MILAN MAHENDRA SECURITIES P. LTD, MUMBAI V. ITO 4(3)(3), MUMBAI

ITA 763/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0760 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGAR ZAIN V P
• Keywords: Invalid notice; Principle of natural justice
• Section: 143(3); 142(1); 148; 144

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.6880/MUM/2012 ASSESSMENT YEAR: 2003-04 MILAN MAHENDRA SECURITIES PVT. LTD. 407, PROSPECT CHAMBERS, 317, D.N. ROAD, FORT, MUMBAI-400001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX-4(3), AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO. AABCM0778P ITA NO.763/MUM/2013 ASSESSMENT YEAR: 2009-10 MILAN MAHENDRA SECURITIES PVT. LTD. 407, PROSPECT CHAMBERS, 317, D.N. ROAD, FORT, MUMBAI-400001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX-4(3), AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO.AABCM0778P !' # / ASSESSEE BY SHRI NEELKANTH KHANDELWAL $ / REVENUE BY SHRI ASGAR ZAIN, V.P. DR $& ' # ( / DATE OF HEARING : 10/07/2015 ' # ( / DATE OF ORDER: 02/09/2015 MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEALS ARE BY THE ASSESSEE, DIRECTED AGAINST THE IMPUGNED ORDERS DATED 03/09/2012 AND 01/01/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, FOR ASSESSMENT YEARS 2003-04 AND 2009-10. 2. FIRST, WE SHALL TAKE UP THE ADDITION GROUND RAI SED BY THE ASSESSEE, WHEREIN, THE ASSESSEE HAS CHALLENG ED THE LEGALITY OF ISSUANCE OF NOTICE U/S 148 OF THE ACT, PENDING NOTICE ISSUED U/S 142(1) OF THE ACT AND ALSO ON MER IT, COMPUTING CAPITAL GAINS ON SALE OF SHARES AND NOT A LLOWING SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF EARLIER YEARS, ETC. THE LD. COUNSEL FOR THE ASSESSEE, SHRI NEELKANTH KHANDELWAL, CONTENDED THAT ISSUANCE OF NOTICE U/S 1 48 OF THE ACT AND THEREAFTER FRAMING U/S 143(3) R.W.S 147 OF THE ACT IS CONTRARY TO THE LAW, MORE SPECIFICALLY, WHEN NOTICES U/S 142(1) OF THE ACT AND HAD ALREADY BEEN ISSUED A ND THE ASSESSMENT WAS IN PROGRESS. IT WAS ALSO CONTENDED THAT NOTICE U/S 148 OUGHT NOT TO HAVE BEEN ISSUED AS EVE N THE TIME LIMIT TO COMPLETE THE BEST JUDGMENT ASSESSMENT U/S 144 HAD NOT ELAPSED. ON THE OTHER HAND, SHRI ASGAR ZAIN, V.P. LD. DR, DEFENDED THE IMPUGNED ORDER BY CONTEND ING THAT ASSESSING OFFICER WAS WITHIN HIS POWER TO ISSU E NOTICE U/S 147 OF THE ACT. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A MEMBER OF BSE, ACQUIRED MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 3 MEMBERSHIP RIGHT ON OR BEFORE 31 ST DECEMBER, 1997. THERE WAS INFORMATION RECEIVED BY THE DDIT (INVESTIGATION ) THAT THE ASSESSEE RECEIVED LONG TERM CAPITAL GAINS OF RS .2.21 CRORES, ON SALE OF SHARES OF BSE LTD. THE ASSESSING OFFICER FOUND FROM THIS SYSTEM THAT THE ASSESSEE HAS NOT FI LED ITS RETURN OF INCOME, THEREFORE, HE ISSUED NOTICE U/S 1 42(1) OF THE ACT DATED 16/11/2010 TO THE ASSESSEE. IN RESPON SE TO NOTICE DATED 09/11/2011, THE ASSESSEE FILED RETURN OF INCOME ON 15/11/2011, DECLARING NIL INCOME, HOWEVER , THE ASSESSING OFFICER DID NOT ALLOW SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF EARLIER YEARS AGAINST CAPITAL GAIN S. HOWEVER, WITHOUT GOING INTO MUCH DELIBERATION, THE ONLY LEGAL ISSUE IS TO BE DECIDED WHETHER NOTICE U/S 148 , (WHICH WAS ISSUED ON 25/03/2011) IS A VALID NOTICE WHEN PROCEEDINGS U/S 142(1) WERE STILL PENDING. UNCONTROVERTEDLY, NOTICE U/S 142(1) WAS ISSUED TO T HE ASSESSEE ON 16/11/2010 AND THERE IS NOTHING ON RECO RD TO SUGGEST THAT PROCEEDING SO INITIATED, THROUGH NOTIC E U/S 1421(1), WERE EITHER DROPPED OR CONCLUDED, THEREFOR E, ISSUANCE OF NOTICE U/S 148, DURING PENDENCY OF PROC EEDINGS U/S 142(1) OF THE ACT, ARE NOT VALID. OUR VIEW IS FORTIFIED BY THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF H. GOUTHAMCHAND VS ADDL. CIT (2010) 131 TTJ 204 (BANG.). THE RATIO LAID DOWN IN THE FOLLOWING CASE S SUPPORTS OUR VIEW:- I. BALAKRISHNAN V. GENERAL MANAGER, HINDUSTAN MACHINE TOOLS LTD. [2007] 208 CTR (KAR.) 337 : [2007] 290 IT R 227 (KAR.), MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 4 II. BHOLANATH R. SHUKLA V. ITO [2009] 122 TT] (MUMBAI) 332 : [2009] 21 DTR (MUMBAI)(TRIB) 270 : 28 ITCL 187 (MUM BAI), III. CIT V. BANSHIDHAR JALAN [1994] 120 CTR (CAL.) 401 : [1994] 207 ITR 488 (CAL.), IV. CIT V. BHAN TEXTILES (P.) LTD. [2007] 208 CTR (DELHI) 253 : [2006] 287 ITR 370 (DELHI), V. CIT V. BIDHU BHUSAN SARKAR [1967] 63 ITR 278 (SC), VI. CIT V. C. PALANIAPPAN [2006] 284 ITR 257 (MAD.), VII. CIT V. EQBAL SINGH SINDHANA [2007] 212 CTR (DELHI) 341 : [2008] 304 ITR 177 (DELHI), VIII. CIT V. KARNATAKA VIDYUTN KHARKHANE LTD. [2009] 313 ITR 345 (KAR.), IX. CIT V. LUNAR DIAMONDS LTD. [2005] 197 CTR (DELHI) 31 2 : [2006] 281 ITR 1 (DELHI), X. CIT V. M CHELLAPPAN [2005] 198 CTR (MAD.) 490 : [20 06] 281 ITR 444 (MAD.), XI. CIT. PAWAN GUPTA [2009] 223 CTR (DELHI) 487 : [2009] 22 DTR (DELHI) 291 : 28 ITCL 634 (DELHI), XII. CIT V. SATYA NARAIN KESHAV RAM (P.) LTD. 24 ITCL 4 86 (ALL.), XIII. CIT V. SOHAN LAL CHHAJAN MAL [2009] 222 CTR (P. & H .) 190 : [2008] 307 ITR 53 (P. & H.), XIV. CLT V . SOORAJMULL NAGARMALL [1981] 23 CTR (CAL.) 2 59 : [1983] 141 ITR 140 (CAL.), XV. CIT V. VAROAMAN ESTATE (P.) LTD. [2007] 208 CTR (DELHI ) 251 : [2006] 287 ITR 368 (DELHI), MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 5 XVI. CPR CAPITAL SERVICES LTD. V. DY. CIT [2008] 115 TTJ ( DELHI) 528 : [2008] 6 DTR (DELHI)(TRIB) 70 : 23 ITCL 28 (D ELHI), XVII. DY. CIT V. MAHI VALLEY HOTELS & RESORTS [2006] 201 CT R (GUJ.) 308 : [2006] 287 ITR 360 (GUJ.), XVIII. GINA ENTERPRISES VS. ASSTT. CIT (ITA NOS. 155 & 175/BANG/2007), XIX. HOTEL SURYA VS. ITO (ITA NOS.668 & 669/BANG/2001), XX. KUBER TOBACCO PRODUCTS (P.) LTD. VS. DY. CIT [2009] 1 20 TTJ (DELHI) 577 :[2009] 18 DTR (DELHI)(TRIB) 1 : 28 ITCL 86 (DELHI), XXI. LAND ACQUISITION OFFICER, CITB V. NARAYANAIAH K 2. K NT. L.J. 189, XXII. NRIPENDRA MISHRA V. ITO [2009] 121 TTJ (LUCKNOW) 70 1 : [2009] 19 DTR (LUCKNOW)(TRIB) 15 : 27 ITCL 185 (LUC KNOW) AND XXIII. SMT. NILOFER HAMEED V. ITO [1999] 152 CTR (KER.) 93 : [1999] 235 ITR 161 (KER.). 2.2. FURTHER, THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS M.P. SINGH (217 CTR 487) (PUNJAB & HARYANA) : (2008) 174 TAXAMAN 423 (P & H), WHICH IS ON IDENTICAL ISSUE, WHEREIN, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON THE PLEA THAT THERE WAS ESCAPEMENT OF I NCOME. THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE U/S 142(1) CALLING UPON HIM TO FURNISH RETURN OF INCOME . THE ASSESSEE BELATEDLY FILED THE RETURN, WHICH WAS TREA TED AS INVALID RETURN. THEREAFTER, THE ASSESSING OFFICER I SSUED NOTICE U/S 148 AND COMPLETED THE ASSESSMENT U/S 143 (3) R.W.S 147 OF THE ACT. THE ISSUE BEFORE THE HONBLE HIGH MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 6 COURT WAS WHETHER THE ASSESSING OFFICER WAS RIGHT I N ISSUING THE NOTICE U/S 148, WITHOUT FRAMING ASSESSMENT IN R ESPONSE TO EARLIER NOTICE ISSUED U/S 142(1) OF THE ACT. TH E HONBLE HIGH COURT HELD THAT THE LD. ASSESSING OFFICER WAS HAVING NO JURISDICTION. WHILE COMING TO THIS CONCLUSION, THE HONBLE COURT ALSO DISCUSSED THE DECISION FROM HONBLE DELH I HIGH COURT IN CASE OF KLM ROYAL DUTCH AIRLINES VS ASST. DIT (2007) 159 TAXMAN 191 AND ALSO DISCUSSED THE DECISI ON OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS CAPTAIN A.P. KAMAT (2003) 133 TAXMAN 71 (MUMBAI) (MAG). THE RATIO LAID DOWN IN PARIMISETTI SEETHARAMANMA VS. CIT (196 3) 50 ITR 450, 460 (AP), ON APPEAL (1965) 57 ITR 532 (SC), ADINARAYAN MURTHY VS CIT (1965) 56 ITR 574(AP), ON APPEAL (1967) 65 ITR 607(SC), AATMA RAM VS CIT (1960) 39 ITR 418 (PUNJAB), CIT VS SURENDRA KUMAR BHADANI, (1 987) 164 323 (PATNA), CIT VS JAIDEO JAIN & COMPANY (1997 ) 227 ITR 302 (RAJ.) SUPPORTS OUR VIEW. IN THE PRESENT A PPEAL, THE MACHINERY OF REASSESSMENT WAS ALREADY SET IN MOTION WITH THE ISSUANCE OF EARLIER NOTICE AND REASSESSMENT WAS NOT COMPLETED FOR WHATEVER REASON, THE STAND OF THE ASS ESSING OFFICER CANNOT BE ACCEPTED BECAUSE ISSUANCE OF SECO ND NOTICE U/S 148, IS A INVALID NOTICE/LACKS JURISDICT ION, CONSEQUENTLY, THE RE-ASSESSMENT SO FRAMED DESERVES TO BE QUASHED. 2.3. SINCE, WE HAVE DISPOSED OFF THE APPEAL ON THE LEGAL ISSUE, THEREFORE, WE ARE NOT GOING INTO THE M ERITS OF THE APPEAL. MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 7 3. NOW, WE SHALL TAKE UP ITA NO.6880/MUM/2012, WHEREIN, THE ONLY GROUND ARGUED BY THE ASSESSEE IS UPHOLDING THE DISALLOWANCE OF A SUM OF RS.5,22,52,8 32/-, BEING THE INTEREST ON BANK OVERDRAFT ACCOUNT ON THE GROUND THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE AS SESSEE DURING THE YEAR. THE LD. COUNSEL FOR THE ASSESSEE, CONTENDED THAT AN EX-PARTY ORDER HAS BEEN PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS THE ASSESSE E DID NOT RECEIVE THE NOTICE AND ON 20/12/2011 FILE ADJOU RNMENT ON THE GROUND OF AILMENT. ON 21/03/2012, AGAIN DUE TO AILMENT, EVEN ADJOURNMENT COULD NOT BE FILED AND ON 24/04/2012, THE ASSESSEE HAD ALREADY GONE FOR VACAT ION, THUS, COULD NOT ATTEND THE CASE. ON THE OTHER HAND , THE LD. DR, CONTENDED THAT IN SPITE OF PROVIDING SUFFICIENT OPPORTUNITY, THE ASSESSEE DID NOT ATTEND THE PROCEE DINGS. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WITHOUT G OING INTO MERITS OF THE APPEAL AND KEEPING IN VIEW, THE PRINC IPLE OF NATURAL JUSTICE, WE ARE OF THE VIEW, THAT NO PERSON SHOULD BE CONDEMNED UNHEARD. EVEN OTHERWISE, FOR THE LAXITY, IF ANY, ON THE PART OF THE CHARTERED ACCOUNTANT, THE ASSESS EE SHOULD NOT SUFFER. THUS, WE REMAND THIS APPEAL TO T HE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO DIS POSE OFF THE APPEAL ON MERIT. THE ASSESSEE BE GIVEN OPPORTU NITY OF BEING HEARD. THE ASSESSEE IS ALSO WARNED TO REMAIN VIGILANT IN FUTURE AND ATTEND THE PROCEEDINGS ON THE DATE TO BE FIXED BY THE OFFICE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IF THE ASSESSEE STILL REMAINS ABSENT, T HE LD. FIRST MILAN MAHENDRA SECURITIES PVT. LTD. ITA NO.6880/MUM/2012 & ITA NO.763/MUM/2013 8 APPELLATE AUTHORITY IS FREE TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE ONLY. FINALLY, THE APPEAL IN ITA NO.763/MUM/2013 IS ALLOWED AND ITA NO.6880/MUM/2012 IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 10/07/2015. SD/ - (B.R.BASKARAN) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & MUMBAI; ) DATED : 02/09/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0# ( *+ ) / THE CIT, MUMBAI. 4. 0# / CIT(A)- , MUMBAI 5. 2$3 .# , *+( * 4 , & / DR, ITAT, MUMBAI 6. 5! 6& / GUARD FILE. / BY ORDER, /2+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI