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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-33, Mumbai [in short CIT(A)], in appeal No. CIT(A)-33/Rg.21/144/2015-16, dated 18.01.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-21(1), Mumbai (in short ‘ACIT’/ AO) for the A.Y. 2009-10 vide order dated nil under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) holding that the objection raised by the assessee before the AO against reopening is properly dealt by the Assessing Officer. For this assessee has raised the following ground: - “1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the objections raised by the appellant before the AO against reopening of the assessment have been property dealt by the Assessing Officer. The CIT(A) ought to have quashed the assessment proceeding as the AO has failed in addressing the objections raised by the appellant against reopening by passing a speaking order.”
At the outset, the learned Counsel for the assessee took us through the reasons recorded for reopening of assessment supplied by the AO vide No. ACIT 18(1)/Disposal of objection against 148/2014-15 dated 15.04.2014, the following are the reasons: - “During the recent past Maharashtra Sales Tax Department has carried out various searches on the persons / Entities involved in issuance of fictitious sales bills. The data of the said searches, carried out by the Maharashtra Sales Tax Department along with the statements etc. of such parties indulged in issuance of bogus bills i.e. without delivery of actual goods, has been communicated to Director General of Income tax (Inv.) Mumbai.
The DGIT (Inv.) Mumbai vide his letter No Corr. Field/ DGIT(Inv.)/2013-14 dated 26.12.2013 has communicated the details of fictitious purchase. The name of the assessee found in this list, is beneficiary of such accommodation bills. The assessee has availed accommodation/ fictitious bills from the below names parties to the extent of amount mentioned against their names.
Sr. Name of the party who have issued Amount of such No. bogus bills to the assessee bogus bills. 1 SHAH INDUSTRIES 11,813 I have visited the website of Maharashtra VAT (222.mahavat.govt.in/Tin search/ Tin search). And on putting the TIN 27040185390V of the above party I have found that this TIN has been cancelled since 01.04.2006. Thus the TIN of the selling party was cancelled on the date when the assessee has claimed purchase from this party. /since the assessee has physically not purchase any goods from the above alleged sellers, therefore the expenditure to that extent i.e. ₹ 11,813 has been inflated by the assessee. Since there is inflation of expenditure which ultimately results into under assessment of income therefore I have reasons to believe that income to the extent of ₹ 88,313 chargeable to tax has escaped assessment for AY 2009-10. Accordingly, the case of the assessee requires to be reopened under section 147 of the I.T. Act. In order to frame assessment in its proper perspective and to bring to tax appropriate income of the assessee including under stated income on account of accommodated purchased bills, as discussed above. It is therefore, a fit case for instance of notice under section 148 of the I.T. Act.
Notice under section 148 of the I.T. Act is accordingly issued for AY 2009-10 under the seal and signature of the undersigned.”
The learned Counsel for the assessee then drew our attention to the objection raised vide letter No.SC-148/BS/A.Y.09-10/02 dated 30.04.2014 for reopening of the objections running into 7 pages, which were not dealt with by the AO while completing the assessment. The learned Counsel for the assessee took us through the re-assessment order passed under section 143(3) read with section 147 of the Act and stated that there are no iota of comments on the objections raised to the reasons recorded for issuance of notice under section 148 of the Act. The learned Counsel for the assessee also drew our attention to the letter written to the ACIT dated 20.11.2014, whereby the first objection for non- adjudication of objections raised as raised during the course of assessment as well is as under: - “1. Reason provided on 15.04.2014 but till date you have not raised any objection We would like to inform you that, we have already filed Objection for reopening vide out letter No SC- 148/BS/AY 09-10/02 dated 30.04.2014 submitted on 30.04.2014.”
From the above, the learned Counsel for the assessee stated that once the objections are not dealt with by the AO, no valid assessment can be framed in view of the decision of Hon’ble Bombay High Court in the case of KSS Petron Pvt. Ltd. vs. ACIT in of 2014 (Bom.), wherein Hon’ble Bombay High Court discussing the case law of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19 (SC), quashed the assessment vide Para 7 to 11 as under: - “7 On further Appeal, the Tribunal passed the impugned order. By the impugned order it held that the Assessing Officer was not justified in finalizing the Assessment, without having first disposed of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's decision in GKN Driveshafts (India) Ltd., v/s. ITO 259 ITR 19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law.
8 We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.
9 In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within which the Assessing Officer must pass an order on the notice of reopening i.e. within one year from the end of the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh Assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be passed within one year from the end of the financial year in which the order under Section 254 of the Act, was passed by the Tribunal and received by the Commissioner of Income Tax.
10 The Director of the appellant has filed an affidavit dated 19th September, 2006. In the affidavit, it is stated that consequent to the impugned order of the Tribunal dated 14th August, 2013, the Assessing Officer has not passed any order of reassessment. Time was granted on the last occasion to enable the Respondent to respond to the affidavit dated 19th September, 2006 of the Director of the Appellant Company. The Respondent is unable to dispute the facts stated in the affidavit dated 19th September, 2016 filed by the Director of the Appellant Company. The time to pass a order on the notice dated 28th March, 2008, even consequent to the impugned order of the Tribunal, has lapsed.
11 Therefore, on the above facts and law, the substantial question of law is answered in the negative i.e. in favour of the Appellant Assessee and against the Respondent Revenue.”
The learned Counsel for the assessee also drew our attention to the order of Tribunal, Mumbai Bench, in the case of DCIT vs. National Bank for Agriculture and Rural Development in for AY 2004-05 vide order dated 28.10.2016. In view of the above, the learned Counsel for the assessee stated that once the objections are not disposed off, re-assessment framed is not valid.
On the other hand, the learned Sr. Departmental Representative stated that Hon’ble Madras High Court in the case of Home Finders Housing Ltd. Vs. ITO (2018) 93 taxmann.com 371 (Madras), has considered the issue and held that for non-compliance of procedure indicated by the Supreme Court would not make the order void or non-est and such a violation is procedural irregularity which could be cured by remitting the matter to the AO. Accordingly, he urged that the matter be restored back to the file of the Assessing Officer. He also argued that this decision of Hon’ble Madras High Court has been confirmed by Hon’ble Supreme Court while dismissed SLP in the case of Home Finders Housing Ltd. vs. ITO (2018) 94 taxmann.com 84 (SC). In reply, the learned Counsel for the assessee stated that the dismissal of SLP by Hon’ble Supreme Court is merely exercising its discretionary jurisdiction to grant or not to grant leave to appeal. The learned Counsel for the assessee relied on the decision of Hon’ble Supreme Court in the case of Kunhayammed vs. State of Kerala (2010) 113 Taxman 470 (SC).
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the AO has not adjudicated the objection raised by assessee on the reasons recorded for issuance of notice under section 148 of the Act vide letter No.SC-148/BS/A.Y.09-10/02 dated 30.04.2014. We have gone through the assessment order and other material placed before us, which in no way indicates that the AO has adjudicated the objections. Once the objections raised by assessee and not adjudicated by the AO in term of the decision of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), the assessment / re-assessment framed by the AO in lieu of notice under section 147/ 148 of the Act is quashed. We find that this issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of KSS Petron Pvt. Ltd. (supra). Even Hon’ble Delhi High Court in the case of PCIT vs. Tupperware India (P.) Ltd. (2016) 65 taxmann.com 17 (Delhi) held as under:-
5. Apparently, the Assessee did raise an objection to the order of the AO reopening the assessment. In the order dated 28th January 2011 allowing the Assessee's appeal, the Commissioner of Income Tax (Appeals) ['CIT (A)'] noted that the Assessee had indeed filed objections to the reopening of the assessment by its letter dated 9th August 2006. In the remand report dated 20th December 2010, the AO quoted a paragraph from the order sheet which stated that the aforementioned letter dated 9th August 2006 had been handed over to the AO and that the AO had sought some more information which the Assessee had not filed. The CIT (A) accordingly held that by stating that no objections had been filed, the AO had very conveniently disregarded the guidelines" laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963. The CIT (A), therefore, agreed with the Assessee that since the procedure laid down by the SC in the aforementioned decision was mandatory, the AO had in fact not disposed of the objections by a speaking order. Nevertheless, the CIT (A) held that the said defect "does not make the assessment order illegal and hence it cannot be quashed. It is a technical mistake which is curable."
6. The Court is of the considered view that after having correctly understood the decision of the Supreme Court in GKN Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment..”
In view of the above facts and proposition of law settled by Hon’ble jurisdictional High court in the case of KSS Petron Pvt. Ltd. (supra) & Hon’ble Delhi High Court in the case of Tupperware India (P.) Ltd. (supra), the re-assessment is quashed and appeal of assessee is allowed on this jurisdictional issue.
As we have already quashed the re-assessment, we need not to go into the merits of the case, which have become academic.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28-08-2018.