MANJU PRVAINCHAND JAIN, MUMBAI V. ITO 18(2)(3), MUMBAI

ITA 7337/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9804 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Reopening of assessment; Unexplained investment; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 148; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) SMT.MANJU PRAVINCHAND JAIN, SHOP NO.56, 1/3 DR.M.B.VELKAR STREET, MUMBAI 400 002. PAN:AAJPJ 5149 ...... A PPELLANT VS. THE INCOME-TAX OFFICER-18(2)(3), 306,3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021 .... RESPOND ENT APPELLANT BY : SHRI ANUJ KISNADW ALA RESPONDENT BY : MS. N. HEMALATH A DATE OF HEARING : 25/07/2017 DATE OF PRONOUNCEMENT : 23 /08/2017 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE P ERTAINING TO ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-29, MUMBAI DATED 28/09/2016, WHICH IN TURN, ARISES OUT OF OR DER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 25/03/2015. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY UPHOLDING THE REOPENING O F THE APPELLANT'S CASE U/S 148 OF THE INCOME TAX ACT, 1961. ('THE ACT'). . 2 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS BY UPHOLDING THE AO'S ORDER U/S 143(3) R.W S 147 DATED 25.03.2016 DESPITE THE FACT THAT THE ASSESSING OFFICER HAS NOT COMMUNICATED THE REASONS RECORDED FOR REOPENING THE CASE, TO THE APPELLANT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN NOT APPLYING THE TESTS OF NATURAL JUSTICE AS THE ASSESSEE WAS NOT PROVIDED ANY OPPORTUNITY OF BEING HEARD DURING THE REMAND PROCEEDINGS, EITHER BY THE CIT(A) OR BY THE ASSESSING OFFICER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY NOT DELETING THE ADDITION OF RS 37,00,000/- U/S 69 OF THE ACT. 5.THE LEARNED C!T(A) ERRED IN UPHOLDING THE ORDER P ASSED BY THE AO U/S 143(3) R.W.S 147 DATED 25/03/2015. DESPITE THE FAC T THAT THE ASSESSING OFFICER HAD NO INDEPENDENT EVIDENCE TO JUSTIFY THE ADDITION OF RS 37,00,000 IN A.Y. 2007-08 AND INSPITE OF THE FACT T HAT THE AO HAD NOT CONDUCTED ANY ENQUIRY TO GATHER ANY INDEPENDENT EVI DENCE 6 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODI FY, ALTER AND/ OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE TIME OF HEARING, THE LD.REPRESENTATIVE FO R THE ASSESSEE HAS RAISED A PRELIMINARY ISSUE, WHICH IS MANIFESTED IN GROUND OF APPEAL NO.2 ABOVE, THAT THE IMPUGNED REASSESSMENT ORDER MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS BAD I N LAW BECAUSE THE ASSESSING OFFICER DID NOT COMMUNICATE THE REASONS RECORDED FO R REOPENING OF ASSESSMENT TO THE ASSESSEE. SINCE THE SAID ISSUE G OES TO THE ROOT OF THE JURISDICTION OF THE ASSESSING OFFICER TO MAKE THE A SSESSMENT, THE SAME IS BEING ADVERTED TO AT THE THRESHOLD. 4. THE RIVAL COUNSELS HAVE BEEN HEARD WITH RESPECT TO THE AFORESAID ISSUE AND THE RELEVANT RECORD PERUSED. THE ISSUE IS BEI NG DISPOSED OFF IN THE FOLLOWING PARAS. 3 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) 5. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE INDIVIDUAL FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 31/03/200 8 DECLARING AN INCOME OF RS.1,34,199/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . SUBSEQUENTLY, THE ASSESSING OFFICER RECORDED REASON S AND REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF T HE ACT ON 28/03/2004. IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, ASSESSEE VIDE COMMUNICATION DATED 04/04/2014 STATED THAT THE RETU RN OF INCOME FILED ORIGINALLY DATED 31/03/2008 MAY BE TREATED AS RETU RN FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT. IN THE ENSUING REASSESSMENT, THE TOTAL INCOME HAS BEEN ASSESSED AT RS.38,34,200/-, W HICH INTER-ALIA, INCLUDES AN ADDITION OF RS.37.00 LACS UNDER SECTION 69 OF TH E ACT AS UNEXPLAINED INVESTMENT. THE SAID ADDITION HAS SINCE BEEN AFFIR MED BY CIT(A) ALSO AND, THUS, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIB UNAL. 5.1 THE FIRST POINT MADE BY THE APPELLANT IS THAT V IDE COMMUNICATION DATED 04/04/2014, A COPY OF WHICH IS PLACED AT PAGE-1 OF THE PAPER BOOK, ASSESSEE HAD SOUGHT THE REASONS FOR REOPENING THE ASSESSMENT AND THAT THE SAME HAVE NOT BEEN FURNISHED TO HIM. THEREFORE, IN TERM S OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. T REND ELECTRONICS,379 ITR 456 (BOM), THE ASSESSMENT SO FINALIZED IS BAD IN LA W. ON THIS POINT, THE LD.REPRESENTATIVE FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING JUDGMENTS ALSO:- (I) CIT VS. IDBI LTD. (2016) 76 TAXMANN.COM 227 (B OM) (II) CIT VS.VIDESH SANCHAR NIGAM LTD.,340 ITR 66(B OM) (III) VIDESH SANCHAR NIGAM LTD. VS. JCIT, ITA NO.76 26/MUM/2004 DATED 30/10/2009.(MUMBAI TRIBUNAL) 4 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) (IV) INDUSTRIAL DEVELOPMENT BANK OF INDIA VS. DCIT, ITA NO1391/MUM/2004 & 1394/MUM/2004 DATED 1 2/12/2012. (MUMBAI TRIBUNAL) (V) TREND ELECTRONICS V. ITO, ITA NO.902/MUM/2013 DT.25/03/2013 (MUMBAI TRIBUNAL) (VI) TELCO DADAJEE DHACKJEE LTD. VS. DCIT,ITA NO.4 613/MUM/2005 DATED 12/05/2010 (MUMBAI TRIBUNAL) 5.2 ELABORATING THE FACT-SITUATION, THE LD.REPRESEN TATIVE FOR THE ASSESSEE POINTED OUT THAT EVEN BEFORE THE CIT(A) SIMILAR POI NT HAS BEEN RAISED, BUT THE SAME HAS BEEN DISMISSED INSPITE OF THE FACT THAT TH E ASSESSING OFFICER COULD NOT PRODUCE ANY EVIDENCE TO DEMONSTRATE THAT THE RE ASONS RECORDED WERE FURNISHED TO THE ASSESSEE. IN THIS CONTEXT, THE LD .REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE REMAND REPORT OF THE ASSES SING OFFICER DATED 26/09/2016, ADDRESSED TO THE CIT(A), WHEREIN ALTHOU GH IT IS ASSERTED THAT THE REASONS HAVE BEEN FURNISHED TO THE ASSESSEE VIDE LE TTER DATED 01/08/2014, BUT THERE WAS NO PROOF OF SERVICE ON THE ASSESSEE. THE LD.REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE ABSENCE OF ANY EVIDENCE OF THE REASONS HAVING BEEN FURNISHED TO THE ASSESSEE, THE CIT(A) O UGHT TO HAVE HELD THAT THE REASONS HAVE NOT BEEN FURNISHED AND, THEREFORE, THE ASSESSMENT OUGHT TO HAVE BEEN TREATED AS BAD IN LAW. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED OUT THAT THE CIT(A) NOTICED THAT ONLY ONE COMMUNICATION WAS ADDRESSED BY THE ASSESSEE ASKING FOR THE SUPPLY OF REASONS AND AFTER THAT ASSESSEE HAS CO- OPERATED IN THE ASSESSMENT AND, THEREFORE, THERE IS NO FAULT IN THE PROCEEDINGS. THE LD. DEPARTMENTAL REPRESENTATIVE A LSO POINTED OUT THAT SINCE SUCH AN OBJECTION WAS NOT RAISED TILL COMPLET ION OF THE ASSESSMENT AND 5 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) HAVING REGARD TO THE PROVISIONS OF SECTION 292BB OF THE ACT, THE SAME WOULD NOT INVALIDATE THE ASSESSMENT. 7. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. IN SO FAR AS THE POINT OF LAW RAISED BY THE ASSESSEE IS CONCERNED, IT IS W ELL SETTLED THAT THE REQUIREMENTS CONTAINED IN SECTION 147/148 OF THE AC T OF RECORDING OF REASONS AND FURNISHING OF REASONS TO THE ASSESSEE HAVE TO B E STRICTLY COMPLIED WITH. IN THE CASE OF TREND ELECTRONICS (SUPRA), THE HON'B LE BOMBAY HIGH COURT HELD THAT THE FAILURE TO FURNISH REASONS RECORDED, WHEN SOUGHT BY THE ASSESSEE WOULD INVALIDATE THE REASSESSMENT. IN THIS CONT EXT, THE HON'BLE BOMBAY HIGH COURT FOLLOWED ITS EARLIER DECISION IN THE CAS E OF VIDESH SANCHAR NIGAM LTD. (SUPRA) AND HELD THAT AN ORDER PASSED IN REASS ESSMENT PROCEEDINGS IS BAD IN LAW IN CASE THE REASONS RECORDED FOR REOPENIN G OF THE ASSESSMENT SOUGHT BY THE ASSESSEE HAVE NOT BEEN FURNISHED. THE FOLLO WING DISCUSSION IN THE ORDER OF THE HON'BLE BOMBAY HIGH COURT IS RELEVANT: - THESE RECORDED REASONS AS LAID DOWN BY THE APEX COU RT MUST BE FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR SO AS TO ENABLE THE ASSESS EE TO OBJECT TO THE SAME BEFORE THE ASSESSING OFFICER. THUS IN THE ABSENCE OF REASO NS BEING FURNISHED, WHEN SOUGHT FOR WOULD MAKE AN ORDER PASSED ON REASSESSMENT BAD IN LAW. THE RECORDING OF REASONS (WHICH HAS BEEN DONE IN THIS CASE) AND FURN ISHING OF THE SAME HAS TO BE STRICTLY COMPLIED WITH AS IT IS A JURISDICTIONAL IS SUE. THIS REQUIREMENT IS VERY SALUTARY AS IT NOT ONLY ENSURES REOPENING NOTICES ARE NOT LI GHTLY ISSUED. BESIDES IN CASE THE SAME HAVE BEEN ISSUED ON SOME MISUNDERSTANDING/ MIS CONCEPTION, THE ASSESSEE IS GIVEN AN OPPORTUNITY TO POINT OUT THAT THE REASONS TO BELIEVE AS RECORDED IN THE REASONS DO NOT WARRANT REOPENING BEFORE THE REASSES SMENT PROCEEDINGS ARE COMMENCED. THE ASSESSING OFFICER DISPOSES OF THESE OBJECTIONS AND IF SATISFIED WITH THE OBJECTIONS, THEN THE IMPUGNED REOPENING NOTICE UNDER SECTION 148 OF THE ACT IS DROPPED/WITHDRAWN OTHERWISE IT IS PROCEEDED WITH FU RTHER. IN ISSUES SUCH AS THIS, I.E. WHERE JURISDICTIONAL ISSUE IS INVOLVED THE SAM E MUST BE STRICTLY COMPLIED WITH BY THE AUTHORITY CONCERNED AND NO QUESTION OF KNOWLEDG E BEING ATTRIBUTED ON THE BASIS OF IMPLICATION CAN ARISE. WE ALSO DO NOT APPR ECIATE THE STAND OF THE REVENUE, THAT THE RESPONDENT-ASSESSEE HAD ASKED FOR REASONS RECORDED ONLY ONCE AND THEREFORE SEEKING TO JUSTIFY NON-FURNISHING OF REAS ONS. WE EXPECT THE STATE TO ACT MORE RESPONSIBLY. 6 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) 7.1 IN VIEW OF THE AFORESAID LEGAL POSITION, I N THE FACTS OF THE PRESENT CASE, IT IS QUITE CLEAR THAT THERE IS NO PROOF OF SUPPLY OF REASONS TO THE ASSESSEE. IN FACT, THE FOLLOWING PORTION OF THE REMAND REPORT TO THE CIT(A) IS RELEVANT, WHICH READS AS UNDER:- 3. IN THIS REGARD, THIS IS TO SUBMIT THAT A LETTER SENDING THE REASONS TO THE ASSESSEE ON 1/8/2014 IS ON RECORD (COPY ENCLOSED) BY ERSTWHI LE ITO 14(1)(2), MUMBAI, HOWEVER, NO ACKNOWLEDGEMENT IS ON RECORD. FOR OBTA INING THE ACKNOWLEDGEMENT OF THE SERVICE OF THE REASONS, THE UNDERSIGNED HAS WRITTEN A LETTER DATED 15/9/2016 TO THE PRESENT ITO18(1)(2) (ERSTWHILE ITO14(1)(2). A COPY OF THE ACKNOWLEDGEMENT WILL BE FORWARDED TO YOUR HONOUR AS AND WHEN THE SA ME IS RECEIVED FROM THE OFFICE OF THE ITO18(1)(2). 4. HOWEVER, IT IS ALSO NOTICED THAT DURING THE COUR SE OF THE ASSESSMENT PROCEEDINGS BEFORE THE UNDERSIGNED, NEITHER THE ASSESSEE NOR TH E A.R STATED ABOUT NON RECEIPT OF THE REASONS. ALSO, THE ASSESSEE DID NEVER RAISE ANY OBJECTION TILL THE COMPLETION OF THE ASSESSMENT ORDER. IN THIS REGARD RELIANCE I S PLACED ON THE PROVISIONS OF SECTION 292BB OF THE INCOME TAX ACT,1961. THE REPORT OF THE ASSESSING OFFICER IS QUITE CLEAR THAT IT ACKNOWLEDGES THAT THERE IS NO PROOF OF SERVICE OF FURNISHING OF REASO NS TO THE ASSESSEE. APART THEREFROM, THE LD.REPRESENTATIVE FOR THE ASSESSEE A LSO REFERRED TO REPLY RECEIVED FROM THE DEPARTMENT TO AN INFORMATION SOUG HT UNDER THE RIGHT TO INFORMATION ACT, 2005 DATED 04/05/2017, WHICH IS AS UNDER:- THE APPLICANT, SMT. MANJU PRAVINCHAND JAIN HAS MA DE REQUEST U/S. 6(1) OF THE RIGHT TO INFORMATION ACT, 2005 (HEREINAFTER REFERRE D TO AS 'THE ACT') VIDE APPLICATION FILED ON 10.04.2015 & RECEIVED IN THIS OFFICE ON 13 .04,2017 UPON TRANSFER OF THE SAME BY THE ITO-WD-18(2)(3), MUMBAI SEEKING THE FOL LOWING INFORMATION: 'EXTRACT OF THE DISPATCH REGISTER REFLECTING THE NU MBER AND THE DATE OF DISPATCH OF THE LETTER DATED 01.08.2014 ALONG WITH THE DETAILS OF THE DISPATCH OF THE COPY OF THE REASONS RECORDED FOR REOPENING THE CASE, CLAIMED AS SERVED/ COMMUNICATED TO THE ASSESSEE'. 2. THE REQUEST OF THE APPLICANT IS CONSIDERED CAREF ULLY., THE INFORMATION SOUGHT BY THE APPLICANT IS AS UNDER:- 7 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) 'THE REQUISITE DOCUMENT IS VERY OLD ONE AND THE SAM E COULD NOT BE TRACEABLE DESPITE UTMOST EFFORTS. HOWEVER, EFFORTS ARE BEING MADE TO TRACE OUT THE REQUISITE DOCUMENT AND THE SAME WILL BE PROVIDED AS SOON AS I T BECOMES AVAILABLE.' THE AFORESAID REPLY OF THE DEPARTMENT ALSO CLEARLY POINT OUT THAT THERE IS NO PROOF OF THE REASONS HAVING BEEN FURNISHED TO THE A SSESSEE. QUITE CLEARLY THE ASSESSEE IN THE PRESENT CASE HAD SOUGHT FOR THE REA SONS RECORDED AND THERE IS NO MATERIAL ON RECORD TO SAY THAT THE SAME HAVE BEE N FURNISHED TO HIM BEFORE COMPLETION OF ASSESSMENT. THEREFORE, FOLLOW ING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT REFERRED ABOVE, THE IMPU GNED ASSESSMENT IS HELD TO BE BAD IN LAW. 7.2 IN SO FAR AS THE PLEA OF THE LD. DEPARTMENTAL R EPRESENTATIVE BASED ON THE PROVISIONS OF SECTION 292BB OF THE ACT IS CONCE RNED, THE SAME IN MY VIEW, IS OF NO CONSEQUENCE AS IT IS INSERTED BY THE FINAN CE ACT, 2008 W.E.F 01/04/2008 AND IS, THEREFORE, PROSPECTIVE IN OPERAT ION, AND IS THUS, NOT APPLICABLE FOR THE INSTANT PROCEEDINGS. 7.3 THUS, IN VIEW OF THE AFORESAID DISCUSSION, THE IMPUGNED REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 143(3) R.W.S. 147 OF THE ACT IS BAD IN LAW AND IS HEREBY QUASHED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23/08/2017 . SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 23/08/2017 VM , SR. PS 8 ITA NO.7337/MUM/2016 ( ASSESSMENT YEAR 2007-08) 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI