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2015 (12) TMI 110 - ITAT BANGALORE

2015 (12) TMI 110 - ITAT BANGALORE - TMI - Reopening of assessment - non issue of notice - Held that:- We do not concur with the contentions of Revenue that non-supply of copy of the reasons recorded by the Assessing Officer, for initiation of re-assessment proceedings under Section 147 of the Act, as requested for by the assessee is not fatal to the reassessment proceedings / order. The Hon'ble Apex Court in the case of GKN Drive Shafts (India) Ltd. in [2002 (11) TMI 7 - SUPREME Court ], laid d .....

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f the Act and has also sought for the reasons recorded by the Assessing Officer for initiating re-assessment proceedings under Section 147 of the Act. The learned CIT (Appeals) observed that the Assessing Officer, however, has failed to furnish the assessee with a copy of the reasons so recorded and this failure on the part of the Assessing Officer, in our view, has prevented the assessee from filing his objections, if any, to the notice issued under Section 148 of the Act. This failure on the p .....

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mmissioner of Income Tax (Appeals)-II, Bangalore dt.24.03.2014 in respect of Sri M.R. Seetharam (Indl) and M.R. Seetharam, HUF for Assessment Year 2004-05. The assessee's have also preferred Cross Objections ( C.O. in short) in respect of the aforesaid orders of the CIT (Appeals) - II, Bangalore. Since these appeals and C.Os were heard together and are interconnected, they are being disposed off hereunder, by way of this order. Revenue s appeals for Assessment Year 2004-05 in the case of Mr. .....

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essment was completed under Section 143(3) of the Act vide order dt.22.12.2006, wherein the income of the assessee was determined at ₹ 6,74,73,557. 2.2 A search under Section 132 of the Act was conducted in the case of one Sri Sohanraj as well as M/s. Mehta Associates, Bangalore on 10.10.2009 wherein it was found that the assessee was a partner in the above firm, which was the sole C&F Agent of Manikchand Gutka for the State of Karnataka. As per information gathered in the search of th .....

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g the approval of the CIT-III, Bangalore. 2.3 A perusal of the impugned order of the learned CIT (Appeals) indicates that in response to the notice issued under Section 148 of the Act on 31.3.2011, the assessee vide letter dt.26.4.2011 requested that the original return filed under Section 139(1) for Assessment Year 2004-05 be treated as the return of income filed in response to the notice issued for Assessment Year 2004-05 and requested that he be provided / furnished with a copy of the reasons .....

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of the assessee was determined at ₹ 12,87,03,560; which included an addition of the said amount of ₹ 7,16,22,000 under Section 69A/69 of the Act. 3. Aggrieved by the order of assessment dt.30.12.2011 for Assessment Year 2004-05, the assessee preferred an appeal before the CIT (Appeals) - II, Bangalore, challenging the said re-assessment order on various grounds, including challenging the validity of the said re-assessment order passed without supplying the assessee the reasons recor .....

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sought by him vide letter dt.26.11.2011. This fact of non-supply of copy of reasons recorded is also evident from the assessee's letter filed on 23.12.2011 before the Assessing Officer. In coming to the finding she did, the learned CIT (Appeals), inter alia, relied on the following decisions of the co-ordinate bench in the cases of :- (i) Synopsis International Ltd. V DDIT in ITA No.549/Bang/2011 dt.10.12.2012; and (ii) Suez Tractabel SA V DDIT in ITA No.656/Bang/2009 dt.7.6.2013. 4.1 Aggrie .....

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ll aware of the reasons of reopening throughout the reassessment proceedings and the assessee had appeared & co-operated in the reassessment proceedings and the same cannot be held bad in law as per the provisions of section 292BB. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4, The appellant craves leave .....

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ons for re-opening the assessment and had appeared and co-operated in the re-assessment proceedings. 5. The assessee has filed cross objection, in respect of the impugned order of the CIT (Appeals) - II, Bangalore dt.24.3.2014 for Assessment Year 2004-05, which are as under :- 1. The order of the learned Commissioner of Income-tax [Appeals] in as far as it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The ord .....

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tions to invoke the provision of section 147 did not exist and thereby issuing the notice under section 148 was not present under the facts and circumstances of the case. 5. Without prejudice if at all any reasons are recorded by the learned assessing officer, though the same was not furnished to the Respondent / Cross Objector the said reasons utmost may be considered and regarded as reason to suspect and under no stretch of imagination the same cannot be construed as reason to believe which is .....

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law as no proceedings can be initiated under section 148 if the information based on which the assessment is re-opened is pursuant to a search. 8. Without prejudice the Respondent / Cross Objector contends that no proper procedure has been followed by the learned assessing officer for issuance of a notice under the provisions of section 148 of the Act as envisaged under the statue under the facts and circumstances of the case. 9. Without Prejudice the Respondent / Cross objector denies himself .....

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Officer is not correct in making addition under a specific section of the Act. Section 69 and 69A of the Income tax Act are deeming provisions and has to be strictly construed. The learned Assessing Officer has erred in not clearly specifying under which section the addition has been made. The learned Assessing Officer further failed to appreciate that in the scheme of the Act more so in respect of deemed income there is no question of alternatives and ought to have been specific to the relevan .....

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d assessing officer proceeded to use the statement against the Respondent / Cross Objector without even giving an opportunity which is against the settled principles of law and thus the Order passed on such grave violation of principles of natural justice deserves to be cancelled on the facts and circumstances of the case. 13. Without Prejudice the learned Assessing Officer is not justified in law in charging the interest under section 234 A, 234 B and 234 C of the Act and further the calculatio .....

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of equity and justice. 6. Condonation of Delay of 4 days in filing the Cross Objections by the assessee. 6.1 Admittedly there is a delay of 4 days on the part of the assessee in filing the C.O. before the Tribunal. In this regard, along with the C.O., the assessee has filed an Affidavit dt.11.5.2015 sworn to before a Notary accompanied by the petition for condontation of the delay of 4 days in filing the C.O. before the Tribunal. It was submitted therein that the notice of Revenue s appeal whic .....

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on of delay in filing the C.O., the assessee placed reliance on the decision of the Hon'ble Apex Court in the following cases :- (i) Collector, Land Acquisition V MST Katiji & Others (1987) 167 ITR 471. (ii) Concord of India Insurance Co. Ltd. (118 ITR 507). 6.2 We have heard both the learned Departmental Representative for Revenue and the learned Authorised Representative for the assessee in the matter. Taking into account the facts and circumstances of the case and the reasons cited in .....

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learned Departmental Representative for Revenue and the learned Authorised Representative for the assessee. The learned Departmental Representative contended that though it is evident that the assessee was not supplied with a copy of the reasons recorded by the Assessing Officer for initiation of re-assessment proceedings under Section 147 of the Act and sought for vide his letter dt.26.4.2011, the assessee was well aware of the reasons for re-opening of the assessment for Assessment Year 2004- .....

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sion of the Hon'ble Allahabad High Court in the case of CIT V Shyam Cold Storage in ITA No.28/2011 in support of the contention that the provisions of Section 292BB of the Act cure the defect of non-supply of reasons. 7.2 We have carefully perused the contents of the copy of assessee's letter filed on 23.12.2011, placed before us and relied on by Revenue. We find that the above referred letter is merely written by the assessee as a reply to a questionnaire/requirement by the Assessing Of .....

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f the Act, as requested for by the assessee is not fatal to the reassessment proceedings / order. The Hon'ble Apex Court in the case of GKN Drive Shafts (India) Ltd. in 259 ITR 19, laid down the law that it is mandatory for supply of the copy of the reasons recorded, if asked for by the assessee; provided the assessee has complied with his duty of filing a return of income in response to the notice under Section 148 of the Act. In the case on hand, the learned CIT (Appeals) in the impugned o .....

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lure on the part of the Assessing Officer, in our view, has prevented the assessee from filing his objections, if any, to the notice issued under Section 148 of the Act. This failure on the part of the Assessing Officer is in violation of the principles of natural justice and falls foul of the decision of the Hon'ble Apex Court in the case of GKN Drive Shaft (India) Ltd. (supra). It is mandatory that the Assessing Officer should furnish the copy of the reasons recorded for initiation of re-a .....

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e Hon'ble Allahabad High Court in the case of CIT V Shital Prasad Kharag Prasad (2006) 280 ITR 541, the co-ordinate benches of this Tribunal in the case of Synopsis International Ltd. (supra) and Suez Tractabel SA (supra), and of the Agra Bench of the ITAT in the case of ITO V Sikindar Lal Jain (45 SOT 113), etc; holding as under para 3.10 of the impugned order :- 3.10 The gist of the decisions of the Hon'ble Supreme Court in the case of GKN Driveshaft V. ITO (259 ITR 19), Hon'ble Hi .....

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h the reasons renders the assessment proceedings invalid and void ab initio. The Hon'ble ITAT, Delhi Bench and Mumbai Bench in ITO V. Smt. Gurinder Kaur (102 ITD 189) and Datmatics Ltd. V. ACIT (110 ITD 24) have taken the same view in the light of the Hon'ble Supreme Court s decision in GKN Driveshaft s case. The decision of the Hon'ble ITAT in Suez Tractabel SA V. DCIT (143 ITD 614) is squarely applicable to the facts of the appellant s case. Respectfully following the law laid down .....

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als) in her order while cancelling the order of re-assessment passed under Section 143(3) rws 147 of the Act dt.29.12.2011. We have perused the judgment of the Hon'ble Allahabad High Court in the case of Shyam Cold Storage (supra), relied upon by Revenue, and with due respect find its facts not at all applicable to the facts of the assessee in the case on hand and therefore has no bearing in deciding this appeal. In view of the facts and circumstances of the case as discussed above and in co .....

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he fact that we have dismissed the Revenue s appeal in ITA No.926/Bang/2014, we are of the view that the assessee's C.O. No.74/Bang/2015, which is supportive of the impugned order of the learned CIT (Appeals), is rendered infructuous, and is therefore accordingly dismissed. 9. In the result, both Revenue s appeal and the assessee's C.O. for Assessment Year 2004-05 are dismissed. Revenue s appeals for Assessment Year 2004-05 in the case of Mr. M.R. Seetharam - (HUF) in ITA No.927/Bang/201 .....

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vide order dt.22.12.2006, wherein the income of the assessee was determined at ₹ 16,33,430. 9.2 A search under Section 132 of the Act was conducted in the case of one Sri Sohanraj as well as M/s. Mehta Associates, Bangalore on 10.10.2009 wherein it was found that Sri M.R. Seetharam was a partner in the above firm, which was the sole C&F Agent of Manikchand Gutka for the State of Karnataka. As per information gathered in the search of the Sohanraj Group of cases, Sri M.R. Seetharam had .....

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impugned order of the learned CIT (Appeals) indicates that in response to the notice issued under Section 148 of the Act, the assessee vide letter dt.26.4.2011 requested that the original return filed under Section 139(1) for Assessment Year 2004-05 be treated as the return of income filed in response to the notice issued for Assessment Year 2004-05 and requested that he be provided / furnished with a copy of the reasons recorded by the Assessing Officer for initiating re-assessment proceedings .....

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tion of the said amount of ₹ 7,16,22,000 under Section 69A/69 of the Act, on protective basis. 10. Aggrieved by the order of assessment dt.30.12.2011 for Assessment Year 2004- 05, the assessee preferred an appeal before the CIT (Appeals) - II, Bangalore, challenging the said re-assessment order on various grounds, including challenging the validity of the said re-assessment order passed without supplying the assessee the reasons recorded by the Assessing Officer for initiation of re-assess .....

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-supply of copy of reasons recorded is also evident from the assessee's letter filed on 23.12.2011 before the Assessing Officer. In coming to the finding she did, the learned CIT (Appeals), inter alia, relied on the following decisions of the co-ordinate bench in the cases of :- (i) Synopsis International Ltd. V DDIT in ITA No.549/Bang/2011 dt.10.12.2012; and (ii) Suez Tractabel SA V DDIT in ITA No.656/Bang/2009 dt.7.6.2013. 11.1 Aggrieved by the order of the CIT (Appeals) - II, Bangalore dt .....

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sessment proceedings and the assessee had appeared & co-operated in the reassessment proceedings and the same cannot be held bad in law as per the provisions of section 292BB. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4, The appellant craves leave to add, alter, amend and / or delete any of the ground m .....

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co-operated in the re-assessment proceedings. 12. The assessee has filed cross objection, in respect of the impugned order of the CIT (Appeals) - II, Bangalore dt.24.3.2014 for Assessment Year 2004-05, which are as under :- 1. The order of the learned Commissioner of Income-tax [Appeals] in as far as it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The order passed by the learned Commissioner of Income-tax [ .....

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927/Bang/2014 & C.O. Nos.74 & 75/Bang/2015 section 147 did not exist and thereby issuing the notice under section 148 was not present under the facts and circumstances of the case. 5. Without prejudice if at all any reasons are recorded by the learned assessing officer, though the same was not furnished to the Respondent / Cross Objector the said reasons utmost may be considered and regarded as reason to suspect and under no stretch of imagination the same cannot be construed as reason .....

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g officer is bad in law as no proceedings can be initiated under section 148 if the information based on which the assessment is re-opened is pursuant to a search. 8. Without prejudice the Respondent / Cross Objector contends that no proper procedure has been followed by the learned assessing officer for issuance of a notice under the provisions of section 148 of the Act as envisaged under the statue under the facts and circumstances of the case. 9. Without Prejudice the Respondent / Cross objec .....

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facts and circumstances of the case. 11. Without Prejudice the learned Assessing Officer is not correct in making addition under a specific section of the Act. Section 69 and 69A of the Income tax Act are deeming provisions and has to be strictly construed. The learned Assessing Officer has erred in not clearly specifying under which section the addition has been made. The learned Assessing Officer further failed to appreciate that in the scheme of the Act more so in respect of deemed income th .....

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ination which the same was denied by the learned Assessing Officer and the learned assessing officer proceeded to use the statement against the Respondent / Cross Objector without even giving an opportunity which is against the settled principles of law and thus the Order passed on such grave violation of principles of natural justice deserves to be cancelled on the facts and circumstances of the case. 13. Without Prejudice the learned Assessing Officer is not justified in law in charging the in .....

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of the appeal, the Appellant prays that the appeal may be allowed in the interest of equity and justice. 13. Condonation of Delay of 4 days in filing the Cross Objections by the assessee. 13.1 Admittedly there is a delay of 4 days on the part of the assessee in filing the C.O. before the Tribunal. In this regard, along with the C.O., the assessee has filed an Affidavit dt.11.5.2015 sworn to before a Notary accompanied by the petition for condontation of the delay of 4 days in filing the C.O. bef .....

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the same delay is not condoned. In support of the assessee's plea for condonation of delay in filing the C.O., the assessee placed reliance on the decision of the Hon'ble Apex Court in the following cases :- (i) Collector, Land Acquisition V MST Katiji & Others (1987) 167 ITR 471. (ii) Concord of India Insurance Co. Ltd. (118 ITR 507). 13.2 We have heard both the learned Departmental Representative for Revenue and the learned Authorised Representative for the assessee in the matter. .....

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