PROCYON OFFSHORE SERVICES P. LTD,MUMBAI vs. ACIT 5(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the orders,dated 20/04/2012, of the CIT (A)-9,Mumbai, the assessee has filed the appeals for the above-mentioned two Assessment Years(AY.s.)raising various grounds of appeals.Considering the fact that the issues involved in both the cases are almost identical, we are adjudicating both appeals by single order.The details of filing of returns, returned incomes and assessed incomes etc., can be summarised as under: A.Y. ROI filed on Returned Assessment dt. Assessed CIT(A) order dt. Income(Rs.) Income(Rs.) 2004-05 25.10.2004 Nil 24.12.2009 1,05,47,180/- 20.04.2012 2005-06 28.10.2005 Nil 24.12.2009 95,910/- 20.04.2012 ITA/4951/Mum/2012- AY.2004-05: Brief Facts: 2.Assessee-company is engaged in the business of shipping services. Return of income,filed by the assessee, was processed u/s. 143 (1) of the Act on 08/07/2005. It was rectified u/s.154 of the Act,on 07/06/2006 for granting TDS credit. Subsequently,the Assessing Officer (AO) issued a notice u/s. 147 of the act on 22/02/2008.In response,the assessee furnished a letter,dated 12/02/2009,stating that the original return furnished by it should be treated as the returnfiled in response to the notice issued u/s. 148 of the Act and requested the AO to supply the reasons recorded for reopening of the assessment.As per the AO,assessee was furnished 1

4951-52/M/12-Procycon Offshore the copy of the recorded reasons,vide letter 30/11/2009. The AO issued notices u/s.143 (2) and 142(1)of the Act and completed the assessment u/s.144 r.w.s. 147 of the Act,disallowing depreciation of Rs. 17.81 lakhs.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him,it was argued that due to change of address, notices issued by the AO were sent to the old address and not at the new address of the assessee, that the reopening of assessment was bad in law,that no fresh material evidence was brought on record. The assessee filed the paper book before the FAA on 07/06/2011.He called for a Remand Report (RR) from the AO and directed him to examine the fresh evidences and to examine the issues raised by the assessee.After considering the RR and the submission of the assessee, he held that return filed by the assessee was processed u/s. 143(1)of the Act,that no opinion was formed by the AO, that it could not be said that there was a change of opinion in issuing the notice u/s.148 of the Act,that the time of issue of notice u/s. 148 the AO had material on hand that income had escaped assessment, that the sufficiency or the correctness of the material was not to be considered at the time of issue of reassessment notice,that the AO had correctly issued the notice, that he had given a copy of the reasons recorded to the assessee during the course of assessment proceedings.Thus, the FAA upheld the reopening.With regard to the claim of the assessee of depreciation of a vessel he held that it was acquired in the subsequent year, that it had put to use the ship in the subsequent year, it had never used the ship for its business purposes, that the AO had correctly disallowed with depreciation on the said shipping vessel.Regarding the expenses,disallowed u/s.37 (1) of the Act,the FAA held that the assessee had furnished the copies of the invoice for the first time before him,that it had not claimed that the evidence was submitted as an additional evidence, that no application under rule 46A had been made,that the assessee had failed to explanation as to how the expenditure incurred by it was for business purposes.He upheld the disallowance made by the AO amounting Rs. 5.54 lakhs.

4.During the course of hearing before us, the Authorised Representative(AR) stated that the reasons were not furnished by the AO to the =,that it was gross violation of the mandate of the provisions of the Act.He referred to the case of Videsh Sanchar Nigam Ltd.(340ITR66). The Departmental Representative(DR) supported the order of the FAA.

5.We have heard the rival submissions and perused the material before us. In our opinion, before deciding the issues on merits the jurisdictional issue has to be adjudicated.The 2

4951-52/M/12-Procycon Offshore assessee had,before the FAA as well as before us, argued that reasons for reopening were not supplied to it. It has referred to the letter dated 12/02/2009 (page 45 of the paper book) wherein it had requested the AO to furnish at the reasons recorded by him for reopening the assessment for the year under consideration.As per the AO, he had supplied the reasons on 30/11/2009. We find that there was a change in address of the assessee, that the office of the assessee was shifted from Bandra to Nariman point, that the assessee had intimated the change of address,that the departmental authorities were aware of the new address, that the notices issued by the AO were received back by him, that the AO had completed assessment u/s. 144 of the Act. Considering the sequence of the events it was the duty of the AO to prove before the FAA that the reassessment notice was actually served upon the assessee.The AO himself at mention that the notices issued by him along with the reasons recorded could not be served on the assessee. It is also a fact that the assessee was not aware of the ex-parte assessment passed by the AO. We have gone through the remand report filed by the AO. We find that he has not proved that reasons recorded by him were served on the assessee. In our opinion,valid service of reasons recorded for reopening as a pre-requisite for completing the assessment u/s. 147 of the Act. The assessee cannot be kept dark about the reasons recorded by the AO.In the case before us, there is no evidence that the reasons were handed over to the assessee or validly served upon it. Therefore, assessment order passed has to be held as invalid.Here,we would like to refer to the case of Trend Electronics (379 ITR 456),wherein the Hon’ble Bombay High Court has held as under: “It is axiomatic that the power to reopen a completed assessment under the Act is an exceptional power and whenever the Revenue seeks to exercise such power, it must strictly comply with the pre-requisite conditions, viz., recording 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 must be furnished to the assessee when sought for so as to enable the assessee to object to the reasons before the Assessing Officer. Thus, in the absence of reasons being furnished when sought for would make an order of reassessment bad in law. The recording of reasons and furnishing of the reasons has to be strictly complied with as it is a jurisdictional issue. This requirement is salutary as it not only ensures reopening notices are not lightly issued but also where notices 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 reopening notice u/s. 148 is dropped or withdrawn otherwise it is proceeded with further. In issues such as this, i.e., where the jurisdictional issue is involved this must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise…...” Considering the above,we hold that the order of the AO was invalid.So,reversing the order of the FAA,we decide the first ground of appeal in favour of the assessee.As we have decided

4951-52/M/12-Procycon Offshore the jurisdictional issue in favour of the assessee,so,we are not adjudicating the matter on merits. ITA/4952/Mum/2012-AY.2005-06: 6.Facts for the year are similar to the facts of the earlier year-except for the amount involved for depreciation on vessel.So,following our order for the earlier year,we decide the jurisdictional issue in favour of the assessee and reverse the order of the FAA.Like last AY.we are not adjudicating the issues of merits.