ACIT 3(1)(1), MUMBAI V. RAJIV K PATODIA, MUMBAI

ITA 6295/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3799 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Question of law
• Section: 143(3); 69; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA, A M & HONBLE SH. SANDEEP GOSAIN , J M ./ I.T.A. NO . 6295 /MUM/201 6 ( / ASSESSMENT YEAR: 2007 - 08 ) A CIT 3(1)(1 ) R. NO. 607, AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. RAJIV K. PATODIA FLAT NO. 301, KSHITIJ 30 TH FLOOR, 47, NAPENSEA RD. MUMBAI - 400 008 ./ ./ PAN NO. AA DPP9795Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SH. CHAITANYA ANJARIA , DR / RESPONDENTBY : SHRI S. L. JAIN, AR / DATE OF HEARING : 03.12 .201 8 / DATE OF PRONOUNCEMENT : 29.01.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS CHALLENGING AGAINST THE ORDER OF LD. CIT (APPEAL) 8, MUMBAI DATED 22.07.16 F OR AY 20 07 - 08. 2 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA 2. AT THE VERY OUTSET, LD. AR DRAWN OUR ATTENTION TO THE LETTER DATED 01.10.10 MOVED BY THE ASSESSEE UNDER RULE 27 OF ITAT RULES 1963 WITH A REQUEST THAT AO HAD ERRED IN MAKING ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT WITHOUT PROVIDING OF OPPORTUNITY OF HEARING AND WITHOUT ISSUING A NOTICE U/S 143(2) OF THE ACT, HENCE THE ASSESSMENT MADE BY THE AO IS BAD IN LAW AND PRAYED TO BE CANCELLED. 3. THE LD. AR BY RAISING THE ABOVE GROUND HAS CHALLENGED THE ORDER OF REOPENING AS THE MANDATORY NOTICE U/S 143(2) WAS NOT ISSUED BY THE AO. IT WAS ARGUED THAT THIS IS A LEGAL GROUND AND GOES TO THE ROOT OF THE MATTER AND ALSO SUPPORTS THE ORDER OF LD. CIT(A ) IN SETTING ASIDE ORDER OF REOPENING 4 . ON THE OTHER HAND, LD. DR CONTESTED THE SAID APPLICATION AND SUBMITTED THAT THE ASSESSEE BEING THE RESPONDENT IN THE PRESENT CASE HAS NO RIGHT TO MOVE AN APPLICATION UNDER RULE 27 OF I.T. (APPELLATE TRIBUNAL) RULE 1963. 5 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS APPLICATION AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS JUDGMENT CITED BY THE PARTIES, WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VRS. HAZARIMAL 3 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA NAGJI & CO. 1168 ITR (VOL. XLVI), WHEREIN IT WAS HELD THAT THE POWERS OF THE APPELLATE TRIBUNAL ARE SIMILAR TO THE POWERS OF THE APPELLATE COURT UNDER THE CIVIL PROCEDURE CODE. IN SO FAR AS A RESPONDENT ONLY WANT TO MAINTAIN THE DECREE OF THE LOWER COURT WHICH IS IN HIS FAVOUR, HE IS ENTITLED TO SUPPORT IT ON FRESH GROUNDS IF HE CAN DO SO, AND THE APPELLATE COURT ALSO WILL HAVE JURISDICTION TO PERMIT HIM TO DO SO, PROVIDED THAT THE FRESH GROUNDS WHICH HE WANTS TO URGE DO NOT REQUIRE A FURTHER INVESTIGATION IN TO F ACTS WHICH ARE NOT ALREADY ON RECORD AND ARE NOT BASED ON FACTS WHICH WERE NEITHER ALLEGED NOR ADMITTED NOR PROVED AND WHICH THE OTHER SIDE WAS NEVER CALLED UPON TO MEET IN THE LOWER COURT. 6 . FROM THE ABOVE PROPOSITION AS LAID DOWN BY THE HONBLE JURISDI CTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE ASSESSEE/RESPONDENT HAD RAISED A LEGAL GROUND WHICH IS PURELY BASED ON THE FACTS WHICH EXISTED ON THE FILE. THEREFORE, WE ARE WELL WITHIN THE JURISDICTION TO PERMIT THE ASSESSEE /RESPONDENT TO RAISE THE LEGAL GROUND AFRESH. THUS, THE APPLICATION FILED BY THE ASSESSEE STANDS ALLOWED AND THE LEGAL GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATING THE SAME ON MERITS. 