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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 1996-97 is directed against an order passed by CIT(A)-12, Mumbai dated 12/11/2012 which in turn arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’) dated 26/03/2004.
In this appeal, assessee has raised the following Grounds of appeal:-
“ 1. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer reopening the assessment u/s.147 of the Income Tax Act.
2. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer disallowing Rs.6,75,000/- paid to Triveni International Productions Pvt. Ltd. on account of advertising and sales promotion expenditure.
The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer in disallowing interest for Rs.3,933/- paid to Triveni International Productions Pvt. Ltd..
The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer in disallowing sales commissions expenses Rs.4,31,978/- paid to Bahari & Co. Pvt. Ltd.
5. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer in disallowing conducting charges Rs.4,61,230/- paid to Prahalad Mohan.
6. The assessee company craves leave to add, alter or amend the above grounds of appeal
.”
3. Although the assessee has raised multiple Grounds of appeal, but the first and foremost grievance is with regard to the validity of the proceedings initiated by issuance of notice under section 147/148 of the Act. The brief facts, in relation to the said issue are summarized as follows. The appellant before us is a company incorporated under the provisions of the Companies Act, 1956 and for assessment year 1996-97 it filed a return of income on 28/11/1996 declaring an income of Rs.26,240/-. Subsequently, assessment under section 143(3) of the Act was completed on 25/5/1998 assessing the total income at Rs.5,59,166/-, wherein the only addition made was on account of disallowance of Sales Tax of earlier years of Rs.5,30,922/-. Subsequently, a notice under section 148 was issued on 23/03/2003 reopening the assessment on the ground that certain income chargeable to tax had escaped assessment. In the ensuring assessment finalized under section 143(3) r.w.s. 148 of the Act dated 26/3/2004, the total income has been determined at Rs.22,28,191/-, after making certain additions/disallowances. Apart from challenging the additions before the CIT(A), assessee had raised an Additional Ground of appeal contending that the case of the assessee could not be reopened under section 147/148 of the Act and that the Assessing Officer erred in reopening the assessment on the basis of loose papers, which were in-fact found in the course of a search proceedings in the case of a sister concern, i.e. Magna Publishing Co. Ltd. In this context, relevant facts are that a search and seizure action was undertaken by the Department under section 132(1) of the Act on 11/2/2000 in the case of Magna Publishing Co. Ltd. a sister concern of the assessee company , whereas the case of the assessee was covered by a survey conducted under section 133A of the Act simultaneously on 11/2/2000. The order of the CIT(A) reveals that the initiation of proceedings under section 147/148 of the Act was sought to be challenged by the assessee as an Additional Ground of appeal on various points. The CIT(A) has discussed the issue in detail from paras 2.2 to 3.4 of his order and it is concluded that the Additional Ground of appeal being raised by the assessee was an afterthought and it has been further held that the assessee ‘could not establish the case’ at all. In this background, assessee is in further appeal before us.
4. Before us, the Ld. Representative for the assessee has made varied submissions on the aspect of the validity of proceedings initiated under section 147/148 of the Act. One pertinent point raised by the assessee is that the reassessment in the present case has been sought to be made by issuance of a notice under section 148 of the Act beyond a period four years from the end of the relevant assessment year and in that view of the matter, the conditions prescribed in the first proviso to section 147 of the Act are required to be complied with; and that, in the present case, the reasons recorded by the Assessing Officer do not contain any averment that the conditions prescribed in the first proviso to section 147 of the Act are fulfilled. In support, reliance has been placed on the judgment of the Hon'ble Bombay High Court in the case of DIL Ltd. vs. ACIT, 343 ITR 296(Bom).
4.1 In order to appreciate the aforesaid plea, we may refer to the reasons recorded by the Assessing Officer, which are placed at page 24 of the Paper Book, and which read as under:-
“A Survey u/s. 133A was conducted on the assessee’s office premises on11.2.2000. During the course of survey, evidence was found that the payment of Rs.6.75 lakhs to M/s. Triveni International Productions P. Ltd. for making of corporate film, was bogus. Therefore, the income has been under assessed by Rs.6.75 lakhs.” 4.2 Admittedly, in the present case, the reopening of assessment is by way of a notice under section 148 of the Act dated 23/03/2003, which is beyond a period of four years from the end of the relevant assessment year. It is also emerging from record that the original return of income filed by the assessee was subject to scrutiny assessment under section 143(3) of the Act dated 25/5/1998, wherein the total income of the assessee was computed at Rs. Rs.5,59,166/- The first proviso to section 147 of the Act provides that in case, the reopening of assessment is beyond a period of 4 years, the proceedings can be validly reopened only incase the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. In the present case, the plea of the assessee is that the reasons recorded do not contain any statement to the effect that assessee has failed to disclose fully and truly all material facts necessary for assessment. The aforesaid plea of the assessee is quite potent considering the reasons recorded, which have been reproduced above and also in the light of the judgment of Hon'ble Bombay High Court in the case of DIL Ltd.(supra).
The Ld. Departmental Representative contended that the plea of invalidity of the reassessment proceedings has been belatedly raised by the assessee before the CIT(A) at a stage when assessee’s petition was dismissed by the Income Tax Settlement Commission also.
We have carefully considered the objection raised by the Ld. Departmental Representative on the belated raising of such Ground before the CIT(A). In fact, the CIT(A) has also taken note of the same and accordingly to him, raising of the Ground challenging the validity of initiation of proceedings under section 147/148 of the Act was an afterthought and thus, he did not admit the same. The aforesaid objection of the Revenue, in our view, is quite misplaced. Ostensibly, the plea raised by the assessee challenging the validity of the initiation of proceedings under section 147/148 of the Act involves a point of law and it is also clear that the facts relevant to decide the same are emerging from record. It is a well settled legal proposition that an assessee is entitled to raise a fresh plea in appeal proceedings so long as, such fresh claim is bonafide and involve a point of law on which no fresh facts are required to be investigated. In the context of the said proposition, the Ld. Representative for the assessee had relied upon the following decisions:-
(1) Nirmala L. Mehta vs. CIT, 269 ITR 2(Bom) (2) Smt. Raj Rani Gulati vs. CIT, 346 ITR 543 (All) (3) CIT vs. St. Mary’s Malankara Seminary, 348 ITR 69 (Ker) (4) CIT vs. Pruthvi Brokers and Shareholders P. Ltd., 349 ITR 336 (Bom)
6.1 The only objection raised by the Revenue is that the omission to raise such a plea before the Assessing Officer and even at the time of initial filing of appeal before the CIT(A) was deliberate and that it was raised in the course of proceedings before the CIT(A) as an afterthought. The CIT(A) further notes that assessee had approached the Settlement Commission admitting the concealment of income for the instant assessment year but the plea of the assessee was rejected and only after that the assessee raised the issue of the validity of proceedings under section 147/148 of the Act before the CIT(A). In our considered opinion, the case of the assessee cannot be shut out merely because fresh plea has been raised in the course of proceedings before the CIT(A) and not at the time of filing the appeal before the CIT(A). Quite clearly, the plea of the assessee is based on the validity of the reasons recorded by the Assessing Officer, which were recorded by the Assessing Officer before issuance of notice under section 148 of the Act. Quite clearly, the factum of the assessee’s application being rejected by the Settlement Commission or that the ground was not raised at the time of filing of appeal before the CIT(A) do not turn much so far as the validity of the reasons recorded for issuance of notice under section 148 of the Act are concerned. There is neither any material and nor it has been established by Revenue that omission to raise such a Ground earlier was deliberate or malafide. Under these circumstances, in our view, the point being raised by the assessee regarding the validity of initiation of proceedings under section 147/148 of the Act deserves to be admitted for adjudication. In the course of hearing, the aforesaid was put across to the Ld. Departmental Representative and it was specifically required from him to justify the initiation of proceedings under section 147/148 of the Act in the present case in the light of the judgment of the Hon'ble Bombay High Court in the case of DIL Ltd. (supra). No specific credible argument has been raised in this regard.
6.2 In our considered opinion, in the present case, the reasons recorded for reopening the assessment do not contain any charge against the assessee that there has been any failure on its part to fully and truly disclose all material facts necessary for assessment. The aforesaid is a primary requirement contained in the first proviso to section 147 of the Act and since the same has not been fulfilled, the basis on which the reopening of assessment was sought to be effected by the Assessing Officer, deserves to be treated as untenable in the eyes of law, considering the judgment of Hon'ble Bombay High Court in the case of DIL(supra).
6.3 In view of the aforesaid discussion, we hold that the proceeding initiated by issuance of notice under section 148 of the Act dated 23/3/2003 is contrary to law and is hereby set-aside. As a consequence, the assessment framed thereafter is liable to be quashed, we hold so.
6.4 Since we have quashed the assessment based on the above plea of the assessee, the other arguments raised by the assessee in relation to the merits of the additions are rendered academic and are not being addressed.
Resultantly, the appeal of the assessee is allowed, as above.
Order pronounced in the open court on 19/10/2016