Sri. M.R. Anandaram (HUF), Bangalore V. Assistant Commissioner of Income Tax, Circle 6(3)(1), Bangalore

MA 45/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2753 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C PRABHAKAR J
• Keywords: Capital asset converted into stock in trade; Invalid notice; Period of limitation; Procedural lapse; Assessment record
• Section: 292BB; 143(2); 48; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P NOS.45 TO 48/BANG/2021 (IN CO NOS.220 TO 223/BANG/2015) ASSESSMENT YEAR : 2007-08 SN MP NOS. AND ASSESSMENT YEAR APPELLANT RESPONDENT 1. 45/BANG/2021 (IN CO NO.220/ BANG/2015) SRI M.R AANADARAM [HUF], GOKUL HOUSE, GOKULA, MATHIKERE, BENGALURU-560 054. PAN AABHM 9819 G THE ACIT, CIRCLEE- 6(3)(1), BENGALURU. 2. 46/BANG/2021 (IN CO NO.221/ BANG/2015) M.R KODANDARAM [HUF], GOKUL HOUSE, GOKULA, MATHIKERE, BENGALURU-560 054. PAN AABHM 9893 E 3. 47/BANG/2021 (IN CO NO.222/ BANG/2015) SHRI M.R PATTABHIRAM, [HUF], GOKUL HOUSE, GOKULA, MATHIKERE, BENGALURU-560 054. PAN AACHM 7618 G 4. 48/BANG/2021 (IN CO NO.223/ BANG/2015) M.R SEETHARAM [HUF], GOKUL HOUSE, GOKULA, MATHIKERE, BENGALURU-560 054. PAN AAHHS 7342 J MP NOS.45 TO 48 /BANG/2021 PAGE 2 OF 12 APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI J.C PRABHAKAR, JCIT(DR) DATE OF HEARING : 08.10.2021 DATE OF PRONOUNCEMENT : 11.10.2021 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER BY THESE 4 COMMON MISCELLANEOUS APPLICATIONS, THE ASSESSEE SEEKS TO RECTIFY THE ORDER OF TRIBUNAL IN CO NO.220 TO 223/2015 DATED 1/4/2021 FOR THE ASST. YEA R 2007-08. 2. THE LD.AR SUBMITTED THAT UPON THE DIRECTION OF T HE HONBLE HIGH COURT IN ITS JUDGMENT IN ITA NO.452 OF 2016 TO 455 OF 2016 DATED 27/1/2021, THE TRIBUNAL HEARD THE MATTER ON 29/3/2021 AND VIDE COMMON ORDER DATED 1/4/2021 IN CO NO.220 TO 223 /BANG/2015 FOR THE ASS T. YEAR 2007-08 DISPOSED OF THE CROSS-OBJECTIONS AS FO LLOWS:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THE PRESENT CASE, NOTICE UNDER SECTION 1 48 OF THE ACT REOPENING ASSESSMENT WAS ISSUED TO THE ASSESSEE ON 28.11.2011. THE ASSESSEE FILED A LETTER DATED 21.12.2011 BEFORE AO ON 23.12.2011 STATING THAT THE ORIGINAL RETURN FILED ON 27.03.200 9 OF THE ACT BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSUE D UNDER SECTION 148 OF THE ACT. AS SUCH, TIME LIMIT TO ISSUE NOTICE UND ER SECTION 143(2) OF THE ACT STARTS FROM 23.12.2011. TIME LIMIT UNDER SE CTION 143(2) OF THE ACT FOR THE ASSESSMENT YEAR 2007-08 AS PER THE PROV ISION TO CLAUSE II TO SECTION 143(2) OF THE ACT IS AS FOLLOWS: PROVID ED THAT NO NOTICE UNDER CLAUSE II SHALL BE SERVED ON THE ASSESSEE AFT ER THE EXPIRY OF MP NOS.45 TO 48 /BANG/2021 PAGE 3 OF 12 TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH TH E RETURN IS FURNISHED. 5. AS SUCH, THE TEWELVE MONTHS STARTS F ROM 31.12.2011 AND LAPSES ON 31.12.2012. IN THE PRESENT CASE, AS S EEN FROM THE COPY OF NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT PR ODUCED BY AR, IT WAS ISSUED ON 28.02.2013. LEARNED DR HAS NOT PRODUC ED ANY ASSESSMENT RECORDS TO PROVE THAT WHETHER ANY NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THESE ASSESSEES BEF ORE 31.12.2012. HIS ONLY OBJECTION IS THAT PROVISION TO SUB-SECTION 292 BB IS COMING FOR THE ASSISTANCE OF THE REVENUE. HOWEVER, WE FIND THA T AS DECIDED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF NITTUR VASANTH KUMAR MAHESH VS. ACIT REPORTED IN 265 TAXMANN.COM 277, IT WAS HELD THAT : AS REGARDS APPLICABILITY OF SECTION 292BB, SAID SECTION CONTEMPLATES, IT SHALL BE DEEMED THAT ANY NOTICE UN DER ANY PROVISION OF THE ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM (ASSESSEE) HAS BEEN DULY SERVED UPON HIM IN TIME, IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FRO M TAKING ANY OBJECTIION IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT, ONLY WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR CO-OPERA TED IN ANY INQUIRY RELATING TO AN ASSESSMENT OR RE-ASSESSMENT. ASSESSEE'S APPEARANCE OR CO-OPERATION IS SINE-QUA-NON TO INVOK E SECTION 292BB OF THE ACT. FURTHER, IT IS WELL SETTLED LEGAL PRINC IPLE THAT OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE PROPER NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE. THE FLAW FOUND IN THE NOTICE ISSUED UN DER SECTION 143(2) GOES TO THE ROOT OF THE MATTER AND THE SAME CANNOT BE CURED OR DISPENSED WITH, TO CONSIDER THE CASE ON MERITS. THE ASSESSMENT ORDER IS PASSED BASED ON THE INVALID NOTICE, WHICH DOES N OT SURVIVE. NOTICE IS THE FOUNDATION. ASSESSMENT ORDER BUILT UPON SUCH DEFECTIVE NOTICE WOULD CERTAINLY FALL TO THE GROUND. 6. THE CONTENT ION OF AR HERE IS THAT NOW IT IS WELL SETTLED IN THE JUDGMENT IN THE CASE OF ACIT VS. HOTEL BLUEMOON 321 ITR 362, ALACRITI HOUSING LTD., VS. CIT 341 ITR 264, INDUS TOWERS LTD., VS. DCIT 82 TAXMANN.COM 430 , NITTUR VASANTH KUMAR MAHESH VS. ACIT 265 TAXMANN.COM 277, BIHAR POLICE BUILDING CONSTRUCTION CORPORATION [P] LTD., VS. PCIT 108 TAXMANN.COM 48, PCIT VS. SILVER LINE 65 TAXMANN.COM 137 THAT DELAY IN ISSUING A NOTICE UNDER SECTION 143(2) OF T HE ACT WOULD BE FATAL AND ASSESSMENT IS BAD IN LAW. 6.1 IN THE CASE OF CIT VS. LAXMANDAS KHANDELWAL 417 ITR 325 WHEREIN IT WAS HEL D THAT ACCORDING TO SECTION 292BB OF THE ACT, IF THE ASSES SEE HAD PARTICIPATED IN THE PROCEEDINGS, BY WAY OF LEGAL FI CTION, NOTICE WOULD BE DEEMED TO BE VALID EVEN THERE BE INFRACTION AS D ETAILED IN THE SAID SECTION. THE SCOPE OF THE PROVISION IS TO MAKE SERV ICE OF NOTICE HAVING CERTAIN INFIRMITIES TO BE PROPER AND VALID IF THERE WAS REQUISITE MP NOS.45 TO 48 /BANG/2021 PAGE 4 OF 12 PARTICIPATION ON PART OF THE ASSESSEE. IT IS, HOWEV ER, TO BE NOTED THAT THE SECTION DOES NOT SAVE COMPLETE ABSENCE OF NOTIC E. FOR SECTION 292BB TO APPLY, THE NOTICE MUST HAVE EMANATED FROM THE DEPARTMENT. IT IS ONLY THE INFIRMITIES IN THE MANNER OF SERVICE OF NOTICE THAT SECTION SEEKS TO CURE. THE SECTION IS NOT INTENDED TO CURE COMPLETE ABSENCE OF NOTICE ITSELF. SINCE THE FACTS ON RECORD ARE CLEAR THAT NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS HOWEVER ISSUED BY DEP ARTMENT, THE FINDING RENDERED BY THE HIGH COURT AND THE TRIBUNAL AND THE CONCLUSION ARRIVED AT WERE CORRECT. 6.2 FURTHER IT WAS HELD BY KERALA HIGH COURT IN THE CASE OF PADINJARKARA AGENCIES PVT . LTD., VS. CIT 398 ITR 381 WHEREIN THE HONBLE HIGH COURT AFTER CO NSIDERING THE JUDGMENT OF HOTEL BLUEMOON CITED SUPRA HELD THAT WH ERE ADVERSE ORDERS ARE PASSED AGAINST ASSESSEE ONLY AFTER AFFOR DING ASSESSEE PROPER OPPORTUNITY, THEN ASSESSMENT ORDER PASSED CA N BE CONSIDERED AS VALID. BEING SO, IN OUR OPINION, IT IS APPROPRIA TE TO REMIT THE ISSUE TO THE FILE OF CIT(A) TO EXAMINE WHETHER THERE IS P ROPER SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT BEFORE 31.12 .2012 IN THESE CASES TO THE ASSESSEE AFTER SEEING THE CASE RECORDS AND DECIDE ACCORDINGLY IN THE LIGHT OF JUDGMENT OF HOTEL BLUEM OON CITED SUPRA. IN THE RESULT, ALL THE CROSS OBJECTIONS OF THE ASSE ESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. 3. THE LD.AR SUBMITTED THAT THE HIGH COURT IN ITS JUDGMENT CITED (SUPRA) OBSERVED IN PARA 5 AS FOLLOW S:- '5. IN VIEW OF THE AFORESAID SUBMISSION AND TAKING INTO ACCOUNT THE FACT THAT THE ISSUE WITH REGARD TO THE FACT WHETHER THE NOTICE UNDER SECTION 143(2) OF THE ACT TO THE ASSESSEE WAS BARRED BY LIMITATION AND THE SAME OUGH T TO HAVE BEEN ISSUED BEFORE 30.09.2012, HAS NOT BEEN ADJUDICATED EITHER BY THE COMMISSIONER OF INCOME TA X (APPEALS) OR BY THE TRIBUNAL, IN THE FACTS AND CIRC UMSTANCES OF THE CASE, IT IS NOT NECESSARY FOR US TO DEAL WIT H THE SUBSTANTIAL QUESTIONS OF LAW FRAMED IN THIS APPEAL. THE IMPUGNED ORDER PASSED BY THE TRIBUNAL DATED 27.05.2016, IS HEREBY QUASHED AND THE MATTER IS REM ITTED TO THE TRIBUNAL TO ADJUDICATE THE ISSUE WHETHER THE NO TICE ISSUED UNDER SECTION 143(2) OF THE ACT DATED 28.02. 2013, TO THE ASSESSEE IS BARRED BY LIMITATION AND IS CONTRAR Y TO PROVISIONS OF ACT. NEEDLESS TO STATE THAT THE TRIBU NAL ITSELF SHALL DECIDE THE ISSUE WITHIN A PERIOD OF TWO MONTHS FRO M THE DATE OF RECEIPT OF CERTIFIED COPY OF THE ORDER PASSED MP NOS.45 TO 48 /BANG/2021 PAGE 5 OF 12 TODAY. THE PARTIES SHALL BE AT LIBERTY TO RAISE ALL LEGAL CONTENTIONS WITH REGARD TO THE AFORESAID ISSUE.' 4. ACCORDING TO THE LD.AR, THE HONBLE HIGH COURT HAS GIVEN DIRECTION TO THE TRIBUNAL TO DECIDE THE ISSU E ITSELF, AS THE TRIBUNAL HAS NOT JUSTIFIED IN REMITTING THE ISSUE RELATING TO THE ADJUDICATION OF ISSUE IN RESPECT OF SERVICE OF NOTICE U/S 143(2) OF THE ACT TO THE FILES OF THE AO FOR FRESH CONSIDERATION. THE FINDINGS OF THE TRIBUNAL IN PAR A 6.2 IS CONTRARY TO THE JUDGMENT OF HONBLE HIGH COURT CITE D (SUPRA). ACCORDINGLY, IT WAS SUBMITTED THAT THE IS SUE MAY BE RECALLED OR RECTIFIED AT THE END OF THE TRIBUNA L ITSELF OTHERWISE, IT AMOUNTS TO MISCARRIAGE OF JUSTICE. FU RTHER, IT WAS SUBMITTED THAT THE ASSESSEE RELIED ON VARIOUS JUDGMENTS WHICH WERE QUOTED BY THE TRIBUNAL IN PAR A 6 OF THE ORDER. HOWEVER, THE SAME WERE NOT FOLLOWED, WHICH IS A MISTAKE APPARENT FROM RECORD THAT MAY BE RECTI FIED IN THE INTERESTS OF JUSTICE. ON THE OTHER HAND, IF TH E TRIBUNAL IS NOT IN A POSITION TO ACCEPT THE EARLIER ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, THE ISSUE MAY BE REFERRED TO SPECIAL BENCH. FOR THIS PURPOSE, HE RE LIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DLF UNIVERSAL REPORTED IN 172 TAXMAN 107 (DELHI). 5. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE CHRONOLOGICAL EVENTS HAVE TAKEN PLACE IN THE RE- ASSESSMENT PROCEEDINGS, WHICH ARE AS FOLLOWS:- MP NOS.45 TO 48 /BANG/2021 PAGE 6 OF 12 MP NOS.45 TO 48 /BANG/2021 PAGE 7 OF 12 6. FURTHER, IT WAS SUBMITTED BY THE LD.DR THAT NO NOTICE U/S 143(2) OF THE ACT WAS ISSUED PRIOR TO MP NOS.45 TO 48 /BANG/2021 PAGE 8 OF 12 28/2/2013 AND IT WAS ISSUED ONLY ON 28/12/2013. HE RELIED ON THE PROVISIONS OF SEC.292BB OF THE INCOME -TAX ACT, WHICH PUTS BAR ON ASSESSEE - A) FROM RAISING OBJECTION WITH REGARD TO SERVICE OF NOTICES B) TIME OF SERVICE OF NOTICES C) MANNER OF SERVICE OF NOTICES IS CONCERNED. ACCO RDINGLY, THE LD.DR SUBMITTED THAT IN THESE CASES THE ASSESS EE APPEARED BEFORE THE AO AND CO-OPERATED IN THE ASSESSMENT PROCEEDINGS, THE OBJECTION OF THE ASSESS EE MAY BE REJECTED. 7. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON RECORDS. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND CASE LAWS CITED BY THE PARTIE S. IN THE PRESENT CASE, ON EARLIER OCCASION, TRIBUNAL REM ITTED THE ISSUE BACK TO THE FILES OF CIT(A) TO VERIFY WHE THER NOTICE U/S 143(2) IS ISSUED TO THE ASSESSEE PRIOR TO 31/12/2012. NOW, THE QUESTION BEFORE US WHETHER TH E TRIBUNAL IS JUSTIFIED IN REMITTING THE ISSUE BACK T O THE CIT(A) FOR FRESH CONSIDERATION WHEN THE HIGH COURT HAS DIRECTED THE TRIBUNAL TO DECIDE THE ISSUE ITSELF WI THIN THE PERIOD OF 2 MONTHS ON THE DATE OF RECEIPT OF THE CO PY OF THE ORDER. IN OUR OPINION, DUE TO NON AVAILABILITY OF ASSESSMENT RECORDS BEFORE THIS TRIBUNAL, THE TRIB UNAL MP NOS.45 TO 48 /BANG/2021 PAGE 9 OF 12 OPTED TO REMIT THE ISSUE. NOW THE ASSESSEE PLEADED THAT THE TRIBUNAL ITSELF HAS TO DECIDE THE ISSUE INSTEA D OF REMITTING THE ISSUE BACK TO THE FILES OF THE CIT(A) , WHICH IS FAIR PROPOSITION. DURING THE PRESENT PROCEEDINGS, THE LD.DR FILED DETAILS ISSUE OF VARIOUS NOTICES TO THE ASSESSEES AS EXTRACTED IN PARA 5 OF THIS ORDER. CONSIDERING THESE DETAILS FILED BY THE LD.DR, IT IS APPROPRIATE TO DECIDE THE LEGAL ISSUE IN DISPUTE BY THIS TRIBUNAL ITSELF. IT WAS NOTICED FROM THE SUBMISSIO N OF THE LD.DR THAT THERE WAS NO ISSUE OF NOTICE U/S 143(2) OF THE ACT TO ASSESSEE WITHIN THE STIPULATED TIME AND IT W AS ISSUED ONLY ON 28/2/2013 INSTEAD OF ISSUING IT ON O R BEFORE 31/12/2012. FURTHER, PROVISIONS OF SECTION 292BB IS APPLICABLE FROM ASST. YEAR 2008-09 ONLY. 8. THUS, IT MEANS THAT THERE WAS NO PROPER ISSUE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT. THUS, BY PLACING RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LAXMAN KHANDAWALA IN 417 ITR 325 (SC), WE QUASH THE ASST. ORDER IN ALL THES E CASES. ACCORDINGLY, EARLIER ORDER OF THE TRIBUNAL IN PARA 6.2 WHICH READ AS FOLLOWS IS DELETED. 6.2 FURTHER IT WAS HELD BY KERALA HIGH COURT IN TH E CASE OF PADINJARKARA AGENCIES PVT. LTD., VS. CIT 398 ITR 38 1 WHEREIN THE HONBLE HIGH COURT AFTER CONSIDERING THE JUDGME NT OF MP NOS.45 TO 48 /BANG/2021 PAGE 10 OF 12 HOTEL BLUEMOON CITED SUPRA HELD THAT WHERE ADVERSE ORDERS ARE PASSED AGAINST ASSESSEE ONLY AFTER AFFORDING AS SESSEE PROPER OPPORTUNITY, THEN ASSESSMENT ORDER PASSED CA N BE CONSIDERED AS VALID. BEING SO, IN OUR OPINION, IT I S APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF CIT(A) TO EXAMINE WHETHER THERE IS PROPER SERVICE OF NOTICE UNDER SECTION 143 (2) OF THE ACT BEFORE 31.12.2012 IN THESE CASES TO THE ASSESSE E AFTER SEEING THE CASE RECORDS AND DECIDE ACCORDINGLY IN T HE LIGHT OF JUDGMENT OF HOTEL BLUEMOON CITED SUPRA. 8.1 AFTER DELETION OF EARLIER PARA AS ABOVE, THE NE W PARAS 6.2 & 7 IS INSERTED TO THE EARLIER ORDER DATED 1/4 /2021 WHICH READS AS FOLLOWS:- 6.2. FURTHER, IT WAS HELD BY KERALA HIGH COURT IN THE CASE OF PADINJAKARA AGENCIES PVT. LTD., VS. CIT 398 ITR 381 WHEREIN THE HONBLE HIGH COURT AFTER CONSIDERING THE JUDGMENT OF HOTEL BLUEMOON CITED SUPRA HELD THAT WHERE ADVERSE ORDERS ARE PASSED AGAINST ASSESSEE ONLY AFTER AFFORDING ASSESSEE PROPER OPPORTUNITY, THEN ASSESSMENT ORDER PASSED CAN BE CONSIDERED AS VALID. BUT IN THE PRESENT CASE, THE NOTICES U/S 143(2) WERE ISSUED ON 28/2/2013, WHICH IS BEYOND THE PERIOD OF LIMITATION TO ISSUE OF NOTICE U/S 143(2) OF THE ACT. THE ASSESSEE SHOULD HAVE MP NOS.45 TO 48 /BANG/2021 PAGE 11 OF 12 BEEN ISSUED THIS NOTICE ON OR BEFORE 31/12/2012. ACCORDINGLY, IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON IN 321 ITR 362, WE QUASH THE ASSESSMENTS IN ALL THESE ASSESSEES BEFORE US. 7. IN THE RESULT, ALL THE CROSS-OBJECTIONS OF THE ASSESSEES ARE ALLOWED. 8.2 IN THE RESULT, MISC. APPLICATIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCT, 2021 . SD/- SD/- (BEENA PILLAI) ( CHANDRA POOJARI) JUDICIAL MEMBER A CCOUNTANT MEMBER BANGALORE, DATED, 11 TH OCT , 2021 / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, B ANGALORE.