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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 19.03.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 1995-96.
The assessee has raised the following grounds of appeal:
1. The Ld. CIT(A) ought to have appreciated that as per the decision of Hon'ble Special Court dated 30.04.2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Late Shri Harshad S. Mehta and hence the income assessed by the Assessing Officer ought to have been taxed in the hands of Late Shri Harshad S. Mehta and not in the hands of the appellant.
2. The Ld. CIT(A) has erred in law and in facts in passing order without complying with the principles of natural justice.
4. The Ld. CIT(A) ought to have appreciated that the appellant was entitled to deduction on account of interest expenditure.
5. The Ld. CIT (A) has erred in law and in facts in not granting deduction under chapter VI A of the Act.
6. The Ld. CIT (A) has erred in law and in facts in confirming interest charged u/s. 234A, 234B and 234C of the Act.
7. The Ld. CIT (A) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant was subjected to the provisions of TDS and hence on the said amount of tax, no interest can be computed u/s. 234B and 234C of the Act.
8. The appellant craves leave of Your Honour to add to, amend and / or alter all or any of the grounds of appeal.”
3. Besides, the assessee has also raised additional ground which is as under: “1. The Ld. CIT(A) erred in law and in facts in not appreciating that the reopening of assessment and passing of assessment order dated 30.03.2001 was bad in law and invalid.”
The issue raised in the additional ground of appeal is jurisdictional issue challenging reopening the assessment and therefore assessment order dated 30.03.2011 being bad in law.
The facts in brief are that the return of income was not filed by the assessee. The notice under section 147 of the Act was issued by AO on 31.03.1999 which was served upon the assessee. Thereafter, the assessment was framed vide order dated 30.03.2001 u/s 144 read with section 147 of the Act. The assessee challenged the validity of reopening of assessment before the Ld. CIT(A) but the same was not pressed. Now assessee by raising the additional ground seeks to raise this issue before the Tribunal. The Ld. Counsel of the assessee
3 Rina S. Mehta submitted that the said ground was not taken inadvertently while filing the appeal before the Tribunal. The Ld. A.R. stated that the said ground is a legal ground which challenges the jurisdiction of the AO in initiating the reassessment proceedings and passing reassessment order and goes to the root of the matter and may be admitted/. The ld counsel relied on the following decisions in defense of his arguments: 1. National Thermal Power Corporation vs. CIT (229 ITR 386 SC) 2. Jute Corporation of India vs. CIT [187 ITR 688 (SC)] 3. Ahmedabad Electricity Co. Ltd. vs. CIT [199 ITR 351 (Bom.) (FB)] 4. CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” (2012) 349 ITR 336 (Bom.)
The Ld. A.R. therefore submitted that the additional ground may kindly be admitted and adjudicated in view of the ratio laid down in the above decisions.
The Ld. D.R., on the other hand, objected to the admission of the additional ground on the ground that the issue was not pressed by the assessee before the Ld. CIT(A) though the ground was specifically raised and also this being a second round of litigation, the assessee has not taken this in the earlier round and thus it can not be raised now before the Tribunal and thus prayed before the Bench that the same may kindly be dismissed.
Replying to the objection raised by the Ld. D.R., the Ld. Counsel of the assessee submitted that even if the issue is not pressed before the Ld. CIT(A), it would not preclude the assessee from raising the ground before the Tribunal. The Ld. A.R. relied on a couple of decisions namely;
The Ld. Counsel submitted that in both these decisions it has been held that even though the issue is not pressed before the Ld. CIT(A) during appellate proceedings regarding the validity of reassessment proceedings, the same can be raised before the Tribunal.
After hearing both the parties and perusing the material on record, we observe that the issue raised by the assessee in the additional ground of appeal is purely legal and technical in nature challenging the jurisdiction of the AO to initiate the reassessment proceedings and consequently framing the assessment order which though challenged before the Ld. CIT(A) but not pressed during the course of hearing. We are of the considered view that the issue as raised by the assessee by way of additional ground is a legal issue which does not require any further verification of facts or record and has to be admitted for adjudication. We do not find any merit in the objections raised by the Ld. D.R. that this is second round of litigation and this issue was not raised in the first round. The case of the assessee which is clearly covered by the decisions of the Hon’ble Supreme Court in the case of National Thermal Power Corporation vs. CIT (supra), Jute Corporation of India vs. CIT (supra) & Ahmedabad Electricity Co. Ltd. vs. CIT (supra). In the case of Inventors Industrial Corporation Ltd. vs. CIT (supra) it has been held that assessee is entitled to challenge the jurisdiction to initiate reassessment proceedings before appellate authorities in the second round of proceedings even though it
5 Rina S. Mehta has not been raised earlier or in the first round of proceedings. In the case of P.V. Doshi vs. CIT (supra), the Hon’ble Gujarat High Court while reversing the order of the Tribunal has held that there is no bar on raising the issue before the Tribunal even if in the first round this is not pressed when the matter was taken up before appellate Assistant Commissioner and thus answered the question raised in favour of the assessee and against the Revenue. We, therefore, respectfully following the same admit the additional ground raised by the assessee challenging the jurisdiction of the AO to frame assessment.
The Ld. A.R. submitted before the Bench that the AO has not provided the copy of reasons recorded for reopening the assessment despite the repeated requests made by the assessee. The Ld. A.R. submitted that failure of the AO to provide copy of reasons recorded rendered the initiation of reassessment proceedings and consequent assessment order as invalid and void. The Ld. A.R. submitted that assessee has requested the AO on numerous occasions vide letter dated 19.04.1999, 02.03.2001, 30.05.2018 and 01.05.2019 to provide copies of reasons recorded, however, the request of the assessee went unheeded till date. The Ld. A.R. drew the attention of the Bench to the above letters pointing out that the assessee has specifically requested for supply of reasons recorded for reopening the assessment. The Ld. A.R. submitted that these facts were never denied by the Ld. D.R. at the time of hearing and thus it can be presumed that AO has not recorded any reason for reopening the assessment and on this count itself the notice under section 148 of the Act and consequent assessment order may be quashed. The Ld. A.R. relied on a series of 6 Rina S. Mehta decisions namely CIT vs. IDBI Ltd. (76 Taxmann.com 227)(Bom), CIT vs. Videsh Sanchar Nigam Ltd. (340 ITR 66)(Bom), Pr. CIT vs. Jagat Talkies Distributors (398 ITR 13)(Del) and PCIT V Ramaiah(2019)103taxmann.com202(SC).
The Ld. D.R., on the other hand, strongly opposed the arguments of the Ld. A.R. by submitting that assessee has not filed any return of income in response to notice issued under section 148 and the copy of reasons recorded were not provided to the assessee as no return of income was filed by the assessee. The Ld. D.R. submitted that the assessment framed by the AO is very much valid and deserved to be sustained primarily for the reason that assessee has not complied with the notice issued under section 148 of the Act by filing in return of income and in defence of argument the Ld. D.R. relied on the decisions of Hon’ble Supreme Court in the case of DCIT vs. Zuari Estate Development & Investment Co. Ltd. (373 ITR 661).
In the rebuttal, the Ld. A.R. of the assessee submitted that the reopening provisions not be invoked and AO can not assume jurisdiction under section 147 of the Act merely because the assessee has not filed the return of income and in such cases the AO is well within its right to complete the assessment under section 144 of the Act. The Ld. A.R. submitted that it is trite law that assessment can be reopened only by the AO only if he has some tangible material to suggest that some income has escaped assessment and thus merely because of return of income is not filed it can not be a reason to reopening the assessment. The Ld. A.R. also distinguished the decision of the Apex Court referred to by the Ld. D.R. The Ld. A.R. also 7 Rina S. Mehta submitted that there were some practical difficulties which were beyond the control of the assessee as to why the income tax return could be filed before the AO. The Ld. A.R. submitted that even after the completion of the assessment, the reasons were not supplied to the assessee. The Ld. A.R. also submitted that if the arguments of the Ld. D.R. qua non supplying of reasons on the ground that AO has not filed any return of income is accepted it would give blanket power to re-open the assessment in all the cases where assessee does not file the return of income even though the reopening of the assessment was beyond the scope of section 147 of the Act. The Ld. A.R. submitted that decision of the Hon’ble Supreme Court in the case of DCIT vs. Zuari Estate Development & Investment Co. Ltd. (supra) was rendered on completely different set of facts and not applicable to the present case. The Ld. A.R. submitted that in that case the assessment was completed by way of intimation under section 143(1) of the Act and subsequently reassessment proceedings were taken up wherein the contentions of the assessee was that reopening was based upon the change of opinion as the issue has already been verified as intimation under section 143(1) is already issued and the Hon’ble Court has held that there is no assessment carried out and it will not be a case of change of opinion and reopening was held to be valid. The Ld. A.R. submitted that the present case is with respect to non supply of reasons and not qua the change of opinion and thus this is clearly distinguishable on facts. The Ld. A.R. finally prayed before the Bench that the reassessment proceedings as well as the consequent reassessment order may be quashed as the same is without jurisdiction.
8 Rina S. Mehta 13. We have heard the submissions of both the parties and perused the material on record including the various citations by the rival parties. We observe that in this case the assessee has not filed any return of income despite the issue of notice under section 148 due to the fact that all the records of the assessee were seized by the various government agencies and assessee was not having any access to such records at the relevant point of time. This fact was brought to the notice of the AO. Thereafter, the assessee requested by various letters dated 19.04.1999, para 5, 02.03.2001 para 9, during course of the assessment proceedings to supply the reasons but AO did not supply any reasons recorded for re-opening. Even after completion of the assessment, the assessee again requested vide letter dated 30.05.2018 and 01.05.2019 to supply copy of reasons but some were not supplied to the assessee. In our opinion, once it has established that assessee has not been supplied copy of reasons recorded, then the reassessment proceedings as well as the assessment framed as a result thereof are invalid. The case of the assessee is squarely covered by the decision of the Hon’ble Bombay High Court in the case of CIT vs. IDBI Ltd. (supra) wherein it has been held that where the reasons recorded are not supplied to the assessee, the order of reassessment would be without jurisdiction. The Hon’ble Bombay High Court while passing the decision followed the earlier order in the case of CIT vs. Videsh Sanchar Nigam Ltd. (supra). The case of the assessee is also covered by the decision of Hon’ble Delhi High Court in the case of Pr. CIT vs. Jagat Talkies Distributors (supra) wherein it has been held that failure to provide copy of reasons recorded is not a procedural lapse
9 Rina S. Mehta and such failure renders the notice and consequent proceedings as void ab initio. The Hon’ble Apex court in the case of Pr CIT Vs V. Ramaih (supra) held that non communication of reasons recorded for re-assessment to the assessee did not amount to mere procedural lapse and is a fatal lapse and goes to the roots of the case. The decision relied upon by the Ld. D.R. in the case of DCIT vs. Zuari Estate Development & Investment Co. Ltd. (supra) was perused and found to be distinguishable on facts. We, therefore, respectfully following the decisions as stated hereinabove quash the reassessment proceedings and the consequent order passed by the AO. Since we have allowed the appeal of the assessee on additional ground raised, the main ground raised by the assessee need not be adjudicated.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 17.07.2019.