4 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA 7 . ALTHOUGH IN THE PRESENT APPEAL, THE REVENUE HAS CHALLENGED THE ORDER OF LD. CIT(A) IN QUASHING THE ORDER OF REOPENING , BUT AT THE SAME TIME, THE ASSESSEE BEING THE RESPONDENT HAS ALSO RAISED A LEGAL GROUND, WHICH HAS ALREADY BEEN ADMITTED FOR ADJUDICATING THE SAME ON MERITS. SINCE THE LEGAL GROUND RAISED BY THE ASSESSEE /RESPONDENT GOES TO THE ROOTS OF THE CASE, THEREFORE WE HAVE DECIDED TO DEAL WITH THE LEGAL GROUND RA ISED BY THE ASSESSEE/RESPONDENT FIRSTLY. 8 . LD. AR OF THE ASSESSEE SUBMITTED THAT ALTHOUGH THE ADDITIONAL GROUND NOW RAISED BEFORE US, WAS ALSO RAISED BEFORE LD. CIT(A) BY WAY OF ADDITIONAL GROUND VIDE LETTER DATED 14.07.16 THAT THE AO ERRED IN COMPLETING THE ASSESSMENT WITHOUT ISSUING A NOTICE U/S 143(2) THEREBY ERRED IN COMPLETING THE ASSESSMENT WITHOUT COMPLYING WITH THE JURISDICTIONAL REQUIREMENT. IT WAS ALSO ARGUED T HAT S INCE THIS GROUND RAISED BY THE ASSESSEE IS LEGAL IN NATURE , BUT LD. CIT(A) HAD NOT ADJUDICATED THE SAME. 9 . AFTER HAVING GONE THROUGH THE FACTS AS WELL AS ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND THAT ADDITIONS MADE BY THE AO U/S 69 OF THE A CT IN THE ORDER PASSED U/S 143(3) R.W.S. 147 5 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA OF THE I.T. ACT. HOWEVER, THE ADDITIONS WERE DELETED BY LD. CIT(A) BY HOLDING THAT THE REOPENING PROCEEDINGS WERE NOT VALID AND THUS ALLOWED THE APPEAL FILED BY THE ASSESSEE. LD. CIT(A) WHILE QUASHING THE RE - OPE NING PROCEEDINGS HAD NOT DEALT WITH THE LEGAL GROUND SPECIFICALLY RAISED BY THE ASSESSEE VIDE LETTER DATED 14.07.16. THE LD. CIT(A) HAS NOT RECORDED ITS FINDINGS ON THE GROUNDS OF APPEAL /ADDITIONAL GROUND WHEREBY A SPECIFIC GROUND WAS RAISED BY THE ASSESS EE THAT THE AO HAD COMPLETED THE ASSESSMENT WITHOUT ISSUING NOTICE U/S 143(2) OF THE I.T. ACT WHICH IS MANDATORY IN NATURE. 10 . BE THAT AS IT MAY, IT IS THE PRIMARY DUTY WHICH IS BESTOWED UPON LD. CIT(A) TO BRING ON RECORD THE COMPLETE AND ALL RELEVANT FACTS OF THE CASE WHILE DECIDING THE APPEAL. IT WOULD BE RELEVANT HERE TO QUOTE FROM HONBLE DELHI HIGH COURT IN THE CASE OF CIT VRS. JANSAMPARK ADVERTISING AND MARKETING PVT. LTD. DATED 11.03.15, WHEREIN IT WAS HELD AS UNDER: - 35. ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT ARE NOT A GAME OF HIDE AND SEEK. THE INQUIRY IN THE WAKE OF A NOTICE UNDER SECTION 148 IS NOT AN EMPTY FORMALITY. IT MUST BE EFF ECTIVE AND WITH A SENSE OF 6 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA PURPOSE. THERE IS AN ELABORATE PROCEDURE SET OUT WHICH REQUIRES SCRUPULOUS ADHERENCE AND FOLLOWED UP ON. IN THE HIERARCHY OF THE AUTHORITIES, THE AO IS PLACED AT THE BOTTOM RUNG. THE TWO LAYERS OF APPEALS, BEFORE THE MATTER ENGAG ES THE APPELLATE JURISDICTION OF THIS COURT, ARE AUTHORITIES VESTED WITH THE JURISDICTION, POWER AND OBLIGATION TO REACH APPROPRIATE FINDINGS ON FACTS. NOTICEABLY, IT IS ONLY THE APPEAL TO THE HIGH COURT, UNDER SECTION 260 - A , WHICH IS RESTRICTED TO CONSIDERATION OF 'SUBSTANTIAL QUESTION OF LAW', IF ANY ARISING. AS WOULD BE SEEN FROM THE DISCUSSION THAT FOLLOWS, THE OBLIGATION TO MAKE PROPER INQUIRY AND REACH FINDIN G ON FACTS DOES NOT END WITH THE AO. THIS OBLIGATION MOVES UPWARDS TO CIT (APPEALS), AND ALSO ITAT, SHOULD IT COME TO THEIR NOTICE THAT THERE HAS BEEN DEFAULT IN SUCH RESPECT ON THE PART OF THE AO. IN SUCH EVENT, IT IS THEY WHO ARE DUTY BOUND TO EITHER THE MSELVES PROPERLY INQUIRE OR CAUSE SUCH INQUIRY TO BE COMPLETED. IF THIS WERE NOT TO BE DONE, THE POWER UNDER SECTION 148 WOULD BE RENDERED PRONE TO ABUSE. 