M/s. S.N. Bros.Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 741/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3580 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-07-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: TILAK CHANDNA
• Keywords: Business income; Principle of natural justice; Additional evidence; Reason to believe; Reassessment proceedings
• Section: 143(3); 234B; 69A; 139(1); 147; 68; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFOE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 741(DEL)2010 ASSESSMENT YEAR: 2001-02 M/S. S.N. BROS. PVT.LTD. INCOME TAX OFFICER, WZ-110, SHAKUR PUR VILLAGE. V. WARD 9(1), NEW DEL HI. DELHI-110034. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SAMPATH, ADV. & SHRI TILAK CHANDNA, CA RESPONDENT BY: SHRI MANISH GUPTA, SR. DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 001-02, TAKING THE FOLLOWING CONCISE GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE ORDER OF THE LEARNED ASSESSING OFFICER U/S 147/143(3) AND TH AT OF LD. COMMISSIONER OF INCOME TAX(APPEALS) DISMISSING THE APPEAL OF THE APPELLANT COMPANY ARE ARBITRARY, ERRONEOUS, AGAINST THE PRINCIPLES OF NATURAL JUSTICE, AGAINST THE PROVISIONS OF THE INCO ME TAX ACT, 1961 AND THUS ARE BAD IN LAW AND ILLEGAL. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER AND LEARNED CIT(A) HAD ERRED ON F ACTS AND IN LAW BECAUSE: ITA 741(DEL)2010 2 I) LEARNED AO, WARD 9(1), NEW DELHI DID NOT HAVE JURIS DICTION TO ASSESS OR REASSESS THE APPELLANT COMPANY AS IT WAS AO, WARD 7(1) WITH WHOM RETURNS HAVE BEEN FILED FOR THE CURR ENT, PREVIOUS AND SUBSEQUENT ASSESSMENT YEARS AND WHO HA S JURISDICTION OVER THE APPELLANT COMPANY AND WHO HAD ASSESSED THE APPELLANT COMPANY U/S 143(3) FOR THE ASSESSMENT YEAR 2001- 02, WHICH IS THE ASSESSMENT YEAR UNDER LITIGATION. II) WITHOUT PREJUDICE TO THE PLEA THAT AO, WARD 9(1) WA S NOT VESTED WITH JURISDICTION ON THE APPELLANT COMPANY, CONSIDERING A VALID AND LEGAL ORDER U/.S 143(3) OF THE ACT SUBS ISTED IN THE CASE OF THE APPELLANT COMPANY FOR THE YEAR IN QUEST ION, ACTION U/S 147 TAKEN AFTER LAPSE OF FOUR YEARS FROM THE EN D OF RELEVANT ASSESSMENT YEAR WAS BARRED BY LIMITATION IN VIEW O F THE FIRST PROVISO TO SECTION 147 AS IT HAS NOT BEEN A CASE OF THE AO EITHER IN THE REASONS OF REOPENING OR THE ASSESSMENT PROCE EDINGS OR ORDER PASSED U/S 144/147 OF THE ACT THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. OTHER CONDITIONS IN WHICH THE PRO VISO PERMITS THE REOPENING AND REASSESSMENT BEYOND FOUR YEARS DO NOT APPLY IN THE CASE. III) AS CAN BE DISCERNED FROM THE REASONS RECORDED U/S 1 48(2), THE LD. AO, WARD 9(1) HAD NO VALID AND LEGALLY SUSTAINA BLE REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT, A CONDITION PRECEDENT TO ASSUME JURISDI CTION U/S 147. THE REASONS RECORDED ARE VAGUE, NON SPECIFIC AND NOT RELEVANT TO ARRIVE AT REASON TO BELIEVE. TO CONST ITUTE VALID REASONS TO BELIEVE U/S 147, THE BELIEF HAS TO BE TH AT OF THE AO HIMSELF AND NOT BORROWED BELIEF FROM OTHER WING OR AGENCY AND AO WAS DUTY BOUND TO SHOW APPLICATION OF MIND TO TH E INFORMATION SO RECEIVED OR PRESENCE OF SOME COGENT MATERIAL JUSTIFYING REASONS TO BELIEVE. IV) AS CAN BE DISCERNED AND MADE OUT FROM THE RECORDS A ND THE REASON RECORDED, THERE HAS NOT BEEN A VALID SANCTIO N FOR ISSUE OF NOTICE U/S 151, THE SAME BEING ACCORDED IN A MEC HANICAL ITA 741(DEL)2010 3 MANNER AND ON INCOMPLETE, INCORRECT AND WRONG FACTS PARTICULARLY OF PREVIOUS ASSESSMENT DETAILS OF THE APPELLANT COMPANY. V) NO SERVICE OF NOTICE U/S 148 HAS TAKEN PLACE IN THE CASE, MUCH LESS A LEGALLY VALID AND EFFECTIVE SERVICE, A CONDI TION PRECEDENT AND MANDATORY BEFORE MAKING THE ASSESSMENT OR REASS ESSMENT UNDER SEC. 147. VI) ASSESSMENT U/S 147 HAS BEEN MADE SOLELY AT INCOME A LLEGED TO HAVE ESCAPED ASSESSMENT IGNORING BUSINESS INCOME/LO SS, DULY ASSESSED U/S 143(3) OF THE ACT OF THE APPELLANT COM PANY FROM THE BUSINESS OPERATIONS DESPITE THIS FACT AND ALL N ECESSARY FACTS BROUGHT ON RECORD BEFORE LD. CIT(A). WITHOUT PREJ UDICE TO OUR PLEA OF ILLEGALITY OF THE PROCEEDINGS U/S 147 AND A SSESSMENT THERE-UNDER OF THE INCOME ALLEGED TO HAVE ESCAPED, TOTAL INCOME IN THE APPELLANT CASE CAN ONLY BE INCOME ORI GINALLY ASSESSED U/S 143(3) AND INCOME ESCAPING ASSESSMENT AND NOW BEING ASSESSED TO TAX. VII) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AMOUNT OF SHARE CAPITAL RECEIVED BY THE COMPANY AMOUNTING TO RS.14, 15,000.00 CANNOT BE ASSESSED TO INCOME EITHER U/S 68 OR SECTI ON 69A AS THE APPELLANT COMPANY HAS DISCHARGED ONUS AND BURDE N PLACED ON IT UNDER THESE PROVISIONS BY PROVIDING CONFIRMAT ION, AFFIDAVITS, ASSESSMENT DETAILS, COPY OF SHARE APPLI CATION, BANK STATEMENTS OF THE INVESTORS. AS AGAINST THIS, NEI THER LD. AO NOT CIT(A) APPEAL COULD BRING ON RECORDS ANY MATERIAL A GAINST THE APPELLANT COMPANY WHICH CAN SUGGEST THAT THE ADDITI ON IS LIABLE TO BE MADE UNDER THE PROVISIONS OF THE ACT. VIII) THE APPEAL HAS BEEN DISPOSED OF WITHOUT GRANTING A REQUEST AND PRAYERS MADE TO ALLOW CROSS EXAMINATION OF THE INVE STORS, CONFRONTING THE MATERIAL PROVIDED TO, GATHERED OR O THERWISE IN POSSESSION OF THE AO, IF ANY, AGAINST THE APPELLANT COMPANY WITH REGARD TO THESE INVESTMENTS PARTICULARLY THE S TATEMENTS OF THE INVESTORS DENYING THESE INVESTMENTS, ALLEGED TO BE IN RECORDS OF THE INVESTIGATION WING AND PERUSED BY TH E AO BEFORE INITIATING ACTION U/S 147, THE PROCEEDINGS OF THE I NVESTIGATION ITA 741(DEL)2010 4 WING AND REPORT OR DECISIONS THEREOF, ACTIONS TAKEN BY THE DEPARTMENT AGAINST THESE INVESTORS AND RESULTS THER EOF. IX) IT HAS RESULTED INTO A STRANGE AND UNSUSTAINABLE SI TUATION IN THE LAW WHERE TWO ORDERS FOR THE SAME ASSESSMENT EYAR A RE SUBSISTING; ONE U/S 143(3) AT AN ASSESSED LOSS OF R S. 32,26,324/- AND ANOTHER U/S 147 AT AN ASSESSED INCOME OF RS. 14 ,57,250/-. X) THERE WAS NO JUSTIFICATION FOR THE PROCEEDINGS U/S 144 OF THE ACT AGAINST THE APPELLANT COMPANY WHEN THERE WAS NO VA LID AND EFFECTIVE SERVICE OF NOTICE UPON IT OF THE PROCEEDI NGS U/S 143 READ WITH SECTION 147 AND THE BEST JUDGMENT ASSESSM ENT HAS BEEN MADE IN VIOLATION OF THE REQUIREMENTS OF SECTI ON 144. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT TAKING COGNIZANCE OF THE EVIDENCE AND DOCUMENTS PRODUCED BY THE APPELLANT CO MPANY BEFORE HER IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIO NS. THESE ARE DECLARED AS ADDITIONAL EVIDENCE NOT PERMISSIBLE U/S 46A. THE LD. CIT(A) WAS WRONG NOT TO TAKE COGNIZANCE OF THE EVID ENCE AND DOCUMENTS PRODUCED, WHICH SHE WAS DUTY BOUND BECAUS E (A) SHE HERSELF PROCEEDED IN THE COURSE OF APPELLATE PROCEE DINGS, TO EXAMINE THE ISSUE ON MERITS BY ASKING THE APPELLANT TO PROD UCE THE NECESSARY EVIDENCE AND DOCUMENTS (B) SUCH EVIDENCE AND DOCUME NTS WERE DULY ADMISSIBLE UNDER THE LAW FOR WHICH A PROPER AND LEG ALLY MAINTAINABLE AND ADMISSIBLE APPLICATION WAS MADE TO HER. THAT IT IS FACTUALLY INCORRECT ON THE PART OF LD. CIT(A) TO STATE THAT N O APPLICATION UNDER RULE 46A HAS BEEN MADE BEFORE HER. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT DISPOSI NG OF OR CONSIDERING GROUNDS OF APPEAL OR PLEAS RAISED RAISI NG SUBSTANTIAL QUESTIONS OF LAW AND FACTS BEFORE HER IN THE COURSE OF APPELLATE PROCEEDINGS, PARTICULARLY, (A) THAT PROCEEDINGS U/S 147 WERE BARRED BY LIMITATION UNDER PROVISO TO SECTION 147 (B) AO W ARD 9(1) HAD NO JURISDICTION TO MAKE ASSESSMENT OR REASSESSMENT (C) IN THE ABSENCE OF VACTION OF KVALID AND LEGAL ORDER U/S 143(3), NO AS SESSMENT OR REASSESSMENT U/S 147 COULD BE MADE OR THE LEAST CIT (A) COULD HAVE DONE, WHEN IT WAS DULY BROUGHT TO HER NOTICE, WAS T O TAKE NOTICE OF THE SAME AND DIRECT THE AO TO COMPUTE INCOME ACCORDINGL Y. ITA 741(DEL)2010 5 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT CONSIDE RING AT ALL THE BINDING JUDICIAL DECISIONS CITED BEFORE HER IN SUPP ORT OF THE GROUNDS OF APPEAL/PLEAS RAISED BEFORE HER, WHICH, IN LAW, S HE WAS DUTY BOUND TO CONSIDER AND FOLLOW HAVING REGARD TO PRINCIPLE O F RESPECTING JUDICIAL HIERARCHY AND DECORUM. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASES THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THA T IN THE ORIGINAL PROCEEDINGS U/S 143(3) THE ISSUE OF CAPITAL INVESTM ENT, UNDER DISPUTE, WAS NOT EXAMINED OR THE APPELLANT COMPANY DID NOT P RODUCE BOOKS OF ACCOUNT FOR EXAMINATION OF THE AO, WARD 7(1) WITH R EGARDS TO THESE JUDGMENTS OR OTHERWISE. 2. THE FIRST ISSUE RAISED IS REGARDING JURISDICTION OF THE AO. THE ASSESSEE SAYS THAT THE ITO, WARD 9(1), NEW DELHI, WHO HAS PASSED THE ASSESSMENT ORDER, DID NOT HAVE JURISDICTION OVER TH E ASSESSEE AND THAT THEREFORE, THE ASSESSMENT ORDER IS BAD IN LAW. 3. THIS ISSUE HAS NOT BEEN TAKEN UP BY THE ASSESSE E BEFORE THE CIT(A) IN THE GROUNDS OF APPEAL RAISED, WHICH READ AS FOLLOWS :- I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ASSESSMENT ORDER BOTH ON FACTS AND IN LAW, IS ILLEG AL, BAD, ERRONEOUS, UNJUST, ARBITRARY, AGAINST THE PRINCIPLES OF NATURA L JUSTICE, AGAINST FACTS ON RECORDS AND BASED ON SURMISES AND CONJECTU RES. II) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. AO HAS ERRED, BOTH ON FACTS AND IN LAW, IN INVOKING TH E PROVISIONS OF SECTION 147 OF THE ACT BASED ON AN ILLEGAL NOTICE U NDER SEC.148 OF THE ACT. ITA 741(DEL)2010 6 III) THAT IN VIEW OF SUBSISTENCE OF A VALID, LEGAL ASSESSMENT ORDER PASSES UNDER SEC. 143(3) OF THE ACT AFTER DUE PROCE SS OF LAW, BASED ON RECORDS AND REPRESENTATION BY THE COMPANY, SUBSEQUE NT ILLEGAL ORDER PASSED U/S 147/144 OF THE ACT HAS TO BE QUASHED AND OR ANNULLED AS THERE CANNOT BE TWO ASSESSMENT ORDERS IN THE CASE O F THE ASSESSEE FOR THE SAME ASSESSMENT ORDER. IV) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED BOTH ON FACTS AND IN LAW IN ASSESSING INC OME OF RS. 14,57,250.00 U/S 147/144 OF THE ACT. V) THAT THE LD. AO HAS ERRED BOTH ON FACTS AND IN LAW, ON LEVYING THE INTERST U/S 234B OF THE ACT. VI) THAT THE APPELLANT CRAVES YOUR HONOURS LEAVE TO ADD, ALTER, MODIFY, DELETE, CHANGE AND SUBSTITUTE ANY GROUNDS O F APPEAL AT ANY STAGE OF THE APPELLATE PROCEEDINGS. 4. THE STAND OF THE ASSESSEE IS THAT HOWEVER, THE I SSUE WAS RAISED BEFORE THE LD.CIT(A) IN THE WRITTEN SUBMISSIONS FILED. A TTENTION HAS BEEN DRAWN TO THE COPY OF THE SAID WRITTEN SUBMISSIONS FILED BEFO RE THE LD. CIT(A) AS CONTAINED AT PAGES 116 TO 122 OF THE ASSESSEES PAP ER BOOK. IT IS CONTENDED THAT THE ISSUE OF THE AOS JURISDICTION WAS THUS RA ISED BEFORE THE LD. CIT(A) IN THE WRITTEN SUBMISSIONS FILED, BUT THE LD. CIT(A ) FAILED TO ADJUDICATE THE SAME. AN AFFIDAVIT IN SUPPORT OF THIS CONTENTION HAS ALSO BEEN FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE. 5. THE LD. DR, PER CONTRA, HAS SUBMITTED THAT IN VI EW OF THE PROVISIONS OF SECTION 124(2) OF THE ACT, WHICH SECTION PROVIDES FOR A SEPARATE MACHINERY ITA 741(DEL)2010 7 FOR RESOLVING DISPUTES CONCERNING THE JURISDICTION OF THE AO, THIS ISSUE, AT THE OUTSET, DID NOT LIE BEFORE THE LD. CIT(A). 6. IN THIS REGARD, IT IS SEEN, THAT THOUGH THE ISSU E OF CHALLENGE TO THE JURISDICTION OF THE AO WAS NOT TAKEN UP BY THE ASSE SSEE IN THE GROUNDS OF APPEAL RAISED BEFORE THE LD. CIT(A), IT INDEED WAS TAKEN IN THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A). 7. THE THIRD PARA AT PAGE 117 OF THE ASSESSEES PAP ER BOOK, COMPRISING PART OF THE ASSESSEES WRITTEN SUBMISSIONS FILED BE FORE THE LD. CIT(A) READS AS UNDER:- THE LEARNED AO, COMPANY WARD 9(1), WHO HAS INITITE D THE ASSESSMENT/REASSESSMENT PROCEEDINGS U/S 147/148 AN D HAE PASSED ASSESSMENT/REASSESSMENT ORDER BOTH UNDER CHALLENGE BEFORE YOUR HONOUR, DID NOT HAVE A JURISDICTION ON THE APPELLAN T COMPANY AS THE JURISDICTION LAY WITH AO, COMPANY WARD 7(1) TO WHOM THE ORIGINAL RETURN U/S 139(1) WAS FILED AND WHO HAS MADE AN ASS ESSMENT ORDER U/S 143(3) OF THE ACT. THUS, INITIATION OF ASSESSMENT/ REASSESSMENT PROCEEDINGS, ISSUE OF NOTICE U/S 148 AND ASSESSMENT /REASSESSMENT ORDER PASSED U/S 147/144 ARE SANS JURISDICTION AND ILLEGAL. 8. THE ASSESSEE THUS DID TAKE UP BEFORE THE LD. CI T(A) THE CHALLENGE TO THE AOS JURISDICTION. HOWEVER, A PERUSAL OF THE O RDER UNDER APPEAL SHOWS THAT THIS ISSUE WAS NEITHER DISCUSSED, NOR DECIDED BY THE LD. CIT(A). 9. IN THE INTEREST OF JUSTICE, THEREFORE, WE REMIT THIS MATTER TO THE FILE OF THE LD. CIT(A), TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, IN THE LIGHT OF ITA 741(DEL)2010 8 THE DECISION TO BE TAKEN ON THE ISSUE OF JURISDICTI ON OF THE AO OVER THE ASSESSEE. 10. SINCE THE ISSUE OF JURISDICTION ITSELF STANDS R EMITTED TO THE LD. CIT(A) AS ABOVE, WE ARE NOT, AT THIS STAGE, ENTERING UPON THE OTHER GROUNDS RAISED BY THE ASSESSEE. 11. RESULTANTLY, FOR STATISTICAL PURPOSES, THE ASSE SSEES APPEAL IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.07.2010. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 16.07.2010 *RM COPY FORWARDED TO: 1. M/S. S.N. BROS. PVT.LTD. WZ-110, SHAKUR PUR VILLAGE. DELHI-110034. 2. ITO, WARD 9(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR