SADHANA M. SHAH, MUMBAI V. ITO 16(2)(2), MUMBAI

ITA 6072/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3843 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SERVICE OF NOTICE US OF
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.6072/MUM/12 ( / ASSESSMENT YEAR: 2003-04) MRS. SADHANA M. SHAH 22, MEERA FLATS, 4 TH FLOOR, L.D.RUPAREL MARG, MUMBAI - 400006 / VS. ITO 16(2)(2) ROOM NO.214, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 400007 ./ ./ PAN/GIR NO. : AAVPS7994L ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 28.04.2016 !' /DATE OF PRONOUNCEMENT:10.08.2015 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 08.08.2012 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 28, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y. 2003-04. 2. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUES: I. 1. THE COMMISSIONER OF INCOME TAX (APPEALS) 28 [CIT(A)] ERRED IN REJECTING THE APPELLANTS PLEA S THAT THE ISSUANCE AND SERVICE OF NOTICE U/S.143(2) OF ASSESSEE BY: SHRI SNEHAL J. SHAH DEPARTMENT BY: SHRI KAMAL MANGAL ITA NO.6072/M/12 A.Y. 2003-04 2 THE INCOME TAX ACT (THE ACT) BEYOND THE STIPULATE D TIME AND VITIATED THE ASSESSMENT PROCEEDINGS AND CONSEQUENTLY RENDERING THE ENTIRE ASSESSMENT PROCEEDINGS AB INITIO VOID, ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 2. THE APPELLANT PRAYS THAT THE ASSESSMENT BE QUASHED AS BEING INVALID AND WITHOUT JURISDICTION. WITHOUT PREJUDICE TO ABOVE; II. 1. THE CIT(A) ERRED IN UPHOLDING THE ASSESSING OFFICERS ACTION OF TREATING REPAIR EXPENSES OF RS.15,33,808/- AS CAPITAL IN NATURE. 2. THE APPELLANT PRAYS THAT THE REPAIR EXPENSES BE ALLOWED AS REVENUE EXPENDITURE. WITHOUT PREJUDICE, THE APPELLANT PRAYS THAT IN THE EVENT THE ASSESSING OFFICERS CONTENTIONS IS UPHELD THEN DEPRECIATION AT THE APPLICABLE RATES BE ALLOWED ON SUCH CAPITAL EXPENDITURE. III. 1. THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF 25% OF SALARY EXPENDITURE ON THE GROUND THAT THE SAME WERE QUITE HIGH AND EXCESSIVE. 2. THE APPELLANTS PRAYS THAT THE DISALLOWANCE OF RS.1,02,000/- BE DELETED. IV. 1. THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.1,29,392/- ON ACCOUNT OF INTERES T PAID ON BORROWED FUNDS. 2. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.1,29,392/- BE DELETED. V. 1. THE CIT(A) ERRED IN NOT GIVING ANY FINDINGS O N THE APPELLANTS CLAIM FOR ALLOWING EXEMPTION OF RS.8,01,000/- U/S.54F OF THE ACT. 2. THE APPELLANT PRAYS THAT EXEMPTION U/S.54F BE ALLOWED TO HER. ITA NO.6072/M/12 A.Y. 2003-04 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED HER RETURN OF INCOME ON 19.11.2003 DECLARING TOTAL INCOME TO THE TUNE OF RS.13,76,040/-. THE RETURN WAS ACCOMPANIED BY TAX AUDIT REPORT U/S. 44AB IN FORM NO.3CB AND 3CD, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AND ANNEXURES, IN THE CASE OF M/S.SADHNA ENGINEERING CORPORATION AND ALSO M/S. SADHANA OFFICE BUSINESS CENTRE SEPARATELY, AND TDS CERTIFICATES, C OMPUTATION OF INCOME ETC. THE RETURN WAS PROCESSED U/S.143(1) OF THE IN COME TAX ACT, 1961 ( IN SHORT THE ACT). THEREAFTER, THE RETURN U/S.143(2 ) ISSUED AND SERVED UPON THE ASSESSEE. FURTHER NOTICE U/S.143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED AND SERVED UPON THE ASSES SEE. THE ASSESSEE WAS CARRYING ON BUSINESS AS THE PROPRIETOR OF (1) M/S. SADHANA ENGINEERING CORPORATION AND (2) M/S. SADHANA BUSINESS CENTRE. IN ADDITION, THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAIN AND INCOME FROM O THER SOURCES. THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED BY THE ASS ESSING HER INCOME TO THE TUNE OF RS.46,85,626/- U/S. 143(3) OF THE ACT ON 31 .01.2006. THE ASSESSEE WAS NOT SATISFIED WITH THE SAID ASSESSMENT, THEREFO RE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ASSESSMENT ORDER U/S.1 43(3) OF THE ACT. THEREFORE, FEELING AGGRIEVED THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.-1:- 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS FILED HER RETURN OF INCOME FOR THE A.Y.2003-04 ON 19.11.2003. THE ASSESSEE RECEIVED T HE NOTICE U/S.143(2) OF ITA NO.6072/M/12 A.Y. 2003-04 4 THE ACT ON 08.12.2005 DATED 06.12.2005 BEYOND ONE Y EAR THEREFORE THE ASSESSMENT U/S.143(3) OF THE ACT IS TIME BARRED IN VIEW OF THE LAW SETTLED IN COMMISSIONER OF INCOME TAX, CHENNAI VS. GITSONS ENG INEERING CO. [2015] 53 TAXMANN.COM 108 (MADRAS) . IT IS ALSO ARGUED THAT IT IS NECESSARY THAT THE NOTICE SHOULD BE ISSUED WITHIN THE ONE YEA R BUT FACTUALLY THE SAME SHOULD BE SERVED ALSO WITHIN THE ONE YEAR WHICH IS NOT IN HER CASE. THEREFORE, THE ASSESSMENT U/S.143(3) IS WRONG AGAIN ST LAW AND FACTS IN VIEW OF THE LAW SETTLED IN SUBHAM ENTERPRISES VS. INCOME TAX OF FICER [2004] 3 SOT 250 (ALL.) AND COMMISSIONER OF INCOME TAX VS. B HAN TEXTILES PVT. LTD. [2006] 287 ITR 370 (DELHI) AND PRAKASH RAMJI G AVALI VS. INCOME TAX OFFICER, WARD 3(1), THANE [2012] 21 TAXMANN.COM 534 (MUM.) AND BHPE KINHILL JOINT VENTURE VS. ADDITIONAL DIRECTOR OF INCOME TAX, RANGE 1 [2009] 116 ITD 123 (DELHI) . 5. HOWEVER, ON THE OTHER HAND THE LEARNED DEPARTMEN TAL REPRESENTATIVE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CI T(A) IN QUESTION. ON APPRAISAL OF THE ASSESSMENT ORDER ON RECORD IT CAME INTO THE NOTICE THAT NOTICE U/S.143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIO NNAIRE WERE ISSUED AND SERVED UPON THE ASSESSEE BUT THE EXACT DATE OF ISSU ANCE OF NOTICE ARE NOT MENTIONED ON RECORD. THE ASSESSEE FILED HER RETURN OF INCOME ON 19.11.2003 FOR THE A.Y.2003-04. THE COPY OF REMAND REPORT DAT ED 04.05.2011 ON THE FILE SPEAKS THAT NOTICE FOR THE A.Y.2003-04 U/S.143 (2) OF THE ACT WAS ISSUED ON 24.11.2004 BUT NOWHERE SPEAKS ABOUT THE SERVICE OF THE SAID NOTICE. THE SAID REPORT ALSO SPEAKS THAT THE DIRECT PROOF OF SE RVICE OF FIRST NOTICE IS NOT AVAILABLE ON THE RECORD. IN VIEW OF THE SAID REPOR T, IT IS NOT ON RECORD ABOUT THE SERVICE OF NOTICE ISSUED ON 24.11.2004. IN BRI EF THE ASSESSEE FILED HER ITA NO.6072/M/12 A.Y. 2003-04 5 RETURN OF INCOME ON 19.11.2003 AND UP TO THE ONE YE AR THERE WAS NO RECORD ON THE FILE TO WHICH IT CAN BE ASSUMED THAT THE AUT HORITY ISSUED THE NOTICE AND SAID NOTICE HAS DULY BEEN SERVED UPON THE ASSESSEE WITHIN ONE YEAR. THE ASSESSMENT U/S.143(3) HAS BEEN CONCLUDED WITHOUT SE RVICE OF NOTICE BEYOND THE PERIOD OF ONE YEAR WHICH DOES NOT SEEM JUSTIFIA BLE AND IN ACCORDANCE WITH LAW. IN THIS REGARD WE ALSO FIND SUPPORT OF LAW SETTLED IN SUBHAM ENTERPRISES VS. INCOME TAX OFFICER [2004] 3 SOT 250 (ALL.) AND COMMISSIONER OF INCOME TAX VS. BHAN TEXTILES PVT. L TD. [2006] 287 ITR 370 (DELHI) AND PRAKASH RAMJI GAVALI VS. INCOME TAX OFFICER, WARD 3(1), THANE [2012] 21 TAXMANN.COM 534 (MUM.) AND BHPE KIN HILL JOINT VENTURE VS. ADDITIONAL DIRECTOR OF INCOME TAX, RANG E 1 [2009] 116 ITD 123 (DELHI) . THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES WE SET ASIDE THE ASSESSMENT ORDER OF THE ASSESSMENT YEAR OF 2003-04 IN QUESTION U/S.143(3) OF THE ACT. ACCORDINGLY THIS ISSUE IS BEING DECIDED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ISSUE NO.-2-5:- 6. THE ISSUE NO.2 TO 5 ARE ON THE MERIT OF THE CASE . WHILE DECIDING THE ISSUE NO.1 THE ASSESSMENT ORDER U/S.143(3) OF THE A CT IN QUESTION HAS BEEN ORDERED TO BE SET ASIDE, THEREFORE, DECIDING THE SA ID ISSUES IS MERELY BECOME AN ACADEMIC IN NATURE HENCE NOT REQUIRED TO BE ADJU DICATED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ITA NO.6072/M/12 A.Y. 2003-04 6 ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST , 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 10 TH AUGUST, 2016 MP MP MP MP ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// (/') * (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI