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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI R.C.SHARMA & SHRI C.N. PRASAD
आदेश / O R D E R PER C.N.PRASAD (J.M.) : This appeal is filed by the Assessee against the order of the Ld. CIT (Appeals)-8, Mumbai dated 21.12.2011 for the assessment year 2004-05 arising out of the assessment order passed u/s 143(3) r.w.s. 147 of the Act.
2 M/s. Revival Synthetics Ltd
The Assessee has raised the following grounds “
1. On the facts and in the circumstances of the case and in the law the Ld C.1.T.(A) erred in confirming the reopening of the assessment u/s 147 of the Act without any valid reason recorded for the same and merely on the basis of some unestablished information from CIT (A) - 37, Mumbai & thereafter passing a fresh assessment order u/s 143(3) r.w.s 147 of the act, ignoring the submission made by the AR of the assessee company in this regard. Thereby such reopening itself is bad- in-law.
2. On the facts and in the circumstances of the case and in the law the Ld. CJ.T.(A) erred in confirming the decision of the Assessing Officer passing the order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 by adding Rs. 5,00,000/-, received by the assessee company towards share capital from M/s.Suryadeep Salt Refinery & Chemical Works P. Ltd., contending the same as assessee owns concealed income without producing any evidence to that effect even after assessee company producing all the relevant records & document during the course of assessment proceeding.”
Briefly stated the facts are that the Assessee engaged in the business of manufacture and sale of clothes filed its return of income on 29.10.2004 delcaring income of Rs.3,09,170/-. The return was processed u/s 143(1) on 09.11.2004 accepting the income return. Subsequently assessment was reopened u/s 147 of the Act by issue of notice dated 29.03.2010 u/s 148. In response to the said notice, the Assessee vide letter dated 02.04.2010 requested the Assessing Officer to treat the return filed u/s 139(1) on 29.10.2004 as the return filed in response to notice u/s 148. Subsequently on 14.05.2010, the Assessee filed objections for reopening the assessment. Reassessment was completed later on 30.11.2010 by the Assessing Officer determining the income at Rs.8,09,170/-. While completing the reassessment, the Assessing Officer made addition of Rs.5 lakhs as undisclosed income being the share application money received by the Assessee from Suryadeep Salt 3 M/s. Revival Synthetics Ltd Refinery & Chemical Works Ltd. On appeal, the Ld. CIT (Appeals) affirmed the reopening of assessment as well as the addition on merits. Before us, the Assessee challenged the order of the Ld. Commissioner of Income Tax (Appeals) in sustaining the reopening of the assessment as well as the addition on merits. The Ld. Counsel for the Assessee at the outset submits that the objections filed by the Assessee against the reopening of assessment have not been disposed off by the Assessing Officer before passing reassessment order and therefore reassessment order passed by the Assessing Officer is bad in law in view of the decision of the Jurisdictional High Court in the case of MSPL Gases Ltd. Vs. DCIT in WP No.1269 of 2015 dated 27.01.2016. The Ld. Counsel for the Assessee also places reliance on the following decisions and submits that similar view has been taken in these decisions : 1) CIT Vs. Multiplex Trading & Industrial Co. Ltd. [94 CCH 30 (Del)] 2) Principal Commissioner of Income Tax Vs. Tupperware India Pvt. Ltd. dated 10.08.2015 3) General Motors India Pvt. Ltd. Vs. DCIT [275 CTR 123 (Guj)] 4) Bharuch Enviro Infrastructure Ltd. Vs DCIT, ITA No.731 & 732 / AHD/2007 dated 05.08.2014 Therefore in view of the above decisions, the Ld. Counsel for the Assessee submits that since the Assessing Officer has not disposed of the objections for reopening the assessment before passing the reassessment order, the assessment order is invalid.
The Ld. Counsel for the Assessee further submits that referring to the reasons for reopening which is placed at paper book page no.1 submits that there was no tangible materials which has come on record suggest that there is 4 M/s. Revival Synthetics Ltd escapement of income. The Ld. Counsel submits that Assessing Officer has not made any enquiry of Mr Narendra Shah as the assessment was sought to be reopen based on his statement made before the Ld. CIT (Appeals) by him in the proceedings before the Ld. CIT (Appeals) in his own case. The Ld. Counsel submits that there is nothing on record to suggest that income had escaped assessment other than a letter said to have given to the Ld. CIT (Appeals) by Mr Narendra Shah stating that he has provided accommodation entries. No material is there to show that it is a bogus transaction. The Ld. Counsel for the Assessee submits that the Assessee has infact issued shares to the said concern who made investment in Assessee Company. Therefore he submits that even on merits the addition is not sustainable.
We have heard the rival submissions, perused the orders of the authorities below. It is an admitted fact that the Assessee immediately after receiving the notice u/s 148 for reopening assessment filed letter stating that the return filed u/s 139(1) may be treated as return filed in response to notice u/s 148 and also filed objections on 14.05.2010 for reopening the assessment vide letter dated 13.05.2010. The Assessing Officer without disposing off the objections passed reassessment order u/s 143(3) r.w.s. 147 on 30.11.2010 making addition of Rs.5 lakhs treating the share application money invested by Suryadeep Salt Refinery & Chemical Works Ltd. as undisclosed income of the Assessee.
6. Now the question to be addressed before us is whether the reassessment order passed u/s 143 r.w.s. 147 without disposing off the objections raised by the Assessee in reopening the assessment is a valid order or not. The Bombay 5 M/s. Revival Synthetics Ltd High Court in the case of MSPL Gases Ltd. Vs. DCIT in WP 1269/2015 dated 27.01.2016 held as under : “3. The undisputed facts in the present case are that consequent to the reopening notice dated 14th March, 2014, the Assessing Officer has passed an assessment order dated 3rd February 2015. However, the Assessing Officer has passed the order of reassessment on 3rd February, 2015 for AY 2010-11 without disposing of the Petitioner's objections dated 2nd May 2014 to the reopening notice dated 14th March 2014 in complete defiance of the decision of the Apex Court in the case of GKN Driveshafts (India)Ltd v/s Income Tax Officer and O t h e r s , reported in 259 ITR 19(SC). The Apex Court in the above case had laid down that before taking up the reassessment consequent to reopening notice under section 147 of the Act, the reasons recorded for reopening the assessment should be forwarded to the Assessee and if the Assessee objects to the same, he should first dispose of its objections to the reopening notice . 4. When the Petition reached effective hearing for the first time on 23rd July 2015 for admission, the Revenue accepted the position that the order dated 3rd February 2015 passed on reopening of assessment for AY 2010-11 is without jurisdiction and the same be set aside. However, we were disturbed as on quite a few occasions we had noticed the orders on reassessment were being passed without disposing of the objections. However, in Court the Revenue accepts the position that the order is not sustainable. We were of the view that if a mechanism could be put in place by the Revenue to recall an order such as this (where even the Revenue concedes that the order dated 3rd February 2015 is without jurisdiction). This for the reason that otherwise Assessees are being unnecessarily harassed and have to move the Court to remedy the injustice to have the order which is ex facie without jurisdiction, set aside. 5. In fact, on 7th December, 2015 the Principal Commissioner of Income Tax along with the Commissioner of Income Tax(Judicial) attended Court and conceded the position that the 6 M/s. Revival Synthetics Ltd 5th February, 2015 is not sustainable in law and should not have been passed in defiance of the decision of the Supreme Court in GKN Driveshafts (India ) Ltd (supra). We were also informed that appropriate directions would be issued to ensure that mistake such as these do not occur in the future. However, they sought time to consider the best possible manner this illegality could be remedied / cured and that some mechanism could be put in place to take care in the future, if and when such a situation arises i.e. where even the officers of the Revenue accept that the order is without jurisdiction. Thus, this Petition was adjourned to enable the Commissioner of Income Tax to consider the same and put in place an appropriate mechanism to ensure that the Assessees are not unnecessarily harassed.
6. Today, when the Petition reached hearing, the learned Additional Solicitor General informs us that the Commissioner of Income Tax has on 16th December, 2015 passed an order under Section 264 of the Act setting aside the order of the reassessment dated 3rd February, 2015 passed by the Assessing Officer. It further directed the Assessing Officer to commence the reassessment proceedings afresh after disposal of the Petitioner's objections. However, we are taken aback as we were given to understand that the Commissioner of Income Tax will consider and a mechanism would be put in place for future while curing this injustice. It is very pertinent to note that we could have set aside the order dated 3rd February 2015 passed on merit being an order without jurisdiction on the first effective hearing itself. This for the reason that it was accepted by the Revenue that the order dated 3rd February 2015 is without jurisdiction. We had adjourned this petition from time to time with the hope that a mechanism would be created by the Revenue to set right an injustice which is not disputed in this case and found also in other cases. We find that no attempt has been made on the part of the officers of the Revenue to try and place some procedure / mechanism in place to cure such admitted injustice.
7 M/s. Revival Synthetics Ltd
At this stage, the Additional Solicitor General on instructions, states that the Revenue is withdrawing its order dated 16th December, 2015 passed in the case of the Petitioner. In the above view, we are not called upon to consider the validity of the order dated 16th December, 2015 passed under Section 264 of the Act, as the same is withdrawn. 8. It is accepted by the Revenue that passing of an assessment order without disposing of the objections to the reasons recorded in support of the reopening notice, is an order without jurisdiction being in defiance of the Apex Court's decision in GKN Driveshafts (India) Ltd (supra). Therefore, we set aside the order dated 3rd February, 2015 passed on reassessment for the A.Y. 2010-11.”
We also find that similar view has been taken by the Delhi High Court in the case of CIT Vs. Multiplex Trading & Industrial Co. Ltd. (supra), Principal CIT Vs. Tupperware India Pvt. Ltd. (supra) and the Gujarat High Court in the case of General Motors India Pvt. Ltd. Vs. DCIT (supra).
However, we also find that the Bombay High Court in the case of Aggarwal Metals Vs. DCIT [346 ITR 64] considered a situation where the Assessing Officer without disposing of the objections for reopening the assessment passed reassessment order and the Hon’ble High Court quashed the assessment, however, operation of notice u/s 148 stayed granting further time for completion of reassessment.
Taking the totality of facts and circumstances into account and also keeping in view the reasons for reopening the assessment, we would follow the decision of the Jurisdictional High Court in the case of MSPL Gase Ltd (supra) and hold that reassessment order passed without disposing of the objections is 8 M/s. Revival Synthetics Ltd bad in law. Thus, we set aside the reassessment order passed u/s 143(3) r.w.s.147 of the Act. Since we have disposed off the ground raised by the Assessee on reopening the assessment setting aside the assessment order, we are not inclined to go into the merits of the case as it would become only academic at this stage.
In the result, ground no.1 in the appeal of the Assessee is allowed.
Order pronounced in the open court on the 23rd day of March 2017.