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Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE
Before: SHRI. ABRAHAM P. GEORGE & SHRI. VIJAYPAL RAO
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER (Assessment Year : 2006-07) & Stay Peition No.130/Bang/2015 (In (Assessment Year : 2006-07) Shri. C. Jayaram (HUF), No.154, Kariyamana Agrahara Village, Varthur Hobli, Bellandur Post, Bangalore 560 103 .. Appellant PAN : AADHC7565F v. Income-tax, Officer, Ward – 7(2), Bangalore .. Respondent Assessee by : Shri. S. Venkatesan, CA Revenue by : Shri. Sunil Kumar Agarwala, JCIT Heard on : 17.11.2015 Pronounced on : 27.11.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by assessee, it has altogether raised six grounds, of which ground 2 assails the assumption of jurisdiction u/s.148 of the ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 2 Income-tax Act, 1961 (‘the Act’ in short). Since this ground goes to the root of the matter it is considered first.
Ld. Counsel for the assessee submitted that the impugned assessment year was the first one in which assessee was assessed in the status of HUF. According to the Ld. AR the AO issued notice u/s.148, dt.25.03.2013. As per the Ld. AR pursuant to such notice assessee had filed a return for the impugned assessment year and also requested the AO to furnish him a copy of the reasons recorded for issue of notice. As per the Ld. AR assessee had specifically stated in the said letter dt.12.08.2013 placed at paper book page 9 that the reasons were being sought by virtue of the judgment of Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd v. ITO [(2003) 259 ITR 19]. As per the Ld. AR, such reasons were never supplied to the assessee. Ld. AR submitted that assessee might have been aware of the reasons but still the AO having not furnished the reasons to the assessee, assessment was void-ab-initio. Accordingly, as per the Ld. AR, assumption of jurisdiction without supplying the reasons, despite a specific request from the assessee was void in view of the judgment of Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd (supra).
ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 3 Ld. AR submitted that this issue was taken by the assessee before the CIT (A) in first appeal. However, as per Ld. AR, CIT (A) had held that the issues on which reopening was resorted to, were squarely confronted to the assessee and assessee had actively participated in the proceedings before the AO. Continuing his arguments, Ld. AR submitted that CIT (A) had taken a stand that assessee having revised his return of income for A. Y. 2006-07 on 21.03.2014 which reflected the core issue for which the assessment was reopened for the impugned assessment year, it could not plead ignorance of the reasons. As per the Ld. AR none of the observation of the CIT (A) would address a situation where assessee despite his request has not been supplied with the reasons for reopening. According to him for this reason alone assessment had to be quashed. Reliance was placed on the judgment of Hon’ble Delhi High Court in the case of Pr.CIT v. Samcor Glass Ltd [ITA Nos.768 & 769/2014, dt.12.10.2015]; Hon’ble Bombay High Court in the case of CIT v. Trend Electronics [ITA.1867 of 2013, dt.16.09.2014 and that of Hon’ble jurisdictional High Court in the case of Kothari Metal [W. A. No.218/2015 [IT] dt.14.08.2015].
Per contra, Ld. DR submitted that assessee had entered into a joint development agreement with Vaswani Estates Developers P. Ltd, for ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 4 development of land measuring 1 acre and 21.58 guntas. As per the Ld. DR, vide this joint development agreement assessee was entitled to 31% of the super built-up area upon completion of the project and this 69% of the land stood conveyed to the builder. Capital gains arising to this transaction was not reported and assessee had failed to file a return of income for impugned assessment year. It was for this reason that the assessment was reopened. Assessee had never filed a return for the impugned assessment year. In the return filed pursuant to the notice assessee had computed capital gains on the very same property. Thus according to the Ld. DR assessee was aware of the reason for which notice u/s.148 of the Act was issued. Assessee had actively participated in the assessment proceedings also. Thus according to him assessee on the one hand was asking for a copy of reasons, but whereas on the other hand it had declared income on account of capital gains on the very same transactions which was the core reason why notice u/s.148 of the Act was issued.
We have perused the orders and heard the rival contentions. Notice dated.25.03.2013 issued u/s.148 of the Act has been placed by the assessee at paper book page.1. Assessee had, by virtue of its letter dt.12.08.2013, required the AO to furnish the reasons for issue of such notice. Such letter ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 5 was submitted along with the return of income filed in pursuance to notice u/s.148 of the Act. It might be true that assessee in such return had shown capital gains arising out of the joint development agreement he entered with Vaswani Estates Developers P. Ltd. It might also be true that this might have been the reason for which the notice u/s.148 of the Act was issued. However, it remains an uncontroverted fact that AO had not complied with the law laid down by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd (supra). AO had not given copy of the reasons for which notice u/s.148 of the Act was issued. In our opinion awareness of the assessee as to the reason why notice u/s.148 of the Act was issued may not be sufficient to satisfy the requirement in this regard. No doubt Ld. DR has relied on a judgment of Hon’ble Madras High Court in the case of CIT v. C. Palaniappan [(2011) 241 CTR 207] where it was held that non-furnishing of reasons was only a supervening illegality and would not render the proceedings void by itself. However, we find that Hon’ble Delhi High Court in the case of Samcor Glass Ltd [supra] and Hon’ble Bombay High Court in the case of Trend Electronics [supra] had held that jurisdictional issues should be strictly complied with by the authorities concerned and no question of knowledge being attributed on the basis of implication can arise. Hon’ble jurisdictional High Court in the ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 6 case of Kothari Metals (supra), where a reopening was attempted on a return subject to processing u/s.143(1) of the Act, had held as under at para 6 of its judgment dt.14.08.2015 :
The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. After filing of the return in response to the notice issued under Section 148 of the Act or on request of the asessee requesting that the return of income initially filed be treated as a return of income filed in response to such notice, the assessee is entitled to be furnished the reasons for such re-opening, which can also be challenged independently. Since such reasons had not been furnished to the appellant, even though a request for the same had been made, we are of the opinion that proceedings for the re-assessment could not have been taken further on this ground alone. 05. Once a jurisdictional High Court decision is there on a particular legal issue, this Tribunal being an inferior forum to jurisdictional High Court, is bound to follow the said judgment. Accordingly we are constrained to quash the assessment done on the assessee for the impugned assessment year. Appeal of the assessee having been allowed on legal ground itself, other grounds relating to the merits of the issue are not dealt with. Assessee’s appeal is allowed.
6. Since the appeal of the assessee has been allowed, the stay petition filed by the assessee has become infructuous and it is dismissed.
ITA.1287/Bang/2015 & SP.130/Bang/2015 Page - 7
In the result, appeal of the assessee is allowed while its stay petition is dismissed as infructuous.
Order pronounced in the open court on 27th day of November, 2015.