38. THE PROVISION OF APPEAL, BEFORE THE CIT (APPEALS) AND THEN BEFORE THE ITAT, IS MADE MORE AS A CHECK ON THE ABUSE OF POWER AND AUTHORITY BY THE AO. WHILST IT IS TRUE THAT IT IS THE OBLIGATION OF THE AO TO CONDUCT PROPER SCRUTINY OF THE MATERIAL, GIVEN THE FACT 7 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA THAT THE TWO APPELLATE AUTHORITIES ABOVE ARE ALSO FORUMS FOR FACT - FINDING, IN THE EVENT OF AO FAILING TO DISCHARGE HIS FUNCTIONS PROPERLY, THE OBLIGATION TO CONDUCT PROPER INQUIRY ON FACTS WOULD NATURALLY SHIFT TO THE DOOR OF THE SAID APPELLATE AUTHORITY. FOR SUCH PURPOSES, WE ONLY NEED TO POINT OUT ONE STEP IN THE PROCEDURE IN APPEAL AS PRESCRIBED IN SECTION 250 OF THE INCOME TAX ACT WHEREIN, BESIDES IT BEING OBLIGATORY FOR THE RIGHT OF HEARING TO BE AFFO RDED NOT ONLY TO THE ASSESSEE BUT ALSO THE AO, THE FIRST APPELLATE AUTHORITY IS GIVEN THE LIBERTY TO MAKE, OR CAUSE TO BE MADE, 'FURTHER INQUIRY', IN TERMS OF SUB - SECTION (4) WHICH READS AS UNDER: - THE COMMISSIONER (APPEALS) MAY, BEFORE DISPOSING OF ANY A PPEAL, MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT, OR MAY DIRECT THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME TO THE COMMISSIONER (APPEALS). 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELE TING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO 8 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACE OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL A UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. 11 . APART FROM ABOVE, WE FIND THAT HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VRS. CIT 1981 131(ITR) PAGE 451 HAS HELD THAT T HE DUTY OF THE TRIBUNAL DOES NOT END WITH MAKING A DECLARATION THAT THE ASSESSMENTS ARE ILLEGAL AND IT IS DUTY BOUND TO ISSUE FURTHER DIRECTIONS. THE APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEED INGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE AND THE STA TUTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE. 12 . THEREFORE, KEEPING IN VIEW THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT T HE MATTER BACK TO THE 9 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA FILE OF LD. CIT(A) WITH A DIRECTION TO PASS AFRESH ORDER ON ALL THE GROUNDS RAISED BY THE ASSESSEE INCLUDING THE ADDITIONAL GROUND RAISED VIDE LETTER DATED 14.07.16, WHEREIN THE ASSESSEE HAD RAISED A LEGAL GROUND THEREBY CHALLENGING THE ORDER OF REOPEING . IT IS NEEDLESS HER E TO MENTION THAT BEFORE PASSING AFRESH ORDER OF ASSESSMENT, THE LD. CIT(A) SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. 13 . BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE T HE MATTER BACK TO THE FILE OF LD. CIT(A) S HALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE LD. CIT(A) INDEPENDENTLY IN ACCORDANCE WITH LAW. 1 1 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JAN, 2019. SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 29 . 01 .201 9 SR.PS . DHANANJAY 10 I.T.A. NO. 6295 /MUM/201 6 RAJIV K. PATODIA / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI