TMI Blog2019 (7) TMI 1960X X X X Extracts X X X X X X X X Extracts X X X X ..... vide letter dated 13-03-2019. The relevant extract of the application has already been extracted in the preceding paragraph. The above application was also supplied to the Ld. DR as well and the matter was heard up to 30th April 2019. Therefore it is clear that the other party was well-informed about the invocation of the issue under the rule 27 of ITAT Rules. Therefore we conclude that the Ld. AR has rightly invoked the provisions of rule 27 of ITAT rules. Non-adjudication of the issue by CIT - Notice issued u/s 143(2) was time-barred - whether the non-adjudication of the issue raised by the assessee before the Ld. CIT (A) amounts to deemed rejection the ground of appeal of the assessee? - HELD THAT:- CIT (A) decided the technical issue in favor of the assessee on other reasons except for the issue on hand, i.e., nonissuance of the statutory notice. Thus the question arises whether the assessee was aggrieved because of non-adjudication of the ground of appeal by the Ld. CIT(A). The answer is certainly in affirmative. But the assessee chose not to appeal as it succeeded on other reasons/ contentions raised before the ld. CIT(A). Accordingly, the Revenue filed an appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of CIT Vs. PVS Beedies Limited 237 ITR 13. 2. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) has erred in holding that the reference made by the AO to the TPO was incorrect and that the assessment order was barred by limitation without proper appreciation of the provisions of section 147 as amended by the Finance Act, 2009 w.e.f. 1.4.1989. 3. The appellant craves to be allowed to amend, delete or add any other grounds of appeal during the course of hearing of this appeal. 3. The assessee has invoked the rule 27 of ITAT rules vide letter dated 13-3-2019 challenging the validity of the reopening on the basis that the notice under section 143(2) was not issued within the prescribed time. The extract of the application is reproduced as under: March 13, 2019 To The Asstt.Registrar Income Tax Appellate Tribunal Ahmedabad Respected Sir, This is in respect of following appeal filed: In the matter of : Ranbaxy Laboratories Ltd. ITA No. : 3799/Del/2009 Assessment Year : 2002-03 Bench : D Date of Hearing : 19/-03/2019 In captioned departmental appeal, ld.CIT(A) has given relief by quash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in response to such notice filed the return of income dated 26-4-2007. After that, the AO issued a notice under section 143(2) of the Act vide dated 26-11-2008. 8. As per the Ld. AR for the assessee, the mandatory notice under section 143(2) of the Act was issued after the due date as specified under the Act. Accordingly, the Ld. AR submitted that the assessment framed under section 147/143(3) of the Act is not sustainable and liable to be quashed. 9. On the contrary, the Ld. DR before us submitted that the assessee cannot make any submission under rule 27 of ITAT rule without making any formal application in writing. 9.1. The Ld.DR further submitted that if the assessee wants to make the application under rule 27 of ITAT rules, then it has to make the application when the appeal was filed. In the case on hand, the appeal has been listed for hearing on several occasions, and at one occasion the appeal was treated as part heard, and another occasion the appeal was treated as heard but the same were subsequently released and fixed for the fresh hearing. But there was no application filed by the assessee under rule 27 of ITAT rules till the date of the present hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the factual report on the issue as under: 1. As per the records available, the notice u/s.143(2) has been issued on 26.11.2008 for reassessment proceedings u/s.147 of the I.T. Act. In this regard, the AO has mentioned in para 9 of the assesemnt order as under: In response to the notice u/s.143(2), on behalf of the assessee company, the assessment proceedings have been attended by Mr.S.C.Agrawal, Vice President (Global Taxation), and the case was discussed. 2. Regarding evidence of service of notice u/s.143(2), the same is not available on file. The notice was issued by the Addl.CIT, Range 15, New Delhi through Speed Post dated 27.11.2008. 3. Regarding issue whether the assessee has objected to the issue of notice u/s.143(2) during the assessment proceedings, the assessment records with the undersigned have been thoroughly verified. However, the letter dated 3.12.2008 of the assessee is not found on record. Only order sheet entry dated 4.12.2008 is there in the records which states that SRI S.C. Agrawal, A.R. appeared before me file written submission dated 3.12.08. Case discussed. Therefore, the undersigned is not in a position to confirm whether the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Head Office located at 12th Floor, Devika Tower, Nehru Place, New Delhi on 31.03.2007. The essence for time limit for notice provided case not only the notice was issued within a period fo 4 years from the end of the relevant assessment year, but the same was also served within the aforesaid time limit. Therefore, the objections raised by the assessee are not tenable .. 5. From the above, it is observed that the AO has mentioned about the assessee s objection for reassessment proceedings and has nto mentioned about the assessee s objection to the issue of notice u/s.143(2). Further in this case, non-availability of relevant records from the original AO CIT(A) at Delhi till date has already been reported. Therefore, a copy of the assessee s submission dated 3.12.2008 has been obtained from the assessee. In the above impugned submission, the assessee has objected to the issue of notice u/s.143(2) as well in addition to the validity of reassessment proceedings. The same cannot be verified from the Department records. 6. In this regard, it is also brought to your kind notice that the assessee during 2nd appellate proceedings before the hon ble ITAT did not file any cross obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided against the assessee. Therefore, the assessee is entitled to make an application under rule 27 of ITAT rules. 12. Regarding the case laws referred by the Ld. DR, the Ld. AR for the assessee submitted that the facts in those case laws do not apply to the facts of the present case. 12.1. The Ld. AR further submitted that the issue regarding the validity of the notice issued under section 143(2) of the Act was also raised before the AO vide letter dated 3-12-2008. Therefore, even the provisions of section 292BB of the Act will not be applied to the instant case. 12.2. Both the Ld. DR and AR vehemently supported the orders of the authorities below as favorable to them. 13. We have heard the rival contentions of both the parties and perused the materials available on record. The controversy in the present case relates to the issuance of the statutory notice under section 143(2) of the Act in the context of the applicability of the provisions of rule 27 of ITAT rules. The following issues emerge for our adjudication. Issue 1 Whether it is compulsory to make an application in writing to invoke the provisions of rule 27 of ITAT rules. Issue 2 Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the office of the AO. Therefore, in the given facts and circumstances, there remains no ambiguity that the affected party was duly given the opportunity. Accordingly, we are of the view the issue raised under rule 27 of ITAT rules was very much in the knowledge of the Ld. DR. As such the case was fixed for hearing on several occasions as part heard, meaning thereby the Ld. DR was very familiar with the issue as discussed above. 18. Besides the above, we also note that the assessee has also made an application under rule 27 of ITAT rules vide letter dated 13-03-2019. The relevant extract of the application has already been extracted in the preceding paragraph. 19. The above application was also supplied to the Ld. DR as well and the matter was heard up to 30th April 2019. Therefore it is clear that the other party was well-informed about the invocation of the issue under the rule 27 of ITAT Rules. Therefore we conclude that the Ld. AR has rightly invoked the provisions of rule 27 of ITAT rules. Issue 2 20. There is no issue to the fact that the assessee has raised the contention before the Ld. CIT (A) that the notice issued under section 143(2) was time-barred. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal would be entitled to defend the order of the Commissioner on all grounds including on grounds held against him by the Commissioner without filing an independent appeal or crossobjection. 12. Rule 27 of the Rules is akin to Rule 22 Order XLI of the Civil Procedure Code. Sub-rule (1) provides that any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been decided in his favour; and may also take any cross-objection to the decree which he could have taken by way of an appeal. In case of Virdhachalam Pillai vs. Chaldean Syrian Bank Ltd, Trichur and anr reported in AIR 1964 SC 1425 in context of the said Rule the Supreme Court observed as under: 32. Learned Counsel for the appellant raised a short preliminary objection that the learned Judges of the High Court having categorically found that there was an antecedent debt which was discharged by the suit-mortgage loan only to the extent of Rs. 59,000/- and odd and there being no appeal by the Bank against the finding that the balance of the Rs. 80,000/- had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that the assessee had succeeded before the Commissioner (Appeals). The appeal had been allowed and the penalty levied by the assessing officer deleted in entirety. In fact, there was no occasion for the assessee to feel aggrieved and hence, it was not necessary for the assessee to prefer an appeal. The position in law is well settled that a cross objection, for all intents and purposes, would amount to an appeal and the cross objector would have the same rights which an appellant has before before the Tribunal. 18. Section 253 of the Act provides for appeal to the Tribunal. Under subsection (1), an assessee is granted right to file an appeal; under sub-section (2), the Commissioner is granted a right to file appeal by issuing necessary direction to the assessing officer; sub-section (3) prescribes the period of limitation within which an appeal could be preferred. Section 253(4) of the Act lays down that either the assessing officer or the assessee, on receipt of notice that an appeal against the order of Commissioner (Appeals) has been preferred under subsection (1) or subsection (2) by the other party, may, notwithstanding that no appeal had been filed against suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is placed on page 529 of the paper book. The relevant extract of the letter is reproduced as under: 3rd December 2008 The Additional Commissioner of Income-tax Range-15 Central Revenue Building New Delhi Dear Sir, Sub : Notice dated 26th November 08 issued under section 143(2) of the Income-tax Act, 1961 ( the Act ) for reassessment proceedings for AY 2002-03 Permanent Account Number : AAACR 0127 N This refers to the captioned notice under section 143(2) of the Act dated 26th November 08 received by the assessee on 1st December 08 in connection with the reassessment proceedings initiated against the assessee vide notice dated 30 March 2007 issued under section 148 of the Act. At the outset it is submitted that the captioned notice under section 143(2) of the Act is issued beyond the statutory period of limitation provided under the proviso to section 143(2) of the Act read with section 148 of the Act, and hence the same is time barred. Accordingly, the present reassessment proceedings initiated against the assessee company under section 147 of the Act do not have the sanction of law and should be dropped. Without prejudice to the assessee s cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period 1.4.1997 to 25.7.2002 on the basis of notice issued on 6.7.2006 under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void. 32. In view of the above, we conclude that there was not issued the statutory notice under section 143(2) of the Act within the prescribed time. Thus in the absence of the statutory notice, the assessment framed under section 143(3)/147 of the Act is not sustainable. Hence the ground raised by the assessee in the application under rule 27 is allowed. Now coming to the appeal filed by the Revenue: 33. As we have held the order passed by the AO as infructuous in the preceding paragraphs, the appeal filed by the Revenue does not require any separate adjudication. However, for the sake of completeness of the issue raised by the Revenue, we deem it appropriate to adjudicate the same in the manner as detailed below. 34. The interconnected issue raised by the Revenue is that the ld. CIT-A erred in qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of opinion. Accordingly, provisions of Section 147 of the Act are not attracted. It is a well settled legal AO is not empowered to issue notice under Section 148 of the basis of change of opinion to reconsider the issue which had already been considered and allowed. To this effect there are large number of direct decisions, including the decisions of Supreme Court commencing from the decision in the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191. It is also stated in this regard that though in the case of the appellant most of the issues mentioned in the reasons recorded by the AO have been discussed in the order of assessment but as per the legal position it is also immaterial whether the issue has been discussed by the AO in the order of assessment or not. Once the material is there before the AO while passing the original order of assessment, it will be presumed that same had been considered by AO and claim has been allowed after due consideration. In this regard reference can be made to the following observations of Delhi High Court in the case of CIT v. Eicher Ltd., 294 ITR 310 on page 315. In so far as the present appeal is concerned, we find that the assessee had p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Delhi High Court in the case of Transworld International Inc. v. JCIT, 273 ITR 242 after a detailed discussion in this regard has observed that primary function of audit in relation to assessments and refunds is the consideration whether the internal procedures are adequate and sufficient. It is not intended that the purpose of audit should go any further. Whether the internal audit party of the Income Tax Department or an audit party of Comptroller Auditor General, they perform essentially administrative or executive functions and cannot be attributed the powers of judicial supervision over the quasi judicial act of Income-tax authorities. Accordingly, it has been observed in the above case that audit parties whether internal audit party or audit party of Comptroller General of India, have no authority to go into the interpretation of legal provisions. In the above background, it was held that audit objections raised by the audit party will not amount to fresh information supplied to the Assessing Officer which can be the basis for reopening the assessment as relating to interpretation of law. In the above case while concluding the matter the Hon'ble jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the Assessing Officer had received information from an audit report which was not before the Income-tax Officer, but is another thing to say that such information can be derived by the material which had been supplied by the assessee himself. I 13. It is clear on the basis of above holding of Hon'ble Delhi high court that AO had no power to issue notice u/s 148 of the Act on perusal of material which was? already there With him. Above decision of the High court has also been subsequently followed in other decisions referred to by the appellant in its written submissions. 14. Further, since the facts regarding issues mentioned in the reasons recorded by the AO had already been on record and the issues had been duly considered during the course of original assessment proceedings, raising the issues in these proceedings amounts to reconsideration of the same. It amounts to change of opinion. 15. In view of above factual position and the case laws in my considered opinion notice issued by the AO under Section 148 of the Act is not in terms off pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad also discussed the issue in detail in the order of assessment at page 9 had given a clear holding to the effect that prices charged were at Arms Length and did not enquire any further adjustment- On comparison of the transfer prices charged by the assessee from its Associated Enterprises and net margins thereon, in respect of these international transactions, it is observed that the prices charged by the assessee on international transactions with its Associated Enterprises were at Arms Length. I have also observed that the declared margins/profits as per the books in the assessee's return are higher than the profits/margins computed as per the Most Appropriate Method and therefore, I hold that the prices charged were at Arms Length and do not require any further adjustment. 17. In these circumstances, I have no option but to hold that AO had exceeded his jurisdiction in making the reference to TPO as the same was not warranted at the stage it was made. In regard to time limit for completing the assessment pursuant to notice under Section 148 of the Act, it is observed that provisions of sub-section (2) of Section 153 of the Act read with 3rd proviso extend the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer pursuant to aforesaid notice is also time barred. Hence, the notice issued under Section 148 of the Act is hereby quashed and order of assessment passed pursuant thereto is hereby set aside, In view of my above decision, I do not consider it necessary to go into the merits of the additions/adjustments made by the AO in the assessment order. In the result, the appeal is allowed. 36. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. Both the ld. DR and the AR before us relied on the order of the authorities below as favorable to them. 37. Heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). We also find that the ld. CIT(A) has passed a speaking order, which is self-explanatory and reproduced herein above. Thus,we are in agreement with the finding of the ld. CIT-A that the reopening of the assessment under section 147 of Act based on revenue audit objection is not permissible. Therefore we concur with the finding of the learned CIT(A) after placing the relian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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