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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. Per Sandeep Gosain, J. M.:
Both the present appeals have been filed by the assessee as well as by the Revenue against the order of Commissioner of Income Tax (Appeals)-41, Mumbai dated 28.01.2014 for A.Y. 2007-08 on the grounds of appeal mentioned hereinbelow.
Grounds of “1. The Hon'ble Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT (A)") has erred in confirming the order of learned assessing officer (hereinafter referred as" A.O.") of making addition of amount Invested in Millennium Clothing Pvt. Ltd. of Rs.50,00,000/- made on protective basis without considering the facts and circumstances of the case. Accordingly, such addition should be deleted.
2. The Hon'ble CIT (A) has erred in confirming the order of A.O. of reopening of the assessment even after the said assessment was completed u/s 143 (3) of the Income Tax Act, 1961 and passing of the reassessment order without justification and against the basic principles of natural justice. Accordingly, the necessary direction should be given in this regard.
3. The Hon'ble CIT (A) has erred in confirming the order of A.O. of making addition of Rs.2,50,000/- added on substantive basis being 5% of cash incentive on protective addition of Rs. 50,00,000/- as referred in ground no. 1 hereinabove without considering the facts and circumstances of the case. Accordingly, such addition should be deleted. Grounds of ITA No.4364/M/2014 "1.Whether, on facts and in the circumstances of the case and in law, the id. CIT(A), erred in holding that the substantive addition under section 69 of the. Income- Tax Act, 1961 on the investments made by the assessee in the shares of FFL ( R s . 4 0 , 0 0 , 0 0 0 / - ) a n d M B I P L ( R s . 1 5 , 0 0 , 0 0 0 / - ) a s g e n u i n e investments/ transactions." ii. Whether, on facts and in the circumstances of the case and in law, the id. CIT(A), erred in ignoring the fact the banking transactions have conclusively proved that the transactions were non genuine and bogus and the said investments were unexplained investment of the assessee. iii. Whether, on facts and in the circumstances of the case and in law, the Id. CIT(A), erred in deleting the cash incentive of Rs.2,75,000/- i.e. Commission @ 5%."
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. 2. The brief facts of the case are that the assessee filed return on 16.11.2007 declaring an income of Rs.12,980/-. A notice u/s.143(2) dated 25th of September, 2008 was issued and scrutiny assessment was completed accepting the returned income of Rs.12,980/-. Subsequently, a notice u/s.148 dated 29th March, 2012 was issued and served on the assessee. Re-opening assessment order u/s.147 r.w.s. 143(3) of the Income Tax Act was passed by the AO on 05.02.2013 at assessed income of Rs.1,10,37,980/- after making certain additions.
Aggrieved by the order of the AO, assessee preferred an appeal before CIT(A). However, the CIT(A) after considering the case of both the parties partly allowed the appeal.
Aggrieved by the order of CIT(A), the assessee as well as Revenue has filed the present appeal before us.
First of all we take up appeal filed by the assessee on the grounds mentioned below.
“Grounds of “1. The Hon'ble Commissioner of Income Tax (Appeals) (hereinafter referred as 3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. "CIT (A)") has erred in confirming the order of learned assessing officer (hereinafter referred as" A.O.") of making addition of amount Invested in Millennium Clothing Pvt. Ltd. of Rs.50,00,000/- made on protective basis without considering the facts and circumstances of the case. Accordingly, such addition should be deleted.
The Hon'ble CIT (A) has erred in confirming the order of A.O. of reopening of the assessment even after the said assessment was completed u/s 143 (3) of the Income Tax Act, 1961 and passing of the reassessment order without justification and against the basic principles of natural justice. Accordingly, the necessary direction should be given in this regard.
3. The Hon'ble CIT (A) has erred in confirming the order of A.O. of making addition of Rs.2,50,000/- added on substantive basis being 5% of cash incentive on protective addition of Rs. 50,00,000/- as referred in ground no. 1 hereinabove without considering the facts and circumstances of the case. Accordingly, such addition should be deleted.”
At the outset, learned AR has drawn our attention to the application for seeking condonation of delay in filing appeal before the Tribunal. In this regard, it is submitted by learned AR that the appeal could not be filed within the prescribed period of 60 days from the date of service of notice as there was change of address and the order of the CIT(A) was misplaced in the absence of proper staff. It is further submitted that because of non availability and misplacement of order, the appeal could not be filed within limitation and hence there occurred a delay in filing the appeal. Learned AR also drawn our attention to the affidavit filed by Shri M. K. Malpani who claims to be the Director of assessee-company in which the contentions contained in the application are reiterated.
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. 7. We heard the counsel for both the parties on this application and considering the arguments as well as contentions contained in the application as well as supportive affidavit. We are of the view that rights of the assessee would be prejudice in case assessee is not provided an opportunity to contest its case on merits. We found support from the judgment of Hon’ble Supreme Court in the case of Mst. Kitji vs. Land Acquisition Collector, AIR 1987 SC 1353, wherein it has been held that the Courts should adopt a liberal approach where the delay is of few days and in construing the expression “sufficient cause the principle of advance substantial justice is of prime importance hence the expression” sufficient cause should receive liberal construction, therefore, following the judgment of Hon’ble Supreme Court, we allow the application filed by the assessee for seeking condonation of delay and admit the appeal to be decide on merits. During the pendency of the present appeal, the assessee has also moved another application for raising addition ground of appeal.
We heard the counsel for both the parties and we have perused the contents of the application for seeking permission to take additional ground of appeal and we are of the considered view that the additional grounds which the assessee now wants to raise before us is squarely of legal in nature and the said legal grounds goes to the roots of the case and even otherwise it is a settled law
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. that legal pleas/grounds can be raised at any stage of hearing. We found support from the judgment of Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (1998) 229 ITR 383 (SC). Considering the facts of the case as well as the ratio laid down by Hon’ble Supreme Court, we allow the application filed by assessee for seeking to take additional ground of appeal.
9. Since the additional ground raised by the assessee goes to the roots of the case and the jurisdiction of the Assessing Officer in invoking the provision of Section 147 of the Income Tax Act has been challenged, therefore, in our considered view this additional ground needs to be adjudicated firstly.
“Ground No.4:- The assessment order passed by the ld. AO is not legally sustainable as the Ld. AO did not supply the appellant with reasons for reopening the assessment u/s.147 as mandated by the Hon’ble Supreme Court in the case of GKN Driveshaft (India) Ltd. vs. Income Tax Officer & Ors 259 ITR 0019 (SC). Ground No.5:- The assessment order passed by the Ld. AO is not legally sustainable as the Ld. AO did not follow the procedure for completing the assessment u/s.147 as laid down by the Hon’ble Bombay High Court in the case of Asian Paints Ltd. vs. Deputy Commissioner of Income Tax & ANR ITR 0090 (Bom).”
Grounds No.4 and 5 raised by the assessee before us are interrelated and interconnected; therefore, we think it fit to decide the same by passing a common order.
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. 11. Learned AR appearing on behalf of the assessee argued that the assessment order passed by AO u/s.147 r.w.s. 143(3) of the Income Tax Act is not legally sustainable as the AO did not supply the assessee for the reasons for re-opening the assessment u/s.147 as mandate by the Hon’ble Supreme Court in the case of M/s. GKN Driveshaft (India) Ltd. V/s. ITO and Ors, 259 ITR 19 (SC). Learned AR further submitted that assessee vide letter dated 26.11.2012 requested the AO for providing the reason for reopening the assessment. It was also submitted that the reasons recorded by the AO were provided to the assessee vide AO’s letter dated 5.2.2013 along with the assessment order which was also passed on the same date. Therefore, it is submitted by the AR that the AO has furnished the reasons merely as a formality and taken the issue very casually without following the procedure laid down by the Hon’ble Apex Court in the case of GKN Drife Shafts India Ltd. V/s. ITO (supra).
On the other hand, learned DR appearing on behalf of the Revenue relied upon the order passed by the lower authorities.
We have perused the record as well as the order passed by the Revenue authorities. We have noticed that since the notice u/s.148 was issued in the case of the assesee within the expiry of four years from the end of the relevant
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. assessment year, therefore, what all is required to be seen is whether the AO had “reasons to believe that income chargeable to tax has escaped assessment or not”. Learned CIT(A) has also dealt with the issue in paragraph 5.3.2 in its order which is reproduced below:
“5.3.2 As regards the plea of non-communication of reasons for re-opening the assessment, it is seen from perusal of the case records that the appellant has placed on record copy of its letter dated 19.12.2012 addressed to the A.O. and filed in 'Tapal' on 17.12.2012 wherein it is clearly stated in Para 2 that 'we submit that now we have furnished the reply (to notice u/s.148) by letter filed on 26.11.2012. In para 2 of our letter filed on 26.11.2012, we have given our objections for reopening of assessment u/s.148 which may kindly be considered'. It is further observed from the record that the objections raised by the appellant vide letters dated 26.11.2012 and 19.12.2012 were disposed of by the A.O. vide letter dated 05.02.2013. Thus, it transpires from the record that the appellant was not only aware of the reasons recorded by the A.O. for reopening the assessment but had also availed of opportunity to file objections to issuance of notice u/s.148. It is also seen that the A.O. had duly disposed of the objections by passing a speaking order before passing the impugned assessment order. Presuming (for the sake of argument only) that the reasons were not formally communicated to the appellant, this would not invalidate the reassessment proceedings, as held in the case of ITO v. Smt. Gurinder Kaur 102 ITD 189 (Del). In that case, it has been held that there is no requirement that the A.O. has to formally communicate the reasons for reopening the assessment to the assessee and, therefore, reassessment cannot be invalidated on the ground that the reasons for reopening the assessment were not disclosed to the assessee. While coming to this conclusion, the Hon'ble Tribunal relied on the judicial pronouncements/precedents reported in 63 ITR 219 (SC) and 25 ITR 447 (Mad.).”
After considering the detailed order passed by CIT(A), we are of the considered view that the assessee was not only aware of the reasons recorded by the AO for reopening the assessment but had also availed of the opportunity to file objections to the issuance of notice u/s.148, therefore, it cannot be presumed that the reasons recorded by the AO were not in the knowledge of the 3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. assessee. Therefore, considering the judgments relied upon by the assessee as well mentioned in the orders passed by CIT, we dismiss this ground of appeal raised by the assessee.
15. Learned AR further submitted that the assessment order passed by AO is not legally sustainable as the AO did not follow the procedure for completing the assessment u/s.147 as laid down by the Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. DCIT, (2008) 296 ITR 90 (Bombay). In this context, learned AR also relied upon the above mentioned detailed judgment of Hon’ble Bombay High Court.
On the other hand, learned DR appearing on behalf of the Revenue relied upon the order passed by the lower authorities.
We have heard the counsel for both the parties and perused the material available on record as well as order passed by Revenue Authorities.
After perusal of the assessment order passed u/s.147 r.w.s. 143(3) of the Income Tax Act, it is clearly mention that in paragraph 2.1 of the said assessment order that the reasons for reopening was provided to the assessee
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. vide order dated 5.2.2013 by the AO and the objections to the reopening was also rejected by the same order and the same was sent by speed post to the address given in the return on income. Meaning thereby the objections of the assessee against the reopening were rejected by the AO on 5.2.2013 itself. In the present case, assessment order u/s.147 r.w.s. 143(3) of the Income Tax Act, 1961 was also passed on 5.2.2013 by a consolidated order which is apparent from paragraph 12 on index/first page of the order which goes to show that the objections raised by assessee regarding reopening were rejected on 5.2.2013 and on the same date order u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 was also passed which is a clear violation of the judgment of Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. DCIT and Others (supra), wherein it has been categorically mentioned that “if the AO does not accept the objection filed by the assessee against reopening of the assessment, he is not to proceed further in the matter for the period of four weeks from the date of service of order rejecting the objections on the assessee, above procedure is to be followed strictly in all stage of reopening of assessment”. From the above directions issued by the Hon’ble Bombay High Court, it is clear that the AO was to provide four weeks from the date of service of order, rejecting the objections on the assessee before proceeding further in the matter but in the present case as per the AO, objections were rejected on 5.2.2013 and 3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. assessment order was also passed on 5.2.2013 u/s.147 r.w.s. 143(3) of the Income Tax Act, 1961, the AO has not given four clear weeks however there is no material on record to prove the service of order rejecting the objections of the assessee. The entire facts which emerges from the order of assessment itself goes to show that the assessment order passed u/s.147 r.w.s. 143(3) of the Income Tax Act, 1961 is in clear violation of the directions given by the Hon’ble Bombay High Court in the case of Asian Paints Ltd. and Others, therefore, the same is not sustainable in law and it is liable to be set aside even otherwise as per the facts contained in the present case, the reopening was initiated on the solitary statement of Shri Jagdish Purohit, which was retracted later on. Apart from that no substantial evidence has been brought on record to corroborate the initial statement made by Shri Jagdish Purohit. On this aspect, our attention was drawn to the judgment of Hon’ble Gujarat High Court in the case of “Commissioner of Income Tax Vs. Shraddhaben Modi”, wherein it was held that in the absence of any independent material, no reopening can be initiated on the statement (which was later on retracted) of the party. Further it was held that any notice of reopening u/s.148 would be required to be tested by Touch Stone of reasons recorded by the Assessing Officer. Use of statement recorded u/s.133A could not be permitted without any corroborative evidence –
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd. proceedings u/s.147 and notice u/s.148 could not be permitted to be sustained – Revenue’s Appeal dismissed.
From the principles laid down by the aforementioned judgment, it is clear that no reopening proceedings can be initiated only on the solitary statement without any corroborative material placed on record and moreover in the present case the statement made by Jagdish Purohit has already been retracted, therefore, a retracted statement without any corroborative evidence cannot be made basis for reopening the assessment. However, considering the facts and circumstances of the present case as well as taking into account the legal proposition as discussed above, we are of the considered view that the proceedings u/s.147 and the notice issued u/s.148 could not be permitted to be sustained. Hence, these grounds of appeal raised by the assessee are allowed.
20. Other grounds raised by the assessee in the present case become infructuous. Thus, the appeal filed by the assessee is allowed.
21. As we have already allowed the assessee’s appeal, therefore, the appeal of the Revenue does not require any adjudication as has become infructuous.
Hence, the appeal of the Revenue is dismissed as infructuous.
3035/Mum/2014 (A.Y. 2007-08) Hakmans Financial Services & Securities Pvt. Ltd.
To sum up, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed as infructuous. Order pronounced in the open court on 21st September, 2016
Sd/- Sd/- (R.C. Sharma) (Sandeep Gosain) लेखा सद�य / Accountant Member �या�यक सद�य / Judicial Member मुंबई Mumbai; �दनांक Dated : 21.09.2016 P.K.K., Sr.P.S. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT - concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,