IN THE INCOME TAX APPELLATE TRIBUNAL
`C' : NEW DELHI
DELHI BENCH `C
GUPTA, VICE PRESIDENT AND
BEFORE SHRI G.C. GUPTA,
RAO, ACCOUNTANT MEMBER
SHRI INTURI RAMA RAO,
Nos.1068/Del/2008 to 1073/Del/2008
ITA Nos
Years : 1999-
Assessment Years 2004-05
1999-2000 to 2004-
M/s Jagat Talkies Vs. Deputy Commissioner of
Distributors,
Distributors, Income Tax,
1489, Chandni Chowk, Circle-
Circle-29(1),
Delhi 110 006. New Delhi.
PAN : AAAFJ5470B.
(Appellant) (Respondent)
Appellant by : Shri Kaanan Kapur and
Shri Bhushan Kapur, Advocates.
Respondent by : Shri T.Vasanthan, Senior DR.
Date of hearing : 07.05.2015
Date of pronouncement : 10.06.2015
ORDER
GUPTA, VP :
PER G.C. GUPTA,
This bunch of six appeals preferred by the assessee for the
assessment years 1999-2000 to 2004-05 is directed against the order
of learned CIT(A)-XXV, New Delhi. Since identical issue is involved in
all these appeals, the same are being disposed of with this
consolidated order.
2. The identical grounds of appeal No.1 to 4 of the assessee in all
these appeals are as under:-
"1. That the learned CIT(A) has erred in confirming the
action of learned Assessing Officer, that completing
assessment u/s 143(3)/148 of the Income Tax Act, 1961
was in order.
2 ITA-1068 to 1073/Del/2008
2. That the learned CIT(A) has erred in law and on facts
in confirming A.O.'s action of issuing the notice u/s 148
which was without jurisdiction as the condition precedent
to the exercise of jurisdiction u/s 148 i.e. the `recording of
reason was totally absent.
3. That the learned Assessing Officer had not given
reasonable opportunity to appellant before making
assessment u/s 143(3)/148 of the Income Tax Act, 1961.
4. That the orders passed by the learned CIT(A) and
Assessing Officer are against the principle of natural
justice."
3. The learned counsel for the assessee submitted that in this case,
the assessee is in second round of litigation before the Tribunal. In the
first round of litigation, the Tribunal, vide its order dated 05.01.2009,
has passed the ex parte appellate order by recording "none" present
on behalf of the assessee appellant and has restored the issue of
legality of reassessment proceedings initiated by issue of notice under
Section 148 of the Income-tax Act, 1961 for a fresh decision to the file
of the Assessing Officer in the light of the decision of Hon'ble Apex
Court rendered in the case of GKN Driveshafts (India) Ltd. Vs. ITO &
Others [2003] 259 ITR 19 (SC). With regard to the other grounds of
appeal raised by the assessee, the Tribunal has noted in its order that
no adjudication is called for regarding the other grounds of the
assessee in any of these years as the Assessing Officer has to frame
de-novo assessments in all these years and, hence, at this stage, no
adjudication is called for regarding the other grounds of the assessee.
The learned counsel for the assessee submitted that the assessee
preferred a writ petition against the order of the Delhi Tribunal dated
05.01.2009 before Hon'ble Delhi High Court and, the Hon'ble High
Court, vide its order dated 09.05.2011, allowed the writ petition of the
assessee and set aside the order of the Tribunal dated 05.01.2009 and
directed the Tribunal to decide the aforesaid appeals afresh and
3 ITA-1068 to 1073/Del/2008
consequently, the appeals of the assessee were fixed for hearing
before the Tribunal.
4. The learned counsel for the assessee submitted that the
assessee had specifically requested the Assessing Officer for the copy
of the reasons leading to reopening of the assessment in these cases
under Section 148, but the Assessing Officer had ignored the request
of the assessee and proceeded with the assessment proceedings. The
assessee has filed a four page letter dated 23.06.2006 addressed to
the Assessing Officer wherein a request has been made in the
concluding part of the letter to supply the reasons for reopening the
cases under Section 148 of the Act. He submitted that in view of the
failure of the Assessing Officer in supplying the reasons recorded while
reopening the assessments in this case by issue of notice under
Section 148, the entire reassessment proceedings were bad in law and
liable to be quashed. The learned counsel for the assessee submitted
that an affidavit regarding non-receipt of reasons for reopening of
assessment under Section 148 was filed. He referred to paragraph 4.6
of the impugned order passed by the learned CIT(A) wherein he has
recorded that it appears from the records that the request for
providing reasons for issuing the notice under Section 148 was made
by the appellant. The CIT(A) further recorded that it is also apparent
from the assessment records that there was no formal communication
of the reasons for issuing notice under Section 148 by the Assessing
Officer to the assessee. However, the CIT(A) decided the issue against
the assessee on the plea that it was not correct to say that the
assessee remained ignorant about the reasons for the issue of notice
under Section 148 of the Act. The learned counsel for the assessee
has relied on a series of decisions as under :-
(i) GKN Driveshafts (India) Ltd. Vs. ITO and Others [2003] 259 ITR
19 (SC).
4 ITA-1068 to 1073/Del/2008
(ii) Haryana Acrylic Manufacturing Company Vs. CIT and Anr.
[2009] 308 ITR 38 (Delhi).
(iii) CIT Vs. Videsh Sanchar Nigam Limited [2012] 340 ITR 66
(Bom).
(iv) CIT Vs. Fomento Resorts and Hotels Ltd. judgment dated
27.11.2006 in Tax Appeal No.71 of 2006 (Bombay High Court).
(v) Shri Balwant Rai Wadhwa Vs. ITO order dated 14.01.2011 in ITA
No.4806/Del/2010 (ITAT, Delhi `A' Bench).
(vi) Industrial Development Bank of India Vs. DCIT order dated
12.12.2012 in ITA No.1391 and 1394/M/2004 (ITAT, Mumbai `D' Bench).
(vii) S. Prasad Raju Vs. DCIT [2005] 96 TTJ (Hyd) 832.
(viii) Tata International Ltd. Vs. DCIT [2012] 52 SOT 465 (Mum).
(ix) Virendra Dev Dixit and Smt. Kamla Devi Dixit Vs. ACIT [2011]
331 ITR 483 (All).
(x) Kamal Corporation Vs. Commissioner, Trade Tax [2009] 20 VST
157 (All).
(xi) Rajesh Babubhai Damania Vs. CIT [2001] 251 ITR 541 (Guj.).
(xii) Hira Lal Vs. Ratan Lal AIR 1944 All 293.
5. The learned counsel for the assessee submitted that the decision
of Hon'ble Delhi High Court in Haryana Acrylic Manufacturing Company
5 ITA-1068 to 1073/Del/2008
(supra) clinches the issue in favour of the assessee, wherein it is held
that the requirement of recording the reasons and communicating the
same to the assessee, enabling the assessee to file objections and the
requirement of passing a speaking order are all designed to ensure
that the Assessing Officer does not reopen assessments which have
been finalized on his mere whim or fancy and that he does so only on
the basis of lawful reasons. Thus, a deviation from these directions
would entail the nullifying of the proceedings. The Hon'ble High Court,
for this reason, quashed the notice under Section 148 as well as all
proceedings subsequent thereto including the assessment order of the
Assessing Officer.
6. The learned DR has opposed the submissions of the learned
counsel for the assessee. He submitted that the CIT(A) has passed a
detailed and speaking order on the issue of validity of issuance of
notices under Section 148 of the Act. He submitted that the finding of
the CIT(A) as recorded in paragraph 6.4 of his appellate order was that
it was not correct to say that the assessee remained ignorant about
the reasons for the issue of notice under Section 148 of the Act. The
CIT(A) has recorded certain facts, i.e., that the assessee has not filed
any return for A.Y. 1998-99 although its total income was in excess of
maximum amount not chargeable to income tax and that, as per
provisions of Section 139(1), it was required to furnish the return of
income in the prescribed form etc. and that, under the provisions of
Section 147 read with Explanation 2(a) thereto, where no return of
income is furnished, although the total income exceeds the maximum
amount not chargeable to income tax, the case is deemed to be one
where income chargeable to tax has escaped assessment and the
Assessing Officer is required to assess such income under Section 147
of the Act. The learned DR referred to paragraph 9.1 of the learned
CIT(A)'s order wherein it was recorded that the observation of the
Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd.
