TaxTMI 
TaxTMI 
2019 (7) TMI 1960
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....ourt 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 quashing the reassessment procee....
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....eturn 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. Accordingly, the Ld. DR vehemently objected on the....
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....e 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 has objected to the delayed issuance of notice u/s.143(2) during the assessment proceedings. 4. A reference is made in the assessment order with respect to the assessee's objection towards validity of reassessment proceedings u/s.147 of the I.T.Act. In the assessment order, in para 10 of the order, the Assessing Officer has concluded as under: "..... During the course of reassessment proceedings, the assessee company has filed its detailed sub....
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....essee'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 objections. Instead, the assessee has taken recourse to the provisions of Rule 27 of the ITAT Rules. It is observed that the recourse to Rule 27 can only be taken where any ground is decided by the CIT(A) against the assessee. The recourse to Rule 27 taken by the assessee is not based on the prescribed procedure. The assessee is satisfied with the outcome of the appeal decided by the CIT(A). Since the CIT(A) has not decided against the assessee on the ....
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....-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 the non-adjudication of the issue raised by the assessee before the Ld. CIT (A) is deemed as decided against the assessee. Issue 3 Whether the provisions of section 292BB of the Act would be applied in the given facts and circumstances of the case. Now we proceed to adjudicate the issues as discussed above individually and one by one as follows: Issue 1 14. First of all, we find pertinent to refer the provisions of rule 27 of ITAT rules which reads as under: "The respondent....
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....plication 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 the contention of the assessee was not decided by the Ld. CIT(A) for the reason best known to him. The issue arises 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. 21. Rule 27 states that the respondent may support the order of the Ld. CIT (A) on any of the ground decided against him. The assessee before the Ld. CIT (A) has challenged the reassessment proceedings initiated under section 147 of the Act on var....
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.... 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 not gone in discharge of an antecedent debt, the respondent was precluded from putting forward a contention that the entire sum of Rs. 80,000/- covered by Exs. A and B went for the discharge of antecedent debts. We do not see any substance in this objection, because the respondent is entitled to canvass the correctness of findings against it in order to support the decree that has been passed against the appellant." 13. Likewise, in case of S.Nazeer Ahmed vs. State Bank of Mysore and ors reported in 2007 AlR SCW 766....
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..... 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 such an order or any part thereof, within 30 days of the notice, file a memorandum of cross objections verified in the prescribed manner and such memorandum shall be disposed of by the Tribunal as if it were an appeal presented within the period of limitation prescribed under sub-section (3). Therefore, on a plain reading of the provision, it transpires that a party has been granted an option or a discretion to file cross objection. 19. In case a party having succeeded before Commissioner (Appeals) opts not to file cross obj....
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....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 contention that the present proceedings are illegal, being based on the notice issued under section 143(2) of the Act beyond the limitation period, the assessee submits as under:" XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX "VI. Notice under section 143(2) was not served: In any case, the reassessment proceedings are invalid since the notice issued to the assessee under section 143(2) of the Act is after the limitation period." 25. The Ld. DR has not controverted the content of the letter as discussed above with cogent reasons despite sufficient time a....
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....ssment 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 quashing the assessment order framed by the AO under section 143(3)/147 of the Act. 35. At this juncture, we find it important to refer to the relevant findings of the ld. CIT(A) on the above issue which stands as under: "8. I have carefully considered the submissions made by the appellant company and has also gone through the copies of documents placed on record. Particularly, I have looked into the statement submitted by the appellant company in its paper book on pages 90-91 wherein the appellant company has provided the information regarding examination of issues mentioned ....
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....he 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 placed all the material before the Assessing Officer and where there was a doubt, even that was clarified by the assessee in its letter dated November 8, 1995. If the Assessing Officer, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the Assessing Officer at the time of framing the original assess....
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....cial 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 jurisdictional High Court has held that if on the same material a different view is sought to be taken, may be on the basis of observations of audit party, it would be nothing but a mere change of opinion and that would not amount to escapement of income. 11. On the basis of above clear legal position I hold that observations of Revenue Audit party in the case of the appellant would not amount to fresh material empowering the Assessing Officer to issue notice under Section 147 of the Act for the reason that observations are relating to interpretation of law and no such factual position has been....
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....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 provisions of Section 147 of the Act as explained in various decisions. I Accordingly, the notice deserves to be quashed. Subsequent proceedings also becomes invalid and not sustainable under law. passed by the AO is also to be quashed. Hence, order of assessment 16. I have also carefully considered the contention of the appellant company regarding the time limit for passing the order of assessment under reference. The appellant has contended that the AO had made the reference to TPO on 04.04.2007 i.e. immediately after issuing the notice under Section 148 of the Income Tax Act dated 30.03.2....
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.... 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 time limit from nine months to 21 months only in the cases where reference has been made to TPO under Section 92 CA of the Act during the course of reassessment proceedings. My holdings given hereinabove in regard to validity of reference to TPO in terms of Section 147 of the Act also holds goods for the purpose of Section 153(2) of the Act as the language of Section 147 and 153 are similar in this regard. Accordingly, the AO could not take recourse to extended time limit of 21 months as reference to TPO was not during the course of reassessment proceedings. It has already been noted that issue r....