TECHNIMONT ICB P.LTD,MUMBAI vs. DCIT RG 9(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dtd.10.12.2012of the CIT(A)-20,Mumbai,the assessee has filed the present appeal.Assessee-company,engaged in the business of engineering design and construction activities,filed its return of income on 27/10/2005, declaring income of Rs.4.39 crores.The Assessing Officer (AO) completed the assessment u/s.143(3) of the Act, on 26/12/ 2008,determining its income at Rs. 12.82 crores. 2.First ground of appeal is about rectification proceedings carried out u/s.154 of the Act.Against the order of the AO passed for the year under consideration, the assessee preferred an appeal before the First Appellate Authority (FAA).Giving effect to his order, dated 26/03/2010,the AO passed an order on 20/05/2010. The AO observed that there was mistake in his order of May 20th, 2010. Accordingly, a notice u/s.154 was issued on 07/09/2011 proposing to rectify the mistake. As per the AO while giving effect to the order of the FAA,the returned income of Rs.4.39 crore was taken,that the said income included set off of losses of Rs.1.67 crores of the AY. 2003-04, that there were no losses of that AY. pending for set off in the year under appeal i.e. AY. 2005-06. As per the AO, the assessee did not make any submission with regard to notice issued for rectification. He held that the assessee had no objection to the proposed rectification of mistakes. Accordingly, he revised the total income the assessee as under: i. Total income as per order dated 20/05/2010 giving effect to the order of the FAA- Rs. 4.39 crores

1596/M/13(05-06) Tecnimont ICB Pvt.Ltd. ii. Add: withdrawal of loss of AY. 2003-04 Rs. 1.67 crores iii. Revised Total Income Rs. 6.07 crores. 2.1.Aggrieved by the rectification order of the AO, the assessee preferred an appeal before the FAA. Before him it was argued that order passed by the AO was illegal, bad in law and contrary to the provisions of the Act,that the assessee had not received any notice u/s.154, that he wrongly mentioned the fact that notice was duly served upon the assessee, that no opportunity was granted to the assessee, that the set of losses was granted by the AO while passing the order u/s.143 (3) on 26/12/200 it, that the AO had erred in not providing any reason as to why loss should not be treated as claimed by the assesee in the year under appeal, that brought forward unabsorbed depreciation of Rs.1.67 crores, referred as loss by the AO, was set off by the assessee, that same was brought forward from the AY. s.2001-02 and 2002-03 and not from the AY. 2003-04.

3.After hearing the submission of the assessee and considering the available material, the FAA referred the matter to the AO along with the paper book filed by the assessee containing 107 pages. The explanation of the assessing officer was forwarded to the assessee and final hearing of the case was fixed on 08/11/2012.As per the FAA, no counter reply of facts of the case, as mentioned by the AO, was filed before him. He held that there was no balance loss was left to be carried forward and to be set off in the year under consideration, that the AO had analysed the factual matters of the case, that the assessee was not able to refute the finding given by the AO, that rectification order was as per law, that there was no merit in the argument that notice u/s.154 was not served, that it was evident from the rectification order that notice was seen posted through RPAD served by the postal authorities at given address.

4.During the course of hearing before us, the Authorised Representative stated that assessee did not receive any notice alleged to have been issued on 07/09/2011 and it was not duly served on the assessee by postal authorities, that assessee had submitted a letter, dated 10/02/2012, to the AO and had requested him to supply it a copy of the notice as well as the postal acknowledgement, that it did not receive any response from the AO, that the office of the AO provided a printout of the notice to its representative,that no evidence of postal acknowledgement was made available, that the presumption of the AO that the assessee had no objection to the proposed rectification was not true, that sub-section 3 of section 154 of the Act stipulated that reasonable opportunity of being heard has to be given to the assessee

1596/M/13(05-06) Tecnimont ICB Pvt.Ltd. before passing rectification order and that hearing notices to be issued, that both the statutory requirements had not been complied with, that the AO had withdrawn the set off of losses/depreciation on the ground that said losses/depreciation were brought forward from the AY. 2003-04, that the AO had proposed the rectification of an error apparent from record for the order giving effect to the order of the FAA for the AY. 2005-06, that the assessee had claimed the set off in the original return of income which was duly considered and allowed by the AO in the order dated 26/12/2008,that thereafter there were no proceedings in connection with the matter in the appeal before the F AA, that question of withdrawal of loss/ depreciation by the rectification of the order giving effect to the FAA would not arise, that the disputed brought forward losses depreciation related to AY. 2001–02 and 2002–03, that assessment order u/s.143 (3) for the AY. 2003-04 was passed on 14/02/2006, that the CIT set aside the order on 31/03/2008, that the assessee filed an appeal against the revisionary order of the CIT,that the Tribunal,vide its order dated 29/10/2008, set aside the order of the CIT dated 31/03/2008 passed u/s.263, that the appeal filed by the Department against the order of the Tribunal was dismissed by the Hon’ble Bombay High Court on 01/02/2010, that the original order u/s.143 dated 14/02/2006 remained restored, that the departmental authorities have passed the rectification order/confirmed the order on the basis of erroneous facts. The Departmental Representative supported the order of the FAA.

5.We have heard the rival submissions and perused the material before us. We find the AO had passed rectification order in pursuance of the order of the FAA. We find that specific ground was raised by the assessee before the FAA about non-service of rectification notice. Neither the AO in his remand report nor the FAA has given any categorical finding of fact about the service of notice issued u/s.154 of the Act. Service of notice is the first pre- requisites for passing a rectification order. In our opinion, issuance of notice or handing over the notice to the dispatch section is not sufficient. Unless and until a notice is served upon the assessee or is returned back by the postal authorities with comments of refuse to receive, it cannot be presumed that notice was served upon the assessee. In the absence of a valid service of notice, all other proceedings would be vitiated for not following the basic principle of natural justice.Only on this count the order of the FAA deserves to be reversed. However, we find that the order passed by the AO u/s.143(3) of the Act became final after the judgment of the Hon’ble High Court of Bombay wherein it had upheld the order of the Tribunal wherein the revisionary proceedings, initiated by the CIT, u/s.263 of the Act,were set aside. As a result,the claim made by the assessee for carry forward and set off of unobserved loss/ 3