6 ITA-1068 to 1073/Del/2008
(supra) does not suggest that non-communication of the reasons would
result in the assessment proceedings and the assessment order
becoming void or bad in law where the return of income under Section
139(1) itself was not filed. The CIT(A) further noted that it is important
to note that the said observation was made by the Hon'ble Apex Court
in the context of an assessee who has filed the return of income under
Section 139(1) of the Act. Learned DR relied on the decision of Hon'ble
Gujarat High Court in Sahkari Khand Udyog Mandal Ltd. Vs. ACIT in
Special Civil Application No.3955 of 2014 dated 31.03.2014 in support
of the case of the Revenue. The learned DR submitted that the
assessee has cooperated with the Assessing Officer in the assessment
proceedings and, therefore, it should not be open to the assessee now
to plead that it was not supplied the copy of the reasons recorded for
reopening of the assessment. The learned DR also relied on the ex
parte order of the Tribunal dated 05.01.2009 wherein the Tribunal has
restored the matter to the file of the Assessing Officer for a fresh
decision. He relied on the order of the Assessing Officer and the
learned CIT(A).
7. We have considered the rival submissions carefully and have
gone through the order of the Assessing Officer and the learned CIT(A).
We find that the basic facts in this case are not in dispute. The
reassessment proceedings were initiated in this case by issue of
notices under Section 148 of the Act for the relevant assessment
years. The assessee has specifically requested for the reasons leading
to the reopening of assessment under Section 148 and has also filed a
four page letter dated 23.06.2006 addressed to the Assessing Officer
during the course of assessment proceedings wherein, apart from
dealing with the queries of the Assessing Officer, a request was made
in the concluding part of the letter to supply the reasons for reopening
of the assessment under Section 148 of the Act. The assessee has also
filed an affidavit to this effect regarding non-receipt of reasons for
7 ITA-1068 to 1073/Del/2008
reopening of the case under Section 148 of the Act. The CIT(A) has
given a finding in paragraph 6.4 of his appellate order that it appears
from the records that the request for providing reasons for issuing the
notice under Section 148 was made by the appellant. The CIT(A)
further recorded that it is also apparent from the assessment records
that there was no formal communication of the reasons for issuing
notice under Section 148 by the Assessing Officer to the assessee.
This finding recorded by the learned CIT(A) could not be controverted
before us on behalf of the Revenue. In these facts of the case, the only
issue which requires adjudication is that whether the non-
communication of the reasons recorded for issuing notice under
Section 148 of the Act, inspite of a specific request made by the
assessee for providing reasons for issuing the notice under Section
148, renders the whole reassessment proceedings vitiated and void in
law. The Tribunal, vide its order dated 05.01.2009, has set aside the
issue of validity of notice under Section 148 for the relevant
assessment years and has restored the same to the file of the
Assessing Officer for a fresh decision in the light of the decision of
Hon'ble Apex Court rendered in the case of GKN Driveshafts (India)
Ltd. (supra). We find that the Hon'ble Supreme Court, in its judgment
dated 25.11.2002 in GKN Driveshafts (India) Ltd. (supra), held that
when a notice under Section 148 of the Act is issued, the proper course
of action for the notice is to file return and if he so desires, to seek
reasons for issuing notices. The Assessing Officer is bound to furnish
the reasons within a reasonable time. On receipt of reasons, the notice
is entitled to file objections to issuance of notice and the Assessing
Officer is bound to dispose of the same by passing a speaking order.
In the case of the assessee before us, we find that the assessee has
requested for furnishing of the reasons recorded for issuance of notice
under Section 148 of the Act and the Assessing Officer has not
furnished the reasons to the assessee. The plea of the learned DR,
that this decision of Hon'ble Apex Court in GKN Driveshafts (India) Ltd.
8 ITA-1068 to 1073/Del/2008
(supra) is distinguishable, as, in this case, the assessee has filed the
return of income, is not sustainable. We find that filing of return of
income or otherwise is not decisive to the issue of legality of the notice
of reassessment by issue of notice under Section 148 of the Act. The
decision of Hon'ble Gujarat High Court in Sahkari Khand Udyog Mandal
Ltd. (supra), relied upon by the learned DR, is of no help to the case of
the Revenue. We find that the Department in this case has supplied
the assessee the copy of the reasons recorded by the Assessing Officer
for issuing such notice. The Hon'ble High Court has concluded in this
case that the Assessing Officer shall supply the reasons recorded by
him for issuing such notice within 30 days of the filing of the return of
income by the assessee without waiting for the assessee to demand
such reasons. In the case of the assessee before us, it is an admitted
fact that the Department has failed to supply the assessee the copy of
reasons recorded by the Assessing Officer for issuance of notice under
Section 148 of the Act. The reliance of the learned DR on the order of
the Tribunal in the case of the assessee dated 05.01.2009, wherein the
issue of legality of issue of notice under Section 148 was restored by
the Tribunal to the file of the Assessing Officer, is also misplaced for
the reason that the said order of the Tribunal dated 05.01.2009 was
set aside by the Hon'ble Delhi High Court vide their order dated
09.05.2011, wherein it directed the Tribunal to decide the aforesaid
appeals afresh. The case law cited by the learned counsel for the
assessee supports the case of the assessee that once it is found that
the copy of the reasons recorded for issuance of notice under Section
148 of the Act was not given to the assessee, inspite of a specific
request made by the assessee in this behalf, the proceedings of
assessment thereafter, including the assessment order passed, shall
be vitiated and void. The decision of Hon'ble Delhi High Court in
Haryana Acrylic Manufacturing Company (supra) is binding on the
Tribunal, wherein it is held that the requirement of recording the
reasons and communicating the same to the assessee, enabling the
9 ITA-1068 to 1073/Del/2008
assessee to file objections and the requirement of passing a speaking
order, are all designed to ensure that the Assessing Officer does not
reopen the assessments which have been finalized on his mere whim
and fancy, and that he does so only on the basis of lawful reasons and,
a deviation from these directions would entail the nullifying of the
proceedings and, the order of assessment in this case was accordingly
quashed. Respectfully following the decision of Hon'ble Jurisdictional
High Court in Haryana Acrylic Manufacturing Company (supra), we
decide the issue in favour of the assessee and hold that in view of the
fact that the assessee was not given the copy of the reasons for
issuing notice under Section 148 of the Act by the Assessing Officer
inspite of a specific written request of the assessee for providing the
same, the whole reassessment proceedings and the resultant order of
assessment passed under Section 143(3)/148 of the Act have become
vitiated entailing in nullifying proceedings and, accordingly, the orders
of assessment under Section 143(3)/148 are quashed and, the grounds
of appeal No.1 to 4 of the assessee in all these appeals are allowed.
8. In view of our decision quashing the reassessment proceedings
itself, we are not adjudicating the other grounds of appeal of the
assessee raised by it in all the appeals on merits.
9. In the result, all the appeals of the assessee are allowed.
Decision pronounced in the open Court on 10th June, 2015.
Sd/- Sd/-
RAO)
(INTURI RAMA RAO) (G.C. GUPTA)
(G.C. GUPTA)
ACCOUNTANT MEMBER VICE PRESIDENT
VK.
10 ITA-1068 to 1073/Del/2008
Copy forwarded to: -
1. Appellant : M/s Jagat Talkies Distributors,
1489, Chandni Chowk, Delhi 110110 006.
2. Respondent : Deputy Commissioner of Income Tax,
Circle-
Circle-29(1), New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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