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Shri Sanjay Gupta, M/s Durowell Industries, 22, Udai Park, New Delhi. Vs. Income Tax Officer, Ward 24(2), New Delhi.
June, 18th 2015
ITA No.2960/Del/2013
Asstt.Year: 2002-03

              IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCH "G" NEW DELHI

       BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
                        AND
       SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER

                    ITA No.2960/Del/2013
                   ASSTT.YEAR: 2002-03

Shri Sanjay Gupta,                   vs      Income Tax Officer,
M/s Durowell Industries,                      Ward 24(2), New Delhi.
22, Udai Park, New Delhi.
(Appellant)                               (Respondent)
                      Appellant by: Shri Suresh Kumar Gupta, CA
                   Respondent by: Shri B.R.R. Kumar, Sr. DR
                                     Date of Hearing: 06.05.2015
                          Date of Pronouncement: 17th June, 2015


                                ORDER

PER C.M. GARG, JUDICIAL MEMBER

       This appeal by the assessee has been directed against the order of the

CIT(A)-XXIII, New Delhi dated 28.02.2013 in Appeal No.50/10-11 for AY

2002-03.


2.     Briefly stated the facts giving rise to this appeal are that the appellant

filed return of income for the Assessment Year 2002-03 on 31.10.2002

declaring an income of Rs. 2,13,695/-. An assessment was completed under

section 143(3) on 28.03.2005 at an income of Rs. 10,94,330/-. The assessment

was re-opened under section 147 and the assessment was completed under


                                        1
ITA No.2960/Del/2013
Asstt.Year: 2002-03

section 143(3) read with section 147 on 07.12.2009, accepting the returned

income. The Assessing Officer inadvertently omitted to include the additions

made in the original assessment proceedings of Rs. 8,29,600/- out of

commission payment, of Rs. 40,572/- out of vehicle expenses, and of Rs.

10,463/- out of telephone expenses. The Assessing Officer issued notice under

section 154 on 13.05.2010 proposing to amend the assessment order dated

07.12.2009. No reply was filed by the appellant on the specified date of hearing,

which was 20.05.2010. The Assessing Officer accordingly, rectified the.

mistake vide order under section 154 dated 24.05.2010, and assessed the total

income at Rs. 10,94,330/- as was assessed in the original assessment order

under section 143(3) dated 28.03.2005.

3.     The aggrieved assessee preferred an appeal before the CIT(A) against the

order of the AO u/s 154 of the Act dated 24.5.2010 but remained empty handed

as the appeal was also dismissed by the first appellate authority. Now, the

empty handed assessee is before this Tribunal in this second appeal. Ground No.

1 raised by the assessee reads as under:-


             "The ld. CIT(A) has erred both in law and on facts in
        confirming the disallowance of          Rs.8,29,600/- being
        commission paid to M/s Rajeev Industries ignoring the fact
        that AO has failed to comply with the directions of the ld.
        CIT(A) to verify the justification of the payment of
        commission after opportunity to the appellant."
4. We have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. assessee's representative submitted that 2 ITA No.2960/Del/2013 Asstt.Year: 2002-03 the CIT(A) has erred in law and on facts in confirming the disallowance of Rs.8,29,600/- being commission paid to M/s Rajeev Industries ignoring the fact that AO has failed to comply with the directions of the ld. CIT(A) to verify the justification of the payment of commission after opportunity to the assessee. Ld. AR has chronologically drawn our attention towards assessment order passed u/s 143(3) of the Act dated 28.3.2005, appellate order of the CIT(A) dated 27.9.2012 against the assessment u/s 143(3) of the Act, reassessment order passed u/s 147/143(3) of the Act dated 7.12.2009, order of rectification passed u/s 154/147 dated 24.5.2010 and impugned order of the CIT(A) dated 28.2.2013 and submitted that the AO made additions during original assessment proceedings u/s 143(3) of the Act amounting to Rs.8,29,600 being commission paid to M/s Rajeev Industries. Ld. AR further took us through page no. 19 and 20 of the assessee's paper book and submitted that the issue of impugned addition was agitated by the assessee before the first appellate authority during appeal against the order u/s 143(3) of the Act but the same was dismissed without any adjudication on merits simply holding that the original assessment was reopened and reassessment has been made, as such the original assessment and appeal against that order u/s 143(3) of the Act does not survive and has become infructuous. 5. Ld. AR vehemently contended that during the reassessment proceedings, the AO did not make any disallowance or addition in this regard and completed 3 ITA No.2960/Del/2013 Asstt.Year: 2002-03 the reassessment u/s 147/143(3) of the Act on 7.12.2009 at the returned income but subsequently without any valid reason, the AO issued a notice u/s 154 of the Act to the assessee, showing his intention to rectify the reassessment order dated 7.12.2009. Ld. AR further pointed out that the said notice was given to the assessee on 13.5.2010 fixing the case for hearing on 20.5.2010 but on the said date of hearing, the AO marked absent of the assessee and passed an ex parte order without affording due opportunity of hearing for the assessee in a hasty manner and passed the rectification order on 24.5.2010 by revising the impugned addition of Rs.8,29,600 without any justified reason and violating principles of natural justice. Ld. AR further pointed out that in the order dated 24.5.2010, the AO had not mentioned that a notice dated 13.5.2010 was duly served on the assessee and despite due service, neither the assessee nor his representative attended the proceedings. 6. Ld. AR further submitted that the assessee challenged the order of rectification before the CIT(A) with a legal objection that the AO passed rectification order without providing reasonable opportunity of hearing to the assessee but the ld. CIT(A) did not address this issue properly. Ld. AR further pointed out that the CIT(A) while passing the impugned order ignored this fact that during the earlier appellate proceedings, the assessee's ground on merit was not adjudicated and the same was simply dismissed by observing that the original assessment was reopened and reassessment has been made and 4 ITA No.2960/Del/2013 Asstt.Year: 2002-03 therefore, original assessment and appeal against that order did not survive and had become infructuous. 7. Ld. AR concluded the argument with a final submission that the ground of assessee before the CIT(A) against impugned addition with regard to commission paid to M/s Rajeev Industries was not adjudicated on merits and the same was dismissed as infructuous in the light of this fact that the assessment was reopened and reassessment order was passed. Ld. AR further pointed out that during reassessment proceedings u/s 147/143(3) of the Act, the AO did not make any addition in this regard and assessment was finalised at the returned income. Ld. AR also submitted that the AO rectified the reassessment order ex parte without affording due opportunity of hearing for the assessee and when the assessee agitated this issue before the CIT(A), the first appellate authority did not adjudicate the issue of violation of principles of natural justice as well as impugned addition on merits. Ld. AR finally submitted that the assesee was not allowed proper opportunity of hearing before the authorities below and the issue of impugned addition was dismissed on technical grounds without any proper adjudication on merits. 8. Ld. DR supported the orders of the authorities below and submitted that when reassessment proceedings were started and ended by passing a reassessment order u/s 147/143(3) of the Act, then original assessment order passed u/s 143(3) of the Act and appeal against that order does not survive for 5 ITA No.2960/Del/2013 Asstt.Year: 2002-03 adjudication and the same was correctly dismissed by the CIT(A). Ld. DR further pointed out that the reassessment proceedings were completed without making any addition on account of impugned commission amount but this was a mistake apparent from record which was rightly rectified by the AO by passing order dated 24.5.2010 u/s 154/147 of the Act supporting the impugned order of the CIT(A). Ld. DR also contended that the AO did not refer to the original records before completing the reassessment u/s 147 of the Act and the counsel of the assessee never brought the assessment order u/s 143(3) of the Act dated 28.3.2005 to the attention of the AO, further, the AO was quite justified and correct in rectifying the reassessment order and appeal was rightly dismissed by the CIT(A). However, ld. DR fairly accepted that in the rectification order dated 24.5.2010, the service of notice on the assessee has not been mentioned. 9. On careful consideration of above submissions, we are of the considered view that the AO passed rectification order ex parte without affording due opportunity of hearing for the assessee as from the rectification order, we clearly note that the AO has mentioned that notice dated 13.5.2010 for the hearing on 20.5.2010 was duly served on the assessee or his representative. In this situation, the rectification order passed in a hasty manner is clearly against the principles of natural justice. From the impugned order of the CIT(A), we note that the assessee agitated this violation by way of ground no. 2 but the same was not properly adjudicated and addressed by the CIT(A). During the 6 ITA No.2960/Del/2013 Asstt.Year: 2002-03 appeal proceedings against the original order, the ground of assessee pertaining to disallowance of commission was not adjudicated on merits because the appeal was dismissed on account of reopening of assessment and subsequent reassessment order and during the first appellate proceedings against the rectification order, the ground of assessee pertaining to commission was not adjudicated on merits and the CIT(A) adjudicated the limited issue that there was an apparent mistake on the face of reassessment order dated 7.12.2009 and the CIT(A) simply holding that the AO did not refer to the original records and the counsel of the assessee never brought the assessment order u/s 143(3) of the Act to the attention of the AO. In this situation, we are inclined to hold that the issue requires proper adjudication at the level of the AO after affording due opportunity of hearing for the assessee. Hence, rectification order as well as impugned order of CIT(A) dated 28.2.2013 are hereby set aside and the issue of claim of the assessee of Rs.8,29,600 being commission paid to M/s Rajeev Industries is restored to the file of AO for a proper and fresh adjudication. The AO is directed to adjudicate the issue without being prejudiced from the earlier orders and orders of the CIT(A). Therefore, ground no. 1 of the assessee is deemed to be allowed for statistical purposes. 7 ITA No.2960/Del/2013 Asstt.Year: 2002-03 Ground no. 2 of the assessee 10. Ld. AR submitted that the CIT(A) has erred both in facts and in law in confirming the disallowance of Rs.40,752/- and Rs.10,463/- out of vehicle and telephone expense respectively for personal use of these assets/facilities. Ld. AR further submitted that the AO did not bring any fact or allegation against the assessee that there was an element of personal use of vehicle and telephone facility by the assessee. Ld. DR submitted that the AO inadvertently omitted to include the additions on account of commission and disallowance out of vehicle expenses and telephone expenses which was rectified by the AO vide order dated 24.5.2010 passed u/s 154/147 of the Act. 11. On careful consideration of above submissions, we are of the considered view that since by the earlier part of this order we have held that the AO passed rectification order ex parte without affording due opportunity of hearing for the assessee and we have restored the issue of commission to the file of the AO for fresh adjudication, therefore, we also deem it proper and justified to restore the issue of disallowance on account of vehicle and telephone expenses made by the AO on the allegation of personal use by the assessee. Therefore, ground no.2 of the assessee is also restored to the file of the AO for fresh adjudication after affording due opportunity of hearing for the assessee. Accordingly, ground no. 2 of the assessee is also deemed to be allowed for statistical purposes. 8 ITA No.2960/Del/2013 Asstt.Year: 2002-03 12. In the result, the appeal of the assessee is allowed for statistical purposes only on aforementioned issues for the limited purpose as indicated above. Order pronounced in the open court on 17.6.2015. Sd/- Sd/- (S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 17th JUNE 2015 `GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT(A) 4. C.I.T. 5. DR By Order Asstt. Registrar 9
 
 
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