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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under section 253 of Income-tax Act (the Act) is directed against the order of ld. CIT(A)-3, Thane dated 17.08.2017 for Assessment Year 2007-08 in confirming the addition made in Assessment Order passed under section 143(3) r.w.s 147 dated 27.03.2015. The assessee has raised the following grounds of appeal:
1) The Ld CIT(A)-3 Thane has seriously erred in upholding action of assessing officer in reopening validly completed assessment without appreciating that the said action was illegal and unjustified both on facts and in law. 2) Without prejudice to above the appellant submits that the order passed in pursuance to notice u/s 148 issued is ab-inito void and bad in law since a) The same has been passed without complying with mandatory conditions of see 147-151 of I.T Act 1961 Mum 2017-Anil Khubchandani b) In violation of principles of natural justice without providing copy of statement recorded behind the back of assessee as also without making the person on whose statement not only notice u/s 148 has been issued but even addition has been made available for cross examination inspite of a specific request having been made. 3) The appellant submits that even on merits the addition of Rs 67,79,200/- made by the assessing officer as alleged on money paid by the assessee is illegal and unjustified without there being any evidence except the self serving statement of the director of Hiranandani Group. 4) The Appellant craves leave to add, amend, alter and/or vary any of grounds at the time or before the hearing of this appeal. 5) The Appellant therefore prays that order passed by the lower authorities may please be held as illegal/ab-initio void and bad in law and/or addition of Rs 67,79,200/- made may please be deleted.
Brief facts of the case are that as gathered from the record of lower authority. The assessee filed his return of income for Assessment Year 2007-08 on 12.06.2007. The assessment was completed on 24.09.2009 under section 143(3) of the Act. Subsequently, the assessment was re- opened under section 147. Assessment was reopened on the basis of information received from the Director of Investigation-II, Mumbai that in the search and seizure action on Hiranandani Group Builders and Developers, it was noted that assessee has given on-money payment to M/s Crescendo Associates of M/s Hiranandani Group for purchase of Flat no. 2702, Glendale Hiranandani. After recording reasons of re-opening notice under section 148 was issued on 30.03.2014. The following reasons were recorded.
“Dated: 28/03/2014 The return of income for AY 2007-08 declaring income of Rs. 42,84,346/- was filed on 31.10.2007. Later, the return was processed u/s 143(1) of the I. T. 2 Mum 2017-Anil Khubchandani Act, 1961 by accepting the returned income on 08/12/2000 OR Later, the return was selected for scrutiny u/s. 143 of the I.T. Act, 1961 and the income was assessed at Rs. 43,52,270/- on 24.12.2009.
2. Subsequently, A search was conducted by Director of Investigation (Inv) - II, Mumbai on the Hiranandani Group Builders and Developers on 11.3.2014. During the course of search proceedings, evidence related to inter alia payment of on money (cash) amounting to Rs. 43,52,270/- in the F. Y. 2 006 - 07 by the assessee Shri. Anil Khubchandani being Flat purchaser, has been found. When the evidences were confronted to the Directors and promoters of the Hiranandani Group, they accepted the fact that on money was received on sale of various flats and the same has not been reflected in regular books of accounts. In view of these facts, the details on the record in the case of the Assessee, are perused and it is found that the Assessee has not disclosed the aforesaid payments to Hiranandani Group concern – M/s Cresendo Associates for the purchase of house property in his return filed. Thus, the assessee has made investment of Rs. 43,52,270/- which is not recorded in the books of account, maintained by the Assessee and the assessee has not offered any explanation about the nature and source of the investments. Hence, an amount of Rs. 43,52,270/- should be deemed to be the income of the assessee of financial year 2006-07.
In view of above facts, the income of the Assessee for A.Y. 2007-08 has been understated by Rs. 43,52,270/-. Therefore, the undersigned has reason to believe that the income of the Assessee amounting to Rs. 43,52,270/- for the a.Y. 2007-08 has escaped assessment within the meaning of section 147 of the IT Act, 1961 by reason of failure on the part of the assessee for which notice u/s. 148 of the I.T. Act is required to be issued.
Sd/- (Somnath M. Waiale)” 3. In response to the notice under section 148, the assessee filed his return of income on 12.06.2014. The assessee vide his letter/application dated 13.06.2014 demanded the copy of reasons recorded. The assessee was Mum 2017-Anil Khubchandani provided the copy of reasons recorded as referred above. The assessee again vide his application dated 14.06.2014 filed on 17.06.2014 raised objection against the re-opening and demanded for cross-examination of Directors of M/s Hiranandani Group. The assessment order disclosed that order disposing the objection was passed on 16.01.2015. In the reasons of re-opening, the Assessing Officer mentioned that amount of on-money of Rs. 43,52,270/- was paid as per information received from Investigation Unit. The assessee denied of having paid as on-money payment. The Assessing Officer thereafter proceeded for re-assessment and asked the assessee to furnish the evidence in support that no on-money was paid for purchase of Flat. The assessee denied of paying such on-money. The Assessing Officer on the basis of alleged information from Investigation Wing made addition of Rs. 67,79,200/- on account of on-money(cash) paid to M/s Hiranandani Group. On appeal before the ld. CIT(A), the re- opening as well as addition made by Assessing Officer was upheld. Hence, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. At the outset of hearing, the ld. AR of the assessee submits that he is not pressing ground no. 2a which relates to mandatory sanction of higher authorities. Considering the submission of 4 ITA No. 6300 Mum 2017-Anil Khubchandani ld. AR of the assessee, Ground No.2a of the appeal is dismissed as not pressed.
Ground No. 1, 2 & 2b relates to validity of re-opening. The ld. AR of the assessee submits that the assessment order passed by Assessing Officer under section 143(3) r.w.s 147 is invalid as the same is passed without disposing the objection filed by assessee against the re-opening. The Assessing Officer has not passed any speaking order on the objection of assessee. The action of assessing officer is in violation of law declared by Hon’ble Supreme Court in GKN Driveshaft 259 ITR 19 (SC). The ld. AR of the assessee further submits that the in para-4 of assessment order it is mentioned that speaking order dated 16.01.2015 disposing the objection of assessee was passed and duly served upon the assessee. In fact no such order was passed by Assessing Officer nor was it ever served upon the assessee. In support of his submissions the ld AR for the assessee relied on decisions of Tribunal in Shri Anil Jaggi vs. ACIT in ITA No. 3049/Mum/2016 dated 20.12.2017, ITO vs. Shri Nikhil Vinod Agarwal in ITA No. 2574/Mum/2017 dated 13.10.2017, decision of Hon’ble Bombay High Court in Signature Hotels (P) Ltd. vs. ITO (2011) 338 ITR 0051, Sarthak Securities Co. (P) Ltd. vs. ITO 329 ITR 110, CIT vs. Sfil Stock Broking Ltd. 6. On the other hand, the ld. DR for the Revenue strongly opposed the contention of ld. AR of the assessee. The ld. DR submits that objection of 5 Mum 2017-Anil Khubchandani the assessee was duly considered and disposed of by speaking order and have been served upon the assessee, which has been clearly mentioned by assessing officer in its order.
On the contention of both the parties, a report was sought from the Assessing Officer through ld. DR. On the instruction of ld. DR, the Assessing Officer furnished the report dated 23.05.2018, copy of which is placed on record. For completeness of the order, the contents of which are extracted below:
“To The Senior Authorised Representative, A' Bench, ITAT-V, Room NO. 330, 3rd Floor, Old CGO Building, M. K. Road, Mumbai-400020. Sir, Sub: Appeal in case of Anil Khubchandani (PAN- ABIPK4770G) A.Y. 2007-08 -reg Ref:- Your office letter No. CIT(DR)/ITAT 'A Bench/Appeal/2018- 19 dated 03-05-2018. Kindly refer to the above. As desired, compliance of the following are as under: 1) Provide the proof of service/issue of order disposing the objections raised by the assessee against the reopening u/ s 148 of the IT Act 1961. Comments:- The case record have been perused and proof of service could not be located since more than 3 yrs have passed and there has been movement of record to various offices. 2) On the perusal of the case records sent by you on 02-05-2018, It was observed that the date of order disposing objection is 09-01-2015 but in the reassessment order u/» 143(3) r.w.s. 147 dated 27-03-2015 at page No.3, the date of order disposing objection is mentioned as 16-01-2015. Clarification is.... Comments:- This appears to be a typographical error since letter template of some other case has been taken and due to over-sight, the date could not have been edited.
Mum 2017-Anil Khubchandani
It is also requested that request may be made to the Hon'ble bench to restore the matter to the Assessing Officer, if some technical reasons/ grounds is being sought by the assessee, in the interest of the Revenue.
Yours Faithfully, (Pravin M. Chavan) Asst. Commissioner of Income Tax, Circle-2, Kalyan.
After furnishing the above referred report, the ld. AR of the assessee was also directed to file an affidavit of assessee. The ld. AR of the assessee filed the affidavit of assessee dated 19.06.2018. In the affidavit, the assessee has specifically deposed that no order on the objection against the re-opening was served upon him. After the report of assessing officer and seeking the affidavit, the appeal was again fixed for hearing on 21.06.2018
On 21.06.2018, the ld. Representative of the parties was again heard on ground no. 1 & 2. The ld. AR of the assessee again reiterated his submission that no order disposing the objection was passed by Assessing Officer nor it was served upon the assessee. In support of his submission, the ld. AR of the assessee relied upon the decision of jurisdictional High Court in case of Aroni Commercials Ltd. vs. DCIT [362 ITR 403 (Bom)], Asian Paints Ltd. vs. DCIT [296 ITR 0090 (Bom)].
On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue further reiterated that though there is no proof on record about the service of order of disposing the objection. However, the objection of the assessee was disposed of vide Mum 2017-Anil Khubchandani order dated 09.01.2015. Copy of which is placed on record. In support of his submission, the ld. DR for the Revenue relied upon the decision of Hon’ble Supreme Court in Home Finders Housing Ltd. vs. ITO [2018] 94 Taxmann.com 84 (SC), ITO vs. Tech Span India Pvt. Ltd. & Ors in C.A.
No. 273/2007 dated 24.04.2018. 11. We have considered the rival submission of both the parties and have gone through the orders of authorities below. It is not in dispute that assessment order under section 143(3) for Assessment Year 2007-08 was passed on 24.12.2009 assessing the total income at Rs. 43,52,266/-. The assessment was re-opened under section 147 on 28.03.2014. Notice under section 148 dated 30.03.2014 was issued to the assessee and served on 31.03.2014.
The assessee furnished his return of income in response to the notice under section 148 on 12.06.2014. In the reasons of re-opening, the Assessing Officer has disclosed that assessee made investment of Rs. 43,52,270/-, which is not recorded in the books of account of assessee and that the assessee has not offered any explanation about the nature and source of investment. In fact a figure of Rs. 43,52,270/- was the income assessed by Assessing Officer while passing the assessment order under section 143(3) on 24.12.2009. The Assessing Officer while passing the assessment order made addition of Rs. 67,79,200/- on account of alleged on-money payment to M/s Hiranandani Group. The main thrust of submission of ld. AR of assessee is that objection filed by Assessing Officer was not disposed of 8 Mum 2017-Anil Khubchandani before passing the re-assessment order and that the alleged order passed by Assessing Officer on 16.01.2015 (correct dated is 09.01.2015), copy of which now as placed on record, was never communicated to the assessee nor there is such evidence on the record of assessing officer. The perusal of report furnished by Assessing Officer makes it clear that there is no evidence in the file of Assessing Officer about the service of order of disposing objection dated 09.01.2015. The assessee has now filed his affidavit categorically deposing that no such order disposing objection was ever served upon him.
The Hon’ble jurisdictional High Court in Asian Paints vs. DCIT (supra) held that in case Assessing Officer does not accept the objection filed by assessee against the re-opening, he is not to proceed further in the matter for a period of four weeks from the date of service of the order rejecting objection on the assessee. The Hon’ble High Court further held that this procedure is to be followed strictly in all such cases of re-opening of assessment. The Hon’ble Jurisdictional High Court pronounced the order in Asian Paints Ltd (supra) on 29th January 2007.
The Hon’ble Bombay High Court further in case of Aroni Commercials Ltd. vs. DCIT (supra) held that the law declared by High Court is binding on all authorities functioning within the jurisdiction of the Court. It is not open to the Assessing Officer to feign ignorance of law declared by the Court and pass the order in defiance of it. The Hon’ble Bombay High 9 ITA No. 6300 Mum 2017-Anil Khubchandani Court in Asian Paints Ltd. vs. DCIT (supra) has clearly laid down that when assessment is sought to be re-opened under section 148 of the Act and objection of the assessee have been overruled by the Assessing Officer than in such case, the Assessing Officer will not proceed further in matter for a period of four weeks from the date of receipt of order rejecting the objection of the assessee.
Admittedly, there is no evidence available on record which may suggest that order disposing objection was communicated to the assessee. Perusal of record reveals that before the ld. CIT(A), the assessee raised the contention that speaking order on the objection be passed and communicated to him. (Page No. 29, 30, & 32 of Paper Book). On the submission of assessee, the ld. CIT(A) called the remand report of Assessing Officer, however, the Assessing Officer nowhere in the remand report dated 22.05.2015 (page 36-38 of PB) contended that the objection raised by assessee was disposed of or it was communicated to the assessee.
Therefore, in view of the above discussion, we are of the view that the order on disposing of objection against the re-opening was not communicated to the assessee and that the order passed by Assessing Officer is in violation of decision of jurisdictional High Court in Asian Paints Ltd. vs. DCIT (supra), which we held as invalid in the eyes of law.
The decisions relied by ld. DR for the Revenue is not helpful to the ld DR for the revenue. The ld. DR for the revenue heavily relied on the decision 10 Mum 2017-Anil Khubchandani of Hon’ble Supreme Court in Home Finders Housing Ltd. vs. ITO (supra).
In the this case the Hon,ble Court dismissed the Special Leave Petition (SLP) of assessee and upheld the decision of Karnataka High Court in Home Finders Housing Ltd. vs. ITO (2018) 93 taxmann.com 371/ 404 ITR 611 (Madras). The assessee has challenged the decision of Double Bench of Hon’ble Madras High in affirming the order of Single Judge in remitting the matter to the file of assessing officer for passing a fresh order, after disposal of the objections.
The other decision relied by ld DR for the revenue in TechSpan India (supra). The ld DR for the revenue heavily relied para 12 of the said decision, wherein Hon’ble Apex Court held that every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on the assumed change of opinion even in cases where the order of assessment does not itself to a given aspect sought to be examined in the re-assessment proceedings. The Hon’ble Court ultimately held that where question as to how and to what extent deduction should be allowed under section 10A was well considered in original assessment proceedings itself, initiation of re-assessment proceedings under section 147 by issuing a notice under section 148 merely because of fact that now Assessing Officer was of view that deduction under section 10A was allowed in excess, was based on nothing but a change of opinion. Hence, this decision Mum 2017-Anil Khubchandani is also not helpful to the revenue on the ground of validity of re-opening of the assessment.
Considering the above factual and legal discussion, the ground No. 1 and 2b of the assessee are allowed.
As we have allowed the appeal of assessee on legal issue. Therefore, the discussion on merit of the case has become academic.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 20/09/2018.