Income Tax Appellate Tribunal - Mumbai
Sanket Food Products P. Ltd, Jalna vs Assessee on 2 July, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI 'E ' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, JM
ITA Nos. 6826/Mum/2010 (Assessment Year 2006-07)
Sanket Food Products P Ltd Vs The Asst Commr of Income Tax
A9/26 Addl MIDC Area, Cen.Cir 11, Mumbai
Aurangabad Road
Jalna 431 203
(Appellant ) (Respondent )
ITA No. 6837/Mum/2010 (Assessment Year 2006-07)
The Asst Commr of Income Tax Vs Sanket Food Products P Ltd
Cen.Cir 11, Mumbai A9/26 Addl MIDC Area,
Aurangabad Road
Jalna 431 203
(Appellant ) (Respondent )
&
ITA Nos. 6827/Mum/2010 (Assessment Year 2007-08)
Sanket Food Products P Ltd Vs The Asst Commr of Income Tax
A9/26 Addl MIDC Area, Cen.Cir 11, Mumbai
Aurangabad Road
Jalna 431 203
(Appellant ) (Respondent )
PAN No. AAECS0131P
Assessee by Sh Dharmesh Shah
Revenue by Sh Girjia Dayal
Dt.of hearing 4th Feb 2013
Dt of pronouncement 8th, FEB 2013
ORDER
PER VIJAY PAL RAO, JM
For the Assessment Year 2006-07, cross appeals are filed against the order dated 2.7.2010 of the Commissioner of Income Tax(Appeals) whereas for the Assessment Year 2007-08, the assessee has filed the appeal against the order dated 2.7.2010 of the Commissioner of Income Tax(Appeals).
ITA Nos. 6826/Mum/2010 (by the assessee) 2 The assessee has raised the following grounds in this appeal: 2 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010
.
"1.The Ld. CIT(A) having held that the notice u/s. 153A and notice u/s. 142(1) are not properly served hence on the facts and circumstances of the case and in law CIT(A) ought not to confirm the addition of `. 13,07,303/- as agitated in ground no. 6 before him.
Without prejudice to the above
2. On the Facts and circumstances of the case and in Law the Ld. Commissioner of Income Tax (Appeal) erred in confirming the addition of `. 13,07,303/- u/s. 41(1) of Income Tax Act.
3. On the Facts and circumstances of the case and in Law the Ld. ACIT as well as Commissioner of income Tax (A) erred in holding that the loose paper found from third party as per Annexure All pertaining to the appellant company and failed to appreciate the fact that nowhere in the said loose paper the name of the appellant company is appearing .
4. On the Facts and circumstances of the case and in Law the Ld. ACIT as well Commissioner of Income Tax (A) erred in relying on the loose papers found from the third party and without recording any reasons, the Ld. ACIT erred in holding that the transactions appearing in the said loose papers is pertaining to the appellant.
5. On the Facts and circumstances of the case and in Law the Ld. ACIT erred in making an assessment u/s. 153(C) whereas the original notice have been allegedly issued u/s. 153A.ITA No. 6837/Mum/2010 (by the revenue)
2.1 The revenue has raised the following grounds in this appeal:
1) "On the facts and in circumstances and in Law, the Ld. CIT(A) erred in holding that the statutory notices were not served on the assesses when the said notices were duly served following the procedure laid down in law."
2) "On the facts and in circumstances and in Law, the Ld. CIT(A) erred in admitting additional evidences adduced by the assessee without giving a clear finding that the rigorous tests laid down in Rule-46A(l) were satisfied in the case."
3) "On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in ignoring the fact that sufficient opportunity had been given to the assessee and this fact was reiterated in the remand report by the Assessing Officer before proceeding to admit additional evidence which amounted to a fresh assessment in the case of the assessee." 3 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010
.
4) "On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in deleting the disallowance of ` .65,56,126/- out of advertisement expenses incurred, `.31,14,289/- out of miscellaneous expenses without discussing merits of the additional evidence furnished before him and without giving the finding that the addition was not called for in view of the additional evidence furnished before him."
5) "On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in deleting the addition of Rs.76,35,000/- on account of cash credits without discussing the merits of the additional evidence furnished before him and without giving a definite finding that the addition was not called for in view of the additional evidence furnished before him."
