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
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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
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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
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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
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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
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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
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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.
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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.
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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
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