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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER PER ANIL CHATURVEDI, AM :
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.
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
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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.
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).
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.
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.
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.
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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.”
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.
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.
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.”
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
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Shareholders reported as 349 ITR 336. Ld.D.R. did not seriously object
to the additional grounds raised now by the assessee.
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.
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.
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.
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
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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.
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).
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.
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
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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.
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).
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.
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.
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.