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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE
BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No.80/Bang/2020 Assessment Year : 2005-06
M/s Gita Refractories Pvt. Ltd., The Income Tax Officer, Vs. Bo. 2, Opp. Kalpana Chawla Road, Ward-11(2), 5th Main, 4th Cross, Bhoopsandra, Bengaluru. Sanjay Nagar, RMV 2nd Stage, Bengaluru-560 094. PAN : AAACG5273C APPELLANT RESPONDENT
Assessee : Shri V Narendra Sharma, Advocate by Revenue : Shri K Sankar Ganesh, JCIT (DR) by
Date of hearing : 08.09.2022 Date of : 26.09.2022 Pronouncement
O R D E R Per Laxmi Prasad Sahu, Accountant Member :-
This is an appeal filed by the assessee against the order passed by the CIT(A)-3 dated 28/11/2019 on the following grounds of appeal:-
ITA No.80/Bang/2020 Page 2 of 14 “1. The learned CIT (A) erred in passing the order in the manner which he did. 2. On the facts and in the circumstances of the case, the reopening of the assessment u/s 147 of the Act by issuing the notice u/s 148 was opposed to law and accordingly the assessment as made is liable to be cancelled. 3. The conditions precedent being absent, the re-opening of the assessment u/s 147 is bad in law. 4. The learned CIT(A) erred in upholding a sum of Rs. 1,43,09,000/- towards alleged suppressed sale of Scarp Without appreciating the submission of the Appellant. 5. The learned CIT(A) further erred in upholding an addition of Rs. 4,68,450/- without appreciating the submission made by the Appellant 6. Without prejudice the addition is excessive arbitrary and excessive and ought to be reduced substantially. 7. The learned CIT(A) erred in upholding the interest under sec 234B and 234D of the Act 8. For these and such other grounds that may be urged at the time of hearing the Appellant prays that the appeal may be allowed.”
The assessee has also filed additional ground of appeal on 18.01.2021 bearing request serial No.345 which is as under:- “These are legal ground and arising from the fact already before lower authority. In fact no specific ground was raised. Hence now we are raising specific ground. In the circumstances it is prayed that the additional ground now raised may kindly be linked up with the original grounds of appeal and may kindly be admitted and disposed of on merits in the interest of justice.”
ITA No.80/Bang/2020 Page 3 of 14 1. The Mandatory sanction under 151 of the Act is not taken and the assessment proceedings are void ab initio on the facts and circumstances of the case. 2. Without prejudice, the mandatory sanction under section 151 of the Act,, is not taken in accordance with law and the assessment proceedings ,.a void ab initio on the facts and circumstances of the case.
The brief facts of the case are that the assessee filed return of income on 31.10.2005 declaring loss of Rs.21,19,532/- and paid tax as per section 115JB. The case was selected for scrutiny and other statutory notices were issued to the assessee. The assessment was completed u/s 143(3) after making addition on account of ESI & PF expenses of Rs.124,448/- and disallowance u/s 40A(3) of Rs.34,44,337/- and Rs.2,24,952/- was made. The assessee filed appeal before the CIT(A), he partly allowed the appeal of the assessee. The assessee filed appeal before the ITAT and ITAT adjudicated the matter on 05.02.2010 vide ITA No.702/Bang/2009. Later on, the CIT exercised his revisionary power u/s 263 on two grounds : 1) excess claim of additional depreciation 2) wrongly allowed the commission expenses.
The CIT after considering the submissions of the asseseee directed to pass fresh order after considering these two issues vide order dated 25.03.2010. The AO passed consequential order on 23.08.2010 after disallowing as per observation of the CIT.
ITA No.80/Bang/2020 Page 4 of 14 5. A survey u/s 133A was conducted on the assessee’s premises on 22.03.2011. The assessment was re-opened u/s 147 of the Act by issuing notice u/s 148 dated 22.03.2012 based on the information contained in the books of accounts and other documents impounded during the course of survey after obtaining approval from the Addl.CIT dated 21.03.2012. The assessee submitted that a letter, on 9.4.2021 requesting that the original return filed u/s 139 may be replaced as return in response to the notice u/s 148 of the Act thereafter other statutory notices were issued to the assessee and reassessment was completed assessing the income at Rs.1,47,47,157/-.
Aggrieved, the assessee filed appeal before the CIT(A) and he dismissed the appeal of the assessee.
Against the order of CIT(A), the assessee filed appeal before the ITAT.
The ld.AR submitted that the additional ground is a legal ground, which can be raised at any stage of the proceedings and he relied on the judgment of Hon’ble Supreme Court in the case National Thermal Power Corporation Vs. CIT [1998] 97 Taxman 58 (SC). On the other hand, the ld.DR. opposed to filing the additional ground after so much lapses of time and it should not be accepted. Considering the issue involved by way of raising additional ground
ITA No.80/Bang/2020 Page 5 of 14 which is a legal issue, therefore, relying on the judgment of Hon’ble Supreme Court cited supra, the additional ground is admitted.
