DCIT 7(3), V. WELSPUN INDIA LTD,

MA 674/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7068 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 16-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FAROOKH IRANI MR MITESH SHAH
• Keywords: Opportunity of being heard; Period of limitation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO , J.M. M.A. NO. 674/MUM/2010 (IN ITA NO. 2277/MUM/2007 ASSESSMENT YEAR: 2001-02 DY. COMMISSIONER OF INCOME TAX 7(3), APPLICANT MUMBAI. VS. WELSPUN INDIA LTD.,, RESPONDENT TRADE WORLD, B WING, 9 TH FLOOR, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. (PAN AAACWO 7441) APPLICANT BY : MR. FAROOKH IRANI/ MR. MITESH SHAH RESPONDENT BY : MR. SUNIL KUMAR SINGH ORDER PER V. DURGA RAO, J.M.: THIS MISCELLANEOUS APPLICATION FILED BY THE ASSESSE E ARISES OUT OF THE ORDER OF ITAT G BENCH, MUMBAI BENCHES, MUM BAI, IN APPEAL ITA NOS. 2277 TO 79/M/07 AND 2281/M/07 DATED 27 TH FEBRUARY, 2009. DECEMBER, 2009. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF SPIRAL PI PES AND SAW PIPES. THE CASE WAS SELECTED FRO SCRUTINY AND, SUBSEQUENTL Y, THE AO APPOINTED SPECIAL AUDITOR UNDER THE PROVISIONS OF S ECTION 142(2A) OF THE ACT. ON THE BASIS OF THE AUDIT REPORT, ASSESSME NT WAS COMPLETED U/S 143(3) READ WITH SECTION 142(2A) OF THE ACT. T HE AO WHILE APPOINTING SPECIAL AUDITOR, NO OPPORTUNITY WAS GIVE N TO THE ASSESSEE. ON APPEAL, THE LEARNED CIT(A) FOLLOWING THE JUDGME NT OF APEX COURT M.A. NO. 674/MUM/2010 M/S WELSPUN INDIA LTD. 2 IN THE CASE OF RAJESH KUMAR & OTHERS V. DCIT, 281 I TR 91 HELD THAT SPECIAL AUDIT WAS NOT VALID AS IT WAS DONE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE AS PER THE JUDGMENT OF THE APEX COU RT IN THE CASE OF RAJESH KUMAR & OTHERS (SUPRA). WHEN THE REVENUE CAR RIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL DISMISS ED THE APPEALS FILED BY THE REVENUE UPHOLDING THE ORDER OF CIT(A) BY HOL DING THAT WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AS THE CIT(A) H AS FOLLOWED THE JUDGMENT OF THE APEX COURT IN THE CASE OF RAJESH KU MAR & OTHERS (SUPRA). THE TRIBUNAL FURTHER HELD THAT IN CASE OF SAHARA IN DIA FIRM V. CIT, 300 ITR 403 (SC), THE APEX COURT HELD THAT ASSESSEE HAS TO BE PROVIDED A REASONABLE OPPORTUNITY OF BEING HEARD BE FORE PASSING AN ORDER U;/S 142(2A) OF THE ACT. 3. IN THE M.A. THE REVENUE HAS RAISED SPECIFIC OBJE CTION THAT THE TRIBUNAL WHILE DECIDING THE ISSUE COMMITTED A MISTA KE BY MENTIONING THE JUDGEMENT OF SAHARA INDIA FIRM V. CIT (SUPRA) W HEREIN THE HONBLE APEX COURT HELD THAT AO WHILE ORDERING SPEC IAL AUDIT U/S 142(2A) OF THE ACT, AN OPPORTUNITY MUST BE GIVEN TO THE ASSESSEE, BUT THE APEX COURT HELD THAT IT HAS ONLY PROSPECTIVE AP PLICATION. THEREFORE, THE REVENUE CONTENDED THAT THE DECISION IN THE CASE OF SAHARA INDIA FIRM (SUPRA) HAS NO APPLICATION IN THE YEAR UNDER CONSIDERATION. 4. THE LEARNED DR SUBMITTED THAT THE ORDER OF THE I TAT SUFFERS FROM A MISTAKE APPARENT ON RECORD AS WHAT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE SUBSEQUENT JUDGMENT OF SAHARA INDIA VS. CIT (SUPRA) IS THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH KUMAR & OTHERS WILL APP LY ONLY PROSPECTIVELY I.E. WITH EFFECT FROM 01/11/2006, THE REFORE, THE CASE WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE, AS T HE ORDER FOR CONDUCTING SPECIAL AUDIT BEING PASSED ON 25/03/2004 . IT IS, THEREFORE, POINTED OUT THAT THE DECISION OF SAHARA INDIA VS. C IT CLEARLY LAYS DOWN THAT SINCE THE LAW AS STATED ABOVE WILL APPLY ONLY PROSPECTIVELY M.A. NO. 674/MUM/2010 M/S WELSPUN INDIA LTD. 3 WITH EFFECT FROM 01/11/2006, IT WILL NOT BE OPEN TO THE ASSESSEE TO URGE BEFORE THE APPELLATE AUTHORITIES THAT THE EXTE NDED PERIOD OF LIMITATION UNDER EXPLANATION 1(III) TO SEC. 153(3) WAS NOT AVAILABLE TO THE AO BECAUSE OF AN INVALID ORDER U/S 142(2A) OF T HE ACT. THE LEARNED DR FURTHER SUBMITTED THAT THE TRIBUNAL HAS FAILED T O CONSIDER THE ISSUE ON MERITS, FOR WHICH, HE RELIED UPON THE DECI SION IN THE CASE OF POORANMAL VS. CIT, 95 ITR 505. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE TRIBUNAL HAS PASSED A COMMON ORD ER FOR THE ASSESSMENT YEARS 2001-02, 2002-03 & 2003-04 BEING I TA NOS. 2277 TO 2279 AND 2281/M/07 DATED 27 TH FEBRUARY, 2009. IT IS SUBMITTED THAT AGAINST THE SAID ORDER OF THE TRIBUNAL, THE RE VENUE FILED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND TH E HONBLE JURISDICTIONAL HIGH COURT VIDE INCOME TAX APPEAL (L ) NOS. 1825 OF 2009 AND 1826 OF 2009, RELATING TO AY 2002-03 & 200 3-04, ORDERS DATED 6 TH AUGUST09 AND 10 TH AUGUST, 2009 DISMISSED THE APPEALS OF THE REVENUE. IT IS FURTHER SUBMITTED THAT THERE IS NO MISTAKE APPARENT ON RECORD IN THE ORDER PASSED BY THE TRIBUNAL WHERE IN THE TRIBUNAL UPHELD THE ORDER OF THE CIT(A) IN WHICH THE CIT(A) FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F RAJESH KUMAR AND OTHERS (SUPRA). ALTERNATIVELY, THE LEARNED COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CAS E OF SAHARA INDIA FIRM (SUPRA) HELD THAT THE RATIO LAID DOWN THEREIN PROSPECTIVELY APPLIES TO ONLY TO THAT CASE AND THE DECISION IS NOT IN GEN ERAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE ONLY POINT FOR CONSIDERATIO N BEFORE US IS WHETHER THE TRIBUNAL HAS COMMITTED A MISTAKE APPARE NT ON RECORD WHILE UPHOLDING THE ORDER OF CIT(A) OR NOT. IN THE CASE UNDER CONSIDERATION, THE AO HAD DIRECTED FOR SPECIAL AUDI T AS PER SECTION 142(2A) OF THE ACT WITHOUT GIVING OPPORTUNITY TO TH E ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) ON THE M.A. NO. 674/MUM/2010 M/S WELSPUN INDIA LTD. 4 GROUND THAT IT IS A VIOLATION OF PRINCIPLES OF NATU RAL JUSTICE. THE LEARNED CIT(A) FOLLOWING THE DECISION OF RAJESH KUM AR & OTHERS (SUPRA) HELD THAT WHILE REFERRING TO SPECIAL AUDIT U/S 142(2A) OF THE ACT, NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE, THE REFORE, THE SPECIAL AUDIT IS INVALID. WHEN THE MATTER CARRIED TO THE TR IBUNAL BY THE REVENUE, THE TRIBUNAL GAVE A FINDING THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE CIT(A) FOR THE REASON THAT THE CIT(A) FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA JESH KUMAR & OTHERS (SUPRA) AND INVALIDATED THE ACTION OF THE AO . WHILE DOING SO, THE TRIBUNAL HAS FURTHER OBSERVED THAT IN CASE OF S AHARA INDIA FIRM V. CIT (SUPRA) THE HONBLE APEX COURT HELD THAT AO WH ILE ORDERING SPECIAL AUDIT U/S 142(2A) OF THE ACT, AN OPPORTUNIT Y MUST BE GIVEN TO THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF SAHARA INDIA FIRM (SUPRA) AFFIRMED THE ORDER PASSED BY IT IN THE CASE OF RAJESH KUMAR & OTHERS (SUPRA). HOWEVER, THE HONBLE SUPREM E COURT HAS OBSERVED AS UNDER:- THERE IS NO DENYING THE FACT THAT THE LAW ON THE SU BJECT WAS IN A FLUX IN THE SENSE THAT TILL THE JUDGMENT IN RAJESH KUMAR WAS RENDERED, THERE WAS DIVERGENCE OF OPINION AMONGST V ARIOUS HIGH COURTS. ADDITIONALLY, EVEN AFTER THE SAID JUDGMENT , ANOTHER TWO- JUDGE BENCH OF THIS COURT HAD EXPRESSED RESERVATION ABOUT ITS CORRECTNESS. HAVING REGARD TO ALL THESE PECULIAR CI RCUMSTANCES AND THE FACT THAT ON DECEMBER 14, 2006, THIS COURT HAD DECLINED TO STAY THE ASSESSMENT PROCEEDINGS, WE ARE OF THE O PINION THAT THIS COURT SHOULD BE LOATHE TO QUASH THE IMPUGNED O RDERS. ACCORDINGLY, WE HOLD THAT THE LAW ON THE SUBJECT, C LARIFIED BY US, WILL APPLY PROSPECTIVELY AND IT WILL NOT OPEN TO TH E APPELLANTS TO URGE BEFORE THE APPELLATE AUTHORITY THAT THE EXTEND ED PERIOD OF LIMITATION UNDER EXPLANATION 1(III) TO SECTION 153( 3) OF THE ACT WAS NOT AVAILABLE TO THE AO BECAUSE OF AN INVALID ORDER U/S 142(2A) OF THE ACT. HOWEVER, IT WILL BE OPEN TO THE APPELLA NTS TO QUESTION BEFORE THE APPELLATE AUTHORITY, IF SO ADVISED, THE CORRECTNESS OF THE MATERIAL GATHERED ON THE BASIS OF THE AUDIT REP ORT SUBMITTED UNDER SUB-SECTION (2A) OF SECTION 142 OF THE ACT. 7. ON CAREFUL CONSIDERATION OF THE ABOVE OBSERVATIO NS OF THE HONBLE SUPREME COURT, WE AGREE WITH THE SUBMISSION S MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DECISION RENDERED IN THE SAID CASE PROSPECTIVELY APPLIES TO THAT CASE ALONE AND NOT MADE IN GENERAL. WE ARE OF THE VIEW THAT THE TRIBUNAL HAS N OT M.A. NO. 674/MUM/2010 M/S WELSPUN INDIA LTD. 5 CONSIDERED/DISCUSSED WHETHER THE LAW LAID DOWN BY T HE HONBLE SUPREME COURT IN THE CASE OF SAHARA INDIA FIRM (SUP RA) IS RETROSPECTIVE OR PROSPECTIVE OPERATION. THEREFORE, THERE IS NO MISTAKE APPARENT ON RECORD AND THE TRIBUNAL HAS NOT COMMITT ED ANY MISTAKE AS IT IS UPHELD BY THE ORDER OF CIT(A), WHO DISMISS ED THE ACTION OF THE AO FOLLOWING THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF RAJESH KUMAR & OTHERS (SUPRA) WHEREIN IT WAS HELD T HAT WHILE REFERRING TO SPECIAL AUDIT U/S 142(2A) OF THE ACT, THE AO MUST BE GIVEN AN OPPORTUNITY TO THE ASSESSEE. IN SO FAR AS THE MERITS OF THE CASE AS SUBMITTED BY THE LEARNED DR, ONCE THE CIT(A ) QUASHED THE SPECIAL AUDIT ITSELF, AND WHEN WE ARE DECIDING THE M.A. FILED BY THE ASSESSEE U/S 254(2), FURTHER GOING INTO MERITS OF T HE CASE DOES NOT ARISE AT ALL AT THIS STAGE. IN VIEW OF THE ABOVE DI SCUSSION, THE M.A. FILED BY THE REVENUE IS HEREBY DISMISSED. 8. IN THE RESULT, THE MA FILED BY THE REVENUE IS DISMISSED, AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF AUGUST, 2011. SD/- SD/- (P.M. JAGTAP) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 12 TH AUGUST, 2011 KV M.A. NO. 674/MUM/2010 M/S WELSPUN INDIA LTD. 6 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, F BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 08/08/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 09/08/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER