Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Instant appeal by the assessee is directed against the order dated 7th December 2015, passed by the learned Commissioner (Appeals)–24, Mumbai, pertaining to assessment year 2002–03, on the following grounds:–
The learned CIT(A) erred in passing an ex-parte order without serving a notice of hearing to the appellant. He erred in not appreciating that appellant's representative attended the hearing when the first notice of hearing was received by the appellant, however, due to the transfer of CIT(A), the hearing could not take place and therefore, the appellant's representative was asked to wait for the fresh notice of hearing.
2 Anchemco Limited
2. The learned CIT(A) erred in confirming the additions made in rectification order passed under Section 154 of the Income tax Act.
3. The learned CIT(A) erred in not directing the assessing officer to withdraw the order passed under Section 154 as it was passed beyond 4 years from date of passing the original order and the fact that additions made by the learned AO were on debatable issues and the same cannot be rectified as mistakes apparent from the record.
Brief facts are, the assessee a company filed its return of income for the impugned assessment year on 30th October 2002, showing loss of ` 16,28,212. As it appears, no regular assessment in the case of assessee was made originally and the return of income was processed under section 143(1) of the Income Tax Act, 1961 (for short "the Act") on 13th March 2003, accepting the loss. Subsequently, the Assessing Officer re–opened the assessment under section 147 of the Act for the reason that the assessee has been allowed excess interest under section 24(1)(vi) of the Act which resulted in escapement of assessment. However, while completing the assessment under section 143(3) r/w section 147, vide order dated 27th March 2006, the Assessing Officer instead of making addition of the escaped income which formed the basis for re–opening as per the reasons recorded, made other additions which resulted in determination of loss at ` 13,00,872. Being aggrieved of the order so passed, the assessee preferred appeal before the learned Commissioner (Appeals), inter–alia,
3 Anchemco Limited on the ground that the assessment order passed is invalid as the Assessing Officer has passed the impugned assessment order by making additions other than the addition proposed as per reasons recorded. The learned Commissioner (Appeals), while deciding assessee’s appeal vide order dated 5th March 2008, having found that the additions made in the assessment order were different from the income sought to be assessed as per the reasons recorded, held that the Assessing Officer had no reason to believe that income had escaped assessment as the very ground for re–opening have been held by the Assessing Officer to be non–existent. Accordingly, he cancelled the re– assessment proceedings. In pursuance to the appeal order passed by the learned Commissioner (Appeals), the Assessing Officer on 2nd April 2008, passed an order giving effect to learned Commissioner (Appeals)’s order determining the loss at ` 16,28,212, as claimed in the return of income originally filed by the assessee. When the matter stood thus the Assessing Officer on 20th March 2009, issued a notice, purportedly under section 154 of the Act, seeking to rectify the assessment order passed under section 143(3) r/w section 147 of the Act for the reason that the provisions for staff benefit amounting to ` 18,00,976 was wrongly allowed, hence, there is a mistake apparent on record. Though, the assessee objected to proceedings under section 154, the Assessing Officer rejecting the objections of the assessee
4 Anchemco Limited passed an order on 8th February 2013 under section 154 of the Act adding back the amount of ` 18,00,976 being provisions for staff benefit. Being aggrieved of the aforesaid order passed under section 154, assessee preferred appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals), however, dismissed the appeal of the assessee observing that the assessee has not been able to effectively address the issues on merit and in the process holding that the order passed under section 154 was passed within six years from the date of giving effect to the order of the learned Commissioner (Appeals).
Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, the order passed under section 154 is barred by limitation as the only valid order which could have been rectified under section 154 is the intimation issued under section 143(1)(a) passed on 13th March 2003. He submitted, as the re– assessment order under section 143(3) r/w section 147 was cancelled by the learned Commissioner (Appeals) it is to be deemed to have never existed, hence, no proceedings under section 154 could have been initiated to rectify the same. He submitted, the Assessing Officer, therefore, could not have passed the rectification order or after lapse of 10 years. The learned Authorised Representative submitted, even
5 Anchemco Limited otherwise also, the subject matter of addition in the rectification proceedings is not permissible as it is a debatable issue.
Learned Departmental Representative on the other hand relied upon the observations of the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. Undisputed facts are, the assessee’s return of income was processed under section 143(1)(a) of the Act on 13th March 2003, accepting the loss declared in the return of income and no regular assessment was made under section 143(3) of the Act. Subsequently, the Assessing Officer re–opened the assessment under section 147 and ultimately passed an assessment order under section 143(3) r/w section 147 on 27th March 2006. However, it is a fact on record the learned Commissioner (Appeals) cancelled the assessment order passed under section 143(3) r/w section 147, on the reasoning that the reason on the basis of which assessment was re–opened was found to be non–existent by the Assessing Officer himself in course of assessment proceedings. Thus, it is apparent that the learned Commissioner (Appeals) held the re–opening of assessment is invalid. Thus, after cancellation of re–assessment order, the only valid order which could have been made subject matter of proceedings under section 154 is the order under section 143(1)(a) passed on 13th March
6 Anchemco Limited 2003. However, the Assessing Officer could not have rectified that order beyond the period of four years. The plea of the Department that the Assessing Officer has rectified the order giving effect to learned Commissioner (Appeals)’s order is totally misconceived. As could be seen from the order passed under section 154 of the Act, the Assessing Officer has stated that the amount of ` 18,00,976 should have been added while completing the assessment under section 143 r/w section 147. When the very re–assessment proceeding has been held to be invalid it is not understood how the Assessing Officer can make an addition claimed to be arising out of an invalid proceedings. Even otherwise also, this issue can be looked into from another angle. As is evident, the assessment was re–opened for the reason that the assessee was allowed excess benefit of interest on borrowed capital under section 24(1)(vi). Escapement of income on account of provisions of staff benefit was never a reason on the basis of which the assessment was re–opened. Therefore, when the Assessing Officer in the assessment order passed under section 143(3) r/w section 147, had not made any addition of the escaped income, which was made subject matter of re–opening, any other addition could not have been made in the assessment order passed by applying the same reasoning of the learned Commissioner (Appeals) on the basis of which he cancelled the re–assessment. Therefore, under no circumstances, it is permissible for 7 Anchemco Limited the Assessing Officer to make addition of ` 18,00,976 in a proceeding under section 154. What the Assessing Officer could not have done directly, he cannot be allowed to do indirectly. Therefore, re– assessment proceedings having been declared illegal or invalid, any proceeding on the basis of such re–assessment proceeding, has to be declared as invalid. Therefore, only course left open to the Assessing Officer to rectify the so called mistake was to initiate proceeding under section 154 against the order passed under section 143(1)(a) which is the only valid order on record. The notice issued under section 154 being beyond the period of four years from the date of order passed under section 143(1)(a), it is barred by limitation, hence, has to be declared as invalid. Consequently, we set aside the impugned order of the learned Commissioner (Appeals) by allowing the grounds raised by assessee.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 03.06.2016