The ld.AR submitted that the notice u/s 143 has been issued after 4 years and after obtaining approval from the Addl.CIT is bad in law since the case was completed u/s 143(3). The remand were also called by this CIT(A), which was submitted by the DCIT on 28/08/2019. The Addl.CIT has no power to give approval for issuing notice u/s 148. The competent authority is CIT. He relied on the following judgments.
The ld.DR relied on the order of the lower authorities.
After considering the rival submissions, perusing the entire material on record and examining the order of the lower
ITA No.80/Bang/2020 Page 6 of 14 authorities, we observe that originally the assessment was made u/s 143(3) and later on the assessment was revised u/s 263 of the Act for the two issues. The AO passed consequential order as per the direction of CIT u/s 143(3) r.w.s 263. A survey u/s 133A of the Act was conducted in the business premises of the assessee company on 22/03/2011 and certain books of accounts and other documents were impounded. After obtaining approval from the Addl.CIT Shri Jayaram on 21.03.2012 vide F.No.04/Addl.CIT/R- 11/2011-12, the AO issued notice u/s 148 of the Act on 22/03/2012, the copy of approval is placed at paper book page No.6. The fact is also emanating from the remand report called by the CIT dated 26.08.2019 and from the assessment order also.
Now we are reproducing the relevant section which is as under:- Income escaping assessment. 76147. If the 77[Assessing] Officer 78[has reason to believe79] that any income chargeable to tax has escaped assessment79 for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess79 such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure79 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts80 necessary for his assessment, for that assessment year.
ITA No.80/Bang/2020 Page 7 of 14 Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily80 amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but— (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.]
Sanction for issue of notice. 151. (1) In a case where an assessment under sub-section (3) of section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under section 14894[by an Assessing Officer, who is below the rank of Assistant Commissioner 95[or Deputy Commissioner], unless the 96[Joint] Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of 96[Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the 96[Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.]
ITA No.80/Bang/2020 Page 8 of 14 13. From the above quoted section, it is clear that the issuance of notice u/s 148 of the Act, in the case of reassessment completed u/s 143(3) beyond four years, the CCIT or CIT has power to give approval u/s 151 for reopening of the completed assessment. In the impugned case, the Add.CIT cannot give approval for reopening the assessment completed u/s 143(3), which is clear from the above cited letter, which is placed on record at P.B.No. 06. In view of this, the approval granted by the Addl. CIT is not in conformity as per the provisions of the Act for reopening of the completed assessment. The case law relied by the ld.AR support the case of the assessee. A similar issue has been decided by the Hon’ble jurisdictional High Court in the case of Commissioner of Income- tax Bangalore Vs. HM Construction reported in [2014] 43 taxmann.com 105 Karnataka wherein it has been held as under:- “3. We have heard the learned counsel for the parties and perused the relevant materials on record including the order of the Tribunal. 4. It appears to us that the Tribunal while dealing with the second question of law held that reopening of the assessment was bad in law as the reasons recorded were not in proper format as contemplated by sub-section (2) of section 148 of the Act and that the prior approval of the Commissioner under section 151 for issuing notice under section 148 of the Act was not obtained. Learned counsel for the parties are ad- idem that if the second question of law is answered agaiithe revenue, the appeal should fail and in that event the first question need not be considered on merits. In view thereof, with the assistance of the learned counsel for the parties. we have gone through the relevant materials on record and so also the provisions contained in Sections 147. 148 and 151 of
ITA No.80/Bang/2020 Page 9 of 14 the Act. The Tribunal has extensively considered the materials on record to hold that the reasons recorded by the Assessing Officer for reopening of the assessment for the year 1995-96 were not in the proper format. Though we may not agree with the findings recorded by the Tribunal in respect thereof, we have examined whether prior approval of the Commissioner as contemplated by section 151 of the Act was obtained, taking the case of Revenue that the reasons recorded under section 148(2) of the Act were sufficient and were in proper format. 5. Having regard to the scheme of the provisions contained in sections 147. 148 and 151 of the Act, it is clear as crystal that if the assessment is reopened after expiry of the four years from the end of relevant assessment year, no notice under section 148 of the Act shall be issued unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issuance of such notice. To examine whether the approval under section 151(1) of the Act was obtained, as observed earlier, we proceed on the assumption that the Assessing Officer had recorded good and sufficient reasons as required under sub-section (2) of section 148 of the Act. Admittedly, neither the reasons recorded by the Assessing Officer under sub-section (2) of section 148 of the Act nor approval granted by the Chief Commissioner or Commissioner as contemplated by the proviso to sub-section (1) of section 151 of the Act is on record. 6. Mr. Aravind, learned counsel appearing for the revenue fairly submitted that the original record/file does not contain either the reasons under section 148(2) or the approval granted by the Chief Commissioner or Commissioner under section 151(1) of the Act. He placed the original file before us for our perusal. We also did not find those documents in the file. He also, on instructions, submitted that even the record that was placed for consideration of the Tribunal has been destroyed. Thus, in the absence of either the reasons recorded by the Assessing
ITA No.80/Bang/2020 Page 10 of 14 Officer or approval granted by the Chief Commissioner or Commissioner, we made an attempt to find out from the other materials on record whether the approval under Section 151 of the Act was obtained before issuing the notice under section 148 thereof. 7. In this connection, Mr. Shankar, learned counsel for the respondent-assessee invited our attention to the order of assessment passed in the connected ITA No.641/2006 dated 26-02-2004, of the very same assessee, pertaining to the assessment year 1996-97. He submitted that insofar as reopening of the assessment for the assessment year 1996-97 is concerned, the approval of theCorrmissioner of Income Tax, as required under section 151 of the Act was obtained and it was also placed on record in that case. In support of this contention, he invited our attention to the observations made by the Assessing Officer at paragraph 2. In this paragraph, the Assessing Officer has observed that "Notice under section 148 was issued to the assessee on 26-3-2003, with the approval of the Commissioner of Income Tax." He submitted that such observations do not find place in the order for the assessment year 1995-96. That apart, it appears from, the observations made by the Appellate Authority, in the order dated 30-03- 2004, the assessee had raised the following ground of challenge: "It is contended that the order of reassessment is bad in law and void-A b-initio for want of requisite jurisdiction since the mandatory requirements to assume jurisdiction u/s. 148 of the Act did not exist and have not been complied with." It is on the basis of this ground of challenge, Mr.Shankar, learned counsel appearing for the assessee vehemently submitted that though such ground was raised, the Appellate Authority did not examine whether approval as contemplated under section 151 of the Act was obtained. 8. On the other hand, Mr. K.V. Aravind, learned counsel appearing for the revenue invited our attention to certain observations made by the Assessing Officer and the Tribunal
ITA No.80/Bang/2020 Page 11 of 14 and submitted that it is possible to draw an inference that approval of the Commissioner under section 151 of the Act was obtained by the Assessing Officer before issuing notice under section 148 thereof. Though, he made feeble attempt to invite our attention to the orders of the Tribunal and of the authorities below in support of this contention, he could not and did not point out any such observation so as to hold that approval under section 151 was obtained before issuing notice under section 148 of the Act. He fairly submitted that there is no finding recorded by either of the authorities below including the Tribunal that approval as contemplated by section 151 of the Act was either referred to or mentioned in the orders. The Tribunal has, at length, considered the issue whether the reasons recorded by the Assessing Officer for reopening of the assessment were in proper format, and held that no such reasons were recorded. The Tribunal recorded such finding and further observed that the note sent to the Commissioner by the Assessing Officer was not sanctioned/approved under section 151 of the Act. In the absence of the order granting approval by the Commissioner under section 151 or in the absence of any indication in the orders passed by the authorities below including the order of the Tribunal or the materials on record that such approval was obtained, it would not be possible to assume that such approval under section 151 of the Act was obtained. The provisions contained in section 151 of the Act are indubitably mandatory in nature and since compliance thereof was either not made or could be established by the revenue, in our opinion, benefit will have to be given to the assessee. Though we do not agree with all the reasons recorded by the Tribunal in the order, it has rightly decided the second question in favour of the assessee. We do not find any reason to interfere with the findings recorded by the Tribunal on the second question and hence, the appeal will have to be dismissed on this ground alone. Order accordingly. 9. Before we part, we observe that causing disappearance of certain documents from the record including reasons
ITA No.80/Bang/2020 Page 12 of 14 recorded by the Assessing Officer as contemplated by sub- section (2) of Section 148 of the Act and approval, if any, obtained under section 151 of the Act may not be innocent or innocuous. The Commissioner, therefore ought to have conducted an enquiry, to find out whether the approval under section 151 of the Act was obtained or if yes, how it disappeared from the record and who was responsible for the same? Though we do not wish to record any positive finding on the conduct of the assessee, we feel that the authorities below ought to have taken disappearance of record to its logical conclusions. 10. In the result, the second question is answered in favour of the assessee and against the revenue and as a result thereof the appeal fails and dismissed as such. No costs.”
Respectfully following the above judgment cited supra, we quash the reassessment proceedings and allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed. Order pronounced in court on 26th day of September, 2022
Sd/- Sd/- (BEENA PILLAI) (LAXMI PRASAD SAHU) Judicial Member Accountant Member
Bangalore, Dated, 26th September, 2022 / vms /
ITA No.80/Bang/2020 Page 13 of 14 Copy to:
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, Bangalore
ITA No.80/Bang/2020 Page 14 of 14 1. Date of Dictation ……………………………………
Date on which the typed draft is placed before the dictating Member ……………………. 3. Date on which the approved draft comes to Sr.P.S .……………………………. 4. Date on which the fair order is placed before the dictating Member ……………….. 5. Date on which the fair order comes back to the Sr. P.S. ………………….. 6. Date of uploading the order on website…………………………….. 7. If not uploaded, furnish the reason for doing so ………………………….. 8. Date on which the file goes to the Bench Clerk ………………….. 9. Date on which order goes for Xerox & endorsement…………………………………… 10. Date on which the file goes to the Head Clerk ……………………. 11. The date on which the file goes to the Assistant Registrar for signature on the order ………………………………. 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order …………………………. 13. Date of Despatch of Order. ……………………………………………..