M/S GOKULDAS EXPORTS vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

Whether the notice issued under section 148 of the Act is valid in law without obtaining the sanction as per provisions of section 151(1) of the Act on the facts and circumstances of the case?

Whether the mandatory conditions to assume jurisdiction under section 147 of the Act exist for issue of notice under section

Whether the reasons recorded for issue of notice under section 148 of the Act without making any allegation that the appellant has failed to disclose fully and truly all material facts necessary for the assessment is valid in law on the facts and circumstances of the case?

Whether the assessment reopened based on the audit objection is valid in law on the facts and circumstances of the case?

Whether the notice issued under section 148 and order passed under section 143(3) read with section 147 of the Act in the name of the partnership firm which was not in existence is valid in law on the facts and circumstances of the case?

Whether the Tribunal was justified in law in holding that the provisions of section 45(4) of the Act are applicable in respect of the assets allotted to the partners by passing the journal entries wherein the book value of assets were reduced from the fixed assets and the capital account of the partners were

Whether the Tribunal was justified in law in confirming the computation made under section 45(4) of the Act when the properties had been withdrawn by the partners held in their names and consequently there was no transfer of capital asset to attract the provisions of section 45(4) of the Act on the facts and circumstances of the case?

Without prejudice whether any capital gains arise when the assets have been transferred at book value and consequently no capital gain is computable on the facts and circumstances of the case?

Without prejudice whether the authorities were justified in assessing the firm after it had ceased to exist on the facts and circumstances of the case?

Whether the Tribunal was justified in not considering the ground raised by the appellant with respect to the value adopted by the Assessing officer was not correct on the facts and circumstances of the case?

After the remand, the ITAT has passed the impugned order dismissing the appeal in its entirety. While doing so, with regard to the aspect of the reopening the assessment it has held that assessee did not file any appeal before this Court nor raised any plea during the hearing of the appeal filed by the Revenue and thus, the finding recorded by the Tribunal had attained finality and the direction of this Court was limited only to the issues decided by this Court against Revenue.

Shri.A.Shankar, learned Senior Advocate submitted that Questions No.1, 2 and 3 are with regard to the validity of notice under Section 148 of the Act. He submitted that the Assessing Officer in his order dated March 26th, 2002 has recorded that the assessment has been reopened based on Revenue audit objection. Therefore, the notice is wholly unsustainable in view of law

He submitted that the issue with regard to Questions No.4, 7, 8 and 9 are on the merits of the matter on the aspect whether the transfer of assets ought to have been considered under Sections 45(1) or 45(4) of the Act. He submitted that in the first round of litigation, ITAT had granted relief to the appellant. However, by the impugned order the ITAT has recorded findings against assessee and dismissed the appeal. He urged that jurisdictional issue with regard to issuance of notice under Section 148 of the Act goes to the root of the matter and the Tribunal has recorded an adverse finding and the same requires reconsideration by the ITAT. He submitted that in view of law laid down in SHREE CHAMUNDI MOPEDS LTD. v. CHURCH OF SOUTH INDIA TRUST ASSOCIATION4 followed by this Court in M/S. KARNATAKA FINANCIAL SERVICES LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX5, when the matter is remanded, the

With regard to Question No.10 he submitted that the partnership firm was converted into a Company under Part IX of the Companies Act, 1956 and therefore, the said partnership firm seized to exist. He urged that the settled position of law is, a notice ought to have been issued to the company which succeeded the partnership firm. In support of this contention, he placed reliance on PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI v. MARUTHI SUZUKI LTD.6

In reply, Shri.Aravind, learned Standing Counsel submitted that this question was never raised by the assessee throughout. Therefore, assessee is estopped from raising this question and same cannot be considered by this Court.

Shri.Shankar also placed reliance on PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI v. MARUTHI SUZUKI LTD. and submitted that the

Question No.11 is with regard to computation of capital gains. Shri. Shankar submitted that in the first round of litigation the ITAT has not considered this aspect and assessee had filed a miscellaneous petition and the same was allowed in favour of the assessee. The revenue challenged the same in ITA No.195/2006 and this Court vide order dated August 6th, 2012 held that since the main order had been set aside and matter was remanded, the ITAT shall consider the valuation aspect in the fresh order to be passed after the remand.

In substance, he contended that computation of capital gains though directed to be considered by this Court, the ITAT has not considered in second round of litigation.

We have carefully considered the rival contentions and perused the records.

Shri. Aravind’s contention is that assessee did not file an independent appeal nor a cross objection. Therefore, in the impugned order, ITAT has rightly recorded that assessee had not challenged the said aspect and dismissed the appeal.

Once there is no dispute with regard to the question that issuance of notice under Section 148 of the Act is a jurisdictional issue and ITAT had granted full relief to the assessee, we are persuaded to accept the submission made by Shri.Shankar that assessee did not challenge that

Questions No.7, 8 and 9 are on merits. In view of law laid in SHREE CHAMUNDI MOPEDS LTD. v. CHURCH OF SOUTH INDIA TRUST ASSOCIATION7, the matter requires reconsideration by the ITAT.

So far as Question No.10 is concerned, Shri. Aravind’s contention is that with regard to transactions which were concluded whilst the firm was partnership in nature, the notice has to be issued in the name of partnership firm. But, undisputed fact is, firm has been converted into a Part IX company. Referring to Section 188 of the Act it was urged by Shri.Aravind that the notice has been rightly issued to the Partnership firm. Since we are persuaded to remand the matter, we do not wish to consider this aspect on merits and keep this contention open.

In view of the above, the following order: