Income Tax Appellate Tribunal - Delhi
Itc Limited, Kolkata vs Assessee on 29 February, 2016
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "C": NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No.1242/Del/2014 (Assessment Year: 2002-03) ITC Limited, DCIT (as successor in interest of erstwhile Central Circle-20, Ansal Hotels Ltd. Since merged with VS- New Delhi ITC Ltd.)Taxation Department, Virginia House, J .L. Nehru Road, Kolkata PAN :AAACIS950L (Appellant) (Respondent) Assessee by : Sh.Rohit Jain, Adv Respondent by: Sh. Amit Jain, Sr. DR Date of Hearing 25/02/2016 Date of pronouncement 16/02/2016 0 R D E R PER PRASHANT MAHARISHI. A. M.
1. This appeal filed by the assessee against the order of learned Commissioner of Income-tax (Appeals)--Vl, New Delhi dated 31.01.2014 for the Assessment Year 2002-03 raising following grounds of appeal:--
i.
H 1.2 That on the facts and in the circumstances of the case, the OT {Appeals} erred in not holding that the order dated 31.12.2009 passed by the Assessing Officer under section 147/1438) of the income--tax Act, 1961 {'the Act') was beyond jurisdiction, bad in law and void-ab--initio.
That on the facts and circumstances of the case, the ClT(A) erred in not quashing the order dated 31.12.2009 passed by the Assessing Officer under section 147/143{3) as without jurisdiction, bad in law and void--ab-initio, since:
{a} no valid notice under section 148 was issued and served under the provisions of the Act; and {b} reassessment proceedings were initiated and completed in the hands of a non existent entity.
That the ClT(A} erred on facts and in law in not adjudicating the aforesaid issue A chaiienging the tegality/ vatidity of the order dated 31.12.2009 passed under section 147/143(3) of the Act in the case/ hands of a non--existent entity.
i.3 1.4 i.5 L6 (0)
2.l
2.2 2.3 Page 2 of 10 That on the facts and circumstances of the case. the ClT{A) further failed to appreciate that the reassessment proceedings were initiated by the Assessing Officer on mere "change of opinion", without forming a reasonable belief of escapement of income, which is sine qua non for assumption of valid jurisdiction.
That on the facts and circumstances of the case, the ClTlA) also failed to appreciate that the proceedings initiated by the Assessing Officer was barred by limitation prescribed in terms of proviso to section T47 of the Act.
That on the facts and circumstances of the case, the ClTlA) also failed to appreciate that the proceedings initiated by the Assessing Officer was barred by limitation prescribed in section l49 of the Act.
That the ClT{A) erred on facts and in law in alleging/ observing that:
the assessee had failed to disclose declare all material facts at the time of original the reassessment order was passed by the Assessing Officer after disposing off the legal objections filed by the appellant challenging the validity of the initiation of the reassessment proceedings.
That the ClTiA) erred on facts and in law in upholding the disallowance of interest amounting to Rs.3,00,53,3él, accrued on secured loan borrowed from M/s. lTC Ltcl.. under section 43B of the Act, on the ground that said interest was not paid by the appellant up to the date of filling of the income tax return for the relevant previous year.
That the CiTlA) erred on facts and in law in not appreciating that the provisions of section 43 B of the Act was not at all applicable to the amounts under consideration inasmuch as the aforesaid interest was payable to M/s. lTC Ltd, which was not a scheduled bank, public financial institution, etc., falling under the said section.
That the ClTlA) erred on facts and in law in not appreciating that the said interest was allowable deduction on accrual basis since the same stood accrued {though not due for payment) in accordance with the terms of agreement with M/s. lTC Limited.
That the ClTlA) erred on facts and in law in erroneously holding that the aforesaid interest would be covered within the ambit of Explanation 3C of section 43B of the Act since the loan taken by the appellant from M/s. lTC Ltd. was to pay off the loan initially taken from the public financial institutions.
The brief facts of the case is that the appellant company is Ansal Hotels Pvt. Ltd. which was merged with lTC Ltd vide order of Hon'ble Delhi High Page 3 of 10 Court dated 02.02.2005. According to The order of The Hon'ble High Court under the scheme of amalgamation of ITC Hotel Ltd and Ansal Hotels Ltd with ITC Ltd. Based on that order of the Hon'ble High Court, The transferee company i.e. Ansal Hotel LTd stands dissolved without resorting To The process of winding up. This fact was intimated To The Registrar of Companies by filing form No. 21 under The Companies Act, 1956 read with relevant rules. A letter dated 25.03.2005 written by [TC Welcome Group Hotels Palace and Resorts Hotel Division. to The CIT, Central Circle-20, Jhandewalan Extension, New Delhi with The captioned subject of amalgamation of Ansal Hotel Ltd with ITC LTd. Stating PAN No of Ansal Hotel and ITC Hotel. According To This letter if was informed That Ansal Hotel Ltd has been amalgamated with ITC LTd. on 23.03.2005 w.e.f 01.04.2004 which is The appointed dated along with That order. Copies of The order of Hon'ble Delhi High Court and Kolkata High Court were furnished and copy of Form No.21 filed with The Registrar of Companies was also attached. IT was further submitted that for The financial year ending 31.03.2005 The audit in that account of ITC Ltd will also include That of Ansal Hotel Ltd and Income Tax Return will also be done similarly since Ansal Hotel Ltd has now ceased to exist statutorily and has become an integral part of ITC LTd. This letter was submitted on 06.04.2005 to The office of The ACIT, Central Circle-20, New Delhi Though addressed to ClT Central Circle-20, New Delhi.
For assessment year 2002--03 the order u/s 143(3) dated 29.03.2005 was passed by The A0 based on return of income filed on 315T October 2002 which was further revised at The Total loss of Rs.49,25,03,779/--. Subsequently. notice 0/5 148 of The Act was issued by The AC on 31.03.2009 To the assessee in The name of Ansal Hotel Ltd stating the address at District Centre, Saket, New Delhi. Against this notice The assessee filed an objection vide letter 24'h April 2009 which was submitted on 27.04.2009 To The office of ACIT. Central Circle. New Delhi.
In That letter it was submitted that notice u/s 148 dated 315T March 2009 were served on 1" April 2009 in The name of The assessee at District k Page 4 of 10 Centre, Saket, New Delhi--17. it was further submitted that revised return of income submitted on 2nd December 2003 may be treated as return filed in pursuance to the notice u/s 148 of the act. The reason recorded for reopening were also sought and fact of the merger was mentioned stating that the assessee company is extinguished and ceased to exists and the notice issued u/s 148 is invalid notice as it has been wrongly served at the aforementioned address. it is stated that it ought to have been served at the registered office of M/s. ITC Ltd. Based on the above facts cited the decision of i-Ion'ble Delhi High Court in the case of CIT Vs. Hotline international Pvt. Ltd and of Delhi Tribunal in the RP. Gupta and Sons (HUF) Vs. ITO. it was stated it is totally bad in law. In the end it is stated that all further correspondence shall be at the address of ITC Ltd.
The A0 vide letter dated 18.1 1.2009 disposed of these objections stating that objection of the assessee is not tenable as the notice has been issued at the address available on record on that particular time. In the end the AO passed order u/s 143(3) of the Act had loss of Rs. 46.24.50.409/- as compared to early loss stock at Rs. 49,25,03,770/-. The assessee being aggrieved with the order of AO preferred appeal before learned Commissioner of Income--tax (Appeals) raising several objections of reassessment aspects from ground No.1.1 to 1.8 while filing Form No.35. The learned Commissioner of income-tax (Appeals) vide this order dated 31.01.2014 has dealt with issue of reopening at Page 53 to 56 of his order as under:-
"5. Decision in Appeal- 1 have carefully considered the submission of the appellant. Vis--a-vis the assessment order under reference Decision on the various grounds of appeal are as below:
5.1 it is contended that the assessment order dated 31.12.2009 passed u/s 147 read with section 143(3) of-the Act, is without jurisdiction, and barred by limitation and hence bad in law and void--ab--inito. Moreover, the same is based on change of opinion, without forming a reasonable belief of escapement of income. Further, no valid issuance/service of notice u/s 148/149 of the Act has been effected by the AO. However, in this regard the AO noted as below during the course of assessment proceedings u/s 143(31/147 of the Act, as per the relevant assessment order.Page 5 of 10
"Assessment was compieted u/s 143(3) of Income Tax Ad 1961 on 29032005 on assessed 1055 of Rs.49,25,03,770/-. Subsequentiy notice u/s 148 of Income tax Act 1961 was issued on 31.03.2009 after recording reasons. NO compliance was made to the notice U/s 148 of Income Tax Act, 1961. The assessee requested for reasons vide fetter dated 28.04.2009. Subsequentiy a notice was Issued u/s 142(1) Income Tax Act. 1961 on 18.11.2009 requiring to furnish expianation on specific issues which were mainiy the grounds on which re--assessment proceedings were initiated. The assessee fiied written submission on 25.11.2009, in which it addressed the issues mentioned in the said notice and 0150 objected to grounds on which re-assessment proceedings were initiated."
5.1.1 As regards the initiation of proceedings u/s 147 of I. T. Act, by issue of notice u/s 148 of I. T. Act, 1961,1 am of the opinion that the same is in order as the assessee has not disciosed and deciared ON the materiai facts at the time of origihaI assessment as refiected in the assessment order, under chaiienge. for the reievant assessment year and thereafter by duiy recording reasons ieading to the formation of beiief that the income has escaped assessment, the AO had issued notice u/s 148 of I. T. Act, which is hereby heid to be IegaIIy in order, since the reasons for reopening of the case was duiy communicated to the appeiiant, during the course of re-assessment proceedings. Even the objection of the assessee regarding the reopening of the case u/s 148 was considered by the AO but found unacceptabie 8 accordingiy, the same was disposed of by an order. It has been heId by the Apex Court in OK. N. Drive Shafts (India) Ltd. V. ITO {2003) 2591TR 19 (SC) that when notice u/s 148 of the Act is issued, the assessee is expected to fife a return of income in response thereto. if the assessee desires to seek the reasons for issuing the notice, the Assessing Officer is bound to dispose of the same by passing a speaking order. [AIso refer AgarwaI Meta! 8. AIioys V. ACIT (2012) 346 ITR 64 {Bom}, Rabo India Finance Ltd. V. DCIT (2012) 346 ITR 81 (Born). Further, in ACIT V. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 111? 500 (SC), it has been interaiia, heid that in case of reassessment proceedings, the A0 is not required to prove escapement and conceaiment conciusiveiy at the time of issue of notice itseIf. Such exercise wouId be carried out during the course of reassessment after providing opportunity of being heard. The Apex Court took simiIar views in Raymond Wooiien Mitts Ltd. V. .110 { 1999) 236 ITR 34 (SC), where it was heId that in determining whether commencement of reassessment proceedings was vaIid, it has oniy to be seen whether there was primatacie some materiai on the basis of which the Department couId reopen the case. The purpose or objective of reopening an assessment is oniy to bring to tax, income escaping assessment. This position of Iaw is categoricaiiy iaid out in Hon'bie jurisdictionai High Court decision in the case of consoiidated Photo 8. Finvesf Ltd. Vs. ACIT {2006) 281 111? 394 {Dei}, wherein it was heId that mere production of books of account or other evidence from which the Assessing Officer couid have, with due M. Page 6 of 10 diligence, discovered the material evidence, does not necessarily amount to a disclosure within the meaning of the proviso to section M? of the li. Act, l96l and even when the assessee has filed certain detaiis at the time of original assessment proceedings, the some do not debar the A0 to issue notice u/s 148 of the Act, if there exist reasons for reopening of assessment. Similarly, in Hanuman Trading Co. Vs. ClT 250 iii? 365 {Del}, it was held by the Hon'ble Delhi High Court by reaffirming the decision of the lTAT in that case that the reasons to believe for reopening the assessment were specific a. definite in their import that there was a direct nexus or live link between the material coming to the notice of the AO & the formation of his belief that the assessee did not place all the material primary facts in respect of the impugned addition & hence initiation of the proceedings u/s i4? by the AC was in accordance with law. in both the Jiudgments, the Hon'ble Delhi High Court followed and applied the decisions of Hon'ble apex court in Calcutta Discount Co. Ltd. Vs. lTO {i96ll 4i lTR 19l {SC} & lTO Vs. Lakhmani Mewal Das { l976) iO3 lTR 437 (SC), besides ClT Vs. Kelvinator of india Ltd. {2002) 256 lTR 1 {Del} (F8) and G.K.N. Driveshatts {lndia} Ltd. Vs. lTO {2003) 259 lTR l9 (SC), referred. The case laws cited by the appellant will also not come to its rescue as the same are in effect decided against the issues raised by the appellant, as has been reflected above. Proviso to section 147 of the Act envisages action in the ordinary course within a period of four years from the end of relevant assessment year. However, that limitation does not apply to a case where income chargeable to tax has escaped assessment on account, interaiia, of failure of the assessee to disclose fully and truly all material facts. Production of books of account and other documentary evidence relevant for assessment did not imply a full and true disclosure in the light of Explanation i to section T47, as held in Consolidated Photo 8. Finvest Ltd. case (Supra). ,. Therefore, the action initiated by the AO did not suffer from any error of '/,iurisdiction or charge of opinion or even nan application of mind. This ground of appeal of the appellant is therefore, dismissed being not tenable in law and in facts of the case."
The Id AR of the assessee submitted that as the assessee company has ceased to exist hence notice served in the name of the particular company is invalid and liable to be quashed. He insisted that the notice may be quashed relying on plethora of decisions. Against this the ld DR relied on the orders of lower authorities.
We have carefully considered the contention on the legal grounds.
On perusal of communication with the Ld AD by the assessee the only objection was that it is served at the different address hence invalid. It (13/.
IO.
Page 7 of 10was never stated by the assessee that the company on which the notice is served has ceased to exist and therefore notice is invalid. ON query whether any such ground was taken before CIT (A) and how it has been decided by him, Ld AR could lay his hands on ground No.l .3 which is as under:-
" l.3 That on the facts and circumstances and in law the impugned order passed by the AO u/s 147/ 143(3) without issuance and service of a valid notice u/s T48 of the Act is without jurisdiction, bad in law and void-ab--initio"
On reading of the above grounds, though it is not specific on the point, but it seems that it may cover the argument of the assessee that notice is issued on the company which has seized to exist is not valid. This is the first argument raised by Id AR before us and that requires an examination.
According to the letter dated 25.03.2005 which is addressed to CIT but is submitted to the office of AClT without marking a copy of the that letter to ACIT but filing at office of A0 on 06.04.2005 is the main supporting evidence of the ld AR that AC was aware of the matter of merger of the assessee i.e. Ansal Hotels Ltd with ITC Ltd. We agree with that there is a merger of Ansal Hotel Ltd with ITC Ltd. on 01.04.2004. However here the assessee is challenging whether the notice should have been issued to the name of Ansal Hotel Ltd or in the name of ITC Hotel Ltd. Admittedly the AO issued notice u/s 148 which is at Page l80 of the PB is in the name of Ansal Hotel Ltd. Now the issue arises that how the AO will come to know about this fact unless communicated by the assessee. Here the assessee has communicated to the CIT and not to ACIT who is AO. However letter has been acknowledged by putting a stamp of office of ACIT, Central Circle-20, New Delhi dated 06.04.2005. Assessee has raised this issue before learned Commissioner of Income-- tax (Appeals), who has not adjudicated the issue of validity of notice and subsequent assessment in the case of non existence entity. On reading of the order of learned Commissioner of Income--tax (Appeals) assessee has made detailed arguments from P.lO to 18 on this issue.
I/ ll.
However, looking at the order of learned Commissioner of Income-tax (Appeals) at Para No.5 of the order we could not find and parties on query from bench, also could not show us whether this issue has been considered and decided by the CIT (A) or not. According to us the learned Commissioner of Income-tax (Appeals) ought to have decided this issue specifically and he failed to address that issue. ln any case the ossessee is also entitled to approach learned Commissioner of Income- tax (Appeals) u/s 154 of the Act if ground of appeal which should have been decided by learned Commissioner of Income-tax (Appeals) has not been decided. Therefore in the interest of the parties we set aside this issue to the file of learned Commissioner of Income-tax (Appeals) with directions to verify whether the ossessee has raised ground of appeal before him that notice issued on a non existence company is invalid and if there is such ground, then decide on merits after due verification of the facts after giving proper opportunity of hearing to the assessee.
In the result ground No.12 of the assessee's appeal is allowed with the above direction.
l2. In view of the above facts we do not decide other grounds of appeal that in case if the ossessee succeeds before the learned Commissioner of Income--tax (Appeals) they will become infructuous.
13. In the result appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29/02/2016.
-Sd/- -Sd/-
(H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:.2q (02/2016 )1 "KKeot Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DRleAT