUANCE OF NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED BY THE AO AS IS EVIDENT FROM THE REMAND REPORT DATED 22.12.2015 FILED BY THE AO BEFORE THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12 . THE SAME ISSUE AROSE BEFORE THE ITAT SMC BENCH MUMBAI IN ASSESSEES OWN CASE FOR AY 2009 - 10 IN ITA NO. 7553/MUM/2016. THE TRIBUNAL VIDE ORDER DATED 05.07.2017 HELD AS UNDER: 8. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT ADMITTEDLY NO NOTICE U/S 143(2) OF THE ACT WAS ISSUED IN THE PRESENT CASE DESPITE THE FACT THAT THE ASSESSEE FILED A LETTER IN RESPONSE TO NOTICE U/S 148 OF THE ACT THAT THE RETURN ORIGINALLY FILED U/S 139(1) OF THE ACT CAN BE TREATED AS RETURN FILED U/S 1 48 OF THE ACT. HON'BLE BOMBAY HIGH COURT IN THE CASE OF GENO PHARMACEUTICALS LTD. (SUPRA) HAS VERY CATEGORICALLY HELD AS PARA 5 AND 6 AS UNDER: - '5. APART FROM THAT, IT IS AN ADMITTED POSITION THAT NO NOTICE UNDER SECTION 143(2) HAD BEEN ISSUED WHILE MAKING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 . THE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT [1998] 229 ITR 383 HAS HELD THAT THE TRIBUNAL HAS DISCRETION TO ALLOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT IN A CASE WHERE THE TRIBUNAL IS ONLY M/S RAJ FILES ITA NO. 5993 & 7554/MUM/2016 5 REQUIRED TO CONSI DER THE QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIAB ILITY OF AN ASSESSEE. THE ITAT, AFTER RELYING ON THE JUDGMENT OF THE APEX COURT IN R. DALMIA V. CIT [1999] 236 ITR 480/102 TAXMAN 702, CAME TO THE CONCLUSION THAT ISSUANCE OF NOTICE UNDER SECTION 143(2) WAS MANDATORY. THE ITAT HAS TAKEN INTO CONSIDERATION THE RELEVANT PROVISIONS AND HAS ALSO TAKEN INTO CONSIDERATION THE JUDGMENT OF THE APEX COURT AND RELYING ON THE SAID JUDGMENTS, THE ITAT HAS HELD THA T NOTICE UNDER SECTION 143(2) IS MANDATORY AND IN THE ABSENCE OF SUCH SERVICE, THE ASSESSING OFFICER CANNOT PROCEED TO MAKE AN INQUIRY ON THE RETURN FILED IN COMPLIANCE WITH THE NOTICE ISSUED UNDER SECTION 148 . 6. UNDER THESE CIRCUMSTANCES, NO CASE IS MADE OUT FOR INTERFERING WITH THE TAX APPEALS NO.77/2012 AND 78/2012 SINCE NO SUBSTANTIAL QUESTION OF LAW IS RAISED IN BOTH THE APPEALS.' 9. RESPECTF ULLY FOLLOWING HON'BLE BOMBAY HIGH COURT, I QUASH THE ASSESSMENT FRAMED IN THE ABSENCE OF NOTICE U/S 143(2) OF THE ACT. THE APPEAL OF THE ASSESSEE ON THIS JURISDICTIONAL ISSUE IS ALLOWED. 10. AS REGARDS TO THE REVENUE'S APPEAL, THE ASSESSEE'S APPEAL IS ALL OWED ON JURISDICTIONAL ISSUE AND ASSESSMENT IS QUASHED, REVENUE'S APPEAL WILL NOT SURVIVE AND HENCE DISMISSED. 5.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE TRIBUNAL AND QUASH THE ASSESSMENT FRAMED IN ABSENCE OF NOTICE U/S 143(2) OF THE ACT. CONSEQUENTLY, THE REVENUES APPEAL SHALL NOT SURVIVE. M/S RAJ FILES ITA NO. 5993 & 7554/MUM/2016 6 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, WHEREAS THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2018. SD/ - SD/ - ( PAWAN SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/12/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI