M/S. KANSAI NEROLAC PAINTS LTD., V. DCIT CIR 7(1),

MA 120/MUM/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6980 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHR S E DASTUR
• Keywords: Rectification of order; Opportunity of being heard; Additional evidence

Judgement Text

1 MA NO.120/MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI A BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL , AM & SHRI VIJAY PAL RAO, JM MA NO.120/MUM/2011 ARISING OUT OF ITA NO. 856/MUM/206 (ASST YEAR 2004-05 ) KANSAI NEROLAC PAINTS LTD (SUCCESSOR OF POLYCOAT POWERS LTD ON AMALGAMATION W.E.F1.4.206) 3 RD FL NEROCAL HOUSE G K MARG - MUMBAI VS THE DY COMMR OF INCOME TAX CR 7(1), MUMBAI (APPLICANT) (RESPONDENT) PAN NO. AAACP3126B ASSESSEE BY SHR S E DASTUR REVENUE BY SH C G N NAIR DT.OF HEARING 16 TH SEPT 2011 DT OF PRONOUNCEMENT 28 TH , SEPT 2011 PER VIJAY PAL RAO, JM THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS D IRECTED AGAINST THE ORDER DATED 20.10.2010 ARISING FROM OF THE LEVY OF PEN ALTY U/S 271(1)( C). 2 SHRI S.E DASTUR, LD SENIOR COUNSEL OF THE ASSESSE E HAS SUBMITTED THAT THE ASSESSEE RAISED A LEGAL ADDITIONAL GROUND BEFORE TH E TRIBUNAL, WHICH WAS ADMITTED BY THE TRIBUNAL FOR ADJUDICATION IN THE PROCEEDINGS OF THE APPEAL OF THE ASSESSEE. HOWEVER, INSTEAD OF HOLDING THE PENALTY ORDER AS NU LL AND VOID, BEING PASSED AGAINST THE NON EXISTING ENTITY/PERSON, THE TRIBUNA L HAS MERELY RESTORED THE MATTER BACK TO THE RECORD OF THE ASSESSING OFFICER. THE LD SR COUNSEL HAS SUBMITTED THAT THE ORDER OF THE TRIBUNAL SUFFERED FROM APPARENT MISTAK E ON RECORD, SPECIFICALLY IN VIEW OF THE DECISION CITED BY THE ASSESSEE WHEREIN IDENT ICAL CIRCUMSTANCES, THE ORDER OF THE ASSESSING OFFICER, WAS HELD AS VOID-AB-INITIO AS THE ORDER CANNOT BE PASSED 2 MA NO.120/MUM/2011 AGAINST A NON EXISTING PERSON. HE HAS RELIED UPON THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF PAMPASAR DISTILLERY LTD VS ACIT REPORTED IN 15 SOT 331 (KOL) . HE HAS ALSO RELIED UPON THE DECISION OF THE DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF IMPASAT (P) LTD VS ITO REPORTED IN 91 ITD 3 54 (DEL) AS WELL AS THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS EXPRESS NEWSPAPERS LTD REPORTED IN 40 ITR 38(MAD). THUS, THE LD SR COUNSEL HAS SUBMITTED THAT THE PENALTY ORDER WAS PASSED AFTER AMALGAMATION OF THE COMPANY AND CONSEQUENTLY CEASED TO BE IN EXISTENCE; THEREFORE, THE SAID ORDER IS NU LLITY AND THE TRIBUNAL SHOULD HAVE ANNULLED THE ORDER INSTEAD OF RESTORING THE MATTER TO THE ASSESSING OFFICER. 2.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSMENT WAS FRAMED AGAINST THE COMPANY M/S PLUCOAT POWERS LTD AND THER EAFTER PENALTY PROCEEDINGS WERE INITIATED. THE ASSESSEE, M/S PLUCOAT POWERS LT D., DULY PARTICIPATED IN THE PENALTY PROCEEDINGS AND FINALLY THE PENALTY ORDER W AS PASSED ON 20.6.2007. HE HAS FURTHER SUBMITTED THAT AT NO STAGE OF PENALTY PROCE EDINGS, THE ASSESSING OFFICER WAS INFORMED ABOUT THE ALLEGED AMALGAMATION OF M/S PLUC OAT POWERS LTD., WITH M/S KANSAL NEROLAC PAINTS LTD; THEREFORE, THE ORDER PA SSED BY THE ASSESSING OFFICER IN THE NAME OF M/S PLUCOAT POWERS LTD., CANNOT BE HELD AS NULL AND VOID IN THE ABSENCE OF ANY INFORMATION BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER REGARDING THE ALLEGED AMALGAMATION. HE HAS SUPPORTED THE ORD ER OF THE TRIBUNAL AND SUBMITTED THAT ONCE THE ORDER HAS BEEN PASSED ON ME RIT, THE SAME CANNOT BE REVIEWED U/S 254(2) OF THE I T ACT. 3 WE HAVE HEARD THE RIVAL CONTENTION AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. UNDISPUTEDLY, THE SAID AMALGAM ATION TOOK PLACE DURING THE PENDENCY OF THE PENALTY PROCEEDINGS. THE ASSESSEE F ILED REPLY ON 5.3.2007 TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER U /S 271(1)( C) WHICH WAS 3 MA NO.120/MUM/2011 CONSIDERED BY THE ASSESSING OFFICER. THE ASSESSEE, EVEN DID NOT RAISE THIS OBJECTION BEFORE THE CIT(A) AND SUBSTITUTED THE NAME OF THE A SSESSEE IN PLACE OF M/S PLUCOAT POWERS LTD. EVEN BEFORE THE TRIBUNAL, THE ASSESSE E DID NOT RAISE ANY SUCH OBJECTIONS IN THE APPEAL MEMO AGAINST CHALLENGING THE ORDER OF THE CIT(A) ARISING FROM THE PENALTY ORDER U/S 271(1)( C) BUT RAISED AN ADDITIO NAL GROUND, WHICH WAS ADMITTED BY THE TRIBUNAL FOR ADJUDICATION. THE TRIBUNAL, AF TER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES AS WELL AS THE CONTENTION OF BOTH THE PARTIES, WAS OF THE VIEW THAT SINCE THE ADDITIONAL GROUND WAS RAISED FOR THE FIRS T TIME AND ADDITIONAL EVIDENCE WAS ALSO FILED BY THE ASSESSEE; THEREFORE, THE LOWER AU THORITIES DID NOT HAVE AN OPPORTUNITY TO CONSIDER THE ISSUE. IN VIEW OF THIS PECULIAR FACT, THE MATTER WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR CONS IDERING THE ISSUE DE-NOVO IN ALL RESPECTS IN ACCORDANCE WITH THE PROVISIONS OF LAW. 3.1 THUS, WHEN ALL THESE CONTENTIONS OF THE ASSESSE E WERE CONSIDERED BY THE TRIBUNAL AND THEREAFTER PASSED THE ORDER ON MERITS WHEREBY THE MATTER WAS REMANDED BACK TO THE RECORD OF THE ASSESSING OFFICE R, KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE; THEREFORE, THE RELIE F SOUGHT IN THE MISCELLANEOUS APPLICATION WOULD CERTAINLY AMOUNT TO REVIEW OF THE EARLIER ORDER WHICH IS BEYOND THE JURISDICTION OF THE TRIBUNAL AND SCOPE OF SEC. 254(2). 3.2. THE SCOPE OF SEC 254(2) IS VERY LIMITED AND CI RCUMSCRIBED. FOR EXERCISING THE JURISDICTIONAL U/S 254(2), IT IS THE MANDATORY COND ITION THAT SUCH MISTAKE SHOULD BE WIDE APPARENT, MANIFEST AND PATENT AND NOT SOMETHIN G WHICH COULD BE INVOLVED SERIOUS CIRCUMSTANCES OF DISPUTES OF QUESTION OF FA CTS OR LAW AND CAN BE ESTABLISHED BY LONG DRAWN PROCESS AND REASONING ON THE POINT TO BE RECTIFIED. A PATENT MISTAKE AS WELL AS EVIDENT ERROR, WHICH DOES NOT REQUIRE AN ELABORATE DISCUSSION OF EVIDENCE OR ARGUMENTS TO ESTABLISH CAN BE SAID TO BE AN ERRO R APPARENT ON THE FACE OF THE 4 MA NO.120/MUM/2011 RECORDS AND CAN BE RECTIFIED UNDER THE AMBIT OF SEC TION 254(2). IT IS WELL SETTLED THAT SEC 254(2) DOES NOT CONFER POWER ON THE TRIBUNAL TO REVIEW IS EARLIER ORDER. THUS, THE TRIBUNAL HAS NO POWER TO REVIEW ITS ORDER PASSED ON MERIT AND IN THE GRAB OF RECTIFICATION OF MISTAKE NO ORDER CAN BE PASSED U/S 254(2) WHICH AMOUNTS TO REVERSAL OF THE ORDER PASSED AFTER DISCUSSING ALL THE FACTS AND STATUTORY PROVISIONS IN DETAIL. 4. SINCE THE AVERMENTS MADE IN THE MISCELLANEOUS AP PLICATION AS WELL AS THE ARGUMENTS OF LD. SENIOR COUNSEL ARE DIRECTED ON THE MERITS OF THE ISSUE IN APPEAL THEREFORE, NEEDLESS TO SAY THAT WE DO NOT SEE ANY F ORCE IN THE CONTENTIONS ADVANCED BY THE ASSESSE IN VIEW OF THE SERIES OF D ECISIONS OF VARIOUS HIGH COURTS AS WELL AS SUPREME COURT ON THE POINT AS UNDER: (I) THE QUESTION BEFORE THE HONBLE DELHI HIGH COUR T, IN THE CASE OF CIT VS ROSHAN LAL REPORTED IN 134 ITR 145 WAS WHETHER THE ASSESSM ENT MADE BY THE ITO WAS INVALID AS FRAMING ASSESSMENT AGAINST A DEAD PERSON AND THE DIRECTIONS OF THE ACIT FOR REASSESSMENT OF THE ASSESSEE WAS CORRECT. THE HON BLE HIGH COURT HAS OBSERVED THAT IF PROCEEDINGS HAD ALREADY BEEN STARTED THEY CAN BE CONTINUED AGAINST THE LEGAL REPRESENTATIVES AND EVEN IF THEY HAD NOT STARTE D AGAINST THE PERSON CAN BE STARTED AGAINST THE LEGAL REPRESENTATIVES AND THEREFO RE, IF THE LEGAL REPRESENTATIVE OR SOME OTHER PERSON CONTINUE TO APPEAR OR CHOOSES TO AP PEAR THE PROCEEDINGS BECOME IRREGULAR AND CAN BE REMANDED BY DIRECTION THA T THEY SHOULD BE PROPERLY CONTINUED. (II) SIMILAR VIEW WAS TAKEN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE SWARAN KANTA V. CIT REPORTED IN 176 ITR 291 AND HEL D THAT ANY PROCEEDING TAKEN AGAINST THE DECEASED BEFORE HIS DEATH SHALL BE DEEM ED TO HAVE BEEN TAKEN AGAINST THE LEGAL REPRESENTATIVE AND MAY BE CONTINUE D AGAINST THE LEGAL REPRESENTATIVE FROM THE STAGE AT WHICH IT STOOD ON TH E DEATH OF THE DECEASED. 5 MA NO.120/MUM/2011 (III) THE SUPREME COURT IN THE CASE OF CIT V. JAI P RAKASH SINGH REPORTED IN 219 ITR 737 HELD THAT AN OMISSION TO SERVE OR ANY DEFECT IN THE SERVICE OF N OTICES PROVIDED BY PROCEDURAL PROVISIONS DOES NOT EFFACE OR ERASE TH E LIABILITY TO PAY TAX WHERE SUCH LIABILITY IS CREATED BY DISTINCT SUBSTANTIVE PROVISI ONS. ANY SUCH OMISSION OR DEFECT MAY RENDER THE ORDER IRREGULAR-DEPENDING UPON THE NATURE OF THE PROVISION NOT COMPLIED WITH BUT CERTAINLY NOT VOID OR ILLEGAL. (IV) SIMILAR VIEW WAS TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S DEEPAK AGRO FOODS VS STATE OF RAJASTHAN & ORS REPOR T3D IN 2008(7) SCC 748 WHEREIN THE SUPREME COURT HAS OBSERVED THAT: (A) ALL IRREGULAR OR ERRONEOUS OR EVEN ILLEGAL ORDERS CANNOT BE HELD TO BE NULL AND VOID AS THERE IS A FINE DISTINCTION BETWEEN THE ORDERS WHICH ARE NULL AND VOID AND ORDERS WHICH ARE IRREGULAR, WRONG OR ILLEGA L. WHERE AN AUTHORITY MAKING ORDER LACKS INHERENT JURISDICTION, SUCH ORDER WO ULD BE WITHOUT JURISDICTION, NULL, NON-EST AND VOID AB INITIO AS DE FECT OF JURISDICTION OF AN AUTHORITY GOES TO THE ROOT OF THE MATTER AND STRIKES AT ITS VERY AUTHORITY TO PASS ANY ORDER AND SUCH A DEFECT CANNOT BE CURED EVEN BY CONSENT OF THE PARTIES. HOWEVER, EXERCISE OF JURISDICTION IN A WRONGFU L MANNER CANNOT RESULT IN A NULLITY IT IS AN ILLEGALITY, CAPABLE OF BEING C URED IN A DULY CONSTITUTED LEGAL PROCEEDINGS. (B) PROCEEDINGS FOR ASSESSMENT UNDER A FISCAL STATUTE ARE NOT IN THE NATURE OF JUDICIAL PROCEEDINGS, LIKE PROCEEDINGS IN A SUIT INA SMUCH AS THE ASSESSING OFFICER DOES NOT ADJUDICATE ON A LIS BETWEEN AN ASSE SSEE AND THE STATE AND, THEREFORE, THE LAW ON THE ISSUE LAID DOWN UNDER THE CIVIL LAW MAY NOT STRICTO SENSU APPLY TO ASSESSMENT PROCEEDINGS. NEVRTHLESS, I N ORDER TO APPRECIATE THE DISTINCTION BETWEEN A NULL AND VOID ORDER AND AN I LLEGAL OR IRREGULAR ORDER, IT WOULD BE PROFITABLE TO NOTICE A FEW DECISIONS OF THIS COURT ON THE POINT (V) THE HONBLE MADRAS HIGH COURT IN THE CASE OF CO MMISSIONER OF INCOME-TAX V. ANAIMUGAN TRANSPORTS (P.) LTD. REPORTED IN 215 ITR 553 HAS OBSERVED THAT A PERSON AUTHORISED BY LAW TO MAKE AN ORDER MAY MAKE A RIGHT ORDER AS WELL AS A WRONG ORDER. EVEN A SUPERIOR OFFICER, WHO HAS FOUND THAT THE ORDER HAS BEEN WRONGLY MADE BY ANY AUTHORITY SUBJECT TO ITS APPELLATE OR REVISI ONAL JURISDICTION, CANNOT TAKE AWAY 6 MA NO.120/MUM/2011 THE VERY DOING OF THE ACT BY HIM, EVEN THEY HAVE FO UND THAT THE ORDER WAS NOT SUSTAINABLE. THE HONBLE HIGH COURT HAS EXPRESSED I TS CONCERN THAT NO HONEST TAXPAYER SHOULD BE ASKED TO PAY MORE, BUT NO ONE EL SE SHOULD BE ALLOWED TO ESCAPE TAX BY TAKING RECOURSE TO QUESTIONABLE METHO DS. (VI) THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF CENTURY ENKA LTD. V. DCIT REPORTED IN 101 ITD 489 ON IDENTICAL FACTS AND CIR CUMSTANCES HAS HELD IN PARA 7 AS UNDER: 7. IN THE INSTANT CASE, WE FIND THAT RETURN OF INCO ME WAS FILED IN THE NAME OF RPL AND INTIMATION UNDER SECTION 143(1) WAS ALSO ISS UED IN THE SAME NAME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THOUGH T HE ASSESSEE HAS WRITTEN LETTER TO VARIOUS AUTHORITIES, BUT, WE DO NOT FIND ANY COMMUNICATION, DIRECTLY MADE TO THE ASSESSING OFFICER WITH REGARD TO THE AMALGAMATION OF THIS COMPANY THOUGH ASSESSEE HAS JOINED THE ASSESSM ENT PROCEEDINGS. SINCE, NOTHING HAS BEEN PLACED ON RECORD TO PROVE THAT THE A SSESSING OFFICER, DESPITE HAVING FULL KNOWLEDGE ABOUT THE FACT OF AMA LGAMATION OF THE ASSESSEE-COMPANY, HAS PASSED THE ASSESSMENT ORDER IN THE NAME OF THE ENTITY WHICH IS NOT IN EXISTENCE. IN THESE CIRCUMSTA NCES, WE ARE OF THE VIEW THAT THE ORDER IN THE NAME OF NON-EXISTING ENTITY W AS PASSED ON ACCOUNT OF IGNORANCE OF THE FACT OF AMALGAMATION. FOR THIS REAS ON, THE ASSESSMENT CANNOT BE HELD TO BE INVALID AND BE KNOCKED DOWN. T HE RIGHT COURSE IS TO SET ASIDE THE ASSESSMENT AND RESTORE THE MATTER TO THE FI LE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-FRAME THE ASSESSMENT IN THE C ORRECT NAME OF THE ASSESSEE. IT IS ONLY AN IRREGULARITY WHICH CAN BE REC TIFIED BY RESTORING THE MATTER BACK TO THE ASSESSING OFFICER FOR FRAMING ASSE SSMENT DE NOVO STARTING WITH ISSUANCE OF NOTICE UNDER SECTION 143(2) IN THE NAME OF THE SUCCESSOR COMPANY. WE, THEREFORE, SET ASIDE THE ORDER OF THE CI T(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO RE-FRA ME THE ASSESSMENT DE NOVO IN TERMS INDICATED ABOVE. SINCE, NO ARGUMENT WAS RAI SED ON MERIT AND THE ENTIRE ASSESSMENT IS SET ASIDE AND THE MATTER IS REST ORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ASSESSMENT, WE FIND NO JUS TIFICATION TO DEAL THE ISSUES ON MERITS. (VII) MOTOR SALES V. COMMISSIONER OF INCOME-TAX 2 30 ITR-44(ALL) THE SHORT QUESTION FOR CONSIDERATION IS WHETHER THE B USINESS OF THE FIRM WAS SUCCEEDED BY THE COMPANY AND WHETHER THERE WAS SUCCE SSION WITHIN THE MEANING 7 MA NO.120/MUM/2011 OF SECTION 170 OF THE ACT. THE AUTHORITIES CLEARLY H ELD THAT THE BUSINESS OF THE FIRM WAS DISTINCT FROM THE BUSINESS OF THE COMPANY. THE APPEL LATE TRIBUNAL RELIED ON THE CASE OF CIT V. A. W. FIGGIES AND CO. [1953] 24 ITR 405 ( SC). IN THIS CASE ALSO, THE ASSESSEE, A PARTNER-SHIP FIRM, CARRIED ON THE BUSINESS AND THAT W AS CONVERTED IN THE YEAR 1947 INTO A LIMITED COMPANY. THE APPELLATE TRIBUNAL AND THE HIGH COURT BOTH HELD THAT THERE WAS SUCCESSION WITHIN THE MEANING OF SECTION 25(4) OF THE INDIAN INCOME-TAX ACT, 1922, ANALOGOUS TO SECTION 170 OF THE ACT. THE SUPREME COURT CONCURRED WITH THE HIGH COURT SAYING (PAGE 409) : WE HAVE NO DOUBT THAT THE TRIBUNAL AND THE HIGH CO URT WERE RIGHT IN HOLDING THAT IN SPITE OF THE MERE CHANGES IN THE CONSTITUTI ON OF THE FIRM, THE BUSINESS OF THE FIRM AS ORIGINALLY CONSTITUTED CONTINUED AS TEA BROKERS RIGHT FROM ITS INCEPTION TILL THE TIME IT WAS SUCCEEDED BY THE LIM ITED COMPANY AND THAT IT WAS THE SAME UNIT ALL THROUGH, CARRYING ON THE SAME BUSINESS, AT THE SAME PLACE AND THERE WAS NO CESSER OF THAT BUSINESS OR A NY CHANGE IN THE UNIT. FROM THE ABOVE REPRODUCED FINDING, IT IS AMPLY CLEA R THAT WHEN A FIRM IS CONVERTED INTO A COMPANY THEN THE BUSINESS OF THE FIRM IS SUC CEEDED BY THE COMPANY. SECTION 170, SUB-SECTION (1), CLAUSES (A) AND (B), OF THE ACT CLEARLY PROVIDES THAT WHERE A PERSON CARRYING ON ANY BUSINESS OR PROFESSION HAS BEEN SUCCEEDED THEREIN BY ANY OTHER PERSON WHO CONTINUES TO CARRY ON THAT B USINESS OR PROFESSION, THE PREDECESSOR SHALL BE ASSESSED IN RESPECT OF THE INCO ME OF THE PREVIOUS YEAR IN WHICH THE SUCCESSION TOOK PLACE UPTO THE DATE OF SUCCESSI ON AND THE SUCCESSOR SHALL BE ASSESSED IN RESPECT OF THE INCOME OF THE PREVIOUS YE AR AFTER THE DATE OF SUCCESSION. FROM SECTION 170(1), IT IS CLEAR THAT THE APPELLATE TRIBUNAL RIGHTLY HELD THAT THE FIRM WAS ASSESSABLE TILL IT WAS SUCCEEDED BY THE COMPANY . IT IS ARGUED BEFORE US BY COUNSEL FOR THE ASSESSEE THAT THE PROFITS OF THE BUSINESS CARRIED ON BY THE FIRM DO NOT ACCRUE DAY-TO-DAY AND T HAT IN THE INSTANT CASE THE ACCOUNT BOOKS WERE NOT CLOSED WHEN THE COMPANY TOOK OVER THE ASSETS AND LIABILITIES OF THE FIRM AND, THEREFORE, THE PROFITS OF THE FIRM COULD NOT BE ASSESSED IN THE HANDS OF THE COMPANY (?). WE DO NOT AGREE WITH THE SUBMISSION OF COUNSEL FOR THE ASSESSEE. WHEN THE BOOKS OF ACCOUNT ARE REGULARLY M AINTAINED BY THE FIRM, PROFITS CAN BE ASCERTAINED WITHOUT ANY DIFFICULTY TILL THE DATE OF SUCCESSION. FOR THE PROFIT, IT IS NOT NECESSARY THAT THE BOOKS OF ACCOUNT SHOULD HAVE BEEN ACTUALLY CLOSED, BECAUSE THE ASSESSMENT OF THE PREDECESSOR FIRM IS NOT DEPENDENT ON THE CLOSING OF THE ACCOUNTS. FOR THE REASONS, BOTH THE PARTS OF THE QUESTION REF ERRED TO THIS COURT ARE ANSWERED IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE REVENUE AN D AGAINST THE ASSESSEE. (VIII) C. I.T V. ETTUMANOOR MOTORS (P.) LTD. 165 IT R-751 (KER) 8 MA NO.120/MUM/2011 SECTION 170(3) OF THE PRESENT ACT SAYS: ' (3) WH EN ANY IUM PAYABLE UNDER THIS SECTION IN RESPECT OF THE INCOME OF SUCH B USINESS OR PROFESSION FOR THE PREVIOUS YEAR IN WHICH THE SUCCESSION TOOK PLACE UP TO THE DATE OF SUCCESSION OR FOR THE PREVIOUS YEAR PRECEDING THAT YEAR, ASSESSED ON T HE PREDECESSOR, CANNOT BE RECOVERED FROM HIM, THE INCOME-TAX OFFICER SHALL RECORD A FINDING TO THAT EFFECT AND THE SUM PAYABLE BY THE PREDECESSOR SHALL THEREAFTER BE PAYABLE BY AND RECOVERABLE FROM THE SUCCESSOR, AND THE SUCCESSOR SHAL L BE ENTITLED TO RECOVER FROM THE PREDECESSOR ANY IUM SO PAID.' (EMPHASIS* SUPPLIE D) THIS SUB-SECTION IS, EXCEPT IN ONE RESPECT, IN PAR I MATERIA WITH THE CORRESPONDING PORTION OF SECTION 26(2) OF THE OLD A CT. THE CRUCIAL DIFFERENCE IS THAT, UNLIKE UNDER THE OLD ACT, IT IS SPECIFICALLY STATED UNDER THE NEW ACT THAT THE INCOME- TAX OFFICER SHOULD RECORD A FINDING TO THE EFFECT TH AT RECOVERY CANNOT BE HAD FROM THE PREDECESSOR BEFORE STEPS ARE INITIATED TO RECOVER FROM THE SUCCESSOR. THE TRIBUNAL FOUND THAT, IN PRINCIPLE, RECOVERY IN RE SPECT OF ASSESSMENTS MADE UNDER THE OLD ACT COULD BE HAD UNDER SECTION 297(2)(J ) READ WITH SECTION 170(3) OF THE NEW ACT. BUT THE TRIBUNAL FURTHER STATED THAT SU CH RECOVERY WAS POSSIBLE ONLY WHERE: (1) ACTION HAD BEEN TAKEN FOR RECOVERY UNDER T HE OLD ACT, AND (2) WHERE THE SUCCESSOR HAD BEEN HEARD BY THE RECOVERING AUTHORITY BE FORE RECORDING A FINDING IN TERMS OF SECTION 170TO THE EFFECT, THAT RECOVERY COUL D NOT BE HAD FROM THE PREDECESSOR. THESE TWO CONDITIONS PRESCRIBED BY THE TR IBUNAL ARE, IN OUR VIEW, TOTALLY UN-WARRANTED BY THE NEW ACT. WHAT APPARENTLY PROMPTED THE TRIBUNAL TO SAY THAT AC TION SHOULD HAVE BEEN TAKEN UNDER THE OLD ACT WERE THE WORDS ' WITHOUT PREJU DICE TO ANY ACTION ALREADY TAKEN FOR THE RECOVERY OF SUCH SUM UNDER THE REPEALED ACT ' APPEARING IN CLAUSE (J) OF SECTION 297(2). THE TRIBUNAL WRONGLY, IN OUR VIEW, THOUGHT THAT THE WORDS ' WITHOUT PREJUDICE, ETC. ' INDICATED THAT ACTION OUGHT TO HA VE BEEN TAKEN UNDER THE OLD ACT. THOSE WORDS ARE ONLY INTENDED TO PROTECT RECOVERY PROCEE DINGS ALREADY TAKEN UNDER THE REPEALED ACT AND NOT TO MAKE SUCH A PROCEEDI NG A CONDITION PRECEDENT TO INVOKE THE POWER UNDER THE NEW ACT. RECOVERY UNDER THE NEW ACT WILL BE WITH- OUT PREJUDICE TO WHATEVER ACTION IN THAT BEHALF HAD A LREADY BEEN TAKEN UNDER THE OLD ACT. ANY OTHER CONSTRUCTION WOULD LEAD TO ABSURDIT Y, FOR IT WOULD THEN MEAN THAT THERE WOULD BE NO STATUTE UNDER WHICH RECOVERY IS POSS IBLE EVEN THOUGH AN ASSESSMENT HAS BEEN VALIDLY MADE UNDER THE REPEALED ACT. THE TRIBUNAL AGAIN WRONGLY ASSUMED THAT SECTION 170( 3) REQUIRED THAT THE SUCCESSOR SHOULD BE HEARD BEFORE THE OFFICER RECORDED A FINDING THAT THE AMOUNT COULD NOT BE RECOVERED FROM THE PREDECESSOR. THE SUCCES SOR, IN OUR VIEW, HAS NO SUCH RIGHT OF HEARING. ALL THAT THE SUCCESSOR IS ENTI TLED TO SAY IS THAT HE SHOULD HAVE NOTICE BEFORE HE IS PROCEEDED AGAINST. NO NOTICE IS R EQUIRED TO BE ISSUED TO HIM TO RECORD A FINDING THAT RECOVERY CANNOT BE HAD AGAINST TH E PREDECESSOR. ONCE THAT FACT IS RECORDED, IT IS OPEN TO THE REVENUE TO PROCE ED AGAINST THE SUCCESSOR AFTER GIVING HIM A REASONABLE OPPORTUNITY OF BEING HEARD. T HAT IN THE PRESENT CASE SUCH A FINDING HAS BEEN ALREADY RECORDED SEEMS TO BE CLEAR F ROM WHAT THE TRIBUNAL SAYS : '...SINCE THE TAX IS SOUGHT TO BE RECOVERED FROM TH E SUCCESSOR, IT IS NECESSARY THAT SUCH A FINDING SHOULD BE RECORDED AFTER HEARING T HE OBJECTIONS OF THE SUCCESSOR THERETO, THE FACT THAT IT HAD BEEN MENTIONED IN THE NOTICE ISSUED TO THE ASSESSEE- COMPANY THAT TAX COULD NOT BE RECOVERED FROM THE VE NDOR-COMPANY IS NOT 9 MA NO.120/MUM/2011 SUFFICIENT. THE INCOME-TAX OFFICER SHOULD HAVE RECORD ED A FINDING AFTER HEARING THE ASSESSEE IN RESPECT OF THAT MATTER. SUCH A FINDING IS NOT FOUND IN THE IMPUGNED ORDER. NOR DID THE DEPART-MENTAL REPRESENTATIVE BRING TO OUR NOTICE THAT SUCH A FINDING BAD BEEN RECORDED BY THE INCOME-TAX OFFICER, AFTER HEARING THE ASSESSEE, IN ANY OTHER PLACE. FOR THIS REASON ALSO, WE HOLD THAT THE IMPUGNE D ORDER IS NOT VALID.' THIS OBSERVATION IMPLIES THAT THE FACT WAS RECORDED , BUT NOT PRECEDED BY NOTICE TO THE ASSESSEE. SUCH NOTICE WAS UNNECESSARY. THE TRIBUNAL HAS THUS ERRED IN LAW IN THESE TWO CRUC IAL ASPECTS. THEREFORE, WE DO NOT FIND ANY MERIT IN THE MISCELLA NEOUS APPLICATION FILED BY THE ASSESSEE. 7 IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS DISMISSED ORDER PRONOUNCED ON THE 28 TH , DAY OF SEPT 2011. SD/- SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 28 TH , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI