Order passed based on notice under section 143(2) beyond stipulated period is bad in law


Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
That CIT(A) has erred in law in not appreciating that notice issued and served under section 143(2) of the Income Tax Act is beyond the stipulated period and order passed in pursuance to such notice is without jurisdiction and bad in law.

Citation :
Bhutani Builders Pvt. Ltd.,(Now known as Aditi Civil Engineering Pvt. Ltd.), E-49, 202, 2nd Floor, Laxmi Nagar, Delhi-110092 (AAACB8056C) (Appellant) vs Income Tax Officer,Ward 2(4),New Delhi. (Respondent)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH `A’ NEW DELHI

 

BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

AND

SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

 

I.T.A.No.5555/Del/2012

Assessment Year: 2006-07

 

Bhutani Builders Pvt. Ltd.,

(Now known as Aditi Civil

Engineering Pvt. Ltd.),

E-49, 202, 2nd Floor,

Laxmi Nagar,

Delhi-110092

(AAACB8056C)

(Appellant)

 

vs

 

Income Tax Officer,

Ward 2(4),

New Delhi.

 (Respondent)

 

Appellant by: S/Shri Salil Kapoor, Vikas Jain

Respondent by: Shri Bhim Singh, Sr.DR

 

O R D E R

 

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

 

This appeal by the assessee has been directed against the order of Commissioner of Income Tax(A)-V, New Delhi dated 22.10.2010 in Appeal No.24/09-10 for AY 2006-07.

 

2. The grounds raised in this appeal read as under:-

 

“1. That Assessment order passed by the AO and also the order passed by CIT (A) are illegal, bad in law, without jurisdiction and against the principles of natural justice.

 

2. That CIT(A) has erred in law in not appreciating that notice issued and served under section 143(2) of the Income Tax Act is beyond the stipulated period and order passed in pursuance to such notice is without jurisdiction and bad in law.

 

3. That the additions made are illegal, bad in law and the CIT(A) has erred in law and also on facts in upholding the same.

 

4. That AO has, in view of the facts and circumstances of the case, erred in law and on facts in adding the investment of Rs. 1,06,20,000/- to the income of the assessee and CIT(A) has erred in not deleting the same.

 

5. That AO has, in view of the facts and circumstances of the case, erred in law and on facts in disallowing the l/5th of expenses (Misc/other) of Rs. 37,60,148/- and making an addition of Rs. 7,52,029/- and CIT(A) has erred in no deleting the same.

 

6. That AO has erred in law and on facts in making and CIT(A) in upholding addition of Rs. 1,06,20,000/- on account of unverified investment and of Rs. 7,52,029/- on account of disallowance of Misc. expenses without bringing any adverse material on record against the assessee.

 

7. That CIT(A) has erred in law and on facts in not deciding the appeal on merits and dismissing the same for non prosecution and the said order is against the principles of law and provisions of Income Tax Act, 1961.

 

8. That the interest u/s 234B, 234C and 234D have been wrongly and illegally charged and are liable to be deleted.

 

9. That the material available on record have not been properly considered and judicially interpreted and the same do not justify the addition made.

 

10. That the addition / disallowance made are based on mere surmises and conjunctures and the same cannot be justified by any material on record and the same are highly excessive.

 

11. The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing.”

 

3. Briefly stated the facts giving rise to this appeal are that the case was selected for scrutiny and notices u/s 143 and 142(1) of the Income Tax Act, 1961 (for short the Act) were served on the assessee. Subsequently, another notice along with questionnaire was issued on 31.1.2008 but the same was not complied by the assessee. The Assessing Officer observed that since no compliance was made by the assessee in response to the notices issued to him, therefore, he had no option but to complete the assessment based on material available on record and the Assessing Officer finalized assessment u/s 144 of the Act by making an addition of Rs.1,06,20,000 on account of investment made from undisclosed sources and another addition of Rs.7,52,029 on account of disallowance of 1/5th of amount claimed by the assessee under the head “other/miscellaneous expenses” amounting to Rs.37,60,148 against the sales of Rs.44,65,370. The assessment was finalized on the net taxable income of Rs.1,11,70,352 as against returned negative income (loss) of Rs.2,01,677/-.

 

4. Being aggrieved by the above assessment order, the assessee preferred an appeal before the Commissioner of Income Tax(A) which was also dismissed by the impugned order. The Commissioner of Income Tax(A) dismissed the appeal for non-prosecution and also on merits by observing that the appellant assessee has not filed any documentary evidence regarding his claim on the grounds raised before him. The Commissioner of Income Tax(A) placed his reliance on the judgment of Hon’ble Supreme Court of India in the case of Commissioner of Income Tax vs B.N. Bhattachargee and another, reported in 118 ITR 461 (SC) and the judgment of ITAT Delhi in the case of Commissioner of Income Tax vs Multiplan India (P) Ltd. 38 ITD 320 (Delhi) and dismissed the appeal for non-prosecution and also on merits by observing that there was non-availability of any submission along with evidence in support of the ground taken by the assessee.

 

5. Ld. counsel for the assessee submitted that the order of the Commissioner of Income Tax(A) dismissing the appeal on the ground of non-prosecution is entirely erroneous and misconceived. Ld. counsel argued that the Commissioner of Income Tax(A) dismissed the appeal for nonprosecution and also on merits despite the fact that it was obligatory for the Commissioner of Income Tax(A) to pass a speaking order discussing the merits of various ground raised by the assessee in the appeals. Ld. Counsel for the assessee submitted that Shri R.S. Negi, Director of the assessee company attended the proceedings up to hearing on 23.02.2010 but for subsequent dates of hearing, the assessee did not receive any notices and as per principles of natural justice, the appeal of the assessee could not be decided fairly without affording opportunity to the assessee of being heard. Counsel for the assessee placed his reliance on the judgment of ITAT, Ahmedabad ‘C’ Bench in the case of Gujarat Themis Biosyn Ltd. Vs Joint Commissioner of Income Tax (2000) 74 ITD 339 (AHD) and pointed out para 2 and 3 of the order which read as under:

 

“2. Shri Mukesh Patel, the learned counsel for the assessee, submitted that the order of the CIT(A) dismissing the appeal on the ground of non-prosecution is entirely erroneous and misconceived. Learned counsel argued that it is obligatory for the CIT(A) to pass a speaking order discussing the merits of the various claims raised by the assessee in the appeal. Learned counsel further submitted that appeals filed for the earlier assessment years, namely, for asst. yrs. 1991-92, 1992-93, 1993-94 and 1994-95, which were filed prior to the filing of the present appeal, were pending before the .CIT(A) and have, in fact, not even been taken up for disposal. In the circumstances, taking up the appeal, for asst. yr. 1995-96, which included common points involved in the earlier years was not proper and appropriate. The learned counsel very fairly conceded that there has been non-compliance with the notices of hearing on 26th Aug., 1998 and 10th Sept., 1998. However, it is pointed out that the adjournment application duly moved by the assessee on 12th Oct., 1998, requesting for adjournment on valid grounds has been  rejected by the CIT(A) without proper appreciation of the reasons which necessitated the request for adjournment by the assessee. Learned counsel strongly pleaded that the impugned order of the CIT(A) may be set aside in the interest of justice and equity. Learned Departmental Representative on the other hand, .placed reliance on the order of the CIT(A).

 

3. We have carefully considered the facts and circumstances of the case as well as submissions made before us. The impugned order passed by the CIT(A) is clearly violative of the express provisions of s. 250(6), which provides that the appellate orders of the CIT(A) are

to state the points arising in the appeal, the decision of the authority thereon and the reasons for such decision. The underlying rationale of the provision is that such orders are subject to further appeal to the Tribunal. Speaking order would obviously enable a party to know precise points decided in his favour or against him. Absence of the formulation of the point for decision for want of clarity in a decision undoubtedly puts a party in quandary. Sec. 250(6) expressly embodies the principles of natural justice and such a provision is clearly mandatory in nature. The impugned order passed by the CIT(A) in violation of the provisions of s. 250(6) cannot, therefore, be sustained. Regarding the decisions of the Delhi Bench of the Tribunal in Multiplan India Ltd. (supra) cited by the learned CIT(A), we find that the said decision is clearly distinguishable. Sec 254 referring to the orders of the Tribunal confers plenary jurisdiction on the Tribunal in the matter of passing orders under s. 254(1). There is no such express stipulation in s. 254 as contained under the provisions of s. 250(6) relating to the orders of first appellate authority. Therefore, reliance placed by the CIT(A) on Multiplan India Ltd. (supra) is entirely misplaced. Similarly, the case of Late Tukojirao Holkar (supra) cited by the learned CIT(A) is distinguishable and does not support the view taken by the CIT(A).”

 

6. Replying to the above, ld. DR, on the other hand, placed his reliance on the impugned order of the Commissioner of Income Tax(A) and submitted that Shri R.S. Negi, Director of the company attended proceedings on three occasions in response to the notices issued to the assessee and subsequent notices were also issued on the same address, therefore, it may be presumed that the assessee deliberately did not comply with the notice issued to him by the Commissioner of Income Tax(A), accordingly, Commissioner of Income Tax(A) rightly dismissed the appeal for nonprosecution and also on merits in absence of supporting submissions and evidence of the assessee.

 

7. A careful consideration of the facts and circumstances of the case as well as rival submissions made before us and on perusal of the impugned order passed by the Commissioner of Income Tax(A) clearly shows violation of the express provisions of section 250(6) of the Act which provides that the appellate authority is bound to state the points and grounds arising in the appeal and the decision thereon with the reasons for such decision. The underlying rationale of the said provision is that such orders are subject to further appeal to the Tribunal, therefore speaking and well reasoned order would obviously enable a party to know the precise points decided in his favour or against him. From the impugned order, we observe that the Commissioner of Income Tax(A) did not adhere to the letter and spirit of the statutory provisions and dismissed the appeal for nonprosecution and also on merits by holding that non-availability of any submission and evidence in support to the ground raised by the assessee in the appeal. In view of above, we are of the opinion that the absence of the formulation of the points for decision for want of clarity in a decision undoubtedly puts the party in dilemma. From Section 250(6) of the Act, it is clear that this statutory provision expressly embodies the principle of natural justice and such a provision is also mandatory in nature. The impugned order passed by the Commissioner of Income Tax(A) in violation of the provisions of Section 250(6) of the Act cannot be sustained. Regarding the decision of Hon’ble Supreme Court in the case of Commissioner of Income Tax vs B.N. Bhattachargee and another (supra) and the judgment of ITAT Delhi in the case of Commissioner of Income Tax vs Multiplan India (P) Ltd. (supra), we find that the benefit of the ratio of the said decision is not available to the revenue as said decisions are clearly distinguishable from the facts and circumstances of the present case since section 254 of the Act referring to the order of the Tribunal confers plenary jurisdiction on the Tribunal in the matter of passing orders u/s 254(1) of the Act and there is n such express stipulation in section 254 as contained under the provisions of section 250(6) relating to the orders of first appellate authority i.e. Commissioner of Income Tax(A). Therefore, we respectfully hold that reliance placed by the CIT(A) on the legal propositions is entirely misplaced and not acceptable as per scheme of the statutory provisions of the Act.

 

8. After foregoing discussion and for the reasons as indicated above, we find it appropriate to set aside the impugned order of the Commissioner of Income Tax(A) and we set aside the same and direct the Commissioner of Income Tax(A) to dispose of the appeal of the assessee afresh after allowing proper opportunity of hearing in accordance with law and well-accepted procedure of the Act. The appeal of the assessee is decided in the manner as indicated above and may be treated as allowed for statistical purposes.

 

Order pronounced in the open court on 3.5.2013.

 

Sd/- Sd/-

(SHAMIM YAHYA) (CHANDRAMOHAN GARG)

ACCOUNTANT MEMBER JUDICIAL MEMBER

 

DT. 3rd MAY 2013

‘GS’

 

Copy forwarded to:-

 

1. Appellant

2. Respondent

3. Commissioner of Income Tax (A)

4. CIT

5. DR

 

True copy

 

By Order

Asstt.Registrar

 

Diganta Paul
on 13 July 2013
Published in Taxation
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