ORACLE FINANCIAL SERVICES SOFTWARE LTD ( FORMERLY KNOAWN AS I-FLEX SOLUTIONS LTD), MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 855/MUM/2013

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0284 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWUNGHI GIMSON
• Keywords: Depreciation; Question of law; Validity of assessment; Procedural lapse; Assessment record; Reassessment proceedings
• Section: 143(3); 143(2); 113; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.855/M/2013 ASSESSMENT YEAR: 2004-05 M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD., ORACLE PARK, OFF WESTERN EXPRESS HIGHWAY, GOREGAON (EAST) MUMBAI 400 063 PAN: AAACC1448B VS. DEPUTY COMMISSIONER OF INCOME TAX, RANGE-8(2), MUMBAI (APPELLANT) (RE SPONDENT) ITA NO.5455/M/2009 ASSESSMENT YEAR: 2004-05 DCIT, 8(2), R.NO.216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. I-FLEX SOLUTIONS LTD., (NOW KNOWN AS ORACLE FINANCIAL SOFTWARE SERVICES LTD., 10-11, SDF-1, SEEPZ ANDHERI (EAST), MUMBAI 400 096 PAN: AAACC1448B (APPELLANT) (RE SPONDENT) ITA NO.5496/M/2009 ASSESSMENT YEAR: 2004-05 ITA NO.920/M/2012 ASSESSMENT YEAR: 2004-05 M/S. ORACLE FINANCIAL SOFTWARE SERVICES LTD., (FORMERLY KNOWN AS I-FLEX SOLUTIONS LTD.), ORACLE PARK, OFF WESTERN EXPRESS HIGHWAY, GOREGAON (EAST) MUM BAI 400 063 PAN: AAACC1448B VS. DEPUTY COMMISSIONER OF INCOME TAX, RANGE - 8(2), MUMBAI (APPELLANT) (RE SPONDENT) ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 2 PRESENT FOR: ASSESSEE BY : SHRI KAMAL SAWHNEY, A.R. SHRI ABHISHEK TILAK, A.R. REVENUE BY : SHRI AWUNGHI GIMSON, D.R. DATE OF HEARING : 25.09.2019 DATE OF PRONOUNCEMENT : 17.12.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS THREE BY THE ASSESS EE AND ONE BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDERS DATED 22.11.2011, 11.10.2012 AND 21.07.2009 OF THE COMM ISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2004-05. ITA NO.920/M/2012 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT HOLDING THAT THE NOTICE UNDER S ECTION 148 OF THE ACT WAS INVALID AND BAD IN LAW. 2. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO OF REASSESSING THE INCOME UNDER SECTION 147 OF THE ACT. 3. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED AO'S ACTION O F WITHDRAWAL OF DEDUCTION FOR DEPRECIATION OF RS. 10,500,000/-. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS WHI CH ARE AS UNDER: - 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W. S. 147 OF THE INCOME TAX ACT, 1961 (ACT) DATED 31 DECEMBER 2009 IS BAD I N LAW AND VOID AB INITIO SINCE STATUTORY NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT ISSUED/SERVED UPON THE APPELLANT. ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 3 3. WE WOULD LIKE TO ADJUDICATE FIRST THE LEGAL ISSU E RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND VIDE LETTE R DATED 08.12.2017. AS IS APPARENT FROM THE ABOVE, THE LEG AL ISSUE RELATES TO NON ISSUANCE AND NON SERVICE OF STATUTOR Y NOTICE UNDER SECTION 143(2) OF THE ACT AND CONSEQUENTLY TH E ASSESSEE HAS CHALLENGED THE VALIDITY OF ASSESSMENT ORDER PAS SED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT DAT ED 31.12.2009. 4. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT THE ADDITIONAL GROUND BEING RAISED BEFORE THE HON'BLE F ORUM IS PURELY A JURISDICTIONAL AND LEGAL ISSUE AND GOES TO THE ROOT OF THE MATTER AND WOULD BE ESSENTIAL FOR JUDICIOUS DISPOSA L OF THE APPEALS. THE LD. A.R. PRAYED BEFORE THE BENCH THAT THE POWERS AS PROVIDED IN RULE 11 OF ITAT RULES MAY KINDLY BE EXERCISED AND THE GROUNDS RAISED MAY KINDLY BE ADMITTED. THE LD. A.R. STATED THAT THOUGH THE GROUND WAS NOT RAISED BEFORE THE AUTHORITIES BELOW AND IS BEING RAISED FOR THE FIRST TIME BEFORE THIS HONBLE FORUM, HOWEVER, THE NON RAISING OF GROUND W AS NEITHER DELIBERATE NOR CONTUMACIOUS BUT ARISING OUT OF LEGA L POSITION WHICH HAS COME TO THE NOTICE OF THE ASSESSEE ONLY R ECENTLY AND THEREFORE THE SAME HAS BEEN FILED IMMEDIATELY BEFOR E THIS HONBLE FORUM. IN DEFENCE OF HIS ARGUMENTS, THE LD . A.R. RELIED ON THE FOLLOWING DECISIONS: 1. JUTE CORPORATION OF INDIA VS. CIT 187 ITR 688 ( SC) 2. NATIONAL POWER THERMAL CORPORATION LTD. VS. CIT (1998) 220 ITR 383 (SC) 3. CIT VS. PRITHVI BROKERS AND SHAREHOLDER (2012) 3 49 ITR 336 (BOMBAY) THE LD. A.R. FINALLY PRAYED THAT IN VIEW OF THE RAT IO LAID DOWN IN THE ABOVE DECISIONS THE ADDITIONAL GROUND R AISED BY THE ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 4 ASSESSEE MAY KINDLY BE ADMITTED FOR THE PROPER DISP ENSATION OF THE SUBSTANTIAL JUSTICE. 5. THE LD. D.R., ON THE OTHER HAND, OPPOSED STRONGL Y THE ADDITIONAL GROUND FILED BY THE ASSESSEE BY SUBMITTI NG THAT THE SAID GROUND WAS NEVER RAISED BEFORE THE AUTHORITIES BELOW OR IN THE MEMORANDUM OF APPEAL FILED BEFORE THE ITAT AND THEREFORE THE SAME MAY KINDLY BE DISMISSED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE LEGAL ISSUE RAISED IS I N RESPECT OF NON ISSUANCE AND NON SERVICE OF NOTICE UNDER SECTION 14 3(2) OF THE ACT IS PURELY A JURISDICTIONAL AND LEGAL ISSUE AND GOES TO THE ROOT OF THE MATTER AND THEREFORE, WE ARE INCLINED TO ADM IT THE SAME FOR ADJUDICATION. THE CASE OF THE ASSESSEE IS ALSO SUPPORTED BY THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA VS. CIT (SUPRA), NATIONAL POWER THERMAL CORPORATION LTD. VS. CIT (SUPRA) AND CIT VS . PRITHVI BROKERS AND SHAREHOLDER (SUPRA) AND ACCORDINGLY THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS HEREBY ADMITTED. 7. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT THE MANDATORY STATUTORY NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT ISSUED AND NOT SERVED UPON THE ASSESSEE. THE L D. A.R. SUBMITTED BEFORE THE BENCH THAT WHILE REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT THE AO HAS FAILED TO I SSUE THE NOTICE UNDER SECTION 143(2) OF THE ACT. THE LD. A. R. SUBMITTED THAT IN ABSENCE OF NON ISSUANCE OF STATUTORY NOTICE , THE AO CAN NOT PROCEED TO COMPUTE THE INCOME IN THE REASSESSME NT PROCEEDINGS. THE LD. A.R. SUBMITTED THAT THE ORDER PASSED ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 5 UNDER SECTION 143(3) READ WITH SECTION 147 OF THE A CT IS THEREFORE WITHOUT JURISDICTION AND IS BAD IN LAW AS THE REV ENUE HAS NOT COMPLIED WITH THE MANDATORY ISSUANCE OF NOTICE UNDE R SECTION 143(2) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE SAID LAPSE ON THE PART OF THE AO IS NOT A PROCEDURAL IRREGULARITY AND IS NOT CURABLE AS THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CAN NOT BE DISPENSED WITH. THE LD. A.R. SUBMITTED THAT THE NON ISSUANCE OF NOTICE UNDER SECTION 143(2) GOES TO THE ROOT OF THE ASSESSMENT AND IS NOT A PROCEDURAL DEFECT BUT RENDE RS THE ENTIRE ASSESSMENT AS NULLITY IN THE EYES OF LAW. IN DEFEN CE OF HIS ARGUMENT THE LD. A.R. RELIED ON THE FOLLOWING JUDIC IAL DECISIONS: 1. CIT VS LAXMAN DAS KHANDELWAL (2019) 108 TAXMAN N.COM 183(SC) 2. ACIT V. HOTEL BLUE MOON: [2010] 188 TAXMAN 113 ( SC) 3. ACIT V. GENO PHARMACEUTICALS LTD.: [2013] 32 TAX MANN.COM 162 (BOMBAY) 4. PCIT V. SILVER LINE: [2016] 65 TAXMANN.COM 137 ( DELHI) 5. AJAYSINGH GAJANANSINGH GOUR V. ITO: ITA NO.398/N AG./2017 (NAGPUR- TRIB) 8. THE LD. A.R., THEREFORE PRAYED BEFORE THE BENCH THAT THE ASSESSMENT SO FRAMED BY THE AO UNDER SECTION 143 RE AD WITH SECTION 147 DATED 31.12.2009 BE QUASHED AS INVALID AND WITHOUT JURISDICTION AS THE SAME SUFFERS FROM THE INCURABLE DEFECTS OF NON ISSUANCE AND NON SERVICE OF NOTICE UNDER SECTIO N 143(2) OF THE ACT. 9. THE LD. D.R. SUBMITTED BEFORE THE BENCH THAT ON 10.01.2019 THE REVENUE WAS DIRECTED BY THE BENCH TO ENSURE THE PRESENCE OF AO WITH THE ASSESSMENT RECORDS SO THAT THE FACT COULD BE ASCERTAINED FROM THE RECORD WHETHER THE NO TICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED OR NOT. ACCOR DINGLY, THE CASE WAS POSTED FOR HEARING ON 25.02.2019 AND THERE AFTER THE CASE WAS ADJOURNED ON SEVERAL OCCASIONS. THE LD. D .R. ON ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 6 25.09.19 INFORMED THE BENCH THAT THOUGH THE ASSESSM ENT RECORDS WERE NOT AVAILABLE WITH THE AO AND THEREFOR E THE SAME COULD NOT BE PRODUCED. HOWEVER, THE LD. D.R. SUBMI TTED THAT THE FACT IS MENTIONED IN THE ASSESSMENT ORDER ITSEL F THAT NOTICE UNDER SECTION 143(2) DATED 06.07.2007 WAS SERVED UP ON THE ASSESSEE ON 06.07.2007. THE LD. D.R. SUBMITTED THA T SINCE THE FACT STANDS MENTIONED IN THE ASSESSMENT ORDER THERE FORE IT CAN BE REASONABLY PRESUMED THAT THE SAID NOTICE WAS ISS UED AND SERVED UPON THE ASSESSEE. THE LD. D.R. AGAIN REITE RATED HIS INABILITY TO PRODUCE THE ASSESSMENT RECORD BEFORE T HE BENCH AND THEREFORE, THE LD. D.R. LEFT THE ISSUE TO THE WISDO M OF THE BENCH BY PLACING THESE FACTS BEFORE THE BENCH. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IM PUGNED ORDER. WE OBSERVE FROM THE FACTS BEFORE US AND THE RIVAL SUBMISSIONS MADE BEFORE US THAT THERE IS CONTROVER SY AS TO NON ISSUANCE AND NON SERVICE OF NOTICE UNDER SECTION 14 3(2) OF THE ACT IN THE REASSESSMENT PROCEEDINGS. IN ORDER TO VE RIFY THE FACT WHETHER THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED OR NOT, ON 10.01.2019 THE LD DR WAS ASKED TO ENSURE TH E PRESENCE OF THE AO ALONG WITH THE ASSESSMENT RECORDS. ACCOR DINGLY, THE CASE WAS POSTED FOR HEARING ON 25.02.2019 AND THERE AFTER THE CASE WAS ADJOURNED ON SEVERAL OCCASIONS. THE LD. D .R. ON 25.09.19 INFORMED THE BENCH THAT THOUGH THE ASSESSM ENT RECORDS WERE NOT AVAILABLE WITH THE AO AND THEREFOR E THE SAME COULD NOT BE PRODUCED, HOWEVER, THE LD. D.R. SUBMIT TED THAT THE FACT IS MENTIONED IN THE ASSESSMENT ORDER ITSELF TH AT NOTICE UNDER SECTION 143(2) DATED 06.07.2007 WAS SERVED UP ON THE ASSESSEE ON 06.07.2007. SINCE THE REVENUE HAS FAILED TO ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 7 PRODUCE THE ASSESSMENT RECORDS DESPITE GRANTING SEV ERAL OPPORTUNITIES , WE ARE LEFT WITH NO ALTERNATIVE BUT TO TAKE AN ADVERSE INFERENCE AGAINST THE REVENUE THAT NO NOTIC E WAS EVER ISSUED OR SERVED UPON THE ASSESSEE. IN THIS BACKGR OUND OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSMENT SO FRAMED BY THE AO WITHOUT ISSUING NOTICE UNDER SECTION 143( 2) IS INVALID AND LIABLE TO BE QUASHED. ACCORDINGLY, WE HOLD THA T THE ASSESSMENT FRAMED BY THE AO UNDER SECTION 143(3) RE AD WITH SECTION 147 OF THE ACT DATED 31.12.2009 IS WITHOUT JURISDICTION AND IS INVALID. THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE VARIOUS DECISIONS RELIED AND REFERRED TO ABOVE AS IN THE CASE OF ACIT VS. GENO PHARMACEUTICALS LTD. (SUPRA) THE H ONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE NO NOTICE UND ER SECTION 143(2) HAS BEEN ISSUED WHILE MAKING ASSESSMENT UNDE R SECTION 143(3) READ WITH SECTION 147, THE ASSESSMENT SO FRA MED IS BAD IN LAW AS THE AO CAN NOT PROCEED TO MAKE AN ENQUIRY ON THE RETURN FILED IN COMPLIANCE TO THE NOTICE ISSUED UND ER SECTION 148 OF THE ACT AND THUS DISMISSED THE APPEAL OF THE REV ENUE BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW AROSE O UT OF THE APPEAL OF THE REVENUE. SIMILARLY, IN THE CASE OF C IT VS. LAXMAN DAS KHANDELWAL (2019) 108 TAXMANN.COM 183 (SC) THE HONBLE APEX COURT HAS HELD THAT NO NOTICE UNDER SECTION 14 3(2) WAS EVER ISSUED BY THE DEPARTMENT, THEREFORE, THE FINDI NG RENDERED BY HIGH COURT AND THE TRIBUNAL AND THE CONCLUSION A RRIVED AT WERE CORRECT AND THERE IS NO REASON TO TAKE A DIFFE RENT VIEW IN THE MATTER. PERTINENT TO MENTION THAT HONBLE MADH YA PRADESH HIGH COURT IN THE CASE OF CIT VS. LAXMAN DAS KHANDE LWAL (SUPRA) HAS HELD THAT AO HAD NO VALID JURISDICTION TO PASS THE ASSESSMENT ORDER AS THE VERY FOUNDATION OF ASSESSME NT ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 8 PROCEEDING IS BAD IN LAW AND HENCE THESE PROCEEDING S CULMINATED IN THE ASSESSMENT ORDER AS WELL AS IMPUG NED ORDER STAND QUASHED AND THUS DISMISSED THE APPEAL OF THE REVENUE. 11. AFTER TAKING INTO CONSIDERATION THE FACTS OF TH E CASE VIS-- VIS THE RATIO LAID DOWN BY THE HONBLE SUPREME COUR T AND VARIOUS HIGH COURTS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT PROCEEDINGS AND THE CONSEQUENT REASSESSM ENT ORDER DATED 31.12.2009 PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 ARE BAD IN LAW AS THE MANDATORY NOTICES UNDER S ECTION 143(2) WAS NOT ISSUED. ACCORDINGLY, WE QUASH THE P ROCEEDINGS INITIATED BY THE AO UNDER SECTION 147 AND ALSO THE CONSEQUENT REASSESSMENT ORDER. THE ADDITIONAL GROUND IS ALLOW ED. SINCE WE HAVE DECIDED THE ADDITIONAL GROUND IN FAVOUR OF THE ASSESSEE OTHER GROUNDS NEED NO ADJUDICATION. RESULTANTLY, A PPEAL IS PARTLY ALLOWED. ITA NO.855/M/2013 A.Y. 2004-05 12. SINCE WE HAVE ALREADY QUASHED THE ASSESSMENT OR DER IN ITA NO.920/M/2012, THEREFORE, CONSEQUENTLY THE PENA LTY ORDER CONFIRMED BY LD. CIT(A) WHICH IS CHALLENGED IN THIS APPEAL DOES NOT SURVIVE. ACCORDINGLY, THE APPEAL OF THE ASSESS EE IS ALLOWED. ITA NO.5455/M/2009 (REVENUES APPEAL) & ITA NO.5496/M/2009 (ASSESSEES APPEAL) 13. THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICA L TO ONE AS DECIDED BY US IN ITA NO.920/M/2012 WHEREIN WE HAVE QUASHED THE ASSESSMENT ORDER FRAMED ON ACCOUNT OF NON ISSUANCE/SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT. OUR DECISION ON THE SAID APPEAL WOULD MUTATIS MUTANDIS APPLY TO THESE APPEALS AS WELL. ACCORDINGLY, THE ASSESSMENT FRAMED BY THE AO UNDER SECTION 143(3) READ WITH SECTION147 OF THE ACT IS QUASHED AND APPEAL OF THE ASSESSEE IS ALLOWED ON TH E ITA NO.855/M/2013 & ITA NO.5455/M/2009 & ORS. M/S. ORACLE FINANCIAL SERVICES SOFTWARE LTD. 9 JURISDICTIONAL ISSUE. CONSEQUENTLY, THE REVENUE APP EAL IN ITA NO.ITA NO.5455/M/2009 BECOMES INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.12.2019. SD/- SD/- (A.D. JAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.12.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.