6) "On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in deleting the addition of ` .6,39,55,5781- towards unexplained sundry creditors without discussing merits of the additional evidence furnished before him and without giving a definite finding that the addition was not called for in view of the additional evidence furnished before him."
3 A search and seizure u/s 132 was carried out in the Shah Group of Jalna on 21.2.2007. The investigation wing has reported that the assessee and its group were involved in unaccounted production and sale of products, suppressing the profits, generating unaccounted income, ploughing back their unaccounted income into the books by way of manoeuvring bogus/artificial shares transactions (long term capital gains) and also claiming benefit of tax at lower rate. The assessment was completed exparte u/s 153C r.w. s 144 of the I T Act.
3.1 On appeal, the assessee filed additional evidence before the Commissioner of Income Tax(Appeals) upon which the Commissioner of Income Tax(Appeals) issued a remand order inviting comments of the Assessing Officer on the additional evidence filed by the assessee. Since the assessee raised the issue of validity of the notice issues u/s 153A and u/s 142(1) of the IT Act by affixture only, the Commissioner of Income Tax(Appeals) held that the Assessing Officer has not followed the 4 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010 .
procedure as provided u/s 282 of the I T Act r.w. Rule 17 of Order V (Rule 20)of the Code of Civil Procedure, 1908 and accordingly, decided the issue of validity of notice in favour of the assessee. The revenue has challenged the order of the Commissioner of Income Tax(Appeals) inter alia with respect to the finding that holding the notice not properly served in ground no.1.
4 Since the issue of validity of notice u/s 153A and u/s 142(1) goes to the root of the matter; therefore, we first take up this legal issue for consideration and adjudication.
5 The ld DR has submitted that the Commissioner of Income Tax(Appeals) has decided the issue without considering the relevant facts about the steps taken by the Assessing Officer for service of notice u/s 153A and 142(1) through registered post and also serve the notice to the official liquidator. He has referred the relevant part of the order of the Commissioner of Income Tax(Appeals) and submitted that the Commissioner of Income Tax(Appeals) has proceeded on the basis of the submissions of the assessee without going through and considering the relevant material on record which clearly shows that the Assessing Officer prior to resorting to the service of notice by way of affixture has also sent the notice through registered post as well as served the notice to the official liquidator of the assessee company. In support of his contention, the ld DR filed a copy of the notice dated 22.10.2008 issued to the official liquidator along with annexure, copy of the response of the official liquidator dated 11.12.2008, copy of notice u/s 143(2) dte13.8.2007 issued to the assessee through registered post. The ld DR has filed copy of the registered post receipt. Thus, the ld DR has submitted that the finding of the Commissioner of 5 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010 .
Income Tax(Appeals) is contrary to the material on record as well as the facts and therefore, is not sustainable.
5.1. On the other hand, the ld AR of the assessee has supported the order of the Commissioner of Income Tax(Appeals) and submitted that when the Commissioner of Income Tax(Appeals) has remanded the matter to the Assessing Officer and in the remand report, the Assessing Officer has not pointed out the issuance of notice either to the assessee or to the official liquidator prior to the service through affixture; therefore, the Commissioner of Income Tax(Appeals) was justified in deciding the issue on the basis of the remand report of the Assessing Officer. He has also contended that for the Assessment Year 2001-02, this issue has been decided by the Commissioner of Income Tax (Appeals) in favour of the assessee and the revenue has not challenged the finding of the Commissioner of Income Tax(Appeals). Therefore, the revenue cannot challenge the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2006-07 on the same issue when the finding of the Commissioner of Income Tax(Appeals) has been accepted for the AY 2001-02. 6 We have considered the rival submissions as well as the relevant material on record. We do not agree with the contention of the ld AR that when the revenue has not challenged the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2001-02, then the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2006-07 cannot be challenged. It is settled proposition of law that principle of res-judicata cannot be applied in the matter of income tax. Every assessment year is a separate unit. Even if the revenue has not challenged the finding of the ld Commissioner of Income Tax(Appeals) for the 6 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010 .
Assessment Year 2001-02, the same would not operate as a binding precedent for the Assessment Year 2006-07. There may be various reasons including tax effect for not challenging the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2001-02. Therefore, we do not find any merit in the objection of the ld AR when both the assessee as well as the revenue are in appeal against the order of the Commissioner of Income Tax(Appeals)on the other isuse for the Assessment Year 2006-07. Further, the facts as brought before us were not considered by the Commissioner of Income Tax(Appeals); therefore, the issue is required to be adjudicated after considering the relevant fact did exist on record. 6.1 The Commissioner of Income Tax(Appeals) has observed in the impugned order that the Assessing Officer should have been served the notice on the appellant company or on the official liquidator by post or as if it were summons issued by a Court under the Code of Civil Procedure, 1908. He has further observed that the Assessing Officer has not done his job in accordance with the sec 282 of the Act. The Commissioner of Income Tax(Appeals) has proceeded on the premises that the Assessing Officer has not sent any notice by post or through process server; therefore, adopting mode of substituted service by way of affixation , the Assessing Officer has not followed the order V, Rule 17 (20)of the CPC 1908 which mandates that the substituted service by affixation to be adopted only if the person refuses to sign the acknowledgement, or the servicing officer, after using all due and reasonable diligence, cannot find the defendant who is absent from his residence etc. He has further observed that in this case there is nothing on record to prove that the service of notice u/s 153A or u/s 142(1) was made by post or through process server. Accordingly, the Commissioner of Income Tax(Appeals) has held 7 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010 .
that the Assessing Officer's action of exclusive mode of service by affixation is not in accordance with the provisions of sec. 282 r.w.r 17 of order No.V of Code of Civil Procedure, 1908.
6.2 The ld DR has produced before us the original records along with the copies of notice dated 13.8.2007 sent through registered post. He has also filed the notice dated 22.10.2008 sent to ShriS Ramakant, Official Liquidator of the assessee as well as the reply of the official liquidator of the assessee dated 11.12.2008 whereby the notice issued by the Assessing Officer u/s 142(1) has been duly acknowledged by the official liquidator.
6.3 Prima facie, it appears that the Assessing Officer issued the notice to the assessee through registered post and also issued notice to the official liquidator of the assessee which has been duly acknowledged by the official liquidator. Thus, it is clear that the find of the Commissioner of Income Tax(Appeals) on the issue of validity of the notice u/s 153A and u/s 142(1) is contrary to the facts as emerged from the record. There is nothing on record to show that the issue of validity of notice was remanded by the Commissioner of Income Tax(Appeals) to the Assessing Officer. Therefore, we do not see any reason to take an adverse inference against the Assessing Officer when these facts are not mentioned in the remand report. 7 In view of the above facts and circumstances of the case, we are of the considered opinion that the issue of validity of notice requires a proper examination and consideration of the relevant facts and records. Accordingly, we set aside this issue to the record of the Commissioner of Income Tax(Appeals) to decide the same afresh after considering the relevant facts on record.
8ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010
.
8 Both the assessee as well as the revenue have challenged the order of the Commissioner of Income Tax(Appeals) on merits.
9 It is to be noticed that the assessment has been framed exparte as the assessee did not appear. On appeal, the Commissioner of Income Tax(Appeals) though issued remand order when the assessee filed additional evidence; however, the Assessing Officer, in the remand report has objected against the admission of the additional evidence without examination/verification or giving any comments on the same.
9.1 Since the additional evidence has not been examined by the Assessing Officer; therefore, in the interest of justice and in view of the fact that the issue of validity of the notice has been set aside to the record of the Commissioner of Income Tax(Appeals), we set aside the ground raised on merits by both the parties to the record of the Commissioner of Income Tax(Appeals) to decide the same afresh after inviting a proper remand report from the Assessing Officer on the additional evidence.
10 For the Assessment Year 2007-08 the assessee has raised the following grounds:
"1 The Ld. CIT(A) having held that the notice u/s. 153A and notice u/s. 142(1) are not properly served hence on the facts and circumstances of the case and in law CIT(A), ought not to confirm the addition of ` 28,43,033/- as agitated in ground no.6 before him.
Without prejudice to the above
2. On the Facts and circumstances of the case and in Law the Ld. Commissioner of Income Tax (Appeal) erred in confirming the addition of `. 28,43,033 u/s. 41(1) of Income Tax Act.9 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010
.
