ITO 5(3)(3), MUMBAI vs. TESLA TECHNOLOGIES AND OXIDATION P.LTD, MUMBAI

At the outset, ld. AR placed on record order of the Tribunal in assessee’s own case for the assessment year 2011-2012, dated 5-1-2016 in ITA No.5506/Mum/2015, wherein similar issue was dealt by Tribunal as under and matter was restored back to the file of AO after having the following observation :- 2. The crux of argument advanced by Shri S.C. Tiwari, ld. counsel for the assessee, is that the ld. First Appellate Authority has not gone into the arguments made by the assessee and the at the relevant time, there was no Bangalore Branch, therefore, the addition was wrongly made. It was also contended that in the audit report, a particular figure was wrongly showed, by the auditor, for which the assessee should not be penalized. Reliance was placed upon the decision from Hon’ble Apex Court in 82 ITR 361 (SC). On the other hand, the ld. DR, Shri A.K. Dhondial, defended the impugned order by contending that the assessee itself accepted the transaction of the Bangalore Bench and paid taxes thereon, therefore, the addition was rightly made. 2.1. I have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, declared nil income in its electronically filed return on 22/12/2011, which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter the Act). Since, the case of the assessee was selected for scrutiny, notice u/s 143(2) of the Act was served upon the assessee. The assessee attended the assessment proceedings from time to time and furnished the necessary details called for by the Assessing Officer. During assessment proceedings, the assessee was provided with an information, as per which, the assessee offered receipt of Rs.3,12,716/- and further to explain as to why the same should not be added to the total income of the assessee. The assessee vide letter dated 26/12/2013 claimed as under:- “In course of assessment proceedings, your honour has provided us with the Annual Information Report. On verifying the same, our above client has ascertained that the solitary transactions aggregating to Rs.3,12,716/- related to the Bangalore Branch for which they have neither any access nor any means of information in view of the dispute amongst the directors.” In view of the above, it can be said that it is observed that assessee has strongly denied the above amount. So far as, showing the same, mistakably in the audit report, the assessee has to explain the same. The mandate of the Constitution of India (Article-265) is to levy and collect due taxes. In CIT vs Shelly Products [2003] 261 ITA Nos.3571&3664/14 ITR 367 (SC), the Hon’ble Apex Court, while considering the case of a valid return held that, even if, tax is paid/found to be less than payable, no further demand can be raised for recovery of the balance amount, since the fresh assessment was barred by time. The Hon’ble Court further held that, if there is no authority with the Assessing Officer to proceed on the invalid return, then what remains the original return and the excess taxes paid by the assessee has to be refunded to the assessee otherwise it would offend Article-265 of the Constitution. The Assessing Officer is directed to examine the claim of the assessee afresh in accordance with law, so that no grievance is caused to either side. The assessee is directed to explain the true facts before the Assessing Officer with liberty to furnish evidence, if any, in support of its claim, for which due opportunity of being heard be provided to the assessee. Thus, the appeal of the assessee is allowed for statistical purposes. Finally, the appeal of the assessee is allowed for statistical purposes.”

Ld. AR drew our attention to the order of the Hon’ble Bombay High Court dated 12-4-2013, in Arbitration Application No.33 of 2009 along with Arbitration Award dated 11th April, 2013, wherein cut off date was determined at 1-4-2008, accordingly business of Bangalore Branch was no more part of assessee’s business. 4. We have considered rival contentions and found that the assessee company is engaged in the business of providing/supplying Air/Water purification systems. The assessee is having Head Office at Mumbai and Branch at Bangaluru. In both the years, addition was made by the AO in respect of transactions pertaining to Bangaluru branch as per 26AS report. 5. Since there was dispute between the directors, assessee-company had no information regarding any income being earned by Bangalore Branch. We found that there was a dispute between the directors of Mumbai office and Bengaluru branch office which resulted in appointment of Arbitrator ITA Nos.3571&3664/14 and the copy of Arbitration award is placed on record. It is further observed that the income in respect of Bengaluru office has been assessed in the hands of the company itself and not in the name of the director. 6. We found that Hon’ble Bombay High Court has also passed arbitration award dated 11/04/2013. Exactly similar issue has been dealt by Tribunal in the assessment year 2011-12. Both learned AR and DR fairly agreed that in view of the decision of the Tribunal both the appeals of the assessee and revenue should be restored to the file of the AO for deciding afresh as per direction given by the Tribunal in its order dated 05/01/2016 in ITA No.5506/M/2015 and also the order passed by Bombay High Court in Arbitration award dated 12/04/2013. 7. In the result, appeals of the Assessee and Revenue are allowed for statistical purposes.