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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ “बी” म ुंबई IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JM AND SHRI RAJESH KUMAR, AM आयकर अपीऱ सं./I.T.A. No.7359/Mum/2007 (ननधधारण वषा / Assessment Year : 1999-2000) बनधम/ The Malabar Hill Club Ltd., DCIT-10(3), Mumbai IL Palazzo, B G Kher Marg, Vs. Malabar Hill, Mumbai-400006 स्थधयी ऱेखध सं./ PAN :AAACW3868M अपीऱार्थी ओर से / Appellant by Shri J D Mistri प्रत्यर्थी की ओर से/Respondent by Shri Suman Kumar सुनवाई की तारीख / Date of Hearing : 30.1.2017 घोषणा की तारीख /Date of Pronouncement :30.1.2017 आदेश / O R D E R PER BENCH:
This appeal by assessee is arising out of the order of ld.CIT(A)-V in appeal No.CIT(A)-V/5(3)/73/06/2007 dated 5.10.2017.
Assessment was framed by ACIT Circle-5(3), Mumbai for the assessment year 1999-2000 vide his order dated 20.3.2006 under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act).
The first issue in this appeal of the assessee is regarding validity of reassessment proceedings. In this appeal the assessee has raised the following grounds: “1.1 The ld.CIT(A) has erred in holding that the re-assessment proceedings were valid and in accordance with law. 1.2 The appellant submits that the re-assessment proceedings were not in accordance with law and the provisions of the Act and consequently the re-assessment order was null and void and the CIT(A) ought to have held as such. 1.3 The appellant submits that the re-assessment proceedings be held to be bad in law and the impugned order should be struck down”
Briefly stated facts are that the assessee filed return of income for the assessment year 1999-2000 on 31.12.1999. This return was processed under section 143(1) of the Act on 14.10.2000. Subsequently, the AO issued a letter dated 21.1.2004, being audit objection, called upon the assessee to make submissions on the issue raised therein vide letter No.ITO/5(3)(4)audit/2002-04. The assessee replied the letter dated 4.2.2004 to the AO and requested the AO to let us know under what provisions the letter is issued. Subsequently, the AO issued notice u/s 148 of the Act dated 30.3.2005. The assessee filed return of income in response to notice issued under section 148 on 19.4.2005 declaring same income as declared in original return of income. The assessee vide its letter dated 2.4.2005 requested the AO to give reasons recorded for the notice
3 issued under section 148 of the Act. The assessee during re-assessment proceedings also requested the AO to give reasons vide letter dated 13.12.2005 and the relevant part of the letter is reproduced as under: “In the first instance we have been instructed to once again request you to kindly forward us the hard copy of the reasons as recorded for the re-opening of the assessment for the year”
Admittedly, no reasons were supplied. The issue was taken before the ld.CIT(A) challenging the reopening and no proper reasons for re-opening of the assessment. Even, the ld.CIT(A) has not provided a copy of reasons but finally, the AO given the reasons only on 13.8.2007 whereas the assessment order was passed on 20.3.2006. The ld. CIT(A) rejected the issue of re-opening of assessment by observing as under : “2.2. The reasons for re-opening assessment u/s 147 of the Income Tax Act recorded by the Ld. A.O. were given to the appellant on 13.08.2007 during the appellate proceedings. The reasons for re- opening recorded by the Ld. A.O. are as under: "The assessment was completed u/s 143(1) on 14.10.2000. During the year, the assessee has written off inter corporate deposits of RS.30,00,000/- as bad debts u/s 36(i)(vii) r.w.s. 36(2). The deposit being capital in nature could not be written off as bad debt. Therefore, the claim for bad debts of Rs.30,00,000/- is not admissible to the assessee . The assessee has claimed deduction of Rs.10.53 804/- on account of major repairs. The assessee has treated it as revenue expenditure.However, in the books of account, the assessee has amortized the same. Therefore, the said expenditure is not allowable as a revenue expenditure .
4 Thus, I have therefore, reason to believe that on account of failure and omission on the part of the assessee to disclose fully and truly all mate, facts necessary for assessment, an income of Rs.40, 53, 8041- chargeable tax has escaped assessment. " 2.3 The appellant contended that no sanction has been taken by the ld.AO from the concerned addl. commissioner of Income Tax 5(3) before issue the said notice u/s 148. However, from the record, I find that the then Addl.CIT-5(3), Mr.A.K.Thatai, has duly approved the reasons for initiating proceedings from 28.03.2005 whereas the impugned notice u/s 148 has been issued on 19.04.2005. Thus, I find that there is no merit in the submissions and arguments of the Ld. A.R. in challenging the proceedings u/s 147 which are found to be absolutely in consonance with the law under the Income Tax Act, 1961. Therefore, the proceedings u/s 147 are upheld and the appeal fails on this ground.” Aggrieved, now, the assessee is in second appeal on this jurisdictional issue.
Before us, the ld.counsel of the assessee Shri J D Mistri after narrating the above stated facts argued that the Hon’ble Bombay High Court in the case of KSS Petron Private Ltd V/s ACIT in ITA No.224 of 2014, order dated 3.10.2016 (Bombay High Court) has held as under (para 8,9, and 2010): “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 re-opening 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 5 following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.
9. In fact, to ensure that re-opening 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 re-opening 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.
The Director of the appellant has filed an affidavit dared 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 re.-assessment. 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.” The ld. Counsel of the assessee also drew our attention to another judgment of the Bombay High Court in the case wherein the Hon’ble Bombay High Court in the case of CIT V/s Trend Electronics (2015) 379 ITR 456) (Bom) vide para 8 and 9 observed and held as under : “8. We find that the impugned order merely applies the decision of the Apex Court in GNK Driveshafts (India) Ltd. (supra). Further it also follows the decision of this Court in Videsh Sanchanr Nigam Ltd. (supra) in holding that an order passed in reassessment proceedings are bad in law in the absence of reasons recorded for issuing a reopening notice under Section 148 of the Act being furnished to the 6 assessee when sought for. It is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever revenue seeks to exercise such power, they must strictly comply with the prerequisite conditions viz. Reopening of reasons to indicate that the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment. These recorded reasons as laid down by the Apex Court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the Assessing Officer. Thus in the absence of reasons being furnished, when sought for would make an order passed on reassessment bad in law. The recording of reasons (which has been done in this case) and furnishing of the same has to be strictly complied with as it is a jurisdictional issue. This requirement is very salutary as it not only ensures reopening notices are not lightly issued. Besides in case the same have been issued on some misunderstanding/misconception, the assessee is given an opportunity to point out that the reasons to believe as recorded in the reasons do not warrant reopening before the reassessment proceedings are commenced. The Assessing Officer disposes of these objections and if satisfied with the objections, then the impugned reopening notice under Section 148 of the Act is dropped/withdrawn otherwise it is proceeded with further. In issues such as this, i.e. where jurisdictional issue is involved the same must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise. We also do not appreciate the stand of the revenue, that the respondent-assessee had asked for reasons recorded only once and therefore seeking to justify non-furnishing of reasons. We expect the state to act more responsibly.
9. In view of the fact that the order of the Tribunal has only applied the settled position of law in allowing the respondent-assessee's appeal. No substantial question of law arises for our consideration”. In view of the above judgment, the ratio laid down by the Hon’ble Bombay High Court, the ld.counsel argued that once the assessment is completed without providing reasons recorded for issuing notice under section 148 of
On the other hand, the ld.DR only relied on the orders of the authorities below.
We have heard the rival contentions and gone through the facts and circumstances of the case, admittedly, the assessment was completed by the AO on 20.3.2006 and reasons were given by the AO to the assessee only on 13.8.2007, during the appellate proceedings before the First Appellate Authority. We find that the Hon’ble Bombay High Court has clearly laid down the ratio that once dictum of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v/s Income-tax Officer[2003] 259 ITR 19 (SC) isnot followed, consequently, the assessment is invalid. Respectfully following the ratio laid down by the Hon’ble Bombay High Court in the case of KSS Petron Private Ltd (supra) we quash the assessment and appeal is allowed.
The issue on merits, once, we have adjudicated the issue of jurisdiction and allowed the appeal in favour of the assessee, we need not go into the merits of the case.
In the result, the appeal of the assessee is allowed. Order pronounced on 30th January, 2017.