3. On the Facts and circumstances of the case and in Law the Ld. ACIT as well as Commissioner of Income Tax (A) erred in holding that the loose paper found from third party as per Annexure All pertaining to the appellant company and failed to appreciate the fact that nowhere in the said loose paper the name of the appellant company is appearing.
4. On the Facts and circumstances of the case and in Law the Ld. ACIT as well Commissioner of Income Tax (A) erred in relying on the loose papers found from the third party and without recording any reasons, the Ld. ACIT erred in holding that the transactions appearing in the said loose papers is pertaining to the appellant
11 We have heard the ld AR as well as the ld DR and considered the relevant material on record. It is pertinent to note that the Commissioner of Income Tax(Appeals) has decided the issue of validity of notice u/s 153A and u/s 142(1) in favour of the assessee in para 4.2 as under:
"4.2 In ground of appeal No.3, the appellant has challenged the issue of service of notice u/s.153 and u/s 142(1) by affixture only. It is admitted by the Assessing Officer that no search and seizure action u/s.132(1) was carried out in the premises of appellant and hence notice u/s.153A was issued not in accordance with the provisions of law. To add it the service of said invalid notice u/s.153A exclusively by the affixture mode cannot be sustained. The Assessing Officer has not followed the provisions of Section 282 of the Act. He should have served the notice on the appellant company or on the official liquidator by post or as if it were summons issued by a Court under the Code of Civil Procedure, 1908 (V of 1908). Such notice should have been addressed by him to the official liquidator or to the person who manages or controls company's affairs. The Assessing Officer has not done his job in accordance with the Section 282 of the Act. In fact, he not sent any of the notices by post or through a process server. He has adopted only the mode of substituted service by way of affixture. Assessing Officer has also not followed order V, Rule 17 of the Code of Civil Procedure, 1908, which mandates that the substituted service by affixture to be adopted only if the person refuses to sign the acknowledgement, or the serving officer after using all due and reasonable diligence, cannot find the defendant who is absent from his residence etc. In this case there is nothing on record to prove that the service of notice u/s.153A or u/s.142(1) was made by post or through process server or after following the due procedure as explained in Section 282 read with Rule 17 of order V of the Code of Civil Procedure, 1908. Therefore, the Assessing Officer's action of exclusive mode of service by affixture is not in accordance with the provisions of Section 282 read with Rule 17 of order No.V of Code of Civil Procedure 1908. Ground NO.3 is allowed in the light of 10 ITA Nos. 6826/Mum/2010 ITA No. 6837/Mum/2010 ITA Nos. 6827/Mum/2010 .
decision given in the case of World Wide Exports P Ltd vs ITO 2172 ITR(AT) 162 (Del)."
11.1 As it is clear from the order of the Commissioner of Income Tax(Appeals) that the notice u/s 153A and u/s 142(1) served through affixation has been held as contrary to the procedure provided u/s 282 r.w.r 17 of order No.V of Code of Civil Procedure, 1908. Since the revenue has not challenged the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2007-08; therefore, the appeal filed by the assessee has become infructuous when the notice issued u/s 153A and u/s 142(1) has been held as against the provisions of law and consequently assessment on the basis of the said invalid notices, would not survive. Therefore, the ground raised by the assessee for the Assessment Year 2007-08 are academic in nature when the finding of the Commissioner of Income Tax(Appeals) on the validity of notice has not been challenged by the revenue. Accordingly, the appeal filed by the assessee for the Assessment Year 2007-08 is dismissed as become infructurous.
12 In the result, the appeals filed by the assessee as well as the revenue for the Assessment Year 2006-07 are allowed for statistical purpose whereas the appeal filed by the assessee for the Assessment Year 2007-08 is dismissed. Order Pronouncement in the Open Court on this 8th, day of Feb 2013 Sd/- Sd/-
( P M JAGTAP ) ( VIJAY PAL RAO )
Accountant Member Judicial Member
Place: Mumbai : Dated: 8th, Feb 2013
Raj*
11
ITA Nos. 6826/Mum/2010
ITA No. 6837/Mum/2010
ITA Nos. 6827/Mum/2010
.
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai