ABHIJIT DESHPANDE, PANDIT AUTOMOTIVE PRIVATE LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 4, PUNE

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ITA 492/PUN/2018Status: DisposedITAT Pune03 May 2019AY 2010-117 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO's failure to dispose of the assessee's objections to the re-opening of assessment by passing a speaking order renders the reassessment order bad in law. Consequently, the reassessment order was set aside.

What were the facts?

The assessee's assessment was re-opened under Section 147. The assessee objected to the re-opening, but the Assessing Officer (AO) did not dispose of these objections by passing a speaking order. The AO proceeded to pass the reassessment order without addressing the assessee's objections.

What were the issues?

Whether the reassessment proceedings are invalid due to the AO's failure to dispose of the assessee's objections by a speaking order. Whether the reassessment order is bad in law for non-compliance with mandatory procedural requirements.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(7)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

For Appellant: Shri Kishore Phadke
For Respondent: Shri Pankaj Garg
Hearing: 06.02.2019Pronounced: 03.05.2019

आदेश / ORDER PER ANIL CHATURVEDI, AM :

1.

This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) – 2, Pune dt.22.02.2017 for the assessment year 2010-11.

2.

The relevant facts as culled out from the material on record are as under :-

Assessee is an individual who electronically filed its return of income for A.Y. 2010-11 on 28.09.2010 declaring total income at Rs.30,20,136/-. The case was re-opened by issuing notice u/s 148 of

ITA No.492/PUN/2018

the Act which was issued on 09.07.2013 and duly served on the

assessee on 26.07.2013. Thereafter the case was taken up for scrutiny

and assessment was framed u/s 143(3) r.w.s. 148 of the Act and the

total income was determined at Rs.1,32,58,278/-. Aggrieved by the

order of AO, assessee carried the matter before Ld.CIT(A), who vide order

dt.22.02.2017 (in appeal No.PN/CIT(A)-2/DCIT Cir-4/PN/22/2015-16)

dismissed the appeal of assessee. Aggrieved by the order of Ld.CIT(A),

assessee is now in appeal before us and has raised the following

grounds :

“1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in dismissing the plea of the assessee that re-opening of the assessment invoking S. 147 was illegal and without jurisdiction since the action was taken by the A.O. keeping the valid return of income filed pending for assessment. The reliance was placed on the Hon'ble Supreme Court judgment. The reopening action u/s 147 being illegal and without jurisdiction the consequential assessment is also bad in law. It be quashed.

2.

On the facts and in the circumstances of the case and in law the Ld. CIT(A) ought to have considered the plea of the assessee favourably that reasons recorded (undated) were without approval of the Addl. CIT as required by S. 151 of the Act. The mentioning in the assessment order only that prior approval of the Addl. CIT was obtained will not comply the mandatory provisions of law. The assessment, therefore, is illegal and without jurisdiction. It be quashed setting aside the order of the Ld. CIT(A).

3.

On the facts and in the circumstances of the case and in law the decision relied upon by the Ld. CIT(A) for his conclusion are distinguishable on facts and law. The reliance placed on those precedents are under misconception of law.

4.

On the facts and in the circumstances of the case and in law the addition made invoking the provisions of Sec.2(22)(e) to tax the deemed dividend for non-availability of accumulated profits was illegal. In the absence of sufficient accumulated profits any payment made by closely held company by way of advance or loan to a shareholder cannot be treated as deemed dividend u/s 2(22)(e) of the Act. The addition made by the A. O. on this count and confirmed by Ld. CIT(A) is not sustainable in law. It be deleted.

5.

On the facts and in the circumstances of the case and in law the Ld. CIT(A) failed to appreciate properly the facts of the case for coming to the conclusion that the deemed dividend of Rs. 1,02,38,142/- u/s 2(22)( e) is taxable in the hands of the assessee. The law has no sanction to it. The addition be deleted.

ITA No.492/PUN/2018

6.

On the facts and circumstances of the case and in law the appeal is delayed by few days. The assessee was prevented by sufficient cause. The balance of convenience is in favour of the assessee. The delay is not intentional. The appellant will file his application for condonation of delay supported by affidavit at the time of hearing. The delay be condoned and the appeal be admitted for hearing in accordance with the provisions of law.”

3.

Subsequently, assessee has raised additions grounds which reads

as under :

“1. Appellant contends that the reassessment proceedings initiated in Appellant's case were based on mere suspicion and not based on a valid reason to believe escapement of income. From the "reasons" recorded, it reveals, no any conspicuous application of mind is reached to form belief of escapement of income.

2.

Appellant contends that the reassessment order passed u/s 147 of the ITA, 1961 on 27/3/2015 is bad in law since, objections raised to the reassessment proceedings were not disposed-off by passing a speaking order by the learned DCIT, Circle-4, Pune. The I-T authorities ought to have appreciated that objections to "reasons" for belief of escapement of income, ought to be disposed off by a speaking order and that too, at least 4-5 weeks prior to the last date of framing a reassessment order, which was not so ensured in the matter.

3.

Appellant contends that there is no reason for taxing the advances made by M/s Pandit Automotive Private Limited to the other three group companies as deemed dividend. Learned I-T authorities ought to have appreciated the following issues before concluding the advances as deemed dividend u/s 2(22)(e) –

a. Commercial expediency in making the advances. b. Actual transactions during the A.Y. 2010-11. C. Insufficiency of profit.”

4.

With respect to additional grounds, it is assessee’s submission

that the additional grounds being legal grounds and since it goes to the

root of the issue involved in the appeal, the same be admitted. With

regard to raising an additional ground and the admissibility, he relied

on the decision of Hon’ble Apex Court in the case of National Thermal

Power Co., Ltd., Vs. CIT reported in 229 ITR 383 (SC) and the decision of

Hon’ble Bombay High Court in the case of Pruthvi Brokers and

ITA No.492/PUN/2018

Shareholders reported as 349 ITR 336. Ld.D.R. did not seriously object

to the additional grounds raised now by the assessee.

5.

On the issue of admission of additional grounds raised by the

assessee, considering the aforesaid facts and in view of the ratio laid

down by the Hon’ble Apex Court in the case of National Thermal

(supra), we admit the additional grounds of appeal filed by the assessee

for adjudication.

6.

The case file reveals that there is delay of 253 days in filing the

present appeal. Assessee filed an affidavit wherein he inter-alia

submitted that the delay of 253 days in filing the present appeal

occurred due to bonafide mistake and it is purely unintentional and

therefore prayed that the delay of 253 days be condoned. Ld.D.R. did

not seriously object to the prayer of condonation.

7.

On the issue of condonation of delay of appeal, we have gone

through the petition filed by the assessee and heard the Ld.D.R. After

considering the reasons stated in the affidavit, we are of the view that

the delay in filing the appeal has been satisfactorily explained. In view

of these facts, we condone the delay and admit the appeal for hearing.

8.

Before us, Ld.A.R. on the additional grounds submitted that AO

has re-opened the assessment and the reasons for re-opening were

supplied to the assessee along with notice u/s 148 of the Act

dt.09.07.2013. He submitted that the assessee vide letter dt.05.03.2014

objected to the re-opening; the copy of the aforesaid letter is placed at

Page 7 of the Paper Book. He submitted that AO did not dispose of the

objections of the assessee on the re-opening. He submitted that Hon’ble

ITA No.492/PUN/2018

Apex Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO [2003]

259 ITR 19 (SC) has held that AO is bound to furnish reasons within a

reasonable time and on receipt of reasons the assessee is entitled to file

the objections to the issuance of notice and the AO is bound to dispose

of the same by passing a speaking order. He therefore submitted that

in the present case, AO has not disposed of the objections raised by the

assessee. He therefore relying on the decision of Hon’ble Bombay High

Court in the cases of KSS Petron Private Limited Vs. ACIT in ITA No.224

of 2014 and M/s. Bayer Material Science Pvt. Ltd. in WP No.2502 of

2015 order dated 27.01.2016 submitted that when AO has not followed

the law laid down by the Hon’ble Apex Court, the order passed by the

AO lacks jurisdiction and therefore be set aside.

9.

Ld.D.R. on the other hand, supported the order of AO and

Ld.CIT(A). He also placed reliance on the decision of Home Finders

Housing Limited Vs. ITO reported in (2018) 94 taxmann.com 84 (SC).

10.

Ld.A.R. in the re-joinder submitted that the Hon’ble Apex Court in

the case of Home Finders Housing Limited has merely dismissed the

SLP without assigning any reasons for dismissal. He relying on the

decision of Hon’ble Apex Court in the case of Kunhayammed and others

Vs. State of Kerala and others reported in (2000) 245 ITR 360 submitted

that when the SLP is dismissed without assigning any reasons, then the

order is not a declaration of law by Supreme Court under Article 141 of

the Constitution.

11.

We have heard the rival submissions and perused the material on

record. It is an undisputed fact that on receipt of the reasons for

re-opening of the assessment u/s 148 of the Act the assessee vide letter

ITA No.492/PUN/2018

dt.05.03.2014 had raised objection to the re-opening of the assessment

proceedings initiated by the AO. The AO did not dispose of the

objections separately and proceeded and passed the re-assessment

order. Before us, Revenue has not placed any material on record to

demonstrate that the reasons recorded for reopening the assessment

was furnished to the assessee. In the present case it is thus clear that

despite the request by the assessee, the Assessing Officer has completed

the assessment without furnishing the reasons recorded for reopening of

assessment. Furnishing the reasons recorded for reopening of the

assessment is mandatory condition as held by the Hon'ble Supreme

Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO (supra)

wherein the Hon'ble Supreme Court has laid down the principle that

recorded reasons must be furnished to the assessee when the assessee

sought for the reasons.

12.

We also find that Hon’ble Bombay High Court in the case of M/s.

Bayer Material Science Pvt. Ltd. (supra) after considering the decision of

Hon’ble Apex Court in the case of GKN Driveshafts (supra) had held that

the reassessment order to be non sustainable when the objections to the

re-assessment were not disposed off by the AO. Similar view was taken

by the Hon’ble Bombay High Court in the case of KSS Petron Pvt. Ltd.

(supra).

13.

We further find that Hon’ble Bombay High Court in the case of

CIT Vs. Trend Electronics (2015) 379 ITR 456 (Bom) after considering

the decision of Hon’ble Bombay High court in the case of CIT Vs. Videsh

Sanchar Nigam Ltd (2012) 340 ITR 66 (Bom) has held that recorded

reasons as laid down by the Apex Court must be furnished to the

assessee when sought for so as to enable the assessee to object to the

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same before the AO. It has further held that the recording of reasons

and furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in the absence of reasons being furnished when

sought for would make an order passed on reassessment bad in law.

14.

Before us, Revenue has not placed any contrary binding decision in its support. Considering the totality of the aforesaid facts and relying

on the decisions cited herein above, we hold the reassessment order

passed by the AO to be bad in law and thus set it aside. Since we have

set aside the re-assessment order, the grounds raised on merits requires no adjudication as they have been rendered academic. Thus, the appeal

of the assessee is allowed.

15.

In the result, the appeal of the assessee is allowed.

Order pronounced on 3rd day of May, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER पुणे Pune; �दनांक Dated : 3rd May, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-2, Pune. 4. Pr. CIT-2, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, 5 ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.

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