Income Tax Appellate Tribunal - Mumbai
Sultan Ahmed, Mumbai vs Assessee on 9 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"WT" Bench, Mumbai
Before Shri Sanjay Arora (AM) & Shri Sanjay Garg (JM)
W.T.A. No. 01/Mum/2012
(Assessment Year: 2005-06)
W.T.A. No. 02/Mum/2012
(Assessment Year: 2006-07)
Shri Sultan Ahmed ACIT 11(1)
34-B, Pali Hill Vs. 4 T H Floor
Nargis Dutt Road Aayakar Bhavan
Bandra West M.K. Road
Mumbai-400 050. Mumbai-400 020.
PAN/GIR No. AAJPS0361F
(Appellant) .. (Respondent)
Assessee by : Shri J.P. Bairagra
Department by : Shri Ganesh Bare
Date of Hearing : 9.1.2013
Date of Pronouncement : 31.1.2013
ORDER
Per Bench:
With this common order, we shall dispose of two appeals dated 10.2.2012 pertaining to assessment years (A.Ys.) 2005-06 & 2006-07 of the same assessee preferred against the orders dated 19.12.2011 of learned Commissioner of Wealth Tax (Appeals)-3, Mumbai ("CWT(A)' for short) in appeal Nos. CIT(A)-3/ACIT-11(1)WT- 95/10-11 & No. CIT(A)-3/ACIT-11(1)WT-96/10-11 respectively for the two years, upholding the assessment orders of even date, 15.11.2010, passed u/s. 16(3) read with section 17 of Wealth Tax Act for the said years.
2. For the sake of convenience the facts arising out of appeal preferred to A.Y. 2005- 06 are taken for discussion. The assessee is aggrieved against the addition of Rs.
2 WTA Nos. 1 & 2/Mum/2012(A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT 1,53,90,000/- on account of value of one flat at Solitaire Apartment, Bandra, Mumbai and further addition of Rs. 77,65,000/- on account of closing stock of diamonds and gems towards less total wealth by the Assessing Officer, which addition has been further upheld by the learned CWT(A) in order under appeal. Apart from challenging the said addition on factual matrix of the case, the assessee has also taken the legal grounds to the effect that learned CWT(A) has wrongly confirmed the reopening of the assessment u/s. 17 of the Wealth Tax Act, 1957, and further it could not have been opened on the basis of audit objections and further that a valid notice u/s. 16(2) of the Wealth Tax Act was not served, hence, learned CWT(A) erred in confirming the action of the Assessing Officer in passing the assessment order u/s. 16(3) read with section 17 of the Wealth Tax Act.
3. Brief facts of the case are that the assessee an individual, filed his wealth tax return on 24.10.2005 declaring net wealth tax at Rs. 10.85 lakhs which was processed u/s. 16(1) accepting the same as at Rs. 10.85 lakhs. It was observed by the Assessing Officer from the return that the assessee claimed two flats i.e. Flat Nos. 11 & 12 at Solitare Apartment, Bandra, Mumbai being exempt u/s. 5(vi) of the Wealth Tax Act. However, as per section 5(vi) of the WT Act, only one house or part of house could be claimed as exempt by the assessee. It was further noticed by the Assessing Officer that the assessee had purchased Starlight Gems in 2003 for Rs. 77,65,000/-which were shown as stock-in-trade. However, records did not show that the assessee was trading in gems, hence, the Assessing Officer also made addition of Rs. 77,65,000/-. In view of the above fact, the Assessing Officer noted that both assets above fall within the ambit of Wealth Tax, the non-disclosure of which in Wealth Tax return, the taxable wealth aggregating Rs. 2,27,40,000/- of the assessee has escaped assessment for the relevant assessment year. Accordingly notice u/s. 17 of the Act was issued on 26.2.2010 and served upon the assessee after recording reasons for reopening of the assessment. The assessee vide his letter dated 9.3.2010 stated that the return of wealth tax originally filed by him should be treated as return of wealth tax in response to the aforesaid notice. Assessee participated 3 WTA Nos. 1 & 2/Mum/2012 (A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT in the reassessment proceedings. The Assessing Officer after considering explanation of the assessee, passed an order u/s. 16(3) read with section 17 of the Wealth Tax Act making above said additions. The assessee preferred an appeal before learned CWT(A) on various grounds including the ground of non-services of notice u/s. 16(2) of the Wealth Tax Act.
4. The Learned CWT(A) after hearing respective representative of the parties upheld the order of the Assessing Officer dated 15.11.2010 computing the net taxable wealth of the assessee at Rs. 2,27,40,000/-.
5. Aggrieved by the order of learned CWT(A), the assessee has filed the present appeal.
6. We are of the opinion that before going into the factual merit of the case, we should address the question of non-issuance of notice u/s. 16(2) of the Wealth Tax Act, agitated by the assessee per Ground Nos. 3 through 5 of its appeals.
6.1 Learned AR while arguing on other grounds taken in the appeal, vehemently submitted that the issue of notice before reopening of the assessment was mandatory. He has relied upon a decision of Hon'ble Supreme Court styled as CIT & Another Vs. Hotel Blue Moon (2010) 229 CTR (SC) 362, wherein Hon'ble Supreme Court while adjudicating upon the case of block assessment under the Income Tax Act has observed that if the Assessing Officer, for any reason, repudiates the return filed by the assessee in response to a notice under section 158BC(a), he must necessarily issue notice under section 143(2) within the time prescribed in the proviso to section 143(2); omission on the part of the assessing authority to issue notice under section 143(2) cannot be a mere procedural irregularity and the same is not curable. The learned AR further submitted that Section 143(2) of the Income Tax Act is in paramateria with section 16(2) of the Wealth Tax Act.
4 WTA Nos. 1 & 2/Mum/2012(A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT 6.2 On the other hand, learned DR submitted that vide Finance Act 2008, w.e.f. 1.4.2008 section 292-BB in the Income Tax Act as well as section 42 in the Wealth Tax Act has been introduced. He further submitted that any right which has been accruing to the assessee for non-service of notice u/s. 16(2) of the Wealth Tax or u/s. 143(2) of the Income Tax Act has been taken away with the introduction of section 292 BB of the I.T. Act and further that a similar corresponding section 42 has been introduced in the Wealth Tax Act also by the Finance Act 2008. Learned DR further submitted that as the said newly introduced sections pertain to the procedural law, hence can be applied retrospectively to the pending assessment proceedings.
The ld. Departmental Representative further submitted that even if it is assumed that section 42 of Wealth Tax Act would not have any retrospective effect, but it relates to procedural law. The reassessment proceedings were initiated in this case in the year 2010 and further the assessee vide his letter dated 9.3.2010 stated that his return of wealth filed originally be treated as return of wealth filed in response to due notice, u/s. 17 of WTA. The procedural law as was in force on the date of return/letter dated 9.3.2010 would be applicable to the case in hand. He vehemently stressed that it is not the assessment year pertaining to which the assessment was made, later the date of reopening of the assessment is relevant and the procedural law as was in force on the date of reopening of assessment has been rightly followed by the Assessing Officer and further that since section 42 of WTA was in force on the relevant date of reopening of assessment, hence the same would be attracted in the case in hand.
7. We have heard the parties, and perused the material on record, as well as the case law cited.
7.1 For the sake of convenience section 16(2) of the Wealth Tax Act is reproduced below:
"16(2) Where a return has been made under section 14 or section 15, or in response to a notice under clause (i) of sub-section (4) of this section, the 5 WTA Nos. 1 & 2/Mum/2012 (A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT Assessing Officer shall, if he] considers it necessary or expedient to ensure that the assessee has not understated the net wealth or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend at the office of the Assessing Officer or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return :
Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished."
Section 42 of the Wealth Tax Act read as under :-
"42. Notice deemed to be valid in certain circumstances : Where an assessee has appeared in any proceedings or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceedings or inquiry under this act that the notice was :-
(a) not served upon him; or
(b) not serviced upon him in time; or
(c) served upon him in an improper manner;
provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."
7.2 The apex court in the case of ACIT vs. Hotel Blue Moon [2010] 321 ITR 362 (SC) has clarified that the non issue of notice u/s.143(2) by the Assessing Officer (A.O.) in section 158BC proceedings (of the Income-tax Act, 1961) is not a procedural irregularity inasmuch as the A.O. could frame an assessment only u/s.143(3) of that Act where he wished to repudiate a return filed in response to a notice u/s.158BC(a) of the said Act. Issue of notice u/s. 143(2) is, thus, mandatory for framing an assessment u/s.143(3). The same would apply in equal measure to a return filed in response to section 148 of the Income-tax Act as well as the section 17 of the Wealth Tax Act, 1957 ('the Act' hereinafter), which are cognate statutes, bearing almost identically worded provisions, inasmuch as the reassessment u/s. 147 or s.17, as the case may be, is again 6 WTA Nos. 1 & 2/Mum/2012 (A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT only an assessment u/s. 143(3) or s. 16(3) respectively, where the corresponding return is subject to verification by the assessing authority. The matter is, thus, no longer res integra after the decision in the case of Hotel Blue Moon (supra). Its stands explained therein that section 143(2) [corresponding to section 16(2) of the Act] consists of two parts; while the first is jurisdictional in nature, the second limb is procedural. This is as the law has since provided a limitation in its respect by prescribing a time limit for its issue. The A.O., accordingly, has to issue notice u/s.143 (2) or section 16(2), as the case may be, within the prescribed time limit where the assessment is to be framed under the verification procedure.
7.3 In the instant case, there has been admittedly no issue of notice u/s.16 (2) of the Act. We say so, as while the assessee disputes the same by making a categorical statement in the matter, which is claimed to be only after an inspection of the record, the Revenue has not brought anything on record to dispute the same or to show of its service on the assessee, which would by implication disprove the assessee's claim. The finding by the ld. CWT(A); he holding that it as not borne out from the record whether the notice u/s. 16(2) was actually issued, does not throw any light in the matter, and is, rather, obfuscatory. The copy of the notice, if issued, would only be in the file, or at least there would be an entry in the order sheet as regards its issue. The same, thus, cannot come to the rescue of the Revenue.
7.4 Coming to the provision of section 42 of the Act, brought on the statute by Finance Act, 2008 w.e.f 01.04.2008, the same relates to the enforcement of the right of objection where the assessee claims either of non service or improper service of any notice, including it being barred by time. The said provision excludes or restricts the right to press the said objection before the appellate authorities where not pressed during the assessment proceedings. The service of notice, and matters related thereto, viz. as to time or manner of service, etc, are decidedly procedural matters, i.e., as distinct from, and in contradistinction to, the issue of notice, which may have, apart from procedure, a 7 WTA Nos. 1 & 2/Mum/2012 (A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT jurisdictional aspect, as in the case of notice u/s.16(2) of the Act. The 'issue' and 'service' qua a notice, though related inasmuch as service would only follow issue, are separate and distinct processes, even as explained by the hon'ble apex court in the case of Upadhyaya (R.K.) v. Shanabhai P. Patel [1987] 166 ITR 163 (SC). There is no vested right in procedure. Further, procedural law, it is also trite, is applicable to pending proceedings, and is in that sense retrospective. Section 292BB of the Income-tax Act (corresponding to section 42 of the Act) has been held as a part of procedural law, as by the hon'ble high court in the case of CIT vs. Panchvati Motors Pvt. Ltd. (in ITA No.292 of 2008 dated 03.05.2011, copy on record). Further, in the instant case, the said section stands to be applied only in relation to a notice issued after 01.04.2008, i.e., after the incorporation of the said provision on the statute, though is in relation to the assessment proceedings for earlier assessment years, being A.Ys. 2005-06 and 2006-07. As such, there is considerable merit in the Revenue's case with regard to the said section being applicable to the notice under reference. So, however, the hon'ble jurisdictional high court has in the cases of CIT v. Salman Khan (in ITA No. 2362 of 2009 dated 01/12/2009, copy on record) and CIT v. Virendra Kumar Agarwal (in ITA No. 2429 of 2009 dated 07/1/2010), brought to our notice by the ld. AR during hearing, clarified in the context of section 292 BB of the I. T. Act that the said provision is only prospective in nature, i.e., would only apply 01.04.2008 onwards, for A.Y. 2008-09 and subsequent assessment years. This would, therefore, conclude the issue qua the objection as to non or improper service that could be validly raised by the assessee before the appellate authorities where not raised in the course of the assessment proceedings, as in the instant case, so that there is no curtailment of the said right (of objection) for the relevant years, or at least as far as this bench of the tribunal is concerned. The Revenue could though raise this issue before the hon'ble High Court in appropriate proceedings.
7.5 In view of the foregoing, the instant assessment proceedings fail both on account of non-issue as well as non-service of a notice u/s.16(2); the Revenue having failed to exhibit, even prima-facie, the same. We decide accordingly.
8 WTA Nos. 1 & 2/Mum/2012(A.Ys. 2005-06 & 2006-07) Shri Sultan Ahmed vs. ACIT
8. We having decided thus, so that the assessment fails as bad in law, we do not consider it necessary to deal with the other issues, legal or factual, raised in the instant appeal. We decide accordingly.
9. In the result, both the assessee's appeals are allowed.
Order pronounced in the open court on 31.1.2013
Sd/- Sd/-
(SANJAY GARG) (SANJAY ARORA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 31/1/2013
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai
PS/Roshani